Kelt Exploration (KEL-T) David Wilson CEO on BNN.ca plans for 2018. The interviewer made sure to mention that Mr. Wilson is best known for selling Celtic Exploration to ExxonMobil for $3-billion in 2012. Kelt was a spinoff from that deal. More than half of Kelt's production is gas. Last month, because of low AECO gas prices (the benchmark in Alberta), Kelt was forced to shut in about 4,770 barrels of oil equivalent a day. Since Nov. 1, the company has brought a majority of the shut-in production back on stream; it had non-AECO contracts that came into effect on Nov. 1. Nonetheless, it has lowered its 2017 production guidance to 21,800 barrels a day from 22,500 barrels a day. In the nine months to Sept. 30, the company produced 21,141 barrels a day, slightly less than the full-year guidance, but it plans to ramp up production in the fourth quarter. It expects to end the year producing 27,500 barrels a day (increased from 26,500 barrels a day). Correspondingly, Kelt has also raised its 2017 capital budget to $226-million from $202-million. Its work in the fourth quarter will include drilling eight wells that will not begin production until 2018.
In the BNN interview, Mr. Wilson was pleased to note that in 2018, Kelt expects to produce 28,500 to 29,500 barrels a day, up from this year's 21,800 barrels a day. As well, the greater production in 2018 will come at a lower capital expenditure of $210-million, compared with this year's $226-million. Mr. Wilson went on to say more about Kelt's exciting 2018 plans, but then the interviewer gave him pause by asking whether cash flow would cover capex over the next year. Mr. Wilson hesitated, replying, "Y-yes ... if you take out the exploitation wells, for sure." Kelt's exploitation program will take up one-third of the $210-million capital budget for 2018, but yes, the budget would be self-financing if one were to consider only two-thirds of it.
Scotia Capital analyst Cameron Bean is not worried by capex coverage or any other concerns. He says the "2018 guidance looks good." He maintains his rating of "sector outperform" and his price target of $10. He is particularly hopeful about Kelt's Inga area, where the company will be drilling three wells before year-end. Mr. Bean points out that west of Kelt's Inga/Firewood block, ConocoPhillips is planning a 12-well delineation program for 2018 at its Blueberry Montney asset. Interestingly, Blueberry is one of the handful of Canadian assets that ConocoPhillips decided to keep, after selling $17.7-billion worth of assets in Alberta to
Cenovus Energy (CVE-T) earlier this year |
