Kelt Exploration (KEL-T) to raise $122.7-million, boosts 2014 capex budget
Feb 5, 2014 - NR
Kelt Exploration Ltd. has expanded its capital expenditure budget to $250-million for 2014, up from $130-million. The increased spending is expected to result in the drilling of 35 gross (27.5 net) wells during the year, with the largest increase in the Karr and the Pouce Coupe/Spirit River areas in west central Alberta.
2014 Drilling Program Previous guidance Current guidance Gross Wells Net Wells Gross Wells Net Wells Pouce Coupe/Spirit River 7 5.6 14 13.2 Karr 2 2.0 7 6.5 Inga/Fireweed 7 2.8 9 3.7 Other 6 5.7 5 4.1 Total 22 16.1 35 27.5 Equity Financing
In connection with the increased capital expenditure program, Kelt is pleased to announce a brokered and non-brokered equity financing for gross aggregate proceeds of $122 million, before the exercise of the over-allotment option.
Brokered Private Placement
Kelt has entered into an agreement with a syndicate of underwriters led by Peters & Co. Limited, and including FirstEnergy Capital Corp., RBC Capital Markets, National Bank Financial Inc., CIBC World Markets Inc., GMP Securities Inc., Scotia Capital Inc., AltaCorp Capital Inc., Dundee Securities Ltd., Cormark Securities Inc., and Macquarie Capital Markets Canada Ltd. (collectively the "Underwriters"), pursuant to which the Underwriters have agreed to purchase for resale to the public, on a bought deal private placement basis, 8.5 million common shares of Kelt at a price of $11.60 per common share, resulting in gross proceeds of $98.6 million and in addition, the Underwriters have agreed to sell to the public, on a guaranteed agency basis, 730,000 common shares of Kelt on a "flow-through" basis in respect of Canadian development expenses at a price of $12.75 per flow-through common share resulting in additional gross proceeds of $9.3 million.
Kelt has also granted the Underwriters an option, exercisable for a period commencing at closing of the offering and ending 30 days following closing of the offering, to purchase an additional 1.275 million common shares at the same common share offering price of $11.60 per common share, which if exercised, would increase the common share offering gross proceeds by $14.8 million. The financing is expected to close on or around March 25, 2014.
Non-brokered Private Placement
In conjunction with the aforementioned brokered private placement, Kelt has agreed to issue to certain directors, officers and employees of the Company, on a non-brokered basis, an additional 1.105 million common shares of Kelt on a "flow-through" basis in respect of Canadian development expenses at a price of $12.75 per flow-through common share, resulting in additional proceeds of $14.1 million. The non-brokered private placement will close concurrently with the closing of the brokered private placement on or around March 25, 2014.
Private Placements
Net proceeds from these private placement equity offerings (collectively, the "Private Placements") will be used to partially finance the increased 2014 capital expenditure programs and for general working capital purposes.
Kelt shall, pursuant to the provisions in the Income Tax Act (Canada), incur eligible Canadian development expenses, (the "Qualifying Expenditures") after the Closing Date (as defined below) and prior to December 31, 2014 in the aggregate amount of not less than the total amount of the gross proceeds raised from the issue of flow-through common shares. Kelt shall renounce the Qualifying Expenditures so incurred to the purchasers of the flow-through common shares in an amount equal to $12.75 per flow-through common share on or prior to December 31, 2014.
This transaction is subject to certain conditions including normal regulatory approvals and specifically, the approval of the Toronto Stock Exchange. The common shares and flow-through common shares will be offered in the provinces of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec and such other provinces as may be agreed to between Kelt and the Underwriters by way of private placement. The Kelt common shares issued in connection with the Private Placements are subject to a statutory hold period of four months plus one day from the date of completion of the Private Placements, in accordance with applicable securities legislation.
Due to abnormally cold weather in North America which has increased heating demand for natural gas and depleted storage levels to decade lows, natural gas prices have increased significantly in the first two months of 2014. As a result, Kelt has increased its natural gas price forecast for AECO to $5.28 per GJ in the first quarter of 2014 and $4.25 per GJ for the remainder of the year.
The impact on average 2014 production relating to the increased capital expenditures is expected to have a greater impact towards the end of the year after budgeting for lead time to drill the additional wells and bring them on-stream. Full year benefits of the forecasted production additions will be recognized in 2015 and is reflected in the exit 2014 production rate shown in the above table.
Financial Position
After giving effect to the increased capital spending and after giving effect to the Private Placements, Kelt estimates that it will have bank debt, net of working capital, of approximately $27.7 million at the end of 2014. As a result, the Company expects to have sufficient financial flexibility to carry out its operations during 2014 and may pursue other opportunities, as they occur. |
