(Stock Symbol "CLT" - TSX)
March 8, 2012
Calgary, Alberta
Celtic Exploration Ltd. ("Celtic" or the "Company") has released its financial results for the three months and twelve months ended December 31, 2011. Summary of results are as follows:
Three months ended December 31, | Twelve months ended December 31, | |||||
(CA$ thousands, unless otherwise indicated) | 2011 | 2010 | Change | 2011 | 2010 | Change |
Revenue, before royalties and financial instruments | 60,980 | 53,042 | 15% | 224,703 | 222,041 | 1% |
Funds from operations | 33,553 | 30,625 | 10% | 135,679 | 130,793 | 4% |
Basic ($/common share) | 0.32 | 0.34 | -6% | 1.39 | 1.46 | -5% |
Diluted ($/common share) | 0.31 | 0.33 | -6% | 1.35 | 1.43 | -6% |
Profit (loss) | (31,026) | (1,284) | 2316% | (27,926) | 26,165 | - |
Basic ($/common share) | (0.30) | (0.01) | 2879% | (0.29) | 0.29 | - |
Diluted ($/common share) | (0.30) | (0.01) | 2879% | (0.29) | 0.29 | - |
Capital expenditures, net of dispositions | (182,282) | (68,186) | 167% | (419,680) | (172,785) | 143% |
Total assets | 1,079,923 | 750,346 | 44% | |||
Bank debt, net of working capital | 211,800 | 203,381 | 4% | |||
Shareholders' equity | 687,252 | 416,407 | 65% | |||
Weighted average common shares outstanding (thousands) | ||||||
Basic | 104,166 | 90,398 | 15% | 97,611 | 89,876 | 9% |
Diluted | 107,456 | 93,118 | 15% | 100,709 | 91,537 | 10% |
Celtic's audited financial statements and related notes for
the year ended December 31, 2011 will be available to the
public on SEDAR at www.sedar.comand
will also be posted on the Company's website at www.celticex.comon March 8, 2012.
Celtic's operating results for the three months and twelve
months ended December 31, 2011 are summarized in the table
below:
Three months ended December 31, | Twelve months ended December 31, | |||||
2011 | 2010 | Change | 2011 | 2010 | Change | |
Production | ||||||
Oil (bbls/d) | 4,124 | 4,096 | 1% | 3,789 | 4,070 | -7% |
Gas (mcf/d) | 84,515 | 79,731 | 6% | 74,539 | 79,404 | -6% |
Combined (BOE/d) | 18,210 | 17,385 | 5% | 16,212 | 17,304 | -6% |
Production per million common shares (BOE/d) | 175 | 192 | -9% | 166 | 193 | -14% |
Realized sales prices, after financial instruments | ||||||
Oil ($/bbl) | 87.19 | 68.56 | 27% | 81.72 | 67.80 | 21% |
Gas ($/mcf) | 3.47 | 3.93 | -12% | 4.02 | 4.37 | -8% |
Operating netbacks ($/BOE) | ||||||
Oil and gas revenue | 36.40 | 33.17 | 10% | 37.97 | 35.15 | 8% |
Realized gain/(loss) on financial instruments | (0.57) | 1.04 | (0.40) | 0.85 | ||
Realized sales price, after financial instruments | 35.83 | 34.21 | 5% | 37.57 | 36.00 | 4% |
Royalties | (4.41) | (3.42) | 29% | (4.30) | (4.05) | 6% |
Production expense | (9.89) | (6.47) | 53% | (8.16) | (8.13) | 0% |
Transportation expense | (0.38) | (0.36) | 6% | (0.40) | (0.44) | -9% |
Operating netback | 21.15 | 23.96 | -12% | 24.71 | 23.38 | 6% |
Drilling activity | ||||||
Total wells | 13 | 15 | -13% | 58 | 62 | -6% |
Working interest wells | 10.0 | 8.2 | 22% | 40.1 | 41.9 | -4% |
Success rate on working interest wells | 100% | 88% | 14% | 96% | 90% | 7% |
Undeveloped land | ||||||
Gross acres | 794,137 | 685,993 | 16% | |||
Net acres | 689,893 | 621,199 | 11% | |||
Reserves - Proved plus probable | ||||||
Oil (mbbls) | 32,803 | 16,806 | 95% | |||
Gas (mmcf) | 636,992 | 304,197 | 109% | |||
Combined (mBOE) | 138,968 | 67,506 | 106% |
Celtic is pleased to report to shareholders on the Company's
activities in 2011. During the year, the Company incurred
substantial capital expenditures drilling wells and building
facility and pipeline infrastructure in its Triassic Montney
plays at Resthaven and Fir. Significant production growth is
expected in 2012, as the majority of new production added
from these two resource plays came on-stream towards the end
of 2011. As a result of the successful drilling results in
these two resource plays and including success in its Kaybob
Devonian Duvernay and Inga Triassic Doig plays, Celtic more
than doubled its proved plus probable reserves at
December 31, 2011.
Highlights for 2011 include funds from operations of $135.7
million ($1.35 per share, diluted), net capital expenditures
of $419.7 million, average production of 16,212 BOE per day
(166 BOE/d per million shares
outstanding), proved plus probable reserves of 139.0 million
BOE, undeveloped land holdings of 689,893 net acres and a
prudent financial position with debt, net of working capital
of $211.8 million or 1.6 times 2011 funds from
operations.
The year 2011 proved to be another important year for Celtic
as the Company set out to establish infrastructure in an
asset base that will allow it to grow over the next decade.
The Company has established land positions in excess of
550,000 net acres in two areas which provide significant
opportunities for growth; the Duvernay play at Kaybob and the
Montney play at Resthaven. These two resource plays will be
the driver for the Company's future growth.
The Duvernay play in the Kaybob area has garnered significant
interest in the past two years whereby industry has invested
over $1.0 billion at Alberta Crown land sales in close
proximity to Celtic owned lands. At February
9, 2012, Celtic owned 108,224 net acres or 169 net sections
with Duvernay rights in this area. After drilling and testing
the first four Duvernay horizontal wells in the area, the
Company is very encouraged with the natural gas rates and the
high associated liquids content.
Celtic continues to actively de-risk the play and during
2012, the Company expects to drill 9 gross (6 net) additional
horizontal wells. After evaluating the results from these
wells, Celtic will be in a position to establish a go forward
capital expenditure program that is focused on development
using multi-well pads on this exciting liquids-rich shale
play.
The second play, in which Celtic was much more active
drilling wells during 2011, is the Resthaven Montney play.
The Company first tested a well in this area in 2007, but did
not aggressively start pursuing it until 2008, after
experiencing positive results from horizontally drilling the
same horizon (Montney) as its Kaybob property. With the
Company's knowledge in the Kaybob area, Celtic commenced
acquiring acreage in the Resthaven
area prior to drilling a horizontal test in the Montney zone
in early 2010. After a favorable flow test, the Company
continued to aggressively acquire acreage on the play. At
December 31, 2011, Celtic owned 442,396 net acres (691
sections) of land on this play. An extensive area wide
drilling program was carried out in 2011, allowing the
Company to evaluate this large liquids-rich resource
play.
Celtic has made significant progress de-risking its Resthaven
lands. To date, the Company has drilled 20 horizontal wells
over a fairway that extends more than 70 kilometres. The
Company has tested four different intervals within the
Montney section and is very pleased with the results to
date.
Construction of pipeline and facility infrastructure
commenced in 2011 and is currently being extended towards the
north-west and the south-east. Celtic has built approximately
55 MMCF per day of compression capacity and the gathering
system consists mainly of 12 inch and 10 inch pipe. At
present, Celtic plans to produce into existing gas plants in
the area until the scope of the development program is fully
understood. The majority of the Company's gas is produced
into the Keyera Simonette gas plant, which is expected to be
converted to a deep cut plant in 2013. In the future, the
Company could construct its own gas processing facility,
although at this time, the Company has no plans to do so.
With on-going success, the Resthaven area could provide the
Company with drilling inventory that would provide production
growth over the next decade at favourable rates of return
using current commodity prices.
At Inga, British Columbia, Celtic has a non-operated interest
in 11,834 net acres (18 sections) of land, as at January 18,
2012. The Doig pool at Inga has proven to be especially well
suited to horizontal drilling. Five wells have been drilled
to date with seven wells planned for 2012. Wells come on
production at rates up to 200 barrels of liquids per MMCF per
day of natural gas and then decline to between 50 and 100
barrels per MMCF per day after being produced for several
months. Celtic has a 40% working interest in this play.
At Fir, Alberta, the Company owns 17,440 net acres (27
sections) of land with Triassic Montney rights. Seven wells
were drilled in 2011. With the exception of one well, the
wells have been drilled over the length of two sections
enhancing the well economics. With the longer horizontals, 20
to 24 fracs are completed, which are expected to result in
double the well productivity and reserves for an approximate
50% increase in capital expenditures. The Company has
continued to develop the pool during the first quarter of
2012.
At Kaybob, Alberta, Celtic continues to be active on its
Montney and Bluesky development programs. In 2011, eight
horizontal Montney wells and seven horizontal Bluesky wells
were drilled and completed. Development will continue on
these two plays in 2012; however, at a lesser pace as the
Company directs more of its capital to its higher liquids
resource plays.
With the continued downward pressure on natural gas prices,
due in part to the abnormally warm 2011 - 2012 winter, Celtic
has reallocated capital expenditures for the last three
quarters of 2012. The Company will be directing capital from
the main gas liquids lands in Resthaven to two oil pools in
the area. As well, the Fir development will be postponed with
capital instead being directed to additional Dunvernay wells,
a new Dunvegan oil play in Kaybob and a Bluesky oil pool in
Kaybob. Total capital expenditures for 2012 will be reduced
from $355.0 million to $300.0 million.
The result of the redirecting of capital will have the effect
of bringing the Company's oil and liquids ratio from the
current 22% of production up to 27% by year end. Production
guidance under the new budget is a yearly average production
of 26,000 to 26,500 BOE per day, representing a 50% increase
year over year in production per share. Exit production is
expected to be 29,900 BOE per day.
At year end, natural gas prices are expected to rebound as a
result of increased demand and lower supply driven by a
reduced gas rig count. At that point, Celtic will be in a
position to carry out an oil weighted budget in
2013 or go back to a gassier budget if gas prices permit.
Looking ahead to 2012, Celtic will use its knowledge and
experience with horizontal multi-stage fracture drilling and
completion technologies to move its new prospects
forward.
We would like to thank our shareholders for their support,
our Board of Directors for their guidance and our employees
for their continued effort and loyalty.
Celtic continues to remain optimistic about its future
prospects. Celtic is opportunity driven and is confident that
it can continue to grow the Company's production base by
building on its current inventory of development prospects
and by adding new exploration prospects. Celtic will
endeavour to maintain a high quality product stream that on
an historical basis receives a superior price with reasonably
low production costs. In addition, the Company takes
advantage of royalty incentive programs in order to further
increase netbacks. Celtic will continue to focus its
exploration efforts in areas of multi-zone hydrocarbon
potential.
Celtic's Board of Directors has approved the Company's
reduced 2012 capital expenditure budget of $300.0 million.
The Company expects to spend $234.0 million on drilling and
completing wells, $50.0 million on facilities, equipment and
pipelines, and $16.0 million on land and seismic.
Celtic expects production in 2012 to average between 26,000
and 26,500 BOE per day (previously between
29,000 and 29,500 BOE per day). The Company recently added
significant production at Resthaven after installing gas
gathering pipelines and compression and dehydration
facilities and looks forward to continued growth from this
area in 2012. Average production in 2012 is expected to be
weighted 24% oil and 76% gas; however, operating income in
2012 is expected to be weighted 73% oil and 27% gas. At the
low end of the
range of 2012's average production forecast, this represents
a 60% increase from average production of 16,212
BOE per day in 2011. On a production per common share basis,
the increase would be 50%.
Celtic expects to achieve continued efficiencies in its cost
structure in 2012. Production expense is estimated to be
$7.89 per BOE and royalties are expected to average 12.7%.
General and administrative expense is estimated to be at
industry leading low levels of $0.66 per BOE.
The Company's average commodity price assumptions for 2012
are US$95.00 (previously US$82.50) per barrel for WTI oil,
US$2.75 (previously US$3.75) per MMBTU for NYMEX natural gas,
$2.35 (previously $3.35) per GJ for AECO natural gas and a
US/Canadian dollar exchange rate of US$0.9804 (previously
US$0.9755). These prices compare to average 2011 prices of
US$95.12 per barrel for WTI oil, US$4.07 per MMBTU for NYMEX
natural gas, $3.43 per GJ for AECO natural gas and a
US/Canadian dollar exchange rate of US$0.9893.
After giving effect to the aforementioned production and
commodity price assumptions, funds from operations for 2012
is forecasted to be approximately $181.5 million or $1.67 per
common share, diluted.
Changes in forecasted commodity prices and variances in
production estimates can have a significant impact on
estimated funds from operations and profit. Please refer to
the advisory regarding forward-looking statements below.
Sensitivities to changes in commodity prices would affect
forecasted 2012 funds from operations as follows:
(i) A change of 15% in the AECO natural gas price of $0.35
per GJ would affect funds from operations by $16.2 million
($0.15 per common share); and
(ii) A change of 15% in WTI oil price of US$14.25 per barrel
would affect funds from operations by $0.6 million ($0.01 per
common share) - impact is minimal due to Celtic's fixed WTI
derivative financial instrument contracts currently in
place.
Bank debt, net of working capital, is estimated to be $325.6
million by the end of 2012 or approximately 1.8 times
forecasted 2012 funds from operations.
Celtic is excited about the growth prospects being generated
in the Company and remains optimistic about the Company's
ability to deliver continued per share growth in production,
reserves, net asset value and funds from operations. Given
the Company's strong inventory of drilling locations, we look
forward to continued growth in
2012 and beyond. The information set out herein under the
heading "2012 Guidance" is "financial outlook" within the
meaning of applicable securities laws. The purpose of this
financial outlook is to provide readers with disclosure
regarding Celtic's reasonable expectations as to the
anticipated results of its proposed business activities for
2012. Readers are cautioned that this financial outlook may
not be appropriate for other purposes.
This document contains expectations, beliefs, plans, goals,
objectives, assumptions, information and statements about
future events, conditions, results of operations or
performance that constitute "forward-looking
information" or "forward-looking statements" (collectively,
"forward-looking statements") under applicable securities
laws. Undue reliance should not be placed on forward-looking
statements. Forward-looking statements are based on current
expectations, estimates and projections that involve a number
of risks and uncertainties, which could cause actual results
to differ materially from those anticipated by the Company
and described in the forward-looking statements. We caution
that the foregoing list of risks and uncertainties is not
exhaustive. Events or circumstances could cause actual dates
to differ materially from those estimated or
projected and expressed in, or implied by, these
forward-looking statements. The forward-looking statements
contained in this document are made as of the date hereof and
the Company does not intend, and does not assume any
obligation, to update or revise any forward-looking
statements, whether as a result of new information, future
events or otherwise unless expressly required by applicable
securities laws.
All dollar amounts are referenced in Canadian dollars, except
when noted otherwise. Where amounts are expressed on a barrel
of oil equivalent ("BOE") basis, natural gas volumes have
been converted to oil equivalence at six thousand cubic feet
per barrel and sulphur volumes have been converted to oil
equivalence
at 0.6 long tons per barrel. The term BOE may be misleading,
particularly if used in isolation. A BOE conversion ratio of
six thousand cubic feet per barrel is based on an energy
equivalency conversion method primarily applicable at the
burner tip and does not represent a value equivalency at the
wellhead. References to oil in this discussion include crude
oil and natural gas liquids ("NGLs"). NGLs include
condensate, pentane, propane, butane and ethane. References
to gas in this discussion include natural gas and
sulphur.
Working interest is abbreviated as "WI". Million cubic feet
is abbreviated as "MMCF". Thousand cubic feet is abbreviated
as "MCF". Barrels are abbreviated as "bbls". Giga joules are
abbreviated as "GJ".
For further information, please contact:
Sadiq H. Lalani, Vice President, Finance and Chief Financial Officer (403) 215-5310. Or visit our website site at www.celticex.com.