Kelt Exploration Ltd. provided an operations update and changes to its 2024 guidance. Due to the current higher than average natural gas storage inventories in both the United States and Canada, current natural gas prices have been weak at North American pricing point hubs; especially at AECO and Station 2 where gas prices have dipped below $1.00/GJ. Kelt has elected to defer the start-up of certain gassier wells in its drilling portfolio to November/December 2024.

Winter gas future strip prices are currently bid at levels significantly higher than current spot prices. In its Wembley/Pipestone Division, where Kelt has a 14-well development drill & complete program targeting Montney oil/liquids-rich gas horizons as part of its 2024 capital program, the Company has drilled and completed the first six wells from its 14-2 pad. These wells offset two existing wells that had an average IP30 rate of 1,326 BOE/d (59% oil and NGLs) per well.

The Company is currently flow-testing the 14-2 wells and expects to continue producing them, and at the same time, shut-in lower CGR gas wells in the area as it awaits completion of a new gas plant that will add 50 MMcf per day of raw gas firm service processing upon start-up, expected prior to the end of the year. Kelt has commenced drilling operations on its five well program off its 14-9 pad, after which the Company will move to its three well program off its 14-26 pad. Kelt expects to frac these remaining eight wells during September and October, bringing them on production in December 2024 with the anticipated start-up of the new gas plant.

At Wembley/Pipestone, Kelt also has 34 MMcf per day of firm raw gas processing capacity at another third-party gas plant. During the second quarter of 2024, this plant processed an average of approximately 21.4 MMcf/d (63%) of Kelt's share of capacity. During the quarter, the operator shut-in the plant to conduct certain scheduled maintenance operations during which it was discovered that additional maintenance was required.

The plant is currently running at 50% capacity but is expected to resume full capacity during the second half of July after completion of the additional repairs. In its Pouce Coupe/Progress/Spirit River Division, Kelt has a 6-well drill & complete program targeting oil horizons in the Charlie Lake formation. Drilling operations commenced in June and all six wells are expected to be drilled by the end of September.

The first two wells are expected to be brought on-stream in September, another two wells in October and the remaining two wells by December 2024. Historically, Charlie Lake wells in this area usually commence production at average oil and NGL rates of approximately 65% to 70% of total production. At Pouce Coupe West, where Kelt has three DUCs on its high deliverability gas block, the Company has elected to defer completions and production start-up to the middle of the fourth quarter due to the current weak AECO gas price environment.

These wells, in aggregate, are expected to add 25 to 30 MMcf per day of gas production. In its Oak/Flatrock Division, Kelt commenced an 8-well development drilling program in November 2023. Two wells were drilled from an existing pad located at 5-33 and three wells were drilled from an existing pad located at 6-35.

These five wells have been completed and put on production. The remaining three wells were drilled in the first quarter of 2024 from an existing pad located at 5-31 and start-up is also being deferred to the fourth quarter of 2024. For the summer of 2024, Kelt has financial contracts in place transferring AECO gas price hub exposure to NYMEX Henry Hub on 20,000 MMBtu per day.

On 10,000 MMBtu per day the differential from NYMEX is fixed at minus $1.06 per MMBtu and on 10,000 MMBtu per day, the fixed differential from NYMEX is calculated at 30% of the floating monthly NYMEX price. For the winter, from November 1, 2024 to March 31, 2025, Kelt has financial contracts in place transferring AECO gas price hub exposure to NYMEX Henry Hub on 40,000 MMBtu per day at a fixed differential from NYMEX at minus $1.09 per MMBtu. Additionally, from November 1, 2024 to March 31, 2025, Kelt has physical contracts in place transferring STATION 2 gas price hub exposure to AECO on 5,000 GJ per day at a fixed differential from AECO at minus $0.15 per GJ.

Kelt recently entered into financial contracts to hedge the price of propane on approximately 45% of its expected propane sales for the period from July 1, 2024 to March 31, 2025. On 250 barrels per day, the Company has fixed the Conway propane price at $0.82 per gallon (equivalent to $34.44 per barrel) and on another 250 barrels per day, Kelt will receive 43.5% of the monthly average WTI oil price for propane sales indexed at Conway. The Company sells its physical propane production at Conway index, net of transportation.

In addition, for the purposes of gas market diversification, Kelt has entered into an agreement to sell 2,513 GJ per day for a two-year term from January 1, 2025 to December 31, 2026 for gas delivered at NIT at a monthly average AESO electricity price divided by a fixed heat rate of 17.95 GJ per MWh.