CALGARY, ALBERTA--(Marketwire - April 11, 2011) - Celtic Exploration Ltd. ("Celtic" or the "Company") (News - Market indicators) is pleased to provide an update on exploration activity and operations and to update its 2011 guidance expectations. Please refer to the advisory regarding forward-looking statements at the end of this press release.
Kaybob – Duvernay
At Kaybob, Celtic has an interest in 92,700 net acres (145 net sections) of land with Devonian Duvernay rights. The Company's discovery horizontal well located at 15-33-060-20W5 (33.3% WI) is currently being tied-in to the KA gas plant and is expected to be on-stream by mid-April 2011. The Company, together with its partners, has now completed a follow-up horizontal well located at 03-13-060-20W5 (33.3% WI). The operator is currently drilling out bridge plugs in the wellbore and will run production tubing in order to perform an in-line test during the next two weeks. This well is tied-in and gas will be processed at the Trilogy Kaybob gas plant. Celtic expects to follow-up with additional drilling in the area during the remainder of 2011.
Celtic has drilled, cored and logged a vertical well located at 14-15-061-21W5 (51.3% WI). The Company has set seven inch intermediate casing above the Duvernay and expects to drill the well horizontally at a later date. Celtic earned 3.3 net sections of land with Duvernay rights from the drilling of this well. Celtic also participated in the drilling of another vertical well located at 14-16-062-21W5 (50% WI) whereby the Company earned 4.0 net sections of land with Duvernay rights from the drilling of this well. This well was cored, logged, and completed vertically.
During March 2011, Celtic drilled a vertical test well on the eastern edge of the Company's Duvernay lands located at 05-20-060-17W5 (100% WI). This well is expected to be completed in late April 2011 in the vertical section of the wellbore in order to provide Celtic with additional knowledge in respect of the transition from the liquids-rich gas window to the oil window.
Fir/Bigstone – Montney
At Fir, Celtic discovered a new Triassic Montney pool in 2010 with its discovery horizontal well located at 04-32-059-22W5 (100% WI). Production from this well is expected to come on stream in late April 2011, when it is tied in to the Kaybob K3 gas plant (which was down for repairs from March 10 to April 8, 2011).
The Company has drilled a second horizontal well at Fir located at 04-05-060-22W5 (100% WI). After clean-up, the well flowed on test over the last day at an average rate of 13.1 MMCF per day of natural gas, with an expected liquids (oil and NGLs) yield of approximately 50 barrels per MMCF. The well tested at an average flowing pressure of 4,261 kPag (618 psi). This well will be tied-in to the Kaybob K3 gas plant in mid-April 2011.
Celtic is very pleased with the results at Fir and expects to follow-up with seven additional horizontal wells during the remainder of 2011, as part of the Company's expanded capital budget for the year. A third horizontal well located at 08-02-060-22W5 was spud on April 1, 2011.
Inga – Doig
The Company has participated in its second horizontal Doig well located at 10-02-088-23W6 (40% WI) in the Inga area of British Columbia. The well was drilled to a total measured depth of approximately 3,100 metres (including approximately a 1,200-metre horizontal lateral). The well was successfully completed with a 12-stage fracture stimulation program. The final rate after clean-up was restricted at 4.0 MMCF per day of gas and approximately 1,400 barrels per day of condensate. The well tested at a flowing pressure of 7,373 kPag (1,069 psi).
The Company is pleased with the initial test results and the well is currently being tied-in to a gas plant in the area in which Celtic has a 40% ownership interest. Celtic has an interest in 4,200 net acres at Inga and has an additional 768 net acres under option through a farm-in commitment. The test results from the Company's second well, which is a step-out from existing well control, provides strong validation for the play. The Company plans to participate in the drilling of three additional horizontal Doig wells (40% WI) at Inga through the remainder of 2011.
Resthaven - Montney
Celtic continues to prove up its Triassic Montney prospect at Resthaven where the Company has now drilled six horizontal wells on its 600 section land block, in addition to several successful vertical re-entry and deepening operations. The Company is very encouraged by the results to date and has expanded its 2011 capital expenditure budget to include additional wells to be drilled at Resthaven during the year.
Celtic's discovery horizontal well located at 02-07-061-02W6 (100% WI) has been on production since early November 2010 and is currently producing at a restricted rate of 2.6 MMCF per day of natural gas, with associated liquids of 90 barrels per day. The well is producing at a flowing tubing pressure of 10,070 kPag (1,459 psi) and production is restricted due to capacity constraints at a third party gas plant.
A horizontal well located at 08-36-059-02W6 (100% WI), approximately ten miles south of the discovery well, has been completed and is currently awaiting tie-in. The well demonstrated an initial bottom-hole reservoir pressure of 39,102 kPag (5,667 psi) which is similar to Celtic's 02-07 discovery well. The well flow tested at 5.2 MMCF per day on frac clean-up. The heel of the horizontal lateral was completed with a plug-and-perf fracture system and illustrates damaged characteristics that the Company expects will clean-up after the well flows for an extended period of time.
Celtic has also completed a horizontal well located at 14-04-061-02W6 (100% WI) which is approximately three miles east of the 02-07 discovery well. The well was drilled into a tighter portion of the lower section of the middle Montney formation in order to test productivity in this interval. As a result of decreased permeability, only five of the 11 fractures were initiated. A flow test was performed on the well with a final rate of 2.4 MMCF per day of gas and 50 barrels per day of free condensate. The Company plans to drill a second horizontal lateral into the upper section of the middle Montney formation which is equivalent to the zone that Celtic's 02-07 well was drilled into. After completion, hydrocarbons from both horizontal laterals can be commingled and produced from the same vertical wellbore.
The Company participated in the drilling of a horizontal well located at 16-27-061-02W6 (30% WI) which is located approximately four miles northeast of Celtic's 02-07 discovery well. This well was successfully completed with a 12-stage fracture stimulation program. The well was flowed on clean-up, up seven inch casing. Production tubing is being run so that a test on this well can be started.
The Company has drilled a horizontal well located at 13-33-062-04W6 (50% WI), which is approximately 15 miles northwest of Celtic's 02-07 discovery well. The Company expects to commence completion operations on this well after spring break-up, in early May, subject to weather conditions.
The Company has drilled another horizontal well located at 15-31-060-02W6 (100%WI) which is approximately two miles south of Celtic's 02-07 discovery well. Completion operations are expected to commence after spring break-up, in early May, subject to weather conditions.
The Company has commenced construction of a gas gathering pipeline system that will connect all of its wells for processing at the Simonette gas plant located at 11-06-063-25W5 which has a licensed capacity of 150 MMCF per day and is operated by Keyera Facilities Income Fund. As a result, the majority of Celtic's new production from the Resthaven area is expected to commence in the third quarter of 2011.
Celtic is excited about this new resource play in the Triassic Montney formation and expects over 40% of its planned capital expenditures in 2011 to be in the Resthaven area.
Non-core Property Dispositions
Celtic has elected to focus its development and future growth opportunities in resource-type plays that provide the Company with the ability to add numerous drilling locations to its inventory that can be drilled horizontally with multi-fracture completions and which, in most cases, are predictable and repeatable.
As a result, the Company expects to continue to monetize existing assets that do not meet this criteria. From March 2010 to March 2011, Celtic has divested non-core assets representing approximately 884 BOE per day of production for gross proceeds of $82.2 million. In aggregate, production on a flowing barrel basis was sold for approximately $93,000 per BOE/day.
2011 Guidance
After evaluating results from the Company's recent drilling activity in its core areas identified above, Celtic's Board of Directors have increased the 2011 capital expenditure budget to $260.0 million (previously $180.0 million). The Company expects to spend $207.0 million on drilling and completing wells, $40.0 million on facilities, equipment and pipelines, and $13.0 million on land and seismic.
Celtic expects production in 2011 to average between 20,000 and 20,400 BOE per day. This estimate is based on production in the first quarter averaging between 15,500 and 16,000 BOE per day, production in the second quarter averaging between 18,500 and 19,000 BOE per day, and production in the second half of the year averaging between 22,800 and 23,300 BOE per day. Production in the first quarter has been negatively affected by approximately 1,000 BOE per day as a result of plant outages at the Kaybob KA and K3 facilities, the most significant being the K3 plant outage from March 10 to April 8, 2011. New production from Fir/Bigstone and Inga, as well as new production from the Company's on-going Montney and Bluesky development program at Kaybob, is expected to provide production growth in the second quarter of the year and new production from the Montney play at Resthaven and the Duvernay play at Kaybob, in addition to on-going drilling at Fir/Bigstone and Inga, is expected to provide the Company with production growth in the second half of 2011. The Company expects to exit 2011 with production of approximately 24,500 BOE per day, an increase of 41% from fourth quarter 2010 production of 17,385 BOE per day. Average production in 2011 is expected to be weighted 23.5% oil and 76.5% gas.
Celtic expects to achieve continued improvement in its cost structure in 2011. Production expense is estimated to be $7.62 per BOE, an improvement of 6% from $8.13 per BOE in 2010. Royalties are expected to average 11.0% compared to 11.5% in 2010. General and administrative expense is estimated to be at industry leading low levels of $0.74 per BOE.
The Company's average commodity price assumptions for 2011 are US$90.00 (previously US$85.00) per barrel for WTI oil, US$4.30 (previously US$4.75) per MMBTU for NYMEX natural gas, $3.55 (previously $3.95) per GJ for AECO natural gas and a US/Canadian dollar exchange rate of US$1.000 (no change from previous forecast). These prices compare to average 2010 prices of US$79.43 per barrel for WTI oil, US$4.42 per MMBTU for NYMEX natural gas, $3.95 per GJ for AECO natural gas and a US/Canadian dollar exchange rate of US$0.970.
After giving effect to the aforementioned production and commodity price assumptions, funds from operations for 2011 is forecasted to be approximately $160.0 million or $1.63 per share, diluted (previous forecast was $159.0 million or $1.70 per share, diluted) and net earnings are forecasted to be approximately $13.0 million or $0.13 per share, diluted (previous forecast was $12.0 million or $0.13 per share, diluted).
Changes in forecasted commodity prices and variances in production estimates can have a significant impact on estimated funds from operations and net earnings. Please refer to the advisory regarding forward-looking statements below.
Sensitivities to changes in commodity prices would affect forecasted 2011 funds from operations and net earnings as follows:
- change in AECO natural gas price of $1.00 per GJ would affect funds from operations by $33.9 million ($0.34 per share) and earnings by $24.8 million ($0.25 per share);
- change in WTI oil price of US$10.00 per barrel would affect funds from operations by $4.1 million ($0.04 per share) and earnings by $3.0 million ($0.03 per share); and
- change in US/Canadian dollar exchange rate of US$0.05 per CAD would affect funds from operations by $8.3 million ($0.09 per share) and earnings by $6.1 million ($0.06 per share).
Bank debt, net of working capital, is estimated to be $182.9 million by the end of 2011 or approximately 1.1 times forecasted 2011 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 2011 and beyond.
The information set out herein under the heading "2011 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 2011. Readers are cautioned that this financial outlook may not be appropriate for other purposes.
Advisory Regarding Forward-Looking Statements
This press release 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.
Other Measurements and Abbreviations
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". Million British Thermal Units is abbreviated as "MMBTU". Kilopascals gauge is abbreviated as "kPag". Pounds per square inch is abbreviated as "psi". West Texas Intermediate is abbreviated as "WTI". New York Mercantile Exchange is abbreviated as "NYMEX". The Alberta Energy Company "C" Meter Station of the Nova Pipeline System is abbreviated as "AECO".
Share Information
The Company is authorized to issue an unlimited number of common shares and an unlimited number of preferred shares. As at March 31, 2011, there were 96.5 million common shares outstanding. There are no preferred shares outstanding.
As at March 31, 2011, directors, employees and certain consultants have been granted options to purchase 6.0 million common shares of the Company at an average exercise price of $8.48 per share.
The Company's common shares trade on the TSX under the symbol "CLT".
For further information please refer to the latest corporate presentation that is available on the Company's website at www.celticex.com.
