CALGARY, ALBERTA--(Marketwire - May 10, 2012) - Celtic Exploration Ltd. (News - Market indicators) ("Celtic" or the "Company") has released its financial and operating results for the three months ended March 31, 2012. Summary of results are as follows:

Financial Statements

Celtic's unaudited condensed interim financial statements and related notes for the quarter ended March 31, 2012 will be available to the public on SEDAR at www.sedar.com and will also be posted on the Company's website at www.celticex.com on May 10, 2012.

Celtic's operating results for the three months ended March 31, 2012 are summarized in the table below:

Message to Shareholders

Celtic Exploration Ltd. ("Celtic" or the "Company") is pleased to report to shareholders the Company's activities in the first quarter of 2012.

During the quarter, Celtic drilled 12 (10.0 net) wells with an overall net success rate of 100%. Production during the quarter averaged 18,735 BOE per day, an increase of 20% from 15,605 BOE per day in the first quarter of 2011. During the quarter, the Company experienced significant production downtime as a result of gas plant outages. The most significant downtime that negatively affected production during the first quarter was the outage at the KA Gas Plant where Celtic's production of approximately 7,700 BOE (78% gas) per day is processed. In addition, production of approximately 1,600 BOE (100% gas) per day was shut-in at the Copton Gas Plant. In aggregate, production for the first quarter was negatively affected by over 3,000 BOE per day. As a result of the downtime and pipeline construction delays at Resthaven, Celtic has reduced its average 2012 production guidance to between 24,500 and 25,000 BOE per day (previously between 26,000 and 26,500 BOE per day). The Company's exit guidance of approximately 29,900 BOE per day remains unchanged.

With the KA and Copton gas plants back online, based on field estimates, Celtic's production for the week ended April 28, 2012 was approximately 22,100 BOE per day. In addition, the Company currently has approximately 6,200 BOE per day of production behind pipe from wells that have been drilled and are awaiting tie-in. Celtic expects the majority of these behind pipe volumes to be brought on-stream during the third quarter of 2012.

In the first quarter of 2012, Celtic recorded funds from operations of $25.9 million ($0.24 per share, diluted), down 21% from $32.7 million ($0.34 per share, diluted) reported in the same quarter of the previous year. Despite higher production levels during the first quarter of 2012, funds from operations decreased primarily due to significantly lower natural gas prices which averaged $2.41 per MCF in the first quarter of 2012, down 43% from $4.22 per MCF in the same period in 2011.

Net capital expenditures during the quarter were $151.7 million, up 112% from $71.5 million in the first quarter of 2011.

Subsequent to the end of the first quarter, Celtic issued 5% convertible debentures by way of short-form prospectus for gross proceeds of $172.5 million.

Drilling and Operations

In the Greater Resthaven area, five horizontal Montney wells were drilled and completed throughout the 702 section block as the Company continued to de-risk its Montney acreage. An additional well in the Smoky area was tested with a vertical strat and drilled to 90 degrees where intermediate casing has been set. The Company expects to drill the horizontal leg on this well next winter due to an early spring break-up. At the south end of the Greater Resthaven land block, Celtic has put on-stream, a newly drilled well located at Harley 06-12-057-27W5 (100% WI). Given the well's location in a previously untested part of the Resthaven land block, the results from this well are significant in evaluating and de-risking the Company's acreage. The well was drilled to a measured depth of 5,115 metres and was completed with a 16-stage foam fracture technique. After 236 hours of clean-up and flow, at the end of the test, the well was producing natural gas at a rate of 9.4 MMCF per day and field condensate of 243 barrels per day, at a flowing wellhead pressure of 1,378 kPa (200 psi). This well is on production and additional liquids will be recovered from the gas stream at the gas plant.

The Company completed the majority of its ambitious pipeline infrastructure construction during the quarter. At Jayar, the Simonette River was crossed and an extension was completed into the northern part of the Resthaven land block. In the southern part of the Resthaven land block, the main "trunk-line" has been completed with the exception of a six kilometre interval and a river crossing which had to be postponed due to an early spring break-up. The river crossing and pipeline construction is now planned for July, which would enable the Company to bring on production three additional Montney wells and a Cretaceous zone.

The Simonette gas plant, at which the majority of the wells in the Company's Resthaven land block produce, continues to make modifications which Celtic expects will increase liquid recoveries. On May 7^th, 2012, the plant was shut down to attempt to further enhance recoveries. The plant is expected to be down for approximately one week while it is retro-fitted. Celtic has made arrangements to divert its Resthaven gas to the Edson and K3 Gas Plants during this period.

The Simonette gas plant is expected to expand and convert to a deep-cut gas plant in late 2013 or early 2014. This will substantially increase liquids recovery from Celtic's Resthaven wells, resulting in an overall increase of approximately 50% in liquids, excluding Ethane.

In 2011, Celtic wells on production in the greater Resthaven area averaged 45 barrels/MMCF of liquids. In 2012, as the Company shifts more of its drilling to "oilier" parts of the acreage this liquids ratio should increase with a further increase in liquids resulting from the start-up of the deep-cut facility at the beginning of 2014.

In the Kaybob area, two Bluesky wells were drilled and completed. The 50% and 75% WI wells did not come on production due to the KA Gas Plant being down; however, these wells have been brought on production in the second quarter. Also at Kaybob, a 33.3% WI Duvernay well was drilled during the quarter and the Company is planning a "hybrid" style completion in May, weather permitting. Two other wells at a 50% WI and at 100% WI were also spud targeting the Duvernay during the first quarter and subsequently shut down, waiting on dry weather, before drilling resumes. A non-operated 50% WI Duvernay well located at 13-22-062-21W5 was completed and tested during the first quarter and is expected to be put on production in July. Celtic has re-allocated additional capital to the Duvernay play during the remainder of 2012.

At Fir, the Company drilled two 100% WI wells which are expected to come on production in May and June. Capital has been shifted from Fir to the Kaybob Dunvegan oil play to increase the Company's exposure to higher netback production.

At Inga, British Columbia, the Company participated in the drilling of a horizontal Doig well. The non-operated 40% WI well was tested and will be placed on production in May. It is anticipated that five more wells will be drilled at Inga prior to year-end.

Outlook

In spite of continued AECO natural gas prices below $2.00 per GJ, Celtic is able to generate high netbacks from its liquids production, the majority of which is condensate that attracts a premium to WTI pricing. In addition, the Company continues to take advantage of the Alberta Government royalty incentive programs.

Given the success from its recent drilling program, Celtic maintains its exit 2012 production guidance of 29,900 BOE per day. The Company has increased its planned 2012 capital expenditure program to $322.0 million, up 7% from its previous budget of $300.0 million. The increased capital spending in 2012 is primarily for a gas plant to be constructed at Kaybob. The Company is currently evaluating the size and type of facility that it expects to commence building later in 2012. A Company owned facility will provide Celtic with greater control over its production run time with less dependence on third party operated facilities, and enhanced liquid recoveries and netbacks.

The Company is excited about its active program and looks forward to updating shareholders with further results in the near future. Celtic continues to maintain a flexible financial position so that it can pursue opportunities as they arise. With the newly constructed pipeline and facility infrastructure at Resthaven, Celtic is positioned to drill wells and add new production with short lead times when natural gas prices make a recovery.

2012 Guidance

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 a 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 an increased 2012 capital expenditure budget of $322.0 million (previously $300.0 million). The increased capital spending in 2012 is primarily for a gas plant to be constructed at Kaybob. The Company is currently evaluating the size and type of facility that it expects to commence building later in 2012. A company owned facility will provide Celtic with greater control over its production run time with less dependence on third parties. The Company expects to spend $241.0 million on drilling and completing wells, $65.0 million on facilities, equipment and pipelines, and $16.0 million on land and seismic in 2012.

Celtic expects production in 2012 to average between 24,500 and 25,000 BOE per day (previously between 26,000 and 26,500 BOE per day). During the first quarter, the Company experienced significant production downtime as a result of gas plant outages. The most significant downtime that negatively affected production during the first quarter was the outage at the KA Gas Plant where Celtic's production of approximately 7,700 BOE (78% gas) per day is processed. In addition, production of approximately 1,600 BOE (100% gas) per day was shut-in at the Copton Gas Plant. Average production in 2012 is expected to be weighted 25% oil and 75% gas (previously 24% oil and 76% gas); however, operating income in 2012 is expected to be weighted 79% oil and 21% gas (previously 73% oil and 27% gas). At the low end of the range of 2012's average production forecast, this represents a 51% increase from average production of 16,212 BOE per day in 2011. On a production per common share basis, the increase would be 41%.

Celtic expects to achieve continued efficiencies in its cost structure in 2012. Production expense is estimated to be $8.76 (previously $7.89) per BOE and royalties are expected to average 11.6% (previously 12.7%). General and administrative expense is estimated to be at industry leading low levels of $0.67 (previously $0.66) per BOE.

The Company's average commodity price assumptions for 2012 are US$97.00 (previously US$95.00) per barrel for WTI oil, US$2.65 (previously US$2.75) per MMBTU for NYMEX natural gas, $2.10 (previously $2.35) per GJ for AECO natural gas and a US/Canadian dollar exchange rate of US$0.9901 (previously US$0.9804). 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 $155.0 million or $1.42 per common share, diluted (previously $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 and profit as follows:

(i) A change of 15% in AECO natural gas price of $0.32 per GJ would affect funds from operations by $14.3 million ($0.13 per common share); and

(ii) A change of 15% in WTI oil price of US$14.55 per barrel would have a minimal impact on funds from operations due to Celtic's fixed WTI derivative financial instrument contracts currently in place.

Celtic estimates 2012 year-end bank debt, net of working capital, to be approximately $210.0 million, which provides the Company with approximately $125.0 million of unused and available bank credit at year-end.

Celtic is excited about the growth prospects being generated in the Company and remains optimistic about the Company's ability to deliver continued per common 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.

Advisory Regarding Forward-Looking Statements

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. Readers are cautioned that the foregoing well test results are not necessarily indicative of long-term performance.

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". Thousand cubic feet is abbreviated as "MCF". Barrels are abbreviated as "bbls". Giga joules are abbreviated as "GJ". Kilopascals is abbreviated as "kPa" and pounds per square inch is abbreviated as "psi".