Celtic Exploration Ltd. has released its operating results for the three months and twelve months ended December 31, 2008.
During the year ended December 31, 2008, Celtic drilled 54 (41.1 net) wells compared to 6 (56.0 net) wells in the previous year, with an overall success rate of 88% (81% in 2007) on net wells drilled. The Company's average working interest in wells drilled during 2008 was 76% compared to an average working interest of 86% in 2007. In 2008, Celtic's horizontal drilling activity increased resulting in the average measured depth of net wells drilled of 2,960 metres, 35% deeper than the average measured depth per well of 2,200 metres in 2007.
Oil and gas production in 2008 increased 41% to average 11,071 BOE per day (69% gas) compared to 7,873 BOE per day (61% gas) in 2007. Average production in the fourth quarter of 2008 was 12,059 BOE per day, up 31% from 9,213 BOE per in the fourth quarter of 2007. Production per million shares outstanding in 2008 averaged 276 BOE per day, up 24% from 222 BOE per day in 2007.
Celtic's production is entirely based in Alberta and is divided into four core areas. In Southern Alberta, the Company's primary natural gas producing properties are located at Drumheller, Michichi and Richdale and its primary oil producing properties are located at Princess and Bantry. In East Central Alberta, the principal producing asset is a shallow natural gas property at Ashmont and Figure Lake. In Northern Alberta, the Company produces mainly light oil from Ogston, Otter and Utikuma Lake. In West Central Alberta, Celtic has both natural gas and light oil production at Kaybob, Fox Creek and Swan Hills. West Central Alberta was the Company's most active drilling area in 2008. Approximately 82% of Celtic's production came from this area.
Future development capital expenditures of $175.7 million included in the proved plus probable reserve evaluation is expected to be spent as follows:
$80.0 million in 2009 (includes 23.7 net horizontal wells and 4.8 net vertical wells), $89.5 million in 2010 (includes 25.7 net horizontal wells and 10.4 net vertical wells), and $6.2 million in 2011 (includes 1.0 net horizontal well and 1.4 net vertical wells).
The Company increased the net present value of proved plus probable reserves, discounted at 10% before tax, to $891.0 million, up 65% from $538.7 million at December 31, 2007. The reserve life index ( "RLI ") remains strong at 12.1 years compared to 10.0 years at December 31, 2007. RLI is calculated using actual fourth quarter production.
Sproule is forecasting WTI Cushing crude oil prices to average US$71.65 per bbl over the next five years, 7% higher than the average price of US$67.17 per bbl over the past five years. Sproule's forecast for NYMEX Henry Hub natural gas prices is to average US$7.88 per mmbtu over the 2009 to 2013 period, an increase of 4% from the average price of US$7.58 per mmbtu during the 2004 to 2008 period.
During 2008, the Company's unaudited capital expenditures, net of dispositions, resulted in proved plus probable reserve additions of 23.5 million (10.3 million in 2007) BOE, resulting in finding, development and acquisition ( "FD&A ") costs of $7.82 ($17.47 in 2007) per BOE, before future development capital and $12.24 ($19.27 in 2007) per BOE, including future development capital.
Greater Kaybob Area
Celtic's most active drilling area is in the Greater Kaybob region of west central Alberta where the Company has been successfully developing several Montney liquids-rich natural gas pools. The Company also has opportunities in other formations in the Greater Kaybob area including the Beaverhill Lake, Nordegg and Bluesky. In the December 31, 2008 reserve evaluation, Sproule has assigned reserves to 2.6 net un-drilled wells in the Bluesky formation and 2.0 net un-drilled wells in the Nordegg formation.
Reserves were not assigned to future Nordegg wells that are pending commingling approval.
Net Asset Value
Celtic's net asset value at December 31, 2008, discounting the present value of reserves at 10% before tax, increased to $842.7 million ($941.3 million using an 8% discount rate, before tax), up 76% from $477.9 million at December 31, 2007. On a per share basis, net asset value increased by 60% to $18.92 per share ($21.13 per share using an 8% discount rate, before tax).
The present value of petroleum and natural gas ( "P&NG ") reserves were determined by Sproule in their year-end evaluation report. Undeveloped land at December 31, 2008 was valued at an average price of $196 per acre.
Celtic is excited about the Company's future growth prospects with a large portfolio of development drilling inventory at Kaybob, Celtic expects to continue to add long-life and high netback reserves over the next several years.
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