Summary
Kelt has shown strong production growth in the past, which continued in Q1. The balance sheet is very healthy. Profit was lower than expected due to lower realized NGL and gas prices. Shareholder returns are limited in 2025 but can increase to good levels in 2029.
In my 85 oil and gas companies ranking, Kelt ranks in the top 25 at a good 21st position.
Production
• Production shrank in 2020 from 29.9 K BoE/d (2019) to 20.9 K BoE/d (2021) due to the sale of the Montney assets. After 2020 Kelt production has shown a continuous growth from 20.9 K BoE/d (2021) to 30.5 K BoE/d in 2024. See chart below.
• Growth continued in 2025. Q1 production (40.0 K BoE/d) was above the outlook (37.5-39.5 K BoE/d, above my expectation (38.5 K BoE/d) and well above Q4 (36.5 K BoE/d.
• Kelt reduced the 2025 outlook was reduced from 44-48 K BoE/d to 44-47 K BoE/d) but still is showing continued growth.
• In 2026/2027 export capacity will be further boosted by a 45 MM scfe/d expansion at Oak/Flatrock.
• After 2025 I expect continued production growth, with production reaching 68-71 K BoE/d in 2029.
- Kelt- production.jpg (40.13 KiB) Viewed 539 times
Balance sheet
• The Kelt balance sheet is in an excellent condition.
• Q1 equity ratio (=equity/balance sheet total) is an excellent 71.8% (2024), although down from 73.5% (late 2024).
• Q1 long-term debt was C$ 103 M, down C$ 6 M compared to the C$ 109 M in late 2024.
• The debt/EBITDA ratio and an annual basis is a low 0.43.
• The balance sheet allows shareholder returns, provided that the FCF is positive.
Profitability
• Kelt is a profitable company.
• Q1 profit was C$ 19 M, eps = C$ 0.10. This was a bit lower than the C$ 0.12 that I had expected.
• The lower profit was due to lower realized NGL price (C$ 41.07/bbl) and the realized gas prices (C$ 2.92/MM Btu).
• The low gas price is common to all companies that I track. The low NGL price was Kelt specific.
• In Q4 Kelt added third-party natural gas processing which resulted in a higher NGLs recovery, but with a lot of less valuable propane and ethane components. The above resulted in a reduction of the realized NGL price in Q4 and Q1
• For 2025, with WTI= $ 60-65/bbl and including the effect of US import tariffs, I expect an eps of C$ 0.46-0.51 (PE=medium 11.2-12.7).
• Over time the eps can grow to C$ 0.55-0.68 (PE= low 8.8-11.0) in 2029.
Shareholder returns
• As long as that the FCF is negative, there will be no shareholder returns (dividend/share buybacks
• No returns were provided in Q1. I expect this to continue in Q2.
• The FCF in 2025 will turn positive in H2. Start of shareholder returns soon thereafter can be considered.
• Returns in 2025 will be limited 1.0-1.4%.
• Returns over time with WTI - $ 60-65/bbl can increase to 8.3-10.4% in 2029.
Conclusions
Kelt has shown strong production growth in the past, which continued in Q1. The balance sheet is very healthy. Profit was lower than expected due to lower realized NGL and gas prices. Shareholder returns are limited in 2025 but can increase to good levels in 2029.
In my 85 oil and gas companies ranking, Kelt ranks in the top 25 at a good 21st position.