Celtic Reports 2008 Operating Results Highlighted by Significant Increases In Production and Reserves



    (Stock Symbol "CLT" - TSX)

    CALGARY, Feb. 4 /CNW/ - Celtic Exploration Ltd. ("Celtic" or the
"Company") has released its operating results for the three months and twelve
months ended December 31, 2008. Summary of results are as follows:

    
    -------------------------------------------------------------------------
                            Three months ended          Twelve months ended
                               December 31,                 December 31,
    -------------------------------------------------------------------------
                           2008     2007   Change     2008     2007   Change
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Production
    -------------------------------------------------------------------------
      Oil (BBLS/d)        3,554    3,230      10%    3,404    3,107      10%
    -------------------------------------------------------------------------
      Gas (MCF/D)        51,029   35,898      42%   46,000   28,599      61%
    -------------------------------------------------------------------------
      Combined (BOE/D)   12,059    9,213      31%   11,071    7,873      41%
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Production per
     million shares
     (BOE/D)                293      245      20%      276      222      24%
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Drilling activity
    -------------------------------------------------------------------------
      Total wells            14        8      75%       54       65     -17%
    -------------------------------------------------------------------------
      Working interest
       wells               10.2      8.0      28%     41.1     56.0     -27%
    -------------------------------------------------------------------------
      Success rate on
       working interest
       wells               100%     100%               88%      81%
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Undeveloped land
    -------------------------------------------------------------------------
      Gross acres                                  318,969  327,050      -2%
    -------------------------------------------------------------------------
      Net acres                                    246,629  248,135      -1%
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Reserves
    -------------------------------------------------------------------------
      Oil & NGLs (MBBLs)                            14,372   11,897      21%
    -------------------------------------------------------------------------
      Natural gas
       (MMCF)(xx)                                  232,831  131,253      77%
    -------------------------------------------------------------------------
      Combined (MBOE)                               53,177   33,773      57%
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Finding, development
     & acquisition cost(*)
    -------------------------------------------------------------------------
      Proved ($/BOE)                                $19.43   $21.45      -9%
    -------------------------------------------------------------------------
      Proved plus Probable
       ($/BOE)                                      $12.24   $19.27     -36%
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
      Recycle ratio (P+P)                            2.9 x    1.7 x
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Net asset value per
     share(*)
    -------------------------------------------------------------------------
      NPV 10%, before tax                           $18.92   $11.80      60%
    -------------------------------------------------------------------------
      NPV 8%, before tax                            $21.13   $12.99      63%
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    (*)    FD&A costs, recycle ratios and net asset value relating to 2008
           have been calculated using unaudited financial information.
    (xx)   Natural gas reserves do not include sulphur reserves of 252,200
           long tones at December 31, 2008 and 160,300 long tones at
           December 31, 2007.

    HIGHLIGHTS

    The year ended December 31, 2008 was another successful year in the
execution of the Company's growth strategy. Highlights for 2008 are as
follows:

    -   Drilled 54 (41.1 net working interest) wells during 2008 resulting in
        7 (4.9 net) oil wells, 39 (30.9 net) natural gas wells and
        3 (0.6 net) coal bed methane wells, for an overall success rate,
        based on net wells, of 88%;

    -   Increased average daily production by 41% to 11,071 BOE per day, up
        from 7,873 BOE per day in 2007 and achieved daily average production
        per million shares of 276 BOE per day, up 24% in 2007 compared to
        222 BOE per day in the previous year;

    -   Increased proved plus probable reserves by 57% to 53.2 million BOE,
        up from 33.8 million BOE at December 31, 2007;

    -   Reported net asset value per share at year-end of $18.92, based on
        net present value of reserves discounted at 10%, before tax and
        $21.13 per share using an 8% discount rate, before tax; and

    -   The Company received regulatory approval on January 30, 2009 to drill
        five wells per section at its Kaybob South Montney development
        prospect.
    

    DRILLING

    During the year ended December 31, 2008, Celtic drilled 54 (41.1 net)
wells compared to 65 (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.

    PRODUCTION

    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. The
following table provides a summary of daily average production in each core
area:

    
    -------------------------------------------------------------------------
    PRINCIPAL PRODUCING PROPERTIES
    -------------------------------------------------------------------------
                                        Year ended   Year ended   Year ended
                                       December 31, December 31, December 31,
    (BOE/d)                                   2008         2007         2006
    -------------------------------------------------------------------------
    West Central Alberta                     9,083        5,498        3,049
    -------------------------------------------------------------------------
    Southern Alberta                         1,330        1,503        1,838
    -------------------------------------------------------------------------
    East Central Alberta                       350          434          471
    -------------------------------------------------------------------------
    Northern Alberta                           308          438          605
    -------------------------------------------------------------------------
    TOTAL                                   11,071        7,873        5,963
    -------------------------------------------------------------------------
    

    RESERVES

    Celtic retains Sproule Associates Limited ("Sproule"), an independent
qualified reserve evaluator to prepare a report on 100% of its oil and gas
reserves. The Company has a Reserves Committee which oversees the selection,
qualifications and reporting procedures of the independent engineering
consultants.
    Reserves as at December 31, 2008 were determined using the guidelines and
definitions set out under National Instrument 51-101 ("NI 51-101").
    At December 31, 2008, Celtic's proved plus probable reserves were 53.2
million BOE, up 57% from 33.8 million BOE at the end of 2007. The following
table outlines a summary of the Company's reserves (gross company interest
reserves before deduction of royalties payable, not including royalties
receivable) at December 31, 2008:

    
    -------------------------------------------------------------------------
    SUMMARY OF RESERVES
    -------------------------------------------------------------------------
                                                                      Future
                                                                 Development
                                                                     Capital
                           Oil & NGLs  Natural Gas     Combined        Costs
                               (MBBLs)       (MMCF)       (MBOE)     ($000's)
    -------------------------------------------------------------------------
    Proved Developed
     Producing                  6,406       76,905       19,224            -
    -------------------------------------------------------------------------
    Proved Developed
     Non-producing                429        4,408        1,164        4,308
    -------------------------------------------------------------------------
    Proved Undeveloped          1,486       42,439        8,558       87,648
    -------------------------------------------------------------------------
    Total Proved                8,321      123,752       28,946       91,956
    -------------------------------------------------------------------------
    Probable Additional         6,051      109,079       24,231       83,758
    -------------------------------------------------------------------------
    Total Proved plus
     Probable                  14,372      232,831       53,177      175,714
    -------------------------------------------------------------------------
    

    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. The following table is a net present
value summary (before tax) as at December 31, 2008:

    
    -------------------------------------------------------------------------
    NET PRESENT VALUE SUMMARY (BEFORE TAX)
    -------------------------------------------------------------------------
                         Undiscounted    NPV 5% BT   NPV 10% BT   NPV 15% BT
                              ($000's)     ($000's)     ($000's)     ($000's)
    -------------------------------------------------------------------------
    Proved Developed
     Producing                635,675      494,583      409,074      351,209
    -------------------------------------------------------------------------
    Proved Developed
     Non-producing             29,577       24,100       20,157       17,206
    -------------------------------------------------------------------------
    Proved Undeveloped        214,276      140,276       98,117       71,207
    -------------------------------------------------------------------------
    Total Proved              879,528      658,959      527,348      439,622
    -------------------------------------------------------------------------
    Probable Additional       871,359      525,525      363,700      272,089
    -------------------------------------------------------------------------
    Total Proved plus
     Probable               1,750,887    1,184,484      891,048      711,711
    -------------------------------------------------------------------------

    The following table is a net present value summary (after tax) as at
December 31, 2008:

    -------------------------------------------------------------------------
    NET PRESENT VALUE SUMMARY (AFTER TAX)
    -------------------------------------------------------------------------
                         Undiscounted    NPV 5% AT   NPV 10% AT   NPV 15% AT
                              ($000's)     ($000's)     ($000's)     ($000's)
    -------------------------------------------------------------------------
    Proved Developed
     Producing                564,825      443,640      370,000      319,949
    -------------------------------------------------------------------------
    Proved Developed
     Non-producing             21,789       17,546       14,510       12,245
    -------------------------------------------------------------------------
    Proved Undeveloped        159,543      101,850       68,782       47,603
    -------------------------------------------------------------------------
    Total Proved              746,157      563,036      453,292      379,797
    -------------------------------------------------------------------------
    Probable Additional       650,105      388,784      266,194      196,699
    -------------------------------------------------------------------------
    Total Proved plus
     Probable               1,396,262      951,820      719,486      576,496
    -------------------------------------------------------------------------
    

    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. The following table summarizes Sproule's forecasted
future commodity prices for the next five years, as at December 31, 2008:

    
    -------------------------------------------------------------------------
    FUTURE COMMODITY PRICE FORECAST
    -------------------------------------------------------------------------
                          WTI Cushing     NYMEX HH       AECO-C      USD/CAD
                            Crude Oil  Natural Gas  Natural Gas     Exchange
                             (US$/BBL)  (US$/MMBTU)       ($/GJ)        (US$)
    -------------------------------------------------------------------------
    2009                        53.73         6.30         6.47        0.800
    -------------------------------------------------------------------------
    2010                        63.41         7.32         7.17        0.850
    -------------------------------------------------------------------------
    2011                        69.53         7.56         7.43        0.850
    -------------------------------------------------------------------------
    2012                        79.59         8.49         7.95        0.900
    -------------------------------------------------------------------------
    2013                        92.01         9.74         8.72        0.950
    -------------------------------------------------------------------------
    Five Year Average           71.65         7.88         7.55        0.870
    -------------------------------------------------------------------------
    

    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.
    The recycle ratio is a measure for evaluating the effectiveness of a
company's re-investment program. The ratio measures the efficiency of capital
investment. It accomplishes this by comparing the operating netback per BOE to
that years' reserve FD&A cost per BOE. Since incorporation, Celtic has
successfully achieved a recycle ratio of 2.3 times on a proved plus probable
basis. In 2008, the recycle ratio was 2.9 times. The following table provides
detailed calculations relating to FD&A costs and recycle ratios:

    
    -------------------------------------------------------------------------
    FINDING, DEVELOPMENT   Year ended   Year ended   Year ended    Cumulative
     AND ACQUISITION      December 31, December 31, December 31,        since
     COSTS                       2008         2007         2006 incorporation
    -------------------------------------------------------------------------
    PROVED RESERVES
    -------------------------------------------------------------------------
    Capital expenditures
     ($000's) (unaudited)     183,478      179,789      164,050      787,875
    -------------------------------------------------------------------------
    Change in future capital
     costs required to
     develop reserves
     ($000's)                  54,106        6,998       18,811       91,956
    -------------------------------------------------------------------------
    Total capital costs
     ($000's)                 237,584      186,787      182,861      879,831
    -------------------------------------------------------------------------
    Reserve additions, net
     (MBOE)                    12,227        8,708        6,010       41,727
    -------------------------------------------------------------------------
    FD&A cost, before future
     capital ($/BOE)            15.01        20.65        27.30        18.88
    -------------------------------------------------------------------------
    FD&A cost, including
     future capital ($/BOE)     19.43        21.45        30.43        21.09
    -------------------------------------------------------------------------
    Operating netback
     ($/BOE) (unaudited)        34.95        32.24        38.81        34.00
    -------------------------------------------------------------------------
    Recycle ratio - proved        1.8          1.5          1.3          1.6
    -------------------------------------------------------------------------
    PROVED PLUS PROBABLE
     RESERVES
    -------------------------------------------------------------------------
    Capital expenditures
     ($000's) (unaudited)     183,478      179,789      164,050      787,875
    -------------------------------------------------------------------------
    Change in future
     capital costs
     required to develop
     reserves ($000's)        103,608       18,508       31,690      175,714
    -------------------------------------------------------------------------
    Total capital costs
     ($000's)                 287,086      198,297      195,740      963,589
    -------------------------------------------------------------------------
    Reserve additions,
     net (MBOE)                23,457       10,292       10,005       65,959
    -------------------------------------------------------------------------
    FD&A cost, before future
     capital ($/BOE)             7.82        17.47        16.40        11.94
    -------------------------------------------------------------------------
    FD&A cost, including
     future capital ($/BOE)     12.24        19.27        19.56        14.61
    -------------------------------------------------------------------------
    Operating netback
     ($/BOE) (unaudited)        34.95        32.24        38.81        34.00
    -------------------------------------------------------------------------
    Recycle ratio -
     proved plus
     probable                     2.9          1.7          2.0          2.3
    -------------------------------------------------------------------------
    

    Celtic's 2008 capital investment program resulted in net reserve
additions that replaced 2008 production by a factor of 3.0 (3.0 in 2007) times
on a proved basis and 5.8 (3.6 in 2007) times on a proved plus probable basis.

    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. The following table outlines the Montney reserves
included in the December 31, 2008 reserve evaluation:

    
    -------------------------------------------------------------------------
    KAYBOB MONTNEY RESERVES
    -------------------------------------------------------------------------
                                                          Lower
                                                         Kaybob        Total
                                                        South &      Greater
                         Kaybob South       KayFox    Chickadee       Kaybob
    -------------------------------------------------------------------------
    Proved Reserves
    -------------------------------------------------------------------------
      Natural Gas (MMCF)       44,082       31,341        1,811       77,234
    -------------------------------------------------------------------------
      Combined Gas and
       NGLs (MBOE)              8,647        6,112          354       15,113
    -------------------------------------------------------------------------
      Net Present Value
       10% BT ($000's)        158,451       88,198        8,163      254,812
    -------------------------------------------------------------------------
      Number of net
       vertical wells -
       producing                 17.5          3.6          0.8         21.9
    -------------------------------------------------------------------------
      Number of net
       horizontal well -
       producing                 13.5          9.8          2.2         25.5
    -------------------------------------------------------------------------
      Number of net
       horizontal wells -
       locations                 10.8         12.7          0.0         23.5
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Proved plus Probable Reserves
    -------------------------------------------------------------------------
      Natural Gas (MMCF)       85,657       65,886        7,344      158,887
    -------------------------------------------------------------------------
      Combined Gas and
       NGLs (MBOE)             16,803       12,846        1,435       31,084
    -------------------------------------------------------------------------
      Net Present Value
       10% BT ($000's)        279,440      188,270       18,570      486,280
    -------------------------------------------------------------------------
      Number of net
       vertical wells -
       producing                 17.5          3.6          0.8         21.9
    -------------------------------------------------------------------------
      Number of net
       horizontal well -
       producing                 13.5          9.8          2.2         25.5
    -------------------------------------------------------------------------
      Number of net
       horizontal wells -
       locations                 21.8         20.2          4.1         46.1
    -------------------------------------------------------------------------
    

    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. The
components of net asset value are summarized in the following table:

    
    -------------------------------------------------------------------------
    NET ASSET VALUE
    -------------------------------------------------------------------------
                                       December 31, December 31, December 31,
                                              2008         2008         2007
                                          Forecast     Forecast     Forecast
                                            Prices       Prices       Prices
                                       8% Discount 10% Discount 10% Discount
                                              Rate         Rate         Rate
                                           ($000's)     ($000's)     ($000's)
    -------------------------------------------------------------------------
    Present value of P&NG reserves,
     discounted, before tax                989,600      891,048      538,719
    -------------------------------------------------------------------------
    Undeveloped land                        48,339       48,339       45,195
    -------------------------------------------------------------------------
    Bank debt, net of working capital
     (2008 is unaudited)                  (138,550)    (138,550)    (136,249)
    -------------------------------------------------------------------------
    Proceeds from exercise of stock
     options                                41,865       41,865       30,197
    -------------------------------------------------------------------------
    Net asset value                        941,254      842,702      477,862
    -------------------------------------------------------------------------
    Diluted common shares outstanding
     (000's)                                44,536       44,536       40,492
    -------------------------------------------------------------------------
    Net asset value per share ($/SHARE)      21.13        18.92        11.80
    -------------------------------------------------------------------------
    

    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.

    COMMON SHARE INFORMATION

    The Company is authorized to issue an unlimited number of common shares
and an unlimited number of preferred shares. As at December 31, 2008, there
were 41.3 million common shares outstanding. There were no preferred shares
outstanding. As at December 31, 2008, directors, employees and certain
consultants have been granted options to purchase 3.2 million common shares of
the Company at an average exercise price of $12.96 per share. Detailed
information regarding the Company's stock options outstanding is contained in
the notes to the financial statements. The Company's common shares trade on
the Toronto Stock Exchange ("TSX") under the symbol "CLT".

    ADVISORY REGARDING FORWARD-LOOKING STATEMENTS

    Certain information with respect to Celtic contained herein, including
management's assessment of future plans and operations, contains
forward-looking statements. These forward-looking statements are based on
assumptions and are subject to numerous risks and uncertainties, certain of
which are beyond Celtic's control, including the impact of general economic
conditions, industry conditions, volatility of commodity prices, currency
exchange rate fluctuations, imprecision of reserve estimates, environmental
risks, competition from other explorers, stock market volatility and ability
to access sufficient capital. As a result, Celtic's actual results,
performance or achievement could differ materially from those expressed in, or
implied by, these forward-looking statements and, accordingly, no assurance
can be given that any events anticipated by the forward-looking statements
will transpire or occur. In addition, the reader is cautioned that historical
results are not necessarily indicative of future performance.

    MEASUREMENTS

    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, propane,
butane and ethane. References to gas in this discussion include natural gas
and sulphur.





For further information:

For further information: CELTIC EXPLORATION LTD., Suite 500, 505 - 3rd
Street SW, Calgary, Alberta, Canada, T2P 3E6, David J. Wilson, President and
Chief Executive Officer, (403) 201-5340; or Sadiq H. Lalani, Vice President,
Finance and Chief Financial Officer, (403) 215-5310; Or visit our website site
at www.celticex.com.

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Celtic Exploration Ltd.

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