CELTIC EXPLORATION LTD. 
By
(Stock Symbol "CLT" - TSX) November 1, 2011
Calgary, Alberta
Celtic Exploration Ltd. ("Celtic" or the "Company") has
entered into an agreement with a major petroleum company to
acquire natural gas assets at Grande Cache, Alberta, adjacent
to Celtic's core area at Resthaven, for cash consideration of
$50.0 million, before closing adjustments. The acquisition
has an effective date of July
1, 2011 and is subject to standard industry closing
conditions. Closing is expected to occur during the second
week of December 2011. The consideration to be paid by Celtic
under the agreement will be financed by bank debt. The
Company has received an indication from its lead bank,
National Bank of Canada, whereby, Celtic's available bank
credit lines will be increased by $25.0 million to $275.0
million, upon closing of the acquisition.
The assets are located in Alberta between townships 58 and 62
and ranges 6 to 10 west of the sixth meridian, directly west
of Celtic's Resthaven lands. Recent natural gas production
from the assets to be acquired was approximately 15.0 million
cubic feet per day or 2,500 BOE per day, of which
approximately 50% is operated. The acquisition also includes
approximately 61,000 net acres (95 sections) of lands, of
which approximately
33,000 net acres (51 sections) are undeveloped. The majority
of the lands contain Cretaceous rights, including the
Cardium, Dunvegan, Cadotte, Falher, Bluesky, Gething Cadomin
and Nikanassin formations.
An independent reserve evaluation was prepared for the vendor
by GLJ Petroleum Consultants Ltd. ("GLJ") effective March 31,
2011. In the report, GLJ assigned 4.7 million BOE of
remaining proved producing reserves and 6.1 million BOE of
remaining proved plus probable reserves. Average royalties
are approximately 16% and production expenses are currently
below $6.00 per BOE.
In addition, the Company will acquire a 30.0% working
interest in the Copton gas plant located at 11-25-059-
09W6; a 7.0% working interest in the Narraway gas plant
located at 10-08-062-10W6; and interests in various
compressors and gas gathering pipelines.
The Company has identified several horizontal drilling
opportunities on the Grande Cache asset base that has
previously been developed using only vertical wells. The
assets are complementary to Celtic's land holdings at
Resthaven where the Company is currently drilling a
horizontal well in the Cretaceous Falher formation.
At Resthaven, Celtic has completed the majority of Phase I
construction of gas gathering pipelines and a central
compression and dehydration facility located at
02-10-060-01W6 (the "Resthaven facility"). The Company has
started operating the Resthaven facility, with the first
compressor running, since October 28, 2011. Natural gas from
the Resthaven facility is pipeline (12 inch) connected to the
Simonette gas plant operated by Keyera Corp. Two 100% working
interest horizontal wells have been tied-in to the Resthaven
facility which is currently producing at the first
compressor's maximum capacity of 12.7 million cubic feet per
day.
A second compressor with a capacity of 15.3 million cubic
feet per day is expected to start up during the second week
of November, at which time, four additional 100% working
interest horizontal wells are expected to be tied- in to the
Resthaven facility. As a result, Celtic will have aggregate
capacity of 28.0 million cubic feet per day
from Phase I construction.
Phase II construction is currently underway as Celtic extends
the gas gathering pipeline system north of the Simonette
River. As part of this construction phase, the Company
expects to install a third compressor and additional
dehydration facilities by late December 2011, expanding the
aggregate capacity of the Resthaven facility to 50.0 million
cubic feet per day.
Celtic currently has four rigs operating in the Resthaven
area and looks forward to providing additional completion
results from recently drilled wells in its November 10, 2011
press release.
Previously, in a press release dated October 20, 2011, the
Company reported on production disruption of approximately
5,500 BOE per day at the K3 gas plant ("K3"), operated by
SemCAMS ULC. Approximately 2,000
BOE per day of Celtic production was restored on October 28,
2011; however, Pembina Pipeline is experiencing a mainline
outage that impacts NGLs currently being shipped from K3. As
a result, processing at K3 is limited due to NGL storage
restraints. SemCAMS/Pembina has reported that these
restrictions are expected to
continue until approximately November 7, 2011.
At Fir, Celtic has completed the Phase I construction of a
compression and dehydration facility located at 01-32-
059-22W5 which has a capacity of 17.5 million cubic feet per
day plus condensate handling of 600 barrels per day. The
Phase II construction at Fir is currently in progress and
when completed, will expand the capacity to
30.0 million cubic feet per day plus condensate handling of
1,250 barrels per day. The Phase II facility expansion is
expected to be completed by early December 2011 and at that
time, Celtic expects to have one
75% working interest and five 100% working interest
horizontal wells on production.
Celtic expects to release its third quarter results on
November 10, 2011. The Company's updated 2011
Guidance will be discussed on November 10, 2011.
Certain information with respect to Celtic contained herein,
including management's assessment of future plans and
operations, the expected timing of the closing of the asset
acquisition, the increase to its bank credit lines, the
start-up of gas facilities and the completion of certain
construction projects contain 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. The forward-
looking statements contained herein 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.
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, please contact:
Sadiq H. Lalani, Vice President, Finance and Chief Financial Officer (403) 215-5310. Or visit our website site at www.celticex.com.
