Right now, most com­pa­nies are spend­ing more time try­ing to stay afloat than pre­par­ing for the next time they’ll be able to soar. But Kelt Ex­plo­ration is one of the few that’s think­ing ahead, and that’s a di­rect re­sult of its long­time chief fi­nan­cial of­fi­cer Sadiq Lalani. Take the com­pany’s ac­qui­si­tion of Artek Ex­plo­ration com­pleted last April, one that saw Kelt take out its Mont­ney neigh­bor in an all-share deal that val­ued Artek at $307 mil­lion, in­clu­sive of debt. There were some ob­vi­ous syn­er­gies be­tween the two com­pa­nies that made the deal a good one for Kelt, most no­tably the fact that they shared a joint ven­ture in the Mont­ney that was pro­duc­ing some very promis­ing well re­sults. “We were afraid that if th­ese Mont­ney re­sults ac­tu­ally sank into the mar­ket­place, it might be dif­fi­cult to buy Artek at a later date, even though com­mod­ity prices were still com­ing off,” Lalani says. “So we made the move and ap­proached them, and we were able to get them en­gaged.”

Kelt also raised $90 mil­lion in a pri­vate place­ment in con­junc­tion with the trans­ac­tion, one that al­lowed it to take on the deal debt-free. But the telling de­tail in the trans­ac­tion wasn’t in the top line terms but in­stead the way it was struc­tured. “The easy thing to do would have been to amal­ga­mate Artek into Kelt and have ev­ery­thing run un­der Kelt,” Lalani says. “But we didn’t – we kept Artek as a wholly owned sub­sidiary, changed the name to Kelt Ex­plo­ration LNG, and moved all of Kelt’s as­sets into this sub­sidiary and took all of the Al­berta as­sets out of Artek and put them into Kelt.” The rea­son? Kelt Ex­plo­ration LNG now has its own tax pools, its own fi­nan­cial state­ments and will run with its own set of books, a de­ci­sion that makes it much eas­ier for Kelt to sell those as­sets should some­body take an in­ter­est in them down the road. “If we had done it the other way and some­body of­fered us a big amount for our B.C. as­sets it would have cre­ated a tax li­a­bil­ity [for Kelt]. But now, that same per­son can come in and buy Kelt LNG, and be­cause we have a cost base in Kelt LNG shares, our pro­ceeds will be a cap­i­tal gain based on that.”

That sort of fore­sight is typ­i­cal for Lalani. Back in 2008, when he was the CFO of Celtic Ex­plo­ration and oil was trad­ing at $140 per bar­rel, most of his peers were dream­ing about the up­side they thought lay ahead. Celtic, on the other hand, locked in some ma­jor hedges for cal­en­dar 2009. By March, oil was at $35 a bar­rel, and those hedges were worth $40 mil­lion. “We kept the hedge on, took the pro­ceeds of that hedge and started ac­quir­ing land at a frac­tion of the price that you would nor­mally have paid in that July 2008 pe­riod.” But while that seems like a no-brainer in ret­ro­spect, Lalani says that be­ing the CFO of a pub­licly traded com­pany means hav­ing to de­fend those sorts of proac­tive de­ci­sions. “In the last two years of Celtic’s life, we sac­ri­ficed pro­duc­tion growth to grow the land base. And it was re­ally that land base that at­tracted Exxon.”

That at­trac­tion even­tu­ally led to a $3.1-bil­lion takeover of­fer from the su­per­ma­jor, one that re­warded Celtic share­hold­ers hand­somely for the pa­tience and dis­ci­pline their man­age­ment team had shown. But those qual­i­ties aren’t al­ways ap­pre­ci­ated by in­vestors, Lalani says. “You have to make tough calls like that, and th­ese are tough calls to make when you’re a pub­licly traded com­pany be­cause you’ve got in­vestors to an­swer to.” He says he re­ceived his fair share of those phone calls back when oil was trad­ing over $100 a bar­rel and Kelt was still keep­ing its pow­der con­spic­u­ously dry. “I had in­sti­tu­tional in­vestors from the United States tell me that we weren’t us­ing our bal­ance sheet cor­rectly, and that we needed to have more debt be­cause it was a cheaper cost of cap­i­tal. Good thing I didn’t take their ad­vice.” No kid­ding. As the re­cent down­turn has demon­strated, the com­pa­nies that get too lev­ered up in the good times are the ones most likely to crash and burn in the bad ones.

Kelt, Lalani says, isn’t go­ing to be one of them. “This is the per­fect mar­ket for Kelt – right now.

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