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Press release from Marketwire

Celtic Enters into Agreement to Acquire Assets at Grand Cache

Tuesday, November 01, 2011

Celtic Enters into Agreement to Acquire Assets at Grand Cache20:24 EDT Tuesday, November 01, 2011CALGARY, ALBERTA--(Marketwire - Nov. 1, 2011) - Celtic Exploration Ltd. ("Celtic" or the "Company") (TSX:CLT) 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. Assets to be Acquired 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.Resthaven Infrastructure UpdateAt 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.K3 Gas Plant UpdatePreviously, 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. Fir Infrastructure UpdateAt 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.Third Quarter ResultsCeltic expects to release its third quarter results on November 10, 2011. The Company's updated 2011 Guidance will be discussed on November 10, 2011.Advisory Regarding Forward-Looking StatementsCertain 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.Other MeasurementsAll 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: David J. WilsonCeltic Exploration Ltd.President and Chief Executive Officer(403) 201-5340ORSadiq H. LalaniCeltic Exploration Ltd.Vice President, Finance and Chief Financial Officer(403) 215-5310www.celticex.com