Celtic Exploration Announces $125.0 Million Bought Deal Equity Financing and Provides Operations Update

CALGARY, ALBERTA--(Marketwire - Sept. 19, 2011) -

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES OF AMERICA.

Celtic Exploration Ltd. (TSX:CLT) ("Celtic" or the "Company") is pleased to announce that it has entered into an agreement with a syndicate of underwriters co-led by FirstEnergy Capital Corp. and RBC Capital Markets, and including CIBC World Markets Inc., GMP Securities L.P., Canaccord Genuity Corp., Peters & Co. Limited, Cormark Securities Inc., Macquarie Capital Markets Canada Ltd., National Bank Financial Inc., Stifel Nicolaus Canada Inc., and TD Securities Inc. (collectively the "Underwriters"), under which the Underwriters have agreed to purchase for resale to the public, on a bought deal basis, 5,000,000 common shares of Celtic, at a price of $25.00 per common share resulting in gross proceeds of $125,000,000.

Celtic has also granted the Underwriters an option, exercisable for a period commencing at closing of the offering and ending 30 days following closing of the offering, to purchase an additional 750,000 common shares at the same offering price which, if exercised, would increase the total gross proceeds to $143,750,000.

Net proceeds from the offering will initially be used to pay down existing credit facilities, and thereafter to fund ongoing exploration and development activities, potential asset acquisitions and for general corporate purposes. This transaction is subject to certain conditions including normal regulatory approvals and specifically, the approval of the Toronto Stock Exchange. The common shares will be offered in all provinces of Canada by way of short form prospectus. Closing is anticipated to occur on or about October 7, 2011.

This press release does not constitute an offer to sell or a solicitation of any offer to buy the common shares in the United States. The common shares have not been and will not be registered under the U.S. Securities Act of 1933 and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of such Act.

Operations Update

Resthaven Montney

At Resthaven, Celtic continues to de-risk its Montney acreage. In the north half of its land block, the Company has drilled and logged a strat well located at 04-27-061-03W6 (100% WI) and in the south half of its land block, the Company has drilled and logged a strat well located at 12-20-058-27W5 (100% WI). Both wells were logged to total depth in the Montney and confirm the continuation of the Middle Montney interval in previously unexplored portions of the play. Celtic has commenced drilling the horizontal portion of these two wells.

The Company plans to drill four to six incremental wells at Resthaven in the fourth quarter of 2011 that were previously not included in the 2011 capital program, thereby increasing its capital expenditure budget for 2011 by $40.0 million. If successful, these wells are expected to be brought on-stream in early 2012.

Kaybob Duvernay

At Kaybob, Celtic plans to spud a third horizontal well in the Duvernay formation located at 13-36-060-20W5, on its joint venture acreage, during the first week of October. Celtic will operate the well in which it has a 33.3% working interest. The well is located in the liquids-rich gas window where the first two horizontal wells have been producing associated liquids of approximately 100 barrels per MMCF of raw gas, during the first three months of production. Celtic currently holds 95,640 net acres (149 net sections) of Duvernay rights in the Kaybob area.

Fir/Bigstone Montney

At Fir/Bigstone, Celtic commenced testing a horizontal well located at 01-34-059-22W5 (100% WI) on September 14, 2011. This well was drilled to a measured depth of 5,480 metres, including a horizontal lateral of 2,538 metres, and was completed with a 24-stage oil fracture technique. Production from the well has been flowing in-line through a recently installed compressor and is being processed at the K3 gas plant. After testing for 84.5 hours, the well was producing natural gas during the last 24 hours at a rate of 15.0 MMCF per day. Associated liquids are expected to be 40 to 60 barrels per MMCF of raw gas. The Company expects to drill three more horizontal wells at Fir prior to year-end.

Advisory Regarding Forward-Looking Statements

The information with respect to Celtic contained herein, contains forward-looking statements, including statements concerning the anticipated closing date, the anticipated use of proceeds of the offering and planned drilling operations. These forward-looking statements are based on assumptions, including the anticipated receipt of regulatory approvals 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. Celtic does not intend, and does not assume any obligation, to update or revise these forward-looking statements except as required pursuant to applicable securities laws.