InPlay Oil Corp press release
InPlay Oil Corp. Announces 2023 Financial, Operating and Reserves Results
TSX - Toronto Stock Exchange · Oil · Natural Gas · Natural Gas Liquids · Canada
Canada NewsWire
CALGARY AB , March 13, 2024 /CNW/ - InPlay Oil Corp. (TSX: IPO) (OTCQX: IPOOF) ("InPlay" or the "Company") announces its financial and operating results for the three and twelve months ended December 31, 2023 , and the results of its independent oil and gas reserves evaluation effective December 31, 2023 (the "Reserve Report") prepared by Sproule Associates Limited ("Sproule"). InPlay's audited annual financial statements and notes, as well as Management's Discussion and Analysis ("MD&A") for the year ended December 31, 2023 will be available at " www.sedarplus.ca " and our website at " www.inplayoil.com ". An updated presentation will be available soon on our website.
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2023 Financial and Operations Highlights:
Achieved average annual production of 9,025 boe/d (1) (58% light crude oil and NGLs) and average quarterly production of 9,596 boe/d (1) (59% light crude oil and NGLs) in the fourth quarter, an increase of 7% compared to 9,003 boe/d (1) (57% light crude oil and NGLs) in the third quarter of 2023. Achieved a quarterly record for light oil production of 4,142 bbl/d in the fourth quarter of 2023. Generated strong adjusted funds flow ("AFF") (2) of $91.8 million ( $1.03 per basic share (3) ), the second highest level ever achieved by the Company, despite WTI prices decreasing 18% and AECO natural gas prices decreasing 50% compared to 2022. Realized strong operating income profit margins of 58% during 2023 notwithstanding the significant benchmark commodity price decreases. Returned $16.5 million to shareholders through our monthly base dividend and normal course issuer bid ("NCIB") share repurchases, representing an annual yield of 8.2% relative to year-end market capitalization. Since November 2022 InPlay has distributed $22.8 million in dividends, or $0.255 per share including dividends declared to date in 2024. Recorded net income of $32.7 million ( $0.37 per basic share; $0.36 per diluted share). InPlay has now returned to a positive retained earnings position on the balance sheet demonstrating that the Company has generated positive earnings since inception (net of dividends paid). Invested $84.5 million to drill, complete and equip 12 (10.5 net) Extended Reach Horizontal ("ERH") wells in Willesden Green, five (5.0 net) ERH wells in Pembina, one (1.0 net) multilateral Belly River well and three (0.6 net) non-operated ERH wells in Willesden Green, in addition to capital spent on two major natural gas facility upgrades to increase operated natural gas takeaway capacity for future growth. Exited 2023 at 0.5x net debt to earnings before interest, taxes and depletion ("EBITDA") (2) which is among the lower leverage ratios amongst our peers. Renewed our revolving Senior Credit Facility with a total lending capacity and borrowing base of $110 million , providing significant liquidity to be used for tactical capital investment and strategic acquisitions. Dedicated $3.3 million to the successful abandonment of 29 (23.1 net) wellbores, 114 (103.3 net) pipelines and the reclamation of 35 (29.3) wellsites.
2023 Reserve Highlights:
An organic 2023 capital program without acquisition/disposition ("A&D") activity resulted in: Proved developed producing ("PDP") reserves of 17,293 mboe (56% light and medium crude oil & NGLs) Proved developed non-producing ("PDNP") reserves of 1,002 mboe (76% light and medium crude oil & NGLs) are expected to move to the PDP reserve category throughout the year, with over 60% of the related wells expected to be finished and on production in the first half of 2024. Total proved ("TP") reserves of 45,919 mboe (62% light and medium crude oil & NGLs) Total proved plus probable ("TPP") reserves of 61,594 mboe (63% light and medium crude oil & NGLs) On a year-over-year basis, PDP, TP and TPP reserves remained relatively unchanged.
Reserves life index ("RLI") (6) for PDP, TP and TPP of approximately 5.2 years, 13.9 years and 18.7 years, respectively highlight a sizable drilling inventory for InPlay to sustainably develop over time. Delivered TPP Finding, Development and Acquisition ("FD&A") costs (including changes in future development costs) of $23.36 /boe notwithstanding $7 million in capital expenditures spent on non-recurring facility projects in 2023 to enhance our natural gas takeaway capacity. This generated a recycle ratio of 1.4x based on an operating netback of $31.61 /boe. Achieved healthy NPV BT10 reserve values (5) : NPV BT10: PDP: $242 million PDP+PDNP: $261 million TP: $571 million TPP: $824 million
Message to Shareholders:
InPlay had another year of solid operational and financial performance in 2023 while continuing to deliver strong returns to shareholders and maintaining a solid balance sheet. The continued development of our drilling inventory has yielded consistent and sustainable results, with our team constantly evaluating options to provide further shareholder returns.
Average 2023 production of 9,025 boe/d (1) generated AFF of $91.8 million ( $1.03 per share). InPlay returned $16.5 million to shareholders through our monthly base dividend and normal course issuer bid ("NCIB") share repurchases. The Company maintained its balance sheet strength with a net debt to EBITDA ratio of 0.5x and total debt capacity of $110 million , allowing the financial flexibility to take advantage of strategic opportunities and weather periods of market volatility.
InPlay achieved strong before tax estimated net present values ("NPV") of future net revenues associated with our 2023 year-end reserves and discounted at 10% ("NPV BT10") although impacted by weaker future commodity prices in comparison to December 31, 2022 . Forecasted WTI and AECO prices used in the Reserve Report decreased by 8% and 48% in year one and 4% and 23% in year two respectively. The Company achieved NPV BT10 reserve values of $242 million (PDP), $571 million (TP) and $824 million (TPP) based on a three independent reserve evaluator average pricing, cost forecast and foreign exchange rates as at December 31, 2023 as used in the Reserve Report.
InPlay remains focused on disciplined development of our high rate of return assets with a focus on maximizing free adjusted funds flow alongside a reasonable production growth profile while maintaining conservative leverage ratios, with the ultimate goal of maximizing returns to shareholders. The Company will remain disciplined and flexible and can quickly adjust capital activity to respond to changing market conditions.
Outlook and Operations Update:
InPlay's capital program for the first quarter of 2024 started with a two (1.9 net) ERH well pad in Willesden Green which came on production at the end of February and is in the early stages of cleanup. Drilling of three (3.0 net) Pembina Cardium ERH wells has been completed with completion operations currently underway. These wells are expected to come on production by the end of March and offset five successful wells drilled in 2023 characterized by low decline rates and high light oil and liquids weightings. An additional two (0.3 net) non-operated Willesden Green ERH wells have recently been drilled, are being completed, and are expected to come online in mid-March with another one (0.35 net) non-operated Willesden Green ERH well drilled in March and expected to be on production in the second quarter.
The Company's first (1.0 net) multilateral Belly River horizontal well was brought on production in December. The well has been on production with no decline and is meeting internal expectations with initial production ("IP") rates of 84 boe/d (96% light crude oil and liquids) and 89 boe/d (97% light crude oil and liquids) over its first 30 and 60 days respectively. The Belly River is characterized by high quality sweet light oil that receives premium pricing to our realized benchmark MSW commodity price. We are encouraged by the results that we are seeing from this well and will continue to evaluate expanding the use of this technology on further potential areas in our Belly River play.
WTI prices remained volatile early in 2024 but have improved throughout the quarter to approximately US $78 /bbl, exceeding the US $75 /bbl assumption utilized in our previously released 2024 budget. Future differentials to WTI, including MSW , are forecasted to significantly improve by 55% – 60% throughout the balance of the year compared to the fourth quarter of 2023 and first quarter of 2024 as new pipeline capacity comes online in the second quarter. The relatively weak Canadian dollar is supportive of the Canadian crude oil price environment and is expected to continue throughout the year. Natural gas prices have been challenged with warmer than average temperatures impacting winter demand resulting in weak AECO prices forecasted through to the end of the summer. InPlay has implemented crude oil and natural gas hedges at favorable pricing levels to mitigate risk and add stability during periods of market volatility.
As previously announced, InPlay's Board of Directors approved a 2024 capital budget of $64 – $67 million which is forecast to result in annual average production of 9,000 – 9,500 boe/d (1) (59% – 61% light crude oil and NGLs). InPlay has taken a measured and disciplined approach to capital allocation for 2024 with a program focused on high return oil weighted locations driving annual oil production growth at the midpoint of guidance of approximately 7% over 2023 despite a 20% to 25% reduction in capital spending year over year. The capital program is designed to responsibly manage the pace of development, maintain operational and financial flexibility and remain focused on delivering return of capital to shareholders. The Company achieved record quarterly light oil production of 4,142 bbl/d and increased our light oil and NGLs weighting to 59% in the fourth quarter of 2023. This higher weighting of light oil and NGLs is expected to continue in 2024 as a result of our oil focused drilling program, allowing the Company to take advantage of the strong oil price environment which is the Company's main revenue and AFF driver.
Financial and Operating Results:
| (CDN) ($000's) | Three months ended
December 31 | Year ended
December 31 | | | | | 2023 | 2022 | 2023 | 2022 | | Financial | | | | | | Oil and natural gas sales | 47,631 | 58,161 | 179,366 | 238,590 | | Adjusted funds flow (3) | 23,544 | 30,271 | 91,784 | 130,805 | | Per share – basic (4) | 0.26 | 0.35 | 1.03 | 1.51 | | Per share – diluted (4) | 0.26 | 0.33 | 1.01 | 1.44 | | Per boe (4) | 26.67 | 34.19 | 27.86 | 39.36 | | Comprehensive income | 11,576 | 20,736 | 32,702 | 83,896 | | Per share – basic | 0.13 | 0.24 | 0.37 | 0.97 | | Per share – diluted | 0.13 | 0.23 | 0.36 | 0.92 | | Capital expenditures – PP&E and E&E | 14,632 | 13,647 | 84,466 | 77,603 | | Property acquisitions (dispositions) | - | - | 327 | (2) | | Net Corporate acquisitions (2) | - | (321) | - | 180 | | Net debt (3) | 45,679 | 32,963 | 45,679 | 32,963 | | Shares outstanding | 90,307,765 | 86,952,601 | 90,307,765 | 86,952,601 | | Basic weighted-average shares | 90,257,367 | 87,106,339 | 89,072,110 | 86,895,314 | | Diluted weighted-average shares | 91,749,661 | 91,229,513 | 90,615,976 | 91,137,173 |
| (CDN) ($000's) | Three months ended
December 31 | Year ended
December 31 | | | | | 2023 | 2022 | 2023 | 2022 | | Operational | | | | | | Daily production volumes | | | | | | Light and medium crude oil (bbls/d) | 4,142 | 3,909 | 3,822 | 3,766 | | Natural gas liquids (boe/d) | 1,520 | 1,532 | 1,396 | 1,402 | | Conventional natural gas (Mcf/d) | 23,606 | 25,090 | 22,839 | 23,623 | | Total (boe/d) | 9,596 | 9,623 | 9,025 | 9,105 | | Realized prices (4) | | | | | | Light and medium crude oil & NGLs ($/bbls) | 80.83 | 90.21 | 81.74 | 100.26 | | Conventional natural gas ($/Mcf) | 2.55 | 5.63 | 2.84 | 5.74 | | Total ($/boe) | 53.95 | 65.69 | 54.45 | 71.79 | | Operating netbacks ($/boe) (2) | | | | | | Oil and natural gas sales | 53.95 | 65.69 | 54.45 | 71.79 | | Royalties | (7.18) | (11.72) | (6.84) | (11.55) | | Transportation expense | (1.06) | (1.26) | (0.95) | (1.18) | | Operating costs | (14.99) | (14.78) | (15.05) | (13.16) | | Operating netback (2) | 30.72 | 37.93 | 31.61 | 45.90 | | Realized gain (loss) on derivative contracts | 0.66 | 0.17 | 1.10 | (1.97) | | Operating netback (including realized derivative contracts) (2) | 31.38 | 38.10 | 32.71 | 43.93 |
2023 Financial & Operations Overview:
Production averaged 9,025 boe/d (1) (58% light crude oil & NGLs) in 2023 compared to 9,105 boe/d (1) (57% light crude oil & NGLs) in 2022. Production averaged 9,596 boe/d (1) (59% light crude oil & NGLs) in the fourth quarter of 2023, a 7% increase in comparison to the third quarter of 2023. Production for 2023 was impacted by approximately 650 boe/d over the year due to extraordinary curtailments experienced from third party capacity constraints and turnarounds, Alberta wildfires, and delays in starting up our natural gas facility in the third quarter as discussed in our prior press releases.
In 2023, commodity prices decreased over 2022 levels. WTI oil prices decreased 18% predominantly as a result of increased supply and sentiment on future demand. Natural gas prices weakened due to production growth in North America with higher than normal inventory levels in North America and Europe , resulting in a 50% decrease in AECO pricing compared to 2022. These lower commodity prices resulted in a 24% decline in our realized sales price driving a decrease to AFF and netbacks compared to 2022, which was partially offset by realized hedging gains.
InPlay's capital program for 2023 consisted of $84.5 million of development capital. The Company drilled, completed and brought on production 12 (10.5 net) Extended Reach Horizontal ("ERH") wells in Willesden Green, five (5.0 net) ERH wells in Pembina, one (1.0 net) multilateral Belly River well and three (0.6 net) non-operated ERH well in Willesden Green. This activity amounted to the drilling of 21 gross (17.1 net) wells. Capital activity in 2023 was also focused on expanding and upgrading our natural gas facility infrastructure to accommodate future growth. InPlay completed two major facility upgrades in 2023 to increase operated natural gas takeaway capacity and to mitigate potential production issues arising from third party outages and capacity constraints. These projects have already shown value by reducing back pressure on wells and lowering declines while improving our liquids weighting with higher natural gas liquids recovery. After the completion of these projects, more consistent run times and the transportation of associated natural gas to our lower cost operated facilities has resulted in operating costs trending downward in the last quarter of 2023 which is expected to continue into 2024.
| Notes: | | | 1. | See "Production Breakdown by Product Type" at the end of this press release. | | 2. | Non-GAAP financial measure or ratio that does not have a standardized meaning under International Financial Reporting Standards (IFRS) and GAAP and therefore may not be comparable with the calculations of similar measures for other companies. Please refer to "Non-GAAP and Other Financial Measures" contained within this press release and in our most recently filed MD&A. | | 3. | Capital management measure. See "Non-GAAP and Other Financial Measures" contained within this press release. | | 4. | Supplementary financial measure. See "Non-GAAP and Other Financial Measures" contained within this press release. | | 5. | See "Corporate Reserves Information" for detailed information from the Reserve Report and associated NPV calculations. | | 6. | "FD&A", "recycle ratio", "reserve life index" and "capital efficiency" do not have standardized meanings and therefore may not be comparable to similar measures presented for other entities. Refer to section "Performance Measures" for the determination and calculation of these measures. | | 7. | Based on a current share price of $2.30. |
Corporate Reserves Information:
The following summarizes certain information contained in the Reserve Report. The Reserve Report was prepared in accordance with the definitions, standards and procedures contained in the COGE Handbook and National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities ("NI 51-101"). Additional reserve information as required under NI 51-101 will be included in the Company's Annual Information Form ("AIF") which will be filed on SEDAR by the end of March 2024 .
| December 31, 2023 | Light and Medium | | Conventional | Oil | BTAX
NPV | Future Development | Net
Undeveloped | | Reserves Category (1)(2)(3)(4)(5) | Crude Oil | NGLs | Natural Gas | Equivalent | 10 % | Capital | Wells | | Mbbl | Mbbl | MMcf | MBOE | ($000's) | ($000's) | Booked | | | | | | | | | | | | Proved developed producing | 6,446.9 | 3,281.0 | 45,392 | 17,293.1 | 242,298 | 45 | - | | Proved developed non- producing | 599.2 | 164.8 | 1,429 | 1,002.2 | 18,600 | 1,363 | - | | Proved undeveloped | 13,598.5 | 4,359.1 | 57,993 | 27,623.2 | 310,198 | 429,296 | 172.7 | | Total proved | 20,644.7 | 7,804.8 | 104,814 | 45,918.5 | 571,097 | 430,704 | 172.7 | | Probable developed producing | 1,873.3 | 911.1 | 13,081 | 4,964.5 | 60,813 | - | - | | Probable developed non-producing | 165.9 | 77.9 | 805 | 377.9 | 6,288 | 21 | - | | Probable undeveloped | 5,994.6 | 1,348.8 | 17,939 | 10,333.1 | 185,391 | 77,732 | 23.6 | | Total probable | 8,033.8 | 2,337.8 | 31,824 | 15,675.5 | 252,492 | 77,753 | 23.6 | | Total proved plus probable (6) | 28,678.4 | 10,142.6 | 136,639 | 61,594.1 | 823,589 | 508,457 | 196.3 |
| Notes : | | | 1. | Reserves have been presented on a gross basis which are the Company's total working interest (operating and non-operating) share before the deduction of any royalties and without including any royalty interests of the Company. | | 2. | Based on an arithmetic average of the price forecasts of three independent reserve evaluator's (Sproule Associates Limited, McDaniel & Associates Consultants Ltd. and GLJ Ltd.) then current forecast at December 31, 2023, as outlined in the table herein entitled "Pricing Assumptions". | | 3. | It should not be assumed that the NPV amounts presented in the tables above represents the fair market value of the reserves. There is no assurance that the forecast prices and cost assumptions will be attained and variances could be material. The recovery and reserves estimates of InPlay's light and medium crude oil, natural gas liquids and conventional natural gas reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual light and medium crude oil, conventional natural gas and natural gas liquids reserves may be greater than or less than the estimates provided herein. | | 4. | All future net revenues are stated prior to provision for interest, general and administrative expenses and after deduction of royalties, operating costs, estimated well abandonment, decommissioning and reclamation costs and estimated future capital expenditures. Future net revenues have been presented on a before tax basis. | | 5. | The Company has included abandonment, decommissioning and reclamation costs for all active and inactive assets including non-producing and suspended wells, facilities and pipelines. December 31, 2023 reserve NPV values are also inclusive of currently enacted carbon taxes. | | 6. | Totals may not add due to rounding. |
Net Present Values of Reserves:
| December 31, 2023 | BTAX NPV 5% | BTAX NPV 10% | | ($000's) | ($000's) | | | PDP NPV (1)(2) | 271,987 | 242,298 | | TP NPV (1)(2) | 744,150 | 571,097 | | TPP NPV (1)(2) | 1,098,195 | 823,589 |
| Notes: | | | 1. | Evaluated by Sproule as at December 31, 2023. The estimated NPV does not represent fair market value of the reserves. | | 2. | Based on an arithmetic average of the price forecasts of three independent reserve evaluator's (Sproule Associates Limited, McDaniel & Associates Consultants Ltd. and GLJ Ltd.) then current forecast at December 31, 2023. |