InPlay Oil Corp press release
InPlay Oil Corp. Announces Second Quarter 2024 Financial and Operating Results
TSX - Toronto Stock Exchange · Oil · Natural Gas · Natural Gas Liquids · Canada
Canada NewsWire
CALGARY, AB , Aug. 14, 2024 /CNW/ - InPlay Oil Corp. (TSX: IPO) (OTCQX: IPOOF) ("InPlay" or the "Company") announces its financial and operating results for the three and six months ended June 30, 2024 . InPlay's condensed unaudited interim financial statements and notes, as well as Management's Discussion and Analysis ("MD&A") for the three and six months ended June 30, 2024 will be available at " www.sedarplus.ca " and our website at " www.inplayoil.com ". Our corporate presentation will soon be available on our website.
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Second Quarter 2024 Financial & Operating Results
Achieved average quarterly production of 8,657 boe/d (1) (59% light crude oil and NGLs), an increase of 2% compared to 8,474 boe/d (1) (57% light crude oil and NGLs) in the second quarter of 2023. Generated strong quarterly Adjusted Funds Flow ("AFF") (2) of $20.1 million ( $0.22 per basic share (3) ), an increase of 22% compared to the first quarter of 2024. Achieved free adjusted funds flow ("FAFF") (3) of $14.0 million resulting in a 15% reduction to net debt (2) from March 31, 2024 . Returned $4.1 million ( $8.2 million in the first six months of 2024) to shareholders through our monthly base dividend, representing an annual yield of 8.2% relative to quarter-end market capitalization. Since November 2022 InPlay has distributed $29.7 million in dividends, or $0.33 per share including dividends declared to date in 2024. Improved operating income profit margin (3) to 58% compared to 57% in the first quarter of 2024. Increased field operating netbacks (3) by 16% compared to the first quarter of 2024. Improved light crude oil and NGLs weighting to 59% from 57% in the first quarter of 2024 resulting in a 4% increase in revenues to $41.5 million compared to $39.8 million in the first quarter of 2024. Realized net income of $5.4 million ( $0.06 per basic share; $0.06 per diluted share). Renewed the Company's fully conforming revolving Senior Credit Facility at $110 million .
Second Quarter 2024 Financial & Operations Overview:
InPlay completed a limited capital program during the second quarter. The Company invested $6.2 million of exploration and development capital which consisted of completion and tie-in costs on three (0.65 net) non-operated wells drilled in the first quarter, facility costs, and drilling one (1.0 net) Belly River well which was completed and brought on production in mid-July at initial production rates in line with internal expectations. InPlay also started drilling one (1.0 net) Glauconite well at Willesden Green.
InPlay continues to see positive results from its optimization program efforts which include lowering pumps in horizontal oil wells as well as adding pumpjacks to certain flowing wells which has had a positive impact on production. The Company spent $1.6 million in optimization capital on this program during the quarter ( $2.9 million year to date) and continues to achieve low decline production adds at a capital efficiency of approximately $6,000 per producing barrel. The Company's optimization program has reduced our base decline rate which reduces the drilling capital required to maintain production and further enhances our ability to generate FAFF. InPlay will continue to evaluate other potential well candidates for this program throughout the remainder of the year.
Production for the quarter averaged 8,657 boe/d (1) (59% light crude oil and NGLs), an increase of 2% compared to 8,474 boe/d (1) (57% light crude oil and NGLs) in the second quarter of 2023. AFF of $20.1 million ( $0.22 per basic share) was generated resulting in $14.0 million of FAFF and a 15% reduction to net debt from March 31, 2024 . The Company continued to execute its return to shareholder strategy with $4.1 million in dividends issued to shareholders during the quarter.
Production volumes were impacted by approximately 530 boe/d in the second quarter comprised of approximately 235 boe/d from primarily non-operated natural gas facility downtime, inclusive of approximately 1,100 boe/d being down for ten days in June at a non-operated facility in Pembina, and approximately 205 boe/d from wells that went down and the inability to service them due to access restraints from extremely wet weather and spring break up road bans in May and early June. The other losses consisted of the voluntary shut-in of uneconomic gas wells as a result of low gas prices.
InPlay renewed its fully conforming revolving Senior Credit Facility at $110 million during the quarter with the addition of another member to the Senior Credit Facility syndicate. The addition of another lender in our syndicate provides additional financial flexibility for the future and is evidence of the strong financial position of the Company.
Glauconite Play
InPlay acquired producing and undeveloped acreage within a delineated Glauconite light oil play at Willesden Green in connection with our November 2021 acquisition. InPlay currently produces approximately 490 boe/d from the pool with no decline over the past 12 months, supporting our view that there are significant undrained reserves to be developed via horizontal wells. From 2012 to 2013 several horizontal wells were drilled into the pool with the best well delivering an IP 30 greater than 1,400 boe/d (~75% oil) which would payout in less than three months at current commodity prices. Industry operators recently developing analogous Glauconite oil pools have also achieved IP 30 rates in excess of 1,000 boe/d. All horizontal wells drilled into the pool from 2012 to 2013 were completed using oil based completions with 100 meter frac interval spacing. The Glauconite reservoir has similar characteristics to the Cardium, where slickwater is used and new completion technology has increased the number of fracs by 2.5 times at approximately 40 meter spacing resulting in material improvements in well productivity. InPlay can apply this same technology to the Glauconite play where we have identified 12 locations which could provide the potential for material reserves and production growth. InPlay spud its first well in the play at the end of June in close proximity to the best horizontal well in the pool. Unfortunately drilling challenges ultimately led to casing failure and it was determined the best course of action was to stop operations. InPlay is currently evaluating options for this well. The Company anticipates returning to drill within the Glauconite pool prior to the end of Q1 2025.
Outlook and Operations Update (5)
The Company has brought one well on production since first quarter drilling and has adjusted plans so that the majority of the remaining wells in the year will come on production in late October to early November. These new wells will come online into higher anticipated winter natural gas pricing where forward future gas prices are forecasted to be approximately three times higher than current prices. This timing will lead to strong production and FAFF in the fourth quarter with the limited capital program.
We recently finished drilling operations on a two (2.0 net) horizontal Cardium well pad in Willesden Green where completions are expected to start in the coming days. InPlay plans to drill four (4.0 net) additional wells throughout the remainder of the year, including a minimum of three (3.0 net) ERH wells in Pembina Cardium Unit 7. This area delivers strong oil production rates augmented with high gas rates and lower production declines compared to other Cardium wells in our inventory, all of which result in this area generating some of the strongest returns within the Company. We are excited to resume development in this highly prolific area (after entering into long term gas handling agreement in the first quarter) and expect to pursue continuous development over the next few years.
In July, InPlay entered into an electricity hedge fixing InPlay's cost on one megawatt ("MW") of electricity for a four year term. Given the softening of the Alberta electricity market in response to policy change and the addition of new power generation capacity to Alberta's grid, the hedged price secured by InPlay of $62.17 per megawatt hour ("MWh") is 62% below 2022 average pool prices and 53% below 2023 average power prices and will reduce InPlay's electrical cost volatility. Electricity costs can be extremely volatile and they comprise a significant percentage of InPlay's operating costs. Therefore, this contract is expected to meaningfully reduce and stabilize operating costs going forward.
InPlay continues to be disciplined with capital allocation and anticipates the Company's 2024 budgeted exploration and development expenditures remain unchanged at $64 - $67 million , with the developed well count dropping from 14 – 15 to 12.6. The Company is adjusting its annual production guidance by 4% to 8,700 – 9,000 boe/d (58% – 60% light crude oil and NGLs), mainly reflecting the foregone production from the Glauconite well, downtime and shut-ins, and the planned rescheduling to bring wells on later in the year. AFF (2) is forecasted to be $80 to $85 million based on USD $80 WTI for the remainder of the year, with estimated FAFF (3) of $13 to $21 million. The Company's leverage metrics are projected to remain at levels which are among the lowest in our peer group with net debt to EBITDA (3) forecasted to be 0.5x – 0.6x for 2024.
Financial and Operating Results:
| (CDN) ($000's) | Three months ended
June 30 | Six months ended
June 30 | | | | | 2024 | 2023 | 2024 | 2023 | | Financial | | | | | | Oil and natural gas sales | 41.5 | 39.8 | 79.5 | 85.1 | | Adjusted funds flow (2) | 20.1 | 21.8 | 36.7 | 43.1 | | Per share – basic (4) | 0.22 | 0.25 | 0.41 | 0.49 | | Per share – diluted (4) | 0.22 | 0.24 | 0.39 | 0.47 | | Per boe (4) | 25.57 | 28.23 | 23.34 | 27.20 | | Comprehensive income | 5.4 | 4.3 | 7.1 | 13.6 | | Per share – basic | 0.06 | 0.05 | 0.08 | 0.15 | | Per share – diluted | 0.06 | 0.05 | 0.08 | 0.15 | | Dividends | 4.1 | 4.0 | 8.2 | 8.0 | | Capital expenditures – PP&E & E&E | 6.2 | 12.8 | 31.7 | 42.3 | | Property acquisitions (dispositions) | - | - | (0.0) | 0.3 | | Net debt (2) | (50.8) | (41.8) | (50.8) | (41.8) | | Shares outstanding | 90.1 | 88.9 | 90.1 | 88.9 | | Basic weighted-average shares | 90.1 | 88.8 | 90.2 | 88.4 | | Diluted weighted-average shares | 93.2 | 91.3 | 93.2 | 90.9 |
| | Three months ended
June 30 | Six months ended
June 30 | | | | | 2024 | 2023 | 2024 | 2023 | | Operational | | | | | | Daily production volumes | | | | | | Light and medium crude oil (bbls/d) | 3,671 | 3,658 | 3,561 | 3,722 | | Natural gas liquids (bbls/d) | 1,438 | 1,187 | 1,462 | 1,322 | | Conventional natural gas (Mcf/d) | 21,291 | 21,772 | 21,645 | 22,208 | | Total (boe/d) | 8,657 | 8,474 | 8,631 | 8,746 | | Realized prices (4) | | | | | | Light and medium crude oil & NGLs ($/bbls) | 83.24 | 78.45 | 78.07 | 79.92 | | Conventional natural gas ($/Mcf) | 1.43 | 2.61 | 2.05 | 3.01 | | Total ($/boe) | 52.63 | 51.56 | 50.58 | 53.74 | | Operating netbacks ($/boe) (3) | | | | | | Oil and natural gas sales | 52.63 | 51.56 | 50.58 | 53.74 | | Royalties | (6.43) | (4.07) | (6.10) | (6.82) | | Transportation expense | (0.98) | (0.97) | (1.04) | (0.94) | | Operating costs | (14.81) | (15.21) | (15.09) | (14.95) | | Operating netback (3) | 30.41 | 31.31 | 28.35 | 31.03 | | Realized gain on derivative contracts | 0.25 | 2.07 | 0.27 | 1.01 | | Operating netback (including realized derivative contracts) (3) | 30.66 | 33.38 | 28.62 | 32.04 |
We would like to thank our staff, contractors, and suppliers for their continued dedication and execution, and we thank our Board of Directors and our shareholders for their continued guidance and support.
| For further information please contact:
Doug Bartole President and Chief Executive Officer InPlay Oil Corp. Telephone: (587) 955-0632 | | | Darren Dittmer Chief Financial Officer InPlay Oil Corp. Telephone: (587) 955-0634 |
| Notes: | | | 1. | See "Production Breakdown by Product Type" at the end of this press release. | | 2. | Capital management measure. See "Non-GAAP and Other Financial Measures" contained within this press release. | | 3. | 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. | | 4. | Supplementary financial measure. See "Non-GAAP and Other Financial Measures" contained within this press release. | | 5. | See "Reader Advisories – Forward Looking Information and Statements" for key budget and underlying assumptions related to our previous and updated 2024 capital program and associated guidance. |
Reader Advisories
Non-GAAP and Other Financial Measures
Throughout this document and other materials disclosed by the Company, InPlay uses certain measures to analyze financial performance, financial position and cash flow. These non-GAAP and other financial measures do not have any standardized meaning prescribed under GAAP and therefore may not be comparable to similar measures presented by other entities. The non-GAAP and other financial measures should not be considered alternatives to, or more meaningful than, financial measures that are determined in accordance with GAAP as indicators of the Company performance. Management believes that the presentation of these non-GAAP and other financial measures provides useful information to shareholders and investors in understanding and evaluating the Company's ongoing operating performance, and the measures provide increased transparency and the ability to better analyze InPlay's business performance against prior periods on a comparable basis.
Non-GAAP Financial Measures and Ratios
Included in this document are references to the terms "free adjusted funds flow", "operating income", "operating netback per boe", "operating income profit margin" and "Net Debt to EBITDA". Management believes these measures and ratios are helpful supplementary measures of financial and operating performance and provide users with similar, but potentially not comparable, information that is commonly used by other oil and natural gas companies. These terms do not have any standardized meaning prescribed by GAAP and should not be considered an alternative to, or more meaningful than "profit before taxes", "profit and comprehensive income", "adjusted funds flow", "capital expenditures", "net debt", or assets and liabilities as determined in accordance with GAAP as a measure of the Company's performance and financial position.
Free Adjusted Funds Flow
Management considers FAFF an important measure to identify the Company's ability to improve its financial condition through debt repayment and its ability to provide returns to shareholders. FAFF should not be considered as an alternative to or more meaningful than AFF as determined in accordance with GAAP as an indicator of the Company's performance. FAFF is calculated by the Company as AFF less exploration and development capital expenditures and property dispositions (acquisitions) and is a measure of the cashflow remaining after capital expenditures before corporate acquisitions that can be used for additional capital activity, corporate acquisitions, repayment of debt or decommissioning expenditures or potentially return of capital to shareholders. Refer below for a calculation of historical FAFF and to the "Forward Looking Information and Statements" section for a calculation of forecast FAFF.
| (thousands of dollars) | | Three Months Ended
June 30 | | | | | | | 2024 | 2023 | | Adjusted funds flow | | | 20,145 | 21,768 | | Exploration and dev. capital expenditures | | | (6,156) | (12,774) | | Property dispositions (acquisitions) | | | - | - | | Free adjusted funds flow | | | 13,989 | 8,994 | | | | | | |
Operating Income/Operating Netback per boe/Operating Income Profit Margin
InPlay uses "operating income", "operating netback per boe" and "operating income profit margin" as key performance indicators. Operating income is calculated by the Company as oil and natural gas sales less royalties, operating expenses and transportation expenses and is a measure of the profitability of operations before administrative, share-based compensation, financing and other non-cash items. Management considers operating income an important measure to evaluate its operational performance as it demonstrates its field level profitability. Operating income should not be considered as an alternative to or more meaningful than net income as determined in accordance with GAAP as an indicator of the Company's performance. Operating netback per boe is calculated by the Company as operating income divided by average production for the respective period. Management considers operating netback per boe an important measure to evaluate its operational performance as it demonstrates its field level profitability per unit of production. Operating income profit margin is calculated by the Company as operating income as a percentage of oil and natural gas sales. Management considers operating income profit margin an important measure to evaluate its operational performance as it demonstrates how efficiently the Company generates field level profits from its sales revenue. Refer below for a calculation of operating income, operating netback per boe and operating income profit margin. Refer to the "Forward Looking Information and Statements" section for a calculation of forecast operating income, operating netback per boe and operating income profit margin.
| (thousands of dollars) | Three Months Ended
June 30 | Six Months Ended
June 30 | | | | | 2024 | 2023 | 2024 | 2023 | | Revenue | 41,460 | 39,762 | 79,457 | 85,063 | | Royalties | (5,063) | (3,137) | (9,590) | (10,791) | | Operating expenses | (11,672) | (11,731) | (23,701) | (23,666) | | Transportation expenses | (773) | (749) | (1,630) | (1,492) | | Operating income | 23,952 | 24,145 | 44,536 | 49,114 | | | | | | | | Sales volume (Mboe) | 787.8 | 771.1 | 1,570.9 | 1,582.9 | | Per boe | | | | | | Revenue | 52.63 | 51.56 | 50.58 | 53.74 | | Royalties | (6.43) | (4.07) | (6.10) | (6.82) | | Operating expenses | (14.81) | (15.21) | (15.09) | (14.95) | | Transportation expenses | (0.98) | (0.97) | (1.04) | (0.94) | | Operating netback per boe | 30.41 | 31.31 | 28.35 | 31.03 | | Operating income profit margin | 58 % | 61 % | 56 % | 58 % |
Net Debt to EBITDA
Management considers Net Debt to EBITDA an important measure as it is a key metric to identify the Company's ability to fund financing expenses, net debt reductions and other obligations. EBITDA is calculated by the Company as adjusted funds flow before interest expense. When this measure is presented quarterly, EBITDA is annualized by multiplying by four. When this measure is presented on a trailing twelve month basis, EBITDA for the twelve months preceding the net debt date is used in the calculation. This measure is consistent with the EBITDA formula prescribed under the Company's Senior Credit Facility. Net Debt to EBITDA is calculated as Net Debt divided by EBITDA. Refer to the "Forward Looking Information and Statements" section for a calculation of forecast Net Debt to EBITDA.
Capital Management Measures
Adjusted Funds Flow
Management considers adjusted funds flow to be an important measure of InPlay's ability to generate the funds necessary to finance capital expenditures. Adjusted funds flow is a GAAP measure and is disclosed in the notes to the Company's financial statements for the three and six months ended June 30, 2024 . All references to adjusted funds flow throughout this document are calculated as funds flow adjusting for decommissioning expenditures. Decommissioning expenditures are adjusted from funds flow as they are incurred on a discretionary and irregular basis and are primarily incurred on previous operating assets. The Company also presents adjusted funds flow per share whereby per share amounts are calculated using weighted average shares outstanding consistent with the calculation of profit per common share.