InPlay Oil Corp. Announces Transformative Acquisition of Highly Accretive, Low Decline Pembina Cardium Oil Assets

2025-02-19

TSX - Toronto Stock Exchange · Oil · Natural Gas · Natural Gas Liquids · Canada

Canada NewsWire

The prospectus supplement, the corresponding base shelf prospectus and any amendment thereto in connection with the financing will be accessible through SEDAR+ within two business days

/NOT FOR DISTRIBUTION TO U.S. WIRE SERVICES OR DISSEMINATION IN THE UNITED STATES /

CALGARY AB , Feb. 19, 2025 /CNW/ - InPlay Oil Corp. (TSX: IPO) (OTCQX: IPOOF) (" InPlay " or the " Company ") is pleased to announce that it has entered into a definitive agreement for the strategic acquisition of Cardium light oil focused assets in the Pembina area of Alberta (the " Acquired Assets ") for consideration of approximately $309 million , prior to adjustments. Consideration will be made up of a $220 million cash payment, $85 million of InPlay common shares (the "Share Consideration" ) to be issued to the Vendor (as defined below) at a deemed price of $1.55 per share, and the inclusion of InPlay's non-operated assets at Willesden Green Unit 2, with a year-end 2023 Proved Developed Producing ( " PDP" ) value of approximately $4.4 million 1 (the "Transaction" ).

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ACQUISITION HIGHLIGHTS

>100% Increase in Production and >170% Increase in Light Oil Production: The Acquired Assets more than double InPlay's production to over 18,750 boe/d 2 , with oil production increasing to over 9,500 bbl/d. Highly Accretive Acquisition Metrics: Purchase completed at 2.2x 2025E operating income 3,4 , 0.5x PDP NPV10% before tax reserve value 5 6 and 0.4x Proved NPV10% before tax reserve value 5,6 ; per-share accretion +45% on 2025E adjusted funds flow (" AFF ") 7 and +70% on 2025E pre-dividend free funds flow 7 . Strengthened Free Funds Flow and Shareholder Return Profile: InPlay's annual dividend of $0.18 /share (11.6% dividend yield 7 based on share price of $1.55 /share), is supported by 2025E pro-forma free funds flow 7 of $104 million (42% free funds flow yield 3 based on pro-forma market capitalization 8 ) which is more than 3x InPlay's current base dividend 4 . Low Decline, Long-Life Reserves with Deep Drilling Inventory: Acquired Assets have a 22% PDP decline rate 9 , a PDP reserve life index 5 of 8.7 years and a Proved reserve life index 5 of 13.8 years, including a deep inventory of tier 1 Cardium locations 5,10 . InPlay to Unlock Operational Synergies: The Acquired Assets directly offset InPlay's existing asset in Pembina, and are expected to provide significant operational synergies on infrastructure, field operations and optimization of development activities.

TRANSACTION DETAILS:

InPlay has entered into a definitive agreement with Obsidian Energy Ltd. (the " Vendor ") and certain of the Vendor's affiliates for the purchase of petroleum and natural gas assets producing approximately 10,000 boe/d (68% oil and NGLs) 2 located primarily in the Pembina area of Alberta for a total purchase price of $309 million effective December 1, 2024 , prior to adjustments. The Transaction's purchase price represents approximately 2.2x operating income 3 4 and is highly accretive to InPlay on both funds flow and free funds flow per share metrics while maintaining conservative corporate leverage ratios. A summary of the relevant metrics of the Transaction is as follows:

STRATEGIC RATIONALE FOR ACQUISITION AND APPROVALS

The Acquired Assets are consistent with InPlay's business model of acquiring high quality, operated, light crude oil reservoirs with large original oil in-place (" OOIP "). The Acquired Assets meet all of InPlay's acquisition criteria and offer low decline, high netback production with extensive infrastructure to facilitate years of future development drilling and waterflood/enhanced oil recovery (" EOR ") optimization.

The Acquired Assets are expected to strengthen InPlay's ability to drive shareholder returns through consolidation of directly contiguous lands where approximately 100% operated and significant infrastructure overlap with existing assets, and InPlay management has demonstrated operational expertise including execution of Pembina Cardium drilling programs. Following closing of the Transaction, InPlay expects to benefit from materially increased operational scale, higher oil-weighting, enhanced free funds flow generation and the addition of high-quality drilling inventory. Importantly, InPlay also anticipates that shareholder returns become more resilient and will be enhanced through additional free funds flow underpinned by the lower-decline, less capital-intensive nature of the Acquired Assets. InPlay's cash dividend of $0.18 /share (annualized) is expected to be supported by $104 million in free funds flow 7 equal to more than 3x the annual base dividend 4 , strongly reinforcing the continued sustainability of the Company's 11.6% dividend yield based on an InPlay share price of $1.55 /share.

The Transaction is transformational for InPlay and is expected to deliver the following benefits for stakeholders:

Large OOIP, high value oil pools under waterflood/EOR enhance netbacks and free funds flow generation. The Acquired Assets increase corporate 2025E production by over 100% highlighted by a >170% increase in oil production while reducing corporate declines from approximately 26% to 24%; Attractive and accretive acquisition price at 2.2x 2025E operating income 3 4 . Assets acquired for 0.5x PDP NPV10% 5 6 and 0.4x Proved NPV10% 5 6 under year-end 2023 reserves for the Acquired Assets; The Acquired Assets are +45% accretive to InPlay's 2025 AFF 7 per share and +70% accretive to InPlay's 2025 pre-dividend free funds flow 7 per share; Dividend sustainability expected to be enhanced due to the high oil weighting and low decline oil revenue stream, generating pro-forma free funds flow 7 of $104 million (42% free funds flow yield 3 based on pro-forma market capitalization 8 ) equal to more than 3x InPlay's existing base dividend 4 ; With PDP NPV10% reserve value of $792 million 5,6 based on year-end 2023 reserve evaluation and commodity prices, the Transaction is expected to establish InPlay as a leader in the region and one of the largest publicly-listed Pembina Cardium oil operators; and The Company will continue to have a strong leverage profile, with estimated 2025E exit net debt to 2025 EBITDA 3,11 ratio of 0.9x.

Completion of the Transaction is subject to customary closing conditions including, without limitation, clearance under the Competition Act ( Canada ), approval of Toronto Stock Exchange ( "TSX" ) and approval by a majority of the votes cast at a special meeting of InPlay shareholders to approve the issuance of the Share Consideration to the Vendor as partial payment of the Transaction purchase price. The special meeting of InPlay shareholders is expected to be held in early April 2025 .

All of the directors and executive officers of InPlay, as well as InPlay's largest institutional shareholder, Carbon Infrastructure Partners, have entered into voting support agreements pursuant to which each has agreed, subject to the terms thereof, to vote their InPlay shares, representing in aggregate 27% of the issued and outstanding InPlay shares, in favour of the Transaction.

The Transaction is currently expected to close in April 2025 .

FINANCING

Transaction consideration is made up of a $220 million cash payment, $85 million of InPlay common shares issued to the vendor at a deemed price of $1.55 per share, and the inclusion of InPlay's non-operated assets at Willesden Green Unit 2, with a year-end 2023 PDP value of approximately $4.4 million 1 .

The $220 million cash consideration will be funded through proceeds from the New Credit Facilities (as defined below) and a bought-deal subscription receipt financing for aggregate gross proceeds of approximately $20 million (the " Offering ", as outlined below).

The Share Consideration issued to the Vendor will be subject to a six-month lock up period, which may be shortened in certain circumstances. Following closing of the Transaction, the Vendor will be InPlay's largest shareholder, owning approximately 35% of the common shares outstanding. Under a shareholder rights agreement between InPlay and the Vendor, the Vendor will be entitled to nominate two members to the InPlay Board of Directors for election at the Special Meeting and has agreed to support the resolutions brought before InPlay shareholders at the 2025 and 2026 annual general meeting of shareholders.

BOUGHT DEAL EQUITY FINANCING

In concert with the Transaction, InPlay has entered into a bought deal agreement with a syndicate of underwriters, co-led by ATB Securities Inc., National Bank Financial Inc. and RBC Capital Markets (collectively, the " Lead Underwriters "), pursuant to which the Underwriters have agreed to purchase for resale to the public approximately 12.9 million subscription receipts (the " Subscription Receipts ") on a bought deal basis. The Subscription Receipts will be offered at a price of $1.55 per Subscription Receipt (the " Offering Price ") for aggregate gross proceeds of approximately $20 million . The Company will use the net proceeds of the Offering to pay for a portion of the cash consideration under the Transaction. The gross proceeds from the Offering will be held in escrow pending the completion of the Transaction.

The Underwriters will have an option to purchase up to an additional 15% of the Subscription Receipts issued under the Offering at the Offering Price to cover over-allotments exercisable in whole or in part at any time up to the earlier of: (i) 30 days following the closing of the Offering; and (ii) the termination of the Transaction.

If all conditions to completion of the Transaction are satisfied or waived and InPlay has confirmed the same to the Underwriters (other than funding the portion of the purchase price therefore to be paid with the net proceeds of, among other sources, the Offering) (the "Release Time" ) before 5:00 p.m. ( Calgary time) on May 30, 2025 , then the net proceeds from the sale of the Subscription Receipts, less any amounts required to satisfy any accrued Dividend Equivalent Payments (defined below), will be released from escrow to InPlay and each Subscription Receipt will automatically receive one common share of the Corporation for each Subscription Receipt held and a Dividend Equivalent Payment. If the Transaction is not completed on or before 5:00 p.m. ( Calgary time) on May 30, 2025 , then the holders of the Subscription Receipts will be entitled to receive, in addition to the full subscription price of such holder's Subscription Receipts, such holders pro rata share of any interest earned or income generated on the net proceeds held in escrow and will not be entitled to any Dividend Equivalent Payment.

While the Subscription Receipts remain outstanding, such receipts will notionally be credited an amount per Subscription Receipt equal to the per InPlay common Share cash dividend, if any, actually paid or payable to holders of common shares in respect of all record dates for such dividends occurring from the closing date of the Offering to, but excluding, the Release Time. Such amounts will only be paid and payable to holders of Subscription Receipts upon the occurrence of the Release Time (any such payment, a " Dividend Equivalent Payment "). Any Dividend Equivalent Payments will be made net of any applicable withholding taxes.

Further information regarding the Offering and the Transaction, including related risk factors, will be set out in the prospectus supplement to InPlay's short-form base shelf prospectus dated December 4, 2024 (collectively, the "Prospectus" ). The prospectus supplement will be filed under the Company's profile on SEDAR+ ( www.sedarplus.ca ) on February 21 , 2025.The Subscription Receipts issued pursuant to the Offering will be distributed by way of the Prospectus. The Subscription Receipts will be offered in all provinces and territories of Canada (other than Quebec ) and may also be offered and sold on a private placement basis in the United States pursuant to exemptions from the registration requirements of the United States Securities Act of 1933, as amended (the " U.S. Securities Act ").

The Offering is expected to close on or about February 26, 2025 , and is subject to certain conditions including, but not limited to, the approval of the TSX. The Company expects that it will seek the approval of the TSX to list the Subscription Receipts once issued, such listing being subject to TSX approval.

This news release does not constitute an offer to sell or a solicitation of an offer to buy any securities in the United States . These securities have not been and will not be registered under the U.S. Securities Act or any U.S. state securities laws, and, accordingly may not be offered or sold in the "United States " or to, or for the account or benefit of, a "U.S. Persons" ( as defined in Regulation S under the U.S. Securities Act) unless registered under the U.S. Securities Act and applicable state securities laws or in certain transactions exempt from the registration requirements of the U.S. Securities Act and applicable state securities laws. Access to the Prospectus, and any amendments to the documents are provided in accordance with securities legislation relating to procedures for providing access to a base shelf prospectus, a prospectus supplement and any amendment to the documents. The Prospectus will be (within two business days from the date hereof), accessible on SEDAR+ at www.sedarplus.ca . An electronic or paper copy of the Prospectus (when filed), and any amendment to the documents may be obtained, without charge, from ATB Securities Inc. at Suite 410, 585 – 8th Avenue SW, Calgary, Alberta T2P 1G1, by email at atbcm_dealflow@atb.com @atb.com. The Prospectus will contain important detailed information about the Company and the proposed Offering. Prospective investors should read the Prospectus (when filed) and the other documents the Company has filed on SEDAR+ before making an investment decision.

NEW CREDIT FACILITIES

In connection with the Transaction, InPlay has secured fully underwritten financing from ATB Capital Markets (" ATB ") or an affiliate thereof, and National Bank Financial Markets (" NBF ") or an affiliate thereof, as co-lead arrangers and joint bookrunners (the " Bookrunners ") for up to $300 million of credit facilities (collectively the " New Credit Facilities ") consisting of an increased $180 million two-year, reserve-based, revolving credit facility issued on standard market terms (estimated to be approximately $135 million drawn following the Transaction, assuming an April 1, 2025 closing) and a fully drawn $120 million two-year amortizing term loan.

Neither of the New Credit Facilities are subject to pre-payment restrictions or penalties and upon closing of the Transaction, InPlay expects to have approximately $45 million of undrawn capacity on its revolving credit facility.

INPLAY PRO FORMA

UPDATED 2025 GUIDANCE

Following closing of the Transaction, InPlay will provide revised guidance for full-year 2025. The guidance will include a full update incorporating the Acquired Assets, as well as any changes to InPlay's current development plans.

ADVISORS

ATB Capital Markets, TPH&Co., the Energy Business of Perella Weinberg Partners, and National Bank Financial Inc. acted as financial advisors to InPlay with respect to the Transaction. Torys LLP and Burnet, Duckworth & Palmer LLP acted as legal advisors to InPlay.

For further information contact:

Doug Bartole or Kevin Leonard President and Chief Executive Officer Vice President, Business Development 403-803-3083 587-893-6804 dougb@inplayoil.com kevinl@inplayoil.com

InPlay Oil Corp. 2000, 350 – 7 th Avenue SW Calgary, AB T2P 3N9 www.inplayoil.com

| Notes: | | | 1. | Purchase price includes the inclusion of InPlay's working interest in Willesden Green Unit 2, which has an estimated PDP NPV10 of approximately $4.4 million, as evaluated by Sproule Associates Limited, effective December 31, 2023 using 3 Consultant's Average price deck as at December 31, 2023. | | 2. | See "Reader Advisories – Production Breakdown by Product Type" | | 3. | See "Reader Advisories – Non-GAAP and Other Financial Measures" for additional details. | | 4. | 2025 operating income estimate uses strip pricing from January through March 2025 and the following assumptions thereafter: US$72 WTI, US$4.50 MSW differential, $1.90 AECO and 0.70 FX. | | 5. | nPlay reserves prepared by Sproule Associates Limited effective December 31, 2023 using 3 Consultant's Average price deck as at December 31, 2023. Acquired Asset reserves prepared by GLJ Ltd. effective December 31, 2023 using 4 Consultant's Average price deck as at January 1, 2024. Acquired Asset booked locations as per GLJ Ltd. Effective December 31, 2023. The pro forma reserves are the sum of the two reserve reports. The actual reserves of the combined company, if evaluated as of December 31, 2024, may differ from the pro forma reserves presented. See "Reader Advisories – Reserves Disclosure" and "Reader Advisories – Drilling Locations" for additional details regarding reserves estimates and drilling locations. | | 6. | Estimated future abandonment and reclamation costs relating only to reserve wells and active pipelines and facilities were taken into account by GLJ in determining the aggregate future net revenue therefrom. Estimated future abandonment and reclamation costs related to inactive wells, pipelines and facilities were not taken into account by GLJ in determining the aggregate future net revenue therefrom. | | 7. | Capital management measure. See "Reader Advisories – Non-GAAP and Other Financial Measures" contained within this press release. | | 8. | InPlay pro forma market capitalization using pro forma basic shares outstanding and bought deal equity offering price of $1.55 per share. Pro forma enterprise value based on estimated net debt 13 at closing, inclusive of transaction costs. Enterprise value is calculated as equity value plus net debt. | | 9. | InPlay estimated annual decline rates. | | 10. | See "Reader Advisories – Drilling Locations" for additional details regarding drilling locations. | | 11. | 2025 production and oil weighting estimated using January 2025 actuals and estimated balance of year production. | | 12. | 2025E pro forma estimates have been presented as though InPlay acquired the Acquired Assets at January 1, 2025 notwithstanding that income from January 1, 2025 to March 31, 2025 represents a purchase price adjustment and such production will not be directly attributed to InPlay. 2025 pro forma estimate uses strip pricing from January through March 2025 and the following assumptions thereafter: US$72 WTI, US$4.50 MSW differential, $1.90 AECO and 0.70 FX. | | | |

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