InPlay Oil Corp press release
InPlay Oil Corp. Announces Second Quarter 2023 Financial and Operating Results
TSX - Toronto Stock Exchange · Oil · Natural Gas · Natural Gas Liquids · Canada
Canada NewsWire
CALGARY, AB , Aug. 14, 2023 /CNW/ - InPlay Oil Corp. (TSX: IPO) (OTCQX: IPOOF) ("InPlay" or the "Company") announces its financial and operating results for the three and six month's ended June 30, 2023 . 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, 2023 will be available at " www.sedar.com " and our website at " www.inplayoil.com ". Our corporate presentation will soon be available on our website.
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Second Quarter 2023 Financial & Operating Highlights
Realized average quarterly production of 8,474 boe/d (1) (57% light crude oil and NGLs) in light of significant production restrictions with shut ins due to the Alberta Wildfires and third party facility restrictions which also temporarily reduced the Company's liquids yield in the quarter. Generated strong quarterly adjusted funds flow ("AFF") (2) of $21.8 million ( $0.25 per basic share (3) ), an increase of 2% from the first quarter of 2023 despite a decrease in production. Generated free adjusted funds flow ("FAFF") (3) of $9.0 million resulting in a 9% reduction to net debt from March 31 , 2023. Maintained balance sheet strength with a low net debt (2) to earnings before interest, taxes and depletion ("EBITDA") (3) ratio of 0.4 on a trailing twelve month basis, down from 0.5 in the second quarter of 2022, providing the financial capability to deliver consistent returns to shareholders with the dividend sustainable through to the end of 2025 in a stress test price environment of US $55 /bbl WTI. Returned $4.0 million ( $8.0 million in the first six months of 2023) directly to shareholders through our monthly base dividend. Achieved net income of $4.3 million ( $0.05 per basic share; $0.05 per diluted share). Renewed the Company's fully conforming revolving Senior Credit Facility at $110 million .
Financial and Operating Results:
| | Three months ended June 30 | Six months ended June 30 | | | | | 2023 | 2022 | 2023 | 2022 | | Financial (CDN) ($millions) | | | | | | Oil and natural gas sales | 39.8 | 71.3 | 85.1 | 123.4 | | Adjusted funds flow (2) | 21.8 | 40.9 | 43.1 | 70.3 | | Per share – basic (4) | 0.25 | 0.47 | 0.49 | 0.81 | | Per share – diluted (4) | 0.24 | 0.45 | 0.47 | 0.77 | | Per boe (4) | 28.23 | 49.62 | 27.20 | 44.93 | | Comprehensive income | 4.3 | 29.0 | 13.6 | 47.8 | | Per share – basic | 0.05 | 0.33 | 0.15 | 0.55 | | Per share –diluted | 0.05 | 0.32 | 0.15 | 0.53 | | Capital expenditures – PP&E and E&E | 12.8 | 17.8 | 42.4 | 39.4 | | Property acquisitions (dispositions) | - | - | 0.3 | - | | Net Corporate acquisitions (3) | - | - | - | 0.4 | | Net debt (2) | (41.8) | (50.5) | (41.8) | (50.5) | | Shares outstanding | 88.9 | 87.1 | 88.9 | 87.1 | | Basic weighted-average shares | 88.8 | 86.9 | 88.4 | 86.7 | | Diluted weighted-average shares | 91.3 | 91.2 | 90.9 | 90.9 | | | | | | | | Operational | | | | | | Daily production volumes | | | | | | Light and medium crude oil (bbls/d) | 3,658 | 3,865 | 3,722 | 3,719 | | Natural gas liquids (bbls/d) | 1,187 | 1,333 | 1,322 | 1,320 | | Conventional natural gas (Mcf/d) | 21,772 | 23,191 | 22,208 | 21,631 | | Total (boe/d) | 8,474 | 9,063 | 8,746 | 8,644 | | Realized prices (4) | | | | | | Light and medium crude oil & NGLs ($/bbls) | 78.45 | 116.74 | 79.92 | 107.48 | | Conventional natural gas ($/Mcf) | 2.61 | 7.61 | 3.01 | 6.49 | | Total ($/boe) | 51.56 | 86.44 | 53.74 | 78.90 | | Operating netbacks ($/boe) (3) | | | | | | Oil and natural gas sales | 51.56 | 86.44 | 53.74 | 78.90 | | Royalties | (4.07) | (11.90) | (6.82) | (11.13) | | Transportation expense | (0.97) | (1.24) | (0.94) | (1.22) | | Operating costs | (15.21) | (12.28) | (14.95) | (12.60) | | Operating netback (3) | 31.31 | 61.02 | 31.03 | 53.95 | | Realized (loss) on derivative contracts | 2.07 | (6.77) | 1.01 | (3.95) | | Operating netback (including realized derivative contracts) (3) | 33.38 | 54.25 | 32.04 | 50.00 |
Second Quarter 2023 Financial & Operations Overview:
During the second quarter of 2023, InPlay invested $12.8 million drilling, completing and equipping two (1.9 net) Extended Reach Horizontal ("ERH") wells in Willesden Green and completing and equipping one (0.95 net) Willesden Green ERH well that was drilled at the end of the first quarter. InPlay also completed our first material upgrade of a gas facility and started a sizable infrastructure project to increase gas takeaway capacity and alleviate back pressure in Willesden Green.
Three (2.9 net) Willesden Green ERH wells were brought on production in June and had average initial production ("IP") rates per well of 424 boe/d (70% light crude oil and NGLs) over their first 30 days.
Production for the three months ended June 30, 2023 averaged 8,474 boe/d (1) (57% light crude oil and NGLs) and was 6% lower compared to the three months ended June 30, 2022 . Production, as felt by many Canadian producers, was negatively impacted over the second quarter as a result of several factors. The third party natural gas processing facility constraints which began on February 15, 2023 , continued into and throughout the second quarter. Shut ins were required with our properties in the Drayton Valley area for a fifteen day period as a result of the Alberta wildfires. Turnarounds occurred at a number of third party facilities, including a 23 day turnaround at a large midstream deep-cut facility. Lastly, extended road bans following Spring breakup resulted in a three week delay in completion operations and the start of production on a three well pad. These events had an impact of approximately 1,350 boed over the second quarter of 2023. The Company's light oil and liquids weighting of 57% during the second quarter was impacted by the turnaround of the deep-cut third party NGL facility, resulting in less NGLs stripped from natural gas production.
Despite these production curtailments experienced in the quarter, InPlay generated AFF of $21.8 million ( $0.25 per basic share) and FAFF of $9.0 million in the quarter reducing net debt by 9% from March 31, 2023 . Net income of $4.3 million ( $0.05 per basic share) was earned during the quarter.
Outlook and Operations Update (5)
InPlay was anticipating stronger crude oil pricing in the second half of the year. With this favorable pricing outlook now occurring the Company continues to focus on drilling oil-weighted properties maximizing our main revenue generating commodity . InPlay began its third quarter drilling program at the beginning of July by drilling three (2.85 net) wells in Willesden Green which are currently being completed and will soon be on production. Drilling operations recently began on a three (3.0 net) well pad in Pembina, offsetting two successful high oil weighted wells, drilled in the first quarter, which are exceeding our internal type curves with average IP rates per well of 302, 304 and 282 boe/d (85% - 89% light crude oil and NGLs) over their first 30, 60 and 90 days respectively. This three well pad is expected to be on production in the second half of September. Drilling plans for the remainder of the year include drilling three (2.6 net) wells in Willesden Green. Construction began on our second significant upgrade and partial replacement of an operated natural gas plant in Willesden Green which is expected to be completed in the third quarter. This upgrade will allow InPlay to continue to expand its operated natural gas capacity and reduce reliance on third party infrastructure as the Company continues to develop its Willesden Green asset. InPlay will continue to prudently allocate its capital resources and will adjust is capital plans considering commodity prices, inflationary cost pressures and other aspects impacting our business.
InPlay's operations and production were impacted in the second quarter of 2023 by the Alberta wildfires, delays in getting new wells on production from extended road-bans, and by third party processing facility constraints and turnarounds. The third party natural gas facility constraints that started in February are expected to end in the third quarter with the natural declines in production and limited natural gas focused drilling from all parties delivering into this non-operated facility. There are however other non-operated natural gas plants and pipeline maintenance shut-ins expected in the second half of the year. With these factors, InPlay is updating its 2023 annual average production guidance to 9,100 to 9,500 boe/d (58% - 60% light oil and liquids). At pricing of US $80.00 WTI, which is slightly below current future pricing, for the remainder of 2023, InPlay now forecasts 2023 AFF (2) of $103 to $108 million with FAFF (3) of $23 to $33 million . AFF (2) of $62 million is forecasted to be generated in the second half of 2023 ( $124 million on an annualized basis). The Company's leverage metrics are forecasted to remain at very low levels, with net debt to EBITDA (3) forecast to be 0.2x – 0.3x for 2023 supporting the Company's sustainable dividend and continued strategy of delivering returns to shareholders. The Company expects its higher return light oil and liquids weighting to increase throughout the remainder of 2023 as a result of drilling high oil-weighted properties and the resumption of NGLs being stripped from gas production at the previously shutdown NGL facility.
Delivering strong returns to shareholders with the payment of our monthly dividend of $0.015 /share, generating significant FAFF, top-tier production per debt adjusted share growth and low leverage all remain top priorities of InPlay. To date, the Company has returned $12 million to shareholders through dividends since our inaugural dividend was declared in November 2022 , representing approximately 5% of our current market capitalization while maintaining a strong financial position.
InPlay possesses top-quality assets, supported by a management team dedicated to providing top-tier returns to shareholders. The Company is well positioned to continue delivering strong returns to shareholders with our strong balance sheet position, disciplined and adaptable capital allocation, and high quality economic asset base.
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.
| 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 2023 capital program and associated guidance.
Reader Advisories
Non-GAAP and Other Financial Measures
Throughout this press release 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", "Net Debt to EBITDA", "Net Corporate Acquisitions", "Debt adjusted production per share" and "EV / DAAFF". 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 (loss) before taxes", "profit (loss) and comprehensive income (loss)", "adjusted funds flow", "capital expenditures", "corporate acquisitions, net of cash acquired", "net debt", "weighted average number of common shares (basic)" 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 cashflows 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 | | | | 2023 | 2022 | | Adjusted funds flow | 21,768 | 40,922 | | Exploration and dev. capital expenditures | (12,774) | (17,850) | | Property dispositions (acquisitions) | - | - | | Free adjusted funds flow | 8,994 | 23,072 |
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.
| (thousands of dollars) | Three Months Ended
June 30 | Six Months Ended
June 30 | | | | | 2023 | 2022 | 2023 | 2022 | | Revenue | 39,762 | 71,287 | 85,063 | 123,444 | | Royalties | (3,137) | (9,811) | (10,791) | (17,410) | | Operating expenses | (11,731) | (10,125) | (23,666) | (19,713) | | Transportation expenses | (749) | (1,021) | (1,492) | (1,914) | | Operating income | 24,145 | 50,330 | 49,114 | 84,407 | | | | | | | | Sales volume (Mboe) | 771.1 | 824.7 | 1,582.9 | 1,564.6 | | Per boe | | | | | | Revenue | 51.56 | 86.44 | 53.74 | 78.90 | | Royalties | (4.07) | (11.90) | (6.82) | (11.13) | | Operating expenses | (15.21) | (12.28) | (14.95) | (12.60) | | Transportation expenses | (0.97) | (1.24) | (0.94) | (1.22) | | Operating netback per boe | 31.31 | 61.02 | 31.03 | 53.95 | | Operating income profit margin | 61 % | 71 % | 58 % | 68 % |
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 below for a calculation of Net Debt to EBITDA and to the "Forward Looking Information and Statements" section for a calculation of forecast Net Debt to EBITDA.
| (thousands of dollars) | Twelve Months Ended
June 30 | | | | 2023 | 2022 | | Adjusted Funds Flow | 103,563 | 103,007 | | Interest expense (Credit Facility and other) | 4,359 | 5,219 | | Interest expense (Lease liabilities) | 59 | 23 | | EBITDA | 107,981 | 108,249 | | Net Debt | 41,821 | 50,473 | | Net Debt to EBITDA | 0.4 | 0.5 |
Net Corporate Acquisitions
Management considers Net corporate acquisitions an important measure as it is a key metric to evaluate the corporate acquisition in comparison to other transactions using the negotiated consideration value and ignoring changes to the fair value of the share consideration between the signing of the definitive agreement and the closing of the transaction. Net corporate acquisitions should not be considered as an alternative to or more meaningful than "Corporate acquisitions, net of cash acquired" as determined in accordance with GAAP as an indicator of the Company's performance. Net corporate acquisitions is calculated as total consideration with share consideration adjusted to the value negotiated with the counterparty, less working capital balances assumed on the corporate acquisition. Refer below for a calculation of Net corporate acquisitions and reconciliation to the nearest GAAP measure, "Corporate acquisitions, net of cash acquired".
| (thousands of dollars) | Three Months Ended June 30 | Six Months Ended June 30 | | | | | 2023 | 2022 | 2023 | 2022 | | Corporate acquisitions, net of cash acquired | - | (20) | - | 411 | | Share consideration | - | - | - | - | | Non-cash working capital acquired | - | - | - | - | | Derivative contracts | - | - | - | - | | Net Corporate acquisitions | - | (20) | - | 411 (1) |
| (1) | During the six months ended June 30, 2022, the acquired amount of Property, plant and equipment was adjusted by $0.4 million as a result of adjustments relating to the acquisition of Prairie Storm, with a corresponding increase in the recognized amounts of Accounts payable and accrued liabilities. |