InPlay Oil Corp press release
InPlay Oil Corp. Announces First Quarter 2024 Financial and Operating Results
TSX - Toronto Stock Exchange · Oil · Natural Gas · Natural Gas Liquids · Canada
Canada NewsWire
CALGARY AB , May 9, 2024 /CNW/ - InPlay Oil Corp. (TSX: IPO) (OTCQX: IPOOF) ("InPlay" or the "Company") announces its financial and operating results for the three months ended March 31, 2024 . InPlay's condensed unaudited interim financial statements and notes, as well as Management's Discussion and Analysis ("MD&A") for the three months ended March 31, 2024 will be available at " www.sedarplus.ca " and our website at " www.inplayoil.com ". An updated presentation will soon be available on our website.
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First Quarter 2024 Financial & Operating Results
Achieved average quarterly production of 8,605 boe/d (1) (57% light crude oil and NGLs). Generated strong quarterly AFF (2) of $16.5 million ( $0.18 per basic share (3) ). Returned $4.1 million to shareholders through our monthly base dividend, representing an annual yield of 7.6% relative to quarter-end market capitalization. Since November 2022 InPlay has distributed $25.6 million in dividends, or $0.285 per share including dividends declared to date in 2024. Realized a strong operating income profit margin of 54%. Completed an active capital program investing $25.5 million to drill, complete and equip 8 (5.6 net) ERH Cardium wells in Pembina and Willesden Green. The majority of production from the program came fully onstream later in March and into April benefiting from April's higher Edmonton Par price of $109.70 /bbl compared to $92.12 /bbl average for the first quarter. Current corporate production is approximately 9,350 boe/d(1) (60% light crude oil and NGLs) based on field estimates.
Outlook and Operations Update (5)
We are excited about our capital program for the remainder of the year and plan to drill and bring new production online in the third quarter of 2024 focused on high oil-weighted properties given the current low natural gas pricing environment. The oil-weighted production from new wells is expected to benefit from higher realized oil prices forecasted for the balance of the year as a result of West Texas Intermediate ("WTI") improvements which started in April. In addition, the Mixed Sweet Blend ("MSW") differential which was USD $8.65 /bbl in Q1 2024 and is forecasted to average USD $3.65 /bbl on futures pricing for the balance of the year with the commencement of flow on the Trans Mountain Pipeline expansion adding to takeaway capacity in Canada . InPlay's second half drilling program is expected to start in June, or potentially July, with over 60% of our net wells for the year remaining to be drilled and brought on production. This activity is projected to lead to strong production rates and free adjusted funds flow ("FAFF") (3) generation.
The Company looks forward to resuming development of a prolific area of Pembina previously restricted by third party gas plant capacity. In the first quarter, InPlay entered into a long-term Gas Handling Agreement which provides guaranteed access to natural gas processing capacity, allowing the Company to recommence development of this lucrative and strong rate of return growth area where InPlay has not drilled since the spring of 2022. These wells are characterized by strong oil rates similar to other Cardium oil wells while also benefitting from materially higher gas rates and lower overall production declines. InPlay plans to drill a three (3.0 net) extended reach horizontal ("ERH") Cardium well pad in this area in the third quarter of 2024 with gas production expected to be sold into the stronger winter gas pricing season when forward pricing is approximately $3.45 /mcf compared to current pricing of $1.70 /mcf.
The Company is well positioned with strong momentum to build upon for the balance of the year as the majority of new production from the Company's first quarter capital program came on-line in late March and early April. Minimal capital spending is planned for the second quarter, and the combination of higher average production with stronger realized oil prices which started in Q2 2024 is expected to result in significant FAFF generation and net debt reduction.
With the new wells coming on production in late March and early April, current corporate production is approximately 9,350 boe/d (1) (60% light crude oil and NGLs) based on field estimates. InPlay reiterates our 2024 annual average production guidance of 9,000 – 9,500 boe/d (59% – 61% light crude oil and NGLs) supported by strong current production rates and the majority of our wells coming on production in the second half of the year, including 3.0 net wells in our prolific Pembina play. The sustained improvement in WTI prices and a lower MSW differential since the release of our budget in late January results in an updated 2024 Adjusted Funds Flow ("AFF") (2) forecast of $90 to $97 million based on USD $80 WTI for the remainder of the year, with estimated FAFF (3) of $23 to $33 million . The Company's leverage metrics are projected to remain at levels which are among the lowest in our peer group. Net debt to EBITDA (3) is forecasted to be 0.4x – 0.5x for 2024 supporting the Company's sustainable dividend and continued strategy of delivering returns to shareholders. The 2024 capital program will remain flexible and InPlay will revisit this program considering market and economic conditions through the remainder of the year.
Financial and Operating Results:
| (CDN) ($000's) | | Three months ended March 31 | | | | | | | 2024 | 2023 | | Financial | | | | | | Oil and natural gas sales | | | 37,997 | 45,301 | | Adjusted funds flow (2) | | | 16,525 | 21,296 | | Per share – basic (4) | | | 0.18 | 0.24 | | Per share – diluted (4) | | | 0.18 | 0.24 | | Per boe (4) | | | 21.10 | 26.23 | | Comprehensive income | | | 1,686 | 9,291 | | Per share – basic | | | 0.02 | 0.11 | | Per share – diluted | | | 0.02 | 0.10 | | Capital expenditures – PP&E and E&E | | | 25,530 | 29,600 | | Property acquisitions (dispositions) | | | (25) | 327 | | Net debt (2) | | | (59,897) | (46,204) | | Shares outstanding | | | 90,119,356 | 88,772,801 | | Basic weighted-average shares | | | 90,194,552 | 87,908,075 | | Diluted weighted-average shares | | | 91,851,224 | 90,425,837 | | Operational | | | | | | Daily production volumes | | | | | | Light and medium crude oil (bbls/d) | | | 3,452 | 3,788 | | Natural gas liquids (bbls/d) | | | 1,487 | 1,458 | | Conventional natural gas (Mcf/d) | | | 22,000 | 22,648 | | Total (boe/d) | | | 8,605 | 9,020 | | Realized prices (4) | | | | | | Light and medium crude oil & NGLs ($/bbls) | | | 72.72 | 81.30 | | Conventional natural gas ($/Mcf) | | | 2.66 | 3.39 | | Total ($/boe) | | | 48.52 | 55.80 | | Operating netbacks ($/boe) (3) | | | | | | Oil and natural gas sales | | | 48.52 | 55.80 | | Royalties | | | (5.78) | (9.43) | | Transportation expense | | | (1.09) | (0.92) | | Operating costs | | | (15.36) | (14.70) | | Operating netback (3) | | | 26.29 | 30.75 | | Realized gains on derivative contracts | | | 0.29 | - | | Operating netback (including realized derivative contracts) (3) | | | 26.58 | 30.75 |
First Quarter 2024 Financial & Operations Overview:
InPlay completed an active capital program during the first quarter of 2024 consisting of $25.5 million of development capital which is approximately 40% of our capital budget for the year. The Company drilled two (1.9 net) ERH wells in Willesden Green which were brought on production in late February, with three (3.0 net) ERH wells in Pembina and two (0.3 net) non-operated Willesden Green ERH wells brought on production in late March. The Company also participated in one (0.35 net) non-operated Willesden Green ERH well which came on production in April. Drilling and completions operations were affected by cold weather and elevated industry activity limiting the availability of service providers resulting in new production coming on approximately three weeks later than anticipated. This delay however, resulted in new flush production coming on-line in a more favorable crude oil pricing environment with improved differentials resulting in materially higher Edmonton Par prices approximating CAD $109.70 /bbl in April compared to CAD $92.12 /bbl average for the first quarter.
The three (3.0 net) Pembina ERH wells drilled in the quarter came on production at the end of March and have exceeded internal expectations with average initial production ("IP") rates per well of 275 boe/d (1) (86% light crude oil and NGLs) over their first 30 days and continue to produce at an average rate of 253 boe/d (1) (84% light crude oil and NGLs). These three wells offset five successful wells drilled in 2023 which have low decline rates and high light oil and liquids weightings contributing to our oil focused development strategy in 2024.
InPlay's operations were impacted by an extreme cold snap in January including temperatures below -40°C for an extended period, which had not been experienced since 2004. The cold weather led to facility issues, low-rate wells freezing, a pipeline break, and an abnormally high number of producing wells going down and requiring servicing which took most of February to get back online. In aggregate, the impact to production for the quarter was approximately 340 boe/d (57% light crude oil and NGLs). In addition, non-operated downtime impacted production by approximately 115 boe/d in the quarter. Approximately half of this non-operated production has resumed and the majority of the remaining offline production is coming back online soon.
InPlay started a pilot optimization program in the quarter to lower pumps in older, low-rate horizontal oil wells to draw down pressure in the reservoir and increase inflows. The results have been positive to date with capital efficiency adds of approximately $6,000 per producing barrel. The Company has identified over 100 potential horizontal well candidates with pumps that can be lowered. The majority of future pump lowerings will occur as wells require servicing in the normal course of operations.
On behalf of our employees, management team and Board of Directors, we would like to thank our shareholders for their support and look forward to updating you on our progress throughout the year.
| 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 to the "Forward Looking Information and Statements" section for a calculation of forecast FAFF.
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 March 31 | | | | | | | 2024 | 2023 | | Revenue | | | 37,997 | 45,301 | | Royalties | | | (4,527) | (7,653) | | Operating expenses | | | (12,030) | (11,935) | | Transportation expenses | | | (857) | (743) | | Operating income | | | 20,583 | 24,970 | | | | | | | | Sales volume (Mboe) | | | 783.1 | 811.8 | | Per boe | | | | | | Revenue | | | 48.52 | 55.80 | | Royalties | | | (5.78) | (9.43) | | Operating expenses | | | (15.36) | (14.70) | | Transportation expenses | | | (1.09) | (0.92) | | Operating netback per boe | | | 26.29 | 30.75 | | Operating income profit margin | | | 54 % | 55 % |
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 months ended March 31, 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.
Net Debt
Net debt is a GAAP measure and is disclosed in the notes to the Company's financial statements for the three months ended March 31, 2024 . The Company closely monitors its capital structure with the goal of maintaining a strong balance sheet to fund the future growth of the Company. The Company monitors net debt as part of its capital structure. The Company uses net debt (bank debt plus accounts payable and accrued liabilities less accounts receivables and accrued receivables, prepaid expenses and deposits and inventory) as an alternative measure of outstanding debt. Management considers net debt an important measure to assist in assessing the liquidity of the Company.
Supplementary Measures
"Average realized crude oil price" is comprised of crude oil commodity sales from production, as determined in accordance with IFRS, divided by the Company's crude oil volumes. Average prices are before deduction of transportation costs and do not include gains and losses on financial instruments.
"Average realized NGL price" is comprised of NGL commodity sales from production, as determined in accordance with IFRS, divided by the Company's NGL volumes. Average prices are before deduction of transportation costs and do not include gains and losses on financial instruments.
"Average realized natural gas price" is comprised of natural gas commodity sales from production, as determined in accordance with IFRS, divided by the Company's natural gas volumes. Average prices are before deduction of transportation costs and do not include gains and losses on financial instruments.
"Average realized commodity price" is comprised of commodity sales from production, as determined in accordance with IFRS, divided by the Company's volumes. Average prices are before deduction of transportation costs and do not include gains and losses on financial instruments.
"Adjusted funds flow per weighted average basic share" is comprised of adjusted funds flow divided by the basic weighted average common shares.