InPlay Oil Corp press release
InPlay Oil Corp. Announces Third Quarter 2023 Financial and Operating Results
TSX - Toronto Stock Exchange · Oil · Natural Gas · Natural Gas Liquids · Canada
Canada NewsWire
CALGARY AB , Nov. 8, 2023 /CNW/ - InPlay Oil Corp. (TSX: IPO) (OTCQX: IPOOF) ("InPlay" or the "Company") announces its financial and operating results for the three and nine months ended September 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 nine months ended September 30, 2023 will be available at " www.sedar.com " and our website at " www.inplayoil.com ".
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Third Quarter 2023 Financial & Operating Highlights
Realized average quarterly production of 9,003 boe/d (1) (57% light crude oil and NGLs), a 6% increase compared to 8,474 boe/d (57% light crude oil and NGLs) in the second quarter of 2023 despite extended curtailments and unplanned downtime experienced in the quarter of approximately 550 boe/d. Generated strong quarterly adjusted funds flow ("AFF") (2) of $25.2 million ( $0.28 per basic share (3) ), an increase of 16% from the second quarter of 2023. Returned $4.0 million ( $12.0 million in the first nine months of 2023) directly to shareholders through our monthly base dividend. Increased revenues by 17% to $46.7 million compared to $39.8 million in the second quarter of 2023. Improved field operating netbacks (3) by 8% compared to the second quarter of 2023. Achieved net income of $7.5 million ( $0.08 per basic share; $0.08 per diluted share). InPlay has now returned to a retained earnings position on the balance sheet demonstrating that the Company has generated positive earnings since inception (net of dividends paid). Invested $27.5 million to drill, complete and equip three (2.9 net) Extended Reach Horizontal ("ERH") wells in Willesden Green, three (3.0 net) ERH wells in Pembina and one (0.35 net) non-operated ERH well in Willesden Green.
Fourth Quarter Operational Update:
Drilled and completed two (1.6 net) ERH wells in Willesden Green which were recently put on production. The three (3.0 net) Pembina ERH wells brought on production shortly before start of the quarter are producing at strong rates of approximately 260 boe/d (1) (87% light crude oil and NGLs) per well. Brought online our second natural gas facility upgrade at Leafland, which has increased operated facility capacity by 66% while improving our liquids yield by 40%. Production benefits are already being realized through reduced back pressure on wells, lower declines and providing more consistent runtimes. Current production is 9,700 boe/d (1) (60% light crude oil and NGLs) based on field estimates., excluding the impact of the two (1.6 net) ERH wells in Willesden Green showing strong flowback rates in the early clean up stage.
Financial and Operating Results:
| | Three months ended
September 30 | Nine months ended
September 30 | | | | | 2023 | 2022 | 2023 | 2022 | | Financial (CDN) ($millions) | | | | | | Oil and natural gas sales | 46.7 | 57.0 | 131.7 | 180.4 | | Adjusted funds flow (2) | 25.2 | 30.2 | 68.2 | 100.5 | | Per share – basic (4) | 0.28 | 0.35 | 0.77 | 1.16 | | Per share – diluted (4) | 0.28 | 0.33 | 0.76 | 1.10 | | Per boe (4) | 30.40 | 34.61 | 28.30 | 41.23 | | Comprehensive income | 7.5 | 15.4 | 21.1 | 63.2 | | Per share – basic | 0.08 | 0.18 | 0.24 | 0.73 | | Per share –diluted | 0.08 | 0.17 | 0.23 | 0.69 | | Capital expenditures – PP&E and E&E | 27.5 | 24.5 | 69.8 | 64.0 | | Property acquisitions (dispositions) | - | - | 0.3 | - | | Net Corporate acquisitions (3) | - | 0.1 | - | 0.5 | | Net debt (2) | (48.8) | (45.6) | (48.8) | (45.6) | | Shares outstanding | 90.3 | 87.2 | 90.3 | 87.2 | | Basic weighted-average shares | 89.3 | 87.1 | 88.7 | 86.8 | | Diluted weighted-average shares | 90.8 | 91.2 | 90.2 | 91.0 | | | | | | | | Operational | | | | | | Daily production volumes | | | | | | Light and medium crude oil (bbls/d) | 3,697 | 3,717 | 3,714 | 3,718 | | Natural gas liquids (bbls/d) | 1,420 | 1,432 | 1,355 | 1,358 | | Conventional natural gas (Mcf/d) | 23,316 | 26,075 | 22,581 | 23,129 | | Total (boe/d) | 9,003 | 9,495 | 8,832 | 8,931 | | Realized prices (4) | | | | | | Light and medium crude oil & NGLs ($/bbls) | 86.28 | 96.98 | 82.09 | 103.89 | | Conventional natural gas ($/Mcf) | 2.82 | 4.60 | 2.94 | 5.77 | | Total ($/boe) | 56.35 | 65.24 | 54.63 | 74.00 | | Operating netbacks ($/boe) (3) | | | | | | Oil and natural gas sales | 56.35 | 65.24 | 54.63 | 74.00 | | Royalties | (6.50) | (12.14) | (6.71) | (11.49) | | Transportation expense | (0.85) | (1.02) | (0.90) | (1.15) | | Operating costs | (15.31) | (12.53) | (15.07) | (12.58) | | Operating netback (3) | 33.69 | 39.55 | 31.95 | 48.78 | | Realized (loss) on derivative contracts | 1.76 | (0.59) | 1.27 | (2.75) | | Operating netback (including realized derivative contracts) (3) | 35.45 | 38.96 | 33.22 | 46.03 |
Third Quarter 2023 Financial & Operations Overview:
The third quarter of 2023 was a capital intensive quarter for the Company. InPlay invested $27.5 million drilling, completing and equipping three (2.9 net) ERH wells in Willesden Green and three (3.0 net) ERH wells in Pembina. The Company also participated in one (0.35 net) non-operated ERH well in Willesden Green not previously budgeted.
In addition to the upgrade of a natural gas facility in the second quarter, the Company completed a second material upgrade of a gas facility during the third quarter which was brought back on-line in early October. This project modernized existing infrastructure in the Leafland area of Willesden Green and has resulted in an approximate 66% increase to the natural gas processing capability of this facility. The addition of a refrigeration plant to this facility has also improved NGL recoveries by approximately 40%. This additional capacity has lowered field pressures in the area which is expected to improve production and reduce declines on existing wells and future drilling locations. This upgrade is expected to accommodate future development in Leafland and provide more consistent and reliable processing capacity within the Company's operational control.
The Company has been focused on a high oil weighted drilling program. Three (2.9 net) Willesden Green ERH wells came on production in August into high pressure pipeline systems with average initial production ("IP") rates per well of 203 boe/d (1) (94% light crude oil and NGLs) over their first 30 days and 215 boe/d (1) (93% light crude oil and NGLs) over their first 60 days. The impact of our facility improvements has enabled these wells to have multiple weeks of flat to improving production rates and after two months they continue to produce at an average rate of approximately 280 boe/d (1) (87% light crude oil and NGLs) per well. The production witnessed from the most recent six wells drilled in Willesden Green have recently benefitted from reduced field pressures and consistent facility runtimes resulting from our operated natural gas facility expansions.
In addition, three (3.0 net) Pembina ERH wells came on production at the end of September with average initial production ("IP") rates per well of 227 boe/d (1) (88% light crude oil and NGLs) over their first 30 days. These wells have also continued to clean up after completions and are currently producing approximately 260 boe/d (1) (87% light crude oil and NGLs) per well.
Production for the three months ended September 30, 2023 averaged 9,003 boe/d (1) (57% light crude oil and NGLs), 6% higher compared to the three months ended June 30 , 2023. Third quarter production was impacted by approximately 550 boe/d (52% light crude oil and NGLs) primarily due to the continuation of multiple third-party natural gas takeaway constraints on our operations and the commissioning of our expanded gas facility that slightly exceeded the anticipated startup timeline. The continued third-party facility outages forced the redirection of associated natural gas to less favorable third-party facilities impacting production through increased back pressure on producing wells as well as higher operating costs.
InPlay generated AFF (2) of $25.2 million ( $0.28 per basic share) an increase of 16% from the second quarter of 2023. The Company achieved net income of $7.5 million ( $0.08 per basic share; $0.08 per diluted share) and has returned to a retained earnings position on the balance sheet. This is evidence of the long-term sustainability of the Company as positive earnings have been generated since inception (net of dividends paid).
Outlook and Operations Update (5)
The majority of InPlay's capital program for the year has been completed. The Company's drilling program for the fourth quarter is underway with two (1.6 net) ERH wells in Willesden Green having been drilled to date. These two wells have been completed and are in the early stages of production. In addition, a 1.0 net Belly River well is now planned to be drilled in the fourth quarter and anticipated to come online in December with its first full month of production expected to commence in January 2024 . This well replaces a previously planned one (0.8 net) Willesden Green well.
The investments made in increasing natural gas takeaway capacity through the two facility upgrades in Willesden Green will be important in alleviating potential production issues from third party facility outages going forward. These upgrades have increased our natural gas processing and takeaway capacity in Leafland from approximately 8,400 mcf/d to 17,300 mcf/d. These projects have already shown their importance by reducing back pressure on wells, lowering declines and providing more consistent runtimes, and the reduction in field pressures has the added benefit of improving our liquids weighting. Current production is approximately 9,700 boe/d (1) (60% light crude oil and NGLs) based on field estimates, excluding the impact of two (1.6 net) ERH wells in Willesden Green which are in early stage cleanup and with only four days of production are showing strong flowback rates.
As a result, the fourth quarter is forecasted to be our highest production quarter of the year and given the strong crude oil pricing environment and weak Canadian dollar, the fourth quarter is also projected to be our highest AFF quarter for the year. As the majority of the 2023 capital program was completed by the end of the third quarter, significant free adjusted funds flow ("FAFF") (3) is expected to be generated in the fourth quarter resulting in a sizeable reduction to net debt prior to year-end.
The Company's updated 2023 drilling program will be more active than previously planned by approximately 0.6 net wells consisting of 21 (17.1 net) horizontal wells. The changes include an additional one (0.35 net) non-op ERH Willesden Green well and a 1.0 net Belly River well instead of a previously planned one (0.8 net) Willesden Green well. As a result, InPlay has revised its 2023 development capital expenditure guidance to approximately $83 million (5) . The timing of the Belly River well will not materially add to 2023 production but will pave the way for potentially an increased Belly River program in 2024 given the high oil weighting and high netback nature of this play. This area is defined by high light-oil weightings that receive a premium to the Mixed Sweet Blend ("MSW"), our pricing benchmark. Our two recent horizontal wells drilled in the area came online in November 2022 and have had operating netbacks of approximately $71.25 /boe since being brought on production, and light oil and liquids weightings of approximately 94% to date. These wells have had very low decline rates over this period with average IP rates per well of 98 boe/d (97% light crude oil and NGLs) and 115 boe/d (92% light crude oil and NGLs) over their first 90 and 335 days respectively.
The Company remains committed to providing strong returns to shareholders. Our monthly base dividend of $0.015/share represents approximately a 7% yield at the current share price. To date, the Company has returned $16 million to shareholders through dividends since our inaugural dividend was declared in November 2022 , representing approximately 7% of our current market capitalization while maintaining a strong financial position. The generation of shareholder returns through significant FAFF, top-tier production per share growth while maintaining low leverage all remain top priorities of InPlay.
InPlay would like to thank our staff, contractors, and suppliers for their continued dedication and execution, and thank the Board of Directors and shareholders for their continued guidance and support. We look forward to releasing our 2024 capital budget and associated guidance in January.
| 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 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 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
September 30 | Nine Months Ended
September 30 | | | | | 2023 | 2022 | 2023 | 2022 | | Revenue | 46,672 | 56,985 | 131,735 | 180,429 | | Royalties | (5,387) | (10,607) | (16,178) | (28,017) | | Operating expenses | (12,677) | (10,946) | (36,343) | (30,660) | | Transportation expenses | (698) | (888) | (2,190) | (2,802) | | Operating income | 27,910 | 34,544 | 77,024 | 118,950 | | | | | | | | Sales volume (Mboe) | 828.3 | 873.5 | 2,411.2 | 2,438.1 | | Per boe | | | | | | Revenue | 56.35 | 65.24 | 54.63 | 74.00 | | Royalties | (6.50) | (12.14) | (6.71) | (11.49) | | Operating expenses | (15.31) | (12.53) | (15.07) | (12.58) | | Transportation expenses | (0.85) | (1.02) | (0.90) | (1.15) | | Operating netback per boe | 33.69 | 39.55 | 31.95 | 48.78 | | Operating income profit margin | 60 % | 61 % | 58 % | 66 % |
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.