International Petroleum Corporation 2018 Third Quarter Financial
Results
International Petroleum Corporation (IPC or
the Corporation) (TSX, Nasdaq Stockholm: IPCO)
today released its financial and operating results and related
management’s discussion and analysis (MD&A) for the three and
nine months ended September 30, 2018.
Financial and Operational
Highlights
- Average net production of 35,200
barrels of oil equivalent (boe) per day (boepd) for the third
quarter of 2018 at the high end of the guidance range; strong
performance from all assets.
- Full year 2018 average production
expected to be at or above the high end of the guidance range of
32,500 to 34,000 boepd.
- Successfully executed the enhanced
gas optimization program and commenced oil drilling in Canada.
- Progressing plans for a third phase
of infill drilling in Malaysia in 2019.
- Progressing plans for Vert La
Gravelle and Villeperdue West developments in France in 2019.
- Operating costs per boe of USD 12.0
for the third quarter of 2018 in line with guidance.
- Full year 2018 capital expenditure
guidance maintained at USD 44.0 million.
- Significant free cash flow
generation with net debt reduced by over USD 140 million since
completion of the acquisition of the Suffield assets to USD 213
million as at September 30, 2018.
- Announced the proposed acquisition
of BlackPearl Resources Inc. (BlackPearl) in October 2018.
|
Three months ended September 30 |
|
Nine months ended September 30 |
USD Thousands |
2018 |
2017 |
|
2018 |
2017 |
Revenue |
106,746 |
47,926 |
|
342,545 |
148,354 |
Gross profit |
37,060 |
7,256 |
|
120,553 |
35,287 |
Net result |
26,487 |
2,172 |
|
74,298 |
13,746 |
Operating cash flow |
67,949 |
28,893 |
|
220,696 |
101,212 |
EBITDA |
66,240 |
26,440 |
|
206,009 |
95,876 |
Mike Nicholson, IPC's Chief Executive Officer,
commented,
"We are very pleased to announce our third
quarter results for 2018. During the third quarter of 2018, our
assets delivered average daily net production of 35,200 boepd, at
the high end of our revised 2018 guidance for the quarter. We
expect our full year 2018 average production to be at or above the
guidance range of 32,500 to 34,000 boepd. Operating costs per boe
in the third quarter of 2018 were in line with guidance at USD
12.0. Our full year 2018 guidance of operating costs per boe of USD
12.6 is maintained.We delivered a strong financial performance
during the third quarter of 2018, generating operating cash flow of
USD 68 million. This allowed IPC to continue to fund our
expenditure program and reduce net debt from USD 255 million at the
end of the second quarter to USD 213 million by the end of the
third quarter. Operating cash flow for the first nine months of
2018 was in excess of USD 220 million and net debt reduction has
been in excess of USD 140 million since completion of the Suffield
acquisition in early January 2018.In Malaysia, following two
successful infill drilling campaigns on the Bertam field in 2016
and 2018, we continue to progress plans for a third campaign with
up to three wells in 2019. We maintained an exceptional facility
uptime performance of greater than ninety-nine percent in the third
quarter of 2018.
In Canada, we commenced the first oil drilling
campaign in the Suffield assets since 2014. In addition, the
immediate focus for the Suffield assets is on gas optimization
activities. Gas production in Canada for the third quarter of 2018
was above the high end of CMD guidance with exceptional performance
from the first phase of gas optimization activity. IPC has
commenced preparations for the second phase of gas optimization in
the fourth quarter of 2018.
In October 2018, IPC announced that it has
agreed to the transformational acquisition of BlackPearl in an
all-share transaction. The transaction combines the highly free
cash flow generative short cycle reserve base of IPC with the
strategic long life reserve and contingent resource base of
BlackPearl, creating a company with the combined financial strength
to accelerate value creation from the enlarged portfolio. IPC’s 2P
reserve base will more than double and the total reserve and
contingent resource base will increase by more than six times to in
excess of one billion barrels of oil equivalent. Reserves life is
extended by seven years and production is expected to increase by
around 50% in the short term. In addition, a high calibre team of
industry professionals with a long track record of value creation
will join IPC. The BlackPearl transaction remains subject to
shareholder approvals of both IPC and BlackPearl and certain
regulatory approvals, with completion expected in December
2018.”
International Petroleum Corp. (IPC) is an
international oil and gas exploration and production company with a
high quality portfolio of assets located in Canada, Malaysia and
Europe, providing a solid foundation for organic and inorganic
growth. IPC is a member of the Lundin Group of Companies. IPC is
incorporated in Canada and IPC’s shares are listed on the Toronto
Stock Exchange (TSX) and the Nasdaq Stockholm exchange under the
symbol "IPCO".
For further information, please contact:
Rebecca
GordonVP Corporate Planning and Investor
Relationsrebecca.gordon@international-petroleum.comTel: +41 22 595
10 50 |
|
Robert
ErikssonMedia Managerreriksson@rive6.chTel: +46 701 11 26 15 |
This information is information that
International Petroleum Corporation is required to make public
pursuant to the EU Market Abuse Regulation and the Securities
Markets Act. The information was submitted for publication, through
the contact persons set out above, at 07:30 CET on November 6,
2018. The Corporation's unaudited interim condensed consolidated
financial statements and management's discussion and analysis
(MD&A) have been filed on SEDAR (www.sedar.com) and are also
available on the Corporation's website
(www.international-petroleum.com). Forward-Looking
Statements This press release contains statements and
information which constitute "forward-looking statements" or
"forward-looking information" (within the meaning of applicable
securities legislation). Such statements and information (together,
"forward-looking statements") relate to future events, including
the Corporation's future performance, business prospects or
opportunities. Actual results may differ materially from those
expressed or implied by forward-looking statements. The
forward-looking statements contained in this press release are
expressly qualified by this cautionary statement. Forward-looking
statements speak only as of the date of this press release, unless
otherwise indicated. IPC does not intend, and does not assume any
obligation, to update these forward-looking statements, except as
required by applicable laws.
All statements other than statements of
historical fact may be forward-looking statements. Any statements
that express or involve discussions with respect to predictions,
expectations, beliefs, plans, projections, forecasts, guidance,
budgets, objectives, assumptions or future events or performance
(often, but not always, using words or phrases such as "seek",
"anticipate", "plan", "continue", "estimate", "expect", "may",
"will", "project", “forecast”, "predict", "potential", "targeting",
"intend", "could", "might", "should", "believe", "budget" and
similar expressions) are not statements of historical fact and may
be "forward-looking statements". Forward-looking statements
include, but are not limited to, statements with respect to: our
intention to continue to implement our strategies to build
long-term shareholder value; the ability of our high quality
portfolio of assets to provide a solid foundation for organic and
inorganic growth; results of previous infill drilling and the
potential for future infill drilling in Malaysia; future
development potential of the Suffield operations, including oil
drilling and gas optimization; timing and certainty regarding
completion of the BlackPearl transaction, including fulfilling the
conditions precedent to such completion; the ability of IPC to
maintain stable long-term production and take advantage of growth
and development upside opportunities post-completion of the
BlackPearl transaction; the ability of IPC to integrate the assets
and personnel of BlackPearl; any combined market capitalization,
production, financial and net asset values figures in respect of
IPC post-completion of the BlackPearl transaction, including
reserves and resources; the process for completing the BlackPearl
transaction; the ability IPC and BlackPearl to obtain necessary
approvals and otherwise satisfy the conditions to closing the
BlackPearl transaction; the absence of material events which may
interfere with the BlackPearl transaction being completed;
estimates of reserves; estimates of contingent resources; estimates
of prospective resources; the ability to generate free cash flows
and use that cash to repay debt and to continue to deleverage; and
future drilling and other exploration and development activities.
Statements relating to "reserves" and "contingent resources" are
also deemed to be forward-looking statements, as they involve the
implied assessment, based on certain estimates and assumptions,
that the reserves and resources described exist in the quantities
predicted or estimated and that the reserves and resources can be
profitably produced in the future. Ultimate recovery of
reserves or resources is based on forecasts of future results,
estimates of amounts not yet determinable and assumptions of
management.
The forward-looking statements are based on
certain key expectations and assumptions made by IPC, including
expectations and assumptions concerning: prevailing commodity
prices and currency exchange rates; applicable royalty rates and
tax laws; interest rates; future well production rates and reserve
and contingent resource volumes; operating costs; the timing of
receipt of regulatory approvals; the performance of existing wells;
the success obtained in drilling new wells; anticipated timing and
results of capital expenditures; the sufficiency of budgeted
capital expenditures in carrying out planned activities; the
timing, location and extent of future drilling operations; the
successful completion of acquisitions and dispositions; the
benefits of acquisitions; the state of the economy and the
exploration and production business in the jurisdictions in which
IPC operates and globally; the availability and cost of financing,
labour and services; and the ability to market crude oil, natural
gas and natural gas liquids successfully.
Although IPC believes that the expectations and
assumptions on which such forward-looking statements are based are
reasonable, undue reliance should not be placed on the
forward-looking statements because IPC can give no assurances that
they will prove to be correct. Since forward-looking statements
address future events and conditions, by their very nature they
involve inherent risks and uncertainties. Actual results could
differ materially from those currently anticipated due to a number
of factors and risks. These include, but are not limited to: the
risks associated with the oil and gas industry in general such as
operational risks in development, exploration and production;
delays or changes in plans with respect to exploration or
development projects or capital expenditures; the uncertainty of
estimates and projections relating to reserves, resources,
production, revenues, costs and expenses; health, safety and
environmental risks; commodity price and exchange rate
fluctuations; interest rate fluctuations; marketing and
transportation; loss of markets; environmental risks; competition;
incorrect assessment of the value of acquisitions; failure to
complete or realize the anticipated benefits of acquisitions or
dispositions; the ability to access sufficient capital from
internal and external sources; failure to obtain required
regulatory and other approvals; and changes in legislation,
including but not limited to tax laws, royalties and environmental
regulations. Readers are cautioned that the foregoing list of
factors is not exhaustive.
Additional information on these and other
factors that could affect IPC, or its operations or financial
results, are included in the Corporation’s Annual Information Form
(AIF) for the year ended December 31, 2017 (See “Cautionary
Statement Regarding Forward-Looking Information”, “Reserves and
Resources Advisory” and “Risk Factors”) and other reports on file
with applicable securities regulatory authorities, including
previous financial reports, management’s discussion and analysis
and material change reports, which may be accessed through the
SEDAR website (www.sedar.com) or IPC's website
(www.international-petroleum.com).
Additional information on these and other
factors that could affect BlackPearl, or its operations or
financial results, are included in BlackPearl’s Annual Information
Form for the year ended December 31, 2017 (See “Cautionary
Statement Regarding Forward-Looking Information”, “Reserves and
Resources Advisory” and “Risk Factors”) and other reports on file
with applicable securities regulatory authorities, including
previous financial reports, management’s discussion and analysis
and material change reports, which may be accessed through the
SEDAR website (www.sedar.com) or BlackPearl’s website
(www.blackpearlresources.ca).
Non-IFRS MeasuresReferences are
made in this press release to "operating cash flow" (OCF),
"Earnings Before Interest, Tax, Depreciation and Amortization"
(EBITDA), "operating costs" and "net debt"/"net cash", which are
not generally accepted accounting measures under International
Financial Reporting Standards (IFRS) and do not have any
standardized meaning prescribed by IFRS and, therefore, may not be
comparable with definitions of OCF, EBITDA, operating costs and net
debt/net cash that may be used by other public companies. Non-IFRS
measures should not be considered in isolation or as a substitute
for measures prepared in accordance with IFRS.
Management believes that OCF, EBITDA, operating
costs and net debt/net cash are useful supplemental measures that
may assist shareholders and investors in assessing the cash
generated by and the financial performance and position of the
Corporation. Management also uses non-IFRS measures internally in
order to facilitate operating performance comparisons from period
to period, prepare annual operating budgets and assess the
Corporation’s ability to meet its future capital expenditure and
working capital requirements. Management believes these non-IFRS
measures are important supplemental measures of operating
performance because they highlight trends in the core business that
may not otherwise be apparent when relying solely on IFRS financial
measures. Management believes such measures allow for assessment of
the Corporation’s operating performance and financial condition on
a basis that is more consistent and comparable between reporting
periods. The Corporation also believes that securities analysts,
investors and other interested parties frequently use non-IFRS
measures in the evaluation of issuers.
The definition and reconciliation of each
non-IFRS measure is presented in IPC's MD&A (See "Non-IFRS
Measures" therein).
Disclosure of Oil and Gas
Information This press release contains references to
estimates of gross 2P reserves attributed to the Corporation's oil
and gas assets. Gross reserves are the total working interest
reserves before the deduction of any royalties and including any
royalty interests receivable.
Reserve estimates, contingent resource
estimates, prospective resource estimates and estimates of future
net revenue in respect of IPC’s oil and gas assets in France,
Malaysia and the Netherlands are effective as of December 31, 2017
and were prepared by IPC and audited by ERC Equipoise Ltd. (ERCE),
an independent qualified reserves auditor, in accordance with
National Instrument 51-101 – Standards of Disclosure for Oil and
Gas Activities (NI 51-101) and the Canadian Oil and Gas Evaluation
Handbook (the COGE Handbook), and using McDaniel’s January 1, 2018
price forecasts as referred to below.
Reserves estimates, contingent resource
estimates and estimates of future net revenue in respect of IPC’s
oil and gas assets in Canada are effective as of January 5, 2018,
being the completion date for the acquisition of these assets by
IPC, and were evaluated by McDaniel & Associates Consultants
Ltd. (McDaniel), an independent qualified reserves evaluator, in
accordance with NI 51-101 and the COGE Handbook, and using
McDaniel's January 1, 2018 price forecasts. The volumes are
reported and aggregated by IPC in this presentation as being as at
December 31, 2017.
The price forecasts used in the reserve audit /
evaluation are available on the website of McDaniel
(www.mcdan.com), and are contained in the AIF.
Reserves estimates, contingent resource
estimates and estimates of future net revenue in respect of
BlackPearl’s oil and gas assets were evaluated by Sproule
Associates Limited (Sproule) in a report prepared by Sproule dated
January 18, 2018 evaluating the oil and gas reserves attributable
to BlackPearl’s properties as at December 31, 2017 and the
contingent resource reports prepared by Sproule dated January 17,
2018 for the Blackrod, Onion Lake and Mooney properties as at
December 31, 2017.
Reserves life index is based on the 2P Reserves
as at December 31, 2017 and estimated average combined production
for 2018 based on the mid-point guidance of IPC and BlackPearl,
being 45,250 boepd.
"2P reserves" means IPC’s gross proved plus
probable reserves. "Proved reserves" are those reserves that can be
estimated with a high degree of certainty to be recoverable. It is
likely that the actual remaining quantities recovered will exceed
the estimated proved reserves. "Probable reserves" are those
additional reserves that are less certain to be recovered than
proved reserves. It is equally likely that the actual remaining
quantities recovered will be greater or less than the sum of the
estimated proved plus probable reserves.
Contingent resources are those quantities of
petroleum estimated, as of a given date, to be potentially
recoverable from known accumulations using established technology
or technology under development, but which are not currently
considered to be commercially recoverable due to one or more
contingencies. Contingencies are conditions that must be satisfied
for a portion of contingent resources to be classified as reserves
that are: (a) specific to the project being evaluated; and (b)
expected to be resolved within a reasonable timeframe.
Contingencies may include factors such as economic, legal,
environmental, political, and regulatory matters, or a lack of
markets. It is also appropriate to classify as contingent resources
the estimated discovered recoverable quantities associated with a
project in the early evaluation stage. Contingent resources are
further classified in accordance with the level of certainty
associated with the estimates and may be sub-classified based on a
project maturity and/or characterized by their economic status.
There are three classifications of contingent
resources: low estimate, best estimate and high estimate. Best
estimate is a classification of estimated resources described in
the COGE Handbook as being considered to be the best estimate of
the quantity that will be actually recovered. It is equally likely
that the actual remaining quantities recovered will be greater or
less than the best estimate. If probabilistic methods are used,
there should be at least a 50% probability that the quantities
actually recovered will equal or exceed the best estimate.
Contingent resources are further classified
based on project maturity. The project maturity subclasses include
development pending, development on hold, development unclarified
and development not viable. All of the Corporation’s contingent
resources are classified as development unclarified. Development
unclarified is defined as a contingent resource that requires
further appraisal to clarify the potential for development and has
been assigned a lower chance of development until contingencies can
be clearly defined. Chance of development is the probability of a
project being commercially viable. Of the Corporation's 63.4 MMboe
best estimate contingent resources (unrisked), 17.4 MMboe are light
and medium crude oil, 7.4 MMboe are heavy crude oil and 38.6 MMboe
are conventional natural gas.
References to "unrisked" contingent resources
volumes means that the reported volumes of contingent resources
have not been risked (or adjusted) based on the chance of
commerciality of such resources. In accordance with the COGE
Handbook for contingent resources, the chance of commerciality is
solely based on the chance of development based on all
contingencies required for the re-classification of the contingent
resources as reserves being resolved. Therefore unrisked reported
volumes of contingent resources do not reflect the risking (or
adjustment) of such volumes based on the chance of development of
such resources.
The contingent resources reported in this press
release are estimates only. The estimates are based upon a number
of factors and assumptions each of which contains estimation error
which could result in future revisions of the estimates as more
technical and commercial information becomes available. The
estimation factors include, but are not limited to, the mapped
extent of the oil and gas accumulations, geologic characteristics
of the reservoirs, and dynamic reservoir performance. There are
numerous risks and uncertainties associated with recovery of such
resources, including many factors beyond the Corporation’s control.
There is uncertainty that it will be commercially viable to produce
any portion of the contingent resources referred to in this press
release.
2P reserves and contingent resources audited by
ERCE and evaluated by McDaniel have been aggregated in this press
release by IPC. Estimates of reserves and future net revenue for
individual properties may not reflect the same level of confidence
as estimates of reserves and future net revenue for all properties,
due to aggregation. This press release contains estimates of the
net present value of the future net revenue from IPC's reserves.
The estimated values of future net revenue disclosed in this press
release do not represent fair market value. There is no assurance
that the forecast prices and cost assumptions used in the reserve
evaluations will be attained and variances could be
material.
BOEs may be misleading, particularly if used in
isolation. A BOE conversion ratio of 6 thousand cubic feet (Mcf)
per 1 barrel (bbl) is based on an energy equivalency conversion
method primarily applicable at the burner tip and does not
represent a value equivalency at the wellhead. As the value
ratio between natural gas and crude oil based on the current prices
of natural gas and crude oil is significantly different from the
energy equivalency of 6:1, utilizing a 6:1 conversion basis may be
misleading as an indication of value.
CurrencyAll dollar amounts in
this press release are expressed in United States dollars, except
where otherwise noted. References herein to USD mean United
States dollars. References herein to CAD mean Canadian
dollars.
- IPC PR Q3 2018 FS-MDA reports
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