InPlay Oil Corp. (TSX: IPO) (OTCQX: IPOOF) (“InPlay” or the
“Company”) is pleased to announce that its Board of Directors has
approved a $35 million Exploration and Development capital program
for 2020.
InPlay delivered another year of exceptional
operational results while successfully responding to significant
challenges facing the industry. The Company continued to leverage
its proven track-record of drilling proficiency and operational
expertise to set industry pacesetting drilling times for horizontal
Cardium wells in both the Willesden Green and Pembina core
areas. Management’s continued capital and operating cost
improvements and high-quality drilling inventory has allowed InPlay
to deliver top-tier capital efficiencies and light oil growth
amongst our light oil peers despite continued volatile commodity
prices. Similar to the last few years, InPlay will adopt a prudent
and flexible 2020 capital program that is forecasted to achieve
between 6 and 10% annual production growth over 2019.
Operations Update
InPlay drilled 13 (8.2 net) horizontal wells in 2019 primarily
in the Willesden Green and Pembina areas, including 10 (5.2 net)
extended reach horizontal (“ERH”) wells and 3 (3.0 net) one-mile
horizontal wells. As announced in November of 2019, due to lower
commodity prices than originally forecasted and more specifically,
continued low natural gas liquids (“NGL”) pricing, we prudently
reduced our 2019 capital program from $36 million to $32 million,
in line with expected 2019 adjusted funds flow (“AFF”)(1), drilling
8.2 net horizontal wells instead of the originally planned 9.0 -
10.0 net horizontal wells. Notwithstanding the reduction of
wells brought on production and lower capital program, the strong
performance of our latest wells resulted in estimated annual
average production of 5,000 boe/d (67% oil and liquids) for 2019,
achieving our annual production guidance of 5,000 – 5,200 boe/d
which was increased in August 2019 from our original guidance of
4,900 – 5,100 boe/d. This represents a 7% increase in annual
average production over 2018, achieved despite an 11% reduction in
originally planned capital spending.
Due to InPlay’s technical advancements, the three 100% Pembina
horizontal wells drilled in Q3 2019 achieved record drill times for
one mile wells in Pembina averaging 4.4 days per well compared to
7.5 to 8.0 days during our last drilling program in Pembina in
2017. The wells initially flowed for 7 to 10 days and then were
placed on artificial lift. Due to operational issues (including
erratic run times) the cleanup of the wells took a month longer
than projected but are now producing at rates exceeding our
forecast with average per well initial production (“IP”) 30 day
rates of 164 boe/d (97% light oil and liquids), average IP 60 day
production rates of 179 boe/d (95% oil and liquids) and average IP
90 day production rates of 190 boe/d (94% light oil and
liquids). Each of the wells has produced at their highest
rates with no decline over the past month at an average per well
rate of 226 boe/d (92 % oil and liquids). InPlay is highly
encouraged by these strong production rates which, combined with a
25% reduction in average all-in well costs totaling $1.8 million,
makes InPlay’s Pembina inventory economically competitive with its
Willesden Green assets.
2020 Capital Program Overview
The Company’s Board of Directors has approved a capital program
for 2020 of $35 million focusing on sustainability and flexibility.
We will continue to run a smart and sound junior light oil growth
company and will adjust the capital program if required in response
to the continued potential for volatile commodity prices. The
program is designed to spend less capital than AFF while expecting
to deliver top tier production per share growth amongst our
peers.
In 2020, InPlay plans on drilling approximately 10.0 - 11.0 net
development Cardium wells in Willesden Green and Pembina, in
addition to one exploration vertical stratigraphic test East
Duvernay well in the Huxley area. The first quarter plans consist
of one ERH Willesden Green well and, with the exceptional results
and economics of our most recent three well Pembina program, InPlay
plans to drill three additional one-mile Pembina Cardium wells
which have a short tie-in to the existing modular facilities built
around the three wells drilled in the fourth quarter of 2019.
The program includes one Duvernay stratigraphic well to be drilled
and additional geological testing to secure further information on
our exciting western-most block of land in the area which has had
recent offsetting drilling activity. The Duvernay stratigraphic
well is estimated to cost $1.2 million and will also extend the
majority of our land holdings on this block for an additional 5
years. Approximately 20% of development capital in 2020 is expected
to be focused in the Pembina area and 80% in the Willesden Green
area. The Company plans to spend approximately 2 - 3 % of our AFF
on our continued decommissioning efforts.
InPlay’s planned capital program is forecasted to result in 2020
annual average production of 5,300 to 5,500 boe/d (67% - 69% oil
& liquids) delivering estimated organic annual production
growth of 6% to 10%. Based on this program, the 2020 AFF(1)
forecast is $36 to $39 million representing a 12% to 21% increase
relative to 2019. Excess AFF above capital expenditures is expected
to be used for debt reduction. The 2020 operating income profit
margin(1) is forecast to be approximately 55%.
The Company’s 2020 guidance is based on a current future
commodity price curve with an annual average WTI price of US
$57.00/bbl, $2.00/mcf AECO and with estimates on foreign exchange
of $0.76 CDN/USD. A change in the price of WTI by US $5.00/bbl
results in a change of approximately $7 million in AFF.
(1)AFF and operating income profit margin are Non-GAAP Measures.
See “Reader Advisories – Non-GAAP Financial Measures”.
About InPlay
Oil Corp.
InPlay, based in Calgary, Alberta, has been engaged in the
business of exploring for, developing and producing oil and natural
gas, and acquiring oil and natural gas properties in western Canada
since it commenced operations as a private company in June 2013.
InPlay has concentrated on exploration and development drilling of
light oil prospects in the Province of Alberta in a focused area of
Central and West Central Alberta.
The InPlay management team has worked closely together for
several years in both private and public company environments and
has an established track record of delivering cost-effective per
share growth in reserves, production, AFF and funds flow. InPlay
will continue to implement its proven strategy of exploring,
acquiring, and exploiting assets with a long term focus on large,
light oil resources. The InPlay management team brings a full
spectrum of geotechnical, engineering, negotiating and financial
experience to its investment decisions. An updated corporate
presentation will be posted to InPlay’s website in due
course. Additional information about the Company can be found
on SEDAR and on InPlay’s website at: www.inplayoil.com.
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 |
Reader Advisories
Non-GAAP Financial
MeasuresIncluded in this press release are references to
the terms “adjusted funds flow” or “AFF” and “operating income
profit margin”. Management believes these measures 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, “funds flow”, “profit (loss) before
taxes”, “profit (loss) and comprehensive income (loss)” or assets
and liabilities as determined in accordance with GAAP as a measure
of the Company’s performance and financial position.
InPlay uses “adjusted funds flow” as a key performance
indicator. Adjusted funds flow should not be considered as an
alternative to or more meaningful than funds flow as determined in
accordance with GAAP as an indicator of the Company’s
performance. InPlay’s determination of adjusted funds flow
may not be comparable to that reported by other companies. Adjusted
funds flow is calculated by adjusting for decommissioning
expenditures from funds flow. This item is adjusted from
funds flow as decommissioning expenditures are incurred on a
discretionary and irregular basis and are primarily incurred on
previous operating assets, making the exclusion of this item
relevant in Management’s view to the reader in the evaluation of
InPlay’s operating performance. For a detailed description of
InPlay’s method of calculating adjusted funds flow and its
reconciliation to the nearest GAAP term, refer to the section
“Non-GAAP Measures” in the Company’s MD&A filed on
SEDAR.
InPlay also uses “operating income” and “operating income profit
margin” as key performance indicators. 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 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 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. For a detailed description of
InPlay’s method of the calculation of operating income and
operating income profit margin and their reconciliation to the
nearest GAAP term, refer to the section “Non-GAAP Measures” in the
Company’s MD&A filed on SEDAR.
Forward-Looking Information and
Statements This news release contains certain
forward–looking information and statements within the meaning of
applicable securities laws. The use of any of the words "expect",
"anticipate", "continue", "estimate", "may", "will", "project",
"should", "believe", "plans", "intends" “forecast” and similar
expressions are intended to identify forward-looking information or
statements. In particular, but without limiting the foregoing, this
news release contains forward-looking information and statements
pertaining to the following: production estimates including 2019
and 2020 annualized forecasts; targeted 2020 annual organic
production growth; light oil and liquids weighting estimates;
future oil and natural gas prices; estimated year ended 2019 and
forecasted 2020 funds flow and adjusted funds flow; forecasted 2020
operating income profit margins; future liquidity and financial
capacity; future results from operations and operating metrics;
future costs, expenses and royalty rates; future interest costs;
the exchange rate between the $US and $Cdn; future development,
exploration, acquisition, development and infrastructure activities
and related capital expenditures, including our planned 2020
capital program, the number of wells to be drilled, completed and
tied-in and the timing thereof; the expectation that 20% of
development capital in 2020 is expected to be focused in the
Pembina area and 80% in the Willesden Green area; the amount and
timing of capital projects; forecasted spending on decommissioning;
excess AFF over 2020 capital expenditures and any corresponding
reduction to debt; our belief that we will deliver top tier
returns, capital efficiencies, production growth and production per
share growth; that our Pembina development has the potential to be
economically competitive with our Willesden Green assets; the
potential of our Duvernay project and extension of our land
holdings; and methods of funding our capital program.
Forward-looking statements or information are based on a number of
material factors, expectations or assumptions of InPlay which have
been used to develop such statements and information but which may
prove to be incorrect. Although InPlay believes that the
expectations reflected in such forward-looking statements or
information are reasonable, undue reliance should not be placed on
forward-looking statements because InPlay can give no assurance
that such expectations will prove to be correct. In addition to
other factors and assumptions which may be identified herein,
assumptions have been made regarding, among other things: the
impact of increasing competition; the general stability of the
economic and political environment in which InPlay operates; the
timely receipt of any required regulatory approvals; the ability of
InPlay to obtain qualified staff, equipment and services in a
timely and cost efficient manner; drilling results; the ability of
the operator of the projects in which InPlay has an interest in to
operate the field in a safe, efficient and effective manner; the
ability of InPlay to obtain financing on acceptable terms; field
production rates and decline rates; the ability to replace and
expand oil and natural gas reserves through acquisition,
development and exploration; the timing and cost of pipeline,
storage and facility construction and the ability of InPlay to
secure adequate product transportation; future commodity prices;
currency, exchange and interest rates; regulatory framework
regarding royalties, taxes and environmental matters in the
jurisdictions in which InPlay operates; and the ability of InPlay
to successfully market its oil and natural gas products.
The forward-looking information and statements
included herein are not guarantees of future performance and should
not be unduly relied upon. Such information and statements,
including the assumptions made in respect thereof, involve known
and unknown risks, uncertainties and other factors that may cause
actual results or events to defer materially from those anticipated
in such forward-looking information or statements including,
without limitation: changes in our planned 2020 capital program;
changes in commodity prices; the potential for variation in the
quality of the reservoirs in which we operate; changes in the
demand for or supply of our products; unanticipated operating
results or production declines; changes in tax or environmental
laws, royalty rates or other regulatory matters; changes in
development plans of InPlay or by third party operators of our
properties; increased debt levels or debt service requirements;
inaccurate estimation of our oil and gas reserve and resource
volumes; limited, unfavorable or a lack of access to capital
markets; increased costs; a lack of adequate insurance coverage;
the impact of competitors; and certain other risks detailed from
time-to-time in InPlay's disclosure documents.
The internal projections, expectation or beliefs
underlying InPlay's planned 2020 capital program and associated
guidance for 2020 is subject to change based on ongoing results,
prevailing economic circumstances, commodity prices and industry
conditions. InPlay's outlook for 2020 and beyond provides
shareholders with relevant information on management's expectations
for results of operations, excluding any potential acquisitions,
dispositions or other strategic transactions that may be completed
in 2020 or beyond. Accordingly, readers are cautioned that
events or circumstances could cause results to differ materially
from those predicted and InPlay's guidance may not be appropriate
for other purposes.
The forward-looking information and statements
contained in this news release speak only as of the date hereof and
InPlay does not assume any obligation to publicly update or revise
any of the included forward-looking statements or information,
whether as a result of new information, future events or otherwise,
except as may be required by applicable securities laws.
The assumptions used by the Company in the
development of forecasted 2020 funds flow, adjusted funds flow,
operating income profit margin and net debt are as follows:
WTI |
US$/bbl |
$57.00 |
|
|
|
|
NGL
Price |
$/boe |
$25.30 |
|
|
|
|
AECO |
$/mcf |
$2.00 |
|
|
|
|
Foreign
Exchange rate |
(US$/CDN$) |
0.76 |
|
|
|
|
MSW
Differential |
US$/bbl |
$5.50 |
|
|
|
|
Production |
Boe/d |
5,300 – 5,500 |
|
|
|
|
Royalties |
$/boe |
3.50 – 4.00 |
|
|
|
|
Operating
expenses |
$/boe |
13.50 – 14.50 |
|
|
|
|
Transportation |
$/boe |
0.70 – 0.90 |
|
|
|
|
Interest |
$/boe |
1.10 – 1.40 |
|
|
|
|
General
and administrative |
$/boe |
2.75 – 3.25 |
|
|
|
|
Capital
Expenditures |
$
millions |
35 |
|
|
|
|
Decommissioning Expenditures |
$ millions |
0.8 – 1.2 |
|
|
|
|
Forecasted Adjusted Funds Flow |
$ millions |
$36 - $39 |
|
|
|
|
Forecasted Funds Flow |
$ millions |
$35 - $38 |
|
|
|
|
- NGLs estimated to represent approximately 23% - 25% of total
oil and liquids production
- Quality and pipeline transmission adjustments may impact
realized oil prices in addition to the MSW Differential provided
above
- Changes in working capital are not assumed to have a material
impact between Dec 31, 2019 and Dec 31, 2020
- Decommissioning expenditures are added back to AFF to arrive at
Funds Flow.
Test Results and Initial Production
RatesTest results and initial production (“IP”) rates
disclosed herein, particularly those short in duration, may not
necessarily be indicative of long term performance or of ultimate
recovery. A pressure transient analysis or well-test interpretation
has not been carried out and thus certain of the test results
provided herein should be considered to be preliminary until such
analysis or interpretation has been completed.
BOE equivalent Barrel of oil
equivalents or BOEs may be misleading, particularly if used in
isolation. A BOE conversion ratio of 6 mcf: 1 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. Given that the value ratio based on the current price of
crude oil as compared to natural gas is significantly different
than the energy equivalency of 6:1, utilizing a 6:1 conversion
basis may be misleading as an indication of value.
Inplay Oil (TSX:IPO)
Historical Stock Chart
From Mar 2024 to Apr 2024
Inplay Oil (TSX:IPO)
Historical Stock Chart
From Apr 2023 to Apr 2024