CALGARY, AB–(Marketwired – January 17, 2017) – InPlay Oil Corp. (“InPlay” or “the Company“) (TSX: IPO) (OTCQX: IPOOF) is pleased to announce that its Board of Directors has approved a $28 million Exploration and Development program for 2017 which is forecasted to deliver over 20% production per share growth from the fourth quarter of 2016 to the fourth quarter of 2017 (assuming all assets acquired and amalgamated on November 7, 2016 produced under InPlay for the full fourth quarter of 2016) while spending less than cash flow. This organic production growth is expected to deliver top quartile per share growth in the industry while spending less than forecasted internally-generated funds flow.
2017 Budget Overview
InPlay’s 2017 capital program is predominantly focused on drilling approximately twelve net horizontal Cardium wells and the completion and tie-in of three Cardium horizontal wells that started drilling in late 2016. This program is focused on the Company’s high rate of return drilling inventory within its core area with expected payouts of 1.0 year or less on current strip commodity prices. The drilling, completion and equipping program will be comprised of approximately 82% of total capital expenditures planned for 2017 with the remaining 18% being spent on optimization, water injection conversions, facilities, land, and exploration activities. This program complements InPlay’s core technical strengths where management has drilled over 200 combined net Cardium horizontal wells. Based on the planned program, InPlay is forecasting an annual average production rate of 4,000 to 4,200 boed (66% light oil and liquids) with exit production of 4,300 – 4,500 boed (68% light oil and liquids).
This budget provides InPlay with significant operational and balance sheet flexibility wherein the Company will spend 16% less than projected funds flow of approximately $33 million based on a WTI price of US$ 55/bbl, foreign exchange of 0.76 CDN/USD, and $ 3.00/GJ AECO price. The program is expected to generate fourth quarter annualized 2017 debt to cash flow of 0.8x. This forecast has also been stress-tested at a flat 2017 WTI price of US$45/bbl which, with InPlay’s current hedges, would leave the Company with expected fourth quarter 2017 annualized debt to cash flow of 1.1x ensuring the 2017 capital program’s viability and results expected to yield top quartile production growth within our oil weighted peers. With only five wells expected to be drilled in the first half of 2017, there will be ample room to expand the program in the second half of the year on current prevailing commodity prices.
Current production, based on field estimates, is 3,600 boed (63% light oil and liquids). The Company drilled 4 (3.9 net) Cardium horizontal wells during November and December 2016, and 2 (1.4 net) additional wells were being drilled over year end with drilling completed in early January. There were 2 (1.9 net) of the 2016 drills completed and brought on production late in December. All of the wells drilled were in central Pembina and the two completed wells are currently in the early clean-up stage and are on track to meet or exceed InPlay’s forecast rates. A three well pad which started drilling in 2016 and finished drilling in early 2017 is expected to have completion operations done by the end of January. The Company anticipates approximately three additional wells to be drilled, completed and brought on production prior to the end of the first quarter or early into the second quarter.
Price Risk Management
A systematic program of layering in commodity swaps and collars to protect against price volatility currently has the Company with price support for the first half of 2017 of 1,600 bbls/day with a floor of $47.86 WTI (US$/bbl) and 1,100 bbls/day with a floor of $45.20 WTI (US$/bbl) for the second half of 2017 assuming a 0.76 CDN/USD exchange rate over the year. Natural gas swaps for 2017 currently have price support for 1,000 GJ/day with a floor of $3.06 CDN$/GJ AECO.
The InPlay team has put together a premier light oil weighted asset base highlighted by large oil in place, low recovery factors, low declines, long reserve life and a large inventory of high rate of return drilling locations.
The Company is extremely pleased with the results achieved to date which are consistent with InPlay’s core strategy focused on being one of the most capital efficient, light oil weighted companies, coupled with the Company’s low base decline of 22% will allow InPlay to provide consistent top tier production per share growth. Since completion of its transformative transaction in November, 2016, the Company’s drilling program has achieved an average duration of eight days from spud to rig release. InPlay’s commitment to cost control, operational efficiencies and the use of innovative technologies has resulted in average costs of $1.65 million to drill, complete, equip, and tie-in InPlay’s first of two, one mile long horizontal wells brought on in late December 2016.
The InPlay management team and Board of Directors are motivated and committed to provide consistent, predictable growth while maintaining a strong balance sheet with financial flexibility through this current environment. The Company looks forward to providing its shareholders with an update in March with the release of year end 2016 reserves and financial results.
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 in June 2013. Since commencing operations, InPlay has concentrated on exploration and development drilling of light oil prospects in the Province of Alberta, focusing in the greater Pembina area of 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 and cash-flow. InPlay will continue to implement its proven strategy of exploring, acquiring, and exploitation with a long term focus on large, light oil resource based assets. 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 can be found on InPlay’s website at: www.inplayoil.com.