CALGARY, AB–(Marketwired – March 14, 2017) – InPlay Oil Corp. (“InPlay” or the “Company“) (TSX: IPO) is pleased to present the results of the Company’s independent reserves evaluation (the “Sproule Report“) prepared by Sproule Associates Ltd. (“Sproule“) effective as of December 31, 2016 and an operations update.
In November 2016, InPlay completed a series of transformational transactions including the go-public reverse takeover (the “Arrangement“) of Anderson Energy Inc., a “bought deal” equity financing for aggregate gross proceeds of $70.3 million and a significant asset acquisition in its core Pembina area (the “Asset Acquisition“).
InPlay successfully executed its strategy in 2016 of assembling a light oil company with premier assets that can provide shareholders with top tier organic growth amongst light oil weighted peers. The Company’s strategy was to build a sustainable light oil resource base backed by solid, predictable reserves with a strong balance sheet and supported by an inventory of high return quick payout drilling locations.
The InPlay team’s efforts to date have resulted in proved developed producing, total proved and total proved plus probable reserve life indices of 5.7, 13.0 and 19.3 years respectively, with an estimated base 2017 proved developed producing decline of 21%. The Company is anticipating >20% per share organic production growth (>25% on a debt adjusted basis) forecasted for the month of December 2017 over December 2016 and debt to cash flow of 1.0 times or less. Also, we have put together a large inventory of drilling locations with payouts estimated at less than one year.
2016 Reserves Highlights:
- Proved Developed Producing (“PDP“) reserves
- Increased by 135% from 3,106.8 mboe to 7,304.0 mboe (65% oil & liquids).
- Replaced production by 691%.
- FD&A costs including the change in future development capital (“FDC”) of $18.12 per boe resulting in a recycle ratio of 1.3 times.
- Reserve life index of 5.7 years, an increase of 29%.
- Total Proved (“TP“) reserves
- Increased by 187% from 5,776.8 mboe to 16,578.5 mboe (67% oil & liquids).
- Replaced production by 1,621%.
- FD&A costs including the change in FDC of $14.13 per boe resulting in a recycle ratio of 1.6 times.
- Reserve life index of 13.0 years, an increase of 58%.
- Proved plus Probable (“P+P“) reserves
- Increased by 180% from 8,739.4 mboe to 24,485.7 mboe (69% oil).
- Replaced production by 2,318%.
- FD&A costs including the change in FDC of $11.54 per boe resulting in a recycle ratio of 2.0 times.
- Reserve life index of 19.3 years, an increase of 55%.
- Using the independent reserves evaluation effective December 31, 2016, the net present value of future net revenues discounted at 10% (“PV10”) before taxes of our P+P reserves, inclusive of our internally estimated undeveloped land value and seismic value of $17.5 million, a fair market value liability of $1.5 million on our commodity derivative contracts and net of estimated net debt at year end of $35.0 million equates to an estimated net asset value of $4.78 per common share.
Since the completion of the Arrangement and related transactions on November 7, 2016, the Company has drilled 10 (8.0 net) light oil Cardium horizontal wells. The drilling program was completed on February 10, 2017, of which 2 (1.9 net) wells came on production in late 2016 and 3 (3.0 net) wells came on production in the middle of February, 2017. There are currently 5 (3.1 net) wells remaining to be completed, equipped and tied in for production. We currently expect these wells will be completed and brought on production through March and April, and even with delays in completions due to high industry activity, we continue to be on target with our production guidance of 4,000 – 4,200 boed average for 2017 and 4,300 – 4,500 boed 2017 exit.
Early results from our new wells, which includes 3 net wells having only one month of production and still in the clean-up stage, are exceeding internal forecasts. These new wells coupled with the low decline asset base has current production, based on field estimates, at approximately 4,100 boed (65% light oil and liquids). The Company anticipates drilling an additional 8 net Cardium horizontal wells prior to yearend, with 7 of the wells slated for the second half of 2017.
2016 Independent Reserves Evaluation:
The following summarizes certain information contained in the Sproule Report. The Sproule Report was prepared in accordance with the definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation Handbook (the “COGE Handbook“) and National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities (“NI 51-101“). Additional reserve information as required under NI 51-101 will be included in the Company’s Annual Information Form (“AIF“) which will be filed on SEDAR by the end of March 2017.
Corporate Reserves Information:
|December 31, 2016
|Proved developed producing||4,749.4||15,328||7,304.0||113,639||–||–|
|Proved developed non-producing||576.4||1,303||793.5||13,395||2,753||–|
|Probable developed producing||1,342.2||4,422||2,079.2||28,192||–||–|
|Probable developed non-producing||152.1||342||209.0||3,528||–||–|
|Total proved plus probable||16,950.3||45,212||24,485.7||317,311||178,413||98.0|
- “Oil & NGL” reserves include all light crude oil & medium oil volumes, and natural gas liquids volumes.
- Reserves have been presented on gross basis which are the Company’s total working interest (operating and non-operating) share before the deduction of any royalties and without including any royalty interests of the Company.
- Based on Sproule’s December 31, 2016, escalated price forecast.
- It should not be assumed that the net present value of estimated future net revenue (“NPV”) presented in the tables above represents the fair market value of the reserves. There is no assurance that the forecast prices and costs assumptions will be attained and variances could be material. The recovery and reserves estimates of InPlay’s crude oil, natural gas liquids and natural gas reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual crude oil, natural gas and natural gas liquids reserves may be greater than or less than the estimates provided herein.
- All future net revenues are stated prior to provision for interest, general and administrative expenses and after deduction of royalties, operating costs, estimated well abandonment and reclamation costs and estimated future capital expenditures. Future net revenues have been presented on a before tax basis.
- Totals may not add due to rounding.
Net Asset Value:
|December 31, 2016|
|BTAX NPV 5%||BTAX NPV 10%|
|Undeveloped acreage(3) & seismic||17,520||0.28||17,520||0.28|
|Fair Market Value of commodity derivative contracts||(1,548||)||(0.03||)||(1,548||)||(0.03||)|
|Net Asset Value (fully-diluted)||397,574||6.37||298,283||4.78|
- Evaluated by Sproule as at December 31, 2016. The estimated net present value of future net revenue (“NPV”) does not represent fair market value of the reserves.
- Based on Sproule’s forecast prices and costs as of December 31, 2016.
- Internally evaluated with an average value of $174 per acre for 81,964 undeveloped net acres and the estimated value of the sizeable seismic database recently acquired.
- Estimated net debt as at December 31, 2016, including working capital deficit (unaudited).
- Based upon 62,396,169 total common shares outstanding as at Dec 31, 2016. There are no dilutive instruments outstanding as of Dec 31, 2016.
Future Development Costs:
The following is a summary of the estimated FDC required to bring InPlay’s undeveloped reserves on production.
|Future Development Capital Costs (amounts in $000,000’s) (1)|
|Total Proved||Total Proved +
|Total undiscounted FDC||129.0||178.4|
|Total discounted FDC at 10% per year||110.2||149.9|
- FDC as per Sproule Report based on Sproule forecast pricing as at December 31, 2016
|Average crude oil price WTI US$/bbl||43.32|
|E&D Capital ($000’s)(2)||10,251|
|Production boed – Full Year 2016||1,940|
|Production boed – Dec 2016||3,484|
|Operating netback $/boe – Full Year 2016||17.57|
|Operating netback $/boe – Dec 2016||22.96|
|Proved Developed Producing|
|Total Reserves mboe||7,304|
|Reserves additions mboe||4,907.2|
|Total Reserves mboe||16,579|
|Reserves additions mboe||11,511.7|
|Change in FDC ($000’s)||73,791|
|Proved Plus Probable|
|Total Reserves mboe||24,486|
|Reserves additions mboe||16,456.3|
|Change in FDC ($000’s)||101,417|
- Financial and production information represent Management estimates per the Company’s 2016 preliminary unaudited financial statements and is therefore subject to audit. Readers are advised that these results may be subject to change.
- Finding, Development & Acquisition (“FD&A”) costs are used as a measure of capital efficiency. The calculation includes the period’s capital expenditures, including Exploration and Development (“E&D”) expenditures and “Acquisition Capital” for the Asset Acquisition and the Arrangement plus the change in Future Development Capital (“FDC”) for that period. This total of capital expenditures, including the change in the FDC, is then divided by the change in reserves for that period incorporating all revisions and production for that same period. For example: 2016 Total Proved = ($88.9 mm + $73.7 mm) / (16,579 mboe – 5,776 mboe + 710 mboe) = $14.13 per boe. E&D capital and the FD&A calculation excludes capitalized G&A expenditures.
- Recycle Ratio is calculated by dividing the month of December’s operating netback per boe by the FD&A costs for that period. For example: 2016 Total Proved = ($22.96/$14.13) = 1.63. The month of December’s netback is used rather than the full year netback as it is the most representative of the Company going forward and it reflects the first full month of operating results following the completion of the Arrangement and Asset Acquisition. The recycle ratio compares netback from existing reserves to the cost of finding new reserves and may not accurately indicate the investment success unless the replacement reserves are of equivalent quality as the produced reserves.
- The reserves replacement ratio is calculated by dividing the yearly change in reserves before production by the actual annual production for that year. For example: 2016 Total Proved = (16,578.5 mboe – 5,776.8 mboe + 710 mboe) / 710 mboe = 1,621%.
- RLI is calculated by dividing the reserves in each category by the month of December’s average production. For example 2016 Total Proven = (16,578.5 mboe) / (3,484 boed * 366) = 13.0 years. The month of December’s average production is used rather than the full year production as it reflects a full month of operating results following the completion of the Arrangement and Asset Acquisition.
The following tables set forth the benchmark reference prices, as at December 31, 2016, reflected in the Sproule Report. These price assumptions were provided to InPlay by Sproule and were Sproule’s then current forecast at the date of the Sproule Report.
SUMMARY OF PRICING AND INFLATION RATE ASSUMPTIONS (1)
as of December 31, 2016
FORECAST PRICES AND COSTS
|Thereafter Escalation rate of 2.0%|
- This summary table identifies benchmark reference pricing schedules that might apply to a reporting issuer.
- The exchange rate used to generate the benchmark reference prices in this table.
- As at December 31, 2016.
We are pleased with the results that we have seen from the assets acquired in the fourth quarter of 2016 both on the base production and the drilling results to date and we look forward to further optimization and development of these assets. InPlay is well positioned financially to support our 2017 developmental capital program. Low debt levels, high netbacks and a solid suite of commodity hedges leaves us well positioned to continue to develop our asset base in the current volatile commodity price environment. Efforts will continue to be focused on operational excellence in order to execute a solid development plan over the entire asset base in a manner that should result in meaningful per share growth to InPlay shareholders.