CALGARY, Alberta, Sept. 13, 2018 (GLOBE NEWSWIRE) — InPlay Oil Corp. (TSX: IPO) (OTCQX: IPOOF) (“InPlay” or the “Company”) is pleased to announce that it has entered into a definitive agreement to sell certain non-core oil and gas properties in the West Pembina area of Alberta for cash consideration of $16.7 million, subject to closing adjustments customary in transactions of this nature (the “Disposition”). InPlay plans to utilize the proceeds from the Disposition to accelerate Cardium drilling within its core Willesden Green area and reduce corporate indebtedness, which will translate into our second increase in 2018 guidance over the past five weeks.
Non-core Asset Rationalization
The Disposition is expected to be completed on October 1, 2018, subject to customary closing conditions. The Disposition involves lower working interest assets and net production of approximately 250 boe/d (72% oil and liquids). InPlay has not been focused on these non-core assets with only one horizontal well having been drilled on the property over the past four years. This Disposition allows InPlay to rationalize assets on premium valuation metrics (approximately $66,800/BOED and 5.6 times operating income) in a challenging market and to effectively redeploy the proceeds into higher return, higher growth assets within its core Willesden Green area.
Acceleration of Cardium Development Program and Increased Guidance
InPlay plans to utilize the proceeds from the Disposition to accelerate its 2018 capital budget to include two additional (2.0 net) 1.5 mile horizontal Cardium wells at Willesden Green directly offsetting the recent wells brought on production. These wells will be drilled in the fourth quarter and represent a 22% increase in the aggregate number of net wells planned to be drilled in 2018. The Company’s production, based on field estimates, has averaged over 4,900 boe/d (71% light oil and liquids) in August, and over 5,000 boe/d (71% light oil and liquids) during the first week of September which is above the high end of prior exit guidance. Strong drilling results and the increase in capital spending have led to an increase in our 2018 forecast guidance inclusive of the Disposition. The new forecast (using current future commodity prices) results in the following:
- 2018 forecasted exploration and development capital expenditures increases to $49 million from $41 million (excluding crown land sales).
- The 2018 exit net debt forecast decreases to approximately $45 million compared to $51.3 million at year end 2017.
- 2018 annual production guidance is forecast to average approximately 4,600 boe/d (71% oil and liquids), the high end of the Company’s recently upwards revised guidance, representing a 16% increase over 2017 annual average production (23% on a debt adjusted per share basis) and a 24% increase over 2017 oil and liquids production levels (33% on a debt adjusted per share basis).
- 2018 exit production guidance increases to 5,100 to 5,200 boe/d (72% oil and liquids) from 4,900 to 5,000 boe/d, representing a 20% increase over 2017 exit production (28% on a debt adjusted per share basis) and a 23% increase over 2017 exit oil and liquids production (31% on a debt adjusted per share basis).
- 2018 adjusted funds flow from operations is forecasted to be approximately $38 million, representing a 52% increase over 2017 adjusted funds flow from operations, resulting from the aforementioned production growth and stronger crude oil commodity prices throughout 2018.
- The forecasted net debt to annualized fourth quarter 2018 adjusted funds flow from operations ratio improves to approximately 0.8 times, down 50% compared to 1.6 times for the fourth quarter of 2017 and down 33% compared to our previously forecasted ratio of 1.2 times.
InPlay continues to realize strong results from its high impact Cardium development program in the greater Willesden Green area. By targeting the bioturbated Cardium within the Willesden Green area, InPlay’s well results continue to exceed internal type curve estimates and show some of the best initial production results to date of all Cardium wells drilled in the area.
The following is a summary of results from the three 1.5 mile InPlay horizontal wells drilled on our newly acquired lands that were placed on stream in the third quarter and which have a minimum of thirty days of production (all production results based on field estimates). The first horizontal well (1.0 net) had an initial production rate (“IP”) IP 30 of 767 boe/d (86% light oil and liquids). The second horizontal well (0.2 net) on production had an IP 30 of 1,002 boe/d (82% light oil and liquids). The third horizontal well (1.0 net) came on production in August and had an IP 30 of 336 boe/d (90% light oil and liquids) is continuing to clean up and currently producing an average of approximately 427 boe/d (89% light oil and liquids) in September.
InPlay’s first horizontal Duvernay well (1 mile lateral) was completed in May 2018. The typical clean-up phase of horizontal Duvernay wells is generally characterized by an extended clean-up period whereby oil cuts as a percentage of produced fluids tend to increase as injected frac fluids are recovered from the reservoir. InPlay is pleased to report that the behavior of the Company’s first well to date is consistent with successful offsetting wells drilled in the area. Upon completion, InPlay allowed the well to flow back for a period of six weeks with oil cuts increasing to approximately 25%. Following the initial flow back, InPlay shut the well in for a six week soak period intended to support the clean-up phase and increase produced oil cuts as performed by leading offset Duvernay operators in the Huxley sub-basin. As anticipated, the soak period has translated to a continued improvement in oil cuts which have averaged 40% over the past 10 days while producing at an average rate of 165 bbl/d of oil based on field estimates. The trend in increasing oil cuts is consistent with trends observed in offsetting wells in the area which tend to ultimately reach a stabilized oil cut between 70% to 90%. The Company continues to closely monitor all activity around our lands. Initial results suggest that our Crown land position in this area will lead to a valuable long term light oil resource play. InPlay plans to continue to follow a conservative development program at a measured pace over the near term.
InPlay is excited about the accelerated development program planned for the remainder of the year which is expected to result in top tier organic light oil growth amongst peers. InPlay’s current land position, asset base and strengthened balance sheet positions InPlay for continued operational and financial success into 2019 and beyond and we look forward to providing further updates on our progress prior to year-end.
Please refer to our website for the updated presentation to be posted shortly at www.inplayoil.com