CALGARY, Alberta – InPlay Oil Corp. (TSX: IPO) (OTCQX: IPOOF) (“InPlay” or the “Company”) is pleased to provide an operations update and a preliminary outlook for 2022.(1)
InPlay continues to achieve strong results from our 2021 drilling program focused on the Pembina Cardium asset acquired in the fourth quarter of 2020. The three 100% Pembina Cardium Extended Reached Horizontal (“ERH”) wells drilled in the first quarter of 2021 continue to flow without artificial lift and outperform our internal forecasted production volumes. Performance of the next three 100% Pembina Cardium ERH wells brought on production at the end of July has exceeded that of the three drilled in the first quarter of 2021 to date. The average combined initial flowing production rates from these latest wells over their first 30 days was approximately 1,530 boe/d(2) (78% light oil and NGLs), based on field estimates. These wells are currently producing at an average combined rate of approximately 1,737 boe/d(2) (71% light oil and NGLs), based on field estimates. This outperformance is expected to generate another record quarterly production rate for InPlay in the third quarter of 2021 of approximately 6,000 boe/d(2) (67% light oil and NGLs), based on field estimates, which represents approximately 11% growth over our previous record production level set in the second quarter of 2021.
Drilling will start on our final two 100% Pembina Cardium ERH wells for 2021 in the upcoming days and these wells are expected to be on production in the second half of October. This activity is forecasted to result in another record quarterly production rate in the fourth quarter of 2021. The strong results of the new wells, low decline on base production and the additional two ERH wells to come on production has InPlay anticipating the Company will be on the high end of our recently increased 2021 annual average production guidance of 5,500 to 5,750 boe/d(2) (68% light oil and NGLs). InPlay is also on track to generate record Adjusted Funds Flow (“AFF”)(3) and record low corporate debt leverage ratios in the third and fourth quarters based on our current 2021 guidance.
The 2021 results provide the Company with a strong foundation heading into 2022. Preliminary production targets are for the Company to average 6,300 to 6,550 boe/d(2) (67% light oil and NGLs) for 2022 which would represent a 12% – 16% increase over our 2021 annual guidance, all achieved through organic drill-bit growth. This organic growth rate is expected to be at the high end of our light oil peer group. Based on current West Texas Intermediate (“WTI”) strip pricing of US $66.30/bbl, this would result in an annual record targeted AFF of $71.5 – $74.5 million and Free Adjusted Funds Flow (“FAFF”)(3) of $32.5 – $35.5 million, based on an assumed $38.0 – $40.0 million capital program drilling 12 – 13 horizontal wells. Based on InPlay’s current market capitalization of $75 million, this would imply a 43% – 47% FAFF yield(3). Reduced debt levels from this significant FAFF would equate to a targeted net debt to earnings before interest, taxes and depletion (“EBITDA”) ratio(3) of 0.3x to 0.4x for 2022.
The Company will continue to be disciplined and flexible with capital spending. Final decisions for our 2022 capital program are expected to occur in late 2021 or early 2022 and will be largely influenced by commodity prices at that time. InPlay is executing on our strategy of measured production per share growth with excess FAFF focused on maximizing returns to shareholders.
InPlay is excited for the remainder of the year where we expect to set quarterly production and AFF records. Please view our September Corporate presentation which will beuploaded to our 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 |
Notes:
- InPlay’s plans for 2022 and associated targets and outlook remain preliminary in nature and do not reflect a Board approved capital expenditures budget. See table in the “Forward Looking Information and Statements” section for underlying material assumptions related thereto.
- See “Reader Advisories – Production Breakdown by Product Type”
- “AFF” and “FAFF” are Non-IFRS Measures and do not have a standardized meaning under International Financial Reporting Standards (IFRS) and GAAP and may not be comparable with the calculations of similar measures for other companies. “Net Debt/EBITDA” and “FAFF Yield” are Non-GAAP Ratios and do not have a standardized meaning under International Financial Reporting Standards (IFRS) and GAAP and may not be comparable with the calculations of similar measures for other companies. Please refer to “Non-GAAP Financial Measures and Ratios” and “BOE equivalent” at the end of this news release and to the section entitled “Non-GAAP Measures and Ratios” in our MD&A for details of calculations, rationale for use and applicable reconciliation to the nearest IFRS measure.
Reader Advisories
Non-GAAP Financial Measures and Ratios
Included in this press release are references to the terms “adjusted funds flow”, “free adjusted funds flow”, “free adjusted funds flow yield” and “Net Debt to EBITDA”. 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. Refer to “Forward Looking Information and Statements” section for a calculation of forecast free adjusted funds flow and its reconciliation to the nearest GAAP term.
InPlay uses “free adjusted funds flow” as a key performance indicator. Free 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. Free adjusted funds flow is calculated by the Company as adjusted funds flow less capital expenditures and is a measure of the cashflow remaining after capital expenditures that can be used for additional capital activity, repayment of debt or decommissioning expenditures. Management considers free adjusted funds flow an important measure to identify the Company’s ability to improve the financial condition of the Company through debt repayment, which has become more important recently with the introduction of second lien lenders. Refer to “Forward Looking Information and Statements” section for a calculation of forecast free adjusted funds flow.
InPlay uses “free adjusted funds flow yield” as a key performance indicator. Free adjusted funds flow is calculated by the Company as free adjusted funds flow divided by the market capitalization of the Company. Management considers FAFF yield to be an important performance indicator as it demonstrates a Company’s ability to generate cash to pay down debt and provide funds for potential distributions to shareholders. Refer below for a calculation of forecast free adjusted funds flow yield.
Outlook FY 2022(1) |
|||
Forecasted Free Adjusted Funds Flow | $ millions | $32.5 – $35.5 | |
Shares outstanding | # of shares | 68,288,616 | |
Closing share price @ September 3, 2021 | $/share | $1.10 | |
Market capitalization @ September 3, 2021 | $ millions | $75.0 | |
FAFF Yield | % | 43% – 47% |
Note:
- InPlay’s plans for 2022 and associated targets remain preliminary in natures and do not reflect a Board approved capital expenditures budget.
InPlay uses “Net Debt/EBITDA” as a key performance indicator. EBITDA 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. EBITDA is calculated by the Company as adjusted funds flow before interest expense. This measure is consistent with the EBITDA formula prescribed under the Company’s Credit Facility. Net Debt/EBITDA is calculated as Net Debt divided by EBITDA. Management considers Net Debt/EBITDA a key performance indicator as it is a key metric under our first lien and second lien credit facilities and is an important measure to identify the Company’s annual ability to fund financing expenses, net debt reductions and other obligations. Refer to the “Forward Looking Information and Statements” section for a calculation of forecast Net Debt/EBITDA.