CALGARY, Alberta – InPlay Oil Corp. (TSX: IPO) (OTCQX: IPOOF) (“InPlay” or the “Company”) is pleased to announce its financial and operating results for the three and nine months ended September 30, 2021. InPlay’s condensed unaudited interim financial statements and notes, as well as Management’s Discussion and Analysis (“MD&A”) for the three and nine months ended September 30, 2021 will be available at “www.sedar.com” and our website at “www.inplayoil.com”.
We are very pleased to present our third quarter financial and operating results in which the efficient execution of our operational and capital program, coupled with the significantly improved commodity price environment, has allowed us to achieve record production and financial results.
Third Quarter 2021 Financial & Operating Highlights
- Achieved record quarterly production for the second consecutive quarter with third quarter production averaging 6,011 boe/d(1) (64% light oil and NGLs), an increase of 61% compared to 3,742 boe/d(1) (69% light oil and NGLs) in the third quarter of 2020 and an increase of 12% compared to 5,386 boe/d(1) (68% light oil and NGLs) in the second quarter of 2021.
- Generated record quarterly adjusted funds flow (“AFF”) of $15.6 million ($0.23 per basic share), an increase of 675% compared to $2.0 million ($0.03 per basic share) in the third quarter of 2020 and an increase of 89% compared to $8.2 million ($0.12 per basic share) in the second quarter of 2021.
- Increased operating netbacks(2) by 168% to $37.09/boe from $13.85/boe in the third quarter of 2020 and by 12% from $33.11/boe in the second quarter of 2021.
- Realized increased quarterly record operating income(2) and operating income profit margin(2) of $20.5 million and 65% respectively compared to $4.8 million and 44% in the third quarter of 2020 and $16.2 million and 64% in the second quarter of 2021.
- Continued to reduce operating expenses to a quarterly record $12.23/boe compared to $14.42/boe in the third quarter of 2020 and $12.51/boe in the second quarter of 2021.
- Generated free adjusted funds flow (“FAFF”)(2) of $5.1 million compared to $1.6 million in the third quarter of 2020 and $3.6 million in the second quarter of 2021.
- Decreased net debt by 6% during the third quarter of 2021 from June 30, 2021 while also achieving production growth of 12% over the same respective period.
- Strengthened our net debt to quarterly annualized earnings before interest, taxes and depletion (“EBITDA”)(2) ratio to 1.1, compared to 5.2 in the third quarter of 2020 and 1.9 in the second quarter of 2021 achieving the lowest quarterly leverage ratio in our corporate history.
- See “Reader Advisories – Production Breakdown by Product Type”
- “Free adjusted funds flow”, “Operating Income”, “Operating Income Profit Margin”, “Operating Netback” and “Net Debt to Quarterly Annualized EBITDA” do not have a standardized meaning under International Financial Reporting Standards (IFRS) and GAAP and therefore may not be comparable with the calculations of similar measures for other companies. Please refer to “Non-GAAP Financial Measures and Ratios” 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.
Financial and Operating Results:
|(CDN) ($000’s)||Three months ended
|Nine months ended
|Oil and natural gas sales||31,331||10,846||76,599||29,105|
|Adjusted funds flow||15,555||2,008||29,879||4,146|
|Per share – basic||0.23||0.03||0.44||0.06|
|Per share – diluted||0.22||0.03||0.43||0.06|
|Comprehensive income (loss)||8,289||(2,717)||59,880||(109,402)|
|Per share – basic||0.12||(0.04)||0.88||(1.60)|
|Per share –diluted||0.12||(0.04)||0.86||(1.60)|
|Exploration and development capital expenditures||10,457||382||27,410||12,502|
|Basic weighted-average shares||68,290,573||68,256,616||68,269,114||68,256,616|
|Diluted weighted-average shares||70,434,134||68,256,616||69,303,639||68,256,616|
|Daily production volumes|
|Light and medium crude oil (bbls/d)||3,154||1,973||2,922||1,976|
|Natural gas liquids (bbls/d)||663||598||731||655|
|Conventional natural gas (Mcf/d)||13,166||7,029||10,831||7,572|
|Light and medium crude oil & NGLs ($/bbls)||75.82||39.51||66.41||34.23|
|Conventional natural gas ($/Mcf)||3.89||2.32||3.51||2.13|
|Operating netbacks ($/boe)|
|Oil and natural gas sales||56.66||31.50||51.41||27.29|
|Realized (loss) on derivative contracts||(3.47)||(2.18)||(6.42)||(0.99)|
|Operating netback (including realized derivative contracts)||33.62||(11.67)||26.24||8.85|
Third Quarter 2021 Financial & Operations Overview
InPlay’s production for the third quarter of 2021 set another quarterly record for the Company averaging 6,011 boe/d(1) (64% light oil & NGLs). Production increased 61% compared to the third quarter of 2020 which averaged 3,742 boe/d (69% light oil & NGLs) and increased 12% compared to our previous quarterly record in the second quarter of 2021 which averaged 5,386 boe/d(1) (68% light oil and NGLs). A lower light oil and liquids weighting of 64% in the quarter is due to less NGLs extracted as a result of a temporary change in the extraction process at a deep cut plant and a fire at another plant utilized by InPlay. The Company is extremely pleased to have achieved quarterly production records in consecutive quarters and to exceed 6,000 boe/d quarterly average production for the first time in our history.
The Company’s capital program for the quarter consisted of $10.5 million of development capital focused primarily on our Pembina lands acquired in late 2020. The program included completing and bringing on production three (3.0 net) 1.5 mile Extended Reach Horizontal (“ERH”) wells that were drilled in June and the drilling operations and initial facilities work of two (2.0 net) ERH wells, which were completed in the fourth quarter and are currently being brought on production. The Company also participated in the drilling of one (0.2 net) non-operated Nisku ERH well and one (0.2 net) non-operated Willesden Green ERH well during the third quarter of 2021.
WTI prices remained strong averaging $70.56 USD/bbl, up 72% compared to $40.93 USD/bbl in the third quarter of 2020. Natural gas prices continued to remain high with AECO daily index prices averaging $3.41/GJ, a 61% increase compared to $2.12/GJ in the third quarter of 2020. Significant increases in propane, butane and ethane prices resulted in realized average NGL prices of $45.01/bbl, up 169% compared to $16.73/bbl in the third quarter of 2020.
The Company’s record production levels combined with very strong commodity prices resulted in InPlay achieving record AFF during the quarter of $15.6 million, an increase of 675% compared to a $2.0 million in the third quarter of 2020 and an increase of 89% compared to $8.2 million in the second quarter of 2021. FAFF of $5.1 million was generated during the quarter which decreased our net debt by 6% from June 30, 2021. This net debt reduction was achieved while also managing production growth of 12% compared to our previous quarterly production record in the second quarter of 2021.
InPlay achieved record low operating costs of $12.23/boe in the third quarter of 2021, improving from $13.84/boe in the third quarter of 2020. Improvements in operating costs on a per boe basis reflect continued focus on operational efficiencies and fixed operating costs being incurred over a larger production base. As a result, the Company increased operating netbacks by 168% to $37.08/boe from $13.84/boe in the third quarter of 2020 and by 12% from $33.11/boe in the second quarter of 2021.
Cardium Acquisition, Equity Financing and Increased Senior Credit Facility
On September 28, 2021, the Company announced that it had entered into a definitive agreement to acquire Prairie Storm Resources Corp. (the “Acquisition”). The Acquisition will be funded by an $11.5 million bought deal equity financing (the “Financing”), available borrowings under InPlay’s Senior Credit Facility and the issuance of approximately 8.3 million common shares of InPlay to shareholders of Prairie Storm. InPlay received a commitment letter from its senior lenders to increase the borrowing capacity of its Senior Credit Facility from $65.0 million to $85.0 million by way of a $20 million Senior Term Facility, subject to and conditional upon the completion of the Acquisition.
The Financing was completed on October 20, 2021 with the full over-allotment of $1.5 million being exercised for total gross proceeds of $11.5 million, which proceeds are being held in escrow pending completion of the Acquisition.
The Acquisition is a significant achievement for InPlay, solidifying the Company as a premier Cardium operator adding additional scale of operations and areas of growth to the Company. We look forward to the closing of this Acquisition which is expected to occur, subject to the satisfaction of conditions, on or around November 30, 2021.
Passing of Board Member
It is with profound sadness that InPlay reports the passing of Mr. Dennis Nerland on October 30th, 2021, a member of the Company’s Board of Directors since 2013. Dennis was a valued member of the Board of Directors and played a significant role in shaping InPlay from inception into the company that it is today. Dennis’ insight, character and warmth will be sorely missed by InPlay and the business community. InPlay extends our deepest condolences to Dennis’ family.
The Company’s operational success in the Cardium and record results achieved during the quarter provide a solid foundation entering into the fourth quarter and looking forward to 2022. The increase in commodity prices and the pending addition of the Prairie Storm assets has the Company extremely well positioned financially and operationally going into 2022. Our updated pro-forma 2021 post-acquisition corporate guidance for 2021 and preliminary post-acquisition corporate outlook for 2022 remain unchanged. Please refer to our press release dated September 28, 2021 for further details.
We are very excited to begin integrating the Prairie Storm assets into our business and look forward to continuing to deliver the same operational excellence that we have previously delivered in our existing Cardium assets. The Company looks forward to executing on our strategy to generate measured production per share growth combined with strong free adjusted funds flow, debt reduction and maximizing returns to shareholders.
For further information please contact:
President and Chief Executive Officer
InPlay Oil Corp.
Telephone: (587) 955-0632
Chief Financial Officer
InPlay Oil Corp.
Telephone: (587) 955-0634
1. See “Reader Advisories – Production Breakdown by Product Type”