CALGARY, Alberta, Aug. 11, 2022 (GLOBE NEWSWIRE) — InPlay Oil Corp. (TSX: IPO) (OTCQX: IPOOF) (“InPlay” or the “Company”) announces its record setting financial and operating results for the three and six months ended June 30, 2022. InPlay’s condensed unaudited interim financial statements and notes, as well as Management’s Discussion and Analysis (“MD&A”) for the three and six months ended June 30, 2022 will be available at “www.sedar.com” and our website at “www.inplayoil.com”. Our updated corporate presentation will also soon be available on our website.
Second Quarter 2022 Financial & Operating Highlights
- Achieved record average quarterly production of 9,063 boe/d(1) (57% light crude oil and NGLs), an increase of 68% from second quarter production in 2021 of 5,386 boe/d(1) (68% light crude oil and NGLs) and an increase of 10% compared to our previous record of 8,221 boe/d(1) (59% light crude oil and NGLs) in the first quarter of 2022. Average production per weighted average basic share increased 32% compared to the second quarter of 2021 (43% on a debt adjusted(4) basis) and 10% compared to the first quarter of 2022 (17% on a debt adjusted basis).
- Generated record quarterly adjusted funds flow (“AFF”)(2) of $40.9 million ($0.47 per weighted average basic share(3)), an increase of 398% compared to $8.2 million ($0.12 per weighted average basic share) in the second quarter of 2021 and an increase of 39% compared to $29.4 million ($0.34 per weighted average basic share) in the first quarter of 2022, our prior record quarter.
- Increased operating netbacks(4) by 84% to $61.02/boe from $33.09/boe in the second quarter of 2021 and by 32% compared to $46.06/boe in the first quarter of 2022, our prior record quarter.
- Realized quarterly record operating income(4) and operating income profit margin(4) of $50.3 million and 71% respectively compared to $16.2 million and 64% in the second quarter of 2021; $34.1 million and 65% in the first quarter of 2022, our prior record quarter.
- Reduced operating expenses to $12.28/boe compared to $12.51/boe in the second quarter of 2021 and $12.96/boe in the first quarter of 2022, despite rising costs of services in the industry.
- Generated free adjusted funds flow (“FAFF”)(4) of $23.1 million, a quarterly record for the Company, resulting in a 31% reduction to net debt from March 31, 2022.
- Achieved a quarterly annualized net debt(2) to earnings before interest, taxes and depletion (“EBITDA”)(4) ratio of 0.3x, compared to 1.9x in the second quarter of 2021 and 0.6x in first quarter of 2022 and a trailing twelve month net debt to EBITDA ratio of 0.5x to June 30, 2022.
- Realized net income of $29.0 million ($0.33 per basic share; $0.32 per diluted share).
Financial and Operating Results:
(CDN) ($000’s) | Three months ended June 30 |
Six months ended June 30 |
||||||
2022 | 2021 | 2022 | 2021 | |||||
Financial | ||||||||
Oil and natural gas sales | 71,287 | 25,267 | 123,444 | 45,268 | ||||
Adjusted funds flow(2) | 40,922 | 8,219 | 70,303 | 14,324 | ||||
Per share – basic(3) | 0.47 | 0.12 | 0.81 | 0.21 | ||||
Per share – diluted(3) | 0.45 | 0.12 | 0.77 | 0.21 | ||||
Per boe(3) | 49.62 | 16.77 | 44.93 | 15.29 | ||||
Comprehensive income | 29,032 | 59,127 | 47,808 | 51,591 | ||||
Per share – basic | 0.33 | 0.87 | 0.55 | 0.76 | ||||
Per share –diluted | 0.32 | 0.85 | 0.53 | 0.75 | ||||
Capital expenditures – PP&E and E&E | 17,850 | 4,744 | 39,413 | 16,954 | ||||
Property acquisitions (dispositions) | – | (101 | ) | (1 | ) | (82 | ) | |
Corporate acquisitions | (20 | ) | – | 411 | – | |||
Net debt(2) | (50,473 | ) | (76,113 | ) | (50,473 | ) | (76,113 | ) |
Shares outstanding | 87,138,301 | 68,288,616 | 87,138,301 | 68,288,616 | ||||
Basic weighted-average shares | 86,873,664 | 68,259,781 | 86,662,821 | 68,258,207 | ||||
Diluted weighted-average shares | 91,282,528 | 69,187,825 | 90,913,356 | 68,687,889 | ||||
Operational | ||||||||
Daily production volumes | ||||||||
Light and medium crude oil (bbls/d) | 3,865 | 2,942 | 3,719 | 2,804 | ||||
Natural gas liquids (bbls/d) | 1,333 | 730 | 1,320 | 765 | ||||
Conventional natural gas (Mcf/d) | 23,191 | 10,286 | 21,631 | 9,643 | ||||
Total (boe/d) | 9,063 | 5,386 | 8,644 | 5,177 | ||||
Realized prices(3) | ||||||||
Light and medium crude oil & NGLs ($/bbls) | 116.74 | 66.46 | 107.48 | 61.29 | ||||
Conventional natural gas ($/Mcf) | 7.61 | 3.27 | 6.49 | 3.25 | ||||
Total ($/boe) | 86.44 | 51.55 | 78.90 | 48.31 | ||||
Operating netbacks ($/boe)(4) | ||||||||
Oil and natural gas sales | 86.44 | 51.55 | 78.90 | 48.31 | ||||
Royalties | (11.90 | ) | (4.83 | ) | (11.13 | ) | (3.85 | ) |
Transportation expense | (1.24 | ) | (1.12 | ) | (1.22 | ) | (1.03 | ) |
Operating costs | (12.28 | ) | (12.51 | ) | (12.60 | ) | (13.40 | ) |
Operating netback | 61.02 | 33.09 | 53.95 | 30.03 | ||||
Realized (loss) on derivative contracts | (6.77 | ) | (9.39 | ) | (3.95 | ) | (8.16 | ) |
Operating netback (including realized derivative contracts) | 54.25 | 23.70 | 50.00 | 21.87 |
Second Quarter 2022 Financial & Operations Overview:
Production averaged 9,063 boe/d(1) (57% light crude oil & NGLs) of sales in the second quarter of 2022, not including over 5,000 bbls of light crude oil inventory build (equal to over 55 bbls/d during the quarter) that was not sold due to difficulty trucking oil as a result of wet weather at the end of June. NGL’s were slightly lower than expected in the quarter due to certain third party facilities having leaner liquids cuts in the quarter. Production increased by 68% compared to 5,386 boe/d(1) (68% light crude oil & NGLs) in the second quarter of 2021 and 10% compared to 8,221 boe/d(1) (59% light crude oil & NGLs) in the first quarter of 2022. This resulted in a quarterly record $40.9 million of AFF generated during the second quarter of 2022 and $23.1 million in FAFF which reduced net debt levels by 31% from March 31, 2022 to $50.5 million at June 30, 2022. Liquidity ratios to the end of the quarter improved significantly resulting in a quarterly annualized net debt to EBITDA ratio of 0.3x and a trailing twelve month net debt to EBITDA ratio of 0.5x to June 30, 2022.
InPlay’s capital program for the second quarter of 2022 consisted of $17.8 million of capital expenditures. During the quarter, InPlay drilled three (3.0 net) 1.5 mile Extended Reach Horizontal (“ERH”) wells in Pembina which were completed and tied in and came on production at the end of May. The Company also finished the drilling operations of an additional two (1.9 net) 2 mile ERH wells in Willesden Green. Completions of these wells was delayed due to the wet weather in June but have now been completed and are in the early cleanup phase. Construction of a modular multi-well facility in Willesden Green began during the quarter to accommodate current and future drilling in the area.
As a result of using a consistent drill crew since the beginning of the year and exceptional project execution, the two 2 mile ERH wells in Willesden Green were drilled in 10.3 and 10.7 days respectively, which were among the fastest drilling operations for 2 mile wells in the area. In comparison to the last 2 mile wells drilled by the Company in Willesden Green in 2018, drilling times improved by approximately 20% which is a positive result for the Company and is an example of InPlay’s continuous drive to achieve operational efficiencies.
Efficient field operations and increased production levels resulted in the Company achieving lower operating expenses of $12.28/boe compared to $12.51/boe in the second quarter of 2021 and $12.96/boe in the first quarter of 2022. This is a significant achievement given the inflationary pressures and supply chain disruptions facing our industry. The resulting operating income and operating income profit margin for the second quarter of 2022 were quarterly records for the Company at $50.3 million and 71% respectively.
Credit Facilities
InPlay is pleased to announce that it has entered into an amended credit facility with its first-lien and second-lien lenders resulting in a fully conforming revolving credit facility with an increased total lending capacity and borrowing base of $110 million. InPlay’s credit facility is now comprised of a $100 million revolving credit facility and a $10 million operating line of credit (together, the “Credit Facility”). The term out date of the Credit Facility has been extended to May 30, 2023 with a maturity date of May 30, 2024. As part of the renegotiated Credit Facility, the Company’s previously outstanding $25 million term facility with the Business Development Bank of Canada (“BDC”) and the remaining $14 million of its senior term facility have been repaid.
InPlay is also pleased to announce that Canadian Western Bank (“CWB”) and BDC have joined ATB Financial as members of the amended Credit Facility syndicate.
The outcome of the Credit Facility redetermination is an extremely positive result for the Company and is anticipated to reduce overall interest costs and provide InPlay with a stable liquidity position.
Outlook
The Company’s strategy has been focused on delivering measured but top-tier production growth amongst our light oil peers while seeking to maximize FAFF which has been used to reduce debt and leverage ratios. Results from our high quality asset base has allowed us to exceed our expectations with production growth per share of 32% (43% on a debt adjusted per share basis) in the past year. Strong and record setting operational and financial performance combined with continued commodity price strength has placed InPlay well ahead of schedule in the reduction of debt levels. The Company has achieved a 0.5x trailing twelve months net debt to EBITDA ratio in the second quarter of 2022 with expectations of leverage ratios continuing to drop throughout the balance of the year based on current commodity prices.
Although the world economic picture and energy prices remain volatile, the Company finds itself in the best operational and financial position in our history. We believe that a target of approximately 0.5x trailing twelve months net debt to EBITDA is a prudent leverage ratio in a higher commodity price environment and will provide the Company significant financial flexibility in a volatile pricing environment. Having achieved this target and with leverage continuing to drop, the Company is now evaluating a potential return of capital to shareholders, while continuing to pursue other accretive acquisition opportunities, with the ultimate goal of strong overall returns to shareholders.
Wet weather in late June delayed the start of our third quarter capital program. The program is now well underway with drilling operations ongoing on the third well of a three (2.9 net) ERH well pad in Willesden Green which is expected to be on production in late August. The drilling operations of an additional two (1.9 net) ERH wells in Willesden Green are planned for the third quarter which are expected to be on production late in September. The Company’s third quarter drilling program is in an area with anticipated higher oil weightings which is expected to result in increased liquids percentages into the second half of the year.
As a result of the strong operational results to date, the Company’s previously released 2022 guidance(5) is reiterated with annual average production anticipated to be 8,900 to 9,400 boe/d(1).
InPlay plans on releasing our inaugural sustainability report in September. In addition, an operational update, a long range forecast, and an update on the evaluation of a potential return to shareholders is expected to be released in September.
Management would like to thank our employees, board members, lenders and shareholders for their support and we look forward to continuing our journey of deleveraging and delivering strong returns to shareholders in a sustainable, prudent and responsible manner.
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:
- See “Production Breakdown by Product Type” at the end of this press release.
- Capital management measure. See “Non-GAAP and Other Financial Measures” contained within this press release.
- Supplementary financial measure. See “Non-GAAP and Other Financial Measures” contained within this press release.
- Non-GAAP financial measure or ratio that does 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 and Other Financial Measures” contained within this press release.
- See “Reader Advisories – Forward Looking Information and Statements” and InPlay’s press release dated May 11, 2022 for full details and key budget and underlying assumptions related to our 2022 capital program and associated guidance.
Reader Advisories
Non-GAAP and Other Financial Measures
Throughout this press release and other materials disclosed by the Company, InPlay uses certain measures to analyze financial performance, financial position and cash flow. These non-GAAP and other financial measures do not have any standardized meaning prescribed under GAAP and therefore may not be comparable to similar measures presented by other entities. The non-GAAP and other financial measures should not be considered alternatives to, or more meaningful than, financial measures that are determined in accordance with GAAP as indicators of the Company performance. Management believes that the presentation of these non-GAAP and other financial measures provides useful information to shareholders and investors in understanding and evaluating the Company’s ongoing operating performance, and the measures provide increased transparency and the ability to better analyze InPlay’s business performance against prior periods on a comparable basis.
Non-GAAP Financial Measures and Ratios
Included in this document are references to the terms “free adjusted funds flow (“FAFF”)”, “operating income”, “operating netback per boe”, “operating income profit margin”, “Net Debt to EBITDA” and “Debt adjusted production per share”. Management believes these measures and ratios 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 “profit (loss) before taxes”, “profit (loss) and comprehensive income (loss)”, “adjusted funds flow”, “capital expenditures”, “corporate acquisitions, net of cash acquired”, “net debt”, “weighted average number of common shares (basic)” or assets and liabilities as determined in accordance with GAAP as a measure of the Company’s performance and financial position.
Free Adjusted Funds Flow
Management considers free adjusted funds flow (“FAFF”) and FAFF per share important measures to identify the Company’s ability to improve its financial condition through debt repayment, which has become more important recently with the introduction of second lien lenders, on an absolute and weighted average per share basis. FAFF should not be considered as an alternative to or more meaningful than AFF as determined in accordance with GAAP as an indicator of the Company’s performance. FAFF is calculated by the Company as AFF less exploration and development capital expenditures and property dispositions (acquisitions) and is a measure of the cashflow remaining after capital expenditures before corporate acquisitions that can be used for additional capital activity, corporate acquisitions, repayment of debt or decommissioning expenditures or potentially return of capital to shareholders. FAFF per share is calculated by the Company as FAFF divided by weighted average outstanding shares. Refer below for a calculation of historical FAFF and to the “Forward Looking Information and Statements” section for a calculation of forecast FAFF.
(thousands of dollars) | Three Months Ended June 30 |
Six Months Ended June 30 |
||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||
Adjusted funds flow | 40,922 | 8,219 | 70,303 | 14,324 | ||||||||
Exploration and dev. capital expenditures | (17,850 | ) | (4,744 | ) | (39,413 | ) | (16,954 | ) | ||||
Property dispositions (acquisitions) | – | 101 | 1 | 82 | ||||||||
Free adjusted funds flow | 23,072 | 3,576 | 30,891 | (2,548 | ) |
Operating Income/Operating Netback per boe/Operating Income Profit Margin
InPlay uses “operating income”, “operating netback per boe” and “operating income profit margin” as key performance indicators. Operating income is calculated by the Company as oil and natural gas sales less royalties, operating expenses and transportation expenses and is a measure of the profitability of operations before administrative, share-based compensation, financing and other non-cash items. Management considers operating income an important measure to evaluate its operational performance as it demonstrates its field level profitability. Operating income should not be considered as an alternative to or more meaningful than net income as determined in accordance with GAAP as an indicator of the Company’s performance. Operating netback per boe is calculated by the Company as operating income divided by average production for the respective period. Management considers operating netback per boe an important measure to evaluate its operational performance as it demonstrates its field level profitability per unit of production. Operating income profit margin is calculated by the Company as operating income as a percentage of oil and natural gas sales. Management considers operating income profit margin an important measure to evaluate its operational performance as it demonstrates how efficiently the Company generates field level profits from its sales revenue. Refer below for a calculation of operating income, operating netback per boe and operating income profit margin.
(thousands of dollars) | Three Months Ended June 30 |
Six Months Ended June 30 |
||||||
2022 | 2021 | 2022 | 2021 | |||||
Revenue | 71,287 | 25,267 | 123,444 | 45,268 | ||||
Royalties | (9,811 | ) | (2,366 | ) | (17,410 | ) | (3,611 | ) |
Operating expenses | (10,125 | ) | (6,129 | ) | (19,713 | ) | (12,551 | ) |
Transportation expenses | (1,021 | ) | (547 | ) | (1,914 | ) | (965 | ) |
Operating income (2) | 50,330 | 16,225 | 84,407 | 28,141 | ||||
Sales volume (Mboe) | 824.7 | 490.1 | 1,564.6 | 937.0 | ||||
Per boe | ||||||||
Revenue | 86.44 | 51.55 | 78.90 | 48.31 | ||||
Royalties | (11.90 | ) | (4.83 | ) | (11.13 | ) | (3.85 | ) |
Operating expenses | (12.28 | ) | (12.51 | ) | (12.60 | ) | (13.40 | ) |
Transportation expenses | (1.24 | ) | (1.12 | ) | (1.22 | ) | (1.03 | ) |
Operating netback per boe | 61.02 | 33.09 | 53.95 | 30.03 | ||||
Operating income profit margin | 71% | 64% | 68% | 62% |
Net Debt to EBITDA
Management considers Net Debt to EBITDA an important measure as it is a key metric to identify the Company’s ability to fund financing expenses, net debt reductions and other obligations. EBITDA is calculated by the Company as adjusted funds flow before interest expense. When this measure is presented quarterly, EBITDA is annualized by multiplying by four. When this measure is presented on a trailing twelve month basis, EBITDA for the twelve months preceding the net debt date is used in the calculation. This measure is consistent with the EBITDA formula prescribed under the Company’s Senior Credit Facility. Net Debt to EBITDA is calculated as Net Debt divided by EBITDA. Refer to the “Forward Looking Information and Statements” section for a calculation of forecast Net Debt to EBITDA.
Production per Debt Adjusted Share
InPlay uses “Production per debt adjusted share” as a key performance indicator. Debt adjusted shares should not be considered as an alternative to or more meaningful than common shares as determined in accordance with GAAP as an indicator of the Company’s performance. Debt adjusted shares is a non-GAAP measure used in the calculation of Production per debt adjusted share and is calculated by the Company as common shares outstanding plus the change in net debt divided by the Company’s current trading price on the TSX, converting net debt to equity. Debt adjusted shares should not be considered as an alternative to or more meaningful than weighted average number of common shares (basic) as determined in accordance with GAAP as an indicator of the Company’s performance. Management considers Debt adjusted share is a key performance indicator as it adjusts for the effects of capital structure in relation to the Company’s peers. Production per debt adjusted share is calculated by the Company as production divided by debt adjusted shares. Management considers Production per debt adjusted share is a key performance indicator as it adjusts for the effects of changes in annual production in relation to the Company’s capital structure. Refer below for a calculation of Production per debt adjusted share.
Three Months Ended June 30 |
|||||||||
2022 | 2021 | ||||||||
Production | Boe/d | 9,063 | 5,386 | ||||||
Net Debt | $ millions | $ | 50.5 | $ | 76.1 | ||||
Weighted average outstanding shares | # millions | 86.9 | 68.3 | ||||||
Assumed Share price(2) | $ | 4.00 | |||||||
Production per debt adjusted share growth(2) | 43% | ||||||||
Three Months Ended | |||||||||
June 30, 2022 |
March 31, 2022 |
||||||||
Production | Boe/d | 9,063 | 8,221 | ||||||
Net Debt | $ millions | $ | 50.5 | $ | 73.4 | ||||
Weighted average outstanding shares | # millions | 86.9 | 86.4 | ||||||
Assumed Share price(2) | $ | 4.00 | |||||||
Production per debt adjusted share growth(2) | 17% |
(1) | Production per debt adjusted share is calculated by the Company as production divided by debt adjusted shares. Debt adjusted shares is calculated by the Company as common shares outstanding plus the change in net debt divided by the Company’s current trading price on the TSX, converting net debt to equity. |
(2) | Weighted average share price throughout the second quarter of 2022. |
Capital Management Measures
Adjusted Funds Flow
Management considers adjusted funds flow to be an important measure of InPlay’s ability to generate the funds necessary to finance capital expenditures. Adjusted funds flow (“AFF”) is a GAAP measure and is disclosed in the notes to the Company’s consolidated financial statements for the year ending December 31, 2021 and the most recently filed quarterly financial statements. All references to AFF throughout this document are calculated as funds flow adjusting for decommissioning expenditures and transaction and integration costs. 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 and transaction costs are non-recurring costs for the purposes of an acquisition, making the exclusion of these items relevant in Management’s view to the reader in the evaluation of InPlay’s operating performance. The Company also presents AFF per share whereby per share amounts are calculated using weighted average shares outstanding consistent with the calculation of profit (loss) per common share.
Net Debt
Net debt is a GAAP measure and is disclosed in the notes to the Company’s consolidated financial statements for the year ending December 31, 2021 and the most recently filed quarterly financial statements. The Company closely monitors its capital structure with a goal of maintaining a strong balance sheet to fund the future growth of the Company. The Company monitors net debt as part of its capital structure. The Company uses net debt (bank debt plus accounts payable and accrued liabilities less accounts receivables and accrued receivables, prepaid expenses and deposits and inventory) as an alternative measure of outstanding debt. Management considers net debt an important measure to assist in assessing the liquidity of the Company.