Business Development Highlights
- In
January 2020 , IPC announced the proposed light oil acquisition of 2P reserves of 14.0 MMboe and 6.2 MMboe of contingent resources (best estimate, unrisked) as atDecember 31, 2019 (2)(3), for total equity and debt consideration ofUSD 59 million . The acquisition of Granite Oil Corp. (Granite) will be IPC’s third acquisition in less than three years. Completion of the Granite transaction remains subject to satisfaction of certain conditions and is expected to occur in earlyMarch 2020 .
2019 Financial and Operational Highlights
- Average net production of approximately 47,200 boepd for the fourth quarter of 2019.
- Full year 2019 average net production of approximately 45,800 boepd, in line with Q3 2019 guidance.
- Full year 2019 operating costs(4) per boe of
USD 12.8 , slightly ahead of Q3 2019 guidance. - Capital expenditure for full year 2019 of
USD 181 million ,USD 4 million below Q3 2019 guidance withUSD 3 million phased into 2020. - Successfully delivered a 26 development well program in the Suffield area,
Canada . - Extensive Suffield area gas swabbing and well optimization program delivered during 2019.
- Onion
Lake Thermal facility expansion and upgrades completed inCanada , as well as the addition of the new F-Pad wells. - Third well pair at the Blackrod project,
Canada , completed with approximately 1,400 metres of horizontal section; commencing steam injection in early 2020. - Successful delivery of the Vert La Gravelle field Phase I redevelopment project, lifting Q4 2019 production in
France by 28 percent relative to Q3 2019. - Successfully delivered the three well infill drilling programme at the Bertam field in
Malaysia and identified additional infill potential. - 2P reserves as at
December 31, 2019 increased to 300 MMboe, with a 2019 reserves replacement ratio of 89% excluding acquisitions and 173% including acquisitions.(2)(3)(5) - Contingent resources (best estimate, unrisked) increased from 849 MMboe as at
December 31, 2018 to 1,089 MMboe as atDecember 31, 2019 .(2)(3)
Three months ended | Year ended | ||||
USD Thousands | 2019 | 2018 | 2019 | 2018 | |
Revenue | 145,535 | 111,898 | 553,749 | 454,443 | |
Gross profit | 43,245 | 26,311 | 152,904 | 146,864 | |
Net result | 38,372 | 29,346 | 103,588 | 103,644 | |
Operating cash flow (4) | 78,888 | 58,322 | 307,944 | 279,018 | |
Free cash flow (4) | 4,432 | 34,864 | 89,308 | 203,282 | |
EBITDA (4) | 77,353 | 58,032 | 302,513 | 264,041 | |
Net Debt (4) | 231,503 | 276,761 | 231,503 | 276,761 |
- Full year 2019 operating cash flow (OCF)(4) generation of
USD 308 million , the highest annual OCF since IPC’s inception. - Full year 2019 free cash flow (FCF)(4) generation of
USD 89 million . - Net debt(4) reduced from
USD 277 million as atDecember 31, 2018 toUSD 231.5 million as atDecember 31, 2019 . - Net debt(4) to EBITDA(4) ratio of less than 0.8 times as at
December 31, 2019 . - In
November 2019 , IPC announced a share repurchase program, with the ability to repurchase up to approximately 11.5 million IPC shares over a twelve month period. Repurchased forUSD 16.9 million and cancelled approximately 3.9 million IPC shares as at endDecember 2019 and a further approximately 2.9 million IPC shares were repurchased forUSD 11.8 million , of which approximately 2.5 million shares were cancelled, as at endJanuary 2020 .
2020 Budget and Production Guidance
- 2020 average net production guidance of 46,000 to 50,000 boepd.(2)
- 2020 operating costs guidance at
USD 13.7 per boe.(2)(4) - Full year 2020 capital expenditure budget of
USD 149 million , includingUSD 3 million of carry-over costs from 2019 andUSD 10 million relating to the assets to be acquired in the Granite transaction.(2)
"Our focus since launching IPC in
2019 Year-End Results
During the fourth quarter of 2019, our assets delivered average daily net production of 47,200 boepd, a four percent increase from Q3 2019. Full year 2019 average production was 45,800 boepd, in line with our Q3 2019 guidance. Record high net production levels above 49,000 boepd were achieved in early
IPC delivered a very strong full year 2019 financial performance generating an operating cash flow of
In
In
In
As at end
In addition, IPC has increased its best estimate contingent resources (unrisked) as at end
Based on third party reserves reports, the net present value (NPV)(2)(3)(6) of IPC’s 2P reserves as at
2020 Budget and Production Guidance
We are pleased to announce our 2020 production guidance is 46,000 to 50,000 boepd.(2) We forecast operating costs for 2020 to be
Our 2020 capital expenditure budget is
Further details regarding IPC’s 2020 budget and production guidance will be provided at IPC’s Capital Markets Day presentation to be held on
Notes:
- IPC's financial statements and MD&A for the year ended
December 31, 2019 are available on IPC's website at www.international-petroleum.com and under IPC’s profile on SEDAR at www.sedar.com. - Includes the reserves and contingent resources as at
December 31, 2019 and the forecast 2020 production, operating costs and capital expenditures attributable to the oil and gas assets of Granite, assuming acquisition as ofJanuary 1, 2020 . Completion of the Granite transaction remains subject to satisfaction of certain conditions and is expected to occur in earlyMarch 2020 . The acquisition cost ofUSD 59 million includesUSD 29 million in cash andUSD 30 million in net debt assumption. See “Forward-Looking Statements” below. - See "Disclosure of Oil and Gas Information" below. Further information with respect to IPC’s and Granite’s reserves, contingent resources and estimates of future net revenue, including assumptions relating to the calculation of NPV, are further described in the material change report (MCR) filed on the date of this press release by IPC and available under IPC’s profile on www.sedar.com and on IPC's website at www.international-petroleum.com. 2P reserves as at
December 31, 2019 of 300 MMboe includes 286.2 MMboe attributable to IPC’s oil and gas assets and 14.0 MMboe attributable to Granite’s oil and gas assets. Contingent resources (best estimate, unrisked) as atDecember 31, 2019 of 1,089 MMboe includes 1,082.5 MMboe attributable to IPC’s oil and gas assets and 6.2 MMboe attributable to Granite’s oil and gas assets. - Non-IFRS measure, see “Non-IFRS Measures” below and in the MD&A.
- Reserves replacement ratio is based on 2P reserves of 288 MMboe as at
December 31, 2018 , production during 2019 of 16.7 MMboe, additions to 2P reserves during 2019 of 14.8 MMboe (or 28.8 MMboe including the 2P reserves attributable to the acquisition of the Granite assets which is expected to be completed in earlyMarch 2020 ) and 2P reserves of 286.2 MMboe (or 300 MMboe including the 2P reserves attributable to the acquisition of the Granite assets which is expected to be completed in earlyMarch 2020 ) as atDecember 31, 2019 . - NPV is after tax, discounted at 8% and based upon the forecast prices and other assumptions further described in the MCR. NPV of the 2P reserves as at
December 31, 2019 ofUSD 2,410 million includesUSD 2,202.5 million attributable to IPC’s oil and gas assets andUSD 207.6 million attributable to Granite’s oil and gas assets. See “Disclosure of Oil and Gas Information” below. - NAV is calculated as NPV less net debt as at
December 31, 2019 . Net debt as atDecember 31, 2019 includesUSD 231.5 million as described above and an additionalUSD 59 million in respect of the Granite acquisition cost, assuming acquisition as of such date. Completion of the Granite transaction remains subject to satisfaction of certain conditions and is expected to occur in earlyMarch 2020 . - NAV per share is based on the number of IPC common shares outstanding as at
December 31, 2019 being 159,790,869. - Estimated free cash flow generation based on IPC’s current business plans over the period of 2020 to 2024. Assumptions include average net production of a variance around 50 Mboepd, average Brent oil prices of
USD 55 to 75 per boe escalating by 2% per year, average gas prices ofCAD 2.50 per thousand cubic feet, and average Brent to Western Canadian Select differentials as estimated by IPC’s independent reserves evaluator and as further described in the MCR. IPC’s current business plans and assumptions, and the business environment, are subject to change. Actual results may differ materially from forward-looking estimates and forecasts. See “Forward-Looking Statements” below.
For further information, please contact:
VP Corporate Planning and Investor Relations rebecca.gordon@international-petroleum.com Tel: +41 22 595 10 50 | Or | Media Manager reriksson@rive6.ch Tel: +46 701 11 26 15 |
This information is information that
Forward-Looking Statements
This press release contains statements and information which constitute "forward-looking statements" or "forward-looking information" (within the meaning of applicable securities legislation). Such statements and information (together, "forward-looking statements") relate to future events, including the Corporation's future performance, business prospects or opportunities. Actual results may differ materially from those expressed or implied by forward-looking statements. The forward-looking statements contained in this press release are expressly qualified by this cautionary statement. Forward-looking statements speak only as of the date of this press release, unless otherwise indicated. IPC does not intend, and does not assume any obligation, to update these forward-looking statements, except as required by applicable laws.
All statements other than statements of historical fact may be forward-looking statements. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, forecasts, guidance, budgets, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as "seek", "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "project", “forecast”, "predict", "potential", "targeting", "intend", "could", "might", "should", "believe", "budget" and similar expressions) are not statements of historical fact and may be "forward-looking statements". Forward-looking statements include, but are not limited to, statements with respect to: IPC’s intention and ability to continue to implement our strategies to build long-term shareholder value; IPC's intention to review future potential growth opportunities; the ability of IPC’s portfolio of assets to provide a solid foundation for organic and inorganic growth; the continued facility uptime and reservoir performance in IPC’s areas of operation; the timing and success of the Villeperdue West development project, including drilling and related production rates as well as future phases of the Vert La Gravelle redevelopment project, and other organic growth opportunities in
The forward-looking statements are based on certain key expectations and assumptions made by IPC, including expectations and assumptions concerning: prevailing commodity prices and currency exchange rates; applicable royalty rates and tax laws; interest rates; future well production rates and reserve and contingent resource volumes; operating costs; the timing of receipt of regulatory approvals; the performance of existing wells; the success obtained in drilling new wells; anticipated timing and results of capital expenditures; the sufficiency of budgeted capital expenditures in carrying out planned activities; the timing, location and extent of future drilling operations; the successful completion of acquisitions and dispositions; the benefits of acquisitions; the state of the economy and the exploration and production business in the jurisdictions in which IPC operates and globally; the availability and cost of financing, labour and services; and the ability to market crude oil, natural gas and natural gas liquids successfully.
Although IPC believes that the expectations and assumptions on which such forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because IPC can give no assurances that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to: the risks associated with the oil and gas industry in general such as operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of estimates and projections relating to reserves, resources, production, revenues, costs and expenses; health, safety and environmental risks; commodity price and exchange rate fluctuations; interest rate fluctuations; marketing and transportation; loss of markets; environmental risks; competition; incorrect assessment of the value of acquisitions; failure to complete or realize the anticipated benefits of acquisitions or dispositions; the ability to access sufficient capital from internal and external sources; failure to obtain required regulatory and other approvals; and changes in legislation, including but not limited to tax laws, royalties, environmental and abandonment regulations. Readers are cautioned that the foregoing list of factors is not exhaustive.
Additional information on these and other factors that could affect IPC, or its operations or financial results, are included in the MCR, the MD&A (See "Cautionary Statement Regarding Forward-Looking Information" therein), the Corporation's Annual Information Form (AIF) for the year ended
Non-IFRS Measures
References are made in this press release to "operating cash flow" (OCF), “free cash flow” (FCF), "Earnings Before Interest, Tax, Depreciation and Amortization" (EBITDA), "operating costs" and "net debt"/"net cash", which are not generally accepted accounting measures under International Financial Reporting Standards (IFRS) and do not have any standardized meaning prescribed by IFRS and, therefore, may not be comparable with definitions of OCF, FCF, EBITDA, operating costs and net debt/net cash that may be used by other public companies. Non-IFRS measures should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS.
Management believes that non-IFRS measures are useful supplemental measures that may assist shareholders and investors in assessing the cash generated by and the financial performance and position of the Corporation. Management also uses non-IFRS measures internally in order to facilitate operating performance comparisons from period to period, prepare annual operating budgets and assess the Corporation’s ability to meet its future capital expenditure and working capital requirements. Management believes these non-IFRS measures are important supplemental measures of operating performance because they highlight trends in the core business that may not otherwise be apparent when relying solely on IFRS financial measures. Management believes such measures allow for assessment of the Corporation’s operating performance and financial condition on a basis that is more consistent and comparable between reporting periods. The Corporation also believes that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of issuers. Forward-looking statements are provided for the purpose of presenting information about management’s current expectations and plans relating to the future and readers are cautioned that such statements may not be appropriate for other purposes.
The definition and reconciliation of each non-IFRS measure is presented in IPC's MD&A (See "Non-IFRS Measures" therein).
Disclosure of Oil and Gas Information
This press release contains references to estimates of gross and net reserves and resources attributed to the Corporation's and Granite’s oil and gas assets. Gross reserves / resources are the working interest (operating or non-operating) share before deduction of royalties and without including any royalty interests. Net reserves / resources are the working interest (operating or non-operating) share after deduction of royalty obligations, plus royalty interests in reserves/resources, and in respect of PSCs in
Reserve estimates, contingent resource estimates and estimates of future net revenue in respect of IPC’s oil and gas assets in
Reserve estimates, contingent resource estimates and estimates of future net revenue in respect of IPC’s oil and gas assets in
Reserve estimates, contingent resource estimates and estimates of future net revenue in respect of the oil and gas assets of Granite Oil Corp. (Granite) are effective as of
The price forecasts used in the Sproule and ERCE reports are available on the website of Sproule (sproule.com) and are contained in the MCR.
The reserves life index (RLI) is calculated by dividing the 2P reserves of 300 MMboe as at
Light, medium and heavy crude oil reserves/resources disclosed in this press release include solution gas and other by-products.
"2P reserves" means proved plus probable reserves. "Proved reserves" are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves. "Probable reserves" are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable reserves.
Contingent resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies. Contingencies are conditions that must be satisfied for a portion of contingent resources to be classified as reserves that are: (a) specific to the project being evaluated; and (b) expected to be resolved within a reasonable timeframe. Contingencies may include factors such as economic, legal, environmental, political, and regulatory matters, or a lack of markets. It is also appropriate to classify as contingent resources the estimated discovered recoverable quantities associated with a project in the early evaluation stage. Contingent resources are further classified in accordance with the level of certainty associated with the estimates and may be sub-classified based on a project maturity and/or characterized by their economic status.
There are three classifications of contingent resources: low estimate, best estimate and high estimate. Best estimate is a classification of estimated resources described in the COGE Handbook as being considered to be the best estimate of the quantity that will be actually recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate. If probabilistic methods are used, there should be at least a 50% probability that the quantities actually recovered will equal or exceed the best estimate.
Contingent resources are further classified based on project maturity. The project maturity subclasses include development pending, development on hold, development unclarified and development not viable. All of the Corporation’s contingent resources are classified as either development on hold or development unclarified. Development on hold is defined as a contingent resource where there is a reasonable chance of development, but there are major non-technical contingencies to be resolved that are usually beyond the control of the operator. Development unclarified is defined as a contingent resource that requires further appraisal to clarify the potential for development and has been assigned a lower chance of development until contingencies can be clearly defined. Chance of development is the probability of a project being commercially viable.
The reserve estimates and contingent resource estimates included in the Sproule reports related to Granite’s oil and gas assets are based on IPC’s assessment of potential development activities related to these assets which may differ from Granite’s assessment and reported figures. All of Granite’s contingent resources are classified by IPC as development unclarified. The chance of development risk of 70% has been applied by IPC to all of Granite’s contingent resources. The risked contingent resources (best estimate) as at
References to "unrisked" contingent resources volumes means that the reported volumes of contingent resources have not been risked (or adjusted) based on the chance of commerciality of such resources. In accordance with the COGE Handbook for contingent resources, the chance of commerciality is solely based on the chance of development based on all contingencies required for the re-classification of the contingent resources as reserves being resolved. Therefore unrisked reported volumes of contingent resources do not reflect the risking (or adjustment) of such volumes based on the chance of development of such resources.
The contingent resources reported in this press release are estimates only. The estimates are based upon a number of factors and assumptions each of which contains estimation error which could result in future revisions of the estimates as more technical and commercial information becomes available. The estimation factors include, but are not limited to, the mapped extent of the oil and gas accumulations, geologic characteristics of the reservoirs, and dynamic reservoir performance. There are numerous risks and uncertainties associated with recovery of such resources, including many factors beyond the Corporation’s control. There is uncertainty that it will be commercially viable to produce any portion of the contingent resources referred to in this press release. References to “contingent resources” do not constitute, and should be distinguished from, references to “reserves”.
2P reserves and contingent resources included in the reports prepared by Sproule and ERCE in respect of IPC’s oil and gas assets in
The reserves and resources information and data provided in this press release presents only a portion of the disclosure required under NI 51-101. All of the required information will be contained in the Corporation’s Annual Information Form for the year ended
BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 thousand cubic feet (Mcf) per 1 barrel (bbl) is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. As the value ratio between natural gas and crude oil based on the current prices of natural gas and crude oil is significantly different from the energy equivalency of 6:1, utilizing a 6:1 conversion basis may be misleading as an indication of value.
Currency
All dollar amounts in this press release are expressed in
Source:
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