International Petroleum Corporation (IPC or the Corporation) (TSX,
Nasdaq Stockholm: IPCO) today released its financial and operating
results and related management's discussion and analysis (MD&A) for the
three months ended March 31, 2019.
Financial and Operational Highlights
-- Average net production of 44,400 barrels of oil equivalent (boe) per day
(boepd) for Q1 2019.
-- The impact of extreme weather on Canada gas production (9% below
mid-point guidance) was more than offset by higher realized gas prices
(31% above forecast). All other producing assets in line with mid-point
guidance.
-- Operating costs per boe of USD 13.2 for Q1 2019, in line with guidance.
-- Canada Suffield area oil drilling program results in line with pre-drill
expectations.
-- Malaysia exploration and three well infill drilling program on track to
commence in Q2 2019.
-- France Vert La Gravelle redevelopment project on track to commence in Q2
2019.
-- Completed acquisition of lands adjoining the Blackrod project in Canada,
with best estimate contingent resources (unrisked) of 243 million boe
(MMboe).
-- Capital expenditure budget increased from USD 166 million to USD 188
million, including to fund the enhanced oil recovery (EOR) development
project at the Suffield N2N oil field and further conventional oil
drilling in the acquired BlackPearl assets in Alberta.
-- Strong first quarter operating cash flow generation of USD 83 million at
the upper end of guidance following the inclusion of the acquired
BlackPearl assets and stronger than forecast realized crude oil and
natural gas prices.
-- Net debt reduced from USD 309 million as at March 31, 2018 to USD 257
million as at March 31, 2019, including net debt from the acquisition of
BlackPearl.
Three months ended
March 31
--------------------
USD Thousands 2019 2018
---------------------- --------- ---------
Revenue 147,420 115,162
Gross profit 46,885 37,573
Net result 33,142 26,313
Operating cash flow 83,056 76,060
EBITDA 81,675 65,291
Net Debt 256,962 309,184
---------------------- --------- ---------
Mike Nicholson, IPC's Chief Executive Officer, commented,
"Our focus remains unchanged: seeking to deliver operational excellence,
demonstrating financial resilience, maximizing the value of our resource
base and targeting growth organically and through acquisition. With a
strong set of first quarter results including for the first time the
results of our BlackPearl acquisition completed in December 2018, as
well as announcing an expanded organic growth program and a very low
cost acquisition of material contingent resources, we continue to make
excellent progress on all fronts in delivering on that strategy.
During Q1 2019, our assets delivered average daily net production of
44,400 boepd. All assets performed in line with our mid-point guidance
with the exception of Suffield gas production in Canada. Abnormally cold
temperatures experienced during the first quarter resulted in lower gas
production. However, the lower production was more than offset by a
higher realized gas price. Production guidance for the full year is
retained at 46,000 to 50,000 boepd. Our operating costs per boe for Q1
2019 was USD 13.2, in line with guidance.
IPC has continued to deliver a robust financial performance during Q1
2019 generating a record high quarterly operating cash flow of USD 83
million, at the upper end of guidance. This allowed IPC to fund its
expenditure program and reduce net debt from USD 277 million at the end
of 2018 to USD 257 million by the end of the first quarter.
In Malaysia, following positive results from the 2016 and 2018 infill
drilling programs and continued good reservoir performance, we approved
a third phase of infill drilling on the Bertam field for execution in
2019. In addition, we plan to drill the Keruing prospect as part of the
same 2019 campaign. We remain on track for the drilling program to
commence in Q2 2019.
In Canada, we plan to drill seventeen development oil wells in the
Suffield area in 2019, excluding wells related to the Suffield N2N EOR
project. The drilling campaign commenced in the fourth quarter of 2018
and production has been in line with pre-drill expectations. Onion Lake
facility optimization and ramp up is ongoing although the abnormally
cold weather during the first quarter has led to a slightly slower ramp
up than planned as we entered the second quarter. On the gas side, the
gas optimization program continues with the objective of minimizing
natural declines through 2019.
In France, our team is focused on the execution of the Vert La Gravelle
redevelopment project using horizontal drilling techniques. The rig has
been contracted and is expected to be on location this month to commence
the drilling of three wells as scheduled.
In addition, we have successfully completed our reviews of the Suffield
N2N EOR development project in Canada and plan to proceed with the
drilling of eight development oil wells and the injection of Alkaline
Surfactant Polymer (ASP) to improve sweep efficiency and recovery
factors. We have also identified two potential new conventional oil
plays on properties acquired as part of the BlackPearl transaction and
we plan to drill five wells that in the success case, could identify up
to 130 conventional oil drilling locations. As a result, we are
increasing our capital budget by USD 22 million, from USD 166 million
which was at the upper end of our guidance to USD 188 million. Following
these changes to our capital expenditure budget, and given our very
strong cash flow generation year to date, we still expect to fully fund
the 2019 capital program from our operating cash flow.
We are also pleased to report that, in less than five months since
completion of the BlackPearl Acquisition, we have been able to acquire a
significant land and contingent resource position adjacent to the
Blackrod property. We believe that the acquired land position holds
among the best quality reservoir and pay thickness that we currently
hold in the area, significantly expanding our core area at Blackrod.
These acquired lands are 100% working interest to IPC and include best
estimate contingent resources (unrisked) of 243 MMboe, increasing IPC's
total contingent resources at the Blackrod project to 987 MMboe and
IPC's total contingent resources base to almost 1,100 MMboe."
International Petroleum Corp. (IPC) is an international oil and gas
exploration and production company with a high quality portfolio of
assets located in Canada, Malaysia and France, providing a solid
foundation for organic and inorganic growth. IPC is a member of the
Lundin Group of Companies. IPC is incorporated in Canada and IPC's
shares are listed on the Toronto Stock Exchange (TSX) and the Nasdaq
Stockholm exchange under the symbol "IPCO".
For further information, please contact:
Rebecca Gordon Robert Eriksson
VP Corporate Planning and Investor Relations Media Manager
rebecca.gordon@international-petroleum.com reriksson@rive6.ch
Tel: +41 22 595 10 50 Tel: +46 701 11 26 15
This information is information that International Petroleum Corporation
is required to make public pursuant to the EU Market Abuse Regulation
and the Securities Markets Act. The information was submitted for
publication, through the contact persons set out above, at 07:30 CET on
May 8, 2019. The Corporation's unaudited condensed consolidated
financial statements and management's discussion and analysis (MD&A)
have been filed on SEDAR (www.sedar.com) and are also available on the
Corporation's website (www.international-petroleum.com).
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 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 proposed Vert La Gravelle development project, including drilling,
and other organic growth opportunities in France, including the
Villeperdue West project; the status of the suspension of operations at
the Grandpuits refinery, and the related effects on production and sales,
in France; the proposed third phase of infill drilling in Malaysia and
the ability to mature additional locations, and the production uplift
from such drilling; the drilling of the Keruing prospect in Malaysia and
the development options if drilling is successful; future development
potential of the Suffield operations, including continued and future oil
drilling and gas optimization programs and the N2N EOR development
project; the proposed further conventional oil drilling in Canada,
including the ability of such drilling to identify further drilling or
development opportunities; future development of the Blackrod project,
including the land position acquired in May 2019, in Canada; the results
of the facility optimization program and the work to debottleneck the
facilities and injection capability, as well as water intake issues, at
Onion Lake Thermal; the ability to integrate the assets and operations
acquired in the BlackPearl Acquisition, including the ability to
accelerate value creation and extend IPC's reserves life following such
acquisition; 2019 production range, exit rate, operating costs and
capital expenditure estimates; potential further acquisition
opportunities; estimates of reserves; estimates of contingent resources;
estimates of prospective resources; the ability to generate free cash
flows and use that cash to repay debt and to continue to deleverage; and
future drilling and other exploration and development activities.
Statements relating to "reserves" and "contingent resources" are also
deemed to be forward-looking statements, as they involve the implied
assessment, based on certain estimates and assumptions, that the
reserves and resources described exist in the quantities predicted or
estimated and that the reserves and resources can be profitably produced
in the future. Ultimate recovery of reserves or resources is based on
forecasts of future results, estimates of amounts not yet determinable
and assumptions of management.
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 and
environmental 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 MD&A (See
"Cautionary Statement Regarding Forward-Looking Information" therein),
the Corporation's Annual Information Form (AIF) for the year ended
December 31, 2018 (See "Cautionary Statement Regarding Forward-Looking
Information", "Reserves and Resources Advisory" and " Risk Factors"
therein) and other reports on file with applicable securities regulatory
authorities, which may be accessed through the SEDAR website
(www.sedar.com) or IPC's website (www.international-petroleum.com).
Non-IFRS Measures
References are made in this press release to "operating cash flow" (OCF),
"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,
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 OCF, EBITDA, operating costs and net debt/net
cash 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.
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 2P reserves
attributed to the Corporation's oil and gas assets. Gross reserves are
the total working interest reserves before the deduction of any
royalties and including any royalty interests receivable.
Reserves estimates, contingent resource estimates and estimates of
future net revenue in respect of IPC's oil and gas assets in the
Suffield area of Canada are effective as of December 31, 2018, and are
included in the report prepared by McDaniel & Associates Consultants
Ltd. (McDaniel), an independent qualified reserves evaluator, in
accordance with National Instrument 51-101 -- Standards of Disclosure
for Oil and Gas Activities (NI 51-101) and the Canadian Oil and Gas
Evaluation Handbook (the COGE Handbook), and using McDaniel's January 1,
2019 price forecasts.
Reserves estimates, contingent resource estimates and estimates of
future net revenue in respect of IPC's oil and gas assets in the Onion
Lake, Blackrod and Mooney areas of Canada are effective as of December
31, 2018, and are included in the report prepared by Sproule Associates
Limited (Sproule), an independent qualified reserves evaluator, in
accordance with NI 51-101 and the COGE Handbook, and using McDaniel's
January 1, 2019 price forecasts.
The contingent resource estimates in respect of the oil and gas assets
acquired in May 2019 in the Blackrod area of Canada are effective as of
December 31, 2018, and have been evaluated by Sproule, in accordance
with NI 51-101 and the COGE Handbook. The lands acquired will be part of
the planned SAGD development at Blackrod and have the same
classification (Development on Hold) as the other Blackrod lands. The
same chance of development risk (77%) has been applied to the acquired
lands as was used for Phase 2 and Phase 3 of the Blackrod project. These
lands will be incorporated into the Phase 2 and Phase 3 development plan
going forward. Additional details regarding the planned development at
Blackrod, including an assessment of the contingencies, timing and
economics for the proposed development, are available in the AIF.
Reserve estimates, contingent resource estimates, prospective resource
estimates and estimates of future net revenue in respect of IPC's oil
and gas assets in France and Malaysia are effective as of December 31,
2018, and are included in the report prepared by ERC Equipoise Ltd.
(ERCE), an independent qualified reserves auditor, in accordance with NI
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