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
year ended December 31, 2019.(1) IPC is also pleased to announce its
2020 capital expenditure budget of USD 149 million and its 2020
production guidance of between 46,000 and 50,000 barrels of oil
equivalent (boe) per day (boepd).(2) 2019 year-end proved plus probable
(2P) reserves and best estimate contingent resources (unrisked) are
respectively 300 million boe (MMboe) and 1,089 MMboe.(2)(3)
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 at December 31, 2019(2)(3), for total equity and
debt consideration of USD 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 early March 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 with USD 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 in Canada,
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 at December 31, 2019.(2)(3)
Three months ended December 31 Year ended December 31
-------------------------------- ------------------------
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 at December 31, 2018 to USD
231.5 million as at December 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 for USD 16.9 million and cancelled
approximately 3.9 million IPC shares as at end December 2019 and a
further approximately 2.9 million IPC shares were repurchased for USD
11.8 million, of which approximately 2.5 million shares were cancelled,
as at end January 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, including
USD 3 million of carry-over costs from 2019 and USD 10 million relating
to the assets to be acquired in the Granite transaction.(2)
Mike Nicholson, IPC's Chief Executive Officer, commented,
"Our focus since launching IPC in April 2017 remains unchanged: seeking
to deliver operational excellence, demonstrating financial resilience,
maximizing the value of our resource base and targeting growth through
acquisition. With financial results delivered at the high end of
guidance and the most active quarter of investment across all areas of
operations, as well as the announcement of another corporate acquisition
and the ongoing execution of IPC's second share repurchase program, we
continue to make excellent progress on all fronts in delivering on that
strategy.
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 December 2019, marginally below the previously guided
50,000 boepd exit rate as the start-up of our A-20 well in Malaysia was
moved into mid-January 2020. Our operating costs per boe for the fourth
quarter was USD 12.4, resulting in a full year 2019 average operating
costs per boe of USD 12.8, marginally below our Q3 2019 guidance.(4)
IPC delivered a very strong full year 2019 financial performance
generating an operating cash flow of USD 308 million, at the upper end
of Q3 2019 guidance and a full year net result of USD 104 million.(4)
The Q4 2019 operating cash flow amounted to USD 79 million.(4) Free
cash flow generation for the full year 2019 was USD 89 million
(excluding the share repurchase program and before payment of the
spin-off residual working capital liability to Lundin Petroleum).(4)
This robust financial performance allowed IPC to fund its expenditure
and share repurchase programs, whilst reducing net debt levels from USD
277 million at the end of 2018 to USD 231.5 million by the end of
2019.(4)
In Canada, during Q4 2019, the full year 2019 average net production
levels at the Suffield area were two percent higher than 2018 levels
demonstrating the positive impact of our ongoing oil drilling and gas
optimization programs more than offsetting natural declines. Our N2N
enhanced oil recovery (EOR) project and drilling program was completed
as scheduled in 2019. In addition, preparatory work continued during Q4
2019 which is expected to allow our single rig drilling program to
continue through 2020. At Onion Lake Thermal in Canada, facility
optimization work completed earlier in 2019 that allowed for steam
injection to commence at F-Pad during Q3 2019 and production ramp up
through Q4 2019. Following completion of the ramp up of production,
average production rates during December 2019 were just below 12,000
boepd in line with expectation. As we look forward, we plan to add
another drilling pad during 2020 to increase production toward facility
capacity levels of 14,000 boepd by year-end 2020.
In Malaysia, a world class uptime performance on the Bertam FPSO in
excess of 99 percent continued during Q4 2019. Fourth quarter 2019
production on the Bertam field was 5,400 bopd, in line with our Q3 2019
guidance and five per cent higher than Q3 2019 production as we started
to benefit from production from the three well infill drilling program.
Following encouraging results from the 2019 infill drilling program, two
additional infill drilling locations have been identified and booked as
contingent resources in the A-15/A-20 Bertam field area. Further
technical work is planned on these locations during 2020, for potential
drilling in 2021.
In France, average daily production in Q4 2019 was 28 percent higher
than Q3 2019 production, averaging 3,200 boepd. The drilling in Q3 2019
of our first horizontal development well at the Vert La Gravelle field
was a major milestone for IPC. Production from the well continues to
exceed expectation. With Phase I of the Vert La Gravelle redevelopment
now being completed, our focus and attention now turns to the Phase I
development of the Villeperdue West field in 2020 with three horizontal
production wells planned, as well as assessing the potential for a Phase
II development of Vert La Gravelle.
As at end December 2019, IPC's 2P reserves are 300 MMboe compared to 288
MMboe as at December 31, 2018.(2)(3) This includes a reserves
replacement ratio in 2019 of 89 percent, excluding the assets to be
acquired in the Granite transaction, and 173 percent including the
Granite assets.(2)(5)
In addition, IPC has increased its best estimate contingent resources
(unrisked) as at end December 2019 to 1,089 MMboe, compared to 849 MMboe
as at end December 2018.(2)(3) We are confident that we have a solid
resource base in place to provide the feedstock to add to reserves in
the future.
Based on third party reserves reports, the net present value
(NPV)(2)(3)(6) of IPC's 2P reserves as at December 31, 2019 was USD
2,410 million. IPC's net asset value (NAV)(2)(3)(7) as at December 31,
2019 was USD 2,120 million. IPC's NAV per share(2)(3)(8) was USD 13.3 as
at December 31, 2019, representing an increase of over 7 percent from
December 31, 2018.
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 USD 13.7 per
boe.(2)(4) We also forecast significant free cash flow generation based
on our 2P reserves base of an aggregate of more than USD 500 million to
USD 1.3 billion over the coming five years, without taking into account
development of our contingent resources or any further potential
acquisitions.(2)(3)(4)(9)
Our 2020 capital expenditure budget is USD 149 million(2) , targeting
production growth in all of our countries of operations. The budget
includes continued oil drilling and gas optimization activities in the
Suffield area, Onion Lake Thermal facilities work and Blackrod project
activities in Canada, as well as carry-over drilling expenditures on the
Bertam field in Malaysia. In France, we continue with finalising Phase I
of the Vert La Gravelle redevelopment project and we plan to commence
the Villeperdue West development project. In addition, the budget
includes approximately USD 10 million to invest in growing the assets to
be acquired in the Granite transaction in Canada.(2)
Further details regarding IPC's 2020 budget and production guidance will
be provided at IPC's Capital Markets Day presentation to be held on
February 11, 2020 at 14:00 CET. A copy of the Capital Markets Day
presentation will be available on IPC's website at
https://www.globenewswire.com/Tracker?data=2OfOmXA2PPjByX-NMcrrtrIpcLPx3pTe2WimyPnfCEC-wOAWbBo3fwA1t5QzkV8Vmrcp9hI3MPAA2Qge-xmv__g71K1qSyTJn9Qgp1EzDzvS3uBkuxd2_LijLY6ZeRYM
www.international-petroleum.com."
Notes:
(1) 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.
(2) 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 of January 1, 2020. Completion of the Granite transaction
remains subject to satisfaction of certain conditions and is expected to
occur in early March 2020. The acquisition cost of USD 59 million
includes USD 29 million in cash and USD 30 million in net debt
assumption. See "Forward-Looking Statements" below.
(3) 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
https://www.globenewswire.com/Tracker?data=2OfOmXA2PPjByX-NMcrrtrIpcLPx3pTe2WimyPnfCEA6CI0jYFwuuCdc8KaY2r-x_2aYOMW40ZWVA8zdbfkhQI8Gv2gf7v9lKvqoAZd0Cit30FIhll9jtlvFp6skJ-Gw
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 at December 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.
(4) Non-IFRS measure, see "Non-IFRS Measures" below and in the MD&A.
(5) 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 early March 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
early March 2020) as at December 31, 2019.
(6) 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 of USD 2,410 million includes USD
2,202.5 million attributable to IPC's oil and gas assets and USD 207.6
million attributable to Granite's oil and gas assets. See "Disclosure of
Oil and Gas Information" below.
(7) NAV is calculated as NPV less net debt as at December 31, 2019. Net
debt as at December 31, 2019 includes USD 231.5 million as described
above and an additional USD 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 early March 2020.
(8) NAV per share is based on the number of IPC common shares
outstanding as at December 31, 2019 being 159,790,869.
(9) 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 of
CAD 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.
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
February 11, 2020. The Corporation's audited 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 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 France; future development potential of Triassic
reservoirs in France and the ability to maintain current and forecast
production in France; the ability of IPC to achieve and maintain current
and forecast production from the third phase of infill drilling in
Malaysia and the ability to identify, mature and drill additional infill
drilling locations; the success and timing of remedial works in respect
of the A-15 well in Malaysia; future development potential of the
Suffield operations, including continued and future oil drilling and gas
optimization programs, the ability to offset natural declines 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; development of the
Blackrod project in Canada, including continued current operations at
the project and steam injection in the third well pair; the results of
the facility optimization program, the work to debottleneck the
facilities and injection capability and the F-Pad production, as well as
water intake and steam generation issues, at Onion Lake Thermal; the
plan to add another drilling pad in 2020 at Onion Lake Thermal and the
production resulting from such pad; the timing and certainty regarding
completion of the proposed acquisition of Granite (the Granite
Acquisition), including the ability of the IPC and Granite to obtain
necessary approvals and otherwise satisfy the conditions to such
completion and the absence of material events which may interfere with
such completion; the ability of IPC to achieve and maintain current and
forecast production and take advantage of production growth and
development upside opportunities related to Granite's assets
post-completion of the Granite Acquisition; the ability of IPC to
integrate Granite's assets into its current operations; the ability of
Granite's existing infrastructure to enable EOR projects, as well as
capacity to allow for potential further field development opportunities
in respect of Granite's assets; the existence of drill-ready
opportunities in respect of Granite's assets and their ability to add
further near-term production of high netback, light oil barrels; the
ability to IPC to acquire further common shares under the share
repurchase program, including the timing of any such purchases; the
return of value to IPC's shareholders as a result of the share
repurchase program; 2020 production range, operating costs and capital
expenditure estimates; estimates of future production, cash flows,
operating costs and capital expenditures that are based on IPC's current
business plans and assumptions regarding the business environment, which
are subject to change; potential further acquisition opportunities;
estimates of reserves; estimates of contingent 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,
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 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, including previous financial reports,
management's discussion and analysis and material change reports, 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),
"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 Malaysia, adjusted for cost and profit oil.
Unless otherwise indicated, reserves / resource volumes are presented on
a gross basis.
Reserve estimates, contingent resource estimates and estimates of future
net revenue in respect of IPC's oil and gas assets in Canada are
effective as of December 31, 2019, and are included in reports prepared
by Sproule Associates Limited (Sproule), 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
Sproule's December 31, 2019, price forecasts.
Reserve estimates, contingent 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, 2019, and are included in the
report prepared by ERC Equipoise Ltd. (ERCE), an independent qualified
reserves auditor, in accordance with NI 51-101 and the COGE Handbook,
and using Sproule's December 31, 2019, price forecasts.
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 December 31, 2019, and are included in
reports prepared by Sproule on behalf of IPC, in accordance with NI
51-101 and the COGE Handbook, and using Sproule's December 31, 2019,
price forecasts.
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 December 31, 2019 (including the 2P reserves
attributable to the proposed acquisition of Granite which is expected to
be completed in March 2020), by the mid-point of the 2020 production
guidance of 46,000 to 50,000 boepd.
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 December 31, 2019 is 4.3
MMboe. The contingency for all of the unrisked best estimate contingent
resources is IPC's corporate commitment whether to proceed with the
specific opportunities, following completion of the Granite Acquisition.
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 Canada,
France and Malaysia have been aggregated by IPC and may also be
aggregated by IPC with the 2P reserves and contingent resources of
Granite included in the reports prepared by Sproule on behalf of IPC.
Estimates of reserves, resources and future net revenue for individual
properties may not reflect the same level of confidence as estimates of
reserves, resources and future net revenue for all properties, due to
aggregation. This press release contains estimates of the net present
value of the future net revenue from IPC's reserves, as well as
estimates of the net present value of the future net revenue from
Granite's reserves prepared on behalf of IPC. The estimated values of
future net revenue disclosed in this press release do not represent fair
market value. There is no assurance that the forecast prices and cost
assumptions used in the reserve evaluations will be attained and
variances could be material.
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 December 31,
2019, which will be filed on SEDAR (accessible at www.sedar.com) on or
before April 1, 2020. Further information with respect to IPC's and
Granite's 2P reserves, contingent resources and estimates of future net
revenue, including assumptions relating to the calculation of net
present value and other relevant information related to the contingent
resources disclosed, is disclosed in the MCR available under IPC's
profile on www.sedar.com and on IPC's website at
www.international-petroleum.com.
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 United States
dollars, except where otherwise noted. References herein to USD mean
United States dollars. References herein to CAD mean Canadian dollars.
Attachment
-- IPC PR Q4 2019 FS-MDA reports
https://ml-eu.globenewswire.com/Resource/Download/aa0c65f1-7051-4da6-a6bb-fb0ca9987b97
(END) Dow Jones Newswires
February 11, 2020 01:30 ET (06:30 GMT)
© 2020 Dow Jones News
