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 for the three
months ended March 31, 2020.
Corporate Update
-- In the April 2, 2020 press release, IPC revised its forecast 2020 net
average production to be in the range of 30,000 to 45,000 barrels of oil
equivalent (boe) per day (boepd), estimated operating costs for 2020 to
be in the range of USD 12 to 13 per boe, and reductions in total forecast
2020 expenditure of between USD 125 and 190 million as compared to
estimates announced at IPC's Capital Markets Day (CMD) in February 2020.
-- Operational decisions that IPC has subsequently made allow it to revise
the forecast 2020 expenditure reductions to between USD 175 and 190
million as compared to CMD estimates. This comprises USD 85 million in
reduced capital and decommissioning expenditures and USD 90 to 105
million in reduced operating costs. As a result, IPC's forecast 2020 net
average production guidance range is 30,000 to 37,000 boepd. IPC's
estimated 2020 capital and decommissioning expenditures are USD 77
million and IPC's forecast 2020 operating costs are in the range of USD
140 to 155 million, resulting in estimated 2020 unit operating costs in
the range of USD 12 to 13 per boe.
-- Financial headroom under the current terms of IPC's existing and new
credit facilities has increased to in excess of USD 100 million.
-- Assuming average 2020 Brent oil prices of USD 25 per barrel and assuming
Western Canadian Select (WCS) oil prices are at zero for the remainder of
the year, IPC expects to utilize less than 40% of its existing financial
headroom.
-- In March 2020, IPC announced the completion of the acquisition of Granite
Oil Corp. (the Granite Acquisition), comprising light oil proved plus
probable reserves of 14.0 million barrels of oil equivalent (MMboe) and
6.2 MMboe of contingent resources (best estimate, unrisked) as at
December 31, 2019.
Q1 2020 Financial and Operational Highlights
-- Average net production of approximately 46,000 boepd for Q1 2020 (43%
heavy crude oil, 20% light and medium crude oil and 37% natural gas).
-- First quarter 2020 operating costs per boe of USD 12.5, slightly ahead of
Q1 2020 guidance.
-- In connection with IPC's revised 2020 business plan, operational
activities and capital expenditures have been reduced, deferred or
cancelled in each region in response to the low oil price environment.
Three months ended
March 31
--------------------
USD Thousands 2020 2019
---------------------- ---------- --------
Revenue 80,536 147,420
Gross profit (12,436) 46,885
Net result (40,069) 33,142
Operating cash flow 21,481 83,056
Free cash flow (42,712) 52,064
EBITDA 19,009 81,675
Net Debt 302,473 256,962
---------------------- ---------- --------
-- Net debt increased from USD 291 million as at December 31, 2019
(including the cost of the Granite Acquisition) to USD 302.5 million as
at March 31, 2020.
-- Operating cash flow generation for Q1 2020 amounted to USD 21.5 million,
below the original CMD guidance as a result of the weakness in commodity
prices towards the end of Q1 2020. This coincided with two cargo liftings
in Malaysia in March 2020 when Brent prices averaged USD 32 per bbl and
the falling commodity prices also impacted the revenues in France where
pricing is based on one month forward Brent prices.
-- Under the previously announced share repurchase program, IPC repurchased
for USD 17.6 million and cancelled approximately 4.4 million IPC shares
during Q1 2020, in addition to the 3.9 million IPC shares cancelled in
2019. In order to conserve liquidity, IPC has suspended further share
repurchases under the program.
Mike Nicholson, IPC's Chief Executive Officer, commented,
"Given the extraordinary market situation that the oil and gas business
is facing in response to the global Covid-19 outbreak, the resulting
collapse in world oil demand, and the initial breakdown in co-operation
among the OPEC+ group in dealing with the supply challenge, we have
witnessed an unprecedented level of volatility and commodity price
weakness during 2020. As a result of this, IPC announced on April 2,
2020 that we are taking decisive action to reset our 2020 expenditure
plans in order to maximize the financial flexibility of the Corporation.
Since that announcement, we have seen encouraging steps taken by OPEC+,
G20 nations and oil producers that we are confident should remove
significant supply, helping to deal with the massive demand destruction
that we have witnessed as well as the inevitable inventory build. We
expect that these actions should flatten the curve of inventory builds
and set a course to rebalance markets in the second half of 2020 and
into 2021. Clearly though, the magnitude and pace of the recovery in oil
demand will be critical in reducing the uncertainty around when oil
prices will recover.
Reset of 2020 CMD Business Plan
Given that IPC operates the majority of our assets, IPC has the
financial and operational flexibility to react swiftly to recent events
and to positively prepare the Corporation to navigate through this
period of extremely low commodity prices. All remaining discretionary
2020 expenditures have been deferred or cancelled and we have built into
our forecast production range the temporary curtailment of production
from those fields that are not expected to generate positive cash flows
at these low pricing levels. These production curtailments relate to a
portion of our oil production. Our Canadian gas production is not
curtailed as we currently forecast positive cash flows.
In our April 2, 2020 announcement, we revised our forecast 2020 net
average production to be in the range of 30,000 to 45,000 boepd,
estimated operating costs for 2020 to be in the range of USD 12 to 13
per boe, and reductions in total forecast 2020 expenditure of between
USD 125 and 190 million as compared to 2020 CMD estimates.
Operational decisions that we have subsequently made allow us to revise
our forecast 2020 expenditure reductions to between USD 175 and 190
million as compared to CMD estimates. This comprises USD 85 million in
reduced capital and decommissioning expenditures and USD 90 to 105
million in reduced operating costs. As a result, our forecast 2020 net
average production guidance range is 30,000 to 37,000 boepd. IPC's
estimated 2020 capital and decommissioning expenditures are USD 77
million and IPC's forecast 2020 operating costs are in the range of USD
140 to 155 million, resulting in estimated 2020 unit operating costs in
the range of USD 12 to 13 per boe. The upper end of our revised
production guidance assumes that the curtailments in Canada to the end
of June 2020 continue through to the end of the year, with the lower end
of the range assuming full curtailment of our Canadian oil production in
the second half of 2020. We retain the flexibility to ramp production
back up during the second half of 2020 should market conditions improve.
Maximizing Financial Flexibility
Having reset our 2020 business plan, we have also been very active in
engaging with our banks to ensure that we can maximize our financial
flexibility. As at the end of the first quarter 2020, we had available
liquidity headroom of around USD 90 million under our existing
international and Canadian credit facilities. We commenced discussions
with our international banking partners to potentially extend the
maturity of and increase our existing reserves-based lending (RBL)
credit facility as we do not believe that this was fully maximized under
previous conditions. In parallel, we have been exploring IPC's ability
to access some of the special financial assistance packages being
offered by the government authorities in France.
I am very pleased to report a positive outcome on the latter. We have
been able to secure a EUR 13 million credit facility from a French
financial institution under this program. The credit facility has an
initial term of 12 months and is extendable by IPC for up to a further
five years. The credit facility is unsecured and is on less expensive
terms than IPC's existing credit facilities.
In Canada, we have also commenced discussions with our banking partners.
Our primary Canadian RBL facility is currently sized at CAD 375 million
and we have drawn CAD 297 million at the end of the first quarter.
Whilst our RBL redetermination discussions are not expected to be
completed until later in Q2 2020, we have been encouraged by the
financial support package that has been announced by the Canadian
Federal Government, through Export Development Canada (EDC). This
program aims to support the oil and gas sector by maintaining liquidity
during the crisis, through the form of guarantees provided by EDC in
respect of RBL facilities. Our CAD 42.5 million facility assumed as part
of the Granite Acquisition is not up for review until the year end. This
is currently drawn at CAD 40 million.
In addition, IPC has the benefit of a hedging program in Canada in place
through to the end of June 2020, that is expected to provide a minimum
average realized WCS price of approximately USD 16 per bbl on our
curtailed oil production levels in Canada during Q2 2020.
We retain access to financial headroom under the current terms of our
existing and new credit facilities available to us in excess of USD 100
million. Taken together with our operational choices and updated hedging
program, we expect to be able to fully fund our revised 2020 expenditure
program from cash flows and current borrowing capacity. Assuming average
2020 Brent oil prices of USD 25 per barrel and assuming WCS oil prices
are at zero for the remainder of the year, we expect to utilize less
than 40% of our existing liquidity headroom. This demonstrates the
financial resilience of IPC to respond to sustained low oil prices.
Q1 2020 Performance
During Q1 2020, our assets delivered average daily net production of
46,000 boepd, in line with our original CMD Q1 2020 guidance. Our
operating costs per boe for Q1 2020 was USD 12.5, slightly below our
original CMD Q1 2020 guidance.
Operating cash flow generation for the first quarter amounted to USD
21.5 million, below our original CMD guidance as a result of the
weakness in commodity prices towards the end of Q1 2020. This coincided
with two cargo liftings in Malaysia in March 2020 when Brent prices
averaged USD 32 per bbl and the falling commodity prices also impacted
the revenues in France where pricing is based on one month forward Brent
prices.
Capital expenditure during Q1 2020 of USD 56 million was around USD 6
million below forecast as we began implementation of our expenditure
reduction program.
Net debt increased from the 2019 year end level of USD 291 million
(including the cost of the Granite Acquisition) to USD 302.5 million as
at March 31, 2020 which also includes the funding of USD 17 million of
share repurchases under the share repurchase program in Q1 2020."
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 6, 2020. The Corporation's unaudited interim condensed consolidated
financial statements (Financial Statements) and management's discussion
and analysis (MD&A) for the three months ended March 31, 2020 have been
filed on SEDAR (www.sedar.com) and are also available on the
Corporation's website (www.international-petroleum.com).
May 06, 2020 01:30 ET (05:30 GMT)
© 2020 Dow Jones News
