InPlay Oil Corp. Announces 2022 Capital Budget Highlighting Record Financial and Operational Guidance
January 12, 2022 - Calgary Alberta – InPlay Oil Corp. (TSX: IPO) (OTCQX: IPOOF) (“InPlay” or the “Company”) is pleased to announce that its Board of Directors has approved a $58 million capital program for 2022 which is forecasted to deliver 2022 average production of 8,900 – 9,400 boe/d(1) (62% - 63% light oil and liquids).
InPlay enters 2022 in the strongest position in the Company’s history following a highly successful 2021, which saw the Company achieve record levels of annual production, adjusted funds flow (“AFF”) and free adjusted funds flow (“FAFF”)(2) while also exiting the year at its lowest ever net debt to earnings before interest, taxes and depletion (“EBITDA”)(2) level. On November 30, 2021 InPlay completed the highly accretive acquisition of Prairie Storm Resources Corp., further expanding our position in the Cardium. Based on continued strong drilling results and the positive outlook for commodity prices, InPlay is well positioned to deliver continued strong operational and financial results in the upcoming year.
2022 Capital Program Overview
The Company’s Board of Directors has approved a capital program for 2022 of $58 million. Given InPlay owns significant infrastructure, over 93% of the capital program is dedicated to growing production through drilling, completion, equipping and optimization expenditures. The 2022 capital program will see InPlay drill the most Cardium Extended Reach Horizontal (“ERH”) wells in our history. The 2022 capital program consists of drilling approximately 17.0 net Cardium wells, with a roughly even allocation of capital between our core Pembina and Willesden Green areas, focused predominantly on ERH wells. The first quarter of 2022 is expected to be our most active quarter to date with plans to drill six gross (4.9 net) ERH wells with three (3.0 net) in Pembina, two (1.7 net) on our recently acquired Prairie Storm lands in Willesden Green and one (0.2 net) ERH non-operated well. The Company also plans to complete, equip, and tie-in the two (1.6 net) ERH wells that were drilled in December 2021 on the Prairie Storm lands. The capital program incorporates approximately 8% cost inflation associated with higher services and tangibles costs anticipated due to an increase in industry activity relative to 2021. InPlay would have experienced even greater cost pressure, however we proactively mitigated the price increase in steel casing by acquiring the majority of our H1 2022 requirements in the third quarter of 2021 when prices were 30% - 35% below current levels.
InPlay’s 2022 capital program is forecasted to deliver(3):
Annual average production of 8,900 to 9,400 boe/d (62% - 63% light oil & liquids), delivering annual production growth of approximately 55% to 63% over 2021. On a debt adjusted basis, production growth per weighted average basic share(2) is forecast to be approximately 76% to 86% over 2021 which is expected to be top-tier per share growth amongst InPlay’s light oil weighted peers;
AFF of $111.0 to $117.0 million, approximately 118% to 129% higher on an absolute basis and 76% to 86% higher per weighted average basic share compared to previous 2021 AFF guidance;
FAFF of $53.5 to $59.5 million, initially used for debt reduction which will significantly improve InPlay’s leverage metrics and long term sustainability;
Net debt to EBITDA of 0.2x to 0.3x with forecasted year end net debt between $22.0 to $28.0 million which represents a 68% decrease from previous 2021 year end net debt guidance. At a stress test pricing level averaging $50 USD WTI over the entire year in 2022, the Company estimates 2022 net debt to EBITDA would remain below 1.0x; and
Record operating income profit margin(2) of approximately 68%.
The Company’s 2022 guidance is based on a current future commodity price curve with an annual average WTI price of US $72.50/bbl, $3.30/GJ AECO and estimated foreign exchange of $0.78 CDN/USD. As demonstrated in the past, the Company will continue to remain flexible, adaptable and react promptly to changing commodity prices throughout the year and will adjust its capital program if deemed appropriate.
InPlay is proud of the actions taken in 2020 to survive the price collapse caused by the pandemic. The strong operational results and acquisitions we made in 2021 have put us in the best financial, operational and sustainable position we have ever been as a company. We are very excited about the upcoming year which will reflect the first year of operations including the Prairie Storm assets. Record financial and operational results are anticipated again in 2022 and we look forward to continuing to maintain sustainability, deliver disciplined growth and strong returns to our shareholders. We would like to thank all of our employees, service providers, and shareholders for their continued efforts and support as well as our directors for their ongoing commitment and dedication. Please view our January 2022 corporate presentation which will be uploaded at www.inplayoil.com.
Notes:
See “Reader Advisories - Production Breakdown by Product Type”
“Free adjusted funds flow”, “Net debt to EBITDA”, “Operating income”, “Operating income profit margin” and “Production per debt adjusted share” do not have a standardized meaning under International Financial Reporting Standards (IFRS) and GAAP and therefore may not be comparable with the calculations of similar measures for other companies. Please refer to “Non-GAAP Financial Measures and Ratios” at the end of this news release and to the section entitled “Non-GAAP Measures and Ratios” in our MD&A for details of calculations, rationale for use and applicable reconciliation to the nearest IFRS measure.
See “Reader Advisories – Forward Looking Information and Statements” for key budget and underlying assumptions related to our 2022 capital program and associated guidance.
Hedging Update
In adherence to our recently increased and amended first lien credit facility, the Company has entered into additional near-term crude oil and natural gas derivative contracts. These contracts are structured such that they still provide InPlay with exposure to significantly higher commodity prices including $USD WTI prices up to $93/bbl in the second quarter of 2022 and $100/bbl in the third and fourth quarter of 2022 while also providing protection to extreme reductions in commodity prices. The following is a summary of all commodity contracts currently in place:
Fixed price swaps provide InPlay with a guaranteed price in lieu of realization of floating index prices.
Costless collars indicate InPlay concurrently bought put and sold call options at strike prices such that the costs and premiums received offset each other, thereby completing the derivative contracts on a costless basis.
Puts provide InPlay with a minimum floor price and full exposure to floating index prices realized above the minimum floor price for a premium payment.
The WTI three-way collars are a combination high priced sold call, low priced sold put and a mid-priced bought put. The high sold call price is the maximum price the Company will receive for the contract volumes. The mid bought put price is the minimum price InPlay will receive, unless the market price falls below the low sold put strike price, in which case InPlay receives market price plus the difference between the mid bought put price minus the low sold put price.
About InPlay Oil Corp.
InPlay, based in Calgary, Alberta, has been engaged in the business of exploring for, developing and producing oil and natural gas, and acquiring oil and natural gas properties in western Canada since it commenced operations as a private company in June 2013. InPlay has concentrated on exploration and development drilling of light oil prospects in the Province of Alberta in a focused area of Central and West Central Alberta.
The InPlay management team has worked closely together for many years in both private and public company environments and has an established track record of delivering cost-effective per share growth in reserves, production, AFF and funds flow. InPlay will continue to implement its proven strategy of exploring, acquiring, and exploiting assets with a long-term focus on large, light oil resources. The InPlay management team brings a full spectrum of geotechnical, engineering, negotiating and financial experience to its investment decisions. An updated corporate presentation will be posted to InPlay’s website in due course. Additional information about the Company can be found on SEDAR and on InPlay’s website at: www.inplayoil.com.
Doug Bartole
President and Chief Executive Officer
InPlay Oil Corp.
Telephone: (587) 955-0632
Darren Dittmer
Chief Financial Officer
InPlay Oil Corp.
Telephone: (587) 955-0634
