International Petroleum Corporation 2018 Year-End Financial Results
and 2019 Budget, Production and Resource Guidance
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, 2018.(1) IPC is also
pleased to announce its 2019 capital expenditure budget range of
between USD 146 and 166 million and its 2019 production guidance of
between 46,000 and 50,000 barrels of oil equivalent (boe) per day
(boepd). 2018 year-end 2P reserves and best estimate contingent
resources (unrisked) are respectively 288 million boe (MMboe) and
849 MMboe.(2)
2018 Business Development Highlights
· Completion of the
acquisition of conventional oil and gas assets in the Suffield area
of southern Alberta, Canada in January 2018.
· Completion of the
acquisition of BlackPearl Resources Inc. (BlackPearl) in December
2018.
· Completion of the disposal
of IPC’s non-core, non-operated gas assets in the Netherlands in
December 2018.
2018 Financial and Operational
Highlights(3)
· Average net production of
34,600 boepd for the fourth quarter of 2018 and 34,400 boepd for
the full year 2018, above the high end of the 2018 capital markets
day (CMD) guidance range.
· Greater than 100% 2P
reserves replacement ratio in 2018, excluding 2P reserves acquired
in the acquisition of BlackPearl.(4)
· 2P reserves more than
doubled to 288 MMboe as at December 31, 2018, including the 2P
reserves acquired in the acquisition of BlackPearl, compared to
December 31, 2017.(2)
· Thirteen-fold increase in
best estimate contingent resources (unrisked) to 849 MMboe as at
December 31, 2018, including the contingent resources acquired in
the acquisition of BlackPearl, compared to December 31,
2017.(2)
· Operating costs per boe of
USD 12.4 for the full year 2018, lower than the 2018 CMD
guidance.(5)
· Sanctioned third phase of
infill drilling in Malaysia for 2019 execution.
· Sanctioned the Vert La
Gravelle development in France for 2019 execution.
· 2018 operating cash flow
generation of USD 279 million.(5)
· Net debt reduced by USD 190
million to USD 166 million as at December 31, 2018, from USD 355
million at the completion of the acquisition of the Suffield area
assets in January 2018. Including the net debt acquired in the
BlackPearl acquisition, net debt of IPC was USD 277 million as at
December 31, 2018.(5)
|
Three months ended December 31 |
|
Year ended December 31 |
USD
Thousands |
2018 |
2017 |
|
2018 |
2017 |
Revenue |
111,898 |
54,647 |
|
454,443 |
203,001 |
Gross profit |
26,311 |
13,471 |
|
146,864 |
48,758 |
Net result |
29,346 |
8,977 |
|
103,644 |
22,723 |
Operating cash flow (5) |
58,322 |
37,156 |
|
279,018 |
138,368 |
EBITDA (5) |
58,032 |
33,383 |
|
264,041 |
129,259 |
2019 Budget and Production Guidance
· 2019 average net production guidance of
46,000 to 50,000 boepd, with 2019 exit rate estimated to be greater
than 50,000 boepd.
· 2019 operating costs guidance at USD
12.9 per boe.(5)
· Full year 2019 capital expenditure
guidance range of USD 146 to 166 million.
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 our
fourth quarter of 2018 performance delivered ahead of guidance and
another transformational acquisition completed in December 2018, we
continue to make excellent progress on all fronts in delivering on
that strategy.
2018 Year-End Results(3)During
the fourth quarter of 2018, our assets delivered average daily net
production of 34,600 boepd, above the high end of our revised
guidance for the quarter. The fourth quarter performance concludes
an excellent year of delivery from all assets with full year 2018
average daily net production of 34,400 boepd, coming in above the
high end of our full year guidance. Our operating costs per boe for
the fourth quarter was USD 13.1, resulting in a full year 2018
average operating costs per boe of USD 12.4, lower than our 2018
CMD guidance of USD 12.6.(5)
IPC has continued to deliver a robust financial
performance during the fourth quarter of 2018 generating operating
cash flow of USD 58 million.(5) This allowed IPC to fund our
expenditure program and reduce net debt from USD 213 million at the
end of the third quarter to USD 166 million by the end of the
fourth quarter.(5) Full year operating cash flow was in excess of
USD 279 million and net debt reduction was close to USD 190 million
since completion of the Suffield acquisition in early January
2018.(5) Including the additional USD 111 million of net debt
acquired as part of the acquisition of BlackPearl, IPC’s total year
end net debt was USD 277 million.(5)In Malaysia, following positive
results from the 2016 and 2018 infill drilling programs and
continued good reservoir performance, we were encouraged to mature
a third phase of infill drilling on the Bertam field for execution
in 2019. Up to three drilling locations have been identified and
work continues to mature additional locations. In addition, we plan
to drill the Keruing prospect during the first half of 2019.
In Canada, during the fourth quarter of 2018,
oil drilling commenced for the first time since 2014 in the
Suffield area. Five horizontal wells had been drilled by the end of
2018, with production commencing in January 2019 at initial rates
in line with expectations. On the gas side, given the exceptional
results from the 2018 gas optimization program, further work is
expected to continue through 2019.
In December 2018, IPC completed the
transformational acquisition of BlackPearl in an all-share
transaction. The transaction combines the highly free cash flow
generative short cycle reserve base of IPC with the strategic long
life reserve and contingent resource base of BlackPearl, creating a
company with the combined financial strength to accelerate value
creation from the enlarged portfolio. IPC’s reserves life index is
more than 16 years following the acquisition. In addition, a high
calibre team of industry professionals with a long track record of
value creation joined IPC to integrate with our existing team in
Canada.
As at end December 2018, IPC’s 2P reserves more
than doubled to 288 MMboe compared to December 31, 2017.(2) This
includes a reserves replacement ratio in 2018 of 103 percent for
IPC’s assets other than those acquired in the BlackPearl
transaction.(4) This results from the maturation of contingent
resources from the infill drilling program in Malaysia as well as
better reservoir performance and certain upgrades in France and
Canada, particularly on back of the gas optimization program in
Canada.
In addition, IPC has increased its best estimate
contingent resources (unrisked) by over thirteen times as at end
December 2018 to 849 MMboe, compared to end December 2017.(2) 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)(6) of IPC’s 2P reserves as at December 31, 2018
was USD 2,314 million. IPC’s net asset value (NAV)(7) as at
December 31, 2018 was USD 2,037 million, representing an increase
of more than two and a half times from December 31, 2017. IPC’s NAV
per share(8) was USD 12.4 as at December 31, 2018, representing an
increase of over 37 percent from December 31, 2017.
2019 Budget and Production
GuidanceWe are pleased to announce our 2019 production
guidance is 46,000 to 50,000 boepd, with the 2019 exit rate
estimated to be greater than 50,000 boepd. We forecast operating
costs for 2019 to be USD 12.9 per boe.(5)
Our 2019 capital expenditure budget range is
between USD 146 and 166 million, targeting production growth in all
of our countries of operations. The budget includes the proposed
2019 infill drilling campaign, the Keruing exploration well and
other optimization work in Malaysia, and the Vert La Gravelle
development project and other project maturation activities in
France. We also include continued Suffield area oil drilling and
gas optimization, Onion Lake Thermal facilities and well work, and
Blackrod project activities in Canada. Given our high working
interests and operatorship position on our assets, IPC retains a
high degree of discretion on the 2019 activity scope based on
market conditions.
Further details regarding IPC’s 2019 budget and
production guidance will be provided at IPC’s Capital Markets Day
presentation to be held on February 12, 2019 at 14:00 CET. A copy
of the Capital Markets Day presentation will be available on IPC's
website at www.international-petroleum.com.”
Notes:(1) IPC's financial statements and
MD&A for the year ended December 31, 2018 are available on
IPC's website at www.international-petroleum.com and under IPC’s
profile on SEDAR at www.sedar.com.(2) See "Disclosure of Oil and
Gas Information" below. Further information with respect to IPC’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.(3) The acquisition of BlackPearl
was completed on December 14, 2018. For accounting purposes, the
acquisition was reflected on the balance sheet as at December 31,
2018. Given that the financial and operational results from the
acquired assets from the date of acquisition to December 31, 2018
were not material to the Corporation, the contribution of these
assets is not reported in 2018.(4) Reserves replacement ratio is
based on 2P reserves of 129.1 MMboe as at December 31, 2017
(including 2P reserves attributable to the acquisition of the
Suffield area assets which completed on January 5, 2018),
production during 2018 of 12.4 MMboe, additions to 2P reserves
during 2018 of 12.7 MMboe and 2P reserves of 128 MMboe as at
December 31, 2018 (excluding 2P reserves attributable to the
acquisition of BlackPearl). (5) Non-IFRS measure, see “Non-IFRS
Measures” below and in the MD&A.(6) NPV is after tax,
discounted at 8% and based upon the forecast prices and other
assumptions further described in the MCR.(7) NAV is calculated as
NPV less net debt as at December 31, 2018.(8) NAV per share is
based on the number of IPC common shares outstanding as at December
31, 2018 being 163,720,065.
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 GordonVP Corporate
Planning and Investor
Relationsrebecca.gordon@international-petroleum.comTel: +41 22 595
10 50 |
|
Robert ErikssonMedia
Managerreriksson@rive6.chTel: +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 12,
2019. 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 proposed Vert La Gravelle development
project and other organic growth opportunities in France, including
the Villeperdue West project; the proposed third phase of infill
drilling in Malaysia and the ability to mature additional
locations; the drilling of the Keruing prospect in Malaysia and the
development options if drilling is successful; future development
potential of the Suffield area operations, including continued and
future oil drilling and gas optimization programs; the state of the
oil markets, including in Canada following the curtailments
announced by the Alberta government in 2018; future development of
the Blackrod project in Canada; the results of the facility
optimization program and the work to debottleneck the facilities
and injection capability 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; 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 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, 2017 (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 MeasuresReferences 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.
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 51-101 and the
COGE Handbook, and using McDaniel’s January 1, 2019 price
forecasts.
The price forecasts used in the reserve reports
are available on the website of McDaniel (www.mcdan.com), and are
contained in the MCR.
The reserves life index (RLI) is calculated by
dividing the 2P reserves of 288 MMboe as at December 31, 2018, by
the mid-point of the initial 2019 production guidance of 46,000 to
50,000 boepd.
"2P reserves" means IPC’s gross 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.
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.
2P reserves and contingent resources have been
aggregated in this press release by IPC. Estimates of reserves and
future net revenue for individual properties may not reflect the
same level of confidence as estimates of reserves 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. 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, 2018, which will
be filed on SEDAR (accessible at www.sedar.com) on or before April
1, 2019. Further information with respect to IPC’s 2P reserves,
contingent resources, prospective 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.
CurrencyAll 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.
- IPC PR Q4 2018 FS-MDA reports
International Petroleum (TSX:IPCO)
Historical Stock Chart
From Apr 2024 to May 2024
International Petroleum (TSX:IPCO)
Historical Stock Chart
From May 2023 to May 2024