International Petroleum Corporation (IPC
or the Corporation) (TSX, Nasdaq Stockholm: IPCO) today released
its financial and operational results and related management’s
discussion and analysis (MD&A) for the three and six months
ended June 30, 2023. IPC also released its Sustainability Report
2022, which details the Corporation's environmental, social and
governance (ESG) performance.
Mike Nicholson, IPC's Chief Executive Officer, comments: “We are
pleased to announce another quarter of strong financial and
operational results for IPC. For the second quarter of 2023, IPC
produced an average of 51,800 barrels of oil equivalent per day
(boepd). Given the strong average daily production over the first
half of 2023, we expect to exceed the upper end of our 48,000 to
50,000 boepd guidance range for the full year 2023. Our financial
results during the second quarter are in line with our 2023
guidance. We continue to progress the exciting development of Phase
1 of the Blackrod project in Canada, including signing the
engineering, procurement and construction contract for the central
processing facility, with cost levels and schedule in line with
expectation, and a large contingency allowance remaining. In
addition, we release today our fourth annual Sustainability Report,
providing further information on our sustainability strategy and
initiatives.”
Q2 2023 Business Highlights
- Strong quarterly average net production of approximately 51,800
barrels of oil equivalent (boe) per day (boepd) for the second
quarter of 2023 (49% heavy crude oil, 18% light and medium crude
oil and 33% natural gas).(1)
- Blackrod Phase 1 engineering, procurement and construction
(EPC) contract for the Central Processing Facility (CPF) signed in
Canada.
- Successfully integrated the assets acquired in the Cor4
acquisition in Canada.(1)(2)
- 1.57 million common shares purchased and cancelled during Q2
2023 under IPC’s normal course issuer bid (NCIB).
- Published IPC’s fourth annual Sustainability Report (2022) and
first standalone TCFD Report.
Q2 2023 Financial Highlights
- Operating costs per boe of USD 17.0 for Q2 2023.(1)(3)
- Operating cash flow (OCF) generation for Q2 2023 amounted to
MUSD 84.(1)(3)
- Capital and decommissioning expenditures of MUSD 62 for Q2
2023.(1)
- Free cash flow (FCF) generation for Q2 2023 amounted to MUSD 16
(MUSD 65 pre Blackrod funding).(1)(3)
- Net cash of MUSD 64 as at June 30, 2023.(3)
- Net result of MUSD 32 for Q2 2023.
Reserves and Resources
- Total 2P reserves as at December 31, 2022 of 487 million boe
(MMboe), with a reserves life index (RLI) of 27 years.(1)(2)
- Contingent resources (best estimate, unrisked) as at December
31, 2022 of 1,162 MMboe.(1)(2)
2023 Annual Guidance
- Full year 2023 average net production forecast expected to
exceed the upper end of 48,000 to 50,000 boepd guidance
range.(1)
- Full year 2023 operating costs guidance forecast remains
unchanged at USD 17.5 to 18.0 per boe.(1)(3)
- Full year 2023 OCF guidance tightened to between MUSD 320 to
390 (assuming Brent USD 75 to 90 per barrel for the remainder of
2023) from previous guidance of MUSD 250 to 495 (assuming Brent USD
70 to 100 per barrel).(1)(3)
- Full year 2023 capital and decommissioning expenditures
guidance forecast unchanged at MUSD 365, including MUSD 287
relating to Phase 1 of the Blackrod project.(1)
- Full year 2023 FCF forecast range tightened to between MUSD -65
to 5 (assuming Brent USD 75 to 90 per barrel for the remainder of
2023) from previous guidance of MUSD -145 to 105 (assuming Brent
USD 70 to 100 per barrel), after taking into account MUSD 287 of
proposed 2023 Blackrod capital expenditures.(1)(3)(4)
|
Three months ended June 30 |
|
Six months ended June 30 |
USD Thousands |
2023 |
2022 |
|
2023 |
2022 |
Revenue |
205,564 |
315,540 |
|
398,080 |
575,322 |
Gross profit |
52,747 |
161,709 |
|
117,130 |
280,809 |
Net result |
32,025 |
105,217 |
|
71,588 |
186,039 |
Operating cash flow (3) |
84,372 |
192,515 |
|
160,272 |
337,625 |
Free cash flow (3) |
16,415 |
151,792 |
|
32,674 |
248,273 |
EBITDA (3) |
85,201 |
194,038 |
|
161,280 |
339,501 |
Net cash (3) |
63,548 |
14,382 |
|
63,548 |
14,382 |
The pull back that we saw in oil and gas prices
during the first quarter of 2023 stabilised during the second
quarter with Brent prices averaging USD 78 per barrel compared with
just over USD 80 per barrel during the first quarter. Demand
concerns continue to weigh on oil markets, as rising interest rates
aimed at taming high inflation, raise recessionary fears. The
surprise production cuts announced by OPEC+ in early April were
followed up with additional ‘voluntary cuts’ implemented by Saudi
Arabia through July and August, a fourth pre-emptive move by the
group, aimed at ensuring recent oil price weakness is not
sustained. Inventory levels have moved back below the five-year
average levels and market observers expect a deficit in the oil
market for the remainder of 2023. Strategic Petroleum Reserve (SPR)
releases in the US have come to an end and up to 12 million barrels
are expected to be repurchased to begin refilling the SPR by the
end of the year. The physical market certainly seems tighter than
that priced in by the financial markets and many commentators
believe oil prices will increase from the recent market trading
range. We saw Brent prices trade in July occasionally over the USD
80 per barrel mark which had not been the case since April.
The second quarter 2023 West Texas Intermediate
(WTI) to Western Canadian Select (WCS) crude price differentials
averaged around USD 15 per barrel, USD 10 per barrel tighter than
first quarter levels and USD 5 per barrel tighter than our base
case 2023 market guidance. Those market factors that have driven
differentials wider such as the SPR releases, higher natural gas
prices and refinery outages have now turned to provide more
favourable tailwinds to the WTI/WCS differentials going forward. In
addition, the expansion of the Trans Mountain pipeline (590,000
barrels per day of extra capacity linking Edmonton to the port of
Vancouver) due in service in Q1 2024, as well as a reduction in
Mexican heavy oil exports to the US (due to domestic refinery
capacity increases by more than 200,000 barrels per day) is
expected to provide stronger support to WTI/WCS differentials going
forward. Current WTI/ WCS differentials have tightened to less than
USD 15 per barrel for the remainder of 2023 and the whole of 2024
as a result of these favourable market developments. IPC has taken
the opportunity to lock in a WTI/WCS differential of approximately
USD 14 per barrel for close to 50% of our forecast 2024 Canadian
WCS forecast production volumes. Leveraging on the traditional
lower costs for condensate in the summer season, we also locked in
approximately 50%, or 3,000 barrels per day, of our Q3 2023 and Q1
2024 average daily condensate purchase forecast at WTI minus USD
1.60 per barrel.
Gas market prices remained below our 2023 base
case price guidance of CAD 3.50 per Mcf during the second quarter.
IPC’s average realised gas price was CAD 2.44 per Mcf during the
quarter, compared with CAD 3.60 per Mcf during the first quarter of
2023. The recent weakness seen in North American gas prices was to
a large extent driven by a much milder winter in Europe and the
resulting reduced demand for US LNG. IPC was partially protected by
AECO gas price hedges that were put in place when gas prices were
much stronger in late 2022: 33.7 MMcf per day at CAD 4.10 per Mcf
from April to October 2023, which represents approximately 50% of
our net long exposure.
Second Quarter 2023 Highlights and Full Year 2023
Guidance
During the second quarter of 2023, our assets
delivered average net production of 51,800 boepd, above our
high-end guidance for the second quarter in succession. This was
made possible by the very high uptime performance across all our
assets as well as the production contribution from our recent Cor4
acquisition in Canada and our successful four well drilling program
in France. Given the very strong first half performance averaging
around 52,000 boepd, full year 2023 average net production is now
expected to exceed the upper end of the guidance range of 48,000 to
50,000 boepd.(1)
Our operating costs per boe for the second
quarter of 2023 were USD 17.0, in line with our latest guidance.
Full year 2023 operating costs per boe guidance of USD 17.5 to 18.0
per boe remains unchanged.(1)(3)
Operating cash flow (OCF) generation for the
second quarter of 2023 was USD 84 million, ahead of guidance as a
result of the strong production performance and tighter WCS/WTI
differentials. Full year 2023 OCF guidance of USD 250 to 495
million (assuming Brent USD 70 to 100 per barrel) is tightened to
USD 320 to 390 million (assuming Brent USD 75 to 90 per barrel for
the remainder of 2023).(1)(3)
Full year 2023 capital and decommissioning
expenditure forecast of USD 365 million is unchanged.(1)
Free cash flow (FCF) generation was USD 16
million (USD 65 million pre Blackrod funding) during the second
quarter of 2023. Full year 2023 FCF guidance of USD -145 to 105
million (assumed Brent USD 70 to 100 per barrel) is tightened to
USD -65 to 5 million (assuming Brent USD 75 to 90 per barrel for
the remainder of 2023).(1)(3)(4)
IPC’s transformational growth program is
estimated to generate FCF post growth investment of between USD 2.6
and 4.4 billion over the next ten years assuming average Brent oil
prices between USD 75 to 95 per barrel. This represents more than 2
to 3 times IPC’s current market capitalisation.(1)(3)(4)
During the second quarter of 2023, IPC’s net
cash position of USD 67 million was reduced to USD 64 million,
largely driven by the funding of USD 14 million for the continuing
share repurchase program (NCIB) and other working capital
movements. (3) Gross cash on the balance sheet as at June 30, 2023
amounts to USD 374 million providing a significant war chest to
pursue our three strategic pillars of returning value to
stakeholders, pursuing value adding M&A and focusing on organic
growth. Furthermore, IPC’s CAD 150 million Canadian Revolving
Credit Facility (RCF) remains undrawn.
Phase 1 Blackrod Project
Following the successful completion of FEED
studies and the continued strong production performance from well
pair three during 2022, IPC took the decision in Q1 2023 to advance
the development of Phase 1 of the Blackrod project. Development
capital expenditure to first oil is estimated at approximately USD
850 million (including inflation and contingencies). First oil of
the Phase 1 development is estimated to be in late 2026, with
forecast production of 30,000 bopd by 2028. The breakeven oil price
estimated by IPC assuming a 10% discount rate is a WTI price of
approximately USD 59 per barrel. Using the December 31, 2022 price
forecasts of our independent qualified reserves evaluator, Sproule
Associates Limited (Sproule), the net present value as at that
date, at a 10% discount rate (after tax), of Phase 1 of the
Blackrod project is USD 807 million. IPC intends to fund the Phase
1 development with cash on hand and forecast FCF generated by our
operations.(1)(2)
During the second quarter, the Phase 1
development activities have progressed according to plan. The
engineering, procurement and construction (EPC) contract for the
major Phase 1 central processing facility was signed with cost
levels and schedule in line with expectation. This contract
provides a high degree of certainty for the largely fixed price
element of the Phase 1 development capital expenditure which
represents close to 65% of the overall Phase 1 capital expenditure
budget to first oil. In addition, IPC has decided to lock in
approximately 65% of the CAD/USD exposure through a combination of
hedging and contractual arrangements to give greater certainty to
the USD funding requirement for the Phase 1 project costs.
Following these actions, more than 85% of the overall Phase 1
contingency (USD 110 million) remains available, a comfortable
position to be in.
However, we believe it is prudent to retain the
total Phase 1 capital expenditure estimate to first oil of USD 850
million given the early stages in the project’s execution.
M&A
During Q2 2023, IPC successfully integrated the
acquired Cor4 assets into the Group following completion of the
acquisition in March 2023. Four wells were successfully drilled and
brought on production from the Ellerslie fairway since the
beginning of the year and we plan to drill another two wells on
this exciting play in 2023.(1)(2)
2023 Capital Allocation
Framework
Normal Course Issuer Bid
In Q4 2022, IPC announced the renewal of the
NCIB, with the ability to repurchase up to approximately 9.3
million common shares over the twelve-month period to early
December 2023. By the end of June 2023, IPC purchased and cancelled
7.1 million common shares under the NCIB. The average price of
common shares purchased under the renewed NCIB during the period of
December 2022 to June 2023 was SEK 101 / CAD 13.00 per share.
As at June 30, 2023, IPC had a total of
130,497,085 common shares issued and outstanding, with no common
shares held in treasury.
2023 Capital Allocation Plans
IPC’s capital allocation framework consists of
distributing to shareholders a minimum of 40% of the FCF generated
by the business, provided that IPC’s net debt to EBITDA ratio is at
or below 1 time.(3) These shareholder distributions are planned to
be implemented by continued share repurchases under the NCIB as
well as the consideration by IPC of other forms of shareholder
distributions, subject to further applicable regulatory and
corporate approvals.
Despite the higher level of capital investment,
and notwithstanding the capital allocation framework described
above, IPC plans to continue to purchase and cancel common shares
under the NCIB to the remaining limit as at June 30, 2023 of 2.2
million common shares by the end of November 2023, resulting in the
anticipated cancellation of 7% of shares outstanding as of December
2022. We believe a combination of materially growing our 2P
reserves, production and asset value whilst reducing our share
count is a winning combination for shareholders.
Environmental, Social and Governance
(“ESG“) Performance
IPC is committed to the continued advancement of
our ESG practices in our sustainability focus areas. The Group’s
six sustainability priorities are:
- Ethics & Integrity
- Rewarding Workplace
- Health & Safety
- Community Engagement
- Climate Action
- Environmental Stewardship
As part of our commitment to operational
excellence, our objective is to reduce risk and eliminate hazards
to prevent the occurrence of accidents, ill health and
environmental damage, as these are essential to the success of our
operations. During the second quarter of 2023, IPC recorded no
material safety or environmental incidents.
With respect to climate action, IPC has made
notable progress over the past years. Our operational emission
reduction efforts have resulted in a reduction of greater than
125,000 tonnes of CO2e emissions since announcing IPC’s climate
strategy in 2020. IPC also signed its first virtual green power
purchase agreement in 2022, contributing to a greater share of
green energy in the Alberta electricity grid. In addition, IPC
expanded carbon compensation efforts by offsetting a substantial
share of the Group’s 2022 CO2e emissions, offsetting a total of
330,000 tonnes of CO2e for the year 2022. These initiatives put IPC
on track to achieve a 50% reduction in our net emissions intensity
by 2025, and the company announced this year at the 2023 Capital
Markets Day (CMD) a commitment to extend the reduced net emissions
intensity level through 2027.
Sustainability Reporting and Climate
Disclosures
Alongside the publication of this second quarter
2023 financial report, IPC releases its fourth annual
Sustainability Report and its first standalone TCFD Report. The
Sustainability Report provides details on IPC’s approach to
sustainability, highlighting specific initiatives, and measurable
goals and targets related to the key focus areas set by the Group.
The TCFD Report aligns with the recommendations of the Task Force
on Climate-Related Financial Disclosures (TCFD) and demonstrates
our commitment to addressing climate-related risks and
opportunities to our business.
The Sustainability Report and the TCFD Report,
including additional information on IPC’s efforts and performance
across its sustainability priorities, are available on our website
at www.international-petroleum.com.
Notes:
(1) |
See “Supplemental Information regarding Product Types” in “Reserves
and Resources Advisory” below. See also the annual information form
for the year ended December 31, 2022 (AIF) available on IPC’s
website at www.international-petroleum.com and under IPC’s profile
on SEDAR+ at www.sedarplus.ca. IPC completed the acquisition of
Cor4 on March 3, 2023. The Financial Statements have been prepared
on that basis, with revenues and expenses related to the assets
acquired in the Cor4 acquisition included in the Financial
Statements from March 3, 2023. Certain historical and forecast
operational and financial information included in the MD&A,
including production, reserves, operating costs, OCF, FCF and
EBITDA related to the assets acquired in the Cor4 acquisition, are
reported based on the effective date of the Cor4 acquisition of
January 1, 2023. |
(2) |
See “Reserves and Resources Advisory“ 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 described in the AIF. 2P reserves as at
December 31, 2022 of 487 MMboe includes 471 MMboe attributable to
IPC’s oil and gas assets and 15.9 MMboe attributable to the oil and
gas assets acquired in the Cor4 acquisition. |
(3) |
Non-IFRS measure, see “Non-IFRS Measures” below. |
(4) |
Estimated FCF generation is based on IPC’s current business plans
over the periods of 2023 to 2027 and 2028 to 2032, including net
cash of USD 175 million as at December 31, 2022 less the Cor4
acquisition consideration of USD 62 million. Assumptions include
average net production of approximately 50 Mboepd over the period
of 2023 to 2027, average net production of approximately 65 Mboepd
over the period of 2028 to 2032, average Brent oil prices of USD 75
to 95 per boe escalating by 2% per year, and average Brent to
Western Canadian Select differentials and average gas prices as
estimated by IPC’s independent reserves evaluator and as further
described in the AIF. IPC’s market capitalization is at close on
July 28, 2023 (USD 1,190 million based on 95.92 SEK/share, 130.5
million IPC shares outstanding and exchange rate of 10.55 SEK/USD.
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 GordonVP Corporate Planning and Investor
Relationsrebecca.gordon@international-petroleum.comTel: +41 22 595
10 50 |
Or |
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 August 1, 2023.
The Corporation's unaudited interim condensed consolidated
financial statements (Financial Statements) and management's
discussion and analysis (MD&A) for the three and six months
ended June 30, 2023 have been filed on SEDAR+ (www.sedarplus.ca)
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:
- 2023 production range, operating
costs, operating cash flow, free cash flow, and capital and
decommissioning 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;
- IPC’s financial and operational
flexibility to continue to react to recent events and navigate the
Corporation through periods of volatile commodity prices;
- IPC’s continued access to its
existing credit facilities, including current financial headroom,
on terms acceptable to the Corporation;
- The ability to fully fund future
expenditures from cash flows and current borrowing capacity;
- IPC’s ability to maintain
operations, production and business in light of any future
pandemics and the restrictions and disruptions related thereto,
including risks related to production delays and interruptions,
changes in laws and regulations and reliance on third-party
operators and infrastructure;
- IPC’s intention and ability to
continue to implement our strategies to build long-term shareholder
value;
- 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;
- Future development potential of the
Suffield and Ferguson operations in Canada, including the timing
and success of future oil and gas drilling and optimization
programs;
- Development of the Blackrod project
in Canada, including estimates of resource volumes, future
production, timing, regulatory approvals, third party commercial
arrangements, breakeven oil prices and net present values;
- Current and future drilling pad
production and timing and success of facility upgrades, tie-in work
and infill drilling at Onion Lake Thermal;
- The potential improvement in the
Canadian oil egress situation and IPC’s ability to benefit from any
such improvements;
- The timing and success of the
future development projects and other organic growth opportunities
in France;
- The ability to maintain current and
forecast production in France;
- The ability of IPC to achieve and
maintain current and forecast production in Malaysia;
- The ability to IPC to acquire
further common shares under the NCIB, including the timing of any
such purchases;
- The return of value to IPC’s
shareholders as a result of the NCIB;
- The ability of IPC to implement
further shareholder distributions in addition to the NCIB;
- IPC’s ability to implement its GHG
emissions intensity and climate strategies and to achieve its net
GHG emissions intensity reduction targets;
- Estimates of reserves and
contingent resources;
- The ability to generate free cash
flows and use that cash to repay debt;
- IPC’s ability to identify and
complete future acquisitions; 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.
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 general
global economic, market and business conditions, 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 fluctuations; interest rate
and exchange rate fluctuations; marketing and transportation; loss
of markets; environmental and climate-related 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.
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" and “Reserves and Resources
Advisory” therein), the Corporation's Annual Information Form (AIF)
for the year ended December 31, 2022 (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.sedarplus.ca) or IPC's website
(www.international-petroleum.com).
Management of IPC approved the production,
operating costs, operating cash flow, capital and decommissioning
expenditures and free cash flow guidance and estimates contained
herein as of the date of this press release. The purpose of these
guidance and estimates is to assist readers in understanding IPC’s
expected and targeted financial results, and this information may
not be appropriate for other purposes.
Estimated FCF generation is based on IPC’s
current business plans over the periods of 2023 to 2027 and 2028 to
2032. Assumptions include average net production of approximately
50 Mboepd over the period of 2023 to 2027, average net production
of approximately 65 Mboepd over the period of 2028 to 2032, average
Brent oil prices of USD 75 to 95 per boe escalating by 2% per year,
and average Brent to Western Canadian Select differentials and
average gas prices as estimated by IPC’s independent reserves
evaluator and as further described in the AIF. 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.
Non-IFRS MeasuresReferences 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 similar measures presented by other public
companies. Non-IFRS measures should not be considered in isolation
or as a substitute for measures prepared in accordance with
IFRS.
The definition of each non-IFRS measure is
presented in IPC's MD&A (See "Non-IFRS Measures" therein).
Operating cash flowThe following table sets out
how operating cash flow is calculated from figures shown in the
Financial Statements:
|
Three months ended June 30 |
|
Six months ended June 30 |
USD Thousands |
2023 |
|
2022 |
|
|
2023 |
|
2022 |
|
Revenue |
205,564 |
|
315,540 |
|
|
398,080 |
|
575,322 |
|
Production costs |
(116,597 |
) |
(118,151 |
) |
|
(234,124 |
) |
(228,700 |
) |
Current tax |
(4,595 |
) |
(4,874 |
) |
|
(8,586 |
) |
(8,997 |
) |
Operating cash flow |
84,372 |
|
192,515 |
|
|
155,370 |
|
337,625 |
|
The operating cash flow for the first six months
of 2023 including the operating cash flow contribution of the Cor4
acquisition from the effective date of January 1, 2023 to the
completion date of March 3, 2023 amounts to USD 160,272
thousand.
Free cash flowThe following table sets out how
free cash flow is calculated from figures shown in the Financial
Statements:
|
Three months ended June 30 |
|
Six months ended June 30 |
USD Thousands |
2023 |
|
2022 |
|
|
2023 |
|
2022 |
|
Operating cash flow - see above |
84,372 |
|
192,515 |
|
|
155,370 |
|
337,625 |
|
Capital expenditures |
(58,822 |
) |
(29,788 |
) |
|
(107,060 |
) |
(68,141 |
) |
Abandonment and farm-in
expenditures1 |
(3,717 |
) |
(2,435 |
) |
|
(4,928 |
) |
(4,360 |
) |
General, administration and
depreciation expenses before depreciation2 |
(3,766 |
) |
(3,351 |
) |
|
(7,577 |
) |
(7,121 |
) |
Cash financial items3 |
(1,652 |
) |
(5,149 |
) |
|
(2,300 |
) |
(9,730 |
) |
Free cash flow |
16,415 |
|
151,792 |
|
|
33,505 |
|
248,273 |
|
1 See note 17 to the Financial Statements2
Depreciation is not specifically disclosed in the Financial
Statements3 See notes 4 and 5 to the Financial Statements
The free cash flow for the first six months of
2023 including the free cash flow contribution of the Cor4
acquisition from the effective date of January 1, 2023 to the
completion date of March 3, 2023 amounts to USD 32,674
thousand.
EBITDAThe following table sets out the
reconciliation from net result from the consolidated statement of
operations to EBITDA:
|
Three months ended June 30 |
|
Six months ended June 30 |
USD Thousands |
2023 |
2022 |
|
2023 |
2022 |
Net
result |
32,025 |
105,217 |
|
71,588 |
186,039 |
Net financial items |
6,955 |
15,297 |
|
11,970 |
21,904 |
Income tax |
9,609 |
37,452 |
|
25,220 |
64,950 |
Depletion |
33,362 |
31,830 |
|
39,801 |
59,782 |
Depreciation of other tangible
fixed assets |
2,436 |
3,021 |
|
4,994 |
5,101 |
Exploration and business
development costs |
422 |
829 |
|
2,031 |
930 |
Depreciation included in general,
administration and depreciation expenses 1 |
392 |
392 |
|
775 |
795 |
EBITDA |
85,201 |
194,038 |
|
156,379 |
339,501 |
1 Item is not shown in the Financial
Statements
The EBITDA for the first six months of 2023
including the EBITDA contribution of the Cor4 acquisition from the
effective date of January 1, 2023 to the completion date of March
3, 2023 amounts to USD 161,280 thousand.
Operating costsThe following table sets out how
operating costs is calculated:
|
Three months ended June 30 |
|
Six months ended June 30 |
USD Thousands |
2023 |
|
2022 |
|
|
2022 |
|
2021 |
|
Production costs |
116,597 |
|
118,151 |
|
|
234,124 |
|
228,700 |
|
Cost of blending |
(40,870 |
) |
(57,639 |
) |
|
(88,687 |
) |
(100,280 |
) |
Change in inventory position |
4,560 |
|
10,175 |
|
|
10,295 |
|
13,728 |
|
Operating costs |
80,2870 |
|
70,687 |
|
|
155,732 |
|
142,148 |
|
The operating costs for the first six months of
2023 including the operating costs contribution of the Cor4
acquisition from the effective date of January 1, 2023 to the
completion date of March 3, 2023 amounts to USD 162,533
thousand.
Net cashThe following table sets out how net
cash is calculated from figures shown in the Financial
Statements:
USD Thousands |
June 30, 2023 |
|
December 31, 2022 |
|
Bank loans |
(10,629 |
) |
(12,142 |
) |
Bonds |
(300,000 |
) |
(300,000 |
) |
Cash and cash equivalents |
374,177 |
|
487,240 |
|
Net cash |
63,548 |
|
175,098 |
|
|
|
|
|
|
Reserves and Resource
AdvisoryThis press release contains references to
estimates of gross and net reserves and resources attributed to the
Corporation's oil and gas assets. For additional information with
respect to such reserves and resources, refer to “Reserves and
Resource Advisory” in IPC's MD&A and AIF. Light, medium and
heavy crude oil reserves/resources disclosed in this press release
include solution gas and other by-products. Also see “Supplemental
Information regarding Product Types” below.
Reserve estimates, contingent resource estimates
and estimates of future net revenue in respect of IPC’s oil and gas
assets in Canada (other than the assets acquired in the Cor4
acquisition) are effective as of December 31, 2022, and are
included in the 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, 2022 price forecasts.
Reserve estimates and estimates of future net
revenue in respect of IPC’s oil and gas assets acquired in the Cor4
acquisition are effective as of December 31, 2022 and are included
in the report prepared by GLJ Ltd. (GLJ), an independent qualified
reserves auditor, in accordance with NI 51-101 and the COGE
Handbook, and using Sproule’s December 31, 2022, 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,
2022, 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, 2022 price forecasts.
The price forecasts used in the Sproule, GLJ and
ERCE reports are available on the website of Sproule (sproule.com)
and are contained in the AIF. These price forecasts are as at
December 31, 2022 and may not be reflective of current and future
forecast commodity prices.
The reserve life index (RLI) is calculated by
dividing the 2P reserves of 487 MMboe as at December 31, 2022
(including 15.9 MMboe acquired in the Cor4 acquisition), by the
mid-point of the 2023 CMD production guidance of 48,000 to 50,000
boepd.
IPC uses the industry-accepted standard
conversion of six thousand cubic feet of natural gas to one barrel
of oil (6 Mcf = 1 bbl). A BOE conversion ratio of 6:1 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.
Supplemental Information regarding
Product Types
The following table is intended to provide
supplemental information about the product type composition of
IPC’s net average daily production figures provided in this press
release:
|
Heavy Crude Oil(Mbopd) |
Light and Medium CrudeOil (Mbopd) |
Conventional Natural Gas(per day) |
Total(Mboepd) |
Three months
ended |
|
|
|
|
June 30, 2023 |
25.3 |
9.2 |
104.0 MMcf(17.3 Mboe) |
51.8 |
June 30, 2022 |
22.9 |
9.9 |
99.6 MMcf(16.6 Mboe) |
49.4 |
Six months
ended |
|
|
|
|
June 30, 2023 |
26.0 |
9.4 |
102.0 MMcf(17.0 Mboe) |
52.3 |
June 30, 2022 |
22.6 |
8.9 |
96.6 MMcf(16.1 Mboe) |
47.6 |
Year
ended |
|
|
|
|
December 31, 2022 |
22.6 |
9.6 |
98.1 MMcf(16.4 Mboe) |
48.6 |
|
|
|
|
|
This press release also makes reference to IPC’s
forecast total average daily production of 48,000 to 50,000 boepd
for 2023. IPC estimates that approximately 50% of that production
will be comprised of heavy oil, approximately 17% will be comprised
of light and medium crude oil and approximately 33% will be
comprised of conventional natural gas.
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.
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