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 three months and year ended
December 31, 2023. IPC is also pleased to announce its 2024 budget,
including that IPC continues to progress the development of the
Blackrod Phase 1 project in Canada in line with schedule and
budget. IPC also confirms its intention to complete the previously
announced normal course issuer bid (NCIB) to acquire a further 6.5
million common shares up to December 2024, in addition to the 1.8
million common shares already purchased for cancellation under the
NCIB in December 2023 and January 2024. IPC’s 2024 capital and
decommissioning expenditure budget is USD 437 million and its 2024
average daily production guidance is between 46,000 and 48,000
barrels of oil equivalent (boe) per day
(boepd).(1) 2023
year-end proved plus probable (2P) reserves are 468 million boe
(MMboe) and best estimate contingent resources (unrisked) are 1,145
MMboe.(1)(2)
William Lundin, IPC's President and Chief
Executive Officer, comments: “We are very pleased to announce that
IPC achieved record operational results in 2023. Our average net
production was 51,100 boepd for the full year, with very strong
operational and ESG performance across all our areas of operation.
We exited 2023 at approximately 49,500 boepd. In a significant
investment year for our Blackrod Phase 1 development project, we
still produced positive annual free cash flows from our business.
We also returned USD 95 million to shareholders through share
buybacks and closed the Cor4 acquisition for a consideration of USD
62 million, ending the year in a net cash position of USD 58
million. With significant gross cash resources of USD 517 million
at 2023 year-end, we continue to be well positioned to deliver on
our three strategic pillars of Organic Growth, Stakeholder returns,
and M&A that drive value creation for our
stakeholders.(1)(3)
On Organic Growth, we are very pleased with the
progress of the development of Phase 1 of the Blackrod project,
Canada, which remains in line with schedule and budget. Phase 1 of
the Blackrod project continues to forecast first oil in late 2026,
with peak production planned to increase to 30,000 bopd by 2028.
This transformational growth project is forecast to push IPC
production levels on average from approximately 55,000 boepd
between 2024 to 2028, to approximately 65,000 boepd between 2029 to
2033.(1)(2)
On Stakeholder Returns, we completed the
2022/2023 NCIB program, purchasing and cancelling 9.3 million IPC
common shares over the period of December 5, 2022 to December 4,
2023, representing approximately 6.8% of the common shares
outstanding at the start of that program. We immediately
recommenced purchasing under the renewed 2023/2024 NCIB, purchasing
for cancellation 1.2 million common shares during December 2023 and
over 600,000 common shares during January 2024. We confirm our
intention to complete the 2023/2024 NCIB by purchasing up to a
further 6.5 million common shares by early December 2024,
representing a 6.5% reduction in the number of shares common
outstanding at the beginning of the 2023/2024 NCIB.
On M&A, we successfully integrated the
assets acquired in March 2023 through the acquisition of Cor4 Oil
Corp. (Cor4) adjacent to our Suffield property in Alberta, Canada.
We continue to advance oil drilling operations in the exciting
Ellerslie play.(1)
I am very pleased to have assumed the President
and CEO role from January 1, 2024. IPC has a world class set of
asset and management teams which is further complemented by a very
experienced and skilled Board; this combined with our high-quality
assets makes IPC a differentiator amongst the E&P space. I look
forward to continuing to advance the proven strategies of IPC in
this exciting year of financial strength, operational excellence
and continued growth.”
2023 Business Highlights
- Average net production of
approximately 49,600 boepd for the fourth quarter of 2023 was in
line with the high end of the guidance range for the period (52%
heavy crude oil, 13% light and medium crude oil and 35% natural
gas).(1)
- Full year 2023 average net
production was 51,100 boepd, above the high end of annual guidance
and a record high for IPC.(1)
- Following the decision in Q1 2023
to develop Phase 1 of the Blackrod project, work on the project has
progressed in line within the overall schedule and budget to first
oil in late 2026. Key events include signing of the engineering,
procurement and fabrication contract with the Engineering,
Procurement and Construction (EPC) contractor for the Central
Processing Facility and advancement of facility engineering and
fabrication works, access road expansion and site civil preparation
works, and drilling operations.
- Successfully integrated the
Suffield area assets acquired from Cor4 Oil Corp. (Cor4) in March
2023 and executed the drilling program in the Ellerslie play with
eight wells drilled in 2023.
- Production sustaining Pad L at
Onion Lake Thermal (OLT) successfully brought online, supporting
record average daily production in 2023 from the OLT asset.
- Sale of small non-core assets in
Canada for MUSD 20, at a significant premium to 2P reserves net
present value.(2)
- In Malaysia, successfully completed
planned maintenance turnaround at the Bertam field on scope,
schedule, and budget.
- In France, successfully delivered
three new production wells at Villeperdue West and one side-track
well at Merisier.
- 9.3 million common shares purchased
and cancelled from December 5, 2022 to December 4, 2023 under IPC’s
2022/2023 NCIB and a further 1.8 million common shares purchased
for cancellation during December 2023 and January 2024 under the
renewed 2023/2024 NCIB. 7% of IPC’s common shares outstanding were
reduced through the NCIB in 2023.
- In Q3 2023, published IPC’s fourth
annual Sustainability Report and its first stand-alone report
aligned with the Task Force on Climate-Related Financial
Disclosures (TCFD).
- Commitment to reduce IPC’s net
emissions intensity to 20 kg CO2/boe by 2025 is extended to remain
at that level through end 2028.
2023 Financial Highlights
- Operating costs per boe of USD 18.3
for the fourth quarter of 2023 and USD 17.6 for the full year in
line with full year guidance of USD 17.5 to 18 per boe.(3)
- Strong operating cash flow (OCF)
generation for the fourth quarter and full year 2023 amounted to
MUSD 74 and MUSD 353, respectively.(3)
- Capital and decommissioning
expenditures of MUSD 130 for the fourth quarter and MUSD 327 for
the full year 2023, in line with most recent full year guidance of
MUSD 330.
- Positive free cash flow (FCF)
generation for the full year 2023 of MUSD 3, with negative FCF
generation of MUSD 65 for the fourth quarter in line with
expectations and taking into account the significant capital
expenditures during the quarter. FCF for the full year 2023, before
2023 Blackrod capital expenditure of MUSD 240, was MUSD
243.(3)
- Net cash of MUSD 58 and gross cash
of MUSD 517 as at December 31, 2023.(3)
- Net result of MUSD 30 for the
fourth quarter of 2023 and MUSD 173 for the full year 2023.
- Further strengthened IPC’s
financial position with an increase of IPC’s bonds to MUSD 450 due
February 2027 and an increase of IPC’s undrawn Canadian revolving
credit facility to MCAD 180.
Reserves, Resources and
Value
- Total 2P reserves as at December
31, 2023 of 468 MMboe, representing a reserves replacement ratio of
78% compared to year-end 2022, with a reserves life index (RLI) of
27 years.(1)(2)
- Contingent resources (best
estimate, unrisked) as at December 31, 2023 of 1,145
MMboe.(1)(2)
- 2P reserves net asset value (NAV)
as at December 31, 2023 of MUSD 3,087 (10% discount
rate).(1)(2)(4)(5)
2024 Annual Guidance
- Full year 2024 average net
production forecast at 46,000 to 48,000 boepd.(1)
- Full year 2024 operating costs
guidance forecast at USD 18 to 19 per boe.(3)
- Full year 2024 OCF guidance
estimated at between MUSD 261 to 382 (assuming Brent USD 70 to 90
per boel).(3)
- Full year 2024 capital and
decommissioning expenditures guidance forecast at MUSD 437,
including MUSD 362 relating to continued development of Phase 1 of
the Blackrod project.
- Full year 2024 FCF ranges from
approximately MUSD 144 to 268 (assuming Brent USD 70 to 90 per boe)
before taking into account proposed Blackrod capital expenditures,
or MUSD -218 to -94 including proposed Blackrod capital
expenditures.(3)
Business Plan Production and Cash Flow
Guidance
- 2024 – 2028 business plan forecasts:
- average net production forecast approximately 55,000
boepd.(1)
- capital expenditure forecast of USD 11 per boe, including USD 6
per boe for the Blackrod Phase 1 project.
- operating costs forecast of USD 18 per boe.(3)
- FCF forecast of approximately MUSD 900 to 1,800 (assuming Brent
USD 75 to 95 per boe).(3)(7)
- 2029 – 2033 business plan forecasts:
- average net production forecast of approximately 65,000
boepd.(1)
- capital expenditure forecast of USD 5 per boe.
- operating costs forecast of USD 18 per boe.(3)
- FCF forecast of approximately MUSD 1,750 to 2,800 (assuming
Brent 75 to 95 USD per boe).(3)(7)
|
Three months endedDecember 31 |
|
Year endedDecember 31 |
USD Thousands |
2023 |
2022 |
|
2023 |
2022 |
Revenue |
198,460 |
254,615 |
|
853,906 |
1,129,298 |
Gross profit |
39,955 |
95,411 |
|
250,514 |
516,709 |
Net result |
29,710 |
61,183 |
|
172,979 |
337,725 |
Operating cash flow(3) |
73,634 |
113,668 |
|
353,048 |
622,947 |
Free cash flow(3) |
(64,688) |
65,288 |
|
2,689 |
430,242 |
EBITDA(3) |
66,284 |
125,651 |
|
350,618 |
639,480 |
Net Cash(3) |
58,043 |
175,098 |
|
58,043 |
175,098 |
IPC’s strategy since launching IPC in April 2017 remains
unchanged: to deliver operational excellence through responsible
operatorship, maintain financial resilience, maximise the value of
our resource base, target growth organically and through
acquisitions, and deliver stakeholder returns.
IPC has followed through on this vision resulting in material
value creation for all stakeholders through efficient capital
allocation and operational proficiency. Since inception, IPC has
sustained no material safety incidents across all operating
domains, delivered within or ahead of guidance every reporting
year, increased the Reserves Life Index (RLI) from 8 years to 27
years largely through 5 accretive acquisitions, and cancelled over
62.5 million common shares.
The company is strongly positioned to continue following through
on our strategy supported by a strong balance sheet to start 2024
with net cash of USD 58 million and material production growth
expected from the Blackrod Phase 1 development with first oil
expected in late 2026.(3)
Following a year of exceptionally high oil and gas prices in
2022 with Brent prices averaging over USD 100 per barrel for the
full year 2022, IPC continued to benefit in 2023 from strong oil
benchmark prices, with average Brent prices over USD 82 per barrel
for the full year. Quarterly average Brent prices during 2023
ranged between USD 78 to USD 87 per barrel. Strong oil and gas
demand is expected to continue in 2024 which, along with such
factors as OPEC+ decisions to curtail supply, potential market and
transportation disruptions due to ongoing geopolitical tensions,
and current global observed crude inventory levels at the bottom
end of the five-year average, could limit downside risks on
commodity prices in 2024. These positive factors may be partially
offset by increased forecast supply from countries such as the
United States in a Presidential election year, which could be
expected to limit price upside.
In Canada, fourth quarter 2023 West Texas Intermediate (WTI) to
Western Canadian Select (WCS) crude price differentials averaged
around USD 22 per barrel, with average differentials of around USD
18.5 for the full year. The Trans-Mountain (TMX) pipeline is
currently expected to commence line-fill in the first half of 2024
which should benefit the WTI/WCS differentials during 2024 and into
the future. IPC has hedged the WTI/WCS differential for
approximately 70% of our Canadian crude production at USD 15 per
barrel and hedged 25% of our WTI exposure for approximately USD 81
per barrel for 2024.
Gas markets in 2023 witnessed a substantial decrease from the
2022 average AECO benchmark prices above CAD 5 per Mcf. The average
AECO gas price was CAD 2.30 per Mcf for the fourth quarter of 2023,
and an average of CAD 2.60 for the full year 2023. IPC’s realized
prices for gas were CAD 2.55 per Mcf for the fourth quarter of 2023
and CAD 3.36 per Mcf for the full year 2023, taking into account
hedges in place until October 31, 2023.
IPC benefits from a well-balanced mix of production comprising
approximately 54% Canadian Crude, 33% Canadian Natural Gas and 13%
Brent weighted oil, on average over 2023. With strong commodity
pricing, combined with delivering operational excellence above the
high end of IPC’s 2023 guidance, IPC has again been able to deliver
a very strong financial performance in the fourth quarter and
throughout the full year 2023.
Fourth Quarter and Full Year 2023
Highlights
During the fourth quarter of 2023, IPC’s assets delivered
average net production of 49,600 boepd, in line with high-end
guidance for the quarter. This was made possible by high
operational performance across all of IPC’s assets as well as the
production contribution from IPC’s 2023 investment program in
Canada and France, notwithstanding some downtime from two
production wells in Malaysia through Q4 which have now been
worked-over and are back on-stream as of end January 2024. Full
year 2023 average net production of 51,100 boepd was a record high
for IPC and on target with guidance of greater than 50,000
boepd.(1)
IPC’s operating costs per boe for the fourth quarter of 2023 was
USD 18.3. Full year 2023 operating costs per boe was USD 17.6, in
line with guidance of USD 17.5 to 18 per boe.(3)
Operating cash flow (OCF) generation for the fourth quarter of
2023 was USD 74 million. Full year 2023 OCF was USD 353 million in
line with the most recent guidance of USD 340 to 365 million.
(3)
Capital and decommissioning expenditure for the fourth quarter
of 2023 was USD 130 million. Full year 2023 capital and
decommissioning expenditure of USD 327 million was in line with
guidance of USD 330 million.
Free cash flow (FCF) generation was in line with guidance at
negative USD 65 million during the fourth quarter of 2023,
reflecting the higher level of capital expenditure on the Blackrod
Phase 1 development project. Full year 2023 FCF generation was USD
3 million, at the higher end of the most recent guidance of USD -65
to 5 million.(3)
As at December 31, 2023, IPC’s net cash position was USD 58
million. IPC’s gross cash on the balance sheet amounts to USD 517
million which provides IPC with significant financial strength to
continue progressing its strategies in 2024, including advancing
the Phase 1 Blackrod development, returning value to shareholders
through the 2023/2024 NCIB, and remaining opportunistic to
M&A.(3)
Blackrod Project
In Q1 2023, IPC announced the decision to
advance the development of Phase 1 of the Blackrod project.
Development capital expenditure to first oil is estimated at USD
850 million nominal. First oil of the Phase 1 development is
estimated to be in late 2026, with forecast net production of
30,000 bopd by 2028. The Blackrod Phase 1 development targets 218
million barrels of 2P reserves and the sanction case WTI breakeven
estimated as of January 1, 2023, using the December 31, 2022 price
forecasts of IPC’s qualified independent reserves evaluator,
Sproule Associates Limited (Sproule), was USD 59 per barrel
assuming a 10% discount rate. Following capital expenditure of USD
240 million invested in 2023, the project is forecast to add USD
981 million to IPC’s 2P reserves net present value (NPV) as at
January 1, 2024, with a WTI breakeven of USD 54.5 per barrel
assuming a 10% discount rate, using Sproule’s December 31, 2023
price forecasts. IPC forecasts capital expenditure in 2024 for the
Blackrod project of USD 362 million, with the remainder of the
estimated total project budget to be invested prior to first oil.
With greater than 1 billion barrels of contingent resources (best
estimate, unrisked) remaining, Blackrod presents material upside to
future phase expansions beyond the initial first Phase of
development.(1)(2)(4)
Project activities for the multi-year Phase 1
development have progressed in line with schedule and budget.
Following the successful completion of Front-End Engineering and
Design (FEED) studies through 2022, IPC formerly established a
partnership with the Engineering, Procurement and Construction
(EPC) contractor in 2023 through contractual commitments for the
Central Processing Facility (CPF). As at the end of 2023, major
long lead items have been procured, fabrication has commenced, site
civil and commercial road expansion works have advanced, drilling
is underway, and third-party pipeline commercial agreements are
progressing according to plan.
Following significant project milestones
achieved through 2023, IPC is well positioned to continue advancing
responsible development of the Blackrod Phase 1 development through
2024. With a combination of contractual commitments and financial
foreign exchange hedges locked in at more favourable rates than
assumed at project sanction, IPC sits comfortably within the
overall budget and schedule guidance to first oil. IPC intends to
fund the remaining Phase 1 development costs with forecast cash
flow generated by its operations and cash on hand.(3)
M&A
IPC was pleased to close the strategic acquisition of Cor4 in
March 2023 for a consideration of USD 62 million. The acquisition,
located in the Suffield area, brought in 15.9 MMboe of 2P reserves
as at January 1, 2023 and delivered greater than 5,000 boepd
through 2023. The asset holds high quality mineral rights within
the Ellerslie formation, an attractive feature that crystallised
through 2023 as eight wells were successfully drilled into this
play supporting higher than forecast production rates. The acquired
asset team has been effectively integrated within IPC and further
synergies within Suffield area are of continued focus as we seek to
unlock further value potential.(1)(2)
Following the strategic divestiture of small non-core production
and land assets in the greater John Lake area in Canada announced
in Q3 2023, IPC further sold non-producing lands in Q4 for a
consideration of USD 3.5 million. The total proceeds in aggregate
from the non-core dispositions in Q3 and Q4 was in excess of USD 20
million. The 2P reserves and NPV10 as of January 1, 2023 were 0.6
MMboe and USD 7.7 million respectively for the divested
properties.(2)(4)
IPC continues to review potential M&A opportunities. IPC has
added over USD 2.5 billion of aggregate value in FCF generation and
2P reserves NPV increases, from IPC’s last 5
acquisitions.(3)(4)
Stakeholder Returns: Normal Course
Issuer Bid
During the period of December 5, 2022 to
December 4, 2023, IPC purchased and cancelled an aggregate of
approximately 9.3 million common shares under the 2022/2023 normal
course issuer bid / share repurchase program (NCIB). The average
price of shares purchased under the 2022/2023 NCIB was SEK 102 /
CAD 13.0 per share.
In Q4 2023, IPC announced the renewal of the
NCIB, with the ability to repurchase up to approximately 8.3
million common shares over the period of December 5, 2023 to
December 4, 2024. Under the 2023/2024 NCIB, IPC repurchased and
cancelled approximately 1.2 million common shares in December 2023.
By the end of January 2024, IPC repurchased for cancellation over
600,000 common shares under the 2023/2024 NCIB. The average price
of common shares purchased under the 2023/2024 NCIB during December
2023 and January 2024 was SEK 114.5 / CAD 15 per share.
As at February 6, 2023, IPC had a total of
126,479,966 common shares issued and outstanding, of which IPC
holds 102,200 common shares in treasury.
Notwithstanding the record level of capital
investment forecast for 2024, IPC confirms its intention to
continue to purchase and cancel common shares under the 2023/2024
NCIB to the remaining limit of 6.5 million common shares by
December 4, 2024. This would result in the cancellation of 6.5% of
shares outstanding as at the beginning of December 2023.
IPC continues to believe that reducing the
number of shares outstanding while in parallel investing in
material production growth at Blackrod will prove to be a winning
formula for our stakeholders.
Environmental, Social and Governance
(ESG) Performance
Responsible operatorship and ensuring that IPC
adheres to the highest principles of business conduct have been
integral parts of how IPC does business since it started in
2017.
With the publication of IPC’s second quarter
2023 financial report, IPC was very pleased to publish its fourth
Sustainability Report and its first stand-alone report aligned with
the Task Force on Climate-Related Financial Disclosures. IPC is
committed to the continued advancement of ESG practices in its
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 IPC’s commitment to operational
excellence, its 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
IPC’s operations. During the fourth quarter and for the full year
2023, IPC recorded no material safety or environmental
incidents.
With respect to climate action, as previously
announced, IPC targets a reduction of net GHG emissions intensity
by the end of 2025 to 50% of IPC’s 2019 baseline and IPC remains on
track to achieve this reduction. IPC has extended its commitment to
remain at 2025 levels of 20 kg CO2/boe through to the end of
2028.
Reserves, Resources and
Value
As at the end of December 2023, IPC’s 2P
reserves are 468 MMboe. During 2023, IPC replaced 78% of the annual
2023 production. The reserves life index (RLI) as at December 31,
2023, remains at approximately 27 years.(1)(2)
The net present value (NPV) of IPC’s 2P reserves
as at December 31, 2023 was USD 3,023 million. IPC’s net asset
value (NAV) was USD 3,081 or SEK 244 / CAD 32 per share as at
December 31, 2023.(1)(2)(4)(5)(6)
In addition, IPC’s best estimate contingent
resources (unrisked) as at December 31, 2023 are 1,145 MMboe, of
which 1,066 MMboe relate to future potential phases of the Blackrod
project.(1)(2)
2024 Budget and Operational
Guidance
IPC is pleased to announce its 2024 average net
production guidance is 46,000 to 48,000 boepd. IPC forecasts
operating costs for 2024 to be USD 18 to 19 per boe.(1)(3)
IPC forecasts FCF generation based on its 2P
reserves base of in aggregate of more than USD 900 to 1,800 million
over the period of 2024 to 2028. In addition, IPC forecasts FCF
generation of USD 1,750 to 2,800 million over the period of 2029 to
2033.(2)(3)(7)
IPC’s 2024 capital and decommissioning
expenditure budget is USD 437 million, with USD 362 million
forecast relating to the Phase 1 development of the Blackrod
project. The remainder of the 2024 budget in Canada includes,
drilling at the Suffield and Ferguson assets, further development
of the Mooney asset, and ongoing optimization work. IPC also
completed well workover operations in Malaysia by January 2024 and
expects to conduct technical studies for future development
potential. Following the successful execution of the 2023 drilling
campaign in France, the subsurface teams are maturing drilling
targets within the Paris Basin.
2024 is set to be a record growth investment
year for IPC; we have therefore set a limited sustaining capital
expenditure plan of USD 75 million, inclusive of decommissioning,
across the producing assets in the portfolio. With robust cashflow
being generated from the producing assets and gross cash resources
of USD 517 million, IPC intends to fully complete the remaining
share buybacks available under the NCIB program through 2024.
In all of IPC’s areas of operation, IPC has
significant flexibility to control its pace of spend based on the
development of commodity prices during 2024.
Further details regarding IPC’s proposed 2024
budget and operational guidance will be provided at IPC’s Capital
Markets Day presentation to be held on February 6, 2024 at 14:00
GMT. A copy of the Capital Markets Day presentation will be
available on IPC's website at www.international-petroleum.com.
Notes:
(1) See “Supplemental Information regarding
Product Types” in “Reserves and Resources Advisory” below. See also
the material change report (MCR) available on IPC’s website at
www.international-petroleum.com and filed on the date of this press
release under IPC’s profile on SEDAR+ at www.sedarplus.ca. IPC
completed the acquisition of Cor4 Oil Corp. (Cor4) on March 3,
2023. The Financial Statements have been prepared on that basis,
with revenues and expenses related to the Brooks assets acquired in
the Cor4 acquisition included in the Financial Statements from
March 3, 2023. Certain historical 2023 operational and financial
information included in the MD&A, including production,
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 MCR. Reserves replacement ratio is based on 2P
reserves of 471.5 MMboe as at December 31, 2022 (not including 2P
reserves related to the Brooks assets acquired in the Cor4
acquisition), sales production during 2023 of 17.7 MMboe, net
additions to 2P reserves during 2023 of 16.0 MMboe, other revisions
downward of 2.2 MMboe, and 2P reserves of 468 MMboe as at December
31, 2023.(3) Non-IFRS measure, see “Non-IFRS Measures” below and in
the MD&A. (4) NPV is after tax, discounted at 10% and based
upon the forecast prices and other assumptions further described in
the MCR. See “Reserves and Resources Advisory” below.(5) NAV is
calculated as NPV plus net cash of USD 58 million as at December
31, 2023. (6) NAV per share is based on 126,992,066 IPC common
shares outstanding as at December 31, 2023. NAV per share is not
predictive and may not be reflective of current or future market
prices for IPC common shares.(7) Estimated FCF generation is based
on IPC’s current business plans over the periods of 2024 to 2028
and 2029 to 2033. Assumptions include average net production of
approximately 55 Mboepd over the period of 2024 to 2028, average
net production of approximately 65 Mboepd over the period of 2029
to 2033, 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 MCR.
IPC’s market capitalization is at close on January 19, 2024 (USD
1,378 million based on 113.6 SEK/share, 126.99 million IPC shares
outstanding and exchange rate of 10.47 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 Gordon |
|
Robert Eriksson |
VP Corporate Planning and
Investor Relations |
|
Media Manager |
rebecca.gordon@international-petroleum.com |
Or |
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 6,
2024. The Corporation's audited condensed consolidated financial
statements (Financial Statements) and management's discussion and
analysis (MD&A) for the three months and year ended December
31, 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:
- 2024 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;
- The ability to fully fund future
expenditures from cash flows and current borrowing capacity;
- IPC’s intention and ability to
continue to implement its 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;
- 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;
- Future development potential of the
Suffield, Brooks, Ferguson and Mooney operations, including the
timing and success of future oil and gas drilling and optimization
programs;
- Current and future operations and
production performance at Onion Lake Thermal;
- The potential improvement in the
Canadian oil egress situation and IPC’s ability to benefit from any
such improvements;
- The ability of IPC to achieve and
maintain current and forecast production in France and
Malaysia;
- The intention and ability of 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 continued access to its
existing credit facilities, including current financial headroom,
on terms acceptable to the Corporation;
- 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 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 “Risk Factors”,
"Cautionary Statement Regarding Forward-Looking Information" and
“Reserves and Resources Advisory” therein), the Corporation’s
material change report dated February 6, 2024 (MCR), 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”) 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 2024 to 2028 and 2029 to
2033. Assumptions include average net production of approximately
55 Mboepd over the period of 2024 to 2028, average net production
of approximately 65 Mboepd over the period of 2029 to 2033, 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 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.
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 December 31 |
|
Year ended December 31 |
USD Thousands |
2023 |
|
2022 |
|
|
2023 |
|
2022 |
|
Revenue |
198,460 |
|
256,479 |
|
|
853,906 |
|
1,129,298 |
|
Production costs |
(126,414) |
|
(127,495) |
|
|
(491,303) |
|
(476,986) |
|
Current tax |
1,588 |
|
(15,316) |
|
|
(14,457) |
|
(29,365) |
|
Operating cash flow |
73,634 |
|
113,668 |
|
|
348,146 |
|
622,947 |
|
The operating cash flow for the year ended
December 31, 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 amounted to USD 353,048
thousand.
Free cash flowThe following table sets out how
free cash flow is calculated from figures shown in the Financial
Statements:
|
Three months ended December 31 |
|
Year ended December 31 |
USD Thousands |
2023 |
|
2022 |
|
|
2023 |
|
2022 |
|
Operating cash flow - see above |
73,634 |
|
113,668 |
|
|
348,146 |
|
622,947 |
|
Capital expenditures |
(128,825) |
|
(42,792) |
|
|
(312,729) |
|
(157,662) |
|
Abandonment and farm-in
expenditures1 |
(1,516) |
|
(1,085) |
|
|
(9,199) |
|
(6,962) |
|
General, administration and
depreciation expenses before depreciation2 |
(5,762) |
|
(3,333) |
|
|
(16,886) |
|
(12,832) |
|
Cash financial items3 |
(2,219) |
|
(1,170) |
|
|
(5,812) |
|
(15,249) |
|
Free cash flow |
(64,688) |
|
65,288 |
|
|
3,520 |
|
430,242 |
|
1 See note 20 to the Financial Statements2
Depreciation is not specifically disclosed in the Financial
Statements3 See notes 5 and 6 to the Financial Statements
The free cash flow for the year ended December
31, 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 amounted to USD 2,689
thousand.
EBITDAThe following table sets out the
reconciliation from net result from the consolidated statement of
operations to EBITDA:
|
Three months ended December 31 |
|
Year ended December 31 |
USD Thousands |
2023 |
|
2022 |
|
2023 |
|
2022 |
Net
result |
29,710 |
|
61,183 |
|
172,979 |
|
337,725 |
Net financial items |
6,509 |
|
6,002 |
|
22,736 |
|
37,131 |
Income tax |
4,691 |
|
24,486 |
|
55,362 |
|
127,413 |
Depletion |
30,434 |
|
30,320 |
|
101,922 |
|
122,041 |
Depreciation of other tangible
fixed assets |
1,309 |
|
2,695 |
|
7,812 |
|
10,787 |
Exploration and business
development costs |
348 |
|
558 |
|
2,355 |
|
2,775 |
Depreciation included in general,
administration and depreciation expenses 1 |
389 |
|
407 |
|
1,569 |
|
1,609 |
Sale of assets |
(7,016) |
|
- |
|
(19,018) |
|
- |
EBITDA |
66,284 |
|
125,651 |
|
345,717 |
|
639,480 |
1 Item is not shown in the Financial
Statements
The EBITDA for the year ended December 31, 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 amounted to USD 350,618 thousand.
Operating costsThe following table sets out how
operating costs is calculated:
|
Three months ended December 31 |
|
Year ended December 31 |
USD Thousands |
2023 |
|
2022 |
|
|
2023 |
|
2022 |
|
Production costs |
126,414 |
|
127,495 |
|
|
491,303 |
|
483,646 |
|
Cost of blending |
(44,473) |
|
(46,534) |
|
|
(172,996) |
|
(189,172) |
|
Change in inventory position |
1,427 |
|
(4,592) |
|
|
3,655 |
|
(158) |
|
Operating costs |
83,368 |
|
76,369 |
|
|
321,962 |
|
294,316 |
|
The operating costs for the year ended December
31, 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 amounted to USD 328,763
thousand.
Net cash The following table sets out how net
cash is calculated from figures shown in the Financial
Statements:
USD
Thousands |
December 31, 2023 |
December 31, 2022 |
Bank loans |
(9,031) |
|
(12,142) |
|
Bonds 1 |
(450,000) |
|
(300,000) |
|
Cash and cash equivalents |
517,074 |
|
487,240 |
|
Net cash |
58,043 |
|
175,098 |
|
1 The bond amount represents the redeemable
value at maturity (February 2027).
Reserves and Resources
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
Resources Advisory” in the MD&A and the MCR. 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 are effective as of December 31, 2023, 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, 2023 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,
2023, 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, 2023 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. These price forecasts are as at December
31, 2023 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 468 MMboe as at December 31, 2023 by
the mid-point of the 2024 CMD production guidance of 46,000 to
48,000 boepd. Reserves replacement ratio is based on 2P reserves of
471.5 MMboe as at December 31, 2022 (not including 2P reserves
related to the Brooks assets acquired in the Cor4 acquisition),
sales production during 2023 of 17.7 MMboe, net additions to 2P
reserves during 2023 of 16.0 MMboe, other revisions downward of 2.2
MMboe, and 2P reserves of 468 MMboe as at December 31, 2023.
The reserves and resources information and data
provided in this press release present 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, 2023, which will
be filed on SEDAR+ (accessible at www.sedarplus.ca) on or before
April 1, 2024. Further information with respect to IPC’s 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.sedarplus.ca and on IPC’s website at
www.international-petroleum.com.
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 Crude Oil (Mbopd) |
Conventional Natural Gas (per day) |
Total(Mboepd) |
Three months
ended |
|
|
|
|
December 31, 2023 |
25.7 |
6.6 |
103.8 MMcf(17.3 Mboe) |
49.6 |
December 31, 2022 |
22.6 |
10.3 |
98.1 MMcf(16.4 Mboe) |
49.2 |
Year
ended |
|
|
|
|
December 31, 2023 |
25.8 |
8.1 |
102.8 MMcf(17.1 Mboe) |
51.1 |
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 46,000 to 48,000 boepd
for 2024. IPC estimates that approximately 51% of that production
will be comprised of heavy oil, approximately 15% will be comprised
of light and medium crude oil and approximately 34% 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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