International Petroleum Corp. to acquire Blackpearl Resources Inc.
in strategic business combination of high quality, long life
producing assets and exciting organic growth opportunities
International Petroleum Corp. (“IPC”) (TSX,
Nasdaq Stockholm: IPCO) and BlackPearl Resources Inc.
(“BlackPearl”) (TSX: PXX, Nasdaq Stockholm: PXXS) are pleased to
announce that they have entered into an agreement under which IPC
will acquire all of the shares of BlackPearl based upon a share
exchange ratio of 0.22 shares of IPC for each BlackPearl share (the
“Transaction”). Based upon a volume weighted
average price (VWAP) of the IPC Shares for the last thirty days,
this represents an acquisition price of CAD 1.85
per BlackPearl share representing a premium of 42%
to the closing price of the BlackPearl Shares on October 9, 2018 or
a premium of 49% to the VWAP of the BlackPearl Shares for the last
thirty days. The acquisition remains subject to shareholder
approvals of both IPC and BlackPearl and certain regulatory
approvals, with completion expected in December
2018.
Mike Nicholson, Chief Executive Officer of IPC comments: “With
the completion of this transformational acquisition, IPC will more
than double its total 2P reserves, with an increased oil weighting
up from 42% to 74%. Total 2P reserves and contingent resources of
IPC increase close to six times. IPC’s 2P reserves life is
increased by seven years and daily average net production is
expected to increase by more than 50% in the years ahead compared
to IPC today. We also welcome the addition of a high calibre team
of BlackPearl management and operational professionals with a long
track record of value creation, to complement the existing IPC
team.”
John Festival, Chief Executive Officer of BlackPearl comments:
“This transaction will be very beneficial to the BlackPearl
shareholders, who will gain an immediate material increase in value
from the offered premium as well as exposure to the free cash flow
of IPC’s diversified asset base while retaining the upside exposure
to BlackPearl’s quality resource base. The combined company will
have the financial strength to potentially accelerate development
of BlackPearl’s exciting growth projects. I am very pleased to be
joining the Board of Directors of IPC and look forward to adding
strategic input to IPC going forward.”
Lukas H. Lundin, Chairman of IPC comments: “I am very excited
about the future of IPC as the leading oil and gas growth company
in the Lundin Group. IPC’s strategy is to maximize the value of the
current asset base and, at the same time, seek to use its financial
strength to acquire strategic oil and gas assets. This is exactly
the right time in the resource cycle to be pursuing this strategy.
The acquisition by IPC of BlackPearl takes the resource base above
1 billion barrels and is another big step in delivering that
strategy. The Lundin family is fully committed to remain as a major
shareholder of IPC into the future.”
Summary of the Combination: IPC
Post-Transaction
Enterprise Value |
Equity Value
(1) |
USD 1.01 billion |
Net Debt (2,
3) |
USD 348 million |
Enterprise
Value |
USD 1.36 billion |
Common Shares
Outstanding |
approximately 164 million |
First Half 2018 Production |
Production
(3) |
44,500 barrels of oil equivalent per day (boepd) |
Oil and
NGLs |
61% |
Reserves and Resources (4) |
Proved and
Probable (2P) Reserves |
291.5 million barrels of oil equivalent (MMboe) |
Reserves life
index |
17.6 years |
Contingent
Resources (Best Estimate) |
852.9 MMboe |
Net Asset Value (5) |
2P Core
NAV |
USD 2.43 billion |
% discount to
2P Core NAV |
58% |
Financial (6) |
First Half
2018 Operating Cash Flow |
USD 178 million |
2018 Capital
Expenditure Guidance |
USD 120 million |
Notes:
(1) Based on the closing price of the IPC Shares of October 9,
2018, converted to USD at current exchange rates.
(2) Non-IFRS Measure. Net debt as at June 30, 2018. See
“Non-IFRS Measures” below.
(3) Combined production based on the average production for the
first six months of 2018 of approximately 33,900 boepd for IPC and
approximately 10,600 boepd for BlackPearl.
(4) See “Disclosure of Oil and Gas Information” below. 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, Malaysia and the Netherlands are
effective as of December 31, 2017 and were prepared by IPC and
audited by ERC Equipoise Ltd. (ERCE), an independent qualified
reserves auditor, 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, 2018 price forecasts as referred to
below. Reserves 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 January 5, 2018, being the
completion date for the acquisition of these assets by IPC, and
were evaluated by McDaniel & Associates Consultants Ltd.
(McDaniel), an independent qualified reserves evaluator, in
accordance with NI 51-101 and the COGE Handbook, and using
McDaniel's January 1, 2018 price forecasts. The volumes are
reported and aggregated by IPC in this press release as being as at
December 31, 2017. Reserves estimates, contingent resource
estimates and estimates of future net revenue in respect of
BlackPearl’s oil and gas assets were evaluated by Sproule
Associates Limited (Sproule) in a report prepared by Sproule dated
January 18, 2018 evaluating the oil and gas reserves attributable
to BlackPearl’s properties as at December 31, 2017 and the
contingent resource reports prepared by Sproule dated January 17,
2018 for the Blackrod, Onion Lake and Mooney properties as at
December 31, 2017. Reserves life index is based on the 2P Reserves
as at December 31, 2017 and estimated average combined production
for 2018 based on the mid-point guidance of IPC and BlackPearl,
being 45,250 boepd.
(5) Net present value (NPV) of future net revenue is after tax,
discounted at 8% and based upon the McDaniel's January 1, 2018
price forecasts in respect of the IPC assets and Sproule’s January
1, 2018 price forecasts in respect of the BlackPearl assets. 2P
Core net asset value (NAV) is calculated as NPV less net debt as at
January 1, 2018. The percent discount to 2P Core NAV is the
discount of the Equity Value relative to the 2P Core NAV.
(6) Non-IFRS measure. See “Non-IFRS Measures” below.
The Transaction
IPC and BlackPearl have entered into an agreement (the
“Arrangement Agreement”) to effect the Transaction by way of a plan
of arrangement of BlackPearl under the Canada Business Corporations
Act. The Transaction will result in holders of common shares of
BlackPearl (“BlackPearl Shares”) receiving, directly or indirectly,
0.22 common shares of IPC (“IPC Shares”) for each BlackPearl Share
owned. The exchange ratio represents an acquisition price of CAD
1.85 per BlackPearl Share based on a thirty day VWAP of the IPC
Shares prior to the date of Arrangement Agreement. This represents
a premium of 42% to the closing price of the BlackPearl Shares on
October 9, 2018 or a premium of 49% to the VWAP of the BlackPearl
Shares for the last thirty days. Under the Arrangement Agreement,
no fractional IPC Shares will be issued and any fractional
entitlements to IPC Shares will be rounded.
Under the Arrangement Agreement, IPC will issue approximately 76
million IPC Shares to the holders of BlackPearl Shares on a fully
diluted basis, resulting in IPC having approximately 164 million
IPC Shares outstanding at completion of the Transaction. Entities
related to the Lundin family will continue to be the largest
shareholder of IPC with approximately 24% of the then outstanding
IPC Shares.
The board of directors of IPC (the “IPC Board”) and the board of
directors of BlackPearl (the “BlackPearl Board”) have unanimously
approved the Transaction, following the recommendations made by
special committees of independent directors of the respective
Boards. The Transaction is subject to approval by the shareholders
of both companies, the Court of Queen’s Bench of Alberta, stock
exchange approvals and approvals by certain regulatory and other
authorities (including that a prospectus in Sweden prepared by IPC
is approved and registered by the Swedish Financial Supervisory
Authority (the “SFSA”)), and is subject to the satisfaction or
waiver of other customary closing conditions. The Transaction is
anticipated to close in December 2018.
On completion of the Transaction, Chris Hogue, current Vice
President Operations of BlackPearl, will become the Senior
Vice-President, Canada for IPC. Ed Sobel, current Vice President
Exploration of BlackPearl, will become the Vice President,
Exploration of IPC. Chris and Ed will be based in Calgary, Alberta.
John Festival, a Director and the Chief Executive Officer of
BlackPearl, will join the IPC Board following completion of the
Transaction. No other changes are proposed to the IPC Board
or senior management in connection with the Transaction.
Strategic Rationale
The Transaction is consistent with IPC management’s strategy for
IPC to be a leading independent oil and gas company focused on
production of high quality assets in stable jurisdictions around
the world and generating long term value for all its
stakeholders.
Stable Long-Term Production: IPC will have
forecast average combined production of approximately 45,250
boepd for 2018, based on the mid-point guidance of IPC and
BlackPearl, across a diverse set of oil and gas assets in Canada
(Alberta and Saskatchewan), Malaysia, France and The
Netherlands. Production will be comprised of approximately
61% liquids (21% light oil and condensate, 40% heavy oil) and 39%
natural gas. By geography, production will be weighted
approximately 78% from Canada, 15% from Malaysia and 7% from France
and The Netherlands.
Strong Reserves and Resources: IPC will have
combined gross 2P reserves as at December 31, 2017 of 291.5 MMboe
and best estimate contingent resources as at December 31, 2017 of
852.9 MMboe. IPC’s reserves life index will be approximately 17.6
years on a 2P basis.
Organic Growth Opportunities: IPC will have a
deep inventory of high quality drilling prospects and identified
future development projects, with the potential to generate
positive returns and deliver organic production and reserves
growth.
Strong Balance Sheet: IPC will have strong
financial liquidity from the cash flows generated by its operations
throughout the world, as well as continued access to unutilized
amounts under credit facilities to accelerate investment in the
combined company’s growth projects.
Ability to Optimize Capital Allocation: IPC
will have a diverse portfolio of assets in Canada, Malaysia and
Europe, allowing it to high grade investment opportunities from the
enlarged portfolio and achieve attractive returns for
shareholders.
Strong Management and Board: IPC plans to
continue with its existing Board and management, complemented by
the addition of BlackPearl management representatives both at the
IPC Board level and in local and senior management. The two
combined organizations have substantial local knowledge and
operating capabilities.
Increased Scale and Expanded Investor Base: IPC
is expected to have a market capitalization of approximately USD 1
billion on closing of the Transaction, allowing IPC to access a
greater universe of institutional and retail investors on both the
Toronto Stock Exchange and the Nasdaq Stockholm. IPC’s
current dual stock exchange listing and its significant access to a
European investor base, combined with BlackPearl’s North American
investors, could benefit all shareholders in the combined IPC going
forward in terms of improved liquidity and market attention.
IPC and BlackPearl Asset Summary
IPC will acquire the Canadian asset base of BlackPearl to
combine with IPC’s existing Canadian and international assets.
These assets include the following:
Onion Lake –Saskatchewan, Canada
BlackPearl’s Onion Lake property is made up of a 12,000 boepd
heavy oil thermal project with reserve life of over 20 years.
BlackPearl owns 100% of the thermal project and is the operator. In
addition, BlackPearl, with its working interest partner, the Onion
Lake Cree Nation, produce 2,000 boepd of conventional heavy
oil.
The first 6,000 boepd phase of the Onion Lake thermal project
commenced commercial production in 2015. The second 6,000
boepd phase commenced steam injection during the first quarter of
2018 and reached name-plate capacity of 12,000 boepd in late
September. Total cost of the expansion was CAD 175 million, which
is just under CAD 30,000 per flowing barrel, a top tier industry
metric. During the second quarter of 2018, BlackPearl also started
construction of the first sustaining well pad and related
facilities for the first phase which is expected to be completed by
the end of the year.
During the third quarter of 2018, BlackPearl began work on a
facility optimization program of the first phase steam facilities.
This optimization work is expected to allow an increase in thermal
production by up to an additional 2,000 boepd and is expected to
cost approximately CAD 15 million, representing an industry leading
development capital of CAD 7,500 per flowing barrel. This program
is expected to be completed in the first half of 2019 and
BlackPearl anticipates it will take approximately nine to twelve
months after completion to reach the increased production
target.
Suffield Area – Alberta, Canada
IPC acquired its interest in the Suffield Area oil and gas
assets in January 2018. These assets are situated in southeast
Alberta and are operated by IPC. The oil assets are 100% working
interest and gas assets are 99.6% working interest.
The Suffield Area oil and gas assets are held over a large,
contiguous land position of 800,000 net acres of shallow natural
gas rights and 100,000 net acres of oil rights in southeast
Alberta. These producing fields have future development potential
from a combination of low risk development drilling, well
stimulation and enhanced oil recovery (EOR) opportunities, which
had not been undertaken for a number of years due to the previous
owner’s capital allocation priorities.
Bertam Field – Malaysia
IPC’s production and reserves in Malaysia come from the Bertam
oil field located offshore Peninsular Malaysia. The Bertam field
has been on production since April 2015. IPC is the operator of
Block PM307 with a 75% working interest, with Petronas Carigali Sdn
Bhd holding the remaining 25%. Production from IPC’s oil and
gas assets in Malaysia is light, high quality oil. A number of
future infill drilling locations and near field exploration targets
have been identified.
Paris Basin and Aquitaine Basin – France
IPC’s oil and gas assets in France are comprised of two main
operating basins, the Paris Basin, which is operated by IPC, and
the Aquitaine Basin, which is operated by Vermilion Energy. Both
basins are characterized by a high number of wells with low
production decline rates. Production from IPC’s oil and gas assets
in in France is light, high quality oil. IPC is maturing the
development of its two biggest fields in the Paris Basin: the Vert
La Gravelle field as well as the western flank of the Villeperdue
field.
Blackrod SAGD Project – Alberta, Canada
BlackPearl has received regulatory approval for an 80,000 boepd
SAGD (steam-assisted-gravity-drainage) oil sands project at
Blackrod. The delineated resource contains over 600 million boe of
best estimate contingent resource which represents over a 20 year
reserve life index at 80,000 boepd. For the last 5 years,
BlackPearl has operated a successful SAGD pilot at Blackrod which
has validated both commercial production rates and a corresponding
steam oil ratio.
Recommendations of the BlackPearl Board and the IPC
Board
Based on the unanimous recommendation from a special committee
comprised of independent directors of BlackPearl (the “BlackPearl
Special Committee”), the BlackPearl Board has unanimously approved
the Transaction, determined that the Transaction is in the best
interests of BlackPearl and the holders of BlackPearl Shares, and
has recommended that the holders of BlackPearl Shares vote in
favour of the Transaction. GMP FirstEnergy has provided the
BlackPearl Special Committee with its verbal opinion that, subject
to its review of the final form of documents effecting the
Transaction, the consideration to be received by holders of
BlackPearl Shares pursuant to the terms of the Arrangement
Agreement is fair, from a financial point of view, to BlackPearl
shareholders.
All of the directors and officers of BlackPearl, as well as
entities related to the Lundin family and Burgundy Asset Management
Ltd., together representing approximately 40% of the total
BlackPearl Shares, have entered into agreements with IPC pursuant
to which they have agreed to vote their BlackPearl Shares in favour
of the Transaction.
Based on the unanimous recommendation from a special committee
comprised of independent directors of IPC (the “IPC Special
Committee”), the IPC Board has unanimously approved the
Transaction, determined that the Transaction is in the best
interests of IPC, and has recommended that the holders of IPC
Shares vote in favour of the issuance of IPC Shares pursuant to the
Transaction. Paradigm Capital Inc. (“Paradigm Capital”) has
provided the IPC Special Committee with its written opinion that
the exchange ratio pursuant to the Arrangement Agreement is fair,
from a financial point of view, to IPC and to the holders of IPC
Shares.
All of the directors and officers of IPC as well as an entity
related to the Lundin family, together representing approximately
34% of the total IPC Shares, have entered into agreements with
BlackPearl pursuant to which they have agreed to vote their IPC
Shares in favour of the issuance of IPC Shares in connection with
the Transaction.
All of the directors and officers of IPC and all of the officers
of BlackPearl, as well as the entities related to the Lundin
family, have further agreed not to dispose of any IPC Shares which
they currently own or which will be acquired in exchange for
BlackPearl Shares in the Transaction (other than BlackPearl Shares
acquired under BlackPearl’s equity incentive plans), for a period
of six months following completion of the Transaction.
Additional Transaction Details
The Transaction requires approval by at least 66⅔% of the votes
cast by holders of BlackPearl Shares present in person or
represented by proxy at a special meeting of holders of BlackPearl
Shares to be called to consider the Transaction and a majority of
the votes cast by holders of BlackPearl Shares after excluding the
votes cast by those persons whose votes may not be included
pursuant to Multilateral Instrument 61-101 - Protection of Minority
Security Holders in Special Transactions.
The issuance of the IPC Shares pursuant to the Transaction
requires approval by more than 50% of the votes cast by holders of
IPC Shares represented in person or by proxy at a special meeting
of holders of IPC Shares to be called to consider the issuance of
IPC Shares pursuant to the Transaction, as required by the rules of
the Toronto Stock Exchange. The Transaction also requires approval
by the SFSA of IPC’s prospectus in Sweden.
The Arrangement Agreement contemplates that IPC and BlackPearl
shareholders will hold their respective shareholder meetings in
December 2018. It is expected that a joint management information
circular will be sent to the shareholders of each of IPC and
BlackPearl in November 2018. Closing of the Transaction is expected
to occur in December 2018.
The Arrangement Agreement provides for a non-solicitation
covenant by BlackPearl, subject to the fiduciary duty obligations
of the BlackPearl Board, and the right of IPC to match any superior
proposal received by BlackPearl. The Arrangement Agreement provides
for a non-completion fee of CAD 20 million in the event the
Transaction is not completed or is terminated by BlackPearl in
certain circumstances.
The Arrangement Agreement provides that completion of the
Transaction is subject to certain conditions, including the receipt
of all required regulatory approvals, final consents from the
external lenders of IPC and BlackPearl, the approval of the Toronto
Stock Exchange of the listing of the IPC Shares to be issued in
connection with the Transaction and the approval of the SFSA of the
Swedish prospectus (as described above), the approval of the
shareholders of IPC and BlackPearl (as described above), the
approval of the Court of Queen's Bench of Alberta and approval
under the Competition Act (Canada).
Advisors
Paradigm Capital provided a fairness opinion to the IPC Special
Committee with respect to the Transaction. Blake, Cassels &
Graydon LLP is acting as IPC’s Canadian legal advisor and Gernandt
& Danielsson Advokatbyrå KB is acting as IPC’s Swedish legal
advisor.
GMP FirstEnergy is acting as financial advisor to BlackPearl and
provided the BlackPearl Special Committee with a fairness opinion
with respect to the Transaction. National Bank Financial and
AltaCorp Capital are acting as strategic advisors to BlackPearl.
Bennett Jones LLP is acting as BlackPearl’s legal advisor.
Conference Call: Wednesday October 10, 2018 at
4:00 p.m. CET, 10:00 a.m. EDT, 8:00 a.m. MDT
A conference call will be held today, Wednesday
October 10, 2018, starting at 4:00 p.m. CET, 10:00 a.m. EDT, 8:00
a.m. MDT. Mike Nicholson, CEO of IPC, Christophe
Nerguararian, CFO of IPC, and John Festival, CEO of BlackPearl,
will discuss the Transaction.
Dial in numbers for participants
are:
Canada/US: +1 855 269 2605
UK: +44 20 3194 0550
Sweden: +46 85 199 93 55
A presentation related to the Transaction will be available in
connection with the conference call on IPC’s website at
www.international-petroleum.com and BlackPearl’s website at
www.blackpearlresources.ca.
For further information in respect of IPC, 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 |
For further information in respect of BlackPearl, please
contact:
John
FestivalPresident and CEO403-215-8313 |
|
Don CookChief
Financial Officer403-215-8313 |
This information is information that each of
International Petroleum Corporation and BlackPearl Resources Inc.
is required to make public pursuant to the EU Market Abuse
Regulation. The information was submitted for publication, through
the contact persons set out above, at 08:00 CET on October 10,
2018.
Important Information
This press release is not an offer to sell or a
solicitation of any offer to buy any securities issued by IPC or
BlackPearl in any jurisdiction where such offer or sale would be
unlawful. Copies of this press release are not being made and may
not be distributed or sent into any jurisdiction in which such
distribution would be unlawful or would require registration or
other measures.
In any EEA member state, other than Sweden, that
has implemented Directive 2003/71/EC as amended (together with any
applicable implementing measures in any member state, the
“Prospectus Directive”), this press release is only addressed to
and is only directed at qualified investors in that member state
within the meaning of the Prospectus Directive.
For Swedish purposes only, any offering of the
securities referred to in this press release will be made by means
of a prospectus. This press release is not a prospectus for the
purposes of the Prospectus Directive. Swedish investors should not
base their decision to vote at the shareholders’ meetings of IPC
and BlackPearl as referred to in this press release except on the
basis of information contained in the aforementioned prospectus
and/or the joint management information circular referred to
above.
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
IPC’s or BlackPearl'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: timing
and certainty regarding completion of the Transaction, including
fulfilling the conditions precedent to such completion; the ability
of IPC to maintain stable long-term production and take advantage
of growth and development upside opportunities post-completion of
the Transaction; the ability of IPC to integrate the assets and
personnel of BlackPearl; any combined market capitalization,
production, financial and net asset values figures in respect of
IPC post-completion of the Transaction, including reserves and
resources; the process for completing the Transaction; the ability
of the Parties to obtain necessary approvals and otherwise satisfy
the conditions to closing the Transaction; the absence of material
events which may interfere with the Transaction being completed;
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 neither IPC nor BlackPearl can
give 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 that the parties will not receive
required approvals to complete the Transaction or may not be able
to satisfy the conditions to closing; 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 IPC’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”) 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.sedar.com) or IPC's website
(www.international-petroleum.com).
Additional information on these and other
factors that could affect BlackPearl, or its operations or
financial results, are included in BlackPearl’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”) 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.sedar.com) or BlackPearl’s website
(www.blackpearlresources.ca).
Non-IFRS Measures
References are made in this press release to
"operating cash flow" (OCF), "operating costs" and "net debt",
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, operating costs and net debt
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, operating costs and net debt are useful supplemental measures
that may assist shareholders and investors in assessing the cash
generated by and the financial performance and position of IPC and
BlackPearl. Management also uses non-IFRS measures internally in
order to facilitate operating performance comparisons from period
to period, prepare annual operating budgets and assess IPC’s and
BlackPearl’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 IPC’s and BlackPearl’s operating performance and
financial condition on a basis that is more consistent and
comparable between reporting periods. IPC’and BlackPearl’ also
believe that securities analysts, investors and other interested
parties frequently use non-IFRS measures in the evaluation of
issuers.
The definition of each non-IFRS measure is
presented in IPC's MD&A for the six months ended June 30, 2018
(See "Non-IFRS Measures" therein).
Disclosure of Oil and Gas
Information
This press release contains references to
estimates of gross 2P reserves attributed to IPC’s and BlackPearl’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.
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,
Malaysia and the Netherlands are effective as of December 31, 2017
and were prepared by IPC and audited by ERC Equipoise Ltd. (ERCE),
an independent qualified reserves auditor, 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, 2018
price forecasts as referred to below.
Reserves 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 January 5, 2018,
being the completion date for the acquisition of these assets by
IPC, and were evaluated by McDaniel & Associates Consultants
Ltd. (McDaniel), an independent qualified reserves evaluator, in
accordance with NI 51-101 and the COGE Handbook, and using
McDaniel's January 1, 2018 price forecasts. The volumes are
reported and aggregated by IPC in this presentation as being as at
December 31, 2017.
The price forecasts used in the reserve audit /
evaluation are available on the website of McDaniel
(www.mcdan.com), and are contained in IPC’s AIF.
Reserves estimates, contingent resource
estimates and estimates of future net revenue in respect of
BlackPearl’s oil and gas assets were evaluated by Sproule
Associates Limited (Sproule) in a report prepared by Sproule dated
January 18, 2018 evaluating the oil and gas reserves attributable
to BlackPearl’s properties as at December 31, 2017 and the
contingent resource reports prepared by Sproule dated January 17,
2018 for the Blackrod, Onion Lake and Mooney properties as at
December 31, 2017.
"2P reserves" means 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 IPC’s contingent resources are
classified as development unclarified. 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. Of IPC’s 63.4 MMboe best estimate contingent
resources (unrisked), 17.4 MMboe are light and medium crude oil,
7.4 MMboe are heavy crude oil and 38.6 MMboe are conventional
natural gas.
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 IPC’s and BlackPearl’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 audited by
ERCE and evaluated by McDaniel in respect of IPC, and 2P reserves
and contingent resources evaluated by Sproule in respect of
BlackPearl, have been aggregated in this press release. 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 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.
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.
Currency
All 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 V1 - IPCO PXX Annoucement 10-10-2018
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