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 and
nine months ended September 30, 2019. In addition, IPC is pleased
to announce that it has sought approval from the Toronto Stock
Exchange (the “TSX”) to commence a normal course issuer bid to
repurchase its own common shares through the facilities of the TSX
and Nasdaq Stockholm.
Financial and Operational
Highlights
- IPC intends to launch a new share repurchase program, the
second since our April 2017 spin-off, with the intention to
repurchase up to approximately seven percent or 11.5 million IPC
shares, the maximum permitted over a twelve month period under
Canadian and Swedish securities law. Implementation of the share
repurchase program remains subject to Toronto Stock Exchange (TSX)
approval.
- Average net production of 45,500 barrels of oil equivalent
(boe) per day (boepd) for Q3 2019 in line with guidance.
- First ever horizontal well on the Vert La Gravelle field in
France successfully completed in September 2019.
- Commenced the three well infill drilling program in
Malaysia.
- Onion Lake Thermal F-Pad wells in Canada came on stream in
September 2019.
- On track for 50,000 boepd 2019 exit rate with ongoing drilling
activities in Canada, France and Malaysia.
- Operating costs per boe of USD 13.0 for Q3 2019, in line with
guidance.
- Capital expenditure budget remains in line with guidance of USD
188 million.
- Strong operating cash flow generation of USD 70 million in Q3
2019 (USD 229 million for the first nine months of 2019) at the
upper end of guidance.
- Operating cash flows were utilised to fund capital expenditures
and to reduce financial liabilities, with net debt decreasing from
USD 277 million as at December 31, 2018 to USD 208 million as at
September 30, 2019.
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|
|
|
|
Three months endedSeptember 30 |
|
Nine months endedSeptember 30 |
USD Thousands |
2019 |
2018 |
|
2019 |
2018 |
Revenue |
131,437 |
106,746 |
|
408,214 |
342,545 |
Gross profit |
23,487 |
37,060 |
|
109,659 |
120,553 |
Net result |
6,330 |
26,487 |
|
65,216 |
74,298 |
Operating cash flow |
69,504 |
67,949 |
|
229,056 |
220,696 |
EBITDA |
68,885 |
66,240 |
|
225,160 |
206,009 |
Net Debt |
207,778 |
213,217 |
|
207,778 |
213,217 |
|
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|
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Mike Nicholson, IPC's Chief Executive Officer,
commented,
"We are pleased to announce another strong set
of results for the first nine months of 2019.
During Q3 2019, our assets delivered average
daily net production of 45,500 boepd, in line with our latest Q2
guidance. Full year average production guidance is unchanged,
expected at the lower end of the 46,000 to 50,000 boepd guidance
range. The 2019 exit production rate expectation remains at 50,000
boepd. Our operating costs per boe for Q3 2019 was USD 13.0, in
line with guidance. Full year capital expenditure guidance remains
unchanged at USD 188 million.
IPC has continued to deliver a robust financial
performance during Q3 2019 generating a quarterly operating cash
flow of USD 70 million, at the upper end of guidance. This allowed
IPC to fund its expenditure program and to reduce net debt from USD
239 million at the end of Q2 2019 to USD 208 million by the end of
Q3 2019.
In Malaysia, a world class uptime performance on
the Bertam FPSO in excess of 99% continued during Q3 2019. Third
quarter production on the Bertam field was in line with our Q2
guidance. The three well infill drilling program commenced in late
August 2019.
In Canada, the N2N enhanced oil recovery project
and drilling program in the Suffield area remain on schedule with
the N2N plant ramp up ongoing and four out of a planned eight wells
on production. The average production from the Onion Lake Thermal
facility during Q3 2019 was in line with our Q2 guidance. Facility
optimization work has been completed at Onion Lake Thermal that
allowed for steam injection to commence at F-Pad during Q3 2019 and
for the start-up of production from the F-Pad wells during
September 2019.
In France, the first horizontal development well
at the Vert La Gravelle field commenced production in mid-September
2019. This was IPC’s first horizontal well drilled into the
Triassic reservoir in France. Initial indications of productivity
from the well are ahead of expectation. We are currently drilling
the second well in the Southern part of the Vert La Gravelle
field.
With significant undrawn credit facilities at
our disposal, we continue to opportunistically evaluate additional
acquisition targets that we believe can deliver long-term value for
our shareholders.
Share Repurchase Program
We are today pleased to announce that we have
sought approval from the TSX to commence a normal course issuer bid
to repurchase IPC’s common shares through the facilities of the TSX
and Nasdaq Stockholm. The Board of Directors has approved, subject
to acceptance by the TSX, the repurchase of up to approximately
11.5 million common shares, representing approximately 7% of IPC's
outstanding common shares (or 10% of IPC's "public float" as at
November 5, 2019), over a period of twelve months. IPC currently
does not hold any common shares in treasury.
IPC has determined to implement the proposed
share repurchase program because it believes that the current
common share price does not reflect the underlying value of those
shares. IPC believes that the share repurchase program represents
an effective use of IPC’s capital and an efficient way to return
value to IPC’s shareholders.
As and when considered advisable by IPC, common
shares may be repurchased on the TSX and Nasdaq Stockholm at the
prevailing market price at the time of such purchase and in
accordance with the applicable rules and policies of the TSX and
Nasdaq Stockholm and applicable Canadian and Swedish securities
laws. The actual number of common shares that will be repurchased,
and the timing of any such purchases, will be determined by IPC,
subject to the limits imposed by the TSX and Nasdaq Stockholm.
There cannot be any assurances as to the number of common shares
that will ultimately be acquired by IPC. Any common shares
purchased by IPC under the share repurchase program will be
cancelled.”
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 November 5,
2019. The Corporation's unaudited condensed consolidated financial
statements and management's discussion and analysis (MD&A) have
been filed on SEDAR (www.sedar.com) and are also available on the
Corporation's website (www.international-petroleum.com).
Forward-Looking Statements This press release
contains statements and information which constitute
"forward-looking statements" or "forward-looking information"
(within the meaning of applicable securities legislation). Such
statements and information (together, "forward-looking statements")
relate to future events, including the Corporation's future
performance, business prospects or opportunities. Actual results
may differ materially from those expressed or implied by
forward-looking statements. The forward-looking statements
contained in this press release are expressly qualified by this
cautionary statement. Forward-looking statements speak only as of
the date of this press release, unless otherwise indicated. IPC
does not intend, and does not assume any obligation, to update
these forward-looking statements, except as required by applicable
laws.
All statements other than statements of
historical fact may be forward-looking statements. Any statements
that express or involve discussions with respect to predictions,
expectations, beliefs, plans, projections, forecasts, guidance,
budgets, objectives, assumptions or future events or performance
(often, but not always, using words or phrases such as "seek",
"anticipate", "plan", "continue", "estimate", "expect", "may",
"will", "project", “forecast”, "predict", "potential", "targeting",
"intend", "could", "might", "should", "believe", "budget" and
similar expressions) are not statements of historical fact and may
be "forward-looking statements". Forward-looking statements
include, but are not limited to, statements with respect to: IPC’s
intention and ability to continue to implement strategies to build
long-term shareholder value; IPC’s intention to review future
potential growth opportunities; the ability of IPC’s portfolio of
assets to provide a solid foundation for organic and inorganic
growth; the continued facility uptime and reservoir performance in
IPC’s areas of operation; the completion of the Vert La Gravelle
redevelopment project, including drilling and related production
rates and the ability to gather further information regarding the
southern part of the field, and other organic growth opportunities
in France; the completion of the third phase of infill drilling in
Malaysia and the ability to identify and mature additional
locations, and the production uplift from such drilling; future
development potential of the Suffield operations, including
continued and future oil drilling and gas optimization programs,
the ability to offset natural declines and the N2N EOR development
project (including estimated peak rates and timing of such
project); the proposed further conventional oil drilling in Canada,
including the ability of such drilling to identify further drilling
or development opportunities; development of the Blackrod project
in Canada; the results of the facility optimization program and the
work to debottleneck the facilities and injection capability and
the F-Pad production, as well as water intake and steam generation
issues, at Onion Lake Thermal; the intention to commence a share
repurchase program, including the acceptance thereof by the TSX;
the ability to IPC to acquire common shares under the proposed
share repurchase program, including the timing of any such
purchases; the return of value to IPC’s shareholders as a result of
the share repurchases program; 2019 production range, exit rate,
operating costs and capital expenditure estimates; potential
further acquisition opportunities; estimates of reserves; estimates
of contingent resources; estimates of prospective resources; the
ability to generate free cash flows and use that cash to repay debt
and to continue to deleverage; and future drilling and other
exploration and development activities. Statements relating to
"reserves" and "contingent resources" are also deemed to be
forward-looking statements, as they involve the implied assessment,
based on certain estimates and assumptions, that the reserves and
resources described exist in the quantities predicted or estimated
and that the reserves and resources can be profitably produced in
the future. Ultimate recovery of reserves or resources is
based on forecasts of future results, estimates of amounts not yet
determinable and assumptions of management.
The forward-looking statements are based on
certain key expectations and assumptions made by IPC, including
expectations and assumptions concerning: prevailing commodity
prices and currency exchange rates; applicable royalty rates and
tax laws; interest rates; future well production rates and reserve
and contingent resource volumes; operating costs; the timing of
receipt of regulatory approvals; the performance of existing wells;
the success obtained in drilling new wells; anticipated timing and
results of capital expenditures; the sufficiency of budgeted
capital expenditures in carrying out planned activities; the
timing, location and extent of future drilling operations; the
successful completion of acquisitions and dispositions; the
benefits of acquisitions; the state of the economy and the
exploration and production business in the jurisdictions in which
IPC operates and globally; the availability and cost of financing,
labour and services; and the ability to market crude oil, natural
gas and natural gas liquids successfully.
Although IPC believes that the expectations and
assumptions on which such forward-looking statements are based are
reasonable, undue reliance should not be placed on the
forward-looking statements because IPC can give no assurances that
they will prove to be correct. Since forward-looking statements
address future events and conditions, by their very nature they
involve inherent risks and uncertainties. Actual results could
differ materially from those currently anticipated due to a number
of factors and risks. These include, but are not limited to: the
risks associated with the oil and gas industry in general such as
operational risks in development, exploration and production;
delays or changes in plans with respect to exploration or
development projects or capital expenditures; the uncertainty of
estimates and projections relating to reserves, resources,
production, revenues, costs and expenses; health, safety and
environmental risks; commodity price and exchange rate
fluctuations; interest rate fluctuations; marketing and
transportation; loss of markets; environmental risks; competition;
incorrect assessment of the value of acquisitions; failure to
complete or realize the anticipated benefits of acquisitions or
dispositions; the ability to access sufficient capital from
internal and external sources; failure to obtain required
regulatory and other approvals; and changes in legislation,
including but not limited to tax laws, royalties and environmental
regulations. Readers are cautioned that the foregoing list of
factors is not exhaustive.
Additional information on these and other
factors that could affect IPC, or its operations or financial
results, are included in the MD&A (See "Cautionary Statement
Regarding Forward-Looking Information" therein), the Corporation's
Annual Information Form (AIF) for the year ended December 31, 2018
(See "Cautionary Statement Regarding Forward-Looking Information",
"Reserves and Resources Advisory" and "Risk Factors" therein) and
other reports on file with applicable securities regulatory
authorities, which may be accessed through the SEDAR website
(www.sedar.com) or IPC's website
(www.international-petroleum.com).
Non-IFRS MeasuresReferences are
made in this press release to "operating cash flow" (OCF),
"Earnings Before Interest, Tax, Depreciation and Amortization"
(EBITDA), "operating costs" and "net debt"/"net cash", which are
not generally accepted accounting measures under International
Financial Reporting Standards (IFRS) and do not have any
standardized meaning prescribed by IFRS and, therefore, may not be
comparable with definitions of OCF, EBITDA, operating costs and net
debt/net cash that may be used by other public companies. Non-IFRS
measures should not be considered in isolation or as a substitute
for measures prepared in accordance with IFRS.
Management believes that OCF, EBITDA, operating
costs and net debt/net cash are useful supplemental measures that
may assist shareholders and investors in assessing the cash
generated by and the financial performance and position of the
Corporation. Management also uses non-IFRS measures internally in
order to facilitate operating performance comparisons from period
to period, prepare annual operating budgets and assess the
Corporation’s ability to meet its future capital expenditure and
working capital requirements. Management believes these non-IFRS
measures are important supplemental measures of operating
performance because they highlight trends in the core business that
may not otherwise be apparent when relying solely on IFRS financial
measures. Management believes such measures allow for assessment of
the Corporation’s operating performance and financial condition on
a basis that is more consistent and comparable between reporting
periods. The Corporation also believes that securities analysts,
investors and other interested parties frequently use non-IFRS
measures in the evaluation of issuers.
The definition and reconciliation of each
non-IFRS measure is presented in IPC's MD&A (See "Non-IFRS
Measures" therein).
Disclosure of Oil and Gas
Information This press release contains references to
estimates of gross 2P reserves attributed to the Corporation's oil
and gas assets. Gross reserves are the total working interest
reserves before the deduction of any royalties and including any
royalty interests receivable.
Reserves estimates, contingent resource
estimates and estimates of future net revenue in respect of IPC’s
oil and gas assets in the Suffield area of Canada are effective as
of December 31, 2018, and are included in the report prepared by
McDaniel & Associates Consultants Ltd. (McDaniel), an
independent qualified reserves evaluator, in accordance with
National Instrument 51-101 – Standards of Disclosure for Oil and
Gas Activities (NI 51-101) and the Canadian Oil and Gas Evaluation
Handbook (the COGE Handbook), and using McDaniel's January 1, 2019
price forecasts.
Reserves estimates, contingent resource
estimates and estimates of future net revenue in respect of IPC’s
oil and gas assets in the Onion Lake, Blackrod and Mooney areas of
Canada are effective as of December 31, 2018, and are included in
reports prepared by Sproule Associates Limited (Sproule), an
independent qualified reserves evaluator, in accordance with NI
51-101 and the COGE Handbook, and using McDaniel's January 1, 2019
price forecasts.
Reserve estimates, contingent resource
estimates, prospective resource estimates and estimates of future
net revenue in respect of IPC’s oil and gas assets in France and
Malaysia are effective as of December 31, 2018, and are included in
the report prepared by ERC Equipoise Ltd. (ERCE), an independent
qualified reserves auditor, in accordance with NI 51-101 and the
COGE Handbook, and using McDaniel’s January 1, 2019 price
forecasts.
The price forecasts used in the reserve reports
are available on the website of McDaniel (www.mcdan.com), and are
contained in the MCR.
"2P reserves" means IPC’s gross proved plus
probable reserves. "Proved reserves" are those reserves that can be
estimated with a high degree of certainty to be recoverable. It is
likely that the actual remaining quantities recovered will exceed
the estimated proved reserves. "Probable reserves" are those
additional reserves that are less certain to be recovered than
proved reserves. It is equally likely that the actual remaining
quantities recovered will be greater or less than the sum of the
estimated proved plus probable reserves.
Contingent resources are those quantities of
petroleum estimated, as of a given date, to be potentially
recoverable from known accumulations using established technology
or technology under development, but which are not currently
considered to be commercially recoverable due to one or more
contingencies. Contingencies are conditions that must be satisfied
for a portion of contingent resources to be classified as reserves
that are: (a) specific to the project being evaluated; and (b)
expected to be resolved within a reasonable timeframe.
Contingencies may include factors such as economic, legal,
environmental, political, and regulatory matters, or a lack of
markets. It is also appropriate to classify as contingent resources
the estimated discovered recoverable quantities associated with a
project in the early evaluation stage. Contingent resources are
further classified in accordance with the level of certainty
associated with the estimates and may be sub-classified based on a
project maturity and/or characterized by their economic status.
There are three classifications of contingent
resources: low estimate, best estimate and high estimate. Best
estimate is a classification of estimated resources described in
the COGE Handbook as being considered to be the best estimate of
the quantity that will be actually recovered. It is equally likely
that the actual remaining quantities recovered will be greater or
less than the best estimate. If probabilistic methods are used,
there should be at least a 50% probability that the quantities
actually recovered will equal or exceed the best estimate.
Contingent resources are further classified
based on project maturity. The project maturity subclasses include
development pending, development on hold, development unclarified
and development not viable. All of the Corporation’s contingent
resources are classified as either development on hold or
development unclarified. Development on hold is defined as a
contingent resource where there is a reasonable chance of
development, but there are major non-technical contingencies to be
resolved that are usually beyond the control of the operator.
Development unclarified is defined as a contingent resource that
requires further appraisal to clarify the potential for development
and has been assigned a lower chance of development until
contingencies can be clearly defined. Chance of development is the
probability of a project being commercially viable.
References to "unrisked" contingent resources
volumes means that the reported volumes of contingent resources
have not been risked (or adjusted) based on the chance of
commerciality of such resources. In accordance with the COGE
Handbook for contingent resources, the chance of commerciality is
solely based on the chance of development based on all
contingencies required for the re-classification of the contingent
resources as reserves being resolved. Therefore unrisked reported
volumes of contingent resources do not reflect the risking (or
adjustment) of such volumes based on the chance of development of
such resources.
The contingent resources reported in this press
release are estimates only. The estimates are based upon a number
of factors and assumptions each of which contains estimation error
which could result in future revisions of the estimates as more
technical and commercial information becomes available. The
estimation factors include, but are not limited to, the mapped
extent of the oil and gas accumulations, geologic characteristics
of the reservoirs, and dynamic reservoir performance. There are
numerous risks and uncertainties associated with recovery of such
resources, including many factors beyond the Corporation’s control.
There is uncertainty that it will be commercially viable to produce
any portion of the contingent resources referred to in this press
release.
2P reserves and contingent resources have been
aggregated in this press release by IPC. Estimates of reserves and
future net revenue for individual properties may not reflect the
same level of confidence as estimates of reserves and future net
revenue for all properties, due to aggregation. This press release
contains estimates of the net present value of the future net
revenue from IPC's reserves. The estimated values of future net
revenue disclosed in this press release do not represent fair
market value. There is no assurance that the forecast prices and
cost assumptions used in the reserve evaluations will be attained
and variances could be material.
BOEs may be misleading, particularly if used in
isolation. A BOE conversion ratio of 6 thousand cubic feet (Mcf)
per 1 barrel (bbl) is based on an energy equivalency conversion
method primarily applicable at the burner tip and does not
represent a value equivalency at the wellhead. As the value
ratio between natural gas and crude oil based on the current prices
of natural gas and crude oil is significantly different from the
energy equivalency of 6:1, utilizing a 6:1 conversion basis may be
misleading as an indication of value.
CurrencyAll dollar amounts in
this press release are expressed in United States dollars, except
where otherwise noted. References herein to USD mean United
States dollars. References herein to CAD mean Canadian
dollars.
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