International Petroleum Corporation (IPC or the
Corporation) (TSX, Nasdaq Stockholm: IPCO)
announces its plans to reduce total forecast 2020 expenditure by
between USD 125 and 190 million. IPC’s revised total
estimated 2020 capital and decommissioning
expenditures account for approximately USD 85 million of the total
forecast reduction. IPC’s total forecast 2020 operating costs are
revised downwards by between USD 40 and 105 million, depending on
production levels and commodity prices.
Mike Nicholson, IPC's Chief Executive Officer,
comments: “Following the extraordinary developments in the world
since we released our 2020 budget and production guidance and held
our 2020 Capital Markets Day in February, IPC is taking decisive
action to reset our 2020 expenditure plans in order to maximise the
financial flexibility of the Corporation.
Given that we operate the majority of our
assets, IPC has significant financial and operational flexibility
to react swiftly to recent events and to positively prepare the
Corporation to navigate through this period of extremely low
commodity prices. All remaining discretionary 2020 expenditures
have been deferred or cancelled and we have built into our forecast
range the temporary curtailment of production from those fields
that are not expected to generate positive cash flows at these low
pricing levels. These proposed production curtailments relate to
our oil production, as we currently forecast positive cash flows
from our gas production in Canada. We currently expect our 2020 net
average production to be in the range of 30,000 to 45,000 barrels
of oil equivalent (boe) per day, depending on how commodity prices
evolve over the remainder of 2020 and the operational choices that
we make to maximise the liquidity position of the Corporation.
Operating costs for 2020 are expected to be in the range of USD 12
to 13 per boe.
We retain access to significant financial
headroom, with undrawn amounts under existing credit facilities
currently at around USD 90 million.
We expect to be able to fully fund our revised
2020 expenditure program from cash flows and current borrowing
capacity. Assuming average 2020 Brent oil prices of USD 25 per
barrel and assuming Western Canadian Select oil prices are at zero
for the remainder of the year, we would expect to utilise around
half of our liquidity headroom. This demonstrates the financial
resilience of IPC to respond to sustained low oil prices.
The situation around the Covid-19 outbreak
continues to evolve in all of our countries of operation. We are
focused on protecting the health and safety of our employees,
contractors and other stakeholders, while also working to ensure
business continuity. The revised expenditure program and changes to
operations will commence immediately. The Corporation will continue
to monitor the commodity price outlook, as well as the restrictions
and potential disruptions relating to the Covid-19 outbreak, and
IPC has the ability to make further adjustments to these forecasts
as needed.”
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 |
The information was submitted for publication,
through the contact persons set out above, at 08:30 CET on April 2,
2020.
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.
The Covid-19 virus and the restrictions
and disruptions related to it, as well as the actions of certain
oil and gas producing nations, have had a drastic adverse effect in
2020 on the world demand for, and prices of, oil and gas as well as
the market price of the shares of oil and gas companies generally,
including the Corporation’s common shares. These factors are beyond
the control of the Corporation and it is difficult to assess how
these, and other factors, will continue to affect the Corporation
and the market price of IPC’s common shares. In light of the
current situation, as at the date of this press release, the
Corporation continues to review and assess its business plans and
assumptions regarding the business environment, as well as its
estimates of future production, cash flows, operating costs and
capital expenditures.
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: 2020
production range, operating costs 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 ability to reduce
expenditures to forecast levels; IPC’s financial and operational
flexibility to react to recent events and to prepare the
Corporation to navigate through periods of low commodity prices;
IPC’s ability to defer or cancel expenditures and to curtail
production, and to resume such production following curtailment;
IPC’s continued access to its existing credit facilities, including
current financial headroom, on terms acceptable to the Corporation;
the ability to fully fund 2020 expenditures from cash flows and
current borrowing capacity; the financial resilience of IPC to
respond to sustained low oil prices; IPC’s flexibility to remain
within existing financial headroom should Brent and Canadian oil
prices fall to zero through the end of 2020; the ability of IPC to
make further adjustments to its 2020 expenditure plans, including
to further lower production and operating costs; IPC’s ability to
generate cash flows; and the ability to maintain operations,
production and business in light of the Covid-19 outbreak 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. 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;
anticipated timing and results of capital expenditures; the
sufficiency of budgeted capital expenditures in carrying out
planned activities; 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; competition; incorrect assessment
of the value of acquisitions; failure to 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. 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 management’s discussion and analysis
for the year ended December 31, 2019 (See "Cautionary Statement
Regarding Forward-Looking Information" therein), the Corporation's
Annual Information Form (AIF) for the year ended December 31, 2019
(See "Cautionary Statement Regarding Forward-Looking Information",
"Reserves and Resources Advisory" and " Risk Factors" therein) and
other reports on file with applicable securities regulatory
authorities, including previous financial reports, management’s
discussion and analysis and material change reports, which may be
accessed through the SEDAR website (www.sedar.com) or IPC's website
(www.international-petroleum.com).
Non-IFRS MeasuresReferences may
be 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 definitions of OCF, FCF, 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 non-IFRS measures 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. Forward-looking statements are provided for
the purpose of presenting information about management’s current
expectations and plans relating to the future and readers are
cautioned that such statements may not be appropriate for other
purposes.
The definition of each non-IFRS measure is
presented in IPC's MD&A (See "Non-IFRS Measures"
therein).
Disclosure of Oil and Gas
Information 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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