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 for the three months ended March 31, 2020.
Corporate Update
- In the April 2, 2020 press release, IPC revised its forecast
2020 net average production to be in the range of 30,000 to 45,000
barrels of oil equivalent (boe) per day (boepd), estimated
operating costs for 2020 to be in the range of USD 12 to 13 per
boe, and reductions in total forecast 2020 expenditure of between
USD 125 and 190 million as compared to estimates announced at IPC’s
Capital Markets Day (CMD) in February 2020.
- Operational decisions that IPC has subsequently made allow it
to revise the forecast 2020 expenditure reductions to between USD
175 and 190 million as compared to CMD estimates. This comprises
USD 85 million in reduced capital and decommissioning expenditures
and USD 90 to 105 million in reduced operating costs. As a result,
IPC’s forecast 2020 net average production guidance range is 30,000
to 37,000 boepd. IPC’s estimated 2020 capital and decommissioning
expenditures are USD 77 million and IPC’s forecast 2020 operating
costs are in the range of USD 140 to 155 million, resulting in
estimated 2020 unit operating costs in the range of USD 12 to 13
per boe.
- Financial headroom under the current terms of IPC’s existing
and new credit facilities has increased to in excess of USD 100
million.
- Assuming average 2020 Brent oil prices of USD 25 per barrel and
assuming Western Canadian Select (WCS) oil prices are at zero for
the remainder of the year, IPC expects to utilize less than 40% of
its existing financial headroom.
- In March 2020, IPC announced the completion of the acquisition
of Granite Oil Corp. (the Granite Acquisition), comprising light
oil proved plus probable reserves of 14.0 million barrels of oil
equivalent (MMboe) and 6.2 MMboe of contingent resources (best
estimate, unrisked) as at December 31, 2019.
Q1 2020 Financial and Operational
Highlights
- Average net production of approximately 46,000 boepd for Q1
2020 (43% heavy crude oil, 20% light and medium crude oil and 37%
natural gas).
- First quarter 2020 operating costs per boe of USD 12.5,
slightly ahead of Q1 2020 guidance.
- In connection with IPC’s revised 2020 business plan,
operational activities and capital expenditures have been reduced,
deferred or cancelled in each region in response to the low oil
price environment.
|
Three months ended March 31 |
USD Thousands |
2020 |
|
2019 |
Revenue |
80,536 |
|
147,420 |
Gross profit |
(12,436 |
) |
46,885 |
Net result |
(40,069 |
) |
33,142 |
Operating cash flow |
21,481 |
|
83,056 |
Free cash flow |
(42,712 |
) |
52,064 |
EBITDA |
19,009 |
|
81,675 |
Net Debt |
302,473 |
|
256,962 |
- Net debt increased from USD 291 million as at December 31, 2019
(including the cost of the Granite Acquisition) to USD 302.5
million as at March 31, 2020.
- Operating cash flow generation for Q1 2020 amounted to USD 21.5
million, below the original CMD guidance as a result of the
weakness in commodity prices towards the end of Q1 2020. This
coincided with two cargo liftings in Malaysia in March 2020 when
Brent prices averaged USD 32 per bbl and the falling commodity
prices also impacted the revenues in France where pricing is based
on one month forward Brent prices.
- Under the previously announced share repurchase program, IPC
repurchased for USD 17.6 million and cancelled approximately 4.4
million IPC shares during Q1 2020, in addition to the 3.9 million
IPC shares cancelled in 2019. In order to conserve liquidity, IPC
has suspended further share repurchases under the program.
Mike Nicholson, IPC's Chief Executive Officer,
commented,
"Given the extraordinary market situation that
the oil and gas business is facing in response to the global
Covid-19 outbreak, the resulting collapse in world oil demand, and
the initial breakdown in co-operation among the OPEC+ group in
dealing with the supply challenge, we have witnessed an
unprecedented level of volatility and commodity price weakness
during 2020. As a result of this, IPC announced on April 2, 2020
that we are taking decisive action to reset our 2020 expenditure
plans in order to maximize the financial flexibility of the
Corporation.
Since that announcement, we have seen
encouraging steps taken by OPEC+, G20 nations and oil producers
that we are confident should remove significant supply, helping to
deal with the massive demand destruction that we have witnessed as
well as the inevitable inventory build. We expect that these
actions should flatten the curve of inventory builds and set a
course to rebalance markets in the second half of 2020 and into
2021. Clearly though, the magnitude and pace of the recovery in oil
demand will be critical in reducing the uncertainty around when oil
prices will recover.
Reset of 2020 CMD Business
PlanGiven that IPC operates the majority of our assets,
IPC has the 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 production range the
temporary curtailment of production from those fields that are not
expected to generate positive cash flows at these low pricing
levels. These production curtailments relate to a portion of our
oil production. Our Canadian gas production is not curtailed as we
currently forecast positive cash flows.
In our April 2, 2020 announcement, we revised
our forecast 2020 net average production to be in the range of
30,000 to 45,000 boepd, estimated operating costs for 2020 to be in
the range of USD 12 to 13 per boe, and reductions in total forecast
2020 expenditure of between USD 125 and 190 million as compared to
2020 CMD estimates.
Operational decisions that we have subsequently
made allow us to revise our forecast 2020 expenditure reductions to
between USD 175 and 190 million as compared to CMD estimates. This
comprises USD 85 million in reduced capital and decommissioning
expenditures and USD 90 to 105 million in reduced operating costs.
As a result, our forecast 2020 net average production guidance
range is 30,000 to 37,000 boepd. IPC’s estimated 2020 capital and
decommissioning expenditures are USD 77 million and IPC’s forecast
2020 operating costs are in the range of USD 140 to 155 million,
resulting in estimated 2020 unit operating costs in the range of
USD 12 to 13 per boe. The upper end of our revised production
guidance assumes that the curtailments in Canada to the end of June
2020 continue through to the end of the year, with the lower end of
the range assuming full curtailment of our Canadian oil production
in the second half of 2020. We retain the flexibility to ramp
production back up during the second half of 2020 should market
conditions improve.
Maximizing Financial
FlexibilityHaving reset our 2020 business plan, we have
also been very active in engaging with our banks to ensure that we
can maximize our financial flexibility. As at the end of the first
quarter 2020, we had available liquidity headroom of around USD 90
million under our existing international and Canadian credit
facilities. We commenced discussions with our international banking
partners to potentially extend the maturity of and increase our
existing reserves-based lending (RBL) credit facility as we do not
believe that this was fully maximized under previous conditions. In
parallel, we have been exploring IPC’s ability to access some of
the special financial assistance packages being offered by the
government authorities in France.
I am very pleased to report a positive outcome
on the latter. We have been able to secure a EUR 13 million credit
facility from a French financial institution under this program.
The credit facility has an initial term of 12 months and is
extendable by IPC for up to a further five years. The credit
facility is unsecured and is on less expensive terms than IPC’s
existing credit facilities.
In Canada, we have also commenced discussions
with our banking partners. Our primary Canadian RBL facility is
currently sized at CAD 375 million and we have drawn CAD 297
million at the end of the first quarter. Whilst our RBL
redetermination discussions are not expected to be completed until
later in Q2 2020, we have been encouraged by the financial support
package that has been announced by the Canadian Federal Government,
through Export Development Canada (EDC). This program aims to
support the oil and gas sector by maintaining liquidity during the
crisis, through the form of guarantees provided by EDC in respect
of RBL facilities. Our CAD 42.5 million facility assumed as part of
the Granite Acquisition is not up for review until the year end.
This is currently drawn at CAD 40 million.
In addition, IPC has the benefit of a hedging
program in Canada in place through to the end of June 2020, that is
expected to provide a minimum average realized WCS price of
approximately USD 16 per bbl on our curtailed oil production levels
in Canada during Q2 2020.
We retain access to financial headroom under the
current terms of our existing and new credit facilities available
to us in excess of USD 100 million. Taken together with our
operational choices and updated hedging program, 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 WCS oil prices are at
zero for the remainder of the year, we expect to utilize less than
40% of our existing liquidity headroom. This demonstrates the
financial resilience of IPC to respond to sustained low oil
prices.
Q1 2020 PerformanceDuring Q1
2020, our assets delivered average daily net production of 46,000
boepd, in line with our original CMD Q1 2020 guidance. Our
operating costs per boe for Q1 2020 was USD 12.5, slightly below
our original CMD Q1 2020 guidance.
Operating cash flow generation for the first
quarter amounted to USD 21.5 million, below our original CMD
guidance as a result of the weakness in commodity prices towards
the end of Q1 2020. This coincided with two cargo liftings in
Malaysia in March 2020 when Brent prices averaged USD 32 per bbl
and the falling commodity prices also impacted the revenues in
France where pricing is based on one month forward Brent
prices.
Capital expenditure during Q1 2020 of USD 56
million was around USD 6 million below forecast as we began
implementation of our expenditure reduction program.
Net debt increased from the 2019 year end level
of USD 291 million (including the cost of the Granite Acquisition)
to USD 302.5 million as at March 31, 2020 which also includes the
funding of USD 17 million of share repurchases under the share
repurchase program in Q1 2020.”
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 May 6, 2020. The
Corporation's unaudited interim condensed consolidated financial
statements (Financial Statements) and management's discussion and
analysis (MD&A) for the three months ended March 31, 2020 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.
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:
- IPC’s ability to maximize liquidity and financial flexibility
in connection with the Covid-19 outbreak and reduction in commodity
prices;
- the expectation that recent actions will assist in reducing
inventory builds and in rebalancing markets, including supply and
demand for oil and gas;
- 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 to expected levels
following curtailment;
- IPC’s continued access to its existing credit facilities,
including current financial headroom, on terms acceptable to the
Corporation;
- IPC’s ability to extend and maintain the maturity of and
increase the international RBL and to redetermine and maintain the
Canadian RBL, including accessing the EDC guarantees, on terms
acceptable to the Corporation;
- the ability to fully fund 2020 expenditures from cash flows and
current borrowing capacity;
- IPC’s flexibility to remain within existing financial
headroom;
- IPC’s 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;
- IPC’s intention and ability to continue to implement our
strategies to build long-term shareholder value;
- the ability of IPC’s portfolio of assets to provide a solid
foundation for organic and inorganic growth;
- the continued facility uptime and reservoir performance in
IPC’s areas of operation;
- future development potential of the Suffield operations,
including future oil drilling and gas optimization programs, the
ability to offset natural declines and the N2N EOR development
project;
- 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, 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;
- addition of another drilling pad at Onion Lake Thermal and the
production resulting from such pad;
- the ability of IPC to achieve and maintain current and forecast
production and take advantage of production growth and development
upside opportunities related to the oil and gas assets acquired in
the Granite Acquisition;
- the ability of existing infrastructure acquired in the Granite
Acquisition to enable EOR projects, as well as capacity to allow
for potential further field development opportunities;
- the timing and success of the Villeperdue West development
project, including drilling and related production rates as well as
future phases of the Vert La Gravelle redevelopment project, and
other organic growth opportunities in France;
- future development potential of Triassic reservoirs in France
and the ability to maintain current and forecast production in
France;
- the ability of IPC to achieve and maintain current and forecast
production in Malaysia and the ability to identify, mature and
drill additional infill drilling locations;
- the success and timing of further remedial works in respect of
the A-15 well in Malaysia;
- the ability to IPC to acquire further common shares under the
share repurchase program, including the timing of any such
purchases;
- the return of value to IPC’s shareholders as a result of the
share repurchase program;
- estimates of reserves;
- estimates of contingent resources;
- the ability to generate free cash flows and use that cash to
repay debt; 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,
labor 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, including those experienced in 2020;
- exchange rate and 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, 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 Financial Statements and MD&A for
the three months ended March 31, 2020 (See “Cautionary Statement
Regarding Forward-Looking Information”), the Corporation’s press
release of April 2, 2020, 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”) 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 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", 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 Corporation uses non-IFRS measures to
provide investors with supplemental measures to assess 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 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 and net reserves and resources attributed to the
Corporation's oil and gas assets. Gross reserves / resources are
the working interest (operating or non-operating) share before
deduction of royalties and without including any royalty interests.
Net reserves / resources are the working interest (operating or
non-operating) share after deduction of royalty obligations, plus
royalty interests in reserves/resources, and in respect of PSCs in
Malaysia, adjusted for cost and profit oil. Unless otherwise
indicated, reserves / resource volumes are presented on a gross
basis.
Reserve estimates, contingent resource estimates
and estimates of future net revenue in respect of IPC’s oil and gas
assets in Canada (including oil and gas assets acquired in the
Granite Acquisition) are effective as of December 31, 2019, 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, 2019 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,
2019, 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, 2019 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 AIF. These price forecasts are as at December
31, 2019 and may not be reflective of current and future forecast
commodity prices.
2P reserves as at December 31, 2019 of 300 MMboe
includes 286.2 MMboe attributable to IPC’s oil and gas assets and
14.0 MMboe attributable to oil and gas assets acquired in the
Granite Acquisition. Contingent resources (best estimate, unrisked)
as at December 31, 2019 of 1,089 MMboe includes 1,082.5 MMboe
attributable to IPC’s oil and gas assets and 6.2 MMboe attributable
to oil and gas assets acquired in the Granite Acquisition. The
reserve life index (RLI) is calculated by dividing the 2P reserves
of 300 MMboe as at December 31, 2019 (including the 2P reserves
attributable to oil and gas assets acquired in the Granite
Acquisition), by the mid-point of the 2020 CMD production guidance
of 46,000 to 50,000 boepd.
The product types comprising the 2P reserves
described in this press release are contained in the AIF. Light,
medium and heavy crude oil reserves/resources disclosed in this
press release include solution gas and other by-products.
Light, medium and heavy crude oil
reserves/resources disclosed in this press release include solution
gas and other by-products.
"2P reserves" means 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.
Each of the reserves categories reported (proved
and probable) may be divided into developed and undeveloped
categories. “Developed reserves” are those reserves that are
expected to be recovered from existing wells and installed
facilities or, if facilities have not been installed, that would
involve a low expenditure (for example, when compared to the cost
of drilling a well) to put the reserves on production. The
developed category may be subdivided into producing and
non-producing. “Developed producing reserves” are those reserves
that are expected to be recovered from completion intervals open at
the time of the estimate. These reserves may be currently producing
or, if shut-in, they must have previously been on production, and
the date of resumption of production must be known with reasonable
certainty. “Developed non-producing reserves” are those reserves
that either have not been on production, or have previously been on
production, but are shut-in, and the date of resumption of
production is unknown. “Undeveloped reserves” are those reserves
expected to be recovered from known accumulations where a
significant expenditure (for example, when compared to the cost of
drilling a well) is required to render them capable of production.
They must fully meet the requirements of the reserves
classification (proved, probable) to which they are assigned.
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. References to “contingent resources” do not constitute,
and should be distinguished from, references to “reserves”.
2P reserves and contingent resources included in
the reports prepared by Sproule and ERCE in respect of IPC’s oil
and gas assets in Canada, France and Malaysia have been aggregated
by IPC and may also be aggregated by IPC with the 2P reserves and
contingent resources attributable to the oil and gas assets
acquired in the Granite Acquisition included in the reports
prepared by Sproule on behalf of IPC. Estimates of reserves,
resources and future net revenue for individual properties may not
reflect the same level of confidence as estimates of reserves,
resources 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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