InPlay Oil (IPOOF) Q3 Results - Nov 10

InPlay Oil (IPOOF) Q3 Results - Nov 10

Postby dan_s » Wed Nov 10, 2021 9:54 am

My initial comments are in blue. I will post my updated forecast/valuation model for InPlay by noon.
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CALGARY, Alberta, Nov. 10, 2021 (GLOBE NEWSWIRE) -- InPlay Oil Corp. (TSX: IPO) (OTCQX: IPOOF) (“InPlay” or the “Company”) is pleased to announce its financial and operating results for the three and nine months ended September 30, 2021. InPlay’s condensed unaudited interim financial statements and notes, as well as Management’s Discussion and Analysis (“MD&A”) for the three and nine months ended September 30, 2021 will be available at “www.sedar.com” and our website at “www.inplayoil.com”.

We are very pleased to present our third quarter financial and operating results in which the efficient execution of our operational and capital program, coupled with the significantly improved commodity price environment, has allowed us to achieve record production and financial results.

Third Quarter 2021 Financial & Operating Highlights

Achieved record quarterly production for the second consecutive quarter with third quarter production averaging 6,011 boe/d(1) (64% light oil and NGLs), an increase of 61% compared to 3,742 boe/day (69% light oil and NGLs) in the third quarter of 2020 and an increase of 12% compared to 5,386 boe/d (68% light oil and NGLs) in the second quarter of 2021. < My Q3 forecast was 6,065 Boepd, 54.4% light oil, 12.6% NGLs and 33% natural gas.

Generated record quarterly adjusted funds flow (“AFF”) of $15.6 million ($0.23 per basic share), an increase of 675% compared to $2.0 million ($0.03 per basic share) in the third quarter of 2020 and an increase of 89% compared to $8.2 million ($0.12 per basic share) in the second quarter of 2021. < InPlay's AFF of $15.6 million compares to my operating cash flow forecast of $13.7 million. Thanks to higher netbacks below.

Increased operating netbacks by 168% to $37.09/boe from $13.85/boe in the third quarter of 2020 and by 12% from $33.11/boe in the second quarter of 2021. < This is VERY GOOD NEWS and netbacks should be even higher in Q4.

Realized increased quarterly record operating income and operating income profit margin of $20.5 million and 65% respectively compared to $4.8 million and 44% in the third quarter of 2020 and $16.2 million and 64% in the second quarter of 2021.

Continued to reduce operating expenses to a quarterly record $12.23/boe compared to $14.42/boe in the third quarter of 2020 and $12.51/boe in the second quarter of 2021. < Compares to my Q3 forecast of $12.50/boe.

Generated free adjusted funds flow (“FAFF”) of $5.1 million compared to $1.6 million in the third quarter of 2020 and $3.6 million in the second quarter of 2021.

Decreased net debt by 6% during the third quarter of 2021 from June 30, 2021 while also achieving production growth of 12% over the same respective period.

Strengthened our net debt to quarterly annualized earnings before interest, taxes and depletion (“EBITDA”) ratio to 1.1, compared to 5.2 in the third quarter of 2020 and 1.9 in the second quarter of 2021 achieving the lowest quarterly leverage ratio in our corporate history.
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18 months ago I didn't know if InPlay would survive the pandemic. Thanks to the low interest rate loan they got from the Canadian government, quick moves by Doug Bartole's team to cut expenses and outstanding well results this year, IPOOF is one of my Top Picks in our Small-Cap Growth Portfolio. Prior to this solid quarter, my valuation of IPOOF was $3.25US per share. My valuation will be going up.
Dan Steffens
Energy Prospectus Group
dan_s
 
Posts: 27309
Joined: Fri Apr 23, 2010 8:22 am

Re: InPlay Oil (IPOOF) Q3 Results - Nov 10

Postby dan_s » Wed Nov 10, 2021 10:40 am

Read this carefully as it is KEY to my valuation of IPOOF

SUBSEQUENT EVENTS

Proposed Acquisition
On September 28, 2021, the Company entered into a definitive agreement (the “Agreement”) to acquire
Prairie Storm Resources Corp. ("Prairie Storm"), a light-oil Cardium focused producer with operations
primarily in the Willesden Green area of central Alberta, pursuant to a plan of arrangement under the
Business Corporations Act (Alberta) (the "Arrangement") . Pursuant to the Agreement, subsequent to
satisfaction of the conditions thereto, InPlay will acquire all of the issued and outstanding common shares
of Prairie Storm (the "Prairie Storm Shares") for consideration of: (a) the payment of an aggregate of
approximately $39.9 million in cash; and (b) the issuance of an aggregate of approximately 8.3 million
common shares of InPlay ("InPlay Shares"). The Arrangement is expected to close on or around
November 30, 2021.
The Arrangement will be funded by a combination of a $11.5 million bought deal equity financing led by
Eight Capital, as sole bookrunner, together with ATB Capital Markets as co-lead underwriters (the
"Financing"), available borrowings under InPlay's Senior Credit Facility, as amended and described below,
and the issuance to shareholders of Prairie Storm of approximately 8.3 million InPlay Shares.

Financing
On September 28, 2021, InPlay entered into an agreement with a syndicate of underwriters led by Eight
Capital and ATB Capital Markets (the "Underwriters"), pursuant to which the Underwriters agreed to
purchase for resale to the public, on a bought deal basis, 9.6 million subscription receipts ("Subscription
Receipts")
of InPlay at a price of $1.20 per Subscription Receipt for aggregate gross proceeds of
approximately $11.5 million, inclusive of the full exercise of the Underwriters’ over-allotment option. The
Financing was closed on October 20, 2021. Each Subscription Receipt represents the right to receive,
without payment of additional consideration or further action on the part of the holder, one (1) common
share of InPlay upon completion of the Arrangement.


So, when the acquisition closes at the end of November, InPlay's outstanding common stock will increase from ~68.3 million + 17.9 million to 86.2 million.

Senior Credit Facility Amendments
In connection with the Arrangement, on September 28, 2021 the Company entered into a commitment
letter agreement with its current syndicate of Lenders pursuant to which the Lenders have agreed to
increase the aggregate available borrowing capacity of InPlay’s Senior Credit Facility from $65.0 million to
$85.0 million, subject to and conditional upon the completion of the Arrangement and the Financing (the
"Senior Credit Facility Amendments"). In addition to InPlay's current syndicated fully conforming,
revolving Senior Credit Facility totaling $65 million, under the Senior Credit Facility Amendments, the
Lenders have committed to provide InPlay with an additional $20 million syndicated term facility maturing
November 30, 2022 (the "Senior Term Facility"). The Senior Term Facility will require mandatory
repayments as follows: (i) $6 million by May 31, 2022; (ii) $7 million by August 31, 2022; and (iii) $7 million
by November 30, 2022.
Dan Steffens
Energy Prospectus Group
dan_s
 
Posts: 27309
Joined: Fri Apr 23, 2010 8:22 am

Re: InPlay Oil (IPOOF) Q3 Results - Nov 10

Postby dan_s » Wed Nov 10, 2021 10:58 am

Acquisition Highlights

 Average production from the Prairie Storm Assets is expected to be approximately 1,800 boe/d upon
completion of the Acquisition.

 Drilling after closing of the Acquisition is anticipated to increase production from the Prairie Storm Assets
to approximately 2,755 boe/d in 2022. This is expected to result in approximately $31.0 to $33.0 million
of operating income and approximately $16.5 to $18.5 million of free adjusted funds flow (“FAFF”)
after incorporating capital expenditures and additional general and administrative and interest expense from
the Acquisition.

 The current production decline rate on the Prairie Storm Assets of approximately 10% per annum is accretive
to InPlay’s decline rate.

 Attractive acquisition metrics:
o 2.5 times run rate operating income; 1.3 times 2022 operating income
o $8.26/boe of 2020 YE PDP reserves; $1.90/boe of 2020 YE TP reserves; $1.51/boe of 2020
YE TPP reserves
 The Acquisition is expected to deliver the following accretion metrics:
o 15% accretive to forecast 2022 production per share;
o 12% accretive to targeted 2022 Adjusted Funds Flow (“AFF”) per share;
o 17% accretive to targeted 2022 FAFF per share; and
o 21% accretive to PDP reserves per share; 60% accretive to TP reserves per share and 46%
accretive to TPP reserves per share.

 Pro forma completion of the Acquisition, InPlay is targeting 2022 production to average between 8,900 and
9,400 boe/d which is anticipated to generate $106.5 to $111.5 million of AFF and $55.0 to $59.0
million of FAFF.


 Strengthens InPlay’s balance sheet with 2022 targeted net debt to earnings before interest, taxes and
depletion (“EBITDA”) improving to 0.2 times – 0.3 times.
 Adds proved developed producing (“PDP”) reserves of 4.9 million boe, total proved (“TP”) reserves of
21.3 million boe and total proved plus probable (“TPP”) reserves of 26.8 million boe(4). Production from
January 1, 2021 to November 30, 2021 on the Prairie Storm Assets is estimated to be approximately 0.6
million boe.
 Includes approximately 37,995 net acres of high working interest (77%) Cardium land, making InPlay one
of the largest acreage holders in the Willesden Green Cardium play.
 Adds over 86 net booked drilling locations. InPlay plans to commence drilling on the Prairie Storm Assets
immediately post-closing of the Acquisition. The Company will focus on wells in a targeted Cardium oil
area that delivers better than average production rates due to higher associated gas concentrations, with initial
production rates benefitting from the anticipated strong winter gas prices.
 The Acquisition provides significant improvements to the Company’s sustainability: low decline production;
strong FAFF; sizeable drilling inventory; the addition of material scale to the Company with significant
anticipated cost savings through synergies; and a strengthened balance sheet with improvements to net
debt/EBITDA in 2022.
Dan Steffens
Energy Prospectus Group
dan_s
 
Posts: 27309
Joined: Fri Apr 23, 2010 8:22 am


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