InPlay Oil (IPOOF) Updated valuation - Nov 10

InPlay Oil (IPOOF) Updated valuation - Nov 10

Postby dan_s » Wed Nov 10, 2021 12:04 pm

IPO.TO is trading at $2.02Cdn at the time of this post. First Call's price target is $2.79Cdn.

InPlay's Q3 operating cash flow exceeded my forecast, primarily due to much better realized liquids prices (net of cash settlements on their hedges).
Realized prices in Canadian dollars were $76.25/bbl of crude oil (up from $58.25 in Q2), $45.01/bbl of NGLs (up from $30.27 in Q2) and $3.75/mcf for natural gas (up from $3.27 in Q2). InPlay only has ~40% of their oil hedge in Q4 at US prices of $61 to $69 per bbl, so I'm estimating a realized oil price of $82Cdn/bbl in Q4.
None of the company's NGLs are hedged.
As of September 30, none of their oil was hedged beyond December, 2021. If they do hedge some oil for 2022 it will be with collars that have high ceilings.

I have updated my forecast/valuation model assuming that the Prairie Storm Acquisition closes on November 30. As long as the deal closes before year-end it won't impact my valuation since the Effective Date of the transaction is much earlier. Operating cash flow from the assets between the Effective Date and the Acquisition Date is a Post-Closing adjustment to the cash portion of the acquisition price.

My valuation of IPOOF increases from $3.25US to $3.90US, primarily because I am now giving equal weight to 2021 and 2022 operating cash flow per share estimates ($0.68Cdn in 2021 and $1.27Cdn in 2022). If WTI does average $80US/bbl in 2022 my valuation will go up again when I role the model forward to include a 2023 forecast.

Moving forward, InPlay's well results will be key to the valuation. So far they are outstanding.

My updated forecast/valuation model will be posted to the EPG home page in a few minutes.
Dan Steffens
Energy Prospectus Group
dan_s
 
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