Yesterday I finished my review of the updated profile for InPlay Oil. My valuation increases by $0.25 to $3.75US per share for IPOOF.
It closed at $1.55US on Friday.
As noted on the first page of the profile, this stock is trading at less than the PV10 Net Asset Value of just its PDP reserves. NO profitable upstream company should trade below the PV10 of just its proved developed producing (PDP) reserves. That gives no value to the Company's "Running Room" and InPlay has A LOT OF RUNNING ROOM. < See page 2 of the profile.
It also pays monthly dividends that offer more than 8% yield.
A few months ago, InPlay's production mix of 40% natural gas, 16% NGLs and 44% crude oil looked too "gassy". Since the North American natural gas market has tightened up, that negative is turning into a positive.
InPlay has a pristine balance sheet, is free cash flow positive, has a lot of high-quality / low-risk drilling inventory, most of which pays out in less than a year at today's oil & gas prices, AND it pays a nice monthly dividend.
IPOOF is one of my Top Picks in our High Yield Income Portfolio.
InPlay Oil (IPOOF) Valuation Update - Oct 5
InPlay Oil (IPOOF) Valuation Update - Oct 5
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: InPlay Oil (IPOOF) Valuation Update - Oct 5
Notes below are from Noble Research. Their price target for IPOOF is $6.00US per share.
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Updating estimates. While we lowered our fiscal year 2024 adjusted funds flow estimate to
C$83.9 million from C$91.0 million, our full year EPS estimate remains C$0.18. Based on the
production profile, we expect the fourth quarter to be the company’s strongest. We increased
our 2025 AFF and EPS to C$99.7 million and C$0.27 from C$99.4 million and C$0.26 to reflect
stronger production growth.
Rating is Outperform. In our view, InPlay's second quarter operational and financial results
were solid. The outlook for 2025 remains favorable due to the development of an area in the
Pembina which was previously restricted by third party gas plant capacity, along with expected
drilling within a delineated Glauconite light oil play at Willesden Green.
Fundamental Analysis
Our fundamental assessment rating, separate from our investment rating and valuation, is based on five attributes. We assign
InPlay 4.0 checks out of a possible 5.0 checks. In our opinion, the company’s corporate governance practices are shareholder
friendly with the company’s board of directors being comprised of five independent members in addition to InPlay’s CEO,
Douglas Bartole. The board is diverse, with differing financial and operational backgrounds. We believe InPlay’s management
team is strong with a long history of operating energy assets in Western Canada. InPlay faces a favorable market opportunity
given high energy prices. InPlay is a low-cost producer with ample growth opportunities putting it in a good competitive position
relative to other western Canadian energy companies. An efficient operating structure grants the company significant operating
leverage to rising revenues. We view the company’s financial leverage positively following recent deleveraging and liquidity
improvements. InPlay’s liquidity is adequate. For further explanation of our fundamental analysis, refer to disclosures at the end
of this report.
Valuation Summary
Our price target on the shares of IPOOF is $6.00 per share. Our price target is based on a two-stage discounted cash flow
model that uses a discount rate of 10.0% and a long-term growth rate of 2.5%. Our price target on the shares of IPOOF
equates to a price target of C$8.00 for the shares of IPO on the Toronto exchange. Due to fluctuations in exchange rates, we
have employed a baseline exchange rate of US$0.75 per C$1.00.
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IPOOF is trading at $1.51US per share this morning.
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Updating estimates. While we lowered our fiscal year 2024 adjusted funds flow estimate to
C$83.9 million from C$91.0 million, our full year EPS estimate remains C$0.18. Based on the
production profile, we expect the fourth quarter to be the company’s strongest. We increased
our 2025 AFF and EPS to C$99.7 million and C$0.27 from C$99.4 million and C$0.26 to reflect
stronger production growth.
Rating is Outperform. In our view, InPlay's second quarter operational and financial results
were solid. The outlook for 2025 remains favorable due to the development of an area in the
Pembina which was previously restricted by third party gas plant capacity, along with expected
drilling within a delineated Glauconite light oil play at Willesden Green.
Fundamental Analysis
Our fundamental assessment rating, separate from our investment rating and valuation, is based on five attributes. We assign
InPlay 4.0 checks out of a possible 5.0 checks. In our opinion, the company’s corporate governance practices are shareholder
friendly with the company’s board of directors being comprised of five independent members in addition to InPlay’s CEO,
Douglas Bartole. The board is diverse, with differing financial and operational backgrounds. We believe InPlay’s management
team is strong with a long history of operating energy assets in Western Canada. InPlay faces a favorable market opportunity
given high energy prices. InPlay is a low-cost producer with ample growth opportunities putting it in a good competitive position
relative to other western Canadian energy companies. An efficient operating structure grants the company significant operating
leverage to rising revenues. We view the company’s financial leverage positively following recent deleveraging and liquidity
improvements. InPlay’s liquidity is adequate. For further explanation of our fundamental analysis, refer to disclosures at the end
of this report.
Valuation Summary
Our price target on the shares of IPOOF is $6.00 per share. Our price target is based on a two-stage discounted cash flow
model that uses a discount rate of 10.0% and a long-term growth rate of 2.5%. Our price target on the shares of IPOOF
equates to a price target of C$8.00 for the shares of IPO on the Toronto exchange. Due to fluctuations in exchange rates, we
have employed a baseline exchange rate of US$0.75 per C$1.00.
------------------------------
IPOOF is trading at $1.51US per share this morning.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group