InPlay Oil (IPOOF) Update - July 19

[dan_s]

IPOOF currently trades at $1.97US. My current valuation is $6.00US, which compares to First Call's price target of $4.28US.

InPlay's production will be down from Q1 to Q2 due to wildfire related shut-ins. There was no serious damage from the fires and InPlay's guidance points to significant production growth in both Q3 and Q4. The Company's exit rate should be close to 12,000 bpd this year.

Here is what I like:
> InPlay is close to being debt free.
> It generates free cash flow that is used to pay monthly dividends of $0.015 ($0.18 per year) for annualized yield of close to 7%.
> It has a lot of "running room" that justifies a much higher valuation multiple. It currently trades at less than 2.4 X 2023 operating cash flow per share.
> InPlay is a "Screaming Takeover Target" for large-caps that need more high-quality drilling inventory. The Company has hundreds of low-risk development drilling locations.
> Free cash flow should exceed $0.65Cdn per share in 2024 giving management that cash needed to accelerate development drilling and/or pay higher dividends.

I may be moving InPlay into our High Yield Income Portfolio.