Energy Prospectus

InPlay Oil Corp. Announces Transformative Acquisition of Highly Accretive, Low Decline Pembina Cardium Oil Assets
Wed, February 19, 2025 at 4:19 PM CST

InPlay Oil Corp. (TSX: IPO) (OTCQX: IPOOF) ("InPlay" or the "Company") is pleased to announce that it has entered into a definitive agreement for the strategic acquisition of Cardium light oil focused assets in the Pembina area of Alberta (the "Acquired Assets") for consideration of approximately $309 million, prior to adjustments. Consideration will be made up of a $220 million cash payment, $85 million of InPlay common shares (the "Share Consideration") to be issued to the Vendor (as defined below) at a deemed price of $1.55 per share, and the inclusion of InPlay's non-operated assets at Willesden Green Unit 2, with a year-end 2023 Proved Developed Producing ("PDP") value of approximately $4.4 million1 (the "Transaction").

ACQUISITION HIGHLIGHTS

>100% Increase in Production and >170% Increase in Light Oil Production: The Acquired Assets more than double InPlay's production to over 18,750 boe/d2, with oil production increasing to over 9,500 bbl/d.

Highly Accretive Acquisition Metrics: Purchase completed at 2.2x 2025E operating income3,4, 0.5x PDP NPV10% before tax reserve value5 6 and 0.4x Proved NPV10% before tax reserve value5,6; per-share accretion +45% on 2025E adjusted funds flow ("AFF")7 and +70% on 2025E pre-dividend free funds flow7.

Strengthened Free Funds Flow and Shareholder Return Profile: InPlay's annual dividend of $0.18/share (11.6% dividend yield based on share price of $1.55/share), is supported by 2025E pro-forma free funds flow of $104 million (42% free funds flow yield3 based on pro-forma market capitalization) which is more than 3x InPlay's current base dividend .

Low Decline, Long-Life Reserves with Deep Drilling Inventory: Acquired Assets have a 22% PDP decline rate9, a PDP reserve life index5 of 8.7 years and a Proved reserve life index5 of 13.8 years, including a deep inventory of tier 1 Cardium locations5,10.

InPlay to Unlock Operational Synergies: The Acquired Assets directly offset InPlay's existing asset in Pembina, and are expected to provide significant operational synergies on infrastructure, field operations and optimization of development activities.

TRANSACTION DETAILS:

InPlay has entered into a definitive agreement with Obsidian Energy Ltd. (the "Vendor") and certain of the Vendor's affiliates for the purchase of petroleum and natural gas assets producing approximately 10,000 boe/d (68% oil and NGLs) located primarily in the Pembina area of Alberta for a total purchase price of $309 million effective December 1, 2024, prior to adjustments. The Transaction's purchase price represents approximately 2.2x operating income and is highly accretive to InPlay on both funds flow and free funds flow per share metrics while maintaining conservative corporate leverage ratios.

I will take a closer look at this deal on Thursday.

Anyone have links for yesterday's deal announcement or today''s upsize announcement? InPlay's website appears not to be up to date (pathetic).

Market giving pps another pounding. An 11% yield sounds wonderful until you consider that the pps has declined from > US $3.50 to under $1.20 in under 3 years. Excellent destruction of shareholder value. Not the type of "transformation" I was investing for. Rant over.

People "Fear Change".
> 95% of the time a company's stock trades off when a big acquisition is announced; especially when shares of stock are involved.
> Doug Bartole's team has a strong track record of making strategic acquisitions that payout quickly.
> His team members are experts in the Pembina Area.
> This Transformative deal DOUBLES THE COMPANY'S PRODUCTION. It increases InPlay's light oil production by 170% to 9,500 bpd of oil that is selling for over $90Cdn/bbl.
> InPlay is not going to cut the monthly dividend AND the Company has a lot more "Running Room" in their core area.

Plus, natural gas prices in Western Canada will increase, which will give InPlay a significant revenue boost this year.

When stocks sell off based on FEAR, they bounce back.

I will update my forecast/valuation model for InPlay this afternoon.

I'm guessing the additional dilution (on top of that announced yesterday) is what contributed the selloff of this badly beaten down stock.

Will be interested to see in your analysis of the deal what will happen to debt to ebitda and to relevant per share metrics (after incorporating new share count).

InPlay has entered into a definitive agreement with Obsidian Energy Ltd. (the "Vendor") and certain of the Vendor's affiliates for the purchase of petroleum and natural gas assets producing approximately 10,000 boe/d (68% oil and NGLs) located primarily in the Pembina area of Alberta for a total purchase price of $309 million effective December 1, 2024, prior to adjustments.

The Transaction's purchase price represents approximately 2.2x operating income and is highly accretive to InPlay on both funds flow and free funds flow per share metrics while maintaining conservative corporate leverage ratios.

Key to my valuation of IPO.TO
> The Acquired Assets are +45% accretive to InPlay's 2025 Adjusted Funds Flow ("AFF") per share and +70% accretive to InPlay's 2025 pre-dividend free funds flow per share;

> Dividend sustainability expected to be enhanced due to the high oil weighting and low decline oil revenue stream, generating pro-forma free funds flow of $104 million (42% free funds flow yield based on pro-forma market capitalization) equal to more than 3x InPlay's existing base dividend;

CALGARY, AB, Feb. 20, 2025 /CNW/ - InPlay Oil Corp. (TSX: IPO) (OTCQX: IPOOF) ("InPlay" or the "Company") is pleased to announce that, as a result of excess demand, it has agreed with the syndicate of underwriters led by ATB Securities Inc., National Bank Financial Inc. and RBC Capital Markets (collectively, the "Lead Underwriters" and together with the rest of the syndicate of underwriters, the "Underwriters") to increase the size of its previously announced bought-deal prospectus offering (the "Offering") to $28.5 million.

The Underwriters have agreed to purchase for resale to the public, on a bought-deal basis, a total of 18,387,500 subscription receipts ("Subscription Receipts") of InPlay at a price of $1.55 per Subscription Receipt for gross proceeds of approximately $28.5 million. In addition, the Underwriters will now have an option to purchase up to an additional 2,758,125 Subscription Receipts under the Offering at a price of $1.55 per Subscription Receipt to cover over-allotments and for market stabilization purposes.

As previously announced, InPlay has entered into a definitive agreement (the "Acquisition Agreement") for the purchase of petroleum and natural gas assets located primarily in the Pembina area of Alberta for a total purchase price of approximately $309 million, prior to adjustments (the "Transaction"). It is anticipated that InPlay will fund the Transaction, with the net proceeds of the Offering and through draws from InPlay's recently announced $300 million credit facilities.

Completion of the Offering is subject to customary closing conditions, including the receipt of all necessary regulatory approvals, including the approval of the Toronto Stock Exchange. Closing of the Offering is expected to occur on February 27, 2025.

Dan,

Slide 9 of the deal deck shows an estimated 2025 YE net debt of $194 mm and 0.9X net debt/EBITDA.

How does this compare to pre-deal and, more importantly, to debt levels of similarly situated companies?

I ask because for some investors, debt is higher on their list of considerations than it is on yours (not a criticism, just something that can affect where the market as a whole values a company).

Thank you.

Harry and I compared notes, and I made some more conservative adjustments to my forecast model.

InPlay should generate EBITDA of approximately $194 million in 2025 and $284 million EBITDA in 2026. The Company's free cash flow will be more than enough the service the debt, which is why Doug had no problem getting the credit facility increased.

InPlay's balance sheet was in good shape already and the common stock sale keeps the balance sheet ratios in good shape.

InPlay has increased their D&C capex for 2025 to $94 million, so I expect the Company to ramp up production from 18,750 Boepd in April to an exit rate of close to 20,000 Boepd with a mix of approximately 51% light oil, 38% natural gas and 11% NGLs.

Free cash flow net of capex and interest payments is much higher per share YOY.

Harry and I agree that the additional "Running Room" that InPlay has in their core area, is a significant increase our valuations of IPOOF.

Keep in mind that all of the Canadian companies have the FEAR of Trump Tariffs keeping a lid on share prices. In my opinion, the FEAR is not justified.

I sent a few questions to Doug Bartole. Here is his response.

"Dan we are very excited as we now have the biggest position in the largest light oil pool in western Canada where we have been leaders in technology on the Cardium. The high-quality (development drilling) inventory gives us over 10 years of stay first inventory and potential to double that over time. The synergies we see will be massive that is well before how accretive it is. We will look at and get back to you. It will probably be next week."

A plus for me is that making a large acquisition in the same area where InPlay already has significant operations and extensive knowledge of the geology means they will not have to add a lot more staff. I expect InPlay to announce a drilling program that will ramp up after Spring Breakup in June.