CALGARY, Alberta, Jan. 22, 2019 (GLOBE NEWSWIRE) — InPlay Oil Corp. (“InPlay” or “the Company”) (TSX: IPO, OTCQX: IPOOF) is pleased to announce that its Board of Directors has approved a $36 million Exploration and Development capital program for 2019.
A year of exceptional operational results in 2018, drilling pacesetter horizontal Cardium wells at Willesden Green, positions us to continue with a focused 2019 capital program. With the potential for continued commodity price volatility, we plan to deliver a prudent and flexible 2019 capital program that is forecast to achieve between ten and fourteen percent exit oil and liquids per share growth over 2018. The excellent production results seen from new wells in addition to anticipated reductions in operating and general and administrative costs, on a per boe basis, position us well to continue to deliver higher cash flow provided by operating activities and higher operating income profit margins compared to 2018.
In 2018 InPlay drilled 16 (11.2 net) horizontal wells in the Willesden Green area including 12 (8.6 net) extended reach horizontal wells (“ERH”) and 4 (2.6 net) one-mile horizontal wells. In the Duvernay, the Company completed its first horizontal well and drilled one vertical stratigraphic test well. The result is estimated annual average production of approximately 4,650 boe/d (70% oil and liquids) which achieves production growth of approximately 17% over 2017 (22% for oil and liquids), exceeding our recently increased annual production guidance of 4,600 boe/d following the two previous increases to production guidance in the second half of 2018. This production growth was achieved through organic drill bit success inclusive of selling non-core assets producing approximately 250 boe/d in October and with the deferral of completions on two ERH wells drilled in the fourth quarter of 2018.
In the fourth quarter, unique circumstances unfolded which had a significant negative impact on crude oil markets. Extended refinery turnarounds in the Midwest USA, increased oil supplies and transportation infrastructure restrictions led to significantly higher than normal Edmonton light oil to West Texas Intermediate (“WTI”) differentials, negatively impacting realized oil prices over the quarter. The Alberta Government reacted to this situation and imposed production curtailments starting in January 2019 which resulted in these differentials correcting back to more normalized levels at this time. InPlay is not affected by these production curtailments as they only apply to producers that produce in excess of 10,000 bbls/d of Alberta crude oil production. Decreases in WTI prices were also experienced in the fourth quarter affecting realized oil prices. WTI crude oil prices dropped to average US$ 58.81/bbl in the fourth quarter of 2018 from an average of US$ 66.80/bbl over the first nine months of 2018 and traded at a low of US$ 42.53/bbl in the month of December. InPlay prudently reacted to these pricing impacts and adjusted our fourth quarter 2018 capital program accordingly. Three (2.2 net) 1.5 mile Willesden Green horizontal wells were drilled in the quarter, however two net ERH wells originally planned for completion mid-fourth quarter 2018 were deferred until early 2019 so as to not sell the high rate initial production from these wells into the steeply discounted pricing environment. This strategy was successful as we can now take advantage of the significantly improved pricing environment in 2019. Also, one vertical stratigraphic test well in the Huxley Duvernay area was drilled in the fourth quarter extending the land tenure on this block for an additional five years.
Our Willesden Green drilling program has provided exceptional results to date exceeding our expectations which was the driver behind enabling InPlay to exceed annual average production guidance and increasing our production guidance twice in the second half of 2018, even after factoring in the non-core asset disposition and deferred completions in the fourth quarter. We continue to excel in the execution of our drilling and completions capital program with our 1.5 mile ERH wells averaging 9.7 drilling days with the last two wells averaging nine drilling days which are the pacesetters in the area. The last 2.0 mile ERH well was drilled in 12.5 days making it another industry pacesetter in Willesden Green. InPlay’s completion programs also incorporate leading edge methods and technologies, streamlining operations and reducing operational start up issues and timelines. Our operations in the Willesden Green area are highly supported given the core technical strengths of management which has combined experience on drilling and completion of over 300 horizontal multi-frac wells.
The last two ERH wells that came on production in October flowed at an average rate of 562 boe/d (86% light oil and liquids) and 520 boe/d (79% light oil and liquids) over the initial 30 and 60 day periods respectively. Results from our nine ERH wells in Willesden Green in 2018 are as follows: Average initial production (“IP”) rates of IP(30 days) of 524 boe/d (86% light oil and liquids), IP (60 days) of 480 boe/d (83% light oil and liquids) and IP (90 days) of 422 boe/d (80% light oil and liquids).
2019 Budget Overview
The Company’s Board of Directors has approved a capital budget for 2019 of $36 million. The focus is on sustainability and flexibility with respect to commodity prices. InPlay intends to follow a prudent capital program in 2019 with first half (“H1/19”) spending less than estimated cash flow provided by operating activities. The second half (“H2/19”) capital program will be flexible and can be adjusted to accommodate variability in commodity prices. This program will allow the Company to maintain a solid financial footing while also managing to achieve a meaningful level of top tier light oil growth throughout the year.
The approved 2019 capital program includes the completion of the two deferred horizontal wells drilled in the fourth quarter of 2018 as well as drilling approximately nine net horizontal wells with the majority being ERH Cardium wells in our core Willesden Green bioturbated play. Capital in H1/19 will be comprised of completing the two net deferred ERH Willesden Green wells and drilling approximately three net ERH wells on estimated capital expenditures of $14 to $16 million, providing up to approximately $2 million in excess cash flow provided by operating activities above capital expenditures. The balance of $20 to $22 million in capital is planned to be spent in the second half of 2019.
The 2019 capital program drives annual average 2019 production guidance of 4,900 to 5,100 boe/d (approximately 70% oil & liquids) with exit production of 5,400 to 5,600 boe/d (70% oil & liquids) and corresponding estimated organic annual production growth of between six and ten percent for oil and liquids and on a total barrels of oil equivalent (“boe”) basis for the full year of 2019 compared to 2018 and exit production growth of between ten and fourteen percent.
The Company’s 2019 guidance is based on a current future commodity price curve with an annual average WTI price of US$ 54.00/bbl, $1.50/mcf AECO and with estimates on foreign exchange of 0.75 CDN/USD and an Edmonton light sweet differential of ($7.50) US$/bbl. A change in the price of WTI by US$ 5.00/bbl results in a difference of approximately $7 million in cash flow provided by operating activities. Starting in January 2019, we saw significant improvements in the Edmonton light differential with trading following more historically normal levels. Efficiencies in operating activities are also anticipated to be achieved with operating costs and general and administrative costs forecast to be reduced on a boe basis by between approximately six and ten percent in 2019 over 2018. With continuous efficiencies in operations and the high netback structure of InPlay’s assets, even at lower WTI pricing than 2018, InPlay estimates operating income profit margins of approximately 55%, which results in an increase of approximately six percent over 2018. This program is expected to continue to yield strong financial returns with top quartile light oil production growth amongst our light oil weighted peers.
About InPlay Oil Corp.
InPlay, based in Calgary, Alberta, has been engaged in the business of exploring for, developing and producing oil and natural gas, and acquiring oil and natural gas properties in western Canada since it commenced operations as a private company in June 2013. Since commencing operations InPlay has concentrated on exploration and development drilling of light oil prospects in the Province of Alberta in a focused area of Central and West Central Alberta.
The InPlay management team has worked closely together for several years in both private and public company environments and has an established track record of delivering cost-effective per share growth in reserves, production and cash flow provided by operating activities. InPlay will continue to implement its proven strategy of exploring, acquiring, and exploiting on with a long term focus on large, light oil resource based assets. The InPlay management team brings a full spectrum of geotechnical, engineering, negotiating and financial experience to its investment decisions. An updated corporate presentation will be posted to InPlay’s website in due course. Additional information about the Company can be found on InPlay’s website at: www.inplayoil.com.
For further information please contact:
|Doug Bartole||Darren Dittmer|
|President and Chief Executive Officer||Chief Financial Officer|
|InPlay Oil Corp||InPlay Oil Corp.|
|(587) 955-0632||(587) 955-0634|
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