InPlay Oil Announces 2017 Capital Budget of $28-M With Production Growth of Over 20%
InPlay Oil Corp. (“InPlay” or “the Company”) (IPO.TO) (OTCMKT:IPOOF) is pleased to announce that its Board of Directors has approved a $28 million Exploration and Development program for 2017 which is foretasted to deliver over 20% production per share growth from the fourth quarter of 2016 to the fourth quarter of 2017 (assuming all assets acquired and amalgamated on November 7, 2016 produced under InPlay for the full fourth quarter of 2016) while spending less than cash flow.
This organic production growth is expected to deliver top quartile per share growth in the industry while spending less than foretasted internally-generated funds flow.
2017 Budget Overview
InPlay’s 2017 capital program is predominantly focused on drilling approximately twelve net horizontal Cardium wells and the completion and tie-in of three Cardium horizontal wells that started drilling in late 2016. This program is focused on the Company’s high rate of return drilling inventory within its core area with expected payouts of 1.0 year or less on current strip commodity prices.
The drilling, completion and equipping program will be comprised of approximately 82% of total capital expenditures planned for 2017 with the remaining 18% being spent on optimization, water injection conversions, facilities, land, and exploration activities. This program complements InPlay’s core technical strengths where management has drilled over 200 combined net Cardium horizontal wells.
Based on the planned program, InPlay is forecasting an annual average production rate of 4,000 to 4,200 boed (66% light oil and liquids) with exit production of 4,300 – 4,500 boed (68% light oil and liquids).
This budget provides InPlay with significant operational and balance sheet flexibility wherein the Company will spend 16% less than projected funds flow of approximately $33 million based on a WTI Crude Oil price of US$ 55/bbl, foreign exchange of 0.76 CDN/USD, and $ 3.00/GJ AECO price.
The program is expected to generate fourth quarter annualized 2017 debt to cash flow of 0.8x. This forecast has also been stress-tested at a flat 2017 WTI price of US$45/bbl which, with InPlay’s current hedges, would leave the Company with expected fourth quarter 2017 annualized debt to cash flow of 1.1x ensuring the 2017 capital program’s viability and results expected to yield top quartile production growth within our oil weighted peers.
With only five wells expected to be drilled in the first half of 2017, there will be ample room to expand the program in the second half of the year on current prevailing commodity prices.Operations UpdateCurrent production, based on field estimates, is 3,600 boed (63% light oil and liquids).
The Company drilled 4 (3.9 net) Cardium horizontal wells during November and December 2016, and 2 (1.4 net) additional wells were being drilled over year end with drilling completed in early January.
There were 2 (1.9 net) of the 2016 drills completed and brought on production late in December.
All of the wells drilled were in central Pembina and the two completed wells are currently in the early clean-up stage and are on track to meet or exceed InPlay’s forecast rates.
A three well pad which started drilling in 2016 and finished drilling in early 2017 is expected to have completion operations done by the end of January. The Company anticipates approximately three additional wells to be drilled, completed and brought on production prior to the end of the first quarter or early into the second quarter.
Price Risk Management
Asystematic program of layering in commodity swaps and collars to protect against price volatility currently has the Company with price support for the first half of 2017 of 1,600 bbls/day with a floor of $47.86 WTI (US$/bbl) and 1,100 bbls/day with a floor of $45.20 WTI (US$/bbl) for the second half of 2017 assuming a 0.76 CDN/USD exchange rate over the year. Natural gas swaps for 2017 currently have price support for 1,000 GJ/day with a floor of $3.06 CDN$/GJ AECO.
The InPlay team has put together a premier light oil weighted asset base highlighted by large oil in place, low recovery factors, low declines, long reserve life and a large inventory of high rate of return drilling locations.
Danny Gravelle Goal Capital Inc., Tel. 949-305-5093 Mobile 916-934-6898