Energy Fuels is a leading U.S.-based uranium mining company, supplying U3O8 to major nuclear utilities. Energy Fuels also produces vanadium from certain of its projects, as market conditions warrant, and is ramping up commercial-scale production of REE carbonate. Its corporate offices are in Lakewood, Colorado, near Denver, and all its assets and employees are in the United States. Energy Fuels holds three of America’s key uranium production centers: the White Mesa Mill in Utah, the Nichols Ranch in-situ recovery (“ISR”) Project in Wyoming, and the Alta Mesa ISR Project in Texas. The White Mesa Mill is the only conventional uranium mill operating in the U.S. today, has a licensed capacity of over 8 million pounds of U3O8 per year, has the ability to produce vanadium when market conditions warrant, as well as REE carbonate from various uranium-bearing ores. The Nichols Ranch ISR Project is on standby and has a licensed capacity of 2 million pounds of U3O8 per year. The Alta Mesa ISR Project is also on standby and has a licensed capacity of 1.5 million pounds of U3O8 per year. In addition to the above production facilities, Energy Fuels also has one of the largest NI 43-101 compliant uranium resource portfolios in the U.S. and several uranium and uranium/vanadium mining projects on standby and in various stages of permitting and development. The primary trading market for Energy Fuels’ common shares is the NYSE American under the trading symbol “UUUU,” and the Company’s common shares are also listed on the Toronto Stock Exchange under the trading symbol “EFR.” Energy Fuels’ website is www.energyfuels.com.
Michael Heim, Senior Vice President, Equity Research Analyst, Energy & Transportation, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
Energy Fuels reported financial results for the quarter and the year that were largely expected. Earnings for 2024 were $99.8 million or $0.62 per share. However, the positive results were due to a $119 million or $0.73 per share nonrecurring gain on the sale of property. Excluding the sale, the company would have reported a $20 million or $0.12 per share loss for the year. Quarterly losses were slightly higher than expected on limited sales.
Energy Fuel’s liquidity position has grown dramatically in recent quarters. As of December 31, 2023, the company had $222.34 million of working capital and no debt. With such a large liquidity position, the company is well positioned to expand operations without seeking external financing. This includes restarting uranium mining operations but could also fund all or most of the proposed REE Oxide circuit expansion.
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*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
Vancouver, British Columbia–(Newsfile Corp. – February 21, 2024) – Hemisphere Energy Corporation (TSXV: HME) (OTCQX: HMENF) (“Hemisphere” or the “Company”) is pleased to announce that it has been named as one of the top performers on the TSX Venture Exchange (“TSXV”) for the third consecutive year.
The 2024 TSXV 50 showcases the top 50 of over 1,600 TSXV issuers across five sectors: energy, mining, clean technology, life sciences, diversified industries, and technology. The ranking is an equal weighting of each company’s performance during 2023 across three key indicators: market capitalization growth, share price appreciation, and trading volume. More details can be found at the following link: www.tsx.com/venture50.
“We are proud to earn a ranking on the 2024 TSXV Venture 50 list for the third consecutive year,” said Don Simmons, President and Chief Executive Officer of Hemisphere. “The Company has continued to take great strides in growing its operations over the past year while maintaining a strong balance sheet and focusing heavily on return of capital to its shareholders.”
About Hemisphere Energy Corporation
Hemisphere is a dividend-paying Canadian oil company focused on maximizing value per share growth with the sustainable development of its high netback, low decline conventional heavy oil assets through polymer flood enhanced recovery methods. Hemisphere trades on the TSX Venture Exchange as a Tier 1 issuer under the symbol “HME” and on the OTCQX Venture Marketplace under the symbol “HMENF”.
For further information, please visit the Company’s website at www.hemisphereenergy.ca to view its corporate presentation or contact:
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.
The uranium spot price has crossed a major threshold, surging past $100/lb in January 2024 to reach $106.51/lb in early February. This long-awaited milestone marks the first time uranium has hit triple digits since the bull run leading up to the 2008 financial crisis.
The implications of breaching $100/lb are significant for the uranium market. Prices at this level indicate the serious supply and demand imbalances that have characterized the market for years are finally coming to a head. With demand outpacing available supply from mines, traders see uranium poised for further gains still.
The main driver behind January’s price spike was a cut to production forecasts from Kazatomprom, the world’s largest uranium miner. The company stunned the market by announcing lower guidance for 2024 and 2025 due to shortages of a key chemical and construction delays. This reversal came just months after Kazatomprom had planned to boost output to meet rising demand. The supply uncertainty led uranium prices to immediately jump over 8%.
For investors, Kazatomprom’s about-face signals that the supply response to uranium’s bull run may proceed slower than expected. Mine expansions and restarts are lagging, with not enough incentive yet for substantial new production. The supply picture is further complicated by uncertainty around Niger’s uranium exports following a coup there last year.
Junior uranium miners have been the biggest winners from the bullish momentum. With less exposure to long-term contracts than larger producers, juniors are benefiting from the full upside of rising spot prices. Many have announced restarts of idled capacity to take advantage of the favorable pricing environment. Their outsized gains indicate investors see juniors playing a key role in bridging future supply shortfalls.
Reaching the $100/lb mark is a psychological victory for uranium bulls who have waited years for prices to reflect positive fundamentals. Nuclear energy demand is on the rise again amid its role in carbon-free baseload power. With most forecast models predicting large supply deficits opening up over the next decade, there is a growing sense $100/lb is just the beginning.
Past experience shows reaching this triple-digit territory is when utilities truly start getting worried about security of supply. The last time uranium crossed above $100/lb in 2007, it sparked a frenzy of long-term contracting not seen before or since. While contracting volumes picked up last year, they remain below levels to fully cover global reactor requirements.
Many see $100/lb as the price needed to incentivize meaningful new mine production. Bringing large-scale conventional projects online takes over a decade when factoring in permitting and construction. Even smaller ISR operations can take several years to expand. With demand projected to outstrip supply for years to come, prices above $100/lb may be the new normal rather than an unsustainable spike.
For investors, uranium crossing $100/lb should serve as a wake-up call that a structural bull market is unfolding. Uranium has significantly outperformed most other commodity sectors over the past several years. With demand still rising and enormous lead times for new projects, supply shortfalls won’t be reversed overnight.
Now is the time for investors to gain exposure before uranium potentially keeps running toward new highs. Uranium equities offer upside well beyond movements in the underlying commodity price. Juniors in particular stand to see valuations explode higher if they can continue locking in contracts above $100/lb.
While nothing moves up forever, the fundamentals underpinning uranium’s surge past $100/lb look here to stay. Nuclear reactors need reliable fuel supply. Achieving net-zero carbon emissions globally depends on nuclear generation ramping up. With mines struggling to keep pace, all signs point to the uranium bull market having ample room left to run at these levels and beyond.
The mining sector has experienced boom and bust cycles throughout history, but current trends suggest we may be entering a new era of growth and opportunity. With the world transitioning to clean energy and electric vehicles, demand is surging for key minerals like lithium, cobalt, nickel and copper. This creates an attractive investment case for the mining sector.
Historic Trends
Looking back, the mining industry has gone through periods of rapid expansion and painful contraction. During economic expansions and commodity bull markets, mining companies ramp up exploration, development and production to capitalize on high prices. This leads to oversupply and when demand eventually weakens, the cycle turns downward.
We saw this play out in dramatic fashion over the past decade. High prices in the 2000s encouraged massive investment in new mines and supply capacity. But when Chinese growth began to slow around 2012, demand weakened and prices collapsed. The mining sector was forced to drastically cut back on production and capital investment.
Many mining companies barely stayed afloat during this bust period. But this reduction in supply helped set the stage for the next upcycle. Now, after years of underinvestment, mines are depleting reserves faster than they are being replenished. With commodity demand picking up again, conditions are ripe for the next mining boom.
Current Market Trends
Several key trends suggest we are now in the early stages of a new mining upcycle:
Electric vehicle revolution – EV adoption is accelerating around the world, dramatically increasing demand for lithium, cobalt, nickel, copper and other key minerals. Total EV sales increased 70% in 2021 and are projected to rise more than 5-fold by 2030. This will require a massive increase in mineral supply.
Renewable energy expansion – Solar, wind and other renewables are seeing surging growth as countries aim to cut carbon emissions. This further increases metals demand for batteries, transmission lines, wiring and other components.
Supply chain vulnerabilities – The pandemic and geopolitics have exposed risks of relying on a few key countries for critical mineral supply. Governments are now focused on developing domestic mining capacity to ensure supply security.
Decarbonization efforts – Reaching net zero emissions will require a staggering volume of minerals for clean energy infrastructure buildout. Models estimate needing 30 times more lithium and 15 times more cobalt by 2040.
These trends all point to a pending boom in mining investment and production. The demand outlook has fundamentally shifted in a more positive direction.
For investors, this macro backdrop presents an opportunity to capitalize on the coming mining supercycle. Some ways to gain exposure include:
Lithium mining stocks – Lithium prices have skyrocketed 10-fold in the past two years as demand for electric vehicle batteries has soared. Leading lithium miners like Albemarle, SQM and Livent are seeing their earnings multiply. They are investing heavily to aggressively expand production capacity to ride the lithium boom. Their stocks still may have substantial upside given the tight supply and surging demand forecasts.
Nickel and cobalt miners – Clean energy technologies like batteries require vast amounts of nickel and cobalt. Both metals face looming supply deficits. Miners expanding production such as Glencore, Sherritt International and Giga Metals stand to benefit enormously from surging demand and higher prices over the coming decade. These miners offer some of the best leverage to capitalize on the EV battery revolution.
Copper miners – Copper is essential for global electrification and will be required by the millions of tons for EV charging networks, power grids, wiring and electronics. Leading copper miners like Freeport McMoRan, Southern Copper and First Quantum Minerals offer direct exposure to higher copper prices. Many are expanding production while also paying healthy dividends.
Diversified mining majors – Large diversified miners like BHP, Rio Tinto and Vale mine a broad mix of commodities from copper and iron ore to coal and potash. Their diversification provides stability while still benefiting from the overall minerals boom. These global giants pay some of the highest dividends in the market.
Junior mining stocks – Earlier stage mining companies developing new projects provide extreme upside potential leverage but also greater risk. Conduct thorough due diligence on management track record, finances, permitting status and feasibility studies before investing.
Physical gold and silver – Precious metals like gold and silver can provide a hedge against market volatility. Buying physical coins and bars or investing in ETFs offers exposure. Just a small allocation of 5-10% can help balance a portfolio.
Mining ETFs – Funds like the Global X Lithium ETF (LIT), VanEck Vectors Gold Miners ETF (GDX) and SPDR Metals & Mining ETF (XME) provide diversified exposure to mining stocks and commodities. This simplifies investing in the sector.
With mining poised to boom, investors have many options to position for the coming supercycle. As with any investment, proper due diligence and risk management remain critical. But the macro trends point to a bright future for mining stocks. For investors, now may be the ideal time to position for the coming mining supercycle.
Oil prices are on track to post gains this week, driven higher by geopolitical tensions in the Middle East despite ongoing concerns about still high inflation and a cloudy demand outlook.
West Texas Intermediate crude futures have risen approximately 2% week-to-date and were trading around $78 per barrel on Friday. Brent crude, the international benchmark, was up 1.8% on the week to $83 per barrel.
According to analysts, speculative traders and funds are bidding up oil futures based on worries that simmering conflicts in the Middle East could disrupt global supplies. Volatility and uncertainty in the region tends to spur speculative trading in oil markets.
“This is geopolitics with flashing flights, it points right to specs taking advantage of the situation,” said Bob Yawger, managing director at Mizuho America. “They’re rolling the dice expecting something will happen.”
Tensions have escalated on the border between Israel and Lebanon after Israel conducted airstrikes in southern Lebanon this week in retaliation for rocket attacks from the area. The powerful Lebanese militia Hezbollah has vowed to strike back against Israel in response.
There are worries the Israel-Lebanon clashes could spread to a wider conflict, potentially including Israel’s ongoing offensive in Gaza. This could disrupt oil production or transit through the critical Suez Canal. The Middle East accounted for nearly 30% of global oil production last year.
Prices Shake Off Demand Worries
Notably, crude prices have shaken off downward pressure this week from stubbornly high inflation as well as forecasts for weaker demand growth in 2024.
US consumer and wholesale inflation reports this week came in hotter than expected. Persistently high inflation reduces the chances of the Federal Reserve pivoting to interest rate cuts this year which could otherwise boost oil demand.
Demand outlooks for 2024 have also been murky. The International Energy Agency (IEA) downwardly revised its 2024 oil demand growth forecast to 1.2 million barrels per day, half of 2023’s pace. It sees supply growth outpacing demand this year.
However, OPEC offered a more bullish view in its latest report, projecting world oil demand will increase by 2.2 million barrels per day in 2024. The cartel sees demand growth exceeding non-OPEC supply growth.
Investors Shake Off Bearish Signals
Given the conflicting demand forecasts, the resilience of oil prices likely reflects investor optimism over tightening fundamentals outweighing potentially bearish signals.
“There is and has been a yawning chasm in demand estimates,” said Tamas Varga, analyst at PVM brokerage. “The difference of opinions in global oil consumption for this year and the individual quarters, even for the current one, is clearly puzzling.”
Ultimately, lingering Middle East geopolitical risks appear to be overshadowing inflation and demand concerns in driving investor sentiment. With tensions still elevated, investors seem positioned for further volatility and potential price spikes on any supply disruptions.
The diverging demand forecasts and data points mean uncertainty persists around whether markets will tighten as much as OPEC expects or remain oversupplied per the IEA outlook. But with inventories still low by historical standards, prices have room to run higher on any bullish shocks.
What’s Next For Oil Markets
Looking ahead, Middle East tensions, China’s reopening, and the extent of Fed rate hikes will be key drivers of oil price trends. Any military escalation or supply disruptions from the Israel-Lebanon tensions could send crude prices spiking higher.
China’s demand recovery as it exits zero-Covid policies will also remain in focus. Signs of China’s crude imports and manufacturing activity reviving could offer a bullish boost to prices.
At the same time, stubborn inflation likely keeps the Fed on track for further rate hikes in the near term. Only clear signs of slowing price growth might promptdiscussion of rate cuts to stimulate growth. For now, Fed policy looks set to weigh on oil demand and limit significant upside.
Overall, investors should brace for continued volatility in oil markets in 2024. While prices may trend higher on tight supplies, lingering demand uncertainties and geo-political tensions look set to drive choppy price action. Nimble investors able to capitalize on price spikes and dips may find opportunities. But those with a lower risk tolerance may wish to stay on the sidelines until fundamentals stabilize.
Texas-based Diamondback Energy announced Monday that it will purchase Endeavor Energy Partners, the largest privately held oil and gas producer in the prolific Permian Basin, in a cash-and-stock deal valued at approximately $26 billion including debt.
The deal represents one of the largest energy sector acquisitions announced so far in 2024 and highlights the ongoing consolidation in the Permian as companies seek scale and improved efficiencies. Once completed, the merged company will be the third-largest producer in the basin behind only oil majors ExxonMobil and Chevron.
“Diamondback has proven itself to be a premier low-cost operator in the Permian Basin over the last 12 years, and this combination allows us to bring this cost structure to a larger asset base and allocate capital to a stronger pro forma inventory position,” said Travis Stice, CEO of Diamondback, in a statement.
The combined company is projected to pump 816,000 barrels of oil equivalent per day (boepd), with Diamondback estimating $550 million in annual cost savings. Diamondback shareholders will own approximately 60.5% of the new entity, while Endeavor owners will hold the remaining 39.5% stake.
The Permian Basin is located in West Texas and southeastern New Mexico. Technological advances in hydraulic fracturing and horizontal drilling have transformed the Permian into the most prolific oil field in the United States, responsible for about 40% of the country’s crude output.
Endeavor operates in the Midland sub-basin on the Texas side of the Permian, with its acreage located adjacent to existing Diamondback properties. This geographic overlap should allow for significant synergies as the companies integrate operations, infrastructure and drilling inventory.
Diamondback management highlighted Endeavor’s status as one of the Permian’s lowest-cost producers as a key rationale behind the acquisition. Folding Endeavor’s assets into Diamondback’s portfolio should lower overall expenses and boost cash flow on a per-share basis.
The merged company will hold approximately 1.1 million net acres in the Permian Basin and control over 2 billion barrels of recoverable oil equivalent resources. This expanded footprint provides enhanced scale for Diamondback to fund further development.
“This combination allows us to bring this cost structure to a larger asset base and allocate capital to a stronger pro forma inventory position,” noted Stice.
While offering enticing synergies, the partnership also carries risks if oil prices decline significantly from current levels near $80 per barrel. Diamondback is assuming roughly $7 billion of Endeavor’s debt as part of the transaction.
However, the substantial cost efficiencies and expanded production capacity position the newly merged business well for strong free cash flow generation, even in a lower price environment.
The deal is expected to close in Q4 2024 after customary approvals. Shares of Diamondback were up nearly 3% in Monday morning trading on news of the acquisition. The transaction continues the consolidation wave among Permian Basin independents as companies strive to improve margins and gain scale.
For Diamondback, the bold bet on Endeavor represents an opportunity to solidify its status as a Permian leader, while acquiring premium assets that should drive growth for years to come. The combined corporation will boast immense resources, significant capital flexibility and a management team with a proven track record in the basin.
The biggest publicly traded oil companies in the West had a clear message for investors this earnings season: We’re going to keep paying you billions in dividends and stock buybacks, no matter how much our profits fluctuate.
BP, Chevron, ExxonMobil, Shell and TotalEnergies doled out over $111 billion to shareholders in 2023, an all-time record for the group, according to a Reuters analysis. This lavish payout comes even as the companies’ combined net profits sank 37% from 2022’s windfall heights of $196 billion.
It’s a calculated move to reassure investors, particularly major institutional shareholders like pension funds, that the oil supermajors still deserve a place in their portfolios despite LAST year’s stark reminder of the sector’s persistent volatility.
For over a decade, Big Oil has seen its status as a stalwart, dividend-paying pillar of investors’ portfolios slowly erode. The energy sector’s weighting in the S&P 500 index sat at just 4.4% in January, down dramatically from 14% in 2012.
Several factors catalyzed this decline: poor capital discipline leading to wasted spending and subsequent dividend cuts, huge swings in oil and gas prices, the rise of the tech sector, and growing concerns about oil’s role in climate change.
But Russia’s invasion of Ukraine in 2023 sparked an unexpected fossil fuel rally, with Brent crude prices averaging over $100 per barrel and natural gas prices skyrocketing. The oil giants cashed in with their highest profits ever, starkly highlighting the sector’s persistent upside potential.
Now with economic headwinds buffeting energy markets, their mammoth payouts to shareholders seek to underscore oil’s reliability versus more speculative investments. “During a time of geopolitical turmoil and economic uncertainty, our objective remained unchanged: safely deliver higher returns and lower carbon,” said Chevron CEO Mike Wirth after announcing a 6% dividend increase.
Besides dividends, oil majors are channeling these record buybacks to shareholders. Exxon Mobil alone spent $35 billion last year snapping up its own shares, while Shell has vowed “complete predictability” around shareholder returns.
This focus on payouts over production indicates Big Oil has absorbed the lessons of overspending on large-scale projects with uncertain demand outlooks. After former CEO John Browne spearheaded a failed push for aggressive growth at BP, lease write-downs of $60 billion soon followed.
Now with the transition to cleaner energy casting further uncertainty over long-term oil demand, companies are tightly rationing investment. Bernstein analyst Oswald Clint said investors “absolutely remember the sins of the past investment cycles and are pretty determined not to repeat those.”
While Exxon and Chevron are still expanding oil output, others like BP and Shell plan to cut production over this decade as part of their climate strategies. But all are aligning around far greater capital discipline and what they call “high-grading” their portfolios.
Rather than chasing growth, new projects must meet stricter hurdles for returns, emissions, and regulations. Tobias Wagner of Moody’s Investors Service expects only minimal investment increases industry-wide in 2024 given the cautious outlook.
So even as society decarbonizes, the oil supermajors are making a case that their stocks can still reward shareholders through the transition. Yet it remains to be seen whether investors who have fled the sector for greener pastures like clean energy and tech will find these guarantees compelling enough to return.
General Motors (GM) announced Wednesday its largest investment yet to lock up critical raw materials needed for its ambitious electric vehicle (EV) production plans. The Detroit automaker said it will spend $19 billion over the next decade to source cathode materials from South Korean supplier LG Chem.
The materials—including nickel, cobalt, manganese and aluminum—are key ingredients for the lithium-ion batteries that power EVs. Under the agreement spanning 2026-2035, LG Chem will ship over 500,000 tons of cathode materials to GM’s joint battery cell plants with LG spinoff Ultium Cells in the United States.
GM stated this is enough supply for approximately 5 million EVs with an estimated range of over 300 miles per charge. The materials will come from an LG Chem plant currently under construction in Tennessee.
For GM, signing a long-term purchase agreement helps mitigate risks around securing sufficient future EV battery supplies amid intensifying competition. As automakers collectively invest billions to shift their lineups to mostly EVs by 2030, critical mineral shortages could constrain production plans.
“This contract builds on GM’s commitment to create a strong, sustainable battery EV supply chain to support our fast-growing EV production needs,” said Jeff Morrison, GM vice president of global purchasing and supply chain.
The LG Chem deal ranks among the largest—if not the largest—EV supply contract inked by GM to date. It highlights an urgency by the company to lock up raw materials as the global auto industry accelerates its electric shift. GM aspires to exclusively sell EVs by 2035.
However, the 14-year LG Chem agreement also implies GM may be adapting its EV strategy to account for adoption happening slower than anticipated. The original pact was scheduled to expire in 2030, but GM extended it another five years.
After initially forecasting aggressive EV sales growth, GM has pulled back on targets amid steeping battery costs and strained consumer budgets. “We’re also being a little bit prudent about the pace at which the transition occurs,” said CEO Mary Barra.
Nonetheless, GM remains laser-focused on its EV future. It recently announced a $650 million investment to expand production of its profitable full-size SUVs—but as electric versions only by 2024. “We have the manufacturing flexibility to build EVs at scale,” said Barra.
For investors, GM’s major bet on EVs represents an opportunity to capitalize on the immense growth projected in the electric vehicle market over the next decade. Research firm IDTechEx forecasts the EV market will balloon from $287 billion in 2021 to over $1.3 trillion by 2031 as adoption accelerates globally. GM’s plan to phase out gas-powered cars and transition to an all-electric lineup positions it as a leading EV player in this booming new automotive era.
Meanwhile, LG Chem said it aims to “bolster cooperation with GM in the North American market” through the expanded cathode materials agreement. The supplier has jockeyed with China’s CATL for the title of world’s top EV battery maker.
For both LG and GM, ensuring cathode supply security with a US-based plant mitigates geopolitical risks. President Biden’s Inflation Reduction Act requires automakers to source critical minerals domestically or from allies to qualify for EV tax credits.
While the road to an all-electric future remains bumpy, GM’s huge bet on sourcing vital battery ingredients shows its commitment to phasing out the internal combustion engine. As Barra stated, “We’re on our way to an all-electric portfolio.”
CALGARY, AB, Feb. 1, 2024 /CNW/ – InPlay Oil Corp. (TSX: IPO) (OTCQX: IPOOF) (“InPlay” or the “Company”) is pleased to confirm that its Board of Directors has declared a monthly cash dividend of $0.015 per common share payable on February 29, 2024, to shareholders of record at the close of business on February 15, 2024. The monthly cash dividend is expected to be designated as an “eligible dividend” for Canadian federal and provincial income tax purposes.
About InPlay Oil Corp.
InPlay is a junior oil and gas exploration and production company with operations in Alberta focused on light oil production. The company operates long-lived, low-decline properties with drilling development and enhanced oil recovery potential as well as undeveloped lands with exploration possibilities. The common shares of InPlay trade on the Toronto Stock Exchange under the symbol IPO and the OTCQX Exchange under the symbol IPOOF.
SOURCE InPlay Oil Corp.
For further information: please contact: Doug Bartole, President and Chief Executive Officer, InPlay Oil Corp., Telephone: (587) 955-0632, www.inplayoil.com; Darren Dittmer, Chief Financial Officer, InPlay Oil Corp., Telephone: (587) 955-0634
Electric vehicle technology firm Exro Technologies is acquiring e-mobility drivetrain maker SEA Electric in an all-stock $300 million deal. The strategic merger combines two complementary electric propulsion platforms, setting the stage to disrupt the surging commercial EV space.
For investors, the transaction provides Exro with enhanced scale, revenue, and a clear path to profitability. With SEA’s major OEM customers like Volvo and Toyota, over 1,000 EV system orders are forecast for 2024 generating above $200 million sales.
The consolidated entity targets delivery of complete, next-gen propulsion solutions demanded by fleet operators and manufacturers transitioning to electric. Significant synergies, cross-selling opportunities, and cost savings are expected from the integration of the companies’ technologies.
Massive Addressable Market
Exro’s battery control electronics and SEA’s full electric drive systems together optimize EV power, efficiency, and costs. This unique, end-to-end capability unlocks a share of the enormous global commercial EV market.
Market research firm IDTechEx sees the medium and heavy commercial EV market reaching over $140 billion annually by 2031. With increasingly stringent emissions regulations worldwide, electrifying trucks, buses, construction equipment and beyond offers massive potential.
Exro and SEA aim to be at the forefront of this shift providing the integrated propulsion technologies enabling OEMs to electrify their offerings at scale.
Key Customer Wins
A huge value driver is SEA Electric’s multi-year supply agreements with heavy-duty truck leaders Mack and Hino for thousands of initial EV systems. This provides the merged Exro with committed volumes and Tier 1 auto relationships to leverage.
SEA’s proven proprietary technology underwent extensive validation by the major OEMs. Having signed binding long-term deals, SEA Electric immediately thrusts Exro into a commanding competitive position and cash flow generation.
Clear Path to Profitability
Beyond the technology and growth synergies, the transaction offers investors a profitability catalyst for Exro. Management estimates achieving positive cash flow within 12 months post-close given the ramping order book.
This would mark a key inflection point in Exro’s maturation toward becoming a fully self-sustaining EV enterprise. Profitability could further enhance access to capital to fuel expansion efforts.
The merger is subject to shareholder greenlighting, but the strategic fit and near-term income opportunity make a compelling case. With Polestar and others vying in electric commercial vehicles, Exro seizes pole position through its SEA Electric deal.
InPlay Oil is a junior oil and gas exploration and production company with operations in Alberta focused on light oil production. The company operates long-lived, low-decline properties with drilling development and enhanced oil recovery potential as well as undeveloped lands with exploration possibilities. The common shares of InPlay trade on the Toronto Stock Exchange under the symbol IPO and the OTCQX Exchange under the symbol IPOOF.
Michael Heim, Senior Vice President, Equity Research Analyst, Energy & Transportation, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
Management updated its 2023 guidance. The adjustment reflects a drop in production expectations. New guidance is significantly below the 9,700 boe/d production flow reported from the field on November 9, 2023. The decline may represent a sharper decline rate from initial production rates than had previously been expected by management. The drop in production lead to a sharp reduction in projected Adjusted Funds Flow and Free Funds Flow.
Management also sharply reduced its 2024 production estimates. New guidance calls for 2024 production that is only slightly higher than newly revised 2023 guidance despite the drilling of 14-15 new wells and an expected reduction in curtailment. While it is possible that management is simply being conservative, it may also reflect well decline rates as discussed above.
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This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).
*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
CALGARY, AB, Jan. 29, 2024 /CNW/ – InPlay Oil Corp. (TSX: IPO) (OTCQX: IPOOF) (“InPlay” or the “Company”) is pleased to announce that its Board of Directors have approved a capital program of $64 – $67 million for 2024.
2024 Capital Program Highlights
InPlay’s 2024 exploration and development capital program of $64 – $67 million is forecast to deliver the following(5):
Annual average production of 9,000 – 9,500 boe/d (59% – 61% light crude oil and NGLs);
Drilling program focused on high return oil weighted locations driving annual oil production growth at the midpoint of guidance of 7% over 2023;
Operating income profit margin(2) of approximately 59%;
Reduction in capital spending of 20% – 25% compared to 2023 including reduced facilities and infrastructure spending by over 50% providing strong capital efficiencies;
Adjusted Funds Flow (“AFF”)(4) of $89 – $96 million;
Free Adjusted Funds Flow (“FAFF”)(2) of $22 – $32 million;
Net debt(4) of $37 – $44 million with a net debt to EBITDA ratio(2) of 0.4 – 0.5 times which is among the lower leverage ratios amongst our peers;
Base dividend of $16 – $17 million at the current monthly dividend rate of $0.015/share ($0.18/share annualized) which represents approximately an 8% yield at the current share price; and
Significant unutilized financial liquidity which can be used to pursue potential tactical capital investments.
The table below highlights our 2024 guidance:
2024(5)
WTI (US$/bbl)
75.00
Production (boe/d) (1)
9,000 – 9,500
Capital ($ millions)
64 – 67
Net wells
14.0 – 15.0
AFF ($ millions) (4)
89 – 96
FAFF ($ millions) (2)
22 – 32
Net Debt at Year-end ($ millions) (4)
(44) – (37)
Annual Net Debt / EBITDA (2)
0.4 – 0.5
Dividend ($ millions)
16 – 17
The amounts above do not include potential future purchases through the Company’s normal course issuer bid (“NCIB”).
With continued commodity price volatility, specifically weak natural gas fundamentals, and current low investor sentiment, InPlay has taken a measured and disciplined approach to capital allocation for 2024, seeking to maximize capital efficiencies, AFF(2), and FAFF(2) supporting strong returns to shareholders with a priority on maintaining our pristine balance sheet. Despite a 20% to 25% reduction in capital spending year over year, InPlay is forecasting to deliver approximately 7% growth in our oil volumes as we focus on higher oil weighted assets that deliver greater returns. The capital program is designed to responsibly manage the pace of development, maintain flexibility and remain focused on delivering return of capital to shareholders.
Given the higher rate of return of InPlay’s oil weighted properties, the Company plans to direct its 2024 capital budget towards oil weighted drilling in the Cardium and Belly River. Plans are to drill approximately 11 – 12 net Extended Reach Horizontal (“ERH”) Cardium wells in Willesden Green and Pembina. Also, 3.0 net wells are planned in the Belly River taking advantage of the very high oil weighting of approximately 90%. These Belly River wells exhibit increasing oil rates over the first three quarters of production and a low decline rate thereafter. Our two most recent horizontal wells drilled in the Belly River, which came online in November 2022, have delivered operating netbacks of approximately $71.25/boe since being brought on production. Our higher oil weighted locations are characterized by strong light oil rates with lower total boe/d rate relative to wells with higher natural gas weightings. The Company’s 2024 drilling program plans on drilling fewer wells in 2024 compared to 2023, as a result of our cautious, disciplined capital approach for the year and is structured to take advantage of improving differentials starting in the second quarter of 2024 and throughout the balance of the year. Facility capital in 2024 is forecasted to be approximately $6.4 million less than 2023 due to the reduced drilling program and significant capital spent on two major natural gas plant upgrades completed in 2023.
InPlay’s first quarter of 2024 drilling program consists of five (4.9 net) ERH Cardium wells and three (0.7 net) non-operated ERH Cardium wells. Drilling has started on a two well (1.9 net) pad in Willesden Green which is expected to come on production in February. Capital activity will then move to Pembina to drill three (3.0 net) Cardium ERH wells. These wells will offset our five successful wells drilled in 2023 characterized by low decline rates and high light oil and liquids weighting with average initial production (“IP”) rates of 257 boe/d (89% light crude oil and liquids), 265 boe/d (86% light crude oil and liquids) and 239 boe/d (82% light crude oil and liquids) over their first 30, 60 and 180 days respectively.
InPlay made significant investments in 2023 to increase operated natural gas takeaway capacity for future growth in Willesden Green and to mitigate potential production issues arising from third party outage and capacity constraints. These projects have already shown their value by reducing back pressure on wells, lowering declines and providing more consistent runtimes while improving our liquids weighting with a higher natural gas liquids recovery. To further enhance our natural gas takeaway capabilities, InPlay has entered into a long term Gas Handling Agreement with an industry partner guaranteeing access to natural gas takeaway and processing capacity in the Company’s Pembina area where we were initially curtailed by approximately 6 mmcfd and associated oil and liquids starting on February 15, 2023 with the gradual reduction in curtailments and the full resumption of production in September 2023. This contract will allow InPlay to restart with certainty of capacity the development of this prolific and strong rate of return growth area where drilling activity has not occurred since the spring of 2022. InPlay plans on drilling a three (3.0 net) ERH Cardium well pad in this area in the third quarter of 2024. The Company projects fewer operated and non-operated turnarounds and other infrastructure issues during 2024 after an unprecedented high level of disruptions in 2023.
To mitigate risk and add stability during periods of market volatility, commodity hedges have been secured through 2024 and into 2025 as summarized below.
Q1/24
Q2/24
Q3/24
Q4/24
Q1/25
Natural Gas AECO Swap (mcf/d)
–
1,900
1,900
640
–
Hedged price ($AECO/mcf)
–
2.00
2.00
2.00
–
Natural Gas AECO Costless Collar (mcf/d)
4,870
3,790
3,790
5,050
3,790
Hedged price ($AECO/mcf)
2.48 – 3.82
2.08 – 2.77
2.08 – 2.77
2.27 – 3.04
2.48 – 3.46
Crude Oil Costless Collar (bbl/d)
–
1,000
–
–
–
Hedged price ($USD WTI/bbl)
–
72.00 – 80.25
–
–
–
Crude Oil Costless Collar (bbl/d)
330
–
–
–
–
Hedged price ($CAD WTI/bbl)
95.00 – 110.00
–
–
–
–
Crude Oil WTI Three-way Collar (bbl/d) (7)
–
–
1,000
1,000
–
Low sold put price ($USD WTI/bbl)
–
–
64.00
64.00
–
Mid bought put price ($USD WTI/bbl)
–
–
74.00
74.00
–
High sold call price ($USD WTI/bbl)
–
–
82.48
82.48
–
InPlay will continue to prudently allocate capital resources and adjust its capital plans in consideration of commodity prices, inflationary cost pressures and other aspects impacting our business. Should commodity prices improve and stabilize, InPlay will remain disciplined and flexible and can quickly adjust capital activity to respond to changing market conditions.
2023 Update
InPlay’s fourth quarter capital program consisted of drilling two (1.6 net) ERH wells in Willesden Green that were brought on production in November. Also, the company drilled its first (1.0 net) multilateral Belly River horizontal well which was brought on production in December. The well has been on production for approximately one month and is still in its initial stages of cleanup and early production results are meeting our internal expectations with oil cuts increasing, consistent with offsetting wells.
The increase in North American natural gas production coupled with a warm start to winter has natural gas storage inventories at very high levels resulting in weaker than expected natural gas prices during the fourth quarter that continued into 2024. Crude oil differentials began to weaken in November and widened throughout the quarter which impacted realized oil pricing during this period. Higher differentials are extending into the first quarter of 2024 but forward indices show them improving and narrowing starting in the second quarter of 2024 and throughout the remainder of the year.
Annual average production for 2023 is forecast to be approximately 9,050 boe/d(1) (58% light crude oil & NGLs) which was impacted by approximately 650 boe/d over the year due to extraordinary curtailments experienced from third party capacity constraints and turnarounds, Alberta wildfires, and from delays in starting up our natural gas facility in the third quarter as discussed in our prior press releases.
The table below highlights our updated forecasted 2023 guidance:
2023(3)
WTI (US$/bbl)
77.61
Production (boe/d) (1)
9,000 – 9,100
Capital ($ millions)
84.5
Net wells
17.1
AFF ($ millions) (4)
91 – 93
FAFF ($ millions) (2)
6 – 8
Net Debt at Year-end ($ millions) (4)
(45) – (47)
Dividend ($ millions)
16
See Reader Advisories for previous guidance and underlying assumptions.
As commented on above, continued commodity price volatility and current weak industry sentiment has resulted in the Company taking a conservative, disciplined approach to capital allocation in 2024. Preliminary estimates and plans for 2025 and beyond will be dependent on the stability of commodity prices and industry sentiment balancing manageable growth and ensuring the long term sustainability of our return of capital to shareholder strategy. As a result, the Company withdraws its preliminary estimates and plans for 2025.
We look forward to the profitable development of our high rate of return asset base and continuing to provide strong returns to shareholders through 2024 and beyond. On behalf of our employees, management team and Board of Directors, we would like to thank our shareholders for their support.
For further information please contact:
Doug Bartole President and Chief Executive Officer InPlay Oil Corp. Telephone: (587) 955-0632
See “Reader Advisories – Production Breakdown by Product Type”
2.
Non-GAAP financial measure or ratio that does not have a standardized meaning under International Financial Reporting Standards (IFRS) and GAAP and therefore may not be comparable with the calculations of similar measures for other companies. Please refer to “Non-GAAP and Other Financial Measures” contained within this press release.
3.
Based on estimated, unaudited year-end 2023 results. See “Reader Advisories – Forward Looking Information and Statements” for underlying assumptions related to our estimated, unaudited year-end 2023 results.
4.
Capital management measure. See “Non-GAAP and Other Financial Measures” contained within this press release.
5.
See “Reader Advisories – Forward Looking Information and Statements” for key budget and underlying assumptions related to our 2024 capital program and associated guidance.
6.
Supplementary financial measure. See “Non-GAAP and Other Financial Measures” contained within this press release.
7.
The WTI three-way collars are a combination high priced sold call, low priced sold put and a mid-priced bought put. The high sold call price is the maximum price the Company will receive for the contract volumes. The mid bought put price is the minimum price InPlay will receive, unless the market price falls below the low sold put strike price, in which case InPlay receives market price plus the difference between the mid bought put price minus the low sold put price.
Reader Advisories
Non-GAAP and Other Financial Measures
Throughout this press release and other materials disclosed by the Company, InPlay uses certain measures to analyze financial performance, financial position and cash flow. These non-GAAP and other financial measures do not have any standardized meaning prescribed under GAAP and therefore may not be comparable to similar measures presented by other entities. The non-GAAP and other financial measures should not be considered alternatives to, or more meaningful than, financial measures that are determined in accordance with GAAP as indicators of the Company performance. Management believes that the presentation of these non-GAAP and other financial measures provides useful information to shareholders and investors in understanding and evaluating the Company’s ongoing operating performance, and the measures provide increased transparency and the ability to better analyze InPlay’s business performance against prior periods on a comparable basis.
Non-GAAP Financial Measures and Ratios
Included in this document are references to the terms “free adjusted funds flow”, “operating income”, “operating netback per boe”, “operating income profit margin”, “Net Debt to EBITDA”, “Production per debt adjusted share” and “EV / DAAFF”. Management believes these measures and ratios are helpful supplementary measures of financial and operating performance and provide users with similar, but potentially not comparable, information that is commonly used by other oil and natural gas companies. These terms do not have any standardized meaning prescribed by GAAP and should not be considered an alternative to, or more meaningful than “profit (loss) before taxes”, “profit (loss) and comprehensive income (loss)”, “adjusted funds flow”, “capital expenditures”, “corporate acquisitions, net of cash acquired”, “net debt”, “weighted average number of common shares (basic)” or assets and liabilities as determined in accordance with GAAP as a measure of the Company’s performance and financial position.
Free Adjusted Funds Flow
Management considers FAFF an important measure to identify the Company’s ability to improve its financial condition through debt repayment and its ability to provide returns to shareholders. FAFF should not be considered as an alternative to or more meaningful than AFF as determined in accordance with GAAP as an indicator of the Company’s performance. FAFF is calculated by the Company as AFF less exploration and development capital expenditures and property dispositions (acquisitions) and is a measure of the cashflow remaining after capital expenditures before corporate acquisitions that can be used for additional capital activity, corporate acquisitions, repayment of debt or decommissioning expenditures or potentially return of capital to shareholders. Refer to the “Forward Looking Information and Statements” section for a calculation of forecast FAFF.
Operating Income/Operating Netback per boe/Operating Income Profit Margin
InPlay uses “operating income”, “operating netback per boe” and “operating income profit margin” as key performance indicators. Operating income is calculated by the Company as oil and natural gas sales less royalties, operating expenses and transportation expenses and is a measure of the profitability of operations before administrative, share-based compensation, financing and other non-cash items. Management considers operating income an important measure to evaluate its operational performance as it demonstrates its field level profitability. Operating income should not be considered as an alternative to or more meaningful than net income as determined in accordance with GAAP as an indicator of the Company’s performance. Operating netback per boe is calculated by the Company as operating income divided by average production for the respective period. Management considers operating netback per boe an important measure to evaluate its operational performance as it demonstrates its field level profitability per unit of production. Operating income profit margin is calculated by the Company as operating income as a percentage of oil and natural gas sales. Management considers operating income profit margin an important measure to evaluate its operational performance as it demonstrates how efficiently the Company generates field level profits from its sales revenue. Refer to the “Forward Looking Information and Statements” section for a calculation of operating income, operating netback per boe and operating income profit margin.
Net Debt to EBITDA
Management considers Net Debt to EBITDA an important measure as it is a key metric to identify the Company’s ability to fund financing expenses, net debt reductions and other obligations. EBITDA is calculated by the Company as adjusted funds flow before interest expense. When this measure is presented quarterly, EBITDA is annualized by multiplying by four. When this measure is presented on a trailing twelve month basis, EBITDA for the twelve months preceding the net debt date is used in the calculation. This measure is consistent with the EBITDA formula prescribed under the Company’s Senior Credit Facility. Net Debt to EBITDA is calculated as Net Debt divided by EBITDA. Refer to the “Forward Looking Information and Statements” section for a calculation of forecast Net Debt to EBITDA.
Production per Debt Adjusted Share
InPlay uses “Production per debt adjusted share” as a key performance indicator. Debt adjusted shares should not be considered as an alternative to or more meaningful than common shares as determined in accordance with GAAP as an indicator of the Company’s performance. Debt adjusted shares is a non-GAAP measure used in the calculation of Production per debt adjusted share and is calculated by the Company as common shares outstanding plus the change in net debt divided by the Company’s current trading price on the TSX, converting net debt to equity. Debt adjusted shares should not be considered as an alternative to or more meaningful than weighted average number of common shares (basic) as determined in accordance with GAAP as an indicator of the Company’s performance. Management considers Debt adjusted share to be a key performance indicator as it adjusts for the effects of capital structure in relation to the Company’s peers. Production per debt adjusted share is calculated by the Company as production divided by debt adjusted shares. Management considers Production per debt adjusted share is a key performance indicator as it adjusts for the effects of changes in annual production in relation to the Company’s capital structure. Refer to the “Forward Looking Information and Statements” section for a calculation of forecast Production per debt adjusted share.
EV / DAAFF
InPlay uses “enterprise value to debt adjusted AFF” or “EV/DAAFF” as a key performance indicator. EV/DAAFF is calculated by the Company as enterprise value divided by debt adjusted AFF for the relevant period. Debt adjusted AFF (“DAAFF”) is calculated by the Company as adjusted funds flow plus financing costs. Enterprise value is a capital management measure that is used in the calculation of EV/DAAFF. Enterprise value is calculated as the Company’s market capitalization plus net debt. Management considers enterprise value a key performance indicator as it identifies the total capital structure of the Company. Management considers EV/DAAFF a key performance indicator as it is a key metric used to evaluate the sustainability of the Company relative to other companies while incorporating the impact of differing capital structures. Refer to the “Forward Looking Information and Statements” section for a calculation of forecast EV/DAAFF.
Capital Management Measures
Adjusted Funds Flow
Management considers adjusted funds flow to be an important measure of InPlay’s ability to generate the funds necessary to finance capital expenditures. Adjusted funds flow is a GAAP measure and is disclosed in the notes to the Company’s financial statements for the year ending December 31, 2022 and the most recently filed quarterly financial statements. All references to adjusted funds flow throughout this document are calculated as funds flow adjusting for decommissioning expenditures and transaction and integration costs. Decommissioning expenditures are adjusted from funds flow as they are incurred on a discretionary and irregular basis and are primarily incurred on previous operating assets. Transaction costs are non-recurring costs for the purposes of an acquisition, making the exclusion of these items relevant in Management’s view to the reader in the evaluation of InPlay’s operating performance. The Company also presents adjusted funds flow per share whereby per share amounts are calculated using weighted average shares outstanding consistent with the calculation of profit per common share.
Net Debt
Net debt is a GAAP measure and is disclosed in the notes to the Company’s financial statements for the year ending December 31, 2022 and the most recently filed quarterly financial statements. The Company closely monitors its capital structure with the goal of maintaining a strong balance sheet to fund the future growth of the Company. The Company monitors net debt as part of its capital structure. The Company uses net debt (bank debt plus accounts payable and accrued liabilities less accounts receivables and accrued receivables, prepaid expenses and deposits and inventory) as an alternative measure of outstanding debt. Management considers net debt an important measure to assist in assessing the liquidity of the Company.
Supplementary Measures
“Average realized crude oil price” is comprised of crude oil commodity sales from production, as determined in accordance with IFRS, divided by the Company’s crude oil production. Average prices are before deduction of transportation costs and do not include gains and losses on financial instruments.
“Average realized NGL price” is comprised of NGL commodity sales from production, as determined in accordance with IFRS, divided by the Company’s NGL production. Average prices are before deduction of transportation costs and do not include gains and losses on financial instruments.
“Average realized natural gas price” is comprised of natural gas commodity sales from production, as determined in accordance with IFRS, divided by the Company’s natural gas production. Average prices are before deduction of transportation costs and do not include gains and losses on financial instruments.
“Average realized commodity price” is comprised of commodity sales from production, as determined in accordance with IFRS, divided by the Company’s production. Average prices are before deduction of transportation costs and do not include gains and losses on financial instruments.
“Adjusted funds flow per weighted average basic share” is comprised of adjusted funds flow divided by the basic weighted average common shares.
“Adjusted funds flow per weighted average diluted share” is comprised of adjusted funds flow divided by the diluted weighted average common shares.
“Adjusted funds flow per boe” is comprised of adjusted funds flow divided by total production.
Preliminary Financial Information
The Company’s expectations set forth in the updated forecasted 2023 guidance are based on, among other things, the Company’s anticipated financial results for the three and twelve month periods ended December 31, 2023. The Company’s anticipated financial results are unaudited and preliminary estimates that: (i) represent the most current information available to management as of the date of hereof; (ii) are subject to completion of audit procedures that could result in significant changes to the estimated amounts; and (iii) do not present all information necessary for an understanding of the Company’s financial condition as of, and the Company’s results of operations for, such periods. The anticipated financial results are subject to the same limitations and risks as discussed under “Forward Looking Information and Statements” below. Accordingly, the Company’s anticipated financial results for such periods may change upon the completion and approval of the financial statements for such periods and the changes could be material.
Forward-Looking Information and Statements
This news release contains certain forward–looking information and statements within the meaning of applicable securities laws. The use of any of the words “expect”, “anticipate”, “continue”, “estimate”, “may”, “will”, “project”, “should”, “believe”, “plans”, “intends”, “forecast” and similar expressions are intended to identify forward-looking information or statements. In particular, but without limiting the foregoing, this news release contains forward-looking information and statements pertaining to the following: the Company’s business strategy, milestones and objectives; all estimates and guidance related to the year ended 2023 results; the Company’s planned 2024 capital program including wells to be drilled and completed and the timing of the same; 2024 guidance based on the planned capital program and all associated underlying assumptions set forth in this press release including, without limitation, forecasts of 2024 annual average production levels, adjusted funds flow, free adjusted funds flow, Net Debt/EBITDA ratio, operating income profit margin, and Management’s belief that the Company can grow some or all of these attributes and specified measures; light crude oil and NGLs weighting estimates; expectations regarding future commodity prices; future oil and natural gas prices; future liquidity and financial capacity; future results from operations and operating metrics; future costs, expenses and royalty rates; future interest costs; the exchange rate between the $US and $Cdn; future development, exploration, acquisition, development and infrastructure activities and related capital expenditures, including our planned 2024 capital program; the amount and timing of capital projects;; and methods of funding our capital program.
The internal projections, expectations, or beliefs underlying our Board approved 2024 capital budget and associated guidance are subject to change in light of, among other factors, the impact of world events including the Russia/Ukraine conflict and war in the Middle East, ongoing results, prevailing economic circumstances, volatile commodity prices, and changes in industry conditions and regulations. InPlay’s 2024 financial outlook and guidance provides shareholders with relevant information on management’s expectations for results of operations, excluding any potential acquisitions or dispositions, for such time periods based upon the key assumptions outlined herein. Readers are cautioned that events or circumstances could cause capital plans and associated results to differ materially from those predicted and InPlay’s guidance for 2024 may not be appropriate for other purposes. Accordingly, undue reliance should not be placed on same.
Without limitation of the foregoing, readers are cautioned that the Company’s future dividend payments to shareholders of the Company, if any, and the level thereof will be subject to the discretion of the Board of Directors of InPlay. The Company’s dividend policy and funds available for the payment of dividends, if any, from time to time, is dependent upon, among other things, levels of FAFF, leverage ratios, financial requirements for the Company’s operations and execution of its growth strategy, fluctuations in commodity prices and working capital, the timing and amount of capital expenditures, credit facility availability and limitations on distributions existing thereunder, and other factors beyond the Company’s control. Further, the ability of the Company to pay dividends will be subject to applicable laws, including satisfaction of solvency tests under the Business Corporations Act (Alberta), and satisfaction of certain applicable contractual restrictions contained in the agreements governing the Company’s outstanding indebtedness.
Forward-looking statements or information are based on a number of material factors, expectations or assumptions of InPlay which have been used to develop such statements and information but which may prove to be incorrect. Although InPlay believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because InPlay can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified herein, assumptions have been made regarding, among other things: the impact of increasing competition; the general stability of the economic and political environment in which InPlay operates; the timely receipt of any required regulatory approvals; the ability of InPlay to obtain qualified staff, equipment and services in a timely and cost efficient manner; drilling results; the ability of the operator of the projects in which InPlay has an interest in to operate the field in a safe, efficient and effective manner; the ability of InPlay to obtain debt financing on acceptable terms; the anticipated tax treatment of the monthly base dividend; the timing and amount of purchases under the Company’s NCIB; field production rates and decline rates; the ability to replace and expand oil and natural gas reserves through acquisition, development and exploration; the timing and cost of pipeline, storage and facility construction and the ability of InPlay to secure adequate product transportation; future commodity prices; that various conditions to a shareholder return strategy can be satisfied; the ongoing impact of the Russia/Ukraine conflict and war in the Middle East; currency, exchange and interest rates; regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which InPlay operates; and the ability of InPlay to successfully market its oil and natural gas products.
The forward-looking information and statements included herein are not guarantees of future performance and should not be unduly relied upon. Such information and statements, including the assumptions made in respect thereof, involve known and unknown risks, uncertainties and other factors that may cause actual results or events to defer materially from those anticipated in such forward-looking information or statements including, without limitation: the continuing impact of the Russia/Ukraine conflict and war in the Middle East; inflation and the risk of a global recession; changes in our planned 2023 capital program; changes in our approach to shareholder returns; changes in commodity prices and other assumptions outlined herein; the risk that dividend payments may be reduced, suspended or cancelled; the potential for variation in the quality of the reservoirs in which we operate; changes in the demand for or supply of our products; unanticipated operating results or production declines; changes in tax or environmental laws, royalty rates or other regulatory matters; changes in development plans or strategies of InPlay or by third party operators of our properties; changes in our credit structure, increased debt levels or debt service requirements; inaccurate estimation of our light crude oil and natural gas reserve and resource volumes; limited, unfavorable or a lack of access to capital markets; increased costs; a lack of adequate insurance coverage; the impact of competitors; and certain other risks detailed from time-to-time in InPlay’s continuous disclosure documents filed on SEDAR including our Annual Information Form and our MD&A.
This press release contains future-oriented financial information and financial outlook information (collectively, “FOFI”) about InPlay’s financial and leverage targets and objectives, potential dividends, share buybacks and beliefs underlying our Board approved 2024 capital budget and associated guidance, all of which are subject to the same assumptions, risk factors, limitations, and qualifications as set forth in the above paragraphs. The actual results of operations of InPlay and the resulting financial results will likely vary from the amounts set forth in this press release and such variation may be material. InPlay and its management believe that the FOFI has been prepared on a reasonable basis, reflecting management’s reasonable estimates and judgments. However, because this information is subjective and subject to numerous risks, it should not be relied on as necessarily indicative of future results. Except as required by applicable securities laws, InPlay undertakes no obligation to update such FOFI. FOFI contained in this press release was made as of the date of this press release and was provided for the purpose of providing further information about InPlay’s anticipated future business operations and strategy. Readers are cautioned that the FOFI contained in this press release should not be used for purposes other than for which it is disclosed herein.
The forward-looking information and statements contained in this news release speak only as of the date hereof and InPlay does not assume any obligation to publicly update or revise any of the included forward-looking statements or information, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.
Risk Factors to FLI
Risk factors that could materially impact successful execution and actual results of the Company’s 2023 and 2024 capital program and associated guidance and estimates include:
volatility of petroleum and natural gas prices and inherent difficulty in the accuracy of predictions related thereto;
the extent of any unfavourable impacts of wildfires in the province of Alberta.
changes in Federal and Provincial regulations;
the Company’s ability to secure financing for the Board approved 2024 capital program and longer-term capital plans sourced from AFF, bank or other debt instruments, asset sales, equity issuance, infrastructure financing or some combination thereof; and
those additional risk factors set forth in the Company’s MD&A and most recent Annual Information Form filed on SEDAR
Key Budget and Underlying Material Assumptions to FLI
The key budget and underlying material assumptions used by the Company in the development of its current and previous 2023 guidance and 2024 guidance are as follows:
The change in production per debt adjusted share growth between previous and updated guidance is primarily due to 2023 production being impacted by approximately 650 boe/d as a result of curtailments, Alberta wildfires, natural gas facility startup delays as discussed in the body of this press release.
(1)
As previously released August 14, 2023.
(2)
As previously released November 9, 2023.
(3)
As previously released January 18, 2023.
(4)
Production per debt adjusted share is calculated by the Company as production divided by debt adjusted shares. Debt adjusted shares is calculated by the Company as common shares outstanding plus the change in net debt divided by the Company’s current trading price on the TSX, converting net debt to equity. Future share prices are assumed to be consistent with the current share price.
(5)
Weighted average share price throughout 2022 and 2023.
(6)
Ending share price at December 31, 2022 and December 31, 2023.
(7)
The change in the 2023 forecasted results from prior guidance results from an increase in capital expenditures and decrease in adjusted funds flow as a result of a reduction to production, a higher natural gas weighting of total production and lower AECO natural gas prices than previously forecasted.
(8)
The Company has withdrawn its 2024 and 2025 production per debt adjusted share and EV/DAAFF forecast for 2024 and 2025. The Company believes that these metrics can be quite variable and hard to reasonably estimate given the volatility in the Company’s share price, which is a material assumption used in the calculation of these metrics.
(9)
Continued commodity price volatility and current weak industry sentiment has resulted in the Company taking a conservative and disciplined approach to capital allocation in 2024 and future years. Preliminary estimates and plans for 2025 and beyond will be dependent on the stability of commodity prices and industry sentiment balancing manageable growth and ensuring the long term sustainability of our return of capital to shareholder strategy. As a result, the Company withdraws its preliminary estimates and plans for 2025.
See “Production Breakdown by Product Type” below
Quality and pipeline transmission adjustments may impact realized oil prices in addition to the MSW Differential provided above
Changes in working capital are not assumed to have a material impact between the years presented above.
Production Breakdown by Product Type
Disclosure of production on a per boe basis in this press release consists of the constituent product types as defined in NI 51–101 and their respective quantities disclosed in the table below:
Notes:
1.
This reflects the mid-point of the Company’s 2023 updated production guidance range of 9,000 to 9,100 boe/d.
2.
This reflects the mid-point of the Company’s 2023 previous production guidance range of 9,100 to 9,500 boe/d.
3.
This reflects the mid-point of the Company’s 2024 production guidance range of 9,000 to 9,500 boe/d.
4.
This reflects the midpoint of the Company’s annual production previous preliminary estimate range.
5.
With respect to forward–looking production guidance, product type breakdown is based upon management’s expectations based on reasonable assumptions but are subject to variability based on actual well results.
References to crude oil, light oil, NGLs or natural gas production in this press release refer to the light and medium crude oil, natural gas liquids and conventional natural gas product types, respectively, as defined in National Instrument 51-101, Standards of Disclosure for Oil and Gas Activities (“NI 51-101”).
BOE Equivalent
Barrel of oil equivalents or BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different than the energy equivalency of 6:1, utilizing a 6:1 conversion basis may be misleading as an indication of value.
Initial Production Rates
References in this press release to IP rates, other short-term production rates or initial performance measures relating to new wells are useful in confirming the presence of hydrocarbons; however, such rates are not determinative of the rates at which such wells will commence production and decline thereafter and are not indicative of long-term performance or of ultimate recovery. While encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production for the Company. Accordingly, the Company cautions that the test results should be considered to be preliminary.
Michael Heim, Senior Vice President, Equity Research Analyst, Energy & Transportation, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
Hemisphere Energy reported 2024-4Q production results. Hemisphere Energy reported production of 3,375 boe/d, a 16% increase over the same period in 2022 and an 11% increase over 2023-3Q results. Production for the most recent quarter surpassed the 3,325 boe/d rate we had been using in our models.
Management gives initial 2024 production, pricing, and cost guidance. Management gave initial 2024 production, cash flow and capital expenditure guidance. Guidance was largely in line with our expectations.
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*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
