Over the last few weeks, crude oil prices gushed from a low of about $65 to $130.50. All thanks to Russia’s invasion of Ukraine. While oil has since corrected to $97, the pullback may only be temporary. That could happen for a few reasons. One, according to Tom Kloza, global head of energy analysis at the Oil Price Information Analysis, as noted by CNN, prices could rise again this spring and summer, as demand recovers, with the national average climbing to around $4.50 a gallon. Two, no one is quite sure when Russia will leave Ukraine. Three, there’s still a significant supply-demand imbalance with oil. That being said, oil prices could remain elevated for the foreseeable future, which could boost earnings for companies such as InPlay Oil Corp. (TSX: IPO) (OTCQX: IPOOF), NuVista Energy Ltd. (TSX: NVA) (OTC: NUVSF), Oasis Petroleum Inc. (NASDAQ: OAS), Exxon Mobil Corp. (NYSE: XOM), and Chevron Corporation (NYSE: CVX).
Look at InPlay Oil Corp. (TSX: IPO) (OTCQX: IPOOF), For Example
InPlay Oil Corp. announced its record setting financial and operating results for the three and twelve months ended December 31, 2021, and the results of its independent oil and gas reserves evaluation effective December 31, 2021 prepared by Sproule Associates Limited. InPlay’s audited annual financial statements and notes, as well as Management’s Discussion and Analysis for the year ended December 31, 2021 will be available at “www.sedar.com” and our website at “www.inplayoil.com”.
2021 Highlights:
- Completed the acquisition of Prairie Storm Resources Corp. on November 30, 2022 at attractive transaction metrics which enhances InPlay’s position as a sizable producer and acreage holder with a deep and highly economic drilling inventory in the light oil window of Central Alberta's Cardium fairway.
- Achieved record average annual production of 5,768 boe/d (65% light crude oil and NGLs), an increase of 45% from 2020 at 3,985 boe/d (68% light crude oil and NGLs) and an increase of 15% compared to pre-COVID levels of 5,000 boe/d (66% light crude oil and NGLs) in 2019. Annual average production per weighted average basic share increased 31% compared to 2020.
- Generated record annual adjusted funds flow of $47.0 million ($0.67 per weighted average basic share), an increase of 532% compared to $7.4 million ($0.11 per weighted average basic share) in 2020 and an increase of 45% compared to $32.5 million ($0.48 per weighted average basic share) in 2019, our prior record year. Excluding the impact of realized hedging losses, AFF for 2021 would have been $59.9 million.
- Increased operating netbacks by 203% to $34.63/boe from $11.45/boe in 2020 and 52% from $22.75/boe in 2019.
- Realized annual record operating income and operating income profit margin of $72.9 million and 64% respectively compared to $16.7 million and 40% in 2020; $41.5 million and 55% in 2019.
- Reduced operating expenses to an annual record $12.83/boe compared to $14.43/boe in 2020 and $14.36/boe in 2019, despite rising costs of services in the industry.
- Generated annual free adjusted funds flow of $13.6 million.
- Lowered annual net debt to earnings before interest, taxes and depletion (“EBITDA”) ratio to 1.5, compared to 6.7 in 2020 and 1.6 in 2019. Fourth quarter 2021 annualized net debt to EBITDA ratio was 1.1 compared to 4.0 in 2020 and 1.6 in 2019 achieving the lowest leverage ratios in our corporate history.
- Achieved significant growth in reserves and reserves per weighted average basic share:
Proved developed producing reserves increased 64% (61% per weighted average basic share) to 15,890 mboe (58% light and medium crude oil & NGLs)
Total proved (“TP”) reserves increased 112% (106% per weighted average basic share) to 45,891 mboe (62% light and medium crude oil & NGLs)
Total proved plus probable (“TPP”) reserves increased 85% (81% per weighted average basic share) to 60,640 mboe (63% light and medium crude oil & NGLs)
- Achieved record NPV BT10 reserve and net asset values:
NPV BT10: $206 million (PDP), $471 million (TP) and $686 million (TPP)
NAV: $1.85 per weighted average basic share (PDP), $4.92 per weighted average basic share (TP) and $7.41 per weighted average basic share (TPP)
West Texas Intermediate (“WTI”) prices used in the Reserve Report to value the Company’s reserves are approximately 22% and 15% less than current strip pricing for 2022 (US $72.83 vs. approximately US $89.00) and 2023 (US $68.78 vs. approximately US $79.00) respectively.
- Finding, Development and Acquisition costs, associated recycle ratios and capital efficiencies which are top tier amongst light oil weighted peers.
FD&A costs of $8.47/boe (PDP), $12.03/boe (TP) and $9.56/boe (TPP), consistent with three year averages of $9.67/boe (PDP), $10.98/boe (TP) and $9.23 (TPP).
Recycle ratios of 4.1 (PDP), 2.9 (TP) and 3.6 (TPP) compared to 1.2 (PDP), 2.0 (TP) and 1.4 (TPP) in 2020.
InPlay added new light oil weighted production at a capital efficiency of $12,583 per boe/d.
- Materially increased the reserve life index of our assets which in turn improves the long term sustainability of the Company:
PDP reserve life index of 7.5 years compared to 6.6 years in 2020
TP reserve life index of 21.8 years compared to 14.8 years in 2020
TPP reserve life index of 28.8 years compared to 22.5 years in 2020
- Successful development and A&D activity resulting in top-tier reserve replacement:
PDP replacement of 395% (2020 – 166%)
TP replacement of 1,253% (2020 – 309%)
TPP replacement of 1,422% (2020 – 479%)
- Increased liquidity through an increased capacity within our Senior Credit Facility from $65.0 million to $85.0 million and total debt capacity of $111 million.
- Abandonment and Reclamation Obligations spending of $2.3 million, reducing our liability by 3% through the successful abandonment of 75 wellbores and the reclamation of 22 well sites.
- Achieved a 20% reduction to the Company’s emissions (Scope 1 and 2) on a per boe basis compared to 2020.
Other related developments from around the markets include:
NuVista Energy Ltd. “announced record-setting reserves, financial and operating results for the three months and year ended December 31, 2021, and to provide a number of updates which demonstrate material advancement of our Pipestone and Wapiti Montney development. 2021 was a year of significant commodity price recovery after the difficult year in 2020 due to the reduction in energy demand as a result of the Covid-19 pandemic. We used our significantly growing adjusted funds flow in a disciplined manner by growing production with new high-return wells to fill and optimize existing facilities while making rapid and meaningful progress in debt reduction. NuVista is now moving forward through 2022 with strength and increasing momentum in this significantly improved commodity price environment.”
Oasis Petroleum Inc. announced the declaration of its first variable dividend in the amount of $3.00 per share of Oasis common stock, payable on March 31, 2022 to shareholders of record as of March 21, 2022, in connection with its previously announced plan to return $70 million of capital to shareholders per quarter. Oasis expects to return approximately $70 million of capital in the second quarter of 2022 in the form of its $0.585 per share base dividend and a supplemental variable dividend in advance of closing the proposed merger with Whiting Petroleum Corporation. During the second half of 2022, the combined company will target a return of capital program representing 60% of free cash flow. The combined company is expected to increase its aggregate base dividend at close to approximately $25 million per quarter, or $0.585 per share, using variable dividends and share repurchases to return the full targeted amount.
Exxon Mobil Corp. just announced, “We are focused on leading the industry in safety, reliability, environmental performance, earnings and cash flow growth – and ultimately shareholder returns,” said Darren Woods, chairman and chief executive officer. “We’ll continue to innovate and provide solutions that meet the growing needs of society, including its net-zero emissions ambitions, by fully leveraging our competitive advantages of scale, integration, technology, functional excellence, and our highly skilled people.” Company plans include annual structural reductions of $9 billion a year by 2023 compared to 2019, building on $5 billion annual structural reductions achieved to date. These savings and other improvements, including a streamlined organizational structure, will enable ExxonMobil to double earnings and cash flow potential by 2027 versus 2019, reduce breakeven costs by roughly $10 per barrel, boost returns on capital employed, and sustainably grow total shareholder returns and distributions.
Chevron Corporation reported on its progress to deliver higher returns and advance a lower carbon future. “Chevron’s executing a straightforward strategy, grounded in capital and cost discipline,” said Michael Wirth, chairman and CEO. “We’re aiming to grow cash flow and return more of it to shareholders, leveraging our strengths to deliver lower carbon energy to a growing world.” Chevron expects to continue to improve capital and cost efficiency to deliver higher returns. In line with this objective, the company announced: Maintaining guidance for annual organic capital and exploratory expenditures of $15 billion to $17 billion through 2026; A target to reduce 2026 operating expenses per barrel by more than 10% from 2021 levels; Expected oil and gas production CAGR greater than 3% by 2026.
Legal Disclaimer / Except for the historical information presented herein, matters discussed in this article contains forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from any future results, performance or achievements expressed or implied by such statements. Winning Media is not registered with any financial or securities regulatory authority and does not provide nor claims to provide investment advice or recommendations to readers of this release. For making specific investment decisions, readers should seek their own advice. InPlay Oil paid three thousand five hundred dollars for advertising and marketing services to be distributed by Winning Media. Winning Media is only compensated for its services in the form of cash-based compensation. Winning Media owns ZERO shares of InPlay Oil. Please click here for disclaimer.
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