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InPlay Oil Corp. Third Quarter 2020 Results

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   |    Thursday,November 12,2020

InPlay Oil Corp. reported its Q3 2020 results.

Q3 2020 Financial & Operations Results

Production averaged 3,742 boe/d (69% oil & liquids) in the third quarter of 2020 up 19% compared to the second quarter of 2020 which averaged 3,154 boe/d (66% oil & liquids). As commodity prices began to recover during the third quarter of 2020 the Company gradually eased temporary production curtailments and shut-ins implemented as a response to the commodity price capitulation due to the COVID-19 pandemic. Increasing production throughout the third quarter resulted in average production of 4,268 boe/d (70% oil & liquids) in September 2020. Currently there is approximately 245 boe/d (80% oil and liquids) including roughly 110 boe/d of non-operated production that is still shut in and requiring servicing that does not yet meet our payout criteria. As crude oil prices continue to recover the majority of this production is expected to be brought back onstream.

While oil prices have begun to recover from unprecedented lows experienced during the second quarter of 2020, low commodity prices continued to impact the Company’s financial performance during the third quarter. West Texas Intermediate (“WTI”) prices averaged $40.93 USD/bbl compared to $27.85 USD/bbl in the second quarter of 2020 and $56.45 USD/bbl during the third quarter of 2019. Natural gas prices however were stronger in relation to 2019 with natural gas AECO daily index prices increasing 147% averaging $2.12/GJ in the third quarter of 2020 compared to $0.86/GJ in the third quarter of 2019. Despite weak crude oil prices InPlay still generated adjusted funds flow (“AFF”) of $2.0 million during the third quarter of 2020 representing a 227% improvement relative to the second quarter of 2020.

The Company continued to perform extremely well operationally in a very challenging environment. As a result of initiatives in response to COVID-19 to reduce costs and scale back discretionary expenditures, the Company achieved lower total operating and general and administrative (“G&A”) costs during the third quarter of 2020 of $5.0 million and $0.9 million respectively compared to $6.3 million and $1.6 million in the third quarter of 2019. The Company started incurring costs associated with servicing wells that went down and despite the presence of fixed costs being incurred over a significantly lower production base, InPlay’s aggressive cost cutting campaign resulted in only a minor increase in operating expenses per boe ($14.42 in Q3 2020 vs. $13.47 in Q3 2019) and an impressive reduction in G&A per boe ($2.74 in Q3 2020 vs. $3.34 in Q3 2019). This reduction in the third quarter of 2019 included $0.2 million from the Canada Emergency Wage Subsidy (“CEWS”). Amounts received from the CEWS program in the fourth quarter and going forward are expected to be negligible.

Fourth Quarter Activities Update

Business Development Bank of Canada (“BDC”) Term Facility

As announced on November 2, 2020 the Company finalized the definitive agreements with the Business Development Bank of Canada (“BDC“) and our current syndicate of lenders providing a $25 million nonrevolving, second lien senior secured four-year term loan facility (the “BDC Term Facility“) maturing on October 30, 2024. The term loan was fully funded to the Company on November 2, 2020 and the proceeds will be used by InPlay for working capital and general corporate purposes. This program was implemented to provide pre-COVID viable companies with liquidity to enable a return to pre-COVID production and reserve levels in a normal crude oil pricing environment and we are proud of the fact that we acted quickly and were the first oil and gas Company to successfully close a financing under the BDC program. We feel this demonstrates the support and belief that BDC and our other senior lenders have in InPlay to return to pre-COVID production levels and to achieve long term financial stability and growth.

Strategic Cardium Asset Acquisition

Also as previously announced, the Company successfully closed a strategic acquisition in our core Pembina Cardium area of operations for a total cost of approximately $1.9 million (net of adjustments) adding the following to our Pembina asset base:

  • Current production of approximately 240 boe/d (63% oil and liquids) with a base decline rate of approximately 10%.
  • Proved Developed Producing Reserves (“PDP”) of over 1,000 Mboe (assigned by the seller’s independent external reserve evaluator effective January 1, 2020).
  • PDP reserve acquisition metrics of approximately $1.90/BOE.
  • All lands are 100% working interest Crown land providing InPlay total control over pace of development.
  • Approximately 11 sections (7,040 net acres) of land and a potential drilling inventory of over 30 locations with 23 net tier-1 Extended Reach Horizontal (“ERH”) locations identified by InPlay.
  • Production acquisition metrics of approximately $7,900 boe/d.
  • Net Operating Income acquisition metrics of approximately 1.0 times based on 2019 operating income.

InPlay is excited about this acquisition as we believe it provides potential for upside similar to our recent successful results in Pembina that have exceeded our production expectations and which also included drilling three of industry’s fastest one-mile wells in the play to date with our top pacesetter well being drilled in 4.1 days. Based on cost reductions, technological improvements in all of our operations and the strong recent production results in Pembina, this asset immediately competes with our top-tier locations in terms of potential economics and strong returns.


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