InPlay Oil Details Q1 2019 Results

InPlay Oil Corp. reported its financial and operating results for the three months ended March 31, 2019.

Q1 was highlighted by a 7% increase in production and a 14% increase in adjusted funds flow from operations(1) compared to the three months ended March 31, 2018.

First Quarter 2019 Financial & Operating Highlights

• Increased revenue 51% to $19.2 million in the first quarter of 2019 compared to $12.7 million in the fourth quarter of 2018. Significant improvements to realized crude oil prices began early in the first quarter of 2019 as a result of the dramatic improvement in the Edmonton light oil to West Texas Intermediate (“WTI”) differential with Edmonton light differentials narrowing to average US $4.85/bbl in the first quarter of 2019 compared to US $26.30/bbl in the fourth quarter of 2018.

• Achieved production growth of 7% with average production of 4,737 boe/d (68% light oil and liquids) in the first quarter of 2019 compared to 4,415 boe/d (71% light oil and liquids) in the first quarter of 2018, net of the sale of approximately 250 boe/d of non-core producing assets in October 2018. As well, approximately 6,000 barrels of light oil above normal levels was held in storage at the end of the first quarter.

• Generated adjusted funds flow from operations (1) of $9.1 million ($0.13 per basic share) representing a 14% increase over the first quarter of 2018 total of $7.9 million. On a per boe basis, adjusted funds flow from operations improved by 6% to $21.24/boe in the first quarter of 2019 compared to $19.98/boe in the first quarter of 2018. These results were achieved despite a 13% decrease in WTI prices over the same respective periods resulting in a realized oil price of $63.79/boe in the first quarter of 2019 compared to $69.44/boe in the first quarter of 2018.

• Efficiencies and a continued focus on decreasing costs in operations resulted in operating costs of $14.29/boe, a decrease of 11% compared to the first quarter of 2018 and a decrease of 6% compared to the fourth quarter of 2018. General and administrative costs decreased 9% to $3.71/boe in comparison to $4.08/boe in the first quarter of 2018.

• Operating income profit margin (1) of 59% was generated in the first quarter of 2019 compared to 32% in the fourth quarter of 2018 and 56% in the first quarter of 2018, even with the lower realized oil prices received over the first quarter of 2019 compared to the first quarter of 2018.

• Capital expenditures of $14.8 million were incurred in the first quarter, drilling and completing five (2.7 net) extended reach horizontal (“ERH”) wells and completing two (2.0 net) ERH wells that were drilled in the fourth quarter of 2018.

Financial and Operating Results:

Q1 Capital & Operations Overview

InPlay’s capital program of $14.8 million for the first quarter of 2019 consisted of completing two (2.0 net) extended reach horizontal (“ERH”) Cardium wells that were drilled in the fourth quarter of 2018 and drilling four (2.5 net) ERH Cardium wells that were completed later in March 2019. One (0.2 net) non-operatedERH Nisku well was also drilled and completed in the quarter and placed on production early in the second quarter of 2019. Production for the quarter averaged 4,737 boe/d (68% light oil and liquids) which we are pleased to have achieved considering the extreme cold weather that occurred for a six week period starting in February that caused temporary production down-time and slowed down some of our capital activities. Operations maintained cost discipline over this period and consciously left volumes that were difficult to produce in the extreme weather temporarily down. This is one of the factors that enabled us to reduce operating costs which dropped 11% from $15.98/boe in the first quarter of 2018 to $14.29/boe in the first quarter of 2019. Infrastructure we have built in the past year has also provided us with more storage options and as a result 6,000 bbls of light oil was left in storage over the quarter and will be sold in the second quarter where WTI prices to date have been US $5.00/bbl to $7.00/bbl higher than in March.

Results from our drilling continue to be consistently strong exceeding our forecasts. Based on field estimates, production from the two 100% ERH wells brought on production in late January and the two 100% ERH wells brought on production in mid-March delivered an average initial production (“IP”) 45 day rate of 639 boe/d (81% light oil and liquids). The non-operated ERH Nisku well produced an average of 515 boe/d (87% light oil and liquids) in April and over the last seven days has averaged 1,150 boe/d (96% light oil and liquids) based on field estimates.

Total oil and liquids weighting as a percentage of production was 68% in the first quarter of 2019 in comparison to 71% in the first quarter of 2018. This change was mostly due to operations requiring Cardium associated gas production to be routed to facilities yielding a lower percentage of natural gas liquids. This did not have a significant impact on cash flow in the quarter as natural gas pricing was strong due to the impact of the extended cold weather. InPlay is proactively working on infrastructure and facility upgrades that will allow associated natural gas production from our operations to be routed to higher liquids-yieldinggas plants. More historically typical oil and liquids weighting percentages of approximately 70% are expected in the second quarter of 2019 and into the second half of the year.

Outlook

Overall commodity prices have improved significantly with Edmonton light sweet prices increasing 55% to CDN $66.53/bbl in the first quarter of 2019 from CDN $42.68/bbl in the fourth quarter of 2018 following an improvement in average light oil differentials with first quarter 2019 averaging US $4.85/bbl which is much closer to typical historical levels. WTI prices have also recently improved significantly ranging from US $60.00 - $65.00/bbl in the second quarter to date.

We had a very successful first quarter where we spent capital efficiently with strong results as evidenced by our two 100% ERH wells brought on production in March being in the top three average daily performing Cardium oil wells of the month. These wells produced an average of 885 boe/d (88% light oil and liquids) and 895 boe/d (87% light oil and liquids) respectively during the twenty days they were on production in March.

In the first quarter of 2019 we drilled 2.7 net ERH wells with the majority of our remaining 2019 capital planned to be spent in the second half of the year on approximately six net additional Cardium ERH wells. Field estimated average production in April was approximately 5,600 boe/d (70% light oil and liquids) which positions us well in the second quarter of 2019 where minimal capital spending is planned and we anticipate a record quarter for the Company in terms of adjusted funds flow from operations at forecasted production and current strip pricing. The majority of the remaining budgeted development capital for 2019 is planned to be incurred in the Willesden Green area. InPlay reiterates its forecasted 2019 capital budget of $36 million, exit production guidance of 5,400 – 5,600 boe/d (approximately 70% light oil and liquids) generating production growth of between ten to fourteen percent, and annual average production guidance of 4,900 – 5,100 boe/d (approximately