IPC second quarter 2019 financial results

August 6, 2019

International Petroleum Corporation (IPC or the Corporation) (TSX, Nasdaq Stockholm: IPCO) today released its financial and operating results and related management’s discussion and analysis (MD&A) for the three and six months ended June 30, 2019.

Financial and Operational Highlights

• Average net production of 46,100 barrels of oil equivalent (boe) per day (boepd) for Q2 2019, a four percent increase from Q1 2019.
• Operating costs per boe of USD 12.6 for Q2 2019, slightly better than guidance.
• Drilling operations have commenced and continue in Canada, France and Malaysia.
• Canada Suffield area oil drilling program results outperforming pre-drill expectations.
• Canada Suffield N2N enhanced oil recovery (EOR) development project approved during Q2 2019, forecast to add peak rates of approximately 1,250 bopd once fully ramped up.
• France Vert La Gravelle redevelopment project commenced in Q2 2019.
• Completed acquisition of lands adjoining the Blackrod project in Canada, with best estimate contingent resources (unrisked) of 243 million boe (MMboe).
• Capital expenditure budget remains in line with guidance of USD 188 million.
• Strong operating cash flow generation of USD 76 million in Q2 2019 (USD 160 million for the first half of 2019) at the upper end of guidance.
• Operating cash flows were utilised to fund capital expenditures and to reduce financial liabilities, with net debt decreasing from USD 277 million as at December 31, 2018 to USD 239 million as at June 30, 2019.

Three months ended June 30 Six months ended June 30
USD Thousands 2019 2018 2019 2018
Revenue 129,357 120,637 276,777 235,799
Gross profit 39,287 45,920 86,172 83,493
Net result 25,744 21,498 58,886 47,811
Operating cash flow 76,496 76,687 159,552 152,747
EBITDA 74,600 74,478 156,275 139,769
Net Debt 239,322 254,628 239,322 254,628

Mike Nicholson, IPC’s Chief Executive Officer, commented,

“We are pleased to announce another strong set of quarterly results, with a ramp up in activity levels across all of our areas of operations during the first half of 2019.

During Q2 2019, our assets delivered average daily net production of 46,100 boepd. Full year average production is expected to be towards the lower end of the 46,000 to 50,000 boepd guidance range as a result of the delayed ramp up at Onion Lake Thermal in Canada and the partial production curtailment experienced in France during Q2 2019. The curtailment in France was due to a temporary suspension of operations at a refinery, with normal operations resuming in late July 2019. The 2019 exit production rate expectation remains at 50,000 boepd. Our operating costs per boe for Q2 2019 was USD 12.6, slightly better than guidance.

IPC has continued to deliver a robust financial performance during Q2 2019 generating a quarterly operating cash flow of USD 76 million, at the upper end of guidance. This allowed IPC to fund its expenditure program and to reduce net debt from USD 257 million at the end of Q1 2019 to USD 239 million by the end of Q2 2019.

In Malaysia, following positive results from the 2016 and 2018 infill drilling programs and continued good reservoir performance, we approved a third phase of infill drilling on the Bertam field for execution in 2019. The drilling program commenced in June 2019. The drilling of two infill landing pilots has been completed. Better than expected results were encountered in the A-15 area and poorer than expected results were encountered in the A-14 area. As a result, the third infill well (A-20) is planned for the A-15 area. The Keruing exploration well was drilled in Q3 2019 and the well is being plugged and abandoned after the reservoir was found to be water-bearing. The drilling program in Malaysia continues with the drilling of three infill wells (A-18, A-19, A-20) and work progresses to identify potent