IPC Announces First Quarter 2024 Financial and Operational Results

International Petroleum Corporation (IPC or the Corporation) (TSX, Nasdaq Stockholm: IPCO) today released its financial and operational results and related management’s discussion and analysis (MD&A) for the three months ended March 31, 2024.

William Lundin, IPC's President and Chief Executive Officer, comments:
“We are pleased to announce another strong quarter of production and operational performance, which was combined with favourable commodity prices. IPC achieved an average net daily production during the quarter of 48,800 barrels of oil equivalent per day (boepd). Our financial results during the quarter are in line with the 2024 guidance announced at our Capital Markets Day in February as we continue to excel operationally across our operations in Canada, Malaysia and France. At the same time, we also continued with purchases of IPC common shares under the normal course issuer bid, having completed approximately one-third of the current 2023/2024 program between December 2023 and March 2024. In addition, we are progressing the development of Phase 1 of the Blackrod project in Canada according to plan, which continues to forecast first oil in late 2026.”

Q1 2024 Business Highlights

• Average net production of approximately 48,800 boepd for the first quarter of 2024 was above the high end of the guidance range for the period (51% heavy crude oil, 16% light and medium crude oil and 33% natural gas).⁽¹⁾
• Progressing development activities on Phase 1 of the Blackrod project which remains on schedule and on budget.
• Successfully drilled, completed and tied-in three out of five 2024 budgeted Ellerslie wells within the Suffield area.
• 1.6 million IPC common shares purchased and cancelled during Q1 2024 under IPC’s normal course issuer bid (NCIB) and continuing with target to complete the full 2023/2024 NCIB this year.

Q1 2024 Financial Highlights

• Operating costs per boe of USD 17.1 for Q1 2024, below guidance.⁽³⁾
• Operating cash flow (OCF) generation of MUSD 89 for Q1 2024, ahead of the guidance range.⁽³⁾
• Capital and decommissioning expenditures of MUSD 125 for Q1 2024, in line with guidance.
• Free cash flow (FCF) generation for Q1 2024 amounted to MUSD -43 (MUSD 53 pre-Blackrod Phase 1 project funding).⁽³⁾
• Gross cash of MUSD 397 and net debt of MUSD 61 as at March 31, 2024.⁽³⁾
• Net result of MUSD 34 for Q1 2024.

Reserves and Resources

• Total 2P reserves as at December 31, 2023 of 468 MMboe, with a reserves life index (RLI) of 27 years.⁽¹⁾⁽²⁾
• Contingent resources (best estimate, unrisked) as at December 31, 2023 of 1,145 MMboe.⁽¹⁾⁽²⁾

2024 Annual Guidance

• Full year 2024 average net production guidance range maintained at 46,000 to 48,000 boepd.⁽¹⁾
• Full year 2024 operating costs guidance range maintained at USD 18 to 19 per boe.⁽³⁾
• Full year 2024 OCF guidance estimated at between MUSD 323 and 363 (assuming Brent USD 70 to 90 per boe for the remainder of 2024).⁽³⁾
• Full year 2024 capital and decommissioning expenditures guidance forecast maintained at MUSD 437.
• Full year 2024 FCF guidance estimated at between MUSD -154 and -114 (assuming Brent USD 70 to 90 per boe for the remainder of 2024), after taking into account MUSD 362 of forecast full year 2024 capital expenditures relating to the continued development of Phase 1 of the Blackrod project and the additional oil hedges executed in March and April 2024.⁽³⁾

During the first quarter of 2024, oil prices remained strong, with Brent prices averaging USD 83 per barrel. Following the quarter, Brent prices increased to spot rates over USD 91 per barrel in April 2024. Increased global crude demand revisions in combination with downward supply adjustments largely influenced by extended OPEC+ curtailments and rising geopolitical tension in the Middle East are some of the key factors that have lead to higher oil prices. Global crude inventories were largely unchanged in the first quarter and are below the 5 year average. Current consensus is that the oil market will be in a deficit for the remainder of 2024.

IPC has taken advantage of the favourable pricing outlook by increasing our benchmark hedged volumes to around 50% of our oil production at approximately USD 80.3 and USD 85.5 per barrel for West Texas Intermediate (WTI) and Dated Brent, respectively, for the remainder of 2024. Despite a favourable outlook for crude prices, 2024 is an election year in the United States and with recent inflation data impacting rate cut decisions, IPC took prudent action to protect the business in a downside pricing scenario given the record investment year for the Corporation.

In Canada, first quarter 2024 WTI to Western Canadian Select (WCS) crude price differentials averaged around USD 19 per barrel, with differentials decreasing to around USD 12 per barrel in April 2024. The Trans-Mountain (TMX) pipeline began commercial operations in May 2024 which should benefit future WTI/WCS differentials. Another positive catalyst for WCS is the reduced Mexican heavy oil exports to the US. IPC has hedged the WTI/WCS differential for approximately 70% of our Canadian crude production at USD 15 per barrel for 2024.

Gas markets in the first quarter of 2024 were relatively weak, given the warmer than average weather conditions and high gas storage levels in North America. The average AECO gas price was CAD 2.50 per Mcf for the first quarter of 2024.

First Quarter 2024 Highlights and Full Year 2024 Guidance

During the first quarter of 2024, our assets delivered average net production of 48,800 boepd, ahead of guidance for the quarter. High uptime performance was achieved across all our assets, including resumed production in Malaysia following the completion of the previously announced well maintenance work. IPC also benefited from short cycle investment activities, mainly within Southern Alberta assets in Canada where three out of five 2024 budgeted Ellerslie wells have been successfully drilled. We maintain the full year 2024 average net production guidance range of 46,000 to 48,000 boepd.⁽¹⁾

Our operating costs per boe for the first quarter of 2024 was USD 17.1, below guidance. Full year 2024 operating costs per boe guidance of USD 18.0 to 19.0 per boe remains unchanged.⁽³⁾

Operating cash flow (OCF) generation for the first quarter of 2024 was MUSD 89. Full year 2024 OCF guidance is tightened to MUSD 323 to 363(assuming Brent USD 70 to 90 per boe for the remainder of 2024).⁽³⁾

Capital and decommissioning expenditure for the first quarter of 2024 was MUSD 125 in line with guidance. Full year 2024 capital and decommissioning expenditure of MUSD 437 is unchanged.

Free cash flow (FCF) generation was MUSD -43 (MUSD 53 pre-Blackrod Phase 1 project funding) during the first quarter of 2024. Full year 2024 FCF guidance is tightened to MUSD -154 to -114 (assuming Brent USD 70 to 90 per boe for the remainder of 2024) after taking into account MUSD 362 of forecast full year 2024 capital expenditures relating to the continued development of Phase 1 of the Blackrod project and the additional oil hedges executed in March and April 2024.⁽³⁾

As at March 31, 2024, IPC’s net debt position was MUSD 61, from a net cash position of MUSD 58 as at December 31, 2023, largely driven by the funding of forecast capital expenditures and the continuing share repurchase program (NCIB).⁽³⁾ Gross cash on the balance sheet as at March 31, 2024 amounts to MUSD 397 providing a significant war chest to pursue our three strategic pillars of organic growth, returning value to stakeholders, and pursuing value adding M&A.

Blackrod Project

In Q1 2024, IPC continued to advance the development of Phase 1 of the Blackrod project. Development capital expenditure to first oil is estimated at MUSD 850. First oil of the Phase 1 development is estimated to be in late 2026, with forecast net production of 30,000 bopd by 2028. IPC forecasts development capital expenditure in 2024 for the Blackrod Phase 1 project of MUSD 362, of which MUSD 96 was invested in Q1 2024.⁽¹⁾

Project activities for the multi-year Blackrod Phase 1 development have progressed in line with expectations. As at the end of Q1 2024, fabrication and installation have commenced, site civil and commercial road expansion works continue to advance, drilling is progressing, and third-party pipeline commercial agreements are moving forward according to plan. IPC intends to fund the remaining Blackrod Phase 1 development costs with forecast cash flow generated by its operations and cash on hand.⁽³⁾

Stakeholder Returns: Normal Course Issuer Bid

In Q4 2023, IPC announced the renewal of the NCIB, with the ability to repurchase up to approximately 8.3 million common shares over the period of December 5, 2023 to December 4, 2024. Under the 2023/2024 NCIB, IPC repurchased and cancelled approximately 1.2 million common shares in December 2023 and a further 1.6 million common shares during Q1 2024. The average price of common shares purchased under the 2023/2024 NCIB during Q1 2024 was SEK 115 / CAD 15 per share.

As at March 31, 2024, IPC had a total of 125,438,160 common shares issued and outstanding and IPC held no common shares in treasury. As at April 30, 2024, IPC had a total of 125,151,742 common shares issued and outstanding and IPC held no common shares in treasury.

Notwithstanding the record level of capital investment forecast for 2024, IPC confirms its intention to continue to purchase and cancel common shares under the 2023/2024 NCIB to the remaining limit as at April 1, 2024 of 5.5 million common shares by early December 2024. This would result in the cancellation of 6.5% of shares outstanding as at the beginning of December 2023. IPC continues to believe that reducing the number of shares outstanding while in parallel investing in material production growth at the Blackrod project will prove to be a winning formula for our stakeholders.

Environmental, Social and Governance (ESG) Performance

During the first quarter of 2024, IPC recorded no material safety or environmental incidents.

As previously announced, IPC targets a reduction of our net GHG emissions intensity by the end of 2025 to 50% of IPC’s 2019 baseline and IPC remains on track to achieve this reduction. During the first quarter of 2024, IPC announced the commitment to remain at 2025 levels of 20 kg CO₂/boe through to the end of 2028.

Notes:

1. See “Supplemental Information regarding Product Types” in “Reserves and Resources Advisory” below. See also the annual information form for the year ended December 31, 2023 (AIF) available on IPC’s website at www.international-petroleum.com and under IPC’s profile on SEDAR+ at www.sedarplus.ca.
2. See “Reserves and Resources Advisory“ below. Further information with respect to IPC’s reserves, contingent resources and estimates of future net revenue, including assumptions relating to the calculation of NPV, are described in the AIF.
3. Non-IFRS measures, see “Non-IFRS Measures” below and in the MD&A.