Growing, Undervalued, Low-Leverage…

In This Energy Bull Market, InPlayOil’s (TSX:IPO) (OTCQX:IPOOF) Record-Setting Quarter Could Set ItStock Up For More 1000+% Potential Breakouts
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Latest News - Nov 10, 2021

InPlay Oil Corp. Announces Third Quarter 2021 Financial and Operating Results Highlighted by Record Quarterly Production and Financial Results

Who is InPlay Oil Corp.

About The Company

InPlay Oil Corp. is a growth-oriented light oil development and production company based in Calgary, Alberta.

InPlay’s activity is focused on large oil in place pools with low recovery factors, low declines, and long life reserves primarily targeting the Cardium Formation in Alberta. InPlay has a strong balance sheet allowing it to weather commodity volatility and develop its extensive inventory of horizontal drilling locations. InPlay’s shares trade on the Toronto Stock Exchange under the symbol IPO.

If you ever want a potentially classic case of FOMO, just look at stocks like InPlayOil (TSX:IPO) (OTCQX:IPOOF) and the broader energy sector. 

Don’t act like you didn’t believe this sector was dead when oil prices turned negative on Apr 26, 2021. (Source 4) With all of this clean energy talk and climate change buzz, you’ve probably been continuing to overlook it too. 

You could be making a big, big mistake. 

Oil prices have rebounded as the world’s economic recovery has caused demand to skyrocket. Just look at what’s happening in the U.S. and its angry citizens dealing with skyrocketing gas prices. The current U.S. administration, which mind you shut down domestic pipelines, has been under immense pressure to tap into the country’s Strategic Petroleum Reserves. (Source 5) They really don’t have a choice. 

Moreover, both Brent Crude Oil and WTI Crude reached roughly seven-year highs above $86 and $85, respectively, in October 2021. (Source 6) (Source 7)

This could only be the beginning. Many industry heavyweights are calling for oil prices to continue surging.

Jeremy Weir, CEO of Trafigura Group, predicted crude to soar above $100 a barrel at the FT Commodities Asia Summit thanks to a “very tight oil market.” (Source 5) Senior management at Russian energy giant, Rosneft, was even more aggressive, forecasting prices to hit $120 per barrel in the second half of 2022. (Source 8)

Yet somehow, this oil bull market gets overlooked in the news. Is it because the mass media wants to promote clean energy? Is it because other sectors might be sexier?

The bottom line is if you’re overlooking energy, you’re missing out on some stocks that have completely clobbered the market. Some energy plays year-to-date as of Nov 15, 2021, saw moves that could make you cry, such as: (Source 15)

    • Gulfport Energy Corporation 59,444.47% 
    • Extraction Oil and Gas, Inc. 25,238.26%  
    • Noble Corporation 12,665.85% 
    • Lonestar Resources U.S. Inc. 6,300.00% 
    • Rosehill Resources Inc. 3,154.84%
    •  

InPlayOil (TSX:IPO) (OTCQX:IPOOF) could have that same sort of potential upside. This Canada-based growth-oriented light oil development and production company could have a rare blend of growth, value, and low leverage. All while operating at the heart of one of the most under-the-radar sector bull markets we’ve ever seen.

With activity focused on large oil in place pools with low recovery factors, low declines, and long-life reserves in the Cardium Formation in Alberta, InPlay recently reported a record-setting quarter. (
Source 2) And the stock has skyrocketed as much as 1,005% between Dec 02, 2020, and Nov 15, 2021. (Source 3


So without further ado, here are five top reasons why the stock might just be getting started with even more explosive room to run.

Reason #1

The Record-Setting Quarter InPlayOil (TSX:IPO) (OTCQX:IPOOF) Just Announced

Want some first-hand evidence as to why ​​InPlayOil (TSX:IPO) (OTCQX:IPOOF) might be the top company in this energy bull rush? Look at the their latest earnings report.

On Nov 10, 2021, InPlayOil (TSX:IPO) (OTCQX:IPOOF) reported Q3 2021 financial and operating results highlighted by record-setting quarterly production and financial results. (Source 2)

The significantly improved commodity price environment, which we discussed earlier, is one potential catalyst. Coupled with the efficient execution of its operational and capital program, it’s caused a tsunami of eye-popping production and financial figures.

InPlayOil (TSX:IPO) (OTCQX:IPOOF) was sure to highlight the following: (Source 2)

So essentially, the company achieved record production and record growth while both slashing operating expenses and leverage. Yet this illustration of 3Q21 from Michael A. Zuk, Managing Partner of Athena Capital Markets, could depict it better than all these words. In his view, it shows a “​​bigger and less burdened” junior company. Mind you, these figures don’t even consider the lucrative promise of its latest Prairie Storm Acquisition (which we detail later).
You can imagine what figures like this could do for the company’s future. Still, even before its Q3 report was released, the company reported some shocking growth figures and projections.

    • Consistently grew production (excluding 2020)
      • 2021 estimated pro forma production growth of ~47% over 2020 (~18% over 2019)
      • Preliminary 2022 outlook for pro forma production growth of 50% – 55% over 2021
    • Has consistently grown AFF (excluding 2020)
      • 2021 forecasted pro forma AFF growth of ~606% over 2020 (~61% over 2019)
      • Preliminary 2022 outlook for pro forma AFF growth of 103% – 112% over 2021
    • Has consistently grown reserves in all categories every year
      • Significant pro forma reserves growth in 2020 compared to 2019 (PDP +67%, TP +131%, TPP +119%) with top-tier FD&A costs
Should it come as a surprise that its preliminary 2022 pro forma outlook also includes fund flows of $105.0mm – $110.0mm? Or FAFF of $55.0mm – $59.0mm, resulting in FAFF yield of 54% – 58%, net debt/EBITDA of 0.2 – 0.3x, and production growth / weighted average share of 25% – 27% over 2021e? (Source 1)

As it continues executing a strategy for top-tier production growth, this can tend to happen when your ‘Best in Class’ operational and technical team drives costs lower and beats production forecasts.

Reason #2

Undervalued, Underleveraged, and an Explosive Stock Chart Screaming “FOMO”

The company’s stock has essentially been on a vertical surge since the end of 2020. After trading as low as $0.20 a share on Dec 02, 2020, the stock rampaged 1,005% to its Nov 15, 2021 close of $2.21. (Source 3)

(Source 3)

Furthermore, as of Nov 15, 2021, the company has several bullish technical indicators in the short-, medium-, and long-term, such as its 20 Day Moving Average, 20 – 50 Day MACD Oscillator, 20 – 100 Day MACD Oscillator, 20 – 200 Day MACD Oscillator, 50 Day Moving Average, 50 – 100 Day MACD Oscillator, 50 – 150 Day MACD Oscillator, 50 – 200 Day MACD Oscillator, 100 Day Moving Average, 150 Day Moving Average, 200 Day Moving Average, and 100 – 200 Day MACD Oscillator. (Source 10)

 

Yet despite the rally that this stock has been on, what truly makes it so attractive is that InPlayOil (TSX:IPO) (OTCQX:IPOOF) is so underleveraged and potentially undervalued. 


First, let’s talk about the company’s lack of leverage. We mentioned earlier that in its Q3 report, it reported its lowest quarterly leverage ratio in the company’s history. (Source 2) Yet beyond this, the company consistently reduced leverage yearly pre-2020. This record-setting lack of leverage is simply a process of accelerating its eye-popping efficiency. (Source 1)

(Source 1)

Additionally, the stock could be severely undervalued. As it is, oil is underweighted in most portfolios and very overlooked. Just look at this headline in June 2021, before oil prices really started taking off- “Stock investors are poised to miss out on soaring oil prices with energy only making up 2% of portfolios, BofA says.” (Source 11)

 

Look where we are now. 

 

A SeekingAlpha piece on the company from Nov 13, 2021 noted that the company is trading at less than 4x Free Cash Flow using $70 WTI. It also notes its Prairie View acquisition (more on that later) as a game-changer for the company’s operations and production capabilities. Yet, in the article’s words, “The acquisition makes InPlay Oil cheap on basically any metric. Assuming the company’s base case scenario is credible, InPlay Oil will generate in excess of C$0.60/share in free cash flow in 2022, which makes the current share price of C$2.11 still a steal.” (Source 16)

 

Based on research from Michael A. Zuk, Managing Partner at Athena Capital Markets, the InPlayOil (TSX:IPO) (OTCQX:IPOOF) stock benefits from a relatively small share count and +$110mm in AFF in 2022e. (Source 9) He also uses ‘Year to go Private’ as a unique metric. He screens it at just 2.3 years based on his calculations, which is the top of the peer group (and cheapest on EV/EBITDA). Additionally, in his view, it would take a $4.50 share price to trade at its peer group’s mean, without quality adjusting the name for lower leverage, better PPS+FCF growth, minimal ARO, and more.Based on further research from Michael A. Zuk, Managing Partner at Athena Capital Markets, the InPlayOil (TSX:IPO) (OTCQX:IPOOF) stock also benefits from a relatively small share count and +$110mm in AFF in 2022e. (Source 9) He also uses ‘Year to go Private’ as a unique metric. He screens it at just 2.3 years based on his calculations, which is the top of the peer group (and cheapest on EV/EBITDA). Additionally, in his view, it would take a $4.50 share price to trade at its peer group’s mean, without quality adjusting the name for lower leverage, better PPS+FCF growth, minimal ARO, and more.

 

(Source 9)

A $4.50 share price after the stock already soared 1,005%? As in 103.62% of more potential room to run from its Nov 15, 2021 closing price? Intriguing, to say the least…

Reason #3

Production and Operations Have InPlayOil (TSX:IPO) (OTCQX:IPOOF) Set For Long-Term Sustainability

The best defense to downside commodity prices is a low-cost producer- which is precisely what Inplay is. 

It has simply skyrocketed from an oil bull market while remaining protected from downside risk. It has low decline base production requiring minimal capital to keep flat while adding significant top-tier operated high working interest inventory. In fact, the company could be in the top quartile in declines in oil’s weighted growth universe. Low decline production + high netback light oil + quick payout inventory = TOP-TIER LIGHT OIL GROWTH + SUSTAINABILITY. (Source 1)

 

(Source 1)

Additionally, it has some of the most robust barrel-producing capacities in its peer group. It is a well-known play that’s been around for some time.  

(Source 1)

You can thank its operations in Canada’s Cardium for that. Its Cardium projects are well-established, low risk, and offer some of the safest returns in the Western Canada Sedimentary Basin. With 80% Cardium production, InPlayOil (TSX:IPO) (OTCQX:IPOOF) has built itself into a drilling industry pacesetter with horizontal wells and exceeding forecasted volumes. (Source 1

Reason #4

Acquisitions, ​​Acquisitions, ​​Acquisitions...

Its Q4 2020 acquisition of the Pembina Cardium project (100% WI) is arguably its most notable and game-changing project to date. (Source 1) When oil was still cheap at the end of 2020, and the outlook was uncertain at best, InPlayOil (TSX:IPO) (OTCQX:IPOOF) had foresight and cahonés. It “bought low,” expanded its operations, and is today laughing all the way to the bank.

 

After acquiring the property, InPlay immediately built a multi-well battery in Q1/21 to handle full field development. With 26 well inventory remaining with ~30% of the locations unbooked, along with 100% WI lands, development can occur at a pace within the company’s control. (Source 1)


To this date, the project has significantly outperformed forecasted production volumes and booked reserves on all producing wells drilled. (Source 1)

Not to rest on its laurels, the company announced an acquisition on Sep 28, 2021, with that same type of potential. While the acquisition has not closed yet, it is a definitive agreement to acquire light-oil Cardium-focused producer Prairie Storm Resources Corp. for roughly $40.5 million. This deal could be colossal and potentially make InPlay one of the largest acreage holders in the entire Willesden Green Cardium. (Source 12)


While its latest earnings reports and projections don’t take this acquisition into account, the company anticipates the following: (Source 12)

Attractive acquisition metrics include:

- 2.5 times run rate operating income
- 1.3 times 2022 operating income
- $8.26/boe of 2020 YE PDP reserves
- $1.90/boe of 2020 YE TP reserves
- $1.51/boe of 2020 YE TPP reserves

Accretion metrics include:

- 15% accretive to forecast 2022 production per share(6)
- 12% accretive to targeted 2022
- Adjusted Funds Flow (“AFF”) per share
- 17% accretive to targeted 2022 FAFF per share
- 21% accretive to PDP reserves per share
- 60% accretive to TP reserves per share
-46% accretive to TPP reserves per share

Additionally, InPlayOil (TSX:IPO) (OTCQX:IPOOF) targets 2022 production to average between 8,900 and 9,400 boe/d, which is anticipated to generate $106.5 $111.5 million of AFF and $55.0 to $59.0 million of FAFF. This could strengthen an already strong balance sheet with 2022 targeted net debt to earnings before interest, taxes, and depletion (“EBITDA”), improving to 0.2 times – 0.3 times. (Source 12)

 

It also adds proved developed producing (“PDP”) reserves of 4.9 million boe total proved (“TP”) reserves of 21.3 million boe and total proved plus probable (“TPP”) reserves of 26.8 million boe. On Prairie Storm’s assets, production from Jan 01, 2021, to Nov 30, 2021, is estimated to be approximately 0.6 million boe. It also includes about 37,995 net acres of high working interest (77%) Cardium land. (Source 12)


Lastly, this acquisition could potentially add over 86 net booked drilling locations while adding even more improvements to the company’s sustainability. This includes low decline production, strong FAFF, sizable drilling inventory, the addition of material scale to the company with significant anticipated cost savings through synergies, and a strengthened balance sheet with improvements to net debt/EBITDA in 2022. (Source 12)

Reason #5

Environmentally-Friendly?!

A way to invest in oil’s surge while remaining environmentally friendly? Imagine that. 

 

Coupled with an energy market that’s skyrocketing, InPlayOil could shockingly be an ESG play as well. Thanks to all of the buzz behind ESG investing, this space could see an astounding $53 Trillion worth of inflows by 2025. (Source 14)

 

InPlayOil (TSX:IPO) (OTCQX:IPOOF) isn’t your typical environmentally-hazardous oil driller from Texas. We should note that being a Canadian oil producer already makes it more environmentally friendly than any U.S. play. The U.S., and most other countries, do not have the same type of environmental regulation that Canada has. When it comes to energy, Canada is one of the most environmentally-responsible nations on the planet, and it shows. 

 

“Canada supplies energy to the world while operating some of the safest, low-environmental impact facilities in the world,” according to a Context Energy Examined piece. (Source 13) “In fact, among oil-producing nations, Canada is a leader along environmental, social and governance measures. In a world that will require oil and natural gas resources to meet energy demand for decades to come, Canada is already a sustainable supplier of choice,” the piece added. (Source 13)

 

InPlayOil (TSX:IPO) (OTCQX:IPOOF) is no exception and has reported stunning environmental numbers not only for an oil company but for ANY type of company. (Source 1)

So to sum it up…

If there was a perfect play for the perfect time, I have yet to see one quite like InPlayOil (TSX:IPO) (OTCQX:IPOOF).

 

It is growing at breakneck speed thanks to oil’s bull market and a well-rounded acquisition strategy. It’s undervalued, unleveraged, and has seen its stock soar by 1000+% since December. (Source 3) Based on its latest record-setting earnings report and what analysts like Michael A. Zuk say, this could only be the beginning too.

 

Beyond combining exposure to energy’s upside with potential downside risk protection, InPlay continues shattering production volume estimates and keeps on expanding its footprint with strategic acquisitions. Yet, it could also be a top ESG play in the soaring energy industry. 

 

The forecasts are bullish, the potential is there, and you might want to get quite enthusiastic about this company’s prospects.

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