International Petroleum Corporation

Okay, so welcome, everybody, to IPC's second quarter results update presentation for 2025. I'm William Lundeen, the president and CEO, and alongside me today is Christoph Nergerarian, our CFO, as well as Rebecca Gordon, our SVP of corporate planning and investor relations. So I'll start in the usual format with the quarterly highlights and provide an operational update at each of our assets. Then Christophe will go into greater detail on the financial aspects for the quarter. Following the presentation, we'll take questions which can be submitted online or through the conference call. This was another solid quarter for the company with average daily production rates of 43.6 thousand barrels of oil equivalent per day. I was in line with guidance and our full year production guidance is maintained at 43 to 45 thousand barrels of oil equivalent per day. Operating costs for the quarter were slightly below guidance at $17.80. There's slightly cheaper input costs as well as some activity refacing. Full year operating expenditure outlook is maintained between 18 and $19 a barrel. On the capital expenditure front, our full year guidance is maintained at 320 million USD. Through the first six months of the year, we spent around 199 So that represents slightly more than 60% of our full year capital program. And with about 138 out of the $199 million spent through the first six months of the year, that was allocated towards the transformational BlackRod phase one development. And we did host a large investor and an analyst site visit in the quarter to showcase the world-class asset, which was very well received. And a special hats off to our team for facilitating a great tour to some of our key stakeholders during that period in June. So on the cash flow front, Brent averaged around $68 a barrel in Q2. Our operating cash flow for the quarter was $55 million, which was in line with expectation. Full year OCF outlook is forecast between 245 to 260 million USD, assuming Brent prices of 60 to $75 a barrel for the remainder of the year. Free cash flow for the quarter after taking into account all capex that was spent was minus 58 million USD and the full year free cash flow forecast for our final major growth spend year at Blackrod is expected to be between 135 million to 120 million USD, between 60 and 75 Brent, that is negative 135 to negative 120. On the balance sheet front, our net debt position as at the end of Q2 stands at 375 million US dollars with gross cash available to the business of 79 million USD. And we have increased our revolving credit facility in Canada from 180 million CAD to 250 million CAD, which remains undrawn at this period. So the company remains well positioned with healthy liquidity availability. We did elect to increase our oil hedging exposure during the second quarter, and that took place during the price spike while the Iran-Israel conflicts were escalating in June. So we added 4,000 barrels per day for the second half of 2025 in the form of zero cost callers between $65 and $75 a barrel WTI. So really helps protect the downside in this volatile market for the remainder of this year. On the ESG side of things, there were no material incidents recorded during the quarter, and we're pleased to announce the release of our sixth annual sustainability report, which came alongside our Q2 results. On the share repurchase front, we've made great headway with our NCIB program. We are about 85% progressed through that program and the average repurchase price for the 2024-2025 NCIB program has been around 142 per share. So we intend to complete that program before expiry in December. First half production average for 2025 when you take into account all six months of the year is right in line in the middle of our guidance at 44,000 VOEs per day and Q2 production average again was 43.6 thousand barrels of oil equivalent per day. As can be seen on the production plot really highlights the low decline nature of our producing assets and We look forward to seeing the incremental production boost in Q3 from the short cycle investments that were undertaken mainly at Onion Lake Thermal in Canada and the Bertam Field in Malaysia. And you can see some of those investments starting to bear its fruits in the beginning of July there on that production plot from Onion Lake Thermal as annotated. Again, the full year production forecast for 2025 is maintained between 43 and 45,000 barrels of oil equivalent per day. Very confident to be able to deliver in another year within production guidance. Our portfolio is a diversified production mix and it consists of one third natural gas weighting and then two thirds oil with about 55% of that oil mix coming from Canada and the balance coming from France and Malaysia. And of course those two assets have Brent linked pricing. Moving on to our operating cash flow. So for the first six months of the year, the business generated a robust $130 million in OCF and the Brent to WTI differential during that period was $4 a barrel. And the WTI to WCS differential averaged $11 per barrel through the first six months of the year. So it's notably the tightest first half differential we have seen since IPC stepped into Canada and this is very much a feature of there now being more takeaway capacity than supply in the Western Canadian sedimentary basin thanks to the TMX pipeline coming on stream. So full year OCF is expected to be between $245 to $260 million for the year as we've tightened that and we are forecasting differentials between $3 a barrel and $10 barrel for Brent to WTI and WTI to WCS in the $60 scenario. And for the $75 scenario, we are forecasting a differential of $5 and $15 a barrel respectively for that Brent to WTI and WTI to WCS diff. Capital expenditure inclusive of decommissioning spend is forecast at $320 million USD. So our CapEx profile is expected to gradually decrease throughout the year as we progress into the second half and as we get closer to the Black Rod Phase 1 completion. and the bulk of our non-BlackRod CapEx investments that have largely taken place to current point in time. Now, again, mainly relating to the investments at Onion Lake Thermal, as well as in Malaysia, which I will expand on in detail in the upcoming slides. Free cash flow year to date for the first half, it was 43. Million USD excluding any CapEx investments at the BlackRod asset. When taking into account all CapEx, the free cash flow for the first half of the year is minus 101. Similarly to the OCF, we've tightened our free cash flow full year outlook for 2025, where excluding BlackRod CapEx, we expect to generate between 95 to 110 million USD, between 60 and $75 Brent. And when taking into account the capex at Blackrod, the full year free cash flow outlook is expected to be between minus 135 and minus 120 million USD between 60 and $75 rent. Share repurchases, IPC has continued on its anti-dilution path and the company has achieved a notable milestone in the corner. quarter where we now have less shares outstanding compared to that of when the company was formed. Only 76 million shares have been repurchased since the company's inception and the average price all those shares have been repurchased at is 77 sec per share or Canadian $10 per share, which is less than half the price of our current share price today. The portfolio has underwent a significant transformation with material increases to production, reserves, resources and value as can be seen on the right hand side of the slide compared to that of the portfolio IPC was sitting on when the company was IPO'd in April 2017. So provided we keep trading at a discount relative to our intrinsic value, the balance sheet stays in good shape and our net debt to EBITDA is less than 1.75 times. We intend to complete the remaining 2024-2025 NCIB program by the time it expires in early December. So really the combination of turbocharging production growth through the BlackRod investment and canceling out the shares should prove to be a winning formula for our stakeholders. The net asset value side, we have at, year end 24 and net asset value based on our 2P reserves in excess of $3 billion, representing a fair share price of 287 sec per share or 37 CAD per share. And again, no value is assigned to our large contingent resource base in this NAV calculation. And based on this NAV where we're currently trading, it represents approximately a 40% discount to our intrinsic value, which really underpins the strategy for our shareholder returns being buybacks opposed to dividends. So the phase one development at the Blackrod asset, it's very much on time and on budget. Great progress has been made on this project since it was sanctioned in February of 2023. We've greatly de-risked the overall project. Around 729 million USD of growth CapEx has been incurred since the project was sanctioned or around 86% of the total growth CapEx to first oil. So as prime contractor of the site, I'm especially proud that there has been no material safety incidents since responsible development activities began. And a notable milestone was achieved at the end of Q2, where the final central processing facility module was delivered to site. So now all fabrication for the CPF is completed at this stage. So really mechanical, electrical and instrumentation work scopes at site are the key focus for our project and the construction and operation teams at site remain diligently working well ahead on those fronts. Well pad facilities, drilling and completions, third party pipeline systems are all progressing according to plan. So we're very pleased with the status of the project at this stage and we feel really confident to deliver within the guidance that has been set out. Overall on the schedule, I had noted the main scopes that are advancing. It's very exciting to see as we get closer to this asset about to come on stream. And as we get closer to the startup of the BlackRod phase one development, we will initiate our progressive turnover strategy in the coming time to position us well for the overall startup of this asset. And moving on now to our producing assets at Onion Lake Thermal, we had stable production performance for the quarter. And you can see on the production plot that we began benefiting from some of the short cycle investment opportunities that were undertaken whereby there is four infill wells planned this year at Onion Lake Thermal. Two of those started producing at the end of Q2 and the other two infill wells are coming on stream just after Q2. And we also have the final two well pairs on LPAD also ramping up to keep production levels as high as possible at this asset for the remainder of 2025. Moving on to the subfield area assets, so valuable low decline production here as can be seen on the production plot. There is no major development activity planned for 2025, but there is a large inventory of drill-ready opportunities that sits within the portfolio that could be sanctioned at the discretion of the company. And the gas production here is a strategic benefit to have within the portfolio, especially as we look to ramp up Blackrod. in due course, which helps as a natural hedge relative to the gas consumption at the other assets in Canada. On the other assets in Canada, seeing good performance through the second quarter. There was some planned maintenance activity that successfully got completed in May. We are seeing a nice response from the polymer flood at our Mooney asset. And again here, there's no major development activity planned at the other assets in Canada. Moving on to Malaysia for the second quarter is another great quarter of operational performance. We're at high facility uptime. excluding planned maintenance, which was greater than 99%. We also successfully completed the drilling and work over campaign that just finished after Q2. So encouraging results to start out whereby we have a new well, A21, on stream and we also brought A15 online after the work over so we're in a cleanup and stabilization period but we look forward to coming out with the next quarterly results where you can see the arrow signaling increase in overall production here thanks to those investments that were undertaken earlier in the year. And there is planned maintenance activity also scheduled for late September and also going into Q4. And that is very much on track overall to take place. In France, in low decline production here as well, stable operations through the second quarter of 2025, there is quite a lot of maintenance well work over activity. As you can see in the production plot, we benefited from a slight production boost there and robust pipeline of investment opportunities also sit within the France business. And that is shown on the graphic on the right of the slide. Where in the FAB field, we like to call it Fanton Ebron, there are multiple sidetrack opportunities that we are excited to unleash when appropriate. And with that, I will pass it along to Christophe to go through the financial highlights for the second quarter.

Yeah, thank you very much, Will. Good morning, everyone. So a good production, just 2% below the one for the first quarter. So we were producing on average 43.6 thousand barrels of oil equivalent per day during this quarter and just at 44,000 right in the middle of the guidance for the first six months of this year. So we're very happy to reiterate the guidance in terms of our production forecast for the for the whole year. And actually, we reiterate the guidance on all matters. So we keep the 43 to 45,000 barrels of oil equivalent per day production guidance for the year, as well as the OPEX guidance and the CAPEX guidance. Oil prices were slightly lower, $7, $8 lower than during the first and with a mildly lower production, the operating cash flow was as well lower in the second quarter, but still strong at 55 million US dollars, 130 million for the first six months of the year. And interestingly, we were still before the BlackRod CAPEX phase one, we posted a positive free cash flow for the quarter. So the base business is running smoothly and very well. As you can see here on this first slide, reasonably high capex, still lots of investments, mostly on BlackRock phase one project. So we spent actually 100 million during first quarter this year, another 100 million US dollars during the second quarter. So we almost spent two-thirds of our CAPEX guidance for the year at 320 million by the end of this year. So we signaled before that this year the CAPEX program would be front-loaded during the year, and that's exactly what's happening with almost a third in the first and the second quarter. With a net debt of $375 million, the leverage of the company is now at around 1.4 times, which is still very reasonable when you think that on aggregate, we've already spent 85% of $730 million of capex cumulatively on the project. As I mentioned, the realized prices in this second quarter were a bit lower, with Brent and WTI almost $8 per barrel lower. Now, the interesting point is that the WTI to WCS, the differential there, was very, very good, very tight at minus $10. And it's reassuring to see all the positive benefit finally of having the expansion of the Trans Mountain pipeline on stream. There's ample egress capacity now from the Western side of Canada with oil flowing freely to the US without any tariffs. And it's very, it's very, supportive of our ongoing investment at BlackRock to see that the differential remains very tight at minus 10. So the Brent on average was at 68 this quarter. It doesn't look like it, but we continue to receive very strong premium in Malaysia. We only had one lifting this quarter. in France was selling again on par with Brent. The WTI was at 64, WCS $10 lower at $54 per barrel and was selling oil from Suffield and Onion Lake essentially on par with WCS. Gas prices, as you know in Canada, There is a reasonably strong seasonality with gas prices and gas prices are traditionally lower in the summer times. No difference is this year with reasonably low gas prices. The good thing is that the LNG Canada project started with the first energy trains on stream and we believe that this should help the market by rebalancing the egress with the production and we hope to see improved gas prices towards the end of the year when the storage level starts to improve. Looking at the cumulative operating cash flow and a bid of $130 and $123 million for the first six months, you can see that despite slightly lower production this year compared to the first six months last year, and much lower oil prices, the base business continues to deliver very strong cash flows to fund our investment and our share buyback. Operating costs, as I mentioned, the guidance is maintained at between $18 to $19 per BOE for operating costs. The second quarter was a bit lower than anticipated, driven by lower electricity prices. but you can see that we anticipate slightly higher operating costs per barrel. There is some upside for the third and the fourth quarter, but we're expecting higher OPEX per barrel for the rest of the year, including with some maintenance costs in Q3 and Q4 in Malaysia, where we have to shut in production for a few days and spend some normal maintenance OPEX there. In terms of net back, you can see that for the first six months of the year, with $42 per BOE of revenues, that translated into a cash margin of $16 per BOE and $16 per B as well. for the operating cash flow for the first six months of the year and EBITDA just above 15 with GNA maintained at $1 per BUE. So the costs remain under control while the production is reasonably flat. So when you look at the net debt from the beginning of this year to the end of the second quarter, you can see that our operating cash flow of 130 million almost fully funds the BlackRock phase one investment of 138 million. And if you exclude that, our operating cash flow actually fully cover around a bit more all the rest of our costs, including the capex for the rest of the business or GNA on that financial items and the share buyback. So we added around $167 million of net debt during the first six months. of this year and we had 375 million US dollars net debt at the end of the quarter with a leverage of 1.4. the net financial items and the GNA on this slide, you can see that it's a bit misleading. It's not misleading. It's obviously correct. But we had a non-cash gain in terms of the FX movement, which offset some real cash financial costs. So the total net financial items are essentially zero this quarter, but we're continuing, obviously, to pay our coupon and other bonds. And then the rest of our finance costs, which are very stable quarter to quarter, they just look small this quarter with this non-cash gain on the FX front. GNA, as I mentioned, remain under control at 4 million US dollar. or $1 per BOE for the quarter. So financial results for the first six months with $338 million of revenues and $207 million of production costs. We had a cash margin of $130 million, gross profit of $68 million and net result of $30 million for the first six months. The balance sheet remains strong and the common theme is that we are using more and more of our cash to invest in the business and BlackRod in particular. So you can see the cash position going down while we're increasing the value of our oil and gas assets on the balance sheet exactly as you would expect. The capital structure of the business has not really evolved. We still have, obviously, our $450 million worth of bonds, which are maturing in February 2027. So we are following very closely with our banks and brokers the state of the debt capital market. We remain very opportunistic, and if the right window opens, will contemplate refinancing, extending the maturity or the best solution for the business in the next few months. There's no rush, but of course, we remain very focused on the state of the market. We were able and willing and we welcome another bank in our bank syndicate in Canada. So while our revolving credit facility was fully available and drawn at the end of the second quarter, we increased that rcf in canada from 180 to 250 million cad or roughly 180 million us dollar again which which is fully available and we extended the maturity until may 2027 we we have a lot of credit facility uh which of 40 million which is going to go down once the pipeline, the BlackRock pipeline are fully up and running, which is expected during this year. Still a very small French unsecured loan, which will be fully repaid by the end of May 2026. So a solid balance sheet and lots of liquidity with a fully available and ungrown Canadian RCF. In terms of hedging, while there were some very high geopolitical tensions between Israel and Iran during the second quarter, we used that opportunity to add a bit of downside protection on our WTI-linked production. So we added 4,000 barrels a day. of zero-cost collar between $65 and $75 a barrel for the second half of this year. Otherwise, we remain reasonably well protected as well for the brand with around 40% of our exposure hedged for the second quarter this year. The WTI swaps and the Brent swaps are unfortunately in the money as well as our gas swaps for the moment and potentially for the second half of this year based on the current forward curve. And you can see here the FX protection which we entered into earlier on. No change there. And we were pretty happy with the hedges we did on the FX front on the Canadian dollar to protect our investment in BlackRock. So thank you very much. And I will let, we'll conclude.

Thanks, Christoph. So in summary for the six months highlights for the business, we've invested 199 million US dollars in capital expenditure. 138 of that has gone to the Black Rod phase one development. Production front, 43.6 thousand barrels of oil equivalent per day for the second quarter. Full year production guidance is maintained at 43 to 45 thousand barrels of oil equivalent per day. Operating costs, $17.80 for Q2. And again, we maintain our full year outlook of OpEx per BOE between 18 and $19. Strong cashflow in Q2 of 55 million USD through operating cashflow and free cashflow for the quarter was minus $58 million in free cashflow. The balance sheet, again, to reiterate, a net debt position of $375 million and gross cash resources available just below $80 million as at the end of June 2025. no material safety incidents or environmental incidents through the quarter or throughout the year. And again, the sustainability report we issued, we encourage our audience to read that prescriptive write up in terms of some of the initiatives and performance highlights on the sustainability front that the company has undertaken. Share repurchases, we are 85% the way there progressed through this NCIB program. well positioned to complete that and the intention is to do so. So with that, happy to turn it over to the operator to take questions. Thank you.