International Petroleum Corporation

Okay, so welcome everybody to IPC's 2026 First Quarter Results Update Presentation. I'm William Lundeen, the President and CEO, and joined today by Christoph Norderarian, our CFO, as well as Rebecca Gordon, our SVP of Corporate Planning and Investor Relations. So I'll start with the highlights and give an operational update, then Christoph will touch on the financial highlights for the quarter. Following the presentation, we'll take questions which can be submitted through conference call or via the web online. Jumping into the highlights, we're very pleased to report another solid quarter of operational performance. Production for Q1 was at the top end of the quarterly forecast at 43,000 barrels of oil equivalent per day. And we're retaining our full year production guidance range of 44 to 47,000 BOEs per day. We had good cost discipline with Q1 operating expenditure coming in at sub USD $18 per barrel of oil equivalent, and we are maintaining guidance for OPEX at USD $18 to $20 per barrel. Entering 2026, we set a lean work program and budget as we are assuming a base case price estimate of $65 per barrel Brent. And in response to the improved pricing environments, we're taking advantage of our operatorship and increasing our capital program from 122 million to 163 million USD predominantly to accommodate short cycle investments across some of our producing assets. The Q1 capital spend was $71 million USD. Operating cash flow generation for Q1 was $68 million and we've revised our full year OCF guidance to $220 to $340 million USD, assuming $70 to $90 per barrel Brent for the remainder of 2026. Free cash flow was minus 17 million USD and we are entering a really an inflection point here for the company and there shouldn't be too many more quarters of negative free cash flow going forward with Blackrod First Oil expected in the near horizon. Full year free cash flow is expected to be between zero to $120 million positive million USD between 70 to $90 Brent for the rest of 2026. Net debt stands at $513 million, and we expanded our Canadian credit facility during the quarter to 250 million USD. We also extended the maturity of that to 2028, so that gives us some increased headroom and overall flexibility. Our benchmark hedges for WTI and Brent for approximately 40% of our production exposure rolls off in June, leaving us fully exposed to benchmark oil prices from July onwards. We have some WTI WCS differential hedges and transport slash quality related hedges tied to our Canadian heavy oil exposure as well at attractive levels. and some natural gas hedges in place that are currently in the money as well. No material incidents took place during the quarter. Very pleased to report on. So under the following slide as shown on the production graph on slide three here, IPC delivered flat production really at the high end of our guidance in the first quarter with overall strong performance across all the assets in the portfolio. So I'll touch on more detail on each of the assets performance later on in the presentation. Moving on, we're very strongly positioned to deliver within our CMD production forecast range of 44 to 47,000 barrels of oil equivalent per day. Drawing your eyes to the bottom of the production chart on this slide, 2026 is really a story of two tails here with forecast production volumes expected to rise materially at the back end of the year with Black Rod phase one oil production set to come online. In addition to some of the incremental capital adds, fast payback projects we've also added in. This will be contributing more so at the back end of this year for production rates. Our production mix is weighted to 60% towards Canadian crude, which is tied to WCS pricing, 10% to Brent-linked production coming from Malaysia and France, and the remaining balance of 30% being natural gas from southern Alberta. And I'd also like to reiterate here that the 44,000 to 47,000 barrels of oil equivalent per day guidance is an annual average, very much an annual average rather than a quarterly average, as can be seen on the high and low guidance bands on that bottom left-hand chart. OPEC, so we are maintaining that original capital markets day forecast as we set out in February of $18 to $20 a barrel. First quarter operating cash flow was 68 million USD. The differentials from Brent to WTIs can be seen in the brackets there was $9 and from WTI to WCS was $14 a barrel. So the Brent to WTI differential was notably high on the back end of the geopolitical conflict in the Middle East, which our Brent link production benefits from, of course. Our operating cash flow full year forecast for 2026 is updated to 220 to 340 million USD based on 70 to $90 Brent. And that assumes a $5 differential between Brent and WTI and a $14 differential between WTI and WCS. So material improvement compared to our CMD forecast and notably more than funding our incremental capital spend program this year with the revised updated operating cash flow generation outlook. Moving on to our CAPEX program, inclusive of decommissioning, which now stands at a forecast of $163 million. That's roughly $40 million higher than the original CMD CAPEX guidance. The increase is mainly due to accelerated fast payback drilling activity at our Southern Suffield assets in Alberta and in the Paris Basin in France, which I will expand on in the following asset specific slides. So we continue to see great progress at Blackrod and we've updated our 2026 budget outlook for the forecast spend at that asset. Big picture, the multi-year budget for Blackrod phase one growth capital to first oil is $850 million USD. There has been some minor cost pressure with total costs expected to be approximately $850 57 million USD, which is less than 1% overall of that original sanction capex guidance for the growth capital to First Oil. And we're still expecting the project to be delivered in terms of First Oil in Q3 of 2026, which is ahead of the original timeline given at the time of sanction back in 2023. Because of this continued acceleration and positive progress, there are some sustaining completion costs as well being pulled forward, which is a positive outcome overall. The free cash flow outlook, we're projecting to generate between nil to $120 million of positive free cash flow between 70 and $90 Brent for the remainder of 2026. Very exciting to be returning into a positive free cash flow generating position this year with a major boost in free cash flow levels anticipated in 2027 and beyond as BlackRock phase one ramps up and comes on stream. Moving to the share repurchases slide. IPC, of course, is a very strong track record of share repurchases in our brief history as a company. So 77 million shares have been bought back at an average price of 79 SEC or Canadian dollars, $11 per share, respectively. And that represents around $1.4 billion of value created from the share repurchases when comparing the average share price that those shares were bought back at our current share price. Notably on the anti-dilution waterfall, the only time shares were issued in a transaction was for the Black Pearl acquisition back in 2018. All of those shares have been bought back and our current shares outstanding is just shy of 113 million shares, which is less than the original starting amounts of 113.5 million shares. we've transformed the company to where we are today compared to at inception in 2017 when now we see a 4.5 times increase in production levels 18 times increase on our 2p reserves in excess of 20 years added to our 2p reserve life index in excess of a billion barrels of contingent resources added an overall four times increase to our NAV compared to that of when the company was formed at the beginning of 2017. So Blackrod, this is a 20-year journey in the making to bring this vision into reality by unlocking a phase one commercial development. I had the privilege of being at site at the end of April. This is a world-class SAGD plant with the best in class operational staff. It's a compact site with a small footprint for the CPF and nearby well pad facility tie-ins. This asset is going to propel the company to new levels, and it's been a fantastic journey going from sanction through to development and on to startup now with rotating equipment well in service at this point in time. Original guidance for this project, again back in 2023 when it was sanctioned, called for first oil in late 2026 and growth capital up until that point of $850 million USD. We achieved first steam ahead of our original forecast, resulting in a schedule improvement, which was announced at the beginning of this year, with first oil expected in Q3 2026. so operations continue to progress well and we're strongly positioned to deliver within this accelerated timeline cumulative spend as at the end of q1 from the beginning of 2023 on the growth capital is 842 million usd with some minor works remaining on the final boiler tie in as well as well pad facilities as we expect to deliver this project overall in line with the original growth capital guidance to first oil. I really couldn't be more proud of our multidisciplinary IPC teams as well as the vendors utilized in this major undertaking. And we're especially pleased that there has been no material safety incidents under IPC supervision as prime contractor of the site. Excellent delivery overall and stewardship of this project to date. black rod valuation again is a true game-changing asset for ipc we have regulatory approval up to 80 000 barrels of oil per day with over 1.45 billion barrels of recoverable resource phase one targets 30 000 barrels per day and 311 million barrels of 2p reserves And the economics as at the beginning of this year based on our conservative reserve auditor price deck is 1.4 billion USD of net present value using a 10% discount rate and approximately a $47 WTI breakeven. As you can see on the figure on the right-hand side of the slide, this is a massive uniform sandstone reservoir. It's contiguous and homogeneous, lending to a very much predictable and scalable production potential as validated through the 15 years that it's been under pilot operation testing. In the lower graph here, the dark wedge on the bar chart reflects what is booked in 2P reserves and carried within our valuation. The light blue component of that bar chart is the contingent resources and represents upside to our business. Moving on to our producing assets. Current flagship oil producing asset at Onion Lake Thermal delivered stable production through Q1. We also did some 40 seismic work at the beginning of the year and reviewing that data to hone in on some additional potential infill targets on existing producing drainage patterns. And also to note on that schematic on the right, H pad is the next main drainage pattern to be developed in the sequence. Moving on to the Suffield area assets, so very much predictable and low decline production. The Suffield area assets, which delivered around 23,000 barrels of oil equivalent per day through Q1. We're very excited to be redeploying some capital into these assets where we've sanctioned a four well production drilling campaign within the Basel Quartz area just west of the Suffield block. Production from France and Malaysia for Q1 was in excess of 5,000 barrels of oil per day. We had some incremental activity that's also been sanctioned now in France. We looked to drill three side tracks in the FAB field and one side track in the Ville-Purdue field. It's very exciting to be drilling again in France. And in Malaysia, we also plan to do an operational activity, a workover using a hydraulic workover unit later this year on our A13 well. So with that, I will hand it over to Christoph to go through the financial highlights. Thank you.

Thank you very much, Will. Good morning, everyone. So, indeed, a good quarter with production at the high end of our Q1 guidance at 43,000 barrels of oil equivalent per day. And, of course, during this first quarter when the situation happened between Iran, the U.S., and Israel, The oil prices increased massively from the beginning of March. And so you really have a relatively high average oil price, dated Brent oil price for the whole quarter in excess of $81 per barrel. But that was really a two. Two sides of the story with lower oil prices in January and February and much higher in March. So overall, that really helped generate on that basis strong operating cash flows and EBITDA for the quarter at 68%. and 64 million U.S. dollar as as we guided before. And as most of our investors know, the capital expenditure in 2026 was always expected to be much front loaded. And so you can see a disproportionate portion of the capex spent during this this quarter translating into a free cash flow of negative 17 million U.S. dollar and depends where oil prices will We'll be on average for Q2, but it's fair to assume that the free cash flow may be negative again in Q2. But from that point onwards, we're expecting to turn the corner and to be again back into free cash flow territory for the for the second half. Depending on where first oil kicks in at BlackRock. So 13 million US dollar of net profit for this quarter. The net debt increased during this first quarter by 30 million US dollars. Again, it's fair to assume that this net debt would increase again in the second quarter. And from that point on, progressively, depending on where oil prices stand, we should see some deleverage from Q3 or from Q4. But certainly this year, we should start to see some deleveraging and accelerated deleveraging as demand. the BlackRock production ramps up over time. Realized prices, so I mentioned, were strong. And I think it's interesting, a bit sad at the same time, but interesting to see that the physical market is quite dislocated. And so the dated Brent has been trading at between $5 up to $30 premium. on top of the future of the financial brand, if you wish. And when we lifted our cargo in Malaysia, the last one in March, we had a good premium. And for the future June cargo, which we're going to lift in Malaysia, we can see that the physical market is very tight because the premium we can realize there are very, very high. So you can see we sold in March a cargo in Malaysia at $110 per barrel. While on average for the quarter, the 80 Brent was 81. The Brent WTI differential widened a bit at $89 and the WTI WCS differential stood at 14, negative $14 for the quarter. We're continuing in Canada to sell our heavy oil on parity or very close to the WCS. Gas prices were actually okay during this first quarter, but overall the market, again, is quite disconnected between the U.S. and the Canadian market. It's been a new reality for the Canadian gas prices over the last 18 months now for the lack of infrastructure and communicating infrastructure between the Canadian gas pipeline networks. pipeline network and the U.S. market. So you can see that we realized 2.5 Canadian dollar per MCF during this first quarter. But the forecast is showing for the summer months lower gas prices, which is which is still a negative to IPC, given that we're producing more gas than we're consuming at Onion Lake or that we will consume in the following quarters at Black Rod. Now, the... The positive in the long run is that because we are consuming gas at Blackrod, it will be a relatively cheap feedstock gas going forward. In terms of financial results, it's interesting to compare 2025 and 2026. We had similar during this first quarter, 2026, we had similar production and overall revenues in between the first quarter, 26 and 25. Some of the difference between the two quarters in 26 and 25 was coming from the fact that we lost $10 million of hedges, hedge losses in this first quarter. because we had hedged around 40% of our WTI and Brent exposure at between $62 and $68 per barrel. And of course, we've been losing in the months of March mainly. And given that we are still hedged until the end of June at those around 40% level, At current prices, we can expect to make a hedging loss of around $30 million during the second quarter. But I think it's important to flag as well that beyond the end of June, we no longer have any benchmark hedge. So we are totally exposed to the Brent and WTI prices going forward into the second half of 2026. Looking at the operating costs, so we were below during this first quarter as a result of strong production level and relatively low electricity and gas prices. We can expect higher operating costs per barrel going into the second quarter with a bit of slightly lower production in the second quarter. In the third quarter, When we're going to move progressively into commercial production at Blackrod, we're going to register some OPEX, which will be a bit higher in the first month of operation. But you can see that as soon as the Blackrod production ramps up in the fourth quarter, the demand, the OPEX per barrel will progressively reduce. And we would expect that trend to continue into 2027. You can see the net back on the following graph with a gross margin of close to 18%. dollar per barrel and operating cash flow at 17.5 and EBITDA at 16.5 dollar per barrel of oil equivalent of net back. Looking at the evolution of our net debt, so we increased our net debt this quarter by 30 million US dollars given the reasonably high capex of 71 million we spent during the year. So we spent more capex than the level of operating cash flow. This is going to reverse in Q2 and even more so in the second half of this year. In terms of financial items, it's sort of a steady state now. In the second half last year, when we refinanced our bonds, we had some exceptional and one-off fees that we paid as part of that bond refinancing. From now on, it's going to be much more stable. And just to mention that the foreign exchange loss you can see here of 6.5 million during this quarter is a non-cash item. Otherwise, the GNA remains reasonably stable and flat at around 4 million US dollars per quarter. So looking at the financial results, we generated net revenues of $173 million, netting a cash margin of $68 million and gross profit of $37 million, which nets off the financial items tax and tax elements yielded net profit of $13 million for the quarter. The balance sheet has continued to evolve since we sanctioned the BlackRock project. As you would expect, our level of cash has reduced and our level of net debt increased over the last three years. But again, we are almost touching distance from reversing this trend, certainly going into 2027, but as well going into the second half of this year.

i will let will conclude this presentation thank you very much christoph so in summary Very exciting to be ramping up activity really across all regions of operations. Q1 capital came in at 71 million USD and the full year outlook is $163 million now, really leveraging our operatorship and increasing our production exposure to the high commodity pricing environment that we're seeing. We're well positioned to deliver within our production guidance and our operating costs remain under control. Operating cash flow generation was robust for Q1 at 68 million USD. And the outlook for the full year is 220 to $340 million. We have an excess of 150 million USD of undrawn liquidity headroom. There are no material environmental or safety incidents that took place in the first quarter. With that, I'm happy to pass it over to the operator to begin questions, and you can also submit your questions online via the web. Thank you.