(Idea) InPlay Oil

Note: Dollar references are to Canadian dollars unless otherwise specified.

InPlay Oil (IPO:CA) is a Canadian E&P with a technical management team that is growing production through the drill bit. In 2023, it produced approximately 9,000 boe/d, comprised of 41% crude oil, 16% NGLs, and 43% natural gas.

The company’s operations are focused primarily on the Pembina and Willesden Green plays of the Cardium in Alberta, which account for 85% of its production. East Duvernay production accounts for the remaining 15%.

InPlay’s assets are shown in the map below.

Source: InPlay Oil, February 2024 Investor Presentation.

The most attractive feature of InPlay’s stock is its high dividend yield. The company intends to pay the dividend on a monthly basis throughout 2024. Its $0.18 per share annual payout represents an attractive 8.5% yield on InPlay’s $2.13 market. We estimate InPlay generates enough free cash flow to pay its dividend down to US$73 per barrel WTI, which is quite low for a small E&P.

InPlay’s organic growth strategy is facilitated by its approximately 18 years of proved and probable reserves. Its targeted plays have significant oil in place and low recovery factors that management is intent on increasing. The company drills repeatable, low-risk horizontal infill wells and uses water floods to enhance recovery. These wells require little infrastructure investment. Its Pembina and Willesden Green wells boast first-year capital efficiencies in the low-$20,000 range. Its overall capital efficiency stands below $16,000, significantly better than most Canadian E&Ps.