(Idea) International Petroleum Corp
International Petroleum Corp. (OTCPK:IPCFF) (IPCO.CA) is a Canadian-domiciled E&P with a corporate headquarters in Geneva, Switzerland. The company was spun off from Lundin Petroleum in 2017 to manage Lundin’s assets in Malaysia, France, and the Netherlands. The Lundin family is well known for being some of the best resource investors on the planet, and they have maintained an equity interest in IPCO since its spin-off. Today, Lundin interests own approximately 30% of IPCO’s outstanding common shares.
Since its spin-off, IPCO has expanded in Canada, aiming at steady net asset value (NAV) growth through acquisitions and the drill bit, achieving successes in both areas. Its NAV—represented by proved and probable reserve value discounted at 10%—has grown from $543 million in 2017 to $3.5 billion at year-end 2022. Production over the same timeframe increased from 10,600 boe/d to 50,000 boe/d currently. Meanwhile, the common share count has remained in check, only increasing from 113.5 million in 2017 to approximately 128.2 million today.
The company’s production is split 57% from Southern Canada, 31% from Northern Canada, and 6% each from Malaysia and France. Its production is 78% oil and 22% natural gas. The slide below shows its production profile and full-year 2023 guidance.
Source: IPCO Q3 Earnings Results Presentation, Oct. 31, 2023.
IPCO’s diversified portfolio provides flexibility for funding the company’s most attractive prospects. Drilling results have been consistently successful throughout its asset portfolio.
A Well-Managed E&P
IPCO is a rationally managed company—high praise in the energy sector and important for investors in such a capital-intensive, cyclical business. Management is conservative on all fronts, which should comfort long-term holders as it embarks on major growth projects.
IPCO’s balance sheet is in a net cash position, excluding decommissioning liabilities, with $543 million of cash and $434 million of long-term debt. Its cash deposits generate enough yield to cover most of its interest expense.
Management has hedged intelligently. It took advantage of high natural gas prices last year to hedge its production through this year. More recently, it hedged the WTI-WCS differential at $15 per barrel, so it has effectively locked in a WCS price of $66. It also hedged some condensate and foreign exchange exposure.
Attractive Growth Prospects
In 2023, IPCO pivoted from steady growth to accelerated growth by sanctioning Phase 1 of its Blackrod SAGD oil sands project. Given investors’ distaste for capex-fueled growth among all energy companies, its stock has struggled throughout 2023 despite its significant growth prospects.
Over time, management expects Blackrod to increase companywide production from 50,000 bpd to 65,000 bpd and above in the remainder of the decade as it develops Blackrod. The following graphic depicts the production and reserve growth forecasted by management.