Fossil Fuels Far From Extinct: Oil and Gas Companies See Record Revenues

Newsfile Corp.
August 12, 2021·

Point Roberts, Washington and Delta, British Columbia--(Newsfile Corp. - August 12, 2021) - Investorideas.com, a leading investor news resource covering oil and gas stocks releases a special report featuring InPlay Oil Corp. (TSX: IPO) (OTCQX: IPOOF), looking at the stream of record breaking revenues from the oil and gas industry following COVID-19 lockdowns and surprisingly, amidst global concerns of climate change and fossil fuel emissions.

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https://www.investorideas.com/news/2021/energy/08120Fossil-Fuels.asp

The Canadian Association of Petroleum Producers (CAPP) recently released a new report titled, Canada's Natural Gas and Oil Emissions: Ongoing Reductions, Demonstrable Improvement.


The report, which lays out the means to a lower-carbon future through innovation and new technology, and illustrates the industry's proven track record of lowering emissions-intensity, is the first in a series of planned Environment, Social and Governance (ESG) disclosures.

Ben Brunnen, Vice President, Oil Sands, Fiscal & Economic Policy commented, "Canada's natural gas and oil industry has a track record of being one of the most transparent around the world. This report raises the bar even higher, positioning the industry as a leader in voluntarily reporting the collective emissions performance of our industry, and should be a challenge for other jurisdictions to do the same."

Brunnen continued saying, "The international comparable data shows Canada is a good performer when it comes to emissions intensity but also that we're continuously getting better. The key to our future will be the ability of our industry to quickly advance new technologies to continue reducing GHG intensity, keeping Canada a global supplier of choice."

InPlay Oil Corp. (TSX: IPO) (OTCQX: IPOOF) reflected this upward trend for Canadian oil and gas having recently announced its financial and operating results for the three and six months ended June 30, 2021. InPlay's condensed unaudited interim financial statements and notes, as well as Management's Discussion and Analysis ("MD&A") for the three and six months ended June 30, 2021 will be available at www.sedar.com and the Company's website at www.inplayoil.com.

From the news: The company achieved record quarterly production of 5,386 boe/d (68% light oil and NGLs), an increase of 71% compared to 3,154 boe/d (66% light oil and NGLs) in the second quarter of 2020 and an increase of 8% compared to 4,965 boe/d (70% light oil and NGLs) in the first quarter of 2021.

InPlay also continued new well production performance in excess of forecasts with the 3.0 net Extended Reach Horizontal ("ERH") wells drilled in the first quarter of 2021 on our newly acquired Pembina asset having a combined average 120 day initial production ("IP") rate of 1,390 boe/d (74% light oil and NGLs) based on field estimates.

This led to the company realizing a quarterly record operating income and operating income profit margin of $16.2 million and 64% respectively compared to $0.3 million and 6% in the second quarter of 2020 and $11.9 million and 60% in the first quarter of 2021.

From the news: The Company's decision to reinvest in the Pembina Cardium has been extremely successful as the results have exceeded expectations since they resumed drilling in this area in late 2019. The three 100% Pembina Cardium 1.5 mile wells drilled in the first quarter of 2021 on lands acquired in the fourth quarter of 2020 have performed exceptionally to date. These wells continue to flow without artificial lift, have produced an average of approximately 55,000 boe per well (73% light oil and NGLs) over their first 120 days and have paid out in three to four months. Their production rates have continued to substantially exceed both their internal forecasted production volumes and reserves assigned to these locations in our December 31, 2020 independent reserve report.

From the news: InPlay's strong results in the first half of 2021 and continuing in the second half of 2021 from the Pembina drills have allowed the Company to increase its 2021 annual average production guidance to between 5,500 and 5,750 boe/d (68% light oil and NGLs) from our previous guidance of 5,100 to 5,400 boe/d (69% light oil and NGLs). The drilling program for the remainder of the year has not changed from drilling 5.0 net operated horizontal wells.

From the news: InPlay is expected to have lower debt exiting 2021 than that previously forecasted, close to our pre-pandemic 2019 debt levels. InPlay's fourth quarter 2021 annualized net debt to earnings before interest, taxes and depletion ("EBITDA") ratio(5) is now forecast to be 0.7 to 0.9 times, the lowest in our history.

Capital for 2021 is anticipated to be $29 million resulting in forecast AFF increased to an annual record $44.5 - $47.5 million and forecast Free Adjusted Funds Flow ("FAFF") increased to $15.5 - $18.5 million, a 35 - 39% FAFF yield which will be used to pay down debt. Quarterly AFF in both the third and fourth quarter of 2021 is expected to exceed the AFF generated during the first half of 2021.

From the news: InPlay, like many others in the space, continues to benefit from record levels of production being sold into one of the strongest commodity pricing environments that have been seen in years. West Texas Intermediate ("WTI") prices remained strong in the second quarter of 2021 averaging $66.07 USD/bbl compared to $27.83 USD/bbl in the COVID-19 impacted second quarter of 2020. Strong natural gas prices continued in the second quarter of 2021 with AECO daily index prices averaging $2.93/GJ compared to $1.89/GJ in the second quarter of 2020. Realized NGL prices also averaged $30.27/bbl compared to $11.66/bbl for the second quarter of 2020.

The Company's 2021 guidance is based on a current future commodity price curve with an annual average WTI price of US $64.50/bbl, $3.35/GJ AECO and estimated foreign exchange of $0.80 CDN/USD.

Tourmaline Oil Corp. also recently announced their financial and operating results for the second quarter of 2021.

They saw second quarter 2021 cash flow of $1.89 per diluted share, record free cash flow of $343.9 million, and average production of 410,339 boepd, exceeding the high end of expectations despite challenging operating conditions in June's heat wave.

From the news: The updated five-year plan, at current strip pricing, delivers $1.8 billion of FCF in 2022 and $7.0 billion over the full five-year duration of the plan. The 2022 free cash flow equates to over $5.50 per basic share, a FCF yield of 16% and reduces the 2022 total payout ratio to 48%.

The Company now expects to achieve year-end 2021 net debt of approximately $1 billion (less than 0.4 times debt to cash flow, and less than one times annual FCF). As at July 15, 2021, Tourmaline's Topaz equity ownership was valued at $939.7 million, which essentially offsets the estimated year-end net debt.

From the news: With incremental volumes on the GTN Malin/PG&E system and the Company's recently announced Gulf Coast LNG pathway in 2023, Tourmaline will have 905 mmcfpd exposed to export markets on firm, long-term transport agreements at exit 2023. Tourmaline's largest export market, PG&E California, is currently trading at $5.50/mmbtu (US).

Independent oil and gas producer Northern Oil and Gas Inc. per share of 92 cents, reported second-quarter 2021 adjusted earnings, beating the Zacks Consensus Estimate of 69 cents and significantly improving from the year-ago profit of 21 cents. The outperformance can be attributed to higher commodity prices and better-than-expected production.

The company's oil and gas sales of $225.7 million beat the Zacks Consensus Estimate of $182 million. The top line also skyrocketed from the year-ago figure of $20.7 million.

Northern, which instituted a 50% dividend hike ahead of its earnings release, saw its adjusted EBITDA more than double to $132.8 million.

This is in line with Marathon Oil Corporation, who reported second-quarter 2021 adjusted net income per share of 22 cents, also beating the Zacks Consensus Estimateof 18 cents. In the year-ago period, the company had incurred a loss of 60 cents.

Marathon Oil's bottom line was favorably impacted by stronger liquids realizations and better-than-expected domestic production. Precisely, volumes in the United States came in at 283,000 barrels of oil equivalent per day (BOE/d), beating the Zacks Consensus Estimate of 272,000 BOE/d.

Marathon Oil reported revenues of $1.1 billion that jumped from the year-ago sales of $272 million but missed the Zacks Consensus Estimate by 0.4%. This was due to the lower-than-expected international segment production available for sale, which at 65,000 BOE/d fell short of the Zacks Consensus Estimate by 3,000 BOE/d.

The company stuck to its $1 billion capital spending budget for 2021 and delivered a free cash flow of $420 million during the quarter.

"The notion that we can shut off a major, industrialized economy with the flick of a switch is patently unrealistic," Alberta's Premier Jason Kenney said, as quoted by CBC News, adding that giving up fossil fuels for a country with the geographical location-and climate-of Canada would come at a cost that will be measured in human lives.

Kenney went on to note that most of the world was dependent on fossil fuels, and there was "no credible way" to eliminate this dependence in the observable future.

"It is a utopian notion that we can suddenly end the use of hydrocarbon based energy," the Alberta Premier said. "The challenge is to shrink carbon and CO2 output, and Alberta is increasingly a world leader in that respect."

"The industry is confident that they have a place in the future of energy development. It's going to certainly be a different mix of energy sources going forward," according to Tristan Goodman, President of the Explorers and Producers Association of Canada, as quoted by the Financial Post. "Many of our businesses are entering the renewables space, so it's not an either or," he added.

As we all continue to face up to the harsh realities of the environmental impacts our modern industries are placing on the world, there is still a place for fossil fuels, even amidst movements towards renewable energy sources. As the world recovers from the manufacturing slow-downs and global supply chain disruptions due to COVID-19, fossil fuels may be on the rise for much longer than expected.