International Petroleum Q1 Earnings Call Highlights

Key Points

• Blackrod is the key catalyst: IPC expects first oil in Q3 2026 with total costs ~$857 million (≈1% over prior guidance), Phase 1 targeting 30,000 bpd, ~311 million 2P barrels and an estimated $1.4 billion NPV (10%) with a ~$47 WTI break‑even.
• Production and capital program: Q1 averaged 43,000 BOE/d (top of the forecast) and IPC reiterated full‑year guidance of 44,000–47,000 BOE/d, while raising 2026 capex to $163 million to accelerate short‑cycle drilling in Canada and France expected to deliver in excess of 1,000 bpd for 2027.
• Financials and hedging: Q1 OpEx was sub‑$18/BOE with operating cash flow of $68 million and EBITDA of $64 million, but free cash flow was negative $17 million and net debt stands at $513 million; about 40% of oil hedges roll off in June, after Q1 hedge losses of $10 million and potential Q2 hedge losses of ~$30 million.

International Petroleum TSE: IPCO reported first-quarter 2026 production at the top end of its quarterly forecast and maintained its full-year outlook, while increasing its 2026 capital program to accelerate short-cycle investments and support expected production growth later in the year when the Blackrod project is scheduled to reach first oil.

Production and guidance

President and CEO William Lundin said first-quarter production averaged 43,000 barrels of oil equivalent per day (BOE/d), which he described as “at the top end of the quarterly forecast.” The company reiterated its full-year 2026 production guidance of 44,000 to 47,000 BOE/d, emphasizing that the range is an annual average rather than a quarterly target.

Lundin said IPC’s production mix is weighted toward Canada, with approximately 60% Canadian crude tied to WCS pricing, 10% Brent-linked production from Malaysia and France, and 30% natural gas from Southern Alberta.

Costs, cash flow, and updated 2026 outlook

IPC reported first-quarter operating expenditure below its guidance range. Lundin said Q1 OpEx came in at “sub USD 18 per barrel of oil equivalent,” and the company maintained its guidance of $18 to $20 per BOE for the year.

Chief Financial Officer Christophe Nerguararian said the quarter benefited from a stronger commodity price environment later in the period, noting that dated Brent averaged more than $81 per barrel during the quarter following a sharp rise in March tied to geopolitical developments. The company reported operating cash flow of $68 million and EBITDA of $64 million for Q1.

IPC updated its 2026 operating cash flow forecast to $220 million to $340 million, based on $70 to $90 Brent for the remainder of the year. Lundin said the forecast assumes a $5 Brent-WTI differential and a $14 WTI-WCS differential. For Q1, Lundin cited a $9 Brent-WTI differential and a $14 WTI-WCS differential.

Free cash flow in Q1 was negative $17 million, which management attributed to front-loaded spending. Nerguararian said it is “fair to assume” free cash flow may be negative again in Q2, but the company expects to “turn the corner” in the second half of the year depending on the timing of Blackrod first oil. IPC’s full-year free cash flow outlook was stated as $0 to $120 million (at $70-$90 Brent for the remainder of 2026).

Capital spending increased; management highlights short-cycle projects

IPC increased its 2026 capital expenditure forecast to $163 million (inclusive of decommissioning) from $122 million. Lundin said the increase primarily reflects accelerated, fast-payback drilling activity in Canada and France, as well as an updated budget outlook for Blackrod. The company reported Q1 capital spending of $71 million.

Responding to an analyst question from Teodor Sveen-Nilsen of SB1 Markets, Lundin said the “lion’s share” of the roughly $40 million increase is tied to activity rather than cost inflation, including:

• A four-sidetrack drilling program in France for approximately $15 million
• Four wells at the Suffield area assets in Southern Alberta, including activity on the Cor4 property, with the combined France and Brooks/Southern Alberta programs totaling about $23 million

Lundin said the additional programs are expected to contribute production later in 2026, and he added that IPC expects to see “in excess of 1,000 barrels per day on average delivered for 2027” from the two programs.

Blackrod timeline, spending, and economics

Management repeatedly pointed to Blackrod Phase 1 as the key operational catalyst. Lundin said the multi-year growth capital budget to first oil was originally $850 million, and IPC now expects total costs of about $857 million, which he characterized as “less than 1% overall” above the sanctioned guidance. IPC said it still expects first oil in Q3 2026, which Lundin noted is ahead of the original late-2026 timeline provided when the project was sanctioned in 2023.

Lundin said cumulative spending on Blackrod growth capital from the start of 2023 through the end of Q1 2026 was $842 million, with remaining work including “the final boiler tie-in as well as well pad facilities.” He also said IPC has regulatory approval up to 80,000 barrels per day, with Phase 1 targeting 30,000 barrels per day and 311 million barrels of 2P reserves.

On economics, Lundin said Blackrod Phase 1 had an estimated $1.4 billion net present value at a 10% discount rate based on the company’s reserve auditor price deck, and a roughly $47 WTI break-even.

Both Lundin and Nerguararian said operating costs could be higher early in Blackrod’s commercial ramp-up. Nerguararian said OpEx per barrel may rise in Q2 due to slightly lower production, and could also be higher in the early months of Blackrod operations before declining as volumes ramp up.

Balance sheet, hedging, and capital allocation

IPC reported net debt of $513 million, and Nerguararian said net debt increased by $30 million during the quarter. He added that net debt could rise again in Q2, with deleveraging expected from Q3 or Q4 as Blackrod begins producing and depending on oil prices.

Lundin said IPC expanded its Canadian credit facility to $250 million and extended its maturity to 2028, providing additional flexibility. In online Q&A, Nerguararian said the company aims to “raise and improve liquidity when we don’t need it,” describing the facility increase and extension as a move to maintain ample liquidity.

On hedging, management said benchmark oil hedges covering about 40% of production exposure (WTI and Brent) roll off in June, leaving IPC fully exposed to benchmark prices from July. Nerguararian said IPC recorded $10 million in hedge losses in Q1 because those positions were set at roughly $62 to $68 per barrel, and he indicated Q2 hedge losses could be around $30 million at current prices.

In response to a question from Mark Wilson of Jefferies on Canadian gas, Nerguararian said IPC has 50,000 GJ per day hedged at about CAD 2.7 per GJ (or CAD 2.8 per MCF). He also said IPC realized CAD 2.5 per MCF in Q1, while noting forecasts show lower summer gas prices. Nerguararian added that a longer-term positive is that Blackrod will consume gas, making lower prices a “relatively cheap feedstock gas going forward.”

On shareholder returns, Lundin said IPC has an NCIB in place through December but has prioritized incremental capital spending on production-contributing projects “as opposed to share buybacks” in the current pricing environment while staying focused on bringing Blackrod online. He said the company will continue monitoring conditions and liquidity headroom when considering restarting buybacks.

About International Petroleum TSE: IPCO

International Petroleum Corp is an international oil and gas exploration and production company. It is engaged in the exploration, development, and production of oil and gas. Geographically, the company holds a portfolio of oil and gas production assets and development projects in Canada, Malaysia and France. It is based in Canada and derives revenue from the sales of gas, crude oil, and natural gas liquids, of which key revenue is derived from the sales of crude oil.

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