International Petroleum Corp stock falls after earnings miss

Investing.com -- Shares of International Petroleum Corporation (TSX:IPCO) slipped 1% as the company reported a fourth-quarter net profit of $0.4 million, falling short of the company-collected consensus of $27 million. Despite revenue rising 3% to $199 million, surpassing the consensus of $194 million, the earnings miss weighed on investor sentiment.

The company’s EBITDA for the quarter was $76 million, a 3% increase and slightly above the consensus of $74 million. Production also saw a modest uptick, with a 5% quarter-over-quarter increase to 47.4 thousand barrels of oil equivalent per day (kboe/d), which was 1% higher than the consensus.

Year-end 2024 2P reserves increased by 5% to 493 million barrels of oil equivalent (mmboe) compared to the year-end 2023 figure of 468 mmboe. This was supported by a 250% reserves replacement ratio and a reserve life of 31 years. The company’s net debt came in at $209 million, beating the consensus of $230 million.

The Trans Mountain pipeline, which began operations in the second quarter of 2024, was highlighted as a factor contributing to tighter Western Canadian Select (WCS) to West Texas Intermediate (WTI) differentials, which were less than $13 per barrel in the fourth quarter.

This is lower than the full year average of $15 per barrel. Approximately 50% of IPC’s 2025 WCS to WTI differential exposure is hedged at $14 per barrel, which the company believes will help mitigate the potential impact of U.S. tariffs on Canadian production.

Canadian gas prices averaged C$1.5 per thousand cubic feet (mcf) in the fourth quarter, up from C$0.67/mcf in the third quarter. This is partly due to higher-than-average Western Canada gas storage levels, which have been affected by delays in the LNG Canada start-up project, now expected to commence in mid-2025.

For fiscal year 2025, IPC guided production to 43-45 kboe/d, representing a 7% decrease year-over-year (YoY). Capital expenditures (capex) and decommissioning are projected at $320 million, including $230 million for the Blackrod project, which is lower YoY compared to $442 million.

Operating expenses are estimated at $18-19 per barrel of oil equivalent (boe), with operating cash flow between $210-280 million and free cash flow (FCF) between $80-150 million, excluding Blackrod capex.

The Blackrod Phase 1 development is reported to be on schedule and budget, with 70% of the capital spent since its sanction in early 2023. The total project guidance remains at $850 million in capital expenditure to first oil in late 2026.

Furthermore, IPC has initiated a share buyback program, purchasing 2.2 million common shares by the end of January 2025, at an average price of SEK 135 / CAD 17.5 per share, which is 29% of the total 7.5 million shares authorized for repurchase.

Jefferies analysts commented on the results, stating, "While 4Q24 net profit was a miss, but net debt beat cons, we believe the long-term visibility is the more important point. With average net production of 57kboe/d over 2025-29 (JEFe 55.9kboe/d), and FCF of $1.2-2.0bn (JEFe $1.0bn), IPCO looks well positioned going into the end of this decade, and beyond."

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