CA - International Petroleum: Heavy Oil Expansion

2024-04-11 09:33:24 ET

Summary

• International Petroleum is a Canadian company focused on heavy oil and thermal oil business, with expansion plans underway.
• The company has a conservative net debt position. However, long-term debt is climbing as the company retires stock and expands production.
• The Blackrod Project is undergoing a capital project for increased production, with upfront costs but potential long-term cash flow that is protected with depletion (or depreciation) charges.
• Heavy oil is a discounted product compared to WTI pricing. There is a fear of a widening discount during times of weak pricing.
• International Petroleum is part of the Lundin Group Of Companies.

International Petroleum ( OTCPK:IPCFF ) is a Canadian company that reports using United States dollars. It is part of the Lundin Group of Companies. A major part of the business is in Canada (although the company has some overseas business as well). That Canadian business is centered upon the heavy oil or even the thermal oil business. There are some expansion plans underway for the thermal oil operations. This has led to the company taking on some debt, which may be a concern to shareholders, even though this is a well-run company.

The heavy oil business, including thermal oil, is producing a product that sells at a discount to the light oil business. That discount can widen during economic downturns. The period 2015 to 2020 was particularly brutal for this business. It led to a fair amount of debt market requirements for these companies to have a conservative net debt position....

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