International Petroleum Corporation (IPCFF) Q3 2023 Earnings Call Transcript

International Petroleum Corporation (OTCPK:IPCFF) Q3 2023 Earnings Conference Call October 31, 2023 4:00 AM ET

Company Participants

Mike Nicholson – CEO

Christophe Nerguararian – CFO

Rebecca Gordon – VP, Corporate Planning & Investor Relations

Conference Call Participants

Mike Nicholson

First off, a very good morning, to everybody and welcome to IPC’s Third Quarter Results and Operations Update Presentation. My name is Mike Nicholson. I’m the CEO of IPC. Also joining me this morning and presenting is Christophe Nerguararian the CFO; and Rebecca Gordon, who’s our VP of Investor Relations, and Corporate Planning.

I’ll be beginning in the usual fashion by walking through the operations report just off I will then run through the detailed financial numbers and then at the end of both presentations, we will of course have the opportunity to take any questions that you have. And you can send your questions in by the website or we can also take your questions from the conference call.

So to get started with the Q3 highlights, it’s been another very solid quarterly performance from the company in terms of production and our third quarter production numbers were above 50,000 barrels of oil equivalent per day. So still in a good position to retain our full year guidance of in excess of 50,000 barrels of oil equivalent per day.

On the cost side for the quarter, operating costs were very much in line, at just below $18 per barrel and we were maintaining again the full year OpEx guidance of between $17.50 to $18 per barrel. In terms of our capital expenditure guidance, trimming that slightly from $365 million down to $330 million and of course the major growth project is our Blackrod phase 1 development and that’s very much on schedule and on budgets.

Cash flow generation in the company’s strong production, solid commodity prices during the third quarter led to very, very high cash flow generation. Third quarter OCF was just under a $120 million and we’ve updated and tightened the guidance range for our full year cash flow numbers to between $340 million and $365 million US, assuming that oil prices Brent remains between $80 to $90 per barrel during the fourth quarter.

Free cash for likewise was also very strong $35 million in the third quarter, and prior to the funding of our Blackrod in excess of a $100 million. So, extremely solid cash flow generation and as with our OCF we’re tightening our free cash flow guidance to between minus $15 million and plus $5 million assuming the same $80 to $90 dollar per barrel oil price.

The balance sheet has never been better. The net cash position of the company stands at $83 million, that’s an increase from the second quarter. Gross cash resources stand in excess of $540 million and we’ve seen a turbocharge as a result of the $150 million bond tap that we completed during the third quarter. And we’ve also been able to increase the RCF that we haven’t ever used from a $150 million CAD up to now $165 million Canadian dollars and that’s completely undrawn.

And when you put all those liquidity lines together, that means the company has in excess of US$650 US of financial fire power pretty formidable.

On the hedging side, we continue to benefit through October and for about 50% of our net loan gas production with our AECO hedged at $4.10 and per MCF. Also in terms of our differential hedging for 2023, we’ve got some WCS, ERV hedges, which relate to the transportation component of the differential, we’ve hedged 12,000 barrels per day at minus $10 per barrel.

And in the fourth quarter, those the market on those hedges is more than $4 a barrel so we’re going to see some nice hedging gains during the fourth quarter and on that position. We have for the first time started to take advantage of the strong commodity price environment that we’ve seen recently. And we’ve hedged 25% of our Canadian production WTI exposure at some of the highest prices that we’ve seen for forward ‘24 prices in excess of $80 per barrel.

And we are now executing our second quarter results that we’ve hedged 50% of our WCS differential exposure. We’ve topped that up to now 75% hedged at an average of $15 per barrel and with some of the recent use of some delays in Transmountain, we have seen differentials gap wider for next year to in excess of $17 per barrel. So the timing on those hedges looks to be quite prudent.

And we’ve also increased the Canadian dollar, US dollar hedges in relation to our Blackrod Phase one development project pushing that up to now in excess of 70% given the strong US dollar that we’ve seen in recent weeks.

On the M&A side, I’ll come back to this. But we managed to conclude during the third quarter, the disposal of a non-core property in France for $17 million, and 0.6 million barrels of 2P reserves, and we have managed to dispose of that at a 220% discount to NAV. So very nice transaction there.

And then finally, last but not least, on our share buyback, share repurchase program, we’re now 90% complete with this year’s normal course issuer bids, we’ve repurchased 8.4 million shares and we still intend to complete the entire program by early December. What’s also, extremely positive news this morning is, I’m delighted to announce that we’re going to repeat on the normal course issuer bid.

The Board has approved and for us to renew the normal course issuer bids in early December 2022 we plan and intend to complete another buyback NCIB program through 2024.

So to go into a little bit more detail and on production as I mentioned and in the highlights, our average daily production during the third quarter was just over 50,000 barrels of oil equivalent per day. In Canada, very strong performance from all the major producing assets. And if you look at some of the production investments, great results.

And I’ll go into a bit more detail on our next slide from our Suffield Ellerslie program. It’s exceeding expectation. You are also going to see really solid results from the early drilling Onion Lake and Pad L, which has been brought online ahead of schedule.

And when we look at the international business and the French Four Well drilling program that was completed early in 2023 continues to perform ahead of forecasts and our Bertam plant shutdown which was a two week shutdown was completed and slightly earlier than scheduled with an expanded work scope. So really phenomenal job by all of our countries of operations through the third quarter.

And this next slide and just shows the results of each of the main production investments through the third quarter of 2023. If we start with the chart on the top right hand side of this slide, you can see the Four Well program and as part of our Ellerslie drilling program on the Suffield property that was the Cor4 acquisition.

You can see that we’re producing still today and well ahead of our pre-drill guidance. In France, on the bottom right hand side of this slide, you can see the continued outperformance of the Four Well drilling program. Three wells and they’ll pretty west and one side track well in Merisie and France. And again, we’re almost 50% higher today from that drilling program relative to pre-drilling expectations. So, great results.

And on the bottom left hand side of the slide, the most recent activity, which is bringing into production, and the pads, the first two wells from our Pad L, you can see that we’re more than a month ahead of schedule of starting up production from that new well pads and we’re running hot on the ramp up. So, again great results across all three of those programs during the quarter.

So what does that mean in terms of the full year guidance? Well the year-to-date production for the first nine months running at 51,600 barrels of oil equivalent per day, we still feel extremely comfortable and that we expect our full year numbers to be above the high end of our original guidance in excess of 50,000 barrels of oil equivalent per day. And I certainly expect us to be somewhere in the 50,000 to 51,000 barrels a day range.

Turning to operating cash flow now. So it was very strong first nine month cash flow generation, just under US$280 million with average Brent prices for the first nine months of $82 per barrel and we’ve taken the opportunity to tighten the guidance for the full year. On the right hand side of this slide to now $340 million assuming Q4 oil prices of $80 Brent and up to $365 if oil prices are around $90 million, it’s a $20 per barrel for the fourth quarter.

On the capital expenditure side, that’s a record investment year and our growth projects for IPC progress in the Phase one development works. Blackrod, as we mentioned during our second quarter results, we signed a major facility EPC contract during the second quarter. We’ve already spent around $200 million so far in the first nine months of 2023 and we’re revising down slightly our CapEx budget for the full year and down from $365 million, down to $330 million, predominantly as a result of the phasing of our Blackrod’s to capital expenditure.

So we’ve got strong operating cash flow, record investment, but I think what’s been really impressive as we’ve still been able to fully fund the investment this year, in our growth projects out of the base business cash flow first, nine month free cash flow has been US$67 million. We’re still got a big quarter of investment in the fourth quarter. But we expect to be broadly breakeven.

And if you look at the most recent guidance that we’re just giving today, we expect free cash flow to between somewhere minus $15 million, $80 all, or up to plus $5 million assuming $90 Brent. So, largely fully funding our highest ever investment year in the company and out of the base business cash flow generation.

So to turn now to IPC’s shareholder return framework. This is not new and as long as our balance sheet is good shape, and our net debt-to-EBITDA leverage ratio is below one time. We’ve made that commitment to return at least 40% of free cash flow to shareholders. We announced our intention at the beginning of this year to go well beyond that minimum commitment. And given the fact that we – the balance sheet was in such a strong position with $425 million of gross cash, we made the commitment to conclude the normal course issuer bid through 2023.

And that’s exactly what we’ve done. We’ve got back 8.4 million shares since the since December of 2022. We’re 90% complete with that program and we bought back the average purchase price of the stock and was SEK101 per year under the 2023 program.

And if you look at the longer term track record of the company, I think this is something that we’ve been really proud of year after year to consistently be able to grow the business production, reserves, cash flow, and combine that with buybacks and reducing the share count. And I think that’s a real winning combination for all of our shareholders.

So far, we’ve repurchased more than 60 million IPC shares with an average price of only SEK63 per share. And if you look at the, the pre-market opening share price of SEK115 per share, that means that we’ve generated close to $280 million of value for all of our shareholders through those various buyback programs.

And obviously, very pleased to announce again that we plan to continue that anti-dilution staircase and the Board has approved for us to renew the 2023-2024 NCIB program, and we’ve intend to fully complete that during 2024. That means that the share count should drop to close to 120 million shares by the year end, which was out and only 6% dilution. And from when the company started, and of course, with fivefold increase in production with a 16-fold increase in 2P reserves, 20 years almost added to our reserve life and a huge undeveloped contingent resource inventory of in excess of 1 billion barrels, four times cash flow and more than $3 billion of value created if we can continue to reduce the share count and add to all of these metrics, then we can deliver exceptional above peer group returns for all of our shareholders in the years ahead.

If you look at this next slide and our market cap liquidation, and what we’re looking at here is just a five year and a ten year free cash flow and with $1.4 billion of free cash flow at $95 per barrel forecast over the next five years, it means that in just that first five years we can just under $95 oil price by that every single IPC share that’s outstanding.

And if we look at the 10 year outlook with the major growth and position that the company finds itself and oil prices of less than $75 per barrel, we can actually buy back the entire share count two-fold. So very, very strong cash flow generation metrics for the company.

And likewise, if we if we look at IPC through the value lens, this is our third-party reserve auditor’s valuation at the beginning of this year effectively using and real oil prices of $80 per barrel. And our NPV10 of our assets is just over US $3.5 billion. And if we look at where the stock was trading yesterday market close SEK115 a share.

That’s a 62% discount to where we see the fair value of our 2P reserves and of course, that doesn’t assume that we develop any of our billion barrels of continued resources. We don’t do any value accretive M&A. So it’s why we’re so keen to continue to hammer away the share count and continue with our share buyback program.

This next slide just touches upon the non-core disposal that we announced in Canada this morning. So, these were some small production in the John Lake and Fishing Lake area in Alberta. Production was just under 400 barrels of oil per day. So we’ll only – 0.7% of IPCs 2023 production, very favorable trading metric Canadian in excess of CAD$60,000 per flowing barrel.

And also if we look at the reserves relatively small, 0.6 million barrels and of 2P reserves or 0.13% of IPCs, 2P reserves. And with the consideration, not insignificant of US$17 million, that’s 220% of our MPV 10 of this asset or 1.4% of IPCs enterprise value. So if we can sell non-core assets at more than 2x, and buy back or existing stock at $0.30 at $0.40 in a dollar and that’s a really efficient way to allocate capital and this can effectively fund 20% of our 2023-2024 buyback program.

So just to walk through each of the individual assets in a little bit more detail. And our Blackrod Phase one development project, IPC holds 100% working interest in that project. We took the decision in February of this year to sanction the phase one development and that will see us in this US$850 million US to build a 30,000 barrels a day facility tapping the first 220 million barrels of 2P reserves with more than 1 billion barrels of undeveloped contingent resources in the surrounding area. And we are still very much on schedule and on budget to deliver first oil in this project in late 2026.

This next slide just shows the high level schedule with planning and the commencement of fabrication in the workshop in 2023. Next year, we start to mobilize the site to move into the manufacturing and the construction phase. And, as you can see, we plan to start the commissioning of the facilities in late 2025 with the first oil day in towards late 2026.

And I think it’s always helpful just to see a picture, there was a thousand words and if we look at this next slide and you can see some of the progress. Last quarter we showed and we didn’t increase the bridge size and replace the bridge on the main access road. If you look at the picture on the bottom of this bottom middle of this slide, you can see now the road widening activities that are going on.

And on the bottom right hand side of this slide, you can see that we put the piles in place and we’ve actually started assembly of the construction camp in advance of the CPA construction that should commence next year.

And then on the bottom left, you can see the progress made in the workshop on the manufacturer of one of the treater vessels. So EPC contract as we said was signed back in the second quarter. That was a major project milestone. We’ve increased the hedges 70% of our Canadian dollar exposure is now been locked in and we’ve planned to potentially even do some more in the fourth quarter and costs and schedule is very much in line with expectation from the previous slide.

Turning now to Onion Lake Thermal and with the introduction of the production from the two new wells as Pd L, we’ve been pushing up against that facility, nameplate capacity of 14,000 barrels per day. And again just a recap from the production investment slide you can see on the bottom right hand side of the slide here just the fact that those two new wells came on more than a month ahead of schedule and the ramp up has been ahead of forecast. So off to a great start there with the new Pad L and again a great job done and congrats to the Onion Lake Thermal team.

Turning to the Suffield area assets. I think, if you look at the bottom left hand side of this slide, you can see the large jump that we got to oil production as a result of the Cor4 acquisition. We now call this property Brooks, and going forward, we’ve seen really good performance from the initial results of that drilling program. And if I jump to this next slide and again it’s a recap from earlier in the presentation.

With that promising start and we’ve seen to the first six wells that we’ve planned to drill as part of the 2023 program with production running ahead of pre-drill guidance. We’ve taken the decision to actually expand the drilling program now up to eight wells. So adding an additional two wells to the 2023 program. And that should stand us in really good stand going forward with still in excess of 30 remaining targets on this exciting play that we brought into the IPC portfolio at the beginning of this year.

And now turning to Malaysia. We really successfully delivered a huge workscope actually that’s planned to be a two-week shutdown and went 35,000 man hours more than four support vessels for this major shutdown and turnaround and everyone came home safely. So it really was a tremendous job by the whole team in Malaysia to deliver that under budget and ahead of schedule.

We did have two wells and that failed during the third quarter. And so we’ve scheduled them for workover in Q4. Typically, what was forecast 1 to 2 wells to go down during the years. We’ve been fortunate that we haven’t had to in recent time and we’ve got a rig that will come to the site in November and we should have those two workovers completed by January of next year.

And the team in Malaysia are still excited about an upside development potential in the Northeastern part of the field and we’ll see if there is any future drilling locations in that part of the field the that was betting plan, I would say there is maybe one more.

Turning to France. It’s been really long life, stable, low decline asset. If we look at the production plot on the bottom right hand side and on the chart here you can see that we benefited from the investment program in new wells that were brought into production. The three wells at Villeperdue West and the Merisier side-track that was very much producing well in excess of our pre-drill expectations. So, again, great job done there by team France.

And then, just on sustainability and ESG, it was a really solid performance. A lot of activity, particularly with a back time turnaround, no safety incidents and.or environmental into incidents year-to-date and we published our fourth sustainability report alongside our second quarter results. And our climate strategy, very much on track to be reducing our net emissions intensity by 50% through the end of 2025.

So that concludes the operations part. So, I’ll pass across to Christophe now. And he can walk through the detailed financial numbers. So Christophe?

Christophe Nerguararian

Thank you very much, Mike. Very happy to be here this morning to present what clearly is a very strong quarter. The results are been carried by strong operational performance and obviously the strongest oil prices and the best net back we’ve seen for the whole year. So with the production in the third quarter in excess of 50,000 barrels of oil equivalent per day, we were happy to confirm that we maintain a positive outlook for the whole year with a guidance for this year, which will be in excess of 50,000.

Clearly, strong Brent and WTI prices, but as well, a fairly tight differential. I’ll come back to that which together with OpEx per barrel under control at $17.90 in the last of this quarter translated into a very strong, EBITDA and operating cash flow. So if you look at the nine months operating cash flow, let me back actually with this strong quarter, we’re fairly close to the Capital Markets Day guidance for the first nine months.

If you extrapolate it what it meant from the full year to three quarters. And with capital expenditure, which is a bit below our initial guidance that translated into very strong free cash flow. The free cash flow for this quarter alone is as much as the free cash flow for the first two quarters, and the same for the net results.

Looking at the realized oil prices, as I was saying, you can see that clearly in this third quarter, prices were as high as they have been for the for the whole year. And we’ve been continuing to sell our Malaysian cargos at seven to eight that are premium to the Brent dated – Brent’s benchmark and in France, we’ve been setting our production in line with the dated Brent.

Now, as you can tell the WTI/WCS differential was fairly tight at the $13 per barrel and that translated into a very, very strong and good WCS level at $69 and you could compare that to the third quarter in 2022 where despite the Brent being a $101 per barrel. The WCS was only $3 higher. So that differential is very important. As Mike mentioned, I will come back to that. We’ve hedged a good chunk of our exposure for 2024 already.

Looking at the gas, I mean, we locked in at Q4, 2022 for the bulk of 2023, we had very good hedging levels when the gas prices were running in very hot on the back of the Russian war and we’ve benefited from those hedge levels throughout this year. This is coming to an end at the end of October and so the market is between CAD2.5 and CAD3 per MCF. So lower than the CAD3.50 we used during our Capital Markets Day. But as you can see the realized gas prices, we’ve managed to be at or above the market price by having a productive marketing strategy.

Looking at the operating cash flow and EBITDA, so I think it’s interesting because if you compare Q3 this year to Q3 last year, you can see that what’s catching up there. If you look at the nine months year- to-date operating cash flow EBITDA, we’re lagging obviously compared to 2022 where the Brent on average was in excess of a $100.

But it’s interesting to see that the third quarter is not that different with a big time operating cash flow around $120 million and that goes a long way to explain again that IPC has a very high talk to us, high oil prices. And when you have high oil prices and good WCS oil types, the rich IWC differential clearly the financial performance is very strong.

In terms of operating costs, again, very happy to report that we expect the full year operating cost per barrel of oil equivalent to be within the fairly tight guidance range we announced previously of between $17.5 to $18 per BOE. You can see an increased OpEx per barrel in the second half of this year. In the third quarter, that was mainly driven by the shut-in in Malaysia to perform some maintenance work at the FPSO Bertam. And in the fourth quarter, it’s driven by a bit of a reduced production, again from Malaysia waiting for us to workover the little bit two wells which will come back onstream in the first quarter next year.

Strong, very strong net back during this quarter at above $25 and $26 respectively for operating cash flow and EBITDA per barrel of oil equivalents. And interestingly enough that compares to around $28 per BOE of net back which we guided at our Capital Markets Day in a $100 case. And an obviously that’s driven by the very tight the retail that we see as differential during this during this quarter.

And even for the year-to-date performance, the net back on the operating cash flow EBITDA per BOE was around $20 and that that is just $1 shy of our base case for the Capital Markets Day.

Looking at our net cash evolution here from an opening cash position of $175 million down to where we stand now at $83 million, I think it’s really interesting to realize that with a operating cash flow of $280 million year-to-date, that was enough to cover all of our CapEx, all of our G&A, all of our financial costs and as well the acquisition of Cor4 which as Mike mentioned is performing very, very well.

In addition, as you can see here, and as Mike mentioned, we’ve completed 90% of our share buyback program, which we intend to complete by the end of November. And there’s a reasonably large change in working capital here, which was – which includes some decommissioning costs. Some time differences in the way we pay some taxes and as well, but discounts when we it relates – relating to the bond tap.

But very happy that we are sitting on actually US$540 million of gross cash, US$83 million of net cash and that re-puts the company in an extremely strong footing to embark on the heavy CapEx here next year in 2024.

Interesting to look at what the net interest expenses are, very, very small but less than $1 million this quarter and actually it’s been less than $1 million per quarter. And that’s interesting because, we’ve raised more bonds – issued more bonds at seven and a quarter coupon actually the yield of the last bone tap was higher than that.

But because we’re able to deposit our US dollars or Canadian dollars at on deposit rates in excess of five, sometimes in excess of 5.5%, we generate lots of financial interest income, which nets of the actual coupon cost. So long story short, a reasonably low net interest cost for that.

And on the G&A, that remains very much under control at less than US$1 per BOE. So if you looked at our financial results for the first nine months, with $660 million, $655 million of revenues. We’ve generated a cash margin of $291 million gross and net profit of $211 million, $143 million for the year. So very strong performance again, I would say for this for this year-to-date performance.

Looking at the balance sheet. I mean, the two of three main points are the increase in the oil and gas properties. That’s a direct result of the CapEx program we’ve done so far this year mostly investing into Blackrod Phase 1, but also as Mike mentioned some drilling in France earlier this year and some other investments that Onion Lakes are more bringing onstream few wells. So that $200 million increase on oil and gas properties is the direct result of development CapEx.

And on the liabilities side of the balance sheet, you can see the increase in the bonds. Now, we have US$450 million of bonds outstanding. There was a small discount relating to the issue discounts, which will unwind overtime over the next three years. And the equity increase is the direct result of the positive net profit we keep on adding to that row on the balance sheet.

The capital structure of the business is very strong. It’s not changed fundamentally. We’ve just added more bonds and I think I want to preempt one question which I’ve heard before which is, why do you expand fully undrawn revolver credit facility in Canada? Why do you tap the bond market when you’re already sitting on so much cash?

Well, I think the answer is, we don’t need and we don’t believe we will need that all that cash resources. But in 2020 nobody expected to COVID to break out the business. So we don’t know what we do in the future. What we know is, we’ve embarked and we want to conclude successfully the investments in the Blackrod project.

So the Black road project is on time and on budget. There’s no hidden message by increasing the strengths of our balance sheet here to be very clear. But we know what we’re committing to. And so we want to be covered in any case with a strong balance sheet, and sitting on lots of cash gives us that flexibility and very much aligned our balance sheet with our strategic pillars, which are to invest in Blackrod to continuously look at M&A, even though we’re not looking at anything material right now and to continue if not accelerate share buyback or return of capital to shareholders if oil prices remain very strong.

In terms of hedging, we had been quite active in 2023. I mentioned about the gas hedging which has yielded very strong result, more than $10 million hedging profit this year. We also have this oil hedges for the transportation cost between – for heavy oil, which is in the money as we speak.

And as Mike mentioned, I think one of the key drivers you’ve understood if you’ve been following our story that the WTI/WCS differential is important. And so, given that we will have some important CapEx for Blackrod next year, with decided to hedge 75% of all WTI/WCS exposure for the Canadian oil production next year.

We manage to lock that it at minus US$15 per BOE, per barrel, which is a decent oil hedge in the money because the market rates is minus US$17 as we speak. And we’ve also decided as we guided in the past to hedge 25% of our Canadian oil production at the WTI level of $80. So effectively for 25% of our Canadian oil production, we have locked in a WCS price of $66.81 minus $15 and for another $15, 50% of our Canadian oil production, we’ve locked in the differential at minus $15.

We also locked in some condensate prices. We need to buy condensates to blend it with our production in order to sell it at the WCS specification, and we’ve managed to lock in good prices for 3,000 barrels a day in Q4 this year, and Q1 next year, which are the months when traditionally condensate trades higher. We manage to lock in the price of WTI minus 1.6, which it usually trades at the premium in the winter months and 3,000 barrels a day stands for roughly 50% of the condensate we need to blend with our Suffield and Onion Lake crude oil production.

We’ve been also proactive this year and added effects on FX hedging, because we are we’re spending most of our costs locally in Canada in Canadian dollar, in Malaysian ringgits in Malaysia. The US dollar is very strong against those currencies. And so we’ve hedged between two-thirds and 75% of our local currency exposure for next year with also 70% of the Blackrod’s CapEx overall until the end of 2025 hedged at also a fairly good level I would say at CAD1.33 per US dollar, which puts us in a very strong position to really manage the budget for Blackrod.

And that concludes my part. I believe Mike walk us through the last slide.

Mike Nicholson

Okay. Thank you, very much, Christophe and amazing set of numbers. So something of – just lost my slide. So, yeah, fair. So just to conclude the – with the highlighters, it’s just lots of. So the – a very, very solid third quarter performance by the company. And if we just recap on the production numbers, another quarter, the third in succession above our high end guidance of over 50,000 barrels of oil equivalent per day.

So, of course, we do expect the full year numbers to excceed 50,000 that was in excess of our original high end guidance. The cost delivery remains really solid with third quarter OpEx below $18 per barrel. And our full year guidance unchanged between $17.50 and $18 per barrel embarking upon our biggest ever investment year in the company’s history, with full year CapEx, now expected to be around US$330 million. And as Christophe touched upon and I mentioned your share buybacks and returns have been one of our core strategic pillars where 90% done on the 2023 program. We plan to complete that by early December and we’re going to do the same again or we intend to with a renewal and completing that program through 2024.

Cash flow numbers, extremely solid. Good production. Tight differentials. Solid, commodity prices led to operating cash flow of just under $120 million. $35 million of free cash flow during the quarter and we expect to be largely free cash flow breakeven with somewhere between minus $15 million and plus $5 million dollars for the full year.

The balance sheet has never been in better shape with net cash of $83 million. Gross cash of $543 million and with the RCF undrawn liquidity lines of in excess of $650 million US dollars. The sustainability strategy and climate strategy very much on track with a plan to reduce our net emissions intensity by 50% through the end of 2025.

And last but not least, I am very pleased to announce this morning that Will Lundin will be stepping up to succeed me as is the CEO of IPC. After 19 years working with both Lundin Petroleum and IPC, it’s time I think for me to take a slightly different role and step up onto the Board of this amazing company and continue and to watch the progress.

Will is an exceptional individual. He’s lived, embraced, value mission in the resource industry and the oil and gas space. I think the time is very good right now with such a strong balance sheet and a reserve life of in excess of 25 years and 1 billion barrels of undeveloped contingent resources, I think we’re going to be in great hands and this is very much in line with the way we like to run our succession planning within the Lundin Group.

So, I would like to just thank very much to the Lundin family and the IPC Board and particularly the amazing team of professionals within IPC corporately here in Geneva and in Canada, France and Malaysia. And also to all of the shareholders and analysts that’s been privileged to engage with over these years. So that concludes the presentation part. Happy to pass across now and take any questions that you may have.

Question-And-Answer Session

Operator

[Operator Instructions]

We will take the first question from [Indiscernible] from Jefferies. Your line is open now. Please go ahead.

Unidentified Analyst

Hi guys. Good morning. And thank you for taking my questions and I just want to say my congrats on your 10 years CEO and wishing yourself on William all the best on your new roles. So just one on the CapEx phasing into 2024 for Blackrod. So little bit check is all that CapEx falling in 2024 or would it be split over a number of years to first oil?

And secondly, I just wanted to ask you what are your views with the major milestones for Blackrod up until first oil? And are you still exploring perhaps any interest in Blackrod? Thank you.

Mike Nicholson

Yes. Thanks very much and a great question. And I think in terms of the phasing of the CapEx, just to be clear in typical IPC fashion when we set the budget this year, next year, we took a relatively conservative position. So we expect to be spending the budget as fast as we can possibly move burning through all of the contingency. We don’t want to be coming back to increase our CapEx guidance.

So, I think the fact that we see some CapEx move into next year and some into 2025. That’s more driven by our conservative nature and with respect to how we budget and how we like to guide our performance as opposed to anything with respect to worrying about the schedule. So very much on schedule and on budget with the project.

But I think the major milestones we set out in the presentation. So of course, it’s really the road access, which we’ve started work and we’ve started work also on expanding the road. As we move into next year, the major activities will be getting that construction camp completed with the mobilization of the and from the workshop of the main vessels and to the site the pipelines which are expected to commence in 2024. We’re already looking to start to sign a couple of the main pipeline contracts.

Again, everything there is very much on schedule. And the drilling which is other key part of the project which is expected to commence next year, maybe we can even start that late this year. So I think on all the key work scope to civil works, the fabrication getting ready to start, the CPF construction, the drilling and the pipelines, I think everything is very much running as we would expect that.

Unidentified Analyst

Okay. Thank you very much, guys. Very clear.

Mike Nicholson

Thank you.

Operator

Thank you. [Operator Instructions]

It appears no further question. I’ll hand it back over to your host for closing remarks. Thank you.

Rebecca Gordon

Thanks, operator. And we’ve just got a couple of questions here from the Internet. Mike, how is the Onion Lake capacity expansion going? And how is the current levels of production for Onion Lake?

Mike Nicholson

Yeah, good question. I think as we showed in on this slide with respect to Onion Lake with the new Pad L the contribution from the two wells, we’ve been actually pushing up towards the capacity limits of 14,000 barrels per day. That is of course the option to look at expanding that production capacity. But I think one way for you know at least a year or so to see this sustained production can be retained that those levels before deciding to invest an additional facility expansion and of course that will be driven by how much return we can make by investing and increasing the facilities, say up to 16,000 barrels a day and accelerating that production. But I didn’t want at least run the plan for a sustained period. That was levels that we’re certainly very much off to a good start with Pad L.

Rebecca Gordon

Yes. Very good and a couple of questions from different people relating to the non-core assets divestments. Are there any other non-core assets that we could look at divesting if we are getting such good prices for them?

Mike Nicholson

Yeah, well, I think the margins there are always some small land positioning mainly in Canada, I would say. So given the very favorable results that we saw and the amazing job done by the team in Canada, if there’s some any additional small non-core packages, then we’ll look to tidy those up in the months ahead.

Rebecca Gordon

Next, Christophe, there’s a couple of questions on the share buybacks. And is there a level where we will buy back less shares in terms of the NAV?

Christophe Nerguararian

Yeah, it’s a very good question. And obviously, if you look at the discounts we’re trading at it’s I wish we will very soon be in a position where there’s no such discount as long as there’s such a way discounts. I don’t see a reason to stop buying back our shares makes tremendous sense to do it to create more value for our shareholders.

As Mike mentioned, even if it’s a small, that asset we disposed of, if we can get two to three times the value from an NAV basis and recycle that to buy our shares back at a 60% discount I think it’s a very good use of our capital.

Rebecca Gordon

Very good. And Christopher, perhaps another question on 2024 activity. How does the Blackrod CapEx phasing impact on 2024 activity. And any catch-up effects from the movement in 2023 to 2024?

Christophe Nerguararian

Yeah I think it’s fair to say as Mike mentioned that 2024 is really going to be the CapEx here year Blackrod and I think it’s going to draw any other activity that we will be looking at investing in next year. So, I think generally, it’s too early to guide. We’ll give all the details in early February obviously for 2024. But it’s a first assumption to say that, really the vast majority of our investment efforts will be on our Blackrod phase one next year.

Rebecca Gordon

Very good. And finally, there’s quite a few comments here. Thank you, Mike, for your great work as CEO, I won’t read them all out. So get a big head all this way out, but yeah, lots of comments on that and looking forward to a very bright future with Will as CEO. So, that’s the end of the Internet questions.

Mike Nicholson

Great. Well, thank you very much. Another amazing quarter. Congrats again to all of the IPC team and I am very much looking forward to tonight with new role on the Board and wish Will, all the best of luck I know that he’s going to drive the company to new heights. So, I look forward to tracking that progress.

Christophe Nerguararian

Thank you. Thank you very Mike. It’s been absolutely a great honor, pleasure. I feel amazing to work with you and for you. I think it’s absolute to mention that from all the team and from all the colleagues around the world it was a privilege. We will definitely try to run with the team and we’ll as fast as you’ve been running and pushing us over the last six years. I think with Will it’s a challenge we’re willing to take and really so much full of energy. And I have a clear vision for the business that I think we should – we are embarking on a very, very exciting phase.

The only the only downside is you’ll be asking all the tough questions on the Board. I know you exactly first hand what’s happening in the car who’s driving, who is doing what? But very much looking forward to continue working with you in your different role and taking up the new challenge with Will who is an exceptional leader.

Mike Nicholson

Thanks very much, Christophe. Yes, thanks.

Rebecca Gordon

Thanks, everyone.

Mike Nicholson

Okay, thank you.