InPlay Oil's Strategic Momentum: A Blueprint for Energy Market Resilience and Value Creation

In a volatile energy market, companies that combine operational excellence with disciplined capital allocation often emerge as standout performers. InPlay Oil Corp. (TSE: IPO) is one such example, leveraging production outperformance, strategic acquisitions, and a robust hedging strategy to position itself for a compelling turnaround and long-term value creation. For investors seeking exposure to a high-conviction energy play, InPlay's current trajectory offers a compelling case.

Production Outperformance: A Catalyst for Growth

InPlay's Q2 2025 results underscore its operational prowess. The company exceeded internal production forecasts by 1,000 boe/d, driven by seven new wells brought online in March 2025. These wells outperformed internal type curves by an average of 135% in their first 120 days, with three ranking among the top ten Cardium producers in April. Notably, two of these wells held the top two positions in April and May and maintained second and third places in June. This exceptional performance, achieved in a $60 WTI environment, highlights InPlay's ability to generate rapid returns on capital.

The company's current production of 19,400 boe/d—maintained without new wells since March—positions it to meet or exceed 2025 guidance. Moreover, capital efficiency is a hallmark of InPlay's strategy. With 2025 spending expected to fall in the lower half of its $53–$60 million budget, the company is prioritizing free cash flow generation to reduce net debt and sustain its 10% dividend yield.

Acquisition-Driven Scale: Strengthening the Foundation

InPlay's April 2025 acquisition of Cardium-focused assets in Alberta's Pembina region has been a game-changer. The deal added over 400 high-quality drilling locations, extended reserve life, and reduced the corporate base decline rate to 24%. By boosting the production mix to 62% light crude oil and NGLs, the acquisition enhanced profitability and resilience.

The financial impact is equally striking: free adjusted funds flow (FAFF) per share increased by 65%, directly supporting the company's dividend sustainability. This strategic move not only diversified InPlay's asset base but also reinforced its ability to generate consistent cash flow, even in a low-price environment.

Hedging as a Shield Against Volatility

Energy markets are inherently cyclical, but InPlay's hedging strategy provides a critical buffer. The company has secured over 70% of its natural gas production and 60% of its light crude output for the remainder of 2025 and into 2026. These hedges ensure cash flow stability, enabling InPlay to maintain its debt-reduction trajectory and shareholder returns.

As of Q2 2025, InPlay's net debt-to-EBITDA ratio stood at 1.2x, a significant improvement from previous levels. This balance sheet discipline, combined with a 138% year-over-year increase in adjusted funds flow, underscores the company's ability to navigate price fluctuations while maintaining financial flexibility.

Future-Proofing the Business

Looking ahead, InPlay's drilling plans for 5.0–5.5 net Cardium wells in Pembina—set to come online by October—signal confidence in replicating past success. These wells, located near top producers, are expected to further boost production and cash flow. Additionally, capital will be directed toward facility upgrades and infrastructure projects, ensuring operational efficiency remains a competitive advantage.

The company's partnership with Delek Group Ltd., which holds a 32.7% stake, adds another layer of strategic strength. Delek's expertise in energy value creation and operational optimization aligns with InPlay's goals, reinforcing its long-term growth potential.

Investment Thesis: A High-Conviction Play

For investors, InPlay's combination of production outperformance, acquisition-driven scale, and proactive hedging creates a compelling risk-reward profile. The company's ability to generate free cash flow while maintaining a 10% dividend yield is rare in the energy sector, particularly for a mid-sized player.

With a net debt reduction of $26 million in Q2 alone and a clear path to further debt reduction, InPlay is well-positioned to capitalize on a potential upturn in energy prices. The recent drilling campaign and strategic infrastructure investments suggest the company is not resting on its laurels but actively building a foundation for sustained growth.

Conclusion: A Turnaround Story with Long-Term Legs

InPlay Oil's strategic momentum is not a flash in the pan. By combining operational excellence with disciplined capital allocation, the company has created a resilient business model that thrives in both high- and low-price environments. For investors with a high-conviction energy portfolio, InPlay represents a rare opportunity to participate in a turnaround story with clear catalysts and long-term value creation.

As the energy market continues to evolve, companies like InPlay—those that adapt, innovate, and execute—will likely outperform. With its strong hedge position, robust production growth, and strategic partnerships, InPlay Oil is poised to deliver compelling returns for shareholders in the years ahead.