Okay. So very good morning to everybody and welcome to IPC's First Quarter Results and Operations Update Presentation. My name is Mike Nicholson. I'm the CEO of IPC. I'm also joined this morning by Christoph Nergerarian, who's the CFO and Rebecca Gordon, who's our VP of Corporate Planning and Investor Relations.
I'll begin in the usual fashion by walking through the operations update and then I'll pass across to Christophe and he'll walk through the financial numbers for the Q1. And then at the end of the presentation, we'll open up and you have the ability to ask questions and we'll take those from the participants joining from the conference call or from the questions that are submitted online. So to get started, the Q1 highlights, very, very strong Q1 for IPC. For the first time in 2 years, we've seen synchronized strong Brent prices, very tight differentials, strong gas prices and exceptionally high uptime performance, which has led to very strong production. And just to put things in context before we start the presentation, the last time we had this kind of Q1 production and free cash flow delivery was Q1 of 2019 and the stock was trading at 50 second share and today we're trading close to 30 second share.
So I think there's still some seriously huge upside and for IPC investors, but let's get into the highlights for the Q1. Our Q1 average net production was just under 44,000 barrels of oil equivalent per day and that was above our high end guidance. And as a result of that, I'll get into more details in the presentation, but we certainly feel confident to say that we're trending towards the upside of our full year guidance. 1st quarter operating costs of $14.40 a barrel and we're exactly in line with guidance and we retain the full year guidance numbers that we gave in our Capital Markets Day. In terms of our organic growth program, still very limited capital expenditure programs of $37,000,000 for the full year.
But as we mentioned in our February CMD presentation, we do still have some execution flexibility in Q4 to add some infill drilling at either our onion lake thermal project in Canada or our Bertam project in Malaysia. And I'll come back and just recap on those details. In terms of cash flow generation, it was an exceptionally strong quarter for IPC. Our Q1 operating cash flow was just under 70 $1,000,000 and a free cash flow generation of $49,000,000 and in just 1 quarter that represents approximately 10% of the company's market capitalization. Of course, all that free cash flow was used to reduce our debt levels and net debt at the end of the Q1 stood at $286,000,000 and of course, that's indeed had an impact on our leverage ratios with our net debt to EBITDA leverage ratio dropping to 1.8 times for the last 12 months or if you annualize the Q1 EBITDA, we will be down at close to 1.1 times.
So our balance sheet starting to get in extremely strong condition. In terms of business development activity, as we mentioned in February, we're pleased to conclude the acquisition of the remaining 25 percent interest in our Burtam field in Malaysia and there was no upfront consideration and to acquire that interest. And still a very strong performance on the ESG front, no operational impacts as a result of COVID, no material safety incidents and we've secured through our partnership with First Climate and the carbon offsets that we need on our 5 year journey and to reduce our net emissions intensity by 50% by the end of 2025. So really good start to 2021. I'll get now into a little bit more details on our production numbers.
As I mentioned, Q1 production was 43,000 700 barrels of oil equivalent per day. And if you look at the chart on this slide, you can see the Capital Markets Day high and low range and across the quarter, we were above that high end range for most of that period. And as really as a result in Canada, a very high uptime and strong reservoir performance and particularly during February March and there was a shorter, sharper winter in Canada, which meant we weren't impacted by the freeze offs on our Canadian gas production as much as we've seen in previous years. So a nice combination of events to drive a good strong production performance in Canada. And likewise, internationally, our Malaysian business, Burtam FPSO continued to have exceptionally high operating uptime of 100% during the Q1.
And again, you're going to see continued strong good performance on all of our core producing assets in our French business. So really everything and operational excellence delivered by all of our teams on the ground. So great job done by everyone there. Does that mean in terms of our full year guidance? So just to recap in our Capital Markets Day presentation, we'd announced a guidance range of 41,000 to 43,000 barrels of oil equivalent per day.
That did include the step up in our working interest in our Bertham field in Malaysia to 100% from the 10th April. But the investment program that embarked in the Q1 and was largely targeted at production increases on our onion lake thermal pad D, which is going to see a steady ramp up in production during the second half. So the fact that we're seeing those production adds in the second half combined with an above high end guidance performance in Q1 leads us to feel confident to state that we expect our full year numbers to be up towards the high end of that 43,000 barrels of oil equivalent per day guidance range. Investment strategy that we announced back in February is unchanged. It's still focused on a very limited capital expenditure budget for 2021, focused on maximizing our free cash flow generation and that budget is $37,000,000 So as we said then, quite a significant drop from the 2020 expenditure levels, which was cut back significantly, so down 55% from last year.
As I mentioned on the previous slide, the key capital spend for this year is on our Onion Lake thermal project and I'll come back to give you an update on progress there. But we do have that flexibility should we choose to do so and to add some additional infill drilling on thermal in the Q4 or to drill an additional infill well in our Malaysian Burtam field. In terms of the free cash flow breakeven of the 2021 expenditure program, fully funded below $40 per barrel and with a differential of $2 for the WTI and dollars 13 for the WCS. Given it today Brent prices are closer to $70 per barrel and differentials are similar to those levels, you're going to see some pretty phenomenal free cash flow generation and I'll get back to where that stands in the context of our full year numbers in the next couple of slides. Before we talk about the cash flow generation, I think it is important to touch upon improvements that we're seeing in the fundamentals for Canadian crude differentials.
We've talked about this slide over a number of years and what we've seen in Canada certainly for more than the last 5 years was the production was running ahead of available egress capacity. And with the progress and the construction progress that we're seeing on Enbridge Line 3, which is now 60% complete, and also the ongoing construction of Trans Mountain pipeline, that pipeline due to come into service late 2022, early 2023 means that for the first time in more than 5 years, we've got more than enough egress capacity and we're starting to see that play out in terms of the fundamentals that support Canadian crude price differentials. If you look at forward markets for 20222023, we're seeing WCS differential trade at below $13 per barrel and levels that we haven't seen for quite some time. And of course IPC with the 3 acquisitions that we've made in Canada over these last three years has positioned itself extremely well and to take advantage of those improving pricing dynamics. So if we now look at the operating cash flow guidance, as I mentioned in the highlights, our Q1 operating cash flow was $68,000,000 and that was based on $61 per barrel average Brent prices with WTI differentials averaging $3 and Canadian WCS differentials averaging $12.50 dollars per barrel.
So below the high end Brent price forecast, but if you look at that relative to the $65 forecast, we were guiding operational cash flow of somewhere between $210,000,000 $220,000,000 notwithstanding the fact that Brent prices were actually below that $65 per barrel high case, we generated close to 1 third of that full year OCF guidance. And that was really a result of the stronger production performance, higher gas prices and tighter differentials. So 2021 off to a great start. In terms of our capital expenditure, during the Q1, it was exactly in line with guidance and $12,000,000 which was close to 1 third of our $37,000,000 capital expenditure budget. So how does that feed through into our free cash flow generation?
As I mentioned, with $61 Brent and less than $13 dips, we had an exceptional free cash flow generation of $49,000,000 during the Q1. And again, if you look at that high end guidance of $65 that we were forecasting, we were looking at a range for the full year of somewhere between 148,000,000 dollars to $155,000,000 So in the Q1 alone, we've generated close to 1 third of that high end free cash flow guidance. And with forward looking Brent prices closer to $70 today and still seeing very tight crude differentials around $13 per barrel and a strong production performance. If oil prices stay at these levels and we can expect IPC to generate well in excess of that high end guidance that we've already announced. And that really ties back to the long term free cash flow guidance that we gave back in February.
We showed that if you look at the 5 year business plan for IPC, we can keep production essentially flat at 45,000 barrels per day with an average capital investment maintenance CapEx of $4.50 per barrel and between $55.65 Brent long term oil prices generate somewhere between $600,000,000 $900,000,000 of free cash flow. And if you look at the quarterly average and that would be around $45,000,000 of free cash flow per quarter. Obviously, production is lower than that 5 year average that we're guiding for Q1 and we're already close to $50,000,000 So you can see that these long term free cash flow guidance numbers are absolutely anchored in reality. Great cash flow numbers and exceptional free cash flow yields, but if you also look at IPC through the valuation metric, I think you can also say it's an extremely undervalued 2P reserve base that we have. Our year end 2020 2P net asset value was around 1,300,000,000 dollars and that 2P reserve base is calculated using oil prices which are significantly lower than where they stand today.
We're looking at $48 per barrel for this year and long term prices don't get to $57 per barrel until 20 $25 And on those pricing assumptions, if you look at the share price of $0.28 a share and at the end of March, at the end of the Q1, we're trading at about a 61% discount to that SEK0.70 per share 2P net asset value on a conservative price deck and that does not include a single dollar of value assigned to the 1,000,000,000 barrels of contingent resources that we have in the portfolio. So now a few slides on each of the key operating areas, starting in Canada first and if we turn to our Suffield oil asset, very strong and steady production performance through the Q1. If you look at the chart on the bottom right hand side of the screen, you can see we've been producing in excess of 8,000 barrels of oil equivalent per day during the Q1 and that's at levels above Q1 2016 levels. One of the key factors that's driving that strong performance is the end to end enhanced oil recovery project that we sanctioned 2 years ago, there's always going to be a slow burn and a slow ramp up and that project is performing ahead of schedule.
And if you look at the chart on the top right hand side of the slide, you can see the red line was our investment case and the hard blue line is our production actuals and you can see the ramp up in production is running well ahead of expectation. No further major capital activities are planned on the Saffood property on the oil side for the remainder of 2021, but we do have a deep inventory of additional infill drilling locations and we can restart that program extremely quickly. So huge amount of discretion with respect to how quickly we want to restart drilling on our Suffield property. On the gas side, Suffield Gas, really good cash flows in Q1. Christophe will show the gas price numbers in his presentation.
And the focus there has been unchanged for the last couple of years. It's managed the natural declines with very low cost optimization activity. So there's no major capital expenditures planned for the Q1, but what you can see from chart on the bottom right hand side of this slide is that we've got a very, very active gas swabbing program. We've been ramping that up since we took over operatorship in 2018 and we expect those optimization activity levels from 2020 to continue into 2021. If you look at the production performance on the bottom right hand side of this slide, we did see a dip in February with the cold weather, but as you can see, our current production, our spot production is back up to around 100,000,000 standard cubic feet per day, so very steady and low declines on the Suffield gas property there.
Turning to Onion Lake Thermal, again from the chart on the bottom of this slide, you can see again a very stable production performance and the biggest project that we have going on there this year, which started in the Q1 is the completion of the D prime time works and we've gone into the turnaround at the beginning of this month and project is going very well. It's on schedule, It's on budget and we expect to start steaming up at the end of this month. And what we should see is a steady and gradual ramp up in production through the second half of twenty twenty one, which should see production adds by the year end of an excess of 1500 barrels of oil equivalent per day. And that's why we guided in our February Capital Markets Day guidance that we expected to exit 2021 above the high end of that 43,000 barrels per day range. And I did mention we've got some flexibility about some further activities that we could take at any point in time.
There's 5 infill wells have been identified. You can see it's right in the heart of the property. If you look at the yellow box on the map on the right hand side of this slide and the blue eyed picture, which shows 5 separate infill drilling locations that we think can be and can drain additional oil that's not been accessed from the current wells that we have drilled from those existing well pads. So all the facilities are in place, the surface locations and can be drilled from existing well pads. So it's very, very there's no essentially no facilities or CapEx, really just well drilling CapEx.
And of course, as a result of that, we see some pretty stellar economics and you can look at breakevens of $20 per barrel WCS when WCS prices are currently above $50 a barrel and assuming $55 Brent, you're getting your payback in less than 1 year and of course with an extra $15 on the oil price that payback time accelerates materially. So the capital expenditure is around $7,000,000 to move forward with those projects. We're not making any decisions right now, but if we see in the second half a recovery, a more fundamentally based recovery in market balances with demand recovering and matching supply, then it's certainly something that we could move forward with in the Q4 if we chose to do so. Ferguson property, which was the acquisition of Granite back in late 2019, again, we hit the pause button on our investment plans there. We'd originally planned the 6 well drilling program last year before market prices collapsed.
Current focus is on gas injection and re pressurizing via some well conversions, but certainly as we move into next year if we see continued strong commodity prices, this would be one of the projects that we want to get going again at least with a 6 well and program. And we've got the potential to more than double production with the well locations that we have already identified on this property. On the conventional oil side in Canada, John Lake and Onion Lake Primary are back online, real focus there is on minimizing our operating costs, but we're producing today above 1,000 barrels a day from those properties. And as a result of the strong Canadian crude prices, we've taken a decision to look to restart production on our Mooney asset. That's got the potential to add 500 barrels a day and during the second half of twenty twenty one.
And again, that's another reason why we feel confident to state that full year production should be trending towards the upper end of that 43,000 BOE per day guidance range. On Black Rods, we continue with our pilot program, the 3rd well pair of the 1.4 kilometer horizontal well pair that we drilled last year. The early production results continue to be very positive indeed. And if you look at the chart on the bottom left hand side of the slide, you can see that our initial production rates are running ahead of expectation and the temperature and performance across the entire horizontal section of the well are performing extremely well indeed. And this is really important for us because of course that can impact overall economics and that was the reason that we decided to move forward with this project.
If we can drain a larger pool of oil from smaller number of well pads and less infrastructure and less construction, reduced environmental footprint and that should feed into to lower breakeven costs. So not a project for today, but some really good work and we're getting some really good confirmation on those results and should we see continued high oil prices to mature the subsurface on this project. And turning now to Tarbertan field in Malaysia, just continues to stand as every single quarter since this field was put on stream in 2015, we've had uptime above 99% and that continued through Q1 of 2021. And the big news, as I mentioned in the highlights, was that we added an additional 25% working interest from our partner Petronas Charigali effective from the 10th April of this year. Petronas choose to withdraw late last year.
And so as a result, there's 0 upfront consideration and we managed to agree a small assumption of some residual decommission liabilities of $1,000,000 And so extremely pleased to have acquired that additional production and net to IPC that adds just in excess of 12.50 barrels of oil per day from the 10th April. And there is still some additional upside on the Burtam field and if we look at the potential to sidetrack our A15 well, we have within our $37,000,000 capital expenditure budget for this year, Part of that includes an allowance for long lead items for ESP pumps and for the casing equipment that would need to drill that well. So this scheduled flexibility, again, should we choose to do so, we could still move forward with drilling this well in the Q4 of this year. Rate potential now that we have 100% interest if that comes on stream would be an add of 1500 barrels per day. So when you're looking at just Onion Lake Thermal and Bertam and those two projects alone could add above 3,000 barrels a day and to our exit rate.
So quite a nice little bit of growth in those two projects alone. And again, if you look at the economics on the bottom left hand side of this slide, it's an extremely robust project breakevens around $35 per barrel and again at $55 per barrel, you're getting your money back in around 1 year, but of course it's $70 a barrel and it's going to be much quicker than that. And the additional capital that we would need to invest if we chose to move forward with that project would be $22,000,000 Finally, turning to the French business, again very strong production from all of our fields in France and VGR113 which was the redevelopment that we put in place back in 2019 continues to outperform. And if I can ask you to look at the chart on the top right hand side of this slide. You can see the dark blue spiky lines is the actual production performance that we've had from VGR5.
The bump that you can see in January 2021 was when we took the decision to convert our VGR5 water producer into water injector and that's important because that now provides pressure support to VGR113. You can see there's very little decline in production from 113. And one of the reasons is we just haven't seen any water breakthrough so far from this well. Our simulation model is expected water to start to break through in the Q3 of last year and we still haven't seen any water yet. So that's certainly above expectation and is feeding into the strong performance of the French business.
We touched upon before about Total's decision to close the Grand Puy refinery, which was the refinery that we sold our Paris Basin production to. We're now going to be exporting our crude and to the refinery in Le Havre and we've now signed a new 5 year contract with Total that sees us through until the end of 2026. And as a result, we've locked in that net cost increase that we previously guided towards of an increase of around $5 per barrel relative to the Grand Prix sales option. Turning now to our sustainability and ESG strategy, still have to be extremely vigilant with respect to our COVID operating protocols across all of our sites in Malaysia, in Canada and in France. I think our teams have really done a tremendous job at keeping our people safe and not having any operational interruptions at any of our sites.
So tremendous job by the teams on the grounds there. As we mentioned in our Capital Markets Day presentation, IPC has made a commitment to reduce our net emissions intensity by 50% end of 2025 and that target is to be achieved by continued reduction in our operational emissions and also investing in carbon offsets and in line with our partnership that we've formed with First Climate and we've been in a position to secure more than double the offsets that we had in 2020. So going from 50,000 tons to 100,000 tons to offset the 2020 emissions and that will be updated in our 2021 sustainability report. We're moving forward with our strengthening our non financial disclosure reporting and we plan to publish our sustainability report towards the end of this year and we've just concluded a full company wide materiality assessment and the reason for doing that is so is that we can get our sustainability report to be fully GRR compliant this year. So again, a lot of good work going on from our teams across all of the areas of operation and IPC on the ESG front.
So that concludes my part of the presentation. I think it's been a great Q1, and I'll pass you across to Christophe, and he will walk you through the numbers in more detail. So Christophe, across to you.
Thank you, Mike. Good morning to everyone. Indeed, a pleasure to be here. What a change from last year. As Mike mentioned, the combination of very strong operational performance in a much higher oil price and gas price environment means indeed a very good quarter.
With Brent on average in excess of 6 $61 for the Q1 and operating costs in line at $14.4 per barrels of oil equivalent. It translated into a very healthy $68,000,000 for operating cash flow and $66,000,000 of EBITDA for that single quarter, translating in turn to 27,000,000 euros net profit. The net debt was reduced by USD 35,000,000 so most of the free cash flow, and I'll give you the breakdown, essentially was used to reduce that debt. As we guided previously at our Capital Markets Day in early February. This year is very light on CapEx, very focused on cash flow generation with that cash flow dedicated to debt reduction.
So already from a year end leverage ratio of 3x, we've been able to deleverage considerably in this Q1. And on the trailing 12 months rolling basis, our leverage has come off from 3 times to 1.8 times. On an annualized basis, our leverage is much closer to 1x actually. And so we're confident that by the end of this year, we should be indeed on an annual basis with the leverage at or below one time. In terms of realized oil prices, the offtake and the liftings were a bit lumpy.
In Malaysia and France, we had a strong realized price with a strong cargo in Malaysia in February and another cargo in Aquitaine in France. So we had realized prices, which averaged more than USD 3.5 per barrel on top of the average Brent for the Q1. Interestingly, in Canada, we've seen despite a much improved Brent and WTI average level in this first quarter, we've seen that the differential between the WTI and the WCS have remained very tight. And this is important because obviously most of our production, oil production in Canada is sold off that WCS. In terms of premium or discount for Suffield and Onion Lake assets, you can see that the Suffield here realized price was just shy of the WCS of $45 per barrel.
More importantly, you can see a much improved $2 improved netback at onion lake thermal. And this is really driven by the fact that we are selling now roughly half of our onion lake thermal production blended. So we are buying condensates. So you can see on our account slightly higher condensate cost purchase to blend into our own production, which we then are able to sell at the WCS specification. So we've narrowed the gap and are able to sell closer to WCS for cold in February, as everyone knows, in North of cold in February, as everyone knows in North America.
And the gas prices totally spiked at that moment in time. We were partially hedged, so we didn't fully capture that spike. But still, it's the 2nd best quarter in terms of realized gas price for our business in Canada. So we sold on average at just above CAD3.1 per Mcf, which is exceptional. And we also have I'll talk to it again at the end of those few slides, but we also built up a very strong hedging on the gas, which should see our average realized gas price just shy of CAD3 per Mcf or half of the remaining production this year.
So good gas prices in Q1 and well positioned to continue to benefit from a strong gas price going forward. I like this slide particularly because we've turned the corner of 2020. So we are no longer comparing 2020 to the previous year. Obviously, when you see that, it's obvious that 2020 was a very low year and that 2021 was starting with this Q1 has seen exceptional performance. We generated $68,000,000 $66,000,000 of operating cash flow and EBITDA, respectively, as I mentioned before.
I think more importantly, this is both ahead of most analysts' consensus and as well as our own budget. So really a good performance, which we hope and do everything we can to continue to deliver. In terms of operating costs, no change to our guidance. The OpEx per barrel of oil equivalent this first quarter was set at $14.4 per barrel. And we maintain our guidance.
We expect to see increased operating costs in the second quarter on the back of a reduced production from the maintenance and turnaround work at both our FPSO in Malaysia and on and on Lake thermal. But overall, we should deliver OpEx per barrel for the year, roughly at the level of our Q1. Interesting to look at netback, especially if you look at this in comparison to what we guided previously, early early February at our Capital Markets Day, because the EBITDA and operating cash flow per barrel are actually 3.5 dollars higher than what we guided in a high case. So we've really delivered a good performance. And obviously, given that some of our OpEx are fixed, our increased revenues translate into a much increased EBITDA and operating cash flow, which itself translates into a much stronger free cash flow compared to our previous guidance.
And I'll come back to that. Right now, by showing you the breakdown of our debt reduction during that Q1, starting from the $68,000,000 of operating cash flow. And the free cash flow generation, so free cash flow for the Q1 was actually 49,000,000 just shy of 50,000,000 U. S. Dollar.
And all of the available cash after the change in working capital was allocated to debt reduction. So we reduced our net debt by just in excess of $35,000,000 and we had a change in working capital of $30,000,000 which was driven by increased activity, increased oil prices and higher oil inventories, resulting into this increased working cap quarter from the end of last year to this quarter. Generally, you've seen that I talked to the fact that OpEx were in line with expectations. The other main costs or G and A and finance costs are under control, flat quarter to quarter and in line with expectations. So not much to report other than the costs are under control in our business.
Now the financial results, you can see that the cash margin, given a very low G and A, very low cash taxes or cash margin, which is really the revenues less OpEx is at the same level almost as our EBITDA and operating cash flow at €69,000,000 translating to gross profit of €38,000,000 and very good net profit for the quarter at EUR 27,000,000 Our balance sheet is our total the total size of our balance sheet is relatively flat quarter on quarter. The points to note is obviously the debt reduction on the liability side. And then generally because there was more activity in Q1 than Q4, we have more payables, but with increased oil prices, we also have more receivables. And finally, given that we only had one lifting in Malaysia, we had a growing oil inventory at the end of March on our balance sheet generating this positive change in working capital. We consumed some of the free cash flow as part of our increased working cap, which may unfold over the next months quarters.
The final point is to give some lights, shed some lights around our hedging position. We used a very positive and supportive oil price environment to lock in some hedges for oil production in Canada. And so we're in a position where roughly 50% of our Canadian oil production is hedged as well as 25% for the second half. And on average, we managed to lock in a US45 dollars per barrel WCS, which is once again higher than our best case and our high case from our capital markets there. So very happy with that level, even if today it is actually even higher at around at closer to $50 WCS.
On the gas side, as I hinted before, we have a mix of forward sales contracts and financial hedges, which translate into the fact that for this Q2 we're in. Next quarter, we're roughly 50% hedged and at C2.9 dollars per Mcf. So again, we should be ahead of our previous guidance. So overall, a very good quarter, locked in some hedges. Production performance is very good.
So we're looking forward to some other good performance over the next three quarters this year. Thank you very much, and I will let Mike conclude.
Well, thank you very much Christophe and some really phenomenal financial numbers there. So just to recap on the Q1 performance, it's been one of the best quarters that we've seen in more than 2 years. The last time we had this kind of production levels and free cash flow generation was the Q1 of 2019 when oil prices were averaging around $63 per barrel. But as I mentioned, the IPC stock price was closer to SEK 50 a share rather than SEK 30 a share this morning. When we look at the outlook in terms of the production performance, good gas prices, strong absolute crude prices and tight differentials, we've really got everything and tailwinds running in synchronization.
So let's just recap on the highlights for the Q1. Production of 43,700 barrels of oil equivalent per day above the high end guidance and with a good production we've seen through April, with the uplift in our Malaysian the D prime and mini coming on stream in the second half, we expect full year production to be towards the top end of that guidance range. Good continued delivery on the OpEx in line with guidance in the Q1 and no changes made to the full year numbers. And organic growth CapEx remains limited and delivering very strong free cash flow, dollars 37,000,000 but we do have some optionality at onion thermal in Canada and in Malaysia for the Q4 if we continue to see us running above that high in guidance that we gave in excess of $150,000,000 of free cash flow. Cash flow for the Q1 was above the high in guidance at just under $70,000,000 and the Q1 free cash flow generation was an exceptional $49,000,000 which represents in 1 quarter only close to 10% of IPC's market cap at the end of the Q1.
The balance sheet is in much better position than it was last year during the pandemic. The year end net sorry, quarter end net debt is $286,000,000 and we're seeing that the power of that free cash flow and the deleveraging. At the end of December, our net debt to EBITDA ratio was 3 times and already by the end of the Q1 that's dropped to 1.8 times. And if you annualize our Q1 EBITDA will be down at close to 1.1x. So again, the balance sheet is now in really good shape.
Good performance on the BD front. We were able to conclude the acquisition of a 25% interest in our Burtam field in Malaysia for no consideration and that adds from the 10th April 12 50 barrels a day of extra production. So it's a bit like picking up an infill well without having to pay for the CapEx to drill it. On the ESG side as well, no material safety incidents, no interruptions to any of our operational sites. As I mentioned, we've secured the carbon offset credits that we need in 2021 to offset our 2020 emission reductions target.
So I think it's been a very solid performance and congratulations to the whole IPC team that have been a part of delivering this performance. So that concludes the presentation part. I guess we can turn over now to open up for some Q and A.
The first question comes from the line of Teodor Nilsen from Fairbank 1 Markets. Please go ahead. Your line is open.
Good morning and congrats on impressive results for Q1. I have three questions actually. First one on guidance. Mike, you said that you likely will come in the upper end of the current guidance. I just wonder how sensitive is that statement to oil and gas prices?
Let's say that, okay, we'll see $50 oil price and not close to $70 to the remaining of the year. Would you still expect to end up in the upper end of the guided range? And second question is on the emission reduction, talking about 50% reduction by 2020 5. And that will come from both operational initiatives and also some other offsetting initiatives. I just wonder, is it possible to be more specific and also maybe share some thoughts around the costs and investments required to for those 50% reduction?
And my final question is on the pecking order for cash flow, of course, net debt is coming rapidly down now. So how do you think around dividends versus M and A and when should we expect the dividend? That's all.
Okay. Yes. So the first question on the cash flow guidance, let me just refer back to the slide to give you a bit of direction there, Tidar. Yes, so if we look at the full year numbers that we gave in our guidance, you can see on average, you're looking at between a $10 increase in Brent crude prices, so $55 per barrel, we're assuming around $100,000,000 of free cash flow and at $65,000,000 we're looking around $150,000,000 So one can say for every $10 per barrel, you're looking at about a $50,000,000 increase. Now of course, that's on a full year basis.
So you would need to adjust that for the period of the year that's remaining. Christophe showed at Capital Markets Day in his presentation that the impact of a $5 per barrel tightening of the Canadian crude price differential would translate into about a $30,000,000 uplift in free cash flow as well. And if you look at that high end guidance that we gave at $65,000,000 of around $150,000,000 it assumed WTI differentials of 4 and WCS differential of 17. So you had a $21 discount from your $65 per barrel price forecast. So we were looking at WCS prices of $44 per barrel in that upside scenario and Canadian crude prices today are trading around $53,000,000 fifty 4.
So I think all the information is there in the netbacks to be able to extrapolate that. But if you're looking at $65 plus today and $30 differentials with the beat in Q1, you should be looking at well in excess of that high end guidance. And your second question was on the ESG and the carbon offset projects, and you talked about the numbers in the projects. So far in terms of operational reductions that we've seen from our assets, we've seen about 100,000 tons and that's been split between our project, Bertrand project in Malaysia where we invested dual fuel power generation, which allowed us to use the flash gas of the separators and to generate power to run our pumps as opposed to and as opposed to using diesel. And in Canada, it was the investment in the heat recovery units that reduces the amount of gas that we need to run our facilities.
So if you look at the offsets that we secured relative to the operational emissions reductions for this year, it's about 100,000 tons each. The particular project that we've partnered with for last year and for this year's credits is a solar powered project. It's 100 megawatt project in the northern region of Punjab and its credits that are generated by greening up the grid in Northern India. So without that project going ahead, it's about 70% of India's energy production comes from coal fired power generation. So by moving forward with this solar project that generates carbon credits, which we are purchasing through our partnership with First Climate.
And the cost of those are all embedded in our operating cost guide forecast. And then on your third question with respect to priority for the free cash flow generation. And I think right now as you've seen, it's all the free cash flow that we're generating is going towards debt reduction and during our Capital Markets Day presentation and we're asked about buybacks which is your question. We said the last time that we were we launched a buyback program was when our leverage ratio was below one times. And I think we've reported this morning a big step forward towards that deleveraging.
In the last 12 months basis, we're 1.8 times and our sense is before we want to be pretty cautious because we have to recognize that the recovery that we've seen in oil prices has been really at the feet of OPEC and Saudi Arabia in particular, and we still got amount of supply that's been withheld from the market. So we would like to see the continued rollout of vaccination program. We'd like to see a fundamental recovery in demand in the second half. If we see continued strong oil prices that will see us deleverage and then you're going to see stock levels move back to much more fundamentally balanced levels. And I think if we've got those and that combination of things within stock to make us feel much more confident about relaunching and the buyback program.
I think that covers all your questions, Theodor?
Yes, it is. But actually, my first question, my question was more on the volume sensitivity and not on the cash flow, but I can reach out to Rebecca later.
Okay. Thank you.
Okay. Thanks.
Thanks.
Thank you. We have no further questions from the audio line. So I will pass back for any online questions.
Hey, thank you. Actually, we had a lot of online questions on dividends And Mike's question on in Lake. How much production shut in do you expect during the ramp up of D Prime? And how much incremental production there are after when D Prime comes online?
Yes. So I mean to give some general guidance, the way the team in Canada have planned the shutdown is gradually across the full month of May. So there are 2 trains at Onion Lake Thermal. So we've got a couple of days at the beginning of the month where we had a full shutdown. And then for the remainder of the month, there's going to be one train down for approximately half the month and another train down and for the second half.
So you typically onion thermal is producing around 10000 to 11000 barrels per day and we expect a reduction in production just for that particular month of around 4000 barrels a day on average across the month of May. In terms of the adds from D Prime, we expect, as I mentioned in the presentation, a slow ramp up, but we should be seeing in excess of 1500 barrels a day of additional production adds and from D prime towards the end of this year.
And a question on hedging for Christoph. Yes. So what is the hedging strategy going forward with respect to Canadian oil? And then we have another question here from a different investor, which is when will you stop hedging Canadian production? Will it be with Enbridge Line 3 online?
Yes. No, it's a good question. And obviously, coming from where we're coming with 2020 back in our mind, we were happy to be able to lock in some of our Canadian oil production at above the high end of our range. So Mike mentioned before, the high end for WCS prices in our budget was 44%. We've managed to hedge above that level at 45%, 50% in the second quarter, 25% of our Canadian oil production in the second half of this year.
There's always some reason to ensure minimum cash going forward to deleverage, to prepare the balance sheet in case we want to do a bit more CapEx, to have a solid balance sheet in case we find some M and A opportunities. So it's really about managing the unexpected. We don't have a formal policy. We don't have bank hedging covenants as we speak. Given that WCS can be hedged for the second half of this year right now at $50 on average, we will continue to discuss and appreciate if we want to lock in a bit more for the second half of this year, because WCS at 50 is a very high level, obviously, more than 10% above where we guided the high end of the range.
Just to comment on the last part of the question, I think it's a very fair point to note, as Mike explained before that we're almost there with Line 3, which is still expected to come on stream by the end of this year. Trans Mountain and the expansion of Trans Mountain is also progressing very well. So all of this should stabilize going forward, the WTI, WCS differential. So bodes very well for IPC business in overall and in Canada in particular. And so we'll reevaluate what we will do in terms of hedging for 'twenty two.
But definitely, if you look at the last two years, 2019, 2020 and this Q1, on average, the BTI WCS differential has been between 12% 13% on average over those periods. So really good sign for our business.
Okay. Thanks, Christophe. Mike, regarding the additional growth opportunities, first question is, is there any threshold oil price level you want to see over a sustained period of time in order for you to CapEx program?
No, I mean, we haven't set an absolute target. I mean, obviously, the interaction between Brent prices and continued strong differentials will help. So if we are still trending towards the high end guidance or even above that with tighter differentials, that certainly puts us on very solid footing
to move forward with those.
I think what's going to be important is that into 2022 because if we make these additional investments, it's going to have a limited impact on our 2021 numbers. But if it can add entry level production capacity for 2022, and as I said, we've seen that solid recovery in demand and inventory levels rebalance. I think it's more how that forward outlook is into 2022 transpires before we decide to do anything more from those optional projects.
Okay. And second question on the well drilling candidates. Why are you looking for M and A when you have those returns on your into a well doing in Canada? If you want to grow, where can you find best returns?
I mean, I don't think if you look at those 2 projects alone, we're talking about $30,000,000 of incremental investment. And if we're if you're looking at tight differentials and free cash flow potential, as I mentioned, in excess of $180,000,000 if you add in the tight differential upside on our high case, I don't think we're limited by looking at further M and A by a $30,000,000 investment addition program. I think we've got the financial capacity to do both.
And a question on M and A again. So are you involved in any current M and A processes in the mutual and Malaysia? And is that a focus area for M and A?
We don't comment on particular specific jurisdictions, but I think a general comment is for sure we've seen an uptick in M and A activity, particularly relative to 2020. And we're always actively engaged in screening a number of opportunities and like most of the time since IPC was spun off back in 2017, where we have ongoing a number of opportunities that we are engaged in. So it's just part and parcel of what we do on a month to month basis.
Okay. And in terms of operations and the netbacks we're seeing from Onshore Canada, what are we seeing from producers in neighboring properties? Are we seeing the same sort of benefits or is it an
I mean, I think in general across the Canadian energy space, of course, absolute prices and crude differentials and gas prices impact all producers alike. And I think what you're going to see in the Q1 is across the whole Canadian energy space, a fundamental improvement in their free cash flow generation. So it's not isolated to IPC, but I think the fact that we bought into that whole story and at a point where differentials were distressed and valuations were extremely low, I think we've got a phenomenal platform to create a huge amount of value for our shareholders.
Yes. Well, again, I mean, 3 times at the end of last year is not in absolute terms an issue, but for the other industry, for the upstream, it's a bit high. So we feel much definitely much more comfortable today. We don't have a set leverage level that we want to achieve. Typically, if by year end, we are at or below one time, it opens the door to doing to considering buybacks, as Mike mentioned before.
But that needs to be weighed against some very, very good payback and very good high return projects that we may consider as the additional CapEx we could spend in Canada or Malaysia. But yes, of course, we want to delever it from continue to delever it from where we are, and we expect that to naturally happen in the next 2, 3 quarters.
Mike, one last question from the webcast. Will you be positioned in a couple of years to develop Black Rose on your own? Or will you need to bring in a partner?
I think it's too early to answer that question right now. I mean, all the work that has gone on right now by our team and country is to really mature the whole kind of subsurface and development concept on Blackrod and by moving forward with the 3rd well pair and using the latest technology, so much longer horizontal drilling using latest flow control devices as we said to try and reduce the construction and drilling footprint and environmental footprint and get those breakeven costs down, we're going to be in a very, very good position. I think the one thing about that project that sets it apart from other growth projects is that we have all the environmental permits and the construction permits in place. So if we choose to move forward with the 1st phase development of the 180,000,000 barrels out of the 1,000,000,000 barrels of contingent resource, we can do so without any further approval. So that's obviously very attractive to partners and whether we choose to move forward ourselves or to bring in a partner, I think a project of that size and scale and it would be more prudent to dilute our interest.
No decisions have been made in that respect thus far.
I believe we have one more question on the line. Operator, if you could answer that.
Thank you. Yes, we have one more question from James Hosey from Barclays. Please go ahead. Your line is open.
Hi, good morning. Thanks for taking the question. I was just wondering on your debt facilities and whether any of the facilities have restrictions on your ability to resume shareholder returns? And also is there kind of a list of priorities in terms of which facilities you'd be looking to pay down first through this year?
Yes. Thank you, James. Well, yes, as you know, you have all sorts of covenants and limitations in debt facilities. But there are provisions, which in certain cases allow you, including driven by leverage, which allow you to allow us to return capital to shareholders. So that's embedded in the credit facilities we have.
If we can and as much as possible, we like to obviously reduce and repay our most expensive credit lines. So as much as possible, that's what we do and focus on. And generally, especially in Canada, where some of the finance costs are driven by leverage, we should also see, especially in the second half of this year the leverage really materializes, some reduction in the cost of debt.
Okay. Thanks very much.
Okay. Operator, no further questions.
Thank you. We have no further questions. So I will pass back for any closing comments.
Okay. Thank you very much, operator. And thanks, everyone, for taking the time to tune in this morning. I think it's been exceptionally strong performance by IPC during the Q1 and we look forward to that continuing and reporting in early August for our Q2 results. So thank you very much indeed everybody.