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i3 Energy PLC
Symbol ITE
Shares Issued 700,054,815
Close 2021-09-27 C$ 0.24
Recent Sedar Documents

i3 Energy's H1 NOI at 12.5M pounds

2021-09-27 06:38 ET - News Release

Mr. Majid Shafiq reports

I3 ENERGY PLC ANNOUNCES INTERIM REPORT AND DIVIDEND DECLARATION

i3 Energy PLC has released its unaudited results for the period ended June 30, 2021. A complete copy of the company's unaudited 2021 first half report and interim financial statements will be available on the company's website.

Highlights

Dividend declaration:

  • Concurrent with this interim report, i3 announces a first half 2021 dividend of 2.20 million British pounds or 0.2 pence per share. The ex dividend date, record date and payment date will be Oct. 7, 2021, Oct. 8, 2021, and Oct. 29, 2021, respectively.
  • Including the 0.16-pence-per-share special dividend announced in July, total dividends of 0.36 pence per share have been declared during the year to date. These dividends do not include the benefit of the enlarged portfolio following the completion of the acquisition of the assets from Cenovus Energy Inc., which completed postperiod-end. The second half 2021 dividend will benefit from the enlarged cash flow resulting from this transaction.

Financial highlights:

  • H1 revenue of 26.5 million British pounds (net) and net operating income (revenue less royalties, opex, processing and transportation) of 12.5 million British pounds and cash flow from operations of eight million British pounds;
  • Concluded a reduction of the company's share premium account and announced an intended special dividend of 1.16 million British pounds (or 0.16 pence/share, which was subsequently paid on Aug. 6, 2021).

Operational highlights:

  • Sustained average production above 9,000 barrels of oil equivalent per day for the six-month period, offsetting expected natural decline through excellent operations management and targeted maintenance capital allocation;
  • H1 volumes do not include any production from the assets acquired from Cenovus Energy Inc., as the transaction closed postperiod-end. Including production from these assets, production for the week ending Sept. 18, 2021, averaged 18,741 boepd;
  • Increased exposure to Alberta's premier Clearwater play;
  • Confirmed presence of oil in three gas wells in i3's extensive Marten Creek acreage, providing a green light for a winter 2021/2022 oil appraisal and development program;
  • Farmed in to a 50-per-cent working interest in the Marten Hill's Clearwater area and participated in two successful development wells, which added about 120 boepd net production, with an option to drill seven additional wells on the acreage;
  • Participated in Crown land sales, bolstering acreage through a 15-year lease on seven sections (17.9 square kilometres) of land in the emerging Cadotte area;
  • Acquired a 49.5-per-cent interest in South Simonette at a cost of $4.7-million, increasing i3's operated interest in this Montney oil play to 99 per cent and allowing it to bring back on three wells to increase its corporate production by about 720 boepd and adding reserves of 4.9 million barrels of oil equivalent at a before-tax NPV10 (net present value at a 10-per-cent discount) valuation of $30.9-million (U.S.);
  • Elected to drill two oil-weighted wells with a partner at its Wapiti Elmworth acreage, expected to initially increase i3's production by about 175 boepd, with payback estimated in 1.3 years;
  • Acquired about 230 boepd of Wapiti production, conducted six reactivations to increase production to 471 boepd, significantly exceeding the expected 310 boepd;
  • Brought on stream a gas well located on the company's Noel acreage in northeastern British Columbia at an average rate of 650 boepd, exceeding expectations by 30 per cent.

Postperiod-end highlights:

  • The company acquired about 8,400 boepd (51 per cent oil and natural gas liquids) of low-decline production from Cenovus Energy, located within i3's central Alberta core area, for a total consideration of $65-million ($53.7-million (U.S.)). The assets were acquired on excellent metrics of 1.73 times next 12-month cash flow, $6,381 (U.S.)/boepd and 68 U.S. cents per boe of 2P (proven and probable) reserves and containing 79.5 mmboe of 2P reserves with an NPV10 of $193-million (U.S.) as at April 1, 2021, an inventory of greater than 140 net drilling locations, 80 net reactivation opportunities, 1,140-kilometre network of operated pipelines and key processing facilities. The transaction closed on July 7, 2021.
  • To finance the Cenovus acquisition on July 7, 2021, i3 raised approximately 40 million British pounds through the placing and subscription of 363.7 million placing shares at the issue price of 11 pence per placing share, a 3-per-cent discount to the 15-day average closing price of 11.4 pence.
  • On July 8, 2021, i3 announced the declaration of its maiden special dividend of 0.16 pence per share.
  • The company commenced a hedging program, which will result in approximately 50 per cent of corporate volumes being hedged on a rolling 12-month forward-looking basis. Currently through a combination of physical and financial swaps, about 24 per cent to 26 per cent of forecast production is hedged through to the end of 2021, about 22 per cent hedged in Q1 2022 and 4.5 per cent in Q2 2022.
  • The company agreed to terms with farm-in partners for the Serenity field appraisal drilling program. The company awaits confirmation of financing commitments from those potential farm-in partners before finalizing and executing documentation.

Majid Shafiq, chief executive officer of i3 Energy, commented: "Two thousand twenty-one has been a transformational year for i3. We are now a substantial production company with a full cycle E&P portfolio containing multiple options to create and return value to our shareholders. We will continue our efforts in the remainder of 2021 and beyond to grow our production business and build the scale required to efficiently and effectively maximize and sustain value creation."

Postperiod and outlook

On July 6, 2021, the registrar of companies registered the cancellation of i3's share premium account. The 64.1-million-British-pound balance of the group's share premium will be transferred to retained earnings in the second half of 2021.

On July 7, 2021, i3 announced that it had reached a definitive agreement with Cenovus Energy, a senior Canadian oil and gas producer, to acquire certain petroleum and infrastructure assets within i3's central Alberta core area for a total consideration of $65-million ($53.7-million (U.S.)). The strategic acquisition delivers extensive operational synergies, a large reserve base with multiyear development inventory and expected strong free cash flow. The acquisition includes approximately 8,400 boepd (51 per cent oil and NGLs) of predictable low-decline production, 79.5 mmboe of 2P reserves with an NPV10 of $193-million (U.S.) as at April 1, 2021 (inclusive of undiscounted asset retirement obligations (ARO) of $92-million (U.S.), inflated at 2 per cent and discounted at 10 per cent for an NPV10 ARO value of $23-million (U.S.)), an inventory of greater than 140 net drilling locations and 80 net reactivation opportunities across approximately 212,000 net acres, an 1,140 km network of operated pipelines, and key processing facilities.

Also on July 7, 2021, i3 announced the conditional placing and subscription of 363.7 million placing shares at the issue price of 11 pence per placing share, a 3-per-cent discount to the 15-day average closing price of 11.4 pence. This includes shares placed through a PrimaryBid offering. The total fundraising was for approximately 40 million British pounds. The placing and subscription were approved by the shareholders on July 26, 2021, and admitted to trading on the Alternative Investment Market on July 27, 2021. Following the placing and subscription, the company's issued share capital stood at 1,091,424,766 ordinary shares with a nominal value of 0.01 pence each.

Further details of the acquisition and the equity fundraising are available at the company's website.

On July 8, 2021, i3 announced the declaration of its maiden special dividend of 0.16 pence per share with an ex dividend date of July 15, 2021, record date of July 16, 2021, and payment date of Aug. 6, 2021.

On July 30, 2021, the company issued options over a total of 53,705,491 ordinary shares to i3 staff and board and has additionally issued 1.75 million options to incoming staff and conditionally allocated 3.75 million for additional hires as part of the acquisition. The options were issued in accordance with the rules of the company's employee share option plan at an exercise price of 11 pence per share. Of the options issued to employees of i3 Canada, one-third of the options vested immediately, with a further one-third vesting if production of 20,000 boepd is achieved prior to July, 2022 (substantially financed from internally generated cash flow), and 100 per cent will vest upon the addition of 9,250 boepd or 50 mmboe 2P reserves. Of the options issued to employees of i3 North Sea Ltd., one-third of the options vested immediately, with a further one-third vesting at spudding of the earlier of a second appraisal well or first development well at either Serenity or Liberator, and 100 per cent will vest upon the addition of 2,500 boepd of European production. Of the options issued to the executive and non-executive directors and one corporate employee, one-third of the options vested immediately, with a further one-third vesting (i) at spudding of the earlier of a second appraisal well or first development well at either Serenity or Liberator; or (ii) if production of 20,000 boepd is achieved prior to July, 2022 (substantially financed from internally generated cash flow), whichever is first to occur, and 100 per cent upon (i) the addition of 2,500 boepd of European production; or (ii) the addition of 9,250 boepd or 50 mmboe 2P reserves, whichever is first to occur. The options will otherwise fully vest on the third anniversary.

On Aug. 20, 2021, the company closed the acquisition previously announced on July 7, 2021.

On Sept. 15, 2021, the company announced that certain loan noteholders had exercised warrants over 9,828,010 shares in the company. These shares were admitted to trading on AIM on Sept. 17, 2021.

On Sept. 27, 2021, and concurrent with this interim report, i3 announces a first half 2021 dividend of 2.20 million British pounds (0.2 pence per share). The company confirms the following for its H1 2021 dividend:

Dividend:  0.20 pence per share

Ex dividend date:   Oct. 7, 2021

Record date:  Oct. 8, 2021

Payment date:  Oct. 29, 2021

Payment to shareholders holding their shares on the Toronto Stock Exchange will be made in Canadian dollars, using the exchange rate from the Bank of England, at close on the dividend announcement date, Sept. 27, 2021.

Following the placing and subscription, the warrant exercise, and as at the date of this report, the company's issued share capital stands at 1,101,252,776 ordinary shares with a nominal value of 0.01 pence each.

Throughout July, August and September, i3 entered various risk management contracts, as summarized in the associated table.


Type                         Effective date   Termination date       Total volume         Avg. price

AECO 5A financial swaps        Nov. 1, 2021     March 31, 2022      10,000 gj/day         $4.0975/gj
AECO 5A physical swaps         Nov. 1, 2021     March 31, 2022      15,000 gj/day         $4.3313/gj
AECO 5A physical swaps        April 1, 2022      Dec. 31, 2022       4,000 gj/day         $3.4900/gj
WTI financial swaps            Jan. 1, 2022     March 31, 2022        350 bbl/day         $83.04/bbl
WTI financial swaps           April 1, 2022      Dec. 31, 2022        200 bbl/day         $83.00/bbl

Terms have been agreed in principle with farm-in partners for the Serenity field appraisal drilling program. The company awaits confirmation of financing commitments from those potential farm-in partners before finalizing and executing documentation.

The company's focus for the remainder of 2021 will be on five key areas:

  1. The growth of i3's Canadian business by way of operational excellence, capital deployment and strategic upsizing in core areas;
  2. The farmout of its U.K. licences to conduct further appraisal drilling at Serenity and/or Liberator;
  3. Dividend distributions to its shareholders of up to 30 per cent of free cash flow;
  4. Conducting the company's operations safely and in an environmentally secure manner;
  5. Continuing to develop the company's Environmental, social and corporate governance strategy and publishing the company's maiden annual sustainability report.

About i3 Energy PLC

i3 Energy is an oil and gas company with a low-cost, diversified, growing production base in Canada's most prolific hydrocarbon region, the Western Canadian sedimentary basin and appraisal assets in the North Sea with significant upside.

The company is well positioned to deliver future growth through the optimization of its existing 100-per-cent-owned asset base and the acquisition of long-life, low-decline conventional production assets.

i3 is dedicated to responsible corporate practices and the environment, and places high value on adhering to strong environmental, social and governance practices. i3 is proud of its performance to date as a responsible steward of the environment, people and capital management.

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