REG - i3 Energy PLC - i3 Energy Canada Ltd. Announces 2023 Reserves

I3 EnergyAnnouncement

25/03/2024 07:00

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RNS Number : 1207I  i3 Energy PLC  25 March 2024

25 March 2024

i3 Energy plc

("i3", "i3 Energy", "i3 Canada", or the "Company")

i3 Energy Canada Ltd. Announces Year-End 2023 Reserves

i3 Energy plc (AIM:I3E) (TSX:ITE), an independent oil and gas company with
assets and operations in the UK and Canada, is pleased to announce the
results of its 2023 year-end reserve report, for its subsidiary i3 Energy
Canada Ltd.

i3's independent reserve report (the "GLJ report") was prepared by GLJ
Ltd. ("GLJ") in accordance with standards contained in the Canadian Oil and
Gas Handbook (COGEH) and National Instrument 51-101 Standards of Disclosure
for Oil and Gas Activities ("NI 51-101"), with an effective date of 31
December 2023. All cash figures presented below are expressed in USD unless
otherwise stated.

Highlights

Successful Execution of 2023 Capital Programme and Strong Performance of the
Company's Production Base Maintained Reserve Volumes Across Key
Categories Despite Limited Capital Expenditures Due to Declining Commodity
Prices

·    Total Company Interest Total Proved ("1P") reserves and Total Proved
plus Probable ("2P") reserves were effectively maintained year-over-year at
92.9 million barrels of oil equivalent ("boe") and 179.9 million boe,
respectively.

·    Proved Developed Producing ("PDP"), 1P and 2P reserve volumes all
experienced strong positive technical revisions, despite the dramatic
reduction in forecasted natural gas and natural gas liquids pricing which
impacts approximately 76% of the Company's produced commodities.

 

Established Reserves Highlights Strong Underlying Corporate Value

·    The Before-tax Net Present Value ("NPV") of cash flows attributable
to the Company's reserves, discounted at 10%, has been determined to be USD
303.1 million (CAD 400.9 million), USD 501.3 million (CAD 663.1 million), and
USD 1,026.4 million (CAD 1,357.5 million) for its PDP, 1P and 2P reserves,
respectively, being indicative of the Company's robust portfolio of economic
development opportunities.

·    Reserves values per share, after adjusting for year-end net debt of
approximately USD 23 million, of £0.18 per share (CAD 0.31) (PDP), £0.31 per
share (CAD 0.53) (1P) and £0.67 per share (CAD 1.10) (2P), represent
significant premiums to the Company's current share price.

 

Long Reserve Life and Low Decline Rate Reinforce the Sustainability of the
Company's Total Return Model

·    PDP, 1P and 2P reserve life index of 7.1 years, 12.6 years, and 23.0
years, respectively, show increased reserve life across each of the
categories.

·    Following the 2023 capital programme, i3's top-tier corporate decline
rate for 2024 of approximately 15%((10)), allied with an extensive portfolio
of diversified booked drilling locations, underpins the Company's growth and
income strategy.

Strong Finding, Development and Acquisition ("FD&A") Metrics and Recycle
Ratios

·    Very strong economics demonstrated by low cost and high return
projects.

·    Efficient FD&A of $5.67/boe (PDP), $2.32/boe (1P) and $1.76/boe
(2P), after including changes in FDC, translate to strong recycle ratios of
2.17x (PDP), 5.31x (1P) and 6.97x (2P).

 

Large Inventory of Booked Development Locations with Significant Inventory of
Future Unbooked Locations

·    Total gross booked locations of 391 (254.4 net) across the Company's
four core areas, for a total Company inventory (booked and unbooked) of
greater than 950 gross (550 net) undeveloped locations.

·    Total undeveloped inventory represents greater than 50 years of
development drilling based on the Company's 2023 capital programme.

 

Majid Shafiq, CEO of i3 Energy plc, commented:

"We are extremely pleased with the results of our 2023 year-end reserves audit
which once again confirms the high-quality nature of our assets and speaks to
the tenacity and diligence of our employees in Canada, both in the head office
and at field level. In 2023 we limited our capital expenditures due to the low
commodity price environment and despite that, we have managed to maintain our
reserves volumes essentially flat. This is a testament to the quality of our
base assets and also our drilling inventory. This quality is characterised by
a low decline rate, the substantial scale of our operations and the diversity
of the fields and reservoirs we produce from, which allows us to add reserves
with good oil field management in addition to drilling operations. Our 2P
reserves are valued at over USD 1.0 billion or £0.67 per share, demonstrating
the value potential of this portfolio, and the scope for many years of growth
from a total shareholder return perspective."

 

2023 Reserves Review

i3's independent reserve report (the "GLJ report") was prepared by GLJ
Ltd. ("GLJ") in accordance with standards contained in the Canadian Oil and
Gas Handbook (COGEH) and National Instrument 51-101 Standards of Disclosure
for Oil and Gas Activities ("NI 51-101"), with an effective date of 31
December 2023.The reserves evaluation was based on the average forecast
pricing of GLJ, McDaniel & Associates Consultants Ltd. and Sproule
Associates Limited ("3 Consultants Average", or "3CA") and foreign exchange
rates at 1 January 2024.

Reserves included are Company Interest reserves which reflect i3's total
working interest reserves before the deduction of any royalties and including
any royalty interests payable to the Company. Additional reserve information
as required under NI 51-101 will be included on Forms 51-101 F1-F3 which will
be filed on SEDAR+ at www.sedarplus.ca (http://www.sedarplus.ca) . The numbers
outlined in the tables below may not add due to rounding.

 

Summary of Reserves

The tables below outline GLJ's estimates of i3's reserves at 31 December
2023.

 

 

 i3 YE 2023 - Reserves Volumes
                       Company Interest Reserves
 Reserves Category     Oil     NGL     Gas      Total    Liquids Weighting
                       Mbbl    Mbbl    MMcf     Mboe
 Proved Producing      7,185   15,144  148,627  47,100   47%
 Proved non-Producing  128     773     7,031    2,073    43%
 Proved Undeveloped    5,973   14,814  137,856  43,763   47%
 Total Proved          13,286  30,731  293,515  92,936   47%
 Probable Producing    9,575   19,810  194,024  61,723   48%
 Total Probable        19,179  25,630  252,731  86,931   52%
 Proved plus Probable  32,465  56,361  546,247  179,867  49%

 

 

 

                                 i3 YE 2023 - Reserves Values
                                 Before Tax Net Present Value (USD M)

                                 Discount Rate

                                 0%         5%         10%        15%       20%
 Proved      Producing           251,569    342,870    303,140    262,382   230,319
 Proved Developed Non-Producing  16,489     12,920     10,454     8,681     7,364
 Proved   Undeveloped            438,715    283,408    187,733    126,418   85,373
 Total Proved                    706,773    639,198    501,327    397,481   323,055
 Probable   Producing            477,183    470,120    386,120    321,997   276,059
 Total Probable                  1,308,636  794,983    525,070    367,867   268,697
 Proved plus Probable            2,015,408  1,434,180  1,026,396  765,349   591,752

 

Performance Measures - Finding and Development ("F&D"), Finding,
Development and Acquisition ("FD&A") Costs and Recycle Ratio

F&D and FD&A costs for 2023, 2022, 2021 and the three-year average are
presented in the tables below. The capital costs used in the calculations are
those costs related to land acquisition and retention, seismic, drilling,
completions, tangible well site, tie-ins, and facilities, plus the change in
estimated Future Development Costs ("FDC") as per the GLJ report. Net
acquisition costs are the cash outlays in respect of acquisitions, minus the
proceeds from the disposition of properties during the year. The reserves used
in this calculation are working interest reserve additions, including
technical revisions and changes due to economic factors. The recycle ratio is
the net operating income (revenue minus royalties, opex, transportation and
processing) per barrel divided by the cost per barrel (F&D or FD&A).

 

                               2023   2022    2021   3-Year Average
 Proved Developed Producing
 F&D costs (per boe)           $5.70  $9.89   $2.41  $6.72
 F&D recycle ratio             2.2x   2.2x    5.7x   2.4x
 FD&A costs (per boe)          $5.67  $9.89   $1.81  $3.92
 FD&A recycle ratio            2.2x   2.2x    7.5x   4.1x

 Total Proved
 F&D costs (per boe)           $2.32  $14.74  $3.72  $8.81
 F&D recycle ratio             5.3x   1.5x    3.7x   1.8x
 FD&A costs (per boe)          $2.32  $14.74  $4.17  $6.08
 FD&A recycle ratio            5.3x   1.5x    3.3x   2.7x

 Total Proved Plus Probable
 F&D costs (per boe)           $1.77  $15.26  $3.17  $10.96
 F&D recycle ratio             7.0x   1.4x    4.3x   1.5x
 FD&A costs (per boe)          $1.76  $15.26  $4.00  $6.62
 FD&A recycle ratio            7.0x   1.4x    3.4x   2.5x

 

Reserve Life Index ("RLI")

RLI is calculated by taking the Total Company Interest Reserves from the GLJ
Report and dividing them by the projected 2024 production as estimated in the
GLJ Report.

                                 Company Interest Reserves      2024 Company Production      YE 2023 RLI
 Reserves Category               (Mboe)                         (Mboe)                       (Years)

 Proved Producing                47,100                         6,666                        7.1
 Total Proved                    92,936                         7,349                        12.6
 Proved plus Probable Producing  61,723                         6,934                        8.9
 Proved plus Probable            179,867                        7,828                        23.0

 

Forecast Prices Used in Estimates

GLJ has employed the 3 Consultants Average forecast prices in the GLJ Report.
The 3CA forecast prices, exchange rate and inflation (2% post 2038)
assumptions as at 31 December 2023 are tabulated below.

 

       Canadian Light Sweet  Western Canada Select  Alberta AECO-C  Pentanes Plus  Butanes     Propanes    Inflation Rate  Exchange Rate
       40° API               WCS 20.5 API           Spot            FOB Edmonton
 Year  ($Cdn/bbl)            ($Cdn/bbl)             ($Cdn / MMBTU)  ($Cdn/bbl)     ($Cdn/bbl)  ($Cdn/bbl)  (% / year)      (USD/CAD)

 2024  92.91                 76.74                  2.20            96.79          47.69       29.65       0.0             0.752
 2025  95.04                 79.77                  3.37            98.75          48.83       35.13       2.0             0.752
 2026  96.07                 81.12                  4.05            100.71         49.36       35.43       2.0             0.755
 2027  97.99                 82.88                  4.13            102.72         50.35       36.14       2.0             0.755
 2028  99.95                 85.04                  4.21            104.78         51.35       36.87       2.0             0.755
 2029  101.95                86.74                  4.30            106.87         52.38       37.60       2.0             0.755
 2030  103.98                88.48                  4.38            109.01         53.43       38.35       2.0             0.755
 2031  106.07                90.24                  4.47            111.19         54.50       39.12       2.0             0.755
 2032  108.18                92.04                  4.56            113.41         55.58       39.90       2.0             0.755
 2033  110.35                93.89                  4.65            115.67         56.70       40.70       2.0             0.755
 2034  112.56                95.77                  4.74            117.98         57.83       41.52       2.0             0.755
 2035  114.81                97.68                  4.84            120.34         58.99       42.35       2.0             0.755
 2036  117.10                99.63                  4.94            122.75         60.17       43.20       2.0             0.755
 2037  119.44                101.63                 5.03            125.20         61.37       44.06       2.0             0.755
 2038  121.83                103.66                 5.13            127.71         62.60       44.94       2.0             0.755
       Escalation rate of 2% thereafter

 

Notes:

1.     $ = USD.

2.     Any year-end figures converted from CAD to USD are done so at CAD
1.32 to USD 1, any 2023 full-year figures converted from CAD to USD are done
so at CAD 1.35 to USD 1, and any figures converted from CAD to GBP are
done so at CAD 1.68 to GBP 1.

3.     Reserves estimates have been prepared by GLJ in accordance with
standards contained in the Canadian Oil and Gas Evaluation (COGE) Handbook.

4.      Total Company Interest - Represents the sum of the company's
working interest and any royalty interests it may hold.

5.      Working Interest - Represents the percentage of ownership in a
specific property's mineral rights that a company holds.

6.     Proved reserves are those reserves that can be estimated with a
high degree of certainty to be recoverable. If probabilistic methods are used,
there should be at least a 90% probability that the quantities actually
recovered will be equal to or exceed the estimate.

7.     Probable reserves are those additional reserves that are less
certain to be recovered than proved reserves. It is equally likely that the
actual remaining quantities recovered will be greater or less than the sum of
the estimated Proved plus Probable (2P) reserves. When probabilistic methods
are used, there should be at least a 50% probability that the actual
quantities recovered will be equal to or exceed the 2P estimate.

8.     Developed reserves are those reserves expected to be recovered from
known accumulations from existing wells and facilities where no significant
expenditure is required to render them capable of production. They must fully
meet the requirements of the reserves category (for example proved or
probable) to which they are assigned.

9.      Developed producing reserves are those reserves expected to be
recovered from completion intervals that are open and producing at the
effective date of the estimate.

10.     Proved plus Probable Developed Producing (2PDP) reserves are those
reserves for which there is a 50% probability that the actual quantity of oil
and gas that will be recovered from the current producing assets will equal or
exceed the 2PDP estimate.

11.  Undeveloped reserves are those reserves expected to be recovered from
known accumulations where a significant expenditure (for example, when
compared to the cost of drilling a well) is required to render them capable of
production. They must fully meet the requirements of the reserves category
(for example proved or probable) to which they are assigned.

12.     The Company is in a tax paying position due to fully utilising its
Canadian non-capital tax loss pools during the year ended 31 December 2022.

13.     F&D costs are calculated as exploration and development
expenditures, plus changes in future development capital. F&D costs are
also presented on a per Boe basis, dividing F&D costs by the change in
reserve volumes plus production volumes in the applicable period.

14.     "FD&A costs" are calculated as exploration and development
expenditures, plus acquisition costs, disposition proceeds, and changes in
future development capital. FD&A costs are also presented on a per Boe
basis, dividing FD&A costs by the change in reserve volumes (including
reserve volumes associated with acquisitions and dispositions) plus applicable
production volumes.

15.     Recycle ratio is calculated as the operating netback per boe
divided by F&D or FD&A costs per boe as applicable. The operating
netbacks used in the respective years are as follows: 2023 (unaudited and in
USD) - $12.30/boe; 2022 - $21.84/boe, 2021 - $13.67/boe and the three-year
average is $16.25/boe.

16.    Reserves Life Index is calculated by dividing the relevant reserve
volume at year end, in boe, by i3's annual production during the year, in boe.

17.   Per share numbers are calculated by dividing by the basic shares
outstanding as at December 31, 2023 of 1,202,447,663.

 

 

END

Enquiries:

 i3 Energy plc                                  c/o Camarco

 Majid Shafiq (CEO)                             Tel: +44 (0) 203 757 4980

 WH Ireland Limited (Nomad and Joint Broker)

 James Joyce, Darshan Patel, Isaac Hooper       Tel: +44 (0) 207 220 1666

 Tennyson Securities (Joint Broker)

 Peter Krens                                    Tel: +44 (0) 207 186 9030

 Stifel Nicolaus Europe Limited (Joint Broker)

 Ashton Clanfield, Callum Stewart               Tel: +44 (0) 20 7710 7600

 Camarco

 Andrew Turner, Violet Wilson, Sam Morris       Tel: +44 (0) 203 757 4980

 

Notes to Editors:

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
optimisation of its existing 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
("ESG") practices.  i3 is proud of its performance to date as a responsible
steward of the environment, people, and capital management.  The Company is
committed to maintaining an ESG strategy, which has broader implications to
long-term value creation, as these benefits extend beyond regulatory
requirements.

i3 Energy is listed on the AIM market of the London Stock Exchange under the
symbol I3E and on the Toronto Stock Exchange under the symbol ITE. For further
information on i3 Energy please visit https://i3.energy

Qualified Person's Statement

In accordance with the AIM Note for Mining and Oil and Gas Companies, i3
discloses that Majid Shafiq is the qualified person who has reviewed the
technical information contained in this document. He has a Master's Degree in
Petroleum Engineering from Heriot-Watt University and is a member of the
Society of Petroleum Engineers. Majid Shafiq consents to the inclusion of the
information in the form and context in which it appears.

This announcement contains inside information for the purposes of Article 7 of
the UK version of Regulation (EU) No 596/2014 which is part of UK law by
virtue of the European Union (Withdrawal) Act 2018, as amended ("MAR"). Upon
the publication of this announcement via a Regulatory Information Service,
this inside information is now considered to be in the public domain.

 

 

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