REG - i3 Energy PLC - Q4 2023 Operational and Financial Update

I3 EnergyAnnouncement

26/02/2024 07:15

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RNS Number : 4136E  i3 Energy PLC  26 February 2024

26 February 2024

i3 Energy plc

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

Q4 2023 Operational and Financial Update

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
following Q4 2023 operational and financial update.

Highlights:

·    2023 annual average production of 20,711 barrels of oil equivalent
per day ("boepd"), which represents record annual corporate production and is
at the high end of the Company's 2023 guidance range of 20,000 - 21,000 boepd

·    Q4 2023 production averaged 20,413 boepd

·    2023 drilling programme completed, delivering 12 gross (8.0 net)
wells, which met or exceeded management's expectations and were completed on
budget despite a high inflationary environment

·    In Q4, four gross oil focused wells (2.54 net) were drilled in i3's
Central Alberta core area

·    Full year 2023 net operating income ("NOI")(1) (unaudited) is
approximated at USD 93 million, in line with guidance, with year-end 2023 Net
Debt(2) expected to be approximately USD 23 million (unaudited).

·    Dividends of £3.083 million were declared and paid during the fourth
quarter, with total dividends of £13.298 million declared and £15.338
million paid in 2023. Additionally, the Q4 2023 dividend of £3.084 million
was declared and paid in early 2024.

 

Majid Shafiq, CEO of i3 Energy plc, commented:

"The fourth quarter of 2023 rounded off a highly successful annual capital
programme for the Company, with a dozen wells drilled, and which like our 2022
programme, in aggregate exceeded pre-drill expectations and was executed
safely and in line with budget. We are very pleased that this programme,
combined with our robust, low decline, asset base and a razor-sharp focus on
operational efficiency, delivered very strong financial performance, despite a
challenging commodity price environment and ensured that the company met its
production and net operating income guidance for the year. This is a testament
to the quality of our portfolio and the skill, expertise and dedication of our
staff. Our strong production and financial performance supported our capital
programme, debt re-payments, and dividend payments to shareholders of over
£15 million throughout the year, and our extensive drilling inventory
provides multiple options to maximise return on capital deployment. As we
enter 2024 with continued weakness in commodity price forecasts, in particular
for North American gas, our business strategy remains flexible between high
rate of return organic drilling and inorganic growth opportunities. The
Company is progressing several initiatives which will be incorporated into an
optimised 2024 drilling and capital programme, and we look forward to updating
the market on this during the course of March."

Production Update

Production in Q4 2023 averaged 20,413 boepd, comprised of 63.9 million
standard cubic feet of natural gas per day ("mmcf/d"), 5,180 barrels per day
("bbl/d") of natural gas liquids ("NGLs"), 4,155 bbl/d of oil & condensate
and 429 boepd of royalty interest production. The quarterly production
represents a decrease of approximately 3% relative to Q3 2023, resulting from
conservative capital management during the period of softening gas prices.

                                   Period Average Production Comparison: Last Five Quarters
                                   Q4 2023       Q3 2023       Q2 2023       Q1 2023       Q4 2022
 Production (boepd)                20,413        21,156        18,529        22,773        22,757
 Oil & Condensate (bbl/d)          4,155         4,485         4,247         5,238         5,119
 NGLs (bbl/d)                      5,180         4,887         4,057         5,569         5,106
 Gas (mcf/d)                       63,894        68,653        58,965        69,555        72,442
 Royalty Interest (boepd)          429           342           398           373           458

 

Corporate production for the second week of February 2024 averaged 20,042
boepd with 49% representing oil and NGLs. Although intermittent seasonal
production curtailments have occurred in 2024, the continued performance of
i3's predictable, low-decline reserves, reflects the sustainable production
base that the Company has acquired and developed.

Hedging Programme

i3 continues to employ a defensive risk management strategy, protecting
approximately USD $41 million of 2024 NOI with current hedges in place as
follows:

              Swaps
 GAS          Volume (GJ)   Price (C$/GJ)
 Q1 2024      2,275,000     3.04
 Q2 2024      1,365,000     2.52
 Q3 2024      1,380,000     2.52
 Q4 2024      1,685,000     2.64
 Q1 2025      1,800,000     2.69

                                                Costless Collars
 OIL          Volume (bbl)  Price (C$/bbl)      Volume (bbl)  Avg Floor Price (C$/bbl)  Avg Ceiling Price (C$/bbl)
 Q1 2024      189,750       95.89               22,750        100.00                    121.32
 Q2 2024      182,000       98.45               38,000        95.99                     108.46
 Q3 2024      84,500        100.08              122,500       100.00                    111.11
 Q4 2024      115,050       95.95               23,250        100.67                    111.90
 Q1 2025      20,150        96.32

 

 

Operational Results

In total, i3's 2023 Canadian drilling programme was comprised of 10 gross (7.5
net) operated wells and two gross (0.5 net) non-operated wells. The total 2023
capital expenditures of approximately USD 30 million (unaudited) served to
efficiently delineate and develop its core areas of Central Alberta, Wapiti
and the Clearwater. The well performance associated with the targeted
formations, in aggregate, continues to meet or exceed management expectations.
Further, the Company diligently managed the long-term performance of its
high-impact Simonette Montney oil wells, drilled in 2022, further increasing
the Company's conviction and commitment to unlocking the value inherent in
these prolific oil weighted assets.

The Q4 2023 programme, focused on Central Alberta, included the drilling,
completion and tie-in of two gross (2.0 net) horizontal Glauconite oil
locations, one gross (0.53 net) vertical Leduc oil well and a minor working
interest (0.01 net) in a non-operated Belly River oil well.

Central Alberta

Based on the Company's track record of successful Glauconite drilling in
Central Alberta and the strong well results of industry peers in proximal
acreage, i3 drilled, completed, equipped and tied-in two gross (2.0 net)
1-mile Glauconite oil wells from a single surface pad location. Resulting from
upfront logistical work and efficient drilling, this two-well development was
delivered approximately 13% under budget. The wells were brought on production
at the end of December 2023 and have delivered strong performance while
continuing to clean-up and recover load fluid.

 

The 102/03-05-043-02W5 was equipped with a hydraulic pumpjack and has produced
peak oil rates of up to 150 bbl/d with associated gas compared to an expected
type curve IP30(3) of 122 bbl/d, and is currently producing 120 boepd. The
102/14-08-043-02W5 initially flowed without artificial lift at peak oil rates
in excess of 400 bbl/d compared to an expected type-curve IP30 of 124 bbl/d.
Subsequently, this well has been equipped with a pumpjack and bottom hole
insert pump and its last weekly average production is at 232 boepd.  Both
wells are in line with expectations and have further optimization potential.

 

In Q4, i3 and its working interest partners drilled one gross (0.53 net)
vertical Leduc oil well into the Homeglen Rimbey D-3 unit in Central Alberta.
 This well was drilled into a structural high in the underlying Leduc
formation, that targeted un-swept attic oil. The Leduc formation, accurately
identified on 3D seismic, was intersected approximately 5-7 metres higher than
offsetting producing wells. However, a 7-metre-thick tight dolomite cap was
encountered which effectively negated the structural gain. The well was
swabbed and produced light oil with a high water cut and is not deemed
economic in the current price environment. i3 and its working interest
partners will utilize the wellbore for ongoing observation and optimization of
the Homeglen Rimbey Unit.

Serenity

The Company continues with its partner Europa Oil and Gas to evaluate
commercialisation options for the Serenity discovery.

Environmental, Social and Governance ("ESG")

Expanding on the ESG initiatives executed in 2022, i3 Energy has maintained
its commitment to reducing its Scope 1 and Scope 2 carbon emissions. i3
replaced pneumatic pumps with solar-driven alternatives at 11 locations, which
is expected to reduce methane emissions by an estimated 445t CO2e.
Additionally, the electrification of 13 pumpjack engines in Carmangay and
Retlaw are expected to further reduce emissions by an estimated 2,759 tCO2e
per year. In a further move towards greenhouse gas reduction, the Company
replaced natural gas-fired heaters with electric heaters at one of its
Medicine River locations. In collaboration with an offset operator, i3
implemented an Alternative Fugitive Emissions Management Programme (ALT FEMP)
at its locations in 2023, which images methane emissions from the air and is
anticipated to contribute to a substantial reduction in fugitive emissions by
over 50% compared to the previous year. Concurrently, i3 implemented two
compressor consolidation projects which are expected to achieve annual
emission reductions of 2,728 tCO2e and 681 tCO2e, respectively. These
endeavours exemplify i3 Energy's dedication to environmental sustainability
and continual progress in ESG practices. In January 2024, the Company was also
pleased to publish its 2022 ESG Report.

Return of Capital

The Company remains committed to delivering a sustainable dividend as part of
its total return model. During 2023, £13.298 million dividends were declared
and £15.338 million or 1.2825 pence per share were paid. Q4 2023 dividends of
0.2565 pence per share were declared in January and paid in February 2024.
Subject to Board approval at the end of quarter, the Company expects to pay
the Q1 2024 dividend of 0.2565 pence per share in early Q2 2024, with an
announcement made in due course, which translates to a forward running yield
of 11.5% based on the closing price of i3's ordinary shares on 23 February
2024.

Year-End 2023 Reserves Update

i3's year-end 2023 independent reserves evaluation is in progress and the
Company expects to release its final numbers in late March, prior to the
dissemination of its 2023 year-end financial statements.

Year-End 2023 and 2024 Quarterly Financial Reporting

As the Company's Canadian shareholding has now increased beyond 10%, i3 is no
longer a designated foreign issuer and therefore is no longer eligible for TSX
continuous disclosure exemptions previously granted through National
Instrument 71-102. As such, the Company will commence issuing TSX required
quarterly financial reports for Q1 2024, including a Management Discussion and
Analysis (MD&A). Additionally, an Annual Information Form (AIF) will be
included as part of the Company's 2023 year-end financial statements which
will be issued by 31 March 2024.

Outlook

In lower commodity price environments, when drilling economics soften, i3
Energy evaluates opportunities in the M&A market, where higher returns on
investment are often achievable. Accordingly, the Company is currently
evaluating several options to enhance shareholder value which include
strategic acquisitions and disposition of non-core assets to increase
liquidity.

The capital programme will target the second half of the year, with wells
brought on production ahead of stronger winter pricing. Considering the
current weak forecast for North American gas prices, the drilling programme
currently being planned will focus on oil well locations, but we retain the
option to pivot to liquids rich gas wells should gas pricing improve. The
Company currently has over 25 locations acquired and surveyed, across our
portfolio of assets (including oil and gas wells), which will allow the
Company to optimise capital allocation based on forecast H2 oil and gas
prices.

 

Notes:

Unless otherwise denoted, all figures are referenced in USD ($) and assume a
foreign exchange rate for the relevant period or point in time.

(1) Net operating income is defined as gross profit before depreciation and
depletion, gains or losses on risk management contracts, and other operating
income, which equals revenue from the sale of oil and gas and processing
income, less production costs

(2) Net Debt is defined as borrowings and leases and trade and other payables,
less cash and cash equivalents and trade and other receivables

(3) IP30 is the initial production rate through the first 30 days of a well

 

END

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.

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                     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 high working interest 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

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the UK version of Regulation (EU) No 596/2014 which is part of UK law by
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