REG - i3 Energy PLC - Record Corporate Production & Canada 2021 Reserves

I3 EnergyAnnouncement

04/04/2022 07:00

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RNS Number : 0631H  i3 Energy PLC  04 April 2022

4 April 2022

i3 Energy plc

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

Record Corporate Production and i3 Canada Ltd YE 2021 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 that the
Company has achieved a record for corporate production as well as provide a
2021 year-end reserves 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
2021.

 

Highlights

 

·    Record Corporate Production on Strong Operational Performance.

o  Based on field estimates, i3 exited the first quarter of 2022 with a
record weekly average production of approximately 20,312 boepd comprised of
61.1 million standard cubic feet of gas per day ("mmscfd"), 6,290 barrels per
day ("bbl/d") of natural gas liquids ("NGLs"), 3,522 bbl/d of oil and 316
boepd of gross overriding royalty interest production.

o  Current production continues to exceed expectations due to continual
outperformance of the Company's low decline production base, which has been
further enhanced through strong drilling results via i3's inaugural
development drilling program.

o  Based on forward strip pricing at 31 March 2022, i3 now forecasts
full-year 2022 net operating income ("NOI" = revenue minus royalties, opex,
transportation and processing) of $192 million, a 28% increase over that
predicted in the Company's December 2021 capital budget announcement. This
increase reflects the upward shift in commodity prices, in addition to well
results that have bettered i3's pre-drill forecasts.

 

·    Acquisitions within Core Areas Provided Significant Reserve
Additions.

o  Proved plus probable developed producing reserves ("P50 PDP") increased
262% to 60.1 million boe, total proved ("1P") reserves increased 163% to 85.3
million boe and total proved plus probable ("2P") reserves increased 185% to
154.1 million boe, compared to the prior year.

 

·    Material Increase in the Company's Reserve Value.

o  The Before-tax Net Present Value of cash flows attributable to the
Company's reserves, discounted at 10%, has been determined to be $354mm,
$444mm, and $775mm for its P50 PDP, 1P and 2P reserves, respectively, being
indicative of the Company's strong production base and robust portfolio of
economic development opportunities.

 

·    Accretive Acquisitions Provided Significant Reserve Additions on a
Per Share Basis.

o  P50 PDP net present value ("NPV"), using a 10% discount rate, increased by
231% to £0.24 per share, 1P NPV increased by 195% to £0.30 per share and 2P
NPV increased by 172% to £0.52 per share, as compared to the prior year.

o  The NPV calculations performed by GLJ used an average 2022-2026 WTI price
of $69.18/bbl (three consultants average) which is significantly lower than
current strip prices.

 

·    Excellent Organic Reserves Replacement Ratio, Long Reserve Life
Assets and Low Decline Profile Demonstrate Sustainability of the Company's
Total Return Model.

o  On a Proven reserves basis, the Company's organic reserves replacement
ratio in 2021 was 220%. P50 PDP, 1P and 2P reserve life index of 9.5 years,
11.8 years and 18.6 years, respectively, combined with our low base decline
rate of approximately 12.4% and our extensive inventory of highly economic
development drilling locations, underpins i3's ability to sustainably grow
production per share from our existing asset base and generate significant
distributable cash flow for our shareholders.

 

·    Strong FD&A Metrics and Recycle Ratios Reflective of Efficient
Development and Acquisition Strategy.

o  Efficient development and disciplined acquisitions provided strong proved
developed producing ("PDP") FD&A of $1.96 per boe, 1P FD&A of $4.51
per boe and 2P of $4.31 per boe, delivering recycle ratios of 5.8x, 2.5x and
2.6x, respectively.

 

Ryan Heath, President of i3 Energy Canada Ltd., commented:

 

"The Canadian reserve report reflects the hard work and commitment of the
entire i3 team. Strategic, accretive acquisitions along with efficient,
low-cost field optimization has built predictable base production and a
portfolio with extensive future development opportunities. i3 Canada is
pleased to deliver record production exceeding 20,000 boepd, resulting from
the Company's low decline profile and strong drilling performance."

 

Majid Shafiq, CEO of i3 Energy plc, commented:

"Our 2021 year-end reserves report encapsulates a very successful year for i3
Energy. We significantly increased our reserve base year-on-year through a
combination of accretive acquisitions and operational activity, with our 2P
reserves being valued at $775 million or £0.52 per share at year-end.

 

"Our organic reserves replacement ratio during the year was greater than 200%
demonstrating the quality of our assets and operational capability to replace
production from our existing asset base and with a 2P reserves life index of
almost 19 years and multiple drilling opportunities, we have a portfolio
ideally suited to deliver a consistent and progressive dividend and value
growth.

 

"We are very pleased to exit the last quarter at over 20,000 boepd and look
forward to updating the market with results from our currently active drilling
program."

 

2021 Reserves Review

The Company's year-end reserves were evaluated by GLJ in accordance with the
definitions, standards and procedures contained in the COGEH and NI 51-101 as
of 31 December 2021. 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 2022.

 

Reserves included are Company share 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 in our Annual Information Form which
will be filed on SEDAR. 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 2021.

 

 

 

                                     i3 YE
 2021 - Reserves Volumes
 Reserves Category     Total Company Interest Reserves
                       Oil     NGL     Gas      Total    Liquids Weighting

                       Mbbl    Mbbl    MMcf     Mboe
 Proved Producing      7,454   15,406  139,948  46,185   49%
 Proved Non-Producing  406     801     15,304   3,758    32%
 Proved Undeveloped    4,152   11,636  117,695  35,404   45%
 Total Proved          12,011  27,843  272,947  85,346   47%
 Probable Producing    2,257   4,510   42,740   13,891   49%
 Total Probable        9,512   22,500  220,628  68,784   47%
 Proved plus Probable  21,524  50,344  493,575  154,130  47%

 

                       i3 YE 2021 - Reserves Values
                       Before Tax Net Present Value ($MM)
                                                               Disco
                                                               unt
                                                               Rate
                       0%         5%         10%      15%      20%
 Proved Producing      284,418    336,749    295,493  257,966  229,266
 Proved Non-Producing  26,967     21,246     17,328   14,521   12,434
 Proved Undeveloped    305,510    198,952    131,199  87,376   58,012
 Total Proved          616,935    556,947    444,020  359,863  299,713
 Probable Producing    193,704    93,925     58,126   41,047   31,167
 Total Probable        874,094    507,197    331,242  233,388  173,338
 Proved plus Probable  1,491,029  1,064,145  775,262  593,250  473,050

 

Notes:

(1)   The Company is not in a tax paying position due to Canadian tax loss
pools for year-end 2021.

(2)   "Net" reserves mean the Company's working interest share after
deduction of royalty obligations.

 

Reserve Reconciliation

The following table sets out the reconciliation of the Company's total gross
reserves based on forecast prices and costs by principal product type as at 31
December 2021 relative to 31 December 2020

                                   Light and Medium Crude Oil  Heavy Crude  Natural Gas (associated & non-associated)      NGL     Total Oil Equivalent

 Factors                           (Mbbl)                      (Mbbl)       (MMcf)                                         (Mbbl)  (MBOE)
 TOTAL PROVED
 31 December 2020                  4,380                       0            122,387                                        6,963   31,741
 Revisions                         766                         0            25,379                                         2,209   7,205
 Extensions and Improved Recovery  92                          200          7,347                                          448     1,964
 Acquisitions                      7,187                       0            129,351                                        19,180  47,925
 Production                        -704                        -12          -15,097                                        -1,209  -4,441
 31 December 2021                  11,721                      188          269,367                                        27,591  84,394

 TOTAL PROBABLE
 31 December 2020                  4,397                       0            74,005                                         4,592   21,323
 Revisions                         -72                         0            3,160                                          -221    234
 Extensions and Improved Recovery  -16                         265          12,809                                         545     2,928
 Acquisitions                      4,881                       0            129,361                                        17,474  43,916
 Production                        0                           0            0                                              0       0
 31 December 2021                  9,190                       265          219,335                                        22,390  68,401

 TOTAL PROVED PLUS PROBABLE
 31 December 2020                  8,776                       0            196,393                                        11,555  53,065
 Revisions                         695                         0            28,539                                         1988    7440
 Extensions and Improved Recovery  75                          465          20,155                                         993     4,892
 Acquisitions                      12,069                      0            258,712                                        36,654  91,841
 Production                        -704                        -12          -15097                                         -1209   -4441
 31 December 2021                  20,911                      453          488,702                                        49,981  152,797

 

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

F&D and FD&A costs for 2021, 2020 and the two-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 NOI per barrel divided by the cost per barrel (F&D or FD&A).

                               2021   2020   2-Year Average
 Proved Developed Producing
 F&D costs ($/boe)             $2.61  N/A    $2.77
 F&D recycle ratio             4.4x   N/A    3.5x
 FD&A costs ($/boe)            $1.96  $1.65  $1.84
 FD&A recycle ratio            5.8x   1.3x   5.2x

 Total Proved
 F&D costs ($/boe)             $4.02  N/A    $4.12
 F&D recycle ratio             2.8x   N/A    2.3x
 FD&A costs ($/boe)            $4.51  $3.78  $4.25
 FD&A recycle ratio            2.5x   0.6x   2.3x

 Total Proved Plus Probable
 F&D costs ($/boe)             $3.42  N/A    $3.50
 F&D recycle ratio             3.3x   N/A    2.7x
 FD&A costs ($/boe)            $4.31  $3.79  $4.14
 FD&A recycle ratio            2.6x   0.6x   2.3x

 

Reserve Life Index ("RLI")

RLI is calculated by taking the Total Company Interest Reserves from the GLJ
Report and dividing them by the projected 2022 production as estimated in the
GLJ Report.

                                 Total Company Interest Reserves  2022 Company Production  RLI
 Reserves Category               (Mboe)                           (Mboe)                   (Years)

 Proved Producing                46,185                           6,160                    7.5
 Total Proved                    85,345                           7,243                    11.8
 Proved plus Probable Producing  60,075                           6,325                    9.5
 Proved plus Probable            154,130                          8,265                    18.6

 

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 2035)
assumptions as at 31 December 2021 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  (C$/bbl)              (C$/bbl)               (C$/MMBTU)      (C$/bbl)       (C$/bbl)  (C$/bbl)  (%/year)        (USD/CAD)

 2022  86.82                 74.43                  3.56            91.85          57.49     43.39     0               0.7967
 2023  80.73                 69.17                  3.2             85.53          50.17     35.92     2               0.7967
 2024  78.01                 66.54                  3.05            82.98          48.53     34.62     2               0.7967
 2025  79.57                 67.87                  3.1             84.63          49.5      35.31     2               0.7967
 2026  81.16                 69.23                  3.17            86.33          50.49     36.02     2               0.7967
 2027  82.78                 70.61                  3.23            88.05          51.5      36.74     2               0.7967
 2028  84.44                 72.02                  3.3             89.82          52.53     37.47     2               0.7967
 2029  86.13                 73.46                  3.36            91.61          53.58     38.22     2               0.7967
 2030  87.85                 74.69                  3.43            93.44          54.65     38.99     2               0.7967
 2031  89.6                  76.19                  3.5             95.32          55.74     39.77     2               0.7967
 2032  91.4                  77.71                  3.57            97.22          56.86     40.56     2               0.7967
 2033  93.23                 79.26                  3.64            99.17          58        41.37     2               0.7967
 2034  95.09                 80.85                  3.71            101.15         59.15     42.2      2               0.7967
 2035  96.99                 82.47                  3.79            103.17         60.34     43.04     2               0.7967
 2036  98.93                 84.11                  3.86            105.24         61.54     43.91     2               0.7967
 Escalated at 2% per year thereafter

 

Notes:

1.     $ = USD.

2.     Any figures converted from CAD to USD are done so at CAD 1.25 to
USD 1, and any figures converted from CAD to GBP are done so at CAD 1.64 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.     Proved reserves are those reserves that can be estimated with a
high degree of certainty to be recoverable. It is likely that the actual
remaining quantities recovered will exceed the estimated proved reserves. If
probabilistic methods are used, there should be at least a 90% probability
that the quantities actually recovered will equal to or exceed the estimate.

5.     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 equal to or exceed the 2P estimate.

6.     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.

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) / Graham Heath (CFO)        Tel: +44 (0) 203 781 8331

 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

 Owen Roberts, James Crothers, Violet Wilson    Tel: +44 (0) 203 781 8331

 

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 100% 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
("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/
(https://i3.energy/) .

This announcement does not contain inside information.

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