REG - i3 Energy PLC - 2024 Capital Budget and Production Guidance

I3 EnergyAnnouncement

25/04/2024 07:00

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RNS Number : 9394L  i3 Energy PLC  25 April 2024

25 April 2024

i3 Energy plc

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

2024 Capital Budget and Production Guidance

Investor Webinar via Investor Meet Company

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
Company's 2024 capital budget and production guidance. The Company will hold
an investor webinar on Thursday 2 May 2024 at 12:00 pm BST including a
Q&A session (details of which can be found below).

Highlights:

·    2024 Capital Budget

2024 Capital Budget of USD 50.9 million, forecasted to deliver 15 gross wells
(10.5 net, 95% net i3-operated) to be drilled across the Company's diversified
portfolio in Central Alberta, Simonette, and its northern Clearwater acreage.

·    Production Growth

Forecast exit 2024 production of 20,250 - 21,250 barrels of oil equivalent per
day ("boepd"), representing a year-over-year increase of approximately 3% from
the prior year average exit rate (December 2023), or approximately 8% from
current levels, as the Company expects to recommence drilling in June 2024 and
positions for accelerated Montney development in 2025.

·    Cash Flow

USD 70 - 75 million of 2024 Net Operating Income ("NOI") and USD 55 - 60
million of EBITDA before hedging gains and losses, based on budget price
assumptions of USD 82/barrel ("bbl") for WTI and CAD 2.25/Gigajoules ("GJ")
for AECO natural gas.

·    Shareholder Returns

      As part of i3's commitment to its total return model, subject to
Board approval, the Company is expected to return forecasted dividends of
£12.3 million (USD 15.7 million) in 2024, representing 0.2565 pence per share
per quarter or 1.0260 pence per share for the year, which translates to a
forward yield of 8.1% based on the closing price of i3's ordinary shares of
12.66 pence on 23 April 2024.

 

Majid Shafiq, CEO of i3 Energy plc, commented:

"Following very successful initiatives in the first half of the year to
increase our balance sheet strength and liquidity, i3 is extremely pleased to
announce a substantial USD 51 million capital programme for the remainder of
the year, which will drill a diverse group of oil and gas wells across our
portfolio in Canada. The majority of wells will be drilled in the second half
of the year, with the high-volume Central Alberta gas wells producing into a
forecast strong winter pricing environment and pad drilling of our exciting
Montney acreage expected to commence early in Q1 2025. The programme is
designed to deliver production growth and support our dividend programme,
whilst maintaining liquidity and a conservative leverage position to maximise
flexibility to deal with volatile market conditions and opportunities as they
arise."

 

 

2024 Capital Programme Highlights

Following the Company's recent USD 24.8 million partial sale of its royalty
assets, the elimination of all bank indebtedness and the establishment of a
USD 55.6 million reserve-based credit facility, i3 Energy is pleased to
announce a USD 50.9 million 2024 capital programme along with its 2024
operational and financial guidance. This programme will be fully funded from
existing Company resources and is designed to balance growth, financial
discipline, and a sustainable long term-dividend through a predictable
development-focused programme, all while positioning the Company to commence
its Simonette Montney pad development drilling in Q1 2025. The programme is
constrained to fit within the available time window of the second half of the
year.

The 2024 budget currently reflects an estimated total capital investment of
USD 50.9 million in Canada, of which approximately USD 41.1 million is
allocated to drilling and development, with the remaining balance (USD 9.8
million) apportioned to maintenance capital, facilities, land, ESG and seismic
initiatives. The 2024 budget reflects the natural limitations associated with
the Canadian operating environment, including, but not limited to, access
issues associated with seasonal weather conditions. As such, the 2024
programme anticipates drilling operations will commence in late Q2, with
continuous operations through to year-end.

i3's 2024 capital programme will be 85% weighted to the second half of the
year with wells expected to be brought on production ahead of stronger
forecasted winter gas pricing. Should it be the case that the forward strip
forecast for gas prices deteriorates, the Company is well positioned to both
reallocate its drilling locations to more oil weighted development
opportunities or capitalize on strategic accretive acquisitions as they are
identified. Corporate guidance incorporates the drilling of 15 gross (10.5
net) wells with locations split between i3's key operating areas, comprising
11 gross (7.6 net) wells in Central Alberta, 2 gross (1.9 net) wells in
Simonette and 2 gross (1.0 net) wells across the Clearwater fairway. The
programme is primarily focused on development opportunities, supplemented with
targeted high-impact, large resource, oil-centred delineation.

The 2024 capital programme is projected to deliver total average production of
between 18,000 and 19,000 boepd (natural gas, oil & condensate, natural
gas liquids and royalty interest production expected to average approximately
53%, 22%, 24% and 1%, respectively), with estimated peak production achieved
in December. Based on timing, with no operated wells drilled or planned until
June, the 2024 drilling programme is forecast to deliver December exit rate
production growth of 3% when compared to the same period of 2023.
Additionally, when adjusting for the Company's highly accretive partial
royalty disposition, announced on 17 April 2024, December exit production
growth reflects 5% on a year-over-year basis.

The Company's 2024 Budget is designed to ensure a strong balance sheet and
significant financial flexibility to support the Company's income plus growth
strategy and positions i3 to commence its Simonette Montney development in Q1
2025. The capital programme will result in exit 2024 net debt of USD 23 - 26
million, representing a net debt to annualized December 2024 EBITDA before
hedging, of approximately 30% and net debt credit utilization of less than
45%.

For its planning case, i3 has used commodity price assumptions of USD
82.00/bbl for WTI crude oil and CAD 2.25/GJ for AECO natural gas and expects
to generate net operating income of approximately USD 70 - 75 million and
EBITDA before hedging of USD 55 - 60 million for 2024.

 

2024 Guidance and Commodity Price Assumptions

                                                2024 guidance and assumptions ((1))
 Annual Average Production ((2))                18,000 boepd - 19,000 boepd

 Exit Production (Dec. 2024)                    20,250 boepd - 21,250 boepd
 Average Expenses:

 Royalty                                        15%

 Operating & Processing                         USD 11.30/boe - USD 11.50/boe

 Transportation                                 USD 2.10/boe - USD 2.30/boe
 Annual Net Operating Income ((3))              USD 70.0 million - USD 75.0 million

 Exit Net Operating Income (Dec. 2024) ((3))    USD 7.8 million - USD 8.3 million
 Annual EBITDA Before Hedging ((4))             USD 55.0 million - USD 60.0 million

 Exit EBITDA Before Hedging (Dec. 2024) ((4))   USD 6.3 million - USD 6.8 million

 Capital Expenditures                           USD 50.9 million
 Dividends ((5))                                USD 15.7 million
 Net Debt (Dec. 2024) ((6))                     USD 23.0 million - USD 26.0 million

 

2024 Commodity Assumptions ((7))

 WTI ($/bbl)                   USD 82.00/bbl
 MSW Oil Differential ($/bbl)  USD 3.00/bbl
 AECO Natural Gas ($/GJ)       CAD 2.25/GJ
 USD / CAD Foreign Exchange    1.35
 GBP / CAD Foreign Exchange    1.68

 

2024 Net Operating Income Sensitivity ((8))

 2024 sensitivities                         Estimated change to net operating income
 Change in WTI USD 1.00/bbl                 USD 1.2 million
 Change in AECO CAD 0.10/GJ                 USD 1.3 million
 Change in CDN / US exchange rate CAD 0.01  USD 0.9 million

*See below Notes

Hedging

i3 continues to employ a defensive risk management strategy with current
hedges in place to protect USD 43.4 million of net operating income in 2024,
with current hedges in place to cover 31%, 27%, 26% and 24% of the Company's
projected Q1, Q2, Q3 and Q4 2024 future production volumes, respectively. i3's
2024 hedges are as follows:

              Swaps                              Basis Swaps
 GAS          Volume (GJ)   Price (CAD/GJ)       Volume (mmbtu)  Price (USD/mmbtu)
 Q1 2024      2,275,000     3.04                 nil             nil
 Q2 2024      1,365,000     2.52
 Q3 2024      1,380,000     2.52
 Q4 2024      1,685,000     2.64

                                                 Costless Collars
 OIL          Volume (bbl)  Price (CAD/bbl)      Volume (bbl)    Avg Floor Price (CAD/bbl)  Avg Ceiling Price (CAD/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      145,550       97.41                41,450          100.37                     111.46

 

UK Operations

The Company continues to evaluate development options for the Serenity
discovery in consultation with its partner and the North Sea Transition
Authority. There is no capital budget associated with this work in 2024.

Environmental, Social and Governance ("ESG")

i3 is dedicated to conducting its operations responsibly and in accordance
with industry best practices. The Company's commitment to high ESG standards
is central to maintaining our social licence to operate, creating value for
all stakeholders, and ensuring long-term commercial success. i3 recognises the
safety and well-being of our employees, local communities, and other key
stakeholders as a priority, and considers climate change as having a material
impact on our business.

i3 remains committed to environmental sustainability through consistent
implementation of innovative technologies and operational strategies. The
Company proudly continues its utilization of an Alternative Fugitive Emissions
Management Program to mitigate fugitive emissions, with the pilot project
funded by the Alberta Methane Emissions Program and supported by the Alberta
Energy Regulator. Furthermore, i3 is dedicated to expanding its renewable
energy initiatives, with ongoing installations of solar pumps across various
locations. The Company actively explores opportunities to enhance process and
operational efficiencies, particularly in optimizing compression facilities to
minimize fuel consumption and emissions and, as part of its ongoing efforts,
has initiated an analysis of electricity consumption to identify potential
reductions in Scope 2 emissions. Most notably, i3 Energy is piloting
innovative solutions, with the installation of a high to no-bleed,
solar-powered instrument air skid at a strategic location, with plans for
potential expansion to three additional sites in 2024.

The Company will responsibly continue to meet its asset retirement obligations
into 2024, as it plans to complete approximately 40 downhole abandonments,
decommission an estimated 50 surface sites, and abandon approximately 15
pipelines.  i3 has also allocated USD 0.7 million to progress reclamation and
remediation efforts across its portfolio, with 11 reclamation certificates
anticipated in 2024.

Return of Capital

As part of its total return model, the Company remains committed to delivering
a sustainable monthly dividend to complement its organic growth profile. Since
initiating its dividend programme in July 2021 i3 has paid total dividends of
£37.2 million (USD 47.4 million). Based on its recent elimination of all
corporate bank indebtedness and forecasted 2024 guidance, i3 expects to
deliver minimum total 2024 dividends of £12.3 million (USD 15.7 million).
Subject to Board approval, the 2024 forecasted dividend, representing 0.2565
pence per share per quarter or 1.026 pence per share for the year, translates
to a forward yield of 8.1% based on the closing price of i3's ordinary shares
of 12.66 pence on 23 April 2024. Based on projected year-over-year production
growth and anticipated dividend yield, the Company expects to deliver a total
Shareholder return of 11% - 13% in 2024.

Investor Presentation

Majid Shafiq, Ryan Heath and Jason Dranchuk will provide a live presentation
relating to i3 Energy's 2024 Capital Budget via the Investor Meet Company
platform on 2 May 2024 at 12:00pm BST.

The presentation is open to all existing and potential shareholders. Questions
can be submitted pre-event via your Investor Meet Company dashboard up until
9am the day before the meeting or at any time during the live presentation.

Investors can sign up to Investor Meet Company for free and add to meet i3
Energy plc via:

https://www.investormeetcompany.com/i3-energy-plc/register-investor
(https://nam02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.investormeetcompany.com%2Fi3-energy-plc%2Fregister-investor&data=05%7C02%7Csam.morris%40camarco.co.uk%7Ca9a29f4b1168459d2fb808dc6453eaf7%7C77a5f6209d7747dba0cd64c70948d532%7C1%7C0%7C638495558796362103%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C0%7C%7C%7C&sdata=ocb7U1ELPeqdqaRO9x1ZVO0YSA61DJY27M4mc1DPdqc%3D&reserved=0)

Investors who already follow I3 ENERGY PLC on the Investor Meet Company
platform will automatically be invited.

Additionally, i3 is pleased to announce that an updated corporate presentation
will be available on the Company's website https://i3.energy/
(https://i3.energy/) coinciding with the Investor Meet Company live
presentation.

 

*NOTES:

(1) i3's 20243 guidance for its Net Operating Income, EBITDA and year-end Net
Debt is based on an annual average production range of 18,00022,250 - 1923,000
boepd.

(2) Total annual average production (boepd) is comprised of approximately 47%
Oil, Condensate & NGLs, 53% Natural Gas

(3) Net Operating Income is a non-GAAP financial measure and is defined as
gross profit before depreciation and depletion and gains or losses on risk
management contracts, which equals revenue net of royalty expenses, less
production costs

(4) EBITDA is a non-GAAP financial measure and is defined as earnings before
depreciation depletion, financial costs, and tax

(5) Based on i3's annual common share dividend of £12.3 million (US$15.7
million assuming 1.275 GBP:USD) paid in 2024. The declaration of dividends is
subject to the approval of i3's board of directors and is subject to change

(6) Net Debt is a non-GAAP financial measure and is defined as borrowings and
leases and trade and other payables, less cash and cash equivalents and trade
and other receivables

(7) Commodity prices and foreign exchange reflect full year average realized
prices or rates

(8) Illustrates the expected impact of changes in commodity prices and the
CAD:USD exchange rate on i3's estimate of Net Operating Income for 2024,
holding all other variables constant. The sensitivity is based on the
commodity price and exchange rate assumptions set forth in the table above.
Calculations are performed independently and may not be indicative of actual
results. Actual results may vary materially when multiple variables change at
the same time and/or when the magnitude of the change increases.

 

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, 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 (https://i3.energy) .

 

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.

 

 

Forward-Looking Statements

 

This press release offers our assessment of i3's future plans and operations
as at April 24, 2024, and contains certain forward-looking information and
statements within the meaning of applicable securities laws. The use of any of
the words "anticipate", "continue", "estimate", "expect", "forecast", "may",
"will", "project", "should", "plan", "intend", "believe" and similar
expressions (including the negatives thereof) are intended to identify forward
looking information or statements.

The forward-looking information and statements included in this news release
are not guarantees of future performance and should not be unduly relied upon.
Such information and statements involve known and unknown risks, uncertainties
and other factors that may cause actual results or events to differ materially
from those anticipated in such forward-looking information or statements
including, without limitation: those relating to results of operations and
financial condition; general economic conditions; industry conditions; changes
in regulatory and taxation regimes; volatility of commodity prices; escalation
of operating and capital costs; currency fluctuations; the availability of
services; imprecision of reserve estimates; geological, technical, drilling
and processing problems; environmental risks; weather; the lack of
availability of qualified personnel or management; stock market volatility;
the ability to access sufficient capital from internal and external sources;
and competition from other industry participants for, among other things,
capital, services, acquisitions of reserves, undeveloped lands and skilled
personnel. Forward-looking statements are provided to allow investors to have
a greater understanding of our business.

You are cautioned that the assumptions used in the preparation of such
information and statements, including, among other things: future oil and
natural gas prices; future capital expenditure levels; future production
levels; future exchange rates; the cost of developing and expanding our
assets; our ability to obtain equipment in a timely manner to carry out
development activities; our ability to fund future dividends; our ability to
market our oil and natural gas successfully to current and new customers; the
impact of increasing competition; the availability of adequate and acceptable
debt and equity financing and funds from operations to fund our planned
expenditures; and our ability to add production and reserves through our
development and acquisition activities, although considered reasonable at the
time of preparation, may prove to be imprecise and, as such, undue reliance
should not be placed on forward-looking statements. Our actual results,
performance, or achievement could differ materially from those expressed in,
or implied by, these forward-looking statements. We can give no assurance that
any of the events anticipated will transpire or occur, or if any of them do,
what benefits we will derive from them. The forward-looking information and
statements contained in this document is expressly qualified by this
cautionary statement. Our policy for updating forward-looking statements is
that i3 disclaims, except as required by law, any intention or obligation to
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.

Non-IFRS Financial Measures

 

i3 uses the following terms for measurement within this press release that do
not have a standardized prescribed meaning under International Financial
Reporting Standards ("IFRS") and these measurements may not be comparable with
the calculation of similar measurements of other entities. The Company refers
to these as Non-IFRS Measures or Alternate Performance Measures ("APMs"). APMs
are not defined under IFRS and are not considered to be a substitute for or
superior to IFRS measures. Other companies may not calculate similarly defined
or described measures, and therefore their comparability may be limited. The
Company continually monitors the selection and definitions of its APMs, which
may change in future reporting periods.

51-101 Advisory

 

In conformity with National Instrument 51-101, Standards for Disclosure of Oil
and Gas Activities ("NI 51-101"), natural gas volumes have been converted to
barrels of oil equivalent ("boe") using a conversion rate of six thousand
cubic feet of natural gas to one barrel of oil. In certain circumstances,
natural gas liquid volumes have been converted to a thousand cubic feet
equivalent ("mcfe") on the basis of one barrel of natural gas liquids to six
thousand cubic feet of gas. Boes and mcfes may be misleading, particularly if
used in isolation. A conversion ratio of one barrel to six thousand cubic feet
of natural gas is based on an energy equivalency conversion method primarily
applicable at the burner tip and does not represent a value equivalency at the
wellhead. Given that the value ratio based on the current price of crude oil
as compared to natural gas is significantly different from the energy
equivalency of 6:1, utilizing a conversion ratio on a 6:1 basis may be
misleading as an indication of value.

 

 

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