REG - i3 Energy PLC - i3 Energy Canada Ltd YE 2022 Reserves

I3 EnergyAnnouncement

03/04/2023 07:00

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RNS Number : 0418V  i3 Energy PLC  03 April 2023

3 April 2023

i3 Energy plc

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

i3 Energy Canada Ltd YE 2022 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 2022 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 2022.

 Highlights

·    Successful Execution of 2022 Capital Programme Provided
Year-Over-Year Reserve Additions Across All Reserve Categories

o  Total Company Interest proved plus probable developed producing reserves
("2PDP") increased 9% to 65.7 million boe, total proved ("1P") reserves
increased 10% to 93.5 million boe and total proved plus probable ("2P")
reserves increased 18% to 181.5 million boe, compared to the prior year.

 

·    Strong Organic Reserves Replacement Ratio, Long Reserve Life Assets
and Low Decline Profile to Support the Company's Total Return Model

o  The Company's organic Working Interest reserves replacement ratio in 2022
was 176% on a 2PDP reserve basis, 214% on a 1P reserves basis and 479% on a 2P
basis.

o  2PDP, 1P and 2P reserve life indices of 8.8 years, 12.2 years and 22.5
years, respectively, combined with our low base corporate decline rate of
approximately 17% and our extensive inventory of highly economic development
drilling locations, underpin i3's ability to sustainably grow production per
share from our existing asset base and generate significant distributable cash
flow for our shareholders.

 

·    Material Increase in the Company Interest Reserve Value

o  As evaluated by GLJ, the Before-tax Net Present Value ("NPV") of cash
flows attributable to the Company's reserves, discounted at 10%, has been
determined to be $511.0 million (CAD 689.8 million), $623.0 million (CAD 841.0
million), and $1,161.5 million (CAD 1,568.0 million) for its 2PDP, 1P and 2P
reserves, respectively, being indicative of the Company's strong production
base, successful 2022 drilling program and robust portfolio of economic
development opportunities.

o  2PDP NPV per share, using a 10% discount rate, increased by 50%
to £0.36 per share (CAD 0.58 per share), 1P NPV increased by 43%
to £0.43 per share (CAD 0.71 per share) and 2P NPV increased by 56%
to £0.81 per share (CAD 1.31 per share), as compared to the prior year.

·    Strong Finding, Development and Acquisition ("FD&A") Cost Metrics
and Recycle Ratios Reflective of Efficient Development and Opportune
Acquisition Strategy

o  Efficient development provided strong FD&A costs of $7.68 per boe on
a 2PDP basis, translating to recycle ratios of 2.84x.

o  Over the three-year period since its entrance into the Western Canadian
Sedimentary Basin, i3 has delivered FD&A costs of $2.96 per boe on a 2PDP
basis, translating to a recycle ratio of 6.0x.

 

·    Partial Recognition of the Company's Undeveloped Locations Leaves
Significant Inventory of Future Unbooked Upside

o  Successful conversion of undeveloped locations to production, while
increasing the total net undrilled booked locations by 25% to 376 gross (255.1
net) locations across the Company's four core areas, for a total Company
inventory (undrilled booked and undrilled unbooked) of 881 gross (502 net)
undeveloped locations.

o  Material increases in booked Montney and Cardium oil locations, with 32
net and 12.2 net locations added, respectively.

o  Total undeveloped inventory represents greater than 30 years of
development drilling assuming the current annual capital program.

 

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

"The Canadian reserve report reflects the hard work and commitment of the
entire i3 team. The Company's 2022 capital programme was executed with
efficiency, while meeting or exceeding production expectations and corporate
guidance. The efforts of 2022 have placed i3 in a strong position for 2023 as
we continue to build upon the Company's predictable low-decline base
production and further expand its extensive portfolio of high-return
development opportunities."

 

Majid Shafiq, CEO of i3 Energy plc, commented:

"2022 was another very successful year for i3 Energy. In 2021 our reserves
replacement was primarily driven by acquisitions. In 2022 we pivoted to growth
via the drill bit and very successfully grew production and our reserves base.
We proved the quality of our asset base and the expertise of our staff by
organically delivering growth in our P1 reserves by 10% and 2P reserves by
18%. Our 2P reserves are now independently valued at circa $1.2 billion or
£0.81 per share at year end, with their longevity demonstrated by a reserve
life index of 22 years. Whilst this reflects year-end commodity pricing it
demonstrates the material upside in our portfolio and the potential for
year-on-year growth in production and total shareholder return."

 

2022 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 2022. 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 as of 1 January 2023.

 

Reserves included are Company Interest reserves which reflect i3's total
working interest reserves before the deduction of any royalties and include
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. The numbers outlined in the tables below may not sum
precisely due to rounding.

 

Summary of Reserves

The tables below outline GLJ's estimates of i3's reserves as of 31 December
2022.

 

 I3 YE 2022 - Reserves Volumes
                       Company Interest Reserves
 Reserves Category     Oil     NGL     Gas      Total    Liquids Weighting
                       Mbbl    Mbbl    MMcf     Mboe
 Proved Producing      8,076   16,793  145,121  49,056   51%
 Proved Non-Producing  227     1,326   12,676   3,666    42%
 Proved Undeveloped    6,094   15,768  113,327  40,750   54%
 Total Proved          14,398  33,887  271,124  93,472   52%
 Probable Producing    10,915  22,390  194,596  65,738   51%
 Total Probable        19,705  27,954  242,186  88,023   54%
 Proved plus Probable  34,103  61,841  513,310  181,496  53%

 

                                 i3 YE 2022 - Reserves Values
                                 Before Tax Net Present Value (USD MM)

                                 Discount Rate

                                 0%         5%         10%        15%       20%
 Proved      Producing           472,533    490,078    425,097    370,945   330,055
 Proved Developed Non-Producing  26,929     21,108     17,142     14,317    12,227
 Proved   Undeveloped            405,247    268.149    180,729    123,404   84,467
 Total Proved                    904,728    779,335    622,968    508,667   426,749
 Probable   Producing            679,031    614,593    510,964    435,322   381,111
 Total Probable                  1,285,392  800,037    538,510    383,956   285,561
 Proved plus Probable            2,190,121  1,579,372  1,161,478  892,622   712,310

 

Through the Company's productive 2022 drilling programme, i3 successfully
converted a suite of high-return undeveloped locations to production, while
increasing the total net undrilled booked locations by 25% to 376 gross (255.1
net) locations across its core areas, for a total Company inventory (undrilled
booked and undrilled unbooked) of 881 gross (502 net) undeveloped locations.

Material increases in booked reserves were predominantly a direct result of
i3's successful 2022 Montney and Cardium development initiatives, in its
Simonette and Wapiti fields, resulting in an increase of 32 net and 12.2 net
booked oil locations added, respectively. Total undeveloped inventory now
represents greater than 30 years of economic development drilling, based on
the Company's current annual capital programme.

 

Reserve Reconciliation

The following table sets out the reconciliation of the Company's Working
Interest reserves based on forecast prices and costs by principal product type
as of 31 December 2022 relative to 31 December 2021.

 

                                                                                 Light and Medium Crude Oil  Heavy Crude  Natural Gas (assoc. & non-assoc.)      NGL     Total Oil Equivalent
                                                                                 (Mbbl)                      (Mbbl)       (MMcf)                                 (Mbbl)  (MBOE)

 TOTAL PROVED
 December 31, 2021                                                               11,721                      188          269,367                                27,591  84,394
 Revisions                                                                       272                         -4           -6,621                                 5,688   4,852
    Extensions and Improved                                                      3,088                       248          28,323                                 2,607   10,663
            Recovery
 Acquisitions                                                                    8                           0            19                                     2       13
 Production                                                                      -1,103                      -110         -23,023                                -2,213  -7,263
 December 31, 2022                                                               13,985                      321          268,065                                33,674  92,659

 TOTAL PROBABLE
 December 31, 2021                                                               9,190                       265          219,335                                22,390  68,401
 Revisions                                                                       165                         -7           -1,162                                 4,306   4,270
 Extensions and Improved Recovery                                                10,114                      -91          22,854                                 1,165   14,997
 Acquisitions                                                                    8                           0            11                                     1       11
 Production                                                                      0                           0            0                                      0       0
 December 31, 2022                                                               19,478                      168          241,038                                27,861  87,680

 TOTAL PROVED PLUS PROBABLE
 December 31, 2021                                                               20,911                      453          488,702                                49,981  152,795
 Revisions                                                                       437                         -11          -7,783                                 9,993   9,122
 Extensions and Improved Recovery                                                13,203                      157          51,177                                 3,772   25,661
 Acquisitions                                                                    16                          0            30                                     3       24
 Production                                                                      -1,103                      -110         -23,023                                -2,213  -7,263
 December 31, 2022                                                               33,463                      489          509,103                                61,536  180,338

 

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

F&D and FD&A costs for 2022, 2021, 2020 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).

 

                                            2022    2021   2020   3-Year Average

 Proved Developed Producing
 F&D costs ($/boe)                          $9.89   $2.41  N/A    $7.13
 F&D recycle ratio                          2.2x    5.7x   N/A    2.5x
 FD&A costs ($/boe)                         $9.89   $1.81  $1.53  $3.61
 FD&A recycle ratio                         2.2x    7.5x   3.8x   4.9x

 Total Proved
 F&D costs ($/boe)                          $14.74  $3.72  N/A    $10.69
 F&D recycle ratio                          1.5x    3.7x   N/A    1.7x
 FD&A costs ($/boe)                         $14.74  $4.17  $3.51  $6.48
 FD&A recycle ratio                         1.5x    3.3x   1.7x   2.3x

 Proved plus Probable Developed Producing
 F&D costs ($/boe)                          $7.68   $2.16  N/A    $5.79
 F&D recycle ratio                          2.8x    6.3x   N/A    3.1x
 FD&A costs ($/boe)                         $7.68   $1.45  $1.34  $2.96
 FD&A recycle ratio                         2.8x    9.5x   4.4x   6.0x

 Total Proved Plus Probable
 F&D costs ($/boe)                          $15.26  $3.17  N/A    $12.12
 F&D recycle ratio                          1.4x    4.3x   N/A    1.5x
 FD&A costs ($/boe)                         $15.26  $4.00  $3.51  $7.19
 FD&A recycle ratio                         1.4x    3.4x   1.7x   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 2023 production as estimated in the
GLJ Report.

                                 Total Company Interest Reserves      2023 Company Production      YE 2022 RLI
 Reserves Category               (Mboe)                               (Mboe)                       (Years)

 Proved Producing                49,056                               7,166                        6.8
 Total Proved                    93,472                               7,675                        12.2
 Proved plus Probable Producing  65,738                               7,473                        8.8
 Proved plus Probable            181,496                              8,060                        22.5

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 2037)
assumptions as of 31 December 2022 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)

 2023  103.77                76.54                  4.23            106.22         53.88       39.80       0.0             0.745
 2024  97.74                 77.75                  4.40            101.35         52.67       39.13       2.3             0.765
 2025  95.27                 77.54                  4.21            98.94          51.42       39.74       2.0             0.768
 2026  95.58                 80.07                  4.27            100.19         51.61       39.86       2.0             0.772
 2027  97.07                 81.89                  4.34            101.74         52.39       40.47       2.0             0.775
 2028  99.01                 84.02                  4.43            103.78         53.44       41.28       2.0             0.775
 2029  100.99                85.73                  4.51            105.85         54.51       42.11       2.0             0.775
 2030  103.01                87.44                  4.60            107.97         55.60       42.95       2.0             0.775
 2031  105.07                89.20                  4.69            110.13         56.71       43.81       2.0             0.775
 2032  106.69                91.11                  4.79            112.33         57.56       44.47       2.0             0.775
 2033  108.83                92.93                  4.89            114.58         58.71       45.35       2.0             0.775
 2034  111.00                94.79                  4.98            116.87         59.88       46.26       2.0             0.775
 2035  113.22                96.68                  5.08            119.21         61.08       47.19       2.0             0.775
 2036  115.49                98.62                  5.18            121.59         62.30       48.13       2.0             0.775
 2037  117.80                100.59                 5.29            124.03         63.55       49.09       2.0             0.775
       Escalation rate of 2% thereafter

 

Notes:

1.     $ = USD.

2.     Any 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
1.63 to GBP 1.

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

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. 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.

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 than 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 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 utilizing its
Canadian non-capital tax loss pools during the year ended 31 December 2022.

13.   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: 2022 (unaudited) - $29.48/boe;
2021 - $18.45/boe and the three-year average is $23.87/boe

14.   Reserves replacement ratio is calculated by dividing the annual
reserves additions in the year, in boe, by i3's annual production in that
year, in boe.

 

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) 203 781 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

 Georgia Edmonds, Violet Wilson, Sam Morris      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 for
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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