REG - i3 Energy PLC - Interim Report for the 6 Months Ended 30 June 2022
12/09/2022 07:00
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RNS Number : 0191Z i3 Energy PLC 12 September 2022
12 September 2022
i3 Energy plc
("i3", "i3 Energy", or the "Company")
Interim Report for the Six Months Ended 30 June 2022
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
unaudited results for its period ended 30 June 2022. A copy of the Company's
unaudited interim financial statements will be available shortly on the
Company's website at https://i3.energy/investor-relations/regulatory-news.
Highlights
Dividend Declaration
· During the first half of 2022, i3 announced total dividends of
0.60 pence/share (totalling £6.853 million), equating to an H1 yield for the
period from 1 January 2022 to 30 June 2022 of approximately 4.5% for i3's
shareholders based on i3's closing share price on 4 January 2022
· After announcing in December 2021 that the Company was
committing to pay a minimum of £11.827 million in dividends during the course
of 2022 (3.5x all dividends paid during 2021), i3 announced in February 2022
that it would be moving to a monthly dividend and in May 2022 that it would be
increasing its dividends payable during 2022 by 25% to £14.784 million,
equating to 1.3125 pence per share or a 9.8% yield for i3's shareholders based
on i3's issued and outstanding ordinary shares and closing share price on 4
January 2022
Financial Highlights
· H1 revenue of £101.6 million (H1 2021 £26.5 million), net
operating income((1)) (Revenue less royalties, opex, processing and
transportation) of £68.8 million (H1 2021 £12.5 million), and cash flow from
operations of £48.6 million (H1 2021 of £8 million)
· Employees elected to convert 114,547,030 options at a market
price of c.28 pence per share into 66,305,381 ordinary shares (primarily
settled on a post-tax in-the-money basis thereby reducing the resulting option
shares and associated dilution by 42%), enabling all staff to become invested
and aligned as shareholders
(1) Non-IFRS measure. Refer to Appendix B
Operational Highlights
· Average production of 18,950 barrels of oil equivalent per day
("boepd") for the six-month period (107% higher than H1 2021) while exiting H1
above 20,000 boepd, August above 21,100 boepd and presently above 21,600
boepd, offsetting expected natural declines through excellent operations
management, targeted maintenance capital allocation, and the initial
deployment of i3's ongoing 2022 capital programme
· Canadian Capital budget increased by up to USD 50 million above
the previously announced (December 2021) USD 47 million 2022 programme
(together, the "Enlarged Capital Budget"), focused on continued low-risk,
high-return development drilling of i3's core Glauconite and Cardium fairways,
with expanded Montney and Clearwater programmes; i3 remains on track to
deliver peak 2022 production above 24,000 boepd
· Drilled 20 gross wells (11.7 net) wells during H1; production
associated with the majority of the operated Q2 2022 capital programme now in
the initial clean-up phase or being tied into infrastructure, with initial
well results continuing to achieve or exceed management's expectations
· Increased the Company's Clearwater position by ~20% through the
acquisition of 15 net sections (38.5 km(2)) of proximal, strategic acreage
· Executed a Farm-in Agreement with Europa Oil and Gas ("Europa")
for a 25% working interest ("WI") in i3's Block 13/23c North (Licence P.2358)
which contains the Serenity oil discovery, in exchange for Europa funding
46.25% of the cost of the upcoming appraisal well up to a gross capped cost of
£15 million, above which any costs will be funded in proportion to the
respective working interest of each company
· Inaugural annual sustainability report published outlining the
Company's Environmental, Social and Governance ("ESG") initiatives and plans
to reduce greenhouse gas emissions
Post Period and Outlook
On 9 September 2022, the Company announced the appointment of John Festival as
Non-Executive Chairman of i3's Board of Directors, effective immediately.
Linda Beal, who has seen the Company through a period of transformational
growth as Interim Chairperson, remains as a Non-Executive Director with the
Company and will focus on her roles as chair of the Audit and Governance
Committees.
On 1 August 2022, i3 announced that all conditions precedent under the Farm-in
Agreement with Europa had been satisfied and that its farmout of a 25% working
interest the Serenity oil discovery was complete.
· Following the Serenity farm-out, i3 retains a 75% WI in Block
13/23c North (Licence P.2358) and a 100% WI in Block 13/23c South (Licence
P.2358), which contains the Minos High Prospect and Liberator oil discovery.
Between July and September, i3 announced monthly dividends totalling £5.1
million (0.4275 pence per share), bringing the year-to-date yield to 7.7% for
i3's shareholders based on i3's closing share price on 4 January 2022.
As announced on 26 August 2022, with the full deployment of its Enlarged
Capital Budget, i3's 2022 Net Operating Income ("NOI" = revenue minus
royalties, opex, transportation and processing) is forecasted to be
approximately USD 200 million driven by recent fluctuations in commodity
prices, pricing differentials and inflationary pressures. This remains USD 8
million above the forecasted NOI of USD 192 million announced by i3 on 12
April 2022, which increased rapidly thereafter to USD 241 million by i3's Q1
operational update of 9 May 2022. The recent softening in full-year 2022
commodity pricing predictions and expected differentials since May's Q1 update
result in a 9.4% decrease to i3's revenue forecast (circa 6% for gas and 3.4%
for liquids), while inflationary pressures are predicted to increase costs
(royalties, opex, transportation and processing) by 3.0%. i3 continues to
employ a defensive risk management strategy with current hedges in place to
cover 36% and 22.5% of the Company's projected H2 2022 and H1 2023 production
volumes, respectively. i3's hedges are as follows:
Swaps Costless Collars Participation Swaps((4))
Period Commodity Volume Average Volume Avg Floor Price Avg Cap Price Volume Avg Floor Price
2022 (Q3&Q4) Gas 6,897,325 GJs CAD 3.85/GJ
Oil 230,000 bbls CAD 94.15/bbl 414,000 bbls CAD 92.20/bbl
Propane 92,000 bbls USD 46.93/bbl
2023 (Q1&Q2) Gas 2,397,500 GJs CAD 4.41/GJ 1,125,000 GJs CAD 5.80/GJ CAD 10.09/GJ
Oil 72,150 bbls CAD 108.24/bbl 252,900 bbls CAD 100.00/bbl CAD 126.31/bbl
Propane 45,000 bbls USD 42.00/bbl USD 51.61/bbl
The Company's focus for the remainder of 2022 will be on 5 key areas:
1 The growth of i3's Canadian business by way of operational
excellence, capital deployment and strategic upsizing in core areas;
2 Serenity appraisal drilling and, upon success, the booking of
reserves and initiation of field development planning;
3 Dividend distributions to shareholders of up to 30% of free cash
flow;
4 Conducting operations safely and in an environmentally secure
manner; and
5 Continuing to develop the ESG strategy outlined in its recently
published maiden annual sustainability report.
Majid Shafiq, CEO of i3 Energy plc, commented:
"We are very pleased to announce a solid set of results for the first half of
the year. These reflect the hard work of our staff in Canada and the UK in
successfully progressing our business plan on all fronts. We have made great
strides in executing efficiently on our operated drilling program in Canada,
with all wells drilled being on prognosis geologically and production
contributions now commencing following tie-ins to infrastructure. We are also
very happy to bring in a partner to the Serenity oil field in the UK and plans
to drill the appraisal well are on track to spud this month. Our operations
team continue to perform diligently to maintain our base production volumes,
whilst operating safely with no lost time incidents being recorded. We also
published our inaugural annual ESG report which set out our commitment to high
ESG standards and operating practises. Our move to a monthly dividend program
reflects our confidence in the stability and resilience of our production
assets and we look forward to updating the market over the next quarter as our
busy drilling program continues."
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
Georgia Edmonds, Sam Morris, 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 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 quoted 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/.
The information contained within this announcement is deemed by the Company to
constitute inside information under the Market Abuse Regulation (EU) No.
596/2014.
Chairman's and Chief Executive's Statement
Overview of the year to date
i3 is extremely pleased with its progress across the first half of 2022, which
served to further validate the Company's buy-and-build strategy of using
acquisitions during distressed markets to purchase high-quality but
undercapitalized assets, improving the productivity of those assets through
operational excellence and the pursuit of low-cost, high return projects, and
then turning to the drill-bit if asset price inflation makes organic growth
the more profitable option during times of market frothiness to ensure that
the Company's capital efficiency remains high and minimising the time to
payback of every dollar deployed. This approach, which i3 has implemented to
grow its Canadian business since 2020, has created a portfolio of producing
assets with upside from which shareholder value can be created and returned in
the form of share price appreciation and a meaningful cash yield.
The historic lack of investment in the exploration and production sector has
resulted in limited spare oil and gas production capacity. The world's gradual
return to "normal" through the second half of 2021 following the end of the
majority of Covid related restrictions and the consequent demand growth saw
oil prices quintuple from 18 months prior. Russia's tragic invasion of Ukraine
at the beginning of 2022 further exacerbated the supply and demand imbalance,
driving energy prices in some jurisdictions to untested heights, contributing
to rocketing inflationary concerns which threaten to invoke recessions (if not
already underway in some markets). With citizens suffering cost of living
increases and businesses facing increased costs to production, there has been
a scramble for energy security. Some countries, facing brownout and blackout
threats, have had to make the unfortunate decision to reinstate coal-fired
power plants, going entirely against their stated commitments to climate
change initiatives. As a joined-up approach amongst the world's economies to
meet the ever-increasing energy demands of humanity seems unlikely in the
near-term, it would be reasonable to expect a continuance of oil and gas price
volatility. Against the background of this volatility and until some of these
ongoing issues are resolved, we expect oil and gas prices to remain robust.
Increasing commodity prices have naturally resulted in an increase to the
average price at which oil and gas transactions are being consummated. In many
instances, transactions are now occurring at a five-fold premium to the
per-barrel of oil equivalent ("boe") of reserves and per-flowing boe prices
that i3 paid for its 2020 and 2021 acquisitions in Canada. And even though the
current cash flow multiples of two to four times being paid to secure these
transactions remains reasonable in the context of the commodity price forward
curve (if achieved), i3 has commenced executing an organic growth plan via the
drilling of its own inventory of proven undeveloped reserves, which deliver
paybacks of less than 12 months. With over 450 net drilling locations
identified, i3 has the capacity to continue to grow production levels
significantly and only consider acquisitions if they are highly-strategic and
can be concluded at attractive and highly accretive metrics.
In light of the current market and in hindsight, the Directors see that the
USD 5,533/boepd paid by the Company for its 2020 and 2021 acquisitions was an
outstanding result for such high-quality production assets. i3's acquisitions
included significant untapped Proven Undeveloped ("PUD"), Proven plus Probable
("2P") development opportunities and a material number of un-booked drilling
locations, resulting in several exciting plays in our current portfolio. The
upside potential within i3's Simonette Montney, Central Alberta Glauconite,
Wapiti Cardium and Marten Hills Clearwater positions in Canada and its
Serenity discovery in the UK, as well as redevelopment options of some of our
more mature assets via secondary recovery and infill drilling, present
company-making opportunities that have the potential to deliver multiples of
i3's current production, reserves and cash flow.
Following i3's aggressive inorganic growth in 2020 and 2021, the Company went
through an opportunity high-grading process which culminated in the 20
December 2021 announcement of a planned USD 47 million 2022 capital budget.
These funds were to be deployed such that production and cash flow could be
organically increased, targeted upside in the Company's key assets could be
advanced and crystallised, and the return of capital to i3's shareholders via
dividend payments could be assured. At the time of announcement, the Directors
anticipated that the capital budget could be expanded if production levels and
commodity prices remained stable. In May, i3's Board of Directors approved a
2022 capital budget increase of up to an additional USD 50 million as a direct
result of the Company's robust operational performance and forecasted strength
in commodity prices, allowing the expansion and acceleration of i3's key
Canadian development opportunities.
The Enlarged Capital Budget of USD 97 million is fully-funded through existing
Company resources (cash on hand and near-term forecasted cash flow), and is
expected to materially enhance 2022 production and NOI while preserving the
Company's strong balance sheet. The programme is designed to maximize
near-term production and cash flow through further development of the
Company's large inventory of predictable and highly-economic oil wells in the
Cardium and liquids rich gas wells in the Glauconitic plays, while continuing
to advance i3's high-impact Simonette Montney position and recently expanded
Clearwater holdings. The budget also includes an amount of capital that has
been allocated to fund highly economic, non-operated drilling opportunities as
they arise, and projects which enhance cashflow and increase netbacks such as
well reactivations, debottlenecking, consolidation, and tariff-generating
third-party tie-ins to i3-operated facilities.
During Q1 2022, the Company participated in 11 gross (5.2 net) wells across
its drilling portfolio, including 3 gross (3.0 net) operated wells and 8 gross
(2.2 net) non-operated wells. Building on the strong operational results in
Q1, in Q2 i3 participated in 9 gross (6.5 net) wells across its drilling
portfolio, including 7 gross (5.9 net) operated wells and 2 gross (0.6 net)
non-operated wells. Production associated with the majority of the operated Q2
2022 capital programme is in the initial clean-up phase or currently being
tied in. Results from i3's H1 campaign continue to achieve or exceed
management's expectations and we are looking forward to providing production
updates as wells are brought on stream. Having average H1 production of 18,950
boepd and current production of 21,602 boepd, we are very pleased with our
year-to-date operational and asset performance. The Enlarged Capital Budget is
forecast to provide peak production during 2022 above 24,000 boepd, and as a
material percentage of the budget will be deployed in Q4 2022, the full impact
and benefit of the expanded capital budget will last well into 2023 and
beyond. Operating our assets in a safe and secure manner is fundamental to our
business and we are pleased that we suffered no lost time incidents in H1
2022, and we continue to advance our health and safety policies and procedures
as we integrate additional production assets.
The Company continues to actively identify production optimisation and cost
reduction opportunities within our portfolio, focussing on maintaining high
uptime, minimising operating costs, optimising operated processing facilities
and infrastructure, and implementing high return workovers to offset natural
production declines. These efforts have increased aggregate average net
production and substantially reduced the decline rates predicted within the
Company's Canadian competent persons report ("CPR"). Our ongoing realized
average decline rate of 11.5% is a testament to the quality of the assets in
the portfolio and the dedication of our workforce. In parallel with
operational activity, we continue to review the reservoir performance of the
producing assets and identify mature fields where redevelopment could
materially increase production and ultimate hydrocarbon recovery.
Regarding i3's UK assets, the Company was very pleased to announce on 1 August
2022 the completion of a 25% working interest farmout to Europa Oil & Gas
Limited ("Europa"), in exchange for Europa funding 46.25% of the upcoming
Serenity appraisal well, expected to spud during mid-September. This
delineation well will test the thickness of the Captain sand to the West of
the initial Serenity discovery well 13/23c-10 and allow the Company to update
its estimates of oil in place. i3 UK's independent CPR estimates a range of
16 million barrels in the low case, which could support a single well
development in the vicinity of the discovery well via existing infrastructure,
to 240 million barrels in the high case, which would likely require a
stand-alone FPSO development. At present, the Company carries no reserves for
Serenity and as such does not consider any estimated production or cash flow
in its go-forward forecasts, thereby presenting pure potential upside value to
i3's current share price.
Financial discipline
The Board and Management are focused on delivering consistent value to
shareholders. i3 is committed to being a dividend payer that distributes up to
30% of its free cash flow, and it is protecting this commitment through a
conservative hedging program. The Company has and continues to keep a
substantial portion of its production hedged through risk management contracts
to manage commodity price risk, with additional free cash being available to
acquire additional production assets conditional on the associated metrics
competing with the organic returns achievable through the development of our
PUD and 2P inventory. As i3 continues to grow its portfolio, a proportion of
all incremental production will be hedged in order to secure future cash flow,
and the Company will remain commercial in monetising assets when third-party
interest warrants consideration.
With the well-timed acquisitions and capital deployment of the last 24 months,
the Company's assets have continued to outperform the Directors' expectations.
During H1 2022, i3 announced dividend distributions totalling £6.853 million.
Following a 25% increase to our 2022 dividend guidance from £11.827 million
to £14.784 million, the Company now pays a current monthly dividend of 0.1425
pence per share.
Governance
The Board recognises its responsibility for the proper management of the
Company and is committed to maintaining a high standard of corporate
governance. The Directors also recognise the importance of sound corporate
governance commensurate with the size and nature of the Company and the
interests of its shareholders. The Quoted Companies Alliance has published a
set of corporate governance guidelines for AIM companies, which include a code
of best practice comprising principles intended as a minimum standard, and
recommendations for reporting corporate governance matters. The Directors
comply with the QCA Corporate Governance Guidelines for Smaller Quoted
Companies so far as it is practicable having regard to the size and current
stage of development of the Company. The Board currently comprises two
Executive Directors (being the Chief Executive Officer and the Chief Financial
Officer) and four Non-Executive Directors (including the Chairman).
The Board's decision-making process is not dominated by any one individual or
group of individuals. The composition of the Board will be reviewed regularly
and modified as appropriate in response to the Company's changing
requirements. The Board has established an Audit and Risk Committee, Corporate
Governance Committee, Health, Safety, Environment and Security Committee,
Reserves Committee, and Remuneration Committee to ensure proper adherence to
sound governance and decision making.
Environmental stewardship
i3 is fortunate to operate in the UK and Canada which have some of the world's
most stringent and rigorous environmental laws and regulations. The Company
strives to meet or exceed all local, provincial or national environmental,
operational, reporting and compliance obligations and abandonment and
reclamation requirements. In Q4 2021 the Company commenced a detailed study of
its recently acquired operated wells and facilities to record baseline
emissions data for the purposes of developing an ESG strategy to meet its
currently stated target of being net zero with respect to Scope 1 and Scope 2
emissions by 2050. The work included an evaluation of potential opportunities
to reduce greenhouse gas emissions. i3 published its inaugural annual ESG
report on 7 July 2022 as part of the Company's commitment to long-term
sustainable resource development, environmental stewardship and the well-being
of employees and the communities in which i3 operates. The ESG report set out
the Company's goals and ambitions with respect to greenhouse gas emission
reductions and environmental stewardship.
Having now replaced the Company's entire inventory of high-bleed pneumatic
controllers with low-bleed units or instrument air, i3 continues to advance
its 30-well site electrification project at the Carmangay field to eliminate
greenhouse gas emissions associated with current propane-powered engines on
its pumping wells. Applications have now been approved for approximately USD
0.3 million grant funding under the Government of Alberta's Emissions
Reduction program to further assist the Company's electrification and vent
reduction projects at Carmangay. Similar projects are also being advanced at
i3's Simonette and Retlaw fields. Additionally, the Company continues to
exceed its abandonment obligations under the Alberta Energy Regulator's
("AER") Inventory Reduction Program (previously the Area Based Closure
Program) and expects to deploy approximately USD 2.5 million on wellbore
abandonment activities in 2022, targeting greater than 60 inactive wellbores.
Looking ahead
The Company is very proud of what it has and continues to accomplish. In
Canada, i3 will continue to adhere to its stated strategy for finding,
developing and acquiring assets as the Directors and management believe their
approach offers an excellent balance of risk and reward. In the UK, i3 remains
committed to the further appraisal and development of Serenity and we are
looking forward to the imminent commencement of our drilling programme.
Beyond our current business as an oil and gas company, we see climate change
as the most urgent matter of our time and deem it critical to act in a manner
that exhibits this concern. Though recent events somewhat painfully
demonstrate the world's continued reliance on a hydrocarbon-based economy, we
recognize the crucial role that our sector has to play in the transition to
net zero and we remain committed to an evolution of our energy company into
one that continues to benefit society for generations to come.
As always, we extend gratitude to our capital providers for their ongoing
support and to our employees for their relentless commitment to making i3 a
success. Though we operate within a macro environment that is beyond our
control, we believe we are doing the right things to create a very valuable
business that can weather the changing times.
"John Festival" "Majid Shafiq"
John Festival Majid Shafiq
Non-Executive Chairman
Chief Executive Officer
9 September 2022 9 September 2022
Financial Review
Production and revenue
Six-months Ended 30 June 2022 Six-months Ended 30 June 2021 Year Ended 31 December 2021
£'000 £'000 £'000
Oil and condensate (bbl/d) 3,916 1,814 2,424
Natural gas liquids (bbl/d) 5,021 1,893 2,854
Natural gas (mcf/d) 57,754 31,028 41,378
Royalty interest (boepd) 387 217 268
Total Production (boepd) 18,950 9,095 12,442
i3's production in the first half of 2022 averaged 18,950 boepd. Production
was comprised of 21% oil and condensate, 26% natural gas liquids, 51% natural
gas and 2% royalty interest. i3's production in the first half of 2021
averaged 9,095 boepd. Production over this period was comprised of 20% oil and
condensate, 21% natural gas liquids, 57% natural gas and 2% royalty interest.
Total production from the first half of 2022 increased 108% over the same
period in 2021, primarily as a result of a full six months of production
attributed to the Cenovus acquisition, which closed in August 2021. In
addition to the Cenovus acquisition, production increased as a result of newly
drilled production in the Marten Hills (Clearwater), Open Creek (Glauconite)
and Wapiti / Elmworth (Cardium and Dunvegan) areas.
Production for the full year of 2021 averaged 12,442 boepd. Production was
comprised of 20% oil and condensate, 23% natural gas liquids, 55% natural gas
and 2% oil and natural gas liquids.
Six-months Ended 30 June 2022 Six-months Ended 30 June 2021 Year Ended 31 December 2021
£'000 £'000 £'000
Total Revenue 101,571 26,479 86,763
Total revenue for the first half of 2022 was £101.6 million. Revenue over
this period was comprised of proceeds from the sale of oil and gas of £114.7
million, less associated royalties of £16.2 million, plus processing and
other income of £3.1 million. Revenue from oil and gas sales of £114.7
million was comprised of 65% oil and natural gas liquids and 35% natural
gas. Crown, freehold, and gross overriding royalties of £16.2 million, as a
percentage of oil and gas sales, was 14%. Processing and other income of £3.1
million over the above period primarily resulted from fees charged to third
party users of various facilities which are partially or wholly owned by the
Group.
Total revenue for the first half of 2021 was £26.5 million and was comprised
of proceeds from the sale of oil and gas of £28.3 million, less associated
royalties of £2.9 million, plus processing income of £1.1 million. Revenue
from oil and gas sales of £28.3 million was comprised of 62% oil and natural
gas liquids and 38% natural gas. Crown, freehold, and gross overriding
royalties of £2.9 million, as a percentage of oil and gas sales, was 10%.
Processing income of £1.1 million over the above period resulted from fees
charged to third party users of various facilities which are partially or
wholly owned by the Group.
Total revenue from the first half of 2022 increased 284%, compared to the
first half of 2021. The increase was primarily a result of increased
production coupled with an increase in commodity pricing in the first half of
2022. In addition to an increase in production and commodity pricing,
processing income increased period over period as a result of additional
third-party processing fees due to acquired facilities from the Cenovus
acquisition. The increases in oil and gas sales and processing income were
partially offset by an increase in royalty expenses due to increased
production and increased commodity pricing.
Expenses
Six-months Ended 30 June 2022 Six-months Ended 30 June 2021 Year Ended 31 December 2021
£'000 £'000 £'000
Total Production Costs 32,782 14,012 37,945
Production costs are primarily comprised of field labour and general field
maintenance, land retention and taxes, well repairs and expensed workovers,
processing, and product transportation.
Production costs in the first half of 2022 associated with the extraction and
processing of the Group's Canadian oil and gas assets totalled £32.8 million,
or £9.56/boe. Production costs in the first half of 2021 associated with the
extraction and processing of the Group's Canadian oil and gas assets totalled
£14.0 million, or £8.50/boe. The increase in production costs on a £/boe
basis is primarily a result of scheduled facility turnarounds and costs
associated with putting wells back on production, as a result of favorable
commodity price conditions. Also, general inflation in the first half of 2022
put pressure on existing production costs causing overall costs to increase,
compared to the same period in 2021.
Administrative expenses increased by £2.7 million to £9.5 million from the
first half of 2021 to the first half of 2022. The increase is largely due to
increased personnel costs and the increased overhead resulting from the
expansion of the Group's Canadian business in the second half of 2021 and the
first half of 2022.
Finance costs
The Group incurred finance costs of £3.3 million (six months ended 30 June
2021 - £3.6 million). The decrease is largely attributable to reduced
interest of £0.5 million on the loan notes which was paid in cash at 8% in
2022 and paid in kind at 11% in 2021, £0.5 million of warrant modification
expense incurred in 2021 but not in 2022, and a £0.3 million reduction in
bank charges and interest of creditors. These changes were offset by an
increase of £0.3 million for the accretion of loan notes and an increase of
£0.7 million in unwinding the discount on the decommissioning provision.
Cash and cash equivalents
The Group had £30.3 million of cash and cash equivalents at 30 June 2022, an
increase of £15.0 million from 31 December 2021. The increase was driven by
£48.6 million in net cash from operating activities, largely due to strong
net operating income in the period. The increase was partially offset by
£23.7 million of net cash used in investing activities, primarily capital
expenditure at the Group's Canadian operations as discussed below, and £12.0
million of net cash used in financing activities, primarily dividends paid,
interest paid, and employment tax settled on exercised share options. Cash and
cash equivalents were further impacted by £2.1 million for favourable foreign
exchange movements in the Canadian Dollar relative to the British Pound
Sterling and the impact this had on Canadian Dollar cash balances.
Exploration & evaluation and property, plant, & equipment
The Group had PP&E assets of £221.5 million (30 June 2021 - £110.1
million, 31 December 2021 - £224.1 million) and intangible E&E assets of
£54.7 million (30 June 2021 - £49.4 million, 31 December 2021 - £49.8
million) as at 30 June 2022.
The increase due to additions and acquisitions was offset by various disposals
and the depletion charge for the payment. Further details are in Note 8
(#_Property,_plant,_and) of the financial statements.
Total property, plant and equipment additions in the first half of 2022
totaling £34.1 million was comprised of work associated with the Group's
Canadian oil and gas assets.
Six-months Ended 30 June 2022 Six-months Ended 30 June 2021 Year Ended 31 December 2021
£'000 £'000 £'000
Land 57 260 358
Seismic 99 - 321
Drilling, completions 28,966 1,608 6,592
Facilities, equipment and pipelines 4,416 1,298 3,586
Other 611 26 327
Total Property, Plant & Equipment Additions 34,149 3,192 11,184
During the first half of 2022, i3 invested £29 million to drill and complete
19 (10.7 net) wells, in addition to drilling 1 (1.0 net) well that commenced
its completion program in July 2022. Also, i3 tested well locations in the
Marten Hills and Gilby area.
During the first half of 2022, i3 also invested £4.4 million on equipping the
above drilled wells, except for the Wapiti wells, which will be equipped in
July 2022. Also included in the £4.4 million, were various well and facility
electrification projects along with facility upgrades and pipeline
modifications.
An additional £0.8 million was spent on land retention costs, seismic costs
and other.
In the first half of 2022, i3 participated in drilling a total of 5 (5.0 net)
Glauconite wells in the Open Creek area, 6 (2.6 net) Clearwater wells in the
Marten Hills area, 1 (0.99 net) Montney well in the south Simonette area, 7 (3
net) Cardium wells in the Wapiti area and 1 (0.07 net) Dunvegan well in the
Elmworth area.
During the first half of 2022, additions to intangible exploration and
evaluation assets of £4.7 million was primarily comprised of capital costs
associated with various Crown land acquisitions in the Marten Hills Clearwater
play and the upcoming Serenity well.
Six-months Ended 30 June 2022 Six-months Ended 30 June 2021 Year Ended 31 December 2021
£'000 £'000 £'000
Total Exploration and Evaluation Additions 4,663 573 1,010
Profit, EPS, EBITDA, Adjusted EBITDA, and Net Operating Income
The Group's profit, EPS, EBITDA, Adjusted EBITDA, and Net operating income are
presented in the following table.
Six-months Ended 30 June 2022 Six-months Ended 30 June 2021 Year Ended 31 December 2021
£'000 £'000 £'000
Profit / (loss) for the period 14,725 (7,030) 25,083
Basic earnings / (loss) per share 1.30 (0.99) 2.84
Diluted earnings / (loss) per share 1.20 (0.99) 2.60
EBITDA ((1)) 38,821 2,773 54,996
Adjusted EBITDA ((1)) 38,821 2,973 30,239
Net operating income ((1)) 68,789 12,467 48,818
(1) Non-IFRS measure. Refer to Appendix B.
Principal risks and uncertainties
The Group operates in the oil and gas industry in an environment subject to a
range of inherent risk and uncertainties. The principal risks and
uncertainties, being those determined to be the most significant, are set out
in the annual report for the year ended 31 December 2021, along with the way
they are mitigated. The Directors have reconsidered the principal risks and
uncertainties and have concluded that the risks published in the 2021 annual
report remain appropriate, although highlight the impact that rising interest
rates and supply and demand dynamics have had on global inflation rates in
2022, and that continued inflation rate increases could adversely impact the
future operating and capital expenditures of the Group.
Going concern
The Directors have considered the going concern of the Group and are satisfied
that the Group has sufficient resources to operate and to meet their
commitments as they come due over the going concern period. The Group
continues to closely monitor its cash balances which stood at £30.3 million
as at 30 June 2022. Refer to Note 2 (#_Basis_of_preparation) of the financial
statements for further discussion.
Condensed Consolidated Statement of Comprehensive Income
Notes Six-months Ended 30 June 2022 Six-months Ended 30 June 2021 Year Ended 31 December 2021
£'000 £'000 £'000
(unaudited) (unaudited) (audited)
Revenue 4 (#_Revenue) 101,571 26,479 86,763
Production costs (32,782) (14,012) (37,945)
Loss on risk management contracts 14 (#_Risk_management_contracts) (20,475) (2,715) (5,485)
Depreciation and depletion 8 (#_Property,_plant,_and) (15,017) (7,036) (21,643)
Gross profit 33,297 2,716 21,690
Administrative expenses (9,493) (6,779) (13,094)
Acquisition costs - (200) (256)
Gain on bargain purchase - - 25,013
Operating profit / (loss) 23,804 (4,263) 33,353
Finance costs 5 (#_Finance_costs) (3,281) (3,583) (7,609)
Profit / (loss) before tax 20,523 (7,846) 25,744
Tax (charge) / credit for the period 6 (#_Taxation) (5,798) 816 (661)
Profit / (loss) for the period 14,725 (7,030) 25,083
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Foreign exchange differences on translation of foreign operations 11,605 732 1,511
Other comprehensive income for the period, net of tax 11,605 732 1,511
Total comprehensive income / (loss) for the period 26,330 (6,298) 26,594
Earnings / (loss) per share Pence Pence Pence
Earnings / (loss) per share - basic 7 (#_Earnings_per_share) 1.30 (0.99) 2.84
Earnings / (loss) per share - diluted 7 (#_Earnings_per_share) 1.20 (0.99) 2.60
All operations are continuing.
The accompanying notes form an integral part of these interim financial
statements.
Condensed Consolidated Statement of Financial position
Assets Notes 30 June 2022 30 June 2021 31 December 2021
£'000 £'000 £'000
(unaudited) (unaudited) (audited)
Non-current assets
Property, plant & equipment 8 (#_Property,_plant,_and) 221,469 110,149 224,080
Exploration and evaluation assets 9 (#_Exploration_and_evaluation) 54,715 49,382 49,819
Deferred tax asset 6 (#_Taxation) - 1,398 -
Other non-current assets 74 716 74
Total non-current assets 276,258 161,645 273,973
Current assets
Cash and cash equivalents 30,335 4,717 15,335
Trade and other receivables 10 (#_Trade_and_other) 36,973 8,892 25,503
Risk management contracts 14 (#_Risk_management_contracts) 533 - 814
Inventory 883 229 665
Total current assets 68,724 13,838 42,317
Current liabilities
Trade and other payables 11 (#_Trade_and_other_1) (54,970) (12,926) (19,709)
Risk management contracts 14 (#_Risk_management_contracts) (8,271) (1,864) (925)
Borrowings and leases 12 (#_Borrowings) (25,534) (29) (69)
Decommissioning provision 13 (#_Decommissioning_provision) (2,509) (1,988) (2,368)
Total current liabilities (91,284) (16,807) (23,071)
Net current (liabilities) / assets (22,560) (2,969) 19,246
Non-current liabilities
Non-current accounts payable 11 (#_Trade_and_other_1) - (1,899) (557)
Borrowings and leases 12 (#_Borrowings) - (20,911) (23,855)
Decommissioning provision 13 (#_Decommissioning_provision) (92,533) (67,161) (123,155)
Deferred tax liability 6 (#_Taxation) (8,335) - (7,486)
Total non-current liabilities (100,868) (89,971) (155,053)
Net assets 152,830 68,705 138,166
Capital and reserves
Ordinary shares 15 (#_Authorised,_issued_and) 119 73 113
Deferred shares 15 (#_Authorised,_issued_and) 50 50 50
Share premium 15 (#_Authorised,_issued_and) 48,646 64,057 44,203
Share-based payment reserve 16 (#_Share-based_payments) 6,164 7,223 9,102
Warrants - LNs 16 (#_Share-based_payments) 2,045 8,180 2,045
Foreign currency translation reserve 12,969 585 1,364
Retained earnings / (accumulated deficit) 82,837 (11,463) 81,289
Shareholders' funds 152,830 68,705 138,166
The accompanying notes form an integral part of these interim financial
statements.
The consolidated financial statements of i3 Energy plc, company number
10699593, were approved by the Board of Directors and authorized for issue on
9 September 2022. Signed on behalf of the Board of Directors by:
"Majid Shafiq"
Majid Shafiq - Director
Condensed Consolidated Statement of Changes in Equity
Ordinary shares Share premium Deferred shares Share-based payment reserve Warrants - LN Foreign currency translation reserve Retained earnings Total (unaudited)
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 January 2021 70 61,605 50 6,337 9,714 (147) (4,433) 73,196
Total comprehensive loss for the period - - - - - 732 (7,030) (6,298)
Transactions with owners:
Exercise of options 2 15 - - - - - 17
Exercise of warrants 1 2,437 - (452) (1,534) - - 452
Share-based payment expense - - - 1,338 - - - 1,338
Balance at 30 June 2021 73 64,057 50 7,223 8,180 585 (11,463) 68,705
Balance at 1 January 2022 113 44,203 50 9,102 2,045 1,364 81,289 138,166
Total comprehensive income for the period - - - - - 11,605 14,725 26,330
Transactions with owners:
Exercise of options 15 (#_Authorised,_issued_and) 6 4,443 - (3,774) - - (6,324) (5,649)
Exercise of warrants - - - - - - - -
Share-based payment expense 16 (#_Share-based_payments_1) - - - 836 - - - 836
Dividends declared in the period - - - - - - (6,853) (6,853)
Balance at 30 June 2022 119 48,646 50 6,164 2,045 12,969 82,837 152,830
The accompanying notes form an integral part of these interim financial
statements.
The following describes the nature and purpose of each reserve within equity:
Reserve Description and purpose
Ordinary shares Represents the nominal value of shares issued
Share premium account Amount subscribed for share capital in excess of nominal value
Deferred shares Represents the nominal value of shares issued, the shares have full capital
distribution (including on wind up) rights and do not confer any voting or
dividend rights, or any of redemption
Share-based payment reserve Represents the accumulated balance of share-based payment charges recognised
in respect of share options granted by the Company less transfers to retained
earnings in respect of options exercised or cancelled/lapsed
Warrants - LNs Represents the accumulated balance of share-based payment charges recognised
in respect of warrants granted by the Company in respect to warrants granted
to the loan note holders
Foreign currency translation reserve Exchange differences arising on consolidating the assets and liabilities of
the Group's non-Pound Sterling functional currency operations (including
comparatives) recognised through the Consolidated Statement of Other
Comprehensive Income
Retained earnings Cumulative net gains and losses recognised in the Consolidated Statement of
Comprehensive Income
CONDENSED Consolidated Statement of Cash Flow
Notes Six-months Ended 30 June 2022 Six-months Ended 30 June 2021 Year Ended 31 December 2021
£'000 £'000 £'000
(unaudited) (unaudited) (audited)
OPERATING ACTIVITIES
Profit / (loss) before tax 20,523 (7,846) 25,744
Adjustments for:
Depreciation and depletion 8 (#_Property,_plant,_and) 15,017 7,036 21,643
Gain on bargain purchase and asset dispositions - - (25,013)
Finance costs 5 (#_Finance_costs) 3,281 3,583 7,609
Unrealised loss on risk management contracts 14 (#_Risk_management_contracts) 7,223 1,858 111
Unrealised FX gain (2) (157) (154)
Share-based payments expense - employees (including NEDs) 16 (#_Share-based_payments_1) 836 1,338 3,217
Operating cash flows before movements in working capital:
Increase in trade and other receivables (11,686) (441) (15,297)
Increase in trade and other payables 13,656 2,671 6,862
Increase in inventory (218) (64) (283)
Net cash from operating activities 48,630 7,978 24,439
INVESTING ACTIVITIES
Acquisitions 15 (3,850) (37,079)
Expenditures on property, plant & equipment (19,277) (2,283) (9,465)
Disposal of property, plant & equipment 170 50 529
Expenditures on exploration and evaluation assets (4,452) (3,514) (3,317)
Expenditure on decommissioning oil and gas assets (201) (175) (648)
Tax credit for R&D expenditure 6 (#_Taxation) - 487 487
Net cash used in investing activities (23,745) (9,285) (49,493)
FINANCING ACTIVITIES
Proceeds on issue of ordinary shares, net of issue costs 15 (#_Authorised,_issued_and) 635 17 38,125
Employment tax on exercised share options 16 (#_Share-based_payments_1) (6,324) - -
Interest and other finance charges paid 5 (#_Finance_costs) (1,161) (356) (448)
Lease payments 12 (#_Borrowings) (15) (15) (30)
Dividends paid 15 (#_Authorised,_issued_and) (5,153) - (3,417)
Net cash (used in) / from financing activities (12,018) (354) 34,230
Effect of exchange rate changes on cash 2,133 200 (19)
Net Increase / (Decrease) in cash and cash equivalents 15,000 (1,461) 9,157
Cash and cash equivalents, beginning of period 15,335 6,178 6,178
CASH AND CASH EQUIVALENTS, END OF PERIOD 30,335 4,717 15,335
Included within cash and cash equivalents is £345 thousand of restricted
cash, which relates to guarantees for product marketing.
Non-current accounts payable reconciliation is shown in Note 11
(#_Trade_and_other_1) and the debt reconciliation is shown in Note 12
(#_Borrowings) .
The accompanying notes form an integral part of these interim financial
statements.
Notes TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1 Summary of significant accounting policies
General Information and Authorisation of Financial Statements
i3 Energy plc ("the Company") is a Public Company, limited by shares,
registered in England and Wales under the Companies Act 2006 with registered
number 10699593. The Company's ordinary shares are traded on the Toronto Stock
Exchange and the AIM Market operated by the London Stock Exchange. The address
of the Company's registered office is New Kings Court, Tollgate, Chandler's
Ford, Eastleigh, Hampshire, SO53 3LG.
The Company and its subsidiaries (together, "the Group") principal activities
consist of oil and gas production in Western Canadian Sedimentary Basin and of
the appraisal of oil and gas assets on the UK Continental Shelf.
2 Basis of preparation
The condensed consolidated interim financial statements have been prepared in
accordance with International Accounting Standard 34 'Interim Financial
Reporting' ("IAS 34") and the AIM rules. These condensed consolidated interim
financial statements have been prepared using the accounting policies that
were applied in the Group's statutory financial statements for the year ended
31 December 2021 and are expected to be applied in the preparation of the
financial statements for the year ended 31 December 2022. The condensed
interim financial statements should be read in conjunction with the annual
financial statements for the year ended 31 December 2021, which have been
prepared in accordance with UK adopted international accounting standards.
The reports for the six months ended 30 June 2022 and 30 June 2021 are
unaudited and do not constitute statutory accounts as defined by the Companies
Act 2006. The financial statements for 31 December 2021 have been prepared and
delivered to the Registrar of Companies. The auditor report of these financial
statements was unqualified.
The financial information is presented in Pounds Sterling (£, GBP), which is
the Company's functional currency, and rounded to the nearest thousand unless
otherwise stated. The functional currency of the Company's UK subsidiary, i3
Energy North Sea Limited, is GBP, and the functional currency of its Canadian
subsidiary, i3 Energy Canada Limited, is CAD. A summary of period-average and
period-end exchange rates is presented in the table below:
Six-months Ended 30 June 2022 Six-months Ended 30 June 2021 Year Ended 31 December 2021
Period-average GBP:CAD exchange rate 1.6513 1.7319 1.7246
Period-end GBP:CAD exchange rate 1.5661 1.7112 1.7166
In preparing these interim financial statements, management has made
judgements and estimates that affect the application of accounting policies
and the reported amounts of assets and liabilities, income, and expense.
Actual results may differ from these estimates. The significant judgements
made by management in applying the Group's accounting policies and the key
sources of estimation uncertainty were the same as those disclosed in the
Group's statutory financial statements for the year ended 31 December 2021
except for 'Fair value judgements for business acquired' as there were no
business combinations completed during the period ended 30 June 2022.
Going concern
The Group's business activities, together with the factors likely to affect
its future development, performance and position are set out in the Chairman's
and Chief Executive's Statement. The financial position of the Group, its net
cash position and liabilities are described in these consolidated interim
financial statements and in the Financial Review.
The Group ended the period with cash and cash equivalents of £30.3 million,
current assets of £68.7 million, and current liabilities of £91.3 million.
The Group's debt primarily consists of the £22.0 million H1-2019 LNs which
mature in 2023, whose carrying value of £25.5 million as at 30 June 2022 has
been classified as a current liability. During the 6 months ended 30 June
2022, the Group generated £48.6 million of cash from operating activities.
The Directors have given careful consideration to the appropriateness of the
going concern assumption, including cash forecasts through the end of 2023,
committed capital expenditure, and the principal risks and uncertainties faced
by the Group. The cash flow forecasts include the continued payment of regular
dividends, the capital programs in Canada, the drilling of an appraisal well
at Serenity, and the repayment of the H1-2019 LNs in May 2023. This assessment
also considered various downside scenarios including a combined downside
scenario with a USD 20/bbl decrease in WTI, a CAD 1/GJ decrease in AECO, and a
20% reduction in production rates, risks which are partially mitigated by the
risk management contracts the Group currently has in place.
Following this review, the Directors are satisfied that the Group has
sufficient resources to operate and to meet their commitments as they come due
over the going concern period which considers at least 12 months from the date
of approval of the financial statements. Accordingly, the Directors continue
to adopt the going concern basis in preparing the financial statements for the
period ended 30 June 2022.
3 Segmental reporting
The Chief Operating Decision Maker (CODM) is the Board of Directors. They
consider that the Group operates as two segments, as follows:
· UK / Corporate - That of Corporate activities in the UK and oil
and gas exploration, appraisal and development on the UKCS.
· Canada - That of oil and gas production in the WCSB.
Such components are identified on the basis of internal reports that the Board
reviews regularly.
The following is an analysis of the Group's revenue and results by reportable
segment for the six months ended 30 June 2022:
UK / Corporate Canada Total
£'000 £'000 £'000
Revenue - 101,571 101,571
Production costs - (32,782) (32,782)
Loss on risk management contracts - (20,475) (20,475)
Depreciation and depletion (2) (15,015) (15,017)
Gross (loss) / profit (2) 33,299 33,297
Administrative expenses (4,749) (4,744) (9,493)
Operating (loss) / profit (4,751) 28,555 23,804
Finance costs (2,070) (1,211) (3,281)
(Loss) / profit before tax (6,821) 27,344 20,523
Tax credit for the period - (5,798) (5,798)
(Loss) / profit for the period (6,821) 21,546 14,725
The timing of revenue recognition has been disclosed within Note 4 (#_Revenue)
.
The following is an analysis of the Group's revenue and results by reportable
segment for the six months ended 30 June 2021:
UK / Corporate Canada Total
£'000 £'000 £'000
Revenue - 26,479 26,479
Production costs - (14,012) (14,012)
Loss on risk management contracts - (2,715) (2,715)
Depreciation and depletion (1) (7,035) (7,036)
Gross (loss) / profit (1) 2,717 2,716
Administrative expenses (3,484) (3,295) (6,779)
Acquisition costs - (200) (200)
Operating (loss) (3,485) (778) (4,263)
Finance costs (2,927) (656) (3,583)
(Loss) before tax (6,412) (1,434) (7,846)
Tax credit for the period 487 329 816
(Loss) for the period (5,925) (1,105) (7,030)
The following is an analysis for the Group's revenue and results by reportable
segment for the 12 months ended 31 December 2021:
UK / Corporate Canada Total
£'000 £'000 £'000
Revenue - 86,763 86,763
Production costs - (37,945) (37,945)
Loss on risk management contracts - (5,485) (5,485)
Depreciation and depletion (4) (21,639) (21,643)
Gross (loss) / profit (4) 21,694 21,690
Administrative expenses (7,059) (6,035) (13,094)
Acquisition costs - (256) (256)
Gain on bargain purchase and asset dispositions - 25,013 25,013
Operating profit (7,063) 40,416 33,353
Finance costs (5,930) (1,679) (7,609)
(Loss) / profit before tax (12,993) 38,737 25,744
Tax (charge) / credit for the year 487 (1,148) (661)
(Loss) / profit for the year (12,506) 37,589 25,083
The following is an analysis of the Group's assets and liabilities by
reportable segment as at 30 June 2022 and the capital expenditure for the
period then ended:
UK / Corporate Canada Total
£'000 £'000 £'000
Total assets 52,791 292,191 344,982
Total liabilities (29,041) (163,111) (192,152)
Capital expenditure - E&E 379 4,284 4,663
Capital expenditure - PP&E 1 34,149 34,150
The following is an analysis of the Group's assets and liabilities by
reportable segment as at 30 June 2021 and the capital expenditure for the
period then ended:
UK / Corporate Canada Total
£'000 £'000 £'000
Total assets 49,853 125,630 175,483
Total liabilities (24,404) (82,374) (106,778)
Capital expenditure - E&E 573 - 573
Capital expenditure - PP&E - 3,192 3,192
The following is an analysis of the Group's assets and liabilities by
reportable segment as at 31 December 2021 and the capital expenditure for the
period then ended:
UK / Corporate Canada Total
£'000 £'000 £'000
Total assets 50,129 266,161 316,290
Total liabilities (25,733) (152,391) (178,124)
Capital expenditure - E&E 1,010 - 1,010
Capital expenditure - PP&E - 11,184 11,184
4 Revenue
All revenue is derived from contracts with customers and is comprised of the
sale of oil and gas and processing income, net of royalties, as follows:
Six-months Ended 30 June 2022 Six-months Ended 30 June 2021 Year Ended 31 December 2021
£'000 £'000 £'000
Oil and natural gas liquids 74,607 17,424 61,027
Natural Gas 40,011 10,820 34,994
Royalties (16,174) (2,908) (12,094)
Revenue from the sale of oil and gas 98,444 25,336 83,927
Processing income 3,081 1,143 2,605
Other operating income 46 - 231
Total revenue 101,571 26,479 86,763
Revenue from the sale of oil and natural gas liquids is recognised at the
point in time when title transfers to the purchaser. Processing income is
recognised at the time the service is rendered.
5 Finance costs
Six-months Ended 30 June 2022 Six-months Ended 30 June 2021 Year Ended 31 December 2021
£'000 £'000 £'000
Accretion of loan notes 1,616 1,348 2,824
PIK interest expense on loan notes - 1,619 3,144
Cash interest expense on loan notes 1,154 - -
Share-based compensation - warrants (Note 16 (#_Share-based_payments) ) - 451 451
Unwinding of discount on decommissioning provision (Note 13 1,206 535 1,539
(#_Decommissioning_provision) )
Bank charges and interest on creditors 7 356 374
Gain on financial instrument at FVTPL (Note 11 (#_Trade_and_other_1) ) (702) (726) (723)
Total finance costs 3,281 3,583 7,609
6 Taxation
Taxation charge / (credit)
The below table reconciles the tax charge for the period to the expected tax
charge based on the result for the period and the corporation tax rate.
Six-months Ended 30 June 2022 Six-months Ended 30 June 2021 Year Ended 31 December 2021
£'000 £'000 £'000
Profit / (loss) before income tax 20,523 (7,846) 25,744
Rate of Corporate Tax 40% 40% 40%
Expected tax charge / (credit) 8,209 (3,138) 10,298
Effects of:
Interest and other expenses not deductible for SCT 277 293 620
Permanent differences 464 708 (3,804)
Foreign tax rate difference (4,648) 244 (6,585)
Change in estimated pool balances 53 - 179
Derecognition of deferred tax asset 1,443 1,564 440
R&D tax credit received - (487) (487)
Total income tax charge / (credit) 5,798 (816) 661
Of which: Six-months Ended 30 June 2022 Six-months Ended 30 June 2021 Year Ended 31 December 2021
£'000 £'000 £'000
Current tax charge / (credit) 5,675 (487) (487)
Deferred tax charge / (credit) 123 (329) 1,148
Total income tax charge / (credit) 5,798 (816) 661
In 2021 the Group received £487 thousand in R&D tax refunds in the UK in
respect of the 2019 fiscal year. The difference on foreign tax rate results
from the 23% rate of corporate taxation at its Canadian subsidiary.
Deferred tax
The components of the net deferred tax asset and the movements during the
period is summarised as follows:
At 31 December 2021 Acquired during the period Recognised in income FX movement At 30 June 2022
£'000 £'000 £'000 £'000 £'000
UK:
Deferred tax assets:
Losses 28,711 - 2,139 - 30,850
Valuation allowance (8,782) - (1,991) - (10,773)
Deferred tax liabilities:
PP&E / E&E (19,929) - (148) - (20,077)
Net deferred tax asset / (liability) - - - - -
Canada:
Deferred tax assets:
Decommissioning provision 28,870 - (9,279) 2,269 21,860
Losses 2,416 - (2,511) 95 -
Risk management contracts 25 - 1,661 93 1,779
Other 207 - (1) 20 226
Valuation allowance (5,639) - 545 (512) (5,606)
Deferred tax liabilities: -
PP&E / E&E (33,365) - 9,462 (2,691) (26,594)
Net deferred tax asset / (liability) (7,486) - (123) (726) (8,335)
Net deferred tax asset / (liability) (7,486) - (123) (726) (8,335)
A deferred tax asset has not been recognised in respect of tax losses and
allowances in the UK due to uncertainty over the availability of future
taxable profits in the UK to offset these losses against.
The Group recognised a deferred tax charge of £123 thousand for changes in
net deductible temporary differences in the period. The deferred tax asset has
been recognised in Canada to the extent that the Group anticipates probable
future taxable profits to against which the assets can be utilised.
The Group's estimated tax pools are summarised in the following table. The
non-capital tax loss pools in Canada expire over a period of 20 years. All
other tax pools do not expire.
30 June 2022 30 June 2021 31 December 2021
£'000 £'000 £'000
UK:
Taxable losses 34,986 25,227 29,325
Mineral extraction allowances 50,198 49,382 49,819
Total - UK 85,184 74,609 79,144
Canada:
Canadian exploration expense 1,746 3,116 3,107
Canadian development expense 30,568 5,405 7,519
Canadian oil and gas property expense 62,800 39,614 56,391
Undepreciated capital cost 15,241 9,111 11,991
Non-capital losses - 22,127 10,503
Other 921 674 833
Total - Canada 111,276 80,047 90,344
7 Earnings per share
From continuing operations
Basic earnings or loss per share is calculated as profit / (loss) for the
period, divided by the weighted average number of ordinary shares, adjusted
for any bonus element.
Diluted earnings or loss per share amounts are calculated by dividing profits
or losses for the period attributable to ordinary equity holders of the parent
by the weighted average number of ordinary shares outstanding during the
period, plus the weighted average number of shares that would be issued on the
conversion of dilutive potential ordinary shares into ordinary shares.
The calculation of the basic and diluted earnings per share is based on the
following data:
Six-months Ended 30 June 2022 Six-months Ended 30 June 2021 Year Ended 31 December 2021
£'000 £'000 £'000
Earnings
Earnings / (loss) for the purposes of basic and diluted earnings per share 14,725 (7,030) 25,083
being net loss attributable to owners of i3 Energy
Weighted average number of shares
Weighted average number of Ordinary Shares - basic 1,135,217,866 708,565,347 883,664,352
Effect of dilutive potential ordinary shares:
Share options 85,054,264 - 49,369,708
Warrants 9,047,953 - 32,758,752
Weighted average number of Ordinary Shares - diluted 1,229,320,083 708,565,347 965,792,812
Basic earnings / (loss) per share (pence) 1.30 (0.99) 2.84
Diluted earnings / (loss) per share (pence) 1.20 (0.99) 2.60
The Share options and Warrants were anti-dilutive for the six months ended 30
June 2021 as the Group incurred a loss. As at 30 June 2022, the number of
potentially dilutive Share options and Warrants outstanding was 29,205,789 and
9,051,927, respectively (Note 16 (#_Share-based_payments_1) ).
In 2021, prior to the BHGE warrant repricing on 17 May 2021, these instruments
were anti-dilutive as their exercise price exceed the average market price of
the Ordinary Shares over this period. Concurrent with their repricing the BHGE
warrants were immediately exercised for ordinary shares. The BHGE shares were
therefore included in the basic weighted average number of Ordinary Shares
from 17 May 2021 but were not further included in the effect of dilutive
potential ordinary shares.
8 Property, plant, and equipment
Oil and gas assets Right of use assets Other fixed assets Total
£'000 £'000 £'000 £'000
Cost
As at 1 January 2021 113,193 108 22 113,323
Acquisitions 122,762 - - 122,762
Additions 11,184 - 50 11,234
Disposals (8,242) - - (8,242)
Changes to decommissioning estimates 7,603 - - 7,603
Decommissioning settlements under SRP and ASCP (Note 13 (324) - - (324)
(#_Decommissioning_provision) )
Exchange movement 3,857 1 - 3,858
As at 31 December 2021 250,033 109 72 250,214
Acquisitions 51 - - 51
Additions 34,149 - 1 34,150
Disposals (360) - - (360)
Changes to decommissioning estimates (43,992) - - (43,992)
Exchange movement 25,867 11 3 25,881
As at 30 June 2022 265,748 120 76 265,944
Accumulated depreciation
As at 1 January 2021 (4,789) (6) (19) (4,814)
Charge for the year (21,611) (27) (5) (21,643)
Disposals 481 - - 481
Exchange movement (158) - - (158)
As at 31 December 2021 (26,077) (33) (24) (26,134)
Charge for the period (15,000) (12) (5) (15,017)
Exchange movement (3,320) (4) - (3,324)
As at 30 June 2022 (44,397) (49) (29) (44,475)
Carrying amount at 31 December 2021 223,956 76 48 224,080
Carrying amount at 30 June 2022 221,351 71 47 221,469
9 Exploration and evaluation assets (Intangible)
Six-months Ended 30 June 2022 Six-months Ended 30 June 2021 Year Ended 31 December 2021
£'000 £'000 £'000
At start of period 49,819 48,809 48,809
Additions 4,663 573 1,010
Exchange movement 233 - -
At end of period 54,715 49,382 49,819
Included within E&E assets is the Group's UK P.2358 Licence, which
commenced its four-year second term on 30 September 2020 and contains the
Serenity discovery and the Liberator West and Minor High prospective areas.
In March 2022 the Group announced it had agreed farm-in terms with Europa Oil
& Gas Limited ("Europa") for a 25% working interest ("WI") in Block 13/23c
North (Licence P.2358) which contains the Serenity discovery. Under the terms
of the farmout, Europa will fund 46.25% of the cost of the upcoming Serenity
appraisal well up to a gross capped well cost of £15 million. Any well costs
exceeding £15 million will be funded by the companies in proportion to their
respective working interests. The Farm-In Agreement ("FIA") was signed in
April 2022 and following the fulfilment of all conditions precedent in the
FIA, the transaction closed in August 2022. Following this farm-out, i3
retains a 75% WI in Block 13/23c North (Licence P.2358) and a 100% WI in Block
13/23c South (Licence P.2358), which contains the Minos High Prospect and
Liberator discovery.
Also included within E&E assets are costs associated with land purchases
in the Clearwater play in Canada.
Management conducted an assessment of indicators of impairment for its E&E
assets as at 30 June 2022, concluding that no indicators of impairment were
identified.
10 Trade and other receivables
30 June 2022 30 June 2021 31 December 2021
£'000 £'000 £'000
Trade receivables 28,459 6,052 21,982
Joint venture receivables 4,654 1,178 1,483
Prepayments & other receivables 3,860 1,662 2,038
Total trade and other receivables 36,973 8,892 25,503
Trade and other receivables are all due within one year.
Joint venture receivables represent amounts due from operating partners for
operating and capital activity in Canada.
The fair value of trade and other receivables is the same as their carrying
values as stated above and they do not contain any impaired assets.
The maximum exposure to credit risk at the reporting date is the carrying
value of each class of receivable mentioned above. The Group does not hold any
collateral as security.
11 Trade and other payables
30 June 2022 30 June 2021 31 December 2021
£'000 £'000 £'000
Trade creditors 13,698 3,192 5,169
Sales tax payable 632 25 65
Accruals 31,923 9,247 13,565
Dividends payable 1,700 - -
Joint venture payables 1,033 462 910
Income taxes payable 5,984 - -
Total trade and other payables 54,970 12,926 19,709
The average credit period taken for trade purchases is 30 days. No interest is
charged on the trade payables. The carrying values of trade and other payables
are considered to be a reasonable approximation of the fair value and are
considered by the Directors as payable within one year.
Joint venture payables represent amounts due to operating partners for
operating and capital activity in Canada.
Non-current accounts payable
On 2 July 2019 the Group agreed with Baker Hughes, a GE Company, and GE Oil
& Gas Limited (collectively referred to as "BHGE" hereafter) that £3.0
million of oilfield service and oilfield equipment contract payments will not
become payable until such time as i3 has received its first sales revenues
from Liberator Phase I. This payable has been recorded as a non-current
accounts payable.
On 17 May 2021, i3 announced that it had successfully restructured legacy
contracts and agreements for equipment, oil field services, and warrants with
BHGE. In summary, the remainder of a £5.8 million contract for subsea trees
and wellheads was cancelled, 5,277,045 warrants had an exercise price
reduction to £0.0001 per share (the "Warrant Shares"), and an outstanding
contingent payment for £3.0 million ("Deferred Payment Invoice Balance", or
"DPIB") in oil field services and equipment that becomes payable at such time
as the Company receives consideration from any sale or farm-down of its
Serenity or Liberator assets will be reduced by the exercise value of the
Warrant Shares, the market value of the Warrant Shares from time to time, all
dividends received by BHGE associated with the Warrant Shares, and certain
payments to be made to BHGE. The purpose of this restructuring was to enable
i3 to become a dividend payer, as certain conditions of the abovementioned
contracts prevented it from reducing its share premium account - a required
step in order for i3 to effect dividend distributions to its shareholders. The
incremental fair value of the modified warrants was expensed in 2021 (Note 5
(#_Finance_costs) ).
The future Market Value reduction of the payable amount will vary with the
trading value of i3 shares and therefore represents an embedded derivative.
The entire combined contract is designated as at FVTPL. The fair value of
£1,087 thousand has been calculated as the £3.0 million payable amount, less
the exercise value of the Warrant Shares of £1 thousand, less cash payments
of £487 thousand made against the DPIB balance in 2021, less the Market Value
of the Warrant Shares of £1,383 thousand, which totals the 5,277,045 Warrant
Shares as at the 30 June 2022 share price of 26.20/share and £42 thousand of
dividends paid to the Warrant Shares. The fair value of the combined
contract is classified as Level 2 in the fair value hierarchy as defined by
IFRS 13 'Fair value measurements'. The remaining balance is expected to be
paid in 2022 has been classified as a current liability. A reconciliation of
the balance is as follows:
30 June 2022 30 June 2021 31 December 2021
£'000 £'000 £'000
Opening payable amount 1,789 3,000 3,000
Exercise value of the Warrant Shares - (1) (1)
Cash payments made during the period - - (487)
Non-cash change in market value of the Warrant Shares (702) (726) (723)
Total 1,087 2,273 1,789
30 June 2022 30 June 2021 31 December 2021
£'000 £'000 £'000
Of which:
Current, within trade accounts payable 1,087 374 1,232
Non-current - 1,899 557
Total 1,087 2,273 1,789
12 Borrowings
H1-2019 loan note facility
In May 2019, the Group completed a £22 million H1-2019 loan note facility
("H1-2019 LN"). The H1-2019 LNs have a term of 4 years, maturing on 31 May
2023 and bearing interest, payable on a quarterly basis at the Group's option
(i) in cash at a rate of 8% per annum, or (ii) in kind at a rate of 11% per
annum by the issuance of additional H1-2019 LNs. The Group elected to pay all
interest in kind prior to 2022, and in cash for the first two quarters of
2022.
Interest expense and accretion expense to 30 June 2022 was £1,154 thousand
and £1,616 thousand respectively (note 5 (#_Finance_costs) ).
Borrowings reconciliation
H1-2019 LN Leases Total
£'000 £'000 £'000
At 31 December 2020 17,887 99 17,986
Increase through interest (non-cash) 3,144 2 3,146
Accretion expense (non-cash) 2,824 - 2,824
Lease payments (cash) - (30) (30)
Exchange movement (non-cash) - (2) (2)
At 31 December 2021 23,855 69 23,924
Increase through interest (non-cash) - 1 1
Accretion expense (non-cash) 1,616 - 1,616
Lease payments (cash) - (15) (15)
Exchange movement (non-cash) - 8 8
At 30 June 2022 25,471 63 25,534
H1-2019 LN Leases Total
£'000 £'000 £'000
Of which:
Current 25,471 63 25,534
Non-current - - -
At 30 June 2022 25,471 63 25,534
13 Decommissioning provision
30 June 2022 30 June 2021 31 December 2021
£'000 £'000 £'000
At start of period 125,523 66,783 66,783
Liabilities assumed through acquisitions 66 540 56,350
Liabilities incurred 612 11 312
Liabilities disposed (190) (776) (7,984)
Liabilities settled (320) (196) (670)
Liabilities settled under SRP and ASCP - (87) (324)
Change in estimates (43,992) 1,301 7,603
Unwinding of discount (Note 5 (#_Finance_costs) ) 1,206 535 1,539
Exchange movement 12,137 1,038 1,914
At end of period 95,042 69,149 125,523
30 June 2022 30 June 2021 31 December 2021
£'000 £'000 £'000
Of which:
Current 2,509 1,988 2,368
Non-current 92,533 67,161 123,155
Total 95,042 69,149 125,523
A summary of the key estimates and assumptions are as follows:
30 June 2022 30 June 2021 31 December 2021
Undiscounted / uninflated cash flows (CAD, thousands) 208,582 121,910 207,371
Inflation rate 1.78% 1.73% 1.82%
Discount rate 3.14% 1.84% 1.68%
Timing of cash flows 1-50 years 1-50 years 1-50 years
Liabilities settled reflect work undertaken in the period. This includes wells
decommissioned under Alberta's Site Rehabilitation Program ("SRP") and
Saskatchewan's Accelerated Site Closure Program ("ASCP") whereby certain costs
of settling the Group's liabilities were borne by the Government of Canada.
Where liabilities were settled through the SRP a corresponding decrease to the
decommissioning asset was recorded. The change in estimate for the period
ended 30 June 2022 was primarily driven by changes in market interest rates
(which increased 1.46%) and inflation rates (which decreased 0.04%) as
published by the Bank of Canada. The inflation and discount rates have been
pinpointed as a key source of estimation uncertainty, and a sensitivity to a
+/- 0.50% movement to these inputs have been disclosed in the key sources of
estimation uncertainty note in the Group's statutory financial statements for
the year ended 31 December 2021.
14 Risk management contracts
The Group enters into a variety of risk management contracts to hedge a
portion of the Group's exposure to fluctuations in prevailing commodity prices
for oil, gas, and natural gas liquids. The Group's physical commodity
contracts represent physical delivery sales contracts in the ordinary course
of business and are therefore not recorded at fair value in the consolidated
interim financial statements. The Group's financial risk management contracts
have not been designated as hedging instruments in a hedge relationship under
IFRS 9 and are carried at fair value through profit and loss. The financial
risk management contracts are classified as Level 2 in the fair value
hierarchy as defined by IFRS 13 'Fair value measurements'.
The principal terms of the risk management contracts held as at 30 June 2022
are presented in the table below.
Type Effective date Termination date Total Volume Avg. Price
AECO 5A Physical Swaps 1 Apr 2022 31 Dec 2022 9,000 GJ/Day CAD 3.6244 / GJ
AECO 5A Physical Swaps 1 Apr 2022 31 Oct 2022 20,275 GJ/Day CAD 3.9371 / GJ
AECO 5A Physical Swaps 1 Jul 2022 31 Jul 2022 7,500 GJ/Day CAD 3.2700 / GJ
AECO 5A Physical Swaps 1 Aug 2022 31 Aug 2022 7,500 GJ/Day CAD 3.3300 / GJ
AECO 5A Physical Swaps 1 Sep 2022 30 Sep 2022 7,500 GJ/Day CAD 3.2600 / GJ
AECO 5A Physical Swaps 1 Oct 2022 31 Dec 2022 7,500 GJ/Day CAD 3.5000 / GJ
AECO 5A Physical Swaps 1 Nov 2022 30 Nov 2022 2,500 GJ/Day CAD 5.0050 / GJ
AECO 5A Financial Swaps 1 Nov 2022 31 Mar 2023 10,000 GJ/Day CAD 4.1500 / GJ
AECO 5A Physical Swaps 1 Nov 2022 31 Mar 2023 5,000 GJ/Day CAD 4.3800 / GJ
AECO 5A Physical Swaps 1 Dec 2022 31 Dec 2022 2,500 GJ/Day CAD 5.0800 / GJ
AECO 5A Physical Swaps 1 Jan 2023 31 Jan 2023 2,500 GJ/Day CAD 5.1500 / GJ
AECO 5A Financial Swaps 1 Jan 2023 31 Mar 2023 5,000 GJ/Day CAD 4.3800 / GJ
AECO 5A Physical Swaps 1 Jan 2023 31 Mar 2023 5,000 GJ/Day CAD 4.7500 / GJ
AECO 5A Physical Swaps 1 Feb 2023 28 Feb 2023 2,500 GJ/Day CAD 5.1300 / GJ
AECO 7A Physical Collar 1 Jan 2023 31 Mar 2023 2,500 GJ/Day CAD 6.0000-9.4000 / GJ
AECO 7A Financial Collar 1 Jan 2023 31 Mar 2023 5,000 GJ/Day CAD 6.5000-9.3300 / GJ
WTI Financial Swaps 1 Apr 2022 31 Dec 2022 1,000 bbl/Day CAD 92.63 / bbl
WTI Financial Swaps 1 Jul 2022 30 Sep 2022 250 bbl/Day CAD 100.09 / bbl
WTI Physical Swaps 1 Oct 2022 31 Oct 2022 250 bbl/Day CAD 100.00 / bbl
WTI Physical Swaps 1 Nov 2022 30 Nov 2022 250 bbl/Day CAD 100.00 / bbl
WTI Physical Swaps 1 Dec 2022 31 Dec 2022 250 bbl/Day CAD 101.05 / bbl
WTI Physical Swaps 1 Jan 2023 31 Jan 2023 250 bbl/Day CAD 100.00 / bbl
WTI Financial Swaps 1 Jan 2023 31 Mar 2023 250 bbl/Day CAD 106.00 / bbl
WTI Physical Swaps 1 Feb 2023 28 Feb 2023 250 bbl/Day CAD 100.00 / bbl
WTI Physical Swaps 1 Mar 2023 31 Mar 2023 250 bbl/Day CAD 109.53 / bbl
WTI Physical Swaps 1 Jan 2023 30 Jun 2023 150 bbl/Day CAD 114.20 / bbl
Purchased WTI Put Option * 1 Jan 2022 31 Dec 2022 1,000 bbl/Day CAD 92.20 / bbl
Sold WTI Call Option * 1 Mar 2022 31 Dec 2022 500 bbl/Day CAD 92.20 / bbl
WTI Physical Collar 1 Jan 2023 30 Jun 2023 150 bbl/Day CAD 100.00-129.50 / bbl
WTI Physical Collar 1 Jan 2023 30 Jun 2023 250 bbl/Day CAD 100.00-129.00 / bbl
WTI Physical Collar 1 Apr 2023 30 Jun 2023 250 bbl/Day CAD 100.00-131.25 / bbl
WTI Financial Collar 1 Apr 2023 30 Jun 2023 250 bbl/Day CAD 100.00-132.25 / bbl
Conway Financial Swaps 1 Jan 2022 31 Dec 2022 500 bbl/Day USD 1.1175 / gal
* The purchased WTI put option has a strike price of CAD 92.20 / bbl and a
premium of CAD 11.00 / bbl. The sold WTI call option has a strike price of CAD
92.20 / bbl and a premium of CAD 17.60 / bbl. The option premiums have been
deferred over their effective periods and the resulting liability is included
in the net carrying value of the financial instrument as of 30 June 2022.
The Group's losses on risk management contracts are presented in the following
table.
Six-months Ended 30 June 2022 Six-months Ended 30 June 2021 Year Ended 31 December 2021
£'000 £'000 £'000
Unrealised loss on risk management contracts 7,223 1,858 111
Realised loss on risk management contracts 13,252 857 5,374
Total 20,475 2,715 5,485
The carrying value of the Group's risk management contracts are presented in
the following table.
30 June 2022 30 June 2021 31 December 2021
£'000 £'000 £'000
Current asset 533 - 814
Current liability (8,271) (1,864) (925)
Net current liability (7,738) (1,864) (111)
15 Authorised, issued and called-up share capital
Issuance Ordinary shares Deferred shares Nominal value per Share Ordinary shares Deferred shares Share premium before share issuance costs Share issuance costs Share premium after Share issuance costs
date
Shares Shares £ £'000 £'000 £'000 £'000 £'000
At 31 December 2020 700,054,815 5,000 - 70 50 64,804 (3,199) 61,605
Issued on exercise of 0.01 pence H1-2019 warrants Various 40,140,172 - 0.0001 4 - 7,669 - 7,669
Issued on exercise of 0.01 pence options Various 15,303,960 - 0.0001 2 - - -
Issued on exercise of 5 pence options Various 1,700,000 - 0.0001 - - 85 - 85
Issued on exercise of 0.01 pence BHGE warrants 4 Jun 21 5,277,045 - 0.0001 1 - 903 - 903
Capital reduction * 6 Jul 21 - - - - - (67,255) 3,199 (64,056)
Issued at 11 pence/share 27 Jul 21 363,700,000 - 0.0001 36 - 39,970 (2,000) 37,970
Issued on exercise of 11 pence EMI options 1 Oct 21 250,000 - 0.0001 - - 27 - 27
At 31 December 2021 1,126,425,992 5,000 - 113 50 46,203 (2,000) 44,203
Issued on exercise of 5 pence options 6 Jun 22 40,860,277 - 0.0001 4 - 2,038 - 2,038
Issued on exercise of 6.1 pence options 6 Jun 22 7,994,653 - 0.0001 1 - 487 - 487
Issued on exercise of 11 pence options 6 Jun 22 17,450,451 - 0.0001 1 - 1,918 - 1,918
As at 30 June 2022 1,192,731,373 5,000 - 119 50 50,646 (2,000) 48,646
* On 6 July 2021 the Registrar of Companies registered the cancellation of
i3's share premium account. The £64.1 million balance of the Group's share
premium net of share issuance costs was accordingly transferred to retained
earnings. This created distributable reserves and enabled the Company to
become dividend paying.
The ordinary shares confer the right to vote at general meetings of the
Company, to a repayment of capital in the event of liquidation or winding up
and certain other rights as set out in the Company's articles of association.
The deferred shares do not confer any voting rights at general meetings of the
Company and do confer a right to a repayment of capital in the event of
liquidation or winding up, they do not confer any dividend rights or any of
redemption.
On 6 June 2022, 66,305,381 ordinary shares were admitted to trading following
the exercise of employee share options. Further details are provided in Note
16 (#_Share-based_payments_1) .
£6.9 million of dividends were proposed during the period ended 30 June 2022
(year ended 31 December 2021 - £3.4 million) as follows:
Declaration date Ex-Dividend date Record date Payment date Dividend per share Total Dividend
(pence) £'000
9 February 2022 17 February 2022 18 February 2022 11 March 2022 0.1050 1,183
9 March 2022 17 March 2022 18 March 2022 8 April 2022 0.1050 1,183
6 April 2022 14 April 2022 19 April 2022 6 May 2022 0.1050 1,183
11 May 2022 19 May 2022 20 May 2022 10 June 2022 0.1425 1,604
8 June 2022 16 June 2022 17 June 2022 8 July 2022 0.1425 1,700
Total 6,853
16 Share-based payments
During the period the Group had share based payment expense of £836 thousand
(Six-months ended 30 June 2021: £1,789 thousand; Year ended 31 December 2021:
£3,668 thousand).
Employee and NED share options
During the period the Group had share based payment expense relating to the
issuance of share options of £836 thousand (Six-months ended 30 June 2021:
£1,338 thousand; Year ended 31 December 2021: £3,217 thousand). The expense
during the period relates to the amortisation of options granted in prior
years over their expected vesting periods.
Details on the employee and NED share options outstanding during the period
are as follows:
Number of options Weighted average exercise price Weighted average contractual life
(pence)
At 31 December 2020 16,157,614 0.01 3.85
Issued - 10 January 2021 13,166,358 6.10 10.00
Issued - 10 January 2021 75,184,252 5.00 10.00
Issued - 30 July 2021 57,121,402 11.00 10.00
Issued - 16 December 2021 1,625,000 11.00 10.00
Exercised during the year (17,003,960) 0.51 3.98
Forfeited during the year (2,290,291) 7.62 9.75
At 31 December 2021 143,960,375 7.48 9.22
5p options exercised during the period (67,006,794) 5.00 8.54
6.1p options exercised during the period (12,454,359) 6.10 8.54
11p options exercised during the period (35,085,877) 11.00 9.09
Granted during the period 425,000 11.00 10.00
Forfeited during the period (632,556) 11.00 9.47
At 30 June 2022 29,205,789 9.49 8.79
In May 2022, i3 employees and directors elected to exercise options over an
aggregate 114,547,030 ordinary shares of i3 Energy plc. The Company primarily
settled in ordinary shares only the post-tax in-the-money value of the options
(based on c.28 pence per share), which resulted in the issuance of 66,305,381
ordinary shares which were admitted to trading on 6 June 2022. £635 thousand
in proceeds was collected from employees who elected not to settle their
strike price through a reduction in ordinary shares received. £6,324 thousand
in employment tax was settled by the Company with the relevant taxation
authorities on behalf of the employees which has been recorded within equity
as a deduction from retained earnings. £6 thousand was recorded as an
increase to the ordinary shares account, which represents the number of
ordinary shares issued multiplied by their nominal value of £0.001 per share.
£4,443 thousand was recorded as an increase to the share premium account,
which represents the number of ordinary shares issued multiplied by the excess
in the respective strike prices over the nominal value of the shares. £3,774
thousand has been recorded as a decrease to the share-based payment reserve,
which represents the strike price settled through surrendered shares.
3,579,348 outstanding employee share options as at 30 June 2022 were fully
vested and exercisable.
Warrants
During the period the Group had share based payment expense relating to the
modification and issuance of warrants of £nil (Six-months ended 30 June 2021:
£451 thousand; Year ended 31 December 2021: £451 thousand). Details on the
warrants outstanding during the period are as follows:
Number of warrants Weighted average exercise price Weighted average contractual life
(pence)
At 31 December 2020 58,694,348 5.27 1.98
BHGE warrants modified - 17 May 2021 (5,277,045) 56.85 0.34
BHGE warrants modified - 17 May 2021 5,277,045 0.01 0.34
BHGE warrants exercised - 17 May 2021 (5,277,045) 0.01 0.3
H1-2019 LN warrants exercised throughout the year (40,140,172) 0.01 1.34
At 31 December 2021 13,277,131 15.07 1.85
Expired in the period (4,225,204) 47.34 NA
At 30 June 2022 9,051,927 0.01 0.92
On 17 May 2021, i3 announced that it had successfully restructured legacy
contracts and agreements for equipment, oil field services, and warrants with
BHGE. This resulted in the exchange of 5,277,045 warrants with a strike price
of 56.85 pence for Ordinary Shares with a nominal value of 0.01 pence. Further
details are provided in Note 11 (#_Trade_and_other_1) .
17 Related party transactions
Remuneration of Key Management Personnel
Directors of the Group are considered to be Key Management Personnel. The
remuneration of the Directors will be set out in the annual report for the
year-ending 31 December 2022.
Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note.
Ultimate parent
There is no ultimate controlling party of the Group.
18 Commitments
1 year 1-2 years 3-4 years 5+ years Total
£'000 £'000 £'000 £'000 £'000
Operating 315 196 - - 511
Transportation 884 2,061 347 58 3,350
Total 1,199 2,257 347 58 3,861
Operating commitments relate to offices leases in Canada that expire in
December 2023. Transportation commitments relate to take-or-pay pipeline
capacity in Alberta.
In addition to the above, the Group has £7.7m of capital commitments for the
Serenity well which is expected to be spud in September 2022.
19 Events after the reporting period
After 30 June 2022 i3 has declared dividends as summarised in the following
table:
Declaration date Ex-Dividend date Record date Payment date Dividend per share Total Dividend
(pence) £'000
9 July 2022 14 July 2022 15 July 2022 5 August 2022 0.1425 1,700
3 August 2022 11 August 2022 12 August 2022 2 September 2022 0.1425 1,700
7 September 2022 15 September 2022 16 September 2022 7 October 2022 0.1425 1,700
Total 5,100
On 1 August 2022, i3 announced that all conditions precedent in the Farm-In
Agreement with Europa had been fulfilled, and that the transaction had
completed. The Farm-In Agreement was entered into in April 2022, the key terms
of which are outlined in Note 9 (#_Exploration_and_evaluation) .
Throughout July, August, and September, i3 entered various risk management
contracts, as summarised below.
Type Effective date Termination date Total Volume Avg. Price
AECO 5A Physical Swaps 1 Sep 2022 30 Sep 2022 10,000 GJ/Day CAD 4.8250 / GJ
AECO 7A Financial Collar 1 Jan 2023 31 Mar 2023 5,000 GJ/Day CAD 5.0000-11.2000 / GJ
WTI Financial Collar 1 Jan 2023 31 Mar 2023 300 bbl/Day CAD 100.00-120.00 / bbl
WTI Financial Collar 1 Jan 2023 31 Mar 2023 200 bbl/Day CAD 100.00-121.50 / bbl
WTI Financial Collar 1 Jan 2023 31 Mar 2023 300 bbl/Day CAD 100.00-125.25 / bbl
WTI Financial Collar 1 Jan 2023 31 Mar 2023 300 bbl/Day CAD 100.00-121.40 / bbl
WTI Physical Collar 1 Jan 2023 31 Mar 2023 300 bbl/Day CAD 100.00-126.75 / bbl
WTI Financial Collar 1 Apr 2023 30 Apr 2023 300 bbl/Day CAD 100.00-120.75 / bbl
Conway Financial Collar 1 Jan 2023 31 Mar 2023 250 bbl/Day USD 1.0000-1.2500 / gal
Conway Financial Collar 1 Jan 2023 31 Mar 2023 250 bbl/Day USD 1.0000-1.2100 / gal
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