REG - i3 Energy PLC - Partial Sale of the Company's Royalty Assets

I3 EnergyAnnouncement

17/04/2024 12:45

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RNS Number : 0053L  i3 Energy PLC  17 April 2024

17 April 2024

i3 Energy plc

 

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

 

Partial Sale of the Company's Royalty Assets and Elimination of All Bank
Indebtedness

 

i3 Energy plc (AIM:I3E) (TSX:ITE), an independent oil and gas company with
assets and operations in the UK and Canada, is pleased to announce that its
subsidiary, i3 Energy Canada Ltd., has entered into a definitive agreement
with a newly formed private royalty company for the sale of certain of the
Company's royalty assets (the "Royalty Disposition") for a total gross cash
consideration of USD 24.81 million (CAD 33.50 million((1))) before customary
closing adjustments. The proceeds of the Royalty Disposition mark the next
step in transitioning i3's capital structure, enhancing the Company's
financial flexibility through improved liquidity and enabling acceleration of
its growth and income-based business plan.

 

Highlights:

 

·    Accelerating and Unlocking Value: Realization of USD 24.81 million in
gross proceeds from the sale of an estimated 388 barrels of oil equivalent per
day ("boe/d")((2)), translates to 6.9 times 2024 forecasted cash flow and
approximately USD 63,960 per flowing boe/d, which represents a significant
premium to the Company's current market valuations.

 

·    Pro Forma Financial Position Upon Closing: The proceeds of the
Royalty Disposition will fully eliminate i3's outstanding bank indebtedness
and establish a working capital surplus((4)) without materially impacting its
working interest production base; which, together with forecasted cash flows
and undrawn credit facility, provides the Company with significant liquidity
to execute its growth and income strategies.

 

·    Retained Key Royalty Position at Greater Simonette: As part of i3's
high-impact Montney oil asset at Simonette, the Company has retained its
16,160 acre royalty position, along with approximately 35 boe/d of associated
production((3)) (collectively the "Simonette Royalty"), throughout this core
area.

 

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

 

"i3 Energy Canada Ltd. is extremely pleased to have closed this complex
accretive transaction with a newly minted private Canadian royalty company.
Proceeds from the Royalty Disposition advantageously position the Company to
fully eliminate its bank debt and create a working capital surplus; all while
preserving a substantial, low decline, production base exceeding 19,000 boe/d
(~48% liquids). The increased liquidity on the Company's balance sheet
combined with its stable cash flows, will support both its organic and
inorganic initiatives, as we actively look towards a dynamic 2024."

 

 

The Royalty Disposition, involving most of the Company's royalty assets, but
not its core Simonette Royalty, provides substantial capital and will allow i3
to accelerate value associated with its extensive inventory of high-return
drilling locations, while jointly pursuing accretive inorganic growth
initiatives.

 

The Royalty Disposition is comprised of i3 fee royalties, i3 gross overriding
royalties, along with certain newly created royalties on a minor subset of
previously unburdened lands, and is expected to average 388 boe/d in 2024,
while delivering USD 3.61 million in royalty income based on strip pricing (as
at 3 April 2024).

 

The Company now has a fully undrawn USD 55.56 million (CAD 75 million) senior
secured revolving credit facility with a Canadian chartered bank and will
remain disciplined with its conservative approach to debt management as it
looks to balance stable, predictable, growth, along with its ongoing dividend
programme. The Company now looks forward to updating the market later this
month with its capital programme for 2024.

 

Norton Rose Fulbright Canada acted as legal counsel to i3 in relation to the
Royalty Disposition.

 

(1)   Unless otherwise denoted, all figures are referenced in USD ($) and
assume a foreign exchange rate of 1.35 CAD:USD

(2)   Production numbers reflect the Company's 2024 average

(3)   Production numbers reflect the Company's December 2023 average

(4)   Non-IFRS measure, refer to 'Non-IFRS Financial Measures'

 

 

END

Enquiries:

 i3 Energy plc                                  c/o Camarco

 Majid Shafiq (CEO)                             Tel: +44 (0) 203 757 4980

 WH Ireland Limited (Nomad and Joint Broker)

 James Joyce, Darshan Patel, Isaac Hooper       Tel: +44 (0) 207 220 1666

 Tennyson Securities (Joint Broker)

 Peter Krens                                    Tel: +44 (0) 207 186 9030

 Stifel Nicolaus Europe Limited (Joint Broker)

 Ashton Clanfield, Callum Stewart               Tel: +44 (0) 20 7710 7600

 Camarco

 Andrew Turner, Violet Wilson, Sam Morris       Tel: +44 (0) 203 757 4980

 

Notes to Editors:

i3 Energy is an oil and gas Company with a low cost, diversified, growing
production base in Canada's most prolific hydrocarbon region, the Western
Canadian Sedimentary Basin and appraisal assets in the North Sea with
significant upside.

 

The Company is well positioned to deliver future growth through the
optimisation of its existing asset base and the acquisition of long life, low
decline conventional production assets.

 

i3 is dedicated to responsible corporate practices and the environment, and
places high value on adhering to strong Environmental, Social and Governance
("ESG") practices.  i3 is proud of its performance to date as a responsible
steward of the environment, people, and capital management.  The Company is
committed to maintaining an ESG strategy, which has broader implications to
long-term value creation, as these benefits extend beyond regulatory
requirements.

 

i3 Energy is listed on the AIM market of the London Stock Exchange under the
symbol I3E and on the Toronto Stock Exchange under the symbol ITE. For further
information on i3 Energy please visit https://i3.energy (https://i3.energy) .

 

 

This announcement contains inside information for the purposes of Article 7 of
the UK version of Regulation (EU) No 596/2014 which is part of UK law by
virtue of the European Union (Withdrawal) Act 2018, as amended ("MAR"). Upon
the publication of this announcement via a Regulatory Information Service,
this inside information is now considered to be in the public domain.

 

 

Forward-Looking Statements

 

This press release offers our assessment of i3's future plans and operations
as at April 17, 2024, and contains certain forward-looking information and
statements within the meaning of applicable securities laws. The use of any of
the words "anticipate", "continue", "estimate", "expect", "forecast", "may",
"will", "project", "should", "plan", "intend", "believe" and similar
expressions (including the negatives thereof) are intended to identify forward
looking information or statements.

The forward-looking information and statements included in this news release
are not guarantees of future performance and should not be unduly relied upon.
Such information and statements involve known and unknown risks, uncertainties
and other factors that may cause actual results or events to differ materially
from those anticipated in such forward-looking information or statements
including, without limitation: those relating to results of operations and
financial condition; general economic conditions; industry conditions; changes
in regulatory and taxation regimes; volatility of commodity prices; escalation
of operating and capital costs; currency fluctuations; the availability of
services; imprecision of reserve estimates; geological, technical, drilling
and processing problems; environmental risks; weather; the lack of
availability of qualified personnel or management; stock market volatility;
the ability to access sufficient capital from internal and external sources;
and competition from other industry participants for, among other things,
capital, services, acquisitions of reserves, undeveloped lands and skilled
personnel. Risks are described in more detail in our Financial Review, which
is available on www.i3.energy (http://www.i3.energy) and on www.sedar.com
(http://www.sedar.com) . Forward-looking statements are provided to allow
investors to have a greater understanding of our business.

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

 

Non-IFRS Financial Measures

 

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

The term "working capital surplus" in this press release is not a recognised
measure under IFRS. i3 refers to working capital surplus as "Net Debt" in
other public filings, which is defined as borrowings and leases, trade and
other payables, other non-current liabilities, and incomes taxes
receivable/payable, less cash and cash equivalents and trade and other
receivables. Management of i3 believes that that Net Debt is a meaningful
measure to monitor the liquidity position of the i3 Energy Group.

See i3's Interim Report and Annual Report and Consolidated Financial
Statements as filed on www.i3.energy (http://www.i3.energy) and on
www.sedar.com (http://www.sedar.com) for the periods ended 30 June 2023 and 31
December 2022, respectively, for a discussion of Net Debt.

 

51-101 Advisory

 

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

 

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