REG - i3 Energy PLC - Q3 2022 Operational and Financial Update

I3 EnergyAnnouncement

02/11/2022 07:17

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RNS Number : 9979E  i3 Energy PLC  02 November 2022

2 November 2022

i3 Energy plc

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

Q3 2022 Operational and Financial Update

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
following Q3 2022 operational and financial update.

Highlights:

·    Canadian portfolio validated through consecutive quarter-on-quarter
organic growth since completing Canadian asset acquisitions in Q3 2021

·    Record corporate production exceeding 23,000 barrels of oil
equivalent per day ("boepd") achieved in October with forecasts in line to
reach 24,000 boepd prior to year-end

·    Average Q3 production of 20,571 boepd, comprised of 64.2 mmcf/d,
5,038 barrels per day ("bbl/d") of natural gas liquids, 4,396 bbl/d of oil
& condensate and 440 boepd of royalty interest production

·    2022 drilling programme nearing completion, delivering wells to date
which have met or exceeded pre-drill expectations, with programme costs in
line with the budget

·    Brought onto production nine operated gross wells (7.93 net)
including the following key wells:

o  In Central Alberta, successfully drilled two operated (100% working
interest ("WI")), wells targeting the Falher zone in Willesden Green and two
operated (65% WI) wells targeting the Belly River formation in Leedale

o  In Simonette North, successfully drilled one operated (100% WI) well
targeting the Middle Montney formation

·    Post Q3 operations continuing with five gross (4.3 net) operated
wells and five non-operated gross (1.4 net) wells to be brought on stream
before year-end

·    Assuming the full implementation of the Company's previously
announced Enlarged Capital Budget (as announced on 9 May 2022), full-year 2022
net operating income ("NOI")((1)) is now forecast to be approximately USD
172((2)) million based on current strip pricing.

·    Completed the 13/23c-12 appraisal well on the UK North Sea Serenity
field with results currently being evaluated

·    Dividends of £5.098 million paid in the quarter with £11.952
million in dividends paid to date in 2022

 

Majid Shafiq, CEO of i3 Energy plc, commented:

"Q3 2022 was another extremely busy operational period for the Company with
extensive drilling operations being conducted in Canada and the UK. We
achieved record production levels in the quarter and are on track to exceed
24,000 boepd before year end; a highly significant achievement built on the
organic growth of the superbly executed drilling campaign in Canada. The
benefits of this drilling success will be largely realised in 2023 as most of
the production growth commenced in the second half of the year. Whilst the
Serenity appraisal well in the UK didn't prove up the anticipated volumes
hoped for, we remain confident in our ability to commercialise value from the
discovery. We have commenced our annual budgeting cycle and will announce
before year end a 2023 capital programme, based on our total shareholder
return model, balancing activities to seek to grow the share price with
sustainable growing cash returns to shareholders".

Production Update

Production in Q3 2022 averaged 20,571 boepd, comprised of 64.2 million
standard cubic feet of gas per day ("mmcf/d"), 5,038 barrels per day ("bbl/d")
of natural gas liquids, 4,396 bbl/d of oil & condensate and 440 boepd of
royalty interest production. The strong quarterly production represents an
increase of approximately 55% and 6% over Q3 2021 and Q2 2022, respectively.
The growth realized in the third quarter marks the fifth consecutive
quarter-on-quarter production increase for i3, which reflects both the
predictable low-decline nature of the Company's base assets and the efficiency
of its 2022 drilling programme to date.

 Period Comparison: Last Three Quarters((2))
                               Q3 2022                 Q2 2022                 Q1 2022
 Production (boepd)                   20,571                  19,502                  18,391

 Oil & Condensate (bbl/d)              4,396                   3,886                   3,945

 NGLs (bbl/d)                          5,038                   5,099                   4,942

 Gas (mcf/d)                          64,180                  60,785                  54,688

 Royalty Interest (boepd)                440                     385                     389

 

Subsequent to Q3, i3 has achieved record corporate production of over 23,000
boepd as new wells were brought on stream, cleaned-up and optimized. The
Company remains on track to reach 24,000 boepd by year-end with contribution
increases from five gross (3.93 net) Montney and Cardium wells, which are
still being cleared up, two gross (2 net) Falher wells recently drilled,
tied-in and commencing clean-up and seven gross (3.7 net) recently drilled
wells in the Glauconite, Clearwater, and Belly River formations, all of which
are expected to be completed and tied-in prior to year-end.

Operational Results

i3 continued the execution of its expanded 2022 drilling programme, and in Q3
2022, the Company brought 11 gross (8.5 net) wells on production, which
focussed on operated oil and liquids rich gas wells, in its strategically
important Central Alberta (Glauconite), Wapiti (Cardium), Simonette (Montney)
and Clearwater (operated and non-operated) assets. In the quarter, i3
participated in six gross (4.2 net) wells across its drilling portfolio,
including four gross (3.7 net) operated wells and two gross (0.51 net)
non-operated wells.

Central Alberta (Glauconite, Falher & Belly River)

Based on the Company's successful Q1 Glauconite drilling programme at Open
Creek, i3 drilled, completed, equipped and tied-in three offsetting (100% WI)
Glauconite wells from a single pad location. Post clean-up of these 3 wells,
the Company's total Glauconite programme year to date has seen total project
results outperforming type curve estimates and is on track to deliver pay-outs
of approximately 8 months with peak 30-day individual well rates averaging in
excess of 600 boepd. The Company spud the final Open Creek Glauconite well of
its 2022 programme in October and the well reached total depth on 29 October,
with completion operations commencing early November. Initial geological data
conforms with pre-drill expectations.

In August, the Company spudded its first two (100% WI) 1.5-mile extended-reach
horizontal Falher wells from a common pad at Willesden Green. The wells were
drilled on time and on budget and exhibited strong gas response along the
entire horizontal lateral lengths, consistent with the large-rate offsetting
Falher wells and the Company's geotechnical interpretation. Completion and
tie-in operations were finalized in late October, with clean-up flow having
now commenced.

In late September, i3 commenced a two-well (1.3 net) Belly River drilling
programme in Leedale, further demonstrating the multi-zone development
inventory within the Company's Central Alberta portfolio. Drilling and
completion operations were finished in late October and the wells are
currently being equipped with production facilities and are expected to
commence clean-up flow in mid-November.

Wapiti / Elmworth (Cardium)

In Q2, i3 drilled and operated four gross (2.94 net) horizontal Cardium oil
wells, consisting of a 1.0 net single-well operation plus three gross (1.94
net) wells drilled from a common surface pad, representing the Company's
initial operated development within this core area. The four-well programme
has now been tied-in, with realized 30-day production rates of greater than
490 boepd per well, despite strong pipeline backpressure associated with the
area gathering system. The Company expects ongoing third-party compression
upgrades to alleviate current backpressure curtailment.

Simonette (Montney)

i3's initial two gross (1.99 net) Middle Montney and Lower
Montney extended-reach horizontal wells at North and South Simonette,
respectively, are now tied-in, following the installation of additional
testing equipment. Both wells are now in the clean-up phase, recovering
completion fluids associated with the stimulation operations. Peak rates from
these high-impact 2-mile horizontal wells are expected to occur mid-to-late Q4
following an extended clean-up period, as is common with high intensity
multistage Montney completions.

Clearwater

In Q3, i3 continued advancing the ongoing development and delineation of its
Clearwater portfolio with the drilling of its initial six-leg horizontal
multilateral well (0.5 net) in the greater Harmon area. This well is expected
to begin clean-up flow in November following installation of production
facilities.

Subsequent to the end of quarter, i3 and its working interest partner spud two
gross (0.6 net) nine-leg multilateral horizontal wells at Marten Hills, with
the third and final one gross (0.3 net) well in the programme being drilled at
present. The initial two wells are currently being equipped with production
facilities and all three wells are planned to commence clean-up flow in
November.

Additionally, i3 has continued to expand its Clearwater portfolio with the
addition of 15 gross (15 net) sections of Clearwater rights within its core
operating areas. Upon acquisition of these new lands, i3 increased its
Clearwater position by approximately 16% to 109 net sections.

2022 Guidance Update

On 9 May 2022, following the excellent results of its initially budgeted
drilling programme [and forecasted strength in commodity prices,] i3 announced
an increase in its 2022 capital budget by up to 100%, to USD 97 million (the
"Enlarged Capital Budget"). The Enlarged Capital Budget and expanded drilling
programme had dual objectives - to increase production and grow booked
reserves while demonstrating the upside from certain strategic assets in i3's
Canadian portfolio. As outlined above, a significant number of the Company's
recently drilled operated wells are still in the clean-up flow period or await
tie-in to production facilities and are set to contribute during the remainder
of the year. Although 2022 operations are not complete, i3 is currently
forecasting that the full-year development drilling spend will be
approximately in line with the Enlarged Capital Budget; being a major
achievement considering industry wide inflationary pressures impacting the
costs for oilfield equipment and services.

The Enlarged Capital Budget remains on track to deliver peak production above
24,000 boepd before year-end 2022. i3's full year 2022 NOI is forecasted to be
approximately USD 170 million based on current strip prices. This is a
reduction of USD$28 million compared to the Q2 Operational Update guidance and
is primarily due to the recent softening of liquids and AECO gas forward
pricing. Compared to the strip pricing used for the Q2 guidance, full year
2022 WTI oil pricing (to which the majority of i3's oil production is
referenced) is down 2.3%, NGL pricing is down 7.4% and AECO gas pricing is
down 8.8%.

i3 continues to employ a defensive risk management strategy with current
hedges in place to cover 34.6%, 40.7% and 5.7%% of the Company's projected Q4
2022, Q1 2023 and Q2 2023 production volumes, respectively. i3's hedges are as
follows:

 

 

 

 

 

 

              Swaps                                           Costless Collars                                          Participation Swaps((3))
 GAS          Volume (GJ)   Price (C$/GJ)       Volume (GJ)   Avg Floor Price (C$/GJ)   Avg Ceiling Price (C$/GJ)
 Q4 2022      3,214,025     3.90
 Q1 2023      2,397,500     4.41                1,125,000     5.80                      10.09

 OIL          Volume (bbl)  Price (C$/bbl)      Volume (bbl)  Avg Floor Price (C$/bbl)  Avg Ceiling Price (C$/bbl)      Avg Floor Price (C$/bbl)
 Q4 2022      115,000       94.18               207,000                                                                 92.2
 Q1 2023      58,500        106.85              162,000       100.00                    124.44
 Q2 2023      13,650        114.20              90,900        100.00                    129.63

 PROPANE      Volume (bbl)  Price (C$/bbl)      Volume (bbl)  Avg Floor Price (C$/bbl)  Avg Ceiling Price (C$/bbl)
 Q4 2022      46,000        46.93
 Q1 2023                                        45,000        42.00                     51.61

 

Serenity Appraisal Drilling

The 13/23c-12 Serenity appraisal well was drilled in October. The target
Captain sand interval was not present in the well, although over 100ft of
Captain sands were found lower in the section but were water wet. The well was
plugged and abandoned. Data from the well is being analysed and will be
incorporated into updated mapping of the field around the 13/23-10 discovery
well, where there is the potential for a single well development and for which
development and monetization options are being evaluated. The well was drilled
significantly below budget and the final cost is expected to be approximately
USD 10.5 million (gross). i3's working interest in the field is 75% post the
farm-out to Europa Oil and Gas and under the terms of the farm-out agreement
i3's paying interest for the well is 53.75% resulting in a net expected well
cost to the Company of USD 5.7 million.

Environmental, Social and Governance ("ESG")

i3 continues to advance its initiatives to reduce greenhouse gas emissions.
The wellsite electrification project to replace gas powered engines at the
Carmangay field is ongoing, while its project to replace high emission
chemical pumps has commenced in the Central Alberta field locations.

i3 will be publishing an updated ESG report before year end, which will
include disclosure on the assets acquired from Cenovus Energy in 2021. This
data was not available when the inaugural report was published on 7 July 2022.

Return of Capital

The Company remains committed to delivering a sustainable monthly dividend as
part of its total return model. The Company paid dividends of £5.098 million
in Q3 via its monthly dividend programme of 0.1425 pence/share and has paid
£11.952 million in dividends to date for 2022.

 

 

2023 Capital Budget

The Company has commenced its annual budget exercise for 2023. The results and
subsequent learnings from its 2022 drilling programme are being incorporated
into the well selection and planning exercise to ensure optimised production
and economic delivery. The Company's total return model will endeavour to seek
to optimise share price growth and growing sustainable cash return to
shareholders.

(1) NOI = revenue minus royalties, opex, transportation and processing.

Unless otherwise denoted, all figures are referenced in USD ($) and assume a
foreign exchange rate of 1.30 CAD:USD, which is the average forecast for 2022
and 1.12 GBP:USD which was the average over the period September to October
2022, when costs were incurred for the UK drilling programme.

(2) Unaudited management estimates.

(3) i3 receives the average floor price plus 50% of difference between the
average floor price and the realised price if higher.

 

END

 

Qualified Person's Statement

In accordance with the AIM Note for Mining and Oil and Gas Companies, i3
discloses that Majid Shafiq is the qualified person who has reviewed the
technical information contained in this document. He has a Master's Degree in
Petroleum Engineering from Heriot-Watt University and is a member of the
Society of Petroleum Engineers. Majid Shafiq consents to the inclusion of the
information in the form and context in which it appears.

Enquiries:

 i3 Energy plc                                  c/o Camarco

 Majid Shafiq (CEO)                             Tel: +44 (0) 203 781 8331

 WH Ireland Limited (Nomad and Joint Broker)

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

 Tennyson Securities (Joint Broker)

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

 Stifel Nicolaus Europe Limited (Joint Broker)

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

 Camarco

 Georgia Edmonds, Violet Wilson                 Tel: +44 (0) 203 781 8331

 

Notes to Editors:

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

The Company is well positioned to deliver future growth through the
optimisation of its existing 100% owned asset base and the acquisition of long
life, low decline conventional production assets.

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

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

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the UK version of Regulation (EU) No 596/2014 which is part of UK law by
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