REG - i3 Energy PLC - Q3 2023 Operational and Financial Update

I3 EnergyAnnouncement

08/11/2023 07:00

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RNS Number : 7657S  i3 Energy PLC  08 November 2023

8 November 2023

i3 Energy plc

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

Q3 2023 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, announces the following Q3 2023
operational and financial update.

Q3 Highlights:

·    Average Q3 2023 production of approximately 21,156 barrels of oil
equivalent per day ("boepd"), representing a 14% increase over the prior
quarter and a 3% increase from Q3 2022.

·    Net operating income for the quarter reflecting restored production
and strengthening commodity prices was USD 25.97 million (as compared to USD
17.66 million in Q2), representing a 47% increase quarter-over-quarter.

·    i3 remained focused on repayment of its new credit facility, with the
original drawn amount of CAD 75 million reduced to CAD 66.67 million (USD
49.39 million) and net debt as at 30 September 2023 of approximately USD 27.56
million, down from USD 38.98 million as at 30 June 2023.

·    As part of i3's commitment to its total shareholder return model,
dividends of £3.08 million (USD 3.91 million) were declared in Q3 and paid in
October 2023.

·    Post quarter-end the board of directors approved a USD 6 million
capital program, for the balance of 2023, centred on the Company's Glauconite
and Leduc oil fairways in Central Alberta.

 

 

Majid Shafiq, CEO of i3 Energy plc, commented:

"Following the major scheduled maintenance activities and disruptions due to
wildfires in Q2 we are very pleased with the recovery of production levels in
Q3, and we remain on track to meet our previously stated guidance for 2023
production and net operating income. We will also shortly commence a three
well drilling programme, focussed on oil development in Central Alberta."

Production Update

Production in Q3 2023 averaged 21,156 boepd, comprised of 68.7 million
standard cubic feet of natural gas per day ("mmcf/d"), 4,887 barrels per day
("bbl/d") of natural gas liquids ("NGLs"), 4,485 bbl/d of oil & condensate
and 342 boepd of royalty interest production. The strong quarterly production
represents an increase of greater than 14% from Q2 2023 and approximately 3%
over Q3 2022, despite a 21-day curtailment in Central Alberta associated with
a meter station outage. The meter station outage impacted i3's calendar-day
volumes by 1,120 boepd in August or 377 boepd for Q3 2023. The performance of
the assets in Q3 2023, post Q2 2023 turnarounds and disruptions, and in light
of the downtime experienced in Q3 2023, reflects both the deliverability of
the underlying reservoirs and their predictable low-decline nature, and
supports the quality of the Company's large inventory of development drilling
locations.

 

                                   Period Average Production Comparison: Last Five Quarters
                                   Q3 2023       Q2 2023       Q1 2023       Q4 2022       Q3 2022
 Production (boepd)                21,156        18,529        22,773        22,757        20,571
 Oil & Condensate (bbl/d)          4,485         4,247         5,238         5,119         4,396
 NGLs (bbl/d)                      4,887         4,057         5,569         5,106         5,038
 Gas (mcf/d)                       68,653        58,965        69,555        72,442        64,180
 Royalty Interest (boepd)          342           398           373           458           440

 

Hedging Programme

i3's risk management strategy currently protects USD 50.65 million (CAD 67.87
million) and USD 28.32 million (CAD 37.95 million) of net operating income for
2023 and 2024, respectively with current hedges in place to cover 29%, 33%,
12%, 11% and 2% of the Company's projected Q4 2023 & Q1, Q2, Q3 and Q4 of
its 2024 production volumes, respectively. i3's hedges are as follows:

 

              Swaps                             Basis Swaps
 GAS          Volume (GJ)   Price (C$/GJ)       Volume (mmbtu)  Price ($US/mmbtu)
 Q4 2023      1,835,000     2.99                327,067         (1.46)
 Q1 2024      2,275,000     3.04                nil             nil

                                                Costless Collars
 OIL          Volume (bbl)  Price (C$/bbl)      Volume (bbl)    Avg Floor Price (C$/bbl)  Avg Ceiling Price (C$/bbl)
 Q4 2023      184,000       99.16               nil             nil                       nil
 Q1 2024      182,000       95.68               22,750          100.00                    121.32
 Q2 2024      159,250       98.20               22,750          100.00                    107.00
 Q3 2024      38,500        101.63              122,500         100.00                    111.11
 Q4 2024      nil           nil                 23,250          100.67                    111.90

 

 

Q3 2023 Operations

The Company experienced a strong Q3 2023 after a challenging Q2 2023 period in
which corporate production averaged 18,529 boepd, with approximately 3,100
boepd offline for the quarter, due to restrictions resulting from the Alberta
wildfires, unanticipated apportionment issues associated with the Pembina
Peace Pipeline liquids line, critical downtime related to debottlenecking
projects and i3 turnaround initiatives (both operated & non-operated).
After such significant downtime experienced in Q2 2023, the Company is pleased
to report that production returned rapidly to pre-restricted levels and
continued to outpace anticipated declines throughout Q3, achieving Quarterly
production of 21,156 boepd.

Capital activities in Q3 2023 were limited to USD 1.73 million (CAD 2.23
million), with the Company focussing on reestablishing and optimizing
productive capacity post turnarounds and disruptions experienced in the prior
quarter. Of the total Q3 2023 capital expenditure programme, i3 invested USD
0.41 million (CAD 0.55 million), focused primarily in the Lodgepole area of
Central Alberta, on pipeline infrastructure to consolidate and optimize
volumes at its operated 13-35-047-10W5 gas plant.

Similar gathering system improvements in the Wapiti area, completed in Q2 2023
by a third-party operator, have alleviated line pressure constraints and
allowed the Company to optimize production in the quarter from its 3-well
Cardium pad that was drilled and brought on production earlier this year. Post
debottlenecking, the 3 Cardium wells have performed above GLJ's Proved Plus
Probable type curve expectations, with unrestricted rates having exceeded peak
rate predictions.

The strong volumes associated with the Wapiti programme have occurred
despite unanticipated apportionment issues associated with the Pembina Peace
Pipeline liquids line, resulting in reduced liquids yields realized by area
operators. i3 expects the apportionment issues to be resolved over the coming
months as local operators work diligently to optimize throughput efficiencies
for all relevant parties. This was evidenced by September's production, which
averaged 21,380 boepd, comprised of 67.6 mmcf/d, 5,200 bbl/d of NGLs, 4,480
bbl/d of oil & condensate and 433 boepd of royalty interest production.

Environmental, Social and Governance ("ESG")

i3 is committed to conducting its operations responsibly and in accordance
with industry best practices. The Company's commitment to high ESG standards
is central to maintaining our social licence to operate, creating value for
all stakeholders, and ensuring long-term commercial success.

In Q3 2023, i3 invested USD 0.8 million net, before any government grants, to
abandon 5 wells, decommission 7 sites and abandon 11 pipelines, while further
advancing site reclamations across its portfolio. Incorporating activity from
H1 2023 brings the Company's year-to-date abandonment and decommissioning
totals to 25 wells, 13 sites, 16 pipelines, with a further 13 sites having
been reclaimed. i3 will continue its 2023 abandonment and reclamation
programme, with approximately USD 3.91 million being directed to pipeline /
wellbore abandonments, pipeline / facility decommissioning and well site
reclamation.

Serenity

The base case development for Serenity assumed a joint development with the
Tain field. Following the relinquishment of the Tain Licence by the licence
holders, i3 and its partner Europa Oil and Gas are now considering other
options for development and will update the market as and when necessary.

 

Q4 2023 Capital Programme

The Company has prepared an oil focused Q4 2023 drilling programme to
capitalize on the continued relative strength in oil prices. The programme
previously contemplated follow-up drilling at Dawson to further develop and
delineate the Company's initial successful Clearwater oil discovery from Q1
2023. However, access constraints have delayed Clearwater development until
2024. Given the Company's extensive portfolio of development opportunities and
flexible operating model, the Q4 2023 programme has refocused to Central
Alberta and will now include the drilling, completion and tie-in of 2 gross
(2.0 net) horizontal Glauconite oil locations and 1 gross (0.53 net) vertical
Leduc oil well. The wells are expected to spud in early-to-mid Q4, with tie-in
occurring ahead of year-end. Despite the operational shift and delayed on
stream date, corporate production is expected to meet i3's previously stated
2023 guidance. Additionally, the results of the 2 Glauconitic oil wells and
Leduc drill are expected to position the Company for a strong start to 2024.

 

Reiteration of 2023 Guidance & Return of Capital

i3's 2023 guidance remains unchanged at 20,000 to 21,000 boepd, delivering net
operating income of USD 90 million - 95 million for the year (with 25.9
million realized in Q3). With Board approval for the Company's USD 6 million
Q4 2023 capital program, i3's full-year 2023 exploration and development
expenditures are in line with previously announced guidance. Strong
operational performance of the Company's predictable low-decline production
base has allowed i3 to achieve the previously stated corporate guidance
despite the unplanned disruptions the Company has navigated throughout 2023.

On 31 May 2023 the Company refinanced its outstanding debt of circa CAD 50
million with a new CAD 100 million facility; of which, CAD 75 million was
drawn for general working capital purposes and to settle the Company's
outstanding loan notes. To align with the Company's conservative approach to
debt management, the new facility amortises on a straight-line monthly basis
(unlike the prior Senior Secured Guaranteed Loan Notes, which were
non-amortising). At the end of Q3 2023, the Company has repaid USD 6.22
million (CAD 8.33 million) of the new facility, exiting with USD 49.39 million
(CAD 66.67 million) remaining. This amortisation schedule will repay the loan
over its three-year term, beginning with USD 15.97 million in amortisation
(CAD 21.40 million), interest commitments and associated set-up costs to be
paid throughout 2023.

As part of i3's total shareholder return model, dividends of £3.08 million
(USD 3.91 million) were declared in Q3 and paid in October 2023. The Company
remains committed to its total shareholder return model, consisting of
production growth through drilling and accretive M&A activity, and
shareholder cash returns via dividends, whilst prudently maintaining capital
discipline. Subject to Board approval at the end of quarter, the Company
expects to pay the Q4 dividend of 0.2565 pence per share in January 2024, with
an announcement made in due course. Including dividends declared thus far in
2023 and with the expected payment for the Q4 2023 period, the forecasted
aggregate 2023 dividends to be paid to shareholders is £16.38 million, or
1.362 pence per share, representing a yield of approximately 11.6% for 2023
and a forward running yield of 8.7% based on the closing price of i3's
ordinary shares of 11.74 pence on 7 November 2023.

 

 

 

 

 

 

 

Note: Unless otherwise denoted, all figures are referenced in USD ($) and
assume a foreign exchange rate of 1.34 CAD:USD and 1.27 GBP:USD, which is the
average rate for Q3 2023, or where applicable, a 30 September 2023 period end
foreign exchange rate of 1.35 CAD:USD and 1.22 GBP:USD.

Note: Net Operating Income (NOI) and Net Debt are non IFRS measures. See
Appendix B within the Interim Financial Statements for definition and
reconciliation to nearest equivalent statutory IFRS measure.

 

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

 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 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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