REG - i3 Energy PLC - Q4 2022 Operational and Financial Update

I3 EnergyAnnouncement

27/02/2023 07:15

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RNS Number : 1165R  i3 Energy PLC  27 February 2023

27 February 2023

i3 Energy plc

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

Q4 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 Q4 2022 operational and financial update.

Highlights:

·    Average Q4 2022 production of approximately 22,757 barrels of oil
equivalent per day ("boepd"), an 11% increase from the previous quarter, with
current production of approximately 23,440 boepd

·    Record corporate production exceeding 24,000 boepd achieved in
December

·    2022 drilling programme completed, delivering 31 gross (18.4 net)
wells, which met or exceeded management's expectations and completed
approximately 5% underbudget in a high inflationary environment

·    In Q4, 10 gross wells (5.7 net) brought onto production and 8 gross
wells (4.3 net) drilled in its core Central Alberta, Wapiti and Clearwater
assets

·    Completed the 13/23c-12 appraisal well on the UK North Sea Serenity
field, with a single well field development plan now being progressed

·    Dividends of £5.098 million declared and £3.399 million paid in the
quarter, with total dividends of £15.351 million paid in 2022

·    Operations commenced on the 2023, USD 64.05 million capital programme
ahead of schedule targeting 23 gross wells, with 6 gross (4.3 net) wells
drilled

 

Majid Shafiq, CEO of i3 Energy plc, commented:

"Q4 2022 was very busy as we completed our 2022 drilling programme which met
management expectations, was executed under budget and achieved peak
production rates in excess of 24,000 boepd. We have successfully completed the
first phase of our 2023 drilling programme, with multiple wells now on
clean-up flow and several Clearwater intervals tested, and we are now on
course to deliver positive YE2022 financials and reserves data by the end of
March."

Production Update

Production in Q4 2022 averaged 22,757 boepd, comprised of 72.4 million
standard cubic feet of gas per day ("mmcf/d"), 5,106 barrels per day ("bbl/d")
of natural gas liquids, 5,119 bbl/d of oil & condensate and 458 boepd of
royalty interest production. The strong quarterly production represents an
increase of approximately 25% and 11% over Q4 2021 and Q3 2022, respectively.
The growth realized in the fourth quarter marks the seventh 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.

                                   Period Average Production Comparison: Last Five Quarters
                                   Q4 2022       Q3 2022                 Q2 2022                 Q1 2022       Q4 2021
 Production (boepd)                22,757               20,571                  19,502           18,391        18,229

 Oil & Condensate (bbl/d)                                4,396                   3,886                         3,624

                                   5,119                                                         3,945

 NGLs (bbl/d)                      5,106                 5,038                   5,099           4,942         4,601

 Gas (mcf/d)                       72,442               64,180                  60,785           54,689        58,037

 Royalty Interest (boepd)                                  440                     385                         331

                                   458                                                           389

 

In Q4, i3 achieved record corporate production, with peak daily rates
exceeding 24,000 boepd in December as new wells were brought on stream,
cleaned-up and optimized.

Current corporate production averaged 23,472 boepd, for the seven-day period
ending 18 February 2023, comprised of approximately 70.7 mmcf/d, 7,132 bbl/d
of NGLs, 4,516 bbl/d of oil and condensate and an estimated 400 boepd of gross
overriding royalty interest production. Although intermittent seasonal
production curtailments occurred, due to operational freeze-up, the continued
performance of i3's predictable, low-decline asset base positions the Company
to meet or exceed management's production forecasts.

Hedging Programme

i3 continues to employ a defensive risk management strategy, protecting USD
~41.5 million((1)) of NOI for 2023 with current hedges in place to cover
38.3%, 20.3%, 11.1% and 6.2% of the Company's projected Q1, Q2, Q3 and Q4 2023
production volumes, respectively. I3's hedges are as follows:

              Swaps                                           Costless Collars                                                      Basis Swaps
 GAS          Volume (GJ)   Price (C$/GJ)       Volume (GJ)   Avg Floor Price (C$/GJ)   Avg Ceiling Price (C$/GJ)   Volume (mmbtu)  Price ($US/mmbtu)
 Q1 2023      2,397,500     4.41                 1,125,000    5.8                       10.09
 Q2 2023                                                                                                            960,101         (1.46)
 Q3 2023                                                                                                            970,652         (1.46)
 Q4 2023                                                                                                            327,067         (1.46)

                                                                                                                                    Participation Swaps((2))

 OIL          Volume (bbl)  Price (C$/bbl)      Volume (bbl)  Avg Floor Price (C$/bbl)  Avg Ceiling Price (C$/bbl)  Volume (bbl)    Avg Floor Price (C$/bbl)
 Q1 2023      58,500        106.85              162,000       100.00                    124.22
 Q2 2023      36,400        112.83              113,650       100.00                    127.35                      91,000          90.00
 Q3 2023      92,000        100.25
 Q4 2023      92,000        100.25

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

 

Q4 2022 Operational Results

i3 continued the successful execution of its expanded 2022 drilling programme
into Q4, along with the commencement of its 2023 capital programme, bringing
12 gross (7.7 net) wells on production, which focussed on operated oil and
liquids rich gas wells in its strategically important Central Alberta
(Glauconite, Falher, Belly River), Wapiti (Cardium, Dunvegan), and Clearwater
(operated and non-operated) assets. In the quarter, the Company participated
in 8 gross (4.3 net) wells across its drilling portfolio, including 5 gross
(3.4 net) operated wells and 3 gross (0.9 net) non-operated wells.

In total, i3's 2022 Canadian drilling programme delivered 16 gross (14.2 net)
operated wells and 15 gross (4.2 net) non-operated wells incurring a total
drilling capex of USD 71 million. The programme efficiently served to further
delineate and develop its core areas, with the aggregate well performance of
key targeted reservoirs meeting or exceeding management expectations. Further,
the Company diligently managed its use of capital and was pleased to achieve a
total budget underspend of 5.3%, a significant achievement in an environment
of high inflation.

Simonette (Montney)

i3's initial 2 gross (1.99 net) Middle Montney and Lower
Montney extended-reach 2-mile horizontal wells at North and South Simonette,
respectively, were drilled and tied-in to production in late Q3 2022. The
South Simonette Lower Montney well is now fully cleaned up and has
demonstrated strong results, with initial production rates of over 1000 boepd.
The single well targeting the Middle Montney formation in North Simonette
continues to produce lower water cuts and higher gas oil ratios as load fluid
recovery progresses.  Peak producing day production rates exceed 500 boepd.
These results, showcasing modern stimulation technology, are very encouraging
for future full field pad development.

 

In addition to the Montney formation, the Company's Simonette acreage has
additional oil and gas potential in the Dunvegan and Wilrich formations with
hundreds of potential future drilling locations. i3 plans to drill 2 Dunvegan
wells and 1 Wilrich well in the Simonette field in H2 2023.

 

Marten Hills (Clearwater)

In Q4, i3 and its working interest partner drilled three gross (0.9 net)
nine-leg multilateral horizontal wells at Marten Hills. The wells were
equipped and tied-in to production facilities in November and put on clean up
flow with production results exceeding Company forecasts, achieving an average
gross initial 30-day producing rate of 235 bbl/d.

2023 Capital Programme

In December 2022, i3 announced a USD 64.05 million capital programme for 2023
focussed on drilling activities in its Canadian portfolio and is forecast to
deliver 23 gross wells (15.2 net, 70% net i3 operated). The drilling programme
was accelerated and commenced in December 2022 with 3 gross operated (1.77
net) 1.5 mile horizontal Cardium oil wells and one gross (0.22 net)
non-operated Dunvegan oil well drilled in Wapiti / Elmworth, a 100% working
interest, 1.5 mile, Cardium oil well in Carnwood (Central Alberta), and 3
gross (2.5 net) Clearwater wells being drilled in Dawson and Marten Creek -
the Company's two largest contiguous Clearwater land positions. These wells
are either being flowed back for clean-up or being tied-in to production
facilities to commence clean-up.

Year-End 2022 Reserves Update

i3's year end 2022 reserves audit is in progress and the Company expects to
release its final numbers in March, prior to the dissemination of 2022
year-end financial statements.

Serenity

In October 2022 the Company completed operations on the Serenity appraisal
well in the UKCS. i3 continues to work with its partner Europa Oil and Gas to
advance a field development plan for a one well development for the Serenity
field.

Environmental, Social and Governance ("ESG")

In Q4 i3 continued with its ongoing methane reduction initiatives. After
completing the upgrading of high bleed pneumatic controllers to low bleed or
non-bleed alternatives across its portfolio, the Company commenced replacement
of pneumatic pumps with solar driven pumps (no venting). These initiatives
have resulted in a decrease of 71,450 tonnes of CO2e/year, which is the
equivalent of removing 15,530 cars off the road per year. i3 also completed
the electrification of 30 pumpjacks in its Carmangay and Retlaw properties,
reducing CO2e emissions by approximately 6,366 tonnes/year. The Company
further partnered with Recover Energy Services to manage the efficient
disposal of oil-based drilling waste and as determined by Recovery, avoided
2,773 metric tonnes of CO2e emissions.

i3 published an updated ESG report in December, which included disclosure on
the assets acquired from Cenovus Energy in 2021. This data was not available
when the inaugural report was published in July 2022.

Return of Capital

The Company remains committed to delivering a sustainable monthly dividend as
part of its total return model. In Q4 the Company announced paid of £5.1
million via its monthly dividend programme of 0.1425 pence/share. The Company
paid a total dividend of £15.35 million in 2022.

(1) 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) 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, Sam Morris     Tel: +44 (0) 203 781 8331

 

Notes to Editors:

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

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

i3 is dedicated to responsible corporate practices and the environment, and
places high value on adhering to strong Environmental, Social and Governance
("ESG") practices.  i3 is proud of its performance to date as a responsible
steward of the environment, people, and capital management.  The Company is
committed to maintaining an ESG strategy, which has broader implications 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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this inside information is now considered to be in the public domain.

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