26 February 2024
i3 Energy plc
("i3", "i3 Energy",
or the "Company")
Q4 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, is pleased to announce the following Q4 2023
operational and financial update.
Highlights:
·
2023 annual average production of 20,711 barrels of oil
equivalent per day ("boepd"), which represents record annual
corporate production and is at the high end of the Company's 2023
guidance range of 20,000 - 21,000 boepd
· Q4
2023 production averaged 20,413 boepd
·
2023 drilling programme completed, delivering 12 gross (8.0
net) wells, which met or exceeded management's expectations and
were completed on budget despite a high inflationary
environment
· In
Q4, four gross oil focused wells (2.54 net) were drilled in i3's
Central Alberta core area
·
Full year 2023 net operating income ("NOI")1
(unaudited) is approximated at USD 93 million, in line with
guidance, with year-end 2023 Net Debt2 expected to be
approximately USD 23 million (unaudited).
·
Dividends of £3.083 million were declared and paid during the
fourth quarter, with total dividends of £13.298 million declared
and £15.338 million paid in 2023. Additionally, the Q4 2023
dividend of £3.084 million was declared and paid in early
2024.
Majid Shafiq,
CEO of i3 Energy plc, commented:
"The fourth
quarter of 2023 rounded off a highly successful annual capital
programme for the Company, with a dozen wells drilled, and which
like our 2022 programme, in aggregate exceeded pre-drill
expectations and was executed safely and in line with budget. We
are very pleased that this programme, combined with our robust, low
decline, asset base and a razor-sharp focus on operational
efficiency, delivered very strong financial performance, despite a
challenging commodity price environment and ensured that the
company met its production and net operating income guidance for
the year. This is a testament to the quality of our portfolio and
the skill, expertise and dedication of our staff. Our strong
production and financial performance supported our capital
programme, debt re-payments, and dividend payments to shareholders
of over £15 million throughout the year, and our extensive drilling
inventory provides multiple options to maximise return on capital
deployment. As we enter 2024 with continued weakness in commodity
price forecasts, in particular for North American gas, our business
strategy remains flexible between high rate of return organic
drilling and inorganic growth opportunities. The Company is
progressing several initiatives which will be incorporated into an
optimised 2024 drilling and capital programme, and we look forward
to updating the market on this during the course of
March."
Production Update
Production in Q4 2023 averaged 20,413 boepd,
comprised of 63.9 million standard cubic feet of natural gas per
day ("mmcf/d"), 5,180 barrels per day ("bbl/d") of natural gas
liquids ("NGLs"), 4,155 bbl/d of oil & condensate and 429 boepd
of royalty interest production. The quarterly production represents
a decrease of approximately 3% relative to Q3 2023, resulting from
conservative capital management during the period of softening gas
prices.
|
|
Period Average Production
Comparison: Last Five Quarters
|
|
Q4 2023
|
Q3 2023
|
Q2 2023
|
Q1 2023
|
Q4 2022
|
Production
(boepd)
|
20,413
|
21,156
|
18,529
|
22,773
|
22,757
|
Oil &
Condensate (bbl/d)
|
4,155
|
4,485
|
4,247
|
5,238
|
5,119
|
NGLs
(bbl/d)
|
5,180
|
4,887
|
4,057
|
5,569
|
5,106
|
Gas
(mcf/d)
|
63,894
|
68,653
|
58,965
|
69,555
|
72,442
|
Royalty
Interest (boepd)
|
429
|
342
|
398
|
373
|
458
|
Corporate production for the second
week of February 2024 averaged 20,042
boepd with 49% representing oil and NGLs.
Although intermittent seasonal production
curtailments have occurred in 2024, the
continued performance of i3's predictable, low-decline
reserves, reflects the sustainable production base that the
Company has acquired and developed.
Hedging Programme
i3 continues to employ a defensive risk
management strategy, protecting approximately USD $41 million of
2024 NOI with current hedges in place as follows:
|
|
Swaps
|
|
|
|
GAS
|
|
Volume (GJ)
|
Price
(C$/GJ)
|
|
|
|
|
Q1
2024
|
|
2,275,000
|
3.04
|
|
|
|
|
Q2
2024
|
|
1,365,000
|
2.52
|
|
|
|
|
Q3
2024
|
|
1,380,000
|
2.52
|
|
|
|
|
Q4
2024
|
|
1,685,000
|
2.64
|
|
|
|
|
Q1
2025
|
|
1,800,000
|
2.69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costless
Collars
|
OIL
|
|
Volume
(bbl)
|
Price
(C$/bbl)
|
|
Volume
(bbl)
|
Avg Floor Price
(C$/bbl)
|
Avg Ceiling Price
(C$/bbl)
|
Q1
2024
|
|
189,750
|
95.89
|
|
22,750
|
100.00
|
121.32
|
Q2
2024
|
|
182,000
|
98.45
|
|
38,000
|
95.99
|
108.46
|
Q3
2024
|
|
84,500
|
100.08
|
|
122,500
|
100.00
|
111.11
|
Q4
2024
|
|
115,050
|
95.95
|
|
23,250
|
100.67
|
111.90
|
Q1
2025
|
|
20,150
|
96.32
|
|
|
|
|
Operational Results
In total, i3's 2023 Canadian drilling programme
was comprised of 10 gross (7.5 net) operated wells and two gross
(0.5 net) non-operated wells. The total 2023 capital expenditures
of approximately USD 30 million (unaudited) served to efficiently
delineate and develop its core areas of Central Alberta, Wapiti and
the Clearwater. The well performance associated with the targeted
formations, in aggregate, continues to meet or exceed management
expectations. Further, the Company diligently managed the long-term
performance of its high-impact Simonette Montney oil wells, drilled
in 2022, further increasing the Company's conviction and commitment
to unlocking the value inherent in these prolific oil weighted
assets.
The Q4 2023 programme, focused on Central
Alberta, included the drilling, completion and tie-in of two gross
(2.0 net) horizontal Glauconite oil locations, one gross (0.53 net)
vertical Leduc oil well and a minor working interest (0.01 net) in
a non-operated Belly River oil well.
Central
Alberta
Based on the Company's track record of
successful Glauconite drilling in Central Alberta and the strong
well results of industry peers in proximal acreage, i3 drilled,
completed, equipped and tied-in two gross (2.0 net) 1-mile
Glauconite oil wells from a single surface pad location. Resulting
from upfront logistical work and efficient drilling, this two-well
development was delivered approximately 13% under budget. The wells
were brought on production at the end of December 2023 and have
delivered strong performance while continuing to clean-up and
recover load fluid.
The 102/03-05-043-02W5 was equipped
with a hydraulic pumpjack and has produced peak oil rates of up to
150 bbl/d with associated gas compared to an expected type curve
IP303 of 122 bbl/d, and is currently producing 120
boepd. The 102/14-08-043-02W5 initially flowed without artificial
lift at peak oil rates in excess of 400 bbl/d compared to an
expected type-curve IP30 of 124 bbl/d. Subsequently, this well has
been equipped with a pumpjack and bottom hole insert pump and its
last weekly average production is at 232 boepd. Both wells
are in line with expectations and have further optimization
potential.
In Q4, i3 and its working interest
partners drilled one gross (0.53 net) vertical Leduc oil well into
the Homeglen Rimbey D-3 unit in Central Alberta. This well
was drilled into a structural high in the underlying Leduc
formation, that targeted un-swept attic oil. The Leduc
formation, accurately identified on 3D seismic, was intersected
approximately 5-7 metres higher than offsetting producing wells.
However, a 7-metre-thick tight dolomite cap was encountered which
effectively negated the structural gain. The well was swabbed and
produced light oil with a high water cut and is not deemed economic
in the current price environment. i3 and its working interest
partners will utilize the wellbore for ongoing observation and
optimization of the Homeglen Rimbey Unit.
Serenity
The Company continues with its partner Europa
Oil and Gas to evaluate commercialisation options for the Serenity
discovery.
Environmental, Social and Governance
("ESG")
Expanding on the ESG initiatives executed in
2022, i3 Energy has maintained its commitment to reducing its Scope
1 and Scope 2 carbon emissions. i3 replaced pneumatic pumps with
solar-driven alternatives at 11 locations, which is expected to
reduce methane emissions by an estimated 445t CO2e. Additionally,
the electrification of 13 pumpjack engines in Carmangay and Retlaw
are expected to further reduce emissions by an estimated 2,759
tCO2e per year. In a further move towards greenhouse gas reduction,
the Company replaced natural gas-fired heaters with electric
heaters at one of its Medicine River locations. In collaboration
with an offset operator, i3 implemented an Alternative Fugitive
Emissions Management Programme (ALT FEMP) at its locations in 2023,
which images methane emissions from the air and is anticipated to
contribute to a substantial reduction in fugitive emissions by over
50% compared to the previous year. Concurrently, i3 implemented two
compressor consolidation projects which are expected to achieve
annual emission reductions of 2,728 tCO2e and 681 tCO2e,
respectively. These endeavours exemplify i3 Energy's dedication to
environmental sustainability and continual progress in ESG
practices. In January 2024, the Company was also pleased to publish
its 2022 ESG Report.
Return of Capital
The Company remains committed to delivering a
sustainable dividend as part of its total return model. During
2023, £13.298 million dividends were declared and £15.338 million
or 1.2825 pence per share were paid. Q4 2023 dividends of 0.2565
pence per share were declared in January and paid in February 2024.
Subject to Board approval at the end of quarter, the Company
expects to pay the Q1 2024 dividend of 0.2565 pence per share in
early Q2 2024, with an announcement made in due course, which
translates to a forward running yield of 11.5% based on the closing
price of i3's ordinary shares on 23 February 2024.
Year-End 2023 Reserves
Update
i3's year-end 2023 independent reserves
evaluation is in progress and the Company expects to release its
final numbers in late March, prior to the dissemination of its 2023
year-end financial statements.
Year-End 2023 and 2024 Quarterly
Financial Reporting
As the Company's Canadian shareholding has now
increased beyond 10%, i3 is no longer a designated foreign issuer
and therefore is no longer eligible for TSX continuous disclosure
exemptions previously granted through National Instrument 71-102.
As such, the Company will commence issuing TSX required quarterly
financial reports for Q1 2024, including a Management Discussion
and Analysis (MD&A). Additionally, an Annual Information Form
(AIF) will be included as part of the Company's 2023 year-end
financial statements which will be issued by 31 March
2024.
Outlook
In lower commodity price environments, when
drilling economics soften, i3 Energy evaluates opportunities in the
M&A market, where higher returns on investment are often
achievable. Accordingly, the Company is currently evaluating
several options to enhance shareholder value which include
strategic acquisitions and disposition of non-core assets to
increase liquidity.
The capital programme will target the second
half of the year, with wells brought on production ahead of
stronger winter pricing. Considering the current weak forecast for
North American gas prices, the drilling programme currently being
planned will focus on oil well locations, but we retain the option
to pivot to liquids rich gas wells should gas pricing improve. The
Company currently has over 25 locations acquired and surveyed,
across our portfolio of assets (including oil and gas wells), which
will allow the Company to optimise capital allocation based on
forecast H2 oil and gas prices.
Notes:
Unless otherwise denoted, all figures are referenced in USD
($) and assume a foreign exchange rate for the relevant period or
point in time.
(1) Net operating income is defined as gross profit before
depreciation and depletion, gains or losses on risk management
contracts, and other operating income, which equals revenue from
the sale of oil and gas and processing income, less production
costs
(2) Net Debt is defined as borrowings and leases and trade and
other payables, less cash and cash equivalents and trade and other
receivables
(3) IP30 is the initial production rate through the first 30
days of a well
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
Majid Shafiq (CEO)
|
c/o Camarco
Tel: +44 (0) 203 757 4980
|
|
|
WH
Ireland Limited (Nomad and Joint Broker)
James Joyce, Darshan Patel
|
Tel: +44 (0) 207 220 1666
|
|
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Tennyson Securities (Joint Broker)
Peter Krens
|
Tel: +44 (0) 207 186 9030
|
|
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Stifel Nicolaus Europe Limited (Joint
Broker)
Ashton Clanfield, Callum
Stewart
|
Tel: +44 (0) 20 7710 7600
|
|
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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 high
working interest 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
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.