2024 Capital Budget and Production Guidance

i3 Energy PLC

25 April 2024

 

25 April 2024

i3 Energy plc

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

2024 Capital Budget and Production Guidance

Investor Webinar via Investor Meet Company

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 Company's 2024 capital budget and production guidance. The Company will hold an investor webinar on Thursday 2 May 2024 at 12:00 pm BST including a Q&A session (details of which can be found below).

Highlights:

·    2024 Capital Budget

2024 Capital Budget of USD 50.9 million, forecasted to deliver 15 gross wells (10.5 net, 95% net i3-operated) to be drilled across the Company's diversified portfolio in Central Alberta, Simonette, and its northern Clearwater acreage.

·    Production Growth

Forecast exit 2024 production of 20,250 - 21,250 barrels of oil equivalent per day ("boepd"), representing a year-over-year increase of approximately 3% from the prior year average exit rate (December 2023), or approximately 8% from current levels, as the Company expects to recommence drilling in June 2024 and positions for accelerated Montney development in 2025.

·    Cash Flow

USD 70 - 75 million of 2024 Net Operating Income ("NOI") and USD 55 - 60 million of EBITDA before hedging gains and losses, based on budget price assumptions of USD 82/barrel ("bbl") for WTI and CAD 2.25/Gigajoules ("GJ") for AECO natural gas.

·    Shareholder Returns

      As part of i3's commitment to its total return model, subject to Board approval, the Company is expected to return forecasted dividends of £12.3 million (USD 15.7 million) in 2024, representing 0.2565 pence per share per quarter or 1.0260 pence per share for the year, which translates to a forward yield of 8.1% based on the closing price of i3's ordinary shares of 12.66 pence on 23 April 2024.

Majid Shafiq, CEO of i3 Energy plc, commented:

"Following very successful initiatives in the first half of the year to increase our balance sheet strength and liquidity, i3 is extremely pleased to announce a substantial USD 51 million capital programme for the remainder of the year, which will drill a diverse group of oil and gas wells across our portfolio in Canada. The majority of wells will be drilled in the second half of the year, with the high-volume Central Alberta gas wells producing into a forecast strong winter pricing environment and pad drilling of our exciting Montney acreage expected to commence early in Q1 2025. The programme is designed to deliver production growth and support our dividend programme, whilst maintaining liquidity and a conservative leverage position to maximise flexibility to deal with volatile market conditions and opportunities as they arise."

2024 Capital Programme Highlights

Following the Company's recent USD 24.8 million partial sale of its royalty assets, the elimination of all bank indebtedness and the establishment of a USD 55.6 million reserve-based credit facility, i3 Energy is pleased to announce a USD 50.9 million 2024 capital programme along with its 2024 operational and financial guidance. This programme will be fully funded from existing Company resources and is designed to balance growth, financial discipline, and a sustainable long term-dividend through a predictable development-focused programme, all while positioning the Company to commence its Simonette Montney pad development drilling in Q1 2025. The programme is constrained to fit within the available time window of the second half of the year.

The 2024 budget currently reflects an estimated total capital investment of USD 50.9 million in Canada, of which approximately USD 41.1 million is allocated to drilling and development, with the remaining balance (USD 9.8 million) apportioned to maintenance capital, facilities, land, ESG and seismic initiatives. The 2024 budget reflects the natural limitations associated with the Canadian operating environment, including, but not limited to, access issues associated with seasonal weather conditions. As such, the 2024 programme anticipates drilling operations will commence in late Q2, with continuous operations through to year-end.

i3's 2024 capital programme will be 85% weighted to the second half of the year with wells expected to be brought on production ahead of stronger forecasted winter gas pricing. Should it be the case that the forward strip forecast for gas prices deteriorates, the Company is well positioned to both reallocate its drilling locations to more oil weighted development opportunities or capitalize on strategic accretive acquisitions as they are identified. Corporate guidance incorporates the drilling of 15 gross (10.5 net) wells with locations split between i3's key operating areas, comprising 11 gross (7.6 net) wells in Central Alberta, 2 gross (1.9 net) wells in Simonette and 2 gross (1.0 net) wells across the Clearwater fairway. The programme is primarily focused on development opportunities, supplemented with targeted high-impact, large resource, oil-centred delineation.

The 2024 capital programme is projected to deliver total average production of between 18,000 and 19,000 boepd (natural gas, oil & condensate, natural gas liquids and royalty interest production expected to average approximately 53%, 22%, 24% and 1%, respectively), with estimated peak production achieved in December. Based on timing, with no operated wells drilled or planned until June, the 2024 drilling programme is forecast to deliver December exit rate production growth of 3% when compared to the same period of 2023. Additionally, when adjusting for the Company's highly accretive partial royalty disposition, announced on 17 April 2024, December exit production growth reflects 5% on a year-over-year basis.

The Company's 2024 Budget is designed to ensure a strong balance sheet and significant financial flexibility to support the Company's income plus growth strategy and positions i3 to commence its Simonette Montney development in Q1 2025. The capital programme will result in exit 2024 net debt of USD 23 - 26 million, representing a net debt to annualized December 2024 EBITDA before hedging, of approximately 30% and net debt credit utilization of less than 45%.

For its planning case, i3 has used commodity price assumptions of USD 82.00/bbl for WTI crude oil and CAD 2.25/GJ for AECO natural gas and expects to generate net operating income of approximately USD 70 - 75 million and EBITDA before hedging of USD 55 - 60 million for 2024.

2024 Guidance and Commodity Price Assumptions

	2024 guidance and assumptions (1)
Annual Average Production (2) Exit Production (Dec. 2024)	18,000 boepd - 19,000 boepd 20,250 boepd - 21,250 boepd
Average Expenses: Royalty Operating & Processing Transportation	15% USD 11.30/boe - USD 11.50/boe USD 2.10/boe - USD 2.30/boe
Annual Net Operating Income (3) Exit Net Operating Income (Dec. 2024) (3)	USD 70.0 million - USD 75.0 million USD 7.8 million - USD 8.3 million
Annual EBITDA Before Hedging (4) Exit EBITDA Before Hedging (Dec. 2024) (4)	USD 55.0 million - USD 60.0 million USD 6.3 million - USD 6.8 million
Capital Expenditures	USD 50.9 million
Dividends (5)	USD 15.7 million
Net Debt (Dec. 2024) (6)	USD 23.0 million - USD 26.0 million

2024 Commodity Assumptions ⁽⁷⁾

WTI ($/bbl)	USD 82.00/bbl
MSW Oil Differential ($/bbl)	USD 3.00/bbl
AECO Natural Gas ($/GJ)	CAD 2.25/GJ
USD / CAD Foreign Exchange	1.35
GBP / CAD Foreign Exchange	1.68

2024 Net Operating Income Sensitivity ⁽⁸⁾

2024 sensitivities	Estimated change to net operating income
Change in WTI USD 1.00/bbl	USD 1.2 million
Change in AECO CAD 0.10/GJ	USD 1.3 million
Change in CDN / US exchange rate CAD 0.01	USD 0.9 million

*See below Notes

Hedging

i3 continues to employ a defensive risk management strategy with current hedges in place to protect USD 43.4 million of net operating income in 2024, with current hedges in place to cover 31%, 27%, 26% and 24% of the Company's projected Q1, Q2, Q3 and Q4 2024 future production volumes, respectively. i3's 2024 hedges are as follows:

		Swaps			Basis Swaps
GAS		Volume (GJ)	Price (CAD/GJ)		Volume (mmbtu)	Price (USD/mmbtu)
Q1 2024		2,275,000	3.04		nil	nil
Q2 2024		1,365,000	2.52
Q3 2024		1,380,000	2.52
Q4 2024		1,685,000	2.64
					Costless Collars
OIL		Volume (bbl)	Price (CAD/bbl)		Volume (bbl)	Avg Floor Price (CAD/bbl)	Avg Ceiling Price (CAD/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		145,550	97.41		41,450	100.37	111.46

UK Operations

The Company continues to evaluate development options for the Serenity discovery in consultation with its partner and the North Sea Transition Authority. There is no capital budget associated with this work in 2024.

Environmental, Social and Governance ("ESG")

i3 is dedicated 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. i3 recognises the safety and well-being of our employees, local communities, and other key stakeholders as a priority, and considers climate change as having a material impact on our business.

i3 remains committed to environmental sustainability through consistent implementation of innovative technologies and operational strategies. The Company proudly continues its utilization of an Alternative Fugitive Emissions Management Program to mitigate fugitive emissions, with the pilot project funded by the Alberta Methane Emissions Program and supported by the Alberta Energy Regulator. Furthermore, i3 is dedicated to expanding its renewable energy initiatives, with ongoing installations of solar pumps across various locations. The Company actively explores opportunities to enhance process and operational efficiencies, particularly in optimizing compression facilities to minimize fuel consumption and emissions and, as part of its ongoing efforts, has initiated an analysis of electricity consumption to identify potential reductions in Scope 2 emissions. Most notably, i3 Energy is piloting innovative solutions, with the installation of a high to no-bleed, solar-powered instrument air skid at a strategic location, with plans for potential expansion to three additional sites in 2024.

The Company will responsibly continue to meet its asset retirement obligations into 2024, as it plans to complete approximately 40 downhole abandonments, decommission an estimated 50 surface sites, and abandon approximately 15 pipelines.  i3 has also allocated USD 0.7 million to progress reclamation and remediation efforts across its portfolio, with 11 reclamation certificates anticipated in 2024.  

Return of Capital

As part of its total return model, the Company remains committed to delivering a sustainable monthly dividend to complement its organic growth profile. Since initiating its dividend programme in July 2021 i3 has paid total dividends of £37.2 million (USD 47.4 million). Based on its recent elimination of all corporate bank indebtedness and forecasted 2024 guidance, i3 expects to deliver minimum total 2024 dividends of £12.3 million (USD 15.7 million). Subject to Board approval, the 2024 forecasted dividend, representing 0.2565 pence per share per quarter or 1.026 pence per share for the year, translates to a forward yield of 8.1% based on the closing price of i3's ordinary shares of 12.66 pence on 23 April 2024. Based on projected year-over-year production growth and anticipated dividend yield, the Company expects to deliver a total Shareholder return of 11% - 13% in 2024. 

Investor Presentation

Majid Shafiq, Ryan Heath and Jason Dranchuk will provide a live presentation relating to i3 Energy's 2024 Capital Budget via the Investor Meet Company platform on 2 May 2024 at 12:00pm BST.

The presentation is open to all existing and potential shareholders. Questions can be submitted pre-event via your Investor Meet Company dashboard up until 9am the day before the meeting or at any time during the live presentation.

Investors can sign up to Investor Meet Company for free and add to meet i3 Energy plc via:

https://www.investormeetcompany.com/i3-energy-plc/register-investor

Investors who already follow I3 ENERGY PLC on the Investor Meet Company platform will automatically be invited.

Additionally, i3 is pleased to announce that an updated corporate presentation will be available on the Company's website https://i3.energy/ coinciding with the Investor Meet Company live presentation.

*NOTES:

(1) i3's 20243 guidance for its Net Operating Income, EBITDA and year-end Net Debt is based on an annual average production range of 18,00022,250 - 1923,000 boepd.

(2) Total annual average production (boepd) is comprised of approximately 47% Oil, Condensate & NGLs, 53% Natural Gas

(3) Net Operating Income is a non-GAAP financial measure and is defined as gross profit before depreciation and depletion and gains or losses on risk management contracts, which equals revenue net of royalty expenses, less production costs

(4) EBITDA is a non-GAAP financial measure and is defined as earnings before depreciation depletion, financial costs, and tax

(5) Based on i3's annual common share dividend of £12.3 million (US$15.7 million assuming 1.275 GBP:USD) paid in 2024. The declaration of dividends is subject to the approval of i3's board of directors and is subject to change

(6) Net Debt is a non-GAAP financial measure and is defined as borrowings and leases and trade and other payables, less cash and cash equivalents and trade and other receivables

(7) Commodity prices and foreign exchange reflect full year average realized prices or rates

(8) Illustrates the expected impact of changes in commodity prices and the CAD:USD exchange rate on i3's estimate of Net Operating Income for 2024, holding all other variables constant. The sensitivity is based on the commodity price and exchange rate assumptions set forth in the table above. Calculations are performed independently and may not be indicative of actual results. Actual results may vary materially when multiple variables change at the same time and/or when the magnitude of the change increases.

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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: [phone]
WH Ireland Limited (Nomad and Joint Broker) James Joyce, Darshan Patel, Isaac Hooper	Tel: [phone]
Tennyson Securities (Joint Broker) Peter Krens	Tel: [phone]
Stifel Nicolaus Europe Limited (Joint Broker) Ashton Clanfield, Callum Stewart	Tel: [phone]
Camarco Andrew Turner, Violet Wilson, Sam Morris	Tel: [phone]

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.

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 24, 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. 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 fund future dividends; 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.   

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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