Q3 2023 Operational and Financial Update

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 Majid Shafiq (CEO)	c/o Camarco Tel: [phone]
WH Ireland Limited (Nomad and Joint Broker) James Joyce, Darshan Patel	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 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

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.

 

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