i3 Energy Canada Ltd YE 2022 Reserves

RNS Number : 0418V

i3 Energy PLC

03 April 2023

 

3 April 2023

i3 Energy plc

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

i3 Energy Canada Ltd YE 2022 Reserves

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 results of its 2022 year-end reserve report, for its subsidiary i3 Energy Canada Ltd.

i3's independent reserve report (the "GLJ report") was prepared by GLJ Ltd. ("GLJ") in accordance with standards contained in the Canadian Oil and Gas Handbook (COGEH) and National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities ("NI 51-101"), with an effective date of 31 December 2022.

 Highlights

· Successful Execution of 2022 Capital Programme Provided Year-Over-Year Reserve Additions Across All Reserve Categories  

o  Total Company Interest proved plus probable developed producing reserves ("2PDP") increased 9% to 65.7 million boe, total proved ("1P") reserves increased 10% to 93.5 million boe and total proved plus probable ("2P") reserves increased 18% to 181.5 million boe, compared to the prior year.

· Strong Organic Reserves Replacement Ratio, Long Reserve Life Assets and Low Decline Profile to Support the Company's Total Return Model

o  The Company's organic Working Interest reserves replacement ratio in 2022 was 176% on a 2PDP reserve basis, 214% on a 1P reserves basis and 479% on a 2P basis.

o  2PDP, 1P and 2P reserve life indices of 8.8 years, 12.2 years and 22.5 years, respectively, combined with our low base corporate decline rate of approximately 17% and our extensive inventory of highly economic development drilling locations, underpin i3's ability to sustainably grow production per share from our existing asset base and generate significant distributable cash flow for our shareholders. 

· Material Increase in the Company Interest Reserve Value

o  As evaluated by GLJ, the Before-tax Net Present Value ("NPV") of cash flows attributable to the Company's reserves, discounted at 10%, has been determined to be $511.0 million (CAD 689.8 million), $623.0 million (CAD 841.0 million), and $1,161.5 million (CAD 1,568.0 million) for its 2PDP, 1P and 2P reserves, respectively, being indicative of the Company's strong production base, successful 2022 drilling program and robust portfolio of economic development opportunities.

o  2PDP NPV per share, using a 10% discount rate, increased by 50% to 0.36 per share (CAD 0.58 per share), 1P NPV increased by 43% to 0.43 per share (CAD 0.71 per share) and 2P NPV increased by 56% to 0.81 per share (CAD 1.31 per share), as compared to the prior year.

· Strong Finding, Development and Acquisition ("FD&A") Cost Metrics and Recycle Ratios Reflective of Efficient Development and Opportune Acquisition Strategy

o  Efficient development provided strong FD&A costs of $7.68 per boe on a 2PDP basis, translating to recycle ratios of 2.84x.

o  Over the three-year period since its entrance into the Western Canadian Sedimentary Basin, i3 has delivered FD&A costs of $2.96 per boe on a 2PDP basis, translating to a recycle ratio of 6.0x.

· Partial Recognition of the Company's Undeveloped Locations Leaves Significant Inventory of Future Unbooked Upside

o  Successful conversion of undeveloped locations to production, while increasing the total net undrilled booked locations by 25% to 376 gross (255.1 net) locations across the Company's four core areas, for a total Company inventory (undrilled booked and undrilled unbooked) of 881 gross (502 net) undeveloped locations.

o  Material increases in booked Montney and Cardium oil locations, with 32 net and 12.2 net locations added, respectively.

o  Total undeveloped inventory represents greater than 30 years of development drilling assuming the current annual capital program.

Ryan Heath, President of i3 Energy Canada Ltd., commented:

"The Canadian reserve report reflects the hard work and commitment of the entire i3 team. The Company's 2022 capital programme was executed with efficiency, while meeting or exceeding production expectations and corporate guidance. The efforts of 2022 have placed i3 in a strong position for 2023 as we continue to build upon the Company's predictable low-decline base production and further expand its extensive portfolio of high-return development opportunities."

Majid Shafiq, CEO of i3 Energy plc, commented:

"2022 was another very successful year for i3 Energy. In 2021 our reserves replacement was primarily driven by acquisitions. In 2022 we pivoted to growth via the drill bit and very successfully grew production and our reserves base. We proved the quality of our asset base and the expertise of our staff by organically delivering growth in our P1 reserves by 10% and 2P reserves by 18%. Our 2P reserves are now independently valued at circa $1.2 billion or £0.81 per share at year end, with their longevity demonstrated by a reserve life index of 22 years. Whilst this reflects year-end commodity pricing it demonstrates the material upside in our portfolio and the potential for year-on-year growth in production and total shareholder return."

2022 Reserves Review

The Company's year-end reserves were evaluated by GLJ in accordance with the definitions, standards and procedures contained in the COGEH and NI 51-101 as of 31 December 2022. The reserves evaluation was based on the average forecast pricing of GLJ, McDaniel & Associates Consultants Ltd. and Sproule Associates Limited ("3 Consultants Average", or "3CA") and foreign exchange rates as of 1 January 2023.

Reserves included are Company Interest reserves which reflect i3's total working interest reserves before the deduction of any royalties and include any royalty interests payable to the Company. Additional reserve information as required under NI 51-101 will be included on Forms 51-101 F1-F3 which will be filed on SEDAR. The numbers outlined in the tables below may not sum precisely due to rounding.

Summary of Reserves

The tables below outline GLJ's estimates of i3's reserves as of 31 December 2022.

I3 YE 2022 - Reserves Volumes
	Company Interest Reserves
Reserves Category	Oil	NGL	Gas	Total	Liquids Weighting
	Mbbl	Mbbl	MMcf	Mboe
Proved Producing	8,076	16,793	145,121	49,056	51%
Proved Non-Producing	227	1,326	12,676	3,666	42%
Proved Undeveloped	6,094	15,768	113,327	40,750	54%
Total Proved	14,398	33,887	271,124	93,472	52%
Probable Producing	10,915	22,390	194,596	65,738	51%
Total Probable	19,705	27,954	242,186	88,023	54%
Proved plus Probable	34,103	61,841	513,310	181,496	53%

	i3 YE 2022 - Reserves Values
	Before Tax Net Present Value (USD MM) Discount Rate
	0%	5%	10%	15%	20%
Proved  Producing	472,533	490,078	425,097	370,945	330,055
Proved Developed Non-Producing	26,929	21,108	17,142	14,317	12,227
Proved  Undeveloped	405,247	268.149	180,729	123,404	84,467
Total Proved	904,728	779,335	622,968	508,667	426,749
Probable  Producing	679,031	614,593	510,964	435,322	381,111
Total Probable	1,285,392	800,037	538,510	383,956	285,561
Proved plus Probable	2,190,121	1,579,372	1,161,478	892,622	712,310

Through the Company's productive 2022 drilling programme, i3 successfully converted a suite of high-return undeveloped locations to production, while increasing the total net undrilled booked locations by 25% to 376 gross (255.1 net) locations across its core areas, for a total Company inventory (undrilled booked and undrilled unbooked) of 881 gross (502 net) undeveloped locations. 

Material increases in booked reserves were predominantly a direct result of i3's successful 2022 Montney and Cardium development initiatives, in its Simonette and Wapiti fields, resulting in an increase of 32 net and 12.2 net booked oil locations added, respectively. Total undeveloped inventory now represents greater than 30 years of economic development drilling, based on the Company's current annual capital programme.

Reserve Reconciliation

The following table sets out the reconciliation of the Company's Working Interest reserves based on forecast prices and costs by principal product type as of 31 December 2022 relative to 31 December 2021. 

	Light and Medium Crude Oil	Heavy Crude	Natural Gas (assoc. & non-assoc.)	NGL	Total Oil Equivalent
	(Mbbl)	(Mbbl)	(MMcf)	(Mbbl)	(MBOE)
TOTAL PROVED
December 31, 2021	11,721	188	269,367	27,591	84,394
Revisions	272	-4	-6,621	5,688	4,852
Extensions and Improved   Recovery	3,088	248	28,323	2,607	10,663
Acquisitions	8	0	19	2	13
Production	-1,103	-110	-23,023	-2,213	-7,263
December 31, 2022	13,985	321	268,065	33,674	92,659
TOTAL PROBABLE
December 31, 2021	9,190	265	219,335	22,390	68,401
Revisions	165	-7	-1,162	4,306	4,270
Extensions and Improved Recovery	10,114	-91	22,854	1,165	14,997
Acquisitions	8	0	11	1	11
Production	0	0	0	0	0
December 31, 2022	19,478	168	241,038	27,861	87,680
TOTAL PROVED PLUS PROBABLE
December 31, 2021	20,911	453	488,702	49,981	152,795
Revisions	437	-11	-7,783	9,993	9,122
Extensions and Improved Recovery	13,203	157	51,177	3,772	25,661
Acquisitions	16	0	30	3	24
Production	-1,103	-110	-23,023	-2,213	-7,263
December 31, 2022	33,463	489	509,103	61,536	180,338

Performance Measures - Finding and Development ("F&D"), Finding, Development and Acquisition ("FD&A") Costs and Recycle Ratios

F&D and FD&A costs for 2022, 2021, 2020 and the three-year average are presented in the tables below. The capital costs used in the calculations are those costs related to land acquisition and retention, seismic, drilling, completions, tangible well site, tie-ins, and facilities, plus the change in estimated future development costs ("FDC") as per the GLJ report.  Net acquisition costs are the cash outlays in respect of acquisitions, minus the proceeds from the disposition of properties during the year. The reserves used in this calculation are working interest reserve additions, including technical revisions and changes due to economic factors. The recycle ratio is the net operating income (revenue minus royalties, opex, transportation and processing) per barrel divided by the cost per barrel (F&D or FD&A).

	2022	2021	2020	3-Year Average
Proved Developed Producing
F&D costs ($/boe)	$9.89	$2.41	N/A	$7.13
F&D recycle ratio	2.2x	5.7x	N/A	2.5x
FD&A costs ($/boe)	$9.89	$1.81	$1.53	$3.61
FD&A recycle ratio	2.2x	7.5x	3.8x	4.9x
Total Proved
F&D costs ($/boe)	$14.74	$3.72	N/A	$10.69
F&D recycle ratio	1.5x	3.7x	N/A	1.7x
FD&A costs ($/boe)	$14.74	$4.17	$3.51	$6.48
FD&A recycle ratio	1.5x	3.3x	1.7x	2.3x
Proved plus Probable Developed Producing
F&D costs ($/boe)	$7.68	$2.16	N/A	$5.79
F&D recycle ratio	2.8x	6.3x	N/A	3.1x
FD&A costs ($/boe)	$7.68	$1.45	$1.34	$2.96
FD&A recycle ratio	2.8x	9.5x	4.4x	6.0x
Total Proved Plus Probable
F&D costs ($/boe)	$15.26	$3.17	N/A	$12.12
F&D recycle ratio	1.4x	4.3x	N/A	1.5x
FD&A costs ($/boe)	$15.26	$4.00	$3.51	$7.19
FD&A recycle ratio	1.4x	3.4x	1.7x	2.5x

Reserve Life Index ("RLI")

RLI is calculated by taking the Total Company Interest reserves from the GLJ Report and dividing them by the projected 2023 production as estimated in the GLJ Report.

	Total Company Interest Reserves		2023 Company Production		YE 2022 RLI
Reserves Category	(Mboe)		(Mboe)		(Years)
Proved Producing	49,056		7,166		6.8
Total Proved	93,472		7,675		12.2
Proved plus Probable Producing	65,738		7,473		8.8
Proved plus Probable	181,496		8,060		22.5

Forecast Prices Used in Estimates

GLJ has employed the 3 Consultants Average forecast prices in the GLJ Report. The 3CA forecast prices, exchange rate and inflation (2% post 2037) assumptions as of 31 December 2022 are tabulated below.

	Canadian Light Sweet	Western Canada Select	Alberta AECO-C	Pentanes Plus	Butanes	Propanes	Inflation Rate	Exchange Rate
	40° API	WCS 20.5 API	Spot	FOB Edmonton
Year	($Cdn/bbl)	($Cdn/bbl)	($Cdn/ MMBTU)	($Cdn/bbl)	($Cdn/bbl)	($Cdn/bbl)	(% / year)	(USD/CAD)
2023	103.77	76.54	4.23	106.22	53.88	39.80	0.0	0.745
2024	97.74	77.75	4.40	101.35	52.67	39.13	2.3	0.765
2025	95.27	77.54	4.21	98.94	51.42	39.74	2.0	0.768
2026	95.58	80.07	4.27	100.19	51.61	39.86	2.0	0.772
2027	97.07	81.89	4.34	101.74	52.39	40.47	2.0	0.775
2028	99.01	84.02	4.43	103.78	53.44	41.28	2.0	0.775
2029	100.99	85.73	4.51	105.85	54.51	42.11	2.0	0.775
2030	103.01	87.44	4.60	107.97	55.60	42.95	2.0	0.775
2031	105.07	89.20	4.69	110.13	56.71	43.81	2.0	0.775
2032	106.69	91.11	4.79	112.33	57.56	44.47	2.0	0.775
2033	108.83	92.93	4.89	114.58	58.71	45.35	2.0	0.775
2034	111.00	94.79	4.98	116.87	59.88	46.26	2.0	0.775
2035	113.22	96.68	5.08	119.21	61.08	47.19	2.0	0.775
2036	115.49	98.62	5.18	121.59	62.30	48.13	2.0	0.775
2037	117.80	100.59	5.29	124.03	63.55	49.09	2.0	0.775
	Escalation rate of 2% thereafter

Notes:

1.  $ = USD.

2.  Any figures converted from CAD to USD are done so at CAD 1.35 to USD 1, and any figures converted from CAD to GBP are done so at CAD 1.63 to GBP 1.

3. Reserves estimates have been prepared by GLJ in accordance with standards contained in the Canadian Oil and Gas Evaluation Handbook (COGEH).

4.  Total Company Interest - Represents the sum of the company's working interest and any royalty interests it may hold.

5.  Working Interest - Represents the percentage of ownership in a specific property's mineral rights that a company holds.

6. Proved reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves. If probabilistic methods are used, there should be at least a 90% probability that the quantities actually recovered will equal to or exceed the estimate.

7. Probable reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater than or less than the sum of the estimated Proved plus Probable (2P) reserves. When probabilistic methods are used, there should be at least a 50% probability that the actual quantities recovered will equal or exceed the 2P estimate.

8.  Developed reserves are those reserves expected to be recovered from known accumulations from existing wells and facilities where no significant expenditure is required to render them capable of production. They must fully meet the requirements of the reserves category (for example proved or probable) to which they are assigned.

9.  Developed producing reserves are those reserves expected to be recovered from completion intervals that are open and producing at the effective date of the estimate.

10.  Proved plus Probable Developed Producing (2PDP) reserves are those reserves for which there is a 50% probability that the actual quantity of oil and gas that will be recovered from the current producing assets will equal or exceed the 2PDP estimate.

11. Undeveloped reserves are those reserves expected to be recovered from known accumulations where a significant expenditure (for example, when compared to the cost of drilling a well) is required to render them capable of production. They must fully meet the requirements of the reserves category (for example proved or probable) to which they are assigned.

12.  The Company is in a tax paying position due to fully utilizing its Canadian non-capital tax loss pools during the year ended 31 December 2022.

13.  Recycle ratio is calculated as the operating netback per boe divided by F&D or FD&A costs per boe as applicable. The operating netbacks used in the respective years are as follows: 2022 (unaudited) - $29.48/boe; 2021 - $18.45/boe and the three-year average is $23.87/boe

14.  Reserves replacement ratio is calculated by dividing the annual reserves additions in the year, in boe, by i3's annual production in that year, in boe.

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 Georgia Edmonds, 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 for 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 does not contain inside information.

 

END

 

 

MSCITMJTMTAMBPJ