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 audited results for the year ended 31 December 2021.
A copy of the Company’s financial statements will be posted to shareholders and made available shortly on the Company’s website at https://i3.energy. The Notice of Annual General Meeting (“AGM”) will be posted in due course. The AGM will be held at 11:00 am BST on 30th June 2022 at the offices of W H Ireland at 24 Martin Lane, London, EC4R0DR.
·During the course of 2021, i3 paid total dividends of 0.36 p/share, equating to a yield of approximately 6.5% for i3’s shareholders based on i3’s closing share price on 1 January 2021.
· Announced in December that the Company is committing to pay a minimum of £11.827 million in dividends during the course of 2022 (3.5x all dividends paid during 2021), equating to 1.05 pence per share or a 10.2% yield on the date of announcement, with forecasted year end “2022 Unencumbered Cash” of US$66 million which could support additional shareholder distributions or share buybacks, M&A, and supplemental development activity.
·2021 revenue of £86.8 million (net) and net operating income (revenue less royalties, opex, processing and transportation) of £48.8 million and cash flow from operations of £24.4 million.
·To fund the Cenovus acquisition on 7 July 2021, i3 raised approximately £40 million through the placing and subscription of 363,700,000 shares at an issue price of 11 pence per share, a 3% discount to the 15-day average closing price of 11.4 pence.
·Concluded a reduction of the Company’s share premium account by way of a UK court approvals process in order to free up distributable reserves to effect the abovementioned dividend payments.
·2021 full-year production averaged 12,442 boepd, with Q4 2021 including the newly integrated Central Alberta assets acquired from Cenovus Energy (which closed in August 2021) averaging 18,229 boepd (compared to 13,239 boepd in Q3, 9,018 boepd in Q2 and 9,173 boepd in Q1 2021). Q4’s production was comprised of 58 million standard cubic feet of gas per day (“mmscfd”), 5,210 barrels per day (“bbl/d”) of NGLs, 3,015 bbl/d of oil and 331 boepd of gross overriding royalty interest production. Q4 2021 production was impacted by the closing of multiple non-core asset disposals and December’s severe cold weather.
· Increased exposure to Alberta’s premier Clearwater play:
•Confirmed presence of oil in three gas wells in i3’s extensive Marten Creek acreage, providing a green light for a winter 2021/22 oil appraisal programme.
•Farmed-in to a 50% working interest in the Marten Hill’s Clearwater area and participated in two successful development wells which added c.120 boepd net production, with an option to drill seven additional wells on the acreage.
•Participated in Crown Land Sales, bolstering acreage through a 15-year lease on seven sections (17.9 km2) of land in the emerging Cadotte area.
· Acquired a 49.5% interest in South Simonette at a cost of US$4.2 million, increasing i3’s previously held 49.5% operated interest in this Montney oil play to 99% and allowing it to bring back on to production three wells to increase its corporate production by c.720 boepd and adding reserves of 4.9 MMboe at a before-tax NPV10 valuation of US$30.9 million. Total estimated 2P reserves as of 31 December 2021 were 10.3 MMboe.
·Elected to drill two oil-weighted wells with a partner at its Wapiti Elmworth acreage, expected to initially increase i3’s production by c.175 boepd, with payback estimated in 1.3 years.
·Acquired c.230 boepd of Wapiti production, conducted six reactivations to increase production to 471 boepd, significantly exceeding the expected 310 boepd.
·Brought on stream a gas well located on the Company’s Noel acreage in Northeast British Columbia at an average rate of 650 boepd, exceeding expectations by 30%.
·Acquired circa 8,400 boepd (51% oil and NGLs) of low decline production from Cenovus Energy Inc, located within i3’s Central Alberta core area, for a total consideration of CAD65 million (US$53.7 million). The assets were acquired on excellent metrics of 1.73x next twelve months cashflow, US$6,381/boepd and US$0.68/boe of 2P reserves and contain 79.5 MMboe of 2P reserves with an NPV10 of US$193 million as at 1 April 2021, an inventory of greater than 140 net drilling locations, 80 net reactivation opportunities and 1,140 km network of operated pipelines, and key processing facilities. The transaction closed on 20 August 2021.
·To increase its focus on its high working interest assets in Central Alberta, Wapiti / Elmworth, Simonette and the Clearwater play, during Q4 2021 the Company executed multiple non-core disposals with the purpose of reducing its per boe operating costs, decreasing end-of-life obligations, and releasing US$945 thousand of decommissioning-related bonds to i3’s balance sheet (previously held with provincial oil and gas authorities to offset potential end-of-life liabilities). On a combined basis, these disposals reduced i3’s production by approximately 130 boepd from a combined 213 gross (184.5 net) wells (consisting of 36 gross (34.3 net) active and 177 gross (150.2 net) inactive wells) and reduced the Company’s overall undiscounted asset retirement obligation by approximately US$9.8 million. The proceeds from these and future disposals will be utilised to accelerate growth from i3’s extensive inventory of highly economic development locations as the Company remains focused on delivering total shareholder returns.
· During Q4 the Company brought on stream four gross (1.5 net) highly economic non-operated horizontal wells within its Central Alberta and Wapiti core areas, at an average 37% working interest. The programme consisted of one well targeting the liquids-rich Ellerslie formation, one Belly River oil producer and two Dunvegan oil wells, which in aggregate contributed net average daily production over its initial 30-day production period (“IP30 rates”) of approximately 600 boepd (65% oil and NGLs) and are collectively meeting or exceeding i3’s forecasted type curves. This non-operated programme is expected to pay out in approximately one year and serve to further bolster i3’s year-end reserves and add newly identified offsetting development locations.
· The Company continued to systematically identify and develop its robust inventory of low-cost, high-return recompletion and reactivation opportunities, which produce top-tier returns and assist in further reducing i3’s corporate operating costs on a boe basis through the utilisation of the Company’s extensive network of owned and operated infrastructure while optimising field efficiencies with nominal capital. 16 gross (14 net) oil-focused recompletions and reactivations were brought on production in Q4, resulting in net IP30 rates of approximately 240 boepd (65% oil and NGLs). Cumulatively, the operations were completed on budget and are anticipated to pay out in substantially less than one year.
· On 20 December 2021, the Company announced a fully funded 2022 capital budget of US$47 million to fund a 12.6 net well operated drilling programme, non-operated drilling, well reactivations, debottlenecking, consolidation, and third-party tariff generating projects. This programme is expected to deliver average corporate production in 2022 above 20,000 boepd, with peaks reaching 21,000 boepd.
· The Company commenced a hedging program which will result in approximately 50% of corporate volumes being hedged on a rolling 12 month forward looking basis.
· Agreed terms with a potential farm-in partner for the Serenity field appraisal drilling programme and, at year-end, the Company was awaiting confirmation of funding commitments from that potential farm-in partner before finalising and executing documentation.
Post Period and Outlook
A summary of key events which occurred after the reporting period are presented in note 24 to the financial statements.
The Company’s focus for the remainder of 2022 will be on four key areas:
1 The growth of i3’s Canadian business through the deployment of capital into its large proven undeveloped reserves base, operational excellence to improve uptime and field performance, and strategic upsizing in core areas;
2 Drilling an appraisal well at the Company’s Serenity oil discovery in the UK to prove reserves and to guide future development plans;
3 Dividend distributions to its shareholders of up to 30% of free cash flow; and
4 Conducting its operations safely and in an environmentally secure manner.
The Company continuously evaluates opportunities to strengthen its balance sheet whilst maintaining tight control of its costs and working capital position.
Majid Shafiq, CEO of i3 Energy plc, commented:
“2021 was another truly transformational year for i3 which saw very significant growth for the Company across all factors which drive shareholder value – production, cashflow, reserves and portfolio scale and scope. We entered the year having completed two acquisitions in late January 2020 which saw our entry to the Canadian E&P market with circa 9,000 boepd of production. We have just exited Q1 2022 producing in excess of 20,000 boepd with year-end audited 2P reserves of 154 MMboe with a valuation of US$775mm and forecast NOI for the year of US$192mm. Our organic reserve replacement ratio for the year was over 200%, and this was achieved on the back of hundreds of well interventions which are a testament to the dedication of all our staff from field operations to those based in the office. We were also active throughout the year optimising our portfolio with numerous acquisitions and divestments, including one substantial transaction, the acquisition of circa 8,400 boepd in our core Central Alberta area from Cenovus Energy, and other strategic acquisitions in our Simonette Montney acreage and the Clearwater play which has given us exposure to significant near-term share price catalysts. Analysis and prioritisation of our substantial drilling portfolio over the course of the second half of the year allowed us to announce in December our inaugural operated drilling program which commenced in January 2022, and which will see us drilling circa 12.6 net wells during the first three quarters of the year. In the UK we continued discussions with potential farminees for our Serenity appraisal well and in March 2022 announced a deal which will allow us to spud the well later this year.
We are also pleased to have commenced dividend payments in 2021 and to have announced an increased dividend for 2022. We are confident we will add substantial shareholder return through exploitation of the extensive portfolio of drilling options we have lined up for 2022.
We are transformed into a strong, diversified production company with significant near-term growth catalysts over which we have operational control.
I would as always like to thank and pay tribute to all i3 staff, who have continued to work diligently, professionally and with good humour, whilst building our business under the difficult circumstances of the global COVID-19 pandemic and also for the continued support of our shareholders and investors who helped fund and support our growth in 2021.”
“Majid Shafiq, Chief Executive Officer”
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.
i3 Energy plc
Majid Shafiq (CEO) / Graham Heath (CFO)
Tel: +44 (0) 203 781 8331
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