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 unaudited results for its period ended 30 June 2022. A copy of the Company’s unaudited interim financial statements will be available shortly on the Company’s website at https://i3.energy/investor-relations/regulatory-news.
· During the first half of 2022, i3 announced total dividends of 0.60 pence/share (totalling £6.853 million) , equating to an H1 yield for the period from 1 January 2022 to 30 June 2022 of approximately 4.5% for i3’s shareholders based on i3’s closing share price on 4 January 2022
· After announcing in December 2021 that the Company was committing to pay a minimum of £11.827 million in dividends during the course of 2022 (3.5x all dividends paid during 2021), i3 announced in February 2022 that it would be moving to a monthly dividend and in May 2022 that it would be increasing its dividends payable during 2022 by 25% to £14.784 million, equating to 1.3125 pence per share or a 9.8% yield for i3’s shareholders based on i3’s issued and outstanding ordinary shares and closing share price on 4 January 2022
· H1 revenue of £101.6 million (H1 2021 £26.5 million), net operating income(1) (Revenue less royalties, opex, processing and transportation) of £68.8 million (H1 2021 £12.5 million), and cash flow from operations of £48.6 million (H1 2021 of £8 million)
· Employees elected to convert 114,547,030 options at a market price of c.28 pence per share into 66,305,381 ordinary shares (primarily settled on a post-tax in-the-money basis thereby reducing the resulting option shares and associated dilution by 42%), enabling all staff to become invested and aligned as shareholders
(1) Non-IFRS measure. Refer to Appendix B
· Average production of 18,950 barrels of oil equivalent per day (“boepd”) for the six-month period (107% higher than H1 2021) while exiting H1 above 20,000 boepd, August above 21,100 boepd and presently above 21,600 boepd, offsetting expected natural declines through excellent operations management, targeted maintenance capital allocation, and the initial deployment of i3’s ongoing 2022 capital programme
· Canadian Capital budget increased by up to USD 50 million above the previously announced (December 2021) USD 47 million 2022 programme (together, the “Enlarged Capital Budget”), focused on continued low-risk, high-return development drilling of i3’s core Glauconite and Cardium fairways, with expanded Montney and Clearwater programmes; i3 remains on track to deliver peak 2022 production above 24,000 boepd
· Drilled 20 gross wells (11.7 net) wells during H1; production associated with the majority of the operated Q2 2022 capital programme now in the initial clean-up phase or being tied into infrastructure, with initial well results continuing to achieve or exceed management’s expectations
· Increased the Company’s Clearwater position by ~20% through the acquisition of 15 net sections (38.5 km2) of proximal, strategic acreage
· Executed a Farm-in Agreement with Europa Oil and Gas (“Europa”) for a 25% working interest (“WI”) in i3’s Block 13/23c North (Licence P.2358) which contains the Serenity oil discovery, in exchange for Europa funding 46.25% of the cost of the upcoming appraisal well up to a gross capped cost of £15 million, above which any costs will be funded in proportion to the respective working interest of each company
· Inaugural annual sustainability report published outlining the Company’s Environmental, Social and Governance (“ESG”) initiatives and plans to reduce greenhouse gas emissions
POST PERIOD AND OUTLOOK
On 9 September 2022, the Company announced the appointment of John Festival as Non-Executive Chairman of i3’s Board of Directors, effective immediately. Linda Beal, who has seen the Company through a period of transformational growth as Interim Chairperson, remains as a Non-Executive Director with the Company and will focus on her roles as chair of the Audit and Governance Committees.
On 1 August 2022, i3 announced that all conditions precedent under the Farm-in Agreement with Europa had been satisfied and that its farmout of a 25% working interest the Serenity oil discovery was complete.
· Following the Serenity farm-out, i3 retains a 75% WI in Block 13/23c North (Licence P.2358) and a 100% WI in Block 13/23c South (Licence P.2358), which contains the Minos High Prospect and Liberator oil discovery.
Between July and September, i3 announced monthly dividends totalling £5.1 million (0.4275 pence per share), bringing the year-to-date yield to 7.7% for i3’s shareholders based on i3’s closing share price on 4 January 2022.
As announced on 26 August 2022, with the full deployment of its Enlarged Capital Budget, i3’s 2022 Net Operating Income (“NOI” = revenue minus royalties, opex, transportation and processing) is forecasted to be approximately USD 200 million driven by recent fluctuations in commodity prices, pricing differentials and inflationary pressures. This remains USD 8 million above the forecasted NOI of USD 192 million announced by i3 on 12 April 2022, which increased rapidly thereafter to USD 241 million by i3’s Q1 operational update of 9 May 2022. The recent softening in full-year 2022 commodity pricing predictions and expected differentials since May’s Q1 update result in a 9.4% decrease to i3’s revenue forecast (circa 6% for gas and 3.4% for liquids), while inflationary pressures are predicted to increase costs (royalties, opex, transportation and processing) by 3.0%. i3 continues to employ a defensive risk management strategy with current hedges in place to cover 36% and 22.5% of the Company’s projected H2 2022 and H1 2023 production volumes, respectively. i3’s hedges are as follows:
The Company’s focus for the remainder of 2022 will be on 5 key areas:
1 The growth of i3’s Canadian business by way of operational excellence, capital deployment and strategic upsizing in core areas;
2 Serenity appraisal drilling and, upon success, the booking of reserves and initiation of field development planning;
3 Dividend distributions to shareholders of up to 30% of free cash flow;
4 Conducting operations safely and in an environmentally secure manner; and
5 Continuing to develop the ESG strategy outlined in its recently published maiden annual sustainability report.
Majid Shafiq, CEO of i3 Energy plc, commented:
“We are very pleased to announce a solid set of results for the first half of the year. These reflect the hard work of our staff in Canada and the UK in successfully progressing our business plan on all fronts. We have made great strides in executing efficiently on our operated drilling program in Canada, with all wells drilled being on prognosis geologically and production contributions now commencing following tie-ins to infrastructure. We are also very happy to bring in a partner to the Serenity oil field in the UK and plans to drill the appraisal well are on track to spud this month. Our operations team continue to perform diligently to maintain our base production volumes, whilst operating safely with no lost time incidents being recorded. We also published our inaugural annual ESG report which set out our commitment to high ESG standards and operating practises. Our move to a monthly dividend program reflects our confidence in the stability and resilience of our production assets and we look forward to updating the market over the next quarter as our busy drilling program continues.”
i3 Energy plc
Majid Shafiq (CEO) / Graham Heath (CFO)
Tel: +44 (0) 203 781 8331
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