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 provide the following update.
· Q3 2021 average production of approximately 13,740 boepd, based on net field sales estimates, with September averaging approximately 18,985 boepd.
· Inclusive of i3’s current hedges, full-year 2021 net operating income (“NOI” = revenue minus royalties, opex, transportation and processing) is now forecast to be approximately USD 65.7mm, and USD 119.1mm (assuming CAD:USD 1.24) for the next twelve months (“NTM”) from 1 October 2021. This increased guidance is due to lower-than-expected base declines, the results of our reactivation programme and strong commodity prices.
·Dividend payments commenced during the quarter with a special dividend of 0.16 pence per share paid on 6 August 2021 and the H1 dividend of 0.2 pence per share to be paid on 29 October 2021.
· Closed the strategic acquisition of approximately 8,400 barrels of oil equivalent per day (“boepd”) (51% oil and NGLs) of predominantly operated, conventional, low-decline production, and a network of complementary midstream infrastructure from Cenovus Energy Inc. (“Cenovus”) in i3’s Central Alberta core area.
· Completed a bolt-on acquisition of 230 boepd in the Wapiti area, which i3 has since increased to approximately 480 boepd through field operations.
·Completed well reactivation programmes in recently acquired South Simonette and Wapiti acreage, adding approximately 970 net boepd.
· Drilled and completed six wells, with two wells being drilled in each of the Marten Hills, Wapiti and Pembina areas, adding combined net production of 565 boepd, with the 15-29 Ellerslie well at Pembina still to come on production.
Majid Shafiq, CEO of i3 Energy plc, commented:
“The third quarter of 2021 continued with an intense level of activity across all fronts. We closed the transaction with Cenovus which added circa 8,400 boepd of production to our portfolio and, together with ongoing optimisation of our pre-existing asset base and some smaller transactions, we have managed quarter-on-quarter production growth and are currently producing circa 19,000 boepd.
We are now finalising our capital programme for the rest of this year and for 2022, following which we will commence deployment of free cash flow into an active, operated development drilling programme, which we expect to materially grow our production base into a very positive commodity price environment.
We are also extremely pleased to have commenced dividend payments this quarter and look forward to completing payment of our H1 2021 dividend on 29 October.”
Production in Q3 2021 from the pre-Cenovus acquisition assets, based on net field sales estimates, averaged 9,975 boepd (compared to 8,905 boepd in Q2 2021 and 9,090 boepd in Q1 2021), and comprised of field estimate sales equalling 34.6 million standard cubic feet of gas per day (“mmscfd”), 2,500 barrels per day (“bbl/d”) of natural gas liquids, 1,490 bbl/d of oil and 215 boepd of gross overriding royalty interest production. Since acquiring its initial assets in Canada in Q3 2020, the Company has successfully implemented its strategy to offset natural field declines and grown production with a combination of efficient organic growth and small bolt on acquisitions.
Aggregate corporate production in Q3 2021 based on net field sales estimates, including 42 days production from the assets acquired from Cenovus on 20 August 2021, the closing date for that transaction, averaged approximately 13,740 boepd and comprised of net field estimate sales equalling 44.5 mmscfd, 3,990 bbl/d of natural gas liquids, 2,070 bbl/d of oil and 265 boepd of gross overriding royalty interest production.
Current aggregate corporate production based on net field sales estimates and before gross overriding royalty interest production averaged approximately 18,960 boepd, for the seven-day period ending 16 October 2021, equalling 57.3 mmscfd, 5,880 bbl/d of natural gas liquids, 3,520 bbl/d of oil.
2021 and Next Twelve-Month Net Operating Income Forecast
Based on 13 October 2021 strip pricing, i3 forecasts 2021 full-year NOI of approximately USD 65.7mm and NTM NOI from 1 October 2021 of USD 119.1mm. The increase from the previous NTM NOI guidance of USD 94.8mm announced on 16 August 2021 is principally due to strong operational performance and strengthening commodity price forecasts. The forecasts assume natural decline of the Company’s currently producing well stock and do not include any incremental production from development drilling, workovers, or other capital projects, which i3 is currently evaluating. The forecasts include the impact of the Company’s current commodity hedging portfolio which is detailed below:
Central Alberta Core Area Production Acquisition
The acquisition of assets from Cenovus in the Company’s Central Alberta core area, as announced on 7 July 2021, closed on 20 August 2021. The transaction has an effective date of 1 April 2021 and income accrued in the period from the effective date to the closing date will be recognised as an adjustment to the consideration paid for the assets.
Wapiti Area Production Acquisition
The Company completed the Wapiti production acquisition, at an average working interest of 72%, on 20 July 2021, with a 1 April 2021 effective date.
Wapiti Area Production Acquisition Well Reactivations
These assets were producing 230 boepd at the time of i3’s abovementioned acquisition. The Company completed both compression and a six well reactivation programme which resulted in material production gains. Production from the assets post reactivation more than doubled – averaging approximately 480 boepd during the month of September – considerably higher than our initial expectation of circa 300 boepd. All-in capital of approximately USD 0.1mm for the compression and reactivation programme translates to capital efficiencies of less than $600/boepd based on September production and is expected to pay out in less than 3 months.
South Simonette Well Reactivations
i3 completed on 28 May 2021 its acquisition of the entire 49.5% operated interest held by Anegada Oil Corporation in its South Simonette property. i3 now controls a 99% operated interest in the associated land base, which has a gross area of 64 km2. Three wells were worked over, two non-producing wells had gas-lift installed and the third an electric submersible pump. The three wells were brought back on-line in sequence and the initial 14-day production averaged approximately 730 boepd comprised of field estimate sales equalling 1.7 mmscfd, 423 bbl/d of natural gas liquids, 26 bbl/d of oil from South Simonette, meeting i3’s prognosis of circa 720 boepd.
Marten Hills Clearwater multi-lateral wells 01-12-075-26W4 and 02-12-075-26W4 were drilled, completed, and tied into production infrastructure in late July. Average production since start-up has been approximately 110 boepd (96% oil, 4 % gas).
i3 owns a 50% working interest in these wells and has the option under the associated farm-in agreement, previously announced on 5 May 2021, to participate in an additional 7 wells, at least 4 of which will be spud by 31 March 2022, which would see i3 earn 11.5 net sections of land (circa 29.4 km2) in the Marten Hills, Cadotte and West Dawson areas of the Clearwater play.
Wapiti Elmworth Drilling
Two horizontal wells targeting the Dunvegan formation in i3’s Elmworth Wapiti acreage were drilled, completed and tied in during August and September. i3 has a 50% working interest in these wells. Both wells encountered excellent reservoir quality and were drilled and completed on time and budget. The first well 09-17-071-10W6 was on-stream on 27 September 2021 and the second well 08-17-071-10W6 commenced production on 30 September 2021. Average production from the two wells since clean-up and over the 14-day period between 7 October 2021 and 20 October 2021 was approximately 190 boepd, which exceeded pre-drill expectations of circa 175 boepd.
Pembina Area Drilling
Wells 14-29-049-10W5 and 15-29-049-10W5 in the Pembina area were drilled, completed, and tied in during August and September. Each of these 2,850m Ellerslie Formation horizontals encountered excellent porosity ranging from 6-12% porosity. i3 has a 33% working interest in these wells. The 14-29-049-10W5 well was tied in to i3’s Lodgepole facility in September and initially produced at an average rate of approximately 260 boepd net to i3 during the 14-day period between 8 September 2021 and 30 September 2021. The strong results exhibited by the 14-29 well continue to outperform i3 expectations. The second well will be brought on production following the overhaul of a compression unit in the production facility, which is expected to occur in November.
Remaining 2021 and 2022 Capital Programme
Following completion of the acquisition of the Cenovus assets, the Company is evaluating the expanded portfolio of potential development drilling locations and is preparing a capital budget for the remainder of 2021 and the full year 2022. Guidance on the programme, budget, and expected impact on production and cashflow forecasts will be provided later in the year.
Serenity Appraisal Drilling Farmout
Discussions continue with potential farm-in partners for the Serenity field appraisal drilling programme. Terms have been agreed and we await confirmation of funding commitments from counterparties, which we expect before year-end 2021, before finalising and executing documentation. The market will be updated if and when agreements are reached.
Environment, Social and Governance (“ESG”)
i3 has commenced a strategic review of its ESG objectives and targets. This will lead to the publication of the Company’s maiden sustainability report in Q1 of 2022. In the meantime, the Company continues to pursue carbon emission reduction initiatives to meet and exceed current regulatory requirements. As part of this programme, i3 has replaced 354 pneumatic controllers, which previously used natural gas as the fluid, with low bleed controllers or instrument air. An additional 35 controllers are pending replacement in the near term. The Company is an active participant in the Government of Alberta’s Site Rehabilitation Program (“SRP”) and Saskatchewan’s Accelerated Site Closure Programme (“ASCP”). Through i3’s involvement in the SRP and ASCP, the Company has received grants to date exceeding CAD 2.4mm, which are dedicated to accelerating the closure of inactive wells, pipelines and facility liabilities. CAD 0.86mm of this has been deployed to date to abandon 25 wells and 2 pipelines. The Company is actively advancing a programme to deploy the remaining CAD 1.5mm which will further reduce the Company’s overall future decommissioning liability.
i3 commenced dividend payments during the quarter, with a special dividend of 0.16 pence per share paid on 6 August 2021 and following publication of the Company’s Interim Report in September, i3 declared an H1 2021 dividend of 0.20 pence per share with an ex-dividend date of 7 October 2021 and payment date of 29 October 2021.
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
If anyone reads this article found it useful, helpful? Then please subscribe www.share-talk.com or follow SHARE TALK on our Twitter page for future updates.
Terms of Website Use
All information is provided on an as-is basis. Where we allow Bloggers to publish articles on our platform please note these are not our opinions or views and we have no affiliation with the companies mentioned