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 the period ended 30 June 2021.
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.
· Concurrent with this Interim Report, i3 announces an H1 2021 dividend of £2.20 million or 0.2 p/share. The Ex-Dividend Date, Record Date and Payment Date will be 7 October 2021, 8 October 2021, and 29 October 2021, respectively
· Including the 0.16 p/share special dividend announced in July, total dividends of 0.36 p/share have been declared during the year to date. These dividends do not include the benefit of the enlarged portfolio following the completion of the acquisition of the assets from Cenovus Energy Inc., which completed post period end. The H2 2021 dividend will benefit from the enlarged cash flow resulting from this transaction
· H1 revenue of £26.5mm (net) and net operating income (Revenue less royalties, opex, processing and transportation) of £12.5mm and cash flow from operations of £8mm
· Concluded a reduction of the Company’s share premium account and announced an intended special dividend of £1.16 million (or 0.16 p/share which was subsequently paid on 6 August 2021)
· Sustained average production above 9,000 boepd for the sixth month period, offsetting expected natural decline through excellent operations management and targeted maintenance capital allocation
· H1 volumes do not include any production from the assets acquired from Cenovus Energy Inc., as the transaction closed post period end. Including production from these assets, production for the week ending 18 September 2021 averaged 18,741 boepd
· 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 and development 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 CAD4.7 million, increasing i3’s operated interest in this Montney oil play to 99% and allowing it to bring back on 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
· 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%
Post Period-End Highlights
· 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 7 July 2021
· To fund the Cenovus acquisition on 7 July 2021, i3 raised approximately £40 million through the Placing and Subscription of 363,700,000 Placing Shares at the Issue Price of 11 pence per Placing Share, a 3% discount to the 15-day average closing price of 11.4 pence
· On 8 July 2021, i3 announced the declaration of its Maiden Special Dividend of 0.16 pence/share
· 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. Currently through a combination of physical and financial swaps, circa 24% to 26% of forecast production is hedged through to the end of 2021, circa 22% hedged in Q1 2022 and 4.5% in Q2 2022
· Agreed terms with farm-in partners for the Serenity field appraisal drilling programme. We await confirmation of funding commitments from those potential farm-in partners before finalising and executing documentation
Majid Shafiq, CEO of i3 Energy plc, commented:
“2021 has been a transformational year for i3. We are now a substantial production company with a full cycle E&P portfolio containing multiple options to create and return value to our shareholders. We will continue our efforts in the remainder of 2021 and beyond to grow our production business and build the scale required to efficiently and effectively maximise and sustain value creation.”
Post Period and Outlook
On 6 July 2021 the Registrar of Companies registered the cancellation of i3’s share premium account. The £64.1 million balance of the Group’s share premium will be transferred to retained earnings in the second half of 2021.
On 7 July 2021, i3 announced that it had reached a definitive agreement with Cenovus Energy Inc., a senior Canadian oil and gas producer, to acquire certain petroleum and infrastructure assets within i3’s Central Alberta core area (the “Cenovus Assets”), for a total consideration of CAD65 million (US$53.7 million) (the “Acquisition”). The strategic Acquisition delivers extensive operational synergies, a large reserve base with multi-year development inventory and expected strong free cash flow. The Acquisition includes approximately 8,400 boepd (51% oil and NGLs) of predictable low-decline production, 79.5 MMboe of 2P reserves with an NPV10 of US$193 million as at 1 April 2021 (inclusive of undiscounted asset retirement obligations (“ARO”) of US$92 million, inflated at 2% and discounted at 10% for an NPV10 ARO value of US$23 million), an inventory of greater than 140 net drilling locations and 80 net reactivation opportunities across approximately 212,000 net acres, an 1,140 km network of operated pipelines, and key processing facilities.
Also on 7 July 2021, i3 announced the conditional Placing and Subscription of 363,700,000 Placing Shares at the Issue Price of 11 pence per Placing Share, a 3% discount to the 15-day average closing price of 11.4 pence. This includes shares placed through a PrimaryBid offering. The total fundraising was for approximately £40 million. The Placing and Subscription was approved by the Shareholders on 26 July 2021 and admitted to trading on AIM on 27 July 2021. Following the Placing and Subscription, the Company’s issued share capital stood at 1,091,424,766 ordinary shares with a nominal value of £0.0001 each.
Further details of the Acquisition and the equity fundraise are available at https://i3.energy/investor-relations/regulatory-news.
On 8 July 2021, i3 announced the declaration of its Maiden Special Dividend of 0.16 pence/share with an Ex-Dividend date of 15 July 2021, Record Date of 16 July 2021, and Payment Date of 6 August 2021.
On 30 July 2021, the Company issued options over a total of 53,705,491 ordinary shares to i3 staff and board and has additionally issued 1,750,000 options to incoming staff and conditionally allocated 3,750,000 for additional hires as part of the Acquisition. The options were issued in accordance with the rules of the Company’s Employee Share Option Plan at an exercise price of £0.11 per share. Of the options issued to employees of i3 Canada, one-third of the options vested immediately, with a further one-third vesting if production of 20,000 boepd is achieved prior to July 2022 (substantially funded from internally generated cash flow), and 100 per cent will vest upon the addition of 9,250 boepd or 50 MMboe 2P reserves. Of the options issued to employees of i3 North Sea Limited, one-third of the options vested immediately, with a further one-third vesting at spud of the earlier of a second appraisal well or first development well at either Serenity or Liberator, and 100 per cent will vest upon the addition of 2,500 boepd of European production. Of the options issued to the executive and non-executive directors and one corporate employee, one-third of the options vested immediately, with a further one-third vesting (i) at spud of the earlier of a second appraisal well or first development well at either Serenity or Liberator; or (ii) if production of 20,000 boepd is achieved prior to July 2022 (substantially funded from internally generated cash flow), whichever is first to occur, and 100 percent upon (i) the addition of 2,500 boepd of European production; or (ii) the addition of 9,250 boepd or 50 MMboe 2P reserves, whichever is first to occur. The options will otherwise fully vest on the third anniversary.
On 20 August 2021, the Company closed the Acquisition previously announced on 7 July 2021.
On 15 September 2021, the Company announced that certain Loan Noteholders had exercised warrants over 9,828,010 shares in the Company. These shares were admitted to trading on AIM on 17 September 2021.
On 27 September 2021 and concurrent with this Interim Report, i3 announces an H1 2021 dividend of £2.20 million (0.2p/sh). The Company confirms the following for its H1 2021 dividend:
Dividend: 0.20 pence/share
Ex-Dividend Date: 7 October 2021
Record Date: 8 October 2021
Payment Date: 29 October 2021
Payment to shareholders holding their shares on the TSX will be made in Canadian dollars, using the exchange rate from the Bank of England, at close on the Dividend announcement date, 27 September 2021.
Following the Placing and Subscription, the Warrant Exercise, and as at the date of this report, the Company’s issued share capital stands at 1,101,252,776 ordinary shares with a nominal value of £0.0001 each.
Throughout July, August, and September, i3 entered various risk management contracts, as summarised below.
Terms have been agreed in principle with farm-in partners for the Serenity field appraisal drilling programme. We await confirmation of funding commitments from those potential farm-in partners before finalising and executing documentation.
The Company’s focus for the remainder of 2021 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 The farmout of its UK licences to conduct further appraisal drilling at Serenity and/or Liberator;
3 Dividend distributions to its shareholders of up to 30% of free cash flow;
4 Conducting our operations safely and in an environmentally secure manner; and
5 Continuing to develop our ESG strategy and publishing our maiden annual sustainability report.
i3 Energy plc
Majid Shafiq (CEO) / Graham Heath (CFO)
Tel: +44 (0) 203 781 8331
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