---
title: "Malcy’s Blog – Oil price, Touchstone Exploration, Sound Energy, Serica Energy, i3 Energy & Jadestone Energy"
publisher: "Share Talk"
author: "sharetalk"
published: "2023-06-29T15:16:51+00:00"
modified: "2023-06-29T15:16:51+00:00"
date: 2023-06-29
canonical: "https://www.share-talk.com/malcys-blog-oil-price-touchstone-exploration-sound-energy-serica-energy-i3-energy-jadestone-energy/"
category: "Energy"
categories: ["Energy", "Malcy's Blog"]
tags: ["i3 Energy", "Jadestone Energy", "Serica Energy", "Sound Energy", "Touchstone Exploration"]
image: "https://i0.wp.com/www.share-talk.com/wp-content/uploads/2023/11/Stencil-Google-Chrome-2023-04-19-at-2.47.43-PM.jpeg?fit=1231%2C615&quality=89&ssl=1"
format: "news"
language: "en-GB"
---

# Malcy’s Blog – Oil price, Touchstone Exploration, Sound Energy, Serica Energy, i3 Energy & Jadestone Energy

**Published:** June 29, 2023
**Author:** sharetalk
**Categories:** Energy, Malcy's Blog
**Tags:** i3 Energy, Jadestone Energy, Serica Energy, Sound Energy, Touchstone Exploration
**Featured image:** ![](https://i0.wp.com/www.share-talk.com/wp-content/uploads/2023/11/Stencil-Google-Chrome-2023-04-19-at-2.47.43-PM.jpeg?fit=1231%2C615&quality=89&ssl=1)

---

**WTI (Aug) $69.56 +$1.86, Brent (Aug) $74.03 +$1.77, Diff -$4.47 -9c.**

**[Author @mgrahamwood](https://twitter.com/mgrahamwood)**

**USNG (Aug) $2.66 -12c, UKNG (July) 82.0p -3.0p, TTF (Aug) €32.905 -€2.09.**

## **Oil price**

A quiet week for oil, peculiarly since it started with the Wagner Group attack on Putin, of sorts, and whilst the Central Bank leaders roadshow in Europe remains solid with regard to more rate rises oil demand is tight. This was proved by yesterday’s EIA inventory stats in which crude drew by some 9.603m barrels when the whisper by the scallywags on the street best guess was just over 1m. With demand for gasoline remaining strong and no sign of the USA domestic requirements falling at all I see this remaining as it is for a while.

## **Touchstone Exploration**

Touchstone has provided an update on the construction of the Cascadura facility and Royston-1X production testing, ahead of our Annual General Meeting which will be held today at 10:30 a.m. (MDT). Touchstone has an 80 percent operating working interest in the Cascadura field and the Royston-1X well, which are located on the Ortoire block onshore in the Republic of Trinidad and Tobago. Heritage Petroleum Company Limited holds the remaining 20 percent working interest.

Cascadura

Construction of the Cascadura natural gas and liquids facility is progressing. We are currently undertaking pre-commissioning of the facility, which consists of testing all electronics, alarms, operating systems, flare and emergency shutdown systems, as well as purging air from the system using inert nitrogen gas. In parallel with these operations, on or about July 8, 2023, we will remove the downhole safety plugs from the Cascadura-1ST1 and Cascadura Deep-1 wells and commence facility commissioning operations.

Royston

We have completed the second production test of the Royston-1X well, which included three zones targeting a gross interval of 80 feet in the middle portion of the subthrust sheet of the Herrera Formation at depths between 10,604 and 11,020 feet. Each zone produced light crude oil, with wellhead shut in pressure up to 2,450 pounds per square inch. Production flowed to the surface at non-commercial rates. This section of the formation appears to be a low permeability reservoir, and further testing will not be conducted. The next well test will target a gross interval of 106 feet within the intermediate sheet, which is the primary target of the well.

Virtual Webinar Event

President and Chief Executive Officer, Paul Baay, will be presenting at the Shares / AJ Bell investor webinar on Wednesday, July 5, 2023 at 18:00 p.m. (BST). Following the presentations there will be a live question and answer session. Existing shareholders and potential investors can register to join the event for free via the following link: [https://www.sharesmagazine.co.uk/events/event/shares-investor-webinar-0507](https://url.avanan.click/v2/___https:/www.sharesmagazine.co.uk/events/event/shares-investor-webinar-0507___.YXAxZTpzaG9yZWNhcDphOm86OTQ2MTQ0MWU0NzU1NzAzOGVhODE4YmQ4YWU0YTAxZWM6NjozODRiOmRhZWVmNDM2YTg0MDZmMGNjZjhlMzZmMTBmNTc2ODcyZTdjNWU2MGQ2OTk5N2I3NWU5NmJiOTg4OTZjYjcyM2M6cDpU).

*These are exciting times for Touchstone as the massive development that is Cascadura is now just around the corner, less than a fortnight until first gas from what will be a total game-changer for the company and its shareholders. *

*The company is in the Bucket List for a good reason and I still believe that the huge upside potential from Cascadura is no way represented by the current share price, my 200p TP still stands. *

## **Sound Energy**

*Following yesterday’s announcement and my rapid departure from the office I have managed to contact Sound and can add to what I knew was a really exciting announcement for the company and its shareholders. *

*So, no sooner had the tax dispute dust settled formally we now see Attijariwafa bank firm up its term sheet for debt funding the Tendrara gas pipeline project. Sound call this phase two but this really is the prize to get the Tendrara basin value unlocked.  The Condition precedents are normal and I am sure that the various Moroccan authorities and state participants will be doing everything they can to ensure these are met in good order.*

*With the Calvalley transaction announced a few days ago we can see Sound has all the jigsaw pieces on the table;  debt, equity and supportive authorities.  Now Sound has the not inconsiderable job of meshing it all together, closing each deal in order to deliver FID on the project potentially this year.*

*This is a really important move for Sound as at long last, visibility on the Tendrara project has been confirmed and a FID this year is on the cards which will be a monumental boost for the company. *

## **Serica Energy**

Serica has announced that at the Annual General Meeting today, presentations will be made by both the Chair, Tony Craven Walker, and the Chief Executive, Mitch Flegg. Copies of the presentations will be available on the Company website [www.serica-energy.com](http://www.serica-energy.com/) under Investors/Presentations.

Production

2023 group production remains strong. The monthly net production (in boe/d) for each of the assets in the portfolio is as follows:

|   |   |   |   |   |   |   |
| --- | --- | --- | --- | --- | --- | --- |
|  | Jan 23 | Feb 23 | Mar 23 | Apr 23 | May 23 | Jun 23 (to date) |
| Bittern | 7,403 | 4,982 | 6,593 | 3,650 | 5,101 | 6,339 |
| Bruce | 5,558 | 5,385 | 8,187 | 7,574 | 8,645 | 7,963 |
| Columbus | 2,785 | 2,155 | 2,661 | 2,147 | 1,540 | 2,480 |
| Erskine | 1,846 | 1,700 | 1,369 | 1,425 | 1,815 | 1,930 |
| Evelyn | 5,844 | 3,589 | 5,373 | 3,937 | 4,357 | 6,074 |
| Gannet E | 4,387 | 4,416 | 11,934 | 7,421 | 9,201 | 10,649 |
| Guillemot W&NW | 167 | 151 | 328 | 102 | 232 | 279 |
| Orlando | 2,265 | 4,102 | 4,024 | 3,899 | 3,367 | 3,343 |
| Rhum | 14,581 | 12,980 | 15,228 | 18,389 | 18,791 | 17,525 |
| Total | 44,836 | 39,460 | 55,697 | 48,544 | 53,049 | 56,582 |

Net production for the combined Serica and Tailwind portfolios has averaged over 49,000 boe/d YTD (to 24 June). There will be several planned maintenance programmes on our assets this summer. Some of these outages have just commenced and some will occur during the second half of the year so full year 2023 production guidance remains unchanged at 40,000 – 47,000 boe/d.

Costs

Unaudited production costs for the group are running at approximately US$17/boe YTD on a proforma basis including Tailwind assets from 1 January 2023. This in line with our expectations for the period as inflationary pressures continue within the UK North Sea.

Commodity Prices

Year to date realised commodity prices of approximately 100p/therm for gas and US$64/bbl for oil on a proforma basis incorporating Tailwind assets from 1 January 2023. This includes a mix of volumes sold at spot prices and volumes sold at fixed prices. The remaining fixed price volumes are:

Gas:     50,000 therms/day at 41p for Q3 2023

Oil:       11,000 bbls/day at US$61 for 2H 2023

5,000 bbls/day at US$70 for 1H 2024

2,700 bbls/day at US$80 for 2H 2024

Capital Expenditure

Serica has a strong balance sheet with significant net cash enabling it to continue its onging programme of investing in the portfolio to add value. Serica is also a current UK Ring Fence Corporation Tax and EPL payer. The costs of our 2023/4 Capital Expenditure programme can be offset against our taxable revenues and will further qualify for the EPL investment incentives designed to encourage companies to invest.

The acquisition of the former Tailwind assets has added a range of opportunities to Serica’s hopper of potential future organic investments.

Serica’s planned 2023/24 investment programme includes two Light Well Intervention Vessel campaigns (2023 & 2024) on the Bruce and Keith fields and a four-well drilling campaign in the Triton Area (Bittern B1z, Gannet GE-05, Evelyn Phase 2 and a Guillemot NW infill well).

Following detailed interpretation of the North Eigg exploration well results, Serica has decided that there is an insufficient accessible volume of oil to justify re-entering the suspended well and drilling a sidetrack. Following consultation with the NSTA, we have elected to go into the second term of the P2501 Licence for the purpose of completing the abandonment of the North Eigg well. Only the area immediately around the well necessary for the abandonment is being retained with the remainder of the block being relinquished.

**Mitch Flegg, Chief Executive, commented:**

“Serica has established a diverse and balanced portfolio in the UKCS. The acquisition of Tailwind has provided an additional independent production hub and has resulted in a more balanced split between oil and gas. The benefits of this are already becoming apparent with production remaining at consistently high levels since completion of the deal.

In 2022 the reserves added to the combined Serica and Tailwind portfolios were more than three times the volume of oil and gas produced. This is an outstanding reserves replacement record and we are already working on an exciting programme of value-adding investment opportunities across the enlarged company in 2023/24.

We are disappointed that we have been unable to identify a viable sidetrack target for the North Eigg exploration well. Especially given the current licencing and fiscal uncertainties for UK North Sea activities, we believe that a disciplined approach to investment is important. In the near term, this means maturing better short-cycle investment opportunities within our portfolio.

As previously announced, Serica is proposing a final dividend of 14 pence per share, bringing the total dividend in respect of the last financial year to 22 pence per share. We are aiming to maintain or increase the dividend in future years.” 

 *A confident and astute AGM statement by Mitch Flegg in which he points out the quality of the Serica portfolio cum Tailwind which has been producing at nearly 50/- boe/d but with an eye on maintenance work guidance is still 40-47/-. *

*Tactically with politics in mind he also says that short-cycle investment opportunities are being addressed and we know what that is code for. The dividend of 14p goes XD today so worth having on its own, while adding the minimum of 8p making 22p gives them a yield of 10%, a substantial amount and covered more than twice and which the company are aiming to ‘maintain or increase in future years’. *

*Serica is in very good nick since the Tailwind deal which has made the company ‘more balanced’ in the words of Mitch Flegg, and he is now clearly looking at more M&A activity. If industry valuations are anything like the quoted ones then it may be an asset deal, otherwise there are accretive opportunities all over the place in the market. *

## **i3 Energy**

i3 Energy plc has announce the following Q1 2023 operational and financial update, along with its revised 2023 capital and dividend programme.

The Company will hold an investor webinar on Wednesday 5 July 2023 at 3:00 pm BST including a Q&A session (details of which can be found below).

Q1 Highlights:

·    Average Q1 2023 production of approximately 22,773 barrels of oil equivalent per day (“boepd”), representing a 24% increase from Q1 2022.

·    Capitalizing on the availability of services, i3 commenced its Q1 2023 capital programme in late Q4 2022 with a total of 8 gross wells (5.5 net) successfully drilled by the end of Q1 2023 in its core Central Alberta, Wapiti and Clearwater assets.

·    CO2e emission reduction initiatives continued with electrification of 12 well sites in Carmangay and Retlaw.

·    As part of i3’s commitment to its total shareholder return model, dividends of £6.12 million (USD 7.71 million) were paid in Q1 2023.

·    Post quarter-end strengthened the Company’s balance sheet with the refinancing of its outstanding loan notes of circa CAD 50 million with a new CAD 100 million facility.

Outlook:

·    Given prevailing and forecast commodity pricing for 2023, i3 has adjusted its full-year 2023 capital and dividend programme.

o  Approved capital programme of USD 25 million plus USD 6 million, subject to board approval, for a revised drilling programme targeting the Company’s Clearwater acreage. The approved and contingent drilling programme in Canada is currently forecast to deliver 14 gross (8.5 net) oil focussed wells, down from the previously expected 23 (net 15.2) wells.

o  i3 approved capital programme to deliver average annual production of 20,000 to 21,000 boepd, representing an increase of up to 3% over 2022 production.

o  The Company’s adjusted dividend programme is forecast to return £15.4 million in dividends during the first nine months of 2023.

**Majid Shafiq, CEO of i3 Energy plc, commented:**

“Q1 2023 was another busy quarter for i3 as we commenced our planned 2023 drilling programme in Canada, drilling production wells in Central Alberta, Wapiti and key Clearwater wells in our Dawson and Marten Creek acreage. Average production in Q1 resulted in another consecutive quarter of growth, dating back to Q2 2021, which is a testament to the quality of our asset base and operations staff. Since commencement of our Canadian operations, i3 has invested circa USD 80 million in drilling operations; grown production from zero to over 24,000 boepd and has returned £31.0 million in dividend payments to shareholders.

Given prevailing commodity prices and in line with our disciplined approach to capital allocation and prudent amortisation and management of the Company’s debt, we have revised down our 2023 capital and dividend programme, protecting the value of the assets and providing us with the flexibility to ramp up operations should commodity prices improve. We remain confident that our asset base, with a 2PDP NPV10 per share of £0.36 and P+P NPV10 per share of £0.81 as at 1 January 2023, i3’s total shareholder return model and business strategy which, subject to market conditions, optimises growth through drilling or alternatively M&A if commodity prices remain low, will allow us to continue to deliver strong returns to shareholders.”

*Nothing went right in this quarter for i3 and investors have to consider how much of the bad news might have been predicted therefore mitigating the rather harsh 23% off the share price, now slightly better than that. *

*Well, one thing is the effect of oil and gas prices being below budget, something that should be taken as read but seemed to surprise the market especially in Canadian gas prices, now hurriedly being mitigated by a move to a higher oil mix. Then there is the fact that i3 is now a tax payer, ironically its huge recent success having meant that it has run through the accumulated tax losses picked up in recent deals. *

*Changing to an amortising loan which makes perfect sense and cutting back on the capital programme may also have been wise but now production is under pressure with guidance down to 20-21/- boe/d unchanged from last year but more importantly leaving the dividend exposed as itself is calculated as a percentage of FCF and ultimately variable.  *

*i3 is a fundamentally very strong business and has been sitting on the bench for the Bucket List which gets its recalculation at the close tomorrow so it may not get in, at least in this quarter. But the shares still yield a running 6% having paid out an 8% yield in the year to date and management promise to use its freedom in the M&A market in order to remedy the situation. *

Production Update

Production in Q1 2023 averaged 22,773 boepd, comprised of 69.6 million standard cubic feet of natural gas per day (“mmcf/d”), 5,569 barrels per day (“bbl/d”) of natural gas liquids (“NGLs”), 5,238 bbl/d of oil & condensate and 373 boepd of royalty interest production. The strong quarterly production represents an increase of approximately 24% over Q1 2022. Production growth in Q1 2023 was achieved despite the impact of gathering system pressure constraints and curtailments relating to the ongoing capacity restrictions in the Pembina Peace Pipeline liquid line in the Company’s Wapiti area, which necessitated selling a higher proportion of hot gas rather than NGLs, and a reduction in over 500 boepd of production over the quarter. i3 expects these restrictions will be minimized or resolved by mid Q3 2023 with the commissioning of Keyera’s Key Access Pipeline System (“KAPS”). Despite these recent constraints, solid performance in Q1 has resulted in i3 realising consecutive quarter-on-quarter increases in production since Q2 2021, which reflects both the predictable low-decline nature of the Company’s base assets and the quality of its inventory of development drilling locations.

|   |   |   |   |   |   |
| --- | --- | --- | --- | --- | --- |
|   |   | Period Average Production Comparison: Last Five Quarters |  |  |  |
|   | Q1 2023 | Q4 2022 | Q3 2022 | Q2 2022 | Q1 2022 |
| Production (boepd) | 22,773 | 22,757 | 20,571 | 19,502 | 18,391 |
|  |  |  |  |  |  |
| Oil & Condensate (bbl/d) |   5,238 |   5,119 | 4,396 | 3,886 |   3,945 |
|  |  |  |  |  |  |
| NGLs (bbl/d) | 5,569 | 5,106 | 5,038 | 5,099 | 4,942 |
|  |  |  |  |  |  |
| Gas (mcf/d) | 69,555 | 72,442 | 64,180 | 60,785 | 54,689 |
|  |  |  |  |  |  |
| Royalty Interest (boepd) |   373 |   458 | 440 | 385 |   389 |

Corporate field production estimates averaged 20,729 boepd, for the seven-day period ending 31 May 2023, comprised of approximately 63.6 mmcf/d of natural gas, 4,990 bbl/d of NGLs, 4,741 bbl/d of oil and condensate and an estimated 400 boepd of gross overriding royalty interest production. Throughout May and into June, production has been affected by planned facility turnarounds, at operated and third-party area gas plants.  Production over this period has been further impacted by the ongoing Alberta wildfires, which have curtailed production in the Company’s Lodgepole, Wapiti and Simonette areas. No more than 15% of corporate production has been temporarily shut-in at any one time throughout these events.

Hedging Programme

i3’s risk management strategy currently protects USD ~45.6 million(1) (CAD 60.7 million) of net operating income for 2023 with current hedges in place to cover 38.9%, 22.6%, 18.4% and 16.9% of the Company’s projected Q1, Q2, Q3 and Q4 2023 production volumes, respectively. i3’s hedges are as follows:

|   |   |   |   |   |   |   |   |   |   |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  | Swaps |   | Costless Collars | Basis Swaps |  |  |  |  |
| GAS |   | Volume (GJ) | Price (C$/GJ) |   | Volume (GJ) | Avg Floor Price (C$/GJ) | Avg Ceiling Price (C$/GJ) | Volume (mmbtu) | Price ($US/mmbtu)  |
| Q1 2023 |  | 2,397,500 | 4.41 |  |  1,125,000 | 5.80 | 10.09 |  |  |
| Q2 2023 |  |  |  |  |  |  |  | 960,101 | (1.46)  |
| Q3 2023 |  | 610,000  | 2.76  |  |  |  |  | 970,652 | (1.46)  |
| Q4 2023 |  | 920,000  | 2.76  |  |  |  |  | 327,067 | (1.46)  |
|  |  |  |  |  |  |  |  |  |   |
|   |  |  |  |  |  |  |  | Participation Swaps(2)  |  |
| OIL |   | Volume (bbl) | Price (C$/bbl) |   | Volume (bbl) | Avg Floor Price (C$/bbl) | Avg Ceiling Price (C$/bbl) | Volume (bbl) | Avg Floor Price (C$/bbl) |
| Q1 2023 |  | 58,500 | 106.85 |  | 162,000 | 100.00 | 124.22 |  |  |
| Q2 2023 |  | 36,400 | 112.83 |  | 113,650 | 100.00 | 127.35 | 91,000 | 90.00  |
| Q3 2023 |  | 138,000 | 101.10 |  |  |  |  |  |  |
| Q4 2023 |  | 138,000 | 101.10 |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |
| PROPANE |   | Volume (bbl) | Price (C$/bbl) |   | Volume (bbl) | Avg Floor Price (C$/bbl) | Avg Ceiling Price (C$/bbl) |   |  |
| Q1 2023 |  |  |  |  | 45,000 | 42.00 | 51.61 |  |  |
|  |  |  |  |  |  |  |  |  |  |

Q1 2023 Operational Results

With the success of i3’s 2022 drilling programme, the Company capitalized on the availability of services and accelerated a portion of its Q1 2023 programme in late Q4 2022. The drilling programme focussed on operated oil and liquids rich gas wells in Central Alberta (Cardium), Wapiti (Cardium, Dunvegan), and Clearwater (operated and non-operated) assets. As part of the 2023 programme, the Company participated in 8 gross (5.5 net) wells across its drilling portfolio, including 7 gross (5.0 net) operated wells and 1 gross (0.5 net) non-operated well.

Wapiti

In Q1, i3 and its working interest partner completed the drilling of 4 gross (2.0 net) horizontal wells in the Wapiti area. The wells included 3 gross (1.8 net) operated 1.5-mile Cardium wells and 1 gross (0.2 net) operated 2-mile Dunvegan well. The Cardium wells were efficiently drilled off a common pad and tied-in to existing production facilities, in which i3 holds a working interest, while the Dunvegan well was drilled off an existing pad and tied-in to the same production facilities.

Production associated with the Q1 programme at Wapiti was impacted due to high gathering system pressures, which restricted the Company’s ability to optimize the productive capacity of the new wells. The relevant third-party area operator is scheduled to debottleneck the gathering system in late Q2 through an upgrade of existing infrastructure, which is expected to alleviate line pressure constraints, thereby eliminating restrictions on well performance, and allowing the Company to optimize production from its new Wapiti wells.

Additionally, the Wapiti area has experienced unanticipated apportionment issues associated with the Pembina Peace Pipeline liquids line, which has resulted in reduced liquids yields realized by area operators. i3 expects the apportionment issues to be resolved with the upcoming commissioning of KAPS.

Central Alberta

i3’s Q1 capital programme in Central Alberta was focussed primarily in the greater Lodgepole area, where the Company expanded its extensive infrastructure network and drilled 1 gross (1.0 net) well. The Company’s infrastructure improvements include a 2.3 km pipeline to reroute production away from third-party infrastructure, reducing the fee structure and improving run-time efficiencies.  The rerouting project was executed on-time and below budget.

 

i3 drilled 1 gross (1.0 net) horizontal Cardium oil well in the Lodgepole area of Central Alberta. The well was drilled off an existing pad-site and tied into its new pipeline system. The well was drilled on-budget and placed on stream in late Q1. The performance of the new well has been impacted by disruptions associated with wildfires in the area.  As proximal wildfires continue, or are brought under control, the Company will remain focussed on optimizing its production output while maintaining personnel safety as its highest priority.

Clearwater

In Q1, i3 drilled 3 gross (2.5 net) multilateral horizontal Clearwater wells at Dawson and Marten Creek as part of its ongoing exploration and development portfolio of 144 gross sections (109 net sections, equivalent to 280 km2) of prospective Clearwater lands.

At Dawson, i3 and its 50% partner, drilled the 05-16-081-16W5 six-leg (7,500 m of total lateral length) multilateral horizontal Clearwater well. The well was drilled with oil-based mud (“OBM”) and placed on production in late January. After recovering the OBM drilling fluid, the well had an initial 30 days’ production averaging 81 barrels of oil per day (“bopd”) before being shut-in late March due to road bans associated with spring breakup. Scaling the well performance for an industry standard eight-leg multilateral horizontal well configuration (10,000 m) translates, encouragingly, to an estimated 110 bopd rate. With the success of this initial earning well, i3 and its 50% partner have elected to drill the second and final earning well at Dawson, which the Company anticipates will be drilled and on production prior to year-end.

At Marten Creek, i3 followed up on its 2022 recompletion activity with 2 gross (2.0 net) exploratory three-leg multilateral horizontal wells (retrieving a vertical core from one well). The two exploratory wells were drilled in January, targeting two separate Clearwater sequences. The core indicated two thick, oil saturated sands with encouraging porosity and permeability levels and free oil was detected in the rig process system during drilling operations. The wells were equipped with temporary production facilities and placed on production in late January and early February, respectively.  Due to unseasonably warm weather in the area and early breakup of ice-roads, production equipment had to be removed from the well-sites before all the associated OBM was recovered. i3 intends to return this coming winter to complete testing of the wells to determine deliverability.

Additionally, the Company is pleased to disclose the location of its 15 section Clearwater land acquisitions, previously announced on 2 November 2022. These 15 gross (15 net) sections are situated in the Cadotte and Walrus areas, offsetting i3’s existing land positions, and are proximal to active development and delineation by industry peers. With these acquisitions, the Company has increased its position at Cadotte to 18 gross (15 net) sections and 10 gross (10 net) sections at Walrus.

Serenity

i3 continues to work with its partner Europa Oil and Gas to advance a field development plan for a one-well development for the Serenity field.

Environmental, Social and Governance (“ESG”)

i3 is committed to conducting its operations responsibly and in accordance with industry best practices. The Company’s commitment to high ESG standards is central to maintaining our social licence to operate, creating value for all stakeholders, and ensuring long-term commercial success.

In Q1 2023, i3 invested USD 1.20 million net, before any government grants, to complete 20 well abandonments and further advance site reclamations across its portfolio. Incorporating the results of the Q1 2023 programme, i3 has successfully reduced its inactive well count by 20% since the beginning of 2022. In 2023, i3 will continue its abandonment and reclamation programme, with approximately USD 3.91 million being directed to pipeline and wellbore abandonments, pipeline and facility decommissioning, along with well site reclamation.

Additionally, i3 continues to reduce its emissions footprint through its ongoing electrification projects. In Q1 2023, the Company completed the electrification of 12 gross (10.5 net) well sites in Carmangay and Retlaw to eliminate the use of propane and natural gas for power generation.

Return of Capital & Change of 2023 Guidance

The Company is revising its capital and dividend programme for the remainder of 2023.

The 2023 budget announced in December 2022 was based on consensus estimates for 2023 oil and gas prices of USD 80/bbl for WTI and CAD 4.50/GJ for AECO gas.  Due to slower than expected global demand growth and resilient supply dynamics, commodity prices have subsequently fallen significantly. In particular, the AECO gas strip forecast for 2023 has fallen to approximately CAD 2.60/GJ while the WTI strip forecast for 2023 has fallen to approximately USD 72.00/bbl. This reduction in commodity pricing has impacted the Company’s forecasted cash flows for 2023 in line with the sensitivity guidance i3 released in December 2022, alongside its original 2023 capital budget.

At the end of May the Company refinanced its outstanding debt of circa CAD 50 million with a new CAD 100 million facility; of which, CAD 75 million was drawn to settle the Company’s outstanding loan notes and an additional CAD 25 million provided for general working capital purposes. To align with the Company’s conservative approach to debt management, the new facility amortises on a straight-line monthly basis (unlike the debt it replaced, which was non-amortising). This amortisation schedule will repay the loan over its three-year term, beginning with USD 16.1 million in amortisation, interest commitments and associated set-up costs to be paid throughout the remainder of 2023.

The Company remains committed to its total shareholder return model, consisting of production growth through drilling and accretive M&A activity, and shareholder cash returns via dividends, whilst prudently maintaining capital discipline. i3 is therefore revising its capital budget for the year to an approved USD 25 million, and an additional amount of circa USD 6 million, subject to board approval, for a revised drilling programme targeting locations in the Company’s Clearwater acreage, which in aggregate is expected to result in the drilling of 14 gross (8.5 net) wells (previously 23 gross (15.2 net) wells). Due to a steady decline in 2023 gas prices, i3’s capital focus will shift from its large inventory of high-rate liquids rich gas Glauconite and Cardium locations, to the efficient development and delineation of its oil focussed Clearwater opportunities at Dawson and its expanded position in Cadotte, as surface locations are secured and prepared for operations in mid-to-late Q4. Should the outlook for commodity prices strengthen in the second half of 2023, the Company will refresh its capital plans to accelerate its drill ready low-risk high-impact Glauconite / Falher, Cardium and Dunvegan / Wilrich inventory in Central Alberta, Wapiti, and Simonette respectively. By year-end, the Company’s revised capital programme will deliver 4 gross (2 net) wells in Wapiti, 1 gross (1 net) well in Central Alberta and, subject to board approval of the revised drilling programme, 9 gross (5.5 net) wells in the Clearwater, with production for the year forecast to average 20,000 to 21,000 boepd, pre-drilling of the Clearwater wells. This forecast accounts for the downtime associated with i3’s, and third-party operators, planned summer turnaround maintenance programmes, which are currently underway, and some lesser downtime related to precautionary shutdowns to mitigate risks associated with wildfires in Alberta. Despite the downtime, the Company’s approved capital programme is forecast to deliver production growth of up to 3% on a year over year basis (adjusting for planned turnarounds, curtailments and downtime associated with the wildfires, i3’s 2023 revised production forecast would have been expected to deliver approximately 7% year-over-year growth).

Due to the overarching commodity price outlook, the financial ratios and restrictions on distributions contained within the Loan Documentation and to align with forecast 2023 cashflows, the Company is also revising downward its 2023 expected go forward dividend by 50% from 0.171 pence/share per month to the equivalent of 0.0855 pence/share per month. Additionally, the Company will now commence paying dividends on a quarterly basis and will pay the Q3 dividend in October 2023, subject to being in compliance with (or obtaining a waiver from) the financial ratios contained within the Loan Documentation, following the financial ratio test at each quarter end. Including dividends declared for the first 6 months in 2023 of £12.3 million, the forecast aggregate dividend payment to shareholders for the first nine months of 2023, of 1.28 pence per share, represents a yield of approximately 7.9% and a forward running yield of 6.3% based on the closing price of i3’s ordinary shares of 16.26 pence on 28 June 2023. The Company will continue to review its capital and dividend programmes on a quarterly basis, with the purpose of balancing its total return model whilst maintaining balance sheet strength.

The Company’s asset base and operating model provides a large degree of flexibility to modify and to scale up or down its operations and capital programme. Should commodity prices improve i3 will have the option to rapidly deploy capital to expand its revised 2023 drilling programme. Alternatively, during periods of low commodity pricing and low asset valuations the Company’s business model directs us to focus on growth via acquisitions to maximise return on capital. It was through such similar initiatives in 2020 and 2021 that the Company acquired its Canadian asset portfolio at very low cash flow and reserve-based multiples. i3 aggressively monitors the transaction market in efforts to identify acquisition opportunities which can be appropriately financed to provide superior returns to those achieved by organic growth.

i3’s revised guidance for 2023, which is now based on strip pricing for the remainder of the year, is shown below. Sensitivity to movement in commodity prices is also provided.

2023 Updated Guidance

|   |   |
| --- | --- |
|   | 2023 guidance and assumptions (3) |
| Annual Average Production (4) | 20,000 – 21,000 boepd |
| Average Expenses ($/boe) Royalty Operation & Transport |   15.3% USD 13.40 – 13.60 / boe |
| Net Operating Income (5) | USD 75 million – 80 million |
| EBITDA (6) | USD 67 million – 72 million |
| Capital Expenditures | USD 25 million |
| Dividends (7) (Forecast for Jan – Sept. 2023) | USD 19 million |

2023 Updated Commodity Assumptions (8)

|   |   |
| --- | --- |
| WTI (USD/bbl) | $72.00/bbl |
| MSW Oil Differential (USD/bbl) | $3.10/bbl |
| AECO Natural Gas (CAD/GJ) | $2.60/GJ |
| USD / CAD Foreign Exchange | 1.33 |
| GBP / CAD Foreign Exchange | 1.68 |

Next Twelve-Month Net Operating Income Sensitivity (9)

|   |   |
| --- | --- |
| Next twelve months’ sensitivity | Estimated change to net operating income |
| Change in WTI USD 1.00/bbl | USD 1.30 million |
| Change in AECO CAD 0.10/GJ | USD 1.40 million |
| Change in CAD/USD exchange rate CAD 0.01 | USD 1.27 million |

**Notice of Investor Presentation via Investor Meet Company**

Management will be hosting a live presentation via Investor Meet Company on 5 July 2023 at 3:00 pm BST.

The presentation is open to all existing and potential shareholders. Questions can be submitted pre-event via your Investor Meet Company dashboard up until 9am the day before the meeting or at any time during the live presentation.

Investors can sign up to Investor Meet Company for free and to meet I3 ENERGY PLC via: [https://www.investormeetcompany.com/i3-energy-plc/register-investor](https://www.investormeetcompany.com/i3-energy-plc/register-investor)

Investors who already follow I3 ENERGY PLC on the Investor Meet Company platform will automatically be invited.

(1) Unless otherwise denoted, all figures are referenced in USD ($) and assume a foreign exchange rate of 1.33 CAD:USD and 1.26 GBP:USD, which is the average forecast for 2023

(2) i3 receives the average floor price plus 50% of difference between the average floor price and the realised price if higher. 

(3) i3’s 2023 guidance for its Net Operating Income and EBITDA is based on an annual average production range of 20,000 – 21,000 boepd.

(4) Total annual average production (boepd) is comprised of approximately 48% Oil, Condensate & NGLs, 51% Natural Gas and 1% Gross Overriding Royalty Production

(5) Net Operating Income is a non-GAAP financial measure and is defined as gross profit before depreciation and depletion and gains or losses on risk management contracts, which equals revenue net of royalty expenses, less production costs

(6) EBITDA is a non-GAAP financial measure and is defined as earnings before depreciation depletion, financial costs, and tax

(7) Based on i3’s forecast nine-month 2023 ordinary share dividend of £15.2 million (US$19.0 million assuming 1.26 GBP:USD) to be declared and paid during the first nine months in 2023. The declaration of dividends is subject to terms of loan facility and the approval of i3’s board of directors, compliance with (or waiver from) the financial ratios contained within the Company’s refinanced debt documentation and is subject to change. Forecast of Q4 2023 dividends are not included in current guidance numbers but will be revisited when the Company reviews its Q4 capital and dividend programmes this fall.

(8) Commodity prices and foreign exchange reflect full year average realized prices or rates

(9) Illustrates the expected impact of changes in commodity prices and the CAD:USD exchange rate on i3’s estimate of Net Operating Income for 2023 of USD 75 million to USD 80 million, holding all other variables constant. The sensitivity is based on the commodity price and exchange rate assumptions set forth in the table above. Calculations are performed independently and may not be indicative of actual results. Actual results may vary materially when multiple variables change at the same time and/or when the magnitude of the change increases.

## **Jadestone Energy**

Jadestone announced on 6 June 2023, 7 June 2023 and 9 June 2023 the details of an open offer to raise gross proceeds of up to approximately US$8.3 million through the issue of up to 14,887,039 Open Offer Shares at 45 pence per share. The Company also published a circular in connection with the Open Offer on 9 June 2023.

The Open Offer closed for acceptances at 11.00 am on 28 June 2023. The Company announces that it has received valid applications under the Open Offer  in respect of 73,557 shares from Qualifying Shareholders. This represents approximately 0.49% of the aggregate number of shares offered to Qualifying Shareholders pursuant to the Open Offer.

The Board notes that the Company’s share price was below the Open Offer price of 45 pence per share for the duration of the Open Offer, which is likely to explain the level of applications. Notwithstanding the level of applications received, the Board still believes that it was appropriate to give those shareholders who did not participate in the Placing or Subscription announced in early June 2023 the opportunity to participate in the Equity Fundraise at the same price.

The Open Offer will raise additional gross proceeds for the Company of US$33,100.65. Following completion of the Open Offer, the aggregate gross proceeds raised by the Company pursuant to the Equity Fundraise will be approximately US$52.63 million, with net proceeds of approximately US$50.03 million. 

Application has been made to the London Stock Exchange for the Open Offer Shares to be admitted to trading on AIM (“Admission”). It is expected that Admission will become effective and dealings will commence in the Open Offer Shares at 8.00 a.m. on 3 July 2023.

Capitalised terms used but not defined in this announcement shall have the meaning given to them in the announcement published by the Company on 6 June 2023.

Total voting rights

Following the admission of the Open Offer Shares, the Company’s total issued share capital will be 540,766,574 Ordinary Shares of £0.001 par value in issue, and no Ordinary Shares in treasury. Given the Company does not hold any ordinary shares in treasury, this figure may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change in their interest in, the share capital of the Company under the Disclosure Guidance and Transparency Rules.

*This was a combination of external bad luck and what you make yourself, normally an Open Offer to shareholders is welcomed, indeed companies can be castigated for not sharing in a raise but in this case running into a hedge fund dumping stock into the market was at the very least unfortunate. *

*But Jadestone has had a shocker of a year and from the non-discovery of a thinly covered hole in the tank of the FPSO at Montara to now will hopefully have been forgotten before long even though it has taken a hedge fund having to lighten its load to accentuate its misfortune. *

*As I said before, Paul Blakeley and his team deserve to be given the benefit of the doubt, investors who share this view will be buying very cheap stock and ultimately be highly rewarded.*

![](https://www.share-talk.com/wp-content/uploads/2020/08/Malcolm_Graham_Wood-300x225.jpg)

**[Author @mgrahamwood](https://twitter.com/mgrahamwood)**

Disclaimer & Declaration of Interest

The information, investment views and recommendations in this article are provided for general information purposes only. Nothing in this article should be construed as a solicitation to buy or sell any financial product relating to any companies under discussion or to engage in or refrain from doing so or engaging in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the writer but no responsibility is accepted for actions based on such opinions or comments. The writer may or may not hold investments in the companies under discussion

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