25 April 2024
i3 Energy plc
("i3", "i3 Energy",
or the "Company")
2024 Capital Budget and Production
Guidance
Investor Webinar via Investor Meet
Company
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 Company's 2024 capital
budget and production guidance. The Company
will hold an investor webinar on Thursday 2 May
2024 at 12:00 pm BST including a Q&A session (details of which can be
found below).
Highlights:
·
2024 Capital Budget
2024 Capital Budget of USD 50.9 million,
forecasted to deliver 15 gross wells (10.5 net, 95% net
i3-operated) to be drilled across the Company's diversified
portfolio in Central Alberta, Simonette, and its northern
Clearwater acreage.
·
Production Growth
Forecast exit 2024 production of 20,250 -
21,250 barrels of oil equivalent per day ("boepd"), representing a
year-over-year increase of approximately 3% from the prior year
average exit rate (December 2023), or approximately 8% from current
levels, as the Company expects to recommence drilling in June 2024
and positions for accelerated Montney development in
2025.
·
Cash Flow
USD 70 - 75 million of 2024 Net Operating
Income ("NOI") and USD 55 - 60 million of EBITDA before hedging
gains and losses, based on budget price assumptions of USD
82/barrel ("bbl") for WTI and CAD 2.25/Gigajoules ("GJ") for AECO
natural gas.
· Shareholder Returns
As part of i3's commitment
to its total return model, subject to Board approval, the Company
is expected to return forecasted dividends of £12.3 million (USD
15.7 million) in 2024, representing 0.2565 pence per share per
quarter or 1.0260 pence per share for the year, which translates to
a forward yield of 8.1% based on the closing price of i3's ordinary
shares of 12.66 pence on 23 April 2024.
Majid Shafiq,
CEO of i3 Energy plc, commented:
"Following
very successful initiatives in the first half of the year to
increase our balance sheet strength and liquidity, i3 is extremely
pleased to announce a substantial USD 51 million capital programme
for the remainder of the year, which will drill a diverse group of
oil and gas wells across our portfolio in Canada. The majority of
wells will be drilled in the second half of the year, with the
high-volume Central Alberta gas wells producing into a forecast
strong winter pricing environment and pad drilling of our exciting
Montney acreage expected to commence early in Q1 2025. The
programme is designed to deliver production growth and support our
dividend programme, whilst maintaining liquidity and a conservative
leverage position to maximise flexibility to deal with volatile
market conditions and opportunities as they
arise."
2024 Capital
Programme Highlights
Following the Company's recent USD 24.8 million
partial sale of its royalty assets, the elimination of all bank
indebtedness and the establishment of a USD 55.6 million
reserve-based credit facility, i3 Energy is pleased to announce a
USD 50.9 million 2024 capital programme along with its 2024
operational and financial guidance. This programme will be fully
funded from existing Company resources and is designed to balance
growth, financial discipline, and a sustainable long term-dividend
through a predictable development-focused programme, all while
positioning the Company to commence its Simonette Montney pad
development drilling in Q1 2025. The programme is constrained to
fit within the available time window of the second half of the
year.
The 2024 budget currently reflects an estimated
total capital investment of USD 50.9 million in Canada, of which
approximately USD 41.1 million is allocated to drilling and
development, with the remaining balance (USD 9.8 million)
apportioned to maintenance capital, facilities, land, ESG and
seismic initiatives. The 2024 budget reflects the natural
limitations associated with the Canadian operating environment,
including, but not limited to, access issues associated with
seasonal weather conditions. As such, the 2024 programme
anticipates drilling operations will commence in late Q2, with
continuous operations through to year-end.
i3's 2024 capital programme will be 85%
weighted to the second half of the year with wells expected to be
brought on production ahead of stronger forecasted winter gas
pricing. Should it be the case that the forward strip forecast for
gas prices deteriorates, the Company is well positioned to both
reallocate its drilling locations to more oil weighted development
opportunities or capitalize on strategic accretive acquisitions as
they are identified. Corporate guidance incorporates the drilling
of 15 gross (10.5 net) wells with locations split between i3's key
operating areas, comprising 11 gross (7.6 net) wells in Central
Alberta, 2 gross (1.9 net) wells in Simonette and 2 gross (1.0 net)
wells across the Clearwater fairway. The programme is primarily
focused on development opportunities, supplemented with targeted
high-impact, large resource, oil-centred delineation.
The 2024 capital programme is projected to
deliver total average production of between 18,000 and 19,000 boepd
(natural gas, oil & condensate, natural gas liquids and royalty
interest production expected to average approximately 53%, 22%, 24%
and 1%, respectively), with estimated peak production achieved in
December. Based on timing, with no operated wells drilled or
planned until June, the 2024 drilling programme is forecast to
deliver December exit rate production growth of 3% when compared to
the same period of 2023. Additionally, when adjusting for the
Company's highly accretive partial royalty disposition, announced
on 17 April 2024, December exit production growth reflects 5% on a
year-over-year basis.
The Company's 2024 Budget is designed to ensure
a strong balance sheet and significant financial flexibility to
support the Company's income plus growth strategy and positions i3
to commence its Simonette Montney development in Q1 2025. The
capital programme will result in exit 2024 net debt of USD 23 - 26
million, representing a net debt to annualized December 2024 EBITDA
before hedging, of approximately 30% and net debt credit
utilization of less than 45%.
For its planning case, i3 has used commodity
price assumptions of USD 82.00/bbl for WTI crude oil and CAD
2.25/GJ for AECO natural gas and expects to generate net operating
income of approximately USD 70 - 75 million and EBITDA before
hedging of USD 55 - 60 million for 2024.
2024 Guidance and Commodity Price
Assumptions
|
2024 guidance and assumptions (1)
|
Annual Average Production (2)
Exit Production (Dec. 2024)
|
18,000 boepd - 19,000
boepd
20,250 boepd - 21,250
boepd
|
Average Expenses:
Royalty
Operating &
Processing
Transportation
|
15%
USD 11.30/boe - USD
11.50/boe
USD 2.10/boe - USD
2.30/boe
|
Annual Net Operating Income (3)
Exit Net Operating Income (Dec. 2024) (3)
|
USD 70.0 million - USD 75.0
million
USD 7.8 million - USD 8.3
million
|
Annual EBITDA Before Hedging (4)
Exit EBITDA Before Hedging (Dec. 2024) (4)
|
USD 55.0 million - USD 60.0
million
USD 6.3 million - USD 6.8
million
|
Capital Expenditures
|
USD 50.9 million
|
Dividends (5)
|
USD 15.7 million
|
Net
Debt (Dec. 2024) (6)
|
USD 23.0 million - USD 26.0
million
|
2024 Commodity
Assumptions (7)
WTI ($/bbl)
|
USD 82.00/bbl
|
MSW Oil Differential
($/bbl)
|
USD 3.00/bbl
|
AECO Natural Gas ($/GJ)
|
CAD 2.25/GJ
|
USD / CAD Foreign
Exchange
|
1.35
|
GBP / CAD Foreign
Exchange
|
1.68
|
2024 Net Operating Income Sensitivity
(8)
2024 sensitivities
|
Estimated change to net operating income
|
Change in WTI USD
1.00/bbl
|
USD 1.2 million
|
Change in AECO CAD
0.10/GJ
|
USD 1.3 million
|
Change in CDN / US exchange rate CAD
0.01
|
USD 0.9 million
|
*See below Notes
Hedging
i3 continues to employ a defensive risk
management strategy with current hedges in place to protect USD
43.4 million of net operating income in 2024, with
current hedges in place to cover 31%, 27%, 26% and 24% of the
Company's projected Q1, Q2, Q3 and Q4 2024 future production
volumes, respectively. i3's 2024 hedges are as
follows:
|
|
|
|
|
|
|
|
|
|
Swaps
|
|
Basis Swaps
|
|
GAS
|
|
Volume (GJ)
|
Price
(CAD/GJ)
|
|
Volume
(mmbtu)
|
Price
(USD/mmbtu)
|
|
Q1
2024
|
|
2,275,000
|
3.04
|
|
nil
|
nil
|
|
Q2
2024
|
|
1,365,000
|
2.52
|
|
|
|
|
Q3
2024
|
|
1,380,000
|
2.52
|
|
|
|
|
Q4
2024
|
|
1,685,000
|
2.64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costless
Collars
|
OIL
|
|
Volume
(bbl)
|
Price
(CAD/bbl)
|
|
Volume
(bbl)
|
Avg Floor Price
(CAD/bbl)
|
Avg Ceiling Price
(CAD/bbl)
|
Q1
2024
|
|
189,750
|
95.89
|
|
22,750
|
100.00
|
121.32
|
Q2
2024
|
|
182,000
|
98.45
|
|
38,000
|
95.99
|
108.46
|
Q3
2024
|
|
84,500
|
100.08
|
|
122,500
|
100.00
|
111.11
|
Q4
2024
|
|
145,550
|
97.41
|
|
41,450
|
100.37
|
111.46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK
Operations
The Company continues to evaluate development
options for the Serenity discovery in consultation with its partner
and the North Sea Transition Authority. There is no capital budget
associated with this work in 2024.
Environmental,
Social and Governance ("ESG")
i3 is dedicated 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. i3 recognises the safety and well-being of our employees,
local communities, and other key stakeholders as a priority, and
considers climate change as having a material impact on our
business.
i3 remains committed to environmental
sustainability through consistent implementation of innovative
technologies and operational strategies. The Company proudly
continues its utilization of an Alternative Fugitive Emissions
Management Program to mitigate fugitive emissions, with the pilot
project funded by the Alberta Methane Emissions Program and
supported by the Alberta Energy Regulator. Furthermore, i3 is
dedicated to expanding its renewable energy initiatives, with
ongoing installations of solar pumps across various locations. The
Company actively explores opportunities to enhance process and
operational efficiencies, particularly in optimizing compression
facilities to minimize fuel consumption and emissions and, as part
of its ongoing efforts, has initiated an analysis of electricity
consumption to identify potential reductions in Scope 2 emissions.
Most notably, i3 Energy is piloting innovative solutions, with the
installation of a high to no-bleed, solar-powered instrument air
skid at a strategic location, with plans for potential expansion to
three additional sites in 2024.
The Company will responsibly continue to meet
its asset retirement obligations into 2024, as it plans to complete
approximately 40 downhole abandonments, decommission an estimated
50 surface sites, and abandon approximately 15 pipelines. i3
has also allocated USD 0.7 million to progress reclamation and
remediation efforts across its portfolio, with 11 reclamation
certificates anticipated in 2024.
Return of
Capital
As part of its total return model, the Company
remains committed to delivering a sustainable monthly dividend to
complement its organic growth profile. Since initiating its
dividend programme in July 2021 i3 has paid total dividends of
£37.2 million (USD 47.4 million). Based on its recent elimination
of all corporate bank indebtedness and forecasted 2024 guidance, i3
expects to deliver minimum total 2024 dividends of £12.3 million
(USD 15.7 million). Subject to Board approval, the 2024 forecasted
dividend, representing 0.2565 pence per share per quarter or 1.026
pence per share for the year, translates to a forward yield of 8.1%
based on the closing price of i3's ordinary shares of 12.66 pence
on 23 April 2024. Based on projected year-over-year production
growth and anticipated dividend yield, the Company expects to
deliver a total Shareholder return of 11% - 13% in
2024.
Investor
Presentation
Majid Shafiq, Ryan Heath and Jason Dranchuk
will provide a live presentation relating to i3 Energy's 2024
Capital Budget via the Investor Meet Company platform on 2 May 2024
at 12:00pm 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 add to meet i3 Energy plc via:
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.
Additionally, i3 is pleased to announce that an
updated corporate presentation will be available on the Company's
website https://i3.energy/
coinciding with the Investor Meet
Company live presentation.
*NOTES:
(1) i3's 20243 guidance for its Net Operating
Income, EBITDA and year-end Net Debt is based on an annual average
production range of 18,00022,250 - 1923,000
boepd.
(2) Total annual average
production (boepd) is comprised of approximately 47% Oil,
Condensate & NGLs, 53% Natural Gas
(3) 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
(4) EBITDA is a non-GAAP financial measure and is defined as
earnings before depreciation depletion, financial costs, and
tax
(5) Based on i3's annual common share dividend of £12.3
million (US$15.7 million assuming 1.275 GBP:USD) paid in 2024. The
declaration of dividends is subject to the approval of i3's board
of directors and is subject to change
(6) Net Debt is a non-GAAP financial measure and is defined as
borrowings and leases and trade and other payables, less cash and
cash equivalents and trade and other receivables
(7) Commodity prices and foreign exchange reflect full year
average realized prices or rates
(8) Illustrates the expected impact of changes in commodity
prices and the CAD:USD exchange rate on i3's estimate of Net
Operating Income for 2024, 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.
END
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.
Enquiries:
i3
Energy plc
Majid Shafiq (CEO)
|
c/o Camarco
Tel: +44 (0) 203 757 4980
|
|
|
WH
Ireland Limited (Nomad and Joint Broker)
James Joyce, Darshan Patel, Isaac Hooper
|
Tel: +44 (0) 207 220 1666
|
|
|
Tennyson Securities (Joint Broker)
Peter Krens
|
Tel: +44 (0) 207 186 9030
|
|
|
Stifel Nicolaus Europe Limited (Joint
Broker)
Ashton Clanfield, Callum
Stewart
|
Tel: +44 (0) 20 7710 7600
|
|
|
Camarco
Andrew Turner, Violet Wilson, Sam
Morris
|
Tel: +44 (0) 203 757 4980
|
Notes to Editors:
i3 Energy is an oil and gas Company
with a low cost, diversified, growing production base in
Canada's most prolific
hydrocarbon region, the Western Canadian Sedimentary Basin and
appraisal assets in the North Sea with significant
upside.
The Company is well positioned to
deliver future growth through the optimisation of its existing
asset base and the acquisition of long life, low decline
conventional production assets.
i3 is dedicated to responsible
corporate practices and the environment, and places high value on
adhering to strong Environmental, Social and Governance
("ESG") practices. i3 is proud of its performance
to date as a responsible steward of the environment,
people, and capital
management. The Company is committed to maintaining an ESG strategy, which
has broader implications to long-term value creation, as these
benefits extend beyond regulatory requirements.
i3 Energy is listed on the AIM
market of the London Stock Exchange under the symbol I3E and on the
Toronto Stock Exchange under the symbol ITE. For further
information on i3 Energy please
visit https://i3.energy.
This announcement contains inside
information for the purposes of Article 7 of the UK version of
Regulation (EU) No 596/2014 which is part of UK law by virtue of
the European Union (Withdrawal) Act 2018, as amended ("MAR"). Upon
the publication of this announcement via a Regulatory Information
Service, this inside information is now considered to be in the
public domain.
Forward-Looking Statements
This press release offers our
assessment of i3's future plans and operations as at April 24,
2024, and contains certain forward-looking information and
statements within the meaning of applicable securities laws. The
use of any of the words "anticipate", "continue", "estimate",
"expect", "forecast", "may", "will", "project", "should", "plan",
"intend", "believe" and similar expressions (including the
negatives thereof) are intended to identify forward looking
information or statements.
The forward-looking information and
statements included in this news release are not guarantees of
future performance and should not be unduly relied upon. Such
information and statements involve known and unknown risks,
uncertainties and other factors that may cause actual results or
events to differ materially from those anticipated in such
forward-looking information or statements including, without
limitation: those relating to results of operations and financial
condition; general economic conditions; industry conditions;
changes in regulatory and taxation regimes; volatility of commodity
prices; escalation of operating and capital costs; currency
fluctuations; the availability of services; imprecision of reserve
estimates; geological, technical, drilling and processing problems;
environmental risks; weather; the lack of availability of qualified
personnel or management; stock market volatility; the ability to
access sufficient capital from internal and external sources; and
competition from other industry participants for, among other
things, capital, services, acquisitions of reserves, undeveloped
lands and skilled personnel. Forward-looking statements are
provided to allow investors to have a greater understanding of our
business.
You are cautioned that the
assumptions used in the preparation of such information and
statements, including, among other things: future oil and natural
gas prices; future capital expenditure levels; future production
levels; future exchange rates; the cost of developing and expanding
our assets; our ability to obtain equipment in a timely manner to
carry out development activities; our ability to fund future
dividends; our ability to market our oil and natural gas
successfully to current and new customers; the impact of increasing
competition; the availability of adequate and acceptable debt and
equity financing and funds from operations to fund our planned
expenditures; and our ability to add production and reserves
through our development and acquisition activities, although
considered reasonable at the time of preparation, may prove to be
imprecise and, as such, undue reliance should not be placed on
forward-looking statements. Our actual results, performance, or
achievement could differ materially from those expressed in, or
implied by, these forward-looking statements. We can give no
assurance that any of the events anticipated will transpire or
occur, or if any of them do, what benefits we will derive from
them. The forward-looking information and statements contained in
this document is expressly qualified by this cautionary statement.
Our policy for updating forward-looking statements is that i3
disclaims, except as required by law, any intention or obligation
to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
Non-IFRS Financial Measures
i3 uses the following terms for
measurement within this press release that do not have a
standardized prescribed meaning under International Financial
Reporting Standards ("IFRS") and these measurements may not be
comparable with the calculation of similar measurements of other
entities. The Company refers to these as Non-IFRS Measures or
Alternate Performance Measures ("APMs"). APMs are not defined under
IFRS and are not considered to be a substitute for or superior to
IFRS measures. Other companies may not calculate similarly defined
or described measures, and therefore their comparability may be
limited. The Company continually monitors the selection and
definitions of its APMs, which may change in future reporting
periods.
51-101 Advisory
In conformity with National
Instrument 51-101, Standards for Disclosure of Oil and Gas
Activities ("NI 51-101"), natural gas volumes have been converted
to barrels of oil equivalent ("boe") using a conversion rate of six
thousand cubic feet of natural gas to one barrel of oil. In certain
circumstances, natural gas liquid volumes have been converted to a
thousand cubic feet equivalent ("mcfe") on the basis of one barrel
of natural gas liquids to six thousand cubic feet of gas. Boes and
mcfes may be misleading, particularly if used in isolation. A
conversion ratio of one barrel to six thousand cubic feet of
natural gas is based on an energy equivalency conversion method
primarily applicable at the burner tip and does not represent a
value equivalency at the wellhead. Given that the value ratio based
on the current price of crude oil as compared to natural gas is
significantly different from the energy equivalency of 6:1,
utilizing a conversion ratio on a 6:1 basis may be misleading as an
indication of value.