i3 Energy delivers record production in FY23 despite headwinds
() , a UK and Canada focused oil producer, announced its audited final results for the year ended December 31, 2023 (FY23). i3 reported record annual production of 20,711 boepd, at the high end of its 2023 guidance range, and 2% above FY22 production. Record production was achieved despite the loss of c. 3,100 boepd in Q2 mostly due to the Alberta wildfires.
i3 Energy's 2023 capital programme delivered 12 gross (8.0 net) wells, completed within budget. Despite the 2023 capital programme being significantly lower than the 2022 programme, kept proven (1P) and proven + probable (2P) reserves flat at 92.9 mmboe and 179.9 mmboe respectively, with a healthy 2P reserves life index of 23.0 years. The group has 390 gross booked drilling locations in its audited reserves, and over 950 including un-booked locations.
During the period, successfully restructured its debt through a CAD$100m loan facility with Trafigura Canada, and settled £22m in outstanding loan notes. The Trafigura debt was refinanced post-period via a CAD$75m facility with National Bank of Canada. Total dividends of £13.3m were declared and £15.3m paid in FY23.
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Building on a highly productive 2022 work programme, i3 Energy has delivered a steady 2023 despite multiple headwinds, including the Alberta wildfires, high inflation, and volatility in commodity prices, alongside debottlenecking projects and 20 planned turnarounds. To manage these challenges, the group lowered capex to US$30m and focused on low-risk wells and its core production asset in Clearwater, still managing to achieve record production of 20,711 boepd with 12 new gross wells, and maintain reserve volumes essentially flat.
Looking ahead, the group has more than 390 booked drilling locations to support future growth, and a healthy balance sheet following the negotiation of a new CAD$75m facility with National Bank of Canada, replacing last year's Trafigura facility. Also post-period, sold non-core royalty production for c. US$25m, further strengthening its balance sheet. returned £15.33m in dividends last year per its "total shareholder return model", and remains a solid choice for dividend investors.
Last week, announced an ambitious US$50.9m 2024 capital programme that will see the development of 15 gross wells across its acreages in Canada. The new work programme is estimated to deliver an annual production increase of 3-8%. It will be fully funded from existing resources and support a long-term dividend, with c. £12.3m to be returned in FY24, representing 1.0260/p for the year and a forward yield of 8.1% based on a share price of 12.66p for .
Investors should note that the 2024 capital programme will be c. 85% H2-weighted to take advantage of stronger forecast winter gas pricing. In the event forward gas prices deteriorate, has flexibility to reallocate drilling locations to more oil-weighted opportunities.
On the ESG front, i3 continued to make progress in reducing Scope 1 and Scope 2 carbon emissions. The group completed electrification of 25 pumpjacks and 2 natural gas generators, resulting in an emissions reduction of 4,268 tCO2 and 907 tCO2 per year respectively. also replaced 295 gas-driven pneumatic pumps with solar-powered ones, expected to eliminate 8,971 tCO2 annually. At 3 locations, high-pressure natural gas-driven pneumatics were converted to compressed instrument air, yielding an annual methane emissions reduction of 660 tCO2.
's Canadian portfolio holds significant upside across years of potential growth, with 2P reserves now valued at c. US$1bn or £0.67/share - a significant premium to 's current share price. 's projects have strong economics, characterised by low cost and high-returns. Efficient "strong finding, development and acquisition" (FD&A) metrics of US$5.67/boe (PDP), US$2.32/boe (1P) and US$1.76/boe (2P) translate to robust recycle ratios of 2.17x (PDP), 5.31x (1P) and 6.97x (2P).
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