I3 Energy production continues to perform strongly and returns to the dividend list
(AIM:I3E ) has confirmed to investors that production ‘remains predictably stable’ with the period from November 2020 to January 2021 averaging 9,150 boe/d (41% liquids).
The independent oil and gas firm which acquired a low cost, diversified production base in Canada's Western Canadian Sedimentary Basin as well as appraisal assets in the North Sea back in 2020, said its diversified portfolio continues to perform ‘at or above expectations’.
I3 said its production volumes have so far exceeded the forecasted rates of the competent persons reports used for i3's 2020 AIM Re-admission documents by over 1,000 boe/d.
The Group’s forecasts 2021 net operating income at around CAD$35m (US$27.6m) based on mid-February strip pricing, an estimated maintenance capital budget of around CAD$3m and excluding any volumes from the recently tested Noel well in Northeast British Columbia.
The Noel well is expected to be brought on production at around 500 boe/d during 2Q21.
It is expected that i3 Energy will declare its maiden dividend in Q121 - subject to loan note holder, judicial, and shareholder approval - for payment in early 2Q. As previously disclosed, the Company aims to distribute up to 30% of free cash flow as a dividend to shareholders.
Meanwhile, the Group informed investors that discussions continue with a potential farm-in partner for the Serenity discovery, with terms currently being negotiated. I3 said the recent strength in commodity prices has reinvigorated activity within its virtual data room, and additional parties previously contacted during early 2020 have now ‘re-engaged’ with i3.
"We remain very pleased with the performance of our Canadian assets, which are producing better than both internal and independent third-party technical evaluator estimates and forecasts, generated at the time of the acquisitions,” said Majid Shafiq, CEO of i3 Energy.
He added, "Our Canadian and UK teams continue to pursue synergistic opportunities to grow our platform through accretive M&A, while the current commodity environment also has i3 progressing organic opportunities from within, as is exemplified by the excellent result we've just achieved at Noel."
I3 said it remains confident in its portfolio of assets, ‘with ongoing work revealing numerous opportunities that were previously undercapitalised or overlooked by the prior operators.’
The Group also highlighted to investors that it has been an active participant in the Government of Alberta's Site Rehabilitation Program ("SRP") and Saskatchewan's Accelerated Site Closure Program ("ASCP") as part of its commitment to ESG leadership.
Through its involvement, i3 has received grants to date in excess of $1.9m, dedicated to accelerating the closure relating to inactive wells, pipelines and facility liabilities, it said. This is expected to result in a reduction to i3’s overall future decommissioning liability.
The Company added that it is further pursuing carbon emission reduction initiatives in order to both meet and exceed current regulatory requirements. These initiatives will qualify for carbon credits which can be sold or used to offset future carbon tax obligations, it noted.
Shareholders will be delighted that production is either performing at or above expectations and the company intends to join the dividend list. Shares in i3 Energy have increased by over 5% in value since the beginning of 2021 with the shares jumping 19.86% higher this morning to 7p in early trade. Importantly for shareholders, the Group continues to pursue synergistic opportunities in both Canada and the UK while the recent strength in commodity prices has also reinvigorated activity for i3’s virtual data room.
Reasons to Follow I3E
i3 Energy’s strategy is to focus on the development of discoveries located close to existing infrastructure and the exploitation of producing fields, whilst maintaining limited exploration exposure.
Positive Drilling Results
i3 Energy has several positive re-rating catalysts from near-term drilling results from the existing asset portfolio.
Transitioning to Production with Dividend
Recently moved into production with low-risk growth opportunities in production at low marginal cost.
i3 previously stated that it expects to begin paying a dividend of between 20% and 30% of free cash flow annually prior to the end of 1Q21, and then up to 40% as its Canadian business expands.
Platform for Organic and Acquisitive Growth
Established a platform to transform the business over the next 12 months through organic production growth and complementary acquisitions.
Majid Shafiq, CEO of I3E said i3’s entry into the WCSB is “to provide a platform to execute on a strategy for the rapid growth of a Canadian onshore production portfolio via M&A.”
Alongside its acquisition of Toscana, i3 has continued to expand its Canadian assets, with CEO, Majid Shafiq, and in particular, has viewed 2020 as “a transformational year.”
In September 2020, the company told investors that it completed its acquisition of all the petroleum and infrastructure assets of Gain Energy for CAD$80m after raising around £29m in August in order to complete its proposed acquisition of the Gain Energy assets in Canada.
Meanwhile, i3 Energy also agreed to sell Gain's Saskatchewan portfolio to Harvard Resources Inc. for CAD$45m, around US$33m, immediately following the completion of its acquisition of Gain.
i3 believes the diversification of its portfolio will add ‘a quality production base to provide internal free cash flow to grow the enlarged group and provide a near-term return to its shareholders.’
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