In a report for the six months to 30 June 2021, I3 Energy (I3E) said the year to date has been “transformational” thereby prompting i3 to declare a 1H21 dividend of £2.2m or 0.2 p/share.
The London-listed independent oil and gas company, which holds assets and operations in both the UK and Canada, detailed that including the 0.16 p/share special dividend announced back in July 2021, 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, which completed post period end. I3 said the 2H21 dividend will benefit from the enlarged cash flow resulting from this transaction.
In 1H21, I3 reported net revenue of £26.5m (net), net operating income of £12.5m and cash flow from operations of £8m. Over the period, the Company concluded a reduction of its share premium account and announced an intended special dividend of £1.16m paid last month.
i3 sustained an average production of above 9,000 boepd, offsetting expected natural decline ‘through excellent operations management and targeted maintenance capital allocation.’
The Group stated that 1H volumes do not include any production from the assets acquired from Cenovus Energy as the transaction closed post period end. Including production from these assets, production for the week ending 18 September 2021 averaged 18,741 boepd.
In 1H21, i3 confirmed the presence of oil in three gas wells in its Marten Creek acreage, providing a green light for a winter 2021/22 oil appraisal and development programme.
Meanwhile, the Company successfully farmed-in to a 50% working interest in the Marten Hill's Clearwater area and participated in two successful development wells which added around 120 boepd net production, with an option to drill seven additional wells on the acreage.
Over the period, i3 acquired a 49.5% interest in South Simonette at a cost of CAD$4.7m as well as around 230 boepd of Wapiti production. The Group conducted six reactivations to increase production to 471 boepd here, significantly exceeding the expected 310 boepd.
In addition,i3 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, i3 acquired c.8,400 boepd of low decline production from Cenovus Energy Inc, located within its Central Alberta core area, for a total consideration of CAD65m (US$53.7m).
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.
Majid Shafiq, Chief Executive of i3 Energy, 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."
View from Vox
I3 said its strategic acquisition of Cenovus Energy delivers ‘extensive operational synergies, a large reserve base with multi-year development inventory and expected strong free cash flow.’
The Company highlighted to investors that the assets were acquired on ‘excellent metrics’ of 1.73x next twelve months cash flow, 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.
The assets contain inventory of greater than 140 net drilling locations, 80 net reactivation opportunities and 1,140 km network of operated pipelines, and key processing facilities.
Post-period, the Company agreed terms with farm-in partners for the Serenity field appraisal drilling programme. i3 is now awaiting confirmation of the funding commitments from those potential farm-in partners before finalising and executing documentation for the programme.
I3 said its focus remains on growing its Canadian business and executing the farmout of its UK licences to conduct further appraisal drilling at Serenity and/or Liberator. In addition, it aims to make dividend distributions to its shareholders of up to 30% of free cash flow.
Reasons to I3E
i3E’s is focused on the development of discoveries located close to existing infrastructure and the exploitation of producing fields, whilst maintaining limited exploration exposure.
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.
i3 Energy also agreed to sell Gain's Saskatchewan portfolio to Harvard Resources Inc. for CAD$45m, c.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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