EASTLEIGH, UK / ACCESSWIRE / March 4, 2022 / 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 that the Company has achieved a record for corporate production as well as provide a 2021 year-end reserves report for its subsidiary i3 Energy Canada Ltd.
i3's independent reserve report (the "GLJ report") was prepared by GLJ Ltd. ("GLJ") in accordance with standards contained in the Canadian Oil and Gas Handbook (COGEH) and National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities ("NI 51-101") with an effective date of 31 December 2021.
Highlights
Record Corporate Production on Strong Operational Performance.
Based on field estimates, i3 exited the first quarter of 2022 with a record weekly average production of approximately 20,312 boepd comprised of 61.1 million standard cubic feet of gas per day ("mmscfd"), 6,290 barrels per day ("bbl/d") of natural gas liquids ("NGLs"), 3,522 bbl/d of oil and 316 boepd of gross overriding royalty interest production.
Current production continues to exceed expectations due to continual outperformance of the Company's low decline production base, which has been further enhanced through strong drilling results via i3's inaugural development drilling program.
Based on forward strip pricing at 31 March 2022, i3 now forecasts full-year 2022 net operating income ("NOI" = revenue minus royalties, opex, transportation and processing) of $192 million, a 28% increase over that predicted in the Company's December 2021 capital budget announcement. This increase reflects the upward shift in commodity prices, in addition to well results that have bettered i3's pre-drill forecasts.
Acquisitions within Core Areas Provided Significant Reserve Additions.
Proved plus probable developed producing reserves ("P50 PDP") increased 262% to 60.1 million boe, total proved ("1P") reserves increased 163% to 85.3 million boe and total proved plus probable ("2P") reserves increased 185% to 154.1 million boe, compared to the prior year.
Material Increase in the Company's Reserve Value.
The Before-tax Net Present Value of cash flows attributable to the Company's reserves, discounted at 10%, has been determined to be $354mm, $444mm, and $775mm for its P50 PDP, 1P and 2P reserves, respectively, being indicative of the Company's strong production base and robust portfolio of economic development opportunities.
Accretive Acquisitions Provided Significant Reserve Additions on a Per Share Basis.
P50 PDP net present value ("NPV"), using a 10% discount rate, increased by 231% to £0.24 per share, 1P NPV increased by 195% to £0.30 per share and 2P NPV increased by 172% to £0.52 per share, as compared to the prior year.
The NPV calculations performed by GLJ used an average 2022-2026 WTI price of $69.18/bbl (three consultants average) which is significantly lower than current strip prices.
Excellent Organic Reserves Replacement Ratio, Long Reserve Life Assets and Low Decline Profile Demonstrate Sustainability of the Company's Total Return Model.
On a Proven reserves basis, the Company's organic reserves replacement ratio in 2021 was 220%. P50 PDP, 1P and 2P reserve life index of 9.5 years, 11.8 years and 18.6 years, respectively, combined with our low base decline rate of approximately 12.4% and our extensive inventory of highly economic development drilling locations, underpins i3's ability to sustainably grow production per share from our existing asset base and generate significant distributable cash flow for our shareholders.
Strong FD&A Metrics and Recycle Ratios Reflective of Efficient Development and Acquisition Strategy.
Efficient development and disciplined acquisitions provided strong proved developed producing ("PDP") FD&A of $1.96 per boe, 1P FD&A of $4.51 per boe and 2P of $4.31 per boe, delivering recycle ratios of 5.8x, 2.5x and 2.6x, respectively.
Ryan Heath, President of i3 Energy Canada Ltd., commented:
"The Canadian reserve report reflects the hard work and commitment of the entire i3 team. Strategic, accretive acquisitions along with efficient, low-cost field optimization has built predictable base production and a portfolio with extensive future development opportunities. i3 Canada is pleased to deliver record production exceeding 20,000 boepd, resulting from the Company's low decline profile and strong drilling performance."
Majid Shafiq, CEO of i3 Energy plc, commented:
"Our 2021 year-end reserves report encapsulates a very successful year for i3 Energy. We significantly increased our reserve base year-on-year through a combination of accretive acquisitions and operational activity, with our 2P reserves being valued at $775 million or £0.52 per share at year-end.
"Our organic reserves replacement ratio during the year was greater than 200% demonstrating the quality of our assets and operational capability to replace production from our existing asset base and with a 2P reserves life index of almost 19 years and multiple drilling opportunities, we have a portfolio ideally suited to deliver a consistent and progressive dividend and value growth.
"We are very pleased to exit the last quarter at over 20,000 boepd and look forward to updating the market with results from our currently active drilling program."
2021 Reserves Review
The Company's year-end reserves were evaluated by GLJ in accordance with the definitions, standards and procedures contained in the COGEH and NI 51-101 as of 31 December 2021. The reserves evaluation was based on the average forecast pricing of GLJ, McDaniel & Associates Consultants Ltd. and Sproule Associates Limited ("3 Consultants Average", or "3CA") and foreign exchange rates at 1 January 2022.
Reserves included are Company share reserves which reflect i3's total working interest reserves before the deduction of any royalties and including any royalty interests payable to the Company. Additional reserve information as required under NI 51-101 will be included in our Annual Information Form which will be filed on SEDAR. The numbers outlined in the tables below may not add due to rounding.
Summary of Reserves
The tables below outline GLJ's estimates of i3's reserves at 31 December 2021.
i3 YE 2021 - Reserves Volumes
ReservesCategory
Total Company Interest Reserves
Oil
Mbbl
NGL
Mbbl
Gas
MMcf
Total
Mboe
Liquids Weighting
Proved Producing
7,454
15,406
139,948
46,185
49%
Proved Non-Producing
406
801
15,304
3,758
32%
Proved Undeveloped
4,152
11,636
117,695
35,404
45%
Total Proved
12,011
27,843
272,947
85,346
47%
Probable Producing
2,257
4,510
42,740
13,891
49%
Total Probable
9,512
22,500
220,628
68,784
47%
Proved plus Probable
21,524
50,344
493,575
154,130
47%
i3 YE 2021 - Reserves Values
Before Tax Net Present Value ($MM)
Discount Rate
0%
5%
10%
15%
20%
Proved Producing
284,418
336,749
295,493
257,966
229,266
Proved Non-Producing
26,967
21,246
17,328
14,521
12,434
Proved Undeveloped
305,510
198,952
131,199
87,376
58,012
Total Proved
616,935
556,947
444,020
359,863
299,713
Probable Producing
193,704
93,925
58,126
41,047
31,167
Total Probable
874,094
507,197
331,242
233,388
173,338
Proved plus Probable
1,491,029
1,064,145
775,262
593,250
473,050
Notes:
(1) The Company is not in a tax paying position due to Canadian tax loss pools for year-end 2021.
(2) "Net" reserves mean the Company's working interest share after deduction of royalty obligations.
Reserve Reconciliation
The following table sets out the reconciliation of the Company's total gross reserves based on forecast prices and costs by principal product type as at 31 December 2021 relative to 31 December 2020
Light and Medium Crude Oil
Heavy Crude
Natural Gas (associated & non-associated)
NGL
Total Oil Equivalent
Factors
(Mbbl)
(Mbbl)
(MMcf)
(Mbbl)
(MBOE)
TOTAL PROVED
31 December 2020
4,380
0
122,387
6,963
31,741
Revisions
766
0
25,379
2,209
7,205
Extensions and Improved Recovery
92
200
7,347
448
1,964
Acquisitions
7,187
0
129,351
19,180
47,925
Production
-704
-12
-15,097
-1,209
-4,441
31 December 2021
11,721
188
269,367
27,591
84,394
TOTAL PROBABLE
31 December 2020
4,397
0
74,005
4,592
21,323
Revisions
-72
0
3,160
-221
234
Extensions and Improved Recovery
-16
265
12,809
545
2,928
Acquisitions
4,881
0
129,361
17,474
43,916
Production
0
0
0
0
0
31 December 2021
9,190
265
219,335
22,390
68,401
TOTAL PROVED PLUS PROBABLE
31 December 2020
8,776
0
196,393
11,555
53,065
Revisions
695
0
28,539
1988
7440
Extensions and Improved Recovery
75
465
20,155
993
4,892
Acquisitions
12,069
0
258,712
36,654
91,841
Production
-704
-12
-15097
-1209
-4441
31 December 2021
20,911
453
488,702
49,981
152,797
Performance Measures - Finding and Development ("F&D"), Finding, Development and Acquisition ("FD&A") Costs and Recycle Ratio
F&D and FD&A costs for 2021, 2020 and the two-year average are presented in the tables below. The capital costs used in the calculations are those costs related to: land acquisition and retention, seismic, drilling, completions, tangible well site, tie-ins, and facilities, plus the change in estimated future development costs ("FDC") as per the GLJ report. Net acquisition costs are the cash outlays in respect of acquisitions, minus the proceeds from the disposition of properties during the year. The reserves used in this calculation are working interest reserve additions, including technical revisions and changes due to economic factors. The recycle ratio is the NOI per barrel divided by the cost per barrel (F&D or FD&A).
2021
2020
2-Year Average
Proved Developed Producing
F&D costs ($/boe)
$2.61
N/A
$2.77
F&D recycle ratio
4.4x
N/A
3.5x
FD&A costs ($/boe)
$1.96
$1.65
$1.84
FD&A recycle ratio
5.8x
1.3x
5.2x
Total Proved
F&D costs ($/boe)
$4.02
N/A
$4.12
F&D recycle ratio
2.8x
N/A
2.3x
FD&A costs ($/boe)
$4.51
$3.78
$4.25
FD&A recycle ratio
2.5x
0.6x
2.3x
Total Proved Plus Probable
F&D costs ($/boe)
$3.42
N/A
$3.50
F&D recycle ratio
3.3x
N/A
2.7x
FD&A costs ($/boe)
$4.31
$3.79
$4.14
FD&A recycle ratio
2.6x
0.6x
2.3x
Reserve Life Index ("RLI")
RLI is calculated by taking the Total Company Interest Reserves from the GLJ Report and dividing them by the projected 2022 production as estimated in the GLJ Report.
Total Company Interest Reserves
2022 Company Production
RLI
Reserves Category
(Mboe)
(Mboe)
(Years)
Proved Producing
46,185
6,160
7.5
Total Proved
85,345
7,243
11.8
Proved plus Probable Producing
60,075
6,325
9.5
Proved plus Probable
154,130
8,265
18.6
Forecast Prices Used in Estimates
GLJ has employed the 3 Consultants Average forecast prices in the GLJ Report. The 3CA forecast prices, exchange rate and inflation (2% post 2035) assumptions as at 31 December 2021 are tabulated below.
Canadian Light Sweet
Western Canada Select
Alberta AECO-C
Pentanes Plus
Butanes
Propanes
Inflation Rate
Exchange Rate
40° API
WCS 20.5 API
Spot
FOB Edmonton
Year
(C$/bbl)
(C$/bbl)
(C$/MMBTU)
(C$/bbl)
(C$/bbl)
(C$/bbl)
(%/year)
(USD/CAD)
2022
86.82
74.43
3.56
91.85
57.49
43.39
0
0.7967
2023
80.73
69.17
3.2
85.53
50.17
35.92
2
0.7967
2024
78.01
66.54
3.05
82.98
48.53
34.62
2
0.7967
2025
79.57
67.87
3.1
84.63
49.5
35.31
2
0.7967
2026
81.16
69.23
3.17
86.33
50.49
36.02
2
0.7967
2027
82.78
70.61
3.23
88.05
51.5
36.74
2
0.7967
2028
84.44
72.02
3.3
89.82
52.53
37.47
2
0.7967
2029
86.13
73.46
3.36
91.61
53.58
38.22
2
0.7967
2030
87.85
74.69
3.43
93.44
54.65
38.99
2
0.7967
2031
89.6
76.19
3.5
95.32
55.74
39.77
2
0.7967
2032
91.4
77.71
3.57
97.22
56.86
40.56
2
0.7967
2033
93.23
79.26
3.64
99.17
58
41.37
2
0.7967
2034
95.09
80.85
3.71
101.15
59.15
42.2
2
0.7967
2035
96.99
82.47
3.79
103.17
60.34
43.04
2
0.7967
2036
98.93
84.11
3.86
105.24
61.54
43.91
2
0.7967
Escalated at 2% per year thereafter
Notes:
1. $ = USD.
2. Any figures converted from CAD to USD are done so at CAD 1.25 to USD 1, and any figures converted from CAD to GBP are done so at CAD 1.64 to GBP 1.
3. Reserves estimates have been prepared by GLJ in accordance with standards contained in the Canadian Oil and Gas Evaluation (COGE) Handbook.
4. Proved reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves. If probabilistic methods are used, there should be at least a 90% probability that the quantities actually recovered will equal to or exceed the estimate.
5. Probable reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated Proved plus Probable (2P) reserves. When probabilistic methods are used, there should be at least a 50% probability that the actual quantities recovered will equal to or exceed the 2P estimate.
6. Undeveloped reserves are those reserves expected to be recovered from known accumulations where a significant expenditure (for example, when compared to the cost of drilling a well) is required to render them capable of production. They must fully meet the requirements of the reserves category (for example proved or probable) to which they are assigned.
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) / Graham Heath (CFO)
c/o Camarco
Tel: +44 (0) 203 781 8331
WH Ireland Limited (Nomad and Joint Broker)
James Joyce, Darshan Patel
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
Owen Roberts, James Crothers, Violet Wilson
Tel: +44 (0) 203 781 8331
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 100% owned 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 does not contain inside information.
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