TIDMI3E
RNS Number : 8751B
i3 Energy PLC
07 June 2023
7 June 2023
i3 Energy plc
("i3", "i3 Energy", or the "Company")
Final Results for the year ended 31 December 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 the audited results for the year ended 31 December
2022. A copy of the Company's financial statements will be posted
to shareholders and made available shortly on the Company's website
at https://i3.energy . The Notice of Annual General Meeting ("AGM")
will be posted in due course. The AGM will be held at 11:00 am BST
on 30(th) June 2023 at the offices of WH Ireland Limited at 24
Martin Lane, London, EC4R 0DR.
2022 Financial, Reserves & PRODUCTION Highlights
CANADA UK AND CORPORATE
--------------------------------------------------------- -----------------------------------------------------------
Average daily production (BOE/d) 2022: 20,317 Group Revenue (GBPm) 2022: 208.4
2021: 12,442 2021: 86.8
2020: 8,732 2020: 13.0
2019: 0 2019: 0
------------------------------------- -------------- --------------------------------------- --------------
2P reserves (MMBOE) 2022: 181.5 Group Profit / (loss) after tax (GBPm) 2022: 42.0
2021: 154.1 2021: 25.1
2020: 54.0 2020: 11.7
2019: 0 2019: (10.9)
------------------------------------- -------------- --------------------------------------- --------------
PDP reserves (MMBOE) 2022: 49.1 Group NOI (GBPm) (1) 2022: 131.7
2021: 46.2 2021: 48.6
2020: 18.1 2020: 4.9
2019: 0 2019: 0
------------------------------------- -------------- --------------------------------------- --------------
2P reserves Before-tax NPV 10 (USDm) 2022: 1,162 Group Adjusted EBITDA (GBPm) (1) 2022: 98.0
2021: 775 2021: 30.2
2020: 183 2020: (0.8)
2019: 0 2019: (5)
--------------------------------------- --------------
Dividends declared (GBPm) 2022: 17.4
2021: 3.4
2020: 0
2019: 0
------------------------------------- -------------- --------------------------------------- --------------
(1) Non-IFRS measure. Refer to Appendix B
2022 Achievements
Organic Production Growth Delivering Record Production
-- Four quarters of production growth with peak daily rates
exceeding 24,000 barrels of oil equivalent per day ("boepd").
Shareholder Return
-- Increased dividends declared from GBP3.4 million in 2021 to
GBP17.4 million in 2022 and announced 2023 dividend guidance of
GBP24.5 million (2.052 pence / share).
Capital Program
-- GBP75.8 million capital expenditure in 2022 delivered 31 gross (20.1 net) wells.
-- Increased the Group's leasehold position to 628,000 net acres.
-- Aggregate well productivity met or exceeded management
expectation and key wells drilled in strategic Simonette and
Clearwater acreage.
-- Through participation in land sale auctions, farm-ins and
joint ventures, and partner consolidation, i3 has grown its acreage
in the strategic Clearwater play to greater than 69,600 acres (109
sections) with an average working interest of 76%
-- Farmed out 25% of the Serenity licence to Europa who paid
46.25% of the Serenity 13/23c-12 appraisal well costs. The well was
drilled in October 2022. The company is evaluating one well
development options.
Reserves Growth
-- Our 2022 capital program helped to increase Proved plus
Probable reserves ("2P") by 18% to 182 Million Barrels of Oil
Equivalent ("mmboe"), resulting in reserves replacement of 479% on
a 2P basis.
-- The Group now has 376 gross booked drilling locations in its
audited reserves and 940 including un-booked locations.
ESG Performance
-- Published inaugural annual ESG Report.
-- Eliminated all high-bleed pressure controllers and commenced
installation of solar powered pumps. These initiatives when
complete will eliminate 71,450 tonnes CO2e methane emissions
equivalent to taking circa 16,000 cars off the road.
-- Completed the electrification of 7 pumpjacks in Carmangay and
Retlaw to reduce use of diesel and propane for power generation,
with a further 29 electrifications underway.
-- Implemented efficient disposal of oil based drilling fluid,
avoiding 2,500 tonnes of CO2e emissions.
-- Ongoing annual abandonment and reclamation program abandoned
69 wells and decommissioned 37 well sites, representing
approximately 14% of operated non-producing wells.
Outlook
A summary of key events which occurred after the reporting
period are presented in note 24 to the financial statements and
includes the announcement on 31 May 2023 of the successful
redemption of the Company's outstanding GBP22 million H1-2019 Loan
Notes (the "Loan Notes"), due 31 May 2023, and the establishment of
a CAD 100 million debt facility, which will provide i3 greater
financial flexibility and enhanced credit capacity to further
execute its ongoing business plan. The Company's focus for the
remainder of 2023 will be on three key areas:
1 The growth of i3's Canadian business through the deployment of
capital into its large proven undeveloped reserves base,
operational excellence to improve uptime and field performance, and
strategic upsizing in core areas;
2 Maintaining flexibility to adapt to economic challenges while
maximizing total shareholder return; and
3 Conducting its operations safely and in an environmentally secure manner.
The Company continuously evaluates opportunities to strengthen
its balance sheet whilst maintaining tight control of its costs and
working capital position.
Majid Shafiq, CEO of i3 Energy plc, commented:
"Following an active period of acquisitions over the course of
2020 and 2021, 2022 was a period of consolidation and organic
growth. Our most recent significant acquisition in Q3 2021 of circa
8,400 boepd in our core Central Alberta area from Cenovus Energy,
was integrated into our Canadian business and operational and
organisational efficiencies implemented across our entire
portfolio. Commodity price strength in the second half of 2021 led
us to pivot from growth via acquisitions to organic growth through
the exploitation of our extensive inventory of drilling locations
and in January 2022 we commenced our inaugural operated drilling
program with an announced USD47 million budget. Based on the
positive results from the wells drilled in Q1 2022, the Canadian
capex program was expanded to circa USD90 million and during the
course of the year we drilled a total of 20.1 net wells in Canada.
The program was very successful with all wells meeting or exceeding
management expectations in terms of production performance and
costs versus budget. In conjunction with an extensive workover
program the new wells contributed to the achievement of our stated
goal of reaching 24,000 boepd before the end of the year and also
to a very positive year end reserves audit which resulted in an 18%
increase in our booked 2P reserves and a 479% increase in our
reserves replacement ratio on a 2P basis. In the UK, a farmout of
the Serenity appraisal well allowed the company to significantly
reduce its capital exposure and the well was successfully drilled
to complete the appraisal of the field. The potential for a single
well development is being evaluated.
2022 also saw the publication of our maiden ESG report and we
are very pleased that activities throughout the year saw
significant reductions in CO2e emissions as we began to implement
methane emission reduction initiatives. We continued to deliver on
our total shareholder return model, as we balanced our production
growth with increased cash returns to investors with an expanded
dividend program which saw over GBP17.4 million in dividends being
declared during the year.
The first half of 2023 has seen continued operational and
commercial activity. Our 2023 capital program has commenced with
the pre-spring break component completed and we are very pleased to
have repaid our outstanding debt and established a new CAD100
million loan facility, which validates the quality and scale of our
reserves base in Canada.
All of this was possible due to the expertise and commitment of
our staff in Canada and the UK and I would like to thank them for
their continued efforts and all our investors and shareholders for
their continued support. We look forward to another successful year
as we navigate the operational and business challenges that lay
ahead with continued dedication and hard work".
AIM Application - Correction
i3 also announces that, further to the announcement on 17 May
2021, 5,277,045 ordinary shares ("Ordinary Shares") were issued to
Baker Hughes, a GE company (GE Oil & Gas UK Limited and Baker
Hughes collectively referred to hereafter as "BHGE") in relation to
warrants exercised and these were not admitted to trading on AIM at
that time. An application will be made for the Ordinary Shares to
be admitted to trading on AIM and are expected to be admitted on 13
June 2023.
The Ordinary Shares rank pari passu with the existing Ordinary
Shares, including the right to receive all dividends and other
distributions declared after the date of issue.
Following Admission of the Ordinary Shares, the Company's issued
share capital will though remain the same as previously reported at
1,201,874,464 Ordinary Shares with a nominal value of GBP0.0001
each. Shareholders may use this figure of ordinary shares as the
denominator by which they are required to notify their interest in,
or change their interest in, the Company under the Disclosure
Guidance and Transparency Rules.
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 c/o Camarco
Majid Shafiq (CEO) Tel: +44 (0) 203 781
8338
WH Ireland Limited (Nomad and Joint
Broker) Tel: +44 (0) 207 220
James Joyce, Darshan Patel 1666
Tennyson Securities (Joint Broker)
Peter Krens Tel: +44 (0) 207 186
9030
Stifel Nicolaus Europe Limited (Joint
Broker) Tel: +44 (0) 20 7710
Ashton Clanfield, Callum Stewart 7600
Camarco
Georgia Edmonds, Violet Wilson, Sam Tel: +44 (0) 203 781
Morris 8338
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 for 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
Chairperson's and Chief Executive's Statement
Following its very successful entry into Canada through M&A
and the aggregation of a significant portfolio of development
assets over the course of 2020 and 2021, the strengthening of oil
and gas prices in 2021 resulted in a shift of strategy for the
Company to focus on internally generated growth through the
exploitation of its extensive portfolio of development drilling
locations.
In January 2022, i3 embarked on its inaugural drilling campaign
in Canada. The Company announced in December 2021 an internally
funded USD 47 million programme of drilling which was designed to
drill 17 gross wells (12.6 net) across its key assets. The
programme was designed to maximize near-term production and cash
flow through further development of the Company's large inventory
of predictable and highly economic Glauconite locations in Central
Alberta , while continuing to advance i3's high-impact Simonette
Montney position and recently expanded Clearwater holdings. The
program was expected to add incremental peak production of 5,250
boepd and result in average 2022 production of over 20,000 boepd
while testing and advancing important growth catalysts in its
portfolio. Based on the very positive results of the wells drilled
in the first quarter, the Company's strong operational performance
and the forecasted strength of commodity prices, the Company
decided in May to expand its program with an additional US$50
million of capital. The revised capital budget was forecast to
provide peak production above 24,000 boepd by year end.
We are very pleased that the drilling programme was executed
under budget and the aggregate well performance met management
expectations. In total, i3's 2022 drilling programme delivered 31
gross (18.4 net) wells and was executed circa 5% under budget with
excellent capital efficiencies, which was a major achievement
considering the highly inflationary environment the Company and its
industry peers were challenged with. Such success was achieved by a
strong focus on operational efficiency and cost control and is a
testament to the dedication and skills of all our staff. In
addition to production wells in our Core Central Alberta and Wapiti
areas, key development and delineations wells were drilled in our
growth assets in Simonette (in the Montney formation) and Marten
Hills (in the Clearwater formation), and production data from these
wells will help us plan for future expansion in these areas.
The very successful drilling campaign allied with an extensive
suite of regular workovers, reactivations and a focus on uptime and
operational efficiencies resulted in a continuation of production
growth since our entry into Canada. The company entered the year at
circa 18,000 boepd and reached 24,000 boepd in December, with a Q4
average production level of 22,757 boepd.
Although our focus in 2022 was on production growth, the
drilling campaign targeted locations that would advance the
development of strategic assets in our Simonette Montney and
Clearwater assets. We also significantly grew our exposure to the
Clearwater play through a series of strategic transactions
including successful bids at Alberta Crown Land Sales, joint
ventures, farm-in agreements and partner consolidation. This
activity has grown our Clearwater land position by circa 120% to
109 net sections (279 km(2) ) from the 50 net sections (128 km(2) )
acquired as part of the Company's first transaction in Canada, the
Toscana acquisition in 2020.
The Company's year end 2022 audited reserves reflect the
successful reservoir management of ongoing operations and the
results of the 2022 drilling program. The Company offset production
declines and increased its Proven Developed Producing (PDP), Total
Proved (1P) and Proved plus Probable (2P) reserves to 49.1 mmboe,
93.5 mmboe and 181.5 mmboe respectively. Relative to year end 2021
the Company's PDP, P1 and 2P reserves increased by 6%, 10% and 19%
respectively. This was a significant result and achieved with
positive revisions to existing reserves and reserves adds from new
development drilling locations. The scale and longevity of our
asset portfolio is demonstrated by a reserves life index of 22.5
years for the Company's 2P reserves.
Our 2022 drilling program and subsurface technical work has
contributed to an increase in the Company's total inventory to 940
gross (537 net) drilling locations of which only 376 gross (255
net) are booked in the year end 2022 reserves report. A significant
proportion of these un-booked drilling locations are located in
Simonette, Wapiti and our Clearwater acreage, which illustrate the
organic growth potential in these assets. Together the booked and
un-booked drilling locations provide for multiple years of future
drilling activity and production growth.
In the UK, we farmed out 25% of our Serenity discovery to Europa
Oil and Gas Limited in return for a 1.85 for 1 carry, resulting in
the reduction of our drilling capex share from 100% to 53.75%. The
well was drilled in October but unfortunately the targeted sand was
not found at the appraisal well location and consequently in place
hydrocarbon volumes are much lower than originally estimated. U
pdated mapping of the field around the 13/23-10 discovery well,
shows there is the potential for a single well development, for
which development and monetization options are being evaluated. The
well was drilled significantly below budget resulting in a net cost
to the Company of USD 5.7 million .
Based on the success of our 2022 drilling campaign and our
budget commodity price forecasts, the Company announced its 2023
capital budget and drilling programme on 22 December 2022. The
Company plans to spend USD 64.05 million focussed on a drilling
campaign on its Canadian assets. Similar to the 2022 programme, the
drilling targets production wells in our key assets in Central
Alberta, Simonette, Wapiti and the Clearwater with an additional
element of Clearwater appraisal wells in our legacy acreage
(acquired via the Toscana acquisition) and an earn-in appraisal
well in our non-operated asset base. In total the 2023 programme is
scheduled to deliver 23 gross wells (15.2 net, 70% net i3
operated). Based on the expected performance of these wells,
forecast 2023 annual production is expected to be in the range of
22,250 to 23,000 boepd, representing a year-over-year increase of
approximately 10% to 13%, with an expected peak production rate in
2023 of approximately 26,000 boepd. Our budget allocation to the UK
is limited to USD 0.6 million, which will be used to advance the
Serenity one well development to field development plan stage. The
Canadian drilling programme for Q1 2023 has been completed with
wells being equipped and tied into production facilities for
clean-up. Drilling operations will recommence in Q3 2023 when
surface conditions allow operations, following the Spring seasonal
wet period.
We continue to actively identify production optimisation and
cost reduction opportunities within our portfolio, focussing on
maintaining high uptime, minimising operating costs, optimising
operated processing facilities and infrastructure, and implementing
high return workovers to offset natural production declines. These
efforts continue to increase aggregate average net production and
substantially reduce the decline rates predicted within the
Company's competent persons reports. This is a testament to the
quality of the assets in the portfolio and the dedication of our
workforce. In parallel with operational activity, we continue to
review the reservoir performance of the producing assets and
identify mature fields where redevelopment, particularly through
the implementation of relatively low-cost secondary recovery
projects, could materially increase production and ultimate
hydrocarbon recovery. Operating our assets in a safe and secure
manner is fundamental to our business and we continue to advance
our health and safety policies and procedures as we acquire and
integrate additional production assets. There were 101 routine
regulatory government inspections during 2022. 75 returned
satisfactory results, 20 were categorised as low risk, and six that
were deemed to be high risk were subsequently remedied.
Financial Discipline
The Board and Management are focused on delivering consistent
value to shareholders. i3 is committed to its total shareholder
return model which allies production and asset value growth with a
progressively growing dividend and protects this commitment through
a conservative hedging program. The Company has and continues to
keep a substantial portion of its production hedged through risk
management contracts to manage commodity price risk, with free cash
post dividend payments deployed to either acquire production assets
or develop our proven undeveloped (PUD) and 2P inventory dependent
on which option delivers higher returns in the prevailing commodity
price environment. As i3 continues to grow its portfolio, a
proportion of all incremental production will be hedged in order to
secure future cash flows, and the Company will remain commercial in
monetising assets when third-party interest warrants
consideration.
With the well-timed acquisitions and capital deployment of the
last 30 months, the Company's assets have continued to outperform
the Directors' expectations. As per our commitment to those
shareholders who funded our entry to and growth in Canada, and as
part of our total shareholder return model, we commenced paying a
dividend in 2021 and have grown that year-on-year from GBP3.4
million in 2021, to GBP15.4 million in 2022 and plan to pay
dividends of GBP24.5 million in 2023.
Operational flexibility and the short-term nature of forward
capital commitments in Canada mean that the Company has
considerable optionality to rapidly expand or reduce its capital
programme to prudently manage its balance sheet to ensure risks are
appropriately mitigated in volatile commodity markets.
Governance
The Board recognises its responsibility for the proper
management of the Company and is committed to maintaining a high
standard of corporate governance. The Directors also recognise the
importance of sound corporate governance commensurate with the size
and nature of the Company and the interests of its shareholders.
The Quoted Companies Alliance has published a set of corporate
governance guidelines for AIM companies, which include a code of
best practice comprising principles intended as a minimum standard,
and recommendations for reporting corporate governance matters. The
Directors comply with the QCA Corporate Governance Guidelines for
Smaller Quoted Companies so far as it is practicable having regard
to the size and current stage of development of the Company. The
Board currently comprises two Executive Directors (being the Chief
Executive Officer and the President Canada) and four Non-Executive
Directors (including the Chairperson).
The Board's decision-making process is not dominated by any one
individual or group of individuals. The composition of the Board
will be reviewed regularly and modified as appropriate in response
to the Company's changing requirements. The Board has established
an Audit and Risk Committee, Corporate Governance Committee,
Health, Safety, Environment and Security Committee, Reserves
Committee, and Remuneration Committee to ensure proper adherence to
sound governance and decision making.
Environmental Stewardship
i3 is fortunate to operate in the UK and Canada which have some
of the world's most stringent and rigorous environmental laws and
regulations and the Company strives to meet or exceed all local,
provincial or national operational, environmental, reporting and
compliance obligations and abandonment and reclamation
requirements. The Company is committed to conducting its operations
responsibly and in accordance with industry best practices. i3'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.
To demonstrate the Company's commitment to long-term sustainable
resource development, environmental stewardship and the well-being
of employees and the communities in which i3 operates, i3 published
its inaugural annual ESG report in July 2022. The ESG report set
out the Company's goals and ambitions with respect to greenhouse
gas emission reductions, environmental stewardship, social policies
and governance. i3 published an updated ESG report in December
2022, which included disclosure on the assets acquired from Cenovus
Energy in 2021. This data was not available when the inaugural
report was published in July 2022.
The Company made big strides in 2022 to reduce methane
emissions. After completing the upgrading of high bleed pneumatic
controllers to low bleed or non-bleed alternatives across its
portfolio, the Company commenced replacement of pneumatic pumps
with solar driven pumps (no venting). These initiatives have
resulted in a decrease of 71,450 tonnes of CO2e/year, which is the
equivalent of removing 15,530 cars from the road per year. i3 also
completed the electrification of 30 pumpjacks in its Carmangay and
Retlaw properties, reducing CO2e emissions by approximately 6,366
tonnes/year. The Company further partnered with Recover Energy
Services ("Recovery") to manage the efficient disposal of oil-based
drilling waste and as determined by Recovery, avoided 2,500 metric
tonnes of CO2e emissions. Similar initiatives will continue in 2023
as we continue to reduce the carbon intensity of our production
base. These CO2e emissions reductions qualify for carbon credits
which can be sold or used to offset future carbon tax
obligations.
i3 also takes its abandonment and reclamation obligations very
seriously and i n 2022 it abandoned a total of 69 wells and
decommissioned 37 well sites, representing approximately 14% of its
operated non-producing well stock. In 2023, and in accordance with
the Alberta Energy Regulator's decommissioning guidance, i3 expects
to deliver a similar number of abandonment operations as achieved
in 2022.
Looking ahead
The Company looks forward to executing a successful drilling
program in Canada in 2023, growing production and returning cash to
shareholders and so delivering on its total shareholder return
model.
Looking beyond 2023, we have a high quality and diverse asset
portfolio in Canada with immense unrealized upside potential. We
will continue to focus our efforts on advancing these key assets to
efficient and rapid commercialisation and value crystallisation. We
will selectively target key assets and wells to optimise these
developments and conversion of resources to reserves bookings. We
are fortunate that we operate the vast majority of our assets which
allows us to control the timing and pace of development. We also
own high working interests in our operated assets which also
provides us with optionality on how to finance these
developments.
Whilst our current focus is on organic growth, we recognise that
commodity price volatility and resulting market dislocations will
provide opportunities to grow through low-cost mergers and
acquisitions and we remain vigilant to take advantage of these
opportunities as and when they arise.
We are committed to operating in a safe and socially responsible
manner and the safety of our employees and contractors is of
primary importance. We are proud of our green house gas emission
reduction initiatives and achievements in 2022 and we will
endeavour to deliver year-on-year reductions in the carbon
intensity of our production.
As always, we extend gratitude to our shareholders for their
ongoing support and to our employees for their relentless
commitment to making i3 a success. Though we operate within a macro
environment that is beyond our control, we believe we are doing the
right things to create a very valuable business that can weather
good times and bad.
i3 will continue to manage our Canadian and UK businesses in a
manner that maximizes value creation and distributed returns.
"John Festival" "Majid Shafiq"
John Festival Majid Shafiq
Non-Executive Chairperson Chief Executive Officer
6 June 2023 6 June 2023
Consolidated Statement of Comprehensive Income
Notes Year Ended Year Ended
31 December 31 December
2022 2021
-------------------------------------------- ----- ------------ ------------
GBP'000 GBP'000
Revenue 6 208,436 86,763
Production costs (76,418) (37,945)
Loss on risk management contracts 18 (18,990) (5,485)
Depreciation and depletion 12 (34,339) (21,643)
------------ --------------
Gross profit 78,689 21,690
Administrative expenses 7 (15,038) (13,094)
Acquisition costs - (256)
(Loss) / gain on bargain purchase
and asset dispositions 4 (9) 25,013
------------ --------------
Operating profit 63,642 33,353
Finance costs 8 (7,865) (7,609)
Profit before tax 55,777 25,744
Tax charge 9 (13,826) (661)
Profit for the year 41,951 25,083
============ ==============
Other comprehensive income:
Items that may be reclassified subsequently
to profit or loss:
Foreign exchange differences on translation
of foreign operations 6,688 1,511
------------ --------------
Other comprehensive income for the
year, net of tax 6,688 1,511
Total comprehensive income for the
year 48,639 26,594
============ ==============
Earnings per share Pence Pence
Earnings per share - basic 11 3.60 2.84
Earnings per share - diluted 11 3.43 2.60
------------ --------------
All operations are continuing.
The accompanying notes form an integral part of these financial
statements.
Consolidated Statement of Financial Position
Assets Notes 31 December 31 December
2022 2021
------------------------------------- ----- ----------- -----------
GBP'000 GBP'000
Non-current assets
Property, plant & equipment 12 236,465 224,080
Exploration and evaluation assets 13 62,060 49,819
Other non-current assets 74 74
Total non-current assets 298,599 273,973
Current assets
Cash and cash equivalents 16,560 15,335
Trade and other receivables 14 34,843 25,503
Risk management contracts 18 1,111 814
Inventory 2,099 665
----------- -----------
Total current assets 54,613 42,317
Current liabilities
Trade and other payables 15 (55,846) (19,709)
Risk management contracts 18 (381) (925)
Borrowings and leases 16 (27,241) (69)
Decommissioning provision 17 (3,190) (2,368)
Total current liabilities (86,658) (23,071)
Net current (liabilities) / assets (32,045) 19,246
Non-current liabilities
Non-current accounts payable 15 - (557)
Borrowings and leases 16 - (23,855)
Decommissioning provision 17 (90,141) (123,155)
Deferred tax liability 9 (11,667) (7,486)
Total non-current liabilities (101,808) (155,053)
Net assets 164,746 138,166
=========== ===========
Capital and reserves
Ordinary shares 19 119 113
Deferred shares 19 50 50
Share premium 19 48,646 44,203
Share-based payment reserve 20 6,311 9,102
Warrants - LNs 16 2,045 2,045
Foreign currency translation reserve 8,052 1,364
Retained earnings 99,523 81,289
Shareholders' funds 164,746 138,166
=========== ===========
The accompanying notes form an integral part of these financial
statements.
The consolidated financial statements of i3 Energy plc, company
number 10699593, were approved by the Board of Directors and
authorised for issue on 6 June 2023. Signed on behalf of the Board
of Directors by:
Majid Shafiq
Director
Consolidated Statement of Changes in Equity
Ordinary Share Deferred Share-based Warrants Foreign Retained Total
shares premium shares payment - LN currency earnings
reserve translation
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- ----------- -------- ------------ --------- --------
Balance at 31 December
2020 70 61,605 50 6,337 9,714 (147) ( 4,433) 73,196
Total comprehensive
income for the year - - - - - 1,511 25,083 26,594
Capital reduction 19 - (64,056) - - - - 64,056 -
Transactions with owners:
1
Issue of share capital 9 36 37,970 - - - - - 38,006
Exercise of options 20 2 112 - - - - - 114
Exercise of warrants 20 5 8,572 - (452) (7,669) - - 456
Share-based payment
expense 20 - - - 3,217 - - - 3,217
Dividends declared
in 2021 19 - - - - - - (3,417) (3,417)
Balance at 31 December
2021 113 44,203 50 9,102 2,045 1,364 81,289 138,166
Total comprehensive
income for the year - - - - - 6,688 41,951 48,639
Transactions with owners:
Exercise of options 20 6 4,443 - (3,883) - - (6,324) (5,758)
Share-based payment
expense 20 - - - 1,092 - - - 1,092
Dividends declared
in 2022 19 - - - - - - (17,393) (17,393)
-------- -------- -------- ----------- -------- ------------ --------- --------
Balance at 31 December
2022 119 48,646 50 6,311 2,045 8,052 99,523 164,746
======== ======== ======== =========== ======== ============ ========= ========
The accompanying notes form an integral part of these financial
statements.
The following describes the nature and purpose of each reserve
within equity:
Reserve Description and purpose
Ordinary shares Represents the nominal value of shares issued
Share premium account Amount subscribed for share capital in excess of nominal
value
Deferred shares Represents the nominal value of shares issued, the
shares have full capital distribution (including on
wind up) rights and do not confer any voting or dividend
rights, or any of redemption
Share-based payment Represents the accumulated balance of share-based
reserve payment charges recognised in respect of share options
granted by the Company less transfers to retained
deficit in respect of options exercised or cancelled/lapsed
Warrants - LNs Represents the accumulated balance of share-based
payment charges recognised in respect of warrants
granted by the Company in respect to warrants granted
to the loan note holders
Foreign currency Exchange differences arising on consolidating the
translation reserve assets and liabilities of the Group's non-Pound Sterling
functional currency operations (including comparatives)
recognised through the Consolidated Statement of Other
Comprehensive Income.
Retained earnings Cumulative net gains and losses recognised in the
Consolidated Statement of Comprehensive Income
Note: The issued share capital comprises of both ordinary and
deferred shares and the consolidated nominal value exceeds the
required minimum issued capital of GBP 50,000.
Consolidated Statement of Cash Flow
Notes Year ended Year ended
31 December 31 December
2022 2021
-------------------------------------------- ----- ------------ ------------
GBP'000 GBP'000
OPERATING ACTIVITIES
Profit before tax 55,777 25,744
Adjustments for:
Depreciation and depletion 12 34,339 21,643
Loss / (gain) on bargain purchase
and asset dispositions 4 9 (25,013)
Finance costs 8 7,865 7,609
Unrealised (gain) / loss on risk management
contracts 18 (858) 111
Non-cash other income (215) -
Unrealised FX loss 7 113 (154)
Share-based payments expense - employees
(including NEDs) 7 1,092 3,217
Operating cash flows before movements
in working capital:
(Increase) in trade and other receivables (8,378) (15,297)
Increase in trade and other payables 12,782 6,862
(Increase) in inventory (1,434) (283)
------------ ------------
Net cash from operating activities 101,092 24,439
------------ ------------
INVESTING ACTIVITIES
Acquisitions (531) (37,079)
Expenditures on property, plant &
equipment (64,374) (9,465)
Disposal of property, plant & equipment 621 529
Expenditures on exploration and evaluation
assets (13,842) (3,317)
Expenditure on decommissioning oil
and gas assets 17 (437) (648)
Tax credit for R&D expenditure 9 - 487
------------ ------------
Net cash used in investing activities (78,563) (49,493)
------------ ------------
FINANCING ACTIVITIES
Proceeds on issue of ordinary shares,
net of issue costs 19 - 38,125
Interest and other finance charges
paid 8 (2,330) (448)
Exercise of warrants and options 635 -
Employee tax on exercised share options (6,432) -
Lease payments 16 (74) (30)
Dividends paid 19 (15,353) (3,417)
Net cash (used in) / from financing
activities (23,554) 34,230
Effect of exchange rate changes on
cash 2,250 (19)
------------ ------------
Net Increase in cash and cash equivalents 1,225 9,157
Cash and cash equivalents, beginning
of year 15,335 6,178
------------ ------------
CASH AND CASH EQUIVALENTS, OF
YEAR 16,560 15,335
============ ============
Included within cash and cash equivalents is GBP354 thousand of
restricted cash, which relates to guarantees for product marketing.
Non-current accounts payables reconciliation is show in note 15 and
the debt reconciliation is shown in note 16 .
The accompanying notes form an integral part of these financial
statements.
Notes To the Group Financial Statements
1 General information
i3 Energy plc ("the Company") is a Public Company, limited by
shares, registered in England and Wales under the Companies Act
2006 with registered number 10699593. The Company's ordinary shares
are traded on the Toronto Stock Exchange and the AIM Market
operated by the London Stock Exchange. The address of the Company's
registered office is New Kings Court, Tollgate, Chandler's Ford,
Eastleigh, Hampshire, SO53 3LG.
The Company and its subsidiaries (together, "the Group")
principal activities consist of oil and gas production in Western
Canadian Sedimentary Basin and of the appraisal of oil and gas
assets on the UK Continental Shelf.
2 Basis of preparation
The financial statements of i3 Energy plc have been prepared in
accordance with UK-adopted international accounting standards in
accordance with the requirements of the Companies Act 2006 and in
accordance with the requirements of the AIM rules.
The consolidated financial statements have been prepared under
the historical cost convention, as modified by the financial assets
and financial liabilities (including derivative instruments) at
fair value through profit or loss.
The financial information is presented in Pounds Sterling (GBP,
GBP), which is the Company's functional currency, and rounded to
the nearest thousand unless otherwise stated. The functional
currency of the Company's UK subsidiary, i3 Energy North Sea
Limited, is GBP, and the functional currency of its Canadian
subsidiary, i3 Energy Canada Limited, is CAD. A summary of
period-average and period-end exchange rates is presented in the
table below:
Year ended Year ended
31 December 31 December
2022 2021
------------------------------------- ------------ ------------
Period-average GBP:CAD exchange rate 1.6073 1.7246
Period-end GBP:CAD exchange rate 1.6283 1.7166
The principal accounting policies applied in the preparation of
these consolidated financial statements are set out below. These
policies have been consistently applied unless otherwise
stated.
Basis of Consolidation
The consolidated financial statements consolidate the audited
financial statements of i3 Energy plc and the financial statements
of its subsidiary undertakings made up to 31 December 2022.
Subsidiaries are entities over which the Group has control. The
Group controls an entity when the Group is exposed to, or has
rights to, variable returns from its involvement with the entity
and has the ability to affect those returns through its power over
the entity. Subsidiaries are fully consolidated from the date on
which control is transferred to the Group. They are de-consolidated
from the date that control ceases.
When necessary, adjustments are made to the financial statements
of subsidiaries to bring their accounting policies into line with
the Group's accounting policies. All intra-group assets and
liabilities, equity, income, expenses, and cash flows relating to
transactions between members of the Group are eliminated in full on
consolidation.
Going concern
The Directors have, at the time of approving the financial
statements, a reasonable expectation that the Company and the Group
have adequate resources to continue in operational existence for
the foreseeable future. Thus, they continue to adopt the going
concern basis of accounting in preparing the financial statements.
The use of this basis of accounting takes into consideration the
Group's current and forecast financing position, additional details
of which are provided in the going concern section of the
Directors' Report.
3 Significant accounting policies
Financial instruments
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and cash held on
current account or on short-term deposits at variable interest
rates with original maturity periods of up to three months. Any
interest earned is accrued monthly and classified as interest
income within finance income.
Trade and other receivables
Trade and other receivables are initially recognised at fair
value when related amounts are invoiced then carried at this amount
less any impairment of these receivables using the expected credit
loss model. A provision for impairment is made when there is
objective evidence (such as the probability of insolvency or
significant financial difficulties of the debtor) that the Company
will not be able to collect all of the amounts due under the
original terms of the invoice. The carrying amount of receivables
is reduced through use of an allowance account. Impaired debts are
derecognised when they are assessed as uncollectible.
Trade and other payables
These financial liabilities are all non-interest bearing and are
initially recognised at the fair value of the consideration
payable.
Loan Notes
These financial liabilities are all interest bearing and are
initially recognised at amortised cost and include the transaction
costs directly related to the issuance. The transaction costs are
amortised using the effective interest rate method over the life of
the Loan Notes.
Financial liabilities at Fair Value Through Profit or Loss
("FVTPL")
Financial liabilities at FVTPL comprise of the Group's risk
management contracts and non-current accounts payable. Financial
liabilities are classified as at FVTPL when the financial liability
is (i) contingent consideration that may be paid by an acquirer as
part of a business combination to which IFRS 3 applies, (ii) held
for trading, or (iii) it is designated as at FVTPL.
A financial liability is classified as held for trading if:
-- it has been incurred principally for the purpose of repurchasing it in the near term; or
-- on initial recognition it is part of a portfolio of
identified financial instruments that the Company manages together
and has a recent actual pattern of short-term profit-taking; or
-- it is a derivative that is not designated and effective as a hedging instrument.
A financial liability other than a financial liability held for
trading or contingent consideration that may be paid by an acquirer
as part of a business combination may be designated as at FVTPL
upon initial recognition if:
-- such designation eliminates or significantly reduces a
measurement or recognition inconsistency that would otherwise
arise; or
-- the financial liability forms part of a group of financial
assets or financial liabilities or both, which is managed, and its
performance is evaluated on a fair value basis, in accordance with
the Company's documented risk management or investment strategy,
and information about the grouping is provided internally on that
basis; or
-- it forms part of a contract containing one or more embedded
derivatives, and IFRS Financial Instruments: Recognition and
Measurement permits the entire combined contract (asset or
liability) to be designated as at FVTPL.
Financial liabilities at FVTPL are stated at fair value, with
any gains or losses arising on re-measurement recognised in profit
or loss. The net gain or loss recognised in profit or loss
incorporates any interest paid on the financial liability and is
included in the 'other gains and losses' line item in the
consolidated statement of comprehensive income.
Risk management contracts
Financial risk management contracts are measured and recognised
in accordance with the Group's accounting policy for financial
liabilities at FVTPL as described above. Physical risk management
contracts represent physical delivery sales contracts in the
ordinary course of business and are therefore not recorded at fair
value in the consolidated financial statements. Settlements on
these physical risk management contracts are recognised within
realised gains or losses on risk management contracts at the time
of settlement.
Embedded derivatives
Derivatives embedded in other financial instruments or other
host contracts are treated as separate derivatives when their risks
and characteristics are not closely related to those of the host
contracts and the host contracts are not measured at FVTPL.
Leases
Lease liabilities are initially measured at the present value of
lease payments unpaid at the commencement date. Lease payments are
discounted using the incremental borrowing rate (being the rate
that the lessee would have to pay to borrow the funds necessary to
obtain an asset of similar value in a similar economic environment
with similar terms and conditions) unless the rate implicit in the
lease is available. The Group currently uses the rate implicit in
the lease as the discount rate for all leases. For the purposes of
measuring the lease liability, lease payments comprise fixed
payments.
Right-of-use assets are measured at cost, which comprises the
initial measurement of the lease liability, plus any lease payments
made prior to lease commencement, initial direct costs incurred and
the estimated cost of restoration or decommissioning, less any
lease incentives received. The right-of-use assets is depreciated
on a straight-line basis over their expected useful lives.
Right-of-use assets are subject to an impairment test if events and
circumstances indicate that the carrying value may exceed the
recoverable amount.
Lease repayments made are allocated to capital repayment and
interest so as to produce a constant periodic rate of interest on
the remaining lease liability balance.
Right-of-use assets are presented within property, plant, and
equipment. Lease liabilities are presented within borrowings and
leases. In the cash flow statement, lease repayments (both the
principal and interest portion) are presented within cash used in
financing activities, except for payments for leases of short-term
and low-value assets and variable lease payments, which are
presented within cash flows from operating activities.
Leases of low-value items (such as office equipment) and
short-term leases (where the lease term is 12 months or less) are
expensed on a straight-line basis to the consolidated statement of
comprehensive income.
Inventory
Inventories comprise oil and gas in tanks and field parts and
supplies, all of which are stated at the lower of production cost
(including royalties, depletion and amortisation of plant,
property, and equipment), and net realisable value. Net realisable
value is the estimated selling price in the ordinary course of
business less marketing costs. The cost of inventory is expensed in
the period in which the related revenue is recognised.
Equity
Equity instruments issued by the Company are usually recorded at
the proceeds received, net of direct issue costs, and allocated
between called up share capital and share premium accounts as
appropriate.
Foreign currency
Transactions denominated in currencies other than functional
currency are translated at the exchange rate ruling at the date of
the transaction. Monetary assets and liabilities denominated in
foreign currencies are re-translated at the rate of exchange ruling
at the balance sheet date. All differences that arise are recorded
in the consolidated statement of comprehensive income. The
functional currency of the Company is GBP, and the Group results
and financial position are presented in GBP.
For the purpose of presenting consolidated financial statements,
the assets and liabilities of the Group's foreign operations are
translated at exchange rates prevailing on the reporting date.
Income and expense items are translated at the average exchange
rates for the period, unless exchange rates fluctuate significantly
during that period, in which case the exchange rates at the date of
transactions are used. Exchange differences arising, if any, are
recognised in other comprehensive income and accumulated in a
separate component of equity (attributed to non -- controlling
interests as appropriate).
Taxation
Tax is recognised in profit or loss, except to the extent that
it relates to items recognised in other comprehensive income or
directly in equity. In this case, the tax is also recognised in
other comprehensive income or directly in equity respectively.
Deferred tax is accounted for using the balance sheet liability
method in respect of temporary differences arising from differences
between the carrying amount of assets and liabilities in the
financial statements and the corresponding tax bases used in the
computation of taxable profit. However, deferred tax liabilities
are not recognised if they arise from the initial recognition of
goodwill; deferred tax is not accounted for if it arises from
initial recognition of an asset or liability in a transaction other
than a business combination that at the time of the transaction
affects neither accounting nor taxable profit or loss.
In principle, deferred tax liabilities are recognised for all
taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profit
will be available against which deductible temporary differences
can be utilised.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries and associates,
and interests in joint ventures, except where the Company is able
to control the reversal of the temporary difference and it is
probable that the temporary difference will not reverse in the
foreseeable future.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred tax assets and
liabilities relate to taxes levied by the same taxation authority
on either the same taxable entity or different taxable entities
where there is an intention to settle the balances on a net
basis.
Deferred tax is calculated at the tax rates that are expected to
apply to the period when the asset is realised or the liability is
settled. Deferred tax assets and liabilities are not
discounted.
Intangible assets - Exploration and evaluation expenditures
(E&E)
Development expenditure
Expenditure on the construction, installation, and completion of
infrastructure facilities such as platforms, pipelines and the
drilling of development wells, including service, is capitalised
initially within intangible fixed assets and when the well has
formally commenced commercial production, then it is transferred to
property, plant and equipment and is depreciated from the
commencement of production as described in the accounting policy
for property, plant and equipment.
Drilling costs and intangible licences
The Group applies the successful efforts method of accounting
for oil and gas assets, having regard to the requirements of IFRS 6
'Exploration for and Evaluation of Mineral Resources'. Costs
incurred prior to obtaining the legal rights to explore an area are
expensed immediately to the consolidated statement of comprehensive
income.
Expenditure incurred on the acquisition of a licence interest is
initially capitalised within intangible assets on a field-by-field
basis. Costs are held, unamortised, within Petroleum mineral leases
until such time as the exploration phase of the field area is
complete or commercial reserves have been discovered. The cost of
the licence is subsequently transferred into property, plant and
equipment and depreciated over its estimated useful economic
life.
Exploration expenditure incurred in the process of determining
exploration targets is capitalised initially within intangible
assets as drilling costs. Drilling costs are initially capitalised
on a well-by-well basis until the success or otherwise has been
established. Drilling costs are written off on completion of a well
unless the results indicate that hydrocarbon reserves exist and
there is a reasonable prospect that these reserves are commercially
viable. Drilling costs are subsequently transferred into 'Drilling
expenditure' within property, plant and equipment and depreciated
over their estimated useful economic life.
Impairment
The Group assesses at each reporting date whether there is an
indication that an asset may be impaired. This includes
consideration of the IFRS 6 impairment indicators for any
intangible exploration and evaluation expenditure capitalised as
intangible assets. Examples of indicators of impairment include
whether:
(a) the period for which the entity has the right to explore in
the specific area has expired during the period or will expire in
the near future and is not expected to be renewed.
(b) substantive expenditure on further exploration for and
evaluation of mineral resources in the specific area is neither
budgeted nor planned.
(c) exploration for and evaluation of mineral resources in the
specific area have not led to the discovery of commercially viable
quantities of mineral resources and the entity has decided to
discontinue such activities in the specific area.
(d) sufficient data exist to indicate that, although a
development in the specific area is likely to proceed, the carrying
amount of the exploration and evaluation asset is unlikely to be
recovered in full from successful development or by sale.
If any such indication exists, or when annual impairment testing
for an asset is required, the Group makes an estimate of the
asset's recoverable amount, which is the higher of its fair value
less costs to sell and its value in use. Any impairment identified
is recorded in the consolidated statement of comprehensive
income.
Property, plant and equipment
Oil and gas assets - cost
Oil and gas assets are accumulated generally on a cost
generating unit (CGU) basis and represent the cost of developing
the commercial reserves discovered and bringing them into
production, together with the intangible exploration and evaluation
asset expenditures incurred in finding commercial reserves
transferred from intangible exploration and evaluation assets. The
cost of oil and gas properties also includes the cost of directly
attributable overheads, borrowing costs capitalised and the cost of
recognising provision for future restoration and
decommissioning.
Oil and gas assets - depreciation and depletion
Oil properties, including certain related pipelines, are
depreciated using a unit-of-production method. The cost of
producing wells is amortised over proved plus probable reserves.
Licence acquisition, common facilities and future decommissioning
costs are amortised over total proved plus probable reserves. The
unit-of-production rate for the depreciation of common facilities
takes into account expenditures incurred to date, together with
estimated future capital expenditure expected to be incurred
relating to as yet undeveloped reserves expected to be processed
through these common facilities.
Oil and gas assets - impairment
An impairment test is performed whenever events and
circumstances arising during the development or production phase
indicate that the carrying value of an oil and gas property may
exceed its recoverable amount.
The carrying value is compared against the expected recoverable
amount of the asset, generally by reference to the present value of
the future net cash flows expected to be derived from production of
commercial reserves. The cash-generating unit applied for
impairment test purposes is generally the field, except that a
number of field interests may be grouped as a single
cash-generating unit where the cash inflows of each field are
interdependent.
Any impairment identified is charged to the statement of
comprehensive income. Where conditions giving rise to impairment
subsequently being reversed, the effect of the impairment charge is
also reversed as a credit to the statement of comprehensive income,
net of any depletion that would have been charged since the
impairment.
Non-oil and gas assets
Property, plant and equipment is stated at cost less accumulated
depreciation and any accumulated impairment losses. Depreciation is
provided on all property, plant, and equipment to write off the
cost less estimated residual value of each asset over its expected
useful economic life on a straight-line basis at the following
annual rates:
-- Office equipment - 20% or straight line over the life of the
equipment, whichever is the lesser
-- Field equipment - between 5% and 25%
All assets are subject to annual impairment reviews where
indicators of impairment are present.
Property, plant, and equipment - disposals
An item of property, plant and equipment is derecognised upon
disposal or when no future economic benefits are expected to arise
from the continued use of the asset. The gain or loss arising on
the disposal or retirement of an asset is determined as the
difference between the sales proceeds and the carrying amount of
the asset and is recognised in profit or loss.
Decommissioning provision
Liabilities for decommissioning costs are recognised when the
Group has an obligation to plug and abandon a well, dismantle and
remove a facility or an item of plant and to restore the site on
which it is located, and when a reliable estimate of that liability
can be made. Where an obligation exists for a new facility or item
of plant, such as oil production or transportation facilities, this
liability will be recognised on construction or installation.
Similarly, where an obligation exists for a well, this liability is
recognised when it is drilled. An obligation for decommissioning
may also crystallise during the period of operation of a well,
facility or item of plant through a change in legislation or
through a decision to terminate operations; an obligation may also
arise in cases where an asset has been sold but the subsequent
owner is no longer able to fulfil its decommissioning obligations,
for example due to bankruptcy. The amount recognised is the present
value of the estimated future expenditure determined in accordance
with local conditions and requirements. The provision for the costs
of decommissioning wells, production facilities and pipelines at
the end of their economic lives is estimated using existing
technology, at future prices, depending on the expected timing of
the activity, and discounted using a risk-free rate.
An amount equivalent to the decommissioning provision is
recognised as part of the corresponding intangible asset (in the
case of an exploration or appraisal well) or property, plant, and
equipment. The decommissioning portion of the property, plant and
equipment is subsequently depreciated at the same rate as the rest
of the asset. Other than the unwinding of discount on or
utilisation of the provision, any change in the present value of
the estimated expenditure is reflected as an adjustment to the
provision and the corresponding asset where that asset is
generating or is expected to generate future economic benefits. If
government assistance is obtained to reduce the liability, the
carrying value of the decommissioning provision and the
corresponding E&E or PP&E asset are reduced by the
estimated amount of the extinguished liability.
Joint operations
The majority of the Group's exploration and production
activities are conducted jointly with others and, accordingly,
these consolidated financial statements reflect only the Group's
interest in such activities.
Revenue
Revenue from contracts with customers is recognised, net of
royalties, when or as the Group satisfies a performance obligation
by transferring control of a promised good or service to a
customer. The transfer of control of oil, natural gas, natural gas
liquids and petroleum, and other items usually coincides with title
passing to the customer and the customer taking physical
possession. The Group principally satisfies its performance
obligations at a point in time; the amounts of revenue recognised
relating to performance obligations satisfied over time are not
significant.
When, or as, a performance obligation is satisfied, the Group
recognises as revenue the amount of the transaction price that is
allocated to that performance obligation. The transaction price is
the amount of consideration to which the Group expects to be
entitled. The transaction price is allocated to the performance
obligations in the contract based on standalone selling prices of
the goods or services promised.
Contracts for the sale of commodities are typically priced by
reference to quoted prices. Revenue from term commodity contracts
is recognised based on the contractual pricing provisions for each
delivery. Certain of these contracts have pricing terms based on
prices at a point in time after delivery has been made. Revenue
from such contracts is initially recognised based on relevant
prices at the time of delivery and subsequently adjusted as
appropriate. All revenue from these contracts, both that recognised
at the time of delivery and that from post-delivery price
adjustments, is disclosed as revenue from contracts with
customers.
Royalty income is recognised as it accrues in accordance with
the terms of the overriding royalty agreements.
Processing income is recognised at the time the services are
rendered.
Finance income
Finance income consists of bank interest on cash and cash
equivalents which is recognised as accruing on a straight-line
basis, over the period of the deposit.
Share-based payments
Equity-settled share-based payments to employees and others
providing similar services are measured at the fair value of the
equity instruments at the grant date. The fair value excludes the
effect of non-market-based vesting conditions.
The fair value determined at the grant date of the
equity-settled share-based payments is expensed on a straight-line
basis over the vesting period, based on the Company's estimate of
equity instruments that will eventually vest. At each balance sheet
date, the Company revises its estimate of the number of equity
instruments expected to vest as a result of the effect of
non-market-based vesting conditions. The impact of the revision of
the original estimates, if any, is recognised in profit or loss
such that the cumulative expense reflects the revised estimate,
with a corresponding adjustment to equity reserves. When
non-employee share options or warrants are exercised, the initial
fair value ascribed to the instruments and recorded as a reserve is
reclassified to share premium.
Business combinations
Acquisitions of business are accounted for using the acquisition
method. The consideration transferred in a business combination is
measured at fair value, which is calculated as the sum of the
acquisition -- date fair values of assets transferred by the Group,
liabilities incurred by the Group to the former owners of the
acquiree and the equity interest issued by the Group in exchange
for control of the acquiree. Acquisition -- related costs are
recognised in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired, and
the liabilities assumed are recognised at their fair value at the
acquisition date.
Goodwill is measured as the excess of the sum of the
consideration transferred, the amount of any non -- controlling
interests in the acquiree, and the fair value of the acquirers
previously held equity interest in the acquiree (if any) over the
net of the acquisition -- date amounts of the identifiable assets
acquired, and the liabilities assumed. If, after reassessment, the
net of the acquisition -- date amounts of the identifiable assets
acquired and liabilities assumed exceeds the sum of the
consideration transferred, the amount of any non -- controlling
interests in the acquiree and the fair value of the acquirers
previously held interest in the acquiree (if any), the excess is
recognised immediately in profit or loss as a bargain purchase
gain.
Segmental reporting
In the opinion of the Board of Directors, being the Chief
Operating Decision Maker, the Group has one class of business,
being the exploration for, and the development and production of,
oil and has reserves and other related activities. The Group's
primary reporting format is determined to be the geographical
segment according to the location of the oil and gas asset,
currently Canada and UK / Corporate.
Changes in accounting standards
The standards which applied for the first time this year have
been adopted and have not had a material impact.
Standards which are in issue but not yet effective:
At the date of authorisation of these financial statements, the
following Standards and Interpretation, which have not yet been
applied in these financial statements, were in issue but not yet
effective. The Group does not anticipate they will have a material
impact.
Standard Description Effective date for
Interpretation annual accounting period
beginning on or after
--------------- ----------------------------------------- -------------------------
IAS 1 Amendments - Presentation of Financial 1 January 2023
Statements and IFRS Practice Statement
2: Disclosure of Accounting Policies
IAS 8 Amendments - Accounting Policies, Changes 1 January 2023
in Accounting Estimates and Errors
- Definition of Accounting Estimates
IAS 12 Amendments - Income Tax - Deferred 1 January 2023
Tax related to Assets and Liabilities
arising from a Single Transaction
IFRS 16 Amendments - Lease Liability in a Sale TBC
and Leaseback
--------------- ----------------------------------------- -------------------------
The Group has not early adopted any of the above standards and
intends to adopt them when they become effective.
Critical accounting judgements and key sources of estimation
uncertainty
The preparation of financial statements using accounting
policies consistent with IFRS requires the Directors to make
estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and
liabilities and the reported amounts of income and expenses. The
preparation of financial statements also requires the Directors to
exercise judgement in the process of applying the accounting
policies. Changes in estimates, assumptions and judgements can have
a significant impact on the financial statements.
Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised
prospectively from the period in which the estimates are
revised.
Critical Accounting Judgements
The following are critical judgements, apart from those
involving estimations (which are presented separately below), that
the Directors have made in the process of applying the Group's
accounting policies and that have the most significant effect on
the amounts recognises in the financial statements.
Carrying value of intangible exploration and evaluation
assets
At 31 December 2022, the Group held oil and gas E&E assets
of GBP62.1 million (2020: GBP49.8 million), note 13 . The carrying
value of E&E assets are assessed for impairment when there is
an indication that the asset may be impaired. In making this
judgement the Management considers the indicators of impairment in
the intangible exploration and evaluation asset accounting policies
set out above. For its UK assets, management has considered the
well result at the 13/23c-12 Serenity appraisal well to represent
an indicator of impairment and has made an estimate of the asset's
recoverable amount. Further discussion is provided in note 13 .
For its Canada assets, management has considered the recency of
the land purchases, budgeted spend, the plans to further appraise
the Clearwater play and the fact that there is no observable data
which would suggest that the carrying value of Clearwater play
exceeds that of its value from successful development or sale, and
have concluded that no indicators of impairment are present.
Carrying value of property, plant and equipment - oil and gas
assets
At 31 December 2022, the Group held oil and gas PP&E assets
of GBP236.5 million (2021: GBP224.1 million), note 12 . These
assets are subject to an annual impairment assessment under IAS 36
'Impairment of assets' whereby management is first required to
consider if there are any indicators of impairment, and if so,
management is then required to estimate the asset's recoverable
amounts. The judgement over indicators of impairment considers
several internal and external factors, including changes in
estimated commercial reserves, changes in oil prices, and changes
in expected future operating and capital expenditure,
decommissioning expenditure, the NPV10 of 2P reserves per the 31
December 2022 independent competent person's report, and increases
in cost of capital which may indicate a higher discount rate is
likely required in assessing the asset's recoverable amount. There
is also judgement in defining the Group's cash-generating units,
which is the smallest identifiable group of assets that generates
cash inflows that are largely independent of the cash inflows from
other assets or group of assets. After considering the above,
Management has concluded that there were no indicators of
impairment of oil and gas PP&E assets as at 31 December
2022.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources
of estimation uncertainty at the reporting period that may have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year,
are discussed below.
Estimated future cash flows for intangible exploration and
evaluation assets for impairment testing
The Group assesses at each reporting date whether there is an
indication that an asset may be impaired. If any such indication
exists, or when annual impairment testing for an asset is required,
the Group makes an estimate of the asset's recoverable amount,
which is the higher of its fair value less costs to sell and its
value in use. As discussed in note 13 , management considered the
results of the 13/23c-12 Serenity appraisal well to represent an
indicator of impairment and has made an estimate of the asset's
recoverable amount based on value in use using a discounted cash
flow model of a one well development of the Serenity field. A one
well development is dependent on access to infrastructure at
neighbouring fields which may not become available to the
Group.
The discounted cash flow model required management to make
assumptions about future production profiles, Brent pricing,
capital, operating and abandonment costs, and the discount rate
applied. The most difficult, subjective, or complex assumptions
include the Brent pricing and the discount rate applied. The Brent
pricing assumption ranges from $80-$95 over the life of a one well
development of the Serenity field and is based on an average of
price decks obtained from the Group's brokers, advisors, and the
Group's reserves engineers. The discount rate of 10% is based on
the risk profile of similar assets in the UKCS. Management has
considered several downside scenarios on these assumptions.
Decreasing the Brent pricing assumption by 5% or increasing the
discount rate to 13% would not have resulted in an impairment
individually but would have resulted in an impairment if
aggregated. It is reasonably possible that changes to these
assumptions within the next financial year could require a material
adjustment to the Group's intangible exploration and evaluation
assets.
Commercial hydrocarbon reserves estimates
Commercial hydrocarbon reserves are those that can be
economically extracted from the Group's oil and gas assets. These
estimates are based on information compiled by independent
qualified persons, GLJ Ltd., as at 31 December 2022 and 31 December
2021 and consider a number of factors, including assumptions about
future commodity prices, production rates, operating costs,
exchange rates, and various geological and geophysical technical
factors to model reservoir size, quality, and extractability.
Reserve estimates may change from period to period. Changes to
reserves estimates may have a material impact on the depletion
charge for oil and gas PP&E assets, the decommissioning
provision, the carrying value of deferred tax assets, and the
Group's conclusions around indicators of impairment for oil and gas
PP&E assets. The reserve reports are available at
https://i3.energy/ .
The Group estimates it commenced the year with 154.1 MMboe of
proved plus probable reserves. A 2.0 MMboe increase/decrease to
this estimate would have decreased/increased the oil and gas
depletion charge for the period by GBP458 thousand,
respectively.
Decommissioning costs
At 31 December 2022 the Group had recorded a decommissioning
provision of GBP93.3 million (2021: GBP125.5 million). In
estimating the amount of the provision, Management makes various
assumptions around costs, time to abandonment and inflation rates,
which are discounted at long term government bond rates, see note
17 .
The most difficult, subjective, or complex assumptions include
the inflation rate and the discount rate, which have been selected
based on market rates published by the Bank of Canada. A 0.5%
increase/decrease in the inflation rate would have
increased/decreased the decommissioning provision by GBP12.4
million and GBP10.5 million, respectively. A 0.5% increase/decrease
in the discount rate would have decreased/increased the
decommissioning provision by GBP10.3 million and GBP12.3 million,
respectively.
Recognition and measurement of deferred tax assets
At 31 December 2022, the Group held deferred tax liabilities of
GBP11.7 million (2021: GBP7.5 million) which result from temporary
differences at the Group's Canadian operations. This liability has
been reduced by certain deferred tax assets from deductible
temporary differences at the Group's Canadian operations. In
accordance with IAS 12 'Income Taxes', deferred tax assets shall be
recognised for all deductible temporary differences to the extent
that it is probable that taxable profit will be available against
which the deductible temporary difference can be utilised. The
Group has generated positive cash flows and profits from its
Canadian operations in 2022 and expects to continue to do so in the
future. Management has applied judgement in determining the extent
to which it is probable that taxable profits will be available
based on estimates of future profits, which include estimates of
commercial reserves, oil, gas and NGL prices, operating and capital
expenditure, and decommissioning expenditure. If future taxable
profits differ from these estimates, the deferred tax asset
associated with these deductible temporary differences could be
derecognised and result in a deferred tax charge to the
consolidated statement of comprehensive income.
4 (Loss) / gain on bargain purchase and asset dispositions
The gain on bargain purchase and asset dispositions as per the
consolidated statement of comprehensive income is as follows:
2022 2021
GBP'000 GBP'000
-------------------------------------- -------- --------
Gain on bargain purchase - 24,262
(Loss) / gain on asset dispositions (9) 751
(Loss) / gain on bargain purchase and
asset dispositions (9) 25,013
====================================== ======== ========
The loss in 2022 relates to purchase price adjustments on asset
dispositions completed in the prior year.
5 Segmental reporting
The Chief Operating Decision Maker (CODM) is the Board of
Directors. They consider that the Group operates as two segments,
as follows:
-- UK / Corporate - That of Corporate activities in the UK and
oil and gas exploration, appraisal and development on the UKCS.
-- Canada - That of oil and gas production in the WCSB.
Such components are identified on the basis of internal reports
that the Board reviews regularly.
The following is an analysis of the Group's revenue and results
by reportable segment in 2022:
UK / Corporate Canada Total
GBP'000 GBP'000 GBP'000
---------------------------------- -------------- -------- --------
Revenue - 208,436 208,436
Production costs - (76,418) (76,418)
Loss on risk management contracts - (18,990) (18,990)
Depreciation and depletion (4) (34,335) (34,339)
---------------------------------- -------------- -------- --------
Gross (loss) / profit (4) 78,693 78,689
Administrative expenses (6,821) (8,217) (15,038)
Acquisition costs - - -
(Loss) on bargain purchase
and asset dispositions - (9) (9)
---------------------------------- -------------- -------- --------
Operating (loss) / profit (6,825) 70,467 63,642
Finance costs (5,179) (2,686) (7,865)
---------------------------------- -------------- -------- --------
(Loss) / profit before tax (12,004) 67,781 55,777
Tax (charge) / credit for
the year - (13,826) (13,826)
---------------------------------- -------------- -------- --------
(Loss) / profit for the year (12,004) 53,955 41,951
================================== ============== ======== ========
The following is an analysis of the Group's revenue and results
by reportable segment in 2021:
UK / Corporate Canada Total
GBP'000 GBP'000 GBP'000
---------------------------------- -------------- -------- --------
Revenue - 86,763 86,763
Production costs - (37,945) (37,945)
Loss on risk management contracts - (5,485) (5,485)
Depreciation and depletion (4) (21,639) (21,643)
---------------------------------- -------------- -------- --------
Gross (loss) / profit (4) 21,694 21,690
Administrative expenses (7,059) (6,035) (13,094)
Acquisition costs - (256) (256)
Gain on bargain purchase and
asset dispositions - 25,013 25,013
---------------------------------- -------------- -------- --------
Operating (loss) / profit (7,063) 40,416 33,353
Finance costs (5,930) (1,679) (7,609)
---------------------------------- -------------- -------- --------
(Loss) / profit before tax (12,993) 38,737 25,744
Tax (charge) / credit for
the year 487 (1,148) (661)
---------------------------------- -------------- -------- --------
(Loss) / profit for the year (12,506) 37,589 25,083
================================== ============== ======== ========
The following is an analysis of the Group's assets and
liabilities by reportable segment as at 31 December 2022 and the
capital expenditure for the year then ended:
UK / Corporate Canada Total
GBP'000 GBP'000 GBP'000
--------------------------- -------------- --------- ---------
Total assets 57,500 295,712 353,212
Total liabilities (30,166) (158,300) (188,466)
Capital expenditure - E&E 5,650 6,677 12,327
Capital expenditure - PP&E - 75,793 75,793
The following is an analysis of the Group's assets and
liabilities by reportable segment as at 31 December 2021 and the
capital expenditure for the year then ended:
UK / Corporate Canada Total
GBP'000 GBP'000 GBP'000
--------------------------- -------------- --------- ---------
Total assets 50,129 266,161 316,290
Total liabilities (25,733) (152,391) (178,124)
Capital expenditure - E&E 1,010 - 1,010
Capital expenditure - PP&E - 11,184 11,184
6 Revenue
All revenue is derived from contracts with customers and is
comprised of the sale of oil and gas and processing income, net of
royalties, as follows:
2022 2021
GBP'000 GBP'000
------------------------------------- ---------------------- --------
Oil and condensate 113,003 40,829
Natural gas liquids 40,142 19,107
Natural gas 77,656 34,134
Royalty interest 4,890 1,951
------------------------------------- ---------------------- --------
Oil and gas sales 235,691 96,021
Royalties (33,536) (12,094)
------------------------------------- ---------------------- --------
Revenue from the sale of oil and gas 202,155 83,927
Processing income 5,995 2,605
Other operating income 286 231
------------------------------------- ---------------------- --------
Total revenue 208,436 86,763
===================================== ====================== ========
All revenue is from the Group's Canadian operations. Revenue
from the sale of oil and natural gas liquids is recognised at the
point in time when title transfers to the purchaser. Processing
income is recognised at the time the service is rendered.
During the year ended 31 December 2022, three (2021: four)
customers individually totalled more than 10% of total revenues,
totalling 81% (2021: 79%) in aggregate and 35%, 25%, and 21%,
individually (2021: 25%, 20%, 19%, and 15%).
7 Administrative expenses
2022 2021
GBP'000 GBP'000
------------------------------ ---------------------- --------
Directors' fees 323 300
Employee costs* 9,982 8,503
Professional fees** 1,830 1,728
Other 2,285 2,448
Realised FX loss 505 269
Unrealised FX loss / (gain) 113 (154)
Total administrative expenses 15,038 13,094
============================== ====================== ========
* Group staff costs comprised:
2022 2021
GBP'000 GBP'000
--------------------------------------------- ---------------------- --------
Wages, salaries, and benefits 11,602 6,027
Social security costs 1,189 336
Other pension costs 304 254
Share-based payments expense - employees
(including NEDs) 1,092 3,217
--------------------------------------------- ---------------------- --------
Total staff costs 14,187 9,834
Capitalised salaries and overhead recoveries (4,205) (1,331)
--------------------------------------------- ---------------------- --------
Charge to the profit or loss 9,982 8,503
============================================= ====================== ========
i3 Energy plc had an average of two staff during the year ended
31 December 2022 (2021: Nil) and paid GBP1,050 thousand of wages,
salaries and benefits and GBP137 thousand of social security costs
(2021: Nil). The Non-Executive Directors of the Group are not
considered staff, and their remuneration is disclosed in note 10
.
The average number of persons employed by the Group, including
Executive Directors, was:
Average number of persons employed 2022 Number 2021 Number
------------------------------------ ------------ ------------
Operations 31 29
Corporate and administration 25 18
------------------------------------ ------------ ------------
Total 56 47
==================================== ============ ============
** Included within professional fees are fees payable to the
Company's auditor and its associates for the following:
2022 2021
GBP'000 GBP'000
------------------------------------------- -------- --------
Audit services
The audit of the Company's annual accounts 130 120
The audit of the Company's subsidiaries - -
------------------------------------------- -------- --------
Total audit fees 130 120
Advisory on certain employment matters 1 -
Procedures related to the Group's interim
financial statements 3 -
-------------------------------------------
Total 134 120
=========================================== ======== ========
8 Finance costs
2022 2021
GBP'000 GBP'000
----------------------------------------- -------- --------
Accretion of loan notes ( note 16 ) 3,386 2,824
PIK interest expense on loan notes (
note 16 ) - 3,144
Cash interest expense on loan notes
( note 16 ) 2,309 -
Stock-based compensation - warrants
( note 20 ) - 451
Unwinding of discount on decommissioning
provision ( note 17 ) 2,667 1,539
Bank charges and interest on creditors 21 374
(Gain) / loss on financial instrument
at FVTPL ( note 15 ) (518) (723)
----------------------------------------- -------- --------
Total finance costs 7,865 7,609
========================================= ======== ========
9 Taxation
Taxation credit
The below table reconciles the tax charge for the year to the
profit before tax per the consolidated statement of comprehensive
income.
2022 2021
GBP'000 GBP'000
* Restated
Profit before income tax 55,777 25,744
Rate of Corporate Tax in Canada 23% 23%
--------------------------------------- --------- ------------
Expected tax charge 12,829 5,921
Effects of:
Interest and other not deductible for
SCT or EPL 1,993 620
Permanent differences 1,213 (3,804)
Foreign tax rate difference (5,041) (2,208)
Change in estimated pool balances 22 179
Derecognition of deferred tax asset 2,810 440
R&D tax credit received - (487)
--------------------------------------- --------- ------------
Total income tax charge 13,826 661
======================================= ========= ============
* Canada is the only jurisdiction where the Group produces oil
and gas, generates taxable income, and records a current and
deferred tax charge. As such, the Group elected to change the tax
rate in reconciliation of the tax charge to 23% in 2022, the
combined corporate rate of taxation in Canada. The comparative
period has been restated on the same basis. The total income tax
charge was unimpacted in both periods, with the only changes being
to the 'Expected tax charge' and the 'Foreign tax rate difference'
lines in the reconciliation above. The difference on foreign tax
rate results from the difference between 65% overall tax rate in
the UK and the 23% tax rate used in the reconciliation.
Of which: 2022 2021
GBP'000 GBP'000
Current tax charge / (credit) 10,002 (487)
Deferred tax charge 3,824 1,148
------------------------------- --------- ---------
Total income tax charge 13,826 661
=============================== ========= =========
The current tax charge of GBP10,002 thousand in 2022 resulted
from taxable income in the Group's Canadian subsidiary, i3 Energy
Canada Limited, which is payable in the first half of 2023. The
current tax credit of GBP487 thousand in 2021 resulted from the
receipt of R&D tax refunds in the UK in respect of the 2019
fiscal year.
In 2022 the Energy Profits Levy (EPL) was introduced at a rate
of 25% with effect from 26 May 2022. This, along with the Ring
Fence Corporation Tax (RFCT) at 30% and the Supplementary Charge
(SCT) of 10% brings the overall tax rate in the UK to 65%. The EPL
increased to a rate of 35% effective 1 January 2023 which will
bring the overall tax rate in the UK to 75%. The EPL will remain in
effect until 31 March 2028. The Group will not be impacted by the
increase until such time as taxable profits are generated in the
UK. The combined corporate rate of taxation in Canada remained
unchanged at 23%.
Deferred tax
The components of the net deferred tax asset and the movement
during the year is summarised as follows:
At 31 Acquired Recognised FX movement At 31 December
December during in income 2022
2021 the year
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- --------- --------- ---------- ----------- --------------
UK:
Deferred tax assets:
Losses 28,711 - 8,809 - 37,520
Valuation allowance (8,782) - (6,341) - (15,123)
Deferred tax liabilities:
PP&E (19,929) - (2,468) - (22,397)
--------- --------- ---------- ----------- --------------
Net deferred tax - - - - -
asset
Canada:
Deferred tax assets:
Decommissioning provision 28,870 - (9,088) 1,684 21,466
Losses 2,416 - (2,579) 163 -
Risk management contracts 25 - (197) 4 (168)
Other 207 - 16 11 234
Valuation allowance (5,639) - 1,788 (329) (4,180)
Deferred tax liabilities:
PP&E (33,365) - 6,236 (1,890) (29,019)
--------- --------- ---------- ----------- --------------
Net deferred tax
liability (7,486) - (3,824) (357) (11,667)
Net deferred tax
asset / (liability) (7,486) - (3,824) (357) (11,667)
========= ========= ========== =========== ==============
A deferred tax asset has not been recognised in respect of tax
losses and allowances in the UK due to uncertainty over the
availability of future taxable profits in the UK to offset these
losses against.
The Group recognised a net deferred tax liability through a
deferred tax charge of GBP3,824 thousand for changes in net
deductible temporary differences in the year and GBP357 thousand
for FX movements during the year. The deferred tax liability has
been partially offset by a deferred tax asset which has been
recognised in Canada to the extent that the Group anticipates
probable future taxable profits to against which the assets can be
utilised.
The Group's estimated tax pools are summarised in the following
table. The non-capital tax loss pools in Canada expire over a
period of 20 years. All other tax pools do not expire.
31 December 31 December
2022 2021
GBP'000 GBP'000
---------------------------------------------- ----------- -----------
UK:
Taxable losses 38,927 29,325
Mineral extraction allowances 52,466 49,819
---------------------------------------------- ----------- -----------
Total 91,393 79,144
Canada:
Canadian exploration expense (CEE, deductible
at 100% p.a.) 1,623 3,107
Canadian development expense (CDE, deductible
at 30% p.a.) 37,870 7,519
Canadian oil and gas property expense
(COGPE, deductible at 10% p.a.) 58,478 56,391
Undepreciated capital cost (UCC, deductible
at 25% p.a.) 18,867 11,991
Non-capital losses (NCL, deductible
at 100% p.a.) - 10,503
Other (deductible at various rates p.a.) 1,019 833
---------------------------------------------- ----------- -----------
Total 117,857 90,344
============================================== =========== ===========
10 Directors' remuneration
Salary / Bonus Share based Total
Fees payments
GBP'000 GBP'000 GBP'000 GBP'000
---------------------- -------- ------- ----------- -------
2022
Executive Directors
Majid Shafiq 487 833 3,507 4,827
Graham Heath 702 668 2,596 3,966
Ryan Heath 295 535 2,511 3,341
Non-Executive
Directors
Neill Carson 68 - 227 295
Richard Ames 68 - 227 295
Linda Beal 106 - 117 223
John Festival 81 - 223 304
---------------------- -------- ------- ----------- -------
Total 1,807 2,036 9,408 13,251
====================== ======== ======= =========== =======
Salary / Bonus Share based Total
2021 Fees payments
Executive Directors
Majid Shafiq 384 438 252 1,074
Graham Heath 319 358 156 833
Non-Executive
Directors
Neill Carson 60 - 51 111
Richard Ames 60 - 51 111
Linda Beal 120 - 45 165
John Festival 60 - 13 73
---------------------- -------- ------- ----------- -------
Total 1,003 796 568 2,367
====================== ======== ======= =========== =======
Share based payments represent the difference between the
exercise price and the market value of i3 shares on the date of
exercise, multiplied by the number of options exercised.
Included in Graham Heath Salary / Fees is a one-time
compensation for loss of office payment of GBP 417 thousand.
During the year the Company contributed GBP2 thousand to i3's
CEO's pension scheme (2021 - GBP2 thousand ).
11 Earnings per share
From continuing operations
Basic earnings or loss per share is calculated as profit/(loss)
for the year, adjusted to exclude any costs of servicing equity
(other than dividends), divided by the weighted average number of
ordinary shares, adjusted for any bonus element.
Diluted earnings or loss per share amounts are calculated by
dividing losses or profits for the year attributable to ordinary
equity holders of the parent by the weighted average number of
ordinary shares outstanding during the year, plus the weighted
average number of shares that would be issued on the conversion of
dilutive potential ordinary shares into ordinary shares.
The calculation of the basic and diluted earnings per share is
based on the following data:
Year Ended Year Ended
31 December 31 December
2022 2021
--------------------------------------- ------------- ------------
Earnings
Earnings for the purposes of basic and
diluted earnings per share being net
profit attributable to owners of i3
Energy (GBP'000) 41,951 25,083
Weighted average number of shares
Weighted average number of Ordinary
Shares - basic 1,164,210,976 883,664,352
Effect of dilutive potential ordinary
shares:
Share options 51,089,073 49,369,708
Warrants 9,048,113 32,758,752
--------------------------------------- ------------- ------------
Weighted average number of Ordinary
Shares - diluted 1,224,348,162 965,792,812
Basic earnings per share (pence) 3.60 2.84
Diluted earnings per share (pence) 3.43 2.60
In 2021, prior to the BHGE warrant repricing on 17 May 2021,
these instruments were anti-dilutive as their exercise price exceed
the average market price of the Ordinary Shares over this period.
Concurrent with their repricing the BHGE warrants were immediately
exercised for ordinary shares. The BHGE shares were therefore
included in the basic weighted average number of Ordinary Shares
from 17 May 2021 but were not further included in the effect of
dilutive potential ordinary shares.
12 Property, plant, and equipment
Oil and Right of Other fixed Total
gas assets use assets assets
------------------ ---------------------- ----------------------- ------------------------- ----------------------
Cost
As at 1 January
2021 113,193 108 22 113,323
Acquisitions 122,762 - - 122,762
Additions 11,184 - 50 11,234
Disposals (8,242) - - (8,242)
Changes to
decommissioning
estimates
( note 17 ) 7,603 - - 7,603
Decommissioning
settlements under
SRP and ASCP (
note 17 ) (324) - - (324)
Exchange movement 3,857 1 - 3,858
As at 31 December
2021 250,033 109 72 250,214
Acquisitions 1,653 - - 1,653
Additions 75,793 - 21 75,814
Disposals (1,386) (28) - (1,414)
Changes to
decommissioning
estimates
( note 17 ) (40,233) - - (40,233)
Decommissioning
settlements under
SRP and ASCP (
note 17 ) (731) - - (731)
Transfer between
asset classes - (88) 88 -
Exchange movement 12,585 7 3 12,595
------------------ ---------------------- ----------------------- ------------------------- ----------------------
As at 31 December
2022 297,714 - 184 297,898
Accumulated
depreciation and
depletion
As at 1 January
2021 (4,789) (6) (19) (4,814)
Charge for the
year (21,611) (27) (5) (21,643)
Disposals 481 - - 481
Exchange movement (158) - - (158)
------------------ ---------------------- ----------------------- ------------------------- ----------------------
As at 31 December
2021 (26,077) (33) (24) (26,134)
Charge for the
year (34,301) (17) (21) (34,339)
Disposals - 12 - 12
Transfer between
asset classes - 42 (42) -
Exchange movement (968) (4) - (972)
------------------ ---------------------- ----------------------- ------------------------- ----------------------
As at 31 December
2022 (61,346) - (87) (61,433)
Carrying amount at
31 December
2021 223,956 76 48 224,080
------------------ ---------------------- ----------------------- ------------------------- ----------------------
Carrying amount at
31 December
2022 236,368 - 97 236,465
================== ====================== ======================= ========================= ======================
13 Exploration and evaluation assets (Intangible)
Year Ended Year Ended
31 December 31 December
2022 2021
GBP'000 GBP'000
At start of year 49,819 48,809
Additions 12,327 1,010
Exchange movement (86) -
------------------ ------------ ------------
At end of year 62,060 49,819
================== ============ ============
Included within E&E assets is the Group's UK P.2358 Licence,
which commenced its four-year second term on 30 September 2020 and
contains the Serenity discovery and the Liberator West and Minor
High prospective areas.
In March 2022 the Group announced it had agreed farm-in terms
with Europa Oil & Gas Limited ("Europa") for a 25% working
interest ("WI") in Block 13/23c North (Licence P.2358) which
contains the Serenity discovery. Under the terms of the farmout,
Europa will fund 46.25% of the cost of the upcoming Serenity
appraisal well up to a gross capped well cost of GBP15 million. Any
well costs exceeding GBP15 million will be funded by the companies
in proportion to their respective working interests. The Farm-In
Agreement ("FIA") was signed in April 2022 and following the
fulfilment of all conditions precedent in the FIA, the transaction
closed in August 2022. Following this farm-out, i3 retains a 75% WI
in Block 13/23c North (Licence P.2358) and a 100% WI in Block
13/23c South (Licence P.2358), which contains the Minos High
Prospect and Liberator discovery.
In September 2022, the 13/23c-12 Serenity appraisal well was
spud and drilled to a total vertical depth of 5,630 ft below sea
level. The targeted Lower Cretaceous Captain sand, which contained
hydrocarbons in the 13/23c-10 well discovered in October 2019, was
not present at this location. Over 100 ft of other Captain sands in
various sequences were found but were water wet. The well was
plugged and abandoned. Management considers the well result to
represent an indicator of impairment and has made an estimate of
the asset's recoverable amount based of management's best estimate
of value in use using a discounted cash flow model of a one well
development of the Serenity field. The estimated recoverable amount
exceeded the carrying amount of the Group's UK E&E assets as at
31 December 2022, and accordingly no impairment was recognised.
Further discussion is provided in note 2 .
Also included within E&E assets are costs associated with
land purchases and a preliminary appraisal well in the Clearwater
play in Canada.
14 Trade and other receivables
31 December 31 December
2022 2021
GBP'000 GBP'000
---------------------------------- --------------------- -----------
Trade and accrued receivables 26,770 21,982
Joint venture receivables 5,563 1,483
Prepayments & other receivables 2,510 2,038
---------------------------------- --------------------- -----------
Total trade and other receivables 34,843 25,503
================================== ===================== ===========
Trade and accrued receivables are all due within one year.
Joint venture receivables represent amounts due from operating
partners for operating and capital activity in Canada and the
UK.
The fair value of trade and other receivables is the same as
their carrying values as stated above and they do not contain any
impaired assets.
The maximum exposure to credit risk at the reporting date is the
carrying value of each class of receivable mentioned above. The
Group does not hold any collateral as security.
15 Trade and other payables
31 December 31 December
2022 2021
GBP'000 GBP'000
------------------------------- ----------- -----------
Trade creditors 15,383 5,169
Sales tax payable 378 65
Accruals 26,909 13,565
Dividends payable 2,040 -
Joint venture payables 1,263 910
Income taxes payable 9,873 -
-------------------------------
Total trade and other payables 55,846 19,709
=============================== =========== ===========
The average credit period taken for trade purchases is 60 days.
No interest is charged on the trade payables. The carrying values
of trade and other payables are considered to be a reasonable
approximation of the fair value and are considered by the Directors
as payable within one year.
Joint venture payables represent amounts due to operating
partners for operating and capital activity in Canada.
Non-current accounts payable
On 2 July 2019 the Group agreed with Baker Hughes, a GE Company,
and GE Oil & Gas Limited (collectively referred to as "BHGE"
hereafter) that GBP3,000 thousand of oilfield service and oilfield
equipment contract payments will not become payable until such time
as i3 has received its first sales revenues from Liberator Phase I.
This payable was previously recorded as a non-current accounts
payable.
On 17 May 2021, i3 announced that it had successfully
restructured legacy contracts and agreements for equipment, oil
field services, and warrants with BHGE. In summary, the remainder
of a GBP5.8 million contract for subsea trees and wellheads was
cancelled, 5,277,045 warrants had an exercise price reduction to
GBP0.0001 per share (the "Warrant Shares"), and an outstanding
contingent payment for GBP3.0 million ("Deferred Payment Invoice
Balance", or "DPIB") in oil field services and equipment that
becomes payable at such time as the Group receives consideration
from any sale or farm-down of its Serenity or Liberator assets will
be reduced by the exercise value of the Warrant Shares, the market
value of the Warrant Shares from time to time, all dividends
received by BHGE associated with the Warrant Shares, and certain
payments to be made to BHGE. The purpose of this restructuring was
to enable i3 to become a dividend payer, as certain conditions of
the abovementioned contracts prevented it from reducing its share
premium account - a required step in order for i3 to effect
dividend distributions to its shareholders. The incremental fair
value of the modified warrants was expensed in 2021 ( note 8 ).
In Q4 2022, the Group received consideration from the Serenity
farm-in in excess of the DPIB amount and the repayment was
triggered. The repayment amount of GBP1,270 thousand was calculated
as the GBP3.0 million payable amount, less the exercise value of
the Warrant Shares of GBP1 thousand, less cash payments of GBP487
thousand made in 2021 against the DPIB balance, less the Market
Value of the Warrant Shares of GBP1,161 thousand, which totals the
5,277,045 Warrant Shares as at the repayment date share price of
22.00p/share, less GBP81 thousand of dividends paid on the Warrant
Shares. The repayment amount was settled in cash in 2022 and the
liability was extinguished. The increase in i3's share price from
13.35p/share from 31 December 2021 to 22.00p/share at the repayment
date resulted in a non-cash gain in the value of the Warrant Share
which has been recorded in the consolidated statement of
comprehensive income within Finance Costs.
A reconciliation of the balance is as follows:
Year Ended Year Ended
31 December 31 December
2022 2021
GBP'000 GBP'000
--------------------------------------- ------------ ------------
At start of year 1,789 3,000
Exercise value of the Warrant Shares (1) (1)
Cash payments made during the year (1,270) (487)
Non-cash change in market value of the
Warrant Shares ( note 8 ) (518) (723)
---------------------------------------
At end of year - 1,789
======================================= ============ ============
31 December 31 December
2022 2021
GBP'000 GBP'000
--------------------------------------- ----------- -----------
Of which:
Current, within trade accounts payable - 1,232
Non-current - 557
---------------------------------------
Total - 1,789
======================================= =========== ===========
16 Borrowings
H1-2019 loan note facility
In May 2019, the Company completed a GBP22 million H1-2019 loan
note facility ("H1-2019 LN"). The H1-2019 LNs have a term of 4
years, maturing on 31 May 2023 and bearing interest, payable on a
quarterly basis at the Group's option (i) in cash at a rate of 8%
per annum, or (ii) in kind at a rate of 11% per annum by the
issuance of additional H1-2019 LNs. The Group elected to pay all
interest in kind prior to 2022, and in cash for all four quarters
in 2022.
The noteholders were granted warrants ("H1-2019 LN Warrants") in
the notional amount of GBP1 for each GBP1 of loan notes issued,
with H1-2019 Warrants being issued proportionately across three
series. The H1-2019 LN Warrants vested on the issue date and expire
4 years thereafter and can be exercised through either/or a
combination of a cash payment and/or surrender of H1-2019 LNs plus
accrued interest equal to the aggregate notional amount of the
H1-2019 LN Warrants being exercised. Each H1-2019 LN Warrant gives
the holder the right to convert the notional amount into such
number of shares as is derived by dividing the notional amount by
the exercise price. The following table outlines the terms of the
warrants as at their issuance date.
Notional Exercise Shares Share price Time to Value (
amount of price upon to be issued at issuance maturity GBP /share)
warrants issuance upon exercise ( GBP ) (years)
( GBP ) ( GBP /share) of warrants
Tranche
1 7,333,333 0.4070 18,018,018 0.39 4 0.2557
Tranche
2 7,333,333 0.4810 15,246,015 0.39 4 0.2435
Tranche
3 7,333,333 0.5550 13,213,213 0.39 4 0.2313
Total fair value of the Tranche 1, Tranche 2 and Tranche 3
warrants on issuance was GBP11,375 thousand and was bifurcated from
the debt contract and classified as equity. The H1-2019 LNs are
comprised of the following components: the debt contract, the
conversion feature, the interest rate payment option and the early
conversion feature (at the Group's option). At inception the debt
component was recorded at an estimated fair value of GBP10,625
thousand. The debt balance is unwound using the effective interest
rate method to the principal value at maturity with a corresponding
non-cash accretion charge to earnings.
Interest expense and accretion expense to 31 December 2022 was
GBP2,309 thousand and GBP3,386 thousand respectively.
Borrowings reconciliation
H1-2019 LN Leases Total
GBP'000 GBP'000 GBP'000
----------------------------- ---------- ------- -------
At 31 December 2020 17,887 99 17,986
Increase through interest
(non-cash) 3,144 2 3,146
Accretion expense (non-cash) 2,824 - 2,824
Lease payments (cash) - (30) (30)
Exchange movement (non-cash) - (2) (2)
-----------------------------
At 31 December 2021 23,855 69 23,924
Increase through interest
(non-cash) 2,309 1 2,310
Accretion expense (non-cash) 3,386 - 3,386
Lease and interest payments
(cash) (2,309) (74) (2,383)
Exchange movement (non-cash) - 4 4
----------------------------- ---------- ------- -------
At 31 December 2022 27,241 - 27,241
============================= ========== ======= =======
The classification as at 31 December 2022 is as follows:
H1-2019 LN Leases Total
GBP'000 GBP'000 GBP'000
-------------------- ---------- ------- -------
Of which:
Current 27,241 - 27,241
Non-current - - -
-------------------- ---------- ------- -------
At 31 December 2022 27,241 - 27,241
==================== ========== ======= =======
The classification as at 31 December 2021 is as follows:
H1-2019 LN Leases Total
GBP'000 GBP'000 GBP'000
-------------------- ---------- ------- -------
Of which:
Current - 69 69
Non-current 23,855 - 23,855
-------------------- ---------- ------- -------
At 31 December 2021 23,855 - 23,924
==================== ========== ======= =======
17 Decommissioning provision
Year Ended Year Ended
31 December 31 December
2022 2021
GBP'000 GBP'000
----------------------------------------- ---------------------- ------------
At start of year 125,523 66,783
Liabilities assumed through acquisitions 348 56,350
Liabilities incurred 1,369 312
Liabilities disposed (213) (7,984)
Liabilities settled (2,190) (670)
Liabilities settled under SRP and ASCP (731) (324)
Change in estimates (40,233) 7,603
Unwinding of discount ( Note 8 ) 2,667 1,539
Exchange movement 6,791 1,914
At end of year 93,331 125,523
========================================= ====================== ============
31 December 31 December
2022 2021
GBP'000 GBP'000
------------ ----------- -----------
Of which:
Current 3,190 2,368
Non-current 90,141 123,155
------------
Total 93,331 125,523
============ =========== ===========
A summary of the key estimates and assumptions are as
follows:
31 December 31 December
2022 2021
------------------------------------- ----------- -----------
Undiscounted / uninflated cash flows
(CAD, thousands) 206,613 207,371
Inflation rate 2.09% 1.82%
Discount rate 3.28% 1.68%
Timing of cash flows 1-50 years 1-50 years
Liabilities settled reflect work undertaken in the period. This
includes wells decommissioned under Alberta's Site Rehabilitation
Program ("SRP") and Saskatchewan's Accelerated Site Closure Program
("ASCP") whereby certain costs of settling the Group's liabilities
were borne by the Government of Canada. Where liabilities were
settled through the SRP and ASCP a corresponding decrease to the
decommissioning asset was recorded. The change in estimate for the
year ended 31 December 2022 was primarily driven by changes in
market interest and inflation rates as published by the Bank of
Canada. The inflation and discount rates have been pinpointed as a
key source of estimation uncertainty and are further discussed in
note 2 .
18 Risk management contracts
The Group enters risk management contracts to hedge a portion of
the Group's exposure to fluctuations in prevailing commodity prices
for oil, gas, and natural gas liquids. The Group's physical
commodity contracts represent physical delivery sales contracts in
the ordinary course of business and are therefore not recorded at
fair value in the consolidated financial statements. The Group's
financial risk management contracts have not been designated as
hedging instruments in a hedge relationship under IFRS 9 and are
carried at fair value through profit and loss. The financial risk
management contracts are classified as Level 2 in the fair value
hierarchy as defined by IFRS 13 'Fair value measurements' ( note 22
).
The principal terms of the risk management contracts held as at
31 December 2022 are presented in the table below.
Type Effective date Termination date Total Volume Avg. Price
AECO 5A Financial Swaps 1 Nov 2022 31 Mar 2023 10,000 GJ/Day CAD 4.1500 / GJ
AECO 5A Physical Swaps 1 Nov 2022 31 Mar 2023 5,000 GJ/Day CAD 4.3800 / GJ
AECO 5A Physical Swaps 1 Jan 2023 31 Jan 2023 2,500 GJ/Day CAD 5.1500 / GJ
AECO 5A Financial Swaps 1 Jan 2023 31 Mar 2023 5,000 GJ/Day CAD 4.3800 / GJ
AECO 5A Physical Swaps 1 Jan 2023 31 Mar 2023 5,000 GJ/Day CAD 4.7500 / GJ
AECO 5A Physical Swaps 1 Feb 2023 28 Feb 2023 2,500 GJ/Day CAD 5.1300 / GJ
AECO 7A Physical Collar 1 Jan 2023 31 Mar 2023 2,500 GJ/Day CAD 6.0000-9.4000 / GJ
AECO 7A Financial Collar 1 Jan 2023 31 Mar 2023 5,000 GJ/Day CAD 6.5000-9.3300 / GJ
AECO 7A Financial Collar 1 Jan 2023 31 Mar 2023 5,000 GJ/Day CAD 5.0000-11.2000 / GJ
WTI Physical Swaps 1 Jan 2023 31 Jan 2023 250 bbl/Day CAD 100.00 / bbl
WTI Financial Swaps 1 Jan 2023 31 Mar 2023 250 bbl/Day CAD 106.00 / bbl
WTI Physical Swaps 1 Feb 2023 28 Feb 2023 250 bbl/Day CAD 100.00 / bbl
WTI Physical Swaps 1 Mar 2023 31 Mar 2023 250 bbl/Day CAD 109.53 / bbl
WTI Physical Swaps 1 Jan 2023 30 Jun 2023 150 bbl/Day CAD 114.20 / bbl
WTI Physical Collar 1 Jan 2023 30 Jun 2023 150 bbl/Day CAD 100.00-129.50 / bbl
WTI Physical Collar 1 Jan 2023 30 Jun 2023 250 bbl/Day CAD 100.00-129.00 / bbl
WTI Physical Collar 1 Apr 2023 30 Jun 2023 250 bbl/Day CAD 100.00-131.25 / bbl
WTI Financial Collar 1 Apr 2023 30 Jun 2023 250 bbl/Day CAD 100.00-132.25 / bbl
WTI Financial Collar 1 Jan 2023 31 Mar 2023 300 bbl/Day CAD 100.00-120.00 / bbl
WTI Financial Collar 1 Jan 2023 31 Mar 2023 200 bbl/Day CAD 100.00-121.50 / bbl
WTI Financial Collar 1 Jan 2023 31 Mar 2023 300 bbl/Day CAD 100.00-125.25 / bbl
WTI Financial Collar 1 Jan 2023 31 Mar 2023 300 bbl/Day CAD 100.00-121.40 / bbl
WTI Physical Collar 1 Jan 2023 31 Mar 2023 300 bbl/Day CAD 100.00-126.75 / bbl
WTI Financial Collar 1 Apr 2023 30 Apr 2023 300 bbl/Day CAD 100.00-120.75 / bbl
WTI Financial Collar 1 Apr 2023 30 Jun 2023 250 bbl/Day CAD 100.00-118.20 / bbl
WTI Purchased Put Option 1 Apr 2023 30 Jun 2023 1,000 bbl/Day CAD 100.00 / bbl
WTI Financial Swaps 1 Apr 2023 30 Jun 2023 250 bbl/Day CAD 112.00 / bbl
Conway Financial Collar 1 Jan 2023 31 Mar 2023 250 bbl/Day USD 1.0000-1.2500 / gal
Conway Financial Collar 1 Jan 2023 31 Mar 2023 250 bbl/Day USD 1.0000-1.2100 / gal
The Group's losses on risk management contracts arose due to
commodity price increases in 2021 and 2022 which resulted in the
Group settling its hedge positions at lower prices than could have
otherwise been achieved at prevailing market prices. These losses
are presented in the following table.
2022 2021
GBP'000 GBP'000
-------------------------------------------- -------- --------
Unrealised (gain) / loss on risk management
contracts (858) 111
Realised loss on risk management contracts 19,848 5,374
Total 18,990 5,485
============================================ ======== ========
The carrying value of the Group's risk management contracts are
present in the following table.
31 December 31 December
2022 2021
GBP'000 GBP'000
-------------------------------- ----------- -----------
Current asset 1,111 814
Current liability (381) (925)
Net current asset / (liability) 730 (111)
================================ =========== ===========
19 Authorised, issued and called-up share capital
Issuance Ordinary Deferred Nominal Ordinary Deferred Share Share Share
date shares shares value per shares shares premium issuance premium
Share before costs after
share Share
issuance issuance
costs costs
Shares Shares GBP GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 31 December 2020 700,054,815 5,000 - 70 50 64,804 (3,199) 61,605
Issued on
exercise of
0.01 pence
H1-2019
warrants Various 40,140,172 - 0.0001 4 - 7,669 - 7,669
Issued on
exercise of
0.01 pence
options Various 15,303,960 - 0.0001 2 - - -
Issued on
exercise of
5 pence
options Various 1,700,000 - 0.0001 - - 85 - 85
Issued on
exercise of
0.01 pence
BHGE
warrants 4 Jun 21 5,277,045 - 0.0001 1 - 903 - 903
Capital
reduction * 6 Jul 21 - - - - - (67,255) 3,199 (64,056)
Issued at 11
pence/share 27 Jul 21 363,700,000 - 0.0001 36 - 39,970 (2,000) 37,970
Issued on
exercise of
11 pence
EMI options 1 Oct 21 250,000 - 0.0001 - - 27 - 27
------------ ---------- ------------- --------- --------- ---------- ---------- --------- --------- ---------
At 31 December 2021 1,126,425,992 5,000 - 113 50 46,203 (2,000) 44,203
Issued on
exercise of
5 pence
options 6 Jun 22 40,860,277 - 0.0001 4 - 2,038 - 2,038
Issued on
exercise of
6.1 pence
options 6 Jun 22 7,994,653 - 0.0001 1 - 487 - 487
Issued on
exercise of
11 pence
options 6 Jun 22 17,450,451 - 0.0001 1 - 1,918 - 1,918
At 31 December 2022 1,192,731,373 5,000 - 119 50 50,646 (2,000) 48,646
======================== ============= ========= ========= ========== ========== ========= ========= =========
* On 6 July 2021 the Registrar of Companies registered the
cancellation of i3's share premium account. The GBP64.1 million
balance of the Group's share premium net of share issuance costs
was accordingly transferred to retained earnings. This created
distributable reserves and enabled the Company to become dividend
paying.
The ordinary shares confer the right to vote at general meetings
of the Company, to a repayment of capital in the event of
liquidation or winding up and certain other rights as set out in
the Company's articles of association.
The deferred shares do not confer any voting rights at general
meetings of the Company and do confer a right to a repayment of
capital in the event of liquidation or winding up, they do not
confer any dividend rights or any of redemption.
On 6 June 2022, 66,305,381 ordinary shares were admitted to
trading following the exercise of employee share options. Further
details are provided in note 20 .
GBP17.4. million of dividends were declared in 2022 as
follows:
Declaration Ex-Dividend Record date Payment Dividend Total Dividend
date date date per share
(pence) GBP'000
------------- ------------- ------------- ------------- ---------- --------------
9 February 17 February 18 February 11 March
2022 2022 2022 2022 0.1050 1,183
17 March 18 March
9 March 2022 2022 2022 8 April 2022 0.1050 1,183
14 April 19 April
6 April 2022 2022 2022 6 May 2022 0.1050 1,183
11 May 2022 19 May 2022 20 May 2022 10 June 2022 0.1425 1,604
8 June 2022 16 June 2022 17 June 2022 8 July 2022 0.1425 1,700
5 August
6 July 2022 14 July 2022 15 July 2022 2022 0.1425 1,700
3 August 11 August 12 August 2 September
2022 2022 2022 2022 0.1425 1,700
7 September 14 September 15 September 7 October
2022 2022 2022 2022 0.1425 1,700
5 October 13 October 14 October 4 November
2022 2022 2022 2022 0.1425 1,700
2 November 10 November 11 November 2 December
2022 2022 2022 2022 0.1425 1,700
22 December 5 January 6 January 27 January
2022 2023 2023 2023 0.1710 2,040
------------- ------------- ------------- ------------- ----------
Total 17,393
========================================================== ========== ==============
GBP3.4 million of dividends were declared in 2021 as
follows:
Declaration Ex-Dividend Record date Payment Dividend Total Dividend
date date date per share
(pence) GBP'000
------------- ------------- ------------- ----------- ---------- --------------
6 August
8 July 2021 15 July 2021 16 July 2021 2021 0.16 1,163
27 September 7 October 8 October 29 October
2021 2021 2021 2021 0.20 2,254
------------- ------------- ------------- ----------- ---------- --------------
Total 3,417
======================================================== ========== ==============
20 Share-based payments
During the year the Group had share based payment expense of
GBP1,092 thousand (2021: GBP3,668 thousand).
Employee and NED share options
During the year the Group had share based payment expense
relating to the issuance of share options of GBP1,092 thousand
(2021: GBP3,217 thousand). Details on the employee and NED share
options outstanding during the period are as follows:
Number of Weighted Weighted
options average exercise average contractual
price life
(pence)
------------------------------ ------------ ----------------- --------------------
At 31 December 2020 16,157,614 0.01 3.85
Issued - 10 January 2021 13,166,358 6.10 10.00
Issued - 10 January 2021 75,184,252 5.00 10.00
Issued - 30 July 2021 57,121,402 11.00 10.00
Issued - 16 December 2021 1,625,000 11.00 10.00
Exercised during the year (17,003,960) 0.51 3.98
Forfeited during the year (2,290,291) 7.62 9.75
------------------------------ ------------ ----------------- --------------------
At 31 December 2021 143,960,375 7.48 9.22
5p options exercised during
the period (67,006,794) 5.00 8.54
6.1p options exercised during
the period (12,454,359) 6.10 8.54
11p options exercised during
the period (35,085,877) 11.00 9.09
Granted during the period 2,700,000 24.10 10.00
Forfeited during the period (708,390) 11.00 8.84
------------------------------ ------------ ----------------- --------------------
At 31 December 2022 31,404,955 10.72 7.93
============================== ============ ================= ====================
In May 2022, i3 employees and directors elected to exercise
options over an aggregate 114,547,030 ordinary shares of i3 Energy
plc. The Company primarily settled in ordinary shares only the
post-tax in-the-money value of the options (based on c28 pence per
share), which resulted in the issuance of 66,305,381 ordinary
shares which were admitted to trading on 6 June 2022. GBP635
thousand in proceeds was collected from employees who elected not
to settle their strike price through a reduction in ordinary shares
received. GBP6,324 thousand in employment tax was settled by the
Company with the relevant taxation authorities on behalf of the
employees which has been recorded within equity as a deduction from
retained earnings. GBP6 thousand was recorded as an increase to the
ordinary shares account, which represents the number of ordinary
shares issued multiplied by their nominal value of GBP0.001 per
share. GBP4,443 thousand was recorded as an increase to the share
premium account, which represents the number of ordinary shares
issued multiplied by the excess in the respective strike prices
over the nominal value of the shares. GBP3,883 thousand has been
recorded as a decrease to the share-based payment reserve, which
represents the strike price settled through surrendered shares.
Throughout 2022, the Company issued options over a total of
2,700,000 ordinary to new employees of i3 Canada. The options were
issued in accordance with the rules of the Company's Employee Share
Option Plan at exercise prices equal to the market price of i3
shares at the date of the grants, which ranged from 21.55 pence to
29.40 pence per share. One-third of the options will vest on each
of the 12-month, 24-month, and 36-month anniversaries of the
employment start dates. The fair values were calculated using the
Black Scholes model with inputs for stock price and exercise price
ranging from 21.55 pence to 29.40 pence per share, time to maturity
of 10 years, volatility ranging from 100% to 104%, the Risk-Free
Interest rate ranging from 1.90% to 3.15%, and a dividend yield
ranging from 6% to 8%. The resulting fair value of GBP278 thousand
will be expensed over the expected vesting period.
On 10 January 2021, the Company issued options over a total of
75,184,252 ordinary shares as described in the Gain-related
Readmission document released on 11 August 2020. The options were
issued in accordance with the rules of the Company's Employee Share
Option Plan at an exercise price of 5.00 pence per share. Of the
options issued to employees of i3 Canada. One-third of the options
vested immediately, with a further one-third vesting in
July 2021 if production exits at or above 9,000 boepd, and 100
per cent will vest if there is an addition of 5,000 boepd or,
alternatively, 25 MMboe 2P reserves. Of the options issued to
employees of i3 North Sea Limited, one-third of the options vested
immediately, with a further one-third vesting at the spud of the
next Serenity / Liberator appraisal well, and 100 per cent will
vest upon a third-party reserve auditor attributing 25 MMbbls 2P
post drilling of a Serenity / Liberator appraisal well. The options
will otherwise fully vest on the third anniversary. Of the options
issued to the Executive and Non-Executive Directors and one
corporate employee, one-third of the options vested immediately,
with a further one-third vesting upon the earlier of spud of the
next Serenity or Liberator appraisal well; and July 2021 production
exits being at or above 9,000 boepd, and 100% will vest upon the
earlier of a third-party reserve auditor attributing 25 MMbbls 2P
post drilling of a Serenity or Liberator appraisal well and the
addition of 5,000 boepd or 25 MMboe 2P reserves. The fair value was
calculated using the Black Scholes model with inputs for stock
price of 6.10 pence, exercise price of 5.00 pence, time to maturity
of 10 years, volatility of 114%, the Risk-Free Interest rate of
0.360%, and a dividend yield of 11%. The resulting fair value of
GBP1,384 thousand will be expensed over the expected vesting
period.
On 10 January 2021, the Company also issued options over a total
of 13,166,358 ordinary shares to key staff that joined its Canadian
subsidiary, i3 Energy Canada Ltd., following the acquisition of
Gain's oil & gas assets. The options were issued in accordance
with the rules of the Company's Employee Share Option Plan at an
exercise price of 6.10 pence per share, the closing price on 8
January 2021. The fair value was calculated using the Black Scholes
model with inputs for share price of 6.10 pence, exercise price of
6.10 pence, time to maturity of 10 years, volatility of 114%, the
Risk-Free Interest rate of 0.360%, and a dividend yield of 11%. The
options contain the same vesting conditions as the 5.00 pence
options for employees of i3 Canada as described in the paragraph
above. The resulting fair value of GBP240 thousand will be expensed
over the expected vesting period.
On 30 July 2021, the Company issued options over a total of
53,705,491 ordinary shares to i3 staff and board and has
additionally issued 1,750,000 options to incoming staff and
conditionally allocated 3,750,000 for additional hires as part of
the Acquisition. A total of 57,121,402 options were ultimately
issued. The options were issued in accordance with the rules of the
Company's Employee Share Option Plan at an exercise price of 11.00
pence per share. Of the options issued to employees of i3 Canada, o
ne-third of the options vested immediately, with a further
one-third vesting if production of 20,000 boepd is achieved prior
to July 2022 (substantially funded from internally generated cash
flow) ; and 100 per cent will vest upon the addition of 9,250 boepd
or 50 MMboe 2P reserves . Of the options issued to employees of i3
North Sea Limited, o ne-third of the options vested immediately,
with a further one-third vesting at spud of the earlier of a second
appraisal well or first development well at either Serenity or
Liberator , and 100 per cent will vest upon the addition of 2,500
boepd of European production . Of the options issued to the
Executive and Non-Executive Directors and one corporate employee,
one-third of the options vested immediately, with a further
one-third vesting (i) at spud of the earlier of a second appraisal
well or first development well at either Serenity or Liberator; or
(ii) if production of 20,000 boepd is achieved prior to July 2022
(substantially funded from internally generated cash flow),
whichever is first to occur, and 100 per cent will vest upon (i)
the addition of 2,500 boepd of European production; or (ii) the
addition of 9,250 boepd or 50 MMboe 2P reserves, whichever is first
to occur. The fair value was calculated using the Black Scholes
model with inputs for stock price of 10.95 pence, exercise price of
11.00 pence, time to maturity of 10 years, volatility of 110%, the
Risk-Free Interest rate of 0.647%, and a dividend yield of 6%. The
resulting fair value of GBP3,202 thousand will be expensed over the
expected vesting period.
On 16 December 2021, the Company issued options over a total of
1,625,000 to new employees of i3 Canada. The vesting conditions
mirror those of the 30 July 2021 grant described above, except for
the first one-third of options vesting on the 6-month employment
anniversary rather than immediately.
In addition, to incentivise the UK and Canadian offices of the
Enlarged Group to work as one team and assist each other as
required going forward, if one of the offices satisfies one of the
early vesting criteria for the options described above then the
equivalent vesting criteria for the other office shall be deemed 20
per cent satisfied (and a further 6.67%. of the options held by
employees in the other office would vest immediately).
All options issued on 10 January 2021, 30 July 2021, and 16
December 2021 will otherwise fully vest on the third anniversary of
their grant dates.
3,579,348 outstanding employee share options as at 31 December
2022 were fully vested and exercisable.
Warrants
During the year the Group did not incur a share based payment
expense relating to the modification and issuance of warrants
(2021: GBP451 thousand). Details on the warrants outstanding during
the period are as follows:
Number of Weighted Weighted
warrants average exercise average contractual
price life
(pence)
------------------------------ ------------ ----------------- --------------------
At 31 December 2020 58,694,348 5.27 1.98
BHGE warrants modified -
17 May 2021 (5,277,045) 56.85 0.34
BHGE warrants modified -
17 May 2021 5,277,045 0.01 0.34
BHGE warrants exercised -
17 May 2021 (5,277,045) 0.01 0.30
H1-2019 LN warrants exercised
throughout the year (40,140,172) 0.01 1.34
------------------------------
At 31 December 2021 13,277,131 15.07 1.85
Expired in the period (4,225,204) 47.34 NA
At 31 December 2022 9,051,927 0.01 0.42
============================== ============ ================= ====================
On 17 May 2021, i3 announced that it had successfully
restructured legacy contracts and agreements for equipment, oil
field services, and warrants with BHGE. This resulted in the
exchange of 5,277,045 warrants with a strike price of 56.85 pence
for Ordinary Shares with a nominal value of 0.01 pence. Further
details are provided in Note 15 .
EMI options
The Company operates an Employee Management Incentive (EMI)
share option scheme. Grants were made on 14 April 2016 and 6
December 2016. The scheme is based on eligible employees being
granted EMI options. The right to exercise the option is at the
employee's discretion for a ten-year period from the date of
issuance.
250,000 options were exercised on 1 October 2021 at a price of
GBP0.11 per share. 250,000 options remain outstanding and were
exercisable at both 31 December 2022 and 2021 at a price of GBP0.11
per share. If the options remain unexercised after a period of ten
years from the date of grant the options expire. Employees who
leave i3 Energy have 60 days to exercise the Options prior to them
being forfeited. The options outstanding at 31 December 2022 have a
weighted average exercise price of GBP0.11 and a weighted average
remaining contractual life of 3.93 years.
21 Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note.
Remuneration of Key Management Personnel
Directors of the Group are considered to be Key Management
Personnel. The remuneration of the Directors is set out in note 10
.
Ultimate parent
There is no ultimate controlling party of the Group.
22 Financial instruments, financial and capital risk management
Financial instruments
Fair value measurements
The Group carries risk management contracts, and prior to its
redemption in Q4 2022, non-current accounts payable at FVTPL. The
fair value of the risk management contracts is determined by
discounting at a risk-free rate the difference between the
contracted prices and the published forward curves at the reporting
date. The fair value of non-current accounts payable was determined
by subtracting the value of the Warrant Shares, being the 5,277,045
Warrant Shares multiplied by the higher of (i) the quoted price of
one i3 share at the reporting date, and (ii) the 5-day volume
weighted average value of one i3 share during the 5-day dealing
period to 17 September 2021, from the remaining Deferred Payment
Invoice Balance. The risk management contracts and non-current
accounts payable are classified as Level 2 valuations within the
fair value hierarchy as defined by IFRS 13 Fair Value Measurement
which is as follows:
-- Level 1 fair value measurements are those derived from quoted
prices (unadjusted) in active markets for identical assets or
liabilities;
-- Level 2 fair value measurements are those derived from inputs
other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e., as
prices) or indirectly (i.e., derived from prices); and
-- Level 3 fair value measurements are those derived from
valuation techniques that include inputs for the asset or liability
that are not based on observable market data (unobservable
inputs).
There were no financial assets or liabilities measured at Level
1 or 3 or reclassified between Levels 1, 2 or 3 during the
year.
The fair value of the Group's financial assets and liabilities
approximate to their carrying amounts at the reporting date. The
following tables combine information about the Group's classes of
financial instruments and their fair value and carrying amounts at
the reporting date.
As at 31 December 2022 Carried at Carried at
FVTPL amortised
cost
------------------------------------ ---------- ----------
Financial assets
Cash and cash equivalents - 16,560
Trade and other receivables - 34,843
Risk management contracts (Level 2) 1,111 -
---------- ----------
Total 1,111 51,403
Financial liabilities
Trade and other payables - 55,846
Risk management contracts (Level 2) 381 -
Borrowings and leases - 27,241
Total 381 83,087
As at 31 December 2021 Carried at Carried at
FVTPL amortised
cost
------------------------------------ ---------- ----------
Financial assets
Cash and cash equivalents - 15,335
Trade and other receivables - 25,792
Risk management contracts (Level 2) 814 -
---------- ----------
Total 814 41,127
Financial liabilities
Trade and other payables 1,232 17,746
Risk management contracts (Level 2) 925 -
Borrowings and leases - 23,924
Non-current accounts payable (Level
2) 557 -
---------- ----------
Total 2,714 41,670
Financial risk management
Financial risk factors
The Group's activities expose it to a variety of financial
risks; market risk (including foreign currency risk and price
risk), credit risk and liquidity risk. The Group's overall risk
management programme focuses on the unpredictability of financial
markets and seeks to minimise potential adverse effects on the
Group's financial performance.
Risk management is carried out by the Board of Directors under
policies approved at Board meetings. The Board frequently discusses
principles for overall risk management including policies for
specific areas such as foreign exchange.
a Market risk
i Foreign exchange risk
The Group is exposed to foreign exchange risk arising from
various currency exposures, primarily with respect to the UK pound
sterling and the Canadian dollar and US dollar. Foreign exchange
risk arises from recognised monetary assets and liabilities (USD
and CAD bank accounts) where they may be denominated in a currency
that is not the local functional currency. The Group mitigates is
foreign exchange exposure by holding monetary assets and
liabilities primarily in the local functional currency. All of the
monetary assets and liabilities held by the Group's Canadian
operations were held in CAD, the functional currency, and therefore
there is no foreign exchange exposure in the Canadian operations.
The UK operations did not hold significant monetary assets or
liabilities in currencies other than UK pound sterling as at 31
December 2022.
The Group is also exposed to exchange differences on translation
of its foreign operations in Canada, which resulted in a gain of
GBP6,529 thousand for the year ended 31 December 2022 (2021:
GBP1,511 thousand). A 10% strengthening of GBP against CAD as at 31
December 2022 would have resulted in a loss on translation of
GBP7,073 thousand (2021: GBP8,876 thousand), and a 10% weakening of
GBP to CAD would have resulted in a gain of GBP23,152 thousand
(2021: GBP14,222 thousand). Profit after tax would not be
impacted.
b Credit risk
Credit risk arises from cash and cash equivalents and trade
receivables from the sale of hydrocarbons. It is Group policy to
assess the credit risk of new customers.
The Group considers the credit ratings of banks in which it
holds funds in order to reduce exposure to credit risk. The Group
will only keep its holdings of cash with institutions which have a
minimum credit rating of 'A'. The Group sells hydrocarbons to
reputable purchasers and are settled the month following their
sale. Long-term deposits for decommissioning provisions are lodged
with government bodies. The carrying value of cash and cash
equivalents and trade and other receivables represents the Group's
maximum exposure to credit risk at year end.
The Group considers that it is not exposed to major
concentrations of credit risk.
The Group holds cash as a liquid resource to fund its
obligations. The Group's cash balances are held in Sterling
Canadian Dollar, and US Dollar. The Group's strategy for managing
cash is to maximise interest income whilst ensuring its
availability to match the profile of the Group's expenditure. This
is achieved by regular monitoring of interest rates and monthly
review of expenditure forecasts.
c Liquidity risk
The Group relies upon debt and equity funding, and cash flow
from its Canadian operations to finance operations. The Directors
are confident that adequate liquidity will be forthcoming with
which to finance operations. Controls over expenditure are
carefully managed.
The Group ensures that its liquidity is maintained by a
management process which includes projecting cash flows and
considering the level of liquid assets in relation thereto,
monitoring Balance Sheet liquidity and maintaining funding sources
and back-up facilities.
The Group's expected cash flows for its financial liabilities
are presented in the following table and includes undiscounted
principal and expected interest payments.
6 Months 6-12 months 1-2 years 2+ years Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- -------- ----------- --------- -------- -------
Trade and other
payables 55,846 - - - 55,846
H1 2019 LNs 22,000 - - - 22,000
H1 2019 cash and
PIK interest ** 7,204 - - - 7,204
At 31 December
2022 85,050 - - - 85,050
===================== ======== =========== ========= ======== =======
6 Months 6-12 months 1-2 years 2+ years Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- -------- ----------- --------- -------- -------
Trade and other
payables 18,970 740 - - 19,710
Non-current payable
* - - 557 - 557
H1 2019 LNs - - 22,000 - 22,000
H1 2019 PIK interest
** - - 9,680 - 9,680
Leases 11 6 - - 17
---------------------
At 31 December 2021 18,981 746 32,237 - 51,964
===================== ======== =========== ========= ======== =======
* The non-current payable was repayable at such time as i3 has
received consideration from any sale or farm-down of its Serenity
or Liberator assets (see note 15 ). This was achieved in 2022 and
the full balance was repaid within the year.
** The H1 2019 LNs have an early redemption option and the
interest can be paid in either cash or in kind (see note 16). The
table assumes no early redemption and that the remaining interest
is paid in cash, with the accrued PIK interest repaid at
maturity.
d Commodity price risk
Commodity price risk in the Group primarily arises from price
fluctuations in markets for the Group's oil, gas and NGL products.
Commodity prices can be volatile and may be impacted by various
supply and demand factors which are outside the Group's control.
Fluctuations in commodity prices could have a significant impact on
future results of operations, cash flow generation, and development
opportunities.
The Group manages commodity price risks by entering a variety of
risk management contracts. Further details of risk management
contracts at 31 December 2022 are provided in note 18 , and of risk
management contracts entered after the reporting period are
provided in note 24 .
The following table illustrates the impact on the Group's profit
before tax and equity due to reasonably possible changes in
commodity prices and their impact on the fair value of financial
instruments, with all other variables held constant.
Decrease Increase in
in commodity commodity
price / increase price / (decrease)
in profit in profit
before loss before loss
and equity and equity
GBP'000 GBP'000
---------------------------------- ----------------- -------------------
Change in WTI - CAD 5.00 / bbl 141 (141)
Change in AECO - CAD 0.50 / GJ 700 (700)
Change in Conway - USD 5.00 / bbl 140 (140)
Capital risk management
The Group's objectives when managing capital are to safeguard
the Group's ability to position as a going concern and to continue
its development and production activities. The capital structure of
the Group consists of borrowings and leases of GBP27,241 thousand
at 31 December 2022 (2021: GBP23,924 thousand) ( note 16 ), has
capital, defined as the total equity and reserves of the Group of
GBP164,746 thousand (2021: GBP138,166 thousand) and cash and
equivalents of GBP16,560 thousand (2021: GBP15,335 thousand).
The Group monitors its level of cash resources available against
future planned exploration and evaluation activities and may issue
new shares in order to raise further funds from time to time.
23 Commitments
At 31 December 1 year 2-3 years 4-5 years 5+ years Total
2022
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- ------- --------- --------- -------- -------
Operating 388 - - - 388
Transportation 1,720 1,423 225 18 3,386
---------------
Total 2,108 1,423 225 18 3,774
=============== ======= ========= ========= ======== =======
Transportation commitments relate to take-or-pay pipeline
capacity in Alberta.
The Group did not have any capital commitments as at 31 December
2022 or 2021.
24 Events after the reporting period
After 31 December 2022 i3 entered into various risk management
contracts, as summarised below.
Type Effective date Termination date Total Volume Avg. Price
NYMEX Physical Basis Differential 1 Apr 2023 31 Oct 2023 10,000 MMBtu/Day (USD 1.4625 / MMBtu)
WTI Financial Swaps 1 Jul 2023 31 Dec 2023 500 bbl/Day CAD 100.20 / bbl
WTI Physical Swaps 1 Jul 2023 31 Dec 2023 500 bbl/Day CAD 100.30 / bbl
In early-2023 the Company has declared dividends as summarised
in the following table:
Declaration Ex-Dividend Record date Payment Dividend Total Dividend
date date date per share
(pence) GBP'000
------------ ------------ ------------ ------------- ---------- --------------
12 January 19 January 20 January 10 February
2023 2023 2023 2023 0.1710 2,040
8 February 16 February 17 February 10 March
2023 2023 2023 2023 0.1710 2,040
15 March 23 March 24 March 14 April
2023 2023 2023 2023 0.1710 2,040
12 April 20 April 21 April
2023 2023 2023 12 May 2023 0.1710 2,040
17 May 2023 25 May 2023 26 May 2023 16 June 2023 0.1710 2,055
------------ ------------ ------------ ------------- ---------- --------------
Total 10,215
======================================================= ========== ==============
On 4 January 2023 the Group issued a total of 116,667 Ordinary
Shares of 0.01 pence each following the exercise of options by an
employee, at an exercise price of GBP0.11 per Ordinary Share. The
Ordinary Shares were subsequently admitted for trading on AIM.
On 3 April 2023 the Group announced the reserves of i3 Energy
Canada Limited as of 31 December 2022. Highlights include Company
Interest PDP reserves of 49MMboe, 1P reserves of 93MMboe, and 2P
reserves of 181MMboe. Further details can be found on the Company's
website at www.i3.energy .
On 19 April 2023, the Company issued options over a total of
3,000,000 Ordinary Shares to Jason Dranchuk, the CFO and a Person
Discharging Managerial Responsibilities of the Company. The options
were issued in accordance with the rules of the Company's Employee
Share Option Plan at an exercise price of 20.00 pence per share.
One-third of the options vest upon achieving production of 26,000
boepd, one-third upon the addition of 5,000 boepd vs acquisitions,
and one-third upon the addition of 25 MMbbl of 2P reserves. The
options will otherwise vest as to one-third on the first, second,
and third anniversary of the grant date, to the extent the award
has not otherwise vested in accordance with the above
provisions.
On 25 April 2023 the Group issued a total of 9,051,927 Ordinary
Shares of 0.01 pence each following the exercise of Warrants by
certain of its loan noteholders. The Ordinary Shares were
subsequently admitted for trading on AIM. Following the exercise
there were no more warrants outstanding.
On 31 May 2023 the Group announced the successful redemption of
the Company's outstanding GBP22 million H1-2019 Loan Notes (the
"Loan Notes"), due 31 May 31 2023, and the establishment of a CAD
100 million debt facility, which will provide i3 greater financial
flexibility and enhanced credit capacity to further execute its
ongoing business plan. The Company and i3 Energy Canada Ltd. have
signed agreements with Trafigura Canada Ltd., a subsidiary of
Trafigura Pte Ltd., a market leader in the global commodities
industry, for a CAD100 million loan facility (the "Facility") and
an associated commercial contract related to i3 Energy Canada
Ltd.'s oil production. The Facility has a three-year term, with
interest payable monthly at 9.521% per annum, calculated on the
outstanding portion of the loan. The Facility carries no penalty if
repaid early and amortises monthly on a straight-line basis, which
aligns with the Company's conservative approach to debt management.
Advances under the Facility can be repaid either with cash or by
way of set-off against deliveries of crude oil under the commercial
contract which has a minimum term of three years. The documentation
establishing the Facility includes the option for a CAD75 million
advance which has been fully drawn by the Company and a CAD25
million accordion facility amount, which can be made available
during the Facility's three-year term. The Facility is secured by a
first lien against substantially all the assets and shares of i3
Energy Canada Ltd., permitting maximum financing flexibility for
the rest of the Company's international portfolio. The Company will
utilize a portion of proceeds from the initial advance to redeem
the outstanding Loan Notes. The balance of the proceeds will be
available for general corporate purposes of the Company and of i3
Energy Canada Ltd., including working capital requirements,
acceleration of organic growth (from i3's proven portfolio of
development drilling locations) and to fund accretive acquisition
opportunities.
Appendix A: Glossary
1P Proved reserves
2P Proved plus probable reserves
--------------------------------------------------
AER Alberta Energy Regulator
--------------------------------------------------
AIM The AIM Market of the London Stock Exchange
--------------------------------------------------
APM Alternate Performance Measure
--------------------------------------------------
ARO Asset Retirement Obligation
--------------------------------------------------
ASCP Saskatchewan's Accelerated Site Closure Program
--------------------------------------------------
bbl Barrel
--------------------------------------------------
bbl/d Barrels per day
--------------------------------------------------
BHGE Baker Hughes, a GE Company, and GE Oil & Gas
Limited
--------------------------------------------------
BOE Barrels of Oil Equivalent
--------------------------------------------------
boepd Barrels of Oil Equivalent Per Day
--------------------------------------------------
CAD Canadian Dollars
--------------------------------------------------
Cenovus, CVE Cenovus Energy Inc.
--------------------------------------------------
Cenovus Acquisition 20 August 2021
Date
--------------------------------------------------
Cenovus Assets Certain petroleum and infrastructure assets
acquired from Cenovus
--------------------------------------------------
CEO Chief Executive Officer
--------------------------------------------------
CFO Chief Financial Officer
--------------------------------------------------
the Code QCA Corporate Governance Code
--------------------------------------------------
Company i3 Energy plc
--------------------------------------------------
CPR Competent person's report
--------------------------------------------------
E&E Exploration and evaluation
--------------------------------------------------
EPL Energy Profits Levy
--------------------------------------------------
ERP Emergency Response Plan
--------------------------------------------------
Europa Europa Oil & Gas Limited
--------------------------------------------------
FCF Free cash flow
--------------------------------------------------
FIA Farm-In Agreement
--------------------------------------------------
FVTPL Fair Value through Profit or Loss
--------------------------------------------------
Gain Gain Energy Ltd.
--------------------------------------------------
gal Gallon
--------------------------------------------------
GBP British Pounds Sterling
--------------------------------------------------
GJ Gigaloule
--------------------------------------------------
Gross wells Wells participated in by i3
--------------------------------------------------
Group, i3 i3 Energy plc, together with its subsidiaries
--------------------------------------------------
i3 Canada i3 Energy Canada Limited
--------------------------------------------------
IAS International Accounting Standard
--------------------------------------------------
IFRIC International Financial Reporting Interpretations
Committee
--------------------------------------------------
IFRS International Financial Reporting Standard
--------------------------------------------------
IP30 Average daily production of a well over its
initial 30-day production period
--------------------------------------------------
mcf Thousand cubic feet
--------------------------------------------------
mcf/d Thousand cubic feet per day
--------------------------------------------------
MMboe Million Barrels of Oil Equivalent
--------------------------------------------------
MMBtu Metric Million British Thermal Unit
--------------------------------------------------
NGL Natural gas liquids
--------------------------------------------------
NED Non-Executive Director
--------------------------------------------------
Net wells Gross wells multiplied by i3's working interest
--------------------------------------------------
NOI Net Operating Income
--------------------------------------------------
NPV 10 Net Present Value, discounted at 10%
--------------------------------------------------
NSTA UK North Sea Transition Authority
--------------------------------------------------
NTM Next Twelve Months
--------------------------------------------------
PDP Proved, developed, producing reserves
--------------------------------------------------
PIK Payment in kind
--------------------------------------------------
PP&E Property, plant and equipment
--------------------------------------------------
QCA Quoted Companies Alliance
--------------------------------------------------
RFCT Ring Fence Corporation Tax
--------------------------------------------------
SCT Supplementary Charge
--------------------------------------------------
SRP Alberta's Site Rehabilitation Program
--------------------------------------------------
Toscana Toscana Energy Income Corporation
--------------------------------------------------
TSX Toronto Stock Exchange
--------------------------------------------------
UKCS UK Continental Shelf
--------------------------------------------------
USD (US$) United States Dollar
--------------------------------------------------
WI Working Interest
--------------------------------------------------
Appendix B: Alternate performance measures
The Group uses Alternate Performance Measures ("APMs"), commonly
referred to as non-IFRS measures, when assessing and discussing the
Group's financial performance and financial position. 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 Group continually monitors the
selection and definitions of its APMs, which may change in future
reporting periods.
EBITDA and Adjusted EBITDA
EBITDA is defined as earnings before depreciation and depletion,
financial costs, and tax. Adjusted EBITDA is defined as EBITDA
before gain on bargain purchase and acquisition costs. Management
believes that EBITDA provides useful information into the operating
performance of the Group, is commonly used within the oil and gas
sector, and assists our management and investors by increasing
comparability from period to period. Adjusted EBITDA removes the
gain or loss on bargain purchase and asset dispositions and the
related acquisition costs which management does not consider to be
representative of the underlying operations of the Group.
A reconciliation of profit as reported under IFRS to EBITDA and
Adjusted EBITDA is provided below.
2022 2021
GBP'000 GBP'000
-------------------------------------- -------- --------
Profit for the year 41,951 25,083
Depreciation and depletion 34,339 21,643
Finance costs 7,865 7,609
Tax 13,826 661
-------------------------------------- -------- --------
EBITDA 97,981 54,996
Acquisition costs - 256
Loss / (gain) on bargain purchase and
asset dispositions 9 (25,013)
-------------------------------------- -------- --------
Adjusted EBITDA 97,990 30,239
====================================== ======== ========
Net operating income
Net operating income is defined as gross profit before
depreciation and depletion, gains or losses on risk management
contracts, and other operating income, which equals revenue from
the sale of oil and gas and processing income, less production
costs. Management believes that net operating income is a useful
supplementary measure as it provides investors with information on
operating margins before non-cash depreciation and depletion
charges and gains or losses on risk management contracts.
A reconciliation of gross profit as reported under IFRS to net
operating income is provided below.
2022 2021
GBP'000 GBP'000
* Restated
---------------------------------- -------- -----------------------
Gross profit 78,689 21,690
Depreciation and depletion 34,339 21,643
Loss on risk management contracts 18,990 5,485
Other operating income (286) (231)
---------------------------------- -------- -----------------------
Net operating income 131,732 48,587
================================== ======== =======================
* In 2022 management changed the definition of net operating
income to exclude other operating income. Other operating income
arises on an ad-hoc basis and isn't considered representative of
the underlying field operations and field income of the Group. The
comparative period has been restated on a consistent basis.
Acquisitions & Capex
Acquisitions & Capex is defined as cash expenditures on
acquisitions, PP&E, and E&E. Management believes that
Acquisition & Capex is a useful supplementary measure as it
provides investors with information on cash capital investment
during the period.
A reconciliation of the various line items per the statement of
cash flows to Acquisitions & Capex is provided below.
2022 2021
GBP'000 GBP'000
-------------------------------------------- -------- --------
Acquisitions 531 37,079
Expenditures on property, plant & equipment 64,374 9,465
Expenditures on exploration and evaluation
assets 13,842 3,317
-------------------------------------------- -------- --------
Acquisitions & Capex 78,747 49,861
============================================ ======== ========
Free cash flow (FCF)
FCF is defined as cash from / (used in) operating activities
less cash capital expenditures on PP&E and E&E. Management
believes that FCF provides useful information to management and
investors about the Group's ability to pay dividends.
A reconciliation of cash from / (used in) operating activities
to FCF is provided below.
2022 2021
GBP'000 GBP'000
-------------------------------------------- -------- --------
Net cash from operating activities 101,092 24,439
Expenditures on property, plant & equipment (64,374) (9,465)
Expenditures on exploration and evaluation
assets (13,842) (3,317)
-------------------------------------------- -------- --------
FCF 22,876 11,657
============================================ ======== ========
Net debt
Net debt is defined as borrowings and leases and trade and other
payables, less cash and cash equivalents and trade and other
receivables. Management believes that net debt is a meaningful
measure to monitor the liquidity position of the Group.
A reconciliation of the various line items per the statement of
financial position to net debt is provided below.
2022 2021
GBP'000 GBP'000
---------------------------- -------- --------
Borrowings and leases 27,241 23,924
Trade and other payables 55,846 19,709
Cash and cash equivalents (16,560) (15,335)
Trade and other receivables (34,843) (25,503)
---------------------------- -------- --------
Net debt 31,684 2,795
============================ ======== ========
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END
FR NKABBDBKBCAK
(END) Dow Jones Newswires
June 07, 2023 02:00 ET (06:00 GMT)
I3 Energy (LSE:I3E)
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