TIDMI3E
RNS Number : 9306K
i3 Energy PLC
31 August 2023
31 August 2023
i 3 Energy plc
("i3", "i3 Energy", or the "Company")
Interim Report and Operational Update for the Six Months Ended
30 June 2023
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 unaudited results for its period ended 30 June
2023. A copy of the Company's unaudited interim financial
statements will be available shortly on the Company's website at
https://i3.energy/investor-relations/regulatory-news .
Highlights And Outlook
H1 2023 HIGHLIGHTS
------------------------------------------------------------------------
Average Production 20,640 BOEPD (H1 2022: 18,950)
2PDP and 2P Reserves 65.7 & 181.5 MMBOE (At 1 January
2023)
Revenue (net of royalties) GBP75.5 MILLION (H1 2022:
GBP101.6 MILLION)
Net Operating Income ("NOI")(1) GBP38.9 MILLION (H1 2022:
GBP68.8 MILLION)
Acquisitions & Capex(1) GBP27.2 MILLION (H1 2022:
GBP23.7 MILLION)
FCF(1) (GBP2.9) MILLION (H1 2022:
GBP24.7 MILLION)
Profit Before & After Tax GBP14.5 & GBP10.9 MILLION
(H1 2022: GBP20.5 & GBP14.7
MILLION)
Adjusted EBITDA(1) GBP38.6 MILLION (H1 2022:
GBP38.8 MILLION)
Basic and Diluted EPS 0.91 and 0.90 PENCE
(H1 2022: 1.30 & 1.20 PENCE)
H1 2023 Dividends Declared GBP10.2 MILLION (H1 2022:
GBP6.9 MILLION)
2023 Canadian Capital Programme DRILLED 8 GROSS (5.5 NET)
WELLS
UK Assets EVALUATING A ONE-WELL DEVELOPMENT
OF SERENITY
(1) Non-IFRS measure. Refer to Appendix B.
Highlights
Financial Highlights
-- H1 2023 revenue (net of royalties) of GBP75.5 million (H1
2022: GBP101.6 million), net operating income (1) of GBP38.9
million (H1 2022: GBP68.8 million), and cash flow from operations
of GBP24.3 million (H1 2022: of GBP48.4 million).
-- Successfully completed the new CAD 100 million, 3-year, first
lien Debt Facility with Trafigura Canada Ltd. (a subsidiary of
Trafigura Pte Ltd.) and redeemed the H1 2019 Loan Notes in
full.
(1) Non-IFRS measure. Refer to Appendix B
Dividends
-- During the first half of 2023, i3 declared total dividends of
0.855 pence/share (totalling GBP10.215 million) .
-- In June 2023 the Company revised its annual dividend guidance
from a monthly equivalent of 0.1710 to 0.0855 pence per share, to
be paid quarterly, which annualises to approximately GBP12.3
million based on the number of ordinary shares outstanding as at 30
June 2023.
Operational Highlights
-- Average H1 2023 production of 20,640 barrels of oil
equivalent per day ("boepd") for the six-month period (9% higher
than 18,950 boepd achieved in H1 2022) while exiting H1 above
22,000 boepd.
-- Average Q2 2023 production of approximately 18,529 boepd,
representing a 5% decrease from Q2 2022, was more favourable than
anticipated given that approximately 3,100 boepd was offline for
the quarter due to restrictions associated with the Alberta
wildfires, unanticipated apportionment issues associated with the
Pembina Peace Pipeline liquids line and the scheduled turnarounds
and debottlenecking projects.
-- Post May / June curtailments, Company production has
recovered with a July average rate of 22,065 boepd.
-- Drilled 8 gross wells (5.5 net) wells during H1 in the
Company's core Central Alberta, Wapiti and Clearwater assets as
part of the 2023 capital programme.
-- CO2e emission reduction initiatives continued with
electrification of 12 well sites in Carmangay and Retlaw.
-- Responsive corporate action throughout Alberta and British
Columbia during the May and June wildfire situation, focussing on
the protection and safety of field staff, industry partners,
emergency responders and the impacted communities, while minimizing
production downtime and ensuring asset integrity.
-- As a result of the wildfires, certain facilities were
periodically shut-in with resultant calendar day downtime estimated
at 1,650 boepd and 385 boepd, respectively for May and June.
-- i3 performed 20 operated turnarounds on its facilities in
Central Alberta, to ensure the regulatory compliance and integrity
of its assets.
-- The turnaround operations were completed on time and within
budgeted forecasts, and affected June's production by 7,230
boepd.
-- The Company's Q1 Wapiti Cardium programme is now producing
unrestricted, with peak initial production ("IP") rates exceeding
GLJ's Proved Plus Probable forecasts.
Outlook
A summary of key events which occurred after the reporting
period are presented in note 19 to the financial statements. The
Group'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 established 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 operations safely and in an environmentally secure manner.
The Group continuously evaluates opportunities to strengthen its
balance sheet while maintaining tight control of its costs and
working capital position.
Majid Shafiq, CEO of i3 Energy plc, commented :
"H1 2023 was another very active period for i3. We completed our
planned Q1 capital program, drilling 8 gross (5.5 net) wells in our
Central Alberta, Wapiti and Clearwater acreage, re-financed our
outstanding loan notes which were due in May with a new CAD 100
million loan facility and successfully conducted 20 planned
operated facility turnarounds, whilst safely managing our
operations during the recent extended period of wildfires in
Alberta. Our asset base continues to perform well, having averaged
20,640 boepd in H1, 9% higher than the same period last year and
exiting H1 at greater than 22,000 boepd, and with 2P reserves of
182 mmboe provides a solid platform for growth.
Commodity price weakness in the first half of the year meant the
Company revised its 2023 capital and dividend programme in June
having declared GBP10.215 million in dividends to our shareholders
in H1. Improvement in commodity prices in July and August and
future pricing, has resulted in an increase of around 20% in our
forecast for full year net operating income to USD 90 to 95
million. Price volatility has also resulted in potential
opportunities for growth via M&A and we continue to monitor the
market to ensure our capital allocation for the remainder of the
year is optimised. We are confident that our business model, allied
with our asset base and the skills and dedication of our staff,
will continue to create and extract value through the commodity
price cycle."
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) / Jason Dranchuk Tel: +44 (0) 203 781
(CFO) 8331
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
Andrew Turner, Sam Morris, Violet Tel: +44 (0) 203 757
Wilson 4980
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 asset base and the acquisition of
long life, low decline conventional production assets.
i3 is dedicated to responsible corporate practices and the
environment, and places high value on adhering to strong
Environmental, Social and Governance ("ESG") practices. i3 is proud
of its performance to date as a responsible steward of the
environment, people, and capital management. The Company is
committed to maintaining an ESG strategy, which has broader
implications to long-term value creation, as these benefits extend
beyond regulatory requirements.
i3 Energy is quoted 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/ .
The Company advises that it has obtained an exemption pursuant
to Section 602.1 of the TSX Company Manual (the Manual), in respect
of certain shareholder approval requirements that would otherwise
be applicable to the Company's Employee Stock Option Plan and
Non-Employee Stock Option Plan (together, the Plans), namely those
set forth in Section 613 of the Manual (the Exemption). As such,
the Company is exempt from complying with the requirements of
Section 613 in respect of the Plans.
Pursuant to the Manual, the Exemption will be valid for a period
of three years from the date hereof, expiring on July 17, 2026. The
Company follows AIM Rules for Companies and has received
shareholder approval for its Employee Stock Option Plan and
Non-Employee Stock Option Plan.
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.
Chairman's and Chief Executive's Statement
Overview of the year to date
i3 has had an active first half of 2023 navigating a challenging
period in the energy sector and the broader capital markets. The
first half of 2023 was marked by commencement of the Company's
capital programme in Wapiti, Central Alberta and in the Clearwater,
the establishment of a new long-term debt facility and the
operational challenges associated with the Alberta wildfires and
multiple planned and unplanned production disruptions. With these
hurdles behind it, the Company is well positioned to deliver
continued value to shareholders through its total return model.
During the first half of 2023, the Company settled its
outstanding GBP22 million Senior Secured Guaranteed Loan Notes (the
"Loan Notes"), which were due for repayment at the end of May. The
Loan Notes were settled from the proceeds of a new CAD 100 million
loan facility (the "Facility") established with Trafigura Canada
Ltd., a subsidiary of Trafigura Pte Ltd. The Facility consists of a
CAD 75 million facility, used to repay the loan notes and for
general corporate purposes, and a CAD 25 million accordion. We are
very pleased to have established a relationship with Trafigura, a
sophisticated oil and gas trader and a potential partner for future
production focussed growth.
Operationally, i3 commenced 2023 following an active and very
successful USD 71 million drilling campaign in 2022, which allowed
the Company to average 20,317 boepd for the year with peak
production exceeding 24,000 boepd. Although commodity prices had
softened through 2022, the forecast at year end remained strong as
the Company set a 2023 capital programme of USD 64 million based
upon average annual price assumptions of USD 85/bbl for WTI and CAD
4.50/GJ for AECO gas (coinciding with the industry consensus). The
initial portion of the 2023 capital programme, including 8 gross
(5.5 net) wells, were successfully drilled and tied-in before the
Spring break up period commenced. Initial production results from
the 2023 programme were impacted by a weakening commodity price
outlook and a series of other factors, including Alberta wildfires,
unanticipated apportionment issues, as well as scheduled
turnarounds and debottlenecking projects. These factors affected
near-term production which, when combined with the continued
softening commodity outlook, resulted in lower full year production
and cashflow guidance and reduced capital and dividend
programmes.
Since issuing the Company's revised 2023 capital and dividend
programme at the end of June 2023, i3's predictable low decline
production has recovered following the Company's planned
maintenance activities which involved shutdown of certain major
operated facilities, which were completed successfully during June.
Seasonal wildfires this year have been worse and more prolonged
than normal, and although none of our facilities (operated or
non-operated) were damaged, periodical shut down of certain
facilities was required as a precautionary measure, which
negatively impacted our production volumes during May and June by
1,650 boepd and 385 boepd, respectively. Despite this, our wells
and facilities which were impacted by maintenance and unplanned
shutdowns have since been brought back on-stream and are performing
at pre-shutdown levels. With the return in corporate production,
combined with the recovery in underlying commodity prices,
particularly WTI, we are forecasting an approximate 20% increase to
the Company's revised 2023 estimated Net Operating Income guidance,
as issued at the end of Q2.
As per i3's total return model, the Company continually
evaluates the optimal way in which to deliver shareholder value. In
addition to its distribution model, the Company weighs the expected
return generated through organically drilling its extensive
portfolio of development locations against potential acquisition
opportunities and deploys capital accordingly to achieve the
highest return on a risk adjusted basis. As is to be expected, the
fall in commodity prices in H1 have resulted in lower asset
transaction metrics in Canada. i3 continues to monitor the market
and will participate in acquisitions should the Company find
accretive opportunities that fit its strategy.
In the UK, in conjunction with our joint venture partner, the
Company continues to progress discussions with all stakeholders
regarding the potential development of the Serenity field.
The Company's YE 2022 reserves audit, which on a 2P basis,
resulted in an increase in reserves of 18%, with a reserve life
index of 22.5 years and a value of USD 1.161 billion. With more
than 370 booked (gross) drilling locations, i3's reserves report
exhibits a strong and diverse asset base which can support growth
through the business and commodity cycles, and we look forward to
advancing our growth initiatives throughout the remainder of 2023.
We believe the mid-to-long-term supply/demand imbalance in oil and
gas production is and will continue to support pricing; as we have
seen both principal commodities strengthen in Q3 2023, positively
impacting i3's forecast cashflows for the remainder of the year (as
exhibited in the below 2023 Updated Guidance chart).
i3 is committed to conducting its operations safely, responsibly
and in accordance with industry best practices, and we continue to
advance our health and safety policies and procedures as we
integrate additional production assets. The Company's commitment to
high ESG standards is central to maintaining its social licence to
operate, creating value for all stakeholders, and ensuring
long-term commercial success. Following the publication of our
maiden annual sustainability report and establishing a baseline for
our business we have continued efforts to reduce the carbon
intensity of i3's operations through methane emission reductions
and electrification projects, and these efforts will continue into
the second half of the year.
"John Festival" "Majid Shafiq"
John Festival Majid Shafiq
Non-Executive Chairman Chief Executive Officer
30 August 2023 30 August 2023
Operational Review
Production in the first half of 2023 averaged 20,640 boepd,
comprised of 64.2 million standard cubic feet of natural gas per
day ("mmcf/d"), 4,809 barrels per day ("bbl/d") of natural gas
liquids ("NGLs"), 4,740 bbl/d of oil & condensate and 386 boepd
of royalty interest production, which was 9% higher than production
in the same period of 2022. A successful winter drilling and
workover program helped bolster average production in Q1 2023.
However, average production in Q2 2023 was negatively impacted by
wildfires and scheduled turnarounds in the months of May and June,
resulting in lower average sales production. Throughout this
period, volumes from the Company's northern areas were temporarily
shut-in due to encroaching forest fires. The areas affected
included Lodgepole, Edson, Wapiti, Simonette, Tony Creek and Noel
in Northern BC. On a calendar day basis approximately 1,650 boepd
(comprised of 300 bbls of oil, 260 bbls on NGLs and 6,550 mcf/d of
gas) was shut in for the month of May and approximately 385 boepd
in June (comprised of 18 bbls of oil, 53 bbls on NGLs and 1,885
mcf/d of gas). Fortunately, no personnel were endangered during
this period and no material damage was incurred to field facilities
and production has since been restored. The Company would like to
thank our field staff, industry partners, emergency responders and
firefighters for their professionalism and rapid response in
protecting the effected communities and our thoughts remain with
impacted community members. In June, production was temporarily
shut-in due to scheduled operated and third-party facility
turnarounds primarily affecting the Company's central Alberta areas
of Gilby and Rimbey, and to a lesser extent Wapiti in the North. In
conjunction with a major third-party gas plant's scheduled
four-year turnaround, i3 performed twenty operated turnarounds on
associated facilities in Central Alberta to ensure the regulatory
compliance and integrity of the Company's assets. These turnarounds
had a gross cost of USD 2.9 million (USD 2.4 million net) and were
successfully executed with production now back online. i3's July
2023 Company production, averaging 22,065 boepd, comprised of 69.5
million standard cubic feet of natural gas per day ("mmcf/d"),
5,490 barrels per day ("bbl/d") of natural gas liquids ("NGLs"),
4,597 bbl/d of oil & condensate and 403 boepd of royalty
interest production.
Royalty Interest production averaged 386 boepd in H1, which was
in line with the same period of 2022. The Company remains focused
on maximizing third-party activity on its extensive portfolio of
198,040 acres of royalty interest lands. During the first half of
2023, third-party operators drilled and brought on production 3
wells within the Company's royalty interest properties.
With the success of i3's 2022 drilling programme, the Company
capitalized on the availability of services and accelerated a
portion of its Q1 2023 programme in late Q4 2022. The drilling
programme focussed on operated oil and liquids rich gas wells in
Central Alberta (Cardium), Wapiti (Cardium, Dunvegan), and
Clearwater (operated and non-operated) assets. As part of the 2023
programme, the Company participated in 8 gross (5.5 net) wells
across its drilling portfolio, including 7 gross (5.0 net) operated
wells and 1 gross (0.5 net) non-operated well.
Wapiti
In H1, i3 and its working interest partner completed the
drilling of 4 gross (2.0 net) horizontal wells in the Wapiti area.
The wells included 3 gross (1.8 net) operated 1.5-mile Cardium
wells and 1 gross (0.2 net) operated 2-mile Dunvegan well. The
Cardium wells were efficiently drilled off a common pad and tied-in
to existing production facilities, in which i3 holds a working
interest, while the Dunvegan well was drilled off an existing pad
and tied-in to the same production facilities.
Production associated with the Q1 programme at Wapiti was
impacted due to high gathering system pressures, which restricted
the Company's ability to optimize the productive capacity of the
new wells. The relevant third-party area operator, as scheduled,
debottlenecked the gathering system in late Q2 through an upgrade
of existing infrastructure, which alleviated line pressure
constraints, thereby eliminating restrictions on well performance
and have allowed the Company to optimize production from its new
Wapiti wells. Post debottlenecking, in the past 2 months the 3-well
Cardium pad has performed above GLJ's Proved Plus Probable type
curve expectations, with recent production readily outpacing IP
peak rate forecasts.
Additionally, throughout H1, the Wapiti area had experienced
unanticipated apportionment issues (occurring when volumes exceed
available pipeline capacity in any given month) associated with the
Pembina Peace Pipeline liquids line, which resulted in reduced
liquids yields realized by area operators. The apportionment issues
have since been resolved with the commissioning of Keyera's Key
Access Pipeline System.
Central Alberta
i3's Q1 capital programme in Central Alberta was focussed
primarily in the greater Lodgepole area, where the Company expanded
its extensive infrastructure network and drilled 1 gross (1.0 net)
well. The Company's infrastructure improvements include a 2.3 km
pipeline to reroute production away from third-party
infrastructure, reducing the fee structure and improving run-time
efficiencies. The rerouting project was executed on-time and below
budget.
i3 drilled 1 gross (1.0 net) horizontal Cardium oil well in the
Lodgepole area of Central Alberta. The well was drilled off an
existing pad-site and tied into its new pipeline system. The well
was drilled on-budget and placed on stream in late Q1. The
performance of the new well was impacted by disruptions associated
with wildfires in the area but has since been brought back
online.
Gas processing in Central Alberta has been reduced as a result
of consolidating and rationalizing gas volumes and agreements
through a third-party gas plant for processing and sales. The
three-year processing agreement partially offset higher costs due
to facility maintenance activities and will reduce operating
expenses for the remainder of the term.
Clearwater
In Q1, i3 drilled 3 gross (2.5 net) multilateral horizontal
Clearwater wells at Dawson and Marten Creek as part of its ongoing
exploration and development portfolio of 144 gross sections (109
net sections, equivalent to 280 km2) of prospective Clearwater
lands.
At Dawson, i3 and its 50% partner, drilled the 05-16-081-16W5
six-leg (7,500 m of total lateral length) multilateral horizontal
Clearwater well. The well was drilled with oil-based mud ("OBM")
and placed on production in late January. After recovering the OBM
drilling fluid, the well had an initial 30 days' production
averaging 81 barrels of oil per day ("bopd") before being shut-in
late March due to road bans associated with spring breakup. Scaling
the well performance for an industry standard eight-leg
multilateral horizontal well configuration (10,000 m) translates,
encouragingly, to an estimated 110 bopd rate. With the success of
this initial earning well, i3 and its 50% partner have elected to
drill the second and final earning well at Dawson, which the
Company anticipates will be drilled and on production prior to
year-end or early Q1 2024. Throughout H1, i3 has been working to
secure multiple pad sites at East Dawson to facilitate future
expansion of the field, upon further operational success.
At Marten Creek, i3 followed up on its 2022 recompletion
activity with 2 gross (2.0 net) exploratory three-leg multilateral
horizontal wells (retrieving a vertical core from one well). The
two exploratory wells were drilled in January, targeting two
separate Clearwater sequences. The core indicated two thick, oil
saturated sands with encouraging porosity and permeability levels
and free oil was detected in the rig process system during drilling
operations. The wells were equipped with temporary production
facilities and placed on production in late January and early
February, respectively. Due to unseasonably warm weather in the
area and early breakup of ice-roads, production equipment had to be
removed from the well-sites before all the associated OBM was
recovered. i3 intends to return this coming winter to complete
testing of the wells to determine deliverability.
Hedging Programme
i3's risk management strategy currently protects USD 51.02
million (CAD 67.86 million) of net operating income for 2023 with
current hedges in place to cover 39%, 23%, 21% and 28% of the
Company's projected Q1, Q2, Q3 and Q4 2023 production volumes,
respectively. i3's 2023 hedges are shown in the below chart, with
additional information provided below in notes 14 and note 19 to
the H1 2023 Interim Consolidated Financial Statements:
Swaps Costless Collars Basis Swaps
GAS Volume Price Volume Avg Avg Volume Price ($US/mmbtu)
(GJ) (C$/GJ) (GJ) Floor Ceiling (mmbtu)
Price Price
(C$/GJ) (C$/GJ)
Q1 2023 2,397,500 4.41 1,125,000 5.80 10.09
Q2 2023 960,101 (1.46)
Q3 2023 610,000 2.76 970,652 (1.46)
Q4 2023 1,835,000 2.99 327,067 (1.46)
Participation Swaps
OIL Volume Price Volume Avg Avg Volume Avg Floor
(bbl) (C$/bbl) (bbl) Floor Ceiling (bbl) Price (C$/bbl)
Price Price
(C$/bbl) (C$/bbl)
Q1 2023 58,500 106.85 162,000 100.00 124.44
Q2 2023 36,400 112.83 113,650 100.00 127.35 91,000 90.00
Q3 2023 168,500 99.69
Q4 2023 184,000 99.16
PROPANE Volume Price Volume Avg Avg
(bbl) ($US/bbl) (bbl) Floor Ceiling
Price Price
($US/bbl) ($US/bbl)
Q1 2023 45,000 42.00 51.61
---------- ----------- ----------- ----------- ----------- --------- ------------------
Serenity
i3 continues to work with its partner Europa Oil and Gas to
advance a field development plan for a one-well development for the
Serenity field.
Environmental, Social and Governance ("ESG")
i3 is committed to conducting its operations responsibly and in
accordance with industry best practices. The Company'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.
On an operated basis in H1 2023, i3 invested USD 1.4 million
gross (USD 0.8 million net) to complete 20 well abandonments,
decommission 6 facilities and abandon 5 pipelines as well as
advance site reclamations across its portfolio achieving 10 site
closures with reclamation certification. With a net spend of USD
0.8 million i3 was able to reduce the Company's deemed liability by
USD 1.1 million. In 2023, i3 is on track and committed to exceed
its mandated, operated closure spend, with approximately USD 3.9
million gross being directed to pipeline and wellbore abandonments,
pipeline and facility decommissioning, along with well site
reclamation. In H1 2023, i3 deployed USD 2.4 million towards
closure spend incorporating non-operated activities.
Additionally, i3 continues to reduce its emissions footprint
through its ongoing electrification projects. The Company has spent
a net USD 0.3 million (including USD 0.1 million, which is
reimbursable through Alberta's SPEED funding) to complete the
electrification of 12 gross (10.5 net) well sites in Carmangay and
Retlaw to eliminate the use of propane and natural gas for power
generation.
2023 Updated Guidance
i3's full year 2023 revised guidance, as at 30 August 2023,
which is now based on strip pricing for the remainder of the year,
is shown below. With the improvement in underlying commodity prices
and the continued performance of the Company's stable production
base, 2023 expected NOI has increased approximately 19% to USD 92.5
million. Guidance provided previously, as part of our 29 June 2023
press release has been presented for comparative purposes.
Sensitivity to movement in commodity prices is also provided.
Previous full year Revised full year
2023 guidance and assumptions 2023 guidance and
as provided - 29 June assumptions - 30 Aug
2023 2023
Annual Average Production 20,000 - 21,000 boepd 20,000 - 21,000 boepd
(1)
------------------------------- ----------------------
Royalty Rate 15.3% 14.3%
------------------------------- ----------------------
Operating & Transport USD 13.40 - 13.60 / USD 12.90 - 13.10
boe / boe
------------------------------- ----------------------
Net Operating Income USD 75 million - 80 USD 90 million - 95
(2) million million
------------------------------- ----------------------
EBITDA (2) USD 67 million - 72 USD 80 million - 85
million million
------------------------------- ----------------------
Capital Expenditures USD 25 million USD 25 million
------------------------------- ----------------------
Dividends Paid (3) USD 19 million USD 19 million
(Forecast for Jan
- Oct. 2023)
------------------------------- ----------------------
2023 Updated Commodity Assumptions (4)
WTI (USD/bbl) USD 72.00/bbl USD 76.60/bbl
MSW Oil Differential USD 3.10/bbl USD 2.75/bbl
(USD/bbl)
-------------- --------------
AECO Natural Gas CAD 2.60/GJ CAD 2.70/GJ
(CAD/GJ)
-------------- --------------
USD / CAD Foreign
Exchange 1.33 1.35
-------------- --------------
GBP / CAD Foreign
Exchange 1.68 1.68
-------------- --------------
GBP / USD Foreign
Exchange 1.26 1.26
-------------- --------------
Next Twelve-Month Net Operating Income Sensitivity (5)
Next twelve months' sensitivity Estimated change to net operating Estimated change to net operating
income - 29 June 2023 income - 30 Aug 2023
Change in WTI USD 1.00/bbl USD 1.30 million USD 1.33 million
---------------------------------- -----------------------------------
Change in AECO CAD 0.10/GJ USD 1.40 million USD 1.41 million
---------------------------------- -----------------------------------
Change in CAD/USD exchange USD 1.27 million USD 0.98 million
rate CAD 0.01
---------------------------------- -----------------------------------
(1) Total annual average production (boepd) is comprised of
approximately 48% Oil, Condensate & NGLs, 51% Natural Gas and
1% Gross Overriding Royalty Production.
(2) Non-IFRS measure. Refer to Appendix B.
(3) Based on i3's forecast nine-month 2023 ordinary share
dividend payments of GBP15.2 million (US$19.0 million assuming 1.26
GBP:USD) to be paid through October 2023. The declaration of
dividends is subject to terms of loan facility and the approval of
i3's board of directors, compliance with (or waiver from) the
financial ratios contained within the Company's refinanced debt
documentation and is subject to change. Forecast of Q4 2023
dividends are not included in current guidance numbers but will be
revisited when the Company reviews its Q4 capital and dividend
programmes this fall.
(4) Commodity prices and foreign exchange reflect full year
average realized prices or rates.
(5) Illustrates the expected impact of changes in commodity
prices and the CAD:USD exchange rate on i3's estimate of Net
Operating Income for 2023 of USD 90 million to USD 95 million,
holding all other variables constant. The sensitivity is based on
the commodity price and exchange rate assumptions set forth in the
table above. Calculations are performed independently and may not
be indicative of actual results. Actual results may vary materially
when multiple variables change at the same time and/or when the
magnitude of the change increases.
Financial Review
Production
Average Sales Production Six-months Six-months Year Ended
Ended 30 Ended 30 31 December
June 2023 June 2022 2022
---------------------------- ---------- ------------------ ------------
Oil and condensate (bbl/d) 4,740 3,916 4,340
Natural gas liquids (bbl/d) 4,809 5,021 5,047
Natural gas (mcf/d) 64,231 57,754 63,076
Royalty interest (boepd) 386 387 418
---------- ------------------ ------------
Total Production (boepd) 20,640 18,950 20,317
========== ================== ============
Average Sales Production Mix Six-months Six-months Year Ended
Ended 30 Ended 30 31 December
June 2023 June 2022 2022
----------------------------- ---------- ---------- ------------
Oil and condensate 23% 21% 21%
Natural gas liquids 23% 26% 25%
Natural gas 52% 51% 52%
Royalty interest 2% 2% 2%
---------- ---------- ------------
100% 100% 100%
========== ========== ============
Production in the first half of 2023 averaged 20,640 boepd,
which was 9% higher than production in the same period of 2022. A
successful H2 2022 drilling and workover program helped bolster
average production in Q1 2023, however average production in Q2
2023 was negatively impacted by forest fires in the month of May
and scheduled turnarounds in the month of June 2023, resulting in
lower average sales production. In May, average sales production
from the Company's northern areas (Simonette, Wapiti, Lodgepole,
Edson, Tony Creek and Noel in BC) were temporarily shut-in as a
precaution to encroaching forest fires. In June, production was
temporary shut-in due to scheduled operated facility turnarounds,
which primarily affected the Company's central Alberta areas of
Gilby and Rimbey. The Wapiti area was also affected by temporary
shut-in production due to a third-party facility turnaround. No
major damage was incurred due to forest fires and wells have since
come back on-line. In addition, scheduled turnarounds progressed as
expected and wells impacted by the downtime have also come back
on-line.
Average sales production mix, period over period, was consistent
with just over 50% of sales derived from natural gas and 46% - 47%
of sales represented by oil, condensate and natural gas liquids
followed by 2% of sales from royalty interest wells.
Royalty Interest production averaged 386 boepd in H1, which was
in line with the same period of 2022. The Company remains focused
on maximizing third-party activity on its extensive portfolio of
198,040 acres of royalty interest lands. During the first half of
2023, third-party operators drilled and brought on production 3
wells on the Company's royalty interest properties.
A summary of average sales volumes for the 8 preceding quarters
is presented below.
Average Sales Production Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023
Oil and condensate (bbl/d) 2,425 3,624 3,945 3,886 4,396 5,119 5,238 4,247
Natural gas liquids (bbl/d) 2,999 4,601 4,942 5,099 5,038 5,106 5,569 4,057
Natural gas (mcf/d) 45,079 58,037 54,689 60,785 64,180 72,442 69,555 58,965
Royalty interest (boepd) 302 331 389 385 440 458 373 398
-------------------------------- -------- -------- -------- -------- -------- -------- -------- --------
Total Sales Production (boepd) 13,239 18,229 18,391 19,502 20,571 22,757 22,773 18,529
================================ ======== ======== ======== ======== ======== ======== ======== ========
Revenue
i3's proceeds from the sale of oil and gas produced from its
Canadian oil and gas assets are based on average sales production
volumes and averaged realised sales prices in Canadian dollars. The
below table shows the average prices in Canadian dollars realised
by the Group for the six months ended 30 June 2023 and 2022 and the
year ended 31 December 2022.
Average Realised Pricing (1) Six-months Six-months Year Ended
Ended 30 Ended 30 31 December
June 2023 June 2022 2022
------------------------------- ---------- ---------- ------------
Oil and condensate (CAD$/bbl) 94.60 123.72 114.66
Natural gas liquids (CAD$/bbl) 22.97 37.01 35.02
Natural gas (CAD$/mcf) 2.97 6.19 5.42
Royalty interest (CAD$/bbl) 36.14 46.94 51.37
---------- ---------- ------------
Total (CAD$/boe) 37.01 55.18 51.08
========== ========== ============
(1) Average realised prices derived by dividing oil and gas
sales in GBP by averaged sales production and converting to CAD
using period-average GBP/CAD exchange rate six months ended 30 June
2023 of 1.6613, six months ended 30 June 2022 of 1.6513 (year ended
31 December 2022 of 1.6073).
Six-months Six-months Year Ended
Ended 30 Ended 30 31 December
June 2023 June 2022 2022
GBP'000 GBP'000 GBP'000
----------------------------- ---------- ---------- ----------------------
Oil and condensate 48,850 53,104 113,003
Natural gas liquids 12,035 20,366 40,142
Natural Gas 20,816 39,157 77,656
Royalty interest 1,520 1,991 4,890
----------------------------- ---------- ---------- ----------------------
Oil and gas sales 83,221 114,618 235,691
Royalties (10,540) (16,174) (33,536)
Revenue from the sale of oil
and gas 72,681 98,444 202,155
Processing income 2,701 3,081 5,995
Other operating income 107 46 286
----------------------------- ---------- ---------- ----------------------
Total revenue 75,489 101,571 208,436
========== ========== ======================
Total revenue for the first half of 2023 was GBP75.5 million.
Oil and gas sales of GBP83.2 million in the first half of 2023 was
27% lower than the same period in 2022, which was primarily due to
lower commodity prices in the first half of 2023. Oil prices
trended lower in the first half of 2023, as initial 2022 post Covid
travel demand levelled off, the recovery of the Chinese economy was
more sluggish than expected, and concerns over Russian oil
curtailment at the start of the Ukrainian / Russian war in 2022
diminished. Natural gas liquid prices fell in Q2 2023, compared to
the same period in 2022 due to lower underlying oil and gas prices
in addition to a return to normal North America NGL inventory
levels in 2023. AECO and NYMEX pricing was high in H1 2022 in
response to the war. However, pricing experienced downward pressure
due to a mild winter, increased production, and strong storage
levels in H1 2023, resulting in lower realised pricing.
Royalty rates in Alberta, which is where most of the Company's
production comes from, are based on a sliding scale where the
royalty rate is dependent on a monthly Alberta par price for oil
and on a monthly Alberta reference price for natural gas and NGLs
and individual well production rates. Higher commodity prices
attract a higher royalty rate and vice-versa. Similarly, high
individual production rates attract higher royalty rates and
vice-versa. Royalties for the first half of 2023, consisting of
Crown, gross overriding and freehold payments, was GBP10.5 million,
compared to GBP16.2 million in the first half of 2022. Royalties as
a percentage of oil and gas sales in the first half of 2023 and the
same period in 2022 were 13% and 14%, respectively. In the first
half of 2023, i3 received a positive one-time yearly gas cost
allowance ("GCA") adjustment from the Alberta Government of GBP 1.8
million.
Processing and other income of GBP2.8 million in the first half
of 2023 was slightly lower than processing and other income of
GBP3.1 million in the first half of 2022. Lower processing and
other income in the first half of 2023, compared to the same period
in 2022 was primarily due to the impact of scheduled facility
turnarounds in June 2023, which temporarily restricted third party
production through certain of the Company's operated
facilities.
Expenses
Production costs Six-months Six-months Year Ended
Ended 30 Ended 30 31 December
June 2023 June 2022 2022
GBP'000 GBP'000 GBP'000
--------------------------------- ---------- ---------- ------------
Total Production Costs 36,437 32,782 76,418
Total Production Costs (GBP/boe) 9.75 9.56 10.31
========== ========== ============
Total production costs are primarily comprised of field labour
and general field maintenance, land retention and taxes, well
repairs and expensed well workovers / facility turnarounds,
processing fees, and product transportation.
Total production costs in the first half of 2023 associated with
the extraction and processing of the Group's Canadian oil and gas
assets totalled GBP36.4 million, or GBP9.75/boe, compared to total
production costs in the first half of 2022 of GBP32.8 million, or
GBP9.56/boe. An increase in production costs period over period is
primarily due to production outages in conjunction with scheduled
one-time facility turnaround costs in June of 2023, which were on
budget and totaled approximately GBP1.9 million, or approximately
GBP0.51/boe. Also attributing to the increase in production costs
in the first half of 2023 are higher electricity costs due to
increased price and usage and continued inflationary pressures on
existing production costs. These increases were partially offset by
reduced third-party processing fees negotiated in the period.
Administrative expenses decreased by GBP5.4 million to GBP4.1
million from the first half of 2022 to the first half of 2023. The
decrease is largely due to a decrease in personnel costs following
changes to the Group's short term incentive plan in the first half
of 2023, along with a general reduction in professional fees and
other administrative costs.
Finance costs
The Group incurred finance costs of GBP4.7 million, an increase
of GBP1.4 million from the GBP3.3 million in the first half of
2022. GBP0.2 million of the increase is attributable to increases
in interest expense and amortisation of deferred finance costs due
to the larger principal balance on the May 2023 Debt Facility,
discussed further below. There was also a GBP0.3 million increase
in bank charges and interest on creditors relating to timing of
income tax payments, a GBP0.2 million increase in the unwinding of
discount on decommissioning provision, and a GBP0.7 million
increase relating to a gain on financial instrument at FVTPL which
was recorded in the first half of 2022 with no such gain in 2023.
Further details are provided in financial statements note 5 and
note 12 .
Tax charge
The Group's current and deferred tax charges are presented in
the following table.
Of which: Six-months Six-months Year Ended
Ended 30 Ended 30 31 December
June 2023 June 2022 2022
GBP'000 GBP'000 GBP'000
------------------------------- ---------- ---------- ------------
Current tax charge 5,262 5,675 10,002
Deferred tax (credit) / charge (1,737) 123 3,824
------------------------------- ---------- ---------- ------------
Total income tax charge 3,525 5,798 13,826
========== ========== ============
The current tax charge in 2023 and 2022 resulted from taxable
income at the Group's Canadian operations, which prior to 2022 had
been sheltered by the Group's accumulated non-capital losses. These
non-capital losses were fully utilised in 2022 and the residual
taxable income was subject to taxation at the combined rate of 23%.
The Group paid the current income tax expense for the year ended 31
December 2022 in the first half of 2023 and has made installment
payments against the expected tax owing for the year ending 31
December 2023. The current tax charge in 2023 was partially offset
by the receipt of R&D tax refunds of GBP0.2 million in the UK
in respect of the 2020 and 2021 fiscal years.
The deferred tax credit resulted from changes in net deductible
temporary differences in Canada. Further details are provided in
note 6 .
Profit, EPS, EBITDA, Adjusted EBITDA, and Net Operating
Income
The Group's profit, EPS, EBITDA, Adjusted EBITDA, and Net
operating income are presented in the following table.
Six-months Six-months Year Ended
Ended 30 Ended 30 31 December
June 2023 June 2022 2022
GBP'000 GBP'000 GBP'000
----------------------------------- ---------- ---------- ------------
Profit for the period 10,944 14,725 41,951
Basic earnings per share (pence) 0.91 1.30 3.60
Diluted earnings per share (pence) 0.90 1.20 3.43
EBITDA (1) 38,561 38,821 97,981
Adjusted EBITDA (1) 38,561 38,821 97,990
Net operating income (1) 38,945 68,835 131,732
(1) Non-IFRS measure. Refer to Appendix B.
Cash and cash equivalents
The Group had GBP12.7 million of cash and cash equivalents at 30
June 2023, a decrease of GBP3.9 million from 31 December 2022. The
decrease was driven by GBP24.3 million in net cash from operating
activities, offset by GBP27.0 million of net cash used in investing
activities, primarily capital expenditure at the Group's Canadian
operations as discussed below, and GBP1.2 million of net cash used
in financing activities, primarily dividends paid and various debt
finance costs.
PP&E and E&E
The Group had PP&E assets of GBP219.9 million (30 June 2022:
GBP221.5 million, 31 December 2022 - GBP236.5 million) and
intangible E&E assets of GBP63.0 million (30 June 2022: GBP54.7
million, 31 December 2022: GBP62.1 million) as at 30 June 2023.
The increase due to additions and acquisitions was offset by
various disposals and the depletion charge for the period. Further
details are in Note 8 of the financial statements.
Total property, plant and equipment additions in the first half
of 2023 totaling GBP15.4 million was comprised of work associated
with the Group's Canadian oil and gas assets.
Six-months Six-months Year Ended
Ended 30 Ended 30 31 December
June 2023 June 2022 2022
GBP'000 GBP'000 GBP'000
------------------------------------ ---------------- --------------- ------------
Land 118 57 975
Seismic 21 99 452
Drilling, completions 8,234 28,966 58,135
Facilities, equipment and pipelines 6,851 4,416 14,862
Other 136 611 1,369
------------------------------------ ---------------- --------------- ------------
Total Property, Plant & Equipment
Additions 15,360 34,149 75,793
================ =============== ============
During the first half of 2023, i3 invested GBP15.4 million on
property, plant and equipment additions. i3 participated in
drilling 8 (5.5 net) wells, which includes 3 (1.8 net) wells in the
Wapiti area which were spud in December 2022. 3 wells (2.5 net)
were drilled in the Clearwater area and are currently shut-in due
to seasonal, winter only access. The remaining 2 wells, which
consisted of 1 well (1.0 net) in the Lodgepole area and 1 well (0.2
net) in the Wapiti area were drilled, completed and equipped and
placed on production in the first half of 2023. i3 also completed,
equipped and placed on production 3 (1.8 net) Wapiti wells that
were drilled in December 2022. Additional investments focused on
various well and facility electrification projects along with
facility upgrades and well and pipeline modifications. An
additional GBP0.3 million was spent on land retention costs,
seismic and other costs.
During the first half of 2022, i3 invested GBP29 million to
drill and complete 19 (10.7 net) wells, in addition to drilling 1
(1.0 net) well that commenced its completion program in July 2022.
Also, i3 tested well locations in the Marten Hills and Gilby area.
i3 also invested GBP4.4 million on equipping the above drilled
wells, except for the Wapiti wells, which were equipped in July
2022. Also included in the GBP4.4 million, were various well and
facility electrification projects along with facility upgrades and
pipeline modifications. An additional GBP0.8 million was spent on
land retention costs, seismic costs and other.
During the first half of 2023, additions to intangible
exploration and evaluation assets of GBP1.2 million was primarily
comprised of appraisal drilling costs in the Clearwater play in
Canada and costs associated with progressing a development of the
Serenity in the UK.
Six-months Six-months Year Ended
Ended 30 Ended 30 31 December
June 2023 June 2022 2022
GBP'000 GBP'000 GBP'000
------------------------------ ---------- ---------- ------------
Canada 986 4,284 6,677
UK 214 379 5,650
------------------------------ ---------- ---------- ------------
Total E&E capital expenditure 1,200 4,663 12,327
========== ========== ============
Borrowings and leases
The Group had borrowings and leases of GBP41.2 million at 30
June 2023, an increase of GBP14.0 million from GBP27.2 million at
31 December 2022. The increase is largely due to drawing GBP44.5
million on the new Debt Facility and fully repaying GBP28.9 million
on the H1-2019 Loan Notes, partially offset by deferred finance
costs and an amortisation payment on the Debt Facility. The Debt
Facility amortises monthly on a straight-line basis, and
accordingly GBP13.8 million has been classified as a current
liability, which represents the principal payments net of deferred
finance costs over the 12 months following 30 June 2023. Further
details regarding the establishment of the Debt Facility and the
repayment of the H1-2019 Loan Notes are provided in note 12 to the
financial statements.
Dividends
In the first half of 2023, the Group declared and paid GBP10.2
million and GBP12.3 million of dividends, respectively (first half
2022: declared GBP6.9 million and paid GBP5.2 million, full year
2022: declared GBP17.4 million and paid GBP15.4 million). In June
2023 the Group revised its annual dividend guidance to a monthly
equivalent of 0.0855 pence per share, to be paid quarterly, which
annualises to approximately GBP12.3 million at GBP3.1 million per
quarter based on the number of ordinary shares outstanding as at 30
June 2023.
Principal risks and uncertainties
The Group operates in the oil and gas industry in an environment
subject to a range of inherent risk and uncertainties. The
principal risks and uncertainties, being those determined to be the
most significant, are set out in the annual report for the year
ended 31 December 2022, along with the way they are mitigated. The
Directors have reconsidered the principal risks and uncertainties
and have concluded that the risks published in the 2022 annual
report remain appropriate, although highlight that the new Debt
Facility established during the period contains various covenants,
and non-compliance with these covenants could negatively impact the
Group. The Group closely monitors these covenants and was in full
compliance as at 30 June 2023.
Going concern
The Directors have considered the going concern of the Group and
are satisfied that the Group has sufficient resources to operate
and to meet their commitments as they come due over the going
concern period. The Group continues to closely monitor its cash
balances which stood at GBP12.7 million and a net current liability
of GBP2.7 million as at 30 June 2023. Refer to Note 2 of the
financial statements for further discussion.
Condensed Consolidated Statement of Comprehensive Income
Notes Six-months Six-months Year Ended
Ended 30 Ended 30 31 December
June 2023 June 2022 2022
-------------------------------------- ----- ------------- ------------ ------------
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
Revenue 4 75,489 101,571 208,436
Production costs (36,437) (32,782) (76,418)
Gain / (loss) on risk management
contracts 14 3,343 (20,475) (18,990)
Depreciation and depletion 8 (19,410) (15,017) (34,339)
------------- ------------ ------------
Gross profit 22,985 33,297 78,689
Administrative expenses (4,083) (9,493) (15,038)
Loss on asset dispositions - - (9)
------------- ------------ ------------
Operating profit 18,902 23,804 63,642
Finance income 249 - -
Finance costs 5 (4,682) (3,281) (7,865)
Profit before tax 14,469 20,523 55,777
Tax charge 6 (3,525) (5,798) (13,826)
------------- ------------ ------------
Profit for the period 10,944 14,725 41,951
============= ============ ============
Other comprehensive income:
Items that may be reclassified
subsequently to profit or loss:
Foreign exchange differences
on translation of foreign operations (4,449) 11,605 6,688
------------- ------------ ------------
Other comprehensive income
for the period, net of tax (4,449) 11,605 6,688
Total comprehensive income
for the period 6,495 26,330 48,639
============= ============ ============
Earnings per share Pence Pence Pence
Earnings per share - basic 7 0.91 1.30 3.60
Earnings per share - diluted 7 0.90 1.20 3.43
------------- ------------ ------------
All operations are continuing.
The accompanying notes form an integral part of these interim
financial statements.
Condensed Consolidated Statement of Financial Position
Assets Notes 30 June 2023 30 June 2022 31 December 2022
------------------------------------- ----- ------------- ------------ ----------------
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
Non-current assets
Property, plant & equipment 8 219,894 221,469 236,465
Exploration and evaluation assets 9 63,036 54,715 62,060
Other non-current assets - 74 74
Total non-current assets 282,930 276,258 298,599
Current assets
Cash and cash equivalents 12,682 30,335 16,560
Trade and other receivables 10 25,118 36,973 34,843
Risk management contracts 14 1,030 533 1,111
Inventory 2,597 883 2,099
------------- ------------ ----------------
Total current assets 41,427 68,724 54,613
Current liabilities
Trade and other payables 11 (27,273) (54,970) (55,846)
Risk management contracts 14 - (8,271) (381)
Borrowings and leases 12 (13,799) (25,534) (27,241)
Decommissioning provision 13 (3,084) (2,509) (3,190)
Total current liabilities (44,156) (91,284) (86,658)
Net current (liabilities) / assets (2,729) (22,560) (32,045)
Non-current liabilities
Borrowings and leases 12 (27,391) - -
Decommissioning provision 13 (81,883) (92,533) (90,141)
Deferred tax liability 6 (9,577) (8,335) (11,667)
Total non-current liabilities (118,851) (100,868) (101,808)
Net assets 161,350 152,830 164,746
============= ============ ================
Capital and reserves
Ordinary shares 15 120 119 119
Deferred shares 15 50 50 50
Share premium 15 50,704 48,646 48,646
Share-based payment reserve 16 6,621 6,164 6,311
Warrants - LNs 16 - 2,045 2,045
Foreign currency translation reserve 3,603 12,969 8,052
Retained earnings 100,252 82,837 99,523
Shareholders' funds 161,350 152,830 164,746
============= ============ ================
The accompanying notes form an integral part of these interim
financial statements.
The consolidated financial statements of i3 Energy plc, company
number 10699593, were approved by the Board of Directors and
authorized for issue on 30 August 2023. Signed on behalf of the
Board of Directors by:
"Majid Shafiq"
Majid Shafiq - Director
Condensed Consolidated Statement of Changes in Equity
Ordinary Share Deferred Share-based Warrants Foreign Retained Total
shares premium shares payment - LN currency earnings (unaudited)
reserve translation
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- ----------- -------- ------------ ---------- ------------
Balance at 1 January
2022 113 44,203 50 9,102 2,045 1,364 81,289 138,166
Total comprehensive
income for the
period - - - - - 11,605 14,725 26,330
Transactions with
owners:
Exercise of options 6 4,443 - (3,774) - - (6,324) (5,649)
Exercise of warrants - - - - - - - -
Share-based payment
expense - - - 836 - - - 836
Dividends declared
in the period - - - - - - (6,853) (6,853)
-------- -------- -------- ----------- -------- ------------ ---------- ------------
Balance at 30 June
2022 119 48,646 50 6,164 2,045 12,969 82,837 152,830
-------- -------- -------- ----------- -------- ------------ ---------- ------------
Balance at 1 January
2023 119 48,646 50 6,311 2,045 8,052 99,523 164,746
Total comprehensive
income for the
period - - - - - (4,449) 10,944 6,495
Transactions with
owners:
Exercise of options 15 - 13 - - - - - 13
Exercise of warrants 1 2,045 - - (2,045) - - 1
Share-based payment
expense 16 - - - 310 - - - 310
Dividends declared
in
the period - - - - - - (10,215) (10,215)
-------- -------- -------- ----------- -------- ------------ ---------- ------------
Balance at 30 June
2023 120 50,704 50 6,621 - 3,603 100,252 161,350
======== ======== ======== =========== ======== ============ ========== ============
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
earnings 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
The accompanying notes form an integral part of these interim
financial statements.
Condensed Consolidated Statement of Cash Flow
Notes Six-months Six-months Year Ended
Ended 30 Ended 30 31 December
June 2023 June 2022 2022
* Restated * Restated
-------------------------------------- ----- ------------- ------------ ------------
OPERATING ACTIVITIES GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
Profit before tax 14,469 20,523 55,777
Adjustments for:
Depreciation and depletion 8 19,410 15,017 34,339
Loss on bargain purchase and
asset dispositions - - 9
Finance costs 5 4,682 3,281 7,865
Unrealised (gain) / loss on risk
management contracts 14 (328) 7,223 (858)
Non-cash other income - - (215)
Unrealised FX (gain) / loss (15) (2) 113
Share-based payments expense
- employees (including NEDs) 16 310 836 1,092
Expenditure on decommissioning
oil and gas assets (3,333) (201) (437)
Current taxes paid (13,675) - -
Operating cash flows before movements
in working capital:
Decrease / (Increase) in trade
and other receivables 12,153 (11,686) (8,378)
(Decrease) / Increase in trade
and other payables (8,881) 13,656 12,782
(Increase) in inventory (498) (218) (1,434)
------------- ------------ ------------
Net cash from operating activities 24,294 48,429 100,655
------------- ------------ ------------
INVESTING ACTIVITIES
Acquisitions (12) 15 (531)
Expenditures on property, plant
& equipment (25,963) (19,277) (64,374)
Disposal of property, plant &
equipment - 170 621
Expenditures on exploration and
evaluation assets (1,192) (4,452) (13,842)
Tax credit for R&D expenditure 6 184 - -
------------- ------------ ------------
Net cash used in investing activities (26,983) (23,544) (78,126)
------------- ------------ ------------
FINANCING ACTIVITIES
Exercise of warrants and options 14 635 635
Employment tax on exercised share
options 16 - (6,324) (6,432)
Repayment of H1-2019 LN facility 12 (28,856) - -
Issuance of debt facility 12 44,481 - -
Payment of deferred finance costs 12 (2,039) - -
Principal payments on debt facility 12 (1,238) - -
Interest and other finance charges
paid 5 (1,277) (1,161) (2,330)
Lease payments 12 - (15) (74)
Dividends paid 15 (12,254) (5,153) (15,353)
Net cash used in financing activities (1,169) (12,018) (23,554)
Effect of exchange rate changes
on cash (20) 2,133 2,250
------------- ------------ ------------
Net (Decrease) / Increase in
cash and cash equivalents (3,878) 15,000 1,225
Cash and cash equivalents, beginning
of period 16,560 15,335 15,335
------------- ------------ ------------
CASH AND CASH EQUIVALENTS,
OF PERIOD 12,682 30,335 16,560
============= ============ ============
* The classification of certain comparative lines have been
restated - see Note 2. Included within cash and cash equivalents is
GBP343 thousand of restricted cash, which relates to guarantees for
product marketing. The debt reconciliation is shown in Note 12 .
The accompanying notes form an integral part of these interim
financial statements.
Notes to the Condensed Consolidated Interim Financial
Statements
1 Summary of significant accounting policies
General Information and Authorisation of Financial
Statements
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 the
Western Canadian Sedimentary Basin and of the appraisal of oil and
gas assets on the UK Continental Shelf.
2 Basis of preparation
The condensed consolidated interim financial statements have
been prepared in accordance with International Accounting Standard
34 'Interim Financial Reporting' ("IAS 34") and the AIM rules.
These condensed consolidated interim financial statements have been
prepared using the accounting policies that were applied in the
Group's statutory financial statements for the year ended 31
December 2022 and are expected to be applied in the preparation of
the financial statements for the year ending 31 December 2023. The
condensed interim financial statements should be read in
conjunction with the annual financial statements for the year ended
31 December 2022, which have been prepared in accordance with UK
adopted international accounting standards.
The reports for the six months ended 30 June 2023 and 30 June
2022 are unaudited and do not constitute statutory accounts as
defined by the Companies Act 2006. The financial statements for 31
December 2022 have been prepared and delivered to the Registrar of
Companies. The auditor's report for these financial statements was
unqualified.
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 Ltd., is CAD. A summary of
period-average and period-end exchange rates is presented in the
table below:
Six-months Six-months Year Ended
Ended 30 Ended 30 31 December
June 2023 June 2022 2022
--------------------------------- ---------- ---------- ------------
Period-average GBP:CAD exchange
rate 1.6613 1.6513 1.6073
Period-end GBP:CAD exchange rate 1.6823 1.5661 1.6283
In preparing these interim financial statements, management has
made judgements and estimates that affect the application of
accounting policies and the reported amounts of assets and
liabilities, income, and expense. Actual results may differ from
these estimates. The significant judgements made by management in
applying the Group's accounting policies and the key sources of
estimation uncertainty were the same as those disclosed in the
Group's statutory financial statements for the year ended 31
December 2022, except for 'Estimated future cash flows for
intangible exploration and evaluation assets for impairment
testing' as there were no indicators of impairment for the period
ended 30 June 2023.
Going concern
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the Chairman's and Chief Executive's Statement. The
financial position of the Group, its net cash position and
liabilities are described in these consolidated interim financial
statements and in the Financial Review.
The Group ended the period with cash and cash equivalents of
GBP12.7 million, current assets of GBP41.4 million, and current
liabilities of GBP44.2 million. The Group's debt primarily consists
of the CAD 75.0 million drawn on the Debt Facility in May 2023,
whose carrying value is GBP41.2 million as at 30 June 2023 (note
12). During the 6 months ended 30 June 2023, the Group generated
GBP24.3 million of cash from operating activities.
The Directors have given careful consideration to the
appropriateness of the going concern assumption, including cash
forecasts through the end of 2024, committed capital expenditure,
and the principal risks and uncertainties faced by the Group. The
cash flow forecasts include maintenance capital expenditure in
Canada and monthly amortisation payments on the Debt Facility. This
assessment also considered various downside scenarios including a
combined downside scenario with a 15% reduction in strip commodity
prices, risks which are partially mitigated by the risk management
contracts the Group currently has in place.
Following this review, the Directors are satisfied that the
Group has sufficient resources to operate and to meet their
commitments as they come due over the going concern period which
considers at least 12 months from the date of approval of the
financial statements. Accordingly, the Directors continue to adopt
the going concern basis in preparing the financial statements for
the period ended 30 June 2023.
Reclassification of comparative information
Following an increase in decommissioning expenditure in 2023 and
a review of the financial statements, the Group has elected to
change the classification of expenditure on decommissioning oil and
gas assets from investing activities to operating activities within
the consolidated statement of cash flow. There has been no change
to the consolidated statements of comprehensive income or financial
position.
3 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 for the six months ended 30 June 2023:
UK / Corporate Canada Total
GBP'000 GBP'000 GBP'000
---------------------------------- -------------- -------- --------
Revenue - 75,489 75,489
Production costs - (36,437) (36,437)
Loss on risk management contracts - 3,343 3,343
Depreciation and depletion (2) (19,408) (19,410)
---------------------------------- -------------- -------- --------
Gross (loss) / profit (2) 22,987 22,985
Administrative expenses (1,310) (2,773) (4,083)
Operating (loss) / profit (1,312) 20,214 18,902
Finance income - 249 249
Finance costs (2,978) (1,704) (4,682)
---------------------------------- -------------- -------- --------
(Loss) / profit before tax (4,290) 18,759 14,469
Tax credit / (charge) for
the period 184 (3,709) (3,525)
---------------------------------- -------------- -------- --------
(Loss) / profit for the period (4,106) 15,050 10,944
============== ======== ========
The timing of revenue recognition has been disclosed within Note
4 .
The following is an analysis of the Group's revenue and results
by reportable segment for the six months ended 30 June 2022:
UK / Corporate Canada Total
GBP'000 GBP'000 GBP'000
---------------------------------- -------------- -------- --------
Revenue - 101,571 101,571
Production costs - (32,782) (32,782)
Loss on risk management contracts - (20,475) (20,475)
Depreciation and depletion (2) (15,015) (15,017)
---------------------------------- -------------- -------- --------
Gross (loss) / profit (2) 33,299 33,297
Administrative expenses (4,749) (4,744) (9,493)
Acquisition costs - - -
Operating (loss) / profit (4,751) 28,555 23,804
Finance costs (2,070) (1,211) (3,281)
---------------------------------- -------------- -------- --------
(Loss) / profit before tax (6,821) 27,344 20,523
Tax (charge) for the period - (5,798) (5,798)
---------------------------------- -------------- -------- --------
(Loss) / profit for the period (6,821) 21,546 14,725
============== ======== ========
The following is an analysis for the Group's revenue and results
by reportable segment for the 12 months ended 31 December 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 - - 0
(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) 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 assets and
liabilities by reportable segment as at 30 June 2023 and the
capital expenditure for the period then ended:
UK / Corporate Canada Total
GBP'000 GBP'000 GBP'000
--------------------------- ------------------- ------------------ ------------------
Total assets 56,294 268,063 324,357
Total liabilities (42,067) (120,940) (163,007)
Capital expenditure - E&E 214 986 1,200
Capital expenditure - PP&E - 15,360 15,360
The following is an analysis of the Group's assets and
liabilities by reportable segment as at 30 June 2022 and the
capital expenditure for the period then ended:
UK / Corporate Canada Total
GBP'000 GBP'000 GBP'000
--------------------------- ------------------- ------------------ ------------------
Total assets 52,791 292,191 344,982
Total liabilities (29,041) (163,111) (192,152)
Capital expenditure - E&E 379 4,284 4,663
Capital expenditure - PP&E 1 34,149 34,150
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 period 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
4 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:
Six-months Six-months Year Ended
Ended 30 Ended 30 31 December
June 2023 June 2022 2022
GBP'000 GBP'000 GBP'000
----------------------------- ---------- ---------- ----------------------
Oil and condensate 48,850 53,104 113,003
Natural gas liquids 12,035 20,366 40,142
Natural gas 20,816 39,157 77,656
Royalty interest 1,520 1,991 4,890
----------------------------- ---------- ---------- ----------------------
Oil and gas sales 83,221 114,618 235,691
Royalties (10,540) (16,174) (33,536)
Revenue from the sale of oil
and gas 72,681 98,444 202,155
Processing income 2,701 3,081 5,995
Other operating income 107 46 286
----------------------------- ---------- ---------- ----------------------
Total revenue 75,489 101,571 208,436
========== ========== ======================
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.
5 Finance costs
Six-months Six-months Year Ended
Ended 30 Ended 30 31 December
June 2023 June 2022 2022
GBP'000 GBP'000 GBP'000
----------------------------------------- ---------- ---------- ------------
Accretion of loan notes ( Note
12 ) 1,615 1,616 3,386
Cash interest expense on loan
notes 951 1,154 2,309
Unwinding of discount on decommissioning
provision ( Note 13 ) 1,408 1,206 2,667
Interest on Debt Facility ( Note
12 ) 318 - -
Amortisation of deferred finance
costs ( Note 12 ) 93 - -
Bank charges and interest on
creditors 297 7 21
Gain on financial instrument
at FVTPL - (702) (518)
----------------------------------------- ---------- ---------- ------------
Total finance costs 4,682 3,281 7,865
========== ========== ============
6 Taxation
Taxation charge / (credit)
The below table reconciles the tax charge for the period to the
expected tax charge based on the result for the period and the
corporation tax rate.
Six-months Six-months Year Ended
Ended 30 Ended 30 31 December
June 2023 June 2022 2022
GBP'000 GBP'000 GBP'000
* Restated
----------------------------------- ---------- ----------- ------------
Profit before income tax 14,469 20,523 55,777
Rate of Corporate Tax 23% 23% 23%
----------------------------------- ---------- ----------- ------------
Expected tax charge 3,328 4,720 12,829
Effects of:
Interest and other expenses not
deductible for SCT or EPL 1,155 277 1,993
Permanent differences 609 464 1,213
Foreign tax rate difference (2,231) (1,159) (5,041)
Change in estimated pool balances - 53 22
Derecognition of deferred tax
asset 848 1,443 2,810
R&D tax credit received (184) - -
----------------------------------- ---------- ----------- ------------
Total income tax charge / (credit) 3,525 5,798 13,826
========== =========== ============
* 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 2H 2022, the
combined corporate rate of taxation in Canada. The comparative
six-months ended period ended 30 June 2022 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. There has been no change to the
year ended 31 December 2022 reconciliation as presented in the 31
December 2022 audited financial statements.
Of which: Six-months Six-months Year Ended
Ended 30 Ended 30 31 December
June 2023 June 2022 2022
GBP'000 GBP'000 GBP'000
------------------------------- ---------- ---------- ------------
Current tax charge 5,262 5,675 10,002
Deferred tax (credit) / charge (1,737) 123 3,824
------------------------------- ---------- ---------- ------------
Total income tax charge 3,525 5,798 13,826
========== ========== ============
In 2023 the Group received GBP184 thousand in R&D tax
refunds in the UK in respect of the 2020 and 2021 fiscal years.
Deferred tax
The components of the net deferred tax asset and the movements
during the period is summarised as follows:
At 31 December Acquired Recognised FX movement At 30 June
2022 during the in income 2023
period
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- -------------- ----------- ---------- ----------- ----------
UK:
Deferred tax assets:
Losses 37,520 - 2,692 - 40,212
Valuation allowance (15,123) - (2,531) - (17,654)
Deferred tax liabilities:
PP&E / E&E (22,397) - (161) - (22,558)
-------------- ----------- ---------- ----------- ----------
Net deferred tax - - - - -
asset / (liability)
Canada:
Deferred tax assets:
Decommissioning
provision 21,466 - (1,250) (673) 19,543
Losses - - - - -
Risk management
contracts (168) - (75) 6 (237)
Other 234 - (8) (8) 218
Valuation allowance (4,180) - 673 126 (3,381)
Deferred tax liabilities: -
PP&E / E&E (29,019) - 2,397 902 (25,720)
-------------- ----------- ---------- ----------- ----------
Net deferred tax
asset / (liability) (11,667) - 1,737 353 (9,577)
Net deferred tax
asset / (liability) (11,667) - 1,737 353 (9,577)
============== =========== ========== =========== ==========
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 deferred tax credit of GBP1,737 thousand
for changes in net deductible temporary differences in the period.
The deferred tax asset has been recognised in Canada to the extent
that the Group anticipates probable future taxable profits 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.
30 June 30 June 2022 31 December
2023 GBP'000 2022
GBP'000 GBP'000
-------------------------------------- -------- ------------ -----------
UK:
Taxable losses 43,001 34,986 38,927
Mineral extraction allowances 52,680 50,198 52,466
-------- ------------ -----------
Total - UK 95,681 85,184 91,393
Canada:
Canadian exploration expense (CEE,
deductible at 100% p.a.) 1,610 1,746 1,623
Canadian development expense (CDE,
deductible at 30% p.a.) 38,428 30,568 37,870
Canadian oil and gas property expense
(COGPE, deductible at 10% p.a.) 53,790 62,800 58,478
Undepreciated capital cost (UCC,
deductible at 25% p.a.) 21,584 15,241 18,867
Non-capital losses (NCL, deductible - - -
at 100% p.a.)
Other (deductible at various rates
p.a.) 954 921 1,019
-------------------------------------- -------- ------------ -----------
Total - Canada 116,366 111,276 117,857
======== ============ ===========
7 Earnings per share
From continuing operations
Basic earnings or loss per share is calculated as profit for the
period, 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 profits or losses for the period attributable to ordinary
equity holders of the parent by the weighted average number of
ordinary shares outstanding during the period, 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:
Six-months Six-months Year Ended
Ended 30 Ended 30 31 December
June 2023 June 2022 2022
GBP'000 GBP'000 GBP'000
------------------------------------ ------------- ------------- -------------
Earnings
Earnings for the purposes of
basic and diluted earnings per
share being net loss attributable
to owners of i3 Energy 10,944 14,725 41,951
Weighted average number of shares
Weighted average number of Ordinary
Shares - basic 1,196,168,433 1,135,217,866 1,164,210,976
Effect of dilutive potential
ordinary shares:
Share options 14,618,629 85,054,264 51,089,073
Warrants 5,748,341 9,047,953 9,048,113
------------- ------------- -------------
Weighted average number of Ordinary
Shares - diluted 1,216,535,403 1,229,320,083 1,224,348,162
Basic earnings per share (pence) 0.91 1.30 3.60
Diluted earnings per share (pence) 0.90 1.20 3.43
As at 30 June 2023, the number of potentially dilutive Share
options and Warrants outstanding was 34,288,288 and nil,
respectively, plus 250,000 EMI options (Note 16).
8 Property, plant, and equipment
Oil and Right of Other fixed Total
gas assets use assets assets GBP'000
GBP'000 GBP'000 GBP'000
------------------ ---------------------- ----------------------- ------------------------- ----------------------
Cost
As at 1 January
2022 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 (40,233) - - (40,233)
Decommissioning
settlements under
SRP and ASCP (
Note 13 ) (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
Acquisitions 26 - - 26
Additions 15,360 - - 15,360
Disposals (17) - - (17)
Changes to
decommissioning
estimates (4,992) - - (4,992)
Exchange movement (9,746) - (5) (9,751)
As at 30 June 2023 298,345 - 179 298,524
Accumulated
depreciation
As at 1 January
2022 (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)
Charge for the
period (19,397) - (13) (19,410)
Exchange movement 2,211 - 2 2,213
------------------ ---------------------- ----------------------- ------------------------- ----------------------
As at 30 June 2022 (78,532) - (98) (78,630)
Carrying amount at
31 December
2022 236,368 - 97 236,465
------------------ ---------------------- ----------------------- ------------------------- ----------------------
Carrying amount at
30 June 2023 219,813 - 81 219,894
====================== ======================= ========================= ======================
9 Exploration and evaluation assets (Intangible)
Six-months Six-months Year Ended
Ended 30 Ended 30 31 December
June 2023 June 2022 2022
GBP'000 GBP'000 GBP'000
------------------- ---------- ---------- ------------
At start of period 62,060 49,819 49,819
Additions 1,200 4,663 12,327
Exchange movement (224) 233 (86)
------------------- ---------- ---------- ------------
At end of period 63,036 54,715 62,060
========== ========== ============
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 Minos
High prospective areas.
Also included within E&E assets are costs associated with
land purchases and preliminary appraisal drilling in the Clearwater
play in Canada.
Management conducted an assessment of indicators of impairment
for its E&E assets as at 30 June 2023, concluding that no
indicators of impairment were identified.
10 Trade and other receivables
30 June 30 June 2022 31 December
2023 GBP'000 2022
GBP'000 GBP'000
---------------------------------- -------- ------------------ ---------------------
Trade receivables 12,650 28,459 26,770
Joint venture receivables 7,423 4,654 5,563
Prepayments & other receivables 5,045 3,860 2,510
----------------------------------
Total trade and other receivables 25,118 36,973 34,843
======== ================== =====================
Trade and other receivables are all due within one year.
Joint venture receivables represent amounts due from operating
partners for operating and capital activity in Canada.
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.
11 Trade and other payables
30 June 30 June 2022 31 December
2023 GBP'000 2022
GBP'000 GBP'000
------------------------------- -------- ------------ -----------
Trade creditors 8,162 13,698 15,383
Sales tax payable 149 632 378
Accruals 16,928 31,923 26,909
Dividends payable - 1,700 2,040
Joint venture payables 605 1,033 1,263
Income taxes payable 1,429 5,984 9,873
------------------------------- -------- ------------ -----------
Total trade and other payables 27,273 54,970 55,846
======== ============ ===========
The average credit period taken for trade purchases is 30 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.
12 Borrowings and leases
Debt Facility
On 31 May 2023 i3 Energy Plc established a CAD 100 million debt
facility in the form of a Prepayment Agreement (the "Debt
Facility") with Trafigura Canada Ltd., a subsidiary of Trafigura
Pte Ltd (collectively, "Trafigura"). Concurrently, i3 Energy Canada
Ltd. ("i3 Canada") entered an associated commercial contract
related to i3 Canada's oil production. The Debt 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. 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 CAD 75 million advance which has been fully drawn by
the Company and a CAD 25 million accordion facility amount, which
can be made available during the Debt Facility's three-year term.
The Debt Facility is secured by a first lien against substantially
all the assets and shares of i3 Canada. The Company utilised a
portion of proceeds from the initial advance to redeem the
outstanding H1-2019 Loan Notes as discussed below.
The Debt Facility contains the following covenants:
i. Global Coverage Ratio greater than 125% for the first 12
months and 140% thereafter. Global Coverage Ratio is the percentage
of (a) the aggregate of: (i) the Cash balance of i3 Energy Canada
as at such date, (ii) the PV10 of the Proved Developed Producing
Reserves (or, if agreed by the Buyer, acting reasonably, the Proved
Plus Probable Developed Producing Reserves) owned by i3 Canada)
using 85% of the Strip Price and curves, and (iii) the mark to
market value (gain or loss) of the Secured Swap Agreements; to, (b)
the Principal amount outstanding at each date of determination.
ii. Liquidity Ratio greater than 1.10:1.00. Liquidity Ratio is
the ratio of (a) the sum of the following for the next quarter: (i)
the revenues of the i3 Canada from the sale of Petroleum
Substances, (ii) any royalty or processing income of i3 Canada;
(iii) the aggregate amount of all uncalled debt, equity and other
capital that is the subject of a binding commitment in favour of i3
Canada from a person who is not an Affiliate; (iv) expected revenue
from Permitted Swap Agreements; and (v) all Cash of i3 Canada; to,
(b) the sum of the following, all cash costs of i3 Canada in
respect of the production, transportation and storage of Petroleum
Substances including, without limitation, operating expenses,
marketing expenditures, capital expenditures, taxes and interest
expense and all distributions and payments of financial
indebtedness made by i3 Canada for the next quarter.
iii. Net Debt to EBITDAX less than 3.00:1.00. (a) Net Debt:
means, on a consolidated basis and at any time, the aggregate
amount of Financial Indebtedness of i3 Canada (excluding any
intercompany Financial Indebtedness) net of free and available Cash
and Cash Equivalents of i3 Canada. (b) EBITDAX: means, for any
fiscal period and as determined in accordance with IFRS (on a
consolidated basis) in respect of i3 Canada: (a) all Net Income for
such period; plus (b) Interest Expense to the extent deducted in
determining such Net Income; plus (c) all amounts deducted in the
calculation of such Net Income in respect of the provision for
income taxes; plus (d) all amounts deducted in the calculation of
such Net Income in respect of non-cash items, including
depreciation, depletion, amortization (including amortization of
goodwill and other intangibles), accretion, deferred income taxes,
foreign currency obligations, noncash losses resulting from
marking-to-market any outstanding hedging and financial instrument
obligations, non-cash compensation expenses, provisions for
impairment of oil and gas assets and any other non-cash expenses
for such period; plus (e) exploration expenses; and (f) losses
attributable to extraordinary and non-recurring losses, in each
case to the extent deducted in the calculation of such Net Income;
less (on a consolidated basis), without duplication: (a) earnings
attributable to extraordinary and non-recurring earnings and gains,
in each case to the extent included in the calculation of such Net
Income (including interest income); (b) to the extent included in
the calculation of such Net Income, gains from asset sales; (c) all
cash payments during such period relating to non-cash charges which
were added back in determining EBITDAX in any prior period; and (d)
to the extent included in such Net Income, any other non-cash items
increasing such Net Income for such period, including non-cash
gains resulting from marking-to-market any outstanding hedging and
financial instrument obligations for such period.
iv. Liquidity Threshold greater than CAD 10 million. i3 Canada
shall ensure that at all times it has a Cash balance in a bank
account in an amount equal to or greater than CAD 10 million.
The Global Coverage Ratio, Liquidity Ratio, and Net Debt to
EBITDAX are tested on the last day of each fiscal quarter. The
Liquidity Threshold must be always maintained. The Group was in
compliance with all covenants as at 30 June 2023.
H1-2019 loan note facility
In May 2019, the Group 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 quarters since.
The H1-2019 LNs matured on 31 May 2023 and were repaid in full
using proceeds from the Debt Facility issuance.
Interest expense and accretion expense to 30 June 2023 was
GBP951 thousand and GBP1,615 thousand respectively (note 5).
Borrowings reconciliation
Leases H1-2019 Debt Facility Total
LN
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ ------- -------- ------------- --------
At 1 January 2022 69 23,855 - 23,924
Increase through interest
(non-cash) 1 2,309 - 2,310
Accretion expense (non-cash) - 3,386 - 3,386
Lease and interest payments
(cash) (74) (2,309) - (2,383)
Exchange movement (non-cash) 4 - - 4
------------------------------
At 31 December 2022 - 27,241 - 27,241
Issuance (cash) - - 44,481 44,481
Increase through interest
(non-cash) - 951 318 1,269
Accretion expense (non-cash) - 1,615 - 1,615
Lease and interest payments
(cash) - (951) (318) (1,269)
Principal payments (cash) - (28,856) (1,238) (30,094)
Additions in deferred finance
costs (cash) - - (2,039) (2,039)
Amortisation of deferred
finance costs (non-cash) - - 93 93
Exchange movement (non-cash) - - (107) (107)
------------------------------ ------- -------- ------------- --------
At 30 June 2023 - - 41,190 41,190
======= ======== ============= ========
The classification as at 30 June 2023 is as follows:
Leases H1-2019 Debt Facility Total
LN
GBP'000 GBP'000 GBP'000 GBP'000
---------------- ------- ------- ------------- -------
Current - - 13,799 13,799
Non-current - - 27,391 27,391
---------------- ------- ------- ------------- -------
At 30 June 2023 - - 41,190 41,190
======= ======= ============= =======
The classification as at 31 December 2022 is as follows:
Leases H1-2019 Debt Facility Total
LN
GBP'000 GBP'000 GBP'000 GBP'000
-------------------- ------- ------- ------------- -------
Current - 27,241 - 27,241
Non-current - - - -
-------------------- ------- ------- ------------- -------
At 31 December 2022 - 27,241 - 27,241
======= ======= ============= =======
The classification as at 30 June 2022 is as follows:
Leases H1-2019 Debt Facility Total
LN
GBP'000 GBP'000 GBP'000 GBP'000
---------------- ------- ------- ------------- -------
Current 63 25,471 - 25,534
Non-current - - - -
---------------- ------- ------- ------------- -------
At 30 June 2022 63 25,471 - 25,534
======= ======= ============= =======
13 Decommissioning provision
30 June 30 June 2022 31 December
2023 GBP'000 2022
GBP'000 GBP'000
----------------------------------------- -------- -------------------- ----------------------
At start of period 93,331 125,523 125,523
Liabilities assumed through acquisitions 14 66 348
Liabilities incurred 135 612 1,369
Liabilities disposed (17) (190) (213)
Liabilities settled (1,921) (320) (2,190)
Liabilities settled under SRP
and ASCP - - (731)
Change in estimates (4,992) (43,992) (40,233)
Unwinding of discount ( Note
5 ) 1,408 1,206 2,667
Exchange movement (2,991) 12,137 6,791
At end of period 84,967 95,042 93,331
======== ==================== ======================
30 June 30 June 2022 31 December
2023 GBP'000 2022
GBP'000 GBP'000
------------ -------- ------------ -----------
Of which:
Current 3,084 2,509 3,190
Non-current 81,883 92,533 90,141
Total 84,967 95,042 93,331
======== ============ ===========
A summary of the key estimates and assumptions are as
follows:
30 June 30 June 2022 31 December
2023 2022
-------------------------------------- ---------- ------------ -----------
Undiscounted / uninflated expenditure
(CAD, thousands) 205,282 208,582 206,613
Inflation rate 1.70% 1.78% 2.09%
Discount rate 3.09% 3.14% 3.28%
Timing of cash flows 1-50 years 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") whereby certain costs of settling the Group's
liabilities were borne by the Government of Canada in 2022. Where
liabilities were settled through the SRP a corresponding decrease
to the decommissioning asset was recorded. The change in estimate
for the period ended 30 June 2023 was primarily driven by changes
in market interest rates (which decreased 0.19%) and inflation
rates (which decreased 0.39%) as published by the Bank of Canada.
The inflation and discount rates have been pinpointed as a key
source of estimation uncertainty, and a sensitivity to a +/- 0.50%
movement to these inputs have been disclosed in the key sources of
estimation uncertainty note in the Group's statutory financial
statements for the year ended 31 December 2022.
14 Risk management contracts
The Group enters a variety of 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 interim 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'.
The principal terms of the risk management contracts held as at
30 June 2023 are presented in the table 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)
AECO 5A Physical Swaps 1 Aug 2023 31 Mar 2024 10,000 GJ/Day CAD 2.7600 / GJ
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
WTI Financial Swaps 1 Jul 2023 31 Dec 2023 500 bbl/Day CAD 102.80 / bbl
The Group's gains and losses on risk management contracts are
presented in the following table.
Six-months Six-months Year Ended
Ended 30 Ended 30 31 December
June 2023 June 2022 2022
GBP'000 GBP'000 GBP'000
--------------------------------- ---------- ---------- ------------
Unrealised (gain) / loss on risk
management contracts (328) 7,223 (858)
Realised (gain) / loss on risk
management contracts (3,015) 13,252 19,848
Total (3,343) 20,475 18,990
========== ========== ============
The carrying value of the Group's risk management contracts are
presented in the following table.
30 June 30 June 2022 31 December
2023 GBP'000 2022
GBP'000 GBP'000
-------------------------------- -------- ------------ -----------
Current asset 1,030 533 1,111
Current liability - (8,271) (381)
Net current asset / (liability) 1,030 (7,738) 730
======== ============ ===========
15 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 1 January 2022 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
Issued on
exercise of
11 pence
options 9 Jan 23 116,667 - 0.0001 - - 13 - 13
Issued on
exercise of
0.01 pence
warrants 25 Apr 23 9,051,927 - 0.0001 1 - 2,045 - 2,045
Cancellation
of shares 29 May 23 (25,503) - 0.0001 - - - - -
As at 30 June 2023 1,201,874,464 5,000 - 120 50 52,704 (2,000) 50,704
============= ========= ========= ========= ========== ========= ========= =========
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.
The cancellation of shares related to unclaimed shares from the
Toscana acquisition which completed in 2020. The time limit to
claim the shares had expired and 25,503 ordinary shares reverted to
the Company to be held in treasury and were subsequently
cancelled.
During the six-month period ended 30 June 2023 the Company
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 0.8550 10,215
======================================================= ========== ==============
During the year ended 31 December 2022 the Company 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
------------- ------------- ------------- ------------- ---------- --------------
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 1.4835 17,393
========================================================== ========== ==============
16 Share-based payments
During the period the Group had share based payment expense of
GBP310 thousand (Six-months ended 30 June 2022: GBP836 thousand;
Year ended 31 December 2022: GBP1,092 thousand).
Employee and NED share options
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) (years)
------------------------------ ------------ ----------------- --------------------
At 1 January 2022 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
11p options exercised during
the period (116,667) 11.00 8.72
Granted during the period 3,000,000 20.00 10.00
At 30 June 2023 34,288,288 11.62 8.34
============ ================= ====================
On 18 April 2023, the Company issued options over a total of
3,000,000 ordinary shares to the CFO, 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, the closing
price on 18 April 2023. The fair value was calculated using the
Black Scholes model with inputs for share price of 20.00 pence,
exercise price of 20.00 pence, time to maturity of 10 years,
volatility of 97%, the Risk-Free Interest rate of 3.742%, and a
dividend yield of 10%. One-third of the options will vest upon
achieving production of 26,000 boepd, one-third upon the addition
of 5,000 boepd via acquisitions, and one-third upon the addition of
25 MMbbl of 2P reserves. The award shall vest as to one-third upon
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. The resulting fair value of GBP179 thousand will
be expensed over the expected vesting period.
3,862,681 outstanding employee share options as at 30 June 2023
were fully vested and exercisable.
Warrants
Details on the warrants outstanding during the period are as
follows:
Number Weighted Weighted
of warrants average exercise average contractual
price life
(pence)
------------------------ ------------ ----------------- --------------------
At 1 January 2022 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
Exercised in the period (9,051,927) 0.01 0.42
------------------------ ------------ ----------------- --------------------
At 30 June 2023 - - -
============ ================= ====================
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 throughout 2023 and 2022 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 30 June 2023 have a
weighted average exercise price of GBP0.11 and a weighted average
remaining contractual life of 3.43 years.
17 Related party transactions
Remuneration of Key Management Personnel
Directors of the Group are considered to be Key Management
Personnel. The remuneration of the Directors will be set out in the
annual report for the year-ending 31 December 2023.
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note.
Ultimate parent
There is no ultimate controlling party of the Group.
18 Commitments
1 year 1-2 years 3-4 years 5+ years Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- ------- --------- --------- -------- -------
Operating 188 - - - 188
Transportation 1,620 1,410 214 10 3,254
Total 1,808 1,410 214 10 3,442
======= ========= ========= ======== =======
Operating commitments relate to offices leases in Canada that
expire in December 2023. Transportation commitments relate to
take-or-pay pipeline capacity in Alberta.
19 Events after the reporting period
Throughout July and August, i3 entered various risk management
contracts, as summarised below.
Type Effective date Termination date Total Volume Avg. Price
AECO 5A Physical Swaps 1 Nov 2023 31 Mar 2024 15,000 GJ/Day CAD 3.2267 / GJ
WTI Financial Swaps 1 Aug 2023 31 Mar 2024 500 bbl/Day CAD 93.33 / bbl
WTI Financial Swaps 1 Jan 2024 31 Mar 2024 1,500 bbl/Day CAD 96.47 / bbl
WTI Financial Swaps 1 Apr 2024 30 Jun 2024 1,750 bbl/Day CAD 98.20 / bbl
WTI Financial Swaps 1 Jul 2024 31 Aug 2024 500 bbl/Day CAD 101.50 / bbl
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, boe/d 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
--------------------------------------------------
CO2e Carbon dioxide
--------------------------------------------------
the Code QCA Corporate Governance Code
--------------------------------------------------
Company i3 Energy plc
--------------------------------------------------
CPR Competent person's report
--------------------------------------------------
Debt Facility Prepayment Agreement with Trafigura, dated
31 May 2023
--------------------------------------------------
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
--------------------------------------------------
GCA Gas Cost Allowance
--------------------------------------------------
GJ Gigajoule
--------------------------------------------------
Gross wells Wells participated in by i3
--------------------------------------------------
Group, i3 i3 Energy plc, together with its subsidiaries
--------------------------------------------------
i3 Canada i3 Energy Canada Ltd.
--------------------------------------------------
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
--------------------------------------------------
Mmcf Million 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
--------------------------------------------------
p.a. per annum
--------------------------------------------------
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
--------------------------------------------------
Trafigura Trafigura Pte Ltd. and its subsidiary Trafigura
Canada Ltd.
--------------------------------------------------
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 calculate similarly
defined or described measures differently, 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 on bargain purchase and asset disposition 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.
Six-months Six-months Year Ended
Ended 30 Ended 30 31 December
June 2023 June 2022 2022
GBP'000 GBP'000 GBP'000
--------------------------- ---------- ---------- ------------
Profit for the period 10,944 14,725 41,951
Depreciation and depletion 19,410 15,017 34,339
Finance costs 4,682 3,281 7,865
Tax 3,525 5,798 13,826
--------------------------- ---------- ---------- ------------
EBITDA 38,561 38,821 97,981
Loss on asset dispositions - - 9
--------------------------- ---------- ---------- ------------
Adjusted EBITDA 38,561 38,821 97,990
========== ========== ============
Net Operating Income
Net operating income is defined as gross profit before
depreciation and gains or losses on risk management contracts,
which equals revenue net of royalty expenses, less production
costs. Management believes that net operating income is a useful
supplement 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.
Six-months Six-months Year Ended
Ended 30 Ended 30 31 December
June 2023 June 2022 2022
GBP'000 GBP'000 GBP'000
* Restated
--------------------------------- ---------- ----------- ------------
Gross profit for the period 22,985 33,297 78,689
Depreciation and depletion 19,410 15,017 34,339
(Gain) / loss on risk management
contracts (3,343) 20,475 18,990
Other operating income (107) 46 (286)
---------- ----------- ------------
Net operating income 38,945 68,835 131,732
========== =========== ============
* In 2H 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 H1 2022 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 supplement 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.
Six-months Six-months Year Ended
Ended 30 Ended 30 31 December
June 2023 June 2022 2022
GBP'000 GBP'000 GBP'000
-------------------------------- ---------- ---------- ------------
Acquisitions 12 (15) 531
Expenditures on property, plant
& equipment 25,963 19,277 64,374
Expenditures on exploration
and evaluation assets 1,192 4,452 13,842
-------------------------------- ---------- ---------- ------------
Acquisitions & Capex 27,167 23,714 78,747
========== ========== ============
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.
Six-months Six-months Year Ended
Ended 30 Ended 30 31 December
June 2023 June 2022 2022
* Restated * Restated
GBP'000 GBP'000 GBP'000
----------------------------------- ---------- ----------- ------------
Net cash from operating activities 24,294 48,429 100,655
Expenditures on property, plant
& equipment (25,963) (19,277) (64,374)
Expenditures on exploration and
evaluation assets (1,192) (4,452) (13,842)
----------------------------------- ---------- ----------- ------------
FCF (2,861) 24,700 22,439
========== =========== ============
* The classification of certain comparative lines have been
restated - see Note 2.
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.
30 June 30 June 2022 December
2023 GBP'000 2022
GBP'000 GBP'000
---------------------------- -------- ------------ --------
Borrowings and leases 41,190 25,534 27,241
Trade and other payables 27,273 54,970 55,846
Cash and cash equivalents (12,682) (30,335) (16,560)
Trade and other receivables (25,118) (36,973) (34,843)
-------- ------------ --------
Net debt 30,663 13,196 31,684
======== ============ ========
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END
IR NKDBKABKKDFN
(END) Dow Jones Newswires
August 31, 2023 02:15 ET (06:15 GMT)
I3 Energy (LSE:I3E)
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I3 Energy (LSE:I3E)
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