TIDMI3E
RNS Number : 9836M
i3 Energy PLC
27 September 2021
27 September 2021
i3 Energy plc
("i3", "i3 Energy", or the "Company")
Interim Report and Dividend Declaration for the Six Months Ended
30 June 2021
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 the period ended 30 June
2021. 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
Dividend Declaration
-- Concurrent with this Interim Report, i3 announces an H1 2021
dividend of GBP2.20 million or 0.2 p/share. The Ex-Dividend Date,
Record Date and Payment Date will be 7 October 2021, 8 October
2021, and 29 October 2021, respectively
-- Including the 0.16 p/share special dividend announced in
July, total dividends of 0.36 p/share have been declared during the
year to date. These dividends do not include the benefit of the
enlarged portfolio following the completion of the acquisition of
the assets from Cenovus Energy Inc., which completed post period
end. The H2 2021 dividend will benefit from the enlarged cash flow
resulting from this transaction
Financial Highlights
-- H1 revenue of GBP26.5mm (net) and net operating income
(Revenue less royalties, opex, processing and transportation) of
GBP12.5mm and cash flow from operations of GBP8mm
-- Concluded a reduction of the Company's share premium account
and announced an intended special dividend of GBP1.16 million (or
0.16 p/share which was subsequently paid on 6 August 2021)
Operational Highlights
-- Sustained average production above 9,000 boepd for the sixth
month period, offsetting expected natural decline through excellent
operations management and targeted maintenance capital
allocation
-- H1 volumes do not include any production from the assets
acquired from Cenovus Energy Inc., as the transaction closed post
period end. Including production from these assets, production for
the week ending 18 September 2021 averaged 18,741 boepd
-- Increased exposure to Alberta's premier Clearwater play
-- Confirmed presence of oil in three gas wells in i3's
extensive Marten Creek acreage, providing a green light for a
winter 2021/22 oil appraisal and development programme
-- Farmed-in to a 50% working interest in the Marten Hill's
Clearwater area and participated in two successful development
wells which added c.120 boepd net production, with an option to
drill seven additional wells on the acreage
-- Participated in Crown Land Sales, bolstering acreage through
a 15-year lease on seven sections (17.9 km(2) ) of land in the
emerging Cadotte area
-- Acquired a 49.5% interest in South Simonette at a cost of
CAD4.7 million, increasing i3's operated interest in this Montney
oil play to 99% and allowing it to bring back on three wells to
increase its corporate production by c.720 boepd and adding
reserves of 4.9 MMboe at a before-tax NPV(10) valuation of US$30.9
million
-- Elected to drill two oil-weighted wells with a partner at its
Wapiti Elmworth acreage, expected to initially increase i3's
production by c.175 boepd, with payback estimated in 1.3 years
-- Acquired c.230 boepd of Wapiti production, conducted six
reactivations to increase production to 471 boepd, significantly
exceeding the expected 310 boepd
-- Brought on stream a gas well located on the Company's Noel
acreage in Northeast British Columbia at an average rate of 650
boepd, exceeding expectations by 30%
Post Period-End Highlights
-- Acquired circa 8,400 boepd (51% oil and NGLs) of low decline
production from Cenovus Energy Inc, located within i3's Central
Alberta core area, for a total consideration of CAD65 million
(US$53.7 million). The assets were acquired on excellent metrics of
1.73x next twelve months cashflow, US$6,381/boepd and US$0.68/boe
of 2P reserves and contain 79.5 MMboe of 2P reserves with an
NPV(10) of US$193 million as at 1 April 2021, an inventory of
greater than 140 net drilling locations, 80 net reactivation
opportunities and 1,140 km network of operated pipelines, and key
processing facilities. The transaction closed on 7 July 2021
-- To fund the Cenovus acquisition on 7 July 2021, i3 raised
approximately GBP40 million through the Placing and Subscription of
363,700,000 Placing Shares at the Issue Price of 11 pence per
Placing Share, a 3% discount to the 15-day average closing price of
11.4 pence
-- On 8 July 2021, i3 announced the declaration of its Maiden
Special Dividend of 0.16 pence/share
-- The Company commenced a hedging program which will result in
approximately 50% of corporate volumes being hedged on a rolling 12
month forward looking basis. Currently through a combination of
physical and financial swaps, circa 24% to 26% of forecast
production is hedged through to the end of 2021, circa 22% hedged
in Q1 2022 and 4.5% in Q2 2022
-- Agreed terms with farm-in partners for the Serenity field
appraisal drilling programme. We await confirmation of funding
commitments from those potential farm-in partners before finalising
and executing documentation
Majid Shafiq, CEO of i3 Energy plc, commented:
"2021 has been a transformational year for i3. We are now a
substantial production company with a full cycle E&P portfolio
containing multiple options to create and return value to our
shareholders. We will continue our efforts in the remainder of 2021
and beyond to grow our production business and build the scale
required to efficiently and effectively maximise and sustain value
creation."
Post Period and Outlook
On 6 July 2021 the Registrar of Companies registered the
cancellation of i3's share premium account. The GBP64.1 million
balance of the Group's share premium will be transferred to
retained earnings in the second half of 2021.
On 7 July 2021, i3 announced that it had reached a definitive
agreement with Cenovus Energy Inc., a senior Canadian oil and gas
producer, to acquire certain petroleum and infrastructure assets
within i3's Central Alberta core area (the "Cenovus Assets"), for a
total consideration of CAD65 million (US$53.7 million) (the
"Acquisition"). The strategic Acquisition delivers extensive
operational synergies, a large reserve base with multi-year
development inventory and expected strong free cash flow. The
Acquisition includes approximately 8,400 boepd (51% oil and NGLs)
of predictable low-decline production, 79.5 MMboe of 2P reserves
with an NPV(10) of US$193 million as at 1 April 2021 (inclusive of
undiscounted asset retirement obligations ("ARO") of US$92 million,
inflated at 2% and discounted at 10% for an NPV(10) ARO value of
US$23 million), an inventory of greater than 140 net drilling
locations and 80 net reactivation opportunities across
approximately 212,000 net acres, an 1,140 km network of operated
pipelines, and key processing facilities.
Also on 7 July 2021, i3 announced the conditional Placing and
Subscription of 363,700,000 Placing Shares at the Issue Price of 11
pence per Placing Share, a 3% discount to the 15-day average
closing price of 11.4 pence. This includes shares placed through a
PrimaryBid offering. The total fundraising was for approximately
GBP40 million. The Placing and Subscription was approved by the
Shareholders on 26 July 2021 and admitted to trading on AIM on 27
July 2021. Following the Placing and Subscription, the Company's
issued share capital stood at 1,091,424,766 ordinary shares with a
nominal value of GBP0.0001 each.
Further details of the Acquisition and the equity fundraise are
available at
https://i3.energy/investor-relations/regulatory-news.
On 8 July 2021, i3 announced the declaration of its Maiden
Special Dividend of 0.16 pence/share with an Ex-Dividend date of 15
July 2021, Record Date of 16 July 2021, and Payment Date of 6
August 2021.
On 30 July 2021, the Company issued options over a total of
53,705,491 ordinary shares to i3 staff and board and has
additionally issued 1,750,000 options to incoming staff and
conditionally allocated 3,750,000 for additional hires as part of
the Acquisition. The options were issued in accordance with the
rules of the Company's Employee Share Option Plan at an exercise
price of GBP0.11 per share. Of the options issued to employees of
i3 Canada, one-third of the options vested immediately, with a
further one-third vesting if production of 20,000 boepd is achieved
prior to July 2022 (substantially funded from internally generated
cash flow), and 100 per cent will vest upon the addition of 9,250
boepd or 50 MMboe 2P reserves. Of the options issued to employees
of i3 North Sea Limited, one-third of the options vested
immediately, with a further one-third vesting at spud of the
earlier of a second appraisal well or first development well at
either Serenity or Liberator, and 100 per cent will vest upon the
addition of 2,500 boepd of European production. Of the options
issued to the executive and non-executive directors and one
corporate employee, one-third of the options vested immediately,
with a further one-third vesting (i) at spud of the earlier of a
second appraisal well or first development well at either Serenity
or Liberator; or (ii) if production of 20,000 boepd is achieved
prior to July 2022 (substantially funded from internally generated
cash flow), whichever is first to occur, and 100 percent upon (i)
the addition of 2,500 boepd of European production; or (ii) the
addition of 9,250 boepd or 50 MMboe 2P reserves, whichever is first
to occur. The options will otherwise fully vest on the third
anniversary.
On 20 August 2021, the Company closed the Acquisition previously
announced on 7 July 2021.
On 15 September 2021, the Company announced that certain Loan
Noteholders had exercised warrants over 9,828,010 shares in the
Company. These shares were admitted to trading on AIM on 17
September 2021.
On 27 September 2021 and concurrent with this Interim Report, i3
announces an H1 2021 dividend of GBP2.20 million (0.2p/sh). The
Company confirms the following for its H1 2021 dividend:
Dividend: 0.20 pence/share
Ex-Dividend Date: 7 October 2021
Record Date: 8 October 2021
Payment Date: 29 October 2021
Payment to shareholders holding their shares on the TSX will be
made in Canadian dollars, using the exchange rate from the Bank of
England, at close on the Dividend announcement date, 27 September
2021.
Following the Placing and Subscription, the Warrant Exercise,
and as at the date of this report, the Company's issued share
capital stands at 1,101,252,776 ordinary shares with a nominal
value of GBP0.0001 each.
Throughout July, August, and September, i3 entered various risk
management contracts, as summarised below.
Type Effective date Termination date Total Volume Avg. Price
AECO 5A Financial Swaps 1 Nov 2021 31 Mar 2022 10,000 GJ/day CAD 4.0975/GJ
AECO 5A Physical Swaps 1 Nov 2021 31 Mar 2022 15,000 GJ/day CAD 4.3313/GJ
AECO 5A Physical Swaps 1 Apr 2022 31 Dec 2022 4,000 GJ/day CAD 3.4900/GJ
WTI Financial Swaps 1 Jan 2022 31 Mar 2022 350 bbl/day CAD 83.04/bbl
WTI Financial Swaps 1 Apr 2022 31 Dec 2022 200 bbl/day CAD 83.00/bbl
Terms have been agreed in principle with farm-in partners for
the Serenity field appraisal drilling programme. We await
confirmation of funding commitments from those potential farm-in
partners before finalising and executing documentation.
The Company's focus for the remainder of 2021 will be on 5 key
areas:
1 The growth of i3's Canadian business by way of operational
excellence, capital deployment and strategic upsizing in core
areas;
2 The farmout of its UK licences to conduct further appraisal
drilling at Serenity and/or Liberator;
3 Dividend distributions to its shareholders of up to 30% of free cash flow;
4 Conducting our operations safely and in an environmentally secure manner; and
5 Continuing to develop our ESG strategy and publishing our
maiden annual sustainability report.
Enquiries:
i3 Energy plc
Majid Shafiq (CEO) / Graham Heath c/o Camarco
(CFO) Tel: +44 (0) 203 781 8331
WH Ireland Limited (Nomad and Joint
Broker)
James Joyce, Darshan Patel Tel: +44 (0) 207 220 1666
Canaccord Genuity Limited (Joint
Broker)
Henry Fitzgerald- O'Connor, James Tel: +44 (0) 207 523 8000
Asensio
Tennyson Securities (Joint Broker) Tel: +44 (0) 207 186 9030
Peter Krens
Camarco
Owen Roberts, James Crothers, Violet Tel: +44 (0) 203 781 8331
Wilson
Notes to Editors:
i3 Energy is an oil and gas Company with a low cost,
diversified, growing production base in Canada's most prolific
hydrocarbon region, the Western Canadian Sedimentary Basin and
appraisal assets in the North Sea with significant upside.
The Company is well positioned to deliver future growth through
the optimisation of its existing 100% owned asset base and the
acquisition of long life, low decline conventional production
assets.
i3 is dedicated to responsible corporate practices and the
environment, and places high value on adhering to strong
Environmental, Social and Governance ("ESG") practices. i3 is proud
of its performance to date as a responsible steward of the
environment, people, and capital management. The Company is
committed to maintaining an ESG strategy, which has broader
implications to long-term value creation, as these benefits extend
beyond regulatory requirements.
i3 Energy is listed on the AIM market of the London Stock
Exchange under the symbol I3E and on the Toronto Stock Exchange
under the symbol ITE. For further information on i3 Energy please
visit https://i3.energy/
The information contained within this announcement is deemed by
the Company to constitute inside information under the Market Abuse
Regulation (EU) No. 596/2014.
Chairperson's and Chief Executive's Statement
Overview of the year to date
i3 is very pleased with the results of the first half of 2021
after a busy period of corporate, financial, and operational
integration following its 2020 acquisition-based entry into the
Western Canadian Sedimentary Basin. January through June saw the
Company executing on its stated strategy of using acquisitions,
operational focus, and the drill-bit to create a portfolio of
producing assets with realisable upside, from which shareholder
value could be created and returned in the form of share price
growth and a cash yield.
Since securing our foundational Canadian asset base in H2 2020
through the corporate and asset acquisitions of Toscana Energy
Income Corporation and Gain Energy Ltd, respectively, the Company
has been very active in the basin. On 17 June, i3 announced that
the numerous acquisition and drilling initiatives it had concluded
or committed to during the course of H1 were expected to increase
the Company's next twelve months ("NTM") net operating income
("NOI" = revenue minus royalties, opex, transportation and
processing) to an estimated US$44 million (a 42% increase over the
guidance announced on 5 May), and were expected to see i3's
production surpass 10,000 boepd during the second half of the year.
In these initial transactions i3 had been able to capture its
entire Canadian portfolio at an average of 1.0x NTM NOI (from June
2021) and US$4,557/boepd. The directors believe these to be
exceptional metrics in the context of the market.
Immediately following the period on 6 July, i3 announced that it
had signed an Asset Sale Agreement ("ASA") with Cenovus Energy
Inc., a senior Canadian oil and gas producer, to acquire certain
conventional central Alberta petroleum and infrastructure assets.
The acquisition would include approximately 8,400 boepd (51% oil
and NGLs) of predictable low-decline production, 79.5 MMboe of 2P
reserves with an NPV(10) of US$193 million, as at 1 April 2021, an
inventory of greater than 140 net drilling locations and 80 net
reactivation opportunities across approximately 212,000 net acres,
a 1,140 km network of operated pipelines, and key processing
facilities. The Cenovus assets complement i3's existing area assets
with approximately 3,090 boepd of overlapping joint working
interest production and associated land positions. The CAD65
million acquisition was funded through an equity issuance of
363,700,000 shares at an issue price of 11 pence per share,
representing a 3% discount to the 15-day average closing price to 7
July of 11.4p.
We see the Cenovus acquisition as a continuation of i3's stated
strategy of capitalizing on the recent market conditions to create
a cash-generative, all-weather portfolio by efficiently
consolidating high quality undercapitalized assets within our core
operating areas. The production, infrastructure and lands
associated with the acquisition directly overlap our current
Central Alberta asset base and provide meaningful operational
synergies. Through this strategic acquisition, i3 significantly
enhances its production, cash flow and reserve base while
strengthening its balance sheet. Furthermore, the Cenovus
acquisition enhances i3's ability to grow future production, free
cash flow, and its planned return of capital to shareholders.
As graphically presented below, the abovementioned transactional
and operational activity in the first half of the year has resulted
in i3's forecasted NTM NOI and production increasing by 123% and
113%, respectively, at exceptional effective acquisition metrics of
1.36x NTM NOI, or US$5,533/boepd.
http://www.rns-pdf.londonstockexchange.com/rns/9836M_1-2021-9-26.pdf
1) Figures are i3 management estimates from 1 June 2021 (based
on 2 June 2021 forward strip (see Appendix))
2) Figures based on GLJ reports of 31 Dec 2020 (i3) and 1 April 2021 (Cenovus)
3) Includes the drilling of two pre-elected, post transaction wells
The market conditions of the last 18 months have provided an
unusual opportunity to acquire high quality production assets at
historically low valuations. Importantly though, i3's acquisitions
have also garnered numerous Proven Undeveloped (PUD) and/or Proven
plus Probable (2P) development opportunities, resulting in several
highly prospective projects now existing within our portfolio. The
upside potential within our South Simonette, North Simonette and
Clearwater positions, as well as redevelopment options of some of
our more mature assets via secondary recovery and infill drilling,
present company-making opportunities that have the potential to
deliver multiples of i3's current production, reserves and cash
flow. Once the Management has concluded the process of fully
integrating the newly acquired assets into the Company, it will be
high-grading opportunities that can be unlocked via farm-down or
through internal capital allocation. As it has done, the Company
will continue to balance its pursuit of organic and inorganic
opportunities, directing disciplined capital allocation towards its
core operating areas. i3 remains confident that this strategy will
deliver to its shareholders meaningful value through both share
price appreciation and long-term cash distributions.
In the UK, our team remains confident in its belief that the
Serenity discovery also holds a company-making resource, and we
expect that the next appraisal drilling there will prove this
premise. Discussions continue with potential farm-in partners for a
2022 Serenity field appraisal drilling programme. Indicative terms
have been agreed in principle, but we await confirmation of funding
commitments from those potential farm-in partners before finalising
and executing documentation.
Production Operations
http://www.rns-pdf.londonstockexchange.com/rns/9836M_1-2021-9-26.pdf
Note: The above figures are unaudited and demonstrate volumes by
accounting month on an accruals basis
Following the closing of the Gain asset transaction on 4
September 2020 and the Toscana corporate transaction on 30 October
2020 our initial focus was the integration of these businesses in
Canada and into i3 Energy plc. In parallel with that process, we
immediately began a detailed review of the asset portfolio to
identify production optimisation and cost reduction opportunities.
We focussed on maintaining high uptime, minimising operating costs,
optimising operated processing facilities and infrastructure, and
actively implementing high return workovers to offset natural
production declines. These efforts continue to substantially
increase aggregate average net production and approximately halved
the aggregate decline rates predicted within the Company's
competent persons reports. This is a testament to the quality of
the assets in the portfolio and the dedication of our workforce. In
parallel with operational activity, we continue to review the
reservoir performance for the producing assets and identify mature
fields where redevelopment, particularly through the implementation
of relatively low-cost secondary recovery projects, could
materially increase production and ultimate hydrocarbon recovery.
Operating our assets in a safe and secure manner is fundamental to
our business and we continue to advance our health and safety
policies and procedures as we acquire and integrate additional
production assets. There were 71 routine regulatory government
inspections during the first half. 58 returned satisfactory
results, 12 were categorised as low risk, and only one of was
deemed to be high risk and has been subsequently remedied.
Financial discipline
The Board and Management are focused on delivering consistent
value to shareholders. i3 is committed to being a dividend payer
that distributes up to 30% of its free cash flow, and it is
protecting this commitment through a conservative hedging program.
The Company has and continues to keep a substantial portion of its
production hedged to manage commodity price risk, with additional
free cash being redeployed to acquire production assets conditional
on the associated acquisition metrics competing with the organic
returns achievable through the development of our proven
undeveloped (PUD) and 2P inventory. As i3 continues to aggressively
grow its portfolio, a proportion of all incremental production will
be hedged in order to secure future cash flow, and the Company will
remain commercial in monetizing assets when third-party interest
warrants consideration.
Having strategically acquired a large production package at the
bottom of the market in 2020, the Company's assets have
outperformed the directors' expectations. As a result, during H1,
i3 reclassified its previously announced dividend of CAD2 million
(initially associated with Q1 2021 FCF) as a "special dividend"
which was paid after court proceedings approved the cancellation of
i3's share premium account. Moving forward, scheduled half-yearly
dividends will be declared alongside the Company's release of each
of its Interim and Annual Reports.
The Company's rapid Canadian growth has come with a material
increase in expenditure as we operate a quickly growing business;
we will look to optimise this as we move from integration to
operation. With the continued delays to securing appraisal partners
at Serenity, i3's UK staff remain at half-time.
Having announced on 23 February that the Company forecasted
full-year 2021 net operating income of US$27.6 million (later
updated to US$33.8 million in June), we were pleased to deliver
from that same asset base total NOI of US$17.1 million (GBP12.467
million) during the first half alone. With Operating Cash Flow of
GBP7.978 million and Capex totalling GBP5.797 million, free cash
flow for the period - the basis for which i3's bi-annual dividend
is determined - is GBP2.181 million. As previously stated, we would
typically commit to paying up to 30% of this figure. However, given
cash flow associated with the Cenovus transaction was not included
in the period and instead was netted from the acquisition price at
close in August, and that a high proportion of H1 Capex was
deployed late in the period, i3 will declare a dividend of GBP2.20
million (0.2p/sh) for H1 2021, showing the Board's confidence in
the cash flow generating ability of our portfolio, with the
residual for the full year to be paid at the announcement of the
Company's 2021 Annual Report in Q2 2022.
Governance
The Board recognises its responsibility for the proper
management of the Company and is committed to maintaining a high
standard of corporate governance. The Directors also recognise the
importance of sound corporate governance commensurate with the size
and nature of the Company and the interests of its shareholders.
The Quoted Companies Alliance has published a set of corporate
governance guidelines for AIM companies, which include a code of
best practice comprising principles intended as a minimum standard,
and recommendations for reporting corporate governance matters. The
Directors intend to comply with the QCA Corporate Governance
Guidelines for Smaller Quoted Companies so far as it is practicable
having regard to the size and current stage of development of the
Company. The Board currently comprises two executive Directors
(being the Chief Executive Officer and the Chief Financial Officer)
and four non-executive Directors (including the Chairperson).
The Board's decision-making process is not dominated by any one
individual or group of individuals. The composition of the Board
will be reviewed regularly and modified as appropriate in response
to the Company's changing requirements. The Board has established
an Audit Committee, Corporate Governance Committee, Health, Safety,
Environment and Security Committee, Reserves Committee, and
Remuneration Committee to ensure proper adherence to sound
governance and decision making.
Environmental Stewardship
i3 is committed to conducting its operations to be in full
compliance with both provincial and state environmental regulations
and reporting obligations. In Q4 2020 we commenced the integration
of the reporting systems and databases inherited from Toscana and
with the Gain assets into i3's ESG management system and the
development of a corporate ESG strategy. Central to that strategy
is a commitment to achieve net zero carbon emissions by 2050. We
continue to develop our ESG strategy and plan to publish our maiden
annual sustainability report at the end of 2021. In December 2020
we commenced the development of a strategy to minimise fugitive GHG
emissions from our production infrastructure. The first element of
this was a plan to replace hi-bleed natural gas pneumatic
controllers with low-bleed models across our portfolio in addition
to conversions to instrument air; these projects commenced in
December. These initiatives qualify for carbon credits which can be
sold or used to offset future carbon tax obligations. The Company
also takes very seriously its asset retirement obligations and is
an active participant in the Government of Alberta's Site
Rehabilitation Program ("SRP") and Saskatchewan's Accelerated Site
Closure Program ("ASCP"). We received grants totalling CAD2.4
million in H1 2021 which contributed to certain decommissioning
operations in our Wapiti, Simonette, Marten Creek and Clair field
locations.
Looking ahead
The Company is very proud of what it has and continues to
accomplish since reinventing itself in 2020 and expects to deliver
more of the same. We carry on growing our Canadian production
business by employing our stated strategy of being acquisitive when
systemic or situational drivers offer good value, while drilling
our ever-growing inventory of high-quality proven undeveloped and
2P reserves when doing so offers better returns than the M&A
market. In the UK, we remain committed to the further appraisal and
development of Serenity as and when capital becomes available from
potential partners.
Beyond our current business as an oil and gas company, we see
climate change as the most urgent matter of our time and deem it
critical to act in a manner that exhibits this concern. Though the
world will undoubtedly require oil and gas for some time yet, we
understand the crucial role that hydrocarbon-based corporates have
to play in the transition to net zero and we remain committed to an
evolution of our energy company into one that continues to benefit
society for generations to come.
As always, we extend gratitude to our capital providers for
their ongoing support and to our employees for their relentless
commitment to making i3 a success. Though we operate within a macro
environment that is beyond our control, we believe we are doing the
right things to create a very valuable business that can weather
good times and bad.
i3 will continue to manage our Canadian and UK businesses in a
manner that maximizes value creation and distributed returns.
"Linda Beal" "Majid Shafiq"
Linda Beal Majid Shafiq
Interim Non-Executive Chairperson Chief Executive Officer
27 September 2021 27 September 2021
Financial Review
Production and revenue
i3's production in the first half of 2021 averaged 9,095 boepd.
Production over this period reflected a full six months of
production attributed to the purchase of the GAIN Assets on 3
September 2020 and the subsequent acquisition of Toscana on 30
October 2020. Production was comprised of 58% natural gas and 42%
oil and natural gas liquids.
Total revenue for the first half of 2021 was GBP26.5 million.
Revenue over this period was comprised of proceeds from the sale of
oil and gas of GBP28.3 million, less associated royalties of GBP2.9
million, plus processing income of GBP1.1 million. Revenue from oil
and gas sales of GBP28.3 million was comprised of 62% oil and
natural gas liquids and 38% natural gas. Crown, freehold, and gross
overriding royalties of GBP2.9 million, as a percentage of oil and
gas sales, was 10%. Processing income of GBP1.1 million over the
above period resulted from fees charged to third party users of
various facilities which are partially or wholly owned by the
Group.
Expenses
Production costs in the first half of 2021 associated with the
extraction and processing of the Group's Canadian oil and gas
assets totalled GBP14.0 million, or GBP8.50/boe. These costs are
primarily comprised of field labour and general field maintenance,
land retention and taxes, well repairs and workovers, processing,
and product transportation.
Administrative expenses increased from GBP1.7 million to GBP6.8
million from the first half of 2020 to the first half of 2021. The
increase is largely due to the increased overhead resulting from
the expansion of the Group's Canadian business in the second half
of 2020, and employee share payment expense of GBP1.3 million.
Risk management contracts
In the first half of 2021, the Group entered 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 throughout 2021. The risk management contracts
include natural gas swaps ranging from CAD2.4500 to CAD2.7925 per
GJ, oil swaps ranging from CAD64.50 to CAD75.20 per barrel, and
propane swaps at USD0.7725 per gallon. For the 6 months ended 30
June 2021, the group incurred realised and unrealised losses on
risk management contracts of GBP0.9 million and GBP1.9 million,
respectively, as a result of improving commodity prices over the
period (2020: nil).
Through July, August, and September, the Group entered various
risks management contracts to hedge a portion of the Group's
exposure to fluctuations in prevailing commodity prices for oil,
gas, and natural gas liquids throughout late 2021 and across 2022.
Further details are in Note 19 of the financial statements.
Finance costs
The Group incurred finance costs of GBP3.6 million (six months
ended 30 June 2020 - GBP4.8 million). The decrease is largely
attributable to reduced warrant modification costs due to the
re-pricing of the loan note warrants in the first half of 2020, and
a fair value gain on a non-current accounts payable which was
restructured in May 2021 and will now reduce by the market value of
i3 shares held by the counterparty. The decrease was offset by
increases in accretion and interest expense on loan notes, the
unwinding of the decommissioning provision, and bank charges and
interest on creditors.
Exploration & Evaluation and Property, Plant, &
Equipment
The Group had PP&E assets of GBP110.1 million (31 December
2020 - GBP108.5 million) and intangible E&E assets of GBP49.4
million (31 December 2020 - GBP48.8 million) as at 30 June 2021.
Total PP&E additions of GBP3.2 million were comprised of work
associated with the Group's Canadian oil and gas assets. Major
expenditures related to the following projects: i3 spent GBP1.5
million in the Marten Hills area, Clearwater play. In the first
quarter of 2021, i3 recompleted three oil appraisal wells and
acquired additional Clearwater lands in Marten Hills. In the second
quarter of 2021, i3, along with an existing Clearwater partner,
commenced a Marten Hills drilling programme targeting the
Clearwater play. i3 also spent GBP0.4 million in the Clair area,
constructing a trucking off-loading terminal to increase
operational treating efficiencies. An additional GBP0.4 million was
spent in Northeast British Columbia on a tie-in project for a Noel
gas well, which commenced production in late June 2021. In the
Group's Simonette area, GBP0.6 million was spent on various
equipping, pipeline, and workover projects. The remaining GBP0.3
million related to miscellaneous equipment optimization
expenditures. The Group also completed acquisitions of GBP3.4
million, primarily through the acquisition of additional working
interest in i3's South Simonette property. The increase due to
additions and acquisitions was offset by various disposals and the
depletion charge for the payment. Further details are in Note 8 of
the financial statements.
The increase in intangible E&E assets was due to GBP0.6
million of capitalised costs during the period.
Loss, EPS, EBITDA, Adjusted EBITDA, and Net Operating Income
The Group's loss, 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 2021 June 2020 2020
GBP'000 GBP'000 GBP'000
---------------------------------- ---------- ---------- ------------
(Loss) / profit for the period (7,030) (6,611) 11,718
Basic (loss) / earnings per share (0.99) (6.14) 3.78
Diluted (loss) / earnings per
share (0.99) (6.14) 3.46
EBITDA (1) 2,773 (1,763) 22,830
Adjusted EBITDA (1) 2,973 (1,564) (839)
Net operating income (1) 12,467 - 4,916
(1) Non-IFRS measure. Refer to Appendix B.
Post-period fundraise and acquisition
In July 2021, the Group completed the conditional Placing and
Subscription of 363,700,000 Placing Shares at the Issue Price of 11
pence per Placing Share, a 3% discount to the 15-day average
closing price of 11.4 pence. This includes shares placed through a
PrimaryBid offer. The total fundraising was for approximately GBP40
million. The Placing and Subscription was approved by the
Shareholders on 26 July 2021 and admitted to trading on AIM on 27
July 2021.
The fundraising proceeds were used to acquire certain petroleum
and infrastructure assets within i3's Central Alberta core area
from Cenovus Energy Inc., for a total consideration of CAD65
million (US$53.7 million) (the "Acquisition"). The strategic
Acquisition delivers extensive operational synergies, predictable
low-decline production, a large reserve base with multi-year
development inventory and expected strong free cash flow. The
Acquisition includes approximately 8,400 boepd (51% oil and NGLs)
of predictable low-decline production, 79.5 MMboe of 2P reserves
with an NPV(10) of US$193 million as at 1 April 2021 (inclusive of
undiscounted asset retirement obligations ("ARO") of US$92 million,
inflated at 2% and discounted at 10% for an NPV(10) ARO value of
US$23 million), an inventory of greater than 140 net drilling
locations and 80 net reactivation opportunities across
approximately 212,000 net acres, an 1,140 km network of operated
pipelines, and key processing facilities.
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 2020, 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 2020 annual
report remain appropriate.
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 GBP4.7 million as at 30 June 2021. 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 2021 June 2020 2020
Restated
*
-------------------------------------- ----- ------------ ------------ ------------
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
Revenue 4 26,479 - 12,991
Production costs (14,012) - (8,075)
Loss on risk management contracts 14 (2,715) - -
Depreciation and depletion 8 (7,036) - (4,854)
------------ ------------ ------------
Gross profit 2,716 - 62
Administrative expenses (6,779) (1,747) (5,755)
Acquisition costs (200) (199) (1,542)
Gain on bargain purchase - - 25,211
------------ ------------ ------------
Operating (loss) / profit (4,263) (1,946) 17,976
Finance costs 5 (3,583) (4,848) (7,368)
(Loss) / profit before tax (7,846) (6,794) 10,608
Tax credit for the period 6 816 183 1,110
------------ ------------ ------------
(Loss) / profit for the period (7,030) (6,611) 11,718
============ ============ ============
Other comprehensive income
/ (loss):
Items that may be reclassified
subsequently to profit or loss:
Foreign exchange differences
on translation of foreign operations 732 - (147)
------------ ------------ ------------
Other comprehensive income
/ (loss) for the period, net
of tax 732 - (147)
Total comprehensive (loss)
/ income for the period (6,298) (6,611) 11,571
============ ============ ============
(Loss) / earnings per share Pence Pence Pence
(Loss) / earnings per share
- basic 7 (0.99) (6.14) 3.78
(Loss) / earnings per share
- diluted 7 (0.99) (6.14) 3.46
------------ ------------ ------------
All operations are continuing.
The accompanying notes form an integral part of these financial
statements.
* The presentation, description, and classification of certain
comparative lines have been restated - see Note 2.
Condensed Consolidated Statement of Financial position
Assets Notes 30 June 2021 30 June 2020 31 December 2020
------------------------------------- ----- ------------ ------------ ----------------
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
Non-current assets
Property, plant & equipment 8 110,149 8 108,509
Exploration and evaluation assets 9 49,382 48,640 48,809
Loan receivable - 2,007 -
Deferred tax asset 6 1,398 - 1,052
Deposit 716 - 678
Total non-current assets 161,645 50,655 159,048
Current assets
Cash and cash equivalents 4,717 1,516 6,178
Trade and other receivables 10 8,892 106 8,731
Inventory 229 - 164
------------ ------------ ----------------
Total current assets 13,838 1,622 15,073
Current liabilities
Trade and other payables 11 (12,926) (6,403) (13,156)
Risk management contracts 14 (1,864) - -
Borrowings and leases 12 (29) - (28)
Decommissioning provision 13 (1,988) - (1,234)
Total current liabilities (16,807) (6,403) (14,418)
Net current assets (2,969) (4,781) 655
Non-current liabilities
Non-current accounts payable 11 (1,899) (3,000) (3,000)
Borrowings and leases 12 (20,911) (15,413) (17,958)
Decommissioning provision 13 (67,161) - (65,549)
------------ ------------ ----------------
Total non-current liabilities (89,971) (18,413) (86,507)
Net assets 68,705 27,461 73,196
============ ============ ================
Capital and reserves
Ordinary shares 15 73 11 70
Deferred shares 15 50 50 50
Share premium 15 64,057 32,572 61,605
Share-based payment reserve 16 7,223 6,215 6,337
Warrants - LNs 16 8,180 11,375 9,714
Foreign currency translation reserve 585 - (147)
Accumulated deficit (11,463) (22,762) (4,433)
Shareholders' funds 68,705 27,461 73,196
============ ============ ================
The accompanying notes form an integral part of these financial
statements.
The consolidated financial statements of i3 Energy plc, company
number 10699593, were approved by the Board of Directors and
authorized for issue on 27 September 2021.
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 (Accumul-ated Total
shares premium shares payment - LN currency deficit) (unaudited)
reserve translation
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- ----------- -------- ------------ -------------- ------------
Balance at 1
January
2020 11 32,572 50 3,802 11,375 - (16,151) 31,659
Total
comprehensive
loss for the
period - - - - - - (6,611) (6,611)
Transactions with
owners:
Warrants - LNs - - - - - - - -
Share-based
payment
expense - - - 2,413 - - - 2,413
-------- -------- -------- ----------- -------- ------------ -------------- ------------
Balance at 30
June
2020 11 32,572 50 6,215 11,375 - (22,762) 27,461
-------- -------- -------- ----------- -------- ------------ -------------- ------------
Balance at 1
January
2021 70 61,605 50 6,337 9,714 (147) ( 4,433) 73,196
Total
comprehensive
loss for the
period - - - - - 732 (7,030) (6,298)
Transactions with
owners:
Exercise of
options 16 2 15 - - - - - 17
Exercise of
warrants 16 1 2,437 - (452) (1,534) - - 452
Share-based
payment
expense 16 - - - 1,338 - - - 1,338
Balance at 30
June
2021 73 64,057 50 7,223 8,180 585 (11,463) 68,705
======== ======== ======== =========== ======== ============ ============== ============
The accompanying notes form an integral part of these financial
statements.
The following describes the nature and purpose of each reserve
within equity:
Reserve Description and purpose
Ordinary shares Represents the nominal value of shares issued
Share premium account Amount subscribed for share capital in excess of nominal
value
Deferred shares Represents the nominal value of shares issued, the
shares have full capital distribution (including on
wind up) rights and do not confer any voting or dividend
rights, or any of redemption
Share-based payment Represents the accumulated balance of share-based
reserve payment charges recognised in respect of share options
granted by the Company less transfers to retained
deficit in respect of options exercised or cancelled/lapsed
Warrants - LNs Represents the accumulated balance of share-based
payment charges recognised in respect of warrants
granted by the Company in respect to warrants granted
to the loan note holders
Foreign currency Exchange differences arising on consolidating the
translation reserve assets and liabilities of the Group's non-Pound Sterling
functional currency operations (including comparatives)
recognised through the Consolidated Statement of Other
Comprehensive Income.
Accumulated deficit Cumulative net gains and losses recognised in the
Consolidated Statement of Comprehensive Income
Note: The issued share capital comprises of both ordinary and
deferred shares and the consolidated nominal value exceeds the
required minimum issued capital of GBP 50,000.
CONDENSED Consolidated Statement of Cash Flow
Notes Six-months Six-months Year Ended
Ended 30 Ended 30 31 December
June 2021 June 2020 2020
Restated
*
-------------------------------------- ----- ------------ ------------ ------------
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
OPERATING ACTIVITIES
(Loss) / profit before tax (7,846) (6,794) 10,608
Adjustments for:
Depreciation and depletion 8 7,036 - 4,854
Gain on bargain purchase - - (25,211)
Finance costs 5 3,583 4,848 7,368
Unrealised loss on risk management
contracts 14 1,858
Unrealised FX (gain) / loss (157) (46) 68
Share-based payments expense
- employees 16 1,338 - 336
Operating cash flows before movements
in working capital:
(Increase) / decrease in trade
and other receivables (441) 199 (7,217)
Increase / (decrease) in trade
and other payables 2,671 (1,706) 4,974
(Increase) / decrease in inventory (64) - 69
------------ ------------ ------------
Net cash from / (used in) operating
activities 7,978 (3,499) (4,151)
------------ ------------ ------------
INVESTING ACTIVITIES
Acquisitions (3,850) (967) (18,474)
Cash assumed on business acquisitions - - 262
Expenditures on property, plant
& equipment (2,283) - (229)
Disposal of property, plant &
equipment 50 - -
Expenditures on exploration and
evaluation assets (3,514) (13,243) (17,403)
Expenditure on decommissioning
oil and gas assets (175) - (131)
Tax credit for R&D expenditure 6 487 383 383
------------ ------------ ------------
Net cash used in investing activities (9,285) (13,827) (35,592)
------------ ------------ ------------
FINANCING ACTIVITIES
Proceeds on issue of ordinary
shares, net of issue costs 15 17 - 27,253
Interest and other finance charges
paid 5 (356) (269) (114)
Lease payments 12 (15) - (10)
Net cash (used in) / from financing
activities (354) (269) 27,129
Effect of exchange rate changes
on cash 200 41 (278)
------------ ------------ ------------
Net (Decrease) / Increase in
cash and cash equivalents (1,461) (17,554) (12,892)
Cash and cash equivalents, beginning
of period 6,178 19,070 19,070
------------ ------------ ------------
CASH AND CASH EQUIVALENTS,
OF PERIOD 4,717 1,516 6,178
============ ============ ============
Included within cash and cash equivalents is GBP248 thousand of
restricted cash, which relates to guarantees for product
marketing.
Net debt reconciliation is shown in Note 12
The accompanying notes form an integral part of these financial
statements.
* The presentation, description, and classification of certain
comparative lines have been restated - see Note 2.
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 the development and production of
oil and gas on the UK Continental Shelf and the Western Canadian
Sedimentary Basin.
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 2020 and are expected to be applied in the preparation of
the financial statements for the year ended 31 December 2021. The
condensed interim financial statements should be read in
conjunction with the annual financial statements for the year ended
31 December 2020, which have been prepared in accordance with
international financial reporting standards in conformity with the
requirements of the companies Act 2006.
The reports for the six months ended 30 June 2021 and 30 June
2020 are unaudited and do not constitute statutory accounts as
defined by the Companies Act 2006. The financial statements for 31
December 2020 have been prepared and delivered to the Registrar of
Companies. The auditor report of 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 Limited, is CAD.
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 2020 except for 'Fair value judgements for business
acquired' as there were no business combinations completed during
the period ended 30 June 2021.
The principal accounting policies applied in the preparation of
these consolidated interim financial statements are consistent with
those that were applied in the Group's statutory financial
statements for the year ended 31 December 2020 and are expected to
be applied in the preparation of the financial statements for the
year ended 31 December 2021, except for Property, plant and
equipment - disposals and Risk management contracts which are
applicable to the Group for the first time in H1 2021:
Property, plant, and equipment - disposals
An item of property, plant and equipment is derecognised upon
disposal or when no future economic benefits are expected to arise
from the continued use of the asset. The gain or loss arising on
the disposal or retirement of an asset is determined as the
difference between the sales proceeds and the carrying amount of
the asset and is recognised in profit or loss.
Risk management contracts
Financial risk management contracts are measured and recognised
in accordance with the Group's accounting policy for financial
liabilities at fair value through profit or loss as disclosed in
the financial statements for the year ended 31 December 2020.
Physical risk management contracts represent physical delivery
sales contracts in the ordinary course of business and are
therefore not recorded at fair value in the consolidated interim
financial statements. Settlements on these physical risk management
contracts are recognised within realised gains or losses on risk
management contracts at the time of settlement.
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 Chairperson'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 Directors have given careful consideration to the
appropriateness of the going concern assumption, including cash
forecasts through the end of 2022, committed capital expenditure,
and the principal risks and uncertainties faced by the Group. This
assessment also considered various downside scenarios including oil
and gas commodity prices and production rates. 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 consolidated interim financial statements.
Restatement and reclassification of comparative information
Following the acquisitions completed in 2020, commencement of
production, and a review of the financial statements, the Group has
elected to change the presentation and classification of certain
items within the Statement of Consolidated Income and the Statement
of Cash Flow. There has been no change to the reported total
comprehensive loss for the half-year ended 30 June 2020 or the year
ended 31 December 2020.
Expense related to the issuance of warrants of GBP2,413 thousand
in H1 2020 was previously presented within administrative expenses.
This expense is now presented within finance costs.
Acquisition costs related to the Gain and Toscana acquisitions
of GBP199 thousand in H1 2020 was previously presented within
administrative expense. These costs are not presented separately on
the statement of comprehensive income.
Interest and other finance charges paid of GBP269 thousand was
previously presented as a cash outflow from operating activities.
This is now presented as a cash outflow from financing
activities.
Deferred consideration for the Toscana debt acquisition of
GBP1,040 thousand was previously presented as a cash outflow from
investing activities. This is now presented within the movement in
trade and other payables within operating activities.
Tax credit for R&D expenditure of GBP383 thousand was
previously presented as a cash inflow from operating activities.
This is now presented as a cash inflow from investing
activities.
All of the reclassification adjustments are consistent with the
presentation in the audited financial statements for the year ended
31 December 2020.
3 Segmental reporting
The Chief Operating Decision Maker (CODM) is the Board of
Directors. In the first half of 2020, they considered that the
Group operated in a single segment, that of corporate activities in
the UK and oil and gas exploration, appraisal, and development on
the UKCS, and therefore comparative H1 2020 information has not
been presented. Following the Gain acquisition which completed on 3
September 2020 and the Toscana acquisition which completed on 30
October 2020, 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 2021:
UK / Corporate Canada Total
GBP'000 GBP'000 GBP'000
---------------------------------- -------------- -------- --------
Revenue - 26,479 26,479
Production costs - (14,012) (14,012)
Loss on risk management contracts - (2,715) (2,715)
Depreciation and depletion (1) (7,035) (7,036)
---------------------------------- -------------- -------- --------
Gross (loss) / profit (1) 2,717 2,716
Administrative expenses (3,484) (3,295) (6,779)
Acquisition costs - (200) (200)
Bargain purchase gain - - -
---------------------------------- -------------- -------- --------
Operating (loss) (3,485) (778) (4,263)
Finance costs (2,927) (656) (3,583)
---------------------------------- -------------- -------- --------
(Loss) before tax (6,412) (1,434) (7,846)
Tax credit for the period 487 329 816
---------------------------------- -------------- -------- --------
(Loss) for the period (5,925) (1,105) (7,030)
================================== ============== ======== ========
The following is an analysis for the Group's revenue and results
by reportable segment for the 12 months ended 31 December 2020:
UK / Corporate Canada Total
GBP'000 GBP'000 GBP'000
------------------------------- -------------- -------- --------
Revenue - 12,991 12,991
Production costs - (8,075) (8,075)
Depreciation and depletion (5) (4,849) (4,854)
------------------------------- -------------- -------- --------
Gross (loss) / profit (5) 67 62
Administrative expenses (3,335) (2,420) (5,755)
Acquisition costs (989) (553) (1,542)
Bargain purchase gain 5,962 19,249 25,211
------------------------------- -------------- -------- --------
Operating profit 1,633 16,343 17,976
Finance costs (7,108) (260) (7,368)
------------------------------- -------------- -------- --------
(Loss) / profit before tax (5,475) 16,083 10,608
Tax credit for the period 383 727 1,110
------------------------------- -------------- -------- --------
(Loss) / profit for the period (5,092) 16,810 11,718
=============================== ============== ======== ========
The following is an analysis of the Group's assets and
liabilities by reportable segment as at 30 June 2021 and the
capital expenditure for the period then ended:
UK / Corporate Canada Total
GBP'000 GBP'000 GBP'000
--------------------------- -------------- -------- ---------
Total assets 49,853 125,630 175,483
Total liabilities (24,404) (82,374) (106,778)
Capital expenditure - E&E 573 - 573
Capital expenditure - PP&E - 3,192 3,192
The following is an analysis of the Group's assets and
liabilities by reportable segment as at 31 December 2020 and the
capital expenditure for the year then ended:
UK / Corporate Canada Total
GBP'000 GBP'000 GBP'000
--------------------------- -------------- -------- ---------
Total assets 48,932 125,189 174,121
Total liabilities (24,160) (76,765) (100,925)
Capital expenditure - E&E 2,281 - 2,281
Capital expenditure - PP&E - 697 697
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 2021 June 2020 2020
GBP'000 GBP'000 GBP'000
----------------------------- ---------- ---------- ------------
Oil and natural gas liquids 17,424 - 7,274
Natural Gas 10,820 - 5,978
Royalties (2,908) - (830)
----------------------------- ---------- ---------- ------------
Revenue from the sale of oil
and gas 25,336 - 12,422
Processing income 1,143 - 569
----------------------------- ---------- ---------- ------------
Total revenue 26,479 - 12,991
========== ========== ============
All revenue is from the Group's Canadian operations and is
recognised at the point in time when title transfers to the
purchaser.
5 Finance costs
Six-months Six-months Year Ended
Ended 30 Ended 30 31 December
June 2021 June 2020 2020
GBP'000 GBP'000 GBP'000
Restated
*
----------------------------------------- ---------- ---------- ------------
Accretion of loan notes 1,348 1,132 2,355
Interest expense on loan notes 1,619 1,303 2,487
Share-based compensation - warrants
(Note 16) 451 2,413 2,198
Unwinding of discount on decommissioning
provision (Note 13) 535 - 214
Bank charges and interest on
creditors 356 - 114
Gain on financial instrument
at FVTPL (Note 11) (726) - -
---------- ---------- ------------
Total finance costs 3,583 4,848 7,368
========== ========== ============
-- * The presentation, description, and classification of
certain comparative lines have been restated - see Note 2.
6 Taxation
Taxation 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 Year Ended
Ended 30 June 31 December
2021 2020
GBP'000 GBP'000
(Loss) / profit before income tax (7,846) 10,608
Rate of Corporate Tax 40% 40%
--------------- -------------
Expected tax (credit) / charge (3,138) 4,243
Effects of:
Interest and other not deductible for
SCT 293 491
Permanent differences 708 (4,415)
Foreign tax rate difference 244 (3,747)
Change in deferred tax asset 1,564 2,701
R&D tax credit received (487) (383)
--------------- -------------
Total income tax (credit) (816) (1,110)
=============== =============
Of which: Six-months Year Ended
Ended 30 June 31 December
2021 2020
GBP'000 GBP'000
Current tax - prior years (487) (383)
Deferred tax - current year (329) (727)
--------------- -------------
Total income tax (credit) (816) (1,110)
=============== =============
During the year the Group received GBP487 thousand in R&D
tax refunds in the UK in respect of the 2019 fiscal year. The
difference on foreign tax rate results from the 23% rate of
corporate taxation at its Canadian subsidiary.
Deferred tax
The components of the net deferred tax asset and the movements
during the year is summarised as follows:
At 31 December Recognised FX movement At 30 June
2020 in income 2021
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- -------------- ---------- ----------- ----------
UK:
Deferred tax assets:
Losses 25,764 1,794 - 27,558
Valuation allowance (6,238) (1,564) - (7,802)
Deferred tax liabilities:
PP&E (19,526) (230) - (19,756)
-------------- ---------- ----------- ----------
Net deferred tax - - - -
asset
Canada:
Deferred tax assets:
Decommissioning
provision 15,360 304 240 15,904
Losses 5,625 (621) 85 5,089
Other 157 (4) 3 156
Risk management
contracts - 427 1 428
Valuation allowance (7,912) - (123) (8,035)
Deferred tax liabilities:
PP&E (12,178) 223 (189) (12,144)
-------------- ---------- ----------- ----------
Net deferred tax
asset 1,052 329 17 1,398
Net deferred tax
asset 1,052 329 17 1,398
============== ========== =========== ==========
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 recovery of GBP329 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 to
against which the assets can be utilised.
The Group's estimated tax pools are summarised in the following
table. The non-capital tax loss pools in Canada expire over a
period of 20 years. All other tax pools do not expire.
30 June 2021 31 December
GBP'000 2020
GBP'000
-------------------------------------- ------------ -----------
UK:
Taxable losses 25,227 20,585
Mineral extraction allowances 49,382 48,809
------------ -----------
Total - UK 74,609 69,394
Canada:
Canadian exploration expense 3,116 3,068
Canadian development expense 5,405 4,698
Canadian oil and gas property expense 39,614 39,311
Undepreciated capital cost 9,111 8,383
Non-capital losses 22,127 24,456
Other 674 684
-------------------------------------- ------------ -----------
Total - Canada 80,047 80,600
============ ===========
7 Earnings per share
From continuing operations
Basic earnings or loss per share is calculated as profit/(loss)
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 losses or profits 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 2021 June 2020 2020
GBP'000 GBP'000 GBP'000
--------------------------------------- ----------- ----------- ------------
Earnings
(Loss) / earnings for the purposes
of basic and diluted earnings
per share being net loss attributable
to owners of i3 Energy (7,030) (6,611) 11,718
Weighted average number of shares
Weighted average number of Ordinary
Shares - basic 708,565,347 107,719,400 309,889,077
Effect of dilutive potential
ordinary shares:
Share options - - 2,399,909
Warrants - - 26,700,708
----------- ----------- ------------
Weighted average number of Ordinary
Shares - diluted 708,565,347 107,719,400 338,989,694
Basic (loss) / earnings per share
(pence) (0.99) (6.14) 3.78
Diluted (loss) / earnings per
share (pence) (0.99) (6.14) 3.46
The Share options and Warrants were anti-dilutive for the six
months ended 30 June 2020 and 30 June 2021 as the Group incurred a
loss. As at 30 June 2021, the number of potentially dilutive Share
options and Warrants outstanding was 88,904,264 and 46,628,357,
respectively (Note 16).
8 Property, plant, and equipment
Oil and gas Right of use Other fixed Total
assets assets assets GBP'000
GBP'000 GBP'000 GBP'000
------------------------------- ----------- ------------ ----------- --------
Cost
As at 1 January 2020 - - 22 22
Additions - - - -
------------------------------- ----------- ------------ ----------- --------
As at 30 June 2020 - - 22 22
Acquisitions 114,826 - 114,826
Additions 697 110 - 807
Changes to decommissioning
estimates (2,310) - - (2,310)
Decommissioning settlements
under SRP (Note 13) (104) - - (104)
Exchange movement 84 (2) - 82
------------------------------- ----------- ------------ ----------- --------
As at 31 December 2020 113,193 108 22 113,323
Acquisitions 3,412 - - 3,412
Additions 3,192 - 4 3,196
Disposals (826) - - (826)
Changes to decommissioning
estimates 1,301 - - 1,301
Decommissioning settlements
under SRP (Note 13) (87) - - (87)
Exchange movement 1,779 1 - 1,780
As at 30 June 2021 121,964 109 26 122,099
Accumulated depreciation
As at 1 January 2020 - - (14) (14)
Charge for the period - - (3) (3)
------------------------------- ----------- ------------ ----------- --------
As at 30 June 2020 - - (17) (17)
Charge for the period (4,843) (6) (2) (4,851)
Exchange movement 54 - - 54
------------------------------- ----------- ------------ ----------- --------
As at 31 December 2020 (4,789) (6) (19) (4,814)
Charge for the period (7,022) (13) (1) (7,036)
Exchange movement (100) - - (100)
------------------------------- ----------- ------------ ----------- --------
As at 30 June 2021 (11,911) (19) (20) (11,950)
Carrying amount at 30 June
2020 - - 8 8
Carrying amount at 31 December
2020 108,404 102 3 108,509
------------------------------- ----------- ------------ ----------- --------
Carrying amount at 30 June
2021 110,053 90 6 110,149
=========== ============ =========== ========
Right of use assets consist of certain field vehicles whose
leases commenced in September 2020.
9 Exploration and evaluation assets (Intangible)
Six-months Six-months Year Ended
Ended 30 Ended 30 31 December
June 2021 June 2020 2020
GBP'000 GBP'000 GBP'000
------------------- ---------- ---------- ------------
At start of period 48,809 46,528 46,528
Additions 573 2,112 2,281
------------------- ---------- ---------- ------------
At end of period 49,382 48,640 48,809
========== ========== ============
The Directors have considered the carrying value of the
exploration and evaluation assets as at 30 June 2021 and concluded
that no indicators of impairment arose during the period. In
reaching this conclusion, the Directors have given particular
attention to the relinquishment of UKCS Licence P.1987 which
reached the end of its two-year second term on 31 December 2020.
Licence P.1987 encompasses UK Block 13/23d which contains
contingent resources for the Group's Liberator asset, which have
been evaluated as sub-commercial by i3 and in an 'independent
competent person' report and as such do not represent a viable
commercial development. i3 may choose to re-apply for Licence
P.1987 licence in the future if justified by its appraisal of the
Liberator West / Minos High prospective areas and/or the Serenity
discovery. The relinquishment will result in a significant saving
in licence fees whilst i3 progresses its appraisal of resources on
its adjoining P.2358 Licence.
This relinquishment has no impact on Licence P.2358, which
commenced its four-year second term on 30 September 2020 and
contains the vast majority of the resources and potential reserves
in the Company's UK acreage. Licence P.2358 includes the Serenity
discovery and the Liberator West and Minos High prospective areas,
which will be the focus of plans for appraisal and exploration
drilling.
10 Trade and other receivables
Other receivables are all due within one year.
30 June 2021 30 June 2020 31 December
GBP'000 GBP'000 2020
GBP'000
---------------------------------- ------------ ------------ -----------
Trade receivables 6,052 - 6,295
Sales tax receivables - 70 46
Joint venture receivables 1,178 - 864
Prepayments & other receivables 1,662 36 1,526
Total trade and other receivables 8,892 106 8,731
============ ============ ===========
Other receivables are all due within one year.
The fair value of 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 2021 30 June 2020 31 December
GBP'000 GBP'000 2020
GBP'000
------------------------------- ------------ ------------ -----------
Trade creditors 3,192 3,523 7,780
Sales tax payable 25
Accruals 9,247 2,880 5,146
Joint venture payables 462 - 230
Total trade and other payables 12,926 6,403 13,156
============ ============ ===========
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.
Non-current accounts payable
On 2 July 2019 the Group agreed with Baker Hughes, a GE Company,
and GE Oil & Gas Limited (collectively referred to as "BHGE"
hereafter) that GBP3.0 million of oilfield service and oilfield
equipment contract payments will not become payable until such time
as i3 has received its first sales revenues from Liberator Phase I.
This payable has been recorded as a non-current accounts
payable.
On 17 May 2021, i3 announced that it had successfully
restructured legacy contracts and agreements for equipment, oil
field services, and warrants with BHGE. In summary, the remainder
of a GBP5.8 million contract for subsea trees and wellheads was
cancelled, 5,277,045 warrants had an exercise price reduction to
GBP0.0001 per share (the "Warrant Shares"), and an outstanding
contingent payment for GBP3.0 million ("Deferred Payment Invoice
Balance", or "DPIB") in oil field services and equipment that
becomes payable at such time as the Company receives consideration
from any sale or farm-down of its Serenity or Liberator assets will
be reduced by the exercise value of the Warrant Shares, the market
value of the Warrant Shares from time to time, all dividends
received by BHGE associated with the Warrant Shares, and certain
payments to be made to BHGE across 2021 totalling GBP374 thousand.
The purpose of this restructuring was to enable i3 to become a
dividend payer, as certain conditions of the abovementioned
contracts prevented it from reducing its share premium account - a
required step in order for i3 to effect dividend distributions to
its shareholders.
The future Market Value reduction of the payable amount will
vary with the trading value of i3 shares and therefore represents
an embedded derivative. The entire combined contract is designated
as at FVTPL. The fair value of GBP2,273 thousand has been
calculated as the GBP3.0 million payable amount, less the exercise
value of the Warrant Shares of GBP1 thousand, less the Market Value
of the Warrant Shares of GBP726 thousand as at the 30 June 2021
share price of 13.75p/share. The fair value of the combined
contract is classified as Level 2 in the fair value hierarchy as
defined by IFRS 13 'Fair value measurements'. GBP374 thousand
expected to be paid within 2021 has been classified as a current
liability (30 June and 31 December 2020: nil), and the remaining
GBP1,899 thousand has been classified as a non-current liability
(30 June and 31 December 2020: GBP3.0 million). A reconciliation of
the balance is as follows:
30 June 2021
GBP'000
----------------------------------- ------------
Opening payable amount 3,000
Exercise value of the Warrant
Shares (1)
Market value of the Warrant Shares
as at 30 June 2021 (726)
Total 2,273
============
30 June 2021
GBP'000
------------------------------- ------------
Of which:
Current, within trade accounts
payable 374
Non-current 1,899
Total 2,273
============
12 Borrowings
H1-2019 loan note facility
In May 2019, the Company completed a GBP22 million H1-2019 loan
note facility ("H1-2019 LN"). The H1-2019 LNs have a term of 4
years, maturing on 31 May 2023 and bearing interest, payable on a
quarterly basis at the Company'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.
Interest expense and accretion expense to 30 June 2021 was
GBP1,619 thousand and GBP1,348 thousand respectively.
Borrowings reconciliation
H1-2019 LN Leases Total
GBP'000 GBP'000 GBP'000
-------------------------- ---------- ------- -------
At 31 December 2019 13,046 - 13,046
New leases - 110 110
Increase through interest 2,486 1 2,487
Accretion expense 2,355 - 2,355
Lease payments - (10) (10)
Exchange movement - (2) (2)
At 31 December 2020 17,887 99 17,986
Increase through interest 1,619 1 1,620
Accretion expense 1,348 - 1,348
Lease payments - (15) (15)
Exchange movement - 1 1
---------- ------- -------
At 30 June 2021 20,854 86 20,940
========== ======= =======
H1-2019 LN Leases Total
GBP'000 GBP'000 GBP'000
---------------- ---------- ------- -------
Of which:
Current - 29 29
Non-current 20,854 57 20,911
---------- ------- -------
At 30 June 2021 20,854 86 20,940
========== ======= =======
13 Decommissioning provision
30 June 2021 30 June 2020 31 December
GBP'000 GBP'000 2020
GBP'000
----------------------------------------- ------------ ------------ -----------
At start of period 66,783 - -
Liabilities assumed through acquisitions 540 - 69,092
Liabilities incurred 11 - -
Liabilities disposed (776) - -
Liabilities settled (196) - (109)
Liabilities settled under SRP (87) - (104)
Change in estimates 1,301 - (2,310)
Unwinding of discount (Note 5) 535 - 214
Exchange movement 1,038 - -
At end of period 69,149 - 66,783
============ ============ ===========
30 June 2021 30 June 2020 31 December
GBP'000 GBP'000 2020
GBP'000
------------ ------------ ------------ -----------
Of which:
Current 1,988 - 1,234
Non-current 67,161 - 65,549
Total 69,149 - 66,783
============ ============ ===========
A summary of the key estimates and assumptions are as
follows:
30 June 2021 30 June 2020 31 December
2020
------------------------------- ------------ ------------ -----------
Undiscounted / uninflated cash
flows (CAD, thousands) 121,910 N/A 122,926
Inflation rate 1.73% N/A 1.00%
Discount rate 1.84% N/A 1.21%
Timing of cash flows 1-50 years N/A 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. Where
liabilities were settled through the SRP a corresponding decrease
to the decommissioning asset was recorded. The change in estimate
for the 6 months ended 30 June 2021 resulted from a change in
market interest and inflation rates.
14 Risk management contracts
In the first half of 2021, the Group entered 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 derivative financial instruments are
presented in the table below.
Type Effective date Termination date Total Volume Avg. Price
AECO 5A Financial Swaps 1 Jun 2021 31 Oct 2021 24,000 GJ/Day CAD 2.6538 / GJ
AECO 5A Physical Swaps 1 Jun 2021 31 Oct 2021 14,000 GJ/Day CAD 3.2661 / GJ
WTI Financial Swaps 1 Apr 2021 31 Dec 2021 400 bbl/Day CAD 74.45 / bbl
WTI Physical Swaps 1 Mar 2021 31 Dec 2021 350 bbl/Day CAD 64.50 / bbl
Conway Financial Swaps 1 Apr 2021 31 Dec 2021 200 bbl/Day USD 0.7725 / gal
The Group's losses on risk management contracts are presented in
the following table.
Six-months Six-months Year Ended
Ended 30 Ended 30 31 December
June 2021 June 2020 2020
GBP'000 GBP'000 GBP'000
----------------------------------- ---------- ---------- ------------
Unrealised loss on risk management
contracts 1,858 - -
Realised loss on risk management
contracts 857 - -
Total 2,715 - -
========== ========== ============
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
As at 31 December 2019 107,719,400 5,000 - 11 50 33,965 (1,393) 32,572
Warrants
exercised
at 0.01
pence/share 24 Aug 20 6,788,945 - 0.0001 1 - - - 1,661
Issued at 5
pence/share 28 Aug 20 581,147,255 - 0.0001 58 - 28,999 (1,806) 27,194
Issued for
Toscana
acquisition 30 Oct 20 4,399,215 - 0.0001 - - 178 - 178
----------- ---------- --------- ---------- ---------- --------- ---------- ---------
As at 31 December 2020 700,054,815 5,000 - 70 50 64,804 (3,199) 61,605
Issued on
exercise of
0.01 pence
H1-2019
warrants 16 Apr 21 6,788,946 - 0.0001 1 - 1,534 - 1,534
Issued on
exercise of
0.01 pence
options Various 15,303,960 - 0.0001 1 - - - -
Issued on
exercise of
5 pence
options 28 Apr 21 300,000 - 0.0001 - - 15 - 15
Issued on
exercise of
0.01 pence
BHGE
warrants 4 Jun 21 5,277,045 - 0.0001 1 - 903 - 903
As at 30 June 2021 727,724,766 5,000 - 73 50 67,256 (3,199) 64,057
=========== ========== ========= ========== ========== ========= ========== =========
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.
No dividends were proposed during the period. (2019 - Nil). In
July 2021 the Company declared its Maiden Special Dividend. Further
details are provided in Note 19.
16 Share-based payments
During the period the Group had share based payment expense of
GBP1,789 thousand (Six-months ended 30 June 2020: GBP2,413
thousand; Year ended 31 December 2020: GBP2,533 thousand).
Employee and NED Share Options
During the period the Group had share based payment expense
relating to the issuance of share options of GBP1,338 thousand
(Six-months ended 30 June 2020: GBPnil; Year ended 31 December
2020: GBP335 thousand). Details on the employee and NED share
options outstanding during the period are as follows:
Number of Weighted average Weighted average
options exercise price contractual
life
(pence)
---------------------------- ------------ ---------------- ----------------
At 31 December 2019 and
30 June 2020 12,252,013 46.03 8.91
Cancelled - 28 October 2020 (12,252,013) 46.03 8.09
Issued - 28 October 2020 12,128,955 0.01 4.00
Issued - 3 December 2020 4,028,659 0.01 4.00
------------ ---------------- ----------------
At 31 December 2020 16,157,614 0.01 3.85
Issued - 10 January 2021 13,166,358 6.10 10.00
Issued - 10 January 2021 75,184,252 5.00 10.00
Exercised during the period (15,603,960) 0.11 3.48
---------------------------- ------------ ---------------- ----------------
At 30 June 2021 88,904,264 5.11 9.48
============ ================ ================
On 10 January, the Company issued options over a total of
13,166,358 ordinary shares to key staff that joined its Canadian
subsidiary, i3 Energy Canada Ltd., following the acquisition of
Gain's oil & gas assets. The options were issued in accordance
with the rules of the Company's Employee Share Option Plan at an
exercise price of 6.1 pence per share, the closing price on 8
January 2021. One-third of the options vested immediately, with a
further one-third vesting in July 2021 if production exits at or
above 9,000 boepd, and 100 per cent will vest if there is an
addition of 5,000 boepd or, alternatively, 25 MMboe 2P reserves.
The options will otherwise fully vest on the third anniversary. The
fair value was calculated using the Black Scholes model with inputs
for share price of 6.1 pence, exercise price of 6.1 pence, time to
maturity of 10 years, volatility of 114%, the Risk-Free Interest
rate of 0.360%, and a dividend yield of 11%. The resulting fair
value of GBP240 thousand will be expensed over the expected vesting
period.
On 10 January, the Company also issued options over a total of
75,184,252 ordinary shares as described in the Gain-related
Readmission document released on 11 August 2020. The options were
issued in accordance with the rules of the Company's Employee Share
Option Plan at an exercise price of 5 pence per share. Options
issued to employees of i3 Canada contain the same vesting
conditions as the 6.1 pence options described in the paragraph
above. Of the options issued to employees of i3 North Sea Limited,
one-third of the options vested immediately, with a further
one-third vesting at the spud of the next Serenity / Liberator
appraisal well, and 100 per cent will vest upon a third-party
reserve auditor attributing 25 MMbbls 2P post drilling of a
Serenity / Liberator appraisal well. The options will otherwise
fully vest on the third anniversary. Of the options issued to the
executive and non-executive directors and one corporate employee,
one-third of the options vested immediately, with a further
one-third vesting upon the earlier of spud of the next Serenity or
Liberator appraisal well; and July 2021 production exits being at
or above 9,000 boepd, and 100% will vest upon the earlier of a
third-party reserve auditor attributing 25 MMbbls 2P post drilling
of a Serenity or Liberator appraisal well and the addition of 5,000
boepd or 25 MMboe 2P reserves. The options will otherwise fully
vest on the third anniversary. The fair value was calculated using
the Black Scholes model with inputs for stock price of 6.10 pence,
exercise price of 5.0 pence, time to maturity of 10 years,
volatility of 114%, the Risk-Free Interest rate of 0.360%, and a
dividend yield of 11%. The resulting fair value of GBP1,384
thousand will be expensed over the expected vesting period.
30,003,857 outstanding employee share options as at 30 June 2021
were fully vested and exercisable.
Warrants
During the period the Group had share based payment expense
relating to the modification and issuance of warrants of GBP451
thousand (Six-months ended 30 June 2020: GBP2,413 thousand; Year
ended 31 December 2020: GBP2,198 thousand). Details on the warrants
outstanding during the period are as follows:
Number of Weighted average Weighted average
warrants exercise price contractual
life
(pence)
--------------------------- ------------ ---------------- ----------------
At 31 December 2019 65,483,293 46.98 3.04
Modified - 23 June 2020 (55,981,044) 46.09 2.67
Modified - 23 June 2020 55,981,044 0.01 2.67
------------ ---------------- ----------------
At 30 June 2020 65,483,293 0.01 2.01
Exercised - 24 August 2020 (6,788,945) 0.01 2.77
At 31 December 2020 58,694,348 5.27 1.98
Exercised - 16 April 2021 (6,788,946) 0.01 2.12
Modified - 17 May 2021 (5,277,045) 56.85 0.34
Modified - 17 May 2021 5,277,045 0.01 0.34
Exercised - 17 May 2021 (5,277,045) 0.01 0.3
------------ ---------------- ----------------
At 30 June 2021 46,628,357 0.04 1.63
============ ================ ================
On 17 May, i3 announced that it had successfully restructured
legacy contracts and agreements for equipment, oil field services,
and warrants with BHGE. This resulted in the exchange of 5,277,045
warrants with a strike price of 56.85 pence for Ordinary Shares
with a nominal value of 0.01 pence. Further details are provided in
Note 11.
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 2021.
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 57 11 - - 68
Transportation 1,605 1,099 340 121 3,165
Total 1,662 1,110 340 121 3,233
======= ========= ========= ======== =======
Operating commitments relate to offices leases in the UK that
expire in April 2022 and a field office lease in Canada that
expires in July 2021. Transportation commitments relate to
take-or-pay pipeline capacity in Alberta.
19 Events after the reporting period
On 6 July 2021 the Registrar of Companies registered the
cancellation of i3's share premium account. The GBP64.1 million
balance of the Group's share premium will be transferred to
retained earnings in the second half of 2021.
On 7 July 2021, i3 announced that it had reached a definitive
agreement with Cenovus Energy Inc., a senior Canadian oil and gas
producer, to acquire certain petroleum and infrastructure assets
within i3's Central Alberta core area (the "Cenovus Assets"), for a
total consideration of CAD65 million (US$53.7 million) (the
"Acquisition"). The strategic Acquisition delivers extensive
operational synergies, predictable low-decline production, a large
reserve base with multi-year development inventory and expected
strong free cash flow. The Acquisition includes approximately 8,400
boepd (51% oil and NGLs) of predictable low-decline production,
79.5 MMboe of 2P reserves with an NPV(10) of US$193 million as at 1
April 2021 (inclusive of undiscounted asset retirement obligations
("ARO") of US$92 million, inflated at 2% and discounted at 10% for
an NPV(10) ARO value of US$23 million), an inventory of greater
than 140 net drilling locations and 80 net reactivation
opportunities across approximately 212,000 net acres, an 1,140 km
network of operated pipelines, and key processing facilities.
Also on 7 July 2021, i3 announced the conditional Placing and
Subscription of 363,700,000 Placing Shares at the Issue Price of 11
pence per Placing Share, a 3% discount to the 15-day average
closing price of 11.4 pence. This includes shares placed through
the PrimaryBid offer. The total fundraising was for approximately
GBP40 million. The Placing and Subscription was approved by the
Shareholders on 26 July 2021 and admitted to trading on AIM on 27
July 2021. Following the Placing and Subscription, the Company's
issued share capital stood at 1,091,424,766 ordinary shares with a
nominal value of GBP0.0001 each.
Further details of the Acquisition and the equity fundraise are
available at
https://i3.energy/investor-relations/regulatory-news.
On 8 July 2021, i3 announced the declaration of its Maiden
Special Dividend of 0.16 pence/share with an Ex-Dividend Date of 15
July 2021, Record Date of 16 July 2021, and Payment Date of 6
August 2021.
On 30 July 2021, the Company issued options over a total of
53,705,491 ordinary shares to i3 staff and board and has
additionally issued 1,750,000 options to incoming staff and
conditionally allocated 3,750,000 for additional hires as part of
the Acquisition. The options were issued in accordance with the
rules of the Company's Employee Share Option Plan at an exercise
price of GBP0.11 per share. Of the options issued to employees of
i3 Canada, one-third of the options vested immediately, with a
further one-third vesting if production of 20,000 boepd is achieved
prior to July 2022 (substantially funded from internally generated
cash flow), and 100 per cent will vest upon the addition of 9,250
boepd or 50 MMboe 2P reserves. Of the options issued to employees
of i3 North Sea Limited, one-third of the options vested
immediately, with a further one-third vesting at spud of the
earlier of a second appraisal well or first development well at
either Serenity or Liberator, and 100 per cent will vest upon the
addition of 2,500 boepd of European production. Of the options
issued to the executive and non-executive directors and one
corporate employee, one-third of the options vested immediately,
with a further one-third vesting (i) at spud of the earlier of a
second appraisal well or first development well at either Serenity
or Liberator; or (ii) if production of 20,000 boepd is achieved
prior to July 2022 (substantially funded from internally generated
cash flow), whichever is first to occur, and 100 percent upon (i)
the addition of 2,500 boepd of European production; or (ii) the
addition of 9,250 boepd or 50 MMboe 2P reserves, whichever is first
to occur. The options will otherwise fully vest on the third
anniversary.
On 20 August 2021, the Company closed the Acquisition previously
announced on 7 July 2021.
On 15 September 2021, the Company announced that certain Loan
Noteholders had exercised warrants over 9,828,010 shares in the
Company. These shares were admitted to trading on AIM on 17
September 2021.
On 27 September 2021 and concurrent with this Interim Report, i3
announces an H1 2021 dividend of GBP2.20 million (0.2p/sh). The
Company confirms the following for its H1 2021 dividend:
Dividend: 0.20 pence/share
Ex-Dividend Date: 7 October 2021
Record Date: 8 October 2021
Payment Date: 29 October 2021
Payment to shareholders holding their shares on the TSX will be
made in Canadian dollars, using the exchange rate from the Bank of
England, at close on the Dividend announcement date, 27 September
2021.
Following the Placing and Subscription, the Warrant Exercise,
and as at the date of this report, the Company's issued share
capital stands at 1,101,252,776 ordinary shares with a nominal
value of GBP0.0001 each.
Throughout July, August, and September, i3 entered various risk
management contracts, as summarised below.
Type Effective date Termination date Total Volume Avg. Price
AECO 5A Financial Swaps 1 Nov 2021 31 Mar 2022 10,000 GJ/day CAD 4.0975/GJ
AECO 5A Physical Swaps 1 Nov 2021 31 Mar 2022 15,000 GJ/day CAD 4.3313/GJ
AECO 5A Physical Swaps 1 Apr 2022 31 Dec 2022 4,000 GJ/day CAD 3.4900/GJ
WTI Financial Swaps 1 Jan 2022 31 Mar 2022 350 bbl/d CAD 83.04/bbl
WTI Financial Swaps 1 Apr 2022 31 Dec 2022 200 bbl/d CAD 83.00/bbl
20 Operating income statement of the Cenovus Assets
The acquisition by the Company of the Cenovus Assets closed
after the end of the reporting period. The operating income
statement of the Cenovus Assets for the six months to 30 June 2021
are presented below:
Cenovus Assets estimated Operating Statement of Income Before
Depletion and Taxation:
Six-months Ended 30
June 2021 (unaudited)
GBP'000
Revenue
Production Revenue 27,813
Net Royalties (3,304)
-----------------------
Net Revenues 24,509
Operating Expense (10,871)
-----------------------
Net Income Before Depletion and Taxation 13,638
=======================
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END
IR SEAFUMEFSESU
(END) Dow Jones Newswires
September 27, 2021 02:00 ET (06:00 GMT)
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