i3 Energy delivers 7th consecutive quarterly production increase, revises capital and dividend programme
(), a UK and Canada focused oil producer, issued a Q1 2023 operational and financial update along with a revised 2023 capital and dividend programme.
The company reported average Q1 2023 production of approximately 22,773 barrels of oil equivalent per day (boepd), representing a 24% increase from Q1 2022. It got a head start on its Q1 2023 capital programme in late Q4 2022, with a total of 8 gross wells (5.5 net) successfully drilled by end of Q1 2023 in its core Central Alberta, Wapiti, and Clearwater assets. i3 Energy's CO2 emission reduction initiatives continued with electrification of 12 well sites in Carmangay and Retlaw.
Post-period, i3 refinanced its outstanding loan notes of c. CAD 50m with a new CAD 100m facility, and paid £6.12m of dividends in Q1 2023.
In light of prevailing and forecast commodity pricing for 2023, i3 revised down its FY23 capital and dividend programme. The new capital programme allocates US$25m, plus an additional US$6m subject to board approval, for a revised work programme targeting the company's Clearwater acreage.
The programme is currently forecast to deliver 14 gross (8.5 net) oil wells in Clearwater, down from the previously expected 23 (net 15.2). i3 expects the new capital programme to deliver average annual production of 20,000-21,000 boepd, representing an increase of c. 3% over 2022 production.
The adjusted dividend programme is forecast to return £15.4m in dividends during the first 9 months of 2023.
In summary, i3 delivered another consecutive quarter-on-quarter production increase, uninterrupted since Q2 2021, as the company began to deliver on its 2023 work programme in Canada. Despite the capital and dividend cut made in light of recent commodity price trends, production is expected to continue rising, and the company's balance sheet should continue to strengthen.. i3's asset base remains strong with a 2PDP NPV10 per share of £0.36 and P+P NPV10 per share of £0.81.
While short-term investors may not be happy about the dividend cut, long-term investors should be reassured by the company's disciplined approach to capital allocation and steady production increases in line with aggressive work programmes and M&A. The adjusted budget will afford i3 the flexibility to quickly ramp up operations should commodity prices change. Despite the cut, we have no reason to doubt i3's continued commitment to a shareholder return model as the company has already returned £31m after investing US$80m (£63m) in drilling programmes since commencement of Canadian operations.
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