GCIi3 Energy delivers robust Q1 performance, refinances debt and monetises non-core assets
() , a UK and Canada focused oil producer, announced its financial and operational results for Q1 2024 ended March 31, 2024.
i3 reported free cash flow of US$15m for Q1, up from US$9.9m a year ago. Additionally, the company secured a new CAD$75m reserve-based credit facility with National Bank of Canada, comprised of CAD$55m revolving and CAD$20m operating facility. The new loan was partially used to repay 's outstanding CAD$57m balance of its existing facility with Trafigura.
Post quarter-end, entered a definitive agreement to sell most of its royalty assets for a total consideration of US$24.81m (CAD$33.5m) in cash, translating to 6.9x of its FY24 forecast cash flow or approx. US$64k per flowing boepd. had net debt of US$21m on March 31, 2024, which was eliminated at the close of the royalty disposition.
also published its 2022 ESG Report in January, and reported continued progress on its CO2 reduction initiatives, including the electrification of 3 wells and downhole abandon of 4 wells.
Production in Q1 2024 averaged 19,410 boepd, a 4% decrease from Q4 2023, resulting from conservative capital management of softening gas prices and downtime due to extreme cold weather in January 2024. paid £3.084 (US$3.91m) in dividends during the period.
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Another strong quarter from , building on a record FY23 that saw annual average production reach 20,711 boepd thanks to a highly productive 2023 work programme. The 4% decrease in quarter-on-quarter production in Q1 was expected due to consolidation of gas prices and unusually cold weather across 's Canadian concessions in January. It is not a significant movement on 's production curve and should not be interpreted as a trend reversal.
The highlight of the quarter was 's refinancing of its existing debt with non-amortising, traditional oil and gas reserves-based loan, as well as the beginning of its monetising the majority of non-core royalty production. The latter yielded a significant US$24.8m cash injection into 's balance sheet and much increased liquidity. The restructuring ensured the company could maintain its generous dividend and continue its ambitious 2024 work programme that is targeting a diversified inventory across 's Canadian portfolio, with 390 booked drilling locations.
We expect the US$51m 2024 capital programme to yield another significant 5-10% increase in annual production. The new work programme will be fully funded from existing resources. remains well funded after the aforementioned partial sale of its royalty assets. The 2024 programme will also support a long-term dividend, with an est. £12.3m to be returned in FY24, representing 1.0260/p for the year and a forward yield of 8.1% based on a share price of 12.66p for .
Investors should note that the new capital programme will be c. 85% H2-weighted to take advantage of stronger forecast winter gas pricing. In the event forward gas prices deteriorate, has flexibility to reallocate drilling locations to more oil-weighted opportunities. Additionally, pad drilling of the prospective Montney acreage is expected to begin in Q1 2025.
On the ESG front, i3 continued to make progress in reducing Scope 1 and Scope 2 carbon emissions in Q1. The company electrified 3 well sites, converting combustion engines to electric drive engines on existing pumpjacks. further executed Phase 1 of its previously announced ALT FEMP programme, which images methane emissions from the air. The effect of this program was an annual emissions reduction of 3862 tCO2e, with Phase 2 currently underway. During the period, also downhole abandoned 4 wells, and in January 2024 published its 2022 ESG Report.
's Canadian portfolio holds significant upside across years of potential growth, with 2P reserves now valued at c. US$1bn or £0.67/share - a significant premium to 's current share price. 's projects have strong economics, characterised by low cost and high-returns. Efficient "strong finding, development and acquisition" (FD&A) metrics of US$5.67/boe (PDP), US$2.32/boe (1P) and US$1.76/boe (2P) translate to robust recycle ratios of 2.17x (PDP), 5.31x (1P) and 6.97x (2P).
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