I3 Energy (I3E ) has taken operatorship and doubled its position in the South Simonette oil property area, a premium light oil asset situated in the Lower Montney in British Columbia.
The independent oil and gas company with assets and operations in the UK and Canada said it has acquired a further 49.5% stake in the asset, thereby taking its overall stake to 99%.
I3 is acquiring the stake through a right of first refusal, paying $4.2m as well as $0.58m to cover costs of reactivating two suspended wells where work is expected to restart in July.
The work which is to be undertaken at these two currently suspended wells at South Simonette in July 2021 is estimated to result in an incremental increase to i3's corporate production and net operating income (NOI) of 720 barrels of oil equivalent per day (boepd).
The move, which will result in $5.2m of cash flow, doubles i3’s working interest position in over 70 potential Lower Montney development well locations at South Simonette.
This latest investment brings i3 ownership at its North and South Simonette properties to almost 100% allowing it to control investment and development timing in these assets.
i3 explained how the North and South Simonette areas are considered core and strategic components of the firm’s Canadian asset portfolio, encapsulating a broadly contiguous land base that represents a large contingent of i3's highest rate of return development locations.
To date, the wells drilled at South Simonette have exhibited initial oil production rates as high as 740 bopd, in line with GLJ's 2P expectation for wells from this zone. If fully exploited, i3 believes South Simonette could deliver peak net production of over 16,000 boepd.
Commenting on this investment, Ryan Heath, President of i3 Canada, said: “The recent increase in global oil prices has resulted in a significant increase in M&A activity in offsetting Montney acreage, as competitors seek to grow their exposure to this prolific play.
In this environment i3 is very pleased to capture a near 100% operated and contiguous working interest in over 120 km2 of Montney acreage in Simonette which includes strategically located processing infrastructure. This is now a very attractive package."
Majid Shafiq, CEO of i3 Energy, has described the acquisition as “a very accretive addition” and “highly strategic” in reference to the company’s production portfolio across Canada.
Shafiq highlighted to investors that both the North and South Simonette properties act as “significant contributors” to i3’s current production base, and provide “significant, incremental oil-focussed growth potential during a sustained period of higher oil prices.”
“Together with recent acquisitions and advancement of development opportunities in our growing Clearwater position and other assets in our portfolio, this acquisition provides significant optionality in terms of where we choose to allocate our development capital."
Meanwhile, in a separate statement, the company published its final results for the year ended 31 December 2020 in which it hailed a “transformational” year which was largely characterised by the group’s efforts to increase its corporate foothold across Canada.
In particular, i3 cited its acquisition of Toscana in October 2020 as well as the acquisition of the GAIN assets in September 2020 which were acquired for $35m and delivered c.9,000 boepd of long-life, low-decline production from 467 wells over a 497,000 acre leasehold.
Overall, total revenue from the company’s Canadian assets amounted to £13m for 2020. Meanwhile, profit after tax for the final year ended 31 December 2020 came to £11.7m.
“Following shareholder and court approval of our balance sheet restructuring we will soon pay our maiden dividend and commence a cycle of regular cash returns to our shareholders.
We see tremendous potential for growth, in Canada both organically through exploitation of untapped potential in our current asset base and through accretive acquisitions and in the UK through the drill bit,” commented Majid Shafiq, Chief Executive of i3 Energy.
Looking ahead, i3 highlighted that negotiations continue with multiple potential farm-in partners in regard to the Serenity field appraisal drilling programme in the North Sea.
I3’s focus for 2021 will include growing the Canadian business, ensuring the farmout of its UK licences and distributing dividends to shareholders with up to 30% of free cash flow.
View from Vox
Today’s acquisition which will see i3 take operatorship of South Simonett and double its existing 49.5% stake in the light oil asset to almost 100%, is expected to offer significant, incremental oil-focussed growth potential during a sustained period of higher oil prices.
The news follows a string of recent acquisitions for the group which continues to advance opportunities across its Clearwater position as well as other assets across its portfolio.
Shares in i3 have risen by over 60% since the start of 2021. The stock was trading 10.67% higher at 8.3p following the news of the acquisition and the publication of its final results.
Reasons to I3E
i3E’s is focused on the development of discoveries located close to existing infrastructure and the exploitation of producing fields, whilst maintaining limited exploration exposure.
Majid Shafiq, CEO of I3E said i3’s entry into the WCSB is “to provide a platform to execute on a strategy for the rapid growth of a Canadian onshore production portfolio via M&A.”
Alongside its acquisition of Toscana, i3 has continued to expand its Canadian assets, with CEO, Majid Shafiq, and in particular, has viewed 2020 as “a transformational year.”
In September 2020, the company told investors that it completed its acquisition of all the petroleum and infrastructure assets of Gain Energy for CAD$80m after raising around £29m in August in order to complete its proposed acquisition of the Gain Energy assets in Canada.
i3 Energy also agreed to sell Gain's Saskatchewan portfolio to Harvard Resources Inc. for CAD$45m, c.US$33m, immediately following the completion of its acquisition of Gain.
i3 believes the diversification of its portfolio will add ‘a quality production base to provide internal free cash flow to grow the enlarged group and provide a near-term return to its shareholders.’
Follow News & Updates from i3 Energy here: