i3 Energy (I3E) , a UK and Canada focused oil producer, released details of its Canadian subsidiary's 2023 year-end reserve report.
i3 Energy Canada saw total company interest total proved (1P) reserves and total proved plus probable (2P) reserves effectively maintained year-over-year at 92.9 million barrels of oil equivalent (boe) and 179.9 million boe respectively.
Proved developed producing (PDP), 1P and 2P reserve volumes saw strong positive technical revisions despite significant reductions in forecast natural gas and natural gas liquids pricing, which impact c. 76% of I3E's produced commodities.
The before-tax NPV of cash flows attributable to I3E's reserves, discounted at 10%, was estimated at US$303.1m, US$501.3m, and US$1,026.4m for its PDP, 1P and 2P reserves respectively. Additionally, PDP, 1P and 2P reserve life indices of 7.1 years, 12.6 years, and 23.0 years respectively indicated increased reserve life across each of the categories.
In terms of inventory, total gross booked locations of 391 (254.4 net) across I3E's four core areas added to a total company inventory (booked and unbooked) of over 950 gross (550 net) undeveloped locations. The total undeveloped inventory represents over 50 years of development drilling, based on I3E's 2023 capital programme.
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Very strong year-end reserve numbers from i3 Energy Canada, prompting an equally strong reaction from markets as I3E shares climbed 9.5% on Monday. Despite lowering capex in response to low commodity prices last year, the company managed to maintain reserve volumes flat. I3E'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 I3E's current share price.
I3E'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 rebust recycle ratios of 2.17x (PDP), 5.31x (1P) and 6.97x (2P).
The long reserve life indices plus low decline rates reinforce the sustainability of i3 Energy's return model. Following its 2023 capital programme, I3E's top-tier corporate decline rate for 2024 is approx. 15%, which combined with an extensive portfolio of diversified booked drilling locations, underpins I3E's growth and income strategy. The company has a significant pipeline of booked development locations, plus a large inventory of future unbooked locations, providing strong visibility.
Separately, I3E announced a CAD$75m reserve-based lending facility for its Canadian subsidiary. CAD$57m will be used to repay the outstanding balance of I3E's existing loan facility with Trafigura while the remaining liquidity should significantly enhance I3E's financial flexibility, enabling further accelerated growth.
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