I3 Energy (I3E) announced that it has signed a CA$65 million ($53.7million) deal to acquire a package of oil and gas assets in Canada from senior oil and gas producer, Cenovus Energy.
The independent oil and gas company, which holds assets and operations in the UK and Canada, said it plans to raise a minimum of £40m through a placing as well as further funding by way of an offer made via the PrimaryBid platform, to help fund its purchase of the assets.
The London-listed firm said the assets will complement its existing area assets with around 3,090 boepd of overlapping joint working interest production and associated land position.
i3 explained to investors that the deal will see the business acquire production of around 8,400 barrels of oil equivalent per day, with proven plus probable reserves of 79.5m barrels.
This will include an inventory of greater than 220 identified development drilling locations and reactivation opportunities 212,000 net acres and 708 miles of pipelines. I3 said the profits attributable to the assets being acquired in the year ended 31 December 2020 were £7.1m.
I3 believe the assets will be materially accretive to its forecast production, NOI, and reserves (around 30%, 20%, and 76%, respectively) in the year following the closing of the acquisition.
The Company noted that the ‘significant expansion’ of its ownership across all existing and additional oil and gas licenses as well as infrastructure in i3's Central Alberta core area will allow it to ‘materially reduce unit operating costs and maximise third party tariff income.’
I3 said the proposed acquisition will enable it to strengthen its financial position. Upon the official closing of the acquisition, i3 said it expects to have estimated net debt of only US$27 million, which translates to a current net debt to NTM NOI ratio of approximately 0.36x.
‘The complementary nature of the Assets provides the basis for strong operational and financial synergies and continued good stewardship on behalf of all stakeholders,’ i3 said.
I3 ‘s share placing is subject to shareholder approval, with a general meeting to be held on or around July 26. In the meantime, both Calgary-based Cenovus Energy and i3 Energy have signed the agreement into escrow until “irrevocable commitments” are made on the placing.
"We continue to execute on our business plan which is to build and grow a material and diversified production business through the most efficient deployment of capital, whether that is through exploitation of opportunities within the Company's existing portfolio or through accretive acquisitions such as this one,” said Majid Shafiq, Chief Executive of i3 Energy.
I3 said the transaction will scale up its cash flow, lower unit operating costs, increase third party tariff income and add scale to its ‘expanding list of varied development opportunities’ which, in turn, will materially increase its options to grow the business and manage risks.
Commenting on the transaction, Ryan Heath, President of i3 Energy Canada Ltd., said “The inherent synergies of the transaction, being immediately evident and robust, will most certainly expand with time to further enhance field efficiencies and cash flow throughout our central Alberta core area, to the benefit of the Company and its stakeholders."
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In June 2021, i3 told investors that its maiden dividend could be paid in July. In addition, last week, i3 Energy told investors in an update that production in 2Q21 has averaged 9,142 boepd, with this including the impact of routine facility maintenance on third-party facilities.
The independent oil and gas company, which holds assets and operations in the UK and Canada, said production has averaged 9,353 boepd at the A-52-G horizontal well on its Noel acreage in northeast British Columbia which was previously brought on-stream on 17 June.
I3 said the rig has been moved to, and now spud, the second well in this Marten Hills Clearwater drilling programme at 02-12-075-26W4, with drilling expected to finish mid-July.
The Company explained that the tie-in and equipping of the wells is expected to take five days following rig release, with production from both wells anticipated to commence in late July.
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.
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.
Shares in i3 Energy have increased by around 70% in value since the beginning of 2021. The stock was trading 14.58% lower during late morning trading at 12.3p following the news.
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.’
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