I3 Energy (I3E) said it is planning to expand its drilling programme for the second half of the year as a result of a continued strong performance of the company’s base production assets.

The Company, which operates as an independent oil and gas company with assets and operations in the UK and Canada, reported average production of approximately 18,095 barrels of oil equivalent per day ("boepd") in 1Q22 representing a 100% increase over 1Q.

I3 said this strong quarterly production represents a 100% increase over 1Q21 and is a direct result of the continued outperformance of the company’s low-decline base production, which is forecasted at 11.5%, as well as strong operational results across the Canadian portfolio.

The Company exited 1Q22 with record production of 20,312 boepd with April field sales estimates averaging 20,256 boepd. Today, i3's Board of Directors has also approved a 2022 capital budget increase of up to an additional $50 million, internally funded through existing operations, over the previously announced Canadian capital budget of $47 million.

I3 said the increased capital budget is a direct result of its robust operational performance and forecasted strength in commodity prices. The enlarged capital budget of up to $97 million will allow for the expansion and acceleration of its key Canadian development opportunities.

i3  explained that the enlarged capital budget is fully-funded through existing Company resources (cash on hand and near-term forecasted cash flow), and is expected to materially enhance 2022 production and NOI ‘while preserving the Company's strong balance sheet.’

The programme is designed to maximize near-term production and cash flow through further development of i3’s Glauconite locations in Central Alberta, while continuing to advance its Simonette Montney position and the company’s recently expanded Clearwater holdings. 

The revised capital budget is forecast to provide peak production above 24,000 boepd. As a material percentage of the budget will be deployed in 4Q22, the full impact and benefit of the expanded capital budget will occur in 2023 and beyond, i3 highlighted to its shareholders.

Based on full deployment of i3's enlarged capital budget, 2022 NOI is now forecasted to be $241m, with i3 expecting a material working capital surplus that will be available for additional development drilling, opportunistic acquisitions, and distributions to shareholders, it reported.

While monthly dividend payments of £1.1827m commenced in March 2022 with year-to-date distributions totalling £3.55m, a dividend increase is expected to be announced in due course due to the company’s strong performance and supported by i3’s current cash flow forecasts. 

Commenting, Majid Shafiq, CEO of i3 Energy informed investors: "We are very pleased with the continued strong performance of our Canadian production base, and the resulting cash flow generation in the first quarter of 2022. We exited Q1 above 20,000 boepd, in part due to the contribution from wells drilled as part of our maiden operated drilling programme. 

He added: “Results from wells drilled to date have met or exceeded management's pre-drill geological and production capacity expectations and have been drilled within budget. An increase in dividend pay-out for 2022 is also expected to be announced in due course."

Shares in I3 Energy were trading 3.49% higher during morning trading at 28.88p. Since the end of 2021, the stock has more than doubled in value from 13.3p as at 31 December 2021.  

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Results from the company’s wells drilled to date have either met or exceeded management's pre-drill geological and production capacity expectations and have been drilled within budget.

Today, the Board of I3 said a continued strong performance of i3’s production base assets, together with increased NOI projections and strong commodity price forecasts has informed its next move to expand the company’s drilling programme for the second half of the year.

In addition, i3 has expanded its capital budget to up to $97 million to allow for the expansion and acceleration of its key Canadian development opportunities. This is also a direct result of the Company's robust operational performance and forecasted strength in commodity prices.

i3 said it continues to expand upon and advance the development of its large inventory of both booked and unbooked locations, as it focuses on delivering total shareholder returns.

Based on current strip pricing, i3 has an identified inventory of 870 gross (465 net) locations. It is now actively advancing to bring forward a multi-year development strategy, capitalizing on robust near-term commodity prices as well as i3’s extensive infrastructure network, it stated.

In recent weeks, i3 has established a joint venture partnership for the Serenity project in the North Sea after the oil and gas firm executed its farm-in agreement with Europa Oil & Gas.

Drilling of the Serenity appraisal well is expected for 3Q22, and well costs are estimated at around £14m. The tie-up is subject to regulatory approval by Britain’s North Sea Transition Authority, and there are no material conditions for Europa to satisfy to complete the farm-in.

The Board of i3 has reiterated its confidence in its belief that the Serenity field holds a company-making resource and it expects the next appraisal well to prove that premise.

In the full year to 31 December 2021, i3 paid total dividends of 0.36 p/share, equating to a yield of around 6.5% for shareholders based on i3’s closing share price on 1 January 2021.

As announced in December 2021, i3 is committing to pay a minimum of £11.827 million in dividends during the course of 2022 - that’s 3.5 times all dividends paid throughout 2021 and equates to 1.05 pence per share or a 10.2% yield on the date of announcement. Today, the Board said an increase in dividend pay-out for 2022 is expected to be announced "in due course."

I3 has also forecasted year end “2022 Unencumbered Cash” of $66m which could support shareholder distributions or share buybacks, M&A, and supplemental development activity.

Shares in i3 Energy have more than doubled since the year ended 31 December 2021.

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