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I know it's frowned upon folks but I've just finished accumulating a decent stake in a great speccy. Worth checking out if you're interested. Imo it's one of the best I have seen in a while. Tony, would love to get your thoughts on it. It's still flying under the radar but I do feel has the potential to 2-5x in the next 9 months depending on results. Company is called Deltic energy. Happy to talk more on the other board for those interested.
As for here, well it looks pretty good doesn't it. I'm back up to 4m shares. Still looking to accumulate more on any weakness. I'm expecting a bit post divi, as is the way here. Hard work getting them at the moment. GLA
I get the LNG, new pipeline etc narratives. However, I note the SP here is lagging the POO macro having soaked up the UK tax concerns.
Now given I3E’s predictable revenue stream, which translates to predictable divi income. Add in the POO outlook + I3E’s ops ambitions and shareholder loyalty it’s looking a very compelling investment now for growth and income!
Today I bought back in.
Usual caveats
Trek
Glad to see that you are bullish again :-)
I partially debunked a very similar post from Canuck 6 months:
“….but the reason why i3 Energy doesn’t trade at 110% of its PDP is because no one in the Alberta O&G industry has heard of us”
Couple of things wrong with this Imo and you probably wont like to hear it – Canadians only make up 10% of the shareholding, 90% are UK i.e. UK Investors call the shots. Secondly, your assertion that that this is the reason is purely speculation on your part yet you spit it out as fact. I will touch on a couple of reasons in a later response to another poster who asked me this question.
“Peters & Co, the leading Canadian O&G investment bank doesn’t include us in their small cap charts”
There are a few small caps that are not included. When Peters & Co held a conference last year, the question was asked why i3e was not in attendance/presenting. The response from the Company was that Peters & Co typically follow the larger names only and / or Companies that use Peter & Co’s banking services. This does not include I3e but it certainly includes a few small caps such as Gear Energy that do use their services. You will see from a link that I’ll put out later that Gear Energy also trades at the bottom end of the valuation multiples – how can that be if the're covered by Peters and Co??
I3e is covered by Canaccord Genuity Group Inc. who are a leading independent, full-service financial services firm with an international footprint and who by the way are headquartered in Canada with offices in London and elsewhere. They have put out several research notes. I would think also the new bank that that has provided the loan facility also cover them as possibly do others.
If anyone is interested in a proper response to IBB_Invests posts direct from the horses mouth– would suggest you copy it and email it into Investor relations at i3e and get their thoughts!
Coincidently or Not - Rockcreekfreak updated his prior charts on reserve values and posted on his twitter page:
https://twitter.com/rockcreekfreak/status/1776353694973587723
My thoughts on Justfencings earlier question - there are many factors affecting valuations and analysts use multiple metrics to arrive at a blended valuation. I've listed some of the more important below:
1) Cash Flow / Free Cashlow is one of the most important. i3e is 50% Gas and 25% NGL's both of which have been at multi year lows, so I3e's cash flows have been impacted more than those of Oil weighted Companies.
2) Size - Large Oil and Gas Companies typically attract significant premiums over smaller companies on most metrics. You cannot expect i3e as a microcap to trade at large cap multiples. Perhaps my earlier email was a little misleading in that I was quoting an average without taking into account other factors such as market cap. Now that we have the link above - a better analysis can be done on where i3e sits in relation to small caps with similar Oil / Gas weightings.
3) Management - most agree that i3e has competent Management but there are quite a few that feel that PR is deficient. The handling of the dividend cut left a lot to be desired and shook confidence . This was by far the most impactful RNS in the last year or so and it will take time for confidence to be fully restored. We've not had an equivalent RNS to the upside. The financial/operational updates have been very solid but not spectacular - same for the reserves report. Perhaps the best RNS we have had recently was the new loan facility but not earth shaterring by itself - just incrementally good. Perhaps the upcoming Capex update will be that spark that helps drive the SP higher.
4) Debt -no need to delve into this but i3e's new facility has cut the interest payments and provides better liquidity which hopefully facilitates a crackerjack Capex update.
So to help close the valuation gap:
a) Continued operational excellence and no more nasty surprises
b) More visibility with PR / Coverage etc
c) Improved Gas prices (&NGL) - the difference between CAD 1.60/GJ and CAD 3.00/GJ is about $19m additional NOI. Most Industry Insiders are expecting better gas prices as we move into Q3/Q4. This is possibly the most important factor moving forward along with the continued strength of Oil.
Thanks for the in depth post Tony, we should only have to wait a couple of weeks tops to find out what the Board has managed to conjure up to push the company forward in the next 12 months.
Didn't I tell you that Tony would disagree and come to defend I3 Energy's poor analyst coverage. Tony some responses below to your comments (you didn't 'debunk' anything BTW):
1. "Couple of things wrong with this Imo and you probably wont like to hear it – Canadians only make up 10% of the shareholding, 90% are UK i.e. UK Investors call the shots. Secondly, your assertion that that this is the reason is purely speculation on your part yet you spit it out as fact. I will touch on a couple of reasons in a later response to another poster who asked me this question."
Yes, of course Canadians only represent 10% of i3' investor base! This is a result of near zero analyst coverage for this company wherein 100% of their revenue comes from Canada! No revenue is generated from the UK yet 90% of our investors come from there. UK investors have little knowledge of the Western Canadian oil basin. There is something wrong that Canadian's are only 10%. This should be significantly higher for a company whose operation are in Canada! Again, this is because of a lack of analyst coverage and no marketing of the company to Canadian investors.
2. “There are a few small caps that are not included. When Peters & Co held a conference last year, the question was asked why i3e was not in attendance/presenting. The response from the Company was that Peters & Co typically follow the larger names only and / or Companies that use Peter & Co’s banking services. This does not include I3e but it certainly includes a few small caps such as Gear Energy that do use their services. You will see from a link that I’ll put out later that Gear Energy also trades at the bottom end of the valuation multiples – how can that be if the're covered by Peters and Co??"
Gear Energy is a terrible example of another company with a low valuation multiple. You are ignoring that Gear Energy is currently up for sale. No sophisticated investor or investment fund will invest in a company that is for sale where there is a high likelihood that it could get taken under. Not a good comparison to i3 Energy.
Peters & Co was just one of the examples I used. There are many other investment banks/ funds that hold events and conferences where small caps have the opportunity to present. Since following i3, I have yet to see them present once in Canada. Eg below:
https://schachterenergyreport.ca/about/conference-sandbox/
3. "I3e is covered by Canaccord Genuity Group Inc. who are a leading independent, full-service financial services firm with an international footprint and who by the way are headquartered in Canada with offices in London and elsewhere."
Canaccord is the only single Canadian coverage. i3' peers have 5x the coverage.
4. If anyone is interested in a proper response to IBB_Invests posts direct from the horses mouth– would suggest you copy it and email it into Investor relations.."
i3 Energy IR do not respond to emails!! I have emailed severals times over the y
Very well said Tony.
IBB_Invest,
Your post was debunked and your response is very poor. I only have one additional point to add to your latest post:
"UK investors have little knowledge of the Western Canadian oil basin" - This is a load of crap - an oil well is an oil well - there's nothing particularly special about a Canadan Oil Well . You may think you are smarter than the rest of the world - but you are not !
"There is something wrong that Canadian's are only 10%." - I agree, put your hand in your pocket an buy more shares - simples !!
Further to IBB_INVEST rebuttal: the market is the market. You can't argue with it. We're being valued at a discount rate of 20% which is 100% more than other peers in Canada are being valued at (10%). The market is saying we're 100% riskier than everyone else? Why? The asset is fine. The balance sheet is OK, and just got better?
Is I3 a good operator? Well, it has an opex of $14.80 that's terrible compared to a best in class operator like Peyto
Plus, GLJ estimates they have to spend $235M in capex in 2025 "n to
convert proved non-producing and undeveloped reserves and probable reserves to proved developed
producing reserves". They better have a banner year in 2024 then...otherwise they will lose reserves.
Cannuck - whwre on earth do you get your figures from ?
As per page 11 of the 2023 interim report - i3e's opex includig transprtation is stated as S12.90 to $13.10 . Its possible also that the final figure for 2023 could be a little less as many Companies are announcing a reduction in 2023 opex costs.
As per the attached BOE report card - the average Opex plus transportation cost is about $11.90 (USD). Its a small sample size but indicates that i3e is about $1 more than average - personally i would not classify this as terrible - its about 10% more than average. You're also comparing to Peyto which has a multi billion dollar market cap and so is likely to benefit from scale.
It mystifies me that as a shareholder - you go out of your way to trash i3e and most of the time with incorrect data. Keep trying buddy - one day i'm sure you will get it right !
https://boereport.com/2024/04/02/boe-intel-q4-2023-earnings-season-report-card-part-2/
"Plus, GLJ estimates they have to spend $235M in capex in 2025 "n to"
I'm sorry but you have absolutely no idea what you are talking about !
Cannuck - whwre on earth do you get your figures from ?
I got them from the GLJ report filed with SEDAR
https://x.com/DerAchsenZeit/status/1776697198866280643
There are two sets of numbers :
Opex - i've pointed you towards the correct numbers and i3's numbers are not terrible.
Development Capex - you've pulled off a number from the reserves report and completely misunderstood what it represents.
Lets use a bit of common sense and sense check what your trying to tell people (incorrectly). Take a look at the Q4 update - 8 net wells and $30m in Capex. Now go check the YE reserves report - not complicated - $30m in capex was sufficient to replenish reserves. Had they spent $60 m for example - they would have added significantly to reserves,
The S234m that you are referencing refers to something else entirely - I'm not going to explain it to you - your going to have to use your noddle and figure it out yourself and if you have any integrity - once youve figured it out - you should correct all the nonesense you are posting on twitter !
Tony, you did not debunk anything. You pointed out that i3 has one third rate analyst covering it. Unlike it's peers, it has no major Canadian bank coverage and none of the leading Calgary based O&G investment banks. You do not have a leg to stand on in your weak argument that i3 has the same coverage of its peers. It simply does not!
" "UK investors have little knowledge of the Western Canadian oil basin" - This is a load of crap - an oil well is an oil well - there's nothing particularly special about a Canadan Oil Well . You may think you are smarter than the rest of the world - but you are not ! "
This is absolute rubbish Tony. A UK offshore well is NOT the same as a Central Alberta well. A US Permian well is NOT the same as a Central Alberta well. A NEBC Montney well is NOT the same as a Central Alberta well. An Alberta Montney well is NOT the same as a Central Alberta well. A Sask well is NOT the same as a Central Alberta well. A Fort McMurray oil sands well is NOT the same as a Central Alberta well. A Clearwater thermal heavy oil well is NOT the same as a Central Alberta well.
You are a terrible O&G investor is you think i3's Central Alberta oil wells are apples to apples to any of those listed above. They are not.
If an oil well is just an oil well. Why do certain asset's like Athabasca's production trade ($ per boe/d) trade as a huge premium to a conventional boe such as i3' or InPlay?
The average UK investor is NOT as familiar with the Western Canadian oil basin as Canadian investors. Delusional if you think they are. For a Canadian oil producer, i3 Energy's 10% Canadian investor base is simply pathetic and management should be ashamed of this, admit it and work to improve it. It is as simple as that. Indefensible.
"There is something wrong that Canadian's are only 10%." - I agree, put your hand in your pocket an buy more shares - simples !!
I own plenty of i3 Energy shares already. Canadian funds own ZERO shares due to managements substandard marketing of their company.
I've mentioned this a couple of times: I really don't get why they're not buying back shares with some of the cash being returned to shareholders. I do hold a small position here, but that's not going to increase until management rethink the dividend policy. The investors I talk to have the same opinion: Undervalued companies with strong cash flow must do buybacks to get back to a fair valuation, get protection from take over, keep a steady shareholder base, keep their bank happy, etc. etc.
Are you advocating for cancelling the dividend and buy back stock ? I dont think you will get too many takers here supporting that idea.
i3e have addressed the issue of buying back stock several times and it does not look like it will happen which imo is a mistake.
With a dividend of £12.3m and since the paying off the loan, which needed repaying with a facility that only needs the interest paying on whatever is drawn down, there should be about £40m pa cash flow from operations plus £40m undrawn facility. I3 Energy now has the opportunity for either earning enhancing acquisitions or share buy backs .
IBB_INVEST have you contacted i3 management and shared your views, did they agree?
My understanding is that i3 have been working at increasing Canadian exposure, they now have I believe some Canadian coverage and have reached over 10% so they will now take on Canadian reporting standards quarterly. I think this will increase over time Canadian take up of shares, however if you disagree best write to the company with your ideas. Maybe they didn't think of them.
Stas - why are you in 88e and not PANR ?
"The $234m that you are referencing refers to something else entirely - I'm not going to explain it to you - your going to have to use your noddle and figure it out yourself."
That's a capex program that has been disclosed by I3 to the reserve auditor. If they can't generate $234M themselves (highly unlikely), where is that money coming from?
It is not up to generalist investors like me to convince management to do their job and market the company via investment bank and fund analyst coverage. As a CEO and President, they should know that this is an important part of their job. Below is i3' measly single Canadian analyst coverage for a 21,000 boe/d company:
Canaccord Genuity (though no longer listed on i3' website as analyst coverage?!)
A year ago when shareholders asked management why they have next to no Canadian coverage, they responded by saying that companies need to use the services of the banks to get coverage and i3 don't want to do that as its too expensive etc. though they are working on getting better coverage. IMO that was a bulls**t answer.
i3 Energy Comp Analyst Coverage below:
1) Crew Energy (30,200 boe/d)
https://crewenergy.com/investors/
ATB Capital Markets
BMO Capital Markets
Canaccord Genuity
Cormark Securities Inc.
Desjardins Capital
National Bank Financial
Peters & Co. Limited
Raymond James
RBC Capital Markets
Scotia Capital
Stifel FirstEnergy
TD Securities
Velocity Trade
2) Saturn Oil & Gas (26,890 boe/d)
https://saturnoil.com/investors/#analyst-coverage
Beacon Securities Limited, Canada
Canaccord Genuity Corp., Canada
Echelon Capital Markets, Canada
Eight Capital, Canada
Velocity Trade Capital, Canada
3) Pinecliff Energy (26,000 Boe/d)
https://www.pinecliffenergy.com/investor-relations#analyst
Cannacord Genuity
Desjardin Capital Markets
Haywood Securities Inc.
Paradigm Capital
Peters & Co.
Schacter Energy Research
Stifel FirstEnergy
4) Surge Energy (24,438 boe/d)
https://www.surgeenergy.ca/analyst-coverage/
Acumen Capital Partners
ATB Capital Markets
BMO Capital Markets
Canaccord Genuity
Cormark Securities
Eight Capital
National Bank Financial
Peters & Co.
Raymond James
Schachter Energy Research
Stifel FirstEnergy
Velocity Trade Capital
5) Cardinal Energy (22,500 boe/d)
https://cardinalenergy.ca/investors/analyst-coverage/
ATB Capital Markets
BMO
CIBC
Peters and Co.
Raymond James
RBC Capital Markets
Stifel FirstEnergy
6) Bonterra Energy (14,204 boe/d)
https://bonterraenergy.com/investors/
Acumen Capital
Stifel FirstEnergy
Haywood Securities
Paradigm Capital
Peters & Co
Raymond James
7) Journey Energy (12,400 boe/d)
Peters & Co. (https://vimeo.com/864017426/d8a3efff9e)
Several others
8) Yangarra (12,000 boe/d)
https://www.yangarra.ca/annual-reports/analyst-coverage/
Acumen Capital Finance Partners Limited
ATB Capital Markets
Canaccord Genuity
Cormark Securities Inc.
National Bank Financial
Paradigm Capital Inc.
Peters & Co
Raymond James Ltd.
9) InPlay Oil (9,500 boe/d)
https://www.inplayoil.com/investors/analyst-coverage
Acumen Capital Partners
ATB Capital Markets
Beacon Securities Limited
Canaccord Genuity
Schachter Energy Research Services
Noble Capital Markets, Inc.
Eight Capital
10) Gear Energy (6,000 boe/d)
Stas, Tony, why are you in 88e and PANR, and not DELT :)
ibb, you're making some very good points. i agree they can and should be doing more in canada. there's no excuses. if i3e is to get closer to canadian peers we need more canadian shareholders. the lse and aim have proven themselves to be ****house places to be listed as a commodities company versus us, canada or aus. mgt need to get their act together on this front and drive more canadian ownership.
100% they need to GGG. Majid and Co have proven so be very good managers, especially in operations and investment banking. They have navigated the company exceptionally well during very low commodity pricing and have proven to be shrewd businessmen when dealing with banks on debt negotiations and M&A. Now is the time to market the company via investment funds and get that Canadian and US ownership up there.