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Re. share buy backs - I'm not advocating for dividend cancellation; but maybe they should flex share buy back so it's 10-50% of shareholder return, depending on share price vs. forward P/E.
Couldn't agree more IBB. It's something that needs continued focus as they're managing pretty much everything else quite well.
Not a fan of BBs. Waste of money imo and I'd rather have it in my pocket for sure, than expecting the sp to re-rate upwards. Only time I see that happen is when the BBs are substantial, and even then it has f'all impact on the sp.
Quick question about the trans mountain gas pipeline, how confident are posters here on the re-rate upwards of Canadian gas prices in 2025? And how much of this is driven by LNG exports, for instance how much Canadian production is expected to head to other markets through LNG Canada and the US facilities?
Looks like I'm going to need to wait until after ex-divi if I'm going to get more in the high 10's low 11's. Bugger as I had opportunities to build another 500k-1m shares in the 10's a couple of weeks ago. GLA
I agree with you Sturm. I sent an article to i3e from Goehring & Rozencwajg which argued the case that mathematically, buybacks were more accretive to NAV than drilling new wells in the current low valuation environment. I.e. Companies should be prioritizing buyback rather than focusing on growth. Eric Nuttal obviously agrees because he advocates something very similar.
I3e disagrees and thinks that cash is better spent on growth and that after studying the situation small buybacks don’t have a significant impact on SP. I have a couple of comments on this:
1) I also agree that a focus on growth is probably more prudent than a large buyback
2) I’m not sure I agree with the conclusions from i3e’s study on small buy backs. First of all, by its very nature, a “small” buyback in theory should only have a “small” impact on SP. To measure this is difficult because there are a whole host of other factors that affect SP that are in play concurrently not least the POO. Also, its not like pushing a button where you get an immediate reaction. Buybacks indisputably increase the NAV per share and over time shares tend to more toward a multiple of this. I rate i3e Management highly but in the analysis of this kind of data, I would go with Goehring & Rozencwajg. I think a small buyback is a no lose proposition.
Interestingly a Company that was mentioned here earlier in the thread (Gear Energy) announced the results of its strategic review in February. The purpose of the review was to try to do something about its chronic undervaluation. They Contracted this super-duper Investment Bank – Peters & Co that our Canadian friends keep going on about to lead the review with all option on the table including but not limited to a sale of assets or even the whole company – sound familiar?
Conclusion: Conduct a Normal Course Issuer Bid (NCIB) – aka stock buyback !!!! I could have told them that without them having to pay all those fancy banking fees !!!
Interesting as well that despite have a large number of Investment Banks following them - they are still significantly undervalue like i3e.
Good post IBB_Invest and hats off to you for spending the time to do the research and provide some back up for the points you were making. Most dont do it and parrot what others are saying.
"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......"
I have some more detailed comments on your post which I will put up later. But a couple of general comments on the above:
1) I agree with Stas20 - it maybe no your job, but its your investment - I would have thought it much more constructive to email your comments to i3e than to spend your time moaning on here.
2) "As a CEO and President, they should know that this is an important part of their job......" I'm sure he does and had you emailed him - you would have a better understanding of what he does and why.
IBB_Invest,
I’ve added 2023 revenues to the list of Companies you provided. I have the following comments:
1) Peer translates to “of equal standing” – BOEPD is misleading as you can see that Oil weighted stocks have significantly higher revenues than their Gas weighted counter parts. I would argue that Saturn, Surge and Cardinal with significantly higher revenues are not peers. I3e sits at 6th on the list based on revenues.
2) At the bottom of the list, I have included the PDP ratios that came from the excellent charts provided by @RockCreekFreak. You can see that Yangarra & Saturn Oil trade on a significantly lower multiple than i3e, Bonterra at the same multiple and Birchcliff only slightly above. So, despite these Companies throwing money at Investment Banks left right and centre – it does not appear that it’s done a lot for their rating – at least on this metric
3) Looking at other metrics – unfortunately Shubham Garg has not updated his cash flow multiples in over a year and Eric Nuttall only provides the numbers for a handful of Companies, however, looking at the numbers I have – Surge is down in the dumps with i3e, Tamarrack Valley and Vermillion which are not on your list also trade at low Cash Flow multiples and all these Companies have a large number of Analysts following.
4) Journey Energy appears to have only 1 analyst covering it – similar to i3e.
5) So given the above – it begs the question why i3e would throw a lot of money at Canadian Investment Banks to follow them when only 10% of the shares are held by Canadians. Remember were comparing against Canadian Companies where most if not all the holders are Canadian.
So, in conclusion – spending a lot of money on Investment Bank Coverage in Canada is not the magic bullet some think. Don’t get me wrong – it cannot do any harm to increase coverage as long as it's cost effective– but you only represent 10% of holders – UK holders call the shots – get used to it!
Crew energy (CR) 32,200 Rev CAD 327M
Saturn Oil (Soil) 26,890 Rev CAD 693M
Pinecliff Energy (PNE) 26,000 CAD 188M
Surge Energy (SGY) 24,438 CAD 670M
Cardinal Energy (CJ) 22,500 CAD 589M
Bonterra Energy (BNE) 14,204 CAD 319M
Journey Energy (JOY) 12,400 CAD 225M
Yangarra (YGR) 12,000 CAD 166M
Inplay Oil (IPO) 9,500 CAD 179M
Gear Energy (GXE) 6,000 CAD 148M
I3 Energy (i3e) 21,000 CAD 282M
YDR 0.3, SOIL 0.4, BNE 0.6 i3e 0.6, BIR 0.7 JOY 0.8
Tony, I think the point IBB is trying to make is the 10% Canadian ownership is linked to the lack of coverage we're getting from the majority of leading Canadian banks and funds in the O&G sector. You've made the point previously that our under-valuation versus peers is probably related to our low Canadian ownership, which is something I agree as a probable reason. So getting more coverage surely has to help, especially when coming from such a low base of local investor awareness. The probability of investors putting money into i3e is zero if they haven't heard of us. And doing f'all to drive awareness is simply going to keep that probability at / near zero in Canada, alongside a low valuation multiple.
We've seen what PR coverage here can do to the sp. They should be focusing on doing this in Canada. I believe there's another couple of pennies in value that can be squeezed solely from doing this, alongside the excellent job they're doing from an ops standpoint. Either way things are looking much better now. They need to jump on this momentum and give us a proper re-rate. GLA
Personally I dont care whether Canadian Ownership is 10%, 20% or 2% - i'm interested in the share price and the real drivers of price. Generally its a plus to have a wider investment base but there's nothing to say that increasing Canadian ownership will increase the share price.
I've already alluded to the fact that I think that this is not always the case and provide data below to support my argument. The multiples of PDP that a Compant trades at is directly related to the number of buyers you have for the stock. I've already pointed to several Canadian peers that trade on Inferior PDP multiples despite having 10 investment banks following them.
I'm starting to think the low valuation is primarily the oil to gas ratio. Hopefully this is rectified in the 2024 capex programme. We'll probably look back in a year or two and think i3e came out of the gas slump not too badly. It's been a dire environment.
"'m starting to think the low valuation is primarily the oil to gas ratio. Hopefully this is rectified in the 2024 capex programme."
The company has advised its reserve auditor it will spend between $36M-$43M in capex in 2024. That won't move the needle much. Looks like they will go "balls to the walls" in 2025, when they hope AECO will average $4 or so.
https://x.com/DerAchsenZeit/status/1776697198866280643
Tony, why use PDP rather than financial metrics? Reserves are one (and not the best) way to analyse across companies - this is something we've agreed on in the past. EV:EBITDA imo is the best metric. How do we stack up against the competition on these metrics?
Also, what do you think of DELT? Take a look as I think this is a f@cking good speccy over the next 6-12 months. Happy to pick up on the other board.
Yesterday there was a good exchange of views. Perhaps the most profound comment though was Tony's 'Peer translates to “of equal standing” – BOEPD is misleading as you can see that Oil weighted stocks have significantly higher revenues than their Gas weighted counter parts.'
But it is more than that and is where the comparisons cited fail as i3E has no peer. I do not know of another London listed O&G stock with NS acreage and Canadian production with a secondary listing on TSX. Period.
All the Canadian generated income has to first fund London and the NS team and Licences, before considering what to do with the 'FCF'.
However, it is important to remember that the Canadian venture was only undertaken to meet the obligations of the revised loan note terms, and that the fund raise that came with it had a Dividend Policy: 'to begin paying a dividend of between 20 per cent. and 30 per cent. of free cash flow annually, progressively increasing this to 40 per cent. asi3's Canadian business expand'. That Loan note provider is still the largest stockholder and will clearly be afforded the same access to the BOD that Eric enjoys with the BODs of companies with his much smaller percentage holdings to express his preferential views and which may or may not be aligned with PIs.
With the NS still in abeyance, the progress on the Canadian assets was not only derailed by the Trafigura amortising loan and covenants (in conjunction with realised lower commodity prices) but also resulted in a halving of dividend.
Now, free from those shackles with the RBL, the long awaited 2024 Capex plan can be delivered. But there will still be some wondering why an appropriate plan could not be announced last year and updated as things changed. Q1 was put on ice.
Apparently C$232,649M were to be spent this year according to the 2022 Reserves Report...but just C$36,630M according to the 2023 Reserves Report. DYOC.
jimo
joe
"Apparently C$232,649M were to be spent this year according to the 2022 Reserves Report...but just C$36,630M according to the 2023 Reserves Report. DYOC."
Thanks for doing the work of comparing '22 and '23 reserve reports JoeSoap. Kicking the can down the road has been the real business model of this company. Don't know why they keep boasting about their "total return" model. They stopped growing in 2023. No wonder investors feel they are treading water here.
The share price is holding up remarkably well considering its ex dividend and AECO is in the toilet. Below are the average AECO prices in CAD / GJ. The good news is AECO typically bottoms in May and rises from there though the end of the year. Storage volumes are way up but we also have commissioning of Kitimat in the coming months which will draw gas and LNG shipment before the end of the year.
IMO the SP should rally pretty strongly in the coming months.
9th April CAD 1.33 / GJ
April CAD 1.54 / GJ
Mar CAD 1.69 / GJ
YTD CAD 2.29 / GJ
2023 CAD 2.50 / GJ
I think we might see a share price bounce tomorrow. I was hoping to pick up a few more around 11.50 but I’m not counting my chickens now. I also think mm’s could be short of shares.
The market is rightly looking 6 months ahead
Plenty of buying in Canada over last few days. Is word finally getting around? Somethings up.
Getting a Canadian institution declare a holding would be a big plus.
Volume looks the same in Canada to me 3LBs. Just a little more upward buying pressure over the pond creating a small disconnect. Agree it would help to get some more coverage over there Vernet. Still holding out for sub 11.5p. GLA
Good luck with price target GGG!
Majid has played this well, flagging mid April for potentially transformative news timed to follow the dividend.
Further to Tony's AECO post@ 9:22
https://oilprice.com/Latest-Energy-News/World-News/Texas-Natural-Gas-Prices-Are-Negative-As-Drillers-Chase-Oil-Sales.html
Yep you could be right on the share front.
Over 8 million more shares brought than sold over the last couple of weeks.
If this continues we should suddenly see spikes and many more bluey days
Re broker note - cash generating, valuation gap and significant growth forecast ''..and the best case scenario (2P case) currently offers almost 7x uplift.. With activity set to ramp up over the course of the year we see significant upside for the shares in the near to medium term.''
''It's a cash machine -share price disconnect is truly exceptionally attractive in our judgement, the valuation gap has grown inordinately creating, in our view, an exceptional attractive opportunity''
https://twitter.com/surprised_trade/status/1778691691089625514
Highly likely Monday is the big news day.
With i3e's record - im sure some will think highly unlikely ! But lets see - a Mondoy morning RNS would not go amiss !