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I messaged IR about this deal and got the following response from management today (IR turn around has picked up recently):
Q1 - With this disposition, what are the acreage revisions for i3' Central Alberta, Clearwater, Wapiti and Simonette plays?
A1 - There are no acreage revisions for the Company’s working interest positions and no revisions for reserves. Royalty barrels are not included in reserves.
Q2 - Furthermore, does this disposition reduce the booked locations of 391 (254.4 net) across the Company's four core areas per the March 25th 2024 Reserves Report?
A2 - No there are no changes in booked locations at all, booked or not booked in the Company’s reserves.
“Nothing really interesting in the report except they state drilling to be Oil Focused - really forrest ! But the interesting bit aquisitions may focus on Gas !”
Yes, no one should expect an oily acquisition with oil at $85. Won’t get bargains in the environment as everyone is making money.
Alberta AECO gas on the other hands is at cyclical lows of around $1 USD. US Permian gas is negative $4. That means these producers need to PAY someone to take the gas from them.
If the gas market in Canada further deteriorates this summer which is very likely could, there might be some very very cheap gas assets on the market or levered take-over targets for i3. Majid & Co will be like vultures I expect now that they have a fortress debt free balance sheet. Excellent position to be in for astute deal makers like i3 management.
Fantastic. Majid confirmed that these barrels NOT part of their companies reserves and therefore booked locations for drilling!
Perfect!!!! Prooved again: Majid is a superior dealmaker. And he is worth his salary.
Their Simonette Montney is a game changing company defining asset. Everyone hear should check out i3’ grandfather, Crescent Point Energy who did a whole Investor Day on their Montney that offsets i3’ Simonette.
https://www.crescentpointenergy.com/invest/2024-investor-day
Also astonishing is the realisation for me just how valuable the simonette acreage is they retained, its potential, if fully developed seems massive.
Interesting these assets were not all oil they were in the same ratio as the business in general so quite gassy, 50% gas, 16% oil and the rest condensate and NGL's - what a brilliant deal when he highlights the fact that in 2020 they paid $26m to acquire 9000 barrels from gain energy and they have just sold 388 barrels for $25m - its just astonishing.
Https://www.proactiveinvestors.co.uk/companies/news/1045609/i3-energy-ceo-majid-shafiq-says-strategic-royalty-asset-sale-accelerates-value-1045609.html
This excellent interview explains the benefits and value of the deal.
here's majid beating the drum - lets hope everyone has there hearing aids switched on !
https://*********************/media/i3-energy-ceo-majid-shafiq-says-strategic-royalty-asset-sale-accelerates-value-
SPANGEL REPORT:
I3 Energy* (I3E LN) 12.3p, Market Cap £148m: Royalty sale boosts firepower
• i3 announced an agreement with a newly formed private royalty company to sell the majority of its royalty assets in Canada for a cash consideration of $24.8m (C$33.5m).
• The divested royalties are expected to average production of 388boe/d in 2024 and generate $3.6m in royalty income based on strip pricing, which translates to a sales metric of 6.9x 2024 forecast cash flow or $64k/boe/d.
• The Company retains its 16,160-acre royalty position over Montney assets at Simonette, which includes 35boe/d of associated production and is a key growth area for the Company and its peers.
• I3 commented that cash flows from a current production base of 19kboe/d (~48% liquids) and a fully undrawn C$75m reserve-based lending (RBL) facility provide significant liquidity for organic and inorganic opportunities. Following on from the new credit facility by a major Canadian Bank, the sale of a non-core royalty package has now significantly improved i3’s balance sheet strength and liquidity position. The valuation metrics associated with the transaction represent a material premium to the Company’s current market valuation ($9.7k/boe/d), which reflects the higher industry valuations that are available for low risk, cash flowing assets. We expect i3 to redeploy the funds to drill on its extensive inventory of high-return drilling locations and also pursue accretive inorganic growth initiatives, as the Company looks to expand its valuation multiples closer in line to peers. We look forward to the management updating the market this month on the 2024 capital programme, as i3’s robust production and cash flow generation provides the liquidity to execute its growth and income strategies (c.8.5% yield).
Intra day rns release was a clever move.
Agree on your last Nomadic. I'm hoping they'll head down this route. Benefit of going after oil is we can prove up more reserves, which in turn pushes our value and makes us more attractive as a t/o target. Would be very happy if they plough a good $50m into oil focused wells over the next 12 months. We're still making cash and have our loan facility to draw down from. And they can steadily add more wells to avoid too much risk should poo take a turn in H2, or they can pivot back to gas if they see prices increasing.
Would like to see some PR around this deal. The deal won't move the dial on the sp if no-one knows about it. They've now had a couple of opportunities to do interviews and push for more coverage. Hopefully on the back of the development plan they'll get out there and beat the drum. Still great value to be had here. If gas prices improve to CAD$3 in H2 like some are saying, then we should be at 15p quite easily.
I'm up to 4.75m shares now with an average of 10.1p. Funny thing is I had this level when I started to sell down a little while ago. If this stays around these levels over the coming months I'll be adding more. My DELT speccy is the big upside (or not) play I'm making this year. Probably in too deep but the reward profile is very attractive. If it comes in I'll add a lot more here and in PTAL. These are my safe 10-25% capital gain and 10% income payers over the next 12 months. Even if we get the lower end of value uplift it's still a solid 20-25% overall gains. What's not to like. GLA
It's an interesting one with potential gas acquisition. Clearly depends on the price and metrics could be very accretive with AECO in the doldrums. However, gas weighted stocks are always depressed vs oil heavy peers. Another cheap 5k boepd of gas won't help i3e on this front. Hard to see past putting all the capex into oil this year imo - start giving reasons to remove the value gap and attract premiums.
The interest on the Can$27million drawn down on the loan would have been US$1.8m pa so giving up US$3.6m only costs US$1.8m in cash flow. There must be oil and particularly gas producers in Canada with weaker balance sheets than I3 ripe for takeover - would help if share price was a bit higher to allow share based acquisitions though.
Interesting Tony, I don't see the WHI report. I only see a new ones from Tennyson and Zeus which are always private. I would expect WHI to make theirs available as they always have.
"The more I think of that deal the more I realise this is a mini game changer and watch this space now"
I think debt refinancing was the cake and this latest deal is the cherry on top. Before these two transactions - I was stuggling to see how they could make any meaninful acquisitions that would move the needle - this now appears to open the door to a number of possibilities.
Zeus Report Part 2
I3 Energy overview. I3 is an E&P company focused mainly onshore Canada, with producing assets across central Alberta, Clearwater in northern Alberta, and Simonette and Wapiti/Elmworth in western Alberta. These hold a total 180mmboe of net 2P reserves. The company also has the Serenity discovery in the UK North Sea. I3 produced at 21mboe/d net in H1 2023, generating EBITDA of £38.6m and FCF of (£6.4m) after CAPEX of £27.2m. Full year 2023 production was 20.7mboe/d and end 2023 net debt guided at c.US$23m (the company is expected to now move to a net cash position post its royalties sale). The shares are on a prospective 2024 dividend yield of 9%, based on consens.
Nothing really interesting in the report except they state drilling to be Oil Focused - really forrest ! But the interesting bit aquisitions may focus on Gas !
For some reason Zeus dont provide a target price like they do for some other companies. Tennyson have also just issued a report but this is currently only available to premium users.
Zues Report Part 1
Canada royalty assets sale
I3 has announced the sale of the majority of its royalty interests in Canada, for US$24.8m cash. This allows the company to fully repay amounts drawn on its debt facility and create a working capital surplus, giving I3 significant additional funding flexibility going forward.
Royalty sales provides significant cash for limited reduction in forward cash flows. I3 is selling 388boe/d of royalty production (leaving the company with 35boe/d) for cash of US$24.8m. This is only a small part of the company’s total 20.7mboe/d 2023 production. The interests are forecast to represent US$3.6m of pre-tax cash flows in 2024 (boosted by royalty income incurring no OPEX, unlike field revenues), and hence the US$24.8m deal price represents a significant acceleration of cash flows here.
The retained royalty position is in I3’s Simonette area – this is one of I3’s four core regions onshore Canada, and the retention of this portion should help to reinforce the company’s position there.
Upfront cash increases funding flexibility for I3. The cash from this deal will allow I3 to repay the outstanding portion of its US$55.6m debt facility, and create a working capital surplus. As such, post the deal the company will have significant liquidity from its cash, cash flows, and available debt facility to continue pursuing its strategy. We await further details of this in the upcoming announcement of the 2024 work programme, but we would expect forward drilling to focus on oil production, while any new acquisitions could potentially be gas focussed (both driven by the prevailing prices for oil and gas, respectively). The additional cash from this deal should give I3 plenty of wherewithal to pursue its aims here.
Deal price represents good value achieved for I3. In our view, the US$24.8m represents decent value for I3. It is the equivalent of US$64k per flowing boe, which is a significant premium to the US$7.6k per flowing boe that the shares were trading at prior to the announcement. While royalty income is worth a bit more that straight field income due to the lack of OPEX, this is still a very significant premium.
Going forward, we look for further news from release of the 2024 work programme and progress on executing this, the 2023 results, and, potentially, any further acquisitions as I3 continues to evolve its portfolio.
The more I think of that deal the more I realise this is a mini game changer and watch this space now
Journey back towards 20p just opened
Anyone got access to Zeus Capital research note?
Agree on NS. Construct a transaction that moves the asset and tax losses to Serica would be ideal.
This is looking interesting again. Just need to drop the North Sea albatross now. Imo.
Interestingly there is an updated WHI report out covering this transaction but access is currently only available to premium members unlike previous reports - maybe it will be released today ?
IBB_Invest,
No fee of GORR Lands recorded for Clearwater or Wapiti. For Cental Alberta:
"320,000 net acres with 171 net booked locations" plus "Additional 181,081 acres of fee and GORR lands"
For the Montney:
">10,500 acre GORR across active competitors lands"