The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
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I3E still look like an inviting value proposition and with a 9% dividend forecast for the year ahead is there going to be a better time to buy?
Tony, I am sure you have better information than I have regarding well costs across the various types. Also, I didn't see any NGL hedging in their plan? Do you have a feel for the typical Gas/NGL split on these wells?
Its not the assumptions that concern me in some respect, but the units of measure used, at least if they used the same it would make cross referencing and understanding why figures are not compatible understandable.
I had spoken to Graham Heath about this before when WHI had screwed up a few reports particularly the numbers for SG&A where if they had spoken to i3e they could have plugged much more accurate numbers into their models.
Of course WHI do have access to i3e and i'm sure talk from time to time - but as far as Oil & Gas prices and other assumptions - i3e leave them to make their own projections.
Thanks tony, yes I have looked at the tables, wow WHI confuse everything, I note they use for 2025e
$3.18 CAD/mcf, perhaps Majid could do well to talk to them so that their broker reports at least align with i3's reporting or vice versa!!!
I agree Vista except for the economics of the wells - if gas prices more to where they think they might - the Central Alberta Gas wells have vary favourable economics particularly if they have high liquids weighting.
I think its interesting that there is only a couple of wells slated for Clearwater - these are nearly 100% Oil - a question for the upcoming meeting me thinks.
Also your assumption on the price used for gas is incorrect - for some reason WHI use Henry hub as the bench mark presumably because they think it is a more visable number for investors - but if you actualy go into the tables and look at "realized prices" - you can see that they use the correct CAD AECO pricing in their number crunching
I think its nonsense because it actually confuses investors . They use to quote Brent as the bench marl for oil but thankfully have changed to WTI but even WTI is not stictly correct - it would be better if they stuck to the applicable bench marks which are WCS & Edmonton Light Sweet.
Thanks Tony, yes the discrepancy between volume and revenue is important which I overlooked, thank you.
May I ask, what are your thoughts on the gas price that WHI has used when converted to CAD/GJ particularly against gasalberta forecasts?
Stas,
There's no doubt that the projected increase in gas price is having a significant impact on their valuation but its not all of it. Its also got to do with the significant capital program and associated production and better Oil & NGL prices and better liquidity due to the refinancing.
whilst gas is 52% of production - its only about 14% of revenue in April and even in December where I have plugged in CAD 3.00 for AECO - its still only 21% of revenue. So their valuation is underpinned by more than just a projected increase in AECO.
Welloil, of course I would like that to be the case, however it takes one hell of a leap of faith to believe that current gas prices at just over a $ , that it is acceptable to then forecast on over 4 times this, I'd be happy to be wrong, can someone show me forecasted gas prices of this level, https://www.gasalberta.com/gas-market/market-prices is not showing this.
I think everyone was hoping for something more in terms of production / NOI but probably unrealistically so. I3E are sill undervalued versus peers and according to broker estimtes.
As the drilling is very much back loaded we will only see it reflected in year end production rate. Some will say even that is only +3% but then you have to remember that there was no new production coming on-line in Q1 24 due to the limited 23 capital budget so they have a full years decline to overcome.
Regarding the drilling of additional gas wells - I think if they did not drill some gas wells it would have been very difficult to show a headline increase in production by year end. The high BOEPD / lower capital cost of the gas wells relative to Simonette was probably a factor here. I know the economics would favour Simonette drills but not sure why they wouldn't drill them until 2025 other than for the above reason .
Just my opinion.
Stas, have you considered why the consensus across the Canadian gas sector is so bullish on pricing going forward? Could it be that an army of professional analysts have more insight than your good self? Could it be a masterstroke that i3e are going after low cost gas to sell into a rising market coupled with the ability to pivot to oil if required? I trust Majid and the board to make decisions in our best interests, I suggest you do the same.
I3E shares are 9% down in early trading as the market takes profits on the back of lower y/y production guidance, which was due to i3’s slowdown in investment over the recent winter period in response to falling commodity prices. This follows recent improvements to i3’s balance sheet strength and liquidity position (and stock price) over the last few weeks following the $25m sale of a non-core royalty package and a new $75m credit facility by a major Canadian Bank.
This enables i3 to significantly expand its fully funded capex programme as it targets a ramp-up in drilling activity that balances growth, financial discipline, and a sustainable long term-dividend, all while positioning the Company to commence its high-impact Simonette Montney pad development drilling early next year.
Additionally do note that WHI have used the price for gas being $US 3.50/mmbtu whereas i3e used the value of CAD/GJ.
If I am not mistaken, then that would work out at $5.05 CAD/GJ using;
- the current exchange rate of 1 USD = 1.36786 CAD
- 1 mmbtu = 1.05506 GJ (approximately)
thus
Convert USD to CAD:
3.50 USD/mmbtu x 1.36786 CAD/USD = 4.79201 CAD/mmbtu
Convert mmbtu to GJ:
1 mmbtu = 1.05506 GJ (approximately), we can multiply the CAD/mmbtu by this conversion factor.
4.79201 CAD/mmbtu×1.05506 GJ/mmbtu = 5.05109 CAD/GJ
So, the forecasted AECO gas price of $3.50 USD/mmbtu would be approximately $5.05 CAD/GJ. what world does WHI live in to take $5.05 CAD/GJ as forecasted AECO gas and being the house broker Majid should be all over this.
I think, the foundations are decent, however doubts remain on management ability to unlock value through organic growth. Seem intent on status quo rather than growth.
Tony from what I can see the reasoning behind the increase in price by WHI, is they have raised the target price aspect of the prior price by 63% which is the same price increase they have adjusted the gas price uplift.
old target price 16.2p represents approx. 50% gas thus 16.2p / 2 = 8.1p x 163% = 13.2p + 8.1p = 21.3p thus new price is just a reflection of WHI increasing the gas price by 63% - It then all comes down to trust in their gas price forecasting.
"Gas futures in alberta are below $2 for the remainder of 2024, I don't know how they project it to be $2.5 for the whole year. The guidance doesn't make any sense and it looks like it will be lowered/worsened already in Q2"
For anyone that runs the numbers - the guidance makes sense and if anything is on the conservative side - of course it all depends on oil & gas prices. WHI seem to think the same.
I see production towards the top end of guidance and NOI being in excess of $80m. They have already confirmed their intention to maintain the diviend at current levels and ye production of around 21,000 boepd with them set to ramp up Montney development in 2025.
Market reaction is overdone imo and on the back of this RNS - WHI have actually increased their valuation because they have run and understand the numbers,
...and yet the brokers based on the exact same figures see additional value and have raised the sp target to 21p from 16p....panic selling stated panic selling and the market is always quick to dive, slower to recover, however, all the reasons for investing in i3e have actually improved not got worse. Our brokers both agree with a raised target and both expecting an upward re rating going forward.
Rehauer, however the numbers are portrayed, people will simply look at the narrative, this being, the other day we are told of this fantastic deal that has made us debt free, today we have an RNS that shows we are likely to just end the year on the same production as last year (3% change) but with greater debt than last year, with whi showing us having a net debt figure figure rising into 2025e of £40.7m
Net debt - GBP (£m) 29.6 23.8 29.0 40.7
Majid is going to have to do some pretty major explaining, particularly as even to get to these numbers he has used a gas price double that of today.
However we look at this the market is seeing this as disappointing, seems a kick in the goolies for WHI to then up their target to 21p when actually all they have done is base that on changes in the way they have conducted their analysis by increasing the commodity price by 63%!
Well Tony - you know and I know and every financal educated knows that:
- RBL is part of the "Ressorces available"
- you do investment plans based on the forward curve and not on current pricing ("thats why we drill the gassy part!)
- you can't Invest more than your cash flow + pay taxes + pay dividend and keep debt flat
- drill and complete close to yearend and reap the profits/cash flow before oil/gas flows
But the wording (again) has confuses the private investors - who sell today. They mix up "ressources available" and "cash on hand". Wording could have been more precise here.
To be frank: If someone compares 2024 projection wir 2023 projection (and not real data) - there is nothing what i3 could do about that.
Last remark: Obviously nobody values the Q1 2025 plan to take the incoming cash to do pad-Development in Simonette! We can reap economies of scale there and the 2024 investment programm ist the perfect foundation. That's stategic, that's a clever way to do business!
WH ireland broker raises target to 21p from 16p on release of i3e capital budget and forecast rns
(have been asked to provide part view of report released today on the back of today's rns so here is part view)
https://twitter.com/surprised_trade/status/1783428334380048768
The gas export markets from Canada will be transformed by the new LNG hubs coming onstream starting in the next few months with LNG Canada in British Columbia - there are also another 7 LNG export hubs coming onstream in the next few years. Forecast gas prices look low to me in today's rns.
https://natural-resources.canada.ca/energy/energy-sources-distribution/natural-gas/canadian-liquified-natural-gas-projects/5683
I’m not impressed with this RNS and am angry. It’s unclear and illogical.
We see scope for i3 Energy to trade above peers as it switches from consolidation mode into growth mode. We also see scope for the peer group as a whole to experience EV/DACF multiple expansion over the course of 2024 and 2025 – these valuations are too low, in our opinion, relative to historical norms. We believe that growing interest in the sector, the increased perception of energy scarcity and reduced production growth from US shale oil all play in favour of better valuations for oil & gas companies and we see i3 Energy in a prime position to participate in that rerating.
Target raised to 21p from 16p
What's exit EBITDA and why is it so low? Is there a 50 Mn hedging loss in the mix?
https://i3.energy/investors/regulatory-news-alerts/