Telegraph (again)!7 Sep 2023 16:56
Update: i3 Energy
Smith & Nephew failed to work out from the start, but i3 Energy did, at least for a while. First analysed at 11.5p in September 2021, the shares swiftly gushed to a high of 32p last summer, only to recede as oil and gas prices fell, wildfires in Canada curtailed output and management responded by (prudently) cutting the dividend.
The good news is that production is still growing, the yield is still plump, the oil price is firming.
Founded in 2014 and first quoted on Aim in 2017, i3 Energy acquires and develops mature oil and gas fields that are expected to have a long remaining life. It has a working interest in about 850 sites across Canada and the North Sea that require limited investment and are producing nearly 21,000 barrels of oil equivalent, according to last week’s interim results. That is below last year’s overall run rate (and peak output of more than 24,000 barrels), thanks largely to the Canadian wildfires, but increased output is the plan, especially as i3 Energy has a base of undeveloped reserves.
Increased production is therefore one potential catalyst for the stock, while higher commodity prices would be another. Natural gas prices remain depressed, but oil is rising. America’s efforts to pressure Saudi Arabia and Opec into producing more oil are coming to nought, while the Biden administration is doing all it can to prevent the development of new shale fields even as its efforts to depress the oil price by running down its strategic reserves prove unsuccessful.
Common sense, and the need for energy security, would suggest that the US will need to top up those reserves at some stage and that could give crude prices a boost, to the benefit of producers such as i3 whose shares could yet catch light once more. Hold.
Russ Mould is investment director at AJ Bell, the stockbroker
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