Member Info for tonynorstrom1

Who's Eric Nuttall - I was talikng about my Stock Broker - Eric Onions from ****terton, Dorset.

mighty mouse has got it all figured out !!

"The number one priority for any business outside of the UK is growth ahead of dividends." - Have you told Eric this - he's saying he want's no growth and 50-75% of FCF paid out to his investors in the form of dividends and share buybacks !!

Also have you seen this:

https://www.jwnenergy.com/article/2022/11/30/i3-energy-plc-and-trido-energy-services-initiate-m/

I know you were a bit concerned about i3e's tree hugging credentials - maybe you and your mates can now hold off your planned trip to the Tate Modern and put the supper glue away.

Dont get frustrated GGG - just run the numbers and make sure you include for everything - simples !

GGG,

If we cannot afford a 10% buyback - then we cannot afford the dividend you are talking about.

Dividends don’t help production or 2P reserves either - not sure the point you’re trying to make there.

There’s just about no one in Canada that agree’s with you on buybacks (and indeed big Oil, Warren Buffet etc) Now is a particularly opportune time to do one as the Canadian Oil Sector is significantly undervalued by historical metrics.

https://www.bnnbloomberg.ca/market-call/full-episode-market-call-for-tuesday-november-29-2022~2570550

Here’s a video that explains it all.

Well I think thats the point GGG - you cannot guarantee the base dividend if it’s pitched too high - what you have suggested is too high but let’s see.

Going the otherway and putting the £30m on top of the current dividend is way to expensive imo unless it’s a bonus dividend. Once you set your base dividend - you have to maintain or increase it. If you’re forced to cut the dividend due to low oil and gas prices - not very good for the SP as opposed to one off type shareholder returns from any excess FCF you might have at the end of the year.

It seems many Canadian Oilers and fund managers think it’s the at to go and I think it’s especially attractive at the moment with the SP being half of Canadian Peers.

Also as Cash has already pointed out - if you did buy back say 10% - not only does it increase the yield by the same percentage but saves on the payout that can be used to plough back into dividends.

Clearly Nuttall , MEG, Tammarack Valley et al don’t think it’s too expensive.

I guess we’ll have to agree to disagree and see which way I3E go - they clearly have to do something.

Talking about Walking away with your tail between your legs - where’s McSelfish ? Maybe he he only come out when the sun shines - solar panels may be his thing !

I listened to the Daniel Dicker interview - yes he confirms that Oil is undervalued and the fundamentals dictate a significantly higher oil price -
Not sure I agree with all his comments on Oil Companies and in particulate that the SP’s will moderate over the coming months. The SP of Chevron and Exxon for example are not to far away from the Oil Sector average of 8-9x earnings. IMO investors are beginning to appreciate the superior returns of Oil Companies v the rest of the S&P.

I’m becoming more convinced that I3E should commence a significant share buyback of the same magnitude of MEG - ie looking to buyback up to 40% of the stock over the next 2-3 years. Cut the Capex aiming for 10-15% in production growth and look to increase the dividend along with base earnings and buyback 10-20% of the stock each year. That in itself should allow I3E to increase the dividend.

that is correct or certainly what Majid stated in a recent interview along with the statement that they plan to market i3e more aggressively in Canada going forward.

https://oilprice.com/Energy/Energy-General/Oil-Stocks-Are-Showing-A-Peculiar-Disconnect-From-Crude-Prices.html

Interesting article - were in a sector that is half the price of the S&P on a PE basis , a third the price on a PEG basis are we are around half the price of our Canadian peers. We just need Majid to start delivering some good PR.

Also a couple of good interviews with Eric Nuttall on BNN Bloomberg Market Call - many of the companies he is in will be looking to pay between 50% and 100% of free cash flow back to investors early next year with a significant portion in the form of share buyback including MEG which he thinks will buy back up to 40% of its stock over the next few years - Majid - are you watching !

Eric Nuttall posted a poll he got from BMO Capital Markets - interesting result. Shareholders preferred method of returning excess capital to Shareholders:

43% - share buybacks
22% - increase in base dividend
21% - bonus dividends
14% - variable dividend.

GGG - must have changed his vote !

I just looked at Shubham Garg's Q3 Valuation spreadsheet - its quite clever - updates automatically from the web with the latest SP & Strip Pricing.

For those that don't know - Shubham produces a valuation spreadsheet tracking pretty much all the Oil & Gas Producers in Canada. He issues after quarterly reporting but has these links that update SP & Strip to current.

Average FCF yield in Canada is 18.2%.

i3e trades at more than twice this yield (half as cheap as the average stock) at 39.2%

Only one Company is cheaper than i3e - Vermillion Energy @ 55.3%. I'll have to dig into this and see why its so cheap.

And get this - PetroTal Corp trades at 39.2% - we're trading cheaper on a FCF yield than a Company whose production is frequently disrupted by the local population as well as having pipeline constraints worse than Canada.

This discount to Canadian Peers is COMPLETELY unjustified in my opinion:

1) i3e has net cash - way better that the average Canadian Company who still have net debt.
2) Reserve life index of over 20 years - above average.
3) Significant land positions in some of the best acreage in Canada including Simonette & Clearwater - which many will know have the best economics in North America
4) Above average production growth.

I think were suffering a bit of a hangover from: (and we shouldn't be)

1) Serenity - markets always react negatively to a duster and this was a relatively high profile one. However, this is behind us now and should in no way affect the current valuation - all our cash flow is from Canada. In fact i3e need to seriously consider shutting down the uk operation as it is a cash drain and profitability would be even further improved by doing this.

2) Poor NOI projections that have in no way reflected the underlying financial strength of the business. I think i3e have tried to defend using strip pricing to forecast as being "more accurate". This has not proven to be the case and has been a massive own goal ! Lower strip / oil & Gas producers affect all Oil Companies yet most have reported record profits which is what i3e should have done. i3e have had record profits but have unfortunately forecasted in what can only be described as a naïve manner.

IMO - we're are an above average Company in Canada for the reasons described above and should be valued on an above average FCF yield which would mean a more than doubling of the SP.

I think the market will recognize this eventually - i3e just need to continue their operational performance but clearly they need to do a much better job of the PR.

Tovoc,

Do the tax incentives apply to Ireland - don’t the profits have to be invested in UK Energy Projects?

pmanual,

Do you you have a resource that gives you historical AECO prices - I dont with the exception of this: https://www.arcenergyinstitute.com/ which gives you graphs which enables you to get approximate monthy values.

This website https://www.gasalberta.com/gas-market/market-prices gives you current months and previous month only.

I have the following additional comments:

1) As per Carmarco - i3e gas pricing is based on the monthly index and not the daily index - have you taken this into account?

2) I made my spread sheet / model and then "calibrated" it by tweeking numbers / rates / factors to reproduce the numbers in the H1 interim results. In doing this I found several interesting points which i'm following up with i3e to clarify:

a) In order to match gas sales in the H1 report - I had to tweek up the $/GJ rate over what the above reports tell me is applicable.

b) to match the oil sales figures in the H1 report - I had to apply a discount to WTI significantly higher than the discounts we are told apply.

So in short - I've used my judgement to apply the most appropriate numbers imo - but you could be right - lets see. I update the spreadsheet regularly when I get better or the latest data.

mighty mouse - if I do all the maths for you, i'll have to charge but i'll give you a couple of hints so you can do it yourself:

1) Participation swaps is for the oil - check it out on the internet to see how they work but you said you were interested in gas so you can forget for now.

2) Costless Collars is in 2023 so you can put that aside for now and just look at the AECO swaps for 2022 Q4

3) They give you the total GL hedged for Q4 - calculate what that is per day. They also give you the mcf/day for Q3 - convert this to GJ/day and hey presto divide one by the other and you have the approximate % hedged.

they have made it easy for you - they have given you the total GJ hedged in Q4 with the average price. If you look at the H1 results both H1 and post period - there are actually multiple hedges - some running for just a month and others for 2 months or more.

Danger_Mouse - are you invested here ?

CaneToad,

In response to your question - so running the spread sheet with the following main assumptions:

WTI = $75, AECO = USD 3.70, Production @ 24,731 boepd

FCF defined as Cash Flow - Maintenance Capital (Capital required to maintain production flat - this is approximately $30m. )

The spreadsheet kicks out:

NOI NTM = $150 approx (£128m)
Dividend / Share @ 30% of FCF = 0.1769p (25% hike on current)
Capex Budget at 40% of FCF = £33m approx ($40m approx - above and beyond $30m Maintenence Capital)
Balance 30% of FCF for debt repayment, aquisitions, bonus dividends etc)

So you see i3e are generating bucket loads of cash even at WTI 75 - shareholder returns all depend on how much i3e allocate to Capex and the coverage. I dont see them hiking the base dividend 25% but I could be wrong. A more conservative approach might be a 10% hike along with a share re-purchase but lets see what they do. Lots of cash to manage - decisions , decisions decisions !

JMort,

Well he’s more wrong than he is right - though I’m sure he could justify his answer - You can go to their H1 report and they provide the numbers which show in H1 they paid out 27% of FCF. In H2 and full year - no even close - they’ve paid out way more than 30%.

But it’s a nonsense anyway because of the way they define FCF which in my view makes no sense and is not consistent with the way many Canadian Oilers do it and the funds for that matter such as Nine Point Capital (Eric Nuttals fund).

What they all most certainly will do is reduce Capex Spend in 2023 and hey presto - they are back within the 30%.

What I think makes way more sense is all cash flow in excess of the day to day running costs of the business is classified as FCF. Then they set their Capital Allocation Policy - for example up to 40% of FCF for Capex, 20% Dividends and 40% for debt repayment, acquisitions , bonus dividends etc.

Anyway - GLA - let’s see what Majid does.

Jmort,

Do you think Majid was correct - presumably as an investor you would want to know the right answer - right?

Extrapolated / Guestimated from 3Q guidance, latest presentation and the remaining wells to be brought online - hopefully wont be to far out.