Member Info for tonynorstrom1

A couple of things to bear in mind - about 6 months ago Eric Nuttal referred to Tamarack Valley as a small cap when it’s market cap was about $800m - so he’s talking about significantly bigger companies than I3E though I think with the Cenovus acquisition we might be sneaking into the very bottom end of Companies that are big enough for them to be on his radar and have the ability to buy into a meaningful stake considering the size of his fund.

I pointed out Nine Point Capitals view on Capital returns to i3e about 3 months back and asked how they planned to compete for investor funds if peer group Companies are looking to pay up to 50% of FCF back to investors via buybacks and dividends.

The response back was that these companies don’t have the growth catalyst relative to their size that i3e have and they believe that growing the Company will provide better value / shareholder returns than stock but backs - let’s see.

That’s why I’ve said in the past that in my opinion their focus on growth / capex is right - but they could consider a smaller but back to improve investor sentiment only whilst focusing the majority of available funds on Capex / acquisitions and strengthening the balance sheet.

https://financialpost.com/commodities/energy/oil-gas/eric-nuttall-why-im-excited-about-small-canadian-energy-stocks-for-2022

really good read - I know the comment about Kuwait supply is true - i've worked on Oil Projects in Kuwait.

https://www.thestar.com/business/opinion/2021/12/13/odd-alliance-of-investors-and-environmentalists-keep-oil-stocks-afloat.html

Interesting Article with insight into Oil supply / demand going forward. Also the following quote from Eric Nuttall on valuations:

"Even though prices for many Canadian oil stocks have already doubled this year, valuations are still “ludicrously inexpensive,” says Nuttall. In many cases, current valuations are a fraction of typical historical levels. By one measure of valuation — enterprise value to operating cash flow — Canadian oil stocks are currently trading at a ratio of 2.0 to 3.5 times, versus typical historical figures of 7.0 to 9.0 times, Nuttall says."

I have i3e trading at 1.8x operating cash flow. A pretty easy estimate to make given i3e regularly give NOI and requires only a couple of adjustments which are fairly easy to estimate and get you in the ball park for operational CF.

So if we were trading in the range that Nuttall says current apply to Canadian Oil Companies then i3e should trade somewhere in the range 12p to 21p. If the sector was to get back to historical valuations then the estimates would be 2 to 3 times higher.

This also ignores the transformational impact a Serenity or Simonette Development could have on i3e's valuation.

Wouldn't mind that job myself !

Cenovus more than doubled the size of I3E’s acreage and possible drilling locations. They were going though what they called a “high grading exercise”. I believe due to the large number of possible drilling locations - they have underestimated how long it would take for their Engineering / Subsurface Teams to evaluate and prioritize the targets. This is what I think has happened.

I’m hoping that they have begun on some targets or workovers already so when we get the update - it’s a progress report as well as a plan. Hopefully we should hear something shortly.

https://masterinvestor.co.uk/equities/i3-energy-earnings-accretive-acquisitions-have-transformed-this-penny-stock/

Dug up by someone on the ADVFN board - tells us what we already know but nice to see I3E getting more exposure.

GGG,

I’m going to go out on a limb here and I may have to eat humble pie - but I’m going to say your making it up. I think Tullow have provided CF projections but not FCF - big difference.

Can you provide the link ?

It would be great if they did give FCF / Dividend guidance - do you know of any Oiler that does this ?

GGG,

It would be great if they did give FCF / Dividend - do you know of any Oiler that does this ?

Toad,

Apologies if I have caused offence - my comments were tongue in cheeky and not meant to be rude to you personally. Perhaps I have to improve my writing skills!

To answer your questions:

1) I have not paid for the Stockopedia Service - I must have seen the free pages which have seemed a little off with the data for the shares i'm following.

2) If its research is based purely on the Company Reports - it means its at least 3 months out of date for the interims and more than that for the full year results. So for example with a fast moving stock / balance sheet like i3e's - it throws up erroneous flags. Your bankruptcy red flag - what is that ratio based on ? Looking at the interim report - they had $4m in cash + $8m adjustment due to the purchase price of Cenovus + 3 x $7m = $33m in cash .(There generating $7m a month in free cash flow)

So it doesnt look like their should be any bankruptcy concerns today yet you think the red flag could be there another 6 months or a year !!

3) Some of the other data you quote - cannot really say to much because it doesnt tie in 100% with the interim report - so I dont think is correct. The $28.5m is the revenue and not guidance for the preceding 6 months - it should not match the TTM figure in Stockopedia because that is the preceding 12 months correct? The net profit figures you quote - I do not recognize when looking at the Company report.

"Why is the profit Margin so low" - not sure the figure is 100% correct for a start, however if you look at the Interim report - there is a pretty sizeable non cash charge for Depletion & Depreciation. I think with the addition of Cenovus- I think your going to see sizeable adjustments in this category along with gains or losses (likely to be gains) when the reserves are revalued at the end of the year. That's why I dont give to much weigh to profit or loss at this point in their development and look more at cash flows.

Anyway - lets hope this is the week when they let us know of the plans and progress going forward - GLA !!

Fledermausmann,

I agree that they could do a little more in the way of reporting especially if they are trying to woo Canadian Investors - I was just defending them as I think a few are overly critical of them. I mentioned Gear Energy - they do produce a somewhat formal monthly report where they includes various figures including production , Operational Funds flow etc for the month - theres nothing stopping i3e from doing the same.

Have you seen the Broker reports on i3e's website - they contain most of the information you a talking about including valuation comparisons. Ive included the link to one report but there are others:

https://i3.energy/wp-content/uploads/2021/10/211019_I3E-Sitting-pretty.pdf

FCF is a little bit of a mystery (as is the dividend) mainly because the way they define it which basically includes deduction of Capex which in my opinion is not the best definition for a couple of reasons including they havent announced their Capex plans yet so FCF and Dividend are hard to Project.

The other reason is Capex (excluding Maintenance Capex) is a discretionary spend. If you follow Eric Nuttall at all - he is encouraging the Companies he invests in to make bigger returns of Capital to shareholders and not spend on Capex - so i3e's definition doesnt match up with Eric Nuttall's / Nine Point Capitals definition either which imo is a much more logical definition.

anyway the broker report includes there forecast for the dividend.

Fledermausen,

1) Its US Dollars ($) obviously - who works in Canadian Dollars (CAD) ?

2) Like is or not I3E are primarily a UK listed company and work to AIM reporting guidelines meaning they are required to produce full financials twice yearly as opposed to the TSX where you get quarterly results.

3) "Why are they using a measure that not a single other oil producer (at least in Canada) seems to be using?" This is misleading - Canadian Companies are famous for using non-GAAP financial terms resulting in many of them defining there own financial measures - look at Gear Energy for example - they report Funds Flow From Operations and Adjusted Funds Flow from operations - what's that when its at home and go and take a look at their definition of it !!!! NOI is a simple measure to report and understand and i3e's definition is at least clear !

4) Does anyone report FCF outside of their quarterly or bi yearly results - I don't think they do. Dividends are associated with FCF and are fore a specific period whereas i3e use NOI quite often to indicate the impact on financials for the next 12 months after a specific event as they happen such as the Cenovus deal.

5) NOI is quite and important measure and i3e have been reporting it nearly every month and sometime more than once a month so I think there communicating reasonably well.

And also “cheap shares often become even cheaper” - a lazy fat toad sound bite IMO.

Depends on how you define cheap. I’m saying cheap on a FCF multiple basis - gold standard - cash is king. I don’t think you see many shares get cheaper when they are valued on a low FCF multiple and ate forecasting to grown FCF - all dependent on the Oil Price of Course!

I think stockopedia is crap quite frankly.

I’m not familiar with the Altman z score - but the risk of bankruptcy if I3E are reporting correctly is minimal IMO - a lot more Oil Companies will go bust before I3E.

I3e are close to net debt zero by my calculations - they have about $35m in debt but almost match that in cash and are generating at current oil prices about $7m per month in FCF.

If they cut Capex and saved costs - they can keep the lights on at $33 / bbl - so a significant margin of safety.

I don’t see any major red flags - the biggest risk to shareholders in the short term to medium term is a recession IMO but their balance sheet should be reasonably robust unless it’s we hit Armageddon.

Big Fat Lazy Toad,

I'm interested in how you actually go about picking a share - your asking about the difference between NOI and revenue and its basically all in the last operational & financial update (and all previous updates) ??

At the current Oil and Gas price i have NOI at about $111m - so by my calculations their slightly under their projection. I estimate that we need Oil at around $77 and Gas at $3.50 (current price) in order to meet i3e's projected $119m . I think Oil is likely to average over $77 over the next 12 months.

An aside from the above - i3e is just about the cheapest Canadian Company on CF & FCF multiples so in my opinion - all looks good !

Its seems like an extraordinary increase but you just have to run the numbers:

1) H1 oil price was about $62 ave (my estimate) - its now about $72 and been much higher. So just take $10 x 20,000 x 340 days = $68m
2) Gas has almost doubled in the period.
3) Production has doubled.

So if you run the numbers its in the ball park - if you havent run the numbers and your invested why would you even cast doubt - ive run the numbers !

I3e define net operating income in just about every financial update the provide.

Revenue should be pretty much self explanatory.

Cenkman,

One issue I have with the list is it is based on PE ratio which is skewed by impairment charges on assets or in this case more likely gains on assets due to the Oil Price.

If you were to look at valuation metrics based on CF, FCF and ratio's to reserves - i3e would be pretty close to the top of the list on most undervalue Oil Sock.

Is anyone else wondering why someone would post about Canadian Oil Sands and "Top Emitter".

i3e does not have any oils sand or heavy oils for that matter - light crude !! Were in the sweet spot - why would anyone suggest otherwise!

You can stop trying so hard now Scott - I have it on good authority that the Gold Medal in the As*hole Olympics is yours !