Member Info for tonynorstrom1

There have been some calculations that Imo are fatally floored - i.e. they doesn’t take into account that the royalty barrels are revenues that don’t have associated opex, capex and other costs. Here’s my calculation – a bit rough - comments welcome:

$3.6m (income per year on royalty bbls) / (388 boepd x 365 days) = $25.42 / boe

(i.e. each royalty barrels earns $25.42 / boe)

Doing a similar calculation for i3e’s production barrels starting from NOI and deducting costs to come up with an income per boe.

$93m (NOI) – $18m (SG&A) - $3.6m (Royalty boe) - $25m (Capex) - $4m (abandonment) - $5m (hedging loss) = $37.4 (income)

$37.4m / (19,500 boepd x 365) = $5.25 / boe

(i.e. each production barrel earns about $5.25 / boe)

25.42 / 5.25 = 4.84

(i.e. each royalty barrel earns 4.84 x more income than each production barrel)

Valuation of Royalty Barrels = $64k per flowing boe

£147m (market cap) x 1.25 = $183.7m / 19500 boepd = $9.4k per flowing boe (valuation of i3e’s production barrels)

$64k/$9.4k = 6.81

6.81/4.84 = 1.41 (i.e. the royalty barrels attract a premium of about 1.41x production barrels on an income basis)

Or put another way i3e’s sp should be trading at a minimum 1.41 x 12.3p = 17.3p

I think there is upside to this valuation as the barrels are from Central Albert which are the most gas weighted bbls in i3e’s portfolio with Clearwater and the Montney potentially being much more valuable on a boe basis.

So what if Polus doubled their money - they placed their bet and they won. Your only jealous that you lacked the b@llocks and / or the brains to buy shares at the same price as they did. In fact retail shareholders had the opportunity to buy in lower than polus did as the sp drifted slightly lower after each placing.

In addition - I like the dividend, every other poster on here that i've seen like the dividend also. Your the only one i've seen that doesnt like the dividend. I have two suggestions:

1) Write a cheque to i3e and give back your dividend

or

2) Sell your shares and p1ss off !

And your missing something else which is mentioned in the i3e response. The North American Market was almost dead in terms of institutional support when i3e were looking to get the finance to purchase Canadian assets. Even the UK retail market was pretty lacklustre and have always failed to take up the shares set aside for them in various placings. Without the Uk Institutions , I3e will have almost certainly gone bankrupt. Re-read what i3e said about Institutional Ownership.

As I have said previously, Canadian shareholders are currently not that important - are you going to pander to the 10% or the 90% that stumped up the cash when it mattered ?

We can agree to disagree - but imo your not understanding the response from i3e. I3e were 6 out of 10 in the list you presented in terms of revenue and only have 1/10 the liquidity of its peers - why would they waste money when the stadium is only 1/10 full.

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).

Stas - with respect - you're not coming across as someone that is concerned with adding balance. Also a couple of your of comments are questionable at best:

"they had 2 potential funders they now have one" - these are Oil services companies. There has been no indication at all that one Company has dropped out due to the business case - it could well be that PANR selected one Company as the preferred vendor.

"The mkt cap shows itself to be massively overvalued against other dividend paying companies" - This is comment is nonesensical and you know better. Production Companies and pure play exploration Companies are completely different business models. No pure play exploration Company pays a dividend and the valuation metrics between the two models are completely different. If you want to be usefull - come up with a couple of pure play exploration Companies and compare metrics.

"their auditor has highlighted the material uncertainly risk" - I would bet this is common for exploration companies all of wwhich have to raise capital - this is no unique to PANR. I think some here probably do not understand the funding risk and assume that its a slam dunk but your motives for coming onto this board to highlight this are questionable.

Scot has provoked a lot of this discussion by his excessive, unecessary and negative posting on the 88e board - but his posts do tend to be factual.

Unlike one or two here who believe it is more more constructive to moan on this forum rather than asking the Company a question - I forwarded a couple of the gripes to i3e (Camarco) The response is pasted below in inverted commas:

So I already highlighted that i3e was one of the smaller Companies on the list of the 10 "peers" previously highlighted here. As many know - only 10% of the shareholders are Canadian . So not only are we one of the smallest Companies, there's only 10% of the liquidity for Investment Banks to trade and earn commisions vis a vis canadian peers where you have 100%. I'm not saying that i3e cannot do more - but some of the comments posted by others lack context or pespective. Anyway - i3e response below:

"The Cannacord Genuity analyst covering i3e is not a third-rate analyst. Regarding making their investment research available to retail investors, all banks have their own compliance procedures which may or may not allow distribution of their research to retail investors. I3 Energy is not involved in their decision making in this regard. Investment banks have their own criteria to consider when allocating their resources. One criteria is the amount of income they might receive from trading volumes in the stock and potential investment banking income generated from the relationship developed with the corporate entity. Small cap stocks like i3 Energy have more limited trading volumes and in i3 Energy’s case as circa 90% of its shareholding is UK based, the majority of its liquidity is on the AIM market which is not traded by many Canadian brokers. It is especially true for small cap stocks that institutional shareholders typically appear on the register as part of an equity raising process because there is not enough liquidity to build significant positions in open market trading without materially moving the price. The equity raised by i3 Energy to fund its acquisitions in Canada was all raised in the London market in 2020 and 2021, when the North American equity market for small cap Canadian oil and gas stocks was extremely limited. I3 Energy has grown its Canadian shareholding over time from circa 3% to just over 10% and we expect it to continually to grow organically, particularly the retail element. A significant growth in the institutional shareholding percentage will take longer and will likely be associated with an equity raise in Canada, for which the Company has no plans at the moment."

"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.

Mail@europaoil.com is the correct address. Will Holland usually responds and pretty quickly even to prickly questions.

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"

"If I were a betting man I think this may also contribute to a dividend increase to be announced. Or back to monthly dividend?"

Personally - I dont see them increasing the dividend at this point:

1) Gas is in the dumps

2) Production is now apparently somewhere between 19,000 & 20,000 - I was modelling slightly higher so will have to adjust when they provide the actual numbers

3) If I was in i3e's shoes - I'd be wanting to pay a sustainable dividend out of cash flow and not debt or one off asset sales. Because of 1) & 2) above cash flows are a little lower than some think. Still sufficient to cover the dividend and capex but not sufficient yet imo to be bumping up the dividend which contemplating growing production either via M&A or a significant capex program.

I could be wrong - thats just how I see it !

For those that didn’t read past the headlines

1) A little bit disappointing to see that production has slipped below 20,000 boepd

2) Looks like the announcement of the capital program may have slipped a week or two – but I’ll accept this RNS in lieu – it looks like they have been busy.

3) M&A still looks to be on the cards!

4) They lose about $3.61m in yearly revenue from the sale – but this is more than made up by savings on Interest and capital repayments and the loan is now completely retired! Great deal.

“……..all while preserving a substantial, low decline, production base exceeding 19,000 boe/d (~48% liquids). The increased liquidity on the Company's balance sheet combined with its stable cash flows, will support both its organic and inorganic initiatives, as we actively look towards a dynamic 2024."

“The Company now looks forward to updating the market later this month with its capital programme for 2024.”

“The Royalty Disposition, involving most of the Company's royalty assets, but not its core Simonette Royalty, provides substantial capital and will allow i3 to accelerate value associated with its extensive inventory of high-return drilling locations, while jointly pursuing accretive inorganic growth initiatives.”

“The Royalty Disposition is comprised of i3 fee royalties, i3 gross overriding royalties, along with certain newly created royalties on a minor subset of previously unburdened lands, and is expected to average 388 boe/d in 2024, while delivering USD 3.61 million in royalty income based on strip pricing (as at 3 April 2024).”

As others have said - you can absolutely not value the Company on this metric for several reasons:

1) Oil weighted stocks attract much higher multiples than Gas weighted - in the order of 2 to 3 times or more depending on the actual weightings

2) Overiding royalties dont incur decomm, capex or opex costs hence much more valuable on a boe basis than production barrels - revenues with no costs !

No one saw that coming - really good news ! I guess the clue was the reference to the "sale of non-core assets" in a previous RNS.

Highlights the potential value in i3e's large acreage !

I dont thinks its a particulary conservative calculation at this point in time.

Why have they not scheduled a podcast to explain the result?