Sapan Gai, CCO at Sovereign Metals, discusses their superior graphite test results. Watch the video here.
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?
Decided to return proceeds to shareholders.
This is good news albeit expected. Does not impact how they pay the dividend - this is determined by underlying distributions.
It does allow bigger distributions if for example they sold assets and decided ton
We now know approximately how many shares Cannuck has !
I'll post some numbers once we get an update - too many unknows at present to come up with anything meaningfull - mainly where production sits now and what the capital program looks like. Its going to have to be a significant program to avoid our 1st year over year production decline.
Oil is strong and looks to be heading higher but Gas is in the dumps - closed at CAD 1.16 / GJ last week !!! Prices softened a little bit by having some good hedges in place but it looks like we are only 25% hedged in Q2. Gas typically bottoms in May and should move higher from there particularly with Kitimat coming online by the end of the year.
It could still be a very good year but we need to see which direction the ship is pointed
Not sure what happened there but here's the link:
https://www.sharesoc.org/campaigns/shareholder-rights-campaign/#join
Anyone that complained here about this issue - there is an online petition as well as a form letter to send to your local MP.
Aimshare - thank you.
Here's the link to the site you mentioned:
And just for clarity - i'm not suggesting that an EGM be called - I think as others have said, Will Holland needs a little time to prove up his strategy. However, if we're sitting here 1 year from now and the only progress is additional directors and more Management options - what then ?
"You have to re ask the question for the long termers would you invest in the company now given the fundamentals or would your money be better placed elsewhere genuine question?"
that's an interesting question:
UK assets - difficult regulatory environment and takes forever to get permits / approval. Contrast to i3e where they can apply for a licence and be drilling in less than a month. Also the farce with the installation of the pump gives you cause to question the competency of the operators.
EG & Ireland - these are binary outcomes - the're either going to happen or they are not. In these kind of scenarios you would want to be backing a CEO with a track record of building companies and creating value - Andrew Austin from Kistos springs to mind - non of Europa's past CEO's appear to tick this box - Will Holland is still auditioning for the part.
So I think it safe to say there are better opportunities out there but then theirs always the carrot - what if Ireland or EG drops - the rewards will be substantial.
Trackman - your post is non sensical - what's all this rubbish about buying a penny stock, risk reward and shut up and enjoy the ride - what are you going on about and whats that go to do with the price of Tea in China ???
This is about shareholder rights and holding a Company/ CEO to account. As owner of a couple of million shares - I hope Will Holland succeeds but if he doesnt -shareholder rights should be respected and and EGM granted if requested. Its not even just about Europa - i'm sure posters here hold shares in other AIM stocks and want to have the ability to exercise their rights if the situation arises.
So in conclusion - sit in your chair - shut up - do nothing and keep on hoping - if thats what YOU want to do !
The fact that you brought up EnQuest I think demonstates that posters here should take any comments you make on valuation with a big grain of salt. So stick to your guns buddy but be careful not to shoot yourself in the toe !
Anyone have access to the latest Cannacord report and what did it say - any price targets ?