Member Info for tonynorstrom1

I think your bonkers - its all about the maths, spread sheets and finding the best rates of returns. Increasing Production is not the end goal - increasing shareholder value is the goal. Now It maybe that drilling wells is the best way to achieve this when prices are high enough but no good drilling more wells if they're not profitable.

One point I think you're not appreciating is that new wells have high decline rates - up to 50% or more in the 1st year - so a good chunk of the overall cash flow is earned in the early months. If you bring them on in a low oil/gas price environment - they may make very poor rates of return. This fact alone I think pretty much rules out drilling any more gas wells or gas weighted wells until AECO recovers.

North Simonette is gas weighted and even South Simonette has a 30% gas weighting and at $10m-$12m a pop - they are pretty risky wells to drill right now imo. That leaves Clearwater and few other area's that are largely Oil Weighted that still offer attractive rates of return but even then its not risk free as some operators have drilled wells with an IP30 rate of 60 bopd or less. You can imagine (or perhaps you don't) that at these flow rates - the returns are probably not great.

So its OK being a strategic visionary like yourself - but if you don't understand the maths - then that's not enough. Fortunately Majid and the team are focused on the best rates of return and will allocate capital accordingly.

Jolly v Eric Nuttall +I3E Management + many Oilers both Canadian & UK and not to forget Buffet.

The maths is the maths - if you don’t understand it -does not mean it’s stupid - perhaps take a look in the mirror.

Anyway - I still retain confidence in Majid and the team and I’m sure they will make the right call.

Do the calculation yourself Pete and then email in your own question if you are genuinely interested.

Bear in mind though that the CEO appointment was announced 3rd April and I would bet that his compensation package was set some time before that in alignment with Corporate Goals that were probably formulated at the start of the year or even late last year - the world has changed considerably since then in terms of planned budgets, cashflows and I would not be surprised if this has not impacted M&A plans.

So good question - please share the answer when you get it.

Also worth reminding yourself at what price his options were set - obviously events have not gone to script so far this year - but "we remain bullish"

Of course it would be great if i3e had the funds to announce a 10% increase in production - but it would cost $70 to $80 million dollars - NOI is forecast to be $75 to $80m at per the new budget assumptions.

NOI is before the deduction of SG&A ($20m), Capex $80m (to achieve 10% growth), Tax ($6m -$10m ?), Hedging losses, well abandonment and Finance Charges ($20m)

Can you kindly explain how the maths would work ?

Q27: Having so many shareholders trapped into a choice of realising a very substantial capital loss for very little dividend return, I envisage any future share price rises being rapidly reversed as some shareholders bail out, grateful to have reduced their losses. Volatility is likely to be greatly enhanced by traders taking advantage of the unfortunate long-term shareholders’ pain. Is there any possibility of a share buyback program to smooth the volatility and give trapped shareholders an opportunity to exit their positions without driving the share price ever lower?

There were numerous questions on buybacks and the answer to them was yes they are considering them. The answer to this one is recorded and puts a little bit more meat on the bone but paraphrasing:

We are considering share buybacks, we have not done it in the past because based on where the markets were trading we were able to make high rates of return by reinvesting our capital into drilling out our wells, with where our shares are trading now - it looks like that equation has changed.

Or put another way - as per the article I shared a couple of days ago - when Oil Companies are valued at very low trading multiples - the maths says that it is more beneficial for shareholder returns to buy back your own stock.

Q47: Do you consider the 3-7% yoy production growth as acceptable

The 3% to 7% growth is based on limited capital deployment and will be a significant achievement as that growth is after replacing the annual natural decline in asset production of circa 17%.

I think Jolly commented on this and imo his comments were off base - I agree with the above and it should be noted that the 3% could actually go up if prices recover and i3e are able to expand their drilling program towards the end of the year.

And some of the whiners like Pete - might appreciate this:

Q64: Why has the new CFO now shown his commitment to i3 and confidence in the business by buying shares with his own cash?

The CFO is committed and confident in the future of the organization. We have been in a closed period for most of his tenure (financing, Q1 update, year end results) and he will now be looking to build a base position as timing permits.

Some interesting questions and answers - 78 in total

Q75: As per various presentations – above $65/bbl is the approximate price at which the Company believes it is more profitable to drill out its acreage as opposed to M&A. Given that 50% of i3e’s production is Gas – what is the number in CAD for AECO prices to justify drilling?

The economics for each of our well locations is different and is dependent on well cost and expected production performance which is itself based on geological parameters at the well location and well geometry and type. The economics for wells across our four core areas (including our Glauconitic liquids rich gas locations in Central Alberta) are shown on page 17 of our current corporate presentation which is available on the Company’s website. These economics have been evaluated at US75/bbl for WTI and CAD3.00/GJ (current strip price for AECO gas is circa CAD2.80/GJ). At these prices the Glauconitic gas wells have rates of return in the range of 58% to 93% which are significantly lower than we see for our oil well locations, hence our current preference to target Clearwater oil locations.

Https://www.youtube.com/watch?v=oId3Q12vWyw

Pretty interesting presentation - i3e's major acquisitions covered in 3 separate segments within the video.

Maybe Pete but its true - i've posted to back-up to support what I have said - Jolly is merely providing his opinion without any back-up.

Up to fellow posters to make up their own mind.

"So is that a total of USD 31 million for the year to achieve this 3% increase?" great question Mort and i'm not 100% sure - its worth posting in a question to i3e.

I could harzard a guess by running some numbers but since the increase is only 3% - thats probably exceeds the limits of accuracy of the calculation.

But you can run a calculation yourself - they give a corporate decline rate of 17% - multiply this by the average 2023 production rate to find the number of barrels to be replaced and then look at the cost of a new well and its expected production. I'll double check this again in the next week but last time I checked - it was roughly $25m for stay flat capex.

Your opinion jolly but imo - it seems you dont understand the importance of per share metrics and you definitely have not read or understood the article I have posted. But thats ok - everyone is responsible for doing their own research and making their own decisions.

"Imo, spend on growing production and building economies of scale. The company should rationalise operating costs as much as possible and upscale production. Production growth should add to the bottom line and cash reserves. We were old at the recent presentation above $72, we'll be coining it in. Buybacks no thanks."

all sensible stuff but i'm in favour of running the maths and choosing the most sensible financial option taking into account shareholder value and balance sheet strength. Its all about which option increases net asset value and earnings per share the most.

"Yeh that’s the theory but the SP drops sometimes even when share buy backs a re taking place"

I thought I had already covered that in my post below:

"There is also the argument that Company X, Y , Z are buying back shares and its done nothing for the SP. I dont necessarily buy this argument because there is a whole slew of factors that play into whether a share price increases or decreases so hard to isolate theses factors and see the true effect of a share buyback but I think it is an established fact that shares / sectors do tend to get valued on earning multiples over time ."

and aside from that - its not always like pressing a button and you get an immediate response. The same could also be said about dividends and acquisitions - some on here were predicating a significant rise in SP when they first hiked the dividend here - the opposite was true and the SP fell for a variety of reasons. Also the same could be said about the acquisitions - there was no immediate step change in SP when the acquisitions were first executed but as the value was recognized - the SP steadily rose over time.

Someone here brought up Shell - but Shells Oil production has fallen the last four or five years on the trot and its reserves are also shrinking. Its going to be hard for Shell to grow its production and reserves going forward. That's not the case with i3e who are growing both production and reserves and have done it for the last 3 years ( should you be buying back stock in a shrinking business ?) You also have to look at how many shares the Company are doling out - when I looked at BP for example which I have owned previously - the share count didnt look to have shrunk over time despite buying back shares for many years.

That's my second 10 cents worth !

Look at share buybacks another way - company x has a 100 shareholders with 1 share each and has a total of 100 wells so in effect each shareholder owns 1 well each. I think nearly everyone here would agree that the more wells each shareholder own the more valuable his holding in Company X is.

So lets say company x buys back 10 shares - the company now has 90 shareholders owning 100 wells. Now each shareholder owns 100/90 or 1.1 wells each.

So there are three ways of increasing the number of wells per shareholder - buy back you own shares as in the example above, make an acquisition or company x drills additional wells.

So its a question of running the maths and findimg out which method adds more net asset value. Again I think most here would agree that i3e is cheaper than the average company so unless unless they find really cheap wells - then its logical that perhaps its better to buy back your own shares than to buy another Companies wells. Then compare the economics of drilling your own wells versus buying them - at low oil and gas prices, the economics of drilling your own wells become less attractive - i3e have said all along - low oil prices look for acquisitions, high prices look to drill.

The maths is not 100% straight forward because you have to also figure the multiples the market is prepared to pay for adding incremental barrels to a companies production and reserves. But this company has done it and explained the maths - refer to page 4 & 5.

https://4043042.fs1.hubspotusercontent-na1.net/hubfs/4043042/Content%20Offers/2022.Q3%20Commentary/2022.Q3%20GR%20Market%20Commentary.pdf

I heard one objection here against buybacks arguing that Company Y had started buybacks, ran low on cash and the had to do an equity raise - this is not the problem of buybacks but rather poor cash management.

Buybacks have also gotten a bad rap from Companies abusing buybacks to inflate earnings per share without consideration for whether the shares are cheap or represent a good investment. It wouldn't be a good idea for example to be buying back shares in a Company that has a long term trend of declining earnings and looking like going out of business.

There is also the argument that Company X, Y , Z are buying back shares and its done nothing for the SP. I dont necessarily buy this argument because there is a whole slew of factors that play into whether a share price increases or decreases so hard to isolate theses factors and see the true effect of a share buyback but I think it is an established fact that shares / sectors do tend to get valued on earning multiples over time .

Anyway - thats my 10 cents worth !

Nomad - I think possibly two restrictions. One is that they must have distributable reserves which they do have so based on this alone I believe they could kick off now. They may also be restricted by the financial ratio checks which can be met or waived. Its possible that they could go to the lender and request a waiver to kick off now using funds that have already been authorized to spend.

"Let's give it a 110 bbls/day + one more well in there. It doesn't sound lucrative so far doesn't it? Clearwater ain't easy, and I'd basically ascribe $0 valuation to a company that keeps touting it as a company maker. Show me the low decline 700-800 bbls/day....oh wait they are in Montney (Simonette)"

So a reminder of what WHI had to say:

"Don’t be fooled by the modest per-well production, these shallow wells are being drilled for circa $US1.1m (a WHI estimate) and generating highly attractive economic returns."

Also a bit of a refresher for Canuc:

https://1drv.ms/b/s!AoSqKfvcR4IMgYRlVoWtLWWWGqVTaQ?e=T5efOt

This is i3e's partner in Clearwater on some drills/acreage. Refer to the Martin Hills Type curve on page 12 along with some of the production numbers for the development wells.

Running a few rough numbers on an IP30 100 bopd well - looks like they would payout in around a year, perhaps a fraction less and a lot less if oil prices rise. Also with an expected ultimate recovery of 75,000 bbl - they would payout multiple times over the life of the well with the bulk of it in the early years - sounds pretty lucrative to me.

If you go to i3e's Q4 update - they drilled a well in Martin Hills with and IP30 of 230 bopd - these wells will payout in 6 months or less depending on the POO.

With regards to Simonette - yes this area produces some gushers - but they need to be because the well costs $10m a pop and take a little longer to payout. i3e drilled a well there last year and is still pumping out 500 - 600 boepd 12 months later - ok looks like we have very good acreage in 2 areas not to mention Wapiti which i3e says is performing above expectation !

Pete,

I have not given an SP forecast for a long time as it’s too difficult. I instead provide data/research on where peers are trading and leave it to the individual to make their own assessment. Also as you should know (or perhaps you don’t) - the market often misprices shares as I think is the case here - accept your responsibility for any gains or losses you have made and stop blaming others.

I find it mind blowing that a shareholder would come onto a public forum and trash their own stock - hey, but each to their own.

Jim,

You regularly post mis-information such as your line on Management admitting to passing on material information to II’s ahead of an RNS - many will have noted that you wouldn’t or more likely couldn’t back that up.

As far as nonsense I formation - regular posters here will have noted that I correctly forecast NOI on several occasions ahead of company announcement. I also forecast FY results a couple of months ahead of the official release and had Revenue, NOI and year ending cash within a pretty high degree of accuracy - it’s on this BB - check it out.

I will shortly have a 2023 H1 forecast well ahead of the official release if fellow posters here are interested.

People on here are now tired of both our exchanges on this BB and other BB’s and are well aware of my thoughts on the subject and your thoughts - so why don’t you give it a rest now.

Jim - I don’t charge £30 pounds a month for the numbers. Fellow posters can take it or leave it as they please. I also don’t peddle false information to sell a blog.