Member Info for tonynorstrom1

I think it means that they wanted to nullify the pre-emptive rights clause. Pre-emtive rights means that if the Company are planning a rights issue - they have to offer ALL existing shareholders the opportunity to participate and purchase an amount of shares proportional to their existing shareholding. This exception has normally been passed previously so very interesting that it has been rejected now (if correct).

Normally it takes time to get PI's on board and often as in the past , PI's have not elected to take up all their shares - so to be able to react more quickly (in the opinion of management), if they pass this clause, they can bi-pass PI's and give first right to institutional shareholders and normally the rights issue is fully subscribed in advance and the company can move more quickly on an acquisition. It sounds bad for PI's but in reality based on past experience, PI's have not taken up their full allotment meaning a delay in confirming any funding arrangements. In addition, although it looks like a snub , PI's are often able to pick up shares cheaper on the open market after the placing. This has certainly been the case on the last couple of placings.

So very interesting and presumably not all institutional investors were onboard which you would normally expect them to be !!

GGG,

We’re abviously not on the same page - but an additional cut of $5m does not stack up against an increase in $2.6m per month in debt repayments ($16.1m for the remainder of the year) - not to mention the other factors in play mentioned earlier.

Painful as it seems now - I think the new debt arrangement is positive going forward - it forces Management to pay down debt monthly instead of accruing to the balance sheets and reduces the possibility of surprises going forward.

Stas,

Obviously not privy to any conversation you’ve had - my initial reaction is that you may have misinterpreted what he was saying because it does not match with what the company have said on record or what I am currently seeing in place now. What they said on record was that they will hedge “up to 50%” of production on a rolling basis to protect the dividend and capex program. What I’m currently seeing (and from memory because I don’t have the exact numbers in front of me) is that they are hedging about 35% of oil at pretty decent prices so they are currently in the money or pretty close to it but only about 15% of gas at around CAD 2.00 or CAD 2.50 so not great but only 15% of volumes so have great torque to the increase in gas price. So all seemed very sensible to me.

I did not study the hedges in the update so the Situation may have changed slightly - will check later to day and see if the above still holds true.

Thanks for your response Stas - would be certainly interested in any feedback you get on the concerns you've noted as would others here i'm sure.

Part of the answer may lie in the fact (as mentioned by Majid in the interview) that at a certain Oil price, it's more advantageous commercially to do M&A than to drill new wells -so assuming that you accept this then just because it might its prudent to cut the Capex budget - it does not necessarily follow that they should not spend on M&A.

Someone also mentioned the point that if they were going to buy something - how would i3e's own shares stack up - probably quite favourably I would imagine.

Also - all this chatter about equity dilution is currently just rumour - nothing more.

It would be interesting to hear Scott123 take on all of this - he has been strangely silent in recent months. A fair weather golfer perhaps !

GGG - I don't think you are thinking straight at the moment - still obviously a little shocked at yesterdays update as most of us are.

Two things you should consider:

1) What H2 budget is their left to cut ?? If you look at the revised Capital budget and compare with one of the recent presentation where they lay out the Capex spend by month - they have already spent a big chunk of that $25m in H1 (just over $20m if my memory serves me correct)

2) Loan facility - probably not to dissimilar to a mortgage where the bank lays out how much you can borrow based on a multiple of your income. You don't get to say to the bank I reject that deal - you must give me 20x my salary ! Your probably going to respond by saying that they should have gone to another lender - to which I would suggest they have already done the rounds in the market and selected the best deal.

Anyway pointless in trashing i3e Management on this forum if you are a shareholder - its just shooting yourself in the foot. I would strongly suggest you sign up the the webinar and ask a few searching questions there.

PanamaPete,

I truly hope that I have not mislead anyone. There have been a couple of things that have change very recently that have tipped the balance:

1) The new debt facility has certain covernants and financial ratios that have to be met that impact the level of shareholder distributions. Its difficult as a PI's to know what these are but perhaps investors smarter than me would have been able to hazard a guess and been more conservative with their projections.

2) Production Curtailments have been higher than previously forecast due to wild fires and capacity constrains in the system - these obviously impact income and potentially distributions and were not known until the Q1 update.

3) The new debt facility is amortisized which is completely different to the old loan notes which as per the RNS means that just over $16m will be paid in the remainder of the year in Principle, Interest and set up costs. This amounts to nearly $2.6m a month which would cover the dividend by itself. With the previous loan notes - only interest was payable which until fairly recently was "paid in kind" i.e. no cash payment but added to the outstanding principle.

4) Finally - who thought Oil & Gas prices would still be at this level - I think nearly everyone including myself though they would be higher than they are currently.

Its been a humbling experience and I was clearly wrong in thinking that they would not cut the dividend despite recognizing it was becoming tighter .

TheA20 - I hope some investors here do attend the AGM and voice their concerns. If anyone is going - can they include a question on SG&A and point out that despite a reduction in H2 v H1 (2022) - it is still significantly higher than many Canadian peers and is particularly noticeable now with low oil and gas prices - what are they doing about it !

I would also point people to the Webinar on the 5th July - the link is on yesterdays RNS. I hope some here will sign up for it - you get to post in questions. The last event - I3e did seem to address all the questions including the difficult ones.

GLA - here's hoping for better days !

Worth also noting he addressed the issue of the "late" update - so not as some had speculated i.e. tardy reporting , but a deliberate act to see if there were any signs that Oil and Gas Prices were on there way up - I'm sure to minimize any necessary adjustments to the capex/dividend program. I'm sure if we had put ourselves in Majid's shoes we would have made a similar decision

I understand investor frustration here , like everyone else, i've seen the SP move from highs of over 30p down to its current state. But I don't understand where some are coming from . A few here were very keen to bump up the dividend which we all enjoyed although some questioned whether it would affordable at lower prices. A few have suggested that they should have maintained the dividend dipping into the loan if necessary - I think most will agree that this is not sustainable and would be a flip of a coin on oil & gas prices - probably not a bet any sensible CEO running an all weather Company should make.

I think i3e also addressed the issue in a round about way of the move to quarterly dividends in the RNS:

"Additionally, the Company will now commence paying dividends on a quarterly basis and will pay the Q3 dividend in October 2023, SUBJECT TO BEING IN COMPLIANCE with (OR OBTAINING A WAIVER FROM) the FINANCIAL RATIOS CONTAINED within the LOAN DOCUMENTATION, following the FINANCIAL RATIO TEST AT THE END OF EACH QUARTER".

Also worth noting that the CEO needs board approval to exercise the additional $6m in capex spending. So I think Majids options were limited in what action he could take. GGG did comment that i3e should never have agreed to the Loan Covenants - I think he knows that I3e will have negotiated the best terms possible but at the end of the day - the lender will insist on certain minimum protections. Also the timings were not in i3e'e favour i.e. Loan Notes becoming due coinciding with low oil prices and the Q1 update / review of spending plans.

The only mistake (if it was a mistake because shareholders all benefited greatly from it) was pitching the dividend too high in the 1st place.

Focusing on the positives (hard to see them now I know) - but if you go back to the the last time i3e were at 13.5p - it was approximately the beginning of Q1 2022. If you compare where we are at now with 2022 - production is up about 20%, reserves are up significantly and we have a new long term loan facility. For balance I would add that Serenity has not really panned out as hoped (though many will say this is a good thing) and the dividend is down a little on where it was Q1 2022. So the major difference between then and now is sentiment and a lower Oil & Gas price. Our foundations are now stronger and we look to be well set for the next up cycle in Oil and Gas (if it comes - I think it will).

What are you talking about - what ratios should they have used in their projections and on what basis - I have already admitted that they don't have a crystal ball like you - its very easy to be super smart after the fact. Please spell out where you think they went wrong other than just saying they assumed to high and oil and gas price (which by the way was strip so imo you are wrong.) Your offering your opinion which is ok but then seem to present it as an established fact - its not - its your opinion.

The management team have a record of drilling 40 plus wells of which only one was a duster - so again what are you talking about ?

I'm not sure the point you are trying to make - lets make the assumption that I3e have made all the right decisions but oil falls to $10 /bbl - its clear they lose money and if prices stay at that level they go out of business - simples and through no fault of there own -the share price is linked to the price of oil & Gas period !

"How are they doing on there total return model" - well I cannot tell you on how you are doing - I don't know the price you have bought in at. I can tell you i'm still a little bit up on my capital and with the dividends added on top - I've done ok but obviously well down from the peak. That's the ups and downs of investing in a commodity stock - what's your point ?

Some on here with a better following than you have suggested that i3e should have maintained the dividend and funded with debt if required until the POO rises in H2 seemingly ignoring the possibility that prices don't rise in H2. Management don't have the luxury of driving the bus from the back seat like me and you and at some point have to crunch the numbers and make a call on what they see now.

@WCSBCanuck

When they set the dividend - WTI and AECO were significantly higher and based on strip / consensus and so the dividend was covered by FCF. As its turned out prices have fallen significantly so i3e have had to review. As per the Proactive Interview - they waited to see where prices were heading and have had to make a call on what they see now.

Obviously had they had someone as smart as you and able to forecast prices 6 months in advance - then perhaps they would have been able to make a better call ?

Even had they had the benefit of your expertise and performed the stress tests at the prices you determined - would we be in a better position now ?

Stas20 - your thoughts ?

Dartron - are you providing any information that the average PI does not already know. If the Oil price tracks down month on month then surely the earnings per share tracks down - is that not correct? If you pull up a chart - oil has been pretty much on a down trend for the last 12 months.

Out of interest and bearing in mind the POO is outside of i3e's control - what is the financial incompetence you are referring to ?

GGG,

No question its a poor update:

1) I'll start of by saying that I didn't think they would cut the dividend but it seems their hands may have been tied by debt covenants / financial ratio's. You will recall that originally I thought that I3e were aggressive and front running the dividend i.e. paying out in excess of 30% of FCF (a lot more) with presumably the expectation that production growth along with strong Oil & Gas Prices would catch up with their targeted payout ratios's. Alas Oil & Gas prices have been softer than many expected including the Company and they have reacted accordingly.

2) Disappointed to see they have dropped the monthly dividend - will ask the Company why in the upcoming webinar.

3) Some unexpected production curtailments have not helped

4) I don't think the fundamentals of the Company have changed - they still have very good assets, strong balance sheet and with higher Oil and Gas prices we should see a rebound.

5) They have been proactive with instigating monthly dividends, sector leading yields and above average production growth. I think they have been equally proactive in cutting the above to maintain financial discipline / strength in a lower than expected Oil price environment. Painful in the short term but probably prudent looking further out and as I say - their hands were probably tied by the new debt covenants which probably would not have been an issue with higher Oil & Gas Prices.

I saw how disappointed you were and highly critical of management in your post below - I'm still trying to get my head around the RNS and figure out if Management could have done things any better (communications , size of budget cuts etc) given the hand they had to play (not made my mind up on that yet) The delayed Q1 update and dividend announcement was a bit of a flag and obviously a number of investors have reacted accordingly - perhaps a little unfair to suggest that II's have been tipped off.

H2 looks promising for higher Oil & Gas prices and I think the longer term outlook for i3e is still is potentially very good albeit with this setback today which is possibly not as bad as it looks at first sight after having had time to absorb the RNS. 7% dividend is still pretty decent and financial expectations re-set to align more realistically with the current situation -perhaps least resistance is now to the upside ?

Mr Fibbles - I think you are right that Gas should be a more prominent part of i3e's income stream in future years, however, you are quoting US Gas Futures and I3e sells at AECO pricing. The two are currently disconnected and have been for quite some time with AECO often at a significant discount to Henry Hub.

With new pipelines and Canadian LNG - the prices should converge in future years but that's not the case at present.

Thickster - I agree:

If the economics of whatever they are considering is no longer as per budgeted plan - I cannot think of too many better things to do than to start buying back shares !

I3e is not necessarily contemplating an equity raise - this authorization to issue shares is a standard authorization they seek every 12 months - refer to the following note at the end of resolution 10:

"The Directors have no present intention of exercising the authorities sought pursuant to this resolution, but

consider them desirable to allow the Company to retain flexibility"

This is not to say that they wont raise - but the present intention is not - but circumstances can change as they have in the past.

Is it really a surprise to anyone here that the SP has trended down for around a year - just pulled up the chart for WTI and that has pretty much trended down for the last year also - am I missing something?

We have an advantage over many oilers in that we are able to grow production year over year - I posted a link to a "report card" on Boereport.com a while back and whilst i3e was not top of the log in terms of yoy production growth - they certainly seemed to be in the top 25th percentile and the planned 10-13% growth this year would put them pretty high up on the log again.

Holding tight - I am !

I'm not tying the SP solely to production numbers - there are many factors that go into determining the SP - just making the point that It might take more than a 5000 boepd acquisition to move the share price to 30p - not only that but to "Catapult " no less.

What your post seems to ignore is that its not just i3e - virtually the whole of the Oil & Gas space is depressed and trading at historical low multiples - particularly Canadian equities.

The biggest factor currently imo has very little to do with i3e but rather recession / demand worries though delayed reporting of the Q1 update and Dividend Announcement are not helping.

I believe demand worries will recede (although there are no guarantees) and the who sector will rerate upwards. In addition, i3e has the opportunity to re-rate within the sector if we see above average performance and I think we have seen some of that.