The latest Investing Matters Podcast episode featuring financial educator and author Jared Dillian has been released. Listen here.
"It's far form 'total return' when you look at production increases yoy. "
Production is flat for the year. WH Ireland shows average daily production for 2022 at 20,317. It estimates 2023 to end at 20,668. All this company has been doing this year is offsetting the 17% corporate decline rate. Offsetting decline rates is a necessary business cost of a 'decline' business.
The company needs to grow through drillbit since it has 20+ years worth of inventory. It is not.
...now that the capital reduction is out of the way, and as expected was a 'nothing burger', those who were hanging their hope on it revise their analytical framework. This motley company's share price will go nowhere fast until they have a complete review of strategy.
The 'total return strategy' is value extractive not accretive.
So, the strategic shareholder base that insists on extracting value rather than creating is not aligned with the retail interest.
Londinium continues to display the worst instinct of empire.
" I don't think there has been any change in strategy or at least if there has been - i3e has not communicated it yet."
There better be, and fast.
Rehauer: "Like Martin Luther King said - I have a dream..."
Like Eric Nuttall said - "dare to dream" (to get market multiples that make your valuation close to NAV)
"On what basis are you saying they shouldn't be paying a dividend?"
On the basis that if you're not creating value, a dividend is extracting value.
Yeah, but those were huge companies. This one is minuscule.
PP: my nonexistent xenophobia aside, we are all flies caught up in the same soup, and this company is displaying signs of something I never thought existed when I went to business school: negative synergies. THE WHOLE IS LESS THAN THE SUM OF ITS PARTS.
"Can you kindly explain the difference between "extracting" value out of Canada as opposed to "creating" value"
Yes! Dividends are being paid, when they shouldn't, and most that money is leaving Canada.
" using language like "Colonist UK BOD"
Well yeah, if you extract value out of Canada, rather than create it, that language is absolutely justified.
Long form article below.
https://zerogcos.substack.com/p/expecting-a-company-shake-up
This fella actually took the time to write a long form article a few months back, and after alerted about this LTIP debacle, has some thoughts that I find worthwhile mulling. The board/management are not working for us.
https://x.com/oilgastourist/status/1723019015398789615?s=20
Hey Tones, see multiple on Kelt from TD (very conservative) below.
It's 4.3x
https://pbs.twimg.com/media/F-hUeKXbwAAFtvt?format=jpg&name=medium
I share your sentiments here Dartron. There really is no value add whatsover to the 'capital reduction'. It merely allows the company to continue with its silly "total return" strategy, as according to Brutish Law one must have retained earnings (destination of said monies) to pay a dividend.
As for the drawing down of that Trafigura facility, I will differ with you there. They had to roll over their prior debt that matured, and the interest expense (annually) continues to be the same. So, think of it as the price I3 must pay to be in Canada, independent of any activity. Mercifully, it will go away in 3 years.
"“You simply cannot analyse these small caps based on fundamentals - and you will lose money doing so.”"
Yes you can. The trick is when it comes to what multiples to use. Both WH Ireland (5x) and Tennysson (xx) are using multiples no Canadian juniors can ever dream of. Take it down a notch I say, and mayhap 15p is the best we can do.
(note: 5x multiple they are assuming is TOO HIGH. Nobody in Canada is currently getting that. That's a US level multiple)
i3 Energy announced solid 3Q production of 21,156 boe/d (WHIe: 21,524 boe/d) and we see their full-year production for 2023 trending toward the mid-point of their guidance range of 20,000 to 21,000 boe/d (unchanged). The company announced that it intends to re-initiate its organic growth/drilling program with the allocation of $6m towards a three-well capex program.
We are adjusting our 2024 WTI oil price assumption downward from $90.00/b to $84.00/b – reflecting commodity price dynamics.
Our valuation remains premised on a 5x EV/CF multiple and our updated fair value estimate amounts to 20.9p (down from 25.6p). We believe the company’s 3Q update reflects solid operational delivery, a strengthening balance sheet and a renewed focus on organic growth.
A dud?
This $6M of capex was initially broadcast as Clearwater capex.
"· Post quarter-end the board of directors approved a USD 6 million capital program, for the balance of 2023, centred on the Company's Glauconite and Leduc oil fairways in Central Alberta."
"PPS if there is no RNS, where will the sp be?"
Not present.
"The only other thing is they could do to generate a decent return for shareholders is put up the 'for sale' sign. This would be the best thing to do in the interest of shareholders but I think Majid is a little too comfortable on his £600k salary."
We keep faulting Maj. Perhaps we should fault those who hired him?
Is this even important at this point? Or will the algos think I3 finally did a quarterly and give us some friggin credit?
"For PE, simply offering double our sp would still put us on an EV:EBITDA of less than 4.5."
If Arc is getting 4.1x why should a PE give I3 a 4.5x?