i3 Energy plc, an independent oil and gas company with assets and operations in the UK and Canada is pleased to announce the following operational update.
· Group production from the Gain Energy Ltd. ("Gain") and Toscana Energy Income Corporation ("Toscana") assets during October averaged 9,407 boepd (61% gas, 39% liquids), with both portfolios performing to management expectations
· First dividend expected to be declared and paid in Q1 20211
· Toscana acquisition approved by shareholders of both Toscana and i3 Energy
· Toscana's tax losses of CAD$128mm (US$94mm) will support tax efficient income for several years from i3's production portfolio
· Trading of i3 shares on the Toronto Stock Exchange ("TSX") expected to commence on 6th November with ticker ITE
· Integration of Gain assets and staff completed
Majid Shafiq, CEO of i3 Energy plc, commented:
"We are delighted to announce the closing of the Toscana acquisition and with it the imminent listing of i3 on the TSX. This and the acquisition of the Gain assets in September completes the first phase of our Canadian business plan. We will now look to fully integrate and optimise our operations to maximise margins in a strengthening Canadian gas price environment with current AECO2 strip pricing in excess of CAD$3.0/MMBtu3 out to June 2021 (a price last seen in 2016), whilst continuing with our plan to build on the platform with synergistic and accretive M&A activity."
i3 is pleased to announce that the i3 completed the acquisition of Toscana on 30th October 2020.
Toscana was the first Canadian deal i3 announced earlier this year as the Company's entry into the Canadian oil and gas sector and forms the basis of our Canadian operating platform. All Toscana corporate staff will now become employees of i3 Energy.
Toscana had 2P Reserves of 3.98 MMboe (46 per cent. gas, 54 per cent. oil) as of 30 June 2020 with a reserve life index of 16.3 years. Average production in 2019 was 1,065 boepd which generated CAD$5.5 million (c.US$4mm) in Field Netback (revenue minus royalties minus opex) from 12 low-decline, long-life conventional oil and gas fields. Toscana operates 62% of its 196 wells with an average working interest of 67% and an average break-even price of CAD$30.43/boe (c.US$22.38/boe). Production from Toscana's properties averaged 689 boepd (42% gas, 58% liquids) in October, with several wells shut-in for economic reasons since the drop in oil prices in Q1 of this year. Operating margins are constantly monitored and some wells have been brought back online in the last several weeks. Toscana has accumulated tax pools of c.CAD$128 million (US$94 million), which will allow cash flows from the Company's Canadian production portfolio to remain tax efficient for the next several years. The Toscana portfolio contains a number of production optimisation and opex reduction opportunities which the Company will actively review, implementing those that pass our economic hurdles. Additionally, Toscana has a very large acreage position in the Clearwater play, providing significant growth potential in a moderately higher oil price environment from relatively low cost but highly productive wells.
i3 Energy has received conditional approval from the TSX to list all its outstanding share capital on the TSX, subject to i3 Energy satisfying the listing requirements set out in the conditional approval letter issued by the TSX. The first day of trading on the TSX is expected to occur on 6thNovember 2020.
On completion of the Gain acquisition on 3rd September, twenty-two staff from Gain joined i3 Energy and all contracts for field operating personnel were novated to the Company, delivering to i3 multiple years of knowledge of the acquired assets and related commercial and business relationships. The integration of the Gain assets and business into i3 Energy has proceeded very smoothly and without any operational issues. Toscana has been managing the assets we acquired from Gain since the completion of that acquisition in September under a management and administrative services agreement, thus allowing the assimilation of the Toscana assets and operations to occur immediately in a seamless fashion, with preparation for integration of business systems well advanced.
Production from the Gain assets over the period from 1st May (transaction effective date) to 31st August averaged 8,935 boepd (63% gas, 37% liquids). There were scheduled maintenance shutdowns at two non-operated facilities in September, resulting in several wells being shut-in during the month, reducing average production in September to 6,483 boepd (59% gas, 41% liquids). All wells shut in for maintenance operations were back on-line by mid-October. Production during the month of October averaged 8,718 boepd (62% gas, 38 % liquids).
The Company envisages the declaration and payment of its first dividend in the first quarter of 2021. As previously disclosed the Company aims to pay out up to 30% of free cashflow as a dividend to shareholders. Based on the current share price, the Company expects the dividend yield to be in excess of 10% on an annual basis.
Serenity Appraisal Drilling Farm-out
The company is in discussions with a counterparty regarding a potential farm-in to the Serenity discovery. Terms are being negotiated and the market will be updated if and when an agreement is reached.