i3 Energy Plc (LON:i3) is to drill two new ‘high return’ wells in the Wapiti production area in western Canada in the coming weeks.
The decision to drill the two wells, slated to start in July, is expected to boost output and revenue at an estimated net cost of around US$2.1mln, which i3 noted is just 1.3x the forecasted net operating income for the next twelve months. It is expected that the drill programme will conclude early in the third quarter. The wells are expected to add around 175 barrels of oil per day net to i3.
The company has also executed a letter of intent to acquire an additional 230 boepd of production in the Wapit area. These assets, Cardium and Dunvegan, are described as ‘synergistic’ to the company’s existing interests in the area.
It subsequently plans to invest in a programme of six well reactivations across Cardium and Dunvegan which is forecast to add 310 boepd, at a capital cost of around US$410,000.
"i3 is continuing to deliver on its stated strategy of economics-driven buying or building, dependent on attainable metrics,” said chief executive Majid Shafiq.
“To date in 2021, i3's WCSB initiatives are expected to materially increase both production and free cash flow, which is expected to directly translate into healthier cash distributions and a stronger balance sheet to pursue opportunities as they arise.”
Shafiq added: "On our intention to become a dividend payer, the necessary share capital reduction is nearly behind us and we expect to commence returning value to our shareholders by way of a special dividend, with scheduled half-yearly dividend payments thereafter alongside our Interim and annual reports."
In a separate statement, i3 reported its reserves for 2020 which set a valuation (a discounted net present value) of US$97mln for proven reserves and US$183mln for proved plus probable reserves.
Consultant GLJ Ltd provided the assessment which detailed 17.51mln barrels of proved producing reserves, comprising 55% of all the company’s proved (1P) reserves.
Additionally, it states some 22.83mln of ‘proved plus probable producing’ reserves which represents just 43% of all proved and probable (2P) reserves.
The report also deemed the production base to be a ‘top tier’ low-decline asset, based on first-year declines of 13% although i3 said its in-house observation of the declines is significantly below that projection.
I3’s proved plus probable reserves comprise 62% natural gas and 38% oil and natural gas liquid (NGLs).