I3 Energy Plc is set for very positive catalysts both in terms of commodity prices and the group’s operations, that’s according to analysts at WH Ireland.
The stockbroker highlighted that I3 has “its propeller turning” in Canada where a multi-well drill campaign promises to build material production volumes, described by WH Ireland as a development with major strategic implications.
Today, the company provided details of its planned Phase One, US$47mln, capital programme for 2022.
The company, in a statement, said that seven wells (five net) will be drilled across its portfolio - including the Central Alberta, Marten Hills & Marten Creek, and Simonette areas – targeting 2,450 barrels oil equivalent of addition production (expected to be 55% oil and natural gas liquids).
At the same time, a programme of recompletions and reactivations is planned to take advantage of low-cost, high-return opportunities. It is expected to yield 600 boepd and the investments are forecast to achieve payback within a year.
WH Ireland highlighted that its recently updated fair value pitched 37p per share of ‘upside’, of which 30p per share ascribed to the Canadian assets.
“Specifically, our valuation remains premised on our estimate of cash flow from operations for 2022 multiplied by 5.0x to arrive at a fair value estimate,” WH Ireland analyst Brendan Long said in a note.
“Looking ahead, we see very positive catalysts for i3 Energy: i) commodity prices rising ii) i3 Energy establishing itself an operator capable of drilling long-reach laterals iii) hundreds of undrilled well locations – circa 450 and iv) very significant amounts of unallocated cash that can be deployed opportunistically – we expect the company’s year-end cash balance to be greater than $80m in the absence of more-than-guided capex.”
Elsewhere, SP Angel analyst Sam Wahab added: “i3’s low-decline assets continue to outperform expectations, and the company is forecasting robust cash flow generation from its production business following an intense period of accretive growth since its mid-2020 entry into the Western Canadian Sedimentary Basin.”
“In addition, the recently announced monthly dividend will appeal to investors seeking regular income and the option for reinvestment to improve returns.”
I3, meanwhile, revealed the results of the campaign’s first well which is its first as operator.
The well was drilled on the Open Creek field of Central Alberta. The well (numbered as the 14-24 well) was drilled over seventeen days, down to a vertical depth of 5,334 metres with a 2,900 metre lateral section and it encountered clean sand and strong gas shows throughout the entirety of the horizontal length. It is the first of two to be drilled off the same drill pad.
The drill rig has now skidded over to drill the second well from the pad, and, it is planned that both wells will be completed and tested.
I3 said it expects the wells will yield around 600 boepd per well.
"We are very pleased to have successfully completed drilling operations on our first new operated well in the company's 2022 Canadian capital programme and look forward to bringing this well and subsequent wells onto production over the first half of this year,” Shafiq said.