29 April
2024
i3 Energy
plc
("i3",
"i3 Energy", or the "Company")
Final Results for the year
ended 31 December 2023
i3 Energy plc (AIM:I3E) (TSX:ITE),
an independent oil and gas company with assets and operations in
the UK and Canada, is pleased to announce the audited results for
the year ended 31 December 2023. A copy of the Company's
financial statements will be made available shortly on the
Company's website at https://i3/energy
as well as filed under the Company's profile on
SEDAR+ at www.sedarplus.ca
and will be posted to those shareholders who make
or have made a request to receive a paper copy. The Annual
General Meeting ("AGM") will be held at 11:00 am BST on
27th June 2024 at the offices of WH Ireland Limited at
24 Martin Lane, London, EC4R 0DR.
CANADA
|
UK AND
CORPORATE
|
|
Average
daily production (BOE/d)
|
2023:
20,711
2022:
20,317
2021:
12,442
2020:
8,732
|
|
|
Group
Revenue (£m)
|
2023:
146.3
2022:
208.4
2021:
86.8
2020:
13.0
|
2P
reserves (MMBOE)
|
2023:
179.9
2022:
181.5
2021:
154.1
2020:
54
|
|
|
Group
Profit after tax (£m)
|
2023:
15.1
2022:
42.0
2021:
25.1
2020:
11.7
|
PDP
reserves (MMBOE)
|
2023:
47.1
2022:
49.1
2021:
46.2
2020:
18.1
|
|
|
Group
NOI (£m) (1)
|
2023:
74.5
2022:
131.7
2021:
48.6
2020:
4.9
|
2P
reserves Before-tax NPV 10 (USDm)
|
2023:
1,026
2022:
1,162
2021:
775
2020:
183
|
|
|
Group
Adjusted EBITDA (£m) (1)
|
2023:
67.8
2022:
98.0
2021:
30.2
2020:
(0.8)
|
|
|
|
|
Dividends declared (£m)
|
2023:
13.3
2022:
17.4
2021:
3.4
2020:
0
|
|
|
|
|
|
| |
(1)
Non-IFRS measure. Refer to Appendix B
Achievements in 2023
Record Annual
Production
· Record annual production of 20,711 barrels of oil equivalent
per day ("boepd"), at the high end of the Company's 2023 guidance
range of 20,000 to 21,000 boepd and 2% above 2022
production.
· Record production achieved despite loss of approximately
3,100 boepd in Q2 due to restrictions associated with the Alberta
wildfires, unanticipated apportionment issues associated with the
Pembina Peace Pipeline liquids line, debottlenecking projects and
twenty scheduled operated turnarounds.
Shareholder
Return
· Total dividends of £13.298 million declared and £15.338
million paid in 2023.
Capital
Programme
· £23.2 million capital expenditure in 2023 delivered 12 gross
(8.0 net) wells, which were completed on budget in a high
inflationary environment.
Debt
Re-financing
· Successfully completed a CAD 100 million, 3-year, first lien
Debt Facility with Trafigura Canada Ltd. (a subsidiary of Trafigura
Pte Ltd.) and redeemed the H1 2019 Loan Notes in full.
Reserves
Replacement
· Managed to maintain Proven ("1P") and Proven plus Probable
("2P") reserves essentially flat, despite a significantly lower
capital programme in 2023 relative to the prior year, with a very
healthy 2P reserves life index of 23.0 years.
· The Group now has over 390 gross booked drilling locations in
its audited reserves and over 950 including un-booked
locations.
Extensive Planned
Maintenance Programme Executed
· Scheduled turnaround programmes successfully completed on 20
operated facilities, on-time and on-budget.
ESG
Performance
· Completed the electrification of 25 pumpjacks in Carmangay
and Retlaw to reduce use of diesel and propane for power
generation, with a further two electrifications underway, which
will eliminate 4,268 tonnes of CO2 ("tCO2") emissions
annually.
· Completed electrification of two natural gas generators,
resulting in an annual emission reduction of 907 tCO2 equivalent
("tCO2e").
· In 2023, we replaced 295 gas driven pneumatic pumps with
solar powered pumps, which is expected to eliminate 8,971 tCO2
emissions annually.
· Launched an alternative Fugitive Emissions Management
Programme, utilising airborne methane imaging technology which is
expected to reduce fugitive methane emissions by 50% relative to
2022.
· Converted high-pressure natural gas driven pneumatics to
compressed instrument air at three of i3's locations to reduce
methane emissions equal to over 660 tCO2e annually.
· Ongoing annual abandonment and reclamation programme
abandoned 46 wells, 26 pipelines and decommissioned 16 well sites,
representing approximately 12% of operated non-producing
wells.
Outlook
A summary of key events which
occurred after the reporting period are presented in
note
24 to the financial statements.
The Company's focus for the remainder of 2024 will be on three key
areas:
1 The growth of i3's Canadian business through the deployment
of capital into its large proven undeveloped reserves base,
operational excellence to improve uptime and field performance, and
strategic upsizing and/or repositioning of its core areas through
M&A;
2 Maintaining flexibility to adapt to economic developments
while maximizing total shareholder return; and
3 Conducting its operations safely and in an environmentally
secure manner.
The Company continuously evaluates
opportunities to strengthen its balance sheet whilst maintaining
tight control of its costs and working capital position.
Majid Shafiq, CEO of i3 Energy plc,
commented:
"i3 entered 2023 with strong momentum following a very
successful Q4 drilling campaign in 2022, proceeding to drill and
tie-in 8 wells in our Wapiti, Central Alberta and Clearwater
acreage before the Spring break up period last March. However, as
became common for 2023, the market was hit by volatile commodity
prices, and, alongside natural disasters like the Alberta
wildfires, and planned turnarounds and debottlenecking projects, i3
moved quickly to revaluate its capital programme and protect its
balance sheet. We proceeded to focus on low-risk wells in our core
production assets and appraisal wells in the Clearwater and are
very pleased with the results, which were delivered on budget even
in an inflationary cost environment. Despite these challenges
and due to our ability to adapt our portfolio and investment and
drilling strategy quickly, i3 achieved record annual average
production of 20,711 boepd. This is a testament to the quality of
our low decline production base, our low-risk drilling inventory
and the skills and dedication of our employees.
As
reported post-period end, i3's 2023 audited reserves report showed
little change in 1P and 2P reserves, reflecting successful
operational management and the quality of the Company's portfolio,
and was achieved despite the mid-year change in capital budget and
programme. With more than 390 booked (gross) drilling locations,
i3's reserves report exhibits a strong and diverse asset base which
can support growth through the business and commodity cycles, and
we look forward to advancing our growth initiatives in the near
term.
Financially, i3 was well funded in 2023, supported by the
negotiation of a new CAD 100 million facility with Trafigura early
in the year, and the settlement of our outstanding £22 million Loan
Notes. Post-period, the Company has since established a CAD 75
million non-amortising credit facility with the National Bank of
Canada, which allowed the Company to repay the Trafigura loan
facility. i3 has benefitted greatly from building a strong
relationship with Trafigura, a sophisticated oil and gas trader,
but with the Company's focus on Canadian growth, recognised the
significance of having a Canadian bank support us in country. Also
post-period, the Company sold its non-core royalty production for
circa USD 25mm at a cashflow multiple far in excess of the
Company's trading value, which combined with the new credit
facility has significantly strengthened our balance sheet and
provides financial flexibility to manage fluctuating market
conditions.
i3
was pleased to return £15.338 million in dividends to investors in
2023 and remains committed to delivering shareholder value via cash
returns and growth. Management continuously weighs the expected
returns generated through organic portfolio development against
potential acquisition opportunities, which we continue to actively
evaluate.
The Company looks forward to 2024 and beyond in a
much-strengthened financial position, with a strong balance sheet,
and growing relationships with providers of debt capital for
growth. Our core asset base continues to perform consistently well
and will underpin the development of the significant undeveloped
reserve and resource potential in our portfolio. We look forward to
executing a successful drilling programme in Canada in 2024, in
what we believe will be a more positive pricing environment,
growing production and continuing to return cash to shareholders to
deliver on our total shareholder return model."
Qualified Person's Statement
In accordance with the AIM Note
for Mining and Oil and Gas Companies, i3 discloses that Majid
Shafiq is the qualified person who has reviewed the technical
information contained in this document. He has a Master's Degree in
Petroleum Engineering from Heriot-Watt University and is a member
of the Society of Petroleum Engineers. Majid Shafiq consents to the
inclusion of the information in the form and context in which it
appears.
Enquiries:
i3 Energy plc
Majid Shafiq (CEO)
|
c/o Camarco
Tel: +44 (0) 203 757
4980
|
|
|
WH Ireland Limited (Nomad and Joint Broker)
James Joyce, Darshan Patel, Isaac Hooper
|
Tel: +44 (0) 207 220
1666
|
|
|
Tennyson Securities (Joint Broker)
Peter Krens
|
Tel: +44 (0) 207 186
9030
|
|
|
Stifel Nicolaus Europe Limited (Joint
Broker)
Ashton Clanfield, Callum
Stewart
|
Tel: +44 (0) 20 7710
7600
|
|
|
Camarco
Andrew Turner, Violet Wilson, Sam
Morris
|
Tel: +44 (0) 203 757
4980
|
Notes to Editors:
i3 Energy is an oil and gas
Company with a low cost, diversified, growing production base
in Canada's most
prolific hydrocarbon region, the Western Canadian Sedimentary Basin
and appraisal assets in the North Sea with significant
upside.
The Company is well positioned to
deliver future growth through the optimisation of its existing
asset base and the acquisition of long life, low decline
conventional production assets.
i3 is dedicated to responsible
corporate practices and the environment, and places high value on
adhering to strong Environmental, Social and Governance
("ESG") practices. i3 is proud of its performance
to date as a responsible steward of the environment,
people, and
capital management. The Company is committed to maintaining an ESG
strategy, which has broader implications to long-term value
creation, as these benefits extend beyond regulatory
requirements.
i3 Energy is listed on the AIM
market of the London Stock Exchange under the symbol I3E and on the
Toronto Stock Exchange under the symbol ITE. For further
information on i3 Energy please
visit https://i3.energy
This announcement contains inside information for the
purposes of Article 7 of the UK version of Regulation (EU) No
596/2014 which is part of UK law by virtue of the European Union
(Withdrawal) Act 2018, as amended ("MAR"). Upon the publication of
this announcement via a Regulatory Information Service, this inside
information is now considered to be in the public
domain.
Forward-Looking
Statements
This press release offers our
assessment of i3's future plans and operations as at April 29,
2024, and contains certain forward-looking information and
statements within the meaning of applicable securities laws. The
use of any of the words "anticipate", "continue", "estimate",
"expect", "forecast", "may", "will", "project", "should", "plan",
"intend", "believe" and similar expressions (including the
negatives thereof) are intended to identify forward looking
information or statements.
The forward-looking information
and statements included in this news release are not guarantees of
future performance and should not be unduly relied upon. Such
information and statements involve known and unknown risks,
uncertainties and other factors that may cause actual results or
events to differ materially from those anticipated in such
forward-looking information or statements including, without
limitation: those relating to results of operations and financial
condition; general economic conditions; industry conditions;
changes in regulatory and taxation regimes; volatility of commodity
prices; escalation of operating and capital costs; currency
fluctuations; the availability of services; imprecision of reserve
estimates; geological, technical, drilling and processing problems;
environmental risks; weather; the lack of availability of qualified
personnel or management; stock market volatility; the ability to
access sufficient capital from internal and external sources; and
competition from other industry participants for, among other
things, capital, services, acquisitions of reserves, undeveloped
lands and skilled personnel. Risks are described in more detail in
our Financial Review, which is available on www.i3.energy and on www.sedar.com.
Forward-looking statements are provided to allow investors to have
a greater understanding of our business.
You are cautioned that the
assumptions used in the preparation of such information and
statements, including, among other things: future oil and natural
gas prices; future capital expenditure levels; future production
levels; future exchange rates; the cost of developing and expanding
our assets; our ability to obtain equipment in a timely manner to
carry out development activities; our ability to fund future
dividends; our ability to market our oil and natural gas
successfully to current and new customers; the impact of increasing
competition; the availability of adequate and acceptable debt and
equity financing and funds from operations to fund our planned
expenditures; and our ability to add production and reserves
through our development and acquisition activities, although
considered reasonable at the time of preparation, may prove to be
imprecise and, as such, undue reliance should not be placed on
forward-looking statements. Our actual results, performance, or
achievement could differ materially from those expressed in, or
implied by, these forward-looking statements. We can give no
assurance that any of the events anticipated will transpire or
occur, or if any of them do, what benefits we will derive from
them. The forward-looking information and statements contained in
this document is expressly qualified by this cautionary statement.
Our policy for updating forward-looking statements is that i3
disclaims, except as required by law, any intention or obligation
to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
Non-IFRS Financial
Measures
i3 uses the following terms for
measurement within this press release that do not have a
standardized prescribed meaning under International Financial
Reporting Standards ("IFRS") and these measurements may not be
comparable with the calculation of similar measurements of other
entities. The Company refers to these as Non-IFRS Measures or
Alternate Performance Measures ("APMs"). APMs are not defined under
IFRS and are not considered to be a substitute for or superior to
IFRS measures. Other companies may not calculate similarly defined
or described measures, and therefore their comparability may be
limited. The Company continually monitors the selection and
definitions of its APMs, which may change in future reporting
periods. Refer to Appendix B for further discussion.
Chairperson's and Chief Executive's
Statement
Overview of the year
i3 Energy had a very busy 2023
navigating a challenging period in the energy sector and the
broader capital markets.
Operationally, i3 commenced 2023
following a very successful drilling campaign in 2022, which
allowed the Company to average 20,317 boepd for 2022 with peak
production exceeding 24,000 boepd. Although commodity prices had
softened through 2022, the forecast at year-end remained strong and
the Company set a 2023 capital programme of USD 64 million,
similar to the prior year, based upon average annual price
assumptions for 2023 of USD 85/bbl for WTI and CAD
4.50/GJ for AECO gas (coinciding with the industry consensus). The
Q1 scheduled component of the 2023 capital programme, including 8
gross (5.5 net) wells, was successfully drilled in the Company's
Wapiti, Central Alberta and Clearwater assets and tied-in before
the Spring break up period commenced. First half production and
cashflow numbers were impacted by a weakening commodity price
outlook and a series of other factors,
including Alberta wildfires, unanticipated sales
apportionment issues through third-party infrastructure, as well as
scheduled turnarounds and debottlenecking projects. Ultimately for
2023, WTI oil and AECO 5A gas averaged USD 77.61/bbl and CAD
2.64/mcf respectively. These factors when combined with the
continued softening commodity outlook, resulted in significantly
lower full year forecasted cashflows than budgeted at the start of
the year. The Company consequently re-calibrated its capital and
dividend programme mid-way through the year to be constrained by
full year forecast cash flow and issued revised full year
production and cashflow guidance. Total budgeted capital
expenditures for the year was reduced to approximately USD 30
million and the drilling programme was completed in Q4 with the
drilling of 4 gross (2.5 net) wells in Central Alberta. The 2023
drilling programme targeted low risk oil wells in our core
production assets and appraisal wells in our Clearwater acreage. We
are pleased with the well results which were drilled on budget in a
cost environment which was still inflationary.
Seasonal wildfires in 2023 were
worse and more prolonged than normal, and although none of our
facilities (operated or non-operated) were damaged, periodical shut
down of certain facilities was required as a precautionary measure,
which negatively impacted our production volumes during May and
June by 1,650 boepd and 385 boepd, respectively.
Additionally, the Company conducted a major programme of
planned maintenance activities in June which involved shutdown of
20 major operated facilities, which were completed successfully on
time and on budget. In aggregate the wildfires, debottlenecking
projects, turnarounds and unanticipated apportionment issues
associated with the Pembina Peace liquids pipeline resulted in the
loss of approximately 3,100 boepd in Q2. Despite this, our wells
and facilities which were impacted by maintenance and unplanned
shutdowns were ultimately brought back on-stream and at
pre-shutdown levels.
We are very pleased that despite the
Q2 production curtailments and a constrained capital programme the
Company managed to achieve record annual average production in 2023
of 20,711 boepd, and as mentioned below, managed to keep oil
equivalent reserves essentially flat. This is a testament to the
quality of our low decline production base, our low-risk drilling
inventory and the skills and dedication of our
employees.
The Company's year end 2023 audited
reserves on a 1P and 2P basis remained essentially flat year on
year and reflects successful operational management and the results
of the 2023 drilling programme. This was achieved with a limited
capital programme and again points to the quality of the Company's
oil and gas properties. The 2P reserves were evaluated with an
NPV10 of USD 1.03 billion on a pre-tax basis with the longevity of
the reserves demonstrated by a very healthy reserve life index of
23.0 years. With more than 390 booked (gross) drilling locations,
i3's reserves report exhibits a strong and diverse asset base which
can support growth through the business and commodity cycles, and
we look forward to advancing our growth initiatives in the near
term. Although gas prices weakened through 2023 and were a major
factor in our operational decision making and financial results, we
believe the mid-term outlook is positive due to the pending
start-up of LNG exports from Canada's west coast from the LNG
Canada facility which is expected to begin start-up activities in
2024.
During the first half of 2023, the
Company settled its outstanding £22 million Senior
Secured Guaranteed Loan Notes (the "Loan Notes"), which were due
for repayment at the end of May. The Loan Notes were settled using
the proceeds from a new CAD 100 million loan facility
(the "Facility") established with Trafigura Canada Ltd., a
subsidiary of Trafigura Pte Ltd. The Facility consists of
a CAD 75 million facility, used to repay the loan notes
and for general corporate purposes, and a CAD 25
million accordion. The Facility had a
three-year amortisation period which served to strengthen the
balance sheet as the loan was paid down. We are very pleased to have established a relationship with
Trafigura, a sophisticated oil and gas trader and a potential
partner for future production focussed growth.
After year-end, the Company
established a CAD 75 million senior secured revolving
credit facility with a Canadian chartered bank which was utilized
to settle the Company's existing CAD 75 million Loan
facility with Trafigura, without prepayment penalty, of which
approximately CAD 57 million was outstanding at the time
of the repayment. Secured against substantially all the assets and
shares of i3 Energy Canada Ltd., the new Credit Facility,
comprises a CAD 55 million revolving facility and
a CAD 20 million operating loan facility. The
two-year term of the new Credit Facility is expected to be extended
on an annual basis, subject to lender approval.
As per i3's total return model, the
Company declared £13.298 million and paid £15.338 million in
dividends in 2023. The Company continually evaluates the optimal
way in which to deliver shareholder value. In addition to its
distribution model, the Company weighs the expected return
generated through organically drilling its extensive portfolio of
development locations against potential acquisition opportunities
and deploys capital accordingly to achieve the highest return on a
risk adjusted basis. As is to be expected, the fall in commodity
prices in 2023 resulted in lower asset transaction metrics
in Canada. i3 continues to monitor the market and will
participate in acquisitions should the Company find accretive
opportunities that fit its strategy.
In the UK, in conjunction with
our joint venture partner, the Company continues to evaluate
options to develop the Serenity field.
i3 is committed to conducting its
operations safely, responsibly and in accordance with industry best
practices, and we continue to advance our health and safety
policies and procedures as we integrate additional production
assets. The Company's commitment to high ESG standards is
central to maintaining its social licence to operate, creating
value for all stakeholders, and ensuring long-term commercial
success. Following the publication of our maiden annual
sustainability report and establishing a baseline for our business
we have continued efforts to reduce the carbon intensity of i3's
operations through methane emission reductions and electrification
projects, and these efforts will continue and expand as we evaluate
additional initiatives to meet our net-zero targets.
Financial Discipline
The Board and Management are focused
on delivering consistent value to shareholders. i3 is committed to
its total shareholder return model which aligns production and
asset value growth with dividend returns and protects this
commitment through a conservative hedging programme. The Company
has and continues to keep a substantial portion of its production
hedged through risk management contracts to manage commodity price
risk, with free cash post dividend payments deployed to either
acquire production assets or develop our proven undeveloped (PUD)
and 2P inventory dependent on which option delivers higher returns
in the prevailing commodity price environment. As i3 continues to
grow its portfolio, a proportion of all incremental production will
be hedged in order to secure future cash flows, and the Company
will remain commercial in monetising assets when third-party
interest warrants consideration.
As part of our total shareholder
return model, we commenced paying a dividend in 2021 and have grown
dividends paid from £3.4 million in 2021, to £15.4 million in 2022
and 2023.
Operational flexibility and the
short-term nature of forward capital commitments in Canada mean
that the Company has considerable optionality to rapidly expand or
reduce its capital programme to prudently manage its balance sheet
to ensure risks are appropriately mitigated in volatile commodity
markets.
Governance
The Board recognises its
responsibility for the proper management of the Company and is
committed to maintaining a high standard of corporate governance
commensurate with the size and nature of the Company and the
interests of its shareholders. The Quoted Companies Alliance has
published a set of corporate governance guidelines for AIM
companies, which include a code of best practice comprising
principles intended as a minimum standard, and recommendations for
reporting corporate governance matters. The Directors comply with
the QCA Corporate Governance Guidelines for Smaller Quoted
Companies so far as it is practicable having regard to the size and
current stage of development of the Company. The Board currently
comprises two Executive Directors (being the Chief Executive
Officer and the President Canada) and four Non-Executive Directors
(including the Chairperson).
The Board's decision-making process
is not dominated by any one individual or group of individuals. The
composition of the Board will be reviewed regularly and modified as
appropriate in response to the Company's changing requirements. The
Board has established an Audit and Risk Committee, Corporate
Governance Committee, Health, Safety, Environment and Security
Committee, Reserves Committee, and Remuneration Committee to ensure
proper adherence to sound governance and decision
making.
Environmental Stewardship
i3 is fortunate to operate in the
UK and Canada which have some of the world's most stringent and
rigorous environmental laws and regulations and the Company strives
to meet or exceed all local, provincial or national operational,
environmental, reporting and compliance obligations and abandonment
and reclamation requirements. The Company
is committed to conducting its operations responsibly and in
accordance with industry best practices. i3's commitment to high
ESG standards is central to maintaining our social licence to
operate, creating value for all stakeholders, and ensuring
long-term commercial success. i3 recognises the safety and
well-being of our employees, local communities, and other key
stakeholders as a priority, and considers climate change as having
a material impact on our business.
To demonstrate the Company's
commitment to long-term sustainable resource development,
environmental stewardship and the well-being of employees and the
communities in which i3 operates, i3 publishes annually an ESG
report. The ESG report summarises the Company's ESG performance and
key initiatives and its goals and ambitions with respect to
greenhouse gas emission reductions, environmental stewardship,
social policies and governance.
As part of its continued effort to
reducing its Scope 1 and Scope 2 carbon emissions, in 2023 i3
replaced pneumatic pumps with solar-driven alternatives at 295
locations, which are expected to reduce methane emissions by an
estimated 8,971t CO2e. Additionally, the electrification of 25
pumpjack engines in Carmangay and Retlaw are expected to further
reduce emissions by an estimated 4,268 tCO2e per year. In a further
move towards greenhouse gas reduction, the Company replaced natural
gas-fired heaters with electric heaters at one of its Medicine
River locations. In collaboration with an offset operator, i3
implemented an Alternative Fugitive Emissions Management Programme
(ALT FEMP) at its locations in 2023, which images methane emissions
from the air and is anticipated to contribute to a substantial
reduction in fugitive emissions by over 50% compared to the
previous year. Concurrently, i3 implemented two compressor
consolidation projects which are expected to achieve annual
emission reductions of 2,728 tCO2e and 681 tCO2e,
respectively. In our Simonette field two
natural gas generators were electrified, resulting in an annual
emission reduction of 907 tCO2e. i3 converted a number of
high-pressure natural gas driven pneumatics to compressed
instrument air reducing methane emissions by over 660 tCO2e in
2023.These endeavours exemplify i3 Energy's dedication to
environmental sustainability and continual progress in ESG
practices. In January 2024, the Company was also pleased to publish
its 2022 ESG Report.
i3 takes its abandonment and
reclamation obligations very seriously and in 2023 it abandoned a total of 46 wells and decommissioned 16
well sites, as well as 26 pipelines representing approximately 12%
of its operated non-producing well stock. In 2024, and in
accordance with the Alberta Energy
Regulator's decommissioning guidance, i3 expects to deliver a
similar number of abandonment operations as achieved in
2023.
Looking ahead
The Company looks forward to 2024 and beyond in
a much strengthened financial position, with a strong balance
sheet, and growing relationships with providers of debt capital for
growth. Our core asset base continues to perform consistently well
and will underpin the development of the significant undeveloped
reserve and resource potential in our portfolio. The Company looks
forward to executing a successful drilling programme in Canada in
2024, growing production and continuing to return cash to
shareholders to deliver on its total shareholder return
model.
Looking beyond 2024, we have a high quality and
diverse asset portfolio in Canada with immense unrealized upside
potential. We will continue to focus our efforts on advancing these
key assets to efficient and rapid commercialisation and value
crystallisation. We will selectively target key assets and wells to
optimise these developments and conversion of resources to reserves
bookings. We are fortunate that we operate the vast majority of our
producing assets and drilling inventory which allows us to control
the timing and pace of development. We also own high working
interests in our operated assets which also provides us with
optionality on how to finance these developments.
Whilst we have an extensive inventory of high
quality, high return drilling locations, we recognise that
commodity price volatility and resulting market dislocations will
provide opportunities to grow through low-cost mergers and
acquisitions and we remain vigilant to take advantage of these
opportunities as and when they arise.
We are committed to operating in a safe and
socially responsible manner and the safety of our employees and
contractors is of primary importance. We are proud of our
green-house gas emission reduction initiatives and achievements in
2023 and we will endeavour to deliver year-on-year reductions in
the carbon intensity of our production.
As always, we extend gratitude to our
shareholders for their ongoing support and to our employees for
their relentless commitment to making i3 a success. Though we
operate within a macro environment that is beyond our control, we
believe we are doing the right things to create a very valuable
business that can weather good times and bad.
i3 will continue to manage our Canadian and UK
businesses in a manner that maximizes value creation and
shareholder returns.
"John
Festival"
John Festival
Non-Executive Chairperson
26 April 2024
|
"Majid
Shafiq"
Majid Shafiq
Chief Executive Officer
26 April 2024
|
Consolidated Statement of Comprehensive
Income
|
Notes
|
Year Ended 31 December
2023
|
Year
Ended 31 December 2022
|
|
|
|
£'000
|
£'000
|
|
Revenue
|
6
|
146,314
|
208,436
|
Production costs
|
|
(71,348)
|
(76,418)
|
Gain / (loss) on risk management
contracts
|
18
|
2,048
|
(18,990)
|
Depreciation and
depletion
|
12
|
(38,232)
|
(34,339)
|
Gross profit
|
|
38,782
|
78,689
|
Administrative expenses
|
7
|
(9,861)
|
(15,038)
|
Loss on asset
dispositions
|
|
-
|
(9)
|
Operating profit
|
|
28,921
|
63,642
|
Finance income
|
|
640
|
-
|
Finance costs
|
8
|
(8,663)
|
(7,865)
|
Profit before tax
|
|
20,898
|
55,777
|
Tax charge
|
9
|
(5,751)
|
(13,826)
|
Profit for the year
|
|
15,147
|
41,951
|
|
|
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
Items that may be reclassified subsequently to profit or
loss:
|
|
|
|
Foreign exchange differences on
translation of foreign operations
|
|
(4,222)
|
6,688
|
Other comprehensive (loss) / income for the year, net of
tax
|
|
(4,222)
|
6,688
|
|
|
|
|
Total comprehensive income for the year
|
|
10,925
|
48,639
|
|
|
|
|
Earnings per share
|
|
Pence
|
Pence
|
Earnings per share -
basic
|
11
|
1.26
|
3.60
|
Earnings per share -
diluted
|
11
|
1.24
|
3.43
|
|
|
|
|
All operations are
continuing.
The accompanying notes form an
integral part of these financial statements.
Consolidated Statement of Financial
Position
Assets
|
Notes
|
31 December
2023
|
31
December 2022
|
Non-current
assets
|
|
£'000
|
£'000
|
Property, plant &
equipment
|
12
|
205,667
|
236,465
|
Exploration and evaluation
assets
|
13
|
63,133
|
62,060
|
Other non-current assets
|
|
-
|
74
|
Total non-current assets
|
|
268,800
|
298,599
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
|
23,507
|
16,560
|
Trade and other
receivables
|
14
|
20,534
|
34,843
|
Income taxes receivable
|
|
205
|
-
|
Risk management
contracts
|
18
|
1,701
|
1,111
|
Inventory
|
|
1,847
|
2,099
|
Total current assets
|
|
47,794
|
54,613
|
Current
liabilities
|
|
|
|
Trade and other payables
|
15
|
(27,640)
|
(45,973)
|
Income taxes payable
|
|
-
|
(9,873)
|
Risk management
contracts
|
18
|
(136)
|
(381)
|
Borrowings and leases
|
16
|
(14,001)
|
(27,241)
|
Decommissioning
provision
|
17
|
(3,244)
|
(3,190)
|
Total current liabilities
|
|
(45,021)
|
(86,658)
|
Net current assets / (liabilities)
|
|
2,773
|
(32,045)
|
Non-current
liabilities
|
|
|
|
Borrowings and leases
|
16
|
(20,568)
|
-
|
Decommissioning
provision
|
17
|
(78,109)
|
(90,141)
|
Deferred tax liability
|
9
|
(9,817)
|
(11,667)
|
Other non-current
liabilities
|
|
(84)
|
-
|
Total non-current liabilities
|
|
(108,578)
|
(101,808)
|
|
|
|
|
Net assets
|
|
162,995
|
164,746
|
Capital and
reserves
|
|
|
|
Ordinary shares
|
19
|
120
|
119
|
Deferred shares
|
19
|
50
|
50
|
Share premium
|
19
|
-
|
48,646
|
Share-based payment
reserve
|
20
|
6,892
|
6,311
|
Warrants - LNs
|
16
|
-
|
2,045
|
Foreign currency translation
reserve
|
|
3,830
|
8,052
|
Retained earnings
|
|
152,103
|
99,523
|
Shareholders' funds
|
|
162,995
|
164,746
|
The accompanying notes form an
integral part of these financial statements.
The consolidated financial
statements of i3 Energy plc, company number 10699593, were approved
by the Board of Directors and authorised for issue on 26 April
2024. Signed on behalf of the Board of Directors by:
"signed"
Majid Shafiq, Director
Consolidated Statement of Changes in
Equity
|
|
Ordinary
shares
|
Share
premium
|
Deferred
shares
|
Share-based payment
reserve
|
Warrants -
LN
|
Foreign currency translation
reserve
|
Retained
earnings
|
Total
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Balance at 31 December 2021
|
|
113
|
44,203
|
50
|
9,102
|
2,045
|
1,364
|
81,289
|
138,166
|
Total comprehensive income for the
year
|
|
-
|
-
|
-
|
-
|
-
|
6,688
|
41,951
|
48,639
|
Transactions with
owners:
|
|
|
|
|
|
|
|
|
|
Exercise of options
|
20
|
6
|
4,443
|
-
|
(3,883)
|
-
|
-
|
(6,324)
|
(5,758)
|
Share-based payment
expense
|
20
|
-
|
-
|
-
|
1,092
|
-
|
-
|
-
|
1,092
|
Dividends declared in
2022
|
19
|
-
|
-
|
-
|
-
|
-
|
-
|
(17,393)
|
(17,393)
|
Balance at 31 December 2022
|
|
119
|
48,646
|
50
|
6,311
|
2,045
|
8,052
|
99,523
|
164,746
|
Total comprehensive income for the
year
|
|
-
|
-
|
-
|
-
|
-
|
(4,222)
|
15,147
|
10,925
|
Capital reduction
|
|
-
|
(50,731)
|
-
|
-
|
-
|
-
|
50,731
|
-
|
Transactions with
owners:
|
|
|
|
|
|
|
|
|
|
Exercise of options
|
20
|
-
|
40
|
-
|
-
|
-
|
-
|
-
|
40
|
Exercise of warrants
|
20
|
1
|
2,045
|
-
|
-
|
(2,045)
|
-
|
-
|
1
|
Share-based payment
expense
|
20
|
-
|
-
|
-
|
581
|
-
|
-
|
-
|
581
|
Dividends declared in
2023
|
19
|
-
|
-
|
-
|
-
|
-
|
-
|
(13,298)
|
(13,298)
|
Balance at 31 December 2023
|
|
120
|
-
|
50
|
6,892
|
-
|
3,830
|
152,103
|
162,995
|
The accompanying notes form an
integral part of these financial statements.
The following describes the nature
and purpose of each reserve within equity:
Reserve
|
Description and purpose
|
Ordinary shares
|
Represents the nominal value of
shares issued
|
Share premium account
|
Amount subscribed for share capital
in excess of nominal value
|
Deferred shares
|
Represents the nominal value of
shares issued, the shares have full capital distribution (including
on wind up) rights and do not confer any voting or dividend rights,
or any of redemption
|
Share-based payment
reserve
|
Represents the accumulated balance
of share-based payment charges recognised in respect of share
options granted by the Company less transfers to retained deficit
in respect of options exercised or cancelled/lapsed
|
Warrants - LNs
|
Represents the accumulated balance
of share-based payment charges recognised in respect of warrants
granted by the Company in respect to warrants granted to the loan
note holders
|
Foreign currency translation
reserve
|
Exchange differences arising on
consolidating the assets and liabilities of the Group's non-Pound
Sterling functional currency operations (including comparatives)
recognised through the Consolidated Statement of Other
Comprehensive Income.
|
Retained earnings
|
Cumulative net gains and losses
recognised in the Consolidated Statement of Comprehensive
Income
|
Note: The issued share
capital comprises of both ordinary and deferred shares and the
total nominal value exceeds the required minimum issued capital
of £50,000.
Consolidated Statement of Cash
Flow
|
Notes
|
Year ended 31 December
2023
|
Year
ended 31 December 2022
*
Restated
|
OPERATING
ACTIVITIES
|
|
£'000
|
£'000
|
Profit before tax
|
|
20,898
|
55,777
|
Adjustments for:
|
|
|
|
Depreciation and
depletion
|
12
|
38,232
|
34,339
|
Loss on asset
dispositions
|
|
-
|
9
|
Finance costs
|
8
|
8,663
|
7,865
|
Unrealised (gain) on risk
management contracts
|
18
|
(860)
|
(858)
|
Non-cash other income
|
|
-
|
(215)
|
Unrealised FX loss
|
7
|
15
|
110
|
Share-based payments expense -
employees (including NEDs)
|
7
|
581
|
1,092
|
Expenditure on decommissioning oil
and gas assets
|
17
|
(3,722)
|
(2,190)
|
Current tax expense
|
9
|
(7,423)
|
(10,002)
|
Changes in non-cash working capital
- operating activities
|
4
|
(6,776)
|
14,728
|
Net cash from operating activities
|
|
49,608
|
100,655
|
INVESTING
ACTIVITIES
|
|
|
|
Acquisitions
|
|
(133)
|
(531)
|
Additions to property, plant &
equipment
|
12
|
(23,155)
|
(74,445)
|
Disposal of property, plant &
equipment
|
|
381
|
621
|
Additions to exploration and
evaluation assets
|
13
|
(1,281)
|
(12,327)
|
Tax credit for R&D
expenditure
|
9
|
184
|
-
|
Changes in non-cash working capital
- investing activities
|
4
|
(5,232)
|
8,556
|
Net cash used in investing activities
|
|
(29,236)
|
(78,126)
|
FINANCING
ACTIVITIES
|
|
|
|
Exercise of warrants and
options
|
|
42
|
635
|
Employee tax on exercised share
options
|
|
-
|
(6,432)
|
Repayment of H1-2019 LN
facility
|
16
|
(28,856)
|
-
|
Issuance of debt
facility
|
16
|
44,481
|
-
|
Payment of deferred finance
costs
|
16
|
(2,039)
|
-
|
Principal payments on debt
facility
|
16
|
(8,636)
|
-
|
Interest and other finance charges
paid
|
8
|
(3,513)
|
(2,330)
|
Lease payments
|
16
|
-
|
(74)
|
Dividends declared
|
19
|
(13,298)
|
(17,393)
|
Changes in non-cash working capital
- financing activities
|
4
|
(1,758)
|
2,040
|
Net cash used in financing activities
|
|
(13,577)
|
(23,554)
|
Effect of exchange rate changes on
cash
|
|
152
|
2,250
|
Net Increase in cash and cash equivalents
|
|
6,947
|
1,225
|
Cash and cash equivalents,
beginning of year
|
|
16,560
|
15,335
|
CASH AND CASH EQUIVALENTS, END OF YEAR
|
|
23,507
|
16,560
|
* The classification of certain
comparative lines has been restated - see Note
2. Additional cash flow
information is provided in note 4. The accompanying notes form an
integral part of these financial statements.
Notes To the Group Financial
Statements
1
General information
i3 Energy plc ("the Company") is a
Public Company, limited by shares, registered in England and Wales
under the Companies Act 2006 with registered number 10699593. The
Company's ordinary shares are traded on the Toronto Stock Exchange
and the AIM Market operated by the London Stock Exchange. The
address of the Company's registered office is New Kings Court,
Tollgate, Chandler's Ford, Eastleigh, Hampshire, SO53
3LG.
The Company and its subsidiaries (together, "the
Group") principal activities consist of oil and gas production in
Western Canadian Sedimentary Basin ("WCSB") and of the appraisal of
oil and gas assets on the UK Continental Shelf ("UKCS").
2 Basis of
preparation
The financial statements of i3 Energy plc have
been prepared in accordance with UK-adopted international
accounting standards in accordance with the requirements of the
Companies Act 2006 and in accordance with the requirements of the
AIM rules.
The consolidated financial statements have been
prepared under the historical cost convention, as modified by the
financial assets and financial liabilities (including derivative
instruments) at fair value through profit or loss.
The financial information is presented in Pounds
Sterling (£, GBP), which is the Company's functional currency, and
rounded to the nearest thousand unless
otherwise stated. The functional currency of the Company's UK
subsidiary, i3 Energy North Sea Limited, is GBP, and the functional
currency of its Canadian subsidiary, i3 Energy Canada Limited, is
CAD. A summary of period-average and
period-end exchange rates is presented in the table
below:
|
Year ended 31 December
2023
|
Year
ended 31 December 2022
|
Period-average GBP:CAD exchange
rate
|
1.6778
|
1.6073
|
Period-end GBP:CAD exchange
rate
|
1.6808
|
1.6283
|
The principal accounting policies applied in the
preparation of these consolidated financial statements are set out
below. These policies have been consistently applied unless
otherwise stated.
Basis of Consolidation
The consolidated financial statements
consolidate the audited financial statements of i3 Energy plc and
the financial statements of its subsidiary undertakings made up to
31 December 2023.
Subsidiaries are entities over which the Group
has control. The Group controls an entity when the Group is exposed
to, or has rights to, variable returns from its involvement with
the entity and has the ability to affect those returns through its
power over the entity. Subsidiaries are fully consolidated from the
date on which control is transferred to the Group. They are
de-consolidated from the date that control ceases.
When necessary, adjustments are made to the
financial statements of subsidiaries to bring their accounting
policies into line with the Group's accounting policies. All
intra-group assets and liabilities, equity, income, expenses, and
cash flows relating to transactions between members of the Group
are eliminated in full on consolidation.
Going concern
The Directors have, at the time of approving the
financial statements, a reasonable expectation that the Company and
the Group have adequate resources to continue in operational
existence for the foreseeable future. Thus, they continue to adopt
the going concern basis of accounting in preparing the financial
statements. The use of this basis of accounting takes into
consideration the Group's current and forecast financing position,
additional details of which are provided in the going concern
section of the Directors' Report.
Reclassification of comparative information
Following an increase in decommissioning
expenditure in 2023, first payments of Canadian corporate income
tax, and a review of the financial statements, the Group has
elected to change the presentation and classification of certain
items within the Consolidated Statement of Financial Position and
the Consolidated Statement of Cash Flow. There has been no change
to the reported total comprehensive income, net assets or net
current assets, or total increase in cash and cash equivalents for
the year ended 31 December 2022. These reclassification changes are
as follows:
· Income taxes
payable of £9,873 thousand were previously presented within Trade
and other payables. This liability is now presented as a separate
line item of the Consolidated Statement of Financial Position. This
reclassification had no impact on total current liabilities or net
current liabilities.
· Expenditure on
decommissioning oil and gas assets of £437 thousand has been
reclassified from investing activities to operating activities
within the Consolidated Statement of Cash Flow.
· Non-cash changes
in working capital are now presented separately in each of the cash
from or used in operating activities, investing activities, and
financing activities sections of the Consolidated Statement of Cash
Flow. This had no impact on the respective subtotals within each
section. Further cash flow information is provided in note 4.
3 Significant
accounting policies
Financial instruments
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand
and cash held on current account or on short-term deposits at
variable interest rates with original maturity periods of up to
three months. Any interest earned is accrued monthly and classified
as interest income within finance income.
Trade and other receivables
Trade and other receivables are initially
recognised at fair value when related amounts are invoiced then
carried at this amount less any impairment of these receivables
using the expected credit loss model. A provision for impairment is
made when there is objective evidence (such as the probability of
insolvency or significant financial difficulties of the debtor)
that the Company will not be able to collect all of the amounts due
under the original terms of the invoice. The carrying amount of
receivables is reduced through use of an allowance account.
Impaired debts are derecognised when they are assessed as
uncollectible.
Trade and other payables
These financial liabilities are all non-interest
bearing and are initially recognised at the fair value of the
consideration payable.
Loan Notes
These financial liabilities are all interest
bearing and are initially recognised at amortised cost and include
the transaction costs directly related to the issuance. The
transaction costs are amortised using the effective interest rate
method over the life of the Loan Notes.
Financial liabilities at Fair Value Through
Profit or Loss ("FVTPL")
Financial liabilities at FVTPL comprise of the
Group's risk management contracts and non-current accounts payable.
Financial liabilities are classified as at FVTPL when the financial
liability is (i) contingent consideration that may be paid by an
acquirer as part of a business combination to which IFRS 3 applies,
(ii) held for trading, or (iii) it is designated as at
FVTPL.
A financial liability is classified as held for
trading if:
· it has been
incurred principally for the purpose of repurchasing it in the near
term; or
· on initial
recognition it is part of a portfolio of identified financial
instruments that the Company manages together and has a recent
actual pattern of short-term profit-taking; or
· it is a
derivative that is not designated and effective as a hedging
instrument.
A financial liability other than a financial
liability held for trading or contingent consideration that may be
paid by an acquirer as part of a business combination may be
designated as at FVTPL upon initial recognition if:
· such designation
eliminates or significantly reduces a measurement or recognition
inconsistency that would otherwise arise; or
· the financial
liability forms part of a group of financial assets or financial
liabilities or both, which is managed, and its performance is
evaluated on a fair value basis, in accordance with the Company's
documented risk management or investment strategy, and information
about the grouping is provided internally on that basis;
or
· it forms part of
a contract containing one or more embedded derivatives, and IFRS
Financial Instruments: Recognition and Measurement permits the
entire combined contract (asset or liability) to be designated as
at FVTPL.
Financial liabilities at FVTPL are stated at
fair value, with any gains or losses arising on re-measurement
recognised in profit or loss. The net gain or loss recognised in
profit or loss incorporates any interest paid on the financial
liability and is included in the 'other gains and losses' line item
in the consolidated statement of comprehensive income.
Risk management contracts
Financial risk management contracts are measured
and recognised in accordance with the Group's accounting policy for
financial liabilities at FVTPL as described above. Physical risk
management contracts represent physical delivery sales contracts in
the ordinary course of business and are therefore not recorded at
fair value in the consolidated financial statements. Settlements on
these physical risk management contracts are recognised within
realised gains or losses on risk management contracts at the time
of settlement.
Embedded derivatives
Derivatives embedded in other financial
instruments or other host contracts are treated as separate
derivatives when their risks and characteristics are not closely
related to those of the host contracts and the host contracts are
not measured at FVTPL.
Leases
Lease liabilities are initially measured at the
present value of lease payments unpaid at the commencement date.
Lease payments are discounted using the incremental borrowing rate
(being the rate that the lessee would have to pay to borrow the
funds necessary to obtain an asset of similar value in a similar
economic environment with similar terms and conditions) unless the
rate implicit in the lease is available. The Group currently uses
the rate implicit in the lease as the discount rate for all leases.
For the purposes of measuring the lease liability, lease payments
comprise fixed payments.
Right-of-use assets are measured at cost, which
comprises the initial measurement of the lease liability, plus any
lease payments made prior to lease commencement, initial direct
costs incurred and the estimated cost of restoration or
decommissioning, less any lease incentives received. The
right-of-use assets is depreciated on a straight-line basis over
their expected useful lives. Right-of-use assets are subject to an
impairment test if events and circumstances indicate that the
carrying value may exceed the recoverable amount.
Lease repayments made are allocated to capital
repayment and interest so as to produce a constant periodic rate of
interest on the remaining lease liability balance.
Right-of-use assets are presented within
property, plant, and equipment. Lease liabilities are presented
within borrowings and leases. In the cash flow statement, lease
repayments (both the principal and interest portion) are presented
within cash used in financing activities, except for payments for
leases of short-term and low-value assets and variable lease
payments, which are presented within cash flows from operating
activities.
Leases of low-value items (such as office
equipment) and short-term leases (where the lease term is 12 months
or less) are expensed on a straight-line basis to the Consolidated
Statement of Comprehensive Income.
Inventory
Inventories comprise oil and gas in tanks and
field parts and supplies, all of which are stated at the lower of
production cost (including royalties, depletion and amortisation of
plant, property, and equipment), and net realisable value. Net
realisable value is the estimated selling price in the ordinary
course of business less marketing costs. The cost of inventory is
recognised in production costs and the royalty portion in royalties
in the period in which the related revenue is
recognised.
Equity
Equity instruments issued by the Company are
usually recorded at the proceeds received, net of direct issue
costs, and allocated between called up share capital and share
premium accounts as appropriate.
Foreign currency
Transactions denominated in currencies other
than functional currency are translated at the exchange rate ruling
at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are re-translated at the rate of
exchange ruling at the balance sheet date. All differences that
arise are recorded in the consolidated statement of comprehensive
income. The functional currency of the Company is GBP, and the
Group results and financial position are presented in
GBP.
For the purpose of presenting consolidated
financial statements, the assets and liabilities of the Group's
foreign operations are translated at exchange rates prevailing on
the reporting date. Income and expense items are translated at the
average exchange rates for the period, unless exchange rates
fluctuate significantly during that period, in which case the
exchange rates at the date of transactions are used. Exchange
differences arising, if any, are recognised in other comprehensive
income and accumulated in a separate component of equity
(attributed to non‑controlling interests as
appropriate).
Taxation
Tax is recognised in profit or loss, except to
the extent that it relates to items recognised in other
comprehensive income or directly in equity. In this case, the tax
is also recognised in other comprehensive income or directly in
equity respectively.
Deferred tax is accounted for using the balance
sheet liability method in respect of temporary differences arising
from differences between the carrying amount of assets and
liabilities in the financial statements and the corresponding tax
bases used in the computation of taxable profit. However, deferred
tax liabilities are not recognised if they arise from the initial
recognition of goodwill; deferred tax is not accounted for if it
arises from initial recognition of an asset or liability in a
transaction other than a business combination that at the time of
the transaction affects neither accounting nor taxable profit or
loss.
In principle, deferred tax liabilities are
recognised for all taxable temporary differences and deferred tax
assets are recognised to the extent that it is probable that
taxable profit will be available against which deductible temporary
differences can be utilised.
Deferred tax liabilities are recognised for
taxable temporary differences arising on investments in
subsidiaries and associates, and interests in joint ventures,
except where the Company is able to control the reversal of the
temporary difference and it is probable that the temporary
difference will not reverse in the foreseeable future.
Deferred tax assets and liabilities
are offset when there is a legally enforceable right to offset
current tax assets against current tax liabilities and when the
deferred tax assets and liabilities relate to taxes levied by the
same taxation authority on either the same taxable entity or
different taxable entities where there is an intention to settle
the balances on a net basis.
Deferred tax is calculated at the
tax rates that are enacted or substantively enacted. Deferred tax
assets and liabilities are not discounted.
Intangible assets - Exploration and
evaluation expenditures (E&E)
Drilling costs and intangible
licences
The Group applies the successful efforts method
of accounting for oil and gas assets, having regard to the
requirements of IFRS 6 Exploration for and Evaluation of Mineral
Resources. Costs incurred prior to obtaining the legal
rights to explore an area are expensed immediately to the
consolidated statement of comprehensive income.
Expenditure incurred on the acquisition of a
licence interest is initially capitalised within intangible assets
on a field-by-field basis. Costs are held, unamortised, within
Petroleum mineral leases until such time as the exploration phase
of the field area is complete or commercial reserves have been
discovered. The cost of the licence is subsequently transferred
into property, plant and equipment and depreciated over its
estimated useful economic life.
Exploration expenditure incurred in the process
of determining exploration targets is capitalised initially within
intangible assets as drilling costs. Drilling costs are initially
capitalised on a well-by-well basis until the success or otherwise
has been established. Drilling costs are written off on completion
of a well unless the results indicate that hydrocarbon reserves
exist and there is a reasonable prospect that these reserves are
commercially viable. Drilling costs are subsequently transferred
into 'Drilling expenditure' within property, plant and equipment
and depreciated over their estimated useful economic
life.
Impairment
The Group assesses at each reporting
date whether there is an indication that an asset may be impaired.
This includes consideration of the IFRS 6 impairment indicators for
any intangible exploration and evaluation expenditure capitalised
as intangible assets. Examples of indicators of impairment include
whether:
(a) the period for which the entity
has the right to explore in the specific area has expired during
the period or will expire in the near future and is not expected to
be renewed.
(b) substantive expenditure on
further exploration for and evaluation of mineral resources in the
specific area is neither budgeted nor planned.
(c) exploration for and evaluation
of mineral resources in the specific area have not led to the
discovery of commercially viable quantities of mineral resources
and the entity has decided to discontinue such activities in the
specific area.
(d) sufficient data exist to
indicate that, although a development in the specific area is
likely to proceed, the carrying amount of the exploration and
evaluation asset is unlikely to be recovered in full from
successful development or by sale.
If any such indication exists, or
when annual impairment testing for an asset is required, the Group
makes an estimate of the asset's recoverable amount, which is the
higher of its fair value less costs to sell and its value in use.
Any impairment identified is recorded in the consolidated statement
of comprehensive income.
Development expenditure
When the technical feasibility and commercial
viability of extracting a mineral resource are demonstrable, the
net capitalised costs incurred to date in respect of those reserves
are reclassified as oil and gas assets within property, plant and
equipment. This typically occurs when commercial reserves have been
found and a field development plan has been approved. The costs are
subsequently depreciated from the commencement of production as
described in the accounting policy for property, plant and
equipment.
Property, plant and equipment
Oil and gas assets - cost
Oil and gas assets are accumulated generally on
a cost generating unit (CGU) basis and represent the cost of
developing the commercial reserves discovered and bringing them
into production, together with the intangible exploration and
evaluation asset expenditures incurred in finding commercial
reserves transferred from intangible exploration and evaluation
assets. The cost of oil and gas properties also includes the cost
of directly attributable overheads, borrowing costs capitalised and
the cost of recognising provision for future restoration and
decommissioning.
Oil and gas assets - depreciation and
depletion
Oil properties, including certain related
pipelines, are depreciated using a unit-of-production method. The
cost of producing wells is amortised over proved plus probable
reserves. Licence acquisition, common facilities and future
decommissioning costs are amortised over total proved plus probable
reserves. The unit-of-production rate for the depreciation of
common facilities takes into account expenditures incurred to date,
together with estimated future capital expenditure expected to be
incurred relating to as yet undeveloped reserves expected to be
processed through these common facilities.
Oil and gas assets - impairment
An impairment test is performed in accordance
with IAS 16 Property, Plant and
Equipment whenever events and circumstances arising during
the development or production phase indicate that the carrying
value of an oil and gas property may exceed its recoverable
amount.
The carrying value is compared against the
expected recoverable amount of the asset, generally by reference to
the present value of the future net cash flows expected to be
derived from production of commercial reserves. The cash-generating
unit applied for impairment test purposes is generally the field,
except that a number of field interests may be grouped as a single
cash-generating unit where the cash inflows of each field are
interdependent.
Any impairment identified is charged to the
statement of comprehensive income. Where conditions giving rise to
impairment subsequently being reversed, the effect of the
impairment charge is also reversed as a credit to the statement of
comprehensive income, net of any depletion that would have been
charged since the impairment.
Non-oil and gas assets
Property, plant and equipment is stated at cost
less accumulated depreciation and any accumulated impairment
losses. Depreciation is provided on all property, plant, and
equipment to write off the cost less estimated residual value of
each asset over its expected useful economic life on a
straight-line basis at the following annual rates:
· Office equipment
- 20% or straight line over the life of the equipment, whichever is
the lesser
· Field equipment
- between 5% and 25%
All assets are subject to annual impairment
reviews where indicators of impairment are present.
Property, plant, and equipment - disposals
An item of property, plant and equipment is
derecognised upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset. The gain or
loss arising on the disposal or retirement of an asset is
determined as the difference between the sales proceeds and the
carrying amount of the asset and is recognised in profit or
loss.
Decommissioning provision
Liabilities for decommissioning costs are
recognised when the Group has an obligation to plug and abandon a
well, dismantle and remove a facility or an item of plant and to
restore the site on which it is located, and when a reliable
estimate of that liability can be made. Where an obligation exists
for a new facility or item of plant, such as oil production or
transportation facilities, this liability will be recognised on
construction or installation. Similarly, where an obligation exists
for a well, this liability is recognised when it is drilled. An
obligation for decommissioning may also crystallise during the
period of operation of a well, facility or item of plant through a
change in legislation or through a decision to terminate
operations; an obligation may also arise in cases where an asset
has been sold but the subsequent owner is no longer able to fulfil
its decommissioning obligations, for example due to bankruptcy. The
amount recognised is the present value of the estimated future
expenditure determined in accordance with local conditions and
requirements. The provision for the costs of decommissioning wells,
production facilities and pipelines at the end of their economic
lives is estimated using existing technology, at future prices,
depending on the expected timing of the activity, and discounted
using a risk-free rate.
An amount equivalent to the decommissioning
provision is recognised as part of the corresponding intangible
asset (in the case of an exploration or appraisal well) or
property, plant, and equipment. The decommissioning portion of the
property, plant and equipment is subsequently depreciated at the
same rate as the rest of the asset. Other than the unwinding of
discount on or utilisation of the provision, any change in the
present value of the estimated expenditure is reflected as an
adjustment to the provision and the corresponding asset where that
asset is generating or is expected to generate future economic
benefits. If government assistance is obtained to reduce the
liability, the carrying value of the decommissioning provision and
the corresponding E&E or PP&E asset are reduced by the
estimated amount of the extinguished liability.
Joint operations
The majority of the Group's exploration and
production activities are conducted jointly with others and,
accordingly, these consolidated financial statements reflect only
the Group's interest in such activities.
Revenue
Revenue from contracts with customers is
recognised, net of royalties, when or as the Group satisfies a
performance obligation by transferring control of a promised good
or service to a customer. The transfer of control of oil, natural
gas, natural gas liquids and petroleum, and other items usually
coincides with title passing to the customer and the customer
taking physical possession. The Group principally satisfies its
performance obligations at a point in time; the amounts of revenue
recognised relating to performance obligations satisfied over time
are not significant.
When, or as, a performance obligation is
satisfied, the Group recognises as revenue the amount of the
transaction price that is allocated to that performance obligation.
The transaction price is the amount of consideration to which the
Group expects to be entitled. The transaction price is allocated to
the performance obligations in the contract based on standalone
selling prices of the goods or services promised.
Contracts for the sale of commodities are
typically priced by reference to quoted prices. Revenue from term
commodity contracts is recognised based on the contractual pricing
provisions for each delivery. Certain of these contracts have
pricing terms based on prices at a point in time after delivery has
been made. Revenue from such contracts is initially recognised
based on relevant prices at the time of delivery and subsequently
adjusted as appropriate. All revenue from these contracts, both
that recognised at the time of delivery and that from post-delivery
price adjustments, is disclosed as revenue from contracts with
customers.
Royalty income is recognised as it accrues in
accordance with the terms of the overriding royalty
agreements.
Processing income is recognised at the time the
services are rendered.
Finance income
Finance income consists of bank interest on cash
and cash equivalents which is recognised as accruing on a
straight-line basis, over the period of the deposit.
Share-based payments
Equity-settled share-based payments to employees
and others providing similar services are measured at the fair
value of the equity instruments at the grant date. The fair value
excludes the effect of non-market-based vesting
conditions.
The fair value determined at the grant date of
the equity-settled share-based payments is expensed on a
straight-line basis over the vesting period, based on the Company's
estimate of equity instruments that will eventually vest. At each
balance sheet date, the Company revises its estimate of the number
of equity instruments expected to vest as a result of the effect of
non-market-based vesting conditions. The impact of the revision of
the original estimates, if any, is recognised in profit or loss
such that the cumulative expense reflects the revised estimate,
with a corresponding adjustment to equity reserves. When
non-employee share options or warrants are exercised, the initial
fair value ascribed to the instruments and recorded as a reserve is
reclassified to share premium.
Business combinations
Acquisitions of business are accounted for using the
acquisition method. The consideration transferred in a business
combination is measured at fair value, which is calculated as the
sum of the acquisition‑date fair values of
assets transferred by the Group, liabilities incurred by the Group
to the former owners of the acquiree and the equity interest issued
by the Group in exchange for control of the acquiree.
Acquisition‑related costs are
recognised in profit or loss as incurred.
At the acquisition date, the identifiable assets
acquired, and the liabilities assumed are recognised at their fair
value at the acquisition date.
Goodwill is measured as the excess of the sum of the
consideration transferred, the amount of any non‑controlling interests in the acquiree, and the fair
value of the acquirers previously held equity interest in the
acquiree (if any) over the net of the acquisition‑date amounts of the identifiable assets acquired, and
the liabilities assumed. If, after reassessment, the net of the
acquisition‑date amounts of the
identifiable assets acquired and liabilities assumed exceeds the
sum of the consideration transferred, the amount of any
non‑controlling interests in the acquiree
and the fair value of the acquirers previously held interest in the
acquiree (if any), the excess is recognised immediately in profit
or loss as a bargain purchase gain.
Segmental reporting
In the opinion of the Board of Directors, being the
Chief Operating Decision Maker, the Group has one class of
business, being the exploration for, and the development and
production of, oil and gas reserves and other related activities.
The Group's primary reporting format is determined to be the
geographical segment according to the location of the oil and gas
asset, currently Canada and UK / Corporate.
Changes in accounting standards
The standards which applied for the first time
this year have been adopted and have not had a material
impact.
Standards which are in issue but not yet
effective:
At the date of authorisation of these financial
statements, the following Standards and Interpretation, which have
not yet been applied in these financial statements, were in issue
but not yet effective. The Group does not anticipate they will have
a material impact.
i. Amendments to
IFRS 10 and IAS 28 Sale or Contribution of Assets between an
Investor and its Associate or Joint Venture
ii. Amendments to IAS
1 Classification of Liabilities as Current or
Non-current
iii. Amendments to IAS 1
Non-current Liabilities with Covenants
iv. Amendments to IAS 7 and
IFRS 7 Supplier Finance Arrangements
v. Amendments to IFRS
16 Lease Liability in a Sale and Leaseback
The Group has not early adopted any of the above
standards and intends to adopt them when they become
effective.
Critical accounting judgements and key
sources of estimation uncertainty
The preparation of financial statements using
accounting policies consistent with IFRS requires the Directors to
make estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and
liabilities and the reported amounts of income and expenses. The
preparation of financial statements also requires the Directors to
exercise judgement in the process of applying the accounting
policies. Changes in estimates, assumptions and judgements can have
a significant impact on the financial statements.
Estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to accounting estimates are
recognised prospectively from the period in which the estimates are
revised.
Critical Accounting Judgements
The following are critical judgements, apart
from those involving estimations (which are presented separately
below), that the Directors have made in the process of applying the
Group's accounting policies and that have the most significant
effect on the amounts recognises in the financial
statements.
Carrying value of intangible exploration and
evaluation assets
At 31 December 2023, the Group held oil and gas
E&E assets of £63.1 million (2022: £62.1 million), note 13. The carrying value of
E&E assets are assessed for impairment when there is an
indication that the asset may be impaired. In making this judgement
the Management considers the indicators of impairment in the
intangible exploration and evaluation asset accounting policies set
out above. For its UK assets, management has considered the results
of the 31 December 2022 impairment test which used a discounted
cash flow model of a one well development of the Serenity field and
has concluded that there were no developments in 2023 which would
change the conclusions reached at the time, and therefore that no
indicators of impairment were present. A one well
development may be dependent on access to infrastructure at
neighbouring fields which may not become available to the Group,
and therefore the commercial development of Serenity is not
certain.
For its Canada assets, management has considered
the recency of the land purchases, budgeted spend, the plans to
further appraise the Clearwater play and the fact that there is no
observable data which would suggest that the carrying value of the
Clearwater play is below that of its value from successful
development or sale, and have concluded that no indicators of
impairment were present.
Carrying value of property, plant and
equipment - oil and gas assets
At 31 December 2023, the Group held oil and gas
PP&E assets of £205.6 million (2022: £236.4 million), note 12. These
assets are subject to an annual impairment assessment under IAS 36
'Impairment of assets' whereby management is first required to
consider if there are any indicators of impairment, and if so,
management is then required to estimate the asset's recoverable
amounts. The judgement over indicators of impairment considers
several internal and external factors, including changes in
estimated commercial reserves, changes in commodity prices, and
changes in expected future operating and capital expenditure,
decommissioning expenditure, the NPV10 of 2P reserves per the 31
December 2023 independent competent person's report, and increases
in cost of capital which may indicate a higher discount rate is
likely required in assessing the asset's recoverable amount. There
is also judgement in defining the Group's cash-generating units,
which is the smallest identifiable group of assets that generates
cash inflows that are largely independent of the cash inflows from
other assets or group of assets. After considering the above,
Management has concluded that there were no indicators of
impairment of oil and gas PP&E assets as at 31 December
2023.
Key sources of estimation
uncertainty
The key assumptions concerning the future, and
other key sources of estimation uncertainty at the reporting period
that may have a significant risk of causing a material adjustment
to the carrying amounts of assets and liabilities within the next
financial year, are discussed below.
Commercial hydrocarbon reserves
estimates
Commercial hydrocarbon reserves are those that
can be economically extracted from the Group's oil and gas assets.
These estimates are based on information compiled by independent
qualified persons, GLJ Ltd., as at 31 December 2023 and 31 December
2022 and consider a number of factors, including assumptions about
future commodity prices, production rates, operating costs,
exchange rates, and various geological and geophysical technical
factors to model reservoir size, quality, and extractability.
Reserve estimates may change from period to period. Changes to
reserves estimates may have a material impact on the depletion
charge for oil and gas PP&E assets, the decommissioning
provision, the carrying value of deferred tax assets, and the
Group's conclusions around indicators of impairment for oil and gas
PP&E assets. The reserve reports are available at https://i3.energy/. Highlights from the 31
December 2023 estimates are provided in note 24.
The Group estimates it commenced the year with
182 MMboe of proved plus probable reserves. A 2.0 MMboe
increase/decrease to this estimate would have decreased/increased
the oil and gas depletion charge for the period by £420 thousand,
respectively.
Decommissioning costs
At 31 December 2023 the Group had recorded a
decommissioning provision of £81.4 million (2022: £93.3 million).
In estimating the amount of the provision, Management makes various
assumptions around costs, time to abandonment and inflation rates,
which are discounted at long term government bond rates, see
note 17.
The most difficult, subjective, or complex
assumptions include the inflation rate and the discount rate, which
have been selected based on market rates published by the Bank of
Canada. A 0.5% increase/decrease in the inflation rate would have
increased/decreased the decommissioning provision by £12.4 million
and £10.5 million, respectively. A 0.5% increase/decrease in the
discount rate would have decreased/increased the decommissioning
provision by £10.3 million and £12.3 million, respectively. A 2.0%
increase/decrease in the inflation rate would have
increased/decreased the decommissioning provision by £61.6 million
and £29.8 million, respectively. A 2.0% increase/decrease in the
discount rate would have decreased/increased the decommissioning
provision by £29.2 million and £62.1 million,
respectively.
Recognition and measurement of deferred tax
assets
At 31 December 2023, the Group held deferred tax
liabilities of £9.8 million (2022: £11.7 million) which result from
temporary differences at the Group's Canadian operations. This
liability has been reduced by certain deferred tax assets from
deductible temporary differences at the Group's Canadian
operations. In accordance with IAS 12 'Income Taxes', deferred tax
assets shall be recognised for all deductible temporary differences
to the extent that it is probable that taxable profit will be
available against which the deductible temporary difference can be
utilised. The Group has generated positive cash flows and profits
from its Canadian operations in 2023 and expects to continue to do
so in the future. Management has applied judgement in determining
the extent to which it is probable that taxable profits will be
available based on estimates of future profits, which include
estimates of commercial reserves, oil, gas and NGL prices,
operating and capital expenditure, and decommissioning expenditure.
If future taxable profits differ from these estimates, the deferred
tax asset associated with these deductible temporary differences
could be derecognised and result in a deferred tax charge to the
consolidated statement of comprehensive income.
4 Cash flow
information
Included within cash and cash equivalents is
£321 thousand of restricted cash (2022: £354 thousand), which
relates to guarantees for product marketing. The debt
reconciliation is shown in note
16.
A reconciliation of the changes in non-cash
working capital balances for the year ended 31 December 2023 and
their impacts on the various sections of the consolidated statement
of cash flow is presented below:
|
Trade and other
receivables
|
Inventory
|
Trade and other
payables
|
Income taxes receivable /
(payable)
|
Other non-current
liabilities
|
Total
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Closing balance
|
20,534
|
1,847
|
(27,640)
|
205
|
(84)
|
|
Opening balance
|
34,843
|
2,099
|
(45,973)
|
(9,873)
|
-
|
|
Increase / (decrease) in
cash
|
14,309
|
252
|
(18,333)
|
(10,078)
|
84
|
(13,766)
|
Generated from / (used in):
|
|
|
|
|
|
|
Operating activities
|
13,835
|
252
|
(10,869)
|
(10,078)
|
84
|
(6,776)
|
Investing activities
|
474
|
-
|
(5,706)
|
-
|
-
|
(5,232)
|
Financial activities
|
-
|
-
|
(1,758)
|
-
|
-
|
(1,758)
|
Increase / (decrease) in
cash
|
14,309
|
252
|
(18,333)
|
(10,078)
|
84
|
(13,766)
|
A reconciliation of the changes in non-cash
working capital balances for the year ended 31 December 2022 and
their impacts on the various sections of the consolidated statement
of cash flow is presented below:
|
Trade and other
receivables
|
Inventory
|
Trade and other
payables
|
Income taxes
payable
|
Other non-current
liabilities
|
Total
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Closing balance
|
34,843
|
2,099
|
(45,973)
|
(9,873)
|
-
|
|
Opening balance
|
25,503
|
665
|
(19,709)
|
-
|
(557)
|
|
Change
|
(9,340)
|
(1,434)
|
26,264
|
9,873
|
(557)
|
|
Non-cash gain on DPIB
|
-
|
-
|
-
|
-
|
518
|
|
Increase / (decrease) in
cash
|
(9,340)
|
(1,434)
|
26,264
|
9,873
|
(39)
|
25,324
|
Generated from / (used in):
|
|
|
|
|
|
|
Operating activities
|
(8,543)
|
(1,434)
|
14,832
|
9,873
|
-
|
14,728
|
Investing activities
|
(797)
|
-
|
10,624
|
-
|
(1,271)
|
8,556
|
Financial activities
|
-
|
-
|
808
|
-
|
1,232
|
2,040
|
Increase / (decrease) in
cash
|
(9,340)
|
(1,434)
|
26,264
|
9,873
|
(39)
|
25,324
|
5 Segmental
reporting
The Chief Operating Decision Maker
(CODM) is the Board of Directors. They consider that the Group
operates as two segments, as follows:
· UK
/ Corporate - That of Corporate activities in the UK
and oil and gas exploration, appraisal and development on the
UKCS.
· Canada
- That of oil and gas production in the
WCSB.
Such components are identified on
the basis of internal reports that the Board reviews
regularly.
The following is an analysis of the
Group's revenue and results by reportable segment in
2023:
|
UK /
Corporate
£'000
|
Canada
£'000
|
Total
£'000
|
Revenue
|
-
|
146,314
|
146,314
|
Production costs
|
-
|
(71,348)
|
(71,348)
|
Loss on risk management
contracts
|
-
|
2,048
|
2,048
|
Depreciation and
depletion
|
(4)
|
(38,228)
|
(38,232)
|
Gross (loss) / profit
|
(4)
|
38,786
|
38,782
|
Administrative expenses
|
(3,199)
|
(6,662)
|
(9,861)
|
(Loss) on bargain purchase and
asset dispositions
|
-
|
-
|
-
|
Operating (loss) / profit
|
(3,203)
|
32,124
|
28,921
|
Finance income
|
-
|
640
|
640
|
Finance costs
|
(5,590)
|
(3,073)
|
(8,663)
|
(Loss) / profit before tax
|
(8,793)
|
29,691
|
20,898
|
Tax (charge) for the
year
|
(341)
|
(5,410)
|
(5,751)
|
(Loss) / profit for the year
|
(9,134)
|
24,281
|
15,147
|
The following is an analysis of the
Group's revenue and results by reportable segment in
2022:
|
UK /
Corporate
£'000
|
Canada
£'000
|
Total
£'000
|
Revenue
|
-
|
208,436
|
208,436
|
Production costs
|
-
|
(76,418)
|
(76,418)
|
Loss on risk management
contracts
|
-
|
(18,990)
|
(18,990)
|
Depreciation and
depletion
|
(4)
|
(34,335)
|
(34,339)
|
Gross (loss) / profit
|
(4)
|
78,693
|
78,689
|
Administrative expenses
|
(6,821)
|
(8,217)
|
(15,038)
|
(Loss) on bargain purchase and
asset dispositions
|
-
|
(9)
|
(9)
|
Operating (loss) / profit
|
(6,825)
|
70,467
|
63,642
|
Finance costs
|
(5,179)
|
(2,686)
|
(7,865)
|
(Loss) / profit before tax
|
(12,004)
|
67,781
|
55,777
|
Tax (charge) / credit for the
year
|
-
|
(13,826)
|
(13,826)
|
(Loss) / profit for the year
|
(12,004)
|
53,955
|
41,951
|
The following is an analysis of
the Group's assets and liabilities by reportable segment as at 31
December 2023 and the capital expenditure for the year then
ended:
|
UK /
Corporate
£'000
|
Canada
£'000
|
Total
£'000
|
Total assets
|
56,041
|
260,553
|
316,594
|
Total liabilities
|
(35,606)
|
(117,993)
|
(153,599)
|
Capital expenditure -
E&E
|
275
|
1,006
|
1,281
|
Capital expenditure -
PP&E
|
-
|
23,155
|
23,155
|
The following is an analysis of
the Group's assets and liabilities by reportable segment as at 31
December 2022 and the capital expenditure for the year then
ended:
|
UK /
Corporate
£'000
|
Canada
£'000
|
Total
£'000
|
Total assets
|
57,500
|
295,712
|
353,212
|
Total liabilities
|
(30,166)
|
(158,300)
|
(188,466)
|
Capital expenditure -
E&E
|
5,650
|
6,677
|
12,327
|
Capital expenditure -
PP&E
|
-
|
75,793
|
75,793
|
6
Revenue
All revenue is derived from contracts with
customers and is comprised of the sale of oil and gas and
processing income, net of royalties, as follows:
|
2023
£'000
|
2022
£'000
|
Oil and condensate
|
95,628
|
113,003
|
Natural gas liquids
|
23,319
|
40,142
|
Natural gas
|
39,191
|
77,656
|
Royalty interest
|
3,263
|
4,890
|
Oil and gas sales
|
161,401
|
235,691
|
Royalties
|
(21,397)
|
(33,536)
|
Revenue from the sale of oil and gas
|
140,004
|
202,155
|
Processing income
|
5,819
|
5,995
|
Other operating income
|
491
|
286
|
Total revenue
|
146,314
|
208,436
|
All revenue is from the Group's Canadian
operations. Revenue from the sale of oil and natural gas
liquids is recognised at the point in time when title transfers to
the purchaser. Processing income is recognised at the time the
service is rendered.
During the year ended 31 December 2023, three
(2022: three) customers individually totalled more than 10% of
total revenues, totalling 87% (2022: 81%) in aggregate and 40%,
26%, and 21%, individually (2022: 35%, 25%, and 32%).
7
Administrative expenses
|
2023
£'000
|
2022
£'000
|
Directors' fees
|
345
|
323
|
Employee costs*
|
5,293
|
9,982
|
Professional fees**
|
1,918
|
1,830
|
Other
|
2,419
|
2,285
|
Realised FX (gain) /
loss
|
(129)
|
505
|
Unrealised FX loss
|
15
|
113
|
Total administrative expenses
|
9,861
|
15,038
|
* Group staff costs comprised:
|
2023
£'000
|
2022
£'000
|
Wages, salaries, and
benefits
|
7,232
|
11,602
|
Cash pool LTIP awards
|
185
|
-
|
Social security costs
|
362
|
1,189
|
Contributions to retirement savings
plans
|
331
|
304
|
Share-based payments expense -
employees (including NEDs)
|
581
|
1,092
|
Total staff costs
|
8,691
|
14,187
|
Capitalised salaries and overhead
recoveries
|
(3,398)
|
(4,205)
|
Charge to the profit or loss
|
5,293
|
9,982
|
i3 Energy plc had an average of two staff
during the year ended 31 December 2023 (2022: two) and paid £1,073
thousand of wages, salaries and benefits and £102 thousand of
social security costs (2022: £1,050 thousand and £137 thousand,
respectively). The Non-Executive Directors of the Group are not
considered staff, and their remuneration is disclosed in note 10.
On 9 November 2023 the Group granted £1,837
thousand of Cash pool LTIP awards which vest according to the same
terms of the 9 November 2023 share option grant as disclosed in
note 20. The resulting expense
is recognised in administrative costs over the vesting term and
presented within trade and other payables and other non-current
liabilities depending on the expected time of payment.
The average number of persons employed by the
Group, including Executive Directors, was:
Average number of persons
employed
|
2023
Number
|
2022
Number
|
Operations
|
33
|
31
|
Corporate and
administration
|
28
|
25
|
Total
|
61
|
56
|
** Included within professional fees are fees
payable to the Company's auditor and its associates for the
following:
|
2023
£'000
|
2022
£'000
|
Audit
services
|
|
|
The audit of the Company's annual
accounts
|
142
|
130
|
Total audit fees
|
142
|
130
|
Advisory on certain employment
matters
|
1
|
1
|
Procedures related to the Group's
interim financial statements
|
3
|
3
|
Total
|
146
|
134
|
8
Finance costs
|
2023
£'000
|
2022
£'000
|
Accretion of loan notes
(note
16)
|
1,615
|
3,386
|
Cash interest expense on loan notes
(note
16)
|
951
|
2,309
|
Unwinding of discount on
decommissioning provision (note 17)
|
2,771
|
2,667
|
Interest on Debt Facility
(Note
16)
|
2,258
|
-
|
Amortisation of deferred finance
costs (Note
16)
|
667
|
-
|
Bank charges and interest on
creditors
|
305
|
21
|
(Gain) / loss on financial
instrument at FVTPL (note 15)
|
-
|
(518)
|
FX loss on Debt Facility
(Note
16)
|
96
|
-
|
Total finance costs
|
8,663
|
7,865
|
9
Taxation
Taxation credit
The below table reconciles the tax charge for
the year to the profit before tax per the consolidated statement of
comprehensive income.
|
2023
£'000
|
2022
£'000
|
Profit before income tax
|
20,898
|
55,777
|
Rate of Corporate Tax in
Canada
|
23%
|
23%
|
Expected tax charge
|
4,807
|
12,829
|
Effects of:
|
|
|
Interest and other not deductible
for SCT or EPL
|
1,155
|
1,993
|
Permanent differences
|
530
|
1,213
|
Foreign tax rate
difference
|
(619)
|
(5,041)
|
Change in estimated pool
balances
|
-
|
22
|
Derecognition of deferred tax
asset
|
62
|
2,810
|
R&D tax credit
received
|
(184)
|
-
|
Total income tax charge
|
5,751
|
13,826
|
Of which:
|
2023
£'000
|
2022
£'000
|
Current tax charge
|
7,239
|
10,002
|
Deferred tax (credit) /
charge
|
(1,488)
|
3,824
|
Total income tax charge
|
5,751
|
13,826
|
The current tax charge of £7,239 thousand in
2023 resulted from taxable income in the Group's Canadian
subsidiary, i3 Canada, which was payable on instalment throughout
2023 and into the first half of 2024. In 2023 the Group received
£184 thousand in R&D tax credit refunds in the UK in respect of
the 2020 and 2021 fiscal years which is included in the current tax
expense.
In 2022 the Energy Profits Levy (EPL) was
introduced at a rate of 25% with effect from 26 May 2022 and
increased to 35% effective 1 January 2023. This, along with the
Ring Fence Corporation Tax (RFCT) at 30% and the Supplementary
Charge (SCT) of 10% brings the overall tax rate in the UK to 75%.
The EPL will remain in effect until 31 March 2028, although in
2023, the UK governance announced that the EPL will switch off if
commodity prices remain below threshold prices. The Group will not
be impacted by the EPL until such time as taxable profits are
generated in the UK. The combined corporate rate of taxation in
Canada remained unchanged at 23%.
Deferred tax
The components of the net deferred tax asset and
the movement during the year is summarised as follows:
|
At 31 December
2022
|
Acquired during the
year
|
Recognised in
income
|
FX
movement
|
At 31 December
2023
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
UK:
|
|
|
|
|
|
Deferred tax assets:
|
|
|
|
|
|
Losses
|
37,520
|
-
|
847
|
-
|
38,367
|
Unrecognised deferred tax
asset
|
(15,123)
|
-
|
(641)
|
-
|
(15,764)
|
Deferred tax liabilities:
|
|
|
|
|
|
PP&E
|
(22,397)
|
-
|
(206)
|
-
|
(22,603)
|
Net deferred tax asset
|
-
|
-
|
-
|
-
|
-
|
Canada:
|
|
|
|
|
|
Deferred tax
assets:
|
|
|
|
|
|
Decommissioning
provision
|
21,466
|
-
|
(2,088)
|
(667)
|
18,711
|
Losses
|
-
|
-
|
-
|
-
|
-
|
Other
|
234
|
-
|
(13)
|
(7)
|
214
|
Unrecognised deferred tax
asset
|
(4,180)
|
-
|
279
|
130
|
(3,771)
|
Deferred tax
liabilities:
|
|
|
|
|
|
Risk management
contracts
|
(168)
|
-
|
(198)
|
6
|
(360)
|
PP&E
|
(29,019)
|
-
|
3,508
|
900
|
(24,611)
|
Net deferred tax
liability
|
(11,667)
|
-
|
1,488
|
362
|
(9,817)
|
|
|
|
|
|
|
Net deferred tax liability
|
(11,667)
|
-
|
1,488
|
362
|
(9,817)
|
Deferred tax assets of £15,764 thousand and
£3,771 thousand have not been recognised in respect of tax losses
and allowances in the UK and Canada, respectively, due to
uncertainty over the availability of future taxable profits to
offset these losses against. The unrecognised deferred tax asset in
Canada relates to the Group's successor mineral resource tax pools
which can only be utilised against future income from certain
properties acquired from Toscana in 2020.
The Group recognised a net deferred tax
liability through a deferred tax credit of £1,488 thousand for
changes in net deductible temporary differences in the year and
£362 thousand for FX movements during the year. The deferred tax
asset has been recognised in Canada to the extent that the Group
anticipates probable future taxable profits against which the
assets can be utilised.
The Group's estimated tax pools are summarised
in the following table. All other tax pools held by the Group do
not expire.
|
31 December
2023
£'000
|
31
December 2022
£'000
|
UK:
|
|
|
Taxable losses
|
39,233
|
38,927
|
Mineral extraction
allowances
|
52,705
|
52,466
|
Total
|
91,938
|
91,393
|
Canada:
|
|
|
Canadian exploration expense (CEE,
deductible at 100% p.a.)
|
1,611
|
1,623
|
Canadian development expense (CDE,
deductible at 30% p.a.)
|
33,502
|
37,870
|
Canadian oil and gas property
expense (COGPE, deductible at 10% p.a.)
|
50,744
|
58,478
|
Undepreciated capital cost (UCC,
deductible at 25% p.a.)
|
20,194
|
18,867
|
Other (deductible at various rates
p.a.)
|
930
|
1,019
|
Total
|
106,981
|
117,857
|
10 Directors'
remuneration
2023
|
Salary /
Fees
|
Bonus
|
Share based
payments
|
Total
|
|
£'000
|
£'000
|
£'000
|
£'000
|
Executive
Directors
|
|
|
|
|
Majid Shafiq *
|
500
|
167
|
-
|
667
|
Ryan Heath
|
304
|
99
|
|
403
|
Non-Executive
Directors
|
|
|
|
|
Neill Carson
|
75
|
-
|
-
|
75
|
Richard Ames
|
75
|
-
|
-
|
75
|
Linda Beal
|
75
|
-
|
-
|
75
|
John Festival
|
120
|
-
|
-
|
120
|
Total
|
1,149
|
266
|
-
|
1,415
|
2022
Executive
Directors
|
Salary /
Fees
|
Bonus
|
Share based
payments
|
Total
|
Majid Shafiq *
|
487
|
833
|
3,507
|
4,827
|
Graham Heath
|
702
|
668
|
2,596
|
3,966
|
Ryan Heath
|
295
|
535
|
2,511
|
3,341
|
Non-Executive Directors
|
|
|
|
|
Neill Carson
|
68
|
-
|
227
|
295
|
Richard Ames
|
68
|
-
|
227
|
295
|
Linda Beal
|
106
|
-
|
117
|
223
|
John Festival
|
81
|
-
|
223
|
304
|
Total
|
1,807
|
2,036
|
9,408
|
13,251
|
|
|
|
|
|
* Highest paid director
|
|
|
|
|
Share based payments represent the difference
between the exercise price and the market value of i3 shares on the
date of exercise, multiplied by the number of options
exercised.
The bonuses in the table above are presented
on a cash-paid basis. Historically, the annual bonus cycle spanned
the 12-month period from 1 July to 30 June of the following year.
This was adjusted to a calendar-year cycle in 2023, and
accordingly, the bonuses in 2023 were prorated and paid for half a
year, relative to a full year payment in
2022.
Included in Graham Heath Salary / Fees in 2022
is a one-time compensation for loss of office payment of
£417 thousand upon his retirement in September
2022.
During each of 2023 and 2022 the Group
contributed £2 thousand and £9 thousand
to Majid Shafiq's and Ryan Heath's retirement savings plans,
respectively.
11 Earnings per
share
From continuing operations
Basic earnings or loss per share is calculated
as profit/(loss) for the year, adjusted to exclude any costs of
servicing equity (other than dividends), divided by the weighted
average number of ordinary shares, adjusted for any bonus
element.
Diluted earnings or loss per share amounts are
calculated by dividing losses or profits for the year attributable
to ordinary equity holders of the parent by the weighted average
number of ordinary shares outstanding during the year, plus the
weighted average number of shares that would be issued on the
conversion of dilutive potential ordinary shares into ordinary
shares.
The calculation of the basic and diluted
earnings per share is based on the following data:
|
Year Ended 31 December
2023
|
Year Ended 31
December 2022
|
Earnings
|
|
|
Earnings for the purposes of basic and diluted
earnings per share being net profit attributable to owners of i3
Energy (£'000)
|
15,147
|
41,951
|
|
|
|
Weighted
average number of shares
|
|
|
Weighted average number of Ordinary Shares -
basic
|
1,199,155,654
|
1,164,210,976
|
Effect of
dilutive potential ordinary shares:
|
|
|
Share options
|
15,246,295
|
51,089,073
|
Warrants
|
2,850,547
|
9,048,113
|
Weighted average number of Ordinary Shares -
diluted
|
1,217,252,496
|
1,224,348,162
|
|
|
|
Basic earnings per share (pence)
|
1.26
|
3.60
|
Diluted earnings per share (pence)
|
1.24
|
3.43
|
12
Property, plant, and equipment
|
Oil and gas
assets
|
Right of use
assets
|
Other fixed
assets
|
Total
|
Cost
|
£'000
|
£'000
|
£'000
|
£'000
|
As at 1 January 2022
|
250,033
|
109
|
72
|
250,214
|
Acquisitions
|
1,653
|
-
|
-
|
1,653
|
Additions
|
74,424
|
-
|
21
|
74,445
|
Decommissioning provisions
incurred
|
1,369
|
-
|
-
|
1,369
|
Disposals
|
(1,386)
|
(28)
|
-
|
(1,414)
|
Changes to decommissioning
estimates (note 17)
|
(40,233)
|
-
|
-
|
(40,233)
|
Decommissioning settlements under
SRP and ASCP (note 17)
|
(731)
|
-
|
-
|
(731)
|
Transfer between asset
classes
|
-
|
(88)
|
88
|
-
|
Exchange movement
|
12,585
|
7
|
3
|
12,595
|
As at 31 December 2022
|
297,714
|
-
|
184
|
297,898
|
Acquisitions
|
436
|
-
|
-
|
436
|
Additions
|
23,155
|
-
|
-
|
23,155
|
Decommissioning provisions
incurred
|
195
|
-
|
-
|
195
|
Disposals
|
(709)
|
-
|
-
|
(709)
|
Changes to decommissioning
estimates (note 17)
|
(8,283)
|
-
|
-
|
(8,283)
|
Exchange movement
|
(9,341)
|
-
|
(5)
|
(9,346)
|
As
at 31 December 2023
|
303,167
|
-
|
179
|
303,346
|
Accumulated depreciation and
depletion
|
|
|
|
|
As at 1 January 2022
|
(26,077)
|
(33)
|
(24)
|
(26,134)
|
Charge for the year
|
(34,301)
|
(17)
|
(21)
|
(34,339)
|
Disposals
|
-
|
12
|
-
|
12
|
Transfer between asset
classes
|
-
|
42
|
(42)
|
-
|
Exchange movement
|
(968)
|
(4)
|
-
|
(972)
|
As at 31 December 2022
|
(61,346)
|
-
|
(87)
|
(61,433)
|
Charge for the year
|
(38,206)
|
-
|
(26)
|
(38,232)
|
Exchange movement
|
1,984
|
-
|
2
|
1,986
|
As
at 31 December 2023
|
(97,568)
|
-
|
(111)
|
(97,679)
|
Carrying amount at 31 December
2022
|
236,368
|
-
|
97
|
236,465
|
Carrying amount at 31 December 2023
|
205,599
|
-
|
68
|
205,667
|
13
Exploration and evaluation assets (Intangible)
|
Year Ended 31 December
2023
£'000
|
Year
Ended 31 December 2022
£'000
|
At start of year
|
62,060
|
49,819
|
Additions
|
1,281
|
12,327
|
Exchange movement
|
(208)
|
(86)
|
At
end of year
|
63,133
|
62,060
|
Included within E&E assets is the Group's
UK P.2358 Licence, which commenced its four-year second term on 30
September 2020 and contains the Serenity discovery and the
Liberator West and Minos High prospective areas. Following the 2022
farm out to Europa Oil & Gas
Limited ("Europa"), i3 retains a 75% WI in Block
13/23c North (Licence P.2358) which contains the Serenity discovery
and a 100% WI in Block 13/23c South (Licence P.2358), which
contains the Minos High Prospect and Liberator
discovery.
Also included within E&E assets are costs
associated with land purchases and an appraisal well in the
Clearwater play in Canada.
Management conducted an assessment of
indicators of impairment for its E&E assets as at 31 December
2023, concluding that no indicators of impairment were identified.
Further discussion is provided in note 2.
14 Trade and other
receivables
|
31 December
2023
£'000
|
31
December 2022
£'000
|
Trade and accrued
receivables
|
12,839
|
26,770
|
Joint venture
receivables
|
4,732
|
5,563
|
Prepayments & other
receivables
|
2,963
|
2,510
|
Total trade and other receivables
|
20,534
|
34,843
|
Trade and accrued receivables are all due
within one year.
Joint venture receivables represent amounts
due from operating partners for operating and capital activity in
Canada and the UK.
The fair value of trade and other receivables is
the same as their carrying values as stated above and they do not
contain any impaired assets.
The maximum exposure to credit risk at the
reporting date is the carrying value of each class of receivable
mentioned above. The Group does not hold any collateral as
security.
15 Trade and other
payables
|
31 December
2023
£'000
|
31
December 2022
£'000
|
Trade creditors
|
5,736
|
15,383
|
Sales tax payable
|
170
|
378
|
Accruals
|
20,746
|
26,909
|
Cash pool LTIP awards - current
liability
|
101
|
-
|
Dividends payable
|
-
|
2,040
|
Joint venture payables
|
887
|
1,263
|
Total trade and other payables
|
27,640
|
45,973
|
The average credit period taken for
trade purchases is 60 days. No interest is charged on the trade
payables. The carrying values of trade and other payables are
considered to be a reasonable approximation of the fair value and
are considered by the Directors as payable within one
year.
Joint venture payables represent amounts due
to operating partners for operating and capital activity in
Canada.
16 Borrowings
Debt Facility
On 31 May 2023 i3 Energy plc established a CAD
100 million debt facility in the form of a Prepayment Agreement
(the "Debt Facility") with Trafigura Canada Ltd., a subsidiary of
Trafigura Pte Ltd (collectively, "Trafigura"). Concurrently, i3
Energy Canada Ltd. ("i3 Canada") entered an associated commercial
contract related to i3 Canada's oil production. The Debt Facility
has a three-year term, with interest payable monthly at 9.521% per
annum, calculated on the outstanding portion of the loan. The
Facility carries no penalty if repaid early and amortises monthly
on a straight-line basis. Advances under the Facility can be repaid
either with cash or by way of set-off against deliveries of crude
oil under the commercial contract which has a minimum term of three
years. The documentation establishing the Facility includes the
option for a CAD 75 million advance which has been fully drawn by
the Company and a CAD 25 million accordion facility amount, which
can be made available during the Debt Facility's three-year term.
The Debt Facility is secured by a first lien against substantially
all the assets and shares of i3 Canada. The Company utilised a
portion of proceeds from the initial advance to redeem the
outstanding H1-2019 Loan Notes as discussed below.
The Debt Facility contains the following
covenants:
i. Global Coverage Ratio greater than 125% for
the first 12 months and 140% thereafter. Global Coverage
Ratio is the percentage of (a) the aggregate of: (i) the Cash
balance of i3 Energy Canada as at such date, (ii) the PV10 of
the Proved Developed Producing Reserves (or, if agreed by the
Buyer, acting reasonably, the Proved Plus Probable Developed
Producing Reserves) owned by i3 Canada) using 85% of the Strip
Price and curves, and (iii) the mark to market value (gain or loss)
of the Secured Swap Agreements; to, (b) the Principal amount
outstanding at each date of determination.
ii. Liquidity Ratio greater than 1.10:1.00.
Liquidity Ratio is the ratio of (a) the sum of the following for
the next quarter: (i) the revenues of i3 Canada from the sale of
hydrocarbons, (ii) any royalty or processing income of i3 Canada;
(iii) the aggregate amount of all uncalled debt, equity and other
capital that is the subject of a binding commitment in favour of i3
Canada from a person who is not an Affiliate; (iv) expected revenue
from risk management contracts; and (v) all Cash of i3 Canada; to,
(b) the sum of the following, all cash costs of i3 Canada in
respect of the production, transportation and storage of Petroleum
Substances including, without limitation, operating expenses,
marketing expenditures, capital expenditures, taxes and interest
expense and all distributions and payments of financial
indebtedness made by i3 Canada for the next quarter.
iii. Net Debt to EBITDAX less than
3.00:1.00. (a) Net Debt: means, on a consolidated basis and
at any time, the aggregate amount of Financial Indebtedness of i3
Canada (excluding any intercompany Financial Indebtedness) net of
free and available Cash and Cash Equivalents of i3 Canada. (b)
EBITDAX: means, for any fiscal period and as determined in
accordance with IFRS (on a consolidated basis) in respect of i3
Canada: (a) all Net Income for such period; plus (b) Interest
Expense to the extent deducted in determining such Net Income; plus
(c) all amounts deducted in the calculation of such Net Income in
respect of the provision for income taxes; plus (d) all amounts
deducted in the calculation of such Net Income in respect of
non-cash items, including depreciation, depletion, amortization
(including amortization of goodwill and other intangibles),
accretion, deferred income taxes, foreign currency obligations,
noncash losses resulting from marking-to-market any outstanding
hedging and financial instrument obligations, non-cash compensation
expenses, provisions for impairment of oil and gas assets and any
other non-cash expenses for such period; plus (e) exploration
expenses; and (f) losses attributable to extraordinary and
non-recurring losses, in each case to the extent deducted in the
calculation of such Net Income; less (on a consolidated basis),
without duplication: (a) earnings attributable to extraordinary and
non-recurring earnings and gains, in each case to the extent
included in the calculation of such Net Income (including interest
income); (b) to the extent included in the calculation of such Net
Income, gains from asset sales; (c) all cash payments during such
period relating to non-cash charges which were added back in
determining EBITDAX in any prior period; and (d) to the extent
included in such Net Income, any other non-cash items increasing
such Net Income for such period, including non-cash gains resulting
from marking-to-market any outstanding hedging and financial
instrument obligations for such period.
iv. Liquidity Threshold greater than CAD 10
million. i3 Canada shall ensure that, at the last day of
each calendar month, it has a Cash balance in a bank account in an
amount equal to or greater than CAD 10 million.
The Global Coverage Ratio, Liquidity Ratio, and
Net Debt to EBITDAX are tested on the last day of each fiscal
quarter. The Liquidity Threshold was initially required to be
always maintained but was subsequently amended to be tested on the
last day of each calendar month. The Group was in compliance with
all covenants as at 31 December 2023. The Debt Facility was prepaid
in full in March 2024 with cash on hand and proceeds from the
Credit Facility, refer to note 24
for further information.
H1-2019 loan note facility
In May 2019, the Group completed a £22 million
H1-2019 loan note facility ("H1-2019 LN"). The H1-2019 LNs have a
term of 4 years, maturing on 31 May 2023 and bearing interest,
payable on a quarterly basis at the Group's option (i) in cash at a
rate of 8% per annum, or (ii) in kind at a rate of 11% per annum by
the issuance of additional H1-2019 LNs. The Group elected to pay
all interest in kind prior to 2022, and in cash for all quarters
since. The H1-2019 LNs matured on 31 May 2023 and were repaid in
full using proceeds from the Debt Facility issuance.
Interest expense and accretion expense on the
H1-2019 LNs to 31 December 2023 was £951 thousand and £1,615
thousand respectively (note
8).
Borrowings reconciliation
|
Leases
|
H1-2019 LN
|
Debt
Facility
|
Total
|
|
£'000
|
£'000
|
£'000
|
£'000
|
At 1 January 2022
|
69
|
23,855
|
-
|
23,924
|
Increase through interest
(non-cash)
|
1
|
2,309
|
-
|
2,310
|
Accretion expense
(non-cash)
|
-
|
3,386
|
-
|
3,386
|
Lease and interest payments
(cash)
|
(74)
|
(2,309)
|
-
|
(2,383)
|
Exchange movement
(non-cash)
|
4
|
-
|
-
|
4
|
At 31 December 2022
|
-
|
27,241
|
-
|
27,241
|
Issuance (cash)
|
-
|
-
|
44,481
|
44,481
|
Increase through interest
(non-cash)
|
-
|
951
|
2,258
|
3,209
|
Accretion expense
(non-cash)
|
-
|
1,615
|
-
|
1,615
|
Lease and interest payments
(cash)
|
-
|
(951)
|
(2,258)
|
(3,209)
|
Principal payments
(cash)
|
-
|
(28,856)
|
(8,636)
|
(37,492)
|
Additions in deferred finance costs
(cash)
|
-
|
-
|
(2,039)
|
(2,039)
|
Amortisation of deferred finance
costs (non-cash)
|
-
|
-
|
667
|
667
|
Exchange movement
(non-cash)
|
-
|
-
|
96
|
96
|
At
31 December 2023
|
-
|
-
|
34,569
|
34,569
|
The classification as at 31 December
2023 is as follows:
|
Leases
|
H1-2019 LN
|
Debt
Facility
|
Total
|
|
£'000
|
£'000
|
£'000
|
£'000
|
Current
|
-
|
-
|
14,001
|
14,001
|
Non-current
|
-
|
-
|
20,568
|
20,568
|
At
31 December 2023
|
-
|
-
|
34,569
|
34,569
|
The classification as at 31 December
2022 is as follows:
|
Leases
|
H1-2019 LN
|
Debt
Facility
|
Total
|
|
£'000
|
£'000
|
£'000
|
£'000
|
Current
|
-
|
27,241
|
-
|
27,241
|
Non-current
|
-
|
-
|
-
|
-
|
At 31 December 2022
|
-
|
27,241
|
-
|
27,241
|
17 Decommissioning
provision
|
Year Ended 31 December
2023
£'000
|
Year
Ended 31 December 2022
£'000
|
At start of year
|
93,331
|
125,523
|
Liabilities assumed through
acquisitions
|
303
|
348
|
Liabilities incurred
|
195
|
1,369
|
Liabilities disposed
|
(328)
|
(213)
|
Liabilities settled
|
(3,722)
|
(2,190)
|
Liabilities settled under
SRP
|
-
|
(731)
|
Change in estimates
|
(8,283)
|
(40,233)
|
Unwinding of discount
(Note
8)
|
2,771
|
2,667
|
Exchange movement
|
(2,914)
|
6,791
|
At end of year
|
81,353
|
93,331
|
|
31 December
2023
£'000
|
31
December 2022
£'000
|
Of which:
|
|
|
Current
|
3,244
|
3,190
|
Non-current
|
78,109
|
90,141
|
Total
|
81,353
|
93,331
|
A summary of the key estimates and assumptions
are as follows:
|
31 December
2023
|
31
December 2022
|
Undiscounted / uninflated cash
flows (CAD, thousands)
|
200,745
|
206,613
|
Inflation rate
|
1.62%
|
2.09%
|
Discount rate
|
3.02%
|
3.28%
|
Timing of cash flows
|
1-50
years
|
1-50
years
|
Liabilities settled reflect work undertaken in
the period. This includes wells decommissioned under Alberta's Site
Rehabilitation Program ("SRP") whereby certain costs of settling
the Group's liabilities were borne by the Government of Canada in
2022. Where liabilities were settled through the SRP a
corresponding decrease to the decommissioning asset was recorded.
The change in estimate for the year ended 31 December 2023 was
primarily driven by changes in market interest and inflation rates
as published by the Bank of Canada. The inflation and discount
rates have been pinpointed as a key source of estimation
uncertainty and are further discussed in note 3.
18 Risk management
contracts
The Group enters risk management contracts to
hedge a portion of the Group's exposure to fluctuations in
prevailing commodity prices for oil, gas, and natural gas liquids.
The Group's physical commodity contracts represent physical
delivery sales contracts in the ordinary course of business and are
therefore not recorded at fair value in the consolidated financial
statements. The Group's financial risk management contracts have
not been designated as hedging instruments in a hedge relationship
under IFRS 9 and are carried at fair value through profit and loss.
The financial risk management contracts are classified as Level 2
in the fair value hierarchy as defined by IFRS 13 'Fair value
measurements' (note
22).
The principal terms of the risk management
contracts held as at 31 December 2023 are presented in the table
below.
Type
|
Effective date
|
Termination date
|
Total Volume
|
Avg. Price
|
AECO 5A Physical Swaps
|
1 Aug
2023
|
31 Mar
2024
|
10,000
GJ/Day
|
CAD
2.7600 / GJ
|
AECO 5A Physical Swaps
|
1 Nov
2023
|
31 Mar
2024
|
15,000
GJ/Day
|
CAD
3.2267 / GJ
|
|
|
|
|
|
WTI Financial Swaps
|
1 Aug
2023
|
31 Mar
2024
|
500
bbl/Day
|
CAD
93.33 / bbl
|
WTI Financial Swaps
|
1 Jan
2024
|
31 Mar
2024
|
1,500
bbl/Day
|
CAD
96.47 / bbl
|
WTI Financial Swaps
|
1 Apr
2024
|
30 Jun
2024
|
1,750
bbl/Day
|
CAD
98.20 / bbl
|
WTI Financial Swaps
|
1 Jul
2024
|
31 Aug
2024
|
500
bbl/Day
|
CAD
101.50 / bbl
|
WTI Financial Swaps
|
1 Jul
2024
|
30 Sep
2024
|
250
bbl/Day
|
CAD
98.44 / bbl
|
WTI Financial Swaps
|
1 Sep
2024
|
30 Sep
2024
|
250
bbl/Day
|
CAD
102.18 / bbl
|
|
|
|
|
|
WTI Financial Collar
|
1 Jan
2024
|
31 Mar
2024
|
250
bbl/Day
|
CAD
100.00-121.32 / bbl
|
WTI Financial Collar
|
1 Apr
2024
|
30 Jun
2024
|
250
bbl/Day
|
CAD
100.00-107.00 / bbl
|
WTI Financial Collar
|
1 Jul
2024
|
30 Sep
2024
|
250
bbl/Day
|
CAD
100.00-108.00 / bbl
|
WTI Financial Collar
|
1 Jul
2024
|
30 Sep
2024
|
250
bbl/Day
|
CAD
100.00-111.00 / bbl
|
WTI Financial Collar
|
1 Jul
2024
|
30 Sep
2024
|
250
bbl/Day
|
CAD
100.00-112.00 / bbl
|
WTI Financial Collar
|
1 Jul
2024
|
30 Sep
2024
|
250
bbl/Day
|
CAD
100.00-112.10 / bbl
|
WTI Financial Collar
|
1 Jul
2024
|
30 Sep
2024
|
250
bbl/Day
|
CAD
100.00-113.80 / bbl
|
WTI Financial Collar
|
1 Sep
2024
|
30 Sep
2024
|
250
bbl/Day
|
CAD
100.00-107.00 / bbl
|
WTI Financial Collar
|
1 Oct
2024
|
31 Oct
2024
|
250
bbl/Day
|
CAD
100.00-111.15 / bbl
|
WTI Financial Collar
|
1 Oct
2024
|
31 Oct
2024
|
250
bbl/Day
|
CAD
100.00-113.10 / bbl
|
WTI Financial Collar
|
1 Oct
2024
|
31 Oct
2024
|
250
bbl/Day
|
CAD
102.00-111.45 / bbl
|
The Group's gains and losses on risk
management contracts are presented in the following
table.
|
2023
£'000
|
2022
£'000
|
Unrealised (gain) on risk
management contracts
|
(860)
|
(858)
|
Realised (gain) / loss on risk
management contracts
|
(1,188)
|
19,848
|
Total (gain) / loss on risk management
contracts
|
(2,048)
|
18,990
|
The carrying value of the Group's risk
management contracts are present in the following table.
|
31 December
2023
£'000
|
31
December 2022
£'000
|
Current asset
|
1,701
|
1,111
|
Current liability
|
(136)
|
(381)
|
Net current asset
|
1,565
|
730
|
19 Authorised, issued and
called-up share capital
|
Issuance
date
|
Ordinary
shares
|
Deferred
shares
|
Nominal value per
Share
|
Ordinary
shares
|
Deferred
shares
|
Share premium before share
issuance costs
|
Share issuance
costs
|
Share premium after Share
issuance costs
|
|
|
Shares
|
Shares
|
£
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
At 31 December 2021
|
|
1,126,425,992
|
5,000
|
-
|
113
|
50
|
46,203
|
(2,000)
|
44,203
|
Issued on exercise of 5 pence
options
|
Various
|
40,860,277
|
-
|
0.0001
|
4
|
-
|
2,038
|
-
|
2,038
|
Issued on exercise of 6.1 pence
options
|
Various
|
7,994,653
|
-
|
0.0001
|
1
|
-
|
487
|
-
|
487
|
Issued on exercise of 11 pence
options
|
Various
|
17,450,451
|
-
|
0.0001
|
1
|
-
|
1,918
|
-
|
1,918
|
At 31 December 2022
|
|
1,192,731,373
|
5,000
|
-
|
119
|
50
|
50,646
|
(2,000)
|
48,646
|
Issued on exercise of 11 pence
options
|
9 Jan
23
|
116,667
|
-
|
0.0001
|
-
|
-
|
12
|
-
|
12
|
Issued on exercise of 0.01 pence
warrants
|
25 Apr
23
|
9,051,927
|
-
|
0.0001
|
1
|
-
|
2,045
|
-
|
2,045
|
Cancellation of shares *
|
29 May
23
|
(25,503)
|
-
|
0.0001
|
-
|
-
|
-
|
-
|
-
|
Issued on exercise of 5 pence
options
|
12 Oct
23
|
573,199
|
-
|
0.0001
|
-
|
-
|
28
|
-
|
28
|
Capital reduction **
|
13 Nov
23
|
-
|
-
|
-
|
-
|
-
|
(52,731)
|
2,000
|
(50,731)
|
At 31 December 2023
|
|
1,202,447,663
|
5,000
|
-
|
120
|
50
|
-
|
-
|
-
|
* The cancellation of shares related to
unclaimed shares from the Toscana acquisition which completed in
2020. The time limit to claim the shares had expired and 25,503
ordinary shares reverted to the Company to be held in treasury and
were subsequently cancelled.
** On 13 November 2023 the Registrar of
Companies registered the cancellation of i3's share premium
account. The £50.7 million balance of the Group's share premium net
of share issuance costs was accordingly transferred to retained
earnings. This increased distributable reserves to enable the
Company to continue paying dividends.
The ordinary shares confer the right to vote at
general meetings of the Company, to a repayment of capital in the
event of liquidation or winding up and certain other rights as set
out in the Company's articles of association.
The deferred shares do not confer any voting
rights at general meetings of the Company and do confer a right to
a repayment of capital in the event of liquidation or winding up,
they do not confer any dividend rights or any of
redemption.
During the year ended 31 December 2023 the
Company declared dividends as summarised in the following
table:
Declaration date
|
Ex-Dividend
date
|
Record
date
|
Payment
date
|
Dividend per
share
|
Total
Dividend
|
|
|
|
|
(pence)
|
£'000
|
12 January 2023
|
19
January 2023
|
20
January 2023
|
10
February 2023
|
0.1710
|
2,040
|
8 February 2023
|
16
February 2023
|
17
February 2023
|
10 March
2023
|
0.1710
|
2,040
|
15 March 2023
|
23 March
2023
|
24 March
2023
|
14 April
2023
|
0.1710
|
2,040
|
12 April 2023
|
20 April
2023
|
21 April
2023
|
12 May
2023
|
0.1710
|
2,040
|
17 May 2023
|
25 May
2023
|
26 May
2023
|
16 June
2023
|
0.1710
|
2,055
|
2 October 2023
|
12
October 2023
|
13
October 2023
|
27
October 2023
|
0.2565
|
3,083
|
Total
|
|
|
|
1.1115
|
13,298
|
During the year ended 31 December 2022 the
Company declared dividends as summarised in the following
table:
Declaration date
|
Ex-Dividend
date
|
Record
date
|
Payment
date
|
Dividend per
share
|
Total
Dividend
|
|
|
|
|
(pence)
|
£'000
|
9 February 2022
|
17
February 2022
|
18
February 2022
|
11 March
2022
|
0.1050
|
1,183
|
9 March 2022
|
17 March
2022
|
18 March
2022
|
8 April
2022
|
0.1050
|
1,183
|
6 April 2022
|
14 April
2022
|
19 April
2022
|
6 May
2022
|
0.1050
|
1,183
|
11 May 2022
|
19 May
2022
|
20 May
2022
|
10 June
2022
|
0.1425
|
1,604
|
8 June 2022
|
16 June
2022
|
17 June
2022
|
8 July
2022
|
0.1425
|
1,700
|
6 July 2022
|
14 July
2022
|
15 July
2022
|
5 August
2022
|
0.1425
|
1,700
|
3 August 2022
|
11
August 2022
|
12
August 2022
|
2
September 2022
|
0.1425
|
1,700
|
7 September 2022
|
14
September 2022
|
15
September 2022
|
7
October 2022
|
0.1425
|
1,700
|
5 October 2022
|
13
October 2022
|
14
October 2022
|
4
November 2022
|
0.1425
|
1,700
|
2 November 2022
|
10
November 2022
|
11
November 2022
|
2
December 2022
|
0.1425
|
1,700
|
22 December 2022
|
5
January 2023
|
6
January 2023
|
27
January 2023
|
0.1710
|
2,040
|
Total
|
|
|
|
1.4835
|
17,393
|
20 Share-based
payments
Employee and NED share options
During the year the Group had share based
payment expense relating to share options of £581 thousand (2022:
£1,092 thousand). Details on the employee and NED share options
outstanding for the Group and Company during the period are as
follows:
|
Number of
options
|
Weighted average exercise
price
|
Weighted average contractual
life
|
|
|
(pence)
|
|
At 31 December 2021
|
143,960,375
|
7.48
|
9.22
|
5p options exercised during the
period
|
(67,006,794)
|
5.00
|
8.54
|
6.1p options exercised during the
period
|
(12,454,359)
|
6.10
|
8.54
|
11p options exercised during the
period
|
(35,085,877)
|
11.00
|
9.09
|
Granted during the
period
|
2,700,000
|
24.10
|
10.00
|
Forfeited during the
period
|
(708,390)
|
11.00
|
8.84
|
At 31 December 2022
|
31,404,955
|
10.72
|
7.93
|
5p options exercised during the
period
|
(573,199)
|
5.00
|
7.25
|
11p options exercised during the
period
|
(116,667)
|
11.00
|
8.94
|
Granted during the
period
|
21,509,470
|
12.55
|
10.00
|
Forfeited during the
period
|
(2,757,490)
|
10,92
|
7.55
|
At 31 December 2023
|
49,467,069
|
11.57
|
9.19
|
On 9 November 2023, the Company
issued options over a total of 17,959,470 ordinary shares to i3
staff and directors. The options were issued in accordance with the
rules of the Company's Employee Share Option Plan at an exercise
price of 11.3 pence per share. Of the options issued to employees
of i3 Canada and i3 Energy plc, one-third of the
options vest on achieving production of 26,000 boepd (this target
to be adjusted downwards by the production volume associated with
any i3 divestment in the period), one-third of the options vest on
the acquisition of 5,000 boepd, and the final one-third of the
options vest on the addition of 25 mmbbls of 2P reserves. Of the
options issued to employees of i3 North
Sea Limited, one-third of the options vest on FDP of
Serenity, on-third of the options vest on acquisition of 2,500
boepd, and the final one-third of the options vest on addition of
10 mmbbls of 2P reserves. The options will otherwise vest one-third
each year, on the anniversary of the grant, if not vested in
accordance with the conditions above. The
fair value was calculated using the Black Scholes model with inputs
for stock price of 11.30 pence, exercise price of 11.30 pence, time
to maturity of 10 years, volatility of 94%, the Risk-Free Interest
rate of 4.275%, and a dividend yield of 9%. The resulting fair
value of £676 thousand will be expensed over the expected vesting
period.
On 26 July 2023, the Company issued
options over a total of 550,000 ordinary shares to new employees of
i3 Canada. The options were issued in accordance with the rules of
the Company's Employee Share Option Plan at an exercise price of
12.78 pence, the closing price on 26 July 2023. The options have
the same vesting conditions as those issued on 18 April
2023. The fair value was calculated using the Black
Scholes model with inputs for share price of 12.78 pence, exercise
price of 12.78 pence, time to maturity of 10 years, volatility of
96%, the Risk-Free Interest rate of 4.307%, and a dividend yield of
8%. The resulting fair value of £27 thousand will be expensed over
the expected vesting period.
On 18 April 2023, the Company issued options
over a total of 3,000,000 ordinary shares to the CFO, a Person
Discharging Managerial Responsibilities of the Company. The options
were issued in accordance with the rules of the Company's Employee
Share Option Plan at an exercise price of 20.00 pence per share,
the closing price on 18 April 2023. The fair value was calculated
using the Black Scholes model with inputs for share price of 20.00
pence, exercise price of 20.00 pence, time to maturity of 10 years,
volatility of 97%, the Risk-Free Interest rate of 3.742%, and a
dividend yield of 10%. One-third of the options will vest upon
achieving production of 26,000 boepd, one-third upon the addition
of 5,000 boepd via acquisitions, and one-third upon the addition of
25 MMbbl of 2P reserves. The award shall vest as to one-third upon
the first, second, and third anniversary of the grant date, to the
extent the award has not otherwise vested in accordance with the
above provisions. The resulting fair value of £179 thousand will be
expensed over the expected vesting period.
In May 2022, i3 employees and directors
elected to exercise options over an aggregate 114,547,030 ordinary
shares of i3 Energy plc. The Company primarily settled in ordinary
shares only the post-tax in-the-money value of the options (based
on c28 pence per share), which resulted in the issuance of
66,305,381 ordinary shares which were admitted to trading on 6 June
2022. £635 thousand in proceeds was collected from employees who
elected not to settle their strike price through a reduction in
ordinary shares received. £6,324 thousand in employment tax was
settled by the Company with the relevant taxation authorities on
behalf of the employees which has been recorded within equity as a
deduction from retained earnings. £6 thousand was recorded as an
increase to the ordinary shares account, which represents the
number of ordinary shares issued multiplied by their nominal value
of £0.001 per share. £4,443 thousand was recorded as an increase to
the share premium account, which represents the number of ordinary
shares issued multiplied by the excess in the respective strike
prices over the nominal value of the shares. £3,883 thousand has
been recorded as a decrease to the share-based payment reserve,
which represents the strike price settled through surrendered
shares.
Throughout 2022, the Company issued options over
a total of 2,700,000 ordinary to new
employees of i3 Canada. The options were issued in
accordance with the rules of the Company's Employee Share Option
Plan at exercise prices equal to the market price of i3 shares at
the date of the grants, which ranged from 21.55 pence to 29.40
pence per share. One-third of the options will vest on each of the
12-month, 24-month, and 36-month anniversaries of the employment
start dates. The fair values were calculated using the Black
Scholes model with inputs for stock price and exercise price
ranging from 21.55 pence to 29.40 pence per share, time to maturity
of 10 years, volatility ranging from 100% to 104%, the Risk-Free
Interest rate ranging from 1.90% to 3.15%, and a dividend yield
ranging from 6% to 8%. The resulting fair value of £278 thousand
will be expensed over the expected vesting period.
7,960,369 outstanding employee share options
as at 31 December 2023 were fully vested and
exercisable.
Warrants
Details on the warrants outstanding during the
period are as follows:
|
Number of
warrants
|
Weighted average exercise
price
|
Weighted average contractual
life
|
|
|
(pence)
|
|
At 31 December 2021
|
13,277,131
|
15.07
|
1.85
|
Expired in the period
|
(4,225,204)
|
47.34
|
NA
|
At 31 December 2022
|
9,051,927
|
0.01
|
0.42
|
Exercised in the period
|
(9,051,927)
|
0.01
|
NA
|
At 31 December 2023
|
-
|
-
|
-
|
EMI options
The Company operates an Employee Management
Incentive (EMI) share option scheme. Grants were made on 14 April
2016 and 6 December 2016. The scheme is based on eligible employees
being granted EMI options. The right to exercise the option is at
the employee's discretion for a ten-year period from the date of
issuance.
250,000 options were exercised on 1 October 2021
at a price of £0.11 per share. The remaining 250,000 options
expired during the year. There were no EMI options outstanding at
31 December 2023.
21 Related party
transactions
Transactions between the Company and its
subsidiaries, which are related parties, have been eliminated on
consolidation and are not disclosed in this note.
Remuneration of Key Management
Personnel
Directors of the Group are considered to be Key
Management Personnel. The remuneration of the Directors is set out
in note
10.
Ultimate parent
There is no ultimate controlling party of the
Group.
22 Financial instruments,
financial and capital risk management
Financial instruments
Fair value measurements
The Group carries risk management contracts, and
prior to the redemption of the deferred invoice balance with BHGE
in Q4 2022, non-current accounts payable at FVTPL. The fair value
of the risk management contracts is determined by discounting at a
risk-free rate the difference between the contracted prices and the
published forward curves at the reporting date. The fair value of
non-current accounts payable was determined by subtracting the
value of the Warrant Shares, being the 5,277,045 Warrant Shares
multiplied by the higher of (i) the quoted price of one i3 share at
the reporting date, and (ii) the 5-day volume weighted average
value of one i3 share during the 5-day dealing period to 17
September 2021, from the remaining Deferred Payment Invoice
Balance. The risk management contracts and non-current accounts
payable are classified as Level 2 valuations within the fair value
hierarchy as defined by IFRS 13 Fair Value Measurement which is as
follows:
· Level 1 fair
value measurements are those derived from quoted prices
(unadjusted) in active markets for identical assets or
liabilities;
· Level 2 fair
value measurements are those derived from inputs other than quoted
prices included within Level 1 that are observable for the asset or
liability, either directly (i.e., as prices) or indirectly (i.e.,
derived from prices); and
· Level 3 fair
value measurements are those derived from valuation techniques that
include inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
There were no financial assets or liabilities
measured at Level 1 or 3 or reclassified between Levels 1, 2 or 3
during the year.
The fair value of the
Group's financial assets and liabilities approximate to their
carrying amounts at the reporting date. The following tables
combine information about the Group's classes of financial
instruments and their fair value and carrying amounts at the
reporting date.
As
at 31 December 2023
|
Carried
at FVTPL
|
Carried
at amortised cost
|
Financial assets
|
|
|
Cash and cash
equivalents
|
-
|
23,507
|
Trade and other
receivables
|
-
|
20,534
|
Income taxes receivable
|
-
|
205
|
Risk management contracts (Level
2)
|
1,701
|
-
|
Total
|
1,701
|
44,246
|
Financial liabilities
|
|
|
Trade and other payables
|
-
|
24,640
|
Risk management contracts (Level
2)
|
136
|
-
|
Borrowings and leases
|
-
|
34,569
|
Other non-current
liabilities
|
-
|
84
|
Total
|
136
|
59,293
|
As
at 31 December 2022
|
Carried
at FVTPL
|
Carried
at amortised cost
|
Financial assets
|
|
|
Cash and cash
equivalents
|
-
|
16,560
|
Trade and other
receivables
|
-
|
34,843
|
Risk management contracts (Level
2)
|
1,111
|
-
|
Total
|
1,111
|
51,403
|
Financial liabilities
|
|
|
Trade and other payables
|
-
|
45,973
|
Income taxes payable
|
-
|
9,873
|
Risk management contracts (Level
2)
|
381
|
-
|
Borrowings and leases
|
-
|
27,241
|
Total
|
381
|
83,087
|
All financial assets and liabilities of the
Company were carried at amortised cost at 31 December 2023 and
2022. The fair value of the Company's financial assets and
liabilities approximate to their carrying amounts at the reporting
date.
Financial risk management
Financial risk factors
The Group's activities expose it to a variety of
financial risks; market risk (including foreign currency risk and
price risk), credit risk and liquidity risk. The Group's overall
risk management programme focuses on the unpredictability of
financial markets and seeks to minimise potential adverse effects
on the Group's financial performance.
Risk management is carried out by the Board of
Directors under policies approved at Board meetings. The Board
frequently discusses principles for overall risk management
including policies for specific areas such as foreign
exchange.
a Market
risk
i
Foreign exchange risk
The Group is exposed to foreign exchange risk
arising from various currency exposures, primarily with respect to
the UK pound sterling and the Canadian dollar and US dollar.
Foreign exchange risk arises from recognised monetary assets and
liabilities (USD and CAD bank accounts) where they may be
denominated in a currency that is not the local functional
currency. The Group mitigates is foreign exchange exposure by
holding monetary assets and liabilities primarily in the local
functional currency. All of the monetary assets and liabilities
held by the Group's Canadian operations were held in CAD, the
functional currency, and therefore there is no foreign exchange
exposure in the Canadian operations. The UK operations did not hold
significant monetary assets or liabilities in currencies other than
UK pound sterling as at 31 December 2023 with the exception of the
Debt Facility which is denominated in CAD. A 10% strengthening of
GBP against CAD as at 31 December 2023 would have increased foreign
exchange gains for the Group and Company by £3,247 thousand, and a
10% weakening of GBP to CAD would have increased foreign exchange
losses for the Group and Company by £3,969 thousand. No comparable
figures are provided as the Debt Facility was entered into in May
2023.
The Group is also exposed to exchange
differences on translation of its foreign operations in Canada,
which resulted in a loss of £4,222 thousand for the year ended 31
December 2023 (2022: gain of £6,529 thousand). A 10% strengthening
of GBP against CAD as at 31 December 2023 would have resulted in a
loss on translation of £16,344 thousand (2022: £7,073 thousand),
and a 10% weakening of GBP to CAD would have resulted in a gain of
£10,593 thousand (2021: £23,152 thousand). Profit after tax would
not be impacted.
b Credit
risk
Credit risk arises from cash and cash
equivalents and trade receivables from the sale of hydrocarbons. It
is Group policy to assess the credit risk of new
customers.
The Group considers the credit ratings of banks
in which it holds funds in order to reduce exposure to credit risk.
The Group will only keep its holdings of cash with institutions
which have a minimum credit rating of 'A'. The Group sells
hydrocarbons to reputable purchasers and are settled the month
following their sale. Long-term deposits for decommissioning
provisions are lodged with government bodies. The carrying value of
cash and cash equivalents and trade and other receivables
represents the Group's maximum exposure to credit risk at year
end.
The Group considers that it is not exposed to
major concentrations of credit risk.
The Group holds cash as a liquid resource to
fund its obligations. The Group's cash balances are held in
Sterling Canadian Dollar, and US Dollar. The Group's strategy for
managing cash is to maximise interest income whilst ensuring its
availability to match the profile of the Group's expenditure. This
is achieved by regular monitoring of interest rates and monthly
review of expenditure forecasts.
c Liquidity
risk
The Group relies upon debt and equity funding,
and cash flow from its Canadian operations to finance operations.
The Directors are confident that adequate liquidity will be
forthcoming with which to finance operations. Controls over
expenditure are carefully managed.
The Group ensures that its liquidity is
maintained by a management process which includes projecting cash
flows and considering the level of liquid assets in relation
thereto, monitoring Balance Sheet liquidity and maintaining funding
sources and back-up facilities.
The Group's expected cash flows for its
financial liabilities are presented in the following table and
includes undiscounted principal and expected interest
payments.
|
6 Months
|
6-12
months
|
1-2 years
|
2+ years
|
Total
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Trade and other payables
|
27,539
|
101
|
-
|
-
|
27,640
|
Borrowings and leases
|
9,027
|
8,667
|
16,249
|
6,347
|
40,290
|
Other non-current
liability
|
-
|
-
|
50
|
34
|
84
|
At
31 December 2023
|
36,566
|
8,768
|
16,299
|
6,381
|
68,014
|
|
6 Months
|
6-12
months
|
1-2 years
|
2+ years
|
Total
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Trade and other payables
|
45,973
|
-
|
-
|
-
|
45,973
|
Income taxes payable
|
9,873
|
-
|
-
|
-
|
9,873
|
H1 2019 LNs
|
22,000
|
-
|
-
|
-
|
22,000
|
H1 2019 cash and PIK
interest
|
7,204
|
-
|
-
|
-
|
7,204
|
At 31 December 2022
|
85,050
|
-
|
-
|
-
|
85,050
|
d Commodity
price risk
Commodity price risk in the Group primarily
arises from price fluctuations in markets for the Group's oil, gas
and NGL products. Commodity prices can be volatile and may be
impacted by various supply and demand factors which are outside the
Group's control. Fluctuations in commodity prices could have a
significant impact on future results of operations, cash flow
generation, and development opportunities.
The Group manages commodity price risks by
entering a variety of risk management contracts. Further details of
risk management contracts at 31 December 2023 are provided in
note 18, and of risk
management contracts entered after the reporting period are
provided in note 24.
The following table illustrates the impact on
the Group's profit before tax and equity due to reasonably possible
changes in commodity prices and their impact on the fair value of
financial instruments, which pertain to the Group's financial risk
management contracts, with all other variables held
constant.
|
Decrease
in commodity price / increase in profit before loss and
equity
£'000
|
Increase
in commodity price / (decrease) in profit before loss and
equity
£'000
|
Change in WTI - CAD 5.00 /
bbl
|
1,793
|
(2,920)
|
Capital risk management
The Group's objectives when managing capital are
to safeguard the Group's ability to position as a going concern and
to continue its development and production activities. The capital
structure of the Group consists of borrowings and leases of £34,569
thousand at 31 December 2023 (2022: £27,241 thousand) (note 16), has capital, defined as the total
equity and reserves of the Group of £162,995 thousand (2022:
£164,746 thousand) and cash and equivalents of £23,507 thousand
(2022: £16,560 thousand).
The Group monitors its level of cash
resources available against future planned exploration and
evaluation activities and may issue new shares in order to raise
further funds from time to time.
23 Commitments
At
31 December 2023
|
1 year
|
2-3 years
|
4-5 years
|
5+ years
|
Total
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Operating
|
92
|
112
|
-
|
-
|
204
|
Transportation
|
1,810
|
1,418
|
349
|
4
|
3,581
|
Total
|
1,902
|
1,530
|
349
|
4
|
3,785
|
Transportation commitments relate to take-or-pay
pipeline capacity in Alberta.
The Group did not have any capital commitments
as at 31 December 2023 or 2022.
24 Events after the
reporting period
After 31 December 2023 i3 entered into various
risk management contracts, as summarised below.
Type
|
Effective
date
|
Termination
date
|
Total
Volume
|
Avg. Price
|
AECO 5A Financial Swaps
|
1 Apr
2024
|
31 Mar
2025
|
15,000
GJ/Day
|
CAD
2.5200 / GJ
|
AECO 5A Financial Swaps
|
1 Nov
2024
|
31 Mar
2025
|
5,000
GJ/Day
|
CAD
3.2000 / GJ
|
AECO 5A Physical Swaps
|
1 Apr
2025
|
30 Apr
2025
|
2,500
GJ/Day
|
CAD
2.7700 / GJ
|
AECO 5A Physical Swaps
|
1 Apr
2025
|
31 Dec
2025
|
7,500
GJ/Day
|
CAD
3.1167 / GJ
|
|
|
|
|
|
WTI Financial Swaps
|
1 Mar
2024
|
31 Mar
2024
|
250
bbl/Day
|
CAD
100.90 / bbl
|
WTI Financial Swaps
|
1 Apr
2024
|
30 Jun
2024
|
250
bbl/Day
|
CAD
100.15 / bbl
|
WTI Financial Swaps
|
1 Jul
2024
|
30 Sep
2024
|
250
bbl/Day
|
CAD
99.14 / bbl
|
WTI Financial Swaps
|
1 Oct
2024
|
31 Oct
2024
|
150
bbl/Day
|
CAD
97.32 / bbl
|
WTI Financial Swaps
|
1 Oct
2024
|
31 Dec
2024
|
1,200
bbl/Day
|
CAD
95.89 / bbl
|
WTI Financial Swaps
|
1 Nov
2024
|
30 Nov
2024
|
500
bbl/Day
|
CAD
103.40 / bbl
|
WTI Financial Swaps
|
1 Dec
2024
|
31 Dec
2024
|
500
bbl/Day
|
CAD
102.50 / bbl
|
WTI Financial Swaps
|
1 Jan
2025
|
31 Jan
2025
|
1,050
bbl/Day
|
CAD
99.03/ bbl
|
WTI Financial Swaps
|
1 Jan
2025
|
31 Mar
2025
|
200
bbl/Day
|
CAD
101.20 / bbl
|
WTI Financial Swaps
|
1 Feb
2025
|
28 Feb
2025
|
400
bbl/Day
|
CAD
102.33 / bbl
|
WTI Financial Swaps
|
1 Mar
2025
|
31 Mar
2025
|
400
bbl/Day
|
CAD
101.63 / bbl
|
WTI Financial Swaps
|
1 Apr
2025
|
30 Apr
2025
|
1,000
bbl/Day
|
CAD
102.49 / bbl
|
WTI Financial Swaps
|
1 Feb
2025
|
28 Feb
2025
|
400
bbl/Day
|
USD
76.55 / bbl
|
WTI Financial Swaps
|
1 Mar
2025
|
31 Mar
2025
|
400
bbl/Day
|
USD
75.95 / bbl
|
|
|
|
|
|
WTI Financial Collar
|
1 Apr
2024
|
31 May
2024
|
250
bbl/Day
|
CAD
90.00-110.65 / bbl
|
WTI Financial Collar
|
1 Nov
2024
|
30 Nov
2024
|
200
bbl/Day
|
CAD
100.00-112.55 / bbl
|
WTI Financial Collar
|
1 Dec
2024
|
31 Dec
2024
|
200
bbl/Day
|
CAD
100.00-110.15 / bbl
|
WTI Financial Collar
|
1 Jan
2025
|
31 Jan
2025
|
200
bbl/Day
|
CAD
100.00-110.50 / bbl
|
WTI Financial Collar
|
1 Jan
2025
|
31 Jan
2025
|
250
bbl/Day
|
CAD
100.00-110.00 / bbl
|
WTI Financial Collar
|
1 Feb
2025
|
28 Feb
2025
|
250
bbl/Day
|
CAD
100.00-112.25 / bbl
|
WTI Financial Collar
|
1 Mar
2025
|
31 Mar
2025
|
250
bbl/Day
|
CAD
100.00-110.45 / bbl
|
|
|
|
|
|
Conway Financial Swap
|
1 Jan
2025
|
31 Mar
2025
|
250
bbl/Day
|
USD
0.8325 / gal
|
In early-2024 the
Company has declared dividends as summarised in the following
table:
Declaration date
|
Ex-Dividend
date
|
Record
date
|
Payment
date
|
Dividend per
share
|
Total
Dividend
|
|
|
|
|
(pence)
|
£'000
|
9 January 2024
|
18
January 2024
|
19
January 2024
|
9
February 2024
|
0.2565
|
3,084
|
4 April 2024
|
11 April
2024
|
12 April
2024
|
3 May
2024
|
0.2565
|
3,084
|
Total
|
|
|
|
0.5130
|
6,168
|
On 11 March 2024 the Group announced a further
reduction of capital following the transition of the Company
standalone financial statements from FRS 101 to UK-adopted
international accounting standards as described in further detail
in note 2 and note 8 to the Company Financial
Statements. This adoption resulted in a transition reserve of
£148,517 thousand which will be capitalised by way of a bonus issue
of newly created capital reduction shares with a nominal value of
£0.0001 and share premium of £0.1234 for each share. Following the
bonus issue, the standing credit of £148,397 thousand in the
Company's share premium account will be cancelled. This is expected
to occur within the first half of 2024 and will increase
distributable reserves in the Company to facilitate the future
payment of dividends (in cash or otherwise) to Shareholders, where
justified by the profits of the Company, or to allow the redemption
or buy-back of the Company's shares (or other distributions to
Shareholders).
On 25 March 2024 the Group announcement the
establishment of a CAD 75 million reserve-based lending facility
(the "Credit Facility"). The Credit Facility agreement was entered
into by i3 Canada with the National Bank of Canada and comprises a
CAD 55 million revolving facility and a CAD 20 million operating
loan facility. The two-year term of the Credit Facility is expected
to be extended on an annual basis, subject to lender approval. The
interest rate on the outstanding portion of the revolving facility
depends on certain ratios and at inception will be Canadian Prime
Rate plus 2.00%, with the option to change to Canadian Overnight
Repo Rate plus 3.00%. The Credit Facility is secured against
substantially all the assets and shares of i3 Canada. The Group
initially drew CAD 27 million on the Credit Facility, which was
used along with cash on hand to repay the Debt Facility with
Trafigura without any prepayment penalty. The balance of undrawn
credit will be available for general corporate purposes, including
working capital requirements, acceleration of organic growth from
i3's proven portfolio of development drilling locations, and to
fund accretive acquisition opportunities.
On 25 March 2024 the Group announced the
reserves of i3 Canada as of 31 December 2023. Highlights include
Company Interest PDP reserves of 47MMboe, 1P reserves of 93MMboe,
and 2P reserves of 180MMboe. Further details can be found on the
Company's website at www.i3.energy.
On 17 April 2024 the Group announced the partial
sale of i3 Canada's royalty assets for a total gross cash
consideration of CAD 33.5 million before customary closing
adjustments. A portion of the proceeds on disposition were used to
fully eliminate the Group's outstanding indebtedness on the credit
facility. The balance, along with the fully undrawn amount of CAD
75 million on the Credit Facility, will be used for general
corporate purposes and to support both its organic and inorganic
initiatives.