I3 Energy Plc has had its price target raised by stockbroker WH Ireland which looks ahead to greater than expected cash flow over the remainder of 2021, as its latest Canadian acquisition closes.
WH Ireland’s fair value estimate is lifted to 29p from 27.2p – versus a current market price of around 11p – following Monday’s upbeat trading statement which highlighted production growth which will be further elevated through the acquisition of assets from Cenovus Energy, due to complete later this week.
Analyst Brendan Long noted that the effective date of the transaction is moved to April 1 which boosts the deal’s economics (reducing the effective transaction cost) along with recently improved oil prices.
“We expect the company to grow its cashflow further over the course of 2021 and beyond from drilling more wells than we have assumed and through securing more value accretive acquisitions,” Long said in a note.
“We had indicated that i3 Energy’s prior “net operating income” guidance of $US 75.3m was going to be materially beaten because the commodity prices assumed in that estimate were too low.
“The updated guidance of US$94.8mln on a next twelve-month basis reflects a material increase in commodity prices.”
Long highlighted the company’s achievement in exceeding 10,000 barrels a day, at the end of July, and that with the acquisition and an upcoming four-well drill programme he expects the company to see close to 19,000 boepd in the coming twelve months.
“Crossing the 10,000 boe/d threshold, having only entered Canada in 2020 and having only deployed minimal capital in Canada, is an extremely noteworthy achievement,” the analyst added.
An intensely active period
I3 in Monday’s statement described its second quarter as “another intensely active and transformational period”.
Second-quarter production, excluding assets in the Cenovus and Wapiti acquisitions, averaged 8,905 boepd – and in the final week of July the rate was 10,031 boepd. I3 said it is forecasting full year net operating income at US$62.4mln for 2021, and for the next twelve months (starting August 1) it expects the figure will be around US$94.8mln.
“The second quarter of 2021 was another intensely active and transformational period for i3 Energy,” said chief executive Majid Shafiq.
“We commenced drilling operations in our Marten Hills and Wapiti acreage and in early July announced a strategic and synergistic acquisition in our core Central Alberta area of operations from Cenovus, which will take our production to over 18,000 boepd when completed later this month.
“This acquisition more than doubles our proved plus probable reserves base to 133 mmboe, in addition to materially increasing our unbooked resource portfolio.”
The company added that it paid a maiden special dividend of 0.16p per share, paid on August 6 2021.