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i3 Energy (LSE:i3E / TSX:ITE) has raised £40m to fund further acquisitions within the Canadian oil market. The firm confirmed it is aiming to expand its operations in Alberta today with the proposed acquisition of assets from Cenovus Energy.

The oil firm is using PrimaryBid to raise the funds via a share placing with retail investors. A total of 363.7m shares were up for grabs at 11p.

i3 Energy said the deal would provide it with considerable operational synergies plus predictable production flow. The deal is being described as a continuation of i3’s strategy of capitalising on the recent market conditions to create a cash-generative, all-weather portfolio by efficiently consolidating high quality undercapitalised assets within its core operating areas.

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i3 Energy is building a portfolio of gas and oil assets

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The company is a diverse oil play focused on the Canadian oil and gas space. It has built up a portfolio of assets through a range of acquisitions. Its strategy is to focus on the development of discoveries located close to existing infrastructure and the exploitation of producing fields. It also plans to maintain “limited exploration exposure.”

i3 Energy shares leaped on the news, hitting a brief peak of 16.8p although a time of writing (Wednesday) shares were off over 14%. The market seems to be reaching for a price for the stock at around the 12p mark with 16p looking like over-enthusiasm on the part of some buyers. Overall i3 Energy shares have been progressing gradually upwards in the course of 2021, backed up by renewed enthusiasm for oil plays.

The deal sees it picking up approximately 8,400 boepd (51% oil and natural gas liquids) of predominantly operated, conventional, low-decline production and an extensive network of complementary midstream infrastructure to support long-term sustainable operations.

The production, infrastructure and lands associated with the acquisition directly overlap i3’s current asset base and the firm says they provide meaningful operational synergies which are expected to further enhance free cash flow. Profits attributable to the assets being acquired – in the year ended 31 December 2020 – were £7.1m.

“We continue to execute on our business plan which is to build and grow a material and diversified production business through the most efficient deployment of capital, whether that is through exploitation of opportunities within the company’s existing portfolio or through accretive acquisitions such as this one,” explained Majid Shafiq, CEO of i3 Energy. “This transaction not only scales up our cashflow, but it will also, in the near term, lower our unit operating costs, increase third party tariff income and add scale to i3’s expanding list of varied development opportunities, which will materially increase our options to both grow the business and manage risks.”

Cenovus Energy is a top tier veteran participant in Canada’s Western Canadian Sedimentary Basin. i3 Energy will be entering an escrow agreement with Cenovus paying C$65m for the assets. This includes both oil and natural gas production plus almost 80m barrels of proved and provable oil reserves. i3 is talking about a potential 140 future drilling locations and 80 possible well reactivation opportunities.

Other assets include over 1,000km of pipelines and processing facilities.

i3 Energy confirmed that the placing and the PrimaryBid offer are conditional on shareholder approval of “certain resolutions” at the company’s General Meeting, scheduled for 26 July.

Related

Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Stuart Fieldhouse

Stuart Fieldhouse

Stuart Fieldhouse has spent 25 years in journalism and marketing, including as a wealth management editor for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong. He was the founder editor of The Hedge Fund Journal.

Stuart has worked at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Based in The Armchair Trader’s London office, Stuart continues to advise fund managers, private banks, family offices and other financial institutions.

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