Registration number: 10699593
ANNUAL REPORT AND FINANCIAL
STATEMENTS FOR THE YEAR
ENDED 31 DECEMBER 2021
i3 Energy PLC 2021 Annual Report and Financial Statements – Strategic Report
Highlights And Outlook
Contents
Strategic Report
Highlights And Outlook .......................................................................................... 1
Interim Chairperson’s and Chief Executive’s Statement ..................................... 5
Principal Risks and Uncertainties........................................................................ 10
Section 172 Statement .......................................................................................... 15
Financial Review ................................................................................................... 18
Governance
Board of Directors ................................................................................................. 20
Corporate Governance Report ............................................................................. 22
Audit and Risk Committee Report ....................................................................... 29
Corporate Governance Committee Report ......................................................... 31
Health, Safety, Environment and Security Committee Report .......................... 32
Reserves Committee Report ................................................................................ 34
Remuneration Committee Report ........................................................................ 35
Directors’ Report ................................................................................................... 36
Financial Statements
Independent Auditors Report ............................................................................... 40
Consolidated Statement of Comprehensive Income.......................................... 46
Consolidated Statement of Financial Position ................................................... 47
Consolidated Statement of Changes in Equity ................................................... 48
Consolidated Statement of Cash Flow ................................................................ 49
Notes To the Group Financial Statements .......................................................... 50
Company Statement of Financial Position .......................................................... 84
Company Statement of Changes in Equity ......................................................... 85
Notes To the Company Financial Statements .................................................... 86
Corporate Information .......................................................................................... 90
Appendix A: Glossary ........................................................................................... 91
Appendix B: Alternate performance measures .................................................. 93
i3 Energy PLC
i3 Energy PLC 2021 Annual Report and Financial Statements – Strategic Report
Highlights And Outlook
HIGHLIGHTS AND OUTLOOK
CANADA
UK AND CORPORATE
Completed 20 August 2021
CENOVUS ACQUISITION
SERENITY
25% farmout on 1.85 for 1 basis (concluded
post year-end)
Total 2021 Revenue
£86.8 MILLION
£25.1 MILLION
Profit after tax
FY 2021 and Q4 2021 Production
12,442 BOEPD AND 18,229 BOEPD
2.84 AND 2.60 PENCE
Basic and diluted EPS
Production acquisitions
8,000+ BOEPD
£40 MILLION
Equity raised
PDP and 2P reserves
45 MMBOE AND 153 MMBOE
£3.4 MILLION
Dividends declared and paid in 2021
Leasehold position
612k NET ACRES
£3.5 MILLION
Dividends declared to date in 2022
Net production wells
902
£11.8 MILLION
Full-year dividend guidance for 2022
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i3 Energy PLC 2021 Annual Report and Financial Statements – Strategic Report
Highlights And Outlook
Highlights
Dividend Distributions
•
•
During the course of 2021, i3 paid total dividends of 0.36 p/share, equating to a yield of approximately
6.5% for i3’s shareholders based on i3’s closing share price on 1 January 2021.
Announced in December that the Company is committing to pay a minimum of £11.827 million in
dividends during the course of 2022 (3.5x all dividends paid during 2021), equating to 1.05 pence per
share or a 10.2% yield on the date of announcement, with forecasted year end "2022 Unencumbered
Cash" of US$66 million which could support additional shareholder distributions or share buybacks, M&A,
and supplemental development activity.
Financial Highlights
•
•
2021 revenue of £86.8 million (net) and net operating income (revenue less royalties, opex, processing
and transportation) of £48.8 million and cash flow from operations of £24.4 million.
To fund the Cenovus acquisition on 7 July 2021, i3 raised approximately £40 million through the placing
and subscription of 363,700,000 shares at an issue price of 11 pence per share, a 3% discount to the
15-day average closing price of 11.4 pence. Concluded a reduction of the Company’s share premium
account by way of a UK court approvals process in order to free up distributable reserves to effect the
abovementioned dividend payments.
Operational Highlights
•
2021 full-year production averaged 12,442 boepd, with Q4 2021 including the newly integrated Central
Alberta assets acquired from Cenovus Energy (which closed in August 2021) averaging 18,229 boepd
(compared to 13,239 boepd in Q3, 9,018 boepd in Q2 and 9,173 boepd in Q1 2021). Q4's production
was comprised of 58 million standard cubic feet of gas per day ("mmscfd"), 5,210 barrels per day ("bbl/d")
of NGLs, 3,015 bbl/d of oil and 331 boepd of gross overriding royalty interest production. Q4 2021
production was impacted by the closing of multiple non-core asset disposals and December's severe
cold weather.
•
Increased exposure to Alberta’s premier Clearwater play:
•
•
•
Confirmed presence of oil in three gas wells in i3’s extensive Marten Creek acreage, providing a
green light for a winter 2021/22 oil appraisal programme.
Farmed-in to a 50% working interest in the Marten Hill’s Clearwater area and participated in two
successful development wells which added c.120 boepd net production, with an option to drill seven
additional wells on the acreage.
Participated in Crown Land Sales, bolstering acreage through a 15-year lease on seven sections
(17.9 km2) of land in the emerging Cadotte area.
Acquired a 49.5% interest in South Simonette at a cost of US$4.2 million, increasing i3’s previously held
49.5% operated interest in this Montney oil play to 99% and allowing it to bring back on to production
three wells to increase its corporate production by c.720 boepd and adding reserves of 4.9 MMboe at a
before-tax NPV10 valuation of US$30.9 million. Total estimated 2P reserves as of 31 December 2021
were 10.3 MMboe.
Elected to drill two oil-weighted wells with a partner at its Wapiti Elmworth acreage, expected to initially
increase i3's production by c.175 boepd, with payback estimated in 1.3 years.
Acquired c.230 boepd of Wapiti production, conducted six reactivations to increase production to 471
boepd, significantly exceeding the expected 310 boepd.
Brought on stream a gas well located on the Company's Noel acreage in Northeast British Columbia at
an average rate of 650 boepd, exceeding expectations by 30%.
•
•
•
•
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i3 Energy PLC 2021 Annual Report and Financial Statements – Strategic Report
Highlights And Outlook
•
•
•
•
Acquired circa 8,400 boepd (51% oil and NGLs) of low decline production from Cenovus Energy Inc,
located within i3’s Central Alberta core area, for a total consideration of CAD65 million (US$53.7 million).
The assets were acquired on excellent metrics of 1.73x next twelve months cashflow, US$6,381/boepd
and US$0.68/boe of 2P reserves and contain 79.5 MMboe of 2P reserves with an NPV10 of US$193
million as at 1 April 2021, an inventory of greater than 140 net drilling locations, 80 net reactivation
opportunities and 1,140 km network of operated pipelines, and key processing facilities. The transaction
closed on 20 August 2021.
To increase its focus on its high working interest assets in Central Alberta, Wapiti / Elmworth, Simonette
and the Clearwater play, during Q4 2021 the Company executed multiple non-core disposals with the
purpose of reducing its per boe operating costs, decreasing end-of-life obligations, and releasing US$945
thousand of decommissioning-related bonds to i3's balance sheet (previously held with provincial oil and
gas authorities to offset potential end-of-life liabilities). On a combined basis, these disposals reduced
i3's production by approximately 130 boepd from a combined 213 gross (184.5 net) wells (consisting of
36 gross (34.3 net) active and 177 gross (150.2 net) inactive wells) and reduced the Company's overall
undiscounted asset retirement obligation by approximately US$9.8 million. The proceeds from these and
future disposals will be utilised to accelerate growth from i3's extensive inventory of highly economic
development locations as the Company remains focused on delivering total shareholder returns.
During Q4 the Company brought on stream four gross (1.5 net) highly economic non-operated horizontal
wells within its Central Alberta and Wapiti core areas, at an average 37% working interest. The
programme consisted of one well targeting the liquids-rich Ellerslie formation, one Belly River oil producer
and two Dunvegan oil wells, which in aggregate contributed net average daily production over its initial
30-day production period (“IP30 rates”) of approximately 600 boepd (65% oil and NGLs) and are
collectively meeting or exceeding i3's forecasted type curves. This non-operated programme is expected
to pay out in approximately one year and serve to further bolster i3's year-end reserves and add newly
identified offsetting development locations.
The Company continued to systematically identify and develop its robust inventory of low-cost, high-
return recompletion and reactivation opportunities, which produce top-tier returns and assist in further
reducing i3's corporate operating costs on a boe basis through the utilisation of the Company's extensive
network of owned and operated infrastructure while optimising field efficiencies with nominal capital. 16
gross (14 net) oil-focused recompletions and reactivations were brought on production in Q4, resulting
in net IP30 rates of approximately 240 boepd (65% oil and NGLs). Cumulatively, the operations were
completed on budget and are anticipated to pay out in substantially less than one year.
• On 20 December 2021, the Company announced a fully funded 2022 capital budget of US$47 million to
fund a 12.6 net well operated drilling programme, non-operated drilling, well reactivations,
debottlenecking, consolidation, and third-party tariff generating projects. This programme is expected to
deliver average corporate production in 2022 above 20,000 boepd, with peaks reaching 21,000 boepd.
•
•
The Company commenced a hedging program which will result in approximately 50% of corporate
volumes being hedged on a rolling 12 month forward looking basis.
Agreed terms with a potential farm-in partner for the Serenity field appraisal drilling programme and, at
year-end, the Company was awaiting confirmation of funding commitments from that potential farm-in
partner before finalising and executing documentation.
Post Period and 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 2022 will be on four 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 in core
areas;
2 Drilling an appraisal well at the Company’s Serenity oil discovery in the UK to prove reserves and to guide
future development plans;
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i3 Energy PLC 2021 Annual Report and Financial Statements – Strategic Report
Highlights And Outlook
3 Dividend distributions to its shareholders of up to 30% of free cash flow; and
4 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.
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i3 Energy PLC 2021 Annual Report and Financial Statements – Strategic Report
Interim Chairperson’s and Chief Executive’s Statement
INTERIM CHAIRPERSON’S AND CHIEF EXECUTIVE’S
STATEMENT
Overview of the year
i3 is extremely pleased with the results of 2021, which served to prove the Company’s buy-and-build strategy of
using acquisitions, operational focus, and the drill-bit to create a portfolio of producing assets with realisable upside
from which shareholder value could be created and returned in the form of share price growth and a cash yield.
Having acquired Toscana Energy Income Corporation (“Toscana”) in 2020, with its modest amount of production,
as a foundation atop which to build a growth-focused production business in the Western Canadian Sedimentary
Basin (“WCSB”), followed by the purchase of the entire asset portfolio of Gain Energy Ltd. (“Gain”), the Company
entered 2021 having secured over 9,000 boepd during one of the most depressed and volatile years in the sector’s
history. During a period when most companies hunkered down, i3 bought assets as quickly as access to capital
and deal-flow permitted, as buying at or near market bottoms is a long-proven strategy for increasing both the
margins of safety and error, providing tremendous torque to an eventual macro-economic recovery. Our
acquisition-led entry into the WCSB during a period which saw unprecedented commodity price lows positioned
the Company for success, and following a busy period of corporate, financial, and operational amalgamation of
Toscana and Gain into i3 Energy Canada Limited, the Canadian operations team set to harvesting the low-hanging
fruit that existed within these long-undercapitalised portfolios, while the executive continued to seek further material
asset packages that could be purchased.
On 17 June, i3 announced that numerous acquisition and drilling initiatives it had concluded or committed to during
the course of H1 would result in i3's production surpassing 10,000 boepd during the second half of the year and
were expected to materially increase the Company's next twelve months (“NTM”) net operating income (“NOI” =
revenue minus royalties, opex, transportation and processing) well-beyond its previous market guidance. To mid-
year 2021, i3 had been able to capture its entire Canadian portfolio at an average of 1.0x NTM NOI (from June
2021) and US$4,557/boepd.
On 6 July, i3 announced that it had signed an Asset Sale Agreement ("ASA") with Cenovus Energy Inc., a senior
Canadian oil and gas producer, to acquire certain conventional central Alberta petroleum and infrastructure assets.
The acquisition would include approximately 8,400 boepd (51% oil and NGLs) of predictable low-decline production,
79.5 MMboe of 2P reserves with an NPV10 of US$193 million, as at 1 April 2021, an inventory of greater than 140
net drilling locations and 80 net reactivation opportunities across approximately 212,000 net acres, a 1,140 km
network of operated pipelines, and key processing facilities. The Cenovus assets complement i3's existing area
assets with approximately 3,090 boepd of overlapping joint working interest production and associated land
positions. The CAD65 million acquisition was funded through an equity issuance of 363,700,000 shares at an issue
price of 11 pence per share, representing a 3% discount to the 15-day average closing price to 7 July of 11.4p.
The Cenovus acquisition is a continuation of i3's stated strategy of capitalising on the abnormal market conditions
of 2020 and 2021 to create a cash-generative, all-weather portfolio by efficiently consolidating high quality
undercapitalised assets within our core operating areas. The production, infrastructure and lands associated with
the acquisition directly overlap our current Central Alberta asset base and provide meaningful operational synergies.
Through this strategic acquisition, i3 significantly enhances its production, cash flow and reserve base while
strengthening its balance sheet. Furthermore, the Cenovus acquisition enhances i3's ability to grow future
production, free cash flow, and its planned return of capital to shareholders through dividend payments.
All in, the abovementioned initiatives were concluded at exceptional effective acquisition metrics of 1.36x NTM NOI,
or US$5,533/boepd. In the context of the market, the Directors believe this to be an outstanding result for such high-
quality production assets. As importantly, i3’s acquisitions have garnered untapped Proven Undeveloped (PUD)
and/or Proven plus Probable (2P) development opportunities, resulting in several highly prospective projects now
existing within our portfolio. The upside potential within i3’s South Simonette, North Simonette and Clearwater
positions in Canada and its Serenity discovery in the UK, as well as redevelopment options of some of our more
mature assets via secondary recovery and infill drilling, present company-making opportunities that have the
potential to deliver multiples of i3’s current production, reserves and cash flow.
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i3 Energy PLC 2021 Annual Report and Financial Statements – Strategic Report
Interim Chairperson’s and Chief Executive’s Statement
The opportunity high-grading process which followed our integration of the Cenovus assets culminated in the 20
December announcement of a planned US$47 million 2022 capital budget (the “Capital Budget”), such that
production and cash flow can continue to be increased, targeted upside in the Company's key Clearwater and
Simonette Montney plays can be advanced, and the substantial return of capital to i3’s shareholders can be
assured.
The Capital Budget, which is fully funded from existing Company resources and forecast internally generated cash
flow, is predicted to provide incremental peak production of up to 5,250 boepd through the funding of 12.6 net wells
(17 gross, 88% i3-operated, including one Montney oil producer at Simonette plus two (net) oil producers and two
non-producing test wells in the Clearwater play), oil wells in the Cardium and liquids rich gas wells in the Falher and
Glauconitic plays and maintenance capital to support producing wells and infrastructure. The budget also includes
an amount of capital that has been allocated to fund highly economic, non-operated drilling opportunities as they
arise, and projects which enhance cashflow and increase netbacks such as well reactivations, debottlenecking,
consolidation, and tariff-generating third-party tie-ins to i3-operated facilities. This activity is expected to deliver a
26% production increase over the 2022 exit rates predicted under i3's blowdown case (which considers no capex
and a conservatively estimated natural decline across the entire portfolio of 14%), resulting in average 2022
production above 20,000 boepd with peaks reaching 21,000 boepd. The Capital Budget focuses on a combination
of swift payback and high impact targets in i3’s core operating areas as follows:
Early results from the abovementioned activities position i3 to achieve or exceed the initial expectations noted
above. Should similar success continue, the Company will look to accelerate additional capital deployment which
will take advantage of operational momentum and the current favourable commodities environment. The Company
remains highly confident that the continuance of its Canadian strategy, in accordance with the above, will deliver to
its shareholders meaningful value through both share price appreciation and long-term cash distributions. The
following graphically demonstrates i3’s growth in the WCSB since its entry in 2020; we expect to continue along an
equally exciting trajectory:
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i3 Energy PLC 2021 Annual Report and Financial Statements – Strategic Report
Interim Chairperson’s and Chief Executive’s Statement
154 MMBOE 2P reserves in the chart above reflects the Company Interest reserves as of 31 December 2021.
We continue to actively identify production optimisation and cost reduction opportunities within our portfolio,
focussing on maintaining high uptime, minimising operating costs, optimising operated processing facilities and
infrastructure, and implementing high return workovers to offset natural production declines. These efforts continue
to increase aggregate average net production and substantially reduce the decline rates predicted within the
Company’s competent persons reports. This is a testament to the quality of the assets in the portfolio and the
dedication of our workforce. In parallel with operational activity, we continue to review the reservoir performance of
the producing assets and identify mature fields where redevelopment, particularly through the implementation of
relatively low-cost secondary recovery projects, could materially increase production and ultimate hydrocarbon
recovery. Operating our assets in a safe and secure manner is fundamental to our business and we continue to
advance our health and safety policies and procedures as we acquire and integrate additional production assets.
There were 106 routine regulatory government inspections during 2021. 83 returned satisfactory results, 19 were
categorised as low risk, and four that were deemed to be high risk were subsequently remedied.
The Company was very pleased to announce on 2 March 2022 that, regarding its UK assets, i3 would be welcoming
Europa Oil & Gas Limited (“Europa”) as a 25% working interest joint venture partner in the Company’s Serenity oil
discovery upon the execution of a farm-in, join operating agreement, and trust deed (each essentially agreed
between the parties), in exchange for Europa funding 46.25% of the next Serenity appraisal well, being planned for
H2 2022. The team remains confident in its belief that the Serenity field holds a company-making resource, and
we expect this next appraisal well to prove that premise. Discussions continue with other potential farminees, and
i3 will consider bringing in additional parties up to the point of drilling commencement.
Financial Discipline
The Board and Management are focused on delivering consistent value to shareholders. i3 is committed to being
a dividend payer that distributes up to 30% of its free cash flow, and it is protecting this commitment through a
conservative hedging program. The Company has and continues to keep a substantial portion of its production
hedged through risk management contracts to manage commodity price risk, with additional free cash being
redeployed to acquire production assets conditional on the associated acquisition metrics competing with the
organic returns achievable through the development of our proven undeveloped (PUD) and 2P inventory. As i3
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i3 Energy PLC 2021 Annual Report and Financial Statements – Strategic Report
Interim Chairperson’s and Chief Executive’s Statement
continues to grow its portfolio, a proportion of all incremental production will be hedged in order to secure future
cash flow, and the Company will remain commercial in monetising assets when third-party interest warrants
consideration.
With the well-timed acquisitions and capital deployment of the last 24 months, the Company's assets have
continued to outperform the Directors' expectations. During H2 2021, i3 made dividend distributions totalling £3.417
million, and on 20 December 2021 the Company committed to pay a minimum dividend of £11.827 million during
the course of 2022. Showing the Directors’ confidence in the consistent performance of the portfolio, on 3 February
2022 i3 announced that this sum would be paid in ten equal increments on a monthly schedule with its first monthly
dividend to be paid in March.
The strong performance of the Company’s assets combined with the current strength in commodity prices will result
in i3 having a substantial sum of unencumbered free cash which can be directed towards additional production
growth initiatives, shareholder distributions or share buybacks, and deleveraging.
Governance
The Board recognises its responsibility for the proper management of the Company and is committed to maintaining
a high standard of corporate governance. The Directors also recognise the importance of sound 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 intend to 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 Chief Financial Officer) and four Non-Executive Directors (including the Interim 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.
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i3 Energy PLC 2021 Annual Report and Financial Statements – Strategic Report
Interim Chairperson’s and Chief Executive’s Statement
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
environmental operational, reporting and compliance obligations and abandonment and reclamation requirements.
In Q4 2021 the Company commenced a detailed study of its recently acquired operated wells and facilities to record
baseline emissions data for the purposes of developing an ESG strategy to meet its currently stated target of being
net zero with respect to Scope 1 and Scope 2 emissions by 2050. The work included an evaluation of potential
opportunities to reduce greenhouse gas emissions and the Company intends to publish in Q2 2022 its maiden
annual sustainability report, which will report our emissions, water use and air quality data and outline our ESG
vision and strategy. On acquisition of its Canadian portfolio in late 2020, the Company commenced initiatives to
reduce GHG emissions from its operated assets. This has included the replacement of 389 pneumatic controllers
which use natural gas as the operating fluid with low bleed controllers or replaced the operating fluid with air. The
majority of these conversions were conducted in 2021. These initiatives qualify for carbon credits which can be
sold or used to offset future carbon tax obligations. The Company has also commenced the replacement where
practical and economically feasible of some propane power generation units with direct connections to utility
electricity supply. The Company also takes very seriously its asset retirement obligations and is an active participant
in the Government of Alberta’s Site Rehabilitation Program (“SRP”) from which it has received grants of US$1.8
million in total and Saskatchewan’s Accelerated Site Closure Program (“ASCP”) and has a regular and routine
program to abandon non-operational assets and reclaim the associated land and environment. In 2021 the
Company abandoned 17 wells (for a total of 30 including 2020), and 6 pipelines and decommissioned 1 facility and
obtained 9 reclamation certificates.
Looking ahead
The Company is very proud of what it has and continues to accomplish since reinventing itself in 2020 and expects
to deliver more of the same. We will carry on growing our Canadian production business by employing our stated
strategy of being acquisitive when systemic or situational drivers offer good value, while drilling our ever-growing
inventory of high-quality proven undeveloped and 2P reserves when doing so offers better returns than the M&A
market. In the UK, we remain committed to the further appraisal and development of Serenity and are looking
forward to our H2 2022 drilling programme.
Beyond our current business as an oil and gas company, we see climate change as the most urgent matter of our
time and deem it critical to act in a manner that exhibits this concern. Though the world will undoubtedly require oil
and gas for some time yet, we understand the crucial role that hydrocarbon-based corporates have to play in the
transition to net zero and we remain committed to an evolution of our energy company into one that continues to
benefit society for generations to come.
As always, we extend gratitude to our capital providers 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
distributed returns.
“Linda Beal”
“Majid Shafiq”
Linda Beal
Non-Executive Interim Chairperson
11 April 2022
Majid Shafiq
Chief Executive Officer
11 April 2022
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i3 Energy PLC 2021 Annual Report and Financial Statements – Strategic Report
Principal Risks and Uncertainties
PRINCIPAL RISKS AND UNCERTAINTIES
Key Operating, Strategic, and Financial Risks
The Group operates in the oil and gas industry in an environment subject to a range of inherent risks and
uncertainties. Following the Group’s entrance to Canada in 2020 and its further expansion in 2021 the Group’s risks
shifted toward a range of operational risks.
The Group completes a bottom-up process for identifying various operational, strategic, and financial risks. These
risks are maintained on the corporate risk register which is continually monitored by management. Management
then assesses the potential probability and impact of each risk, and those determined to be the most significant are
classified as the Group’s key risks. The principal risks and uncertainties are reviewed by management and the Audit
and Risk Committee twice per year and approved by the Board annually. The current key risks and their associated
mitigations are set out below.
Key Risk
Description
Mitigation
Operational:
Sub-surface
assessment and
production, reserve,
and resource
estimation
Health, Safety,
Security and
Environment
Regulatory and
compliance
Change in
the period
No change
No change
Incorrect interpretation of
subsurface data may lead
to inaccurate reserves
and production forecasts
which may have an
adverse impact on the
financial performance of
the Group. See Financial
Statements note 3 where
the carrying value of
intangible exploration and
evaluation assets has
been identified as a
critical accounting
judgement.
Both onshore and
offshore development
carry the risk of major
incident and harm to the
Group's employees,
contractors, and the
environment.
The Group employs experienced sub-
surface professionals with deep knowledge
of different play types and contracts.
The Group engages external consultants to
complete independent reserves
assessments and to compile Competent
Persons Reports.
The Group's appraisal programmes are
designed to de-risk the overall field
development. Well and seismic data is
continually reviewed to best allocate capital
and make drilling decisions.
Integrated Management System (IMS) set
up to ensure all regulatory and
environmental and safety requirements are
met, appropriate training is in place and
compliance verified.
Various Health, Safety, Security and
Environment policies and manuals are
implemented in Canada, including a
comprehensive Emergency Response Plan.
The Group operates in
two jurisdictions which
have unique regulatory
frameworks. Non-
compliance with
regulations could lead to
loss of title to its assets,
financial damage, or
reputational damage.
IT security is ensured through an external
service provider.
The Group manages its regulatory and
compliance risks through the employment of
sufficient competent personnel and through
retaining suitably proficient advisors.
No change
The Group actively engages with its
regulators.
The Group continually monitors the status
and commitments on its licences.
i3 Energy PLC
10
Change in
the period
Decrease
i3 Energy PLC 2021 Annual Report and Financial Statements – Strategic Report
Principal Risks and Uncertainties
Key Risk
Description
Mitigation
Canadian operations
risk
The Group ensured that the acquisition of
the Canadian production assets included the
transfer of all staff who the Group
considered were required to effectively and
safely operate those assets, including key
operational staff from the Cenovus
acquisition completed in August 2021. This
resulted in a seamless transfer of the
business into the Group. The Group
continually monitors its human resource
base to ensure it has the experience and
qualifications to manage its operations and
appropriately mitigate associated operational
and business risks. Technical, safety and
business training is conducted to ensure skill
sets are up to date and relevant to the
Group’s business. The Group has
introduced flexible working practices into its
Canadian and UK operations to manage
periods of Covid related travel and working
practice regulations. There is no requirement
for overnight accommodation at any of the
Group’s field operations which minimises
COVID related risks.
There is a risk that
financial and operational
performance of the
Group's Canadian
operations are negatively
impacted due to sub-
optimal well performance,
loss of access to third
party gathering,
processing, and pipeline
infrastructure, weather
patterns, and non-
integration of assets
acquired. Sub-optimal
project management
could lead to project
delays or cost overruns.
The ongoing COVID-19
pandemic could interrupt
production or the
availability of key staff.
The Group considers the
risk level to have
decreased in 2021 due to
entrance to Canada
occurring in 2020 the
improved understanding
of the COVID-19
pandemic.
The Group continually engages with its
operating partners and closely monitors the
operation of its assets.
No change
The Group will complete thorough due
diligence reviews before entering future farm
down transactions to ensure that their
strategic and operational objectives are
aligned with those of the Group.
JV partner alignment The Group has both
operated and non-
operated interests in
Canada and in early-2021
announced a farm down
of its interest in the UK.
Where the Group
operates as non-operating
partner it may have
limited control over the
day-to-day management
or operations of these
assets. A third-party
operator's
mismanagement of an
asset may result in
significant delays or
materially increased costs
to the Group, or to
liabilities over which the
Group is joint and
severally liable. There is
no guarantee that a third-
party operator's HSSE
standards are aligned with
the Group's.
Strategic:
i3 Energy PLC
11
i3 Energy PLC 2021 Annual Report and Financial Statements – Strategic Report
Principal Risks and Uncertainties
Key Risk
Description
Mitigation
Climate change and
energy transition
A global transition to
alternative energy
sources could have an
adverse impact on
commodity prices and/or
the Group's access to and
cost of capital.
The Group maintains compliance with
current environmental regulations. It is
committed to conducting its operations with
net zero GHG emissions by 2050. Our
strategy development includes consideration
of these risks and potential mitigants. A
strategy to participate in the energy
transition is being developed in concert with
discussions with the investment community
to ensure our investment proposition
remains relevant to the market.
Change in
the period
No change
i3 Energy plc is in the process of completing
its first Sustainability Report which we
anticipate releasing in Q2 2022.
The Group engages with a range of advisors
and active competitor monitoring to provide
a range of opportunities for screening.
Decrease
The Group is led by experienced
professionals spanning key disciplines to
screen and fully assess growth
opportunities.
The Group has strong relationships within
the sector, both in the UK and Canada.
The Group continually reviews its portfolio of
assets to identify internal growth
opportunities.
No change
The Group is in active farm-down
discussions, and in early-2022 welcomed
Europa as a 25% working interest joint
venture partner in the Company’s Serenity
oil discovery which will be effective upon the
execution of a farm-in, joint operating
agreement, and trust deed (each essentially
agreed between the parties).
The Group is considering multiple field
development approaches and will proceed in
accordance with a strategy contingent on the
results of the future appraisal drilling
programme.
Lack of growth
Development of North
Sea assets
The Group is seeking
opportunities to expand its
portfolio of assets and to
increase production rates
from existing assets but
may not find such assets
to be able to deliver value
from such acquisitions.
The Group considers the
risk level to have
decreased in 2021 due to
the significant acquisitions
completed in 2020 and
2021 and the ability to
grow production through
the Canadian 2P portfolio
which is within the
Group’s control.
Further appraisal drilling
is required to develop the
Serenity discovery, the
results of which are
uncertain until the work is
completed. There is a
high cost associated with
further appraisal drilling
and therefore it is
contingent upon raising
the necessary funds.
There is uncertainty
whether a subsequent
development of the field
would be commercial or
whether this would require
access to third-party
production, processing
and transportation
facilities. See Financial
Statements note 3 where
the carrying value of
intangible exploration and
evaluation assets has
been identified as a
i3 Energy PLC
12
i3 Energy PLC 2021 Annual Report and Financial Statements – Strategic Report
Principal Risks and Uncertainties
Key Risk
Description
critical accounting
judgement.
Mitigation
Change in
the period
Financial:
Commodity price
volatility
Decommissioning
costs
Capital requirements
and access to capital
Oil and gas commodity
prices can be volatile and
are dependent on the
level of supply and
demand for oil and gas
products at any given
time, as most recently
illustrated following
Russia’s invasion of
Ukraine in 2022. The
Group's operating cash
flows in the short-term
and returns on capital
projects in the long-term
may be negatively
impacted by depressed oil
and gas prices. See
Financial Statements note
3 where the carrying
value of intangible
exploration and evaluation
assets and oil and gas
assets have been
identified as critical
accounting judgements.
The Group forecasts
decommissioning costs
over the next 50 years.
There is a risk that the
cost estimates overrun
either due to inaccurate
estimation or unforeseen
site contaminations. See
Financial Statements note
3 where decommissioning
costs have been identified
as a key source of
estimation uncertainty.
The Group will require
significant capital to grow
its operations in Canada
and to develop its oil and
gas assets on the UKCS.
The Group may be
dependent or partially
dependent on access to
external capital to deliver
this growth, and there is
no guarantee the capital
will be available at terms
acceptable to the Group.
The Group plans based on a range of
commodity prices, stress test scenarios and
sensitivities when allocating capital.
No change
The Group closely monitors the profitability
of its Canadian operations, including trends
in both spot and forward commodity pricing.
The Group continually reviews its hedging
strategy and executed various commodity
hedging contracts throughout 2021 and
2022, hedging approximately 50% of
corporate volumes on a rolling 12 month
forward looking basis. A summary of the
Group’s hedges are provided in note 18 and
note 24 of the financial statements.
The Group uses commonly accepted cost
estimation techniques based on rates
published by the Alberta Energy Regulator
(“AER”).
No change
The Group employs experienced
professionals to oversee the
decommissioning cost estimates.
The Group continually invests in
decommissioning its assets, including
participation in Alberta’s SRP and
Saskatchewan’s ASCP programs.
The Group is publicly listed on both the TSX
and the AIM which provides access to equity
capital markets. The Group successfully
accessed these markets and secured equity
funding in 2020 and 2021.
No change
The Group continually engages with
shareholders and industry partners.
The Group generates positive cash flows
from its Canada operations which will
decrease the Group's dependency on
external financing.
i3 Energy PLC
13
i3 Energy PLC 2021 Annual Report and Financial Statements – Strategic Report
Principal Risks and Uncertainties
Key Risk
Description
Mitigation
The Group continually monitors its capital
allocation and will only pursue programs that
are of appropriate size and risk relative to
the Group's capital resources.
Change in
the period
The risks set out above are not exhaustive and it is likely that the risks identified will evolve and that additional risks
will arise in the future. Any of these risks could have a material adverse effect on the business.
i3 Energy PLC
14
i3 Energy PLC 2021 Annual Report and Financial Statements – Strategic Report
Section 172 Statement
SECTION 172 STATEMENT
Section 172 (1) of the Companies Act obliges the Directors to promote the success of the Company for the benefit
of the Company’s members as a whole. This section specifies that the Directors must act in good faith when
promoting the success of the Company and in doing so have regard (amongst other things) to:
a. the likely consequences of any decision in the long term,
b. the interests of the Company’s employees,
c. the need to foster the Company’s business relationship with suppliers, customers, and others,
d. the impact of the Company’s operations on the community and environment,
e. the desirability of the Company maintaining a reputation for high standards of business conduct, and
f. the need to act fairly as between members of the Company.
a. the likely
consequences of any
decision in the long term,
The Board of Directors meets regularly and uses these meetings to consider the
likely consequences of any decisions in the long term. This includes its collective
responsibility for formulating the Company’s strategy, which is to i) acquire
undervalued developed producing fields and operate them efficiently, safely and in
full regulatory compliance, and ii) ultimately deliver hydrocarbon projects into
production by graduating assets through the industry life cycle of exploration,
appraisal, development, production, and optimisation. Some key decisions were
taken by the Board since the beginning of 2021 which were aimed to deliver on this
strategy. These included:
• Raising £40 million of equity and in order to complete the Cenovus
acquisition;
• Acquiring a sizeable asset portfolio from Cenovus which will enhance cash
flow generation and the Group’s ability to fund a regular dividend and
provide capital for additional organic or inorganic expansion;
•
Implementing an active hedging strategy designed to protect shareholder
returns; and
• Continuing the search for farminees on the Serenity oil discovery,
including the early-2022 announcement that i3 would be welcoming
Europa as a 25% working interest joint venture partner in the Company’s
Serenity oil discovery which will be effective upon the execution of a farm-
in, join operating agreement, and trust deed (each essentially agreed
between the parties).
The decisions outlined above considered the interests of the Company’s
stakeholders, including revenue and cash flow generation which can be returned to
shareholders through dividends, improved funding position to settle obligations to
suppliers, and longer-term stability for i3’s employees.
The Board places equal importance on all shareholders and strives for transparent
and effective external communications, within the regulatory confines of an AIM-
listed company. The primary communication tool for regulatory matters and matters
of material substance is through the Regulatory News Service, (“RNS”). The
Company’s website is also updated regularly and provides further details on the
business as well as links to helpful content such as our latest investor presentations.
We also hold regular investor events which are open to all shareholders and provide
an environment where shareholders can interact with the Board and management,
ask questions, and raise their concerns.
b. the interests of the
Company’s employees,
Our employees are one of the primary assets of our business and will be critical to
the future success of the Company. Our employee headcount expanded
significantly through the Company’s wholly owned subsidiary i3 Energy Canada
i3 Energy PLC
15
i3 Energy PLC 2021 Annual Report and Financial Statements – Strategic Report
Section 172 Statement
Limited following the integration of the Gain and Toscana acquisitions which closed
in 2020 and the Cenovus acquisition which closed in 2021. The Company has an
employee onboarding process in place that provides new employees the
information, relationships, and tools they need to be comfortable and confident in
their work. First and foremost, the Directors strive to ensure a safe working
environment for all its staff and contractors, and we are proud of our safety
achievements in 2021. We also seek to reward employees with remuneration
packages which align the interests of the Company and its shareholders with those
of its employees. We believe we have achieved this through the award of share
options which contain vesting conditions aligned with the strategic objectives of the
Group. To ensure our remuneration packages are competitive and appropriate the
Remuneration Committee seeks external advice on market practice and
benchmarks. Employees are also provided with challenging work and external
training opportunities to ensure their continual development. The Board engages
with the Group’s employees continually throughout the year, both formally at Board
meetings, and also informally through interaction and operational, financial and
M&A discussions with certain employees.
The Company fosters its business relationships with suppliers, customers,
contractors, and its various joint venture business partners in Canada. The Group
engages frequently with key suppliers through a regular review of vendor due
diligence, creating efficiencies within the supply chain, and considering their
interests in our operations. Examples in 2021 include continued discussion with key
vendors and the repayment of balances due from the 2019 drilling campaign, the
renegotiation of a long-term accounts payable and associated share warrants and
engaging with vendors regarding liabilities assumed through the Toscana
acquisition. The Group also works extensively with joint interest partners, in
particular through our Canadian operations where we operate primarily through joint
interests on our producing assets and communicates frequently with these partners.
The Executive Directors engage directly with joint venture partners, including
potential farminees on the UK assets.
The Group and its suppliers, customers, contractors, and various joint venture
partners are committed to ethical principles and place great value on integrity and
compliance with the applicable laws and regulations. The Company expects all of
its business partners to follow similar standards in their behaviour.
The Company considers the impact of its operations on the community and the
environment. The Group maintains offices in both Aberdeen and Calgary through
which we integrate with the local communities and engage directly with local
municipalities on various matters. The Company regularly engages with the AER
following our introduction to Canadian operations and have been recognised as an
upstanding operator
its
the
to responsibly
decommissioning obligations
decommission in accordance with local regulations and in collaboration with the
AER. This was demonstrated by incurring decommissioning spend and assistance
under the Alberta SRP and Saskatchewan ASCP programs.
region. The Company closely monitors
it
in Canada which
intends
in
c. the need to foster the
Company’s business
relationship with
suppliers, customers and
others,
d. the impact of the
Company’s operations
on the community and
environment,
i3 Energy plc is in the process of completing its first Sustainability Report which we
anticipate releasing in Q2 2022.
e. the desirability of the
Company maintaining a
reputation for high
The Board has an obligation to ensure the Company acts responsibly and maintains
a reputation for high standards of business conduct. There is regular
communication between the Directors, Executive Directors, and key members of
i3 Energy PLC
16
i3 Energy PLC 2021 Annual Report and Financial Statements – Strategic Report
Section 172 Statement
standards of business
conduct, and
f. the need to act fairly as
between members of the
Company.
the management team to ensure this culture is promoted and maintained
throughout the organisation. The Company operates with open, transparent, and
two-way communication and consistent access to the Directors. All of the
Company’s employees must adhere to i3’s anti-bribery and corruption policies and
uphold the Company’s business ethics at all times.
The Company recognises its broad range of stakeholders and the need to operate
in a manner that is fair to all these stakeholders. The Board meets regularly and
considers the interests of the various stakeholders in the decisions they make. This
was demonstrated through the Company’s approach to the Cenovus acquisition
which were structured to create value for shareholders, but also to ensure continuity
and integration of certain employees from Cenovus and to present growth
opportunities to existing employees of the i3 Group. The Company communicates
regularly with external stakeholders through investor roadshows and meetings and
regular operational and financial updates through RNS announcements.
The Directors believe they have acted in the way they consider most likely to promote the success of the Company
for the benefit of its members as a whole, as required by Section 172 (1) of the Companies Act 2006.
i3 Energy PLC
17
i3 Energy PLC 2021 Annual Report and Financial Statements – Strategic Report
Financial Review
FINANCIAL REVIEW
Fundraising
In July 2021 the Group issued 363,700,000 new Ordinary Shares at 11 pence per Ordinary share, for gross
proceeds of £40.0 million (£38.0 million net of issuance costs). The proceeds were primarily used to fund the
Cenovus acquisition, and for ongoing operations and general corporate purposes.
Acquisitions
On 20 August 2021 the Group completed the acquisition of certain petroleum and infrastructure assets (the
“Cenovus Assets”) from Cenovus Energy Inc. (“Cenovus”) for gross consideration of CAD65 million. The Cenovus
Assets include approximately 8,400 boepd (51% oil and NGLs) of predictable low-decline production, 79.5 MMboe
of 2P reserves, an inventory of greater than 140 net drilling locations and 80 net reactivation opportunities across
approximately 212,000 net acres, an 1,140 km network of operated pipelines, and key processing facilities. The
acquisition enabled the Group to expand its Canadian operations through cash flow generating assets. The net
consideration of £33.3 million resulted in the recognition of PP&E assets of £117.4 million, prepaid expenses of
£1.0 million, inventory of £0.2 million, a decommissioning provision of £53.8 million, a deferred tax liability of £7.2
million, and a resulting gain on bargain purchase of £24.3 million. Further details are provided in note 4 to the
financial statements.
In addition to the Cenovus acquisition, the Group completed smaller oil and gas asset acquisitions in Canada which
did not meet the definition of business combinations, resulting in the recognition of PP&E assets of £5.4 million and
associated decommissioning provision of £2.6 million.
Production and revenue
Total average daily production in the year ended 2021 was 12,442 boepd, which increased 42% from total average
daily production of 8,732 boepd from 3 September 2020 to 31 December 2020. The increase in average daily
production is mostly attributed to the Cenovus assets acquisition, which closed on 20 August 2021 and averaged
approximately 8,400 boepd from close to 31 December 2021. In addition, i3 completed two strategic asset
acquisitions, with one in Simonette and the other in Wapiti adding approximately 250 boepd. i3’s daily average
production also increased as a result of new production adds from i3 participating in non-operated drills and planned
recompletions and workovers. Average production additions in 2021 were partially offset by natural production
declines and temporary production disruptions due to cold temperatures in late December 2021. i3 also sold all of
its assets in the province of Saskatchewan with the sale of its Weyburn property. The sale closed 29 November
2021 and had a minor impact on overall 2021 production. Daily average production mix in 2021 was comprised of
56% natural gas and 44% oil and natural gas liquids, compared to daily average production mix in 2020 comprised
of 59% natural gas and 41% oil and natural gas liquids.
Total revenue for the year ended 31 December 2021 was £86.8 million, compared to £13.0 million for the year
ended 31 December 2020. Revenue in 2021 was comprised of proceeds from the sale of oil, gas and natural gas
liquids of £96.0 million, less associated royalties of £12.1 million, plus processing income and other operating
income of £2.8 million. Total revenue of £13.0 million for the year ended 31 December 2020 was reflective of the
period from 3 September 2020 to 31 December 2020 and is comprised of sales of oil, gas and natural gas liquids
and processing income, net of associated royalties. Revenue for 2021 from the sale of oil and gas, before royalties,
processing income and other operating income was £96.0 million, of which, 64% was from the sale of oil and
natural gas liquids and 36% was from the sale of natural gas. Crown, freehold, and gross overriding royalties of
£12.1 million, as a percentage of oil and gas sales, was 13%. Processing income in 2021 of £2.6 million is from
fees charged to third party users of various facilities which are partially or wholly owned by i3.
Expenses
Production costs for the year ended 31 December 2021 associated with the extraction and processing of i3’s
Canadian oil and gas assets were £37.9 million, or £8.36/boe. These costs are primarily comprised of field labour
and general field maintenance, land retention and taxes, well repairs and workovers, processing, and product
transportation. Production costs for the year ended 31 December 2020 associated with the extraction and
processing of i3’s Canadian oil and gas assets were £8.1 million, or £7.51/boe. Costs in this period were incurred
from 3 September 2020 to 31 December 2020.
i3 Energy PLC
18
i3 Energy PLC 2021 Annual Report and Financial Statements – Strategic Report
Financial Review
Administrative expenses increased from £5.8 million to £13.1 million, largely due to the increased overhead
resulting from the effect of a full year expansion of the Group’s Canadian business.
Finance costs
The Group incurred finance costs of £7.6 million (2020 - £7.4 million). The increase is largely attributable to the
interest and accretion expense on the H1-2019 loan note facility, which accrue interest on amounts previously paid
in kind. There were also increases in the unwinding of the decommissioning provision. These increases were
partially offset by a decrease in warrant modification expense relating to the H1-2019 warrants which had their
strike prices reduced in 2020, and a 2021 gain on a non-current accounts payable balance whose repayment
amount is reduced based on the market value of the associated Warrant Shares. Further details are provided in
financial statements note 8 and note 15.
Profit, EPS, Net operating income, EBITDA, Adjusted EBITDA
The Group made a profit of £25.1 million (2020 – £11.7 million), equating to basic and diluted earnings per share
of 2.84 pence and 2.60 pence per share, respectively (2020 – 3.78 pence and 3.46 pence per share, respectively).
Net operating income was £48.8 million, EBITDA was £55.0 million and adjusted EBTIDA was £30.2 million (2020
– Net operating income was £4.9 million, EBITDA was £22.8 million and adjusted EBTIDA was a loss of £0.8
million). Net operating income, EBITDA and Adjusted EBITDA are non-IFRS measures, refer to Appendix B.
PP&E and E&E
The Group had PP&E assets of £224.1 million (2020 - £108.5 million) and intangible E&E assets of £49.8 million
(2020 – £48.8 million) as at 31 December 2021. The increase in PP&E was largely due to the Cenovus acquisition,
through which £117.4 million was recognised, offset by depletion in the period. Total PP&E additions of £11.2
million was comprised of work associated with the Group’s Canadian oil and gas assets. Of the £11.2 million, the
Group spent £5.3 million on drilling and completing various wells in addition to their associated abandonment
liabilities. Most significantly, wells in Marten Hills, Elmworth and Drayton Valley for £4.6 million. £2.9 million was
spent on well equipment additions and various facility and pipeline upgrades. The Group spent £1.0 million on three
recompletions at Marten Hills and one in Carmangay. £1.3 million was also spent on various well optimizations.
The remaining £0.7 million was spent on land acquisitions and seismic purchases.
The increase in intangible E&E assets was due to £1.0 million of capitalised costs during the period.
Key Performance Indicators (“KPIs”)
i3 spent the first half of 2021 securing an acquisition from Cenovus that doubled the size of the Company during
the second half. The newly acquired assets, operations and human resources were integrated during the fourth
quarter, including the incorporation and reconciliation of post completion financial and lease operating data for the
enlarged asset portfolio. The Company also commenced a detailed analysis of the enlarged portfolio to establish
baseline ESG and GHG emissions data as input to its maiden sustainability report. Following 2021’s material
growth, i3 has commenced the development of KPIs which are focussed on shareholder return, leverage ratio,
operating cost optimisation, health, and safety and ESG targets, and the Company plans to begin reporting against
these in 2022.
Going concern
The Directors have considered the going concern of the Group and are satisfied that the Group has sufficient resources
to operate and to meet their commitments as they come due over the going concern period. The Group continues to closely
monitor its cash balances which stood at £15.3 million as at 31 December 2021. Further details are provided in the Directors
Report and note 2 to the financial statements.
Approval of the Strategic Report
This report was approved by the Board of Directors on 11 April 2022 and signed on its behalf by:
Linda Beal
Non-Executive Interim Chairperson
11 April 2022
i3 Energy PLC
19
i3 Energy PLC 2021 Annual Report and Financial Statements – Governance
Board of Directors
BOARD OF DIRECTORS
The Directors of the Company who were in office during the year and up to the date of signing the financial
statements were:
Linda Beal
Non-Executive Interim Chairperson (Appointed Interim Chairperson of the Board on 7
February 2020)
Ms. Beal has over 30 years’ experience advising international E&P clients and since 2016 has been a board
member of various companies. As a Director of other small cap natural resources businesses, she brings corporate
governance and financial expertise and experience as Audit & Risk Committee Chair. Ms. Beal joined Grant
Thornton in 2013 as a Tax Partner and was Global Leader for Energy and Natural Resources, mandated to build
its global energy and natural resources capability. Previously, she spent 30 years at PwC and its legacy firm Price
Waterhouse in Audit and Tax, 16 of them as a Partner. Launching PwC's Natural Resources Independents
business in the mid-2000s, she focused on advising international E&P clients across the AIM, FTSE350, overseas
listed and private sectors.
Ms. Beal graduated in 1982 from the University of Nottingham with a BSc (Hons) in Mathematics, thereafter,
qualifying at Price Waterhouse as a Chartered Accountant in 1985.
Majid Shafiq
Chief Executive Officer
Mr. Shafiq has over 30 years of technical and investment banking experience focused on the global E&P sector. Prior
to founding Argentil Capital Partners (UK) Limited as CEO in 2015, Majid spent circa fifteen years in energy investment
banking advising on asset level acquisitions and divestments, corporate M&A and equity financing for the private and
public, small to mid-cap oil and gas sector. During that time, he worked for Waterous and Co, Tristone Capital Ltd and
FirstEnergy Capital LLP as Managing Director, Corporate Finance. Prior to his investment banking career, he worked
for Mobil Oil Corporation for 13 years in various petroleum engineering and commercial roles in the UK and the
Netherlands. Mr. Shafiq holds a Bachelors degree in Nuclear Engineering from Manchester University, a Masters
degree in Petroleum Engineering from Heriot-Watt University and an MBA from London Business School.
Mr. Shafiq served as a Non-Executive Director of the Company until 8 October 2018 at which time he succeeded Mr.
Carson as Chief Executive Officer of the Company.
Graham Heath
Chief Financial Officer
Prior to co-founding i3 in late 2014, Mr. Heath, BComm, served as VP Corporate Development and later as Interim
CFO at Iona Energy from December 2010 alongside Mr. Carson. During his time at Iona, Mr. Heath worked with the
senior management team to build the company from infancy to 40MMboe of 2P reserves and production above
6,000 boepd, listing the company on the Toronto Venture Exchange, and structuring equity, debt, and derivative
financings in excess of US$670 million. As VP Corporate Development he was a proactive engager of all external
stakeholders and as Interim CFO led a finance and administration team that expanded internal financial controls
while improving quarter-on-quarter quality and delivery of financial reporting. Before joining Iona, Mr. Heath’s 17-
year career focused on energy-related tech start-ups and consulting within Alberta’s Oil and Gas Industry. Between
1998 and 2010, Mr. Heath consulted to Colt Engineering, PanCanadian Petroleum, EnCana Corporation and
Cenovus Energy. From 2002 to 2006, Mr. Heath was Cofounder and VP of Strategic Development for The CO2 Hub
– a marketplace created to facilitate the sale and purchase of carbon dioxide and its related purification, compression,
storage, and transportation services – designed to foster the aggregation of CO2 supply and demand for its use in
enhanced oil recovery. Mr. Heath holds a Bachelor of Commerce from the University of Calgary.
Neill Carson
Non-Executive Director
Mr. Carson, Bsc (Hons) Combined Geology & Physics, MSC Geophysics, has 35 years of management and
international project experience in the oil & gas industry. On completion of his Bachelors (with First Class Honours)
i3 Energy PLC
20
i3 Energy PLC 2021 Annual Report and Financial Statements – Governance
Board of Directors
and Master degrees in the geosciences from Ulster University and Birmingham University respectively, he joined
Amoco in 1981. During his 14 years with Amoco he was responsible for numerous exploration and production projects
within the UKCS. Mr. Carson’s international career widened through exploration management positions for BP Amoco
in the Netherlands, Bolivia, and Pakistan. As Performance Unit Leader for BP Pakistan, Mr. Carson was responsible
for the delivery and growth of approximately 12,000 boepd and capital budgets in excess of US$50 million. Through
his career with BP Amoco, Mr. Carson executed growth plans through successful oil and gas discoveries, and the
development and management of commercial portfolios. He contributed as a select member of a targeted team to
BP’s world-wide new venture screening initiative in 2003. In early 2004, Mr. Carson co-founded Ithaca Energy Inc.
(‘‘Ithaca’’) where he served as its President and a Director from April 2004 and acted as Chief Operating Officer until
late 2007. While at Ithaca, Mr. Carson was responsible for asset acquisitions, all aspects of operations and safety,
general corporate strategy, and the drilling of four successful oil wells. Across his 4 years with Ithaca, the portfolio
grew to 39MMboe of 2P reserves and was on plan to deliver 8,000 boepd of production. Mr. Carson founded Iona
Energy Inc. (‘‘Iona’’) in late 2007 where he served as Chief Executive Officer until his departure in mid 2014 to form
i3. Responsible for all aspects of corporate strategy and portfolio development, he grew Iona to 40MMboe of 2P
reserves and saw peak production of 6,700 boepd.
Mr. Carson served as Chief Executive Officer of the Company until 8 October 2018 at which time he was succeeded
by Mr. Shafiq. Mr. Carson continues to serve on the Board as a Non-Executive Director.
Richard Ames
Non-Executive Director
Mr. Ames BS MS, brings to the Board 38 years of broad range experience in the oil and gas industry with senior
executive roles in full-cycle oil and gas exploration and production, information technology and oil and gas services.
He has held several Vice President positions in TNK-BP, Sidanco, and Amoco in Russia & Kazakhstan, where he
was responsible for government liaison, the implementation of business strategies and the management of
exploration and new venture projects. Mr. Ames has recently held Board and Advisory Board of Director positions
in Iona, Accenture Russia, the Kiawah Conservancy, and DataSpace. Mr. Ames graduated from Duke University
with a Bachelor of Science degree in Geology, and from the University of Georgia with a Master of Science in
Geology. Mr. Ames joined Amoco in 1981 and worked as a geologist responsible for reserve definition in several
international petroleum basins including the North Sea.
John Festival
Non-Executive Director
Mr. John Festival is a chemical engineer with 37 years of experience in the Canadian oil and gas sector, focused
on the WCSB and has an excellent track record of founding, growing and monetising oil and gas ventures in
Canada. He is currently the CEO of Broadview Energy and was the President and CEO of Black Pearl Resources
Inc. prior to its acquisition by International Petroleum in December 2018 in a stock and debt transaction valued at
c. US$715 million. He was previously the founder and President of Black Rock Ventures Inc. which was established
in 2001 and sold to Shell Canada for CAD2.4 billion in 2006. He graduated in 1984 with a BSc in Chemical
Engineering from the University of Saskatchewan.
i3 Energy PLC
21
i3 Energy PLC 2021 Annual Report and Financial Statements – Governance
Corporate Governance Report
CORPORATE GOVERNANCE REPORT
Overview of Board Governance
The Group believes that its success is dependent upon sound and effective governance. The Directors recognise
the importance of strong corporate governance and have developed a corporate governance framework and
policies appropriate to the size of the Group. The Board places strong emphasis on health and safety, good financial
discipline, governance, and environmental stewardship. The Group has established clearly defined responsibilities
and accountability, clear delegated authority limits, robust systems and processes and risk management
procedures to safeguard shareholder value.
Business Conduct
i3 has a Code of Business Conduct and Ethics which sets out the behavior it expects of its Directors, management,
employees, contractors, sub-contractors, agents intermediaries and suppliers. i3 has a zero-tolerance policy to
bribery and corruption and is committed to conducting business ethically, with integrity and complying with all
applicable legal requirements.
Our Code of Business Conduct and Ethics addresses anti-bribery and corruption, health and safety, environment,
confidentiality, conflicts of interest, data protection, fair competition, export controls and sanctions compliance,
information technology and internet usage and employment practices.
The Company is respectful of human rights and believe that is it important to embed it in our culture and the way
we do business, treat our employees and engage with our stakeholders.
The Company also has policies and procedures guidance which is provided to all Directors and employees for
share dealing, whistleblowing, disclosure and social media policy.
The Code of Business Conduct and Ethics and the other procedures are updated at least annually and reviewed
by the Corporate Governance Committee or Audit and Risk Committee and approved by the Board annually.
i3 believes in organizational diversity and asserts that discrimination isn’t acceptable, irrespective of age, disability,
gender, ethnicity, faith, race, sexual orientation, or any other factor that makes people different.
The Company maintains a risk register and as part of the Group’s risk management procedures, the risks the Group
is facing are updated by management and are reviewed by the Audit and Risk Committee at least twice per year
and reviewed and approved by the Board annually.
Board agenda and activities during the year
The Board of Directors at the year-end included two Executive Directors and four Non-Executive Directors. The
Board, through the Non-Executive Interim Chairperson and Non-Executive Directors, maintain regular contact with
advisors and public relations consultants in order to ensure that the Board develops an understanding of the views
of major shareholders of the Company.
The Board meets regularly throughout the year, for both Committee and Board meetings. During the year to 31
December 2021 the Board met for a total of fifteen meetings, one sub-committee meeting and passed resolutions
in writing on fourteen occasions. The Board is responsible for formatting, reviewing, and approving the Group’s
strategy, financial activities and operating performance. Day-to-day management is devolved to the Chief
Executive Officer of the Company, who is charged with consulting the Board on all significant financial and
operational matters. Consequently, decisions are made promptly and following consultation amongst the Directors
where necessary and appropriate.
Regular CEO updates are sent to the Board twice per month, Board agendas with board packs are circulated in
advance of each board meeting detailing the items to be covered at the meeting and any resolutions to be passed.
The Company requires that its Non-Executive Directors meet among themselves to freely consider management’s
strategy and other sensitive issues without the Company’s management or Executives present.
All necessary information is supplied to the Directors on a timely basis to enable them to discharge their duties
effectively, and all Directors have access to independent professional advice, at the Company’s expense, as and
when required.
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Board Meetings:
Linda Beal
Majid Shafiq
Graham Heath
Neill Carson
Richard Ames
John Festival
Eligible to Attend
Attended
15
15
15
15
15
15
15
15
15
15
15
14
In addition to the above meetings there was also one meeting of a sub-committee of the Board.
Governance framework
The Board of i3 Energy plc (the “Company”) has adopted the QCA Corporate Governance Code (“the Code”) as
its code of corporate governance. The Code is published by the Quoted Companies Alliance (“QCA”) and is
available at www.theqca.com. The Directors are of the opinion that the recommendations of the QCA code have
been implemented to an appropriate level.
The Code sets out 10 principles that should be applied. These are listed below together with a short explanation
of how the Board applies each of the principles, including where applicable any deviation from those principles:
Principle One
Business Model and Strategy
During 2021 the Company completed a significant acquisition in the Western Canadian Sedimentary Basin
(“WCSB”) which doubled the Company’s daily production. The Board has concluded that the highest near to
medium term value can be delivered to its shareholders through organic development by drilling upside
opportunities on i3’s WCSB acreage portfolio and acquiring additional developed producing assets in the WCSB if
opportunities at attractive metrics arise, in addition to farming down i3’s UK North Sea licences for further appraisal
drilling and eventual development. Acquisitions during 2000 and 2021 have enabled the Company to become a
monthly dividend payer while providing multiple potential streams of future value creation.
Principle Two
Understanding Shareholder Needs and Expectations
The Board is committed to maintaining good communication and having constructive dialogue with its shareholders.
The Company has ongoing relationships with its retail shareholders. Institutional shareholders and analysts have
the opportunity to discuss issues and provide feedback at meetings or via telephone conference with the Company.
In addition, all shareholders, when applicable and safe to do so and in consideration of UK Government guidance,
are encouraged to attend the Company’s Annual and General Meetings. Investors also have access to current
information on the Company through its website, www.i3.energy and via Camarco, the Company’s communications
advisor, who is available to answer investor relations enquiries.
Principle Three
Considering wider stakeholder and social responsibilities
The Board recognises that the long-term success of the Company is reliant upon the efforts of the employees of
the Company and its contractors, suppliers, regulators and other stakeholders. The Board has put in place a range
of processes and systems to ensure that there is close oversight and contact with its key relationships. For
example, following COVID-19 best practices, the NEDs participated in management calls and engaged with staff
to ensure that there is two-way communication with staff members to create proper alignment between corporate
goals, targets, and employee aspirations. This feedback loop assists the Company in responding to new issues
and opportunities that arise to further the success of employees and the Company. The Company has ongoing
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relationships with a broad range of its stakeholders and has regular and direct interaction with various levels of
government and provides these stakeholders with the opportunity to raise issues and provide feedback to the
Company.
The Board is focused on the need to advance the Company’s sustainability strategy, and i3 is in the process of
releasing its inaugural 2022 Sustainability Report in Q2 of 2022. The Board established a HSES Committee of the
Board during 2021 to provide structured oversight of its programmes. i3 is committed to complying with evolving
reporting requirements and will align with industry and regulatory efforts to decarbonise Western Canadian
Sedimentary Basin operations.
Principle Four
Risk Management
In addition to its other roles and responsibilities, the Audit & Risk Committee is responsible to the Board for ensuring
that procedures are in place and are being implemented effectively to identify, evaluate and manage the significant
risks faced by the Company.
A detailed list of the Company’s key risks are listed on pages 10 through 14 of this Annual Report.
The Directors have established procedures for the purpose of providing a system of internal control. An internal
audit function is not considered necessary or practical due to the size of the Company. However, the Audit and
Risk Committee and the Board will continue to monitor the need for an internal audit function. The Non-Executive
Directors works closely with and has regular ongoing dialogue with both the Chief Executive Officer and the Chief
Financial Officer of the Company and has established appropriate reporting and control mechanisms to ensure the
effectiveness of its control systems.
Principle Five
A Well-Functioning Board of Directors
As at the date hereof the Board is comprised of two Executive Directors, Mr. Majid Shafiq and Mr. Graham Heath,
Interim Chairperson Ms. Linda Beal and three Non-Executive Directors, Mr. Richard Ames, Mr. Neill Carson and
Mr. John Festival. Mr. David Knox resigned on 7 February 2020 and Ms. Linda Beal was appointed Interim
Chairperson on that same date. The Executive Directors have direct responsibility for business operations, whilst
the Interim Chairperson leads and chairs the Board and, along with the Non-Executive Directors, has a
responsibility to bring independent, objective judgement to bear on Board decisions. Biographical details of the
current Directors are set out on the Company’s website under the heading “About Us / Board & Executive”.
Executive and Non-Executive Directors are subject to re-election at each Annual General Meeting.
At the time of this report, the Non-Executive Interim Chairperson of the Board and the Non-Executive Directors
held shares and options to acquire shares in the Company. The Board has considered, in conjunction with its
advisors, whether these have any impact on their independence and have concluded they do not. Apart from these
matters and their Directors’ fees the Non-Executive Directors have no other financial interests in the Company or
business relationships that would interfere with their independent judgement.
The Board meets at least six times per annum. It has established an Audit & Risk Committee, a Corporate
Governance Committee, a Health, Safety, Environmental and Security Committee, a Reserves Committee and a
Remuneration Committee, particulars of which appear hereafter. The Board has agreed that appointments to the
Board are made by the Board as a whole, with recommendations from the Corporate Governance Committee, and
therefore has not created a Nominations Committee. The Board considers the above appropriate given the
Company’s current stage of operations. It shall continue to monitor the need to match resources to its operational
performance and the matter will be kept under review going forward. The Non-Executive Directors are considered
to be independent. The Board notes that the QCA recommends a balance between Executive and Non-Executive
Directors and recommends that there be two independent Non-Executives. The Board shall review further
appointments as scale and complexity grows.
All Directors have access to the advice of the Company’s solicitors. Necessary information is supplied to the
Directors on a timely basis to enable them to discharge their duties effectively, and all Directors have access to
independent professional advice, at the Group’s expense, as and when required.
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Attendance at Board and Committee Meetings
The Company shall report annually on the number of Board meetings held during the year and the attendance
record of individual Directors.
Principle Six
Appropriate Skills and Experience of the Directors
The Board currently consists of six Directors, and, in addition, the Company has employed the outsourced services
of Burness Paull to act as the Company Secretary. The Directors collectively have significant experience in oil and
gas, North Sea production, WCSB production, UK and Canadian listings, growing businesses, transactions, finance
and accounting. The Company believes that the current balance of skills in the Board as a whole, reflects a very
broad range of commercial and professional skills across geographies and industries and each of the Directors has
experience in public markets. The professional experience of each of the Directors is set out on the Company’s
website.
The Board includes one female Director and various nationalities. Diversity will form a part of any future recruitment
consideration if the Board concludes that replacement or additional Directors are required.
The Board shall review annually the appropriateness and opportunity for continuing professional development
whether formal or informal.
Principle Seven
Evaluation of Board Performance
Internal evaluation of the Board, the Committee and individual Directors is undertaken on an ad hoc basis by the
Interim Chairperson, who consults with the other Directors as appropriate regarding effectiveness and performance
as well as the Directors’ continued independence.
The results and recommendations of these internal evaluations of the Board shall identify the key targets and
requirements that are relevant to the Board.
Principle Eight
Corporate Culture
The Board recognises that their decisions regarding strategy and risk will impact the corporate culture of the
Company as a whole and that this will impact their performance of the Company. The Board is very aware that the
tone and culture set by the Board will greatly impact all aspects of Company and employee performance. The
corporate governance arrangements that the Board has adopted are designed to ensure that the Company delivers
long-term value to its shareholders and that shareholders have the opportunity to express their views and
expectations to the Company in a manner that encourages open dialogue with the Board. The Company values
open and respectful dialogue with employees, suppliers and other stakeholders and places a high degree of
importance on sound ethical judgement and behaviours to achieve its corporate objectives. The Company provides
a NED liaison, Mr. John Festival, to all staff as part of its Whistleblowing Policy. The Board expects these values
to permeate throughout every aspect of the organization – employees, relationships, actions. The Directors foster
an open culture which invites feedback and positive constructive challenge. The Company has adopted a code for
Directors’ and employees’ dealings in securities which is appropriate for a company whose securities are traded
on AIM and in accordance with the requirements of the Market Abuse Regulation which came into effect in 2016.
Principle Nine
Maintenance of Governance Structures and Processes
Ultimate authority for all aspects of the Company’s activities rests with the Board. The Executive Directors have
day-to-day responsibility for the operational management of the Company’s activities. The Non-Executive Directors
are responsible for bringing independent and objective judgement to Board decisions. There is clear separation of
the roles of the Chief Executive Officer and Non-Executive Interim Chairperson. The Interim Chairperson is
responsible for overseeing the running of the Board, ensuring that no individual or group dominates the Board’s
decision-making and ensuring the Non-Executive Directors are properly briefed on matters.
The Company operates the following Board committees:
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Audit & Risk Committee
Corporate Governance Committee
Health, Safety, Environment and Security Committee
Reserves Committee
Remuneration Committee
The Committee chairs and members have been selected based on the most relevant experience and expertise.
Each Non-Executive Director sits on a minimum of three committees and of these is chair of at least one committee
ensuring that the committees are well qualified with a range of contributions and experience. The roles and
responsibilities and terms of reference for each of the committees are reviewed at least annually to ensure they
remain applicable.
The Interim Chairperson has overall responsibility for corporate governance matters in the Company and chairs
the Corporate Governance Committee and the Audit and Risk Committee.
The Board receives twice monthly updates regarding the principal areas of activity of the Company including
production and has unrestricted access to management and employees of the Company. The Board also has the
authority to retain and terminate external legal counsel, consultants, or other advisors to assist it in fulfilling its
responsibilities and to set and pay the respective reasonable compensation of these advisors without consulting or
obtaining the approval of any Officer of the Company. The Company shall provide appropriate funding, as
determined by the Board, for the services of these advisors.
Furthermore, the Interim Chairperson maintains close dialogue with other Directors, both through the forum of
Board meetings and through Non-Executive Director meetings and meetings with the CEO and ad hoc
communication on an individual level.
Audit & Risk Committee
The Audit & Risk Committee meets at a minimum of twice a year. As of the date of this document, the members
of the Audit & Risk Committee are Ms. Linda Beal (Chair), Mr. Richard Ames and Mr. John Festival. Each of the
members of the Audit & Risk Committee are independent. Each of the members of the Audit & Risk Committee
are familiar with accounting principles, financial statements and financial reporting requirements and possess
experience that is relevant to the performance of their duties as members of the Audit & Risk Committee of the
Company.
The Audit & Risk Committee’s primary responsibilities are the planning and reviewing of the Annual Report and
interim statements and accounts and to ensure that internal controls and risk management is maintained. The
Audit & Risk Committee approves the appointment of external auditors and determines their fees and ensures the
auditors’ independence as well as focusing on compliance requirements, accounting standards and review of key
accounting judgements. It is also responsible for monitoring and ensuring an effective system of internal controls
is maintained. The ultimate responsibility for reviewing and approving the annual financial statements and interim
statements remains with the Board.
The full terms of reference for the Audit & Risk Committee are available on the Company’s website.
Corporate Governance Committee
The Corporate Governance Committee meets as required, but at least once a year, increasing to at least twice a
year in 2022. Its members are Ms. Linda Beal (Chair), Mr. Neill Carson and Mr. John Festival.
The Corporate Governance Committee’s primary purpose is to develop and recommend to the Board guidelines,
policies and procedures relating to corporate governance as well as compliance with AIM and TSX rules.
The Committee is also responsible for monitoring the overall effectiveness of the Board.
Health, Safety, Environment and Security (HSES)
The HSES Committee meets as required, but at least twice a year. Its members are Mr. John Festival (Chair), Mr.
Neill Carson, Mr. Majid Shafiq, Mr. Ian Schafer (COO, i3 Energy Canada Ltd.) and Mr. John Woods (COO, i3
Energy NSL Limited).
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The HSES Committee assists the Board in conducting business in a manner that promotes a safe, secure, and
healthful workplace for its employees and contractors, protects the environment and ensures that the Company
will continue to be a valued member of the communities in which it operates.
Reserves Committee
The Reserves Committee meets as required, but at least twice a year. Its members are Mr. Neill Carson (Chair),
Mr. Richard Ames and Mr. John Festival. The Chief Executive Officer, the Chief Financial Officer and other
Directors may also attend and speak at meetings of the reserves committee.
The Reserves Committee assists the Board in monitoring and reviewing the appointment of an independent
engineering firm retained by the Company to report on the quantity and the value of the Company’s oil and gas
reserves. The Reserves Committee reviews the procedures by which the Company provides information to the
independent engineering firm to be used as the basis of evaluation and audit, ensuring disclosure complies with
applicable laws and regulations, and is also responsible for matters relating to the preparation and public disclosure
of estimates of the Company’s reserves.
Remuneration Committee
The Remuneration Committee meets at least twice a year. Its members are Mr. Richard Ames (Chair) and Ms.
Linda Beal. The Chief Executive Officer, the Chief Financial Officer and other Directors may also attend and speak
at meetings of the remuneration committee.
The Company’s policy is to remunerate senior executives fairly in such a manner as to facilitate the recruitment,
retention, and motivation of staff. The Remuneration Committee agrees with the Board a framework for the
remuneration of the Interim Chairperson, the Executive Directors, and the senior management of the Company.
The principal objective of the committee is to ensure that members of the executive management of the Company
are provided incentives to encourage enhanced performance and are, in a fair and responsible manner, rewarded
for their individual contributions to the success of the Company. Non-Executive fees are considered and agreed
by the Board as a whole.
The terms of reference of the Remuneration Committee are available on the Company’s website.
Principle Ten
Shareholder Communication
The Board is committed to maintaining good communication and having constructive dialogue with its shareholders.
The Company has ongoing relationships with its retail shareholders. Institutional shareholders and analysts have
the opportunity to discuss issues and provide feedback at meetings with the Company. In addition, all shareholders,
when applicable and safe to do so and in consideration of UK Government guidance, are encouraged to attend the
Company’s Annual and General Meetings.
Investors also have access to current information on the Company through its website, www.i3.energy and via
Camarco, the Company’s communication advisor, who is available to answer investor relations enquiries.
Internal controls
The Directors acknowledge their responsibility for the Group’s system of internal controls and for reviewing their
effectiveness. These internal controls are designed to safeguard the assets of the Group and to ensure the reliability
of financial information for both internal use and external publication. Whilst the Directors are aware that no system
can provide absolute assurance against material misstatement or loss, regular reviews of internal controls are
undertaken to ensure that they are adequate and effective.
Risk management, uncertainties and treasury policy
Risk assessment and evaluation is an essential part of the Group’s planning and is an important aspect of the
Group’s internal controls system – a crucial activity for achieving its strategic objectives.
There is a process of evaluation of projects, activities, and performance targets wherein the Board regularly reviews
actual progress to that previously forecast. Project milestones and timelines are regularly reviewed.
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The Group finances its operations through debt, equity, and operating cash flows, and holds its cash as a liquid
resource to fund the obligations of the Group. Decisions regarding the management of these assets are approved
by the Board. Please refer to note 22 for further detail on how the Board manages financial risk.
The principal risks facing the Group are set out in the Strategic Report.
Securities trading
The Board has adopted a Share Dealing Code that applies to Directors, senior management and any employee
who is in possession of material non-public information (“MNPI”). All such persons are prohibited from trading in
the Company’s securities if they are in possession of MNPI. Subject to this condition and trading prohibitions
applying to certain periods, trading can occur provided the relevant individual has received the appropriate
prescribed clearance from the Company’s Nomad.
“Linda Beal”
Linda Beal
Non-Executive Interim Chairperson
11 April 2022
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Audit and Risk Committee Report
AUDIT AND RISK COMMITTEE REPORT
The Audit and Risk Committee assists the Board's oversight of the integrity of the financial statements and other
financial reporting and the internal controls and risk management of the Group.
The Audit and Risk Committee comprises Linda Beal (Non-Executive Director and Committee Chairperson),
Richard Ames (Non-Executive Director) and John Festival (Non-Executive Director). All the Committee members
are independent Non-Executive Directors with recent and relevant financial experience in the energy sector. Under
its terms of reference the Audit and Risk Committee meets at least 2 times per annum but generally meets more
often. The Audit and Risk Committee met five times during 2021 with all members in attendance at every meeting
and will meet at least four times during 2022. The Audit and Risk Committee had two meetings with the auditors
during 2021 including sessions without management present. The CEO and key members of the Finance team
attended the majority of the Committee meetings in 2021. The Audit and Risk Committee Chair also speaks
regularly with the Group Finance team and the audit partner outside the formal Committee meetings.
Key responsibilities
The terms of reference of the Audit and Risk Committee were reviewed and updated during the year to reflect best
practice and the integration of the 2020 and 2021 acquisitions. The principal roles and responsibilities of the
Committee include:
• Monitoring the integrity of the interim and annual financial statements and ensuring full compliance with
accounting standards.
• Reviewing key accounting policies, judgements, and estimates.
• Reviewing the disclosures in the interim and annual report and financial statements.
• Overseeing the relationship with the external auditor, appointment and approval of auditor remuneration
and assessment of the auditor’s independence and objectivity.
• Reviewing and monitoring the effectiveness of the Group’s financial reporting, internal control policies,
and procedures for the identification, assessment, and reporting of risk.
• Considering the need for an internal audit function.
2021 meetings
During 2021 the key areas covered by the Committee were:
• Review of the Company’s internal controls including the Finance team structure, responsibilities and
reporting lines, the Company’s Delegation of Authority and Whistleblowing Policy and the Company’s risk
management framework, management’s assessment of key risks and the risk register all of which were
updated following acquisitions and associated integration of teams and systems.
• Review of audit planning and approach for 2020, the first year of production for the Group.
• Review of the 2020 annual financial statements including review of key accounting judgements and
estimates and discussion with the external auditors their audit findings. Consideration of the independence
of the auditors.
• Review of the 2021 interim financial statements including review of key accounting judgements and
estimates and discussion with the external auditors.
• Consideration of the external auditor’s independence and effectiveness and whether their reappointment
should be recommended. Whilst PKF Littlejohn have been the Company’s auditors for many years and
PKF Littlejohn provided reporting accountant services in relation to the 2020 reverse takeovers, the Audit
and Risk Committee are comfortable that PKF Littlejohn remain independent.
• Consideration of whether the Company should implement an internal audit function. The Committee
concluded that this was not appropriate in view of the integration of the Finance teams and systems and
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additional review procedures implemented following the acquisitions.
• Review of the Committee’s terms of reference and membership.
2021 Group financial statements key judgements and estimates
An essential element of the integrity of the financial statements lies around the key assumptions and estimates or
judgements to be made. The Audit and Risk Committee reviews key judgements prior to publication of the financial
statements at both the end of the financial year and at the end of the six-month interim period, as well as considering
significant issues throughout the year.
In particular, this includes reviewing any subjective material assumptions within the Group’s activities to enable an
appropriate determination of asset valuation, provisioning and the accounting treatment thereof. The Audit and
Risk Committee reviewed and was satisfied that the judgements exercised by management on material items
contained within the Report and Financial Statements are reasonable.
Key judgements and estimates in the 2021 Group financial statements considered by the Audit and Risk Committee
were:
• Carrying value of intangible exploration and evaluation assets.
• Carrying value of property, plant, and equipment – oil and gas assets.
• Cenovus acquisition accounting, including the fair value judgements therein.
• Decommissioning provision estimates.
• Recognition and measurement of deferred tax assets.
• Various other financial reporting matters including the IFRS 2 share-based payment charge for employee
stock options granted during the year and the accounting and fair value assessment following the 2021
modification of the non-current accounts payable.
2022 and beyond
The Audit and Risk Committee, shall continue to work according to its Terms of Reference, and keep under review
the Company’s control and risk management framework and ensure it remains appropriate as the Group’s
business develops.
Linda Beal
Chairperson of the Audit and Risk Committee
11 April 2022
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Corporate Governance Committee Report
CORPORATE GOVERNANCE COMMITTEE REPORT
The Corporate Governance Committee assists the Board in the oversight of Corporate Governance. The primary
purpose is to develop and recommend to the Board guidelines, policies and procedures relating to corporate
governance and compliance with AIM and TSX rules. The Committee is also responsible for monitoring the overall
effectiveness of the Board.
The Corporate Governance Committee’s membership comprises Linda Beal (Non-Executive Director and
Committee Chairperson), Neill Carson (Non-Executive Director) and John Festival (Non-Executive Director).
The Governance Committee met once during 2021 and will meet at least two times during 2022.
Independence of Non-Executive Directors
The Corporate Governance Committee and the Board are satisfied that each Non-Executive Director serving at
the end of the year remains independent and continues to have sufficient time to discharge their responsibilities to
the Company.
2021 activities
The Corporate Governance Committee oversaw a review by the Executives of the functions, capabilities and
responsibilities in the Group and put forward a recommendation for the roles, responsibilities and membership of
the Board Committees following the 2020 acquisitions.
The Committee also monitored and reviewed the Companies transactional activities, stakeholder engagement and
ABC Policy, i3 Dealing Code, Whistleblowing Policy and other various governance policies which were updated
during the year following the Cenovus assets acquisition and compliance with Canadian and UK regulatory and
legal requirements.
2022 looking forward
The Corporate Governance Committee will continue to monitor and advise on Corporate Governance and pay
particular attention to Board structure, diversity and reviewing and ensuring the Company’s policies and procedures
are reviewed at least annually and implemented as detailed.
Linda Beal
Chairperson of the Corporate Governance Committee
11 April 2022
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Health, Safety, Environment and Security Committee Report
HEALTH, SAFETY, ENVIRONMENT AND SECURITY
COMMITTEE REPORT
The Health, Safety Environmental and Security Committee (“HSES”) provides assurance to the Board on
occupational health, safety environmental and security policies. It is primarily focused on ensuring that
effective HSE policies are adopted and applied across the Group. Since Q2 2021, the HSES Committee
has added Environmental, Social and Governance (ESG) assurance into their remit.
The HSES Committee comprises of John Festival (Non-Executive Director and Committee Chairman), Neill
Carson (Non-Executive Director), Majid Shafiq (Executive Director) and the COO’s of i3 Energy Canada Ltd,
Ian Schafer, and i3 Energy North Sea Limited, John Woods.
Safety is the number one core value at i3 Energy plc. We strive to achieve an injury-free workplace by making
safety an integral part of our culture and incorporating it into every aspect of our operations. We empower
employees to take ownership of safety at the local level. The HSES Committee meets quarterly to:
• Oversee our policies, procedures, practices, and strategies relating to health, safety, environment,
security, and climate-related issues to ensure due consideration of risks, opportunities, and potential
performance improvements.
• Review and report to the Board with respect to the consideration and integration of climate-related issues
in the development of our business strategy and financial planning.
• Review our disclosure, reporting and external communication practices pertaining to climate issues,
including assessments of materiality and ESG report development.
• Consider and review the establishment of, and performance against targets, benchmarks, procedures,
and disclosures used to measure progress in absolute terms and relative to peers.
• Review our enterprise risk management program as it relates to identifying, assessing, and managing
related risks and report to our audit committee.
HSES Policy
i3 Energy plc and its subsidiaries (i3 Energy North Sea Limited and i3 Energy Canada Ltd.), together “i3 Energy”,
will conduct business in a manner that promotes a safe, secure, and healthy workplace for our employees and
contractors, while protecting the environment and ensuring that we will continue to be a valued member of the
communities in which we operate and a valued supplier to our customers.
We believe that HSES performance is a primary measure of our company's success, and we apply the following
guiding principles when conducting our day-to-day operations:
• We are compliant, respectful, and ethical; we act with integrity, and we expect the same from our suppliers
and customers.
• We design and operate our sites and processes in a manner that ensures the safety and security of our
employees, contractors, environment, and the communities where i3 Energy operations are located.
• We support our customers and contractors to help ensure that i3 Energy’s products are handled,
transported, and processed in a safe, secure, and environmentally responsible manner.
• We focus on good corporate citizenship, giving due consideration to sustainable use of resources,
reduction of emissions and environmental impacts.
• We set goals and objectives that demonstrate our core values of safety & integrity.
2021 activities
The Company completed its acquisition of Toscana Energy Income Corporation and Gain Energy in late 2020 and
followed up with the acquisition of assets from Cenovus Energy in Q3 2021. This resulted in an intense period of
consolidation and integration of these assets and harmonisation of HSES policies and procedures across the
different business units and throughout the enlarged workforce. As part of this effort the Company developed
procedures, documentation, and training on our Safety Loss Management System (SLMS) including:
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• Health and Safety Management System (HSMS), including Safe Operating Procedures (SOPs).
• Emergency Response Plans (ERPs).
• Pipeline Operating Manual (POM).
• Pressure Equipment Integrity Management Program Manual (PEIM).
The Company conducted quarterly HSE Committee meetings, monthly safety meetings and quarterly inspections
of at least one active work site in addition to three emergency response (ERP) exercises.
We are very pleased with the safety performance of our operations throughout the year, with only one recorded
incident requiring medical treatment.
In December we commenced work on our maiden annual sustainability report which will be published in Q2 2022
and will set out targets for GHG emission reductions from a 2020 baseline and achieving net zero emissions. The
Company made considerable efforts in 2021 to proactively reduce its GHG emissions. The entire inventory of
pneumatic controllers (which use natural gas) were converted from high bleed to low bleed units or replaced with
instrument air. We also commenced an analysis of our portfolio to identify sites which could be electrified, and three
sites were converted and a project to install flowlines in the Carmangay field was initiated to reduce infield trucking.
2022 looking forward
In 2022 we will continue to review and improve HSES procedures, evaluate HSES performance against industry
standards and strengthen work force engagement, ownership, and delivery of HSES goals. We will place a greater
focus on ESG and increase our efforts to reduce GHG emissions and set out our targets and goals in our maiden
annual sustainability report to be published in Q2 2022.
John Festival
Chairman of the Health, Safety, Environment and Security Committee
11 April 2022
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Reserves Committee Report
RESERVES COMMITTEE REPORT
The Reserves Committee’s purpose is to assist the Board in monitoring and reviewing the appointment of an
independent engineering firm retained by the Company to report on the quantity and the value of the Company’s
oil and gas reserves. The Reserves Committee reviews the procedures by which the Company provides information
to the independent engineering firm to be used as the basis of evaluation and audit, ensuring disclosure complies
with applicable laws and regulations, and is also responsible for matters relating to the preparation and public
disclosure of estimates of the Company’s reserves.
The Reserves Committee comprises of Neill Carson (Non-Executive Director and Committee Chairman), Richard
Ames (Non-Executive Director) and John Festival (Non-Executive Director). The Reserves Committee met twice
in 2021 and typically meets twice a year prior to publication of the semi-annual and annual results.
2021 activities
• Reviewed the Company’s procedures for providing information to the qualified reserves auditor who
reported on reserves data.
• Met with management and the qualified reserves auditor to review the reserves data and the auditor's
annual reserves report.
• Reviewed and recommended to the Board (via the Audit and Risk Committee) approval of the content
and filing of the Company’s annual statement of reserves data and other oil and gas information.
2022 looking forward
• Meet with the reserves auditor and review year-end 2021 reserve revisions and booking.
• Make a recommendation to the Board (via the Audit and Risk Committee) regarding the Company’s annual
statement of reserves data and other oil and gas information.
Neill Carson
Chairman of the Reserves Committee
11 April 2022
i3 Energy PLC
34
i3 Energy PLC 2021 Annual Report and Financial Statements – Governance
Remuneration Committee Report
REMUNERATION COMMITTEE REPORT
The Remuneration Committee is a standing Committee of the Board and meets regularly to consider all material
elements of Executive Director remuneration including salary, share schemes, and incentivization. The
Committee makes recommendations to the Board on the framework for Executive Director remuneration and its
cost. The Remuneration Committee assists the Board in discharging its oversight responsibilities relating to the
attraction, compensation, evaluation and retention of Executive Directors and key senior management
employees, in particular the Chief Executive Officer. The Remuneration Committee aims to ensure that the
Company has the right skills and expertise needed to enable the Company to achieve its goals and strategies
and that fair and competitive compensation is awarded with appropriate performance incentives across the
Company.
The Remuneration Committee comprises Richard Ames (Non-Executive Director and Committee Chairman) and
Linda Beal (Non-Executive Director). The Remuneration Committee met three times in 2021 and proposes to
meet at least twice during the next financial year.
The Remuneration Committee is responsible for making recommendations to the Board regarding the framework
for the remuneration of the Executive Directors and other members of executive management. The Remuneration
Committee works within its terms of reference, and its role includes:
• Reviewing and approving the Company's overall compensation philosophy programs.
• Determining and agreeing with the Board, the Remuneration Policy for all Executive Directors and, under
guidance of the Executive Directors, other members of the key senior Management Team.
• Ensuring Executive remuneration packages are appropriate.
• Determining whether annual bonus payments should be made and approving levels for individual
Executive Directors.
• Determining each year whether any awards/grants should be made under the incentive schemes and the
value of such awards.
• Considering any new long-term incentive scheme awards and performance criteria.
• Agreeing Directors’ service contracts and notice periods.
2021 activities
• Approved the level of the 2021 cash bonus.
• Agreed the 2021 Executive salary increases after using benchmarks.
• Approved the grant of Long-Term Incentive Plan (LTIP) awards for 2021.
• Approved the vesting of performance awards granted in 2021.
2022 looking forward
• Proposing and agreeing the remuneration packages for Executive Directors.
• Reviewing and agreeing the bonus to be awarded to Executives in year 2022.
Details of the Directors’ Remuneration are provided in note 10 to the financial statements. The Directors’ interests
are provided in the Directors’ Report.
Richard Ames
Chairman of the Remuneration Committee
11 April 2022
i3 Energy PLC
35
i3 Energy PLC 2021 Annual Report and Financial Statements – Governance
Directors’ Report
DIRECTORS’ REPORT
The Directors are pleased to present this year’s Annual Report together with the audited consolidated financial
statements for the year ended 31 December 2021.
Principal Activities
The principal activities of the Group consist of the appraisal of oil and gas assets on the UK Continental Shelf and
of oil and gas production in Western Canadian Sedimentary Basin. The Company’s wholly-owned subsidiaries - i3
Energy North Sea Limited and i3 Energy Canada Limited are independent oil and gas companies with appraisal
assets in the UK and producing assets in Canada, respectively. The Company’s principal activity is that of a listed
holding company.
Business Review and Future Developments
The budgetary constraints of the last several years have begun to abate with the recent strengthening in commodity
prices and the stark realisation that country-level energy security is absolutely critical. The Group continues to be
well-positioned to take advantage of this environment through its Canadian production-focused growth programme
and the further appraisal of its UKCS asset base. The business developments during the year are highlighted in
the Interim Chairperson and Chief Executive Officer’s Statement.
Results and Dividends
The profit on ordinary activities of the Group after taxation amounted to £25.1 million (2020: £11.7 million).
Dividends of £3.4 million were declared and paid in 2021 (2020- Nil).
Directors’ Remuneration
The Group remunerates the Directors at levels commensurate with its size and the experience of its Directors. The
Remuneration Committee has reviewed the Directors’ remuneration, after consultation with an external advisor, and
believes the levels uphold these objectives. Details of the Directors’ emoluments and payments made for professional
services rendered are set out in note 10 to the financial statements.
Directors and their interests
The beneficial interests of the Directors in the shares and options of the Company at 31 December are as follows:
Director
Neill Carson
Graham Heath
Majid Shafiq
Richard Ames
Linda Beal
John Festival
2021 Shares
2020 Shares
2021 Options
2020 Options
7,246,509
8,550,495
2,951,541
738,951
700,000
199,060
6,712,133
6,816,213
143,765
204,575
-
-
1,198,800
13,802,847
18,517,500
1,198,800
788,827
1,198,800
534,376
1,734,282
2,807,776
534,376
123,058
134,262
On 29 April 2021, the Company announced that certain of its Directors exercised options over 6,045,072 shares in
the Company and on 22 October 2021 a Director exercised options over 400,000 shares in the Company.
Share Capital
At 31 December 2021, 1,126,425,992 ordinary shares with a nominal value of £0.0001 each and 5,000 deferred
shares of £10 each were issued and fully paid. Each ordinary share carries one vote and the deferred shares do
not confer any voting rights.
i3 Energy PLC
36
i3 Energy PLC 2021 Annual Report and Financial Statements – Governance
Directors’ Report
Substantial Shareholders
At 28 February 2022, notification had been received by the Company of the following who had a disclosable interest
in 3% or more of the nominal value of the ordinary share capital of the Company:
Cairn Capital
Premier Miton Investors
Slater Investments
Amati Global Investors
Hargreaves Lansdown Asset Mgt
Interactive Investor
AJ Bell Securities
26.13%
13.96%
9.33%
7.16%
4.57%
4.35%
3.15%
As at 28 February 2022 the Company had not been notified of any other person who had an interest in 3% or more
of the nominal value of the ordinary share capital of the Company.
Corporate Governance
A statement of Corporate Governance is set out on pages 22 to 28. The Group has adopted the Quoted Companies
Alliance Corporate Governance Code (“the Code”). Details of how the Group complies with the Code, and the
reasons for any non-compliance, are set out on page 22 to 28, together with the principles contained within the
Code.
Information on the Audit & Risk Committee, Corporate Governance Committee, Reserves Committee, Remuneration
Committee, and Health, Safety, Environment and Security Committee is included in the Corporate Governance section of
the Annual Report.
Environmental Responsibility
The Company is aware of the potential impact that its subsidiaries and investments may have on the environment.
Accordingly, the Group ensures that with regard to the environment, all its companies and associated subsidiaries
at a minimum comply with applicable jurisdictional regulatory guidelines including those of the UK North Sea
Transition Authority, the Alberta Energy Regulator, Saskatchewan Energy and Resources, the BC Oil and Gas
Commission and other local regulators. i3 Energy plc is in the process of completing its first Sustainability Report
which we anticipate releasing in Q2 2022. See HSES Committee Report on page 32.
Engagement with employees and stakeholders
The Group is committed to promoting policies that ensure high calibre employees are attracted, motivated and
retained for the ongoing success of the business. Employees and those who seek to work within the Group are
treated equally regardless of sex, marital status, creed, colour, race, or ethnic origin.
The Board is committed to effectively communicating with the stakeholders of the Company. Clear communication
with shareholders and all stakeholders is an important aspect of the role of the Group’s Board and senior
management. In addition to the regulatory forms of communication, including annual and interim reports and
Regulatory News Service releases, enquiries from shareholders are encouraged and i3 aims to deliver a timely
response from either the Company or its representatives.
Details of the Group’s activities can be found at the Company’s website (www.i3.energy).
In consideration of environmentally sustainable business practices, the Board has approved the adoption electronic
communications as its default method of communication with shareholders going forward for reasons of efficiency
and to reduce the volume of paper used in shareholder mailings.
Insurance and indemnities
The Group maintains insurance in respect of its Directors and Officers against liabilities in relation to the Company
and the Group. The Group maintains insurance in respect of its exploration and development and operational
projects in the North Sea and Canada.
i3 Energy PLC
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i3 Energy PLC 2021 Annual Report and Financial Statements – Governance
Directors’ Report
Each of the Directors have signed an Indemnity Deed which provides that the Company indemnifies the Director
or Officer to the maximum extent permitted by law in respect of legal proceedings and any claims made against
that Director or Officer.
Information contained elsewhere in this Annual Report
Information regarding the Group’s key performance indicators, subsequent events, principal risks and uncertainties,
and future developments are set out in the Strategic Report. Information regarding the Group’s financial instruments
and risk management policies are set out in note 22 to the Group Financial Statements.
Statement of Disclosure of Information to the Auditor
As at the date of this report the serving Directors confirm that:
So far as each Director is aware, there is no relevant audit information of which the Group’s auditor is unaware,
and the Directors have taken all the steps that they ought to have taken in order to make themselves aware of any
relevant audit information and to establish that the Group’s auditor is aware of that information.
Auditor
PKF Littlejohn LLP has signified its willingness to act as the Company’s auditor.
Going Concern
The Group’s business activities, together with the factors likely to affect its future development, performance and position
are set out in the Strategic Report in the Interim Chairperson’s and Chief Executive’s Statement and Strategy and KPIs
sections. The financial position of the Group, its net cash position and liabilities are described in the Financial Review. Further
information on the Group’s commitments is provided in note 23 and on the Group’s exposure to financial risks and
management thereof is provided in note 22.
The Group ended the year with cash and cash equivalents of £15.3 million, current assets of £42.3 million, and current
liabilities of £23.1 million. The Group’s debt primarily consists of the £22.0 million H1-2019 LNs which mature in 2023. During
2021, the Group generated £24.4 million of cash from operating activities.
The Directors have given careful consideration to the appropriateness of the going concern assumption, including cash
forecasts through the end of 2023, committed capital expenditure, and the principal risks and uncertainties faced by the
Group. The cash flow forecasts include the continued payment of regular dividends, the capital programs in Canada, the
drilling of an appraisal well at Serenity, and the repayment of the H1-2019 LNs in May 2023. This assessment also
considered various downside scenarios including a combined downside scenario with a US$20/bbl decrease in WTI, a
CAD1/GJ decrease in AECO, and a 20% reduction in production rates, risks which are partially mitigated by the risk
management contracts the Group currently has in place.
Following this review, the Directors are satisfied that the Group has sufficient resources to operate and to meet their
commitments as they come due over the going concern period which considers at least 12 months from the date of approval
of the financial statements. Accordingly, the Directors continue to adopt the going concern basis in preparing the financial
statements for the year ended 31 December 2021.
Directors’ Responsibilities
The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with
applicable laws and regulations.
The Directors are required to prepare financial statements for each financial year. The Directors have elected to
prepare the Group Financial Statements in accordance with international accounting standards in conformity with
the requirements of the Companies Act 2006. Under Company law the Directors must not approve the Financial
Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and of
the profit or loss of the Group for that year.
In preparing the parent Company Financial Statements, the Directors are required to:
• Select suitable accounting policies and then apply them consistently;
• Make judgements and accounting estimates that are reasonable and prudent;
i3 Energy PLC
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i3 Energy PLC 2021 Annual Report and Financial Statements – Governance
Directors’ Report
• State whether Financial Reporting Standard 101 Reduced Disclosure Framework has been followed, subject
to any material departures disclosed and explained in the Financial Statements; and
• Prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that
the Group will continue in business.
In preparing the Group Financial Statements, International Accounting Standard 1 requires that Directors:
• Properly select and apply accounting policies;
• Present information, including accounting policies, in a manner that provides relevant, reliable,
comparable and understandable information;
• Provide additional disclosures when compliance with the specific requirements in IFRS Standards are
insufficient to enable users to understand the impact of particular transactions, other events and conditions
on the entity's financial position and financial performance; and
• Make an assessment of the company's ability to continue as a going concern.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
Group’s transactions and disclose with reasonable accuracy at any time the financial position of the Group. They
are also responsible for safeguarding the assets of the Group, and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included
on the Group’s website. The Group is compliant with AIM Rule 16 regarding the Group’s website.
Responsibility Statement
We confirm that to the best of our knowledge:
•
•
•
the financial statements, prepared in accordance with the relevant financial reporting framework, give a
true and fair view of the assets, liabilities, financial position and profit or loss of the company and the
undertakings included in the consolidation taken as a whole;
the Strategic Report includes a fair review of the development and performance of the business and the
position of the Company and the undertakings included in the consolidation taken as a whole, together
with a description of the principal risks and uncertainties that they face; and
the Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and
provide the information necessary for shareholders to assess the company’s position, performance,
business model and strategy.
Annual General Meeting
The Annual General Meeting of the Company will be held on 30 June 2022 and will be detailed in the Notice of
Meeting.
This Director’s Report and Responsibility Statement was approved by the Board and was signed on its behalf:
Linda Beal
Non-Executive Interim Chairperson
11 April 2022
i3 Energy PLC
39
i3 Energy PLC 2021 Annual Report and Financial Statements – Financial Statements
Independent Auditors Report
INDEPENDENT AUDITORS REPORT
Independent Auditors Report to Members of I3 Energy Plc
Opinion
We have audited the financial statements of i3 Energy Plc (the ‘parent company’) and its subsidiaries (the ‘group’)
for the year ended 31 December 2021 which comprise the Consolidated Statement of Comprehensive Income, the
Consolidated and Parent Company Statements of Financial Position, the Consolidated and Parent Company
Statement of Changes in Equity, the Consolidated Statement of Cash Flows, and notes to the financial statements,
including significant accounting policies. The financial reporting framework that has been applied in the preparation
of the group financial statements is applicable law and UK-adopted international accounting standards The financial
reporting framework that has been applied in the preparation of the parent company financial statements is
applicable law and United Kingdom Accounting Standards, including FRS 101 Reduced Disclosure Framework
(United Kingdom Generally Accepted Accounting Practice).
In our opinion, the financial statements:
•
•
•
•
give a true and fair view of the state of the group’s and parent company’s affairs as at 31 December 2021
and of the group’s profit for the year then ended;
the group financial statements have been properly prepared in accordance with UK-adopted international
accounting standards;
the parent company financial statements have been properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice; and
the financial statements have been prepared in accordance with the requirements of the Companies Act
2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit
of the financial statements section of our report. We are independent of the group and parent company in
accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK,
including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Director's use of the going concern basis of
accounting in the preparation of the financial statements is appropriate. Our evaluation of the Directors’ assessment
of the group and parent company’s ability to continue to adopt the going concern basis of accounting included a
review of budgets for the period of 12 months from the date of approval of the financial statements, including
checking the mathematical accuracy of the budgets, discussion of significant assumptions used by management,
and comparing these with current year and post year end performance. We have also reviewed the latest available
post year end management accounts, bank statements, regulatory announcements, board minutes and assessed
any external industry wide factors which might affect the group and the parent company.
Based on the work we have performed, we have not identified any material uncertainties relating to events or
conditions that, individually or collectively, may cast significant doubt on the group or parent company's ability to
continue as a going concern for a period of at least twelve months from when the financial statements are
authorised for issue.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the
relevant sections of this report.
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i3 Energy PLC 2021 Annual Report and Financial Statements – Financial Statements
Independent Auditors Report
Our application of materiality
The scope of our audit was influenced by our application of materiality. The quantitative and qualitative thresholds
for materiality determine the scope of our audit and the nature, timing, and extent of our audit procedures. The
materiality for the group financial statements was set at £5,644,000 (2020 – £3,075,000), with performance
materiality set at £3,386,400 (2020 – £1,845,000).
The materiality for the group financial statements as a whole has been calculated as 4% of net assets, which we
have determined, in our professional judgement, to be one of the principal benchmarks within the financial
statements relevant to members of the group in assessing financial performance. The benchmark is deemed to be
relevant as the key areas of focus of the group relate to the value of the producing and exploration assets, as well
as the accompanying decommissioning provision, and the loan notes outstanding.
The parent company materiality for the financial statements as a whole was set at £2,101,000 (2020 - £1,406,000)
for statement of financial position items and £98,000 (2020 – £106,000) for statement of comprehensive income
items testing. The parent company performance materiality was set at £1,260,600 (2020 - £843,600) and £58,800
(2020 - £63,600), respectively. The reason being a result of the key area of focus for the parent company financial
statements being the recoverability of loans to subsidiaries. A separate materiality for profit and loss items was
calculated in order to ensure sufficient appropriate coverage was obtained in order to provide an opinion. For each
component in the scope of our group audit, we allocated a materiality that was less than our overall group
materiality. We agreed with the Audit and Risk Committee that we would report to them misstatements identified
during our audit above £282,200 (group audit) and £105,050 and £4,900 for company’s statement of financial
position and company’s statement of comprehensive income respectively.
Our approach to the audit
In designing our audit, we determined materiality and assessed the risk of material misstatement in the financial
statements. In particular, we looked at areas involving significant accounting estimates and judgement by the
Directors such as the impairment of intangible assets and the assumptions used in calculating the fair value of
financial assets. and considered future events that are inherently uncertain We also addressed the risk of
management override of internal controls, including among other matters consideration of whether there was
evidence of bias that represented a risk of material misstatement due to fraud.
The group holds three companies that are consolidated within these financial statements, two based in the UK and
one based in Canada. We identified three significant components, being the parent company, i3 Energy North Sea
Limited and i3 Energy Canada Ltd, which were subject to a full scope audit by a team with relevant sector
experience from the PKF London office. No component auditors were engaged.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of
the financial statements of the current year and include the most significant assessed risks of material misstatement
(whether or not due to fraud) we identified, including those which had the greatest effect on the overall audit
strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters
were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
Key Audit Matter
How our scope addressed this matter
Carrying Value of Property, plant & equipment
(“PPE”) (Note 12)
As at 31 December 2021, the carrying value of the
producing assets in relation to the group’s projects in
Canada are £224 million.
Our work in this area included:
• Verifying the inputs into the impairment indicators
assessment, including the reserves, pricing indices
and forecasts.
• A review of the competent persons report (“CPR”)
in place, assess their scope of work, including an
evaluation of their competence, capabilities and
independence and confirming the reserves thereto;
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i3 Energy PLC 2021 Annual Report and Financial Statements – Financial Statements
Independent Auditors Report
Key Audit Matter
How our scope addressed this matter
Management are required to assess the producing
assets for impairment indicators under IAS 36.
involved
This is considered to be a key audit matter due to the
significant
in
judgement and estimates
assessing whether any impairment has arisen at the
year end, and in quantifying any such impairment.
Whilst the oil prices have increased significantly in the
current year, the recent and historic volatile nature of
long-term oil prices give rise to an increased risk,
especially in the circumstances of the company being
its key source of revenue.
• A review of management’s internal production
forecasts to the CPR in place and assessing the
appropriateness of any differences which arise;
• A review of management’s assessment on the
impact of market conditions on the carrying value
of assets;
• Discussions with internal valuation experts to
independently develop a reasonable range of
discount rates for the Western Canadian
Sedimentary Basin (“WCSB”) assets and
compared those to the discount rate applied by
management;
• An assessment of any further management
assumptions by reference to third party
information, our knowledge of the group and
industry and also budgeted and forecast
performance; and
• An assessment of whether management’s
presentation and disclosures relating to estimation
uncertainty are adequate.
consider Management’s
We
of
impairment is reasonable in concluding no impairment
is required to be recognised at year-end.
assessment
Carrying Value of Exploration Assets (note 13)
Our work in this area included:
The group holds intangible assets of £49.8 million as
at 31st December 2021, comprising capitalised
exploration costs in respect of the Liberator and
Serenity projects. There is a risk that additions in
assets have not been capitalised in accordance with
IFRS 6 criteria and that the carrying value of the asset
is overstated as at 31 December 2021.
Particularly for early-stage exploration projects where
the calculation of recoverable amount via value in use
possible, management’s
calculations
assessment of impairment under IFRS 6 requires
significant estimation and judgement.
not
is
• Substantive testing of a sample of
exploration and evaluation expenditures to
assess their eligibility for capitalisation under
IFRS 6 by corroborating to original source
documentation;
• Confirming that i3 Energy North Sea Limited
holds good title to the relevant licence areas;
• Making enquiries of management regarding
future plans for each project including
obtaining cashflow projections where
necessary and corroborating to minimum
spend requirements attached to licences,
where appropriate;
• Considering whether there are indications of
impairment on a project by project basis in
accordance with IFRS 6; and
• Reviewing management’s impairment paper
in respect of the carrying value of intangible
assets and providing challenge,
corroborating any key assumptions used.
consider Management’s
We
of
impairment is reasonable in concluding no impairment
is required to be recognised at year-end.
assessment
Acquisition from Cenovus Energy Inc (Note 4)
Our work in this area included:
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i3 Energy PLC 2021 Annual Report and Financial Statements – Financial Statements
Independent Auditors Report
Key Audit Matter
How our scope addressed this matter
During the year, the company acquired the assets of
Cenovus Energy
included
low-decline
approximately 8,400 boepd with
production and 79.5MMboe of 2P reserves.
Inc. The acquisition
The company acquired
encumbrances (apart
acceptable permitted encumbrances)
consideration of CAD 65 million (US$53.7 million).
free of all
industry standard or
for gross
the assets
from
There is a risk that the appropriate fair values have not
been applied to the assets acquired and the resulting
goodwill or gain on bargain purchase has been
accounted for incorrectly.
This is considered to be a key audit matter due to the
significant judgement and estimates required by
management in order to assess the fair values of the
assets acquired.
• Reviewing the Asset Sale Agreement
entered into between the company and
Cenovus Energy Inc, reconciling the key
terms within the agreement to the working
paper provided by management and the
accounting treatment applied;
• Reviewing the fair value adjustments made
by management against the book value of
the assets acquired, and challenging the
assumptions and inputs made by
management thereto;
• Review and challenge of management’s
assessment of the asset acquisition meeting
the business combination criteria per IFRS
3.
• Recalculating the resulting goodwill or gain
on bargain purchase recorded in the
financial statements;
• Assessing whether management’s
presentation and disclosures relating to the
resulting Goodwill or gain or bargain
purchase and the estimation uncertainty are
adequate.
We consider Management’s assessment and
treatment of the acquisition reasonable.
Other information
The other information comprises the information included in the Annual Report, other than the financial statements
and our auditor’s report thereon. The Directors are responsible for the other information contained within the Annual
Report. Our opinion on the group and parent company financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance
conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our knowledge obtained in the course of the
audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent
material misstatements, we are required to determine whether this gives rise to a material misstatement in the
financial statements themselves. If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the strategic report and the Directors’ report for the financial year for which the
financial statements are prepared is consistent with the financial statements; and
the strategic report and the Directors’ report have been prepared in accordance with applicable legal
requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and parent company and their environment obtained
in the course of the audit, we have not identified material misstatements in the strategic report or the Directors’
report.
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i3 Energy PLC 2021 Annual Report and Financial Statements – Financial Statements
Independent Auditors Report
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires
us to report to you if, in our opinion:
•
•
adequate accounting records have not been kept by the parent company, or returns adequate for our
audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns;
or
•
certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of Directors
As explained more fully in the Statement of Directors Responsibilities, the Directors are responsible for the
preparation of the group and parent company financial statements and for being satisfied that they give a true and
fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the group and parent company financial statements, the Directors are responsible for assessing the
group’s and the parent company’s ability to continue as a going concern, disclosing, as applicable, matters related
to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate
the group or the parent company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance
with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures
in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including
fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.
We obtained an understanding of the group and parent company and the sector in which they operate to identify
laws and regulations that could reasonably be expected to have a direct effect on the financial statements. We
obtained our understanding in this regard through discussions with management, and application of audit
knowledge and experience of the sector.
We determined the principal laws and regulations relevant to the group and parent company in this regard to be
those arising from financial reporting legislation being IFRS for the consolidated financial statements and FRS 101
for the Company financial statements, the Companies Act 2006, taxation legislation, AIM Rules, local employment
law and Canada Oil and Gas Drilling and Production Regulations.
Our audit procedures were designed to ensure the audit team considered whether there were any indications of
non-compliance by the group and parent company with those laws and regulations.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures
in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including
fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
• We obtained an understanding of the group and parent company and the sector in which they operate to
identify laws and regulations that could reasonably be expected to have a direct effect on the financial
statements. We obtained our understanding in this regard through discussions with management, industry
research, and application of cumulative audit knowledge and experience of the sector.
• We determined the principal laws and regulations relevant to the group and parent company in this regard
to be those arising from:
- Companies Act 2006
- Canada Business Corporations Act
i3 Energy PLC
44
i3 Energy PLC 2021 Annual Report and Financial Statements – Financial Statements
Independent Auditors Report
-
-
-
Securities Law
Anti Money Laundering Legislation
Local tax laws and regulations
• We designed our audit procedures to ensure the audit team considered whether there were any
indications of non-compliance by the group and parent company with those laws and regulations. These
procedures included, but were not limited to:
-
-
-
- Discussion with management;
- Confirmation from legal advisors.
A review of the Board minutes throughout the year and post year end
A review of the RNS announcements;
A review of general ledger transactions;
• We also identified the risks of material misstatement of the financial statements due to fraud. We
considered, in addition to the non-rebuttable presumption of a risk of fraud arising from management
override of controls, the risk relating to the valuation of the assets and liabilities acquired to be an area of
potential for management bias. The valuation of the assets acquired are classified as “level 3” in the fair
value hierarchy table and supporting evidence has been obtained from the financial information available
to support the fair value of the assets acquired.
• As in all of our audits, we addressed the risk of fraud arising from management override of controls by
performing audit procedures which included, but were not limited to: the testing of journals; reviewing
accounting estimates for evidence of bias; and evaluating the business rationale of any significant
transactions that are unusual or outside the normal course of business
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those
leading to a material misstatement in the financial statements or non-compliance with regulation. This risk
increases the more that compliance with a law or regulation is removed from the events and transactions reflected
in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is
also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional
concealment, forgery, collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of the financial statements is located on the Financial
Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s
report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those
matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone, other than the company and the company's
members as a body, for our audit work, for this report, or for the opinions we have formed.
Joseph Archer (Senior Statutory Auditor)
For and on behalf of PKF Littlejohn LLP
Statutory Auditor
11 April 2022
15 Westferry Circus
Canary Wharf
London E14 4HD
i3 Energy PLC
45
i3 Energy PLC 2021 Annual Report and Financial Statements – Financial Statements
Consolidated Statement of Comprehensive Income
CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
Notes
Year Ended 31
December 2021
Year Ended 31
December 2020
Revenue
Production costs
Loss on risk management contracts
Depreciation and depletion
Gross profit
Administrative expenses
Acquisition costs
Gain on bargain purchase and asset dispositions
Operating profit
Finance costs
Profit before tax
Tax (charge) / credit for the year
Profit for the year
Other comprehensive income / (loss):
Items that may be reclassified subsequently to profit or loss:
Foreign exchange differences on translation of foreign operations
Other comprehensive income / (loss) for the year, net of tax
Total comprehensive income for the year
Earnings per share
Earnings per share – basic
Earnings per share - diluted
All operations are continuing.
The accompanying notes form an integral part of these financial statements.
6
18
12
7
4
4
8
9
11
11
£’000
86,763
(37,945)
(5,485)
(21,643)
21,690
(13,094)
(256)
25,013
33,353
(7,609)
25,744
(661)
25,083
£’000
12,991
(8,075)
–
(4,854)
62
(5,755)
(1,542)
25,211
17,976
(7,368)
10,608
1,110
11,718
1,511
1,511
(147)
(147)
26,594
11,571
Pence
2.84
2.60
Pence
3.78
3.46
i3 Energy PLC
46
i3 Energy PLC 2021 Annual Report and Financial Statements – Financial Statements
Consolidated Statement of Financial Position
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Assets
Notes 31 December 2021 31 December 2020
Non-current assets
Property, plant & equipment
Exploration and evaluation assets
Deferred tax asset
Other non-current assets
Total non-current assets
Current assets
Cash and cash equivalents
Trade and other receivables
Risk management contracts
Inventory
Total current assets
Current liabilities
Trade and other payables
Risk management contracts
Borrowings and leases
Decommissioning provision
Total current liabilities
Net current assets
Non-current liabilities
Non-current accounts payable
Borrowings and leases
Decommissioning provision
Deferred tax liability
Total non-current liabilities
Net assets
Capital and reserves
Ordinary shares
Deferred shares
Share premium
Share-based payment reserve
Warrants – LNs
Foreign currency translation reserve
Retained earnings / (accumulated deficit)
Shareholders’ funds
12
13
9
14
18
15
18
16
17
15
16
17
9
19
19
19
20
16
£’000
£’000
224,080
49,819
–
74
108,509
48,809
1,052
678
273,973
159,048
15,335
25,503
814
665
42,317
6,178
8,731
–
164
15,073
(19,709)
(13,156)
(925)
(69)
(2,368)
(23,071)
19,246
(557)
(23,855)
(123,155)
(7,486)
(155,053)
–
(28)
(1,234)
(14,418)
655
(3,000)
(17,958)
(65,549)
–
(86,507)
138,166
73,196
113
50
44,203
9,102
2,045
1,364
81,289
138,166
70
50
61,605
6,337
9,714
(147)
(4,433)
73,196
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 11 April 2022. Signed on behalf of the Board of Directors by:
Majid Shafiq, Director
i3 Energy PLC
47
i3 Energy PLC 2021 Annual Report and Financial Statements – Financial Statements
Consolidated Statement of Changes in Equity
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Notes 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 2019
Total comprehensive income for the year
Transactions with owners:
Issue of share capital
Exercise of warrants – LNs
Share-based payment expense
Balance at 31 December 2020
Total comprehensive income for the year
Capital reduction
Transactions with owners:
Issue of share capital
Exercise of options
Exercise of warrants
Share-based payment expense
Dividends declared in 2021
19
20
20
19
19
20
20
20
19
11
–
32,572
–
58
27,372
1
–
1,661
–
50
–
–
–
–
3,803
11,375
–
(16,151)
31,660
–
–
–
–
–
(1,661)
2,534
–
(147)
11,718
11,571
–
–
–
–
–
–
27,430
1
2,534
70
61,605
50
6,337
9,714
(147)
(4,433)
73,196
–
–
–
(64,056)
36
37,970
2
5
–
–
112
8,572
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(452)
(7,669)
3,217
–
–
–
1,511
25,083
26,594
–
64,056
–
–
–
–
–
–
–
–
–
–
38,006
114
456
3,217
(3,417)
(3,417)
Balance at 31 December 2021
113
44,203
50
9,102
2,045
1,364
81,289
138,166
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 consolidated nominal value exceeds
the required minimum issued capital of £50,000.
i3 Energy PLC
48
i3 Energy PLC 2021 Annual Report and Financial Statements – Financial Statements
Consolidated Statement of Cash Flow
CONSOLIDATED STATEMENT OF CASH FLOW
OPERATING ACTIVITIES
Profit / (loss) before tax
Adjustments for:
Depreciation and depletion
Gain on bargain purchase and asset dispositions
Finance costs
Unrealised loss on risk management contracts
Unrealised FX (gain) / loss
Share-based payments expense – employees (including NEDs)
Operating cash flows before movements in working capital:
(Increase) in trade and other receivables
Increase in trade and other payables
(Increase) / decrease in inventory
Net cash from / (used in) operating activities
INVESTING ACTIVITIES
Business acquisitions
Cash assumed on business acquisitions
Expenditures on property, plant & equipment
Disposal of property, plant & equipment
Expenditures on exploration and evaluation assets
Expenditure on decommissioning oil and gas assets
Tax credit for R&D expenditure
Net cash used in investing activities
FINANCING ACTIVITIES
Proceeds on issue of ordinary shares, net of issue costs
Interest and other finance charges paid
Lease payments
Dividends paid
Net cash from financing activities
Effect of exchange rate changes on cash
Net Increase / (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
CASH AND CASH EQUIVALENTS, END OF YEAR
Notes
Year ended 31
December 2021
Year ended 31
December 2020
£’000
£’000
25,744
10,608
12
4
8
18
7
7
4
4
17
9
19
8
16
19
21,643
(25,013)
7,609
111
(154)
3,217
(15,297)
6,862
(283)
24,439
4,854
(25,211)
7,368
–
68
336
(7,217)
4,974
69
(4,151)
(37,079)
(18,474)
–
(9,465)
529
(3,317)
(648)
487
262
(229)
–
(17,403)
(131)
383
(49,493)
(35,592)
38,125
(448)
(30)
(3,417)
34,230
(19)
9,157
6,178
15,335
27,253
(114)
(10)
–
27,129
(278)
(12,892)
19,070
6,178
Included within cash and cash equivalents is £315 thousand of restricted cash, which relates to guarantees for product marketing.
Non-current accounts payables reconciliation is show in note 15 and the debt reconciliation is shown in note 16.
The accompanying notes form an integral part of these financial statements.
i3 Energy PLC
49
i3 Energy PLC 2021 Annual Report and Financial Statements – Financial Statements
Notes To the Group 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 the appraisal of oil and gas
assets on the UK Continental Shelf and of oil and gas production in Western Canadian Sedimentary Basin.
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.
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 2021.
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 on page 38.
i3 Energy PLC
50
i3 Energy PLC 2021 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
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 statement of comprehensive income.
i3 Energy PLC
51
i3 Energy PLC 2021 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
3 Significant accounting policies - continued
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 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 expensed 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 statement of
comprehensive income. The functional currency of the Company is GBP, and the Group results and financial
position are presented in GBP.
i3 Energy PLC
52
i3 Energy PLC 2021 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
3 Significant accounting policies - continued
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 the Consolidated Statement of Comprehensive Income, 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 expected to apply to the period when the asset is realised or the
liability is settled. Deferred tax assets and liabilities are not discounted.
Intangible assets – Exploration and evaluation expenditures (E&E)
Development expenditure
Expenditure on the construction, installation, and completion of infrastructure facilities such as platforms, pipelines
and the drilling of development wells, including service, is capitalised initially within intangible fixed assets and
when the well has formally commenced commercial production, then it is transferred to property, plant and
equipment and is depreciated from the commencement of production as described in the accounting policy for
property, plant and equipment.
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 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.
i3 Energy PLC
53
i3 Energy PLC 2021 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
3 Significant accounting policies - continued
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 statement of comprehensive income.
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
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 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 income statement. Where conditions giving rise to impairment
subsequently being reversed, the effect of the impairment charge is also reversed as a credit to the income
statement, net of any depreciation that would have been charged since the impairment.
i3 Energy PLC
54
i3 Energy PLC 2021 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
3 Significant accounting policies - continued
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.
i3 Energy PLC
55
i3 Energy PLC 2021 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
3 Significant accounting policies - continued
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.
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.
i3 Energy PLC
56
i3 Energy PLC 2021 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
3 Significant accounting policies - continued
Standard
Interpretation
Description
Effective date for annual
accounting period beginning on or
after
IAS 1
IAS 16
IAS 37
IAS 8
IAS 1
Amendments – Presentation and Classification of Liabilities as
Current or Non-current
Amendments - Property, Plant and Equipment
Provisions, Contingent Liabilities and Contingent Assets
Amendments - Definition of Accounting Estimates
Amendments – Disclosure of Accounting Policies
TBC
1 January 2022*
1 January 2022*
1 January 2023*
1 January 2023*
IFRS 3
Amendments – Business Combinations – Conceptual Framework
1 January 2022*
IFRS
Annual Improvements to IFRS Standards 2018-2020
1 January 2022*
*Subject to UK endorsement
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 2021, the Group held oil and gas E&E assets of £49.8 million (2020: £48.8 million), note 13. The
carrying value of E&E assets are assessed for impairment when circumstances suggest that the carrying amount
may exceed its recoverable value. In making this judgement the Management considers the indicators of
impairment in the intangible exploration and evaluation asset accounting policies set out above. Management has
considered the expiration of the P.1987 licence on 31 December 2020, prevailing commodity prices, and budgeted
spend and future activity on the P2358 licence, concluding that these do not represent an indicator of impairment.
Further discussion is provided in note 13. Refer to note 24 for discussion around the early-2022 farm-out of
Serenity.
i3 Energy PLC
57
i3 Energy PLC 2021 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
3 Significant accounting policies - continued
Carrying value of property, plant and equipment – oil and gas assets
At 31 December 2021, the Group held oil and gas PP&E assets of £224.0 million (2020: £108.4 million), note 12,
with the majority of the 2021 increase being acquired through the Cenovus acquisition which completed in the
period, note 4. 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
oil prices, and changes in expected future operating and capital expenditure, decommissioning expenditure, the
NPV10 of 2P reserves per the 31 December 2021 independent competent person’s report, and increases in cost
of capital which may indicate a higher discount rate is likely required in assessing the assets recoverable amount.
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 2021.
Fair value judgements for businesses acquired
The Group completed 1 business combination during the year ended 31 December 2021. Management has applied
judgement in concluding that the Group had acquired a business in the Cenovus acquisition. In accordance with
IFRS 3 ‘Business combinations’, management has then applied judgement in estimating the fair value of assets
acquired and liabilities assumed, which included estimates relating to oil and gas reserves, future production rates,
oil and gas prices, operating and capital expenditure, decommissioning expenditure, and discount rates. Further
details are provided in note 4.
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 as at 31 December
2021 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 depreciation 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/.
The Group estimates it had commenced the year with 54.0 MMboe of proved plus probable reserves and acquired
a further 80.7 MMboe through the Cenovus acquisition. A 1.0 MMboe increase/decrease to each of these estimates
would have decreased/increased the oil and gas depreciation charge for the period by £553 thousand, respectively.
Decommissioning costs
At 31 December 2021 the Group had recorded a decommissioning provision of £125.5 million (2020: £66.8 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 £18.5 million and £15.4 million,
respectively. A 0.5% increase/decrease in the discount rate would have decreased/increased the decommissioning
provision by £15.4 million and £18.6 million, respectively.
i3 Energy PLC
58
i3 Energy PLC 2021 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
3 Significant accounting policies - continued
Recognition and measurement of deferred tax assets
At 31 December 2021, the Group held deferred tax liabilities of £7.5 million (2020: asset of £1.1 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 2021 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 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 statement of comprehensive income.
4
Business combinations
On 6 July 2021 (“Cenovus ASA Date”) the Group through its wholly owned subsidiary i3 Energy Canada Limited
(“i3 Canada”) entered into a binding purchase and sale agreement to acquire certain petroleum and infrastructure
assets (the “Cenovus Assets”) from Cenovus Energy Inc. (“Cenovus”) for gross consideration of CAD65.0 million
(£37.1 million). The transaction completed on 20 August 2021 (the “Acquisition Date”) at which point i3 obtained
control of the Cenovus Assets, which include approximately 8,400 boepd (51% oil and NGLs) of predictable low-
decline production, 79.5 MMboe of 2P reserves, an inventory of greater than 140 net drilling locations and 80 net
reactivation opportunities across approximately 212,000 net acres, an 1,140 km network of operated pipelines, and
key processing facilities. The acquisition enabled the Group to expand its Canadian operations through cash flow
generating assets.
The Cenovus Assets are an integrated set of activities and assets that are capable of being managed and
conducted for the purpose of providing a return, and therefore constitute a business. Accordingly, the transaction
has been accounted for in accordance with IFRS 3 ‘Business Combinations’ which requires the assets acquired
and liabilities assumed to be recognised on the acquisition date at their fair value.
The acquisition had an effective date of 1 April 2021 and therefore the acquisition price of CAD65 million was (i)
reduced by CAD7.6 million for the income generated from the Cenovus assets between the “Economic Effective
Date” of 1 May 2020 and the Acquisition Date; and (ii) increased by CAD0.9 million for interest accruing from the
Economic Effective Date to the Acquisition Date at Canadian Prime + 1.0% on the Gross consideration.
The fair value of oil and gas assets is estimated based on the pre-tax net present value of PDP reserves as derived
from a reserves report by a firm of independent reservoir engineers dated 30 April 2021, re-run with an effective
date of 20 August 2021 with an updated price deck, discounted at a rate of 10% which management determined
to be representative of the risk profile of the assets, along with the market value of the seismic data acquired as
estimated from the sale price of similar data. The fair value of the decommissioning provision is estimated based
on rates published by the AER. These represent a level 3 valuation in the IFRS 13 fair value hierarchy as they are
based on valuation techniques that use inputs which are not based on observable market data. The fair value of
the assets acquired, and liabilities assumed exceed the consideration by £24.3 million, reflecting the gain on
bargain purchase which has been recorded in the statement of comprehensive income. It is likely that the gain on
bargain purchase arose due to the oil price recovery between the date the purchase price was agreed and the
acquisition date. Further details of the transaction are provided in the Strategic Report.
The amounts recognised in respect of the identifiable assets acquired and liabilities assumed are as set out in the
table below.
i3 Energy PLC
59
i3 Energy PLC 2021 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
4 Business combinations - continued
Net consideration to allocate
Property, plant, and equipment – oil and gas assets
Inventory
Prepaid expenses
Decommissioning provisions
Deferred tax liability
Gain on bargain purchase
Total
20 August 2021
£’000
33,264
117,416
218
979
(53,840)
(7,247)
(24,262)
33,264
The Cenovus assets contributed £23.2 million revenue (net of royalties) and £16.8 million to the Group’s net
operating income for the period between the acquisition date and the reporting date. If the acquisition of the
Cenovus assets had been completed on the first day of the financial year, Group revenues for the year would have
been £118.4 million and Group net operating income would have been £66.3 million. Net operating income is a
non-IFRS measure, refer to Appendix B. It is considered impractical to present the impact on profit as if the
acquisition had competed on the first day of the financial year as it would require estimation of commercial reserves,
future development costs, various judgements over the decommissioning provision, and certain administrative
costs, all of which are not readily available to Management, and therefore the impact on net operating income has
been presented instead.
Acquisition costs of £0.3 million (2020 - £1.5 million) relating to the acquisition have been recognised in the
statement of comprehensive income.
A gain on asset dispositions arose upon the sale of certain oil and gas assets. Further details are provided in note
12.
The gain on bargain purchase and asset dispositions as per the consolidated statement of comprehensive income
is as follows:
Gain on bargain purchase
Gain on asset dispositions
Gain on bargain purchase and asset dispositions
5
Segmental reporting
2021
£’000
24,262
751
25,013
2020
£’000
25,211
–
25,211
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 2021:
i3 Energy PLC
60
i3 Energy PLC 2021 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
5 Segmental reporting - continued
Revenue
Production costs
Loss on risk management contracts
Depreciation and depletion
Gross (loss) / profit
Administrative expenses
Acquisition costs
Gain on bargain purchase and asset dispositions
Operating profit
Finance costs
(Loss) / profit before tax
Tax (charge) / credit for the year
(Loss) / profit for the year
UK / Corporate
£’000
–
–
–
(4)
(4)
(7,059)
–
–
(7,063)
(5,930)
(12,993)
487
(12,506)
Canada
£’000
86,763
(37,945)
(5,485)
(21,639)
21,694
(6,035)
(256)
25,013
40,416
(1,679)
38,737
(1,148)
37,589
The following is an analysis of the Group’s revenue and results by reportable segment in 2020:
Revenue
Production costs
Depreciation and depletion
Gross (loss) / profit
Administrative expenses
Acquisition costs
Bargain purchase gain
Operating profit
Finance costs
(Loss) / profit before tax
Tax credit for the year
(Loss) / profit for the year
UK / Corporate
£’000
–
–
(5)
(5)
(3,335)
(989)
5,962
1,633
(7,108)
(5,475)
383
(5,092)
Canada
£’000
12,991
(8,075)
(4,849)
67
(2,420)
(553)
19,249
16,343
(260)
16,083
727
16,810
Total
£’000
86,763
(37,945)
(5,485)
(21,643)
21,690
(13,094)
(256)
25,013
33,353
(7,609)
25,744
(661)
25,083
Total
£’000
12,991
(8,075)
(4,854)
62
(5,755)
(1,542)
25,211
17,976
(7,368)
10,608
1,110
11,718
The following is an analysis of the Group’s assets and liabilities by reportable segment as at 31 December 2021 and
the capital expenditure for the year then ended:
Total assets
Total liabilities
Capital expenditure – E&E
Capital expenditure – PP&E
UK / Corporate
£’000
50,129
(25,733)
1,010
–
Canada
£’000
266,161
(152,391)
–
11,184
Total
£’000
316,290
(178,124)
1,010
11,184
i3 Energy PLC
61
i3 Energy PLC 2021 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
5 Segmental reporting - continued
The following is an analysis of the Group’s assets and liabilities by reportable segment as at 31 December 2020 and
the capital expenditure for the year then ended:
Total assets
Total liabilities
Capital expenditure – E&E
Capital expenditure – PP&E
6
Revenue
UK / Corporate
£’000
48,932
(24,160)
2,281
–
Canada
£’000
125,189
(76,765)
–
697
Total
£’000
174,121
(100,925)
2,281
697
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:
Oil and natural gas liquids
Natural Gas
Royalties
Revenue from the sale of oil and gas
Processing income
Other operating income
Total revenue
2021
£’000
61,027
34,994
(12,094)
83,927
2,605
231
86,763
2020
£’000
7,274
5,978
(830)
12,422
569
–
12,991
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 2021, four (2020: three) customers individually totalled more than 10% of total
revenues, totalling 79% (2020: 70%) in aggregate.
7
Administrative expenses
Directors’ fees
Employee costs*
Professional fees**
Other
Realised FX loss / (gain)
Unrealised FX (gain) / loss
Total administrative expenses
2021
£’000
300
8,503
1,728
2,448
269
(154)
13,094
2020
£’000
229
2,879
1,207
1,388
(16)
68
5,755
i3 Energy PLC
62
i3 Energy PLC 2021 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
7 Administrative expenses - continued
* Group staff costs comprised:
Wages, salaries, and benefits
Social security costs
Other pension costs
Share-based payments expense – employees (including NEDs)
Total staff costs
Capitalised salaries and overhead recoveries
Charge to the profit or loss
2021
£’000
6,027
336
254
3,217
9,834
(1,331)
8,503
2020
£’000
3,185
44
64
336
3,629
(750)
2,879
i3 Energy plc had no staff during the year ended 31 December 2021 (2020 - Nil) and therefore no payments were
made. The Directors of the Group are not considered staff, and their remuneration is disclosed in note 10.
The average number of persons employed by the Group, including Executive Directors, was:
Average number of persons employed
2021 Number
2020 Number
Operations
Corporate and administration
Total
29
18
47
13
7
20
** Included within professional fees are fees payable to the Company’s auditor and its associates for the following:
Audit services
The audit of the Company’s annual accounts
The audit of the Company’s subsidiaries
Total audit fees
Reporting accountant work in relation to 2020 admission documents
Total
8
Finance costs
Accretion of loan notes (note 16)
Interest expense on loan notes (note 16)
Stock-based compensation – warrants (note 20)
Unwinding of discount on decommissioning provision (note 17)
Bank charges and interest on creditors
(Gain) / loss on BHGE DPIB (note 15)
Total finance costs
2021
£’000
120
–
120
–
120
2021
£’000
2,824
3,144
451
1,539
374
(723)
7,609
2020
£’000
80
–
80
170
250
2020
£’000
2,355
2,487
2,198
214
114
–
7,368
i3 Energy PLC
63
i3 Energy PLC 2021 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
9
Taxation
Taxation credit
The below table reconciles the tax charge for the year to the expected tax charge based on the result for the year
and the corporation tax rate.
Profit before income tax
Rate of Corporate Tax
Expected tax charge
Effects of:
Interest and other not deductible for SCT
Permanent differences
Foreign tax rate difference
Change in estimated pool balances
Derecognition of deferred tax asset
R&D tax credit received
Total income tax charge / (credit)
Of which:
Current tax (credit) – prior years
Deferred tax charge / (credit) – current year
Total income tax charge / (credit)
2021
£’000
25,744
40%
10,298
620
(3,804)
(6,585)
179
440
(487)
661
2021
£’000
(487)
1,148
661
2020
£’000
10,608
40%
4,243
491
(4,415)
(3,747)
–
2,701
(383)
(1,110)
2020
£’000
(383)
(727)
(1,110)
During the year the Group received £487 thousand in R&D tax refunds in the UK in respect of the 2019 fiscal year.
The difference on foreign tax rate results from the 23% rate of corporate taxation at its Canadian subsidiary.
i3 Energy PLC
64
i3 Energy PLC 2021 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
9 Taxation - continued
Deferred tax
The components of the net deferred tax asset and the movement during the year is summarised as follows:
At 31 December
2020
Acquired
during the year
Recognised
in income
FX movement At 31 December
2021
£’000
£’000
£’000
£’000
£’000
UK:
Deferred tax assets:
Losses
Valuation allowance
Deferred tax liabilities:
PP&E
Net deferred tax asset
Canada:
Deferred tax assets:
Decommissioning provision
Losses
Risk management contracts
Other
Valuation allowance
Deferred tax liabilities:
PP&E
25,764
(6,238)
(19,526)
–
15,360
5,625
–
157
(7,912)
–
–
–
–
2,947
(2,544)
(403)
–
12,383
679
(3,263)
25
48
–
–
–
–
–
–
–
–
448
54
–
2
28,711
(8,782)
(19,929)
–
28,870
2,416
25
207
2,360
(87)
(5,639)
Net deferred tax asset
1,052
(7,247)
(1,148)
(12,178)
(19,630)
(997)
(560)
(143)
(33,365)
(7,486)
Net deferred tax asset / (liability)
1,052
(7,247)
(1,148)
(143)
(7,486)
A deferred tax asset has not been recognised in respect of tax losses and allowances in the UK due to uncertainty
over the availability of future taxable profits in the UK to offset these losses against.
The Group recognised a net deferred tax liability through the Cenovus acquisition of £7,247 thousand, and a
deferred tax charge of £1,148 thousand for changes in net deductible temporary differences in the year. The
deferred tax liability has been partially offset by a deferred tax asset which has been recognised in Canada to the
extent that the Group anticipates probable future taxable profits to against which the assets can be utilised.
i3 Energy PLC
65
i3 Energy PLC 2021 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
9 Taxation - continued
The Group’s estimated tax pools are summarised in the following table. The non-capital tax loss pools in Canada
expire over a period of 20 years. All other tax pools do not expire.
UK:
Taxable losses
Mineral extraction allowances
Canada:
Canadian exploration expense
Canadian development expense
Canadian oil and gas property expense
Undepreciated capital cost
Non-capital losses
Other
Total
10 Directors’ remuneration
31 December 2021
£’000
29,325
49,819
79,144
3,107
7,519
56,391
11,991
10,503
833
90,344
2021
Executive Directors
Majid Shafiq
Graham Heath
Non-Executive Directors
Neill Carson
Richard Ames
Linda Beal
John Festival
Total
2020
Executive Directors
Majid Shafiq
Graham Heath
Non-Executive Directors
David Knox
Neill Carson
Richard Ames
Linda Beal
John Festival
Total
Salary / Fees
Bonus
Share based
payments
£’000
£’000
£’000
384
319
60
60
120
60
438
358
–
–
–
–
1,003
796
252
156
51
51
45
13
568
Salary / Fees
Bonus
Share based
payments
313
244
22
57
54
70
6
766
389
329
–
–
–
–
–
718
–
–
–
–
–
–
–
–
31 December 2020
£’000
20,585
48,809
69,394
3,068
4,698
39,311
8,383
24,456
684
80,600
Total
£’000
1,074
833
111
111
165
73
2,367
Total
702
573
22
57
54
70
6
1,484
i3 Energy PLC
66
i3 Energy PLC 2021 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
10 Directors’ remuneration - continued
Share based payments represents 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 comparative figures for 2020 have also
been presented on this basis.
During the year the Company contributed £2 thousand to i3’s CEO’s pension scheme (2020 - £3 thousand).
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:
Earnings
Earnings for the purposes of basic and diluted earnings per share
being net profit attributable to owners of i3 Energy (£’000)
25,083
11,718
Year Ended 31
December 2021
Year Ended 31
December 2020
Weighted average number of shares
Weighted average number of Ordinary Shares – basic
883,664,352
309,889,077
Effect of dilutive potential ordinary shares:
Share options
Warrants
49,369,708
2,399,909
32,758,752
26,700,708
Weighted average number of Ordinary Shares – diluted
965,792,812
338,989,694
Basic earnings / (loss) per share (pence)
Diluted earnings / (loss) per share (pence)
2.84
2.60
3.78
3.46
In 2021, prior to the BHGE warrant repricing on 17 May 2021, these instruments were anti-dilutive as their exercise
price exceed the average market price of the Ordinary Shares over this period. Concurrent with their repricing the
BHGE warrants were immediately exercised for ordinary shares. The BHGE shares were therefore included in the
basic weighted average number of Ordinary Shares from 17 May 2021 but were not further included in the effect
of dilutive potential ordinary shares.
In 2020, prior to the option and warrant repricing on 28 October 2020 and 23 June 2020 (note 20), respectively,
these instruments were anti-dilutive as their exercise prices exceeded the average market price of the Ordinary
Shares over this period. The Share options and Warrants were dilutive following their re-pricing and their impact is
presented in the table above.
i3 Energy PLC
67
i3 Energy PLC 2021 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
12
Property, plant, and equipment
Oil and gas assets
assets Other fixed assets
Total
Right of use
Cost
As at 1 January 2020
Acquisitions
Additions
Changes to decommissioning estimates
Decommissioning settlements under SRP and ASCP (note 17)
Exchange movement
As at 31 December 2020
Acquisitions
Additions
Disposals
Changes to decommissioning estimates
–
114,826
697
(2,310)
(104)
84
113,193
122,762
11,184
(8,242)
7,603
Decommissioning settlements under SRP and ASCP (note 17)
(324)
Exchange movement
As at 31 December 2021
Accumulated depreciation
As at 1 January 2020
Charge for the year
Exchange movement
As at 31 December 2020
Charge for the year
Disposals
Exchange movement
As at 31 December 2021
Carrying amount at 31 December 2020
Carrying amount at 31 December 2021
–
–
110
–
–
(2)
108
–
–
–
–
–
1
109
–
(6)
–
(6)
22
–
–
–
–
–
22
–
50
–
–
–
–
72
(14)
(5)
–
(19)
22
114,826
807
(2,310)
(104)
82
113,323
122,762
11,234
(8,242)
7,603
(324)
3,858
250,214
(14)
(4,854)
54
(4,814)
3,857
250,033
–
(4,843)
54
(4,789)
(21,611)
(27)
(5)
(21,643)
481
(158)
–
–
–
–
481
(158)
(26,077)
(33)
(24)
(26,134)
108,404
223,956
102
76
3
48
108,509
224,080
During the year, i3 disposed of certain assets in its Weyburn, Marten Creek, and Drayton Valley areas for net
proceeds of £529 thousand. After removing the associated decommissioning obligations, a resulting gain on
disposition of £751 thousand has been recognised in the consolidated statement of comprehensive income.
Right of use assets consist of certain field vehicles whose leases commenced in September 2020.
i3 Energy PLC
68
i3 Energy PLC 2021 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
13
Exploration and evaluation assets (Intangible)
At start of year
Additions
At end of year
Year Ended 31
December 2021
£’000
48,809
1,010
49,819
Year Ended 31
December 2020
£’000
46,528
2,281
48,809
The Directors have considered the carrying value of the exploration and evaluation assets as at 31 December 2021
and concluded that no indicators of impairment arose during the period. In reaching this conclusion, the Directors
have given particular attention to the relinquishment of UKCS Licence P.1987 which reached the end of its two-
year second term on 31 December 2020. Licence P.1987 encompasses UK Block 13/23d which contains
contingent resources for the Group’s Liberator asset, which have been evaluated as sub-commercial by i3 and in
an 'independent competent person' report and as such do not represent a viable commercial development. i3 may
choose to re-apply for Licence P.1987 licence in the future if justified by its appraisal of the Liberator West / Minos
High prospective areas and/or the Serenity discovery. The relinquishment will result in a significant saving in licence
fees whilst i3 progresses its appraisal of resources on its adjoining P.2358 Licence.
This relinquishment has no impact on Licence P.2358, which commenced its four-year second term on 30th
September 2020 and contains the vast majority of the resources and potential reserves in the Company's UK
acreage. Licence P.2358 includes the Serenity discovery and the Liberator West and Minos High prospective
areas, which will be the focus of plans for appraisal and exploration drilling.
Management also considered the active farm-out discussion which were ongoing at 31 December 2021, which
ultimately led to an agreement with a new joint venture partner in early-2022. Further details are provided in note
24.
14
Trade and other receivables
Trade receivables
Sales tax receivables
JV receivables
Prepayments & other receivables
Total trade and other receivables
All receivables are all due within one year.
31 December 2021
£’000
21,982
–
1,483
2,038
25,503
31 December 2020
£’000
6,295
46
864
1,526
8,731
JV receivables represent amounts due from operating partners for operating and capital activity in Canada.
The fair value of 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.
i3 Energy PLC
69
i3 Energy PLC 2021 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
15
Trade and other payables
Trade creditors
Sales tax payable
Accruals
JV payables
Total trade and other payables
31 December 2021
£’000
5,169
65
13,565
910
19,709
31 December 2020
£’000
7,780
–
5,146
230
13,156
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.
JV payables represent amounts due to operating partners for operating and capital activity in Canada.
Non-current accounts payable
On 2 July 2019 the Group agreed with Baker Hughes, a GE Company, and GE Oil & Gas Limited (collectively referred
to as “BHGE” hereafter) that £3.0 million of oilfield service and oilfield equipment contract payments will not become
payable until such time as i3 has received its first sales revenues from Liberator Phase I. This payable was previously
recorded as a non-current accounts payable.
On 17 May 2021, i3 announced that it had successfully restructured legacy contracts and agreements for equipment,
oil field services, and warrants with BHGE. In summary, the remainder of a £5.8 million contract for subsea trees and
wellheads was cancelled, 5,277,045 warrants had an exercise price reduction to £0.0001 per share (the “Warrant
Shares”), and an outstanding contingent payment for £3.0 million (“Deferred Payment Invoice Balance”, or “DPIB”) in
oil field services and equipment that becomes payable at such time as the Company receives consideration from any
sale or farm-down of its Serenity or Liberator assets will be reduced by the exercise value of the Warrant Shares, the
market value of the Warrant Shares from time to time, all dividends received by BHGE associated with the Warrant
Shares, and certain payments to be made to BHGE. The purpose of this restructuring was to enable i3 to become a
dividend payer, as certain conditions of the abovementioned contracts prevented it from reducing its share premium
account – a required step in order for i3 to effect dividend distributions to its shareholders. The incremental fair value of
the modified warrants was expensed in 2021 (note 8).
The future Market Value reduction of the payable amount will vary with the trading value of i3 shares and therefore
represents an embedded derivative. The entire combined contract is designated as at FVTPL. The fair value of £1,789
thousand has been calculated as the £3.0 million payable amount, less the exercise value of the Warrant Shares of £1
thousand, less cash payments of £487 thousand made against the DPIB balance, less the Market Value of the Warrant
Shares of £723 thousand, which totals the 5,277,045 Warrant Shares as at the 31 December 2021 share price of
13.35p/share and £19 thousand of dividends paid to the Warrant Shares. The fair value of the combined contract is
classified as Level 2 in the fair value hierarchy as defined by IFRS 13 ‘Fair value measurements’. £1,232 thousand
is expected to be paid in 2022 has been classified as a current liability (31 December 2020: nil), and the remaining
£557 thousand has been classified as a non-current liability (31 December 2020: £3.0 million). A reconciliation of
the balance is as follows:
At start of year
Exercise value of the Warrant Shares
Cash payments made during the year
Non-cash change in market value of the Warrant Shares (note 8)
At end of year
Year Ended 31
December 2021
£’000
3,000
(1)
(487)
(723)
1,789
Year Ended 31
December 2020
£’000
3,000
–
–
–
3,000
i3 Energy PLC
70
i3 Energy PLC 2021 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
15 Trade and other payables - continued
31 December 2021
£’000
1,232
557
1,789
31 December 2020
£’000
–
3,000
3,000
Of which:
Current, within trade accounts payable
Non-current
Total
16 Borrowings
H1-2019 loan note facility
In May 2019, the Company 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
Company’s option (i) in cash at a rate of 8% per annum, or (ii) in kind (at i3’s option) at a rate of 11% per annum
by the issuance of additional H1-2019 LNs.
The noteholders were granted warrants (“H1-2019 LN Warrants”) in the notional amount of £1 for each £1 of loan
notes issued, with H1-2019 Warrants being issued proportionately across three series. The H1-2019 LN Warrants
vested on the issue date and expire 4 years thereafter and can be exercised through either/or a combination of a
cash payment and/or surrender of H1-2019 LNs plus accrued interest equal to the aggregate notional amount of
the H1-2019 LN Warrants being exercised. Each H1-2019 LN Warrant gives the holder the right to convert the
notional amount into such number of shares as is derived by dividing the notional amount by the exercise price.
The following table outlines the terms of the warrants as at their issuance date.
Notional
amount of
warrants (£)
Exercise
price upon
issuance
(£/share)
Shares to be
issued upon
exercise of
warrants
Share price at
issuance (£)
Time to
maturity
(years)
Value
(£/share)
Tranche 1
7,333,333
0.4070
18,018,018
Tranche 2
7,333,333
0.4810
15,246,015
Tranche 3
7,333,333
0.5550
13,213,213
0.39
0.39
0.39
4
4
4
0.2557
0.2435
0.2313
Total fair value of the Tranche 1, Tranche 2 and Tranche 3 warrants on issuance was £11,375,184 and was
bifurcated from the debt contract and classified as equity.
The H1-2019 LNs are comprised of the following components: the debt contract, the conversion feature, the interest
rate payment option and the early conversion feature (at i3’s option). At inception the debt component was recorded
at an estimated fair value of £10,624,816. The debt balance is unwound using the effective interest rate method to
the principal value at maturity with a corresponding non-cash accretion charge to earnings.
On the 23 June 2020 the Company amended the 30 April 2020 Development Funding Long-stop Date (previously
amended on 8 November 2019 when the Majority Noteholders of the Company’s secured loan notes agreed to
extend the date by which the Company must either inter into a reserves-based lending facility or find an alternative
means of funding to achieve first oil from the Liberator field, to 30 April 2020). As the Company was not in a position
to enter into such a facility by 30 April 2020, the Company and the Majority Noteholders have come to an agreement
to waive this condition in return for certain amendments to the May 2019 Loan Note Instrument and the associated
Warrant Instruments.
The Loan Note Instrument Amendments are as follows:
i3 Energy PLC
71
i3 Energy PLC 2021 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
16 Borrowings - continued
The obligation to enter into a development facility for Liberator by a certain date has been removed. A new
Corporate Development Long-stop Date had been set for 30 September 2020 prior to which i3 has to achieve one
of the following Corporate Development Longstop Conditions:
• Secure firm irrevocable commitments for a minimum £15 million of unsecured or fully subordinated
financing, subject only to closing mechanics; or
• Agree a farm-out and/or funding term sheet, subject only to legal documentation to fund the drilling of a
least one appraisal well on Serenity during 2020 or 2021; or
• Execute an acquisition agreement for at least 2500 boepd of production net to i3.
In addition, the Company has an obligation to achieve net corporate production at or above 5000 boepd by 30 April
2021. These requirements were met with the completion of the Gain acquisition on 3 September 2020.
The Loan Note Instrument amendments include the requirement that the currently outstanding i3 management
options will be cancelled, and replacement options will be issued to i3 staff and Directors which replicate the terms
of the adjusted Loan Note warrants (the "New Options") in relation to the exercise price, to seek alignment between
the Noteholders and management (note 20).
The Warrant Instrument Amendments are as follows:
All warrants associated with the Loan Notes will have their strike prices reset to the nominal value of i3 shares
(£0.0001/share). The Company calculated the difference in the fair value of the unmodified and modified warrants
at the modification date of June 23, 2020, resulting in an additional expense of £2,199 thousand recognised in
share-based payment expense in 2020 (note 20). 40,140,172 H1-2019 LN Warrants were exercised in 2021 (note
20).
The H1-2019 LNs are redeemable before the maturity date and the holders are secured against the Group’s assets.
The Company may repay all or part of the H1-2019 LNs within the first 12 months at 116% of par and at par plus
accrued interest thereafter. The fair value of the repayment option is nil at 31 December 2021.
Interest expense and accretion expense to 31 December 2021 was £3,144 thousand and £2,824 thousand
respectively.
Borrowings reconciliation
At 31 December 2019
New leases
Increase through interest (non-cash)
Accretion expense (non-cash)
Lease payments (cash)
Exchange movement (non-cash)
At 31 December 2020
Increase through interest (non-cash)
Accretion expense (non-cash)
Lease payments (cash)
Exchange movement (non-cash)
At 31 December 2021
H1-2019 LN
£’000
13,046
–
2,486
2,355
–
–
17,887
3,144
2,824
–
–
23,855
Leases
£’000
–
110
1
–
(10)
(2)
99
2
–
(30)
(2)
69
Total
£’000
13,046
110
2,487
2,355
(10)
(2)
17,986
3,146
2,824
(30)
(2)
23,924
i3 Energy PLC
72
i3 Energy PLC 2021 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
16 Borrowings - continued
Of which:
Current
Non-current
At 31 December 2021
H1-2019 LN
£’000
Leases
£’000
–
23,855
23,855
69
–
69
Total
£’000
69
23,855
23,924
17 Decommissioning provision
At start of year
Liabilities assumed through acquisitions
Liabilities incurred
Liabilities disposed
Liabilities settled
Liabilities settled under SRP and ASCP
Change in estimates
Unwinding of discount (Note 8)
Exchange movement
At end of year
Of which:
Current
Non-current
Total
A summary of the key estimates and assumptions are as follows:
Undiscounted / uninflated cash flows (CAD, thousands)
Inflation rate
Discount rate
Timing of cash flows
Year Ended 31
December 2021
£’000
66,783
56,350
312
(7,984)
(670)
(324)
7,603
1,539
1,914
125,523
Year Ended 31
December 2020
£’000
–
69,092
–
–
(109)
(104)
(2,310)
214
–
66,783
31 December 2021
£’000
31 December 2020
£’000
2,368
123,155
125,523
1,234
65,549
66,783
31 December 2021
31 December 2020
207,371
1.82%
1.68%
122,926
1.00%
1.21%
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”) and Saskatchewan’s Accelerated Site Closure Program (“ASCP”) whereby certain
costs of settling the Group’s liabilities were borne by the Government of Canada. 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 2021 was primarily driven by changes in market interest and inflation rates as
published by the Bank of Canada.
i3 Energy PLC
73
i3 Energy PLC 2021 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
18 Risk management contracts
In 2021, the Group entered a variety of 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 2021 are presented in the table
below.
Type
Effective date
Termination date
Total Volume
Avg. Price
AECO 5A Financial Swaps
1 Nov 2021
31 Mar 2022
10,000 GJ/Day
CAD 4.0975 / GJ
AECO 5A Physical Swaps
1 Nov 2021
31 Mar 2022
15,000 GJ/Day
CAD 4.3313 / GJ
AECO 5A Physical Swaps
1 Apr 2022
31 Dec 2022
9,000 GJ/Day
CAD 3.6244 / GJ
Chicago Physical Basis
Differential
WTI Financial Swaps
WTI Financial Swaps
1 Dec 2021
31 Mar 2022
5,000 MMBtu/Day
(USD 1.0450) /
MMBtu
1 Jan 2022
31 Mar 2022
350 bbl/Day
CAD 83.04 / bbl
1 Apr 2022
31 Dec 2022
500 bbl/Day
CAD 87.86 / bbl
Purchased WTI Put Option *
1 Jan 2022
31 Dec 2022
1,000 bbl/Day
CAD 92.20 / bbl
Conway Financial Swaps
1 Jan 2022
31 Dec 2022
500 bbl/Day
USD 1.1175 / gal
* The purchased WTI put option has a strike price of CAD 92.20 / bbl and a premium of CAD 11.00 / bbl. The option
premium has been deferred over the effective period of 1 January 2022 to 31 December 2022 and the resulting
liability is included in the net carrying value of the financial instrument as of 31 December 2021.
The Group’s losses on risk management contracts are presented in the following table.
Unrealised loss on risk management contracts
Realised loss on risk management contracts
Total
2021
£’000
111
5,374
5,485
2020
£’000
–
–
–
i3 Energy PLC
74
i3 Energy PLC 2021 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
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
At 31 December 2019
Shares
Shares
107,719,400
5,000
Warrants exercised at 0.01 pence/share
24 Aug 20
6,788,945
Issued at 5 pence/share
28 Aug 20
581,147,255
Issued for Toscana acquisition
30 Oct 20
4,399,215
–
–
–
£
–
0.0001
0.0001
0.0001
At 31 December 2020
700,054,815
5,000
–
Issued on exercise of 0.01 pence H1-2019
warrants
Various
40,140,172
Issued on exercise of 0.01 pence options
Various
15,303,960
Issued on exercise of 5 pence options
Various
1,700,000
Issued on exercise of 0.01 pence BHGE
warrants
Capital reduction *
4 Jun 21
6 Jul 21
5,277,045
–
Issued at 11 pence/share
27 Jul 21
363,700,000
Issued on exercise of 11 pence EMI options
1 Oct 21
250,000
–
–
–
–
–
–
–
0.0001
0.0001
0.0001
0.0001
–
0.0001
0.0001
£’000
£’000
£’000
£’000
£’000
11
1
58
–
70
4
2
–
1
–
36
–
50
33,965
(1,393)
32,572
–
–
–
50
–
–
–
–
–
–
1,661
–
1,661
29,000
(1,806)
27,194
178
–
178
64,804
(3,199)
61,605
7,669
–
85
903
–
–
–
–
7,669
–
85
903
(67,255)
3,199
(64,056)
39,970
(2,000)
37,970
27
–
27
At 31 December 2021
1,126,425,992
5,000
–
113
50
46,203
(2,000)
44,203
* On 6 July 2021 the Registrar of Companies registered the cancellation of i3’s share premium account. The £64.1
million balance of the Group’s share premium net of share issuance costs was accordingly transferred to retained
earnings. This created distributable reserves and enables the Company to become dividend paying.
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.
£3.4 million of dividends were proposed and paid in 2021 (2020 - Nil) as follows:
Declaration date
Ex-Dividend date
Record date
Payment date
8 July 2021
15 July 2021
16 July 2021
6 August 2021
27 September 2021
7 October 2021
8 October 2021
29 October 2021
Total
Dividend per
share
(pence)
0.16
0.20
Total Dividend
£’000
1,163
2,254
3,417
i3 Energy PLC
75
i3 Energy PLC 2021 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
20
Share-based payments
During the year the Group had share based payment expense of £3,668 thousand (2020: £2,534 thousand).
Employee and NED Share Options
During the year the Group had share based payment expense relating to the issuance of share options of £3,217
thousand (2020: £335 thousand). Details on the employee and NED share options outstanding during the period
are as follows:
Number of options Weighted average
exercise price
Weighted average
contractual life
At 31 December 2019
Cancelled – 28 October 2020
Issued – 28 October 2020
Issued – 3 December 2020
At 31 December 2020
Issued – 10 January 2021
Issued – 10 January 2021
Issued – 30 July 2021
Issued – 16 December 2021
Exercised during the year
Forfeited during the year
At 31 December 2021
12,252,013
(12,252,013)
12,128,955
4,028,659
16,157,614
13,166,358
75,184,252
57,121,402
1,625,000
(17,003,960)
(2,290,291)
143,960,375
(pence)
46.03
46.03
0.01
0.01
0.01
6.10
5.00
11.00
11.00
0.51
7.62
7.48
8.91
8.09
4.00
4.00
3.85
10.00
10.00
10.00
10.00
3.98
9.75
9.22
On 10 January 2021, the Company issued options over a total of 75,184,252 ordinary shares as described in the
Gain-related Readmission document released on 11 August 2020. The options were issued in accordance with the
rules of the Company's Employee Share Option Plan at an exercise price of 5 pence per share. Of the options
issued to employees of i3 Canada. One-third of the options vested immediately, with a further one-third vesting in
July 2021 if production exits at or above 9,000 boepd, and 100 per cent will vest if there is an addition of 5,000
boepd or, alternatively, 25 MMboe 2P reserves. Of the options issued to employees of i3 North Sea Limited, one-
third of the options vested immediately, with a further one-third vesting at the spud of the next Serenity / Liberator
appraisal well, and 100 per cent will vest upon a third-party reserve auditor attributing 25 MMbbls 2P post drilling
of a Serenity / Liberator appraisal well. The options will otherwise fully vest on the third anniversary. Of the options
issued to the Executive and Non-Executive Directors and one corporate employee, one-third of the options vested
immediately, with a further one-third vesting upon the earlier of spud of the next Serenity or Liberator appraisal
well; and July 2021 production exits being at or above 9,000 boepd, and 100% will vest upon the earlier of a third-
party reserve auditor attributing 25 MMbbls 2P post drilling of a Serenity or Liberator appraisal well and the addition
of 5,000 boepd or 25 MMboe 2P reserves. The fair value was calculated using the Black Scholes model with inputs
for stock price of 6.10 pence, exercise price of 5.0 pence, time to maturity of 10 years, volatility of 114%, the Risk-
Free Interest rate of 0.360%, and a dividend yield of 11%. The resulting fair value of £1,384 thousand will be
expensed over the expected vesting period.
On 10 January 2021, the Company also issued options over a total of 13,166,358 ordinary shares to key staff that
joined its Canadian subsidiary, i3 Energy Canada Ltd., following the acquisition of Gain's oil & gas assets. The
options were issued in accordance with the rules of the Company's Employee Share Option Plan at an exercise
price of 6.1 pence per share, the closing price on 8 January 2021The fair value was calculated using the Black
Scholes model with inputs for share price of 6.1 pence, exercise price of 6.1 pence, time to maturity of 10 years,
volatility of 114%, the Risk-Free Interest rate of 0.360%, and a dividend yield of 11%. The options contain the same
vesting conditions as the 5 pence options for employees of i3 Canada as described in the paragraph above. The
resulting fair value of £240 thousand will be expensed over the expected vesting period.
i3 Energy PLC
76
i3 Energy PLC 2021 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
20 Share-based payments - continued
On 30 July 2021, the Company issued options over a total of 53,705,491 ordinary shares to i3 staff and board and
has additionally issued 1,750,000 options to incoming staff and conditionally allocated 3,750,000 for additional
hires as part of the Acquisition. A total of 57,121,402 options were ultimately issued. The options were issued in
accordance with the rules of the Company's Employee Share Option Plan at an exercise price of 11 pence per
share. Of the options issued to employees of i3 Canada, one-third of the options vested immediately, with a further
one-third vesting if production of 20,000 boepd is achieved prior to July 2022 (substantially funded from internally
generated cash flow); and 100 per cent will vest upon the addition of 9,250 boepd or 50 MMboe 2P reserves. Of
the options issued to employees of i3 North Sea Limited, one-third of the options vested immediately, with a further
one-third vesting at spud of the earlier of a second appraisal well or first development well at either Serenity or
Liberator, and 100 per cent will vest upon the addition of 2,500 boepd of European production. Of the options
issued to the Executive and Non-Executive Directors and one corporate employee, one-third of the options vested
immediately, with a further one-third vesting (i) at spud of the earlier of a second appraisal well or first development
well at either Serenity or Liberator; or (ii) if production of 20,000 boepd is achieved prior to July 2022 (substantially
funded from internally generated cash flow), whichever is first to occur, and 100 per cent will vest upon (i) the
addition of 2,500 boepd of European production; or (ii) the addition of 9,250 boepd or 50 MMboe 2P reserves,
whichever is first to occur. The fair value was calculated using the Black Scholes model with inputs for stock price
of 10.95 pence, exercise price of 11.0 pence, time to maturity of 10 years, volatility of 110%, the Risk-Free Interest
rate of 0.647%, and a dividend yield of 6%. The resulting fair value of £3,202 thousand will be expensed over the
expected vesting period.
On 16 December 2021, the Company issued options over a total of 1,625,000 to new employees of i3 Canada.
The vesting conditions mirror those of the 30 July 2021 grant described above, except for the first one-third of
options vesting on the 6-month employment anniversary rather than immediately.
In addition, to incentivise the UK and Canadian offices of the Enlarged Group to work as one team and assist each
other as required going forward, if one of the offices satisfies one of the early vesting criteria for the options
described above then the equivalent vesting criteria for the other office shall be deemed 20 per cent satisfied (and
a further 6.67 per cent. of the options held by employees in the other office would vest immediately).
All options issued on 10 January 2021, 30 July 2021, and 16 December 2021 will otherwise fully vest on the third
anniversary of their grant dates.
99,721,892 outstanding employee share options as at 31 December 2021 were fully vested and exercisable.
Warrants
During the year the Group had share based payment expense relating to the modification and issuance of warrants
of £451 thousand (2020: £2,198 thousand). Details on the warrants outstanding during the period are as follows:
Number of warrants Weighted average
exercise price
Weighted average
contractual life
At 31 December 2019
Modified – 23 June 2020
Modified – 23 June 2020
Exercised – 24 August 2020
At 31 December 2020
BHGE warrants modified – 17 May 2021
BHGE warrants modified – 17 May 2021
BHGE warrants exercised – 17 May 2021
65,483,293
(55,981,044)
55,981,044
(6,788,945)
58,694,348
(5,277,045)
5,277,045
(5,277,045)
H1-2019 LN warrants exercised throughout the year
(40,140,172)
At 31 December 2021
13,277,131
(pence)
46.98
46.09
0.01
0.01
5.27
56.85
0.01
0.01
0.01
15.07
3.04
2.67
2.67
2.77
1.98
0.34
0.34
0.3
1.34
1.85
i3 Energy PLC
77
i3 Energy PLC 2021 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
20 Share-based payments - continued
On 17 May 2021, i3 announced that it had successfully restructured legacy contracts and agreements for
equipment, oil field services, and warrants with BHGE. This resulted in the exchange of 5,277,045 warrants with a
strike price of 56.85 pence for Ordinary Shares with a nominal value of 0.01 pence. Further details are provided in
Note 15.
EMI Options
The Company operates an Employee Management Incentive (EMI) share option scheme. Grants were made on
14th April 2016 and 6th 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. 250,000 options remain
outstanding and were exercisable at both 31 December 2021 and 2020 at a price of £0.11 per share. If the options
remain unexercised after a period of ten years from the date of grant the options expire. Employees who leave i3
Energy have 60 days to exercise the Options prior to them being forfeited. The options outstanding at 31 December
2021 have a weighted average exercise price of £0.11 and a weighted average remaining contractual life of 4.93
years.
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 following its modification in May 2021, 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 is 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.
i3 Energy PLC
78
i3 Energy PLC 2021 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
22 Financial instruments, financial and capital risk management - continued
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 2021
Financial assets
Cash and cash equivalents
Trade and other receivables
Risk management contracts (Level 2)
Total
Financial liabilities
Trade and other payables
Risk management contracts (Level 2)
Borrowings and leases
Non-current accounts payable (Level 2)
Total
As at 31 December 2020
Financial assets
Cash and cash equivalents
Trade and other receivables
Deposit
Total
Financial liabilities
Trade and other payables
Borrowings and leases
Non-current accounts payable
Total
Financial Risk Management
Financial Risk Factors
Carried at FVTPL Carried at amortised
cost
–
–
814
814
1,232
925
–
557
2,714
15,335
25,792
–
41,127
17,746
–
23,924
–
41,670
Carried at FVTPL Carried at amortised
cost
–
–
–
–
–
–
–
–
6,178
8,731
678
15,587
13,156
7,986
3,000
24,142
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.
i3 Energy PLC
79
i3 Energy PLC 2021 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
22 Financial instruments, financial and capital risk management - continued
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 as
at 31 December 2021.
The Group is also exposed to exchange differences on translation of its foreign operations in Canada, which
resulted in a gain of £1,511 thousand for the year ended 31 December 2021 (2020: £185 thousand). A 10%
strengthening of GBP against CAD as at 31 December 2020 would have resulted in a loss on translation of £8,876
thousand (2020: £4,522 thousand), and a 10% weakening of GBP to CAD would have resulted in a gain of £14,222
thousand (2020: £5,201 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
Trade and other payables
Non-current payable *
H1 2019 LNs
H1 2019 PIK interest **
Leases
£’000
18,970
–
–
–
11
£’000
740
–
–
–
6
£’000
–
557
22,000
9,680
–
At 31 December 2021
18,981
746
32,237
£’000
–
–
–
–
–
–
i3 Energy PLC
Total
£’000
19,710
557
22,000
9,680
17
51,964
80
i3 Energy PLC 2021 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
22 Financial instruments, financial and capital risk management - continued
6 Months
6-12 months
1-2 years
2+ years
Trade and other payables
Non-current payable *
H1 2019 LNs
H1 2019 PIK interest **
Leases
£’000
13,155
–
–
–
15
At 31 December 2020
13,170
£’000
£’000
–
–
–
–
15
15
–
–
–
–
17
17
£’000
–
3,000
22,000
9,680
–
34,680
Total
£’000
13,155
3,000
22,000
9,680
47
47,882
* The non-current payable will not become payable until such time as i3 has received consideration from any sale or
farm-down of its Serenity or Liberator assets (see note 15). However, as the DPIB will be reduced by certain payments
to BHGE, management expects the balance will be repaid by 2023.
** The H1 2019 LNs have an early redemption option and the interest can be paid in either cash or in kind (see
note 16). The table assumes no early redemption and that all interest is paid in kind at the maturity.
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 entered in 2021 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, with all other variables held
constant.
Decrease in
commodity price /
increase in profit
before loss and
equity
Increase in
commodity price /
(decrease) in profit
before loss and
equity
£’000
1,555
262
677
£’000
(651)
(262)
(677)
Change in WTI – CAD 5.00 / bbl
Change in AECO – CAD 0.50 / GJ
Change in Conway – USD 5.00 / bbl
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 £23,924 thousand at 31 December 2021 (2020 - £17,986 thousand) (note 16), has capital, defined
as the total equity and reserves of the Group of £138,731 thousand (2020 - £79,888 thousand) and cash and
equivalents of £15,335 thousand (2020 - £6,178 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.
i3 Energy PLC
81
i3 Energy PLC 2021 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
23 Commitments
Operating
Transportation
Total
1 year
£’000
–
1,663
1,663
2-3 years
4-5 years
5+ years
£’000
–
1,322
1,322
£’000
£’000
–
298
298
–
55
55
Total
£’000
–
3,338
3,338
The Group previously held an operating commitment to lease offices in the UK that expired in April 2022, which
was terminated early by the Group in 2021.Transportation commitments relate to take-or-pay pipeline capacity in
Alberta.
The Group did not have any capital commitments as at 31 December 2021 (2020 - £3,960 thousand).
24
Events after the reporting period
After 31 December 2021 i3 entered into various risk management contracts, as summarised below.
Type
Effective date
Termination date
Total Volume
Avg. Price
AECO 5A Physical Swaps
1 Apr 2022
30 Jun 2022
7,500 GJ/Day
CAD 3.2500 / GJ
AECO 5A Physical Swaps
1 Apr 2022
31 Oct 2022
20,275 GJ/Day
CAD 3.9371 / GJ
AECO 5A Physical Swaps
1 Jul 2022
31 Jul 2022
7,500 GJ/Day
CAD 3.2700 / GJ
AECO 5A Physical Swaps
1 Aug 2022
31 Aug 2022
7,500 GJ/Day
CAD 3.3300 / GJ
AECO 5A Physical Swaps
1 Sep 2022
30 Sep 2022
7,500 GJ/Day
CAD 3.2600 / GJ
AECO 5A Physical Swaps
1 Oct 2022
31 Dec 2022
7,500 GJ/Day
CAD 3.5000 / GJ
AECO 5A Physical Swaps
1 Nov 2022
30 Nov 2022
2,500 GJ/Day
CAD 5.0050 / GJ
AECO 5A Financial Swaps
1 Nov 2022
31 Mar 2023
10,000 GJ/Day
CAD 4.1500 / GJ
AECO 5A Physical Swaps
1 Nov 2022
31 Mar 2023
5,000 GJ/Day
CAD 4.3800 / GJ
AECO 5A Physical Swaps
1 Dec 2022
31 Dec 2022
2,500 GJ/Day
CAD 5.0800 / GJ
AECO 5A Physical Swaps
1 Jan 2023
31 Jan 2023
2,500 GJ/Day
CAD 5.1500 / GJ
AECO 5A Financial Swaps
1 Jan 2023
31 Mar 2023
5,000 GJ/Day
CAD 4.3800 / GJ
AECO 5A Physical Swaps
1 Jan 2023
31 Mar 2023
5,000 GJ/Day
CAD 4.7500 / GJ
AECO 5A Physical Swaps
1 Feb 2023
28 Feb 2023
2,500 GJ/Day
CAD 5.1300 / GJ
WTI Financial Swaps
WTI Financial Swaps
WTI Financial Swaps
WTI Physical Swaps
WTI Physical Swaps
WTI Physical Swaps
WTI Physical Swaps
WTI Financial Swaps
WTI Physical Swaps
WTI Physical Swaps
1 Apr 2022
30 Jun 2022
250 bbl/Day
CAD 100.00 / bbl
1 Apr 2022
31 Dec 2022
500 bbl/Day
CAD 97.41 / bbl
1 Jul 2022
30 Sep 2022
250 bbl/Day
CAD 100.09 / bbl
1 Oct 2022
31 Oct 2022
250 bbl/Day
CAD 100.00 / bbl
1 Nov 2022
30 Nov 2022
250 bbl/Day
CAD 100.00 / bbl
1 Dec 2022
31 Dec 2022
250 bbl/Day
CAD 101.05 / bbl
1 Jan 2023
31 Jan 2023
250 bbl/Day
CAD 100.00 / bbl
1 Jan 2023
31 Mar 2023
250 bbl/Day
CAD 106.00 / bbl
1 Feb 2023
28 Feb 2023
250 bbl/Day
CAD 100.00 / bbl
1 Mar 2023
31 Mar 2023
250 bbl/Day
CAD 109.53 / bbl
Sold WTI Call Option *
1 Mar 2022
31 Dec 2022
500 bbl/Day
CAD 92.20 / bbl
* The sold WTI call option has a strike price of CAD 92.20 / bbl and a premium of CAD 17.60 / bbl. The option
premium has been deferred over the effective period of 1 March 2022 to 31 December 2022.
i3 Energy PLC
82
i3 Energy PLC 2021 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
24 Events after the reporting date - continued
On 3 February 2022 the Group announced it had revised its dividend guidance from bi-annually to monthly. In
early-2022 the Company has declared dividends as summarised in the following table:
Declaration date
Ex-Dividend date
Record date
Payment date
9 February 2022
17 February 2022
18 February 2022
11 March 2022
9 March 2022
17 March 2022
18 March 2022
8 April 2022
6 April 2022
14 April 2022
19 April 2022
6 May 2022
Total
Dividend per
share
(pence)
0.105
0.105
0.105
Total Dividend
£’000
1,183
1,183
1,183
3,549
On 2 March 2022 the Group noted the announcement by Europa Oil & Gas Limited ("Europa") (company number
03093716) regarding its agreement in principle to farm-in to the Company's Serenity oil discovery in the UK North
Sea and the equity funding it is conducting to fund its farm-in obligations.
We can confirm that the farm-in, joint operating agreement and trust deed have been essentially agreed between
the parties to enable Europa to acquire a 25% non-operated working interest ("WI") in a sub-area of UKCS Licence
P.2358 Block 13/23c (containing the Serenity discovery) by funding a 46.25% paying interest for one appraisal well
on the field, whereafter i3 will retain a 75% operated WI in the Block.
The well cost is estimated to be circa £14 million and Europa's 46.25% paying interest will be applied up to a
capped gross well cost of £15 million. Any well costs exceeding £15 million will be paid by the companies in
proportion to their respective working interests. Completion of the deal and transfer of the licence interest to Europa
will be subject to the following principal conditions:
1. Europa funding an escrow account with their paying interest obligation. We note that closing of Europa's equity
funding is subject to the approval of its shareholders at an EGM. This shareholder approval was obtained by Europa
on 25 March 2022.
2. Approval of the UK Oil and Gas Authority ("OGA") to the creation of the Serenity area of Block 13/23c as a new
block of Licence P.2358 (the "New Serenity Block").
3. Consent of the OGA to assignment of an interest in the Licence and New Serenity Block to Europa.
4. UK National Security and Investment Act approval.
5. Approval of i3's Loan Note holders of the assignment of the Licence interest.
Following this farm-out i3 will retain a 100% WI in the remainder of Block 13/23c which contains the Minos High
prospect and Liberator discovery.
On 4 April 2022 the Group announced the reserves of i3 Energy Canada Limited as of 31 December 2022.
Highlights include Company Interest PDP reserves of 46MMboe, 1P reserves of 85MMboe, and 2P reserves of
154MMboe. Further details can be found on the Company’s website at www.i3.energy.
i3 Energy PLC
83
i3 Energy PLC 2021 Annual Report and Financial Statements – Financial Statements
Company Statement of Financial Position
COMPANY STATEMENT OF FINANCIAL POSITION
Notes
31 December 2021
£’000
31 December
2020
£
4
4
5
6
324
99,861
75
100,260
66
140
206
(131)
(131)
75
324
67,754
–
68,078
70
49
119
(1,294)
(1,294)
(1,175)
100,335
66,903
113
50
44,203
9,098
2,045
44,826
100,335
70
50
61,605
6,333
9,714
(10,869)
66,903
Assets
Non-current assets
Investment in subsidiary
Loans to subsidiaries
Other non-current asset
Total non-current
Current assets
Cash at bank and in hand
Trade and other receivables
Total current assets
Current liabilities
Trade and other payables
Total current liabilities
Net current assets / (liabilities)
Net assets
Capital and reserves
Ordinary shares
Deferred shares
Share premium
Share-based payment reserve
Warrants – LNs
Retained earnings / (accumulated deficit)
Shareholders’ funds
Company number 10699593
The Company has elected to take the exemption under Section 408 of the Companies Act 2006 from presenting
the Parent Company Statement of Comprehensive Income. The loss for the Company for the year was £4,944
thousand (2020 - £4,900 thousand).
The accompanying notes form an integral part of these financial statements.
Signed on behalf of the Board of Directors by:
Majid Shafiq, Director
11 April 2022
i3 Energy PLC
84
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Company Statement of Changes in Equity
COMPANY STATEMENT OF CHANGES IN EQUITY
Notes
Ordinary
shares
Share
premium
Deferred
shares
Warrants -
LNs
Retained
earnings
Total
Share-
based
payment
reserve
£’000
£’000
£’000
£’000
£’000
£’000
£’000
32,572
50
3,799
11,375
(5,969)
41,838
Balance at 31 December 2019
Loss for the year
Issue of share capital
Exercise of warrants
Share-based payment expense
11
–
58
1
–
–
27,372
1,661
–
–
–
–
–
Balance at 31 December 2020
70
61,605
50
Total comprehensive loss for the year
Capital reduction
Transactions with owners:
Issue of share capital
Exercise of options
Exercise of warrants
Share-based payment expense
Dividends declared
–
–
–
(64,056)
36
37,970
2
5
–
–
112
8,572
–
–
–
–
–
–
–
–
–
–
–
–
2,534
6,333
–
–
–
–
–
–
(1,661)
–
(4,900)
(4,900)
–
–
–
27,430
1
2,534
9,714
(10,869)
66,903
–
–
–
–
(4,944)
(4,944)
64,056
–
–
–
–
–
38,006
114
456
3,217
(3,417)
(3,417)
(452)
(7,669)
3,217
–
–
–
Balance at 31 December 2021
113
44,203
50
9,098
2,045
44,826
100,335
The accompanying notes form an integral part of these financial statements.
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Notes To the Company Financial Statements
NOTES TO THE COMPANY FINANCIAL STATEMENTS
1
Summary of significant accounting policies
General Information and Authorisation of Financial Statements
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’s principal activity is that of a listed holding company and the ultimate parent of the i3 Energy plc
Group, whose principal activities consist of the development and production of oil and gas on the UK Continental
Shelf (UKCS) and the Western Canadian Sedimentary Basin (WCSB).
2
Basis of preparation
The Company meets the definition of a qualifying entity under FRS 100, and as such these financial statements have
been prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101). The
financial statements have been prepared under the historical cost convention. In 2020 the Company transitioned from
IFRS as adopted by the European Union for all periods presented. There were no amendments on the adoption of FRS
101.
The financial information is presented in Pounds Sterling (£, GBP), which is the Company’s functional and presentation
currency, and rounded to the nearest thousand unless otherwise stated.
The Company has taken advantage of the exemption provided by Section 408 of the Companies Act 2006 not to publish
its individual income statement and related notes, and has also taken advantage of the following disclosure exemptions
under FRS 101:
•
•
•
•
•
•
•
•
•
•
paragraphs 45(b) and 46 to 52 of IFRS 2 ‘Share-based Payment’ (details of the number and weighted average
exercise prices of share options, and how the fair value of goods or services received was determined), as
equivalent disclosures are included within the consolidated financial statements;
paragraphs 62, B64(d), B64(e). B64(g), B64(h), B64 (j) to B64(m), B64(n)(ii), B64(o)(ii), B64(p), B64(q)(ii), B66
and B67 of IFRS 3 ‘Business Combinations’ as equivalent disclosures are included within the consolidated
financial statements;
all requirements of IFRS 7 ‘Financial Instruments: Disclosures’, as equivalent disclosures are included in the
consolidated financial statements;
paragraph 38 of IAS 1 ‘Presentation of Financial Statements’ – the requirement to disclose comparative
information in respect of:
paragraph 79(a)(iv) of IAS 1 (a reconciliation of the number of shares outstanding at the beginning and end of
the period);
paragraph 73(e) of IAS 16 ‘Property, Plant and Equipment’ (reconciliations between the carrying amount at
the beginning and end of the period); and
paragraph 118(e) of IAS 38 ‘Intangible Assets’ (reconciliations between the carrying amount at the beginning
and end of the period);
IAS 7 ‘Statement of Cash Flows’;
paragraphs 30 and 31 of IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’ (the
requirement for the disclosure of information when an entity has not applied a new IFRS that has been issued
but is not yet effective); and
paragraph 17 of IAS 24 ‘Related Party Disclosures’ (key management compensation), and the other
requirements of that standard to disclose related party transactions entered into between two or more members
of a group, provided that any subsidiary which is a party to the transaction is wholly owned by such a member.
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Notes To the Company Financial Statements
3
Significant accounting policies
The Company’s accounting policies are aligned with the Group accounting policies as set out within the Group financial
statements, with the addition of the following:
Investments
Investments in subsidiary undertakings are stated at cost less any provision for impairment in value, prior to their
elimination on consolidation.
Critical accounting judgements and key sources of estimation uncertainty
Refer to note 3 of the Group financial statements for a description of critical account judgements and key sources
of estimation uncertainty. There were no further key sources of estimation uncertainty identified for the Company.
The following is the critical judgement that the Directors have made in the process of applying the Company’s
accounting policies and that have the most significant effect on the amounts recognised in the Company financial
statements.
Carrying value of loans to subsidiaries
At 31 December 2021, the Company held loans to subsidiaries of £99.9 million (2020: £67.8 million), note 4. The
carrying value of loans to subsidiaries are assessed for impairment when circumstances suggest that the carrying
amount may exceed its recoverable value. In making this assessment, Management has considered the underlying
assets of its subsidiaries, which for i3 Energy North Sea Limited primarily consists of intangible E&E assets and for
i3 Canada Limited primarily consists of oil and gas PP&E assets. The recoverability of both intangible E&E assets
and oil and gas PP&E assets have been identified as a critical accounting judgement by the Group, and following
detailed assessments by Management, no indicators of impairment have been identified as at 31 December 2021.
Further details are in note 3 to the Group financial statements. Accordingly, through the expected recoverability of
these E&E and PP&E assets, management expects the Group to recovery the carrying value of its loans to
subsidiaries.
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Notes To the Company Financial Statements
4
Investment in subsidiaries
At 31 December 2021 the Company held 100% of the share capital of the following wholly owned subsidiaries:
Company
Place of Business
Registered Office
Ownership held Nature of business
i3 Energy North
Sea Limited
England and Wales New Kings Court
100%
Tollgate
Chandler’s Ford
Eastleigh,
Hampshire
SO53 3LG
Exploration &
Production
i3 Energy Canada
Limited
Canada
4600, Bankers Hall West
Calgary, Alberta
T2P 5C5
100%
Exploration &
Production
As at 31 December 2020
Additions
As at 31 December 2021
Total
£’000
324
–
324
For the year ended 31 December 2021, i3 Energy North Sea Limited was entitled to exemption from audit under
section 479A of the Companies Act 2006.
As at 31 December 2021 the Company had total net funds receivable from subsidiaries of £99,861 thousand (2020
- £67,754 thousand). Included within these balances are management service fees of £861 thousand (2020 -
£1,420 thousand) for administrative services provided to i3 Energy Canada Limited.
Loans advanced from or to the subsidiaries are unsecured, interest free and have no fixed repayment date. On 30
March 2020, the Company purchased the rights and interests in TEIC’s CAD24.8 million senior and CAD3.2 million
junior debt facilities for CAD3.0 million and CAD0.4 million, respectively (£2.0 million), with cash consideration
being paid 50% up front and 50% payable on 31 December 2020. The Company later acquired 100% of the share
capital on 30 October 2020, and therefore this amount is included within loans to subsidiaries as at 31 December
2020 and 2021.
5
Trade and other receivables
VAT receivable
Prepayments & other receivables
Total trade and other receivables
Other receivables are all due within one year.
31 December 2021
£’000
31 December 2020
£’000
25
115
140
–
49
49
The fair value of other receivables is the same as their carrying values as stated above.
Other receivables 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 Company does not hold any collateral as security.
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Notes To the Company Financial Statements
6
Trade and other payables
Trade creditors
Accruals
Total trade and other payables
31 December 2021
£’000
31 December 2020
£’000
37
94
131
1,123
171
1,294
The average credit period taken for trade purchases is 30 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.
7
Disclosures included in the Group Financial Statements
Certain information relevant to the Company Financial Statements is included in the notes to the Group financial
statements. These include:
• Note 2 – Basis of preparation
• Note 3 – Significant accounting policies
• Note 4 – Business combinations
• Note 7 – Administrative expenses
• Note 19 – Authorised, issued, and called-up share capital
• Note 20 – Share-based payments
• Note 22 – Financial instruments and capital risk management
• Note 24 – Events after the reporting period
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Corporate Information
CORPORATE INFORMATION
Registered number
10699593
Directors
Company Secretary
Registered Office
Independent Auditor
Solicitors
Nominated Advisor and Broker
Brokers
Registrars
Principal Bankers
Company Website
Linda Janice Beal – Non-Executive Director and Interim Non-Executive
Interim Chairperson
Majid Shafiq – Chief Executive Officer
Graham Andrew Heath – Chief Financial Officer
Richard Millington Ames – Non-Executive Director
Neill Ashley Carson – Non-Executive Director
John Festival – Non-Executive Director
Burness Paull LLP
New Kings Court
Tollgate
Chandler’s Ford
Eastleigh, Hampshire
United Kingdom
S053 3LG
PKF Littlejohn LLP (Registered Auditor)
15 Westferry Circus
Canary Wharf
London E14 4HD United Kingdom
Burness Paull LLP
50 Lothian Road
Festival Square
Edinburgh
EH3 9WJ
WH Ireland Limited
24 Martin Lane
London
EC4R 0DR
Tennyson Securities
23 Floor 20 Fenchurch Street
London
EC3M 3BY
Canaccord Genuity Limited
88 Wood Street
London
EC2V 7QR
Stifel Nicolaus Europe Limited
150 Cheapside
London
EC2V 6ET
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
Royal Bank of Scotland
www.i3.energy
Company Telephone Number
+44 (0) 1224 945 980
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Appendix A: Glossary
APPENDIX A: GLOSSARY
1P
2P
AER
AIM
APM
ARO
ASCP
bbl
BHGE
BOE
BOEPD
CAD
Cenovus
Proved reserves
Proved plus probable reserves
Alberta Energy Regulator
The Alternate Investment Market of the London Stock Exchange
Alternate Performance Measure
Asset Retirement Obligation
Saskatchewan’s Accelerated Site Closure Program
Barrel
Baker Hughes, a GE Company, and GE Oil & Gas Limited
Barrels of Oil Equivalent
Barrels of Oil Equivalent Per Day
Canadian Dollars
Cenovus Energy Inc.
Cenovus Acquisition Date 20 August 2021
Cenovus Assets
Certain petroleum and infrastructure assets acquired from Cenovus
CEO
CFO
CLNs
Chief Executive Officer
Chief Financial Officer
Convertible Loan Notes
Company
i3 Energy plc
CPR
E&E
Europa
FCF
FVTPL
Gain
Competent person’s report
Exploration and evaluation
Europa Oil & Gas Limited
Free cash flow
Fair Value through Profit or Loss
Gain Energy Ltd.
Gain Acquisition Date
3 September 2020
Gain Assets
Assets retained by i3 following the purchase from Gain and sale to Harvard
gal
GBP
GJ
Gallon
British Pounds Sterling
Gigaloule
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Appendix A: Glossary
Group
Harvard
i3
i3 Energy plc, together with its subsidiaries
Harvard Resources Inc.
i3 Energy plc, together with its subsidiaries
i3 Canada
i3 Energy Canada Limited
IAS
IFRIC
IFRS
IP30
LLR
MMboe
MMBtu
NGL
NED
NOI
NTM
OGA
PDP
PP&E
RTO
SRP
TEIC
International Accounting Standard
International Financial Reporting Interpretations Committee
International Financial Reporting Standard
Average daily production of a well over its initial 30-day production period
The licensee’s deemed asset to deemed liability ratio as determined under
Directive 006 (Licensee Liability Rating (LLR) Program and Licence Transfer
Process) of the Alberta Energy Regulator (AER). The deemed asset value is
calculated by multiplying the licensee’s reported production of oil and gas for the
prior 12 months by the rolling 3-year provincial industry average netback
(determined by the AER). The deemed liability is the total cost for the future
abandonment and site reclamation of all a licensee’s wells and upstream facilities
based on provincial industry average costs (determined by the AER).
Million Barrels of Oil Equivalent
Metric Million British Thermal Unit
Natural gas liquids
Non-Executive Director
Net Operating Income
Next Twelve Months
UK Oil and Gas Authority
Proved, developed, producing reserves
Property, plant and equipment
Reverse Take-over
Alberta’s Site Rehabilitation Program
Toscana Energy Income Corporation
Toscana
Toscana Energy Income Corporation
Toscana Acquisition Date 30 October 2020
TSX
UKCS
Toronto Stock Exchange
UK Continental Shelf
USD (US$)
United States Dollar
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Appendix B: Alternate performance measures
APPENDIX B: ALTERNATE PERFORMANCE MEASURES
The group uses Alternate Performance Measures (“APMs”), commonly referred to as non-IFRS measures, when
assessing and discussion the Group’s financial performance and financial position. APMs are not defined under
IFRS and are not considered to be a substitute for or superior to IFRS measures. Other companies may calculate
similarly defined or described measures, and therefore their comparability may be limited. The group continually
monitors the selection and definitions of its APMs, which may change in future reporting periods.
EBITDA and Adjusted EBITDA
EBITDA is defined as earnings before depreciation, depletion, financial income, and tax. Adjusted EBITDA is
defined as EBITDA before gain on bargain purchase and acquisition costs. Management believes that EBITDA
provides useful information into the operating performance of the Group, is commonly used within the oil and gas
sector, and assists our management and investors by increasing comparability from period to period. Adjusted
EBITDA removes the gain on bargain purchase and the related acquisition costs which management does not
consider to be representative of the underlying operations of the Group.
A reconciliation of profit as reported under IFRS to EBITDA and Adjusted EBITDA is provided below.
Profit for the year
Depreciation and depletion
Finance costs
Tax
EBITDA
Acquisition costs
Gain on bargain purchase and asset dispositions
Adjusted EBITDA
Net operating income
2021
£’000
25,083
21,643
7,609
661
54,996
256
(25,013)
30,239
2020
£’000
11,718
4,854
7,368
(1,110)
22,830
1,542
(25,211)
(839)
Net operating income is defined as gross profit before depreciation and gains or losses on risk management
contracts, which equals revenue net of royalty expenses, less production costs. Management believes that net
operating income is a useful supplement measure as it provides investors with information on operating margins
before non-cash depreciation and depletion charges and gains or losses on risk management contracts.
A reconciliation of gross profit as reported under IFRS to net operating income is provided below.
Gross profit
Depreciation and depletion
Loss on risk management contracts
Net operating income
Acquisitions & Capex
2021
£’000
21,690
21,643
5,485
48,818
2020
£’000
62
4,854
–
4,916
Acquisitions & Capex is defined as cash expenditures on acquisitions, PP&E, and E&E. Management believes that
Acquisition & Capex is a useful supplement measure as it provides investors with information on cash capital
investment during the period.
A reconciliation of the various line items per the statement of cash flows to Acquisitions & Capex is provided below.
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Appendix B: Alternate performance measures
Acquisitions
Expenditures on property, plant & equipment
Expenditures on exploration and evaluation assets
Acquisitions & Capex
2021
£’000
37,079
9,465
3,317
49,861
2020
£’000
18,474
229
17,403
36,106
Free cash flow (FCF)
FCF is defined as cash from / (used in) operating activities less cash capital expenditures on PP&E and E&E.
Management believes that FCF provides useful information to management and investors about the Group’s ability
to pay dividends.
A reconciliation of cash from / (used in) operating activities to FCF is provided below.
Net cash from / (used in) operating activities
Expenditures on property, plant & equipment
Expenditures on exploration and evaluation assets
FCF
2021
£’000
24,439
(9,465)
(3,317)
11,657
2020
£’000
(4,151)
(229)
(17,403)
(21,783)
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