ANNUAL REPORT
AND FINANCIAL
STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
REGISTRATION NUMBER: 10699593
CONTENTS
Strategic Report
i3 Energy at a Glance
Highlights And Outlook
Chairperson’s and Chief Executive’s Statement
Business Model
Strategy
Key Performance Indicators
Reserves
Environment, Social and Governance
Principal Risks and Uncertainties
Section 172 Statement
Financial Review
Governance
Board of Directors
Corporate Governance Report
Audit and Risk Committee Report
Corporate Governance Committee Report
Health, Safety, Environment and Security Committee Report
Reserves Committee Report
Remuneration Committee Report
Directors’ Report
Financial Statements
Independent Auditor’s Report
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flow
Notes To the Group Financial Statements
Company Statement of Financial Position
Company Statement of Changes in Equity
Company Statement of Cash Flow
Notes To the Company Financial Statements
Appendix A: Glossary
Appendix B: Alternate Performance Measures
Corporate Information
1
2
5
9
10
12
15
17
23
27
29
39
41
47
50
51
53
54
55
61
67
68
69
70
71
106
107
108
109
113
116
119
STRATEGIC
REPORT
01
i3 Energy at a Glance
02 Highlights
05 Chairperson’s and
Chief Executive’s Statement
09 Business Model
10 Strategy
12 Key Performance Indicators
15 Reserves
17 Environment, Social and
Governance
23 Principal Risks and Uncertainties
27 Section 172 Statement
29 Financial Review
I3 ENERGY AT A GLANCE
ACHIEVEMENTS IN 2023
DIVERSIFIED PORTFOLIO OF OPPORTUNITIES
Record Annual Production
UK
CANADA
LARGE DEVELOPMENT PORTFOLIO
>390 Booked Diversified Locations
>950 Total Future Locations
BASE DECLINE OF 17%
614K Net Acres (2,485 Km2)
2023 PRODUCTION
UK
LARGE DEVELOPMENT PORTFOLIO
>390 Booked Diversified Locations
>950 Total Future Locations
2023 OIL AND GAS SALES
Oil + Cond
22%
CANADA
BASE DECLINE OF 17%
614K Net Acres (2,485 Km2)
20,711
boe/d
Royalty
Production
2%
£161.4
MM
NGLs
24%
Gas
52%
Oil + Cond
59%
NGLs
15%
Gas
24%
2023 PRODUCTION
2023 OIL AND GAS SALES
• Record annual production of 20,711 barrels of oil
equivalent per day (“boepd”), at the high end of the
Company’s 2023 guidance range of 20,000 to 21,000
boepd and 2% above 2022 production.
• Record production achieved despite loss of
approximately 3,100 boepd in Q2 due to restrictions
associated with the Alberta wildfires, unanticipated
apportionment issues associated with the Pembina
Peace Pipeline liquids line, debottlenecking projects and
twenty scheduled operated turnarounds.
Shareholder Return
• Total dividends of £13.298 million declared and
£15.338 million paid in 2023.
Capital Programme
• £23.2 million capital expenditure in 2023 delivered
12 gross (8.0 net) wells, which were completed on
budget in a high inflationary environment.
Debt Re-financing
• Successfully completed a CAD 100 million, 3-year, first
lien Debt Facility with Trafigura Canada Ltd. (a subsidiary
of Trafigura Pte Ltd.) and redeemed the H1 2019 Loan
Notes in full.
Reserves Replacement
• Managed to maintain Proven (“1P”) and Proven plus
Probable (“2P”) reserves essentially flat, despite a
significantly lower capital programme in 2023 relative to
the prior year, with a very healthy 2P reserves life index
of 23.0 years.
• The Group now has over 390 gross booked drilling
locations in its audited reserves and over 950 including
un-booked locations.
OUTLOOK
Extensive Planned Maintenance
Programme Executed
• Scheduled turnaround programmes successfully
completed on 20 operated facilities, on-time and
on-budget.
ESG Performance
• Completed the electrification of 25 pumpjacks in
Carmangay and Retlaw to reduce use of diesel and
propane for power generation, with a further two
electrifications underway, which will eliminate 4,268
tonnes of CO2 (“tCO2”) emissions annually.
• Completed electrification of two natural gas generators,
resulting in an annual emission reduction of 907 tCO2
equivalent (“tCO2e”).
• In 2023, we replaced 295 gas driven pneumatic pumps
with solar powered pumps, which is expected to
eliminate 8,971 tCO2 emissions annually.
• Launched an alternative Fugitive Emissions
Management Programme, utilising airborne methane
imaging technology which is expected to reduce fugitive
methane emissions by 50% relative to 2022.
• Converted high-pressure natural gas driven
pneumatics to compressed instrument air at three of i3’s
locations to reduce methane emissions equal to over
660 tCO2e annually.
• Ongoing annual abandonment and reclamation
programme abandoned 46 wells, 26 pipelines
and decommissioned 16 well sites, representing
approximately 12% of operated non-producing wells.
20,711
boe/d
Royalty
Production
2%
£161.4
MM
Gas
52%
Oil + Cond
59%
Oil + Cond
22%
NGLs
24%
01
NGLs
15%
Gas
24%
A summary of key events which occurred after the reporting period are presented in note 24 to the financial statements.
The Company’s focus for the remainder of 2024 will be on three key areas:
1 The growth of i3’s Canadian
business through the
deployment of capital into
its large proven undeveloped
reserves base, operational
excellence to improve
uptime and field performance,
and strategic upsizing and/
or repositioning of its core areas
through M&A;
2 Maintaining flexibility to adapt
to economic developments
while maximizing total
shareholder return; and
3 Conducting its operations safely
and in an environmentally
secure manner.
.
The Company continuously
evaluates opportunities to
strengthen its balance sheet whilst
maintaining tight control of its costs
and working capital position.
I3 ENERGY PLC
02
I3 ENERGY PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
HIGHLIGHTS
CANADA
UK AND CORPORATE
AVERAGE DAILY
PRODUCTION BOE/D
GROUP
REVENUE £m
GROUP PROFIT
AFTER TAX £m
GROUP ADJUSTED
EBITDA(1)
£m
2023
2022
2021
2020
12,442
8,732
20,711
20,317
2023
2022
2021
86.8
146.3
208.4
208.4
2023
2022
2021
2020
13.0
2020
11.7
15.1
42.0
42.0
2023
2022
67.8
98.0
25.1
2021
30.2
2020
-0.8
2P AND PDP
RESERVES MMBOE
2P RESERVES
BEFORE-TAX NPV 10 (USDm)
2023
2022
2021
2020
183
179.9
181.5
154.1
1,026
1,162
775
2023
2022
47.1
49.1
2021
46.2
54.0
2020
18.1
GROUP NOI(1)
£m
DIVIDENDS DECLARED £m
2023
2022
74.5
131.7
2021
48.6
2020
4.9
2023
2022
2021
3.4
2020 0
13.3
17.4
(1) Non-IFRS measure. Refer to Appendix B.
■ 2P reserves ■ PDP reserves
03
I3 ENERGY PLC
04
I3 ENERGY PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS CHAIRPERSON’S
AND CHIEF EXECUTIVE’S
STATEMENT
Overview of the year
i3 Energy had a very busy 2023
navigating a challenging period in
the energy sector and the broader
capital markets.
John Festival
Non-Executive
Interim Chairperson
Majid Shafiq
Chief Executive
Officer
Operationally, i3 commenced 2023 following a very successful
drilling campaign in 2022, which allowed the Company
to average 20,317 boepd for 2022 with peak production
exceeding 24,000 boepd. Although commodity prices had
softened through 2022, the forecast at year-end remained
strong and the Company set a 2023 capital programme of
USD 64 million, similar to the prior year, based upon average
annual price assumptions for 2023 of USD 85/bbl for WTI
and CAD 4.50/GJ for AECO gas (coinciding with the industry
consensus). The Q1 scheduled component of the 2023
capital programme, including 8 gross (5.5 net) wells, was
successfully drilled in the Company’s Wapiti, Central Alberta
and Clearwater assets and tied-in before the Spring break
up period commenced. First half production and cashflow
numbers were impacted by a weakening commodity price
outlook and a series of other factors, including Alberta
wildfires, unanticipated sales apportionment issues through
third-party infrastructure, as well as scheduled turnarounds
and debottlenecking projects. Ultimately for 2023, WTI oil
and AECO 5A gas averaged USD 77.61/bbl and CAD 2.64/mcf
respectively. These factors when combined with the continued
softening commodity outlook, resulted in significantly lower
full year forecasted cashflows than budgeted at the start
of the year. The Company consequently re-calibrated its
capital and dividend programme mid-way through the year
to be constrained by full year forecast cash flow and issued
revised full year production and cashflow guidance. Total
budgeted capital expenditures for the year was reduced to
approximately USD 30 million and the drilling programme was
completed in Q4 with the drilling of 4 gross (2.5 net) wells in
Central Alberta. The 2023 drilling programme targeted low risk
oil wells in our core production assets and appraisal wells in
our Clearwater acreage. We are pleased with the well results
which were drilled on budget in a cost environment which was
still inflationary.
Seasonal wildfires in 2023 were worse and more prolonged
than normal, and although none of our facilities (operated
or non-operated) were damaged, periodical shut down of
certain facilities was required as a precautionary measure,
which negatively impacted our production volumes during
May and June by 1,650 boepd and 385 boepd, respectively.
Additionally, the Company conducted a major programme
of planned maintenance activities in June which involved
shutdown of 20 major operated facilities, which were
completed successfully on time and on budget. In aggregate
the wildfires, debottlenecking projects, turnarounds and
unanticipated apportionment issues associated with the
Pembina Peace liquids pipeline resulted in the loss of
approximately 3,100 boepd in Q2. Despite this, our wells and
facilities which were impacted by maintenance and unplanned
shutdowns were ultimately brought back on-stream and at pre-
shutdown levels.
We are very pleased that despite the Q2 production
curtailments and a constrained capital programme the
Company managed to achieve record annual average
production in 2023 of 20,711 boepd, and as mentioned below,
managed to keep oil equivalent reserves essentially flat. This
is a testament to the quality of our low decline production
base, our low-risk drilling inventory and the skills and
dedication of our employees.
The Company’s year end 2023 audited reserves on a 1P and
2P basis remained essentially flat year on year and reflects
successful operational management and the results of the
2023 drilling programme. This was achieved with a limited
capital programme and again points to the quality of the
Company’s oil and gas properties. The 2P reserves were
evaluated with an NPV10 of USD 1.03 billion on a pre-tax basis
with the longevity of the reserves demonstrated by a very
healthy reserve life index of 23.0 years. With more than 390
booked (gross) drilling locations, i3’s reserves report exhibits
a strong and diverse asset base which can support growth
through the business and commodity cycles, and we look
forward to advancing our growth initiatives in the near term.
Although gas prices weakened through 2023 and were a
major factor in our operational decision making and financial
results, we believe the mid-term outlook is positive due to the
pending start-up of LNG exports from Canada’s west coast
from the LNG Canada facility which is expected to begin start-
up activities in 2024.
During the first half of 2023, the Company settled its
outstanding £22 million Senior Secured Guaranteed Loan
Notes (the “Loan Notes”), which were due for repayment
at the end of May. The Loan Notes were settled using the
proceeds from a new CAD 100 million loan facility (the
“Facility”) established with Trafigura Canada Ltd., a subsidiary
of Trafigura Pte Ltd. The Facility consists of a CAD 75 million
facility, used to repay the loan notes and for general corporate
purposes, and a CAD 25 million accordion. The Facility had
a three-year amortisation period which served to strengthen
the balance sheet as the loan was paid down. We are very
pleased to have established a relationship with Trafigura, a
sophisticated oil and gas trader and a potential partner for
future production focussed growth.
After year-end, the Company established a CAD 75 million
senior secured revolving credit facility with a Canadian
chartered bank which was utilized to settle the Company’s
existing CAD 75 million Loan facility with Trafigura, without
prepayment penalty, of which approximately CAD 57 million
was outstanding at the time of the repayment. Secured against
substantially all the assets and shares of i3 Energy Canada
Ltd., the new Credit Facility, comprises a CAD 55 million
revolving facility and a CAD 20 million operating loan facility.
The two-year term of the new Credit Facility is expected to be
extended on an annual basis, subject to lender approval.
As per i3’s total return model, the Company declared £13.298
million and paid £15.338 million in dividends in 2023. The
Company continually evaluates the optimal way in which to
deliver shareholder value. In addition to its distribution model,
the Company weighs the expected return generated through
organically drilling its extensive portfolio of development
locations against potential acquisition opportunities and
deploys capital accordingly to achieve the highest return
on a risk adjusted basis. As is to be expected, the fall in
commodity prices in 2023 resulted in lower asset transaction
metrics in Canada. i3 continues to monitor the market and will
participate in acquisitions should the Company find accretive
opportunities that fit its strategy.
In the UK, in conjunction with our joint venture partner, the
Company continues to evaluate options to develop the
Serenity field.
i3 is committed to conducting its operations safely, responsibly
and in accordance with industry best practices, and we
continue to advance our health and safety policies and
procedures as we integrate additional production assets. The
Company’s commitment to high ESG standards is central to
maintaining its social licence to operate, creating value for all
stakeholders, and ensuring long-term commercial success.
Following the publication of our maiden annual sustainability
report and establishing a baseline for our business we
have continued efforts to reduce the carbon intensity of
i3’s operations through methane emission reductions and
electrification projects, and these efforts will continue and
expand as we evaluate additional initiatives to meet our net-
zero targets.
05
I3 ENERGY PLC
06
I3 ENERGY PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
Company Statement of Financial Position
COMPANY STATEMENT OF FINANCIAL POSITION
Assets
Non-current assets
Investment in subsidiaries
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
Borrowings (current)
Trade and other payables
Total current liabilities
Net current (liabilities) / assets
Borrowings (non-current)
4
4
5
7
6
7
Other non-current liabilities
Total non-current liabilities
Looking beyond 2024, we have a high quality and diverse
asset portfolio in Canada with immense unrealized upside
potential. We will continue to focus our efforts on advancing
these key assets to efficient and rapid commercialisation and
value crystallisation. We will selectively target key assets
and wells to optimise these developments and conversion
of resources to reserves bookings. We are fortunate that we
operate the vast majority of our producing assets and drilling
inventory which allows us to control the timing and pace of
development. We also own high working interests in our
Ordinary shares
operated assets which also provides us with optionality on
how to finance these developments.
Net assets
Capital and reserves
Deferred shares
Share premium
Whilst we have an extensive inventory of high quality, high
return drilling locations, we recognise that commodity price
volatility and resulting market dislocations will provide
opportunities to grow through low-cost mergers and
acquisitions and we remain vigilant to take advantage of these
opportunities as and when they arise.
Warrants – LNs
Share-based payment reserve
Transition reserve
We are committed to operating in a safe and socially
responsible manner and the safety of our employees and
contractors is of primary importance. We are proud of
our green-house gas emission reduction initiatives and
achievements in 2023 and we will endeavour to deliver year-
on-year reductions in the carbon intensity of our production.
Retained earnings
Shareholders’ funds
Company number 10699593
Notes
31 December 2023
31 December 2022
31 December 2021
£’000
£’000
£’000
* Restated
* Restated
148,841
74,708
75
148,841
99,861
75
223,624
248,777
148,841
99,547
–
248,388
33
83
116
(14,001)
(828)
(14,829)
(14,713)
(20,568)
(10)
(20,578)
120
50
–
6,888
–
148,517
57,522
213,097
1,666
90
1,756
–
(2,654)
(2,654)
(898)
–
–
–
119
50
48,646
6,307
2,045
148,517
17,042
222,726
213,097
222,726
248,852
66
140
206
–
(131)
(131)
75
–
–
–
113
50
44,203
9,098
2,045
148,517
44,826
248,852
103
John Festival
Non-Executive Chairperson
26 April 2024
Majid Shafiq
Chief Executive Officer
Majid Shafiq, Director
26 April 2024
26 April 2024
I3 ENERGY PLC
08
i3 Energy PLC
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 profit for the Company for the year was £3,047 thousand (2022: loss of
£4,067 thousand).
As always, we extend gratitude to our shareholders for their
ongoing support and to our employees for their relentless
commitment to making i3 a success. Though we operate
within a macro environment that is beyond our control, we
believe we are doing the right things to create a very valuable
business that can weather good times and bad.
i3 will continue to manage our Canadian and UK
businesses in a manner that maximizes value creation and
shareholder returns.
* Restated for adoption of UK IFRS in the year. Further discussion is provided in note 8.
The accompanying notes form an integral part of these financial statements.
Signed on behalf of the Board of Directors by:
Financial Discipline
The Board and Management are focused on delivering
consistent value to shareholders. i3 is committed to its total
shareholder return model which aligns production and
asset value growth with dividend returns and protects this
commitment through a conservative hedging programme. The
Company has and continues to keep a substantial portion of
its production hedged through risk management contracts to
manage commodity price risk, with free cash post dividend
payments deployed to either acquire production assets or
develop our proven undeveloped (PUD) and 2P inventory
dependent on which option delivers higher returns in the
prevailing commodity price environment. As i3 continues to
grow its portfolio, a proportion of all incremental production
will be hedged in order to secure future cash flows, and the
Company will remain commercial in monetising assets when
third-party interest warrants consideration.
As part of our total shareholder return model, we commenced
paying a dividend in 2021 and have grown dividends paid
from £3.4 million in 2021, to £15.4 million in 2022 and 2023.
Operational flexibility and the short-term nature of forward
capital commitments in Canada mean that the Company has
considerable optionality to rapidly expand or reduce its capital
programme to prudently manage its balance sheet
to ensure risks are appropriately mitigated in volatile
commodity markets.
Governance
The Board recognises its responsibility for the proper
management of the Company and is committed to maintaining
a high standard of corporate governance commensurate with
the size and nature of the Company and the interests of its
shareholders. The Quoted Companies Alliance has published
a set of corporate governance guidelines for AIM companies,
which include a code of best practice comprising principles
intended as a minimum standard, and recommendations for
reporting corporate governance matters. The Directors comply
with the QCA Corporate Governance Guidelines for Smaller
Quoted Companies so far as it is practicable having regard to
the size and current stage of development of the Company.
The Board currently comprises two Executive Directors (being
the Chief Executive Officer and the President Canada) and
four Non-Executive Directors (including the Chairperson).
The Board’s decision-making process is not dominated by
any one individual or group of individuals. The composition
of the Board will be reviewed regularly and modified
as appropriate in response to the Company’s changing
requirements. The Board has established an Audit and Risk
Committee, Corporate Governance Committee, Health, Safety,
Environment and Security Committee, Reserves Committee,
and Remuneration Committee to ensure proper adherence to
sound governance and decision making.
Environmental Stewardship
i3 is fortunate to operate in the UK and Canada which
have some of the world’s most stringent and rigorous
environmental laws and regulations and the Company strives
to meet or exceed all local, provincial or national operational,
environmental, reporting and compliance obligations and
abandonment and reclamation requirements. The Company
is committed to conducting its operations responsibly and in
accordance with industry best practices. i3’s commitment to
high ESG standards is central to maintaining our social licence
to operate, creating value for all stakeholders, and ensuring
long-term commercial success. i3 recognises the safety and
well-being of our employees, local communities, and other key
stakeholders as a priority, and considers climate change as
having a material impact on our business.
To demonstrate the Company’s commitment to long-term
sustainable resource development, environmental stewardship
and the well-being of employees and the communities in
which i3 operates, i3 publishes annually an ESG report. The
ESG report summarises the Company’s ESG performance
and key initiatives and its goals and ambitions with respect
to greenhouse gas emission reductions, environmental
stewardship, social policies and governance.
As part of its continued effort to reducing its Scope 1 and
Scope 2 carbon emissions, in 2023 i3 replaced pneumatic
pumps with solar-driven alternatives at 295 locations, which
are expected to reduce methane emissions by an estimated
8,971t CO2e. Additionally, the electrification of 25 pumpjack
engines in Carmangay and Retlaw are expected to further
reduce emissions by an estimated 4,268 tCO2e per year.
In a further move towards greenhouse gas reduction, the
Company replaced natural gas-fired heaters with electric
heaters at one of its Medicine River locations. In collaboration
with an offset operator, i3 implemented an Alternative Fugitive
Emissions Management Programme (ALT FEMP) at its locations
in 2023, which images methane emissions from the air and is
anticipated to contribute to a substantial reduction in fugitive
emissions by over 50% compared to the previous year.
Concurrently, i3 implemented two compressor consolidation
projects which are expected to achieve annual emission
reductions of 2,728 tCO2e and 681 tCO2e, respectively.
In our Simonette field two natural gas generators were
electrified, resulting in an annual emission reduction of 907
tCO2e. i3 converted a number of high-pressure natural gas
driven pneumatics to compressed instrument air reducing
methane emissions by over 660 tCO2e in 2023. These
endeavours exemplify i3 Energy’s dedication to environmental
sustainability and continual progress in ESG practices. In
January 2024, the Company was also pleased to publish its
2022 ESG Report.
i3 takes its abandonment and reclamation obligations very
seriously and in 2023 it abandoned a total of 46 wells
and decommissioned 16 well sites, as well as 26 pipelines
representing approximately 12% of its operated non-producing
well stock. In 2024, and in accordance with the Alberta Energy
Regulator’s decommissioning guidance, i3 expects to deliver a
similar number of abandonment operations as achieved
in 2023.
Looking ahead
The Company looks forward to 2024 and beyond in a much
strengthened financial position, with a strong balance sheet,
and growing relationships with providers of debt capital for
growth. Our core asset base continues to perform consistently
well and will underpin the development of the significant
undeveloped reserve and resource potential in our portfolio.
The Company looks forward to executing a successful drilling
programme in Canada in 2024, growing production and
continuing to return cash to shareholders to deliver on its total
shareholder return model.
07
I3 ENERGY PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
BUSINESS MODEL
i3’s Total Shareholder Return Model
i3 is committed to a total shareholder return model via
accretive production and reserves expansion which should,
over the business cycle, deliver share price growth and
consistent distribution of profits via dividend payments. Our
asset base has characteristics that allow us to offer both
growth and income to our investors.
The Company participates in approximately 1,900 production
wells (~865 net) and operates over 75% of its production. It
also owns or has access to significant capacity in operated
and non-operated production facilities, and pipelines which
allows it to maintain access to markets, optimise netbacks
and minimise downtime. Our current production mix, which
consists of approximately 50% gas, 25% oil and condensate
and 25% natural gas liquids, spreads commodity price risk
and provides the option to regulate our production mix to
optimise revenues. This extensive portfolio provides the risk
diversification necessary to sustain the reliable and stable
production levels required to support a dividend
paying business.
Our business model delivers growth either via accretive
acquisitions when market conditions offer opportunities
to add production at low cost, or in high commodity price
environments by drilling our diverse portfolio of high return,
high working interest, operated drilling locations. This allows
i3 to deliver rapid payout on capital investment throughout
the business and commodity price cycle. We also seek to
add acreage which offers the potential for step changes
in production growth, and endeavor to own high working
interests in these assets to ensure we are in control of project
timelines and provide financing optionality to
fund developments.
Our dual listing in London and Toronto provides access to
international capital markets for equity and debt, which allows
the Company to quickly access a range of capital sources and
provides the ability to react swiftly to acquisition opportunities
and raise finance at the lowest possible cost of capital.
HIGH
DEPENDABLE
YIELD
EFFICIENT
PRODUCTION
GROWTH
Balanced with
30%
I N C O M E
Income Return
Target
20%
T O TA L
R E T U R N
10%
0%
Total Return
Target
G R O W T H
X
E
P
A
C
Growth Return
Target
STRATEGY
ACQUIRE
i3 targets long-life and low-cost PDP
assets with robust PUD inventories, with
a focus on distressed, overleveraged or
non-core asset packages of high API/BTU
production streams with low sustaining
capex and decommissioning exposure
RATIONALISE
Newly acquired portfolios are
rationalised to extract value from
non-synergistic assets for
re-deployment into strategic
consolidation at i3’s core plays
U I R E
Q
A C
+
D
T
S
E
N
V
E
N
R
A
T
I
O
N
A
L
I
S
E
D
I
I
E
V
R
I
D
ODUCE
PR
DIVIDEND & REINVEST
Pay regular dividends and
invest residual cash flow in
PDP assets or low-cost organic
PUD and 2P reserves development
PRODUCE
Optimise and streamline field
operations to increase efficiency and
improve per boe netbacks; actively
participate in non-operated partnerships
to influence value generation
09
I3 ENERGY PLC
010
I3 ENERGY PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
When commodity prices are low, we focus on growth via asset and corporate
acquisitions. We are disciplined in our approach and evaluate all opportunities
against strict criteria which align with our business plan. The acquired assets
should be within or adjacent to our existing core area of operations in order
to maximise synergies and lower unit operating costs or if not, material
enough to establish a new core area. Rapid payback is a fundamental criteria
when we evaluate the economics of potential acquisitions, alongside drilling
inventory to provide production growth and reserves replacement.
In higher commodity price environments, when asset prices inflate and
potential transactions fail to meet our acquisition criteria, we shift to growth via
drilling and organic development. We currently have over 950 locations in our
portfolio, which provides decades of drilling inventory.
Our extensive portfolio of diverse assets and drilling inventory, which produce
a balanced mix of commodities, offers significant optionality to deploy capital
in the most economically advantageous opportunities depending on where
we happen to be within the commodity price and business cycle.
We entered the Canadian E&P sector in 2020 via a series of acquisitions,
when a period of low commodity prices and a lack of capital availability in the
Canadian market provided a unique opportunity to build a material production
business with in-built drilling upside, at historically low acquisition costs. In
2022, following a period of sustained oil and gas price inflation, we pivoted to
drilling driven growth, as per our strategy and successfully executed drilling
programmes in Canada of £13 million in 2023 and £58 million in 2022. 2023
saw a prolonged period of declining oil and in particular gas prices and the
company consequently executed a constrained capital programme focussed
on oil wells.
CYCLE-BOTTOM
ACQUISITION
Acquire PDP at
<2.0x NOI, adding
PUD/2P reserves at
very low cost
+
CYCLE-TOP
DRILLING
Drill commodity-driven
PUD/2P inventory
and hedge or sell
new production into
price strength
=
VALUE
MAXIMISATION
All weather portfolio
management that
maximises cycle and
inventory to create
shareholder value
KEY PERFORMANCE
INDICATORS
Health, Safety & Environment (“HSE”)
The safety of our staff and the maintenance of the environment in which we operate are the primary considerations in our
operations. 2023 was another busy operational period for i3 Canada. We conducted a drilling campaign of 12 gross wells (8.0
net) over the course of the year. We continue to improve our Health and Safety Management System to incorporate operational
and safety lessons learned since commencement of our operations in Canada. Our senior operations and HSE leadership review
operations on an ongoing basis and incidents in detail, including third party service providers in that process where relevant, to
ensure that lessons are learned and incorporated not only into our Safety Loss Management System but into the daily work culture
of our operational staff. We hold monthly safety meetings and conduct quarterly inspections of designated active work sites and
hold quarterly Joint Health and Safety Committee meetings. We also conduct annual comprehensive pipeline risk assessments and
through the course of the year conduct two full mobilisation emergency response plan (“ERP”) exercises and six table-top
ERP exercises.
Metric
Material lost
time incident
Unit
Reportable
injuries
Target
1
Actual
1
There was one injury to a third-party service contractor in Canada that
resulted in a lost time incident.
Regulatory
inspections
Pass rate on
high-risk items
95%
96.4%
There were four high risk category reports on 112 inspections in
Canada. All items were resolved.
Major incidents Major and critical
incidents as % of
all incidents
6%
3.0%
There were only 3 incidents classified as major out of 99 reported
incidents in Canada.
Complete or
initiate site
electrifications
Number of sites
25
27
27 sites were electrified in 2023
We are very pleased with our realised HSE record in 2023 as detailed in the table above. These metrics are key measures which
collectively reflect the aggregate HSE performance of the Company and driving improvements in these metrics will result in positive
HSE outcomes for i3.
Production
Our Production and Operations teams were able to deliver total 2023 production volumes 1% above our average annual
target forecast.
Metric
Production
Unit
Outcome as
% difference
to annual
average stated
production
Target
0%
Actual
1%
2023 budget production average of 20,500 boepd versus outcome of
20,711 boepd
011
I3 ENERGY PLC
012
I3 ENERGY PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Reserves
Decommissioning Stewardship
The Alberta Energy Regulator (AER) specifies the annual abandonment and reclamation obligations (ARO) for oil and gas companies
operating in the province, through the mandatory closure spend programme.
Metric
Closure spend
efficiency
Unit
Closure spend
efficiency in
reducing ARO
Inactive well
count reduction
Inactive wells
reduced
Target
100%
Actual
122%
Operated closure programmes removed CAD 4.5 million of liability with
a net spend of CAD 3.7million.
40
46
46 wells abandoned and 9 reclamation certificates achieved
i3 exceeded its regulatory requirements as specified in Alberta’s mandatory closure spend programme. It is a major priority for
the Company to operate in an environmentally safe manner and to ensure we return our operating sites to their native condition
following completion of production activities. We expect to continue to exceed regulatory requirements on an on-going basis.
Reserves replacement is a critical requirement for all oil and gas production companies and in particular those like i3 which
offer a total shareholder return model. Proven Developed Producing (“PDP”) reserves replacement is a necessary and minimum
requirement to ensure the Company can maintain production volumes and cash flow in a flat commodity price environment.
Metric
Canadian
Reserves
Unit
PDP reserves
replacement
(adjusted for
dispositions)
Target
100%
Actual
96%
Total PDP add of 5.43 Mboe (revisions, drilling and net acquisition)
against production of 7.390 Mboe brought PDP reserves from 49,056 in
2022 to 47,100 in 2023
Due to a combination of drilling and recompletion activities combined with above forecast production results in existing wells,
the Company achieved PDP reserves replacement ratio of 96%. The 2023 drilling programme was constrained mid-year due in
particular to the low gas price environment and we believe that had the original budgeted progamme been executed, the reserves
replacement ratio would have been greater than 100%. Due to what we believe is the high degree of predictability of our proven
undeveloped (“PUD”) well locations, (which are converted to PDP reserves upon drilling), the performance in 2023 gives us a high
degree of confidence that the Company’s asset base can continue to replace PDP reserves on a go-forward basis.
Operations
Operational performance is key to the economic success of our business. Our operational KPI’s address the efficiency of
deployment of operating and capital costs and the effectiveness of that deployment from an economic and strategic standpoint.
Target
0%
Actual
-12%
100%
78%
Opex in 2023 was £9.44 vs £10.31/boe in 2022. Adjusted for 4.2%
inflation (CPI) it was 12% lower than opex/boe in 2022
Budgeted aggregate IP30 for i3 Canada’s 2023 drilling programme was
1,669 boepd, compared to actual achieved IP30 of 1,308 boepd, not
including the exploration wells like Marten creek Clearwater or Wapiti
Dunvegan
100%
103%
Based on i3 Canada’s operated AFEs. 2023 actual spend of CAD 51.1
million versus AFE estimates of CAD 49.4 million.
Metric
Opex/BOE
Capital
programme
performance
Actual costs v
AFE1 estimates
Unit
Opex per BOE
relative to prior
year (inflation
adjusted)
Aggregate
IP30 (post
commissioning)
Annual Actual
/ Annual AFEs
(adjusted for
estimated
inflation)
Note 1: Authorisation for Expenditure
i3 is very pleased with its operational performance in 2023. Our operating costs per BOE were 12 percent lower than those realised
in 2022 on an inflation adjusted basis and whilst total operated capital expenditure was 3% higher than AFE estimates, we consider
this to be a significant achievement considering the elevated inflationary environment for oilfield services and equipment that
continue to persist.
013
I3 ENERGY PLC
014
I3 ENERGY PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS RESERVES
Since i3’s entry into Canada in 2020, the Company has established a low decline, long reserve life, diversified portfolio of assets
with a strong inventory of booked and unbooked drilling locations. Through 2021, i3 delivered strong growth in production and
reserves primarily through acquisition activity. In 2022, due to prevailing high commodity prices, the Company decided to deploy
its capital towards a drilling programme in Canada, which focussed on development drilling in i3’s key assets in Central Alberta,
Simonette, Wapiti and the Clearwater play. In 2023 the Company chose to reduce its capital programme due to the deterioration in
commodity prices, drilling 12 gross (8 net) wells across its core areas.
The Company’s year-end 2023 reserves volumes and valuations as evaluated by its independent reserves evaluator GLJ are
tabulated below. The valuations use forecast commodity prices which are the averages of the 1 January 2024 forecasts of the
reserves auditors GLJ, Sproule and McDaniel & Associates, referred to as 3CA.
Category
PDP
PDNP + PUD
TP
P+PDP
Prob
P+P
Oil + Cond
(Mbbl)
7,507
6,148
13,655
9,987
19,363
33,018
NGl
(Mbbl)
14,822
15,540
30,362
19,398
25,446
55,808
Gas
(mmcf)
148,627
144,888
293,515
194,024
252,732
546,247
BOE
(Mboe)
47,100
45,836
92,936
61,723
86,931
179,867
GLJ (Jan 2024 3CA)
NPV10
(USD M)
$303,140
$198,187
$501,327
$386,121
$525,070
$1,026,396
Total Company Interest proved developed producing reserves
(“PDP”) decreased approximately 4% to 47.1 million boe, total
proved (”1P”) reserves decreased approximately 1% to 92.9
million boe and total proved plus probable (“2P”) reserves
decreased approximately 1% to 179.9 million boe, compared to
the prior year, principally due to the significantly smaller 2023
drilling programme as compared to that conducted in 2022.
The Company’s stable, long reserve life assets, continue to
exhibit a low decline profile, which resulted in strong
technical revisions associated with the outperformance
of the Company’s stable base production, despite the
dramatic reduction in forecasted natural gas and natural
gas liquids pricing.
In 2023, the Company’s organic working interest reserves
included an additional 6.9 million boe on a 1P basis and 5.8
million boe on a 2P basis through extensions, improvements
and revisions, before adjustments for 2023 production and
dispositions. The 2023 programme delivered efficient Finding,
Development and acquisition (“FD&A”) metrics of USD 5.67/
boe (PDP), USD 2.32/boe (1P) and USD 1.76/boe (2P) after
including changes in Future Development Capital (“FDC”).
When compared to the Company’s 2023 netback of USD
12.30 per boe, this translates to strong recycle ratios of 2.17x
(PDP), 5.31x (1P) and 6.97x (2P).
Based on the Company’s 2023 year-end reserves, PDP, 1P and
2P reserve life indices increased year-over-year to 7.1 years,
12.6 years and 23.0 years, respectively. With the success of
the 2023 programme and the strong outperformance of i3’s
production base, the Company’s corporate decline rate has
improved to approximately 17% on a PDP basis.
As evaluated by GLJ, the Before-tax Net Present Value
(“NPV”) of cash flows attributable to the Company’s reserves,
discounted at 10%, has been determined to be USD 303.1
million, USD 501.3 million, and USD 1,026.4 million for its PDP,
1P and 2P reserves, respectively. Based on the NPV of the
Company’s year-end 2023 reserves after adjusting for year-
end net debt of USD 23 million, this translates to PDP NPV of
£0.18 per share (CAD 0.31 per share), 1P NPV of £0.31 per share
(CAD 0.53 per share) and 2P NPV of £0.66 per share (CAD 1.10
per share). These strong reserve values have been achieved
despite a significant decrease in forecasted natural gas and
natural gas liquids pricing, which impacted approximately 76%
of the Company’s produced commodities.
The Company’s assets in Canada contain a diversified portfolio
of oil and gas properties and economic drilling opportunities
totalling greater than 950 gross (approximately 550 net)
booked and unbooked undeveloped drilling locations.
Despite the near-term challenges associated with the current
commodity price outlook for natural gas and natural gas
liquids, i3’s broad scale of future drilling opportunities
positions the Company for future growth in production,
cash flow and reserves.
015
I3 ENERGY PLC
016
I3 ENERGY PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS ENVIRONMENT,
SOCIAL AND
GOVERNANCE
ESG Vision and Strategy
i3 Energy is committed to conducting its operations
responsibly and in accordance with industry best practices.
We choose to operate in jurisdictions with world-class
regulations governing all aspects of ESG. Our commitment to
high ESG standards is central to maintaining our social licence
to operate, creating value for all stakeholders and ensuring
long-term commercial success. We recognise the safety and
well-being of our employees, local communities and other
key stakeholders as a priority, and consider climate change
as having a material impact on our business. We endeavour
to set a high standard of ESG performance not only to benefit
our business and stakeholders, but also to encourage similar
actions amongst peers and have a positive influence on the
energy sector.
Our key ESG commitments include:
Minimising our environmental impact in a manner that is
mindful of the climate science, while on the journey to
achieve our net zero target no later than 2050, or earlier if
technologically and commercially feasible
• Ensuring our business is resilient to the energy transition
and a low-carbon future.
• Protecting the safety, health and well-being of all
affected stakeholders.
• Maintaining positive and responsive relationships with
local communities.
• Meeting or exceeding all applicable legal and
regulatory requirements.
• Endorsing and aligning with international
best-practice initiatives.
In 2022, i3 Energy, guided by our ESG advisors, completed a
high-level ESG materiality assessment to assess, review, and
confirm the importance of ESG topics to both our company
and external stakeholders. This evaluation considered
the potential risks, opportunities, and the potential impact
associated with each topic.
• Analysing our external stakeholder landscape.
• Conducting impact evaluation and mapping, using the data
and insights to inform the materiality analysis.
• Engaging with internal and external stakeholders to assess
the impact of specific ESG-related topics on the company
and gauge stakeholder sentiments regarding current and
emerging matters.
The list of material topics identified through our assessment
and analysis – which we will use in our ongoing risk
assessment and strategic planning – are outlined in the
graphic below. This assessment will be repeated in 2024.
017
I3 ENERGY PLC
018
Significant strides have marked our journey, particularly in reducing emissions. With a focus on reducing Scope 1 and Scope 2
emissions through innovative technologies, streamlined operations, and a rigorous commitment to energy efficiency, we have
achieved substantial reductions in our carbon footprint. These efforts align seamlessly with our long-term vision of achieving net-
zero emissions by no later than 2050.
I3 ENERGY PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS ENVIRONMENT
Amid increasing global attention to climate change, fossil
fuel producers like i3 Energy need to consider how to adapt
operations and business planning to align with a transition
to a low-carbon world. i3 Energy has therefore stated its
ambition to reach net zero Scope 1 and 2 emissions by 2050.
We are now in the initial stages of planning how to achieve
this and have undertaken a preliminary analysis to explore the
Company’s pathway to net zero and how we might accelerate
our 2050 target. This exercise represents an important first
step in our net zero journey. As we explore appropriate
pathways to net zero, building on the exercise and initiatives
we have already undertaken, we are committed to:
• Ongoing improvement in emission data integrity and
monitoring to accurately report the company’s overall
emission profile.
• Achieving active emissions reductions, resulting in a 4%
reduction in Scope 1 and Scope 2 emissions intensity from
2021 to 2022 while our daily average production grew by
23% over the same period.
• Investigating and implementing solutions that continue to
improve operational efficiencies to help accelerate the date
by which we achieve net zero.
• Continuously researching and investing in technologies and
practices to decarbonize production processes, including
exploring carbon capture and storage (CCS) technologies,
utilizing renewable energy sources, and adopting best
practices for reducing emissions during oil and
gas extraction.
After making our commitment to achieve net zero Scope 1
and Scope 2 emissions by 2050, we undertook a study to
identify and assess potential pathways the Company could
take to achieve this commitment, using marginal abatement
cost curve (MACC) analysis. In 2022, our primary focus was
on the upgrade and replacement of gas operated pneumatic
controllers, electrification and the installation of solar pumps
to mitigate vented methane emissions. These and other
initiatives continued in 2023 in addition to the implementation
of a new leak detection and repair programme.
i3 Energy’s Emissions Profile
Our operating portfolio is relatively well positioned for a lower-
carbon economy, given its majority gas profile.
Our combined 2022 (the latest year for which we have
fully reported data) Scope 1 and Scope 2 intensity was 41.0
kgCO2e/boe. Despite a significant increase in production
during that year, i3 Energy achieved a 4% reduction in carbon
intensity compared to 2021. Through the implementation of
emissions reduction initiatives, carbon intensity now stands
below the average emissions intensity for conventional oil
and natural gas production and processing in Canada, which
Environment and Climate Change Canada projected at 48.1
kgCO2e/boe and 42.0 kgCO2e/boe, respectively, for the
year 2020.
Resource Use
Energy and resource use efficiency is a key priority for i3
Energy to reduce the overall environmental impact across
our assets.
i3 Energy is proud to report that in order to minimise the use
of freshwater, the majority of the water used in our operations
is recycled, using flowback water for most of our operating
needs. We do use some fresh water sources for drilling and
completion work. In these instances, we apply for temporary
diversion rights from the provincial government to draw
primarily on dugouts, or occasionally, creeks. We are looking
at technology innovations to allow us to also use recycled
flowback water in this type of work.
Initiatives to Reduce Methane Emissions, Drive
Energy Efficiency and Reduce Energy Use
Engine Efficiency
i3 Energy performed a comprehensive inventory and
assessment of compressor engines across all sites to measure
fuel gas consumption, and NOx emissions, enabling our
operators to optimize fuel efficiency and engine performance.
Compressor Consolidation Projects
i3 also implemented two compressor consolidation projects
which achieved annual emission reductions of 3,409 tCO2e.
Electrification
i3 Energy is actively pursuing the electrification of its Alberta
operations, reducing reliance on fossil fuels and switching to
cleaner energy sources.
In 2023 the Company continued the process of converting
fossil fuel powered wellsites to electric power supply. At the
Company’s Carmangay and Retlaw properties, 25 pumpjacks
were electrified in 2023 which reduced annual methane
emissions by 4,268 tCO2e per year. This is in addition to
the 7 pumpjacks which were electrified in 2022 (annual
emissions reduction of 1,273 tCO2e). In our Simonette field two
natural gas generators were electrified, resulting in an annual
emission reduction of 907 tCO2e. The Company will continue
to evaluate opportunities to expand this initiative to other parts
of its operated asset locations.
Instrument Air Conversions
The operation of our instrument systems relies on high-
pressure natural gas to power pneumatic valves and
machinery, leading to methane emissions. To address this, we
are implementing air compressors to replace high-pressure
natural gas, thereby eliminating methane emissions from site
operations. In 2023, the conversion of instrument air systems
at three of our locations resulted in the avoidance of over 660
tCO2e emissions.
Fugitive Emissions Reduction
In 2023, we launched the Alternative Fugitive Emissions
Management Programme (Alt-FEMP), in collaboration with an
industry partner, transitioning to Bridger’s Gas Mapping LiDAR
(GML) technology for methane detection. This innovative
approach, utilising crewed aircraft with laser technology, aims
to digitalise leak detections, streamlining operations and
reducing methane leakage by over 50% within two years. Our
commitment to environmental responsibility and operational
efficiency drives this initiative, demonstrating a proactive
stance towards sustainable practices in the industry.
Process Optimization
i3 Energy has invested in software to optimise its field process
data acquisition in order to proactively detect and repair leaks.
Among other things, this Intricate Fuel Flare and Vent Software
(FFVS) tracks fugitive emissions from field components to
allow for improved management and reporting under Alberta’s
Directive 060. FFVS allows for process optimisation through
the tracking and management of fugitive emissions from leaks
and subsequent repairs. When the FFVS implementation is
complete across the portfolio, we expect to further reduce
methane emissions.
Solar Pumps
Commencing in 2021, i3 began an initial programme to replace
400 pneumatic pumps with non-venting solar-driven electric
pumps. As of year-end 2023, i3 has replaced 519 pneumatic
pumps resulting in an annual reduction of approximately
16,584 tCO2e.
Abandonment and Reclamation
i3 Energy has been an active participant in government
programmes to accelerate the responsible decommissioning
of inactive well, pipeline and facility liabilities. In 2023
the Company abandoned 46 wells, 26 pipelines and
decommissioned 16 well sites, representing 12% of operated
non-producing wells.
019
I3 ENERGY PLC
020
I3 ENERGY PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS SOCIAL
Safety
Maintaining safe operations throughout our portfolio is of the
utmost importance to i3 Energy. This commitment has two
elements. First, we are committed to protecting the health and
safety of our workforce and maintaining a strong safety culture
for our employees and contractors. Our goal is to achieve zero
harm. Second, we endeavour to ensure that our operations
do not negatively impact the health and safety of local
communities, landowners or other affected stakeholders.
In this regard, we:
• Comply with, or exceed, all applicable environmental
legislation, regulation and policy (which is already
very stringent).
• Strive to create a workplace that is safe, prevent potential
workplace injuries, and conduct investigations into any
incidents that do occur.
• Continuously work to improve health and
safety performance.
• Work to understand any potential risks to the health and
safety of local communities.
• Disclose our performance in quantifiable metrics.
Our workforce
i3 Energy is a rapidly growing energy company, and we
recognise that our workforce – at all levels – is fundamental
to the success of our business. We aim to have a diverse and
inclusive working environment which recruits, respects and
rewards our staff based solely on their skills and contribution
to the goals and success of the Company. We endeavour to
be an enjoyable and rewarding place to work, where integrity,
openness and collaboration are fundamental to the way we
do business. We also see ourselves as a fully integrated
member of the communities in which we operate. Many of
our employees live in those communities, and we strive to
positively impact local society as we go about our
day-to-day business.
GOVERNANCE
Accountability and Integrity on ESG
i3 Energy’s approach to ESG is supported by strong governance structures and corporate policies. To reflect the increasing
importance of ESG-related risks and opportunities, i3 Energy has formed a Health, Safety, Environment and Security (HSES)
Committee with oversight of ESG matters.
We are committed to:
• Further enhancing board oversight and
understanding of ESG issues.
• Utilising ESG-linked key performance
indicators (KPIs), as well as monitoring
leading and lagging indicators on safety.
• Developing management incentives for
good performance on ESG issues.
• Implementing our Code of Business
Conduct and Ethics, which aligns with our
commitment to operate in an ethical and
transparent manner.
• Ensuring our employees receive first-class
training and guidance on ESG issues and
engaging in dialogue with suppliers and
contractors about our ESG approach.
Corporate Governance and our Board
i3 Energy’s Board recognises the importance of sound corporate governance commensurate with the size and nature of the
Company and the interests of shareholders. As a UK corporation traded on the UK AIM, the UK Corporate Governance Code does
not apply to us. However, the Quoted Companies Alliance (QCA) 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. i3 Energy’s board has adopted the QCA Corporate Governance Guidelines for Smaller
Quoted Companies.
Stakeholder and Community Relationships
i3 Energy values the views and input of all stakeholders, and we seek to build and maintain strong relationships with local
communities, indigenous groups, regulators and our shareholders. Open and comprehensive engagement with stakeholders is
critical to our success as a company. In this regard, the Company strives to:
• Maintain dialogue with our investors and shareholders around ESG-related matters, including our performance and approach to
the most material issues.
• Engage regularly and respectfully with the communities around our operations and maintain an open platform for dialogue
• Understand and respond to local needs in relation to community investments, socio-economic impacts and
environmental concerns.
• Respond in a timely and transparent manner to concerns raised by stakeholders.
• Identify and minimise adverse impacts on communities from our operations.
We are fortunate to operate largely in Alberta, where the energy sector is heavily regulated by the Alberta Energy Regulator (AER).
The AER oversees some of the largest established energy reserves in the world and ensures that companies like i3 Energy develop
and produce oil and gas in a responsible and safe manner – and that stakeholders are regularly consulted and engaged with
respect to our operations. Similarly, the energy sector in the UK is stringently regulated by the NSTA. Companies like i3 Energy that
are active on the UK Continental Shelf are subject to robust oversight.
021
I3 ENERGY PLC
022
I3 ENERGY PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 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. 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 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
Change in the period
Key Risk
Description
Mitigation
Change in the period
OPERATIONAL:
Sub-surface assessment
and production, reserve,
and resource estimation
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.
The Group employs experienced sub-surface
professionals with deep knowledge of
different play types and contracts.
No change
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.
The Group consists of a diverse and large
portfolio of wells and reservoirs/play types
which minimises concentration risk such
that one failure will not materially affect the
business value or its operations.
Health, Safety, Security and
Environment
Both onshore and offshore
development carry the risk of
major incident and harm to the
Group’s employees, contractors,
and the environment.
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.
No change
Regulatory and compliance 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. Future changes in
regulations or taxation regimes
could negatively impact the Group.
The Group considers the risk
level to have increased in 2023
due to losing the designated
foreign issuer status on 1 January
2024 and therefore becoming
ineligible for TSX continuous
disclosure exemptions granted
through National Instrument 71-102
Continuous Disclosure and
Other Exemptions Relating to
Foreign Issuers.
Various Health, Safety, Security and
Environment policies and manuals are
implemented in Canada, including a
comprehensive Emergency Response Plan.
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.
Increase
The Group actively engages with its regulators.
The Group continually monitors the status of
and commitments on its licences.
The Group is not currently generating taxable
profits in the UK, and closely monitors its tax
position in Canada.
The Group employs personnel with sufficient
competence and experience in TSX
continuous disclosure requirements to help
transition into these continuous disclosure
requirements.
OPERATIONAL:
Canadian operations risk
JV partner alignment
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.
No change
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 joint
arrangements to ensure that their strategic and
operational objectives are aligned with those
of the Group.
There is a risk that financial and
operational performance of the
Group’s Canadian operations are
negatively impacted due to sub-
optimal drilling or 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. Operational non-
compliance could lead to claims or
litigation against the Group.
The Group has both operated and
non-operated interests in Canada
and an operating interest in the
Group’s Serenity asset 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.
023
I3 ENERGY PLC
024
I3 ENERGY PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Key Risk
Description
Mitigation
Change in the period
Key Risk
Description
Mitigation
Change in the period
STRATEGIC:
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.
Lack of growth
The Group seeks opportunities to
expand its portfolio of assets and
to increase production rates from
existing assets. The Group may
not find or be able to finance the
acquisition of suitable acquisitions
or fund internal growth options.
Development of
North Sea assets
Following the results of the
13/23c-12 appraisal well drilled in
2022, the Group continues work
on a field development plan for
a one well development of the
Serenity field. There is a high cost
associated with a field development
plan and therefore it is contingent
upon raising the necessary funds.
There is uncertainty whether a
one well development of the field
would be commercial, and it is
likely to require access to third-
party production, processing, and
transportation facilities. If the Group
us unable to develop its North
Sea assets, i3 Energy Plc may not
recover its loan and investment
into i3 Energy North Sea Limited
which could negatively impact the
Company’s distributable reserves
and ability to pay dividends. See
Financial Statements note 3 where
the carrying value of intangible
exploration and evaluation assets
has been identified as a critical
accounting judgement.
The Group considers the risk level
to have increased in 2023 due to
approaching the September 2024
deadline for FDP on the P.2358
licence.
No change
FINANCIAL:
Commodity price volatility
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. The Group monitors its
role in the energy transition in concert with
discussions with the investment community
to ensure our investment proposition remains
relevant to the market.
The Group considers the impacts of climate
change and energy transition when assessing
its E&E and PP&E assets for impairment. See
Financial Statements note 3 where the carrying
value of E&E and PP&E oil and gas assets
has been identified as a critical accounting
judgement.
i3 Energy plc has published an ESG Report
which is available at www.i3.energy.
The Group engages with a range of advisors
and active competitor monitoring to provide a
range of opportunities for screening.
No change
Decommissioning costs
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
and it has an extensive and risk diversified
inventory of development drilling locations
which provide growth options throughout the
business and commodity cycle.
The Group in partnered with Europa Oil and
Gas (Holdings) plc as a 25% working interest
joint venture partner in the Group’s Serenity
oil discovery which reduces the future capital
costs net to i3.
The Group is in active discussion with the
NSTA and is working on a field development
plan for a one well development of the
Serenity field.
The Group is in active discussion with
neighbouring operators regarding potential
access to shared iinfrastructure and is also
evaluating low-cost stand-alone options.
Increase
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
with the increase in commodity
prices following Russia’s invasion
of Ukraine in 2022 and subsequent
decreases in commodity prices
through 2023. 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 E&E assets and oil
and gas PP&E 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. For some
projects or to accelerate growth,
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 2022 and
2023. 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 programme.
No change
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.
In May 2023, the Group established a new
CAD 100 million Debt Facility, providing
additional capital to the Group. Further
details are provided in note 16 to the
financial statements. This Debt Facility was
subsequently replaced in March 2024, with
further details provided in note 24 to the
financial statements.
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.
The Group continually monitors its capital
allocation and will only pursue programmes
that are of appropriate size and risk relative to
the Group’s capital resources.
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.
025
I3 ENERGY PLC
026
I3 ENERGY PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 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 2023 which
were aimed to deliver on this strategy.
These included:
• Entering into a CAD 100 million Debt
Facility with Trafigura, whose three-
year amortisation period results
in conservative balance sheet
management over the longer term;
• Executing the Group’s 2023 capital and
drilling programmes in Canada which
invested £24.9 million in acquisitions
and capex, which helped the Group
achieve record corporate
production levels;
• Engaging with the NSTA and nearby
operators to continue evaluating
development options for the Group’s
Serenity asset; and
• Declaring £13.3 million of dividends as
part of the Company’s total
return model.
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, an
expanded asset portfolio, 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
and TSX 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 has expanded
steadily through the Company’s wholly
owned subsidiary i3 Energy Canada
Limited following a series of acquisitions
and subsequent growth through the
capital programs. 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 the Company’s staff
and contractors, and we are proud of
our safety achievements in 2023. 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,
which includes the November 2023
LTIP share option and cash pool awards.
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
throughout the year, both formally at
Board meetings, and also informally
through interaction and operational,
financial and M&A discussions with
certain employees. The Board met in
person at its Canadian office which
included an open town hall with all
employees.
c. the need to foster the Company’s
business relationship with suppliers,
customers and others,
The Company fosters its business
relationships with suppliers, customers,
contractors, and its various joint venture
business partners in Canada and the
UK. The Group engages frequently
with key suppliers through a regular
e. the desirability of the Company
maintaining a reputation for high
standards of business conduct, and
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 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.
f. the need to act fairly as between
members of the Company.
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.
review of vendor due diligence, creating
efficiencies within the supply chain,
and considering their interests in our
operations. An example in 2023 was
the prudent refinancing and payment
of the Loan Note holders in full upon
maturity. 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 its business
partners to follow similar standards in
their behaviour.
d. the impact of the Company’s
operations on the community and
environment,
The Company considers the impact of
its operations on the community and
the environment. The Group employs
individuals in both the UK and Canada
through which we integrate with the
local communities and engage directly
with local municipalities on various
matters. The Company regularly
engages with the AER regarding its
Canadian operations and we have been
recognised as an upstanding operator
in the region. The Company closely
monitors its decommissioning obligations
in Canada which it intends to responsibly
decommission in accordance with local
regulations and in collaboration with the
AER. In 2023, the Group incurred £3.7
million of decommissioning spend.
In early-2024 the Company released its
latest ESG report which can be viewed
at www.i3.energy.
027
I3 ENERGY PLC
028
I3 ENERGY PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS FINANCIAL REVIEW
Production
Average Sales Production
Oil and condensate (bbl/d)
Natural gas liquids (bbl/d)
Natural gas (mcf/d)
Royalty interest (boepd)
Average Sales Production (boepd)
Average Sales Production
Oil and condensate
Natural gas liquids
Natural gas
Royalty interest
Year Ended 31
December 2023
Year Ended 31
December 2022
4,528
4,921
65,260
385
20,711
4,340
5,047
63,076
418
20,317
Year Ended 31
December 2023
Year Ended 31
December 2022
22%
24%
52%
2%
100%
21%
25%
52%
2%
100%
Average sales production increased 2% to 20,711 boepd in 2023, compared to 20,317 boepd in 2022. In May, sales production
from the Company’s northern areas were temporarily shut-in as a precaution to encroaching forest fires. In June, scheduled facility
turnarounds in the Company’s central Alberta and Wapiti areas temporarily shut-in production. There was no major damage to i3’s
production facilities as a result of the forest fires, nor were any employees or consultants injured, and wells have been brought back
on production. In addition, scheduled turnarounds were completed and affected wells and facilities are back on-line. The Group also
experienced unanticipated apportionment issues associated with the Pembina Peace Pipeline liquids line. In Q4 2023 average sales
production dropped slightly primarily due to interruptions resulting from temporary third-party facility outages.
Average sales production mix was consistent year over year, with 46% of the production mix consisting of oil and condensate and
natural gas liquids, 52% natural gas and 2% representing royalty interest wells.
A summary of average sales volumes for the eight preceding quarters is presented below.
Average Sales Production
Oil and condensate (bbl/d)
Natural gas liquids (bbl/d)
Q1
2022
3,945
4,942
Q2
2022
3,886
5,099
Q3
2021
4,396
5,038
Q4
2022
5,119
5,106
Q1
2023
5,238
5,569
Q2
2023
4,247
4,057
Q3
2023
4,485
4,887
Q4
2023
4,155
5,180
Natural gas (mcf/d)
54,689
60,785
64,180
72,442
69,555
58,965
68,653
63,894
Royalty interest (boepd)
389
385
440
458
373
398
342
429
Total Sales Production (boepd)
18,391
19,502
20,571
22,757
22,773
18,529
21,156
20,413
Pricing
In the first half of 2023, the WTI price started to stabilise as global demand moderated and the potential of Russian supply issues
relating to the ongoing Ukraine/Russia conflict subsided. In the second half of 2023, the WTI price spiked in Q4 2023 due to initial
concerns over the middle east Gaza conflict. In the first half of 2023, AECO and NYMEX natural gas prices eased as concerns
diminished over global natural gas and LNG supply due to the invasion of Ukraine by Russia. Throughout 2023 natural gas storage
levels remained full, or above average due to a mild winter, an oversupply in the US, and a lack of demand in North America. The
mild winter also contributed to NGL prices declining year over year in conjunction with declining oil and natural gas prices.
The below table shows the average benchmark prices for 2023 and 2022.
Average Benchmark Pricing
WTI (USD$/bbl)
WTI (CAD$/bbl)
NYMEX (USD$/mmbtu)
AECO 5A (CAD$/mcf)
Year Ended 31
December 2023
Year Ended 31
December 2022
77.61
104.77
2.75
2.64
94.23
122.37
6.65
5.31
i3’s proceeds from the sale of oil and gas produced from its Canadian oil and gas assets are based on sales production volumes
and realised sales prices in Canadian dollars. The below table shows the average prices in Canadian dollars realised by i3 in 2023
and 2022.
Average Realised Pricing (1)
Oil and condensate (CAD$/bbl)
Natural gas liquids (CAD$/bbl)
Natural gas (CAD$/mcf)
Royalty interest (CAD$/boe)
Total (CAD$/boe)
Year Ended 31
December 2023
Year Ended 31
December 2022
97.07
21.78
2.76
38.92
35.82
114.66
35.02
5.42
51.37
51.08
(1) Average realised prices derived by dividing oil and gas sales in GBP by averaged sales production and converting to CAD using period-average
GBP/CAD exchange rate year ended 31 December 2023 1.6778 (year ended 31 December 2022 1.6073).
Revenue
Oil and gas sales
Royalties
Revenue from the sale of oil and gas
Processing income
Other operating income
Total revenue
Year Ended 31
December 2023
£’000
Year Ended 31
December 2022
£’000
161,401
(21,397)
140,004
235,691
(33,536)
202,155
5,819
5,995
491
286
146,314
208,436
Total revenue decreased 30% in 2023, compared to 2022, primarily because of lower commodity prices, partially offset by
lower royalties.
029
I3 ENERGY PLC
030
I3 ENERGY PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Revenue
Oil and gas sales:
Oil and condensate
Natural gas liquids
Natural gas
Royalty interest
Oil and gas sales
Year Ended 31
December 2023
£’000
Oil and gas
sales mix
2023
Year Ended 31
December 2022
£’000
Oil and gas
sales mix
2022
95,628
23,319
39,191
3,263
161,401
59%
15%
24%
2%
100%
113,003
40,142
77,656
4,890
235,691
48%
17%
33%
2%
100%
Revenue from oil and gas sales in 2023 of £161.4 million was 32% lower, compared to the same period in 2022 of £235.7 million. The
year over year decrease in revenue from oil and gas sales was primarily related to lower commodity prices.
Production costs
Total Production Costs
Total Production Costs
Total Production Costs (£/boe)
Year Ended 31
December 2023
£’000
Year Ended 31
December 2022
£’000
71,348
9.44
76,418
10.31
Total production costs are primarily comprised of field labour and general field maintenance, land retention and taxes, well repairs
and workovers, processing, and product transportation. The year over year decrease in total production costs on a £/boe basis
is primarily due to reduced third-party processing fees negotiated in 2023 and lower electricity costs in the second half of 2023,
partially offset by production outages due to scheduled facility turnaround costs in June 2023.
Royalties:
Royalties
Royalties (£/boe)
Royalties (% of oil and gas sales)
Year Ended 31
December 2023
£’000
Year Ended 31
December 2022
£’000
(21,397)
2.83
13%
(33,536)
4.52
14%
Gain or loss on risk management contracts
Total Production Costs
Unrealised gain on risk management contracts
Realised gain / (loss) on risk management contracts
Total gain / (loss) on risk management contracts
Year Ended 31
December 2023
£’000
Year Ended 31
December 2022
£’000
860
1,188
2,048
858
(19,848)
(18,990)
Royalties are comprised of payments made to the Alberta Government (Crown), holders of freehold lands, gross overriding royalty
holders and payments to certain first nations. Royalty rates for Alberta Crown royalties, which is where the majority of the Company’s
production comes from, are based on a sliding scale where the royalty rate is dependent on a monthly Alberta par price for oil and
on a monthly Alberta reference price for natural gas and NGLs and individual well production rates. Higher commodity prices attract
a higher royalty rate and vice-versa. Similarly, high individual production rates attract higher royalty rates and vice-versa.
Royalties in 2023 of £21.4 million were 36% lower, compared to royalties in 2022 of £33.5 million. Lower royalties in 2023 are
primarily a result of lower commodity prices and lower oil par and natural gas reference prices, compared to the same period in
2022. Also in 2023, i3 received a positive one-time yearly gas cost allowance (“GCA”) adjustment from the Alberta Government of
£1.1 million. Royalties as a percentage of oil and gas sales in 2023 and 2022 were 13% and 14%, respectively.
The Group enters 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 financial commodity contracts are remeasured at fair value
at reach reporting date with the changes recognised as an unrealised gain or loss on risk management contracts. 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. Realised gains or losses represent actual cash settlements on the financial and physical contracts in the
period. In 2022 there was a general increase in commodity prices which created a loss on risk management contracts. In 2023 the
commodity prices softened, particularly on natural gas, and as a result the Group recognised a gain in 2023. At 31 December 2023
the net current risk management contract asset was £1.6 million (2022: £0.7 million).
Processing and other operating income:
Processing income
Other operating income
Year Ended 31
December 2023
£’000
Year Ended 31
December 2022
£’000
Depreciation and depletion
Total Depreciation and depletion
5,819
5,995
Total Depreciation and depletion
491
286
Total Depreciation and depletion (£/boe)
Year Ended 31
December 2023
£’000
Year Ended 31
December
2022
38,232
5.06
34,339
4.63
Total processing and other operating income
6,310
6,281
Total processing and other operating income in 2023 and 2022 were £6.3 million. Processing income is the result of fees charged
to third party users of various facilities which are partially or wholly owned by the Group. Slightly lower processing income in 2023,
compared to 2022 was primarily due to the impact of scheduled facility turnarounds in June 2023, which temporarily restricted third
party production through certain of the Company’s operated facilities.
The Group incurred depreciation and depletion of £38.2 million, an increase of £3.9 million from £34.3 million in 2022. The increase
is largely due to an increase in production and an increase in depletion rates from £4.63 to £5.03/boe. This increase on a per boe
basis is due to changes in the proved plus probable reserves and future development costs from year to year.
031
I3 ENERGY PLC
032
I3 ENERGY PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Administrative expenses
Administrative expenses decreased by £5.1 million from £15.0 million to £9.9 million, largely due to decreased personnel costs under
the Group’s short term incentive plan in the first half of 2023 and FX gains and losses. A breakdown of administrative expenses is
as follows:
Directors’ fees
Employee costs
Professional fees
Other
Realised FX (gain) / loss
Unrealised FX loss
Total administrative expenses
Finance income
Year Ended 31
December 2023
£’000
Year Ended 31
December 2022
£’000
345
323
5,293
9,982
1,918
1,830
2,419
2,285
(129)
505
15
9,861
113
15,038
The Group recognised finance income of £0.6 million, an increase from £0 in 2022. Certain banking terms were modified in
early-2023 which resulted in the Group earning interest on cash balances maintained in the current banking account of i3 Canada.
Finance costs
The Group incurred finance costs of £8.7 million, an increase of £0.8 million from £7.9 million 2022. £0.3 million relates to an increase
in bank charges and interest on creditors relating to timing of income tax payments, a £0.1 million increase in the unwinding of
discount on decommissioning provision, and a £0.5 million increase relating to a gain on financial instrument at FVTPL which was
recorded in 2022 with no such gain in 2023. This was partially offset by a net decrease of £0.1 million in total finance costs incurred
on the H1-2019 Loan Notes and the Debt Facility. Further details are provided in the following table:
Accretion of loan notes
Cash interest expense on loan notes
Unwinding of discount on decommissioning provision
Interest on Debt Facility
Amortisation of deferred finance costs
Bank charges and interest on creditors
(Gain) / loss on financial instrument at FVTPL
FX loss on Debt Facility
Total finance costs
2023
£’000
1,615
951
2,771
2,258
667
304
–
97
8,663
2022
£’000
3,386
2,309
2,667
–
–
21
(518)
–
7,865
Tax charge
The Group’s current and deferred tax charge are
presented in the following table.
Current tax charge
Deferred tax (credit) / charge
Total income tax charge
Year Ended 31
December 2023
£’000
Year Ended 31
December 2022
£’000
7,239
(1,488)
5,751
10,002
3,824
13,826
The Group incurred a current tax charge of £7.2 million, a decrease of £2.8 million from £10.0 million in 2022. £0.2 million of the
decrease relates to the receipt of R&D tax refunds in the UK in respect of the 2020 and 2021 fiscal years. The balance of the
decrease is due to reduced profitability in Canada relative to 2022 following a softening in commodity prices.
The deferred tax credit in 2023 and charge in 2022 resulted from changes in net deductible temporary differences in Canada.
Further details are provided in the financial statements note 9.
Profit, EPS, Net operating income, EBITDA, Adjusted EBITDA
The Group’s profit, EPS, EBITDA, Adjusted EBITDA, and Net operating income are presented in the following table.
Profit for the year
Basic earnings per share (pence)
Diluted earnings per share (pence)
EBITDA (1)
Adjusted EBITDA (1)
Net operating income (1)
(1) Non-IFRS measure. Refer to Appendix B.
Year Ended 31
December 2023
£’000
Year Ended 31
December 2022
£’000
15,147
1.26
1.24
67,793
67,793
74,475
41,951
3.60
3.43
97,981
97,990
131,732
Cash and cash equivalents
The Group had £23.5 million of cash and cash equivalents at 31 December 2023, an increase of £6.9 million from £16.6 million 31
December 2022. The increase was driven by £49.6 million in net cash from operating activities, offset by £29.2 million of net cash
used in investing activities, primarily capital expenditure at the Group’s Canadian operations as discussed below, and £13.6 million
of net cash used in financing activities, primarily dividends paid and various debt finance costs. There was also a £0.1 million positive
effect for exchange rate changes in the period.
033
I3 ENERGY PLC
034
I3 ENERGY PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS PP&E and E&E
The Group had PP&E assets of £205.7 million (2022: £236.5 million) and intangible E&E assets of £63.1 million (2022: £62.1 million) as
at 31 December 2023.
The increase due to additions and acquisitions of PP&E was offset by various disposals and the depletion charge for the year.
Further details are in note 12 of the financial statements.
Total property, plant and equipment additions in the year of 2023 totaling £23.2 million (2022: £74.4 million) was comprised of work
associated with the Group’s Canadian oil and gas assets as per the table below.
Land
Seismic
Drilling, completions, recompletions
Facilities, equipment and pipelines
Total Property, Plant & Equipment
Year Ended 31
December 2023
£’000
Year Ended 31
December 2022
£’000
183
41
12,720
10,211
23,155
975
452
58,135
14,862
74,424
In 2023, i3 invested £23.2 million on property, plant and
equipment additions. £12.7 was invested to drill 12 (8.0 net)
wells, including 3 (1.8 net) wells in the Wapiti area, which
were spud in December 2022 and completed and placed on
production in 2023.
In the first half of 2023, 5 (3.7 net) wells were drilled, completed
and equipped. 3 (2.5 net) of the wells were drilled in the
Clearwater area, including the preliminary appraisal well
classified within E&E, which are currently shut-in due to
seasonal, winter only access. The remaining 2 wells, which
consisted of 1 well (1.0 net) in the Lodgepole area and 1 well
(0.2 net) in the Wapiti area were drilled, completed and
equipped and placed on production.
In the second half of 2023, 4 (2.5 net) wells were drilled,
completed and equipped, which consisted of 2 (2 net)
Glauconite wells in the Rimbey area, 1 (0.5 net) Leduc well
also in the Rimbey area and 1 (.01 net) Belly River well in the
Leedale area.
During 2023, £10.2 was invested on equipping and tie-ins of
the above drilled wells, and additional investments focused on
various well and facility electrification projects along with facility
upgrades and well and pipeline modifications.
An additional £0.2 million was spent on land retention and
seismic costs.
During the year of 2022, i3 invested £58.1 million to drill 31 (20.1
net) wells, 28 (18.3 net) of which were completed in 2022 and 3
(1.8 net) Wapiti wells which were completed in January 2023.
During the year of 2022, i3 also invested £14.9 million on
equipping and tie-ins of the above drilled wells, except for the
Wapiti wells, which were equipped in 2023. Included in the
£14.9 million, were various well and facility electrification projects
along with facility upgrades and pipeline modifications.
An additional £1.4 million was spent on land retention and
seismic costs.
In the year of 2022, i3 drilled a total of 6 (6 net) Glauconite
wells in the Open Creek area, 2 (1.3 net) Belly River wells in the
Leedale area, 3 (2 net) Falher/Cardium wells in the Willesden
Green area, 10 (4 net) Clearwater wells in the Marten Hills area,
2 (1.99 net) Montney wells in the south Simonette area, 7 (4.72
net) Cardium wells in the Wapiti area and 1 (0.07 net) Dunvegan
well in the Elmworth area.
During 2023, additions to intangible exploration and evaluation
assets totaled £1.3 million.
Canada
UK
Total E&E capital expenditure
Year Ended 31
December 2023
£’000
Year Ended 31
December
2022
1,006
275
1,281
6,677
5,650
12,327
E&E capital expenditure in Canada relates to various Crown land acquisitions and a preliminary appraisal well drilled in the Marten
Hills, Clearwater play. E&E capital expenditure in the UK primarily relates to continued evaluation of the Group’s Serenity asset.
Further details about the well results and the impairment conclusions are provided in financial statement note 13.
Borrowings and leases
The Group had borrowings and leases of £34.6 million at 31
December 2023, an increase of £7.4 million from £27.2 million
at 31 December 2022. The increase is largely due to drawing
£44.5 million on the new Debt Facility and fully repaying £28.9
million on the H1-2019 Loan Notes, partially offset by deferred
finance costs and amortisation payment on the Debt Facility.
The new Debt Facility amortises monthly on a straight-line basis,
and accordingly £14.0 million has been classified as a current
liability, which represents the principal payments net of deferred
finance costs over the 12 months following 31 December 2023.
Further details regarding the establishment of the Debt Facility
and the repayment of the H1-2019 Loan Notes are provided in
note 16 to the financial statements. Subsequent to 31 December
2023, the Debt Facility was prepaid in full with cash on hand
and proceeds from the Credit Facility, see note 24 to the
financial statements.
Dividends
In 2023 the Group declared and paid £13.3 million and £15.3
million of dividends, respectively. (2022: declared and paid
£17.4 million and £15.4 million of dividends, respectively). In
June 2023 the Group revised its annual dividend guidance
to a monthly equivalent of 0.0855 pence per share, to be
paid quarterly, which annualises to 1.026 pence per share or
approximately £12.3 million, or 0.2565 pence per share or
approximately £3.1 million per quarter based on the number
of ordinary shares outstanding as at 31 December 2023. The
Group has maintained this quarterly dividend since publishing
this revised guidance.
In November 2023 the Registrar of Companies registered the
cancellation of i3’s share premium account. The £50.7 million
balance of the Group’s share premium net of share issuance
costs was accordingly transferred to retained earnings.
In 2023 i3 Energy Plc transitioned to UK IFRS and elected to
use fair value as the deemed cost of its investment in i3 Energy
Canada Ltd. as at the transition date, being 1 January 2022. This
resulted in a £148.5 million undistributable transition reserve
within equity. Post year-end, the Group is undertaking a bonus
share issuance and another capital reduction process to move
the undistributable transition reserve of £148.5 million into
distributable reserves which is expected to complete within the
first half of 2024.
Both initiatives increase distributable reserves to enable the
Company to continue paying dividends.
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 £23.5 million as at 31
December 2023. Further details are provided in the Directors
Report and note 2 to the financial statements.
Critical accounting policies
and estimates
A summary of the Group’s accounting policies, estimates
and judgements can be found in note 2 and note 3 of the
financial statements.
Internal controls over financial reporting
i3 Energy’s CEO and its CFO have designed, or caused to be
designed under their direct supervision, i3 Energy’s disclosure
controls and procedures (as defined by National Instrument 52-
109 – Certification of Disclosure in Issuers’ Annual and Interim
Filings, adopted by the Canadian Securities Administrators)
to provide reasonable assurance that (i) material information
relating to i3 Energy, including its consolidated subsidiaries, is
made known to them by others within those entities, particularly
during the period in which the annual filings are being prepared;
and (ii) material information required to be disclosed in i3
Energy’s annual filings, interim filings or other reports filed
or submitted by it under Canadian securities legislation is
recorded, processed, summarized and reported on a timely
basis. Further, they have evaluated, or caused to be evaluated
under their direct supervision, the effectiveness of i3 Energy’s
disclosure controls and procedures as at 31 December 2023
and have concluded the disclosure controls and procedures are
fully effective.
i3 Energy’s CEO and its CFO have also designed, or caused to
be designed under their direct supervision, i3 Energy’s internal
control over financial reporting to provide reasonable assurance
regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance
with IFRS.
There were no changes to i3 Energy’s internal control over
financial reporting in the quarter ended 31 December 2023.
Notwithstanding the foregoing, because of its inherent
limitations, a control system can provide only reasonable
assurance that the objectives of the control system are met
and may not prevent or detect misstatements. Management’s
estimates may be incorrect, or assumptions about future
events may be incorrect, resulting in varying results. In addition,
management has attempted to minimize the likelihood of fraud.
However, any control system can be circumvented through
collusion and illegal acts.
Approval of the Strategic Report
This report was approved by the Board of Directors
on 26 April 2024 and signed on its behalf by:
John Festival
Non-Executive Chairperson
26 April 2024
035
I3 ENERGY PLC
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I3 ENERGY PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS GOVERNANCE
39 Board of Directors
41 Corporate Governance Report
47 Audit and Risk Committee Report
50
Corporate Governance
Committee Report
51
Health, Safety, Environment and
Security Committee Report
53 Reserves Committee Report
54 Remuneration Committee Report
55 Directors’ Report
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:
John Festival
Non-Executive Chairperson
Majid Shafiq
Chief Executive Officer
Ryan Heath
President i3 Energy Canada
Linda Beal
Non-Executive Director
Neill Carson
Non-Executive Director
Richard Ames
Non-Executive Director
Mr. John Festival is a chemical engineer
with 39 years of experience in the
Canadian oil and gas sector, focused
on heavy oil in western Canada and has
an excellent track record of founding,
growing and monetising oil and gas
companies in Canada. He is currently
the CEO of Broadview Energy and
a director of Cardinal Energy Ltd.,
Advantage Energy Ltd. and Athabasca
Oil Corporation, and was the President
and CEO of BlackPearl 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 one
of the founding partners and President
of BlackRock Ventures Inc. which was
sold to Shell Canada for CAD 2.4 billion
in 2006. He graduated in 1984 with a
BSc in Chemical Engineering from the
University of Saskatchewan.
AR
C
R
Mr. Shafiq has 35 years of technical
and investment banking experience
focused on the global E&P sector.
Prior to joining i3 as CEO, Majid
spent circa eighteen years in energy
investment banking advising on asset
level acquisitions and divestments,
corporate M&A and equity financings
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, First Energy
Capital LLP and Argentil Capital
Partners LLP. 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.
H
Ryan has over 24 years’ experience
in the Canadian oil and gas sector,
building junior resources companies
in the Western Canadian Sedimentary
Basin. Ryan joined i3 through its
acquisition of Toscana Energy Income
Corporation in 2020, where he was the
CEO since 2019.
Prior to Toscana, Ryan was VP Land
& Negotiations at Paredes Energy
Corporation, and throughout his career
has been instrumental in the growth
and development of several public
and private E&P companies, including
Striker Exploration Corp., Hyperion
Exploration Corp., and Severo Energy
Corp. Additionally, Ryan held roles
of increasing Land Management
and Business Development focused
responsibilities with Paramount Energy
Trust and NCE Petrofund Corp.
Ryan graduated from the
University of Calgary with a Bachelor of
Commerce, specialising in Petroleum
Land Management.
Key to committee membership
AR Audit & Risk Committee
RC Remuneration Committee
C
Corporate Governance Committee
R Reserves Committee
H HSES Committee
Committee Chair
Mr. Ames BS MS brings to the
Board over 40 years of broad range
experience with senior executive
roles in the oil and gas industry. His
career has included Vice President
roles at TNK-BP, Sidanco and
Amoco with responsibilities over
Information Technology, Oil and
Gas Services, Human Resources,
Business Development and Oil
and Gas Exploration. Mr. Ames has
held Board and Advisory Board of
Director positions in Iona, Accenture
Russia, DataSpace and the Kiawah
Conservancy. 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 degree in Geology.
AR
R
Ms. Beal has over 35 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. With PwC’s Natural Resources
Independents business she focused on
advising international E&P clients across
the AIM, FTSE350, overseas listed and
private sectors. Mrs. Beal is currently a
director at Orca Energy Group Inc and
Kropz Plc.
Ms. Beal graduated from the University
of Nottingham with a BSc (Hons) in
Mathematics, thereafter, qualifying at
Price Waterhouse as a
Chartered Accountant.
RC
Mr. Carson, Bsc (Hons) Combined Geology
& Physics, MSC Geophysics, has over 40
years of management and international
project experience in the oil & gas industry.
On completion of his Bachelors (with First
Class Honours) 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 co-founded Quattro
Energy ltd (“Quattro”) where he serves as
Executive Chairman.
C
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039
I3 ENERGY PLC
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I3 ENERGY PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
i3 Energy PLC 202 3 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, human rights, modern slavery, criminal finance act, disclosure and social media
policies.
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 organisational 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 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 2023 the Board met for a total of six meetings, one sub-committee meeting and passed resolutions in
writing on nine 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 monthly, 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.
i3 Energy PLC 202 3 Annual Report and Financial Statements – Governance
Corporate Governance Report
Board Meetings:
John Festival
Majid Shafiq
Ryan Heath
Linda Beal
Neill Carson
Richard Ames
Eligible to Attend
Attended
6
6
6
6
6
6
6
6
6
6
6
6
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
The Company’s business plan is to deliver returns to shareholders in the form of dividends and share price growth,
via stable and growing production and reserves expansion. The Company has acquired and developed a portfolio
that is extensive, diverse and produces a mix of gas, oil and NGLs. This diversity helps to mitigate risks to
production and cash flows, which is critical to stability of dividends in normal market conditions. The portfolio also
contains hundreds of drilling locations which allows the Company to continue to grow through the business and
commodity price cycle. During extended periods of low commodity prices when asset prices fall, the Company
takes advantage of opportunities to acquire production and reserves at low multiples and when commodity prices
and asset prices increase the Company pivots towards organic growth via drilling its extensive portfolio of
development drilling locations.
Principle Two
Understanding Shareholder Needs and Expectations
The Board is committed to maintaining good communication and having constructive dialogue with its shareholders.
The Company regularly presents at retail investor focussed conferences using both online and physical formats.
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 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. The
Company has ongoing 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
i3 Energy PLC
041
40
i3 Energy PLC
41
I3 ENERGY PLC
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I3 ENERGY PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
i3 Energy PLC 202 3 Annual Report and Financial Statements – Governance
Corporate Governance Report
feedback to the Company. The Board is focused on the need to advance the Company’s sustainability strategy,
and i3 released its inaugural Sustainability Report in 2022 and its second report in early-2024. The Board
established a HSES Committee of the Board during 2021 to provide structured oversight of its programmes and in
2023 an ESG Committee consisting of a diverse group of staff to develop and implement policies. i3 is committed
to complying with evolving reporting requirements and will align with industry and regulatory efforts to decarbonise
its oil and gas 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 key risks
faced by the Company.
A summary of the Company’s principal risks are listed in the Strategic 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 work closely with and have regular ongoing dialogue with both the Chief Executive Officer and the Chief
Financial Officer of the Company to ensure that management have 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. Ryan Heath,
Non-Executive Chairperson Mr. John Festival and three Non-Executive Directors, Ms. Linda Beal, Mr. Neill Carson
and Mr. Richard Ames. Mr. Graham Heath resigned as a Director and Chief Financial Officer on 28 September
2022 to focus on personal health issues such that he can pursue other interests. Jason Dranchuk was appointed
the new Chief Financial Officer with a start date in Q2 2023. The Executive Directors have direct responsibility for
business operations, whilst the 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 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 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 at least two independent
Non-Executives. The Board shall review further appointments as the scale and complexity of the Company’s
business 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.
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.
i3 Energy PLC 202 3 Annual Report and Financial Statements – Governance
Corporate Governance Report
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
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
NED liaisons, Mr. John Festival and Ms. Linda Beal, to all staff as part of its Whistleblowing Policy. The Board
expects these values to permeate throughout every aspect of the organisation – 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 Chairperson. The 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:
Audit & Risk Committee
Corporate Governance Committee
Health, Safety, Environment and Security Committee
Reserves Committee
Remuneration Committee
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Corporate Governance Report
The terms of reference for all Board committees are available on the Company’s website.
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 Chairperson has responsibility for corporate governance matters in the Company and is a committee member
of the Audit and Risk Committee and Corporate Governance Committee.
The Board receives 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 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 four times 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 overseeing and reviewing of the Annual Report and
interim statements and accounts and ensuring that an effective system of 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 and estimates. The ultimate responsibility for reviewing and
approving the annual financial statements and interim statements remains with the Board.
Corporate Governance Committee
The Corporate Governance Committee meets as required, but at least twice a year. 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.
Health, Safety, Environment and Security (HSES) Committee
The HSES Committee meets as required. 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 North Sea Limited).
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 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 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.
Principle Ten
Shareholder Communication
The Board is committed to maintaining good communication and having constructive dialogue with its shareholders.
The Company regularly presents at retail investor focussed conferences using both online and physical formats.
Institutional shareholders and analysts have the opportunity to discuss issues and provide feedback at meetings
with the Company. In addition, all shareholders 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. 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 and its Nomad.
The Reserves Committee meets as required, but at least once 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.
John Festival
Non-Executive Chairperson
26 April 2024
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Audit and Risk Committee Report
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.
This report covers:
•
•
•
•
The key responsibilities of the Audit and Risk Committee
2023 meetings and membership
2023 Group financial statements key accounting judgements and estimates
2024 and beyond
Key responsibilities
The terms of reference of the Audit and Risk Committee were reviewed and updated during the year. The principal
roles and responsibilities of the Audit and Risk Committee include:
• Monitoring the integrity of the interim and annual financial statements and ensuring full compliance with
accounting standards.
• Reviewing key accounting judgements and estimates.
• Reviewing the consistency and appropriateness of accounting policies.
• Reviewing the disclosures in the interim and annual report and financial statements and advising the
Board whether it is fair, balanced and understandable and provides the information necessary for
shareholders and stakeholders to assess the Group’s position, performance and strategy.
• Overseeing the relationship with the external auditor, appointment and approval of auditor remuneration
and assessment of the auditor’s independence and objectivity.
• Reviewing and approving the annual audit plan and reviewing the effectiveness and findings of the audit.
• 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.
• Reviewing the procedures for prevention of bribery and receiving reports on non-compliance, if any.
• Reviewing the whistleblowing system and procedures for detecting fraud.
• Reporting to the Board on the activities of the Committee and making recommendations to the Board on
areas within the Committee’s remit.
2023 meetings and membership
The Audit and Risk Committee comprises Linda Beal (Non-Executive Director and Committee Chairperson),
Richard Ames (Non-Executive Director) and John Festival (Non-Executive Chairperson). 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 four times per annum but
generally meets more often. The Audit and Risk Committee met five times during 2023 with all members in
attendance at every meeting and will meet at least four times during 2024. The Audit and Risk Committee had four
meetings with the auditors during 2023 including sessions without management present. The CEO, CFO, and key
members of the Finance team attended the majority of the Committee meetings in 2023. The Audit and Risk
Committee Chair also speaks regularly with the Group Finance team and the audit partner outside the formal
Committee meetings.
During 2023 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 the Company’s risk management framework,
management’s assessment of key risks and the risk register.
• Review of the 2022 annual financial statements including review of key accounting judgements and
estimates and discussion with the external auditors their audit findings.
• Review of audit planning and approach for the 2023 Group financial statements.
• Consideration of the independence of the auditors.
• Review of the 2023 unaudited 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.
• Consideration of whether the Company should implement an internal audit function. The Committee
concluded that this was not required in view of the integration of the Finance teams and systems and
additional review procedures implemented following the acquisitions.
• Review of the Committee’s terms of reference and membership.
• Consideration of the impacts if the Group would no longer qualify as designated foreign issuer and
therefore become in eligible for TSX continuous disclosure exemptions granted through National
Instrument 71-102 Continuous Disclosure and Other Exemptions Relating to Foreign Issuers.
2023 Group financial statements key accounting 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 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 2023 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.
• 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.
• Going concern.
• Carrying value of loans to and investments in subsidiaries
The Committee concurred with the judgements exercised by management contained in the 2023 Group financial
statements.
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2024 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.
As the Company's Canadian shareholding has now increased beyond 10%, i3 is no longer a designated foreign
issuer and therefore is no longer eligible for TSX continuous disclosure exemptions previously granted through
National Instrument 71-102. As such, the Company will commence issuing TSX required quarterly financial reports
for Q1 2024 initially, including a Management Discussion and Analysis (“MD&A”). Additionally, an Annual
Information Form (“AIF”) will be filed on www.sedarplus.com shortly. The Audit and Risk Committee will meet at
least four times in 2024 in response to the quarterly reporting requirements. The Audit and Risk Committee will
monitor the Company’s reporting.
Linda Beal
Chairperson of the Audit and Risk Committee
26 April 2024
i3 Energy PLC 202 3 Annual Report and Financial Statements – Governance
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 Chairperson).
The Governance Committee met twice during 2023 and will meet at least two times during 2024.
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.
2023 activities
The Committee monitored and reviewed the Company’s transactional activities, stakeholder engagement, ABC
Policy, i3 Dealing Code, Whistleblowing Policy, Anti Slavery, Criminal Finances Act, and other various governance
policies which were reviewed and, if required, updated during the year. The Committee also monitored compliance
with Canadian and UK regulatory and legal requirements.
The Committee considered the impacts if the Group would no longer qualify as designated foreign issuer and
therefore become ineligible for TSX continuous disclosure exemptions granted through National Instrument 71-102
Continuous Disclosure and Other Exemptions Relating to Foreign Issuers.
2024 looking forward
The Corporate Governance Committee will continue to monitor and advise on Corporate Governance and
reviewing and ensuring the Company’s policies and procedures are reviewed at least annually and implemented
as detailed.
As the Company's Canadian shareholding has now increased beyond 10%, i3 is no longer a designated foreign
issuer and therefore is no longer eligible for TSX continuous disclosure exemptions previously granted through
National Instrument 71-102. As such, the Company will commence issuing TSX required quarterly financial reports
for Q1 2024 initially, including a Management Discussion and Analysis (“MD&A”). Additionally, an Annual
Information Form (“AIF”) will be filed on www.sedarplus.com shortly. The Corporate Governance Committee will
monitor the Company’s reporting.
Linda Beal
Chairperson of the Corporate Governance Committee
26 April 2024
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HEALTH, SAFETY, ENVIRONMENT AND SECURITY
COMMITTEE REPORT
The Health, Safety Environmental and Security (“HSES”) Committee provides assurance to the Board on
occupational health, safety environmental and security policies. 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 Chairperson and Committee Chairperson), 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 when required 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.
•
For HSES related issues, 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 and Risk 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 aim to have a diverse and inclusive working environment which recruits, respects and rewards our
staff solely on their skills and contribution to the goals and success of the company.
• We see ourselves as a fully integrated member of the communities in which we operate and strive to
positively impact local society as we go about our day-to-day operations.
• We set goals and objectives that demonstrate our core values of safety & integrity.
2023 activities
With i3’s growth transitioning from acquisition to capital development for 2022 and 2023 the focus remained on
implementation of HSES policies and procedures across the different business units throughout Alberta. As part of
this ongoing effort the Company continues to refine procedures, documentation, and training through our Safety
Loss Management System (SLMS) including:
• 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 multiple emergency response plan (ERP) exercises throughout our
areas of operation.
We are very pleased with the safety performance of our personnel throughout the year, with only one recorded lost
time incident requiring medical treatment.
i3 also released its second annual sustainability report published in early-2024 which showed progress on GHG
emission reductions from a 2020 baseline and progress towards net zero emissions. The Company made
considerable efforts in 2022 to proactively reduce its GHG emission intensity from the 2020 baseline of 44.8
KgCO2e/boe to 41.0 KgCO2e/boe. i3 continued with efforts to reduce emissions through projects which included
the installation of solar powered chemical injection pumps, electrification of single wells that formerly ran on
propane fuel and instrument air conversions. We continue the analysis of our portfolio to identify sites which could
be electrified, opportunities to install effluent pipelines to reduce infield trucking, compressor consolidation and
engine conversion projects to lower emissions.
2024 looking forward
The establishment of i3’s ESG committee, comprised of a multidisciplinary team of senior leadership and subject
matter experts across the organization, will continue to push forward initiatives that lead to continual improvement
in HSES procedures and to evaluate HSES performance against industry standards and strengthen work force
engagement, ownership, and delivery of HSES goals. We will continue to focus on ESG and maintain efforts to
reduce GHG emissions.
John Festival
Chairperson of the Health, Safety, Environment and Security Committee
26 April 2024
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Reserves Committee Report
Remuneration Committee Report
RESERVES COMMITTEE REPORT
REMUNERATION 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 once in
2023 and typically meets at least once a year prior to publication of the annual results.
2023 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.
2024 looking forward
• Meet with the reserves evaluator and review year-end 2023 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
Chairperson of the Reserves Committee
26 April 2024
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 incentivisation. 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. 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 Chairperson)
and Linda Beal (Non-Executive Director). The Remuneration Committee met three times in 2023 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 programmes.
• 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.
2023 activities
• Reviewed and recommend to the Board the level of the 2022 cash bonus paid in 2023.
• Reviewed and recommend to the Board the 2023 Executive salary increases after using benchmarks.
• Reviewed and recommend to the Board the grant of performance awards in 2023, including the
performance based vesting conditions.
• Commenced a remuneration benchmarking review with the support of external remuneration advisors.
2024 looking forward
• Proposing and recommending to the Board the remuneration packages for Executive Directors.
• Proposing and recommending to the Board Long-Term Incentive Plan (LTIP) awards for 2024.
• Reviewing and recommending to the Board the potential 2023 cash bonus to be awarded and paid to
Executives in 2024.
•
Finalising the remuneration benchmarking review with the support of external remuneration advisors.
Details of the Directors’ Remuneration are provided in note 10 to the financial statements. The Directors’ interests
are provided in the Directors’ Report. Additionally, the Company no longer qualifies for the foreign issuer
exemptions previously granted under NI 71-102 and will therefore be required to file an Information Circular
containing further details regarding executive compensation. This will be available on https://www.sedarplus.ca/
within the first half of 2024.
Richard Ames
Chairperson of the Remuneration Committee
26 April 2024
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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 2023.
Principal Activities
The principal activities of the Group consist of oil and gas production in the Western Canadian Sedimentary Basin
and appraisal of oil and gas assets on the UK Continental Shelf. 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 global market for oil and gas remains volatile, however there is a consensus that demand for oil and gas will
remain strong in the near to mid-term. The Group business plan is to deliver total shareholder return through
dividends and production growth. The strategy to deliver this is dependent on the prevailing commodity price
environment. In higher price environments the Group focuses on organic growth through exploitation of its
extensive inventory of drill locations. In lower commodity price environments, when drilling economics soften, i3
Energy evaluates opportunities in the M&A market, where higher returns on investment are often achievable.
Accordingly, the Company is currently evaluating several options to enhance shareholder value which include
development drilling, strategic acquisitions and disposition of non-core assets to increase liquidity. The business
developments during the year are highlighted in the Strategic Report and the Chairperson and Chief Executive
Officer’s Statement.
Results and Dividends
The profit on ordinary activities of the Group after taxation amounted to £15.1 million (2022: £42.0 million). In 2023
the Group declared and paid £13.3 million of dividends and £15.3 million of dividends, respectively. (2022: declared
and paid £17.4 million and £15.4 million of dividends, respectively).
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 2023 are as follows:
Director
Majid Shafiq
Ryan Heath
Neill Carson
John Festival
Richard Ames
Linda Beal
Share Capital
2023 Shares
2022 Shares
2023 Options
2022 Options
9,875,110
8,483,945
7,666,111
3,072,360
1,539,723
1,305,493
9,537,891
8,255,374
7,666,111
2,602,360
1,539,723
1,305,493
4,636,724
3,857,385
150,000
150,000
150,000
183,333
2,333,333
1,666,666
150,000
150,000
150,000
183,333
At 31 December 2023, 1,202,447,663 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 202 3 Annual Report and Financial Statements – Governance
Directors’ Report
Substantial Shareholders
At 28 March 2024, 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:
Polus Capital Management (London)
Premier Miton Investors (London)
Slater Investments (London)
JP Morgan Securities (London)
Hargreaves Lansdown Asset Mgt (Bristol)
Interactive Investor (Glasgow)
Janus Henderson Investors (London)
19.67%
10.60%
9.05%
8.39%
6.05%
5.06%
3.20%
As at 26 April 2024 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 above. 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 above, 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 (NSTA), the Alberta Energy Regulator, the BC Oil and Gas Commission and other local
regulators. i3 Energy plc published its most recent ESG report in January 2024 which can be found at the
Company’s website (www.i3.energy). See the HSES Committee Report.
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 of
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.
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Directors’ Report
i3 Energy PLC 202 3 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 Officers 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 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 £23.5 million, current assets of £47.8 million, and current
liabilities of £45.0 million. The Group’s debt primarily consisted of the £34.6 million carrying value of the CAD 75 million Debt
Facility with Trafigura which amortises monthly toward its maturity in May 2026. During 2023, the Group generated £49.6
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 June 2025, committed capital expenditure, and the principal risks and uncertainties faced by the
Group. The cash flow forecasts reflect the new CAD 75 million Credit Facility secured in March 2024 and the subsequent
repayment of the Debt Facility with Trafigura, further details of which are provided in note 24 to the financial statements. This
assessment also considered various downside scenarios including a combined downside scenario with a 15% reduction in
strip commodity prices and a production run rate of 80%, 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 2023.
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;
• State whether international accounting standards in conformity with the requirements of the Companies
Act 2006 have 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 is expected to be held on 27 June 2024 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:
John Festival
Non-Executive Chairperson
26 April 2024
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FINANCIAL
STATEMENTS
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67
Independent Auditor’s Report
Consolidated Statement of
Comprehensive Income
Consolidated Statement of Changes in Equity
Consolidated Statement of Financial Position
Consolidated Statement of Cash Flow
Notes To the Group Financial Statements
68
69
70
71
106 Company Statement of Financial Position
107 Company Statement of Changes in Equity
108 Company Statement of Cash Flow
109 Notes To the Company Financial Statements
113
116
119
Corporate Information
Appendix A: Glossary
Appendix B: Alternate Performance Measures
i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
Independent Auditor’s Report
INDEPENDENT AUDITOR’S REPORT
Independent Auditor’s 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 2023 which comprise the Consolidated Statement of Comprehensive Income, the
Consolidated and Company Statement of Financial Position, the Consolidated and Company Statements of
Changes in Equity, the Consolidated and Company Statements of Cash Flows and notes to the financial
statements, including significant accounting policies. The financial reporting framework that has been applied in
their preparation is applicable law and UK-adopted international accounting standards and as regards the parent
company financial statements, as applied in accordance with the provisions of the Companies Act 2006.
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the state of the group’s and of the parent company’s
affairs as at 31 December 2023 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 UK-adopted
international accounting standards and as applied in accordance with the provisions of the Companies
Act 2006; 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 directors’ 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’s and parent company’s ability to continue to adopt the going concern basis of accounting included a
review of forecasts for the period of 12 months from the date of approval of the financial statements, including
checking the mathematical accuracy of the forecasts, 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
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's 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.
i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
Independent Auditor’s 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 £2,250,000 (2022: £7,052,000), with performance
materiality set at £1,800,000 (2022: £4,231,200).
The materiality for the group financial statements as a whole has been calculated as approximately 1.5% of
Revenue, where in the prior year 4% of net assets were used. As the group continues its growth and increases its
revenue, we have determined, in our professional judgement, revenue to be one of the principal benchmarks within
the financial statements relevant to members of the group in assessing financial performance. In the prior year, net
assets as a benchmark was deemed to be relevant as the key areas of focus of the group related to the value of
the producing and exploration assets, as well as the accompanying decommissioning provision, and the loan notes
outstanding. Performance materiality was set at 80% (2022: 60%) of headline materiality based on our inherent
risk assessment calculation of a publicly traded company in the oil and gas industry. The percentages increased
as a result of reduced inherent risk from our cumulative audit experience.
The parent company materiality for the financial statements as a whole was set at £1,800,000 (2022: £1,684,000)
which is based on 4% of net assets of the parent company, capped at group performance materiality. The parent
company performance materiality was set at £1,440,000 (2022: £1,010,400). The reason for the use of net assets
being a result of the key area of focus being the valuation of investment in subsidiaries. A separate area 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 Committee that we would report to them misstatements identified during our audit above
£112,500 (2022: £352,600) and £2,500 (2022: £84,200) for the group and parent company 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 North Sea Ltd and
i3 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 judgment, were of most significance in our audit of the
financial statements of the current period 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 2023, the carrying value of the
producing assets in relation to the group’s projects in
Canada are £206m.
Our work in this area included:
• Assessing the process used by management
to derive their internal Reserves and
Contingent Resources estimates and
associated production profiles.
• Reviewing the Competent Person Report
(“CPR”) in place, assessing the scope of
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Independent Auditor’s Report
Independent Auditor’s Report
Key Audit Matter
How our scope addressed this matter
Key Audit Matter
How our scope addressed this matter
As per IAS 36 requirements, management are
required to assess the producing assets for indicators
of impairment on an annual basis.
involved
This is considered to be a key audit matter due to the
in
judgement and estimates
significant
assessing whether any impairment indicators exist at
the year end, and in quantifying any such impairment.
Prices have decreased in the current year, and the
recent and historic volatile nature of long-term oil
prices give rise to an increased risk, especially as it is
the company’s key source of revenue and cash
generation.
This is also the key balance in the financial statements
and therefore considered to be a key audit matter.
work, including an evaluation of the
competence, capabilities and independence
of the Competent Person;
• Reviewing management’s internal
production forecasts to the CPR in place and
assessing the appropriateness of any
differences which may arise;
• Reviewing of management’s oil price
assumptions against readily available market
data and trends, using the latest Three
Consultants Average (3CA) pricing forecast,
in order to challenge the validity and
acceptability of forecasted price. In addition,
consideration of external market factors and
the impact on the valuation of the oil and gas
assets held, such as the energy transition,
demand and climate change;
• Verifying the inputs into the impairment
indicators assessment, including the
reserves, pricing indices and forecasts.
• 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
assessment
An
of whether management’s
presentation and disclosures relating to estimation
uncertainty are adequate.
Carrying Value of Exploration Assets (note 13)
Our work in this area included:
The group holds intangible assets of £63m as at 31
December 2023, comprising capitalised exploration
costs in respect of the Serenity field held within i3
Energy North Sea Limited, and Clearwater within i3
Energy Canada Ltd.
There is the risk that the asset is overstated as a result
of additions being incorrectly capitalised through not
meeting the criteria per IFRS 6 and that indicators of
impairment exist as at 31 December 2023 which would
trigger the need for impairment.
Particularly for early-stage exploration projects where
the calculation of recoverable amount via value in use
calculations
possible, management’s
assessment of impairment under IFRS 6 requires
estimation and judgement.
not
is
This is considered to be a key audit matter due to the
material value and significant
judgement and
in assessing whether any
involved
estimates
• 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;
• Confirmation that i3 Energy North Sea
Limited holds good title to the relevant
licence areas, under licence P2358;
• 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;
• Assessing the farm-out agreements in place,
its accounting and disclosures;
• Reviewing management’s assessment for
indicators of impairment in respect of the
carrying value of intangible assets and
providing challenge thereto and
corroborating any key assumptions used;
indicators of impairment have arisen at the year end,
and in quantifying any potential impairment.
• Assessing whether management’s
presentation and disclosures related to
exploration assets are complete and
adequate; and
Assessing the impact of the relinquishment of the
neighbouring Tain field by a third party operator, and
any subsequent impact on the development of the
Serenity asset as a result.
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 the 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.
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 directors’ responsibilities statement, 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 and the parent company’s ability to continue as a going concern, disclosing, as applicable, matters related
063
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i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
Independent Auditor’s Report
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, 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
-
- Canada Oil & Gas Drilling and Production Regulations
-
-
Anti Money Laundering Legislation
Local tax laws and regulations
AIM Rules
i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
Independent 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.
Nicholas Joel (Senior Statutory Auditor)
For and on behalf of PKF Littlejohn LLP
Statutory Auditor
26 April 2024
15 Westferry Circus
Canary Wharf
London E14 4HD
• 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;
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; and
• 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, and the impairment assessments undertaken for both the producing assets held
within i3 Canada and the exploration asset within i3 Energy North Sea Limited. We obtained both
corroborative and contradictory evidence in respect of the key inputs into the assessment made, applying
professional scepticism throughout.
• 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.
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i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
Notes
Year Ended 31
December 2023
Year Ended 31
December 2022
Revenue
Production costs
Gain / (loss) on risk management contracts
Depreciation and depletion
Gross profit
Administrative expenses
Loss on asset dispositions
Operating profit
Finance income
Finance costs
Profit before tax
Tax charge
Profit for the year
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Foreign exchange differences on translation of foreign operations
Other comprehensive (loss) / income 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
8
9
11
11
£’000
146,314
(71,348)
2,048
(38,232)
38,782
(9,861)
–
28,921
640
(8,663)
20,898
(5,751)
15,147
£’000
208,436
(76,418)
(18,990)
(34,339)
78,689
(15,038)
(9)
63,642
–
(7,865)
55,777
(13,826)
41,951
(4,222)
(4,222)
6,688
6,688
10,925
48,639
Pence
1.26
1.24
Pence
3.60
3.43
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Assets
Non-current assets
Property, plant & equipment
Exploration and evaluation assets
Other non-current assets
Total non-current assets
Current assets
Cash and cash equivalents
Trade and other receivables
Income taxes receivable
Risk management contracts
Inventory
Total current assets
Current liabilities
Trade and other payables
Income taxes payable
Risk management contracts
Borrowings and leases
Decommissioning provision
Total current liabilities
Net current assets / (liabilities)
Non-current liabilities
Borrowings and leases
Decommissioning provision
Deferred tax liability
Other non-current liabilities
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
Shareholders’ funds
Notes 31 December 2023 31 December 2022
12
13
14
18
15
18
16
17
16
17
9
19
19
19
20
16
£’000
205,667
63,133
–
268,800
23,507
20,534
205
1,701
1,847
47,794
(27,640)
–
(136)
(14,001)
(3,244)
(45,021)
2,773
(20,568)
(78,109)
(9,817)
(84)
£’000
236,465
62,060
74
298,599
16,560
34,843
–
1,111
2,099
54,613
(45,973)
(9,873)
(381)
(27,241)
(3,190)
(86,658)
(32,045)
-
(90,141)
(11,667)
–
(108,578)
(101,808)
162,995
164,746
120
50
–
6,892
–
3,830
152,103
162,995
119
50
48,646
6,311
2,045
8,052
99,523
164,746
i3 Energy PLC
067
The accompanying notes form an integral part of these financial statements.
The consolidated financial statements of i3 Energy plc, company number 10699593, were approved by the Board of Directors
and authorised for issue on 26 April 2024. Signed on behalf of the Board of Directors by:
Majid Shafiq, Director
64
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i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
Consolidated Statement of Changes in Equity
i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
Consolidated Statement of Cash Flow
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
CONSOLIDATED STATEMENT OF CASH FLOW
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 2021
113
44,203
Total comprehensive income for the year
Transactions with owners:
Exercise of options
Share-based payment expense
Dividends declared in 2022
Balance at 31 December 2022
Total comprehensive income for the year
Capital reduction
Transactions with owners:
Exercise of options
Exercise of warrants
Share-based payment expense
Dividends declared in 2023
20
20
19
20
20
20
19
Balance at 31 December 2023
120
–
6
–
–
–
4,443
–
–
50
–
–
–
–
9,102
2,045
1,364
81,289
138,166
–
(3,883)
1,092
–
–
–
–
–
6,688
41,951
48,639
–
–
(6,324)
(5,758)
–
1,092
–
(17,393)
(17,393)
119
48,646
50
6,311
2,045
8,052
99,523
164,746
–
–
–
1
–
–
–
(50,731)
40
2,045
–
–
–
–
–
–
–
–
–
–
–
–
–
581
–
50
6,892
–
–
–
(2,045)
–
–
–
(4,222)
15,147
10,925
–
50,731
–
–
–
–
–
–
–
40
1
581
–
(13,298)
(13,298)
3,830 152,103
162,995
The accompanying notes form an integral part of these financial statements.
The following describes the nature and purpose of each reserve within equity:
Reserve
Description and purpose
Ordinary shares
Represents the nominal value of shares issued
Share premium account
Amount subscribed for share capital in excess of nominal value
Deferred shares
Represents the nominal value of shares issued, the shares have full capital distribution (including on wind
up) rights and do not confer any voting or dividend rights, or any of redemption
Share-based payment reserve
Represents the accumulated balance of share-based payment charges recognised in respect of share
options granted by the Company less transfers to retained deficit in respect of options exercised or
cancelled/lapsed
Warrants – LNs
Represents the accumulated balance of share-based payment charges recognised in respect of
warrants granted by the Company in respect to warrants granted to the loan note holders
Foreign currency translation
reserve
Exchange differences arising on consolidating the assets and liabilities of the Group’s non-Pound Sterling
functional currency operations (including comparatives) recognised through the Consolidated Statement of
Other Comprehensive Income.
Retained earnings
Cumulative net gains and losses recognised in the Consolidated Statement of Comprehensive Income
Note: The issued share capital comprises of both ordinary and deferred shares and the total nominal value exceeds the
required minimum issued capital of £50,000.
Notes
Year ended 31
December 2023
Year ended 31
December 2022
* Restated
OPERATING ACTIVITIES
Profit before tax
Adjustments for:
Depreciation and depletion
Loss on asset dispositions
Finance costs
Unrealised (gain) on risk management contracts
Non-cash other income
Unrealised FX loss
Share-based payments expense – employees (including NEDs)
Expenditure on decommissioning oil and gas assets
Current tax expense
Changes in non-cash working capital – operating activities
Net cash from operating activities
INVESTING ACTIVITIES
Acquisitions
Additions to property, plant & equipment
Disposal of property, plant & equipment
Additions to exploration and evaluation assets
Tax credit for R&D expenditure
Changes in non-cash working capital – investing activities
Net cash used in investing activities
FINANCING ACTIVITIES
Exercise of warrants and options
Employee tax on exercised share options
Repayment of H1-2019 LN facility
Issuance of debt facility
Payment of deferred finance costs
Principal payments on debt facility
Interest and other finance charges paid
Lease payments
Dividends declared
Changes in non-cash working capital – financing activities
Net cash used in financing activities
Effect of exchange rate changes on cash
Net Increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
CASH AND CASH EQUIVALENTS, END OF YEAR
12
8
18
7
7
17
9
4
12
13
9
4
16
16
16
16
8
16
19
4
£’000
20,898
38,232
–
8,663
(860)
–
15
581
(3,722)
(7,423)
(6,776)
49,608
(133)
(23,155)
381
(1,281)
184
(5,232)
£’000
55,777
34,339
9
7,865
(858)
(215)
110
1,092
(2,190)
(10,002)
14,728
100,655
(531)
(74,445)
621
(12,327)
–
8,556
(29,236)
(78,126)
42
–
(28,856)
44,481
(2,039)
(8,636)
(3,513)
–
(13,298)
(1,758)
(13,577)
152
6,947
16,560
23,507
635
(6,432)
–
–
–
–
(2,330)
(74)
(17,393)
2,040
(23,554)
2,250
1,225
15,335
16,560
* The classification of certain comparative lines has been restated – see Note 2. Additional cash flow information is provided in
note 4. The accompanying notes form an integral part of these financial statements.
i3 Energy PLC
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I3 ENERGY PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
i3 Energy PLC 202 3 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 oil and gas production in
Western Canadian Sedimentary Basin (“WCSB”) and of the appraisal of oil and gas assets on the UK Continental
Shelf (“UKCS”).
2
Basis of preparation
The financial statements of i3 Energy plc have been prepared in accordance with UK-adopted international
accounting standards in accordance with the requirements of the Companies Act 2006 and in accordance with the
requirements of the AIM rules.
The consolidated financial statements have been prepared under the historical cost convention, as modified by the
financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.
The financial information is presented in Pounds Sterling (£, GBP), which is the Company’s functional currency,
and rounded to the nearest thousand unless otherwise stated. The functional currency of the Company’s UK
subsidiary, i3 Energy North Sea Limited, is GBP, and the functional currency of its Canadian subsidiary, i3 Energy
Canada Limited, is CAD. A summary of period-average and period-end exchange rates is presented in the table
below:
Period-average GBP:CAD exchange rate
Period-end GBP:CAD exchange rate
Year ended 31
December 2023
Year ended 31
December 2022
1.6778
1.6808
1.6073
1.6283
The principal accounting policies applied in the preparation of these consolidated financial statements are set out
below. These policies have been consistently applied unless otherwise stated.
Basis of Consolidation
The consolidated financial statements consolidate the audited financial statements of i3 Energy plc and the financial
statements of its subsidiary undertakings made up to 31 December 2023.
Subsidiaries are entities over which the Group has control. The Group controls an entity when the Group is exposed
to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns
through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred
to the Group. They are de-consolidated from the date that control ceases.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies
into line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses, and
cash flows relating to transactions between members of the Group are eliminated in full on consolidation.
Going concern
The Directors have, at the time of approving the financial statements, a reasonable expectation that the Company
and the Group have adequate resources to continue in operational existence for the foreseeable future. Thus, they
continue to adopt the going concern basis of accounting in preparing the financial statements. The use of this basis
of accounting takes into consideration the Group’s current and forecast financing position, additional details of
which are provided in the going concern section of the Directors’ Report.
i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
2 Basis of preparation - continued
Reclassification of comparative information
Following an increase in decommissioning expenditure in 2023, first payments of Canadian corporate income tax,
and a review of the financial statements, the Group has elected to change the presentation and classification of
certain items within the Consolidated Statement of Financial Position and the Consolidated Statement of Cash
Flow. There has been no change to the reported total comprehensive income, net assets or net current assets, or
total increase in cash and cash equivalents for the year ended 31 December 2022. These reclassification changes
are as follows:
•
Income taxes payable of £9,873 thousand were previously presented within Trade and other payables.
This liability is now presented as a separate line item of the Consolidated Statement of Financial Position.
This reclassification had no impact on total current liabilities or net current liabilities.
• Expenditure on decommissioning oil and gas assets of £437 thousand has been reclassified from
investing activities to operating activities within the Consolidated Statement of Cash Flow.
• Non-cash changes in working capital are now presented separately in each of the cash from or used in
operating activities, investing activities, and financing activities sections of the Consolidated Statement of
Cash Flow. This had no impact on the respective subtotals within each section. Further cash flow
information is provided in note 4.
3
Significant accounting policies
Financial instruments
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and cash held on current account or on short-term deposits at
variable interest rates with original maturity periods of up to three months. Any interest earned is accrued monthly
and classified as interest income within finance income.
Trade and other receivables
Trade and other receivables are initially recognised at fair value when related amounts are invoiced then carried at
this amount less any impairment of these receivables using the expected credit loss model. A provision for
impairment is made when there is objective evidence (such as the probability of insolvency or significant financial
difficulties of the debtor) that the Company will not be able to collect all of the amounts due under the original terms
of the invoice. The carrying amount of receivables is reduced through use of an allowance account. Impaired debts
are derecognised when they are assessed as uncollectible.
Trade and other payables
These financial liabilities are all non-interest bearing and are initially recognised at the fair value of the consideration
payable.
Loan Notes
These financial liabilities are all interest bearing and are initially recognised at amortised cost and include the
transaction costs directly related to the issuance. The transaction costs are amortised using the effective interest
rate method over the life of the Loan Notes.
Financial liabilities at Fair Value Through Profit or Loss (“FVTPL”)
Financial liabilities at FVTPL comprise of the Group’s risk management contracts and non-current accounts
payable. Financial liabilities are classified as at FVTPL when the financial liability is (i) contingent consideration
that may be paid by an acquirer as part of a business combination to which IFRS 3 applies, (ii) held for trading, or
(iii) it is designated as at FVTPL.
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i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
Notes To the Group Financial Statements
3 Significant accounting policies - continued
A financial liability is classified as held for trading if:
•
•
•
it has been incurred principally for the purpose of repurchasing it in the near term; or
on initial recognition it is part of a portfolio of identified financial instruments that the Company manages
together and has a recent actual pattern of short-term profit-taking; or
it is a derivative that is not designated and effective as a hedging instrument.
A financial liability other than a financial liability held for trading or contingent consideration that may be paid by an
acquirer as part of a business combination may be designated as at FVTPL upon initial recognition if:
•
•
•
such designation eliminates or significantly reduces a measurement or recognition inconsistency that
would otherwise arise; or
the financial liability forms part of a group of financial assets or financial liabilities or both, which is
managed, and its performance is evaluated on a fair value basis, in accordance with the Company’s
documented risk management or investment strategy, and information about the grouping is provided
internally on that basis; or
it forms part of a contract containing one or more embedded derivatives, and IFRS Financial Instruments:
Recognition and Measurement permits the entire combined contract (asset or liability) to be designated
as at FVTPL.
Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on re-measurement recognised
in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial
liability and is included in the ‘other gains and losses’ line item in the consolidated statement of comprehensive
income.
Risk management contracts
Financial risk management contracts are measured and recognised in accordance with the Group’s accounting
policy for financial liabilities at FVTPL as described above. Physical risk management contracts represent physical
delivery sales contracts in the ordinary course of business and are therefore not recorded at fair value in the
consolidated financial statements. Settlements on these physical risk management contracts are recognised within
realised gains or losses on risk management contracts at the time of settlement.
Embedded derivatives
Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives
when their risks and characteristics are not closely related to those of the host contracts and the host contracts are
not measured at FVTPL.
Leases
Lease liabilities are initially measured at the present value of lease payments unpaid at the commencement date.
Lease payments are discounted using the incremental borrowing rate (being the rate that the lessee would have
to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with
similar terms and conditions) unless the rate implicit in the lease is available. The Group currently uses the rate
implicit in the lease as the discount rate for all leases. For the purposes of measuring the lease liability, lease
payments comprise fixed payments.
Right-of-use assets are measured at cost, which comprises the initial measurement of the lease liability, plus any
lease payments made prior to lease commencement, initial direct costs incurred and the estimated cost of
restoration or decommissioning, less any lease incentives received. The right-of-use assets is depreciated on a
straight-line basis over their expected useful lives. Right-of-use assets are subject to an impairment test if events
and circumstances indicate that the carrying value may exceed the recoverable amount.
Lease repayments made are allocated to capital repayment and interest so as to produce a constant periodic rate
of interest on the remaining lease liability balance.
3 Significant accounting policies - continued
Right-of-use assets are presented within property, plant, and equipment. Lease liabilities are presented within
borrowings and leases. In the cash flow statement, lease repayments (both the principal and interest portion) are
presented within cash used in financing activities, except for payments for leases of short-term and low-value
assets and variable lease payments, which are presented within cash flows from operating activities.
Leases of low-value items (such as office equipment) and short-term leases (where the lease term is 12 months or
less) are expensed on a straight-line basis to the Consolidated Statement of Comprehensive Income.
Inventory
Inventories comprise oil and gas in tanks and field parts and supplies, all of which are stated at the lower of
production cost (including royalties, depletion and amortisation of plant, property, and equipment), and net
realisable value. Net realisable value is the estimated selling price in the ordinary course of business less marketing
costs. The cost of inventory is recognised in production costs and the royalty portion in royalties in the period in
which the related revenue is recognised.
Equity
Equity instruments issued by the Company are usually recorded at the proceeds received, net of direct issue costs,
and allocated between called up share capital and share premium accounts as appropriate.
Foreign currency
Transactions denominated in currencies other than functional currency are translated at the exchange rate ruling
at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are re-translated
at the rate of exchange ruling at the balance sheet date. All differences that arise are recorded in the consolidated
statement of comprehensive income. The functional currency of the Company is GBP, and the Group results and
financial position are presented in GBP.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign
operations are translated at exchange rates prevailing on the reporting date. Income and expense items are
translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that
period, in which case the exchange rates at the date of transactions are used. Exchange differences arising, if any,
are recognised in other comprehensive income and accumulated in a separate component of equity (attributed to
non
controlling interests as appropriate).
-
Taxation
Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive
income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in
equity respectively.
Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising
from differences between the carrying amount of assets and liabilities in the financial statements and the
corresponding tax bases used in the computation of taxable profit. However, deferred tax liabilities are not
recognised if they arise from the initial recognition of goodwill; deferred tax is not accounted for if it arises from
initial recognition of an asset or liability in a transaction other than a business combination that at the time of the
transaction affects neither accounting nor taxable profit or loss.
In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profit will be available against which deductible temporary
differences can be utilised.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and
associates, and interests in joint ventures, except where the Company is able to control the reversal of the
temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred tax assets and liabilities relate to taxes levied by the same taxation
authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances
on a net basis.
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i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
Notes To the Group Financial Statements
3 Significant accounting policies - continued
3 Significant accounting policies - continued
Deferred tax is calculated at the tax rates that are enacted or substantively enacted. Deferred tax assets and liabilities
are not discounted.
Intangible assets – Exploration and evaluation expenditures (E&E)
Drilling costs and intangible licences
The Group applies the successful efforts method of accounting for oil and gas assets, having regard to the
requirements of IFRS 6 Exploration for and Evaluation of Mineral Resources. Costs incurred prior to obtaining the
legal rights to explore an area are expensed immediately to the consolidated statement of comprehensive income.
Expenditure incurred on the acquisition of a licence interest is initially capitalised within intangible assets on a field-
by-field basis. Costs are held, unamortised, within Petroleum mineral leases until such time as the exploration
phase of the field area is complete or commercial reserves have been discovered. The cost of the licence is
subsequently transferred into property, plant and equipment and depreciated over its estimated useful economic
life.
Exploration expenditure incurred in the process of determining exploration targets is capitalised initially within
intangible assets as drilling costs. Drilling costs are initially capitalised on a well-by-well basis until the success or
otherwise has been established. Drilling costs are written off on completion of a well unless the results indicate that
hydrocarbon reserves exist and there is a reasonable prospect that these reserves are commercially viable. Drilling
costs are subsequently transferred into ‘Drilling expenditure’ within property, plant and equipment and depreciated
over their estimated useful economic life.
Impairment
The Group assesses at each reporting date whether there is an indication that an asset may be impaired. This includes
consideration of the IFRS 6 impairment indicators for any intangible exploration and evaluation expenditure capitalised
as intangible assets. Examples of indicators of impairment include whether:
(a) the period for which the entity has the right to explore in the specific area has expired during the period or will
expire in the near future and is not expected to be renewed.
(b) substantive expenditure on further exploration for and evaluation of mineral resources in the specific area is neither
budgeted nor planned.
(c) exploration for and evaluation of mineral resources in the specific area have not led to the discovery of commercially
viable quantities of mineral resources and the entity has decided to discontinue such activities in the specific area.
(d) sufficient data exist to indicate that, although a development in the specific area is likely to proceed, the carrying
amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development or by
sale.
If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate
of the asset’s recoverable amount, which is the higher of its fair value less costs to sell and its value in use. Any
impairment identified is recorded in the consolidated statement of comprehensive income.
Development expenditure
When the technical feasibility and commercial viability of extracting a mineral resource are demonstrable, the net
capitalised costs incurred to date in respect of those reserves are reclassified as oil and gas assets within property,
plant and equipment. This typically occurs when commercial reserves have been found and a field development
plan has been approved. The costs are subsequently depreciated from the commencement of production as
described in the accounting policy for property, plant and equipment.
Property, plant and equipment
Oil and gas assets - cost
Oil and gas assets are accumulated generally on a cost generating unit (CGU) basis and represent the cost of
developing the commercial reserves discovered and bringing them into production, together with the intangible
exploration and evaluation asset expenditures incurred in finding commercial reserves transferred from intangible
exploration and evaluation assets. The cost of oil and gas properties also includes the cost of directly attributable
overheads, borrowing costs capitalised and the cost of recognising provision for future restoration and
decommissioning.
Oil and gas assets - depreciation and depletion
Oil properties, including certain related pipelines, are depreciated using a unit-of-production method. The cost of
producing wells is amortised over proved plus probable reserves. Licence acquisition, common facilities and future
decommissioning costs are amortised over total proved plus probable reserves. The unit-of-production rate for the
depreciation of common facilities takes into account expenditures incurred to date, together with estimated future
capital expenditure expected to be incurred relating to as yet undeveloped reserves expected to be processed
through these common facilities.
Oil and gas assets - impairment
An impairment test is performed in accordance with IAS 16 Property, Plant and Equipment whenever events and
circumstances arising during the development or production phase indicate that the carrying value of an oil and
gas property may exceed its recoverable amount.
The carrying value is compared against the expected recoverable amount of the asset, generally by reference to
the present value of the future net cash flows expected to be derived from production of commercial reserves. The
cash-generating unit applied for impairment test purposes is generally the field, except that a number of field
interests may be grouped as a single cash-generating unit where the cash inflows of each field are interdependent.
Any impairment identified is charged to the statement of comprehensive income. Where conditions giving rise to
impairment subsequently being reversed, the effect of the impairment charge is also reversed as a credit to the
statement of comprehensive income, net of any depletion that would have been charged since the impairment.
Non-oil and gas assets
Property, plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment
losses. Depreciation is provided on all property, plant, and equipment to write off the cost less estimated residual
value of each asset over its expected useful economic life on a straight-line basis at the following annual rates:
• Office equipment – 20% or straight line over the life of the equipment, whichever is the lesser
•
Field equipment – between 5% and 25%
All assets are subject to annual impairment reviews where indicators of impairment are present.
Property, plant, and equipment – disposals
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset. The gain or loss arising on the disposal or retirement of an
asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is
recognised in profit or loss.
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i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
Notes To the Group Financial Statements
3 Significant accounting policies - continued
3 Significant accounting policies - continued
Decommissioning provision
Share-based payments
Liabilities for decommissioning costs are recognised when the Group has an obligation to plug and abandon a well,
dismantle and remove a facility or an item of plant and to restore the site on which it is located, and when a reliable
estimate of that liability can be made. Where an obligation exists for a new facility or item of plant, such as oil
production or transportation facilities, this liability will be recognised on construction or installation. Similarly, where
an obligation exists for a well, this liability is recognised when it is drilled. An obligation for decommissioning may
also crystallise during the period of operation of a well, facility or item of plant through a change in legislation or
through a decision to terminate operations; an obligation may also arise in cases where an asset has been sold
but the subsequent owner is no longer able to fulfil its decommissioning obligations, for example due to bankruptcy.
The amount recognised is the present value of the estimated future expenditure determined in accordance with
local conditions and requirements. The provision for the costs of decommissioning wells, production facilities and
pipelines at the end of their economic lives is estimated using existing technology, at future prices, depending on
the expected timing of the activity, and discounted using a risk-free rate.
An amount equivalent to the decommissioning provision is recognised as part of the corresponding intangible asset
(in the case of an exploration or appraisal well) or property, plant, and equipment. The decommissioning portion of
the property, plant and equipment is subsequently depreciated at the same rate as the rest of the asset. Other than
the unwinding of discount on or utilisation of the provision, any change in the present value of the estimated
expenditure is reflected as an adjustment to the provision and the corresponding asset where that asset is
generating or is expected to generate future economic benefits. If government assistance is obtained to reduce the
liability, the carrying value of the decommissioning provision and the corresponding E&E or PP&E asset are
reduced by the estimated amount of the extinguished liability.
Joint operations
The majority of the Group’s exploration and production activities are conducted jointly with others and, accordingly,
these consolidated financial statements reflect only the Group’s interest in such activities.
Revenue
Revenue from contracts with customers is recognised, net of royalties, when or as the Group satisfies a
performance obligation by transferring control of a promised good or service to a customer. The transfer of control
of oil, natural gas, natural gas liquids and petroleum, and other items usually coincides with title passing to the
customer and the customer taking physical possession. The Group principally satisfies its performance obligations
at a point in time; the amounts of revenue recognised relating to performance obligations satisfied over time are
not significant.
When, or as, a performance obligation is satisfied, the Group recognises as revenue the amount of the transaction
price that is allocated to that performance obligation. The transaction price is the amount of consideration to which
the Group expects to be entitled. The transaction price is allocated to the performance obligations in the contract
based on standalone selling prices of the goods or services promised.
Contracts for the sale of commodities are typically priced by reference to quoted prices. Revenue from term
commodity contracts is recognised based on the contractual pricing provisions for each delivery. Certain of these
contracts have pricing terms based on prices at a point in time after delivery has been made. Revenue from such
contracts is initially recognised based on relevant prices at the time of delivery and subsequently adjusted as
appropriate. All revenue from these contracts, both that recognised at the time of delivery and that from post-
delivery price adjustments, is disclosed as revenue from contracts with customers.
Royalty income is recognised as it accrues in accordance with the terms of the overriding royalty agreements.
Processing income is recognised at the time the services are rendered.
Finance income
Finance income consists of bank interest on cash and cash equivalents which is recognised as accruing on a
straight-line basis, over the period of the deposit.
Equity-settled share-based payments to employees and others providing similar services are measured at the fair
value of the equity instruments at the grant date. The fair value excludes the effect of non-market-based vesting
conditions.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-
line basis over the vesting period, based on the Company’s estimate of equity instruments that will eventually vest.
At each balance sheet date, the Company revises its estimate of the number of equity instruments expected to
vest as a result of the effect of non-market-based vesting conditions. The impact of the revision of the original
estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with
a corresponding adjustment to equity reserves. When non-employee share options or warrants are exercised, the
initial fair value ascribed to the instruments and recorded as a reserve is reclassified to share premium.
Business combinations
Acquisitions of business are accounted for using the acquisition method. The consideration transferred in a
business combination is measured at fair value, which is calculated as the sum of the acquisition‑date fair values
of assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the
equity interest issued by the Group in exchange for control of the acquiree. Acquisition‑related costs are recognised
in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired, and the liabilities assumed are recognised at their fair value
at the acquisition date.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non‑controlling
interests in the acquiree, and the fair value of the acquirers previously held equity interest in the acquiree (if any)
over the net of the acquisition‑date amounts of the identifiable assets acquired, and the liabilities assumed. If, after
reassessment, the net of the acquisition‑date amounts of the identifiable assets acquired and liabilities assumed
exceeds the sum of the consideration transferred, the amount of any non‑controlling interests in the acquiree and
the fair value of the acquirers previously held interest in the acquiree (if any), the excess is recognised immediately
in profit or loss as a bargain purchase gain.
Segmental reporting
In the opinion of the Board of Directors, being the Chief Operating Decision Maker, the Group has one class of
business, being the exploration for, and the development and production of, oil and gas reserves and other related
activities. The Group’s primary reporting format is determined to be the geographical segment according to the
location of the oil and gas asset, currently Canada and UK / Corporate.
Changes in accounting standards
The standards which applied for the first time this year have been adopted and have not had a material impact.
Standards which are in issue but not yet effective:
At the date of authorisation of these financial statements, the following Standards and Interpretation, which have
not yet been applied in these financial statements, were in issue but not yet effective. The Group does not anticipate
they will have a material impact.
i.
ii.
iii.
iv.
v.
Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate
or Joint Venture
Amendments to IAS 1 Classification of Liabilities as Current or Non-current
Amendments to IAS 1 Non-current Liabilities with Covenants
Amendments to IAS 7 and IFRS 7 Supplier Finance Arrangements
Amendments to IFRS 16 Lease Liability in a Sale and Leaseback
The Group has not early adopted any of the above standards and intends to adopt them when they become
effective.
i3 Energy PLC
077
74
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I3 ENERGY PLC
75
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I3 ENERGY PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
Notes To the Group Financial Statements
3 Significant accounting policies - continued
Critical accounting judgements and key sources of estimation uncertainty
The preparation of financial statements using accounting policies consistent with IFRS requires the Directors to
make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities and the reported amounts of income and expenses. The preparation of financial statements
also requires the Directors to exercise judgement in the process of applying the accounting policies. Changes in
estimates, assumptions and judgements can have a significant impact on the financial statements.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised prospectively from the period in which the estimates are revised.
Critical Accounting Judgements
The following are critical judgements, apart from those involving estimations (which are presented separately
below), that the Directors have made in the process of applying the Group’s accounting policies and that have the
most significant effect on the amounts recognises in the financial statements.
Carrying value of intangible exploration and evaluation assets
At 31 December 2023, the Group held oil and gas E&E assets of £63.1 million (2022: £62.1 million), note 13. The
carrying value of E&E assets are assessed for impairment when there is an indication that the asset may be
impaired. In making this judgement the Management considers the indicators of impairment in the intangible
exploration and evaluation asset accounting policies set out above. For its UK assets, management has considered
the results of the 31 December 2022 impairment test which used a discounted cash flow model of a one well
development of the Serenity field and has concluded that there were no developments in 2023 which would change
the conclusions reached at the time, and therefore that no indicators of impairment were present. A one well
development may be dependent on access to infrastructure at neighbouring fields which may not become available
to the Group, and therefore the commercial development of Serenity is not certain.
For its Canada assets, management has considered the recency of the land purchases, budgeted spend, the plans
to further appraise the Clearwater play and the fact that there is no observable data which would suggest that the
carrying value of the Clearwater play is below that of its value from successful development or sale, and have
concluded that no indicators of impairment were present.
Carrying value of property, plant and equipment – oil and gas assets
At 31 December 2023, the Group held oil and gas PP&E assets of £205.6 million (2022: £236.4 million), note 12.
These assets are subject to an annual impairment assessment under IAS 36 ‘Impairment of assets’ whereby
management is first required to consider if there are any indicators of impairment, and if so, management is then
required to estimate the asset’s recoverable amounts. The judgement over indicators of impairment considers
several internal and external factors, including changes in estimated commercial reserves, changes in commodity
prices, and changes in expected future operating and capital expenditure, decommissioning expenditure, the
NPV10 of 2P reserves per the 31 December 2023 independent competent person’s report, and increases in cost
of capital which may indicate a higher discount rate is likely required in assessing the asset’s recoverable amount.
There is also judgement in defining the Group’s cash-generating units, which is the smallest identifiable group of
assets that generates cash inflows that are largely independent of the cash inflows from other assets or group of
assets. After considering the above, Management has concluded that there were no indicators of impairment of oil
and gas PP&E assets as at 31 December 2023.
3 Significant accounting policies - continued
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting period
that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities
within the next financial year, are discussed below.
Commercial hydrocarbon reserves estimates
Commercial hydrocarbon reserves are those that can be economically extracted from the Group’s oil and gas
assets. These estimates are based on information compiled by independent qualified persons, GLJ Ltd., as at 31
December 2023 and 31 December 2022 and consider a number of factors, including assumptions about future
commodity prices, production rates, operating costs, exchange rates, and various geological and geophysical
technical factors to model reservoir size, quality, and extractability. Reserve estimates may change from period to
period. Changes to reserves estimates may have a material impact on the depletion charge for oil and gas PP&E
assets, the decommissioning provision, the carrying value of deferred tax assets, and the Group’s conclusions
around indicators of impairment for oil and gas PP&E assets. The reserve reports are available at https://i3.energy/.
Highlights from the 31 December 2023 estimates are provided in note 24.
The Group estimates it commenced the year with 182 MMboe of proved plus probable reserves. A 2.0 MMboe
increase/decrease to this estimate would have decreased/increased the oil and gas depletion charge for the period
by £420 thousand, respectively.
Decommissioning costs
At 31 December 2023 the Group had recorded a decommissioning provision of £81.4 million (2022: £93.3 million).
In estimating the amount of the provision, Management makes various assumptions around costs, time to
abandonment and inflation rates, which are discounted at long term government bond rates, see note 17.
The most difficult, subjective, or complex assumptions include the inflation rate and the discount rate, which have
been selected based on market rates published by the Bank of Canada. A 0.5% increase/decrease in the inflation
rate would have increased/decreased the decommissioning provision by £12.4 million and £10.5 million,
respectively. A 0.5% increase/decrease in the discount rate would have decreased/increased the decommissioning
provision by £10.3 million and £12.3 million, respectively. A 2.0% increase/decrease in the inflation rate would have
increased/decreased the decommissioning provision by £61.6 million and £29.8 million, respectively. A 2.0%
increase/decrease in the discount rate would have decreased/increased the decommissioning provision by £29.2
million and £62.1 million, respectively.
Recognition and measurement of deferred tax assets
At 31 December 2023, the Group held deferred tax liabilities of £9.8 million (2022: £11.7 million) which result from
temporary differences at the Group’s Canadian operations. This liability has been reduced by certain deferred tax
assets from deductible temporary differences at the Group’s Canadian operations. In accordance with IAS 12
‘Income Taxes’, deferred tax assets shall be recognised for all deductible temporary differences to the extent that
it is probable that taxable profit will be available against which the deductible temporary difference can be utilised.
The Group has generated positive cash flows and profits from its Canadian operations in 2023 and expects to
continue to do so in the future. Management has applied judgement in determining the extent to which it is probable
that taxable profits will be available based on estimates of future profits, which include estimates of commercial
reserves, oil, gas and NGL prices, operating and capital expenditure, and decommissioning expenditure. If future
taxable profits differ from these estimates, the deferred tax asset associated with these deductible temporary
differences could be derecognised and result in a deferred tax charge to the consolidated statement of
comprehensive income.
079
i3 Energy PLC
76
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77
I3 ENERGY PLC
080
I3 ENERGY PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
4
Cash flow information
Included within cash and cash equivalents is £321 thousand of restricted cash (2022: £354 thousand), which relates
to guarantees for product marketing. The debt reconciliation is shown in note 16.
A reconciliation of the changes in non-cash working capital balances for the year ended 31 December 2023 and
their impacts on the various sections of the consolidated statement of cash flow is presented below:
Trade and
other
receivables
Inventory
Trade and
other
payables
Income taxes
receivable /
(payable)
Other non-
current
liabilities
Closing balance
Opening balance
Increase / (decrease) in cash
Generated from / (used in):
£’000
20,534
34,843
14,309
£’000
1,847
2,099
£’000
(27,640)
£’000
205
£’000
(84)
(45,973)
(9,873)
252
(18,333)
(10,078)
Operating activities
13,835
252
(10,869)
(10,078)
Investing activities
Financial activities
474
–
–
–
(5,706)
(1,758)
–
–
Increase / (decrease) in cash
14,309
252
(18,333)
(10,078)
Trade and
other
receivables
£’000
34,843
25,503
Inventory
Trade and
other
payables
Income taxes
payable
Other non-
current
liabilities
£’000
2,099
£’000
£’000
(45,973)
(9,873)
665
(19,709)
Closing balance
Opening balance
Change
(9,340)
(1,434)
26,264
Non-cash gain on DPIB
–
–
–
Increase / (decrease) in cash
(9,340)
(1,434)
26,264
Generated from / (used in):
Operating activities
(8,543)
(1,434)
Investing activities
Financial activities
(797)
–
–
–
14,832
10,624
808
–
9,873
–
9,873
–
–
Increase / (decrease) in cash
(9,340)
(1,434)
26,264
9,873
9,873
–
14,728
(1,271)
1,232
(39)
8,556
2,040
25,324
Total
£’000
(13,766)
(6,776)
(5,232)
(1,758)
(13,766)
Total
£’000
25,324
–
84
84
–
–
84
£’000
–
(557)
(557)
518
(39)
i3 Energy PLC 202 3 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
(Loss) on bargain purchase and asset dispositions
Operating (loss) / profit
Finance income
Finance costs
(Loss) / profit before tax
Tax (charge) for the year
(Loss) / profit for the year
UK / Corporate
£’000
–
–
–
(4)
(4)
(3,199)
–
(3,203)
–
(5,590)
(8,793)
(341)
(9,134)
Canada
£’000
146,314
(71,348)
2,048
(38,228)
38,786
(6,662)
–
32,124
640
(3,073)
29,691
(5,410)
24,281
Revenue
Production costs
Loss on risk management contracts
Depreciation and depletion
Gross (loss) / profit
Administrative expenses
(Loss) on bargain purchase and asset dispositions
Operating (loss) / profit
Finance costs
(Loss) / profit before tax
Tax (charge) / credit for the year
(Loss) / profit for the year
UK / Corporate
£’000
–
–
–
(4)
(4)
(6,821)
–
(6,825)
(5,179)
(12,004)
–
(12,004)
Canada
£’000
208,436
(76,418)
(18,990)
(34,335)
78,693
(8,217)
(9)
70,467
(2,686)
67,781
(13,826)
53,955
Total
£’000
146,314
(71,348)
2,048
(38,232)
38,782
(9,861)
–
28,921
640
(8,663)
20,898
(5,751)
15,147
Total
£’000
208,436
(76,418)
(18,990)
(34,339)
78,689
(15,038)
(9)
63,642
(7,865)
55,777
(13,826)
41,951
A reconciliation of the changes in non-cash working capital balances for the year ended 31 December 2022 and
their impacts on the various sections of the consolidated statement of cash flow is presented below:
The following is an analysis of the Group’s revenue and results by reportable segment in 2022:
5
Segmental reporting
The Chief Operating Decision Maker (CODM) is the Board of Directors. They consider that the Group operates as two
segments, as follows:
• UK / Corporate - That of Corporate activities in the UK and oil and gas exploration, appraisal and
development on the UKCS.
• Canada – That of oil and gas production in the WCSB.
Such components are identified on the basis of internal reports that the Board reviews regularly.
The following is an analysis of the Group’s revenue and results by reportable segment in 2023:
The following is an analysis of the Group’s assets and liabilities by reportable segment as at 31 December 2023 and
the capital expenditure for the year then ended:
Total assets
Total liabilities
Capital expenditure – E&E
Capital expenditure – PP&E
UK / Corporate
£’000
56,041
Canada
£’000
260,553
(35,606)
(117,993)
275
–
1,006
23,155
Total
£’000
316,594
(153,599)
1,281
23,155
The following is an analysis of the Group’s assets and liabilities by reportable segment as at 31 December 2022 and
the capital expenditure for the year then ended:
i3 Energy PLC
081
78
i3 Energy PLC
I3 ENERGY PLC
79
082
I3 ENERGY PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
Notes To the Group Financial Statements
5 Segmental reporting - continued
7 Administrative expenses - continued
Total assets
Total liabilities
Capital expenditure – E&E
Capital expenditure – PP&E
6
Revenue
UK / Corporate
£’000
57,500
Canada
£’000
295,712
(30,166)
(158,300)
5,650
–
6,677
75,793
Total
£’000
353,212
(188,466)
12,327
75,793
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 condensate
Natural gas liquids
Natural gas
Royalty interest
Oil and gas sales
Royalties
Revenue from the sale of oil and gas
Processing income
Other operating income
Total revenue
2023
£’000
2022
£’000
95,628
113,003
23,319
40,142
39,191
77,656
3,263
4,890
161,401
(21,397)
140,004
235,691
(33,536)
202,155
5,819
5,995
491
286
146,314
208,436
All revenue is from the Group’s Canadian operations. Revenue from the sale of oil and natural gas liquids is
recognised at the point in time when title transfers to the purchaser. Processing income is recognised at the time
the service is rendered.
During the year ended 31 December 2023, three (2022: three) customers individually totalled more than 10% of
total revenues, totalling 87% (2022: 81%) in aggregate and 40%, 26%, and 21%, individually (2022: 35%, 25%,
and 32%).
7
Administrative expenses
Directors’ fees
Employee costs*
Professional fees**
Other
Realised FX (gain) / loss
Unrealised FX loss
Total administrative expenses
* Group staff costs comprised:
2023
£’000
2022
£’000
345
323
5,293
9,982
1,918
1,830
2,419
2,285
(129)
505
15
113
9,861
15,038
Wages, salaries, and benefits
Cash pool LTIP awards
Social security costs
Contributions to retirement savings plans
2023
£’000
2022
£’000
7,232
11,602
185
–
362
1,189
331
304
Share-based payments expense – employees (including NEDs)
581
1,092
Total staff costs
Capitalised salaries and overhead recoveries
Charge to the profit or loss
8,691
(3,398)
5,293
14,187
(4,205)
9,982
i3 Energy plc had an average of two staff during the year ended 31 December 2023 (2022: two) and paid £1,073
thousand of wages, salaries and benefits and £102 thousand of social security costs (2022: £1,050 thousand and
£137 thousand, respectively). The Non-Executive Directors of the Group are not considered staff, and their
remuneration is disclosed in note 10.
On 9 November 2023 the Group granted £1,837 thousand of Cash pool LTIP awards which vest according to the
same terms of the 9 November 2023 share option grant as disclosed in note 20. The resulting expense is
recognised in administrative costs over the vesting term and presented within trade and other payables and other
non-current liabilities depending on the expected time of payment.
The average number of persons employed by the Group, including Executive Directors, was:
Average number of persons employed
2023 Number
2022 Number
Operations
Corporate and administration
Total
33
28
61
31
25
56
** 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
Total audit fees
Advisory on certain employment matters
Procedures related to the Group’s interim financial statements
Total
2023
£’000
142
142
1
3
146
2022
£’000
130
130
1
3
134
083
i3 Energy PLC
80
i3 Energy PLC
81
I3 ENERGY PLC
084
I3 ENERGY PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
8
Finance costs
Accretion of loan notes (note 16)
Cash interest expense on loan notes (note 16)
Unwinding of discount on decommissioning provision (note 17)
Interest on Debt Facility (Note 16)
Amortisation of deferred finance costs (Note 16)
Bank charges and interest on creditors
(Gain) / loss on financial instrument at FVTPL (note 15)
FX loss on Debt Facility (Note 16)
Total finance costs
9
Taxation
Taxation credit
2023
£’000
1,615
951
2,771
2,258
667
305
–
96
8,663
2022
£’000
3,386
2,309
2,667
–
–
21
(518)
–
7,865
The below table reconciles the tax charge for the year to the profit before tax per the consolidated statement of
comprehensive income.
Profit before income tax
Rate of Corporate Tax in Canada
Expected tax charge
Effects of:
Interest and other not deductible for SCT or EPL
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
Of which:
Current tax charge
Deferred tax (credit) / charge
Total income tax charge
2023
£’000
20,898
23%
4,807
1,155
530
(619)
–
62
(184)
5,751
2023
£’000
7,239
(1,488)
5,751
2022
£’000
55,777
23%
12,829
1,993
1,213
(5,041)
22
2,810
–
13,826
2022
£’000
10,002
3,824
13,826
The current tax charge of £7,239 thousand in 2023 resulted from taxable income in the Group’s Canadian
subsidiary, i3 Canada, which was payable on instalment throughout 2023 and into the first half of 2024. In 2023
the Group received £184 thousand in R&D tax credit refunds in the UK in respect of the 2020 and 2021 fiscal years
which is included in the current tax expense.
Notes To the Group Financial Statements
9 Taxation - continued
In 2022 the Energy Profits Levy (EPL) was introduced at a rate of 25% with effect from 26 May 2022 and increased
to 35% effective 1 January 2023. This, along with the Ring Fence Corporation Tax (RFCT) at 30% and the
Supplementary Charge (SCT) of 10% brings the overall tax rate in the UK to 75%. The EPL will remain in effect
until 31 March 2028, although in 2023, the UK governance announced that the EPL will switch off if commodity
prices remain below threshold prices. The Group will not be impacted by the EPL until such time as taxable profits
are generated in the UK. The combined corporate rate of taxation in Canada remained unchanged at 23%.
Deferred tax
The components of the net deferred tax asset and the movement during the year is summarised as follows:
At 31
December 2022
Acquired
during the year
Recognised
in income
FX movement At 31 December
2023
£’000
£’000
£’000
£’000
£’000
UK:
Deferred tax assets:
Losses
Unrecognised deferred tax asset
Deferred tax liabilities:
PP&E
Net deferred tax asset
Canada:
Deferred tax assets:
Decommissioning provision
Losses
Other
37,520
(15,123)
(22,397)
–
21,466
–
234
Unrecognised deferred tax asset
(4,180)
Deferred tax liabilities:
Risk management contracts
PP&E
Net deferred tax liability
(168)
(29,019)
(11,667)
Net deferred tax liability
(11,667)
–
–
–
–
–
–
–
–
–
–
–
–
847
(641)
(206)
–
–
–
–
–
38,367
(15,764)
(22,603)
–
(2,088)
(667)
18,711
–
(13)
279
(198)
3,508
1,488
–
(7)
130
6
900
362
–
214
(3,771)
(360)
(24,611)
(9,817)
1,488
362
(9,817)
Deferred tax assets of £15,764 thousand and £3,771 thousand have not been recognised in respect of tax losses
and allowances in the UK and Canada, respectively, due to uncertainty over the availability of future taxable profits
to offset these losses against. The unrecognised deferred tax asset in Canada relates to the Group’s successor
mineral resource tax pools which can only be utilised against future income from certain properties acquired from
Toscana in 2020.
The Group recognised a net deferred tax liability through a deferred tax credit of £1,488 thousand for changes in
net deductible temporary differences in the year and £362 thousand for FX movements during the year. The
deferred tax asset has been recognised in Canada to the extent that the Group anticipates probable future taxable
profits against which the assets can be utilised.
i3 Energy PLC
82
085
i3 Energy PLC
83
I3 ENERGY PLC
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I3 ENERGY PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
i3 Energy PLC 202 3 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. All other tax pools held by the Group do
not expire.
UK:
Taxable losses
Mineral extraction allowances
Total
Canada:
Canadian exploration expense (CEE, deductible at 100% p.a.)
Canadian development expense (CDE, deductible at 30% p.a.)
Canadian oil and gas property expense (COGPE, deductible at 10% p.a.)
Undepreciated capital cost (UCC, deductible at 25% p.a.)
Other (deductible at various rates p.a.)
31 December 2023
£’000
39,233
52,705
91,938
1,611
33,502
50,744
20,194
930
31 December 2022
£’000
38,927
52,466
91,393
1,623
37,870
58,478
18,867
1,019
106,981
117,857
Directors’ remuneration
Salary / Fees
Bonus
Share based
payments
£’000
£’000
£’000
500
304
75
75
75
120
1,149
Salary / Fees
487
702
295
68
68
106
81
167
99
–
–
–
–
266
Bonus
833
668
535
–
–
–
–
–
–
–
–
–
–
Share based
payments
3,507
2,596
2,511
227
227
117
223
1,807
2,036
9,408
13,251
Total
£’000
667
403
75
75
75
120
1,415
Total
4,827
3,966
3,341
295
295
223
304
Total
10
2023
Executive Directors
Majid Shafiq *
Ryan Heath
Non-Executive Directors
Neill Carson
Richard Ames
Linda Beal
John Festival
Total
2022
Executive Directors
Majid Shafiq *
Graham Heath
Ryan Heath
Non-Executive Directors
Neill Carson
Richard Ames
Linda Beal
John Festival
Total
* Highest paid director
10 Directors’ remuneration - continued
Share based payments represent the difference between the exercise price and the market value of i3 shares on
the date of exercise, multiplied by the number of options exercised.
The bonuses in the table above are presented on a cash-paid basis. Historically, the annual bonus cycle spanned
the 12-month period from 1 July to 30 June of the following year. This was adjusted to a calendar-year cycle in
2023, and accordingly, the bonuses in 2023 were prorated and paid for half a year, relative to a full year payment
in 2022.
Included in Graham Heath Salary / Fees in 2022 is a one-time compensation for loss of office payment of £417
thousand upon his retirement in September 2022.
During each of 2023 and 2022 the Group contributed £2 thousand and £9 thousand to Majid Shafiq’s and Ryan
Heath’s retirement savings plans, respectively.
11
Earnings per share
From continuing operations
Basic earnings or loss per share is calculated as profit/(loss) for the year, adjusted to exclude any costs of servicing
equity (other than dividends), divided by the weighted average number of ordinary shares, adjusted for any bonus
element.
Diluted earnings or loss per share amounts are calculated by dividing losses or profits for the year attributable to
ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the
year, plus the weighted average number of shares that would be issued on the conversion of dilutive potential
ordinary shares into ordinary shares.
The calculation of the basic and diluted earnings per share is based on the following data:
Earnings
Earnings for the purposes of basic and diluted earnings per share
being net profit attributable to owners of i3 Energy (£’000)
15,147
41,951
Year Ended 31
December 2023
Year Ended 31
December 2022
Weighted average number of shares
Weighted average number of Ordinary Shares – basic
1,199,155,654
1,164,210,976
Effect of dilutive potential ordinary shares:
Share options
Warrants
15,246,295
51,089,073
2,850,547
9,048,113
Weighted average number of Ordinary Shares – diluted
1,217,252,496
1,224,348,162
Basic earnings per share (pence)
Diluted earnings per share (pence)
1.26
1.24
3.60
3.43
i3 Energy PLC
087
84
I3 ENERGY PLC
088
i3 Energy PLC
85
I3 ENERGY PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
12
Property, plant, and equipment
Cost
As at 1 January 2022
Acquisitions
Additions
Decommissioning provisions incurred
Disposals
Changes to decommissioning estimates (note 17)
Decommissioning settlements under SRP and ASCP (note 17)
Transfer between asset classes
Exchange movement
As at 31 December 2022
Acquisitions
Additions
Decommissioning provisions incurred
Disposals
Changes to decommissioning estimates (note 17)
Exchange movement
As at 31 December 2023
Accumulated depreciation and depletion
As at 1 January 2022
Charge for the year
Disposals
Transfer between asset classes
Exchange movement
As at 31 December 2022
Charge for the year
Exchange movement
As at 31 December 2023
Carrying amount at 31 December 2022
Carrying amount at 31 December 2023
Oil and gas assets
Right of use
assets
Other fixed assets
Total
£’000
250,033
1,653
74,424
1,369
(1,386)
(40,233)
(731)
–
12,585
297,714
436
23,155
195
(709)
(8,283)
(9,341)
303,167
£’000
109
–
–
–
(28)
–
–
(88)
7
–
–
–
–
–
–
–
–
£’000
72
–
21
–
–
–
–
88
3
184
–
–
–
–
–
(5)
179
£’000
250,214
1,653
74,445
1,369
(1,414)
(40,233)
(731)
–
12,595
297,898
436
23,155
195
(709)
(8,283)
(9,346)
303,346
(26,077)
(33)
(24)
(26,134)
(34,301)
(17)
(21)
(34,339)
–
–
(968)
(61,346)
(38,206)
1,984
(97,568)
236,368
205,599
12
42
(4)
–
–
–
–
–
–
–
(42)
12
–
–
(972)
(87)
(61,433)
(26)
2
(111)
97
68
(38,232)
1,986
(97,679)
236,465
205,667
i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
13
Exploration and evaluation assets (Intangible)
At start of year
Additions
Exchange movement
At end of year
Year Ended 31
December 2023
£’000
62,060
1,281
(208)
63,133
Year Ended 31
December 2022
£’000
49,819
12,327
(86)
62,060
Included within E&E assets is the Group’s UK P.2358 Licence, which commenced its four-year second term on 30
September 2020 and contains the Serenity discovery and the Liberator West and Minos High prospective areas.
Following the 2022 farm out to Europa Oil & Gas Limited (“Europa”), i3 retains a 75% WI in Block 13/23c North
(Licence P.2358) which contains the Serenity discovery and a 100% WI in Block 13/23c South (Licence P.2358),
which contains the Minos High Prospect and Liberator discovery.
Also included within E&E assets are costs associated with land purchases and an appraisal well in the Clearwater
play in Canada.
Management conducted an assessment of indicators of impairment for its E&E assets as at 31 December 2023,
concluding that no indicators of impairment were identified. Further discussion is provided in note 2.
14
Trade and other receivables
Trade and accrued receivables
Joint venture receivables
Prepayments & other receivables
Total trade and other receivables
31 December 2023
£’000
31 December 2022
£’000
12,839
26,770
4,732
2,963
20,534
5,563
2,510
34,843
Trade and accrued receivables are all due within one year.
Joint venture receivables represent amounts due from operating partners for operating and capital activity in
Canada and the UK.
The fair value of trade and other receivables is the same as their carrying values as stated above and they do not
contain any impaired assets.
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable
mentioned above. The Group does not hold any collateral as security.
i3 Energy PLC
86
089
i3 Energy PLC
I3 ENERGY PLC
87
090
I3 ENERGY PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
15
Trade and other payables
i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
16 Borrowings - continued
Trade creditors
Sales tax payable
Accruals
Cash pool LTIP awards – current liability
Dividends payable
Joint venture payables
Total trade and other payables
31 December 2023
£’000
5,736
170
20,746
101
–
887
27,640
31 December 2022
£’000
iii.
15,383
378
26,909
–
2,040
1,263
45,973
Net Debt to EBITDAX less than 3.00:1.00. (a) Net Debt: means, on a consolidated basis and at any
time, the aggregate amount of Financial Indebtedness of i3 Canada (excluding any intercompany
Financial Indebtedness) net of free and available Cash and Cash Equivalents of i3 Canada. (b) EBITDAX:
means, for any fiscal period and as determined in accordance with IFRS (on a consolidated basis) in
respect of i3 Canada: (a) all Net Income for such period; plus (b) Interest Expense to the extent deducted
in determining such Net Income; plus (c) all amounts deducted in the calculation of such Net Income in
respect of the provision for income taxes; plus (d) all amounts deducted in the calculation of such Net
Income in respect of non-cash items, including depreciation, depletion, amortization (including
amortization of goodwill and other intangibles), accretion, deferred income taxes, foreign currency
obligations, noncash losses resulting from marking-to-market any outstanding hedging and financial
instrument obligations, non-cash compensation expenses, provisions for impairment of oil and gas assets
and any other non-cash expenses for such period; plus (e) exploration expenses; and (f) losses
attributable to extraordinary and non-recurring losses, in each case to the extent deducted in the
calculation of such Net Income; less (on a consolidated basis), without duplication: (a) earnings
attributable to extraordinary and non-recurring earnings and gains, in each case to the extent included in
the calculation of such Net Income (including interest income); (b) to the extent included in the calculation
of such Net Income, gains from asset sales; (c) all cash payments during such period relating to non-cash
charges which were added back in determining EBITDAX in any prior period; and (d) to the extent included
in such Net Income, any other non-cash items increasing such Net Income for such period, including non-
cash gains resulting from marking-to-market any outstanding hedging and financial instrument obligations
for such period.
iv.
Liquidity Threshold greater than CAD 10 million. i3 Canada shall ensure that, at the last day of each
calendar month, it has a Cash balance in a bank account in an amount equal to or greater than CAD 10
million.
The Global Coverage Ratio, Liquidity Ratio, and Net Debt to EBITDAX are tested on the last day of each fiscal
quarter. The Liquidity Threshold was initially required to be always maintained but was subsequently amended to
be tested on the last day of each calendar month. The Group was in compliance with all covenants as at 31
December 2023. The Debt Facility was prepaid in full in March 2024 with cash on hand and proceeds from the
Credit Facility, refer to note 24 for further information.
H1-2019 loan note facility
In May 2019, the Group completed a £22 million H1-2019 loan note facility (“H1-2019 LN”). The H1-2019 LNs have
a term of 4 years, maturing on 31 May 2023 and bearing interest, payable on a quarterly basis at the Group’s option
(i) in cash at a rate of 8% per annum, or (ii) in kind at a rate of 11% per annum by the issuance of additional H1-
2019 LNs. The Group elected to pay all interest in kind prior to 2022, and in cash for all quarters since. The H1-
2019 LNs matured on 31 May 2023 and were repaid in full using proceeds from the Debt Facility issuance.
Interest expense and accretion expense on the H1-2019 LNs to 31 December 2023 was £951 thousand and £1,615
thousand respectively (note 8).
The average credit period taken for trade purchases is 60 days. No interest is charged on the trade payables. The
carrying values of trade and other payables are considered to be a reasonable approximation of the fair value and are
considered by the Directors as payable within one year.
Joint venture payables represent amounts due to operating partners for operating and capital activity in Canada.
16
Borrowings
Debt Facility
On 31 May 2023 i3 Energy plc established a CAD 100 million debt facility in the form of a Prepayment Agreement
(the “Debt Facility”) with Trafigura Canada Ltd., a subsidiary of Trafigura Pte Ltd (collectively, “Trafigura”).
Concurrently, i3 Energy Canada Ltd. (“i3 Canada”) entered an associated commercial contract related to i3
Canada’s oil production. The Debt Facility has a three-year term, with interest payable monthly at 9.521% per
annum, calculated on the outstanding portion of the loan. The Facility carries no penalty if repaid early and
amortises monthly on a straight-line basis. Advances under the Facility can be repaid either with cash or by way of
set-off against deliveries of crude oil under the commercial contract which has a minimum term of three years. The
documentation establishing the Facility includes the option for a CAD 75 million advance which has been fully
drawn by the Company and a CAD 25 million accordion facility amount, which can be made available during the
Debt Facility's three-year term. The Debt Facility is secured by a first lien against substantially all the assets and
shares of i3 Canada. The Company utilised a portion of proceeds from the initial advance to redeem the outstanding
H1-2019 Loan Notes as discussed below.
The Debt Facility contains the following covenants:
i.
ii.
Global Coverage Ratio greater than 125% for the first 12 months and 140% thereafter. Global
Coverage Ratio is the percentage of (a) the aggregate of: (i) the Cash balance of i3 Energy Canada as
at such date, (ii) the PV10 of the Proved Developed Producing Reserves (or, if agreed by the Buyer, acting
reasonably, the Proved Plus Probable Developed Producing Reserves) owned by i3 Canada) using 85%
of the Strip Price and curves, and (iii) the mark to market value (gain or loss) of the Secured Swap
Agreements; to, (b) the Principal amount outstanding at each date of determination.
Liquidity Ratio greater than 1.10:1.00. Liquidity Ratio is the ratio of (a) the sum of the following for the
next quarter: (i) the revenues of i3 Canada from the sale of hydrocarbons, (ii) any royalty or processing
income of i3 Canada; (iii) the aggregate amount of all uncalled debt, equity and other capital that is the
subject of a binding commitment in favour of i3 Canada from a person who is not an Affiliate; (iv) expected
revenue from risk management contracts; and (v) all Cash of i3 Canada; to, (b) the sum of the following,
all cash costs of i3 Canada in respect of the production, transportation and storage of Petroleum
Substances
limitation, operating expenses, marketing expenditures, capital
expenditures, taxes and interest expense and all distributions and payments of financial indebtedness
made by i3 Canada for the next quarter.
including, without
i3 Energy PLC
091
88
i3 Energy PLC
89
I3 ENERGY PLC
092
I3 ENERGY PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
16 Borrowings - continued
Borrowings reconciliation
At 1 January 2022
Increase through interest (non-cash)
Accretion expense (non-cash)
Lease and interest payments (cash)
Exchange movement (non-cash)
At 31 December 2022
Issuance (cash)
Increase through interest (non-cash)
Accretion expense (non-cash)
Lease and interest payments (cash)
Principal payments (cash)
Additions in deferred finance costs (cash)
Amortisation of deferred finance costs (non-cash)
Exchange movement (non-cash)
At 31 December 2023
Leases
H1-2019 LN
Debt Facility
£’000
69
1
–
(74)
4
–
–
–
–
–
–
–
–
–
–
£’000
23,855
2,309
3,386
(2,309)
–
27,241
–
951
1,615
(951)
(28,856)
–
–
–
–
£’000
–
–
–
–
–
–
44,481
2,258
–
(2,258)
(8,636)
(2,039)
667
96
Total
£’000
23,924
2,310
3,386
(2,383)
4
27,241
44,481
3,209
1,615
(3,209)
(37,492)
(2,039)
667
96
34,569
34,569
The classification as at 31 December 2023 is as follows:
Current
Non-current
At 31 December 2023
Leases
H1-2019 LN
Debt Facility
£’000
£’000
–
–
–
–
–
–
£’000
14,001
20,568
34,569
The classification as at 31 December 2022 is as follows:
Current
Non-current
At 31 December 2022
Leases
H1-2019 LN
Debt Facility
£’000
–
–
–
£’000
27,241
–
27,241
£’000
–
–
–
Total
£’000
14,001
20,568
34,569
Total
£’000
27,241
–
27,241
i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
17
Decommissioning provision
At start of year
Liabilities assumed through acquisitions
Liabilities incurred
Liabilities disposed
Liabilities settled
Liabilities settled under SRP
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 2023
£’000
Year Ended 31
December 2022
£’000
93,331
125,523
303
348
195
1,369
(328)
(3,722)
–
(8,283)
2,771
(2,914)
81,353
(213)
(2,190)
(731)
(40,233)
2,667
6,791
93,331
31 December 2023
£’000
3,244
78,109
81,353
31 December 2022
£’000
3,190
90,141
93,331
31 December 2023
31 December 2022
200,745
1.62%
3.02%
206,613
2.09%
3.28%
1-50 years
1-50 years
Liabilities settled reflect work undertaken in the period. This includes wells decommissioned under Alberta’s Site
Rehabilitation Program (“SRP”) whereby certain costs of settling the Group’s liabilities were borne by the
Government of Canada in 2022. Where liabilities were settled through the SRP a corresponding decrease to the
decommissioning asset was recorded. The change in estimate for the year ended 31 December 2023 was primarily
driven by changes in market interest and inflation rates as published by the Bank of Canada. The inflation and
discount rates have been pinpointed as a key source of estimation uncertainty and are further discussed in note 3.
093
i3 Energy PLC
90
i3 Energy PLC
91
I3 ENERGY PLC
094
I3 ENERGY PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
18
Risk management contracts
The Group enters risk management contracts to hedge a portion of the Group’s exposure to fluctuations in
prevailing commodity prices for oil, gas, and natural gas liquids. The Group’s physical commodity contracts
represent physical delivery sales contracts in the ordinary course of business and are therefore not recorded at fair
value in the consolidated financial statements. The Group’s financial risk management contracts have not been
designated as hedging instruments in a hedge relationship under IFRS 9 and are carried at fair value through profit
and loss. The financial risk management contracts are classified as Level 2 in the fair value hierarchy as defined
by IFRS 13 ‘Fair value measurements’ (note 22).
The principal terms of the risk management contracts held as at 31 December 2023 are presented in the table
below.
Type
Effective date Termination date Total Volume
AECO 5A Physical Swaps
AECO 5A Physical Swaps
1 Aug 2023
1 Nov 2023
31 Mar 2024 10,000 GJ/Day
31 Mar 2024 15,000 GJ/Day
Avg. Price
CAD 2.7600 / GJ
CAD 3.2267 / GJ
CAD 93.33 / bbl
CAD 96.47 / bbl
CAD 98.20 / bbl
1 Aug 2023
31 Mar 2024
500 bbl/Day
1 Jan 2024
31 Mar 2024
1,500 bbl/Day
1 Apr 2024
30 Jun 2024
1,750 bbl/Day
1 Jul 2024
31 Aug 2024
500 bbl/Day
CAD 101.50 / bbl
1 Jul 2024
30 Sep 2024
250 bbl/Day
CAD 98.44 / bbl
1 Apr 2024
30 Jun 2024
250 bbl/Day
CAD 100.00-107.00 / bbl
1 Jul 2024
30 Sep 2024
250 bbl/Day
CAD 100.00-108.00 / bbl
1 Jul 2024
30 Sep 2024
250 bbl/Day
CAD 100.00-111.00 / bbl
1 Jul 2024
30 Sep 2024
250 bbl/Day
CAD 100.00-112.00 / bbl
1 Jul 2024
30 Sep 2024
250 bbl/Day
CAD 100.00-112.10 / bbl
1 Jul 2024
30 Sep 2024
250 bbl/Day
CAD 100.00-113.80 / bbl
1 Sep 2024
30 Sep 2024
250 bbl/Day
CAD 100.00-107.00 / bbl
1 Oct 2024
31 Oct 2024
250 bbl/Day
CAD 100.00-111.15 / bbl
1 Oct 2024
31 Oct 2024
250 bbl/Day
CAD 100.00-113.10 / bbl
1 Oct 2024
31 Oct 2024
250 bbl/Day
CAD 102.00-111.45 / bbl
The Group’s gains and losses on risk management contracts are presented in the following table.
Unrealised (gain) on risk management contracts
Realised (gain) / loss on risk management contracts
Total (gain) / loss on risk management contracts
2023
£’000
(860)
(1,188)
(2,048)
2022
£’000
(858)
19,848
18,990
WTI Financial Swaps
WTI Financial Swaps
WTI Financial Swaps
WTI Financial Swaps
WTI Financial Swaps
WTI Financial Collar
WTI Financial Collar
WTI Financial Collar
WTI Financial Collar
WTI Financial Collar
WTI Financial Collar
WTI Financial Collar
WTI Financial Collar
WTI Financial Collar
WTI Financial Collar
WTI Financial Collar
i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
18 Risk management contracts - continued
The carrying value of the Group’s risk management contracts are present in the following table.
Current asset
Current liability
Net current asset
31 December 2023
£’000
1,701
(136)
1,565
31 December 2022
£’000
1,111
(381)
730
19
Authorised, issued and called-up share capital
Issuance
date
Ordinary
shares
Deferred
shares
Nominal
value per
Share
Ordinary
shares
Deferred
shares
Share
premium
before
share
issuance
costs
Share
issuance
costs
Share
premium
after
Share
issuance
costs
At 31 December 2021
Shares
Shares
1,126,425,992
5,000
Issued on exercise of 5 pence options
Various
40,860,277
Issued on exercise of 6.1 pence options
Various
7,994,653
Issued on exercise of 11 pence options
Various
17,450,451
–
–
–
£
–
0.0001
0.0001
0.0001
£’000
£’000
£’000
£’000
£’000
113
50
46,203
(2,000)
44,203
4
1
1
–
–
–
2,038
487
1,918
–
–
–
2,038
487
1,918
At 31 December 2022
1,192,731,373
5,000
–
119
50
50,646
(2,000)
48,646
Issued on exercise of 5 pence options
12 Oct 23
573,199
Capital reduction **
13 Nov 23
–
At 31 December 2023
1,202,447,663
5,000
–
–
–
–
–
0.0001
0.0001
0.0001
0.0001
–
–
–
1
–
–
–
–
–
–
–
–
12
2,045
–
28
–
–
–
–
12
2,045
–
28
(52,731)
2,000
(50,731)
120
50
–
–
–
* The cancellation of shares related to unclaimed shares from the Toscana acquisition which completed in 2020.
The time limit to claim the shares had expired and 25,503 ordinary shares reverted to the Company to be held in
treasury and were subsequently cancelled.
** On 13 November 2023 the Registrar of Companies registered the cancellation of i3’s share premium account.
The £50.7 million balance of the Group’s share premium net of share issuance costs was accordingly transferred
to retained earnings. This increased distributable reserves to enable the Company to continue paying dividends.
The ordinary shares confer the right to vote at general meetings of the Company, to a repayment of capital in the
event of liquidation or winding up and certain other rights as set out in the Company’s articles of association.
The deferred shares do not confer any voting rights at general meetings of the Company and do confer a right to
a repayment of capital in the event of liquidation or winding up, they do not confer any dividend rights or any of
redemption.
WTI Financial Swaps
1 Sep 2024
30 Sep 2024
250 bbl/Day
CAD 102.18 / bbl
Issued on exercise of 11 pence options
9 Jan 23
116,667
Issued on exercise of 0.01 pence warrants
25 Apr 23
9,051,927
1 Jan 2024
31 Mar 2024
250 bbl/Day
CAD 100.00-121.32 / bbl
Cancellation of shares *
29 May 23
(25,503)
095
i3 Energy PLC
93
I3 ENERGY PLC
096
i3 Energy PLC
92
I3 ENERGY PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
19 Authorised, issued and called-up share capital - continued
During the year ended 31 December 2023 the Company declared dividends as summarised in the following table:
Declaration date
Ex-Dividend date
Record date
Payment date
12 January 2023
19 January 2023
20 January 2023
10 February 2023
8 February 2023
16 February 2023
17 February 2023
10 March 2023
15 March 2023
23 March 2023
24 March 2023
14 April 2023
12 April 2023
17 May 2023
20 April 2023
21 April 2023
12 May 2023
25 May 2023
26 May 2023
16 June 2023
2 October 2023
12 October 2023
13 October 2023
27 October 2023
Total
Dividend per
share
(pence)
0.1710
0.1710
0.1710
0.1710
0.1710
0.2565
1.1115
Total Dividend
£’000
2,040
2,040
2,040
2,040
2,055
3,083
13,298
During the year ended 31 December 2022 the Company declared dividends as summarised in the following table:
Declaration date
Ex-Dividend date
Record date
Payment date
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
11 May 2022
8 June 2022
6 July 2022
14 April 2022
19 April 2022
6 May 2022
19 May 2022
20 May 2022
10 June 2022
16 June 2022
17 June 2022
8 July 2022
14 July 2022
15 July 2022
5 August 2022
3 August 2022
11 August 2022
12 August 2022
2 September 2022
7 September 2022
14 September 2022 15 September 2022
7 October 2022
5 October 2022
13 October 2022
14 October 2022
4 November 2022
2 November 2022
10 November 2022 11 November 2022
2 December 2022
22 December 2022
5 January 2023
6 January 2023
27 January 2023
Total
Dividend per
share
(pence)
0.1050
0.1050
0.1050
0.1425
0.1425
0.1425
0.1425
0.1425
0.1425
0.1425
0.1710
1.4835
Total Dividend
£’000
1,183
1,183
1,183
1,604
1,700
1,700
1,700
1,700
1,700
1,700
2,040
17,393
i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
20
Share-based payments
Employee and NED share options
During the year the Group had share based payment expense relating to share options of £581 thousand (2022:
£1,092 thousand). Details on the employee and NED share options outstanding for the Group and Company during
the period are as follows:
Number of options Weighted average
exercise price
Weighted average
contractual life
At 31 December 2021
5p options exercised during the period
6.1p options exercised during the period
11p options exercised during the period
Granted during the period
Forfeited during the period
At 31 December 2022
5p options exercised during the period
11p options exercised during the period
Granted during the period
Forfeited during the period
At 31 December 2023
143,960,375
(67,006,794)
(12,454,359)
(35,085,877)
2,700,000
(708,390)
31,404,955
(573,199)
(116,667)
21,509,470
(2,757,490)
49,467,069
(pence)
7.48
5.00
6.10
11.00
24.10
11.00
10.72
5.00
11.00
12.55
10,92
11.57
9.22
8.54
8.54
9.09
10.00
8.84
7.93
7.25
8.94
10.00
7.55
9.19
On 9 November 2023, the Company issued options over a total of 17,959,470 ordinary shares to i3 staff and
directors. The options were issued in accordance with the rules of the Company's Employee Share Option Plan at
an exercise price of 11.3 pence per share. Of the options issued to employees of i3 Canada and i3 Energy plc,
one-third of the options vest on achieving production of 26,000 boepd (this target to be adjusted downwards by the
production volume associated with any i3 divestment in the period), one-third of the options vest on the acquisition
of 5,000 boepd, and the final one-third of the options vest on the addition of 25 mmbbls of 2P reserves. Of the
options issued to employees of i3 North Sea Limited, one-third of the options vest on FDP of Serenity, on-third of
the options vest on acquisition of 2,500 boepd, and the final one-third of the options vest on addition of 10 mmbbls
of 2P reserves. The options will otherwise vest one-third each year, on the anniversary of the grant, if not vested
in accordance with the conditions above. The fair value was calculated using the Black Scholes model with inputs
for stock price of 11.30 pence, exercise price of 11.30 pence, time to maturity of 10 years, volatility of 94%, the
Risk-Free Interest rate of 4.275%, and a dividend yield of 9%. The resulting fair value of £676 thousand will be
expensed over the expected vesting period.
On 26 July 2023, the Company issued options over a total of 550,000 ordinary shares to new employees of i3
Canada. The options were issued in accordance with the rules of the Company's Employee Share Option Plan at
an exercise price of 12.78 pence, the closing price on 26 July 2023. The options have the same vesting conditions
as those issued on 18 April 2023. The fair value was calculated using the Black Scholes model with inputs for share
price of 12.78 pence, exercise price of 12.78 pence, time to maturity of 10 years, volatility of 96%, the Risk-Free
Interest rate of 4.307%, and a dividend yield of 8%. The resulting fair value of £27 thousand will be expensed over
the expected vesting period.
097
i3 Energy PLC
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I3 ENERGY PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
Notes To the Group Financial Statements
20 Share-based payments - continued
21
Related party transactions
On 18 April 2023, the Company issued options over a total of 3,000,000 ordinary shares to the CFO, a Person
Discharging Managerial Responsibilities of the Company. The options were issued in accordance with the rules of
the Company's Employee Share Option Plan at an exercise price of 20.00 pence per share, the closing price on
18 April 2023. The fair value was calculated using the Black Scholes model with inputs for share price of 20.00
pence, exercise price of 20.00 pence, time to maturity of 10 years, volatility of 97%, the Risk-Free Interest rate of
3.742%, and a dividend yield of 10%. One-third of the options will vest upon achieving production of 26,000 boepd,
one-third upon the addition of 5,000 boepd via acquisitions, and one-third upon the addition of 25 MMbbl of 2P
reserves. The award shall vest as to one-third upon the first, second, and third anniversary of the grant date, to the
extent the award has not otherwise vested in accordance with the above provisions. The resulting fair value of
£179 thousand will be expensed over the expected vesting period.
In May 2022, i3 employees and directors elected to exercise options over an aggregate 114,547,030 ordinary
shares of i3 Energy plc. The Company primarily settled in ordinary shares only the post-tax in-the-money value of
the options (based on c28 pence per share), which resulted in the issuance of 66,305,381 ordinary shares which
were admitted to trading on 6 June 2022. £635 thousand in proceeds was collected from employees who elected
not to settle their strike price through a reduction in ordinary shares received. £6,324 thousand in employment tax
was settled by the Company with the relevant taxation authorities on behalf of the employees which has been
recorded within equity as a deduction from retained earnings. £6 thousand was recorded as an increase to the
ordinary shares account, which represents the number of ordinary shares issued multiplied by their nominal value
of £0.001 per share. £4,443 thousand was recorded as an increase to the share premium account, which
represents the number of ordinary shares issued multiplied by the excess in the respective strike prices over the
nominal value of the shares. £3,883 thousand has been recorded as a decrease to the share-based payment
reserve, which represents the strike price settled through surrendered shares.
Throughout 2022, the Company issued options over a total of 2,700,000 ordinary to new employees of i3 Canada.
The options were issued in accordance with the rules of the Company's Employee Share Option Plan at exercise
prices equal to the market price of i3 shares at the date of the grants, which ranged from 21.55 pence to 29.40
pence per share. One-third of the options will vest on each of the 12-month, 24-month, and 36-month anniversaries
of the employment start dates. The fair values were calculated using the Black Scholes model with inputs for stock
price and exercise price ranging from 21.55 pence to 29.40 pence per share, time to maturity of 10 years, volatility
ranging from 100% to 104%, the Risk-Free Interest rate ranging from 1.90% to 3.15%, and a dividend yield ranging
from 6% to 8%. The resulting fair value of £278 thousand will be expensed over the expected vesting period.
7,960,369 outstanding employee share options as at 31 December 2023 were fully vested and exercisable.
Warrants
Details on the warrants outstanding during the period are as follows:
Number of warrants Weighted average
exercise price
Weighted average
contractual life
13,277,131
(4,225,204)
9,051,927
(9,051,927)
–
(pence)
15.07
47.34
0.01
0.01
–
1.85
NA
0.42
NA
–
At 31 December 2021
Expired in the period
At 31 December 2022
Exercised in the period
At 31 December 2023
EMI options
The Company operates an Employee Management Incentive (EMI) share option scheme. Grants were made on
14 April 2016 and 6 December 2016. The scheme is based on eligible employees being granted EMI options. The
right to exercise the option is at the employee’s discretion for a ten-year period from the date of issuance.
250,000 options were exercised on 1 October 2021 at a price of £0.11 per share. The remaining 250,000 options
expired during the year. There were no EMI options outstanding at 31 December 2023.
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on
consolidation and are not disclosed in this note.
Remuneration of Key Management Personnel
Directors of the Group are considered to be Key Management Personnel. The remuneration of the Directors is set
out in note 10.
Ultimate parent
There is no ultimate controlling party of the Group.
22
Financial instruments, financial and capital risk management
Financial instruments
Fair value measurements
The Group carries risk management contracts, and prior to the redemption of the deferred invoice balance with
BHGE in Q4 2022, non-current accounts payable at FVTPL. The fair value of the risk management contracts is
determined by discounting at a risk-free rate the difference between the contracted prices and the published forward
curves at the reporting date. The fair value of non-current accounts payable was determined by subtracting the
value of the Warrant Shares, being the 5,277,045 Warrant Shares multiplied by the higher of (i) the quoted price of
one i3 share at the reporting date, and (ii) the 5-day volume weighted average value of one i3 share during the 5-
day dealing period to 17 September 2021, from the remaining Deferred Payment Invoice Balance. The risk
management contracts and non-current accounts payable are classified as Level 2 valuations within the fair value
hierarchy as defined by IFRS 13 Fair Value Measurement which is as follows:
•
•
•
Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for
identical assets or liabilities;
Level 2 fair value measurements are those derived from inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived
from prices); and
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the
asset or liability that are not based on observable market data (unobservable inputs).
There were no financial assets or liabilities measured at Level 1 or 3 or reclassified between Levels 1, 2 or 3 during
the year.
The fair value of the Group’s financial assets and liabilities approximate to their carrying amounts at the reporting
date. The following tables combine information about the Group’s classes of financial instruments and their fair
value and carrying amounts at the reporting date.
099
i3 Energy PLC
96
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97
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0100
I3 ENERGY PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
Notes To the Group Financial Statements
22 Financial instruments, financial and capital risk management - continued
22 Financial instruments, financial and capital risk management - continued
Carried at FVTPL Carried at amortised
cost
a Market risk
i
Foreign exchange risk
As at 31 December 2023
Financial assets
Cash and cash equivalents
Trade and other receivables
Income taxes receivable
Risk management contracts (Level 2)
Total
Financial liabilities
Trade and other payables
Risk management contracts (Level 2)
Borrowings and leases
Other non-current liabilities
Total
As at 31 December 2022
Financial assets
Cash and cash equivalents
Trade and other receivables
Risk management contracts (Level 2)
Total
Financial liabilities
Trade and other payables
Income taxes payable
Risk management contracts (Level 2)
Borrowings and leases
Total
–
–
–
1,701
1,701
–
136
–
–
136
23,507
20,534
205
–
44,246
24,640
–
34,569
84
59,293
Carried at FVTPL Carried at amortised
cost
–
–
1,111
1,111
–
–
381
–
381
16,560
34,843
–
51,403
45,973
9,873
–
27,241
83,087
All financial assets and liabilities of the Company were carried at amortised cost at 31 December 2023 and 2022.
The fair value of the Company’s financial assets and liabilities approximate to their carrying amounts at the reporting
date.
Financial risk management
Financial risk factors
The Group’s activities expose it to a variety of financial risks; market risk (including foreign currency risk and price
risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability
of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance.
Risk management is carried out by the Board of Directors under policies approved at Board meetings. The Board
frequently discusses principles for overall risk management including policies for specific areas such as foreign
exchange.
The Group is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to
the UK pound sterling and the Canadian dollar and US dollar. Foreign exchange risk arises from recognised
monetary assets and liabilities (USD and CAD bank accounts) where they may be denominated in a currency that
is not the local functional currency. The Group mitigates is foreign exchange exposure by holding monetary assets
and liabilities primarily in the local functional currency. All of the monetary assets and liabilities held by the Group’s
Canadian operations were held in CAD, the functional currency, and therefore there is no foreign exchange
exposure in the Canadian operations. The UK operations did not hold significant monetary assets or liabilities in
currencies other than UK pound sterling as at 31 December 2023 with the exception of the Debt Facility which is
denominated in CAD. A 10% strengthening of GBP against CAD as at 31 December 2023 would have increased
foreign exchange gains for the Group and Company by £3,247 thousand, and a 10% weakening of GBP to CAD
would have increased foreign exchange losses for the Group and Company by £3,969 thousand. No comparable
figures are provided as the Debt Facility was entered into in May 2023.
The Group is also exposed to exchange differences on translation of its foreign operations in Canada, which
resulted in a loss of £4,222 thousand for the year ended 31 December 2023 (2022: gain of £6,529 thousand). A
10% strengthening of GBP against CAD as at 31 December 2023 would have resulted in a loss on translation of
£16,344 thousand (2022: £7,073 thousand), and a 10% weakening of GBP to CAD would have resulted in a gain
of £10,593 thousand (2021: £23,152 thousand). Profit after tax would not be impacted.
b Credit risk
Credit risk arises from cash and cash equivalents and trade receivables from the sale of hydrocarbons. It is Group
policy to assess the credit risk of new customers.
The Group considers the credit ratings of banks in which it holds funds in order to reduce exposure to credit risk.
The Group will only keep its holdings of cash with institutions which have a minimum credit rating of ‘A’. The Group
sells hydrocarbons to reputable purchasers and are settled the month following their sale. Long-term deposits for
decommissioning provisions are lodged with government bodies. The carrying value of cash and cash equivalents
and trade and other receivables represents the Group’s maximum exposure to credit risk at year end.
The Group considers that it is not exposed to major concentrations of credit risk.
The Group holds cash as a liquid resource to fund its obligations. The Group’s cash balances are held in Sterling
Canadian Dollar, and US Dollar. The Group’s strategy for managing cash is to maximise interest income whilst
ensuring its availability to match the profile of the Group’s expenditure. This is achieved by regular monitoring of
interest rates and monthly review of expenditure forecasts.
c
Liquidity risk
The Group relies upon debt and equity funding, and cash flow from its Canadian operations to finance operations.
The Directors are confident that adequate liquidity will be forthcoming with which to finance operations. Controls
over expenditure are carefully managed.
The Group ensures that its liquidity is maintained by a management process which includes projecting cash flows
and considering the level of liquid assets in relation thereto, monitoring Balance Sheet liquidity and maintaining
funding sources and back-up facilities.
i3 Energy PLC
0101
98
i3 Energy PLC
99
I3 ENERGY PLC
0102
I3 ENERGY PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
Notes To the Group Financial Statements
22 Financial instruments, financial and capital risk management - continued
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
£’000
27,539
9,027
–
36,566
£’000
101
8,667
–
8,768
£’000
–
16,249
50
16,299
£’000
–
6,347
34
6,381
6 Months
6-12 months
1-2 years
2+ years
£’000
45,973
9,873
22,000
7,204
85,050
£’000
£’000
£’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
£’000
27,640
40,290
84
68,014
Total
£’000
45,973
9,873
22,000
7,204
85,050
Trade and other payables
Borrowings and leases
Other non-current liability
At 31 December 2023
Trade and other payables
Income taxes payable
H1 2019 LNs
H1 2019 cash and PIK interest
At 31 December 2022
d Commodity price risk
Commodity price risk in the Group primarily arises from price fluctuations in markets for the Group’s oil, gas and
NGL products. Commodity prices can be volatile and may be impacted by various supply and demand factors
which are outside the Group’s control. Fluctuations in commodity prices could have a significant impact on future
results of operations, cash flow generation, and development opportunities.
The Group manages commodity price risks by entering a variety of risk management contracts. Further details of
risk management contracts at 31 December 2023 are provided in note 18, and of risk management contracts
entered after the reporting period are provided in note 24.
The following table illustrates the impact on the Group’s profit before tax and equity due to reasonably possible
changes in commodity prices and their impact on the fair value of financial instruments, which pertain to the Group’s
financial risk management contracts, with all other variables held constant.
Decrease in
commodity price /
increase in profit
before loss and
equity
Increase in
commodity price /
(decrease) in profit
before loss and
equity
£’000
1,793
£’000
(2,920)
Change in WTI – CAD 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 £34,569 thousand at 31 December 2023 (2022: £27,241 thousand) (note 16), has capital, defined
as the total equity and reserves of the Group of £162,995 thousand (2022: £164,746 thousand) and cash and
equivalents of £23,507 thousand (2022: £16,560 thousand).
The Group monitors its level of cash resources available against future planned exploration and evaluation activities
and may issue new shares in order to raise further funds from time to time.
23
Commitments
At 31 December 2023
Operating
Transportation
Total
1 year
£’000
92
1,810
1,902
2-3 years
4-5 years
5+ years
£’000
112
1,418
1,530
£’000
£’000
–
349
349
–
4
4
Total
£’000
204
3,581
3,785
Transportation commitments relate to take-or-pay pipeline capacity in Alberta.
The Group did not have any capital commitments as at 31 December 2023 or 2022.
24
Events after the reporting period
After 31 December 2023 i3 entered into various risk management contracts, as summarised below.
Type
Effective date
Termination date
Total Volume
Avg. Price
AECO 5A Financial Swaps
1 Apr 2024
31 Mar 2025
15,000 GJ/Day
CAD 2.5200 / GJ
AECO 5A Financial Swaps
1 Nov 2024
31 Mar 2025
5,000 GJ/Day
CAD 3.2000 / GJ
AECO 5A Physical Swaps
1 Apr 2025
30 Apr 2025
2,500 GJ/Day
CAD 2.7700 / GJ
AECO 5A Physical Swaps
1 Apr 2025
31 Dec 2025
7,500 GJ/Day
CAD 3.1167 / GJ
WTI Financial Swaps
WTI Financial Swaps
WTI Financial Swaps
WTI Financial Swaps
WTI Financial Swaps
WTI Financial Swaps
WTI Financial Swaps
WTI Financial Swaps
WTI Financial Swaps
WTI Financial Swaps
WTI Financial Swaps
WTI Financial Swaps
WTI Financial Swaps
WTI Financial Swaps
WTI Financial Collar
WTI Financial Collar
WTI Financial Collar
WTI Financial Collar
WTI Financial Collar
WTI Financial Collar
WTI Financial Collar
1 Mar 2024
31 Mar 2024
250 bbl/Day
CAD 100.90 / bbl
1 Apr 2024
30 Jun 2024
250 bbl/Day
CAD 100.15 / bbl
1 Jul 2024
30 Sep 2024
250 bbl/Day
CAD 99.14 / bbl
1 Oct 2024
31 Oct 2024
150 bbl/Day
CAD 97.32 / bbl
1 Oct 2024
31 Dec 2024
1,200 bbl/Day
CAD 95.89 / bbl
1 Nov 2024
30 Nov 2024
500 bbl/Day
CAD 103.40 / bbl
1 Dec 2024
31 Dec 2024
500 bbl/Day
CAD 102.50 / bbl
1 Jan 2025
31 Jan 2025
1,050 bbl/Day
CAD 99.03/ bbl
1 Jan 2025
31 Mar 2025
200 bbl/Day
CAD 101.20 / bbl
1 Feb 2025
28 Feb 2025
400 bbl/Day
CAD 102.33 / bbl
1 Mar 2025
31 Mar 2025
400 bbl/Day
CAD 101.63 / bbl
1 Apr 2025
30 Apr 2025
1,000 bbl/Day
CAD 102.49 / bbl
1 Feb 2025
28 Feb 2025
400 bbl/Day
USD 76.55 / bbl
1 Mar 2025
31 Mar 2025
400 bbl/Day
USD 75.95 / bbl
1 Apr 2024
31 May 2024
250 bbl/Day CAD 90.00-110.65 / bbl
1 Nov 2024
30 Nov 2024
200 bbl/Day CAD 100.00-112.55 / bbl
1 Dec 2024
31 Dec 2024
200 bbl/Day CAD 100.00-110.15 / bbl
1 Jan 2025
31 Jan 2025
200 bbl/Day CAD 100.00-110.50 / bbl
1 Jan 2025
31 Jan 2025
250 bbl/Day CAD 100.00-110.00 / bbl
1 Feb 2025
28 Feb 2025
250 bbl/Day CAD 100.00-112.25 / bbl
1 Mar 2025
31 Mar 2025
250 bbl/Day CAD 100.00-110.45 / bbl
Conway Financial Swap
1 Jan 2025
31 Mar 2025
250 bbl/Day
USD 0.8325 / gal
0103
i3 Energy PLC
100
i3 Energy PLC
101
I3 ENERGY PLC
0104
I3 ENERGY PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
Notes To the Group Financial Statements
24 Events afters the reporting period - continued
In early-2024 the Company has declared dividends as summarised in the following table:
Declaration date
Ex-Dividend date
Record date
Payment date
9 January 2024
18 January 2024
19 January 2024
9 February 2024
4 April 2024
11 April 2024
12 April 2024
3 May 2024
Total
Dividend per
share
Total Dividend
(pence)
0.2565
0.2565
0.5130
£’000
3,084
3,084
6,168
On 11 March 2024 the Group announced a further reduction of capital following the transition of the Company
standalone financial statements from FRS 101 to UK-adopted international accounting standards as described in
further detail in note 2 and note 8 to the Company Financial Statements. This adoption resulted in a transition
reserve of £148,517 thousand which will be capitalised by way of a bonus issue of newly created capital reduction
shares with a nominal value of £0.0001 and share premium of £0.1234 for each share. Following the bonus issue,
the standing credit of £148,397 thousand in the Company’s share premium account will be cancelled. This is
expected to occur within the first half of 2024 and will increase distributable reserves in the Company to facilitate
the future payment of dividends (in cash or otherwise) to Shareholders, where justified by the profits of the
Company, or to allow the redemption or buy-back of the Company's shares (or other distributions to Shareholders).
On 25 March 2024 the Group announcement the establishment of a CAD 75 million reserve-based lending facility
(the “Credit Facility“). The Credit Facility agreement was entered into by i3 Canada with the National Bank of
Canada and comprises a CAD 55 million revolving facility and a CAD 20 million operating loan facility. The two-
year term of the Credit Facility is expected to be extended on an annual basis, subject to lender approval. The
interest rate on the outstanding portion of the revolving facility depends on certain ratios and at inception will be
Canadian Prime Rate plus 2.00%, with the option to change to Canadian Overnight Repo Rate plus 3.00%. The
Credit Facility is secured against substantially all the assets and shares of i3 Canada. The Group initially drew CAD
27 million on the Credit Facility, which was used along with cash on hand to repay the Debt Facility with Trafigura
without any prepayment penalty. The balance of undrawn credit will be available for general corporate purposes,
including working capital requirements, acceleration of organic growth from i3’s proven portfolio of development
drilling locations, and to fund accretive acquisition opportunities.
On 25 March 2024 the Group announced the reserves of i3 Canada as of 31 December 2023. Highlights include
Company Interest PDP reserves of 47MMboe, 1P reserves of 93MMboe, and 2P reserves of 180MMboe. Further
details can be found on the Company’s website at www.i3.energy.
On 17 April 2024 the Group announced the partial sale of i3 Canada’s royalty assets for a total gross cash
consideration of CAD 33.5 million before customary closing adjustments. A portion of the proceeds on disposition
were used to fully eliminate the Group’s outstanding indebtedness on the credit facility. The balance, along with
the fully undrawn amount of CAD 75 million on the Credit Facility, will be used for general corporate purposes and
to support both its organic and inorganic initiatives.
0105
i3 Energy PLC
102
i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
Company Statement of Financial Position
COMPANY STATEMENT OF FINANCIAL POSITION
Assets
Non-current assets
Investment in subsidiaries
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
Borrowings (current)
Trade and other payables
Total current liabilities
Net current (liabilities) / assets
Borrowings (non-current)
Other non-current liabilities
Total non-current liabilities
Net assets
Capital and reserves
Ordinary shares
Deferred shares
Share premium
Share-based payment reserve
Warrants – LNs
Transition reserve
Retained earnings
Shareholders’ funds
Company number 10699593
Notes
31 December 2023
31 December 2022
£’000
£’000
31 December 2021
£’000
* Restated
* Restated
4
4
5
7
6
7
148,841
99,547
–
248,388
33
83
116
(14,001)
(828)
(14,829)
(14,713)
(20,568)
(10)
(20,578)
148,841
74,708
75
148,841
99,861
75
223,624
248,777
1,666
90
1,756
–
(2,654)
(2,654)
(898)
–
–
–
66
140
206
–
(131)
(131)
75
–
–
–
213,097
222,726
248,852
120
50
–
6,888
–
148,517
57,522
213,097
119
50
48,646
6,307
2,045
148,517
17,042
222,726
113
50
44,203
9,098
2,045
148,517
44,826
248,852
* Restated for adoption of UK IFRS in the year. Further discussion is provided in note 8.
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 profit for the Company for the year was £3,047 thousand (2022: loss of
£4,067 thousand).
The accompanying notes form an integral part of these financial statements.
Signed on behalf of the Board of Directors by:
Majid Shafiq, Director
26 April 2024
i3 Energy PLC
I3 ENERGY PLC
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i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
Company Statement of Changes in Equity
i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
Company Statement of Cash Flow
COMPANY STATEMENT OF CHANGES IN EQUITY
COMPANY STATEMENT OF CASH FLOW
Ordinary
shares
Share
premium
Deferred
shares
Share-
based
payment
reserve
N
o
t
e
s
Warrants -
LNs
Transition
Reserve
Retained
earnings
Total
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
Balance at 31 December 2021 (as reported)
113
44,203
UK IFRS Adoption (note 8)
–
–
Balance at 31 December 2021 * Restated
113
44,203
Total comprehensive loss for the year
Transactions with owners:
Exercise of options
Share-based payment expense
Dividends declared
–
6
–
–
–
4,443
–
–
50
–
50
–
–
–
–
9,098
2,045
148,517
44,826
100.335
–
–
148,517
–
148,517
9,098
2,045
148,517
44,826
248,852
–
(3,883)
1,092
–
–
–
–
–
–
–
–
–
–
(4,067)
(4,067)
(6,324)
(5,758)
–
1,092
(17,393)
(17,393)
Balance at 31 December 2022 * Restated
119
48,646
50
6,307
2,045
148,517
17,042
222,726
Total comprehensive income for the
year
Capital reduction
Transactions with owners:
Exercise of options
Exercise of warrants
Share-based payment expense
Dividends declared
Balance at 31 December 2023
120
–
–
–
(50,731)
–
1
–
–
40
2,045
–
–
–
–
–
–
–
–
–
–
–
–
–
581
–
50
6,888
–
–
–
(2,045)
–
–
–
–
–
–
–
–
–
–
3,047
3,047
50,731
–
–
–
–
40
1
581
(13,298)
(13,298)
148,517
57,522
213,097
* Restated for adoption of UK IFRS in the year. Further discussion is provided in note 8.
The accompanying notes form an integral part of these financial statements.
OPERATING ACTIVITIES
Profit / (loss) before tax
Adjustments for:
Finance costs
Unrealised FX gain
Share-based payments expense – employees (including NEDs)
Current tax expense
Changes in non-cash working capital – operating activities
Net cash from operating activities
INVESTING ACTIVITIES
Net loans (to) / from subsidiary companies
Net cash used in investing activities
FINANCING ACTIVITIES
Exercise of warrants and options
Employee tax on exercised share options
Issuance of debt facility
Payment of deferred finance costs
Principal payments on debt facility
Interest and other finance charges paid
Dividends declared
Changes in non-cash working capital – financing activities
Net cash used in financing activities
Effect of exchange rate changes on cash
Net Increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
CASH AND CASH EQUIVALENTS, END OF YEAR
Notes
Year ended 31
December 2023
Year ended 31
December 2022
£’000
£’000
3,570
(4,067)
4
7
7
7
7
7
3,022
(11)
581
(525)
231
6,868
(24,839)
(24,839)
42
–
44,481
(2,039)
(8,636)
(2,258)
(13,298)
(2,040)
16,252
86
(1,633)
1,666
33
–
(88)
1,092
–
532
(2,531)
25,153
25,153
635
(6,432)
–
–
–
–
(17,393)
2,040
(21,150)
128
1,600
66
1,666
The accompanying notes form an integral part of these financial statements.
0107
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i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
Notes To the Company Financial Statements
i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
Notes To the Company Financial Statements
NOTES TO THE COMPANY FINANCIAL STATEMENTS
4
Investment in subsidiaries
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 financial statements of i3 Energy plc have been prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006.
In 2023 the Company transitioned from FRS101 and adopted UK-adopted international accounting standards for the
first time. The effect of first-time adoption of UK-adopted international accounting standards is set out in note 8. As this
required retrospective application, an opening balance sheet has been presented.
Fees payable to the Company’s auditors by the Group are set out in note 7 to the Group 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 accounting 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 and investments subsidiaries
At 31 December 2023, the Company held loans to subsidiaries of £99.5 million (2022: £74.7 million) and
investments in subsidiaries of £148.8 million (2022: £148.8 million), note 4. The carrying value of loans to and
investments in 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 Ltd. 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 for either. The same cash
flow model used to determine the recoverable amount for the E&E assets was used to estimate the expected
lifetime credit loss on the balances due from i3 Energy North Sea Limited, and as the projected cash flows exceed
the cash flows that are due to the Company under the contract, Management has concluded that there is no
impairment. Further details are in note 3 and note 13 to the Group financial statements. Accordingly, through the
expected recoverability of these E&E and PP&E assets, Management expects the Group to recover the carrying
value of its loans to subsidiaries.
i3 Energy PLC
106
At 31 December 2023 the Company held 100% of the share capital of the following directly 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
Ltd.
Canada
500,207 9th Avenue SW
Calgary, AB T2P 1K3
100%
Exploration &
Production
As at 31 December 2022
Additions
As at 31 December 2023
Total
£’000
148,841
–
148,841
For the year ended 31 December 2023, i3 Energy North Sea Limited was entitled to exemption from audit under
section 479A of the Companies Act 2006.
As at 31 December 2023 the Company had total net funds receivable from subsidiaries of £99,547 thousand (2022:
£74,708 thousand). Included within these balances are management service fees of £643 thousand (2022: £1,479
thousand) for administrative services provided to i3 Canada and £5,254 thousand (2022: nil) for interest charges
on intercompany loans to i3 Canada.
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 2023
£’000
10
73
83
31 December 2022
£’000
2
88
90
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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i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
Notes To the Company Financial Statements
6
Trade and other payables
Trade creditors
Dividends payable
Accruals
Cash pool LTIP awards – current liability
Total trade and other payables
31 December 2023
£’000
118
–
697
13
828
31 December 2022
£’000
46
2,040
568
–
2,654
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 7 – Administrative expenses
• Note 16 – Borrowings
• 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
i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
Notes To the Company Financial Statements
8
First-time adoption of UK-adopted international accounting
standards
In 2023 the Company transitioned to preparing its separate financial statements in accordance with UK-adopted
international accounting standards (“UK IFRS”) for the first time, having previously prepared its separate financial
statements in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (“FRS 101”).
For periods up to and including 31 December 2019, the Company had previously prepared its separate financial
statements in accordance with International Financial Reporting Standards (“EU IFRS”) as adopted by the
European Union.
In 2020, the Company transitioned to FRS 101 in order to obtain the efficiencies available from the reduced
disclosure framework. In 2023, the Company transitioned to UK-IFRS in order to more fully reflect the value of the
group in the parent company balance sheet, and pursuant to distributable reserves planning to facilitate continuing
dividend payments.
The Company has taken the option to apply IFRS 1 First-time Adoption of International Financial Reporting
Standards as the accounts of the preceding period were not IFRS accounts.
The Company has elected to use fair value as the deemed cost of its investment in i3 Energy Canada Limited as
at the date of transition to UK IFRS, being 1 January 2022. The fair value of £148,695 thousand compared to the
FRS 101 carrying amount of £178 thousand, resulting in an amount of £148,517 thousand credited to an
undistributable IFRS-transition reserve in equity.
The measurement of the fair value of the investment in i3 Energy Canda Ltd. was made using significant
unobservable inputs based on a third-party reserve valuation obtained as at the date of transition and applying a
median discount rate of 10% to the after tax estimated future net cash flows of the Group’s PDP reserves. The
equity value of i3 Energy Canada Ltd. was adjusted by its net debt which was considered not materially different
to the carrying amount of its financial assets and liabilities.
No other assets were measured at deemed cost and no other exceptions to the retrospective application of other
IFRSs have been taken.
There was no impact on total comprehensive income reported in prior periods.
A reconciliation of total equity is as follows:
Total equity reported in accordance with FRS 101
Fair value as deemed cost of investment in i3 Energy Canada Ltd.
Total equity reported in accordance with UK IFRS
31 December 2022
£’000
74,209
148,517
222,726
31 December 2021
£’000
100,335
148,517
248,852
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i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
Appendix A: Glossary
Appendix A: Glossary
APPENDIX A: GLOSSARY
1P
2P
3CA
AER
AIF
AIM
APM
ARO
bbl
bbl/d
BHGE
BOE
Proved reserves
Proved plus probable reserves
3 Consultant’s Average, being the average of price forecasts of GLJ Ltd., McDaniel
& Associates Consultants Ltd., and Sproule
Alberta Energy Regulator
Annual Information Form
The AIM Market of the London Stock Exchange
Alternate Performance Measure
Asset Retirement Obligation
Barrel
Barrels per day
Baker Hughes, a GE Company, and GE Oil & Gas Limited
Barrels of Oil Equivalent
boepd, boe/d
Barrels of Oil Equivalent Per Day
CAD
Canadian Dollars
Cenovus, CVE
Cenovus Energy Inc.
CEO
CFO
CO2e
the Code
Company
CPR
Chief Executive Officer
Chief Financial Officer
Carbon dioxide
QCA Corporate Governance Code
i3 Energy plc
Competent person’s report
Credit Facility
Reserve-based lending facility, dated 22 March 2024
Debt facility
Prepayment Agreement with Trafigura, dated 31 May 2023
E&E
EPL
ERP
Europa
FCF
FIA
FVTPL
Exploration and evaluation
Energy Profits Levy
Emergency Response Plan
Europa Oil & Gas Limited
Free cash flow
Farm-In Agreement
Fair Value through Profit or Loss
FX
Gain
gal
GBP
GCA
GJ
Foreign exchange
Gain Energy Ltd.
Gallon
British Pounds Sterling
Gas Cost Allowance
Gigajoule
Gross wells
Wells participated in by i3
Group, i3
i3 Canada
IAS
IFRIC
IFRS
IP30
LTIP
mcf
mcf/d
Mmcf
MMboe
MMBtu
MD&A
NGL
NED
i3 Energy plc, together with its subsidiaries
i3 Energy Canada Ltd.
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
Long term incentive plan
Thousand cubic feet
Thousand cubic feet per day
Million cubic feet
Million Barrels of Oil Equivalent
Metric Million British Thermal Unit
Management Discussion and Analysis
Natural gas liquids
Non-Executive Director
Net wells
Gross wells multiplied by i3’s working interest
NOI
NPV 10
NSTA
NTM
p.a.
PDP
PIK
PP&E
QCA
Net Operating Income
Net Present Value, discounted at 10%
UK North Sea Transition Authority
Next Twelve Months
per annum
Proved, developed, producing reserves
Payment in kind
Property, plant and equipment
Quoted Companies Alliance
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i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
Appendix A: Glossary
RFCT
SCT
SRP
Toscana
Trafigura
TSX
UKCS
Ring Fence Corporation Tax
Supplementary Charge
Alberta’s Site Rehabilitation Program
Toscana Energy Income Corporation
Trafigura Pte Ltd. and its subsidiary Trafigura Canada Ltd.
Toronto Stock Exchange
UK Continental Shelf
USD (US$)
United States Dollar
WI
Working Interest
i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
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 discussing 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 not
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 and depletion, financial costs, 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 or loss on bargain purchase and asset dispositions 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
Loss / (gain) on bargain purchase and asset dispositions
2023
£’000
15,147
38,232
8,663
5,751
67,793
–
–
2022
£’000
41,951
34,339
7,865
13,826
97,981
–
9
Adjusted EBITDA
67,793
97,990
Net operating income
Net operating income is defined as gross profit before depreciation and depletion, gains or losses on risk
management contracts, and other operating income, which equals revenue from the sale of oil and gas and
processing income, less production costs. Management believes that net operating income is a useful
supplementary 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
(Gain) / loss on risk management contracts
Other operating income
Net operating income
2023
£’000
38,782
38,232
(2,048)
(491)
74,475
2022
£’000
78,689
34,339
18,990
(286)
131,732
0115
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113
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i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
i3 Energy PLC 202 3 Annual Report and Financial Statements – Financial Statements
Appendix B: Alternate performance measures
Appendix B: Alternate performance measures
Acquisitions & Capex
Net debt
Acquisitions & Capex is defined as cash expenditures on acquisitions, PP&E, and E&E. Management believes that
Acquisition & Capex is a useful supplementary 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 flow to Acquisitions & Capex is provided below.
Net debt is defined as borrowings and leases, trade and other payables, other non-current liabilities, and incomes
taxes receivable/payable, less cash and cash equivalents and trade and other receivables. This definition was
expanded in 2023 to include other non-current liabilities which is a new account balance that arose during the year.
Management believes that net debt is a meaningful measure to monitor the liquidity position of the Group.
A reconciliation of the various line items per the statement of financial position to net debt is provided below.
Borrowings and leases
Trade and other payables
Other non-current liabilities
Income taxes (receivable) / payable
Cash and cash equivalents
Trade and other receivables
Net debt
2023
£’000
34,569
27,640
84
(205)
(23,507)
(20,534)
18,047
2022
£’000
27,241
45,973
–
9,873
(16,560)
(34,843)
31,684
Acquisitions
Expenditures on property, plant & equipment
Expenditures on exploration and evaluation assets
Acquisitions & Capex
2023
£’000
133
23,155
1,281
24,569
2022
£’000
* Restated
531
74,445
12,327
87,303
* In 2023 management has elected to change the presentation and classification of certain items within the
consolidated statement of cash flow. Further discussion is provided in note 2. Any impacted alternative
performance measures in this Appendix B were updated on a consistent basis.
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 operating activities
Expenditures on property, plant & equipment
Expenditures on exploration and evaluation assets
FCF
2023
£’000
49,608
(23,155)
(1,281)
25,172
2022
£’000
* Restated
100,655
(74,445)
(12,327)
13,883
* In 2023 management has elected to change the presentation and classification of certain items within the
consolidated statement of cash flow. Further discussion is provided in note 2. Any impacted alternative
performance measures in this Appendix B were updated on a consistent basis.
0117
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CORPORATE INFORMATION
Registered number
10699593
Directors
John Festival
Non-Executive Director and
Non-Executive Chairperson
Majid Shafiq
Chief Executive Officer
Ryan Heath
President, i3 Energy Canada Ltd.
Linda Janice Beal
Non-Executive Director
Richard Millington Ames
Non-Executive Director
Neill Ashley Carson
Non-Executive Director
Company Secretary
Burness Paull LLP
Registered Office
New Kings Court
Tollgate
Chandler’s Ford
Eastleigh, Hampshire
United Kingdom
S053 3LG
Independent Auditor
PKF Littlejohn LLP
(Registered Auditor)
15 Westferry Circus
Canary Wharf
London E14 4HD United Kingdom
Solicitors
Burness Paull LLP
50 Lothian Road
Festival Square
Edinburgh
EH3 9WJ
Norton Rose Fulbright Canada LLP
400 3rd Avenue SW, Suite 3700
Calgary, Alberta, Canada
T2P 4H2
Nominated Advisor
and Broker
WH Ireland Limited
24 Martin Lane
London
EC4R 0DR
Brokers
Tennyson Securities
23 Floor 20 Fenchurch Street
London
EC3M 3BY
Stifel Nicolaus Europe Limited
150 Cheapside
London
EC2V 6ET
Registrars
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
Principal Bankers
National Westminster Bank
National Bank of Canada
Company Website
www.i3.energy
Company Telephone Number
+44 (0) 1224 945 980
0119
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