Mr. Majid Shafiq reports

I3 ENERGY PLC ANNOUNCES Q1 UPDATE, REVISED CAPITAL & DIVIDEND PROGRAMME & INVESTOR WEBINAR

i3 Energy PLC has provided the following Q1 2023 operational and financial update, along with its revised 2023 capital and dividend program. Unless otherwise denoted, all figures are referenced in U.S. dollars.

The company will hold an investor webinar on Wednesday, July 5, 2023, at 3 p.m. BST, including a question-and-answer session (details of which can be found below).

Q1 highlights:

• Average Q1 2023 production of approximately 22,773 barrels of oil equivalent per day (boepd), representing a 24-per-cent increase from Q1 2022.
• Capitalizing on the availability of services, i3 commenced its Q1 2023 capital program in late Q4 2022 with a total of eight gross wells (5.5 net) successfully drilled by the end of Q1 2023 in its core central Alberta, Wapiti and Clearwater assets.
• Carbon dioxide equivalent emission reduction initiatives continued with electrification of 12 well sites in Carmangay and Retlaw.
• As part of i3's commitment to its total shareholder return model, dividends of 6.12 million pounds sterling ($7.71-million) were paid in Q1 2023.
• After quarter-end strengthened the company's balance sheet with the refinancing of its outstanding loan notes of approximately $50-million (Canadian) with a new $100-million (Canadian) facility.

Outlook:

• Given prevailing and forecast commodity pricing for 2023, i3 has adjusted its full-year 2023 capital and dividend program:
  • Approved capital program of $25-million plus $6-million, subject to board approval, for a revised drilling program targeting the company's Clearwater acreage. The approved and contingent drilling program in Canada is currently forecast to deliver 14 gross (8.5 net) oil-focused wells, down from the previously expected 23 (net 15.2) wells;
  • i3 approved capital program to deliver average annual production of 20,000 to 21,000 boepd, representing an increase of up to 3 per cent over 2022 production;
  • The company's adjusted dividend program is forecast to return 15.4 million pounds sterling in dividends during the first nine months of 2023.

Majid Shafiq, chief executive officer of i3 Energy, commented:

"Q1 2023 was another busy quarter for i3 as we commenced our planned 2023 drilling program in Canada, drilling production wells in central Alberta, Wapiti and key Clearwater wells in our Dawson and Marten Creek acreage. Average production in Q1 resulted in another consecutive quarter of growth, dating back to Q2 2021, which is a testament to the quality of our asset base and operations staff. Since commencement of our Canadian operations, i3 has invested circa $80-million in drilling operations, grown production from zero to over 24,000 boepd and has returned 31 million pounds sterling in dividend payments to shareholders.

"Given prevailing commodity prices and in line with our disciplined approach to capital allocation and prudent amortization and management of the company's debt, we have revised down our 2023 capital and dividend program, protecting the value of the assets and providing us with the flexibility to ramp up operations should commodity prices improve. We remain confident that our asset base, with a 2PDP NPV (10 per cent) per share of 0.36 pound sterling and P+P NPV (10 per cent) per share of 0.81 pound sterling as at Jan. 1, 2023, i3's total shareholder return model and business strategy which, subject to market conditions, optimizes growth through drilling or alternatively M&A if commodity prices remain low, will allow us to continue to deliver strong returns to shareholders."

Production update

Production in Q1 2023 averaged 22,773 boepd, comprising 69.6 million standard cubic feet of natural gas per day (mmcf/d), 5,569 barrels per day (bbl/d) of natural gas liquids (NGLs), 5,238 bbl/d of oil and condensate, and 373 boepd of royalty interest production. The strong quarterly production represents an increase of approximately 24 per cent over Q1 2022. Production growth in Q1 2023 was achieved despite the impact of gathering system pressure constraints and curtailments relating to the continuing capacity restrictions in the Pembina Peace Pipeline liquid line in the company's Wapiti area, which necessitated selling a higher proportion of hot gas rather than NGLs, and a reduction in over 500 boepd of production over the quarter. i3 expects these restrictions will be minimized or resolved by mid-Q3 2023 with the commissioning of Keyera's Key Access Pipeline System (KAPS). Despite these recent constraints, solid performance in Q1 has resulted in i3 realizing consecutive quarter-on-quarter increases in production since Q2 2021, which reflects both the predictable low-decline nature of the company's base assets and the quality of its inventory of development drilling locations.

Corporate field production estimates averaged 20,729 boepd for the seven-day period ending May 31, 2023, comprising approximately 63.6 mmcf/d of natural gas, 4,990 bbl/d of NGLs, 4,741 bbl/d of oil and condensate, and an estimated 400 boepd of gross overriding royalty interest production. Throughout May and into June, production has been affected by planned facility turnarounds, at operated and third party area gas plants. Production over this period has been further impacted by the continuing Alberta wildfires, which have curtailed production in the company's Lodgepole, Wapiti and Simonette areas. No more than 15 per cent of corporate production has been temporarily shut in at any one time throughout these events.

Hedging program

i3's risk management strategy currently protects approximately $45.6-million ($60.7-million (Canadian)) of net operating income for 2023 with current hedges in place to cover 38.9 per cent, 22.6 per cent, 18.4 per cent and 16.9 per cent of the company's projected Q1, Q2, Q3 and Q4 2023 production volumes, respectively.

Q1 2023 operational results

With the success of i3's 2022 drilling program, the company capitalized on the availability of services and accelerated a portion of its Q1 2023 program in late Q4 2022. The drilling program focused on operated oil- and liquids-rich gas wells in central Alberta (Cardium), Wapiti (Cardium, Dunvegan) and Clearwater (operated and non-operated) assets. As part of the 2023 program, the company participated in eight gross (5.5 net) wells across its drilling portfolio, including seven gross (5.0 net) operated wells and one gross (0.5 net) non-operated well.

Wapiti

In Q1, i3 and its working interest partner completed the drilling of four gross (2.0 net) horizontal wells in the Wapiti area. The wells included three gross (1.8 net) operated 1.5-mile Cardium wells and one gross (0.2 net) operated two-mile Dunvegan well. The Cardium wells were efficiently drilled off a common pad and tied in to existing production facilities, in which i3 holds a working interest, while the Dunvegan well was drilled off an existing pad and tied in to the same production facilities.

Production associated with the Q1 program at Wapiti was impacted due to high gathering system pressures, which restricted the company's ability to optimize the productive capacity of the new wells. The relevant third party area operator is scheduled to debottleneck the gathering system in late Q2 through an upgrade of existing infrastructure, which is expected to alleviate line pressure constraints, thereby eliminating restrictions on well performance, and allowing the company to optimize production from its new Wapiti wells.

Additionally, the Wapiti area has experienced unanticipated apportionment issues associated with the Pembina Peace Pipeline liquids line, which has resulted in reduced liquids yields realized by area operators. i3 expects the apportionment issues to be resolved with the coming commissioning of KAPS.

Central Alberta

i3's Q1 capital program in central Alberta was focused primarily in the greater Lodgepole area, where the company expanded its extensive infrastructure network and drilled one gross (1.0 net) well. The company's infrastructure improvements include a 2.3-kilometre pipeline to reroute production away from third party infrastructure, reducing the fee structure and improving run-time efficiencies. The rerouting project was executed on time and below budget.

i3 drilled one gross (1.0 net) horizontal Cardium oil well in the Lodgepole area of central Alberta. The well was drilled off an existing pad site and tied into its new pipeline system. The well was drilled on budget and placed on stream in late Q1. The performance of the new well has been impacted by disruptions associated with wildfires in the area. As proximal wildfires continue, or are brought under control, the company will remain focused on optimizing its production output while maintaining personnel safety as its highest priority.

Clearwater

In Q1, i3 drilled three gross (2.5 net) multilateral horizontal Clearwater wells at Dawson and Marten Creek as part of its continuing exploration and development portfolio of 144 gross sections (109 net sections, equivalent to 280 square km) of prospective Clearwater lands.

At Dawson, i3 and its 50-per-cent partner drilled the 05-16-081-16W5 six-leg (7,500 metres of total lateral length) multilateral horizontal Clearwater well. The well was drilled with oil-based mud (OBM) and placed on production in late January. After recovering the OBM drilling fluid, the well had an initial 30 days production averaging 81 barrels of oil per day (bopd) before being shut in in late March due to road bans associated with spring breakup. Scaling the well performance for an industry-standard eight-leg multilateral horizontal well configuration (10,000 m) translates, encouragingly, to an estimated 110 bopd rate. With the success of this initial earning well, i3 and its 50-per-cent partner have elected to drill the second and final earning well at Dawson, which the company anticipates will be drilled and on production prior to year-end.

At Marten Creek, i3 followed up on its 2022 recompletion activity with two gross (2.0 net) exploratory three-leg multilateral horizontal wells (retrieving a vertical core from one well). The two exploratory wells were drilled in January, targeting two separate Clearwater sequences. The core indicated two thick, oil-saturated sands with encouraging porosity and permeability levels and free oil was detected in the rig process system during drilling operations. The wells were equipped with temporary production facilities and placed on production in late January and early February, respectively. Due to unseasonably warm weather in the area and early breakup of ice roads, production equipment had to be removed from the well sites before all the associated OBM was recovered. i3 intends to return this coming winter to complete testing of the wells to determine deliverability.

Additionally, the company is pleased to disclose the location of its 15-section Clearwater land acquisitions, previously announced on Nov. 2, 2022. These 15 gross (15 net) sections are situated in the Cadotte and Walrus areas, offsetting i3's existing land positions, and are proximal to active development and delineation by industry peers. With these acquisitions, the company has increased its position at Cadotte to 18 gross (15 net) sections and 10 gross (10 net) sections at Walrus.

Serenity

i3 continues to work with its partner Europa Oil and Gas to advance a field development plan for a one-well development for the Serenity field.

Environmental, social and governance (ESG)

i3 is committed to conducting its operations responsibly and in accordance with industry best practices. 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.

In Q1 2023, i3 invested $1.20-million net, before any government grants, to complete 20 well abandonments and further advance site reclamations across its portfolio. Incorporating the results of the Q1 2023 program, i3 has successfully reduced its inactive well count by 20 per cent since the beginning of 2022. In 2023, i3 will continue its abandonment and reclamation program, with approximately $3.91-million being directed to pipeline and wellbore abandonments, pipeline and facility decommissioning, along with well site reclamation.

Additionally, i3 continues to reduce its emissions footprint through its continuing electrification projects. In Q1 2023, the company completed the electrification of 12 gross (10.5 net) well sites in Carmangay and Retlaw to eliminate the use of propane and natural gas for power generation.

Return of capital and change of 2023 guidance

The company is revising its capital and dividend program for the remainder of 2023.

The 2023 budget announced in December, 2022, was based on consensus estimates for 2023 oil and gas prices of $80/bbl for WTI and $4.50 (Canadian)/gigajoule (GJ) for AECO gas. Due to slower-than-expected global demand growth and resilient supply dynamics, commodity prices have subsequently fallen significantly. In particular, the AECO gas strip forecast for 2023 has fallen to approximately $2.60 (Canadian)/GJ while the WTI strip forecast for 2023 has fallen to approximately $72/bbl. This reduction in commodity pricing has impacted the company's forecasted cash flows for 2023 in line with the sensitivity guidance i3 released in December, 2022, alongside its original 2023 capital budget.

At the end of May the company refinanced its outstanding debt of approximately $50-million (Canadian) with a new $100-million (U.S.) facility, of which $75-million (Canadian) was drawn to settle the company's outstanding loan notes and an additional $25-million (Canadian) provided for general working capital purposes. To align with the company's conservative approach to debt management, the new facility amortizes on a straight-line monthly basis (unlike the debt it replaced, which was non-amortizing). This amortization schedule will repay the loan over its three-year term, beginning with $16.1-million in amortization, interest commitments and associated set-up costs to be paid throughout the remainder of 2023.

The company remains committed to its total shareholder return model, consisting of production growth through drilling and accretive merger and acquisition activity, and shareholder cash returns through dividends, whilst prudently maintaining capital discipline. i3 is therefore revising its capital budget for the year to an approved $25-million, and an additional amount of approximately $6-million, subject to board approval, for a revised drilling program targeting locations in the company's Clearwater acreage, which in aggregate is expected to result in the drilling of 14 gross (8.5 net) wells (previously 23 gross (15.2 net) wells). Due to a steady decline in 2023 gas prices, i3's capital focus will shift from its large inventory of high-rate liquids-rich gas Glauconite and Cardium locations, to the efficient development and delineation of its oil-focused Clearwater opportunities at Dawson and its expanded position in Cadotte, as surface locations are secured and prepared for operations in mid- to late Q4. Should the outlook for commodity prices strengthen in the second half of 2023, the company will refresh its capital plans to accelerate its drill-ready, low-risk, high-impact Glauconite/Falher, Cardium and Dunvegan/Wilrich inventory in central Alberta, Wapiti and Simonette, respectively. By year-end, the company's revised capital program will deliver four gross (two net) wells in Wapiti, one gross (one net) well in central Alberta and, subject to board approval of the revised drilling program, nine gross (5.5 net) wells in the Clearwater, with production for the year forecast to average 20,000 to 21,000 boepd, predrilling of the Clearwater wells. This forecast accounts for the downtime associated with i3's, and third party operators', planned summer turnaround maintenance programs, which are currently under way, and some lesser downtime related to precautionary shutdowns to mitigate risks associated with wildfires in Alberta. Despite the downtime, the company's approved capital program is forecast to deliver production growth of up to 3 per cent on a year-over-year basis (adjusting for planned turnarounds, curtailments and downtime associated with the wildfires, i3's 2023 revised production forecast would have been expected to deliver approximately 7-per-cent year-over-year growth).

Due to the overarching commodity price outlook, the financial ratios and restrictions on distributions contained within the loan documentation, and to align with forecast 2023 cash flows, the company is also revising downward its 2023 expected go forward dividend by 50 per cent from 0.171 pence/share per month to the equivalent of 0.0855 pence/share per month. Additionally, the company will now commence paying dividends on a quarterly basis and will pay the Q3 dividend in October, 2023, subject to being in compliance with (or obtaining a waiver from) the financial ratios contained within the loan documentation, following the financial ratio test at each quarter-end. Including dividends declared for the first six months in 2023 of 12.3 million pounds sterling, the forecast aggregate dividend payment to shareholders for the first nine months of 2023, of 1.28 pence per share, represents a yield of approximately 7.9 per cent and a forward running yield of 6.3 per cent based on the closing price of i3's ordinary shares of 16.26 pence on June 28, 2023. The company will continue to review its capital and dividend programs on a quarterly basis, with the purpose of balancing its total return model whilst maintaining balance sheet strength.

The company's asset base and operating model provides a large degree of flexibility to modify and to scale up or down its operations and capital program. Should commodity prices improve i3 will have the option to rapidly deploy capital to expand its revised 2023 drilling program. Alternatively, during periods of low commodity pricing and low asset valuations the company's business model directs it to focus on growth through acquisitions to maximize return on capital. It was through such similar initiatives in 2020 and 2021 that the company acquired its Canadian asset portfolio at very low cash flow and reserve-based multiples. i3 aggressively monitors the transaction market in efforts to identify acquisition opportunities which can be appropriately financed to provide superior returns to those achieved by organic growth.

i3's revised guidance for 2023, which is now based on strip pricing for the remainder of the year, is shown herein.

Notice of investor presentation through Investor Meet Company

Management will be hosting a live presentation through Investor Meet Company on July 5, 2023, at 3 p.m. BST.

The presentation is open to all existing and potential shareholders. Questions can be submitted pre-event through your Investor Meet Company dashboard up until 9 a.m. the day before the meeting or at any time during the live presentation.

Investors who already follow i3 Energy on the Investor Meet Company platform will automatically be invited.

Qualified person's statement

In accordance with the Alternative Investment Market note for mining and oil and gas companies, i3 discloses that Mr. Shafiq is the qualified person who has reviewed the technical information contained in this document. He has a master's degree in petroleum engineering from Heriot-Watt University and is a member of the Society of Petroleum Engineers. Mr. Shafiq consents to the inclusion of the information in the form and context in which it appears.

About i3 Energy PLC

i3 Energy is an oil and gas company with a low-cost, diversified, growing production base in Canada's most prolific hydrocarbon region, the Western Canadian sedimentary basin, and appraisal assets in the North Sea with significant upside.

The company is well positioned to deliver future growth through the optimization of its existing 100-per-cent-owned asset base and the acquisition of long-life, low-decline conventional production assets.

i3 is dedicated to responsible corporate practices and the environment, and places high value on adhering to strong environmental, social and governance (ESG) practices. i3 is proud of its performance to date as a responsible steward of the environment, people and capital management. The company is committed to maintaining an ESG strategy, which has broader implications to long-term value creation, as these benefits extend beyond regulatory requirements.

We seek Safe Harbor.