i3 Energy (I3E:AIM) 29.4p

Gain to date: 167%

When we flagged the appeal of Canadian oil and gas producer i3 Energy (I3E:AIM) at 11p in July 2021 we couldn’t have foreseen Russia’s invasion of Ukraine and the resulting surge in oil and gas prices.

We simply liked the potential for generous dividends, the business model of acquiring low-cost conventional assets and an attractive equity valuation.

WHAT’S HAPPENED SINCE WE SAID TO BUY?

At the macro level a combination of pent-up demand and the impact on supply of the conflict in Ukraine have helped drive energy prices much higher.

This has combined with rising production from Canada to significantly boost i3’s cash flow and has enabled it to pay a monthly dividend since March 2022.

More recently the company agreed to a farm-out deal on its Serenity prospect in the UK North Sea, with Europa Oil & Gas (EOG:AIM) taking a 25% stake in return for paying 46.25% of the costs of an appraisal well up to £15 million. Anything beyond that would be shared based on the companies’ respective stakes.

WH Ireland analyst Brendan Long says: ‘Big picture, i3 Energy is significantly ahead of the game, in a game where that is absolutely critical. This has become one of the key characteristics of the company and what we are seeing in the North Sea is reminiscent of what led to the company’s exceptional shareholder value creation in Canada, albeit we appreciate that the risk/reward profiles of these jurisdictions are different.’

WHAT SHOULD INVESTORS DO NEXT?

WH Ireland has i3 paying a 1.7p per year dividend based on its Canadian output which at the current share price equates to a yield of 5.8%. Investors therefore have the option of holding on for the steady stream of monthly dividends.

However, given the big increase on our entry point and a potential dampening of commodity prices against a weaker economic backdrop, taking some profit might be sensible at this point.

‹ Previous2022-08-18Next ›