i3 Energy PLC Drilling Contract & Interest Sale in Block 13/23c (7613G)

TIDMI3E

RNS Number : 7613G

i3 Energy PLC

19 March 2020

19 March 2020

i3 Energy plc

("i3" or the "Company")

Drilling Contract and Sale of Economic Interest in Block 13/23c

i3 Energy plc, an independent oil and gas company with assets and operations in the UK, is pleased to announce the following update.

Drilling Contract

The Company has entered into a drilling contract with Dolphin Drilling Limited ("Dolphin") to utilise either the Borgland Dolphin or Blackford Dolphin semi-submersible drilling rig for a minimum 82-day programme which is due to commence not later than 1(st) September 2020 or as otherwise agreed between the parties (the "2020 Campaign"), and also has the ability to be extended for a period of 78 days (the "Option Programme"). The contract is conditional on i3 confirming availability of funds to satisfy its obligations under the contract, 90 days prior to drilling commencement.

i3's current minimum programme for the appraisal drilling consists of two appraisal wells on Serenity plus a sidetrack on each well, contingent on drilling outcomes, at a total expected gross cost of approximately US$33 million. The Option Programme would include wells on the Minos High structure and the Liberator West area in Block 13/23c.

Sale of Economic Interest in Block 13/23c

In concert with the abovementioned drilling contract, i3 has agreed that Dolphin will earn up to a 10% economic interest (the "Dolphin Interest") in Block 13/23c via a Net Revenue Sharing Agreement (the "NRSA") in exchange for Dolphin forgoing its Profit Margin above its Opex, up to a maximum amount of US$14.4 million (the "Dolphin Commitment"). Accordingly, the Dolphin Commitment will cover approximately 22% of the total expected gross costs of each of the 2020 Campaign and Option Programme.

The "Net Revenue" is revenue from the sale of hydrocarbons from Block 13/23c less all costs for developing and producing those hydrocarbons. Once production from Block 13/23c has been achieved, and after such time as i3 has been repaid 200% of all Block 13/23c development Capex costs from associated petroleum revenues, Dolphin will receive a share of field income equal to Dolphin's Interest multiplied by Net Revenue. Any Dolphin Profit Margin paid by i3 during the 2020 Campaign at its election will decrease the Dolphin interest on a proportional basis. At any time prior to the approval by the UK Oil and Gas Authority (the "OGA") of a field development plan ("FDP") which includes production wells in the 13/23c Block, i3 has the right to purchase the Dolphin Interest by paying Dolphin 125% of the Dolphin Commitment. Following the approval of a Block 13/23c FDP by the OGA to develop more than 25 MMbbls of reserves from production wells on that block, Dolphin has the right to sell the Dolphin Interest to i3 for the Dolphin Commitment plus interest accrued at a rate of 8% per annum, and i3 has the obligation to purchase the Dolphin Interest upon Dolphin exercising such right.

i3's management carries 197 MMbbls P50 stock tank oil initially in place (STOIIP) for Serenity which, conservatively modelled as a stand-alone development, demonstrates an after-tax NPV10 break-even at US$20 per barrel Brent pricing.

As announced on 13(th) February and as evidenced by the above transaction, the Company is making good progress in its farm-out process to fund its 2020 drilling programme. The data room remains open and companies continue to actively evaluate the opportunity. i3 will provide further updates to the market as discussions progress.

Site Survey

The site survey over Serenity and the Minos High area of Liberator West has been completed on time and budget without any health and safety incidents. After all final survey reports are received, i3 will commence the technical and environmental work necessary to plan for and permit its Summer 2020 drilling programme.

Minimising Operating Costs

In light of recent world events and their effect on oil and capital markets, the Company has been and continues to decrease its corporate operating costs in order to maximise its current resources. The Company is closely monitoring and applying official government and health guidance in regard to the COVID-19 outbreak ("COVID-19"). At this stage, i3 is not experiencing any direct impact to its business and does not yet foresee any disruption to its 2020 drilling programme from COVID-19.

Majid Shafiq, CEO of i3 Energy commented:

"We are delighted to have executed a drilling contract with Dolphin Drilling for our Summer 2020 appraisal programme. Dolphin performed exceptionally well in our 2019 campaign, drilling our wells on time and on budget and without any significant health, safety or environmental issues. Their support announced today not only contributes a significant component to the funding structure for our upcoming drilling campaign but also demonstrates the quality of our licenses."

ENDS

CONTACT DETAILS:

 
   i3 Energy plc 
    Majid Shafiq (CEO) / Graham Heath      c/o Camarco 
     (CFO)                                  Tel: [phone] 
                                            8331 
 
     WH Ireland Limited (Nomad and Joint 
     Broker) 
    James Joyce, James Sinclair-Ford       Tel: [phone] 
 
    Canaccord Genuity Limited (Joint       Tel: [phone] 
     Broker) 
     Henry Fitzgerald- O'Connor, James 
     Asensio 
    Mirabaud Securities Limited (Joint     Tel: [phone] 
     Broker) 
     Peter Krens 
    Camarco 
     Jennifer Renwick, James Crothers       Tel: [phone] 
                                            8331 
 
 
 
  Notes to Editors: 
   i3 is an oil and gas development company initially focused 
   on the North Sea. The Company's core asset is the Greater 
   Liberator Area, located in Blocks 13/23d and 13/23c, to which 
   i3's independent reserves auditor attributes 11 MMBO of 2P 
   Reserves, 22 MMBO of 2C Contingent Resources and 47 MMBO of 
   mid-case Prospective Resources . The Greater Liberator Area 
   consists of the Liberator oil field discovered by well 13/23d-8 
   and the Liberator West extension. The Greater Liberator Area, 
   along with the Company's Serenity Discovery located in the 
   northern half of Block 13/23c and for which it carries a STOIIP 
   of 197 MMbbls, are owned and operated on a 100% working interest 
   basis. 
 
   The Company's strategy is to acquire high quality, low risk 
   producing and development assets, to broaden its portfolio 
   and grow its reserves and production. 
 
   The information contained within this announcement is deemed 
   by the Company to constitute inside information under the 
   Market Abuse Regulation (EU) No. 596/2014. 
 
   Qualified Person's Statement: 
   In accordance with the AIM Note for Mining and Oil and Gas 
   Companies, i3 discloses that Mihai Butuc, i3's New Ventures 
   Manager, is the qualified person who has reviewed the technical 
   information contained in this document. He graduated as a 
   Diplomat Engineer, Geology and Geophysics from the University 
   of Bucharest in 1985 and is a member of the Society of Petroleum 
   Engineers. Mihai Butuc consents to the inclusion of the information 
   in the form and context in which it appears. 
 

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March 19, 2020 03:00 ET (07:00 GMT)