i3 Energy PLC Gain Energy Ltd. Production Acquisition (0592S)

TIDMI3E

RNS Number : 0592S

i3 Energy PLC

06 July 2020

6 July 2020

i3 Energy plc

("i3" or the "Company")

Gain Energy Ltd. Production Acquisition

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

In reference to the Company's announcement of 23 June 2019 regarding the Letter of Intent to acquire production assets, i3 has now entered into a binding purchase and sale agreement ("PSA")(the "Transaction") for all the petroleum and infrastructure assets (the "Assets") of Gain Energy Ltd. ("Gain"), a private Canadian company with operations in the Western Canadian Sedimentary Basin ("WCSB").

Highlights:

-- During 2019, the Assets produced at 11,020 boepd and generated US$34 million in field EBITDA (revenues minus royalties, opex and transportation) from 365 net wells across multiple low-decline, long-life, light oil and gas fields

   --      The Assets would add 26.4 MMboe PDP and 69.4 MMboe 2P reserves to i3's portfolio 

-- The consideration to be paid for the Assets is C$80 million (US$58.8m), subject to adjustments (outlined below), representing acquisition metrics of approximately 1.7x 2019 field EBITDA, US$5,526/boepd, and US$0.85/boe of 2P reserves

-- The Transaction is a reverse takeover under the AIM Rules for Companies and is subject to i3 shareholder approval. The Company's shares are currently suspended from trading on AIM until it either publishes a "Readmission Document" detailing the Transaction or provides confirmation that the Transaction will not complete.

Transaction and Readmission

On 3 July 2020 (the "PSA Date"), i3 entered a binding purchase and sale agreement with Gain to acquire 100% of its producing and non-producing petroleum assets in the Canadian provinces of Alberta and Saskatchewan. In Q4 of 2019, the Assets produced on average 10,645 boepd (47% liquids) to which Gain's independent reserve evaluator had attributed PDP reserves of 26.4 MMboe with a before-tax NPV10 of US$177 million, and 2P reserves of 69.4 MMboe with a before-tax NPV10 of US$397 million. In 2019, the Gain Assets produced US$34 million in field EBITDA (revenues minus royalties, opex and transportation) from 242 Gain-operated wells at an average working interest of 78% and 1,633 non-operated wells at an average working interest of 11%, and include 174k net developed acres and 186k net undeveloped acres of land. As part of i3's readmission process, the Company has commissioned GLJ Ltd. to update the reserves associated with the Assets. These details will become part of i3's Readmission Document when published.

Under the PSA, i3 will be acquiring the Assets free of all encumbrances (apart from industry standard or acceptable permitted encumbrances) for cash consideration of C$80 million (US$58.8 million) (the "Consideration"). In addition to normal interim period adjustments between the transaction effective date of 1 May 2020 and completion, the Consideration will be adjusted by an amount of interest accruing at Canadian Prime + 2% (totalling approximately 4.45%), and from 29 June 2020 until completion, the Consideration will be adjusted by C$500k (US$368k) per calendar month accruing to compensate Gain for its management of the Assets.

The Company is closely following the global energy transition towards carbon neutral energy sources, and i3 intends to be a proactive participant in this critical endeavour. A major attraction of the Transaction is Gain's interest in the oil-producing Weyburn unit, the fourth largest carbon capture, utilization and storage ("CCUS") project in the world. For Gain's interest, the amount of CO2 annually sequestered is estimated to offset approximately 17,760 boepd of scope 1 greenhouse gas emissions. This figure is at present more than sufficient to cover the 10,645 boepd produced by the Gain Assets in Q4 2019 and will further offset additional production as it is added to i3's portfolio in the future.

The required details of the Transaction will become part of a Readmission Document. As the Transaction is classified as a reverse takeover in accordance with the AIM Rules for Companies, at the request of the Company, its shares were suspended on 23 June 2020 from trading on AIM and will remain so until either the publication of the Readmission Document setting out, inter alia, details of the Transaction, or until i3's confirmation that the Transaction will not complete.

Completion of the Transaction remains subject to i) financing to raise the cash consideration and working capital, ii) industry standard conditions precedent, and iii) i3 shareholder approval. The Company is in discussions with its investors and brokers and is seeking funding for the Consideration and general corporate purposes.

ENDS

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.

CONTACT DETAILS:

 
 i3 Energy plc 
   Majid Shafiq (CEO) / Graham Heath (CFO)           c/o Camarco 
                                                      Tel: [phone] 
 
    WH Ireland Limited (Nomad and Joint Broker) 
   James Joyce, James Sinclair-Ford                  Tel: [phone] 
 
   Canaccord Genuity Limited (Joint Broker)          Tel: [phone] 
    Henry Fitzgerald- O'Connor, James Asensio 
   Mirabaud Securities Limited (Joint Broker)        Tel: [phone] 
    Peter Krens 
   Camarco 
    Georgia Edmonds, James Crothers, Violet Wilson    Tel: [phone] 
 
 
 The information contained within this announcement is deemed 
  by the Company to constitute inside information under the 
  Market Abuse Regulation (EU) No. 596/2014. 
 

Glossary of oil and gas terms, in accordance with standards contained in the Canadian Oil and Gas Evaluation (COGE) Handbook:

 
 Proved Reserves     Proved reserves are those reserves that can 
                      be estimated with a high degree of certainty 
                      to be recoverable. It is likely that the actual 
                      remaining quantities recovered will exceed the 
                      estimated proved reserves. 
 Probable Reserves   Probable reserves are those additional reserves 
                      that are less certain to be recovered than proved 
                      reserves. It is equally likely that the actual 
                      remaining quantities recovered will be greater 
                      or less than the sum of the estimated proved 
                      plus probable reserves. 
 Proved Developed    Those reserves that are expected to be recovered 
  Producing (PDP)     from completion intervals open at the time of 
  Reserves            the estimate. These reserves may be currently 
                      producing or, if shut-in, they must have previously 
                      been on production, and the date of resumption 
                      of production must be known with reasonable 
                      certainty. 
 2P Reserves         Total Proved Reserves plus Total Probable Reserves 
 STOIIP              Stock Tank Oil Initially In Place 
 

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END

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July 06, 2020 02:00 ET (06:00 GMT)