i3 Energy PLC Serenity Oil Discovery and Corporate Update (4394R)

TIDMI3E

RNS Number : 4394R

i3 Energy PLC

29 October 2019

29 October 2019

i3 Energy plc

("i3" or the "Company")

Serenity Oil Discovery and Corporate Update

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

Highlights:

-- The Serenity 13/23c-10 well was successfully drilled on the Company's 100% owned Serenity prospect and is an oil discovery, with preliminary well results that are consistent with i3 Energy's pre-drill estimate of 197 MMbbls STOIIP for the entire Serenity closure within the Company's licence area

-- The Liberator 13/23c-9 well findings have now been integrated with recently acquired seismic data, resulting in Liberator remapping as follows:

o Phase I development area to target 63 MMbbls STOIIP via up to 4 wells with the Company's revised expected recoverable reserves of 23 MMbbls

o Phase II prospective area to target 396 MMbbls STOIIP through future exploration drilling

o Liberator findings presentation available today on i3's website at http://www.i3.energy

-- After planned plugging and abandonment of Serenity well 13/23c-10, the Borgland Dolphin semi-submersible rig will mobilise back to the Liberator field to drill a pilot hole at a future development well at the remapped L2 structural high (approximately 500 meters north east of the 13/23c-9 well)

   --      Rig contract extension and payment deferral structure agreed with Dolphin Drilling 

o i3 has right of first refusal on the Borgland Dolphin semi-submersible rig to 31 January 2020

o Dolphin to partially defer payments into 2020 which enable the Company to adequately fund remainder of 2019 3-well drilling programme

-- Company continuing to advance funding options to develop Liberator on a 100% basis, including negotiating for a reserve-based lending facility of up to $100 million pending successful Liberator drilling results

-- 2,204,574 warrants to subscribe for Ordinary Shares at an exercise price of 56.85 pence issued to GE UK for oilfield services rendered by Baker Hughes

Majid Shafiq, CEO of i3 Energy commented:

"The discovery of the Serenity oilfield, a potentially very large oil resource, is a transformational event for i3 Energy plc.

We now have proven oil in a second structure on our licenses. It is the culmination of three years of detailed geological and reservoir analysis and validates our regional model for the Liberator and Serenity oilfields and neighboring structures. We will now integrate data from the 13/23c-10 well into our geological modelling as we develop an appraisal and development plan for Serenity, which we believe is connected to the undeveloped Tain oilfield.

This result also adds confidence to our revised mapping of the Liberator field, which utilises the same reprocessed seismic dataset now used to map the Serenity field, and integrates data from the recently drilled 13/23c-9 Liberator well. We now look forward to returning to Liberator where we'll continue the necessary drilling operations to progress that field towards development."

Serenity 13/23c-10 well results

Well 13/23c-10, drilled on the Serenity structure, has reached total depth ("TD"). The key geologic horizons were encountered within the prognosed tolerances, and data acquisition operations are nearing completion. The well was drilled down dip from the Repsol Sinopec operated Tain discovery and encountered a sequence of Captain and Coracle sands with oil confirmed in the interval from 4740ft total vertical depth subsea ("TVDSS") to as deep as 5252ft TVDSS. The oil water contact is estimated to be at 5270ft TVDSS based on pressure measurements, the same level as seen in the Blake and Liberator fields. The interval contained circa 339ft measured depth ("MD"), 165ft TVD of sand in total, with oil in the uppermost Captain sand and in the Coracle sands at the base of the interval, and, if connected to the Tain field as i3 anticipates, represents a mapped oil column of approximately 622ft TVD in the Captain sand alone. The net oil interval in the Captain sand was c.10ft of high porosity (30%) sand and thicker than in the up-dip Tain discovery consistent with the Company's expectation that the Captain sands thicken to the west in Serenity (as demonstrated by the c.150 ft of sand seen in the offset 13/23a-7A well situated to the west of Serenity). Reservoir quality is expected to be equivalent to that seen in the Tain wells, one of which (13/23b-5Z) tested at an estimated 2750 bopd from a 5ft interval in the Captain sand. Oil samples to be recovered from the downhole sampling tool are expected to be of similar quality to the 32deg API oil found in the Tain field. The preliminary results, subject to further analysis, are closely in line with the Company's expectations and confirm the strong commercial potential of the Serenity area, of which i3 owns 100%.

Additional pressure measurements and samples are in the process of being taken and the data recovered will be analysed over the coming weeks to develop further appraisal and development options for the Serenity discovery. The well will then be plugged and abandoned as planned, following which the Borgland Dolphin will mobilise to recommence drilling operations on the Liberator field.

Liberator update

Drilling operations at the Company's Liberator field began on 21 August with the spudding of the 13/23c-9 pilot well, the objective of which was to establish the position and optimal trajectory for a future Phase I development well. On 10 September i3 announced that preliminary petrophysical information, obtained from the Measurement While Drilling ("MWD") tools in the well, indicated that the targeted upper Captain sands were absent at the 13/23c-9 location. This was an unexpected result. The Company thereafter acquired a vertical seismic profile ("VSP") and a shear wave sonic log from the well prior to its planned plugging and abandonment.

With the unexpected results, i3 Energy acquired the only other available modern seismic dataset over the area. Unprocessed samples of this data had previously been reviewed by the Company and were considered to be too 'noisy' for meaningful interpretation. However, the quality of the newly re-processed version of this seismic data was significantly improved and included broadband frequency information allowing an inversion process to be applied, providing a new visualisation of the reservoir architecture. i3 Energy's initial acquisition of this seismic data covered approximately 50 km(2) over Liberator, and the Company subsequently purchased an additional 100 km(2) of the data which encapsulates Serenity.

The new visualisation of the field closely matches the results seen in the 13/29c-9 well. The dataset has also been validated by predicting the observed results in the Serenity 13/23c-10 well. The inversion analysis, combined with the reflectivity mapping, has been used to generate revised mapping for the Liberator field and this can be viewed in a Liberator technical update presentation which will be made available on i3 Energy's website at http://www.i3.energy.

The Company's internal estimate of overall STOIIP in the A1, A2, A3 and A4 areas of the field has decreased from 91 to 63 MMbbls, while in the prospective west of the field the STOIIP has increased from 226 to 396 MMbbls (all volumes on a P50 unrisked basis), although the risk has increased due to the lower relief now being mapped between the A3 area and the prospective Liberator West. It is likely that i3 Energy will now seek to include the A3 area in the Phase I development and the Company's revised internal estimate of projected P50 recoverable reserves for Phase I is 23 MMbbls. The Company is in the process of ensuring permits are in place for the drilling of the next well on the Liberator Field, which will be a pilot well targeting the Captain sand in the remapped L2 accumulation - a closure to the north east of the 13/23c-9 well. This region, similar to the A3 and A4 target areas, has significant relief above the prognosed oil-water contact and will provide a good location for a future development well. The LA-03 well, originally planned to be drilled in i3's 2019 campaign, is now likely to be drilled as a pilot during Phase I development execution to optimize the placement of a production well, as will the LA-04 well.

Funding update

Due to the unexpected well result at 13/23c-9, and standby time incurred in advance of drilling the current 13/23c-10 well at Serenity, the Company has been working with Dolphin Drilling to extend its current 94-day contract. Due to Dolphin's excellent performance to date, i3 and Dolphin have agreed to enter into a strategic operational alliance for the use of Dolphin drilling rigs for i3 operations to August 2023, which will cover potential future appraisal and development drilling on Liberator and Serenity. Under the contract extension, i3 Energy has secured a right of first refusal on the Borgland Dolphin semi-submersible rig to 31 January 2020 so that the Company can continue drilling operations at Serenity and Liberator. Associated with this contract extension, Dolphin has agreed to defer certain payments for drilling costs beyond 30 September 2019 which the Company will be due to settle between January and August 2020. With this payment deferral in place, i3 Energy remains comfortable that it has the cash resources available to conclude its planned 2019 3-well drilling operations.

The Company is preparing to fund the Liberator Phase I development on a 100% working interest basis and continues to explore all options for its future funding requirements while advancing its negotiations for a reserve-based lending ("RBL") facility of up to $100 million. Progression of the RBL will require successful drilling at Liberator and the Company is obligated to enter the RBL no later than December 2019 in order to remain in compliance with the terms of its Junior Loan Note Facility.

As part of an agreement announced 2 July 2019, i3 Energy has issued 2,204,574 warrants to subscribe for Ordinary Shares at an exercise price of 56.85 pence per Ordinary Share to GE Oil & Gas UK Limited ("GE UK"). As previously referenced in the Company's announcement, these warrants relate to deferred payments for Oilfield Service ("OFS") contracts, entered into between i3 and Baker Hughes. To 30 September 2019, Baker Hughes had performed and invoiced i3 Energy for GBP1,253,300 worth of oilfield services. GE UK can exercise the warrants via cash settlement or in exchange for payments due to Baker Hughes under OFS contracts with the Company. Junior Noteholders will be offered participation in warrants on the same terms as GE UK, pro-rata to their ownership of i3 Energy on a fully-diluted basis, and also pro-rata to the proportion of warrants issued to GE UK under this arrangement.

In accordance with the provisions of the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority, the Company confirms its issued ordinary share capital comprises 93,433,685 Ordinary Shares of GBP0.0001 each. All of the Ordinary Shares have equal voting rights and none of the Ordinary Shares are held in Treasury. The above figure may be used by shareholders as the denominator for the calculations to determine if they are required to notify their interests in, or change to their interest in, the Company.

With the above issuance of warrants to GE UK, the Company now has notional GBP8mm warrants exercisable at 40.7p/share, notional GBP8mm warrants exercisable at 48.1p/share, notional GBP8mm warrants exercisable at 55.5p/share, and notional GBP1,253,300 warrants exercisable at 56.85p/share which, when fully exercised in aggregate, will convert into 52,907,024 Ordinary Shares of GBP0.0001 each in the Company.

S 

CONTACT DETAILS:

 
   i3 Energy plc 
    Majid Shafiq (CEO) / Graham Heath      c/o Camarco 
     (CFO)                                  Tel: [phone] 
 
     WH Ireland Limited (Nomad and Joint 
     Broker) 
    James Joyce, James Sinclair-Ford       Tel: [phone] 
    GMP FirstEnergy (Joint Broker) 
    Jonathan Wright                        Tel: [phone] 
    Canaccord Genuity Limited (Joint       Tel: [phone] 
     Broker) 
     Henry Fitzgerald- O'Connor, James 
     Asensio 
    Camarco 
     Jennifer Renwick, James Crothers       Tel: [phone] 
 
 
 
  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. 
 

Glossary

 
 
 
 "BCF" or "bscf"               billion (10(9) ) standard cubic feet; 
 "Boe"                       barrels of oil equivalent. One barrel 
                                of oil is approximately the energy 
                                equivalent of 6,000 standard cubic 
                                feet of natural gas; 
 
 "boepd"                       Barrels of oil equivalent per day; 
 
 "MMBO" or "MMbbls"            millions (10(6) ) of barrels of oil; 
 "MMboe"                       millions (10(6) ) of barrels of oil 
                                equivalent; 
 
 "MMcfd" or "MMscfd"           millions (10(6) ) of standard cubic 
                                feet per day; 
 
 "MMstb"                       millions (10(6) ) of stock tank barrels 
                                of oil; 
 "Net Present Value" or        the discounted value of an investment's 
  "NPV"                         cash inflows minus the discounted value 
                                of its cash outflows; 
 
 "PRMS"                        The SPE/WPC/AAPG/SPEE Petroleum Resources 
                                Management System for Reserves and 
                                Resources Classification; 
 "standard cubic feet"         standard cubic feet measured at 14.7 
  or "scf"                      pounds per square inch and 60 degrees 
                                Fahrenheit; 
 
 Stock Tank Oil Initially      a method of estimating how much oil 
  In Place or "STOIIP"          in a reservoir can be economically 
                                brought to the surface; 
 
                                     RESOURCES 
 
   "Contingent Resources"        those quantities of petroleum estimated, 
                                 as of a given date, to be potentially 
                                 recoverable from known accumulations, 
                                 but the applied project(s) are not 
                                 yet considered mature enough for commercial 
                                 development due to one or more contingencies; 
 "Prospective Resources"       those estimated volumes associated 
                                with undiscovered accumulations. These 
                                represent quantities of petroleum which 
                                are estimated, as of a given date, 
                                to be potentially recoverable from 
                                oil and gas deposits identified on 
                                the basis of indirect evidence but 
                                which have not yet been drilled; 
 
   "P10 resource"                reflects a volume estimate that, assuming 
   "High case resource"          the accumulation is developed, there 
                                 is a 10% probability that the quantities 
                                 actually recovered will equal or exceed 
                                 the estimate. This is therefore a high 
                                 estimate of resource; 
 "P50 resource"                reflects a volume estimate that, assuming 
  "Mid case resource"           the accumulation is developed, there 
                                is a 50% probability that the quantities 
                                actually recovered will equal or exceed 
                                the estimate. This is therefore a median 
                                or best case estimate of resource; 
 "P90 resource"                reflects a volume estimate that, assuming 
  "Low case resource"           the accumulation is developed, there 
                                is a 90% probability that the quantities 
                                actually recovered will equal or exceed 
                                the estimate. This is therefore a low 
                                estimate of resource; 
 
                                      RESERVES 
 "Proved Reserves"             those quantities of petroleum which, 
                                by analysis of geological and engineering 
                                data, can be estimated with reasonable 
                                certainty to be commercially recoverable, 
                                from a given date forward, from known 
                                reservoirs and under current economic 
                                conditions, operating methods and government 
                                regulations. Proved reserves can be 
                                categorised as developed or undeveloped. 
                                If deterministic methods are used, 
                                the term reasonable certainty is intended 
                                to express a high degree of confidence 
                                that the quantities will be recovered. 
                                If probabilistic methods are used, 
                                there should be at least a 90% probability 
                                that the quantities actually recovered 
                                will equal or exceed the estimate; 
 
 "Probable Reserves"           those unproved reserves which analysis 
                                of geological and engineering data 
                                suggests are more likely than not to 
                                be recoverable. In this context, when 
                                probabilistic methods are used, there 
                                should be at least a 50% probability 
                                that the quantities actually recovered 
                                will equal or exceed the sum of estimated 
                                Proved plus Probable reserves; 
 "Possible Reserves"           those additional reserves which analysis 
                                of geological and engineering data 
                                suggests are less likely to be recoverable 

                                than Probable Reserves. In this context, 
                                when probabilistic methods are used, 
                                there should be at least a 10% probability 
                                that the quantities actually recovered 
                                will equal or exceed the sum of estimated 
                                Proved plus Probable plus Possible 
                                reserves; 
 "Reserves"                    those quantities of hydrocarbons which 
                                are anticipated to be commercially 
                                recovered from known accumulations; 
 "Justified for Development"   implementation of the development project 
                                is justified on the basis of reasonable 
                                forecast commercial conditions at the 
                                time of reporting, and there are reasonable 
                                expectations that all necessary approvals/contracts 
                                will be obtained; 
 
 "1P"                          the Proved Reserves; 
 
 "2P"                          the sum of Proved plus Probable Reserves; 
 
 "3P"                          the sum of Proved plus Probable plus 
                                Possible Reserves. 
 

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October 29, 2019 03:00 ET (07:00 GMT)