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I3E I3 Energy Plc

11.72
0.72 (6.55%)
Last Updated: 15:04:04
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
I3 Energy Plc LSE:I3E London Ordinary Share GB00BDHXPJ60 ORD 0.01P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  0.72 6.55% 11.72 11.64 11.74 11.82 10.76 10.94 2,984,238 15:04:04
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
Crude Petroleum & Natural Gs 208.44M 41.95M 0.0349 3.38 141.82M

i3 Energy PLC Strategic Production Acquisition & TSX Listing (9675H)

30/03/2020 7:00am

UK Regulatory


I3 Energy (LSE:I3E)
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TIDMI3E

RNS Number : 9675H

i3 Energy PLC

30 March 2020

30 March 2020

i3 Energy plc

("i3" or the "Company")

Strategic Production Acquisition & TSX Listing

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

Highlights:

-- i3 has entered into an Option agreement to acquire all issued and outstanding common shares of Toscana Energy Income Corporation ("Toscana" or "TEIC"), a TSX listed company

-- TEIC had 2019 year-end 2P Reserves of 4.65 MMboe (53% oil, 47% gas) with a reserve life index of 14.7 years

-- Toscana's 2019 production averaged 1,065 boepd and generated C$5.5 million (US$3.9mm) in field netback from 13 low-decline, long-life conventional fields producing at an average breakeven price of C$30.43/boe (US$21.74/boe)

-- TEIC operates 69% of the producing wells in its portfolio at an average net working interest of 67%

-- i3 is purchasing Toscana at a fraction of going market-based valuations for WCSB oil and gas transactions; the total aggregate consideration being paid by i3 for TEIC's debt and equity totals approximately C$3.95 million (US$2.82mm) representing roughly 0.72x Toscana's 2019 field netback, C$3710/boepd (US$2650/boepd), and C$0.85/boe (US$0.61/boe)

o On March 27(th) , i3 used current cash resources to purchase the rights and interests in Toscana's senior and junior debt facilities (which were in default). i3 has acquired Toscana's C$24.8 million senior facility for C$3.0 million and its C$3.2 million junior facility for C$0.4 million, with cash consideration for each being paid 50% up front and 50% at year-end.

o Upon i3's exercise of the Option, Toscana shareholders will be offered up to 4,399,224 i3 shares for TEIC's entire share capital, representing dilution of approximately 4% to the Company's current shareholders and having a market value at March 27(th) of approximately C$0.55 million

-- Following exercise of the Option and on conclusion of the Arrangement Agreement, i3 intends that its enlarged share capital will also be listed on the TSX, satisfying the Company's obligation under its existing Loan Notes to seek a secondary listing for its shares

Majid Shafiq, CEO of i3 Energy commented:

"This is a highly significant acquisition opportunity for i3 which adds material, low cost per barrel, low-decline production as well as a new growth business with a strong management team and strategy in the Western Canadian Sedimentary Basin.

"In addition to diversifying our portfolio, this transaction will help to stabilise our business with a steady revenue stream while adding considerable upside potential from within Toscana's Clearwater acreage - an opportunity which is comparable to the growth potential of our Serenity discovery. We look forward to welcoming the Toscana management team and staff to i3 and working together to grow our business in the UK and Canada."

An updated corporate presentation has been posted to i3's website ( http://www.i3.energy ) which further describes the opportunity.

Production Acquisition Option

The Company is pleased to announce that it has entered into an option agreement to acquire all of the issued and outstanding common shares in the capital of Toscana Energy Income Corporation, a Toronto Stock Exchange ("TSX") listed oil and gas corporation with assets in the Western Canadian Sedimentary Basin ("WCSB") in Alberta and Saskatchewan, Canada (the "Option"). The Option expires on 30 June 2020 or such later date as agreed between the parties. The acquisition would be consummated via a plan of arrangement and the terms of the proposed transaction (the "Arrangement Agreement") have been agreed with the Board of TEIC. Voting support agreements have been obtained from the directors and management of Toscana. The exercise of the Option is not expected to occur until after the publication of audited 2019 year-end accounts for TEIC and i3. The entering into of the Arrangement Agreement may possibly be classified as a reverse takeover under the AIM Rules for Companies and a determination will be made prior to i3's exercise of the Option (the "RTO Determination"). If a positive RTO Determination is made i3 will not be obliged to exercise the Option.

Toscana Energy Income Corporation

In its annual reserves report prepared by Sproule Associates Limited ("Sproule"), TEIC's wholly owned operating subsidiary, Firenze Energy Ltd., has 2019 year-end 2P reserves of 4.65 MMboe (53% oil, 47% gas) with an after-tax NPV10 of C$40.3 million using Sproule's 31 December 2019 forecast for oil and gas prices (further detail may be found at https://www.toscanaenergy.ca/2020/03/toscana-energy-announces-2019-reserves/ and within Toscana's 2019 Annual Information Form once made available on its website ). Toscana's 2019 production was approximately 1,065 boepd (55% 32deg+ API oil, 45% gas) from 13 low-decline, long-life, conventional fields, containing 255 gross (175 net working interest) producing wells. In 2019, TEIC generated C$5.5 million (US$ 3.9mm) in field netback (revenue minus royalties minus opex) and produced at an average field break-even price of C$30.43/boe (US$ 21.74/boe). Toscana's portfolio contains a number of low-cost opportunities to enhance production from existing producing fields, in addition to a significant land position atop the Clearwater formation which, by most economic metrics, is a highly-ranked oil play in the WCSB.

Key Terms of the Arrangement Agreement

Under the terms of the Arrangement Agreement, TEIC shareholders will be offered i3 ordinary shares at an exchange ratio of 0.0281 i3 ordinary shares for each TEIC common share. Based on the current fully-diluted share capital of TEIC, this will result in the issuance of up to 4,399,224 i3 ordinary shares to shareholders of TEIC (market value at March 27(th) of approximately C$0.55 million), representing dilution of approximately 4% to i3's current shareholders. Entering into the Arrangement Agreement will be subject to the outcome of the RTO Determination, and completion of the plan of arrangement will be conditional on a vote in favour of the arrangement resolution by 66 2/3% of TEIC's shareholders voting at a general meeting. TEIC has granted a period of exclusivity until 30 June 2020, during which TEIC will deal exclusively with i3 and not solicit an alternative proposal which would or could reasonably be expected to interfere with or prevent the completion of the Arrangement Agreement with i3. During the exclusivity period, i3 has the right to match the terms of any unsolicited proposal which is superior to that contemplated by the Arrangement Agreement.

Senior and Junior Debt Purchase

As a result of accessing debt to acquire assets in a much stronger commodity environment, TEIC has struggled for some years and was in default under the terms of its debt facility agreements. i3 has purchased the rights and interests in Toscana's C$24.8 million senior and C$3.2 million junior debt facilities using current cash resources of C$3.0 million and C$0.4 million, respectively, with the cash consideration being paid 50% up front and 50% at year-end. The aggregate consideration being paid by i3 for TEIC's debt and equity totals approximately C$3.95 million (US$ 2.82mm) and, in light of TEIC's 2019 production and reserves, represents approximately 0.72x Toscana's 2019 field netback of C$5.5 million (US$ 3.9mm), C$3710/boepd (US$2650/boepd), or C$0.85/boe (US$0.61/boe), and is a fraction of going market-based valuations for WCSB oil and gas transactions.

Secondary Listing

At such time as i3 exercises its Option and on conclusion of the Arrangement Agreement, i3 intends that its enlarged share capital will also be listed on the TSX, satisfying the Company's obligation under its existing Loan Notes to seek a secondary listing for its shares.

Strategic Rationale for the Transaction

i3 Energy believes it is necessary to diversify its asset portfolio in order to spread and mitigate risk. Ideally this would diversify multiple aspects of our business, including geological, project life cycle, project capital intensity and capital market risks, whilst also being both accretive to shareholders and financeable based on our current balance sheet. We also believe it is critical to add production to our asset portfolio to provide internal free cash flow to grow the company and provide a near-term return to our shareholders. Having considered a number of global oil and gas basins and specific opportunities, including in the UK sector of the North Sea in the context of our acquisition criteria, we have concluded that the WCSB provides a unique, time-limited opportunity to build a portfolio of production assets on superior metrics not achievable elsewhere. A short to medium term lack of infrastructure to transport Canadian oil and gas to international markets in combination with depressed gas prices in North America due to the growth in gas supply from shale gas drilling has led to many small and mid-cap oil and gas producers, particularly those with overleveraged balance sheets and heavily gas-weighted portfolios, to become financially distressed and to have limited access to the North American capital markets to fund maintenance opex or growth capex. Many of these companies contain excellent, long-life, low-decline production assets, with solid growth potential that may be acquirable at attractive metrics.

Though world oil markets are highly volatile at present, TEIC provides revenue from its long-life portfolio of assets which contain a number of low-cost production enhancement opportunities with the potential to add several hundred bopd in the near term or at such time as commodity prices strengthen.

The TEIC portfolio also contains an asset with prolific growth potential. TEIC's large land position in the Marten Hills and Nipisi areas of Central Alberta sits atop the lower cretaceous Clearwater formation, a conventional oil play producing 13deg to 23deg API crude oil. The Clearwater play has recently seen significant capital investment and production growth; over 150 wells have been spud since the beginning of 2016 and current production from the play is in excess of 20,000 bopd. In terms of economic metrics, the Clearwater consistently ranks amongst the best in Canada due to its low finding and development costs resulting from shallow reservoir depth and simple, unstimulated open-hole horizontal drilling programs, low initial decline rates and low opex (due to minimal water production). TEIC's acreage consists of 45.9 net sections (73 km(2) ), with each section estimated by TEIC's management to have the potential to contain up to 24 MMbbls of STOIIP. Recovery factors are estimated to range from 5% for primary recovery to 15% using water and polymer flooding. TEIC's acreage is well delineated by way of multiple legacy gas wells which have penetrated the Clearwater oil formation, and a drilling programme of 4 to 6 wells is being planned for the Winter 2020/21 season. Further, due to restrictions on mineral rights licensing in the region, i3 sees this acquisition as providing the last near-term opportunity to garner a sizeable position in the Marten Hills and Nipisi Clearwater fairway.

Following completion of the TEIC transaction, i3 intends to leverage the TEIC platform and management team to execute an M&A driven growth strategy to build a large, low capital intensity, long-life production base in Canada. A portfolio of accretive and material opportunities has already been identified and is being evaluated to high-grade those which meet our acquisition criteria.

On completion of the transaction and subject to regulatory due diligence, John Festival will join the board of i3 as a non-executive director. John is a chemical engineer with over 35 years of experience in the WCSB's oil and gas sector and has an excellent track record of founding, growing and monetising oil and gas ventures in Canada. He is currently the CEO of Broadview Energy and was the President and CEO of Black Pearl Resources Inc. prior to its acquisition by International Petroleum in December 2018 in a stock and debt transaction valued at circa C$715 million. He was previously the founder and President of BlackRock Ventures Inc. which was established in 2001 and sold to Shell Canada for C$2.4 billion in 2006.

Toscana's 2019 Consolidated Statements of Net Loss and Comprehensive Loss

 
                                                  Year ended 
                                                 December 31          Year ended 
                                                                     December 31 
                                                        2019                2018 
                                              --------------      -------------- 
                                                       CAD $               CAD $ 
                                              --------------      -------------- 
Revenues and other income 
     Petroleum and natural gas revenue, net 
      of royalty expense                          15,185,235          13,924,145 
     Royalty revenue                                       -           1,223,168 
     Processing income                               510,876             627,197 
     Other Income                                          -             337,286 
Gain (loss) on risk management contracts              67,346           (317,354) 
                                              --------------      -------------- 
Total revenues and other income                   15,763,457          15,794,442 
                                              --------------      -------------- 
 
Expenses 
     Operating costs                              10,954,962          12,575,036 
     Depletion and depreciation                    6,234,595           6,823,526 
     Impairment                                   11,130,000           3,800,000 
     General and administrative                    2,582,548           3,370,443 
     Share-based payments                             94,500              84,700 
     Financing expense                             3,290,835           3,825,827 
Loss (gain) on disposal of assets and 
 other                                             (953,804)           4,042,728 
Gain on settlement with a creditor                 (176,190)                   - 
Gain on debentures redemption, conversion 
 and amendments                                 (13,257,760)         (1,396,000) 
Gain on acquisition of Cortona, net of 
 transaction costs                                         -           (381,785) 
                                              --------------      -------------- 
     Total expenses                               19,899,686          32,744,475 
                                              --------------      -------------- 
 
Net loss and comprehensive loss                  (4,136,229)        (16,950,033) 
                                              --------------      -------------- 
 
Loss per share 
Basic and diluted                                     (0.04)              (2.39) 
 
 
 

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: +44 (0) 203 7 81 8331 
 
    WH Ireland Limited (Nomad and Joint Broker) 
   James Joyce, James Sinclair-Ford               Tel: +44 (0) 207 220 1666 
 
   Canaccord Genuity Limited (Joint Broker)       Tel: +44 (0) 207 523 8000 
    Henry Fitzgerald- O'Connor, James Asensio 
   Mirabaud Securities Limited (Joint Broker)     Tel: +44 (0) 203 167 7221 
    Peter Krens 
   Camarco 
    Jennifer Renwick, James Crothers               Tel: +44 (0) 203 7 81 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. 
 

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. 
 2P Reserves         Total Proved Reserves plus Total Probable Reserves 
 STOIIP              Stock Tank Oil Initially In Place 
 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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March 30, 2020 02:00 ET (06:00 GMT)

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