i3 Energy plc, an independent oil and gas company with assets and operations in the UK, is pleased to announce the audited results for the period ended 30 June 2020.
- Initiated farm-down process for Serenity and Liberator in the UK North Sea and conducted a site survey over future appraisal and potential development well locations
- Obtained a strategic foothold in Western Canadian Sedimentary Basin ("WCSB") production assets through a debt acquisition of Toscana Energy Income Corporation ("Toscana" or "TEIC") and entry into an Option agreement, exercised in the period, to acquire all issued and outstanding shares of TEIC
- i3 to pay CAD$3.4 million (c.US$2.5 million), half in March 2020 and half at end-December 2020, to acquire all of TEIC's outstanding debt and to assume the role of senior-secured lender to Toscana, who was in default under its CAD$28 million (c.US$21 million) senior and subordinated credit facilities and was conducting a competitive strategic review process; i3 will additionally issue 4,399,224 ordinary shares to TEIC shareholders at completion of the TEIC acquisition, expected to conclude via a Plan of Arrangement during Q4 2020 following a meeting of TEIC's shareholders to approve the transaction
- i3 is acquiring TEIC's 2019 year-end 2P Reserves of 4.65 MMboe (53% oil, 47% gas) with a reserve life index of 14.7 years and Q4 2019 production of 1,065 boepd at US$2,661/boepd and US$0.61/boe 2P
- Announced major acquisition of producing WCSB assets in Alberta and Saskatchewan (the Company subsequently announced post period that these were from Gain Energy Ltd. ("Gain")) and that i3 was also entering an onward sale of Gain's Saskatchewan assets to Harvard Energy ("Harvard"), leaving i3 with all of Gain's Alberta assets (the "Gain Assets") post the completion in September 2020
- The Gain Assets provide i3 with approximately 9,000 boepd of long-life, low-decline production and 54 MMboe 2P reserves at highly attractive acquisition metrics of 1.1x next twelve months ("NTM") net operating income ("NOI" = revenue less royalties, opex and transportation), US$2,876/boepd, and US$0.48/boe 2P
- Completed key amendments to i3's May 2019 Loan Notes, replacing obligations to enter a development funding facility for the Company's UK assets with obligations to achieve certain production and funding levels during 2020 and 2021 (these replacement obligations have been fully satisfied through i3's funding and acquisition of the Gain Assets)
- Suspended trading on AIM to conduct a reverse take-over ("RTO") of the Gain Assets, which has now completed and trading has resumed
- Whilst the acquisition of the Gain assets occurred post period, Note 12 to these interim statements provides an update on the financial information of the Gain assets for the six month period ended 30 June 2020
Post Period and Outlook
On 6th July 2020 (the "PSA Date"), i3 entered a binding purchase and sale agreement with Gain Energy Ltd. ("Gain") to acquire 100% of its producing and non-producing petroleum assets in the Canadian provinces of Alberta and Saskatchewan (the "Gain Portfolio") for CAD$80 million (c.US$59 million), with an effective date of 1st May 2020 (the "Gain Acquisition"). In Q4 of 2019, the Gain Portfolio 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 Portfolio produced ~US$34 million in field NOI 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 includes 174k net developed acres and 186k net undeveloped acres of land. (see 7th August 2020 immediately below for subsequent partial sale of the Gain Portfolio).
On 7th August 2020, i3 announced its conditional sale of Gain's Saskatchewan assets and a proposed £30 million fundraise. The Company agreed to sell, immediately following completion of the Gain Acquisition, those petroleum and infrastructure assets currently held by Gain which are located in Saskatchewan, to Harvard Resources Inc. for CAD$45 million (c.US$33 million) (the "Harvard Sale"), conditional only on completion of the Gain Acquisition, leaving i3 with all of Gain's Alberta assets (the "Gain Assets") post the completion in September 2020.
The net consideration payable by i3 to acquire the Gain Assets, which are the petroleum and infrastructure assets of Gain to be retained by i3 following completion of the Gain Acquisition and the Harvard Sale, is CAD$35 million (c.US$26 million), subject to normal completion adjustments. In 2019, the Gain Assets (excluding, for the avoidance of doubt, those assets being the subject of the Harvard Sale), produced c.US$22 million in field net operating income ("NOI" = revenue less royalties, opex and transportation) from 242 Gain-operated wells at an average working interest of 78% and 1,044 non-operated wells at an average working interest of 14%, and included 172k net developed acres and 186k net undeveloped acres of land. i3 commissioned GLJ Ltd. ("GLJ") to update the reserves associated with the Gain Assets. As at 30 June 2020, the updated 2P reserves of the Gain Assets are 53.8 MMboe with a before-tax NPV10 of c.US$182 million. Based on June 2020 production of 8,948 boepd, the net consideration to be paid by i3 for the Gain Assets translates to acquisition metrics of US$2,876/boepd and US$0.48 per 2P boe.
On 11th August 2020, the Company announced the conditional Placing and Subscription of 568,496,326 new Ordinary Shares at 5 pence per Ordinary Share (the "Issue Price"). The Company also conditionally placed 12,650,929 new Ordinary Shares at the Issue Price with UK retail clients of PrimaryBid. The total firm fundraising was for approximately £29 million and the Company received a further subscription commitment of approximately £1 million, subject to regulatory approval. Also, on 11th August, i3 announced the publication of its Admission Document and Re-admission to trading on AIM.
On 27th August 2020, the Company held a General Meeting at which all resolutions were passed to approve i3's acquisition of the Gain Assets and to issue the abovementioned Placing, Subscription (of those shares not requiring regulatory approval) and PrimaryBid shares, followed by an announcement on 28th August that these shares had been admitted to trading on AIM.
On 28th August 2020, following the completion of the re-admission as set out in the announcement of 11th August 2020, the Company's enlarged share capital was admitted to trading on AIM. Following Admission, the Company had in issue 688,866,655 ordinary shares of £0.0001 each.
On 1st September 2020, the Company announced that certain of its Noteholders exercised warrants over 6,788,945 shares in the Company. An application was made for these shares to be admitted to trading on AIM on 7 September 2020. Following this exercise of warrants the Company now has in issue 695,655,600 ordinary shares of £0.0001 each.
On 4th September 2020, the Company announced that, following the completion of the re-admission as set out in the announcement of 11th August 2020, the Company has now completed the acquisition of all the petroleum and infrastructure assets of Gain Energy Ltd. for CAD$80 million (c.US$58.8 million). The Company has also completed the sale of such petroleum and infrastructure assets held by Gain Energy Ltd which are located in Saskatchewan, to Harvard Resources Inc. for CAD$45 million (c.US$33 million). Concurrently, i3 entered into a Management Services Agreement with Toscana who will manage i3's enlarged staff base in Canada and the Gain Assets until such time as i3 consummates its Plan of Arrangement to acquire TEIC.
The Company's focus for the remainder of 2020 will be on 3 key areas:
1 The conclusion of the Toscana transaction and the integration of the Company's UK and Canadian businesses
2 Further expansion of its Canadian production business
3 The farmout of i3's UK licences to conduct further appraisal drilling at Serenity and/or Liberator
The Company continuously evaluates opportunities to strengthen its balance sheet whilst maintaining tight control of its costs and working capital position.
Majid Shafiq, CEO of i3 Energy plc, commented:
"2020 has been a transformational year for i3. We are now a substantial production company with a full cycle E&P portfolio containing multiple options to create and return value to our shareholders. We will continue our efforts in the remainder of 2020 and beyond to grow our production business and build the scale required to efficiently and effectively maximise and sustain value creation"