i3 Energy FY19 Results and Proposed Placing to raise £30m

i3 Energy plc (I3E.L) FOLLOW has announced Final Results for the year ended 31 December 2019 highlighting significant operational progress achieved during the period and has announced the sale Saskatchewan Assets and Proposed £30 million Fundraise to fund the Gain acquisition and unlock further production potential. 

FY19 Operating Highlights 

• Conducted a site survey for the 2019 multi-well drilling campaign at the Company's UK North Sea licences 

• Entered a contract with Dolphin Drilling for the Borgland Dolphin semi-submersible rig for a multi-well, 94-day drilling programme commencing in Summer 2019 

• Executed a crude oil offtake and marketing agreement with BP Oil International Limited to market future UK crude production 

• Awarded Baker Hughes, a GE Company ("BHGE"), contracts for the Company's 2019 summer drilling programme on its Liberator and Serenity assets 

• Completed drilling of the Liberator 13/23c-9 pilot well; 13/23c-9 was plugged and abandoned as planned following completion of the vertical seismic profile ("VSP") survey and shear wave sonic logging 

• Completed drilling of the 13/23c-10 exploration well, discovering the Serenity oil field 

• Completed drilling of the Liberator 13/23c-11 well; the 13/23c-11 well was plugged and abandoned as planned 

FY19 Corporate Highlights 

• Completed equity placings, raising gross proceeds of approximately £24.4 million prior to expenses 

• Closed investments with funds managed by Bybrook Capital LLP, BP Oil International Limited, Lombard Odier Investment Managers Group and James Caird Asset Management for a £22.0 million Loan Note facility 

• Redeemed all outstanding Convertible Loan Notes totalling £0.4m in principal and paid interest in accordance with the terms on the maturity date of 31 March 2019 

• Extended the Funding Long-stop Date of the Company's Loan Note facility from 30 November 2019 to 30 April 2020, by which time i3 was required to enter a reserve-based lending ("RBL") facility or to source alternative development financing for the Liberator Phase I development.  Subsequent to the year-end the Company announced that the Funding Long-stop Date had been waived and a new Corporate Development Long-stop Date had been set for 30 September 2020 prior to which the Company has to achieve certain conditions as detailed below in Post Period and Outlook 23 June 2020. 

• Linda Beal appointed as a non-executive director of the Company 

Majid Shafiq, CEO of i3 Energy plc, commented: “2018 was a year of intense activity for i3 Energy. In very difficult capital markets, we managed to finance a three well drilling campaign on our North Sea acreage, whilst maintaining a 100% working interest in those licenses. Although drilling results on the Liberator field were disappointing, we believe we made a potentially very significant discovery in the Serenity field and the campaign was conducted essentially on time and budget.  

“We plan to appraise Serenity next year, with the drilling to be fully or partly funded by a farm-out of the asset. If Serenity is as large as we think it might be, it will be a transformational asset for the Company and will have multiple monetisation options. We also believe that Liberator West and the Minos High area still contain significant exploration potential and will seek to test those potential volumes again by a farm down of the acreage.  

The Company has for some time been looking at adding production assets to its portfolio and has evaluated numerous opportunities in the North Sea and other petroleum basins. This work led to the conclusion that there currently exists a time limited opportunity to build a large onshore production base in the Western Canadian Sedimentary Basin on very attractive acquisition metrics through M&A and in early 2020 we decided to act on this opportunity.  

We have since announced two significant transactions; the first a corporate transaction to acquire an operating company, TSX listed Toscana Energy Income Corporation and the second an asset deal to acquire a large production base. We are currently in the process of conducting a financing to complete the asset transaction. When completed these diverse, long life, low decline assets will support our goal of becoming a dividend paying oil and gas company, with the option to grow the business through further M&A or organically by developing a large undeveloped reserves base. I would like to thank our UK management team for their determined effort through 2019 to execute on our strategy to test our oil and gas acreage and delivering the Serenity discovery and to welcome our new colleagues in i3 Canada and look forward to navigating our new horizons as we look to continue our transformation into a material oil and gas production company." 

FY19 Financial Highlights 

Whilst the financial results for the pre-revenue company are largely irrelevant at this stage in the Company’s development, administrative expenses increased to £7.2m (FY18: £2.4m) resulting in a Net loss for the year of £10.8m (FY18: £12.0m) 

Post Period End Highlights 

Post period end the activity at i3 Energy has remained intense, including a corporate and funding update; the issue of 2,816,739 warrants at 56.85 pence per Ordinary Share to GE Oil & Gas UK Limited ("GE UK”);  the appointment of Linda Beal as interim Chairperson appointment of Linda Beal as interim Chairperson as well as plans to list its shares on a secondary exchange. 

From an operational perspective, on 19th March 2020, the Company entered into a drilling contract with Dolphin Drilling Ltd; announced that it had entered into an Option agreement to acquire Toscana Energy Income Corporation and updated investors on the restructuring of the Development Funding Long-stop date of its Loan Note facility. 

In June 2020, the Company announced non-binding letter of intent to acquire a package of producing Canadian oil and gas assets and in July 2020 entered a binding purchase and sale agreement with Gain Energy Ltd. 

The Company's focus for the remainder of 2020 will be on 3 key areas: 

• The completion of the Gain Transaction and i3's Readmission to AIM 

• The completion of the TEIC transaction and the integration of the Company's UK and Canadian businesses 

• The farmout of i3's UK licences to conduct further appraisal drilling at Serenity and/or Liberator 

Conditional Sale of Saskatchewan Assets 

Further to FY19 Results, i3 Energy has agreed to sell Gain's Saskatchewan portfolio to Harvard Resources Inc. ("Harvard") for CAD$45 million (c.US$33 million), immediately following completion of its acquisition of Gain's petroleum and infrastructure assets. 

The Gain Assets delivered production of 8,948 boepd in June 2020 and would add 2P reserves of 53.8 MMboe with a before-tax NPV10 of c.US$182 million. The net consideration for the Gain Assets translates to acquisition metrics of US$2,876/boepd and US$0.48 per 2P boe 

Proposed £30 million Fundraise 

To fund the Gain Acquisition and unlock production potential, i3 is proposing to raise £30 million from institutional and other investors at a price of 5 pence per share, an 18% discount to the closing mid-price at which i3's shares suspended on 23 June 2020 (the "Primary Placing") 

Concurrent with the Primary Placing, Primarybid.com is running an offer for subscription to enable i3's retail shareholder base and new retail investors to participate alongside institutional investors at the same price.