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’s purchase of the petroleum and infrastructure assets of Gain Energy Ltd. (“Gain”) (the “Gain Acquisition”) is ongoing
During the process, i3 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
Net consideration payable by i3 for the remaining petroleum and infrastructure assets of Gain that it is retaining (the “Gain Assets”) is now CAD$35million (c.US$26 million) subject to normal completion adjustments
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
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 (primarybid.com) is running an offer for subscription (the “PrimaryBid Offer”) which will allow i3’s retail shareholder base and new retail investors to participate alongside institutional investors at the same price
Asset acquisition and concurrent onward sale
On 6 July 2020, the Company announced that it had entered into a binding purchase and sale agreement to acquire all the petroleum and infrastructure assets of Gain Energy Ltd., a private Canadian company with operations in the Western Canadian Sedimentary Basin, for CAD$80 million (c.US$59 million), with an economic effective date of 1 May 2020.
Since the announcement of 6 July 2020, the Company has 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.
The net consideration payable by i3 to acquire the Gain Assets, which are the petroleum and infrastructure assets of Gain which are 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 EBITDA 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. As part of the Company’s ongoing AIM readmission process, 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.
As the Gain Acquisition is classified as a reverse takeover (“RTO”) 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 a Readmission Document setting out, inter alia, details of the Gain Acquisition and Harvard Sale, or until i3’s confirmation that these transactions will not complete.
Further details of the Gain Acquisition and the Harvard Sale will become part of a Readmission Document currently being prepared by the Company.
Fundraise to complete RTO
Completion of the abovementioned transactions remains subject to financing and industry standard conditions precedent.
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 (primarybid.com) is running an offer of subscription (the “PrimaryBid Offer”) in order that i3’s retail shareholder base may participate alongside Primary Placing participants. Total funds raised from the Primary Placing and PrimaryBid Offer (together, the “Placings”) will be used to complete the Gain Acquisition, unlock production potential within the Gain Asset portfolio, and for general corporate purposes.
The Gain Acquisition and the Placings remain subject to shareholder approval at a General Meeting of i3’s shareholders, expected to be held on or about 26 August 2020.