I3E will immediately sell some of the wells that it is acquiring in the Gain Energy deal, recouping C$45mln to effectively reduce the initial acquisition cost down to C$35mln
i3 Energy PLC () has revealed a quick-flip of recently-acquired Canadian oil and gas assets and a new £30mln funding via a share sale.
A month ago I3E agreed the reverse takeover of Gain Energy, a producer in the ‘Western Canadian Sedimentary Basin’, via a C$80mln (US$59mln) deal and today it announced a follow-on deal to sell the Gain assets located in Saskatchewan for C$45mln (US$33mln).
It will sell the asset package to Harvard Resources Inc immediately following completion of the reverse takeover.
The company noted that the transaction means that the net consideration to acquire Gain drops to C$35mln (US$26mln).
It pointed out that the assets being retained generated US$22mln of earnings (EBITDA) in 2019, across 242 operated wells and interests in some 1,044 non-operated wells. The retained assets comprise some 53.8mln barrels oil equivalent proved and probable reserves, valued by consultant GLJ at US$182mln (NPV).
Production from the retained asset package will amount to 8,948 barrels oil equivalent per day (boepd).
To raise £30mln, I3E is issuing new shares priced at 5p each which is a discount of around 18% to the price prior to the share’s temporary suspension on AIM.
I3E told investors it expects to hold a general meeting on or about August 26 to seek approval for the transactions.
News of the initial GAIN deal came just weeks after the company exercised its option to acquire Toscana Energy Income Corporation (TEIC) – another Canadian firm with assets in the ‘Western Canadian Sedimentary Basin’. That deal comprised thirteen oil and gas fields, producing around 1,065 boepd.
“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,” Majid Shafiq, I3E chief executive said in a statement.
“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.”
Shafiq added: “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.”
2019 financial results
In a separate statement, I3E reported financial results for the year to December 31, 2019, a year which included fundings grossing £24.4mln, the closure of around £22mln of investment by Bybrook Capital, BP, Lombard Odier and James Caird Asset Management.
For its North Sea business, i3E entered into an offtake deal with BP and signed up Baker Hughes to support its 2019 well programme.
The company in November completed a three-well drill programme which delivered a major success at Serenity which was described as potentially “a very large oil field”.
In October, results from the latest well at the Liberator discovery disappointed though the core portion of the project remains intact and close to 400mln barrels of further untested upside is retained for future appraisal. A Phase 1 field development would see the company target 63mln barrels of oil in place.
In terms of financials, the company reported a net loss of £10.85mln and it ended the year with £19.06mln.
“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,” Shafiq said in the results statement.