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I appreciate that the whole situation can look like a buying time exercise and possibly kicking the can down the road, but what if it isn't?
The funds raised on Friday are stated as described as follows ;
"Such proceeds will bolster the Company's cash resources as it enters the drilling of the A2 well at Liberator which, in conjunction with Dolphin Drilling's partial payment deferral as announced by i3 on 29 October 2019, gives the Company flexibility to extend its drilling programme."
Given we have now just seen a new drilling permit go in, I would say that the above statement points towards sufficient funds being raised to drill a 4th well. This is backed up by the fact it is Bybrook leading the charge, and they are unlikely to be happy, if I3E were intending to go and raise even more funds soon after.
The pure fact that it is Bybrook that have backed this deal, and it is they that are supposed to being paid their 8% per annum fee on the junior debt, says at the very least that the financial position, could well be under control, given they were a party to the extension to 30th April 2020.
Since the 10th Sept L2 result, there has been a constant stream of first to find the negative. A 'ah but what if' campaign if you will, with little or no respect being given to the deals (several of which have been arranged at very short notice but still on good terms), themselves.
These guys are attempting to balance the books during a time when they are trying to establish a development plan, for what is now 2 significant, 100% owned assets, close to established infrastructure.
That doesn't come with perfection, but to date this team has managed it very well, and to the point that they still have junior debt holders willing to pay 35p a share for additional funding, despite the concerns of investors and the recent sustained period of value well below that level. So why no discount?
When are investors going to give that some recognition i wonder? There may well be hurdles still to jump through and perhaps eventually even some more cash to be raised, but as I said earlier today, the pure fact they are willing to drill a 4th well, in Winter, at Liberator, says a lot about their forward planning, their confidence, their investors confidence, and their will to control their development costs, and thus potential dilution down the line. It also says to me that cash is under control.
They didn't work this hard to go and blow it all on a keep the lights on style cash raise.
As for the depressed share price, there appears to be a strong sentiment driven stance, that despite Serenity success, I3E still have to prove that their model for Liberator is correct, and I can actually understand that, but it is skewed given what they just hit, where it is, that it used the same model, and who is next door.
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@tonynorstrom1 My post wasn't designed to highlight general perceived risks, more risk that have been tabled as answers to why the valuation isn't higher, or why investors would be wise to place their money elsewhere. The main reason I started posting so often on this BB, was because from the moment I3E hit an issue with the L2 well, a cacophony of negative noise, hell bent on finding something wrong with I3E, came to the fore, and gave smaller less well armed shareholders, little chance to breathe.
The actual position in the accounts is that I3E spent £7.5m in the period of which £3.3m was on exploration and evaluation assets.
During the period in question the Borgland Dolphin contract was executed and the Gardline contract employing the Ocean Observer to survey the drilling locations for this year, was also signed off.
I cannot say that all of the £3.3m could be attached to the 2019 drilling campaign, or that it is all part of the reported $41m cost for the drilling campaign, but then nor can you either.
What is clear is that drilling campaigns don't just involve drilling and they don't just begin being paid for when the drilling starts.
As I have stated many times before, the $41m contract to this day, has never been stated as being for just 94 days of drilling. Nor can it be easily concluded that I3E raised money for a 94 day programme, knowing fine well the wells could take up to 121 days.
Given the $41m figure has been around since at least the end of last year, £3m of deferred payments agreed with BGHE, when thy went into contract on 2nd July, surely have to be removed from that figure. The campaign is still costing $41m but part of it is either deferred to first oil, or being paid in I3E shares. I make that about $3.75m.
So the starting figure is closer to $37m and not $41m.
What the company has said since, is this ;
" i3 Energy has secured a right of first refusal on the Borgland Dolphin semi-submersible rig to 31 January 2020 so that the Company can continue drilling operations at Serenity and Liberator. "
"Associated with this contract extension, Dolphin has agreed to defer certain payments for drilling costs beyond 30 September 2019 which the Company will be due to settle between January and August 2020. With this payment deferral in place, i3 Energy remains comfortable that it has the cash resources available to conclude its planned 2019 3-well drilling operations."
What nobody can conclude is that the deferred payment was required to ensure that I3E could meet their obligations. What it says is that a deal has been done to allow I3E to continue to drill at Serenity and Liberator.
Then came the £5m from Bybrook, and then we see a new drilling permit for Liberator, with a planned start on 8th December.
BBN,
Money being tight was not a perceived risk - I think the evidence point to it being fact. When we spoke about funding last time, it appears neither of us had paid much attention to the interim results up to the 30th June 19 (30th Sept RNS). Looking at the Income / Cash flow statement - I3E had burnt through about UKP 8m in the 6 months up to the 30th June leaving a cash / cash equivalent balance of UKP33m ($41m) with a $41m / 94 day drilling program yet to start. Using this cash balance as a starting point and forecasting a 115 day drilling program along with additional admin and finance charges to the end of December - my calculation showed they were out of cash in December. The additional 5m raised plus warrants in the last fund raise is probably not sufficient to fund the 4th drill without the benefit of Dolphins deferred payments.
What this indicates to me is that they need to sort out the RBL or farm-out in the next couple of months or otherwise they will be looking to the shareholders again. Now I think I3E have a reasonable chance of sorting all this out and Dolphin and the Junior Lenders have indicated their confidence in I3E with additional funding / deferred payments - but in my opinion, the depressed SP is an indicator that outcome is not certain.
regards
Could / will open the possibility of an early JV , almost certainly with the same party that backed out of the JV a little over a year ago . The have on occasions stated that JV discussions are ongoing only to be greeted by some with a load of vitriol . Of course we dont know who the partner was , not least because I3e has respected confidentiality . The consensus guess way back then [ inc. mine ] was Repsol. Should that be true , with the good news from Serenity , we might in the next year or two , be not just looking at the unitisation of Tain and Serenity , but of the whole block …...interesting times !
The world is perhaps still asleep to the fact a 4th well has been applied for, and what it means for the bigger picture here.
Perceived risks.
1. I3E do not have enough money to pay their bills post A2. A 4th well answers that. One does not push the budget even harder, even for a discounted well, if money is tight.
2. I3E are potentially taking a chance with their Liberator model and thus the COS for A2. A 4th well answers that. If the model was doubted by I3E management, then why would they logically conclude it is a good idea to drill it twice?
3. I3E do not have enough reserves around the A1 & A2 locations to secure an RBL big enough for Phase 1. A 4th well answers that. The 2017 CPR is clear that upto 2km, there is far more certainty about the reservoir. Drilling even just the A4 pilot well in this programme, brings the A3 well location well within that 2km zone (approx 1.2km from A4).
If they decide to bypass A4 because it too is well within range of the A2 drill site (1.5km), and go for the A3 well, which was the original step out planned for this Summer, then upon success, they open up what is now a much bigger Liberator West, because they will be 'only' 1.2km from the perceived connection point, between Liberator phase 1 and Liberator West.
All of which opens up the opportunity to establish more reserves/contingent resources, which in turn opens up greater options for the RBL, which itself can then potentially fund more drills, be it at Liberator or Serenity.
So whilst my first reaction was it is A4, there may be far more worth in it being A3, which would deliver the entire drill programme, as planned, be it more expensive, but potentially opening up, what will be a much bigger.
A successful A3 drill this Summer, should effectively transform Liberator West into an appraisal programme.
Now it could be that the lenders have forced this hand. However, I don't believe that its the case because the deal with Dolphin (deferred costs and strategic partnership), was made prior to the fund raise for the "flexibility to extend its drilling programme" being secured, and prior to the meeting with the RBL lenders. However, I recognise that it could be seen another way
It looks very much to me, that I3E have taken advantage of the gap in the Borgland's work programme, to strike a deal for a more cost effective 4th drill, and set up a chance to deliver what they said they would at the start. This is for me, supported by the fact that ByBrook are supporting the move, rather than I3E having to go to more common methods to obtain the cash required. My opinion only.
its all starting to come together isn't it. Sitting on my hands and wait this out. I still hope for a really good takeover offer at some point. Neptune paid ~$8 per barrel for Edison E&P’s UK and Norwegian producing, development and exploration assets....;o)))
Yes I have just had a look at the energy portal and seen it too.
Here is a link to the portal for those that do not have it. You need to type in 2019 and then scroll down.
It is stated as being an appraisal well, so I wonder if it is the indicated pilot well for the A3 or A4 location.
Well done to those that supported the 4th well theory, I wasn't convinced. With a little hindsight, one can see that there was a good deal to be done with Dolphin to keep the rig active through to the end of January, this ties in nicely with the delayed payments and strategic deal. If so then I3E may well be taking advantage of a market opportunity to really solidify their phase 1 development opportunities.
What this does is really put the cat among the pigeons, because it de-risks the outcome of A2, because its not the last drill, and it offers up the chance to push the reserves higher and thus strike a better/stronger RBL deal.
Lets not forget that I3E will be, one way or another, to appraise Serenity next Spring/Summer, so the better the RBL, the less the potential lean on investors.
Still needs some more thought but looks like a really positive development.
https://itportal.ogauthority.co.uk/edufox5live/fox/edu/WONS_WELLBORE_SEARCH_PUBLIC
Do you have a link BTW
Well, well, well (well)
I3E have applied for consents to Locate a Mobile Installation and Undertake Drilling Operations for Liberator field earliest start date 12th DEC.
So possible 4th well planned this year.