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(Alliance News) - i3 Energy PLC said Monday it has agreed to buy issued and outstanding common shares of Toronto-listed Toscana Energy Income Corp for CAD 4.0 million, about USD2.8 million.
The option agreement ends June 30.
TEIC had 2019 year-end 2P Reserves of 4.65 million barrels of oil equivalent (53% oil, 47% gas) with a reserve life index of 14.7 years, i3 said.
Toscana's 2019 production averaged 1,065 boepd and generated CAD5.5 million, USD3.9 million in field netback from 13 low-decline, long-life conventional fields producing at an average breakeven price of CAD30.43 per barrel.
"i3 is purchasing Toscana at a fraction of going market-based valuations for Western Canada Sedimentary Basin oil and gas transactions," the company said.
The total aggregate consideration being paid by i3 for TEIC's debt and equity totals approximately CAD4.0 million, representing about 0.72 times Toscana's 2019 field netback of CAD3,710 per boepd and CAD0.85 per boe
"This is a highly significant acquisition opportunity for i3 which adds material, low cost per barrel, low-decline production as well as a new growth business with a strong management team and strategy in the Western Canadian Sedimentary Basin," i3 Chief Executive Majid Shafiq said.
Following exercise of the option, i3 intends that its enlarged share capital will also be listed on the TSX, satisfying the company's obligation under its existing loan notes to seek a secondary listing for its shares.
Shafiq added: "In addition to diversifying our portfolio, this transaction will help to stabilise our business with a steady revenue stream while adding considerable upside potential from within Toscana's Clearwater acreage - an opportunity which is comparable to the growth potential of our Serenity discovery. We look forward to welcoming the Toscana management team and staff to i3 and working together to grow our business in the UK and Canada."
Under the deal, TEIC shareholders will be offered i3 ordinary shares at an exchange ratio of 0.0281 i3 ordinary shares for each TEIC common share. Based on the current fully-diluted share capital of TEIC, this will result in the issuance of up to 4.4 million shares to shareholders of TEIC, representing dilution of approximately 4% to i3's current shareholders.
Toscana currently has CAD24.8 million senior and CAD3.2 million junior debt facilities using current cash resources of CAD3.0 million and CAD400,000.
In 2019, Toscana made a CAD4.1 million loss on revenue of CAD15.8 million.
Shares in i3 Energy closed 0.4% higher in London on Monday at 7.22 pence each.
By Paul McGowan; paulmcgowan@alliancenews.com
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