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In very simple terms, what I am understanding is that I3E are freeing up further cash resources to enable them to complete their 3 well drill programme and move them through the RBL, and onto first oil.

Serenity is a great result but it the value here is not just in that discovery, it is in that field discovery being appraised and developed, through the cash flows of a strong LIB phase 1 development. That is why I came here and that is why I am staying.

The deferred payment for Dolphin (which is heavily hinted at being a WIN/WIN because Dolphin have the security of a 'long term' contract with I3E through to 2023, which in times of uncertain oil prices, will be most welcome), confirms the full drill programme costs are covered, and opens up the finalisation of the RBL, that will finance that LIB phase 1 development.

Secure that and the world is I3E's oyster because then the cash flows are there for I3E to do with as they wish, and develop the likes of Serenity as they wish, which strengthens their negotiating arm across the board, and thus will deliver the real value here.

That's what I came for and that is what I am staying for.

If I3E raise equity between now and first oil, it will be because it is value accretive to the business and its shareholders, not because they are running out of money. The real story here starts now.

Lots to digest this morning but I would like to first and foremost focus in on the finance (tonynorstrom1 earlier post noted).

The initial thought process lends one to believe that they are perhaps stretched financially due to the extended drill programme but I would encourage shareholders to read the first paragraph of the "funding update" again.

"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."

The 94 day drill programme was activated upon rig mobilisation to the L2 pilot well, which I have as commencing on 14th August 2019.

The agreement with Dolphin means that I3E will pay for the first 47 days in full plus whatever costs could not be deferred (identified as "certain" in the RNS) beyond 30th Sept. So the statement regarding being "comfortable" is for me a very corporate way of saying there is no problem with finance.

Moving on.

"Progression of the RBL will require successful drilling at Liberator and the Company is obligated to enter the RBL no later than December 2019 in order to remain in compliance with the terms of its Junior Loan Note Facility."

Note - It is important to remember that certain junior debt holders are stated as being members of the RBL syndicate.

So what that means is that the RBL is very much alive and will be driven by the pending "pilot well" into the "remapped L2 accumulation."

That pilot well is needed to secure the RBL (senior debt facility) and can be now be successfully drilled by December 2019. If that is achieved then I3E can, as obligated, meet the terms of the RBL by December 2020.

Logic states that by mentioning the "reserve-based lending ("RBL") facility of up to $100 million," and its December terms, that the company still wants it. If they achieve a December sign off then it is highly likely that they intend keeping to their previous plans of first oil in Summer 2020. A Summer 2020 first oil date allows I3E to meet their stated "defer certain payments for drilling costs to "between January and August 2020," with August perhaps being the key date.

The exact situation with funding has still to play out and perhaps we will learn more on Thursday, but what I don't see right now is a problem with cash flow, or indeed a problem with the anticipated full drill programme. What I see is a move to add security to the balance sheet because the drill programme will enter December, and that means pushing minimum 108 days plus whatever December comes out at, in order to ensure that the company is in a strong position to complete its RBL, which should go a long way if not fully towards securing first oil.

A plan that the company clearly stated was the case even after the L2 pilot well, and now we know why.

In all aspects of life there comes along times when the world will tell us there are things we should not be doing, but everything inside us is screaming that that is not true.

In my opinion, that is when we need to be backing ourselves the most. Even if we end up being wrong, we will always really have been right because we trusted ourselves.

@Heidhoncho At the risk of being a tad annoying, I don't believe I have postulated at all about a DST.

The word I used was "option" and it was based on previous conversations//comments I believe I had seen here and on Twitter, in which other parties suggested that the most recent oil discharge permit could be a DST.

I don't believe that I have at any point suggested that a DST is under way or indeed is being planned. However, I do take on board your comment about "sufficient substantive data" and "managing expectations," a point I have been keen to uphold, but could perhaps be guilty of encouraging.

To be clear, I have no evidence that a DST is planned or is under way. As an existing investor, I have made it clear previously that I am here for the long term, because I believe I3E, against what is currently known and as I understand things to be, is more than capable of delivering a very solid business, when given sufficient time to breathe and express itself. Very little of that long term story hinges on a oil discharge permit.

With that in mind, my quest to establish what is going on is born more out of curiosity and a desire to problem solve, than anything else.

The reason I have't written off a DST yet (despite the fact that the company has never included one in their plans, and the time frames and equipment involved run counter to the facts that we have before us), is because right now it is the only solid option that I am being offered for a 3rd (variation) and stand alone oil discharge permit, being applied for.

I recognise that a DST goes against the 31st Oct date but that is an earliest start date and can change. Probabilities state that I3E booked 31st Oct for the A3 earliest start date because it was achievable, if everything went smoothly. I took that to include a prompt response to their oil discharge permit, which is now 6 days old, which itself is a substantial window of time, within the total time frame we are discussing, so perhaps a factor.

As for the equipment needed for the DST, I take your point but I hadn't written it off on those grounds because until the permit is agreed, said actions likely cannot be implemented. However, as I say, there is no evidence right now that a DST is planned or is taking place, only the oil discharge permit, which I would welcome further ideas on.

Last point. I don't come here to rule the roost and push my ideas onto people. I come here because I want to share my ideas and have them challenged. The problem is that the challenge I seek, is often not forthcoming. So I very much welcome your candor and would encourage more of it, because any idea that I am always right or indeed do not make mistakes, is way off the mark.

One other fact based factor in play here is that if I3E discovered no oil shows or something that gave them belief that no oil was present in the bore, then why was this not simply reported, the same that JOG did on Verbier, back in 2017.

The same that I3E just did down the road at their pilot well, the moment they noted that the upper captain sands were pinched out. Why not as JOG did, report the miss and then introduce the sidetrack?

I3E have already demonstrated that they are prepared to issue bad news if bad news is what it must be, as and when it is known (L2 preliminary result came out at 10am).

But they haven't. What they have done is instigate a sidetrack during the main well bore drill, at a point in time that is barely long enough to enable them to hit the predicted payzone, never mind process the wireline logs fully to enable a measured decision to be made on a sidetrack and its location.

Yet on the L2 well, I3E have spent some 7 weeks reviewing the data, be it they have introduced new seismic, and have barely said a technical word on the subject.

I still refuse to proclaim that Serenity has hit oil, but when considered logically, there is certainly enough evidence to support an argument for it, and/or that there was something in the well bore that has encouraged them, if nothing else.

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Finally, as I stated in my earlier post, the oil discharge for the sidetrack was signed off on 18th Oct. So with all due respect your point about the ;

"An oil discharge permit is needed if drilling through oil bearing formations with water based mud. It would be applied for anticipating you could encounter oil in the reservoir; you get the permit on the basis you may or may not - otherwise you would need to stop drilling if you encountered oil and then get a permit."

has no bearing on the debate.

What we have is a 3rd oil discharge permit variation in play, that was applied for on 23rd Oct, which is 7 days after the date that the geological sidetrack was approved, and 5 days after the oil discharge permit for said sidetrack was approved.

The question I have been posing is why and for what is this permit required? Because as you say there must be an operation that has the chance of releasing oil in manner not covered by the sidetrack, or the original well bore drill. Right now I have DST as an option, but I am open to further offers.

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@CNSInvestor I appreciate what you are saying. However, this is not just about the geological sidetrack in isolation.

The Equinor Verbier drill included for a possible geological sidetrack from the start. I3E did not.

The main exploration drill for Verbier was reported by their partner JOG on 11th Sept, when they stated ;

"The well encountered water bearing Upper Jurassic sands, deeper than anticipated. A decision on whether to drill a sidetrack will be taken after evaluation of wireline logs"

That analysis was reported on 18th Sept when JOG stated that the justification for the sidetrack was based on that fact that ;

"Indications of the potential for hydrocarbons to be present in a smaller accumulation up dip of the 20/05b-13 Verbier exploration well cannot be ruled out."

This ties in with my post of earlier that a geological sidetrack on an exploration/appraisal drill, that is the first drill in the prospect by that company, must have grounds for justifying the sidetrack. Otherwise every exploration drill would apply this technique including the L2 pilot well.

So its not about being indicative of an oil find but more that there is an indication that oil could be present in a sidetrack zone, to the point it is worth expending monies for the sidetrack.

According to the public well bore search, the Verbier sidetrack was authorised on 15th Sept. However, so relatively quickly post the exploration well result.

However, as an example it shows that the basis for the sidetrack decision, was the wireline logs.

The L2 pilot well employed Measurement While Drilling (MWD) tools but both its drill prorgramme and that of Serenity, both made an allowance for wireline logging, be it performance or analysis.

One of the key factors here for me is the speed with which the geological sidetrack was decided.

The variation to the EIA permit was issued on 14th Oct. Serenity was spud on 4th Oct. At best they were at day 11. The Serenity drill programme has 17.5 days from spud until the end of the "wireline logging/VSP (4 day allowance).

It was reported by I3E that the VSP for the L2 pilot well would take 2 days (see 10th Sept interview). So we can in very simple terms, remove 2 days from the programme.

So when all things were running in line with the programme, it should have taken I3E 15.5 days to reach a point where by the y could review the wirelines and make a decision on the sidetrack.

They achieved that decision in just 11 days. Even allowing for a far more successful run, that is sporty, and before anyone asks, it does not include the 7 days of contingency that were allowed for in the programme.

It is these factors that have me wondering here and not just the fact that a geological sidetrack was undertaken.

Sorry key word missed again in part of 1 of last post.

Should read "wouldn't be of any benefit to the company or its shareholders, if they did not have something worth buying into."

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So that OCC decision, when combined with the permit updates, for me acts as a very strong indicator that the company has, as of 23rd Oct, had a positive development, and it does not necessarily need to involve Serenity.

What is more interesting is that we have had no update on either the L2 results or indeed the Serenity drill.

Given what I have just reasoned above, because the L2 results are now highly likely known, if the Serenity drill result was a duster, then the company highly likely has a positive update, with which to counter the affect of the Serenity result. However, the result has not been released. Instead we continue to wait.

What that says to me is that the Serenity result is at the very least still unknown or best case is positive but requires fully defining (The outstanding oil discharge permit supports this incomplete drill conclusion further).

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A little more logic if I may.

The fact that I3E waited until 23rd Oct to confirm their place at the Oil Capital Conference (OCC), a date they have made at least twice before, is for me a clear signal that they wanted something confirmed beforehand.

Right now, as far as the market believes, I3E have a failed drill at L2 and a questionable phase 1 development, due to that well result, and a drill that is underway but with results unknown.

On 23rd Oct, the same day they confirmed their attendance at the OCC, they issued a oil discharge permit variation. A day later they updated their A3 'consent to locate a mobile installation' permit, which confirmed they know where they want to drill. A key outcome of the L2 well analysis because in the interims the company stated ;

"The processing and interpretation of this new seismic data has begun and will continue while i3 is drilling the Serenity SA-01 well and will be integrated with i3's existing mapping to confirm that the planned LA-03 well, situated in the western part of the Liberator structure, remained at an optimal location."

The key words, be it that other may question it, are "will be." They are important because I3E did not have to say that. They could have said "are proposed to be," or "intended to be," "ideally" etc etc. Any phrase that gave them wriggle room to set the A3 drill location prior to the L2 well analysis being completed.

But they didn't. Instead they chose to the emphatic and there is good reason for that. Sometimes it is important to focus in on what companies don't say, rather than what they actually say, and this is a very good example of that.

So for me, the confirmation of the A3 well location, says very clearly that the L2 analysis is completed.

Given that I am firmly in the attending OCC because we have something new and positive to say club, then what we have here is a set of choices.

1. They were waiting on the Serenity sidetrack to confirm oil, be it that it perhaps needs to be tested still.
2. They were waiting on the L2 result to confirm their interims statement that "post-drill analysis incorporating data from the well confirms our view that Liberator is a material asset," and thus the news is related to the Phase 1 development.
3. Its both.

With all due respect to those that may not buy into the logic, I do not see how anyone could reasonably conclude that a company that does not have either of the above options, at its disposal, could conclude that it is a good idea to attend an investor conference, that with its timing and the recent history of the company, would be of any benefit to the company or its shareholders, if they did not have something worth buying into.

A situation whereby I3E do not have one of the above options, smacks fully in the face of the decision to attend.

It is important to remember that the latest oil discharge permit, dated 23rd Oct, has still not been determined/confirmed by the OGA.

So unless I3E have agreed the works associated with said permit verbally, then logically those works will not have been carried out.

I stand by my earlier observations, it is extremely rare for an exploration/appraisal drill.

Note - Yes I am still employing the exploration wording because for the many that feel it is such a drill, the existence of a stand alone oil discharge permit is all the more relevant. If you do not believe me then simply review the last 3 years of OGA drills, and see how many have ever had a further stand alone oil discharge permit, which were NOT a development well.

It is rare.

What has happened previously is that an oil discharge permit has been issued in the manner seen on the Serenity drill, and then followed up several days/weeks later with a varied EIA permit, a development I was aware could happen with Serenity until the A3 drill date was confirmed. That is why the A3 drill confirmation is so important, because it takes that possibility away and confirms the oil discharge permit variation as a very rare stand alone permit, which in my view is significant.

@HeidHoncho Good morning. If I may I will be succinct and direct in my response, in order to try to avoid any further confusion.

You said ;

"If indeed there is a geological sidetrack occurring, then it is equally likely that a revised/additional oil discharge permit is required due to the additional potential reservoir footage being drilled."

The EIA permit variation for the geological sidetrack was issued by I3E on Mon 14th Oct 'confirmed' by the OGA on 16th Oct.
On 11th Oct a variation to the oil discharge permit was issued and signed off shortly after (18th Oct) the EIA.

So the revised oil discharge permit you quite rightly anticipate, was indeed applied for and obtained.

The oil discharge permit I have referred to, is a third variation to that permit, and was issued as a stand alone variation, on 23rd Oct. By stand alone I mean that no other permit has been varied along side it. A situation that is very rare on the OGA portal.

The confirmation of the earliest start date for the next drill (A3), strongly indicates that I3E/Petrofac have a good handle on how much more time they require to complete the S1 drill. That further strongly indicates that the geological sidetrack has been completed.

In addition, the EIA confirmation arrived on 16th Oct and the time that has elapsed since, is some 75% of the total time required to drill to the first target.

So in my view the evidence is pointing towards a geological sidetrack that is complete. That said sidetrack has led to a further need for an oil discharge permit, that has nothing to do with the sidetrack operation itself.

So whilst I cannot completely write off the 'guess' element, the logic driven conclusion is certainly strongly supported by more than one piece of clear evidence, such that we are talking an educated guess at worst.

As for the though process that I have suddenly change my mind regarding the legitimacy of I3E calling Serenity an appraisal drill (a definition I might add that clearly stated on the OGA energy portal), I would simply encourage you to thoroughly read back through the numerous posts I have published here, since the L2 preliminary well result was issued on 10th Sept.

I cannot say that Serenity has hit oil but there is certainly something going on with that drill, because the evidence points to that being the case.

'In case I have missed something along the way'

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Therefore, at c.7-8 days between the permit being confirmed (16th Oct) and the oil discharge permit update (23rd Oct), there should have been ample time to conclude the sidetrack. Given it was only 3-4 days short of the total drill period to date.

Those things combined, indicate strongly the latest oil discharge permit is for a specific operation (DST has been rumoured), which highly likely has been instigated post drilling completion. By that point the timelines become more about output above sea level and not risks below it, with the final operations being the test, and the permanent well abandonment.

This is further supported by the fact that we now know that the sidetrack was geological. Had it been a mechanical sidetrack or even a re-spud, then there is an argument to be had that the oil discharge permit would perhaps soon have been joined by further permit updates, an outcome that I have witnessed through an analysis on other drills on the OGA permit portal.

The confirmation of a geological sidetrack therefore for me, cements the case for the oil discharge permit being associated with a DST.

If indeed true, then what that in turn brings into question is why has a DST has been added to the drill programme, when there was no previous allowance for it in the drill programme, or indeed the previous oil discharge permits.

We should be careful in how we come to our conclusions, particularly when those conclusions offer us something that works in favour of our investment. However, right now the existence of a geological sidetrack on a 'exploration' drill is pointing now towards a drill that has missed its target, but one that has established something that has instigated a geological sidetrack.

Furthermore, said sidetrack has itself spurred the company on to initiate a further stand alone oil discharge permit, which leans heavily towards an operation that involves further testing outside that which has previously been allowed for.

Neither of those two developments, as it stands, points towards a missed target, but I welcome further thoughts on this because I have missed something along the way.

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@Backwoodsman I'm not so sure that your take on this particular geological sidetrack is correct. The immediate thought when we think about a change of target, is an error has been made. This is all the more easy to conclude when the company in question has recently had a 'failed' pilot well with a high COS.

However, the first key question one should be asking oneself is why permit a geological sidetrack on a exploration/appraisal well, that is the first well bored into the prospect? What has justifies it?

This question is all the more relevant given the fact that the company has just completed a pilot drill, which was supposed to confirm a production well location but penetrated a pinched out zone. If a geological sidetrack was justified anywhere then surely it was on the L2 pilot well, but they didn't perform one. Why not? And more importantly why then at Serenity?

The simplest approach is to assume that the company did not hit its desired target and so have performed a sidetrack to search out/find their target. However, if the target is missed on an exploration well (company stated appraisal well), then surely it is simply missed.

Both the L2 pilot and Serenity well have an allowance in their drill programme for wire line logging and VSP. On the L2 pilot well, post pre-liminary result, I3E announced that a VSP would take place, in order to secure well data around the well bore.

If I3E have missed their target at Serenity, then why is the process any different? Why no preliminary result? Why no VSP and better still why is a geological sidetrack now on the table?

If the target had been missed, then I see no reason for a geological sidetrack because it would be guesswork as to which direction they should sidetrack too. A geological sidetrack on an exploration well has to have something to go off, so for me it is highly likely that there is something in that well bore that has stimulated the sidetrack.

My investigations over the last 24 hours, can find no example of a geological sidetrack that would be conducted on a well bore that did not have a reservoir present.

Furthermore, post sidetrack I3E have issued a further oil discharge permit (23rd Oct). I say post sidetrack because the A3 drill permit variation to 31st Oct, demonstrates that the expected timelines to well completion, are now known.

We know this because when the Serenity well permit was varied, I3E set the earliest start date as 7th Oct, which was 18 days after the issue date. The A3 well has been set at just 7 days. There is clearly a good reason for that.

If that weren't enough, as of the geological sidetrack permit date (14th Oct), I3E had been drilling maximum 11 days post spud announcement. The drill programme for S1 has a 13.5 day period between spud and total depth.

In order to determine that a geological sidetrack is required, they have to have at least reached the top of expected the pay zone.

I wonder how long it will take the market to appreciate that that one permit update, means that

1. the A3 appraisal is going head ;
2. The full results of the L2 well are known.
3. That Serenity result is very close because the "well abandonment" timeline for Serenity is stated as being 4.5 days. There are only 6 days left after today, inclusive of 31st.

The important point being they did not have to state 31st Oct. A couple more days here or there, would have made little difference to the permitting process.

Another really interesting point within all of this, is that on 23rd Oct I3E confirmed their attendance at the Proactive Oil Capital Conference. The same day that the Oil Discharge Permit variation was issued, and 1 day prior to the A3 well being confirmed.

Coincidence? Possibly. Likely? Not for me.

Rather interestingly the 'consent to locate a mobile installation' for the Liberator A3 appraisal well, has been updated as of yesterday, with an anticipated start date of 31st Oct.

More interestingly, said permit was updated 1 day after the Oil Discharge Permit variation to the Serenity well, was itself updated.

Meaning whatever is happening at Serenity will soon be complete, and the A3 drill location is now known.

In one fowl swoop we have a deadline for the Serenity well, and we know that A3 is going to happen, and happen soon.

The Oil Discharge Permit for Serenity remains outstanding. I would think it won't be for very long.

The variation itself is not/never accessible , only the fact a variation to the original permit has been lodged, which is visible on the OGA portal. No more, no less.

Evening all,

A new variation to the existing oil discharge permit for the Serenity drill has appeared on the OGA energy portal. It is dated 23.10.2019.

No other permits have been changed.

I am not going to speculate as to why it has been issued. I merely saw it and wished to update the BB, although it’s certainly an interesting development.

@tonynorstrom1 I take on board what you are saying and you are correct that I have made an assumption.

Upon further analysis, I see that the 94 day, 3 well campaign, is included at the top of the slide in the June presentation.

In addition, Majid Shafiq states that the "total cost of that programme is just over $40m."

With the BGHE deferred payment, this would place the total cost at "just over" $37m.

I stand by my earlier statement that the "total cost" will include those considerable contingencies because the company has already stated as much, and it is a sensible conclusion under the circumstances. The drilling schedules (120 days) will have been known at that point in time.

So the total cost is most relevant. That said, I had forgotten about this part of the presentation, even though I have watched a dozen times or so. So I thank you for that.

That error aside, that still places I3E at circa $12m running room post the 120 day drill.

I also support in part what nGOk has stated because the drill programme is broken down into various different components, on every good example being the anchor handlers, which can have very high day rates (circa 75k a day per boat), which themselves skew the average day rate you have employed.

Despite this deviation, I still see a company with a very solid funding position, which should see them through to the senior debt facility sign off, if/when they hit the oil they seek.