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@MTSparky the words employed by the company in their January 2019 update are as follows ;

"i3-estimated STOIIP of 197 MMbbls based on conservative assumptions regarding oil column thickness"

Those figures remain relevant as does the above statement.

If the oil is there and the sands as thick as expected, then recoveries should be at least in the region of 50% (as per Blake).

So a successful drill on Serenity has a very good chance of going on to achieve circa 100mmbbl recoverable. However, at circa 10km in length, further appraisal work could well see that figure pushed higher.

Having reviewed the interims in detail these last few days, I am very much in agreement with Zeusfurla, that the company has things under far greater control than the current market cap would have us all believe. I believe the market is placing far too much emphasis on the failed pilot drill but that this is driven more by misunderstanding and in some quarters, a failure to dig deep enough into the I3E story.

Posting a strong belief on these BBs is often seen as motive driven, which is for the individual to decide. However, sometimes there are stories that are simply just completely misunderstood, and this is for me as good an example as I have witnessed for some time.

I3E as far as I understand is not a one trick pony. It is not living on financial vapour or indeed taking chances with its mapping and thus its upcoming drills. Contributors who state such things, have either not read the information properly, or have failed to understand what they have read.

What that means is that the Serenity well, its potential, and its chances of delivering are being missed because the basis of the analysis is smothered with unsubstantiated rumour and doubt.

If investors understood the company's true position properly, then they would be giving Serenity the respect it deserves rather than spending their time trying to find a problem that doesn't actually exist.

Serenity has an audited COS of 72% and conservative STOIIP of 197mmbbl and is 100% operated and owned by I3E.

It sits c. 1km from the first of 3 successful drills on the Tain discovery next door and is considered to be ;

"the westerly extension of the Tain Discovery into Block 13/23c"

Hence why the company in that very same January presentation talks about ;

"exposure to low cost/high return exploration/appraisal upside"

Yes its technically an exploration well but the audited data states it could actually be an appraisal well and would be if it was owned by Repsol. It is separated by a block border, which drives it categorization. However, that border does not determine whether it is connected or not.

S1 has a lower COS than the pilot well and that did not hit oil. However, that does not remove the validity of Serenity or its characteristics, however much the market would like too.

S1 is a big drill with a very good COS and right now the market is missing it.

Permits now all switched to decision status. The re-mobilization of the Borgland was always a clear signal that the permit process was effectively agreed and it was now far more about when I3E would be ready as opposed to the OGA.

Things should move quickly from here in.

1 of the anchor handlers is now south of the Bleoheim FPSO with the other 2 anchor handlers moving south at pace.

It looks very much like their job is done and the Borgland Dolphin is set up for its drill.

Rig move and anchors was set at 2 days. The team has achieved it in circa 24 hours. This bodes well for the remaining drill time.

Now its about the permit to drill and the spud, both of which cannot be far away.

"quiet confidence"

Looking further at the interims statements, again I am seeing only quite confidence, which runs opposite to what the market is understanding and claiming right now.

"This was an unexpected result that was not only disappointing for i3's technical team, but also a surprise to the myriad of independent technical reviewers, reserves auditors, and third-party consultants who have conducted due diligence on behalf of the Company's stakeholders. All three sets of seismic utilised to map the Liberator structure had conformed to one another and resolved the 13/23c-9 well location as a relatively low-risk target at a structural high, even though proximal to the edge of the channel."

The idea that the I3E team is a band of merry men that are somehow hoodwinking the market and their lenders, is simply wrong and strongly countered by the above statement.

The above statement supports the fact that I3E were not alone in their assessment of the L2 pilot well location and that perhaps, just perhaps, this is about fine tuning and not the loss of their phase 1 asset.

Then they go on to say this ;

"i3's preliminary integration and findings explain the unexpected 13/23c-9 well result and continue to support Management's view of Liberator's potential resources."

Furthermore, the company states that ;

" We are preparing to fund Liberator Phase I on a 100% working interest basis through our progression of a US$100 million reserve-based lending facility."

"Proceeds from the equity issuances and the H1-2019 loan note facility will be used for asset appraisal, development and working capital requirements."

"Following the successful re-activation of the Borgland Dolphin rig, in August we spud our first well (13/23c-9) on the Liberator field and we are currently preparing to spud our second well on the Serenity structure. In parallel with this operational activity, commercial discussions have continued and considerable progress has been made with RSRUK for the tie-in and offtake agreements to evacuate Liberator production through the Bleo Holm FPSO."

The above statements point to the exact situation that I have been explaining these last couple of weeks. That things are under far more control than is assumed. That the phase 1 asset is far from lost but rather being reassessed and that the initial results demonstrate this.

There is a quiet confidence running through this update and for me the market is doggedly determined to cast doubt on this company but is in my view, getting it completely wrong.

Good morning everyone.

Having read through today's RNS thoroughly and after a back check against historic information, I am seeing very little that is problematic here.

The 10th Jan 2019 RNS is the still the key reference point for the drilling programme costs ;

"The Company expects its three-well 2019 drilling programme to cost c.US$41 million with additional capex to 2020 first oil of c.US$90 million, inclusive of considerable contingency."

There remains for me a misunderstanding as to the likely costs for the full 3 drill programme. Some may focus on the c. US$41m but for me the "inclusive of considerable contingency" is at least equally important.

This is further supported by the June presentation, which demonstrates the individual drill costs, which totaled $36m. Then 1 month later we have the $3m costs referral agreement with BGHE, which should have further reduced the drill costs to $33m.

The drill programmes issued to the OGA are inclusive of contingencies and total 120 days (L2 41 days, S1 39 days, and A3 40 days).

Combined these 3 pieces of information strongly support an argument that the 10th Jan estimated $41m cost, is inclusive of the full drill time for each drill. Hence the "inclusive of considerable contingencies" statement.

Common sense says that a company does not issue a 120 day programme to the OGA having failed to raise sufficient funds to cover the possibility of an extended programme. Nor would a group of lenders allow a funding agreement that comes with warrants at a set price, to be undermined by the possibility of a further fund raise at a lower level, to achieve drill programme contingencies that were possible from the start.

So I am comfortable that at the very least that we should be judging I3E on their ability to pay a maximum $41m in costs for a 120 day drill programme.

Day 1 for me is 15th Aug, the day the Borgland set sail from Norway and the L2 drill took until 19th Sept to be completed. That's 36 days and included 7 days for rig mobilisation, which would not apply to the other drills.

Today is day 47 and the Borgland is already on site at Serenity and the well anchors are under way and the company is reporting circa 4 weeks for the drill. All of which points to a drill programme that remains well within its parameters and under control.

This is further supported by the "Going Concern" statement in the interim today. There the company is clear that ;

"The net proceeds of the placing, in addition to the debt facility, will be used for asset appraisal, development and working capital requirements."

"Based on the Board's assessment that the cash flow budgets can be achieved, the Directors have a reasonable expectation that the Group and the Company has access to adequate resources to continue in operational existence for the foreseeable future."

That foreseeable future must include their 3 drill programme. All, of which points to a company that does not need more funds.

The consent to locate the Borgland Dolphin has now been approved and the anchor handlers have started the process of getting her ready to move.

This demonstrates to me a company that is managing a problem with intent and professionalism. It also shows that one should be careful when taking information as read. The application said 13th Oct but the message has always been as soon as possible.

They still have to hit that oil but they are giving themselves and the business, as good a chance as any to achieve it.

Anchor handlers confirmed for tomorrow. Permit approval must have been green lighted.

S1 drill will very soon be gearing up.

Here's the Serenity drill programme that has been provided to the OGA and is not official.

The rig move and anchors is just 2 days post permit. Add another 2 days maximum in for the anchor handlers to arrive and set up the rig to move, and we are talking maximum 4 days. If the permit arrives Monday then they will spud latest Friday 4th Oct.

What they won't do is sit on a permit for another 9 days because its written down in an application

https://twitter.com/Redmirres/status/1177562998388482048?s=20

@Rocketboombag With all due respect, are you absolutely sure that what you are reading and stating is valid?

If we test the logic here. . .

The consent to locate permit is dated 19th Sept and has a 7th Oct earliest start date attached to it.


On 20th Sept I3E has this to say in their operational update RNS ;

"Permitting for the SA-01 well is underway and mobilisation operations will commence as soon as the consent to locate permit is obtained from the regulatory authorities."

Why would a company that is tied to an expensive rig contract, that can book anchor handlers for immediate use, commit so early to a start date that is minimum 17 days in the future?

Why would that same company state that the mobilisation would commence "as soon as" the permit is obtained, and then hold itself to a date that is potentially much further down the line?

They are for me clearly guide dates. The key here is the consent to locate permit and that is all.

When the permit lands everything will happen very quickly because to do otherwise would be a waste considerable amounts of money.

The application may say a date, but logic says something completely opposite.

@Fiah Appreciated. Its a different sort of risk this one. All the research in the world won't help us if they don't hit oil.

What i have tried to do is make sure that any of the other issues that are being banded about, are properly analysed and don't show themselves to be of a serious nature, that they would undermine us all getting to that drill result.

There has been much feeding off of the L2 result and the drop in SP but thus far, as far as I can see , it is in the main unfounded.

Time will tell but I really like the look of Serenity and what it can do to turn things around here. I trust all this hard work will be rewarded.

(3 of 3)

So at the very least there are good grounds for understanding why Dana would also not have found Serenity because their focus was elsewhere on the block and there commitment was limited. It is not beyond the realms of man to understand that in acquisitions, companies pick up unwanted extra blocks and merely conduct their minimum commitment before giving it back. Block 13/23a was not the prize in that particular take over.

There are of course still grounds to challenge my thinking and it is possible that Serenity was seen but not considered viable. However, there are also very good grounds for believing that both Dana and Talisman weren't as focused as I3E have been on this area.

Talisman drilled 3 wells on Tain in 2005 and then a duster in 2008 (i previously thought all 4 struck oil but the duster is at the far right hand side of the Tain block, away from Serenity).

After that they didn't do anything until Repsol came a calling in early 2016. So again the commitment to even the discoveries, never mind the surrounding area, was limited.

I would encourage everyone to review the documents themselves and make their own mind up, but I feel comfortable enough that there are good reasons for why Serenity wasn't seen, and this further reinforces my trust in what I3E are presenting to us all.

(2 of 3)

If we measure across using the scale on Fig.6 (crude but in the ballpark), then we see that the first c.6km of Serenity were actually in Dana's block. That still leaves the juiciest 4km section under Talisman control prior to 2009, with 3km in the relinquished section and 1km inside Tain.

However, if it is indeed true that Talisman did not re-process seismic for that area, which given that Dana did, looks indeed possible, then they would never have known that Serenity was there or indeed that it was connected to Tain.

This is further supported by the drills on Tain. Fig.3 shows 2 well sites on Tain, the original discovery 13/23b-5 and a further 2008 drill 13/23b-6. Both sit right on the Blake 3D (purple) and the peach Dana 3d seismic from 2010.

The other 2 drills conducted by Talisman on Tain, 13/23b-Y and Z, were both sidetracks drilled from the original drill location in on that purple/peach border and completed in 2005. So although Talisman drilled into the surrounding area and indeed very close to Tain, they may well have accomplished this through localised data rather than 3D seismic, and certainly did not have the seismic from Dana, which came 5 years later.

If they had processed more seismic first then they may well have found Serenity and kept the section of the block they instead went on to relinquish in 2009.

So what about Dana?

Well thus far I have found out that Dana acquired Block 13/23a as part of its $240m acquisition of Bow Valley, who at that time were struggling with debt issues. In obtaining the Bow Valley assets, Dana acquired 4 producing blocks in the North Sea and circa 7,800 bopd production (see below).

https://www.theglobeandmail.com/report-on-business/dana-to-buy-bow-valley-for-240-million/article22510579/

As part of the deal Dana as is normal, picked up other blocks with minimum commitments on them. One of these was Block 13/23a (I3E Block 13/23c)

Page 5 of the Dana report states ;

"The Licence commitment was to re-process 200Km2 of 3D Seismic Data and then to either drill one well to 3000m or into the Ettrick B Sands, whichever is shallower, on the Minos Prospect."

Page 6 then goes on to explain that this commitment was scaled back to 162km of re-processing (another indicator of Danas's approach to the Block).

In addition, Dana dumped the Minos prospect, which was favoured by Bow Valley and instead drilled Magnolia, which is next to Serenity but separated by the fault. The prospect was spud in Feb 2013 and would be the only drill that Dana would have on the block before surrendering it in early 2016.

(1 of 3)

Good afternoon all.

There was an outstanding query that was being posed on Twitter, which related to the question ;

Why did Talisman Energy relinquish part of their block (Block 13/23b), when it held the Serenity prospect, which I3E state is connected to the Tain discovery, which they held?

Before we go any further it is important to appreciate that I3E have acquired Block 13/23c, which holds both the Liberator Expansion and Serenity. This block was formerly known as Block 13/23a under Dana and includes both it and an extension to the north, which was always known as block 13/23c. Complicated? Just a little.

As part fo their licensing rounds the OGA realigned the borders post Dana and prior to I3E coming on the scene.

What we do know from the UK OGA Relinquishment reports is that Talisman Energy surrendered this part of their block in December 2009. This then left them with the Tain discovery area, which Repsol took control of through their Jan 2016 acquisition of Talisman Energy.

The enclosed Relinquishment Report from Dana Petroleum dated 8th Feb 2016 certainly provides more detail and a valid reason if nothing else for Serenity being missed by Talisman.

On page 5 you will see 2 figures. Fig. 1 is the original block area that Dana held. At the end of the first term in 2013, 50% was relinquished, leaving the lower part of the block (Fig.2) under Dana control.

For reference, in Fig.1 the rectangular block North East of Blake with 2 dots in it, is Tain. It is key to understand where Tain is in relation to Dana's block 13/23a and Serenity.

Now to the interesting part. On page 6 of that document you will find Fig.3 This is the known 3D seismic that passed over the Dana block at time of relinquishment, which was February 2016 (Dates are critical here).

In the key you will see "WesternGeo," which is depicted as the peach color in Fig.3 This peach area extends right up to the original oil discovery on Tain known as 13/23b-5

Underneath Fig.3 it says ,

"The re-processing of the WesternGeco seismic was completed in 2010 and the inversion was completed in 2011."

Remember Talisman Energy surrendered the part of the block where part of Serenity sits in Dec 2009, so before this 3D seismic and inversion were processed.

Fig.6 shows the location of Dana's only well on Block 13/23a (now Block 13/23c) called Magnolia (13/23a-7-7A).

If we refer to slide 10 of the I3E January presentation, we can see on the far left hand side this Magnolia well. A quick measure places the start of Serenity at c.300m East of that point and about c.750m South.

https://i3.energy/wp-content/uploads/2019/01/20190115-i3-ENERGY-Q1-UPDATE-v1.3.pdf

Fig.6 therefore demonstrates that Serenity started well inside the top area of the original Dana Block 13/23a (See Fig.1 page 5 above)

https://itportal.ogauthority.co.uk/web_files/relinqs/jul2016/P1610.pdf

Before I sign off for the day it is only fair to point out what OilmanJim said in our twitter conversation just now.

The comapany does use the following wording for the Serenity drill.

"Serenity is a high value exploration target and an exciting opportunity for i3 Energy and its shareholders. The structure itself is entirely separate from Liberator and will add significantly to the Company's resources in a success case.

I have no idea why they say exploration rather than appraisal well but the key for me surely has to be the confirmation that "the structure itself is entirely separate from Liberator," so I cannot see any logic in doubting the audited72% COS.

I have no doubt that this weakness in the wording will be exploited by some parties but it really should be clear that the audited statement is king here.

Until tomorrow.

I wonder how long it is going to take for that news to sink in.

S1 is confirmed as an independantly audited appraisal well with 72% CO, looking to open up circa 69mmbbl of recoverable oil.

In double checking a couple of details I re-ran a section of the June presentation from I3E.

In doing so I just heard something very interesting.

At 14mins and 26 secs he says this about the A3 and Serenity wells

"The geological chance of success we are carrying and our auditor is carrying, is 70% on that well (A3) and also just over 70% on this Serenity appraisal well."

Questions have been asked about the non-existence of a CPR for Serenity and whether it is an exploratory well or appraisal.

In that segment the CEO is clear, it is an appraisal well and the auditor has backed the 72% COS.

That is significant.

https://www.youtube.com/watch?v=LxszZF-apmE

Ver y good question O&W but right now I am firmly in the "I'm glad they did" camp. I don't like frivolous answers that don't provide fact but what I do know frombeing inthis investment game a while, is that oil companies miss these opportunities more often than not.

I3E won the licnese in the 30th offshore round. There is nothing to say that Repsol didn't also go after it and I3E beat them to it.

The CEO is also clear in the June presentation that a positive outcome on Serenity would lead to a combined development, which again reinforces my view that a farm out could be on the cards, if I3E deems it the best course of action.

@MrJinx I did say I am in agreement with you and it is a black mark.

I replied to you by saying "that said it doesn't look very good on them because at the very least they should have highlighted a potential undefined charge was to come."

@MrJinx I simply do not see it as a roll of the dice. I wouldn't be here if it was.

CHAR have not succeeded previously and longer term investors are frustrated. But Lixus is a very strong asset and a value at cash only at this stage of its development, with all the 2019 work done to open it up to a partner, is just a crazy valuation in my view.

As the JUne 2019 presentation says "$8.50 -$9/mcf expected gas price to the power sector" coupled with 90mmscf /d production brings in revenues of $279m per annum.

Operating costs inclusive of CAPEX will likely be well under $2 per mcf, so we are talking $200m plus netbacks and a 10 year corporate tax holiday, royalties on gas at just 3.5-5%, and furthe tax & customs duties exemptions (see slide 28 below).

Even if they achieve half of the netbacks its a really attractive project. Its now about how much they can keep hold of and for they receive for the bit they give away. Whatever the case it won't be the current zero that the market is pricing Lixus at.

https://www.chariotoilandgas.com/wp-content/uploads/2019/06/Oil-Capital-Presentation_June-2019_Chariot-Oil-Gas.pdf