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Moving onto Item 4.

"How viable is Serenity and how much risk does it carry?"

I am going to buck the trend here and call out Serenity for what it is, which is a really good appraisal drill of a potentially much larger oil zone than Tain currently carries. Tain was reported by RRE in their RNS of 12th Feb 2019 as follows ;

"The development of the Tain field (50.0% interest) is progressing with the Field Development Plan (FDP) due to be delivered by end of 2019, with the intention of Final Investment Decision (FID) soon afterwards, giving an incremental net 2C reserves of 6.1MMboe."

That places Tain at 2C reserves of 12.2MMboe at 100%.

https://www.lse.co.uk/rns/RRE/rockrose-energy-plc-update-on-activity-and-reserves-gfby13k78qv61he.html

The following report describes the status of Tain after the initial discovery drill and 2 sidetracks. To date 4 drills have been carried out on Tain, all successful.

After the above 3 drills it was stated that ; "the discovery could contain some 20 to 50 million barrels of oil-in-place."

The key line for me in the below report is this ;

"A second sidetrack, 13/23b-y, was drilled to the west and proved the extent of this thicker sand sequence over the structure"

https://www.rigzone.com/oil/news/oil_gas/a/26543/talisman_strikes_at_ross_field_in_north_sea/?utm_source=GLOBAL_ENG

Sidetrack 13/23b-Y is the nearest drill site to the border between Tain and Serenity at circa 800m

This can be measured on page 2 in the enclosed Serenity document from I3E below.

The same page also has this to say about 13/23b-Y ;

"A strong amplitude anomaly is observed at top Rodby"

"c. 10km area of the anomaly lies within block 13/23c (Serenity)"

"The anomaly is present in the area of the 13/23b-Y Tain well"

So we have Tain with thinner sands over at least one third of its total 3km width vs Serenity with ever increasing sand thicknesses and the same anomaly as the nearest drill location to Serenity but at circa 10km in length and far larger area to boot.

Tain currently coming in at 2C reserves of 12.2MMboe but clearly with more to come once in production and further appraisal drills are undertaken.

https://i3.energy/wp-content/uploads/2018/12/20181212-i3-Energy-Prospex.pdf

Now if we refer back to the I3E January 2019 presentation, we see on slide 10, just how close I3E are intending on getting to that Tain 13/23b-Y drill location.

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

On a simple measure I have it at 500m from the block border, which places the total distance at circa 1.3km in a zone, which through the I3E review of the 4 successful Tain wells, is demonstrating an ever increasing thickness of sands.

This is particularly true when we see that since my 10am post, we have discovered that the Serenity drill (S1) mobile installation permit has reached "decision" status.

Apologies everyone I have just revisited my drill programme numbers from this morning and have noted a sizeable error.

Part 2 of my 3 part post timed at 10am today should have ended as follows ;

"That would lend itself to a total covered cost to year end of 94 + 30 = 124 days.

The Borgland Dolphin set sail (rig mobilisation) on 14th August 2019.

Today is 23rd Sept, so we are at day 40 (NOT day 51 as written. I had added in the perceived 14 days for the permit and not updated it prior to publishing).

As it currently stands, I3E and their team should be able to cover all costs if they are able to execute the last 2 drills in circa 84 days starting tomorrow (NOT 73 days as posted earlier).

Clearly the sooner the permit to position the mobile drill rig comes through the better the chances they will have.

This revised timescale should be checked and double checked by all investors but from where I am sitting I3E is fully funded to achieve both the S1 and A3 drill, at the full 40 days for each drill, which itself includes full contingencies.

On that basis, I believe the market is getting this very wrong right now.

@gatto You won't ever get a recommendation to buy from me. What you will get is the facts as they stand and as I understand them to be. It is for you and everyone else to read them and test them as you see fit. I am invested here and I believe in this management team and their assets. I am presenting my case as to why and why I continue to hold and will continue to do so right through this programme.

Is I3E risky? Yes it really is. Is the level of risk and opportunity currently reflected in the valuation? For me it isn't, simply because I am able to clearly demonstrate that the market is analyzing and discussing factors that aren't actually as serious as they are being proclaimed to be. Funding being a prime example.

Can everything still go wrong and this end up much cheaper than today? Yes of course it can.

I am already here and looking to towards results that are much further down the line, so for me it is of little relevance right now. What I don't want to see is investors bullied out of their holdings unless they choose to let them go having considered the full picture and made the decision for themselves.

Good fortune with whatever you decide to do

Moving onto item No. 3

"Will they be able to physically achieve the 3 well programme with Winter approaching?"

I will try to keep this one short and sweet.

In 2016 after a successful pilot well drill, HUR set about drilling Lincoln 205/26b-A.

Enclosed below are Hurricane Energy RNS' dated 9th November 20156 and 19th December 2016.

As the dates themselves clearly demonstrate, HUR drilled that well in late 2016. Later than I3E will need to do if they now are able to mobilize fairly quickly on S1 and then move straight onto A3, whose permits are already in.

Yes it is only 1 example but it is an example that demonstrates that I3E can drill into November and that a deeper drill than A3, can be achieved in 40 days in those conditions. Yes things can go wrong and bad weather could be more of an issue, but it isn't guaranteed. So the 3 drill programme is certainly on if I3E decide it is fully warranted, which in my view they believe it is and are as they state, simply employing their options to the best of their abilities, by switching to S1 to ensure that the optimal location for the A3 is achieved, so they can ensure success as much as their are physically able to above ground, as opposed to what exists below it.

https://ir.q4europe.com/Solutions/Hurricane2018tf/3942/newsArticle.aspx?storyid=14105536

https://ir.q4europe.com/Solutions/Hurricane2018tf/3942/newsArticle.aspx?storyid=14105533

@gatto with all due respect what is 2 weeks in the life of a company? I am here for the long term and expect to be rewarded for my research and support.

As I have clearly explained in my earlier posts today, I3E has a healthy pot of funds even after paying for the initial 94 day drill programme. The perception is that they don't, the truth is they do.

The Serenity rig permit has already moved to "decision" status. Just one working day after the company updated the market on Friday 20th Sept saying ;

"mobilisation operations will commence as soon as the consent to locate permit is obtained from the regulatory authorities,"

OGA have moved the process and the approval will be now be imminent.

So the situation is nowhere near as tragic, desperate, disastrous or even any other extremely emotional wording can conjure up.

The facts say the company is managing the problem very well, that they are funded, and that they are working hard to put it right as soon as possible.

Moving on to item 2 of my list then.

"How viable is Liberator phase 1?"

I have covered this extensively on this BB and so won't regurgitate too much. I have read some comments from the weekend that attempt to conclude that Liberator has no commercial oil in it. With all due respect that is absurd.

The perception as always is based on the current intended programme and not what is actually achievable. Don't get me wrong the company needs to drill A3, which is a commitment under the award of the block. That appraisal will help determine exactly how much oil and in what category they have, in order to finalise the financing.

However, it should not be forgotten that Liberator has a discovery on it already and it is this discovery and the subsequent CPRs for I3E in 2017, that enabled I3E to negotiate their junior debt facility. That facility wasn't conjured up out of thin air. These lenders aren't your standard AIM lending gangs, they are serious people with the likes of BP themselves involved. BP I would argue know their oil and know their data, and so that £22m was attached to the discoveries that sit within that block and can be commercially removed.

Furthermore, fixating oneself with the current development plan and the proposed $90m senior facility, is far too rigid. The CPR talks about a 1 well development plan at circa $35m CAPEX, supporting the cost of the roll out of a 2nd drill shortly after.

If the CPR is to be employed to attack the company then it is only fair to use it to establish what is actually possible and how achievable that is with what we know to date. That 1 well development plan was for LP1 and LP1 holds circa 5m boe of recoverable oil.

Even without further success on Liberator, that plan can be executed and in my view the funds raised to achieve it, with limited additional pain for shareholders if any at all. However, the company clearly wants to achieve more and a quicker timescale.

Right now the market is pricing the next 2 drills at a substantial discount but worse than that it has effectively written off Liberator phase 1 until further notice, with the perception that there is limited chance of a commercial development.

It will take time for I3E to prove that to be incorrect and the 2 drills in between will have far more reaching affects on the whole story first of all, but given that L4 has now been included in the phase 1 scheme, which increases those reserves to 13mmbbl and the 2 well development desired by the company, there is a viable commercial project to be had here, despite the disappointment of L2, which is being grossly overplayed in order to pain a picture of a company that is worth zero if Serenity or indeed A3 do not deliver.

That the story will have changed and downgraded and will have to suffer until the development is achieved is absolutely true but the belief that the company is these 2 drills or nothing is also not true, however much some contributors may wish us to believ

To be clear here.

I3E Energy brought a total of circa $48.85m into the business this year through their various finance raises.

The drilling programme, which is a 'minimum' 94 days contract is perceived to cost $36m but I3E were able to offset $3m in oil service costs post total cost announcement.

Therefore, as a base case investors should be able to calculate that I3E will pay $33m for their drill and hold $48.85m in funds, so have circa $15.85m in float.

It is not confirmed at this time that the contingency element of the drills, so the difference between the advertised 94 day programme and the circa 121 days expected to demonstrated in the drill applications (Serenity still to be confirmed but similar depth to L2 and A3), is an additional cost outside of the advertised figure.

I lean towards it being included for reasons already stated earlier today but it is for the individual to decide whether that could/should be the case or not.

The financial situation is certainly, as a minimum, far better than the market is appreciating and that for me is because the market hasn't done enough homework on the facts, and is simply using old headline figures, which is wrong.

Now we have a decision on the rig for Serenity, so the full approval cannot be far behind. The application states an earliest start date of 7th October in the application but as the PETS system states, it is indicative only. With a permit in hand I3E and sizeable costs per day, I3E will not be standing still on this.

Apologies that should read "Consent to Locate a Mobile Installation."

Looks like I3E have wasted little time in driving the authorities to authorize the Serenity drill mobilization.

Further to my set of posts this morning, the OGA PETS system is now showing the Serenity "permission to position a mobile installation" and oil discharge permit" with a current status of "decision."

https://www.gov.uk/guidance/oil-and-gas-environmental-data

So perhaps that down time won't be very long after all and that 73 day programme or better is on.

(3 of 3)

To be clear, the drills programmes from those twitter links both demonstrate a circa 40 day drill programme but the 2nd (A3) specifically states that the 40 day programme included contingencies.

Where I still have a key outstanding question is on the cost assumption that the 3 drills should cost $36m for a 94 day drill programme.

In business it is rare that a programme and costs would be presented, that do not align with one another. I struggle to see how I3E would report a total cost of $36m to their investors but present a traceable set of drill programmes, which defines a programme of circa 120 days (assuming S1 is also 40 days).

It is not wise to tell the market the lowest possible cost. The usual play is to demonstrate the full potential cost, so contingencies included, and then better it by hitting a ,lower drill programme target.

Yes the company has raised and saved a sizeable float, which could be perceived to be the contingency fund, but with $3m of the $12m negotiated post debt raise, the company would have already have demonstrated to their lenders their ability to cover any foreseen cost overruns, which would mean that those 120 days would need to be covered and proven as such.

So I find myself leaning towards the $36m being a total cost inclusive of contingencies, at least the point that they alleviate the burden on I3E cash levels. After all once the debt facility is drawn the company has to be able to cover its costs through to first oil in Summer 2020, and for me the lenders will have wanted security that the cash raised in 2019 was sufficient for al of that.

This is merely my opinion but I believe that the $36m has more included than just a 94 drill programme but even if it is not, the facts demonstrate clearly that I3E has a lot more cash on hand to support an extended drill programme, than the market is currently prepared to accept.

What the market appears to be doing is taking the circa $41m cost from January 2019, dividing it by the 94 day programme only, and concluding that there is a far greater issue than there really is, be it that the situation is not ideal for anyone involved.

(2 of 3)

So as a starter for 10, we have a potential $36m cost for a 'minimum' 94 day drill programme and I3E holds circa $48.8m in cash minus operating costs and junior debt finance interest payments.

According to the 2018 accounts Administrative expenses for that year were $2.37m

In terms of the junior debt facility the company will pay up until end of 2019 circa £550k ($660k) in interest payments IF, they have already taken the full amount upfront, which I doubt. The 25th Feb RNS is clear when it states ;

"expected to be drawable from April 2019"

In my experience companies don't pay all their costs up front, they are billed on a monthly basis, although there will highly likely be a need to prove payments can be met and also to a degree deposits for big ticket items, such as the oil rig.

However, let's be conservative here and include the full payment of $660k.

That places I3E finances needs at circa $3m for 2019.

So we are at $48.8m - $36m - $3m = $9.8m of float.

However, one month after that June presentation came the agreement with BHGE to offset $3m of the oil services cost until first oil (See RNS dated 2nd July 2019). An agreement that is still receiving no credit from the market post the L2 result.

What that should do is increase that $9.8m to circa $12.8m of float.

So the base case situation as it stands is that I3E holds a free cash float that is equivalent to over 33% of the total 'minimum' drill programme of 94 days, when employing the $36m total drill cost from the June presentation.

It should be noted (and checked) that that slide is the only place I can find where the costs and the 94 drill programme appear together.

On a like for like basis, ignoring the stand down time cost savings reported in Friday's RNS, and on a very simple basis, that equates to circa 30 days, when leaving circa $1.3m in float for the company.

That would lend itself to a total covered cost to year end of 94 + 30 = 124 days.

The Borgland Dolphin set sail (rig mobilisation) on 14th August 2019.

Today is 23rd Sept, so we are at day 51.

As it currently stands, I3E and their team should be able to cover all costs if they are able to execute the last 2 drills in circa 73 days starting tomorrow.

Clearly the sooner the permit to position the mobile drill rig comes through the better the chances they will have.

(1 of 3)

Right now the I3E valuation is being beaten up by a variety of interested parties, be it directly and intentionally or indirect through need and a wish to de-risk following the L2 initial result.

The key questions now appear to centre around the following ;

1. Will I3E be able to afford their 3 well programme now it appears to be an extended period?
2. How viable is Liberator phase 1?
3. Will they be able to physically achieve the 3 well programme with Winter approaching?
4. How viable is Serenity and how much risk does it carry?

1. The opinion as far as I can see is that because I3E have announced Serenity will be next, the belief is that this will lead to an overrun, more costs, and so perhaps I3E will need to raise more funds.

I have been mulling over the documentation and statements that exist and would offer this ;

In the I3E Operational Update RNS from 10th Jan 2019 the drill programme is as follows ;

"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."

Note - This year I3E have raised £19.15m through placement shares at 37p, which included a £16m market raise, £2m from Lombard, an open offer (£360k) and director purchase parallel to the open offer (£788k).

They then raised a further £22m in junior debt financing.

On 22nd March they paid back £433k in outstanding loan notes.

Total £40.7m, which $1.20 exchange that equates to circa $48.85m. From this we need to deduct I3E operating cost and junor debt interest payments at 8% per annum paid quarterly, starting 3rd June 2019 (See RNS of same date).

I3E RNS dated 9th April 2019

"On 9 April 2019, i3 and Dolphin Drilling Limited ("Dolphin") executed a contract to utilize the Borgland Dolphin semi-submersible drilling rig for a 94-day programme which is due to commence between 15 July and 15 August 2019."

I3E RNS 31st May 2019

"Additionally, on April 9 i3 executed a minimum 94-day drilling contract with Dolphin Drilling for the use of the Borgland Dolphin semi-submersible rig, which is expected to spud the first of three back-to-back wells in mid-summer."

The 10th Jan 2019 RNS was released 6 days before the January presentation, which is the last available presentation from the company and also cites this $41m cost.

However, as we all now know, since January 2019 the drill programme has now only changed due L2 moving from a production drill to a pilot drill, and the drill pricing etc has been firmed up. Remember it said "circa" $41m

In the Proactive Investors presentation Mr Shafiq showed a slide with the drill costs for each well (see 15 mins 32 secs in )

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

These were as follows ;

L2 = $11m
A3 = $12m
S1 = $13m

Total cost $36m.

https://twitter.com/Redmirres/status/1174633373576388609?s=20

https://twitter.com/Redmirres/status/1174634195706155

Morning all.

Well it certainly does take a substantial amount of resolve to be a I3E holder right now doesn't it just.

After catching up with some of the comments across social media, I would firstly say this. To sell one's I3E holding is for the individual to decide and those that sell or buy are entitled to do whatever they feel is right for them, their family and their bank account. Just make sure you are doing it based on the information as it truly stands and not the sentiment that is driven by anonymous experts who two days ago you likely didn't even know, and that includes me.

There is a lot of opinion and belief flying around and shortly I will be giving my own as well, but it is worth nothing unless it is at least backed by cold hard provable facts, and even then each and every one of those facts should be checked and cross checked by each and every investor, and a decision made on those checks and not through pure fear and concern, feeding off the fact that the SP is falling and so every must be worthless and a waste of time.

That

I am currently away for the weekend so missing all the fun around today’s RNS. Every investor is entitled to their opinion and mine is very firmly in the camp of I3E being very much misunderstood and so certain corners are very much taking advantage of that.

What I am seeing at the moment is everything that could go wrong be it unproven is being priced into the share. All possibilities positive outcomes currently are not. From where I am sitting the update looks like a management managing a problem well. That’s all I would ever ask of my management teams. Mistakes get made in business but it’s not the making them that count but how we manage them the risk through them afterwards.

Now some facts.

I3E have not said that A3 won’t get drilled, they have said that S1 will get drilled first. Yes they need permits to do that but is that such a heavy task? Firstly they need the permit to position a mobile installation. For L2 this took 15 days after the application date. S1 permit was submitted on 19th Sept. So that would be circa 4th Oct.

At that point I3E would be 51 days into their 94 day Programme and would be commencing drill no.2 programme. If it takes the same time as L2 then it will be completed in around 30 days. That would place them at 81 days. If A3 can achieve the same then we are at 101 days total. Throw 5 days more in for mobilization etc and we are at 106 days.

That’s just 12 days longer than the original programme but even that’s jubious given each drill programme was up to 40 days each. See tweets copies of tweets I posted yesterday.

There is a lot of talk about what a poor position I3E is in but it assumes a great deal will go wrong but gives no credit for what could go right. Plus we are talking about a 72% COS on a drill 1km from an oil discovery looking to unlock around 100m boe of recoverable oil and the market is trying to tell me the stock is overpriced at £22m MC with 13mmbbl of recoverable reserves in the bag.

Can it all go wrong? Yes of course it can. But that does not stop much of this negative tripe being the utter nonsense that it is.

See you all Monday for some good old reasoned debate once more.

Its Hermit Fighter and that is the assigned supply vessel for the Borgland Dolphin. It is not an anchor handler and is highly likely doing its job of keeping the rig supplied.

Well then tiler1 I will contact the company and communicate my disappointment that they felt this was an appropriate action.

What it should mean is that all answers wee in line with previously released data meaning there was nothing new in the Q&A. This further supports the argument that the company is clearly more confident about its phase 1 than the market currently understands.

Good morning. I have added to my position this morning.

RNS 15th May 2019.

"Contracted revenue for 2019, as at 31 December 2018, of £88m"

Today's RNS

"Revenues for FY 2019 expected to be approximately £105m"

"At 31 August 2019, contracted revenue for FY 2020 in excess of £65m"

2020 revenues are already at 62% of the total expected for 2019 and they still have 16 months with which to drive them higher but "Higher gross margins on new contracts being achieved, targeting a blended gross margin in high single digits as legacy contracts expire."

So revenues looking good to keep expanding but lessons learnt from previous low margin aggressive expansion.

Furthermore, cash burn looks under better control. Only 800k worse off than 1 year ago.

It will take time to weed through those low margin contracts but as a 2-3 year play, this is looking like a potentially highly profitable investment.

@zeusfurla Good morning. Firstly, Until it is confirmed by the company officially, I will consider the Q&A document not to be I3E sourced. These guys are all professionals that are used to working for public listed companies, I find it hard to believe that such a document would be released to individual shareholders and not then made available to everyone.

That said the wording ties in with what I have been saying rather strongly this last week or so.

Also, the line between the two blocks and the two CPRs is being taken far too literally. It is acting like a brick wall in some investors heads and really shouldn't be.

@O&W if you are out there. Please listen to the June proactive investors presentation (14 mins and 30 secs onwards). The CEO states just how close the Serentiy drill is to the block border and that it will need to be a unitised development with Tain (so yes RRE) if successful.

Except if it comes in at the sort of levels that are expected then it will certainly be the bigger brother of Tain and will be very desirable to all those involved in RRE, even their shareholders that visit here, who should be hoping it comes in and comes in big.

Let's be honest here, a good success on any of the next two drills will lead to the valuation moving well above that which was seen on 9th Sept.

Closing price that day 55.8p, which equates to a fully diluted valuation of circa £85m.

A3 even at a mediocre level would help cement the LP4 well location and add further upside to a then secured phase 1 development.

A mid case commercial success in line with the CPR will increase I3E total reserves to circa 30m boe, add further 2C contingent resources and will highly likely de-risk a considerable amount of the further upside in Liberator West, which itself conservatively would add circa 50m recoverable resources at the mid case. All of which is conservative and has scope to turn out much better than the above.

That is enticing and certainly would not be valued at £25m on the day prior to the announcement of the result, particularly when there is value in the reserves that are booked already, value in a future drill that is potentially even bigger than A3, and value in the cash on hand.

We all want to see the green light on the next drill but the vast majority already realise that it is going to happen its just that there has been a big shock around these parts of late and it preventing sense from being knocked into our heads.

It gets even sillier when we consider Serenity, which is mapped as an extension of the Tain field that sits just 1km away from the last successful drill there. If there wasn't a block border between the 2 areas then Serenity would be accepted for what it is, the bigger brother of Tain.

Investors are still questioning the COS there even though it is a completely different asset.

I repeat again. 1km away from a known oil discovery.

The next update is the trigger. Confirm the spud is going ahead and everything changes around here.