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Does a possible adjustment to the COS really prevent the A3 drill from going ahead?

Is it worth questioning that until the company has had chance to review its initial findings on L2?

Does missing the edge of the channel in the narrowest section of the field affect the chances of an appraisal well that’s approximately 1km from an entirely section of that channel edge?

Too many assumptions and scaremongering going on right now with too little fact.

@Alexios i would welcome seeing the detail in that WH Ireland note because their figures do not align with the phase 2 CPR, which is king when it comes to Liberator and has been employed by various parties of late to beat the company up with. Those bearish on the company can’t have it both ways.

Liberator East is declared as contingent resources development unknown. The COS stated in the CPR is 70%. There is no definition between gCOS or cCOS. Fact. That supersedes a broker note be they house broker or not, because as seasoned investors as yourself clearly understand, such institutions adjust data as they see fit and make errors hand over fist.

The same CPR has Liberator West as COSg of 56.3% and that contains prospective resources only. So how on earth would A3 in Liberator East be just 60%.

One as yet unmeasured mistake on the pilot well and suddenly all known facts are being questioned and changed. I3E needs to find some stability so this nonsense can stop.

(6 of 6)

In conclusion.

The article seeks to cast doubt on I3E management by questioning their integrity by insinuating that they have lied over the oil figures for Liberator. In doing so this allows the author to spread said sickness to Serenity and make investors question the whole I3E story.

Placing to one side the fact that the BOD has ex the Ithaca Energy COO and an MD of BP Australasia, and the fact that the company managed to convince junior lenders including BP to back them to the tune of 22m, and Baker Hughes were convinced enough to offset 3m in oil services costs until first oil, it has clearly misunderstood the change in events when I3E acquired the neighbouring Block 13/23c.

It has completely misunderstood the fact that LP4 sits within the Liberator East area and not in the extended section of LIberator Phase 1 opened up with the acquisition of Block 13/23c.

These 2 events bring the Liberator East 2C resources fully into play, which at "Contingent Resources, Development Unknown," are fully in line with an updated, costed development plan for Liberator Phase 1, which places the drill centre on the border of Liberator Phase 2 East and allows 2C resources to be re-classified as per the CPR.

Furthermore and critical to all of this, the I3E management are clear in their presentations that unless specifically stated, all references to "reserves, resources, production, and economic figures are based on I3E management's un-risked mid case estimates."

However, they do not deviate away from the core CPR backed figures. When they state 42mmbbl resources they mean of the 64mmbbl 2C resources stated in the CPR. That is why they immediately state beforehand the ;

"AGR independently assessed 22 MMbbls 2C contingent resources and 47 MMbbls Mid-case prospective resources in late
2017 (see Appendix)"

They are merely giving their estimates to what the actual drills can achieve against the CPR numbers.

This article is at best a very poor read of the actual data provided by the company, at worst it is a an intention to undermine the company and its investors, when it and they are at their most vulnerable. The author would have known the potential influence that such insinuations could achieve and for that reason should at the very least have tested the data properly because what has actually been produced is very poor indeed.

(5 of 6)

SP Article
"Then it goes on to stated (page 8) Phase 1 field development plan -  “Phase I targets c.13 MMbbls 2P reserves and 8 MMbbls 2C contingent resources with planned initial flow rates of c.20,000 bopd”. So where is that 8 million barrels of 2C evidenced by 3rd party? What is it – the extra swept volume from the phase 1 the company hoped for from the LPt-02 well or the extra volume from moving the LP2 well west from the phase 1 CPR location into the Phase 2 CPR 2C resource area?"

My Response
As stated above and answered to you directly via Twitter previous to your article being published, the 8mmbbl 2C resources are part of the total 22mmbbl 2C resources that are independently verified by the CPR. As the forward statement states this is a management estimate, which is clear when one reviews the CPR in full and also the maps in the presentation, which show that LP4 sits in the Liberator Phase 2 area. I3E have estimated that LP4 will have circa 8mmbbl of 2C resources in it, which given its location and length isn't unreasonable.

SP Article once more.
"Of course page 7 of that same presentation states 20,000 bls includes phase 2! In my book this is playing more than fast and loose on the facts."

My Response
The 20,000 bls forms part of the Phase 1 CPR (see Section 7.3 page 50) with 2 wells producing max 10,000 bopd each. The CEO was very clear in the June 2019 proactive presentation that it is up to 20,000 bopd. The captain sands throughout Liberator Phase 1 and Phase 2 East are recorded in the CPR as being the characteristics so the flow rates are expected to be similar across the two areas. But as I say the acquisition of Block 13/23a allows the development to move west and capture 2C resources that are actually now reserves because the CPR designated "development unclarified" question has now been answered. Meaning in simple terms it is profitable.

That aside and most importantly, this is all about achieving sufficient reserves to achieve funding for Phase 1, so the actual flow rates are not critical at this time. It is a point worth noting but it is not a critical fundamental to the success of the company.

If 2 wells came on at combined 12,000 bopd (CPR shows original LP1 at circa 6,300 bopd) then that'a a lot of oil and a lot of cash flow for such a small company, even when it was prices at 55p. So although there may be a question over the actual achievable production rates, there is evidence in the CPR to support it is possible BUT, it is not a critical fundamental at this time nor reason to try to tear the integrity of the company apart.

( 4 of 6)

6. "What does the A3 well achieve with regard to establishing (or otherwise) the 2U Liberator West “computer says yes” resource?"

As per CPR it brings a known drill within the designated distance allowed to de-risk a percentage of those resources to contingent/reserves. That is very obvious from the CPR hence why 1C/2C already exist for part of Liberator East

7. "Why is a side track to 13/23C-9 not being undertaken? If it has only missed by a small distance, a side track must be warranted? Or is the resi model vertial domain that far out? What does this mean to oil in place if the case?"

At present the company does not need to side track because a successful A3 will deliver phase 1 and then some if successful and is planned already.. The field is deemed connected but needs to be appraised. Under GB standards the RBL will be measured on all reserves held by the company, even if in separate fields. So that means Serenity too.

Then there were some additional comments, which simply need to be challenged.

SP Article
"Furthermore, I find real issue with the presentation issued 16th Jan 2019.

This describes (page 7) 2P of 13 million barrels 2P (ok if you include the gas in the phase 1 CPR), but also 42 million barrels of 2C. Just hold on a minute. Where the heck has that 20 million barrels over and above the 2C CPR Phase two resource come? Not from any CPR I have noted. "

My Response
You have chosen to completely ignore the line directly above the statement you question, which states ;

"AGR independently assessed 22 MMbbls 2C contingent resources and 47 MMbbls Mid-case prospective resources in late 2017 (see Appendix)"

Liberator East has 64mmbbl of 2C STOIPP. It is clear that they are referring to 42mmbbl of said STOIPP, which they must do until such time they have established oil column depths, which would all them to solidify the percentage of recoverable oil. You have misread the intention.

If they wished to pull the wool over investors eyes, then why would they state the CPR fi

(3 of 6)

Now to those questions.

1. "Has the 3rd party attributable reserves to the LP1 well changed from the CPR due to its apparent change in length and position? Where is the evidence of change in reserve or no change?"

It doesn't need to be adjusted because it is exploiting known total reserves because it remains fully within the Liberator Phase 1 CPR assessed area and the LP1 well has changed position and size only. That does not require a new CPR.

2. "Has the LP2 well in the CPR been re-designated at the LP4 well and its location moved? And if so what are its 3rd party certified reserves -where is the evidence of change reserves or no change? "

As discussed directly with you and confirmed by you on Twitter, the LP4 well sits in Liberator East not Liberator Phase 1, so it can't be LP2 from the CPR because that only concentrated on the section of Liberator Phase 1 that sits in Block 13/23d. Phase 2 East volumes are considered Discovered and are classified as Contingent Resources, Development Unclarified. The confirmation of development has allowed I3E to include 2C resources in the Phase 1 development at the LP4 location.

3. "Was the LPt-02 well that came up short of expectations this week, a trial well to establish the trajectory of the “New” LP2 well (not the CPR LP2 well) and drilled to justify an increased recovery from swept volume on the phase 1 confirmed CPR oil in place as I have concluded?"

Yes of course it was to establish the trajectory of the new LP2 well, as stated by the directors in the interview on Tuesday 10th Sept, in the June Proactive Investors presentation but also that is what is shown in the latest presentation from Jan 2019 on company website. The development has been updated since I3E acquired the neighbouring block 13/23c

4. "I concluded the latest well (13/23C-9) was close to the discovery well and was all about confirming the vertical elevation and lateral extent of the modelled CPR phase 1 confirmed resources? Given the poor results- what is the impact on the oil in place and recoverable volumes?"

That will be determined once the survey results are completed, as confirmed in the interview on Tuesday. So pending until the BOD has sufficient information to give a complete answer as is good practice. They can do no more at this time.

5. "Is the A3 well drilling the Phase 2 CPR 22 million barrel (2C) Liberator East contingent resource and has nothing to do with the LPt-02 well just reported on?"

With known evidence as of Tues 10th Sept the directors have stated no additional risk on A3 drill.

(2 of 6)

The company is entitled to update their development model, particularly after the acquisition of Block 13/23a, which is critical to the updating of the contingent resources on Liberator Phase 2 to reserves, which you have chosen to completely ignore even though its the most important fundamental to this story given the disappointing result on LP2.

They are also entitled to employ the CPR findings as they see fit in order to exploit the maximum number of reserves they can out of their assets so long as they respect the parameters set by the CPR authors.

The CPR is clear that Phase 2 East contains contingent resources that can be upgraded to reserves, so long as they meet the criteria set in the CPR. The missing link was a demonstrable development plan that was financially viable once all opex and capex was considered.

(1 of 6)

Good evening everyone,

Having had direct contact and discussion with the author of the 2 articles written on I3E, both of which proclaim strongly that the company is uninvestable.

Whilst there are certainly question to be answered and full confidence needs to be re-asserted, the basis of the arguments set out by the author and the insinuation that the company is lying and therefore likely pulling the wool over the eyes of its investors, are profoundly floored and I will now set about explaining why by printing excerpts of the article and giving my answers immediately afterwards.

Lets start with the 2 issues that go to the heart of the author's problems with I3E and form the basis for the 7 questions that follow.

SP Article
"So far so good, but for two issues which go the heart of my comments. The company declared the 13/28C (Phase 2) would be called Liberator West (RNS on licence award RNS 23rd May 2018) but the CPR prepared after referred to Liberator East and Liberator West. The phase 1 CPR referred to LP1 and LP2 wells – but the company presentations now have LP1 (east to west – as per CPR well LP1 but much longer and too the north) and LP2 (east to west)– not in the CPR, which is nothing like the LP2 in the CPR and LP4 (which is north to south), a bit like the CPR LP2 well."

My Response
The CPR was NOT prepared afterwards. Phase 2 CPR was published on 16th November 2017. That's 7 months prior to the RNS. That is basics. Other than the RNS for the acquisition that you describe the company has always referred to Liberator as East and West ever since. Therefore, it continues to tie in with the CPR. So where's the problem?

Secondly and most importantly, you are completely missing the fact that said acquisition of Block 13/23c opened up the remaining section of Liberator Phase 1, which sat in that block. This enabled the company to relocate the drill centre, optimising L1 and L2 and introducing LP4, which sits in Liberator East NOT the part of Liberator Phase 1 that sits in Block 13/23c.

This point is absolutely critical. The CPR has always been referenced. It states Liberator East holds 22mmbbl of 2C resources that are "Discovered and are classified as Contingent Resources, Development Unclarified." LP4 sits in a section of that area and so has been designated (by the company) as holding a portion of those 2C resources. All in line with the CPR that you so readily wish to beat the company over the head with.

The authors of the CPR employ data fed to them by the company. They do not decide the number of wells or indeed the well placements, that is for the company to decide. What they do is assess the viability of the chosen development plan and determine the resources and reserves as an independent expert and assessor.

Thank you. I hadn't picked up the official reference LA-03, which is effectively A3 Liberator East.

I believe they have more flexibility than is currently appreciated after such a heavy week for I3E holders but they will want to see the results of A3 and Serenity first.

Agreed A3 as a duster would be awful but it would mean short term SP movement only until the Serenity result was confirmed. So two bites at the cherry not one.

If they fail and I have to stick these in the bottom drawer then so be it because as I have said for the last few days the CPR is clear that a scheme with 1 production well at a rough cost of $35m is possible and can pay for the 2nd well. So whilst there would be a lot of pain to be had short term, the stock wouldn't be dead on its feet.

That said A3 and Serenity carry 70% COS each and the Serenity well is barely over the boundary and less than 1km away from the nearest Tain discovery in much thicker sands than Tain, so maybe just maybe the result will be very good in the end.

"All hangs in La-03 well and if it's a gusher they can maybe re-asign 4-5mmbbls back into 2P Reserves

LA-03 well is designed for L4 horizontal well location which was meant to be the 2nd lateral from L2 drill centre location. Now will they scrap the L2 horizontal due to Lpt duster or they find the new location is unknown yet."

I have already clearly demonstrated here on this BB that under UK RBL rules ALL reserves from multiple fields may be included in the facility.

That means any success that turns resources into proven reserves on Liberator East, West or indeed Serenity should be able to be added to the toal employed by the lenders for the RBL. Hence why we are a long way from lost here.

I don't recognise the reference you are using with LA-03. The L2 drill location has absolutely nothing to do with the drill centre that will be used next year for 2 of the 3 production wells. LP2 does not start from the pilot drill point it starts about 1km west of that and that is the point. LP2 has other zones that it was to penetrate that do not pass through the pilot drill area but of course its all about how far north the channel edge needs to be pushed.

Ok warrants aren't really my biggest headache with this investment right now so I will park that if its ok be it that its pure conjecture at this time.

At present the company has 5mmbbl in LP1 reserves, 8mmbbl in LP4 and something between zero and 8mmbbl in LP2.

The directors have already stated that LP2 cannot be nothing because part of its allowance is in the middle channel.

LP4 has been transferred from Phase 2 2C resources to reserves because the relocation of the drill centre has allowed them to include the LP4 area in Phase 1, thus making it 'development clarified.' (see Phase 2 CPR on company website pages 4 and 6).

A3 will of course decide the true nature of the LP4 reserves because it will be drilled long before Phase 1 gains financial sign off. Still the directors were adamant in the interview that they had 21mmbbl of reserves across the 3 production well sites.

So right now they have, be it debatable, 5mmbbl + 8mmbbl + LP2.

Until LP2 result is confirmed and the model checked nobody can 100% say what is correct but 3-4mmbbl is certainly not the case with the information known at this time.

@Alexios I appreciate what you are saying but you appear to be implying that all 4 junior debt holders are keen to to sell at a price that guarantees they receive their money back only.

Furthermore, you appear to also be implying that the warrants would be sold on at a lower price? The strike price is 48p and unless other parties have been willing to take them on at that lower price with the intention of selling them on for a better price, they are still going to have to pay 48p a share to get their money back.

Perhaps I am missing something and if so I am willing to be educated.

Ever since the warrants were issued the assumption from many quarters has been that they must be being used as leverage. That is possible. However, the junior lenders have bought into a programme that gives I3E the opportunity to exploit defined reserves. It is not a facility that is being issued to a company that has no assets. Therefore, it could just be that said warrant holders wish to hold the warrants as collateral against the loan and are willing to back the company as such because they appreciate that a successful phase 1 and beyond means they can make a lot more money on the way up than down.

That's not designed as a naive statement more one of an alternative outcome.

@garyn indeed but where are they then? They are attached to loan notes and to date not a single one has been triggered.

I've believe for a long time that the junior debt holders are holding onto them. The result of the L2 may have changed that but they aren't stupid, they know the phase 1 area fro what it is and they know that I3E can still get this away.

All the rest of us have is the initial result and the belief that senior debt is required to make it happen.

But as I keep banging on about, the CPR demonstrates 1 well LP1, which was the longest by far in the original CPR set up, as being achievable off $35m of CAPEX with 15% contingencies for the subsea at just over $9m.

The project is there to be had and even more so if LP2 actually delivers meaningful reserves still.

There is no senior debt at this stage. If there were then it would mean phase 1 is going into production and the share price would be much higher.

It is important to remember that the oil is there. It isn't about that its about satisfying the RBL requirements, which is the preferred method of payment chosen by the company.

The Phase 1 CPR speaks about a 1 production well CAPEX at just circa $35m with up to 10,000 bopd possible.

The fixation is on the method chosen not on the viabiity of the project. I3E can update the plan as they see fit.

Investors banging the drum about senior debt is a red herring. The senior debt comes if the scheme allows it and the 2 well production programme can be achieved.

The CPR is very clear that production well No.2 can be paid out of production well 1 cash flows. Therefore, there is the opportunity to produce higher production rates over a longer period.

There is a very intriguing game of say what you see going on here when it should be calculate what can be done.

@garyn Indeed. It is the main reason why I have been questioning the theory that they were being forward sold. Although always possible, for me it does not fit well with the risk profile.

That aside, a successful drill on either A3 or Serenity put those warrants in play and should effectively close out the junior debt facility, be it there is an interest element to consider.

The same would apply next Summer if for whatever reason I3E had to drill again on Phase 1. A successful drill would help close out the warrants. Thus its purely about the interest payments which are covered and getting the phase 1 development over the line and/or a good drill result on A3 or Serenity.

@garyn

From the 25th Feb 2019 RNS

"The Warrants will vest on the Issue Date and expire 4 years thereafter and can be exercised through either/or a combination of a cash payment and/or surrender of Loan Notes plus accrued interest equal to the aggregate notional amount of the warrants being exercised."

RNS dates 1st March

"The Warrants will vest on the Issue Date and expire 4 years thereafter and can be exercised through either/or a combination of a cash payment and/or surrender of Loan Notes plus accrued interest equal to the aggregate notional amount of the warrants being exercised. Each warrant gives the holder the right to convert the Notional Amount into such number of shares as is derived by dividing the Notional Amount by the exercise price, through either/or a combination of a cash payment and/or surrender of Loan Notes plus accrued interest equal to the aggregate notional amount of the warrants being exercised. In effect, the exercise of all Warrants, which in total have a notional value of £24 million, offsets the entire principal value of the Loan Notes owed to Noteholders by the Company."

Investors are very quick to forget the fact that I3E were actually able to achieve a junior debt facility at just 8% interest. Back in 2016 HUR financed their Lancaster development purely through equity, even after the pilot drill came in.

So I3E are to be applauded for their methods and the fact that a successful campaign this Summer would set up the company at circa 155m all in total shares with their junior debt facility repaid in full.

That will be a fantastically strong position if, and it is unfortunately an if, they deliver the goods.

I'm not sure I follow you there Alexios.

The exercise price is king at an average of 48.1p. The lenders involved have the option to convert the loan notes as part of the warrants. I very much doubt they would employ more of their own finances to buy warrants when they can use the debt.

So right now I3E pay the interest at circa £1.76m a year, which is the key consideration here because a year is the planned period until first production.

I3E have minimum $7m left over from the drill if executed as per the timetable and plans.

That's roughly £5.7m in todays money. So no issues with paying their debts or having enough working capital for the foreseeable future.

The £22m stays on the books until it is either paid off or cashed in by the holders.

So it is not an issue for the company. S if god forbid they had to return for a pilot well, which is highly unlikely at this time given the drill may still deliver the desired result even though it missed the channel then it will purely be about the costs of said drill and not servicing debts or surviving, which of course has raised its head because it spreads doubt and fear in those that don't know any better.

My lord if you are an actual investor in this share and believe in the story then it is time to man the battlements in your mind it really is. There are short minded contributors everywhere at the moment and they are truly unscrupulous in their behavior.

Watch them change tact once that A3 drill is under way.

To be absolutely clear.

Total cost of 3 well programme expected to be $41m.

I3E raised £40m, which is equal to circa $48m.

The expected additional monies are expected to cover all working capital requirements up to first oil in 2020.

The £22m in loan notes are exchangeable for warrants valued at an average of 48.1p. So if I3E achieve phase 1 there is a very good chance that junior loan note holders will exchange their debt for shares in the company.

A successful appraisal drill o A3 or Serenity will deliver that outcome leaving I3E open for new business at senior debt level.