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@ColonelDrake I thought better of you than that.

Until the LP2 result is in how can anyone be claiming that a further pilot well is required. The company has clearly stated in the interview on Tuesday that A3 is the next drill but of course there must still be a question to answer until we have that data.

A3 is planned and paid for and costs almost the same as L2. It can unlock substantial reserves, which would put the question of finance for Phase 1 fully to bed.

There is an argument to be had that reserves on Serenity would do the same because its neighboring successful drill just 500m over the border is also planning to tie back to the Bleoheim FPSO and so is clearly viable as a option for Serenity.

The company does not know its full options until it has completed the 3 drills. Until then it is just scaremongering.

What if the data shows they are right next to the channel? What if LP2 still delivers 5mmbbl? What then?

But by all means lets ignore A3 and Serenity and all that oil and COS and concentrate now on debt payments and disgruntled lenders whose opinion and position simply is not known at this time.

With 2 appraisals still to go I am sure they are at the very least open minded about things.

Does anybody have a link to the new WH Ireland note on I3E please? Thank you in advance

@Olderandwiser I tend to agree but would wish to see the results of the L2 well first and the updated model. I don't see how anyone can be certain until that data is presented.

What we do know is that A3 is around 1.25km from the edge of the channel as currently depicted by the model. The L2 drill was only circa 750m from the original discovery so there is very good reason to assume that L2 only missed by a small margin (upto 200m). That sort of distance gives A3 much room in which to wriggle.

Many are naturally cautious and wary of the data right now because of the shock of missing the channel at L2. However, if the data does indeed show a very minor miss then that confidence should begin to filter back in and A3 can be accepted for what it is and where it is.

I would think the BOD are thinking along the very same lines and will be keen to get the results out to market as soon as they can. I would rather they took their time and made sure of things because right now the SP is what it is and is based on what we worry about rather than the opportunity that remains, which is natural. However, the company does not need the share price right now. They are fully funded for what could well be a game changing few months ahead.

So get it checked, get it right, and then tell the market.

However, at 70% COS, adjusted model or not, it is an appraisal well and it is aiming at a much wider resource area, which is holding substantial 2C resources.

The Eastern edge of Phase 2 Liberator East can be included as reserves because it meets the criteria for distance from the original discovery.

The same will then highly likely be applied to Liberator East and perhaps some of Liberator West, which is why the company states ;

"A3 appraisal well intended to de-risk 42 MMbbls contingent resources and 90 MMbbls prospective resources in Liberator’s
Phase II extension"

If A3 hits then everything gets turned on its head and all Phase 1 discussions/concerns are neutralised.

(2 of 2)

However, the key takeaway is that in the 18 months or so post Phase 1 and 2 CPRs, I3E have conducted sufficient work to allow them to adjust their FDP, and to include LP4 as part of their reserves. It just a shame that they didn't share this more clearly with the market.

The 8mmbbl are classed as contingent resources because that was as far as the authors of the CPR could take them because the area was unlicensed. By moving the drill centre over the Eastern part of Phase East, I3E have been able to incorporate the 8mmbbl into phase 1 by answering the "development unclarified" question.

For me they would have been wise updating the CPR at this time. However, as the Oct 2018 RNS demonstrates they feel they have put together enough data to ensure this area of the field can be included.

The CEO in the interview referred to the full 21mmbbl being reserves.

These are then broken down into 8mmbbl for LP4, 8mmbbl for LP2 (under review post drill), and 5mmbbl for LP1.

Before the Phase 1 development is progressed we will have the results of A3 and so will have a more definitive outcome for those 8mmbbl, be it same, smaller, or larger.

The directors did not say in the interview that LP4 is dependent on the A3 result but clearly it will have an affect. If A3 comes in at Mid Case, then LP4 should improve and further enhance Phase 1.

Right now its about believing the word of the directors, which i do. They believe Phase 1 at 13mmbbl is a goer with LP4 already included. The only issue being that A3 is a natural hurdle on the way to that success.

(1 of 2)

@Che7win Good morning. Further to our chat yesterday and in response to the author of the Share Prophet article, I decided to do so more digging last night in order to better understand the science behind the directors claims of 13mmbbl of reserves plus LP2 result.

The first port of call is the January presentation slide 8, which states ;

"Phase I targets c.13 MMbbls 2P reserves and 8 MMbbls 2C contingent resources with planned initial flow rates of c.20,000 bopd"

There are no contingent resources in the Phase 1 area. Therefore, the 8mmbbl must be from Phase 2 East.

Having dug through the many maps in the Phase 2 CPR I found Fig. 1.2 on page 12, which delineates the 3 areas. The red dotted line demonstrates the phase 2 East boundaries. When we compare this to both slide 5 of the Jan presentation and Fig. 3.1 on page 19 of the Phase 1 CPR, we see that LP4 is clearly aiming at the Phase 2 East area.

I had previously thought that it was accessing the area of Liberator Phase 1 that was covered by the CPR but that sat in the unlicensed block 13/23c, that I3E acquired post CPR completion.

That was a mistake.

My initial thoughts after finding this out was to immediately think that the A3 well is needed in order to establish that these 2C resources are valid reserves. However, whilst it will no doubt have an impact the CPR is clear.

Page 4 of the Phase 2 CPR is clear when it says ;

"The objective of the Phase 2 CPR assessment was to determine how far away from the discovery well the well results could be confidently extrapolated north-westwards, in order to justify classification of resources as discovered. Because the area is un-licenced, resources cannot be classified as Reserves."

Page 6 then goes on to say ;

"Phase 2 East volumes are considered Discovered and are classified as Contingent Resources, Development Unclarified."

Since the CPR I3E have conducted a considerable amount of additional mapping and analysis.

This is supported by the RNS from 29th Oct 2018, which states ;

"In November 2017, i3's independent competent person, AGR Tracs International Limited (AGR), attributed a mid-case STOIIP of 237 MMbbls to i3's 100% operated interest in UK North Sea Blocks 13/23d and 13/23c. Based on the Company's subsequent mapping and analysis, i3 believes the mid-case STOIIP to be 314 MMbbls, and the Company will be submitting a revised and enlarged field development plan (FDP) to the OGA before the end of 2018."

Since then the company has updated the plans once again to include a pilot well (L2) and removed the production well mentioned in the same RNS. That has clearly led to some confusion among investors because the original CPR is still attached to the Jan 2019 presentation.

https://ir.q4europe.com/Tools/newsArticleHTML.aspxsolutionID=3508&customerKey=i3energyltd&storyID=14106325&language=en

@Fevertreeman A tad bit fair in my view.

The reality is this year has been disppointing with the drill bit but the company has still managed to hit 6,900 bopd, which is as healthy as its been for a long while.

For me CPO-5 aside, AMER and their partner have needed this year to prepare for the drills on what is upto 5 blocks. The PUT 8 approvals were alwys going to take until Q4 at best due to the decision to take up the offer on the 50% and then sell it on. OXY have also clearly being planning their 5 drills on the othe r4 Putamayo blocks and will drill them in 2020, with or without AMER.

PUT 8 for me has a lot of potential given it has such good access to the OBA. That alone is enough to get excited about in 2020 and it needed this year to make it happen. So yes AMER have consistently tried, very amateurishly, to pull the wool over our eyes on expected drills but there was good reason for the delays on bloaks where they still hold operatorship.

At 50% ownership those drills have the potential to deliver better all round volumes than CPO-5, be it both would be nice.

ONGC can only drag their heels for so long and their is an argument to be had that they too need to get infrastructure and land purchases in place, although right now I don't buy that. So they will be drilling next year and for me they will ramp it up in several areas of the block. Unfortunately we won't be around to witness it or enjoy he rewards that it entails but the oppotunity is very attractive to those interested parties that are sat at the AMER table.

That 8.44m ignores MIton remaining 1.97%, which highly likely went yesterday and any further selling by Lombard today. So its more likely approaching 11m. That's going to cause a sting.

@JohnHenry You may well be right but my own belief is that the existence of two iis who thus far proven to have sold circa 8.44m shares since he RNS landed, is disorting the picture considerably. There may well be questions over the model that need to be answered but the key to all of this, which looks to be completely disregarded at this time, is the viability of phase 1.

The facts say that at Mid Case 11.7mmboe reserves the project is viable and carries NPV10 $328m pre tax.

The directors in the interview have reported 13mmboe of reserves without any contribution from L2, which they say won't be zero.

Therefore, the NPV will be higher than the above quoted $328m.

That's what truly matters here, not the perception of the model, the iis selling or anything else. Is phase 1 a goer? On the figures presented in the CPR, which incidentally is based on Brent $57 per barrel in the first year only, the answer is yes.

It may take an updated CPR from the company, following the data from L2 to trigger the understanding but right now the figures look strong enough and that is why the directors stated that Phase 1 would be unaffected.

The market is determined to ignore that and focus on non core issues but eventually they will die away and true value will come through.

For reasons I have just explained I don't believe it truly matters. As the directors said in the interview the phase 1 development is good enough with LP1 and LP4 and their 13mmboe, with L2 backing it up or substituting if it turns out to be good enough.

Its game on.

Ok understood but with all due respect your previous post pointed towards said 11.7mmbl being a figure the company had stated was what was required. But perhaps I got that wrong.

I do however now appreciate what you are saying and it is a very good point.

The directors reported in the interview on Tuesday that the total reserves now stands at circa 21mmboe. I suspect this includes water injection, which is noted as a opportunity in the CPR and has been successfully employed on Blake.

L2 is supposed to be contributing up to 8mmboe to this.

If in the end it comes in at circa low end 2mmboe, then it will still mean a 15mmboe reserve.

The valuation, which can be found on page 6 of the CPR, has the post tax NPV10 at $200.4m and pre-tax at $327m, based on that 11.7mmboe you have stated.

The BOD are reporting a minimum 13mmboe with no extra help from L2, but which is stated as coming in higher.

So the $200.4m goes up with the target of 18.3mmboe reported in the CPR as carrying post tax $349.8m and pre-tax $576m

So a mediorce result on LP2 would land that, which gives real prospective to the $90m needed to finance Phase 1.

The focus is on the finance options driven by the company's preferred method of a RBL, but the CPR has the original Phase 1 as financially viable at Mid Case 11.7mmboe and I3E already has more than that before the L2 results are finalised and add more to the pot.

The market is getting this. This is becoming more and more interesting.

Thank you Che7win.

Apologies they have sold 3.75% in the last 2 days against 2.98% previously, but my point stands, the opportunity to sell far more was there and the pattern still looks controlled selling at a set bottom limit. But that can always change, we'll see.

Possibly but it will depend on Lombard 's intent. My own view is that they are continuing to be controlled in their sell off and are not dumping at any cost.

Lombard on 11th June held 17.92%.

Lombard on 9th Sept held 14.94%

Lombard today hold 11.19%.

So despite the near 45m in trades over the last 2 days, Lombard sold less then they achieved in the previous 3 months. If they were so keen to leave the table they could have easily driven it harder and much lower already.

What is clear to me having now dissected the interview and tied that in with the other information available, is that there is far more opportunity here than is being allowed for, and that is because the market is still honing in on the actual result of the L2 drill and the iis selling, rather than what it all truly means for the company's future.

I have no doubt that I am not alone in this thinking and some of those thinking the same way likely have far deeper pockets than i do, although i accept that I3E now has a very (un)healthy numbers of traders involved.

@destitute Would you care to explain. If you have found a issue that is worth sharing then it would always be appreciated.

@Che7win I sincerely hope that the figure you have printed is indeed correct but I would want to hear it from the company directly and would be alarmed if such information is being shared with individual shareholders and not the community at large.

A further enhancement to my earlier 3 part post.

Note - Unfortunately, due to the author of the Share Prophets article not being able to take part here I find myself providing lengthier view points here whilst pick up his remarks rather bizarrely on Twitter.

The SP article questioned the influence that a successful A3 drill would have on the RBL facility with the view point that it would add to the

The statement being that "the next drills could add contingent resources which would increase farm out opportunity on the total acerage hence potentially replacing some rbl funding."

Firstly, the resources in Liberator Phase 2 East (A3 location) are already 2C contingent resources. The aim is to de-risk those resources into 22mmbl of reserves in the Mid Case.

According to the enclosed article on financial instruments for the O&G sector states the following on page 5 ;

"RBL is not available during the exploration phase of the field but can be obtained when proven reserves exist, even if there is no production yet."

More improtantly ;

"When the borrower has a portfolio of oil fields, the RBL “borrowing base” is calculated with the cash flow of the set of all reserves, which allows the lender to diversify its risk and the borrower to fund its exploration and development activities"

If the report is to be believed and indeed remains upto date, then a successful drill on A3 and/or Serenity will mean that the reserves attained can be applied to the RBL calculations.

Furthermore, I3E have a startegy of employing Phase 1 cash flows to exploit Phase 2 proven reserves, thus adding further credence to the argument that A3 success will help push tehe RBL over the line, if indeed aid help is required.

I am not party to the discussions with the lenders but at the very least there is evidence out there that counters an argument that A3 and Serenity will add nothing to Phase 1 in supporting its finance.

This is in my view why I3E are playing things close to their chest and likely will continue to do so until A3 and Serenity results are in.

But on this evidence a good hit on A3 or Serenity will confirm the RBL even before before the company does.

https://www.duffandphelps.com/-/media/assets/pdfs/publications/valuation/oil-and-gas-intelligence-report-upstream-sector-2018.ashx

@Jonhnny1949 In my opinion, and it is just that an opinion without the full facts, Lombard have had a policy of reducing their shareholding throughout this 3 drill process. That's because they clearly warrants through the additional 2m placement needed to help complete the junior facility but in addition, it looks like it was never their plan to hold such a large stake entirely through these drills.

How far they intend selling only they know but I don't believe their sell of is related to the pilot drill result, but Miton's for me is.

That aside, the evidence I have posted this morning for me, points to a lobsided market that is being held back by this selling only. Whether said selling will be over by the time A3 comes in is for the individual to decide but I feel much more secure in the Phase 1 development and what it does to support a stronger valuation than we are currently seeing. So I am prepared to wait it out and see what we have when everything is said, done. and drilled.

(3 of 3)

Despite that 1 or 2 blip, Mr Shafiq goes on to say this ;

"We have got more than enough reserves here for a phase 1 development with the 2 wells that we've got (LP1 and LP4) and potentially an LP2 substitute to have an economic development as Phase 1 and to also be able to get that financed"

This statement was made by a man that according to slide 4 of the January presentation has ;

"30 years technical and investment banking experience focused on the global E&P sector"

"CEO of Àrgentil Capital Partners (UK) Limited, Managing Director at FirstEnergy Capital LLP, MD at Tristone, Director at
Waterous and Co."

Take a look at the backgrounds of those companies, the man was on the other side of the table for many years, he is for me the reason why a Junior lending facility was secured, and so whilst I appreciate he is now the CEO and wishes to defend its position, I am still inclined to believe him when he so soon after this perceived disaster is able to say ;

"We have got more than enough reserves here for a phase 1 development. . .to have an economic development as Phase 1 and to also be able to get that financed"

Now it may be that said finance comes with additional caveats or indeed part equity but the confirmation of a phase 1 development that will extract over 13mmbl plus whatever LP2 can now add, means a great deal more than said equity in that it will enable the company to enjoy sizeable cash flows, which can be employed for more drilling and acquisitions.

That reality is not priced into the SP because the market is not only being knocked out of kilter by the IIs selling but also it is refusing to see past a 'duster' or accept what the that duster truly means for the future of I3E. Plus it is fixated on A3 and the risk involved there, which is preventing it from realising that the CEO is telling us that Phase 1 is still very much on.

Like a great many others I too would like to see more evidence of this and perhaps the upcoming suvery results will help with that.

Key Note - A successful definition of the channel edge and a confirmed reserve (be it reduced) would enable the finance discussions to advance, which in turn will help solidify the risk for investors. i.e further dilution or not.

By appreciating that position, one can begin to understand that the A3 drill is not all or nothing. But if it comes in and delivers somewhere between the 22mmbl (Mid Case) and 52mmbl (Upper Case) of further reserves, then the RBL discussion is quickly brought to a close.

(2 of 3)

The author then goes on to question the reserves that are available to I3E for the Phase 1 development and thus the RBL facility. The problem however is again the fact that the acquisition of Block 23/24a has completely changed the location of LP1 and LP2, such that we now have a the same total 55mmbl STOIPP but it is shared out between 3 producing wells, none of which resemble the original CPR.

If we refer back to page 21 of the Phase 1 CPR we see that LP1 originally ran from the centre of the block down to the Blake boundary, where as now it runs from the new drill centre in Block 23/24a (neighboring block) right through Block 13/23d.

Whilst it takes a different course to the original CPR scheme, it is minimum 3km longer and thus will automatically be assigned more reserves than the CPR stated.

LP2 was much shorter but always ran within the confines of Block 13/23D because it had too. Under the new scheme it naturally runs from the drill centre but now in a South Easterly direction and is also a tad bit longer but not by very much.

LP4 exploits the upper region of the Liberator field that was known at the time of the CPR but sat in the neighboring block (see CPR page 19). A simple comparison with the geography of the LP4 drill location shows very clearly that it sits within this extended ara of Liberator Phase 1 only. That's because it is designed to extract part of the 55mmbl STOIPP that is assigned in the CPR and is now fully under I3E ownership.

So with that hopefully cleared up one can begin to understand and appreciate what Mr Heath and Mr Shafiq were truly saying in the interview from Tuesday.

Key statements ;

"From the 55mmbl (STOIPP) we were expecting to get roughly 21mmbl reserves. Of the 21mmbl roughly 8mmbl was going to come from the LP2 well. So that 8mmbl will be lower than 8mmbl. It will be some number between 1 or 2 or whatever the number is between 0 and 8. It won't be zero because we still have volume in the middle but it won't be 8 it'll be something lower"

So coming from a position of trusting the BODs words because it is clear from the above explanation that they have not lied about LP2 and LP4, then the actual, position is a confirmed 13mmbl of reserves plus whatever LP2 turns out to be.

I dislike the use of the words 1 or 2 but I very much like the "whatever the number is between 1 and 8" part.

It will all be about how far the drill is from the boundary and perhaps just perhaps the current surveys will clarify that.

If they are reasonably close and they can hit circa 4mmbl of their intended 8mmbl, then we are talking about 17mmbl of reserves. It will be all about the final production well positions because LP1 runs reasonably close to LP2.

(1 of 3)

Having now revisited the interview in the calm after the storm of the last few days, I am beginning to see far more light at the end of the tunnel than I thought was there. I would be lying if said actions were not spurred on by the article that I saw printed by Share Prophets.

Note - The author of the article has been in contact with me but is unable to engage here due to issues with LSE and work commitments. I am however grateful that he was so obliging.

The key issues I call out yesterday were as follows ;

Firstly, the author's insinuation that the management team of I3E have somehow lied to their investors by stating that the pilot well is associated with LP2, when in his view it is actually LP4. That in turn questions their conclusion to date on the viability of Phase 1, which is central to the major drop in SP we have seen since the RNS was released.

Secondly, the timing of this article, so soon after the news release, inflicted absolute maximum pain on those that read the article and decided to share it (shared 185 times according to the website), at a time when they were at their most vulnerable and seeking reassurance or confirmation of their doubts.

The fundamental mistake made was to apply these outdated CPRs in the first place. They were produced prior to Block 23/24a, which gave the company the opportunity to update their models and their plans for the phase 1 development.

As I explained in my post of yesterday afternoon (4.10pm) the CPR was designed to allow LP2 to puncture the higher zone to the South of phase 1 through a south to north horizontal drill, because the available space in that zone was so limited at that time due to not owning Block 23/24a.

Post Block23/24a acquisition the company re-routed the LP2 well in a South Eastly direction and introduced the LP4 well that whilst running South to North also, actually sits in a Phase 1 zone that although included in the total STOIPP calculation, actually was owned by whoever was able to acquire Block 23/24a.

A quick comparison of the Jan 19 presentation and the Phase 1 CPR demonstrates quite clearly this geographical difference but also the fact that the drill centre has been moved into the Phase 2 area but continues to sit over the Phase 1 development area, which always gave part of itself away to the neighboring Block 23/24a that I3E now owns.

I trust I haven't lost you yet.

What that revelation should do is remove the trust question (at least for now), which in the article was the set up for all other doubts that then followed, thus making them all the more easy to believe, be it by design or not.