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i3 Energy (I3E LN)1; Speculative Buy, £1.50: Well result at Liberator - The 13/23c-11 well has encountered 220 ft measured depth (MD) of sand in the Captain sand. C. 20 ft MD of the Captain sand with oil indications has been found above the expected oil water contact. This compares with expectations of 70’-80’ of sands being above the oil water contact. Market reaction: negative as the encountered sands with oil which are not as thick as expected. This could have a negative impact on Liberator’s volumes. The company indicated that development wells were drilled in similarly thin areas above the oil water contact in other fields in the area. i3 believes that the small amount of sands above the oil water contact at the A2 well location does not mean that the net pay has decreased in the west of Liberator where most of the contingent and prospective resources are located. Encountering thick captain sands at the A2 well also shows the remapping of the field is much more accurate than previously. It also lessens the oil migration risk to the west where the prize lies.

Only with I3E, we listed pre funding, so retail in at the bottom rung.....

Thank you AHP,
As discussed here, single digit interest, like the feedback!

They will expect more than $3.50, more like twice that with infrastructure nearby.

In essence, Baker Huges(GE) agreed to be both a partner and a future shareholder of i3.

They agreed to take full risk on £3 million worth of services and equipment supplied to I3E.
Not only that, but only being paid on first oil from Liberator. This is a huge endorsement of the assets.
They by doing so have aligned themselves to I3E plans which ensures that I3E gets to first production.
Baker Hughes will be fully behind I3E in its efforts to get to first oil. They also become a shareholder via the warrants when exercised (at 56.85p).

BBN,
I share your view.
The competence of the management is higher than comments I read, the belief in the assets by junior funders, Senior debt funders and other parties should not be underestimated.

Take as example Baker Hughes, a part of GE.
The have accepted genuine capital risk as a result of due diligence in I3E assets and I3E management team.
That alone adds to the credibility of both.

Serenity can be included in a SDF if necessary.

It is also possible that they might start with one development well next year instead of two, there are many options.

Serenity can be included in the Senior debt funding if necessary, it can also be sold or JV done.

Plenty of options.

Boblondon,
I think market has panicked and lack of news flow has allowed vacuum to be filled by naysayers.

The company is in lock down, they are extremely busy and will RNS news via official channels.
BBN, I am solidly behind your viewpoint, it’s rational and without emotion.

Any time I have let emotion drive my decisions, it’s been the wrong decision.

Serenity is worth 150p a share on £5 per barrel and ~70m barrels recoverable. I’m using 200m shares. I think that’s conservative, WHi broker note has 268p for Serenity success drill case.

If we strike oil expected here, the above is true, it could be more, or less.
70m barrels at $30 per barrel costs is worth over £2billion profits for which ever company ends up producing from it.

What I’m trying to say is that the upside potential remains. Serenity potential is there.
Liberator potential remains, it is not unchanged but risk profile has increased after L2 well. The company are assessing this and A3 well Drill yet to come.

What will happen now? THE MARKET HAS TURNED.
As the share recovers, you will see derampers suddenly becoming bulls.
You will see as it rises, i3E recovering will be swift and there will be a lot of sellers remorse.
Many selling are waiting to re-enter after they are sure share price is rising.

I feel genuinely sorry for those that have sold last few days as I think they will regret it.

Just some random thought from me, this business could yet be a 10 bagger from here.
Two drills to come, hit either and it’s triple figures...regardless, I’m here for the drills and don’t care where the share goes, the business will dictate the share price long term and I’m onboard for the end result.

BP also negotiated to buy our oil

BigBiteNow,
A very comprehensive, complete and accurate response.
Thanks for taking the time to Do due diligence and analysis.

Thinking about this Q&A:

How has it affected the senior facility?
The senior facility remains subject to a successful drilling campaign at Liberator and will be sized in accordance with well results and associated post-appraisal mapping.

They might choose one production well next year for say $50m costs?

That would at £30 per barrel profit on 10,000 barrels x 365 produce ~£109m profit?

They have multiple options in my opinion.

What does it say The JV not being agreed because of the other party having internal differences might be the reason. You have to go back to last November for this?

I guess we should just ignore Baker Hughes not requesting payment until production in July:
“BHGE has agreed that £3mm of oilfield service ("OFS") and oilfield equipment ("OFE") contract payments will not become payable until such time as i3 has received its first sales revenues from Liberator Phase I.”

Putting things in perspective, according to WHI broker update this week and as referenced in AGR tracs:

A3 well on full success has a $182m or 90p per share valuation.
Serenity well on full success has $544m or 268p per share valuation.

This is the house broker and the risk has increased, but it does show the potential for share recovery if they get next drills right.

BBN,
I agree with your well argued points. It’s best to stay rational and not let emotion take over this week.
A3 on success would reverse much of this weeks damage.

Serenity has as much potential as all of Liberator, so two very significant drills to go.
Let’s see what the VSP seismic shows, would be great if they have just missed the channel.

Your post aligns with my understanding BBN.

My concern was on the senior funding, I was directed to the documentation by the company. I had some concern about the reduction to the 21mmboe, but even on worst case from L2, there is still more than enough for debt financing only for production next year.

Just to add to the below, I agree we need to hear direct from the company and I hope the VSP and sonic log's provide a better picture.

It seems that they were ever so close to the boundary.

BBN,
to be clear, senior lenders assess borrowing base assets, they do exhaustive due diligence on capex/opex and build in contingency.
They plan delayed start and Brent at deeply discounted price curves.

You will see on I3E's website the Phase 1 CPR which includes AGR tracs attributes reserves.

Look at the 2P of 11.7 MMboe - I think they can do it with that - my view.

BBN,
I fully agree with your post.

I have been in contact with the company.
The senior funding has been rigorously checked against lots of parameters. They only need 11.7m barrles mid-case for it to be triggered.

Even with this miss, the 21m barrels is reduced at worst to 14m barrels - it still is more than enough for senior funding WITHOUT dilution.
Did you read the WHI note - this well may have been 100m ourside the zone - so close!

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