Last checked at 19 Mar 2020 07:00
19 March 2020
i3 Energy plc
("i3" or the "Company")
Drilling Contract and Sale of Economic Interest in Block 13/23c
i3 Energy plc, an independent oil and gas company with assets and operations in the UK, is pleased to announce the following update.
Drilling Contract
The Company has entered into a drilling contract with Dolphin Drilling Limited ("Dolphin") to utilise either the Borgland Dolphin or Blackford Dolphin semi-submersible drilling rig for a minimum 82-day programme which is due to commence not later than 1st September 2020 or as otherwise agreed between the parties (the "2020 Campaign"), and also has the ability to be extended for a period of 78 days (the "Option Programme"). The contract is conditional on i3 confirming availability of funds to satisfy its obligations under the contract, 90 days prior to drilling commencement.
i3's current minimum programme for the appraisal drilling consists of two appraisal wells on Serenity plus a sidetrack on each well, contingent on drilling outcomes, at a total expected gross cost of approximately US$33 million. The Option Programme would include wells on the Minos High structure and the Liberator West area in Block 13/23c.
Sale of Economic Interest in Block 13/23c
In concert with the abovementioned drilling contract, i3 has agreed that Dolphin will earn up to a 10% economic interest (the "Dolphin Interest") in Block 13/23c via a Net Revenue Sharing Agreement (the "NRSA") in exchange for Dolphin forgoing its Profit Margin above its Opex, up to a maximum amount of US$14.4 million (the "Dolphin Commitment"). Accordingly, the Dolphin Commitment will cover approximately 22% of the total expected gross costs of each of the 2020 Campaign and Option Programme.
The "Net Revenue" is revenue from the sale of hydrocarbons from Block 13/23c less all costs for developing and producing those hydrocarbons. Once production from Block 13/23c has been achieved, and after such time as i3 has been repaid 200% of all Block 13/23c development Capex costs from associated petroleum revenues, Dolphin will receive a share of field income equal to Dolphin's Interest multiplied by Net Revenue. Any Dolphin Profit Margin paid by i3 during the 2020 Campaign at its election will decrease the Dolphin interest on a proportional basis. At any time prior to the approval by the UK Oil and Gas Authority (the "OGA") of a field development plan ("FDP") which includes production wells in the 13/23c Block, i3 has the right to purchase the Dolphin Interest by paying Dolphin 125% of the Dolphin Commitment. Following the approval of a Block 13/23c FDP by the OGA to develop more than 25 MMbbls of reserves from production wells on that block, Dolphin has the right to sell the Dolphin Interest to i3 for the Dolphin Commitment plus interest accrued at a rate of 8% per annum, and i3 has the obligation to purchase the Dolphin Interest upon Dolphin exercising such right.
i3's management carries 197 MMbbls P50 stock tank oil initially in place (STOIIP) for Serenity which, conservatively modelled as a stand-alone development, demonstrates an after-tax NPV10 break-even at US$20 per barrel Brent pricing.
As announced on 13th February and as evidenced by the above transaction, the Company is making good progress in its farm-out process to fund its 2020 drilling programme. The data room remains open and companies continue to actively evaluate the opportunity. i3 will provide further updates to the market as discussions progress.
Site Survey
The site survey over Serenity and the Minos High area of Liberator West has been completed on time and budget without any health and safety incidents. After all final survey reports are received, i3 will commence the technical and environmental work necessary to plan for and permit its Summer 2020 drilling programme.
Minimising Operating Costs
In light of recent world events and their effect on oil and capital markets, the Company has been and continues to decrease its corporate operating costs in order to maximise its current resources. The Company is closely monitoring and applying official government and health guidance in regard to the COVID-19 outbreak ("COVID-19"). At this stage, i3 is not experiencing any direct impact to its business and does not yet foresee any disruption to its 2020 drilling programme from COVID-19.
Majid Shafiq, CEO of i3 Energy commented:
"We are delighted to have executed a drilling contract with Dolphin Drilling for our Summer 2020 appraisal programme. Dolphin performed exceptionally well in our 2019 campaign, drilling our wells on time and on budget and without any significant health, safety or environmental issues. Their support announced today not only contributes a significant component to the funding structure for our upcoming drilling campaign but also demonstrates the quality of our licenses."
ENDS
CONTACT DETAILS:
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Notes to Editors: i3 is an oil and gas development company initially focused on the North Sea. The Company's core asset is the Greater Liberator Area, located in Blocks 13/23d and 13/23c, to which i3's independent reserves auditor attributes 11 MMBO of 2P Reserves, 22 MMBO of 2C Contingent Resources and 47 MMBO of mid-case Prospective Resources. The Greater Liberator Area consists of the Liberator oil field discovered by well 13/23d-8 and the Liberator West extension. The Greater Liberator Area, along with the Company's Serenity Discovery located in the northern half of Block 13/23c and for which it carries a STOIIP of 197 MMbbls, are owned and operated on a 100% working interest basis.
The Company's strategy is to acquire high quality, low risk producing and development assets, to broaden its portfolio and grow its reserves and production.
The information contained within this announcement is deemed by the Company to constitute inside information under the Market Abuse Regulation (EU) No. 596/2014.
Qualified Person's Statement: In accordance with the AIM Note for Mining and Oil and Gas Companies, i3 discloses that Mihai Butuc, i3's New Ventures Manager, is the qualified person who has reviewed the technical information contained in this document. He graduated as a Diplomat Engineer, Geology and Geophysics from the University of Bucharest in 1985 and is a member of the Society of Petroleum Engineers. Mihai Butuc consents to the inclusion of the information in the form and context in which it appears.
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