I3 Energy Regulatory News (I3E)

23 June 2020

i3 Energy plc

("i3" or the "Company")

Development Funding Long-stop Date

Amendments to Loan Notes

i3 Energy plc, an independent oil and gas company with assets and operations in the UK, announces the following update.

On 8 November 2019, the Majority Noteholders of the Company's secured loan notes agreed to extend the date by which the Company must enter into a reserves based lending facility or find an alternative means of funding to achieve first oil from the Liberator field, to 30 April 2020. As the Company was not in a position to enter into such a facility by 30 April, the Company and the Majority Noteholders have come to an agreement to waive this condition in return for certain amendments to the May 2019 Loan Note Instrument and the associated Warrant Instruments.

Loan Note Instrument Amendments

The obligation to enter into a development facility for Liberator by a certain date has been removed. A new Corporate Development Long-stop Date has been set for 30 September 2020 prior to which i3 has to achieve one of the following Corporate Development Long-stop Conditions:

- Secure firm irrevocable commitments for a minimum of £15mm of unsecured or fully subordinated financing, subject only to closing mechanics; or

- Agree a farm-out and/or funding term sheet, subject only to legal documentation to fund the drilling of at least one appraisal well on Serenity during 2020 or 2021; or

- Execute an acquisition agreement for at least 2500 boepd of production net to i3.

In addition, the Company has an obligation to achieve net corporate production at or above 5000 boepd by 30 April 2021. 

Warrant Instrument Amendments

All warrants associated with the Loan Notes will have their strike prices reset to the nominal value of i3 shares (£0.0001/share).

Cancellation of Existing Director / Management Options and Issue of New Options

The Loan Note Instrument amendments include the requirement that the currently outstanding i3 management options will be cancelled and replacement options will be issued to i3 staff and directors which replicate the terms of the adjusted Loan Note warrants (the "New Options") in relation to the exercise price, to seek alignment between the Noteholders and management. A total of 16,157,612 New Options will be issued, of which 4,097,741 will be reserved for Toscana Energy Income Corporation ("TEIC") staff and an incoming director and will be conditional on the closing of the acquisition of TEIC.

The New Options will vest as follows:

(i) A total of 4,223,528 New Options will vest immediately (equivalent in number to previously vested i3 management options);

(ii) 50% of the unvested New Options vest on the earlier of i3 obtaining (a) £15mm of unsecured or fully subordinated financing, (b) an appraisal farm-out or funding term sheet for Serenity, or (c) a net acquisition of 2500 boepd; and

(iii) 50% of the unvested New Options (or 100% if 50% have not yet vested under (ii) above) vest on the earlier of (a) i3's achievement of 5000 boepd of corporate production, or (b) 31 October 2021.

The number of New Options to be issued to directors remains equivalent to the number of options previously held by each (except for Linda Beal who will not be receiving New Options), as follows:

Majid Shafiq 2,807,776

Graham Heath 1,734,282

Richard Ames 534,376

Neill Carson 534,376

The Loan Note Instrument Amendments is a related-party transaction under Rule 13 of the AIM Rules for Companies as a result of the Company's largest shareholder, Bybrook Capital LLP (owning 13.87% of the Company's issued shares) being a Loan Note holder. In addition, the amendments to the managements options is a related-party transaction for the purposes of Rule 13 of the AIM Rules for Companies. In relation to these transactions, Linda Beal is considered to be independent for the purposes of AIM Rule 13. Having consulted with WH Ireland Limited, the Company's Nominated Advisor ("Nomad"), the independent director considers that the terms of the related-party transactions are fair and reasonable insofar as shareholders are concerned.

Following this announcement, the Company has in issue 5,000 deferred shares of £10.00 each, 107,719,400 ordinary shares of £0.0001 each, 5,277,045 warrants with an exercise price of £0.5685 each, 1,201,201 warrants with an exercise price of £0.555 each, 1,386,001 warrants with an exercise price of £0.481 each, 1,638,002 warrants with an exercise price of £0.407 each, 500,000 EMI options with an exercise price of £0.11 each, 55,981,044 warrants (representing 29.5% of i3's fully diluted share capital) with an exercise price of £0.0001 each, and upon issue 16,157,910 options (representing 8.8% of i3's fully diluted share capital) with an exercise price of £0.0001.

Trading Update

Further to the guidance provided by AIM Regulation, the Company has been granted an extension of up to three months for the reporting and filing of its financial results for the year ended 31 December 2019, such that it will publish these results as soon as possible but not later than 30 September 2020.

Due to the restrictions imposed by the UK Government in respect of COVID-19, there has been a delay in the Company's auditors receiving the relevant information to complete the audit process as the Coronavirus has had an effect on staff availability and external resources.

As referenced on 19 March 2020, the Company is conducting a farmout process of its UK assets. These efforts remain ongoing and engagement continues with potential farminees. i3 will provide further updates to the market as these discussions progress.

On 30 March 2020, i3 announced that it had entered into an Option agreement to acquire Toscana Energy Income Corporation ("TEIC"), a TSX-listed company. Today the Company confirmed that it has executed that Option and will be acquiring all of the issued share capital of TEIC by way of a plan of arrangement. The Company additionally announced that it has entered into a non-binding LOI to acquire a portfolio of producing assets in the Western Canadian Sedimentary Basin.

At the end of May 2020 the Company had a cash balance of £2,381,725. The Company continues to monitor its cash flow and has reduced all costs where appropriate.

ENDS

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