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i3 Energy secures Toscana acquisition and producing assets

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i3 Energy (AIM:I3E FOLLOW) has taken up the option to acquire oil and gas firm, Toscana Energy Income Corporation (“Toscana”) and signed a Letter of Intent to acquire a package of additional producing assets in Canada.

i3 Energy, which previously said it would purchase Toscana ‘at a fraction’ of market-based valuations for Western Canada Sedimentary Basin (“WCSB”) oil and gas transactions, said today that it intends to buy Toscana’s debt and equity for around £2.27 million.

Majid Shafiq, CEO of I3E said the group’s entry into the WCSB “was to provide a platform to execute on a strategy for the rapid growth of a Canadian onshore production portfolio via M&A.”

Upon i3’s exercise of the option, Toscana shareholders will receive 4.4m i3 shares for its entire share capital, representing dilution of around 4% to the group’s current shareholders.

Toscana had reserves of 4.65m barrels of oil equivalent at the end of 2019 with production of 1,065 boe per day and a reserve life index of 14.7 years.

Its assets are described as 13 ‘low-decline, long-life, light oil and gas fields’ and include low-cost opportunities to enhance production from existing producing fields.

Shares in i3 Energy closed at 6.1p on Monday afternoon.

Meanwhile, i3 has also entered a non-binding letter of intent to acquire a package of producing Canadian oil and gas assets (“Proposed Assets”) for just under US$60 million.

The Proposed Assets produced over 10,000 barrels of oil equivalent per day and generated over $34m in revenues net of royalties in 2019 from over 250 net wells across multiple light oil and gas fields.

Upon completion of the transaction, the Proposed Assets would add over 25 million barrels of oil equivalent (“MMBOE”) Proved Developed Producing (“PDP”) reserves and over 65 MMBOE 2P to i3’s portfolio 

Shafiq said the acquisition of the proposed assets “would be the first follow-on transaction in the group’s business plan and would be transformational for i3, adding material, low-cost per barrel, low-decline production, with significant organic growth optionality.”

i3 noted that the assets will also benefit from Toscana’s accumulated tax pools, amounting to $89m, adding that it was currently in discussions with investors and brokers to seek funding.

In a separate statement, i3 Energy said it has agreed amendments to its loan terms, waiving an obligation to secure reserves-based lending for the Liberator oil field.

The deadline, which previously arrived on 30 April 2020, has now been set for 30 September 2020, by which i3 will have to achieve one of three possible long-stop conditions.

The group will either have to secure irrevocable commitments for at least £15m of financing, agree a farm-out or funding term sheet to enable at least one appraisal well on the Serenity field, or execute an acquisition agreement for at least 2,500 boepd of net production.

In addition, the company has committed to achieve net corporate production at or above 5,000 barrels of oil equivalent by 30 April 2021. 

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