Strategic Central Alberta acquisition delivers strong free cash flow proposed conditional placing and primary bid offer


i3 Energy plc (AIM:I3E) (TSX:ITE), an independent oil and gas company with assets and operations in the UK and Canada, is pleased to announce that its wholly owned Canadian subsidiary has signed into escrow, pending receipt of irrevocable commitments for the Placing (as defined below), a definitive agreement with Cenovus Energy Inc., a senior Canadian oil and gas producer, to acquire certain petroleum and infrastructure assets within i3’s Central Alberta core area (the “Assets”), for a total consideration of CA$65 million (US$53.7 million) (the “Acquisition”). The strategic Acquisition delivers extensive operational synergies, predictable low-decline production, a large reserve base with multi-year development inventory and expected strong free cash flow.

The Company intends to raise a minimum of £40 million (before expenses) through a placing of new ordinary shares of £0.0001 each in the capital of Company (the “Placing Shares”) at a price to be confirmed (the “Issue Price”) (the “Placing”). The Placing will be conducted through an accelerated bookbuild (the “Bookbuild”), which will be launched immediately following the publication of this Announcement. The Placing is subject to the terms and conditions set out in the Appendix to this announcement (which forms part of this announcement, such announcement and its Appendix together being this “Announcement”).

In addition to the Placing, the Company intends to raise further funding by way of an offer made by the Company on the PrimaryBid platform through the issue of new ordinary shares in the capital of the Company (the “PrimaryBid Shares”) at the Issue Price (the “PrimaryBid Offer”). A separate announcement will be made shortly regarding the PrimaryBid Offer and its terms. The Placing is not conditional upon the PrimaryBid Offer. The PrimaryBid Offer will close on completion of the Bookbuild process.


Strategic core area consolidation – Acquiring approximately 8,400 boepd (51% oil and NGLs) of predominantly operated, conventional, low-decline production and an extensive network of complementary midstream infrastructure to support long-term sustainable operations

Large reserve base with development upside – Total Proved plus Probable Developed Producing reserves of 27.5 mmboe with an NPV10 of US$90 million and 2P reserves of 79.5 mmboe with an NPV10 of US$193 million (inclusive of undiscounted asset retirement obligations (“ARO”) of US$92 million, inflated at 2% and discounted at 10% for an NPV10 ARO value of US$23 million), including an inventory of greater than 220 identified development drilling locations and reactivation opportunities

Strong net operating income to support consistent free cash flow yields – Next twelve months (“NTM”) estimated net operating income (“NOI” = revenue minus royalties, opex, transportation and processing) of US$31 million supported by a low-decline production profile and minimal required annual maintenance capital provides predictable long-term free cash flow to support i3’s planned dividend distribution policy

Immediately accretive on all key per-share metrics – Materially accretive to forecast production, NOI, and reserves (approximately 30%, 20%, and 76%, respectively) in the 12-month period following closing of the Acquisition

“Hand-in-glove” acquisition provides synergies and scale – Significant expansion of ownership in existing and additional oil and gas licenses and infrastructure in i3’s Central Alberta core area will allow i3 to materially reduce unit operating costs and maximise third party tariff income

Strengthened financial position – Pro forma at closing of the Acquisition, i3 expects to have estimated net debt of only US$27 million, which translates to a current net debt to NTM NOI ratio of approximately 0.36x

Fundraise for the Acquisition – i3 is raising a minimum of £40 million (before expenses) at a price to be confirmed per share through the Placing and the PrimaryBid Offer to fund the Acquisition by way of (i) an accelerated book build to both current and new institutional investors, and (ii) a PrimaryBid Offer to retail shareholders.

Shareholder approval – The Placing and the PrimaryBid Offer are conditional upon, amongst other things, the approval by the Company’s shareholders of certain resolutions to be proposed at a general meeting of the Company’s shareholders on or around 26 July 2021. The Company wishes to conduct the General Meeting in a way that limits the risk associated with the Coronavirus pandemic and complies with the law. In light of this, although shareholders (including their duly appointed proxies and/or corporate representatives) will be, subject to any changes to the rules which may arise after the publication of this Announcement, permitted to attend the General Meeting in person, shareholders will be discouraged from doing so.

Majid Shafiq, CEO of i3 Energy plc, commented:

“We continue to execute on our business plan which is to build and grow a material and diversified production business through the most efficient deployment of capital, whether that is through exploitation of opportunities within the Company’s existing portfolio or through accretive acquisitions such as this one. This transaction not only scales up our cashflow, but it will also, in the near term, lower our unit operating costs, increase third party tariff income and add scale to i3’s expanding list of varied development opportunities, which will materially increase our options to both grow the business and manage risks.”

Ryan Heath, President of i3 Energy Canada Ltd., commented:

“i3 Canada is extremely pleased to have entered into the Acquisition from a top-tier veteran participant of the Western Canadian Sedimentary Basin. The inherent synergies of the transaction, being immediately evident and robust, will most certainly expand with time to further enhance field efficiencies and cash flow throughout our central Alberta core area, to the benefit of the Company and its stakeholders.”