i3 Energy plc, an independent oil and gas company with assets and operations in the UK, is pleased to update the market on its operational and funding progress for the appraisal and development of its 100% owned and operated Liberator field and Serenity prospect.
· Letter of Intent signed for summer 2019 consecutive multi-well drilling campaign (“Rig LOI”) across the Liberator field and Serenity prospect which i3 estimates have STOIIPs of 314 and 197 million barrels (“MMbbls”) respectively. Subject to funding, the Company will drill:
o The A3 appraisal well in Block 13/23c (“Liberator West”) to commence in June 2019, expected to convert Liberator West resources into reserves
o The first Liberator Phase I production well (called L2) in Block 13/23d
o The S1 well into the Serenity prospect that i3 expects will prove a material extension of the neighbouring Tain discovery
· Upon the successful appraisal and development of Liberator and Serenity, i3 could potentially produce more than 200 MMbbls from its current licences
· Offtake terms received from two parties for Liberator Phase I production
o Indicative terms received from Repsol Sinopec Resources UK Limited (“RSRUK”) for utilization of its existing facilities
o Memorandum of Understanding (“MOU”) executed for provision of standalone FPSO for mid-2020 delivery to the Liberator field
· i3 is negotiating terms and expects near-term agreement for US$100 to US$130 million of debt for appraisal drilling and 2019/2020 Liberator Phase I development capex
· Strong response to joint venture farmout process with several companies conducting due diligence and a bid date likely to be set in February
Rig secured for 2019
The Company has entered into a Rig LOI with Dolphin Drilling Limited (“Dolphin”) for a three-well appraisal and development drilling programme to be conducted in the summer of 2019. Per the terms of the Rig LOI, i3 will be utilizing either the Blackford Dolphin or Borgland Dolphin semi-submersible drilling rig to spud its first well between 1st June and 1st July 2019. i3 will first drill the A3 appraisal well in Block 13/23c (“Liberator West”), then drill and suspend the first Liberator Phase I production well in Block 13/23d (L2) and complete the campaign by drilling the S1 well into the Serenity prospect.
i3’s advancement of its integrated subsurface analysis now maps STOIIPs of 314 MMbbls in the Liberator field and 197 MMbbls in Serenity (using conservative assumptions on oil column thickness). As previously announced, if successful, the A3 appraisal well is expected to convert a portion of Liberator West’s resources into reserves, in addition to determining the placement of the second Phase I production well (either L4 or L1), which would be brought onstream alongside the L2 well at a potential combined rate of up to 20,000 barrels of oil per day in mid-2020. A third Phase I well is expected to be delivered in mid-2021 to maximise infrastructure utilization.
The S1 well at Serenity is intended to prove what i3 believes is a material extension of the Tain discovery, which is an unclosed oil-bearing structure immediately adjacent to the east into which there are 4 well penetrations. The A3 and S1 appraisal wells will allow the Company to optimally size the standalone FPSO facility for a potentially enlarged Phase II development which includes both the Liberator and Serenity fields. Upon the successful appraisal and development of Liberator and Serenity, i3 could potentially produce more than 200 MMbbls from its current licences.
Offtake terms received from two infrastructure owners
As previously announced, it is the Company’s intention to deliver first oil from Liberator Phase I by mid-2020 and i3 has sought offtake terms from a number of infrastructure providers that enable it to meet this timeline.
In December 2018, i3 received indicative terms from RSRUK for Liberator’s use of their leased Bleo Holm FPSO facility via Ross field infrastructure, and the parties are working together agreeing the terms for Liberator Phase I construction and tie-in, and transportation, processing and operating services agreements. These agreements are expected to be finalized alongside the 2019 field development plan (“FDP”) approval by the UK Oil and Gas Authority.
As an alternative to the use of the Bleo Holm, i3 has also executed a Memorandum of Understanding for the provision of a standalone floating, production, offloading and storage (“FPSO”) vessel for the Company’s 2020 delivery of Liberator Phase I. i3’s lease of the FPSO would eliminate its reliance on access to third-party operated infrastructure.
The Company will continue to assess both offtake solutions in order to maximize shareholder value as it moves towards its final investment decision at FDP approval.
Appraisal and Development Funding
The Company continues to progress its previously announced joint venture (“JV”) farmout process and has been pleased with the response. Several companies are conducting due diligence, with additional parties scheduled to enter the process in January, and i3 expects to set a bid date during the course of February.
In addition to advancing its JV process, the Company is working with senior and junior lenders in the UK and North America negotiating facilities that would, on finalisation of agreements, provide between US$100 and US$130 million, of which up to 25% would be available towards i3’s 2019 appraisal and development drilling, with the balance drawable for the residual 2019/2020 Liberator Phase I production wells, subsea installation and field tie-in.
The Company expects its three-well 2019 drilling programme to cost c.US$41 million with additional capex to 2020 first oil of c.US$90 million, inclusive of considerable contingency.
i3 is pleased with the strong interest it continues to receive to fund its proposed appraisal and development programme and expects to provide further funding updates in due course.
There can be no certainty that the above negotiations and discussions will lead to definitive agreements.
Majid Shafiq, i3’s CEO, commented:
“We are very pleased with the progress we are making to move the Liberator field towards development and with the ongoing technical maturation of the upside in our acreage to drill ready status. We look forward to the completion of our FDP and funding initiatives and the commencement of a very exciting drilling programme this summer.”