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Canada: i3 Energy exercises option to acquire Toscana Energy Income Corp

23 Jun 2020

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i3 Energy exercises option to acquire Toscana Energy Income Corporation. The strategic production acquisition provides a platform to execute on a strategy for the rapid growth of a Canadian onshore production portfolio.

Toscana Transaction Highlights:

  • i3 has executed its Option to acquire all of the issued and outstanding common shares of Toscana Energy Income Corporation ('TEIC'), a TSX-listed oil and gas company
  • TEIC had 2019 year-end 2P Reserves of 4.65 MMboe (53% oil, 47% gas) with a reserve life index of 14.7 years
  • Toscana's 2019 production averaged 1,065 boepd and generated C$5.5 million (US$4mm) in field netback (revenue minus royalties minus opex) from 13 low-decline, long-life conventional fields producing at an average break-even price of C$30.43/boe (US$22.38/boe)
  • TEIC operates 69% of the producing wells in its portfolio at an average net working interest of 67%
  • The total aggregate consideration being paid by i3 for TEIC's debt and equity totals approximately C$3.85 million (US$2.83mm) representing roughly 0.7x Toscana's 2019 field netback, C$3618/boepd (US$2661/boepd), and C$0.83/boe (US$0.61/boe)
  • In March, i3 acquired the rights and interests in Toscana's C$28 million senior and junior debt facilities (which were in default) for C$3.4 million (US$2.5 million), with cash consideration paid 50% up front and 50% at year-end
  • At completion, Toscana shareholders will receive 4,399,224 i3 shares for TEIC's entire share capital, representing dilution of approximately 4% to the Company's current shareholders
  • At the conclusion of the Arrangement Agreement, i3 intends that its enlarged share capital will be listed on the TSX
  • The acquisition is a reverse takeover under the AIM Rules for Companies and is conditional upon the approval of i3's shareholders

Potential Asset Acquisition Highlights:

  • i3 has entered into a non-binding letter of intent to acquire a package of producing Canadian oil and gas assets
  • In 2019, the Proposed Assets produced at over 10,000 boepd and generated over US$34 million in field netback from over 250 net wells across multiple low-decline, long-life, light oil and gas fields
  • Upon completion, the Proposed Assets would add over 25 MMboe PDP and over 65 MMboe 2P to i3's portfolio
  • Cash flow from the Proposed Assets would benefit from TEIC's US$89 million in accumulated tax pools
  • The total proposed consideration to be paid for the Assets under the letter of intent  is just under US$60 million, representing approximately 1.7x 2019 field netback and approximately 2x that forecasted for the next 12 months, ~US$5,500/boepd, and ~US$0.85/boe of 2P reserves
  • As the Proposed Acquisition would also be a reverse takeover under the AIM Rules for Companies, and at i3's request, the Company's shares are being suspended from trading on AIM until i3 either publishes a 'Readmission Document' detailing the Proposed Acquisition or provides confirmation that discussions have ceased

Majid Shafiq, CEO of i3 Energy commented:

'In March of this year we announced our entry in to the Western Canadian Sedimentary Basin via an option to acquire Toscana Energy Income Corporation, which was to provide a platform to execute on a strategy for the rapid growth of a Canadian onshore production portfolio via M&A. We announced today the exercise of that option and the entering into of an arrangement agreement to effect that transaction. The acquisition of the Proposed Assets would be the first follow-on transaction in our business plan and, would be transformational for i3, adding material, low-cost per barrel, low-decline production, with significant organic growth optionality.'

Click here for full announcement

Source: i3 Energy

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