i3 Energy Plc (LON:I3E) has exercised its option to acquire producing assets in Canada, picking up all of the issued and outstanding common shares of Toscana Energy Income Corporation (TEIC).
The acquired assets produced an average of 1,065 barrels of oil equivalent per day (hoped) net to generate C$5.5mln of field net back.
They are described as 13 “low-decline, long-life, light oil and gas fields” and include low-cost opportunities to grow production.
They comprise over 25mln barrels of proved developed producing (PDP) reserves, plus over 65mln barrels of proved and probable (2P) reserves.
In 2019, the assets had an average break-even price of C$30.43 per boe. Toscana generated C$15.7mln of revenue in 2019 and reported a C$4.13mln loss.
I3 noted that the assets will also benefit from TEIC's accumulated tax pools, amounting to US$89mln.
READ: i3 Energy in talks to amend debt terms
"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,” said Majid Shafiq, i3 chief executive.
“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."
The option was set to expire at the end of June. Now, the company intends to move to a legally binding acquisition agreement for the acquisition.
It is expected that the total deal consideration will be around US$60mln. It is in talks with investors and brokers as it seeks to fund the transaction.
Details of the deal, so far, sees i3 Energy issue 4.39mln new shares to Toscana’s shareholders upon completion. It comes after the AIM-quoted firm in March acquired the rights and interests in Toscana's C$28mln debt facilities, which were in default, for C$3.4mln.
It is classified as a reverse takeover on AIM and following completion i3 intends to have a listing on the Toronto stock exchange.
Today, i3’s shares are suspended on AIM whilst the transaction is advanced.
Debt agreement amended
In a separate statement, i3 Energy announced it has agreed amendments to its loan terms, waiving an obligation to secure reserves-based lending for the Liberator oil field (the deadline had previously arrived, on April 30 2020).
A new date of September 30 has been set, with the company required to achieve one of three possible milestones – either secure irrevocable commitments for at least £15mln of financing, or 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.
It also commits to achieve net production at or above 5,000 boepd by April 30 2021.
Existing share warrants and management share options are also being amended as part of the agreement.