2020 North Sea Appraisal and Option to Acquire Western Canadian Production - i3 Energy
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2020 North Sea Appraisal and Option to Acquire Western Canadian Production
: MARCH 2020 i3 ENERGY (LON:i3E)
Forward looking statements
This presentation contains forward-looking statements and information that both represent i3 management's current
expectations or beliefs concerning future events and are subject to known and unknown risks and uncertainties.
A number of factors could cause actual results, performance or events to differ materially from those expressed or implied by
these forward-looking statements.
Unless otherwise stated, references to reserves, resources, production, and economic figures are based on i3 management’s un-
risked Mid-case estimates. They are preliminary figures and are subject to change. All plans are subject to i3 funding capacity.
: MARCH 2020 2
Highlights
UNLOCKING 2019 drilling programme has proven a material oil discovery at Serenity (c.200 MMstb
POTENTIAL STOIIP) and has de-risked oil migration towards Liberator West (c.400 MMstb STOIIP).
Minimum 82-day drilling contract executed with Dolphin Drilling to conduct 2020
appraisal campaign. i3 has agreed partial economic farmout of up to 10% of future net
2020 FARMOUT revenues associated with Block 13/23c to Dolphin in exchange for their 2020 drilling
AND APPRAISAL contribution of up to US$14.4 million. Farmout process remains ongoing with parties in
i3’s data room.
i3 has purchased the junior and senior secured debt of Toscana Energy Income
WCSB Corporation (TSX:TEI) from its cash resources and has executed an option agreement
PRODUCTION to acquire 100% of TEI’s shares for c.4.4 million i3e shares (total i3 dilution of up to
4%), purchasing 4.65 MMboe 2P and 1,065 boepd of production (55% oil) with potential
ACQUISITION(1) upside of 100+ MMbbls recoverable, for a total consideration of C$3.95 million.
Integration of Toscana’s high-quality management team will enable rapid expansion
GROWTH into the opportunity-rich WCSB. i3 will remain focussed on proving Serenity and
FOCUSED Liberator resources while low-cost Canadian production opportunities are captured to
provide operational cash flow and near-term shareholder distributions.
1) 2P Reserves from Toscana’s 2019 Year-end Reserves Report; 2019 average production (actual)
: MARCH 2020 3
UK North Sea Update
Planned 2020 Drilling Activity and Economic Farmout
: MARCH 2020 4
Assets: 100% WI in Serenity and Liberator
Serenity Oil Discovery Serenity Discovery
Tain Discovery
• Successful 13/23c-10 well discovered
oil in October 2019 in the world class
Captain sands reservoir
• i3 estimates 197 MMstb STOIIP based
on conservative oil column thickness
• Serenity is an amplitude supported
feature mapped by i3 as an extension
of the Tain oil field 13/23c 13/23d
• Tain discovery encountered 32° API
i3’s 100% operated interest
oil, subsequently appraised by three in 13/23c and 13/23d
wells (well 13/23b-5z tested at 6700
bopd)
Serenity Discovery
Liberator Appraisal
• 100% i3 operated working interest
• Fluid and reservoir properties
analogous to neighbouring prolific
Blake field in the Captain sands fairway
• 2019 appraisal critically proved oil
migration towards Liberator West
where relief and column height could
hold large in-place resources
• Material upside in Liberator West of
c.400 MMstb STOIIP to be appraised
following Serenity
• Phasing and timing of development
dependent on future appraisal results Post 13/23c-11 mapping
: MARCH 2020 5
2019 drilling campaign (video here)
Drilling began August 2019 using Dolphin’s Borgland Rig
• 13/23c-9 well missed expected Liberator structural high
• Upper Captain sands pinched out at 13/23c-9 location
• Provided critical vertical seismic profile which was subsequently
tied to recently reprocessed broadband seismic, resulting in
remapping of the Liberator field
• 13/23c-10 well confirmed material Serenity oil discovery
• Well found 11 feet TVD of clean, oil-filled, turbidite Captain
sands
• 13/23c-10 confirmed i3’s prognosed OWC at 5270 ft TVDSS
• Estimated STOIIP of 197 MMstb assumes a 40 ft net thickness;
expected 50% recovery factor yields potential recoverable
resources of c.100 MMbbls
• Serenity could be produced as a phased development across
existing proximal infrastructure followed by a subsea tie-back to
a dedicated FPSO or alternate local infrastructure
• 13/23c-11 Liberator Phase I appraisal well
• Found 220 ft MD of Captain sand confirming the presence of
the Liberator channel west of the 13/23d-8 discovery well
• Confirmed thin oil column above regional OWC at 5270 ft tvdss
• Residual oil column beneath the OWC partially mitigates oil
migration risk towards Liberator West
• Drilling Performance
• Excellent operational performance by Dolphin Drilling, Petrofac
Well Management, Baker Hughes and other well service
providers
• All three wells drilled safely with no environmental, health or
safety issues and all within budget
Ian Little, i3’s Drilling Manager on inspection visit to the Borgland Dolphin semi-sub rig
: MARCH 2020 6
Serenity oil discovery (oil migration video here)
Serenity Discovery 2020 Appraisal Programme and Economic Farmout
• Serenity oil discovery at well 13/23c-10 (“S1”) announced • Drilling contract and net revenue sharing agreement executed
October 2019 with Dolphin Drilling
– Drilled down dip of RSRUK-operated Tain oil field (Tain – Drilling contract executed for minimum 82-day drilling
discovered in 2005, 32° API oil, flow-tested 6,700 bopd) programme expected to commence in Q3 2020 (subject to
funding)
– 13/23c-10 well encountered oil in a sequence of Captain and
Coracle sands – Dolphin drilling will receive up to a 10% net economic interest in
Block 13/23c in exchange for committing up to US$ 14.4 million
– Oil confirmed within the interval from 4740 ft to potentially
towards i3’s 2020 appraisal drilling programme
5252 ft TVDSS, 165 ft TVD sand in total
– Initial 82-day programme will focus on Serenity (two wells plus
– Net oil interval in the Captain sand was c.11 ft of high porosity
sidetracks) w/ additional two-well option totalling 78 days for
(30%) sand, thicker than in the up-dip Tain discovery as
drilling Liberator West and/or the Minos High
prognosed by i3; preliminary biostratigraphic analysis confirms
the net sand is the same as the Tain Captain sand – Wells to penetrate and delineate thickened Captain reservoir to
the West with flow test to demonstrate productivity
– An OWC was estimated at 5270 ft TVDSS using pressure
measurements, which is the regional contact seen in the – Farmout process ongoing with parties in i3’s data room
Liberator and Blake fields
– Proved on-block oil column of 622 ft TVD present in the Captain Liberator–Blake–Tain–Serenity Structural Setting and Fluid Distribution
sand
• i3-estimated P50 STOIIP of 197 MMstb based on conservative
assumptions regarding oil column thickness
– i3’s expectation is that the Captain sands thicken to the west in
Serenity as demonstrated by the c.120 ft of sand seen in the
offset 13/23a-7A (Magnolia) well situated to the west of the
field
– The P50 STOIIP of 197 MMstb assumes an average oil column
thickness of 40 ft across the field
– Due to the high relief above the OWC in the Serenity field,
recovery factors in excess of 50% should be possible
: MARCH 2020 7
Well correlation Magnolia-Serenity-Tain-Blake Flank
8673 m
Note: Distances between wells are not to scale
Magnolia well
Serenity well
Tain wells
Significant upside potential in sand thickness
• The oil-bearing Captain sand found in the Serenity discovery S Captain well
well can be mapped off the 13/23c block to the west in the Blake Flank
Captain and Magnolia wells, through Serenity, Tain and the wells
Blake Field to the east.
• i3 expects the sand thickness in Serenity to increase to the
west, ranging from 11 ft (found in the 13/23c-10 Serenity
discovery well) to 120 ft (found in the 13/23a-7A Magnolia
well). 197 MMstb of STOIIP is based on a conservative
assumed average sand thickness of 40 feet.
: MARCH 2020 8
i3 Option to Acquire
Toscana Energy Income Corporation (TSX:TEI)
Capitalizing on Cash Flow
Assets in the Opportunity Rich
Western Canadian Sedimentary Basin
Toscana Energy: low-cost WCSB production acquisition
i3 Purchases Debt & Executes Option to Acquire TEI’s Equity 1000+ boepd from 255 (175 net) low-decline production wells
• i3 has acquired all debt of Toscana Energy Income Corporation
(TSX:TEI) and executed an option agreement to acquire 100% of TEI Nipisi
– From its cash resources, i3 purchased all rights and interests in TEI’s Clair
Hangingstone
C$24.8MM senior and C$3.2MM junior debt facilities for C$3.0MM and Marten Creek
C$0.4MM, respectively, paid 50% up front and 50% at year-end
– Upon exercise of its option, i3 will offer up to 4,399,224 i3 shares
(valued at C$0.55MM on March 27th) for the entire share capital of
Tony Creek
Toscana, resulting in up to c.4% dilution to i3’s current shareholders Bigoray
• Total cash and share consideration of C$3.95MM (US$2.8MM) buys:
Willesden
– 2019 production of approximately 1065 boepd at C$3710/boepd Green
Nevis
(US$2650/boepd) or 0.72x TEI’s 2019 field netback (revenue minus
Strachan
royalties minus opex) of C$5.5MM (US$3.9MM)
– 2P reserves of 4.65 MMboe for C$0.85/boe (US$0.61/boe)
– Long-life reserves base from low-decline well stock with 2019 average
field break-even of C$30.43/boe (US$21.74/boe) Carmangay
Weyburn
– TEI’s highly experienced team and operational organization Retlaw
– A secondary listing on the Toronto Stock Exchange
• Optimization opportunities within current portfolio to increase
YE Reserves(1) P+PDP 1P 2P
production (boe/d) by 20% - 50% through low-cost workovers or capex
• Potential company-making upside in Toscana’s Clearwater acreage, one
MMboe 2.67 3.48 4.65
of Canada’s top oil plays, with potential recoverable resources above
100 MMbbls net
BTAX NPV10
• Access to high-netback and/or distressed deal-flow provides opportunity $30.2 $32.3 $43.2
(C$MM)
to rapidly grow i3 into a business that generates significant free cash
flow
ATAX NPV10
• i3 expects to execute its option to purchase Toscana after releasing its $30.2 $31.5 $40.3
(C$MM)
2019 Annual Report
(1) Source: Sproule 2019 Toscana Year-end Reserves Report (excludes any potential upside from Clearwater acreage)
: MARCH 2020 10Strategic rationale for i3’s acquisition of TEI
Diversification into a Production-based Portfolio 10-year Production Profiles(1)
• i3 deems it critical to spread and mitigate its
historical single-asset risk
• TEI’s low-decline production portfolio expected to
provide stable long-term cash flow under
attractive acquisition metrics making it a highly
accretive transaction for i3’s shareholders that
can be funded from cash
• Excellent acquisition metrics: 2019 WCSB M&A
and A&D transaction averages place approximate
acquisition value on TEI (55% oil) of over C$30
million on a flowing basis
• Optimization works identified within TEI’s current
production portfolio to increase production by
20% to 50% during 2020
10-year BTAX Cash Flow (MM$C)(1)
• Toscana’s 46 net sections of acreage atop the
Clearwater formation could potentially provide
many multiples of current portfolio value
• i3 is inheriting an experienced Calgary-based
management team with proven M&A credentials,
TSX listing and WCSB presence that will provide
access to other low-cost, high-return
opportunities
• The WCSB is currently out of favour due to egress
issues, a lack of access to capital, and
overleveraged but solid asset portfolios, providing
what i3 believes to be a time-limited opportunity
to grow a material production company on
favourable terms
: MARCH 2020 (1) Source: Sproule 2019 Toscana Year-end Reserves Report (excludes any potential upside from Clearwater acreage) 11Toscana’s Clearwater Formation in Marten Hills & Nipisi
A Premier Economic Play Type in AlbertaClearwater development history
• A top tier economic oil play found in the WCSB Alberta
– Shallow drill depths (400m to 650m)
– 4-8 leg open hole multi-laterals with 20-50m spacing
– No stimulation required
• Activity continues to surge
– ~ 150 wells have been spud since the beginning of 2016
(~60% occurring within the past 12 months)
– Current production (Jan 2020) has grown to >20,000 bbl/d
(>70% YoY) Saskatchewan
– Prolific development potential in a low F&D, high netback
resource play
• Delivers significant sustainable growth
• Key play participants include:
– Public companies Canadian Natural Resources
(CNQ),Cardinal Energy (CJ), Cenovus Energy (CVE) and
Highwood Oil Company (HOLC)
– Largely dominated by privates, including Spur Petroleum
(majority of production), Deltastream Energy, Crestwynd
Exploration, Mancal Energy, Rolling Hills Energy, Summerland
Energy, Turnstone Energy and Woodcote Oil
: MARCH 2020 13Clearwater F sand – oil saturated fairway
: MARCH 2020 14Asset attributes and potential development plan
• 57.6 gross (45.9 net) sections of Clearwater rights (80% avg WI)
• Majority of acreage is held-by-production
• Play fairway - 12 x 42 mile corridor with net pays >5 meters
• Competitive advantage
– Toscana has grandfathered access & right to drill in caribou range
(prior to recently implemented restrictions on mineral rights licensing)
– 166 surface pads on Toscana Lands
– Existing Clearwater well bores on all key sections
– Utilize existing infrastructure and well penetrations to de-risk future
capital spend
– >150km of operating pipeline infrastructure
• Sampling campaign (Winter 2019/20)
– Obtain oil samples throughout field – shoot/swab. Analyze live oil that
has been documented in pig traps, separator dumps and tanks
– Ascertain which samples belong to which well and sand layer
– Test oil samples for API quality, Sulphur content and viscosity
• Continue mapping individual sand layers (Winter 2019/20)
– Net pay / isopach
– Structure
• High grade drilling locations (Spring 2020)
– With mapping, sampling and continued offset operator de-risking
• Implement C$5-C$8MM, 4 to 6 well, drilling campaign (Winter
2020/21)
: MARCH 2020 15Clearwater geological summary
• Clearwater characterized as conventional reservoir
– Targeting marine deltaic and shore face deposits in the Upper Mannville
– Well consolidated oil-bearing formation ranging in net thickness from 5 to 35 meters in up to 8 zones
– Conventional permeability (50-1,000 mD), significant porosity (25-30%) with low water saturation (D & E Development / G Contingent Resource : MARCH 2020 17
Marten Creek and Nipisi STOIIP analysis(1)
• STOIIP of 24.2 MMbbls/section
• Acreage position (45.88 net sections)
supports STOIIP of 1.11 Bbbls
• Primary recovery:
– Assuming primary recovery of 5% = 1.21
MMbbls/section @ 4 wells (8 legs per) = 300
mbbls per well
– Total recoverable reserves of 55.5 MMbbls
• Secondary recovery:
– Assuming secondary recovery (EOR - water &
polymer floods) of 10-15% = 2.4 – 3.6
MMbbls/section @ 4 wells (8 legs per) = 625
– 900 mbbls per well
– Total recoverable reserves of 111.0 – 166.5
MMbbls
1) Toscana’s management view
: MARCH 2020 18Marten Creek and Nipisi type well economics
140
High Case Type Well Low Mid High
Mid Case DCET Costs*
120 ($MM) 1.4 1.4 1.4
Low Case
IP (bopd) 85 115 140
EUR (mbbls) 75 104 127
Barrels of Oil per Day (bbls/d)
100
IRR (%) 35 67 99
80 NPV10 ($MM) 0.59 1.3 1.8
Payout (yrs) 2.4 1.6 1.3
60
*Drilling, completion, equipping and tie-
in (“DCET”) cost estimates of C$1.4MM
40
are for one-off delineation wells; offset
operator costs have been reduced to
20 C$1MM to C$1.1MM with multi-well
pad program development
0
0 5 10 15 20 25 30
Months
• Type wells developed from the analogous Nipisi field to the South
• Input assumptions:
– Sproule Q1 2020 pricing, C$6/bbl Opex, C$4/bbl trucking and a C$4/bbl pipeline tariff to Hardisty (Western Canada
Select reference price)
– 1st year Opex + transportation per boe of C$15
– STOIIP calculations support the estimated EUR of the Type Wells
: MARCH 2020 19Clearwater – play comparables (NBF1 Sep 2019) : MARCH 2020 1) NBF = National Bank of Canada Financial Markets 20
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