i3 Energy plc, an independent oil and gas company with assets and operations in the UK, is pleased to announce the following update.

Drilling Contract

The Company has entered into a drilling contract with Dolphin Drilling to utilise either the Borgland Dolphin or Blackford Dolphin semi-submersible drilling rig for a minimum 82-day programme which is due to commence not later than 1st September 2020 or as otherwise agreed between the parties (the "2020 Campaign"), and also has the ability to be extended for a period of 78 days. The contract is conditional on i3 confirming availability of funds to satisfy its obligations under the contract, 90 days prior to drilling commencement.

i3's current minimum programme for the appraisal drilling consists of two appraisal wells on Serenity plus a sidetrack on each well, contingent on drilling outcomes, at a total expected gross cost of approximately US$33 million. The Option Programme would include wells on the Minos High structure and the Liberator West area in Block 13/23c.

Sale of Economic Interest in Block 13/23c

In concert with the abovementioned drilling contract, i3 has agreed that Dolphin will earn up to a 10% economic interest (the "Dolphin Interest") in Block 13/23c via a Net Revenue Sharing Agreement (the "NRSA") in exchange for Dolphin forgoing its Profit Margin above its Opex, up to a maximum amount of US$14.4 million (the "Dolphin Commitment"). Accordingly, the Dolphin Commitment will cover approximately 22% of the total expected gross costs of each of the 2020 Campaign and Option Programme.

The "Net Revenue" is revenue from the sale of hydrocarbons from Block 13/23c less all costs for developing and producing those hydrocarbons. Once production from Block 13/23c has been achieved, and after such time as i3 has been repaid 200% of all Block 13/23c development Capex costs from associated petroleum revenues, Dolphin will receive a share of field income equal to Dolphin's Interest multiplied by Net Revenue. Any Dolphin Profit Margin paid by i3 during the 2020 Campaign at its election will decrease the Dolphin interest on a proportional basis. At any time prior to the approval by the UK Oil and Gas Authority (the "OGA") of a field development plan ("FDP") which includes production wells in the 13/23c Block, i3 has the right to purchase the Dolphin Interest by paying Dolphin 125% of the Dolphin Commitment. Following the approval of a Block 13/23c FDP by the OGA to develop more than 25 MMbbls of reserves from production wells on that block, Dolphin has the right to sell the Dolphin Interest to i3 for the Dolphin Commitment plus interest accrued at a rate of 8% per annum, and i3 has the obligation to purchase the Dolphin Interest upon Dolphin exercising such right.

i3's management carries 197 MMbbls P50 stock tank oil initially in place (STOIIP) for Serenity which, conservatively modelled as a stand-alone development, demonstrates an after-tax NPV10 break-even at US$20 per barrel Brent pricing.

As announced on 13th February and as evidenced by the above transaction, the Company is making good progress in its farm-out process to fund its 2020 drilling programme. The data room remains open and companies continue to actively evaluate the opportunity. i3 will provide further updates to the market as discussions progress.

Site Survey

The site survey over Serenity and the Minos High area of Liberator West has been completed on time and budget without any health and safety incidents. After all final survey reports are received, i3 will commence the technical and environmental work necessary to plan for and permit its Summer 2020 drilling programme.

Minimising Operating Costs

In light of recent world events and their effect on oil and capital markets, the Company has been and continues to decrease its corporate operating costs in order to maximise its current resources.  The Company is closely monitoring and applying official government and health guidance in regard to the COVID-19 outbreak ("COVID-19"). At this stage, i3 is not experiencing any direct impact to its business and does not yet foresee any disruption to its 2020 drilling programme from COVID-19.

Majid Shafiq, CEO of i3 Energy commented:
"We are delighted to have executed a drilling contract with Dolphin Drilling for our Summer 2020 appraisal programme. Dolphin performed exceptionally well in our 2019 campaign, drilling our wells on time and on budget and without any significant health, safety or environmental issues. Their support announced today not only contributes a significant component to the funding structure for our upcoming drilling campaign but also demonstrates the quality of our licenses."

Link to i3 Energy UK country profile