i3 Energy enters deal to buy all of Toscana

UK-focussed oil and gas company i3 Energy has entered into an option agreement to acquire all issued and outstanding common shares of TSX-listed Toscana Energy Income Corporation (TEIC), it announced on Monday.

The AIM-traded firm said TEIC had 2019 year-end 2P reserves of 4.65 million barrels of oil equivalent, of which 53% was oil and 47% gas, with a reserve life index of 14.7 years.

It said Toscana's 2019 production averaged 1,065 barrels of oil equivalent per day, and generated CAD 5.5m ($3.9m) in field netback from 13 low-decline, long-life conventional fields producing at an average breakeven price of CAD 30.43 per barrel of oil equivalent.

TEIC operates 69% of the producing wells in its portfolio, at an average net working interest of 67%.

i3 said it was purchasing Toscana at a fraction of going market-based valuations for Western Canada Sedimentary Basin (WCSB) oil and gas transactions, with the total aggregate consideration being paid by it for TEIC's debt and equity totalling around CAD 3.95m.

On 27 March, i3 used current cash resources to purchase the rights and interests in Toscana's senior and junior debt facilities, which were in default.

It said it had acquired Toscana's CAD 24.8m senior facility for CAD 3m and its CAD 3.2m junior facility for CAD 0.4m, with cash consideration for each being paid 50% up front and 50% at year-end.

Upon i3's exercise of the option, Toscana shareholders would be offered up to 4,399,224 i3 shares for TEIC's entire share capital, representing dilution of approximately 4% to the company's current shareholders and having a market value as at 27 March of approximately CAD 0.55m.

i3 said that, following exercise of the option and on conclusion of the arrangement agreement, it intended that its enlarged share capital would also be listed on the TSX, satisfying its obligation under its existing loan notes to seek a secondary listing for its shares.

“This is a highly significant acquisition opportunity for i3 which adds material, low cost per barrel, low-decline production as well as a new growth business with a strong management team and strategy in the Western Canadian Sedimentary Basin,” said chief executive officer Majid Shafiq.

“In addition to diversifying our portfolio, this transaction will help to stabilise our business with a steady revenue stream while adding considerable upside potential from within Toscana's Clearwater acreage - an opportunity which is comparable to the growth potential of our Serenity discovery.

“We look forward to welcoming the Toscana management team and staff to i3 and working together to grow our business in the UK and Canada.”

At 1529 BST, shares in i3 Energy were up 5.42% at 7.59p.