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RNS Number : 2335E i3 Energy PLC 16 September 2024
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN, INTO OR
FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE
RELEVANT LAWS OR REGULATION OF SUCH JURISDICTION
FOR IMMEDIATE RELEASE
16 September 2024
I3 Energy plc
("i3 Energy" or the "Company")
Proactive Investors interview in relation to Gran Tierra transaction
Majid Shafiq, CEO of i3 Energy, has conducted an interview with Proactive
Investors in relation to the recommended and final cash and share acquisition
of the entire issued, and to be issued, share capital of i3 Energy by Gran
Tierra Energy Inc. ("Gran Tierra") as announced on 19 August 2024.
The Proactive Investors interview can be found here
https://www.proactiveinvestors.co.uk/LON:I3E/i3-Energy-PLC/timeline/videos
(https://www.proactiveinvestors.co.uk/LON:I3E/i3-Energy-PLC/timeline/videos)
and is also available on the Company's website at
https://i3.energy/grantierra-offer/ (https://i3.energy/grantierra-offer/) .
A copy of this Announcement is and will be available on i3 Energy's website,
subject to certain restrictions relating to persons resident in Restricted
Jurisdictions.
A full transcript of the interview is copied below, in accordance with Rule
20.1 of the Takeover Code.
1. Majid, first some questions on the process. Can you describe the
process to find a buyer, the timetable to completion and could there be a
counter-offer?
The Company received unsolicited approaches from multiple counterparties in Q1
2024. Having considered these unsolicited approaches against the Company's
standalone options, which whilst including significant development potential,
would require significant capital over and above current cash balances,
cashflow and debt availability, the Company decided that it was in the
shareholder's best interests for it to consider a transaction to maximize and
accelerate value realization for its shareholders.
Two independent financial advisors were therefore appointed to manage a
potential sales process and approach potential counterparties.
Beginning in Q2 2024, following confidentiality agreements to protect the
Company's data, all participating counterparties were granted access to a data
room for a sufficient period to conduct thorough due diligence on i3 Energy,
and, post such period, bids were ultimately received from a number of
counterparties in the last week of July 2024.
Gran Tierra's offer was the highest bid received and, as such, it was selected
as the preferred bidder. Subsequently, through a process of negotiation, Gran
Tierra increased its offer on the 27th of July 2024, the 13th of August 2024
and finally on the 15th of August 2024, which reflects the final terms as
announced.
As part of the sales process, the Company also evaluated the option of selling
its core assets individually but concluded this option would carry more
completion risk and, as any financial gains on the asset sales would be
subject to Canadian corporate income taxation, and that any sales proceeds
passed on to shareholders would be subject to dividend taxation, this option
was likely to return less value to shareholders than a corporate sale.
In terms of the timetable to completion, the expected timetable of principal
events is shown on page 21 of the Scheme Document published to shareholders.
Proxy voting forms for the court meeting must be lodged no later than 1:00 pm
on the 3rd of October 2024 and proxy voting forms for the general meeting must
be lodged by no later than 1:15pm on the 3rd of October 2024. However, I must
note that different financial intermediaries may have earlier internal
deadlines and therefore I encourage shareholders to lodge their votes as soon
as possible.
The court meeting and the general meeting are to be held on the 7th of October
at 1:00 pm and 1:15pm respectively. The date for completion of the deal is
uncertain as it is subject to certain conditions precedent which are
highlighted in Part A of Part 3 of the Scheme Document. However, it is the
Board's expectation that completion will occur in Q4 2024.
Whilst there is the possibility of a counter-offer, the Gran Tierra offer is
the best offer resulting from a thorough sales process and no other public
offers for i3 Energy have been made to date. We also note that the directors
of the Company and the Company's largest shareholder, Polus, have signed
binding irrevocable agreements in support of the Gran Tierra offer, with Gran
Tierra having secured binding irrevocable support for the transaction from
32.32% of the Company's outstanding share capital.
2. Can you talk us through the strategic rationale for the transaction
with Gran Tierra and why the Board has recommended it?
The strategic rationale is described on pages 4, 5, 6 and 7 of the i3 Investor
Presentation dated August 2024, which is located on our website under the tab
Investors, Gran Tierra Offer Terms.
This transaction creates a prominent oil weighted full-cycle E&P company
of scale, with top tier producing assets and exploration portfolio, and
significant financial capacity. As such it creates the opportunity to
accelerate production growth from the enlarged portfolio and deliver enhanced
shareholder value.
Some of the key points supporting the Board's recommendation are as follows:
1. Gran Tierra's offer represents a premium of 49% to the closing
price on the 16th of August 2024, the day before the offer was announced and a
premium of 49.7% to the 30-day volume weighted average price, ending the 16th
of August 2024.
2. The offer value compares favourably to comparable company
valuations and transactions across a range of metrics.
3. The offer represents the highest share price of the Company since
October 2023
4. The cash payment accelerates returns and is equivalent to over 10
years of dividends at the current quarterly dividend payment.
5. Based on receiving 1 new share in Gran Tierra for every 207 i3
shares, i3 Energy shareholders will own up to 16.5% of the pro-forma Gran
Tierra company, which brings increased scale and financial capacity to extract
value from i3 Energy's Canadian undeveloped resource base; particularly, its
key Simonette Montney asset - Gran Tierra's financial resources are expected
to be deployed to accelerate its development and i3 shareholders will benefit
from this through their ongoing shareholding in the Combined Group.
6. Beyond the development of key assets in i3's portfolio, i3's
shareholders will gain exposure to Gran Tierra's diverse portfolio of 100%
owned and operated oil weighted production and development assets and a large
inventory of exploration prospects. The pro-forma company will be able to
allocate capital to the most profitable projects from a much larger
opportunity set. The growth potential and optionality in the pro-forma
business will be considerably greater than in i3 Energy as a standalone
entity. Gran Tierra is an active operator and has many projects that if
successful, will deliver incremental near-term production and cashflows. And
finally;
7. The transaction will combine two high quality teams with a strong
track record of success in the jurisdictions in which they operate. We believe
the combination will result in enhanced performance across the business units
and generate beneficial operational and cost synergies.
3. Why did you choose Gran Tierra? Why are they a good fit for i3?
Firstly, Gran Tierra was the highest bidder in the sales process, which was
obviously a very important consideration.
Secondly, the combined company will have much larger scale and financial
capacity than i3 Energy standalone and a substantially higher liquids
weighting, 81%, which will mitigate some of the risks the Company currently
faces due to the volatility of Canadian gas prices and de-risk financing of
i3's key development projects.
Our i3 Corporate Presentation dated the 30th of May 2024, which is available
on the Company's website under tab Investors, Reports, Presentations and
Media, has on page 14 a forecast for Canadian AECO gas pricing as of April
2024, for calendar year 2025 of 3.40 CAD/MMBtu. Due to the over-supply of gas
in North America relative to forecast demand, the forecast average price for
Canadian gas for calendar year 2025 as of the 4th of September 2024 has fallen
to 2.63 CAD/MMBtu, a decrease of nearly 23%, highlighting the risks, due to
i3's Energy's current gas production weighting, for future funding of material
capital projects.
The combined company's increased financial capacity will make it more likely
that i3's key development assets are funded and Gran Tierra has stated that it
will use the company's enhanced pro-forma financial capacity to accelerate
development of i3's Canadian assets.
The key development asset in i3's portfolio is the Montney formation at
Simonette. i3 has prepared a field development plan for the Simonette asset,
which in the Board's opinion would require capex of circa 200 million USD in
order to deliver sustainable production of approximately 10,000 boepd. This
capital would have to be sourced externally, either via debt, equity or a
partial sale of the company's oil and gas assets; and there is no certainty
that this funding could be secured on acceptable terms. On the other hand, in
addition to i3 Energy's 2024 EBITDA guidance of 50-55 million USD and proved
and probable reserves with an after tax NPV10 valuation of 725 million USD,
Gran Tierra has 2024 EBITDA low case to high case guidance of 335-540 million
USD and proved and probable reserves with an NPV10 after tax valuation of 1.9
billion USD. In addition to this increased financial capacity, given the
Combined Group's enhanced scale and diversity, it is expected to have enhanced
access to global debt and equity capital markets.
Gran Tierra and i3's management teams are aligned on the strategy to
accelerate value from i3's asset portfolio, and the rationale for i3's 2024
capital and drilling program, which is continuing as planned. In line with i3
Energy's strategy, Gran Tierra has identified the Simonette Montney oil
development as a key near-term growth project for the combined company.
Continued access to international stock market trading for i3's shareholders
was an important factor when we considered the merits of potential
counterparties. Gran Tierra is already listed on the London Stock Exchange,
the New York Stock Exchange and the Toronto Stock Exchange, and the new Gran
Tiera shares will continue to trade across all three of these markets subject
to receipt of the requisite approvals. As such, investors will continue to
have access to all current trading venues, and will have access to US markets,
with cross-border trading amongst exchanges possible. Given the larger market
capitalisation of the proforma company, it is the Board's expectation that
shareholders will see increased liquidity as a result of the combination.
4. Is the transaction fairly priced?
The Board, who have been so advised by Zeus Capital as to the financial terms
of the offer, consider the offer to be fair and reasonable, and in the best
interests of shareholders as a whole, and as such the Board has recommended
unanimously that the i3 Energy Shareholders vote in favour of the Scheme at
the Court Meeting and the resolutions to be proposed at the i3 Energy General
Meeting.
The offer represented a significant premium of 49% to the closing price on the
last trading day before the offer was announced.
The Board believes the acquisition offers i3 Energy shareholders an
opportunity to realise a cash premium while also gaining additional value
through continued equity ownership in the combined group. This not only
provides an immediate financial benefit but also offers further upside
potential beyond the initial acquisition premium.
In the opinion of the Directors, the acquisition expedites the delivery of
fair value to i3 Energy shareholders without requiring additional capital
investment, time, or operational risk. It eliminates the inherent uncertainty
associated with achieving future value as a standalone entity.
The Board believes the acquisition stands out positively when compared to
similar company valuations and transactions across various metrics, including
enterprise value to EBITDA and market capitalisation to before tax PDP value.
5. Why is the Q3 dividend described as being part of the
'Consideration'?
Typically, in public M&A transactions, dividend payments would reduce the
value of the consideration to be paid to shareholders. The payment of an
Acquisition Dividend on or post-closing was negotiated as an addition to the
original consideration offered by Gran Tierra.
6. Can you give us some detail on the combined company's shareholder
return policy?
Gran Tierra's current policy is to offer shareholder return via growth in the
share price and from share buybacks and we expect this to continue. Since the
1st of January 2023, Gran Tierra has acquired approximately 11% of its
outstanding shares (based on its outstanding share capital as of the 1st of
January 2023).
7. What do shareholders have to look forward to?
In addition to receiving an immediate cash return equal to 10.67 pence per
share, composed of the cash consideration and acquisition dividend, which in
total represents a 14.2% premium to i3's closing price on the day before the
offer announcement, each shareholder will receive shares in Gran Tierra.
Ownership of the enlarged Gran Tierra company will offer exposure to a
substantial business with 2P reserves of 322 mmboe, which is expected to
produce more than 50,000 boepd of oil dominated production and generate
significant EBITDA and cash flows.
The enlarged company's portfolio will include producing oil and gas assets in
Canada, Colombia and Ecuador, with real growth potential from the development
of existing discoveries, and additionally exploration upside across the
portfolio. Gran Tierra has a strong operational track record having
organically increased production by 44% to over 32,000 boepd from 2020 to
2023, achieved 5 consecutive years of 1P reserves growth, and had strong
exploration success, demonstrated by the recent Charapa-B6 discovery, the
fifth consecutive discovery in Ecuador.
Gran Tierra is currently developing its portfolio of 100 per cent owned and
operated oil assets spanning 25 blocks and 1.4 million net acres across
Colombia and Ecuador and has a stated ambition to pursue additional growth
opportunities. As mentioned earlier, access to development capital from the
combined business, will also allow the accelerated development of i3's assets
including its flagship Simonette Montney asset.
We understand that Gran Tierra will be publishing its own webcast in the
coming days and we encourage shareholders to join that, to hear the executive
from Gran Tierra run through an overview of their assets and plans going
forward.
Unless otherwise defined, all capitalised terms in this announcement have the
meaning given to them in the Scheme Document. All references to times are to
London, UK, times unless otherwise stated.
Enquiries:
i3 Energy plc c/o Camarco
Majid Shafiq (CEO) Tel: +44 (0) 203 757 4980
Zeus Capital Limited (Nomad and Joint Broker)
James Joyce, Darshan Patel, Isaac Hooper Tel: +44 (0) 203 829 5000
Tennyson Securities (Joint Broker)
Peter Krens Tel: +44 (0) 207 186 9030
Camarco
Georgia Edmonds, Violet Wilson, Sam Morris Tel: +44 (0) 203 757 4980
Notices relating to financial advisers:
Zeus Capital Limited ("Zeus"), which is authorised and regulated by the FCA in
the United Kingdom, is acting exclusively for i3 Energy as financial adviser,
nominated adviser and joint broker and no one else in connection with the
matters referred to in this Announcement and will not be responsible to anyone
other than i3 Energy for providing the protections afforded to clients of
Zeus, or for providing advice in relation to matters referred to in this
Announcement. Neither Zeus nor any of its affiliates owes or accepts any duty,
liability or responsibility whatsoever (whether direct or indirect, whether in
contract, in tort, under statute or otherwise) to any person who is not a
client of Zeus in connection with the matters referred to in this
Announcement, any statement contained herein or otherwise.
Additional Information
This announcement is for information purposes only. It is not intended to, and
does not, constitute or form part of any offer, invitation or the solicitation
of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise
dispose of, any securities in any jurisdiction, pursuant to this announcement
or otherwise. The distribution of this announcement in jurisdictions other
than the United Kingdom may be affected by the laws of relevant jurisdictions.
Therefore, any persons who are subject to the laws of any jurisdiction other
than the United Kingdom or shareholders of i3 Energy who are not resident in
the United Kingdom will need to inform themselves about, and observe any
applicable requirements. Any failure to comply with the restrictions may
constitute a violation of the securities laws of any such jurisdiction.
This announcement has been prepared in accordance with the laws of England and
Wales, the Code, the AIM Rules for Companies and the Disclosure Guidance and
Transparency Rules and the information disclosed may not be the same as that
which would have been prepared in accordance with the laws of jurisdictions
outside England and Wales.
Responsibility:
The person responsible for arranging the release of this announcement on
behalf of i3 Energy is Majid Shafiq, Chief Executive Officer.
Dealing and Opening Position Disclosure Requirements
Under Rule 8.3(a) of the Takeover Code, any person who is interested in one
per cent. or more of any class of relevant securities of an offeree company or
of any securities exchange offeror (being any offeror other than an offeror in
respect of which it has been announced that its offer is, or is likely to be,
solely in cash) must make an Opening Position Disclosure following the
commencement of the Offer Period and, if later, following the Announcement in
which any securities exchange offeror is first identified.
An Opening Position Disclosure must contain details of the person's interests
and short positions in, and rights to subscribe for, any relevant securities
of each of (i) the offeree company and (ii) any securities exchange
offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a)
applies must be made by no later than 3.30 p.m. (London time) on the 10th
Business Day following the commencement of the Offer Period and, if
appropriate, by no later than 3.30 p.m. (London time) on the 10th Business Day
following the Announcement in which any securities exchange offeror is first
identified. Relevant persons who deal in the relevant securities of the
offeree company or of a securities exchange offeror prior to the deadline for
making an Opening Position Disclosure must instead make a Dealing Disclosure.
Under Rule 8.3(b) of the Takeover Code, any person who is, or becomes,
interested in one per cent. or more of any class of relevant securities of the
offeree company or of any securities exchange offeror must make a Dealing
Disclosure if the person deals in any relevant securities of the offeree
company or of any securities exchange offeror. A Dealing Disclosure must
contain details of the dealing concerned and of the person's interests and
short positions in, and rights to subscribe for, any relevant securities of
each of (i) the offeree company and (ii) any securities exchange offeror(s),
save to the extent that these details have previously been disclosed under
Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be
made by no later than 3.30 p.m. (London time) on the Business Day following
the date of the relevant dealing. If two or more persons act together pursuant
to an agreement or understanding, whether formal or informal, to acquire or
control an interest in relevant securities of an offeree company or a
securities exchange offeror, they will be deemed to be a single person for the
purpose of Rule 8.3.
Opening Position Disclosures must also be made by the offeree company and by
any offeror and Dealing Disclosures must also be made by the offeree company,
by any offeror and by any persons acting in concert with any of them (see
Rules 8.1, 8.2 and 8.4). Details of the offeree and offeror companies in
respect of whose relevant securities Opening Position Disclosures and Dealing
Disclosures must be made can be found in the Disclosure Table on the Panel's
website at www.thetakeoverpanel.org.uk, including details of the number of
relevant securities in issue, when the Offer Period commenced and when any
offeror was first identified. You should contact the Panel's Market
Surveillance Unit on +44 20 7638 0129 if you are in any doubt as to whether
you are required to make an Opening Position Disclosure or a Dealing
Disclosure.
Publication on website
In accordance with Rule 20.1 of the Code, a copy of this announcement is and
will be available free of charge, subject to certain restrictions relating to
persons resident in Restricted Jurisdictions, for inspection on i3 Energy 's
website https://i3.energy/grantierra-offer-terms/
(https://i3.energy/grantierra-offer-terms/) at the same time as publication of
this announcement. For the avoidance of doubt, the contents of the website
referred to in this Announcement are not incorporated into and do not form
part of this Announcement.
Notes to Editors:
i3 Energy plc is an oil and gas Company with a low cost, diversified, growing
production base in Canada's most prolific hydrocarbon region, the Western
Canadian Sedimentary Basin and appraisal assets in the North Sea with
significant upside.
The Company is well positioned to deliver future growth through the
optimisation of its existing asset base and the acquisition of long life, low
decline conventional production assets.
i3 is dedicated to responsible corporate practices and the environment, and
places high value on adhering to strong Environmental, Social and Governance
("ESG") practices. i3 is proud of its performance to date as a responsible
steward of the environment, people, and capital management. The Company is
committed to maintaining an ESG strategy, which has broader implications to
long-term value creation, as these benefits extend beyond regulatory
requirements.
i3 Energy plc is listed on the AIM market of the London Stock Exchange under
the symbol I3E and on the Toronto Stock Exchange under the symbol ITE. For
further information on i3 please visit https://i3.energy (https://i3.energy/)
Forward-Looking Statements
This announcement (including information incorporated by reference into this
announcement), oral statements regarding the Acquisition and other information
published by Gran Tierra and i3 Energy contain certain forward looking
statements with respect to the financial condition, strategies, objectives,
results of operations and businesses of Gran Tierra and i3 Energy and their
respective groups and certain plans and objectives with respect to the
Combined Group. These forward looking statements can be identified by the fact
that they do not relate only to historical or current facts. Forward looking
statements are prospective in nature and are not based on historical facts,
but rather on current expectations and projections of the management of Gran
Tierra and i3 Energy about future events, and are therefore subject to risks
and uncertainties which could cause actual results to differ materially from
the future results expressed or implied by the forward looking statements. The
forward looking statements contained in this announcement include, without
limitation, statements relating to the expected effects of the Acquisition on
Gran Tierra and i3 Energy, the expected timing method of completion, and scope
of the Acquisition, the expected actions of Gran Tierra upon completion of the
Acquisition, Gran Tierra's ability to recognise the anticipated benefits from
the Acquisition, expectations regarding the business and operations of the
Combined Group, and other statements other than historical facts. Forward
looking statements often use words such as "anticipate", "target", "expect",
"estimate", "intend", "plan", "strategy", "focus", "envision", "goal",
"believe", "hope", "aims", "continue", "will", "may", "should", "would",
"could", or other words of similar meaning. These statements are based on
assumptions and assessments made by Gran Tierra, and/or i3 Energy in light of
their experience and their perception of historical trends, current
conditions, future developments and other factors they believe appropriate. By
their nature, forward looking statements involve risk and uncertainty, because
they relate to events and depend on circumstances that will occur in the
future and the factors described in the context of such forward looking
statements in this announcement could cause actual results and developments to
differ materially from those expressed in or implied by such forward looking
statements. Although it is believed that the expectations reflected in such
forward looking statements are reasonable, no assurance can be given that such
expectations will prove to have been correct and readers are therefore
cautioned not to place undue reliance on these forward looking statements.
Actual results may vary from the forward looking statements.
There are several factors which could cause actual results to differ
materially from those expressed or implied in forward looking statements.
Among the factors that could cause actual results to differ materially from
those described in the forward looking statements are changes in the global,
political, economic, business, competitive, market and regulatory forces,
future exchange and interest rates, changes in tax rates and future business
acquisitions or dispositions.
Each forward looking statement speaks only as at the date of this
announcement. Neither Gran Tierra nor i3 Energy, nor their respective groups
assumes any obligation to update or correct the information contained in this
announcement (whether as a result of new information, future events or
otherwise), except as required by applicable law or by the rules of any
competent regulatory authority.
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