i3 Energy PLC Announces Interview in relation to Gran Tierra transaction

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Proactive Investors interview in relation to Gran Tierra transaction

EASTLEIGH / ACCESSWIRE / September 16, 2024 / I3 Energy plc ("i3 Energy" or the "Company") (AIM:I3E)(TSX:ITE)(FRA:I32)

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 and is also available on the Company's website at 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:

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/ 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

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.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.

SOURCE: i3 Energy PLC