i3 Energy and Gran Tierra today announced that, following delivery of the Court Order to the Registrar of Companies and satisfaction or waiver of all of the conditions set out in the Scheme Document, the Scheme has now become Effective in accordance with its terms and, pursuant to the Scheme, the entire issued and to be issued share capital of i3 Energy is now owned by Gran Tierra.

Background to and reasons for the Acquisition

Over the last five years, Gran Tierra has looked to diversify into specific oil and gas basins where it is confident it can create shareholder value focused on operated, high-quality assets with large resources in place and access to infrastructure. The Western Canadian Sedimentary Basin (“WCSB”) being one of the basins on Gran Tierra’s priority list. The majority of the Gran Tierra team has worked in the WCSB and, with its headquarters located in Calgary, is well positioned to do so again.

Gran Tierra believes that the Acquisition offers significant benefits to both companies and their respective shareholders, including the following:

• A business with increased scale and relevance: The Acquisition will create an independent energy company of scale in the Americas with significant production, reserves, cash flows and development optionality. This increased scale is expected to facilitate access to capital, allow for optimised capital allocation, enhance shareholder returns and increase relevance to investors:
  • i3 Energy has guided to 2024 working interest production of 18,000 to 19,000 BOEPD from its Canadian assets with exit rate guidance of 20,250 – 21,250 BOEPD and Gran Tierra has announced 2024 guidance production of 32,000 to 35,000 BOPD (100 per cent. oil).
  • i3 Energy has 1P working interest reserves of 88 MMBOE as at 31 July 2024 and Gran Tierra had 1P working interest reserves of 90 MMBOE as at 31 December 2023.
  • i3 Energy has 2P working interest reserves of 175 MMBOE as at 31 July 2024 and Gran Tierra had 2P working interest reserves of 147 MMBOE as at 31 December 2023.
  • i3 Energy has an independently valued 2P net present value discounted at 10 per cent. ("NPV10") (after tax) of C$994 million (approximately US$725 million) as at 31 July 2024 and Gran Tierra has an independently valued 2P NPV10 (after tax) of US$1.9 billion as at 31 December 2023. On a 1P (after tax) basis, i3 Energy’s NPV10 is C$469 million (approximately US$342 million) and Gran Tierra’s NPV10 is US$1.3 billion.
  • i3 Energy has announced full year 2024 EBITDA guidance of US$50 – 55 million after considering hedges and Gran Tierra has announced full year 2024 EBITDA guidance of US$335 – US$395 million in its low case (at US$70/bbl Brent oil pricing), US$400 – US$460 million in its base case (at US$80/bbl Brent oil pricing), and US$480 – US$540 million in its high case (at US$90/bbl Brent oil pricing).
  • i3 Energy has over 250 net booked drilling locations (374 gross booked drilling locations) associated with 2P reserves which, coupled with Gran Tierra’s substantial booked reserves, recent exploration discoveries and significant prospective acreage across Colombia and Ecuador, provides development and exploration upside potential to shareholders.

• Increased diversity across geographies and product streams: The Acquisition will create a more diverse international energy company operating across the Americas in regions with substantial oil and gas production, well-established regulatory regimes, stable contracts, access to markets and attractive fiscal terms. The Combined Group will offer a more diversified proposition to both i3 Energy Shareholders and Gran Tierra shareholders. Gran Tierra's and i3 Energy's Q2 2024 production imply an approximate geographic split of 62 per cent. Colombia, 36 per cent. Canada, and 3 per cent. Ecuador for the Combined Group, with a commodity mix of 81 per cent. liquids and 19 per cent. natural gas. The addition of new geographies and commodities, along with the exposure to an investment grade country, is expected to benefit the Combined Group in terms of increased development optionality, risk diversification and credit profile. The Combined Group would have approximately 1.4 million net acres in Colombia, 138 thousand net acres in Ecuador and 584 thousand net acres in Canada including 298 thousand net acres in Central Alberta, 102 thousand net acres in Wapiti/Elmworth, 50 thousand net acres in Simonette, and 69 thousand net acres in North Alberta (Clearwater).
• Optimised capital allocation and investment: The Combined Group will have exposure to high return projects across Canada, Colombia and Ecuador, enabling capital allocation and investment across the portfolio to be optimised, using Gran Tierra’s balance sheet strength to accelerate production and cash flow growth from i3 Energy’s 250 net booked drilling locations associated with 2P reserves and additional unbooked Canadian drilling locations and Gran Tierra’s high-impact exploration and low decline oil assets currently under waterflood. Gran Tierra further believes that the strength of the Combined Group will provide an excellent platform for future consolidation, both in Canada and internationally, with significant management expertise, free cash flow, a strong balance sheet and borrowing base potential.
• Balance sheet strength: Gran Tierra has a strong balance sheet and ample liquidity to fund growth projects and shareholder returns. As of 30 June 2024, Gran Tierra had twelve month trailing net debt to adjusted EBITDA of 1.3x and a cash balance of US$115 million. Approximately 70 per cent. of Gran Tierra's debt is due in 2028 and 2029. The addition of i3 Energy’s production and cash flows would enhance Gran Tierra’s balance sheet and enable accelerated investment and shareholder returns. i3 Energy’s assets would add production, cash flows, reserves and a diversified drilling inventory in an investment grade country, Gran Tierra expects this enhanced scale and diversity to provide enhancements to the credit profile of the business and, ultimately, lower its cost of capital. As at 30 June 2024 i3 Energy had zero debt and a C$75 million undrawn credit facility.
• Increased trading liquidity and investor access: Gran Tierra maintains a primary listing on the NYSE American, where it trades significant volume, with additional listings on the London Stock Exchange and the TSX. With i3 Energy Shareholders expected to own up to 16.5 per cent. of Gran Tierra on completion of the Acquisition, the Acquisition is expected to provide enhanced trading liquidity for the Combined Group's shareholders across exchanges and provide continuity of trading venues for i3 Energy Shareholders. Additionally, with increased scale, Gran Tierra expects to be increasingly relevant to a larger pool of international equity and credit investors, with the potential for this to have further benefits in terms of trading liquidity and valuation multiple expansion.
• Cash return for i3 Energy Shareholders with upside potential: Gran Tierra’s offer provides i3 Energy Shareholders with a significant premium, in cash, to the current value of their holdings with material upside potential through equity ownership of the Combined Group. Gran Tierra intends to use the Combined Group's scale and enhanced financial capacity to accelerate development of i3 Energy’s Canadian assets as well as Gran Tierra's existing Colombian and Ecuadorian assets and expects this to provide meaningful long-term returns to shareholders of the Combined Group. Since 1 January 2023 Gran Tierra has purchased approximately 11 per cent. of its Gran Tierra Shares outstanding from free cash flow.

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