Ithaca: CEO Satisfied with Q2 Progress

Ithaca Energy Inc. has announced its quarterly financial results for the three months ended 30 June 2014 (Q2-2014) and half yearly results for the six months ended 30 June 2014 (H1-2014).

Highlights

– H1-2014 cashflow from operations of $101.8 million (H1-2013: $100.5 million), reflecting a Q2-2014 contribution of $58.1 million (Q2-2013: $65.0 million), resulting in H1-2014 cashflow per share of $0.31 (H1-2013: $0.36);
– H1-2014 profit after tax of $17.0 million (H1-2013: $57.3 million). Profit after tax during the quarter was $0.7 million (Q2-2013: $53.8 million), after reflecting an unrealised non-cash hedging loss of $6.9 million;
– Broadening of the producing asset portfolio with the acquisition of interests in three high quality, long-life UK oil fields from Sumitomo Corporation (the “Summit Assets”);
– Additional 1.6 million barrels of oil production hedged at approximately $105/barrel to underpin approximately 70% of production associated with the Summit Assets over the next two years;
– Successful completion of a $300 million senior notes offering, providing diversity in the sources and tenor of funding within the capital structure of the business;
– Net drawn debt of $499 million at 30 June 2014 (excluding the Norwegian tax rebate facility) out of total debt facilities of $1,010 million, including the senior notes issued on 3 July 2014;
– Continued progress made on execution and de-risking of the Greater Stella Area (“GSA”) development, with a further strong clean-up flow test result achieved on the third Stella development well that was completed during the quarter;

Les Thomas, Chief Executive Officer, commented: “I am pleased with the progress made by the Company over the last quarter, having further strengthened the business in three key areas: the successful third Stella well materially de-risked the on-going field development; the Summit acquisition added high quality assets to the existing producing portfolio; and the successful bond offering introduced important funding diversification and flexibility.”

Production & Operations
Average pro-forma production in Q2-2014 was approximately 14,300 barrels of oil equivalent per day (“boepd”), 94% oil, including a contribution of approximately 2,500 boepd from the Summit Assets during the period. Average pro-forma production in H1-2014 was approximately 12,800 boepd including approximately 2,300 boepd from the Summit Assets.

Total 2014 pro-forma production guidance remains unchanged in the range of 13,500 to 15,500 boepd, approximately 95% oil. As previously guided, 2014 production volumes are forecast to be weighted towards the second half of the year, notably from the later part of Q3-2014 post the completion of planned summer maintenance shutdowns, driven by the close out of on-going production enhancement projects.

Greater Stella Area Development Update
During the quarter, drilling of the third Stella development well was completed. The strong results of the clean-up flow test performed on the well, combined with the corresponding results of the first two wells, have served to de-risk the initial annualised production forecast for the GSA hub of approximately 30,000 boepd (100%), 16,000 boepd net to Ithaca. Operations are currently on-going on the fourth well, the Stella Andrew reservoir crestal gas producer, with completion of the well scheduled for early October 2014.

Offshore operations are currently on-going to install the subsea infrastructure associated with the FPF-1 mooring spread. Installation of the mooring piles has recently been completed, with the work now focused on installation of the anchor chains that will be connected to the piles and left ready for pull-in upon arrival of the FPF-1 on location. On the FPF-1 modification works, construction activities on the main deck of the vessel are advancing. All the main oil and gas processing plant packages have been positioned on the vessel and installation of the associated pipework has commenced. Fit out of the accommodation module is progressing well, with handover for pre-commissioning expected shortly.

Corporate Activities
In July 2014 the Company entered into an agreement with Sumitomo Corporation to acquire non-operated interests in the Cook (20.00%), Pierce (7.48%) and Wytch Farm (7.43%) producing oil fields. The acquisition further broadens the Company’s portfolio, adding quality assets with clearly defined upsides, and delivers a further step-up in reserves and acceleration in the monetisation of the existing UK tax allowances pool. The acquisition was completed on 31 July 2014 for a net consideration of $163 million and the assets will be consolidated into the Company’s financial statements from that date.

In July 2014, the Company also successfully completed an offering of $300 million senior unsecured notes due 2019, with a coupon of 8.125%. The diversification in funding sources and tenor that the notes bring into the capital structure compliment the long term production, appraisal and development growth focus of the business.

Press Release, August 12, 2014