Ithaca Doubles Production and Operating Cashflow, CEO Says

Ithaca Energy Inc. announces its quarterly results for the three months ended June 30, 2013 (“Q2 2013”) and half yearly results for the six months ended June 30, 2013 (“H1 2013”). The acquisition of Valiant Petroleum plc (“Valiant”) was completed on April 19, 2013, with the financial results reflecting the takeover of the company from that time.

Financial Highlights

– Q2 2013 cashflow from operations increased approximately 300% to $65.0 million (Q2 2012: $16.3 million), resulting in half yearly cashflow from operations of $100.5 million (H1 2012: $44.7 million) – H1 2013 cashflow per share $0.36 (H1 2012: $0.17)

– Q2 2013 net earnings of $52.2 million (Q2 2012: $30.2 million), resulting in half yearly net earnings of $55.7 million (H1 2012: $43.2 million) – H1 2013 earnings per share $0.20 (H1 2012: $0.20)

– Q2 2013 profit before tax of $69.1 million (Q2 2012: $21.7 million), resulting in half yearly profit before tax of $71.4 million (H1 2012: $35.5 million)

– Q2 2013 average realised oil price of $111 / bbl (Q2 2012: $116 / bbl), including a realised hedging gain of $8 / bbl

– Net drawn debt of $346 million from bank facilities of $780 million at June 30, 2013 (zero net drawn debt at December 31, 2012)

– UK tax allowances pool of $923 million and Norwegian tax receivable of $70 million at June 30, 2013

– Approximately 4.3 million barrels of future 2013-14 oil production hedged at a weighted average price of around $103 / bbl (approximately 30% puts / 70% swaps)

H1-2013 Pro-Forma

The acquisition of Valiant was completed on April 19, 2013, with the financial results reflecting that. The table below sets out the financial highlights of H1 2013 with the exceptional restructuring costs associated with the Valiant transaction separately identified.

Also shown is a pro-forma cashflow summary for H1 2013 to provide an overview of the cash generative nature of the enlarged Company.

The H1-2013 pro-forma highlights are:

– Average net export production in H1 2013 of 14,300 boepd, 95% oil

– H1 2013 cashflow from ongoing operations of $187.4 million

– Operating costs of $32 per barrel of oil equivalent (“boe”) yielding a netback per barrel of over $70 / boe

– Future annual G&A savings of over $20million per annum resulting from the now completed restructuring and full integration of Valiant’s assets into the enlarged

Company

Production and Operations

Based on pro-forma production in H1 2013 and a balanced view of the opportunities and challenges for the second half of 2013 (“H2 2013”), the Company anticipates that full year 2013 production will be at the lower end of the pro-forma annual guidance range of 14,000 to 16,000 boepd.

Production is expected to benefit from recent operational activities and planned work programmes.

An additional production well on the Don Southwest field was drilled and brought online in late June 2013 and drilling of a water injection well in the same area of the field is nearing completion. A chemical treatment campaign on the wells on the West Don field has also successfully been completed.

Good progress continues to be made on the work programme required to enable startup of the electrical submersible pump (“ESP”) on the Causeway field. It is anticipated that the facilities being installed on the host platform for the field will be operational in the fourth quarter of the year, significantly boosting production from the field.

Production from the Athena field was partially reduced during the second quarter as one of the four producing wells, the “P2” well, was temporarily shut-in. A repair was successfully completed as planned in early July 2013 and the well was brought back online.

The key risks to production in H2 2013 relate to completion of works on certain of the Company’s non-operated assets and the results of an ongoing evaluation on one of the Athena wells.

The planned start-up of the ESP on the Causeway field in Q4 2013 is subject to TAQA delivering an on time turnaround of six weeks on the North Cormorant platform and thereafter executing on the plan to deliver power to the Causeway well ESP package.

The Shell operated Cook field has had to be shut-in in the last few days to allow inspection of the infield flowline connecting the field to the Anasuria floating production, storage and offloading vessel. The Operator is planning for the work to be completed in September 2013 to allow restart of production.

Production from one well on the Athena Field, the “P4” well which contributes under 400 boepd (net) was shut-in on 12 August 2013. Diagnostic testing, including investigation of the ESP installed in the well, is underway.

Substantial delay to completion of the above works, including any rig or vessel work required as an outcome of the Athena P4 diagnostic testing, has the potential to reduce full year production below the guidance range.

Greater Stella Area Development

Drilling on the Stella field commenced in June 2013. The first development well is progressing as planned, with drilling currently ongoing in the horizontal reservoir section of the well.

Excellent progress is being made on the subsea infrastructure installation work programme – the 60km 10-inch gas export pipeline and main subsea structures have been installed and infield flowline trenching has been completed.

Execution of the marine system works currently being conducted on the “FPF-1” floating production unit, in Gdansk, Poland is progressing well.

Corporate

The acquisition of Valiant was completed on April 19, 2013 and all the main integration milestones have now been completed.

All future UK exploration and appraisal well commitments transferred as a result of the Valiant acquisition have been farmed out with material expenditure carries – removing approximately $75 million of net exploration expenditure, while creating upside exposure to future wells at an anticipated net cost of less than $10 million. Monetisation of the UK exploration portfolio has exceeded expectations in terms of levels of expenditure carry and speed of execution.

Drilling operations on the Norvarg well were successfully completed in August 2013.

The reserves of the field and potential future development options are currently being evaluated.

A re-focused strategy has been established for the Norwegian business, targeting lower risk geology / geography, with new leadership provided by Lars Thorrud, previously Vice President Business Development in Det Norske Oljeselskap ASA.

Iain McKendrick, Chief Executive Officer, commented: “In the first half of the year we have both doubled production and operating cashflow and importantly diversified our producing asset base to 11 fields. The Greater Stella Area development is moving forward rapidly and with the integration of the Valiant acquisition now completed, including restructuring of the UK exploration portfolio, we look forward to an active second half of the year.”

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Press Release, August 13, 2013