Ithaca Energy: 2Q Net Income Grows to $52 Million

Ithaca Energy, a North Sea oil and gas operator , today announced a rise in its 2Q net profit. The profit was at $52 million, compared to $30.2 million in 2012. Half yearly earning also rose to $55.7 million, from $43.2 million in 2013. The acquisition of Valiant  Petroleum plc was completed on April 19, 2013, with the financial results  reflecting the takeover of the company from that time.

Production & 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.”