Ithaca Releases Update on 2014 Production Plans

Ithaca Energy Inc. (“Ithaca” or the “Company”) provided an operational update and guidance on its planned 2014 production and capital expenditure programme.

Highlights

Total pro-forma 2013 production in line with prior guidance at approximately 13,000 barrels of oil equivalent per day (“boepd”); this reflects inclusion of full year production from the assets acquired as part of the Valiant Petroleum plc (“Valiant”) acquisition, which completed on 19 April 2013.

2014 production is anticipated to be in the range of 11,000 to 13,000 boepd, approximately 95% oil. No production from the Greater Stella Area (“GSA”) hub is incorporated in the guidance range.

First hydrocarbons are anticipated from the GSA hub at the end of 2014, resulting in net initial annualised production for the Company of approximately 16,000 boepd.

2014 capital expenditure is anticipated to total $295 million, reflecting investment in execution of the GSA development and a number of production enhancement activities.

Net drawn debt at 31 December 2013 of $348 million (excluding $33 million drawn down on the Norwegian tax rebate facility).

In line with the Company’s strategy to restructure its Norwegian portfolio, a licence swap has been executed with Tullow Norge AS (“Tullow”) to exchange the Company’s non-operated interests in two Barents Sea licences, including the licence containing the Langlitinden well, for a non-operated position in a Tullow operated Norwegian North Sea licence.

2013 Production

Total pro-forma production in 2013 was approximately 13,000 boepd, 95% oil; this reflects inclusion of full year production from the assets acquired as part of the Valiant acquisition, which completed on 19 April 2013. Average production in the fourth quarter of 2013 was approximately 11,300 boepd, 96% oil.

2014 Operations Outlook

In 2014 the Company’s operational focus will be on the delivery of first hydrocarbons from the Stella field and investment in production enhancement activities.

Greater Stella Area

As reported in the recent GSA operational update, the focus of the 2014 work programme is on drilling of the third and fourth Stella field development wells and completion of the subsea infrastructure installation and FPF-1 modification programmes. First hydrocarbons are anticipated from the GSA hub at the end of 2014, resulting in net initial annualised production for the Company of approximately 16,000 boepd.

Causeway Area

Three key production enhancement activities are to be completed in the Causeway Area during 2014.

Operations are progressing on plan to enable the start-up of electrical submersible pump (“ESP”) support for the Causeway and Fionn production wells. The electrical plant has been installed on the platform and the focus is now on hook-up and commissioning activities to enable start-up of the ESPs in the first half of 2014.

The work required to enable the start-up of water injection on the Causeway field in the first half of the year is progressing well, with the water injection riser connecting the subsea infrastructure for the well to the host platform having been successfully installed in November 2013. The outstanding work to be finished is the hook-up and commissioning of the injection riser and platform pipework.

Operations are underway on the sidetrack of the Fionn field production well, delivery of which is forecast to substantially boost production. Harsh weather in December and January has resulted in operational delays, with the well now expected to be in production in the second quarter of the year.

Dons

The joint venture is planning to drill a new infill production well on the Don Southwest field during 2014 as part of the expected longer term drilling programme designed to maximise production and reserves recovery from the field. Drilling rig contract negotiations are being finalised, with the potential for production to commence in the first half of the year.

Athena

It is intended that a workover will be performed on the “P4” well during the second half of 2014 in order to replace the failed ESP package in the well. The process for securing a drilling rig is underway.

Cook

An approximate eight week shutdown of the Shell-operated Anasuria floating production, storage and offloading vessel (“FPSO”) is planned for the second half of 2014 to enable vessel life extension works to be undertaken. A new production riser for the Cook field will also be installed during the shutdown. These works are focused on improving the operational efficiency and longevity of the facilities, thereby enabling the full potential of the field to be delivered in the coming years.

The new “4D” seismic data acquired over the field in 2013 will be processed and interpreted over the course of the year. This will improve the understanding of reservoir sweep, with the objective of identifying the potential for drilling a further well on the field.

Handcross

Operations commenced at the end of December 2013 on the exploration well being drilled on the Handcross prospect in the West of Shetlands sector of the UK Continental Shelf. As a result of previously announced farm-out transactions, the Company is fully carried for its forecast share of the well cost.

Norway

A licence swap agreement has been executed with Tullow that will result in the transfer to Ithaca of a 10% non-operated interest in licence PL507 in the Norwegian North Sea in exchange for its non-operated interests in licences PL659 (5%), which contains the Langlitinden prospect, and PL610 (12.5%), both of which lie in the Norwegian sector of the Barents Sea.

Licence PL507 contains the Lupus prospect, which is scheduled to be drilled around mid-2014 using the Borgland Dolphin semi-submersible drilling rig, and lies within approximately 40 kilometres of the existing Oseberg field facilities. Following completion, which is subject to normal regulatory consents, the licence partners in PL507 will be Tullow (70%, Operator), Explora (20%) and Ithaca (10%).

2014 Production Guidance

The Company’s 2014 net production is anticipated to be in the range of 11,000 to 13,000 boepd, approximately 95% oil. No production from the GSA hub is incorporated in the guidance range. The range reflects the dependency upon the timing of the various production enhancement activities being executed during the year.

The anticipated schedule of 2014 production enhancement activities means that production volumes are forecast to be weighted towards the second half of the year. Notably, production during the first quarter is estimated to be below the full year range driven primarily by an unplanned shutdown of the Cook field that is currently on-going to repair the gas export compressor on the Anasuria FPSO host facility. It is anticipated that the duration of the repairs will result in the field being re-started in February 2014.

As in previous years, the third quarter of the year is scheduled to be the period in which the main planned infrastructure maintenance shutdowns take place. Planned shutdowns are estimated to result in an overall production deferral of around 1,000 boepd in 2014.

The production forecast anticipates that 2014 will be the last year of production from the Beatrice area facilities. Under the terms of the Beatrice facilities lease agreement executed with Talisman in 2008, Ithaca is able to re-transfer the facilities to Talisman for decommissioning.

2014 Capital Expenditure

The Company anticipates net 2014 capital expenditure to total approximately $295 million.

$185 million relates to the GSA development. This reflects deferment of $60 million of capital expenditure that was previously anticipated for 2013 into 2014, together with $35 million of pre-first hydrocarbons cost growth resulting from the delay to start-up of production and the impact on drilling of the recent harsh weather in the UK North Sea.

$100 million relates to investments on the existing producing asset portfolio; $70million of drilling on the Fionn, Don Southwest and Athena fields and $30 million on enhancing the Cook and Causeway field facilities.

$10 million net of the 78% Norwegian tax refund relates to the Company’s Norwegian portfolio.

Business Development

During 2014, the Company will continue to seek opportunities to enhance the value of its existing UK portfolio. The Company’s growth strategy remains focused on securing appraisal, development and production opportunities with the potential to utilise the organisation’s core subsurface, commercial and project management skills to increase and accelerate shareholder value.

Net Debt

Net drawn debt at 31 December 2013 was approximately $348 million. This excludes $33 million drawn down as of the same date on the Company’s Norwegian tax rebate facility, which serves to accelerate the payment of the 78% tax rebate paid by the Norwegian government on exploration and appraisal activities.

The Company has in place $710 million of long term senior bank debt financing facilities, which comprise a $610 million reserve based lending facility and $100 million corporate facility.

Additional Information

An updated corporate presentation is available on the Company’s website www.ithacaenergy.com.

The Company intends to publish its full year 2013 accounts and year-end reserves, as evaluated by Sproule International Limited, on 31 March 2014.

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Press Release, January 15, 2014; Image: ithacaenergy