North Sea operator takes steps to boost its stake in UK’s largest gas field

Ithaca Energy, a North Sea oil and gas operator and producer, has made a move to enlarge its operated interest in a gas field, said to be the largest one on the UK Continental Shelf (UKCS), by acquiring Spirit Energy’s share in the asset.

Thanks to a sale and purchase agreement with Spirit Energy, Ithaca will get its hands on an additional 46.25% stake in the Cygnus gas field for a purchase price of £116 million (approximately $154 million), based on an effective date of January 1, 2025.

This acquisition, which is subject to the consent from the North Sea Transition Authority (NSTA), will increase the company’s operated interest in this field to 85%. As a result, the transaction is expected to add 23 mmboe of 2P reserves and pro forma production between 12.5 – 13.5 kboe/d in 2025.

While explaining that the move will enhance the balanced production mix of its portfolio through additional gas volumes, the firm underlines that the transaction is in line with its strategy to pursue value-accretive M&A, adding high-quality assets in its core UK Continental Shelf market.

Yaniv Friedman, Ithaca’s Executive Chairman, commented: “Today’s transaction with Spirit Energy provides further equity in a high-margin, high-quality producing gas asset that we understand deeply through our operatorship. This deal follows our Japex (Seagull) deal announced just two months ago and further demonstrates our growth strategy in action.

“By increasing our stake in Cygnus we add incremental reserves and production to our portfolio at attractive valuation metrics that ticks all of our investment criteria, without adding any complexity. We also see significant upside potential through further infill drilling beyond the next three approved wells. This is the type of deals we like.”

Moreover, the latest acquisition equates to a valuation of less than $7/boe on 2P reserves, which Ithaca believes is good value for equity in a producing field it knows.

Described as the largest UK Continental Shelf gas field and a key contributor to the UK’s energy security, Cygnus came online in 2016.

The field hosts two platforms: Cygnus Alpha and Cygnus Bravo. The first consists of three bridge-linked platforms, and the second is an unmanned satellite platform. 

While 11 wells are producing and three further infill wells have been approved, the Valaris Norway rig is on location to spud the first of the two firm wells in Q2 2025, which are expected to come online during H2 2025 and H1 2026.

Located in the Southern North Sea, the field is situated in blocks 44/11a, 44/11b, and 44/12a within water depths in the range of 15 to 25 meters.

Ithaca’s latest M&A move follows its portfolio enhancement with Eni’s upstream assets in the UK, excluding East Irish Sea ones and carbon capture, utilization, and storage (CCUS) activities.