Ithaca Energy Limited (IAECN: ISINs US46567TAA25 / USG49774AA35) (“Ithaca” or the “Company”) is pleased to provide the following operations update ahead of issuance of the 2019 financial results on 31 March 2020.
Ithaca’s 2020 strategic focus is centred on execution of the post-acquisition business transformation programme, building out the long term growth profile of the business and exploring options to optimise the Company’s capital structure, including a potential initial public offering
- Following completion of the Chevron North Sea Limited (“CNSL”) acquisition and transition programme in November 2019, the key focus of the on-going business transformation programme for the enlarged business over the coming months is centred on process simplification, operational efficiencies and value creation
- The operational strategy of the Company is to deliver a balanced blend of investment programmes to sustain and enhance production through continued expansion of the Captain enhanced oil recovery (“EOR”) programme, infill drilling, satellite field developments and near-field exploration and appraisal activities
- With the significantly enhanced organic investment opportunity set provided by the CNSL acquisition, a core operational priority for 2020 involves the maturation of additional targets to further enhance long term production and reserves
- Opportunities to augment the Company’s existing portfolio and resource base remain a key component of the business plan, with a focus on potential strategic bolt-on acquisitions from which to leverage existing operating capabilities and experience
- In line with the corporate objectives of Ithaca’s parent company, the Delek Group Limited, during 2020 the Company anticipates exploring potential options to optimise its capital structure, including a potential initial public offering
Stable year-on-year production
- On a pro-forma basis, taking into account the CNSL acquisition from the transaction effective date of 1 January 2019, full year 2019 production averaged 75,000 barrels of oil equivalent per day (boepd), 63% liquids.
- Production in 2020 is forecast to average between 70,000 to 75,000 boepd, approximately 65% liquids. This range reflects the expected timing for completion of various infill drilling campaigns, start-up of the Vorlich field, the programme of planned maintenance shutdowns across the portfolio and sensitivities associated with the timing and performance of these operational programmes
- As part of a cyclical process, 2020 marks a year of significant planned maintenance shutdowns across the portfolio, the majority of which will impact production in the third quarter.Major shutdowns are taking place on the Captain field, the Erskine field, the Britannia Area and the “FPF-1” floating production facility that serves the Greater Stella Area (“GSA”).The shutdowns are driven by execution of routine platform activities (inspection, maintenance and asset life extension programmes), export infrastructure maintenance activities and, in the case of the FPF-1, Vorlich field tie-in works
- 2020 unit operating expenditure is forecast to be approximately $17/boe. This includes field, host facility and export infrastructure costs, as well as Captain polymer (chemical) costs
2020 represents an active year for investment across the portfolio, involving infill drilling and subsea satellite developments
- The 2020 capital expenditure programme is forecast to total approximately $250 million, including approximately $20 million of decommissioning expenditure
- Approximately two-thirds of the total investment expenditure relates to the Company’s operated assets, with the main activities being on Alba, Captain and the GSA
- Operations are currently underway on the Alba field platform drilling campaign, which involves the completion of three infill production wells and two workovers. The Alba campaign is scheduled to finish towards the end of the year, following which the drilling crew will move to the Captain field for completion of the final platform wells on the Phase I EOR programme
- Sanction of the Phase II Captain EOR investment programme is scheduled for the first half of the year. Phase II involves extending the existing polymer EOR programme to the areas of the main reservoir of the field that are produced via subsea wells
- In the GSA the Vorlich field development is scheduled for start-up around the middle of the year. The main outstanding activities to be completed on the development involve the tie-in of the additional enhanced natural gas liquids processing facilities that have been installed on the FPF-1 and installation of the 10-kilometre infield flowline between the wells and the vessel. The 2020 GSA activity programme also includes the manufacture and fabrication of long lead equipment for wells and subsea infrastructure expected to be used on Hurricane, the next anticipated subsea tieback after Vorlich
- On the Company’s non-operated asset portfolio, infill wells are planned on the Elgin / Franklin, Pierce and Callanish fields. These wells are designed to mitigate natural decline on the fields and maximise long term reserves recovery
- In line with the Company’s infrastructure-led near field exploration strategy, a well on the “Fotla” prospect is scheduled to be drilled in the third quarter of the year. Fotla lies approximately 10 kilometres south of the Alba field
- Approximately $20 million of the total capital expenditure programme for the year is associated with decommissioning activities, the majority of which relates to abandonment of the Jacky field facilities (wells and platform)
Strong balance sheet, underpinned by solid cash flow generation, commodity hedging and UK tax allowances
- Net debt at 31 December 2019 was $1.5 billion. The Company’s debt facilities consist of a $1.65 billion reserves based lending facility plus $500 million senior unsecured notes
- The Company is targeting the generation of at least $900 million of EBITDAX in 2020
- The Company continues to steadily build its commodity hedging book.Just under 80% of 2020 oil production from currently producing fields is now hedged, providing a floor price of $64/bbl.Combined oil and gas hedging covers over 70% of forecast production in 2020 and over 50% in 2021 (with a gas price floor of 51p/therm).The Company continues to seek optimal value through its hedging programme via a combination of swaps and put options
- The Company had a UK tax allowances pool of approximately $2.4 billion carried forward as of 31 December 2019
- During 2020 the Company’s capital allocation priorities are a balanced and proportionate blend of investment to further enhance the value of the business, debt service and shareholder returns
2019 Financial Results
The Company is scheduled to issue its full year 2019 financial results on 31 March 2020, along with the results of its year-end independent reserves evaluation, which is being performed by Netherland Sewell & Associates Inc. A conference call and webcast will be held on the same day at 12.00 GMT (07.00 EST), with a playback facility being made available on the Company’s website later that day. A presentation to accompany the results will be available on the Company’s website prior to the call. Dial-in details for the call will be included in the press release that is issued on the day.
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About Ithaca Energy
Ithaca Energy is an independent oil and gas company with production, development and exploration operations focused on the UK North Sea. The Company was founded in 2004 and has grown through a combination of acquisitions and new field developments. Our strategy is focused on establishing the company as a leading North Sea operator, delivering sustainable growth in free cash flow generation, underpinned by operational excellence and financial discipline.
Ithaca Energy is a wholly owned subsidiary of the Tel Aviv stock exchange listed Delek Group Limited (TASE: DLEKG, US ADR: DGRLY), Israel’s leading integrated energy company. For further information please consult the Company’s website www.ithacaenergy.com.
This press release contains projections, information, beliefs, opinions and other forward-looking statements (collectively “forward-looking statements”) regarding future events and the performance, financial condition, results of operations and business of the Company. All statements and information other than present and historical facts contained in this release are forward-looking. When used in this press release, the words and phrases like “forecast”, "anticipate", "continue", "estimate", "expect", "may", "will", "project", "plan", "should", "believe", "could", “target”, “in the process of”, “on track” and similar expressions, and the negatives thereof, whether used in connection with production forecasts, operational activities, drilling plans, anticipated timing for the commencement of production from new fields and wells, budgetary figures, future operating costs, financing activities, anticipated net debt, anticipated funding requirements and uses of available credit under the Company’s debt facilities, potential developments including the timing and anticipated benefits of acquisitions and dispositions or otherwise, expected future payments in connection with such acquisitions and dispositions, statements relating to reserves, or otherwise, are intended to identify forward-looking statements. Forward-looking statements are based on the Company's current internal expectations, estimates, projections, assumptions and beliefs, including, among other things, assumptions with respect to production, drilling, construction and maintenance times, well completion times, risks associated with operations, future capital and operating expenditures, financing activities, continued availability of financing for future capital expenditures, future acquisitions and dispositions and cash flow, required regulatory, partner and other third party approvals. The reader is cautioned that assumptions used in the preparation of such information may prove to be incorrect. Such statements are not promises or guarantees and are subject to known and unknown risks, uncertainties and other factors that are in many cases beyond the control of the Company and that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Past performance of the Company cannot be relied on as a guide to future performance. The Company believes that the expectations reflected in those forward-looking statements are reasonable at the date of this press release but no assurance can be given that these expectations, or the assumptions underlying these expectations, will prove to be correct and such forward-looking statements included in this press release should not be unduly relied upon. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any forward-looking statement is based except as required by applicable securities laws.