Press Release

Operations & Trading Update

7 April 2020

07 Apr

Ithaca Energy Limited (IAECN: ISINs US46567TAA25 / USG49774AA35) ("Ithaca" or the "Company") is pleased to provide the following operations update together with the results of its year-end 2019 independent reserves evaluation.

The planned issuance of the financial results for the twelve months ended 31 December 2019 has been delayed as a consequence of the UK Financial Conduct Authority's guidance on the publication of results and its request for companies to follow a moratorium on announcements until mid-April given the level of business and economic uncertainty. The regulators are keen to ensure orderly capital markets are maintained during these extraordinary and unprecedented times. During this time audit firms, including the Company's auditor Ernst & Young Global Limited ("EY"), have been required to delay finalising the issuance of audit opinions. The Company will be working with EY to be able to issue the results at the earliest opportunity.


  • Pro-forma1 2019 production of ~75,000 thousand barrels of oil equivalent per day (boepd), 66% liquids, and unit operating costs of $17/boe, resulted in pro-forma EBITDAX of approximately $960 million
  • Average first quarter 2020 production of ~75,000 boepd leading to strong cash flow generation of approximately $150 million
  • 2020 capital expenditure has been cut by 50% to approximately $120 million
  • 2020 operating expenditure has been cut and is forecast to reduce unit costs from $17/boe to approximately $15/boe
  • 32 MMboe (67% oil) hedged from the start of January 2020 into 2022 at an average price floor of $62/bbl oil and 51p/therm gas
  • Hedging position means over $450 million of free cash flow generation forecast in 2020, even if Brent drops to $1/bbl for the balance of the year
  • Net debt at 31 December 2019 was $1.55 billion, implying a net debt to EBIDAX leverage ratio of 1.6x – net debt at the end of the first quarter of 2020 is forecast to reduce to approximately $1.4 billion
  • Total proved and probable reserves ("2P") and resources ("2C") as at 31 December 2019 of 273 million barrels of oil equivalent2 ("MMboe"), implying a reserves and resources replacement ratio of 120% (an addition of 33 MMboe)

Les Thomas, Chief Executive Officer, commented:

"2019 was clearly a transformational year for the Company. With completion of the Chevron North Sea Limited acquisition, we have established Ithaca Energy as a major UK North Sea operator with an exciting future. The acquisition provided us with a high-quality, low cost set of assets and an enlarged platform from which to grow and unlock the full potential of the business."

"With the abrupt emergence over recent weeks of a more challenging macroeconomic environment, it is clear that we need to accelerate our on-going efforts to further reduce the breakeven cost of our assets and our near-term investment programmes. This will allow us to proactively manage our financial profile in the face of a potentially "lower for longer" commodity price outlook. These objectives are core to the transformation programme that is already underway in the business following the acquisition, with the themes of process simplification, operational efficiency and value creation at the heart of the various work programmes."

"In the midst of the Covid-19 crisis, our staff and supply chain have adapted in very challenging circumstances to safely maintain operations, helping to keep the country powered and the lights on. We thank them for their exceptional commitment, flexibility and resilience."

Additional Information

Completion of the CNSL acquisition in 2019 has materially enhanced the operational and financial scale and strength of the busines

  • The CNSL acquisition provided a material and important step up in the scale and breadth of the Company's asset base, adding ten producing field interests along with a wider portfolio of investment opportunities from which to grow the future cashflows of the business and accelerate monetisation of the Company's existing UK tax allowances
  • With pro-forma 2019 average production of approximately 75,000 boepd (66% liquids) and unit operating expenditure of $17/boe, the Company generated pro-forma EBITDAX in the year of approximately $960 million
  • The Company operates approximately 75% of both its production and its proven and probable reserves and resources. This provides significant control and flexibility over the future commitments of the business

Clear focus on reducing the risk of spreading the Covid-19 virus and safeguarding the well-being of employees and contractors, whilst at the same time minimising the impact on the business

  • Beyond the risk to personnel, the most significant Covid-19 risk to the business is a potential shutdown of production resulting from an infection arising amongst the offshore workforce at one of the facilities serving the most material assets in the portfolio, Captain and the Greater Stella Area
  • To minimise this risk, the Company has reduced the number of personnel on each of its operated offshore facilities to a minimum level required to safely maintain production and execute any critical maintenance work scopes. Measures have also been taken to minimise the risk of infected personnel travelling offshore and in the event of a suspected case arising on one of the installations, the ability to isolate and transport to shore any individuals
  • Since the start of the Covid-19 situation, no related incidents have occurred offshore and the Company is now at minimum manning levels across its operated assets

Maintaining financial flexibility and cash flow resilience in the face of the recent dramatic fall in oil prices through the deferral of capital investment programmes

  • Management of the Covid-19 situation has naturally required certain planned 2020 capital investment programmes to be stopped and deferred until a time when normal offshore operations can resume. This includes the Alba infill drilling campaign that commenced at the end of 2019, along with offshore works associated with preparation for the resumption of platform drilling on the Captain field later this year
  • The recent dramatic fall in the oil price has also dictated the need for the Company's wider 2020 capital expenditure plans to be revisited as part of proactively preserving the liquidity and cash flow resilience of the business. The steps that have been taken to reduce and rephase the planned capital expenditure programme include deferment of the Fotla exploration well, a reduction in activities on the Jacky decommissioning programme and the Hurricane development. Similar actions have also been taken across the non-operated asset portfolio, with operators delaying the commencement of planned infill drilling activities
  • It is estimated that the 2020 capital investment programme will reduce from the previously guided level of approximately $250 million to a maximum of around $120 million
  • The majority of deferred capital work programmes are not specifically centred on activities that are scheduled to materially impact 2020 production. The significant exception to this is completion of the Vorlich (34% working interest) field development programme, the execution of which is now being hindered by Covid-19 related restrictions to offshore construction activities; both in terms of completion of the remaining subsea infrastructure installation activities and also the remaining FPF-1 related work scopes. All efforts are on-going to minimise any delay to the field start-up schedule of mid-2020. Vorlich accounted for approximately 6% of the production guidance issued at the start of the year

Solid free cash flow outlook underpinned by material commodity hedging – provides the financial strength to manage the prevailing commodity price environment

  • Despite the recent sharp reduction in prevailing commodity prices, the Company is still expected to generate significant free cash flow in 2020 as a result of a solid production outlook, competitive cost base and strong commodity hedging position
  • 2020 production guidance of 70,000 to 75,000 boepd, approximately 65% liquids, had been announced at the start of the year. This range reflected 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. The forecast clearly did not account for potential operational disruptions arising from the management of the evolving Covid-19 situation. It is broadly forecast that the potential negative impact of Covid-19 on the initial production guidance could be around 10%. This does not take into account any potential disruption that may arise should excess global oil supply require production cutbacks in order for terminals to manage physical storage and processing constraints
  • 2020 unit operating expenditure is forecast to reduce from $17/boe to approximately $15/boe, incorporating the potential production impact associated with managing the Covid-19 situation. This operating expenditure includes field, host facility and export infrastructure costs. The General and Administration ("G&A") costs of the business are estimated to be approximately $1/boe in 2020
  • The free cash flow outlook of the business is materially enhanced by the Company's commodity hedging position. The Company has in place approximately 32 MMboe of production hedged from the start of 2020 into 2022. This equates to around 75% of forecast 2020 oil and gas production from currently producing fields and approximately 50% in 2021, providing an average oil price floor of $62/bbl and an average gas price floor of 51p/therm over the period
  • The Company's hedging position means it is forecast to generate over $450 million of free cash flow in 2020 even if Brent drops to $1/bbl for the balance of the year. This reflects the favourable production and cost profile of the business, along with the asset portfolio achieving oil and gas pricing broadly in line with Brent and NBP price benchmarks
  • The company will reset some of its oil and gas hedges for 2021 and 2022 such that the underlying cash value of the instrument is crystallised and the hedge is replaced with a swap at the current forward curve. This has the benefit of enhancing the Company's liquidity and reducing drawn debt, while retaining protection against any further deterioration in commodity prices
  • The Company had a UK tax allowances pool of approximately $2.4 billion carried forward as of 31 December 2019. Based on current commodity prices, these allowances are forecast to shelter the Company from the payment of tax over the medium term

Strong balance sheet underpinned by disciplined capital allocation priorities aligned with managing an unsettled commodity price environment

  • Net debt at 31 December 2019 was $1.55 billion, implying a net debt to pro-forma EBIDAX leverage ratio of 1.6x as of the same date. Net debt at the end of the first quarter of 2020 is set to reduce to approximately $1.4 billion. The Company's debt facilities consist of a $1.65 billion Reserves Based Lending ("RBL") facility plus $500 million senior unsecured notes
  • Ithaca retains significant liquidity, with cash and undrawn RBL debt availability of approximately $300 million as at the end of March 2020
  • The Company has the flexibility to pay up to a $135 million dividend to its parent company, the Delek Group, subject to the terms of its RBL facility agreement. Any further distributions are subject to the Company not exceeding a 1.3x leverage ratio as per the terms governing distributions in the senior notes indenture

Strategic focus on delivering value accretive growth by unlocking low cost resources through organic investment programmes and bolt-on acquisitions

  • 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 priority for 2020 involves the maturation of additional targets to further enhance long term production and reserves by creating a high-quality portfolio of future investment options
  • 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
  • The Company has acquired licence P.2158 (Block 15/18b) from TOTAL E&P UK Ltd ("TOTAL"). The licence contains the "Yeoman" discovery and southern extent of the Hibiscus Petroleum-operated "Marigold" discovery. The discoveries contain oil and gas within the Palaeocene Balmoral sandstone fairway. Based on Management's forecasts, it is estimated that the licence adds resources of over 15 MMboe3 from the two discoveries. A limited consideration was paid at completion of the acquisition in March 2020, with additional contingent payments payable at Field Development Plan approval and upon reaching a reserves recovery threshold
  • As previously announced, the "Isabella" exploration well in the UK Central North Sea (10% Ithaca Energy working interest) has discovered hydrocarbons in the Upper Jurassic and Triassic sandstone reservoirs. This is an encouraging high-pressure high-temperature gas condensate discovery and further analysis of the well results will now be performed by the Operator (TOTAL) to determine future appraisal activity and recoverable resources estimates. The well has been plugged and abandoned

Year-End Independent Reserves Evaluation

The year-end 2019 independent reserves evaluation has been performed by Netherland Sewell & Associates Inc. ("NSAI"). This now consolidates the Company's reporting under a single qualified reserves evaluator.

Total 2P reserves and 2C resources as at 31 December 2019 have been estimated to be 273 MMboe. This compares to a corresponding year-end 2018 total of 267 MMboe, taking into account the CNSL acquisition from the 1 January 2019 effective date. Given total production of 27 MMboe in 2019, this implies a reserves and resources replacement ratio of 120% for the year. Significantly, proven reserves ("1P") at year-end 2019 are estimated to be 134 MMboe, implying a 180% reserves replacement ratio for the year.

The results of the year-end reserves evaluation highlight the Company's ability to unlock additional opportunities within the enlarged portfolio that has been established following the CNSL acquisition.

The total resource base is comprised of 206 MMboe 2P reserves and 67 MMboe 2C resources. This equates to an approximately 10-year reserves and resource life based on forecast 2020 production. The main movements associated with NSAI's evaluation are the transfer of resources associated with the Captain EOR Phase II development into reserves and the recategorisation by NSAI of the Courageous and Austen GSA satellites from reserves into resources (based on the maturity of the development plans for each of the fields at this point in time). While these transfers have largely offset each other, additionally reserves and resources have been added predominantly in relation to the Captain field (additional infill well opportunities on the field and an increased position on nearby discoveries following the 31st Licence Round awards in 2019).

The report summarising the NSAI reserves evaluation is available on the Company's website (

2019 Financial Results Investor Call

The Company will issue a press release concerning the expected timing for issuance of its 2019 financial results once it is clear when the financial auditors will be in a position to resume normal service for the approval of accounts. The Company will be working with EY to try and achieve this before the end of April 2020.

On the day the results are issued a conference call and webcast will be held at 12.00 BST (07.00 EDT), with a playback facility being made available on the Company's website ( later in the day. A short 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.

- ENDS -


Ithaca Energy
Les Thomas
+44 (0)1224 650 261

Graham Forbes
+44 (0)1224 652 151

Richard Smith
+44 (0)1224 652 172

FTI Consulting (Media Enquiries)
Ben Brewerton
+44 (0)203 727 1000

Sara Powell
+44 (0)203 727 1000


  1. All references to "pro-forma" take into account the contribution from the CNSL assets from the 1 January 2019 effective date of the acquisition to the completion date on 8 November 2019.
  2. The Company's reserves as of 31 December 2019 have been independently evaluated by NSAI, a qualified reserves evaluator, in accordance with the definitions and guidelines set forth in the 2018 Petroleum Resource Management System (PRMS) approved by the Society of Petroleum Engineers (SPE). The report detailing the reserves evaluation is available on the Company's website (
  3. The resource estimate has been prepared by Ithaca Energy and not by an independent qualified reserves evaluator or assessor. This figure is an estimate only and the actual results may be greater than or less than the estimate provided herein. The NSAI year-end 2019 independent reserves evaluation does not include any contribution from the licence acquisition.

All values in this release and the Company's financial disclosures are in US dollars, unless otherwise stated.

The calculation of barrels of oil equivalent ("boe") in the year-end 2019 reserves evaluation and production volumes have been derived by converting gas to oil in the ratio of 5.8 thousand cubic feet ("Mcf") of gas to one barrel ("bbl") of oil. Boe may be misleading, particularly if used in isolation. A boe conversion ratio of 5.8 Mcf : 1 bbl is based on an energy conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 5.8 Mcf : 1 bbl, utilising this conversion ratio may be misleading as an indication of value.

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

Forward-looking Statements

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, reserve and resource estimates, 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, the financial benefits of commodity hedging arrangements, potential developments including the timing and anticipated benefits of acquisitions and divestments or otherwise, expected future payments in connection with acquisitions and divestments, 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 divestments 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.

Operations & Trading Update