Canada’s Ithaca Energy had a roller coaster ride in 2012 with its shares rising to 212p on the news of third party interest early in the year before plunging to 90p in May when the TSX and AIM listed company ceased discussions with potential suitors. The share price recovered somewhat in the New Year and now stands at 122.25p
It is not hard to see why the North Sea producer and explorer attracted predators. This is a solid company with its key drivers moving in the right direction. Figures released in a Q4 2012 production update and outlook for 2013 statement showed that output moved resolutely upwards last year. A key milestone was reached in late May when the Athena oilfield, after many years on the drawing board, was finally brought on stream. Another important event was passed in the summer when the Hurricane appraisal well flowed 24 million cubic feet of gas with 1,200 barrels per day of condensate, making this a real candidate for development as part of the major Greater Stella Area (GSA) production hub in the Central North Sea.
For Q-2012 net average export production, including net production from the Cook and MacCulloch field interests acquired from Noble Energy was 610,070 barrels of oil equivalent (boe) resulting in an average rate of 6,631 boepd with around 90 per cent being oil production. This represents a 31 per cent increase on production in the third quarter of 2012 (Q3-2012: 5,061) and is within guidance range for the quarter.
Output in the quarter came from the operated Athena, Beatrice, Jacky and Anglia fields, the non –operated Cook, Broom and Topaz fields and the Noble assets. The Noble assets were acquired on January 1 2012, with completion anticipated to occur in Q1-2013. Production in Q4-2012 benefitted from a strong performance by the Athena field which continues to produce at a stable gross daily rate of between 10,000 bopd and 11,000 with 2,250 to 2,475 bopd net to Ithaca.
Ithaca says the company’s 2013 net average export production is anticipated to be in the range of 6,000 to 6,700 including around 1,000 boepd from the Noble assets. About 90 per cent of the total is expected to be oil production. The production guidance range reflects anticipated water breakthrough on the Athena field during 2013 and the impact of planned maintenance shutdowns.
But what looks like being a hiatus in output in 2013 should not give rise for concern. Substantial output has been established at a comfortable level and shareholders should have a steady flow of news on the Greater Stella Area project to concentrate on. This scheme could see overall output punted up to around 30,000 boepd in the foreseeable future.
Moreover, the financials are potent with Q3 2012 profits before tax and unrealised losses/gains at US$14.9 million. This represented an increase of more than US$10 million on the Q2- 2012 total of US$4.4 million.Q3 cash flow from operations was US$30.1 million against US$18.1 in Q3 2011. At year end the balance street was strong with substantial cash balances and US$ 350 million tax losses available. There is also a US$430 million debt facility with BNP Paribas which has been syndicated to six other banks.
The company has said it expects 2013 net capital expenditure to total around US$360 million. This spending will come from existing cash balances, anticipated cash flow and the undrawn US$430 million debt facility. The expenditure will be almost entirely focused on executing Greater Stella Area developments. Approval for the Field Development Plan (FDP) for the two fields within the GSA (Stella and Hurricane) was approved by the Department of Energy and Climate Change (DECC) en in June 2012 and progress has already been made.
The modifications contract for the FPF-1 floating production unit has been awarded to the Remontowa shipyard in Gdansk, Poland. The FPF-1 is currently located in Gdansk. The Ensco 100 drilling rig is forecast to start the development drilling campaign in Q1-2013, later than expected because of delays in the completion of drilling programmes for other operators. Four initial Stella wells are to be drilled over a period of around 12 months before the arrival of the FPF-1 for hook up and commissioning currently in H1-2014.
Exciting though the GSA scheme is Ithaca has not discounted the possibility of further purchases. Chief Executive Iain McKendrick has said. “The company is cautiously optimistic of being able to add further asset acquisitions to its portfolio”.