Ithaca Energy Inc.
TSX VENTURE : IAE
AIM : IAE

Ithaca Energy Inc.

December 15, 2010 07:00 ET

Ithaca Energy Inc.: 2011 Work Programme, Production and CAPEX Guidance

LONDON, UNITED KINGDOM and CALGARY, ALBERTA--(Marketwire - Dec. 15, 2010) -  

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Ithaca Energy Inc. (TSX VENTURE:IAE)(AIM:IAE) and its wholly owned subsidiary Ithaca Energy (UK) Limited ("Ithaca" or "the Company"), an independent oil & gas company with exploration, development and production assets in the UK sector of the North Sea, announces its forward Work Programme, Production and CAPEX Guidance for 2011.

Key Highlights

  • Net production for 2011 anticipated to be between 5,500 to 6,000 barrels of oil equivalent per day ("boepd"). (production is ranged since it is subject to certain successful work programmes undertaken in the Beatrice area)
  • Net 2011 CAPEX is estimated to be US$120 million, including:
    • Drilling of a second production well on the Jacky field targeting
      • Production start up mid Q2 2011, with an initial rate expected to exceed 5,000 bopd gross (~ 2,400 barrels of oil per day (bopd) net to Ithaca)
      • Potential of significant additional reserves
    • Athena development expenditure
      • First oil in Q4 2011 at estimated at an initial rate of 22,500 bopd gross (~ 5,000 bopd net to Ithaca)
    • Stella development expenditure, comprising
      • Development 'concept selection' decision studies
      • Detailed design and long lead equipment procurement following Field Development Plan ("FDP") submission
    • Completion of the Beatrice workover programme and facilities enhancements targeted at sustaining Beatrice field production levels at between 2,000 and 2,500 bopd gross (1,000 to 1,250 bopd net to Ithaca)
  • Production at guidance rates is estimated to generate free cash flow at US$85/bbl and 50p/therm (plus contracted gas prices for Anglia production) of between approximately US$100 million and US$115 million.
  • Possible additional appraisal drilling in the Greater Stella Area on Hurricane or Helios prospects
  • Independent evaluation of the Company's reserves (as of December 31, 2010) will focus on the inclusion of Anglia and Topaz, the Garnet and Opal undeveloped discoveries, Stella Andrew reservoir, the strong performance of Jacky and the results of the current Beatrice workover campaign.
  • Other ongoing activities include:
    • Detailed subsurface and development studies to access additional gas production opportunities in the Anglia field (subject to completion of the GDF SUEZ E&P UK LTD transaction)
    • Studies to assess the possibility of the drilling of a second production well on the Topaz field (subject to completion of the GDF SUEZ E&P UK LTD transaction)
    • Expansion of the existing Nigg Terminal facilities to handle additional 3rd party business
  • The Company is fully funded through to first production for all its current development projects, which are targeted at increasing total production to over 20,000 boepd in 2013.

Iain McKendrick, CEO of Ithaca Energy, commented:

"Ithaca enters 2011 in a strong position after undergoing a transformational year in 2010. The Company has secured the potential to increase production to over 20,000 boepd from its existing assets and funding arrangements.

The 2011 work programme is extensive. It includes up to seven additional production wells and a further three optimized production wells and we are investigating the possibility of up to two further appraisal wells in the Greater Stella Area to access significant incremental reserves. Enabled by our strong balance sheet, we will continue to seek acquisition opportunities, which we plan to fund from existing cash flow and debt. With key milestones in 2011 including 'first oil' at Athena and progress at the Stella/Harrier developments, the Company is positioned to unlock significant value in terms of production and reserves."

2011 Work Programme Summary

Jacky (equity interest 47.5%)

As previously announced, a further production well on the Jacky field will be spudded in Q1 2011 to access incremental reserves. Management anticipates that the well will be completed and immediately brought into production in mid Q2 2011. The existing production well has performed strongly since April 2009 and significantly exceeded production forecasts. Production history and detailed subsurface work has shown that the northern area of the field could contain significant bypassed reserves. Management anticipates that a successful second production well will flow at an initial rate in excess of 5,000 bopd gross (~ 2,400 bopd net to Ithaca)

Beatrice (equity interest 50%)

Over the latter part of 2010 an extensive well workover programme has been executed to replace electrical submersible pumps and well tubulars on wells producing to the Beatrice Alpha platform. To date, operations on two of the five wells in the workover campaign have been completed. The Company has completed work on the A23 well and will announce stabilised flow in the near future. Work will continue into 2011 on the remaining wells, although the full workover on the fifth well in the campaign, the A19 water injection well, has been replaced with a more cost effective programme, restarting at least two additional water injection wells using wireline techniques. These interventions, in early 2011, along with improvements to production critical equipment on the facility, have been designed to boost and secure steady production. Management expects the Beatrice Complex production enhancement programme (well workovers, interventions and facility improvements) to be completed by the end of Q1 2011. There will be an 18 day shutdown of the production facilities in Q2 to undertake routine maintenance; production estimates take account of this shutdown.

Athena (equity interest 22.5%)

Ithaca, as operator, received Field Development Plan approval for the Athena field in September 2010 and the project is now in the engineering and procurement phase. The Company has contracted a semi submersible drilling unit to provide for the drilling and completion of one production and one water injection well and the completion of three existing, suspended, wells for production. The programme is scheduled to commence in early January 2011 and is estimated to last 6 months.

Installation of subsea equipment (flowlines, risers, umbilicals, manifold and submerged mooring buoy) will commence in July 2011, in time for the arrival of the Floating, Production, Storage and Offtake ("FPSO") vessel, BW Athena, contracted to service the field.

The FPSO arrived at a shipyard in Dubai on December 12th 2010, ahead of schedule, where it will undergo modification and re-certification. The vessel is due to return to UK waters and to arrive on location at Athena in Q3 2011. Installation of the FPSO vessel to the mooring buoy and 'hook up and commissioning' will be completed in line with targeted first oil in Q4 2011. Initial production from the field is estimated at a gross rate of 22,500 barrels of oil per day ("bopd") (~ 5,000 bopd net to Ithaca).

Stella & Harrier (equity interest 50.33%)

The drilling of a successful appraisal well on the Stella field in Q2 2010 has unlocked the opportunity to co-develop the Stella (Andrew Sandstone and Ekofisk Chalk reservoirs) and the Harrier (Ekofisk and Tor Chalk reservoirs) fields. Net 2P Reserve estimates of the Stella Field (Andrew & Ekofisk), as evaluated by Sproule, rose by 61% from 8.94 million barrels of oil equivalent ("mmboe") to 14.37 mmboe as a result of appraisal drilling. Further technical work has been undertaken on the Andrew reservoir which will be used for future reserves evaluations. Detailed discussions are currently in progress with existing infrastructure owners to secure offtake arrangements for the fields and these are scheduled to be concluded in early 2011. A final decision on the scope, nature and offtake route of the development is expected to be made in Q2 2011.

The Company expects to submit an FDP to the UK authorities, the Department of Environment and Climate Control ("DECC"), by the end of Q2 2011.

Hurricane (equity interest 100%)

The Hurricane discovery lies within the development catchment area of the anticipated Stella production hub. Confirmation of the scope of the development concept for Stella and Harrier at the end of Q1 2011 will influence the timing and number of wells required for the development of Hurricane. The Company has previously indicated its intention to farm out around 50% of its equity interest in the field.

Helios (equity interest 68.33%)

In October 2010, the Company was awarded one new license in the 26th Round, namely block 29/10d, containing the Helios discovery. Lying within the catchment area of the Stella development, the Helios asset will be the focus of intensive subsurface and development studies in early 2011 which may lead to an early appraisal drilling decision. Any appraisal drilling decision will be integrated with the Hurricane and Stella/Harrier activities.

Anglia (equity interest 30%)

The Company is engaged in completing the acquisition of certain UK Gas Basin assets from GDF SUEZ E&P UK LTD before the end of 2010 (the "Acquisition). On completion, Ithaca shall assume operatorship of the Anglia gas field, for which Ithaca's production is sold under contract throughout the life of the field. The Company is fully prepared for the addition of this asset to its existing operated asset portfolio.

During H1 2011, Ithaca will be focusing on the evaluation and optimisation of enhanced field performance opportunities, including the assessment of two potential well workover targets, as well as possible upside opportunities that have already been identified in the southeast extent of the field (structural 'pop-up') and the northwest sector (infill potential). GDF SUEZ E&P UK LTD has estimated that in excess of 2 mmboe of additional net possible reserves lie within the field. In addition to the above studies, Ithaca will be working on the evaluation of potential upgrades to certain elements of the subsea control system to improve the availability of two subsea wells tied into the Anglia platform.

Topaz (equity interest 35%)

Within the portfolio of GDF SUEZ E&P UK LTD assets, Ithaca will acquire an interest in the RWE operated Topaz gas field. The Topaz field was brought into production at the end of 2009. Production history from the field is now adequately established to enable a detailed review of the internal architecture of the reservoir. A technical study is ongoing which could lead to early drilling of a second well on the field. The results of the study and associated potential for an additional well are expected in Q2 2011.

Garnet (equity interest 68.33 %) & Opal (equity interest 53.84%)

The GDF SUEZ E&P UK LTD transaction will also result in Ithaca acquiring an operated interest in both the Garnet and Opal discoveries. An extensive review of all the subsurface data will be performed in 2011 in order to fully assess the development potential of the discoveries. Agreement with the regulatory authorities (DECC) has already been reached to extend the licence term of these discoveries to allow Ithaca, as incoming operator, to make its own assessment of the production potential of the discoveries.

Hedging

The Company elected to financially hedge 177,625 barrels of oil at an average price of $90.38 relating to a proportion of the Company's share of oil produced in November 2010 and expected to be produced in December 2010 which is priced against December 2010 and January 2011 dated Brent.

A revised corporate presentation is now available on the Company's website: www.ithacaenergy.com

In accordance with AIM Guidelines, Lawrie Payne, MA Marine Geology (Alberta & Columbia) and Chairman of Ithaca Energy is the qualified person that has reviewed the technical information contained in this press release.

Not for Distribution to U.S. Newswire Services or for Dissemination in the United States

Forward-looking statements

Some of the statements in this announcement are forward-looking. Forward-looking statements include statements regarding the intent, belief and current expectations of Ithaca Energy Inc. or its officers with respect to various matters. When used in this announcement, the words "expects," "believes," "anticipate," "plans," "may," "will," "should", "scheduled", "targeted", "estimated", "aimed" and similar expressions, and the negatives thereof, whether used in connection with the estimated production levels, results of workover programs, anticipated closing of the GDF acquisition, anticipated time of first oil from the Athena project, anticipated future development areas, oil in place, hydrocarbon composition or otherwise, are intended to identify forward-looking statements. Such statements are not promises or guarantees, and are subject to risks and uncertainties that could cause actual outcome to differ materially from those suggested by any such statements. These forward-looking statements speak only as of the date of this announcement. Ithaca Energy Inc. 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.

Estimates of reserves contained in this press release in connection with the Acquisition may not have been prepared in accordance with the COGE Handbook and have not been prepared by a qualified reserves evaluator of the Company. Sproule International Limited will evaluate the reserves associated with Acquisition at the end of 2010 as part of their annual evaluation of the Company's assets.

The calculation of barrels of oil equivalent ("boe") is based on a conversion rate of six thousand cubic feet of natural gas ("mcf") to one barrel of crude oil ("bbl"). Boes may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf : 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

The estimates of reserves and future net revenue for individual properties may not reflect the same confidence level as estimates of reserves and future net review for all properties, due to effects of aggregation. Possible reserves are those additional reserves that are less certain to be recovered than probable reserves.

Possible reserves are those additional reserves that are less certain to be recovered than probable reserves. There is an equal probability that the quantities actually recovered will be greater or less than the sum of proved plus probable reserves. There is a 10% probability that at least the sum of the estimated proved reserves plus probable reserves plus possible reserves will be recovered.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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