SOURCE: Ithaca Energy Inc

March 23, 2016 03:00 ET

Ithaca Energy Inc Announces 2015 Financial Results

CALGARY, AB--(Marketwired - Mar 23, 2016) - Ithaca Energy Inc. (TSX: IAE) (LSE: IAE)

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

Ithaca Energy Inc.

2015 Financial Results

23 March 2016

Ithaca Energy Inc. (TSX: IAE; LSE: IAE) ("Ithaca" or the "Company") announces its financial results for the twelve months ended 31 December 2015, together with the results of its independent year-end reserves assessment and an operations update.

Solid cashflow generation despite the material decline in Brent prices over the period

  • Average production of 12,066 barrels of oil equivalent per day ("boepd"), above full year guidance (2014: 10,947 boepd)
  • $261 million cashflow from on-going operations1, a 70% increase on 2014 ($153 million) driven by reduced operating costs and hedging gains 
  • Cashflow per share $0.76 (2014: $0.55) 
  • Loss after tax of $121 million as result of a $203 million post-tax impairment charge arising from lower forecast future oil and gas prices

Decisive actions taken in 2015 to ensure the business is resilient to the lower oil price environment

  • Major re-set of operating expenditure - unit operating cost of $31/boe in 2015, a 44% reduction on the previous year (2014: $55/boe) and 22% ahead of targeted savings
  • Major capital expenditure savings secured - 2015 investment programme delivered for $117 million, approximately 25% under budget 
  • Sale of non-core Norwegian business - cash receipt of $60 million and potential $30 million upside exposure 
  • $66 million equity placing with Delek Group Ltd at a 39% premium to the 5 day volume weighted average share price prior to announcement - strengthening the balance sheet and providing additional financial flexibility
  • Substantial deleveraging - net debt reduced from a peak of over $800 million in the first half of 2015 to $665 million at year-end 2015

Strong outlook - platform established to continue deleveraging the business while growing the value of the asset portfolio

  • Completion of the "FPF-1" modifications programme remains on track for sail-away of the vessel in the previously guided May/June 2016 period, leading to anticipated first hydrocarbons from the Stella field in the third quarter of the year
  • Near term production forecast to more than double with start-up of the Stella field - long term growth underpinned by the Greater Stella Area satellite portfolio and leveraging the value of the infrastructure
  • Significant commodity price protection - average of 10,000 boepd hedged until mid-2017 at $61/boe, with a mark-to-market value of $127 million at year-end 2015 
  • Increasing financial flexibility - continued deleveraging of the business within a balanced capital investment programme

Les Thomas, Chief Executive Officer, commented:
"We are pleased to have delivered such a strong cashflow performance in 2015, driven by consistent production levels and rigorous cost control, all underpinned by a substantial hedging position. Further decisive actions, including sale of the Norwegian business and a premium equity placement, have reduced net debt and strengthened the balance sheet, providing increased flexibility to cope with current commodity price volatility and development of the Greater Stella Area. Good progress on the FPF-1 modifications means we remain on track for first production from Stella during the third quarter of 2016."

Production & Operations
Average production in 2015 was 12,066 boepd (94% oil), representing a 10% increase on 2014. The producing assets performed well over the course of the year. Solid operational uptime performance across the main fields, along with the benefit of various production enhancement activities and start-up of the Ythan field, resulted in total production being ahead of full year guidance of 12,000 boepd.

2016 Production guidance
As previously guided, base production in 2016, excluding any contribution associated with start-up of the Stella field during the year, is anticipated to be approximately 9,000 boepd (95% oil). This reflects the cessation of production from the Athena and Anglia fields, no significant capital investment on the existing producing assets during the year and restricted production rates for the Pierce field in the first half of 2016 due to the need to complete remedial works on the subsea gas injection flowline.

The additional production contribution during the year resulting from the start-up of Stella will depend on the exact timing of first hydrocarbons from the field. Prompt ramp up of production is anticipated following first hydrocarbons, leading to an expected initial annualised production rate of approximately 16,000 boepd net to Ithaca.

Production in the first quarter of 2016 is forecast to average approximately 9,000 boepd. This reflects acceleration of the planned 2016 Pierce field maintenance shutdown into the quarter in order to take advantage of the current period of restricted production rates noted above and reduced production from the Dons fields for execution of a well chemical treatment campaign.

Following the recent completion of Shell and ExxonMobil's sale of the Anasuria floating production, storage and offloading ("FPSO") vessel and associated feeder field interests, Ithaca has taken over operatorship of the Cook field (61.345% working interest), which uses the Anasuria as its host facility.

Greater Stella Area Development Update
Significant progress was made on execution of the GSA development in 2015. The five well Stella development drilling programme was successfully completed during the year, along with the subsea infrastructure installation activities required prior to arrival of the FPF-1 on location. The FPF-1 modifications programme, which is being undertaken by Petrofac in the Remontowa shipyard in Poland, has made solid progress over the last twelve months and is in an advanced stage of completion. Commissioning operations on the vessel are nearing completion and the marine work is progressing on schedule.

As announced at the start of this year, sail-away of the FPF-1 is forecast for the May / June 2016 period, leading to anticipated first hydrocarbons from the Stella field in the third quarter.

The Company's commodity hedging position remains unchanged. In 2016 a volume of 11,500 boepd (52% oil) is hedged at an average price of $60/boe, with those volumes weighted toward the first half of the year. In the first half of 2017 approximately 7,000 boepd (50% oil) is hedged at an average price of $62/boe.

As of 1 January 2016 the Company's commodity hedges were valued at $127 million based on the prevailing oil and gas forward curves at that time.

Operating Expenditure
Unit operating costs were reduced from $55/boe in 2014 to $31/boe in 2015, a year-on-year reduction of 44% and substantially below the level anticipated at the start of the year of $40/boe. This significant reduction was achieved through supply chain cost saving initiatives, removing overheads and resetting the cost base to reflect the requirements of the current environment, combined with the cessation of operations at the Company's legacy high cost fields and importantly the retransfer of the Beatrice facilities to Talisman in the first quarter of 2015.

Forecast 2016 unit operating expenditure prior to Stella start-up is anticipated to be approximately $30/boe. Upon the start-up of production from the Stella field, unit operating expenditure is forecast to fall below $25/boe.

Capital Expenditure
Total capital expenditure in 2015 was $117 million, over $30 million lower than initially budgeted, mainly as a result of reduced GSA subsea infrastructure installation costs as well as the removal of expenditure following the sale of the Norwegian business.

The planned capital expenditure programme for 2016 is anticipated to total approximately $50 million, the majority of which relates to the GSA, including activities required to prepare the Vorlich Field Development Plan for approval. There are a number of production enhancement opportunities within the existing producing asset portfolio that could be added to the planned capital expenditure programme, should the prevailing economics justify inclusion. The sanction of all such expenditures is within the control of the Company

The Company had a UK tax allowances pool of over $1,600 million at 31 December 2015. At current commodity prices, the pool is forecast to shelter the Company from the payment of corporation tax over the medium term.

It was announced in the UK Budget on 16 March 2016 that the offshore Supplementary Charge will be reduced from 20% to 10%, with effect from 1st January 2016, resulting in total UK corporate tax falling from 50% to 40%. The rate of Petroleum Revenue Tax ("PRT") has also been reduced from 35% to 0% as of 1 January 2016, eliminating any future PRT tax charge. An immediate cash benefit of $3-$5 million per annum will be realised from the effective removal of PRT on the Wytch Farm field, while the SCT cash benefits will be realised following utilisation of the UK tax allowances pool noted above.

Net Debt
As anticipated, the Company commenced deleveraging the business in 2015. Net debt was reduced from a peak of over $800 million in the first half of the year to $665 million at 31 December 2015. This reduction reflects the benefit of strong operating cashflow generation, lower capital expenditures and the cash received from sale of the Norwegian business as well as proceeds of the equity placing completed in October 2015.

It is anticipated that deleveraging of the business will continue through 2016, with a step change in this profile arising upon the start-up of Stella production. Net debt at the end of Q1 2016 is expected to be approximately $635 million.

Year-End Reserves
Total proved and probable ("2P") reserves at 31 December 2015, as independently assessed by Sproule International Limited ("Sproule"), a qualified reserves evaluator, plus estimated reserves associated with the Vorlich licence are 57 million barrels of oil equivalent ("Mmboe"). The acquisition of the Vorlich licence is scheduled to complete early in the second quarter of 2016. After accounting for non-core licence relinquishments during the year (approximately 10MMboe), changes to the Company's 2P reserves have been modest despite a significant reduction in assumed future oil and gas prices.

Q4-2015 Financial Results Conference Call
A conference call and webcast for investors and analysts will be held today at 12.00 GMT (08.00 EDT). Listen to the call live via the Company's website ( or alternatively dial-in on one of the following telephone numbers and request access to the Ithaca Energy conference call: UK +44 203 059 8125; Canada +1 855 287 9927; US +1 866 796 1569. A short presentation to accompany the results will be available on the Company's website prior to the call.

1. Cashflow from on-going operations of $261 million less $21 million of non-recurring net outflows from discontinuing fields (Beatrice, Athena & Anglia), provided for as onerous contracts in 2014, equates to overall cashflow from operations of $240 million

The audited consolidated financial statements of the Company for the year ended 31 December 2015 and the related Management Discussion and Analysis are available on the Company's website ( and on SEDAR ( All values in this release and the Company's financial disclosures are in US dollars, unless otherwise stated.

- 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    
Edward Westropp +44 (0)203 727 1521
Tom Hufton +44 (0)203 727 1625
Cenkos Securities    
Neil McDonald +44 (0)207 397 8900
Nick Tulloch +44 (0)131 220 6939
RBC Capital Markets    
Daniel Conti +44 (0)207 653 4000
Matthew Coakes +44 (0)207 653 4000

In accordance with AIM Guidelines, John Horsburgh, BSc (Hons) Geophysics (Edinburgh), MSc Petroleum Geology (Aberdeen) and Subsurface Manager at Ithaca is the qualified person that has reviewed the technical information contained in this press release. Mr Horsburgh has over 15 years operating experience in the upstream oil and gas industry.

References herein to barrels of oil equivalent ("boe") are derived by converting gas to oil in the ratio of six 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 6 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 6 Mcf: 1 bbl, utilising a conversion ratio at 6 Mcf: 1 bbl may be misleading as an indication of value.

All references to dollars ($) in this press release refer to the United States dollar (USD).

About Ithaca Energy
Ithaca Energy Inc. (TSX: IAE, LSE AIM: IAE) is a North Sea oil and gas operator focused on the delivery of lower risk growth through the appraisal and development of UK undeveloped discoveries and the exploitation of its existing UK producing asset portfolio. Ithaca's strategy is centred on generating sustainable long term shareholder value by building a highly profitable 25kboe/d North Sea oil and gas company. For further information please consult the Company's website

Forward-looking Statements
Some of the statements and information in this press release are forward-looking. Forward-looking statements and forward-looking information (collectively, "forward-looking statements") are based on the Company's internal expectations, estimates, projections, assumptions and beliefs as at the date of such statements or information, including, among other things, assumptions with respect to production, drilling, construction and maintenance times, well completion times, risks associated with operations, future capital expenditures, continued availability of financing for future capital expenditures, future acquisitions and dispositions and cash flow. The reader is cautioned that assumptions used in the preparation of such information may prove to be incorrect. When used in this press release, the words and phrases like "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 operational activities, sail-away of the FPF-1 vessel, Stella first hydrocarbons, drilling plans including ramp up timing, production forecasts, budgetary figures, future operating costs, anticipated net debt, anticipated funding requirements, planned maintenance shutdowns, the Vorlich reserves, potential developments including the timing and anticipated benefits of acquisitions and dispositions or otherwise, are intended to identify forward-looking statements. Such statements are not promises or guarantees, and are subject to known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. The Company believes that the expectations reflected in those forward-looking statements are reasonable 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. These forward-looking statements speak only as of the date of this press release. 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.

Additional information on these and other factors that could affect Ithaca's operations and financial results are included in the Company's Management Discussion and Analysis and Annual Information Form for the year ended 31 December 2015 and in reports which are on file with the Canadian securities regulatory authorities and may be accessed through the SEDAR website (

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