SOURCE: Ithaca Energy Inc

November 11, 2013 02:00 ET

Ithaca Energy Inc - Q3 2013 Financial Results

ABERDEEN, SCOTLAND--(Marketwired - Nov 11, 2013) - Ithaca Energy Inc. (TSX: IAE) (LSE: IAE)


TSX VENTURE: IAE

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

                       Ithaca Energy Inc.
           Third Quarter 2013 Financial Results
                       11 November 2013

Ithaca Energy Inc. (TSX: IAE, LSE AIM: IAE) ("Ithaca" or the "Company")
announces its quarterly results for the three months ended 30 September
2013.

Highlights

- Record quarterly cashflow from operations of $77.8 million (Q3
2012: $30.1 million) - cashflow per share $0.25 (Q3 2012: $0.12)

- Record quarterly earnings of $54.1 million (Q3 2012: $4.9
million) - earnings per share $0.17 (Q3 2012 $0.02)

- Continued strong netbacks of over $70 / barrel of oil equivalent
("boe")

- Revenue of $114.1 million (Q3 2012: $41.6 million)

- Average production during the period of 11,942 boe per day
("boepd"), 96% oil, reflecting the impact of shutdowns during the
quarter

- Net drawn debt of $357 million at 30 September 2013

- UK tax allowances pool of $993 million and Norwegian tax
receivable of $88 million at 30 September 2013

- Approximately 3.4 million barrels of future 2013-14 oil
production hedged at a weighted average price of ~$102/bbl
(approximately 30% puts / 70% swaps)

Graham Forbes, Chief Financial Officer commented:"Continued high netbacks
of over $70/boe have enabled us to deliver
both record cashflows and earnings during a quarter where annual
shutdowns have tempered production. These results, together with the
enhanced debt facilities announced in October, provide an excellent
financial platform to drive the Company forward".

Greater Stella Area Development

-Deliverability of the Stella reservoir was confirmed with the
successful completion of the Stella "A1" development well during the
quarter, with the clean-up test performed on the well resulting in a
maximum flow rate of 10,835 boepd. Operations are progressing
according to plan on the "A2" development well, with drilling of the
horizontal reservoir section scheduled to commence shortly

-Solid progress continues to be made on execution of the "FPF-1"
floating production facility modifications programme. The vessel has
been re-floated following completion of the dry dock related marine
system works and work has commenced on the main topsides processing
plant construction and installation activities

-Execution of the 2013 subsea infrastructure installation work
programme is nearing completion, with the remaining works now focused
on tie-in of the infield flowlines and umbilicals

A new film is available on the Company's website ( www.ithacaenergy.com )
providing additional information on the work that has been completed on
the development over recent months.

2013 Production Outlook

Total pro-forma production for 2013 is forecast to average
approximately 13,000 boepd; this reflects inclusion of full year
production from the assets acquired as part of the Valiant Petroleum
plc ("Valiant") acquisition, which completed on April 19, 2013. This
is lower than originally anticipated for the year due primarily to
production deferrals resulting from the longer than anticipated
duration of the shutdowns that impacted the Cook and Causeway Area
fields during the second half of the year, and delay to completion of
the electrical submersible pump related works on the Taqa-operated host
facility for Causeway.

Corporate

The Company has extended and improved its long term senior bank debt
financing facilities, increasing its Reserve Based Lending ("RBL")
facility from $430 million to $610 million, and established a new five
year $100 million corporate facility.

Further farm-outs of the three UK exploration well commitments
transferred as a result of the Valiant acquisition were entered into
during the third quarter. When combined with the previously announced
farm-outs, on completion, Ithaca will be fully carried for the forecast
cost of drilling the wells and in addition will receive over $8 million
in cash from the farm-out parties.

                              - ENDS -


Enquiries:

Ithaca Energy

Graham
Forbes       gforbes@ithacaenergy.com           +44 (0)1224 652 151

Richard
Smith        rsmith@ithacaenergy.com            +44(0) 1224 652 172

FTI Consulting

Edward
Westropp     edward.westropp@fticonsulting.com  +44 (0)207 269 7230

Georgia
Mann         georgia.mann@fticonsulting.com     +44 (0)207 269 7212

Cenkos Securities

Jon
Fitzpatrick   jfitzpatrick@cenkos.com           +44 (0)207 397 8900

Neil
McDonald      nmcdonald@cenkos.com              +44 (0)131 220 6939


RBC Capital
Markets

Tim Chapman   tim.chapman@rbccm.com             +44 (0)207 653 4641

Matthew
Coakes        matthew.coakes@rbccm.com          +44 (0)207 653 4871




Notes Regarding Oil & Gas Disclosure

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.

The term "boe" may be misleading, particularly if used in isolation. A
boe conversion 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. 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.

This press release contains non-International Financial Reporting
Standards ("IFRS") industry benchmarks and terms, such as "netbacks"
and "cashflow from operations". Netbacks are calculated on a per unit
basis as oil, gas and natural gas liquids revenues less royalties and
transportation and operating costs. Cashflow from operations and
cashflow from ongoing operations are determined by adding back changes
in non-cash operating working capital to cash from operating
activities. The Company considers cashflow from operations to be a key
measure as it demonstrates the Company's underlying ability to generate
the cash necessary to fund operations and support activities related to
its major assets. The non-IFRS financial measures do not have any
standardised meaning and therefore are unlikely to be comparable to
similar measures presented by other companies. The Company uses the
foregoing measures to help evaluate its performance. As an indicator of
the Company's performance, cashflow from operations should not be
considered as an alternative to, or more meaningful than, net cash from
operating activities as determined in accordance with IFRS.

Further details on the above are provided in the unaudited interim
consolidated financial statements of Ithaca for the quarter ended June
30, 2013, which have been filed with the securities regulatory
authorities in Canada. These financial statements are available on the
System for Electronic Document Analysis and Retrieval at  www.sedar.com 
and on the Company's website:  www.ithacaenergy.com .

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, the
exploitation of its existing UK producing asset portfolio and a
Norwegian exploration and appraisal business centred on the generation
of discoveries capable of monetisation prior to development. 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
 www.ithacaenergy.com .

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

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, well completion times, future capital
expenditures, future acquisitions 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"anticipate", "continue", "estimate", "expect", "may",
"will","project", "plan", "should", "believe", "could", "target" and
similar
expressions, and the negatives thereof, whether used in connection with
operational activities, production forecasts, budgetary figures,
potential developments 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 and 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 and 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.

             HIGHLIGHTS THIRD QUARTER 2013

Record      - Q3 2013 cashflow from operations increased by
financial    over 150% to $77.8 million (Q3 2012: $30.1 million)
results      resulting in Q3 YTD 2013 cashflow from operations of
             $185.3 million (Q3 YTD 2012: $74.8 million) - Q3 YTD 2013
             cashflow per share $0.63 (Q3 YTD 2012: $0.29)

             - Q3 2013 net earnings of $54.1 million (Q3 2012:
             $4.9 million) and Q3 YTD 2013 net earnings of $109.8
             million (Q3 YTD 2012: $48.1 million) - Q3 2013 earnings
             per share of $0.17

             - Netbacks of over $70 / barrel of oil equivalent
             ("boe")

             - Q3 2013 average realised oil price of $109 / bbl
             (Q3 2012: $113 / bbl), including hedging

             - Net drawn debt of $357 million at September 30,
             2013 (zero net drawn debt at December 31, 2012)

             - UK tax allowances pool of $993 million at
             quarter end. Norwegian tax receivable of $88 million

             - Approximately 3.4 million barrels of future
             2013-14 oil production hedged at a weighted average price
             of approximately $102 / bbl (approximately 30% puts / 70%
             swaps)


Oil         - Average production in Q3-2013 was 11,942 barrels
dominated    of oil equivalent per day ("boepd"), 96% oil, reflecting
production   the impact of shutdowns during the quarter

             - Total pro-forma production for 2013 is forecast
             to average approximately 13,000 boepd; this reflects
             inclusion of full year production from the assets acquired
             as part of the Valiant Petroleum plc ("Valiant")
             acquisition, which completed on April 19, 2013. This is
             lower than originally anticipated for the year due
             primarily to production deferrals resulting from the
             longer than anticipated duration of maintenance shutdown
             activities that impacted the Cook and Causeway Area fields
             during the second half of the year, and delay to
             completion of the electrical submersible pump ("ESP")
             related works on the Taqa-operated host facility for
             Causeway

Continued   - Drilling of the Stella "A1" development well was
strong       successfully completed during the quarter, with the
progress     clean-up test performed on the well resulting in a maximum
on Stella    flow rate of 10,835 boepd. Operations are progressing
             according to plan on the "A2" development well, with
             drilling of the horizontal reservoir section scheduled to
             commence shortly

             - Solid progress continues to be made on execution
             of the "FPF-1" floating production facility modifications
             programme. The vessel has been re-floated following
             completion of the dry dock related marine system works and
             work has commenced on the main topsides processing plant
             construction and installation activities

             - Execution of the 2013 subsea infrastructure
             installation work programme is nearing completion, with
             the remaining works now focused on finishing the tie-in of
             the infield flowlines and umbilicals


Enhanced    - The Company has extended and improved its long
debt         term senior bank debt financing facilities, increasing its
facilities   Reserve Based Lending ("RBL") facility from $430 million
             to $610 million and established a new five year $100
             million corporate facility

             - Further farm-outs of the three UK exploration
             well commitments transferred as a result of the Valiant
             Petroleum plc ("Valiant") acquisition were executed during
             the quarter. When combined with the previously announced
             farm-outs, on completion, Ithaca will be fully carried for
             the forecast cost of drilling the wells and in addition will
receive over $8 million in cash from the farm-out
             parties


  SUMMARY STATEMENT OF INCOME

                                          3 Months       9 Months
                                          Ended          Ended
                                          Sep 30         Sep 30
                                          2013   2012    2013    2012
Average Brent Oil Price             $/bbl 110    110     109     110
Average Realised Oil Price(1)       $/bbl 113    110     107     112

Revenue                             M$    114.1  41.6    302.2   117.9
Cost of Sales - excluding DD&A      M$    (35.0) (12.5)  (124.1) (44.0)
G&A etc                             M$    1.2    -       0.8     (1.8)
Non-recurring Valiant Restructuring M$    -      -       (5.2)   -
Realised Derivatives Gain / (Loss)  M$    (2.5)  1.0     11.6    2.7
Cashflow From Operations            M$    77.8   30.1    185.3   74.8
DD&A                                M$    (42.3) (14.6)  (103.1) (39.0)
Unrealised Derivatives Gain /       M$    (13.3) (12.9)  (17.1)  5.2
(Loss)
Non-recurring Valiant Deal Costs    M$    -      -       (5.0)   -
Non-recurring Negative Goodwill     M$    7.0    -       55.9    -
Other                               M$    16.7   (0.6)   1.3     (3.5)
Profit Before Tax                   M$    45.9   2.0     117.3   37.5
Deferred Tax Credit / (Charge)      M$    8.2    2.9     (7.5)   10.6
Profit After Tax                    M$    54.1   4.9     109.8   48.1

Earnings Per Share(2)               $/Sh. 0.17   0.02    0.37    0.19
Cashflow Per Share(2)               $/Sh. 0.25   0.12    0.63    0.29

(1)Average realised price before hedging
(2) Q3 2013 weighted average number of shares of 317.4 million and
Q3 YTD 2013 weighted average number of shares of 294.6 million

  SUMMARY BALANCE SHEET


M$                            Q3 2013 Q4 2012
Cash & Equivalents            77      31
Other Current Assets          366     198
PP&E                          1,466   663
Other Non-Current Assets      54      41
Total Assets                  1,963   934

Current Liabilities           (430)   (206)
Bank debt                     (427)   -
Asset Retirement Obligations  (160)   (53)
Deferred Tax Liabilities      (119)   (62)
Other Non-Current Liabilities (15)    (7)
Total Liabilities             (1,151) (328)

Net Assets                    812     606
Share Capital                 525     431
Other Reserves                23      20
Surplus                       264     154
Shareholders Equity           812     606

                    CORPORATE STRATEGY

                    Ithaca Energy Inc. ("Ithaca" or the "Company") 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, the
                    exploitation of its existing UK producing asset
                    portfolio and a Norwegian exploration and appraisal
                    business centred on the generation of discoveries
                    capable of monetisation prior to development.

                    The Company has a solid and diversified UK
                    producing asset base generating significant free
                    cashflow from mainly oil production.

                    Ithaca's goal is to generate sustainable long term
                    shareholder value by building a highly profitable
                    25kboepd North Sea oil and gas company.

                    Execution of the Company's strategy is focused on
                    the following core activities:

                    - Maximising cashflow and production from
                    the existing asset base.

                    - Delivery of lower risk development led
                    growth through the appraisal of undeveloped
                    discoveries.

                    - Delivering first hydrocarbons from the
                    Ithaca operated Greater Stella Area development.

                    - Monetising proven Norwegian asset reserves
                    derived from exploration and appraisal drilling
                    prior to the development phase.

                    - Continuing to grow and diversify the
                    cashflow base by securing new producing,
                    development and appraisal assets through targeted
                    acquisitions and licence round participation.

                    - Maintaining financial strength and a clean
                    balance sheet, supported by lower cost debt
                    leverage.

                   OPERATIONS UPDATE

                   PRODUCTION

                   Total production in Q3-2013 was 11,942 boepd, 96%
                   oil. This represents an increase of over 130% on
                   the same quarter in 2012 (Q3-2012: 5,061 boepd),
                   driven primarily by the additional assets acquired
                   as a result of the Valiant acquisition.

                   Production during the quarter was derived from the
                   operated Athena, Causeway Area (Causeway and
                   Fionn), Beatrice, Jacky and Anglia fields and the
                   non-operated Dons (Don Southwest and West Don),
                   Cook, Broom and Topaz fields.

                    OPERATIONAL ACTIVITIES

                    Operational activities in Q3-2013 were dominated by
                    maintenance shutdown activity on certain of the
                    Company's main fields.

                    Total production during the quarter was impacted by
                    commencement of the major planned maintenance
                    shutdown of the Taqa-operated North Cormorant
                    platform, which serves as the host facility for the
                    Causeway Area fields. The shutdown commenced at
                    the end of August 2013, with production being
                    reinstated in late October 2013, approximately two
                    weeks behind the original plan. The extended
                    shutdown duration and post-shutdown close-out
                    activities have resulted in slippage in execution
                    of the plan to complete the remaining platform
                    modifications required to deliver power to the
                    Causeway electrical submersible pump package
                    installed in the well. It is anticipated that
                    these platform workscopes will now be completed in
                    2014, resulting in deferment of ESP driven
                    incremental Causeway production.

                    Production during Q3-2013 was also affected by a
                    significant unplanned shutdown of the Shell
                    operated Cook field in August 2013. The Operator
                    commenced the shutdown in early August 2013 in
                    order to undertake an inspection of the infield
                    flowline connecting the field to its host facility,
                    the Anasuria floating production, storage and
                    offloading vessel. The inspection was completed
                    around mid-October 2013, enabling the reinstatement
                    of production. The shutdown duration was longer
                    than initially anticipated by the field Operator
                    due to delays incurred in mobilising a diving
                    support vessel to undertake the inspection works
                    and field re-start operations. However, the
                    inspection confirmed the integrity of the pipeline
                    thus avoiding an extended shutdown in 2014 which
                    was planned to cost $8 million (net).

                    During the quarter diagnostic testing confirmed
                    that the ESP pumps in the "P4" well on the Athena
                    field had failed. The net production impact of
                    this has been successfully mitigated by the
                    optimisation of the other wells on the field and
                    the processing facilities, such that it represents
                    a net production deferment to Ithaca of just over
                    300 bopd. The options for reinstating full
                    production from the well, via either a workover or
                    sidetrack, are currently under evaluation.

                    Minor planned maintenance shutdowns were incurred
                    during the quarter on the Anglia and Topaz gas
                    fields to accommodate the completion of maintenance
                    activities on the gas gathering systems servicing
                    the fields.

                    PRODUCTION OUTLOOK

                    Total pro-forma production for 2013 is forecast to
                    average approximately 13,000 boepd; this reflects
                    inclusion of full year production from the assets
                    acquired as part of the Valiant acquisition, which
                    completed on April 19, 2013. This is lower than
                    originally anticipated for the year primarily as a
                    result of production deferrals resulting from the
                    longer than anticipated duration of the maintenance
                    shutdown activities that have impacted the Cook and
                    Causeway Area fields during the second half of the
                    year, and delay to completion of the ESP related
                    works on the Taqa-operated host facility for
                    Causeway. Maintenance activities on the host
                    facility for the Dons fields, the Northern Producer
                    floating production facility, is also scheduled to
                    result in a modest reduction in production from the
                    fields over approximately two weeks in the final
                    quarter of 2013. These works are being completed
                    in order to improve the future uptime performance
                    of these facilities over the longer term.

                    GREATER STELLA AREA DEVELOPMENT UPDATE

Strong progress     Strong progress has continued to be made with
during the          development of the Greater Stella Area ("GSA") and
quarter on          a number of key milestones have been closed out,
execution of the    including completion of both the first Stella
key GSA             development well and the dry dock related works and
development         re-float of the FPF-1.
workscopes
                    DRILLING PROGRAMME

                    During the quarter the first Stella development
                    well was successfully drilled, completed and tested
                    using the ENSCO 100 jack-up drilling rig. The 30/
                    6a-A1Z ("A1") well is the first of four development
                    wells that are to be drilled on the Stella field
                    prior to the start-up of production.

                    The A1 well was drilled to a total vertical depth
                    subsea of 9,739 feet, with a 2,499 foot horizontal
                    reservoir section completed in the Palaeocene
                    Andrew sandstone reservoir, close to the targeted
                    transition between the oil rim and gas condensate
                    cap. As anticipated prior to drilling, the
                    reservoir quality encountered by the well was in
                    line with previous appraisal wells drilled on the
                    field. The well intersected a net reservoir
                    interval of 1,312 feet.

                    A clean-up and production flow test was performed
on the well. The purpose of this was to clean out
                    the drilling fluids used to complete the well, to
                    ensure that it is configured for the immediate
                    start-up of production following the hook-up of the
                    FPF-1, gain further information on the productivity
                    of the well and obtain hydrocarbon fluid samples.

                    The well flowed at a maximum rate of 10,835 boepd
                    on a 7/8-inch choke, with the full production
                    potential of the well limited by the capacity of
                    the well test equipment on the drilling rig. The
                    maximum flow rate of 10,835 boepd corresponds to
                    6,499 bopd of oil and 26 million standard cubic
                    feet of gas per day ("MMscf/d") of liquids rich
                    gas. Fluid samples show that the oil is of high
                    quality, approximately 42degrees API.

                    The processing facilities that will be used on the
                    FPF-1 to separate and export oil and gas produced
                    from the field will increase the overall oil
                    relative to gas production rate associated with the
                    A1 well, compared to that which can be achieved
                    from the simple separation facilities available for
                    the purposes of the well test.

                    Following completion of the A1 well, the ENSCO 100
                    rig moved directly on to drilling of the Stella A2
                    well. Operations are progressing to plan on the
                    well, with drilling of the horizontal reservoir
                    section scheduled to commence shortly.

                    Management of the Stella drilling and completion
                    operations is being performed by Advanced Drilling
                    Technology International ("ADTI") under "turnkey"
                    contract arrangements.

                    FPF-1 MODIFICATIONS PROGRAMME

                    Solid progress was made during the quarter with
                    execution of the FPF-1 dry dock related marine
                    system refurbishment and hull life extension works,
                    resulting in the vessel exiting the dry dock
                    facility and being re-floated in early October.
                    This marked a major milestone in execution of the
                    FPF-1 modifications programme, allowing the main
                    topsides processing plant construction and
                    installation activities to commence.

                    Three additional sponsons have been added to the
                    pontoons on the FPF-1, involving the construction
                    and installation of approximately 2000 tonnes of
                    steelwork blocks, to provide enhanced buoyancy.
                    Four buoyancy "blisters" are being fabricated and
                    will be added to the columns of the FPF-1 during
                    the next phase of operations, in parallel with the
                    topsides construction works. These modifications
                    are designed to ensure that the FPF-1 can
                    accommodate the new topsides processing equipment
                    that is to be installed on the main deck and
                    achieve strong operational uptime performance.

                    Processing plant equipment and materials for the
                    topsides of the vessel continue to flow to the
                    yard, with most of the major long lead pieces of
                    equipment having now been delivered to site in
                    readiness for installation. Work is progressing on
                    construction of the pre-assembled units and racks
                    that are to be installed on the vessel, which will
                    contain structural steel, pipework spools, cable
                    trays and equipment. The associated preparatory
                    work on the main deck of the FPF-1 is also
                    underway, involving the installation of the
                    structural steelwork on which the units and racks
                    will be located.

                    The FPF-1 modifications and upgrade programme is
                    being managed by Petrofac under the terms of a lump
                    sum incentivised contract. The modification works
                    are being undertaken at the Remontowa shipyard in
                    Gdansk, Poland.

                    SUBSEA INFRASTRUCTURE WORKS

                    Execution of the main subsea infrastructure
                    manufacturing and installation programme, which is
                    being undertaken by Technip UK Limited under the
                    terms of an integrated Engineering, Procurement,
                    Installation and Construction contract, has
                    continued to make rapid progress over Q3-2013.

                    Installation of the main subsea structures that
                    will be used for the production and export of
                    hydrocarbons to and from the FPF-1 was completed
                    during the quarter. The 60km 10-inch gas export
                    pipeline from the FPF-1 to the BP operated Central
                    Area Transmission System ("CATS") pipeline has also
                    now been fully installed following completion of
                    trench backfill, tie-in and as laid survey
                    operations. The pipeline is now configured to
                    receive gas exports upon the start-up of production
                    from the Stella field. No modifications are
                    required to the onshore Teeside Gas and Liquids
                    Processing ("TGLP") terminal to receive and process
                    the rich gas that will be exported from the FPF-1
                    through the CATS pipeline.

                    Installation of the flexible infield flowlines and
                    static umbilicals that connect the Stella field
                    drill centre manifolds to the FPF-1 riser bases has
                    now been completed and diving operations will
                    commence shortly to complete the tie-in of these
                    components. Completion of the tie-in operations
                    will mark the end of the 2013 subsea infrastructure
                    installation campaign.

                    Planning for the remaining subsea infrastructure
                    installation programme is well advanced. The
                    programme will involve tie-in of the wells,
                    installation of the dynamic flexible risers and
                    umbilicals that will connect the riser bases to the
                    FPF-1, the vessel mooring spread and the oil export
                    facilities.

                    GSA LICENCES

                    The GSA coventurers have elected to relinquish
                    licence P.1814 (Block 29/10d), containing the
                    Helios discovery. The licence terms required a
                    commitment to be made to either drilling a well on
                    the block or relinquishing it by October 2013.
                    Such a well commitment was not deemed appropriate
                    by the coventurers at this time.

                         CORPORATE ACTIVITIES

                         NEW DEBT FACILITIES

Enlarged senior debt     The planned enlargement of the Company's
facility established,    $430 million RBL facility was completed in
along with a new         October in order to incorporate the assets
corporate debt facility  acquired as part of the Valiant acquisition
                         and enable retirement of the $350 million
                         bridge credit facility taken out to
                         facilitate the acquisition. The increased
                         $610 million facility is based on
                         conventional oil and gas industry borrowing
                         base financing terms, with a loan term until
                         June 2017, and is available to fund on-going
                         development activities and any producing
                         asset acquisitions.

                         A new $100 million five year corporate debt
                         facility has also been established,
                         providing additional financial flexibility
                         for the Company to add new appraisal /
                         development opportunities to the existing
                         portfolio. This facility is based on normal
                         corporate debt covenants, relating to
                         EBITDAX ("Earnings before Interest Tax
                         Depreciation, Amortisation and Exploration
                         costs") coverage of debt and interest
                         obligations.

                         OIL SALES AGREEMENTS

                         The Company has entered into an extension of
                         its existing agreement with BP Oil
                         International Limited for the marketing of
                         niche grade crudes and its oil sales
                         agreement with Shell Trading International
                         Limited ("Shell") for production from the
                         Cook, Dons, Causeway Area and Broom
                         producing fields. Future volumes from the
                         Stella field may also be included. This
                         latter agreement includes the ability for
                         Ithaca, at its option, to receive
                         pre-payments for future crude sales to
                         Shell.

                           UK EXPLORATION FARM-OUTS

Fully carried positions  In line with the Company's stated objective
plus a positive cash     at the time of the Valiant acquisition,
balance established      further farm-outs have been completed to
through farm-outs of the restructure and de-risk the 3 UK exploration
3 UK exploration wells   well commitments transferred as a result of
commitments transferred  the acquisition. Ithaca will now be fully
from Valiant             carried for the forecast cost of drilling
                         the UK exploration commitment wells and in
                         addition will receive over $8 million in
                         cash from the farm-out parties.

                         The status of the UK exploration farm-outs
                         are summarised below. In addition to these
                         transactions, the Company has also withdrawn
                         from a number of licences in the portfolio
                         transferred from Valiant.

                         - Handcross - P1631 & P1832 (Blocks
                         204/14c, 204/18b & 204/19c): farm-outs have
                         been executed with RWE Dea UK SNS Limited, a
                         subsidiary of Edison International SpA,
                         Oyster Petroleum Limited and Sussex Energy
                         Limited. The agreements provide Ithaca with
                         a fully carried 31% (operated) working
                         interest and also a cash payment. Handcross
                         is a Palaeocene prospect located in the West
                         of Shetland sector of the UK Continental
                         Shelf ("UKCS"). An exploration well is
                         scheduled to be drilled on the prospect
                         using the Stena Carron drillship, with
                         operations anticipated to commence in late
                         2013.

                         - Isabella - P1820 (Blocks 30/6b, 30
                         /11a & 30/12d): farm-out executed with
                         Maersk Oil North Sea UK Limited and a
                         subsidiary of Edison International SpA. The
                         agreement provides Ithaca with a fully
                         carried 10% non-operated working interest
                         and also a cash payment. Isabella is a gas
                         condensate prospect located in the UK
                         Central North Sea. The licence work
                         programme requires an exploration well to be
                         drilled on the prospect by early 2015.

                         - Beverley - P1792 (Blocks 21/30f,
                         22/26c): farm-out executed with Shell UK
                         Limited, resulting in Ithaca reducing its
                         40% interest in the non-operated Central
                         North Sea exploration well to 20%, in return
                         for a partial carry of the costs of a well
                         on the Beverley prospect. The licence work
                         programme requires an exploration well to be
                         drilled on the prospect by early 2015.

                         HANDCROSS WELL

                         The Company is in the process of preparing
                         for the drilling of the operated exploration
                         well on the Handcross prospect located in
                         the West of Shetlands basin. The Stena
                         Carron drillship will be used for the
                         drilling operations and it is anticipated
                         that it will be on location at the end of
2013.

                         LANGLITINDEN WELL

                         Drilling of an exploration well on the Det
                         norske operated Langlintinden prospect is
                         scheduled to commence in late 2013 (5%
                         Ithaca working interest). The well is being
                         drilled on the licence PL659, located in the
                         Norwegian sector of the Barents Sea, in the
                         vicinity of the 2008 Caurus gas discovery
                         located on the same licence.


                     Q3 2013 RESULTS OF OPERATIONS

                      REVENUE

Quarterly revenue     Three Months Ended September 30, 2013
of $114.1 million ,
reflecting a          Revenue increased by $72.5 million in Q3 2013 to
realised average      $114.1 million (Q3 2012: $41.6 million). This was
oil price of $109/    mainly driven by an increase in oil sales
bbl                   volumes, partially offset by a reduction in the
                      oil price.

                      Oil sales volumes increased primarily due to the
                      inclusion of sales from the Dons and Causeway
                      fields following the acquisition of Valiant
                      (April 2013). The additional Cook acquisition
                      (transaction completed in Q1 2013) also added to
                      the increase in oil sales offset by lower volumes
                      from the Beatrice and Jacky fields.

                      Average realised oil prices increased quarter on
                      quarter from $110/bbl in Q3 2012 to $113/bbl in
                      Q3 2013. The average Brent price for the quarter
                      was $110.3/bbl compared to $109.6/bbl for Q3
                      2012. The Company's realised oil prices do not
                      strictly follow the Brent price pattern given the
various oil sales contracts in place, with
                      certain field sales sold at a discount or premium
                      to Brent. The higher premium to Brent achieved
                      this quarter was predominantly driven by
                      significant premiums on the uplift of oil cargoes
                      from Nigg. This increase in average realised oil
                      price was offset by a realised hedging loss of $4
                      /bbl in Q3 2013.

                      Gas sales remained relatively steady quarter on
                      quarter, although volumes remain modest,
                      accounting for only 2% of total revenue.

                      Nine Months Ended September 30, 2013
                      Revenue increased by $184.3 million in Q3 YTD
                      2013 to $302.2 million (Q3 YTD 2012: $117.9
                      million). This movement mainly comprises an
                      increase in oil sales volumes, partially offset
                      by a reduction in oil price.


   In line with the above quarterly movement, oil sales volumes
   increased primarily due to the inclusion of sales from the Dons and
   Causeway fields acquired from Valiant, as well as the additional
   interest acquired in the Cook field and Athena coming onstream in Q2
   2012, partially offset by lower volumes from the Beatrice and Jacky
   fields attributable to planned shutdowns.

   Total gas sales increased primarily as a result of higher realised
   gas prices, with an increase from $38/boe to $43/boe, partially
   offset by lower production volumes in the period.


                   3-Months  9-Months
                   Ended     Ended
                   Sep 30    Sep 30

Average            2013 2012 2013 2012
Realised
Price
Oil          $/bbl 113  110  104  112
Pre-Hedging
Oil          $/bbl 109  113  108  115
Post-Hedging
Gas          $/boe 41   41   43   38                      COST OF SALES

                                        3-Months        9-Months
                                        Ended Sep 30    Ended Sep 30
                       $'000            2013    2012    2013    2012
                       Operating        41,893  20,903  108,275 52,031
                       Expenditure
                       DD&A             42,279  14,563  103,144 39,040
                       Movement in Oil  (6,915) (8,370) 14,798  (7,989)&
Gas Inventory
                       Oil Purchases    34      -       981     -
                       Total            77,291  27,096  227,198 83,082

                       Three Months Ended September 30, 2013

                       Cost of sales increased in Q3 2013 to $77.3
                       million (Q3 2012: $27.1 million). This increase
                       was attributable to increases in operating
                       costs, depletion, depreciation and amortisation
                       ("DD&A") and movement in oil and gas inventory.

                       Operating costs increased in the quarter to
                       $41.9 million (Q3 2012: $20.9 million) primarily
                       due to the inclusion of costs for the Dons and
                       Causeway fields acquired from Valiant, plus the
                       additional acquired interest in the Cook field.

                       Unit operating costs decreased to $38/boe in the
                       period (Q3 2012: $45/boe) mainly as a result of
                       the inclusion of the lower cost Dons and
                       Causeway fields acquired from Valiant. Unit
                       operating costs were not reduced further in the
                       quarter because of the planned Causeway area
                       maintenance shutdown and the unplanned shutdown
                       on Cook for infield flowline integrity
inspection as noted above.

                       DD&A for the quarter increased to $42.3 million
                       (Q3 2012: $14.6 million). This was primarily due
                       to higher production volumes in Q3 2013 as a
                       result of the addition of the Dons and Causeway
                       fields together with the additional acquired
                       interest in the Cook field. The blended DD&A
                       rate for the quarter increased to $38/boe (Q3
                       2012: $31/boe). The blended DD&A rate in Q3
                       2012 was unusually low due to the production
                       mix, however the primary driver for the increase
                       has been "business combination" accounting for
                       transactions.

                       As the below "Changes in Accounting Policies"
                       section outlines, the adoption of international
                       financial reporting standards ("IFRS") and
                       accounting for acquisitions as business
                       combinations has led to increased DD&A rates. It
                       should be noted that this increase in DD&A, and
                       hence Cost of Sales, is offset by a credit in
                       the Deferred Tax charged through the Statement
                       of Income.

                       An oil and gas inventory movement of $6.9
                       million was credited to cost of sales in Q3 2013
                       (Q3 2012 credit of $8.4 million). Movements in
                       oil inventory arise due to differences between
                       barrels produced and sold, with production being
                       recorded as a credit to movement in oil
                       inventory through cost of sales until the oil
                       has been sold. In Q3 2013 fewer barrels of oil
                       were sold (988k bbls) than produced (1,049k
                       bbls), mainly as a result of the timing of Cook,
                       Causeway and Dons field liftings.

                       Movement in Operating     Oil   Gas  Total
                       Oil & Gas Inventory       kbbls kboe kboe
                       Opening inventory         173   10   183
                       Production                1,049 50   1,099
                       Liftings/sales            (988) (50) (1,038)
                       Transfers to LT inventory (7)   -    (7)
                       Closing volumes           227   10   237

                       Nine Months Ended September 30, 2013

                       Cost of sales increased in Q3 YTD 2013 to $227.2
                       million (Q3 YTD 2012: $83.1 million) due to
                       increases in operating costs, DD&A and movement
                       in oil and gas inventory.

                       Operating costs increased in the period to
                       $108.3 million (Q3 YTD 2012: $52.0 million)
                       primarily due to the inclusion of costs for the
                       Dons and Causeway fields acquired from Valiant,
                       plus increased Athena costs (only part period in
                       2012) and the additional interest acquired in
                       the Cook field as noted above.

                       DD&A for the period increased to $103.1 million
                       (Q3 YTD 2012: $39.0 million). This was primarily
                       due to higher production volumes in Q3 YTD 2013
                       with the addition of the Dons and Causeway
                       fields, together with a full period of
                       production from the Athena field and the
                       additional interest in the Cook field.

                       An oil and gas inventory movement of $14.8
                       million was charged to cost of sales in Q3 YTD
                       2013 (Q3 YTD 2012: credit of $8.0 million). In
                       Q3 YTD 2013 more barrels of oil were sold
                       (2,730k bbls) than produced (2,584k bbls), as a
                       result of the timing of liftings.

                       ADMINISTRATION & EXPLORATION & EVALUATION
                       EXPENSES


                                                3-Months   9-Months
                                                Ended Sep  Ended Sep
                                                30         30
                       $'000                    2013  2012 2013   2012
                       General & Administration 1,315 462  6,731  2,566
                       Share Based Payments     203   62   865    401
                       Total Administration     1,518 524  7,596  2,967
                       Expenses
                       Non-recurring Valiant    -     -    10,235 -
                       Acquisition Costs
                       Exploration & Evaluation 509   112  953    191
                       ("E&E")
                       Total                    2,027 636  18,784 3,158


                       Three Months Ended September 30, 2013

                       Total administrative expenses increased in the
                       quarter to $1.5 million (Q3 2012: $0.5 million)
                       primarily due to an increase in general and
                       administrative expenses as a result of the
                       continued growth of the Company, including the
                       associated costs of an enlarged Ithaca group
                       post the Valiant acquisition. Share based
                       payment expenses increased as a result of
                       options being granted towards the end of 2012
                       (none end 2011), therefore higher amortisation
                       expense has been reflected through Q3 2013.

                       Exploration and evaluation expenses of $0.5
                       million were recorded in the quarter (Q3 2012:
                       $0.1 million) primarily due to the expensing of
                       previously capitalised costs relating to areas
                       where exploration and evaluation activities have
                       ceased.

                       Nine Months Ended September 30, 2013

                       Total administrative expenses increased in the
                       period to $7.6 million (Q3 YTD 2012: $3.0
                       million) primarily associated with an increase
                       in general and administrative expenses as a
                       result of the associated costs of an enlarged
                       Ithaca group post the Valiant acquisition as
                       well as higher levels of corporate activity,
                       particularly in the first quarter of the year.

                       FOREIGN EXCHANGE & FINANCIAL INSTRUMENTS

                       Three Months Ended September 30, 2013

                       A foreign exchange gain of $2.2 million was
                       recorded in Q3 2013 (Q3 2012: $0.7 million
                       gain). The majority of the Company's revenue is
                       US dollar driven while operating expenditures
                       are primarily incurred in British pounds. As
                       such, general volatility in the USD:GBP exchange
                       rate is the driver behind the foreign exchange
                       gains and losses, particularly on the
                       revaluation of the GBP bank accounts (USD:GBP
                       1.52 at the start of the quarter rising to
                       USD:GBPP 1.61 at the end of the quarter,
fluctuating between 1.49 and 1.61 during the
                       period). This volatility was partially offset by
                       the foreign exchange hedges and resultant gains
                       described below.

                       The Company recorded a $15.8 million loss on
                       financial instruments for the quarter ended
                       September 30, 2013 (Q3 2012: $12.0 million
                       loss). The loss was predominantly due to a $3.7
                       million realised loss on commodity hedges
                       together with a $22.9 million decrease in the
                       value of oil swaps and put options, due to a
                       reduction in the Brent oil forward curve,
                       partially offset by a $9.7 million gain on the
                       revaluation of foreign exchange instruments. In
                       addition, the Company realised a gain of $1.2
                       million on foreign exchange instruments.

                       The Company continues to limit exposure to
                       fluctuations in foreign currencies with forward
                       contracts to hedge a further GBP65 million and
                       EUR25 million of capital expenditure on the GSA
                       development at rates of $1.52: GBP1.00 and
                       $1.29: EUR1.00.

                       Nine Months Ended September 30, 2013

                       A foreign exchange gain of $0.1 million was
                       recorded in Q3 YTD 2013 (Q3 YTD 2012: $0.9
                       million gain). As above, general volatility in
                       the USD:GBP exchange rate was the main driver
                       behind the foreign exchange loss in Q3 YTD 2013
                       (USD:GBP at January 1, 2013: 1.62. USD:GBP at
                       September 30, 2013: 1.61 with fluctuations
                       between 1.48 and 1.64 during the period).

                       The Company recorded a $5.5 million loss on
                       financial instruments for the nine months ended
                       September 30, 2013 (Q3 YTD 2012: $6.6 million
                       gain). This was primarily driven by a $25.4
                       million downwards revaluation of commodity
                       hedges due to a reduction in value of oil swaps
                       and put options

                       partially offset by a $9.9 million realised gain
                       on commodity hedges (including a $6 million
                       settlement on the swaption conversion), a $8.3
                       million gain on the revaluation of foreign
                       exchange instruments together with a $1.8
                       million realised gain on foreign exchange
                       instruments.

                       BUSINESS COMBINATIONS

                       NEGATIVE GOODWILL

                       If the cost of an acquisition is more than the
                       fair value of net assets acquired, the
                       difference is recognised on the balance sheet as
                       goodwill. Conversely, if the cost of an
                       acquisition is less than the fair value of the
                       assets acquired, the difference is recognised as
                       negative goodwill in the statement of income. As
                       a result of business combination accounting for
                       the Valiant acquisition, $55.0 million of
                       negative goodwill was recognised in Q3 YTD 2013,
                       including $7 million in Q3 2013 relating to the
                       true-up of working capital balances on
                       acquisition. In addition, $0.9 million negative
                       goodwill was recognised in Q1 2013 in relation
                       to the Cook acquisition representing negative
                       goodwill of $55.9 million in the nine month
                       period ended September 30, 2013.

                       EXPLORATION OBLIGATION

                       As part of the Valiant acquisition accounting, a
                       liability was created to cover committed
                       exploration expenditure. On the farm-out of
                       Handcross to Euroil Exploration Limited, a
                       subsidiary of Edison International SpA, $22.3
                       million of this liability was released and
                       credited to the statement of income to reflect
                       the fact that Ithaca will no longer be liable
                       for these costs.

                       TAXATION

No UK tax              Three Months Ended September 30, 2013
anticipated to be
payable in the         A tax credit of $8.2 million was recognised in
mid-term               the quarter ended September 30, 2013 (Q3 2012:
                       $2.9 million credit). This is a product of
                       adjustments to the tax charge primarily relating
                       to the UK Ring Fence Expenditure Supplement,
                       share based payments and the release of
                       exploration obligations. As noted in the Cost Of
                       Sales section the deferred tax credit is
                       increased by the use of accounting for
                       acquisitions as business combinations.

                       In addition, Norwegian tax refunds totalling $88
                       million relating to Norwegian capital
                       expenditure are recognised on the balance sheet.

                       As a result of the above factors, profit after
                       tax increased to $54.1 million (Q3 2012: $4.9
                       million).

                       Nine Months Ended September 30, 2013

                       A tax charge of $7.5 million was recognised in
                       the nine months ended September 30, 2013 (Q3 YTD
                       2012: $10.6 million credit). This is a product
                       of adjustments to the tax charge primarily
                       relating to the UK Ring Fence Expenditure
                       Supplement, share based payments and the release
                       of exploration obligations.

                       As a result of the above factors, profit after
                       tax decreased from $117.3 million to $109.8
                       million (Q3 YTD 2012: $48.1 million).

                       No taxes are expected to be paid in the mid-term
                       relating to upstream oil and gas activities as a
                       result of the $993 million UK tax allowances
                       pool available to the Company.

                       CAPITAL INVESTMENTS

Capital expenditure    $608 million of the total $886 million capital
driven by              additions to D&P assets in Q3 YTD 2013 was
significant            attributable to the fair value on acquisition of
investment in          the Valiant producing fields resulting from
development projects   business combination accounting (the total
and the acquisition    acquisition cost being $293.6 million). A
of Valiant             further $105 million relates to non-cash
                       additions to decommissioning liabilities
                       relating to Valiant acquired assets and the
                       Stella field. The remaining D&P additions of
                       $173 million relate primarily to the acquisition
                       of the additional interest in the Cook field and
                       execution of the GSA development, with the main
                       areas of expenditure being on the manufacture
                       and fabrication of subsea infrastructure and
execution of the FPF-1 modification works (as
                       described above).

                       Capital expenditure on E&E assets in Q3 YTD 2013
                       was $49.7 million, offset by a $28.7 million
                       release of the acquired E&E liability, resulting
                       in a net addition of $21 million. Expenditure
                       was primarily focused

                       on the Norvarg and Storbarden exploration and
                       appraisal wells in Norway as well as UK
                       development projects. As part of the Valiant
                       acquisition accounting, a liability was created
                       to cover the committed exploration spend along
                       with a corresponding asset for the associated
                       Norwegian tax credit receivable. This liability
                       is released as the spend is incurred,
                       essentially resulting in a nil asset value
                       within PP&E.

                       $'000                            Q3 2013 Q3 2012
                       Development & Production ("D&P") 885,757 98,311
                       Exploration & Evaluation         20,979  28,168
                       Other Fixed Assets               711     60
                       Total                            907,447 126,539

                       LIQUIDITY AND CAPITAL RESOURCES


                      $'000           Q3 2013   Q4 2012   Increase /
                                                          (Decrease)
                      Cash & Cash     77,196    31,376    45,820
                      Equivalents
                      Trade & Other   325,677   173,949   151,728
                      Receivables
                      Inventory       28,106    15,878    12,228
Other Current   12,150    8,251     3,899
                      Assets
                      Trade & Other   (408,604) (205,635) (202,969)
                      Payables
                      Net Working     34,525    23,819    10,706
                      Capital

                       As at September 30, 2013, Ithaca had a positive
                       net working capital balance of $34.5 million
                       including a cash balance of $77.2 million.
                       Available cash has been, and is currently,
                       invested in money market deposit accounts with
                       BNP Paribas ("BNPP"). Management has received
                       confirmation from the financial institution that
                       these funds are available on demand.

                       Cash and cash equivalents increased as a result
                       of bank debt drawings towards the end of the
                       quarter offsetting the continued cash investment
                       in the ongoing Stella field development. The
                       funds were drawn for substantial payments due
                       for imminent release post September 30, 2013 on
                       the Stella development. Other working capital
                       movements are driven by the timing of receipts
                       and payments of balances.

                       A significant proportion of Ithaca's accounts
                       receivable balance is with customers in the oil
                       and gas industry and is subject to normal joint
                       venture/industry credit risks. The Company
                       assesses partners' credit worthiness before
                       entering into joint venture agreements. The
                       Company regularly monitors all customer
                       receivable balances outstanding in excess of 90
days. As at September 30, 2013, substantially
                       all of the accounts receivable is current, being
                       defined as less than 90 days. In the past, the
                       Company has not experienced credit loss in the
                       collection of accounts receivable.

                       At September 30, 2013, Ithaca had three loan
                       facilities being a $430 million senior borrowing
                       base facility (the "Facility"), an additional
                       bridge credit facility (the "Bridge Facility")
                       of $350 million (to facilitate the Valiant
                       acquisition) together with a Norwegian debt
                       facility (the "Norwegian Facility") of NOK 450
                       million (~$75 million). At quarter end, the
                       Company had unused credit facilities totalling
                       approximately $421 million (Q4 2012: $430
                       million). Approximately $434 million was drawn
                       down under the facilities at September 30, 2013,
                       being $50 million drawn under the Facility, $350
                       million drawn under the Bridge Facility and $34
                       million drawn under the Norwegian Facility.

                       During the quarter ended September 30, 2013,
                       there was a net cash inflow of approximately
                       $46.7 million (Q3 2012: outflow of $55.0
                       million).

                       Cashflow from Operations

                       Cash generated from operating activities in Q3
                       2013 was $77.8 million primarily due to cash
                       generated from Athena, Beatrice, Jacky, Anglia,
                       Cook and Broom operations, augmented in Q3 2013
                       primarily due to the inclusion of Dons and
                       Causeway operations.

                       Cashflow from Financing Activities

                       Cash generated from financing activities in Q3
                       2013 was $52.1 million primarily due to
                       additional draw down of the existing debt
                       facility in Q3 2013 ($58 million).

                       Cashflow from Investing Activities

                       Cash used in investing activities in Q3 2013 was
                       $139.3 million primarily due to further capital
                       expenditure on the GSA development, including
                       modification of the FPF-1 and subsea
                       infrastructure fabrication works as noted above.

                       The Company continues to be fully funded, with
                       more than sufficient financial resources to
                       cover its anticipated future commitments from
                       its existing cash balance, debt facilities and
                       forecast cashflow from operations. No unusual
                       trends or fluctuations are expected outside the
                       ordinary course of business.

                       COMMITMENTS

                       The engineering financial commitments relate to
                       committed capital expenditure on the GSA
                       development, as well as ongoing capital
                       expenditure on existing producing fields. Rig
                       commitments reflect rig hire costs committed in
                       relation to the anticipated Stella wells. As
                       stated above, these commitments are expected to
                       be funded through the Company's existing cash
                       balance, forecast cashflow from operations and
                       its debt facilities.

                       $'000                   1       2-5      5+
                                               Year    Years    Years
                       Office Leases           954     3,137    -
                       Other Operating Leases  12,319  8,272    -
                       Exploration Licence     583     -        -
                       Fees
                       Engineering             238,451 -        -
                       Rig Commitments         23,094  -        -
                       Total                   275,401 11,049   -

  FINANCIAL INSTRUMENTS

   All financial instruments are initially measured in the balance
   sheet at fair value. Subsequent measurement of the financial
   instruments is based on their classification. The Company has
   classified each financial instrument into one of these categories:


Financial        Ithaca              Subsequent Measurement
Instrument       Classification
Category

Held-for-trading Cash, cash          Fair Value with changes recognised
                 equivalents,        in net income
                 restricted cash,
                 derivatives,
                 commodity hedges,
                 long-term liability

Held-to-maturity -                   Amortised cost using effective
                                     interest rate method.

Loans and        Accounts receivable Transaction costs (directly
Receivables                          attributable to acquisition or
                                     issue of financial asset/
                                     liability) are adjusted to fair
Other financial  Accounts payable,   value initially recognised. These
liabilities      operating bank      costs are also expensed using the
                 loans, accrued      effective interest rate method and
                 liabilities         recorded within interest expense.

The classification of all financial instruments is the same at
inception and at September 30, 2013.

  The table below presents the total gain / (loss) on financial
   instruments that has been disclosed through the statement of
   comprehensive income.


                                     Three months      Nine months
                                     ended             ended
                                     September 30      September 30
$'000                                2013     2012     2013     2012
Revaluation Forex Forward Contracts  9,723    166      8,251    707
Revaluation of Gas Contract          -        610      -        1,368
Revaluation of Other Long Term       (90)     (86)     64       (115)
Liability
Revaluation of Commodity Hedges      (22,945) (13,617) (25,389) 3,241
Total Revaluation Gain/(Loss)        (13,312) (12,927) (17,074) 5,201
Realised Gain on Forex Contracts     1,185    50       1,729    118
Realised Gain/(Loss) on Commodity    (3,687)  888      9,873    2,597
Hedges
Total Realised Gain/(Loss)           (2,502)  938      11,602   2,715
Total Realised / Revaluation Gain/   (15,814) (11,989) (5,472)  7,916
(Loss)
Contingent Consideration             -        -        -        (1,295)
Total Gain/(Loss) on Financial       (15,814) (11,989) (5,472)  6,621
Instruments

  The following table summarises the commodity hedges in place at the
   end of the quarter.



Derivative Term                                 Volume    Average Price
                                                bbl       $/bbl
Oil Swaps         October 2013 - December 2014  2,472,809 102
Put Options       October 2013 - September 2014 930,300   104
Derivative        Term                          Volume    Average Price
                                                Therms    p/therm
Gas Swaps         October 2013 - December 2014  1,974,000 67

The table below summarises the foreign exchange financial instruments
in place at the end of Q3 2013.

Derivative      Forward             Forward         Forward
                Plus                contract        contract
Term            Oct 13 - Dec 13     Oct 13 - Jan 14 Oct 13 - Dec 13
Value           GBP4million / month GBP65 million   EUR25 million
Protection Rate $1.59/GBP1.00       $1.52/GBP1.00   $1.29/EUR1.00
Trigger Rate    $1.50/GBP1.00       N/A             N/A

  SUMMARY OF QUARTERLY RESULTS

$'000            30 Sep 2013 30 Jun 2013 31 Mar 2013
Revenue          114,112     128,360     59,769
Profit After Tax 54,104      52,228      3,472
EPS - Basic      0.17        0.17        0.01
EPS - Diluted    0.17        0.17        0.01


$'000           31 Dec     30 Sep     30 Jun     31 Mar     31 Dec
                2012       2012       2012       2012       2011
Revenue         52,566     41,579     35,779     40,553     54,870
Profit After    45,347     4,894      30,238     12,916     13,318
Tax
EPS - Basic     0.17       0.02       0.12       0.05       0.05
EPS - Diluted   0.17       0.02       0.11       0.05       0.05

               The most significant factors to have affected the
               Company's results during the above quarters, other than
               transactions such as the Valiant acquisition, are
               fluctuation in underlying commodity prices and movement
               in production volumes. The Company has utilised forward
               sales contracts and foreign exchange contracts to take
               advantage of higher commodity prices while reducing the
               exposure to price volatility. These contracts can cause
               volatility in profit after tax as a result of unrealised
               gains and losses due to movements in the oil price and
               USD : GBP exchange rate.

               OUTSTANDING SHARE INFORMATION

               The Company's common shares are traded on the Toronto
               Stock Exchange ("TSX") in Canada under the symbol "IAE"
               and on the Alternative Investment Market ("AIM") in the
               UK under the symbol "IAE".

               As at September 30, 2013, Ithaca had 317,365,658 common
               shares outstanding along with 19,314,630 options
               outstanding to employees and directors to acquire common
               shares.

               No options were granted by the Board of Directors in the
               quarter ended September 30, 2013.

               Due to the exercise and listing of option shares
               following the end of Q3-2013, as at November 8, 2013,
               Ithaca had 322,233,620 common shares outstanding along
               with 14,446,668 options outstanding to employees and
               directors to acquire common shares.

                                           September 30, 2013
               Common Shares Outstanding   317,365,658
               Share Price(1)              $2.45 / Share
               Total Market Capitalisation $777,545,862

               (1) Represents the TSX close price (CAD$2.53 on last
               trading day of September, 2013. US$:CAD$ 0.97 on
               September 30, 2013

              CONSOLIDATION

               The consolidated financial statements of the Company and
               the financial data contained in this management's
               discussion and analysis ("MD&A") are prepared in
               accordance with IFRS.

               The consolidated financial statements include the
               accounts of Ithaca and its wholly-owned subsidiaries
               Ithaca Energy (Holdings) Limited ("Ithaca Holdings"),
               Ithaca Energy (UK) Limited ("Ithaca UK"), Ithaca
               Minerals North Sea Limited ("Ithaca Minerals") and
               Ithaca Energy Holdings (UK) Limited ("Ithaca Holdings
               UK") and its associates FPU Services Limited ("FPU") and
               FPF-1 Limited ("FPF-1").

               The consolidated financial statements also include,
               from April 19 2013 only (being the acquisition date)
               the Valiant group of companies, comprising the following
               companies:

               - Ithaca Petroleum Limited (formerly Valiant
               Petroleum plc)

               - Ithaca Causeway Limited (formerly Valiant
               Causeway Limited)

               - Ithaca Exploration Limited (formerly Valiant
               Exploration Limited)

               - Ithaca Alpha (NI) Limited (formerly Valiant
               Alpha (NI) Limited

               - Ithaca Gamma Limited (formerly Valiant Gamma
               Limited)

               - Ithaca Epsilon Limited (formerly Valiant
               Epsilon Limited)

               - Ithaca Delta Limited (formerly Valiant Delta
               Limited)

               - Ithaca Petroleum Holdings AS (formerly Valiant
               Petroleum Holdings AS)

               - Ithaca Petroleum Norge AS (formerly Valiant
               Petroleum Norge AS)

               - Ithaca Technology AS (formerly Valiant
               Technology AS)

               - Ithaca AS (formerly Querqus AS)

               - Ithaca Petroleum EHF (formerly Valiant
               Petroleum EHF)

               All inter-company transactions and balances have been
               eliminated on consolidation. A significant portion of
               the Company's North Sea oil and gas activities are
               carried out jointly with others. The consolidated
               financial statements reflect only the Company's
               proportionate interest in such activities.

               CRITICAL ACCOUNTING ESTIMATES

               Certain accounting policies require that management make
               appropriate decisions with respect to the formulation of
               estimates and assumptions that affect the reported
               amounts of assets, liabilities, revenues and expenses.
               These accounting policies are discussed below and are
included to aid the reader in assessing the critical
               accounting policies and practices of the Company and the
               likelihood of materially different results being
               reported. Ithaca's management reviews these estimates
               regularly. The emergence of new information and changed
               circumstances may result in actual results or changes to
               estimated amounts that differ materially from current
               estimates.

               The following assessment of significant accounting
               policies and associated estimates is not meant to be
               exhaustive. The Company might realise different results
               from the application of new accounting standards
               promulgated, from time to time, by various rule-making
               bodies.

               Capitalised costs relating to the exploration and
               development of oil and gas reserves, along with
               estimated future capital expenditures required in order
               to develop proved and probable reserves are depreciated
               on a unit-of-production basis, by asset, using estimated
               proved and probable reserves as adjusted for production.

               A review is carried out each reporting date for any
               indication that the carrying value of the Company's D&P
               assets may be impaired. For D&P assets where there are
               such indications, an impairment test is carried out on
               the Cash Generating Unit ("CGU"). Each CGU is
               identified in accordance with IAS 36. The Company's
               CGUs are those assets which generate largely independent
               cash flows and are normally, but not always, single
               developments or production areas. The impairment test
               involves comparing the carrying value with the
               recoverable value of an asset. The recoverable amount of
               an asset is determined as the higher of its fair value
               less costs to sell and value in use, where the value in
               use is determined from estimated future net cash flows.
               Any additional depreciation resulting from the
               impairment testing is charged to the Statement of
               Income.

               Goodwill is tested annually for impairment and also when
               circumstances indicate that the carrying value may be at
               risk of being impaired. Impairment is determined for
               goodwill by assessing the recoverable amount of each CGU
               to which the goodwill relates. Where the recoverable
               amount of the CGU is less than its carrying amount, an
               impairment loss is recognised in the Statement of
               Income. Impairment losses relating to goodwill cannot be
               reversed in future periods.

               Recognition of decommissioning liabilities associated
               with oil and gas wells are determined using estimated
               costs discounted based on the estimated life of the
               asset. In periods following recognition, the liability
               and associated asset are adjusted for any changes in the
               estimated amount or timing of the settlement of the
               obligations. The liability is accreted up to the actual
               expected cash outlay to perform the abandonment and
               reclamation. The carrying amounts of the associated
               assets are depleted using the unit of production method,
               in accordance with the depreciation policy for
               development and production assets. Actual costs to
               retire tangible assets are deducted from the liability
               as incurred.

               All financial instruments, other than those designated
               as effective hedging instruments, are initially
               recognised at fair value on the balance sheet. The
               Company's financial instruments consist of cash,
               restricted cash, accounts receivable, deposits,
               derivatives, accounts payable, accrued liabilities and
               the long term liability on the Beatrice acquisition.
               Measurement in subsequent periods is dependent on the
               classification of the respective financial instrument.

               In order to recognise share based payment expense, the
               Company estimates the fair value of stock options
               granted using assumptions related to interest rates,
               expected life of the option, volatility of the
               underlying security and expected dividend yields. These
               assumptions may vary over time.

               The determination of the Company's income and other tax
               liabilities / assets requires interpretation of complex
               laws and regulations. Tax filings are subject to audit
               and potential reassessment after the lapse of
               considerable time. Accordingly, the actual income tax
               liability may differ significantly from that estimated
               and recorded on the financial statements.

               The accrual method of accounting will require management
               to incorporate certain estimates of revenues, production
               costs and other costs as at a specific reporting date.
               In addition, the Company must estimate capital
               expenditures on capital projects that are in progress or
               recently completed where actual costs have not been
               received as of the reporting date.

               CONTROL ENVIRONMENT

               Ithaca has established disclosure controls, procedures
               and corporate policies so that its consolidated
               financial results are presented accurately, fairly and
               on a timely basis. The Chief Executive Officer and Chief
               Financial Officer have designed, or have caused such
               internal controls over financial reporting to be
               designed under their supervision, to provide reasonable
               assurance regarding the reliability of financial
               reporting and preparation of the Company's financial
               statements in accordance with IFRS with no material
               weaknesses identified.

               Based on their inherent limitations, disclosure controls
               and procedures and internal controls over financial
               reporting may not prevent or detect misstatements and
               even those options determined to be effective can
               provide only reasonable assurance with respect to
               financial statement preparation and presentation.

               As of September 30, 2013, there were no changes in
               Ithaca's internal control over financial reporting that
               occurred during the quarter ended September 30, 2013
               that have materially affected, or are reasonably likely
               to materially affect, our internal control over
               financial reporting.

               CHANGES IN ACCOUNTING POLICIES

               On January 1, 2011, the Company adopted IFRS using a
               transition date of January 1, 2010. The financial
               statements for the quarter ended September 30, 2013,
               including required comparative information, have been
               prepared in accordance with International Financial
               Reporting Standards as issued by the International
               Accounting Standards Board ("IASB").

               The Company elected to present all acquisitions since
               the IFRS transition date as business combinations in
               accordance with IFRS 3®.

               One impact of accounting for acquisitions as business
               combinations is the recognition of asset values, upon
               which the DD&A rate is calculated as pre-tax fair values
               and the recognition of a deferred tax liability on
               estimated future cash flows. With current tax rates at
               62% this increases the DD&A charge for such assets. An
               offsetting reduction is recognised in the deferred tax
               charged through the consolidated statement of income.

               In May 2011, the IASB issued the following standards:
               IFRS 10, Consolidated Financial Statements ("IFRS 10"),
               IFRS 11, Joint Arrangements ("IFRS 11"), IFRS 12,
               Disclosure of Interests in Other Entities ("IFRS 12"),
               IAS 27, Separate Financial Statements ("IAS 27"), IFRS
               13, Fair Value Measurement ("IFRS 13") and amended IAS
               28, Investments in Associates and Joint Ventures ("IAS
               28"). Each of the new standards is effective for annual
               periods beginning on or after 1 January 2013. There has
               been no material impact from the adoption of the new and
               amended standards on the Company's financial statements.

               ADDITIONAL INFORMATION

Non-IFRS
Measures       'Cashflow from operations' referred to in this MD&A is
               not prescribed by IFRS. This non-IFRS financial measure
               does not have any standardised meaning and therefore is
               unlikely to be comparable to similar measures presented
               by other companies. The Company uses this measure to
               help evaluate its performance. As an indicator of the
               Company's performance, cashflow from operations should
               not be considered as an alternative to, or more
               meaningful than, net cash from operating activities as
               determined in accordance with IFRS. The Company
               considers Cashflow from operations to be a key measure
               as it demonstrates the Company's underlying ability to
               generate the cash necessary to fund operations and
               support activities related to its major assets. Cashflow
               from operations is determined by adding back changes in
               non-cash operating working capital to cash from
               operating activities.'EBITDAX' referred to in this MD&A is
not prescribed by
               IFRS. EDITDAX is defined as earnings before interest,
               taxes, Depreciation, Amortization and Exploration costs.
               EBITDAX is a supplemental non-GAAP financial measure
               that is not recognized under IFRS and does not have a
               standardized meaning prescribed by IFRS. EBITDAX should
               not be considered as an alternative to, or more
               meaningful than, net profit and comprehensive income or
               cash flows from operating activities as determined in
               accordance with IFRS or as an indicator of operating
               performance or liquidity. The computations of EBITDAX
               may not be comparable to other similarly titled measures
               of other companies, and accordingly EBITDAX may not be
               comparable to measures used by other companies.'Netbacks'
referred to in this MD&A is not prescribed by
               IFRS. Netbacks are calculated on a per unit basis as
               oil, gas and natural gas liquids revenues less royalties
               and transportation and operating costs. Management
               believes that Netback is a useful supplemental measure
               as it provides an indication of the results generated by
               the principal business activities. Netbacks may not be
               comparable to other similarly titled measures of other
               companies, and accordingly Netbacks may not be
               comparable to measures used by other companies.

Off Balance    The Company has certain lease agreements and rig
Sheet          commitments which were entered into in the normal course
Arrangements   of operations, all of which are disclosed under the
               heading "Commitments", above. Leases are treated as
               either operating leases or finance leases based on the
               extent to which risks and rewards incidental to
               ownership lie with the lessor or the lessee under IAS
               17. No asset or liability value has been assigned to
               any leases on the balance sheet as at September 30,
               2013.


Related        A director of the Company is a partner of Burstall
Party          Winger LLP who acts as counsel for the Company. The
Transactions   amount of fees paid to Burstall Winger LLP in Q3 2013
               was $0.3 million (Q3 2012: $0.1 million). These
               transactions are in the normal course of business and
               are conducted on normal commercial terms with
               consideration comparable to those charged by third
               parties.

               As at September 30, 2013 the Company had a loan
               receivable from FPF-1 Ltd, an associate of the Company,
               for $26.3 million (Q3 2012: $21.6 million) as a result
               of the completion of the GSA transactions in 2012.


BOE            The calculation of boe is based on a conversion rate of
Presentation   six thousand cubic feet of natural gas ("mcf") to one
               barrel of crude oil ("bbl"). The term boe 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. 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.

Well Test      Certain well test results disclosed in this MD&A
Results        represent short-term results, which may not necessarily
               be indicative of long-term well performance or ultimate
               hydrocarbon recovery there from.


            RISKS AND UNCERTAINTIES

            The business of exploring for, developing and producing oil
            and natural gas reserves is inherently risky. There is
            substantial risk that the manpower and capital employed
            will not result in the finding of new reserves in economic
            quantities. There is a risk that the sale of reserves may
            be delayed due to processing constraints, lack of pipeline
            capacity or lack of markets. The Company is dependent upon
            the production rates and oil price to fund the current
            development program.

            For additional detail regarding the Company's risks and
            uncertainties, refer to the Company's Annual Information
            Form dated March 25, 2013, (the "AIF") filed on SEDAR at
             www.sedar.com .

            RISK                           MITIGATIONS

Commodity   The Company's performance is   In order to mitigate the
Price       significantly impacted by      risk of fluctuations in oil
Volatility  prevailing oil and natural gas and gas prices, the Company
            prices, which are primarily    routinely executes commodity
            driven by supply and demand as price derivatives,
            well as economic and political predominantly in relation to
            factors.                       oil production, as a means
                                           of establishing a floor in
                                           realised prices.

Foreign     The Company is exposed to      Given the increasing
Exchange    financial risks including      proportion of development
Risk        financial market volatility    capital expenditure and
            and fluctuation in various     operating costs incurred in
            foreign exchange rates.        currencies other than the
                                           United States dollar, the
                                           Company routinely executes
                                           hedges to mitigate foreign
                                           exchange rate risk on
                                           committed expenditure.

Interest    The Company is exposed to      In order to mitigate the
Rate Risk   fluctuation in interest rates, fluctuations in interest
            particularly in relation to    rates, the Company routinely
            the debt facilities entered    reviews cost exposures as a
            into.                          result of varying rates and
                                           assesses the need to lock in
                                           interest rates.

Debt        The Company is exposed to      The Company believes that
Facility    borrowing risks relating to    there are no circumstances
Risk        drawdown of its debt           at present that result in
            facilities (the "Facilities"). its failure to meet the
            The ability to drawdown the    financial tests and it can
            Facilities is based on the     therefore draw down upon its
            Company meeting certain        Facilities.
            covenants including coverage
            ratio tests, liquidity tests   The Company routinely
            and development funding tests  produces detailed cashflow
            which are determined by a      forecasts to monitor its
            detailed economic model of the compliance with the
            Company. There can be no       financial tests and
            assurance that the Company     liquidity requirements of
            will satisfy such tests in the the Facilities.
            future in order to have access
            to the full amount of the
            Facilities.

            The Facilities includes
            covenants which restrict,
            among other things, the
            Company's ability to incur
            additional debt or dispose of
            assets.

            As is standard to a credit
            facility, the Company's and
            Ithaca Energy (UK) Limited's
            ("Ithaca UK") assets have been
            pledged as collateral and are
            subject to foreclosure in the
            event the Company or Ithaca UK
            defaults.

Financing   To the extent cashflow from    The Company has established
Risk        operations and the Facilities' a fully funded business plan
            resources are ever deemed not  and routinely monitors its
            adequate to fund Ithaca's cash detailed cashflow forecasts
            requirements, external         and liquidity requirements
            financing may be required.     to maintain its funding
            Lack of timely access to such  requirements. The Company
            additional financing, or       believes that there are no
            access on unfavourable terms,  circumstances at present
            could limit the future growth  that would lead to selected
            of the business of Ithaca. To  divestment, delays to
            the extent that external       existing programs or a
            sources of capital, including  default relating to the
            public and private markets,    Facility.
            become limited or unavailable,
            Ithaca's ability to make the
            necessary capital investments
            to maintain or expand its
            current business and to make
            necessary principal payments
            under the Facilities may be
            impaired.

            A failure to access adequate
            capital to continue its
            expenditure program may
            require that the Company meet
            any liquidity shortfalls
            through the selected
            divestment of its portfolio or
            delays to existing development
            programs.

Third Party The Company is and may in the  The Company believes this
Credit Risk future be exposed to third     risk is mitigated by the
            party credit risk through its  financial position of the
            contractual arrangements with  parties. All of the
            its current and future joint   Company's oil production
            venture partners, marketers of from the Beatrice, Jacky and
            its petroleum production and   Athena fields is sold to BP
            other parties. The Company     Oil International Limited.
            extends unsecured credit to    Oil production from Cook,
            these parties, and therefore,  Broom, Causeway, Fionn and
            the collection of any          Dons is sold to Shell
            receivables may be affected by Trading International Ltd.
            changes in the economic        Anglia and Topaz gas
            environment or other           production is sold through
            conditions.                    contracts to RWE NPower PLC
                                           and Hess Energy Gas Power
                                           (UK) Ltd. Cook gas is sold
                                           to Shell UK Ltd. and Esso
                                           Exploration & Production UK
                                           Ltd. The Company has not
                                           experienced any material
                                           credit loss in the
                                           collection of accounts
                                           receivable to date.

                                           The joint venture partners
                                           in those assets operated by
                                           the Company are largely well
                                           financed international
                                           companies. Where
                                           appropriate, a cash call
                                           process has been implemented
                                           with the GSA partners to
                                           cover high levels of
                                           anticipated capital
                                           expenditure thereby reducing
                                           any third party credit risk.

Property    The Company's properties will  The Company has routine
Risk        be generally held in the form  ongoing communications with
            of licenses, concessions,      the UK oil and gas
            permits and regulatory         regulatory body, the
            consents ("Authorisations").   Department of Energy and
            The Company's activities are   Climate Change ("DECC").
            dependent upon the grant and   Regular communication allows
            maintenance of appropriate     all parties to an
            Authorisations, which may not  Authorisation to be fully
            be granted; may be made        informed as to the status of
            subject to limitations which,  any Authorisation and
            if not met, will result in the ensures the Company remains
            termination or withdrawal of   updated regarding fulfilment
            the Authorisation; or may be   of any applicable
            otherwise withdrawn. Also, in requirements.
            the majority of its licenses,
            the Company is often a joint
            interest-holder with another
            third party over which it has
            no control. An Authorisation
            may be revoked by the relevant
            regulatory authority if the
            other interest-holder is no
            longer deemed to be
            financially credible.

            There can be no assurance that
            any of the obligations
            required to maintain each
            Authorisation will be met.
            Although the Company believes
            that the Authorisations will
            be renewed following expiry or
            granted (as the case may be),
            there can be no assurance that
            such

            authorisations will be renewed
            or granted or as to the terms
            of such renewals or grants.
            The termination or expiration
            of the Company's
            Authorisations may have a
            material adverse effect on the
            Company's results of
            operations and business.

            The areas covered by the
            Authorisations are or may be
            subject to agreements with the
            proprietors of the land. If
            such agreements are
            terminated, found void or
            otherwise challenged, the
            Company may suffer significant
            damage through the loss of
            opportunity to identify and
            extract oil or gas.


Operational The Company is subject to the  The Company acts at all
Risk        risks associated with owning   times as a reasonable and
            oil and natural gas            prudent operator. The
            properties, including          Company takes out market
            environmental risks associated insurance to mitigate many
            with air, land and water. All  of these operational,
            of the Company's operations    construction and
            are conducted offshore in the  environmental risks.
            United Kingdom Continental
            Shelf; as such Ithaca is       The Company uses the
            exposed to operational risk    services of Sproule
            associated with weather delays International Limited
            that can result in a material  ("Sproule") to independently
            delay in project execution.    assess the Company's
            Third parties operate some of  reserves on an annual basis.
            the assets in which the
            Company has interests. As a
            result, the Company may have
            limited ability to exercise
            influence over the operations
            of these assets and their
            associated costs. The success
            and timing of these activities
            may be outside the Company's
            control.

            There are numerous
            uncertainties in estimating
            the Company's reserve base due
            to the complexities in
            estimating the magnitude and
            timing of future production,
            revenue, expenses and
            capital.

Competition In all areas of the Company's  The Company places
Risk        business, there is competition appropriate emphasis on
            with entities that may have    ensuring it attracts and
            greater technical and          retains high quality
            financial resources.           resources to enable it to
                                           maintain its competitive
                                           position.

             FORWARD-LOOKING INFORMATION

             This MD&A and any documents incorporated by reference
             herein contain certain forward-looking statements and
             forward-looking information which 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, future capital expenditures,
             future acquisitions and cash flow. The reader is
             cautioned that assumptions used in the preparation of such
             information may prove to be incorrect. The use of any of
             the words "anticipate", "continue", "estimate",
"expect","may", "will", "project", "plan", "should", "believe","could",
"scheduled", "targeted", "approximately" and
             similar expressions are intended to identify
             forward-looking statements and forward-looking
             information. These statements are not guarantees of
             future performance and involve 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 or
             information. The Company believes that the expectations
             reflected in those forward-looking statements and
             information 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 and information included in
             this MD&A and any documents incorporated by reference
             herein should not be unduly relied upon. Such
             forward-looking statements and information speak only as
             of the date of this MD&A and any documents incorporated by
             reference herein and the Company does not undertake any
             obligation to publicly update or revise any
             forward-looking statements or information, except as
             required by applicable laws.

             In particular, this MD&A and any documents incorporated by
             reference herein, contains specific forward-looking
             statements and information pertaining to the following:

             - the quality of and future net revenues from the
             Company's reserves;

             - oil, natural gas liquids ("NGLs") and natural gas
             production levels;

             - commodity prices, foreign currency exchange rates
             and interest rates;

             - capital expenditure programs and other
             expenditures;

             - the sale, farming in, farming out or development
             of certain exploration properties using third party
             resources;

             - supply and demand for oil, NGLs and natural gas;

             - the Company's ability to raise capital;

             - the continued availability of the RBL Facility and
             the $100 million corporate facility;

             - the Company's acquisition strategy, the criteria
             to be considered in connection therewith and the benefits
             to be derived therefrom;

             - the realisation of anticipated benefits from
             acquisitions and dispositions;

             - the Company's ability to continually add to its
             reserves;

             - schedules and timing of certain projects and the
             Company's strategy for growth;

             - the Company's future operating and financial
results;

             - the ability of the Company to optimise operations
             and reduce operational expenditures;

             - treatment under governmental and other regulatory
             regimes and tax, environmental and other laws;

             - production rates;

             - targeted production levels; and

             - timing and cost of the development of the
             Company's reserves.

             With respect to forward-looking statements contained in
             this MD&A and any documents incorporated by reference
             herein, the Company has made assumptions regarding, among
             other things:

             -  Ithaca's ability to obtain additional drilling
             rigs and other equipment in a timely manner, as required;

             -  access to third party hosts and associated
             pipelines can be negotiated and accessed within the
             expected timeframe;

             -  FDP approval and operational construction and
             development is obtained within expected timeframes;

             -  the Company's development plan for the Stella and
             Harrier discoveries will be implemented as planned;

             -  the effect of the Valiant acquisition on Ithaca;

             -  reserves volumes assigned to Ithaca's properties;

             -  ability to recover reserves volumes assigned to
             Ithaca's properties;

             -  revenues do not decrease below anticipated levels
             and operating costs do not increase

             significantly above anticipated levels;

             - future oil, NGLs and natural gas production levels
             from Ithaca's properties and the prices obtained from the
             sales of such production;

             -  the level of future capital expenditure required
             to exploit and develop reserves;

             - Ithaca's ability to obtain financing on acceptable
             terms, in particular, the Company's ability to access the
             Facility;

             -  the continued ability of the Company to collect
             from third parties who Ithaca has provided credit to;

            - Ithaca's reliance on partners and their ability to
             meet commitments under relevant agreements; and

             - the state of the debt and equity markets in the
             current economic environment.

             The Company's actual results could differ materially from
             those anticipated in these forward-looking statements and
             information as a result of assumptions proving inaccurate
             and of both known and unknown risks, including the risk
             factors set forth in this MD&A and under the heading "Risk
             Factors" in the AIF and the documents incorporated by
             reference herein, and those set forth below:

             -  risks associated with the exploration for and
             development of oil and natural gas reserves in the North
             Sea;

             -  risks associated with offshore development and
             production including transport facilities;

             -  operational risks and liabilities that are not
             covered by insurance;

             -  volatility in market prices for oil, NGLs and
             natural gas;

             -  the ability of the Company to fund its substantial
             capital requirements and operations;

             -  risks associated with ensuring title to the
             Company's properties;

             -  changes in environmental, health and safety or
             other legislation applicable to the Company's operations,
             and the Company's ability to comply with current and
             future environmental, health and safety and other laws;

             -  the accuracy of oil and gas reserve estimates and
             estimated production levels as they are affected by the
             Company's exploration and development drilling and
             estimated decline rates;

             -  the Company's success at acquisition, exploration,
             exploitation and development of reserves;

             -  risks associated with realisation of anticipated
             benefits of acquisitions;

             -  risks related to changes to government policy with
             regard to offshore drilling;

             -  the ability of the Company to obtain and maintain
             all of its required permits and licenses;

             -  competition for, among other things, capital,
             drilling equipment, acquisitions of reserves, undeveloped
             lands and skilled personnel;

             -  changes in general economic, market and business
             conditions in Canada, North America, the United Kingdom,
             Europe and worldwide;

             -  actions by governmental or regulatory authorities
             including changes in income tax laws or changes in tax
             laws, royalty rates and incentive programs relating to the
             oil and gas industry including any increase in UK taxes;

             -  adverse regulatory rulings, orders and decisions;
             and

             -  risks associated with the nature of the common
             shares.

Additional
Reader
Advisories   The information in this MD&A is provided as of November 8,
             2013. The Q3 2013 results have been compared to the
             results of the comparative period in 2012. This MD&A
             should be read in conjunction with the Company's unaudited
             consolidated financial statements as at September 30, 2013
             and 2012 and with the Company's audited consolidated
             financial statements as at December 31, 2012 together with
the accompanying notes and MD&A, and AIF for the 2012
             fiscal year. Copies of these documents are available
             without charge from Ithaca or electronically on the
             internet on Ithaca's SEDAR profile at  www.sedar.com .


Consolidated Statement of Income
For the three and nine months ended 30 September 2013 and 2012
(unaudited)

                                   Three months      Nine months
                                   ended             ended
                                   30 Sept           30 Sept
                                   2013     2012     2013      2012
                              Note US$'000  US$'000  US$'000   US$'000
Revenue                       4    114,112  41,579   302,241   117,912
Cost of sales                 5    (77,291) (27,096) (227,198) (83,082)
Gross Profit                       36,821   14,483   75,043    34,830

Exploration and evaluation    10   (509)    (112)    (953)     (191)
expenses

 Administrative expenses          (1,518)  (524)    (7,956)   (2,967)
 Non-recurring Valiant            -        -        (10,235)  -
 acquisition costs
Total Administrative expenses 6    (1,518)  (524)    (17,831)  (2,967)
Operating Profit                   34,794   13,847   56,259    31,672


Foreign exchange                   2,212    748      137       851
(Loss)/gain on financial      24   (15,814) (11,989) (5,472)   6,621
instruments
Release of exploration        15   22,649   -        22,649    205
obligation
Negative goodwill                  7,033    -        55,912    -
Profit Before Interest and         50,874   2,606    129,485   39,349
Tax

Finance costs                 7    (4,956)  (697)    (12,233)  (2,068)
Interest income                    3        61       45        195
Profit Before Tax                  45,921   1,970    117,297   37,476

Taxation                      22   8,183    2,924    (7,492)   10,575
Profit After Tax                   54,104   4,894    109,805   48,051

Earnings per share
Basic                         21   0.17     0.02     0.37      0.19
Diluted                       21   0.17     0.02     0.37      0.18


The accompanying notes on pages 6 to 23 are an integral part of the
financial statements.


Consolidated Statement of Financial Position
(unaudited)

                                              30 September  31 December
                                              2013          2012
                                         Note US$'000       US$'000
ASSETS

Current assets
Cash and cash equivalents                     73,770        31,374
Restricted cash                          8    3,426         2
Accounts receivable                           212,905       159,195
Norwegian tax receivable                      87,517        -
Deposits, prepaid expenses and other          25,255        14,754
Inventory                                9    28,106        15,878
Derivative financial instruments         25   12,150        8,251
                                              443,129       229,454

Non current assets
Long-term receivable                     27   26,346        21,551
Investment in associate                  13   18,337        18,337
Exploration and evaluation assets        10   67,416        47,390
Property, plant & equipment              11   1,398,401     615,788
Goodwill                                 12   985           985
Other non-current assets                      8,126         -
                                              1,519,611     704,051

Total assets                                  1,962,740     933,505


LIABILITIES AND EQUITY
Current liabilities
Trade and other payables                      408,604       205,635
Exploration obligations                  15   21,485        -
                                              430,089       205,635

Non current liabilities
Bank debt                                14   426,574       -
Decommissioning liabilities              16   160,014       52,834
Other long term liabilities              17   2,955         3,018
Contingent consideration                 18   4,000         4,000
Derivative financial instruments         25   8,253         -
Deferred tax liability                   22   119,152       62,370
                                              720,948       122,222

Net Assets                                    811,703       605,648

Equity attributable to equity holders
Share capital                            19   524,908       431,318
Share based payment reserve              20   23,000        20,340
Retained earnings                             263,795       153,990
Shareholders' Equity                          811,703       605,648

The financial statements were approved by the Board of Directors on 8
November 2013 and signed on its behalf by:"Jay Zammit"
Director"John Summers"
Director

The accompanying notes on pages 6 to 23 are an integral part of the
financial statements.

Consolidated Statement of Changes in Equity
(unaudited)

                            Share   Share   Retained  Total
                            Capital Based   Earnings
                                    Payment
                                    Reserve
                            US$'000 US$'000 US$'000    US$'000
Balance, 1 Jan 2012         429,502 17,318  60,591     507,411
Net income for the period   -       -       48,051     48,051
Total comprehensive income  429,502 17,318  108,642    555,462
Share based payment         -       2,399   -          2,399
Options exercised           250     (107)   -          143
Balance, 30 September 2012  429,752 19,610  108,642    558,004

Balance, 1 Jan 2013         431,318 20,340  153,990    605,648
Net income for the period   -       -       109,805    109,805
Total comprehensive income  431,318 20,340  263,795    715,453
Shares issued               93,005  -       -          93,005
Share based payment         -       2,917   -          2,917
Options exercised           585     (257)   -          328
Balance, 30 September 2013  524,908 23,000  263,795    811,703

The accompanying notes on pages 6 to 23 are an integral part of the
financial statements.

Consolidated Statement of Cash Flow
For the three and nine months ended 30 September 2013 and 2012
(unaudited)


                                  Three months ended Nine months ended
                                  30 Sept            30 Sept
                                  2013      2012     2013      2012
                                  US$'000   US$'000  US$'000   US$'000

CASH PROVIDED BY (USED IN):
Operating activities
Profit Before Tax                 45,921    1,970    117,297   37,476
Adjustments for:
Depletion, depreciation and       42,279    14,563   103,144   39,040
amortisation
Exploration and evaluation        509       112      953       191
expenses
Share based payment               203       62       864       401
Loan fee amortisation             592       -        1,777     494
Revaluation of financial          13,312    12,927   17,074    (5,201)
instruments
Revaluation of contingent         -         -        -         1,295
consideration
Movement in goodwill              (7,033)   -        (48,878)  -
Gain on disposal                  -         -        -         (205)
Gain on exploration obligation    (22,321)  -        (22,321)  -
release
Accretion                         1,375     453      2,965     1,272
Bank interest & charges           2,949     -        7,405     -
Valiant acquisition fees          -         -        5,032     -
Cashflow from operations          77,786    30,087   185,312   74,763
Changes in inventory, debtors and (7,925)   (7,255)  12,917    3,092
creditors relating to operating
activities
Net cash from operating           69,861    22,832   198,229   77,855
activities


Investing activities
Acquisition of Valiant            -         -        (200,636) -
Cash acquired on acquisition of   -         -        11,611    -
Valiant
Valiant acquisition fees          -         -        (5,032)   -
Acquisition of Cook               -         -        (33,370)  -
Capital expenditure               (139,304) (60,456) (196,943) (114,745)
Investment in associate           -         -        -         (18,337)
Loan to associate                 -         -        -         (21,551)
Proceeds on disposal              -         -        -         44,878
Settlement of contingent          -         -        -         (15,700)
consideration
Changes in debtors and creditors  63,136    (15,409) (22,133)  15,444
relating to investing activities
Net cash used in investing        (76,168)  (75,865) (446,503) (110,011)
activities

Financing activities
Proceeds from issuance of shares  -         -        328       143
(Increase) / decrease in          -         (340)    (3,226)   (4,049)
restricted cash
Derivatives                       (3,249)   (2,485)  (12,876)  (2,485)
Loan repayment                    -         -        (115,000) -
Loan draw down                    58,123    -        434,041   -
Bank interest & charges           (2,816)   -        (8,321)   -
Net cash from/used in financing   52,058    (2,825)  294,946   (6,391)
activities

Currency translation differences  928       816      (4,276)   (155)
relating to cash

Increase / (decrease) in cash and 46,679    (55,042) 42,396    (38,702)
cash equiv.

Cash and cash equivalents,        27,091    111,885  31,374    95,545
beginning of period

Cash and cash equivalents, end of 73,770    56,843   73,770    56,843
period

The accompanying notes on pages 6 to 23 are an integral part of the
financial statements.



1. NATURE OF OPERATIONS

Ithaca Energy Inc. (the "Corporation" or "Ithaca"), incorporated and
domiciled in Alberta, Canada on 27 April 2004, is a publicly traded
company involved in the exploration, development and production of oil
and gas in the North Sea. The Corporation's registered office is 1600,
333 - 7th Avenue S.W., Calgary, Alberta, Canada, T2P 2Z1. The
Corporation's shares trade on the Toronto Stock Exchange in Canada and
the London Stock Exchange's Alternative Investment Market in the United
Kingdom under the symbol "IAE".

2. BASIS OF PREPARATION

These interim consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRS)
applicable to the preparation of interim financial statements,
including IAS 34 Interim Financial Reporting. These interim
consolidated financial statements do not include all the necessary
annual disclosures in accordance with IFRS.

The policies applied in these condensed interim consolidated financial
statements are based on IFRS issued and outstanding as of 8 November
2013, the date the Board of Directors approved the statements. Any
subsequent changes to IFRS that are given effect in the Corporation's
annual consolidated financial statements for the year ending 31
December 2013 could result in restatement of these interim consolidated
financial statements.

The condensed interim consolidated financial statements should be read
in conjunction with the Corporation's annual financial statements for
the year ended 31 December 2012.

3. SIGNIFICANT ACCOUNTING POLICIES, JUDGEMENTS AND ESTIMATION
UNCERTAINTY

Basis of measurement

The consolidated financial statements have been prepared under the
historical cost convention, except for the revaluation of certain
financial assets and financial liabilities (under IFRS) to fair value,
including derivative instruments.

Basis of consolidation

The consolidated financial statements of the Corporation include the
accounts of Ithaca Energy Inc. and all wholly-owned subsidiaries as
listed per note 27. Ithaca has seventeen wholly-owned subsidiaries,
thirteen of which were acquired on 19 April 2013 as part of the
acquisition of Valiant Petroleum PLC ("Valiant"). The consolidated
financial statements include the Valiant group of companies from 19
April 2013 only (being the acquisition date). All inter-company
transactions and balances have been eliminated on consolidation.

A subsidiary is an entity which the Corporation controls by having the
power to govern the financial and operating policies. The existence and
effect of potential voting rights that are currently exercisable or
convertible are considered when assessing whether Ithaca controls
another entity. A subsidiary is fully consolidated from the date on
which control is obtained by Ithaca and is de-consolidated from the
date that control ceases.

Investments in associates

Interests in entities over which Ithaca has significant influence, but
not control or joint control, are accounted for using the equity
method. Ithaca's share of equity investments' results are recorded in
the consolidated statement of income.

Business Combinations

Business combinations are accounted for using the acquisition method.
The cost of an acquisition is measured as the fair value of the assets
acquired, equity instruments issued and liabilities incurred or assumed
at the date of completion of the acquisition. Acquisition costs
incurred are expensed and included in administrative expenses.
Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured initially at their fair
values at the acquisition date. The excess of the cost of acquisition
over the fair value of the Corporation's share of the identifiable net
assets acquired is recorded as goodwill. If the cost of the acquisition
is less than the Corporation's share of the net assets acquired, the
difference is recognised directly in the statement of income as
negative goodwill.

Goodwill

Capitalisation

Goodwill acquired through business combinations is initially measured
at cost, being the excess of the aggregate of the consideration
transferred and the amount recognised as the fair value of the
Corporation's share of the identifiable net assets acquired and
liabilities assumed. If this consideration is lower than the fair value
of the identifiable assets acquired, the difference is recognised in
the statement of income.

Impairment

Goodwill is tested annually for impairment and also when circumstances
indicate that the carrying value may be at risk of being impaired.
Impairment is determined for goodwill by assessing the recoverable
amount of each cash generating unit ("CGU") to which the goodwill
relates. Where the recoverable amount of the CGU is less than its
carrying amount, an impairment loss is recognised in the statement of
income. Impairment losses relating to goodwill cannot be reversed in
future periods.

Foreign currency translation

Items included in the financial statements are measured using the
currency of the primary economic environment in which the Corporation
and its subsidiary operate (the 'functional currency'). The
consolidated financial statements are presented in United States
Dollars, which is the Corporation's functional and presentation
currency.

Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at year end
exchange rates of monetary assets and liabilities denominated in
foreign currencies are recognised in the statement of income.

Share based payments

The Corporation has a share based payment plan as described in note 19
(c). The expense is recorded in the statement of income or capitalised
for all options granted in the year, with the gross increase recorded
in the share based payment reserve. Compensation costs are based on the
estimated fair values at the time of the grant and the expense or
capitalised amount is recognised over the vesting period of the
options. Upon the exercise of the stock options, consideration paid
together with the amount previously recognised in share based payment
reserve is recorded as an increase in share capital. In the event that
vested options expire unexercised, previously recognised compensation
expense associated with such stock options is not reversed. In the
event that unvested options are forfeited or expired, previously
recognised compensation expense associated with the unvested portion of
such stock options is reversed.

Cash and Cash Equivalents

For the purpose of the statement of cash flow, cash and cash
equivalents include investments with an original maturity of three
months or less.

Restricted cash

Cash that is held for security for bank guarantees is reported in the
balance sheet and cash flow statements separately. If the expected
duration of the restriction is less than twelve months then it is shown
in current assets.

Financial Instruments

All financial instruments, other than those designated as effective
hedging instruments, are initially recognised at fair value in the
statement of financial position. The Corporation's financial
instruments consist of cash, restricted cash, accounts receivable,
deposits, derivatives, accounts payable, accrued liabilities, bank
debt, contingent consideration and the long term liability on the
Beatrice acquisition. The Corporation classifies its financial
instruments into one of the following categories: held-for-trading
financial assets and financial liabilities; held-to-maturity
investments; loans and receivables; and other financial liabilities.
All financial instruments are required to be measured at fair value on
initial recognition. Measurement in subsequent periods is dependent on
the classification of the respective financial instrument.

Held-for-trading financial instruments are subsequently measured at
fair value with changes in fair value recognised in net earnings. All
other categories of financial instruments are measured at amortised
cost using the effective interest method. Cash and cash equivalents are
classified as held-for-trading and are measured at fair value. Accounts
receivable are classified as loans and receivables. Accounts payable,
accrued liabilities, certain other long-term liabilities, and long-term
debt are classified as other financial liabilities. Although the
Corporation does not intend to trade its derivative financial
instruments, they are classified as held-for-trading for accounting
purposes.

Transaction costs that are directly attributable to the acquisition or
issue of a financial asset or liability and original issue discounts on
long-term debt have been included in the carrying value of the related
financial asset or liability and are amortised to consolidated net
earnings over the life of the financial instrument using the effective
interest method.

The Corporation may designate financial instruments as a hedging
instrument for accounting purposes. Hedge accounting requires the
designation of a hedging relationship, including a hedged and a hedging
item, identification of the risk exposure being hedged and an
expectation that the hedging relationship will be highly effective
throughout its term.

The Corporation assesses, both at the hedge's inception and on an
ongoing basis, whether the derivative financial instruments designated
as hedges are highly effective in offsetting changes in cash flows of
the hedged items. The effective portion of the gains and losses on cash
flow hedges is recorded in Other Comprehensive Income until the hedged
transaction is recognised in net earnings. Any hedge ineffectiveness is
immediately recognised in net earnings. When the hedged transaction is
recognised in net earnings, the fair value of the associated cash flow
hedging item is reclassified from other reserves into net earnings.
Hedge accounting is discontinued on a prospective basis when the
hedging relationship no longer qualifies for hedge accounting.

Analysis of the fair values of financial instruments and further
details as to how they are measured are provided in notes 25 to 27.

Inventory

Inventories of materials and product inventory supplies, other than oil
and gas inventories, are stated at the lower of cost and net realisable
value. Cost is determined on the first-in, first-out method. Oil and
gas inventories are stated at fair value less cost to sell.

Property, Plant and Equipment

Oil and gas expenditure - exploration and evaluation assets

Capitalisation

Pre-acquisition costs on oil and gas assets are recognised in the
statement of income when incurred. Costs incurred after rights to
explore have been obtained, such as geological and geophysical surveys,
drilling and commercial appraisal costs and other directly attributable
costs of exploration and evaluation including technical,
administrative and share based payment expenses are capitalised as
intangible exploration and evaluation ("E&E") assets.

E&E costs are not amortised prior to the conclusion of evaluation
activities. At completion of evaluation activities, if technical
feasibility is demonstrated and commercial reserves are discovered
then, following development sanction, the carrying value of the E&E
asset is reclassified as a development and production ("D&P") asset,
but only after the carrying value is assessed for impairment and where
appropriate its carrying value adjusted. If after completion of
evaluation activities in an area, it is not possible to determine
technical feasibility and commercial viability or if the legal right to
explore expires or if the Corporation decides not to continue
exploration and evaluation activity, then the costs of such
unsuccessful exploration and evaluation is written off to the statement
of income in the period the relevant events occur.

Impairment

The Corporation's oil and gas assets are analysed into CGUs for
impairment review purposes, with E&E asset impairment testing being
performed at a grouped CGU level. The current E&E CGU consists of the
Corporation's whole E&E portfolio. E&E assets are reviewed for
impairment when circumstances arise which indicate that the carrying
value of an E&E asset exceeds the recoverable amount. When reviewing E&E
assets for impairment, the combined carrying value of the grouped
CGU is compared with the grouped CGU's recoverable amount. The
recoverable amount of a grouped CGU is determined as the higher of its
fair value less costs to sell and value in use. Impairment losses
resulting from an impairment review are written off to the statement of
income.

Oil and gas expenditure - development and production assets

Capitalisation

Costs of bringing a field into production, including the cost of
facilities, wells and sub-sea equipment, direct costs including staff
costs and share based payment expense together with E&E assets
reclassified in accordance with the above policy, are capitalised as a
D&P asset. Normally each individual field development will form an
individual D&P asset but there may be cases, such as phased
developments, or multiple fields around a single production facility
when fields are grouped together to form a single D&P asset.

Depreciation

All costs relating to a development are accumulated and not depreciated
until the commencement of production. Depreciation is calculated on a
unit of production basis based on the proved and probable reserves of
the asset. Any re-assessment of reserves affects the depreciation rate
prospectively. Significant items of plant and equipment will normally
be fully depreciated over the life of the field. However, these items
are assessed to consider if their useful lives differ from the expected
life of the D&P asset and should this occur a different depreciation
rate would be charged.

Impairment

A review is carried out each reporting date for any indication that the
carrying value of the Corporation's D&P assets may be impaired. For D&P
assets where there are such indications, an impairment test is carried
out on the CGU. Each CGU is identified in accordance with IAS 36. The
Corporation's CGUs are those assets which generate largely independent
cash flows and are normally, but not always, single developments or
production areas. The impairment test involves comparing the carrying
value with the recoverable value of an asset. The recoverable amount of
an asset is determined as the higher of its fair value less costs to
sell and value in use, where the value in use is determined from
estimated future net cash flows. Any additional depreciation resulting
from the impairment testing is charged to the statement of income.

Non Oil and Natural Gas Operations

Computer and office equipment is recorded at cost and depreciated over
its estimated useful life on a straight-line basis over three years.
Furniture and fixtures are recorded at cost and depreciated over their
estimated useful lives on a straight-line basis over five years.

Decommissioning liabilities

The Corporation records the present value of legal obligations
associated with the retirement of long term tangible assets, such as
producing well sites and processing plants, in the period in which they
are incurred with a corresponding increase in the carrying amount of
the related long term asset. The obligation generally arises when the
asset is installed or the ground/environment is disturbed at the field
location. In subsequent periods, the asset is adjusted for any changes
in the estimated amount or timing of the settlement of the obligations.
The carrying amounts of the associated assets are depleted using the
unit of production method, in accordance with the depreciation policy
for development and production assets. Actual costs to retire tangible
assets are deducted from the liability as incurred.

Contingent consideration

Contingent consideration is accounted for as a financial liability and
measured at fair value at the date of acquisition with any subsequent
remeasurements recognised either in the statement of income or in other
comprehensive income in accordance with IAS 39.

Taxation

Current income tax

Current income tax assets and liabilities are measured at the amount
expected to be recovered from or paid to the taxation authorities. The
tax rates and tax laws used to compute the amounts are those that are
enacted or substantively enacted by the reporting date.

Deferred income tax

Deferred tax is recognised for all deductible temporary differences and
the carry-forward of unused tax losses. Deferred tax assets and
liabilities are measured using enacted or substantively enacted income
tax rates expected to apply to taxable income in the years in which
temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in rates is
included in earnings in the period of the enactment date. Deferred tax
assets are recorded in the consolidated financial statements if
realisation is considered more likely than not.

Recent accounting pronouncements

In May 2011, the IASB issued the following standards: IFRS 10,
Consolidated Financial Statements ("IFRS 10"), IFRS 11, Joint
Arrangements ("IFRS 11"), IFRS 12, Disclosure of Interests in Other
Entities ("IFRS 12"), IAS 27, Separate Financial Statements ("IAS 27"),
IFRS 13, Fair Value Measurement ("IFRS 13") and amended IAS 28,
Investments in Associates and Joint Ventures ("IAS 28"). Each of the
new standards is effective for annual periods beginning on or after 1
January 2013. There has been no material impact from the adoption of
the new and amended standards on the Corporation's financial
statements.

Significant accounting judgements and estimation uncertainties

The preparation of financial statements in conformity with IFRS
requires management to make estimates and assumptions regarding certain
assets, liabilities, revenues and expenses. Such estimates must often
be made based on unsettled transactions and other events and a precise
determination of many assets and liabilities is dependent upon future
events. Actual results may differ from estimated amounts.

The amounts recorded for depletion, depreciation of property and
equipment, long-term liability, stock-based compensation, contingent
consideration, decommissioning liabilities, derivatives and deferred
taxes are based on estimates. The depreciation charge and any
impairment tests are based on estimates of proved and probable
reserves, production rates, prices, future costs and other relevant
assumptions. By their nature, these estimates are subject to
measurement uncertainty and the effect on the financial statements of
changes in such estimates in future periods could be material. Further
information on each of these estimates is included within the notes to
the financial statements.



4. REVENUE



                 Three months ended  Nine months ended
                 30 Sept            30 Sept

                 2013      2012      2013     2012

                 US$'000   US$'000   US$'000  US$'000

Oil sales        111,289   38,227    292,506  107,328

Gas sales        2,007     2,040     7,231    6,620

Condensate sales 56        98        328      405

Other income     760       1,214     2,176    3,559

                 114,112   41,579    302,241  117,912




5. COST OF SALES



                                   Three months      Nine months ended
                                   ended             30 Sept
                                   30 Sept

                                   2013     2012     2013      2012

                                   US$'000  US$'000  US$'000   US$'000

Operating costs                    (41,893) (20,903) (108,275) (52,031)

Oil purchases                      (34)     -        (981)     -

Movement in oil and gas inventory  6,915    8,370    (14,798)  7,989

Depletion, depreciation and        (42,279) (14,563) (103,144) (39,040)
amortisation

                                   (77,291) (27,096) (227,198) (83,082)




6. ADMINISTRATIVE EXPENSES



                                       Three months    Nine months
                                       ended           ended
                                       30 Sept         30 Sept

                                       2013    2012    2013     2012

                                       US$'000 US$'000 US$'000  US$'000

General & administrative               (1,315) (462)   (6,731)  (2,566)

Non-recurring Valiant acquisition      -       -       (10,235) -
related costs

Share based payment                    (203)   (62)    (865)    (401)

                                       (1,518) (524)   (17,831) (2,967)





7. FINANCE COSTS



                                Three months ended  Nine months
                                30 Sept             ended
                                                    30 Sept

                                2013      2012      2013     2012

                                US$'000   US$'000   US$'000  US$'000

Accretion                       (1,375)   (453)     (2,965)  (1,272)

Bank charges                    (2,949)   (219)     (7,409)  (264)

Non-operated asset finance fees (40)      (25)      (82)     (38)

Loan fee amortisation           (592)     -         (1,777)  (494)

                                (4,956)   (697)     (12,233) (2,068)






8. RESTRICTED CASH



         30 Sept 31 Dec
         2013    2012
         US$'000 US$'000

Security 3,426   2

         3,426   2




The above represents cash backed letters of credit at 30 September
2013.

9. INVENTORY



                    30 Sept 31 Dec  2013    2012
                    US$'000 US$'000

Crude oil inventory 27,891  15,865

Materials inventory 215     13

                    28,106  15,878




10. EXPLORATION AND EVALUATION ASSETS



                           US$'000


At 1 January 2012          22,689


Additions                  38,188

Write offs/relinquishments (4,261)

Disposals                  (9,226)


At 31 December 2012        47,390


Additions                  20,979

Write offs/relinquishments (953)


At 30 September 2013       67,416




Following completion of geotechnical evaluation activity, certain
licences were declared unsuccessful and certain prospects were declared
non-commercial and therefore the related expenditure of $1.0 million
was expensed in the nine months to 30 September 2013.



11. PROPERY, PLANT AND EQUIPMENT

                         Development & Other
                         Production    fixed
                         Oil and Gas   assets      Total
                         Assets
                         US$'000       US$'000     US$'000

Cost


At 1 January 2012        623,549       2,292       625,841


Additions                139,383       133         139,516

Disposals                (37,912)      -           (37,912)


At 31 December 2012      725,020       2,425       727,445


Additions                885,046       711         885,757


At 30 September 2013     1,610,066     3,136       1,613,202


DD&A


At 1 January 2012        (53,988)      (1,497)     (55,485)


Charge for the period    (55,770)      (402)       (56,172)


At 31 December 2012      (109,758)     (1,899)     (111,657)


Charge for the period    (102,852)     (292)       (103,144)


At 30 September 2013     (212,610)     (2,191)     (214,801)


NBV at 1 January 2012    569,561       795         570,356

NBV at 1 January 2013    615,262       526         615,788


NBV at 30 September 2013 1,397,456     945         1,398,401





12. GOODWILL



                                                        US$'000

Cost

At 1 January 2012, 31 December 2012 & 30 September 2013 985





$1.0 million represents goodwill recognised on the acquisition of gas
assets from GDF in December 2010. As at 30 September 2013, the
recoverable amount of assets acquired from GDF was sufficiently high to
support the carrying value of this goodwill.



13. INVESTMENT IN ASSOCIATES



                                     30 Sept 31 Dec
                                     2013    2012
                                     US$'000 US$'000

Investment in FPF-1 and FPU services 18,337  18,337





Investment in associates comprises shares, acquired by Ithaca Energy
(Holdings) Limited, in FPF-1 Limited and FPU Services Limited as part
of the completion of the Greater Stella Area transactions in 2012.
There has been no change in value during the period with the above
investment reflecting the Company's share of the associates' results.

14. LOAN FACILITY

On 29 June 2012, the Corporation executed a Reserves Based Lending
Facility agreement (the "RBL Facility") for up to $430 million, being
provided by BNP Paribas as Lead Arranger. The loan term was up to five
years and attracted interest at LIBOR plus 3-4.5%.

The Corporation also executed a $350 million bridge loan (the "Bridge
Facility") in April 2013 with BNP Paribas, the Bank of Nova Scotia and
Bank of America Merrill Lynch. The Bridge Facility was available for 12
months and attracted interest of between LIBOR plus 1.0 - 2.25%.

On 1 July 2013, the Corporation signed a NOK 450 million Norwegian
Exploration Financing Facility (the "Norwegian Facility"). Under the
Norwegian tax regime, 78% of exploration, appraisal and supporting
expenditure resulting from operations on the Norwegian Continental
Shelf is refunded by the Government in the December of the year
following the year the costs were incurred. This is a conventional tax
refund facility on industry standard terms

The Corporation is subject to financial and operating covenants related
to the Facility and the Bridge Facility. Failure to meet the terms of
one or more of these covenants may constitute an event of default as
defined in the facility agreements, potentially resulting in
accelerated repayment of the debt obligations.


The Corporation is in compliance with its financial and operating
covenants.

Security provided against the loan

Security provided against the Facility is in the form of a floating
charge over all assets of the Ithaca group pre Valiant acquisition.
Security provided against the Bridge Facility is in the form of a
floating charge over all former Valiant assets.

As at 30 September 2013, $50 million was drawn down under the RBL
Facility, $350 million was drawn down under the Bridge Facility and
approximately $34 million was drawn under the Norwegian Facility. The
$427 million in the balance sheet represents amounts drawn down net of
unamortised loan fees.

Post quarter end, in October 2013, the Corporation increased its
existing Facility to $610 million with enhanced terms including reduced
margin costs (LIBOR plus 2.75%-3%) and greater flexibility over future
unallocated capital. This has enabled retirement of the aforementioned
$350 million Bridge Facility.

The Corporation also established a new five year $100 million corporate
facility in October 2013 with a term of up to 5 years which attracts
interst at LIBOR plus 4.15%.

15. EXPLORATION OBLIGATIONS



                        30 Sept 31 Dec
                        2013    2012
                        US$'000 US$'000

Exploration obligations 21,485  -




The above reflects the fair value of E&E commitments assumed as part of
the Valiant transaction. During the 3 months to 30 September 2013,
$26.8 million was released reflecting expenditure incurred in the
period as well as the partial release of the Handcross obligation post
farm-out to Euroil Exploration Limited, a subsidiary of Edison
International SpA.



16. DECOMMISSIONING LIABILITIES



                             30 Sept 31 Dec
                             2013    2012
                             US$'000 US$'000

Balance, beginning of period 52,834  39,382

Additions                    105,229 9,613

Accretion                    2,965   1,777

Revision to estimates        (1,014) 2,062

Balance, end of period       160,014 52,834




The total future decommissioning liability was calculated by management
based on its net ownership interest in all wells and facilities,
estimated costs to reclaim and abandon wells and facilities and the
estimated timing of the costs to be incurred in future periods. The
Corporation uses a risk free rate of 3.8 percent (31 December 2012: 3.8
percent) and an inflation rate of 2.1 percent (31 December 2012: 2.1
percent) over the varying lives of the assets to calculate the present
value of the decommissioning liabilities. These costs are expected to
be incurred at various intervals over the next 17 years.

Additions in the period primarily relate to the acquisition of Valiant
and the development of Stella.

The economic life and the timing of the obligations are dependent on
Government legislation, commodity price and the future production
profiles of the respective production and development facilities. Note
that upon the acquisition of the Beatrice Field in November 2008, the
Corporation did not assume the decommissioning liabilities.

17. OTHER LONG TERM LIABILITIES



                             30 Sept 31 Dec

                             2013    2012

                             US$'000 US$'000

Balance, beginning of period 3,018   2,785

Revaluation in the period    (63)    233

Balance, end of period       2,955   3,018




On completion of the acquisition of the Beatrice Facilities on 10
November 2008 there were 75,000 barrels of oil in an oil storage tank
at the Nigg Terminal. This volume of oil is required to be in the
storage tank when the Beatrice Facilities are re-transferred. This
volume of oil is valued at the price on the forward oil price curve at
the expected date of re-transfer and discounted. The liability is
subject to revaluation at each financial period end.

18. CONTINGENT CONSIDERATION



                             30 Sept 31 Dec

                             2013    2012

                             US$'000 US$'000

Balance, beginning of period 4,000   24,580

Revision to estimates        -       1,295

Release                      -       (21,875)

Balance, end of period       4,000   4,000




The contingent consideration at the end of the period relates to the
acquisition of the Stella field and is payable upon first oil.



19. SHARE CAPITAL



                                             No. of ordinary   Amount

Authorised share capital                      000               US$'000

At 31 December 2012 and 30 September 2013     Unlimited         -


(a) Issued


The issued share capital is as follows:


Issued                                        Number of common  Amount
                                              shares
                                                                US$'000

Balance 1 January 2012                        259,164,461       429,502

Issued for cash - options exercised           755,542           1,020

Transfer from Share based payment reserve on  -                 796
options exercised

Balance 31 December 2012                      259,920,003       431,318

Share issue                                   56,952,321        93,005

Issued for cash - options exercised           493,334           331

Transfer from Share based payment reserve on  -                 254
options exercised

Balance 30 September 2013                     317,365,658       524,908




(b) Stock options

In the quarter ended 30 September 2013, the Corporation's Board of
Directors did not grant any new options.

In the quarter ended 31 March 2013, the Corporation's Board of
Directors granted 90,000 options at a weighted average exercise price
of $2.00 (C$1.97).

The Corporation's stock options and exercise prices are denominated in
Canadian Dollars when granted. As at 30 September 2013, 19,314,630
stock options to purchase common shares were outstanding, having an
exercise price range of $0.20 to $2.28 (C$0.25 to C$2.31) per share and
a vesting period of up to 3 years in the future.

Changes to the Corporation's stock options are summarised as follows:



                          30 September 2013   31 December 2012

                                     Wt. Avg              Wt. Avg
                          No. of     Exercise No. of      Exercise
                          Options    Price*   Options     Price*

Balance, beginning of     20,347,964 $1.63    17,506,839  $1.66
period

Granted                   90,000     $2.00    6,045,000   $2.05

Forfeited / expired       (630,000)  $2.20    (2,448,333) $3.42

Exercised                 (493,334)  $0.63    (755,542)   $1.26

Options                   19,314,630 $1.64    20,347,964  $1.63




* The weighted average exercise price has been converted into U.S.
dollars based on the foreign exchange rate in effect at the date of
issuance.



The following is a summary of stock options as at 30 September 2013



Options Outstanding

Range of        No. of     Wt. Avg Wt. Avg
                           Life    Exercise
Exercise Price  Options    (Years) Price*


$2.22-$2.28     5,090,000  1.3     $2.23
(C$2.25-C$2.31)

$1.49-$2.03     10,026,667 1.8     $1.76
(C$1.54-C$1.99)

$0.20-$0.81     4,197,963  0.1     $0.55
(C$0.25-C$0.87)

                19,314,630 1.6     $1.48




Options Exercisable                    Wt. Avg Wt. Avg
Range of        No. of     Life    Exercise
Exercise Price  Options    (Years) Price*


$2.22-$2.28     3,260,003  1.3     $2.22
(C$2.25-C$2.31)

$1.49-$2.03     4,528,334  0.4     $1.52
(C$1.54-C$1.99)

$0.20-$0.81     4,197,963  0.1     $0.55
(C$0.25-C$0.87)

                11,986,300 1.3     $1.22




The following is a summary of stock options as at 31 December 2012



Options Outstanding

                           Wt. Avg Wt. Avg
Range of        No. of     Life    Exercise
Exercise Price  Options    (Years) Price*


$2.22-$2.70     5,350,000  2.0     $2.22
(C$2.25-C$2.69)

$1.49-$2.03     10,331,667 2.6     $1.81
(C$1.54-C$1.99)

$0.20-$0.81     4,666,297  0.8     $0.56
(C$0.25-C$0.87)

                20,347,964 2.0     $1.63




Options Exercisable

                 No. of     Wt. Avg Wt. Avg
Range of         Options   Life    Exercise
Exercise Price              (Years) Price*


$2.22-$2.70      3,280,003  2.0     $2.22
(C$2.25-C$2.69)

$1.49-$2.03      3,113,338  1.2     $1.53
(C$1.54-C$1.99)

$0.20-$0.81      4,666,297  0.8     $0.80
(C$0.25-C$0.87)

                 11,059,638 1.3     $1.43




(c) Share based payments

Options granted are accounted for using the fair value method. The
compensation cost during the three months and nine months ended 30
September 2013 for total stock options granted was $1.0 million and
$3.0 million respectively (Q3 2012: $0.8 million, Q3 YTD: $2.4
million). $0.2 million and $0.9 million were charged through the income
statement for share based payment for the three and nine months ended
30 September 2013 respectively, being the Corporation's share of share
based payment chargeable through the income statement. The remainder of
the Corporation's share of share based payment has been capitalised.
The fair value of each stock option granted was estimated at the date
of grant, using the Black-Scholes option pricing model with the
following assumptions:



                            For the      For the
                            nine months  year ended
                            ended       31 December
                            30 September 2012
                            2013

Risk free interest rate     1.30%        0.40%

Expected stock volatility   63%          74%

Expected life of options    3 years      3 years

Weighted Average Fair Value $0.92        $1.08




20. SHARE BASED PAYMENT RESERVE



                                                 30 Sept 31 Dec

                                                 2013    2012

                                                 US$'000 US$'000

Balance, beginning of period                     20,340  17,318

Share based payment cost                         2,917   3,817

Transfer to share capital on exercise of options (257)   (795)

Balance, end of period                           23,000  20,340




21.  EARNINGS PER SHARE

The calculation of basic earnings per share is based on the profit
after tax and the weighted average number of common shares in issue
during the period. The calculation of diluted earnings per share is
based on the profit after tax and the weighted average number of
potential common shares in issue during the period.



                 Three months ended 30 Sept  Nine months ended 30 Sept

                 2013          2012          2013         2012

Weighted average 317,365,658   259,346,128   294,617,969  259,236,730
number of
common shares
(basic)

Weighted average 324,563,406   264,573,365   299,807,995  264,632,244
numbers of
common shares
(diluted)




22.  TAXATION



         Three months ended 30 Sept  Nine months ended 30 Sept

         2013          2012          2013         2012

         US$'000       US$'000       US$'000      US$'000

Taxation 8,183         2,924         (7,492)      10,575




23.  COMMITMENTS



Operating lease commitments                             30 Sept 31 Dec

                                                        2013    2012

                                                        US$'000 US$'000


Within one year                                         13,273  12,759

Two to five years                                       11,409  18,756

More than five years                                    -       65



Capital commitments                                     30 Sept 31 Dec

                                                        2013    2012

                                                        US$'000 US$'000

Capital commitments incurred jointly with other         262,128 111,747
ventures (Ithaca's share)




24.  FINANCIAL INSTRUMENTS

To estimate fair value of financial instruments, the Corporation uses
quoted market prices when available, or industry accepted third-party
models and valuation methodologies that utilise observable market data.
In addition to market information, the Corporation incorporates
transaction specific details that market participants would utilise in
a fair value measurement, including the impact of non-performance risk.
The Corporation characterises inputs used in determining fair value
using a hierarchy that prioritises inputs depending on the degree to
which they are observable. However, these fair value estimates may not
necessarily be indicative of the amounts that could be realised or
settled in a current market transaction. The three levels of the fair
value hierarchy are as follows:

- Level 1 - inputs represent quoted prices in active markets for
identical assets or liabilities (for example, exchange-traded commodity
derivatives). Active markets are those in which transactions occur in
sufficient frequency and volume to provide pricing information on an
ongoing basis.

- Level 2 - inputs other than quoted prices included within Level 1
that are observable, either directly or indirectly, as of the reporting
date. Level 2 valuations are based on inputs, including quoted forward
prices for commodities, market interest rates, and volatility factors,
which can be observed or corroborated in the marketplace. The
Corporation obtains information from sources such as the New York
Mercantile Exchange and independent price publications.

- Level 3 - inputs that are less observable, unavailable or where the
observable data does not support the majority of the instrument's fair
value.

In forming estimates, the Corporation utilises the most observable
inputs available for valuation purposes. If a fair value measurement
reflects inputs of different levels within the hierarchy, the
measurement is categorised based upon the lowest level of input that is
significant to the fair value measurement. The valuation of
over-the-counter financial swaps and collars is based on similar
transactions observable in active markets or industry standard models
that primarily rely on market observable inputs. Substantially all of
the assumptions for industry standard models are observable in active
markets throughout the full term of the instrument. These are
categorised as Level 2.

The following table presents the Corporation's material financial
instruments measured at fair value for each hierarchy level as of 30
September 2013:



                         Level 1 Level 2 Level 3 Total Fair Value
                         US$'000 US$'000 US$'000 US$'000

Derivative financial     -       12,150  -       12,150
instrument asset

Long term liability      -       -       (2,955) (2,955)
on Beatrice acquisition

Contingent consideration -       (4,000) -       (4,000)

Derivative financial     -       (8,253) -       (8,253)
instrument liability




The table below presents the total gain / (loss) on financial
instruments that has been disclosed through the statement of net and
comprehensive income:



                                Three months ended  Nine months ended
30 Sept             30 Sept

                                2013      2012      2013      2012

                                US$'000   US$'000   US$'000   US$'000

Revaluation of forex forward    9,723     166       8,251     707
contracts

Revaluation of gas contract     -         610       -         1,368

Revaluation of other long term  (90)      (86)      64        (115)
liability

Revaluation of commodity hedges (22,945)  (13,617)  (25,389)  3,241

                                (13,312)  (12,927)  (17,074)  5,201


Realised gain/(loss) on         (3,687)   888       9,873     2,597
commodity hedges

Realised gain on forex          1,185     50        1,729     118
contracts

                                (2,502)   938       11,602    2,715


Contingent consideration        -         -         -         (1,295)

Total gain/(loss) on financial  (15,814)  (11,989)  (5,472)   6,621
instruments




The Corporation has identified that it is exposed principally to these
areas of market risk.

i) Commodity Risk

The table below presents the total gain / (loss) on commodity hedges
that has been disclosed through the statement of net and comprehensive
income:



Three months ended 30 Sept

                                         2013     2012

                                         US$'000  US$'000

Revaluation of commodity hedges          (22,945) (13,617)

Realised gain/(loss) on commodity hedges (3,687)  888

Total (loss) on commodity hedges         (26,632) (12,729)




Commodity price risk related to crude oil prices is the Corporation's
most significant market risk exposure. Crude oil prices and quality
differentials are influenced by worldwide factors such as OPEC actions,
political events and supply and demand fundamentals. The Corporation is
also exposed to natural gas price movements on uncontracted gas sales.
Natural gas prices, in addition to the worldwide factors noted above,
can also be influenced by local market conditions. The Corporation's
expenditures are subject to the effects of inflation, and prices
received for the product sold are not readily adjustable to cover any
increase in expenses from inflation. The Corporation may periodically
use different types of derivative instruments to manage its exposure to
price volatility, thus mitigating fluctuations in commodity-related
cash flows.

The below represents commodity hedges in place:



Derivative Term             Volume           Average price

Oil puts   Oct 13 - Sept 14 930,300   bbls   $104/bbl

Oil swaps  Oct 13 - Dec 14  2,472,809 bbls   $102/bbl

Gas swaps  Oct 13 - Dec 14  1,974,000 therms 66.79p/therm




ii) Interest Risk

Calculation of interest payments for the RBL Facility agreement as well
as the Bridge Facility incorporates LIBOR whilst the Norwegian Facility
incorporates NIBOR. The Corporation will therefore be exposed to
interest rate risk to the extent that LIBOR/NIBOR may fluctuate. The
Corporation will evaluate its annual forward cash flow requirements on
a rolling monthly basis.

iii) Foreign Exchange Rate Risk

The table below presents the total (loss) on foreign exchange financial
instruments that has been disclosed through the statement of net and
comprehensive income:



Three months ended 30 Sept

                                                    2013    2012

                                                    US$'000 US$'000

Revaluation of foreign exchange forward contracts   9,723   166

Realised gain on foreign exchange forward contracts 1,185   50

Total gain on forex forward contracts               10,908  216




The Corporation is exposed to foreign exchange risks to the extent it
transacts in various currencies, while measuring and reporting its
results in US Dollars. Since time passes between the recording of a
receivable or payable transaction and its collection or payment, the
Corporation is exposed to gains or losses on non USD amounts and on
balance sheet translation of monetary accounts denominated in non USD
amounts upon spot rate fluctuations from quarter to quarter.

The below represents foreign exchange financial instruments in place:



Derivative   Term     Value              Protection rate Trigger rate

Forward plus Oct 13 - GBP4 million/month $1.59/GBP1.00   $1.50/GBP1.00
             Dec 13

Forward      Oct 13 - GBP65 million      $1.52/GBP1.00   N/A
             Jan 14

Forward      Oct 13 - EUR25 million      $1.29/EUR1.00   N/A
             Dec 13


iv) Credit Risk

The Corporation's accounts receivable with customers in the oil and gas
industry are subject to normal industry credit risks and are unsecured.
All of its oil production from the Beatrice, Jacky and Athena fields is
sold to BP Oil International Limited. Oil production from Cook, Broom,
Dons, Causeway and Fionn is sold to Shell Trading International Ltd.
Anglia and Topaz gas production is currently sold through three
contracts to RWE NPower PLC and Hess Energy Gas Power (UK) Ltd. Cook
gas is sold to Shell UK Ltd and Esso Exploration & Production UK Ltd.

The Corporation assesses partners' credit worthiness before entering
into farm-in or joint venture agreements. In the past, the Corporation
has not experienced credit loss in the collection of accounts
receivable. As the Corporation's exploration, drilling and development
activities expand with existing and new joint venture partners, the
Corporation will assess and continuously update its management of
associated credit risk and related procedures.

The Corporation regularly monitors all customer receivable balances
outstanding in excess of 90 days. As at 30 September 2013 substantially
all accounts receivables are current, being defined as less than 90
days. The Corporation has no allowance for doubtful accounts as at 30
September 2013 (31 December 2012: $Nil).

The Corporation may be exposed to certain losses in the event that
counterparties to derivative financial instruments are unable to meet
the terms of the contracts. The Corporation's exposure is limited to
those counterparties holding derivative contracts with positive fair
values at the reporting date. As at 30 September 2013, exposure is
$12.2 million (31 December 2012: $8.3 million).

The Corporation also has credit risk arising from cash and cash
equivalents held with banks and financial institutions. The maximum
credit exposure associated with financial assets is the carrying
values.

v) Liquidity Risk

Liquidity risk includes the risk that as a result of its operational
liquidity requirements the Corporation will not have sufficient funds
to settle a transaction on the due date. The Corporation manages
liquidity risk by maintaining adequate cash reserves, banking
facilities, and by considering medium and future requirements by
continuously monitoring forecast and actual cash flows. The Corporation
considers the maturity profiles of its financial assets and
liabilities. As at 30 September 2013 substantially all accounts payable
are current.

The following table shows the timing of cash outflows relating to trade
and other payables.



                                         Within 1 year 1 to 5 years

                                         US$'000       US$'000

Accounts payable and accrued liabilities 408,604       -

Other long term liabilities              -             2,955

                                         408,604       2,955




25.  DERIVATIVE FINANCIAL INSTRUMENTS



                                  30 Sept 31 December

                                  2013    2012

                                  US$'000 US$'000

Oil swaps                         (7,648) 2,497

Put options                       3,387   5,667

Gas swaps                         48      -

Embedded derivative               -       87

Foreign exchange forward contract 8,110   -                           3,897
8,251




26.  FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES

Financial instruments of the Corporation consist mainly of cash and
cash equivalents, receivables, payables, loans and financial derivative
contracts, all of which are included in these financial statements. At
30 September 2013, the classification of financial instruments and the
carrying amounts reported on the balance sheet and their estimated fair
values are as follows:



                                30 September 2013   31 December 2012

                                US$'000             US$'000

Classification
                                Carrying  Fair      Carrying  Fair
                               Amount    Value     Amount    Value

Cash and cash equivalents (Held 73,770    73,770    31,374    31,374
for trading)

Restricted cash                 3,426     3,426     2         2

Derivative financial            12,150    12,150    8,251     8,251
instruments (Held for trading)

Accounts receivable (Loans and  300,424   300,424   159,195   159,195
Receivables)

Deposits                        25,255    25,255    14,754    14,754


Bank debt (Loans and            (426,574) (426,574) -         -
Receivables)

Contingent consideration        (4,000)   (4,000)   (4,000)   (4,000)

Derivative financial            (8,253)   (8,253)   -         -
instruments (Held for trading)

Other long term liabilities     (2,955)   (2,955)   (3,018)   (3,018)

Accounts payable (Other         (408,604) (408,604) (205,635) (205,635)
financial liabilities)




27. RELATED PARTY TRANSACTIONS

The consolidated financial statements include the financial statements
of Ithaca Energy Inc and the subsidiaries listed in the following
table:



                             Country of          % equity interest at
                             incorporation       30 Sep

                                                 2013       2012

Ithaca Energy (UK) Limited   Scotland            100%       100%

Ithaca Minerals (North Sea)  Scotland            100%       100%
Limited

Ithaca Energy (Holdings)     Bermuda             100%       Nil
Limited

Ithaca Energy Holdings (UK)  Scotland            100%       Nil
Limited

Ithaca Petroleum PLC         England and Wales   100%       Nil

Ithaca North Sea Limited     England and Wales   100%       Nil

Ithaca Exploration Limited   England and Wales   100%       Nil

Ithaca Causeway Limited      England and Wales   100%       Nil

Ithaca Gamma Limited         England and Wales   100%       Nil

Ithaca Alpha Limited         Northern Ireland    100%       Nil

Ithaca Epsilon Limited       England and Wales   100%       Nil

Ithaca Delta Limited         England and Wales   100%       Nil

Ithaca Petroleum Holdings AS Norway              100%       Nil

Ithaca Petroleum Norge AS    Norway              100%       Nil

Ithaca Technology AS         Norway              100%       Nil

Ithaca AS                    Norway              100%       Nil

Ithaca Petroleum EHF         Iceland             100%       Nil


Transactions between subsidiaries are eliminated on consolidation.

The following table provides the total amount of transactions that have
been entered into with related parties during the nine month period
ending 30 September 2013 and 30 September 2012, as well as balances
with related parties as of 30 September 2013 and 31 December 2012:



                      Sales   Purchases Accounts         Accounts
                                        receivable       payable

                      US$'000 US$'000   US$'000          US$'000

Burstall Winger  2013 -       323       -                -
LLP

                 2012 -       138       -                -






Loans to related parties   Amounts owed from related parties

                            30 Sept          31 Dec

                            2013             2012                  US$'000
US$'000

FPF-1 Limited               26,346           21,551




28. SEASONALITY

The effect of seasonality on the Corporation's financial results for
any individual quarter is not material.

                    This information is provided by RNS
          The company news service from the London Stock Exchange

END

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