SOURCE: Ithaca Energy Inc

August 13, 2013 02:00 ET

Ithaca Energy Inc - Second Quarter Results

ABERDEEN, SCOTLAND--(Marketwired - Aug 13, 2013) -

 Ithaca Energy Inc (TSX VENTURE: IAE) (TSX: IAE)

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

                       Ithaca Energy Inc.

      Second Quarter and Half Yearly 2013 Financial Results

                       13 August 2013

Ithaca Energy Inc. (TSX: IAE), (LSE AIM: IAE) ("Ithaca" or the "Company")
announces its quarterly results for the three months ended June 30,
2013 ("Q2 2013") and half yearly results for the six months ended June
30, 2013 ("H1 2013"). The acquisition of Valiant Petroleum plc
("Valiant") was completed on April 19, 2013, with the financial results
reflecting the takeover of the company from that time.

Financial Highlights

- Q2 2013 cashflow from operations increased approximately 300% to
$65.0 million (Q2 2012: $16.3 million), resulting in half yearly
cashflow from operations of $100.5 million (H1 2012: $44.7 million) -
H1 2013 cashflow per share $0.36 (H1 2012: $0.17)

- Q2 2013 net earnings of $52.2 million (Q2 2012: $30.2 million),
resulting in half yearly net earnings of $55.7 million (H1 2012: $43.2
million) - H1 2013 earnings per share $0.20 (H1 2012: $0.20)

- Q2 2013 profit before tax of $69.1 million (Q2 2012: $21.7 million),
resulting in half yearly profit before tax of $71.4 million (H1 2012:
$35.5 million)

- Q2 2013 average realised oil price of $111 / bbl (Q2 2012: $116 /
bbl), including a realised hedging gain of $8 / bbl

- Net drawn debt of $346 million from bank facilities of $780 million
at June 30, 2013 (zero net drawn debt at December 31, 2012)

- UK tax allowances pool of $923 million and Norwegian tax receivable
of $70 million at June 30, 2013

- Approximately 4.3 million barrels of future 2013-14 oil production
hedged at a weighted average price of around $103 / bbl (approximately
30% puts / 70% swaps)

H1-2013 Pro-Forma

The acquisition of Valiant was completed on April 19, 2013, with the
financial results reflecting that. The table below sets out the
financial highlights of H1 2013 with the exceptional restructuring
costs associated with the Valiant transaction separately identified.
Also shown is a pro-forma cashflow summary for H1 2013 to provide an
overview of the cash generative nature of the enlarged Company.


                                       Fin. Results Pro-Forma
H1 2013                                Valiant from Valiant from
                                       19-Apr-13    01-Jan-13

Production                       boepd 9,138        14,300

Revenue                          M$    188.1        299.6

Reduction in oil inventory       M$    (22.7)       (27.0)

Operating Costs                  M$    (66.3)       (83.2)

G & A                            M$    (5.4)        (15.9)

Forex                            M$    (2.0)        (0.2)

Realised Derivative Gains        M$    14.1         14.1

Cashflow from Ongoing Operations M$    105.8        187.4

Non-Recurring Valiant Costs*

 - Restructuring Costs           M$    (5.2)        (5.2)

Cashflow from Operations         M$    100.5        182.2


*Ithaca's Valiant acquisition transaction costs of $5 million are
included within cashflow from investing activities, resulting in total
non-recurring costs of $10.2 million.

The H1-2013 pro-forma highlights are:

- Average net export production in H1 2013 of 14,300 boepd, 95% oil

- H1 2013 cashflow from ongoing operations of $187.4 million

- Operating costs of $32 per barrel of oil equivalent ("boe") yielding
a netback per barrel of over $70 / boe

- Future annual G&A savings of over $20million per annum resulting from
the now completed restructuring and full integration of Valiant's
assets into the enlarged Company

Production & Operations

Based on pro-forma production in H1 2013 and a balanced view of the
opportunities and challenges for the second half of 2013 ("H2 2013"),
the Company anticipates that full year 2013 production will be at the
lower end of the pro-forma annual guidance range of 14,000 to 16,000
boepd.

Production is expected to benefit from recent operational activities
and planned work programmes.

- An additional production well on the Don Southwest field was drilled
and brought online in late June 2013 and drilling of a water injection
well in the same area of the field is nearing completion. A chemical
treatment campaign on the wells on the West Don field has also
successfully been completed.

- Good progress continues to be made on the work programme required to
enable start-up of the electrical submersible pump ("ESP") on the
Causeway field. It is anticipated that the facilities being installed
on the host platform for the field will be operational in the fourth
quarter of the year, significantly boosting production from the field.

- Production from the Athena field was partially reduced during the
second quarter as one of the four producing wells, the "P2" well, was
temporarily shut-in. A repair was successfully completed as planned in
early July 2013 and the well was brought back online.

The key risks to production in H2 2013 relate to completion of works on
certain of the Company's non-operated assets and the results of an
ongoing evaluation on one of the Athena wells.

- The planned start-up of the ESP on the Causeway field in Q4 2013 is
subject to TAQA delivering an on time turnaround of six weeks on the
North Cormorant platform and thereafter executing on the plan to
deliver power to the Causeway well ESP package.

- The Shell operated Cook field has had to be shut-in in the last few
days to allow inspection of the infield flowline connecting the field
to the Anasuria floating production, storage and offloading vessel. The
Operator is planning for the work to be completed in September 2013 to
allow restart of production.

- Production from one well on the Athena Field, the "P4" well which
contributes under 400 boepd (net) was shut-in on 12 August 2013.
Diagnostic testing, including investigation of the ESP installed in the
well, is underway.

Substantial delay to completion of the above works, including any rig
or vessel work required as an outcome of the Athena P4 diagnostic
testing, has the potential to reduce full year production below the
guidance range.

Greater Stella Area Development

- Drilling on the Stella field commenced in June 2013. The first
development well is progressing as planned, with drilling currently
ongoing in the horizontal reservoir section of the well.

- Excellent progress is being made on the subsea infrastructure
installation work programme - the 60km 10-inch gas export pipeline and
main subsea structures have been installed and infield flowline
trenching has been completed.

- Execution of the marine system works currently being conducted on
the"FPF-1" floating production unit, in Gdansk, Poland is progressing
well.

Corporate

- The acquisition of Valiant was completed on April 19, 2013 and all
the main integration milestones have now been completed.

- All future UK exploration and appraisal well commitments transferred
as a result of the Valiant acquisition have been farmed out with
material expenditure carries - removing approximately $75 million of
net exploration expenditure, while creating upside exposure to future
wells at an anticipated net cost of less than $10 million. Monetisation
of the UK exploration portfolio has exceeded expectations in terms of
levels of expenditure carry and speed of execution.

- Drilling operations on the Norvarg well were successfully completed
in August 2013. The reserves of the field and potential future
development options are currently being evaluated.

- A re-focused strategy has been established for the Norwegian
business, targeting lower risk geology / geography, with new leadership
provided by Lars Thorrud, previously Vice President Business
Development in Det Norske Oljeselskap ASA.

Iain McKendrick, Chief Executive Officer, commented:"In the first half of
the year we have both doubled production and
operating cashflow and importantly diversified our producing asset base
to 11 fields. The Greater Stella Area development is moving forward
rapidly and with the integration of the Valiant acquisition now
completed, including restructuring of the UK exploration portfolio, we
look forward to an active second half of the year."

Company Website

Ithaca has today launched a re-developed Company website,
 www.ithacaenergy.com , with further background information on all its
assets and on-going activities.

                               - ENDS -

Enquiries:

Ithaca Energy:
Iain               imckendrick@ithacaenergy.com       +44 (0)1224 650 261
McKendrick,
CEO
Graham             gforbes@ithacaenergy.com           +44 (0)1224 652 151
Forbes,
CFO

FTI Consulting:
Billy              billy.clegg@fticonsulting.com      +44 (0)207 269 7157
Clegg
Edward             edward.westropp@fticonsulting.com  +44 (0)207 269 7230
Westropp
Georgia            georgia.mann@fticonsulting.com     +44 (0)207 269 7212
Mann

Cenkos Securities plc:
Jon                jfitzpatrick@cenkos.com            +44 (0)207 397 8900
Fitzpatrick
Neil               nmcdonald@cenkos.com               +44 (0)131 220 6939
McDonald

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

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

References herein to "boe" are derived by converting gas to oil in the
ratio of six thousand cubic feet ("Mcf") of gas to one barrel ("bbl")
of oil. Boe may be misleading, particularly if used in isolation. A boe
conversion ratio of 6 Mcf: 1 bbl is based on an energy conversion
method primarily applicable at the burner tip and does not represent a
value equivalency at the wellhead.

This press release contains non-International Financial Reporting
Standards ("IFRS") industry benchmarks and terms, such as
"netbacks","cashflow from operations" and "cashflow from ongoing
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 SECOND QUARTER 2013

                           - The acquisition of Valiant Petroleum plc
                           ("Valiant") was completed on April 19, 2013,
                           and the financial results reflect the
                           takeover of the acquired assets from that
                           time

Record cashflow from       - Q2 2013 cashflow from operations increased
operations                 approximately 300% to $65.0 million (Q2
                           2012: $16.3 million) resulting in half
                           yearly cashflow from operations of $100.5
                           million (H1 2012: $44.7 million) - H1 2013
                           cashflow per share $0.36 (H1 2012: $0.17)

                           - Q2 2013 profit before tax of $69.1 million
                           (Q2 2012: $21.7 million) and net earnings of
                           $52.2 million (Q2 2012: $30.2 million)
                           resulting in H1 2013 profit before tax of
                           $71.4 million (H1 2012: $35.5 million) and
                           H1 2013 net earnings of $55.7 million (H1
                           2012: $43.2 million)

                           - Q2 2013 average realised oil price of $111
                           / bbl (Q2 2012: $116 / bbl), including a
                           realised hedging gain of $8 / bbl

                           - Net drawn debt of $346 million at June 30,
                           2013 (zero net drawn debt at December 31,
                           2012)

                           - UK tax allowances pool of $923 million at
                           quarter end. Norwegian tax receivable of $70
                           million

                           - Approximately 4.3 million barrels of
                           future 2013-14 oil production hedged at a
                           weighted average price of approximately $103
                           / bbl (approximately 30% puts / 70% swaps)

Solid H1 2013 production   - Taking into account production from the
performance                Valiant assets on a pro-forma basis from the
                           start of 2013, total average net export
                           production in H1 2013 was approximately
                           14,300 barrels of oil equivalent per day
                           ("boepd"), approximately 95% oil

                           - Based on pro-forma production in H1 2013
                           and a balanced view of the opportunities and
                           challenges for H2 2013, the Company
                           anticipates that full year 2013 production
                           will be at the lower end of the pro-forma
                           annual guidance range of 14,000 to 16,000
                           boepd

                           - Total average net export production in Q2
                           2013, taking into account the Valiant
                           acquisition from the transaction completion
                           date of April 19, 2013, was 12,100 boepd,
                           approximately 95% oil (Q2 2012: 3,964
                           boepd), resulting in H1 2013 production of
                           9,138 boepd, approximately 93% oil (H1 2012:
                           4,132 boepd)

Strong progress on Stella  - Drilling on the Stella field commenced in
- development drilling     June 2013 - the first well is currently
and subsea                 drilling in the horizontal reservoir section
infrastructure
installation programmes    - Excellent progress is being made on the
commenced                  subsea infrastructure installation work
                           programme - the 60km 10-inch gas export
                           pipeline and main subsea structures have
                           been installed and infield flowline
                           trenching has been completed

                           - Steady progress has being made on
                           execution of the "FPF-1" floating production
                           facility marine system works following the
                           transfer of the vessel to the dry dock
                           facility at the modifications yard in
                           Gdansk, Poland, in April 2013. The hull tank
                           refurbishment operations are nearing
                           completion and installation of the
                           additional buoyancy has commenced

Norvarg drilling           - Drilling operations on the Norvarg
completed                  appraisal well were successfully completed
                           in August 2013. Work is now being undertaken
                           to evaluate the estimated reserves on the
                           structure and potential future development
                           options

Valiant acquisition        - All Valiant's UK assets have been
integration milestones     integrated into Ithaca's existing
completed                  organisation and Valiant's UK office has
                           been closed - this is expected to yield
                           approximately $20 million per annum of
                           overhead savings

                           - All future UK exploration and appraisal
                           well commitments transferred as a result of
                           Valiant acquisition have been farmed out
                           with material expenditure carries - removing
                           approximately $75 million of net UK
                           exploration expenditure, while creating
                           upside exposure to future wells at an
                           anticipated net cost of under $10 million

                           - Re-focused strategy established for the
                           Norwegian business, targeting lower risk
                           geology / geography, with new leadership




  SUMMARY STATEMENT OF INCOME

                                               3 Months Ended June 30
                                               2013     2012     %

    Average Brent Oil Price              $/bbl 102      108      -6%

    Average Realised Oil Price(1)        $/bbl 103      110      -6%


    Revenue                              M$    128.4    35.8     259%

    Cost of Sales - excluding DD&A       M$    (62.1)   (18.9)   229%

    G&A etc                              M$    (6.2)    (2.6)    138%

    Non-recurring Valiant Restructuring  M$    (5.2)    -

    Realised Derivatives Gain / (Loss)   M$    10.2     2.0      410%

    Cashflow From Operations             M$    65.0     16.3     299%

    DD&A                                 M$    (41.4)   (11.1)   273%

    Unrealised Derivatives Gain / (Loss) M$    7.3      17.4     -58%

    Non-recurring Valiant Deal Costs     M$    (4.4)    -

    Non-recurring Negative Goodwill      M$    48.0     -

    Other                                M$    (5.5)    (0.9)    511%

    Profit Before Tax                    M$    69.1     21.7     218%

    Deferred Tax Credit / (Charge)       M$    (16.9)   8.5

    Profit After Tax                     M$    52.2     30.2     73%


    Earnings Per Share(2)                $/Sh. 0.17     0.12     42%

    Cashflow Per Share(2)                $/Sh. 0.21     0.06     233%

                                               6 Months Ended June 30
                                               2013     2012     %

    Average Brent Oil Price              $/bbl 108      114      -5%

    Average Realised Oil Price(1)        $/bbl 104      113      -8%


    Revenue                              M$    188.1    76.3     147%

    Cost of Sales - excluding DD&A       M$    (89.0)   (31.5)   183%

    G&A etc                              M$    (7.5)    (1.1)    581%

    Non-recurring Valiant Restructuring  M$    (5.2)    -

    Realised Derivatives Gain / (Loss)   M$    14.1     1.8      683%

    Cashflow From Operations             M$    100.5    44.7     125%

    DD&A                                 M$    (60.9)   (24.5)   149%

    Unrealised Derivatives Gain / (Loss) M$    (3.8)    18.1

    Non-recurring Valiant Deal Costs     M$    (5.0)    -

    Non-recurring Negative Goodwill      M$    48.9     -

    Other                                M$    (8.3)    (2.8)    196%

    Profit Before Tax                    M$    71.4     35.5     101%

    Deferred Tax Credit / (Charge)       M$    (15.7)   7.7

    Profit After Tax                     M$    55.7     43.2     29%


    Earnings Per Share(2)                $/Sh. 0.20     0.20     -

    Cashflow Per Share(2)                $/Sh. 0.36     0.17     100%


     (1) Average realised price before hedging

     (2) Q2 2013 weighted average number of shares of 305.9 million
     and H1 2013 weighted average number of shares of 283.1 million

    SUMMARY BALANCE SHEET

    M$                             Q2 2013 Q4 2012

    Cash & Equivalents             30      31

    Other Current Assets           315     198

    PP&E                           1,356   663

    Other Non-Current Assets       47      41

    Total Assets                   1,750   934

    Current Liabilities            (365)   (206)

    Asset Retirement Obligations   (141)   (53)

    Deferred Tax Liabilities       (110)   (62)

    Other Non-Current Liabilities  (377)   (7)

    Total Liabilities              (994)   (328)


    Net Assets                     757     606

    Share Capital                  525     431

    Other Reserves                 22      20

    Surplus                        210     154

    Shareholders Equity            757     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 25kboe/d 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.

                       PRODUCTION & OPERATIONS UPDATE

                       Taking into account production from the Valiant
                       assets on a pro-forma basis from the start of
Solid H1-2013          2013, total average net export production in H1
production             2013 was approximately 14,300 boepd,
performance            approximately 95% oil. This is in line with the
                       Company's pro-forma annual guidance range of
                       14,000 to 16,000 boepd.

                       Total average net export production in Q2 2013,
                       taking into account the Valiant acquisition from
                       the transaction completion date of April 19,
                       2013, was 12,100 boepd, approximately 95% oil
                       (Q2 2012: 3,964 boepd), resulting in H1 2013
                       production of 9,138 boepd, approximately 93% oil
                       (H1 2012: 4,132 boepd).

                       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.

                       The material increase in production delivered in
                       Q2 2013 compared to the same quarter in 2012 was
                       primarily attributable to the contribution of
                       the Valiant assets, in addition to the positive
impact of the Athena field start-up (first oil
                       May 2012) and the acquisition of an additional
                       12.885% interest in the Cook field from Noble
                       Energy Capital Limited, the "Cook Acquisition"
                       (transaction completed February 2013).

                       OPERATIONAL ACTIVITIES

                       The fields produced strongly during the quarter,
                       although, as anticipated, production was
                       impacted by planned maintenance shutdowns on a
                       number of assets, including the Beatrice Area
                       infrastructure and Anglia, together with the
                       non-operated Topaz field. Scheduled shutdowns
Main on-going          were also incurred on the Shell-operated
operational work       Anasuria Floating Production, Storage and
programmes focused on  Offloading vessel ("FPSO"), which serves as the
production             host facility for the Cook field, to enable the
enhancement            re-start of production from another field that
activities             uses the vessel.

                       Athena

                       During the quarter the Ithaca operated Athena
                       field completed its first full year of
                       operations.

                       Gross daily production was reduced towards the
                       end of the quarter as one of the four producing
                       wells, the "P2" well, was temporarily shut-in
                       awaiting a repair to the electrical cable
                       serving that particular well. The necessary
                       repair was completed in early July 2013 and the
                       well was brought back online.

                       During the quarter the Athena field commenced
                       the production of water with oil. This was
significantly later than originally anticipated
                       prior to start-up of production from the field.
                       The future evolution of the water production
                       profile will now provide important information
                       for forecasting the ultimate field production
                       profile and the scope for future potential
                       upside investment opportunities. The Athena
                       field accounts for less than 15% of the
                       Company's 2013 production following completion
                       of the Valiant acquisition.

                       Production from one well on the Athena Field,
                       the "P4" well which contributes under 400 boepd
                       (net) was shut-in on 12 August 2013. Diagnostic
                       testing, including investigation of the ESP
                       installed in the well, is underway.

                       Causeway Area

                       Drilling activities on the Causeway water
                       injection well and the Fionn production well
                       were completed in Q1 2013. Since taking control
                       of the assets in Q2 2013, the Company has
                       completed the subsea tie-in works required to
                       put the Fionn well into production and is
                       working closely with Taqa, the operator of the
                       Causeway Area host infrastructure, to facilitate
                       start-up of the installed electrical submersible
                       pumps ("ESPs") and (Causeway) water injection as
                       soon as practicable. It is anticipated that the
                       facilities required to start-up the ESPs on the
                       Causeway field will be operational in the fourth
                       quarter of the year.                   Flow tests
that have been performed on the Fionn
                       well since completion of the subsea tie-in works
                       have confirmed that the field has the potential
                       to flow at considerably better rates if the well
                       is sidetracked to a more optimal location (the
                       well is a re-completed appraisal well).

                       The Company has exercised a rig option
                       originally held by Valiant to complete the
                       sidetrack of the Fionn well. It is anticipated
                       that drilling operations will commence in the
                       fourth quarter of 2013. The well will be
                       sidetracked to a location updip of the existing
                       well to optimise access to the prime reservoir
                       formation and to target potential upside
                       reserves in a secondary reservoir. Prior to the
                       commencement of drilling operations, the well
                       will be produced on free flow (awaiting the
                       start-up of the ESPs).

                       Beatrice Area

                       During the quarter a planned maintenance
                       shutdown was completed on the Beatrice Area
                       infrastructure, which comprises the Beatrice and
                       Jacky offshore platforms and the Nigg oil
                       terminal. The shutdown was focused on both the
                       completion of asset integrity workscopes and the
                       implementation of measures designed to improve
                       the operating efficiency of the facilities.

                       Dons

                       A number of production enhancement activities
                       have been completed on the EnQuest operated Dons
                       fields since the end of Q1 2013. An additional
                       production well on the Don Southwest field was
                       drilled and brought online in late Q2 2013.
                       Drilling of a water injection well in the same
                       area of the field, to support production and
                       reserves recovery from that area of the field,
                       is nearing completion. A chemical treatment
                       campaign on a number of the wells on the West
                       Don field was successfully completed in July
                       2013, using the facilities on the Northern
                       Producer, in order to increase production.

                       Cook

                       During the quarter, the Cook field performed
                       strongly. In the last few days the field has
                       had to be shut-in to allow inspection of the
                       infield flowline connecting the field to the
                       Anasuria FPSO. The Operator is planning for the
                       work to be completed in September 2013 to allow
                       restart of production.

                       PRODUCTION OUTLOOK

                       Based on pro-forma production in H1 2013 and a
                       balanced view of the opportunities and
                       challenges for H2 2013, the Company anticipates
                       that full year production will be at the lower
                       end of the pro-forma annual guidance range of
                       14,000 to 16,000 boepd.

                       Production is expected to benefit from recent
                       operational activities and planned work
                       programmes, notably on the Dons and the Causeway
                       fields. The key risks relate to the timely
                       completion of the works on the Causeway and Cook
                       fields and the results of the on-going
                       evaluation on the Athena P4 well. Substantial
                       delay to completion of the works on these
                       fields, including any rig or vessel work
                       required as an outcome of the Athena P4
                       diagnostic testing, has the potential to reduce
                       full year production below the guidance range.

                       GREATER STELLA AREA DEVELOPMENT UPDATE

                       Strong progress has continued to be made with
                       development of the Greater Stella Area ("GSA"),
Development drilling   with commencement of both the Stella development
and subsea             drilling campaign and the initial subsea
infrastructure         infrastructure installation programme marking
installation           two major project execution milestones.
programmes underway
                       Drilling Programme

                       The high-spec ENSCO 100 heavy duty jack-up
                       drilling rig that is being used for the GSA
                       development drilling campaign commenced
                       operations on the Stella field in June 2013.
                       Management of the drilling and completion
                       operations is being performed by Advanced
                       Drilling Technology International ("ADTI")
under"turnkey" contract arrangements.

                       The initial campaign involves the drilling and
                       completion of four production wells on the
                       Stella field prior to start-up. Three
                       horizontal wells are to be drilled into the oil
                       rim of the field, along with one highly deviated
                       gas-condensate well on the crest of the
                       structure. Each well is anticipated to take
                       approximately 80-90 days to drill, complete and
                       clean-up test. Drilling operations on the first
                       well are currently on-going in the horizontal
                       reservoir section.

                       Subsea Infrastructure Works

                       Execution of the main subsea infrastructure
                       manufacturing and installation programme, which
                       is being executed by Technip UK Limited under
                       the terms of an integrated Engineering,
                       Procurement, Installation and Construction
                       contract, continued to move forward as planned
                       in Q2 2013.

                       The initial offshore installation works
                       commenced in June 2013, with trenching
                       operations being completed in preparation for
                       installation of the infield flowlines. The
                       infield flowlines, which will connect the drill
                       centres to the FPF-1, are scheduled to be
                       installed in Q3 2013.

                       Over a two week period in July 2013, the Apache
                       II pipelay vessel completed the installation of
                       the 60km 10-inch gas export pipeline that will
                       connect the FPF-1 with the BP operated Central
                       Area Transmission System, through which the gas
                       will be transported to shore for processing at
                       the Teeside Gas and Liquids Processing ("TGLP")
                       terminal. The existing facilities at the TGLP
                       terminal will be used to separate the natural
                       gas, which will be sold to the UK spot market on
                       a daily basis, and the associated propane,
                       butane and condensate from within the gas, with
such natural gas liquids being sold by TGLP at
                       prevailing market prices.

                       Installation of the main subsea structures that
                       will be used for the production and export of
                       hydrocarbons to and from the FPF-1 was also
                       completed in July, using the Skandi Arctic
                       construction and diving support vessel.

                       FPF-1 Modification Works

                       Work on the FPF-1 modifications and upgrade
                       programme, which is being managed by Petrofac
                       under the terms of a lump sum incentivised
                       contract, has continued to be focused on
                       execution of the marine system works during the
                       quarter.

                       The FPF-1 was transferred on to the dry dock
                       barge at the Remontowa shipyard in Gdansk,
                       Poland, in April 2013. The key elements of the
                       dry dock works being completed on the vessel are
                       inspection, repair and coating of the hull tanks
                       and the installation of additional buoyancy.

                       The hull tank refurbishment operations are
                       nearing completion. Construction and
                       installation of the steelwork blocks that will
                       form the additional sponsons that are being
                       added to the pontoons of the FPF-1 for enhanced
                       buoyancy is advancing and fabrication of the
                       additional buoyancy "blisters" that are being
                       added to the legs of the vessel has commenced.

                       DRILLING PROGRAMME

                       NORVARG APPRAISAL WELL - NORWAY

Drilling operations    Drilling of the TOTAL E&P Norge operated Norvarg
on Norvarg appraisal   appraisal well in the Norwegian sector of the
well completed -       Barents North Sea was completed in August 2013.
reserves and           Two formation tests were carried out in the
development options    upper and lower parts of the Kobbe Formation,
evaluation to          with the well flowing at a maximum gross
commence               production rate of approximately 6.2 million
                       standard cubic of feet per day on a 52/64-inch
                       choke. An extensive data acquisition programme
                       was completed, including wire line logging,
                       coring and fluid sampling, and work will now be
                       undertaken by the Operator to evaluate the
                       estimated recoverable hydrocarbons on the
                       structure. Downhole pressure gauges have been
                       installed in the well to recover long term
                       pressure build-up data that will be used to
                       evaluate the extent of the reservoir.

                       HANDCROSS

                       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.

                       CORPORATE ACTIVITIES

                       Valiant Petroleum plc Acquisition & Integration

Efficient execution    On April 19, 2013 the Company completed the
of Valiant             acquisition of Valiant. Since this time, the
acquisition            Company has efficiently executed its integration
integration plan -     plan to maximise the value of the acquisition.
maximising
shareholder value      - All Valiant's UK assets have been integrated
                       into Ithaca's existing organisation and
                       Valiant's UK office has been closed - this is
                       expected to yield approximately $20 million per
                       annum of overhead savings.

                      - All future UK exploration and appraisal well
                       commitments transferred as a result of the
                       Valiant acquisition have been farmed out with
                       material expenditure carries being paid by the
                       companies farming in to the licences - removing
                       approximately $75 million of net UK exploration
                       expenditure, while creating upside exposure to
                       future wells at an anticipated net cost of under
                       $10 million.

                      - A re-focused strategy has been established for
                       the Norwegian business, targeting lower risk
                       geology / geography, with new leadership.

                      - Mr Lars Thorrud, previously Vice President
                       Business Development in Det Norske Oljeselskap
                       ASA (Norway), will be taking up the position of
                       General Manager of the Company's Norwegian
                       subsidiary from September 1, 2013. Mr Thorrud,
                       a geologist by background, has been working in
                       the North Sea oil and gas industry for over 24
                       years in various senior technical and commercial
                       management positions. He brings a wealth of
                       experience of building and monetising Norwegian
                       exploration and appraisal portfolios.

                       UK EXPLORATION FARM-OUTS

                       Four significant farm-out transactions have been
executed to effectively restructure and de-risk
                       the UK exploration and appraisal portfolio
                       acquired from Valiant. In addition to the main
                       farm-out transactions listed below, 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 and a subsidiary of
                       Edison International SpA reducing Ithaca's
                       paying interest in the operated West of Shetland
                       exploration well to be drilled in late 2013 from
                       100% to 6%, while retaining a 45% working
                       interest.

                       - 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 Beverly prospect.

                      - Isabella - P1820 (Blocks 30/6b, 30/11a & 30/
                       12d): farm-out executed with Maersk Oil North
                       Sea UK Limited, resulting in Ithaca reducing its
                       50% 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
                       Isabella prospect.

                       With the completion of the above farm-outs, the
                       Company has exceeded its expectations in respect
                       of the restructuring of the UK exploration and
appraisal programmes. The Company will continue
                       to farm-out, divest or relinquish the Valiant UK
                       exploration portfolio in order to create further
                       value.

                       BRIDGE LOAN FACILITY

                       The Company remains on schedule to refinance the
                       existing $350 million Bridge Loan facility,
                       which was fully drawn on April 19, 2013 as part
                       of financing the Valiant acquisition, into an
                       enlarged Senior Borrowing Base facility in the
                       second half of the year.

                       NORWEGIAN DEBT FACILITY

                       On July 1, 2013 the company signed a NOK 450
Enlarged Senior        million (~$75 million) Norwegian Exploration
Borrowing Base         Financing Facility. Under the Norwegian tax
facility to be         regime, 78% of exploration, appraisal and
established in H2      supporting expenditure resulting from operations
2013                   on the Norwegian Continental Shelf is refunded
                       by the Government in the December of the year
                       following the year the costs were
                       incurred. This facility will accelerate the
                       receipt of 95% of the tax refund receivable from
                       the Norwegian Government, significantly
                       increasing financial flexibility and assisting
                       Ithaca's growth in Norway. This is a
                       conventional tax refund facility, on industry
                       standard terms.

                       COMMODITY HEDGING

                       In the quarter, the Company received $9.4
                       million through the settlement of commodity
4.3MMbbl of future     hedges relating to approximately 0.7 million
2013-14 oil            barrels of oil and the exercise of an option to
production hedged at   swap 1 million barrels of production at $107/
~$103/bbl              bbl. On the day of exercise, the Brent forward
                       curve for the period to which the hedge related
                       was at $101 / bbl resulting in the swaption
                       being converted to a cash settlement of $6
                       million and a forward swap of 1 million barrels
                       of production at $101 / bbl.

                       Following the above transactions, 4.3 million
                       barrels of future 2013-14 oil production is
                       hedged at a weighted average price of around
                       $103 / bbl (approximately 30% puts / 70% swaps).

                       The Company recognised a gain of $6.6 million
                       through the revaluation of oil swaps and put
                       options. The hedging instruments are measured at
                       June 30, 2013 and a valuation attributed based
                       on the Brent oil forward curve on that date
                       (spot Brent was trading at $102.4/bbl on June
                       30, 2013). The gains relate to movement in the
                       Brent oil forward curve, and an increase in the
                       implied volatility.

                       Q2 2013 RESULTS OF OPERATIONS

                       REVENUE

                       Three Months Ended June 30, 2013

Record quarterly       Revenue increased by $92.6 million in Q2 2013 to
revenue of $128.4      $128.4 million (Q2 2012: $35.8 million). This
million                was mainly driven by an increase in oil sales
                       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 from April 19, 2013 following the
                       acquisition of Valiant. In addition, there was
                       a significant increase from the Athena field
                       (first oil May 2012) and the additional Cook
                       Acquisition (transaction completed in Q1 2013)
                       offset by lower volumes from the Beatrice and
                       Jacky fields attributable to planned shutdowns.

                       Average realised oil prices decreased quarter on
                       quarter from $110/bbl in Q2 2012 to $103/bbl in
                       Q2 2013. The average Brent price for the quarter
                       was $102/bbl compared to $108/bbl for Q2 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. This decrease in average
                       realised oil price was nonetheless offset by a
                       realised hedging gain of $8/bbl in Q2 2013.

                       Q2 2013 gas sales increased compared to Q2 2012,
                       although volumes remain modest, accounting for
                       only 2% of total revenue.

                       Six Months Ended June 30, 2013

                       Revenue increased by $111.8 million in H1 2013
                       to $188.1 million (H1 2012: $76.3 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, 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 $37/boe to $44/boe, partially
  offset by lower production volumes in the period.

                               3-Months
                               Ended
                               June 30th

  Average Realised Price       2013   2012

  Oil Pre-Hedging        $/bbl 103    110

  Oil Post-Hedging       $/bbl 111    116

  Gas                    $/boe 41     32

                               6-Months
                               Ended
                               June 30th

  Average Realised Price       2013   2012

  Oil Pre-Hedging        $/bbl 104    113

  Oil Post-Hedging       $/bbl 112    116

  Gas                    $/boe 44     37





  COST OF SALES

                                  3-Months Ended 6-Months Ended
                                  June 30th      June 30th

  $'000                           2013    2012   2013    2012

  Operating Expenditure           43,155  15,406 66,382  31,128

  DD&A                            41,367  11,092 60,865  24,477

  Movement in Oil & Gas Inventory 18,137  3,481  21,713  380

  Oil Purchases                   790     -      947     -

  Total                           103,449 29,979 149,907 55,985


    Three Months Ended June 30, 2013

    Cost of sales increased in Q2 2013 to $103.5 million (Q2 2012:
    $30.0 million) due 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 $43.2 million (Q2 2012:
    $15.4 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 $39/boe in the period (Q2 2012:
    $43/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
    Beatrice shutdown and a light well intervention campaign on the
    West Don field. Absent these two events, the combined unit
    operating cost would have been approximately $35/boe following the
    Valiant acquisition.

    DD&A for the quarter increased to $41.4 million (Q2 2012: $11.1
    million). This was primarily due to higher production volumes in Q2
    2013 as a result of the addition of the Dons and Causeway fields,
    together with a full quarter of production from the Athena field
    and the additional acquired interest in the Cook field. The
    blended DD&A rate for the quarter increased to $37/boe (Q2 2012:
    $30/boe). The blended DD&A rate in Q2 2012 was unusually low due
    to the production mix, however the driver for the increase has
been"business combination" accounting for transactions.

    As the below "Changes in Accounting Policies" section outlines, the
    adoption of 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 $18.1 million was charged to
    cost of sales in Q2 2013 (Q2 2012 charge of $3.5 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 Q2 2013 more barrels of oil were sold (1,213k bbls)
    than produced (1,041k bbls), as a result of significant Cook field
    liftings.

    Movement in Operating Oil     Gas  Total

    Oil & Gas Inventory   kbbls   kboe kboe

    Opening inventory     241     11   253

    Production            1,041   60   1,101

    Liftings/sales        (1,213) (61) (1,274)

    Acquired volumes      104     -    104

    Closing volumes       173     10   184


    Six Months Ended June 30, 2013

    Cost of sales increased in H1 2013 to $149.9 million (H1 2012:
    $56.0 million) due to increases in operating costs and DD&A and
    movement in oil and gas inventory.

    Operating costs increased in the period to $66.4 million (H1 2012:
    $31.1 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 $60.9 million (H1 2012: $24.5
    million). This was primarily due to higher production volumes in H1
    2013 with the addition of the Dons and Causeway fields, together
    with a full quarter of production from the Athena field and the
    additional interest in the Cook field.

    An oil and gas inventory movement of $21.7 million was charged to
    cost of sales in H1 2013 (H1 2012: charge of $0.4 million). In H1
    2013 more barrels of oil were sold (1,741k bbls) than produced
    (1,536k bbls), again mainly as a result of Cook field liftings in
    Q2.

   ADMINISTRATION & EXPLORATION & EVALUATION EXPENSES

                                         3-Months Ended 6-Months Ended
                                         June 30th      June 30th
    $'000                                2013     2012  2013     2012

    General & Administration             3,623    1,034 5,415    2,105

    Share Based Payments                 366      204   663      339

    Total Administration Expenses        3,989    1,238 5,478    2,444

    Non-recurring Valiant Acquisition    9,554    -     10,235   -
    Costs

    Exploration & Evaluation             132      4     443      79

    Total                                13,675   1,242 16,756   2,523
                      Three Months Ended June 30, 2013

                      Total administrative expenses increased in the
                      quarter to $4.0 million (Q1 2012: $1.2 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 Q2 2013.

                      Valiant acquisition costs of $9.6 million were
                      incurred in the quarter with approximately half
                      of the costs relating to advisory fees and the
                      other half to restructuring costs. The
                      post-acquisition restructuring is now complete,
                      with Valiant's UK office now closed and new
                      management in place in Norway.

                      Exploration and evaluation expenses of $0.1
                      million were recorded in the quarter (Q2 2012:
                      $0.0 million) primarily due to the expensing of
                      previously capitalised costs relating to areas
                      where exploration and evaluation activities have
                      ceased.

                      Six Months Ended June 30, 2013

                      Total administrative expenses increased in the
                      period to $5.5 million (H1 2012: $2.4 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 June 30, 2013

                      A foreign exchange loss of $2.6 million was
                      recorded in Q2 2013 (Q2 2012: $1.5 million). 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 and
                      end of the quarter but fluctuating between 1.50
                      and 1.58 during the quarter). This volatility was
                      partially offset by the foreign exchange hedges
                      and resultant gains described below.

                      The Company recorded a $17.5 million gain on
                      financial instruments for the quarter ended June
                      30, 2013 (Q2 2012: $19.3 million). The gain was
                      predominantly due to a $9.4 million realised gain
                      on commodity hedges together with a $6.6 million
                      increase in the value of oil swaps and put
                      options, due to a reduction in the Brent oil
                      forward curve, and an increase in the implied
                      volatility. In addition, the Company realised a gain
of $0.8 million on foreign exchange
                      instruments as well as a $0.6 million gain on the
                      revaluation of foreign exchange instruments. The
                      Company continues to limit exposure to
                      fluctuations in foreign currencies with forward
                      contracts to hedge a further GBP100 million and
                      EUR30 million of capital expenditure on the GSA
                      development at rates of $1.52: GBP1.00 and $1.29:
                      EUR1.00.

                      Six Months Ended June 30, 2013

                      A foreign exchange loss of $2.1 million was
                      recorded in H1 2013 (H1 2012: $0.1 million gain).
                      As above, general volatility in the USD:GBP
                      exchange rate was the main driver behind the
                      foreign exchange loss in H1 2013 (USD:GBP at
                      January 1, 2013: 1.62. USD:GBP at June 30, 2013:
                      1.52 with fluctuations between 1.48 and 1.64
                      during the period).

                      The Company recorded a $10.3 million gain on
                      financial instruments for the six months ended
                      June 30, 2013 (H1 2012: $18.6 million). This was
                      primarily driven by a $13.6 million realised gain
                      on commodity hedges, including a $6 million
                      settlement on the swaption conversion, partially
                      offset by a $2.4 million downwards revaluation of
                      commodity hedges due to a reduction in value of
                      oil swaps and put options together with a $1.5
                      million loss on the revaluation of foreign
                      exchange instruments.

                      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, $48.0 million of negative goodwill
                      was recognised in the quarter ended June 30,
                      2013. In addition, $0.9 million negative goodwill
                      was recognised in Q1 2013 in relation to the Cook
                      Acquisition representing negative goodwill of
                      $48.9 million in the six month period ended June
                      30, 2013.

                      TAXATION

                      Three Months Ended June 30, 2013

                      A tax charge of $16.9 million was recognised in
                      the quarter ended June 30, 2013 (Q2 2012: $8.5
No UK tax             million credit). $18.5 million is a non-cash
anticipated to be     charge relating to UK taxation and is a product
payable in the        of adjustments to the deferred tax charge
mid-term              primarily relating to the UK Ring Fence
                      Expenditure Supplement and share based payments.
                      As noted in the Cost Of Sales section the
                      deferred tax credit is increased by the use of
                      accounting for acquisitions as business
                      combinations.

                      The remaining $1.6 million credit is due to
                      Norway tax refunds which have been generated as a
                      result of exploration expenditure, incurred by
                      Ithaca's Norwegian operations, expensed in the
                      statement of income. Further Norwegian tax
                      refunds totalling $70 million relate to Norwegian
                      capital expenditure and are recognised on the
                      balance sheet.

                      As a result of the above factors, profit after
                      tax decreased to $52.2 million (Q2 2012: $30.2
                      million).

                      Six Months Ended June 30, 2013

                      A tax charge of $15.7 million was recognised in
                      the six months ended June 30, 2013 (H1 2012: $7.7
                      million credit). $17.3 million of this non-cash
                      charge relates to UK taxation and is a product of
                      adjustments to the deferred tax charge primarily
                      relating to the UK Ring Fence Expenditure
                      Supplement and share based payments.

                      The remaining $1.6 million credit is due to
                      Norway tax credits which have been generated as a
                      result of exploration expenditure incurred by
                      Ithaca's Norwegian operations.

                      As a result of the above factors, profit after
                      tax decreased to $55.7 million (H1 2012: $43.2
                      million).

                      No taxes are expected to be paid in the mid-term
                      relating to upstream oil and gas activities as a
                      result of the $923 million UK tax allowances pool
                      available to the Company.

                      CAPITAL INVESTMENTS

                      $608 million of the total $748 million capital
                      additions to D&P assets in H1 2013 was
Capital expenditure   attributable to the fair value on acquisition of
driven by             the Valiant producing fields resulting from
significant           business combination accounting (the total
investment in         acquisition cost being $293.6 million). The
development projects  remaining D&P additions of $140 million relate
and the acquisition   primarily to the acquisition of the additional
of Valiant            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 H1 2013 was
                      $29.7 million, offset by a $24.2 million release
                      of the acquired E&E liability, resulting in a net
                      addition of $5.5 million. Expenditure was
                      primarily focused on the Storbarden and Norvarg
                      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                            Q2 2013 Q2 2012

                      Development & Production ("D&P") 748,223 58,558

                      Exploration & Evaluation ("E&E") 5,495   2,553

                      Other Fixed Assets               567     43

                      Total                            754,285 61,154



    LIQUIDITY AND CAPITAL RESOURCES

    $'000                     Q2 2013   Q4 2012   Increase /
(Decrease)

    Cash & Cash Equivalents   30,319    31,376    (1,057)

    Trade & Other Receivables 278,747   173,949   104,798

    Inventory                 20,790    15,878    4,912

    Other Current Assets      15,560    8,251     7,309

    Trade & Other Payables    (365,281) (205,635) (159,646)

    Net Working Capital       (19,865)  23,819    43,684





    As at June 30, 2013, Ithaca had a working capital credit of $19.9
    million including a cash balance of $30.3 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 remained relatively constant period on
    period with other working capital movements 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 June 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 June 30, 2013, Ithaca had two loan facilities totalling $780
    million, being the existing BNPP facility (the "Facility") of $430
    million and an additional bridge loan (the "Bridge Facility") of
    $350 million. At quarter end, the Company had unused credit
    facilities totalling $404 million (Q4 2012: $430 million). $376
    million was drawn down under the facilities at June 30, 2013, being
    $30 million drawn under the Facility and $346 million drawn under
    the Bridge Facility.

    During the quarter ended June 30, 2013, there was a net cash
    outflow of approximately $38.5 million (Q2 2012: inflow of $21.9
    million).

    Cashflow from Operations

    Cash generated from operating activities in Q2 2013 was $65.0
    million primarily due to cash generated from Athena, Beatrice,
    Jacky, Anglia, Cook and Broom operations, augmented in Q2 2013
    primarily due to the inclusion of Dons and Causeway operations.

    Cashflow from Financing Activities

    Cash generated from financing activities in Q2 2013 was $196.9
    million primarily due to the draw down of the existing debt
    facility in Q2 2013 ($320 million), partially offset by the
    repayment of the existing Valiant loan ($115 million).

    Cashflow from Investing Activities

    Cash used in investing activities in Q2 2013 was $259.4 million
    primarily due to the cash consideration paid on the Valiant
    acquisition as well as further capital expenditure on the GSA
    development, including modification of the FPF-1 and subsea
    infrastructure fabrication works.

    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 Stella and Harrier fields, 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 facility.


    $'000                    1 Year  2-5 Years 5+ Years

    Office Leases            423     1,316     -

    Other Operating Leases   12,319  12,078    -

    Exploration Licence Fees 583     -         -

    Engineering              159,861 -         -

    Rig Commitments          46,269  -         -

    Total                    219,455 13,394    -


  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 June 30, 2013, Ithaca had 317,365,658 common shares outstanding
  along with 19,614,630 options outstanding to employees and directors
  to acquire common shares.

  In Q2 2013, a total of 56,952,321 new Ithaca common shares were
  issued and allotted to holders of Valiant shares as part of the
  Valiant acquisition consideration. Admission of the new shares to
  trading on AIM and the TSX occurred by April 22, 2013.

  No options were granted by the Board of Directors in the quarter
  ended June 30, 2012.

  As at August 10, 2013, Ithaca had 317,365,658 common shares
  outstanding along with 19,614,630 options outstanding to employees
  and directors to acquire common shares.


                              June 30, 2013

    Common Shares Outstanding   317,365,658

    Share Price(1)              $1.69 / Share

    Total Market Capitalisation $536,347,962


    (1) Represents the TSX close price (CAD$1.78 on last trading day of
    June, 2013. US$:CAD$ 0.95 on June 30, 2013


   SUMMARY OF QUARTERLY RESULTS


    $'000            30 Jun 2013 31 Mar 2013

    Revenue          128,360     59,769

    Profit After Tax 52,228      3,472


    EPS - Basic      0.17        0.01

    EPS - Diluted    0.17        0.01


    $'000            31 Dec 2012 30 Sep 2012 30 Jun 2012 31 Mar 2012

    Revenue          52,566      41,579      35,779      40,553

    Profit After Tax 45,347      4,894       30,238      12,916


    EPS - Basic      0.17        0.02        0.12        0.05

    EPS - Diluted    0.17        0.02        0.11        0.05

                                 Restated
    $'000            31 Dec 2011 30 Sep 2011

    Revenue          54,870      26,415

    Profit After Tax 13,318      16,016


    EPS - Basic      0.05        0.06

    EPS - Diluted    0.05        0.06



    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.

    Q3 2011 was restated following the Company's election to present
    all acquisitions since the IFRS transition date as business
    combinations in accordance with IFRS 3®. Refer to the "Changes in
    Accounting Policies" below for more details.

    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:
    held-for-trading, held-to-maturity investments, loans and
    receivables, or other financial liabilities. Loans and receivables,
    held-to-maturity investments and other financial liabilities are
    measured at amortised cost using the effective interest rate
    method. For all financial assets and financial liabilities that
    are not classified as held-for-trading, the transaction costs that
    are directly attributable to the acquisition or issue of a
    financial asset or financial liability are adjusted to the fair
    value initially recognised for that financial instrument. These
    costs are expensed using the effective interest rate method and are
    recorded within interest expense. Held-for-trading financial
    assets are measured at fair value and changes in fair value are
    recognised in net income.

    All derivative instruments are recorded in the balance sheet at
    fair value unless they qualify for the expected purchase, sale and
    usage exemption. All changes in their fair value are recorded in
    income unless cash flow hedge accounting is used, in which case
    changes in fair value are recorded in other comprehensive income
    until the hedged transaction is recognised in net earnings.

    The Company has classified its cash and cash equivalents,
    restricted cash, derivatives, commodity hedges and long term
    liability as held-for-trading, which are measured at fair value
    with changes being recognised in net income. Accounts receivable
    are classified as loans and receivables; operating bank loans,
    accounts payable and accrued liabilities are classified as other
    liabilities, all of which are measured at amortised cost. The
    classification of all financial instruments is the same at
    inception and at June 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  Six months
                                          ended June 30 ended June 30
    $'000                                 2013   2012   2013    2012

    Revaluation Forex Forward Contracts   584    (428)  (1,471) 541

    Revaluation of Gas Contract           -      872    -       758

    Revaluation of Other Long Term        96     61     153     (29)
    Liability

    Revaluation of Commodity Hedges       6,623  16,858 (2,444) 16,858

    Total Revaluation Gain / (Loss)       7,303  17,363 (3,762) 18,128

    Realised Gain on Forex Contracts      837    68     544     68

    Realised Gain/(Loss) on Commodity     9,374  1,908  13,560  1,709
    Hedges

    Total Realised Gain/(Loss)            10,211 1,976  14,104  1,777

    Total Realised / Revaluation Gain /   17,514 19,339 10,342  19,905
    (Loss)

    Contingent Consideration              -      -      -       (1,295)

    Total Gain/(Loss) on Financial        17,514 19,339 10,342  18,610
    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         July 2013 -    3,048,951 105
                      December 2014

    Put Options       July 2013 -    1,286,699 102
                      September 2014


    Derivative        Term           Volume    Average Price
                                     Therms    p/therm

    Gas Swaps         July 2013 -    2,342,000 67
                      December 2014


    The table below summarises the foreign exchange financial
    instruments in place at the end of Q2 2013.

    Derivative      Forward   Forward   Forward
                    Plus      contract  contract

    Term            July 13 - July 13 - Aug 13 -
                    Dec 13    Jan 14    Dec 13

    Value           GBP4      GBP100    EUR30
                    million / million   million
                    month

    Protection Rate $1.59/    $1.52/    $1.29/
                    GBP1.00   GBP1.00   EUR1.00

    Trigger Rate    $1.50/    N/A       N/A
                    GBP1.00





              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 international financial reporting
              standards ("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
              19 April 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 June 30, 2013, there were no changes in Ithaca's
              internal control over financial reporting that occurred
              during the quarter ended June 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 June 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.

              OTHER

Non-IFRS      'Cashflow from operations' referred to in this MD&A is
Measures      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.

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.

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 June 30, 2013.

Related       A director of the Company is a partner of Burstall Winger
Party         LLP who acts as counsel for the Company. The amount of
Transactions  fees paid to Burstall Winger LLP in Q2 2013 was $0.0
              million (Q2 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 June 30, 2013 the Company had a loan receivable
              from FPF-1 Ltd, an associate of the Company, for $21.6
              million (Q2 2012: $21.6 million) as a result of the
              completion of the GSA transactions in 2012.

            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.


            To the extent cashflow from    The Company has established
            operations and the Facilities' a fully funded business plan
Financing   resources are ever deemed not  and routinely monitors its
Risk        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 Main Facility and the
            Bridge 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 the integration of Valiant into
            Ithaca's existing operations;

            - 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 Company's reliance on key operational and management
            personnel;

            - 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  The information in this MD&A is provided as of August 10,
Reader      2013. The Q2 2013 results have been compared to the
Advisories  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 June 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 six months ended 30 June 2013 and 2012
(unaudited)

                                  Three months       Six months
                                  ended 30 June      ended 30 June
                                  2013      2012     2013      2012
                             Note US$'000   US$'000  US$'000   US$'000


Revenue                      4    128,360   35,779   188,129   76,332

Cost of sales                5    (103,449) (29,979) (149,907) (55,985)

Gross Profit                      24,911    5,800    38,222    20,347


Exploration and evaluation   10   (132)     (4)      (443)     (79)
expenses


 Administrative expenses    6    (3,989)   (1,238)  (6,078)   (2,444)

 Non-recurring Valiant      6    (9,554)   -        (10,235)  -
acquisition costs

Total administrative              (13,543)  (1,238)  (16,313)  (2,444)
expenses

Operating Profit                  11,236    4,558    21,466    17,824


Foreign exchange                  (2,637)   (1,548)  (2,074)   103

Gain on financial            25   17,514    19,339   10,342    18,610
instruments

Gain on asset disposal            -         205      -         205

Negative goodwill            12   47,964    -        48,878    -

Profit Before Interest and        74,077    22,554   78,612    36,742
Tax


Finance costs                7    (5,001)   (902)    (7,277)   (1,371)

Interest income                   21        69       42        134

Profit Before Tax                 69,097    21,721   71,377    35,505


Taxation - UK deferred tax   23   (18,504)  8,517    (17,309)  7,651

Taxation - Norwegian         23   1,635     -        1,635     -

Profit After Tax                  52,228    30,238   55,703    43,156


Earnings per share

Basic                        22   0.17      0.12     0.20      0.20

Diluted                      22   0.17      0.11     0.19      0.20


The accompanying notes on pages 7 to 23 are an integral part of the
financial statements.

Consolidated Statement of Comprehensive Income
For the three and six months ended 30 June 2013 and 2012
(unaudited)

                                   Three months    Six months
                                   ended 30 June   ended 30 June
                                   2013    2012    2013    2012
                                   US$'000 US$'000 US$'000 US$'000


Profit for the period              52,228  30,238  55,703  43,156

Release of loss on oil price hedge -       376     -       -

Other comprehensive income         -       376     -       -

Total comprehensive income         52,228  30,614  55,703  43,156


The accompanying notes on pages 7 to 23 are an integral part of the
financial statements.

Consolidated Statement of Financial Position
(unaudited)

                                                30 June    31 December
                                                2013       2012
                                          Note  US$'000    US$'000

ASSETS


Current assets

Cash and cash equivalents                       27,091     31,374

Restricted cash                           8     3,228      2

Accounts receivable                             254,894    159,195

Deposits, prepaid expenses and other            23,852     14,754

Inventory                                 9     20,790     15,878

Derivative financial instruments          26    15,560     8,251

                                                345,415    229,454

Non current assets

Long-term receivable                      28    21,551     21,551

Investment in associate                   14    18,337     18,337

Exploration and evaluation assets         10    52,442     47,390

Property, plant & equipment               11    1,303,713  615,788

Goodwill                                  13    985        985

Other non-current assets                        7,738      -

                                                1,404,766  704,051


Total assets                                    1,750,181  933,505


LIABILITIES AND EQUITY


Current liabilities

Trade and other payables                        316,980    205,635

Exploration obligations                   16    48,301     -

                                                365,281    205,635

Non current liabilities

Bank debt                                 15    368,823    -

Decommissioning liabilities               17    140,998    52,834

Other long term liabilities               18    2,866      3,018

Contingent consideration                  19    4,000      4,000

Derivative financial instruments          26    1,596      -

Deferred tax liability                          109,970    62,370

                                                628,253    122,222


Net Assets                                      756,647    605,648


Equity attributable to equity holders

Share capital                             20    524,908    431,318

Share based payment reserve               21    22,046     20,340

Retained earnings                               209,693    153,990

Shareholders' Equity                            756,647    605,648


The financial statements were approved by the Board of Directors on 12
August 2013 and signed on its behalf by:"Jay Zammit"

Director"John Summers"

Director


The accompanying notes on pages 7 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  -       -       43,156   43,156

Total comprehensive income 429,502 17,318  103,747  550,567

Share based payment        -       1,615   -        1,615

Options exercised          250     (107)   -        143

Balance, 30 June 2012      429,752 18,826  103,747  552,325


Balance, 1 Jan 2013        431,318 20,340  153,990  605,648

Net income for the period  -       -       55,703   55,703

Total comprehensive income 431,318 20,340  209,693  661,351

Shares issued              93,005  -       -        93,005

Share based payment        -       1,963   -        1,963

Options exercised          585     (257)   -        328

Balance, 30 June 2013      524,908 22,046  209,693  756,647


The accompanying notes on pages 7 to 23 are an integral part of the
financial statements.

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

                                  Three months        Six months
                                  ended 30 June       ended 30 June
                                  2013       2012     2013      2012
US$'000    US$'000  US$'000   US$'000

CASH PROVIDED BY (USED IN):

Operating activities

Profit Before Tax                 69,097     21,721   71,377    35,505

Adjustments for:

Depletion, depreciation and       41,367     11,092   60,865    24,477
amortisation

Exploration and evaluation        132        4        444       79
expenses

Share based payment               366        204      661       339

Loan fee amortisation             592        416      1,184     494

Revaluation of financial          (7,303)    (17,362) 3,762     (18,128)
instruments

Revaluation of contingent         -          -        -         1,295
consideration

Movement in goodwill              (47,964)   -        (48,878)  -

Gain on disposal                  -          (205)    -         (205)

Accretion                         1,088      436      1,590     820

Bank interest & charges           3,296      -        4,455     -

Valiant acquisition fees          4,351      -        5,032     -

Cashflow from operations          65,022     16,306   100,492   44,676

Changes in inventory, debtors and  19,963    11,168   20,842    10,347
creditors relating to operating
activities

Net cash from operating activities 84,985    27,474   121,334   55,023


Investing activities

Acquisition of Valiant             (200,636) -        (200,636) -

Cash acquired on acquisition of    11,611    -        11,611    -
Valiant

Valiant acquisition fees           (4,351)   -        (5,032)   -

Acquisition of Cook                -         -        (33,370)  -

Capital expenditure                (66,050)  (31,782) (91,434)  (54,290)

Investment in associate            -         (18,337) -         (18,337)

Loan to associate                  -         (21,551) -         (21,551)

Proceeds on disposal               -         44,878   -         44,878

Settlement of contingent           -         (15,700) -         (15,700)
consideration
Changes in debtors and creditors   (56,880)  38,666   (44,441)  30,855
relating to investing activities

Net cash used in investing         (316,306) (3,826)  (363,302) (34,145)
activities


Financing activities

Proceeds from issuance of shares   299       143      328       143

(Increase) / decrease in           (3,226)   457      (3,226)   (3,710)
restricted cash

Derivatives                        (1,680)   -        (9,627)   -

Loan repayment                     (115,000) -        (115,000) -

Loan draw down                     320,918   -        375,918   -

Bank interest & charges            (4,396)   -        (5,506)   -

Net cash from/used in financing    196,915   600      242,887   (3,567)
activities


Currency translation differences   (4,137)   (2,307)  (5,202)   (971)
relating to cash


Increase / (decrease) in cash and  (38,543)  21,941   (4,283)   16,340
cash equiv.


Cash and cash equivalents,         65,634    89,944   31,374    95,545
beginning of period


Cash and cash equivalents, end of  27,091    111,885  27,091    111,885
period


The accompanying notes on pages 7 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 12 August
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 28. 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 required, 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 20
(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,
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    Six months
                 ended 30 June   ended 30 June
                 2013    2012    2013    2012
                 US$'000 US$'000 US$'000 US$'000

Oil sales        125,064 33,293  181,217 69,101

Gas sales        2,452   1,759   5,224   4,580

Condensate sales 135     136     272     306

Other income     709     591     1,416   2,345

Total            128,360 35,779  188,129 76,332


5. COST OF SALES

                                  Three months       Six months
                                  ended 30 June      ended 30 June
                                  2013      2012     2013      2012
                                  US$'000   US$'000  US$'000   US$'000

Operating costs                   (43,155)  (15,406) (66,382)  (31,128)

Oil purchases                     (790)     -        (947)     -

Movement in oil and gas inventory (18,137)  (3,481)  (21,713)  (380)

Depletion, depreciation and       (41,367)  (11,092) (60,865)  (24,477)
amortisation

                                  (103,449) (29,979) (149,907) (55,985)


6. ADMINISTRATIVE EXPENSES

                                      Three months     Six months
                                      ended 30 June    ended 30 June
                                      2013     2012    2013     2012
                                      US$'000  US$'000 US$'000  US$'000

General & administrative              (3,623)  (1,034) (5,415)  (2,105)

Non-recurring Valiant acquisition     (9,554)  -       (10,235) -
related costs

Share based payment                   (366)    (204)   (663)    (339)

                                      (13,543) (1,238) (16,313) (2,444)



7. FINANCE COSTS

                                Three months    Six months
                                ended 30 June   ended 30 June
                                2013    2012    2013    2012
                                US$'000 US$'000 US$'000 US$'000

Accretion                       (1,088) (436)   (1,590) (820)

Bank charges                    (3,297) (38)    (4,460) (44)

Non-operated asset finance fees (24)    (12)    (42)    (13)

Loan fee amortisation           (592)   (416)   (1,185) (494)

                                (5,001) (902)   (7,277) (1,371)


8. RESTRICTED CASH

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

Security 3,228   2

         3,228   2


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

9. INVENTORY

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

Crude oil inventory 20,575  15,865

Materials inventory 215     13

                    20,790  15,878


10. EXPLORATION AND EVALUATION ASSETS

                US$'000


At 1 January    22,689
2012


Additions       38,188

Write offs/     (4,261)
relinquishments

Disposals       (9,226)


At 31 December  47,390
2012


Additions       5,495

Write offs/     (443)
relinquishments


At 30 June 2013 52,442


Following completion of geotechnical evaluation activity, certain
licences were declared unsuccessful and certain prospects were declared
non-commercial and therefore the related expenditure of $0.4 million
was expensed in the six months to 30 June 2013.

11. PROPERY, PLANT AND EQUIPMENT

                      Development& Production
                      Oil and Gas  Other fixed
                      Assets       assets      Total
                      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             748,223      567         748,790


At 30 June 2013       1,473,243    2,992       1,476,235


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 (60,665)     (200)       (60,865)


At 30 June 2013       (170,423)    (2,099)     (172,522)


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

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


NBV at 30 June 2013   1,302,820    893         1,303,713



12. BUSINESS COMBINATION

On 19 April 2013 the Corporation completed the acquisition of Valiant
Petroleum PLC ("Valiant"). The total acquisition consideration was
$293.6 million, being $200.6 million paid in cash and $93 million paid
with Ithaca shares. The interim condensed consolidated financial
statements include the results of Valiant from the acquisition date.

The provisional fair values of the identifiable assets and liabilities
of Valiant as at the acquisition date were:

                                               Provisional
                                               Fair value
                                               US$'000

PP&E                                           608,000

Other non-current assets                       7,145

Deferred tax asset                             10,863


Inventories                                    10,432

Trade and other receivables                    46,718

Norwegian tax receivable                       69,064

Cash and cash equivalents                      11,611


Trade and other payables                       (151,298)

Borrowings                                     (115,000)

Exploration obligations                        (72,500)

Provisions                                     (83,430)


Total identifiable net assets at fair value    341,605


Negative goodwill arising on acquisition       (47,964)

Total consideration                            293,641


The cash outflow on acquisition is as follows:

Net cash acquired                              11,611

Cash paid                                      (200,636)

Net consolidated cash flow                     (189,025)




From the date of acquisition, Valiant has contributed $52.1 million of
revenue and approximately $6 million to the net profit before tax. If
the combination had taken place at the beginning of the year, the
profit before tax from continuing operations for the period would have
been approximately $32 million and revenue from continuing operations
would have been $163.5 million. Note profit before tax excludes
negative goodwill.

13. GOODWILL

                                                   US$'000

Cost

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



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

14. INVESTMENT IN ASSOCIATES

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

Investments 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 Corporation's share of the associates'
results.

15. LOAN FACILITY

On 29 June 2012, the Corporation executed a Senior Secured Borrowing
Base Facility agreement (the "Facility") for up to $430 million, being
provided by BNP Paribas as Lead Arranger. The loan term is up to five
years and attracts interest at LIBOR plus 3-4.5%. This Facility
replaced the previous undrawn $140 million debt facility with Lloyds
Banking Group.

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 is available for 12
months and attracts interest of between LIBOR plus 1.0 - 2.25%,
averaging 1.6% if drawn over the full 12 month period. The intention is
to fold the borrowing secured against the Valiant assets into an
enlarged borrowing base facility during 2013.

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.
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.

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

As at 30 June 2013, $30 million was drawn down under the Facility and
$346 million was drawn down under the Bridge Facility. The $369 million
in the balance sheet represents amounts drawn down net of unamortised
loan fees.

16. EXPLORATION OBLIGATIONS

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

Exploration obligations 48,301  -


The above reflects the fair value of E&E commitments assumed as part of
the Valiant transaction (see note 12), including the release of
expenditure incurred in the period.

17. DECOMMISSIONING LIABILITIES

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

Balance, beginning of period 52,834  39,382

Additions                    87,588  9,613

Accretion                    1,590   1,777

Revision to estimates        (1,014) 2,062

Utilisation                  -       -

Balance, end of period       140,998 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 3.9 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 10 years.

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.

18. OTHER LONG TERM LIABILITIES

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

Balance, beginning of period 3,018   2,785

Revaluation in the period    (152)   233

Balance, end of period       2,866   3,018


On completion of the acquisition of the Beatrice Facilities on November
10, 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.

19. CONTINGENT CONSIDERATION

                             30 June 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.

20. SHARE CAPITAL

                                                   No. of       Amount
                                                   ordinary
Authorised share capital                           000          US$'000


At 31 December 2012 and 30 June 2013               Unlimited    -


(a) Issued


The issued share capital is as follows:


Issued                                             Number of    Amount
                                                   common
                                                   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 June 20123                              317,365,658  524,908


(b) Stock options

In the quarter ended 30 June 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 June 2013, 19,614,630 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 June 2013        31 December 2012
                                        Wt. Avg              Wt. Avg
                             No. of     Exercise No. of      Exercise
                             Options    Price*   Options     Price*

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

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

Forfeited / expired          (330,000)  $2.26    (2,448,333) $3.42

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

Options                      19,614,630 $1.65    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 June 2013

Options Outstanding

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


$2.22-$2.28 (C$2.25-C$2.31) 5,090,000  1.6     $2.23

$1.49-$2.03 (C$1.54-C$1.99) 10,326,667 2.1     $1.81

$0.20-$0.81 (C$0.25-C$0.87) 4,197,963  0.3     $0.55

                            19,614,630 1.6     $1.65




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


$2.22-$2.28      3,260,003  1.5     $2.22
(C$2.25-C$2.31)

$1.49-$2.03      4,475,001  0.6     $1.52
(C$1.54-C$1.99)

$0.20-$0.81      4,197,963  0.3     $0.55
(C$0.25-C$0.87)

                 11,932,967 0.7     $1.37


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



Options Outstanding

                No. of     Wt. Avg Wt. Avg
Range 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
                            Wt. Avg Wt. Avg
Range of        No. of      Life    Exercise
Exercise Price  Options    (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 six months ended 30 June
2012 for total stock options granted was $0.9 million and $1.9 million
respectively (Q2 2012: $0.8 million, Q2 YTD: $1.6 million). $0.3
million and $0.7 million were charged through the income statement for
share based payment for the three and six months ended 30 June 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
                            six months year
                            ended      ended
                            30 June    31 December
                            2013       2012

Risk free interest rate     1.31%      0.40%

Expected stock volatility   63%        74%

Expected life of options    3 years    3 years

Weighted Average Fair Value $0.94      $1.08


21. SHARE BASED PAYMENT RESERVE

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

Balance, beginning of period                     20,340  17,318

Share based payment cost                         1,963   3,817

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

Balance, end of period                           22,046  20,340


22.  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            Six months
                        ended 30 June           ended 30 June
                        2013        2012        2013        2012

Weighted average number 305,912,433 259,198,399 283,055,608 259,181,430
of common shares
(basic)

Weighted average        309,278,839 264,314,570 287,225,134 264,662,007
numbers of common
shares (diluted)


23.  TAXATION

                Three months     Six months
                ended 30 June    ended 30 June
                2013     2012    2013     2012
                US$'000  US$'000 US$'000  US$'000

UK Deferred tax (18,504) 8,517   (17,309) 7,651

Norwegian tax   1,635    -       1,635    -

                (16,869) 8,517   (15,674) 7,651


24.  COMMITMENTS

Operating lease commitments                             30 June 31 Dec
                                                        2013    2012
                                                        US$'000 US$'000


Within one year                                         12,742  12,759

Two to five years                                       13,394  18,756

More than five years                                    -       65



Capital commitments                                     30 June 31 Dec
                                                        2013    2012
                                                        US$'000 US$'000

Capital commitments incurred jointly with other         206,713 111,747
ventures (Ithaca's share)


25.  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
June 2013:

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

Derivative financial instrument asset -       15,560  -       15,560

Long term liability on Beatrice       -       -       (2,866) (2,866)
acquisition

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

Derivative financial instrument       -       (1,596) -       (1,596)
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    Six months
                                        ended 30 June   ended 30 June
                                        2013    2012    2013    2012
                                        US$'000 US$'000 US$'000 US$'000

Revaluation of forex forward contracts  584     (428)   (1,471) 541

Revaluation of gas contract             -       872     -       758

Revaluation of other long term          96      61      153     (29)
liability

Revaluation of commodity hedges         6,623   16,858  (2,444) 16,858

                                        7,303   17,363  (3,762) 18,128


Realised gain on commodity hedges       9,374   1,908   13,560  1,709

Realised gain/(loss) on forex contracts 837     68      544     68

                                        10,211  1,976   14,104  1,777


Contingent consideration                -       -       -       (1,295)

Total gain on financial instruments     17,514  19,339  10,342  18,610


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 June
                                  2013          2012
                                  US$'000       US$'000

Revaluation of commodity hedges   6,623         16,858

Realised gain on commodity hedges 9,374         1,908

Total gain on commodity hedges    15,997        18,766


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             July 13 - 1,268,699 bbls   $105/bbl
                     Sept 14

Oil swaps            July 13 - 3,048,951 bbls   $102/bbl
(including swaption) Dec 14

Gas swaps            July 13 - 2,342,000 therms 66.64p/therm
                     Dec 14


ii) Interest Risk

Calculation of interest payments for the Senior Secured Borrowing Base
Facility agreement with BNP Paribas that was signed on 29 June 2012
incorporates LIBOR. The Corporation will therefore be exposed to
interest rate risk to the extent that LIBOR 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 June
                                               2013        2012
                                               US$'000     US$'000

Revaluation of foreign exchange forward        584         (428)
contracts

Realised gain on foreign exchange forward      837         68
contracts

Total gain/(loss) on forex forward contracts   1,421       (360)


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

Forward    July 13 - GBP100 million     $1.52/GBP1.00   N/A
           Jan 14

Forward    Aug 13 -  EUR30 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 field 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 June 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 June
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 June 2013, exposure is $15.6
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 June 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 316,980       -

Other long term liabilities              -             2,866

                                         316,980       2,866


26.  DERIVATIVE FINANCIAL INSTRUMENTS

                                  30 June 31 December
                                  2013    2012
                                  US$'000 US$'000

Oil swaps                         8,112   2,497

Put options                       7,369   5,667

Gas swaps                         (46)    -

Embedded derivative               -       87

Foreign exchange forward contract (1,471) -

                                  13,964  8,251


27.  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 June 2012, the classification of financial instruments and the
carrying amounts reported on the balance sheet and their estimated fair
values are as follows:

                                30 June 2013        31 December 2012
                                US$'000             US$'000

Classification
                                Carrying  Fair      Carrying  Fair
                                Amount    Value     Amount    Value

Cash and cash equivalents       27,091    27,091    31,374    31,374
(Held for trading)

Restricted cash                 3,228     3,228     2         2

Derivative financial            15,560    15,560    -         -
instruments
(Held for trading)

Accounts receivable             254,894   254,894   159,195   159,195
(Loans and Receivables)

Deposits                        23,852    23,852    14,754    14,754


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

Derivative financial            (1,596)   (1,596)   -         -
instruments
(Held for trading)

Other long term liabilities     (2,866)   (2,866)   (3,018)   (3,018)

Accounts payable                (316,980) (316,980) (205,635) (205,635)
(Other financial liabilities)


28. 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 June
                                                 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 six month period
ending 30 June 2013 and 30 June 2012, as well as balances with related
parties as of 30 June 2013 and 31 December 2012:

                      Sales   Purchases Accounts         Accounts
                                        receivable       payable
                      US$'000 US$'000   US$'000          US$'000

Burstall Winger  2013 -       57        -                -
LLP

                 2012 -       138       -                -




Loans to related parties   Amounts owed from related parties
                            30 June          31 Dec
                            2013             2012
                            US$'000          US$'000

FPF-1 Limited               21,551           21,551


29. 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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