SOURCE: Ithaca Energy Inc

October 09, 2014 02:00 ET

Ithaca Energy Inc. Third Quarter 2014 Operations Update 9 October 2014

ABERDEEN, UNITED KINGDOM--(Marketwired - Oct 9, 2014) -  Ithaca Energy Inc. (TSX: IAE) (LSE: IAE)

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

Ithaca Energy Inc.

Third Quarter 2014 Operations Update

9 October 2014

Ithaca Energy Inc. (TSX: IAE, LSE AIM: IAE) ("Ithaca" or the "Company") provides an operations update following the end of the third quarter of the year ("Q3-2014"). The Company will issue its Q3-2014 financial results on 13 November 2014.

  •  Average pro-forma production in Q3-2014 was approximately 11,600 barrels of oil equivalent per day ("boepd"), 96% oil
  • Full year 2014 pro-forma production is anticipated to be around 12,500 boepd following the deferral of approximately 1,400 boepd of annualised production from the Causeway Area due to an equipment failure on the host platform and a delay in the provision of water injection
  •  Average of approximately 6,400 barrels of oil per day ("bopd") hedged for two years from 1 July 2014 at an average price of $102 per barrel
  • Operations on the Stella "B2" well have been successfully completed and the ENSCO 100 jack-up rig has commenced operations on the fifth Stella development well
  • Field development plan approval received from the Department of Energy and Climate Change ("DECC") for "Ythan", part of the Don North East licence area, with production scheduled to commence in the second quarter of 2015

Average pro-forma production in Q3-2014 was approximately 11,600 boepd, reflecting a full quarter's production from the assets acquired from Sumitomo Corporation (the "Summit Assets"). As previously highlighted, production during the third quarter was reduced by planned summer maintenance shutdowns, most notably with respect to a six week shutdown of the Cook field.

It is anticipated that full year 2014 pro-forma production will now be around 12,500 boepd. This is below the 13,500 boepd lower end of the Company's 2014 pro-forma guidance range primarily due to production deferrals associated with the Causeway Area fields. The Taqa operated host facility has suffered a platform oil export pump failure that has resulted in production from the Causeway Area being shut-in. It is anticipated that this will take several weeks to repair and will therefore impact total production in the fourth quarter of the year. This unplanned shutdown, along with a delay in the provision of water injection from the Taqa facilities, is estimated to result in the deferral of approximately 1,400 boepd of annual average production from the Causeway Area in 2014, resulting in the revised production guidance.

Greater Stella Area Development
Continued progress has been made during the quarter on execution of the Greater Stella Area development. The fourth Stella development well was successfully completed, further de-risking the initial annualised production forecast for the field. The ENSCO 100 drilling rig has now been moved to the main drill centre on the field and has commenced operations on the fifth Stella development well. Work on this year's subsea infrastructure installation campaign has been successfully completed and preparation is well advanced for finishing the remaining subsea activities in 2015. Construction activities continue on the main deck of the "FPF-1" floating production facility, with completion of the works and the delivery of first hydrocarbons scheduled for mid-2015.

Ythan Field Development
Ithaca (40% working interest) and EnQuest (60%, Operator) have received approval from the DECC for the Ythan field development plan. The Ythan field, which lies adjacent to the producing Don Southwest ("Don SW") field in which both Ithaca and EnQuest have corresponding working interest levels, is located within the southern area of the Don North East licence that was awarded by the DECC in March 2014.

A phased development of the field is planned, involving an initial production well being drilled from the Don SW field infrastructure. The Stena Spey semi-submersible rig has been contracted to drill the well. The rig is expected to commence operations in the fourth quarter of this year and enable first production from the field in the second quarter of 2015 for a forecast net capital expenditure of approximately $28 million. The well is targeting the same Brent reservoir sequence as the Don SW field, in a location where an appraisal well has previously been drilled and tested.

Commodity Hedging
For the two year period from 1 July 2014 the Company has approximately 6,400 bopd hedged at an average price of $102/bbl (approximately 70% swaps / 30% puts). Additionally the Company has in place a gas price floor of £0.58/therm (~$10/MMbtu) for 190 million therms (~20 billion cubic feet) of production from the Stella field via put options.

Consolidated Q3-2014 Production
The acquisition of the Summit Assets was completed on 31 July 2014. As such, two months of production from those assets will be included in the Q3-2014 reported earnings. Average consolidated production for Q3-2014 was approximately 10,800 boepd.

Operating Costs
Operating costs incurred in Q3-2014 are anticipated to be around $60 million, reflecting inclusion of the Summit Assets from 31 July 2014. Additionally, the Q3-2014 financial results will recognise the previously highlighted contingent liability associated with the Sullom Voe Terminal 2013 reconciliation charge of approximately $12 million. This is a non-recurring exceptional item.

Net Debt
Net drawn debt at 30 September 2014 was $719 million (excluding the Norwegian tax rebate facility) out of total debt facilities of $1,010 million. The Company's debt facilities include the additional $300 million of senior notes issued on 3 July 2014.

Q3-2014 Financial Results Conference Call
The Company is scheduled to release its Q3-2014 financial results on 13 November 2014. A conference call for investors and analysts will be held at 12:00 GMT on the same day (07.00 EST), with a playback facility being made available on the Company's website later in the day. Dial-in details for the call will be published on the Company's website prior to the call.

- ENDS -

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

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

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 targeting 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

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, construction times, well completion times, risks associated with operations, future capital expenditures, continued availability of financing for 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, the current and forecast production from the Company's assets, 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.

Additional information on these and other factors that could affect Ithaca's operations and financial results are included in the Company's Management's Discussion and Analysis for the year ended December 31, 2013, and the Company's Annual Information Form for the year ended December 31, 2013 and in reports which are on file with the Canadian securities regulatory authorities and may be accessed through the SEDAR website (

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