UK: Ithaca Energy announces its financial results for the six months ended 30 June 2024

Ithaca Energy, a leading UK independent exploration and production company, has announced its unaudited financial results for the six months ended 30 June 2024.

(1) Non-GAAP measure as set out on pages 46 to 48.

H1 2024 Strategic Highlights: Continued execution against our strategy

Transformative Business Combination with Eni UK creates dynamic growth player

Transformational business combination of Ithaca Energy and substantially all of Eni's UK upstream oil and gas assets announced in April 2024, creates a dynamic growth player with the largest resource base in the UKCS(2) and significant growth optionality, creating a platform for organic and inorganic growth (the 'Business Combination' to form the 'Combined Group').

• Well positioned to deliver further consolidation in mature UKCS basin, with a proven track record for value-accretive M&A and an agile response to market dislocation
• Credible platform for international M&A as an additional route for value creation, leveraging the Group’s enhanced technical resource and financial strength and the expertise of its shareholders
• Establishes a diverse and balanced portfolio of scale with pro-forma full year 2024 production forecast of 100 to 110 kboe/d2
• Material combined long-life 2P reserve and 2C resource base of 632 mmboe with organic growth potential to become largest producer in the UKCS by the early 2030s(3)
• Seeks to replicate success of Eni’s proven satellite model and Delek Group’s inorganic growth strategy, combining the agility of an independent with the capabilities of a Major
• Enhanced cash flow generation, with a potential $10bn of total pre-tax cash flow from operations from 2P reserves over the next five years (2025 to 2029) at $88/bbl, 90p/therm(4)
• Combined utilisable c. $6.0 billion of RFCT losses and c. $5.0bn of SCT losses for the Combined Group as at 31 December 2023 to offset against future profits
• Highly cash-generative combination supports attractive and sustainable returns with ambition for up to $500 million total dividends each year in 2024 and 2025(5)
• Enhances balance sheet and financial strength providing material firepower for growth and a potential pathway to investment grade credit rating
• Enhances Ithaca Energy’s GHG emissions intensity with a reduction in combined pro-forma CO2e GHG emissions intensity to 21 kgCO2e/boe (on a Scope 1 and 2 net equity basis)
• Strengthened executive and operational teams, including appointment of Yaniv Friedman as Executive Chairman and Luciano Vasques as Chief Executive Officer (at completion), reflecting the ambition, experience and rigour required to deliver the next phase of transformational growth
• Committed and aligned shareholders in support of long-term growth strategy and shared ambition to enhance liquidity
• In line with the previously announced timeline, the Company will today publish its prospectus, which will be made available on the Company’s website, in support of a targeted completion early Q4 2024

BUILD

• Rosebank project progressed materially to multi-year development timeline including successful completion of major subsea campaign with the installation of all nine subsea structures ahead of schedule, in parallel with ongoing FPSO vessel modifications scopes where work is progressing to seek to maintain schedule
• Captain Electrification technical Front-End Engineering Design (FEED) study completed with Final Investment Decision (FID) subject to fiscal and market conditions
• Successfully awarded licence extension from 31 March 2024 to 31 March 2026 for Cambo field on 19 March, supporting the ongoing live farm-in processes to enable the future progression of Cambo and Fotla towards FID, subject to fiscal and market conditions

BOOST

• Successfully completed the Captain Enhanced Oil Recovery (EOR) Phase II project, executed on plan and within budget, with first Phase II polymer injection into the subsea wells commencing in May 2024 supporting an estimated peak response from the field in 2026
• Continued high levels of activity at Captain, including rig recertification, in support of the topside drilling campaign scheduled to commence in Q3 2024
• Completed W1 well workover at Erskine during July, reinstating the fifth production well at the field

H1 2024 Operational highlights

• Average H1 2024 production of 53.0 thousand barrels of oil equivalent per day (kboe/d)
  • Q1 production of 58.7 kboe/d and Q2 production of 47.4 kboe/d
  • H1 production split 69% liquids and 31% gas
• Lower H1 production primarily reflects operational issues across our non-operated joint venture (NOJV) portfolio and non-operated infrastructure and planned turnaround scopes:
  • As previously reported, non-operated Pierce field production impacted by the vessel remaining off-stream for the entirety of Q1. Returned to full production in Q2 and subsequently achieving high levels of uptime
  • Non-operated Schiehallion field production impacted by: 1) previously reported weather- related downtime and outages caused by the Ocean Great White rig being off station, which will also have an impact on the timing of production wells later in 2024; and 2) operational issues on the Glen Lyon FPSO during Q2 restricting production capacity. The operator is working on a solution to address the issue with an expected return to full capacity in Q3
  • Previously reported compressor issues at Erskine’s host facility (Lomond) significantly impacting production in H1, expected to return to production in H2
  • Turnaround activity at non-operated Jade field during Q2 to address J13 well productivity issues (ongoing)
  • Increase in unplanned production trips at Captain (operated) with remedial work ongoing to address backlog and reliability improvements

H1 2024 Financial highlights: Robust cash flow generation

• Adjusted EBITDAX of $533.0 million (H1 2023: $979.7 million), driven mainly by reduced production of 53.0 kboe/d (H1 2023: 75.8 kboe/d) and lower realised gas prices
• Realised oil and gas prices (respectively) of $87/boe and $57/boe before hedging results and $86/boe and $92/boe after hedging results (H1 2023: $85/boe and $82/boe before hedging results and $83/boe and $125/boe after hedging results)

• Operating costs, net of tanker costs and tariff income, reduced to $263.3 million (H1 2023: $272.1 million), reflecting the Group’s stringent focus on cost control in an inflationary environment, with higher unit operating expenditure reflecting fixed cost nature of operating spend coupled with lower production volumes in the period
• Statutory net income of $105.7 million (H1 2023: $159.6 million) including post-tax decommissioning liability related impairment charges of $19.0 million (H1 2023: $93.6 million) of post-tax impairment charges principally related to GSA) and positively by post-tax reduction in contingent payment liabilities related to updated field development likelihoods of $27.4 million
• Robust net cash flow from operating activities of $559.8 million (H1 2023: $691.0 million)
• H1 2024 producing asset capex of $178 million and Rosebank capex of $90 million reflecting material targeted investment across the Group’s portfolio
• Robust cash generation during H1 2024 supported the continued reduction of net debt with adjusted net debt of $506.0 million (H1 2023: $698.7 million)
• Group leverage position of 0.40x adjusted net debt to adjusted EBITDAX (H1 2023: 0.35x)
• Strong liquidity position of $1,028.0 million reflecting a 30% increase (H1 2023: $791.3 million)
• First interim 2024 dividend of $100 million declared and payable in September. Reaffirming dividend commitment in 2024 and 2025 of 30% post-tax cash flow from operations (CFFO) with ambition for special dividends to increase total distributions to up to $500 million per annum5

FY 2024 Management Guidance

Alongside the publication of the Group’s prospectus today, that will contain a full Competent Persons Report (CPR) prepared for Ithaca Energy plc and Eni UK by an independent reserves auditor, including field economic outputs, management provides the following updated FY 2024 guidance ranges for Ithaca Energy on a Combined Group and standalone basis, based on an effective date of 30 June 2024.

Revisions in management guidance across production, Rosebank capex and cash tax are expected to have limited cash impact at current commodity prices of $76/boe based on midpoint guidance ranges with management reaffirming its dividend commitments for 2024 and 2025 of 30% post-tax CFFO with an ambition for special dividends to increase total distributions to up to $500 million per annum(5):

Net Producing Asset Capital Costs

• FY 2024 Combined Group production of 76-81 kboe/d (revised from 80-87 kboe/d)
• FY 2024 standalone production of 54-57 kboe/d (revised from 56-61 kboe/d), reflecting lower production volumes in H1

Net Operating Costs:

• FY 2024 Combined Group net operating cost guidance range of $650–730 million reaffirmed
• FY 2024 standalone net operating cost guidance range of $540–590 million reaffirmed

Net Producing Asset Capital Costs (excluding pre-FID projects and Rosebank development):

• FY 2024 Combined Group net producing asset capital cost guidance range of $410-480 million reaffirmed
• FY 2024 standalone net producing asset capital cost guidance range of $335-385 million reaffirmed

Net Rosebank Project Capital Costs:

• FY 2024 net Rosebank project capital cost guidance range lowered from $190-230 million to $170- 195 million due to phasing of FPSO upgrades

Cash Tax:

• FY 2024 Combined Group cash tax guidance lowered from $435-455 million to $390-410 million
• FY 2024 standalone cash tax guidance lowered from $345-355 million to $300-320 million largely due to prior year tax return submission processes including decommissioning loss carry back

Yaniv Friedman, Executive Chairman, commented: 'I am delighted to have joined Ithaca Energy in such a pivotal point in the Group’s growth story and look forward to steering the business as it enters it next phase of transformational growth. The publication of the prospectus later today, marks a significant step towards completion of the Group’s Business Combination with Eni UK anticipated in early Q4 2024, creating a dynamic growth player with significant organic and inorganic investment optionality.'

Iain Lewis, Interim Chief Executive Officer and Chief Financial Officer, commented: 'I am pleased to report continued execution against our 2024 strategic priorities in the first half of the year and a strong period of cash flow generation. With a robust liquidity position at the end of H1 and increased financial strength from the addition of Eni UK’s unlevered assets, following completion, we have significant financial firepower to support the delivery of the Group’s strategy and returns to shareholders, while supporting a pathway to investment grade.'

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Source: Ithaca Energy