Voya Asia Pacific High Dividend Equity Income Fund T.IAE

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In two separate transactions, Ithaca is acquiring a 28.46% interest in the Shell operated Cook oil field with net production of 2,260 boed, and a 7.41% interest in the BP operated Maclure oil field with net production of 434 boed. Both fields have been producing for approximately 10 years, and have reached stable production, with some increases or extensions possible from future drilling.

Previously, 2011 average production was estimated at 5,700 boed, the additional 2,694 boed is an increase of 47%. The transactions will take total Company production to almost 8,400 boed, all of it priced relative to the stronger Brent oil and U.K. natural gas markets.

The transactions are expected to close in Q3/11, with an effective date of Jan 1, 2011, requiring a financial adjustment later this year. The transaction, had it closed at the beginning of the year, would have had the effect of raising our cash flow estimate from
.57 to
.89; and since the stock is trading at a 2.9 times multiple, should increase the valuation of the company by
.93.

Ithaca will pay Hess limited, the current owner of the interests in the blocks, US$74.5 million and transfer a 10% interest in three of Ithaca’s exploration blocks in the Southern North Sea to Hess. However, we expect the financial adjustment for three quarters of production could be in the order of $50 million to Ithaca’s credit. Ithaca has US$200 million of cash, and an undrawn debt facility of US$140 million (which may increase to US$185 million after this transaction).

Reserves acquired, based on current data, are estimated at 5.2 million barrels, but Ithaca’s reservoir engineers, Sproule International, will provide an updated reserve audit in about 40 days. Based on 5.2 million barrels, assuming minimal value for the exploration acreage, Ithaca paid US$14.50/b for the reserves. The upcoming report will also detail potential increases to the reserves.

Ithaca’s tax pools of US$220 million provide several years of income tax sheltering. Warren Verbonac 403-205-2224 | [e-mail] EQUITY RESEARCH REPORT

Valuation and Recommendation

Among its peer group of junior Canadian companies operating in the North Sea, Ithaca is in the forefront of developing significant cash flow. This acquisition is a major step in establishing a firm financial foundation for the Company and enhances its ability to continue with its strong development program over the next several years. Ithaca’s current assets are capable of delivering over 25,000 boed in 2013.

We are maintaining our Strong Buy recommendation and increasing our target to $4.00 from $3.50, reflecting the improved financial performance that will stem from the closing of the transaction.