Union Update
Comments from Warren today:
Production from the Jacky (47.5% interest) and Beatrice (50.0% interest) fields averaged 4,862 bd.
Based on an expectation of the Company averaging 5,500 bd, we were forecasting cash flow of
.11 per share; based on the lower production, we expect Ithaca to report .10 per share for the quarter.
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Four workovers are scheduled on Beatrice wells, which should have a positive affect on the production profile.
Upon closing of the purchase of assets producing 6 mmcfd, there will be an adjustment to the financials as the
transaction will be backdated to January 1, 2010. With the adjustment, we expect Ithaca to report
.50 in cash flowfor 2010, rising to .61 in 2011. Details on the pricing of the gas have not been released, but North Sea deliveries to the Bacton terminal averaged $7.00/mcf during Q3/10.
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Valuation and Recommendation
The stock is trading at 3.4 times the 2011 cash flow estimate, under what we would expect for a company whose
production is in the process of increasing over four-fold to approximately 25,000 boed.
We maintain our strong buy recommendation and target of $3.00.
Union Securities
https://www.union-securities.com/CMResearchFiles/1_145_Ithaca%20%28IAE-v%29%20Bulletin%20October%207%202010.pdf