January 06, 2011
Ithaca Energy Has A Second Successful Workover Well On Its Beatrice Alpha Field In The North Sea
Something you could have accused TSX and London AIM listed IthacaEnergy of when it became involved in offshore UK drilling is that itgot its sequencing wrong. That was more than two years ago. But now asthe company goes into 2011 it has production and some excitingdevelopment projects as well as cash. Most investors probably feel thatthe company’s profile is looking a lot better.
Ithaca is one of araft of companies which focused on the North Sea during the oil priceboom of the years 2003-2008 feeling there was further money to be madeeven though the North Sea was supposedly in decline. The companyassembled interests ranging from 20 per cent to 100 per cent in 30blocks under 16 licences covering 514,000 acres which should havecovered the whole gamut of near production, appraisal, development andexploration prospects.
Ithaca decided to go for the jackpotstraight off with participation in some high risk greenfieldexploration wells. These proved disappointing. The boys in the Citybecame wary of backing any more of these wells, so Ithaca decided to ona lower risk project and revisited an old discovery, the Athena field.The field had flowed oil in the 1980s when first discovered but in theeconomic climate of the time (the oil price was low) it was not deemedworth exploiting.
In the 2008 -2009 period the field againflowed several thousand of barrels a day from a number of wells. Butthe climate was again unfavourable but for a different reason. Thecredit crunch of 2008 meant that Ithaca, like many other small cap E& P companies, was a bit strapped for cash.
Ithaca got outof its financial straitjacket with an assets for cash swap with aninterested shareholder Dyas UK. Initially Dyas would purchase anincreased interest in the leased Beatrice Field, in the Inner MorayFirth where there was some near production. There was also a partpurchase of the Jacky discovery. Jacky sits in Block 12/21c right atthe top of Beatrice and was being developed for first production in2009 with a production and export facility through Beatrice.
With some financial wherewithal behind it Ithaca was able quickly to getinto production .By the end of 2010 output was not short of 5,000barrels per day net to the company and made a profit for the year endingDecember 31 2009.
In terms of development projects aninterest in the Athena Field was passed on. A stake in the Stellagas/condensate discovery was to go over. Stella was due to be appraisedin 2009 with possible production in 2010. The schedule has slipped abit, as it so often can with E & Ps, but the Greater Stella Area isthe asset causing the big excitement in the company just now. In 2010the GSA emerged as an important production hub which holds almost 75per cent of the company’s 2P reserves with a high value mix of oil, gasand condensate The Stella appraisal meant an upgrade in reserves sothat Ithaca now has a 2P level of 42 million boe. Nick Muir, Ithaca’schief exploration officer and head of IR said at a recent Oilbarrel.comconference, when speaking about Stella: “This is a coveted address inthe Central North Sea, with numerous off-take solutions”.
Hestressed that the company’s current focus is very much on developmentrather than exploration. Here, Stella and its Harrier satellite are tobe jointly developed while the development of the Hurricane discovery isbeing accelerated following last summer’s C$158 million equityfunding. Stella would involve four oil production wells and one gasproducer, and Harrier two gas producers, with an expected capex ofUS$368 million (a development cost of US$14 a boe).
Beyondthis there is the Athena field development which has at last got FDPapproval and project sanction. Drilling should start early this year,with four producers and one water injector planned for the FPSOdevelopment with first production due in Q3 2011 at a rate of 22,000 bpd(5,000 bpd net to Ithaca).
Ithaca has always been mindfulthat getting into project was what pulled the company out of thedoldrums of failed exploration. It always made it clear it would sweatthe existing producers in the Greater Beatrice Area with a number ofworkovers to help boost output at Beatrice. The first workoverdelivered a 100 per cent uplift in production to 680bpd – as well aslooking at untapped opportunities within this mature field.
Thecompany has just reported that stable production from a secondworkover well (A23) on Beatyrice Alpha has increased by approximately115 per cent to around 560 barrels of oil per day gross (280 net toIthaca), exceeding management expectations. Activities are due tocommence this month on the third workover well of the campaign (BeatriceAlpha well A28).
If the company can maintain its stated rateof drilling of f drilling a new workover well each month and if it cancontinue with the kind of results achieved with the first twoworkovers, then out put from the Greater Beatrice Area should rise verysubstantially.
https://www.oilbarrel.com/nc/news/display_news/article/ithaca-energy-has-a-second-successful-workover-well-on-its-beatrice-alpha-field-in-the-north-sea/860.html