IAE CEO Interview!October 20, 2011 9:08 pm
Deals set to double Ithaca’s output
By Sylvia Pfeifer
https://www.ft.com/cms/s/0/1070b59c-fb31-11e0-8e7e-00144feab49a.html#ixzz1bMQXGWXw
Ithaca Energy is on course to more than double its production to 20,000-plus barrels of oil equivalent per day within 20 months, after the North Sea-focused explorer unveiled a series of transactions, including the acquisition of a smaller rival.
The company bought Challenger Minerals for $35m in cash, increasing its stakes in the Stella and Harrier fields and gaining a non-operated interest in the producing Boom field. After the acquisition, Ithaca will own a 55 per cent stake in the Stella field.
Ithaca also announced a strategic partnership with Petrofac, the oilfield services provider, to create a production hub for the fields in the Greater Stella Area, namely the Stella, Harrier, Hurricane and Helios fields. Under the terms of the agreement, Ithaca and Petrofac will build a floating production unit for the fields, with the first production forecast in the second half of 2013. Petrofac will also take an interest in the fields in exchange for transferring ownership of the floating unit.
The moves will enable Ithaca to boost its production substantially to about 25,000-26,000 boe a day, making the group one of the largest independent UK-listed producers in the British North Sea.
Iain McKendrick, Ithaca chief executive, said the partnership with Petrofac meant both parties were “strategically aligned”.
“Instead of the normal relationship between contractor and operator, Petrofac now has skin in the game,” he said, adding that the creation of a production hub would also allow the company to tie in more fields at a later date.
Mr McKendrick said the development of the Ithaca-controlled production system would help act as a springboard for the company’s future growth.
The company has more than $100m of spare capacity for acquisitions, he said, noting that the focus would be on “undeveloped discoveries”.
Analysts at Cenkos Securities said the deals were positive, noting that the addition of Petrofac as a partner would de-risk the development as well as create “a joint venture consortium that is both aligned and incentivised for maximum resource recovery”.
Ithaca’s investment comes just months after the UK government announced a 12 percentage point rise on oil and gas production. But Mr McKendrick said Ithaca was sheltered from the tax increase for the next three to four years because it has more than $260m worth of tax allowances.
The shares rose 6 per cent to 125¾p on Thursday.