story is like the Dog chasing his tail
e-mail: debbie.lewis@canaccord.com m e-mail: david.pescod@canaccord.com March 21, 2012
ITHACA ENERGY (V-IAE) $3.02 -0.01
Take us back to the ugly days of the last crash in November/
December when we were looking for ideas that should we
ever get out of the second market tumbling in three years,
might make some folks a buck and Ithaca Energy was the pick
of several analysts including Kevin Shaw of Casimir Capital
and Warren Verbonac formerly of Union Securities.
Hey! What could be easier? The Athena project was about
to come on before year-end, cash flow would go up, higher
cash flow means higher stock prices...what could go wrong?
Well of course that was before the curse of the North Sea
hits and in the North Sea these days, there is lots of curses.
From high British taxes, to lack of luck in exploration
(Canadian Overseas misses on their Bluebell play), to nothing
ever happening on time or on budget. And that has been the
case with Ithaca. Athena delayed.
Meanwhile, as we wait for the Ithaca facilities to be put on
stream some time in April (at least one hopes it’s in April after
four months of delay getting the supplies shipped there...if it
gets there) out of left field has come an offer for Ithaca and
it’s been intriguing to see the three or four companies mentioned
as potential takeover targets.
Trying to track down rumors though has been exceptionally
tough as it has been super quiet. Today we do hear chitchat
though from sources we believe reliable (but not that we
would bet on) and they suggest there is lots of permutation
suddenly becoming part of the equation. Their suggestion
now it that there may be two firms buying Ithaca as the gossip
of the day goes—one wanting the ‘for sure’ assets of the
company (the Athena and the Jacky fields) and another entity
buying the Stella fields which are expected to add significant
production, but way in the future, say mid-2013. The gossip
is that Stella might have a few technical questions or challenges.
What kind of a target might the assets attract? Our source
says $3.50 would be a big stretch.
First Energy writes on Ithaca today, “We have revisited our
valuation following an industry transaction providing an implied
value for Ithaca’s interest in Athena and following discussions
with management. As a result, we have reduced our
target price to £1.55 from £1.60 previously, in line with our
new risked NAV of £1.53 on a going concern basis. We reiterate
our Underperform recommendation...”
Folks, $2.48 is not a pleasant number should their analysis
be correct.