Canaccord comments re. IAE Ithaca Energy* (IAE : TSX : $1.84), Net Change: 0.12, % Change: 6.98%, Volume: 4,896,885
The Greek Goddess of Oil? Shares of Ithaca Energy headed north on news that it has started exporting oil from its Athena field
in the North Sea. Ithaca, which holds a 22.5% stake in the venture, said initial peak gross oil production rates were 22,000
barrels of oil per day (bopd) (4,950 bopd net to Ithaca). Oil export operations have commenced. According to the release, the
flow from each of the four oil production wells is being supported by electrical submersible pumps, the operating parameters for
which are being monitored to stabilise long term production rates. Water injection will be used to support the reservoir pressure
– Canadian and U.S. Comments for Friday June 8, 2012 5
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of the field and thereby maintain and sustain production rates. An initial cargo has already been offloaded from the BW Athena
to the shuttle tanker "Betty Knutsen". This and future cargoes will be transferred to Ithaca’s Nigg oil terminal from where
Athena crude will be sold to the market under the company's marketing contract with BP (BP). At current oil prices, the project
is expected to achieve payback within twelve months. John Woods, Chief Developments Officer, commented, "Completion of
the Athena project again demonstrates the Company's ability to deliver major North Sea projects and we look forward to
continuing to grow the Company with the ongoing Greater Stella Area development." Canaccord Genuity Oil & Gas Analyst
Charlie Sharp recently boosted his rating on the company, saying he believes negative sentiment is overdone. The end to
discussions over a possible sale of Ithaca has seen the share price premium (and more) taken out of the market. He notes that
there are still performance risks associated with the ramp up of Athena production over the next few weeks and field delivery in
the coming months, and there remain timing and performance uncertainties with the even more important Stella field. But Sharp
believes the the anticipated production growth and cashflow generation over the next 18 months, the capacity for further
acquisitions through the new $400-million debt facility, and (perversely) the more attractive market rating for a potential
acquirer, all adds up to a compelling valuation and story.