Canaccord comments re. IAE
Ithaca Energy* (IAE : TSX : $1.56), Net Change: -0.27, % Change: -14.75%, Volume: 5,137,558
Athena being testy. Ithaca Energy got crushed after saying that only three of the four wells at its Athena field in the North Sea
are flowing because of a suspected downhole restriction in the P1 well. This has lowered gross field production to 12,000 bbl/d
(w.i. 22.5%) (based on the data obtained, the gross production potential of the restricted well is approximately 5,000 bbl/d).
Ithaca, which is the operator of the Athena field, said testing has confirmed the well integrity and reservoir performance are not
the cause of the issue. Management believes the restriction is attributable to a blockage in the production tubing located within
the well. Diagnostic work is ongoing to identify the nature of the blockage and the most effective course of action for fixing problem
. A Bay Street analyst indicated that at worst, a well work-over (he estimates ~$10 million gross) could be required
to remove the blockage, but management is evaluating lower-cost solutions. As a result of this downhole blockage, along with
some maintenance-related downtime on the Beatrice/Jacky and Cook fields, the company expects total net export production of
370,888 boe or a net average rate of 4,076 boe/d in Q2/12, below analyst expectations. Consequently, the analyst now expects
2012 production to average 5,500 boe/d (down from 7,100 boe/d), pushing both his 2012 CFPS and EPS estimates lower to
.58 and
.35, respectively. He is assuming the issues at Athena are not resolved until Q4/12. The analyst points out that the
production issue at Athena is likely to be a cause for concern among investors following the recent termination in takeover
discussions. However he does acknowledge that Athena was producing at good rates prior to the blockage, and continues to
flow dry oil. Also, water injection is only beginning to impact the wells and could support a longer steady flow rate.