Ithaca summary from yesterday, oversold I think
Jack Lee's Ithaca Energy Inc. (IAE) lost 44 cents to 88 cents on 7.64 million shares, after once again delaying the start-up of its 55-per-cent-held Stella project in the North Sea. The project, which is initially expected to produce 16,000 net barrels of oil equivalent a day -- more than double Ithaca's 2014 production of 12,300 barrels a day -- was originally expected to come on stream in mid-2014. After testing the first two wells of a four-well program at Stella, Ithaca delayed the start date to late 2014. Investors did not really mind. The reason given for the delay was that the first two wells had flowed at far better rates than expected, at over 10,000 barrels a day rather than 7,500, and the existing floating production facility (FPF) was not equipped to handle the high rates. Service provider Petrofac, which owns 20 per cent of Stella, was put in charge of modifying the FPF. Its progress was slow. In May, Ithaca had to push back the start date to mid-2015, but investors took the news well, sending the stock down just eight cents to $2.57. They were similarly equable in November, when the start date was delayed for a third time, to the third quarter of 2015. By this time, the oil price crash had driven Ithaca below $1.50, but investors still seemed to like Stella. It helped that all four wells of the program had excellent results. (As mentioned, the first two tested above 10,000 barrels a day, and the third and fourth flowed over 12,000. Ithaca later added a fifth well for which results are expected next month.) It seems that investors' patience has finally snapped. More FPF delays have pushed back the production date to the second quarter of 2016, around two years behind the original schedule. Ithaca tried to put a good spin on it by saying the work may be late, but it is of very high quality, so by that measure Petrofac is doing a fabulous job. As well, the delay will not cost Ithaca much because Petrofac is under a lump-sum contract. Investors still seem frustrated. They may also be worried about the writedowns at Stella as newly announced by Petrofac in its 2014 results. Its pretax profit plunged to $171-million from $789-million, largely because of $463-million of charges against the value of assets in the North Sea and elsewhere. Around half of the writedowns were applied to its interest in Stella.