IC on Ithaca Last year, the average cost of a barrel of Brent crude was $3 less than Ithaca Energy 's (IAE) 2014 per-barrel operating costs. In that context, the 70 per cent increase in operational cash flow to $261m (£185m) detailed in 2015's financial results is some achievement. The North Sea driller managed this by upping production above guidance, finding itself the right side of a hedging programme, and slashing 44 per cent out of operating costs.
There was "no one silver bullet" which contributed to the savings, according to chief executive Leslie Thomas, although cost deflation in the supply chain certainly helped. This reduced the strain on the balance sheet, most pronounced in the first half of the year when net debt peaked at over $800m (£567m). Completion of a $117m investment programme a quarter under budget, the sale of the non-core Norwegian business for up to $90m, and a $66m equity placing by the Delek Group helped to bring that figure down to $665m by December. Management says this should fall a further $20m by the end of March.
Broker finnCap is forecasting a full-year adjusted pre-tax profit of $194.5m and EPS of 31.3¢, versus $200.4m and 8.4¢ in 2015.
| ITHACA ENERGY (IAE) |
| NET ASSET VALUE: | 193¢ | NET DEBT: | 83% |
| ORD PRICE: | 32.8p | MARKET VALUE: | £135m |
| TOUCH: | 32.5-33.3p | 12-MONTH HIGH: | 61p | LOW: 16p |
| DIVIDEND YIELD: | nil | PE RATIO: | na |
| Year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
| £1=$1.42 |
| 2011 | 129 | 37.1 | 14.0 | nil |
| 2012 | 170 | 29.2 | 36.0 | nil |
| 2013 | 414 | 40.2 | 48.0 | nil |
| 2014 | 379 | -332 | -7.0 | nil |
| 2015 | 207 | -326 | -35.0 | nil |
| % change | -45 | - | - | - |
IC VIEW:
Granted, the oil price slump has been terrible for our original tip (176p, 15 May 2013). But the shares now trade on 1.5 times forward earnings, and with enough cash on hand to reach first production from Stella, we file Ithaca next to Faroe Petroleum (FPM) as a North Sea rebound play. Buy.
Last IC view: Buy, 19p, 13 Jan 2016
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