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Ithaca Energy Inc.: Acquisition of Interests in Three UK Producing Oil Fields

Not for Distribution to U.S. Newswire Services or for Dissemination in the United States

CALGARY, AB -- (Marketwired) -- 06/23/14 -- Ithaca Energy Inc. (TSX: IAE) (LSE: IAE) ("Ithaca" or the "Company") announces it has entered into an agreement with Sumitomo Corporation to acquire interests in three non-operated UK producing oil fields for a total consideration of $170 million. The acquisition further broadens the Company's producing asset base with high quality, long-life oil assets, delivering a step-up in reserves and accelerating monetisation of existing UK tax allowances.


  • Acquisition of interests in three long-life producing oil fields, with clearly defined upside opportunities
  • A further 20.000% interest in the Cook field in which the Company already has a 41.346% interest, a 7.480% interest in the Pierce field and a 7.430% interest in the Wytch Farm field
  • An increase in net proved and probable ("2P") reserves of approximately 12.0 million barrels of oil equivalent ("MMboe")(1), equating to an uplift in total Company 2P reserves of approximately 20%
  • Total acquisition consideration of $170 million, equating to approximately $14.2 per barrel of oil equivalent ("$/boe"). Taking into account the value associated with accelerating use of the Company's existing tax allowances pool, the acquisition cost falls to approximately $12/boe
  • Incremental 2014 pro-forma production from the field interests is estimated to be approximately 2,500 barrels of oil equivalent per day ("boepd")
  • Integration of the acquired fields into the existing portfolio is forecast to have a positive impact on the average unit operating cost per barrel of the Company
  • The Company's leverage (Net Debt / Adjusted EBITDAX) is anticipated to be broadly unchanged at completion

Les Thomas, Chief Executive Officer, commented:
"I am very pleased to announce the acquisition of these three high quality, long-life assets, which represent an excellent addition to the portfolio. The transaction is directly in line with our strategy to further diversify and expand our producing asset portfolio. Moreover, each of the assets has clearly defined upsides that provide the opportunity to generate significant additional value."

A presentation summarising the acquisition is available on the Company's website at www.ithacaenergy.com.

A short conference call for European research analysts will take place at 08.30 UK time on 23 June 2014 and again at 13.30 UK time for North American analysts. For further information contact FTI Consulting.

Further Information

The transaction involves the acquisition of interests in three producing UK oil fields, through the purchase of Summit Petroleum Limited, a subsidiary company of Sumitomo Corporation. Specifically:

  • A further 20.000% interest in the Shell-operated Cook field in which the Company already has a 41.346% interest;
  • A 7.480% interest in the Shell-operated Pierce oil field; and,
  • A 7.430% interest in the Perenco-operated Wytch Farm oil field.

The effective date of the acquisition is 1 January 2014 (the "Effective Date"). The transaction is expected to complete in the third quarter of 2014 and is subject to normal regulatory approvals. At completion the consideration paid will be subject to normal industry adjustments to reflect the income and costs incurred since the Effective Date.

Reserve, Production & Cashflow
The reserves associated with the acquired field interests of approximately 12.0MMboe, over 90% oil, have been estimated by Ithaca(1). The reserves will be independently assessed by Sproule International Limited as part of the normal year end reserves evaluation exercise.

In total the acquired assets produced approximately 2,500 boepd in 2013, approximately 92% oil. This includes the impact of a planned shut-in of the Pierce field for approximately seven months of 2013 in order for the "Haewene Brim" floating production, storage and offloading vessel ("FPSO") that is used on the field to be transferred to dry dock for modification and refurbishment works to enable the tie-in of a third party field to the FPSO in 2014. The vessel returned to the field in late 2013 and production is forecast to resume from the Pierce field in the third quarter of 2014.

On a pro-forma basis, taking into account production from each of the acquired field interests from the transaction Effective Date, the acquisition is forecast to increase the Company's 2014 production guidance by approximately 2,500 boepd. The production guidance for the Company's existing assets remains unchanged, implying increased forecast pro-forma 2014 production guidance of 13,500 to 15,500 boepd.

The aggregate 2013 unit operating costs for the acquired fields was approximately $31/boe, which reflects the impact of the extended shut-in of production on the Pierce field during the year, as described above. Unit operating costs for the acquired fields are anticipated to remain broadly unchanged in 2014, reducing thereafter with the benefit of normal annual production operations at the Pierce field. Given this, the integration of the fields into the Company's existing producing asset portfolio is expected to result in a reduction in the Company's overall unit operating costs.

Oil sales from each of the fields' trades at or around the Brent benchmark price, implying an aggregate cash netback associated with the fields being acquired in 2013 of approximately $72/boe based on an average Brent price for the year of $109/bbl and taking into account gas export sales from the Cook field. Adjusting for the payment of Petroleum Revenue Tax applicable on production from the Wytch Farm field, the aggregate unit cashflow from the fields in 2013 is estimated to have been approximately $52/boe.

Cook Field Summary
The Cook oil field, operated by Shell, lies in Block 21/20a (N) in the Central North Sea area of the UK Continental Shelf ("UKCS"), approximately 175 kilometres east of Aberdeen. The field has been developed as a single well subsea tie-back to the Shell-operated Anasuria FPSO, which serves as a host processing facility to two other nearby fields, with oil exported from the FPSO via shuttle tankers and gas via pipeline to shore.

A "4D" seismic survey was acquired over the field in 2013 in order to obtain additional data to further enhance the co-venturers understanding of the reservoir geology and hydrocarbon sweep to date. Evaluation of the data is currently on-going to assess the potential for drilling of a further well on the field and the associated optimal well location.

The acquisition will result in the Company increasing its existing Cook field interest from 41.345% to 61.346%, furthering its position as the field's largest owner.

Pierce Field Summary
The Pierce field, operated by Shell, is located in blocks 23/22a (ALL) in the Central North Sea area of the UKCS, approximately 280 kilometres east of Aberdeen. The field was discovered in 1975, with first oil achieved in February 1999. The field is developed by subsea wells tied into the Haewene Brim FPSO, with oil export directly to market via shuttle tankers. All Pierce produced gas, other than that consumed for fuel and flare on the FPSO, is currently re-injected into the reservoir. Blowdown of the gas cap is expected later in field life. An infill well / workover programme is scheduled to commence in late 2014 with the objective of boosting near term production levels and maximising reserves recovery.

Wytch Farm Field Summary
The Wytch Farm field, operated by Perenco UK Limited, is located in offshore blocks 98/6a (ALL) and 98/7a (ALL) and onshore blocks SY/88b (ALL), SY/98a (ALL) and SZ/8a (ALL) in Dorset, England. The field was discovered in 1973 by British Gas Corporation, with first oil achieved in 1979. Both the onshore and offshore wells on the field have been drilled from twelve onshore pads (drill centres) located alongside the on-site oil processing facilities; with sixty-four production wells and 31 water injection wells currently in operation. Oil is exported from the field via pipeline directly to the BP-operated Hamble terminal. An infill drilling / well workover programme, including the targeting of undeveloped satellite accumulations, is on-going on the field in order to maintain and grow production levels and maximise reserves recovery.

In accordance with AIM Guidelines, John Horsburgh, BSc (Hons) Geophysics (Edinburgh), MSc Petroleum Geology (Aberdeen) and Subsurface Manager at Ithaca is the qualified person that has reviewed the technical information contained in this press release. Mr Horsburgh has over 15 years operating experience in the upstream oil and gas industry.

(1) Estimates of the proved plus probable reserves associated with the acquisition as disclosed in this press release have been prepared by Ithaca's non-independent qualified reserves evaluator as of June 2014. The reserves estimates contained in this press release are estimates only and the actual results may be greater than or less than the estimates provided herein. The estimates of reserves for individual properties may not reflect the same confidence level as estimates of reserves for all properties, due to the effects of aggregation.

References herein to barrels of oil equivalent ("boe") are derived by converting gas to oil in the ratio of six thousand cubic feet ("Mcf") of gas to one barrel ("bbl") of oil. Boe may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf: 1 bbl is based on an energy conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6 Mcf: 1 bbl, utilising a conversion ratio at 6 Mcf: 1 bbl may be misleading as an indication of value.

Net Debt is calculated as the total debt of the Company excluding the Norwegian tax rebate facility, less unrestricted cash and cash equivalents. EBITDAX is calculated as earnings before interest, tax, depreciation, amortisation and exploration expenditure. Adjusted EBITDAX is calculated as EBITDAX adjusted for costs that are considered by management to be not reflective of our core operations.

About Ithaca Energy
Ithaca Energy Inc. (TSX: IAE) (LSE: IAE) is a North Sea oil and gas operator focused on the delivery of lower risk growth through the appraisal and development of UK undeveloped discoveries, the exploitation of its existing UK producing asset portfolio and a Norwegian exploration and appraisal business targeting the generation of discoveries capable of monetisation prior to development. Ithaca's strategy is centred on generating sustainable long term shareholder value by building a highly profitable 25kboe/d North Sea oil and gas company. For further information please consult the Company's website www.ithacaenergy.com.

Not for Distribution to U.S. Newswire Services or for Dissemination in the United States

Forward-looking statements
Some of the statements and information in this press release are forward-looking. Forward-looking statements and forward-looking information (collectively, "forward-looking statements") are based on the Company's internal expectations, estimates, projections, assumptions and beliefs as at the date of such statements or information, including, among other things, assumptions with respect to production, drilling, construction times, well completion times, risks associated with operations, future capital expenditures, continued availability of financing for future capital expenditures, future acquisitions and cash flow. The reader is cautioned that assumptions used in the preparation of such information may prove to be incorrect. When used in this press release, the words "anticipate", "continue", "estimate", "expect", "may", "will", "project", "plan", "should", "believe", "could", "target" and similar expressions, and the negatives thereof, whether used in connection with operational activities, the acquisition of assets from Sumitomo Corporation and the current and forecast production from those assets, budgetary figures, potential developments or otherwise, are intended to identify forward-looking statements. Such statements are not promises or guarantees, and are subject to known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. The Company believes that the expectations reflected in those forward-looking statements and are reasonable but no assurance can be given that these expectations, or the assumptions underlying these expectations, will prove to be correct and such forward-looking statements and included in this press release should not be unduly relied upon. These forward-looking statements speak only as of the date of this press release. Ithaca Energy Inc. expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any forward-looking statement is based except as required by applicable securities laws.

Additional information on these and other factors that could affect Ithaca's operations and financial results are included in the Company's Management's Discussion and Analysis for the year ended December 31, 2013, and the Company's Annual Information Form for the year ended December 31, 2013 and in reports which are on file with the Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com).

This information is provided by RNS
The company news service from the London Stock Exchange


Ithaca Energy
Les Thomas
[email protected]
+44 (0)1224 650 261

Graham Forbes
[email protected]
+44 (0)1224 652 151

Richard Smith
[email protected]
+44 (0)1224 652 172

FTI Consulting
Edward Westropp
[email protected]
+44 (0)207 269 7230

Shannon Brushe
[email protected]
+44 (0)203 727 1077

Cenkos Securities
Neil McDonald
[email protected]
+44 (0)131 220 6939

Beth McKiernan
[email protected]
+44 (0)131 220 9778

RBC Capital Markets
Tim Chapman
[email protected]
+44 (0)207 653 4641

Matthew Coakes
[email protected]
+44 (0)207 653 4871

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