Ithaca Energy beats production expectations and narrows losses ahead of a potential takeover by Delek

Courtney Goldsmith
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Cabinets From Both UK And Scottish Governments Meet In North East Scotland
Some of Ithaca's shareholders aren't keen on Delek's offer (Source: Getty)

Ithaca Energy pumped up production and narrowed its losses for the year to the end of December 2016 to beat expectations ahead of a recommended takeover

The figures

The North Sea producer reported a loss before tax of $16.2m (£12.9m) compared with a loss of $363.6m in 2015.

The firm's average production over the year was 9,310 barrels of oil equivalent per day (boepd), which was ahead of full year guidance of 9,000 boepd but down from 2015's 12,066 boepd.

Unit operating costs were down 26 per cent to $23 per boe from $31 per boe the previous year, and costs are forecast to be cut to $18 per boe for 2017.

Output in 2017 is expected to be in the range of 19,000 to 22,000 boepd, with production in the first quarter forecast to an average of 9,200 boepd.

Ithaca's shares, which are listed on the Alternative Investment Market (Aim), edged down 0.22 per cent at 114.75p in afternoon trading.

Why it's interesting

Ithaca's board last month accepted a $1.24bn bid from Delek Group, which is currently the company's largest shareholder. The deal values Ithaca’s share value at $646m and gives the firm a total enterprise value of around $1.24bn.

However, a major shareholder is urging fellow investors to reject the deal.

"We do not feel the reasons given for recommending the current offer are compelling, as they fail to take into account the long-term prospects of Ithaca," said Paul Mumford, a fund manager at Cavendish Asset Management, which owns a three per cent stake in the oil firm.

Ithaca's Stella field finally came on stream last month after a series of delays, and chief executive Les Thomas called it a "milestone" for the company. The firm said production to date is around 1,700 barrels of oil per day net to Ithaca, and Thomas said it's expected to ramp up further.

What Ithaca Energy said

Les Thomas, chief executive, said:

Our 2016 financial results reflect a year of good progress for the company culminating in first oil from the Stella field in February 2017. This progress has been reflected in the near four-fold increase in our share price since the start of last year. Stella first oil was an important milestone for the company and production is forecast to ramp-up upon completion of on-going dynamic commissioning of the gas processing facilities.

Having reached this important milestone and after weighing up the potential risks and opportunities that lie ahead, the board considers the takeover offer tabled by Delek as providing full value to shareholders and wholeheartedly recommends its acceptance.

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