13th Nov 2014 10:35
LONDON (Alliance News) - Ithaca Energy Inc Thursday said it expects production to increase by the end of the year following its acquisition of three new producing assets in the North Sea and said it has protected itself from lower oil prices with a significant quantity of oil price hedges.
During the third quarter ended September 30, Ithaca reported a pretax profit of USD8.0 million with USD43.9 million in underlying cash flow from its operations, despite planned maintenance shutdowns during the quarter, it said.
"Given the impact of planned maintenance shutdowns during the quarter, the underlying third quarter numbers represent a solid contribution to the company's year to date results," said Chief Financial Officer Graham Forbes.
Ithaca has also protected itself from lower oil prices, with 630 barrels of oil per day hedged at an average of USD102 per barrel until the end of June 2016. The executed hedges through to 2016 has resulted in the company having a break-even price for its existing producing assets of under USD20 per barrel, said Ithaca.
Based on future oil and gas prices at September 30, when the Brent spot price stood at USD95 per barrel, the company's executed commodity price hedges had a net value of approximately USD25 million, which would increase to over USD60 million with a USD10 per barrel fall in Brent prices, it said.
"In light of the recent fall in oil prices, it is important to note that the company is in a strong financial position, with all debt covenants satisfied and future revenues substantially underpinned by the significant quantity of oil price hedges that have been executed well in excess of prevailing prices," said Forbes.
During the period, Ithaca acquired three producing assets in the UK from Japan's Sumitomo Corp. Ithaca acquired Sumitomo subsidiary Summit Petroleum Ltd, which owned the three licenses, for a total of USD163 million.
Consolidating the new assets into quarterly production from July 31, the average production rate in the third quarter was 10,861 barrels of oil equivalent per day, Ithaca said. Pro-forma production in the quarter, including the Summit assets for the entire quarter, averaged 11,600 barrels of oil equivalent per day, 96% of which was oil.
Ithaca reiterated it is set to achieve a production rate of 12,500 barrels of oil equivalent per day before the end of the year, which will reflect the full integration and inclusion of the three new assets, it said in a statement.
At the Greater Stella area in the North Sea, Ithaca said it has successfully completed a fourth development well in the last quarter and confirmed its forecast of achieving around 30,000 barrels of oil equivalent per day, 16,000 barrels of which will be attributable to Ithaca due to its 54.5% working interest. Drilling of the fifth well at the project is under-way and scheduled to be completed in early 2015.
Ithaca shares were up 2.9% to 79.25 pence per share on Thursday.
By Joshua Warner; [email protected]; @JoshAlliance
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