First Quarter Results

Q1 2013

Ithaca

Valiant

Combined

Total Production

boepd

6,475

8,372

14,847

Av. Realised Oil Price (Exc. Hedging)

$/bbl

106

113

110

Revenue

M$

59.8

90.2

150.0

Inventory Increase/(Decrease)

M$

(3.8)

(3.8)

(7.5)

Operating Costs

M$

(23.2)

(14.2)

(37.4)

G&A

M$

(1.9)

(7.4)

(9.3)

Realised Derivatives Gain / (Loss)

M$

3.9

(0.3)

3.6

Cashflow From Operations

M$

34.8

64.5

99.5

CFPS (using issued Shares 316.9m)

$USD

0.11

0.20

0.31

Ithaca Energy Inc.

Iain McKendrick, CEO

[email protected]

+44 (0) 1224 650 261

Graham Forbes, CFO

[email protected]

+44 (0) 1224 652 151

Cenkos Securities plc

Jon Fitzpatrick

[email protected]

+44 (0) 207 397 8900

Neil McDonald

[email protected]

+44 (0) 131 220 6939

RBC Capital Markets

Tim Chapman

[email protected]

+44 (0) 207 653 4641

Matthew Coakes

[email protected]

+44 (0) 207 653 4871

FTI Consulting

Billy Clegg

[email protected]

+44 (0) 207 269 7157

Edward Westropp

[email protected]

+44 (0) 207 269 7230

Georgia Mann

[email protected]

+44 (0) 207 269 7212

HIGHLIGHTS FIRST QUARTER 2013

Strong cashflow from operations

·; Cashflow from operations increased over 20% to $34.8 million (Q1 2012: $28.4 million) - cashflow per share $0.13 (Q1 2012: $0.11)

·; Adjusted earnings of $14.6 million* excluding unrealised revaluation loss on financial instruments (Q1 2012: $12.1 million)

o Unadjusted earnings of $3.5 million (Q1 2012: $12.9 million)

·; Q1 2013 average realized oil price of $114 / bbl (Q1 2012: $116 / bbl), including a realized hedging gain of $8 / bbl

·; Cash balance of $10.6 million net of drawn debt (Q4 2012: $31.4 million)

·; UK tax allowances pool of $424 million at quarter end

·; Approximately 2.6 million barrels of future 2013-14 oil production hedged at a weighted average price of around $106 / bbl (approximately 25% puts / 75% swaps)

Q1 production in line with forecast

·; Export production increased 51% to approximately 6,475 barrels of oil equivalent per day ("boepd") (Q1 2012: 4,299 boepd), including production from the Cook field interest acquired from Noble Energy Capital Limited ("Noble"), effective January 1, 2012

Greater Stella Area hub - major milestones being achieved

·; "FPF-1" floating production unit transferred to dry dock

·; Contract signed with Applied Drilling Technology International ("ADTI") in April 2013 to manage development drilling and completion operations on the Greater Stella Area ("GSA") under "turnkey" contract arrangements

·; Ensco 100 drilling rig has now completed operations on the wells being drilled prior to commencement of the GSA development drilling programme - rig scheduled to be on location at Stella field in Q2 2013

·; Fabrication of all the required subsea infrastructure that is to be installed by Technip in 2013 is progressing according to plan

Step-change in growth of the Corporation

·; Acquisition of Valiant Petroleum plc ("Valiant") for a total enterprise value of approximately $459 million completed on April 19, 2013

·; Completion of the acquisition of an additional 12.885% interest in the Cook field ("the Cook Acquisition")

SUMMARY STATEMENT OF INCOME

(1) Average realized price before hedging

(2 Weighted average number of shares of 259.9 million pre Valiant Acquisition

SUMMARY BALANCE SHEET

CORPORATE STRATEGY

Ithaca Energy Inc. (the "Corporation" or "Ithaca" or the "Company") is an oil and gas operator focused on North Sea production, appraisal and development activities.

Ithaca's strategy is to grow shareholder value by building a highly profitable 25kboepd North Sea oil and gas company. The execution of this plan is centred on:

·; Maximising production and cashflow from its existing assets

·; Delivering material growth by appraising and developing existing hydrocarbon discoveries

·; Continuing to increase and diversify the Company's portfolio and cashflows through acquisitions

CONSOLIDATION

The consolidated financial statements of the Corporation and the financial data contained in this management's discussion and analysis ("MD&A") are prepared in accordance with international financial reporting standards ("IFRS"). The consolidated financial statements include the accounts of Ithaca and its wholly-owned subsidiaries Ithaca Energy (Holdings) Limited ("Ithaca Holdings"), Ithaca Energy (UK) Limited ("Ithaca UK"), Ithaca Minerals North Sea Limited ("Ithaca Minerals") and Ithaca Energy Holdings (UK) Limited ("Ithaca Holdings UK") and its associates FPU Services Limited ("FPU") and FPF-1 Limited ("FPF-1").

All inter-company transactions and balances have been eliminated on consolidation. A significant portion of the Corporation's North Sea oil and gas activities are carried out jointly with others. The consolidated financial statements reflect only the Corporation's proportionate interest in such activities.

PRODUCTION & OPERATIONS UPDATE

51% increase in production compared to Q1 2012, with production in line with forecast performance

Q1 2013 PRODUCTION

Ithaca's total net export production in Q1 2013 was 6,475 boepd, approximately 90% oil, representing an increase of approximately 51% on Q1 2012 production (Q1 2012: 4,299 boepd). The production performance was in the upper range of that anticipated by the Corporation as part of the 2013 annual production guidance range of 6,000 to 6,700 boepd.

Production in the period was derived from the operated Athena, Beatrice, Jacky and Anglia fields and the non-operated Cook, Broom and Topaz fields. The total Q1 2013 production of 6,475 boepd includes the contribution from the additional 12.885% Cook field interest acquired from Noble.

The material increase in production delivered in Q1 2013 compared to the same quarter in 2012 was primarily attributable to the contribution from the Athena field (first oil May 2012) and the acquisition of the additional Cook field interest from Noble.

The two primary fields contributing approximately 70% of total net production during the quarter were Athena and Cook, with each contributing broadly equally. The Ithaca operated Athena field had another strong quarter, with the stable gross daily production potential of field remaining at between 10,000 and 11,000 bopd, 2,250 to 2,475 bopd net to Ithaca. Consistent daily delivery of the field potential over the period has been achievable as a result of the solid performance of the BW Athena floating, production, storage and offloading vessel ("FPSO"). The field continues to produce "dry" oil.

GREATER STELLA AREA DEVELOPMENT UPDATE

GSA: Significant progress being made, with commencement of drilling campaign set for Q2-2013

FPF-1 Modification Works

Following the transfer in late 2012 of the FPF-1 floating production facility to the Remontowa shipyard in Gdansk, Poland, the modifications work programme being performed by Petrofac in the yard has been focused on preparation for the dry dock.

Inspection, repair and coating of the hull tanks is progressing well and the vessel has now been transferred to the yard's dry dock barge to enable completion of the marine system works. This milestone marks the start of the installation of additional buoyancy on the FPF-1 as part of the marine upgrade works, with steel cutting, rolling and welding operations in progress.

Installation of the new topsides processing plant will commence upon completion of the dry dock works. The vessel preparatory works have largely been completed and delivery to the yard of the equipment and materials required for the construction and fabrication work programme has commenced. The gas export compressors, which represent the key processing plant package with the longest lead time (having being order at the start of 2012), have now been delivered to the yard.

The FPF-1 is being modified and upgraded by Petrofac under the terms of a lump sum incentivised contract that was awarded by the GSA joint venture partners in October 2011.

Drilling Programme

The high-spec Ensco 100 heavy duty jack-up drilling rig that has been contracted for the GSA development drilling campaign has now completed operations on the wells being drilled for the North Sea operator that has being using the rig immediately prior to commencement of the GSA programme.

The rig is being prepared for demobilisation from its current location and will shortly commence its transit to the Able shipyard in Hartlepool, UK, where Ensco will complete a scheduled routine inspection of the unit and certain minor upgrade works to improve the well construction capabilities of the rig specifically designed to improve the efficiency of GSA drilling operations. The unit is expected to arrive on location at the Stella field in Q2-2013.

The initial development drilling campaign involves the completion of four wells on the Stella field prior to start-up of production. As previously announced, Advanced Drilling Technology International ("ADTI"), a subsidiary of Transocean, has been contracted to manage the drilling and completion operations under "turnkey" contract arrangements. The turnkey contract locks in the expenditure and performance requirements of the core drilling operations, with each well anticipated to take approximately 80-90 days to drill, complete and clean-up test.

Subsea Infrastructure Works

Significant progress is being made by Technip UK Limited ("Technip") with preparation for the main subsea infrastructure installation activities that are scheduled to take place offshore in 2013. The subsea programme is being performed under the terms of an Engineering, Procurement, Installation and Construction ("EPIC") contract, thereby ensuring a fully integrated execution plan covering all aspects of this key element of the GSA development.

·; Manufacturing, coating and delivery to Technip's Evanton spool base in NE Scotland of all the required 10-inch export infrastructure linepipe has been completed and the welding of 12 metre pipes into 1000 metre pipe stalks has commenced. The pipe stalks are scheduled to be reeled on to Technip's Apache II pipelay vessel in Q3-2013 for subsequent installation offshore.

·; Manufacture of the static flexible flowlines that will connect the drill centres to the FPF-1 is nearing completion at Technip's manufacturing facility in Le Trey, France. These are scheduled to be installed by the Skandi Arctic construction and dive support vessel, commencing in Q3-2013.

·; The first pipeline trenches to be cut in advance of installation of the flexible flowlines will commence in Q2-2013, marking the start of the offshore installation campaign.

·; Fabrication of the subsea structures that will connect the drill centres with the FPF-1 has been completed at Global Energy Group's facilities in NE Scotland. Installation and testing of the pipework spools, valves and control systems being fitted within the structures is nearing completion. The structures are scheduled to be installed by the Skandi Arctic in Q3-2013.

Q1 2013 CORPORATE ACTIVITIES

Further broadening of the producing asset portfolio - acquisition of additional Cook field interest

Acquisition of Cook Field Interest Completed, Lapse of MacCulloch Field Interest Acquisition

In October 2012, the Corporation announced that it had entered into agreements with Noble Energy Capital Limited (a subsidiary of Noble Energy Inc.) to acquire a 12.885% interest in the Cook field and a 14% interest in the MacCulloch field.

The acquisition of the Cook field interest was completed in February 2013, increasing the Corporation's overall interest in the field to 41.345%. The consideration paid at completion was $37.7 million, with approximately $14 million of this payment being offset by the transfer of oil inventory awaiting offload from the Anasuria floating production, storage and offloading vessel (the host facility for the Cook field) to the Corporation.

The agreement for acquisition of the MacCulloch field interest from Noble has now lapsed and the Corporation has decided not to further pursue this acquisition given the field has remained shut-in since late December 2012. The MacCulloch field was only anticipated to contribute approximately 5% of the Corporation's total forecast 2013 production guidance of 6,000 to 6,700 boepd and represented 1.4MMbbl or less than 3% of the total 51.9MMbbl proved and probable ("2P") reserves at the end of 2012.

ACQUISITION OF VALIANT PETROLEUM PLC

Highly accretive acquisition - materially increasing production, reserves and cashflow

On March 1, 2013, it was announced that the Boards of Ithaca and of Valiant reached agreement on the terms of a recommended acquisition (the "Acquisition") under which Ithaca would acquire all the shares of Valiant. The Acquisition was completed on April 19, 2013, with the cessation of trading of Valiant shares. The total Acquisition price was approximately $309 million. The Corporation also repaid approximately $150 million of Valiant debt / working capital, implying a total enterprise value of approximately $459 million.

The Acquisition is financed by a low interest (London Inter Bank Offered Rate plus 1.0 - 1.6%) $350 million bridge loan and the issue of new Ithaca shares. The bridge facility, which has been agreed with BNP Paribas, the Bank of Nova Scotia and Bank of America Merrill Lynch, is available for 12 months. The intention is to fold the borrowing secured against the Valiant assets into an enlarged borrowing base facility during 2013.

A total of 56,952,321 new Ithaca common shares have been issued and allotted to holders of Valiant shares, immediately following which issue and allotment Ithaca had a total of 316,905,657 common shares outstanding. Admission of the new shares to trading on the Alternative Investment Market ("AIM") and the Toronto Stock Exchange occurred by April 22, 2013.

The Acquisition has resulted in:

·; The establishment of Ithaca as a mid cap North Sea oil and gas operator, with 2P reserves of approximately 70MMboe, of which approximately 50% relates to currently producing assets;

·; A more than doubling of Ithaca's current forecast 2013 production to 14-16kboepd (90% oil), forecast to rise to approximately 27kboepd in 2015; and

·; Anticipated four fold increase in Ithaca's anticipated 2013 cash flow from operations to $400 million, rising to over $700 million in 2015.

COMMODITY HEDGING

At the start of Q1 2013 approximately 3 million barrels of 2013-14 oil production had been hedged at a weighted average price of $109 / bbl (approximately 25% puts / 75% swaps).

In the quarter, the Corporation received $4.2 million through the settlement of commodity hedges relating to approximately 0.4 million barrels of oil.

In April 2013, the Corporation exercised an option to swap 1 million barrels of production at $107/bbl. On the day of exercise, the Brent forward curve, for the period to which the hedge related, was at $101 / bbl resulting in the swaption being converted to a cash settlement of $6 million and a forward swap of 1 million barrels of production at $101 / bbl.

Following the above transactions, 2.6 million barrels of future 2013-14 oil production are hedged at a weighted average price of ~ $106 / bbl (approximately 25% puts / 75% swaps).

The unrealised losses of $11.1 million from the revaluation of financial instruments included a loss of $9.1 million driven by the revaluation of oil swaps and put options. The hedging instruments are measured at March 31, 2013 and a valuation attributed based on the Brent oil forward curve on that date (spot Brent was trading at $108.46/bbl on March 31, 2013). The losses relate to movement in the Brent oil forward curve, a reduction in the implied volatility and the elapsing of time. Whilst significant, these marked-to-market movements represent non-cash revaluations which are highly sensitive to the oil price on the day of valuation and do not affect underlying cashflow from operations. For example, had the revaluation taken place at the end of April 2013, the revaluation would have resulted in a gain rather than a loss.

Q1 2013 RESULTS OF OPERATIONS

REVENUE

Record quarterly revenue of $59.8 million

Revenue increased by $19.2 million in Q1 2013 to $59.8 million (Q1 2012: $40.6 million). This was mainly driven by an increase in oil sales volumes, partially offset by a reduction in oil price.

Oil sales volumes increased primarily due to the inclusion of sales from the Athena field and the Cook Acquisition in Q1 2013 (Athena commenced production in May 2012) offset by natural declines in the Beatrice and Jacky fields. Of the reported 6,475 boepd production, 6,148 boepd flows through the statement of income with the additional 327 boepd reflecting production from the Cook Acquisition prior to completion. The value of the pre-completion production is captured as part of the acquisition accounting on the balance sheet.

Q1 2013 gas sales are in line with Q1 2012 despite a reduction in Anglia and Topaz gas volumes, which was offset by the addition of Cook gas sales as well as an increase in realized gas prices.

Average realized oil prices decreased quarter on quarter from $116/bbl in Q1 2012 to $106/bbl in Q1 2013. The average Brent price for the quarter was $113/bbl compared to $119/bbl for Q1 2012. The Corporation's realized oil prices do not strictly follow the Brent price pattern given the various oil sales' contracts in place, with certain field sales sold at a discount or premium to Brent. This decrease in average realized oil price was nonetheless offset by a realized hedging gain of $8/bbl in Q1 2013.

COST OF SALES

Cost of sales increased in Q1 2013 to $46.5 million (Q1 2012: $26.0 million) due to increases in operating costs, depletion, depreciation and amortization ("DD&A") and movement in oil and gas inventory.

Operating costs increased in the quarter to $23.2 million (Q1 2012: $15.7 million) primarily due to the inclusion of Athena operating costs (nil Q1 2012) and the additional acquired interest in Cook.

Operating costs/boe increased to $42/boe in the period (Q1 2012: $40) mainly as a result of the phasing of Cook costs in 2012 with lower costs in the first quarter 2012 compared to the comparative period 2013. Although operating costs per boe are up compared to Q1 2012, a combined rate of $42/boe for Q1 is in line with the Corporation's forecast to reduce operating costs for its current portfolio (excluding Valiant assets) for the full year to under $40/boe. The absence of production from other fields sharing the FPSO through which Cook oil is exported gives rise to the higher allocation of costs in the quarter. The other main field producing across the FPSO (in which Ithaca has no equity interest) recommenced production at the start of May, ahead of forecast, supporting the expectation of a lower operating cost per barrel over the year.

DD&A expense for the quarter increased to $19.5 million (Q1 2012: $13.4 million). This was primarily due to higher production volumes in Q1 2013 with the addition of the Athena field as well as the recently acquired additional interest in Cook. The blended rate for the quarter was relatively unchanged at $35/boe (Q1 2012: $34/boe).

As the below "Changes in Accounting Policies" section outlines, the adoption of IFRS and accounting for acquisitions as business combinations has led to increased DD&A rates. It should be noted that this increase in DD&A and hence Cost of Sales is offset by a credit in the Deferred Tax charged through the Statement of Income.

An oil and gas inventory movement of $3.6 million was charged to cost of sales in Q1 2013 (Q1 2012 credit of $3.1 million). Movements in oil inventory arise due to differences between barrels produced and sold with production being recorded as a credit to movement in oil inventory through cost of sales until oil has been sold. In Q1 2013 more barrels of oil were sold (528k bbls) than produced (495k bbls), as a result of timings of Cook liftings and Athena shuttle tankers. Volumes account for $3.8 million of the movement, partially offset by a credit of $0.2 million due to the change in valuation of the opening inventory barrels.

ADMINISTRATION & EXPLORATION & EVALUATION EXPENSES

Total administrative expenses increased in the quarter to $2.8 million (Q1 2012: $1.2 million) primarily due to an increase in general and administrative expenses as a result of higher levels of corporate activity ongoing in the quarter, particularly in relation to the Acquisition of Valiant. Share based payment expenses increased as a result of options being granted towards the end of 2012 (none end 2011), therefore higher amortisation expense has been reflected through Q1 2013.

Exploration and evaluation expenses of $0.3 million were recorded in the quarter (Q1 2012: $0.1 million) primarily due to the expensing of previously capitalized costs relating to areas where exploration and evaluation activities have ceased.

FOREIGN EXCHANGE & FINANCIAL INSTRUMENTS

A foreign exchange gain of $0.6 million was recorded in Q1 2013 (Q1 2012: $1.6 million). The majority of the Corporation's revenue is US dollar driven while operating expenditures are primarily incurred in British pounds. As such, general volatility in the USD:GBP exchange rate is the driver behind the foreign exchange gains and losses, particularly on the revaluation of the GBP bank accounts (USD:GBP at January 1, 2013: 1.62. USD:GBP at March 31, 2013: 1.52 with fluctuation between 1.48 and 1.64 during the quarter). This volatility was partially offset by foreign exchange hedges as described in the "Risks and Uncertainties" section below.

The Corporation recorded a $7.2 million loss on financial instruments for the quarter ended March 31, 2013 (Q1 2012: $0.7 million loss). The loss was predominantly due to a $9.1 million reduction in value of oil swaps and put options, due to a relatively strong Brent oil price at quarter end together with a reduction in implied volatility in the period and the elapsing of time. In addition, the Corporation recorded a $2.1 million loss on the revaluation of foreign exchange instruments. The Corporation's exposure to fluctuations in the USD:GBP exchange rate has nonetheless been limited due to the forward contracts entered into to hedge £120 million of capital expenditure on the GSA development at a rate of $1.52:£1.00. The revaluation losses were partially offset by a $4.2 million realized gain on commodity hedges.

TAXATION

No UK tax anticipated to be payable in the mid-term

A deferred tax credit of $1.2 million was recognized in the quarter ended March 31, 2013 (Q1 2012: $0.9 million charge). This credit is a product of adjustments to the tax charge primarily relating to the UK Ring Fence Expenditure Supplement and share based payments. As noted in the Cost Of Sales section the deferred tax credit is increased by the use of accounting for acquisitions as business combinations.

As a result of the above factors, profit after tax increased to $3.5 million (Q1 2012: $12.9 million).

No taxes are expected to be paid in the mid-term relating to upstream oil and gas activities as a result of the $424 million tax losses available to the Corporation.

CAPITAL INVESTMENTS

$70.9 million of the total $103.1 million capital additions to D&P assets in Q1 2013 was attributable to the acquisition of the additional interest in the Cook field, of which $37.7 million represents cash paid with the remainder being due to business combination accounting. The remaining D&P additions were primarily focused on execution of the GSA development, with the main areas of expenditure being on the manufacture and fabrication of subsea infrastructure and the FPF-1 modification works (as described above).

Capital expenditure on E&E assets in Q1 2013 was $2.1 million with spending primarily focused on Hurricane and development projects.

LIQUIDITY AND CAPITAL RESOURCES

Significant investment in development projects

As at March 31, 2013, Ithaca had working capital of $37.4 million including a cash balance of $65.6 million. Available cash has been, and is currently, invested in money market deposit accounts with BNP Paribas. Management has received confirmation from the financial institution that these funds are available on demand.

Cash and cash equivalents increased as a result of $55 million of bank debt drawings towards the end of the quarter offsetting the continued cash investment in the Stella development. The funds were required for substantial payments due for imminent release post March 31, 2013 on the Stella project together with funds required to be held over as part of the Valiant Acquisition. Other working capital movements are driven by the timing of receipts and payments of balances.

A significant proportion of Ithaca's accounts receivable balance is with customers in the oil and gas industry and is subject to normal joint venture/industry credit risks. The Corporation assesses partners' credit worthiness before entering into joint venture agreements. The Corporation regularly monitors all customer receivable balances outstanding in excess of 90 days. As at March 31, 2013, substantially all of the accounts receivable is current, being defined as less than 90 days. In the past, the Corporation has not experienced credit loss in the collection of accounts receivable.

At March 31, 2013, Ithaca had unused credit facilities totalling $375 million (Q4 2012: $430 million). $55 million was drawn down under this facility in Q1 2013.

During the quarter ended March 31, 2013, there was a net cash inflow of approximately $34.8 million (Q1 2012: outflow of $5.6 million).

Cashflow from operations

Cash generated from operating activities was $34.8 million primarily due to cash generated from Athena, Beatrice, Jacky, Anglia, Cook and Broom operations, augmented in Q1 2013 primarily due to the inclusion of Athena.

Cashflow from financing activities

Cash generated from financing activities was $46.0 million primarily due to the draw down of the existing debt facility in Q1 2013 ($55 million), partially offset by oil hedging premiums paid.

Cashflow from investing activities

Cash used in investing activities was $59.4 million primarily due to capital expenditure on the Cook Acquisition and the GSA development, including modification of the FPF-1, subsea design and fabrication works.

The Corporation continues to be fully funded, with more than sufficient financial resources to cover the anticipated level of development capital expenditure commitments and to continue the pursuit of additional asset acquisition opportunities and exploration and appraisal activities on existing and newly acquired licenses through its existing cash balance, forecast cashflow from operations and its debt facility. No unusual trends or fluctuations are expected outside the ordinary course of business.

COMMITMENTS

The engineering financial commitments relate to pre-development committed capital expenditure on the Stella and Harrier fields, as well as ongoing capital and operating expenditure on existing producing fields. Rig commitments reflect rig hire costs committed in relation to the anticipated Stella wells. As stated above, these commitments are expected to be funded through the Corporation's existing cash balance, forecast cashflow from operations and its debt facility.

OUTSTANDING SHARE INFORMATION

The Corporation's common shares are traded on the Toronto Stock Exchange ("TSX") in Canada under the symbol "IAE" and on the Alternative Investment Market ("AIM") in the United Kingdom under the symbol "IAE".

As at March 31, 2013, Ithaca had 259,953,336 common shares outstanding along with 20,344,631 options outstanding to employees and directors to acquire common shares.

In Q1 2013, the Corporation's Board of Directors granted 90,000 options at a weighted average exercise price of C$1.79. Each of the options granted may be exercised over a period of four years from the grant date. One third of the options will vest at the end of each of the first, second and third years from the effective date of grant.

As at May 10, 2013, following completion of the Valiant Acquisition, Ithaca had 317,088,991 common shares outstanding along with 20,011,297 options outstanding to employees and directors to acquire common shares.

(1) Represents the TSX close price (CAD$1.73 on last trading day of March, 2013. US$:CAD$ 0.9825 on March 31, 2013

SUMMARY OF QUARTERLY RESULTS

The most significant factors to have affected the Corporation's results during the above quarters are fluctuation in underlying commodity prices and movement in production volumes. The Corporation has utilized forward sales contracts and foreign exchange contracts to take advantage of higher commodity prices while reducing the exposure to price volatility. These contracts can cause volatility in profit after tax as a result of unrealized gains and losses due to movements in the oil price and USD : GBP exchange rate.

Each of the quarters from Q4 2010 to Q3 2011 was restated following the Corporation's election to present all acquisitions since the IFRS transition date as business combinations in accordance with IFRS 3(R). Refer to the "Changes in Accounting Policies" below for more details.

FINANCIAL INSTRUMENTS

All financial instruments are initially measured in the balance sheet at fair value. Subsequent measurement of the financial instruments is based on their classification. The Corporation has classified each financial instrument into one of these categories: held-for-trading, held-to-maturity investments, loans and receivables, or other financial liabilities. Loans and receivables, held-to-maturity investments and other financial liabilities are measured at amortized cost using the effective interest rate method. For all financial assets and financial liabilities that are not classified as held-for-trading, the transaction costs that are directly attributable to the acquisition or issue of a financial asset or financial liability are adjusted to the fair value initially recognized for that financial instrument. These costs are expensed using the effective interest rate method and are recorded within interest expense. Held-for-trading financial assets are measured at fair value and changes in fair value are recognized in net income.

All derivative instruments are recorded in the balance sheet at fair value unless they qualify for the expected purchase, sale and usage exemption. All changes in their fair value are recorded in income unless cash flow hedge accounting is used, in which case changes in fair value are recorded in other comprehensive income until the hedged transaction is recognized in net earnings.

The Corporation has classified its cash and cash equivalents, restricted cash, derivatives, commodity hedges and long term liability as held-for-trading, which are measured at fair value with changes being recognized in net income. Accounts receivable are classified as loans and receivables; operating bank loans, accounts payable and accrued liabilities are classified as other liabilities, all of which are measured at amortized cost. The classification of all financial instruments is the same at inception and at March 31, 2013.

The table below presents the total gain / (loss) on financial instruments that has been disclosed through the statement of comprehensive income.

The following table summarises the commodity hedges in place at the beginning of the quarter.

*Includes swaption of 1 million bbls which was exercised in April 2013

The table below summarises the foreign exchange financial instruments in place during Q1 2013.

CRITICAL ACCOUNTING ESTIMATES

Certain accounting policies require that management make appropriate decisions with respect to the formulation of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. These accounting policies are discussed below and are included to aid the reader in assessing the critical accounting policies and practices of the Corporation and the likelihood of materially different results being reported. Ithaca's management reviews these estimates regularly. The emergence of new information and changed circumstances may result in actual results or changes to estimated amounts that differ materially from current estimates.

The following assessment of significant accounting policies and associated estimates is not meant to be exhaustive. The Corporation might realize different results from the application of new accounting standards promulgated, from time to time, by various rule-making bodies.

Capitalized costs relating to the exploration and development of oil and gas reserves, along with estimated future capital expenditures required in order to develop proved and probable reserves are depreciated on a unit-of-production basis, by asset, using estimated proved and probable reserves as adjusted for production.

A review is carried out each reporting date for any indication that the carrying value of the Corporation's D&P assets may be impaired. For D&P assets where there are such indications, an impairment test is carried out on the Cash Generating Unit ("CGU"). Each CGU is identified in accordance with IAS 36. The Corporation's CGUs are those assets which generate largely independent cash flows and are normally, but not always, single developments or production areas. The impairment test involves comparing the carrying value with the recoverable value of an asset. The recoverable amount of an asset is determined as the higher of its fair value less costs to sell and value in use, where the value in use is determined from estimated future net cash flows. Any additional depreciation resulting from the impairment testing is charged to the Statement of Income.

Goodwill is tested annually for impairment and also when circumstances indicate that the carrying value may be at risk of being impaired. Impairment is determined for goodwill by assessing the recoverable amount of each CGU to which the goodwill relates. Where the recoverable amount of the CGU is less than its carrying amount, an impairment loss is recognized in the Statement of Income. Impairment losses relating to goodwill cannot be reversed in future periods.

Recognition of decommissioning liabilities associated with oil and gas wells are determined using estimated costs discounted based on the estimated life of the asset. In periods following recognition, the liability and associated asset are adjusted for any changes in the estimated amount or timing of the settlement of the obligations. The liability is accreted up to the actual expected cash outlay to perform the abandonment and reclamation. The carrying amounts of the associated assets are depleted using the unit of production method, in accordance with the depreciation policy for development and production assets. Actual costs to retire tangible assets are deducted from the liability as incurred.

All financial instruments, other than those designated as effective hedging instruments, are initially recognized at fair value on the balance sheet. The Corporation's financial instruments consist of cash, restricted cash, accounts receivable, deposits, derivatives, accounts payable, accrued liabilities and the long term liability on the Beatrice acquisition. Measurement in subsequent periods is dependent on the classification of the respective financial instrument.

In order to recognize share based payment expense, the Corporation estimates the fair value of stock options granted using assumptions related to interest rates, expected life of the option, volatility of the underlying security and expected dividend yields. These assumptions may vary over time.

The determination of the Corporation's income and other tax liabilities / assets requires interpretation of complex laws and regulations. Tax filings are subject to audit and potential reassessment after the lapse of considerable time. Accordingly, the actual income tax liability may differ significantly from that estimated and recorded on the financial statements.

The accrual method of accounting will require management to incorporate certain estimates of revenues, production costs and other costs as at a specific reporting date. In addition, the Corporation must estimate capital expenditures on capital projects that are in progress or recently completed where actual costs have not been received as of the reporting date.

CONTROL ENVIRONMENT

Ithaca has established disclosure controls, procedures and corporate policies so that its consolidated financial results are presented accurately, fairly and on a timely basis. The Chief Executive Officer and Chief Financial Officer have designed, or have caused such internal controls over financial reporting to be designed under their supervision, to provide reasonable assurance regarding the reliability of financial reporting and preparation of the Corporation's financial statements in accordance with IFRS with no material weaknesses identified.

Based on their inherent limitations, disclosure controls and procedures and internal controls over financial reporting may not prevent or detect misstatements and even those options determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

As of March 31, 2013, there were no changes in Ithaca's internal control over financial reporting that occurred during the quarter ended March 31, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

CHANGES IN ACCOUNTING POLICIES

On January 1, 2011, the Corporation adopted IFRS using a transition date of January 1, 2010. The financial statements for the quarter ended March 31, 2013, including required comparative information, have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board ("IASB").

The Corporation elected to present all acquisitions since the IFRS transition date as business combinations in accordance with IFRS 3(R).

One impact of accounting for acquisitions as business combinations is the recognition of asset values, upon which the DD&A rate is calculated as pre-tax fair values and the recognition of a deferred tax liability on estimated future cash flows. With current tax rates at 62% this increases the DD&A charge for such assets. An offsetting reduction is recognized in the deferred tax charged through the consolidated statement of income.

In May 2011, the IASB issued the following standards: IFRS 10, Consolidated Financial Statements ("IFRS 10"), IFRS 11, Joint Arrangements ("IFRS 11"), IFRS 12, Disclosure of Interests in Other Entities ("IFRS 12"), IAS 27, Separate Financial Statements ("IAS 27"), IFRS 13, Fair Value Measurement ("IFRS 13") and amended IAS 28, Investments in Associates and Joint Ventures ("IAS 28"). Each of the new standards is effective for annual periods beginning on or after 1 January 2013. There has been no material impact from the adoption of the new and amended standards on the Corporation's financial statements.

OTHER

Non-IFRS Measures

'Cashflow from operations' referred to in this MD&A is not prescribed by IFRS. This non-IFRS financial measure does not have any standardized meaning and therefore is unlikely to be comparable to similar measures presented by other companies. The Corporation uses this measure to help evaluate its performance. As an indicator of the Corporation's performance, cashflow from operations should not be considered as an alternative to, or more meaningful than, net cash from operating activities as determined in accordance with IFRS. The Corporation considers Cashflow from operations to be a key measure as it demonstrates the Corporation's underlying ability to generate the cash necessary to fund operations and support activities related to its major assets. Cashflow from operations is determined by adding back changes in non-cash operating working capital to cash from operating activities.

BOE Presentation

The calculation of boe is based on a conversion rate of six thousand cubic feet of natural gas ("mcf") to one barrel of crude oil ("bbl"). The term boe may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf: 1 bbl is based on an energy equivalency 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, utilizing a conversion ratio at 6 mcf: 1 bbl may be misleading as an indication of value.

Off Balance Sheet Arrangements

The Corporation has certain lease agreements and rig commitments which were entered into in the normal course of operations, all of which are disclosed under the heading "Commitments", above. Leases are treated as either operating leases or finance leases based on the extent to which risks and rewards incidental to ownership lie with the lessor or the lessee under IAS 17. No asset or liability value has been assigned to any leases on the balance sheet as at March 31, 2013.

Related Party Transactions

A director of the Corporation is a partner of Burstall Winger LLP who acts as counsel for the Corporation. The amount of fees paid to Burstall Winger LLP in Q1 2013 was $0.1 million (Q1 2012: $Nil). These transactions are in the normal course of business and are conducted on normal commercial terms with consideration comparable to those charged by third parties.

As at March 31, 2013 the Corporation had a loan receivable from FPF-1 Ltd, an associate of the Corporation, for $21.6 million (Q1 2012: $Nil) as a result of the completion of the GSA transactions in 2012.

RISKS AND UNCERTAINTIES

The business of exploring for, developing and producing oil and natural gas reserves is inherently risky. There is substantial risk that the manpower and capital employed will not result in the finding of new reserves in economic quantities. There is a risk that the sale of reserves may be delayed due to processing constraints, lack of pipeline capacity or lack of markets. The Corporation is dependent upon the production rates and oil price to fund the current development program.

For additional detail regarding the Corporation's risks and uncertainties, refer to the Corporation's Annual Information Form dated March 25, 2013, (the "AIF") filed on SEDAR at www.sedar.com.

RISK

MITIGATIONS

Commodity Price Volatility

The Corporation's performance is significantly impacted by prevailing oil and natural gas prices, which are primarily driven by supply and demand as well as economic and political factors.

In order to mitigate the risk of fluctuations in oil and gas prices, the Corporation routinely executes commodity price derivatives, predominantly in relation to oil production, as a means of establishing a floor in realised prices.

Foreign Exchange Risk

The Corporation is exposed to financial risks including financial market volatility, fluctuation in interest rates and various foreign exchange rates.

Given the increasing proportion of development capital expenditure and operating costs incurred in currencies other than the United States dollar, the Corporation routinely executes hedges to mitigate foreign exchange rate risk on committed expenditure.

Debt Facility Risk

The Corporation is exposed to borrowing risks relating to drawdown of its senior secured borrowing base facility (the "Facility"). The ability to drawdown the Facility is based on the Corporation meeting certain covenants including coverage ratio tests, liquidity tests and development funding tests which are determined by a detailed economic model of the Corporation. There can be no assurance that the Corporation will satisfy such tests in the future in order to have access to the full amount of the Facility.

The Facility includes covenants which restrict, among other things, the Corporation's ability to incur additional debt or dispose of assets.

As is standard to a credit facility, the Corporation's and Ithaca Energy (UK) Limited's ("Ithaca UK") assets have been pledged as collateral and are subject to foreclosure in the event the Corporation or Ithaca UK defaults.

The Corporation believes that there are no circumstances at present that result in its failure to meet the financial tests and it can therefore draw down upon its Facility.

The Corporation routinely produces detailed cashflow forecasts to monitor its compliance with the financial tests and liquidity requirements of the Facility.

Financing Risk

To the extent cashflow from operations and Facility resources are ever deemed not adequate to fund Ithaca's cash requirements, external financing may be required. Lack of timely access to such additional financing, or access on unfavourable terms, could limit the future growth of the business of Ithaca. To the extent that external sources of capital, including public and private markets, become limited or unavailable, Ithaca's ability to make the necessary capital investments to maintain or expand its current business and to make necessary principal payments under the Facility may be impaired.

A failure to access adequate capital to continue its expenditure program may require that the Corporation meet any liquidity shortfalls through the selected divestment of its portfolio or delays to existing development programs.

The Corporation has established a fully funded business plan and routinely monitors its detailed cashflow forecasts and liquidity requirements to maintain its funding requirements. The Corporation believes that there are no circumstances at present that would lead to selected divestment, delays to existing programs or a default relating to the Facility.

Third Party Credit Risk

The Corporation is and may in the future be exposed to third party credit risk through its contractual arrangements with its current and future joint venture partners, marketers of its petroleum production and other parties. The Corporation extends unsecured credit to these parties, and therefore, the collection of any receivables may be affected by changes in the economic environment or other conditions.

The Corporation believes this risk is mitigated by the financial position of the parties. All of the Corporation's oil production from the Beatrice, Jacky and Athena fields is sold to BP Oil International Limited. Oil production from Cook and Broom is sold to Shell Trading International Ltd. Anglia and Topaz gas production is sold through contracts to RWE NPower PLC and Hess Energy Gas Power (UK) Ltd. Cook gas is sold to Shell UK Ltd. and Esso Exploration & Production UK Ltd. The Corporation has not experienced any material credit loss in the collection of accounts receivable to date.

The joint venture partners in those assets operated by the Corporation are largely well financed international companies. Where appropriate, a cash call process has been implemented with the GSA partners to cover high levels of anticipated capital expenditure thereby reducing any third party credit risk.

Property Risk

The Corporation's properties will be generally held in the form of licenses, concessions, permits and regulatory consents ("Authorizations"). The Corporation's activities are dependent upon the grant and maintenance of appropriate Authorizations, which may not be granted; may be made subject to limitations which, if not met, will result in the termination or withdrawal of the Authorization; or may be otherwise withdrawn. Also, in the majority of its licenses, the Corporation is often a joint interest-holder with another third party over which it has no control. An Authorization may be revoked by the relevant regulatory authority if the other interest-holder is no longer deemed to be financially credible.

There can be no assurance that any of the obligations required to maintain each Authorization will be met. Although the Corporation believes that the Authorizations will be renewed following expiry or granted (as the case may be), there can be no assurance that such Authorizations will be renewed or granted or as to the terms of such renewals or grants. The termination or expiration of the Corporation's Authorizations may have a material adverse effect on the Corporation's results of operations and business.

The areas covered by the Authorizations are or may be subject to agreements with the proprietors of the land. If such agreements are terminated, found void or otherwise challenged, the Corporation may suffer significant damage through the loss of opportunity to identify and extract oil or gas.

The Corporation has routine ongoing communications with the UK oil and gas regulatory body, the Department of Energy and Climate Change ("DECC"). Regular communication allows all parties to an Authorization to be fully informed as to the status of any Authorization and ensures the Corporation remains updated regarding fulfilment of any applicable requirements.

Operational Risk

The Corporation is subject to the risks associated with owning oil and natural gas properties, including environmental risks associated with air, land and water. All of the Corporation's operations are conducted offshore in the United Kingdom Continental Shelf; as such Ithaca is exposed to operational risk associated with weather delays that can result in a material delay in project execution. Third parties operate some of the assets in which the Corporation has interests. As a result, the Corporation may have limited ability to exercise influence over the operations of these assets and their associated costs. The success and timing of these activities may be outside the Corporation's control.

There are numerous uncertainties in estimating the Corporation's reserve base due to the complexities in estimating the magnitude and timing of future production, revenue, expenses and capital.

The Corporation acts at all times as a reasonable and prudent operator. The Corporation takes out market insurance to mitigate many of these operational, construction and environmental risks.

The Corporation uses the services of Sproule International Limited ("Sproule") to independently assess the Corporation's reserves on an annual basis.

Competition Risk

In all areas of the Corporation's business, there is competition with entities that may have greater technical and financial resources.

The Corporation places appropriate emphasis on ensuring it attracts and retains high quality resources to enable it to maintain its competitive position.

FORWARD-LOOKING INFORMATION

This MD&A and any documents incorporated by reference herein contain certain forward-looking statements and forward-looking information which are based on the Corporation'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, 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. The use of any of the words "anticipate", "continue", "estimate", "expect", "may", "will", "project", "plan", "should", "believe", "could", "scheduled", "targeted", "approximately" and similar expressions are intended to identify forward-looking statements and forward-looking information. These statements are not guarantees of future performance and involve 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 or information. The Corporation believes that the expectations reflected in those forward-looking statements and information 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 information included in this MD&A and any documents incorporated by reference herein should not be unduly relied upon. Such forward-looking statements and information speak only as of the date of this MD&A and any documents incorporated by reference herein and the Corporation does not undertake any obligation to publicly update or revise any forward-looking statements or information, except as required by applicable laws.

In particular, this MD&A and any documents incorporated by reference herein, contains specific forward-looking statements and information pertaining to the following:

• the quality of and future net revenues from the Corporation's reserves;

• oil, natural gas liquids ("NGLs") and natural gas production levels;

• commodity prices, foreign currency exchange rates and interest rates;

• capital expenditure programs and other expenditures;

• the sale, farming in, farming out or development of certain exploration properties using third party resources;

• supply and demand for oil, NGLs and natural gas;

• the Corporation's ability to raise capital;

• the continued availability of the Facility;

• the Corporation's acquisition strategy, the criteria to be considered in connection therewith and the benefits to be derived therefrom;

• the realization of anticipated benefits from acquisitions and dispositions;

• the Corporation's ability to continually add to reserves;

• schedules and timing of certain projects and the Corporation's strategy for growth;

• the Corporation's future operating and financial results;

• the ability of the Corporation to optimize operations and reduce operational expenditures;

• treatment under governmental and other regulatory regimes and tax, environmental and other laws;

• production rates;

• targeted production levels; and

• timing and cost of the development of the Corporation's reserves.

With respect to forward-looking statements contained in this MD&A and any documents incorporated by reference herein, the Corporation has made assumptions regarding, among other things:

• Ithaca's ability to obtain additional drilling rigs and other equipment in a timely manner, as required;

• access to third party hosts and associated pipelines can be negotiated and accessed within the expected timeframe;

• FDP approval and operational construction and development is obtained within expected timeframes;

• the Corporation's development plan for the Stella and Harrier discoveries will be implemented as planned;

• the effect of the Valiant Acquisition on Ithaca;

• reserves volumes assigned to Ithaca's properties;

• ability to recover reserves volumes assigned to Ithaca's properties;

• revenues do not decrease below anticipated levels and operating costs do not increase significantly above anticipated levels;

• future oil, NGLs and natural gas production levels from Ithaca's properties and the prices obtained from the sales of such production;

• the level of future capital expenditure required to exploit and develop reserves;

• Ithaca's ability to obtain financing on acceptable terms, in particular, the Corporation's ability to access the Facility;

• the continued ability of the Corporation to collect from third parties who Ithaca has provided credit to;

• Ithaca's reliance on partners and their ability to meet commitments under relevant agreements; and

• the state of the debt and equity markets in the current economic environment.

The Corporation's actual results could differ materially from those anticipated in these forward-looking statements and information as a result of assumptions proving inaccurate and of both known and unknown risks, including the risk factors set forth in this MD&A and under the heading "Risk Factors" in the AIF and the documents incorporated by reference herein, and those set forth below:

• risks associated with the exploration for and development of oil and natural gas reserves in the North Sea;

• risks associated with the integration of Valiant into Ithaca's existing operations;

• risks associated with offshore development and production including transport facilities;

• operational risks and liabilities that are not covered by insurance;

• volatility in market prices for oil, NGLs and natural gas;

• the ability of the Corporation to fund its substantial capital requirements and operations;

• risks associated with ensuring title to the Corporation's properties;

• changes in environmental, health and safety or other legislation applicable to the Corporation's operations, and the Corporation's ability to comply with current and future environmental, health and safety and other laws;

• the accuracy of oil and gas reserve estimates and estimated production levels as they are affected by the Corporation's exploration and development drilling and estimated decline rates;

• the Corporation's success at acquisition, exploration, exploitation and development of reserves;

• risks associated with realisation of anticipated benefits of acquisitions;

• risks related to changes to government policy with regard to offshore drilling;

• the Corporation's reliance on key operational and management personnel;

• the ability of the Corporation to obtain and maintain all of its required permits and licenses;

• competition for, among other things, capital, drilling equipment, acquisitions of reserves, undeveloped lands and skilled personnel;

• changes in general economic, market and business conditions in Canada, North America, the United Kingdom, Europe and worldwide;

• actions by governmental or regulatory authorities including changes in income tax laws or changes in tax laws, royalty rates and incentive programs relating to the oil and gas industry including any increase in UK taxes;

• adverse regulatory rulings, orders and decisions; and

• risks associated with the nature of the common shares.

Additional Reader Advisories

The information in this MD&A is provided as of May 10, 2013. The Q1 2013 results have been compared to the results of the comparative period in 2012. This MD&A should be read in conjunction with the Corporation's unaudited consolidated financial statements as at March 31, 2013 and 2012 and with the Corporation's audited consolidated financial statements as at December 31, 2012 together with the accompanying notes and MD&A, and AIF for the 2012 fiscal year. Copies of these documents are available without charge from Ithaca or electronically on the internet on Ithaca's SEDAR profile at www.sedar.com.

With respect to Ithaca's reserves disclosure, the figures are derived from a report prepared by Sproule, an independent qualified reserves evaluator, evaluating the reserves of Ithaca as of December 31, 2012 and forming the basis for the Statement of Reserves Data and Other Oil and Gas information of Ithaca dated March 19, 2013 (the "Statement"). The reserves for the South West Heather field included in the Statement are those estimated by the Corporation and reviewed by Sproule.

With respect to Valiant reserves, the figures are derived from an Audit of Certain Reserves as at December 31, 2012 prepared by RPS Energy Consultants Limited, an independent qualified reserves evaluator, dated January 24, 2013. The reserves estimates of Ithaca are based on the Canadian Oil and Gas Evaluation Handbook ("COGEH") pursuant to Canadian National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities, with references to oil referring to medium quality oil.

The Ithaca reserves correspond to those in the Statement adjusted to reflect the increased Carna and Cook field equities acquired following the date of issue of the Statement. The reserves estimates of Valiant are based on the 2007 SPE/AAPG/WPC/ SPEE Petroleum Resource Management System which is not materially different from COGEH. The Valiant reserves have been adjusted to reflect the increased Fionn field interest being transferred to Valiant by Antrim Resources (N.I.) Limited.

If a discovery is made, there is no certainty that it will be developed, or if it is developed, there is no certainty as to the timing of such development or the benefits (if any) which may flow to the Corporation. Cashflow from operations includes the impact of executed hedges and does not include non-cash items such as DD&A, revaluation of financial instruments, impairments of fixed assets and movements in goodwill, which may have a significant impact on the Corporation's results.

The reserve estimates set forth in this MD&A are estimates only and the actual reserves and realized revenue may be greater or less than those calculated. The estimates of reserves for individual properties may not reflect the same confidence level as estimates of reserves and future net revenue for all properties, due to the effects of aggregation.

Statements relating to reserves are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described can be profitably produced in the future.

Consolidated Statement of Income

For the three months ended 31 March 2013 and 2012

(unaudited)

Note

2013

US$'000

2012

US$'000

Revenue

4

59,769

40,553

Cost of Sales

5

(46,458)

(26,006)

Gross Profit

13,311

14,547

Exploration and evaluation expenses

9

(312)

(75)

Administrative expenses

6

(2,771)

(1,206)

Operating Profit

10,228

13,266

Foreign exchange

563

1,648

(Loss) on financial instruments

23

(7,172)

(728)

Negative goodwill

11

914

-

Profit on ordinary activities Before Interest and Tax

4,533

14,186

Finance costs

7

(2,276)

(469)

Interest income

20

65

Profit Before Tax

2,277

13,782

Taxation - Deferred tax

21

1,195

(866)

Profit After Tax

3,472

12,916

Earnings per share

Basic

20

0.01

0.05

Diluted

20

0.01

0.05

Consolidated Statement of Comprehensive Income

For the three months ended 31 March 2013 and 2012

(unaudited)

2013

US$'000

2012

US$'000

Profit for the period

3,472

12,916

Net (loss) on oil price hedge

-

(376)

Other comprehensive income

-

(376)

Total comprehensive income

3,472

12,540

Consolidated Statement of Financial Position

(unaudited)

31 March 2013

US$'000

31 Dec 2012

US$'000

ASSETS

Current assets

Cash and cash equivalents

65,634

31,374

Restricted cash

2

2

Accounts receivable

126,303

159,195

Deposits, prepaid expenses and other

5,925

14,754

Inventory

8

26,131

15,878

Derivative financial instruments

24

7,368

8,251

231,363

229,454

Non-current assets

Long-term receivable

21,551

21,551

Investment in associate

18,337

18,337

Exploration and evaluation assets

9

49,186

47,390

Property, plant & equipment

10

699,391

615,788

Goodwill

12

985

985

789,450

704,051

Total assets

1,020,813

933,505

LIABILITIES AND EQUITY

Current liabilities

Trade and other payables

194,278

205,635

Derivative financial instruments

24

2,296

-

196,574

205,635

Non-current liabilities

Bank debt

14

47,312

-

Decommissioning liabilities

15

57,494

52,834

Other long term liabilities

16

2,961

3,018

Contingent consideration

17

4,000

4,000

Deferred tax liabilities

21

102,329

62,370

214,096

122,222

Net assets

610,143

605,648

Shareholders' equity

Share capital

18

431,365

431,318

Share based payment reserve

19

21,316

20,340

Retained earnings

157,462

153,990

Total equity

610,143

605,648

The financial statements were approved by the Board of Directors on 10 May 2013 and signed on its behalf by:

"John Summers"

Director

 "Jay Zammit"

Director

Consolidated Statement of Changes in Equity

(unaudited)

Share capital

Share based

payment

reserve

Retained

E'ings

Other comp. income

Total

US$'000

US$'000

US$'000

US$'000

US$'000

Balance, 1 Jan 2012

429,502

17,318

60,591

-

507,411

Share based payment

-

862

-

-

862

Unrealised hedging loss

-

-

-

(376)

(376)

Net income for the period

-

-

12,916

-

12,916

Balance, 31 March 2012

429,502

18,180

73,507

(376)

520,813

Balance, 1 Jan 2013

431,318

20,340

153,990

-

605,648

Share based payment

-

994

-

-

994

Options exercised

47

(18)

-

-

29

Net income for the period

-

-

3,472

-

3,472

Balance, 31 March 2013

431,365

21,316

157,462

-

610,143

Consolidated Statement of Cash Flow

For the three months ended 31 March 2013 and 2012

(unaudited)

Note

2013

US$'000

2012

US$'000

Operating activities

Profit Before Tax

2,277

13,782

Adjustments for:

Depletion, depreciation and amortisation

10

19,498

13,385

Exploration and evaluation write off

9

312

75

Share based payment

6

295

135

Loan fee amortisation

592

78

Unrealised (gain)/loss on financial instruments

23

11,065

(765)

Revaluation of contingent consideration

17

-

1,294

Movement in goodwill

11

(914)

-

Accretion

7

502

384

Bank charges

1,159

-

Cashflow from operations

34,786

28,368

Changes in inventory, debtors and creditors relating to operating activities

882

(820)

Net cash from operating activities

35,668

27,548

Investing activities

Acquisition of Cook

(33,370)

-

Capital expenditure

(25,384)

(22,508)

Changes in debtors and creditors relating to investing activities

12,439

(7,810)

Net cash (used in) investing activities

(46,315)

(30,318)

Financing activities

Proceeds from issuance of shares

29

-

(Increase) in restricted cash

-

(4,167)

Derivatives

(7,947)

-

Loan draw down

55,000

-

Bank charges

(1,110)

-

Net cash from/(used in) financing activities

45,972

(4,167)

Currency translation differences relating to cash and cash equivalents

(1,065)

1,336

Increase/(decrease) in cash and cash equivalents

34,260

(5,601)

Cash and cash equivalents, beginning of period

31,374

95,545

Cash and cash equivalents, end of period

65,634

89,944

Three months ended 31 March

2013

US$'000

2012

US$'000

Oil sales

56,153

35,808

Gas sales

2,771

2,821

Condensate sales

137

170

Other income

708

1,754

Total

59,769

40,553

Three months ended 31 March

2013

US$'000

2012

US$'000

Operating costs

(23,227)

(15,721)

Oil purchases

(157)

-

Movement in oil and gas inventory

(3,576)

3,100

Depletion, depreciation and amortisation

10

(19,498)

(13,385)

(46,458)

(26,006)

Three months ended 31 March

2013

US$'000

2012

US$'000

General & administrative

(2,476)

(1,071)

Share based payment

(295)

(135)

(2,771)

(1,206)

Three months ended 31 March

2013

US$'000

2012

US$'000

Accretion

(502)

(384)

Bank charges & interest

(1,164)

(6)

Loan fee amortisation

(592)

(78)

Non-operated asset finance fees

(18)

(1)

(2,276)

(469)

31 March

2013

US$'000

31 Dec

2012

US$'000

Crude oil inventory

26,118

15,865

Materials inventory

13

13

26,131

15,878

US$'000

At 1 January 2012

22,689

Additions

38,188

Write offs/relinquishments

(4,261)

Disposals

(9,226)

At 31 December 2012

47,390

Additions

2,108

Write offs/relinquishments

(312)

At 31 March 2013

49,186

Development & Production

Oil and Gas Assets

US$'000

Other fixed

assets

US$'000

Total

US$'000

Cost

At 1 January 2012

623,549

2,292

625,841

Additions

139,383

133

139,516

Disposals

(37,912)

-

(37,912)

At 31 December 2012

725,020

2,425

727,445

Additions

103,070

31

103,101

At 31 March 2013

828,090

2,456

830,546

DD&A

At 1 January 2012

(53,988)

(1,497)

(55,485)

Charge for the period

(55,770)

(402)

(56,172)

At 31 December 2012

(109,758)

(1,899)

(111,657)

Charge for the quarter

(19,397)

(101)

(19,498)

At 31 March 2013

(129,155)

(2,000)

(131,155)

NBV at 1 January 2012

569,561

795

570,356

NBV at 1 January 2013

615,262

526

615,788

NBV at 31 March 2013

698,935

456

699,391

Fair value

US$'000

Oil and gas properties

70,533

Inventories

14,014

Trade receivables

142

Trade and other payables

(734)

Deferred tax liabilities

(41,153)

Provisions

(4,158)

Total identifiable net assets at fair value

38,644

Negative goodwill arising on acquisition

(914)

Total consideration

37,730

The cash outflow on acquisition is as follows:

Cash paid

(37,730)

Net consolidated cash flow

(37,730)

US$'000

Cost

At 1 January 2012, 31 December 2012 & 31 March 2013

985

31 March

2013

US$'000

31 Dec

2012

US$'000

Investments in FPF-1 and FPU services

18,337

18,337

31 March

2013

US$'000

31 Dec

2012

US$'000

Balance, beginning of period

52,834

39,3832

Additions

4,158

9,613

Accretion

502

1,777

Revision to estimates

-

2,062

Balance, end of period

57,494

52,834

31 March

2013

US$'000

31 Dec

2012

US$'000

Balance, beginning of period

3,018

2,785

Revaluation in the period

(57)

233

Balance, end of period

2,961

3,018

31 March

2013

US$'000

31 Dec

2012

US$'000

Balance, beginning of period

4,000

24,580

Revision to estimates

-

1,295

Release