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Ithaca Energy Q3-2014 Operations Update

October 11, 2014

 

Ithaca Energy Inc. provides an operations update following the end of the third quarter of the year (“Q3-2014”).  The Company will issue its Q3-2014 financial results on 13 November 2014.

Average pro-forma production in Q3-2014 was approximately 11,600 barrels of oil equivalent per day (“boepd”), 96% oil. Full year 2014 pro-forma production is anticipated to be around 12,500 boepd following the deferral of approximately 1,400 boepd of annualised production from the Causeway Area due to an equipment failure on the host platform and a delay in the provision of water injection Average of approximately 6,400 barrels of oil per day (“bopd”) hedged for two years from 1 July 2014 at an average price of $102 per barrel Operations on the Stella “B2” well have been successfully completed and the ENSCO 100 jack-up rig has commenced operations on the fifth Stella development well Field development plan approval received from the Department of Energy and Climate Change (“DECC”) for “Ythan”, part of the Don North East licence area, with production scheduled to commence in the second quarter of 2015

Production
Average pro-forma production in Q3-2014 was approximately 11,600 boepd, reflecting a full quarter’s production from the assets acquired from Sumitomo Corporation (SSUMF) (the “Summit Assets”).  As previously highlighted, production during the third quarter was reduced by planned summer maintenance shutdowns, most notably with respect to a six week shutdown of the Cook field.

It is anticipated that full year 2014 pro-forma production will now be around 12,500 boepd.  This is below the 13,500 boepd lower end of the Company’s 2014 pro-forma guidance range primarily due to production deferrals associated with the Causeway Area fields.  The Taqa operated host facility has suffered a platform oil export pump failure that has resulted in production from the Causeway Area being shut-in.  It is anticipated that this will take several weeks to repair and will therefore impact total production in the fourth quarter of the year.  This unplanned shutdown, along with a delay in the provision of water injection from the Taqa facilities, is estimated to result in the deferral of approximately 1,400 boepd of annual average production from the Causeway Area in 2014, resulting in the revised production guidance.

Greater Stella Area Development
Continued progress has been made during the quarter on execution of the Greater Stella Area development.  The fourth Stella development well was successfully completed, further de-risking the initial annualised production forecast for the field.  The ENSCO 100 drilling rig has now been moved to the main drill centre on the field and has commenced operations on the fifth Stella development well.  Work on this year’s subsea infrastructure installation campaign has been successfully completed and preparation is well advanced for finishing the remaining subsea activities in 2015.  Construction activities continue on the main deck of the “FPF-1” floating production facility, with completion of the works and the delivery of first hydrocarbons scheduled for mid-2015.

Ythan Field Development
Ithaca (40% working interest) and EnQuest (60%, Operator) have received approval from the DECC for the Ythan field development plan.  The Ythan field, which lies adjacent to the producing Don Southwest (“Don SW”) field in which both Ithaca and EnQuest have corresponding working interest levels, is located within the southern area of the Don North East licence that was awarded by the DECC in March 2014. 

A phased development of the field is planned, involving an initial production well being drilled from the Don SW field infrastructure.  The Stena Spey semi-submersible rig has been contracted to drill the well.  The rig is expected to commence operations in the fourth quarter of this year and enable first production from the field in the second quarter of 2015 for a forecast net capital expenditure of approximately $28 million.  The well is targeting the same Brent reservoir sequence as the Don SW field, in a location where an appraisal well has previously been drilled and tested.

Financials
Commodity Hedging For the two year period from 1 July 2014 the Company has approximately 6,400 bopd hedged at an average price of $102/bbl (approximately 70% swaps / 30% puts).  Additionally the Company has in place a gas price floor of £0.58/therm (~$10/MMbtu) for 190 million therms (~20 billion cubic feet) of production from the Stella field via put options.


Consolidated Q3-2014 Production
The acquisition of the Summit Assets was completed on 31 July 2014.  As such, two months of production from those assets will

be included in the Q3-2014 reported earnings.  Average consolidated production for Q3-2014 was approximately 10,800

boepd. 

Operating Costs
Operating costs incurred in Q3-2014 are anticipated to be around $60 million, reflecting inclusion of the Summit Assets from 31

July 2014.  Additionally, the Q3-2014 financial results will recognise the previously highlighted contingent liability associated

with the Sullom Voe Terminal 2013 reconciliation charge of approximately $12 million.  This is a non-recurring exceptional item.

 

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