Ithaca Energy Logs Robust Performance

Ithaca Energy Inc. announces its quarterly financial results for the three months ended 30 September 2015 (“Q3-2015” or the “Quarter”) and for the nine months ended 30 September 2015.

Financial Highlights:

Solid cashflow generation in the first nine months of the year

  * Average production of 12,355 barrels of oil equivalent per day (“boepd”), in line with guidance (YTD-2014: 10,640 boepd)
  * $217 million cashflow from on-going operations1 ($57 million in Q3-2015), including oil price hedging gains (YTD-2014: $128 million)
  * Adjusted earnings of $98 million, excluding a non-cash accounting tax charge of $41 million resulting from a reduction in UK tax rates (YTD-2014: $25 million)
  * Cashflow per share $0.66 (YTD-2014: $0.39) and adjusted earnings per share $0.30 (YTD-2014: $0.08)

Business resilient to lower oil price environment

 * Full year 2015 production guidance remains unchanged at 12,000 boepd (95% oil)
  * Significant commodity price hedging in place – average of 5,900 barrels of oil per day (“bopd”) at $64/bbl until June 2017 and approximately 5,000 boepd of gas at 63 pence per therm (~$9.70/MMbtu) until June 2017
  * YTD-2015 unit operating expenditure of approximately $33/boe, a reduction of over 40% compared to 2014, and forecast to fall further to around $25/boe following Stella start-up
  * Forecast 2015 capital expenditure reduced to $120 million – reflecting $30 million of savings associated with lower Greater Stella Area (“GSA”) subsea infrastructure installation costs and removal of Norwegian expenditure
  * Solid cash netbacks – underpinned by tax allowances pool of over $1.5 billion at 30 September 2015

Deleveraging process commenced

  * Net debt reduced from peak of over $800 million in the first half of 2015 to under $690 million at 31 October 2015 – position expected to be broadly unchanged at year-end 2015
  * Deleveraging reflects the benefit of strong operating cashflow generation, lower capital expenditures, the cash received from the sale of the non-core Norwegian business and the recent $66 million premium equity placing
  * Semi-annual redetermination of reserves based lending facilities successfully completed – maintaining over $125 million of funding headroom ahead of Stella start-up

Les Thomas, Chief Executive Officer, stated, “We are very pleased to report a strong set of results thanks to consistent production levels, strong hedging gains and rigorous cost control, all of which has contributed to commencing deleveraging of the business ahead of the step-change that comes with Stella start-up. In parallel, solid progress continues to be made on the Stella development, with commissioning operations advancing on the critical path FPF-1 modifications programme.”

Production & Operations

Average production in the nine months to 30 September 2015 was 12,355 boepd (94% oil), a 16% increase on the same period in 2014.

The Company’s producing assets have been performing well over the course of the year, with solid operational uptime achieved across the main fields. The planned shutdown maintenance activities scheduled for Q3-2015 were efficiently executed, resulting in slightly higher than anticipated production during the Quarter.

Full year 2015 production guidance remains unchanged at 12,000 boepd (95% oil).

As part of the Company’s previously announced activities to high grade the producing portfolio and remove high cost, marginal assets, the planned cessation of production from the Anglia gas field occurred during the Quarter. Production operations continue on the Athena oil field, where a number of initiatives have had a significant impact on reducing the breakeven oil price, although it is still anticipated that production from the field is likely to cease prior to the end of this year. The net daily production capacity of the two fields is approximately 1,000 boepd.

Greater Stella Area Development Update

The primary focus of the on-going GSA development activities remains on completion of the FPF-1 modifications programme that is being undertaken by Petrofac (POFCF), in the Remotowa shipyard in Poland. Sail-away of the FPF-1 from Poland is planned for the end of the first quarter of 2016, with first production from the Stella field anticipated at the end of the second quarter.

At this stage in the modifications programme the critical path to achieving sail-away of the FPF-1 is the completion of commissioning operations, which commenced during the Quarter. Full completion of these operations while the vessel is located in the yard is key to avoiding an extended period of more complicated offshore commissioning activities and delay to the start-up of production.

Continued progress is being made on close out of pre-commissioning activities on the vessel, enabling the various topsides processing, utilities and accommodation sub-systems to be fed into the main commissioning programme. Commissioning of the electrical switchboards that distribute power around the vessel is nearing completion and electrical loop testing on the process control and safety systems is progressing well. Internal vessel inspection activities are advancing, along with commissioning of the various utilities systems. Preparation is also underway for the start-up and commissioning of the power generators in the coming weeks, which represents a key milestone in the on-going work programme.

Following the completion of various offshore campaigns during the Quarter, all the subsea infrastructure that is required to be installed prior to the arrival of the FPF-1 on location is now in place. This represents completion of a further key development milestone, building upon the successful conclusion of the five well Stella development drilling campaign in April 2015.

Net Debt

As anticipated the Company commenced deleveraging the business in the second half of 2015, reflecting the benefit of strong operating cashflow generation, lower capital expenditures and the cash received from sale of the non-core Norwegian business. Net debt was reduced from a peak of over $800 million in the first half of 2015 to $751 million at the end of Q3-2015, further reducing to under $690 million at 31 October 2015 following the recently completed equity investment in the Company. It is anticipated that net debt at the end of this year will remain broadly unchanged from the current level.