The North Sea oil and gas group Ithaca Energy suffered a decline in sales and profits following impairments, lower production and a decline in oil and gas prices.
The FTSE 250-listed group announced plans in the spring to buy all of Italian competitor Eni’s North Sea assets for £754 million and lowered its production forecast for the full year from 80,000 to 87,000 barrels of oil equivalent (boepd) to a range of 76,000 to 81,000.
The company also reported significantly lower production figures in the first half of the year. In the six months to June, production fell from over 75,000 barrels of oil per day to 54,046 barrels of oil per day.
Net profit fell from $159.6 million (£121.9 million) to $105.7 million (£89.7 million). Earnings before interest, taxes, debt, amortisation and exploration (EBITDAX) – an indicator of the financial performance of oil and gas companies – fell from $979.7 million (£748.4 million) to $533 million (£407.2 million).
The company was forced to take a $19 million (£14.5 million) impairment charge against earnings. Earnings were also impacted by the sharp decline in the price of natural gas, which has fallen by over 60 percent since June 30, 2023.
Net debt fell from $698.7 million (£533.6 million) to $506 million (£386.4 million), while available liquidity increased from $791.3 million (£604 million) to $1.1 billion (£840 million).
The company’s earnings continued to be weighed down by the impact of the government’s Energy Profits Levy – a special tax on oil and gas production in the North Sea that energy companies levy in response to the record profits many of them recorded following the Russian invasion of Ukraine.
As part of its plans to accelerate Britain’s move away from fossil fuels, the new Labour government has announced it will raise the tax to an effective rate of 78 percent and remove the investment allowances given to companies like Ithaca to encourage further exploration and investment.
In its earnings announcement, released on the same day that North Sea energy industry body Offshore Energies UK published an open letter from energy companies warning of the negative impact of the plans on jobs, Ithaca Energy described the tax as a “significant headwind”.
The half-year results were the first significant results since Ithaca acquired the North Sea assets of Italian oil giant Eni.
Commenting on the acquisition, Ithaca said: “With a proven track record of value-enhancing mergers and acquisitions, the combination creates an enhanced platform for the implementation of the Group’s inorganic growth strategy in the North Sea and internationally.”
“Ithaca Energy is well positioned to play a central role in further consolidation in the North Sea… and with access to Eni’s global credentials and the expertise and relationships of its shareholders, it supports the ability to expand the group’s M&A strategy internationally and create additional options for value creation.”
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Published: 22-08-2024
