Ithaca Energy reports solid first-quarter production growth

The FTSE 250 company put the growth down to higher production levels, despite lower average oil and gas prices.

Its adjusted net income for the three months ended 31 March totalled $158.4m, remaining relatively flat compared to $161.3m in the first quarter of last year.

Net cash flow from operating activities also showed significant improvement, increasing 24% to $351.4m.

Realised oil and gas prices stood at $83 per barrel and 137p per therm, respectively, before hedging, which were lower than the prices recorded a year ago, which were $100 per barrel for oil and 227p per therm for gas.

Ithaca Energy did, however, report strong cost control, managing to keep unit operating costs at $137m, or $20.30 per barrel of oil equivalent - within the lower end of its guidance range of $130m to $150m for the quarter.

Additionally, the firm’s producing asset capital expenditure totalled $90m, at the lower end of the $90m to $110m guidance range for the period.

“I am pleased to report a strong first quarter performance, with adjusted EBITDAX of $518.1m,” aid chief executive officer Alan Bruce.

“We remain focused on delivering safe and environmentally responsible operations as we execute our value-adding near-term developments such as Captain EORII, K2 and infill drilling at Alba.”

Despite significant merger and acquisition activity in the last 12 months, Ithaca said it had maintained a robust balance sheet, with further deleveraging in the first quarter.

As at 31 March, its net debt totalled $899.6m, narrowing from $971.2m at the end of December and $703.1m a year ago.

The group’s leverage position improved to 0.46x net debt-to-adjusted EBITDAX, compared to 0.55x in March last year.

Looking ahead, Ithaca reaffirmed its guidance for the full year, with production set to come in at between 68,000 and 74,000 barrels of oil equivalent per day.

The company also reaffirmed its operating cost guidance of $560m to $630m, and its producing asset capital cost guidance of $400m to $460m for the full 12 months.

In terms of future activities, Ithaca Energy highlighted the ongoing Captain EOR Phase II project, which was expected to contribute to near-term production growth and increased reserve recovery.

The company said it expected the first Phase II polymer production to start in 2024, with peak production projected for 2025, following the successful implementation of EOR Phase I.

It also initiated front-end engineering design (FEED) activity in April to explore the potential for electrification of the Captain field.

Furthermore, exploration and appraisal activities at K2 and Leverett in the second and third quarters of 2023 were expected to provide near-term upside potential for Ithaca.

“We delivered another strong quarter and met our commitments to deliver high operational performance in a responsible manner, deleverage our balance sheet, and distribute dividends to our shareholders,” added executive chairman Gilad Myerson.

“We are working constructively with the UK government to further develop our key development projects and continue to keep a watchful eye on consolidation opportunities with a focus on maximising shareholder returns.”

Reporting by Josh White for Sharecast.com.