Ithaca Energy, a prominent North Sea energy firm, has reported a significant drop in its interim profit due to reduced production and declining gas prices. The company’s production decreased by nearly 30%, and gas prices also fell. Despite these challenges, Ithaca remains optimistic about its future, especially with its impending acquisition of most of Eni’s UK assets, valued at over £750 million.
Based in Aberdeen, Ithaca is one of the largest independent producers in the North Sea. Its revenue fell from over £1.2 billion in the first half of 2023 to £841.9 million in the same period this year. Production dropped from 75,755 barrels of oil equivalent per day to 53,046 barrels per day, partly due to operational issues at non-operated assets and planned shutdowns at sites under Ithaca’s control. The realized gas price also decreased from £125 per barrel in 2023 to £92 in the first six months of 2024.
As a result, adjusted profits plummeted by 45%, from £979.7 million to £533 million, while pre-tax profits dropped from £248.7 million to £189.4 million. However, Ithaca believes that the Eni deal will position the company to become the North Sea’s largest producer by 2030, targeting more than 100,000 barrels per day. The merger is also expected to aid Ithaca’s international expansion.
The company announced that the Eni acquisition will enable it to pay dividends of £500 million for 2024 and 2025, an increase from the previously guided £400 million. Yaniv Friedman, Ithaca’s executive chairman, confirmed that the company is exploring growth opportunities beyond the North Sea. Interim CEO Iain Lewis noted ongoing discussions with the government regarding the UK oil and gas fiscal regime. The extension of the energy profit levy by 12 months to March 2030, along with a three-percentage-point increase in the top rate, could lead to an effective 78% tax rate on UK profits.
Ithaca booked a charge of £72.8 million for the levy in the first half of 2024, a significant increase from £223 million in 2023. Lewis emphasized that Ithaca has several projects lined up for final investment decisions by the end of this year or early 2025, but capital deployment depends on an appropriate fiscal regime. He also highlighted the ongoing need for hydrocarbons in the UK over the next 25 to 40 years, regardless of the path taken toward net zero.
Ithaca’s shares saw a decline of 2.6%, falling by 3¼p to 127¾p by Thursday lunchtime.
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