Mr. John Summers reports
FIRST QUARTER 2013 FINANCIAL RESULTS AND IMPACT OF VALIANT ACQUISITION
Ithaca Energy Inc. has released its quarterly results for the three months
ended March 31, 2013. In light of the Valiant transaction
closing on April 19, 2013, also included are the unaudited financial
highlights for the same period, for illustrative purposes only, showing
the contribution from Valiant Petroleum PLC for the period,
together with an update on integration activities.
Ithaca first-quarter 2013 highlights
- Cash flow from operations increased over 20 per cent to $34.8-million (first quarter
2012: $28.4-million) -- cash flow per share 13 cents (first quarter 2012: 11 cents);
- $14.6-million of earnings excluding unrealized losses on
financial instruments of $11.1-million (first quarter 2012: $12.1-million);
- Average realized oil price of $114.32 per barrel (first quarter 2012: $116.42 per barrel) including a realized hedging gain of $8 per barrel;
- Strong clean balance sheet with cash net of drawn debt of $10.6-million at end of the first quarter 2013;
- U.K. tax allowance pool of $424-million at end of first quarter 2013;
- Approximately 2.6 million barrels of future 2013-2014 oil
production hedged at a weighted average price of around $106 per barrel
(approximately 25 per cent puts/75 per cent swaps).
Production and operations:
- Total average net export production in the first quarter of 2013 increased 51 per cent to
approximately 6,475 barrels of oil equivalent per day (first quarter 2012: 4,299 barrels of oil equivalent per day), including production from the Cook field
interest acquired from Noble Energy Capital Ltd. (transaction
effective Jan. 1, 2012, and completed on Feb. 5, 2013);
- Production during the quarter was in the upper range of that
anticipated by the 2013 annual guidance range of 6,000 to 6,700 barrels of oil equivalent per day.
The Ithaca-operated Athena field had another strong quarter, with the
field continuing to produce "dry" oil at a stable gross daily
production potential of between 10,000 and 11,000 barrels of oil per day, 2,250 to 2,475
barrels of oil per day net to Ithaca.
Greater Stella area development:
- The FPF-1 has been moved on to the dry dock barge at the
Remontowa shipyard in Gdansk, Poland.
- The Ensco 100 heavy duty jack-up drilling rig has now completed
operations on the wells being drilled prior to commencement of the
Greater Stella area development drilling program -- rig
scheduled to be on location at Stella field in the second quarter of 2013.
- Delivery to the Remontowa yard of the long-lead topsides
processing plant equipment and pipework that is to be installed on the
FPF-1 has commenced.
- Fabrication of the subsea structures that are to be installed by
Technip in 2013 has been completed on schedule at Global Energy Group's
facilities in northeastern Scotland. Installation and testing of
the pipework spools, valves and control systems being fitted within the
structures is nearing completion.
- Welding is under way at Technip's Evanton spool base in northeastern Scotland of the 10-inch steel export infrastructure linepipe that is to
be installed in 2013.
Ithaca and Valiant first-quarter 2013 combination highlights
The financial consolidation of Valiant is only applicable from the second quarter of 2013,
as the acquisition completed on April 19, 2013. However, the following
unaudited first-quarter 2013 consolidated financial summary has been prepared, for
illustrative purposes only, to provide a high-level overview of the
potential cash flow performance of the enlarged company.
This information is provided to assist shareholders with quantifying
the impact of the Valiant acquisition on the company. It does not
represent a guide to future financial performance. The Valiant data
used above have been extracted from the management accounts of Valiant
for the first quarter of 2013. The Valiant accounting policies are broadly similar to
those used by Ithaca.
The first-quarter 2013 combined Ithaca and Valiant highlights are:
- Total net average export production of around 14,850 barrels of oil equivalent per day,
approximately 95 per cent oil;
- Production in line with the company's full-year 2013 guidance
range of 14,000 to 16,000 barrels of oil equivalent per day, with volumes in the second half of
2013 scheduled to benefit from infill drilling activities on the Don
- Cash flow from operations of around $100-million during the first quarter of 2013;
- A substantial reduction in unit operating costs to around $28 per barrel of oil equivalent,
driven by the addition of a higher proportion of low-cost barrels;
- Over 30-per-cent increase in the netback per barrel, to around $80 per barrel of oil equivalent,
attributable to the predominantly oil production base and lower
operating cost per barrel;
- A combined U.K. tax allowances pool of over $900-million at the
end of the first quarter of 2013.
Progress on Valiant acquisition integration
The integration of Valiant's activities into Ithaca's existing
operations is progressing well. The company has made major steps since
completion of the acquisition to realize the substantial cost synergies
that are achievable through removal of operational and administrative
overlaps. The company has formally announced the closure of Valiant's
U.K. office, with all activities being transferred to Ithaca's existing
operations in Aberdeen, U.K. It is anticipated that over three quarters
of the U.K. integration activities and removal of associated overheads
will have been completed within approximately six to eight weeks of
completion of the acquisition, with closure of Valiant's U.K. office
anticipated in July, 2013.
The company has made significant progress toward its objective of
substantially reducing the future U.K. exploration expenditure
commitments that were transferred to Ithaca as part of the Valiant
acquisition. In overall portfolio terms the company has reduced net
exploration expenditure commitments via farm-outs by over $45-million.
The Valiant acquisition has established Ithaca as a leading mid-cap
North Sea oil and gas operator. The transaction has significantly
enhanced the company's existing production base and producing asset
reserves, establishing a highly cash generative business, with tax
allowances sheltering the company from the payment of U.K. tax over the
medium term, and provided operational entry into Norway. The company
has total proven and probable reserves of around 70 million barrels of oil equivalent and a strong
balance sheet containing only low-risk/low-cost senior debt.
In the announcement made by the company on March 1, 2013, in connection
with the Valiant acquisition, Ithaca confirmed that, upon completion of
the acquisition, two existing directors of Valiant, Jannik Lindbaek
and Michael Bonte-Friedheim, were to be appointed to the board of
Ithaca as non-executive directors.
Mr. Bonte-Friedheim has since informed Ithaca that, due to other
business commitments, he will be unable to dedicate sufficient time to
the proposed role and, accordingly, will be unable to join the board of
Ithaca as previously announced. The company wishes Mr. Bonte-Friedheim
every success in the future and thanks him for his invaluable assistance
in the postacquisition integration process.
The company is pleased to confirm that Mr. Lindbaek will be
appointed to the board as a non-executive director in May, 2013.
Mr. Lindbaek was previously chairman of the Norwegian international oil
and gas company, Statoil ASA, prior to its merger with Norsk Hydro in
2007. A further announcement will be made regarding Mr. Lindbaek's
appointment in due course.
CONSOLIDATED STATEMENT OF INCOME
(in thousands of U.S. dollars, except per share amounts)
For the three months ended March 31,
Revenue $ 59,769 $ 40,553
Cost of sales (46,458) (26,006)
Gross profit 13,311 14,547
Exploration and evaluation expenses (312) (75)
Administrative expenses (2,771) (1,206)
Operating profit 10,228 13,266
Foreign exchange 563 1,648
(Loss) on financial instruments (7,172) (728)
Negative goodwill 914 -
Profit on ordinary activities before interest and
tax 4,533 14,186
Finance costs (2,276) (469)
Interest income 20 65
Profit before tax 2,277 13,782
Taxation -- deferred tax 1,195 (866)
Profit after tax $ 3,472 $ 12,916
Earnings per share
Basic $ 0.01 $ 0.05
Diluted 0.01 0.05
We seek Safe Harbor.
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