North Sea oil and gas company, Ithaca Energy, experienced a significant drop in revenue and profit due to impairment charges, decreased production, and a slump in oil and gas prices. The FTSE 250 member, which announced plans in the Spring to acquire all of Eni’s North Sea assets for £754m, has reduced its full-year production forecast from between 80,000-87,000 barrels of oil equivalent (boepd) to a range of 76,000 to 81,000.
The company also reported considerably lower production figures for the first half of the year, with production falling to 54,046 boepd in the six months to June from over 75,000 in the same period last year. Net income dropped from $159.6m (£121.9m) to $105.7 (£89.7m).
Earnings before interest, tax, debt, amortisation and exploration (EBITDAX), a financial performance indicator used by oil and gas companies, plummeted from $979.7m (£748.4m) to $533m (£407.2m). The company was compelled to record an impairment charge of $19m (£14.5m) alongside the earnings, which were further impacted by the dramatic decrease in natural gas price, which has fallen over 60 per cent since 30 June 2023.
Net debt decreased to $506m (£386.4m) from $698.7m (£533.6m), while available liquidity increased to $1.1bn (£840m) from $791.3 (£604m).
The company’s profits continue to be affected by the government’s Energy Profits Levy, a windfall tax on North Sea oil and gas operations that was imposed on energy companies in the wake of substantial profit reports following Russia’s invasion of Ukraine, as reported by City AM.
Under its commitment to hasten the UK’s transition from fossil fuels, the incoming Labour administration has stated it will raise the levy to an effective rate of 78 percent and abolish the concessionary investment allowance that companies, such as Ithaca, had benefited from to stimulate further exploration and investment.
Ithaca Energy referred to the levy as a “substantial headwind” in its financial results announcement; these results coincided with the day Offshore Energies UK, representing the North Sea energy sector, dispatched an open letter cautioning about the negative consequences the proposed plans could pose for employment.
These semi-annual figures marked the first significant reporting since Ithaca took over Eni’s North Sea assets, which belonged to an Italian oil titan.
Regarding the acquisition, Ithaca remarked: “With a proven track record for value- accretive M&A, the Combination creates an enhanced platform for delivery of the Group’s inorganic growth strategy in the North Sea and internationally.”
“Ithaca Energy is well positioned to play a pivotal role in further North Sea consolidation… and with access to Eni’s global credentials and the expertise and relationships of its shareholders, supports the ability to broaden the Group’s M&A strategy internationally, establishing additional options for value creation.”
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Original artice – https://business-live.co.uk/all-about/yorkshire-humber
