By Kristy Dorsey
Aberdeen’s Ithaca Energy has announced plans to step up its offshore activity despite a surge in pre-tax losses during the six months to the end of June.
The company has said it will re-start some of its investment programmes that were put on hold earlier this year in a move to protect its balance sheet amid the plunge in oil prices triggered by the coronavirus pandemic. This will result in a “modest” increase in its capital expenditure for 2020.
The news came just three days after Ithaca announced the appointment of a new chief executive, and coincided with the release of its first half results. These show a widening of pre-tax losses to $1.13 billion (£858 million) from $1.2m in the same period a year earlier.
READ MORE: North Sea veteran Dunnett brought in to lead Aberdeen-based Ithaca Energy
The pre-tax loss was wholly attributable to an £895m impairment charge after being forced to lower its assumptions on oil prices going forward. Revenues for the first half increased to £472m against £155m a year earlier from average production of 73,000 barrels of oil equivalent (boe) per day.
Ithaca, which was bought by Israel’s Delek Group in 2017, said earlier this year that it would halve its capital expenditure for 2020 to approximately $125m. This meant stopping or delaying several North Sea projects such as preparations for drilling on the Captain field, an infill drilling campaign at Alba and its Hurricane tieback in the Greater Stella area.
Some of this work is now set to resume, which will push the upper limit for 2020 capex spending to $135m.
READ MORE: North Sea oil firm slashes valuation of assets
Ithaca became one of the North Sea’s biggest players following the acquisition of Chevron’s portfolio of assets across the basin. That deal, which included stakes in Captain and Alba, was first announced in May of last year.
Following his appointment on Monday, new chief executive Bill Dunett said he intends to build a “battle plan” for the business. Mr Dunnett has joined Ithaca following a five-year spell as head of Repsol-Sinopec Resources UK.
Despite the impact of lower oil prices, Ithaca managed to reduce its net debt to $1.3bn by the end of June, down from $1.55bn at the close of 2019. Full-year production is expected to be towards the top of the 63,000 to 68,000 boe per day guidance previously given.
READ MORE: North Sea oil and gas firm to make big payouts to Israeli owner
The accounts confirm the payment of a $20m dividend to Delek, which purchased Ithaca in a $1bn deal as part of plans to become a significant international player.
The company has benefitted from hedging agreements that are allowing it to sell more than 20 million barrels of oil at an average price of $62 each, compared to the current price of $45-$46 at which Brent crude is trading. It said yesterday that it has hedged a further 23 million barrels for sale into 2022 at an average floor price of $51.
Unit operating costs have fallen to $15 per barrel from $17 previously.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here