UK-focused oil and gas firm Ithaca Energy has seen its shares surge around 10% as investors signalled approval for a growth plan that is expected to support generous payouts to shareholders
The rise came after Ithaca told the stock market it would pay a special dividend of $200 million (£160m) with other distributions in the pipeline.
Executive chairman Yaniv Friedman said Ithaca directors were confident that the company would be able to pay out $500m in total in the current year without straining its finances.
He said Ithaca had put itself on track to grow earnings and generate lots of cash from its portfolio of North Sea assets, which it has expanded since the windfall tax was introduced in 2022.
Ithaca is majority-owned by Israel's Delek group.
The company increased the scale of its North Sea portfolio significantly this year after clinching a deal to acquire the bulk of the UK exploration and production assets owned by Italy’s Eni for around £750m.
It agreed the deal concerned in April despite fears that North Sea firms could face further tax increases.
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These were realised last month when new Labour Chancellor Rachel Reeves confirmed plans for a windfall tax hike in the Budget.
Ithaca bosses appear confident that the company will still be able to achieve good returns on investment in the North Sea even if its tax bills rise.
Mr Friedman said: “The completion of Ithaca Energy’s transformational Business Combination with Eni UK, creates a dynamic growth player with significant organic and inorganic growth optionality.”
He added: “Our increased scale of operations and enhanced cash flows support the Group’s continued growth aspirations and material distributions to shareholders.”
Yesterday’s share price rise may signal that investors believe the Eni deal will boost Ithaca’s prospects.
The company has struggled to win the confidence of investors since it floated on the London Stock Exchange in 2022.
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Israel’s Delek Group retained a 50.4% stake in Ithaca following completion of the Eni deal.
Ithaca is facing big challenges with its controversial plan to develop the giant Cambo oil find West of Shetland. Shell pulled out of the project in 2021 citing the potential for delays and concerns about the economics of the plan.
However, Ithaca has made progress in its efforts to develop the Rosebank field off Shetland with Norway’s Equinor.
The two firms gave the go ahead for the project in September last year.
Campaigners are bitterly opposed and have launched a legal bid to get the approval of the field by the Conservative Government deemed unlawful.
Equinor remains confident that the field will enter production in 2026 or 2027.
An Ithaca spokesman told analysts: “We believe that Rosebank is a project that will continue. We are on time and on budget”.
Ithaca could use acquisitions in the UK and overseas to support growth.
It secured $2.25bn bank funding in October in a refinancing that represented a vote of confidence on the part of lenders.
In the nine months to September 30, Ithaca made $182m profit after tax, compared with $332m in the same period last time.
The price the company got for gas dropped to 73p per therm in the first nine months from 99p. It got $84 per barrel of oil, down from $86/bbl.
Average daily production fell to 52,501 barrels of oil equivalent per day, from 71,048 boepd, following operational issues on assets operated by others. Ithaca said the issues had been substantially resolved.
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Analysts at joint house broker Peel Hunt said: “Following the successful completion of the Eni UK business combination, Ithaca is now a substantially larger and financially stronger business with significant financing capacity to fund future growth.”
Shares in Ithaca Energy closed up 9%, 9.2p, at 109p.
Ms Reeves increased the rate of the windfall tax to 38% from 35%, taking the headline rate to 78%.
Former Conservative Chancellor Jeremy Hunt increased the windfall tax rate to 35% from 25% in November 2022.
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