Ithaca Energy Budget Soon BUY

PUBLISHED: Mar 14 2015 @ 10:56 | Comments (0) | More info about Chrisoil

It amazes me the value you can now buy Ithaca Energy (LSE:IAE) . So whats behind the fall and when will it rebound ?

Firstly whats being played out is nothing to do with private investors but two city funds nearly cleared as i write for there own daft internal reasons after 18 trading days. It seems madness to me why they did not clear into a rise on Budget day rather than sink the shares to these levels. However this bargain basement level will not last even with the oil price on the floor.

The budget is on Wednesday 18th and we are expecting a raft of good news filtering through this weekend from allowances as one paper says to decommissioning and N.Sea tax rates themselves. At present its speculation we await good news on Wednesday.

Post Afren, GKP, Iona needing refinancing now during the low point in the cycle. I have been going through Ithaca debt with a fine detail. The $610m Reserve Base Lending is due mid 2017 unlike bonds this is easier to refinance on low breakeven of $20 a barrel or $52 unhedged regarding 12,000 bopd. Even Moody note highlighted by me still believes the company has enough money. One other point when you think (LSE:ENQ) Enquest needs $80 all in costs unlike Ithaca lets say $36 all in costs average for 2015. The company also has the highest hedge at $102 of any listed oil company on the markets today till mid 2016.

The corporate bond valued at $300m are not due till 2019 so no heavy dilution here at Ithaca Energy i can assure you. The corporate $100m unused loan may or may not go, in my view it will stay based on budget news before April review and i would point out Ithaca has access option of $70m unused from Shell Trading pre payment of oil at good low rates not mentioned.

So what does a non house broker Finncap March 2nd say about the debt situation ? “The capex on Stella is now largely spent and peak debt ($850m) will be reached in Q2. Existing production is cash flow positive and sufficient to meet the scheduled repayments. The hedge at $102 covering $6,300 bopd production is a crucial factor in these calculations”. Despite delay our investment case is unchanged. Stella will add $16,000 net new high margin production from Q2 2016.” The net impact to Ithaca is just $10m for the delay.

I would note Ithaca has head room up to $1 billion in debt.

So Chris Oil can wait whatever the price goes to because i know when oils back at $70 or even stays around $60 in 2016 June with Stella online this companies worth based on Ithaca charts of the past £1.95 let alone £1.80.

My only real concern is the likes of (LSE:PMO) Premier Oil will put in a bid at a 50% to 75% premium at the present time due to silly share prices caused by two naughty city funds.

Fundermentally positive reserve upgrades will come through based on the M&A Sumitomo Corporation in 2014 not updated yet, even taking into account 2p risked athena mess ups. I would highlight $100m of costs Chris Oil estimates will be saved from not having Stella online this year, not highlighted ontop of the 60% expenditure cost cut for 2015 mentioned in January RNS.

Lastly operationally positive Ekofish results will also have a baring on reserves improvement due this month before March 31st results. The figures of all in costs are based on old 2015 expenditure if as i expect the costs savings forecast comes through March 31st that $36 all in cost COMES DOWN FOR 2015.

Buy as much as you can two trading days till Budget. With the oil price cycle forcast to move up in H2 2015 time to go bottom fishing. Interesting Paul Mumford Cavendish Asset Management been buying Ithaca recently. If readers do not know he made a fortune in 1988 by calling the bottom on small oil companies.

Will be on Justin Waite Show again this Thursday March 19th post Budget giving info on N.Sea results and Ithaca Energy as so many shareholders want answers.

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Until the next time more ramblings from the castle can be seen @ chrisoil

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