Ithaca Energy Full Year Results Better Than Expected Rerating Starts Now BUY

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Ithaca Energy (LSE:IAE) full year results came out yesterday unlike everyone else i waited till the webcast and brokers notes to gain valuable information missed. As expected certain aspects i highlighted were proven correct another call by Chris Oil. A major rerating is now on the cards all the way to the Stella field commencing 2Q 2016.

Firstly 2P reserves have increased to 70.5m  pointed out by me in previous articles, an increase of 22% due to the impact of Summit Assets bought in 2014 which includes positive upgrades to come from Wytch Farm gaining benefit from  new N.Sea tax developments straight away. I note Ithaca post webcast has no tax liabilites till 2020.

The company is still cash flow positive making a profit of $148m in 2014 before one off impairment charges on known Athena, Beatrice and Anglia with no decommission costs on the horizon.

Production will increase in 2015 to 12,000bopd 95% oil and 12,500bopd has been generated in Q1 2015. Breakeven for 2015 up to mid 2016  is $10 a barrel all in costs unbelievable !

Combine with the new hedge programme extended to 8,300bopd at $91 per barrel with $60m cash gain lump sum out of $80m, together with 4,000bopd from july 2016-2017 at $69 a barrel. One has to think oil right now is trading at around $55 brent so well over 70% is now hedged above todays price.

Ekofish Stella well results were mentioned as positive with extended flow results due April. Rememeber this is a production well so will not have the highest flow rate in the deeper zone. However the company mentioned positive comments  60ft thick net reservoir which should add to the reserves and production figures for the Stella development.

Onto Stella production platform which caused the share price drop. Additional information is positive that the schedule is on time with a new incentivised mechanical completion from Petrofac, adding confidence to the timeline for completion 1Q 2016 with Stella online completion 2Q adding 16,000bopd net to Ithaca more than a 50% production increase. 75% of construction work has already finished.

Looking at the rigs booked there is some exploration activity in 2015 both in Norway fully benefiting from tax arrangements on drill costs 78% refunds. These drills are Snomus Well Q2 and Myrhauk well Q3 2015 close to existing field discoveries and infastucture.

Ithaca has strong support from its banking syndicate mentioning extension of reseve based lending facility to 3Q 2018. Any doughts about finance has been blown out of the water with these results regarding its debt. Combined with expenditure 2015 $150m hoping for less mentioned in webcast and $50m in 2016 shows a vast profit margin to be gained. Debt also has room to move up to $1.010m so no city issues here.

Cenkos mention “Slippage of GSA has caused market overreaction does not adequatley recognise Ithacas value and strong position in relation to its peers. Ithaca has very little decommissioning exposure and not dependent on growth from exploration. Well placed to repay debt with significant headroom allowing further acqusition opportunities as peers move into distressed situations”

I agree with this summary short term  its all about the Stella well and Ythan production with Wytch Farm upgrades while adding  potential production assets from distressed companies in the N.Sea all happening in 2015.  Not to forget the two costed exploration  wells. With Stella field coming online 1H 2016, a return to £1.95 charts is on the cards given a conservative oil price return in 2016.

Lastly do not forget (LSE:IAE) Ithaca Energy being taken over in 2015 if value is not reflected soon at a significant premium just as in the case of Nautical Petroleum being bought by (LSE:CNE) Cairn Energy.

If your interested get signed up to advfn giving you access to excllent data and level 2 by registering below and North Sea Companies like Ithaca Energy.

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

More calls can be read on the Chris Oil Blog. Including a link to ADVFN Justin Waite Podcast Show on Thursday 2nd April 2015 on Ithaca Energy so stay tuned.

http://chrisoil.blogspot.co.uk

 

 

 

 

 

 

 

 

 

 

 

 

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