Ithaca Energy announces fresh shareholder payout after £175m windfall tax hit
Ithaca Energy announced fresh dividend payments for shareholders, while confirming it expects oil and gas production in 2024 to be lower than this year due to the windfall tax.
To keep shareholders sweet, the North Sea oil and gas producer revealed a fresh second £104m ($133m) (£104m) dividend in its half-year results – taking year to date pay-outs to £208m ($266m).
It is now planning a total dividend of $400m for the full financial year of 2023.
This comes as the FTSE 250 firm also revealed it has taken a £17.48m ($223m) hit from the Energy Profits Levy over the first six months of business this year.
Ithaca expects further decisions to slash output and investment in projects will be made as it draws up its medium term strategy in the second half of this year.
Most recently, Ithaca opted against proceeding with further drilling at its Harriet field due to the UK’s unfavourable investment climate, suffering £257m ( $328.4m) blow from impairment charges in the process.
Expansion plans have also been cancelled in domestic operations such as the Greater Stella Area, Montrose Arbroath Area and Elgin Franklin Area.
The company has warned investors it would also need to pursue more merger opportunities to consolidate its position “until the fiscal is regime is improved.”
Ithaca said it was “clear that we, like the rest of the industry, will feel the impact of lower investment on our medium-term production outlook below previously guided levels.”
Executive chairman Gilad Myerson said: “The energy profits levy continues to have a direct impact on investment in the North Sea and Ithaca’s own investment programme across its diverse high-quality operated and non-operated asset base.
“We continue to constructively engage with the government to highlight the impact of the current fiscal regime to the industry’s outlook and to the government’s stated energy security and net zero ambitions.”
Warnings over the investment climate and the windfall tax were included in Ithaca’s half year results, published this morning.
It revealed pre-tax profits have risen year-on-year, despite the challenges, from £721.4m ($907.4m) to £778.2m ($979.7m) over the first six months of trading in 2023.
This has contributed to net income of £201.2m ($253.2m) – up from £185.5m ($233.4m) last year, with the company still benefitting from elevated commodity prices in trading.
The company has also slashed net debt amid prudent cost control, which has come down from £1.12bn ($1.41bn) to £555.1m ($698.7m).
Ithaca commits to Rosebank as decision looms
The government is currently consulting on the industry’s tax regime to create a “simpler, more predictable” environment, with the Treasury set to hold talks with banks later this week in a bid to lure investment – as reported by City PM
The Energy Profits Levy was first introduced last May by then-Chancellor Rishi Sunak to harness record profits from soaring oil and gas prices to fund support for households and businesses grappling with ultra-high energy bills.
The tax, first set at 25 per cent, was on top of the 40 per cent special corporation tax rate the industry pays.
This was then toughened ten percentage points by current Chancellor Jeremy Hunt last November and also extended to 2028 – which has caused banks to make the terms of lending more stringent, putting even more pressure on producers.
Despite the fiscal hurdles caused by the tax, Ithaca is still committed to supporting Rosebank, the largest undeveloped project in the North Sea which it has a 20 per cent stake in alongside majority owner Equinor.
Ithaca outlined it was still finalising development plans and financing as the project awaits approval from industry regulators.
The project could produce up to 500m barrels of oil and gas over its operational lifespan, and has become a source of controversy – facing resistance from climate groups and environmentalists calling for the project to be abandoned.
Ithaca also has a majority stake in Cambo, another controversial mooted development in the North Sea.
The company trades on the London Stock Exchange, and will open in this morning’s session at 163.8p per share.