Ithaca Energy to buy Eni’s UK assets, but mothballs projects due to windfall tax

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Ithaca Energy, a leading UK independent exploration and production company, has announced plans to combine with substantially all of Eni S.p.A.’s UK upstream assets, including the recently acquired Neptune Energy assets as well as certain carbon capture and storage assets and Irish Sea assets.

The company made the announcement today alongside its results for 2023. Eni is selling the business assets in exchange for shares in Ithaca. After the deal is completed, Eni is anticipated to hold between 38 per cent and 39 per cent of the enlarged issued share capital of Ithaca.

When completed, the deal will see Ithaca Energy become the second-largest operator in the UK Continental Shelf area (the UK’s North Sea production area and other waters over which the country has mineral rights.)

The deal will also take Ithaca’s production to over 100,000 barrels of oil equivalent per day (boe/d). When completed, the producer will have a stake in six of the 10 largest oil-producing fields on the Shelf.

For 2023, Ithaca’s production hit 70.2 kboe/d, in line with guidance of 68 to 74 kboe/d. The group reported adjusted earnings before interest, tax, depreciation, amortisation and capital spending (EBITDAX) of $1.7bn (£1.35bn) and net cash flow from operations of $1.3bn (£1.3bn).

The company has declared a third interim dividend of $134m (£106m) or $0.132 (10p) per share to be paid to shareholders in April, taking the total paid out for the year to $400m (£318m).

For 2024, Ithaca said production would range between 56-61 kboe/d (excluding contributions from the combination). It said production would drop due to issues at some operated and non-operated fields.

Executive chairman, Gilad Myerson, said: “I am delighted to share the news that we have entered into an Exclusivity Agreement with Eni S.p.A to explore a transformational combination with Eni UK’s upstream assets.”

We believe this potential combination would be a strong strategic fit with Eni UK’s cash generative portfolio complementing Ithaca Energy’s high-quality, long-life asset base with significant development opportunity.”

Interim chief executive officer and chief financial officer, Iain Lewis, commented: “We have made material progress in 2023, executing against our BUY, BUILD and BOOST strategy including the milestone sanctioning of Phase I of the Rosebank development and the significant progress towards delivering our Captain EOR Phase II project.

Lewis added: “The Energy Profits Levy continues to have a direct impact on investment in the UK North Sea, with projects across our operated and non-operated deferred or cancelled. The extension of the Energy Profits Levy by a further year to a sunset date of March 2029, highlights the continued fiscal uncertainty our sector faces.”