Ithaca Energy has taken a $500 million impairment against its Greater Stella Area (GSA) “as a direct result” of the UK government’s windfall tax.
In its full year financial results for 2023 released today, Ithaca said its profit for the year of $215.6m was impacted by a $557.9m pre-tax impairment charge (post-tax $154m) mostly related to its GSA and Alba developments.
Ithaca said the impairment charge for GSA follows the decision not proceed with further infill drilling at the Harrier field, as “a direct result of the Energy Profits Levy (EPL) and falling gas prices”.
In relation to Alba, the impairment came from a reduction in estimated future production.
Following a revision to the EPL in November 2022, Ithaca said it incurred charges of $333.4m in the year with the charge payable in October 2024.
The financial results came as Ithaca Energy also announced a deal for a potential merger covering Italian oil and gas operator Eni’s upstream UK assets.
Meanwhile, the company also announced the North Sea Transition Authority has granted an extension to its licence covering the Cambo oil field.
Ithaca blames windfall tax on drop in 2024 production
Looking ahead to the next 12 months, Ithaca said it expects full year 2024 production in the range of 56-61 thousand boe/d.
Ithaca said the drop in production reflects a reduction in investment in near-term projects as a “direct result” of the UK government’s windfall tax on North Sea oil and gas firms.
This reduction in investment includes deferred or cancelled projects at the Greater Stella Area, Montrose Arbroath Area, Elgin Franklin Area and Alba.
Ithaca also expects a “longer path” to peak production from its Captain EOR, which is now anticipated in 2025. Ithaca also highlighted operational issues at its non-operated Pierce and Schiehallion fields, and compressor issues at Erkine’s host facility Lomond, which is impacting production in Q1 2024.
Beyond 2024, Ithaca said it expects production growth through the medium-term with a return towards 80,000 boe/d by 2024 largely due to the Captain EOR and first production from Rosebank.
Ithaca Energy 2023 financial results
Ithaca Energy interim chief executive officer Iain Lewis said the company delivered a “strong set of financial results” in 2023, despite “significant fiscal and political headwinds”.
“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,” he said.
© Supplied by Petrofac“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.”
Ithaca recorded net cash flow from operating activities of approximately $1.3bn in 2023, compared to $1.7bn in 2022.
The company’s group adjusted earnings before interest, taxes, depreciation, amortisation and exploration expense (EBITDAX) figure was just over $1.72bn, a drop from the more than $1.92bn recorded in 2022.
Ithaca’s total production also fell slightly, from 71,403 boe/d in 2022 to 70,239 boe/d last year. The company also recorded a rise in the greenhouse gas intensity of its production, increasing from 23.8 kilograms of CO2 emissions per barrel of oil equivalent to 25kg.
Cambo, Fotla and Captain
Elsewhere in its results, Ithaca laid out its achievements against its ‘Buy, Build, Boost’ strategy over the past 12 months.
In 2023, Ithaca completed acquisitions of remaining stakes in Fotla (40%) and Cambo (30%) from Shell and Spirit Energy respectively.
Ithaca said this provided “full control over pre-Final Investment Decision (FID) work programme and timing” for the two fields.
In its ‘Build’ category, Ithaca highlighted FID for the first phase of the Rosebank development alongside Equinor, with “all major contracts awarded and work underway to upgrade the Petrojarl Knarr FPSO”.
Ithaca also said its Captain electrification FEED study matured to support FID in 2024, with work also progressing on a field development plan for its Marigold project.
Ithaca said it also completed successful exploration at the K2 prospect, where it holds a 50% interest, and appraisal drilling at its non-operated Leverett field with good flow rates achieved.
In its ‘Boost’ category, Ithaca said its Captain enhanced oil recovery (EOR) second phase project is now “substantially complete” (>90%), supporting first phase two polymer injection into the subsea wells in summer 2024.
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