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Boost in oil production raises Ithaca earnings

ITHACA Energy has provided further evidence of how profitable North Sea oil and gas production can be at current crude prices by doubling first-quarter earnings.

Led by chief executive Les Thomas, Ithaca made $4.6m (£2.7m) profit before tax in the three months to March compared with $2.3m in the same period last year, reflecting the benefits of the £203m acquisition of Valiant Petroleum in April last year.

Profits after tax increased four-fold in the first quarter, to $16.4m from $3.5m last time.

The results were announced days after Aberdeen-based Ithaca said the expected start of production from the $385m Greater Stella Area development had been delayed to mid-2015 from the end of this year.

Work in Poland on a floating production facility the company plans to use on Greater Stella is taking longer than expected.

However, chief financial office Graham Forbes said Aim-listed Ithaca had delivered satisfactory results for the first quarter.

He said Ithaca was on track to increase the amount of cash it generates from other assets, like the Don area, in the currrent year.

Ithaca said the addition of Valiant was the driver behind a 50% increase in average production to 9,222 barrels in the first quarter from 6,148 in the same period last year.

With 95% of the production coming from oil, which is more valuable than gas, the acquisition helped Ithaca capitalise on the booming global demand for the black stuff. This has translated into strong prices.

Ithaca's output fetched an average $108 a barrel in the first quarter, up from $106 a barrel last time.

Brent crude traded at around $108 a barrel yesterday.

The company underlined the appeal of investing in the North Sea, where the Government has introduced a series of allowances designed to encourage firms to increase their activity in the area.

"No tax is expected to be paid in the mid-term future relating to upstream oil and gas activities as a result of the $1,174 million of UK tax losses available to the company," it said.

Ithaca, which also has operations in Norway, said further acquisitions could be on the agenda.

These could involve producing, development and appraisal assets.

The company made "several" licence applications in the latest UK licensing round in April.

The increase in after-tax profits partly reflected a one-off $10.5m tax credit.

This was a non-cash accounting credit. However, Ithaca noted that the amount of cash it generated from operations increased to $43.7m from $34.8m. Ithaca's ­operating costs increased to $49.72 a barrel in the first quarter, from $41.98 in the same period of 2013, reflecting planned maintenance and weather-related downtime on some assets. The company expects costs to average $40 per barrel for the year.

Shares in Ithaca Energy closed up 2.5p at 139.5p.

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