NORTH Sea-focused Ithaca Energy has recorded an 80 per cent fall in third-quarter earnings which partly reflected the recent drop in oil prices but said it has significant protection in place against further downside.

The Aberdeen-based company made $8million profit after tax in the three months to September compared with $43m in the same period last time.

Ithaca noted the price it got for oil fell to an average $101 per barrel in the third quarter, from $113/bbl last time.

The industry has seen the price of Brent crude drop to around $80 since the end of the quarter amid plentiful supplies of oil and weakening demand.

The boom in production from shale areas in the US combined with slowing growth in China has sparked fears prices may fall further unless producing nations take steps to limit supplies.

However, Ithaca's chief financial office Graham Forbes said: "In light of the recent fall in oil prices, it is important to note that the company is in a strong financial position, with all debt covenants satisfied and future revenues substantially underpinned by the significant quantity of oil price hedges that have been executed well in excess of prevailing prices".

Companies can use hedges to sell commodities at prices agreed well in advance.

Ithaca said: "Any further drop in Brent over the coming months will be significantly protected by the oil price hedges the company has in place averaging $102/bbl."

The company said it has hedges in place until mid 2016 which mean the firm can cover the costs of producing oil from assets that have been brought onstream at $20 per barrel.

There appears to be no sign the company is losing enthusiasm for the North Sea, in spite of recent complaints from industry body Oil & Gas UK about the high costs of operating in the area.

Ithaca appears confident it can still generate significant returns with a strategy that involves bringing undeveloped discoveries onstream, exploring for new finds and buying producing assets.

After acquiring three UK producing fields from Sumitomo of Japan in July this year for $163m, Ithaca is still in the market for assets.

The company was awarded three exploration licences in the latest UK licensing round.

Noting that the drop in profits was partly due to planned maintenance shutdowns, Mr Forbes said the underlying third quarter numbers represented a solid contribution.

The company generated $44m underlying cash flow from operations in the quarter.

Ithaca said recent drilling on the Stella field increased confidence in the forecast it will produce 16,000 barrels of oil equivalent daily for the company on an annualised basis.

In May, Ithaca said the expected start of production from Greater Stella had been delayed to mid-2015 from the end of this year. Work in Poland on a floating production facility has taken longer than expected.

Ithaca's experience shows not all North Sea fields can hope to find favour from investors.

The company wrote off $14.9m ($5.7m after tax) in respect of its stake in the Anglia gas field in the Southern North Sea in the third quarter. Ithaca said it expects 2015 will be the last year of Anglia production given anticipated rising operating costs.

Ithaca produced an average 10,861 boed in the third quarter, including output from fields acquired from Sumitomo from July 31, compared with 11,942 boed in the same period last year.

Full year production is expected to average 11,200 boed. Turnover fell to $90m in the third quarter, from $114m last time.