North Sea player Ithaca faces fresh delay on major project

The field was originally due to start producing oil late in 2014 but the launch date was initially pushed back to the middle of this year.

The latest change of schedule reflects renewed delays in the completion of work in Poland on a giant floating production facility the company will use on the field.

The delay highlights the kind of complications that firms can face when trying to develop new fields in areas such as the North Sea.

The FPF-1 production vessel is being upgraded for Ithaca to use in the Greater Stella area by Petrofac, the oil services giant that employs 4,500 in Scotland. Petrofac has a 20 per cent interest in Greater Stella.

Announcing annual net profits fell to $581m in 2014, from $650m in 2013, Petrofac said progress on the FPF-1 has been slower than expected over the winter. It did not recognise any profit on the contract in the year.

Petrofac also said it recorded a loss of around $200m in 2014 on a contract to build the giant Laggan - Tormore gas terminal on Shetland for Total.

The oil services company highlighted problems on both contracts in its interim results announcement in November.

Petrofac's chief executive Ayman Asfari said then the company had 300 days of interruption on Laggan-Tormore because of high winds and poor weather.

Ithaca's chief executive Chief executive Les Thomas said yesterday: "It is disappointing to incur a further delay in completion of the FPF-1 modifications programme. While the drilling and subsea installation aspects of the Greater Stella Area development have progressed well, completion of the FPF-1 programme has proved difficult."

The latest delay means Ithaca will bank the first revenues from the giant development around 18 months later than expected.

Ithaca, which has a 55 per cent share in Greater Stella, expects its share of output from fields in the area to be 16,000 barrels oil equivalent per day and provide a big boost to profits.

Ithaca played down the effect of the delay on its finances saying its peak net drawn debt is forecast to be materially unchanged at approximately $850 million.

However, the delay will result in around $10m additional management costs.

While Ithaca said the quality of work being done on the FPF-1 in the Remontowa yard remains high, the latest delay to Stella must be a frustration.

In May last year, Ithaca said the expected start of production from Stella had been delayed to mid-2015 from the end of 2014 because work on the FPF-1 facility was taking longer than expected.

Petrofac's full year result was in line with guidance given at its interim results announcement in November. The company said then it expected profits for 2014 to be at the lower end of the $580m to $600m guidance previously given. It said low oil prices had had an impact, but also cited problems at the Laggan-Tormore gas terminal.

Mr Asfari said then talks regarding a settlement were ongoing and Petrofac would recognise a loss on the development in 2014.

Yesterday Petrofac said: "In respect of the Laggan Tormore project in Shetland, in line with our latest assessment of the schedule and cost -to -complete, and the final commercial settlement agreed with our client, we have recognised a loss on the project in 2014 of around US$200 million." A spokesman said the client referred to is Total.

Mr Asfari said Petrofac had taken robust action to address the challenges it had faced on Laggan-Tormore, Greater Stella and the Ticleni project in Romania.

The company said the operating environment remains uncertain, with the industry adjusting to a lower oil price environment.

However, it added: "Notwithstanding the current lower oil price environment, we continue to see an attractive pipeline of bidding opportunities in the year ahead."

Shares in Ithaca Energy closed down 19.5p at 46.75p.

The company employs around 40 people at its Aberdeen base. It uses contractors offshore.

Shares in Petrofac closed up 71p, at 886p.