Ithaca Energy Inc. First Quarter 2016 Results

ABERDEEN, SCOTLAND–(Marketwired – May 16, 2016) –  Ithaca Energy Inc. (TSX: IAE) (LSE: IAE)

TSX: IAE

Not for Distribution to U.S. Newswire Services or for Dissemination in the United States

Ithaca Energy Inc.

First Quarter 2016 Results

16 May 2016

Ithaca Energy Inc. (TSX: IAE, LSE AIM: IAE) (“Ithaca” or the “Company”) announces its results for the three months ended 31 March 2016 (“Q1-2016” or the “Quarter”).

Resilient cashflow generation during the Quarter

• Average production of ~9,000 boepd – in line with guidance
• $44 million cashflow from operations, driven by reduced operating costs and hedging gains (cashflow per share $0.11)
• Material reduction in operating costs to $25/boe, 17% below 2016 forecast of $30/boe prior to Stella start-up
• Earnings of $18 million (earnings per share $0.04)

Continued deleveraging during the Quarter and strong liquidity position

• Substantial deleveraging – net debt reduced from a peak of over $800 million in the first half of 2015 to $630 million at end Q1-2016
• Over $100 million of funding headroom maintained following the RBL redetermination in April 2016, with total debt availability in excess of $730 million
• Significant commodity price protection – 8,800 boepd hedged from end Q1-2016 until mid-2017 at an average price of $61/boe, with a mark-to-market value of $94 million at end Q1-2016

Material near-term step-change in production and cashflow from the Greater Stella Area (“GSA”)

• On track for first production from the Stella field in September 2016, with FPF-1 sail-away in June, in line with previous guidance
• Production set to more than double to 20-25,000 boepd
• Company unit operating costs set to reduce to $20/boe

Les Thomas, Chief Executive Officer, commented:
“Ithaca has maintained the strong momentum generated in 2015 throughout the first quarter, with Stella progressing on track, further downward pressure on operating costs and reaffirmation of our financial strength. We have a solid foundation to take us forward beyond the start-up of Stella, enabling execution of a balanced and flexible future investment programme that can be tailored for the commodity price environment while meeting our priority of reducing debt.”

Greater Stella Area Development Update
The FPF-1 modifications programme, which is being undertaken by Petrofac in the Remontowa shipyard in Poland, is on track for first production from the Stella field in September 2016, with FPF-1 sail-away in June, in line with the previous guidance window. Commissioning operations on the vessel are well advanced and close out of the marine work to ensure the vessel satisfies the required sail-away certification standards is progressing to plan. Completion of the modifications programme is the critical path item for start-up of production from the Stella field, with the five well development drilling programme and subsea infrastructure installation campaign associated with start-up of the Stella field having both been successfully completed in 2015.

Handover of the various processing, utilities and accommodation systems on the vessel from the modifications to the operations teams is on-going. The next key milestone will be the completion of deep water trials immediately prior to commencing the tow to the field. This involves the FPF-1 being moved to a location off the coast of Gdansk in order to undertake the necessary marine system commissioning trials that cannot be done in the shallow waters of the shipyard.

It is anticipated that the period from sail-away to first hydrocarbons will be approximately three months. Following towing of the FPF-1 to the field, the vessel will be moored on location using twelve pre-installed anchor chains. The dynamic risers and umbilicals that connect the subsea infrastructure to the vessel will then be installed. Thereafter, commissioning of the various processing and utility systems that can only be undertaken on location with hydrocarbons from the field will be completed.

Production & Operations
Average production in Q1-2016 was ~9,000 boepd (91% oil), reflecting the cessation of production from the Athena and Anglia fields and reduced production due to planned maintenance activities on the Pierce field and completion of a chemical treatment campaign on several wells in the Dons Area fields.

Full year base production guidance, excluding any contribution associated with start-up of the Stella field during the year, remains unchanged at 9,000 boepd. The additional production contribution during the year resulting from the start-up of Stella will depend on the exact timing of first hydrocarbons from the field. Prompt ramp up of production is anticipated following first hydrocarbons, leading to an expected initial annualised production rate of approximately 16,000 boepd net to Ithaca.

Production in the second quarter of 2016 is expected to remain in line with 2016 full year guidance, with increased volumes associated with the recommencement of full production on the Pierce field broadly offsetting reduced production from the Dons and Causeway Area fields resulting from a planned two week shutdown of the Brent system in June 2016.

During the Quarter the Company took over operatorship of the Cook field (61.345% working interest) following completion of Shell and ExxonMobil’s sale of the Anasuria floating production, storage and offloading vessel (and associated feeder field interests), which serves as the host facility for the field.

Financials
Hedging
The Company’s future commodity hedged position remains unchanged from that announced at the previous quarter’s financial results. Following the realisation of a $39 million gain in Q1-2016, in the remaining nine months of 2016 a volume of 9,900 boepd (50% oil) is hedged at an average price of $60/boe. In the first half of 2017 approximately 7,000 boepd (50% oil) is hedged at an average price of $62/boe.

As of 1 April 2016 the Company’s commodity hedges were valued at $94 million based on the prevailing oil and gas forward curves at that time.

Operating Expenditure
Operating costs in the first quarter of 2016 continued on the downward trend established in 2015, with an average unit cost of $25/boe for the Quarter. This represents a substantial 17% saving on forecast unit operating expenditure for the existing assets prior to Stella start-up (of $30/boe). This has been achieved as a result of cost reductions secured across the portfolio, with the Cook and Wytch Farm fields delivering the most significant savings. This continued downward pressure on operating costs increases the likelihood of achieving a sub-$30/boe unit cost for the existing producing fields over the course of the year.

Capital Expenditure
Planned capital expenditure in 2016 remains unchanged at $50 million, the majority of which relates to the GSA, including activities required to prepare the Vorlich Field Development Plan for approval.

Beyond 2016, Ithaca forecasts an average underlying capital expenditure of $10-25 million per annum on its producing asset portfolio. This relates to facilities maintenance and low cost production enhancement activities. In addition to this, the Company has a diverse set of further investment opportunities within its existing portfolio and the flexibility to tailor its capital programme to the economic outlook at the time. It is anticipated that the average annual capital expenditure required to develop these opportunities will be between $25 -75 million.

Tax
The Company had a UK tax allowances pool of approximately $1,600 million at 31 March 2016. At current commodity prices, the pool is forecast to shelter the Company from the payment of corporation tax prior to 2020.

Debt Funding
Net debt at 31 March 2016 was $630 million, down from $665 million at 31 December 2015, reflecting the strong operating cashflow generation during the period. This reduction continues the deleveraging trend commenced in 2015, with net debt having being reduced from a peak of over $800 million in the first half of 2015.

Deleveraging of the business continues to remain a core priority of the Company, with a step change in the debt reduction profile achievable upon the start-up of Stella production.

The business is fully funded with strong liquidity, having over $730 million of available debt ahead of planned first hydrocarbons from the GSA, providing in excess of $100 million of funding headroom.

Q1-2016 Financial Results Conference Call
A conference call and webcast for investors and analysts will be held today at 12.00 GMT (08.00 EDT). Listen to the call live via the Company’s website (www.ithacaenergy.com) or alternatively dial-in on one of the following telephone numbers and request access to the Ithaca Energy conference call: UK +44 203 059 8125; Canada +1 855 287 9927; US +1 866 796 1569. A short presentation to accompany the results will be available on the Company’s website prior to the call.

Glossary
boe Barrels of oil equivalent
boepd Barrels of oil equivalent per day
RBL Reserves Based Lending facility

The unaudited consolidated financial statements of the Company for the three months ended 31 March 2016 and the related Management Discussion and Analysis are available on the Company’s website (www.ithacaenergy.com) and on SEDAR (www.sedar.com). All values in this release and the Company’s financial disclosures are in US dollars, unless otherwise stated.

– ENDS –

Enquiries:
Ithaca Energy
Les Thomas	lthomas@ithacaenergy.com	+44 (0)1224 650 261
Graham Forbes	gforbes@ithacaenergy.com	+44 (0)1224 652 151
Richard Smith	rsmith@ithacaenergy.com	+44 (0)1224 652 172
FTI Consulting
Edward Westropp	edward.westropp@fticonsulting.com	+44 (0)203 727 1521
Tom Hufton	tom.hufton@fticonsulting.com	+44 (0)203 727 1625
Cenkos Securities
Neil McDonald	nmcdonald@cenkos.com	+44 (0)207 397 1953
Nick Tulloch	ntulloch@cenkos.com	+44 (0)131 220 9772
Beth McKiernan	bmckiernan@cenkos.com	+44 (0)131 220 9778
RBC Capital Markets
Daniel Conti	daniel.conti@rbccm.com	+44 (0)207 653 4000
Matthew Coakes	matthew.coakes@rbccm.com	+44 (0)207 653 4000

Notes
In accordance with AIM Guidelines, John Horsburgh, BSc (Hons) Geophysics (Edinburgh), MSc Petroleum Geology (Aberdeen) and Subsurface Manager at Ithaca is the qualified person that has reviewed the technical information contained in this press release. Mr Horsburgh has over 15 years operating experience in the upstream oil and gas industry.

References herein to barrels of oil equivalent (“boe”) are derived by converting gas to oil in the ratio of six thousand cubic feet (“Mcf”) of gas to one barrel (“bbl”) of oil. Boe may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf: 1 bbl is based on an energy conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6 Mcf: 1 bbl, utilising a conversion ratio at 6 Mcf: 1 bbl may be misleading as an indication of value.

All references to dollars ($) in this press release refer to the United States dollar (USD).

About Ithaca Energy
Ithaca Energy Inc. (TSX: IAE, LSE AIM: IAE) is a North Sea oil and gas operator focused on the delivery of lower risk growth through the appraisal and development of UK undeveloped discoveries and the exploitation of its existing UK producing asset portfolio. Ithaca’s strategy is centred on generating sustainable long term shareholder value by building a highly profitable 25kboe/d North Sea oil and gas company. For further information please consult the Company’s website www.ithacaenergy.com.

Non-IFRS Measures
“Cashflow from operations” and “cashflow per share” referred to in this press release are not prescribed by IFRS. These non-IFRS financial measures do not have any standardised meanings and therefore are unlikely to be comparable to similar measures presented by other companies. The Company uses these measures to help evaluate its performance. As an indicator of the Company’s performance, cashflow from operations should not be considered as an alternative to, or more meaningful than, net cash from operating activities as determined in accordance with IFRS. The Company considers cashflow from operations to be a key measure as it demonstrates the Company’s underlying ability to generate the cash necessary to fund operations and support activities related to its major assets. Cashflow from operations is determined by adding back changes in non-cash operating working capital to cash from operating activities.

“Net debt” referred to in this press release is not prescribed by IFRS. The Company uses net drawn debt as a measure to assess its financial position. Net drawn debt includes amounts outstanding under the Company’s debt facilities and senior notes, less cash and cash equivalents.

Forward-looking Statements
Some of the statements and information in this press release are forward-looking. Forward-looking statements and forward-looking information (collectively, “forward-looking statements”) are based on the Company’s internal expectations, estimates, projections, assumptions and beliefs as at the date of such statements or information, including, among other things, assumptions with respect to production, drilling, construction and maintenance times, well completion times, risks associated with operations, future capital expenditures, continued availability of financing for future capital expenditures, future acquisitions and dispositions and cash flow. The reader is cautioned that assumptions used in the preparation of such information may prove to be incorrect. When used in this press release, the words and phrases like “anticipate”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “plan”, “should”, “believe”, “could”, “target”, “in the process of”, “on track”,”set to” and similar expressions, and the negatives thereof, whether used in connection with operational activities, sail-away of the FPF-1 vessel, Stella first hydrocarbons, drilling plans including ramp up timing, production forecasts, budgetary figures, future operating costs, anticipated net debt and continued deleveraging, anticipated funding requirements, anticipated characteristics of the Company’s future investment programme, planned capital expenditures, potential investment opportunities including the expected development costs thereof, potential developments including the timing and anticipated benefits of acquisitions and dispositions, the Company’s expected tax horizon or otherwise, are intended to identify forward-looking statements. Such statements are not promises or guarantees, and are subject to known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. The Company believes that the expectations reflected in those forward-looking statements are reasonable but no assurance can be given that these expectations, or the assumptions underlying these expectations, will prove to be correct and such forward-looking statements included in this press release should not be unduly relied upon. These forward-looking statements speak only as of the date of this press release. Ithaca Energy Inc. expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any forward-looking statement is based except as required by applicable securities laws.

Additional information on these and other factors that could affect Ithaca’s operations and financial results are included in the Company’s Management Discussion and Analysis for the quarter ended 31 March 2016 and the Company’s Annual Information Form for the year ended 31 December 2015 and in reports which are on file with the Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com).