TIDMITH TIDMTTM
RNS Number : 1388K
Ithaca Energy PLC
23 August 2023
23 August 2023
ITHACA ENERGY PLC
("Ithaca Energy", the "Company" or the "Group")
First Half Results for the Six Months to 30 June 2023
Strong H1 production performance, continued strategic and
operational progress
Ithaca Energy, a leading UK independent exploration and
production company, today announced its unaudited financial results
for the six months ended 30 June 2023.
Financial key performance indicators
(KPIs)
H1 2023 H1 2022
------------------------------------------- ------- -------
Group adjusted EBITDAX(1) ($m) 979.7 907.4
------------------------------------------- ------- -------
Statutory net income ($m) 159.6 1,557.7
------------------------------------------- ------- -------
Adjusted net income(1) ($m) 253.2 233.4
------------------------------------------- ------- -------
Basic EPS (cents) 15.9 155.0
------------------------------------------- ------- -------
Net cash flow from operating activities
($m) 691.0 989.0
------------------------------------------- ------- -------
Available liquidity (1) ($m) 791.3 320.4
------------------------------------------- ------- -------
Unit operating expenditure(1) ($/boe) 19.8 19.5
------------------------------------------- ------- -------
Adjusted net debt (1) ($m) 698.7 1,414.6
------------------------------------------- ------- -------
Adjusted net debt/Group adjusted EBITDAX
(1) 0.35x 0.91x
------------------------------------------- ------- -------
Other KPIs
Total production (boe/d) 75,755 66,685
------------------------------------------- ------- -------
Tier 1 / 2 process safety events 1 0
------------------------------------------- ------- -------
Serious injury and fatality frequency 0 0
------------------------------------------- ------- -------
(1) Non-GAAP measure as set out on pages 45 to 47.
H1 2023 Operational and strategic highlights
-- Strong H1 production of 75.8 thousand barrels of oil
equivalent per day (kboe/d), supporting full year 2023 production
guidance (H1 2022: 66.7 kboe/d)
- Production growth driven by the contribution of producing
asset additions from M&A transactions completed in the first
half of 2022
- Production split 66% liquids and 34% gas
-- Good progress made in H1 2023 against our BUY, BUILD and
BOOST strategy preserving optionality across our portfolio with the
aim of maximising value to shareholders
BUY
-- Acquired the remaining 40% stake in the Fotla Discovery,
together with three exploration licences, providing Ithaca Energy
with full control over pre-final investment decision (FID) work and
timing (subject to completion)
-- Entered into marketing agreement with Shell U.K. Limited in
relation to its interests in the Cambo field, representing a
meaningful step towards securing an aligned joint venture
partnership that would enable the future progression of the Cambo
project towards FID, subject to regulatory and licensing approval
processes and market conditions
BUILD
-- Pre-FID work continues across the Group's high-value
greenfield and brownfield development portfolio. Focus remains on
finalising development plans and financing for Rosebank
-- Positive exploration drilling results at K2 prospect, with
the decision to proceed with an appraisal side-track (Ithaca Energy
operated, working interest 50%) highlighting Ithaca Energy's
impressive exploration track record
BOOST
-- Production performance in H1 2023 driven by high production
efficiency across our operated assets in Q2 of 93%
-- Material project scopes completed at Captain Enhanced Oil
Recovery (EOR) Phase II with four of the seven wells drilled.
Critical EOR turnaround scopes scheduled for H2 2023
-- Front End Engineering Design (FEED) activity ongoing to
explore the potential for electrification of the Captain field,
demonstrating our continued focus on decarbonisation initiatives
across our portfolio
H1 2023 Financial highlights
-- Announced second interim 2023 dividend of $133 million
payable in September 2023, taking our total year to date interim
2023 dividend to $266 million, with targeted total dividend of $400
million reaffirmed for financial year 2023
-- Group adjusted EBITDAX up 8% to $979.7 million (H1 2022:
$907.4 million), driven by higher production, despite lower average
oil and gas prices
-- Realised oil and gas prices (respectively) of $85/boe and $82/boe before hedging results and
$83/boe and $125/boe after hedging results (H1 2022: $107/boe
and $144/boe before hedging results and $93/boe and $105/boe after
hedging results)
-- Strong cost control, despite inflationary headwinds,
delivering operating costs of $272.1 million ($19.8/boe (H1 2022:
$19.5/boe)), allowing the Group to narrow its full year 2023
guidance range
-- Adjusted net income of $253.2 million (H1 2022: $233.4 million)
-- Statutory net income $159.6 million (H1 2022: $1,557.7
million) reflecting a $73.7 million post-tax impairment of the
Greater Stella Area due to reduction in planned activity, as a
direct result of the Energy Profits Levy (EPL) and falling gas
prices; H1 2022 includes $1,324.3 million gain on bargain purchase
which arose from the acquisitions of Marubeni UK and Siccar Point
Energy
-- Net cash flow from operating activities of $691.0 million (H1 2022: $989.0 million)
-- Producing asset capex of $188 million, allowing the Group to
reduce its full year 2023 guidance range
-- Strong cash flow generation supporting further deleveraging
of the balance sheet in the period. Adjusted net debt of $698.7
million at 30 June 2023 (31 December 2022: $971.2 million; 30 June
2022: $1,414.6 million)
-- Group leverage position of 0.35x adjusted net debt to adjusted EBITDAX (30 June 2022: 0.91x)
-- Successful redetermination of Reserves Based Lending (RBL) facility in June 2023
-- Post period end, signed extension of bp offtake agreement
and, in parallel, entered into new five- year $100 million loan
facility agreement with bp (yet to be drawn)
Outlook
FY 2023 Management Guidance and Outlook
-- Management provides the following updates to previously
provided guidance ranges and activities for full year 2023 (FY
2023):
- Production guidance reaffirmed for FY 2023 of 68-74 kboe/d;
- Operating cost guidance narrowed at the lower end of the range for FY 2023 from $560-
$630 million to $560-$610 million; and
- Producing asset capital cost guidance for FY 2023 reduced from $400-$460 million to $390-
$435 million
-- Turnaround activity across operated and non-operated base scheduled for Q3 2023
-- Captain EOR Phase II project H2 2023 activities include the
continued drilling of Area E wells before moving to Area D to
commence drilling operations and turnaround activity in Q3 that
will support polymer injection into the subsea wells in 2024
-- Continued focus on maturing high-value development projects
and preserving optionality across our portfolio while prioritising
capital allocation to maximise sustainable shareholder returns
-- Management reaffirms its commitment to targeted total
dividend of $400 million for financial year 2023
Energy Profits Levy impact beyond 2023
-- In June 2023, the UK government published terms of reference
for the oil and gas fiscal regime review and committed to engaging
with industry stakeholders. One of HM Treasury's stated objectives
is to achieve a "simpler, more predictable, and stabler regime" (HM
Treasury)
-- In the meantime, until the fiscal regime is improved, as a
direct result of the Energy Profits Levy, investment across our
operated and non-operated portfolio has and will reduce, including
the deferral and cancellation of certain 2023 and 2024 projects,
impacting medium-term production outlook, with production in 2024
expected to be lower than 2023 levels. As part of the Group's
strategy, we continue to leverage our M&A capabilities
evaluating potential inorganic opportunities with the clear
intention to increase our production in the medium-term
-- We are in the process of working through our medium-term
outlook, incorporating the full impact of EPL at an asset level and
updating subsurface models for the latest production history along
with the potential positive effect of new opportunities we are
currently reviewing and we will share an updated view of our
medium-term production outlook later in the year
Gilad Myerson, Executive Chairman, commented: "Ithaca Energy's
robust H1 performance demonstrates continued strong delivery across
our BUY, BUILD and BOOST strategy and our capital allocation policy
in H1 2023. I am delighted to announce today the second tranche of
our 2023 interim dividend, taking our total year to date dividend
in 2023 to $266 million, in line with our commitment to
shareholders at IPO.
The Energy Profits Levy continues to have a direct impact on
investment in the UK North Sea and Ithaca Energy's own investment
programme across its diverse high-quality operated and non-operated
asset base. We continue to constructively engage with the UK
government to highlight the impact of the current fiscal regime to
the industry's outlook and to the UK government's stated energy
security and Net Zero ambitions."
Alan Bruce, Chief Executive Officer, commented: "We are pleased
to share a strong set of results for the first half of 2023, with
growing Adjusted EBITDAX as a result of production of over 75
kboe/d in the period. Production efficiency across our operated
assets has been high demonstrating our strong operational
capabilities.
We continue to take a disciplined approach to capital investment
including at our Captain asset where we are progressing the EOR
Phase II project construction activities as well as evaluating
emissions reduction options. We reported successful exploration
drilling at our K2 prospect in July which further strengthens our
high-quality development portfolio."
Ithaca Energy will host an in person and virtual presentation
and Q&A session for investors and analysts at 09:00 (BST)
today, 23 August 2023, accessible via our website:
https://investors.ithacaenergy.com/
Half-year 2023 performance in review
Strong operational performance in H1 supports the Group's full
year 2023 outlook
Continued focus on personal and process safety with one Tier 1/2
process safety event recorded as a result of a marine gas oil leak
in the Captain FPSO power generation process. The Group's serious
incident and fatality rate remained at zero during the period.
Production in the first half of 2023 rose to an average of 75.8
kboe/d (H1 2022: 66.7 kboe/d), driven by the contribution of
producing asset additions from M&A transactions completed in
the first half of 2022. Production in the six-month period was
split 66% oil and 34% gas.
The Group's operated assets accounted for 54% of total H1 2023
production (H1 2022: 63%) with strong production efficiency across
the Group's operated portfolio. In the second quarter production
efficiency was 93% with the Captain field recording its longest
ever production run between field outages.
H1 2023 non-operated production was impacted by the delayed
start-up and curtailed production of the Pierce field and a number
of unplanned outages at Schiehallion that have now been
resolved.
As we enter the second half of the year, the Group will embark
on a series of planned maintenance campaigns across its operated
and non-operated asset base including a scheduled 25-day turnaround
at Captain, in preparation for the next stage of the EOR Phase II
project.
With strong first half production performance; we reaffirm our
2023 production guidance of 68-74 kboe/d.
Operating costs in H1 2023 of $272.1 million (H1 2022: ($234.4
million), representing a broadly flat net unit opex cost of
$19.8/boe (H1 2022: $19.5/boe).
During the first half of the year, the Group launched an
internal cost optimisation project focused on maintaining tight
control on expenditure across our operated and non-operated assets
and corporate overhead costs.
In the medium-term, the Group has ambitions to materially reduce
the average operating cost per barrel by transitioning our
portfolio to earlier-life assets with lower operating costs.
Operating cost guidance narrowed at the lower end of the range
for the year ended 31 December 2023 from $560-$630 million to
$560-$610 million supported by stringent focus on ongoing cost
control.
Total net producing asset capital expenditure (excluding
decommissioning) in H1 2023 of $188 million reflects the material
work scopes completed at Captain EOR Phase II during the first half
of the year, with the Captain field representing approximately 68%
of producing asset capital expenditure in the period.
Total capital spend in the year reflects lower scheduled
activity across the Group's operated and non- operated assets, with
the deferral and cancellation of capital project activities largely
driven by EPL and the associated fiscal uncertainty.
Producing asset capital cost guidance reduced for the year ended
31 December 2023 from $400-$460 million to $390-$435 million,
reflecting a further reduction to capital cost guidance in addition
to the material reduction in guidance provided earlier in the
year.
Targeted investment across our strategic pillars: BUY, BUILD and
BOOST
With expertise extending across the full life-cycle of E&P
operations, the Group has demonstrated its ability in the first
half of 2023 to execute operations successfully across exploration,
development and production activities.
During July, the Group announced successful exploration drilling
at the K2 prospect together with the decision to proceed with
follow on appraisal drilling. Results from the appraisal side-track
are expected during September and will provide further data to
determine a recoverable resource estimate and future development
activity. The K2 prospect is an excellent demonstration of the
Group's BUILD strategy targeting opportunities close to existing
infrastructure to maximise value.
Across our portfolio, we continue to seek to BOOST the value of
our assets, including infill drilling campaigns that provide
short-cycle returns and near-term cash flow generation. At Alba,
preparations were underway in the first half of the year to support
an infill drilling campaign that will commence in the second half
of the year.
Material progress was made during the first half of the year on
executing Phase II of our pioneering polymer EOR project, that will
maximise recovery rates from Captain and deliver on our strategy to
BOOST field performance. The project reached a number of key
milestones in H1 2023 including the successful installation of
polymer injection pumps, installation of the subsea umbilical
distribution structure and the commencement of Area E drilling
operations. In the second half of the year, activities include
laying flowlines and umbilicals, installation of piping cassettes
and completion of Area E drilling before moving to Area D.
Enhanced oil recovery from Captain EOR Phase I continues to
perform well with the first phase of polymer injection exceeding
expectations with over 11 mmbbls recovered to date. We continue to
refine the pioneering polymer formulation and the development of
5th and 6th generation polymer designs, which will continue to
improve cost efficiency of the polymer flood by 10%.
With material work scopes completed, first injection of polymer
to support EOR Phase II is expected in summer 2024. History
matching of the latest field performance, together with reprocessed
seismic, is currently being worked to provide an updated subsurface
model to refine the polymer response of EOR Phase II. Initial
results confirm no change to overall EOR Phase II reserve recovery
but shows indications of the possibility for a longer path to peak
response and plateau.
The Group continues to leverage our M&A capabilities (BUY)
evaluating potential inorganic opportunities both in the UK and
internationally. During the period, we entered into a marketing
agreement with Shell
U.K. Limited, taking a meaningful step towards securing an
aligned joint venture partnership that would enable the future
progression of the Cambo project towards FID. Development options
for Cambo continue to be evaluated to support submission of a field
development application ahead of the associated licence milestone
of 31 March 2024, subject to the outcome of the marketing campaign.
In July, the Group announced the acquisition of the remaining 40%
stake in the Fotla Discovery providing Ithaca Energy with full
control over pre-FID work and timing.
The pace of investment across our pre-FID projects has slowed as
we continue to engage with the UK government to highlight the
impact of the Energy Profits Levy and fiscal uncertainty on our
ability to make critical decisions on large scale capital
investments. We remain committed to developing our pre-FID projects
and continue to engage in a constructive manner with the UK
government. During the first half of the year, the Group continued
its work towards supporting a final investment decision at Rosebank
and in the near-term, our focus remains on finalising development
plans and financing arrangements for th project, and on
prioritising capital across our strategic pillars that will
maximise shareholder returns in the current fiscal environment.
Meaningful decarbonisation activity
Ithaca Energy is committed to its ambitions of developing one of
the lowest carbon emission portfolios in the UK North Sea by
optimising our current portfolio in the short-term, and
fundamentally transitioning the portfolio in the medium to
long-term.
Significant progress has been made across our operated portfolio
with operational improvements at FPF-1 and Captain and an ongoing
turbine optimisation project at Alba. For the first six months of
2023, the GHG emissions intensity (Scope 1 and 2), from our
operated assets was 24.5 kgCO 2 e/boe.
FEED activity commenced in April 2023 to explore the potential
for electrification of the Group's flagship Captain field,
following the successful conclusion of a pre-FEED study in Q1 2023.
With over 70% of Captain's GHG emissions related to power
generation, partial electrification of the asset has the potential
to substantially reduce emissions intensity. The Captain
electrification project is an important opportunity contributing to
Ithaca Energy meeting its target of a 50% reduction in Scope 1 and
2 CO 2 e emissions by 2030. The delivery of the project is subject
to accessing a suitable grid connection or alternative power source
in a timely manner.
Robust cash flow generation and continued strengthening of the
balance sheet
During H1 2023, our diversified, high-quality asset base
generated net cash flow from operating activities of
$691.0 million. This strong cash flow generation supported the
continued deleveraging of our balance sheet in the first half of
the year, with the Group reporting adjusted net debt of $698.7
million, representing an adjusted net debt to adjusted EBITDAX
ratio of 0.35x at 30 June 2023.
The Group successfully completed the semi-annual redetermination
of its Reserves Based Lending facility (RBL) at the end of June
securing borrowing base availability of $865 million (31 December
2022: $925 million), excluding RBL facilities utilised for letters
of credits. The Group continues to be well supported by a banking
syndicate of nine financial institutions. The impact of the
recently announced price floor, that would trigger the early sunset
of the EPL based on oil prices dropping below $71.40 per barrel and
gas prices below 54 pence per therm, was yet to be factored into
borrowing base availability at redetermination.
Post period end, the Group signed an extension to its Offtake
agreement with bp, and in parallel, entered into a new five-year
$100 million term loan facility agreement with bp at a commercial
interest rate, which is yet to be drawn. This new facility term
provides capital out to 2028, supporting the development of pre-
FID fields.
The Group continues to have sufficient available capital to
support our capital allocation policy with a liquidity position at
30 June of $791.3 million (H1 2022: $320.4 million), prior to
execution of the $100 million bp loan facility agreement.
Net income recorded in H1 2023 of $159.6 million, was impacted
by a pre-tax impairment charge of $328.4 million (post tax $93.6
million), principally in relation to the Greater Stella Area and
other gains of $72.2 million in the period. The impairment charge
follows the decision not to proceed with further infill drilling at
Harrier, as a direct result of the Energy Profits Levy and falling
gas prices.
As we move into the second half of the year, we continue to take
a disciplined approach to hedging, recognising the importance of
balancing upside exposure to commodity prices while managing
downside protection of our cash flows in line with the PROTECT
pillar of our capital allocation policy. At 30 June 2023, the Group
has a hedged position of 9.9 million barrels of oil equivalent
(mmboe) (62% oil) from H2 2023 into 2025 at an average price floor
of $73/bbl for oil and 161p/therm for gas. Following the period
end, we have been active in placing further hedges on attractive
terms and at 15 August our hedged position has increased to 11.5
mmboe (66% oil) from H2 2023 into 2025 at an average price floor of
$73/bbl for oil and 159p/therm for gas.
In line with our capital allocation policy, we announced and
paid the first tranche of our 2023 dividend of $133 million in
March 2023. We are pleased to today declare the second tranche of
our 2023 dividend of a further $133 million, payable in September
this year, taking our total 2023 interim dividend to $266 million.
Ithaca Energy remains committed to its declared dividend policy
with a targeted 2023 total dividend of $400 million.
Outlook
Ithaca Energy remains committed to investing in its asset base
in the UK North Sea and continues to constructively engage with the
UK government to highlight the negative impact of the Energy
Profits Levy to our investment programme and the consequential
medium and long-term impact to the UK government's energy security
and Net Zero ambitions.
New investment has been severely dampened across the UK North
Sea in 2023, with operators delaying or cancelling projects given
the competition for capital across global portfolios. While we
maintain our 2023 production guidance, due to our continued strong
operational performance, it is clear that we, like the rest of the
industry, will feel the impact of lower investment on our
medium-term production outlook below previously guided levels.
The Energy Profits Levy has already resulted in the deferral or
cancellation of investment across the Group's operated and
non-operated assets, including in the Greater Stella Area
(impairment charges in Q2 2023), Montrose Arbroath Area and Elgin
Franklin Area. As capital investment plans are being drawn up for
2024 and beyond, both Ithaca Energy and our diverse partner groups,
are reconsidering the attractiveness of capital deployment
opportunities in the context of an enduring Energy Profits Levy in
what we would consider to be a return to normal commodity prices.
As an inevitable consequence of the current fiscal environment, our
medium-term production outlook will be impacted, such that we now
anticipate production in 2024 to fall below 2023 levels. For
example, the predominantly 100% Ithaca Energy owned Greater Stella
Area is expected to produce over 5,000 boe/d less in 2024, with
Energy Profits Levy related investment decisions driving the
reduction. We are currently in the process of reviewing inorganic
opportunities with the clear intention to increase our production
in the medium-term.
Ithaca Energy is actively participating in the ongoing review of
the Oil and Gas Fiscal Regime in pursuit of a stable and supportive
fiscal regime, required to make critical investment decisions that
will support the UK's future energy security. We strongly believe
that further amendments are required to the Energy Profits Levy
including the amendment, and legislation, of an appropriate price
floor that reflects the seasonal nature and structural changes in
gas markets.
In the period to June 2023, the Group incurred Energy Profits
Levy charges of $223 million.
As we navigate the continued impact of the Energy Profits Levy
to our operations, we remain value-focused and disciplined,
investing only in opportunities across our BUY, BUILD and BOOST
strategy that we believe have the potential to deliver growth and
maximise shareholder value, including the pursuit of value-
accretive inorganic opportunities that strengthen short to
medium-term cash flows.
Enquiries
Ithaca Energy
Kathryn Reid - Head of Investor Relations, kathryn.reid@ithacaenergy.com
Corporate Affairs & Communications
FTI Consulting (PR Advisers to Ithaca
Energy) +44 (0)203 727 1000
Ben Brewerton / Nick Hennis ithaca@fticonsulting.com
About Ithaca Energy plc
Ithaca Energy is a leading UK independent exploration and
production company focused on the UK North Sea with a strong track
record of material value creation. In recent years, the Company has
been focused on growing its portfolio of assets through both
organic investment programmes and acquisitions and has seen a
period of significant M&A driven growth centred upon two
transformational acquisitions in recent years. Today, Ithaca Energy
is one of the largest independent oil and gas companies in the
United Kingdom Continental Shelf (the "UKCS"), ranking second by
resources.
With stakes in six of the ten largest fields in the UKCS and two
of UKCS's largest pre-development fields, and with energy security
currently being a key focus of the UK Government, the Group
believes it can utilise its significant reserves and operational
capabilities to play a key role in delivering security of domestic
energy supply from the UKCS.
Ithaca Energy serves today's needs for domestic energy through
operating sustainably. The Group achieves this by harnessing Ithaca
Energy's deep operational expertise and innovative minds to
collectively challenge the norm, continually seeking better ways to
meet evolving demands.
Ithaca Energy's commitment to delivering attractive and
sustainable returns is supported by a well-defined
emissions-reduction strategy with a target of achieving net zero by
2040.
Ithaca Energy plc was admitted to trading on the London Stock
Exchange (LON: ITH) on 14 November 2022.
-S-
Financial performance: revenue, costs and charges and adjusted
EBITDAX
Statutory net income was $159.6 million (H1 2022: $1,557.5
million) reflecting a $73.7 million post-tax impairment of the
Greater Stella Area due to a reduction in planned activity as a
direct result of the EPL as well as falling gas prices. H1 2022
included a $1,324.3 million gain on bargain purchase which arose on
the Marubeni ans Siccar Point Energy acquisitions.
Adjusted EBITDAX is a key measure of operational performance
delivery in the business and increased by 8.0% in H1 2023 to $979.7
million (H1 2022: $907.4 million) despite lower revenue in H1 2023
of $1,248.1 million (H1 2022:
$1,337.6 million). The reduction in revenue was principally due
to changes in overlift and underlift positions relative to H1 2022
and lower commodity prices compared to H1 2022, partly offset by
higher production in H1 2023 mainly due to acquisitions made during
the first half of 2022. Increased production was delivered from new
field equity production from acquisitions including from the MonArb
area fields (from February 2022), and from the Jade, Elgin
Franklin, Mariner and Schiehallion fields (from July 2022).
Average realised oil prices for H1 2023 were $85/boe before
hedging results and $83/boe after hedging results (H1 2022:
$107/boe before hedging results and $93/boe after hedging results).
Average realised gas prices for H1 2023 were $82/boe before hedging
results and $125/boe after hedging results (H1 2022: $144/boe
before hedging results and $105/boe after hedging results).
The focus on cost was maintained during the period with unit
operating expenditure increasing marginally to $19.8/boe (H1 2022:
$19.5/boe) reflecting our disciplined cost management approach
across the portfolio.
Adjusted EBITDAX analysis
H1 2023 H1 2022 FY 2022
Production kboe/d mmboe kboe/d mmboe kboe/d mmboe
Oil Gas NGL 47 8 40 8 43 16
25 5 24 4 24 9
3 1 3 0 4 1
==================== =============== ========== =============== ================== ================== ==========
Total production 76 14 67 12 71 26
-------------------- --------------- ---------- --------------- ------------------ ------------------ ----------
Revenues(1) $/boe $m $/boe $m $/boe $m
Oil revenue 85 650 107 973 100 1,693
Gas revenue 82 380 144 605 149 1,348
NGL revenue 42 26 67 35 57 76
Oil and gas hedging
gains/(losses) 13 172 (22) (269) (19) (501)
==================== =============== ========== =============== ================== ================== ==========
Total 90 1,228 111 1,344 100 2,615
-------------------- --------------- ---------- --------------- ------------------ ------------------ ----------
Movement in oil and
gas stocks 4 58 (16) (186) (5) (130)
Tanker costs (1) (12) (1) (11) - (18)
Stella royalties - (3) - (6) - (11)
==================== =============== ========== =============== ================== ================== ==========
Total value from
production 93 1,271 94 1,141 94 2,457
-------------------- --------------- ---------- --------------- ------------------ ------------------ ----------
Costs
Operating costs (20) (272) (19) (234) (19) (496)
Routine G&A (1) (15) - (6) (1) (28)
Forex gain/(loss) - (4) - 6 (1) (17)
==================== =============== ========== =============== ================== ================== ==========
Total operating cash
costs (21) (291) (19) (234) (21) (540)
==================== =============== ========== =============== ================== ================== ==========
Adjusted EBITDAX(2) 71 980 75 907 73 1,916
-------------------- --------------- ---------- --------------- ------------------ ------------------ ----------
1 Revenues in the above table exclude principally other income
and put premiums on oil and gas derivative instruments.
2 Non-GAAP measure.
OPERATIONAL AND FINANCIAL REVIEW CONTINUED
Revenue and EBITDAX
H1 2023 H1 2022
Production (boe/d) 75,755 66,685
---------------------------------------------------- ------- -------
$m $m
---------------------------------------------------- ------- -------
Oil sales 650.2 973.3
---------------------------------------------------- ------- -------
Gas sales 379.9 605.0
---------------------------------------------------- ------- -------
NGL sales 26.4 35.3
---------------------------------------------------- ------- -------
Other income 17.4 18.8
---------------------------------------------------- ------- -------
Realised losses on oil derivative contracts (12.5) (125.9)
---------------------------------------------------- ------- -------
Put premiums on oil derivative instruments (6.3) (7.2)
---------------------------------------------------- ------- -------
Realised gains/(losses) on gas derivative contracts 194.1 (144.3)
---------------------------------------------------- ------- -------
Put premiums on gas derivative instruments (1.1) (17.4)
---------------------------------------------------- ------- -------
Total revenue 1,248.1 1,337.6
---------------------------------------------------- ------- -------
Operating costs (300.7) (263.2)
---------------------------------------------------- ------- -------
Inventory movements and other items 32.3 (167.0)
---------------------------------------------------- ------- -------
Adjusted EBITDAX 979.7 907.4
---------------------------------------------------- ------- -------
Statutory net income was $159.6 million (H1 2022: $1,557.7
million) and adjusted net income was $253.2 million (H1 2022:
$233.4 million). A reconciliation between statutory net income and
adjusted net income is set out on page 13.
Total costs and charges
Total costs and charges amounted to $999.4 million (H1 2022:
credit of $403.8 million) and comprised: H1 2023 $m H1 2022 $m
Depletion, depreciation and amortisation (384.1) (297.4)
----------------------------------------- ------- -------
Operating costs (300.7) (263.2)
----------------------------------------- ------- -------
Movement in inventory 57.5 (186.1)
----------------------------------------- ------- -------
Royalties (3.2) (5.4)
----------------------------------------- ------- -------
Impairment (328.4) (7.6)
----------------------------------------- ------- -------
Exploration and evaluation (1.3) (9.5)
----------------------------------------- ------- -------
Other gains/(losses) 72.2 (27.5)
----------------------------------------- ------- -------
Administrative expenses (14.9) (26.7)
----------------------------------------- ------- -------
Gain on bargain purchase - 1,324.3
----------------------------------------- ------- -------
Net finance costs (96.5) (97.1)
----------------------------------------- ------- -------
Total costs and charges (999.4) 403.8
----------------------------------------- ------- -------
Depletion, depreciation and amortisation charges were $384.1
million (H1 2022: $297.4 million). The year-on-year increase is
principally due to the acquisitions made during 2022. Depletion,
depreciation and amortisation per barrel was $28 (H1 2022: $25)
with the increase driven mainly by the acquisitions made during H1
2022.
Operating costs amounted to $300.7 million (H1 2022: $263.2
million) with the increase driven mainly by higher production.
Movements in oil and gas inventories was a credit of $57.5
million (H1 2022: charge of $186.1 million) representing movements
in underlift/overlift entitlement imbalances.
Impairment charges of $328.4 million (H1 2022: $7.6 million)
principally reflects an impairment of development and production
assets relating to the Greater Stella Area field as a result of
lower future gas prices than previously forecast and a reduction in
planned activity as a direct result of the EPL (see note 3 for
further details).
Exploration and evaluation costs amounted to $1.3 million (H1
2022: $9.5 million) and principally relate to licence
relinquishments during the period.
Other gains of $72.2million (H1 2022: losses of $27.5 million)
comprise principally gains on financial instruments and a historic
claim relating to an acquisition which was settled in Q1 2023.
Administrative expenses were $14.9 million (H1 2022: $26.7 million)
with the reduction principally due to non-recurring transaction
costs in H1 2022.
Gain on bargain purchase in H1 2022 arose on the Marubeni and
Siccar Point Energy acquisitions (see 2022 Annual Report and
Accounts for further details).
Net finance costs were $96.5 million (H1 2022: $97.1 million)
with the reduction principally due to lower interest on related
party loans which were repaid during 2022 partly offset by higher
bank interest and higher accretion on decommissioning liabilities
as a result of a higher discount rate.
OPERATIONAL AND FINANCIAL REVIEW CONTINUED
Financial performance: net income
H1 2023
$m
H1 2022
$m
Profit before tax 248.7 1,741.3
--------------------------------- ------- ---------
Tax (89.1) (183.6)
--------------------------------- ------- ---------
Net income after tax 159.6 1,557.7
--------------------------------- ------- ---------
Gain on bargain purchase - (1,324.3)
--------------------------------- ------- ---------
Impairment charges 328.4 -
--------------------------------- ------- ---------
Tax credit on impairment charges (234.8) -
--------------------------------- ------- ---------
Adjusted net income(1) 253.2 233.4
--------------------------------- ------- ---------
1 Non-GAAP measure.
Adjusted net income was broadly in line with H1 2022 despite the
introduction of the EPL which added an incremental current tax
charge of $223.1 million for the first half of 2023.
Financial position: assets/liabilities/equity
30 June 2023 $m 31 December 2022 $m
Total assets 6,365.4 6,759.6
------------------------------------ --------- ---------
Total liabilities (3,853.3) (4,302.1)
------------------------------------ --------- ---------
Net assets and shareholders' equity 2,512.1 2,457.5
------------------------------------ --------- ---------
Assets
At 30 June 2023, total assets amounted to $6,365.4 million (31
December 2022: $6,759.6 million), of which current assets were
$878.6 million (31 December 2022: $988.7 million) and non-currents
assets were $5,486.8 million (31 December 2022: $5,770.9 million).
The decrease in total assets during the period was primarily due to
a reduction in the carrying value of property, plant and equipment
as the depreciation charge and impairment charges during the period
were significantly higher than fixed asset additions, a $59.2m
increase in exploration and evaluation assets primarily due to
additions during the period as well as a $103.3m increase in
deferred tax assets.
Liabilities
At 30 June 2023, total liabilities amounted to $3,853.3 million
(31 December 2022: $4,302.1 million) including decommissioning
provisions of $1,797.5 million (31 December 2022: $1,720.5 million)
and borrowings of
$866.0 million (31 December 2022: $1,213.7 million). The
decrease in total liabilities during the period was primarily due
to lower borrowings of $347.7 million (see cash flow on page 14), a
reduction in trade and other payables of
$190.5 million due to a lower level of unfavourably hedged
commodity positions, lower overlift at 30 June 2023 and lower
derivative financial instruments partly offset by an increase in
current tax payable of $156.0 million principally due to EPL.
Equity and reserves
At 30 June 2023, total equity and reserves amounted to $2,512.1
million (31 December 2022: $2,457.5 million) The increase in equity
and reserves during the period was primarily due to the retained
profit for the period partly offset by the interim dividend paid in
March.
Financial position: cash
H1 2023
$m
H1 2022
$m
Opening cash 253.8 44.9
--------------------------------------------- ------- ---------
Operating cash flows 691.0 989.0
--------------------------------------------- ------- ---------
Investing cash flows (221.6) (1,203.6)
--------------------------------------------- ------- ---------
Financing cash flows (548.1) 332.7
--------------------------------------------- ------- ---------
Foreign exchange 1.2 (2.6)
--------------------------------------------- ------- ---------
Net cash flow (77.5) 115.5
--------------------------------------------- ------- ---------
Closing cash 176.3 160.4
--------------------------------------------- ------- ---------
Undrawn borrowing facilities/restricted cash 615.0 160.0
--------------------------------------------- ------- ---------
Available liquidity 791.3 320.4
--------------------------------------------- ------- ---------
Operating cash flows
Net cash from operating activities amounted to $691.0 million
(H1 2022: $989.0 million) after accounting for adverse working
capital movements of $184.2 million (H1 2022: favourable movements
of $156.7 million) primarily due to changes in the
overlift/underlift position with the reduction principally due to
the working capital movement compared to H1 2022.
Investing cash flows
Cash flow used in investing activities amounted to $221.6
million (H1 2022: $1,203.6 million) reflecting capital expenditure
of $218.0 million (H1 2022: $230.3 million) driven mainly by the
Captain development project. H1 2022 included investing cash flows
related to acquisitions (net of cash acquired) of $957.5 million
being primarily driven by the Siccar Point Energy ($926.7 million)
acquisition.
Financing cash flows
Cash outflow from financing activities of $548.1 million (H1
2022: inflow of $332.7 million) with interest costs and lease
payments of $65.1 million (H1 2022: $67.5 million), a net repayment
of principal debt of $350.0 million (H1 2022: increase of $400.0
million) and the payment of the first interim dividend of $133.0
million (H1 2022: $nil).
Cash balances were $176.3 million (H1 2022: $160.4 million) at
the end of the period and available liquidity was $791.3 million
(H1 2022: $320.4 million).
OPERATIONAL AND FINANCIAL REVIEW CONTINUED
Subsequent events
On 11 July 2023, the Group announced that it had signed a Sale
and Purchase Agreement to acquire the 40% stake in the Fotla
Discovery that it doesn't already own and three exploration
licences from Spirit Energy Resources Limited. The agreement, which
is subject, amongst other things, to regulatory approval, will
bring the Group's working interest in Fotla to 100% providing
Ithaca Energy with full control over pre-final investment decision
work and timing. The total transaction consideration of up to $14.6
million, comprises two capped contingent payments of which
approximately two-thirds is payable on final investment decision
and one-third on first production.
On 26 July 2023, Ithaca Energy announced successful well test
results at the K2 prospect and as a result the Group, together with
its joint venture partner, have decided to perform an appraisal
sidetrack following the positive results in the main bore. The
Group holds a 50% working interest in this licence with the
remaining 50% working interest held by Dana Petroleum.
On 31 July 2023, the Group completed a new 5-year $100m
unsecured loan agreement with bp at a commercial interest rate.
Separately, a new offtake agreement was also completed with bp on
that date which runs concurrently with the loan agreement.
Going concern
Based on their assessment of the Group's financial position over
the period to 30 September 2024, the Directors believe that the
Group will be able to continue in operational existence for the
foreseeable future. Accordingly, they continue to adopt the going
concern basis of accounting in preparing the consolidated financial
statements. Further details are set out in note 3.
Derivative financial instruments
Derivative financial instruments are utilised to manage
commodity price risk in a substantive financial hedging programme
for future oil and gas production volumes. As at 30 June 2023, the
following hedges were in place:
H2 2023 2024 2025
============================================== ======= ========== ====
Oil
---------------------------------------------- ------- ---------- ----
Volume hedged (mmboe) 4.2 1.9 -
---------------------------------------------- ------- ---------- ----
Weighted average floor hedged price ($/bbl) 71 78 -
---------------------------------------------- ------- ---------- ----
Gas
---------------------------------------------- ------- ---------- ----
Volume hedged (mmboe) 1.5 2.1 0.2
---------------------------------------------- ------- ---------- ----
Weighted average floor hedged price (p/therm) 193 143 125
---------------------------------------------- ------- ---------- ----
Principal risks and uncertainties
The Group faces various risks that could result in events or
circumstances that might threaten our business model, future
performance, liquidity, solvency or reputation. Not all of these
risks are completely within the control of the business and the
Group may be affected by risks that have yet to manifest themselves
or are not reasonably foreseeable at the present time.
For those identified risks, the Group has mitigation strategies
to minimise the likelihood of the risk and reduce the impact as far
as is practicable. Depending on the nature of the risk, the Group
may elect to take or tolerate risk, treat risk with mitigating
actions, transfer risk to third parties, or eliminate risk by
ceasing certain operations or activities.
The Directors have reviewed the principal risks and
uncertainties facing the Group and have concluded that those facing
the Group for the remaining six months of the current financial
year are unchanged from the risks set out in the 2022 Annual Report
and Accounts. In reaching this conclusion, the Directors considered
changes in the internal and external environment during the
intervening period which could threaten the Group's business model,
future performance, liquidity, solvency or reputation.
The principal risks and uncertainties are as follows:
-- Major HSE incident
-- Cyber security breach
-- Access to capital
-- Capital project execution and delivery
-- Commodity price exposure and volatility
-- Production delivery issues
-- Energy transition and Net Zero delivery
-- Workforce recruitment and retention
-- Supply chain capacity and capability
-- Governmental regulatory, political policy and fiscal risk
-- Major compliance breach
Details of these principal risks and how they are being managed
are set out on pages 64 to 68 of the 2022 Annual Report and
Accounts.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors confirm that, to the best of their knowledge:
-- The condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting as contained
within UK adopted IFRS;
-- The half-yearly results statement includes a fair review of
the information required by DTR 4.2.7R (indication of important
events during the first six months and description of principal
risks and uncertainties for the remaining six months of the year);
and
-- The half-yearly results statement includes a fair review of
the information required by DTR 4.2.8R (disclosure of material
related parties' transactions and changes therein).
By order of the Board,
IAIN C S LEWIS
Director
22 August 2023
INDEPENT REVIEW REPORT TO ITHACA ENERGY PLC
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2023 which comprises:
-- The condensed consolidated statement of profit or loss;
-- The condensed consolidated statement of comprehensive income;
-- The condensed consolidated statement of financial position;
-- The condensed consolidated statement of changes in equity;
-- The condensed consolidated statement of cash flows; and
-- The related notes 1 to 19 to the condensed consolidated financial statements.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2023 is not prepared, in all material respects, in accordance
with United Kingdom adopted International Accounting Standard 34
and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410 "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" issued by the Financial Reporting Council for use in the
United Kingdom (ISRE (UK) 2410). A review of interim financial
information consists of making inquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with
International Standards on Auditing (UK) and consequently does not
enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
As disclosed in note 2, the annual financial statements of the
group are prepared in accordance with United Kingdom adopted
international accounting standards. The condensed set of financial
statements included in this half- yearly financial report has been
prepared in accordance with United Kingdom adopted International
Accounting Standard 34 Interim Financial Reporting.
Conclusion Relating to Going Concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
Conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This Conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410; however future events or conditions
may cause the entity to cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the directors are
responsible for assessing the company's ability to continue as a
going concern, disclosing as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial
information
In reviewing the half-yearly financial report, we are
responsible for expressing to the company a conclusion on the
condensed set of financial statements in the half-yearly financial
report. Our Conclusion, including our Conclusion Relating to Going
Concern, are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with
ISRE (UK) 2410. Our work has been undertaken so that we might state
to the company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the company, for our review work, for this
report, or for the conclusions we have formed.
DELOITTE LLP
Statutory Auditor London, United Kingdom 22 August 2023
2023 2022 2023 2022
Note US$'000 US$'000 US$'000 US$'000
(Unaudited) (Unaudited) (Unaudited) (Audited)
=============== ================================================================================================ ========================== ============================= ============================== =============================
Revenue 4 603,793 597,426 1,248,109 1,337,585
=============== ================================================================================================ ========================== ============================= ============================== =============================
Cost of sales 5 (327,480) (343,416) (630,391) (752,035)
--------------- ------------------------------------------------------------------------------------------------ -------------------------- ----------------------------- ------------------------------ -----------------------------
Gross profit 276,313 254,010 617,718 585,550
=============== ================================================================================================ ========================== ============================= ============================== =============================
Impairment
charge 3 (328,426) (7,608) (328,426) (7,608)
=============== ================================================================================================ ========================== ============================= ============================== =============================
Exploration
and evaluation
expenses - (7,945) (1,334) (9,550)
=============== ================================================================================================ ========================== ============================= ============================== =============================
Administrative
expenses (5,057) (13,192) (14,935) (26,746)
=============== ================================================================================================ ========================== ============================= ============================== =============================
Other
gains/(losses) 6 (18,752) (21,419) 72,239 (27,562)
=============== ================================================================================================ ========================== ============================= ============================== =============================
Gain on
bargain
purchase - 723,405 - 1,324,342
--------------- ------------------------------------------------------------------------------------------------ -------------------------- ----------------------------- ------------------------------ -----------------------------
Profit/(loss)
from
operations
before tax and
net finance
costs (75,922) 927,251 345,262 1,838,426
=============== ================================================================================================ ========================== ============================= ============================== =============================
Net finance
costs 7 (46,939) (47,606) (96,521) (97,081)
--------------- ------------------------------------------------------------------------------------------------ -------------------------- ----------------------------- ------------------------------ -----------------------------
Profit/(loss)
before tax (122,861) 879,645 248,741 1,741,345
=============== ================================================================================================ ========================== ============================= ============================== =============================
Income tax 12 124,006 (84,162) (89,155) (183,655)
--------------- ------------------------------------------------------------------------------------------------ -------------------------- ----------------------------- ------------------------------ -----------------------------
Profit
attributable
to owners of
the parent 1,145 795,483 159,586 1,557,690
--------------- ------------------------------------------------------------------------------------------------ -------------------------- ----------------------------- ------------------------------ -----------------------------
Three months ended 30 June Six months ended 30 June
2023 2022 2023 2022
Earnings per Note Cents Cents Cents Cents
share for
profit
attributable
to the
ordinary
equity holders
of the Company
=============== ================================================================================================ ========================== ============================= ============================== =============================
Basic earnings
per share 8 0.1 79.1 15.9 155.0
=============== ================================================================================================ ========================== ============================= ============================== =============================
Diluted
earnings per
share 8 0.1 79.1 15.7 154.8
=============== ================================================================================================ ========================== ============================= ============================== =============================
The results
above are
entirely
derived from
continuing
operations.
The
accompanying
notes on pages
26 to 44 are
an integral
part of the
financial
statements.
2023 2022 2023 2022
Note US$'000 US$'000 US$'000 US$'000
(Unaudited) (Unaudited) (Unaudited) (Audited)
===================================================== ===== ============= ============ ============= ============
Profit for the period 1,145 795,483 159,586 1,557,690
===================================================== ===== ============= ============ ============= ============
Items that may be reclassified to profit and loss
===================================================== ===== ============= ============ ============= ============
Fair value gain/(loss) on cash flow hedges and cost
of
hedging 16 (283) 189,916 83,178 (267,082)
===================================================== ===== ============= ============ ============= ============
Deferred tax (charge)/credit on cash flow hedges and
cost of hedging 12 135 (75,966) (62,292) 106,833
----------------------------------------------------- ----- ------------- ------------ ------------- ------------
Other comprehensive profit/(loss) (148) 113,950 20,886 (160,249)
----------------------------------------------------- ----- ------------- ------------ ------------- ------------
Total comprehensive profit attributable to owners of
the parent 997 909,433 180,472 1,397,441
----------------------------------------------------- ----- ------------- ------------ ------------- ------------
The accompanying notes on pages 26 to 44 are an
integral
part of the financial statements.
30 June 31 December
2023 2022
US$'000 US$'000
Note (Unaudited) (Audited)
================ ========================================================================================================================================= =============================== ===============================
Assets
================ ========================================================================================================================================= =============================== ===============================
Current assets
================ ========================================================================================================================================= =============================== ===============================
Cash and cash
equivalents 176,324 253,822
================ ========================================================================================================================================= =============================== ===============================
Trade and other
receivables 9 349,100 359,994
================ ========================================================================================================================================= =============================== ===============================
Decommissioning
receivable 9 24,115 38,115
================ ========================================================================================================================================= =============================== ===============================
Prepaid
expenses and
decommissioning
securities 7,748 9,055
================ ========================================================================================================================================= =============================== ===============================
Inventories 174,064 176,881
================ ========================================================================================================================================= =============================== ===============================
Derivative
financial
instruments 17 147,189 150,858
---------------- ----------------------------------------------------------------------------------------------------------------------------------------- ------------------------------- -------------------------------
878,540 988,725
================ ========================================================================================================================================= =============================== ===============================
Non-current
assets
================ ========================================================================================================================================= =============================== ===============================
Decommissioning
receivable 9 171,551 162,710
================ ========================================================================================================================================= =============================== ===============================
Exploration and
evaluation
assets 10 834,969 775,773
================ ========================================================================================================================================= =============================== ===============================
Property, plant
and equipment 11 3,191,071 3,634,896
================ ========================================================================================================================================= =============================== ===============================
Deferred tax
assets 12 495,715 392,456
================ ========================================================================================================================================= =============================== ===============================
Derivative
financial
instruments 17 9,668 21,191
================ ========================================================================================================================================= =============================== ===============================
Goodwill 783,848 783,848
---------------- ----------------------------------------------------------------------------------------------------------------------------------------- ------------------------------- -------------------------------
5,486,823 5,770,874
---------------- ----------------------------------------------------------------------------------------------------------------------------------------- ------------------------------- -------------------------------
Total assets 6,365,363 6,759,599
---------------- ----------------------------------------------------------------------------------------------------------------------------------------- ------------------------------- -------------------------------
Liabilities and
equity
================ ========================================================================================================================================= =============================== ===============================
Current
liabilities
================ ========================================================================================================================================= =============================== ===============================
Trade and other
payables (520,930) (711,412)
================ ========================================================================================================================================= =============================== ===============================
Current tax
payable (262,705) (106,678)
================ ========================================================================================================================================= =============================== ===============================
Decommissioning
liabilities 14 (86,929) (146,829)
================ ========================================================================================================================================= =============================== ===============================
Lease liability (42,634) (41,637)
================ ========================================================================================================================================= =============================== ===============================
Contingent and
deferred
consideration 15 (38,406) (107,680)
================ ========================================================================================================================================= =============================== ===============================
Derivative
financial
instruments 17 (23,283) (136,668)
---------------- ----------------------------------------------------------------------------------------------------------------------------------------- ------------------------------- -------------------------------
(974,887) (1,250,904)
---------------- ----------------------------------------------------------------------------------------------------------------------------------------- ------------------------------- -------------------------------
30 June 31 December
2023 2022
US$'000 US$'000
Note (Unaudited) (Audited)
================ ===================================================================================================================== ============================= ===============================
Non-current
liabilities
================ ===================================================================================================================== ============================= ===============================
Borrowings 13 (865,984) (1,213,731)
================ ===================================================================================================================== ============================= ===============================
Decommissioning
liabilities 14 (1,710,562) (1,573,711)
================ ===================================================================================================================== ============================= ===============================
Lease liability - (17,221)
================ ===================================================================================================================== ============================= ===============================
Contingent and
deferred
consideration 15 (291,759) (219,120)
================ ===================================================================================================================== ============================= ===============================
Derivative
financial
instruments 17 (10,071) (27,440)
---------------- --------------------------------------------------------------------------------------------------------------------- ----------------------------- -------------------------------
(2,878,376) (3,051,223)
---------------- --------------------------------------------------------------------------------------------------------------------- ----------------------------- -------------------------------
Total
liabilities (3,853,263) (4,302,127)
---------------- --------------------------------------------------------------------------------------------------------------------- ----------------------------- -------------------------------
Net assets 2,512,100 2,457,472
---------------- --------------------------------------------------------------------------------------------------------------------- ----------------------------- -------------------------------
Shareholders'
equity
================ ===================================================================================================================== ============================= ===============================
Share capital 11,445 11,445
================ ===================================================================================================================== ============================= ===============================
Share premium 293,712 293,712
================ ===================================================================================================================== ============================= ===============================
Capital
contribution
reserve 181,945 181,945
================ ===================================================================================================================== ============================= ===============================
Share-based
payment reserve 12,081 4,920
================ ===================================================================================================================== ============================= ===============================
Cash flow hedge
reserve 36,938 16,710
================ ===================================================================================================================== ============================= ===============================
Cost of hedging
reserve 3,933 3,275
================ ===================================================================================================================== ============================= ===============================
Retained
earnings 1,972,046 1,945,465
---------------- --------------------------------------------------------------------------------------------------------------------- ----------------------------- -------------------------------
Total equity 2,512,100 2,457,472
---------------- --------------------------------------------------------------------------------------------------------------------- ----------------------------- -------------------------------
The
accompanying
notes on pages
26 to 44 are
an integral
part
of the
financial
statements.
Approved on
behalf of the
Board on 22
August 2023:
IAIN C S
LEWIS,
Director
Retained
Share Share Capital Share-based Cash flow Cost of earnings/
capital premium contribution payment hedge reserve hedging (accumulated Total
reserve reserve reserve losses)
====================================================================================================================================================================================================================================================================================================================================
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
==================================================================================================================================================================================================================================================================================================================================== ============== ================ ===================== ================================================================================ ========================== ============================ =========================== ==========================
Balance at 1 January 2022 1 634,658 114,000 - (242,791) (4,862) 175,503 676,509
==================================================================================================================================================================================================================================================================================================================================== ============== ================ ===================== ================================================================================ ========================== ============================ =========================== ==========================
Total
comprehensive
income for the
period:
==================================================================================================================================================================================================================================================================================================================================== ============== ================ ===================== ================================================================================ ========================== ============================ =========================== ==========================
Profit for the period - - - - - - 1,557,690 1,557,690
==================================================================================================================================================================================================================================================================================================================================== ============== ================ ===================== ================================================================================ ========================== ============================ =========================== ==========================
Other
comprehensive
expense - - - - (43,649) (116,600) - (160,249)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ -------------- ---------------- --------------------- -------------------------------------------------------------------------------- -------------------------- ---------------------------- --------------------------- --------------------------
Total comprehensive income/(expense) for
the period - - - - (43,649) (116,600) 1,557,690 1,397,441
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ -------------- ---------------- --------------------- -------------------------------------------------------------------------------- -------------------------- ---------------------------- --------------------------- --------------------------
Balance at 30 June 2022 (Audited) 1 634,658 114,000 - (286,440) (121,462) 1,733,193 2,073,950
==================================================================================================================================================================================================================================================================================================================================== ============== ================ ===================== ================================================================================ ========================== ============================ =========================== ==========================
Balance at 1 January 2023 11,445 293,712 181,945 4,920 16,710 3,275 1,945,465 2,457,472
==================================================================================================================================================================================================================================================================================================================================== ============== ================ ===================== ================================================================================ ========================== ============================ =========================== ==========================
Dividend - - - - - - (133,005) (133,005)
==================================================================================================================================================================================================================================================================================================================================== ============== ================ ===================== ================================================================================ ========================== ============================ =========================== ==========================
Share-based
payment
charge - - - 7,161 - - - 7,161
==================================================================================================================================================================================================================================================================================================================================== ============== ================ ===================== ================================================================================ ========================== ============================ =========================== ==========================
Total
comprehensive
income for the
period:
==================================================================================================================================================================================================================================================================================================================================== ============== ================ ===================== ================================================================================ ========================== ============================ =========================== ==========================
Profit for the period - - - - - - 159,586 159,586
==================================================================================================================================================================================================================================================================================================================================== ============== ================ ===================== ================================================================================ ========================== ============================ =========================== ==========================
Other
comprehensive
income - - - - 20,228 658 - 20,886
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ -------------- ---------------- --------------------- -------------------------------------------------------------------------------- -------------------------- ---------------------------- --------------------------- --------------------------
Total comprehensive income for the period - - - - 20,228 658 159,586 180,472
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ -------------- ---------------- --------------------- -------------------------------------------------------------------------------- -------------------------- ---------------------------- --------------------------- --------------------------
Balance at 30 June 2023 11,445 293,712 181,945 12,081 36,938 3,933 1,972,046 2,512,100
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ -------------- ---------------- --------------------- -------------------------------------------------------------------------------- -------------------------- ---------------------------- --------------------------- --------------------------
The accompanying notes on pages 26 to 44
are an integral part of the financial statements.
Three months ended 30 June Six months ended 30 June
Cash provided by/(used in) operating activities:
Note
2023
US$'000
(Unaudited)
2022
US$'000
(Unaudited)
2023
US$'000
(Unaudited)
2022
US$'000
(Audited)
Profit/(loss)
before tax (122,861) 879,645 248,741 1,741,345
===================== =============================== ============================= ============================= ================================
Adjustments for:
===================== =============================== ============================= ============================= ================================
Depletion,
depreciation and
amortisation 11 195,386 152,387 384,120 297,417
===================== =============================== ============================= ============================= ================================
Exploration and
evaluation expenses - 7,945 1,334 9,550
===================== =============================== ============================= ============================= ================================
Impairment charge 328,426 7,608 328,426 7,608
===================== =============================== ============================= ============================= ================================
Increase in
contingent/deferred
consideration 26,103 14,449 1,725 14,449
===================== =============================== ============================= ============================= ================================
Loan fee
amortisation 1,103 1,127 2,254 2,282
===================== =============================== ============================= ============================= ================================
Revaluation of
financial
instruments (16,990) 12,294 (38,660) 18,676
===================== =============================== ============================= ============================= ================================
Prepaid put premiums 1,142 - 1,142 -
===================== =============================== ============================= ============================= ================================
Gain on bargain
purchase - (723,405) - (1,324,342)
===================== =============================== ============================= ============================= ================================
Hedging resets(1) - (10,017) - (20,318)
===================== =============================== ============================= ============================= ================================
Accretion 19,763 12,208 37,912 24,212
===================== =============================== ============================= ============================= ================================
Bank interest and
charges 26,072 49,366 56,355 52,920
===================== =============================== ============================= ============================= ================================
Interest on related
party loan - 17,924 - 17,924
===================== =============================== ============================= ============================= ================================
Interest rate swaps - (4,782) - (257)
===================== =============================== ============================= ============================= ================================
Unrealised foreign
exchange on cash
and cash
equivalents (1,582) 2,585 (1,219) 2,585
===================== =============================== ============================= ============================= ================================
Share-based payment
expenses 4,304 - 8,562 -
===================== =============================== ============================= ============================= ================================
Decommissioning
expenditure (31,314) (7,894) (56,771) (11,689)
--------------------- ------------------------------- ----------------------------- ----------------------------- --------------------------------
Operating cash flows
before movements in
working
capital 429,552 411,440 973,921 832,362
--------------------- ------------------------------- ----------------------------- ----------------------------- --------------------------------
Decrease in
inventories 5,909 8,013 2,818 42,945
===================== =============================== ============================= ============================= ================================
Decrease/(increase)
in trade and other
receivables 13,319 118,709 28,398 (58,228)
===================== =============================== ============================= ============================= ================================
(Decrease)/increase
in trade and other
payables (109,161) 167,142 (215,466) 171,954
===================== =============================== ============================= ============================= ================================
Corporation tax paid - - (98,719) -
--------------------- ------------------------------- ----------------------------- ----------------------------- --------------------------------
Net cash from
operating activities 339,619 705,304 690,952 989,033
--------------------- ------------------------------- ----------------------------- ----------------------------- --------------------------------
FOR THE THREE MONTHSED 31 MARCH
Three months ended 30 June Six months ended 30 June
2023 2022 2023 2022
Note US$'000 US$'000 US$'000 US$'000
(Unaudited) (Unaudited) (Unaudited) (Audited)
===================== ====== ======================= ======================= ======================= =======================
Cash used in
investing activities
===================== ====== ======================= ======================= ======================= =======================
Capital expenditure (120,322) (153,091) (218,002) (230,338)
============================= ======================= ======================= ======================= =======================
Acquisition of subsidiaries
net of cash acquired - (1,017,270) - (957,452)
============================= ======================= ======================= ======================= =======================
Contingent/deferred
consideration payment (1,220) (4,237) (3,568) (15,864)
----------------------------- ----------------------- ----------------------- ----------------------- -----------------------
Net cash used in investing
activities (121,542) (1,174,598) (221,570) (1,203,654)
----------------------------- ----------------------- ----------------------- ----------------------- -----------------------
Cash provided
by/(used in)
financing activities
===================== ====== ======================= ======================= ======================= =======================
Dividends paid - - (133,005) -
===================== ====== ======================= ======================= ======================= =======================
Payments for lease
liabilities (principal) (11,107) (9,621) (15,912) (13,018)
============================= ======================= ======================= ======================= =======================
Loan repayment (third party) (100,000) 600,000 (350,000) 400,000
============================= ======================= ======================= ======================= =======================
Bank interest and charges (7,634) (31,101) (49,182) (54,517)
============================= ======================= ======================= ======================= =======================
Interest rate swaps - 257 - 257
----------------------------- ----------------------- ----------------------- ----------------------- -----------------------
Net cash used in financing
activities (118,741) 559,535 (548,099) 332,722
----------------------------- ----------------------- ----------------------- ----------------------- -----------------------
Currency translation
differences relating to cash 1,583 (1,736) 1,219 (2,582)
----------------------------- ----------------------- ----------------------- ----------------------- -----------------------
Increase/(reduction) in cash
and cash equivalents 100,918 88,505 (77,498) 115,519
----------------------------- ----------------------- ----------------------- ----------------------- -----------------------
Cash and cash equivalents,
beginning of period 75,406 71,863 253,822 44,849
----------------------------- ----------------------- ----------------------- ----------------------- -----------------------
Cash and cash equivalents,
end of period 176,324 160,368 176,324 160,368
----------------------------- ----------------------- ----------------------- ----------------------- -----------------------
1. Hedging resets relate to
the amortisation of the
deferred
reset gains which have been
recycled to the current
year
profit and loss.
The accompanying notes on
pages 26 to 44 are an
integral
part of the financial
statements.
1. Nature of operations
Ithaca Energy plc (the Group or Ithaca Energy), is a Company
limited by shares incorporated and domiciled in the UK and is a
Group involved in the development and production of oil and gas in
the North Sea. The Group's registered office is 17 Hanover Square,
London, United Kingdom, W1S 1BN.
2. Basis of preparation
The condensed consolidated financial statements are prepared in
accordance with United Kingdom adopted International Accounting
Standard 34 Interim Financial Reporting as contained within UK
Adopted IFRS.
The condensed consolidated financial statements for the six
months ended 30 June 2023 do not include all the information
required for a full annual report and do not constitute statutory
accounts within the meaning of section 434(3) of the Companies Act
2006. The condensed consolidated financial statements for the six
month period ended 30 June 2023 are not audited but have been
reviewed by the auditor whose review report is set out on page 18.
The accounting policies adopted in the preparation of the H1 2023
condensed consolidated financial statements are consistent with
those adopted and disclosed in the Group's 2022 Annual Report and
Accounts. Comparative information for the year ended 31 December
2022 has been taken from the statutory accounts for that year, a
copy of which has been delivered to the Registrar of Companies. The
auditor's report on those accounts was not qualified, did not
include a reference to any matters to which the auditors drew
attention by way of emphasis and did not contain any statements
under section 498(2) or (3) of the Companies Act 2006. Comparative
information
for the six months ended 30 June 2022 has been taken from the
audited Historical Financial Information included in the IPO
Prospectus issued in November 2022. A number of amendments to
existing standards and interpretations were effective from 1
January 2023, as was IFRS 17 Insurance Contracts, but there was no
impact on the H1 2023 condensed consolidated financial statements.
The Group has not early adopted any standard, interpretation or
amendment that has been issued but is not yet effective.
The condensed consolidated financial statements are presented in
US dollars as this is the functional currency of the business. All
values are rounded to the nearest thousand (US$'000), except when
otherwise indicated.
In terms of segmental reporting, the Group currently operates a
single class of business being oil and gas exploration, development
and production and related activities in a single geographical
area, being presently the North Sea. The Group's segmental
reporting structure remained in place for all periods presented and
is consistent with the way in which the Group's activities are
presented to the Board and to the Chief Decision Making Officer.
The Group's activities are considered to be an individual operating
segment due to the nature of the Group's operations being uniform,
and such operations existing in a single geographical area which is
overseen by the same management and covered by the same
regulations.
These H1 2023 condensed consolidated financial statements are to
be read in conjunction with Ithaca Energy's Annual Report and
Accounts for the year ended 31 December 2022, which contains
additional accounting policy disclosure.
3. Accounting policies Basis of measurement
The condensed consolidated financial statements have been
prepared on a going concern basis using the historical cost
convention, except for the revaluation of certain financial assets
and financial liabilities (under IFRS) to fair value, including
derivative instruments. Historical cost is generally based on the
fair value consideration given in exchange for the assets.
Going concern
Management closely monitors the funding position of the Group
including monitoring compliance with covenants and available
facilities to ensure sufficient headroom is maintained to fund
operations. Management have considered a number of risks applicable
to the Group that may have an impact on the Group's ability to
continue as a going concern. Short-term and long-term cash
forecasts are prepared on a weekly and quarterly/annual basis
respectively along with any related sensitivity analysis. This
allows proactive management of any business risk including
liquidity risk.
The Directors consider the preparation of the condensed
financial statements on a going concern basis to be appropriate.
This is due to the following key factors:
-- Strong commodity markets and continuing robust commodity
price backdrop despite lower prices during H1 2023 and a well
hedged portfolio over the next 12 months;
-- A new 5-year $100 million loan agreement with bp entered into
after the end of the period (see note 19);
-- Reserves Based Lending (RBL) liquidity headroom of $615
million ($250 million drawn versus $865 million available), plus
$176 million of cash as at the end of June 2023; and
-- Strong operational performance and well-diversified portfolio.
3. Accounting policies continued
Cash flow forecast - base case assumptions: H2 2023 2024
========================================================= ====== ======= ====
Average oil price $/bbl 84 82
========================================================= ====== ======= ====
Average gas price p/th 88 126
========================================================= ====== ======= ====
Average hedged oil price (including floor price for zero
cost collars) $/bbl 72 77
========================================================= ====== ======= ====
Average hedged gas price (including floor price for zero
cost collars) p/th 190 143
--------------------------------------------------------- ------ ------- ----
Owing to the on-going fluctuations in commodity demand and price
volatility, management prepared sensitivity analysis to the
forecasts and applied a number of plausible downside scenarios
including decreases in production of 10%, reduced sales prices of
20% and increases in operating and capital expenditures of 10%.
Management aggregated these scenarios to create a reasonable
combined worst-case scenario. The sensitivity analysis showed that
there was no reasonably possible scenario that would result in the
business being unable to meet its liabilities as they fell due. The
Group would still continue to comply with financial covenants and
have sufficient liquidity throughout the period to 30 September
2024 to continue trading. In addition, mitigation strategies within
the control of management include the reduction in uncommitted
capital expenditure, variable opex savings in the low production
scenario, the cancellation or deferral of future dividends and
further potential to refinance the Group's borrowing
arrangements.
Based on their assessment of the Group's financial position in
the period to 30 September 2024, the Directors believe that the
Group will be able to continue in operational existence for the
foreseeable future. Accordingly, they continue to adopt the going
concern basis of accounting in preparing the H1 2023 condensed
consolidated financial statements.
Use of judgements and estimates
In preparing these H1 2023 condensed consolidated financial
statements, management has made judgements and estimates that
affect the application of accounting policies and the reported
amounts of assets and liabilities and income and expenses. Actual
results may differ from these estimates.
The key sources of estimation uncertainty that may have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next year are the same
as those described on page 150 of the Group's 2022 Annual Report
and Accounts with the below exception. The only critical accounting
judgement applied in the preparation of the H1 2023 condensed
consolidated financial statements is whether there has been an
indication of impairment in respect of the Cambo field, as
discussed further below.
Estimates in impairment of oil and gas assets and goodwill
Determination of whether the Group's oil and gas assets (note
11) or goodwill have suffered any impairment requires an estimation
of the recoverable amount of the cash generating unit (CGU) to
which the oil and gas assets and goodwill have been allocated.
Projected future cash flows are used to determine a fair value less
cost to sell to establish the recoverable amount. Key assumptions
and estimates in the impairment models relate to commodity prices
that are based on an internal view of forward price curves that are
considered to be a best estimate of what a market participant would
use, discount rate which reflect management's best estimate of a
market participant's post-tax weighted average cost of capital, and
oil and gas reserves and resources on a risked basis as described
in the 2022 Annual Report and Accounts. Management's best estimates
of a market participant's view of pricing and discount rates are
also supported by an independent consultant.
Following a quarterly review for indicators of impairment it was
identified that there were indicators of impairment relating to the
Greater Stella Area (GSA) CGU due to lower than previously forecast
future gas prices as well as a reduction in planned activity as a
direct result of the EPL. It was determined that the recoverable
amount of the GSA CGU was $273.5 million compared to a carrying
value of $568.2 million resulting in a pre-tax impairment charge of
$294.7 million. Separately, a pre-tax impairment charge of $33.7
million arose primarily on higher decommissioning costs on Fionn
and Anglia which are both fully depreciated and have ceased
production. The total impairment charge in the six months to 30
June 2023 was therefore $328.4 million (six months to 30 June 2022:
$7.6 million).
The H1 2023 impairment projections for GSA used a post-tax discount
rate of 10.5% and the following nominal commodity price assumptions:
H2 2023 2024 2025 2026 2027
====================================================================== ======= ==== ==== ==== ====
Oil ($/bbl) 84 87 90 92 93
====================================================================== ======= ==== ==== ==== ====
Gas (p/therm) 129 114 99 77 79
---------------------------------------------------------------------- ------- ---- ---- ---- ----
3. Accounting policies continued
Details of assumptions used for impairment testing for year
ending 31 December 2022 and 31 December 2021 are set out on pages
165 and 166 of the 2022 Annual Report and Accounts.
With all other assumptions held constant, a 20% decrease in
forecast revenues, illustrating lower commodity prices and/or
production volumes, would result in a further post-tax impairment
of GSA property, plant and equipment (PP&E) of $98 million. An
increase of 1% in the discount rate assumption would not have a
material impact on the post-tax impairment.
Management has reviewed the carrying value of the Cambo field
and has concluded that due to ongoing initiatives, including those
to address Shell's exit and the 31 March 2024 licence expiry, there
are currently no indicators of impairment. Further details are
provided in the Half Year 2023 Performance in Review.
Judgements and estimates made in assessing the impact of climate
change and the energy transition have not materially changed for
the H1 2023 consolidated condensed financial statements. Details of
these are set out on pages 141 and 142 of the 2022 Annual Report
and Accounts.
4. Revenue
Three months ended 30 June Six months ended 30 June
2023 2022 2023 2022
US$'000 US$'000 US$'000 US$'000
==================================================== ======== ======== ========= ============
Oil sales 336,821 474,968 650,176 973,326
==================================================== ======== ======== ========= ============
Gas sales 152,735 199,261 379,883 604,996
==================================================== ======== ======== ========= ============
NGL sales 12,837 20,338 26,434 35,297
==================================================== ======== ======== ========= ============
Other income 7,821 7,337 17,388 18,782
==================================================== ======== ======== ========= ============
Realised losses on oil derivative contracts (5,740) (73,043) (12,440) (125,908)
==================================================== ======== ======== ========= ============
Put premiums on oil derivative instruments (2,730) (3,645) (6,330) (7,254)
==================================================== ======== ======== ========= ============
Realised gains/(losses) on gas derivative contracts 103,191 (11,319) 194,140 (144,265)
==================================================== ======== ======== ========= ============
Put premiums on gas derivative instruments (1,142) (16,471) (1,142) (17,389)
---------------------------------------------------- -------- -------- --------- ------------
603,793 597,426 1,248,109 1,337,585
---------------------------------------------------- -------- -------- --------- ------------
The majority of payment terms are on a specified monthly date,
as detailed in the initial contract. Otherwise, payment is due
within 30 days of the invoice date. No significant judgements have
been made in determining the timing of satisfaction of performance
obligations, the transactions price and the amounts allocated to
performance obligations. Other income relates to tariff income
receivable in the year.
Revenue from two customers (30 June 2022: one customer) exceeds
10% of the Group's consolidated revenue arising from hydrocarbon
sales for the six months ended 30 June 2023, representing $689.6
million and $216.1 million respectively (six months ended 30 June
2022: $1,308.8 million).
Revenue from contracts with customers derives largely from
customers within a single geographical region, being the United
Kingdom. Revenue from contracts with customers out with the United
Kingdom is immaterial and is therefore not disclosed
separately.
5. Cost of sales
Three months ended 30 June Six months ended 30 June
2023 2022 2023 2022
US$'000 US$'000 US$'000 US$'000
============================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================== ===================== ========================= ========================= =========================
Movement in oil and gas inventory 18,709 (62,011) 57,546 (186,076)
============================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================== ===================== ========================= ========================= =========================
Operating
costs (149,531) (126,211) (300,652) (263,180)
============================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================== ===================== ========================= ========================= =========================
Royalties (1,273) (2,807) (3,165) (5,362)
============================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================== ===================== ========================= ========================= =========================
Depreciation
on
right-of-use
assets (10,534) (9,074) (20,953) (11,519)
============================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================== ===================== ========================= ========================= =========================
Depletion,
depreciation
and
amortisation (184,851) (143,313) (363,167) (285,898)
============================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================== ===================== ========================= ========================= =========================
(327,480) (343,416) (630,391) (752,035)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ --------------------- ------------------------- ------------------------- -------------------------
Royalty costs represent 3.34% of Stella and Harrier field revenue paid
to the original licence holders. Ithaca Energy holds a 100% interest in
the Stella and Harrier fields.
6. Other gains and losses
Three months ended 30 June Six months ended 30 June
2023 2022 2023 2022
US$'000 US$'000 US$'000 US$'000
============================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================== ===================== ========================= ========================= =========================
Gain/(loss) on financial instruments 13,521 (12,295) 27,485 (19,131)
============================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================== ===================== ========================= ========================= =========================
Fair value
losses on
contingent
consideration (26,103) (14,449) (1,725) (14,449)
============================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================== ===================== ========================= ========================= =========================
Net foreign
exchange (5,476) 5,325 (3,589) 6,018
============================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================================== ===================== ========================= ========================= =========================
Settlement of
historic
claim
relating to
an
acquisition (694) - 50,068 -
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ --------------------- ------------------------- ------------------------- -------------------------
(18,752) (21,419) 72,239 (27,562)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ --------------------- ------------------------- ------------------------- -------------------------
On 12 February 2023 the Group reached agreement on the
settlement of a historic claim relating to an acquisition. Under
the terms of the agreement Ithaca Energy received $50.1 million
which was recognised in the condensed consolidated financial
statements in Q1 2023.
7. Net finance costs
Three months ended 30 June Six months ended 30 June
2023 2022 2023 2022
US$'000 US$'000 US$'000 US$'000
============= =============================================================================================== ======================== ======================== ========================
Bank interest
and charges (12,165) (11,533) (28,964) (21,332)
============= =============================================================================================== ======================== ======================== ========================
Senior notes
interest (14,024) (14,024) (27,895) (27,894)
============= =============================================================================================== ======================== ======================== ========================
Loan fee
amortisation (1,103) (1,127) (2,254) (2,282)
============= =============================================================================================== ======================== ======================== ========================
Interest on
lease
liabilities (783) (1,829) (1,635) (1,829)
============= =============================================================================================== ======================== ======================== ========================
Interest on
related
party loan - (5,024) - (17,924)
============= =============================================================================================== ======================== ======================== ========================
Accretion (19,763) (12,208) (37,912) (24,212)
============= =============================================================================================== ======================== ======================== ========================
Realised
gains on
interest
derivative
contracts - 257 - 257
============= =============================================================================================== ======================== ======================== ========================
Interest
income 899 (253) 2,139 -
============= =============================================================================================== ======================== ======================== ========================
Other - (1,865) - (1,865)
------------- ----------------------------------------------------------------------------------------------- ------------------------ ------------------------ ------------------------
(46,939) (47,606) (96,521) (97,081)
------------- ----------------------------------------------------------------------------------------------- ------------------------ ------------------------ ------------------------
There was
no interest
capitalised
into
qualifying
assets in
either
the six
months to
30 June
2023 or the
six months
to 30 June
2022.
8. Earnings per share
The calculation of basic earnings per share is based on the
profit after tax and the weighted average number of ordinary shares
in issue during the period. Basic and diluted earnings per share
are calculated as follows:
Three months ended 30 June Six months ended 30 June
2023 2022 2023 2022
US$'000 US$'000 US$'000 US$'000
========== ============================================================================================================ ==================== ==================== ======================
Earnings
for the
period:
========== ============================================================================================================ ==================== ==================== ======================
Earnings
for the
purpose
of basic
earnings
per share 1,145 795,483 159,586 1,557,690
========== ============================================================================================================ ==================== ==================== ======================
Effect of - - - -
dilutive
potential
ordinary
shares
---------- ------------------------------------------------------------------------------------------------------------ -------------------- -------------------- ----------------------
Earnings
for the
purpose
of
diluted
earnings
per share 1,145 795,483 159,586 1,557,690
---------- ------------------------------------------------------------------------------------------------------------ -------------------- -------------------- ----------------------
Number of
shares
(million)
========== ============================================================================================================ ==================== ==================== ======================
Weighted
average
number of
ordinary
shares
for the
purpose
of basic
earnings
per share 1,006.6 1,005.2 1,006.6 1,005.2
========== ============================================================================================================ ==================== ==================== ======================
Dilutive
potential
ordinary
shares 6.9 0.9 6.9 0.9
---------- ------------------------------------------------------------------------------------------------------------ -------------------- -------------------- ----------------------
Weighted
average
number of
ordinary
shares
for the
purpose
of
diluted
earnings
per share 1,013.5 1,006.1 1,013.5 1,006.1
---------- ------------------------------------------------------------------------------------------------------------ -------------------- -------------------- ----------------------
Earnings
per share
(cents)
========== ============================================================================================================ ==================== ==================== ======================
Basic 0.1 79.1 15.9 155.0
========== ============================================================================================================ ==================== ==================== ======================
Diluted 0.1 79.1 15.7 154.8
---------- ------------------------------------------------------------------------------------------------------------ -------------------- -------------------- ----------------------
9. Trade and other receivables
30 June 31 December
2023 2022
Current US$'000 US$'000
=============================== ======== ===========
Trade receivables 41,350 31,906
=============================== ======== ===========
Other receivables 47,901 14,210
=============================== ======== ===========
Joint venture receivables 125,837 99,800
=============================== ======== ===========
Accrued income 134,012 214,078
------------------------------- -------- -----------
349,100 359,994
------------------------------- -------- -----------
The Group regularly monitors all customer receivable balances
outstanding in excess of 90 days for expected credit losses (ECLs).
The Group applies a simplified approach in calculating ECLs as
allowed under IFRS 9. Provision rates are calculated based on
estimates including the probability of default by assessing
counterparty credit ratings, the economic environment and the
Group's historical credit loss experience. Substantially all trade
and other receivables are current, being defined as less than 90
days, and as such no ECLs have been recognised in the current or
prior year as the ECL is considered immaterial.
30 June 31 December
Non-current 2023 2022
US$'000 US$'000
============================== ========= =============
Decommissioning reimbursement 171,551 162,710
------------------------------ --------- -------------
30 June 31 December
2023 2022
Current US$'000 US$'000
============================== ========= =============
Decommissioning reimbursement 24,115 38,115
------------------------------ --------- -------------
The decommissioning reimbursement represents the equal and
opposite of decommissioning liabilities, net of tax, associated
with the Heather and Strathspey fields and relates to a contractual
agreement as part of the CNSL acquisition. As part of the terms of
the CNSL acquisition, Chevron have the obligation to provide the
security and remain financially responsible for the decommissioning
obligations of CNSL in relation to these interests. As the payment
is virtually certain this has been accounted for under IAS 37 as a
reimbursement asset.
10. Exploration and evaluation assets
US$'000
========================================================= ========
At 1 January 2022 116,355
========================================================= ========
Additions 42,168
========================================================= ========
Acquisitions 706,558
========================================================= ========
Transfers to development and production assets (note 11) (75,005)
========================================================= ========
Write offs/relinquishments (14,303)
--------------------------------------------------------- --------
At 31 December 2022 and 1 January 2023 775,773
========================================================= ========
Additions 60,530
========================================================= ========
Write offs/relinquishments (1,334)
--------------------------------------------------------- --------
At 30 June 2023 834,969
--------------------------------------------------------- --------
10. Exploration and evaluation assets continued
Following completion of geotechnical evaluation activity,
certain North Sea licences were declared unsuccessful and certain
prospects were declared non-commercial. This resulted in the
carrying value of these licences being fully written off to nil
with $1.3 million being expensed in the six months to 30 June 2023
(six months to 30 June 2022: $14.3 million).
The principal exploration and evaluation assets at 30 June 2023
and 31 December 2022 are Cambo and Rosebank, which formed part of
the Siccar Point Energy acquisition in 2022.
11. Property,
plant and
equipment
Right-of-use Development Other fixed
operating and production assets Total
assets assets
US$'000 US$'000 US$'000 US$'000
================ =================================================================== ==================================================================================== ========================= ==========================
Cost
================ =================================================================== ==================================================================================== ========================= ==========================
At 1 January
2022 9,210 5,838,178 40,293 5,887,681
================ =================================================================== ==================================================================================== ========================= ==========================
Additions 89,717 362,844 5,619 458,180
================ =================================================================== ==================================================================================== ========================= ==========================
Acquisitions - 1,115,023 - 1,115,023
================ =================================================================== ==================================================================================== ========================= ==========================
Transfers from
exploration and
evaluation
assets
(note 10) - 75,005 - 75,005
================ =================================================================== ==================================================================================== ========================= ==========================
Change in
decommissioning
estimates - (278,398) - (278,398)
---------------- ------------------------------------------------------------------- ------------------------------------------------------------------------------------ ------------------------- --------------------------
At 31 December
2022 and 1
January 2023 98,927 7,112,652 45,912 7,257,491
================ =================================================================== ==================================================================================== ========================= ==========================
Additions - 268,217 504 268,721
---------------- ------------------------------------------------------------------- ------------------------------------------------------------------------------------ ------------------------- --------------------------
At 30 June 2023 98,927 7,380,869 46,416 7,526,212
---------------- ------------------------------------------------------------------- ------------------------------------------------------------------------------------ ------------------------- --------------------------
Depletion,
depreciation,
amortisation and
Impairment
================ =================================================================== ==================================================================================== ========================= ==========================
At 1 January
2022 (5,429) (2,909,695) (13,824) (2,928,948)
================ =================================================================== ==================================================================================== ========================= ==========================
Depletion, (37,438) (615,261) (10,248) (662,947)
depreciation and
amortisation
charge for
the year
================ =================================================================== ==================================================================================== ========================= ==========================
Impairment
charge - (30,700) - (30,700)
---------------- ------------------------------------------------------------------- ------------------------------------------------------------------------------------ ------------------------- --------------------------
At 31 December
2022 and 1
January 2023 (42,867) (3,555,656) (24,072) (3,622,595)
================ =================================================================== ==================================================================================== ========================= ==========================
Depletion, (20,953) (359,562) (3,605) (384,120)
depreciation and
amortisation
charge for
the period
================ =================================================================== ==================================================================================== ========================= ==========================
Impairment
charge - (328,426) - (328,426)
---------------- ------------------------------------------------------------------- ------------------------------------------------------------------------------------ ------------------------- --------------------------
At 30 June 2023 (63,820) (4,243,644) (27,677) (4,335,141)
---------------- ------------------------------------------------------------------- ------------------------------------------------------------------------------------ ------------------------- --------------------------
Net book value
at 31 December
2022 56,060 3,556,996 21,840 3,634,896
---------------- ------------------------------------------------------------------- ------------------------------------------------------------------------------------ ------------------------- --------------------------
Net book value
at 30 June 2023 35,107 3,137,225 18,739 3,191,071
---------------- ------------------------------------------------------------------- ------------------------------------------------------------------------------------ ------------------------- --------------------------
The transfers from exploration and evaluation assets to
development and production assets in the year to 31 December 2022
relates to the Abigail and Jade South wells. At the point of
transfer these assets were tested for impairment and none was
found.
Other fixed assets includes buildings, computer equipment,
office equipment and furniture and fittings.
As at 30 June 2023 the Group had capital commitments of $89.0
million (31 December 2022: $52.3 million). The key components at 30
June 2023 relate to the Captain Enhanced Oil Recovery (EOR)
project. At 31 December 2022, the commitments related primarily to
the Captain EOR project and drilling at the Shaw field.
12. Taxation
Three months ended 30 June Six months ended 30 June
2023 2022 2023 2022
US$'000 US$'000 US$'000 US$'000
================ =========================================================================================================================================================== ======================== =============================== =========================
Current tax
================ =========================================================================================================================================================== ======================== =============================== =========================
Current
corporation tax
charge (21,382) - (31,695) -
================ =========================================================================================================================================================== ======================== =============================== =========================
Current EPL tax
charge (96,543) - (223,051)
================ =========================================================================================================================================================== ======================== =============================== =========================
Total current
tax charge (117,925) - (254,746) -
================ =========================================================================================================================================================== ======================== =============================== =========================
Deferred tax
================ =========================================================================================================================================================== ======================== =============================== =========================
Adjustment in
respect of
prior period 371 - (16,357) (1)
================ =========================================================================================================================================================== ======================== =============================== =========================
Group tax
credit/(charge)
in consolidated
statement of
profit or loss 242,735 (62,620) 183,123 (162,112)
================ =========================================================================================================================================================== ======================== =============================== =========================
Group tax
(charge)/credit
in consolidated
statement of
other
comprehensive
income 135 (75,966) (62,292) 106,833
---------------- ----------------------------------------------------------------------------------------------------------------------------------------------------------- ------------------------ ------------------------------- -------------------------
Total deferred
tax
credit/(charge) 243,241 (138,586) 104,474 (55,280)
================ =========================================================================================================================================================== ======================== =============================== =========================
Deferred PRT
charge in
consolidated
statement of
profit
or loss (1,175) (21,542) (1,175) (21,542)
---------------- ----------------------------------------------------------------------------------------------------------------------------------------------------------- ------------------------ ------------------------------- -------------------------
Total tax
credit/(charge)
through
consolidated
statement
of profit or
loss 124,006 (84,162) (89,155) (183,655)
---------------- ----------------------------------------------------------------------------------------------------------------------------------------------------------- ------------------------ ------------------------------- -------------------------
The tax on the Group's profit before tax differs from the
theoretical amount that would arise using the 40% statutory rate of
tax applicable for UK ring fence oil and gas activities as
follows:
Three months ended 30 June Six months ended 30 June
2023 2022 2023 2022
US$'000 US$'000 US$'000 US$'000
================= ======================================================================================================================= ======================== ========================= =========================
Accounting
profit/(loss)
before tax (122,861) 879,645 248,741 1,741,345
----------------- ----------------------------------------------------------------------------------------------------------------------- ------------------------ ------------------------- -------------------------
At tax rate of
40% (2022: 40%) 49,144 (351,858) (99,497) (696,538)
================= ======================================================================================================================= ======================== ========================= =========================
Non-deductible
(expense)/income (24,158) 259,885 (6,085) 484,888
================= ======================================================================================================================= ======================== ========================= =========================
Financing costs
not allowed for
Supplementary
Charge (133) (507) (530) (1,015)
================= ======================================================================================================================= ======================== ========================= =========================
Ring Fence
Expenditure
Supplement 25,727 17,490 53,076 34,888
================= ======================================================================================================================= ======================== ========================= =========================
Deferred tax
effect of
investment
allowance 10,859 3,719 18,886 7,253
================= ======================================================================================================================= ======================== ========================= =========================
Prior year
adjustment 371 (1) (16,357) (1)
================= ======================================================================================================================= ======================== ========================= =========================
Deferred tax on
EPL 160,887 - 189,389 -
================= ======================================================================================================================= ======================== ========================= =========================
Current tax on
EPL (96,543) - (223,051) -
================= ======================================================================================================================= ======================== ========================= =========================
Net deferred tax
PRT (705) (12,926) (705) (12,926)
----------------- ----------------------------------------------------------------------------------------------------------------------- ------------------------ ------------------------- -------------------------
Share Schemes (1,059) - (1,059) -
----------------- ----------------------------------------------------------------------------------------------------------------------- ------------------------ ------------------------- -------------------------
Unrecognised tax
losses (384) 36 (3,222) (204)
----------------- ----------------------------------------------------------------------------------------------------------------------- ------------------------ ------------------------- -------------------------
Total tax
credit/(charge)
recorded in the
consolidated
statement of
profit or loss 124,006 (84,162) (89,155) (183,655)
----------------- ----------------------------------------------------------------------------------------------------------------------- ------------------------ ------------------------- -------------------------
12. Taxation continued
The Company is UK tax resident. The effective rate of tax
applicable for UK ring fence oil and gas activities in 2023, was
40% (excluding the Energy Profits Levy ("EPL") of 35%) (2022: 40%
excluding EPL of 25%) consisting of a Ring Fence Corporation Tax
rate of 30% and the supplementary charge of 10%. Items affecting
the tax charge include a 10% uplift on ring fence losses, Ring
Fence Expenditure Supplement increasing the losses available to
offset future profits subject to Ring Fence Corporation Tax and
Supplementary Charge. In addition, investment allowance, a 62.5%
uplift on capital expenditure, is available reducing the profits
subject to the supplementary charge only. Petroleum Revenue Tax
(PRT) is applied at 0% on certain oil and gas fields in the UK,
however adjustments to recognise deferred PRT assets are made to
reflect updated expectations of reversal against profits subject to
the 0% PRT rate. The EPL was enacted on 14 July 2022 with further
changes announced on 17 November 2022 such that the Levy was
increased to 35% from 1 January 2023 until 31 March 2028,
increasing the effective UK ring fenced oil and gas tax rate to
75%.
Deferred tax at 30 June 2023 and 31 December 2022 relates to
the following:
30 June 31 December
2023 2022
US$'000 US$'000
============================================================= =========== =============
Deferred corporation tax liability (1,958,159) (2,258,813)
============================================================= =========== =============
Deferred corporation tax asset 2,433,327 2,629,548
============================================================= =========== =============
Deferred PRT asset 20,547 21,721
------------------------------------------------------------- ----------- -------------
Net deferred tax asset 495,715 392,456
------------------------------------------------------------- ----------- -------------
Deferred tax assets primarily relate to decommissioning
liabilities, brought forward tax losses, and accumulated losses and
profits related to derivative contracts. Deferred tax liabilities
primarily relate to accelerated capital allowances on property,
plant and equipment and accumulated losses and profits related to
derivative contracts.
The gross movement on the deferred tax account in the balance
sheet is as follows:
30 June 31 December
2023 2022
US$'000 US$'000
============================================================== ======== =============
At 1 January 392,456 220,918
============================================================== ======== =============
Profit or loss credit/(charge) 165,551 (1,024,889)
============================================================== ======== =============
Other comprehensive income charge (62,292) (200,455)
============================================================== ======== =============
Business combinations - 1,396,882
-------------------------------------------------------------- -------- -------------
At end of period 495,715 392,456
-------------------------------------------------------------- -------- -------------
12. Taxation continued
The net movement on the deferred tax account through the
consolidated statement of profit or loss and consolidated statement
of comprehensive income relates to the following:
6 months 6 months
ended ended
30 June 30 June
2023 2022
US$'000 US$'000
=========================================================================================================== ===================== ===============
Accelerated
capital
allowances 327,032 23,129
================= ======================================================================================== ===================== ===============
Tax losses (146,427) (212,316)
================= ======================================================================================== ===================== ===============
Abandonment
provision 30,783 5,941
================= ======================================================================================== ===================== ===============
Deferred PRT 470 8,617
================= ======================================================================================== ===================== ===============
Hedging (86,672) 119,349
----------------- ---------------------------------------------------------------------------------------- --------------------- ---------------
Share Schemes 3,374 -
----------------- ---------------------------------------------------------------------------------------- --------------------- ---------------
Investment
Allowances (24,086) -
----------------- ---------------------------------------------------------------------------------------- --------------------- ---------------
Net movement in
the period 104,474 (55,280)
----------------- ---------------------------------------------------------------------------------------- --------------------- ---------------
Deferred
corporation Accelerated
tax on tax
deferred PRT depreciation Total
Gross deferred US$000 US$000 US$000
corporation tax
liabilities
================= ======================================================================================== ===================== ===============
At 1 January 2022 (12,861) (675,279) (688,140)
================= ======================================================================================== ===================== ===============
Prior year
adjustment - (4,347) (4,347)
================= ======================================================================================== ===================== ===============
Reclassification
of
decommissioning
assets - (436,771) (436,771)
================= ======================================================================================== ===================== ===============
Business
combinations - (647,743) (647,743)
================= ======================================================================================== ===================== ===============
Origination and
reversal of
temporary
differences 4,173 (485,985) (481,812)
----------------- ---------------------------------------------------------------------------------------- --------------------- ---------------
At 31 December
2022 (8,688) (2,250,125) (2,258,813)
================= ======================================================================================== ===================== ===============
Prior year
adjustment - (7,307) (7,307)
================= ======================================================================================== ===================== ===============
Origination and
reversal of
temporary
differences 470 307,493 307,963
----------------- ---------------------------------------------------------------------------------------- --------------------- ---------------
At 30 June 2023 (8,218) (1,949,939) (1,958,157)
----------------- ---------------------------------------------------------------------------------------- --------------------- ---------------
12. Taxation
continued
Shares schemes Abandonment
provision Tax losses Hedges Total
Gross deferred US$000 US$000 US$000 US$000 US$000
corporation tax
assets
================= ============================================================================================================================= =========================== ========================== ========================= ===========================
At 1 January 2022 - 197,666 500,282 178,956 876,904
================= ============================================================================================================================= =========================== ========================== ========================= ===========================
Prior year
adjustment - - 3,706 - 3,706
================= ============================================================================================================================= =========================== ========================== ========================= ===========================
Reclassification
of
decommissioning
asset - 436,772 - - 436,772
================= ============================================================================================================================= =========================== ========================== ========================= ===========================
Business
combinations - 156,212 1,858,706 38,406 2,053,324
================= ============================================================================================================================= =========================== ========================== ========================= ===========================
Origination and
reversal of
temporary
differences - (124,598) (390,520) (226,040) (741,158)
----------------- ----------------------------------------------------------------------------------------------------------------------------- --------------------------- -------------------------- ------------------------- ---------------------------
At 31 December
2022 - 666,052 1,972,174 (8,678) 2,629,548
================= ============================================================================================================================= =========================== ========================== ========================= ===========================
Prior year
adjustment 177 - (12,141) 2,721 (9,243)
================= ============================================================================================================================= =========================== ========================== ========================= ===========================
Origination and
reversal of
temporary
differences 3,198 30,783 (134,286) (86,672) (186,977)
----------------- ----------------------------------------------------------------------------------------------------------------------------- --------------------------- -------------------------- ------------------------- ---------------------------
At 30 June 2023 3,375 696,835 1,825,747 (92,629) 2,433,328
----------------- ----------------------------------------------------------------------------------------------------------------------------- --------------------------- -------------------------- ------------------------- ---------------------------
Total
Deferred PRT $000
asset
================= ============================================================================================================================= =========================== ========================== ========================= ===========================
At 1 January 2022 32,154
================= ============================================================================================================================= =========================== ========================== ========================= ===========================
Origination and
reversal of
temporary
differences (10,433)
----------------- ----------------------------------------------------------------------------------------------------------------------------- --------------------------- -------------------------- ------------------------- ---------------------------
At 31 December
2022 21,721
================= ============================================================================================================================= =========================== ========================== ========================= ===========================
Origination and
reversal of
temporary
differences (1,175)
----------------- ----------------------------------------------------------------------------------------------------------------------------- --------------------------- -------------------------- ------------------------- ---------------------------
At 30 June 2023 20,546
----------------- ----------------------------------------------------------------------------------------------------------------------------- --------------------------- -------------------------- ------------------------- ---------------------------
The carrying value of the net deferred corporation tax asset at
30 June 2023 of $475 million (31 December 2022: $371 million) and
the deferred PRT asset of $21 million (31 December 2022: $21
million) are supported by estimates of the Group's future taxable
income, based on the same price and cost assumptions as used for
impairment testing.
An EPL or "the Levy" was enacted on 14 July 2022 applying a Levy
of 25% to the profits of oil and gas companies until 31 December
2025 or earlier if prices return to normalised levels. On 17
November 2022, the Levy was increased to 35% and extended to 31
March 2028 regardless of prices. The Levy is charged upon oil and
gas profits calculated on the same basis as Ring Fence Corporation
Tax (RFCT), however excludes relief for decommissioning and finance
costs. RFCT losses and investment allowance are not available to
offset the EPL. On 9 June 2023 an Energy Security Investment
Mechanism price floor was announced which would remove the EPL if
both average oil and gas prices fall to, or below, $71.40 per
barrel for oil and GBP0.54 per therm for gas, for two consecutive
quarters. It is not currently forecast that this price floor will
be met for both oil and gas prices and therefore there is no impact
on the tax values.
The Group's deferred tax assets are recognised to the extent
that taxable profits are expected to arise in the future against
which tax losses and allowances in the UK can be utilised,
including as a result of Group re-organisations and asset
transfers. In accordance with IAS 12 Income Taxes, the Group
assesses the recoverability of its deferred tax assets at each
period end.
On 20 June 2023, Finance (No. 2) Act 2023 was substantially
enacted in the UK, introducing a global minimum effective tax rate
of 15%. The legislation implements a domestic top-up tax and a
multinational top-up tax, effective for accounting periods starting
on or after 31 December 2023. The Group has applied the exception
under IAS 12 to recognising and disclosing information about
deferred tax assets and liabilities related to top-up income taxes,
therefore there is no impact on the tax values reported.
13. Borrowings
30 June 31 December
2023 2022
US$'000 US$'000
==================================================================== ========= =============
Non-current
==================================================================== ========= =============
RBL facility (250,000) (600,000)
==================================================================== ========= =============
Senior unsecured notes (625,000) (625,000)
==================================================================== ========= =============
Unamortised long-term bank fees 6,073 7,591
==================================================================== ========= =============
Unamortised long-term senior notes fees 2,943 3,678
-------------------------------------------------------------------- --------- -------------
Total debt (865,984) (1,213,731)
-------------------------------------------------------------------- --------- -------------
Accrued interest on borrowings is included within accruals.
Adjusted net debt, which does not include lease liabilities, is set
out in Non-GAAP measures on page 46.
Details of covenants under the RBL facility are set out in note 20
to the 2022 Annual Report and Accounts.
The Group was in compliance with all financial covenants of the RBL
facility in all periods presented.
14. Decommissioning liabilities
30 June 31 December
2023 2022
US$'000 US$'000
===================================== =========== =============
Balance at 1 January (1,720,540) (1,641,489)
===================================== =========== =============
Business combination additions - (390,530)
===================================== =========== =============
Accretion (36,485) (52,592)
===================================== =========== =============
Additions and revisions to estimates (97,238) 298,564
===================================== =========== =============
Decommissioning provision utilised 56,772 65,507
------------------------------------- ----------- -------------
Balance, end of period (1,797,491) (1,720,540)
------------------------------------- ----------- -------------
Current
===================================== =========== =============
Balance, beginning of period (146,829) (94,640)
------------------------------------- ----------- -------------
Balance, end of period (86,929) (146,829)
------------------------------------- ----------- -------------
Non-current
===================================== =========== =============
Balance, beginning of period (1,573,711) (1,546,849)
------------------------------------- ----------- -------------
Balance, end of period (1,710,562) (1,573,711)
------------------------------------- ----------- -------------
The total future decommissioning liability represents the
estimated cost to decommission, in situ or by removal, the Group's
net ownership interest in all wells, infrastructure and facilities,
based upon forecast timing in future periods. The Group uses a
discount rate of 4.25% (31 December 2022: 4.25%) and an inflation
rate of 2.0% (31 December 2022: 2.0%) over the varying lives of the
assets to calculate the present value of the decommissioning
liabilities. Revisions to estimates in the six months ended 30 June
2023 were due to changes in cost estimates and in the year ended 31
December 2022 were due to changes in both cost estimates and
discount rate assumptions. Further details including a sensitivity
on the impact of a change in the discount rate are set out in the
2022 Annual Report and Accounts.
The estimated decommissioning spend in H2 2023 and H1 2024 of
$87 million has been treated as a current liability as at 30 June
2023 (31 December 2022: estimated 2023 spend of $147 million). The
Group currently expects to
incur decommissioning costs over the next 40 years.
15. Contingent and deferred consideration
30 June 31 December
2023 2022
Current US$'000 US$'000
================================================================== ========= =============
Contingent consideration (32,220) (101,559)
================================================================== ========= =============
Petrofac deferred consideration (6,186) (6,121)
------------------------------------------------------------------ --------- -------------
(38,406) (107,680)
------------------------------------------------------------------ --------- -------------
30 June 31 December
2023 2022
Non-current US$'000 US$'000
================================================================== ========= =============
Contingent consideration (229,319) (157,337)
================================================================== ========= =============
Deferred consideration (62,440) (61,783)
------------------------------------------------------------------ --------- -------------
(291,759) (219,120)
------------------------------------------------------------------ --------- -------------
Movement in contingent consideration and deferred consideration
is as follows:
30 June 31 December
2023 2022
US$'000 US$'000
================================================================== ========= =============
At beginning of period (326,800) (75,090)
================================================================== ========= =============
Business combinations - (304,846)
================================================================== ========= =============
Utilisation 3,568 66,132
================================================================== ========= =============
Reversal - 1,100
================================================================== ========= =============
Accretion (5,208) (9,801)
================================================================== ========= =============
Changes in fair value (1,725) (4,295)
------------------------------------------------------------------ --------- -------------
At end of period (330,165) (326,800)
------------------------------------------------------------------ --------- -------------
Cash outflows in the six months to 30 June 2023 of $3.6 million
are in respect of MOGL deferred consideration and the cash outflows
in the year to 31 December 2022 of $66.1 million are in relation to
the consideration payable on Petrofac GSA transaction and three
quarterly payments in consideration to the MOGL oil price
trigger.
Details of movements in contingent and deferred consideration in
the year to 31 December 2022 and sensitivities thereon are set out
in note 25 of the Group's 2022 Annual Report and Accounts.
16. Financial instruments
To estimate the fair value of financial instruments, the Group
uses quoted market prices when available, or industry accepted
third-party models and valuation methodologies that utilise
observable market data. In addition to market information, the
Group incorporates transaction specific details that market
participants would utilise in a fair value measurement, including
the impact of non-performance risk. The Group characterises inputs
used in determining fair value using a hierarchy that prioritises
inputs depending on the degree to which they are observable.
However, these fair value estimates may not necessarily be
indicative of the amounts that could be realised or settled in a
current market transaction. The three levels of the fair value
hierarchy are as follows:
-- Level 1 - inputs represent quoted prices in active markets
for identical assets or liabilities (for example, exchange-traded
commodity derivatives). Active markets are those in which
transactions occur in sufficient frequency and volume to provide
pricing information on an ongoing basis.
-- Level 2 - inputs other than quoted prices included within
Level 1 that are observable, either directly or indirectly, as of
the reporting date. Level 2 valuations are based on inputs,
including quoted forward prices for commodities, market interest
rates, and volatility factors, which can be observed or
corroborated in the marketplace. The Group obtains information from
sources such as the New York Mercantile Exchange and independent
price publications.
-- Level 3 - inputs that are less observable, unavailable or
where the observable data does not support the majority of the
instrument's fair value.
In forming estimates, the Group utilises the most observable
inputs available for valuation purposes. If a fair value
measurement reflects inputs of different levels within the
hierarchy, the measurement is categorised based upon the lowest
level of input that is significant to the fair value measurement.
The valuation of over-the-counter financial swaps and collars is
based on similar transactions observable in active markets or
industry standard models that primarily rely on market observable
inputs. Substantially all of the assumptions for industry standard
models are observable in active markets throughout the full term of
the instrument. These are categorised as Level 2.
Gains or losses on financial instruments, that are not hedge
accounted for, are recorded through the 'other gains and losses'
line in the consolidated statement of profit or loss. Valuation
policies and procedures and sensitivities on the fair values of
financial instruments are set out in the 2022 Annual Report and
Accounts.
All of the Group's assets are pledged as security
against borrowings.
The accounting classification of each category of
financial instruments
and their carrying amounts as at 30 June 2023 are
set out below:
Mandatorily Derivatives
measured designated
Measured at at fair in hedge Total
value through carrying
amortised cost profit relationships amount
$'000 or loss $'000 $'000
$'000
=================================================== ============== ================== =============== ============
Financial assets
=================================================== ============== ================== =============== ============
Cash and cash equivalents 176,324 - - 176,324
=================================================== ============== ================== =============== ============
Trade and other receivables 349,100 - - 349,100
=================================================== ============== ================== =============== ============
Derivative financial instruments - 3,710 153,147 156,857
=================================================== ============== ================== =============== ============
Financial liabilities
=================================================== ============== ================== =============== ============
Borrowings (865,984) - - (865,984)
=================================================== ============== ================== =============== ============
Trade and other payables (452,364) - - (452,364)
=================================================== ============== ================== =============== ============
Lease liability (42,633) - - (42,633)
=================================================== ============== ================== =============== ============
Contingent and deferred consideration (68,626) (261,539) - (330,165)
=================================================== ============== ================== =============== ============
Derivative financial instruments - (20,382) (12,973) (33,355)
--------------------------------------------------- -------------- ------------------ --------------- ------------
(1,042,220)
--------------------------------------------------- -------------- ------------------ --------------- ------------
16. Financial instruments
continued
The accounting
classification of each
category of financial
instruments
and their carrying amounts
as at 31 December 2022 are
set out below:
Mandatorily Derivatives
measured designated
Measured at at fair in hedge Total carrying
value through
amortised profit or relationships amount
cost loss $'000 $'000
$'000 $'000
============================ =========================== ================== ================== ===================
Financial assets
============================ =========================== ================== ================== ===================
Cash and cash equivalents 253,822 - - 253,822
============================ =========================== ================== ================== ===================
Trade and other receivables 359,994 - - 359,994
============================ =========================== ================== ================== ===================
Derivative financial
instruments - 7,125 164,924 172,049
============================ =========================== ================== ================== ===================
Financial liabilities
============================ =========================== ================== ================== ===================
Borrowings (1,213,731) - - (1,213,731)
============================ =========================== ================== ================== ===================
Trade and other payables (618,460) - - (618,460)
============================ =========================== ================== ================== ===================
Lease liability (58,858) - - (58,858)
============================ =========================== ================== ================== ===================
Contingent and deferred
consideration (67,904) (258,896) - (326,800)
============================ =========================== ================== ================== ===================
Derivative financial
instruments - (57,546) (106,563) (164,109)
---------------------------- --------------------------- ------------------ ------------------ -------------------
(1,596,093)
---------------------------- --------------------------- ------------------ ------------------ -------------------
The following table
presents the Group's
material financial
instruments
measured at fair value for
each hierarchy level as of
30 June 2023:
Level 1 Level 2 Level Total
US$'000 US$'000 3 US$'000 fair value
US$'000
============================ =========================== ================== ================== ===================
Contingent consideration - (46,067) (215,472) (261,539)
============================ =========================== ================== ================== ===================
Derivative financial
instrument asset - 156,857 - 156,857
============================ =========================== ================== ================== ===================
Derivative financial
instrument liability - (33,354) - (33,354)
---------------------------- --------------------------- ------------------ ------------------ -------------------
The following table
presents the Group's
material financial
instruments
measured at fair value for
each hierarchy level as of
31 December
2022:
Level 1 Level 2 Level 3 Total fair
US$'000 US$'000 US$'000 value
US$'000
============================ =========================== ================== ================== ===================
Contingent consideration - (35,650) (223,246) (258,896)
============================ =========================== ================== ================== ===================
Derivative financial
instrument asset - 172,049 - 172,049
============================ =========================== ================== ================== ===================
Derivative financial
instrument liability - (164,109) - (164,109)
---------------------------- --------------------------- ------------------ ------------------ -------------------
16. Financial instruments continued
The table below presents the total gain/(loss) on financial
instruments that has been disclosed through the statement of profit
or loss:
Three months ended 30 June Six months ended 30 June
2023 2022 2023 2022
US$'000 US$'000 US$'000 US$'000
===================================================== ============================ ========= ========= =========
Revaluation of forex forward contracts 3,540 (14,862) 5,000 (19,131)
===================================================== ============================ ========= ========= =========
Revaluation of interest rate swaps (891) - (2,535) -
===================================================== ============================ ========= ========= =========
Revaluation of commodity hedges 14,341 2,110 36,195 -
----------------------------------------------------- ---------------------------- --------- --------- ---------
16,990 (12,752) 38,660 (19,131)
===================================================== ============================ ========= ========= =========
Realised loss on forex contracts (885) - (2,967) -
----------------------------------------------------- ---------------------------- --------- --------- ---------
Realised gain on interest rate swaps 2,324 - 3,850 -
----------------------------------------------------- ---------------------------- --------- --------- ---------
Realised loss on commodity hedges (4,908) 457 (12,058) -
----------------------------------------------------- ---------------------------- --------- --------- ---------
Total gain/(loss) on financial instruments 13,521 (12,295) 27,485 (19,131)
----------------------------------------------------- ---------------------------- --------- --------- ---------
Hedging reserve
The table below presents the total gain/(loss) on
financial instruments
that has been disclosed through the statement of
comprehensive income:
Three months ended 30 June Six months ended 30 June
2023 2022 2023 2022
Hedging reserve US$'000 US$'000 US$'000 US$'000
===================================================== ============================ ========= ========= =========
Revaluation gain/(loss) on derivative contracts 352 197,212 83,813 (249,485)
===================================================== ============================ ========= ========= =========
Realised gain/(loss) on derivative contracts 77,106 (111,517) 157,755 (312,156)
===================================================== ============================ ========= ========= =========
Amounts recycled to revenue (81,613) 84,362 (165,862) 270,173
===================================================== ============================ ========= ========= =========
Amounts recycled to revenue - oil put premiums 2,730 3,645 6,330 7,254
===================================================== ============================ ========= ========= =========
Amounts recycled to revenue - gas put premiums 1,142 16,471 1,142 17,389
===================================================== ============================ ========= ========= =========
Amounts recycled to finance costs - interest put
premiums - (257) - (257)
----------------------------------------------------- ---------------------------- --------- --------- ---------
Total gain/(loss) on financial instruments (283) 189,916 83,178 (267,082)
----------------------------------------------------- ---------------------------- --------- --------- ---------
17. Derivative
financial
instruments
30 June 31 December
2023 2022
US$'000 US$'000
=============== =========================================================================================================== ==========================
Oil swaps -
cash flow
hedge 7,396 (28,685)
=============== =========================================================================================================== ==========================
Oil swaps -
non-cash flow
hedge (2,891) (15,027)
=============== =========================================================================================================== ==========================
Oil collars -
cash flow
hedge 2,382 (21,983)
=============== =========================================================================================================== ==========================
Gas swaps -
cash flow
hedge 36,590 19,797
=============== =========================================================================================================== ==========================
Gas swaps -
non-cash flow
hedge (10,118) (29,271)
=============== =========================================================================================================== ==========================
Gas puts -
cash flow
hedge 8,974 9,746
=============== =========================================================================================================== ==========================
Gas collars -
cash flow
hedge 84,832 79,489
=============== =========================================================================================================== ==========================
Interest rate
swaps -
non-cash flow
hedge 3,698 7,125
=============== =========================================================================================================== ==========================
FX forwards -
non-cash flow
hedge (7,360) (13,250)
--------------- ----------------------------------------------------------------------------------------------------------- --------------------------
123,503 7,941
--------------- ----------------------------------------------------------------------------------------------------------- --------------------------
30 June 31 December
Maturity 2023 2022
analysis of US$'000 US$'000
derivative
financial
instruments
=============== =========================================================================================================== ==========================
Non-current
assets 9,668 21,191
=============== =========================================================================================================== ==========================
Current assets 147,189 150,858
=============== =========================================================================================================== ==========================
Non-current
liabilities (10,071) (27,440)
=============== =========================================================================================================== ==========================
Current
liabilities (23,283) (136,668)
--------------- ----------------------------------------------------------------------------------------------------------- --------------------------
123,503 7,941
--------------- ----------------------------------------------------------------------------------------------------------- --------------------------
Judgements and
estimates
applied in
the valuation
of derivative
instruments
can be found
in note 3 to
the 2022
Annual Report
and Accounts.
Derivative
financial
instruments
that are with
counterparties
included
within
the RBL
facility are
subject to
Master Netting
Agreements.
18. Related party transactions
Gilad Myerson and Alan Bruce, who are Directors of Ithaca Energy
plc, are participants in the Company's Share Incentive Plan. On 6
June 2023 both Mr Myerson and Mr Bruce purchased 202 ordinary
shares of GBP0.01 each as a deduction from their respective
salaries, with the Company matching 101 ordinary shares of GBP0.01
each, to each participant at a market rate of GBP1.48015 per
share.
19. Subsequent events
On 11 July 2023, the Group announced that it had signed a Sale
and Purchase Agreement to acquire the 40% stake in the Fotla
Discovery that it doesn't already own and three exploration
licences from Spirit Energy Resources Limited. The agreement, which
is subject, amongst other things, to regulatory approval, will
bring the Group's working interest in Fotla to 100% providing
Ithaca Energy with full control over pre-final investment decision
work and timing. The total transaction consideration of up to $14.6
million, comprises two capped contingent payments of which
approximately two-thirds is payable on final investment decision
and one-third on first production.
On 26 July 2023, Ithaca Energy announced successful well test
results at the K2 prospect and as a result the Group, together with
its joint venture partner, have decided to perform an appraisal
sidetrack following the positive results in the main bore. The
Group holds a 50% working interest in this licence with the
remaining 50% working interest held by Dana Petroleum.
On 31 July 2023, the Group completed a new 5-year $100m
unsecured loan agreement with bp at a commercial interest rate.
Separately, a new offtake agreement was also completed with bp on
that date which runs concurrently with the loan agreement.
Non-GAAP measures
The Group uses certain performance metrics that are not
specifically defined under International Financial Reporting
Standards or other generally accepted accounting principles. These
non-GAAP measures which are presented
in the H1 2023 condensed consolidated financial statements are
defined below:
Adjusted EBITDAX: earnings before interest, tax, put premiums on
oil and gas derivative instruments, revaluation of forex forward
contracts, revaluation of commodity hedges, depletion depreciation
and amortisation, impairment charges or reversals, exploration and
evaluation expenditure, fair value gains/(losses) on contingent
consideration, gain on bargain purchase and transaction costs. This
measure is considered as an indicator of underlying financial
performance as it excludes accounting (e.g. depreciation) and
financing deductions. It is also commonly used by stakeholders as a
comparable metric of core profitability. Adjusted EBITDAX is
reconciled to profit after tax as follows:
H1 2023 H1 2022
$m $m
================================================== ======== =========
Profit after tax 159.6 1,557.7
================================================== ======== =========
Taxation charge 89.2 183.7
================================================== ======== =========
Gain on bargain purchase - (1,324.3)
================================================== ======== =========
Depletion, depreciation and amortisation 384.1 297.4
================================================== ======== =========
Impairment charge 328.4 7.6
================================================== ======== =========
Net finance costs 96.5 97.1
================================================== ======== =========
Oil and gas put premiums 7.5 24.8
================================================== ======== =========
Revaluation of foreign exchange forward contracts (5.0) 18.7
================================================== ======== =========
Revaluation of commodity hedges (33.6) -
================================================== ======== =========
Exploration and evaluation expenses 1.3 9.5
================================================== ======== =========
Fair value loss on contingent consideration 1.8 14.4
-------------------------------------------------- -------- ---------
Transaction costs - 20.8
Historic claim relating to an acquisition (50.1) -
Adjusted EBITDAX 979.7 907.4
Adjusted net income: Profit after tax excluding non-cash bargain
purchase credits, material impairment charges or reversals and the
tax effect of these items where applicable. Adjusted net income,
which is presented as it
eliminates items which distort period-on-period comparisons, is reconciled H1 2023 H1 2022
to profit after tax as follows:
$m $m
Profit after tax 159.6 1,557.7
Gain on bargain purchase - (1,324.3)
Impairment charge 328.4 -
Tax credit on impairment charge (234.8) -
Adjusted net income 253.2 233.4
Adjusted EPS: Adjusted net income divided by the average number
of shares for the period of 1,006.6 million (H1 2022: 1,005.2
million): H1 2023
$m
H1 2022
$m
Non-GAAP measures continued
Adjusted net debt: consists of amounts outstanding under RBL
facility and senior secured loan notes less cash and cash
equivalents excluding lease liabilities and intragroup debt
arrangements or liabilities represented by letters of credit and
surety bonds. Adjusted net debt comprises:
30 June 30 June
2023 2022
$m $m
RBL drawn facility (250.0) (750.0)
Senior unsecured notes (625.0) (825.0)
Cash and cash equivalents 176.3 160.4
Adjusted net debt (698.7) (1,414.6)
Leverage ratio: adjusted net debt at the end of the period divided by adjusted
EBITDAX for the preceding 12 months. The calculations are as follows:
30 June 30 June
2023 2022
Net debt ($m) 698.7 1,414.6
Adjusted EBITDAX ($m) 1,988.4 1,562.7
Leverage ratio 0.35x 0.91x
Available liquidity: the sum of cash and cash equivalents on the
balance sheet and the undrawn amounts available to the Group using
existing approved third-party facilities less restricted cash.
Available liquidity comprises:
30 June 30 June
2023 2022
$m $m
Cash and cash equivalents 176.3 160.4
Restricted cash - (15.0)
Undrawn borrowing facilities 615.0 175.0
Available liquidity 791.3 320.4
Non-GAAP measures continued
Group free cash flow: net cash flow from operating activities
less cash used in investing activities, adding back acquisition of
subsidiaries net of cash acquired, less bank interest and interest
rate swaps. Group free cash flow reconciles to net cash flow from
operating activities as follows:
H1 2023 H1 2022
$m $m
=========
Net cash flow from operating activities 691.0 989.0
=========
Net cash used in investing activities (221.6) (1,203.7)
=========
Add back acquisitions - 957.5
=========
Bank interest and charges (49.2) (54.5)
---------
Group free cash flow 420.2 688.3
Unit operating expenditure: operating costs (excluding
over/underlift) including tariff expense less tariff income and
tanker costs divided by net production for the period. Operating
costs for this calculation reconcile to note 5 as follows:
H1 2023 H1 2022
$m $m
Operating costs per note 5 300.7 263.2
Less Tanker costs (included within operating costs in note
5) (11.6) (10.2)
Less Tariff income (included within other income in note
4) (17.0) (18.6)
Operating costs used to calculate unit operating expenditure 272.1 234.4
DD&A rate per barrel: depletion, depreciation and
amortisation charge for the period divided by net production for
the year.
Other key performance indicators
Total production: historic production boe/d include volumes from
date of acquisition of MOGL on 4 February 2022 and Siccar Point
Energy and Summit on 30 June 2022.
Tier 1 process safety events: process safety incidents as
defined by API 465 Process Safety-Recommended practise on Key
Performance Indicators.
Serious injury and fatality frequency: the number of serious
injuries resulting in permanent impairment, as defined by IOGP, per
million hours worked.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IR DDGDIBSDDGXD
(END) Dow Jones Newswires
August 23, 2023 02:00 ET (06:00 GMT)
Ithaca Energy (LSE:ITH)
Historical Stock Chart
Von Apr 2024 bis Mai 2024
Ithaca Energy (LSE:ITH)
Historical Stock Chart
Von Mai 2023 bis Mai 2024