Ithaca Energy and its wholly owned subsidiary Ithaca Energy (UK) Limited have provided the following financial and operational update.
The Beatrice (100%) acquisition is close to being completed with contracts providing for acquisition of the oilfield by way of a Lease and Use agreement now in final form. These negotiations have been protracted due to the complexities of the transaction and recent financial and oil market volatility.
In the meantime, the Company is proceeding with the development of its Jacky (90%) discovery. The platform has been built and the pipeline is ready to be laid from Beatrice to Jacky. This pipeline will also connect to the Bravo platform from which production was previously suspended due to concerns over pipeline integrity. Bravo was producing approximately 800 barrels per day (bopd) when it was shut in. Field Development approval for Jacky is anticipated once Beatrice is acquired. Any further delay in completing the acquisition of Beatrice will delay Jacky production.
The Company currently has US $38MM in cash. Ithaca previously obtained and has drawn down a US $60MM pre-development line of credit provided by the Royal Bank of Scotland. These funds together with funds raised in a recent share issue, have been utilized to purchase the Stella development project and finance the development costs to date at Jacky and Athena.
Financing of the Beatrice acquisition and completion of the development of the Jacky oil discovery is in the process of being finalised with Ithaca's existing bank and the new banking group which has provided credit-approved offers of finance for a total of US$290MM. While the funds raised in a recent share issue together with the new bank facility previously announced were sufficient at the time to fund the Beatrice acquisition and Jacky development, the recent and rapid erosion of oil prices has created a cash deficiency in drawing down the new debt facility.
Ithaca is in discussions with several sources of bridge financing and believes that this will be successfully accomplished in the very near future, failure of which would delay the acquisition of Beatrice and the completion of the development of Jacky. Should delays be avoided, the conclusion of the Beatrice purchase will provide the Company with approximately 2,000 bopd at signing and the commencement of production from Jacky and the Beatrice Bravo platform in late 2008 or early 2009 will add approximately 8,000 bopd.
Given the contraction in capital availability in the current financial environment, Ithaca is in the process of appointing an agent to sell a portion of the Company's interest in the Athena (70%) project. The development of Athena on schedule with previous expectations depends on successful sale of the interest and/or sufficient bridge financing.
While the Company is doing everything in its power to avoid delays in its projects, should this occur, the Company will maintain its interests, reserves and future income while seeking to sell a portion of its Athena project.
Lawrie Payne, CEO of Ithaca said, "The Beatrice acquisition and the subsequent tie in of the Jacky discovery are proceeding; however completion of the transaction and related financing has taken longer than we had initially anticipated as a result of recent market volatility and the impact on financing of lower oil prices. On accomplishment of these two objectives, the Company will be well financed through significant revenues and bank facilities."
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