The share price of Ithaca Energy (IAE) pulled back sharply after the oil company revealed that it will need to book $10m (£6.45m) in incremental costs as a result of delays affecting the FPF-1 floating production facility modifications programme and start-up of the Greater Stella production hub in the North Sea.
The FPF-1 is being modified in the Remontowa yard in Poland by FTSE 250 oil services engineer Petrofac (PFC), but work hasn't gone according to plan. Modifications to the floating production facility will not be completed in time to achieve 'sail-away' for the vessel in the second quarter of this year. The timetable has been moved back to the first quarter of 2016, which means that first production from the site will be delayed until the second quarter of next year.
Ithaca's shares took a drubbing on the news, which prompted Canaccord Genuity to shave 15p off its target price, to 70p, albeit with a 'speculative buy' recommendation. Despite the severe delays, Ithaca's peak net drawn debt is forecast to be materially unchanged at approximately $850m (£553m). A lower risk timetable is now in place to avoid further delays and strong hedging arrangements should ensure production is sufficient to meet scheduled debt repayments.
