Broker finnCap reiterated its buy recommendation and set a target price of 136p for Ithaca Energy (IAE) following the release of a positive third-quarter update. The North Sea driller said that it was on track to meet full-year expectations following a step up in average production. The average daily rate for the year-to-date of 12,300 barrels of oil equivalent represents a 6 pert cent advance on the corresponding period in 2014. It's worth remembering that around 78 per cent of third-quarter production was hedged at an average price of $90 (£59) a barrel; compared with Brent crude's average rate of $50.
There was also positive news on the capital front. Following reduced commitments on its Greater Stella Area (GSA) subsea infrastructure and the sale of its Norwegian business, the company now expects to reduce its 2015 expenditure to $120m, a fall of $30m against previous guidance. Net debt is also being pegged back. By the year end, Ithaca now expects a figure of $750m, a reduction of $50m from the earlier forecast.
Management points out that because of Ithaca's hedging arrangements, the company is "largely insensitive" to the ongoing slump in crude prices. More importantly, with the subsea infrastructure at GSA in place, and platform work advancing smoothly, we can still expect first production from the field by the end of the second quarter of 2016.
