Join our community of smart investors

Ithaca slashes costs and debt ahead of Stella debut

North Sea driller Ithaca Energy is hoping for - but isn't reliant on - an improvement in prices this year.
March 24, 2016

Last year, the average cost of a barrel of Brent crude was $3 less than Ithaca Energy 's (IAE) 2014 per-barrel operating costs. In that context, the 70 per cent increase in operational cash flow to $261m (£185m) detailed in 2015's financial results is some achievement. The North Sea driller managed this by upping production above guidance, finding itself the right side of a hedging programme, and slashing 44 per cent out of operating costs.

IC TIP: Buy at 33p

There was "no one silver bullet" which contributed to the savings, according to chief executive Leslie Thomas, although cost deflation in the supply chain certainly helped. This reduced the strain on the balance sheet, most pronounced in the first half of the year when net debt peaked at over $800m (£567m). Completion of a $117m investment programme a quarter under budget, the sale of the non-core Norwegian business for up to $90m, and a $66m equity placing by the Delek Group helped to bring that figure down to $665m by December. Management says this should fall a further $20m by the end of March.

Broker finnCap is forecasting a full-year adjusted pre-tax profit of $194.5m and EPS of 31.3¢, versus $200.4m and 8.4¢ in 2015.

ITHACA ENERGY (IAE)

ORD PRICE:32.8pMARKET VALUE:£135m
TOUCH:32.5-33.3p12-MONTH HIGH:61pLOW: 16p
DIVIDEND YIELD:nilPE RATIO:na
NET ASSET VALUE:193¢NET DEBT:83%

Year to 31 DecTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
201112937.114.0nil
201217029.236.0nil
201341440.248.0nil
2014379-332-7.0nil
2015207-326-35.0nil
% change-45---

£1=$1.42