Ithaca Energy's (IAE) shares have yet to fully recover from their hefty slide nearly a year ago when the company opted to walk away from takeover talks with a potential suitor. Things were starting to look up after the Athena oilfield successfully came online in June, but the shares recently slipped again following Ithaca's announcement last month that it will acquire North Sea oil peer Valiant Petroleum (VPP) in a friendly $459m (£304m) deal.
The market seems discouraged by the high price being paid based on proven and probable (2P) reserves - $24.2 a barrel. That's above the typical range of between $10 and $20 a barrel for North Sea assets. But this metric doesn't to the deal justice - not only does the acquisition come with a $500m tax allowance and $23m tax refund but, based on Valiant's current production rates, the deal could pay for itself from operating cash flow in less than two years.
Add to this the group's Greater Stella Area development - where first oil is expected in mid-2014 - plus continued production growth from Athena, and Ithaca stands to have a solid production base of 25,000 barrels of oil equivalent per day (boepd) in 18 months' time. That's up from 5,862 boepd in 2012.
ITHACA ENERGY (IAE) | ||||
|---|---|---|---|---|
| ORD PRICE: | 113p | MARKET VALUE: | £294m | |
| TOUCH: | 112-114p | 12-MONTH HIGH: | 212p | LOW: 91p |
| DIVIDEND YIELD: | NIL | PE RATIO: | 5 | |
| NET ASSET VALUE: | 233¢ | NET CASH: | $31.4m | |
| Year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 2.00 | -30.0 | -23.0 | nil |
| 2009 | 101 | 8.00 | 5.00 | nil |
| 2010 | 132 | 38.0 | 27.0 | nil |
| 2011 | 129 | 37.1 | 14.0 | nil |
| 2012 | 170 | 29.2 | 36.0 | nil |
| % change | +32 | -21 | +157 | - |
£1=$1.51 | ||||
