Ithaca Energy is hoping to shore up its presence in the North Sea and strike a deal to buy most of the UK assets of Italian oil company Eni.
The London-listed Ithaca has an exclusivity period of four weeks in order to firm up a bid. The move would be funded by issuing new shares in Ithaca and potentially result in Eni having a stake of between 38-39 per cent in its fellow oil and gas producer.
Analysts suggested that would imply a price in the region of £550 million given Ithaca’s market cap of close to £1.5 billion.
Eni is a multinational energy group with its headquarters in Rome and a listing on the Italian stock exchange. It produced about 1.7 million barrels of oil per day last year.
Ithaca was floated in London in 2022 and is focused on the UK North Sea. Its majority shareholder is Delek Group, an Israeli conglomerate.
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The proposed transaction would see Eni offload a number of upstream oil and gas assets, including those it recently purchased through the $4.9 billion takeover of Neptune Energy.
The Eni UK business has interests in key hubs such as Elgin Franklin, Cygnus, Seagull and J-Area with production equivalent to 45,000 barrels of oil per day last year. It also has significant reserves of 100 million barrels of oil.
Ithaca has been critical of the UK government’s oil and gas profit levy, stating it has affected sentiment and investment in the North Sea. There are also concerns that an incoming Labour government will legislate to stop new drilling in the basin as part of a shift towards renewable energy.
Ithaca is understood to want to place itself at the forefront of consolidation efforts in UK waters and believes any government in Westminster will eventually come to see the importance of maintaining a domestic oil and gas sector. The company previously paid $1.5 billion to buy Siccar Point Energy in 2022.
While Ithaca is committed to extending its presence in the North Sea, it also continues to mull international expansion.
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The addition of the Eni assets would make Ithaca the second-largest independent producer in the North Sea, with more than 100,000 barrels of oil per day, putting it behind only Harbour Energy.
Gilad Myerson, the Ithaca executive chairman, said: “We believe this potential combination would be a strong strategic fit, with Eni UK’s cash generative portfolio complementing Ithaca Energy’s high-quality, long-life asset base with significant development opportunity.”
Ashley Kelty, an analyst at Panmure Gordon, questioned why Ithaca wanted to “double down” on the UK given the likelihood of an increased tax burden under a Labour government. “However, a tie-up would add more long-term upside and materially increase the size of the company,” he added.
Ithaca also posted its results for 2023 showing production of 70,239 barrels per day, which was down slightly on the previous year but in line with guidance. Revenue was $2.3 billion, down from $2.6 billion, while pre-tax profit came in at $302 million, compared with more than $2 billion in 2022.
Part of the profit decline came from a near $558 million writedown in the value of Ithaca’s interest in the Greater Stella Area.
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For 2024 Ithaca forecasts production to be in the range of 56,000 to 61,000 barrels a day, partly because it had scaled back investment because of the energy profit levy. It expects that to grow back towards 80,000 barrels by 2027 as the Rosebank field moves into production and other projects move forward.
