Q CONSOLIDATED FINANCIAL STATEMENTS

Transcription

1 Q1 CONSOLIDATED FINANCIAL STATEMENTS Ithaca Energy Inc. Q1 Financial Statements 1

2 Consolidated Statement of Income For the three months ended 31 March and (unaudited) Note Revenue 5 Operating costs Other Movement in oil and gas inventory Depletion, depreciation and amortisation Cost of sales Gross Profit 52,908 (37,318) (1,133) 38,916 (44,489) (44,024) 8,884 37,239 (18,118) (115) 2,795 (14,472) (29,910) 7,329 Exploration and evaluation expenses 10 EXP12 Loss on disposal Gain/(loss) on financial instruments 25 Administrative expenses 6 Foreign exchange Finance costs 7 EXP11 Interest income EXP13 Share of profit in associate EXP22 Profit/(Loss) Before Tax (745) (2,393) (11,426) 5,706 (1,041) (1,645) (1,601) 1,708 (15,012) (8,624) , (15,996) 4,176 Taxation 23 Profit After Tax Earnings per share (US$ per share) Basic 22 Diluted 22 21,392 5, ,516 10, The accompanying notes on pages 6 to 21 are an integral part of the financial statements. Ithaca Energy Inc. Q1 Financial Statements 2

3 Consolidated Statement of Financial Position (unaudited) Note ASSETS 31 March 31 December Current assets Cash and cash equivalents CAS01 Restricted Cash CAS03 Accounts receivable 8 CAS02 Deposits, prepaid expenses and other CAS04 Inventory 9 CAS06 Noncurrent assets Longterm receivable 28 Longterm inventory 9 Investment in associate 13 CAS07 Exploration and evaluation assets 10 Property, plant & equipment 11 CAS08 Deferred tax assets Goodwill 12 CAS11 77,133 30, , , ,143 56,555 33, , ,380 44,277 51,809 6,297 7,567 34,717 28,571 34,761 29, ,099 1,091, , ,510 1,726, , ,510 1,794,698 Total assets LIABILITIES AND EQUITY Current liabilities Trade and other payables 15 CLB01 Derivative financial instruments 26 CLB07 Non current liabilities Borrowings 14 CLB02 Decommissioning liabilities 16 CLB04 Other long term liabilities 17 CLB03 Contingent consideration 19 CLB06 Net assets Shareholders' equity Share capital 20 SEQ01 Retained earnings Total equity The financial statements were approved by the Board of Directors on 7 May and signed on its behalf by: "Les Thomas" Director "Brad Hurtubise" Director The accompanying notes on pages 6 to 21 are an integral part of the financial statements. 1,980,189 (268,651) (25,621) (294,272) (628,473) (180,733) (142,020) (9,000) (960,226) 725, ,077 90, ,691 2,015,078 (296,601) (25,029) (321,630) (631,514) (190,945) (141,694) (9,000) (973,153) 720, ,077 85, ,295 Ithaca Energy Inc. Q1 Financial Statements 3

4 Consolidated Statement of Changes in Equity (unaudited) Share capital Share based payment reserve Retained earnings Total Balance, 1 Jan Share based payment Shares issued Profit for the period Balance, 31 March 619,207 25,185 99, , ,138 (609) 1,529 10,691 10, ,345 24, , ,232 Balance, 1 Jan Profit for the period Balance, 31 March 635, ,077 85, ,295 5,396 5,396 90, ,691 In Q217 the conditions of a cash takeover offer for all the common shares of the Company not owned by Delek Group Ltd. ( Delek ) or any of its affiliates for C$1.95 per share (the Offer ) were satisfied and the Offer was accepted by holders of approximately 70.3% of the issued and outstanding common shares, not including the common shares already owned by Delek prior to the announcement of the Offer. As a result of this transaction all stock option immediately vested and therefore there are no outstanding options from 30 June. Therefore the remaining balance of the contributed surplus reserve was transferred to retained earnings. The accompanying notes on pages 6 to 21 are an integral part of the financial statements. Ithaca Energy Inc. Q1 Financial Statements 4

5 Consolidated Statement of Cash Flow For the three months ended 31 March and (unaudited) Operating activities Note (Loss)/Profit Before Tax (15,996) 4,175 Adjustments for: Depletion, depreciation and amortisation 11 Exploration and evaluation expenses 10 Share based payment 6 Loan fee amortisation 7 Revaluation of financial instruments 25 Loss on disposal Accretion Bank interest & charges Share of associate profits 13 44,489 14, , ,192 2,393 2,318 2,069 11,918 5,514 (6,146) Cashflow generated from operations 40,169 30,272 Changes in inventory, receivables and payables relating to operating activities (21,049) (6,916) Net cash generated from operating activities 19,120 23,356 Investing activities Capital expenditure Decommissioning expenditure 16 Proceeds on disposal Contingent consideration Investment in associate Loan repaid/(to) from associate Changes in receivables and payables relating to investing activities Net cash generated from investing activities (15,037) (13,462) (1,456) (569) 51,765 (4,000) (38) 7,531 (235) 4,241 (14,922) 47,044 (33,226) Financing activities Proceeds from issuance of shares Loan (repayment) Bank interest and charges Net cash used in financing activities Currency translation differences relating to cash and cash equivalents Increase/(decrease) in cash and cash equivalents Cash and cash equivalents, beginning of period Cash and cash equivalents, end of period The accompanying notes on pages 6 to 21 are an integral part of the financial statements. (3,970) (15,231) (19,201) ,108 30,542 77,650 2,138 (4,917) (8,805) (11,584) 122 (21,332) 27,199 5,870 Ithaca Energy Inc. Q1 Financial Statements 5

6 1. NATURE OF OPERATIONS Ithaca Energy Inc. (the Corporation or Ithaca ), incorporated and domiciled in Alberta, Canada on 27 April 2004, is a company involved in the development and production of oil and gas in the North Sea. The Corporation's registered office is 1600, 333 7th Avenue S.W., Calgary, Alberta, Canada, T2P 2Z1. The Corporation's shares previously traded on the Toronto Stock Exchange in Canada and the London Stock Exchange s Alternative Investment Market in the United Kingdom under the symbol IAE. 2. BASIS OF PREPARATION These interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) applicable to the preparation of interim financial statements, including IAS 34 Interim Financial Reporting. These interim consolidated financial statements do not include all the necessary annual disclosures in accordance with IFRS. The policies applied in these condensed interim consolidated financial statements are based on IFRS issued and outstanding as of 3 May, the date the Board of Directors approved the statements. Any subsequent changes to IFRS that are given effect in the Corporation s annual consolidated financial statements for the year ending 31 December could result in restatement of these interim consolidated financial statements. The interim consolidated financial statements have been prepared on a going concern basis using the historical cost convention, except for financial instruments which are measured at fair value. The interim consolidated financial statements are presented in US dollars and all values are rounded to the nearest thousand (), except when otherwise indicated. The condensed interim consolidated financial statements should be read in conjunction with the Corporation s annual financial statements for the year ended 31 December. 3. SIGNIFICANT ACCOUNTING POLICIES, JUDGEMENTS AND ESTIMATION UNCERTAINTY Basis of measurement The interim consolidated financial statements have been prepared under the historical cost convention, except for the revaluation of certain financial assets and financial liabilities (under IFRS) to fair value, including derivative instruments. Basis of consolidation The interim consolidated financial statements of the Corporation include the financial statements of Ithaca Energy Inc. and all whollyowned subsidiaries as listed per note 28. Ithaca has eighteen whollyowned subsidiaries. All intercompany transactions and balances have been eliminated on consolidation. Subsidiaries are all entities, including structured entities, over which the group has control. The group controls an entity when the group is exposed to or has rights to variable returns from its investments with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated on the date that control ceases. Business Combinations Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the fair value of the assets acquired, equity instruments issued and liabilities incurred or assumed at the date of completion of the acquisition. Acquisition costs incurred are expensed and included in administrative expenses. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The excess of the cost of acquisition over the fair value of the Corporation's share of the identifiable net assets acquired is recorded as goodwill. If the cost of the acquisition is less than the Corporation's share of the net assets acquired, the difference is recognised directly in the statement of income as negative goodwill. Goodwill Capitalisation Goodwill acquired through business combinations is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised as the fair value of the Corporation's share of the identifiable net assets acquired and liabilities assumed. If this consideration is lower than the fair value of the identifiable assets acquired, the difference is recognised in the statement of income. Ithaca Energy Inc. Q1 Financial Statements 6

7 Impairment Goodwill is tested annually for impairment and also when circumstances indicate that the carrying value may be at risk of being impaired. Impairment is determined for goodwill by assessing the recoverable amount of each cash generating unit ("CGU") to which the goodwill relates. Where the recoverable amount of the CGU is less than its carrying amount, an impairment loss is recognised in the statement of income. Impairment losses relating to goodwill cannot be reversed in future periods. Interest in joint operations Under IFRS 11, joint arrangements are those that convey joint control which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. Investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor. Associates are investments over which the Corporation has significant influence but not control or joint control, and generally holds between 20% and 50% of the voting rights. Under the equity method, investments are carried at cost plus postacquisition changes in the Corporation's share of net assets, less any impairment in value in individual investments. The consolidated income statement reflects the Corporation's share of the results and operations after tax and interest. The Corporation's interest in joint operations (eg exploration and production arrangements) are accounted for by recognising its assets (including its share of assets held jointly), its liabilities (including its share of liabilities incurred jointly), its revenue from the sale of its share of the output arising from the joint operation, its share of revenue from the sale of output by the joint operation and its expenses (including its share of any expenses incurred jointly). Revenue Oil, gas and condensate revenues associated with the sale of the Corporation s crude oil and natural gas are recognised when title passes to the customer. This generally occurs when the product is physically transferred into a vessel, pipe or other delivery mechanism. Revenues from the production of oil and natural gas properties in which the Corporation has an interest with joint venture partners are recognised on the basis of the Corporation s working interest in those properties. Differences between the production sold and the Corporation s share of production are recognised within cost of sales at market value. Interest income is recognised on an accruals basis and is separately recorded on the face of the statement of income. Foreign currency translation Items included in the financial statements are measured using the currency of the primary economic environment in which the Corporation and its subsidiaries operate (the functional currency ). The consolidated financial statements are presented in United States Dollars, which is the Corporation s functional and presentation currency. Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of income. Share based payments Prior to completion of the takeover by Delek Group in June the Corporation had a share based payment plan as described in note 20 (c). The expense was recorded in the consolidated statement of income or capitalised for all options granted in the year, with the gross increase recorded in the share based payment reserve. Compensation costs are based on the estimated fair values at the time of the grant and the expense or capitalised amount is recognised over the vesting period of the options. Upon the exercise of the stock options, consideration paid together with the amount previously recognised in share based compensation reserve was recorded as an increase in share capital. In the event that vested options expired unexercised, previously recognised compensation expense associated with such stock options was not reversed. In the event that unvested options were forfeited or expired, previously recognised compensation expense associated with the unvested portion of such stock options was not reversed. Cash and cash equivalents For the purpose of the statement of cash flow, cash and cash equivalents include investments with an original maturity of three months or less. Ithaca Energy Inc. Q1 Financial Statements 7

8 Financial instruments All financial instruments are initially recognised at fair value on the statement of financial position. The Corporation s financial instruments consist of cash, restricted cash, accounts receivable, deposits, derivatives, accounts payable, accrued liabilities, contingent consideration. Under IAS 39 the Corporation classified its financial instruments into one of the following categories: heldfortrading financial assets and financial liabilities; heldtomaturity investments; loans and receivables; and other financial liabilities. Under IFRS 9, with the exception of derivatives and contingent consideration, all financial instruments will be recorded at amortised cost based on an analysis of the business model and terms of financial assets. There is no change to the classification of financial liabilities. All financial instruments are required to be measured at fair value on initial recognition. Measurement in subsequent periods is dependent on the classification of the respective financial instrument. Heldfortrading (IAS 39) or financial instruments carried at fair value through P&L (IFRS 9) are subsequently measured at fair value with changes in fair value recognised in net earnings. All other categories of financial instruments are measured at amortised cost using the effective interest method. IAS 39 classifications: Cash and cash equivalents are classified as heldfortrading and are measured at fair value. Accounts receivable are classified as loans and receivables. Accounts payable, accrued liabilities, certain other longterm liabilities, and longterm debt are classified as other financial liabilities. Although the Corporation does not intend to trade its derivative financial instruments, they are classified as heldfortrading for accounting purposes. IFRS 9 classifications: Cash and cash equivalents are classified and measured at fair value through profit or loss. Accounts receivable and long term receivables are classified and carried at amortised cost as they have a business model of held to collect and the terms meet the solely payments of principle and interest criteria. Accounts payable, accrued liabilities, certain other longterm liabilities, and longterm debt are classified as other financial liabilities. Although the Corporation does not intend to trade its derivative financial instruments, they are required to be carried at fair value though profit or loss. Transaction costs that are directly attributable to the acquisition or issue of a financial asset or liability and original issue discounts on longterm debt have been included in the carrying value of the related financial asset or liability and are amortised to consolidated net earnings over the life of the financial instrument using the effective interest method. Analyses of the fair values of financial instruments and further details as to how they are measured are provided in notes 25 to 27. Inventory Inventories of materials and product inventory supplies are stated at the lower of cost and net realisable value. Cost is determined on the firstin, firstout method. Current oil and gas inventories are stated at fair value less cost to sell. Noncurrent oil and gas inventories are stated at historic cost. Trade receivables Trade receivables are recognised and carried at the original invoiced amount, less any provision for estimated irrecoverable amounts. Trade payables Trade payables are measured at cost. Property, plant and equipment Oil and gas expenditure exploration and evaluation assets Capitalisation Preacquisition costs on oil and gas assets are recognised in the consolidated statement of income when incurred. Costs incurred after rights to explore have been obtained, such as geological and geophysical surveys, drilling and commercial appraisal costs and other directly attributable costs of exploration and evaluation including technical, administrative and share based payment expenses are capitalised as intangible exploration and evaluation ( E&E ) assets. E&E costs are not amortised prior to the conclusion of evaluation activities. At completion of evaluation activities, if technical feasibility is demonstrated and commercial reserves are discovered then, following development sanction, the carrying value of the E&E asset is reclassified as a development and production ( D&P ) asset, but only after the carrying value is assessed for impairment and where appropriate its carrying value adjusted. If after completion of evaluation activities in an area, it is not possible to determine technical feasibility and commercial viability or if the legal right to explore expires or if the Corporation decides not to continue exploration and evaluation activity, then the costs of such unsuccessful exploration and evaluation are written off to the statement of income in the period the relevant events occur. Ithaca Energy Inc. Q1 Financial Statements 8

9 Oil and gas expenditure development and production assets Capitalisation Costs of bringing a field into production, including the cost of facilities, wells and subsea equipment, direct costs including staff costs and share based payment expense together with E&E assets reclassified in accordance with the above policy, are capitalised as a D&P asset. Normally each individual field development will form an individual D&P asset but there may be cases, such as phased developments, or multiple fields around a single production facility when fields are grouped together to form a single D&P asset. Depreciation All costs relating to a development are accumulated and not depreciated until the commencement of production. Depreciation is calculated on a unit of production basis based on the proved and probable reserves of the asset. Any reassessment of reserves affects the depreciation rate prospectively. Significant items of plant and equipment will normally be fully depreciated over the life of the field. However, these items are assessed to consider if their useful lives differ from the expected life of the D&P asset and should this occur a different depreciation rate would be charged. Impairment For impairment review purposes the Corporation s oil and gas assets are analysed into cashgenerating units ("CGUs") as identified in accordance with IAS 36. A review is carried out each reporting date for any indicators that the carrying value of the Corporation s assets may be impaired. For assets where there are such indicators, an impairment test is carried out on the CGU. The impairment test involves comparing the carrying value with the recoverable value of an asset. The recoverable amount of an asset is determined as the higher of its fair value less costs to sell and value in use, where the value in use is determined from estimated future net cash flows. If the recoverable amount of an asset is estimated to be less that its carrying amount, the carrying amount of the asset is reduced to the recoverable amount. The resulting impairment losses are written off to the statement of income. Non oil and natural gas operations Computer and office equipment is recorded at cost and depreciated over its estimated useful life on a straightline basis over three years. Furniture and fixtures are recorded at cost and depreciated over their estimated useful lives on a straightline basis over five years. Borrowings All interestbearing loans and other borrowings with banks are initially recognised at fair value net of directly attributable transaction costs. After initial recognition, interestbearing loans and other borrowings are subsequently measured at amortised cost using the effective interest method. Amortised cost is calculated by taking into account any issue costs, discount or premium. Loan origination fees are capitalised and amortised over the term of the loan. Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets until such time as the assets are substantially ready for their intended use of sale. All other borrowing costs are expensed as incurred. Senior notes are measured at amortised cost. Decommissioning liabilities The Corporation records the present value of legal obligations associated with the retirement of longterm tangible assets, such as producing well sites and processing plants, in the period in which they are incurred with a corresponding increase in the carrying amount of the related longterm asset. The obligation generally arises when the asset is installed or the ground/environment is disturbed at the field location. In subsequent periods, the asset is adjusted for any changes in the estimated amount or timing of the settlement of the obligations. The carrying amounts of the associated assets are depleted using the unit of production method, in accordance with the depreciation policy for development and production assets. Actual costs to retire tangible assets are deducted from the liability as incurred. Contingent consideration Contingent consideration is accounted for as a financial liability and measured at fair value at the date of acquisition with any subsequent remeasurements recognised either in profit or loss in accordance with IFRS 9. Ithaca Energy Inc. Q1 Financial Statements 9

10 Taxation Current income tax Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amounts are those that are enacted or substantively enacted by the reporting date. Deferred income tax Deferred tax is recognised for all deductible temporary differences and the carryforward of unused tax losses. Deferred tax assets and liabilities are measured using enacted or substantively enacted income tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in rates is included in earnings in the period of the enactment date. Deferred tax assets are recorded in the consolidated financial statements if realisation is considered more likely than not. Deferred tax assets and liabilities are offset only when a legally enforceable right of offset exists and the deferred tax assets and liabilities arose in the same tax jurisdiction. Operating leases Rentals under operating leases are charged to the statement of income on a straight line basis over the period of the lease. Finance leases Finance leases that transfer substantially all the risks and benefits incidental to ownership of the leased item to the Corporation, are capitalised at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in finance costs in the income statement. A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Corporation will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term. Maintenance expenditure Expenditure on major maintenance refits or repairs is capitalised where it enhances the life or performance of an asset above its originally assessed standard of performance; replaces an asset or part of an asset which was separately depreciated and which is then written off, or restores the economic benefits of an asset which has been fully depreciated. All other maintenance expenditure is charged to the statement of income as incurred. Recent accounting pronouncements The Corporation has updated its accounting policies to comply with the new standards (IFRS 9 'Financial instruments' and IFRS 15 'Revenue from contracts with Customers' that are applicable from 1 January. In particular it has considered whether there should be any difference in revenue recognition from transactions with joint operations but the Corporation recognise both underlift and overlift through cost of sales and therefore there is no adjustment to current practice required. The Corporation has also considered whether additional bad debt provisions should be recorded under the expected credit loss model but are comfortable that the credit risk is sufficiently low, even after taking into account forward looking information on the long term debtors. The terms of loans to related parties have been reviewed and the Corporation is satisfied that these meet the solely payments of principle and interest criteria so there have been no classification changes from amortised cost to fair value through profit and loss. Therefore, implementation of the new standards has not had any material impact on the accounts and there is no change to the opening balance sheet or retained earnings. The following standard has been published and is mandatory for the Corporation's accounting periods beginning on or after 1 January 2019, but the Corporation has not early adopted it: IFRS 16 'Leases' The adoption of IFRS 16 Leases, which the Corporation will adopt for the year commencing 1 January 2019, will impact both the measurement and disclosures of leases over a low value threshold and with terms longer than one year. Ithaca is in the process of identifying all lease agreements that exist across the Corporation and has yet to complete its full assessment of the expected financial impact of transition to IFRS 16. Ithaca Energy Inc. Q1 Financial Statements 10

11 Significant accounting judgements and estimation uncertainties The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions regarding certain assets, liabilities, revenues and expenses. Such estimates must often be made based on unsettled transactions and other events and a precise determination of many assets and liabilities is dependent upon future events. Actual results may differ from estimated amounts. The amounts recorded for depletion, depreciation of property and equipment, longterm liability, share based payment, contingent consideration, decommissioning liabilities, derivatives, and deferred taxes are based on estimates. The depreciation charge, any impairment tests and fair value estimates for the purpose of purchase price allocation (business combinations) are based on estimates of proved and probable reserves, production rates, prices, future costs and other relevant assumptions. By their nature, these estimates are subject to measurement uncertainty and the effect on the financial statements of changes in such estimates in future periods could be material. Further information on each of these estimates is included within the notes to the financial statements. 4. SEGMENTAL REPORTING The Company operates a single class of business being oil and gas exploration, development and production and related activities in a single geographical area presently being the North Sea. 5. REVENUE Oil sales Gas sales Condensate sales Other income REV01 REV02 REV03 REV04 Three months ended 31 March 22,079 35,941 24,840 1,130 5, ,908 37, ADMINISTRATIVE EXPENSES Three months ended 31 March General & administrative EXP01 (1,041) (1,580) Share based payments EXP16 (65) (1,041) (1,645) 7. FINANCE COSTS Three months ended 31 March Bank charges and interest Senior notes interest Loan fee amortisation Accretion Other (4,273) (6,094) (776) (2,318) (1,551) (755) (3,830) (1,040) (2,069) (930) (15,012) (8,624) 8. ACCOUNTS RECEIVABLE Trade debtors Accrued income 9. INVENTORY Current Crude oil inventory Materials inventory 31 March 105,385 13, , March 56, , Dec 125,087 29, , Dec 31,932 1,871 33,803 Noncurrent Crude oil inventory 31 March 31 Dec 6,297 7,567 The noncurrent portion of inventory relates to long term stocks at the Sullom Voe Terminal. Ithaca Energy Inc. Q1 Financial Statements 11

12 10. EXPLORATION AND EVALUATION ASSETS At 1 January Additions Disposals Write offs/relinquishments Impairment At 31 December and 1 January Additions Write offs/relinquishments At 31 March 27,075 3,077 (199) (1,057) ,234 5,527 34, PROPERTY, PLANT AND EQUIPMENT Cost Development & Production Oil and Gas Assets Other fixed assets Total At 1 January Additions At 31 December and 1 January Additions Disposals At 31 March DD&A and Impairment 2,541, ,580 2,715,461 9,324 (87,982) 2,636,803 3,411 2,545, ,623 3,454 2,718, ,510 (87,982) 3,640 2,640,443 At 1 January DD&A charge for the period Impairment charge for the period At 31 December and 1 January Disposal DD&A charge for the period At 31 March (1,457,878) (2,815) (1,460,693) (126,663) (204) (126,867) (40,270) (40,270) (1,624,810) (3,019) (1,627,830) 30,975 30,975 (44,469) (20) (44,489) (1,638,304) (3,039) (1,641,344) NBV at 1 January NBV at 1 January 1,084,003 1,090, ,084,599 1,091,086 NBV at 31 March 998, ,099 The net book amount of property, plant and equipment includes $26.4 million (31 December : $26.8 million) in respect of the Pierce FPSO lease held under finance lease. On 18 January the Corporation announced that it has entered into an agreement for the sale of its entire interest in Licences PL089, P534 and PEDL 328, which contain the onshore Wytch Farm field for a cash consideration of $53 million. This was completed on 28 March and resulted in the removal above of $87.9 million of costs and $31 million of DD&A. 12. GOODWILL 31 March 31 Dec Closing balance 123, ,510 $123.5 million goodwill represents $136.1 million recognised on the acquisition of Summit Petroleum Limited ("Summit") in July 2014 as a result of recognising a $136.9 million deferred tax liability as required under IFRS 3 fair value accounting for business combinations. Absent the deferred tax liability the price paid for the Summit assets equated to the fair value of the assets. $1.0 million represented goodwill recognised on the acquisition of gas assets from GDF in December As at 31 December 2015 a nontaxable impairment of $13.6 million was recorded relating to goodwill. Ithaca Energy Inc. Q1 Financial Statements 12

13 13. INVESTMENT IN ASSOCIATES 31 March 31 Dec Investment in FPF1 34,717 28,571 Investment in associates comprises a 49.86% share in FPF1 Limited, a Jersey incorporated company who owns and operates the FPF1 production facility which services the Greater Stella Area. The investment in FPF1 is measured using the equity method. Summarised financial information of the investment are set out below: 31 March 31 March Revenue Costs Gross profit 14,559 (2,233) 12,326 1,559 (1,483) 76 Group's share of profit for the period 6, BORROWINGS RBL facility Senior notes Delek Term loan Security against term loan Long term bank fees Long term senior notes fees Bank debt facilities 31 March (169,600) (300,000) (100,000) (132,290) 70,000 2,143 1,274 (628,473) 31 Dec (174,600) (300,000) (100,000) (131,260) 70,000 2,791 1,555 (631,514) As at 31 March, the Corporation has a $245 million senior RBL facility and a $140 million term loan. The availability of these facilities as at the same date was over $235 million. The facilities are based on conventional oil and gas industry financing terms with repayment in May 2019 and bear a combined annual interest of LIBOR+2.6% based on current drawings. The facilities are for funding Ithaca's ongoing development operations including a $45 million tranche to part fund Vorlich field development capital expenditures. RBL Facility As at 31 March, $169.6 million (31 December : $174.6 million) was drawn down under the RBL. $2.1 million (31 December : $2.8 million) of loan fees relating to the RBL have been capitalised and remain to be amortised. Term Loan Facility As at 31 March, $132.3 million (31 December : $131.3 million) was drawn down under the term loan. Senior Notes The Corporation had $300 million 8.125% senior unsecured notes due July 2019, with interest payable semiannually. $1.3 million of loan fees (31 December : $1.6 million) have been capitalised and remain to be amortised. Delek Loan The Corporation has in place a $30 million unsecured parent company term loan for general corporate purposes and a $70 million unsecured parent company loan, used to part securitize the $140 million term loan via a future acquisition fund, both with maturities of June Covenants The Corporation is subject to financial and operating covenants related to the facilities. Failure to meet the terms of one or more of these covenants may constitute an event of default as defined in the facility agreements, potentially resulting in accelerated repayment of the debt obligations. The Corporation was in compliance with all its relevant financial and operating covenants during the period. Ithaca Energy Inc. Q1 Financial Statements 13

14 The key covenants in the RBL are: Total projected sources of funds must exceed the total projected uses of funds for the remaining term of the RBL The ratio of the net present value of cashflows secured under the RBL for the economic life of the fields to the amount drawn under the facility must not fall below 1.15:1 The ratio of the net present value of cashflows secured under the RBL for the life of the debt facility to the amount drawn under the facility must not fall below 1.05:1 There are no historic or maintenance financial covenant tests associated with the term loan, unsecured senior notes or the parent company loans. Security provided against the facilities The RBL facility is secured by the assets of the guarantor members of the Ithaca Group, such security including share pledges, floating charges and/or debentures. The term loan is secured by floating and/or fixed charges over certain bank accounts accounts relating to the future acquisition fund and a corporate guarantee issued by Delek Group Ltd. The Senior notes are unsecured senior debt of Ithaca Energy Inc., guaranteed by certain members of the Ithaca Group and subordinated to existing and future secured obligations. 15. TRADE AND OTHER PAYABLES 31 March 31 Dec Trade payables Accruals and deferred income Shell prepayment BP gas prepayment (113,239) (93,000) (56,974) (5,438) (101,848) (126,381) (59,010) (9,362) (268,651) (296,601) 16. DECOMMISSIONING LIABILITIES 31 March 31 Dec Balance, beginning of period Disposals (Note 11) Accretion Revision to estimates Decommissioning provision utilised Balance, end of period (190,945) 10,665 (1,909) 1,456 (180,733) (206,933) (8,350) 20,708 3,630 (190,945) The total future decommissioning liability was calculated by management based on its net ownership interest in all wells and facilities, estimated costs to reclaim and abandon wells and facilities and the estimated timing of the costs to be incurred in future periods. The Corporation uses a risk free rate of 4.0 percent (31 December : 4.0 percent) and an inflation rate of 2.0 percent (31 December : 2.0 percent) over the varying lives of the assets to calculate the present value of the decommissioning liabilities. These costs are expected to be incurred at various intervals over the next 19 years. The economic life and the timing of the obligations are dependent on Government legislation, commodity price and the future production profiles of the respective production and development facilities. 17. OTHER LONGTERM LIABILITIES 31 March 31 Dec Finance lease acquired Petrofac incentive payment Petrofac capital allowances repayment Balance, end of period (27,581) (32,224) (82,215) (142,020) (28,309) (31,579) (81,806) (141,694) Ithaca Energy Inc. Q1 Financial Statements 14

15 In 2015 Ithaca entered into an agreement with Petrofac in respect of the FPF1 Floating Production facility whereby Ithaca will pay Petrofac $13.7 million in respect of final payment on variations to the contract, with payment deferred until three and a half years after fully ramped production is achieved from the Stella field. A further payment to Petrofac of up to $34 million was initially to be made by Ithaca dependent on the timing of sailaway of the FPF1. This further payment was revised to $17 million in Q This payment can also be deferred until three and a half years after fully ramped up production is achieved from the Stella field. These payments are reflected in the $31.6m liability above, which has been recorded on legal completion in September of the Stella Sale and Purchase agreement ("SPA") entered into with Petrofac on 19 October Interest is accruing on this liability at a rate of 8.5% per annum. Further, also on legal completion, a liability has been recorded to reflect the value of capital allowances claimed by Ithaca during the Stella development project (see note 23 below). This liability has been calculated based on the anticipated probability of the corporation tax rate expected to be in force in 5 years time and has also been discounted to reflect the time value of money. This has resulted in a liability at 31 March of $82.2 million. The corresponding entries for both the Petrofac incentive payment and capital allowances repayment are included in the PP&E additions. (Note 11) 18. FINANCE LEASE LIABILITIES Total minimum lease payments Less than 1 year Between 1 and 5 years 5 years and later 31 March 31 Dec (2,322) (11,620) (18,006) (2,322) (11,614) (18,585) Interest Less than 1 year Between 1 and 5 years 5 years and later Present value of minimum lease payments Less than 1 year Between 1 and 5 years 5 years and later The finance lease relates to the Pierce FPSO acquired as part of the Summit acquisition. 19. CONTINGENT CONSIDERATION Noncurrent Balance outstanding (874) (3,583) (2,511) (1,448) (8,038) (15,495) 31 March (9,000) (886) (3,651) (2,657) (1,436) (7,964) (15,928) 31 Dec (9,000) The noncurrent contingent consideration balance relates to the acquisition of the Vorlich and Austen fields, with an amount payable upon FDP submission of $6.0 million and subsequent payment of $3 million payable due upon defined production criteria being met. 20. SHARE CAPITAL Number of Amount Authorised share capital ordinary shares At 31 March and 31 December Unlimited (a) Issued The issued share capital is as follows: Issued Number of Amount common shares At 31 March and 31 December 425,338, ,077 Ithaca Energy Inc. Q1 Financial Statements 15

16 (b) Stock options During Q217 conditions of a cash takeover offer for all the common shares of the Company not owned by Delek Group Ltd. ( Delek ) or any of its affiliates for C$1.95 per share (the Offer ) were satisfied and the Offer was accepted by holders of approximately 70.3% of the issued and outstanding common shares, not including the common shares already owned by Delek prior to the announcement of the Offer. As a result of this transaction all stock options immediately vested. Therefore as at 31 March and 31 December there are no outstanding stock options remaining. (c) Share based payment Options granted were accounted for using the fair value method. There are no costs in the quarter ended 31 March for total stock options granted (: $1.3 million). There was no charge through the statement of income for stock based compensation for the quarter ended 31 March (: $0.3 million), previously being the Corporation s share of stock based compensation chargeable through the statement of income. 21. SHARE BASED PAYMENT RESERVE Balance, beginning of period Share based payment cost Transfer to share capital on exercise of options Transfer to retained earnings on closure of scheme Balance, end of period 22. EARNINGS PER SHARE 31 March US$ Dec US$ ,185 1,289 (14,341) (12,133) The calculation of basic earnings per share is based on the profit after tax and the weighted average number of common shares in issue during the period. The calculation of diluted earnings per share is based on the profit after tax and the weighted average number of potential common shares in issue during the period. Weighted average number of common shares (basic) Weighted average number of common shares (diluted) 23. TAXATION Taxation Three months ended 31 March 425,338, ,607, ,338, ,622,600 Three months ended 31 March US$000 US$000 21,392 6,516 In accordance with the Stella Sale and Purchase Agreement ("SPA"), Ithaca received the right to claim a tax benefit for additional capital allowances on certain capital expenditures incurred by Ithaca and paid for by Petrofac on the Stella project. The tax benefit of these capital allowances was received by Ithaca as the expenditure is incurred. In recognition of the benefit Ithaca receives from the additional capital allowances a payment will be made to Petrofac in 2022, 5 years after legal completion of the SPA, in accordance with its terms, of a sum calculated at the prevailing tax rate applied to the relevant capital allowances. The relevant capital allowances are $241 million and implies, assuming current tax rates, a payment of approximately $96 million. The net deferred tax balance at 31 March of $484.3 million comprises a deferred tax asset of $766.5 million offset by a deferred tax liability of $282.2 million. The carrying value of the deferred tax asset of $766.5 million is supported by estimates of the Company's future taxable income, based on the same price and cost assumptions as used for impairment testing and reflecting expected tax planning opportunities. The recoverability of this value is highly sensitive to the assumptions used and any change in those assumptions could impact the recoverability of the asset in the absence of future acquisitions. For example a 10% reduction in assumed future Brent oil prices could result in an approx. $50million reduction in recoverability of the deferred tax asset. Ithaca Energy Inc. Q1 Financial Statements 16

17 24. COMMITMENTS Operating lease commitments Within one year Two to five years Capital commitments Capital commitments incurred jointly with other venturers (Ithaca's share) 31 March 31 Dec March 31 Dec 15,727 16, FINANCIAL INSTRUMENTS To estimate fair value of financial instruments, the Corporation uses quoted market prices when available, or industry accepted thirdparty models and valuation methodologies that utilise observable market data. In addition to market information, the Corporation incorporates transaction specific details that market participants would utilise in a fair value measurement, including the impact of nonperformance risk. The Corporation characterises inputs used in determining fair value using a hierarchy that prioritises inputs depending on the degree to which they are observable. However, these fair value estimates may not necessarily be indicative of the amounts that could be realised or settled in a current market transaction. The three levels of the fair value hierarchy are as follows: Level 1 inputs represent quoted prices in active markets for identical assets or liabilities (for example, exchangetraded commodity derivatives). Active markets are those in which transactions occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2 inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly, as of the reporting date. Level 2 valuations are based on inputs, including quoted forward prices for commodities, market interest rates, and volatility factors, which can be observed or corroborated in the marketplace. The Corporation obtains information from sources such as the New York Mercantile Exchange and independent price publications. Level 3 inputs that are less observable, unavailable or where the observable data does not support the majority of the instrument s fair value. In forming estimates, the Corporation utilises the most observable inputs available for valuation purposes. If a fair value measurement reflects inputs of different levels within the hierarchy, the measurement is categorised based upon the lowest level of input that is significant to the fair value measurement. The valuation of overthecounter financial swaps and collars is based on similar transactions observable in active markets or industry standard models that primarily rely on market observable inputs. Substantially all of the assumptions for industry standard models are observable in active markets throughout the full term of the instrument. These are categorised as Level 2. The following table presents the Corporation s material financial instruments measured at fair value for each hierarchy level as of 31 March : Level 1 Level 2 Level 3 Total Fair Value Contingent consideration Derivative financial instrument liability (9,000) (25,621) (9,000) (25,621) The table below presents the total gain on financial instruments that has been disclosed through the statement of income at the quarter end: Three months ended 31 March Revaluation of forex forward contracts Revaluation of commodity hedges (416) (17) (2,175) (416) (2,192) Realised (loss)/gain on commodity hedges Total gain on financial instruments The Corporation has identified that it is exposed principally to these areas of market risk. (11,010) (11,010) (11,426) 7,898 7,898 5,706 Ithaca Energy Inc. Q1 Financial Statements 17

18 i) Commodity Risk The table below presents the total gain on commodity hedges that has been disclosed through the statement of income at the quarter end: Revaluation of commodity hedges Realised gain on commodity hedges Total gain on commodity hedges Three months ended 31 March (416) (2,175) (11,010) 7,898 (11,426) 5,723 Commodity price risk related to crude oil prices is the Corporation s most significant market risk exposure. Crude oil prices and quality differentials are influenced by worldwide factors such as OPEC actions, political events and supply and demand fundamentals. The Corporation is also exposed to natural gas price movements on uncontracted gas sales. Natural gas prices, in addition to the worldwide factors noted above, can also be influenced by local market conditions. The Corporation s expenditures are subject to the effects of inflation, and prices received for the product sold are not readily adjustable to cover any increase in expenses from inflation. The Corporation may periodically use different types of derivative instruments to manage its exposure to price volatility, thus mitigating fluctuations in commodityrelated cash flows. The below represents commodity hedges in place at the quarter end: Derivative Term Volume Average price Oil swaps April 18 June 19 1,368,486 bbls $54/bbl Oil puts April 18 March 19 1,061,100 bbls $61/bbl Gas swaps April 18 March 19 53,688,000 therms 46p/therm ii) Interest Risk Calculation of interest payments for the RBL Facility agreement incorporates LIBOR. The Corporation is therefore exposed to interest rate risk to the extent that LIBOR may fluctuate. There were no interest rate financial instruments in place at the quarter end. iii) Foreign Exchange Rate Risk The table below presents the total loss on foreign exchange financial instruments that has been disclosed through the statement of income at the quarter end: Three months ended 31 March Revaluation of forex forward contracts Realised (loss) on forex forward contracts (17) Total (loss) on forex forward contracts (17) The Corporation is exposed to foreign exchange risks to the extent it transacts in various currencies, while measuring and reporting its results in US Dollars. Since time passes between the recording of a receivable or payable transaction and its collection or payment, the Corporation is exposed to gains or losses on non USD amounts and on balance sheet translation of monetary accounts denominated in non USD amounts upon spot rate fluctuations from quarter to quarter. The Company enters into forward contracts as a means of hedging its exposure to foreign exchange rate risks. As at 31 March, the Company had 1.7 million per month hedged at a forward rate of $1.40 : 1 for the period April to December. Ithaca Energy Inc. Q1 Financial Statements 18