2016 Financial Results

Transcription

1 Financial Results Released : 23 Mar 17 07:00 RNS Number : 2616A Ithaca Energy Inc 23 March 2017 Not for Distribution to U.S. Newswire Services or for Dissemination in the United States Ithaca Energy Inc. Financial Results 23 March 2017 Ithaca Energy Inc. (TSX: IAE, LSE AIM: IAE) ("Ithaca" or the "Company") announces its financial results for the twelve months ended 31 December, together with the results of its independent year-end reserves assessment and an operations update. Financial and operating highlights Average production of 9,310 barrels of oil equivalent per day ("boepd"), ahead of full year guidance of 9,000 boepd (: 12,066 boepd) Unit operating expenditure reduced to $23/boe in (: $31/boe) cashflow from operations of $147 million, down from $261 million in Loss after tax of $54 million, impacted by the reduction in UK tax rates during the year (: $121 million) Downside commodity price hedging in place to mid ,600 boepd at an average floor of $50/boe Net debt reduced to $598 million at year-end, down from $665 million at the start of Refinancing of the Company's debt facilities anticipated during 2017 Proved and probable reserves, as independently evaluated by Sproule 1, increased to 76 MMboe, primarily as a result of the Vorlich and Austen licence acquisitions and updated portfolio work programmes Greater Stella Area development activities Stella field started up in February production to date approximately 1,700 barrels of oil per day net to Ithaca FPF-1 dynamic commissioning programme on-going - producing at reduced rates to minimise flaring until the gas processing systems are fully commissioned Harrier field development programme underway - development drilling to be completed in 2017, with start-up of production expected in the second half of 2018 Recommended Delek cash takeover offer - opportunity created for shareholders to crystallise the full value of their investments at a premium cash price Takeover offer by DLK Investments Limited, a wholly owned subsidiary of Delek Group Limited ("Delek"), announced on 6 February 2017 for a cash consideration of C$1.95 per share, which equates to approximately 1.19 per share 2 Acceptance of the offer is unanimously recommended by the Board of Directors (excluding the Delek related party directors) based on an evaluation of the fullness of the offer relative to the future upsides and execution risks of the business Shareholder circulars distributed and closing of initial deposit period set as (Toronto time) on 20 April the offer is conditional upon, amongst other things, more than 50% of the shares outstanding that are not currently owned by the Offeror and its affiliates being deposited by that time Les Thomas, Chief Executive Officer, commented: Our financial results reflect a year of good progress for the Company culminating in first oil from the Stella field in February This progress has been reflected in the near four-fold increase in our share price since the start of last year. Stella first oil was an important milestone for the Company and production is forecast to ramp-up upon completion of on-going dynamic commissioning of the gas processing facilities. Having reached this important milestone and after weighing up the potential risks and opportunities that lie ahead, the Board considers the takeover offer tabled by Delek as providing full value to shareholders and wholeheartedly recommends its acceptance." Production & Operations Average production in was 9,310 boepd (92% oil). The asset portfolio performed well over the course of the year, with production running ahead of the 9,000 boepd guidance as a result of solid performance from the Cook field. As previously guided, average production in 2017 is anticipated to be in the range of 19,000 to 22,000 boepd (approximately 75% oil). This range reflects the Stella start-up schedule, the programme of planned maintenance shutdowns during the year and sensitivities associated with the performance of those operational programmes.

2 Production in the first quarter of 2017 is forecast to average approximately 9,200 boepd, including the initial contribution from the Stella field since mid-february While the on-going dynamic commissioning operations are continuing on the FPF-1, the Stella field is being produced at reduced rates from two of the five wells on the field in order to limit gas flaring. As a consequence, average Stella production to date has been approximately 1,700 barrels of oil per day net to Ithaca. Greater Stella Area Development Stella Following completion of the necessary offshore preparatory works on the FPF-1 floating production facility, first hydrocarbons from the Stella field was achieved in mid-february Production was initially started from one well on the field in order to commission and stabilise the liquid processing systems on the FPF-1 and commence oil exports to the shuttle tanker. Continued progress is being made with the FPF-1 dynamic commissioning programme. The key outstanding tasks involve commissioning of the fuel gas system and the two gas export compressors, in order to commence gas exports to the CATS pipeline. Initial load testing on the first of the two gas export compressors identified the requirement for modifications to the instrumentation on the machine in order to complete the commissioning scope. This work is in the process of being completed and it is expected that the planned commissioning programme will shortly recommence. Once load testing of the compressor has been satisfactorily proven, this will enable gas to be routed to the fuel gas system and initial pipeline exports to begin. Following this, testing of the second gas export compressor will commence. Once both export compressors are operational the ramp-up to full production rates will commence, followed by optimisation of production across the wells on the field. While it was anticipated that the dynamic commissioning and ramp-up programme would take up to eight weeks to complete, it is likely that these activities will take longer, with the ramp-up phase of operations now expected to commence in April GSA Oil Export Pipeline The work programme that is underway for installation of the oil export pipeline from the FPF-1 to the Norpipe system remains scheduled for completion in the second half of The main outstanding activities to be completed are the installation and tie-in of the pipeline export pumps on the FPF-1 and installation of the final subsea connections that are required to be undertaken immediately prior to the switchover from shuttle tanker to pipeline export. Harrier Development As previously announced, activities on the Harrier field development programme are scheduled to commence in April 2017, with the arrival on location of the ENSCO 122 heavy duty jack-up drilling rig. The rig programme involves a multilateral well being drilled into the two reservoir formations on the field and is scheduled to be completed in the second half of The Harrier well is to be tied back via a 7.5 kilometre pipeline to an existing slot on the Stella main drill centre manifold for onward export and processing of production on the FPF-1. The subsea infrastructure installation activities are scheduled for summer 2018, resulting in the anticipated start-up of Harrier production in the second half of Financials Hedging The Company's commodity hedging position remains unchanged since the start of As of the start of this year the Company has 7,600 boepd (85% oil) hedged at an average floor price of $50/boe for the 18 months to 30 June Full commodity price upside exposure has been retained on 60% of the volumes hedged and upside exposure to $60/boe has been retained on a further 25% of the hedged volumes. Operating Expenditure Unit operating costs were reduced from $31/boe in to $23/boe in, a year-on-year reduction of 26%. This reduction was achieved through supply chain cost saving initiatives, removing overheads and resetting the cost base to reflect the requirements of the current commodity price environment, combined with the cessation of operations at the Company's legacy high cost fields. Forecast 2017 unit operating expenditure is anticipated to be approximately $18/boe, reflecting the anticipated positive impact on unit costs of Stella field production. Capital Expenditure Total capital expenditure in was $63 million, in line with the revised guidance issued during the year to reflect inclusion of the expenditure associated with acceleration of the GSA oil pipeline installation operations. The planned capital expenditure programme for 2017 is forecast to total approximately $70 million. The majority of this expenditure relates to the GSA, primarily being Harrier development activities plus completion of the GSA oil export pipeline investment programme and Vorlich field development planning activities. Tax The Company had a UK tax allowances pool of over $1,700 million at 31 December. At current commodity prices, the pool is forecast to shelter the Company from the payment of corporation tax over the medium term. During the year the UK government reduced Corporation Tax rates levied on E&P companies by 10% and effectively abolished Petroleum Revenue Tax charges. As a result of these changes, a non-cash deferred tax charge of $58 million is reflected in the Income Statement. Net Debt & Credit Facilities The Company's net debt at 31 December was $598 million, down $67 million since the start of the year. It is anticipated that net debt at the end of the first quarter of 2017 will be approximately $615 million. The increase on the year-end figure is due to anticipated movements in working capital. Net debt is forecast to resume its downward trend over the course of the year as a result of increased cashflow generation from the Stella field. Ithaca's existing bank debt facilities and senior notes have maturities in late 2018 and mid-2019, respectively. During 2017 the Company will assess the options to refinance these credit facilities and the associated debt maturity profiles. Year-End Reserves

3 Total proved and probable ("2P") reserves as at 31 December have been independently estimated by Sproule 1, a qualified reserves evaluator, as 76 million barrels of oil equivalent ("MMboe"). These reserves reflect the addition of the Vorlich and Austen licence acquisitions completed during and updated portfolio work programmes. Further details of the Sproule evaluation are set out in the Management Discussion and Analysis for the financial results. The results of the Sproule reserves assessment do not result in a change in information that would reasonably be expected to alter the conclusions of the independent valuation prepared by GMP FirstEnergy for the purposes of Company's evaluation of the Delek takeover offer, which was completed in accordance with the requirements of Multilateral Instrument Protection of Minority Security Holders in Special Transactions. As such, the Company does not believe that the Sproule reserves assessment would reasonably be considered new information for the purposes of National Instrument Takeover Bids and Issuer Bids, that would reasonably be expected to affect the decision of the shareholders of the Company to accept or reject the Delek takeover offer. Recommended Delek Takeover Offer On 6 February 2017 the Company announced that it had entered into a definitive support agreement with Delek Group Ltd on the terms of a cash takeover bid for all of the issued and to be issued common shares of Ithaca not currently owned by Delek or any of its affiliates for C$1.95 per share (the "Offer"). The Offer is being made by DKL Investments Limited (the "Offeror"), an affiliate of Delek, which is currently Ithaca's largest shareholder and holds approximately 19.7% of the currently issued and outstanding common shares of the Company. The Board of Directors excluding the Delek related party directors (the "Directors"), after consulting with its financial and legal advisers, considers the terms of the Offer to be in the best interests of Ithaca and its shareholders and have accordingly unanimously recommended that shareholders accept the Offer and deposit their shares. The principal reasons for this recommendation are centred on an evaluation of the fullness of the Offer relative to the future upsides and execution risks of the business. A full explanation of the reasons underlying the recommendation to shareholders and the multiple factors evaluated by Directors is contained in the Directors' Circular that was issued to shareholders on 14 March The evaluation and its conclusion was made in light of the Directors' own knowledge of the business, the industry and the financial condition and prospects of the Company and based upon the recommendation of a special committee of independent directors ("the Special Committee"), which has been advised by RBC Capital Markets in its capacity as financial advisor to the Company. The Offer will be open for acceptance until (Toronto time) on 20 April 2017 (the "Expiry Time"). Shareholders wishing to accept the Offer must take action to deposit their shares. Successful completion of the Offer is conditional upon, amongst other things, more than 50% of the common shares outstanding (excluding the shares already owned by the Offeror and its affiliates) being validly deposited under the Offer prior to the Expiry Time (the "Minimum Tender Condition"). No deposited shares will be purchased by the Offeror if the Minimum Tender Condition is not satisfied. Full details of the Offer are contained in Takeover Bid Circular issued by Delek to shareholders of the Company on 14 March 2017 and the associated Ithaca Directors' Circular that was issued on the same date. Copies of both documents are available on the Company's website ( and on SEDAR ( Financial Results Conference Call A conference call and webcast for investors and analysts will be held today at GMT (08.00 EDT), with a playback facility being made available on the Company's website later that day. Listen to the call live via the Company's website ( or alternatively dial-in on one of the following telephone numbers and request access to the Ithaca Energy conference call: UK +44 (0) ; Canada ; US A short presentation to accompany the results will be available on the Company's website prior to the call. Notes 1. The year-end independent reserves evaluation has been performed by Sproule International Limited ("Sproule"), a qualified reserves evaluator, in accordance with the Canadian Oil and Gas Evaluation Handbook pursuant to NI Standards of Reserves Disclosure for Oil and Gas Activities. 2. Based on the closing exchange rate on 10 March 2017, as noted in the Takeover Bid Circular issued by Delek. The audited consolidated financial statements of the Company for the year ended 31 December and the related Management Discussion and Analysis are available on the Company's website ( and on SEDAR ( All values in this release and the Company's financial disclosures are in US dollars, unless otherwise stated. Enquiries: - ENDS - Ithaca Energy Les Thomas lthomas@ithacaenergy.com +44 (0) Graham Forbes gforbes@ithacaenergy.com +44 (0) Richard Smith rsmith@ithacaenergy.com +44 (0) FTI Consulting Edward Westropp edward.westropp@fticonsulting.com +44 (0) Cenkos Securities Neil McDonald nmcdonald@cenkos.com +44 (0) Beth McKiernan bmckiernan@cenkos.com +44 (0) Nick Tulloch ntulloch@cenkos.com +44 (0) RBC Capital Markets Matthew Coakes matthew.coakes@rbccm.com +44 (0)

4 Notes In accordance with AIM Guidelines, John Horsburgh, BSc (Hons) Geophysics (Edinburgh), MSc Petroleum Geology (Aberdeen) and Subsurface Manager at Ithaca is the qualified person that has reviewed the technical information contained in this press release. Mr Horsburgh has over 15 years operating experience in the upstream oil and gas industry. References herein to barrels of oil equivalent ("boe") are derived by converting gas to oil in the ratio of six thousand cubic feet ("Mcf") of gas to one barrel ("bbl") of oil. Boe may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf: 1 bbl is based on an energy conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6 Mcf: 1 bbl, utilising a conversion ratio at 6 Mcf: 1 bbl may be misleading as an indication of value. All references to dollars ($) in this press release refer to the United States dollar (USD), unless otherwise stated. About Ithaca Energy Ithaca Energy Inc. (TSX: IAE, LSE AIM: IAE) is a North Sea oil and gas operator focused on the delivery of lower risk growth through the appraisal and development of UK undeveloped discoveries and the exploitation of its existing UK producing asset portfolio. Ithaca's strategy is centred on generating sustainable long term shareholder value by building a highly profitable 25kboe/d North Sea oil and gas company. For further information please consult the Company's website Forward-looking Statements Some of the statements and information in this press release are forward-looking. Forward-looking statements and forward-looking information (collectively, "forward-looking statements") are based on the Company's internal expectations, estimates, projections, assumptions and beliefs as at the date of such statements or information, including, among other things, assumptions with respect to production, drilling, construction and maintenance times, well completion times, risks associated with operations, future capital expenditures, continued availability of financing for future capital expenditures, future acquisitions and dispositions and cash flow. The reader is cautioned that assumptions used in the preparation of such information may prove to be incorrect. When used in this press release, the words and phrases like "anticipate", "continue", "estimate", "expect", "may", "will", "project", "plan", "should", "believe", "could", "target", "in the process of", "on track" and similar expressions, and the negatives thereof, whether used in connection with the Offer, operational activities, drilling plans, future GSA field development programmes, Stella production ramp-up timing, production forecasts, budgetary figures, future operating costs, anticipated net debt, anticipated funding requirements, planned maintenance shutdowns, potential developments including the timing and anticipated benefits of acquisitions and dispositions or otherwise, are intended to identify forward-looking statements. Such statements are not promises or guarantees, and are subject to known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. The Company believes that the expectations reflected in those forwardlooking statements are reasonable but no assurance can be given that these expectations, or the assumptions underlying these expectations, will prove to be correct and such forward-looking statements included in this press release should not be unduly relied upon. These forwardlooking statements speak only as of the date of this press release. Ithaca Energy Inc. expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any forward-looking statement is based except as required by applicable securities laws. Additional information on these and other factors that could affect Ithaca's operations and financial results are included in the Company's Management Discussion and Analysis and Annual Information Form for the year ended 31 December and in reports which are on file with the Canadian securities regulatory authorities and may be accessed through the SEDAR website ( HIGHLIGHTS Solid cashflow generation in the year Average production of 9,310 barrels of oil equivalent per day ("boepd"), ahead of full year guidance of 9,000 boepd (: 12,066 boepd) Unit operating expenditure reduced to $23/boe in (: $31/boe) cashflow from operations of $147 million, down from $240 million in Loss after tax of $54 million, impacted by the reduction in UK tax rates during the year (: $121 million) Downside commodity price hedging in place to mid ,600 boepd at an average floor of $50/boe Net debt reduced to $598 million at year end, down from $665 million at the start of Refinancing of the Company's debt facilities anticipated during 2017 Proved and probable reserves, as independently evaluated by Sproule 1, increased to 76 MMboe, primarily as a result of the Vorlich and Austen licence acquisitions and updated portfolio work programmes Stella first oil achieved on 16 February 2017 Delek Offer opportunity for shareholders to crystallise full value of their investments at a premium cash price Stella field started up in February 2017 production to date approximately 1,700 barrels of oil equivalent per day net to Ithaca FPF 1 dynamic commissioning programme on going producing at reduced rates to minimise gas flaring until the gas processing systems are fully commissioned Harrier field development programme underway development drilling to be completed in 2017, with start up of production expected in the second half of 2018 Takeover offer by DLK Investments Limited, a wholly owned subsidiary of Delek Group Limited("Delek"), announced on 6 February 2017 for a cash consideration of C$1.95 per share, which equates to approximately 1.19 per share 2 Acceptance of the offer is unanimously recommended by the Board of Directors (excluding the Delek related party directors) based on a number of factors including an evaluation of the fullness of the offer relative to the future upsides and execution risks of the business Shareholder circulars distributed and closing of initial deposit period set as (Toronto time) on 20 April 2017 the offer is conditional upon, amongst other things, more than 50% of the shares outstanding that are not currently owned by the Offeror and its affiliates being deposited

5 (1) The year-end independent reserves evaluation has been performed by Sproule International Limited ("Sproule"), a qualified reserves evaluator, in accordance with the Canadian Oil and Gas Evaluation Handbook pursuant to NI Standards of Reserves Disclosure for Oil and Gas Activities. (2) Based on the closing exchange rate on 10 March 2017, as noted in the shareholder circulars SUMMARY STATEMENT OF INCOME Average Production kboe/d Average Realised Oil Price (1) $/bbl Revenue (2) M$ Commodity Hedging Cash Gain M$ Revenue (2) (Incl. Cash Hedging Gain) M$ Opex M$ (78.2) (106.5) G&A M$ (4.7) (9.8) Foreign Exchange (3) M$ (4.7) (1.7) Cashflow from Operations M$ DD&A & Impairment M$ (76.1) (520.5) Non-Cash Hedging (Loss)/Gain M$ (119.3) (22.6) Finance Costs M$ (36.6) (40.2) Other Non-Cash Costs M$ 1.3 (4.1) Loss before Taxation M$ (83.7) (326.4) Taxation - Excluding Rate Changes M$ Reduced Tax Rates Impact M$ (57.9) (40.3) Earnings Loss M$ (53.8) (121.0) Cashflow Per Share $/Sh Earnings Per Share $/Sh. (0.13) (0.35) (1) Average realised price before hedging (2) Revenue net of stock movements (3) Foreign exchange net of related realised hedging gains & losses SUMMARY BALANCE SHEET M$ 31 Dec. 31 Dec. Cash & Equivalents Other Current Assets PP&E 1,112 1,113 Deferred Tax Asset Other Non-Current Assets Total Assets 1,931 2,063 Current Liabilities (245) (283) Borrowings (619) (666) Asset Retirement Obligations (207) (227) Other Non-Current Liabilities (116) (93) Total Liabilities (1,187) (1,270) Net Assets Share Capital Other Reserves Surplus Shareholders' Equity CORPORATE STRATEGY Ithaca Energy Inc. ("Ithaca" or the "Company") is a North Sea oil and gas operator focused on the delivery of lower risk growth through the appraisal and development of UK undeveloped discoveries and the exploitation of its existing UK producing asset portfolio. Ithaca's goal is to generate sustainable long term shareholder value by building a highly profitable 25kboepd North Sea oil and gas company. Execution of the Company's strategy is focused on the following core activities: Maximising cashflow and production from the existing asset base

6 Delivery of lower risk, long term development led growth through the appraisal of undeveloped discoveries Continuing to grow and diversify the cashflow base by securing new producing, development and appraisal assets through targeted acquisitions and licence round participation Maintaining capital discipline, financial strength and a clean balance sheet, supported by lower cost debt leverage CORPORATE ACTIVITIES Unanimously recommended takeover by Delek Planned RBL redeterminations successfully completed over $110M of headroom in place at end RECOMMENDED DELEK TAKEOVER OFFER On 6 February 2017 the Company announced that it had entered into a definitive support agreement with Delek Group Ltd ("Delek") on the terms of a cash takeover bid for all of the issued and to be issued common shares of Ithaca not currently owned by Delek or any of its affiliates for C$1.95 per share (the "Offer"). The Offer is being made by DKL Investments Limited (the "Offeror"), an affiliate of Delek, which is currently Ithaca's largest shareholder and holds approximately 19.7% of the currently issued and outstanding common shares of the Company. The Board of Directors excluding the Delek related party directors (the "Directors"), after consulting with its financial and legal advisers, considers the terms of the Offer to be in the best interests of Ithaca and its shareholders and accordingly unanimously recommends that shareholders accept the Offer and deposit their shares. A principal reason for this recommendation is centred on an evaluation of the fullness of the Offer relative to the future upsides and execution risks of the business. A full explanation of the reasons underlying the recommendation to shareholders and the multiple factors evaluated by Directors is contained in the Directors' Circular that was issued to shareholders on 14 March 2017 and is available on the Company's Sedar profile at Sedar.com. The evaluation and its conclusion was made in light of the Directors' own knowledge of the business, the industry and the financial condition and prospects of the Company and based upon the recommendation of a special committee of independent directors ("the Special Committee"), which has been advised by RBC Capital Markets ("RBC") in its capacity as financial advisor to the Company. The Offer will be open for acceptance until (Toronto time) on 20 April 2017 (the "Expiry Time"). Shareholders wishing to accept the Offer must take action to deposit their shares. Successful completion of the Offer is conditional upon, amongst other things, more than 50% of the common shares outstanding (excluding the shares already owned by the Offeror and its affiliates) being validly deposited under the Offer prior to the Expiry Time (the "Minimum Tender Condition"). No deposited shares will be purchased by the Offeror if the Minimum Tender Condition is not satisfied. DEBT FACILITIES The Company completes a semi annual redetermination process with its reserves based lending ("RBL") bank syndicate, at the end of April and October of each year, to review the borrowing capacity of its assets based on the technical and commodity price assumptions applied by the syndicate. Following the successful completion of the October redetermination, the Company's available RBL borrowing capacity is over $410 million. When combined with the $300 million senior unsecured notes the Company has in place, the business has a total debt capacity of over $710 million, maintaining in excess of $110 million of funding headroom when compared to net debt at the end of of $598 million. The Company is focused on maintaining a solid liquidity position, with substantial deleveraging having already been delivered before Stella first hydrocarbons. A robust financial position has been retained during the current period of lower and more volatile oil prices as a result of various proactive measures taken to increase the financial strength of the business and ensure that the Company has sufficient flexibility to manage downside risks. As a consequence of the substantial deleveraging, the Company elected to reduce the size of the debt facilities from $650 million to $535 million in June, saving approximately $0.5 million in commitment fees for the remainder of the year. This change has no effect on the current RBL debt capacity of approximately $410 million, as this is below the reduced facility size of $535 million. Both RBL facilities are based on conventional oil and gas industry borrowing base financing terms, neither of which have historic financial covenant tests. The Company's $300 million senior unsecured notes, due July 2019, similarly have no historic financial covenant tests. Ithaca's existing bank debt facilities and senior notes have maturities in late 2018 and mid 2019, respectively. During 2017 the Company will assess the options to refinance these credit facilities and the associated debt maturity profiles. DIRECTOR & EXECUTIVE CHANGES Certain director and senior management changes have been made since the start of the year. Following the Company's annual general meeting in June, Jack Lee and Frank Wormsbecker retired from the Board of Directors. Brad Hurtubise, a serving Non Executive Director of the board, succeeded Mr Lee as Non Executive Chairman. In January Richard Smith was appointed to the executive team as Chief Commercial Officer, and in April, Nick Muir, Chief Technical Officer, left the Company. PRODUCTION & OPERATIONS Solid production ahead of full year guidance PRODUCTION The producing asset portfolio performed well during, with production running ahead of the 9,000 boepd guidance largely as a result of solid performance from the Cook field. Average production for was 9,310 boepd, 92% oil (: 12,066 boepd), which compares to full year base production guidance of approximately 9,000 boepd. When comparing with, production has down by approximately 23%. This reflects the specific steps taken in to reposition the portfolio to

7 meet the requirements of the lower Brent price environment, namely the cessation of production from the Athena and Anglia fields, and no significant investment in the existing production portfolio as a consequence of the prevailing uncertainty and volatility in oil prices. Production was also restricted on the Pierce field during the first half of due to the requirement to complete remedial works on the field's subsea gas injection flowline PRODUCTION Average production in 2017 is anticipated to be in the range of 19,000 to 22,000 boepd (approximately 75% oil). This range reflects the updated Stella start up schedule, the programme of planned maintenance shutdowns during the year and sensitivities associated with the performance of those operational programmes. Production in the first quarter of 2017 is forecast to average approximately 9,200 boepd, including the initial contribution from the Stella field since mid February While the on going dynamic commissioning operations are continuing on the FPF 1, the Stella field is being produced at reduced rates from two of the five wells on the field. As a consequence, average Stella production to date has been approximately 1,700 barrels of oil per day net to Ithaca, with the produced gas being flared until the fuel gas systems have been commissioned. GREATER STELLA AREA DEVELOPMENT GSA "hub and spoke" strategy Ithaca's focus on the Greater Stella Area ("GSA") is driven by monetisation of the Company's existing portfolio of undeveloped discoveries located in the area. The GSA development involves the creation of a production hub based on deployment of the Ithaca operated FPF 1 floating production facility, which is located over the Stella field, with onward export of oil and gas to market. To maximise initial oil and condensate production and fill the gas processing facilities on the FPF 1, initial production from the hub will come from the Stella field. It is anticipated that further wells will then be drilled and tied back to the FPF 1 on the wider GSA satellite portfolio to maintain the gas processing facilities on plateau. Stella first hydrocarbons delivered in February 2017 dynamic commissioning of the gas processing facilities on going STELLA DEVELOPMENT Following completion of the necessary offshore preparatory works on the FPF 1, first hydrocarbons from the Stella field was achieved in mid February Production was initially started from one well on the field in order to commission and stabilise the hydrocarbon processing systems on the FPF 1 and commence oil exports to the adjacent shuttle tanker. Continued progress is being made with the FPF 1 dynamic commissioning programme. The key outstanding tasks involve commissioning of the fuel gas system and the two gas export compressors, in order to commence gas exports to the CATS pipeline. Initial load testing on the first of the two gas export compressors identified the requirement for modifications to the instrumentation on the machine in order to complete the commissioning scope. This work is in the process of being completed and it is expected that the planned commissioning programme will shortly recommence. Once load testing of the compressor has been satisfactorily proven, this will enable gas to be routed to the fuel gas system and initial pipeline exports to begin. Following this, testing of the second gas export compressor will commence. Once both export compressors are operational the ramp up to full production rates will commence, followed by optimisation of production across the wells on the field. While it was anticipated that the dynamic commissioning and ramp up programme would take up to eight weeks to complete, it is likely that these activities will take longer, with the ramp up phase of operations now expected to commence in April GSA OIL EXPORT PIPELINE

8 Switch from oil tanker to pipeline export scheduled for 2017 reducing fixed operating costs and increasing the long term value of the GSA Harrier field development drilling to commence in Q2 2017, commencing the build out of the GSA production hub Access to the Norpipe oil pipeline system was secured in for future GSA oil production, allowing a switch from tanker loading to pipeline exports during This move will significantly reduce the fixed operating costs of the GSA facilities and enhance operational uptime, resulting in improved reserves recovery and increasing the long term value of the GSA as a production hub. The key work associated with creating a connection to the Norpipe system was successfully executed as part of a fast track operational programme undertaken during the planned summer pipeline maintenance shutdown. Following this, the 44 kilometre spurline from the FPF 1 to the Norpipe system was installed in September. The main outstanding activities that now remain to be completed are the installation and tie in of the pipeline export pumps on the FPF 1 and installation of the final subsea connections that need to be undertaken immediately prior to the switchover from shuttle tanker to pipeline export. Norpipe runs approximately 350 kilometres from the Ekofisk offshore production facilities on the Norwegian Continental Shelf to a dedicated oil processing facility at Teesside in the UK, with various UK fields exporting into the system via a spurline. HARRIER DEVELOPMENT In line with the Company's strategy for building out the GSA production hub, investment in the Harrier field development programme will commence in The development involves drilling of a multilateral well into the two reservoir formations on the field, with the well tied back via a 7.5 kilometre pipe to an existing slot on the Stella main drill centre manifold for onward export and processing of production on the FPF 1. The GSA joint venture has contracted with Ensco Offshore UK Limited for the provision of a heavy duty jack up drilling rig, which is expected to arrive on location in April The drilling programme is forecast to be completed in the second half of 2017 and the subsea infrastructure installation activities in summer 2018, resulting in the anticipated start up of Harrier production in the second half of LICENCE PORTFOLIO ACTIVITIES Strategic asset acquisitions close to GSA hub opportunity to leverage infrastructure value GSA SATELLITE ACQUISITIONS In line with Ithaca's strategic objective to increase value from the GSA infrastructure through the acquisition of interests in potential satellite fields, the Company has acquired approximately 33% of the the Vorlich discovery along with a 75% interest and operatorship of the Austen discovery. VORLICH In October the Company completed the acquisition of 100% of licence P1588 (Block 30/1f) through three purchases from ENGIE E&P UK Limited ("ENGIE E&P"), INEOS UK SNS Limited and Maersk Oil North Sea Limited. Licence P1588 contains approximately 10 20% of the Vorlich discovery, with the balance of the discovery located in licence P363 (Block 30/1c). When taking into account the P363 licence interest acquired from TOTAL E&P UK Limited in January, these transactions increase Ithaca's overall interest in the Vorlich discovery by around 16%, to approximately 33%. The remaining interest is owned by BP, who is also Operator of the Vorlich licence. Vorlich was discovered and appraised in 2014 with exploration well 30/1f 13A,Z and 13Z. The well encountered hydrocarbons in a Palaeocene sandstone reservoir in Block 30/1c and a subsequent side track into Block 30/1f confirmed the westerly extension of the discovery. The well was flow tested at a maximum rate of 5,350 boepd (approximately 80% oil). Vorlich is located approximately 10 kilometres north of the Company's GSA production hub and was estimated as of 31 December to contain gross proven and probable undeveloped reserves of approximately 22 MMboe by Sproule. Following completion of the Vorlich appraisal programme in 2014, current activities are focused on planning and preparation of a Field Development Plan ("FDP"). The overall Vorlich licence interests are as follows: Licence P363: BP (Operator), 80%; Ithaca, 20% Licence PL1588: Ithaca (Operator), 100% AUSTEN In December an SPA was completed with ENGIE E&P to acquire a 75% interest and operatorship of Licence P1823 (Block 30/13b), effective 1 May. The licence contains the Austen discovery, which is located approximately 30 kilometres south east of the GSA hub. Austen is an Upper Jurassic oil / gas condensate accumulation on which a number of wells have been drilled, the most recent being appraisal well 30/1b 10,10Z drilled by ENGIE E&P in It is planned for further subsurface and development engineering studies to be completed in order to advance preparation of an FDP for approval prior to January 2019.

9 Operatorship obtained of core producing Cook field in COOK FIELD OPERATORSHIP In March Ithaca took over operatorship of the Cook field (61.345% working interest) following completion of Shell and ExxonMobil's sale of the Anasuria floating production, storage and offloading vessel (and associated feeder field interests), which serves as the host facility for the field. WEST DON FIELD LICENCE INTEREST During Q1 First Oil Expro Limited ("First Oil") entered into administration. Consequently, the joint venture partners in the West Don field have exercised their forfeiture rights, resulting in Ithaca acquiring a further 4.125% interest in the West Don field for zero consideration (proportionate to its West Don field interest prior to the First Oil default). Ithaca's total interest in the field is now 21.4%. The Company does not expect any significant cost exposure as a result of First Oil's default other than the associated net incremental decommissioning liability, which is currently estimated to be $1.9 million. COMMODITY HEDGING Additional hedging put in place commodity price protection established for 7,600 boepd to June 2018 As part of its financial and risk management strategy, the Company actively seeks to maintain a balanced commodity hedging position. Any hedging is executed at the discretion of the Company, with no minimum requirements stipulated in any of the Company's debt finance facilities. In, the Company benefitted from realised commodity hedging gains for the year of $87.9 million, equating to an additional $25 of revenue per sales barrel of oil equivalent in the year. As of 1 January 2017, the Company has 7,600 boepd (85% oil) hedged at an average floor price of $50/boe for the 18 months to 30 June Full commodity price upside exposure has been retained on 60% of the volumes hedged and upside exposure to $60/boe has been retained on a further 25% of the hedged volumes. Based on valuations relative to the respective oil and gas forward curves as of 1 January 2017, these hedges were valued at $7.2 million. RESERVES Total proved and probable ("2P") reserves as at 31 December estimated to be 76 MMboe, as independently evaluated by Sproule International Limited, a qualified reserves evaluator, in accordance with the Canadian Oil and Gas Evaluation Handbook pursuant to NI Standards of Reserves Disclosure for Oil and Gas Activities. The movement in total 2P reserves between end and end is set out in the following table. In summary, the Company's 2P reserves have increased during primarily as a result of the acquisition of the Vorlich and Austen licence interests, coupled with technical revisions for future work programmes on the Cook and Pierce fields. 2P Reserves MMboe Opening Reserves - 31 December * 53.2 Production (3.4) Relinquishments (1.0) Acquisitions 16.2 Revisions - Economic / Technical 11.5 Closing Reserves - 31 December 76.5 * Excluding Vorlich reserves of 3.8 MMboe, for which the licence interest was acquired in but the transaction formally completed in The 2P reserves post tax net present value discounted at 10% ("NPV 10") assessed by Sproule as at 31 December was estimated as $1,528 million, based on forecast Brent prices of $55/bbl in 2017 rising to $70/bbl in 2019 and over $80/bbl in This represents an unrisked estimate of the value of the individual producing and development assets, including four future GSA development projects, drilling of a water injection well on the Cook field and modification of the Pierce field for the gas blowdown phase of operations. This Sproule NPV 10 is not a company valuation as it does not take into account the future financial liabilities of the Company or the estimated decommissioning costs associated with assets that have ceased production prior to the date of the evaluation, being Jacky, Athena, Anglia, Causeway and certain well abandonment obligations. The following table, taking account of the factors noted above, sets out the implied unrisked Company post tax net asset value ("NAV") derived from the Sproule evaluation of C$2.03 per fully diluted share.

10 Unrisked / Sproule Price Deck $million Sproule Post-Tax NAV at ,528 Deductions: RBL Facility (Net of Cash) (298) Senior Notes (300) Petrofac Payments 1 (131) Shell / BP Prepayment (FS note 19) (77) Decommissioning (Non-Sproule Assets) (60) Unrisked Vorlich/Austen Contingent Consideration (FS note 21) (11) Implied Unrisked Company Post-Tax NAV at Implied Fully Diluted Share Price (C$/Sh.) 2 C$ As per Financial Statements note 25 ($100M) and note 26 ($31M) million fully diluted shares, which includes in-the-money options relative to the takeover offer price OPERATING EXPENDITURE Full year opex under guidance for current producing asset base at $23/boe Continued operating cost savings have reduced unit operating costs to $23/boe, down from $31/boe in and below the $30/boe guidance provided at the start of the year. Cost reductions have been achieved across the portfolio, with the Cook, Pierce and Wytch Farm fields delivering the most significant savings. Forecast 2017 unit operating expenditure is anticipated to be approximately $18/boe, reflecting the benefit of the start up of production from the Stella field. CAPITAL EXPENDITURE capital expenditure of ~$60M with 2017 expected expenditure of $70M Total capital expenditure in was $63 million, in line with the revised guidance issued during the year to reflect inclusion of the expenditure associated with acceleration of the GSA oil pipeline installation operations. Net 2017 capital expenditure is forecast to total approximately $70 million. The majority of this expenditure relates to the GSA, primarily being Harrier development activities plus completion of the GSA oil export pipeline investment programme and Vorlich field development planning activities. The forecast expenditure is also inclusive of any additional Stella start up costs, which are expected to be minimal. NET DEBT Further deleveraging delivered in net debt reduced to $598M at end DEBT SUMMARY (M$) 31 Dec. 31 Dec. RBL Facility Senior Notes Total Debt UK Cash and Cash Equivalents (27.2) (11.5) Net Drawn Debt Note this table shows debt repayable as opposed to the reported balance sheet debt which nets off capitalised RBL and senior note costs Net debt was reduced by $67 million in to $598 million at 31 December. This reduction reflects the benefit of continuing strong operating cashflow generation from the base producing assets delivered as a result of solid production, reduced operating costs and lower capital expenditures across the portfolio. TRADING ENVIRONMENT COMMODITY PRICES Average Brent Price $/bbl 44 52

11 The financial results reflect the impact of the continued reduction in Brent prices that has been a central feature of the sector since the middle of The average Brent price fell by 15% to $44/bbl in, down from $52/bbl in. While this has had a significant negative impact on revenues, the fall in Brent has been materially mitigated during the period by the significant hedging protection the Company had in place. FOREIGN EXCHANGE RATES GBP : USD average GBP : USD period end spot Volatility in exchanges rates resulting from the UK's decision during to exit the European Union, has also had a positive impact on the financial results as a consequence of the ensuing devaluation of the pound sterling versus the US dollar. Ahead of the introduction of gas sales from the Stella field the majority of the Company's revenue is US dollar denominated oil sales, while approximately 80% of costs are incurred in pounds sterling. In general, however, the company has sought to minimise currency volatility through active hedging of sterling. SELECTED ANNUAL INFORMATION Revenues have reduced by approximately 30% in as a result of a decrease in the realised oil price, which was also the main driver behind the reduction in revenues in compared to 2014, combined with a reduction in underlying sales volumes. Total assets decreased from to mainly as a result of the decrease in the derivative financial instruments as they unwound and were realised. The cash realised from the derivatives has been used to pay down debt and therefore reduce liabilities. The movement from 2014 to was mainly due to the impairment write downs driven by the oil price environment. In a non cash impairment charge of $203 million (post tax) turned a pre impairment post tax profit of $82 million into a post tax loss of $121 million. A similar impairment charge ($173 million post tax) was recorded in These impairments resulted from materially lower near term oil prices assumptions. In there has been no further significant change in the oil price environment, therefore shows a modest post tax impairment of $3m due to the cessation of production from the Causeway and Topaz fields. Years Ending 31 December ($'000) 2014 Total Revenue 143, , ,593 Cashflow from operations 146, , ,465 (Loss)/Profit After Tax (pre impairment) (50,474) 81, ,993 (Loss)/Profit After Tax (post impairment) (53,800) (121,005) (24,535) Total Assets 1,903,854 2,062,881 2,358,775 Total Non-Current Liabilities (937,256) (985,785) (1,094,571) (1) Net Earnings Per Share ($/Sh.) (0.13) (0.35) (0.07) (1) Net Earnings Per Share - Fully Diluted ($/Sh.) (0.13) (0.35) (0.07) (1) Cashflow Per Share ($/Sh.) (1) Cashflow Per Share - Fully Diluted ($/Sh.) Weighted Average No. Shares (000s) 411, , ,381 Weighted Average No. Shares - diluted (000s) 412, , ,952 (1) Weighted average number of shares

12 RESULTS OF OPERATIONS REVENUE Average Realised Price Oil Pre-Hedging $/bbl Oil Post-Hedging $/bbl Revenue decreased by $63.3 million in to $143.7 million (: $207.0 million) primarily as a consequence of an $11/bbl or 20% decrease in the prehedging realised oil price associated with the fall in Brent during the year, coupled with a 20% decrease in underlying sales volumes. While produced volumes decreased by 23% in compared to, sales volumes decreased to a slightly lesser extent due to lifting schedules, in particular, larger oil liftings from the Cook field in. Sales volumes decreased overall in primarily due to the cessation of production from the Athena, Anglia and Causeway fields as well as reduced production on the Dons fields. The reduction in the average realised price for the year was offset to a significant extent by realised oil and gas hedging gains of $25 per sales barrel of oil equivalent in the year, resulting in an $87.9 million gain on commodities being reported through Foreign Exchange and Financial Instruments (see below). In terms of the average realised oil price for the year, there was a decrease to $44/bbl in (: $54/bbl) in line with the average price of Brent for the twelve months ended 31 December (: $52/bbl). While realised oil prices for each of the fields in the Company's portfolio do not strictly follow the Brent price pattern, with some fields sold at a discount or premium to Brent and under contracts with differing timescales for pricing, the average realised price for all the fields traded in line with Brent. COST OF SALES $'000 Operating Expenditure 78, ,468 DD&A 70, ,230 Movement in Oil & Gas Inventory (2,804) 6,030 Total 145, ,728 Cost of sales decreased in by approximately 37% to $145.9 million (: $232.7 million). This was attributable to decreases in operating costs, depletion, depreciation and amortisation ("DD&A") and an increase in the value of oil and gas inventory. OPERATING EXPENDITURE Reported operating costs decreased by 27% in the year to $78.2 million (: $106.5 million). Cost reductions were achieved across the portfolio, with the Cook, Pierce and Wytch Farm fields delivering the most significant savings. This continued focus on driving down costs resulted in a unit operating cost of $23/boe for, representing a reduction of over 25% compared to the equivalent rate of $31/boe for and below the $30/boe level guided at the start of the year. This reduced rate incorporates a significant benefit (~$3/boe compared to ) relating to movements in the US$:GBP exchange rate, as underlying costs are primarily incurred in pounds sterling. DD&A The unit DD&A rate for the period decreased to $21/boe (: $27/boe), resulting in a total DD&A expense for the period of $70.5 million (: $120.2 million). This reduction in expense was due to a combination of lower production and impairment write downs booked in Q4 as a result of the change in the oil price environment, which also lowered average DD&A/boe rates. MOVEMENT IN INVENTORY An oil and gas inventory movement of $2.8 million was credited to cost of sales in (: charge of $6.0 million). This credit arose primarily as a result of an increase in inventory value arising from the increase in underlying Brent prices between the end of and, partially offset by an overlift in the year. In less barrels of oil were produced (3,103 kbbls) than sold (3,188 kbbls), predominantly due to the lifting of the historic build up of inventory on the Cook field, partly offset by production exceeding liftings on the Pierce field.