2017 Financial Results 28 March 2018

Transcription

1 2017 Financial Results 28 March 2018

2 Cautionary Statement This proprietary presentation (including any accompanying oral presentation, question and answer session and any other document or materials distributed at or in connection with this presentation) (collectively, the Presentation ) has been prepared by Ithaca Energy Inc. ( Ithaca or the Company ). This Presentation does not constitute a prospectus under the prospectus rules made for the purposes of Part VI of the Financial Services and Markets Act 2000 ( FSMA ), as amended, nor does it constitute or form any part of any offer or invitation to purchase, sell or subscribe for, or any solicitation of any such offer to purchase, sell or subscribe for, any securities in Ithaca nor shall this Presentation or any part of it, or the facts of its distribution, form the basis of, or be relied on in connection with, any contract therefor. The contents of this Presentation have not been examined or approved by the Financial Conduct Authority, any authorised person for the purposes of section 21 of FSMA or the Luxembourg Stock Exchange, nor is it intended that the Presentation will be so examined or approved. No reliance may be placed, for any purposes whatsoever, on the information contained in this Presentation. Forward-Looking Statements This Presentation contains projections, information and other forward-looking statements (collectively forward looking statements ) regarding future events and the Company s future performance. All statements and information other than present and historical facts contained in this Presentation are forward looking. When used in this Presentation, words and phrases like forecast, "anticipate", "continue", "estimate", "expect", "may", "will", "project", "plan", "should", "believe", "could", target, scheduled, in the process of, on track and similar expressions, and the negatives thereof, whether used in connection with production forecasts, operational activities, anticipated development plans, planned maintenance shutdowns and the effects thereof, drilling campaigns and plans, budgetary figures, future operating costs, anticipated capital expenditures and capital programmes, financing activities, anticipated net debt, anticipated funding requirements and uses of available credit under the Company s debt facilities, anticipated extension of debt facilities, expectation for development funding or otherwise, any future valuations of the business, potential developments including the timing and anticipated benefits of acquisitions and dispositions or otherwise, expected future payments in connection with such acquisitions and dispositions, statements relating to reserves and the expected tax horizon of the Company are intended to identify forward-looking statements. Forward-looking statements are based on the Company's current internal expectations, estimates, projections, assumptions and beliefs, including, among other things, assumptions with respect to production, drilling, construction and maintenance times, well completion times, risks associated with operations, future capital and operating expenditures, continued availability of financing for future capital expenditures, future acquisitions and dispositions and cash flow, required regulatory, partner and other third party approvals. The reader is cautioned that assumptions used in the preparation of such information may prove to be incorrect. Forward looking statements are not promises or guarantees, and are subject to risks and uncertainties that could cause actual outcomes to differ materially from those suggested by any such statements and the risk that the future benefits and anticipated production by the Company may be adversely impacted. These forward-looking statements speak only as of the date of this Presentation. In the view of the Company s management, this Presentation was prepared by management on a reasonable basis, reflects the best currently available estimates and judgements, and presents, to the best of management s knowledge and belief, the expected course of action and the expected future performance and results of the Company. However, such forward-looking statements are not fact and should not be relied upon as being necessarily indicative of future results and recipients of this Presentation are cautioned not to place undue reliance on this information. Ithaca 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. Non-International Financial Reporting Standards Terms This Presentation contains non-international Financial Reporting Standards ("IFRS") industry benchmarks and terms, such as "cashflow from operations and net debt. Cashflow from operations includes the impact of executed hedges and does not include non-cash items such as depreciation, depletion and amortisation, revaluation of financial instruments, impairments of fixed assets and movements in goodwill, which may have a significant impact on the Company s results. Net debt includes amounts outstanding under the Company s debt facilities, senior notes and parent company term loan, less cash and cash equivalents. These non-ifrs financial measures do not have any standardised meanings and therefore are unlikely to be comparable to similar measures presented by other companies. The Company uses these measures to help evaluate its performance. As an indicator of the Company's performance, cashflow from operations should not be considered as an alternative to, or more meaningful than, net cash from operating activities as determined in accordance with IFRS. The Company considers cashflow from operations to be a key measure as it demonstrates the Company's underlying ability to generate the cash necessary to fund operations and support activities related to its major assets. Further details on the above are provided in the audited consolidated financial statements of Ithaca for the twelve month period ended 31 December 2017 and the related Management Discussion and Analysis ( MD&A ). These financial statements and MD&A are available on the Company s website ( Notes Regarding Oil and Gas Disclosure This Presentation contains estimates of future net revenue from the production of oil and gas reserves of the Company. These estimates do not represent fair market values of the reserves. The estimates of reserves and future net revenues for individual properties may not reflect the same confidence level as estimates of reserves and future net revenues for all properties, due to the effects of aggregation. Possible reserves are those additional reserves that are less certain to be recovered than probable reserves. There is an equal probability that the quantities actually recovered will be greater or less than the sum of the proved plus probable reserves. There is a 10% probability that at least the sum of the estimated proved reserves plus probable reserves plus possible reserves will be recovered. References herein to "boe" mean barrel of oil equivalent which is 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, utilizing a conversion ratio at 6 mcf: 1 bbl may be misleading as an indication of value. Well test results that may be disclosed represent short-term results, which may not necessarily be indicative of long-term well performance or ultimate hydrocarbon recovery therefrom. Statements relating to reserves are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described can be profitably produced in the future. The reserve estimates set forth in this Presentation are estimates only and the actual reserves and realized revenue may be greater or less than those calculated. If a discovery is made, there is no certainty that it will be developed, or if it is developed, there is no certainty as to the timing of such development or the benefits (if any) which may flow to the Company. With respect to Ithaca s reserves, the figures are derived from a report prepared by Sproule International Limited ("Sproule"), an independent qualified reserves evaluator, evaluating the reserves of Ithaca as of 31 December 2017 and forming the Evaluation of the Petroleum & Natural Gas Reserves of Ithaca Energy Inc. dated 16 March The reserve estimates of Ithaca are prepared in accordance with the Canadian Oil and Gas Evaluation Handbook pursuant to NI Standards of Reserves Disclosures for Oil and Gas Activities, which comply in all material respects with the definitions and guidelines set forth in the 2007 Petroleum Resources Management System approved by the Society of Petroleum Engineers. The report summarising the Sproule reserves evaluation is available on the Company s website ( Recipients of this Presentation are specifically referred to the risk factors described in the Company s management discussion and analysis of operating results and financial condition for the twelve month period ended 31 December 2017 (the MD&A ) and in other documents the Company files from time to time with securities regulatory authorities. Copies of the MD&A and other documents are available on the Company s website. Assumptions Throughout This Presentation $ represents US dollars; represents pounds sterling; $M represents millions of US dollars; MMboe represents millions of barrels of oil equivalent; MMbbl represents millions of barrels of oil; kboe/d represents thousands of barrels of oil equivalent per day; MMscf/d represents millions of standard cubic feet per day. ITHACA ENERGY Corporate Presentation 2

3 Highlights Focused Strategy Strong Growth Outlook Solid Balance Sheet Supportive Shareholder Lower risk North Sea production and development led growth Growing cashflow generation from high netback production Strong liquidity profile and track record of disciplined financial management Strong shareholder support integral fit with Delek s strategic plan Experienced operator in attractive, well understood oil and gas province Low cost, quick payback project pipeline building out the GSA hub Refinancing of debt facilities anticipated in 2018 term out maturity profiles Strategic focus on delivering future UK growth objectives Photo: Helicopter operations on the ENSCO 100 drilling rig ITHACA ENERGY Corporate Presentation 3

4 2017 financial summary Annual Production Realised Hydrocarbon Price 1 Unit Operating Expenditure Cashflow from Operations 13.9 kboe/d $68/boe kboe/d $50/boe 2 $43/boe $23/boe $19/boe 3 $29/boe 3 49% 26% 17% 33% Revenue Hedging Gain Pre-Hedging CFFO Hedging Gain Production increase driven by Stella start-up Harrier starting mid-2018 Improving commodity prices prudent hedging levels maintained Material reduction in unit operating expenditure Strong unit cashflows at $50/boe realised pricing Notes: 1. Realised price of hydrocarbons produced in period 2. Revenue figures include movement in inventory 3. Opex figures are net of payments that are received by Ithaca through its 49% ownership in the associated company FPF1 Limited ITHACA ENERGY Corporate Presentation 4

5 2017 financial results Financial Summary Revenue 1 $M Increase of 66% driven by 49% increase in production and higher oil prices Hedging Cash Gain $M Large hedging gains of 2016 associated with falling oil price, absent in 2017 Opex 2 $M (97.5) (78.2) Lower cost GSA barrels ensures opex / boe reduced to $19/boe G & A $M (9.6) (4.7) Underlying G&A reduced to $4.1M absent $5.5M takeover transaction costs Foreign Exchange $M 1.3 (4.7) GBP:USD exchange gain due to rate fluctuations on working capital during the year Cashflow from Operations 2 $M Finance Costs $M (50.1) (36.6) Interest charges unchanged now fully expensed following Stella field start-up DD&A and impairment $M (166.8) (76.1) Production driven increase to DD&A and $39.9M impairment Non-Cash Commodity Hedging (Loss) $M (32.2) (119.3) $32M mark-to-mkt revaluation of remaining hedges due to increased future commodity prices Other Non-Cash Costs 2 $M (2.0) 1.3 No material movement Taxation $M Tax credit enhanced by Ring Fence Expenditure Supplement Earnings Loss $M (26.2) (53.8) 1. Revenue net of stock movements and Stella revenue royalty 2. Figures net of payments that are received by Ithaca through its 49% ownership in the associated company FPF1 Limited ITHACA ENERGY Corporate Presentation 5

6 Strong liquidity profile Credit Facilities & Net Debt $715M finance facilities provide ample liquidity Deleveraging continues to be the priority for free cashflow Parent Loan Term Loan $715M $605M Financial strategy of Ithaca unchanged following Delek acquisition retain flexible low cost capital structure Balanced blend of secured and unsecured debt finance Maintenance of adequate liquidity headroom from cash and undrawn debt RBL 245 No near term dividends focus on investing to further develop and grow the portfolio within a robust capital structure Forecast to achieve sub-3.0x leverage ratio in next 12 months Bond 300 Facilities YE-2017 Net Debt Refinancing of credit facilities to extend maturity profile anticipated in 2018 ITHACA ENERGY Corporate Presentation 6

7 Established independent North Sea operator North Sea pure play business strategy focused on delivering lower risk growth Production and development focus Fionn* Dons Broom Production step-up delivered in 2017 free cashflow profile well established Cashflow sheltered from tax $1.8Bn UK tax allowances pool Cook* Pierce Balanced annual investment programme to sustain and grow production from existing portfolio $10-25M base plus $25-75M GSA satellites / drilling programmes Vorlich Hurricane* Harrier* Austen* Greater Stella Area Stella* Targeting high quality UK asset acquisitions Enhancing scale of business maintaining a robust, low cost capital structure Producing Assets Oil Gas * Ithaca Operated Wytch Farm 1 1. Wytch Farm divestment completion anticipated by end-march 2018 ITHACA ENERGY Corporate Presentation 7

8 Balanced portfolio Year-End P Reserves 1 Balanced production and development asset reserves base 71.7 MMboe 4 Wytch Farm Divestment 2 72 MMboe 1 2P reserves (60% liquids) at year-end 2017 ~$1.4Bn post-tax NPV10 2P valuation 14 years 2P reserves life Development Producing Portfolio constructed around assets with established route to monetisation GSA satellites feeder fields for the FPF-1 production hub Assets with specific short and long term production enhancement targets Year-End P Reserves Axis Title Targeting reserves growth via expansion of GSA satellite field portfolio and selective UK producing asset acquisitions 1. Sproule International Limited independent reserves evaluation, as of 31 December Wytch Farm divestment completion anticipated end-march 2018 ITHACA ENERGY Corporate Presentation 8

9 Greater Stella Area hub and spoke strategy driving free cashflow Ithaca operated production hub 54.66% Monetising ~45MMboe 1 net 2P reserves with existing GSA asset portfolio Targeting additional production from start-up of subsea developments every ~2 years Owned infrastructure low unit opex operations Highly attractive tie-back economics Forecast GSA opex of ~$14/boe Low incremental capex for satellite field developments subsea tie-backs Phased development expenditure, funded from cashflows Growing future reserves Targeting continued low cost entry to existing discoveries build out portfolio UK 30 th Licencing Round applications submitted awards anticipated Q Sproule International Limited independent reserves evaluation, as of 31 December 2017 ITHACA ENERGY Corporate Presentation 9

10 Greater Stella Area building out the production hub Ithaca Energy Field Interests Stella / Harrier 54.66% Vorlich 34% Stella Harrier Vorlich Stella production started up Q Catalyst reserves for investment in central infrastructure FPF-1 production hub oil and gas pipeline export to major UK terminals Start-up scheduled for mid-2018 maintain FPF-1 gas plateau production Dual-lateral well drilled subsea infrastructure installation in Q Capex $5/boe rapid payback development economics Development sanctioned in Q two well subsea tie-back Production start-up scheduled for 2020 capex $12/boe / >50% IRR Value driven by both field ownership and FPF-1 host service provision Photo: FPF-1 on location at the Stella field ITHACA ENERGY Corporate Presentation 10

11 Greater Stella Area infrastructure Plug-in infrastructure design philosophy Subsea architecture incorporates spare manifold / mid-water arch slots for field tie-ins Spare production separator installed on FPF-1 provides process flexibility for tie-ins ITHACA ENERGY Corporate Presentation 11

12 2018 outlook Production & Hedging Limited Cash Outflows Continued Deleveraging ~15 kboe/d 9.8 kboe/d $20/boe 1 $60M $605M $560M 2 $715M Gas Oil Production 2018 Hedging Unit Opex / G&A Capex Net Debt Forecast Net Debt Year-End 2017 Forecast 31 Mar Debt Facilities Enhanced production base established growing with GSA satellite pipeline Solid hedging price floor established Oil $56/bbl (36% puts) Gas 46p/therm ($6/mmbtu) Strong cash netbacks supporting increasing free cashflow generation Tightly managed cost base $19/boe unit opex and $1/boe G&A Capex programme centred on GSA satellite development activities Further deleveraging trajectory over next 12 months Forecast to achieve sub-3.0x leverage ratio 1. Unit operating expenditure net of payments received by Ithaca through its 49% ownership in the associated company FPF1 Limited 2. Forecast 31 March 2018 net debt including proceeds of Wytch Farm divestment (completion anticipated end-march 2018) ITHACA ENERGY Corporate Presentation 12

13 Investment highlights Growing cashflow generation from high netback production Attractive and sustainable free cashflow outlook readily expandable production hub Established operator with proven track record of disciplined financial management Lower risk corporate strategy Financially strong and supportive strategic shareholder Photo: Pipeline reeling operations, Evanton, Scotland ITHACA ENERGY Corporate Presentation 13