Q3-2015 Financial Results 16 November 2015
Disclaimer 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 Services Authority, the London Stock Exchange or the Toronto 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 certain statements which are forward looking. Forward-looking information and forward-looking statements (collectively, the 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 management s assessment of the Company s future production, reserves, financial performance, plans, future capital expenditures, potential acquisitions and operations concerning, among other things, future operating results from targeted production and development plans and various components thereof or the Company s future economic performance. The projections, estimates and beliefs contained in such forward-looking statements necessarily involve known and unknown risks, assumptions, uncertainties and other factors which may cause the Company s actual performance and financial results in future periods to differ materially from any estimates or projections contained herein. When used in this Presentation, the words and phrases like forecasts, expects, believes, anticipate, plans, may, will, should, scheduled, targeted, estimated, in the process of and similar expressions, and the negatives thereof, whether used in connection with operational activities, the sail-away of the FPF-1, Stella first hydrocarbons, operating costs, capital expenditures, drilling plans, production forecasts, maintenance schedules, budgetary figures, financial performance forecasts, anticipated future net debt, anticipated bank debt facilities, potential developments including the timing and anticipated benefits of acquisitions and dispositions, expectation for development funding or otherwise, are intended to identify forward-looking statements. Such 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 "netbacks, "cashflow from operations and net drawn debt. Netbacks are calculated on a per unit basis as oil, gas and natural gas liquids revenues less royalties and transportation and operating costs. 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 drawn debt includes amounts outstanding under the Company s debt facilities and senior notes, less cash and cash equivalents, and excludes any amounts outstanding under the Norwegian tax rebate facility. 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 consolidated audited financial statements of Ithaca for the year ended December 31, 2014, which have been filed with the securities regulatory authorities in Canada. These financial statements are available on the System for Electronic Document Analysis and Retrieval at www.sedar.com and on the Company s website: www.ithacaenergy.com. 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. The well test results disclosed in this presentation 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. The estimates of reserves for individual properties may not reflect the same confidence level as estimates of reserves and future net revenue for all properties, due to the effects of aggregation. 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 December 31, 2014 and forming the basis for the Statement of Reserves Data and Other Oil and Gas Information of Ithaca dated March 11 2014 (the "Statement"). The reserves for the South West Heather Field included in the Statement are those estimated by Ithaca and reviewed by Sproule. The reserves estimates of Ithaca are based on the Canadian Oil and Gas Evaluation Handbook ("COGEH") pursuant to National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities. 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 year ended 31 December 2014 (the MD&A ), the Company s Annual Information Form for the year ended 31 December 2014 (the AIF ) and in other documents the Company files from time to time with securities regulatory authorities. Copies of the MD&A, the AIF and other documents are available on the internet at www.sedar.com. Assumptions Throughout This Presentation $ represents US dollars; C$ represents Canadian 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
Highlights 2015 year to date Production 12.4 kboe/d Unit Operating Expenditure 1 $33/boe Cashflow from On-going Operations 2 $217M Net Drawn Debt 31 October 2015 $690M Funding Headroom $125M Planned FPF-1 Sail-away End Q1-2016 1. Operating expenditure per the Q3-2015 Income Statement plus Athena and Anglia costs in the period, provided for in 2014 under onerous contract provisions 2. Cashflow from on-going operations of $217M less $21M onerous contracts release = total cashflow from operations of $196M Photo: FPF-1 main deck oil and gas processing infrastructure ITHACA ENERGY Corporate Presentation 3
Solid year to date performance Production (kboe/d) Unit Operating Expenditure ($/boe) Realised Hydrocarbon Price ($/boe) 100 $/boe 80 $/boe 2 10.6 kboe/d 12.4 kboe/d 52 $/boe 1 33 $/boe 2 16% 37% 20% YTD-2014 YTD-2015 YTD-2014 YTD-2015 YTD-2014 YTD-2015 Oil Gas Sales Hedging Gain Production running ahead of 12kboe/d full year guidance Portfolio performing well, with solid asset uptime efficiencies Material opex reduction further trimming of 2015 guidance to $33/boe Driven by improved production mix and decreasing supply chain costs Revenue substantially enhanced by hedging gains 46% uplift in YTD-2015 realised hydrocarbon price from hedging 1. Excluding the one-off 2013 Sullom Voe Terminal catch-up cost charged in 2014 2. Revenue and operating expenditure per the Q3-2015 Income Statement plus Athena and Anglia revenue and costs in the period, provided for in 2014 under onerous contract provisions ITHACA ENERGY Corporate Presentation 4
Cashflows underpinned by solid hedging position Oil Hedging Gas Hedging $60M $96/bbl $26/bbl Strong protection in place against commodity price weakness Future hedges ~$100M in the money, ~50:50 oil and gas $62/bbl $69/bbl $58/boe / 63p/therm Prior to Stella start-up, revenue from hedged volumes alone sufficient to cover total cash costs 8.0 kbbl/d YTD-2015 Oct 2015 - Jun 2016 8.5 kbbl/d 4.0 kbbl/d 5.2kboe/d Jul 2016 - Jun 2017 Oct 2015 - Jun 2017 Cashflows sheltered from 50% 1 UK corporate tax over medium term >$1.5Bn allowances pool at end Q3-2015 Hedge Price Q1-2015 Hedging Value Acceleration Volume Hedged 1. Combined tax rate corporation tax rate (30%) and supplementary charge (20%) ITHACA ENERGY Corporate Presentation 5
Financial results nine months to 30 September 2015 Financial Summary YTD-2015 YTD-2014 Revenue 1 $M 163.2 296.7 Production up 16%, but oil prices down 46% (from $106/bbl to $57/bbl) Hedging Cash Gain $M 146.3 (1.5) 25$/bbl hedging gains relating to the period plus $60M accelerated Opex $M (83.4) (162.0) Major reduction in opex driven by improved asset mix and cost saving measures G & A $M (7.6) (11.1) Overheads cut. 2015 cost includes $1.7M of Norway G&A reimbursed at sale completion Foreign Exchange $M (1.7) 6.0 50% of sterling operating costs hedged at $1.48: to end-2016 Cashflow from On-going Ops 2 $M 216.8 128.1 Cashflow per share $0.66 Finance Costs $M (30.4) (21.9) Increased interest costs as reached peak debt requirements DD&A $M (93.2) (132.4) Unit DD&A rate sub-$30/boe Non-Cash Hedging Loss $M (52.4) 33.5 Previously recognised mark-to-market hedging asset now realised as cash in the period Other Non-Cash Costs $M (3.7) (2.1) Gain on Norway sale offset by accounting for Norwegian well (drilled post sale effective date) Taxation $M 19.5 19.8 Credit due to capital allowances on FPF-1 costs being paid by Petrofac and RFES Earnings $M 56.6 25.0 Adjusted earnings of $98M excl. UK tax rate reduction $0.30 per share 1. Revenue less stock movements 2. Cashflow from on-going operations of $217M less $21M onerous contracts release = total cashflow from operations of $196M ITHACA ENERGY Corporate Presentation 6
Lower net debt outlook prior to Stella start-up Net Debt & Finance Facilities (M$) Deleveraging phase commenced Peak net debt prior to Stella start-up passed in H1-2015 Funding Headroom ~$690M $950M Debt Facilities 515 RBL Facilities $815M Debt Availability $30M capital expenditure savings in 2015 guidance reduced to $120M Investment programme largely completed Reduced debt funding requirements Strong operating cashflow generation $30M net cash receipt from sale of Norwegian business $66M equity investment 300 Senior Unsecured Notes Step change in debt reduction post Stella start-up Deleveraging prior to Stella start-up relatively insensitive to Brent given hedging position End-2015 Forecast Net Debt Finance Facilities RBL redetermination completed $125M funding headroom ITHACA ENERGY Corporate Presentation 7
Greater Stella Area development route to first hydrocarbons Development status Five Stella wells drilled, tested and ready to flow All subsea infrastructure in place FPF-1 commissioning operations in progress Remaining key milestones Complete FPF-1 yard commissioning Q1-2016 FPF-1 sail-away End Q1-2016 Subsea / FPF-1 hook-up Q2-2016 First hydrocarbons End Q2-2016 ITHACA ENERGY Corporate Presentation 8
FPF-1 modifications programme sail-away planned for end Q1-2016 Critical path for achieving FPF-1 sail-away is completion of vessel commissioning activities Focus on ensuring no carryover of yard work to offshore Close out of pre-commissioning works advancing Sub-system equipment package and interface testing for handover to commissioning Commissioning and operational readiness preparation on-going Commissioning programme progressing Electrical loop testing on process control and safety system Electrical distribution boards Internal vessel inspections Utility systems HVAC, air compression, diesel, emergency generators Next key milestone is commencement of power generator testing operations in Dec-2015 FPF-1 photos (L-R): control room, electrical switchgear ITHACA ENERGY Corporate Presentation 9
FPF-1 modifications programme Photo: FPF-1 in Remontowa shipyard, Gdansk, Poland ITHACA ENERGY Corporate Presentation 10
FPF-1 modifications programme Photo: FPF-1 oil and gas processing plant ITHACA ENERGY Corporate Presentation 11
FPF-1 modifications programme Photo: FPF-1 main deck infrastructure ITHACA ENERGY Corporate Presentation 12
2015 key priorities delivering on a clear plan Production Maximise operational performance of all fields Stella Deliver milestones required to achieve start-up end Q2-2016 Operating expenditure Reduce cost base to enhance cashflow from producing assets Capital expenditure Maintain strict discipline and control over all investment expenditures Financial Maintain strong balance sheet and financial headroom to deliver GSA first hydrocarbons GSA Strengthen core area position through low cost entry to surrounding undeveloped discoveries Photo: FPF-1 electrical control system room ITHACA ENERGY Corporate Presentation 13