Ithaca Farms-Out More UK Assets

Ithaca Energy Inc. announces further UK exploration portfolio farm-out transactions. When combined with the previously announced UK farm-outs the Company is now fully carried for the forecast cost of drilling the UK exploration well commitments transferred as part of the Valiant Petroleum plc acquisition and in addition will receive over $8 million in cash from the farm-out parties.

Ithaca has entered into a farm-out agreement with Oyster Petroleum concerning UK licences P1631 and P1832 (blocks 204/14c, 204/18b and 204/19c), which contain the Handcross prospect. In addition Sussex Energy, an existing Handcross co-venturer, has exercised an option under the terms of its original farm-out agreement to take a further 5% working interest in the licences.

The agreements will result in the transfer of a 9% working interest in the licences to Oyster Petroleum and a 5% working interest to Sussex Energy in exchange for the companies paying their working interest shares of past and future licence costs in addition to providing Ithaca with a cash payment. These transactions reduce Ithaca’s working interest in the licences from 45% to 31%. Ithaca retains operatorship of the licences.

When combined with earlier farm-out transactions to RWE Dea UK SNS Limited and Edison, Ithaca is now carried for its forecast share of the planned Handcross exploration well cost and will also receive additional cash beyond the carry.

Handcross is a Palaeocene prospect located in the Judd Basin in the West of Shetland sector of the UK Continental Shelf (“UKCS”). An exploration well is to be drilled on the prospect using the Stena Carron drillship, with operations anticipated to commence in late 2013.

Completion of the transactions is subject to normal regulatory and third party consents. Following completion, the Handcross partners will be Ithaca (31%, Operator), Edison (25%), RWE Dea (20%), Sussex Energy (15%) and Oyster Petroleum (9%).

In addition, Ithaca has entered into a further agreement with Oyster Petroleum to transfer its full 33.33% non-operated interest in UK licence P2018 for a cash sum. The licence, covering West of Shetland blocks 214/24b, 214/29a and 214/30c, was awarded in the UK 27th Offshore Licensing Round. Completion of the licence transfer is subject to normal third party and regulatory consents.

Ithaca has also entered into an agreement with Euroil Exploration Limited, a wholly owned subsidiary of Edison, to farm-out a 10% interest in UK licence P1820 which contains the Isabella gas condensate prospect. This transaction reduces Ithaca’s non-operated working interest in the licence from 20% to 10%.

The farm-out agreement provides for Edison to pay its 10% working interest share of future licence costs in addition to a cash payment to Ithaca. When combined with the earlier Isabella farm-out transaction executed with Maersk Oil North Sea UK Limited, Ithaca is now carried for its forecast share of the Isabella exploration commitment well cost and will also receive additional cash beyond the carry.

The P1820 licence was awarded in the UK 26th Offshore Licensing Round and covers blocks 30/6b, 30/11a and 30/12d in the UK Central North Sea. The licence work programme requires an exploration well to be drilled on the Isabella prospect by early 2015.

Completion of the transaction is subject to normal third party and regulatory consents. Following completion, the Isabella partners will be Apache North Sea Limited (50%, Operator), Maersk Oil North Sea UK Limited (30%), Ithaca (10%) and Edison (10%).

Iain McKendrick, Chief Executive Officer, commented:

“I am delighted that the Company has achieved a cashflow positive position with respect to the Handcross and Isabella exploration wells. The Company has successfully executed upon its key post-acquisition objective of removing its UK exploration cost exposure whilst still retaining potential upside.”

September 23, 2013

 

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