Wednesday 5 February 2020

Ithaca Energy Limited (IAECN: ISINs US46567TAA25 / USG49774AA35) (“Ithaca” or the “Company”) is pleased to provide the following operations update ahead of issuance of the 2019 financial results on 31 March 2020.

Ithaca’s 2020 strategic focus is centred on execution of the post-acquisition business transformation programme, building out the long term growth profile of the business and exploring options to optimise the Company’s capital structure, including a potential initial public offering

Following completion of the Chevron North Sea Limited (“CNSL”) acquisition and transition programme in November 2019, the key focus of the on-going business transformation programme for the enlarged business over the coming months is centred on process simplification, operational efficiencies and value creation

The operational strategy of the Company is to deliver a balanced blend of investment programmes to sustain and enhance production through continued expansion of the Captain enhanced oil recovery (“EOR”) programme, infill drilling, satellite field developments and near-field exploration and appraisal activities

With the significantly enhanced organic investment opportunity set provided by the CNSL acquisition, a core operational priority for 2020 involves the maturation of additional targets to further enhance long term production and reserves

Opportunities to augment the Company’s existing portfolio and resource base remain a key component of the business plan, with a focus on potential strategic bolt-on acquisitions from which to leverage existing operating capabilities and experience

In line with the corporate objectives of Ithaca’s parent company, the Delek Group Limited, during 2020 the Company anticipates exploring potential options to optimise its capital structure, including a potential initial public offering

Stable year-on-year production

On a pro-forma basis, taking into account the CNSL acquisition from the transaction effective date of 1 January 2019, full year 2019 production averaged 75,000 barrels of oil equivalent per day (boepd), 63% liquids.

Production in 2020 is forecast to average between 70,000 to 75,000 boepd, approximately 65% liquids. This range reflects the expected timing for completion of various infill drilling campaigns, start-up of the Vorlich field, the programme of planned maintenance shutdowns across the portfolio and sensitivities associated with the timing and performance of these operational programmes

As part of a cyclical process, 2020 marks a year of significant planned maintenance shutdowns across the portfolio, the majority of which will impact production in the third quarter. Major shutdowns are taking place on the Captain field, the Erskine field, the Britannia Area and the “FPF-1” floating production facility that serves the Greater Stella Area (“GSA”). The shutdowns are driven by execution of routine platform activities (inspection, maintenance and asset life extension programmes), export infrastructure maintenance activities and, in the case of the FPF-1, Vorlich field tie-in works

2020 unit operating expenditure is forecast to be approximately $17/boe. This includes field, host facility and export infrastructure costs, as well as Captain polymer (chemical) costs

2020 represents an active year for investment across the portfolio, involving infill drilling and subsea satellite developments

The 2020 capital expenditure programme is forecast to total approximately $250 million, including approximately $20 million of decommissioning expenditure

Approximately two-thirds of the total investment expenditure relates to the Company’s operated assets, with the main activities being on Alba, Captain and the GSA

Operations are currently underway on the Alba field platform drilling campaign, which involves the completion of three infill production wells and two workovers. The Alba campaign is scheduled to finish towards the end of the year, following which the drilling crew will move to the Captain field for completion of the final platform wells on the Phase I EOR programme

Sanction of the Phase II Captain EOR investment programme is scheduled for the first half of the year. Phase II involves extending the existing polymer EOR programme to the areas of the main reservoir of the field that are produced via subsea wells

In the GSA the Vorlich field development is scheduled for start-up around the middle of the year. The main outstanding activities to be completed on the development involve the tie-in of the additional enhanced natural gas liquids processing facilities that have been installed on the FPF-1 and installation of the 10-kilometre infield flowline between the wells and the vessel. The 2020 GSA activity programme also includes the manufacture and fabrication of long lead equipment for wells and subsea infrastructure expected to be used on Hurricane, the next anticipated subsea tieback after Vorlich

On the Company’s non-operated asset portfolio, infill wells are planned on the Elgin / Franklin, Pierce and Callanish fields. These wells are designed to mitigate natural decline on the fields and maximise long term reserves recovery

In line with the Company’s infrastructure-led near field exploration strategy, a well on the “Fotla” prospect is scheduled to be drilled in the third quarter of the year. Fotla lies approximately 10 kilometres south of the Alba field

Approximately $20 million of the total capital expenditure programme for the year is associated with decommissioning activities, the majority of which relates to abandonment of the Jacky field facilities (wells and platform)

Strong balance sheet, underpinned by solid cash flow generation, commodity hedging and UK tax allowances

Net debt at 31 December 2019 was $1.5 billion. The Company’s debt facilities consist of a $1.65 billion reserves based lending facility plus $500 million senior unsecured notes

The Company is targeting the generation of at least $900 million of EBITDAX in 2020

The Company continues to steadily build its commodity hedging book. Just under 80% of 2020 oil production from currently producing fields is now hedged, providing a floor price of $64/bbl. Combined oil and gas hedging covers over 70% of forecast production in 2020 and over 50% in 2021 (with a gas price floor of 51p/therm). The Company continues to seek optimal value through its hedging programme via a combination of swaps and put options

The Company had a UK tax allowances pool of approximately $2.4 billion carried forward as of 31 December 2019

During 2020 the Company’s capital allocation priorities are a balanced and proportionate blend of investment to further enhance the value of the business, debt service and shareholder returns

2019 Financial Results

The Company is scheduled to issue its full year 2019 financial results on 31 March 2020, along with the results of its year-end independent reserves evaluation, which is being performed by Netherland Sewell & Associates Inc. A conference call and webcast will be held on the same day at 12.00 GMT (07.00 EST), with a playback facility being made available on the Company’s website later that day. A presentation to accompany the results will be available on the Company’s website prior to the call. Dial-in details for the call will be included in the press release that is issued on the day.