Ithaca Energy earns $3.77-million (U.S.) in Q2 2009

2009-08-18 14:40 ET - News Release

Mr. Iain McKendrick reports

ITHACA ENERGY INC.: SECOND QUARTER 2009 RESULTS

Ithaca Energy Inc. has released its results for the second quarter ended June 30, 2009.

Net profit for the quarter was $3.8-million with positive cash flow from operations of $16.9-million.

Summary of key events

Operations

• Jacky production commenced on April 6, 2009, as planned.
• Beatrice Alpha, Beatrice Bravo and Jacky together produced 673,073 barrels (463,688 barrels net to Ithaca) of oil to the tank at Nigg Terminal for the period from April 1, 2009, to June 30, 2009.
• Total operational efficiency exceeded 95 per cent for the period as production was stabilized. Work is continuing to maximize and prolong production across the facilities, with a Jacky water injection well scheduled for the third-quarter 2009. The Ensco 80 drilling rig was contracted on Aug. 14, 2009, to complete this work.
• The Jacky field has continued to produce dry oil (being zero or neglible water content), increasing management confidence in the likely ultimate production volume.
• Weighted average realized price for the quarter was $60.38 a barrel (plus an additional price uplift of 96 cents a barrel for 159,806 barrels net to Ithaca at the point of sale to a third party).

Financials

• Net profit for the quarter was $3.8-million (loss of $1.5-million for the three months ended June 30, 2008); due primarily to positive operating cash flows and a $5.6-million gain on financial instruments offset by high depletion charges of $17.6-million.
• The corporation recorded its first quarter of positive cash flow from operations of $16.9-million as the benefit of the Jacky production took effect.
• Total cash at the quarter end stood at $14.3-million, of which $11.9-million was restricted cash held as collateral for letters of credit issued by the Bank of Scotland. In addition, $2.3-million (net to Ithaca) is held on deposit with ENSCO Offshore (U.K.) Ltd. for a future rig commitment (Jacky water injector well) and is included in deposits, prepaid expenses and others.
• In the three months to June 30, 2009, total fixed assets decreased to $299.1-million ($308.5-million as at March 31, 2009) representing the lower capital spent in the period offset by high depletion as Jacky commenced production.

Events subsequent to June 30, 2009

• The corporation announced on July 29, 2009, that it had completed a transaction with Dyas U.K. Ltd., whereby Dyas agreed to convert a loan of $61.2-million into an interest in certain assets of the corporation. The transaction also provided for a $40.6-million cash payment to the corporation. As a consequence of the transaction, the corporation is now debt free and all security held by Dyas has been released.
• Gross oil sales in July totalled 364,842 barrels (net to Ithaca 175,124 barrels) at a realized price of $71.22 per barrel (before additional price uplift at the point of sale to a third party).
• The corporation entered its first commodity hedge on July 24, 2009, whereby it fixed 50,000 barrels of July, August and September production at $70 (U.S.) a barrel.

Outlook

The completion of the second Dyas transaction has given the corporation additional cash to pursue current developments, enhance the efficiency of existing operations and to seek new opportunities to strengthen the portfolio:

• The Jacky water injector is expected to be operational from October, 2009.
• At least one well will also be worked over at Beatrice Bravo in November, 2009, and water injection will also be restarted at Beatrice Bravo at that time.
• Discussions are under way regarding contracting all services for an extensive work over program at Beatrice Alpha.
• The Stella appraisal well is planned for the second half of 2009.
• The Carna development is scheduled to be sanctioned in the fourth quarter of 2009.
• Development decision for the Athena field is expected in the fourth quarter given improved oil prices and greater commercial flexibility in the oil service sector.
• Development of the Polly discovery is under discussion with a major contractor.

   CONSOLIDATED STATEMENTS OF NET AND COMPREHENSIVE PROFIT AND DEFICIT
                            (in U.S. dollars)

                   Three months ended June 30,   Six months ended June 30,
                            2009          2008          2009          2008

Revenues
Oil sales           $ 28,280,275  $          -  $ 31,056,119  $          -
Other income           1,476,638             -     2,446,233             -
Interest income          146,305       126,137       238,254       505,486
                    ------------  ------------  ------------  ------------
                      29,903,218       126,137    33,740,606       505,486
Costs and expenses
General and
administrative         1,273,583       460,116     2,808,058     1,967,409
Operating             12,056,509             -    24,704,897             -
Depletion,
depreciation
and accretion         17,585,049       278,838    20,053,029       485,377
(Gain) loss on
foreign exchange        (890,935)     (447,527)   (1,117,481)    3,549,624
Revaluation of 
long-term liability      483,818             -       483,818             -
Gain on derivative    (5,602,293)            -    (7,043,527)            -
Stock-based
compensation             644,732     1,355,400     1,754,232     1,523,700
Interest and bank
charges                  572,826             -       584,361             -
                    ------------  ------------  ------------  ------------
                      26,123,289     1,646,827    42,227,387     7,526,110
                    ------------  ------------  ------------  ------------
Net and comprehensive
profit (loss)       $  3,779,929  $ (1,520,690) $ (8,486,781) $ (7,020,624)
                    ============  ============  ============  ============
(Deficit), beginning
of period           $(50,554,136) $(13,340,393) $(38,287,426)  $(7,840,459)
                    ------------  ------------  ------------  ------------
(Deficit), end of
period              $(46,774,207) $(14,861,083) $(46,774,207) $(14,861,083)
                    ============  ============  ============  ============

Net profit (loss)
and comprehensive
profit (loss) per
share (basic and
diluted)            $       0.02  $      (0.01) $      (0.05) $      (0.06)

We seek Safe Harbor.