LONDON (Alliance News) - Ithaca Energy Inc Monday said production is expected to significantly increase in the third quarter of 2015 once the Stella oilfield in the North Sea begins production and said it has hedged a proportion of its production to protect itself from the weak oil price whilst reducing capital expenditure for the year by 60%.
During 2014, production averaged 12,300 barrels of oil equivalent per day from its assets, which are based in the North Sea and southern England. In November, the company said it was expecting production in 2014 to reach 12,500 barrels of oil equivalent per day.
Production in 2014 includes the Summit assets which it acquired in July.
Ithaca has forecast production to average around 12,000 barrels of oil equivalent per day during 2015. The company's production in 2014 was made up of 95% oil and 5% gas, which is expected to remain flat during the year.
The slight decrease in production in 2015 from Ithaca's existing producing assets is going to be mainly due to the planned decommissioning of the Beatrice field in January, Ithaca said.
For the 18 month period starting from January 1, Ithaca has hedged around 6,300 barrels of oil per day at an average price of USD102 per barrel to protect itself from the weak oil price alongside a gas price of USD10 per million British thermal units for 20 billion cubic feet of gas from the Stella oilfield. The company said the hedges running into the middle of 2016 has resulted in the Brent break-even price for its existing producing assets to fall below USD20 per barrel.
Brent was quoted Monday morning at USD48.78 per barrel.
In November, Ithaca's partner in the Stella oilfield, Petrofac Ltd, warned that production from the Stella oilfield would be hit by the weaker oil prices and updated its profit forecasts from the project to reflect the reduced oil price and overall cost of the project.
Ithaca continues to develop the Stella oilfield into a production hub. Ithaca is the operator of the license with a 54.66% stake alongside investment company Dyas, which holds a 25.34% interest and Petrofac which holds the remaining balance.
The company said clean-up flow tests from the first four wells in 2014 have de-risked the initial production forecasts for the area. Petrofac is continuing with modification works on the FPF-1 floating production facility which is expected to be finished before production begins from the field in the third quarter.
Once the Stella oilfield commences production, it will add a pro-rata share of 16,000 barrels of oil equivalent per day, which is the annual forecast for the field made by the company.
Ithaca also is planning on conducting a clean-up flow test on the Stella Ekofisk development well in February, the last well to be completed in the company's drilling campaign in the area, it said in a statement.
Once the Stella Ekofisk well is completed, Ithaca will continue to install subsea infrastructure during Spring, before the floating production facility arrives on site.
Total net capital expenditure during 2015 is budgeted at USD150 million, around a 60% reduction compared to 2014. The capital expenditure in 2015 is expected to be weighted to the first half of the year, with USD100 million being invested in the Stella oilfield and the balance being spent on activities in Norway, including ongoing development of the Ythan and Wytch Farm development wells.
At December 31, Ithaca had drawn down USD763 million from its USD1.01 billion debt facility.
Ithaca shares were down 0.4% to 64.50 pence per share on Monday morning.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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Petrofac (PFC)