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Buy Ithaca Energy ahead of start of production of Stella field, Mackie urges

Friday, October 7, 2016 8:57
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Patient shareholders in Ithaca Energy Inc (CVE:IAE, LON:IAE) will not have long to wait now before first production from the Stella field.

Mackie Research reiterated its ‘buy’ recommendation and C$1.75 price target on the expectation of substantial free cash flow once Stella is producing and the potential for future growth through the tie-in of Ithaca’s satellite fields in the Greater Stella Area.

The North Sea firm revealed in its third quarter update that production was ahead of forecasts over the first nine months of 2016, averaging 9,550 barrels oil equivalent per day rather than 9,000 barrels of oil equivalent per day (boepd).

Perhaps more importantly it disclosed installation of the FPF-1 floating production facility is proceeding as planned and first production from the Stella field is on track for November 2016.

The field is expected to add around 16,000 boepd of net production in the final quarter of this year.

“With Stella on production, IAE should generate substantial free cash flow which should allow the company to continue to pay down debt,” Mackie said.

“Net debt as at September 30, 2016 was US$598 million,which is down ~US$8 million from the end of Q2/16 (US$606 million). IAE’s available debt facilities total US$730 million, leaving the company with over ~US$130 million of funding headroom,” the broker noted.

It has adjusted its average production forecast for the whole of 2016 up to 11,375 boepd from 11,090 boepd, as a result of which is cash flow forecast increases to US$154.4mln, worth 37 cents a share, from the previous estimate of US$147.31mln (35 cents a share).


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