Ithaca Energy Share Discussion Threads

[ngms27] 12/7/2016 13:50

I'd re-read that presentation if I were you and understand what it actually says and what it doesn't say.

For example this is only at the operational level...

[whiskeyinthejar] 12/7/2016 12:59

Break even Brent post-Stella (excluding hedges) is $35.

We don't need $70!

Above presentation quotes this. Don't think this has changed either.

[whiskeyinthejar] 12/7/2016 12:58

No it doesn't amount to same thing.

Because only financial test of current earnings is on the corporate facility which is basically the $100m overdraft. These things are much easier to
renegotiate or move because its relatively small, short term borrowing.

"Main debt covenants

- Reserve Based Lending (RBL) facility:
liquidity test and ratio of drawings to NPV of
future cashflow tests
- Corporate facility: indebtedness and interest
cost to historic cashflow tests
- Senior notes: no maintenance financial tests"

So don't see how covenants are an issue.

From q3 2014 presentation



Source is bit dated, but believe quote still reflects current situation.

[ngms27] 12/7/2016 12:41

If oil recovers to $70 onwards Ithaca are laughing and the share price will have 3 digits. If it languishes for 2 years it's no laughing matter, hence my assertion that Ithaca is nothing more or nothing less than a geared play on POO with a hurdle rate to overcome to survive.

The balance of probability is that it will survive and prosper but this isn't a one way ticket and is very like Afren was at the same stage of it's development. That's not a slur just a fact. The Stella cashflow simply has to pay down the debt during the peak production years, Afren failed to do so with there major development and thus collapsed. just like GKP failed to do so.

[joestalin] 12/7/2016 12:30

Not arguing either way but I think the PoO will recover in time. This from CNBC:-
The U.S. oil industry will need to hire tens of thousands of workers in the next two and a half years as oil prices recover and drillers stand up rigs, Goldman Sachs projected in a note this week.

The question is whether workers flushed out of the industry and into a resurgent U.S. labor market will head back to the oil patch. On Friday, government data showed the United States added a whopping 287,000 jobs in June, and the nation's unemployment rate held below 5 percent.

Recruiters have long warned that layoffs could come back to haunt an industry still dealing with a shortage of mid-career workers following the 1980s oil bust. As the United States reaches full employment, oilfield services companies and drillers could face a shortage of workers and may have to pay dearly for them.

Since the start of the oil price downturn in 2014, more than 291,500 energy jobs have been lost worldwide, estimates recruitment agency Airswift.

[ngms27] 12/7/2016 12:19

But there is a covenant test on the debt WHICH takes account of the RBL so it does amount to the same thing.

[whiskeyinthejar] 12/7/2016 12:16

Still with the Afren slur. Afrens reserves dwindled dramatically probably because it bought assets the majors didn't think viable. It was not normal depletion. They also had to write off Kurdish assets. We don't have those problems. Stella will be producing for many years.

Anyway the majority of iae debt is RBL. Reserves based lending.

So loans are secured on undeveloped resources. This means banks are not clamouring to get the oil out of the ground at all. And as I already quoted, there's no covenants test on it.

[ngms27] 12/7/2016 11:36

I agree entirely they were a raging buy below 20p and I duly obliged. However having your head stuck firmly in a bucket of sand wont help if the low price oil environment continues to persist. Afren also had no covenant stress until it was too late, I warned people about this when the shares were 20p and then again 120p. I bought at 20p knowing the risk and sold out at 120p. All documented on these boards.

The similarities here with Afren are:
Both borrowed heavily for field development
Both brought the fields on stream (OK Stellas not yet but will be)
Both need the cashflow from the new field to service / pay down the debt

When the hedges run out if oils still below $60 then Ithaca could be stressed debt wise. It would be interesting to know what there internal hurdle rate is.

Thats why the major production profile for Stella HAS to make serious money not just tick over as other wise they will be left with dwindling assets and debts they cannot service a'la Afren.

I'm not saying this will happen and I do think there maybe more upside yet but it still need a fair wind in the next couple of years to leave a smile on shareholders faces.

[georgie pie] 12/7/2016 11:17

.....Malcy also praised the management....I agree. Brent up 2% @$47.17

[whiskeyinthejar] 12/7/2016 10:39

Of course I've read company announcements.

You now admit debt is being well managed. So nothing like Afren. In fact they got clean bill of health from 6 monthly banking review. The RBL debt doesn't have covenants tests and there's no hint of covenant stress on other debt.

"Both RBL facilities are based on conventional oil and gas industry borrowing base financing terms, neither of which have historic financial covenant tests."

I didn't say this was 'one way ticket to heaven' either.

But at beginning of year, Malcy picked Ithaca for his bucket list of companies best able to survive low price oil environment I agree with him.

[georgie pie] 12/7/2016 10:26

il be surprised if Delek don't put a formal offer forward by end of year to be honest.

[gersemi] 12/7/2016 09:56

Delek will have completed their due diligence on Ithaca. Delek then bought 20% of IAE. I'll say no more

those Israelis never back a loser..

[ngms27] 12/7/2016 09:51

I suggest you read the latest annual reports and RNS's. The debts are checked every year against assets etc to see if the debts remain within covenants. Last year the debt ceiling available to Ithaca was lowered to $730m from $950m but they remained within the covenants. This was 100% due to the hedging saving the day, so good management. This is the latest one: plus the previous one:

They have to start paying back the RBL in January 2017

However if oil prices stay depressed for the next 2 years, the way the covenants work Ithaca could well breach covenants just like Afren did. This is because some of the value from Stella will have been reduced by production and the other fields will have declined. That's why they need to materially pay down debt during the initial high production phase from Stella.

So this isn't the one way ticket to heaven, it's a geared play on POO

[whiskeyinthejar] 12/7/2016 08:36

Most companies have debts.

Where's your evidence Ithaca isn't managing its debts?

I think you are scaremongering and that's low. Very low.

[ngms27] 12/7/2016 08:29

That's where you are wrong. Both have a debt mountain. Afren failed to maintain it's payments and went bust.

[whiskeyinthejar] 12/7/2016 08:18

Lol. Afren had thieving managers, couldn't make money at $60 oil and had rapidly declining production. Ithaca has nothing in common with Afren.

[ngms27] 12/7/2016 07:54

Given the production profile of Stella they need to pay down large amounts of debt in the first two years of operation. If they don't do that then hello Afren mark 2.

They need a positive oil price environment post 2016 to survive IMHO

[whiskeyinthejar] 12/7/2016 07:21

They have 7k bpd hedged at $60 for first half of 2017. That's not far short of current production (9k).

Average Brent has been about $41 this year and they managed to pay down debt. So since opex will be lowest in North Sea they should still be able to pay down a small amount of debt over next 12 months if Brent is only $40.

If you want to look beyond the next 12 months, we will have new president in USA in January. Hillary is front runner and she says shes going to make fracking difficult for oil companies. Maybe she won't do as she saying now, but fracking isn't popular with Democratic voters.

[fsawatcher] 11/7/2016 19:35

they wont be payin down debt if oil in $40's

the only reason they pay down some debt nows is because they got $60pb hedges

most of hedges are gone in early 2017 and stella not hedged

[whiskeyinthejar] 11/7/2016 16:43

From Malky:

Ithaca Energy

A small update from Ithaca this morning which adds a little to our current sum knowledge but confirms its gilt edged credentials in the sector.

First half production was 9,400 boe/d on average and of course Stella will contribute substantially in the second half. A very slight fly in the ointment appears to be another small delay in FPF-1 which is now slated to be on the move in late July and producing in early 4Q 2016. However this is semantics in the overall nature of things, by the end of the year Ithaca will have a serious increase in revenue, be paying down debt with little upcoming capex and continues to tick all the right boxes.

[in_flu_ence] 11/7/2016 15:55

Is there a guesstimate the total capex of the GSA project so far?

[sludgesurfer] 11/7/2016 15:40

There's optimism and there's ineptitide. For the past three years the FPF refit has been a lesson in the latter imho.

[ngms27] 11/7/2016 15:35

In this game all management are over optimistic on timescales. If you are sensible always add a good wallop of additional time so as not to be disappointed.

If someone now told me they would be spudding a well in Q4 2016 I'd think Q2 2017 as more likely for instance.

[sludgesurfer] 11/7/2016 15:26

My intention was not to condescend. We ultimately of course want the same thing. I respectfully choose to differ with regards to whether this mornings announcement can be considered good news or whether it further erodes (albeit in a relatively small way) management's credibility with regards to project management.