(Alliance News) - Ithaca Energy PLC said Wednesday it is in talks to combine Eni Spa's UK assets in a deal that would see the Italian oil major acquire a near 40 percent stake in the North Sea operator in exchange.

Ithaca shares rise 2.8 percent to 146.20 pence each in London Wednesday morning. Eni gains 0.5 percent to EUR14.48 in Milan.

Ithaca has entered into a four-week exclusivity agreement with Eni for "substantially all" of the Milan UK listing's offering, which includes the recent acquisition of Neptune Energy. The deal would exclude some of Eni's carbon capture, utilization and storage assets as well as the Irish Sea assets.

In return, Eni will receive shares in Ithaca, in which it will hold between 38 percent and 39 percent.

"Eni has a well-diversified asset base across 4 key hubs: Elgin Franklin, J-Area, Cygnus and Seagull; Ithaca Energy is already a partner in the Elgin Franklin and Jade fields. The potential combination would represent a value-enhancing opportunity for Ithaca Energy's shareholders, supporting the company's strategy of acquisition, construction and upsizing," Ithaca added.

Ithaca said revenues in 2023 fell 11 percent to USD2.32 billion from USD2.60 billion in 2022. Pre-tax profit plummeted 87 percent to USD302.0 million from USD2.24 billion.

Ithaca was hurt by USD557.9 million in impairment charges, largely from Greater Stella Area and Alba. GSA's impairment was due to the decision not to continue drilling Harrier due to the energy profits tax in the UK. Falling gas prices also contributed to the devaluation. As for Alba, the devaluation is due to the reduction in estimated future production.

In addition, in 2022, the company had recorded a gain of USD.34 billion for the purchase of a company, which was not repeated last year.

"We have made substantial progress in 2023 by executing our buyout, buildout, and enhancement strategy, including the approval of Phase I of the Rosebank development," said Iain Lewis, chief executive officer and interim chief financial officer.

"I am pleased to share a solid set of financial results for 2023, despite the significant fiscal and political hurdles we faced during the year. The energy profits tax continues to have a direct impact on investment in the UK North Sea, with both managed and non-managed projects being postponed or cancelled. The extension of the energy profits tax by an additional year, until the March 2029 expiration date, highlights the continued fiscal uncertainty facing our industry."

Production in 2024 is expected to be between 56,000 and 61,000 barrels of oil equivalent per day, down from 70,239 in 2023. The 2023 result was in line with forecasts of 68,000 to 74,000 barrels.

By Eric Cunha, Alliance News news editor, and translated by Claudia Cavaliere

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