North Sea oil firm Ithaca Energy (IAE:AIM) gains 3.5% to 66.75p as first half output beats expectations. The company is set to commence long-awaited production from its Stella field in November.
Stella has been years in the making and, having been pencilled in for a start date in the first half of 2014, has been beset by delays. The costs of the project also put pressure on Ithaca’s balance sheet, exacerbated by the collapse in the oil price.
Net debt has been reduced from its peak of more than $800 million in the first half of 2015 to $606 million as at 30 June. Ahead of Stella, unit operating costs are guided to hit $25 per barrel of equivalent (boe) which is 17% lower than before.
Stella should see output more than double from the first half’s 9,378 barrels of oil equivalent per day (boepd), with forecasts for 20,000 to 25,000 boepd. This uplift is expected to bring average operating costs down below $20 per boe.
FinnCap analyst Dougie Youngson who has a ‘buy’ recommendation on the stock and a 96p price target comments: ‘Cash flow generation has been strong and net debt continues to reduce. The FPF-1 facility is en route and installation activities are due to start in the short term.’