Daily Letter Summary | 4
1 June 2009
Ithaca Energy Inc. | Frederick Kozak, P.Eng., 1.403.508.3836
IAE : TSX-V : C$0.69 | C$112.0M | Hold , Target C$0.65
• Q1/09 results - sorting out North Sea operations; maintaining C$0.65 target
price and HOLD rating
Event
Ithaca announced Q1/09 operating results on May 29, 2009. For the first quarter of 2009,
the company worked on the tie-in of its second producing field in the North Sea. The Jacky
field was brought on production just after the end of the quarter.
Impact
Neutral. As with most UK North Sea producers, the first few months of new field operations
are impacted by operational-related shutdowns and interruptions of production. As a result,
the company did not have continuous production through the quarter. However, with the
Jacky field now tied in and flush production past, Ithaca is producing gross production of
11,500 bbl/d (7,850 bbl/d net) from its offshore production.
Valuation
Despite the production increase in early Q2/09, we are maintaining our HOLD rating and
target price of C$0.65. Our target price valuation is based on the value of the company’s
proven plus probable reserves for the Jacky and Beatrice fields only. With credit markets
still inaccessible to small UK North Sea producers, Ithaca has limited resources from which
to further grow offshore production.
Next catalyst
The next catalysts will be further operational updates from the Jacky and Beatrice field
operations in the UK North Sea. A return to lending by UK-based banks would cause a
major revaluation for the sector and would be a significant catalyst for our target price, but
this is not expected any time soon. |
