North Sea oil and gas producer Ithaca Energy has entered into an exclusivity agreement to discuss buying all of the UK upstream business of Italy's energy major Eni.
A deal, if it takes place, will be for substantially all of Eni's oil and gas assets in the UK, including the Neptune Energy assets which the Italian major has recently acquired. But a transaction will not include certain carbon capture projects and Irish Sea assets held by Eni, Ithaca Energy said on Wednesday.
Pursuant to the exclusivity agreement, Eni has granted Ithaca Energy exclusivity for a period of 4 weeks from the date of the announcement.
A potential deal would include Eni contributing its UK business in exchange for the issuance of new Ithaca Energy shares to Eni, with Eni anticipated to hold between 38% and 39% of the enlarged issued share capital of Ithaca Energy following completion of a transaction.
Last year, Eni's UK business had a pro forma production of 40,000-45,000 barrels of oil equivalent per day (boe/d), Ithaca Energy said.
If the parties reach an agreement, a combination of the businesses will add significant scale and diversification to Ithaca Energy's business, with pro forma production rising above 100,000 boe/d and creating the second-largest independent operator in the UKCS by production.
A deal would also boost Ithaca Energy's status as the largest independent operator by resource, holding stakes in 6 of the 10 largest fields offshore the UK.
"Although the discussions are at an advanced stage, there can be no certainty that a Potential Combination will occur, nor as to the final terms or timing on which a Potential Combination might be concluded," Ithaca Energy noted.
Separately, the company reported today a plunge in its 2023 profit to $215.6 million from $1 billion in 2022, due to pre-tax impairment charges, the windfall tax, and lower natural gas prices.
As a result of the windfall tax in the UK, or the Energy Profits Levy as it is officially known, Ithaca expects to reduce this year's investment in near-term projects, including deferred or canceled projects at the Greater Stella Area, Montrose Arbroath Area, Elgin Franklin Area, and Alba.
By Tsvetana Paraskova for Oilprice.com
Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More