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Ithaca Energy is in exclusive talks to take over Italian oil major Eni’s UK upstream assets, in what would be a major deal among North Sea oil and gas producers hit by Britain’s windfall tax.
The London-listed company, which has a market capitalisation of nearly £1.5bn, said it had entered a four-week exclusivity period to bid for “substantially all” of Eni’s UK upstream operations, including those of Neptune Energy, which the Italian company agreed to buy last year for $4.9bn.
The deal would make Ithaca one of the biggest independent oil producers in the North Sea and could spur further consolidation, as companies seek scale to fund investment and the cost of decommissioning legacy oil and gas assets in the ageing basin.
Chris Wheaton, an analyst at Stifel, estimated the value of the transaction would be about $1.1bn based on Ithaca’s current capitalisation and said he considered the deal to be a “welcome step forward”.
Ithaca, whose majority owner is Israel’s Delek Group, said the transaction would create the second-biggest independent operator in the UK continental shelf, boosting its production above 100,000 barrels of oil equivalent per day.
The company, which has stakes in the undeveloped Cambo and Rosebank fields, has had a difficult time since listing on the London Stock Exchange in November 2022. Its former chief executive, Alan Bruce, left the group early this year. Shares were up almost 3 per cent in morning trading on Wednesday.
Ithaca said its potential merger with Eni’s assets would be a “transformational” deal for the company, which agreed in April 2022 to pay as much as $1.5bn for North Sea rival Siccar Point. That transaction included stakes in two of the UK’s largest producing fields, Schiehallion and Mariner, as well as in the Cambo and Rosebank fields.
The proposed deal would exclude Eni’s carbon capture and Irish Sea assets, Ithaca added in a statement on Wednesday. Eni would receive new Ithaca stock as part of the deal, ultimately giving it between 38 per cent and 39 per cent of the enlarged group’s share capital following completion.
Eni last year agreed to acquire private equity-backed Neptune Energy in what was then the largest cash deal in the European oil and gas sector for almost a decade. Neptune produces oil and gas from fields in seven other countries, including Norway, Germany, Algeria, the Netherlands and Indonesia.
Ithaca has been one of the most vocal critics of the windfall tax imposed on the sector by the UK government in 2022 after Russia’s invasion of Ukraine caused a surge in energy prices. It previously warned that it would have to defer or cancel investment, and produce less oil.
Ithaca said it expected production for 2024 to be between 56,000 and 61,000 barrels of oil equivalent per day, reflecting a “reduction in investment in near-term projects” as a direct result of the UK levy.
The company also reported a sharp fall in net income of $215.6mn for 2023, down from $1.03bn.
