FOR IMMEDIATE RELEASE
NOT FOR RELEASE, PUBLICATION OR
DISTRIBUTION, IN WHOLE OR IN PART, IN, INTO OR FROM ANY
JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE
RELEVANT LAWS OF THAT JURISDICTION. THIS ANNOUNCEMENT IS FOR
INFORMATION PURPOSES ONLY AND IS NOT AN OFFER OF SECURITIES IN ANY
JURISDICTION.
THIS IS AN ANNOUNCEMENT AND NOT A
CIRCULAR OR PROSPECTUS OR EQUIVALENT DOCUMENT AND INVESTORS AND
PROSPECTIVE INVESTORS SHOULD NOT MAKE ANY INVESTMENT DECISION ON
THE BASIS OF ITS CONTENTS. A CIRCULAR AND PROSPECTUS IN RELATION TO
THE COMBINATION DESCRIBED IN THIS ANNOUNCEMENT WILL EACH BE
PUBLISHED IN DUE COURSE.
THIS ANNOUNCEMENT CONTAINS INSIDE
INFORMATION
23 April 2024
Ithaca
Energy plc ("Ithaca Energy", the "Company" or the
"Group")
Transformational Combination of Ithaca Energy and
substantially all of Eni S.p.A.'s ("Eni") UK Upstream Oil and Gas
Assets,
Accelerating Growth and Value Creation
·
UK Continental Shelf ("UKCS") powerhouse producing 100,000 - 110,000 barrels of oil equivalent per
day[1]
·
Agility of an Independent and capability of a
Major, implementing Eni's regional satellite model
·
Highly cash-generative combination providing
material dividend capacity with ambition for up to $500 million
total dividends each year in 2024 and 2025[2]
·
Complementary portfolio unlocks potential for
material long-term organic growth
·
Platform for further inorganic growth in the UK
and internationally
Gilad Myerson, Executive Chairman, Ithaca Energy,
commented:
"The
transformational combination with Eni UK will further enhance
Ithaca Energy's position as a leading UKCS production and growth
company, with positions in 6 of the 10 largest UKCS assets in the
basin[3].
The synergistic
combination with Eni's highly cash-generative UKCS portfolio has
the ability to unlock our long-life organic growth opportunities
creating a combined entity with substantial scale and
longevity.
With Eni as a
significant, long-term and supportive shareholder, the enlarged
group will benefit from increased financial strength to support the
execution of our BUY, BUILD and BOOST strategy and gain access to
Eni's world-class technical capabilities and operational support.
The combination will create a solid platform which can underpin
material shareholder distributions, including an ambition to pay
special dividends in 2024 and 2025, as well as future organic and
inorganic growth2."
OVERVIEW OF THE
COMBINATION
Ithaca Energy, a leading independent
oil and gas operator in the UK North Sea is pleased to
announce it has reached an agreement on a proposed combination
with Eni in relation to substantially all of the upstream assets of
Eni in the UK (the "Eni UK
Business") in exchange for the issue of ordinary shares in
Ithaca Energy to a subsidiary of Eni, Eni UK Limited ("Eni UK") (the "Combination"), such that at completion
of the Combination ("Completion"), Eni UK will be issued
ordinary shares representing 38.5% of the enlarged issued share
capital of Ithaca Energy.
The Combination is expected to
create a strategic platform for long-term growth in the United
Kingdom North Sea combining Ithaca Energy's portfolio of
development projects and efficient operating model with enhanced
production and cash flow from the Eni UK Business and Eni's
world-class technical expertise. The combination of Ithaca Energy
and the Eni UK Business (together the "Combined Group") has the underlying
un-risked potential to organically grow production to
150,000[4] boepd by the
early 2030s, whilst supporting ongoing shareholder returns. The
Combination is expected to be accretive per
share to EBITDAX, CFFO and Profit, providing a platform for
enhanced shareholder returns.
The portfolio of the Eni UK Business includes
operated interests in 1 producing field: Cygnus (38.75% working
interest); and non-operated interests in 10 producing fields: Elgin
Franklin Area including Elgin, Franklin, West Franklin (21.867%
working interest) and Glenelg (8% working interest), J-Area
including Judy, Joanne, Jasmine (33% working interest) and Jade (7%
working interest), Seagull (35% working interest) and Tommeliten A
(0.07% working interest). The Combination excludes Eni UK East
Irish Sea assets and CCUS activities.
In 2023, the Eni UK Business generated $775 million
of EBITDA[5].
BACKGROUND TO AND
REASONS FOR THE COMBINATION
Combination
Highlights
The board of directors of Ithaca Energy (the
"Ithaca Energy Board")
believes the Combination represents a highly value-accretive
opportunity for Ithaca Energy's shareholders, supporting delivery
of Ithaca Energy's BUY, BUILD and BOOST strategy. The
Combination:
Creates a UKCS
powerhouse
- The
2nd largest independent operator in the UKCS by 2024
production[6]
-
Stakes in 6 of the 10 largest UKCS fields3
-
Pro-forma 2024 production of 100,000 to 110,000 barrels of oil
equivalent per day1
- Forecast to be the
largest operator in the UKCS by production in 2030[7], on an un-risked basis
- Material combined
long-life 2P reserves and 2C resources base of 658 million
barrels of oil equivalent[8]
Combines the agility of an
Independent and capability of a Major
- Eni will be a fully
committed, long-term and supportive shareholder in the Combined
Group supporting the delivery of Ithaca Energy's BUY, BUILD and
BOOST strategy
- Eni's successful
strategic satellite structure will further enhance this UKCS
powerhouse
- Technical
services agreement with Eni will provide Ithaca Energy with access
to leading technical expertise to drive future growth
Delivers material cash flow
and optionality
- Substantial cost
savings to be realised through operational and financial
synergies
- Accretive per
share to EBITDAX, CFFO and Profit, providing a platform for
enhanced shareholder returns
- Expected to improve
Ithaca Energy's credit rating from B+/B1 towards BB-/Ba, with a
pathway towards investment grade
- Committed 2024
and 2025 dividend of 30% post-tax CFFO with an ambition for special
dividends to increase total shareholder distributions to up to $500
million per annum2
Unlocks potential
for material long-term growth
- Reinforces
Ithaca Energy's status as the largest UKCS operator by reserves and
resources[9]
- Enhanced cash flows
unlock significant growth from Ithaca Energy's development
projects, including the second largest undeveloped discovery in the
UK North Sea - Cambo
- Organic growth
potential to increase the Combined Group's production to over
150,000 barrels of oil equivalent per
day4 by the early 2030s on an un-risked basis
Accelerates inorganic growth
opportunities in the UK and internationally
- Increased
scale, debt capacity and potential for lower cost of debt provides
material firepower for growth
- Focused on
opportunities for further inorganic growth in the UK
- Option to
diversify internationally if the right opportunity is identified,
leveraging Eni's global reach and capability
Overview of the
Combined Group's Portfolio
- The
Combination will create a UKCS powerhouse with 37 producing
assets
-
Provides increased non-operated exposure to the Elgin-Franklin and
J-Areas and diversification within the UKCS through the operated
Cygnus producing field and recently onstream Seagull
field
- The
current producing assets and the sanctioned Rosebank development
are expected to sustain production for the Combined Group following
Completion at greater than 100,000 barrels of oil equivalent per
day until at least 2028[10]
- Combined 2P Reserve and 2C Resource base of 658 million
barrels of oil equivalent8 with a resource life of 15
years
- Based on 2023
proforma production the Combined Group was split 51% liquids / 49%
gas[11]
2024 Guidance for
the Combination
All guidance below is based on a full year
contribution from Ithaca Energy and inclusion of Eni UK from the
economic effective date of 30 June 2024[12]:
- Expected 2024
combined production of 80,000 to 87,000 barrels of
oil equivalent per day
- Net operating cost
guidance range of between $650 million and $730 million
- Net producing asset
capital cost guidance range of $410 million to $480 million
(excluding pre-FID projects and Rosebank development)
- Net Rosebank project
capital cost guidance range of $190 million to $230 million
- Cash tax guidance of
$435 million to $455 million
- Ambition for up to $500 million total dividend in
20242
DETAILS OF THE
COMBINATION
Key Transaction
Terms
Based on the relative net asset valuations of Ithaca
Energy and the Eni UK Business, agreed between Ithaca Energy and
Eni, Eni will transfer the Eni UK
Business to Ithaca Energy in exchange for
the issuance of such number of new Ithaca Energy shares to Eni UK
as is equal to 38.5 per cent of the fully diluted issued share
capital of Ithaca Energy at Completion, subject to
adjustment in respect of certain share option rights (the
"Consideration
Shares"), with existing Ithaca Energy shareholders
owning the remaining 61.5 per cent of the share
capital of the Combined Group (the "Merger Ratio").
Using the number of Ithaca Energy shares outstanding
as at 23 April 2024, 635,013,542 Consideration Shares would be
issued to Eni UK to reflect the Merger Ratio. Based on the closing
share price of Ithaca Energy of 118.8p on 23 April 2024, the
Consideration Shares are worth c. £754 million, although it should
be noted that the Merger Ratio was determined between the parties on a relative
net asset value basis rather than with reference to market share
price.
The key terms of the Combination are set out in the
business combination agreement entered into between Ithaca Energy,
Eni UK and Neptune Energy Group Holdings Limited ("Neptune"), both subsidiaries of Eni
(the "Business Combination
Agreement").
The economic effective date for the Combination will
be 30 June 2024, with Completion expected in Q3 2024, subject to the satisfaction of certain regulatory and other
customary conditions precedent. Certain customary financial
adjustments will be made for, amongst other things, cash, financial
debt and working capital, each as at the economic effective date,
to maintain the agreed Merger Ratio.
Free
Float
As a consequence of the issue of the Consideration
Shares to Eni UK, and Ithaca Energy's existing shareholder
structure, the Combination would result in the number of ordinary
shares in public hands being approximately 7 per cent., and below
the minimum 10 per cent. as required by the listing rules issued by
the Financial Conduct Authority (the "FCA") (the "Listing Rules"). Therefore, in order to
ensure that the number of ordinary shares in public hands remains
at or above 10 per cent., Delek has undertaken to use reasonable
endeavours to sell down such number of ordinary shares representing
approximately 3 per cent. of the enlarged issued share capital of
the Company (the "Delek Sell
Down"), prior to Completion.
Delek will enter into a call option agreement with
Eni UK pursuant to which Delek will have the option to require Eni
UK to transfer to Delek such number of Consideration Shares as
represents approximately 1 per cent. of the enlarged issued share
capital of the Company (the "Call
Option"). Once the Delek Sell Down is complete, 10 per cent.
of Ithaca Energy's ordinary shares will be held in public hands.
Following this and assuming the Call Option is exercised,
immediately after admission of the Consideration Shares to the
Premium Listing segment, Delek will hold approximately 52.7 per
cent. and Eni UK will hold 37.3 per cent. of Ithaca Energy's
ordinary shares.
Rule 9
waiver
As Eni UK will hold between 30 per cent. and 50
per cent. of the voting rights of Ithaca Energy at Completion, a
mandatory offer would normally be required under Rule 9 of the UK
Code on Takeovers and Mergers (the "Takeover Code"), however, given
that Delek will still hold shares carrying more than 50 per cent.
of the voting rights following Completion, the UK Panel on Takeover
and Mergers (the "Panel")
has granted a dispensation from Rule 9 pursuant to note 5 (b) of
Rule 9 under the Takeover Code and no such Rule 9 waiver is
required.
Class 1
The Combination constitutes a Class 1 transaction for
the purposes of the Listing Rules for Ithaca Energy. Ithaca Energy
will issue a circular to its shareholders, in due course, in order
to convene a general meeting to seek shareholder approval for the
Combination and the allotment and issue of the Consideration Shares
to Eni UK. In addition, Ithaca Energy will publish and make
available a prospectus in connection with the issue of the
Consideration Shares.
The Profit Before Tax and Gross Assets the subject of
the transaction for the year end 31 December 2023 were £444 million
and £2,062 million respectively.
Lock-up
Eni UK's shareholding in Ithaca Energy will be
subject to a 180 day lock-up period from admission of the
Consideration Shares (subject to customary exceptions).
Relationship
Agreements and Corporate Governance
Eni
Relationship Agreement
At Completion, Eni will enter into a relationship
agreement with Ithaca Energy (the "Eni Relationship Agreement") on
substantially similar terms to the Delek Group Limited
("Delek") relationship
agreement amended and restated on the date of this announcement
with Ithaca Energy (the "Delek
Relationship Agreement"). The Eni Relationship Agreement
will entitle Eni, for so long as it
directly or indirectly holds more than 20% of the Combined Group's
issued share capital, the right to appoint two non-executive
directors to the Ithaca Energy Board, for so long as it
directly or indirectly holds greater than 10% (but not more than
20%) of the Combined Group's issued share capital, the right to
appoint one non-executive director to the Ithaca Energy
Board, and for so long as it holds greater than 25% of the Combined
Group's issued share capital, to appoint one observer to the
Remuneration Committee and the Audit and Risk Committee; and
appoint one director, or failing which an observer to the
Nomination and Governance Committee.
From Completion, under the Delek Relationship
Agreement, Delek will, for so long as it directly or indirectly
holds at least 30% of the Combined Group's issued share capital,
and until the later of the proposed CEO nominated by Eni ceases to
be the CEO and 3 years from Completion, have the right to appoint
three non-executive directors.
Eni will be entitled to recommend the nomination of
the next proposed CEO of the Combined Group in accordance with the
policies and processes of Ithaca Energy's Nomination and Governance
Committee, such appointment to take effect from Completion.
The Ithaca Energy Board is committed to robust
standards of corporate governance and to maintaining a sound
framework for the control and management of the Group. As such, the
Company is actively recruiting for additional independent
non-executive directors to join the Ithaca Energy Board prior to or
from Completion.
Conditions to
Closing
Closing of the Combination is
subject to, amongst other things:
·
Ithaca Energy shareholder approval at a general meeting
convened pursuant to an FCA-approved circular;
· FCA
and London Stock Exchange approval of the admission of the
Consideration Shares;
·
satisfaction of certain regulatory
approvals in the UK; and
·
completion of certain pre-sale reorganization steps in
relation to the Eni UK assets.
Key
termination provisions
The Business Combination Agreement can be terminated
in a number of limited circumstances. Eni UK and Neptune can
terminate the Business Combination Agreement if the Ithaca Energy
Board changes or withdraws its recommendation, or if Ithaca Energy
shareholders do not approve the Combination, or if Ithaca Energy fails to publish the prospectus
or circular once it has been approved by the FCA.
All parties have customary termination rights for material
breaches of certain interim period
covenants and in circumstances where a third-party offer is made
under the Takeover Code and is recommended by the Ithaca Energy
Board.
Completion of the Combination is expected to occur in
Q3 2024.
Ithaca Energy Board
Recommendation and Undertakings
The Ithaca Energy Board have determined that the
Combination is in the best interests of Ithaca Energy based on a
number of factors and intend unanimously to recommend that
shareholders vote in favour of the relevant resolutions at the
shareholder meeting to be held to approve the Combination and the
allotment and issue of the Consideration Shares to Eni UK, amongst
other things.
Each of the members of the Ithaca Energy Board
holding Ithaca Energy shares, has irrevocably undertaken that they
will vote in favour of the relevant resolutions required to
implement the Combination at the shareholder meeting in respect of
their own beneficial holdings of Ithaca Energy shares, representing
approximately 0.2 per cent. of the existing share capital of Ithaca
Energy as at 23 April 2024, being the last practicable date prior
to publication of this announcement.
Delek has irrevocably undertaken to vote in favour of
the relevant resolutions required to implement the Combination at
the Ithaca Energy shareholder meeting in respect of its holding of
Ithaca Energy shares, representing 88.5 per cent. of the existing
share capital of Ithaca Energy as at 23 April 2024, being the last
practicable date prior to publication of this announcement.
Glossary of Industry
Terms
·
"boe"
means barrels of oil equivalent;
· "boepd"
means barrels of oil equivalent per day;
·
"contingent resources"
means quantities of petroleum estimated, as at a given date, to be
potentially recoverable from known accumulations by application of
development projects, but which are not currently considered to be
commercially recoverable owing to one or more contingencies;
·
"kboepd"
means thousand barrels of oil equivalent per day;
·
"mmboe"
means million barrels of oil equivalent;
· "probable
reserves" means additional
reserves that analysis of geoscience and engineering data indicates
are less likely to be recovered than proved reserves but more
certain to be recovered than possible reserves It is equally likely
that actual remaining quantities recovered will be greater than or
less than the sum of the estimated proved plus probable
reserves;
· "proved
reserves"
means those quantities of petroleum, which, by analysis of
geoscience and engineering data, can be estimated with reasonable
certainty to be commercially recoverable, from a given date
forward, from known reservoirs and under defined economic
conditions, operating methods, and government regulations;
·
"Pence/therm"
means pence per therm, with one therm being the energy equivalent
of approximately a hundred cubic feet of natural gas;
·
"UKCS"
means the UK Continental Shelf;
· "2P" or
"2P
reserves"
means proved reserves plus probable reserves.
· "2C" or
"2C resources" means the best estimate scenario of
contingent resources
Ithaca Energy will host a virtual presentation
and Q&A session for investors and analysts at 10:30 BST
tomorrow, 24 April 2024, accessible via our website:
https://investors.ithacaenergy.com/
Enquiries
Ithaca Energy
|
|
Kathryn Reid - Head of Investor
Relations, Corporate Affairs & Communications
|
kathryn.reid@ithacaenergy.com
|
Jefferies
International (Financial Advisor to Ithaca Energy)
|
+44 (0)207
029 8000
|
Paul Wheeler / Sam Barnett / Philip
Clausen-Thue / Will Soutar
|
|
Goldman Sachs
International (Corporate Broker to Ithaca Energy)
Andrew Fry / Jonathan Penkin / Bertie Whitehead /
Adam Laikin
|
+44 (0)207
774 1000
|
FTI
Consulting (PR Advisers to Ithaca Energy)
|
+44 (0)203
727 1000
|
Ben Brewerton / Nick Hennis / Rosie
Corbett
|
ithacaenergy@fticonsulting.com
|
|
|
The
information contained within this announcement is deemed by Ithaca
Energy to constitute inside information for the purposes of Article
7 of the Market Abuse Regulation (EU) No 596/2014
(as it forms part of UK domestic law by virtue of the European
Union (Withdrawal) Act 2018). By the publication of this
announcement via a Regulatory Information Service, this inside
information is now considered to be in the public
domain. The person responsible for
making this announcement on behalf of Ithaca Energy is Julie
McAteer, General Counsel and Company Secretary.
Note to
editors:
About Ithaca Energy plc
Ithaca Energy is a leading UK
independent exploration and production company focused on the UKCS
with a strong track record of material value creation. In recent
years, the Group has been focused on growing its portfolio of
assets through both organic investment programmes and acquisitions
and has seen a period of significant M&A driven growth centred
upon two transformational acquisitions in recent years. Today,
Ithaca Energy is one of the largest independent oil and gas
companies in the UKCS ranking second by resources.
With stakes in six of the ten
largest fields in the UKCS and two of UKCS's largest
pre-development fields, and with energy security currently being a
key focus of the UK Government, the Group believes it can utilise
its significant reserves and operational capabilities to play a key
role in delivering security of domestic energy supply from the
UKCS.
Ithaca Energy serves today's needs
for domestic energy through operating sustainably. The Group
achieves this by harnessing Ithaca Energy's deep operational
expertise and innovative minds to collectively challenge the norm,
continually seeking better ways to meet evolving
demands.
Ithaca Energy's commitment to
delivering attractive and sustainable returns is supported by a
well-defined emissions-reduction strategy with a target of
achieving net zero by 2040.
Ithaca Energy plc was admitted to
trading on the London Stock Exchange (LON: ITH) on 14 November
2022.
IMPORTANT
INFORMATION
The information contained in this announcement is for
information purposes only and does not purport to be complete. The
information in this announcement is subject to change.
This announcement has been prepared in accordance
with English law, the Market Abuse Regulation and the Disclosure
Guidance and Transparency Rules and Listing Rules of the FCA and
information disclosed may not be the same as that which would have
been prepared in accordance with the laws of jurisdictions outside
England.
No person has been authorised to give any information
or make any representations to shareholders with respect to the
Combination other than the information contained in this
announcement and, if given or made, such information or
representations must not be relied upon as having been authorised
by or on behalf of Ithaca Energy, the Ithaca Energy directors, Eni
or the Eni directors, Delek or the Delek directors or any other
person involved in the Combination. None of the above take any
responsibility or liability for, and can provide no assurance as to
the reliability of, other information that you may be given.
Subject to the Market Abuse Regulation and the FCA's Disclosure
Guidance and Transparency Rules and Listing Rules, the delivery of
this announcement shall not create any implication that there has
been no change in the affairs of Ithaca Energy, Eni or Delek since
the date of this announcement or that the information in this
announcement is correct as at any time subsequent to its date.
Jefferies International Limited ("Jefferies") is authorised and regulated
in the United Kingdom by the FCA. Jefferies is acting exclusively
as Sponsor and financial adviser for Ithaca Energy and
no one else in connection with the Combination and the matters
referred to in this announcement, and will not regard any other
person as a client in relation to the Combination or this document
and will not be responsible to anyone other than Ithaca
Energy for providing the protections afforded to its clients,
or for providing advice, in relation to the Combination or this
document or any other Combination, arrangement or matter referred
to in this document. Neither Jefferies nor its parent
nor any of their subsidiaries, branches or affiliates owes or
accepts any duty, liability or responsibility whatsoever (whether
direct or indirect, whether in contract, in tort, under statute or
otherwise) to any person who is not its client in connection with
this announcement, any statements contained herein or
otherwise.
Goldman Sachs International ("GSI"), is authorised by the PRA and
regulated by the FCA and the PRA in the United Kingdom. GSI is
acting as Corporate Broker for Ithaca Energy and no one else
in connection with the Combination and the matters referred to in
this announcement, and will not regard any other person as a client
in relation to the Combination or this document and will not be
responsible to anyone other than Ithaca Energy for
providing the protections afforded to its clients, or for providing
advice, in relation to the Combination or this document or any
other Combination, arrangement or matter referred to in this
document. Neither GSI nor its parent nor any of their subsidiaries,
branches or affiliates owes or accepts any duty, liability or
responsibility whatsoever (whether direct or indirect, whether in
contract, in tort, under statute or otherwise) to any person who is
not its client in connection with this announcement, any statements
contained herein or otherwise.
The contents of this announcement are not to be
construed as legal, business or tax advice. Each shareholder should
consult its own legal adviser, financial adviser or tax adviser for
legal, financial or tax advice respectively.
Percentages in tables have been rounded and
accordingly may not add up to 100 per cent. Certain financial data
have also been rounded. As a result of this rounding, the totals of
data presented in this press release may vary slightly from the
actual arithmetic totals of such data.
Forward-looking
statements
Certain statements in this announcement are
forward-looking statements. In some cases, these forward-looking
statements can be identified by the use of forward looking
terminology including the terms "believes", "expects", "estimates",
"anticipates", "intends", "may", "will" or "should" or in each
case, their negative, or other variations or comparable
terminology. These forward-looking statements reflect Ithaca
Energy's or Eni's current expectations concerning future events and
speak only as of the date of this announcement. They involve
various risks, uncertainties and other factors which may cause the
actual results, performance or achievements of Ithaca Energy, the
Eni Group, the Combined Group, third parties or the industry to be
materially different from any future results, performance or
achievements expressed or implied by such forward looking
statements. Such risks, uncertainties and other factors include,
amongst other things, general economic and business conditions,
industry trends, competition, changes in regulation, currency and
commodity price fluctuations, Ithaca Energy's, the Eni Group's or
the Combined Group's ability to recover its reserves or develop new
reserves and to implement expansion plans and achieve cost
reductions and efficiency measures, changes in business strategy or
development and political and economic uncertainty. There can be no
assurance that the results and events contemplated by these
forward-looking statements will in fact occur.
No statement in this announcement is intended as a
profit forecast or estimate for any period and no statement in this
announcement should be interpreted to mean that earnings, earnings
per share or income, cash flow from operations or free cash flow
for Ithaca Energy, the Eni Group or the Combined Group, as
appropriate, for the current or future years would necessarily
match or exceed the amount set out in any forward-looking statement
or historical published earnings, earnings per share or income,
cash flow from operations or free cash flow for Ithaca
Energy, the Eni Group or the Combined Group, as appropriate.