Ithaca in further Stella delay

Ithaca Energy is further delaying its Stella field offshore the UK to February 2017 due to an electrical inspection program on the FPF-1 floating production facility. First oil was anticipated at the end of November 2016, and was pushed back to January 2017.

Image of the FPF-1, from Ithaca.

"The painstaking electrical inspection program on the FPF-1 is nearing completion and the vessel will shortly be ready for start-up of the Stella field. While this will have taken longer than planned, the transformational step it delivers for the business remains undiminished,” Les Thomas, Ithaca CEO said. “The company moves into 2017 in good health, with increasing cashflow, continued deleveraging and the launch of the low cost Harrier satellite development."

The company's 2017 operational program is dominated by start-up of the Stella field and the start-up of Harrier field development activities.

Preparation for start-up of the Stella field is well advanced, with only completion of the previously announced fault remediation works on the FPF-1 electrical junction boxes outstanding prior to the delivery of first hydrocarbons. The inspection and repair program has been progressing well, with the work now in the latter stages of completion, although challenging offshore weather conditions have impacted the pace of activities on the vessel at times. Conclusion of the work is now expected to push the commencement of Stella production into February 2017.

In line with the company's strategy for building out the GSA production hub, investment in the Harrier field development program will start during 2017. The development involves drilling of a multilateral well into the two reservoir formations on the field, with the well tied back via a 7.5km pipe to an existing slot on the Stella main drill center manifold for onward export and processing of production on the FPF-1.

The GSA joint venture has contracted with Ensco Offshore UK for the provision of a heavy duty jackup drilling rig, which is expected to arrive on location in Q2 2017. The drilling program is forecast to be completed in 2H 2017 and the subsea infrastructure installation activities in summer 2018, resulting in the anticipated start-up of Harrier production in 2H 2018.

The net capital expenditure associated with execution of the development over 2017-18 is approximately US$75 million, equating to a development cost of significantly less than $10/boe. This represents a cost reduction of approximately 50% from that originally forecast. The substantial reduction in capital expenditure is driven by both detailed well engineering design work that has enabled the move away from drilling two individual wells to one multilateral and securing attractive contracting terms across the supply chain.

Over the last 12 months, Ithaca’s producing asset portfolio has performed well, with production running ahead of guidance largely as a result of solid performance from the Cook field, for which the company took over operatorship in March 2016. Average production during the year was approximately 9300 boe/d (92% oil).

Average production in 2017 is anticipated to be in the range of 19,000-22,000 boe/d (approximately 75% oil). This range reflects the updated Stella start-up schedule, the program of planned maintenance shutdowns during the year and sensitivities associated with the performance of those operational programs.