UK: Ithaca Selects Concept for GSA Development. Petrofac Enters the Game

Ithaca Energy Inc. announces that it has concluded its development concept select process for the Greater Stella Area (GSA) fields, with the decision to create a production hub based on a floating production unit located over the Stella field.

The GSA development concept involves the introduction of Petrofac as a new strategic partner; Petrofac is a global integrated energy services company listed in London on the FTSE 100 (LSE: PFC). The  Company will submit a Stella / Harrier Field Development Plan to the Department of Energy and Climate Change (“DECC”) at the end of 2011.

• Creation of a Production “Hub” – The most expedient and value enhancing method of developing the Stella, Harrier, Hurricane and Helios fields, (collectively the “GSA Fields”) is by the deployment of a floating production unit, with the  export of processed fluids to nearby oil and gas transportation pipelines. This decision has resulted in the selection of the Petrofac owned “FPF-1” as the optimal vessel for the development. Establishing a production processing hub provides full control and flexibility over execution of the Stella / Harrier development project. The overall value of the GSA is further enhanced by a secure processing solution for Hurricane and Helios, following their appraisal, and provides the  opportunity to unlock other undeveloped discoveries in the area.

• Higher Production Rates, Higher Value – First hydrocarbons from the hub are forecast by management in H2-2013 at an initial annualised average rate of approximately 30,000 boepd (gross), a level higher than previously anticipated by the Company. Development of the GSA Fields will be focused on prioritising oil and condensate production over gas in the early years, thus maximising the economic value.

• Strategically Aligned Partnership – To maximise the value of the chosen development solution, the Company, Dyas UK Limited (“Dyas”) and Challenger Minerals (North Sea) Limited (“CMNSL”), which, further to an earlier announcement today is now a wholly owned subsidiary of Ithaca, have entered into various transactions with the Petrofac group, and a number of its affiliates (collectively “Petrofac”), effective 1 October 2011. These transactions include the transfer of ownership interests in the FPF-1 floating production unit to the Company and Dyas BV while granting Petrofac the right to earn a 20% interest in Stella / Harrier and the transfer of interests in Hurricane and Helios. This creates a fully  integrated partnership for the GSA hub and the ability to increase the recovery of hydrocarbons from the fields.

• Development De-risking – De-risking of the overall development is achieved by the addition of a strategic partner of the size and quality of Petrofac The capital expenditure to be paid for preparing the FPF-1 for deployment has also been  de-risked through the award of a contract to Petrofac to upgrade and modify the vessel on a lump sum basis with cost and vessel performance incentivisation mechanisms. The value of the FPF-1 development solution is further underpinned by an option granted to the owners of the FPF-1 to sell the vessel to Petrofac after cessation of production from the fields.

• Drilling Rig Commitment Pending – The Company is in advanced discussions with potential drilling rig providers, with a view to securing a suitable rig to commence the Stella / Harrier development drilling campaign in late 2012.

Iain McKendrick, CEO, commented:

 “The successful completion of the development concept select process for the GSA Fields and execution of the associated transactions marks the start of the next exciting phase in the Company’s development of a true production hub; one that  unlocks the significant value underpinning the fields and provides a further springboard for Ithaca’s continued growth. 

The decision to develop the fields via a stand-alone solution, tied directly into existing export infrastructure, provides the Company and its joint venture partners with the control required to maximise the value of the fields and the opportunity to  secure long term growth in an area of the Central North Sea characterised by an array of undeveloped discoveries. 

Petrofac is a world class provider of engineering and operational services with a reputation for delivering value in the North Sea and I am delighted to be welcoming the company into the heart of the GSA development, not only as a provider of key services during the execution phase of the project, but also as a co-venturer within each of the GSA Fields.”

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Source: Ithaca Energy, October 20, 2011