Ithaca-Eni upstream oil & gas combination gives birth to UK’s ‘largest resource holder’ in North Sea

October 3, 2024, by Melisa Čavčić

Italy’s energy giant Eni has fused its upstream assets in the UK, excluding East Irish Sea ones and carbon capture, utilization, and storage (CCUS) activities, with Delek’s Ithaca Energy, a North Sea oil and gas operator and producer. The combination enables the duo to expand their footprint on the UK Continental Shelf (UKCS), setting up the UK’s second-largest oil and gas independent operator with the potential to eclipse Harbour Energy as the top producer on the UKCS.

Eni confirmed an official agreement for the business combination with Ithaca almost a month after the pair entered into an exclusivity agreement regarding the potential upstream merger. The two players were expected to combine the Italian oil major’s UK upstream business with the existing Ithaca business, enabling the enlarged entity to contain stakes in six of the ten largest fields and the top two largest development fields on the UKCS, including Rosebank, Cambo, Schiehallion, Mariner Area, Elgin/Franklin, and J-Area.

The Eni-Ithaca combination has now been wrapped up, aiming to replicate the previous execution of upstream combinations that the Italian giant has formed using its satellite model, including Vår Energi in Norway and Azule Energy in Angola, as a strategic response to the challenges and opportunities of energy markets. The combination was funded by issuing new ordinary shares to Eni UK, representing around 38.7% of Ithaca’s enlarged issued share capital.

“The combination reaffirms the commitment of Eni in the UK, where it is engaged across the entire energy value chain (oil & gas upstream, renewables, CCS projects, potential future development of magnetic fusion projects). By combining two complementary portfolios, the transaction consolidates Eni’s upstream position in the country, where the company sees opportunities for value through growth and optimization,” highlighted the Italian giant.

Furthermore, Eni underlines that this satellite model addresses the challenges and opportunities of energy markets, by creating focused and lean companies able to attract new capital to create value through operating and financial synergies and growth acceleration. The Italian player claims to be a fully committed, long-term, and supportive shareholder of Ithaca, which is now positioned as “the largest resource holder in the UK North Sea.”

With a diversified portfolio of production and development opportunities, the enlarged Ithaca is said to have the means to underpin material long-term organic growth, delivering the oil and gas deemed essential for energy security while supporting the UK’s decarbonization targets.

“With significant optionality across the portfolio, a strong track record in delivering value-accretive M&A and material financial firepower, the combined group will continue to be value-driven, focusing on high-grading investment across its range of organic and inorganic growth opportunities to maximise sustainable shareholder value,” Eni pointed out.

Following the completion of the combination, Ithaca Energy confirmed the formal appointment of Luciano Vasques as Chief Executive Officer and the appointment of two new non-executive directors to its board of directors, Francesco Gattei, Chief Transition & Financial Officer, Chief Operating Officer, and General Manager of Eni, and Guido Brusco, Chief Operating Officer Global Natural Resources and General Manager at Eni, as nominees of the UK firm’s second-largest shareholder, Eni UK.

Applications have been made to the Financial Conduct Authority (FCA) for admission of 639,360,174 new ordinary shares to the equity shares listing category of the official list and to the London Stock Exchange for admission of the new ordinary shares to trading on the main market for listed securities with admission expected on October 4, 2024.

Once the admission of the new ordinary shares has been sorted out, the total number of shares in issue will be 1,653,732,455, of which 50.7% will be held by DKL Energy, an indirect wholly owned subsidiary of Delek Group, and 38.7% by Eni UK, an indirect wholly owned subsidiary of Italy’s Eni.

This combination brings an enlarged and stronger combined group to life with 2024 production greater than 100,000 boepd and the underlying potential to boost output to 150,000 boepd by the early 2030s with material combined long-life 2P reserves and 2C resources base of 658 mmboe, resource life over 15 years based on 2023 pro-forma production, and interest in 37 producing assets.

Eni has been busy with multiple projects, including those related to CCS. The firm and its partner, Snam, recently began the CO2 injection at the first carbon capture and storage project in Italy, with a facility fully powered by electricity from renewable sources, avoiding further CO2 emissions.