Ithaca Energy's recent combination with Eni's UK upstream assets marks a pivotal moment for the company, solidifying its position as the largest resource holder in the UK Continental Shelf (UKCS). Significantly, Ithaca is awarding its shareholders with a $200 million special dividend, underscoring its commitment to enhancing shareholder value. This strategic move aligns with the company's long-term vision, which aims to capitalize on the synergies generated from the merger to create value-driven opportunities and sustainable returns. The full implications of this transaction on Ithaca's future strategy and market position remain to be explored.
Key Transaction Details
The combination between Eni's UK upstream operations and Ithaca Energy was completed on October 7, 2024. This transaction excludes Eni's East Irish Sea assets and carbon capture and storage (CCUS) activities. Eni now holds a 38.7% stake in the enlarged issued share capital of Ithaca Energy, valued at approximately GBP 754 million ($991.4 million).
The combination was funded through the issue to Eni UK of new ordinary shares. This strategic move consolidates Eni's upstream position in the UK, combining two complementary portfolios that are expected to deliver significant growth and optimization opportunities.
Following the transaction, Eni is a fully committed, long-term and supportive shareholder of Ithaca Energy, which is now positioned as the largest resource holder in the UK North Sea with a diversified portfolio of production and development opportunities.
The combined entity has a production capacity of over 100,000 barrels of oil equivalent per day (boepd), with potential to grow to 150,000 boepd by the early 2030s. This transaction aligns with Eni's distinctive satellite model, which addresses the challenges and opportunities of energy markets by creating focused and lean companies. The merger also resulted in a significant financial boost, allowing Ithaca to hand 200 million dollars to its shareholders in the form of a special dividend.
Strategic Benefits and Growth
Several strategic benefits and growth opportunities arise from the combination of Eni's UK upstream operations with Ithaca Energy. This merger creates a UK Continental Shelf (UKCS) powerhouse with stakes in six of the ten largest UKCS fields, boasting a production capacity of 100,000 to 110,000 barrels of oil equivalent per day (boepd) in 2024. The underlying potential to organically grow to 150,000 boepd by the early 2030s further enhances its market position, forecasted to be the largest operator in the UKCS by production in 2030 on an un-risked basis. This strategic positioning is bolstered by asset diversification through strategic interests in key UKCS assets.
Operational synergies include substantial cost savings achieved through operational and financial efficiencies, backed by a technical services agreement with Eni that provides access to leading technical expertise. This combination leverages the agility of an independent and the capabilities of a major, supported by a dedicated and focused management structure.
The deployment of deep operational expertise aims to boost field performance and enhance margins, revealing potential for material long-term organic growth from development projects. This strategic model sets the stage for further inorganic growth both domestically and internationally. The combination also excludes Eni's East Irish Sea assets and CCUS activities, aligning with Eni's strategic focus on optimized upstream operations.
Following the combination, Eni holds a 38.7% stake in the enlarged Ithaca Energy, solidifying its long-term commitment to the partnership.
Financial Structure Overview
Following the strategic combination of Eni's UK upstream operations with Ithaca Energy, a critical aspect of the deal lies in its financial structure. Eni receives approximately 38.7% of Ithaca's enlarged issued share capital through the issuance of new ordinary shares. To guarantee Ithaca's public float meets the Financial Conduct Authority's listing rules, Delek, the majority owner, sold down approximately 3% of the enlarged issued share capital, resulting in a public float of 10%.
Delek holds approximately 50.7% of the shares post-adjustment, while Eni holds 38.7%, and the remaining shares are in public hands. The combination consolidates Eni's upstream position in the UK, enhancing value through growth and optimization. Ithaca now possesses a diversified portfolio of production and development opportunities, positioning it as a leading UKCS production and growth company.
The deal excludes East Irish Sea assets and carbon capture and storage activities, aligning with Eni's strategic satellite model that addresses energy market challenges by creating focused and lean companies. The transaction was completed on October 3, 2024, with all customary cash adjustments for cash, financial debt, and working capital as of the economic effective date. The combined entity is expected to produce over 100,000 barrels of oil equivalent a day initially, with potential growth exceeding 150,000 boed in the early 2030s. Additionally, Ithaca Energy's board appointments include notable figures such as Luciano Vasques as Chief Executive Officer and Mr. Francesco Gattei and Mr. Guido Brusco as new non-executive directors.
Corporate Governance Changes
Key changes to Ithaca Energy's corporate governance structure have taken place as a result of the strategic combination with Eni's UK upstream operations. The new framework secures compliance with UK regulatory requirements and supports long-term organic growth and value creation for shareholders.
Eni, as the second-largest shareholder, will appoint two non-executive directors to the Ithaca Energy Board if it holds greater than 20% of the Combined Group's issued share capital. For holdings between 10% and 20%, Eni will appoint one non-executive director. Additionally, for holdings above 25%, Eni will appoint one observer to the Remuneration Committee and the Audit and Risk Committee, and one director to the Nomination and Governance Committee.
Luciano Vasques, formerly of Eni, is formally designated as the Chief Executive Officer of Ithaca Energy, and Francesco Gattei and Guido Brusco from Eni have been designated as non-executive directors to the Ithaca Energy board.
Delek, holding approximately 52.7% of Ithaca's ordinary shares, will have the right to appoint three non-executive directors if it holds at least 30% of the Combined Group's issued share capital. This structure secures a balanced governance framework, aligning with the company's commitment to robust corporate governance and value-led growth.
The completion of the merger significantly strengthens Ithaca Energy's position in the UK oil and gas industry, with the combined entity now being the largest resource holder in the UK North Sea UKCS leader.
Market Impact and Expectations
The recent combination of Ithaca Energy with Eni's UK upstream operations has greatly bolstered the company's market position, transforming it into the largest resource holder in the UK North Sea. This strategic move is expected to enhance Ithaca Energy's market capitalization due to the increased scale and diversified portfolio, making it one of the leading players in the region.
Market expectations point to substantial growth, with analysts anticipating organic growth to 150,000 boepd by the early 2030s. The combined group is positioned to create value through operating and financial synergies, leveraging its scale to optimize operations and pursue additional growth opportunities.
Moreover, the refined $2.25 billion enhances the group's balance sheet and liquidity, providing considerable financial firepower to pursue organic and inorganic growth opportunities. The successful combination aligns with Eni's satellite model for creating focused and lean companies, demonstrating the potential for efficient and sustainable growth in the UK North Sea. Additionally, Ithaca Energy has announced a $200 million special dividend, which underscores its commitment to delivering shareholder value.
This strengthened market position reinforces Ithaca Energy's commitment to delivering attractive and sustainable returns, supported by a well-defined emissions-reduction strategy.
Conclusion
The successful combination of Ithaca Energy and Eni culminates in a significant financial payout, distributing $200 million to shareholders. This strategic move underscores the company's commitment to value creation and stakeholder returns. Enhanced by the merger's synergies, Ithaca Energy is positioned for dynamic growth, bolstered by a $2.25 billion refinancing and improved credit rating. The special dividend aligns with the company's target of $500 million in shareholder returns for the year.
