Asset/portfolio management

Eni, Ithaca Energy Tie-Up Creates Second-Largest Independent Operator on UK Continental Shelf

The asset combination is structured under Eni’s “satellite model,” which Eni has deployed successfully with similar upstream joint-venture deals in Norway and Angola.

Operated by Ithaca Energy, Alder is a high-pressure/high-temperature gas field tied back to Britannia through a 17-mile subsea pipeline and a single producing well.
Source: Ithaca Energy

Italy’s Eni and Ithaca Energy, the North Sea subsidiary of Israeli energy conglomerate Delek Group, have agreed to combine most of their upstream UK assets in a stock-based transaction that creates the second-largest independent oil and gas operator on the UK Continental Shelf (UKCS) after Harbour Energy.

The tie-up excludes Eni’s East Irish Sea assets and carbon capture, use, and storage activities; included, however, are the assets of Neptune Energy, which Eni bought for $4.9 billion in June 2023.

The deal with Ithaca is the latest upstream combination under Eni’s “satellite model,” which optimizes investment options to grow emerging businesses while freeing up cash flow from traditional assets. Other examples include Eni’s joint-venture creations Vår Energi in Norway and Azule Energy in Angola.

In the UK spinoff, Ithaca will be buying Eni’s UK oil and gas producing assets, in effect, for stock currently valued at $938.3 million, as calculated by Reuters. Ithaca will issue new ordinary shares to EniUK, which will hold 38.5% of the Delek subsidiary’s enlarged share capital.

Upon closing, Delek will hold 52.7% of the combination and Eni 37.3% and 10% of shares will be in public hands, Eni reported in its first-quarter report. The economic effective date for the combination will be 30 June 2024, with completion expected in the third quarter of 2024, following the exercise of various call options and sell downs.

An Oil and Gas Production Powerhouse
In 2024, Eni and Ithaca’s combined 37 producing assets are expected to produce more than 100,000 BOE/D until 2028 and set the stage to grow organically to 150,000 BOE/D by the early 2030s, Eni reported.

Ithaca Energy entered the North Sea market in April 2022 following its $1.1-billion purchase of private equity-backed Siccar Point Energy. In buying Siccar Point, the Delek subsidiary doubled its recoverable reserves and secured the potential to produce at a rate of 80,000–90,000 BOE/D into the early 2030s.

Ithaca currently holds stakes in six of the 10 largest fields and the top two largest development fields on the UKCS (Fig. 1).

Fig. 1—This map shows Ithaca-operated fields in green and nonoperated fields in blue on the UKCS.
Source: Ithaca 2022 Annual Report

Commenting on the combination, Eni’s CEO Claudio Descalzi said in a prepared statement, “We have moved quickly after the acquisition by Eni of Neptune Energy to transform our competitive position in the UK and we see the opportunity for Eni and Ithaca to realize material long-term value.

“Indeed, establishing a leading position in the UK upstream market will mirror our equally strong position in CCS with our HyNet and Bacton Thames projects which together with three other CO2 storage licenses gives us around 1 gigaton of gross storage capacity and will see us become a key player in the decarbonization of the UK’s hard-to-abate industries.”

Descalzi also noted that Eni is a significant partner in the Dogger Bank offshore wind farm. It acquired a 20% stake in the 1.2-GW project in 2022 from Equinor (10%) and SSE Renewables (10%).

Increased Scale and Asset Diversification
In its first-quarter report to shareholders, Eni detailed further benefits of the Ithaca transaction:

  • Pro-forma 2024 production of 100,000–110,000 BOE/D, with potential to become the largest operator on the UKCS by production in 2030.
  • Material combined long-life 2P reserves and 2C resources base of 658 million BOE, with resource life in excess of 15 years based on 2023 pro-forma production, with interest in 37 producing assets and stakes in six of the 10 largest fields on the UKCS (Rosebank, Cambo, Schiehallion, Mariner Area, Elgin/Franklin, and J-Area).
  • The combination to create a diversified and balanced portfolio, with 49% gas weighting based on 2023 pro-forma production.
  • The combined group will enter into a technical services agreement with Eni, enabling it to leverage Eni’s operational capabilities and leadership to support future growth plans.
  • The agreement would embrace (1) Eni’s operational support, including access to subsurface technical expertise and Eni’s innovation center as well as suite of digital tools, and (2) Eni’s world-class exploration capabilities, including access to proprietary supercomputer and screening processes.