Ithaca Boosts Stake in ‘Largest UK Continental Shelf Gas Field’

In a release posted on its website this week, Ithaca Energy announced that it has signed a sale and purchase agreement to acquire an additional 46.25 percent stake in the Cygnus gas field from Spirit Energy for a purchase price of GBP 116 million ($155.8 million).

The deal is based on an effective date of January 1, 2025, and is subject to North Sea Transition Authority (NSTA) consent, Ithaca highlighted in the release, adding that the transaction will increase Ithaca Energy’s operated interest in Cygnus to 85 percent.

Ithaca noted in the release that the deal is expected to add 23 million barrels of oil equivalent of 2P reserves, as at January 1, 2025, and pro forma production between 12.5 – 13.5 thousand barrels of oil equivalent per day in 2025.

“This transaction is in line with the group’s strategy to pursue value-accretive M&A, adding high-quality assets in our core UK Continental Shelf market,” Ithaca said in the release.

“The transaction equates to a valuation of less than $7 per barrel of oil equivalent on 2P Reserves, which we believe is good value for equity in a producing field that we know and understand,” the company added.

In the release, Ithaca’s Executive Chairman Yaniv Friedman said, “[this] transaction with Spirit Energy provides further equity in a high-margin, high-quality producing gas asset that we understand deeply through our operatorship”.

“This deal follows our Japex (Seagull) deal announced just two months ago and further demonstrates our growth strategy in action. By increasing our stake in Cygnus we add incremental reserves and production to our portfolio at attractive valuation metrics that ticks all of our investment criteria, without adding any complexity,” Friedman added.

“We also see significant upside potential through further infill drilling beyond the next three approved wells. This is the type of deals we like,” Friedman continued.

In its release, Ithaca noted that Cygnus is the largest UK Continental Shelf gas field and a key contributor to the UK’s energy security. The company pointed out that production started in 2016, “with 11 wells currently producing, with three further infill wells approved, with the Valaris Norway on location with the first of the two firm wells to be spud in Q2 2025, and expected onstream during H2 2025 and H1 2026”.

In a statement posted on its site this week, Centrica plc announced that subsidiaries of Spirit Energy Limited have entered into agreements to sell a 46.25 percent interest in the Cygnus gas field to a subsidiary of Ithaca Energy plc. 

Centrica noted in that statement that the total value of the transaction to Spirit Energy is approximately GBP 215 million ($288.8 million), “including headline consideration of GBP 116 million and the transfer of GBP 99 million ($132.9 million) of decommissioning liabilities associated with the interest”.

Centrica said in the statement that its 69 percent share of headline consideration is expected to be GBP 80 million ($107.4 million). The company noted that the deal is expected to complete during the second half of 2025, “with customary interim period adjustments to be applied”.

“The transaction is strongly aligned with Centrica and Spirit Energy’s strategy to maximize value from Spirit’s remaining reserves, delivering attractive upfront cash consideration, and provides further value by transferring long-term liabilities,” Centrica said in the statement.

“As an existing shareholder and the operator of Cygnus, Ithaca Energy is ideally positioned to take on majority ownership of the asset,” it added.

In its statement, Centrica noted that, following completion of the transaction, Spirit Energy “will remain focused on the development of the long-term Morecambe Net Zero carbon storage project, its remaining producing assets, and safely and efficiently decommissioning its facilities and wells with minimum environmental impact”.

The company highlighted in the statement that Spirit Energy’s 2P reserves will be reduced by 19.4 million barrels of oil equivalent to reflect the interest disposed.

Chris O’Shea, Group Chief Executive of Centrica and Chairman of Spirit Energy, said in the statement, “our focus is on delivering value for Centrica’s colleagues, customers and shareholders through the energy transition”.

“Through this disposal we are taking another step in reducing our exposure to gas production while accelerating the delivery of enhanced value to shareholders, allowing the Spirit team to further focus on delivering the largest carbon storage project in Europe at Morecambe Net Zero,” he added.

“This is only one of many exciting opportunities across Centrica, aligned to the energy transition, as we continue to re-position our infrastructure portfolio, and we remain firmly focused on capturing the immense value on offer,” he continued.

To contact the author, email andreas.exarheas@rigzone.com