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Ithaca Energy Announces Agreement with Shell to Market Working Interests in Cambo

Ithaca has signed an agreement with Shell U.K. Limited which defines a marketing process for Shell’s 30% working interest in Cambo.

The Cambo field is the second largest undeveloped oil and gas discovery in the UK North Sea, located in the West of Shetland region. The development provides Ithaca Energy with long term production growth at a low expected unit operating cost per barrel. With its modern, energy efficient design and potential for electrification, Cambo could be one of the lowest-emission intensity assets in the North Sea. The field is expected to produce at less than half the CO2 intensity than the average UK field, enabled by the FPSO design which includes features such as being fully electrification ready (subject to grid connection availability), zero routine flaring and the Sevan FPSO hull design reducing power demand.

To enable the successful progression of the project towards final investment decision (“FID”), a number of outcomes are possible under the agreement:

  • For Shell to market and sell a portion of its 30% working interest in Cambo, or the entire 30% interest;
  • In the event that Shell does not sell its entire 30% working interest, for Shell to sell any remaining portion of its own stake, which is not sold to a third party, to Ithaca Energy. The details of this agreement are outlined below.
  • For Shell to sell its entire 30% working interest and, if a potential buyer wanted a greater share of equity, for Ithaca Energy to sell up to 19.99% of Ithaca Energy’s working interest in Cambo.

The agreement entered into between Shell and Ithaca Energy dated 4 May, provides an option for Shell to sell any remaining portion of its own stake (“Option Stake”), which is not sold to a third party to Ithaca Energy, following the conclusion of the marketing process, that will run six months from the date of signing the agreement. In parallel, Ithaca Energy has an option to acquire the Option Stake, in each case subject to regulatory approval.

The transaction structure provides upfront certainty to Ithaca Energy, with very limited near-term cash outflow, in the event that either Ithaca Energy or Shell exercise their options in relation to the Option Stake when the marketing process concludes.

  • Ithaca Energy has entered into the option to acquire the Option Stake at a value equating to $1.50 per boe of the P50 resource volumes being acquired pursuant to the development plan:
    • Should development consent be granted by the North Sea Transition Authority (“NSTA”) on or before 30th June 2024, the P50 resource volume reference will be as per the latest field development plan submitted to the NSTA (approximately 173 mmboe gross)
    • Should development consent be granted by the NSTA after 30th June 2024, the P50 resource volume reference will be determined by the field development plan submitted to the NSTA at the time of development consent.
  • The potential transaction price is subject to a number of customary completion adjustments, which are expected to be immaterial to Ithaca Energy.
  • Ithaca Energy will not be required to pay the vast majority of the potential transaction price until the earlier of: (i) receipt of proceeds of any subsequent sale of a working interest in Cambo by Ithaca Energy; and (ii) first oil.
  • With the exception of minor payments at completion, or if Ithaca Energy subsequently sells a portion of its working interest in the Cambo field, no amounts will be payable should Ithaca Energy decide not to proceed with FID and/or if the NSTA do not provide development consent.

In all sale scenarios, Ithaca Energy would retain at least a 50% working interest in Cambo and will remain the operator of the asset.

Alan Bruce, Chief Executive Officer, Ithaca Energy, commented: “Our agreement with Shell represents a meaningful step towards the development of Cambo, the second largest undeveloped field in the UKCS and a key asset in helping maintain the UK’s future energy security. Securing a new owner for Shell’s stake is an important step in Ithaca Energy progressing to Final Investment Decision. Ithaca Energy’s primary strategic focus is to maximize sustainable shareholder returns through the delivery of our BUY, BUILD and BOOST strategy, including the future development of Cambo.

Ithaca Energy remains committed to investing in the UK North Sea, however, the impact of the amended Energy Profit Levy and the fiscal instability it has created continues to constrain our ability to invest. We are actively engaging, in a constructive manner, with the UK government in pursuit of the fiscal stability required to make critical investment decisions that will support the UK’s long-term energy security.”

Shell’s Senior Vice President, UK Upstream, Simon Roddy, added: “Following an internal review, we have decided to sell our 30% working interest in Cambo and have agreed a process with Ithaca Energy for the sale of Shell’s stake in the field this year. We wish Ithaca Energy well in the future development of the field, which will be important to maintain the UK’s energy security and to sustaining domestic production of the fuels that people and businesses need.”

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