Ithaca Energy Inc. : Stella A2 Well Test Results

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Not for Distribution to U.S. Newswire Services or for Dissemination in the United States

Ithaca Energy Inc.

Successful Stella A2 Well Test Results and GSA Development Update

8 January 2014

Ithaca Energy Inc. (TSX: IAE, LSE AIM: IAE) ("Ithaca" or the "Company") announces completion of flow test operations on the second development well on the Stella field and provides an update on Greater Stella Area ("GSA") development activities.

Highlights

·       The second Stella field development well, "A2", flowed at a maximum rate of 10,442 barrels of oil equivalent per day ("boepd") on a 44/64-inch choke, with the full production potential of the well limited by the capacity of the well test equipment on the drilling rig.

·       The rate of 10,442 boepd comprised 7,281 barrels of oil per day ("bopd") and 19 million standard cubic feet per day ("MMscf/d") of associated gas.  The oil is of high quality, approximately 39° API.

·       The flow test results achieved on the first two Stella development wells substantially de-risk the initial annualised production forecast of approximately 30,000 boepd (100%), 16,000 boepd net to Ithaca, from the four wells planned for start-up of the GSA hub.

·       A2 drilling operations were executed according to plan, with only the harsh weather conditions that have recently effected operations across the North Sea slowing the completion of the scheduled flow test.

·       Following suspension of the A2 well, the ENSCO 100 will be moved approximately three kilometres to the Stella northern drilling centre location to drill the third and fourth development wells.

·       The 2013 subsea infrastructure installation campaign being executed by Technip UK Limited ("Technip") has been successfully closed out, with approximately 65% of the overall subsea work programme having now been completed.

·       The forecast duration of the "FPF-1" modifications work, which is being performed by Petrofac Facilities Management Limited ("Petrofac") under a lump sum incentivised contract, indicates that first hydrocarbons from the GSA hub is now anticipated to be at the end of 2014.

·       The current focus of the FPF-1 vessel modifications programme is on preparation of the main deck and construction of the pre-assembled processing plant units that are scheduled to be lifted on to the vessel in the first quarter of 2014.

Les Thomas, Chief Executive Officer, commented:

"The excellent results of the A2 well represent another important step in de-risking the forecast production from the Stella field and realising the significant shareholder value that lies within the Greater Stella Area.  Whilst the FPF-1 modification works are now forecast to take longer than initially anticipated, the new processing facilities being installed on the vessel will ensure that a high quality production facility is deployed at the centre of the GSA hub."

Further Information

Drilling

Well 30/6a-A2Z ("A2") is the second of four development wells that are to be drilled on the Stella field prior to the start-up of production.  The well was drilled to a total measured depth subsea of 14,455 feet, with a 3,123 foot horizontal reservoir section completed in the Palaeocene Andrew sandstone reservoir, within the targeted oil rim of the field.

The reservoir quality encountered by the well was in line with previous appraisal wells drilled on the field.  The well intersected a net reservoir interval of 2,514 feet (81% net pay).

As with the first Stella development well, "A1", a clean-up flow test has been performed on the A2 well in order to effectively remove the drilling fluids used to complete the well and gain additional reservoir data and fluid samples.

The well flowed at a maximum rate of 10,442 boepd on a 44/64-inch choke, with the full production potential of the well limited by the capacity of the well test equipment on the drilling rig.  Fluid samples show that the oil is of high quality, approximately 39°API.

The maximum flow rate of 10,442 boepd comprised 7,281 bopd of oil and 19 MMscf/d of associated gas.  This compares to the results of the "A1" well completed in late September 2013, which achieved a maximum flow rate of 10,835 boepd (6,499 bopd and 26 MMscf/d) on a 56/64-inch choke.  The proportionately higher A2 oil rate is driven by the location of the well entirely within the oil rim of the field.

The test results achieved on the first two Stella development wells substantially de-risk the initial annualised production forecast for the GSA hub of approximately 30,000 boepd (100%), 16,000 boepd net to Ithaca, which was announced at the time the development concept was selected in October 2011.

The A2 well is in the process of being suspended.  The suspension configuration is such that the well can be brought on to production without the requirement for any further well intervention activity once the FPF-1 is on location and hooked up.

Following completion of the well suspension operations the ENSCO 100 will be moved approximately three kilometres to the Stella northern drilling centre location to drill the third and fourth development wells.

A2 drilling operations were executed according to plan, with only the harsh weather conditions that have recently effected operations across the North Sea slowing the completion of the scheduled flow test.

The high-spec ENSCO 100 heavy duty jack-up drilling rig that is being used for the GSA development drilling campaign commenced operations on the Stella field in June 2013.  Management of the drilling and completion operations is being performed by Applied Drilling Technology International ("ADTI") under "turnkey" contract arrangements.

Subsea Infrastructure

The 2013 subsea infrastructure installation programme was successfully closed out in November 2013.  The main subsea structures for the production and export of hydrocarbons (the manifolds and riser bases), the 60km gas export pipeline and the infield flowlines and umbilicals have all been installed and the associated diver tie-in works completed during the 2013 campaign.  This means that approximately 65% of the overall subsea work programme has now being completed; corresponding to a total of over 220 vessel days in 2013.

Planning for the 2014 subsea infrastructure campaign is well advanced, with the key workscopes to be completed involving the tie-in of the wells, installation of the dynamic flexible risers and umbilicals that will connect the riser bases to the FPF-1, the vessel mooring spread and the oil export facilities.

Execution of the main subsea infrastructure manufacturing and installation programme is being completed by Technip under an integrated Engineering, Procurement, Installation and Construction contract.

FPF-1 Modification Works

The forecast duration of the FPF-1 modifications work indicates that first hydrocarbons from the GSA hub is now anticipated to be at the end of 2014.  The extended duration of the works is attributable to the longer than estimated time required to install the new, rather than refurbished, oil and gas processing plant on the vessel.  While this is now scheduled to take longer than if the original equipment on the FPF-1 had been re-used, the new facilities are designed to ensure that a quality vessel capable of achieving high operational uptime performance is deployed on the hub.

The current focus on the FPF-1 modifications programme is the preparation of the main deck and construction of the pre-assembled processing plant units for lifting on to the vessel in the first quarter of 2014.  The units will contain structural steel, pipework spools, cable trays and equipment that will make up key elements of the topsides processing plant on the vessel.  All the key long lead pieces of processing plant equipment that will be installed within and alongside the units are now on location at the Remontowa yard.

Execution of the FPF-1 modifications work programme is being performed by Petrofac under the terms of a lump sum incentivised contract with the GSA co-venturers.  

Greater Stella Area Development Strategy

Ithaca's focus on the GSA is driven by the monetisation of reserves within the existing portfolio and the generation of additional value via the wider opportunities provided by the range of undeveloped discoveries surrounding the production hub.

The development involves the creation of a production hub based on deployment of the FPF-1 floating production facility located over the Stella field, with onward export of oil and gas.  The FPF-1 will serve as the processing hub for production from the Stella and Harrier fields, plus potential incremental production from Hurricane and other tie-back opportunities in the area.

Ithaca's GSA joint venture partners are Dyas UK Limited (25.34%), a long established privately owned North Sea oil and gas producer, and Petrofac GSA Limited (20%), a subsidiary of Petrofac plc, the leading international oil and gas services provider listed in the FTSE 100 in London.

- ENDS -

Enquiries:

Ithaca Energy
Les Thomas	[e-mail]	[phone]
Richard Smith	[e-mail]	[phone]
FTI Consulting
Edward Westropp	[e-mail]	[phone]
Georgia Mann	[e-mail]	[phone]
Cenkos Securities
Neil McDonald	[e-mail]	[phone]
Beth McKiernan	[e-mail]	[phone]
RBC Capital Markets
Tim Chapman	[e-mail]	[phone]
Matthew Coakes	[e-mail]	[phone]

Notes

In accordance with AIM Guidelines, John Horsburgh, BSc (Hons) Geophysics (Edinburgh), MSc Petroleum Geology (Aberdeen) and Subsurface Manager at Ithaca is the qualified person that has reviewed the technical information contained in this press release.  Mr Horsburgh has over 15 years operating experience in the upstream oil and gas industry.

References herein to barrels of oil equivalent ("boe") are derived by converting gas to oil in the ratio of six thousand cubic feet ("Mcf") of gas to one barrel ("bbl") of oil. Boe may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf: 1 bbl is based on an energy conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.  Given the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6 Mcf: 1 bbl, utilising a conversion ratio at 6 Mcf: 1 bbl may be misleading as an indication of value.

The well test results disclosed in this press release represent short-term results, which may not necessarily be indicative of long-term well performance or ultimate hydrocarbon recovery therefrom.

About Ithaca Energy

Ithaca Energy Inc. (TSX: IAE, LSE AIM: IAE) is a North Sea oil and gas operator focused on the delivery of lower risk growth through the appraisal and development of UK undeveloped discoveries, the exploitation of its existing UK producing asset portfolio and a Norwegian exploration and appraisal business targeting the generation of discoveries capable of monetisation prior to development.  Ithaca's strategy is centred on generating sustainable long term shareholder value by building a highly profitable 25kboe/d North Sea oil and gas company.  For further information please consult the Company's website www.ithacaenergy.com.

Not for Distribution to U.S. Newswire Services or for Dissemination in the United States

Forward-looking statements

Some of the statements and information in this press release are forward-looking. Forward-looking statements and forward-looking information (collectively, "forward-looking statements") are based on the Company's internal expectations, estimates, projections, assumptions and beliefs as at the date of such statements or information, including, among other things, assumptions with respect to production, drilling, construction times, well completion times, risks associated with operations, future capital expenditures, future acquisitions and cash flow. The reader is cautioned that assumptions used in the preparation of such information may prove to be incorrect.  When used in this press release, the words "anticipate", "continue", "estimate", "expect", "may", "will", "project", "plan", "should", "believe", "could", "target" and similar expressions, and the negatives thereof, whether used in connection with operational activities, drilling plans, production forecasts, budgetary figures, potential developments or otherwise, are intended to identify forward-looking statements. Such statements are not promises or guarantees, and are subject to known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. The Company believes that the expectations reflected in those forward-looking statements and are reasonable but no assurance can be given that these expectations, or the assumptions underlying these expectations, will prove to be correct and such forward-looking statements and included in this press release should not be unduly relied upon. These forward-looking statements speak only as of the date of this press release.  Ithaca Energy Inc. expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any forward-looking statement is based except as required by applicable securities laws. 

Additional information on these and other factors that could affect Ithaca's operations and financial results are included in the Company's Management's Discussion and Analysis for the year ended December 31, 2012, and the Company's Annual Information Form for the year ended December 31, 2012 and in reports which are on file with the Canadian securities regulatory authorities and may be accessed through the Company's profile on the SEDAR website (www.sedar.com).

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