April 24, 2024 [Reuters]- Ithaca Energy (ITH.L), opens new tab has agreed to buy nearly all of Eni’s (ENI.MI), opens new tab UK-based oil and gas producing assets for about 754 million pounds ($938.28 million) in stock, as it looks to become one of the biggest independent energy companies in the North Sea.
The combined entity would be able to produce more than 100,000 barrels of oil equivalent per day until at least 2028 and aims to pay dividends of up to $500 million each in 2024 and 2025, Ithaca said on Tuesday.
The North Sea is an energy-rich region in the Atlantic Ocean that has long been coveted by European oil and gas companies for its potential, but aging reserves and security concerns have made development there challenging.
Ithaca is buying all of Eni’s oil and gas producing assets in Britain, excluding its East Irish Sea assets and its carbon capture and storage activities in the country. The assets include those from Eni’s recent purchase of Neptune Energy.
In turn, Ithaca, owned by Tel Aviv-listed Delek Group (DLEKG.TA), opens new tab, will issue new shares to Eni, which will hold 38.5% of the enlarged share capital of Ithaca. Based on Tuesday’s closing share price, those shares are worth 754 million pounds.
Delek will hold just over 50% of Ithaca when the deal closes. Eni will be entitled to nominate the next CEO of Ithaca.
The deal is expected to close in the third quarter, but will take effect from June 30 for the purposes of financial reporting.
“The agreement affords the opportunity to build scale, realizing efficient upstream growth and maximizing value under a dedicated and focused management structure,” said Eni CEO Claudio Descalzi.
The transaction is part of Eni’s broader strategy to develop businesses focused on a geographical area or a specific activity and share the investment efforts with a partner.
Eni teamed up with BP (BP.L), opens new tab to create Azule Energy in 2022, combining their oil and gas producing businesses in Angola.
Ithaca forecast that the combined company, with 37 producing assets, would produce between 80,000 and 87,000 barrels of oil equivalent per day (boe/d) in 2024. Output has to the potential to grow to 150,000 boe/d by the early 2030s.
Ithaca Executive Chairman Gilad Myerson said the deal will allow the company to improve shareholder returns by paying special dividends through next year, while leaving it well-placed for organic and inorganic growth in the future.
Fitch Ratings estimated that the deal will give a $400 million boost to the company’s pre-tax earnings between 2025 and 2027.
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