Just found the aforementioned report from 22 April. GLTA
Building from a stronger platform
Our View: Resuming coverage following Ithaca's accretive acquisition of
Valiant Petroleum and retaining Outperform rating with an increased C
$3.60 (225p) Price Target. Ithaca's investment case remains focused upon
development of Greater Stella Area, but it is now supported by a larger,
diversified production portfolio.
Rebalanced North Sea producer/developer: The Valiant deal represents
a significant step towards management’s goal of establishing Ithaca as a
25,000boe/d North Sea producer, adding a production-weighted portfolio
complementary to its existing assets. Our new tangible NAV is $3.61/share
(or 225p) after adjusting for the deal, up 5% on our previous valuation.
The enlarged company’s 71mmboe of 2P reserves is evenly split between
fields onstream and those under development.
Outlook focused on Stella development: We believe that Ithaca’s stock
price performance will be determined by execution of the Greater Stella
Area development project relative to expectations. Success is required
for Ithaca to fully deliver on its medium-term goal of 25,000boe/d and
establish the project as a hub for further development activity in the area.
The Area accounts for 28% of our risked NAV w/upside potential from
future appraisal drilling and the acqstn of undeveloped discoveries nearby.
55% discount to tangible NAV: Trading at a 55% discount to our tangible
NAV, Ithaca appears more attractively valued than the majority of its
peers where the average discount is 24%. We believe regular operating
and production updates through 2013 can build investor confidence and
narrow the valuation gap. We see Stella development drilling updates and
achieving 2013 pro-forma production guidance of 14,000-16,000boe/d as
the most important 2013 catalysts.
Dramatic cash flow growth: Estimated 2014 CFPS of $1.65 would
represent an almost five-fold increase on 2012. This growth reflects the
addition of the Valiant production portfolio and the start of production
at Stella-Harrier from mid 2014. We forecast Ithaca generating surplus
cash flow before financing of ~$350m during 2014, and ~$475m in 2015.
This creates the scope for modest returns to shareholders but we expect
Ithaca to prioritise debt reduction and more acquisitions/developments to
sustain(or increase) production above management’s 25,000boe/d target.
Low profile exploration: Although we expect Ithaca to manage down
expectations, the 2013 drilling campaign inherited from Valiant offers
unrisked upside of 75% to our NAV, and Ithaca is participating alongside
some credible North Sea explorers. We believe the most interesting wells
are the appraisal of Norvag (Barents Sea) and the Handcross exploration
well (West of Shetland).