Eni combines UK North Sea oil and gas business with Delek-owned Ithaca Energy

Eni is to combine its North Sea oil and gas business with upstream independent Ithaca Energy, majority-owned by Israel's Delek, in a deal set to give the Italian company a 37.3% stake in the "satellite" entity, the companies said late April 23.

The deal, first publicly mooted in late March(opens in a new tab), follows quickly on from Eni's acquisition of London-based Neptune Energy in January, which included an operating stake in the UK's highest producing gas field, Cygnus. The combination should result in 2024 production of over 100,000 b/d of oil equivalent, with a roughly equal weighting between oil and gas, and the potential to reach 150,000 boe/d by the early-2030s, the companies said.

The deal continues a strategy for Eni of creating "satellite" joint ventures offshore Norway and Angola, although Delek is expected to remain the largest shareholder in this instance, with a 52.7% stake upon completion.

The deal excludes Eni's East Irish Sea and carbon capture and storage projects, with the Italian company remaining the primary investor in flagship government-backed CCS project HyNet North West.

Ithaca produced just over 70,000 boe/d in 2023, of which 66% was oil, and had warned its production from the current business would drop to 56,000-61,000 boe/d this year, reflecting the cancellation of several new projects due to the UK tax regime. It has struggled to make headway with the major West of Shetland Cambo oil project -- previously the target of environmental protests -- after entering the project(opens in a new tab) in April 2022 with the purchase of Siccar Point Energy.

Eni had production of around 50,000 boe/d offshore the UK in 2023.

"The Satellite Model is a strategic response to the challenges and opportunities of energy markets, creating focused and lean companies able to attract new capital to create value through operating and financial synergies and the acceleration of growth," Eni said. "The combination will allow Eni to continue pursuing its successful growth on the UK continental shelf, thereby strengthening its commitment to the UK."

Ithaca Executive Chairman Gilad Myerson said: "The synergistic combination with Eni's highly cash-generative UK continental shelf portfolio has the ability to unlock our long-life organic growth opportunities, creating a combined entity with substantial scale and longevity."

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Expanded asset base

The combined entity will have reserves and contingent resources of some 658 million barrels of oil equivalent, including stakes in 37 producing assets, among them six of the UK's 10 largest fields -- Rosebank, Cambo, Schiehallion, the Mariner area, the Elgin-Franklin complex and the J-Area, the companies said. Ithaca already held stakes in Elgin-Franklin and the J-Area, which are thus increased by the combination.

Elgin-Franklin, operated by TotalEnergies, is a significant contributor of both gas to the UK and liquids sold under the Forties crude brand, while the J-Area, operated by Harbour Energy, contributes to Ekofisk crude loadings; Forties and Ekofisk are key grades in the Platts Dated Brent price assessment process. Platts is part of S&P Global Commodity Insights.

Ithaca is also Equinor's partner in the Rosebank oil project under development in the West of Shetland area, which has similarities to Cambo, while the Equinor-led Mariner field contributes UK heavy crude oil.

The combination entails issuing to Eni new Ithaca shares equivalent to 38.5% of the enlarged entity, with Delek selling 3% of the enlarged share capital to ensure 10% or more remains in public hands on the London Stock Exchange.

Dated Brent was assessed at $88.73/b on April 23, up $1.18 on the day, while the month-ahead UK NBP gas contract was assessed by Platts at 71.35 p/th.