Ithaca Energy's Canadian Acquisition Draws Positive Analyst Ratings

Ithaca Energy's first acquisition outside the North Sea has received positive analyst reviews. Following the company's announcement of its purchase of a Canadian offshore oil asset portfolio from Suncor Energy, both Bank of America and Jefferies have indicated that the move strengthens Ithaca's growth profile, reduces its reliance on the UK, and could enhance its dividend payout capabilities.

Bank of America has raised its price target for Ithaca's stock from 305 pence to 310 pence, maintaining its buy recommendation. Jefferies has set a higher target of 350 pence, reflecting a potential upside of approximately 27% at the time of the announcement. The deal involves Ithaca acquiring stakes in three offshore Newfoundland and Labrador assets: a 48% operating interest in Terra Nova, a 40% interest in the White Rose existing assets, and a 38.6% interest in White Rose growth assets.

The initial payment for the acquisition is $860 million in cash, with an additional contingent payment of up to $250 million tied to oil prices. The transaction is expected to be completed in the first half of 2027, pending regulatory approvals. The acquired assets currently produce around 30,000 barrels of oil equivalent per day (boepd) for Ithaca's share, with production projected to increase to 35,000-40,000 boepd by 2029. These assets hold approximately 103 million barrels of proven and probable 2P reserves with an estimated reserve life of 17 years, along with potential for further contingent and prospective resources.

Bank of America highlighted the geographical diversification as a key benefit, noting that Ithaca, previously concentrated in the UK's North Sea, faced significant exposure to British tax and regulatory changes. While the UK operations will remain the primary value driver, the Canadian acquisition marks a crucial step toward establishing an international asset base. The bank also anticipates significant growth, projecting Ithaca's production could reach around 160,000 boepd by 2028, representing an average annual growth rate of about 20% from 2024 levels. This growth is expected to boost Ithaca's EBITDA and cash flow forecasts, potentially supporting increased dividend payouts.

Jefferies emphasized that Ithaca is pursuing a distinct strategy compared to many UK North Sea players. They view the Canadian assets as providing significant, long-term production outside the UK and note technical and operational similarities to Ithaca's existing North Sea operations, which could facilitate integration. Jefferies forecasts the deal will be immediately accretive to adjusted EBITDAX, free cash flow, and dividend per share, without diluting existing shareholders. The acquisition will be financed through existing cash, credit facilities, and local Canadian financing, with net debt to EBITDA expected to remain below 1x upon completion. Jefferies also acknowledged the decommissioning and restoration liabilities associated with the assets, estimated at $900 million, though a significant portion of these costs are long-term.