Ithaca Energy PLC (LSE:ITH) has doubled down on one of its core gas assets, acquiring an additional 46.25% interest in the Cygnus field from Spirit Energy for around $154 million.
The deal lifts its operated stake in the high-margin gas hub to 85%, reinforcing its role as a key player in the UK’s offshore energy mix.
According to Peel Hunt, which reiterated its Buy rating and 169p price target, the transaction looks shrewd on valuation grounds.
Ithaca is paying just $7 per barrel of oil equivalent for 23 million barrels of proven and probable reserves, well below the broker’s discounted cash flow estimate of $12 per barrel for Cygnus. The deal also adds approximately 13,000 barrels per day of net production.
More importantly, Cygnus is a long-life asset with further upside. Peel Hunt sees scope for infill drilling to extend the field’s economic life into the 2030s and beyond. The field already underpins stable cash flow, and additional volumes could be brought on with modest capital outlay.
In the context of a UK energy sector still grappling with fiscal uncertainty and declining domestic gas output, Ithaca’s move signals a vote of confidence in the value of mature but expandable assets. The company now gains not only more control over operations but a larger share of production in a high-demand commodity.
With the acquisition expected to be integrated into updated forecasts shortly, Peel Hunt describes the transaction as “value accretive” and “sensible business development”.
For investors, it strengthens the case for Ithaca’s cash-generative model and positions it well in a market where security of supply is back on the agenda.
Heading into the final hour of trading, the shares were steady at 133.6p.