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ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
Delivering on
our commitments
ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
Our Mission is to be “the
Strength of the North Sea”
We will be determined,
confident and proud, as we
redefine what it means to be
an oil and gas operator.
01ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
COMPANY
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
REPORT
FINANCIAL
STATEMENTS
01ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
Introduction
In our first full year of operations as a publicly listed
company, we have made material progress in delivering
against our IPO commitments.
Despite the considerable headwinds created by fiscal
instability, Ithaca Energy has continued to deliver
against our BUY, BUILD and BOOST strategy. Most
notably, we achieved the milestone sanctioning of the
Rosebank development, a crucial step in supporting our
long-term growth ambitions.
We have delivered strong operational and financial
performance in the year, supporting significant
distributions to our shareholders and fulfilling our
2023 dividend commitment.
As we embark on 2024, our focus continues to be on
executing on our strategic priorities to maximise value
from across our portfolio and deliver on our ambitious
decarbonisation plans, to support long-term sustainable
returns to our shareholders.
2023 has been a critical year for the business, successfully executing
against our BUY, BUILD and BOOST strategy to support our vision
for material long-term growth.
Contents
Company overview 1 to 7
Strategic report 8 to 91
Executive Chairman’s statement 8
Performance review 12
Market review 16
Our business model 22
Our strategy 24
Key performance indicators 26
Operations review 28
Senior Independent Director’s Q&A 34
Our stakeholders 36
Environment, Social and Governance 44
Financial review 78
Risk management 84
Governance report 92 to 139
Chair’s introduction 92
Board of Directors 93
Corporate Governance report 96
Audit and Risk Committee report 104
Nomination and Governance report 108
HSE Committee report 110
Directors’ remuneration report 112
Directors’ report 137
Statement of Directors’ responsibilities 139
Financial statements 140 to 220
Independent auditor’s report 140
Consolidated statement of profit or loss 155
Consolidated statement of comprehensive income 156
Consolidated statement of financial position 157
Consolidated statement of changes in equity 159
Consolidated statement of cash flows 160
Notes to the consolidated financial statements 162
Company statement of financial position 215
Company statement of changes in equity 216
Notes to the Company financial statements 217
Alternative Performance Measures 221
NET CASH FLOW FROM OPERATIONS
$1,291m
(2022: $1,723m)
ADJUSTED EBITDAX
1
$1,723m
(2022: $1,916m)
Financial highlights
LEVERAGE RATIO
1
AT YEAR-END
0.33x
(2022: 0.51x)
TOTAL DIVIDENDS
$400m
(2022: $nil)
PROFIT FOR THE YEAR
$216m
(2022: $1,031m)
STATUTORY EPS
21 cents
(2022: 106 cents)
Read more on page
31
BOOST
field performance
and enhance margins
Read more on page
33
BUILD
a robust long-
term portfolio
Read more on page
24
BUY
high-quality,
long-life assets
Our strategy drives our ambition
You can also read our
Annual Report online:
investors.ithacaenergy.com
1. Non-GAAP measure as set out on pages 221 to 223.
02 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
At a glance
these resources whilst reducing the
environmental impact of our operations.
While we rightly acknowledge the
fundamental challenge posed by the energy
transition to our industry, we remain at
the forefront of our sector’s response. Our
ambitious decarbonisation goals align with
our belief in the environmental advantages
of domestically-produced energy over
high-emission imports.
We remain committed to investing in
sustainable, high-value and long-term
oil and gas production that will create
increased value for our stakeholders and
reduce the environmental impact of the
UK’s oil and gas consumption.
Who we are and what we do
We are proud of our heritage, our
reputation for operational excellence and
our drive and ambition to forge a new
future for our North Sea asset base.
As we move into our industry’s new era,
Ithaca Energy is positioned to play a pivotal
role in safeguarding the UK’s domestic
energy supply, recognising that oil and gas
will remain an important part of the long-
term energy mix for decades to come, as
we navigate the energy transition.
Ithaca Energy is driven by pragmatism
and balance. Pragmatism, because the UK
still needs oil and gas. Balance, because we
recognise our responsibilities to produce
For our people, shareholders, partners
and communities, Ithaca Energy is a
new kind of oil and gas operator.
Bring strength
We are resilient, agile and committed. We bring our collective talent, expertise
and determination to bear daily.
Our values
Our Mission
If our mission is the ‘what’ we aim for, our values are the ‘how’. They guide
how we work resiliently, collaboratively, openly and considerately.
Our mission is to be the ‘Strength of the North Sea’. We serve today’s
needs for domestic energy through operating sustainably. We achieve
this by harnessing our deep operational expertise and innovative minds
to collectively challenge the norm, continually seeking better ways to
meet evolving demands.
Triumph.
We are driven to succeed, to be
the Strength of the North Sea,
maximising value through the
safe, efficient and responsible
production of our Group’s assets.
Deliver results
We control our destinies by harnessing our ambition and pragmatism to deliver
successful outcomes.
Together.
We can only succeed if we
work together, harnessing the
collective expertise and experience
of our people and partners.
Our vision is to be the highest-performing
UKCS independent oil and gas company,
focused on growing value sustainably.
Express yourself
We are empowered to question, sharing the right and responsibility to
challenge and to use our voices in pursuit of‘best’.
Be considered
We genuinely care about making a positive impact for our people, shareholders,
and communities.
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GOVERNANCE
REPORT
FINANCIAL
STATEMENTS
03ANNUAL REPORT AND ACCOUNTS 2023ITHACA ENERGY PLC
Our assets
Today, Ithaca Energy stands as one
of the largest independent oil and gas
operators in the UK North Sea, ranking
third by production.
With a diverse and high-value portfolio of
operated and non-operated assets across
the Northern and Central North Sea,
Moray Firth and West of Shetland, our
focus continues to be on maximising value
in a safe and sustainable manner from
our North Sea asset base.
In 2023, we made material strategic
progress executing against our organic
growth plans, through targeted
investment in high-return and
long-life assets, including the
milestone sanctioning of the
Rosebank development.
Delivering long-term production growth
OPERATED PRODUCING FIELDS
9
AVERAGE PRODUCTION (KBOE/D)
70.2
Our portfolio in numbers
2P RESERVES
AND 2C RESOURCES (MMBOE)
544
% OF 2P RESERVES AND 2C RESOURCES
OPERATED BY ITHACA ENERGY
66%
STAKES IN 6 OF THE 10 LARGEST
FIELDS IN UKCS
6 of 10
STAKES IN 2 OF THE 3 LARGEST
UNDEVELOPED DISCOVERIES IN UKCS
2 of 3
PRODUCING UKCS FIELDS
28
OPERATED ASSETS
NON-OPERATED ASSETS
ELGIN FRANKLIN
CAMBO
ROSEBANK
MARINER
MARIGOLD
COOK MONARB
CAPTAIN
WEST OF SHETLAND
MARINER
MARIGOLD
MONARB
& COOK
GBA & ALBA
GSA (STELLA, HARRIER,
VORLICH AND ABIGAIL)
& OTHER
CAPTAIN
TORNADO
SCHIEHALLION
BRITANNIA
ALDER
ALBA
ENOCHDHU
FOTLA
BRODGAR
CALLANISH
PIERCE
GSA JADE
ISABELLA
ERSKINE
04 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Our vision-in-action
Redefining what it
means to be a leading
oil and gas operator
INVESTMENT IN ROSEBANK
$0.7bn
Estimated Phase I
Net Capex Spend
Read more on page 5
NET ZERO AMBITION
2040
On a Scope 1 and 2
net equity basis
Read more on page 46
With stakes in six of the ten largest fields in the UK North Sea and two of the largest
undeveloped discoveries, Ithaca Energy plays a significant role in meeting the current and
future energy needs of the UK. We do not take this responsibility lightly. We seek to balance
the need to deliver critical energy security with the need to reduce our environmental impact,
while creating value for our people, shareholders, partners and communities.
05ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023 05ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
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ITHACA ENERGY PLC
Delivering critical
energy security
Development of the Rosebank
field is central to the UK’s long-
term energy security strategy.”
Geopolitical tensions and uncertain energy markets
continue to shine a spotlight on the energy sector
and the criticality of developing our own North Sea
resources to provide domestic energy security.
Standing as the largest undeveloped discovery in the
UK with sanctioned Phase I reserves of 234mmboe,
development of the Rosebank field is central to the
UK’s long-term energy security strategy. Beyond
energy security, the benefits of the Rosebank
development to the UK are vast.
Low emissions developments, such as Rosebank,
are critical to meeting the UK’s Net Zero objectives.
With its optimised design to reduce carbon emissions,
the redeployed FPSO will be electrification ready when
arriving at the field, meaning the Rosebank development
has the potential to produce at approximately 3 kg CO
2
/
boe – a seventh of the UK average.
From an economic perspective, the Rosebank
development is expected to result in total direct
investment of £8.5 billion, of which 77% is likely
to be invested in UK-based businesses. During the
construction phase, the project is expected to create
around 2,000 jobs, and throughout the field’s
operational lifetime, it will support approximately 525
full time employees across the lifetime of the field.
Unlocking Rosebank, the UK’s largest undeveloped
discovery, with over 300 mmboe recoverable resources,
will deliver much needed energy security and investment
in the UK while supporting Net Zero targets.
ESTIMATED ROSEBANK GVA
£25bn
Estimated Gross Value Add
1
from
Rosebank field over life of project
(Phases I and II)
Note: Phase I sanctioned.
1 Gross Value Add (GVA)
measures the contribution
to the economy of the
project, comprising direct,
indirect and induced benefits.
06 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC06 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC06 ANNUAL REPORT AND ACCOUNTS 2023
Our vision-in-action continued
Supporting the
energy transition
The energy sector faces a substantial task as we balance
the need to supply reliable long-term hydrocarbon
production with the necessity to significantly lower
our emissions footprint.
With a clear focus and commitment to decarbonisation,
we have embedded a strong ESG mindset across our
operations. Our ambitions are supported by a well-
defined emissions reduction strategy, with a target
of achieving Net Zero by 2040, on a Scope 1 and 2
net equity basis.
To deliver our targets we are taking meaningful action
today to optimise our current portfolio in the short-
term, with the aim of fundamentally transitioning
the portfolio in the medium to long-term, through
investment in low emission intensity assets.
We continue to make significant progress across our
operated portfolio with operational improvements,
such as a sea water lift pump upgrade at FPF-1 and
solar gas turbine upgrade at Captain.
As we continue to work hard to achieve our ambitious
target of reducing Scope 1 and 2 CO
2
e emissions by
25% by 2025, our focus has turned to how we deliver
the next phase of material decarbonisation activity that
will support our target of reducing Scope 1 and 2 CO
2
e
emissions by 50% by 2030, including the retirement
of aging assets.
The most material of these projects is the potential for
electrifying our flagship Captain field. With over 70% of
Captain’s GHG emissions related to power generation,
partial electrification of the asset has the potential to
substantially reduce emissions intensity from the asset
and move the Group closer to achieving its targets.
As the Captain electrification Front-End Engineering
Design (FEED) study draws to a close, the Group is
looking in the coming months to take a final investment
decision on the technical, financial and commercial
viability of the project. We continue to seek assurances
from the UK Government on the protection of the
decarbonisation allowance for sanctioned projects, in
order to facilitate an investment decision that would
realise significant decarbonisation benefits for the UK,
in line with the North Sea Transition Deal (NSTD).
CAPTAIN ELECTRIFICATION
60%
Estimated reduction in Captain
emission intensity
Read more about our FEED
study exploring the potential for
electrification at Captain on
page47
Ithaca Energy is committed to its ambitions of delivering one
of the lowest carbon emissions portfolios in the UK North Sea.
07ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023ITHACA ENERGY PLC
COMPANY
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REPORT
FINANCIAL
STATEMENTS
07ANNUAL REPORT AND ACCOUNTS 2023ITHACA ENERGY PLC
Creating value for
our stakeholders
We aim to maximise
shareholder returns through
the safe and responsible
production of our assets.”
For our people and partners:
Our people, supply chain and joint venture partners
are critical to our ongoing success. We recognise this
through investing in their continued development,
providing competitive reward packages, ensuring a
fair and equitable workplace and through building
collaborative relationships with our partners.
For our shareholders:
We aim to maximise shareholders returns through
the safe and responsible production of our assets.
Our relentless focus on value creation ensures we
remain disciplined and thoughtful, investing only in
opportunities across our BUY, BUILD and BOOST
strategy that we believe have the potential to maximise
shareholder value.
For our communities:
Our commitment to giving back to our local
communities continues to provide a joint sense of
purpose and pride across our organisation with a rise
in our engagement score for social connection in the
year of 43%. In 2023, we expanded our efforts to reach
a wider range of charitable and community projects
broadening our impact across social, environmental
and humanitarian causes.
We care about making a positive impact for our people,
shareholders, partners and communities, reflecting our
ambition to ‘TRIUMPH. TOGETHER.’
COMMITMENT TO MATERIAL
SHAREHOLDER DISTRIBUTIONS
$400m
Total 2023 dividend
1
EMPLOYEE ENGAGEMENT SURVEY
12%
Increase in employee
engagement score
1. Interim dividends of $266 million paid during 2023, with further
interim tranche of $134 million payable in April 2024.
08 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC08 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Executive Chairman’s statement
With a diversified portfolio of high-quality
and cash-generative assets, a strong pipeline
of development opportunities and significant
financial strength.”
GILAD MYERSON
EXECUTIVE CHAIRMAN
We stand as
one of the largest
independent operators
in the UKCS
OUR PEOPLE
631
Onshore and offshore employees
OUR RESERVES
544
2P Reserves and 2C Resources
(mmboe)
09ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
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ANNUAL REPORT AND ACCOUNTS 2023 09
GILAD, THE GROUP HAS MADE GOOD
PROGRESS ON EXECUTING AGAINST STRATEGY
THIS YEAR. WHAT HAVE BEEN THE HIGHLIGHTS?
I am delighted by the progress we have made in our first year
as a public Company – delivering on our pre-IPO commitments
and executing against our BUY, BUILD and BOOST strategy.
In short, we’ve done what we said we were going to do.
From an operational perspective, we’ve delivered a strong
year of production and I’m proud to say we’ve accomplished
this while maintaining our high standards of safety and
environmental performance.
We’ve made material progress to unlock our outstanding
greenfield and brownfield development portfolio, from the
milestone sanctioning of the Rosebank project to resolving
existing partnership arrangements for both Cambo and Fotla,
that I believe will help us unlock these critical projects.
And while our ‘BUY’ activities in 2023 have been focused on
preserving the value of our high-value portfolio, we’ve also spent
considerable time evaluating strategic M&A opportunities.
An area where I am sure we will reap the benefits in 2024.
ITHACA ENERGY SANCTIONED THE ROSEBANK
DEVELOPMENT IN 2023. TELL US MORE ABOUT
THE SIGNIFICANCE OF ACHIEVING THIS
MILESTONE?
Ithaca Energy continues to position itself as a leading
independent operator and it gives us great pleasure to sanction
Rosebank – a world-class project on every metric. We are
delighted to expand our partnership with Equinor as we embark
on the journey together to deliver first production from
Rosebank in 2026/27.
Not only is Rosebank a significant asset for Ithaca Energy,
but it’s a vital asset for the UK. With over 300 mmboe of
recoverable resources, Rosebank is the largest undeveloped
discovery in the UK North Sea and is critical for supporting UK
energy security, creating economic prosperity for the UK and
stimulating employment in highly-skilled jobs.
Our investment in Rosebank demonstrates both delivery
against our strategy to BUILD a robust long-term low emissions
portfolio and our commitment to investing in the UK North Sea.
THE OIL AND GAS INDUSTRY HAS FACED
SIGNIFICANT FISCAL UNCERTAINTY IN 2023.
HOW HAS ITHACA ENERGY RESPONDED TO
THESE HEADWINDS?
There are no two ways about it – fiscal instability has made
2023 a challenging year, with the rules of the game continuously
changing. Uncertainty created by the Energy Profits Levy has
made it difficult for our industry to make critical long-term
investment decisions on capital projects that can last up to
five years to achieving first production.
We have chosen to work collaboratively with the UK
Government as they navigate the complex dynamics of our
industry. We believe being a balanced thought partner for oil
and gas fiscal policy should assist in the co-creation of a fiscal
environment that is good for the government, the industry
and the UK, with energy security always front of mind.
Meanwhile, we continue to focus on maximising value from our
portfolio. Our pace of capital deployment across our portfolio
has rightly slowed, prioritising investment in high-quality, high-
return assets such as Rosebank, while protecting the long-term
value of our pre-Final Investment Decision (FID) assets.
HOW DID ITHACA ENERGY PERFORM IN 2023?
I am very pleased with our overall performance in 2023,
particularly in light of the substantial headwinds we faced.
Reiterating my earlier remarks, a successful year should not only
be measured by our financial performance but in our operating
performance. Where I am pleased to say we performed well,
maximising the production and value of our assets in a safe and
responsible manner. We also made demonstrable progress in our
work to reduce emissions across our portfolio.
We have reported a strong financial performance in 2023, with
adjusted EBITDAX of $1.7 billion, Profit for the year after tax of
$215.6 million and Group free cash flow of $706 million. Our
strong cash flow generation in the year allowed for the continued
deleveraging of the balance sheet with an adjusted net debt
position at the end of the year of $571.8 million. With a liquidity
position of over $1 billion, we have significant financial capacity
to deliver on our growth plans. Lastly, I am very proud to say that
we will deliver against our pre-IPO commitment of distributing
$400 million of dividends for FY 2023 to our shareholders.
Q Q
QQ
10 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC10 ANNUAL REPORT AND ACCOUNTS 2023
MOVING INTO 2024, WHAT ARE YOUR TOP
PRIORITIES FOR THE YEAR?
Our priorities for 2024 are clear. We must continue to execute
against our BUY, BUILD and BOOST strategy with increased
rigour to deliver our goal of maximising value to shareholders.
Our unwavering commitment to achieving operational
excellence, boosting production efficiency, and ensuring
strong safety performance across our assets remains steadfast.
In 2024, our flagship Captain asset enters a pivotal phase
as we execute the final stages of our Enhanced Oil Recovery
(EOR) Phase II project, with first subsea injection targeted
in the summer. Delivery of this project will be a significant
milestone for the Group and will support our medium-term
growth trajectory.
On our large development projects, we will collaborate closely
with Equinor to maintain Rosebank’s progression towards first
production in 2026/27, while actively engaging with potential
farm-in partners to strategically position Cambo and Fotla
for FID in 2025, contingent upon prevailing fiscal conditions.
We anticipate substantial opportunities for material M&A
activity in 2024, following a wave of large-scale consolidation
in 2023. We will seek to capitalise on the favourable M&A
landscape, with our primary focus being on strategically
executing value-enhancing M&A transactions.
2024 WILL SEE THE COMPLETION OF YOUR
CAPTAIN EOR PHASE II PROJECT, CAN YOU
SHARE YOUR THOUGHTS ON THE PROJECT?
Captain EOR Phase II is a landmark project for Ithaca Energy
and builds on the success of our EOR Phase I project, which
has exceeded our initial field development expectations with
over 12 million barrels recovered to date.
As the sole UK operator deploying pioneering polymer flood
technology, our innovative enhanced oil recovery project will
maximise recovery from the Captain field, in an accelerated
timeframe, offering significant decarbonisation benefits.
The project remains on track and within budget with over 90% of
the work scopes completed. When executed the project has the
potential to double production, with peak polymer well response
by 2026 – making a material contribution to our medium-term
production growth.
TELL US MORE ABOUT YOUR THOUGHTS ON
VALUE CREATION POTENTIAL FROM M&A?
Ithaca Energy boasts an impressive track record of generating
substantial value through strategic M&A, capitalising on
market dislocation to execute value-accretive and
transformative acquisitions.
Following a year of consolidation by the majors, we will
undoubtedly see further rationalisation of portfolios and
consolidation activity in the sector. I am confident that Ithaca
Energy is well-placed to respond, with our significant financial
firepower and strong M&A credentials.
Our strategic M&A focus in 2024, will see us target
complementary cash-generative production portfolios
that will support our investment in long-term greenfield
and brownfield development assets to build a portfolio
of significant scale and longevity.
Q
Q
Q
Executive Chairman’s statement continued
Our priorities for 2024 are clear.
We must continue to execute
against our BUY, BUILD and
BOOST strategy with increased
rigour to maximise value to
shareholders.”
11ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
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ITHACA ENERGY PLC
Q Q
WHAT IS YOUR OUTLOOK FOR 2024 AND BEYOND?
Following a strong year of strategic execution, we enter 2024 with increased
confidence in our capabilities to grow Ithaca Energy plc and are excited
about what lies ahead as we enter our next phase of growth.
Today we stand as one of the largest independent operators by resources
and production in the UK North Sea with a diversified portfolio of high-
quality and cash-generative assets, a strong pipeline of development
opportunities and significant financial strength.
Through our continued investment in development projects such as
Captain EOR Phase II and Rosebank, and further optionality across our
portfolio with assets such as Cambo and Fotla, our outlook remains positive
with strong medium-term production growth.
The main headwind is of course the unfortunate lack of fiscal discipline
and stability in the UK. We believe this is unwarranted and unconstructive
for industry. As we draw closer to a General Election, we remain acutely
aware that fiscal uncertainty will persist. In 2024, we will amplify our
political engagement efforts, emphasising the consequences of ongoing
fiscal uncertainty on investment in the oil and gas industry. It is only with
this clarity that we can make responsible investments that bolster domestic
energy security, promote decarbonisation, create jobs and foster prosperity
for the UK.
In the context of this fiscal uncertainty, we are committed to our clear
BUY, BUILD and BOOST strategy while being very thoughtful about
longer-term capital allocation decisions. We believe Ithaca Energy has
the potential to deliver material growth and maximise shareholder value,
including the pursuit of value-accretive M&A that strengthens short to
medium-term cash flows supporting further long-term investment
across our attractive development portfolio.
I’d like to take this opportunity to thank everyone at Ithaca Energy,
offshore and onshore, for the part they have played in our growth story
and their continued unwavering support of our vision as we strive for
further scale and success.
Gilad Myerson
Executive Chairman
CAPTAIN EOR PHASE I
12mmboe
Polymer reserve recovery
CAPTAIN EOR PHASE II
2026
Peak production and polymer response
PULSE SURVEY
12%
Increase in overall employee engagement in 2023
EMPLOYEE CULTURE IS KEY TO BUSINESS
SUCCESS. WHY IS ITHACA ENERGY’S CULTURE
IMPORTANT TO YOU?
The importance of having a highly-motivated, values-driven
team to deliver our strategy cannot be overstated. Put simply,
without a strong culture, Ithaca Energy would not be where
it is today!
Our people are core to everything we do. Our strong sense of
collaboration, accountability, inclusiveness and empowerment
helps us to deliver results while making a positive impact.
I’m incredibly proud of what we have achieved together
at Ithaca Energy and the culture that we have built.
THERE HAVE BEEN SOME BOARD ROOM
CHANGES IN 2024. WHEN DO YOU EXPECT TO
APPOINT A NEW CEO?
Our intention is to appoint a new Chief Executive Officer
(CEO) in as short a timeframe as possible. But with a strong
Executive Leadership Team, and with Iain Lewis at the helm as
our interim CEO, we have the confidence to take our time to
ensure we appoint the right person for the role, as the Group
enters into its next phase of growth.
On behalf of the Ithaca Energy Board, I’d like to thank Alan
Bruce for his hard work and strategic insight over the last two
and a half years and wish him well for the future.
12 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLCITHACA ENERGY PLC
Executing our BUY, BUILD and
BOOST strategy
We made significant progress across our strategic
goals in 2023, delivering against our BUY, BUILD
and BOOST strategy to support the material long-
term growth of the Group. We continue to focus on
maximising value from across our diverse portfolio
with targeted investment in high-quality assets
demonstrating our commitment to investing in the
UK North Sea.
In 2023, we were delighted to announce the landmark
sanctioning of Phase I of the Rosebank development,
with total recoverable resources over 300 mmboe and
Phase I gross reserves of 234 mmboe. As the UK’s
largest undeveloped discovery, the field will provide
critically important domestic energy, supporting
a forecasted 7% of UK oil production from first
production to 2030. And crucially, with its low carbon
emissions design, the field has the potential to produce
at a fraction of the world’s average CO
2
emissions
contributing to both the UK’s energy security and
Net Zero objectives.
The Rosebank development is core to Ithaca
Energy’s BUILD strategy, executing on the material
development portfolio acquired from Siccar Point
Energy in 2022. With estimated net production of
15 kboe/d at the field’s peak and a production life of
25 years, the field supports the Group’s medium to
long-term production growth. After taking the FID,
project activity has ramped up with work underway on
upgrading the Petrojarl Rosebank FPSO (previously
named Petrojarl Knarr), including making the vessel
electrification ready in line with the North Sea
Transition Deal. In 2024, work will commence on the
installation of templates and satellite structures as part
of the multi-year development timeline towards first
production in 2026/27.
At Captain, material progress was made during the year
on executing Phase II of our pioneering polymer EOR
project with the project now over 90% complete and on
track to support first Phase II polymer injection into the
subsea wells in summer 2024. Remaining work scopes
include final commissioning activities on the topsides,
subsea tie-in campaign and completion of the drilling
programme (completed during Q1 2024).
The EOR Phase II project, designed to maximise and
accelerate reserve recovery from Captain and deliver
on our strategy to BOOST field performance, will build
on the success of the first phase of polymer injection
with over 12 mmbbls recovered to date. Extensive
subsurface modelling completed in H2 2023 to refine
the predicted EOR Phase II polymer response, based
on reprocessed seismic and latest field performance,
has successfully confirmed initial overall EOR Phase II
reserve recovery predictions. However, our expectation
is that Captain production will now follow a longer path
to peak response with production expected to peak in
2026, before plateau.
The Group continues to leverage our M&A capabilities to
deliver on our BUY strategy evaluating potential inorganic
opportunities both in the UK and internationally. In
2023, the Group acquired the remaining stakes of the
Cambo and Fotla fields with the aim of preserving the
SAFETY
ZERO
Serious incident and fatalities
frequency (SIF-F)
DAILY PRODUCTION
70 KBOE/D
across 28 fields
Performance review
Track record of delivering
both organic growth and
value accretive M&A
13ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
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13ANNUAL REPORT AND ACCOUNTS 2023
long-term value of our assets by taking full control of
pre-FID work programmes and timing.
Following the successful extension of the Cambo license
milestones from 31 March 2024 to 31 March 2026,
the Group is actively engaging with potential farm-in
partners to secure an aligned joint venture partnership
that would enable the future progression of the Cambo
project towards FID.
In line with the Group’s BUILD strategy we continue
to target high-return tie-back opportunities close to
existing infrastructure to maximise reserve recovery.
In 2023, the Group reported positive appraisal activity
at its non-operated Leverett discovery (Ithaca Energy
Working Interest: 12%) and successful exploration
drilling at its operated K2 prospect (Ithaca Energy
Working Interest: 50%), however, the subsequent
sidetrack encountered significant operational issues
due to severe weather caused by Storm Babet and the
sidetrack was suspended.
Strong delivery against 2023
management guidance
Our production in 2023 averaged 70.2 kboe/d (2022:
71.4 kboe/d), closing the year towards the mid-point
of our 68-74 kboe/d production guidance range.
Production was split 66% liquids and 34% gas with the
Group’s operated assets accounting for 51% of total
2023 production.
Our production performance in 2023 has been
supported by strong production efficiency across our
operated base of 84%, reflecting our commitment to
maximise asset value through operational excellence.
Most notably at FPF-1, where our focus on value and
our investment in driving operational efficiency and
uptime improvements continues to yield production
efficiency rates above 90%.
Production from our non-operated portfolio was
impacted by the delayed start-up and curtailed
production from the Pierce field, where operational
issues related to the vessel mooring system have
temporarily shut down production from the field.
We expect this issue to be rectified during H1 2024.
Operating costs in 2023 of $524 million (2022: $496
million), representing a net unit Opex cost of $20.5/boe
(2022: $19.0/boe), came in below revised and lowered
management guidance of $525 million to $575 million,
reflecting the Group’s stringent focus on cost control
in an inflationary environment, improved FX rates and
a reduction in planned activity.
Total net producing asset capital expenditure (excluding
decommissioning) of $393 million (2022: $405
million), came in at the bottom end of the Group’s
management guidance range of $390 million to $435
million. Net capital expenditure on the progression
of the Rosebank development totalled $97 million,
compared to management guidance of $90million
to $110 million reflecting the meaningful activity in
2023 as project activity ramps up to support a targeted
2026/27 first oil date.
During 2023, the Group launched a cost optimisation
project focused on maintaining tight control on
Our production performance in 2023
has been supported by strong production
efficiency performance.”
expenditure across our operated and non-operated
assets and corporate overhead base. The project was
successful in continuing to build upon Ithaca Energy’s
strong cost culture and delivered more than
$100million of cash savings during the year.
Strong safety performance is critical to our
continued success
Safety is our non-negotiable, number-one priority
and is central to our business success – we do it safely
or not at all. The Group delivered a slightly improved
safety performance in 2023, with fewer Tier 1 and Tier 2
process safety events recorded in the year (2023:
1 Tier 1 and 2 events, 2022: 2 Tier 1 and 2 events).
However, we believe there are areas for continued
improvement and the Group is responding to an
increase in personal safety incidents and process safety
near misses in the final quarter of the year by revisiting
the tone of safety leadership across the business.
Major accident prevention has been a core focus area
in 2023, with the introduction of a process safety
barrier tool across all operating locations designed
to strengthen our defences against high-potential
incidents and process safety events. The Process Safety
Fundamentals programme supports greater visibility
of our Major Accident Hazard (MAH) risks and aims
to enable front-line workers to focus on process safety
where potential for MAH events present in day-to-day
operations. We will continue to support the roll-out of
the barrier tool in 2024 with the aim of improving our
focus on process safety risks and maintaining focus on
preventing high-consequence events.
PRODUCTION EFFICIENCY
84%
Operated assets only
CAPTAIN EOR PHASE II
>90%
Project completion status
14 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLCITHACA ENERGY PLC
Performance review continued
Meaningful focus on decarbonisation
As we continue to progress short-term emissions
reductions projects, we have made significant
progress towards our long-term emissions reduction
strategy, following the decision to proceed with the
development of the low emission intensity Rosebank
field. Development of Rosebank will act as a material
catalyst as the Group looks to fundamentally transition
our portfolio to low-intensity assets in the medium to
long-term, as older higher-intensity assets move closer
to the natural end of their life.
The Rosebank FPSO has been designed to be
electrification ready as part of its optimised design
to reduce carbon emissions, in line with the North Sea
Transition Deal. The Group is collaborating with Equinor
(as Operator), industry partners and government
to pursue a regional solution for power from shore
to Rosebank and nearby fields to minimise carbon
emissions from production. With full electrification, it
is estimated that the Rosebank lifetime upstream CO
2
intensity would decrease from 12kg to approximately
3kg CO
2
/boe – a seventh of the current UK average of
21kg CO
2
/boe and a fraction of the emissions intensity
associated with importing.
The Group’s Scope 1 and 2 GHG emissions across
our operated profile reduced from 483,325 tCO
2
e
in 2022 to 435,792 tCO
2
e in 2023, representing a
slight increase per barrel from 23.8kg CO
2
/boe to
25.0kg CO
2
/boe, due to a reduction in operated assets
production in 2023 versus 2022, and an absolute
reduction of 23%, compared to our 2019 baseline. The
23% reduction achieved in 2023 versus the Group’s
2019 baseline, reflects reductions achieved through
operational improvements of 12%, as well as a 11%
reduction in emissions associated with Alba’s John
Brown turbine outage during the year, which is not
expected to be a recurring reduction. We continue
to work hard to deliver our targeted 25% reduction
in Scope 1 and 2 CO
2
e emissions on a net equity basis by
2025 and remain on track to reach this target.
2023 has seen continued progress across our operated
portfolio delivering operational improvements at
FPF-1 and Captain, while expanding our focus to more
material emission reduction initiatives such as the
potential for electrifying our flagship Captain field.
Following a successful conclusion of a pre-FEED study
in Q1 2023, FEED activity commenced in Q2 and
has been matured to support a Financial Investment
Decision in the coming months. With over 70% of
Captain’s GHG emissions related to power generation,
partial electrification of the asset has the potential to
substantially reduce emissions intensity and is critical
to the Group’s ability to achieve its targeted 50%
reduction in Scope 1 and 2 CO
2
e emissions on a net
equity basis by 2030. We continue to seek assurances
from the UK government to ensure the protection of
the decarbonisation allowance on sanctioned projects to
protect the economic viability of the project. In parallel,
the Group will determine investment viability as projects
compete for capital following a reduction in cash flow
available for reinvestment as a result of the continued
impact of the Energy Profits Levy.
Further details of our emissions reduction roadmap are
provided on pages 46 to 51 and further information on
climate-related risks and opportunities, including those
pertaining to our ability to meet our decarbonisation
targets are set out in pages 52 to 68.
Robust cash flow generation supporting low
leverage position
In 2023, we delivered another year of strong cash flow
generation supporting the further strengthening of our
balance sheet. Our diversified, high-quality asset base
reported adjusted EBITDAX of $1.7 billion (2022: $1.9
billion), generated free cash flow of $0.7 billion (2022:
$1.1 billion), lowering our adjusted net debt position
to $571.8 million at year-end (2022: $971.2 million),
15ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
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ITHACA ENERGY PLC
representing an adjusted net debt to adjusted EBITDAX
ratio of 0.33x (2022: 0.51x).
With a robust available liquidity position at 31 December
2023 of over $1 billion (2022: $0.6 billion), the Group
has sufficient available capital to support our future
growth plans. During 2023, we have entered into
attractive lending arrangements that supplement
our existing capital structure including a five-year
$100 million term loan facility agreement with bp at
a commercial interest rate, and a $150 million project
capex carry arrangement which was unutilised at the
year-end.
Profit for the year of $215.6 million (2022: $1,031.5
million), was impacted by a $557.9 million pre-tax
impairment charge (post-tax $154.0 million), principally
in relation to the Greater Stella Area (GSA) and Alba,
together with other gains of $89.1 million in the period.
The impairment charge for GSA follows the decision
not to proceed with further infill drilling at Harrier, as
a direct result of the Energy Profits Levy (EPL) and
falling gas prices and in relation to Alba due to the
reduction in estimated future production.
Following revisions to the Energy Profits Levy in
November 2022, that saw the rate of EPL rise to 35%,
the Group incurred current EPL charges of $333.4 million
in the year (2022: $131.4 million), with the charge payable
in October 2024. The Group’s cash flows continue to be
protected by our tax efficient structure with a material
ring fence corporate tax and supplementary charge tax
loss position of $4.5 billion at year-end.
The importance of the Group’s robust hedging policy
has been highlighted in the year, with hedging gains
recorded of $266 million. As we move into 2024, we
continue to take a disciplined approach to hedging,
recognising the importance of balancing upside
exposure to commodity prices while managing downside
protection of our cash flows. At year-end, the Group
has a hedged position of 8.2 million barrels of oil
equivalent (mmboe) (57% oil) from 2024 into 2025 at
an average price floor of $78/bbl for oil and 135p/therm
for gas.
In our first full year as a listed Company, we
are delighted to report that our strong financial
performance in the year has supported the delivery
of our 2023 dividend target. The Board has declared
a further interim dividend of $134 million in respect
of the 2023 financial year, bringing our overall 2023
dividend to $400 million, representing ~30% post-tax
cash flow from operations (CFFO) in the year.
Outlook
Following a successful year of progress against our BUY,
BUILD and BOOST strategy in 2023, we enter 2024
with a strong and diverse portfolio of cash-generative
assets and increased 2P Reserves and 2C Resources
of 544 mmboe (2022: 512 mmboe) following the
acquisition of the remaining stakes in Cambo and
Fotla, offset by a full year of production. With further
strengthening of our balance sheet in 2023, we are
well positioned to continue to deliver against our
capital allocation framework supporting our long-term
growth aspirations.
Through strategic acquisitions we have preserved
our investment optionality across our portfolio with
significant brownfield and greenfield development
opportunities such as Cambo, Marigold, Fotla and
Tornado and infill drilling at Montrose, Schiehallion and
Mariner. With further consolidation in the sector likely
due to continued market dislocation, our focus in 2024
will be on prioritising investment across our portfolio
alongside the potential for value-accretive M&A to
maximise shareholder returns.
As a direct result of the Energy Profits Levy,
investment across the UK North Sea during 2023 has
been significantly impacted, as the UK competes for
capital across global portfolios. Our 2024 production
guidance of 56-61 kboe/d reflects the impact of
deferred or cancelled projects across our operated and
non-operated asset base including in the Greater Stella
Area, Montrose Arbroath Area, Elgin Franklin Area and
Alba.
Beyond 2024, the Group expects production growth
through the medium-term with a return towards
80 kboe/d by 2027, as we see the full benefit of
investment in our Captain EOR Phase II project
and first production from the sanctioned Rosebank
development.
Our operating cost guidance for 2024 of $540-590
million reflects our continued focus on cost control
but increasing net costs from the $524 million 2023
outturn, due partly to tariff revenues reducing with
lower third-party throughput at the Greater Stella Area.
As a result of forecasted reductions in 2024 volumes
we expect an increase in unit operating cost per barrel
in the short-term.
Our mid-term ambition is to drive down our average
operating cost per barrel as we transition our portfolio to
earlier-life assets from mature assets with a significantly
lower unit operating cost profile.
Our producing asset capital cost guidance of $335-
385 million (excluding capital investment for projects
awaiting Final Investment Decision and Rosebank),
reflects investment in executing the final stages of
the Captain EOR Phase II project to completion and
first injection in the subsea wells, continued drilling
at Mariner and Schiehallion and facilities upgrades at
Captain. In 2024, we forecast capital spend on the
Rosebank development to be in the range of $190-230
million reflecting a significant ramp up of activities
including FPSO upgrades and installation of subsea
templates and satellites structures.
Ithaca Energy is targeting a 2024 dividend at the top
end of our capital allocation policy range of 15-30%
post-tax CFFO.
2023 ADJUSTED EBITDAX
$1.7bn
LEVERAGE RATIO
0.33x
Adjusted net debt to adjusted EBITDAX
16 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC16 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Market review
UK independent operators
are key to meeting the UK
Government’s energy security
and Net Zero objectives.
The UK oil and gas industry has experienced
substantial headwinds in 2023. Investment in
the basin has slowed significantly as a result of
continued fiscal and political instability and an
enduring Energy Profits Levy, despite a return
to more normalised oil and gas prices in 2023
and 2024.
We continue to constructively engage with
the UK Government to highlight the impact
of materially reduced investment to the
attainment of energy security, decarbonisation
and Net Zero targets.
1 2 3 4 5
Key trends and developments affecting our market
Navigating the
Energy Trilemma
Fiscal instability
dampening
investment
Brent prices
reactive to
geopolitical
events
Significant
softening in
gas prices
Market
consolidation
trend
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38% 36%
1 Navigating the Energy Trilemma
Security
OIL AND GAS FORMS AN ESSENTIAL PART OF THE UK’S ENERGY MIX
The UK has been a net importer of energy since 2004, meaning the UK uses more energy than is supplied from domestic resources. The
energy transition will require significant new investment in alternative energies to meet growing energy demand and close the import gap.
In the meantime, investment in oil and gas is critical to reduce reliance on high-emission and politically volatile import markets.
2023
Mid-2030s
By 2050
In 2023, oil and gas supporting 74%
(2022: 76%) of the UK’s energy needs.
In 2022, importing energy cost the UK
£117 billion.
It is estimated that oil and gas will meet
50% of the UK’s energy needs in the
mid-2030s.
By 2050, it is estimated that oil and
gas will still provide 22% of the UK’s
energy needs.
Energy
Trilemma
SustainabilityAffordability
Summary
With domestic energy security at the forefront of
the UK Government agenda, the oil and gas industry
continues to be at the heart of navigating the Energy
Trilemma, delivering critical UK energy security,
improving energy affordability and lowering emissions.
Today, oil and gas continues to be an essential
component of the energy mix. In 2023, our industry
met over 74% (2022: 76%) of the UK’s energy demands
and, with continued supply vulnerabilities and growth
in alternative energies failing to keep pace with growing
demand, we believe that our sector will continue to have
an important role to play in the global energy mix for
many decades to come.
As we look to successfully manage the transition,
ongoing investment in the UK North Sea will be critical
to abate the decline in UK oil and gas production. The
scale and rate of investment will determine the UK’s
future energy import gap and reliance on costlier,
less secure and higher carbon footprint imports.
Our response
We serve today’s needs for domestic energy through
operating our assets responsibly. For the future, we are
committed to investing in low carbon developments to
support the UK’s energy security into the transition.
We are constructively engaging with the UK
Government to highlight the importance of a stable
fiscal regime to support investment in the basin to
achieve both the UK’s energy security and Net Zero
objectives. In particular, we continue to seek assurances
on the longevity of the decarbonisation investment
allowances on sanctioned projects that would otherwise
be economically unviable, prior to making investment
decisions on decarbonisation activity.
7% 15%
Other energy sources: coal,
renewables, nuclear and biomass
GasOil
21% 29%
18 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLCITHACA ENERGY PLC
Market review continued
Summary
Fiscal and political instability continued to be a
dominant force across the oil and gas industry in 2023,
as the sector grappled with the consequences of further
changes to the Energy Profits Levy at the end of 2022.
The increase in the Energy Profits Levy in the 2022
Autumn Statement, saw the industry’s effective tax rate
rise to 75% until March 2028, with the removal of the
sunset clause that was intended to withdraw the levy
on a return to normal commodity prices. At the same
time, the investment allowance designed to promote
investment in the basin was reduced to 29% with a
decarbonisation allowance of 80% introduced for
spend associated with decarbonisation activity.
As a direct consequence of these changes, new
investment has been severely dampened across the
UK North Sea in 2023, with operators delaying or
cancelling projects given the competition for capital
across global portfolios, the impact to cash flows
available for reinvestment and borrowing capacity. This
has been further exasperated by political uncertainty
and the potential for further fiscal changes.
A recent survey produced by Offshore Energies UK
highlighted the challenges in investor sentiment, with
over 90% of the UK’s offshore operators reported to
be cutting back investment and likely to see a negative
impact to production in the next five years.
The introduction of Energy Security Investment
Mechanism (ESIM) in June 2023 was the first positive
step towards rebuilding investor confidence. However,
the necessity to meet both oil and gas price floors set
at $71.40/bbl and 54p/therm respectively over a rolling
six-month period to trigger the removal of the levy
has had limited impact to investment sentiment and
borrowing capacity.
The Chancellor’s 2024 Spring Budget, extended the
levy by a further year, creating further fiscal instability.
Our response
We continue to constructively engage with the UK
Government to highlight the negative impact of the
Energy Profits Levy to our investment programme and the
consequential medium and long-term impact to the UK
Government’s energy security and Net Zero ambitions.
We have been an active contributor to the fiscal forum
and strongly believe that further amendments are
required to the Energy Profits Levy including the
amendment, and legislation, of an appropriate price
floor that reflects the seasonal nature and structural
changes in gas markets.
As we navigate the continued impact of the Energy
Profits Levy to our operations, we remain value-focused
and disciplined, investing only in opportunities that
we believe have the potential to deliver growth and
maximise shareholder value.
As careful stewards of shareholders capital, the Energy
Profits Levy has already resulted in the deferral or
cancellation of investment across the Group’s operated
and non-operated assets, including in the Greater Stella
Area, Montrose Arbroath Area and Elgin Franklin Area.
As an inevitable consequence of this industry-wide
reduction in investment, we are now experiencing
the impact to our short to medium-term production
outlook with production guidance in 2024, falling
below 2023 production levels.
ESTIMATED
$333 million
2024 EPL payments
OEUK SURVEY
90%
UK offshore operators reducing
investment and likely to see a
negative impact to production in
next five years
2 UK fiscal instability
dampening investment
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ITHACA ENERGY PLC
3 Brent prices reactive
to geopolitical events
Fiscal and political instability continued to
be a dominant force across the oil and gas
industry in 2023, as the sector grappled with
the consequences of further changes to the
Energy Profits Levy at the end of 2022.”
Summary
Oil prices trended downwards in 2023, reflecting a
softening in market fundamentals from multi-year highs
in 2022 as a result of the war in Ukraine, recording an
average Brent crude oil spot price of $82/bbl (2022:
$99/bbl) and closing the year at $77/bbl.
Crude oil markets continued to experience volatility
in 2023 with Russia facing import bans, interest rate
hikes, inflation concerns, fears of recession and global
oil demand falling below expectations. In the first half
of the year, oil prices averaged $80/bbl, increasing in
the second half of the year to $84/bbl.
The extension of OPEC+ members voluntary
production cuts through to the end of 2023, together
with the fall in US commercial crude oil inventories
in late September to its lowest point since December
2022, saw crude reach its year high of 97/bbl as a
result of supply pressure.
Emerging tensions in the Middle East in the final
quarter of the year prompted jitters about potential
supply disruptions with crude prices increasing as a
result of the Israel-Hamas conflict before easing as fears
over a wider conflict and supply disruption were allayed,
rising again in mid-December with growing geopolitical
tension amid Houthi attacks on shipping vessels in the
Red Sea.
REALISED 2023 OIL PRICE
(after hedging)
82
$/bbl
Our response
Ithaca Energy takes a disciplined approach to hedging,
recognising the importance of balancing upside
exposure to commodity prices while managing downside
protection of our cash flows. In 2023, we achieved
realised oil prices of $85/bbl before hedging and
$82/bbl after hedging.
At year-end the Group has 4.7 mmboe of oil hedged
into 2025 at an average price floor of $78/bbl.
20 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
4 Significant softening
in gas prices
Summary
Following a year of extraordinary gas prices in 2022
with significant volatility caused by Russian’s full-scale
invasion of Ukraine, UK National Balancing Point
(NBP) gas price fell materially in 2023 opening the
year at 172p/therm and closing the year at 81p/therm,
recording an average gas price of 102p/therm compared
to an average of 264p/therm in 2022.
Weakening demand fundamentals, reflecting milder
weather and a slower than expected return to global
Post-COVID demand, together with growing
inventories and substantial growth in LNG supply
to Europe has driven the reduction in 2023,
as NBP gas prices return to pre-2022 levels.
REALISED GAS PRICE
(after hedging)
139
p/therm
Our response
With continued volatility in gas markets during 2023,
Ithaca Energy took a proactive approach to hedging,
placing material gas swaps and collars at the peaks in
the commodity markets supporting an attractive hedge
book for gas into 2025. At year-end the Group has
3.5 mmboe of gas hedged into H1 2025 at an average
price floor of 135p/therm.
In 2023, we achieved realised gas prices of 97p/therm
before hedging and 139p/therm after hedging.
0
100
200
300
400
500
600
Gas Price Average Gas Price 2021
Jan 21
Dec 23
Average Gas Price 2022 Average Gas Price 2023
National Balancing Point Gas Price (p/therm)
Market review continued
21ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
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STRATEGIC
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GOVERNANCE
REPORT
FINANCIAL
STATEMENTS
21ANNUAL REPORT AND ACCOUNTS 2023
Summary
Despite a reduction in deal count in 2023, the global
upstream M&A markets recorded decade high deal
spend in the year. Consolidation in 2023 was largely
dominated by the majors with four M&A transactions
recording a consideration greater than $10 billion, with
the ten largest deals accounting for three-quarters of
disclosed global M&A spend.
In Europe, Norwegian gas-focused transactions
underpinned material deal activity including Var
Energi’s acquisition of Neptune’s Norwegian portfolio
and Harbour Energy’s acquisition of Wintershall Dea’s
asset portfolio. In contrast, the UK recorded its lowest
year in M&A spend over the last decade as investment
in the region was impacted by the Energy Profits Levy.
Equinor’s acquisition of Suncor in the UK was largely
driven by the desire to progress with the Rosebank
development, with Suncor holding a stake of 40%
in the field prior to the acquisition.
It is largely anticipated that the trend for material
consolidation will continue into 2024 with further
corporate consolidation and an increase in asset
transactions as buyers seek to rationalise portfolios
following 2023 M&A activity.
Our response
During 2023, Ithaca Energy continued to leverage
its M&A capabilities to review the market for value-
accretive opportunities. Deal flow focused on preserving
the value of our high-quality asset base acquiring the
remaining stake of the Cambo and Fotla fields.
Following the successful extension of the Cambo license
milestones to 31 March 2026, the Group is actively
engaging with potential farm-in partners to secure an
aligned joint venture partnership that would enable
the future progression of both the Cambo and Fotla
projects towards FID.
With further consolidation in the sector likely
due to continued market dislocation and portfolio
rationalisation, our focus in 2024 will be on prioritising
investment across our portfolio alongside the potential
for value-accretive M&A. We will continue to take
a disciplined approach assessing M&A transactions
against our stringent investor criteria in order to
maximise shareholder value.
CAMBO STAKE ACQUIRED
30%
Acquired remaining 30% stake of
Cambo discovery from Shell UK
FOTLA STAKE ACQUIRED
40%
Acquired remaining 40% stake
of Fotla discovery, together with
three explorations licences, from
Spirit Energy
5 Market consolidation trend
22 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC22 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Driven by our mission, vision and values,
we are a Company dedicated to growing
sustainably. This means operating safely
and responsibly, developing our people
and sharing our success.
Our business
model
Our business model
Exploration
and appraisal
Development Production
Late-life operations
and decommissioning
1 4
2 3
What we do
We operate a targeted approach to exploration
and appraisal drilling, prioritising prospects in
close proximity to existing infrastructure hubs.
What we do
With a strong portfolio of brownfield and
greenfield development assets, our focus is on
high-grading investment across our portfolio to
maximise shareholder value.
What we do
To meet continued demand for hydrocarbons,
we aim to maximise field recovery from our
producing asset base by deploying innovative
technology and relentlessly focusing on
production efficiency.
What we do
We efficiently operate our assets in ultra-late
life, maximising production while integrating
decommissioning activities into everyday
operations to maximise the value from
our assets.
Our responsible approach
We aim to identify and commercialise
tie-back developments using existing
infrastructure reducing the emission
intensity of the hub.
Our responsible approach
We are committed to the responsible
execution of decommissioning
programmes, reducing emissions and
maximising recycling where possible.
Our responsible approach
Our focus is on producing as responsibly as
possible at all times, through the execution
of portfolio-wide decarbonisation
initiatives and the use of pioneering
technology to reduce emission intensity.
Our responsible approach
Through investing in low emission
development projects we aim to
fundamentally transition our portfolio to one
of the lowest carbon portfolios in the UK.
23ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023 23ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
COMPANY
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
REPORT
FINANCIAL
STATEMENTS
Delivering value for our stakeholders
$400 million
Total dividend for 2023
15-30%
Post-tax CFFO dividend target
$500 million
Debt repayments
Outcomes
• Attractive 2023 return to shareholders and
a clear future dividend policy of targeted
dividends of 15 -30% post-tax CFFO
• Strong balance sheet with available liquidity
to support future growth opportunities
• Robust hedging policy providing income
statement and balance sheet protection
Outcomes
• Aligned JV partnerships that are collaborative
in nature
• Strategic relationships with key supply chain
partners embracing integration and innovation
• Supporting UK domestic energy security
Outcomes
• A strong safety culture supporting a safe
working environment
• An engaged and inclusive organisation with
a diverse and skilled workforce
• A continuous learning culture that supports
development of new talent
Outcomes
• Formed strategic charitable partnerships
based on employee nominations
• Gave back to local charities in the North East
of Scotland by offering both financial and
volunteering support
• Employee-led community engagement
scheme providing broad financial support
to wide ranging community projects
$524 million
Net operating costs
$392 million
Net producing asset capital investment
25.4 mmboe
Sales volumes
72%
Employees participation in engagement survey (up 3%)
91%
Responded they felt safe at work (up 11%)
(engagement survey)
33%
Of onshore workforce are female
$104 million
Wages and salaries in 2023
6
Key charitable partnerships
>50
Financial donations to support employee
nominated community projects
of 43%
Employee pride in commitment to
social responsibility (engagement survey)
JV partners, suppliers
and customers
Our people
CommunitiesShareholders and lenders
24 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC24 ANNUAL REPORT AND ACCOUNTS 2023
Our strategy
Our strategic pillars
Executing our BUY, BUILD and
BOOST strategy, with targeted
investment in the year focused
on maximising shareholder value.
Leverage our proven M&A execution capabilities and deep
integration expertise to BUY a high-quality, long-life portfolio
of significant scale
• Pursue value accretive transactions with a focus on our core UKCS market
• Leverage our full cycle capabilities to materialise value across asset packages
• Take a measured approach to M&A opportunities, following stringent investment criteria
Progress
• Acquired the remaining 40% stake in Fotla and 30% stake in Cambo, at limited near-term cost,
providing full control over pre-FID work programme and timing
• Embarked on farm-out process to enable the future progression of Cambo and Fotla towards FID
• Disciplined approach to M&A during the year with over 20 opportunities reviewed against our
investment criteria, of which ten proceeded to due diligence
2024 Priorities
• Successful close out of Cambo and Fotla farm-in processes
• Targeted M&A adding further portfolio diversification with a focus on producing asset packages
• Continued M&A discipline to ensure strategic fit
• Consider geographical diversification to portfolio
FOTLA WI
ACQUIRED
40%
CAMBO WI
ACQUIRED
30%
Buy assets
In focus: page 39
25ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
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Progress
• FID taken to progress Phase I of the Rosebank development, the UK’s largest undeveloped discovery
• Captain electrification FEED study commenced and matured to support FID in 2024
• Marigold unitisation and unit operating agreement executed with work progressing on Field Development
Plan (FDP)
• Exploration drilling at K2 and appraisal drilling at Leverett
2024 Priorities
• Finalisation of Captain electrification FEED study to support 2024 FID
• Successful extension of Cambo license from March 2024 (Completed: extension has been granted to
March 2026)
• Complete Fotla development concept selection
• Continued high-grading of investment across development portfolio, prioritising capital to maximise returns
Progress
• Captain EOR Phase II close to full completion with only minor commissioning scopes outstanding
• Maintained high levels of production efficiency supporting a broadly flat unit operating cost, despite
inflationary pressures
• Partnered cost optimisation project successfully achieved material cost savings and reinforced
cost culture in organisation
• Supply chain partnerships developed to support future decommissioning plans including integrated
asset decommissioning approach
2024 Priorities
• First EOR Phase II polymer injection into subsea wells at Captain
• Continuous focus on delivering top quartile production efficiency across operated assets
• Deliver short-term cost optimisation targets
ROSEBANK PHASE I
GROSS RESERVES
234 MMBOE
CAPTAIN ELECTRIFICATION
TARGETED FID
2024
Read more on page 47
OPERATED ASSET
PRODUCTION EFFICIENCY
84%
CAPTAIN EOR PHASE II
SUBSEA INJECTION
H1 2024
Read more on page 31
Develop projects with strong economics and lower carbon intensity
to BUILD a robust long-term portfolio
• Pursue low carbon intensity greenfield projects that significantly transform our emissions footprint
• Target adjacent upside potential to existing greenfield developments
• Invest in brownfield opportunities close to existing infrastructure with attractive returns
• Seek operatorship, where possible, to control our capital programme and ensure the robust high
grading of opportunities
Deploy our deep operational expertise and pioneering minds
to BOOST field performance and enhance margins
• Develop and deploy innovative technology to maximise field recovery
• Focus on production efficiency initiatives to optimise revenue realisation and lower unit operating costs
• Deliver digitalisation initiatives to reduce risk and drive down costs
• Build strategic relationships with key supply chain partners, leveraging on our scale of operations
Build assets
In focus: page 33
Boost assets
In focus: page 31
26 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
56,486
71,403
70,239
FY 2023
FY 2022
FY 2021
291
512
544
FY 2023
FY 2022
FY 2021
497,929
483,325
435,792
FY 2023
FY 2022
FY 2021
24.6
23.8
25.0
FY 2023
FY 2022
FY 2021
Key performance indicators
KPIs
Our KPIs track and measure
both operational and financial
performance and are used to
manage the business, to provide
an objective comparison to our
peer group and as performance
measures for certain Executive
compensation arrangements.
Non-GAAP measures
Adjusted EBITDAX, unit operating expenditure,
available liquidity, leverage ratio, adjusted net
debt and certain other reported metrics are
non-GAAP measures that are not specifically
defined under International Financial Reporting
Standards or other generally accepted accounting
principles. Further details are set out on pages 221
to 223.
How we determine our KPIs
The majority of the Group’s KPIs, as presented, were
identified during the IPO process and included in the
IPO prospectus. These KPIs enable the Board and
the Executive Leadership Team (ELT) to monitor the
Group’s performance. The ELT uses these measures
to evaluate operational and financial performance and
to make informed decisions on operational, financial
and strategic matters.
Safety, production and emissions KPIs
TIER 1 PROCESS SAFETY EVENTS
1 - -
FY 2023, FY 2022, FY 2021
Objective
Ithaca Energy strives to maintain the highest
standards of operational integrity to prevent
any releases of hazardous material from
primary containment.
FY 2023 performance
One Tier 1 event occurred during 2023 with
a loss of containment of marine gas oil from
a flexible fuel hose.
SERIOUS INJURY AND FATALITY FREQUENCY
-/m hrs
FY 2023, FY 2022, FY 2021
Objective
We are committed to continually improve our
safety performance and to take all steps necessary
to ensure that there is no harm to our people.
FY 2023 performance
During 2023 we again had zero events resulting
in serious injury or fatality.
TOTAL PRODUCTION
70,239 boe/d
Objective
We aim to maximise value from our producing
assets through operational efficiency and to
grow through our buy, build and boost strategy.
FY 2023 performance
Total production was 2% lower than 2022
principally due to the planned maintenance
shutdowns in the year and isolated performance
issues across our non-operated joint venture
portfolio.
RESERVES & RESOURCES
544 mmboe
Objective
We aim to have a stable to growing level of
reserves and resources through our BUY,
BUILD and BOOST strategy.
FY 2023 performance
Reserves and resources are 6% higher than 2022
principally reflecting Rosebank sanctioning and
100% ownership of Cambo and Fotla partly offset
by a full year of production.
SCOPE 1 AND 2 EMISSIONS
435,792 tCO
2
e
Objective
Ithaca Energy aims to proactively manage its
environmental impact and adhere to our plan
to achieve Net Zero by 2040.
FY 2023 performance
Scope 1 and scope 2 emissions from operated
assets were 10% lower than 2022 reflecting our
emission reduction projects which are set out in
the ESG section as well as the Alba John Brown
turbine outage during the year.
GREEN HOUSE GAS (GHG) INTENSITY
25.0 kgCO
2
e/boe
Objective
The Group strives to proactively manage its
environmental impact and is committed to the
actions required to achieve Net Zero by 2040.
FY 2023 performance
GHG intensity was 5% higher than 2022
primarily due to lower production in the year.
27ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
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27ANNUAL REPORT AND ACCOUNTS 2023
GOVERNANCE
REPORT
FINANCIAL
STATEMENTS
912.7
1,723.3
1,290.8
FY 2023
FY 2022
FY 2021
18.0
19.0
20.5
FY 2023
FY 2022
FY 2021
1,035.4
1,916.2
1,722.7
FY 2023
FY 2022
FY 2021
0.90
0.51
0.33
FY 2023
FY 2022
FY 2021
930.2
971.2
571.8
FY 2023
FY 2022
FY 2021
619.8
578.8
1,028.2
FY 2023
FY 2022
FY 2021
Financial performance KPIs
ADJUSTED EBITDAX
$1,722.7m
Objective
The Group aims to grow adjusted EBITDAX
through increased production, strict cost control
and our progressive hedging strategy.
FY 2023 performance
Adjusted EBITDAX was 10% lower than 2022
due to a combination of lower commodity prices,
higher unit operating expenditure and lower
production partly offset by hedging gains.
AVAILABLE LIQUIDITY
$1,028.2m
Objective
Ithaca Energy aims to maintain a minimum
available liquidity of $50 million by securing and
maintaining appropriately structured facilities
with third-party lenders.
FY 2023 performance
Available liquidity was 78% higher than 2022
reflecting the reduction in adjusted net debt and
new $150 million capex carry facility, despite a
reduction of $200 million in liquidity available
under the RBL due to amortisation.
NET CASH FLOW FROM OPERATING ACTIVITIES
$1,290.8m
Objective
Ithaca Energy aims to generate predictable and
reliable cash flows to support investment and
shareholder returns whilst maintaining financial
stability and strength throughout the commodity
price cycle.
FY 2023 performance
Net cash flow was 25% lower than 2022 due to
the adjusted EBITDAX outcome and higher cash
tax costs largely due to the Energy Profits Levy.
UNIT OPERATING EXPENDITURE
$20.5/boe
Objective
We aim to optimise unit operating expenditure
by maintaining the highest levels of operational
efficiency whilst not compromising on health,
safety and environmental matters.
FY 2023 performance
Unit operating expenditure was 8% higher than
2022 principally due to the planned maintenance
shutdowns in Q3. Q4 unit operating expenditure
was broadly in line with Q4 2022.
LEVERAGE RATIO – ADJUSTED NET DEBT/
ADJUSTED EBITDAX
0.33x
Objective
The Group aims to achieve a leverage ratio of 1.5
times or lower throughout the commodity price
cycle whilst pursuing prudent capital investment
and M&A opportunities supported by our active
hedging strategy.
FY 2023 performance
The leverage ratio was 35% lower than 2022
principally reflecting the reduction in adjusted
net debt.
ADJUSTED NET DEBT
$571.8m
Objective
We aim to pay down debt where it makes sense
to do so within our capital allocation framework.
FY 2023 performance
Adjusted net debt was 41% lower than 2022 due
to strong operational cash flows, prudent capital
expenditure and the realisation of commodity
hedging gains.
28 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC28 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Operations review
DAILY PRODUCTION
70.2 KBOE/D
Diverse and high-quality
portfolio of operated and non-
operated assets in the UKCS
Our operating review
OPERATED ASSETS
NON-OPERATED ASSETS
ELGIN FRANKLIN
CAMBO
ROSEBANK
MARINER
MARIGOLD
COOK MONARB
CAPTAIN
WEST OF SHETLAND
MARINER
MARIGOLD
MONARB & COOK
GBA & ALBA
GSA (STELLA, HARRIER,
VORLICH AND ABIGAIL)
& OTHER
CAPTAIN
TORNADO
SCHIEHALLION
BRITANNIA
ALDER
ALBA
ENOCHDHU
FOTLA
BRODGAR
CALLANISH
PIERCE
GSA JADE
ISABELLA
ERSKINE
29ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
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Material high-value
asset portfolio
Our UK North Sea portfolio consists of 28 producing
field interests, which predominantly lie in the Northern
and Central North Sea, Moray Firth and West of
Shetland area of the UKCS.
Ithaca Energy operates nine producing fields,
contributing 51.4% of total production, and has a
strong track record of value creation through delivering
efficiency improvements. Our operated asset
production efficiency performance in 2023 of 84%
reflects our commitment to maximising value through
operational excellence, most notably at FPF-1 where
efficiency improvements executed in 2022 continue
to yield production efficiency rates of above 90%.
Our diversified producing asset portfolio comprises
a combination of fields that have a long, stable track
record of production and those that have recently
come onstream.
Our portfolio benefits from the known production
performance characteristics of established fields,
which facilitate the execution of targeted infill drilling
programmes, designed to maximise reserves recovery
and develop higher-margin incremental volumes.
Ithaca Energy has a strong pipeline of organic greenfield
and brownfield growth opportunities, and as operator
of the majority of its 2P reserves and 2C resources, has
significant control and flexibility over execution of the
Group’s strategic, operational and financial priorities.
Net production split
(Operated and non-operated)
Operated
Non-operated
Liquids
Gas
51.4%
OPERATED
51.4%
48.6%
Net production split
(Liquids and gas)
66.4%
LIQUIDS
66.4%
33.6%
30 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Operations review continued
WORKING INTEREST
85%
CAPTAIN % OF TOTAL
PRODUCTION
21%
WORKING INTEREST
36.67%
STELLA, HARRIER, ABIGAIL
WORKING INTEREST
100%
VORLICH
WORKING INTEREST
34%
Alba
Production efficiency from the Alba field averaged
61.3% in 2023, reflecting a challenging year of
operations for the asset. There was no planned
turnaround activity in the year.
Production in the year fell below expectations and was strongly
impacted by a lack of water injection pressure support from mid-April to
the end of the year due to a significant mains power generator outage.
The John Brown turbine required major repair and mediation work due
to a failed turbine blade, with the turbine expected to return to full
operations in March 2024, which will allow a return to water injection
to support the reservoir.
The Alba North Platform drilling rig was active for most of the year,
carrying out coiled tubing operations and plugging and abandonment
activity of wells A59 and A63 as part of our integrated late life/
decommissioning approach. The drilling rig also successfully completed
the workover of well A55, reinstating production in September.
As Alba enters the ultra-late life phase of operations, the Group is maturing
its integrated ultra-late life and decommissioning plan for the asset.
Greater Stella Area
The Greater Stella Area (GSA), hosted by the
FPF-1 floating production unit, recorded another
strong year of production efficiency, averaging 91%
in 2023 (excluding planned turnaround activity).
The Group recorded a strong year of production efficiency at FPF-1, with
downtime recorded from two discrete events in relation to an inlet heater
repair and turbine change out. There was significant activity completed
in the year including a sea water lift pump upgrade (driving emissions
reduction benefits), hull column crack repairs, control room upgrades,
mooring tension upgrades and lifeboat loading and launch change.
Production from the Abigail field, that was successfully tied-back to
FPF-1 in October 2022, has performed better than expected in the
year supporting production at the GSA hub.
As a direct result of the Energy Profits Levy, the Group made the
decision not to proceed with an infill drilling programme previously
planned at the Harrier field during 2024, reflecting the negative impact
to project returns of EPL in conjunction with a softening commodity
price environment. As a result, the Group is maturing its integrated
ultra-late life and decommissioning plan for the asset.
Operated assets
Captain
Production efficiency from the Captain field averaged
84% in 2023 (excluding planned turnaround activity)
reflecting increased turnaround scope and duration.
Activity levels remained high throughout the year with a number of
major work scopes completed including the change out of both solar
gas turbine engines, a major service completed on the export gas
compressor, the addition of a further power water pump and change out
of a FPSO thruster. Execution of fabric maintenance and repair order
activities were supported by a walk-to-work vessel.
A 33-day turnaround campaign saw major upgrades completed to
FPSO A vessel internals, the FPSO flare tip change out, major EOR
Phase II tie-in scopes including electrical tie-ins and significant software
uploads, progression of the installation of the third water injection pump
on the bridge-linked platform (BLP) up to commissioning plus large
internal vessel inspections on the BLP and FPSO.
Execution of the EOR Phase II project is over 90% complete, with the
project on time and within budget.
Read more on project activity in our case study on page 31.
31ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023 31ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
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ITHACA ENERGY PLC
A key tenet of our BUY, BUILD and
BOOST strategy is to drive organic growth
and value creation from our high-quality
asset portfolio.
We achieve this by strategically investing in
brownfield opportunities close to existing
infrastructure and drawing on our deep
operational experience to BOOST field
performance. By adopting pioneering
technologies we have been successful
in accelerating and maximising reservoir
recovery at our flagship Captain field.
Execution of the EOR Phase II project
is over 90% complete, with the project
on time and within budget.”
Build Assets Boost Assets
Case study
Captain
EOR PHASE II
PROJECT COMPLETION STATUS:
90%
PEAK EOR PHASE II
WELL RESPONSE
2026
Building upon the success of EOR Phase I, the second phase of the
EOR programme reflects an expansion of the platform-based EOR
Phase I project to a focus on the subsea area in the Phase II development.
Sanctioned in April 2021, this phase aims to significantly BOOST
production at the field, doubling net production to approximately 30 kboe/d
and reaching peak production in 2026.
Our cutting-edge polymer technology, pioneered by the Group in the UK
North Sea, enhances reservoir sweep efficiency by injecting a water-soluble
polymer into the reservoir. This polymer effectively sweeps previously
bypassed and stranded oil, directing it toward adjacent production wells.
By accelerating and maximising field life recovery, polymer technology
provides significant decarbonisation benefits, with the potential to reduce
carbon intensity by up to an estimated 40%.
With project activity now over 90% complete, our offshore teams have
successfully executed the majority of the critical work scopes including
drilling of five of six injection wells across subsea areas D and E, significant
subsea installation works including flowlines, umbilicals and subsea umbilical
distribution system (SUDS) structures and significant topside construction
activity including installation of new modules and piping cassettes.
As we move into 2024, project work will transition from the construction
phase to commissioning activities supporting first Phase II polymer injection
into the subsea wells in summer 2024.
32 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Operations review continued
WORKING INTEREST
6.25%-73.68%
WORKING INTEREST
41.03%
WORKING INTEREST
11.754%
Montrose Arbroath
Ithaca Energy has a 41.03% equity stake
in the Montrose Arbroath (MonArb) area.
Production from the MonArb area was reliable in the year with net
production to Ithaca Energy of 6.9 kboe/d.
In 2023, a development well was drilled on the Shaw field which
provided useful reservoir information and was suspended pending
further analysis.
Evaluation of development options in the MonArb area continues
with engineering progressing on the North Cayley and Montrose
infill projects.
Schiehallion
Ithaca Energy has a 11.754% equity stake
in the Schiehallion field.
Production from the Schiehallion area delivered net production to
Ithaca Energy of 5.8 kboe/d.
In 2023, progress was made towards the continued development of the
asset with the commencement of drilling on the Ocean Great White rig
with successful delivery of two production wells which came online in
the second half of the year.
Drilling on the field will continue throughout 2024 with multiple wells
anticipated to be delivered in the year.
Non-operated assets
The Group’s non-operated assets consisting of interests in 19 fields, representing 48.6% of 2023 production.
Being an active and collaborative partner is critical to the success of our non-operated joint venture portfolio.
Greater Britannia Area
Comprising of assets: Britannia (32.38%), Alder
(Operated 73.68%), Callanish (16.5%), Brodgar
(6.25%), Enochdhu (50%) and Leverett (12.5%).
Production from the Greater Britannia area was reliable in the year
with net production to Ithaca Energy of 9.1 kboe/d.
Further development of the area progressed with joint venture
preparation for the sixth Callanish well to be spud in 2024, having
previously been scheduled for 2023, and joint venture approval for long-
lead items for a fifth Brodgar well, scheduled to be drilled in 2024/25.
The JV partnership successfully appraised the Leverett discovery,
close to Britannia infrastructure, with good flow rates achieved. The
partnership will now review the data obtained to decide on the preferred
development method with production targeted in the 2026/27
timeframe. The Leverett discovery is a good example of our BUILD
strategy, where we seek to invest in brownfield opportunities close to
existing infrastructure with attractive returns.
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ITHACA ENERGY PLC
Other operated assets
Ithaca Energy owns a 50% interest in the Erskine field
and a 61.35% interest in the Cook field.
• Production efficiency from the Erskine field averaged 76%,
(excluding planned TAR losses), as a result of an extended shutdown
on the host Lomond platform which provides fluid processing and an
export route. A MODU-based intervention is scheduled for 2024
to reinstate production from the W1 well in 2024.
• The Cook field achieved average production efficiency of 97%,
supported by water injection that provides long-term pressure
support for the single production well.
Other non-operated assets
Ithaca Energy owns a 25.5% interest in the Jade field
and interests of less than 10% in the Elgin Franklin,
Mariner, Pierce and Columba assets.
• At Jade, the J14 well was brought online in 2023 and the J6 well
was successfully worked over using the Valaris 120 rig.
• The Mariner field saw two new wells added in 2023, as development
progresses on the asset.
• The Pierce project, operated by Shell, was returned to production in
2023 and subsequently suffered extended downtime due to topsides
and mooring equipment reliability, and remained offline at year-end.
• The Columba asset operator announced plans to cease production
from the field in the next 2 years.
Ithaca Energy and Equinor jointly
sanctioned Phase I of the Rosebank
development in 2023, with gross
reserves of 234 mmboe associated
with this initial phase.
Following sanction, the project has now entered execution phase
with the Petrojarl Knarr FPSO (renamed Petrojarl Rosebank)
docked in Dubai, undergoing extensive refurbishment and upgrade
activity, including preparing the vessel to be electrification ready.
Initial observations from the vessel inspection have not highlighted
any major concerns that would materially impact the development
timeline with activity continuing at pace.
In 2024, work will commence on preparation of the subsea
infrastructure including the installation of templates and satellite
structures as part of the multi-year development timeline towards
first production in 2026/27.
WORKING INTEREST
20%
PHASE I
GROSS 2P RESERVES
234MMBOE
Case study
Rosebank
Sanctioning of the Rosebank development
marks a significant milestone for Ithaca
Energy, as the Group moves forward
delivering against its BUY, BUILD and
BOOST strategy.”
34 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLCANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Senior Independent Director’s Q&A
Q&A with John Mogford
Senior Independent Director
As industry profits cease
to be windfall in nature,
we urge UK policymakers to
adopt a measured approach
to our industry. Encouraging
continued investment in the
basin remains crucial.”
JOHN, CAN YOU SHARE YOUR REFLECTIONS
ON THE GROUP’S FIRST FULL YEAR OF
OPERATIONS AS A LISTED COMPANY?
Like all years there have been ups and downs. Focusing on
the positives, the sanctioning and progress of the Rosebank
development has been a real success and represents a significant
milestone for the Group, executing against our BUILD strategy.
At Captain, we have enjoyed huge technical success, with strong
production in the year and significant progress of the EOR
Phase II project, proving that the field is a very valuable asset
for the Group, that we will continue to invest in for many years
to come.
On a less positive note, changes in the government’s fiscal
policy and ongoing political uncertainty have made it difficult
to operate in the UK, creating an increasingly challenging
environment to make long-term investment decisions. As a
direct result of these fiscal changes, reduced investment across
our portfolio, together with the impact of Storm Babet to K2
appraisal drilling operations, has meant we have added less
reserves than we had planned to in the year.
AS A BOARD YOU HAVE MADE A NUMBER
OF KEY DECISIONS DURING THE YEAR.
HOW DID THE BOARD APPROACH THESE?
Our focus has rightly been on weighing up short-term
performance with longer-term growth. We’ve taken a prudent
approach to our operating and capital budgets, high-grading
investment opportunities across our portfolio, ensuring
we safeguard short-term cash flows while progressing and
preserving the key long-term growth pillars of the Group,
Rosebank and Cambo.
As a recently listed Company, we remained committed
throughout the year to paying the targeted 2023 dividend,
outlined at the IPO, despite the evolving fiscal landscape.
ITHACA ENERGY’S GROWTH STRATEGY
IS CLEAR, HOW DO YOU FEEL THE GROUP
HAS PERFORMED AGAINST STRATEGY?
Over the past year, fiscal uncertainty has weighed heavily
on the execution of our strategy, with M&A activity in the UK
North Sea severely dampened. As an active consolidator in the
Q
Q
Q
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North Sea, material M&A was a core element of our growth
strategy in 2023 and we would have like to have completed
more commercial activities during the year. However, we remain
confident that opportunities for consolidation will materialise in
2024, through further rationalisation of portfolios.
We have enjoyed success with our BUILD strategy, with the
sanctioning of Rosebank, and through our BUY strategy we
preserved optionality and control at our Fotla and Cambo assets,
despite persisting partner and political uncertainty.
WHAT BEARING HAS EPL HAD ON BOARD
DECISIONS DURING THE YEAR?
The Energy Profits Levy has significantly influenced our
investment strategy in 2023. As a direct consequence of the
levy, we’ve had to prioritise and slow the pace of spend across our
capital investment programme, curtailing spend on our mature
late-life assets with infill drilling programmes cancelled at the
Greater Stella Area, shortening field life.
While this had an effect on our 2023 production, its impact
on our 2024 production is even more pronounced. This
unfortunately means we’ve been unable to commit to as many
long-term contracts with our supply chain partners and protect
as many jobs as we would have liked.
WITH CONTINUED FISCAL AND POLITICAL
INSTABILITY, HOW ROBUST IS ITHACA
ENERGY’S STRATEGY?
I am confident that our plans remain robust. Our continued focus
remains on maximising value for our shareholders, through our
BUY, BUILD and BOOST strategy. In times of uncertainty the
Group has had to be much more flexible in its decision-making,
and while our plans are well-founded, the change of fiscal
environment has required an agile and constructive response.
As industry profits cease to be windfall in nature, we urge UK
policymakers to adopt a measured approach to our industry.
Encouraging continued investment in the basin remains
crucial. Without it, we risk causing irreparable damage to the
UK’s energy security, while jeopardising thousands of jobs and
damaging decarbonisation efforts.
Q
Q
AS A NEW BOARD, WHAT CHALLENGES
HAVE YOU FACED?
Given the size of Delek’s shareholding (88.55%), we are deemed
to have a controlling shareholder for the purposes of the Listing
Rules. From the Board’s perspective, our paramount focus is
on creating a governance framework that supports informed
decision-making, where comprehensive and robust debate
ensures that the correct commercial decisions are made that
safeguard both the short-term and long-term performance of
the Group, ensuring that we always act in the best interests of
all our shareholders.
HOW DO YOU FEEL THE BOARD HAS
PERFORMED IN 2023?
I believe the Board has performed well over the course of the
year, despite the fact that we haven’t been able to make any
transformational moves in 2023, primarily as a result of fiscal
and political instability.
At the outset of the year, we conducted a thorough Board
evaluation, identifying areas for improvement. While some
processes still require attention, the Board has diligently
addressed these over the year. Notably, we have enhanced our
remuneration and performance appraisal systems and refined
our capital allocation processes to align with the standards
expected of a FTSE-listed Company. Although we recognise
that there are always areas for improvement around our
processes, I firmly believe that collectively as a Board we have
consistently arrived at the right decisions.
HOW HAS THE RELATIONSHIP AGREEMENT
BETWEEN ITHACA ENERGY AND DELEK
WORKED IN PRACTICE?
The Group entered into a Relationship Agreement with Delek
at the point of the Company’s listing, with the principal purpose
of ensuring that Ithaca Energy is capable of carrying out its
business independently of its controlling shareholder.
The agreement has been critical to establishing the necessary
controls and processes around communication flow with Delek,
which were not required when the Group was private. Although
it took some time to become accustomed to these changes,
I am confident that the established processes ensure sound
decision-making, in the best interests of all shareholders.
WHAT GOVERNANCE AREAS DO YOU BELIEVE
REQUIRE CONTINUED FOCUS?
The Board remains committed to ensuring a rigorous governance
framework is in place. The recent Board evaluation process
highlighted specific areas for continued improvement, particularly
in relation to the frequency and content of Board meetings,
the composition of the Board and workforce engagement.
In light of our CEO’s departure in January 2024, the Board
actively continues its search to identify the right person to fill
the role while ensuring the managerial structure aligns to fit the
responsibilities of the Executive Chairman and the future CEO.
AND YOUR THOUGHTS FOR 2024?
As we move into 2024, I am increasingly optimistic that we
will be able to deliver more on the BUY leg of our strategy.
With all participants in the North Sea having actively reviewed
their strategies over the course of the last year, giving full
consideration to the impact of the fiscal changes to their
businesses, I am confident that there will be more opportunities
in 2024 for potential consolidators, such as ourselves, to be
successful in acquiring new growth opportunities.
Q
Q
Q
Q
Q
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Our stakeholders
At Ithaca Energy, we place
significant importance on the need
for transparent communications
with our people, supporting a culture
of trust and respect.”
Engaging with
our stakeholders
At Ithaca Energy, we genuinely care about making a positive impact
for our people, shareholders and communities.
We regularly map our stakeholders to ensure the groups that we have
identified as key stakeholders remains appropriate. There have been
no changes to the Group’s business or operations that have merited a
change to our key stakeholders within the year and the key stakeholders
as set out in our Section 172 (1) Statement remain the same as the prior
year. We will continue to keep our stakeholder mapping process under
review, adapting our key stakeholders as appropriate.
Section 172 (1) Statement
The Board recognises the importance of engaging and
taking into account the views of all stakeholder Groups,
as delivering value for them is directly linked to the
success of the Group. To shape our long-term strategy
we must understand what matters to them.
Through regular engagement, we gain insight into the
different perspectives of our diverse stakeholders, ensuring
our vision and strategy is understood. Considering their
feedback on our strategy, business model and performance
builds strong, constructive relationships and enables robust
decision-making at Board-level.
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The Directors are required by
law to act in a way that promotes
the success of the Group for the
benefit of its shareholders. The
Directors must also consider
the wider consequences of their
decisions in the long-term and how
those decisions might affect other
groups of stakeholders, including
those listed in section 172(1) of the
Companies Act 2006.
Our Stakeholder Engagement
disclosures describe how the
Directors have had regard to the
matters set out in section 172(1)
(a) to (f) and forms the Directors’
Statement required under
section 414CZA of the
Companies Act 2006.
Disclosure Alignment and next steps
The likely consequence of any
decisions in the long-term
• Our vision and mission – page 2
• Our vision in action – pages 4 to 7
• Our business model and strategy – pages 22 to 25
The interests of employees • Our values – page 2
• ESG: social – pages 69 to 73
Fostering the Company business
relationships with suppliers,
customers and others
• Our vision and mission – page 2
• Our vision in action – pages 4 to 7
• Our business model and strategy – pages 22 to 25
• Engaging with our stakeholders – pages 36 to 43
Impact of operations on the
community and the environment
• ESG: environmental – pages 46 to 68
• ESG: social – pages 69 to 73
Maintaining a reputation for high
standards of business conduct
• Q&A with John Mogford, Senior Independent
Director – pages 34 and 35
• ESG: governance – pages 74 to 77
• Corporate governance – pages 92 to 139
Acting fairly between members
of the Company
• Engaging with our stakeholders – pages 36 to 43
Ithaca Energy non-financial and sustainability information statement
The following information is prepared in accordance with Section 414CA and 414CB(1) of the Companies Act 2006 and the
information is incorporated by cross-reference:
Requirement Our policies and standards
Information related to policies
and due diligence processes
a Environmental matters • Our ESG Policy (online)
• TCFD and CFD (governance and
risk management)
• Our ESG strategy – pages 44 to 77
• TCFD and CFD disclosures – pages 52 to 68
b Employees • Our Code of Conduct
• Our Company Vision and Values
• S172 Statement – pages 36 to 43
• Environmental, Social and Governance –
pages 44 to 77
• Corporate Governance Statement –
pages 92 to 103
• Nomination and Governance Report –
pages 108 and 109
c Social matters • Our ESG Policy (online) • S172 Statement – pages 36 to 43
• Environmental, Social and Governance
– pages 44 to 77
d Respect for human rights • Modern slavery statement (online)
• Modern slavery and human
trafficking policy
• Code of Conduct
• Vision, mission and values – page 2
• Our vision in action – pages 4 to 7
• Our people – pages 70 and 71
e Anti-corruption and anti-bribery • Anti-bribery and corruption
policy (online)
• Code of Conduct
• Governance – pages 74 to 77
Description of principal risks relating to matters (a-e above) • Risk management – pages 84 and 85
• Principal risks – pages 86 to 90
• TCFD disclosures – pages 52 to 68
Relevant information
Our business model can be found in Our Business Model and Strategy – pages 22 to 25
The details of non-financial KPIs can be found on page 26
38 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC38 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Key decisions in 2023
A number of material decisions were made during 2023. The following case studies reflect how our Board considered the interests of stakeholders when reaching
critical decisions across our operated and non-operated portfolio.
Rosebank Final Investment Decision
Decision-making process
As the largest undeveloped discovery in the UKCS, the development of
resources at Rosebank are pivotal to support the UK’s energy security.
Following extensive pre-FID work and planning, the Board worked
closely with Equinor, as field operator and Ithaca Energy’s joint
venture partner, to take the decision to file for development consent.
Together with Equinor, the Group participated in operating and
technical meetings to consider the viability, technical complexity
and risks associated with the projects, ultimately voting alongside
Equinor to approve Phase I of the Rosebank development.
Given the large capital commitment and continued fiscal uncertainty,
the Board gave consideration to a range of economic scenarios modelled
to ensure the project was economically robust. The Board considered
the financial viability and funding capacity associated with the project
and met regularly with its lenders ahead of the decision to proceed.
As part of Ithaca Energy’s ongoing engagement with its shareholders,
the Group regularly meets with its investors to ensure their alignment
with the Group’s strategy. Development of the Rosebank field
formed a critical component of the Group’s investment thesis during
the IPO process and the Board considered the decision to proceed
was in the best interests of maximising shareholder value.
Throughout the project sanction process, the Board engaged
with both the NSTA and the UK Government, responding to the
regulator’s requests for information as part of the formal sanctioning
process. The Board considered both the UK Government and our
local communities in its decision to proceed, recognising that the
Rosebank development supports domestic energy security, direct
investment and employment in the UK, while supporting the UK’s
decarbonisation objectives.
Our stakeholders continued
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Taking full control of certain pre-FID assets
Decision-making process
As a core pillar of our BUILD strategy, Ithaca Energy
looks to invest in projects with a robust economic
and emissions reduction investment case. The
Group considers this to be in the best interests of its
shareholders and its lenders.
In order to advance pre-development projects to a
Final Investment Decision, the Board recognises the
importance of securing an aligned JV partnership.
During 2023, the Group met with its joint venture
partners for both the Cambo and Fotla fields to
understand their appetite to progress these projects
to a final investment decision.
Following these discussions, the Board concluded
that it was in the best interests of the Group to
acquire the remaining interests in Cambo and Fotla
from the existing JV partners, to provide Ithaca
Energy with full control over pre-FID work and
timing. At limited near-term cost, the decision to
proceed with an acquisition preserves the value of
these critical long-term assets to the Group, as the
Group enters a formal farm-in process of each asset.
The Board continues to monitor changes in the UK
fiscal regime, and the consequential impact to its
investment parameters.
Targeted portfolio investment
Decision-making process
The Energy Profits Levy continues to have a direct
impact to investment in the UK North Sea and the
pace of our own investment programme.
During the year we have engaged constructively with
the UK government to articulate the consequences
of continued fiscal and political uncertainty to
investment across the basin and the impact to
the UK’s energy security and Net Zero ambitions.
The Group was an active participant in the 2023 UK
Fiscal Forum that sought to determine constructive
long-term fiscal policy for the UK.
Together with our JV partners across our operated
and non-operated portfolios, we have re-evaluated
near-term investment decisions based on the current
taxation regime. As a direct result, the Board
has made the decision to defer or cancel certain
2023 and 2024 projects due to the attractiveness
of project returns and the need to high-grade
investment opportunities.
The Group has engaged with shareholders throughout
the year to provide clarity on the impact to our
investment programme. During these engagements
we have requested feedback from our shareholders
on their appetite for continued investment in the
UK North Sea and their alignment on the pace of
our investment programme. We believe open and
transparent communication with our shareholders
is critical during this period of fiscal instability.
40 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Focus areas of engagement
• Vision, values and behaviours
• Diversity, equity and inclusion
• Development and progression
• Reward and recognition
Outcome from engagement
Our 2023 employee engagement survey
highlighted a 12% increase in employee
engagement. Feedback has allowed for
focused action areas, addressing key areas for
improvement, such as learning and development.
FY 2024 priorities
In 2024, our focus continues to be on
embedding a strong sense of culture in the
organisation through the roll-out of our
behavioural framework and on addressing
areas identified in our engagement plan.
Links to our values
Focus areas of engagement
• Strategy
• Operational and financial performance
• Capital allocation policy
• Sustainability plans
Outcome from engagement
We have built strong and open relationships
with our shareholders during 2023, ensuring
that our strategy is well understood in light of
the changing fiscal backdrop created by the
Energy Profits Levy.
FY 2024 priorities
Delivering on our commitments to shareholders
is critical to developing our long-term investor
base. We are delighted to have announced a
further interim 2023 dividend of $134 million
in March 2024, delivering on our $400 million
2023 dividend target in our first year as a
listed Company.
Links to our values
Our stakeholders continued
Group 1:
Our people
Group 2:
Shareholders
Active engagement with our stakeholders is at the heart of our Company values with the overall goal of making a positive difference.
Why we engage
Our people are central to our success. We can
only achieve our mission to ‘Triumph. Together.’
by listening and addressing feedback from our
employees. By engaging regularly we aim to achieve
a strong sense of belonging and unity of purpose.
Most importantly, we want our employees to feel
listened to and valued.
How we engage
Frequent and open communication with our
workforce both onshore and offshore is critical.
This is supported through holding regular town
halls, village halls, weekly CEO messages, monthly
Q&A sessions with the Leadership Team, frequent
leadership and Board visits offshore and Board
and leadership engagement with the Employee
Consultation Forum, responding to staff questions.
Our 2023 employee engagement survey,
provided our workforce with the opportunity to
feedback across a range of organisational areas.
With 72% of employees participating in the survey
we received a broad spectrum of input from across
the Company. Employee focus groups helped to
build on feedback received and have informed and
shaped our engagement plans. We’ve responded
quickly to address critical improvement areas.
Recognising the importance of aligning employee
engagement with our organisational goals, the Group
invited all employees to share their suggestions as
part of the cost-optimisation project held in 2023.
Employee participation was critical to support a
cost conscious culture across the organisation.
Why we engage
Engaging with our shareholders in an open and
transparent manner is critical as we seek to build
relationships with our long-term investor base.
It is important that our investors have confidence
in our strategy, particularly in an uncertain fiscal
environment, and that we understand their priorities.
How we engage
We have built an active investor relations programme,
led by the Group’s Executive Chairman, CEO/CFO
and Head of Investor Relations.
We regularly engage with investors throughout the year
through one-to-one investor meetings, publication and
presentation of our financial results on a quarterly basis,
investor webcasts, investor roadshows and attending
industry and investor conferences.
We seek to obtain feedback from our investors regularly,
both directly and through our brokers. This allows us
to gain insights into their priorities, ensuring alignment
with our long-term growth strategy.
As a recently listed entity, it is important that we build
investor relationship based on trust and a reputation
for delivering on our commitments. In 2023, we
have demonstrated a proven ability to deliver on our
management guidance, our growth ambitions and our
dividend targets.
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Focus areas of engagement
• Financial and ESG performance
• Risk management
• Compliance with covenant suite
• ESG performance
Outcome from engagement
We continue to maintain a supportive senior
bank lending group, with a syndicate of ten
banks, and strong relationships with our bond
holders. Our financial discipline and strong free
cash flow generation, means we end the year in
a position of financial strength with significant
debt capacity.
FY 2024 priorities
In 2024, we will continue to foster our
relationships with existing lenders, taking into
consideration the potential for a changing
medium-term lending landscape due to
ESG restrictions.
Links to our values
Group 3:
Lenders
Why we engage
Maintaining the Group’s financial strength and
capacity is critical to supporting the long-term
growth of our business. Our relationships with our
lending groups are vital. Access to long-term debt
financing enables us to continue investing across
the three pillars of our corporate strategy in order
to maximise return to our shareholders.
How we engage
We regularly engage throughout the year with our
syndicate banks and bond holders. Our engagement
led by the Group’s CFO and Head of Corporate
Finance, is not limited to quarterly reporting
cycles, recognising the need to foster strong
working relationships to support our growth plans.
We connect via one-to-one meetings, quarterly
scheduled webcasts with bond holders and attending
conferences throughout the year.
Feedback from our bond holders and our syndicate
banks ensures that their interests are considered
when making decisions that might affect their
capital. During the year we have appreciated our
lenders input on ESG matters, allowing the Group
to shape its long-term ESG strategy.
Redetermination of our Reserves Based Lending
(RBL) facility occurs on a bi-annual basis in June and
December. At period end, we maintained a healthy
liquidity position of over $1 billion, with RBL capacity
of $836 million following redetermination (March
2024). Strong free cash flow generation in the year
has allowed the Group to fully repay its RBL facility
and the facility is currently undrawn.
Focus areas of engagement
• Safety and environmental performance
• Emission reduction plans
• Operational efficiency
• Work programmes and budgets
• Long-term asset strategy
Outcome from engagement
We continue to maintain strong and aligned
partnerships with our joint venture partners.
During 2023, we built upon our existing
JV relationship with Equinor achieving the
significant milestone of taking Final Investment
Decision for the Rosebank development, the
largest undeveloped discovery in the UKCS.
FY 2024 priorities
We will seek to actively engage with our
JV partners to maximise the value of our
assets while focusing on the delivery of
decarbonisation initiatives to meet our
emissions reduction targets.
Links to our values
Group 4:
Joint venture
partners
Why we engage
We pride ourselves on our strong relationships with our
joint venture partners. Whether acting as the Operator
or as a JV partner, we actively engage and challenge to
ensure we maximise the value of our assets, in a safe
and responsible manner.
How we engage
We work collaboratively with our partners, encouraging
open dialogue and different perspectives in order
to achieve partner alignment across short-term
operational decisions and the longer-term strategic
direction for our assets. Across our non-operated
portfolio, we are committed to working in a productive
manner with the Operator by sharing our own
knowledge and experience from our operated base.
We engage on a regular basis via scheduled Operating
Committee Meetings (OCMs) and Technical
Committee Meetings (TCMs), supplemented by day-
to-day interaction between asset managers. The timings
of OCM and TCM engagements are scheduled under
the terms of the Joint Operating Agreement (JOA).
The JOA provides the parameters for discussions
held during OCMs and TCMs, ensuring an effective
environment for engagement across all subject areas.
The Operating Committee is responsible for agreeing
the overall strategic direction of the asset with key
decisions agreed by vote, governed by the JOA pass
mark requirements. It is the responsibility of the
Operating Committee to agree the associated Work
Programme and Budget (WP&B) in alignment with
the overall strategic direction of the asset.
42 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Focus areas of engagement
• Project visibility
• Safety performance
• Payment and contracting terms
• Reliability and quality of product
Outcome from engagement
We continue to maintain and build strong
and trusted relationships with suppliers and
customers. The strength of these relationships
are important to delivering our operational,
environmental and financial performance.
FY 2024 priorities
As we continue to pursue emission reduction
initiatives across our asset base it is important
that we continue to work with our supplier base
to minimise our environmental impact.
We will look to our supply chain partners for
their support in delivering decarbonisation
projects that will have a material impact to
our emissions intensity, such as the potential
electrification of our Captain asset.
Links to our values
Our stakeholders continued
Group 5:
Suppliers
and customers
Group 6:
Government
and regulators
Why we engage
Our ability to operate depends on satisfying licensing
and other regulatory requirements. We continue to
maintain strong and transparent relationships with
the regulators to ensure we comply with regulations,
maintain our license to operate and satisfy
consenting obligations.
The importance of an open dialogue with the UK
Government and parties across the political spectrum
has never been so critical. We constructively engage
to help shape UK fiscal policy that will impact our
operations in the UK North Sea.
How we engage
During 2023, the Group has had frequent and open
dialogue with the Chancellor of the Exchequer, His
Majesty’s Treasury and the Department of Energy
Security and Net Zero (DESNZ) to discuss the
implications of the Energy Profits Levy to investment
in the basin and the potential impact to the UK’s energy
security and decarbonisation targets.
Led by our Executive Chairman, the Group has been
an active participant in the Fiscal Review, including in
relation to the Energy Security Investment Mechanism
(ESIM), and has attended industry roundtable
discussions, met with key ministers and their advisors,
and responded to calls for evidence.
The Group complies with all regulatory requirements
and actively engages with the North Sea Transition
Authority (NTSA), Offshore Petroleum, Regulators for
Environment and Decommissioning (OPRED) and the
Health & Safety Executive, to ensure we are compliant
with all environmental and safety regulations, in line
with our license to operate.
Focus areas of engagement
• Fiscal policy and future investment
• Field Development Plans
• Decarbonisation strategy and performance
• Decommissioning programmes
Outcome from engagement
We have constructively engaged with policy
makers to share our concerns over the impact
to long-term investment from continued
fiscal uncertainty, highlighting the reduction
in investment across our portfolio as a direct
consequence of the Energy Profits Levy.
During the year, we have engaged with the
NSTA during the Rosebank development
consent process and in relation to Cambo
milestone license extension.
FY 2024 priorities
As we actively pursue our decarbonisation
plans, including the potential for electrifying
our Captain asset, we will continue to engage
proactively with the NSTA and DESNZ as we
move closer to FID. All investments will be
reviewed on their ESG merits, as a catalyst to
achieving our Net Zero ambitions by 2040.
Links to our values
Why we engage
With energy security in the spotlight during 2023,
as a result of ongoing geopolitical tensions, our focus
has been on delivering safe and reliable production
to our customers to meet end-user demands. We
recognise that our supply chain is critical to our
ability to do so.
How we engage
We deliver our oil and natural gas liquids (NGL)
products via established specialised marketers under
various term offtake and marketing agreements with
prices linked to standard price benchmarks. Our UK
terminal grade products (Forties and Ekofisk) are
sold at the UK oil terminals under minimum annual
term deals with established international buyers.
Our natural gas is sold at various UK terminal entry
points under mid to long-term sales arrangements
to established international buyers.
We maintain regular dialogue with our customers to
ensure the timely delivery of our product to specific
grades, while meeting our high safety standards.
Our contracting strategies focus on collaboration
and forming strong supplier relationships, centred
around operational and safety performance.
On a day-to-day basis we regularly engage with
our suppliers through scheduled meetings and
performance reviews, seeking opportunities for
improvements and anticipation of potential issues,
while reinforcing our HSE expectations.
Fully recognising the importance of a number of key
suppliers, the Group seeks to manage supply chain
risks by entering into strategic partnerships with key
suppliers where appropriate.
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Focus areas of engagement
• Charity and community support
• STEM initiatives
• Apprenticeship programme
Outcome from engagement
We believe we have made a valuable difference
to our local communities and were delighted to
broaden our support to a number of employee
nominated charities in the year.
Beyond the benefits to our wider communities,
our charitable efforts have increased our
employee engagement, with a rise of 43% in our
engagement survey score for employee pride in
commitment to social responsibility.
FY 2024 priorities
We will look to build on our charitable
commitments in the coming year, seeking
out further team volunteering initiatives and
continuing to engage our employees to direct
our financial support across local charities.
Links to our values
Group 7:
Communities
Why we engage
The passion to be a good neighbour permeates
through our Company values. Recognising that our
support is required more than ever, we are committed
to giving back to our local communities. Through our
charity Committee, we seek to build relationships that
support community and charity project across the
North East of Scotland.
We engage with our charitable partners, to understand
how we can support them both financially and through
committing our time to support volunteering projects.
How we engage
During the year we have worked closely with VSA,
our long-term corporate charity partner, helping to
support the most vulnerable people and their families,
living in communities across the North East of Scotland.
We work with VSA to identify where our support
can make the most difference through continued
financial commitments, fundraising events and
volunteering support.
In order to broaden our impact to our community,
our charity Committee invited employee nominations
to support five further charities. By engaging employees
across our organisation, we were able to identify a wide
range of charities providing support for people living
with dementia, disadvantaged families, children and
young people with additional support needs, cancer
care and support centres, and humanitarian and
disaster relief.
With social projects sponsored by employees and an
Executive lead in tandem, our community engagement
spans across our organisation. Volunteering with our
charity partners or across our wider communities is
encouraged with every onshore employee empowered
to take four corporate social responsibility days a year
to give back to the community.
The Group supports community organisations and the
development of UK talent through science, technology,
engineering and mathematics (STEM) initiatives and
technical apprenticeship programmes. In 2023, the
Group employed seven interns to complete its summer
programme and hired six apprentices for offshore roles
and nine graduates as part of the Group’s graduate
programme. These investments in people are part of
the Group’s commitment to growing and developing
talent in the communities in which we operate.
We continue to actively engage with DESNZ and
the NSTA, recognising the environmental impact
of our operations as we actively pursue emissions
reduction initiatives across our portfolio. The Group
responded to the Draft Oil and Gas Authority (now
NSTA) plan to reduce UK GHG Emissions sharing
our views on how policy amendments could promote
decarbonisation investment.
44 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC44 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Environmental, Social and Governance
2023 Highlights
Environmental
• 2023 emissions performance on operated basis versus 2019 baseline:
• Achieved 23% reduction in absolute emissions
1
• Achieved almost 9% reduction in carbon intensity
• Achieved 0.17% methane intensity
• Updated our GHG reporting to include net equity emissions
• Defined our Net Zero strategy
• Sanctioned Rosebank development, signalling a transition of our portfolio
to lower intensity assets
• Progressed Captain electrification project to be ready to take a FID in 2024
• Completed two significant emission reduction projects offshore reducing annual emissions
by over 13,000 te CO
2
e
• Updated our Emissions Reduction Action Plan and developed a Methane Action Plan
• Enhanced alignment to TCFD recommendations
• Independently verified our GHG emissions
Social
• Improved our Business Management System
• Launched our Group Safety Leadership expectations
• Developed our Process Safety culture, focusing on leadership and frontline operator training
• 72% participation in engagement survey
• 12% increase in employee engagement score
• 42% increase in employee pride in commitment to social responsibility
• Increased charitable contributions and volunteering efforts supporting charities spread
across the North East of Scotland
Governance
• $400 million total dividend payable for 2023
• Board evaluation process completed in relation to 2023
• Succession planning exercise completed for key leadership positions
• DE&I Policy published with introduction of mandatory online awareness sessions
• Launched mandatory online anti-bullying and anti-harassment training courses for all staff
• Zero breaches of our Code of Conduct
ESG
Ithaca Energy is committed to delivering the highest of ESG standards
and has made material progress during 2023 in meeting our ESG targets,
minimising our environmental impact and creating shared value for all our
stakeholders including employees, shareholders and the communities in
which we operate.
REDUCTION IN CARBON
INTENSITY VS 2019 BASELINE
9%
INCREASE IN EMPLOYEE
ENGAGEMENT SCORE
12%
TOTAL DIVIDEND FOR 2023
(MILLION)
$400m
1 Alba Main Power Generator outage accounts for 11%.
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Our commitment to ESG serves
as our social licence to operate,
we do the right things the right way.”
Our ESG policy and strategy supports both the UN Global Compact and UN Sustainability Goals, respecting human and labour
rights, safeguarding the environment and working against corruption in all its forms. Ithaca Energy has adopted the United Nations’
Sustainable Development Goals (SDGs) responding to the call for action by all countries to promote prosperity while protecting the
planet. The SDGs that we believe we have an ability to influence, have been embedded into our Group strategy, with clear ambitions
and targets identified.
Environment
Our commitment:
Responsible operations that protect
ecosystems in which we operate
Sustainable Development
Goals alignment:
Social
Our commitment:
Safe operations that invest in
our people and communities
Sustainable Development
Goals alignment:
Governance
Our commitment:
Running our business with
integrity and transparency
Sustainable Development
Goals alignment:
46 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Environmental, Social and Governance continued
Whilst the world still needs oil and gas, Ithaca Energy is committed to producing it responsibly, with the lowest environmental impact
possible. We are committed to the North Sea Transition Deal (NSTD) and our role in supporting GHG emissions reduction. We
accept the urgent need for action to address climate change and in recognition the Group has established a well-defined emissions
reduction action plan meeting or exceeding NSTD targets. We have an ambitious goal of reaching the Net Zero carbon emissions
target by 2040, on a Scope 1 and 2 net equity basis.
Environment
Introduction
The energy transition is a substantial task facing the
industry and we are strategically positioning ourselves
to deliver one of the lowest carbon emissions portfolios
in the UK North Sea. We aim to achieve this through
meaningful action in the short term, delivering projects to
reduce our emissions associated with current operations,
decommissioning high-intensity assets at the end of
their life and transitioning the portfolio in the medium to
long-term through investment in lower emission intensity
assets, such as Rosebank and Cambo.
We have prioritised operational improvements on our
assets during the year and our well-defined roadmap
supports significant emissions reductions over the
short to medium-term through projects identified
in our Emissions Reduction Action Plans (ERAPs).
The most significant of these projects is the potential
for material electrification of our Captain field.
2023 saw the regulator make strong statements about the
need for decarbonisation, and particularly electrification.
In April 2023, the Operations Director of the NSTA
issued a letter to all oil and gas license holders, highlighting
the expectations on Net Zero and electrification. This
was followed by the publication and public consultation of
the draft OGA Plan in October. These actions reinforce
the importance of Ithaca Energy’s emissions reduction
strategy. The projects executed in 2023, together with
the progression of engineering on material projects, like
electrification, demonstrates our strong position in light
of the regulator’s reiteration of the NSTD’s expectations.
Net Zero Strategy
To support our ambitious goal of reaching our Net
Zero carbon emission target by 2040 and to give more
clarity on the methods of reaching it, the Group has
been further defining its path to Net Zero during 2023.
Our approach involves prioritising the reduction of
emissions from our operations on an equity basis as
far as is reasonably practicable. Our focus today, and
through the short-term is delivering material emissions
reduction projects in line with our emissions reduction
action plans. These actions, together with our portfolio
shift to lower carbon intensity assets, will support our
emissions ambitions in the medium-term. For the
longer-term towards Net Zero by 2040, we believe
there will be offset schemes, leveraging global carbon
prices that will provide trusted ways to fund the best
carbon reduction projects, to mitigate the hard to abate
residual emissions across our portfolio.
On the pathway to Net Zero, we are committed to
emissions reduction targets for our operated assets
and our portfolio as a whole. For our operated assets,
we aim to reduce Scope 1 and 2 emissions by 25% by
2025 from a 2019 baseline, together with achieving zero
routine flaring ahead of 2030, and achieving a maximum
methane intensity of 0.20%. Accounting for major
equipment outage on Alba in 2023, we have reduced our
operated assets emissions by 12% vs. 2019. Whilst the
power generation on Alba will return to normal operation
in 2024, and increase emissions associated with power
generation, we expect a continued emissions reduction
10% reduction
by 2025
25% reduction
by 2027
50% reduction
by 2030
Net Zero
by 2050
Figure 1 – Group Greenhouse Gas (GHG) emissions targets
NSTD commitments to reducing GHG emissions (versus 2018)
Net equity targets (Scope 1 and 2 basis)
Net Zero by 2040
Reduce emissions from oil and gas
production in line with NSTD
commitments up to 2030
Operated assets targets
Achieve 0.20% methane
intensity by 2025
Zero routine flaring
by 2030
Reduce all Scope 1 and 2
CO
2
e emissions from
operated assets by 25% by
2025 from 2019 baseline
We aim to exceed or align to the industry targets in the short and long-term
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Fig – FEED graphic of potential Captain electrification option showing
shore tie-in and new subsea cable, caisson and topsides equipment.
Case study
Captain Electrification
Ithaca Energy is working on what could be the first materially
electrified asset in the North Sea for 40 years, reducing
Captain’s emissions by 110 kte CO₂e/year and emissions intensity
by an impressive 60%.
In 2021, the Group initiated a project to study how we could electrify the Captain Field and following the
successful conclusion of a pre-Front End Engineering and Design (FEED) study in Q1 2023, FEED activity
commenced shortly thereafter. This has been matured to support a Final Investment Decision on this
leading electrification project in 2024, which could see Captain connected to power from shore by 2027.
The Captain asset is well suited for low carbon electrification, with electrically driven machinery and
artificial lift, together with an existing interconnector cable between the platforms and the FPSO. The
proposed design involves a new onshore substation that will have access to the grid and a >100km long
import cable enabling power to travel to the field. Offshore, a new transformer and electrical equipment
would be installed to integrate the low carbon power into the existing electrical system.
Partial electrification of the asset has been deemed to be the optimal solution for Captain, given the
requirement for process heat which is currently provided by the hot exhaust gases from the power
turbines. Given the limitation on space and weight, the field would retain operation of one gas turbine to
provide this heat, resulting in an import demand of 25 MW. The low carbon power supplying this demand
from the mainland would reduce the field’s emissions by 60%, a world-class level of emissions reduction
from an existing offshore oil and gas operation.
It is expected that FEED will complete during Q2 2024 and will deliver the detailed assessment of how
the asset would electrify, enabling the order of long lead items, such as the import cable and transformers.
The final investment decision will depend heavily on assurances from the UK Government on the availability
of the decarbonisation allowance on sanctioned projects that the project currently qualifies for. In parallel,
the Group will determine investment viability as projects compete for capital following a reduction in
cashflow available for reinvestment as a result of the continued impact of the Energy Profits Levy.
INVESTMENT
~£250m
Eliminates >1.1 million tonnes
CO
2
e from the atmosphere over
the remainder of the field’s life
Equivalent to removing 60,000
petrol cars each year off the road
FIRST POWER BY
2027
UK JOBS (DURING PEAK
DEVELOPMENT)
100
NEW CAISSON
CAPTAIN BLP
TRANSMISSION NETWORK
NEW ONSHORE SUBSTATION
IMPORT CABLE
TOPSIDES TRANSFORMER
48 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLCITHACA ENERGY PLC
Environmental, Social and Governance continued
in 2024 relative to 2019, with material emissions
reduction due to the move to single compression train
on FPF1 in Q1 (around 30,000 tCO
2
e for the year).
For our 25% by 2025 target, our outlook is a reduction
of 23-25% through the completion of significant facility
modification scopes that have been progressing through
engineering and construction. These projects, with their
estimated emissions reduction, include reinstating the
second export gas compressor on Captain (21,000
tCO
2
e/year), switching the fired heaters on the FPSO to
majority fuel gas instead of diesel (18,900 tCO
2
e/year),
power water pumps cartridge reconfiguration (10,000
tCO
2
e/year) as well as production decline of fields
processed over FPF-1. Other major projects, including
flare gas recovery on Captain Platforms (14,700 tCO
2
/
year) and zero routine flaring project on the Captain
FPSO (3,000 tCO
2
e/year) are anticipated to be
complete in the following year, which will further reduce
our emissions in line with the original intent of the 25%
by 2025 target.
Across the Group's full portfolio, including our non-
operated assets, our Scope 1 and 2 emissions reduction
targets align with, or exceed, that of the North Sea
Transition Deal targets of 10% by 2025, 25% by 2027 and
50% by 2030, relative to a 2018 baseline. We currently
anticipate meeting the 50% by 2030 target through
key projects including Captain electrification, and major
facilities projects on our non-operated assets, together
with decommissioning high-intensity assets, to provide
capacity for new, low-intensity assets like Rosebank.
Energy Transition
Oil and gas is forecasted to continue to form an essential
part of the UK’s energy mix out to 2050. We believe that
investing in the decarbonisation of our assets, as well as
new low carbon intensity developments, is the best way
to support the UK’s energy security into the transition.
In 2023, substantial progress has been made, with
our Emissions Reduction Action Plans (ERAPs) in
progress, on both operated and non-operated assets,
and the decision to proceed with the development
of the Rosebank field acting as a material catalyst to
our long-term ambitions. The Rosebank FPSO has
been designed to be electrification ready and with full
electrification, it is estimated that the lifetime emissions
intensity could be as low as 3 kgCO
2
/boe, significantly
below the current UK average of 21 kgCO
2
/boe.
The Energy Transition Team has worked with the
operated assets and other stakeholders to continue to
drive down emissions during the year and we continue
to be on track towards achieving our target reduction
of 25% by 2025, for all Scope 1 and 2 CO
2
e emissions
from operated assets, against the 2019 baseline.
Whilst our focus on delivering operational
improvements within our current portfolio of operated
producing assets continues, there is also a focus on our
non-operated assets and the efforts they are making
to reduce emissions, through shared learning and
collaboration. This is reflected in our emissions reporting
this year, where we have started to report all Scope 1
and 2 Greenhouse Gas emissions on a Net Equity basis,
incorporating the proportional contribution from both
operated and non-operated assets.
Our emissions reductions initiatives
During 2023, we have engaged in material
decarbonisation activity covering the following
emissions reduction projects:
FPF-1 – Single sea water lift pump upgrade. The asset’s
sea water lift pumps have been upgraded to allow the
use of one pump as opposed to operating with two. This
has cut the power demand of the platform by 10% and
will bring an estimated reduction of emissions from
July 2023 of approximately 3,500 te of CO
2
e per year
going forward. The upgrade work will also provide a more
reliable seawater system, which supports the utilities of
the platform enabling improved operational efficiency
and minimising flaring excursions; and
Captain – Solar gas turbine upgrade. Both Solar
gas turbines were replaced in 2023 with more
powerful models, which in turn allows more power to
be generated from lower carbon intensity fuel gas,
reducing diesel consumption. The upgrade, along with
replacement of fuel valves for higher reliability, has led
to an immediate decrease in emissions that equate to
approximately 9,800 te of CO
2
e per year.
In 2022, the Energy Transition Team initiated
three major emissions reduction projects on Captain,
namely, flare gas recovery for both the Bridge-Linked
Platform (BLP) and the FPSO and the potential partial
electrification of the asset. In 2023, we continued
to develop these projects, progressing them through
engineering, with the Captain BLP flare gas recovery
project successfully achieving FID. The flare gas
recovery project on the Captain FPSO was also
progressed and a simpler solution was identified and
continues into FEED in 2024. Both flare gas recovery
projects set the asset on the path to achieving zero
routine flaring well ahead of 2030, with plans to
execute in 2025.
The Captain electrification project represents the most
material decarbonisation project across our portfolio.
The project has gathered significant momentum in
2023, with Front-End Engineering and Design (FEED)
progressing as per plan. We continue to work with the
electricity grid operator and other renewable generators
to secure the power source and have also engaged a
number of renewable power providers to confirm that
a consistent, reliable and green power supply will be
available to support the success of this project. Final
Investment Decision (FID) is anticipated to take place
in 2024 with potential first power from shore as early
as 2027. The significant scale and capital required for
this project relies on the fiscal stability and certainty
of the decarbonisation investment allowance, following
project sanction.
Across our non-operated portfolio, we have supported
the execution of a number of emissions reduction
projects as well as continued engineering on larger
scopes. Examples of these include:
• Switching to single compressor mode operation on
Elgin-Franklin, reducing fuel gas associated CO
2
e
going forward by 40,000 te per year; and
• Power generation, compressor and pump
optimisation projects completed on Glen Lyon
resulting in a reduction of 15,000 te CO
2
e per year.
Several of our non-operated assets are progressing
towards zero routine flaring, with engineering efforts to
achieve this, including:
• Studies progressing for flare gas recovery on
Britannia, which could reduce emissions by around
23,000 te CO
2
e per year; and
• Funding of long lead items for flare gas recovery
on Elgin-Franklin, ahead of FID that occurred
January 2024, with anticipated first operation
at the end of 2025.
Emissions Reduction Action Plan progress
In our pursuit of reducing emissions to the lowest possible
levels on our producing assets, the cross-asset Emissions
Reduction Action Plan has been reviewed and optimised
during 2023. As part of our business management
processes, the asset ERAPs are reviewed annually by
a cross-functional team to update work completed in
the previous year, validate the reduction opportunities
and align these opportunities to our business plan.
Furthermore, the team seeks to identify new
opportunities across our portfolio and integrate those
into the asset’s plan during the business planning cycle.
As well as the significant reduction projects, our Emissions
Reduction Action Plan also includes a multitude of
smaller 'marginal gain' projects. In 2023, we completed
the evaluation of 11 different opportunities, ranging
from compressor optimisation and cargo management
procedures to novel technology evaluations utilising waste
heat from turbines to generate additional power. The
range of potential annual emissions reductions achieved
can range from 250 to 2,000 te of CO
2
e per year.
The ERAP included projects such as the Captain BLP
solar gas turbine power management strategy. In addition
to the power upgrades to the solar gas turbine generators,
optimisations made to the power management strategy
have enabled savings that equate to approximately
680 te of CO
2
e per year from June 2023.
Visibility of how efficiently our assets are operating
from an emissions perspective is vital for making
decisions. We have implemented a daily reporting
system that highlights when offshore equipment is not
operating efficiently from an emissions perspective,
such that continuous improvements can be made and
sustained to ensure emissions remain at the minimal
possible level as frequently as possible.
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ITHACA ENERGY PLC
Our focus on reducing our emissions covers both our
offshore and onshore operations. In September we
completed the installation of solar panels on our office
building. Following installation and commissioning in
September 2023, the solar panels generated around
22,000 kWh of electricity, providing around 18% of
the office’s electrical demand in the year. The solar
panels reduce the office’s carbon footprint by 30 te
of CO
2
per year.
Methane Action Plan
Our ERAPs cover reduction opportunities that reduce
both CO
2
and methane. However, with the global
recognition that methane, as a greenhouse gas, is much
more potent than CO
2
, a dedicated, internal cross-asset
Methane Action Plan has been developed. This plan,
which in addition to giving background information on
methane and an overview of current global methane
reduction and monitoring initiatives, details actions for
methane monitoring and abatement for each of the
Group's operated asset.
The World Bank Zero Routine Flaring (ZRF) initiative,
which intends to support the requirement for Zero
Routine Flaring by 2030, has been endorsed by the
UK government and OEUK. The Company supports
the ZRF initiative and meeting the 2030 target of ZRF
as part of NTSD commitments.
The Oil and Gas Methane Partnership (OGMP) 2.0
framework has been selected as the primary model
to build our methane action plan around. OGMP 2.0
is a reporting framework established by the
UN Environmental Programme to prioritise methane
mitigation actions across the global oil and gas industry.
This model sets out a staged methane mitigation
approach, focusing on each source and their materiality.
The Group is working towards formally joining OGMP
in 2024, to bring Ithaca Energy together with over
120 companies supporting this critical effort.
Together with the Net Zero Technology Centre (NZTC)
and several operators, Ithaca Energy has participated
in the technology evaluation for determining real
time flare gas combustion monitoring. Data from the
Captain FPSO was used to evaluate this methodology,
which is recognised by OGMP, to understand the true
combustion efficiency of flared gas. This allows much
more accurate reporting of methane from flared gas
based upon live weather and process plant conditions.
This provides an improvement in accuracy compared to
the current legislative requirement that use a fixed factor.
Ithaca Energy is committed to achieving a maximum
of 0.20% methane intensity by 2025. In 2023 our
methane intensity was 0.17%. The Group currently
utilise a methane intensity with a Global Warming
Potential (GWP) of 28, which is consistent with the
value used by the North Sea Transition Authority
(NSTA) and uses the GWP factor presented in the
International Panel on Climate Change (IPCC)
Fifth Assessment Report (AR5).
Emissions reporting
For the Group’s operated assets, both Scope 1 and
Scope 2 emissions are reported consistently to
emphasise our focus on controlling our operations and
associated emissions reductions. Commencing in 2023,
all Scope 1 Greenhouse Gas (GHG) emissions were also
reported based on a Net Equity basis, incorporating
the proportional contribution from both operated
and non-operated assets. This method offers a more
comprehensive perspective on the Group's emissions,
accounting for their proportional impact and providing
a more accurate reflection of the environmental
footprint, even though control over non-operated
assets is limited. It is upon this full portfolio view that
our longer-term emissions reduction targets are based.
This aligns with the NSTD targets, which is a basin wide
target and not specific to any individual asset. With
our full portfolio view, we can support our co-venturers
regarding emissions reduction focus, fund the most
impactful emissions reduction projects and collaborate
and share best practices for minimising emissions across
our assets.
Scope 3 emissions
The Company does not currently externally report
any Scope 3 emissions data. Work plans in 2024
will review our Scope 3 reporting strategy, including
selecting which categories will be included in the data
gathering activities and evaluation of a system to
capture this information.
50 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Environmental, Social and Governance continued
Streamlined energy and carbon reporting
(SECR)
A breakdown of our energy and carbon reporting has
been provided on page 67 within our TCFD disclosures.
Ithaca Energy has reported on all of the emission
sources within its operational control required under
the Companies Act 2006 (Strategic Report and
Directors’ Report) Regulations 2013 and The Companies
(Directors’ Report) and Limited Liability Partnerships
(Energy and Carbon Report) Regulations 2018.
Ithaca Energy has used the principles of the GHG
Protocol Corporate Accounting and Reporting
Standard (revised edition), and data gathered to fulfil
the requirements under the ‘Environmental Reporting
Guidelines: Including streamlined energy and carbon
reporting guidance March 2019’. All of our reported
emissions relate to emissions from the UK and
offshore area.
Our environmental management system (EMS)
Ithaca Energy’s priority is to provide a safe and healthy
working environment for all its employees, contractors
and other personnel working for the Group, while
simultaneously minimising the environmental impact of
the Group’s operations by operating in an ever-cleaner
manner. The control and management of environmental
matters lies at the centre of the policies and procedures
that constitute the health, safety and environmental
management system, and the culture of the business.
Our EMS, certified to ISO 14001:2015 standard,
is integrated into our Group Business Management
System. The EMS is designed to implement the Group’s
HSE Policy, including emissions and environmental
management. It demonstrates a commitment to
compliance with environmental legislation and the
Group’s standards, processes, activities and objectives
for environmental management of hydrocarbon
exploration and production.
Ithaca Energy’s objective is to provide a safe and
healthy working environment for all its employees,
contractors and other personnel working for
the Group, while simultaneously minimising the
environmental impact of the Group’s operations
by operating in an ever-cleaner manner.”
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Our performance with regard to events reported
to the Regulator as spills (PON 1s) is shown in the
following table.
Spills reported
2023 2022
Total PON1s 24 22
PON1 hydrocarbon 16 13
PON1 chemical 8 9
The increase in PON1s in 2023 is linked to subsea
hydraulic fluid losses and is viewed as an area of focus
and improvement of reporting releases for the Group.
To address the increase of spills reported in 2023,
the Group has established an environmental
improvement plan, which focuses to improve
environmental compliance through:
• Enriching awareness of environmental compliance:
ensuring colleagues fully understand spill definitions,
the risk to the environment and the implications of
non-compliance. This learning will be specifically
targeted to deliver asset and permit-specific training;
• Control of work and work-site risk controls:
sustaining improvement with regard to well handover
processes and worksite controls; and
• Check assurance: part of 'Plan, Do, Check, Act',
linked to increased assurance auditing and aligned
with the externally accredited Environmental
Standard 140001.
Water, spills and waste
We consider that management of our activities and
any associated impacts on the environment are very
important. We systematically manage these aspects
as part of our EMS.
In 2023, Ithaca Energy complied with permitting
requirements for produced water across all producing
operated assets. Produced water discharged volumes
from across Ithaca Energy’s producing operated assets
are summarised below.
2023 2022
Produced water
metric tonnes 4,122,960 6,206,271
Average oil in water mg/l 9mg/l 10mg/l
Produced water re-injection is carried out on the
Captain asset. In 2023, 15,142,133 tonnes of produced
water was re-injected compared to 18,244,584 tonnes
in 2022.
Waste returned onshore from our operated assets is
shown in the following table.
2023 2022
Waste tonnage 6,991 3,020
The increase in waste for 2023 can be attributed
to increased platform drilling and associated waste.
Specifically, platform drilling and P&A activity on the
ANP accounted for 3,450 tonnes of muds, oils and
brine, while on the Captain WPP 458 tonnes of special
waste associated with drilling was reported.
The EMS is designed to implement
the Group’s HSE Policy, including
emissions and environmental
management.”
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Introduction
In compliance with FCA Listing Rule 9.8.6R(8), Ithaca Energy plc is
required to describe and explain compliance with the recommendations
of the Task Force on Climate-related Financial Disclosures (TCFD).
Environmental, Social and Governance continued
TCFD and CFD
Ithaca Energy is also in scope of the Companies
(Strategic Report) (Climate-related Financial
Disclosure) Regulations 2022 and therefore required
to incorporate Climate-related Financial Disclosures
(CFD)-aligned climate disclosures in its Annual Report
and Accounts. We refer to the recommendations of the
TCFD and CFD, structured across the four thematic
areas of the frameworks in the table below, to support
the identification, assessment and management of
climate-related impacts to the Group.
Ithaca Energy has complied with Listing Rule 9.8.6R(8),
with the exception of certain recommendations as
detailed below in the following table. TCFD compliance
summary. We have prepared our disclosure in accordance
with CFD requirements to ensure full compliance with
the CFD regulations 2022.
Recognising the significance of managing climate-
related risks and opportunities to the success of our
business, and as Ithaca Energy report against TCFD
for the second time, we acknowledge the importance
of improving our reporting and communications to
further align with the TCFD recommendations and
expectations of the Financial Reporting Council.
As such, the supporting pages also include details of
planned steps to improve alignment with TCFD and
further develop the disclosure over the coming years.
Further information on the Group’s Energy Transition
strategy can be found earlier in this ESG section.
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TCFD Compliance Summary Compliance status Section reference
Governance
(a) Describe the Board’s oversight of climate-related risks and opportunities Comply TCFD section: Governance (a), pages 54 to 56.
(b) Describe management’s role in assessing and managing climate-related risks and opportunities Comply TCFD section: Governance (b), page 57.
Strategy
(a) Describe the climate-related risks and opportunities the organisation has identified over the short,
medium and long-term
Comply TCFD section: Strategy (a), page 58.
(b) Describe the impact of climate-related risk and opportunities on the organisation’s businesses, strategy
and financial planning
Explain TCFD section: Strategy (b), pages 59 to 62.
(c) Describe the resilience of the organisation’s strategy, taking into consideration different climate-related
scenarios, including a 2°C or lower scenario
Explain TCFD section: Strategy (c), page 63.
Risk management
(a) Describe the organisation’s processes for identifying and assessing climate-related risks Comply TCFD section: Risk management (a), page 64.
(b) Describe the organisation’s processes for managing climate-related risks Comply TCFD section: Risk management (b), page 65.
(c) Describe how processes for identifying, assessing and managing climate-related risks are integrated into the
organisation’s overall risk management
Comply TCFD section: Risk management (c), page 66.
Metrics and Targets
(a) Disclose the metrics used by the organisation to assess climate-related risks and opportunities in line with its
strategy and risk management process
Explain TCFD section: Metrics and targets (a), page 66.
(b) Disclose Scope 1, Scope 2 and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks Explain TCFD section: Metrics and targets (b), page 67.
(c) Describe the targets used by the organisation to manage climate-related risks and opportunities and
performance against targets
Explain TCFD section: Metrics and targets (c), page 68.
54 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Environmental, Social and Governance continued
TCFD Disclosures
Disclosure Alignment and next steps
Governance
(a) Describe the Board’s oversight of climate-related risks and opportunities Comply
The Board has ultimate responsibility and oversight for managing climate-related risks
and opportunities. This includes review of the assessment of climate-related risks and
the appropriateness of mitigating actions.
The Board has established two Committees to support it in this regard:
• Audit and Risk Committee: Informed of climate-related issues, risks and
opportunities by the Energy Transition team on a quarterly basis, ensuring climate
risks are considered as part of wider business processes for evaluating and managing
risk; and
• Health, Safety, Environment and Security Committee: Meeting quarterly, the
Committee hold responsibility for reviewing and assessing climate-related issues,
risks and opportunities, working closely with the Energy Transition and HSE
Teams, tracking GHG emissions vs. corporate targets and ensuring compliance
with regulations and reporting requirements. The HSE Committee reports to the
main Board quarterly, reviewing performance regarding absolute carbon equivalent
emissions and Greenhouse Gas intensity. Methane intensity performance will be
included in 2024 HSE Committee meetings. In addition to HSE Committees,
HSE performance information per month is shared with Board members. The HSE
Committee also periodically reviews progress towards Energy Transition targets.
The Board reviews Ithaca Energy’s energy transition strategy periodically and oversees
its implementation and delivery. During 2023, the Board met ten times and climate-
related matters were discussed at each meeting, including an assessment of climate-
related risks and the effectiveness of corresponding risk management activities. As part
of each meeting pack, the Board receives a report from the Health, Safety, Environment
and Security Committee noting the HSE monthly performance which includes
information on environmental compliance and details of the gross operated emissions.
As a Group principal risk, climate risk is also subject to an annual deep dive session,
where the Board focus on the risk exposure and mitigating activities. The Board receives
additional updates from the Executive Leadership Team, which includes two Board
members, on climate-related matters, risks and opportunities as part of the quarterly
meetings. Reports on sustainability related issues, including progress against targets,
have been delivered and discussed at Executive Leadership Team meetings throughout
the year.
The Board will continue to monitor
implementation and progress towards achieving
climate commitments and the management
of climate-related risk as part of its corporate
decision-making.
The evolution of the Group’s TCFD disclosure will
focus on improvements to further integrate climate
considerations into existing governance frameworks,
for which the Board has ultimate accountability.
This will include monitoring and overseeing progress
against mitigating/realising the identified material
climate-related risks and opportunities, beyond
GHG emissions, through tracking progress on
further relevant metrics and targets as part of
strategy setting and business planning.
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Disclosure Alignment and next steps
Governance continued
(a) Describe the Board’s oversight of climate-related risks and opportunities continued Comply
Principal risks, which include climate risks, are a standing agenda item for the Audit
and Risk Committee. The Audit and Risk Committee plays a key role in supporting and
advising the Board and Executive management in their responsibilities over climate risk
management, including the risks associated with transitioning to a lower-carbon and
more climate-resilient economy. GHG emissions performance versus targets is included
in monthly reports which are provided to the Board to enable monitoring of progress
implementing reductions versus the corporate targets and strategy. The Board receives
copies of all Committee minutes and the respective Committee Chair can speak to the
information provided to the Board if any clarification or further details are requested.
Climate-related risks and opportunities are also discussed by the Board during its annual
strategy discussion.
The Company has a dedicated Energy Transition team to manage the impacts and
opportunities associated with the transition to Net Zero in line with the regulator’s North
Sea Transition Deal.
Climate-related issues are considered by the Board in the organisation’s strategy
development, risk management and financial planning processes, including via
consideration of climate impacts on the assumptions (e.g. commodity and carbon prices)
underlying decisions made in these areas. Recommendations to the Board regarding
major capital investments or M&A opportunities include consideration of climate issues
and their impact on the Group’s emissions reduction targets and long-term strategy.
Discussion of climate and related risks is an integral part of the project approval process.
As well as the set investment criteria on which potential projects are assessed, which has a
focus on energy transition impacts in the long term, the process is being bolstered with a
dedicated M&A Committee which will be a sub-Committee of the Board. Enhancing the
Group’s transaction stage gate process, this new Committee will be actively involved in
the assessment of all transaction opportunities where risk and opportunity are assessed
and measured using a range of qualitative and quantitative metrics such as cashflow,
NPV and emissions intensity. As part of this M&A stage gate process, production
demand, macroeconomic themes, emissions and energy transition impacts in the long
term (with a particular focus if Ithaca is assuming operatorship) will be taken into account.
The Board has established targets for emissions for 2024 together with a 2024 plan to
improve environmental compliance and performance. The plan includes improvement
of environmental operational compliance, radiation management controls and re-
certification of ISO 14001 and progress towards achieving each of these is monitored
and reported to the Board at regular intervals.
Climate performance, including performance against the Company’s Net Zero targets,
is embedded in the corporate scorecard and annual performance KPIs through the
Remuneration Committee. The Committee is responsible for approving the objectives
of the Executive Directors and senior management, on which an element of variable pay
is dependent and average gross operated emissions intensity targets formed part of the
2022 LTIP bonus scorecard for Executive management.
56 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Board
Audit and Risk Committee
Health, Safety, Environment
and Security Committee
Executive Leadership Team (ELT)
Investment Committee
Finance HES Energy Transition
Enterprise Risk Management
Committee
The CEO, with support from the ELT,
is responsible for delivering the Group
strategy including energy transition
commitments.
At the asset and investment level, climate-
related risks and opportunities are assessed
as part of the business planning and pre-
investment due diligence stage.
Principal risks are reviewed and managed by
the ERMC. Emerging risks, including those
related to climate change are escalated to
the Committee for discussion and potential
escalation to a principal risk.
The Board has overall authority for the
management and conduct of the Group’s
business, strategy and development,
including the energy transition strategy.
The finance team formally evaluates and updates
the climate scenario analysis model so that the
HES and Energy Transition teams may facilitate
the climate risk register review on an annual basis
through meetings and workshops with the ELT.
The HES and Energy Transition teams have
responsibility for monitoring climate performance
against targets and for implementing our
climate strategy.
With support from sub-Committees , the
Board holds responsibility for reviewing and
assessing climate-related issues, risks and
opportunities, tracking GHG emissions vs.
corporate targets and ensuring compliance
with regulations and reporting requirements.
Environmental, Social and Governance continued
Governance structure
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Disclosure Alignment and next steps
Governance continued
(b) Describe management’s role in assessing and managing climate-related risks and opportunities Comply
The management of climate-related issues, risks and opportunities are the responsibility
of the General Manager of Non-Operated Joint Venture (NOJV), Energy Transition
and Technology and Innovation, who is a member of Ithaca Energy’s Leadership Team.
Reporting to this position is a dedicated Energy Transition team.
The Energy Transition team, working with Health, Safety and Environment (HSE) team,
manage climate-related issues, risks and opportunities, including the long-list climate
risk and opportunity register. The HSE team manage emissions data and associated
regulatory reporting and meet with the Energy Transition team regularly to report
emissions performance against targets, for operated and non-operated assets. The
Energy Transition Team tracks GHG emissions KPIs and identifies emissions reduction
opportunities, working closely with our asset teams to manage emissions performance
and identify improvement opportunities.
One of the Leadership Team’s monthly meetings per year focuses on climate related
risks and opportunities. The Leadership Team, together with the Energy Transition and
HES teams, review the current assets’ emissions performance, the Group’s outlook
and how business decisions can impact these, updates on critical projects, changes or
potential changes in regulators’ actions and regulations, and any other related items
that could impact the business. Key actions are tracked and managed and reviewed
at subsequent meetings. The Health, Safety, Environment and Security Committee
and Audit and Risk Committees are informed of emissions reduction performance,
major climate-related issues, risks, and opportunities and that these are being managed
appropriately across the wider organisation of functional and asset teams. Progress on
managing key climate-related issues through updates on relevant metrics and targets
(see Metrics and targets (a) for further information), such as towards GHG emissions
targets are communicated to as described above.
Following the 2022 disclosures, the Group has undertaken further detailed scenario
analysis and modelling to assess the range of impacts climate-related risk have on the
business. It is the Group’s intent that this modelling is discussed during 2024 at the
Leadership Team’s meetings and with the Board through the Committees described
in the diagram above.
The HSE team, supported by the Energy Transition team, formally evaluates and
updates the Climate Risk Register on an annual basis through internal workshops, with
additional updates possible should material changes occur. The HSE leadership team is
responsible for the management of this process.
Company principal risks are reviewed regularly, where both General Manager of
Non-Operated Joint Venture (NOJV) and the HSE Manager contribute to discussions
regarding energy transition.
We will further integrate climate-related risks
and opportunities into decision-making at the
management level, including progress on managing
these following the development of specific
metrics and targets.
58 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Environmental, Social and Governance continued
Disclosure Alignment and next steps
Strategy
(a) Describe the climate-related risks and opportunities the organisation has identified over the short, medium and long-term Comply
Our focus this year has been on updating our preliminary risk and opportunity assessment
with a refreshed long-list Climate Risk Register and set of prioritised material climate risks
and opportunities, identified through the process outlined in Risk Management section
a (see page 64). As part of the identification and assessment process, we assessed our
financial exposure to a variety of climate-related risks including physical risks in our own
operations and wider value chain, existing and emerging regulation across our industry and
products, changes to consumer preferences due to sustainable consumer behaviour and
technology changes to support the transition to a lower-carbon economy. We undertook
a risk and opportunities identification exercise, concluding a long-list Climate Risk Register.
From this Climate Risk Register,material risks were identified, which include for this year,
one physical risk, five transition risks and one opportunity, which were taken forward
for financial impact quantification. These risks and opportunities reflect Ithaca Energy’s
sectoral and geographical basis as an upstream oil and gas producer in the UK North Sea,
with dependencies in the global oil and gas market and value chain. For further information
on the risk identification and assessment process, see Risk Management (a).
The physical risks relevant to our business and sector include more frequent and severe
weather events that may affect assets and operations, such as downtime or interruptions
from damage to infrastructure and service provision. Considering the location of our
assets and operations, such weather events include increasing frequency of storms
impacting safe operations.
The transition risks identified as potentially impactful to our business and sector span
the policy and legal, market and technology categories, such as changes to governmental
policy and taxes, consumer and investor preferences/sentiment, and technology readiness.
These could have a direct financial impact to Ithaca Energy based on residual emissions,
sale projections and debt financing plans.
We also considered potential climate-related opportunities that may be relevant for our
business, such as market growth prospects relative to global competitors resulting from
lower carbon intensity products from the UK Continental Shelf (UKCS) region in which
Ithaca Energy operates.
In line with the TCFD requirements, we assessed the impact of two climate scenarios
(further information can be found in Strategy (c)) on the identified material climate risks
and opportunities under our current business model and strategy. Further information
on these scenarios can be found in Strategy (c). The impact of these scenarios has been
explored over our three defined time horizons:
• Short-term: to 2030
• Medium-term: to 2040
• Long-term: to 2050
This aligns with the maturity mix of our asset portfolio (late-life, mid-life and long-life
assets), as well as our emissions reduction targets and associated strategy focused on
short-term operational improvements, mid-term portfolio revitalisation and long-term
targeted electrification, as described earlier in the strategic report. As climate-related
issues tend to materialise over a longer-term than other business risks and usual
business-planning cycles, these timeframes allow the ability to consider climate risks
and opportunities, and their uncertainties, over a relevant period, while also aligning
with global standards and targets. For example, physical risks tend to materialise in the
medium and longer-term and are more significant under a business-as-usual current
policies scenario, while transitions risks tend to materialize in the shorter term and are
more significant under an optimistic Net Zero 2050 scenario.
Further detail on these risks and opportunities and the expected magnitude of impact
under the specified scenarios and time horizons is included in Strategy (b) and Risk
management (b) respectively.
Ithaca Energy will continually monitor and evaluate
existing and future possible climate related risks
and opportunities, updating the Climate Risk
Register on an annual basis as outlined in Risk
Management (a).
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Disclosure Alignment and next steps
Strategy continued
(b) Describe the impact of climate-related risk and opportunities on the organisation’s businesses, strategy and financial planning Explain
In 2023, we undertook a detailed review of our climate-related risks and opportunities and have developed our risk assessment to provide a quantitative assessment of the financial
impacts of the most material of our physical and transitional risks and opportunities. Risks and opportunities were identified through a risk assessment process which assessed the
severity and likelihood of each risk/opportunity under the scenarios and timeframes outlined above. The table below summarises the material physical and transitional risks and
opportunities, their potential financial impact to our business, qualitative discussion of the relative magnitude of their financial impact under assessed scenarios and time horizons
(drawn from the outputs of the quantitative assessment performed), and the key activities we undertake to manage these. The analysis covers both operated and non-operated
assets. For further information, see note 19 of the Financial Statements.
We are acutely aware of our role in contributing to the decarbonisation of our value chain, the oil and gas industry, and to the economy-wide low-carbon transition. Our emissions
reduction plan is centred on our Net Zero by 2040 target, ten years ahead of the North Sea Transition Deal (NSTD) commitments, and our supporting interim targets. Further
information on our targets, as well as details of our ongoing and planned emissions reduction activities such as Captain electrification, can be found in the Energy Transition section
on pages 46 to 51.
We are increasingly considering the implications of climate-related risks and opportunities in our financial planning processes, and the detailed climate risk assessment below has
helped us understand these potential impacts over the climate scenarios and time horizons which we have assessed. As well as through our emissions reduction plan and inclusion
of climate-related targets in our Executive remuneration (see Metrics and targets (a) for further details), we are continually looking to integrate climate change-related impacts
into our strategic and business thinking. Our approach to building and maintaining strategic resilience through governance integration has been detailed further in the Governance
section above. Our intention is to conduct a high-level review of the quantitative scenario analysis assessment annually, and an in-depth update every three years, or following any
major changes to the business such as divestments or acquisitions.
We are fully compliant with the qualitative
requirement of the disclosure. Our intention is
to further mature our climate scenario analysis
and disclosures and take critical learnings from
this exercise forwards toward quantitative
assessment. We will look to define future actions
to enhance data quality and validate and refine our
methodologies to further our understanding and
achieve full compliance.
Additionally, we will review the outputs of the
climate scenario analysis and consider how we
can best integrate the results into our business
decision-making process, ensuring we fully
respond to the resiliency of our business model
and strategy consider the two contrasting climate
scenarios.
60 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Environmental, Social and Governance continued
TCFD taxonomy Climate-related risk/opportunity Potential financial impact
Relative magnitude of financial impact from
scenario analysis
Mitigation activities
Physical risk – acute
S M L
Increased severity of extreme weather
events: Indirect impact to the business
from operational disruption and
forced ‘downtime’ of Ithaca Energy's
assets due to increased severity and
frequency of extreme weather such as
storms resulting in revenue reduction
due to drilling interruptions and
potential increase in repair costs.
• Increases in extreme weather, most notably storms and
high winds and waves, could cause disruption to drilling
operations as health and safety concerns cause a cease in
operations, causing subsequent losses in revenue.
• Ithaca Energy’s North Sea offshore platforms are resilient
to extreme weather, but increased damage repair costs
across operated and non-operated assets may increase
under increased frequency of extreme weather. This may
also have an impact on Ithaca’s insurance premiums.
• The impact of extreme weather could further disrupt
the wider supply chain.
The impact from increased severity of extreme
weather events is expected to be relatively
low under both 'Current Policy' and 'Net Zero'
scenarios. As resilience is already built into the
design of Ithaca Energy’s assets to withstand the
extreme weather conditions of the North Sea
and while frequency and severity of extreme
weather is expected to increase in the future,
any increase in financial damages and disruption
are expected to be limited.
• Continue to assess and embed resilience and
mitigation measures, relating to environmental
hazards and climate change allowances, in the design,
construction and operation of our offshore assets.
• Continue to maintain and update our severe
weather policy and business continuity plans,
including asset level emergency response plans.
• We undertake meteorological and oceanographic
studies for all our offshore developments, which
incorporate the latest climate scenarios.
Transition risk –
policy & legal
S M L
Increased tax burden including carbon
pricing mechanisms: Introduction of
carbon taxation applied to both direct
(Scope 1 & 2) emissions and indirect
(Scope 3 supply chain) emissions,
increasing operational costs.
• Increased exposure to carbon pricing through increased
prices and decreased free allowances would result in direct
cost for Ithaca in relation to Scope 1 and 2 emissions, and
an indirect cost in relation to Scope 3 emissions.
• The potential indirect cost arising from Scope 3 emissions
would likely be passed on to Ithaca Energy from upstream
suppliers as a percentage of the total footprint and cost,
such as for purchased goods and services.
• For Ithaca’s non-operated assets an equity share of the
asset’s emissions and associated costs are likely to be
passed to Ithaca. Changes in equity share will vary the cost
exposure due to change in equity share of GHG emissions.
• Achieving climate targets would significantly reduce
Ithaca’s GHG emission footprint, hence mitigating a
large amount of carbon price exposure.
The impact of carbon pricing is expected to be
more material (moderate) under a ‘Net Zero’
scenario, especially in the short term, as carbon
prices increase and policy changes (e.g. reduction
in free allocations). This impact is expected to be
less material (in the medium to longer-term from
2030) as Ithaca implements measures to reduce
greenhouse gas emissions and meet its Net Zero
by 2040 target, therefore reducing exposure to
increasing carbon prices. In a ‘Current Policies’
scenario, the risk of carbon pricing is expected
to be low as carbon prices rise slightly to their
peak in 2030 before declining until 2050.
• Maintain our roadmap for reaching our Net Zero
2040 target, including meeting our interim 25%
reduction by 2025 on operated assets and 50%
reduction by 2030 on portfolio basis.
• Continue to invest in low-carbon activities available
to Ithaca Energy, to lower our emissions footprint,
such as the ongoing/planned electrification project
at Captain as set out on page 47.
• Continue to use an internal carbon price to inform
capital planning and business decisions and stress
test resilience of Ithaca Energy’s operating model
to market-based carbon price regimes. The current
price of carbon used is £70/tCO
2
e, and is
re-assessed annually.
• Continually assess our strategy for offsetting our
residual emissions to reach our Net Zero 2040 target.
Scenario analysis output table
The below table qualitatively summarises the outcomes of the scenario analysis performed for the material climate-related risks and opportunities. For further information on the climate scenario analysis process, see Strategy (c).
For definitions of timelines used in the scenario analysis table below, see Strategy (a).
TIME
HORIZON
Short-term Medium-term Long-term
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TCFD taxonomy Climate-related risk/opportunity Potential financial impact
Relative magnitude of financial impact from
scenario analysis
Mitigation activities
Transition risk –
policy legal
S M L
Increased risk from litigation, non-
compliance and licenses: Increased
scrutiny on oil and gas sector resulting
from rising instances of non-compliance
and litigation results in increased direct
legal costs, and reduced revenue from
perceived loss of social license to
operate, including risk related to the
impact of the proposed OGA plan if
it were legislated in its current form.
• There are potential direct and indirect financial impacts
related to climate-related litigation such as through class
action against Ithaca Energy. The direct impact would
be a potential increase in legal expenses.
• Non-compliance and fines may be relevant if Ithaca fails
to comply with climate regulation or related disclosure
requirements. However, this is considered unlikely as changes
in the regulatory environment are tracked by Ithaca Energy.
• Increased scrutiny following litigation or non-compliance
could also result in a loss of Ithaca Energy’s social licence to
operate and subsequently a potential loss of future licencing
rights, affecting Ithaca’s ability to generate revenue.
The impact of increased climate litigation is
expected to have the greatest impact under a
'Net Zero' scenario, but remains low under both
'Net Zero' and 'Current Policies' scenarios. Ithaca
Energy’s current legal spend is limited and we are
not expecting a significant increase in litigation
related to climate matters specifically, under
both scenarios the impact is expected to remain
low over all timeframes considered.
• Closely monitor emerging regulation and
requirements, including through engagement
with external consultants, customers, and trade
associations to understand how they apply to Ithaca.
• Continue to work towards and transparently report
against our pathway to Net Zero by 2040.
• Clearly communicate any future development
carbon removal/offset ambitions and strategy.
• Continue to seek independent assurance over
our Scope 1 and 2 emissions, and other KPIs and
reported metrics.
• Continue to work with peers and industry bodies to
provide constructive challenge to the OGA plan
Transition risk –
market
S M L
Increasing cost of capital and/or
reduction in access to capital:
Shifting preferences and priorities of
investors away from high-emitting
industries with an insufficient approach
to climate change, results in increasing
costs of capital and/or increased
third-party divestment.
• As financial institutions come under increasing regulatory
and societal pressure to align their portfolios to a Net Zero
world, it may become harder (reduced or more conditional
access) and more expensive for Ithaca to source funding
if the carbon intensity of the business does not align with
regional, investor and lender expectations.
• As a result, Ithaca Energy may face issues with divestment
and securing funding for exploration activities such as
capital investments and mergers and acquisitions.
• Ithaca’s ownership structure largely protects against large-
scale divestment, but ongoing demonstratable progress
against climate targets should limit the extent of divestment.
The impact of increasing cost of capital and/
or reduction in access to capital is considered
moderate under all scenarios and time horizons.
This risk is more material under a ‘Net Zero’
scenario where interest rates are projected to be
higher, and the risk of divestment is anticipated
to be more likely compared to the ‘Current
Policies’ scenario, where there will be greater
continued reliance on traditional fossil fuels.
• Continue to clearly and publicly communicate our
commitment to our Net Zero goals.
• Continue to monitor investor and bank lending
appetite and preferences in the context of
decarbonisation and the energy transition.
• Continue to work towards and transparently report
against our pathway to Net Zero by 2040.
• Consider incorporating emissions reductions targets
into any lending debt facility.
Transition risk –
technology
S M L
Capital costs and other barriers (e.g.
grid connectivity) associated with the
adoption of low emissions technologies
to meet climate targets: To meet
emissions reductions targets, there
will be a need to invest in emerging
low emissions technologies, such as
electrification and CCUS, which would
result in increased capital expenditure.
• As Ithaca invests in technologies to meet climate
commitments around GHG emission reduction,
there is significant capital expenditure required (e.g.
electrification projects).
• There is some uncertainty around the availability and
marginal abatement cost of certain technologies such
as CCUS which is dependent on scale up to reduce capex.
As a result, investment may be more or less costly
(or delayed) depending on the maturity curve of these
types of technologies required for Ithaca Energy to
reach targets.
• The return on investment for these technologies is largely
driven by the avoided cost associated with carbon price
exposure, driven by policy implementation which can
save Ithaca cost over the longer term.
The impact of capital costs to achieve Ithaca’s
climate targets is more material (moderate)
in the ‘Current Policies’ scenario, especially in
the medium to long-term (2040–2050) as
the marginal abatement costs of low emission
technologies are likely to stay relatively high and
any reductions in operational costs from carbon
savings are limited due to lower carbon prices.
However, in the ‘Net Zero’ scenario, investing
in low emissions technologies to meet climate
targets over the medium to long term is likely to
materialise as a moderate net opportunity for
Ithaca given cost savings associated with carbon
pricing outweigh increased expenditure on low
emission technologies.
• Develop a clear roadmap to reaching our Net Zero
2040 target, including a marginal abatement cost
curve (MACC) and capital allocation plan to set
a clear strategy prioritising the most effective
emissions reductions activities in terms of cost
and reduction potential.
• Continue to monitor the global market for
emerging low carbon technologies, such as CCUS,
and associated government policies affecting
technology development.
• Continue to progress with the Captain, Rosebank
and Cambo electrification projects.
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TCFD taxonomy Climate-related risk/opportunity Potential financial impact
Relative magnitude of financial impact from
scenario analysis
Mitigation activities
Transition risk –
market/policy and
legal
S M L
Reduction in demand and commodity
prices for oil and gas due to changing
consumer preferences and/or
government regulations: Contraction
in oil and gas demand and market value
(i.e. commodity price changes) due to
changes in government policies and
shifting consumer preferences towards
lower carbon alternatives, resulting in
reduced revenue.
• Changing consumer preferences towards lower carbon
energy sources and demand reductions as a result of
climate policy may reduce demand for Ithaca Energy’s
oil and gas products.
• Coupling reduced demand with excess supply could
significantly reduce global prices of hydrocarbons,
which both reduces revenue and increases the risk
of stranded assets.
• Production changes in the short term for Ithaca sees
an increased risk, which can be mitigated through
diversification of the business into other energy sources.
The potential impact of global demand
reduction for hydrocarbons and low oil and gas
prices is expected to be moderately high under
a ‘Net Zero’ scenario, particularly in the
medium-term, despite long-term contracts
partially shielding Ithaca from abrupt changes
to revenue. This impact assumes demand for
Ithaca’s products declines in line with global
demand and Ithaca’s existing assets have not
reached end of useful life.
Over the longer term in both scenarios demand
is projected to reduce, although at a much slower
rate in the ‘Current Policies’ scenario, which
is initially moderately high in the short-term,
decreasing to moderate over the medium-
to long-term.
• Continue to conduct reviews of our corporate
strategy and business model in the context of the
energy transition and changing demand/prices for
oil and gas.
• Continue to explore investment in emissions
reductions to reduce the emissions intensity
of Ithaca’s products.
• Regularly consider business diversification into
the wider energy supply
• Continually assess Ithaca Energy’s ability to
pivot the business as demand dictates and assess
Ithaca’s ability to improve/maintain market share of
hydrocarbon supply should relative carbon intensity
become a differentiating factor. See transition
opportunity for further details.
Opportunity –
market
S M L
Increased demand for Ithaca Energy's
products due to the lower relative
carbon intensity of UKCS O&G
and shifting consumer preferences:
The UKCS low GHG/BOE oil and
gas provides a potential competitive
advantage as transition energy in the
global commodity market which may
increase market share and revenue.
• As the world decarbonises and policy restricts the use
of carbon-intensive fuels, the relative carbon intensity
of hydrocarbons globally is likely to factor into purchasing
decisions for refiners and end users in relations to
downstream processing and combustion.
• The UKCS has a naturally low-carbon intensity compared
to other regions which may increase demand for UKCS
hydrocarbons vs more carbon-intensive sources.
• This relative increase in market share for UKCS may
increase demand for Ithaca Energy’s products and
hence revenue.
The potential impact of increasing demand
for UKCS oil and gas is expected to be more
material (moderate) in the ‘Net Zero’ scenario,
in the short to medium-term as consumers
move to lower carbon intensity hydrocarbons,
before moving to alternative renewable energy
sources in the longer-term. In the ‘Current
Policies’ scenario the opportunity becomes
more material (moderate) in the long-term as
demand for oil and gas products remains steady,
with a continued preference for lower-carbon
intensity hydrocarbons.
• Ongoing implementation of GHG emission
saving projects in-line with climate targets will
reduce Ithaca’s carbon intensity compared to
peers maintaining a strong position in the UKCS.
• Ongoing horizon scanning on how hydrocarbon
characteristics are pricing into decisions on
hydrocarbon selection (e.g. carbon intensity
as well as API gravity and sulphur content).
• Continue to develop a lower carbon intensity
portfolio, as demonstrated by our investment
in electrification projects at our Captain and
Rosebank assets.
Environmental, Social and Governance continued
Scenario Analysis Output Table continued
TIME
HORIZON
Short-term Medium-term Long-term
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Disclosure Alignment and next steps
Strategy continued
(c) Describe the resilience of the organisation’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario Explain
Ithaca Energy assessed its resilience to the selected material climate risks and opportunities
using a combination of quantitative and qualitative scenario and sensitivity analysis, as
outlined in Strategy (b). Scenario analysis is a process for identifying and assessing the
potential implications of a range of plausible future states under conditions of uncertainty.
Scenarios are plausible projections of future macroeconomic and environmental states
based on key trends and inputs such as differing macroeconomic drivers and techno-
economic outcomes and are not designed to deliver precise outcomes or forecasts. Instead,
scenarios provide a way for the Group to consider how the future might look if certain
trends continue or certain conditions are met. With the support of an enlisted third-party,
we assessed the short-list of seven prioritised climate-related risks and opportunities over
the short, medium and long-term horizons under the following scenarios:
• Optimistic ‘Net Zero’ scenario of 1.5°C global warming, which closely maps to the
IPCC’s representative concentration pathway RCP2.6; and
• ‘Current policies’ scenario of 3°C+ global warming, which closely maps to the IPCC’s
representative concentration pathway RCP8.5
Transition risks were assessed using predominantly International Energy Agency (IEA)
scenarios. Where data was not available or appropriate, the Network for Greening the
Financial System (NGFS) scenarios were utilised. Physical risks were assessed using
IPCC AR6 models for RCP2.6 and RCP8.5 scenarios.
The Net Zero scenario assumes all necessary climate policies and related measures are
implemented sufficiently to achieve global Net Zero greenhouse gas emissions by 2050
and subsequently limit global warming to 1.5°C. Therefore, under such a scenario, we
expect transition risks, driven by changes in policy, markets and consumer behaviour,
to have a much greater impact on society and our business than physical risks. Our
analysis shows transition risks in this scenario may have a negative impact on the Group’s
growing portfolio of existing assets and new investment or M&A opportunities, due to
increased carbon costs, demand contraction for hydrocarbons and lower commodity
prices. This would likely result in higher operating costs, lower revenues and reduced
overall asset valuations. Therefore, Ithaca Energy continually evaluates the financial
exposure of current assets as well as potential assets over the short, medium and long-
term. The Group has plans to support the energy transition, as described within the ESG
section above (see page 48) which includes an emissions reduction strategy focusing
on short-term operational improvements, mid-term portfolio revitalisation and long-
term targeted electrification. Additional mitigation measures include exploring further
emissions reduction activities and initiatives to maximise asset efficiency, industry
collaboration on emissions reduction, including examination of developing technologies,
and exploring further M&A and investment opportunities.
In contrast, the 'Current Policies' scenario assumes that some climate policies are
implemented, and as such, some global warming is experienced. Therefore, under this
scenario, we expect physical risks driven by longer-term weather changes from climate
change to have a greater impact on our business compared to the Net Zero scenario.
Our analysis shows that lower carbon costs and higher commodity prices resulting
from a less pronounced transition (in comparison to the Net Zero scenario) mean the
operational costs, revenues, profit margins, production dates and Company valuations
are not as negatively affected. However, the increased physical risk in the long-term of
this scenario may result in damage to assets or supply chain disruption, not only leading
to financial losses from production and operational delays, but also increases in insurance
costs and contingency planning and design, resulting in lower profits and asset valuations.
Based on the climate scenario analysis performed and the current mitigation measures
in place, Ithaca Energy considers itself more resilient under a 'Current Policies' scenario
as we currently have and will continue to design effective contingency and response
plans for offshore development projects to mitigate against increasingly severe physical
climate events. We expect potential changes in demand and commodity prices to be
the most significant climate risk to our business, particularly under a Net Zero scenario.
However, we believe Ithaca Energy has inherent resilience to this risk given UKCS’
lower carbon-intensity production versus other producing regions are anticipated
to be preferred as policy changes drive down spending on more emissions-intensive
products. Ithaca Energy will continue to build robustness and resilience by utilising the
outputs from the climate scenario analysis to inform our sustainability strategy as well as
management and planning measures to mitigate the worst impacts of both physical and
transition risks. For example, we will periodically review the credibility of our emissions
reduction and Energy Transition plans in line with our Net Zero targets, including our
commitments to zero routine flaring, 25% operated emissions reduction by 2025
and continued investment in lowering the carbon footprint of our portfolio such as
electrification projects at our Captain and Rosebank assets. Our targets are discusssed
earlier in this ESG section.
We will consider further integration of different
climate scenarios and related commodity price
forecasts and look to incorporate these into
existing models to provide more granular disclosure
regarding Ithaca Energy’s resilience in areas
including financial resilience and strategy, as well
as to develop and integrate measures to increase
the overall resilience of our business.
64 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLCITHACA ENERGY PLC
Disclosure Alignment and next steps
Risk Management
(a) Describe the organisation’s processes for identifying and assessing climate-related risks Comply
This year, the initial climate risk register, developed in 2022, was refreshed with the
help of a third-party organisation as part of the climate-risk and opportunity financial
impact assessment process. Based on the existing enterprise risk register and climate
risk register, a consideration of existing and emerging regulation, as well as knowledge
of Ithaca Energy and our industry more widely, a new long-list of climate-related risks
and opportunities was created covering all relevant TCFD categories. Each risk and
opportunity was evaluated and given a Current Risk Level score of materiality based
on our existing Enterprise Risk Management framework and Risk Prioritisation Matrix
considering the potential financial impact to the Group, the likelihood of occurrence, the
timing of the risk and the type and location of our existing portfolio. Further information
on how the materiality of climate-related risks is assessed can be found in the Risk
management section (b) below. Following this, a risk validation workshop was facilitated
for senior stakeholders from across the business. The long-list of climate-related risks
and opportunities were reviewed by these stakeholders, and those determined to be
material to Ithaca Energy in terms of impact and likelihood were confirmed to be taken
forwards for quantification through the climate scenario analysis described in Strategy
(c) (see page 63), ensuring alignment with those risks and opportunities deemed most
material against the enterprise risk management framework.
Going forward, Ithaca Energy identifies and evaluates climate-related risks at the
organisational level and the asset and investment level on an ongoing basis.
At the organisational level, responsibility for the climate risk register sits with the
HSE and Energy Transition teams. This includes evaluation of the risks and opportunities
to account for additional planned mitigation measures used to calculate a post-mitigation
residual risk level score. The most material climate-related risks were integrated into the
Group’s formal enterprise risk register under the principal risk ‘Energy Transition and
Net Zero Delivery’ and will be monitored closely on an ongoing basis in conjunction with
other significant business risks. Responsibilities of the HSE and Energy Transition teams
also extend to the review of the climate risk register and identification of any new climate-
related risks and opportunities on a quarterly basis, as part of wider annual re-assessment
and following any material change to the business. This process includes a review of the
discrete asset and function risk registers as well as a consideration of any changes to
existing and emerging regulatory requirements and government policies (also considered
as part of the ‘UK Government’s Energy and Fiscal Policies’ Group emerging risk).
This informs whether any risks need to be updated or added to the climate risk register,
including a (re)assessment of Current and Residual Risk Level Scores, and any changes
communicated to the leadership team as appropriate. On a six-week basis or following
any major updates, the HSE and Risk teams will consult on the need to escalate any
climate-related risks and opportunities to discrete Group Principal Risks based on
financial materiality and mitigation/risk management requirements, before being
raised for discussion with the ELT.
At the asset and investment level, significant climate-related risks relating to fossil fuel
prices, economic lifetime, expected cessation of production and carbon costs have been
integrated into the risk assessment and due diligence process for each asset, investment,
merger or acquisition opportunity. This is used to inform asset management, investment
and strategic decision-making. Additionally, each asset holds their own risk register which
feed into the organisational level climate risk register held by the HSE team. From the
asset risk registers, the top 10 risks are raised to ELT on a monthly basis, overseen by
the Risk function to manage escalation to principal risks where necessary.
We will seek opportunities to further embed and
integrate process for identifying and assessing
climate-related risks to inform corporate
decision-making and financial planning for
existing and future assets.
Environmental, Social and Governance continued
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Risk Management continued
(b) Describe the organisation’s processes for managing climate-related risks Comply
As a Group principal risk under the ‘Energy Transition and Net Zero delivery’ risk,
climate change is governed and managed in line with the Group’s risk management
framework outlined on pages 84 and 85.
As sub-risks within this Group Principal Risk, Ithaca Energy’s Risk, Compliance and
Insurance team review and consider each risk identified in the Climate Risk Register
described above to identify possible options to mitigate, transfer, accept or control
each risk.
If deemed material, each risk will be assigned an overall risk owner, before current and
additional planned risk mitigation measures are then defined and also assigned an action
owner and due date. Decisions to mitigate, transfer, accept or control each risk are based
on the team’s assessment of the most viable or attractive options, such as cost and value
delivered. This process will be repeated for any new climate related risks identified and
reviewed on an annual basis for existing risks. Further information on the Group risk
governance structure and process can be found in the Risk management section
on pages 84 to 91.
Ithaca will also closely monitor the prioritised climate risks and opportunities with the
aim of reducing risk across climate scenarios and strengthening our long-term resilience,
with current management and mitigation actions for those risks summarised in Strategy
(b) on pages 59 to 62.
As previously described, risks and opportunities identified in Ithaca Energy’s Climate
Risk Register have been assessed against our Enterprise Risk Management framework
and Risk Prioritisation Matrix to consider the financial impact to the Group, likelihood of
occurrence and timing of the risk. This allows the climate-related risks and opportunities
to be categorised according to the following risk level scores:
• Risk Levels 1-4 (High)
• Risk Level 5 (Moderately High)
• Risk Level 6 (Moderate)
• Risk Level 7+ (Low)
High and Moderately High climate-related risks are monitored closely by the energy
transition team, with any material changes and progress communicated to the leadership
team. Where appropriate, material climate risks are communicated to the Health,
Safety, Environment and Security Committee and the Audit and Risk Committee,
who will review the likelihood and the impact of principal risks materialising, and the
management and mitigation which aim to reduce the likelihood of their incidence or
their impact.
Moderate and Low climate-related risks are reviewed and updated annually with the rest
of the Climate Risk Register by the energy transition team, which is approved by the
Chief Financial Officer.
We will look to further integrate climate-related
risks and opportunities into decision-making
at management level and improve the process
of identifying climate risks through the Climate
Risk Register.
66 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Disclosure Alignment and next steps
Risk Management continued
(c) Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organisation’s overall risk management Comply
At the organisational level, material transition and physical climate-related risks from
the Climate Risk Register are embedded into the Group’s Enterprise Risk Management
procedures under the “Energy Transition and Net Zero Delivery” principal risk see
page89 along with other business risks to be managed appropriately. As such, each
material climate-related risk will be assigned an overall risk owner, mitigation action
owner and due date by the Risk, Compliance and Insurance team in line with the process
outlined in Risk Management (b) above.
Further information on the Group’s Enterprise Risk Management Section can be found
in the Risks management section (see pages 84 to 91). Climate-related risk in terms of
Energy Transition & Net Zero Delivery risks are included in the Group’s Principal Risks.
Principal risks are frequently reviewed by the Leadership Team (through the Enterprise
Risk Management Committee), by the ARC and at the main Board meetings. Material
climate-related risks are brought forward periodically by the Energy Transition Team
and Chief Financial Officer (CFO) to the Enterprise Risk Management Committee
(ERMC) and the Board to guide corporate decision-making, business strategy and
financial planning. The CFO reviews Group principal risks and attends the ARC and
main Board meetings. In addition, the CFO will periodically review progress regarding
Energy Transition and emission performance at monthly Energy Transition and
emissions meetings.
At the asset and investment level, climate-related risks and opportunities are assessed
as part of the business planning and pre-investment due diligence stage.
As the Group’s climate-related risk management
process and Climate Risk Register evolves, the
integration of climate-related risks into the
Enterprise Risk Management process will be
developed further.
Metrics and Targets
(a) Disclose the metrics used by the organisation to assess climate-related risks and opportunities in line with its strategy and risk management process Explain
Ithaca have considered the all sector-specific metrics suggested by the TCFD
implementation guidance to select the below set of metrics as appropriate to
assess climate-related risks and opportunities in line with the strategy and risk
management process:
• Scope 1 and 2 GHG emissions: The Group collects and tracks Scope 1 and 2 GHG
emissions for each of its operated assets, as well as Scope 1 emissions for non-operated
assets, measured in tonnes of carbon dioxide equivalent (tCO
2
e). The breakdown of
Scope 1 emissions is tracked by source, including emissions from flared hydrocarbons,
other combustion, vented emissions and fugitive emissions. Ithaca Energy accounts
are verified under the requirements, regulations and guidance of the 2020 UK
GHG Order (UK ETS) and OPPC 2013. Scope 2 emissions are emissions from our
office energy purchase. Starting this year, Scope 1 Greenhouse Gas emissions are
also reported on a net equity basis, incorporating the proportional contribution from
both operated and non-operated assets. This method offers a more comprehensive
perspective on the Company’s emissions. It is upon this full portfolio view that our
longer-term emissions reduction targets are based. This aligns with the North Sea
Transition Deal targets, which are basin wide targets and not specific to any individual
asset. For further details see Metrics and targets (b).
• Emissions intensity: The Group tracks the emissions intensity of its portfolio of
operated assets, comparing assets with the industry average. The emissions intensity
metric considers Scope 1 and 2 GHG emissions (as above) and oil and gas production,
measured in kilogrammes of carbon dioxide equivalent per barrel of oil equivalent
(kgCO
2
e/boe). Starting this year, we will also report our net equity Scope 1
emissions intensity.
• Energy intensity: The Group tracks the energy intensity of its portfolio of operated
assets to monitor progress and identify further efficiency opportunities. The energy
intensity metric considers energy consumption from operated assets and Ithaca
Energy’s offices, and oil and gas production, measured in terajoules per barrel of
oil equivalent (TJ/boe).
Delivering on our emissions targets (as detailed in Metrics and targets (c)) is included
as part of the annual score card, which helps determine annual performance bonus
outcomes for almost all of Ithaca’s employees. Milestones related to emissions reduction
project delivery are also included in the individual objectives for relevant employees,
further influencing their future remuneration. For further information on the KPIs
included in performance scorecards (see page 119).
Ithaca Energy currently holds an internal carbon price assumption of £70/tonne in 2023
terms (inflated thereafter). The appropriateness of this assumption will be reviewed
annually or more frequently if warranted by changes to our assessment of the outlook.
Whilst capital spent on decarbonisation efforts
is tracked, going forwards, Ithaca Energy will
consider further developing and disclosing specific
targets related to this spend.
Following this year’s update to the Climate Risk
Register and completion of quantified scenario
analysis per strategy (b) and risk management (a),
we will consider developing further metrics related
to the material climate risks and opportunities to
track progress against relevant targets, informed
by the All-sector and sector specific guidance per
TCFD tables 1.1 and 1.2.
Environmental, Social and Governance continued
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Metrics and Targets continued
(b) Disclose Scope 1, Scope 2 and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks. Explain
Gross operated asset basis 2023 2022 2021
Scope 1 GHG emissions (tCO
2
e) 435,522 482,647 497,362
Scope 2 GHG emissions (tCO
2
e) (Office energy purchased) 270 678 567
Total Scope 1 & 2 GHG emissions (tCO
2
e) 435,792 483,325 497,929
Amount of Scope 1 emissions from flared hydrocarbons (tCO
2
e) 74,696 67,362 82,312
Amount of Scope 1 emissions from other combustion (tCO
2
e) 323,655 375,775 391,977
Amount of Scope 1 emissions from process emissions (tCO
2
e) – – –
Amount of Scope 1 emissions from vented emissions (tCO
2
e) 32,371 39,510 22,215
Amount of Scope 1 emissions from fugitive emissions (tCO
2
e) 3,642 949 949
Carbon intensity (kgCO
2
e/boe) 25.0 23.8 24.6
Energy intensity (TJ/Mboe) 0.35 0.33 0.36
Percentage change in Scope 1 and 2 emissions, compared with 2019 baseline -23% -15% -10%
Energy consumption MWh 1,677,419 1,879,541 2,040,278
Net equity operated and non-operated basis
Scope 1 GHG Emissions (tCO
2
e) 566,711
Carbon Intensity (kgCO
2
e/boe) 19.2
Operational basis data comprises of 100% of emissions from activities operated by Ithaca Group. All emissions metrics are calculated in line with the GHG Protocol. Scope 2
emissions are calculated using a market based method.
From 2023, Scope 1 Greenhouse Gas absolute emissions, and carbon intensity are also reported on a net equity basis, incorporating the proportional contribution from both
operated and non-operated assets. This method offers a more comprehensive perspective on the Group’s emissions. It is upon this full portfolio view that our longer-term emissions
reduction targets are based. This aligns with the North Sea Transition Deal (NSTD) targets, which are basin wide targets and not specific to any individual asset.
Ithaca Energy recognises the materiality of Scope 3 emissions in the organisation’s emissions profile. As a result, we are working to better understand and influence the emissions
from our value chain from both upstream and downstream activities. Using the definitions from the GHG Protocol’s Corporate Value Chain (Scope 3) standard, we are evaluating
which categories are most material to our activities and looking to industry for best practise in quantifying those before reporting, while continuing to engage with our supply chain
to encourage Scope 3 emissions reduction.
The Group will continually monitor the
appropriateness of the metrics and methodologies
disclosed. Ithaca Energy will consider expanding
coverage metrics to include the Scope 3 emissions,
starting with the most material categories,
following the GHG protocol and its defined
Scope 3 categories.
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Disclosure Alignment and next steps
Metrics and Targets continued
(c) Describe the targets used by the organisation to manage climate-related risks and opportunities and performance against targets Explain
Ithaca Energy has a target of achieving Net Zero operations on a Scope 1 and Scope 2
net-equity basis by 2040, ten years ahead of the NSTD commitments, with several
interim targets.
The Group is targeting an absolute reduction of Scope 1 and 2 emissions of 25% from
operated assets by 2025 from a 2019 baseline of 569 ktCO
2
e, and 50% by 2030 on
a net-equity basis, which includes emissions from non-operated joint ventures, using
the NSTD-aligned 2018 baseline. As of the end of 2023, the Group has reduced its
operated Scope 1 and Scope 2 emissions by 23% compared with the 2019 baseline,
11% of which was associated with a major power generation outage on Alba.
All targets are re-baselined following any major changes to the business, including
acquisitions or divestitures. To date, no targets have been re-baselined since the
initial baseline development. The Group's Net Zero strategy is to invest in low carbon
technologies to reduce Ithaca Energy’s operational footprint (i.e. Scope 1 and 2 GHG
emissions) as much as feasible. Any residual emissions will be offset by globally-recognised
removals projects. Further information on our offsetting strategy will be disclosed in
future reporting, where specific offset projects have been identified and/or applied.
Additionally, we set out to achieve a 0.20% methane intensity by 2025, in line with
targets set by OGCI and adopted by the NSTA and OEUK. We calculate our methane
intensity based on the mass of methane we emit across our operated assets, per mass of
gas we export from those assets to pipeline, and express it as an intensity (%) so we can
track our performance against the OGCI target over time. In 2023 our gross operated
methane intensity was 0.17%. We have also reduced our gross operated absolute methane
emissions by 47% compared to a 2018 baseline, in alignment with our commitment to the
OEUK target of 50% absolute methane emission reduction by 2030.
Ithaca Energy is also aligned with the World Bank’s Zero Routine Flaring of operated
assets by 2030.
Further information regarding our climate-related targets can be found in the
environmental content within the ESG section, above.
Following this year’s updates to the Climate Risk
Register and completion of quantified scenario
analysis per strategy (b) and risk management (a),
we will consider developing further targets related
to the material climate risks and opportunities to
manage risk exposure informed by the All-sector
and sector-specific guidance per TCFD tables 1.1
and 1.2.
In 2024, we will further refine our pathway
to achieving our Net Zero goals. In addition to
progressing our understanding and quantification
of our Scope 3 emissions, this will include
reviewing our M&A guidelines to align with our
Net Zero aspirations, developing trigger points
for considerations of low carbon technologies,
an improved internal Net Zero communications
plan and the expansion of our emissions reduction
opportunity set to include non-operated assets.
Environmental, Social and Governance continued
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The Group is committed to providing a safe and healthy working
environment for all its employees, contractors and other personnel
working for us, providing a process safety assurance focus and achieving
excellence in Health, Safety and Environmental (HS&E) performance
across all of our operations.
Social
Health and safety
The Group is committed to providing a safe and healthy
working environment for all its employees, contractors
and other personnel working for us, providing a process
safety assurance focus and achieving excellence
in Health, Safety and Environmental (HS&E)
performance across all of our operations. The Group
considers its HS&E performance, prevention of process
safety events, and the health, safety and security of
those who work for, with and alongside Ithaca Energy
as central to its business success.
To achieve this, the Group aims to manage its business
in compliance with legislation and industry standards,
maintain high-quality systems and processes and
maintain safe and healthy workplaces. Throughout all
of our operations, we promote a positive and robust
safety culture, ensuring that health and safety standards
are not compromised to meet commercial objectives.
In 2023, we have made improvements to our Business
Management System (BMS) which implements the
Safety Management System (SMS) and the EMS as
documented in our HSE policy. The BMS formally
describes the responsibilities of the organisation and
individuals within the organisation and incorporates
the Group’s EMS and SMS.
Improvements initiated in 2023 have included
improving and simplifying how our teams access
procedures, and improvements in key procedures
to provide clarity regarding compliance roles and
responsibilities, and also reflect audit findings.
We proactively manage potential risks of major
incidents by:
• Focusing on developing a strong leadership
culture, prioritising process safety culture and
Stop Work Authority;
• In 2023 launching our Group safety leadership
expectations;
• Developing our process safety culture with focus
on leadership training for seniors’ leaders;
• Frontline Operator Process Safety training; and
• Implementation of Process Safety Fundamentals.
We also ensure that:
• Safety and environmental performance measures
are included in our scorecard, tracked at established
meetings and reviewed by the Board;
• HSE policy in place, which includes Company Major
Accident Prevention Policy (CMAPP) requirements
that provides a framework for all Group activities,
supported by a Company management system;
• Regulator accepted safety cases for all offshore
facilities, summarising management of potential
Major Accident Hazards (MAHs) and safety
and environment sections of our Company
management system;
• Application of robust risk assessment and
management of change processes;
• Line of Defence (LOD) auditing framework in place,
driving focus on prevention of MAHs, with regular
progress reporting to the Board HSE Committee;
Throughout all of our operations,
we promote a positive and robust
safety culture.”
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Environmental, Social and Governance continued
• Independent assurance of safety and environmental
critical elements (SECE) by an Independent
Competent Person (ICP) as part of our written
scheme of verification;
• Independent review of well programmes by our
well examiner;
• Framework for technical authorities, providing
independent assurance;
• Crisis management and emergency response
processes, exercised regularly; and
• Oversight and challenge of Board HSE Committee,
with experienced industry leaders.
The Group monitors and manages the Serious Injury
and Fatality Frequency (SIF-F) associated with its
operated assets as a means of evaluating the health
and safety performance of the Group and the suppliers
working on the assets.
In addition, the Group monitors process safety events,
monitoring Tier 1 and Tier 2 events (as defined by
Institute of Oil & Gas Producers IOGP AP1453) for
learning. Improving operational and process safety
performance, within an open and transparent incident
reporting culture, is a continual focus of the business
and a combination of targets and specific measures
are implemented with a view to facilitating this goal.
Our performance with regard Serious Injury and
Fatalities, Process Safety Events and Recordable Case
or injury rates are shown in the following table:
2023 2022
Serious Injury and Fatalities – –
Process Safety Events Tier 1 1 –
Process Safety Events Tier 2 – 2
Total Recordable Case
Frequency per million hours 3.31 3.38
Our 2024 focus to improve both process safety events
and Recordable Case rates includes:
• Leadership: Supporting our frontline regarding our
safety leadership expectations and human performance;
• Controls: Continuing to improve our control of
work processes;
• Assurance: Delivering our Lines of Defence plans
for HSE and Technical Authority Auditing; and
• Process Safety: Continuing to embed improvements
including immersion regarding Process Safety
Fundamentals, process safety Key Performance
Indicators (KPIs) and the use of the Barrier Model.
Our people
The mark of a great Company isn’t just about what we
achieve, but how we achieve it. It’s about the people
who create and share in that success, the communities
we support and how our work contributes to the greater
good. On all counts, we are proud of who we are and
what we do.
At the close of 2023, we were a complement of
631 employees reflecting some growth this year to
strengthen our business and execute key business
deliverables. In terms of people and culture, the year
brought significant activity to further embed our vision
and values following the launch in 2022.
In addition, we continued to adapt to being a public
Company and all that entails in terms of accountability,
formalising processes and transparent reporting.
Our people priorities and achievements in 2023,
and continuing into 2024, include:
• Continuing to actively work on embedding our
vision and values, with 18 interactive sessions taking
place across the business focusing on building and
leading culture and change and establishing our
culture ambassador team which consist of employee
representatives both onshore and offshore providing
support. To strengthen this further and bring our
values to life our shared behaviours ('Our Way') was
launched in Q1 2024. These core behaviours have
been developed in conjunction with employees, using
the feedback from a cross-section of the organisation
to provide clear expectations, asks and actions to
bring our values to life day to day. During 2024,
Case study
VSA Linn Moor
School
Over VSA’s 150-year history, the charity has helped thousands of
the most vulnerable people and their families living in communities
providing vital support and services to people of all ages living with
a mental health diagnosis, complex additional learning and support
needs, addiction (drugs and alcohol), loneliness and isolation, and
living in extreme poverty.
VSA’s Linn Moor School and Campus provides specialist education and transitioning
care for children and young people living with complex additional support and behavioural
needs. The campus provides a nurturing, warm and aspirational learning environment for
children and young people, creating the environment they need to thrive.
Within the campus grounds, VSA are one of a few specialist providers across the UK that
offer a transitioning care programme for young people aged 18-25 years once they have
graduated from Linn Moor School. At Linn Moor, VSA helps to prepare children and
young people for their journey into adulthood, empowering students with the confidence,
independence and social/life skills to enable students to live happy and healthy lives now
and in the future.
At Ithaca Energy, we were overwhelmed by the work VSA do and pledged our support
to Linn Moor School. Our teams have volunteered to create the Ithaca Energy ‘sensory’
garden, clearing ground, erecting fences and planting shrubs and trees, designed to
stimulate students’ senses – touch, taste and sound – using different plants and
materials which help the children with their cognitive, emotional, physical, social
and communication development.
With over ten teams from across our organisation participating in our efforts covering
1,600 volunteering hours, we transformed the garden from an unused area to a space
where the children can enjoy with the garden due to open in spring 2024.
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we will embed these behaviours in our people
processes to underpin how we manage ourselves and
provide aligned and consistent approaches that gets
the best out of our people and builds a culture we all
want to be part of;
• Improving our employee engagement score by 12%
since our last survey in late 2021. In May 2023 we
ran our most recent engagement survey with a high
participation rate of 72%. To increase transparency
and build on our culture and engagement a number
of employee focus groups took place during the year
along with regular engagement with our employee
consultation forum. In addition, leaders were
empowered to have their own team planning sessions
to prioritise what is important and co-create action
plans. We will carry out pulse surveys in 2024 to
measure our progress;
• Launching our formal graduate programme, with
nine graduates across various disciplines joining
the business to strengthen our talent pipeline;
• Building solid structures around employee
proposition, learning and development, talent
acquisition and management; and
• Evolving the people strategy ensuring it remains
scalable for growth and creates a great place in
which to work, develop and stay.
To attract and retain quality talent, we have various
internal and external development programmes,
educational assistance and graduate and apprentice
training programmes. In 2023, we have been
highlighting our career development tools to raise
awareness, established our talent development team,
developing a bespoke people leaders programme which
was launched in Q1 2024 and completed succession
plans for business critical positions.
Turning to employee wellbeing, supporting positive
mental health and wellbeing is a cause that Ithaca Energy
is passionate about. Support can be ‘direct’, e.g. specific
mental health awareness days/weeks/months, free health
assessments, our employee assistance programme,
seminars on financial wellbeing and retirement planning,
or ‘indirect’, e.g. Rig Run participation that promotes
wellbeing, health and camaraderie for our offshore
employees. We provide extensive employee resources
and supportive guides, including trained mental health
first aiders and wellbeing champions.
Our community neighbours
Ithaca Energy’s mission is to Triumph. Together.
We believe that success comes from collaboration,
harnessing the collective experience of our people –
on and offshore and in our local community. The passion
to be a good neighbour permeates Ithaca Energy’s
DNA. Our aim is to be a long-term member of our
local community, which we believe will help build a
better society.
Over the course of 2023, we have expanded our efforts
to reach a wider range of charitable and community
projects broadening our community impact across
social, environmental and humanitarian causes. We were
delighted to have entered into a further six charitable
partnerships while maintaining an active involvement
with our key charity partner, VSA.
With growing interest from across our organisation, we
invited our employees to nominate charities that they
felt would benefit from our financial and volunteering
support. Nominations were wide reaching, with
Aberdeen Maggie’s Centre, the Living Well Café,
AberNecessities and Camphill School selected as our
local charity projects. Broadening our social impact,
the charity Committee donated to The British Red
Cross Appeal, to assist with aid in Syria following the
Turkish earthquakes, a cause our employees were keen
to support, and to the River Dee Trust to support
conservation efforts in our local community.
We have built strong relationships with our charity
partners and work closely with them to provide the
required support, financially and practically, along with
developing employee engagement opportunities and
learning around different social issues: poverty, dementia,
mental health, cancer and special educational needs.
Our support is multi-faceted: from financial support
and volunteering, to raising awareness of social issues
facing our community. Beyond our key charitable
partnerships, we have matched charitable donations and
supported more than 50 charitable requests from our
employees, donating over £70,000 to local charities,
youth and elderly groups, community sporting clubs
and local schools in the North East of Scotland in 2023.
VOLUNTEERING HOURS
1,600
FUNDS RAISED FOR
VSA IN 2023
£90k
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Case study
Aberdeen Art
Challenge
Ithaca Energy were delighted to host our annual Aberdeen
School’s Art Challenge again in 2023, with hundreds of students
across nine Aberdeen and Aberdeenshire schools taking part in
this year’s challenge.
Designed to encourage creativity and develop new ways of approaching their learning
outcomes, we provided participating schools with a £500 art cupboard voucher. With
an overwhelming response from the applicants, each school submitted their top 10
pieces for our finalist’s exhibition. We were hugely impressed with the quality, diversity
and creativity of the artwork. Supporting the art and creativity provision in primary
schools, even in this small way, is exactly the aim of this competition.
Participating schools again provided tremendously positive feedback with a teacher
from a winning school commenting: “As well as any materials we have required for
expressive arts, new watercolours and clay, the money has been used for buying
materials for sensory packs to help our pupils who need tactile nurture sessions. We
have also bought ear defenders for our pupils who struggle with noise and headphones
with mouthpieces for pupils who use talk to type functions on the computer. It has just
been so lovely to be able to supply our pupils with these extra supports that our school
budget does not have room for.”
Each year, our onshore staff receive four paid
volunteering days to help support community projects
and have participated in various activities in support of
Aberdeen Cyrenians, AberNecessities’ Giving Tree and
Winter Appeals, The River Dee Trust, Cancer Research
UK and VSA’s Linn Moor School. We also offer our
employees the opportunity to take part in learning
lunchtimes, wellbeing seminars and webinars which have
covered subjects from mental health, the menopause to
personal experience of dementia and cancer treatment.
With strong involvement from across our organisation
the results of our employee engagement survey
highlighted the significant swell of pride in our bid to
be a good neighbour. Supporting third-sector work has
created a strong sense of purpose, positively impacting
our engagement metrics. Our most recent engagement
survey revealed a rise in our engagement score for social
connection of 42% in the past 12 months.
VSA
2023 marked one year of our corporate partnership
with VSA. Over the last year our partnership has
flourished, from tea parties and choirs, endurance
events, golf days, the Kilt Walk, the London Marathon,
Run Balmoral, Aberdeenshire Enduro and social events
such as our Burns Supper and two charity balls, VSA
has been at the heart of it all.
Our contribution has already extended significantly
beyond our initial charitable donation of £150,000, with
a further £72,000 of funding in 2023. Ithaca Energy
employees have raised an additional £18,000 through
fundraising activities and ten teams from across the
organisation have committed over 1,600 hours of their
time to volunteer with the charity. In recognition of
our employee’s volunteering efforts, Ithaca Energy
was awarded the VSA Dr Vijay Jandial Award for
Corporate Volunteering.
AberNecessities
It is an honour for Ithaca Energy to support
AberNecessities, a children’s charity dedicated to
supporting children from birth to 18 years of age, living
in extreme poverty across the North East of Scotland.
Our £40,000 donation provided valuable support to
AberNecessities’ ‘Believe in Magic’ and ‘Warm Up
Winter’ campaigns.
In Aberdeen, a startling statistic reminds us that one
in five children live in poverty. For these children, the
magic of Christmas can often remain out of reach.
AberNecessities’ ‘Believe in Magic’ campaign seeks to
address this inequality and provide an equal opportunity
for every child to experience the wonder of the season.
Our support of the 'Believe in Magic' campaign left us
with a sense of the need to do more and we committed
to provide further support for the ‘Warm Up Winter’
campaign. With teachers reporting more and more
children struggling with freezing temperatures,
AberNecessities are working with local schools to
supply ‘Winter Warmer’ packs to help children stay
warm through the colder months.
Teams from across Ithaca Energy proudly committed
their time to the winter campaigns to support the
charity’s fantastic work in the community collecting
a total of 150 gifts under our Giving Trees, as well as
countless donations to the winter clothing appeal.
Our volunteering teams supported efforts at the
charity’s Christmas HQ, from counting and costing
donations, to sorting and organising the gifts and making
the charity’s Christmas Eve box’s for distribution to local
vulnerable children.
Aberdeen Maggie’s Centre
Ithaca Energy are proud to partner with Maggie’s
Centre in Aberdeen, working closely with the charity
to support their fundraising efforts, both financially and
with volunteering support. Maggie’s vision is to provide
a new type of cancer care offering free emotional,
practical and social support to people living with cancer
and their family and friends. Maggie’s Centres across
the UK bring people together in a calm, friendly and
uplifting space.
Environmental, Social and Governance continued
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Case study
River Dee Trust
Ithaca Energy supported the River Dee Trust, a Scottish
conservationist charity that is leading landscape-scale restoration
of the country’s highest river, the River Dee, that stretches 81 miles
from the source high up in the Cairngorms, right down through
Royal Deeside to Aberdeen where it joins the North Sea.
The charities award-winning work seeks to save endangered species, including Atlantic
salmon and freshwater pearl mussels. Restoration efforts include tree planting, flood
prevention, removal of invasive species and innovative techniques to increase the wild
salmon population.
Colleagues from Ithaca Energy volunteered to remove invasive non-native American
skunk cabbage from the River Dee catchments that threaten our river’s biodiversity.
We supported the charity with an initial donation of
£20,000 and held various fundraising initiatives during
the year, including sponsoring and providing volunteers
to support preparation for their first charity ball. In
October 2023, we hosted a cancer in the workplace
session alongside Maggie’s Cancer Support Specialists
who offered advice, support and helped our employees
and managers to learn more about the impact of cancer
in the workplace.
Living Well Project
We are delighted to partner with the Living Well Project,
whose mission is to improve the physical, emotional and
social wellbeing for the lonely and isolated, and for those
living with dementia and their carers. As well as our initial
donation of £20,000, the Living Well Cafes provide an
opportunity for our employees to volunteer at the café,
which provides a safe and supportive place for people
living with dementia and/or memory problems as well
as respite for their caregivers.
Continuing on our employee and charity engagement
efforts, we organised a dementia in the workplace
session to encourage an open and honest conversation
around dementia and Alzheimer’s and for us all to think
about conversations at work. It was a great opportunity
to meet our new charity partner and discuss how
dementia affects lives.
Camphill School
Our final charity partner, Camphill School provides
support to children and young people, many with
additional support needs to reach their fullest potential
with three campuses across Aberdeen. The charity
recently celebrated breaking ground for a new
residential home on their Murtle Estate, as well as a
new zero waste social enterprise called Murtle Market
which will sell organic produce, showcase the arts and
crafts made by students as well as providing essential
development skills for young people.
Camphill School plan to use our £20,000 donation
towards their ‘Building Futures, Transforming Lives –
Together’ campaign. We organised for our first team of
volunteers to visit the site in November. They prepared
glass bottles to be used in a gabion wall in the new
residential house and cleared fallen leaves to make sure
the paths were safe, to help the young people move
around the estate.
The passion to be a good
neighbour permeates Ithaca
Energy’s DNA. Our aim is
to be a long-term member
of our local community,
which we believe will help
build a better society.”
74 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Environmental, Social and Governance continued
Ithaca Energy is led by a Board of Directors who bring a wealth of
sector, Board and public market experience, guiding the business in
its delivery of sustainable value creation for shareholders, through
the responsible management of its assets.
Governance
The Board is committed to maintaining the highest
standards of corporate governance, with a sound
framework for the control and management of the Group.
We will operate in a manner that generates financial
value in an environmentally viable way, while protecting
the value of our assets on behalf of our shareholders.
We fully subscribe to the aim and spirit of the UN’s
Sustainable Development Goals and Ithaca Energy
is a signatory to the UN Global Compact. We are
committed to taking action across the goals that we
believe we have an ability to influence, including
good health and wellbeing, quality education, gender
equality, affordable and clean energy, decent work
and economic growth, industry innovation and
infrastructure, reduced inequalities, responsible
consumption and production, climate action, life
below water and peace, justice and strong institutions.
Our governing principles are rooted in dealing fairly and
openly, creating a place of work that treats everyone
equally. We also demand the same of every business
in our supply chain.
Prior to the Group’s admission to the premium segment
of the London Stock Exchange we formed a new Board
and established the following Committees:
• The Audit and Risk Committee;
• The Nomination and Governance Committee;
• The Remuneration Committee;
• The Health, Safety, Environment and Security
Committee; and
• The Disclosure Committee.
Please refer to the Corporate Governance Report
for further overview.
Diversity, equality and inclusion
We are committed to Diversity, Equity and Inclusion
(DE&I) and creating an open, diverse and inclusive
organisation where all feel genuinely engaged and
supported. Diversity and inclusion are fundamental to
the well-being of our employees and the success of our
business. A diverse and inclusive workforce will support
our business capabilities, increase engagement and
enhance our business results, helping to contribute to
fairer and more equitable communities.
To make progress in this area, our DE&I policy confirms
our commitment to a continuous programme of equality
and inclusion, which supports our core values of ‘Express
Yourself’, ‘Be Considered’ and ‘Bring Strength’ and
‘Deliver Results’. Our policy was published in Q1 2023
and also applies to the Board and its sub-Committees.
The Board is committed to
maintaining the highest standards
of corporate governance.”
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Our aim is that our workforce feels respected, listened
to, comfortable to be themselves and able to give
their best. Additionally, the Group established a DE&I
network in 2022 made up of members from across
the organisation who support the Group in establishing
and sustaining a supportive and welcoming workplace
environment, adopting a culture where all feel a
sense of belonging. The network work to support the
commitment to a diverse workforce, safeguarding
equitable treatment and an inclusive environment.
This is accomplished with leadership endorsement.
Acknowledging that the Group needs to set an example
from the top down, we engaged an external specialist
to provide sessions on inclusion and diversity with
our Leadership Team, our Human Resources team, all
managers and supervisors both onshore and offshore,
and members of the newly-formed DE&I network.
Throughout 2023, we introduced mandatory online
awareness sessions on diversity and inclusion for
employees and contractors. In addition, online
unconscious bias training is mandatory for all supervisors
and managers. We will continue to engage external
parties with expertise in this area to guide the business
on good practice. Our Leadership Team will actively
engage with our DE&I network to build on our ongoing
actions and monitor our progress.
Hiring managers and talent acquisition partners must
adhere to our structures and processes in order to
select the best candidate based on merit. To support a
fair and impartial hiring process, the recruiter ensures
compliance with the recruitment process and policy.
We took steps in 2023 to improve our recruitment
guidance and processes to reinforce our DE&I
commitments and ensure no bias in our processes.
We strive to offer fair and competitive remuneration
in line with the market, and have a structured approach
to remuneration, ensuring salaries are unbiased towards
gender, age, seniority or nationality.
We will continue to build an inclusive and accessible
environment for our talented workforce, striving to
enable everyone who works for and with us, to be
themselves and recognise them for their individual
skills, abilities and qualities.
To continue our progress, listen to employee feedback
and understand the unique experiences of our
employees, we included a number of questions on DE&I
in our 2023 engagement survey as well as including an
optional DE&I demographic data gathering section.
It is important to us to understand how well everyone
feels included and gather data to help inform our actions
and track our progress. To support this we provided all
supervisors with a guide of talking points to explain the
reasons these questions were being asked to support
building trust.
Although we have taken steps to do better, we know
that we are still on this journey and are determined
to keep challenging ourselves to do more. In the
coming year we will continue to make progress on
our pledges, respect our differences and be inclusive
in all that we do.
Non-discrimination and bullying
We are committed to promoting equal opportunities in
all areas of employment. Employees and job applicants
will receive equal treatment regardless of age, disability,
gender reassignment, marital or civil partner status,
pregnancy or maternity, race, colour, nationality,
ethnic or national origin, religion or belief, sex or
sexual orientation.
Similarly, we are committed to providing a working
environment free from harassment and bullying and
ensuring all staff are treated, and treat others, with
dignity and respect.
In 2023, to support this commitment, we launched
a mandatory online bullying and harassment courses
for all employees and contractors which provides
guidance on prevention, action and the steps to take in
maintaining a positive culture.
Gender equality
Gender balance, pay and roles are key components of
equality, and the Group reports on them annually.
On 5 April 2023, we recorded a mean gender pay gap
of 9.7% and a median of 17% between male and female
employees, which largely reflects the lower proportion
of female staff in more senior and technical positions.
This is reflective of the gender balance throughout the
energy sector which has historically had fewer women
in senior, engineering and technical roles. These roles
typically attract higher levels of remuneration, which
can be due to a scarcity of skills or operating in highly-
competitive markets for those skills.
76 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Environmental, Social and Governance continued
Our gender pay gap is further compounded by offshore
allowances, a key factor for accounting for a higher
average pay for men than women, as more men typically
occupy these positions.
The Group has implemented a series of policies to
outline the behaviour it expects of Directors, managers
and employees, and of suppliers, contractors, agents
and partners.
The Group is committed to complying with all
applicable legal requirements, in both the spirit and
letter of the law, and to uphold the highest ethical
standards at all times.
Executive succession planning
Succession planning as well as talent management is
of critical importance and is discussed and reviewed
regularly at both Board and Nomination & Governance
Committee meetings. Having clear and credible plans in
place is vital to ensure that all eventualities are covered
and that the continuity of the business is safeguarded
with disruption minimised as we pursue our strategic
plans for growth.
A regular review of the Board and our leadership team
by the Committee is a key part of this process, as it
allows us to assess the effectiveness of our Directors
and identify potential opportunities that we might
need to develop, as well as mitigate any risks. Proactive
planning will help us prepare for the departure of those
in leadership positions, whether through retirement,
promotion or another form of exit, meaning that we
can rely on able and competent successors.
Regular succession planning enables us to assess and
strengthen our talent pipeline for senior roles and
develop programmes to support career progression
across the business.
Succession planning will strategically support our
leadership development and a pipeline of leaders
who are ready to step in when needed.
Anti-bribery and corruption policy
Ithaca Energy is committed to business integrity, high
ethical values and professionalism in all of its business
dealings and relationships, wherever we operate and
to implementing and enforcing effective systems to
counter bribery and corruption. It has a zero-tolerance
approach to bribery and corruption and the Group’s
anti-bribery and corruption policy specifically prohibits
the offering, giving, solicitation or acceptance of any
bribe to or from any person or Company, wherever
they are situated and whether they are a public official
or body or private person or Company. Any breach of
this policy is regarded as a serious matter and will result
in disciplinary action, including, where appropriate,
summary dismissal.
The Group’s anti-bribery programme is built around
a clear understanding of how and where bribery risks
affect the business and comprises key controls such as:
policies (anti-bribery, gifts and entertainment, supply
chain); procedures such as conducting due diligence
on suppliers; training colleagues on bribery risks; and
ongoing assurance programmes such as external as
well as internal audits to test that the controls are
functioning effectively.
No breaches of the anti-bribery and corruption policy
were identified in 2023 but opportunities to improve
the control framework in this area were identified
by internal audit. Ithaca Energy has appointed an
anti-bribery and corruption champion to support
the maturation of processes and controls.
Whistleblowing
The Group has in place a whistleblowing policy through
which senior managers, officers, Directors, employees,
consultants, contractors and all persons associated with
us, wherever their location in the world, are encouraged
to report any behaviour which they feel is not right,
whether this affects them personally, or a colleague,
or the safety or compliance of the business. Concerns
can relate to actual or potential breaches of law or
Company policy, including those relating to accounting,
risk issues, internal controls, discrimination, bullying,
illegality, suspicion of criminality, modern slavery and
unsafe practices.
Case study
Umbrella Project
Ithaca Energy were delighted to support the Umbrella Project in 2023,
helping to raise awareness and understanding for the ‘umbrella’ term of
Neurodiversity, as part of our Diversity, Equality & Inclusion strategy
As we seek to promote a more inclusive environment, the Group’s Umbrella Project recognises
the uniqueness of every person, and that as a diverse organisation everyone has the potential
to contribute in a valuable way to organisational success if given the opportunity and met with
acceptance for who they are.
In support of raising awareness of Neurodiversity, our DE&I network hosted group awareness
sessions with the ADHD foundation with the aim of increasing understanding of neurodiversity
and how we can support colleagues in the workplace.
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The policy is designed to make it easy for concerns
to be raised. For those wishing to keep their identity
anonymous, they may raise their concerns on a
dedicated whistleblower hotline which is maintained
by an independent external provider who will take the
details of the incident and contact the Group with the
report. This ensures concerns or issues can be escalated
and dealt with effectively, without fear of victimisation,
discrimination or disadvantage, in the interests of the
business, colleagues, shareholders and other stakeholders.
All matters raised are investigated and reported to the
Audit & Risk Committee. No matters were raised or
reported during 2023.
Conflicts of interest policy
Through our conflicts of interest policy, both as a
Group and as individuals, we avoid or declare conflicts
of interest that may lead, or be seen to lead to divided
loyalties. We are committed to working with honesty
and transparency and ask that those who work with us
to consider and declare any potential conflicts in this
shared spirit.
Data protection
As an organisation, we are committed to ensuring
the security and protection of all personal or sensitive
data as this is critical to the sustainability and
competitiveness of our business and to maintaining
the trust of our customers, colleagues and investors.
We recognise our obligations to meet the requirements
of the General Data Protection Regulations and take
every reasonable measure to safeguard all information
under our control. A member of our leadership team is
our designated Data Protection Officer and we have
robust information security policies and procedures
in place to protect data from unauthorised access,
alteration, disclosure and destruction. Our technology
and innovation team are responsible for promoting
awareness of data protection across the organisation,
assessing our compliance, identifying any gaps and
implementing new policies, procedures and measures.
We understand that employee awareness and
understanding is critical to continued compliance.
Board recruitment
Our Directors’ mix of skills, varied perspectives,
knowledge of the sector and wide-ranging business
experience are major contributing factors towards the
proper functioning of the Board and its Committees,
ensuring that matters are debated, business strategies
fully discussed and critically reviewed and the strategic
objectives of the Group are supported.
When a Director is being recruited, the Nomination
& Governance Committee begins by evaluating the
skills and experience required and from that a role
specification is prepared. The Committee is conscious
that diversity of social, professional, international and
ethnic backgrounds as well as of cognitive and personal
strengths is as important as gender diversity and the
role specification will reflect this. Specialist consultants
may be appointed to assist with the recruitment process
and to ensure that potential candidates can bring an
independent and challenging perspective to our business.
Further information on this can be found in the
Corporate Governance section on pages 108 and 109.
Through our conflicts of interest
policy, we are committed to
working with honesty and
transparency.”
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Financial review
Delivering results and
developing optionality
Summary of financial results
Financial key performance indicators (KPIs)
2023 2022
Adjusted EBITDAX
1
($m) 1,722.7 1,916.2
Net cash flow from operating
activities ($m) 1,290.8 1,723.3
Available liquidity
1
($m) 1,028.2 578.8
Unit operating expenditure
1
($/boe) 20.5 19.0
Basic EPS (cents) 21.4 102.6
Adjusted net debt
1
($m) 571.8 971.2
Adjusted net debt/adjusted
EBITDAX
1
0.33x 0.51x
Other KPIs
Total production (boe/d) 70,239 71,403
1. Non-GAAP measure.
Further details of financial KPIs are set out on page 27.
The Group reported average production of
70,239 boe/d for 2023 (2022: 71,403 boe/d) driving
Group adjusted EBITDAX of $1,722.7 million, net cash
flow from operations of $1,290.8 million and statutory
profit for the year of $215.6 million.
Our first full year as a listed Company has not been
without its challenges including the investment and
cash impact of fiscal changes. Yet despite these,
we have reduced adjusted net debt by approximately
$400 million during the year and have lowered our
leverage ratio to 0.33 times adjusted net debt to
adjusted EBITDAX whilst paying out $266 million
of interim dividends.
We have achieved another strong year of production
as well as maintaining our focus on operating costs with
initiatives such as the Partnered Cost Optimisation
project described below.
We have delivered a robust set of results, as well as
moving forwards with sanctioning of the Rosebank
development and strengthening our positions with
the Cambo and Fotla prospects.
With a strong liquidity position at year end of
$1,028.2 million (2022: $578.8 million), the Group
has sufficient available capital to support investment
and is well positioned to finance future growth plans.
During the year we have entered into attractive lending
arrangements including a new $100 million five-year
term loan facility with bp and a $150 million capex carry
arrangement which was unutilised at the year end.
Statutory profit for the year of $215.6 million (2022:
$1,031.5 million) was impacted by a $557.9 million
pre-tax impairment charge principally in relation to
the Greater Stella area following the decision not to
proceed with Harrier drilling, as a direct result of the
Energy Profits Levy (EPL) and falling gas prices and in
relation to Alba due to a reduction in estimated future
production. In 2022, we benefitted from a one-off
gain on bargain purchase of $1,335.2 million partly
offset by a deferred tax charge of 766.5 million on the
introduction of EPL.
The increase in the EPL rate to 35% at the start of the
year was another disappointment for the industry as it
further reduces the free cash available for reinvestment.
However, despite this, we have continued to create
substantive organic value through 2023 and we
believe that our capital allocation framework should
give investors confidence as we seek to continue to
growvalue through 2024 and beyond.
ADJUSTED EBITDAX
$1,722.7m
PROFIT FOR THE YEAR
$215.6m
LEVERAGE RATIO – ADJUSTED NET
DEBT TO ADJUSTED EBITDAX
0.33x
NET CASH FLOW FROM
OPERATING ACTIVITIES
$1,290.8m
ADJUSTED NET INCOME
$369.6m
STATUTORY EARNINGS
PER SHARE
21.4 cents
Non-GAAP measures
Adjusted EBITDAX, adjusted net income,
adjusted net debt, unit operating expenditure and
certain other reported metrics are non-GAAP
measures that are not specifically defined under
International Financial Reporting Standards or
other generally accepted accounting principles.
Further details are set out on pages 221 to 223.
We have reduced adjusted net debt
by $400 million during 2023 and
have lowered our leverage ratio to
0.33 times adjusted net debt to
adjusted EBITDAX whilst paying out
$266 million of interim dividends.
79ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
COMPANY
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
REPORT
FINANCIAL
STATEMENTS
Adjusted EBITDAX analysis 2023 2022
Production kboe/d mmboe kboe/d mmboe
Oil 43 16 43 16
Gas 24 9 24 9
Condensate 3 1 4 1
Total production 70 26 71 26
Revenues
1
$/boe $m $/boe $m
Oil revenue 85 1,330 100 1,693
Gas revenue 76 659 149 1,348
Condensate revenue 44 49 57 76
Oil and gas hedging gains/(losses) 10 266 (19) (501)
Total 90 2,303 100 2,615
Movement in oil and gas stocks 1 20 (5) (130)
Tanker costs (1) (21) – (18)
Stella royalties – (4) – (11)
Total value from production 90 2,299 94 2,457
Costs
Operating costs (20) (524) (19) (496)
Routine G&A (2) (34) (1) (28)
Forex loss/inventory provision (1) (18) (1) (17)
Total operating costs (23) (576) (21) (540)
Adjusted EBITDAX
2
67 1,723 73 1,916
1. Revenues exclude principally other income and put premiums on oil and gas derivative instruments.
2. Non-GAAP measure.
Case study
Partnered Cost Optimisation
In response to higher EPL cash charges and lower commodity prices, we implemented an
internally-managed cost optimisation project during the year to generate additional cash
for future investment.
This further embedded an already cost-conscious culture throughout the Group, focused on
the right activities and also established a more empowered and engaged workforce. In addition,
numerous process improvements were identified and implemented during the project.
The project delivered in-year cash savings of more than $100 million through the elimination
or deferral of both operational expenditure and capital expenditure, which was split broadly
equally between opex and capex.
Empowering our people to deliver improved efficiency and reduced costs is a great example of
our values in action and we are confident that this will sustain value delivery well beyond 2023.
Case study
Hedging strategy in action
Our value constructive hedging policy enabled
substantial participation in price upside throughout
the year whilst also protecting against downside risk.
Commodity price risk is actively managed through a combination of puts,
collars and swaps. On a rolling basis, our target is to hedge oil and gas prices up
to a maximum of 75% of the next year’s production, up to 50% of the following
year and up to 25% of the third year.
During the year, hedges were typically placed at peaks in commodity markets
and as a result of our hedging strategy, gains of $266 million were realised
during FY 2023.
Financial performance: adjusted EBITDAX
Adjusted EBITDAX is a key measure of operational
performance delivery in the business and in 2023 was
$1,722.7 million (2022: $1,916.2 million). The reduction
in adjusted EBITDAX was due to a combination of lower
commodity prices, higher unit operating expenditure,
discussed further below and slightly lower production
volumes driven mainly by the planned maintenance
shutdowns in Q3 2023.
Average realised oil prices for the year were $85/boe
before hedging results and $82/boe after hedging results
(2022: $100/boe before hedging results and $91/boe
after hedging results). Average realised gas prices for
2023 were $76/boe before hedging results and $111/boe
after hedging results (2022: $149/boe before hedging
results and $137/boe after hedging results).
Unit operating expenditure increased to $20.5/boe
(2022: $19.0/boe) largely due to the planned Q3
shutdowns as well as inflationary pressures slightly
outweighing our disciplined cost management approach
across the portfolio. When post shutdown production
resumed in Q4 2023, unit operating expenditure was
$18.5/boe which was broadly the same as Q4 2022.
80 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Revenue, opex and adjusted EBITDAX are as follows:
2023 2022
Production (boe/d) 70,239 71,403
$m $m
Oil sales 1,329.7 1,692.7
Gas sales 658.7 1,348.2
Condensate sales 48.8 75.4
Other income 32.3 40.6
Realised losses on oil
derivative contracts (31.7) (211.6)
Put premiums on oil
derivative instruments (11.8) (14.6)
Realised gains/(losses) on gas
derivative contracts 297.4 (289.9)
Put premiums on gas
derivative instruments (3.6) (42.3)
Total revenue 2,319.8 2,598.5
Operating costs (576.7) (547.8)
Inventory movements and
other items (20.4) (134.5)
Adjusted EBITDAX 1,722.7 1,916.2
Financial performance: adjusted net income
2023 2022
Profit before tax ($m) 302.0 2,240.5
Tax ($m) (86.4) (1,209.0)
Profit for the year after tax ($m) 215.6 1,031.5
Impairment charges 557.9 –
Tax credit on impairment charges (403.9) –
Gain on bargain purchase ($m) – (1,335.2)
EPL deferred tax charge ($m) – 766.5
Adjusted net income
1
($m) 369.6 462.8
Earnings per share (cents) 21.4 102.6
Adjusted earnings per share
1
(cents) 36.7 46.0
1. Non-GAAP measure.
Profit for the year in 2023 was $215.6 million compared with $1,031.5 million in 2022. Profit for the year in 2022
was substantially impacted by bargain purchase gains on acquisitions of $1,335.2 million and exceptional deferred
tax charges, associated with the introduction of the EPL, of $766.5 million during the year.
Financial review continued
81ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
COMPANY
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
REPORT
FINANCIAL
STATEMENTS
Assets
At 31 December 2023, total assets amounted
to $6,246.6 million (2022: $6,759.6 million),
of which current assets were $845.6 million
(2022: $988.7 million) and non-currents assets
were $5,401.0 million (2022: $5,770.9 million). The
decrease in total assets during the year was primarily
due to fixed asset impairment charges of $557.9 million
and lower cash balances of $100.6 million due to the
repayment of debt partly offset by a higher deferred
tax asset of $235.3 million due principally to the asset
impairment charges.
Liabilities
At 31 December 2023, total liabilities amounted to
$3,802.2 million (2022: $4,302.1 million) including
decommissioning provisions of $1,859.7 million
(2022: $1,720.5 million) and non-current borrowings
of $718.2 million (2022: $1,213.7 million). The reduction
in total liabilities during the year was primarily due to
lower non-current borrowings of $495.5 million and a
reduction in trade and other payables of $232.8 million
due to a lower level of negative value commodity hedge
positions, partly offset by higher decommissioning
liabilities of $139.2 million, mainly due to revisions to
asset retirement obligation estimates, and higher current
tax payable of $214.4 million principally due to EPL.
Equity and reserves
At 31 December 2023, total equity and reserves
amounted to $2,444.4 million (2022: $2,457.5
million) The decrease in equity and reserves during the
year was primarily due to interim dividend payments
of $266.0 million partly offset by the retained profit
for the year of $215.6 million and net hedging gains
of $23.9 million.
Impairment charges of $557.9 million (2022:
$31.5 million) principally reflects charges in respect
of the Greater Stella area and Alba following changes
in commodity prices and planned drilling activities
due to EPL.
Exploration and evaluation costs amounted to
$13.6 million (2022: $9.0 million) and principally
related to licence relinquishments during the year
as a result of unsuccessful geotechnical evaluation.
Other gains of $89.1 million (2022: losses of
$9.5 million) comprise principally the settlement of a
claim relating to a historic acquisition of $50.1 million
and a $43.0 million gain on the revaluation and
realisation of commodity hedges.
Administrative expenses were $34.3 million
(2022: $87.9 million) with the decrease principally
due to non-recurring costs associated with the IPO
of$20.3 million and acquisition costs of $25.8 million
in 2022.
Gain on bargain purchase in 2022 arose on the
Marubeni and Siccar Point Energy acquisitions
(see note 17 for further details).
Net finance costs were $184.0 million (2022:
$203.0 million) with the reduction principally due
to there no longer being interest on related-party
loans which were repaid during 2022 and lower
bank interest due to lower debt levels, partly offset
by higher accretion charges as the discount rate on
long-term liabilities has increased from 2.5% in the
year to 31 December 2022 to 4.25% in the year to
31 December 2023.
Taxation
The tax charge for the year was $86.4 million
(2022: $1,029.0 million) with the reduction principally
due to the introduction of the EPL last year. The charge
for 2022 included an exceptional EPL deferred tax
charge of $766.5 million and a current EPL tax charge
of $131.4 million compared to a 2023 EPL deferred tax
credit of $215.9 million and a current EPL tax charge
of $333.4 million.
Total costs and charges
Total costs and charges amounted to $2,017.8 million
(2022: $358.0 million) and comprised:
2023
$m
2022
$m
Depletion, depreciation and
amortisation (740.3) (662.9)
Operating costs (576.7) (547.8)
Movement in inventory 20.6 (130.3)
Inventory provision (16.3) –
Royalties (4.4) (11.3)
Impairment charges (557.9) (31.5)
Exploration and evaluation (13.6) (9.0)
Other gains/(losses) 89.1 (9.5)
Administrative expenses (34.3) (87.9)
Gain on bargain purchase – 1,335.2
Net finance costs (184.0) (203.0)
Total costs (2,017.8) (358.0)
Depletion, depreciation and amortisation charges were
$740.3 million (2022: $662.9 million). The year-on-
year increase is principally due to the full-year effect of
acquisitions made during 2022. Depletion, depreciation
and amortisation per barrel was $29 (2022: $25).
Operating costs amounted to $576.7 million (2022:
$547.8 million) with the increase driven by the full-year
impact of acquisitions made in 2022. As noted above,
unit operating expenditure increased principally as a
result of the Q3 maintenance shutdowns.
Movements in oil and gas inventories was a credit
of $20.6 million (2022: charge of $130.3 million)
representing movements in underlift/overlift
entitlement imbalances.
Materials inventory provisions of $16.3 million
(2022: $nil) were made in respect of principally
MonArb, Britannia and Elgin-Franklin.
Earnings per share (EPS)
Statutory EPS was 21.4 cents (2022: 102.6 cents)
and adjusted EPS was 36.7 cents (2022: 46.0 cents).
Adjusted EPS eliminates items which distort year-on-
year comparisons such as gain on bargain purchase,
impairment charges, the tax effect of these items where
applicable and the exceptional non-cash deferred EPL
charge upon initial implementation in 2022.
Shares in issue
During the year, 7.8 million shares were issued to the
Ithaca Energy plc Employee Benefit Trust (EBT) in
order to satisfy the exercise of employee share options
during the year and in future. As at 31 December 2023
there were 1,014.4 million (2022: 1,006.6 million)
shares in issue.
The weighted average number of shares, excluding shares
held by the EBT, for EPS calculations was 1,006.7 million
(2022: 1,005.2 million).
Dividends
Interim dividends of $266.0 million (2022: $nil) were
paid during the year. A further interim dividend for
FY 2023 of $134.0 million will be paid in April 2024.
Financial position: assets/liabilities/equity
2023
$m
2022
$m
Total assets 6,246.6 6,759.6
Total liabilities (3,802.2) (4,302.1)
Net assets and shareholders’
equity 2,444.4 2,457.5
82 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
At 31 December 2023, cash balances were
$153.2 million (2022: $253.8 million) and available
liquidity was $1,028.2 million (2022: $578.8 million).
Principal risks
The principal and emerging risks facing the Group
are set out on pages 84 to 90.
Derivative financial instruments
Derivative financial instruments are utilised to manage
commodity price risk in a substantive financial hedging
programme for future oil and gas production volumes.
As at 31 December 2023, the following hedges were
in place:
2024 2025
Oil
Volume hedged (mmboe) 4.7 –
Weighted average floor
hedged price ($/bbl) 78 –
Gas
Volume hedged (mmboe) 3.0 0.5
Weighted average floor
hedged price (p/therm) 137 123
Subsequent events
On 6 March 2024, it was announced that EPL will be
extended by a further year to 31 March 2029. If this had
been enacted at the balance sheet date, it is estimated
that this would have increased the deferred tax liability
by $112.2 million.
On 19 March 2024, the North Sea Transition Authority
sanctioned the extension of the licence on the Cambo
field to 31 March 2026.
On 26 March 2024, the Group signed an exclusivity
agreement between Eni S.p.A. and Ithaca Energy
covering substantially all of Eni S.p.A.’s UK upstream
assets, excluding Eni S.p.A. CCUS and Irish sea assets,
under which Eni S.p.A. has granted Ithaca exclusivity
whilst a potential business combination is pursued.
Under the terms of the proposed business combination
Eni S.p.A. is anticipated to hold between 38% and 39%
of the enlarged issued share capital of Ithaca Energy
following completion. If this progresses further, it will
be subject to the issuance of both a Circular and a
Prospectus and the related shareholder approvals
and will also be subject to, amongst other things,
regulatory approvals.
Financial position: cash
2023
$m
2022
$m
Opening cash 253.8 44.8
Operating cash flows 1,290.8 1,723.3
Investing cash flows (492.4) (1,404.2)
Financing cash flows (900.7) (107.4)
Foreign exchange 1.7 (2.7)
Net cash flow (100.6) 209.0
Closing cash 153.2 253.8
Undrawn borrowing facilities 725.0 325.0
Undrawn capex carry facility 150.0 –
Available liquidity 1,028.2 578.8
Operating cash flows
Net cash from operating activities amounted
to $1,290.8 million (2022: $1,723.3 million) after
accounting for adverse working capital movements
of $210.8 million (2022: favourable movements of
$94.8 million) with the reduction principally due to
lower operating profit, the working capital movements
and higher corporation tax payments during the year.
Investing cash flows
Cash flow used in investing activities was
$492.4 million (2022: $1,404.2 million) reflecting
capital expenditure of $478.8 million (2022: $380.6
million) driven mainly by Captain enhanced oil
extraction activities and Rosebank, including ongoing
modifications to the FPSO. 2022 included investing
cash flows related to acquisitions (net of cash acquired)
of $957.4 million being primarily the Siccar Point
Energy ($926.7 million) acquisition.
Financing cash flows
Cash outflow from financing activities amounted to
$900.7 million (2022: $107.4 million) with dividend
payments of $266.0 million (2022: $nil), interest costs
and lease payments of $141.7 million (2022: $177.2
million) and a net reduction in principal debt of
$500.0 million (2022: net increase of $50.0 million).
Financial review continued
83ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
COMPANY
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
REPORT
FINANCIAL
STATEMENTS
COMPANY
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
REPORT
FINANCIAL
STATEMENTS
Going concern
Management closely monitor the funding position of
the Group including monitoring continued compliance
with covenants and available facilities to ensure
sufficient headroom is maintained to fund operations.
Management have considered a number of risks
applicable to the Group that may have an impact on the
Group’s ability to continue as a going concern. Short-
term and long-term cash forecasts are produced on a
weekly and quarterly/annual basis respectively along
with any related sensitivity analysis. This allows proactive
management of any business risks including liquidity risk.
The Directors consider the preparation of the financial
statements on a going concern basis to be appropriate.
This is due to the following key factors:
• Continuing robust commodity price backdrop and a
well-hedged portfolio over the next 12 months;
• New unsecured loan arrangements of $100 million
with bp which was fully drawn at 31 December 2023
and a new $150 million optional project specific
capital expenditure carry arrangement available at
the discretion of the Group which was undrawn at
31 December 2023;
• Reserves Based Lending (RBL) headroom of $836
million ($nil drawn versus $836 million available),
plus $303 million of cash at 22 March 2024; and
• Robust operational performance and a well-
diversified portfolio.
The Group’s base case going concern assessment
assumes an average oil price of $81/bbl and a gas price
of 67p/therm in 2024 and an oil price of $77/bbl and
a gas price of 75p/therm in the six months to 30 June
2025 with production in line with approved asset plans.
Owing to the ongoing fluctuations in commodity
demand and price volatility, management prepared
sensitivity analyses to the forecasts and applied a
number of plausible downside scenarios including:
decreases in production of 10%, reduced sales prices of
20% and increases in operating and capital expenditures
of 10%. Management aggregated these scenarios to
create a reasonable combined worst-case scenario. The
sensitivity analysis showed that, after consideration of
the mitigation strategies within management’s control,
there was no reasonably possible scenario that would
result in the business being unable to meets its liabilities
as they fall due. The analysis demonstrated that the
Group would still continue to comply with financial
covenants and have sufficient liquidity throughout
the period to 30 June 2025 to continue trading.
In addition reverse stress tests have been performed
reflecting further reductions in commodity prices,
prior to any mitigating actions, to determine at what
levels they would have to reach such that either
lending covenants are breached or there is no liquidity
headroom left. This stress test demonstrated that the
likelihood of the fall in price required to cause a breach
of covenants or liquidity issue, is considered sufficiently
remote in the context of the mitigation strategies
available to management.
The mitigation strategies within the control of
management include the reduction in uncommitted
capital expenditure and variable opex savings in the
low production scenario. In addition to this, there
is also further potential to refinance the Group’s
borrowing arrangements.
Based on their assessment of the Group’s financial
position over the period to 30 June 2025, the Directors
believe that the Group will be able to continue in
operational existence for the foreseeable future.
Accordingly, they continue to adopt the going concern
basis of accounting in preparing the consolidated
financial statements.
84 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Risk management
Throughout FY 2023
we have continued to
mature and embed our
risk management process.
Risk governance structure
To achieve the strategic objectives of the Group, creating value over
the long term, it is important that risk is managed in a methodical and
effective manner. To manage the risks the business faces, a stronger and
more robust risk management framework has been designed to identify,
assess and manage risk in a timely manner to ensure ongoing effective
mitigation of risk.
We recognise that risk cannot be fully eliminated or mitigated, therefore it
is important to maintain one of four essential relationships with individual
risks: avoid, accept, mitigate or share/insure. It is the role of the Board and
senior management to determine the levels of risk that is acceptable, the
risk appetite, in the drive to achieve the strategic objectives of the Group.
Ithaca Energy’s risk management framework
Board/Audit
and Risk
Committee
Enterprise Risk
Management
Committee /
Executive
Leadership
Team
Business Units
Identify principal and emerging risks
Direct delivery of strategic actions
in line with risk appetite
Monitor key risk indicators
Consider completeness of identified risks
and adequacy of mitigating action
Consider aggregation of risk exposure
across the business
Report current and emerging risks
Identify, evaluate and mitigate
operational risks
Bottom up
Operational risk management
Assess effectiveness of
risk management system
Report on principal and emerging risks
and uncertainties
Top down
Strategic risk management
Review external environment
Robust assessment of principal
and emerging risks
Determine strategic action points
Execute strategic actions
Report on key risk indicators
85ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
COMPANY
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
REPORT
FINANCIAL
STATEMENTS
GOVERNANCE
REPORT
FINANCIAL
STATEMENTS
Each operation, project and function is responsible
for the identification, tracking and management of
their specific risks with formal risk registers maintained.
Review of key risks are monitored and challenged in
monthly operational and project meetings with ELT
members. Risks are escalated within the defined
governance structure so they can be used to inform
the principal risks of the Group.
The Internal Audit Plan for 2024 was reviewed and
approved by the ARC in November 2023. The areas
and processes that are included in the approved Internal
Audit Plan all map to a principal risk of the Group. As
risk is dynamic, the Internal Audit Plan will be reviewed
throughout the current year to ensure that it remains
focused on the key areas of the Group and to ensure
the most effective use of resources.
Emerging risks
Our risk profile will continue to evolve as a result of
future events and uncertainties. Horizon scanning is
also undertaken at the meetings to help anticipate
future events that may impact existing principal
risks or identify emerging risks that may lead to the
requirement for the creation of a new principal risk.
Emerging risks can be defined as risks where the
scope, impact and likelihood are still uncertain, but
could have a major effect on the strategic objectives
of the Group. These emerging risks are monitored to
understand the potential impact on our business and
the speed at potential onset (risk velocity), to allow
timely decision-making. Where appropriate emerging
risks are escalated to our ARC as part of our regular risk
reporting processes.
Emerging risks, which are managed as a subset of our
principal risks are:
• UK Government’s Energy and Fiscal Policies –
this is an area of such uncertainty, which may lead to
the introduction of onerous regulation and legislation
that may result in an increasingly challenging
environment for the Group. This emerging risk is
closely monitored with current mitigation including
engagement with the UK government, His Majesty’s
opposition and His Majesty’s Treasury. This risk is
managed as a subset of the Government, Regulatory
and Fiscal risk; and
• Geopolitical instability – we monitor the impacts
caused by continuing political instability. Events
such as the Russian war against Ukraine, tensions
in the Middle East arising from the Israeli military
operations in Gaza and attacks on international
shipping in the Red Sea, have an ongoing impact on
inflation and the global supply chain. This emerging
risk is managed and monitored as a subset of the
Supply Chain risk.
We handle climate risk in the same way as we manage
other risks, albeit that time horizons may be longer.
We have continued to develop our climate risk approach
during 2023, more detail on this can be found in our
TCFD disclosures section page 52 to 68.
The Board confirms that it has carried out a robust
assessment of the Group’s emerging and principal
risks. Through the Board and the ARC reviews, no
new principal risks were identified. Set out below
is the Board’s view of the principal risks currently
facing the Group, along with examples of how they
might impact us and an explanation of how the risks
are managed or mitigated.
Risk management in Ithaca Energy
Throughout FY 2023, we have continued to mature
and embed our risk management process, which are
based on ISO 31000.
The Board is ultimately responsible for ensuring that
Group maintains an effective risk management and
internal control system by appropriately incorporating
the ‘three lines of defence model’ into the governance
structure of the Group. Selected principal risks and
associated mitigations are presented and discussed
at each regular meeting of the Board such that all
principal risks and associated mitigations are reviewed
by the Board on an annual basis.
The Audit and Risk Committee (ARC), under
delegated authority from the Board, are responsible for
overseeing the effectiveness of the risk management
processes. Principal risks and mitigations are discussed
with the ARC on a quarterly basis with revised principal
risks and mitigations being approved by the ARC as
required. It is acknowledged that principal risks can
have interdependencies (such as Energy Transition and
Net Zero delivery impacting workforce recruitment or
government, fiscal and political risk impacting capital
project execution) and therefore risks are considered
in combination as well as on a standalone basis.
Senior management is collectively responsible and
accountable for the risk management process across
the organisation with each principal risk assigned and
owned by a member of the Executive Leadership Team
(ELT). An Enterprise Risk Management Committee
(ERMC) with representation from the leadership team
(including the Chief Executive Officer and the Chief
Financial Officer) and Risk Management function,
meet in alternate months. The principal risks facing
the Group are determined and reviewed by the ERMC
at each meeting. Risk assessments are revisited with
consideration given to the risk velocity (the speed at
which the risk could impact the business) with risks
revised and updated as required. Mitigating actions
are monitored and tracked to closure.
86 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Risk management continued
Principal risks
Risk title Risk description Key risk mitigations Activities and Impacts in 2023
Major HSE
Incident
Risk Climate
Operations may face a major accident or process safety event, resulting in
personal injuries, loss of containment, resultant physical asset damage and/
or environmental impact. A major accident event could impact production
and financial performance of the Group. The Group could also be subject to
regulatory actions, including fines and external reputation could be affected.
Board Oversight: The Board sets the expectations for compliance with health
and safety policies and training across the Group and regularly seeks assurance
of compliance with health and safety processes by reviewing health and safety
management information.
• Health and Safety is owned and driven by the leadership team who have
a strong leadership culture, prioritising process safety culture and Stop
Work Accountability. Safety and environmental performance measures are
included in our Group scorecard and are regularly reviewed by management
and the Board.
• Robust and comprehensive HES policy in place, which includes Company
Major Accident Prevention Policy (CMAPP) requirements providing
a framework for all Group activities, supported by a Group business
management system.
• Regulator-accepted safety cases for all offshore facilities, summarising
management of potential Major Accident Hazards (MAH) Application
of Robust Risk Assessment and Management of Change processes.
• Active engagement with key contractors at all levels in the organisation
to ensure alignment on safety expectations.
• Line of Defence auditing framework in place, driving focus on prevention
of MAHs, with regular progress reporting to the Board HSE Committee.
• Independent assurance of Safety and Environmental Critical Elements
(SECE) by an Independent Competent Person (ICP) as part of our
Written Scheme of Verification with a process in place to ensure actions
are managed and implemented appropriately.
• Independent review of well programmes by our well examiner.
• Crisis Management and emergency response processes, exercised regularly.
We have continued to focus on safety leadership, particularly with regard
to Process Safety Leadership and management of MAHs.
A digital Barrier Model has been implemented, supporting reviews of the
strength of our barriers by our frontline teams and asset leadership.
Our Control of Work process have continued to be improved, including
frontline self-assurance and changes to how we appoint our key Permit to
Work roles.
Contractor HSE management processes have been aligned to IOGP standards.
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Risk title Risk description Key risk mitigations Activities and Impacts in 2023
Cyber
Security
Breach
Risk Climate
Cyber security is an ongoing risk to the Group due to the constantly-evolving
and intensifying threat landscape which has heightened due to the increased
Group profile and media attention around the oil and gas industry.
Malicious attacks may lead to system unavailability, lack of access to systems
and loss of data. Leading to production downtime, financial costs, fines and
reputational damage which would have a significant impact on the Group and
adversely affect the Group’s ability to achieve its strategic objectives.
Board Oversight: The Board receives annual updates on the status of cyber
security across the Group and emerging risks and reviews the adequacy of
the Group’s cyber resilience.
• Dedicated Information Risk Management team with appropriate
third-party support to oversee cyber security.
• Best practice security policies, tools and processes implemented
to protect our applications, systems and networks.
• Effective operation of cyber security systems with 24/7 monitoring
and detection by Security Operation Centre.
• Workforce education and ongoing awareness activities.
• Independent testing and assurance of internal controls and systems.
• Regular review and testing of business continuity and disaster
recovery plans.
The continuation of Russia’s attack on Ukraine, the Israeli-Palestinian conflict,
and the global environmental movement to reduce fossil fuels are all factors
which are currently contributing to the ever-evolving cyber threat landscape.
Whilst these threats exist the Group has not been negatively impacted by a
cyber-attack and we are continually assessing and enhancing our monitoring
technologies, policies, processes and training programmes to help protect us
against such threats.
During 2023, we have focused on improving our cyber resilience through:
• the application of more rigorous security controls, designed to detect
and prevent unauthorised access or malicious activities;
• targeted educational programs for our Executive Committee,
Board members and the workforce;
• enhancing our response and business continuity plans through
a cyber lens; and
• upskilling our IT technical response teams through interactive
tabletop exercises.
Access to
Capital
Risk Climate
The Group does not have access to sufficient capital to fund the capital
investment required to deliver the core strategy of the Group. ESG and
fiscal regime instability undermining lending with a number of banks
withdrawing from Reserves Based Lending to oil and gas companies.
Increasing decommissioning security postings exacerbates capital access risk.
Board Oversight: The Board monitors the capital arrangements and structure
of the Group on a quarterly basis as part of the financial reporting cycle.
• Board approved capital allocation framework including adjusted net debt/
adjusted EBITDAX cap of 1.5x, which is calculated quarterly, and forms
part of the Protect leg of the capital allocation framework.
• Diversified capital structure including Reserve Based Lending facility
and Corporate Bonds.
• Actively managed relationships with banks in the RBL facility and
bondholders via quarterly calls.
• Robust hedging programme to manage the impact of commodity price
exposure on leverage ratios.
• Governance structure to provide regular oversight and scrutiny of the
Group’s financial position.
• Annual capital budget preparation is reviewed and approved at Board level.
• Insurance programmes in place with respect to key asset risk areas including
Captain loss of production risk.
There have been changes to the RBL syndicate including the exit of a syndicate
member linked with greenfield development approvals but replacement
syndicate capital has been obtained including the addition of new high-quality
syndicate members.
88 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Risk management continued
Principal risks continued
Risk title Risk description Key risk mitigations Activities and Impacts in 2023
Capital
Project
Execution
Risk Climate
The Group is currently engaged in a significant level of capital project activity
(e.g. Captain EOR II, Rosebank). The Group also has future capital project
plans for greenfield and brownfield developments, some of which require
substantial levels of funding and technical expertise. Consequently, the
Group faces significant risks associated with capital project execution
and development.
If a major capital project materially exceeds cost and schedule estimate it
could erode project economics and create liquidity challenges for the Group.
Board Oversight: The Board sanctions all new large capital projects and receives
regular reporting on capital project progression throughout the year.
• Ithaca stage gate process provides a roadmap for moving an opportunity
from initial concept through to a delivered project.
• Robust investment appraisal process to enable consistent evaluation
of opportunities.
• Contract placement follows a formal tender Board process ensuring
control and value realisation.
• Project reporting is prepared monthly and presented to all project
stakeholders, internal and external.
• Independent technical and business assurance to provide confidence
to decision-makers.
• Project governance is in place to ensure the project meets the needs
of the organisation and that anticipated benefits are realised.
In 2023, the Group launched a stage gate process, providing a structured route
to deliver projects, adding rigour to the project process and consistent outputs.
Costs have been actively managed to mitigate inflationary impacts, either
through commercial negotiation or scope optimisation.
Captain EOR Phase II project now ~90% complete, estimated first subsea
polymer injection in summer 2024.
Rosebank development consent granted and project execution commenced.
Acquisition of remaining stakes in Cambo and Fotla to take full control of
pre-FID work and timing.
Commodity
Price
Volatility
Risk Climate
Future commodity prices are difficult to predict but are expected to remain
subject to increased levels of volatility and speed of change.
The fluctuations in supply and demand, and consequent impact on commodity
prices, may result in the Group being unable to deliver the anticipated financial
returns to shareholders and be unable to support all ongoing operations and
capital projects. This could restrict growth opportunities for the Group and
limit its ability to meet its strategic objectives.
Board Oversight: The Board approves all changes to the Group’s hedging policy
and receives monthly reporting on the Group’s hedging status.
• Effective oil and gas price hedging framework in place using swaps, puts
and zero-cost collars to protect from price downside risk whilst providing
substantial price upside exposure.
• Capital allocation framework designed to protect liquidity.
• Balance of short and long-cycle capital investments.
• Carbon credits auction participation undertaken in a disciplined manner in
order to reduce exposure to price volatility.
Supply and demand dynamics continue to be fluid, driving volatility in pricing.
Actively managed Forex and commodity hedging programme in 2023, with
proactive hedging at peaks in commodity markets.
Production
Delivery
Issues
Risk Climate
Due to a range of factors, such as well performance, ageing assets and
unexpected shutdowns/expenditure, Ithaca may be unable to deliver forecast
production volumes which could then undermine the future growth and
investment strategy.
Board Oversight: The Board reviews performance of all assets and key
production metrics throughout the year.
• Continual monitoring of production efficiency with losses identified and
action taken to rectify.
• Key metrics (leading and lagging) agreed with Board and leadership team
that are regularly reviewed at all levels.
• Diversified portfolio containing operated and non-operated assets across
the lifecycle.
• Continuous engagement with JV partners and regulatory bodies directly
involved with North Sea oil and gas production.
Continued focus on ongoing investment in key assets for drilling,
production enhancement and equipment reliability and availability.
Assurance and challenge session put in place for business plan
production profiles.
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Risk title Risk description Key risk mitigations Activities and Impacts in 2023
Energy
Transition
& Net Zero
Delivery
Risk Climate
The Group is aligned with the government and industry regulator NSTA’s Net
Zero Framework and recognises that our Group needs to evolve to support the
transition as we continue to focus on reducing emissions whilst supporting the
UK’s long-term energy needs.
Transitional risks on the route to Net Zero have been identified, including
changes to supply, demand and pricing for our products as well as potential for
changes to the regulatory landscape which may impact how we operate our
Group and the associated costs of doing so. Changes to investor requirements
could also impact our access to funding and societal expectations could
impact our licence to operate. Longer-term physical risks related to changing
meteorological conditions because of climate change are also considered.
Refer to Section Strategy (b) on pages 59 to 62 of TCFD for more detail.
Board Oversight: The Board sets the GHG/emissions targets for the
Group and maintains oversight of the progress of the GHG/emissions
reduction strategy.
• GHG/emissions reduction strategy and policies in place including 2040
Net Zero goal, endorsed by the Board.
• Progress versus targets regularly reviewed by CEO and leadership
team monthly, and by Health, Safety, Environment and Security
Committee quarterly.
• Emission reduction activities linked to performance compensation.
• Emissions metrics incorporated into investment decisions.
• Emission forecasts built into annual Group planning processes, including
review of risk and opportunities regarding climate change as part of the
TCFD framework.
• Processes established ensuring compliance with regulatory emissions
reporting requirements, including independent verification by UKAS
appointed verifier as part of UK ETS Order.
We took part in the NSTA consultation on draft Oil and Gas Authority (OGA)
Plan to reduce UKCS GHG emissions, principally through electrification.
Significant potential impact if the proposed OGA plan was legislated in its
current form. The consultation process offers the Group the opportunity
to work with peers and industry bodies to provide constructive challenge
to the proposal.
Progress of emissions reduction scopes, with more details provided in
ESG section (see pages 44 to 77).
Continued focus regarding flaring and venting, with more details provided
in ESG section (see pages 44 to 77).
Workforce
Recruitment
& Retention
Risk Climate
Ithaca Energy faces a continuous challenge competing with local markets
and competitors for specific skills and disciplines, especially with the general
shift in the workforce dynamic in the UK and our industry, including an ageing
and experienced workforce offshore. Consequently, this would impact the
business’s capabilities and capacity in delivering the business plan, affecting the
achievement of our strategic objectives and a reduction in shareholder value.
Board Oversight: The Board reviews workforce planning status and initiatives,
including succession planning, at least annually to ensure key skills and
knowledge are retained and developed across the Group.
• Succession planning and workforce planning is undertaken on a regular basis
to evaluate our current and future needs, in line with the Group strategy
(to help identify critical gaps and ensure continuity in key and leadership
positions; retaining and developing the knowledge, quality and skills needed).
• Compensation and benefits are benchmarked against the market and
our peers, to ensure we remain fair, equitable and attractive to new and
existing employees.
• DE&I Committee in place with the aim to improve awareness across the
organisation and create a more inclusive environment.
• Employee consultative forum providing direct access for onshore and
offshore employees to senior management.
Audit of reward package completed with initial findings showing we have
a strong benefit offering which will be supplemented by SIPs and LTIPs.
Employee survey completed in 2023, identifying key focus areas on
communication, sense of belonging and career opportunities.
Appointed culture ambassadors to support embedding the visions and values.
Completed succession planning exercise for all key leadership roles.
Series of DE&I awareness initiatives rolled out during 2023 supporting a sense
of belonging.
Post year-end, the Group launched an Executive search process to appoint
a new Chief Executive Officer.
Supply Chain
Capacity
& Capability
Risk Climate
Group success and achievement of strategic objectives is dependent on supplier
performance. We recognise that our suppliers are subject to similar principal risks to
our own that impact on their capacity and capability, e.g. workforce retention and
recruitment, financial pressures and cost escalation, volatile commodity prices and
regulatory compliance.
Supply chain risks could result in delays and/or increased cost to capital
projects, increased unplanned production downtime, increased safety or
environmental incidents, regulatory breaches which may impact achievement
of strategic objectives and shareholder value.
Board Oversight: The Board maintains oversight of the supply chain and
associated key risks with a formal review at least annually.
• Formal tendering framework in place to ensure that both technical
and financial hurdles are established and met by potential suppliers
prior to appointment.
• Diversification of suppliers and back up providers contracted for key scopes.
• Robust supplier due diligence and qualification process.
• Enhanced liaison, communication and management of key suppliers
throughout capital projects lifecycle.
Improved internal planning and communication with contractors to ensure they
have visibility of our requirements and can plan accordingly.
Supply chain forums held during the year with a focus on safety performance
and expectations.
90 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Principal risks continued
Risk management continued
Risk title Risk description Key risk mitigations Activities and Impacts in 2023
Government
Regulator,
Political &
Fiscal
Risk
Climate
The Group could be adversely impacted by changes to the fiscal, regulatory
and political regime that may undermine its ability to meet its production
commitments and deliver its strategy. Furthermore, the Group is entirely
exposed to the UK jurisdiction and within the UK there is currently a significant
level of political uncertainty that impinges on the UK oil and gas sector. The
EPL was introduced by the UK Government in 2022, increasing the tax burden
on the Group. Changes to the EPL have already been introduced since it was
first announced including the increase in rate and duration and the introduction
of the Energy Security Investment Mechanism, and future changes may arise
as we move closer to a General Election.
The consequence of fiscal, regulatory or political change could significantly
impinge on the future profitability of the Group and also on the economic
feasibility, scale and phasing of the future investment plans.
The Group is also subject to increasing threat of legal challenge, e.g.
environmental challenge. This may result in protracted legal cases/judicial
reviews that may delay the planned completion of future capital
project developments.
Board Oversight: The Board oversees the key regulatory and governance
requirements of the Group through at least annual review of the evolving
risk areas, updates from relevant specialists and the detailed work of Board
sub-Committees on specific operational, HSE and fiscal matters.
• The Group engages in regular and constructive consultations with regulatory
bodies, UK government departments and industry associations, to ensure
the value of the industry on energy security, training etc.
• Active member of the industry trade associate contributing to the strategic
direction and supporting alignment across the industry.
• The Group has considerable experience and robust procedures to manage
legal cases and judicial review.
Ithaca is working closely with the UK government and opposition parties to
ensure the impact of EPL and associated mechanisms are understood and
appropriately responded to.
The Group has been an active contributor to the 2023 fiscal forum and
continues to engage around policy changes.
We took part in the NSTA consultation on draft OGA Plan to reduce
UKCS GHG emissions.
We continue to work with OEUK regarding industry-wide HSE improvement
areas, including late life assets and maintenance.
Major
Compliance
Breach
Risk
Climate
A failure to establish and maintain an effective compliance framework may lead
to deficiencies in key processes or controls and to the risk of a major regulatory
compliance breach that results in significant sanctions, reputational damage,
financial loss and potentially a loss of licence to operate or a prohibition notice
resulting in the shutdown of activities.
Board Oversight: The Board sets the expectations of compliance with legislative
and regulatory requirements and seeks regular assurance over compliance with
Group policies.
• Established governance Committees with defined roles and responsibilities
for Audit and Risk, HSE, Nomination, Remuneration and Disclosure.
• Board approved documented standards, policies and procedures in place.
• Regulatory portal competence and training, together with necessary safety
culture, embedded across the Group.
• Appropriate joint venture management and support from commercial and
legal with respect to Licences, Joint Operating Agreement/Unitisation and
Unit Operating Agreement compliance.
• Comprehensive system of internal controls over financial reporting with
ongoing work to enhance and develop the robustness of material processes
and controls.
Mandatory Code of Conduct training in place and independent whistleblowing
line implemented.
Increased HSE and Technical Assurance auditing, linking to HSE compliance
requirements.
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FINANCIAL
STATEMENTS
Viability statement
unsecured notes and RBL facility, both of which mature
in 2026, can be refinanced on terms that are materially
consistent with the current arrangements, or that other
similar capital can be accessed, and that no changes are
made to the current enacted fiscal and tax regime.
Conclusion
Based on the results of this analysis as set out above,
the Directors confirm that they have a reasonable
expectation that the Group will be able to continue in
operational existence and meet its liabilities as they fall
due over the period to 31 December 2026 and that the
likelihood of extreme scenarios, which would either lead
to a breach of covenants or lack of liquidity, is remote.
The Board confirms that in making this statement that
it carried out a robust assessment of the principal
and emerging risks facing the Group, including
those that would threaten its business model, future
performance, solvency and liquidity.
This strategic report was approved on behalf of the
Board on 26 March 2024:
Iain C S Lewis
Director
Climate change
The Board has also considered how climate risk could
impact the Group’s viability. Further details of the
Group’s assessment of risks and opportunities from
climate change is contained in the strategy (b) section
of our TCFD disclosures on pages 52 to 68.
The section in the TCFD disclosures which outlines
the associated risks over various time horizons, has a
short-term window to 2030. This short-term view most
closely aligns to the three-year period considered in the
viability assessment. As outlined in the TCFD section,
the impact of direct climate-related matters during the
next three years is expected to be limited to certain
transition risks relating to policy and legal matters.
Sensitivity analysis and reverse stress tests
Sensitivities to the base case have been undertaken
in line with the principal risks of the business that are
considered to have the potential to directly impact
the viability of the Group in the three-year period,
namely:
• Reductions in crude oil prices and UK natural gas
prices of 20%;
• Reductions in production levels of 10%; and
• Increases of 10% in both opex and capex was
modelled across the viability statement period.
In addition, management aggregated these scenarios
to create a reasonable combined worst-case scenario.In
this combined downside scenario, after consideration of
mitigation strategies within the control of management,
the Group is forecast to have sufficient financial
headroom and to operate within the requirements of its
financial covenants throughout the viability statement
The Directors have assessed the viability of the
Group over a three-year period to 31 December 2026
(the viability statement period) which was selected for
the following reasons:
• At least annually, the Board considers the Group’s
operating cycles, business plan projections and
debt facility requirements over the coming
three-year period.
• Within the three-year period, liquid commodity
price forecasts are available to use in the business
plan projections. Given the lack of forward liquidity
in oil and gas markets after this three-year period
the Group is reliant on its own internal estimates
of oil and gas prices without reference to liquid
forward curves.
The viability assumptions are consistent with the going
concern assessment for the period to 30 June 2025
as set out in note 3 of the financial statements with
the additional assumption of a crude oil price of
$75/bbl and a UK NBP gas price of 73p/therm in the
second half of 2025 and a crude oil price of $73/bbl and
UK NBP gas price of 72p/therm in calendar year 2026.
This assessment included the potential financial and
operational impacts, in severe but plausible scenarios,
of the principal risks faced by the Group, relevant
financial forecasts and sensitivities, and the availability
of adequate funding.
It should be noted that key assumptions that underpin
the amounts recognised in the Consolidated Balance
Sheet, such as future oil and gas prices, discount rates,
future costs of decommissioning, and tax rates, all go
well beyond the viabilitlity statement period and take
account of climate change and energy transition.
period. The mitigation strategies within the control of
management include the reduction in uncommitted
capital expenditure and variable opex savings in the
low production scenario.
A reverse stress test has also been performed reflecting
further reductions in commodity prices, prior to any
mitigating actions, to determine at what level prices
would have to reach such that there is no liquidity
headroom left. This stress test demonstrated that the
likelihood of the fall in prices required to cause a liquidity
issue is considered sufficiently remote in the context of
mitigation strategies available to management.
Other principal risks
The sensitivities outlined above have particularly focused
on the following principal risks: production delivery issues
risk, commodity price exposure and volatility risk, access
to capital risk and capital project execution and delivery
risk. The other principal and emerging risks facing the
Group as set out on pages 85 to 90 have also been
considered over the viability statement period. On top of
the sensitivities run for commodity prices and production
volumes described above, the potential impacts of the
Group’s other principal risks on the viability of the Group
over the viability statement period has been considered.
The Board has reviewed the risk mitigation strategy for
each of these individual risks and believes that either the
risks are likely to manifest outside the three-year viability
window or that the mitigation strategies are sufficient to
reduce the likelihood and impact of these risks such that
either individually or collectively, they would be unlikely
to jeopardise the Group’s viability over the period to
31 December 2026. In reaching our conclusion on
viability, it has also been assumed that the Group’s senior
92 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Dear Stakeholder,
I am pleased to present the Governance report for
Ithaca Energy plc for the year ended 31 December
2023. This section will enable you to understand Ithaca
Energy’s governance framework and its responsibilities
and the areas of focus and performance of the Board
over the past year.
The importance of strong corporate governance across
the whole organisation is recognised and understood
and we apply and report under the 2018 UK Corporate
Governance Code (the Code). This section, together
with the Directors’ remuneration report, set out
on pages 112 to 136, describes in greater detail how
the principles and provisions of the Code have been
complied with.
Corporate governance
Ithaca Energy plc is fully committed to business integrity,
high ethical values and professionalism in all of its activities.
The Board’s remit is to determine business strategy and
the Group’s appetite for risk; to monitor management’s
performance in delivering against that strategy; and
ensure that the risk management measures and internal
controls put in place are appropriate and effective.
It must ensure that the funding and talent available
to the business will support it in the longer-term and
must remain aware of the Group’s obligations to its
shareholders and other stakeholders, responding to
their needs with transparent reporting and active
engagement. This must all be done within a structure
that is well-controlled, mitigates risk and is compliant
with corporate and social responsibility.
The Board is supported by a high-calibre and
experienced Leadership Team with over 200 years of
combined experience. The Leadership Team, with the
guidance of the Board, continue to focus on maximising
value for shareholders through the safe, efficient and
responsible production of our assets and the pursuit
of the Group’s strategic objectives to BUY, BUILD
and BOOST assets as we seek to build a business of
increased scale and longevity.
As Directors, we are also mindful of our statutory duty
to act in the way each of us considers, in good faith,
would be most likely to promote the success of Ithaca
Energy for the benefit of its members as a whole, as set
out in S.172 of the Companies Act 2006 and further
details of how we have achieved this can be found on
pages 36 to 43.
Board effectiveness
Under the Code, the Board is required to undertake
a formal and rigorous annual evaluation of its own
performance and that of its Committees and individual
Directors. In January 2024, an internally-facilitated
evaluation was conducted, the first since the Group’s
Admission to the London Stock Exchange in November
2022 and details of the process and its outcome are
covered in the Corporate Governance report on
page 103.
Following this, I am satisfied that the Board and its
Committees are carrying out their duties efficiently and
that there is an appropriate balance of skills, experience
and knowledge on the Board. The Board continues
its search for a further Independent Non-Executive
Director and has appointed an Executive search agency
to conduct the search.
Sustainability
Operating in a sustainable manner plays a vital role in
our vision to be a leading independent exploration and
production Company in the UK North Sea to meet the
energy needs of the UK.
Ithaca Energy is committed to its ambitions of building
one of the lowest carbon emissions portfolios in the
UK. We have made demonstrable progress in our
decarbonisation efforts in 2023, delivering near-term
emissions reduction initiatives through operational
improvements and through the sanctioning of the
Rosebank development, we are actively transitioning
our portfolio to low-intensity assets.
We are committed to reducing our environmental
impact and improving the sustainability of all aspects of
our business activities and the Board has endorsed key
targets supported by a well-defined emissions reduction
strategy with a target of achieving Net Zero by 2040,
on a Scope 1 and 2 net equity basis. Further details can
be found on pages 44 to 77.
With this clear ESG mindset embedded across our
operations, the Board has introduced ESG-specific
performance targets to future annual bonus awards and
long-term incentive plans for the Group’s Executive
Directors, reflecting the importance the Board places
on delivering our sustainability goals while maximising
returns to shareholders in a responsible manner.
Diversity, Equality and Inclusion
The Board is cognisant of the importance of creating an
open, diverse and inclusive organisation where individual
differences and the contributions of all are recognised
and valued.
This ongoing programme aims to support a workforce
that is truly representative of all areas of society
and updates are provided to the Board. The Group’s
Diversity, Equality and Inclusion policy is designed to
create and maintain an environment in which employees
feel respected, listened to and comfortable to be
themselves in order that they can develop to their
full potential.
Relationships with stakeholders
We seek to engage with stakeholders in an open,
constructive and transparent manner and make
genuine efforts to ensure stakeholder views and
interests are considered in a balanced manner as part
of the Board’s decision-making process. Our S.172
statement, detailing how we actively engage with all
key stakeholders and the outcome of our stakeholder
engagement, is set out on pages 36 to 43.
Board priorities for 2024
Our focus in the year is to continue the significant
progress made across our strategic objectives in 2023,
delivering against our BUY, BUILD and BOOST
strategy. Our diverse portfolio of high-quality assets,
strong pipeline of organic growth opportunities and
appetite for further M&A activity supports our future
growth aspirations.
We continue to constructively engage with the UK
Government to help shape future energy policy to
create a supportive environment for further investment
in the UK North Sea, while highlighting the continued
impact of fiscal and political uncertainty on meeting the
UK’s energy security and decarbonisation targets.
2023 has been another busy year for Ithaca Energy,
and I would like to thank all of our Directors, employees,
shareholders, stakeholders, partners and contractors for
their continued support and making our first full year as
a listed Company a successful one.
Gilad Myerson
Executive Chairman
Chair’s introduction
93ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
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ITHACA ENERGY PLC
Board of Directors
The Board’s primary objective
is to ensure that Ithaca Energy
remains a successful
Company that generates and
preserves long-term value
for its stakeholders.”
Gilad Myerson
Executive Chairman
Our Board, which sets the direction of the Company
and monitors management in order that it can
achieve long-term success, deliver sustainable value
to shareholders and promotes a culture of openness
and transparency, comprises experienced, high-calibre
members with a strong track record
Gilad Myerson
Executive Chairman and Chair of the Nomination and
Governance Committee
Date of joining:
November 2019
Experience and Board contribution:
Gilad joined the Group in 2019 to drive the growth of the
Company. Currently the Executive Chairman of Ithaca
Energy, Gilad also served as the CEO and CFO of the
Group during the Group’s transformational journey. Gilad
has more than 25 years of experience building businesses
and driving value-creation initiatives in the Private Equity
industry. He joined the Group after serving as the COO
of Theramex, a global specialty pharmaceutical Company
dedicated to women and their health, backed by CVC
Capital. Prior to Theramex, Gilad was a Partner at
McKinsey & Company where he co-led the Private Equity
Practice in EMEA, and served many of the leading US and
European private equity funds on acquisition, value capture,
transformation and exit of companies, achieving returns of
two to six times multiple of money. Gilad has a degree in
Bioinformatics from the Bar Ilan University, 2005.
Principal external appointments:
None
Committee membership:
Nomination and Governance Committee – Chair; and
Disclosure Committee
Iain Lewis
Interim Chief Executive Officer and Chief Financial
Officer
Date of joining:
October 2022
Experience and Board contribution:
Iain joined the Group in July 2022 and is a Chartered
Accountant with 25 years of upstream oil and gas finance
experience in public practice and the multinational
corporate environment. Iain brings to the Board deep
experience in upstream financing, accounting, capital
markets, risk management and capital project management
developed over ten years with EY holding senior positions in
the UK and Canadian extractive industry practices and over
13 years in Executive roles in the Abu Dhabi-listed TAQA
Group. A career focused mainly on UK upstream finance
but with global experience in midstream, infrastructure and
the wider energy value chain allows Iain to drive long-term
value as the Group CFO.
Iain was appointed as Interim Chief Executive Officer in
January 2024, as the Group commenced its search for a
new Chief Executive Officer.
Principal external appointments:
None
Committee membership:
Disclosure Committee
94 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Board of Directors continued
Idan Wallace
Non-Executive Director
Date of joining:
October 2022
Experience and Board contribution:
In January 2020, Idan was appointed as the CEO of Delek
Group Ltd, the controlling shareholder of Ithaca Energy.
Prior to this, he served as the CEO of Tshuva Group, a
Group of private companies owned by Itshak Tshuva, the
controlling shareholder of Delek Group. Idan also served
as a Director in number of leading companies in the
energy, real estate and media sectors. Idan brings to the
Board his extensive expertise in capital markets and in the
energy sector and a genuine perspective on global business
landscape. He also has wide experience in finance and in
initiating and implementing major business moves and
delivering results. Idan holds a degree in law from Tel Aviv
University and is a member of the Israel Bar.
Principal external appointments:
Chief Executive Officer, Delek Group Limited
Committee membership:
Nomination and Governance Committee
John Mogford
Senior Independent Director
Deborah Gudgeon
Independent Non-Executive Director and
Chair of the Audit and Risk Committee
Date of joining:
October 2022
Experience and Board contribution:
John has significant global Executive experience, including
in oil and gas, capital allocation discipline, commodity
value-chains and health, safety and environment. His
career has been spent in various leadership, technical
and operational roles. After 32 years in BP, with roles in
upstream, downstream, renewables and as head of HSE,
culminating in positions on the Executive Committee, John
has served as Managing Director and Operating Partner
of First Reserve on the Boards of First Reserve’s investee
companies, including Chair of Amromco Energy LLC,
White Rose Energy Ventures LLP, Non-Executive Director
of DGE, DOF Subsea AS and MidStates Petroleum,
Independent Non-Executive of BHP Group Limited, ERM
Worldwide Group and the Weir Group Plc. He is a fellow of
the institute of Mechanical Engineering.
Principal external appointments:
None
Committee membership:
Audit and Risk Committee; Health, Safety, Environment
and Security Committee; Nomination and Governance
Committee; and Remuneration Committee
Date of joining:
October 2022
Experience and Board contribution:
Deborah qualified as an ACA accountant at PwC
(Coopers & Lybrand) before spending eight years as
Finance Executive with the Africa-focused mining and
trading Group Lonrho plc. Deborah subsequently held
positions with Deloitte, BDO, Gazelle Corporate Finance
and Penfida Limited. Deborah has significant experience
in acting as an Independent Non-Executive Director
having held that position at Evraz plc, Highland Gold
Mining Limited, Acacia Mining plc and currently at
Serabi Gold plc and Petra Diamonds Limited.
As well as being an Independent Non-Executive Director,
Deborah was or is also Chair of the Audit Committee for
each of these entities making Deborah a strong fit for the
Board. She brings a highly-valued contribution in terms of
Board plc experience and has vast experience of corporate
finance, which is an important element of the Board’s ability
to deliver its strategy.
Principal external appointments:
Petra Diamonds Limited; Serabi Gold plc
Committee membership:
Audit and Risk Committee – Chair; and
Remuneration Committee
Itshak Sharon Tshuva
Non-Executive Director
Date of joining:
March 2023
Experience and Board contribution:
An Israeli entrepreneur and businessman with global
business operations and the major shareholder of Delek
Group, Itshak Tshuva brings to the Board extensive
experience in the international oil and gas markets. In
pursuit of his vision and in partnership with Noble Energy,
since 2000 Delek Group has discovered substantial
offshore natural gas reserves in Israel and Cyprus.
Mr Tshuva has been deeply involved in the development of
Ithaca Energy, both in helping to position it for the IPO last
year and following Admission, in overseeing management in
its implementation of the Group’s strategy.
Principal external appointments:
Delek Group Limited
Committee membership:
None
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Lynne Clow
Non-Executive Independent Director and Chair of the
Remuneration Committee
Assaf Ginzburg
Non-Executive Independent Director
Dave Blackwood
Non-Executive Independent Director and Chair of the
Health, Safety, Environment and Security Committee
Date of joining:
October 2022
Experience and Board contribution:
Lynne is an experienced HR and Operational Director
who has worked extensively in the UK and abroad, across a
variety of sectors. In February 2022, Lynne was appointed
as a Non-Executive Director of the Board of Highlands and
Islands Airports Limited for a three-year term and Chairs its
People Committee. She is also a member of the Children’s
Panel in Scotland and a Non-Executive Director of the
Scottish Prison Service. Lynne has a wealth of strategic and
commercial experience obtained in KCA Deutag which,
in addition to her depth of experience in human resources,
enables her to make a valuable contribution to the Board
and as Chair of the Remuneration Committee.
Principal external appointments:
Dundee Airport Limited; Highlands and Islands Airports
Limited; and Scottish Prison Service
Committee membership:
Remuneration Committee – Chair; Nomination and
Governance Committee; and Audit and Risk Committee
Date of joining:
October 2022
Experience and Board contribution:
From 2004 until May 2020, Assaf held a number of
senior positions at Delek US Energy and Delek Logistics
Partners LP (under the ownership of Delek Group Limited
until 2017), including EVP and Chief Financial Officer.
Assaf is currently the Chief Financial Officer of Ormat
Technologies, a global operator and developer of renewable
energy electricity projects which offers geothermal,
recovered energy, energy management and storage
solutions. Prior to this, Assaf was a member of the Boards
of Directors for each of Alon USA Energy and Delek
Logistics Partners LP. Assaf has a BA in accounting and
economics from Tel Aviv University. As an experienced
finance professional and expert in alternative energies,
Assaf contributes valuable insight to the Board as the Group
shapes its energy transition plans and continues to provide
strong independent challenge.
Principal external appointments:
Ormat Technologies, INC
Committee membership:
Audit and Risk Committee; Nomination and Governance
Committee; Remuneration Committee; and Health,
Safety, Environment and Security Committee
Date of joining:
October 2022
Experience and Board contribution:
Dave has over 48 years’ experience in the oil and gas
sector, including seven years in the service sector with
Schlumberger in the North Sea and the Middle East,
and 27 years in various global roles within BP, including
heading up BP’s upstream business in the UK and Norway.
Since leaving BP in 2009, Dave has been a Senior Advisor
with Evercore, a Non-Executive Director with Valiant
Petroleum, Expro, and Premier Oil plc for four years,
from 2017 to 2021. Dave has a strong understanding of
the technical and commercial issues in play within a full
cycle oil and gas Company and has a depth of experience
in developing and managing large scale complex oil and gas
assets. Dave brings a wealth of experience to the Board
as the Group manages current projects in the UKCS and
assesses future opportunities.
Principal external appointments:
Senior Advisor, Evercore
Committee membership:
Health, Safety, Environment and Security Committee –
Chair
Julie McAteer
General Counsel and Company Secretary
Date of joining:
October 2022
Experience:
Julie joined the Group as Legal and HR Director (since
renamed General Counsel and Company Secretary)
in February 2020 and has over 25 years’ of experience
in the oil and gas sector. Julie previously held senior
leadership and legal manager/corporate and commercial
roles with major operators and independents covering
matters in the UKCS and internationally. For the
previous eight years Julie was Legal Manager and on the
leadership team at Premier Oil. Prior to this she occupied
legal roles for Dana Petroleum plc, Elf Exploration
and TotalEnergies. Julie holds a law degree from the
University of Aberdeen and is dual-qualified to practice
in both Scotland and England.
As Company Secretary, Julie is responsible for advising
the Board on all governance matters.
96 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Corporate Governance report
Statement of compliance
Ithaca Energy and its Board of Directors are fully committed to upholding the highest standards of corporate governance as these play a vital part in driving the right behaviour while being crucial to overall business integrity and performance and to
maintaining a sound framework for the control and management of the Group. The Company applies the provisions of the Financial Reporting Council’s UK Corporate Governance Code 2018 (the Governance Code) except as disclosed on page
97. The Governance Code can be found on the Financial Reporting Council’s website at www.frc.org.uk. Details of the Company’s approach to applying the key principles of the Governance Code are set out in this section of the Report.
The Board plays a critical role in shaping business performance while creating and delivering long-term, sustainable
returns for shareholders. It is responsible for determining business strategy and the Company’s appetite for risk,
for monitoring management’s performance in delivering against that strategy and ensuring the risk management
frameworks and internal controls in place are appropriate and operating effectively. The culture of the business is
considered an important aspect by the Board, as well as how the business is aligned with Ithaca Energy’s vision and values.
The Board is cognisant of the Company’s obligations to its shareholders and other stakeholders, responding to their
needs with transparent reporting and active engagement.
The Board will meet at such times as are necessary, but not less than four times a year.
When a Director is unable to attend a Board or Committee meeting, they receive the papers for consideration
at that meeting and have the opportunity to discuss any issues or make any comments in advance and thereafter
follow up with the Chairman of the relevant meeting.
Table of meeting attendance during 2023
Name
Board
Meetings
Audit and Risk
Committee
Remuneration
Committee
Nomination and
Governance Committee
Health, Safety, Environment
and Security Committee
Gilad Myerson 10/10 N/A N/A 3/3 N/A
John Mogford 9/10 8/8 6/6 3/3 4/4
Alan Bruce 10/10 N/A N/A N/A N/A
Iain Lewis 10/10 N/A N/A N/A N/A
Deborah Gudgeon 10/10 8/8 6/6 N/A N/A
Lynne Clow 9/10 1/1* 6/6 3/3 N/A
Dave Blackwood 10/10 N/A 1/1* N/A 4/4
Assaf Ginzburg 8/10 7/8 5/6 3/3 3/4
Idan Wallace 9/10 N/A N/A 3/3 N/A
Itshak Tshuva 3/7* N/A N/A N/A N/A
* Appointed during 2023.
1. Board leadership and Company purpose
Principles How we have applied the principle
A. A Board’s role The overall role of the Board is to ensure the long-term sustainable success of the Group, making considered decisions for the enduring benefit of its shareholders and relevant stakeholders. Our Directors bring a
diverse set of skills, experience and industry knowledge to help the Board operate in its oversight in the delivery of the Group’s strategy, while providing constructive challenge where necessary.
Our Board is collectively responsible for corporate governance, determining the Group’s strategic direction, reviewing management performance, approving financials, major acquisitions, disposals and capital
expenditure and for providing entrepreneurial leadership to Ithaca Energy within a framework of prudent and effective controls that enable risk to be assessed and managed. It is also responsible for setting the
Company’s values and ethical standards. For more information, please see pages 93 to 95 (Board of Directors) and page 96 (Board leadership and Company purpose).
B. Purpose, culture and strategy In 2022, the Company relaunched its core organisational vision, values and behavioural framework, to ‘bring strength’, ‘deliver results’, ‘express ourselves’ and ‘be considered’. This aligns with the organisational
goals that create a differential advantage and emphasises excellence throughout the business to achieve our purpose of maximising value through the safe, efficient and responsible production of our assets.
More information can be found on page 2 to 7 (Company overview).
A key focus for the Board is the continued establishment of these values within the business through the Employee Engagement Group led by the Employee Engagement Director, Lynne Clow, and the roll-out of the
Culture Ambassador Team who are members of the workforce, empowered to provide insight to the workforce on the adoption of our visions, values and behaviours. Following the 2023 employee engagement survey,
focus groups helped to build on feedback received, allowing specific areas requiring improvement to be addressed quickly, such as learning and development and communication. In 2024, our focus continues to be on
embedding a strong sense of culture in the organisation through our behavioural framework. For more information, please see pages 70 and 71 (Strategic Report) and pages 108 and 109 (Governance Report).
C. Resources and controls Ensuring efficient and effective processes and systems are in place to underpin the Company’s governance procedures is a key responsibility of the Board and the Audit and Risk Committee. During 2023 the
Committee reviewed various internal audit reports on the business’s internal controls and processes, providing feedback and guidance on each. More information can be found on page 104.
New performance measurement tools have been established which are in line with the Group’s visions and values and further details are set out in the Directors’ remuneration report on pages 112 to 136.
D. Stakeholder engagement Active engagement with our stakeholders is at the heart of Ithaca Energy’s values and the Board seeks to ensure there are numerous opportunities throughout the year to meet and/or speak with our shareholders,
lenders, suppliers and our employees. The second employee engagement survey was carried out in May 2023 and highlighted a 12% increase in employee engagement. Further details on the process and outcomes can
be found on pages 36 to 43 (Strategic Report).
E. Workforce policies The Board is committed to ensuring that its policies and procedures remain in line with the Company’s vision and values. For more information, please see pages 74 to 77 (Strategic Report).
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2. Division of responsibility
Principles How we have applied the principle
F. Chair The Executive Chairman, Gilad Myerson, is responsible for leading the Board, setting its agenda and ensuring it is an effective working Group at the head of the Company. While not considered to be independent,
the Nomination and Governance Committee and the Board consider that the role of an Executive Chairman is in the best interests of the Group in order to utilise proven leadership qualities and Gilad’s significant
experience. The Executive Chairman works closely with the Senior Independent Director, John Mogford, who brings a depth of experience and calibre and serves as an intermediary for the Non-Executive Directors
and the Executive Chairman. For more information, please see pages 93 to 95 (Board of Directors) and page 99 (other governance disclosure).
G. Board composition, independence and division
of responsibilities
The Board consisted of three Executive Directors during 2023 (and currently consists of two Executive Directors (of whom one is the Executive Chairman)), five independent Non-Executive Directors, one of whom
acts as Senior Independent Director bringing significant experience, and two Non-Executive Directors, Idan Wallace, who is not deemed independent since he was appointed by Delek Group Limited, the Group’s
largest shareholder, and Itshak Tshuva. Mr Tshuva was appointed to the Board in March 2023 and brings a wealth of experience although is not considered independent as he is the controlling shareholder of Delek
Group Limited. The Directors are collectively responsible for the success of Ithaca Energy. The roles of the Board, the Committees, the Executive Chairman, the Senior Independent Director and the CEO are
documented as are the Matters Reserved for the Board and the Delegation of Authority, the latter which establishes the limits of authority for the CEO. For more information, please see pages 93 to 95 (Board of
Directors) and page 99 (other governance disclosure).
H. Non-Executive Director’s role and
time commitment
The Non-Executives provide a pivotal role for the Board in exercising objective judgement in respect of Board decisions, holding the Leadership Team to account by providing scrutiny and challenge.
The Senior Independent Director serves as a sounding board for the Executive Chairman and acts as intermediary for both the Non-Executive Directors and the Group’s stakeholders.
The Non-Executive Directors have all committed sufficient time to Ithaca Energy to meet their duties in relation to formal meetings of the Board and the relevant Committees as well as commit time through the
year to meet and discuss issues with the leadership team. For more information, please see pages 93 to 95 (Board of Directors).
I. Company Secretary All Directors have access to the advice and services of the Company Secretary and, at the Company’s expense, the Company’s legal advisors. The Company Secretary attends all meetings of the Board and its
Committees and is responsible for making sure all Board procedures are observed and for advising the Board on corporate governance matters. She also has responsibility for ensuring the flow of information within the
Board, its Committees and between senior management and the Non-Executive Directors. For more information, please see pages 93 to 95 (Board of Directors).
3. Composition, succession and evaluation
Principles How we have applied the principle
J. Appointment and succession planning The Nomination and Governance Committee, and where appropriate the full Board, regularly reviews the size, structure and composition of the Board. This Committee is also responsible for reviewing the succession
plans for Directors, including the Chairman and Executive Directors and other senior executives, and ensuring the development of a diverse pipeline for succession. In accordance with the UK Code, all Directors will
retire at the AGM and may offer themselves for re-election. For more information, please see pages 108 and 109 (Nomination and Governance report).
K. Skills, experience and knowledge The Non-Executive Directors’ mix of skills and wide-ranging business experience is a major contributing factor towards the proper functioning of the Board and its Committees, ensuring that matters are debated
thoroughly and that no individual or Group dominates the Board’s decision-making processes. Non-Executive Directors have a particular responsibility for ensuring that the business strategies proposed are fully
discussed and critically reviewed and their collective experience and broad range of skills gained from across a variety of sectors means they can constructively challenge management in relation to the development
of strategy and performance against the goals set by the Board. For more information, please see pages 93 to 95 (Board of Directors).
L. Board evaluation The first annual review was conducted internally in January 2024 and further details on the process and outcomes can be found on page 103.
98 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
4. Audit, risk and internal control
Principles How we have applied the principle
M. Internal and external audit The Audit and Risk Committee is responsible for monitoring the relationship with, and effectiveness and independence of, our external auditors. Pursuant to its terms of reference, the Audit and Risk Committee is
responsible for the consideration and recommendation to the Board, and ultimately the shareholders, on the appointment, re-appointment and removal of the Group’s external auditors. During 2023, the Committee
met eight times and had significant discussions about the Company’s internal policies and procedures, in particular those relating to risk and the internal audit programme and the effectiveness of the external auditors
of the Group. For more information, please see pages 104 to 107 (Audit and Risk Committee report).
N. Fair, balanced and understandable assessment The Board confirms that, in its view, the Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the
Group’s position and performance, business model and strategy. For more information, please see pages 104 to 107 (Audit and Risk Committee report) and pages 137-139 (Directors’ report and statement
of Directors’ responsibilities).
O. Risk management The comprehensive and consistent management of risk is a fundamental part of the culture in Ithaca Energy and while all employees are responsible for risk management, the Directors have overall responsibility for
monitoring and reviewing the effectiveness of the risk management activities from a strategic, financial and operational perspective. The Board is responsible for the Group’s system of risk management system and
internal controls. For more information, please see pages 104 to 107 (Audit and Risk Committee report).
5. Remuneration
Principles How we have applied the principle
P. Remuneration policies and practices The Remuneration Committee is responsible for determining the policy for Directors’ remuneration and setting remuneration for the Executive Chairman, the Executive Directors and the senior managers
who report directly to the Chief Executive Officer to ensure that they support alignment with the Group’s KPIs and long-term strategy. For more information, please see pages 112 to 136 (Directors’
remuneration report).
Q. Developing Executive remuneration policy The Directors’ Remuneration Policy which is designed to promote the delivery of the long-term strategy of the Group and support its objective to retain and recruit talent to our Board and senior management,
was approved by shareholders at the Company’s Annual General Meeting in May 2023. A revised Directors’ Remuneration Policy will be put before shareholders at the 2024 AGM. As set out in the
Remuneration Committee’s terms of reference, no Director may be involved in the decision-making in relation to their own remuneration outcomes. For more information, please see pages 112 to 136
(Directors’ remuneration report).
R. Remuneration outcomes and
independent judgement
To ensure that the Remuneration Committee maintains an independent judgement when determining remuneration outcomes it considers a range of data including detailed business and individual performance
information. The Remuneration Committee also receives advice from external advisers which it considers to be objective and independent. For more information, please see pages 112 to 136 (Directors’
remuneration report).
Corporate Governance report continued
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Other governance disclosure
During the year under review and up until the date of
this report, the Company was fully compliant with the
Governance Code, with the exception of Provision
9 regarding the independence of the Chairman. The
Company has an Executive Chairman, Gilad Myerson,
and as such, he is not considered to be independent.
However, the Board is unanimous in its continued
support for Mr Myerson’s appointment and considers
that the role of an Executive Chairman is in the best
interests of the Group, allowing it the benefit of his
sound leadership and significant experience, thus
ensuring the ongoing commercial success of the
Group. Directors are of the view that there is sufficient
independent challenge and judgement on the Board to
ensure highly-effective, independent governance.
Relationship Agreement
Delek Group Limited (Delek), through its wholly-
owned subsidiary DKL Energy Limited, owns an 88.55%
shareholding in the Company and so is deemed a
controlling shareholder for the purposes of the Listing
Rules. A formal relationship agreement between the
Company and Delek (the Relationship Agreement)
is in place which governs relations between the two
companies, to ensure that the Company is capable
at all times of carrying on its business independently
of Delek and it associates.
The Relationship Agreement came into effect upon
the listing of the Company on the Main Market of
the London Stock Exchange and will continue in force
unless and until (i) the shares of the Company cease to
be listed on the premium listing segment of the Official
List and traded on the London Stock Exchange main
market or (ii) Delek cease to own 30% or more of the
Ordinary Shares of the Company. The Relationship
Agreement complies with the independence provisions
set out in Listing Rules 6/5/4R and 9.2.2ADR.
Under the Relationship Agreement:
• For so long as Delek holds not less than 50% of the
shares of the Company, it is entitled to:
• Appoint one observer to the Board, the
Remuneration Committee and the Audit and
Risk Committee; and
• Appoint one Director to the Nomination and
Governance Committee.
• Whilst Delek holds not less than 20% of the shares of
the Company, it is entitled to nominate a maximum
of two Non-Executive Directors to the Board of the
Company (provided that the Board is able to comply
with the Governance Code).
• Whilst Delek holds not less than 10% of the shares of
the Company, it is entitled to nominate a maximum
of one Non-Executive Director to the Board of
the Company.
Itshak Tshuva and Idan Wallace are the Delek-appointed
Non-Executive Directors.
Tamir Polikar is the appointed observer for the Board
and the Audit and Risk Committee and Leora Pratt
Levin is the appointed observer for the Remuneration
Committee.
Under the Relationship Agreement, Delek undertakes
that it shall:
• not take any action that would have the effect of
preventing the Company from complying with the
Listing Rules;
• not propose or procure the proposal of a shareholder
resolution of the Company which is intended or
appears to be intended to circumvent the proper
application of the Listing Rules;
• comply with the Listing Rules, the Disclosure
Guidance and Transparency Rules, the requirements
of the London Stock Exchange, the FSMA, the
Financial Services Act, UK MAR or the City Code
that apply to it in connection with the Company or
take any action that would prevent the Company
with complying with the same regulations;
• not exercise any of its voting rights in the Company
in a way that would be inconsistent with, or breach
any of the provisions of the Relationship Agreement;
and
• not, unless approved by the Board, take any action
or omit to take any action which would be likely to
result in the cancellation of admission to the main
market of the London Stock Exchange.
In accordance with the Listing Rules, the Board
confirms that, since the date of listing of the Company:
• The Company has complied with the undertakings
in the Relationship Agreement;
• So far as the Company is aware, Delek and its
associates have complied with the undertakings
in the Relationship Agreement; and
• So far as the Company is aware, Delek has
complied with the obligation included in the
Relationship Agreement to procure the compliance
of its associates with the undertakings in the
Relationship Agreement.
Diversity, Equality and Inclusion
Although the UK oil and gas industry has a rich and
diverse heritage, the sector has historically struggled to
proportionately reflect the diversity of the workforce
as a whole and, consistent with our peers, there is
gender imbalance in technical and operations roles
in our business.
The Company recognises the importance of continued
focus and action to improve representation and
conscious decisions are made in the areas of recruitment,
promotion and career development opportunities to
accelerate progress and mitigate the imbalance. In order
to attract and retain a more diverse talent pool, we
understand the need to adopt practical measures such
as flexible working and that we must accelerate our
efforts to create an inclusive environment.
Our Diversity, Equality and Inclusion Policy, overseen
by the Diversity, Equality and Inclusion (DE&I)
Committee, commits the Company to:
• Creating and maintaining an environment in which
individual differences and the contributions of all
are recognised and valued;
• Provide training, development and progression
opportunities to all our employees so that they can
develop to their full potential;
• Reviewing our policies and practices for fairness,
ensuring decisions are made on merit;
• Addressing quickly disrespectful behaviour
highlighted so that it can be corrected quickly;
• Providing training and support across the
organisation so we can all learn and build a greater
understanding of our responsibilities in respect of
diversity, equality and inclusion;
• Supporting, listening and actioning
recommendations from our workforce and DE&I
Committee; and
• Measure and monitor key DE&I data and feedback
to evaluate our progress.
During the year, a Diversity, Equality and Inclusion
Network was established with approximately ten
employee members. This Network is committed to
educating, advocating, engaging and empowering
the Ithaca Energy community to create and sustain a
culture and environment that is diverse, equitable and
inclusive, where everyone has a sense of belonging.
The Network meets regularly and has its own section
on the Company intranet where information, articles
and presentations from relevant external bodies can
be found. The Network has hosted a number of informal
sessions with topics ranging from neurodiversity in the
workplace to supporting colleagues through menopause
or cancer.
100 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Board leadership and
Company purpose
Board Committees
The Board has established
the following Committees,
further details of which
are set out in the relevant
section of the report:
• Audit and Risk Committee
• Nomination and Governance
Committee
• Remuneration Committee
• Health, Safety, Environment
and Security Committee
• Disclosure Committee
The members of these Committees (other
than the Disclosure Committee) are appointed
principally from among the Independent
Non-Executive Directors and all appointments
to these Committees are for an initial period of
up to three years and may be extended by no
more than two additional three-year periods.
1. Audit and Risk Committee
Chair: Deborah Gudgeon
Members: John Mogford
Assaf Ginzburg
Lynne Clow
Observers: Tamir Polikar
The Audit and Risk Committee’s role is to assist the
Board with the discharge of its responsibilities in relation
to financial reporting, including reviewing the Group’s
annual and half-year financial statements and accounting
policies, internal and external audits and controls,
reviewing and monitoring the scope of the annual audit
and the extent of the non-audit work undertaken by
external auditors, advising on the appointment of external
auditors and reviewing the effectiveness of the internal
audit, internal controls, whistleblowing and fraud systems
in place within the Group. The Audit and Risk Committee
shall additionally oversee and advise the Board on the
Group’s overall risk appetite, tolerance and strategy,
review the Group’s capability to identify and manage
new types of risk and keep under review the Group’s
overall risk assessment processes that inform the
Board’s decision-making.
2. Nomination and Governance Committee
Chair: Gilad Myerson
Members: John Mogford
Lynne Clow
Idan Wallace
Assaf Ginzburg
Observers: N/A
The Nomination and Governance Committee
assists the Board in reviewing the structure, size and
composition of the Board, including providing advice
to the Board on the retirement and appointment of
additional and/or replacement Directors. It is also
responsible for reviewing succession plans for the
Directors, including the Chairman and Chief Executive
Officer and other senior executives.
3. Remuneration Committee
Chair: Lynne Clow
Members: John Mogford
Assaf Ginzburg
Deborah Gudgeon
Dave Blackwood
Observers: Leora Pratt Levin
The Remuneration Committee recommends the
Group’s policy and framework on Executive
remuneration, determines the levels of remuneration
for Executive Directors, the Chairman and other senior
executives and prepares an annual remuneration report
for approval by the Shareholders at the Annual General
Meeting. The Remuneration Committee will also
review the scale and structure of Executive Directors’
remuneration and the terms of their service or
employment contracts, including share-based schemes,
other employee incentive schemes adopted by the
Company from time to time and pension contributions
and ensure that payments made on termination are fair
and reasonable.
4. Health, Safety, Environment
and Security Committee
Chair: David Blackwood
Members: John Mogford
Assaf Ginzburg
Observers: N/A
The Health, Safety, Environment and Security
Committee evaluates the effectiveness of the Group’s
policies and systems for identifying and managing
environmental, health and safety risks within the
Group’s operations. Additionally, the Committee
assesses the performance of the Group with regard
to the impact of environmental, health and safety
decisions and actions upon employees, communities
and other third parties.
5. Disclosure Committee
Chair: Julie McAteer
Members: Iain Lewis
Gilad Myerson
Ross Mitchell
Kathryn Reid
Observers: N/A
The Board has established a Disclosure Committee,
Chaired by the General Counsel with members from
the leadership team, in order to ensure timely and
accurate disclosure of all information that is required
to be disclosed to the market to meet the legal and
regulatory obligations and requirements arising from the
listing of the Company’s securities on the London Stock
Exchange, including the Listing Rules, the Disclosure
Guidance and Transparency Rules and UK Market
Abuse Regulations.
101ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
COMPANY
OVERVIEW
STRATEGIC
REPORT
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REPORT
FINANCIAL
STATEMENTS
Division of responsibilities
Non-Executive Directors
The Non-Executive Directors come with their wealth of
business and commercial expertise from many industry
sectors with objective judgement which allows them
to constructively challenge the actions of the Group’s
management and leadership teams. They provide a
crucial role in providing assurance that the Executive
Directors are exercising good judgement when it comes
to decision-making and their delivery of the Group’s
strategy. The Non-Executive Directors receive regular
updates from the Group’s management and Leadership
Team to allow them to monitor both the performance
of the Group and the culture within the organisation.
Company Secretary
The Company Secretary is responsible for advising the
Board, through the Chairman, on all Board procedures
and governance matters. In addition, each Director
has access to the advice and services of the Company
Secretary. The Company Secretary assists with the
ongoing training and development of the Board
and is instrumental in facilitating the induction of
new Directors. The appointment and removal of the
Company Secretary is a Board matter. The Company
Secretary supports the Chairman in the provision
of accurate and timely information. Board agendas
drawn up by the Company Secretary in conjunction
with the Chairman and with agreement from the
Chief Executive. All Board papers are published via
an online Board portal system which offers a fast,
secure and reliable method of distribution.
The Board has responsibility for making all key strategic,
management and commercial decisions that are
necessary for the conduct of the Company’s business
as a whole, including the approval of corporate strategy,
annual budgets, financial statements and reports,
capital allocation (covering dividends, significant
capital projects and acquisitions and disposals) and
key accounting policies. There is a clear division of
responsibilities between the leadership of the Board
by the Executive Chairman, assisted by the Senior
Independent Director, and the leadership of the
Executive Leadership Team by the Chief Executive.
Executive Chairman
The Chairman is responsible for the leadership of
the Board, setting the Board agenda and ensuring the
overall effective working of the Board. The Chairman
has regular one-to-one and Group meetings with
the Non-Executive Directors without the Executive
Directors being present.
Chief Executive
The Chief Executive leads the Executive Leadership
Team and is accountable to the Board. His role is to
develop strategy in consultation with the Board,
to execute that strategy following presentation to,
and consideration and approval by, the Board and
to oversee the operational management.
Senior Independent Director
The Senior Independent Director provides a sounding
board for the Chairman and serves as an intermediary
for the other Directors and the shareholders when
necessary. The Senior Independent Director of the
Company has an important role on the Board in
leading on corporate governance issues and being
available to shareholders if they have concerns which
contact through the normal channels of the Chair,
Chief Executive Officer or other Executive Directors
has failed to resolve or for which such channel of
communication is inappropriate.
The table below sets out the matters that the Board have discussed at each
meeting and the key activities that have taken place during 2023.
Regular matters
considered at
each meeting
Key activities
Strategy Operations Governance Stakeholders
Health, Safety,
Environment and
Security matters
Deep-dive sessions
in relation to
our assets
Operating assets
reviews
Internal audit
review and cyber
security resilience
Discussion of
Company visions and
values for employees
Production
updates
Long-term strategy
planning sessions
Development
assets reviews
Risk management
framework analysis
Interactions
with regulatory
stakeholders
Operational
updates
Senior debt
planning
2023 performance
and budget reviews
and approvals
Risk, going concern
and long-term
viability reviews
Senior debt planning
Risk management Organisational
effectiveness
Debt covenants
compliance and
dividends
Directors’ duties
training
Discussion on risks
relating to fiscal and
regulatory policies
Business
development
opportunities
Discussion on various
regulatory issues
Monitoring of
liquidity and trading
Board evaluation
and composition
Legal and HR
updates
Reporting and
discussion on DE&I
Principal risks
analysis
Financial reporting Approval of
Annual Report and
Accounts
ITHACA ENERGY
BOARD OF DIRECTORS
Remuneration
Committee
Nomination
and Governance
Committee
Audit
and Risk
Committee
Health, Safety,
Environment and
Security Committee
Disclosure
Committee
Chief Executive
Executive
Leadership Team
102 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLCITHACA ENERGY PLC
Remuneration
Governance and Reporting
• Reviewed and approved the Directors’ Remuneration
Policy and 2022 Directors’ Remuneration Report
• Approved a Company-wide framework for the
treatment of remuneration elements for different
exit circumstances
• Reviewed the Company’s Gender Pay Gap Report
prior to publication
• Reviewed its Terms of Reference and recommended
changes to the Board for approval
• Annual performance evaluation
• Update on Company-wide remuneration matters
• Review of Committee membership
Senior Management pay decisions
• Reviewed and approved the proposed individual
remuneration for each member of the ELT in relation
to their performance
• Agreed the remuneration packages for incoming
and outgoing ELT members in line with policy
• Reviewed wider workforce pay outcomes
• Noted the payment to Gilad under the MEP
• Approved the legacy policy payment to Gilad
triggered by the successful outcome of a historic
claim reported in Q1 2023
Incentive and share plan operation
• Reviewed and approved annual bonus metrics
and targets
• Reviewed and approved LTIP metrics and targets
• Reviewed and approved the terms of the Company’s
share incentive plan
Committee Activities during 2023 – At a glance
Audit and Risk
Financial Reporting
• Reviewed and approved the quarterly financial
reporting and trading statements
• Reviewed and approved the Annual Report
Internal control, risk management and
internal audit
• Risk review and assessment, and internal control
effectiveness and approval of risk appetite statement
• Corporate governance updates
• Review of Committee membership
• Approval of internal audit plan
• Review of internal audit reports
• Annual performance evaluation
External audit
• Reviewed and approved external audit report
on year-end results
• Reviewed independence of auditors
• Reviewed external audit plan
Nomination and Governance
• Reviewed composition of the Board and Committees
• Recommended the appointment of Mr Itshak Tshuva
to the Board
• Discussed succession planning
• Reviewed Annual Report
• Reviewed time commitments of Non-Executive
Directors
• Annual performance evaluation
• Recommended to the Board all Non-Executive
Directors to be put forward for re-election at
the AGM
• Initial discussion on Non-Executive Directors
recruitment
• Reviewed Committee membership
• Appointment of Interim CEO
Health, Safety, Environment
and Security
• Reviewed and agreed the Group’s HSE strategy
and performance
• Reviewed HSE reports from management
together with its responsiveness to findings and
recommendations made
• Approved the HSE 2023 technical assurance plan
• Evaluated the effectiveness of the Group’s
policies and systems in delivering the HSE strategy
• Approved the HSE improvement plan
• Reviewed external reports in relation to HSE matters
and input to environmental, social and governance
reporting
• Reviewed and discussed the emissions and energy
transition update
103ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
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OVERVIEW
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FINANCIAL
STATEMENTS
Board evaluation
The effective functioning of the Board and its
Committees is key to the success of the Company
and Ithaca Energy recognises that performance
evaluation is extremely valuable in contributing to the
effectiveness of the Board. The evaluation has been
designed to encourage Directors to optimise their
contribution to the success of the Group and add
value beyond their statutory requirements by building
on existing strengths, agreeing on the challenges
ahead and preparing for the future. It also provides an
opportunity for the Non-Executive Directors, through
their exposure on other Company boards, to draw on
their experience and suggest where improvements
can be made.
The 2023 evaluation exercise was conducted using
a detailed questionnaire focused on the undernoted
seven areas as well as the Board’s interactions with each
of the Audit and Risk, Nomination and Governance,
Remuneration and Health, Safety, Environment and
Security Committees:
• Strategy
• Board discussions during 2023
• Risk and internal controls
• Succession and composition
• Stakeholders
• Board process
• Leadership
Feedback was also obtained on the Chairman’s
performance which was then discussed with the
Senior Independent Director.
Directors completed the questionnaire and returned
it to the Company Secretary who collated and
anonymised the results before providing a detailed
report to the Chairman and Senior Independent
Director. The report covered comments and
suggestions made, together with the rating allocated
to each question by Directors.
The Chairman reported the results of the evaluations
at the Board meeting held on 25 March 2024.
There were many positive comments resulting from
this exercise: Directors agreed that the Board was
very committed to the success of the Group and that
all Directors were strongly involved in every aspect of
the business, even between meetings. The Board had
responded well to the issues which had arisen during
the year and financial and reporting performance
was considered to be strong. It was determined that
there was generally good discussion at meetings
with debate encouraged and all Committees had
performed effectively.
In terms of specific points made, it was acknowledged
that the Company had become a listed entity just over
a year ago and that while processes and procedures were
in place, several required to be tightened up in order
to improve upon the quality of information presented.
Greater detail would be provided in papers on risk,
health and safety and cyber with key issues focused
upon, plans agreed and regular progress updates given.
Some Directors felt that a greater number of meetings,
and more efficient chairing, was required to ensure a
consistent flow of information and that there should
be a more formalised structure. Both these points
have been addressed with additional meetings added
to the schedule going forward and a revised Board
agenda agreed, setting out precisely what areas would
be addressed at each meeting. The Group’s strategy
would be revisited with a view to making it clearer in
order that greater focus could be given to this area and
regular reports on progress against the strategy would
be delivered.
Diversity on the Board was agreed to be an issue and
was a critical consideration in the current recruitment
of a new CEO and additional Non-Executive Directors.
It was felt that succession planning for the Executive
Leadership Team was opaque so this would be reviewed
by the Nomination Committee with a proposal prepared
for the Board’s approval in due course.
Workforce engagement at a Board level was still at a
very early stage, partly impacted by a change in HR
Director. Despite the change in HR leadership, the
Engagement Director has met with office-based staff to
gather their views on a couple of occasions as part of the
Employee Consultation Forum and all Board members
have travelled offshore to visit crews across the Group’s
operated asset base. Further formal engagement with
offshore crews is planned for 2024. Following further
engagement, staff survey outcomes would be shared in
detail with the Board. Lynne Clow holds the position of
Independent Engagement Director.
The evaluation process concluded that the Board was
dealing with the big issues facing both the industry,
our people and the Group in an open, constructive
and challenging manner and the Directors had
contributed effectively.
Measured against the principal duties expected of it,
the Board continues to operate effectively and to meet,
in full, its obligations to support management, build the
Company’s culture, monitor performance in the widest
sense and maintain its strategic oversight. Accordingly,
the process concluded that the Board provides the
effective leadership and control required for a
listed Company.
In accordance with the Code, an externally facilitated
evaluation will be carried out every three years.
104 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Audit and Risk Committee report
Further details of these significant risks are set out on
pages 84 to 90.
The Committee comprises:
Member
Meetings
attended in 2023
Deborah Gudgeon 8/8
John Mogford 8/8
Assef Ginzburg 7/8
Lynne Clow 1/1
The Committee members are considered to possess the
appropriate skills and experience to monitor and ensure
the integrity of the Group’s financial reporting, internal
audit, internal financial control and risk management
systems and to support the Group’s governance. I am
a qualified accountant with extensive experience of
acting as Audit Committee Chair including extractive
industries, Mr Mogford has significant Executive
experience including within oil and gas, Mr Ginzburg
is the Chief Financial Officer of a global operator and
developer of renewable energy projects and Mrs Clow,
who was appointed on 20 September 2023, has a
wealth of strategic and commercial experience in the
oil and gas industry.
In addition to the Committee members, the Executive
Chairman, the Chief Financial Officer and acting Chief
Executive Officer, the Company Secretary, the Assistant
Company Secretary, the Chief Accountant, the Finance
Manager, the Financial Reporting Manager, the Risk,
Assurance and Compliance Manager, the External Audit
Partner and an observer from Delek Group Ltd routinely
attend meetings of the Committee.
Other senior managers of the business are invited to
attend meetings as required to provide the Committee
with a deeper level of insight on relevant business matters.
Other members of the Board have an open invitation
to attend Committee meetings to facilitate a deeper
understanding of the business and support their role
as Directors of the Company. The Committee meets
periodically without management present and private
meetings are held with internal audit and external audit
without management present.
The work of the Committee to the date of this report
broadly fell into three main areas and is summarised below:
Financial reporting
• Reviewed and approved the quarterly and half-
yearly financial statements and associated trading
update statements;
• Reviewed and approved the Group’s annual results
and considered the material accounting policies,
principal estimates and accounting judgements used
in their preparation, the transparency and clarity of
the disclosures within them, and compliance with
international financial reporting standards;
• Reviewed the basis for preparing the Group full-
year financial statements on a going concern basis
with input from the external auditors. The related
disclosures in the Annual Report and Financial
Statements were also reviewed;
• Considered and approved management’s assessment
of the Group’s prospects and longer-term viability
statement contained in the Annual Report and
Financial Statements;
• Considered and approved disclosures on climate-
related matters;
• Received reports from management and external
auditors on accounting, financial reporting and
taxation matters;
Dear fellow shareholder
I am pleased to present my second Audit and Risk
Committee (the Committee) report for the year
ended 31 December 2023. This report sets out the
Committee’s work to ensure the interests of the Group’s
stakeholders are protected through comprehensive
systems supporting both financial reporting and risk
management.
The Committee’s role is to assist the Board with the
discharge of its responsibilities in relation to financial
reporting, including reviewing the Group’s annual,
half-yearly and quarterly financial statements and
accounting policies, internal and external audits and the
extent of the non-audit work undertaken by external
auditors, advising on the appointment of external
auditors and reviewing the effectiveness of internal
audit, internal controls, whistleblowing and fraud
systems in place within the Group. The Committee also
oversees and advises the Board on the Group’s overall
risk appetite, tolerance and strategy and reviews the
overall risk assessment process that inform the Board’s
decision-making. The Committee additionally considers
annually how the Group’s internal audit requirements
will be satisfied and makes recommendations to the
Board accordingly as well as on any areas that need
improvement or action.
This report provides an overview of the Committee’s
principal activities and key areas of focus.
The following financial reporting risks were identified as
being significant, based on feedback from management
and external auditors during the year, and were
considered by the Committee in respect of the
FY 2023 Annual Report and Accounts:
• Oil and gas reserves;
• Carrying value of oil and gas assets;
• Deferred tax recognition and recovery;
• Adequacy of decommissioning provisions; and
• Going concern.
• Reviewed and assessed whether the Annual Report
and Financial Statements, taken as a whole, were fair,
balanced and understandable;
• Reviewed and approved the assumptions such as oil
and gas reserves, future commodity prices, future
growth rates, resultant cash flows and discount
rates used in the impairment reviews and related
disclosures and sensitivities, including considerations
around climate change; and
• Reviewed and approved the assumptions
underpinning decommissioning liabilities such as
oil and gas reserves, inflation and discount rate and
related disclosures and sensitivities.
Internal control, risk management and internal
audit
• Reviewed the structure and effectiveness of the
Group’s system of risk management and internal
control and the related disclosures in the Annual
Report and Financial Statements;
• Reviewed the risk management activities undertaken
by the Group in order to identify, measure and assess
the Group’s principal and emerging risks and review
the velocity and scale of these;
• Reviewed reports from the internal audit department
relating to control matters and monitored progress
against the internal audit plan;
• Reviewed status and progress of the ongoing work
to mature and develop the internal controls over
financial reporting; and
• Assessed the effectiveness of internal audit by
considering the activities described above.
105ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
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OVERVIEW
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External audit
• Considered and approved the scope, audit plan,
terms of engagement and fees for external
audit work to be undertaken in respect of the
FY 2023 audit;
• Received reports from the external auditor on their
findings during the full-year audit;
• Considered the objectivity and independence of the
external auditor and the effectiveness of the external
audit process, taking into account their policies to
safeguard independence, non-audit work undertaken
by the external auditor and compliance with the
Company’s policy on the provision of non-audit
services and applicable regulations;
• Considered and recommended to the Board the
re-appointment of the external auditor; and
• Considered and approved a letter of representation
in respect of the full year to the external auditor.
The matters the Committee considers to be most
significant for the FY 2023 Annual Report and
Financial Statements are as follows:
Significant risks and judgements How the Committee addressed these risks
Oil and gas reserves
The estimation of oil and gas reserves from existing and yet to be commissioned
fields is inherently judgemental. The Group estimates its reserves using standard
recognised evaluation techniques. This estimate is reviewed internally at least
annually and is also reviewed at least annually by independent consultants.
The Committee reviewed the process applied by management to estimate oil
and gas reserves, whether they were in line with general industry practice and
were consistent with the methodology applied in prior years.
The Committee noted that management’s estimates of proven and probable
oil and gas reserves were materially in line with those prepared by independent
consultants.
The Committee concluded that the methodology adopted for estimating oil
and gas reserves, which are used in impairment testing, deferred tax recognition
calculations and the going concern assessment, was fair and reasonable.
Carrying value of oil and gas assets
Significant judgement is required in determining whether there are indications of
impairment, and conducting an impairment review involving the selection of suitable
assumptions for future commodity prices, discount rate, application of Energy
Profits Levy and impact of climate change on long-term commodity prices.
In assessing the impairment reviews the Committee:
• Reviewed and challenged management’s key assumptions for the discount rate;
• Reviewed and challenged management’s key assumptions for future
commodity prices; and
• Based on available market data, approved management’s long-term
assumptions of $85/bbl in 2024, $83/bbl in 2025 and $87/bbl to $93/bbl
thereafter for crude oil and 101p/therm in 2024, 96p/therm in 2025 and
83p/therm to 87p/therm thereafter for UK NBP gas.
The Committee also considered the disclosures on impairment, including
sensitivities, and concluded that they were appropriate.
Details of impairment reviews are set out in note 19 to the consolidated financial
statements.
Deferred tax recognition and recovery
The calculation of deferred tax is typically complicated in the oil and gas
industry requiring significant judgement on future performance and profitability
of assets. This is further complicated by changes made to the EPL and certain
other tax enactments.
The Committee reviewed and challenged management’s projections of UK taxable
profits, which were consistent with those utilised in impairment reviews, and which
support the recognition of a net deferred tax asset at 31 December 2023. The
Committee was satisfied that these projections were reasonable.
The Committee also reviewed and challenged management’s assumptions
with respect to accessibility of UK corporate tax history for decommissioning
expenditure relief which support the recognition of a net deferred tax asset of
$627.7 million at 31 December 2023. The Committee was satisfied that these
assumptions were reasonable.
Further details of the net deferred tax asset are set out in note 27 to the
consolidated financial statements.
106 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Significant risks and judgements How the Committee addressed these risks
Decommissioning liabilities
Decommissioning cost estimates and assumptions are inherently judgemental
with the key assumptions including the decommissioning methodology
(e.g. type of vessel), day rates and discount rate.
In assessing the adequacy of decommissioning liabilities the Committee:
• Reviewed and challenged management’s key assumptions; and
• Questioned and obtained satisfactory answers to significant changes
in particular assets from FY 2022.
The Committee concluded that the methodology used was reasonable and
the assumptions of supply chain rates and discount rate were appropriate and
supported decommissioning liabilities of $1,859.7 million at 31 December 2023.
Further details of decommissioning liabilities are set out in note 23 to the
consolidated financial statements.
Going concern
In preparing the consolidated financial statements the Directors are required
to consider the appropriateness of the going concern basis of accounting
The Committee reviewed management’s projections for consistency in the base
terms with those used for the impairment reviews and resultant liquidity position.
In addition the Committee challenged the sensitivities modelled and agreed that
they were appropriate. Overall, the Committee concluded that the projections
were reasonable and supported a going concern basis of accounting.
The going concern statement is set out on page 91 of the Annual Report and
Financial Statements.
Audit and Risk Committee report continued
Internal control, risk management and
internal audit
The Board is responsible for establishing a framework
of prudent and effective controls, which enable risk to
be assessed and managed. The Committee is responsible
for reviewing the effectiveness of the Group’s risk
management and internal control systems, that include:
• Delegation of Authority that sets out clear authority
for specific matters requiring senior management
and Board approval;
• Annual financial budget and operational targets that
are monitored by management and the Board;
• Financial reporting processes and preparation of
financial statements that comply with relevant
regulatory reporting requirements;
• Risk management process to identify principal and
emerging risks and managements response; and
• Risk-based internal audit programme.
This is discussed more fully on pages 84 to 91 in the
risk management section.
There are specific internal controls surrounding the
financial reporting process and the preparation of
financial statements, including clear guidance and
procedures to ensure that the Group’s financial
reporting processes and the preparation of consolidated
accounts comply with all applicable regulatory and
financial reporting requirements. These policies are
applied consistently by the financial reporting team
and in each other area involved in the preparation of
financial information.
Monthly performance reports and quarterly detailed
management accounts are prepared and are subject
to thorough review by management. These reports
detail the performance of the business and support the
preparation and processes for external financial reporting.
Further progress was made during the year to address
the residual control deficiency observations which
were raised as part of the IPO process. As a result
of the completion of required actions during the
prior and current year, the majority of the control
recommendations have now been fully implemented.
The Committee receives regular updates on the
Group’s system of internal control including details of
the design and effectiveness of key controls mitigating
financial, operational and compliance risk. Management
intends to continue to focus on further standardisation,
documentation and strengthening of internal controls
to give the Committee greater comfort around the
effectiveness of the control environment.
Overall, the Committee is satisfied that the Group’s
internal control framework was operating satisfactorily
during the year. The Committee will continue to work
with management to identify opportunities to further
enhance the internal control framework.
Internal audit
Internal audit provides independent, objective and
timely assurance to senior management and the
Board through the Committee, over the design
and operational effectiveness of key processes and
controls that manage the risks across the organisation.
A Head of Internal Audit, Risk and Insurance was
appointed during the year, reporting functionally to
the Chair of the Committee and administratively to
the Chief Financial Officer regarding internal audit
matters. Our internal audit department operates
on a co-sourced model, utilising external subject
matter expertise to supplement the in-house team.
The Head of Internal Audit also provides oversight
of internal controls compliance and the enterprise
risk management process.
107ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
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STATEMENTS
Five internal audits were carried out during 2023:
• Fraud risk assessments;
• Anti-bribery and corruption policy and procedures
application;
• Sanctions – review controls for compliance with
regulations;
• Controls for large capital projects; and
• Employee expenses –review of controls over out
of pocket expenses and credit card expenditure.
During the year, the Committee:
• Reviewed and approved the 2023 internal audit plan,
ensuring it aligned to the Group’s principal risks;
• Approved the internal audit charter, which
establishes internal audit’s independence, authority,
remit and reporting lines; and
• Received regular reports from internal audit on its
activities and progress against the Group internal
audit plan, allowing the Committee to monitor
delivery against the plan.
External auditor independence and objectivity
Deloitte were appointed as the Company’s external
auditor during 2021 as a result of the then wholly-owned
parent Company, Delek Group Limited, selecting
Deloitte as auditor of the Group. The current external
audit partner is David Paterson with the 2023 audit
being his second year acting in this capacity. The
independence of the external auditor is essential to
the provision of an objective opinion of a true and fair
view presented in the financial statements. Deloitte’s
independence is safeguarded through a numbers of
control measures including:
• Limiting the nature of non-audit services performed
by the external auditor;
• The external auditor’s own internal processes to vet
and approve any requests for any non-audit work to
be performed by the external auditor;
• Monitoring changes in legislation related to auditor
independence and objectivity to assist the Company
to remain compliant;
• The rotation of the lead audit partner after five years;
• Independent reporting lines from the external
auditor to the Committee; and
• An annual review by the Committee of the policy in
place to ensure the objectivity and independence of
the external auditor is maintained.
Assessing the effectiveness of the external
audit process
The Committee, other Board members, senior
management and finance team members evaluated
Deloitte’s performance and the effectiveness of the
external audit process for FY 2023 financial reporting.
The Committee considered the following factors:
• The quality of the interactions between the audit
team and the Committee, other Board members,
management and those involved in the preparation
of the accounts;
• Whether the scope of the audit and the planning
process were appropriate for the delivery of an
effective audit;
• The external auditor’s progress achieved against
the agreed audit plan and communication of any
changes to the plan, including changes in perceived
audit risks;
• The robustness and perceptiveness with which the
external auditor handled the key accounting and
audit judgements and communication of the same
with management and the Committee;
• The expertise and resources of the external audit
team conducting the audit; and
• The quality of the auditor’s recommendations for the
financial reporting process and control improvements.
Taking the above factors into account and the feedback
from the finance team, management, members of the
Committee and the Board, the Committee concluded
that the external audit process and services provided by
Deloitte were satisfactory. The feedback will be shared
with Deloitte and any opportunities for improvement
will be considered and agreed.
A formal recommendation to reappoint Deloitte as external
auditor will be made at the Annual General Meeting.
Policy on the provision of non-audit services
The Committee’s policy on the use of the external
auditor for non-audit services includes the identification
of non-audit services that may be provided and those
that are prohibited. The policy requires that the external
auditor will only be used for non-audit services where
regulation permits, the Group benefits in a cost-
effective manner and the external auditor maintains
the necessary degree of independence and objectivity.
The policy provides for a cap on fees for non-audit work
of 70% of the average of fees paid to the audit firm over
the previous three years for audit services. It should
be noted that the three-year period commenced on
9 November 2022 concurrent with the IPO.
The Committee receives regular reports on all non-
audit assignments awarded to the external auditor and
a breakdown of non-audit fees incurred. The principal
non-audit fees incurred during the year were in respect
of the review of the half-yearly financial statements
and in 2022 principally reflected work as reporting
accountants for certain parts of the IPO process.
Details of amounts paid to the external auditor for
audit and non-audit services are set out in note 7
to the consolidated financial statements.
The Committee is satisfied that the Company is in
compliance with CMA Order 2014 regarding statutory
audit services.
Whistleblowing policy
The Group has a formal Whistleblowing policy
(see pages 76 and 77 for further details) whereby all
employees, contractors, consultants and officers are
able to raise concerns regarding potentially dangerous,
unlawful or unethical activities which may be going on
at work or could be affecting (or risks of affecting) them
or other colleagues. Any such reports are thoroughly
investigated by suitably qualified personnel and where
necessary appropriate action is taken.
Effectiveness of risk management and internal
control systems
The Committee has completed its annual review of
the effectiveness of the Group’s risk management and
internal control systems on behalf of the Board in order
to approve the statements on risk management set out
in the Strategic Report on pages 84 to 91.
Fair, balanced and understandable
The Committee has also completed its annual review
of the processes in place to prepare the 2023 Annual
Report and Accounts and to ensure that they are fair,
balanced and understandable in order to support the
Statement of Directors’ responsibilities on page 139.
Tax strategy
The Committee believes that we have a responsibility to
manage our tax affairs in a way that sustainably benefits
the customers and communities that we serve. We also
have a responsibility to shareholders to ensure that we
pay the right amount of tax and ensure compliance with
UK tax rules. Further information on our tax strategy,
which is reviewed by the Committee annually, can be
found on our website.
Committee evaluation
The Committee’s annual performance evaluation
exercise was carried out in January 2024 and no
concerns were highlighted.
Finally I would like to express my thanks to both
management and the external auditor.
On behalf of the Audit and Risk Committee:
Deborah Gudgeon
Committee Chair
108 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
The Committee’s key objective is to ensure that
the Board and the Executive Leadership Team is
comprised of individuals with the requisite levels of
skills, knowledge, experience and diversity to deliver
the long-term success of the Group. The Committee
is also responsible for evaluating the Directors on an
annual basis, striving for a balance of skills, knowledge,
independence, experience and diverse representation
to allow for it to operate effectively while ensuring
there is no undue reliance on any one individual.
The Committee has specific responsibilities on behalf
of the Board and these are detailed below:
• To regularly review the structure, size and
composition of the Board (including skills,
knowledge, experience and diversity) and make
recommendations to the Board;
• To consider succession planning for the Board and
senior management positions and to determine the
skills and experience required for such appointments;
• To evaluate the balance of skills, knowledge,
experience and diversity required prior to making an
appointment and to prepare a description of the role,
outlining the capabilities required;
• To keep under review the leadership needs of the
organisation, both Executive and Non-Executive
with a view to ensuring the continued ability of
the organisation to compete effectively in the
marketplace;
• To keep fully informed about strategic issues and
commercial changes affecting the Group and market
in which it operates;
• To identify and nominate, for the approval of the
Board, candidates to fill Board vacancies as and when
they arise;
• To review the results of Board performance
evaluation processes and time requirements for
Non-Executive Directors; and
• To liaise with the other Committees of the Board
to ensure that there is consistency with the
Group’s strategy.
Following on from the launch of Ithaca Energy’s
renewed visions and values framework, during 2023 we
continued to work on embedding these in the business,
with around 18 interactive sessions taking place,
focusing on building and leading culture and change.
A number of focus groups were held during the year
to support the roll-out of Ithaca Energy’s behavioural
framework in early 2024, to build upon the Group’s
vision and values.
The Employee Consultation Forum plays an integral
role in improving communication from the top down and
the bottom up, enabling employees to voice their ideas
as well as their concerns on issues which directly affect
them in their place of work. It offers management the
opportunity to consult over business-related issues and
gain commitment to implementing new ideas and new
ways of working to improve the organisation.
It’s important to note that the Company doesn’t replace
regular channels of communication such as talking to
your supervisor, manager or HR representative but
understands that there may be times when an employee
may want to talk to someone else. All communications
with the ECF are confidential and questions submitted
are done so in confidence, names are not passed to
management or HR. There will also be times where
the ECF is bound by the organisation to maintain
confidentiality but where feasible the aim of the
Company is to share as much information as possible.
The Board discusses the outputs of the ECF with the
Leadership Team throughout the year together with the
output of the employee engagement survey, to support
the evolution of the Company’s culture by building on
feedback received from employees from both channels.
Lynne Clow, the Group’s Independent Engagement
Director lead’s the Board’s efforts to engage with the
ECF to increase engagement levels and build a strong
culture within the organisation.
In addition to this, the Company has a team of culture
ambassadors which will assist the Leadership Team
in embedding the vision and values and behaviours
framework into the culture of the Group.
In accordance with the terms of the relationship
agreement between the Company and its controlling
shareholder, Delek informed the Company that it
wished to nominate Mr Tshuva to the Board as one of
its two nominated Directors. In relation to Mr Tshuva’s
appointment, the Committee considered the UK
Corporate Governance Code and the requirements
of the Board in relation to independence and the
diversity of Directors. After discussion, the Committee
welcomed the recommendation of Mr Tshuva to
the Board, noting his extensive experience in the
international oil and gas markets and recommended
his appointment to the Board.
Nomination and Governance report
Dear shareholder,
Chair: Gilad Myerson
Members: John Mogford
Lynne Clow
Idan Wallace
Assaf Ginzburg
Board diversity
The Committee understands the significance of DE&I,
both in the boardroom and also across the whole
business and more information on how Ithaca’s DE&I
policy helps create an open, diverse and inclusive
organisation where everyone feels engaged and
supported can be found on pages 74 and 75. Inclusivity
remains a core value and our aim is for everyone to feel
comfortable to be themselves, feel listened to and be
able to express themselves. We are committed to an
ongoing programme of equality and inclusion for all.
While there is currently no specific Board or
Committee diversity policy, the Board recognises its
importance and it is proposed that one be put in place
during the year. Directors are familiar with the general
DE&I policy and are cognisant of the need to enhance
diversity on the Board and its Committees to promote
innovation and alternative perspectives which will
contribute to the realisation of our strategic goals.
The Board supports the principles of gender and ethnic
diversity and pays close attention to the international
nature of its makeup. Members of the Board and the
Executive Leadership Team collectively possess diversity
of gender, national birthplace, social backgrounds,
cognitive and personal strengths, along with a combination
of skills, experience and knowledge – all of which are
vital for the effective operation of the Board and
oversight of the Group.
109ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
COMPANY
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
REPORT
FINANCIAL
STATEMENTS
The Committee continues to progress its search for an
additional Independent Non-Executive Director and
recognises the requirements of Principle J of the Code
in relation to appointments promoting the diversity of
gender, social and ethnic backgrounds.
A recruitment process including the appointment
of external advisers to assist has commenced to
find a suitable candidate to enhance not only
the independence of the Board, but to bring
complementary skills and experience to the Company.
While the Board is supportive of the FCA’s new
Listing Rule on diversity and inclusion, requiring that:
(i) at least 40% of the Board are women; (ii) at least
one senior Board position (Chair, CEO, CFO or SID)
is a woman; and (iii) at least one Board member is from
a minority ethnic background, it acknowledges that as
at 31 December 2023, targets (i) and (ii) have not yet
been met.
The position at year end is, unfortunately, reflective of
the wider gender imbalance seen throughout the energy
sector which has historically had fewer women in senior
management roles. However, the Board is committed to
making every effort to achieve these two targets by the
end of 2024 and this will be front of mind in the ongoing
search for an additional Non-Executive Director and,
following the departure of Alan Bruce in January 2024,
a Chief Executive Officer. New Directors with technical
and professional skills to complement the existing mix of
skills and experience on the Board will be sought.
All appointments to the Board are based on merit and
candidates will be considered against appropriate criteria,
including diversity of social and ethnic backgrounds as
well as of cognitive and personal strengths in addition
to gender diversity since the primary consideration is to
maintain and enhance the Board’s overall effectiveness
to deliver strong performance and growth in line with
the Company’s ongoing strategic objectives.
The Committee met three times during 2023 and in
addition to considering the composition of the Board,
it reviewed succession planning in respect of the
Executive Leadership Team.
For 2024, the Nomination and Governance
Committee will be focused on:
• The appointment of a new Chief Executive Officer
• Succession planning for the Directors and senior
management: In particular, the recruitment of an
additional Independent Non-Executive Director, which
will assist with the promotion of diversity on the Board.
External advisers have been appointed to assist the
Company in the search of suitable diverse candidates.
• Company strategy: The Nomination and
Governance Committee will continue to monitor
that the Company’s strategy is aligned with its vision
and values.
• Workforce engagement: Following the establishment
of the Employee Consultation Forum, the
Committee has been working with this forum and the
business and a second workforce engagement survey
was carried out in June 2023 to further understand
the objectives and wishes of our employees and
how we can work together to bring out the best in
people. The 2023 employee engagement score
increased 12% since the last survey carried out in
late 2021 and the emphasis during 2024 will be on:
(i) engaging further with the Company around key
trends and actions; (ii) communicating opportunities
for employees to contribute ideas to formulate
action plans; (iii) setting up focus groups; and (iv)
communicating key focus areas and actions. The
Nomination and Governance Committee recognises
the benefits of engaging openly with our people
through our various forums.
• Lynne Clow is Ithaca Energy’s Employee
Engagement Director and Chairs the Employee
Engagement Group, meeting with the Employee
Consultation Forum for their insights, incorporating
their feedback into the Board’s decision-making
and providing guidance across the Company’s
workforce engagement programme. This process is
at a relatively early stage due to there being a change
of HR Director during the year but the Employee
Engagement Director has met with office based staff
several times and will ensure there is more formal
engagement with offshore crews going forward.
Reporting on sex at year-end 2023
(Relevant persons were provided with a copy of LR9 Annex 2 which each completed)
Number of Board
members
Percentage
of the Board
Number of senior
positions on the
Board (CEO, CFO,
SID and Chair)
Number in
Executive
management
Percentage
of Executive
management
Men 8 80.0% 4 3 50.0%
Women 2 20.0% 0 3 50.0%
Reporting on ethnic background at year-end 2023
Number of Board
members
Percentage
of the Board
Number of senior
positions on the
Board (CEO, CFO,
SID and Chair)
Number in
Executive
management
Percentage
of Executive
management
White British or other
White (including
minority-white Groups) 8 80.0% 4 6 100%
Mixed/Multiple
Ethnic Groups – – – – –
Asian/Asian British – – – – –
Black/African/Caribbean/
Black British – – – – –
Other ethnic Group,
including Arab 2 20.0% – – –
Not specified/prefer
not to say – – – – –
• Diversity, equality and inclusion: During 2023, a
Diversity, equality and Inclusion Committee was
established and a Diversity Policy adopted to provide
further awareness within the workforce through
online sessions on diversity and inclusion for all
employees and contractors and unconscious bias
training for supervisors and managers. As Diversity,
Equality and Inclusion is a key element in the
development of the Company’s vision, values, culture
and identity, a DE&I Network was set up to focus on
how it can foster an inclusive work environment. For
2024, the DE&I Network will support the Company
and involve employees in establishing and sustaining
a supportive and welcoming workplace environment,
adopting a culture where all staff have a sense of
belonging. The DE&I Network will supplement the
Company in positioning for future success with the
aim to be an employer of choice, committed to a
diverse workforce, safeguarding equitable treatment
and securing an inclusive environment in line with its
vision and values.
Gilad Myerson
Chair
110 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLCITHACA ENERGY PLC110 ANNUAL REPORT AND ACCOUNTS 2023
The Health, Safety, Environmental
and Security(HSE) Committee is
a key part of our business and as
Committee Chair, I am pleased to
report on the activities of the Board
HSE Committee in 2023.”
Dave Blackwood
Committee Chair
Health, Safety and Environment Committee report
The terms of reference of the Health, Safety,
Environment and Security Committee is to:
• Review and monitor the Group’s HSE strategy
on an annual basis;
• Evaluate the effectiveness of the Group’s policies
and systems in delivering the Group’s HSE strategy;
• On an ongoing basis, assess the scope and
effectiveness of the HSE management system
framework, and systems and processes established
by management to identify, assess, manage and
monitor HSE risks;
• Review the scope and effectiveness of the Group’s
HSE management taking into account the principal
risks inherent and emerging in the business (as
determined by the Audit and Risk Committee and
Board of Directors);
• Consider the results of any reviews and actions
required for the continuous improvement of the
HSE management system;
• Review the remit and the expertise and effectiveness
of the work of those responsible for developing the
HSE framework above;
• Review management’s responsiveness to the findings
and recommendations arising from the reviews;
• Investigate more deeply, on behalf of the Board,
reports from management concerning all serious
incidents and high-potential incidents within the
Group and actions taken by management as a result
of such fatalities or serious accidents;
• Review, assure, audit and approve external
reporting in relation to HSE matters, and input to
environmental, social and governance reporting; and
• Review the register of potential regulatory risks
where any failure would threaten our licence to
operate, to ensure compliance with regulatory
requirements. The review includes potential
significant changes to legislation and expected
standards.
HSE Committee
Highlights HSE incidents and other HSE
matters which have risk implications
Audit and Risk Committee
Refers HSE risks, audit findings
or other HSE matters to the Board
and HSE Committee for review
Figure 1: Relationship between the HSE Committee and the Audit and Risk Committee
The HSE Committee will also review principal findings
from Line of Defence 2 and 3 HSE internal audits,
which may also be discussed at the Audit and Risk
Committee. The Audit and Risk Committee retains
overall responsibility for monitoring and reviewing the
effectiveness of the Group’s risk management and
internal control systems. Where a detailed review of
HSE risks or audit findings is undertaken, this will be
reviewed by the HSE Committee.
Similarly, if the HSE Committee determines that
specific HSE incidents have broader implications, for
risk management or internal control, across the Group
these will be referred to the Audit and Risk Committee.
In 2023, we held four HSE Committees, reviewing:
1. 2023 HSE performance, including operation
safety performance, environmental compliance,
High Potential Incident and Process Safety
event learning.
2. Safe operations, including control of work
improvements, safety leadership expectations
and human performance. The Committee also
reviewed status of maintenance backlog and well
integrity status.
3. Progress regarding our GHG emission targets,
including emission reduction projects at various
stages of maturity. The Committee also reviewed
our approach to Scope 3 emissions, reporting of
net equity emissions and methane management.
4. 2023 NSTA consultation on the OGA draft plan
to reduce UKCS GHG emissions.
5. Progress of the 2023 HSE Improvement plan.
6. Progress with management system improvements
7. Assurance: including status of HSE and Technical
Assurance Line of Defence Level 2 and 3 plans and
principal audit insights.
111ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
COMPANY
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
REPORT
FINANCIAL
STATEMENTS
MOC
1
2
8. Status of process safety risks and progress with
implementing improvements regarding management
of process safety, including leadership training,
process safety key performance indicators (KPIs),
Process Safe Barrier Model Tool (Figure 2) and
launch for frontline teams of Process Safety
Fundamentals (PSFs, Figure 3).
9. Regulatory activity, learning from regulatory
inspections and themes progressed in conjunction
with OEUK HSE forum.
10. Occupational health improvements.
Looking ahead to 2024, the Health, Safety, Environment
and Security Committee proposed standing agenda items
and specific topics for focus includes:
Standing meeting agenda
• HSE performance and status scorecard targets;
• HSE performance leading metrics including Process
Safety Key Performance Indicators;
• Serious Incidents (Significant permanent
impairment) or Fatalities, Process safety Events
(Tier 1 and Tier 2 events*) and High Potential
Incidents, reviewing any reports of events, root
causes and any actions being taken;
• Principal findings from LOD and LOD3 HSE
audits and plan status; and
• Regulatory inspection feedback.
In 2024 we will complete further reviews of:
Process safety: improvements, including embedding
the barrier model tool, approach to Operational
Risk Assessments and use of Process Safety
Fundamentals (PSFs).
Safe operations: improvements regarding Control of
Work, drops prevention and contractor engagement
emissions, progress regarding our Group GHG targets
and North Sea Transition Deal commitments.
Environmental compliance: improvement with
regard to permit compliance, and preparations
for the Secretary of State (SOS) representative
exercise planned for Q4 2024.
Dave Blackwood
Committee Chair
Figure 2: Process Safety Barrier Model Tool
Figure 3: IOGP Process Safety Fundamentals
Maintain safe
isolation
Recognise change
Walk the line
Respect hazards
Apply procedures
Stay within
operating limits
Sustain barriers
Stop if the
unexpected
occurs
Control ignition
sources
Watch for weak
signals
Structural and
marine
Process
containment
SafeguardingManagement Active protectionIgnition control
Emergency
response and
recover
Cargo Tank Venting
Crane and Lifting
Equipment
Fire and Explosion
Protection
Hull Integrity
Shuttle Tanker
Position Keeping
Stability and Ballast
Station Keeping
Structural Integrity
Hydraulic
Containment
(Rotating)
Hydrocarbon
Containment
Pipeline Systems
Pressure Relief
Systems
Open Hazardous
Drains
F&G Detection
Systems
HVAC
Instrument Location
Systems
Shutdown Systems
Verification
MOC
Competency
Alarms
Active Fire Protection
Systems
Hazardous Area
Hardware
Emergency and
Escape Lighting
Emergency Power
Emergency Response
and Rescue Vessel
Escape Routes
Escape Systems
External
Communication
Helicopter Facilities
Internal
Communications
Personal Survival
Equipment
TEMPSC – Lifeboats
Temporary Refuge
112 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Directors’ remuneration report
Dear shareholders,
On behalf of the Remuneration Committee (the “Committee”), I am pleased to present the Company’s Directors’ Remuneration Report (the “Report”) for the year ended 31 December 2023.
Committee composition
The Committee works hard to ensure alignment with shareholder interests and that our approach to remuneration fully supports the Company’s strategy and growth ambitions. The Committee is now comprised of five Non-Executive
Directors (“NEDs”), with David Blackwood, an existing NED, joining the Committee in September 2023.
Company Performance
Ithaca Energy has made material progress in its first full year as a public Company, delivering against our IPO commitments and executing against our strategic priorities, despite the considerable headwinds created by ongoing fiscal and
political instability.
Our vision is to be the highest-performing UKCS independent oil and gas Company, focused on growing value sustainably. We aim to achieve this through continued delivery against our BUY, BUILD and BOOST strategic pillars;
buying high-quality, long-life assets, building a robust long-term portfolio, and boosting field performance and enhancing margins. Our strategy is underpinned by a robust financial framework, our skilled and adaptable workforce and a
clear focus on safe, efficient and responsible production of our Group’s assets.
Our activities in 2023 have been focused on preservation of our high-value portfolio against a challenging fiscal backdrop, together with positive progress in our strategy to build a robust long-term low-emissions portfolio as we embark
on the journey to deliver first production from Rosebank. We have reported a strong financial performance in 2023, with adjusted EBITDAX of $1.7 billion and net cash flow from operating activities of $1.3 billion. With an improved
liquidity position, we now have significant financial capacity to deliver on our growth plans as we look to the future. We measure our success not only by our financial performance and delivery for shareholders, but in our operating
performance. In this, we have maximized the production and value of our assets in a safe and responsible manner. In summary:
• The impact of substantially lower gas prices, and to a lesser extent, oil prices were partly offset by our active hedging strategy, which resulted in a fall in adjusted EBITDAX of 10% from 2022;
• Our production in 2023 averaged 70.2 kboe/d (2022: 71.4 kboe/d), closing the year towards the mid-point of our 68-74 kboe/d production guidance range;
• Our Serious Injury and Fatality Frequency remained at zero and there was one Tier 1 process safety event; we must continue building on the existing safety culture and ensure recordable injuries and high potential events are kept at
acceptable levels, whilst maintaining an open and transparent incident reporting ethos;
• We made demonstratable progress in our work to reduce emissions across our operated portfolio and meaningful progress in our steps to fundamentally transition our portfolio in the medium-term through the sanctioning of low
emission intensity developments such as the Rosebank field; and
• Cash savings of over $100 million delivered during the year through the successful launch of a cost optimisation project focused on maintaining tight control on expenditure across our operated and non-operated assets and corporate
overhead base despite the inflationary environment.
As a leading independent North Sea oil and gas operator, we are now looking at what we have learned from the last year and what this means for the strategy of the Group in 2024 and beyond.
Remuneration outcomes for 2023
Annual bonus
The scorecard targets covered a range of objectives that the Committee regarded as critical in challenging management to drive stretch performance while operating in a safe and sustainable way. Specifically in relation to the free cash
flow target, the Committee decided that in order to provide sufficient focus to meet the emerging challenges presented by the continued low commodity prices and the impact of the Energy Profits Levy, that it was appropriate for the
free cash flow metric to be equally weighted between an absolute and a cost improvement target.
2023 performance resulted in an annual bonus for the Executive Directors (“EDs”) of 59.8% of their maximum opportunity, with half deferred into shares, which will vest after three years conditional upon continued employment.
The Committee considered the bonus outcome in terms of overall business performance (including safety and environmental factors), shareholder and workforce context. In addition, the Committee considered the feedback from the
Audit Committee in relation to the cash savings and operational expenditure outcomes which was positive. The Committee concluded that there were no grounds for exercising its discretion to amend the scorecard outcome and that
the outcome reflected the overall position of the business at the year end. Further details on the bonus outcomes are on page 115.
Long-Term Incentive Plan (LTIP)
The Company’s first LTIP award was granted in December 2022 with a performance period ending on 31 December 2025, and therefore there is no LTIP vesting based on performance during 2023.
113ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
COMPANY
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
REPORT
FINANCIAL
STATEMENTS
Change of Chief Executive Officer
Having led the Group through a successful IPO and first year in the listed environment, Alan Bruce agreed with the Board that he would step down from his role as Chief Executive Officer on 4 January 2024. The Board are now
actively engaged in a formal search process to appoint a new Chief Executive Officer. The Remuneration Committee considered Alan Bruce’s performance in positioning the Company for Admission and in the first year after Admission
and determined that it would be appropriate to treat him as a good leaver under the plan rules for the purpose of bonus awards and all outstanding long-term incentive awards. In line with the terms of his Executive service agreement he
was entitled to six months’ payment in lieu of notice in instalments and subject to mitigation. Full details are set out on page 120.
Until a new Chief Executive Officer is appointed Iain Lewis, our Chief Financial Officer, will also fulfil the role of Interim Chief Executive Officer, with the full support of the Board.
Directors’ Remuneration Policy
Our current Directors’ Remuneration Policy (“Policy”) was approved by shareholders at the 2023 AGM with over 99% support. The period since the 2023 AGM has been one of significant change for the Directors of the Company
in relation to ongoing remuneration, roles and responsibilities including:
• The announcement on 4 December 2023 of the transfer of shares by Gilad Myerson under the Management Equity Plan (“MEP”), a legacy one-off remuneration arrangement that was in place before the IPO, with the result that
he currently has no long-term incentivisation in place; and
• The change in the Chief Executive Officer role, with Alan Bruce stepping down from the role at the beginning of 2024 and Iain Lewis, Chief Financial Officer, taking on the role on a temporary basis.
In this context, the Remuneration Committee has determined that it is the right time to develop a revised Policy for approval at this year’s AGM that attracts, retains, motivates and incentivises the Executive Directors to deliver against
our plans and enables the business to grow and develop, aligning their interests with those of our shareholders and in line with the market.
Our current Policy was designed around four key principles set out on page 127 and a traditional plc remuneration structure of base salary, pension and benefits, annual bonus and LTIP. Having reviewed our core remuneration principles,
the Committee believe that these remain the right principles to drive delivery of our strategy and that the structure remains aligned to these principles, our strategy and market practice. However, the Committee have reflected on
the package delivered through our current incentive opportunities, the fiscal and regulatory environment in which we operate and the future growth opportunities within our sector since the policy was developed. In particular, the
Committee have focused on forming an appropriate package for our Executive Chair post the sale of the MEP shares, which currently leaves the Company with no long-term tool to incentivise him to execute the business strategy
and fully align his interests with those of shareholders in the pursuit of significant return of value.
The following changes to our Policy are therefore proposed by the Committee for 2024 onwards:
• Increase to the maximum bonus from 150% of salary to 175% of salary. It is currently intended to make use of this higher maximum bonus for the Executive Chair. The increase reflects the strategic importance of Gilad Myerson
to the Company’s development and is designed to appropriately reward him for achievement against our business plan.
• Increase maximum LTIP award from 225% of salary to 400% of salary. The higher maximum award is proposed to be granted to the Executive Chair only and will allow us to deliver a higher proportion of pay through stretching
forward-looking arrangements which will only provide reward for achievement of above market long-term shareholder returns.
• Increase maximum shareholding requirement for the Executive Chair in line with the proposed change to the maximum LTIP award to 400% of salary.
The resulting total remuneration package positions the Executive Chair at the upper quartile of the UK oil and gas market. The Committee believes this is appropriate in the context of his experience and contribution and the need
to retain and motivate the Executive Chair over the long term. A summary of the proposed changes to the Policy can be found on pages 116 and 117 and the full Policy is set out on pages 127 to 136. We have undergone a significant
engagement process with our major shareholder and have their full support on the changes proposed. The Committee remains dedicated to ongoing engagement with shareholders on the issue of Executive remuneration and will
continue to engage as appropriate going forward.
Legacy Policy payments
These arrangements were detailed in the 2022 Report.
Success-based compensation
Gilad Myerson was entitled to compensation linked to a successful outcome of a historical claim relating to an acquisition. The Company reached agreement on the settlement in February 2023, triggering a payment of $831,600.
In addition, Idan Wallace, the CEO of the Delek Group and a NED of the Company, received a payment of $462,000 in respect of the same claim.
Management Equity Plan
As disclosed in the 2022 Report and in the IPO Prospectus, Gilad Myerson participated in a MEP, the terms of which meant he was entitled (or in certain circumstances could elect) to receive a one-time payment should a change
of control of the Company, material disposal or termination of his employment not have occurred before 1 October 2023. The payment is in lieu of all MEP Shares, which must be transferred back to the Company for nil payment.
114 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
The payment was intended to operate as a floor on the value that Gilad Myerson may receive in recognition of his contribution to value creation from 2019 onwards and the incentive arrangements forfeited by him on commencing
employment with the Group. Such an exit event did not occur prior to 1 October 2023 and Gilad Myerson subsequently exercised his right to transfer the MEP shares back to the Company on 1 December 2023 and accordingly
received a payment of $8m, which was subject to deductions for income tax and National Insurance contributions.
Executive Director remuneration for 2024
Base salary
The base salary changes for the EDs reflect the change and increased complexity of the roles and responsibilities since Admission. They are proposed to be positioned to provide total remuneration towards the upper quartile of the
market to ensure that packages remain competitive in a challenging sector where we strive to retain and motivate talent and to ensure the balance between fixed and variable pay, short-term and longer-term. Details on how pay was set
across the wider workforce is set out on page 122.
It is anticipated that any further salary during the life of the Policy for the current EDs will be aligned with increases for the workforce.
Salary
1
£000
Executive Chair
2
750
CFO (interim CEO)
3
500
1 Salary increases are effective from 1 January 2024, which aligns with the departure of Alan Bruce and the change in roles and responsibilities.
2. Gilad Myerson’s salary increase represents a £250k increase on his current salary.
3. Iain Lewis is contracted for 80% of normal business hours under the terms of his Executive Service agreement. His 2022 salary of £300k was prorated to reflect working arrangements from a full-time salary of £375k. The proposed salary of £500k reflects an increase of £125k from his previous
full-time salary.
2024 Annual bonus and LTIP opportunities
Annual Bonus
1
LTIP
opportunity
2
Target
opportunity
Maximum
opportunity
Executive Chair 87.5% 175% 400%
CFO (interim CEO) 75.0% 150% 200%
1 50% of any bonus earned will be deferred into shares for three years. The bonus will be assessed against financial, strategic and HSE targets aligned with the business plan. The metrics and weightings are set out on page 117.
2. The shareholding requirement for each ED will align with their LTIP award size.
The Committee have been mindful, when considering metrics for the 2024 annual bonus, of our desire to grow sustainably and the inclusion of safety, emissions, production and operating expenditure metrics directly support these
goals. Performance against the financial and strategic metrics will be a measure of the value we deliver for our shareholders. The Committee remains satisfied that the current Executive remuneration framework is aligned with delivery
of the Company’s ambitious growth plan and targets and the creation of long-term shareholder value. Further details on the 2024 scorecard can be found on page 117.
As disclosed in the 2022 Report (and the IPO prospectus), the metrics adopted for the 2022 LTIP award were weighted between Relative TSR (50%) and a balanced scorecard (50%). The Committee have determined that for the
2024 LTIP the balanced scorecard should be removed and the weighting on Relative TSR should be increased to 100% to align more closely with shareholder experience, particularly in the light of the increased quantum of the Executive
Chair’s award on the current Policy maximum, and to avoid duplication with the annual bonus. The targets are set out on page 117.
We will continue to closely monitor developments in market practice and shareholder guidance over the life of the Policy.
Conclusion
The Committee looks forward to engaging with shareholders and stakeholders on an ongoing basis and welcomes any feedback or comments on this Report. I look forward to seeing shareholders at the upcoming AGM.
Lynne Clow
Chair of the Remuneration Committee
Directors’ remuneration report continued
115ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
COMPANY
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
REPORT
FINANCIAL
STATEMENTS
1 Maximum opportunity excludes the LTIP as the first LTIP awards under the Director’s Remuneration Policy has a performance period ending 31 December 2025. Realised remuneration excludes legacy arrangements.
Key highlights – 2023 remuneration outcomes under the remuneration policy
Outcome of performance measures ending in the financial year
This section summarises performance against targets for the annual bonus. Full detail on the assessment of the performance conditions can be found on pages 119 and 120.
Category Metric
Scorecards
Threshold (25%) Target (50%) Stretch (100%)
HSE (25%) Tier 1 and Tier 2 safety events (15%)
Progress against emissions reduction plan (10%)
Operations (35%) Production (kboe/d) (17.5%)
Operating expense ($m) (17.5%)
Growth (10%) Reserves maturation (Mmboe) (10%)
Financial (20%) Free cash flow ($m) (10%)
Cash flow improvement ($m) (10%)
Strategy (10%) Performance against strategic plan (10%)
2023 annual bonus scorecard outcome
The following table sets out the final outcome for the 2023 annual bonus. A detailed breakdown of performance can be found on pages 119 and 120.
Bonusable Salary
£000
Maximum bonus
% of salary
Scorecard
Board approved
outcome %
Outcome
% of salary
Annual bonus
value
1
£000
Gilad Myerson 500 150% 59.8% 89.7% 449
Alan Bruce 400 150% 59.8% 89.7% 359
Iain Lewis 300 150% 59.8% 89.7% 269
1 50% of any bonus earned is deferred into shares, which vest after three years, subject to continued employment.
Total remuneration outcomes in 2023
The chart below shows the remuneration outcomes for ED in 2023 delivered based on performance compared to the maximum opportunity
1
.
Executive Chair (£’000) Chief Executive Officer (£’000) Chief Financial Officer (£’000)
Maximum
Realised
£0 £200 £400 £600 £800 £1,000 £1,200
£1,400
375
224
375
224
646
646
Fixed Remunera�on Bonus (Cash) Bonus (Deferred)
Maximum
Realised
£0 £200 £400 £600 £800 £1,000 £1,200
£1,400
300
179
300
179
463
463
Fixed Remunera�on Bonus (Cash) Bonus (Deferred)
Maximum
Realised
£0 £200 £400 £600 £800 £1,000 £1,200
£1,400
£225
£135
£225
£135
£349
£349
Fixed Remunera�on Bonus (Cash) Bonus (Deferred)
100%
36%
37%
75%
70%
100%
60%
0%
116 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Key highlights – proposed remuneration policy and 2024 implementation
This section summarises our proposed remuneration policy, including the changes proposed. It also sets out how we propose to implement this in 2024. The full remuneration policy can be found on pages 127 to 136.
The policy for Non-Executive Directors remains unchanged and is set out on page 135. The NED fees are set out on page 124.
Element of remuneration Key features 2024 implementation
Base salary
Competitive fixed level of remuneration to attract and retain
Executive Directors of the necessary calibre to execute
strategy and deliver shareholder value
• No change to current policy
• Normally reviewed annually, taking into account a range of factors. Increases are guided by the general increase for the broader
employee population but on occasion may need to recognise, for example, an increase in the scale, scope or responsibility of the
role, as well as market rates.
Executive Chair – £750,000
CFO (and interim CEO) –
£500,000
Benefits
Provides a suitable but reasonable package of benefits
as part of a competitive remuneration package
• No change to current policy
• Provided where appropriate in a market-related basis, including but not limited to health insurance, life insurance/death in
service, appropriate business travel (including the tax cost where appropriate), car allowance and relocation expenses
No change to quantum
Pension
Provides competitive retirement benefits • No change to current policy
• Pension set in line with the contribution for the wider workforce (15% of salary)
Executive Chair – 15%
CFO (and interim CEO) – 15%
Annual bonus
Rewards the delivery and achievement of financial targets
and key performance indicators which form part of strategy
• Increase to the maximum award opportunity for the Executive Chair from 150% of salary to 175% of salary.
• Awards based on targets set annually against a combination of financial, strategic and operational KPIs.
• Up to 25% of the maximum bonus is delivered for threshold levels of performance and the full bonus is paid for stretch
performance.
• At least 50% is deferred into ordinary shares for three years.
• Awards subject to malus and clawback provisions for up to 3 years post payment and vesting.
Executive Chair – 175%
CFO (and interim CEO) – 150%
LTIP
Aligns the Executive Directors interests with shareholders
and rewards for achievement of long-term objectives
• Increase to the maximum award opportunity from 225% of salary to 400% of salary.
• Awards are subject to a three-year performance period with a two-year holding-period on the net of tax vested shares.
• Dividend equivalents accrue over the period from grant to the earlier of the end of the holding period and exercise.
• Awards are subject to financial and strategic KPIs. Financial metrics (including TSR) comprise at least half of the LTIP awards.
• Up to 25% of the maximum award vests for threshold levels of performance and the full award vests for stretch performance.
• Awards subject to malus and clawback for 6 years (from the date of grant).
Executive Chair – 400%
CFO (and interim CEO) – 200%
Shareholding requirements
Aligns the Executive Directors interests with shareholders • Increase to the requirement in line with the on-going LTIP award size.
• Executive Directors are required to build up the required shareholding over five years.
• A shareholding requirement post-cessation of employment applies of 100% of shareholding requirement (or actual holding if
lower) for one year and 50% for the second-year.
Executive Chair – 400%
CFO (and interim CEO) – 200%
Directors’ remuneration report continued
117ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
COMPANY
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
REPORT
FINANCIAL
STATEMENTS
Performance metrics for the 2024 annual bonus
Category Weighting Metric
Health Safety and Environment 25% Safety events (15%), Emissions reduction (10%)
Operations 35% Production (17.5%), Operating expense (17.5%)
Growth 5% Reserves maturation (5%)
Financial 20% Free cash flow (20%)
Strategy 15% Strategic plan (15%)
Due to commercial sensitivity, actual targets and ranges will be disclosed at the end of the performance period. The Remuneration Committee retains an appropriate level of flexibility to apply discretion to ensure that remuneration
outcomes reflect overall performance and values.
Performance metrics for the 2024 Long-term incentive plan
Targets for these metrics are for the performance period 1 January 2024 – 31 December 2026.
Category Weighting Metric
Threshold
1
(25% vesting)
Maximum
(100% vesting)
TSR 100% TSR versus comparator Group
2,3,4,5
Median Upper quartile or above
1. Nil vesting below threshold performance, performance between threshold and maximum ranges between 25% and 100% on a straight-line basis.
2. Ithaca Energy’s TSR performance will be assessed against that of: Africa Oil, Capricorn Energy, Diversified Energy, DNO ASA, Energean, EnQuest, Genel Energy, Harbour Energy, Kosmos Energy, Maurel & Prom, Okea ASA, Seplat Energy, Serica, Tullow Oil, Vermillion Energy.
3. The peer group will be subject to re-evaluation throughout the performance period to adjust for the effects of corporate events such as mergers and acquisitions, with substitutes introduced where necessary to maintain the approximate size and comparability of the Group.
4. Relative TSR will be calculated incorporating a 3-month average of return index prior to start and at the end of the performance period. The calculation will be on a local currency basis.
5. There is no change to the comparator Group from the 2022 Long-term incentive plan. The comparator Group for awards granted in 2022 published in our 2023 Directors’ Remuneration Report incorrectly included Aker BP, Apache Corp, Hibiscus, Marathon Oil, Murphy Oil, Orron Energy & Santos.
118 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Annual Report On Remuneration
This section of the report sets out how Ithaca Energy has implemented its Policy and legacy arrangements for EDs in 2023. This is in accordance with the requirements of the Large & Medium Sized Companies and Groups
(Accounts and Reports) Regulations 2008 (as amended).
Single total figures of remuneration (audited)
Executive Directors
1
Base Salary
£’000
Benefits
2
£’000
Annual bonus
3
£’000
LTIP
£’000
Pension
4
£’000
Other
5
£’000
Total
£’000
Total Fixed Pay
£’000
Total Variable Pay
£’000
Gilad Myerson 500 78 449 – 68 7,268 8,363 646 7,717
Gilad Myerson (2022) 458 79 – – 60 7,229 7,826 597 7,229
Alan Bruce 400 11 359 – 52 147 969 463 506
Alan Bruce (2022) 91 2 36 – 12 5,895 6,036 106 5,930
Iain Lewis 300 9 269 – 40 1 619 349 270
Iain Lewis (2022) 68 2 27 – 9 285 391 80 311
1 2022 figures reflect remuneration earned since appointment as a Director of the Company. Gilad was a Director for the whole year, Alan and Iain were both appointed with effect from 10 October 2022.
2 Benefits includes the cost, where relevant, of private medical insurance, accommodation, travel and car allowance. 2023 benefits with a value over £5,000:
Gilad
£’000
Alan
£’000
Iain
£’000
Car allowance 9 9 7
Taxable travel
1
68 – –
1. This represents the gross taxable value of expenses relating to accommodation, travel and subsistence incurred whilst travelling on Company business.
3 Bonus payable for the financial year; EDs are required to defer half of any bonus earned into Ithaca Energy shares which will vest after three years, subject to continued employment.
4 Pension provision is up to 15% of salary as a payment into a defined contribution pension scheme and/or a cash amount in lieu of a pension contribution. Any cash allowance paid is reduced to take into account additional employer costs.
5 Other comprises the following legacy arrangements as detailed in the 2022 Report:
Gilad Myerson: 2023: payment in lieu of all MEP shares transferred back to the Company for nil payment of $8,000,000 (GBP equivalent using an exchange rate at date of payment of GBP 1 = USD 1.2536), success based compensation linked to a successful outcome of a historical claim relating
to an acquisition of $831,600 (GBP equivalent using an exchange rate at date of payment of GBP 1: USD 1.20998), a cash dividend payment of £197,307 relating to vested but unexercised shares, the amount of £2,102 representing the value at grant of shares under the Company share incentive
plan; 2022: value of nil-cost options (awarded July 2021) and the value of 210,263 MEP shares (15% of the B1 Ordinary Shares under the MEP), both of which vested on Admission (using Admission share price of £2.50) although the MEP shares were transferred back to the Company
on 1 December 2023 for nil payment, a contractual payment of $1,000,000 as part of the MEP (using an average 2022 exchange rate of GBP 1 = USD 1.23683), and a one-off IPO bonus (£50,000).
Alan Bruce: 2023: a cash dividend payment of £144,910 relating to vested but unexercised shares, the amount of £2,102 representing the value at grant of shares under the Company share incentive plan; 2022: value of nil-cost options (awarded July 2021), 20% of which vested on Admission
(using Admission share price of £2.50), the full value is shown as performance conditions fell away on Admission (details of the amount that lapsed on cessation of employment are set out on page 120), also included is a one-off IPO bonus (£50,000)
Iain Lewis: 2023: the amount of £1,498 representing the value at grant of shares under the Company share incentive plan; 2022: value of At-IPO award of 120,000 nil-cost options with no performance conditions granted on 21 December 2022, valued using the share price at the time of award
of £1.956, and a one-off IPO bonus (£50,000).
Directors’ remuneration report continued
119ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
COMPANY
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
REPORT
FINANCIAL
STATEMENTS
Directors Remuneration in 2023
2023 Annual bonus outcomes
The maximum bonus opportunity for EDs in 2023 was 150% of salary and subject to an assessment of performance against a scorecard of measures.
Half of any bonus earned is payable in cash following the year-end and the other half is deferred into Ithaca Energy shares, which vest after three years.
The following section contains details on the targets and the Remuneration Committee’s assessment of outcomes for the period 1 January 2023 – 31 December 2023 against each of the metrics in the scorecard.
Performance against scorecard (audited)
Category Achievement Weighting Threshold Target Stretch Actual
Result
(% of overall outturn)
Result
(% weighted outturn)
HSE
Tier 1 and Tier 2 safety events
1
15% 2 Year on year
improvement
0 – 37% 5.5%
Progress against emissions reduction plan
1
10% Assessment against plan – 75% 7.5%
Operations
Production (kboe/d)
17.5% 67 74 77 70 36% 6.3%
Operating expense
2
($m) 17.5% 651 592 570 545 100% 17.5%
Growth Reserves maturation (Mmboe)
3
10% 15 20 25 22 70% 7.0%
Financial Free cash flow ($m)
4
10% 581 646 711 459 0% 0%
Cash flow improvement ($m)
5
10% 40 50 60 127 100% 10.0%
Strategy Performance against strategic plan
1
10% Assessment against plan – 60% 6.0%
Total 100% 59.8%
1. The outcome of the Committee assessment against qualitative metrics set out below; 2. Operating costs (including tanker costs) less tariff income; 3. Maturation of projects from undeveloped 2P reserves to developed 2P reserves; 4. Group free cash flow less dividend payments and certain other
items; 5. Cost savings from the Partnered Cost Optimisation project as described on page 79.
Performance against qualitative metrics
Category Metric Highlights from Assessment
Result
(% of overall
outcome)
HSE Tier 1 and Tier 2 safety events Safety is a key part of our business, and an active decision was taken to focus on serious incidents through our scorecard targets.
Key factors in determination of the final outcome were:
• 1 Tier 1–Captain FPSO Marine Gas Oil release May 2023.
• No Tier 2 Process safety events.
5.5%
Progress against emissions
reduction plan
Targets to achieve our objective of minimising the environmental impact of our operations were set with reference to the areas with highest potential
reduction opportunities. Focus was on Captain FGR and Electrification targets and key factors in determination of the final outcomes were:
• Completed Captain FGR targets to commence FEED by end of Q2 and complete concept definition (FID ready) by Q4.
• Captain Electrification target to commence FEED by end of Q2 completed in accordance with Plan.
• Positive progress against Captain Electrification concept definition including Technical Authority engagement completed and Permits,
Licenses, Authorisation, Notification and Consent (PLANC) register in place meeting milestones. Tender Board endorsement for Detail Design
Contracting Strategy underway.
7.5%
Strategy Performance against
strategic plan
In our first full year following a successful IPO, strategic targets have focused on embedding Company vision and values as well as progress against
growth opportunities. The final outcome was determined with consideration of the following:
• Positive progress on implementation of Company vision and values.
• Inorganic growth objectives achieved through the completion of Rosebank FID, closure of Cambo partner deal in November 2023 and project
milestones for Fotla progressed.
• Options for deepening interests in legacy assets and due diligence on organic growth opportunities progressed in line with plan.
6.0%
120 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Discretion
The Committee is conscious of the provisions of the 2018 Code, with remuneration Committees being encouraged to review incentive outcomes against individual and Company performance, together with any wider circumstances,
and to exercise independent judgement and discretion in relation to remuneration outcomes. Taking into account overall business performance, individual performance and shareholder and workforce context, the Committee was of
the view that the bonus outcome was appropriate and there were no grounds for exercising its discretion to amend the scorecard outcome.
LTIP vesting in respect of a performance period ending in 2023
Not applicable.
Awards granted during 2023 (audited)
Not applicable. Initial awards under the LTIP were made in December 2022 and reported in the 2022 Report. As detailed in the 2022 Report the next award was anticipated to be made in 2024.
Payments to past Directors (audited)
No payments were made to past Directors during the year.
Payments for loss of office (audited)
The Board announced on 5 January 2024 that Alan Bruce had stepped down as Chief Executive Officer. The Company’s policy for payment for loss of office is set out on pages 133 and 134.
All payments to Alan Bruce in respect of 2023 are reported in the single figure of remuneration. The following payments have been made in respect of the period from 1 January 2024 up to the date his employment ceased on
4 January 2024. Until this point he continued to receive his base salary of £400,000 per annum and all benefits in line with the terms of his Executive service agreement.
• Base salary: £6,154
• Benefits: £157
• Pension: £800
• Payment in lieu of 9 days’ holiday accrued but untaken: £13,846
Alan Bruce remained eligible to receive a bonus for the period up to 31 December 2023. He will not be eligible for a bonus for 2024.
When his employment ceased on 4 January 2024 he was entitled to the following payments:
• £200,000 in lieu of his notice period (6 months), paid in instalments and subject to mitigation
• £7,500 + VAT towards legal fees in connection with his departure
Treatment of outstanding incentive awards:
The Remuneration Committee considered Alan Bruce’s performance in positioning the Company for Admission and the first year after Admission and determined that it would be appropriate to treat him as a good leaver under the plan
rules for the following outstanding long-term incentive awards.
Option awards
As disclosed in the 2022 Report, Alan Bruce was granted one-off options on 21 July 2021. The full value was reported in 2022 as performance conditions fell away on Admission. As a good leaver Alan Bruce can exercise
the option shares that have vested up until the date his employment ceased on 4 January 2024. Of the total number of options, 20% become exercisable on Admission and a further 20% became exercisable on 14 August 2023.
The remaining 60% lapsed at the date his employment ceased. Malus and clawback provisions will apply as detailed in the rules.
2022 Long-Term Incentive Award
As disclosed in the 2022 Report, Alan Bruce was granted a performance share award under the 2022 long-term incentive plan (‘LTIP Award’) of 360,000 shares. The extent to which the LTIP Award shall become vested shares shall be
determined by the Remuneration Committee in accordance with the rules of the plan and subject to a pro-rata reduction to the number of shares based on the period starting on the grant date and ending on the date his employment
ceased relative to the performance period of the award. Malus and clawback provisions will apply as detailed in the rules.
Shareholding requirement:
In accordance with the Company’s policy on shareholding requirements, Alan Bruce is required to hold shares equal to the lesser of his shareholding on cessation of employment and the in-employment requirement for the first year and
half this amount for the second year post-cessation.
Directors’ remuneration report continued
121ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
COMPANY
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
REPORT
FINANCIAL
STATEMENTS
Executive Remuneration in Context
Historical TSR performance
The table below compares the TSR performance of the Company since Admission against the TSR of the
FTSE350 Oil & Gas sector. This index was chosen as it is a recognised equity market index of which Ithaca
Energy is a member:
106.56
65.84
Ithaca
TSR (rebased to 100)
FTSE 350 Oil & Gas
08/11/2022 30/12/2022
29/12/2023
0
75
150
Percentage change in remuneration of the Directors
The change in salary, bonus and benefits of each of the Directors and that of the wider workforce is set out below.
2022-23 2021-22
Salary
2
Benefits
3
Bonus
4
Salary Benefits Bonus
Executive Chair
Gilad Myerson 0% (0.5%) (47.8%) 11.1% 28.6% 6.2%
Executive Directors
Alan Bruce (CEO) 0% 1.1% 74.2% – – –
Iain Lewis (CFO) 0% 1.3% 61.1% – – –
Non-Executive Directors
5
David Blackwood 0% – – – – –
Lynne Clow 0% – – – – –
Assaf Ginzburg 0% – – – – –
Deborah Gudgeon 0% – – – – –
John Mogford 0% – – – – –
Itshak Sharon Tshuva n/a n/a n/a n/a n/a n/a
Idan Wallace n/a n/a n/a n/a n/a n/a
All UK-based employees
1
5.2% 7.0% (0.6%) 5.5% 13.2% 63.6%
1 UK-based employees are shown as this comprises Ithaca Energy’s entire workforce. The same population as at 31 December 2022 and 31 December 2023 has been used to calculate the change in remuneration which is calculated on a full-time equivalent basis.
2 Changes in salary (including the Executive Chair and EDs) have been calculated on a full-year equivalent basis at 31 December 2022 and 31 December 2023.
3 The change in benefits for Gilad Myerson reflects a decrease in the gross taxable value of travel-related expenses incurred whilst travelling on Company business during 2023. The change in benefits for employees (including EDs) are based on the change in medical and dental premium paid by the
Company on their behalf (the dental premium for 2022 included a half-year, from the date of introduction). Benefits do not include pensions contributions for these purposes. The 2021-22 benefits changes were reported in the 2022 Report.
4 The decrease in bonus for Gilad Myerson reflects the difference between the bonus delivered under the remuneration policy in 2023 and the IPO bonus of £50,000 paid in 2022 in addition to the contractual payment under the MEP. The percentage change in bonus for Alan Bruce and Iain Lewis
reflects the fact that this is the first full year of operation of the Directors Remuneration Policy under which there was a change in their remuneration structure from their pre-IPO arrangements, as disclosed in the 2022 Report and in the IPO Prospectus. 2021-22 changes are in the 2022 Report.
5 Remuneration for the NEDs is disclosed on page 124.
Historical CEO remuneration outcomes
The table below outlines the Group CEO’s single figure for total remuneration, and annual bonus and LTIP
outcomes as a percentage of maximum opportunity and will be built up over a period of ten years:
2023 2022
Annual bonus payout (as a % of maximum opportunity) 60% 78%
LTIP vesting (as a % of maximum opportunity) – –
Group CEO single figure of remuneration (£000)
1
969 6,036
1 Remuneration earned since appointment as a Director of the Company, 10 October 2022
122 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
How pay was set across the wider workforce in 2023
Our approach for setting pay across the wider workforce aligns with our executives. Base salaries are targeted at an appropriate level to reflect an individual’s role and responsibilities against the relevant market for which the Company
completes for talent. In 2023, all employees were eligible to be considered for a bonus award which rewards for performance at a suitable level for the employee’s role. The Company engages with its employee associations on
remuneration matters. Additionally, the Board have established a programme to connect with and gather feedback from employees, details of which are set out on page 96. This provides opportunities to have direct communication
between employees and NEDs on a range of topics including remuneration.
CEO Pay ratio reporting
The table below shows the ratio at median, 25th and 75th percentile of the total remuneration received by the Group CEO compared to the total remuneration received by UK employees. Total remuneration reflects all remuneration
received by an individual, and includes salary, benefits, bonus, pension and value from incentive plans. Details on total remuneration for each quartile employee, and the salary component within are also shown.
Year Method P25 (lower quartile) P50 (median) P75(upper quartile)
2023 Option B 11:1 9:1 6:1
2022 Option B 65:1 57:1 44:1
• The Company has reviewed the methodology to calculate the CEO pay ratio and has used Option B, whereby we have identified employees for comparison using our gender pay gap data set (snapshot data from 5 April 2023) as it
uses a data set which has already been processed and reviewed by the Remuneration Committee and enables timely reporting for disclosure purposes. Employees at P25, P50 and P75 were identified. The total remuneration was
calculated on a full-time basis for these three employees, and for others either side of the quartiles to check for anomalies.
• The single figure for Alan Bruce £968,733 was used to calculate the ratio; this represents remuneration for a full year; however, it does not include any LTIP vesting outcomes as the first LTIP award under the Director’s
Remuneration Policy has a performance period ending on 31 December 2025. The extent to which the award shall become vested shares will be determined by the Remuneration Committee, in accordance with the plan rules at that
time. The single figure for Alan Bruce used to calculate the ratio in 2022 included the value of legacy arrangements in place at the time of the IPO; the ratio is therefore not representative of a ‘typical year’.
The table below shows the total remuneration figure for each quartile employee and the salary component within this.
Year P25 (lower quartile) P50 (median) P75 (upper quartile)
2023
Salary’ £69,552 £83,262 £99,046
Total remuneration £88,179 £109,702 £156,279
1 Given the different fixed pay structures of offshore and onshore employees, any offshore allowance is included in the Salary figures.
• In reviewing the employee pay data, the Committee is comfortable that the P25, P50 and P75 individuals identified appropriately reflect the employee pay profile at those quartiles, and that the overall picture presented by the
ratios is consistent with our pay, reward and progression policies for employees.
Relative importance of spend on pay
The table below outlines the Group’s adjusted net income, dividends paid to shareholders and share buybacks, compared to overall spend on pay in total. Adjusted net income is shown, as this is one of the Group’s key measures of
performance.
2023
$m
2022
$m
% change between
2022-2023
Adjusted net income 369.6 462.8 (20.1)%
Ordinary dividends paid to shareholders 266.0 – –
Share buybacks – – –
Total staff costs 142.7 113.3
1
25.9%
1 This figure is a correction from the figure reported in the 2022 report.
Directors’ remuneration report continued
123ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
COMPANY
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
REPORT
FINANCIAL
STATEMENTS
Statement of Directors’ shareholding and share interests
ED share ownership requirements
Under the Policy, EDs are required to build a shareholding in the Company of:
Role % of base salary
Executive Chair, CEO 225%
CFO 200%
• EDs are required to retain 50% of the net shares released from Deferred Share Bonus Plan and LTIP awards until the shareholding requirement is met
• The shareholding requirement should normally be built up over a period not exceeding five years
• Unvested share awards that are subject to performance conditions are not taken into account in applying this test
• A post-cessation holding period of two years applies. This is at the same level as the current (within employment) guideline for the first year, reducing to half in the second year. The Committee retains the discretion to waive part or all
of the guideline where considered appropriate, for example in exceptional or compassionate circumstances
ED share ownership requirements (audited)
Shares held Options held
Executive Directors Owned outright
1
Vested but not
exercised
2
Unvested and
subj. to continued
employment
3
Unvested and
subj. to perf.
conditions
4
Shareholding
requirement
(% of saIary)
Shareholding at
31 December
2023
5
(% of salary) Requirement met
Gilad Myerson 1,403,444 1,087,300 0 0 225% 571% Yes
Alan Bruce 685 1,087,300 1,630,949 360,000 225% 500%
6
Yes
Iain Lewis 483 44,909 80,000 240,000 200% 31% No
1 Gilad Myerson: amount relates to 1,402,759 shares from vested and exercised one-off options granted on 21 July 2021 and 685 purchased shares under the SIP. This includes a correction from the amount reported in the 2022 Report which should have been 1,402,759. The only variance for 2023
is the shares purchased under the SIP. Alan Bruce and Iain Lewis: amount includes purchased shares under the SIP.
2 Gilad Myerson and Alan Bruce: Options granted in 2021 which vested on Admission, but have not yet been exercised. The Options are denominated in US$ and amount to $2,002,755 (shares are calculated using an exchange rate GBP 1 = USD 1.27736 and share price of £1.4420, the closing price
on 29 December 2023). Iain Lewis: One-third (40,000) nil cost options of a one-off grant of 120,000 nil cost options in December 2022 vested on 9 November 2023. The amount includes dividend equivalent shares of 4,909.
3 Alan Bruce: Options granted in 2021 which vest in equal tranches on the anniversary of the grant date. The Options are denominated in US$ and amount to $3,004,133 (shares are calculated using an exchange rate GBP 1 = USD 1.27736 and share price of £1.4420, the closing price on
29 December 2023). Iain Lewis: Two-thirds (80,000) nil cost options of a one-off grant of 120,000 nil cost options in December 2022 which are due to vest in equal tranches on the second and third anniversary of Admission.
4 2022 LTIP awards granted to Alan Bruce and Iain Lewis in December 2022
5 Current shareholding calculated using shares held (beneficially or in trust), and options (on a net of tax basis) that are vested or unvested subject to continued employment, using a share price of £1.442, the closing price on 29 December 2023.
6 Alan Bruce’s employment ceased on 4 January 2024 at which time shares subject to continued employment (calculated as 1,630,949) lapsed in full. His shareholding (% of salary) as at this date is 200%.
The only changes to EDs interests in Ithaca Energy Shares during the period 1 January 2024 to 15 March 2024 relate to 326 shares acquired by Gilad Myerson and 326 shares acquired by Iain Lewis under the Company’s Share
Incentive Plan, in which all employees are eligible to participate.
Dilution
Awards granted under Ithaca Energy employee share plans are primarily satisfied through shares purchased in the market.
The Company monitors the number of shares issued under the Ithaca Energy employee share plans and their impact on dilution limits. The Company’s usage of shares compared to the relevant dilution limits set by the Investment
Association in respect of all share plans (10% in any rolling ten-year period, starting from the date of Admission) and Executive share plans (5% in any rolling ten-year period, starting from the date of Admission) was 0% of the
Company’s total issued share capital on 31 December 2023
1
.
1 The 2022 annual report and accounts reported the Company’s usage of shares compared to the relevant dilution limits was 0.94% of the Company’s total issued share capital on 31 December 2022. This should also have been 0%in respect of both all share plans and Executive share plans.
Promoting all-employee share ownership
We believe that share ownership by our employees helps them to understand the interests of the Company’s shareholders. On 31 December 2023 86.1% of our employees were shareholders through participation in the Ithaca Energy
plc Share Incentive Plan. This allows employees to buy Ithaca Energy plc shares directly from their earnings. As at 31 December 2023 a total of 543 employees were making a monthly average contribution of £146.
124 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Remuneration for Non-Executive Directors
Single total figure for remuneration for Non-Executive Directors (audited)
The table below sets out the total remuneration earned by each NED who served during 2023:
Non-Executive Directors
1
Fees
2023
£’000
Benefits
2023
£’000
Other
2023
£’000
Total
2023
£’000
Fees
2022
£’000
Benefits
2022
£’000
Other
2022
4
£’000
Total
2022
£’000
David Blackwood 95 – – 95 24 – 50 74
Lynne Clow 95 – – 95 24 – 50 74
Assaf Ginzburg 75 – – 75 24 – 50 74
Deborah Gudgeon 95 – – 95 24 – 50 74
John Mogford 105 – – 105 26 – 100 126
Itshak Sharon Tshuva
2
– – – – n/a n/a n/a n/a
Idan Wallace
2,3
– – 382 382 – – – –
1 All NEDs, except for Itzhak Sharon Tshuva, were appointed to the Board on 31 October 2022; fees and benefits since this date are shown.
2 Itshak Sharon Tshuva, a Director of Delek, was appointed on 30 March 2023. He, along with Idan Wallace, receives no additional fee from Delek for his Directorship of the Company.
3 Idan Wallace received a payment of $462,000 (GBP equivalent using an exchange rate at date of payment of GBP 1: USD 1.20998), triggered by the successful outcome of a historical claim reported in the 2022 Report.
4 Represents the value of the shares that each NED subscribed to on Admission, using the Admission share price of £2.50.
Approach to NED fees for 2024
NED fees were originally set prior to Admission and are reviewed annually.
Role Fee from 1 January 2024
2
Fee from 14 November 2022
Board membership fee £79,000 £75,000
Additional fees paid:
Senior Independent Director £35,000 £30,000
Committee Chair
1
Audit & Risk, Remuneration, HSE £25,000 £20,000
1 Gilad Myerson’s base salary is deemed to include any other fees as a Director of the Company or Group; as such a fee for the Chair of the Nomination Committee has not been set.
2 NED fees will increase of 5%, in line with the budget for the wider workforce. An increase of £5,000 will be made to the Senior Independent Director and Committee Chair fees to reflect roles and responsibilities since Admission.
NED shareholdings (audited)
NEDs
Shares held at
31 Dec 2023
Shareholding
requirement
(% of fees)
Current
shareholding
1
(% of fees) Requirement met
David Blackwood 20,000 100% 38% No
Lynne Clow 24,932 100% 48% No
Assaf Ginsburg 110,000 100% 211% Yes
Deborah Gudgeon 20,000 100% 38% No
John Mogford 70,000 100% 135% Yes
1 Current shareholding has been calculated using shares held (beneficially or in trust) using a share price of £1.4420, the closing share price on 29 December 2023.
There were no changes to NEDs interests in Ithaca Energy Shares during the period 1 January 2024 to 15 March 2024.
Directors’ remuneration report continued
125ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
COMPANY
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
REPORT
FINANCIAL
STATEMENTS
The Remuneration Committee
The full terms of reference for the Committee can be found on the Company‘s website at https://www.ithacaenergy.com/about-us/governance and are also available from the Company’s General Counsel and General Manager,
Business Affairs.
Committee membership
The members of the Committee are shown below.
Member since Meetings in 2023
Lynne Clow (Chair)
1
31 October 2022 7/7
David Blackwood
2
20 September 2023 1/1
Assaf Ginzburg 31 October 2022 5/7
Deborah Gudgeon 31 October 2022 7/7
John Mogford 31 October 2022 7/7
1 Chair from 31 October 2022.
2 David Blackwood attended 4 meetings, by invitation, prior to his appointment to the Committee.
The Committee met seven times during 2023; five meetings were scheduled and two additional occasions were used to consider matters.
The Company’s Executive Chair is invited to all Committee meetings and the Group General Counsel and General Manager, Business Affairs acts as secretary to the Committee. The Chair of the Committee reports to subsequent
meetings of the Board on the Committee’s work and the Board receives a copy of the agenda and the minutes of each Committee meeting.
During the year, the Committee received assistance in considering Executive remuneration from a number of senior managers, who attended certain meetings (or parts thereof) by invitation during the year, including the CEO,
the CFO and the General Manager, People and Culture.
In accordance with the relationship agreement with Delek Group Limited an appointed observer has attended.
No person was present during any discussion relating to their own remuneration.
From January 2023, PricewaterhouseCoopers LLP (PwC) were approved by the Committee and appointed as its advisers. A representative from our external adviser attends, by invitation, all Remuneration Committee meetings
to provide information and updates on external developments affecting remuneration as well as specific matters raised by the Remuneration Committee. Outside the meetings, the Remuneration Committee’s Chair seeks advice
on remuneration matters on an ongoing basis. The advice that the Committee receives is independent and objective. PwC have confirmed that there are no conflicts of interest. There are no other connections with the Company or
individual Directors. The Committee notes that PwC is a member of the Remuneration Consultants Group and voluntarily adheres to its Code of Conduct in relation to Executive remuneration consulting in the UK. Pinsent Masons
LLP (Pinsents), appointed by the Company, provided advice on share incentive plan-related matters, including on senior Executive remuneration issues.
During the year, PwC was paid £92,175 and Pinsents was paid fees of £42,873 for their advice to the Committee on these matters. Fees were charged on a time-spent plus expenses basis. Other services provided to the Company by
Pinsents include corporate and employment law advice.
The Committee reflects on the quality of the advice provided and whether it properly addresses the issues under consideration as part of its normal deliberations. The Committee is satisfied that the advice received during the year was
objective and independent.
126 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
The role of the Remuneration Committee
To consider and make recommendations to the Board in respect of the remuneration policy across the Company including:
- Rewards for the Executive Chair, EDs and senior managers
- The design and targets for the annual bonus plan throughout the Company
- The design and targets for any employee share plans
- Changes to employee benefit structures (including pension)
The Remuneration Committee’s work in 2023
The key matters discussed/approved were:
Jan – March • Preparation of the Directors’ remuneration policy and consultation with shareholders
• 2022 Director’s remuneration report
• Approve performance for the 2022 bonus targets
• Set 2023 annual bonus scorecard targets
• Review remuneration outcomes for Executive Directors and senior employees
April – June • Review Director’s remuneration and market best practice
July – September • Mid-year review of targets and performance against target for annual bonus for the EDs
• Review Company-wide remuneration policy updates
October – December • Review forecast year-end outcomes for allocation of bonus
• Update the Remuneration Committee Terms of Reference
At various points throughout the year, the Committee also made remuneration decisions for senior employees within the Remuneration Committee’s remit.
Remuneration Committee effectiveness
The Committee reviews its remit and effectiveness each year. As this is the first full year of Committee operation the first review will be conducted in 2024.
Statement of voting at AGM
The results of the shareholder vote at the Company’s 2023 AGM on 24 May 2023 in respect of the Policy and the 2022 Directors’ Remuneration Report is set out below.
Percentage of votes cast Number of votes cast
For Against For Against Withheld
Directors’ Remuneration Policy 99.64% 0.36% 957,531,800 3,493,618 925
Directors’ Remuneration Report 99.66% 0.34% 957,720,069 3,305,349 925
Directors’ remuneration report continued
127ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
COMPANY
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
REPORT
FINANCIAL
STATEMENTS
Directors’ Remuneration Policy
This Policy will govern Ithaca Energy’s future remuneration for Executive Directors (“EDs”) and and Non-Executive Directors (“NEDs”), and is intended to apply for up to three years from the date of the AGM, subject to approval by
shareholders. Detail on how we propose to implement this in 2024 is set out on pages 116 and 117.
Proposed remuneration policy
This section summarises the changes proposed from our current remuneration policy, including the rationale for the change.
Element of remuneration Proposed Changes Rationale
Annual bonus
Rewards the delivery and achievement of financial
targets and key performance indicators which form
part of strategy
• Increase to the maximum award opportunity to 175% of salary for the
Executive Chair.
• For the CFO (and interim CEO) the award opportunity remains at
150% of salary.
• The current policy permits a maximum award opportunity of 150%.
• It is currently intended to make use of the higher maximum bonus for the Executive Chair
only. The increase reflects the strategic importance of Gilad Myerson to the Company’s
development and is designed to appropriately reward for achievement against our business
plan.
LTIP
Aligns the Executive Directors’ interests with
shareholders and rewards for achievement of
long-term objectives
• Increase the maximum award opportunity to 400% of salary for the
Executive Chair.
• For the CFO (and interim CEO) the award opportunity remains at
200% of salary.
• The current policy permits a maximum award opportunity of 225% of salary.
• This change provides an appropriate package with which to incentivise our Executive Chair
to execute the business strategy and fully align his interests with those of shareholders in the
pursuit of significant return, post the transfer of the MEP shares.
• The higher maximum award is proposed to be granted to the Executive Chair only and
will allow us to deliver a higher proportion of pay through stretching forward-looking
arrangements which will only provide reward for achievement of above market long-term
shareholder returns.
Shareholding requirements
Aligns the Executive Directors’ interests
with shareholders
• Increase to the requirement in line with the ongoing LTIP award size. • This change is proposed to fully align interests of Executive Directors with those of
shareholders, in the pursuit of significant return of value.
Committee process to determine Remuneration Policy
The Committee designed the Policy around the following key considerations:
• Forward-looking remuneration arrangements should be simple; facilitating greater transparency and alignment with shareholders’ interests over the longer term;
• Alignment with standard market practice and compliance with the UK Corporate Governance Code (the Code);
• The ability to attract, retain and motivate EDs of the right calibre to ensure the continued success of the Company, within a highly competitive environment, whilst ensuring the level and form of remuneration is appropriate; and
• Remuneration should be aligned with the key corporate metrics that drive growth and increase shareholder value with significant emphasis on variable pay.
The role of the Committee and the formulation of the Policy is undertaken in a way that ensures remuneration decisions are undertaken in a manner that prevents and manages any potential conflicts of interest. Should any conflicts
arise these will be alerted to the Committee who will determine appropriate decisions in the best interests of Ithaca Energy’s stakeholders.
The Committee is of view that the proposed Policy is well-aligned with the Code’s six principles:
• Clarity: The Policy supports the financial and strategic objectives of the Group and aligns EDs’ interests with those of shareholders. There is clear disclosure of metrics, weightings and assessment of variable
remuneration outcomes;
• Risk: The Policy ensures risk is reflected in outcomes through: 1) the Committee’s discretion to adjust formulaic outcomes to properly reflect any risk events; 2) deferral of annual bonus and LTIP (over three and five years
respectively), subject to malus and clawback provisions mitigates against future risk; and 3) the within- and post-employment shareholding requirements align to the successful delivery of the Group’s long-term strategy;
• Simplicity: We intend to operate a simple remuneration framework, comprising fixed pay elements, along with short- and long-term variable elements using well understood market standard elements. This provides clear line
of sight for both EDs and shareholders;
• Proportionality: Incentive elements are closely aligned to our strategic goals and robustly assessed, with the Committee having full discretion to adjust outcomes to ensure they align with overall Group performance; and
• Predictability: The Policy sets out the possible future value of remuneration which EDs could receive, including the impact of share price appreciation of 50% (the application of the Policy is illustrated on page 133).
128 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Remuneration Policy – Executive Directors
The following table sets out each element of remuneration for EDs and how it supports Ithaca Energy’s short and long-term strategic objectives:
Element and how it supports
our short and long-term strategic objectives Operation Maximum opportunity Performance conditions and assessment
Base salary
Provides a competitive fixed level of remuneration
to attract and retain EDs of the necessary calibre
to execute Ithaca Energy’s strategy and deliver
shareholder value.
Base salaries for the EDs will normally be reviewed
annually by the Committee.
The following factors are taken into account when
determining base salary levels on appointment:
• Remuneration levels at comparable oil and gas
companies;
• The need for salaries to be competitive;
• Experience and responsibilities of the
individual ED; and
• The total remuneration available to EDs and the
components thereof and the cost to Ithaca Energy.
Base salaries will normally be reviewed annually, but
the Committee reserves the right to review fees
on a discretionary basis if it believes an adjustment
is required to reflect market rates or scope of
responsibilities.
There is no prescribed maximum annual increase.
The Committee is guided by the general increase for
the broader employee population but on occasion
may need to recognise, for example, an increase in
the scale, scope or responsibility of the role, as well as
market rates.
Any movement in base salary takes account of the
performance of the individual and the Group.
Benefits
Provides EDs with a suitable but reasonable
package of benefits as part of a competitive
remuneration package.
In line with the wider workforce, benefits may be
provided where appropriate and on a market-related
basis, including but not limited to health insurance, life
insurance/death in service, reasonable travel (including
the tax cost where appropriate), car allowance and
relocation expenses.
EDs will be able to participate in the Company’s
all-employee share plans on the same basis as other
eligible employees.
The Committee determines the appropriate level
taking into account market practice and individual
circumstances.
There is no prescribed maximum.
Maximum contributions under ‘all employee’ share
plans will be set in line with the wider workforce and
within any other relevant operating limits.
None.
Pensions
Provides market-competitive retirement benefits
for EDs.
Pension provision is a payment into a defined
contribution pension scheme and/or a cash amount in
lieu of a pension contribution.
Pension payments do not form part of salary for the
purposes of determining the extent of participation in
the Company’s incentive arrangements.
The maximum pension provision is 15% of salary, in
line with the wider workforce.
Any cash amount paid may be reduced to take into
account additional employer costs.
None.
Directors’ remuneration report continued
129ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
COMPANY
OVERVIEW
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GOVERNANCE
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FINANCIAL
STATEMENTS
Element and how it supports
our short and long-term strategic objectives Operation Maximum opportunity Performance conditions and assessment
Annual Bonus
Rewards EDs for the delivery and achievement of
financial targets and key performance indicators
which form part of the business strategy.
Deferral provides alignment with shareholders’
interests and aids retention of key personnel.
Awards are based on performance in the year against
targets set by the Committee.
Any bonus is paid annually in cash and shares with at
least 50% of any bonus earned deferred into ordinary
shares for three years. The deferred shares are not
subject to any further conditions, save for continued
employment.
Deferred share awards may include additional
shares (or, at the discretion of the Committee, cash)
equivalent to the value of the dividend roll-up, and may
assume dividend reinvestment.
Malus and clawback provisions apply as detailed within
the Policy.
The maximum bonus opportunity is 175%
of base salary.
Targets are set by the Committee each year that are
appropriately stretching in the context of the business plan.
They are based on a corporate scorecard that consists of
a combination of financial, strategic and operational KPIs.
The Committee may change the KPIs within the scorecard,
and their weighting, from year to year to ensure they
remain aligned to Company strategy.
The Committee has the ability to include an element of
bonus based on personal performance, or to adjust the
outcomes of the corporate scorecard based on personal
performance.
Up to 25% of the maximum bonus is paid for achieving a
threshold level of performance and the full bonus is paid for
delivering stretching levels of performance.
For performance below threshold, no bonus is paid.
Long Term Incentive Plan (LTIP)
Rewards EDs for achievement of the Group’s longer-
term objectives.
Aligns the EDs’ interests with those of shareholders.
Aids retention of key personnel and encourages focus
on sustaining and improving the long-term financial
performance of the Group.
Awards granted annually under the LTIP will be subject
to a three-year performance period and will be settled
in shares.
The Committee sets targets each year so that they are
stretching and facilitate growth for shareholders, while
remaining motivational for management.
EDs must retain the net of tax number of vested LTIP
awards for a two-year holding period.
LTIP awards may include additional shares (or, at the
discretion of the Committee, cash) equivalent to the
value of the dividend roll-up, and may assume dividend
reinvestment over the period from grant to the earlier
of the end of the holding period and the date of
exercise.
Malus and clawback provisions apply as detailed within
the Policy.
Maximum award is 400% of base salary. The initial LTIP award will vest based on financial and
strategic performance conditions which are aligned to KPIs.
Financial metrics (including TSR) will comprise at least half
of LTIP awards.
Up to 25% of the award vests for threshold levels of
performance.
130 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Element and how it supports
our short and long-term strategic objectives Operation Maximum opportunity Performance conditions and assessment
Shareholding requirement
To ensure that EDs’ interests are aligned with those of
shareholders.
EDs are required to build the a shareholding in line with
the on-going LTIP award size. For the first year of the
Policy the requirements are:
• Executive Chair: 400% of base salary
• CFO (and interim CEO): 200% of base salary.
The requirement should normally be achieved over a
five-year period.
At least half of LTIP and deferred bonus awards should
be retained on vesting if the shareholding requirement is
not met.
For two years following cessation of employment,
EDs are subject to a post-employment shareholding
requirement. The requirement is equal to the lesser of
the shareholding on cessation and the in-employment
requirement for the first year and half of this amount for
the second year post-cessation.
N/A None.
Notes to the Policy table
Explanation of chosen performance measures and target setting
Performance measures will be selected to reflect the key performance indicators which are critical to the realisation of our business strategy and delivery of shareholder returns, which includes Total Shareholder Return (TSR).
The performance targets are reviewed each year to ensure that they are sufficiently challenging. When setting these targets the Committee will take into account a number of different reference points including, for financial targets,
the Group’s business plan and consensus analyst forecasts of Group performance. Full vesting will only occur for what the Committee considers to be excellent performance.
Directors’ remuneration report continued
131ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
COMPANY
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
REPORT
FINANCIAL
STATEMENTS
Malus and Clawback
The following table illustrates the time periods during which malus and clawback provisions may apply for each element of variable remuneration:
Remuneration element Malus Clawback
Annual bonus (cash) Up to the date of the cash payment. Up to three years post the date of any cash payment.
Annual bonus (deferred shares) To the end of the three-year vesting period. Up to three years post-vesting.
LTIP To the end of the three-year vesting period. Up to three years post-vesting.
Conditions under which malus and clawback may apply include:
• If it is discovered that there has been a material misstatement of the Group’s financial results for any period;
• If it is discovered that an error of calculation has occurred when assessing the performance conditions or size of award;
• If the participant has committed fraud or misconduct;
• If circumstances where the Participant has, by an act or omission, contributed to injury to the reputation of the Group;
• If the behaviour of the participant materially fails to reflect the governance or values of Ithaca Energy or has caused injury to the reputation of the Group; and/or
• If the Company has suffered an instance of material corporate failure.
Discretions
In exceptional circumstances such that the Committee believes the original measures and/or targets are no longer appropriate e.g. corporate activity, the Committee has discretion to amend performance measures and targets during the year.
The Committee may also, in exceptional circumstances, amend the formulaic annual bonus pay-out and/or amend the LTIP vesting upwards or downwards should the formulaic outcome not, in the view of the Committee,
reflect the overall business performance or individual contribution.
Any such changes would be explained in the subsequent Report and, if appropriate, be the subject of consultation with the Company’s major shareholders. Consistent with best practice, the LTIP rules also provide that any such
amendment must not make, in the view of the Committee, the amended condition materially less difficult to satisfy than the original condition was intended to be before such event occurred.
In line with market practice, the Committee retains discretion relating to operating and administering the Annual Bonus and LTIP. This discretion includes:
• Timing of awards and payments;
• Size of awards, within the overall limits disclosed in the Policy table;
• Determination of vesting;
• Ability to override formulaic outcomes;
• Treatment of awards in the case of change of control or restructuring;
• Treatment of leavers within the rules of the plan, and the policy on payments for loss of office; and
• Adjustments needed in certain circumstances, for example, a rights issue, corporate restructuring or special interim dividend.
132 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Approach to recruitment remuneration
In the event that a new ED or NED was to be appointed, remuneration would be determined consistent with the Policy table, paying no more than is considered necessary. The table below sets out the additional elements of
remuneration that would be considered for the appointment of a new ED.
Remuneration element Policy and operation
Buy-out awards • If it were necessary to attract the right candidate, due consideration would be given to making awards necessary to compensate for forfeited awards in a previous employment.
• In making any such award, the Committee will take into account any performance conditions attached to the forfeited awards, the form in which they were granted and the timeframe of the
forfeited awards.
• The value of any such award will be no higher, on recruitment, than the forfeited awards and will not be pensionable nor count for the purposes of calculating bonus and LTIP awards.
• Any such award would be in addition to the normal bonus and LTIP awards set out in the Policy table.
Relocation costs • Where appropriate, the Company will offer reasonable relocation benefits to assist them, and their dependants in moving home and settling into the new location and to help support with the
costs of a relocation or a residence outside a home country.
• Benefits would normally be market-related and time-bound.
One-off recruitment award • The Remuneration Committee retains the ability to grant a one-off share award that ordinarily would be subject to performance conditions of up to 200% of salary in addition to a normal LTIP
award in exceptional recruitment circumstances, where absolutely necessary and in the best interests of shareholders.
Alignment of the Policy with the wider employee population
The Group aims to provide a remuneration package for all employees that is market-competitive and operates the same reward and performance philosophy throughout the business. The table below sets out details on the remuneration
approach for employees, including EDs:
Element of reward Approach
Base salary • Salaries for employees are set in line with market levels, in order to attract and retain employees.
• Employees’ salaries are reviewed annually, with increases for EDs normally being set with reference to increases for employees.
Benefits • All employees, including EDs, are eligible to participate in the Company’s benefits, which include 3.5 times salary death-in-service cover, private medical benefit, dental plan and income
protection. Employees can increase and/or extend cover if they so choose.
• In 2023 the Company will operate a Share Incentive Plan, which will offer a 2:1 match on shares purchased by employees up to statutory limits. All employees will be eligible to participate in this
plan.
Pension • All employees are eligible to participate in a defined contribution pension scheme with a 15% employer contribution. The approach is the same for EDs.
Annual bonus • All employees are eligible to participate in Annual Bonus arrangements, with payouts being based on a combination of corporate and personal performance. The same corporate scorecard is used
for EDs as the employee population.
• Different bonus opportunities reflect the levels of employee seniority, determined by grade, with more senior employees receiving higher bonus opportunities to increase the proportion of their
pay that is performance-based and at risk.
Long-term incentives • Long-term incentive awards are available to senior management with the same performance conditions as those for the EDs.
• In addition, a number of more junior individuals participate in the Restricted Share Plan, under which share awards are granted without performance conditions
Shareholding requirements • Only EDs have a shareholding requirement
Directors’ remuneration report continued
133ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
COMPANY
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
REPORT
FINANCIAL
STATEMENTS
Illustrations of the application of the Policy
The charts which follow illustrate the remuneration that would be paid to the Executive Chair and CFO (and interim CFO) assuming four different performance scenarios in the first year of the Policy’s operation and excluding any legacy
arrangements. Each of the bars is broken down to show how the total under each scenario is made up of fixed elements of remuneration and variable remuneration.
The scenarios in the graphs are as follows:
Executive Chair
Minimum On-target Maximum Maximum with
50% Share Price
apprecia�on
67%
58%
£0.87m
£3.03m
£5.19m
£6.69m
100% 29% 17% 13%
£0.0m
£1.0m
£2.0m
£3.0m
£4.0m
£5.0m
£6.0m
£7.0m
20%25%
50%
22%
Chief Financial Officer (and interim CEO)
Minimum On-target Maximum Maximum with
50% Share Price
apprecia�on
53%
32%
£0.59m
£1.46m
£2.34m
£2.84m
100% 40% 25% 21%
£0.0m
£1.0m
£2.0m
£3.0m
£4.0m
£5.0m
£6.0m
26%
43%
26%
34%
Key Element Minimum performance On-target performance Maximum performance Maximum performance with 50% share price growth
Fixed remuneration 2024 base salary, benefits and pension 2024 base salary, benefits and pension 2024 base salary, benefits and pension 2024 base salary, benefits and pension
Annual bonus
1, 2
None 50% of maximum opportunity 100% of maximum opportunity 100% of maximum opportunity
Long-Term Incentive Plan
2, 3, 4
None 50% of maximum opportunity 100% of maximum opportunity 100% of maximum opportunity plus 50%
share price growth
1 Maximum bonus opportunity is 175% of base salary for the Executive Chair and 150% of salary for the CFO (and interim CEO)
2 Dividend accrual on deferred remuneration has been excluded from all four scenarios; share price movement has been excluded from the minimum, target and maximum scenarios.
3 Maximum LTIP opportunity is 400% of base salary for the Executive Chair and 200% of salary for the CFO (and interim CEO).
Service contracts for Executive Directors
The period of notice required in the service contracts is six months by the ED and the Company. The service contracts and letters of appointment are available for inspection by shareholders in advance of and at the forthcoming AGM,
and during normal business hours at Ithaca Energy’s registered office address. There are no further obligations which could give rise to a remuneration or loss of office payment other than those set out in the Policy table, the policy on
payments for loss of office and change of control.
Payments for loss of office
When assessing whether payments will be made in respect of loss of office, the Committee will take into account individual circumstances including the reason for the loss of office, Ithaca Energy and individual performance up to the
loss of office and any contractual obligations of both parties.
134 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Contractual payments
In the event of early termination, the Company may make a payment in lieu of notice up to a maximum of six months’ salary. Any payment is subject to phasing and mitigation requirements.
In the event of gross misconduct, the Company may terminate the service contract of an ED immediately and with no liability to make further payments other than in respect of amounts accrued at the date of termination.
The current ED service contracts permit the Company to put an ED on garden leave for some or all of the duration of the notice period.
To mitigate any uncertainty of employment that the IPO may cause the CFO, given the relatively short tenure, the following time-bound condition applies:
• If the CFO’s employment is terminated prior to 25 July 2024, other than for cause, then a sum equivalent to 12 months’ base salary would become payable.
Annual bonus and LTIP
The treatment of awards under the Annual bonus and LTIP for leavers will depend on whether or not they are classified as a Good Leaver. This would typically be where an ED left for reasons including retirement, redundancy, death,
ill-health, injury or disability, the sale of a business outside of the Group or the employing Company ceases to be a member of the Group, or any other circumstances as determined by the Committee.
For ‘other’ leavers, account will be taken of individual circumstances, contractual terms, circumstances of the termination and the commercial interests of the Company to determine whether or not to treat an ED as a Good Leaver.
The table below sets out the leaver treatment for awards under the Annual Bonus and LTIP.
Remuneration element Treatment for Good Leaver Treatment for Other Leaver Remuneration Committee Discretion
Annual bonus • Eligible for a bonus paid, taking into account performance.
• Any bonus paid would normally be subject to pro-rating for time served as an ED
during the year.
• Bonus payments would ordinarily be made at the normal time following the year end
• Normally, a portion of any bonus earned would be deferred into shares for three
years, consistent with the treatment in the Policy table.
• No eligibility for bonus. • It is at the discretion of the Committee as to whether departing EDs would be
paid a bonus. In exercising its discretion on determining the amount payable,
and the form and timing of payment, to an ED on termination of employment,
the Board would consider each instance on an individual basis, taking account of
factors such as performance and circumstances of the termination.
• When determining whether a bonus or any other payment should be made to a
departing ED, the Committee will ensure that no ‘reward for failure’ is made.
LTIP • LTIP awards continue to vest at their original vesting date, subject to satisfaction of
the relevant performance conditions.
• In the event of death, LTIP awards will normally vest immediately. The number
of awards vesting will be determined by the Committee taking into account
performance as at the date of cessation.
• The number of awards vesting will normally be reduced to reflect the proportion of
the vesting period that has elapsed at the date of cessation of employment.
• Any vested but unexercised awards can be exercised in the six-month period
(or 12-month period in the case of death) following cessation or vesting.
• Unvested LTIP awards lapse
on the date of cessation of
employment.
• The Committee may allow LTIP awards to vest as soon as reasonably practicable
on cessation of employment in exceptional circumstances, such as ill-health.
• The Committee may decide, acting fairly and reasonably, that a lesser reduction
for time may be made.
Deferred bonus awards
In the event that an ED leaves due to dismissal for cause or resignation, unless the Committee determines otherwise, unvested deferred bonus awards will lapse. Any vested but unexercised awards will cease to be exercisable with effect
from the beginning of the notice period, unless the Committee determines otherwise.
In the event that an ED leaves for any other reason, unvested deferred bonus awards continue to vest at their normal vesting date, unless the Committee determines otherwise. Any vested but unexercised awards can be exercised in the
six-month period (or 12-month period in the case of death) following cessation or vesting.
Directors’ remuneration report continued
135ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
COMPANY
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
REPORT
FINANCIAL
STATEMENTS
Payments in the event of a change of control
The treatment of each element of remuneration under a change of control is set out in the table below.
Remuneration element Remuneration Policy and operation
Annual bonus (cash) • An annual bonus may be paid subject to time pro-rating (unless the Committee determines otherwise) and performance to the date of the change of control.
• Any annual bonus awarded would be paid fully in cash.
Annual bonus (deferred shares) • Unless the Committee agrees to exchange outstanding deferred bonus awards into awards in the acquiring Company, any outstanding deferred shares will ordinarily vest in full at the date of
change of control (other than in respect of an internal reorganisation).
LTIP • Unless the Committee agrees to exchange outstanding LTIP awards into awards in the acquiring Company, LTIP awards will vest subject to time pro-rating and performance at the date of change
of control (other than in respect of an internal reorganisation).
• The Committee has discretion to reduce the extent of or disapply time pro-rating.
Remuneration Policy – Non-Executive Directors
The NEDs (except Itshak Sharon Tshuva) have entered into letters of appointment with Ithaca Energy dated which last for an initial period of three years and are subject to annual re-election. As at 31 December 2023, the unexpired
term of the letters of appointment is one year and 10 months. Itshak Sharon Tshuva entered into a letter of appointment in March 2023 and is subject to annual re-election. As at 31 December 2023 the unexpired term of his letter of
appointment is two years and 3 months. The letters of appointment are available for viewing at Ithaca Energy’s registered office during normal business hours, and prior to and at the AGM.
The appointment of any non-independent NED is terminable in accordance with the relevant Relationship Agreement. The NEDs will only receive payment until the date their appointment ends and no compensation is payable
on termination.
The table below sets out the key elements of the Policy for NEDs:
Element and how it supports our
short and long-term strategic objectives Operation Maximum opportunity
Performance conditions and
assessment
NED Fees
Provides a market competitive
level of fees to reflect the time
commitment and contributions that
are expected from the NEDs.
The Board as a whole is responsible for setting the remuneration of the NEDs, other than the Chair whose
remuneration is determined by the Committee.
NEDs are paid a base fee in cash. Additional fees may be paid for additional responsibilities such as acting
as Senior Independent Director or for membership or Chairing sub-Committees of the Board.
The NEDs do not participate in Ithaca Energy’s incentive arrangements and no pension contributions are made
in respect of them. Reasonable travel and subsistence expenses (including the tax cost where appropriate and
within the Company’s travel and expenses policy) may be paid or reimbursed by Ithaca Energy.
The fees paid to NEDs will normally be reviewed
annually, but the Committee reserves the right to
review fees on a discretionary basis if it believes an
adjustment is required to reflect market rates, scope of
responsibilities or performance.
There is no prescribed maximum increase, but in
general the level of fee increase for the NEDs will be
set taking account of any change in responsibility or
time commitment required, and the general rise in
salaries across the UK workforce.
None.
Shareholding requirement
To ensure that NEDs’ interests are
aligned with those of shareholders.
NEDs are expected to build and maintain a holding in the Company’s shares of 100% of their base fee.
NEDs have three years from the date of their appointment to the Board to build and maintain this holding. The
Committee may waive this requirement for certain exceptional personal circumstances.
136 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Statement of employment conditions elsewhere in Ithaca Energy
Remuneration arrangements are determined throughout Ithaca Energy based on the same principle that reward should be achieved for delivery of Ithaca Energy’s business strategy and should be competitive within the market to attract
and retain high calibre talent, without paying more than is necessary.
Senior managers below Board level with a significant ability to influence Ithaca Energy’s results may participate in an annual bonus plan and a long-term incentive which reward both performance and loyalty and are designed to retain
and motivate.
While the Committee has not formally consulted with employees in forming this Policy, the Committee considers pay and employment conditions across Ithaca Energy when reviewing the remuneration of the EDs and other senior
employees and is comfortable that the proposed Policy is appropriate and consistent with the approach to remuneration across the Group. The Committee considered the range of base salary increases across Ithaca Energy when
determining increases to award to the EDs. Other considerations include: changes in benefits and bonus, in addition to salary, of UK employees compared with that of Directors; the ratio of CEO pay to that of employees; spend on pay
compared with, for example net income and dividends; and gender pay gaps. The Committee also receives advice on Executive remuneration matters from its appointed advisors, which includes benchmarking of ED remuneration.
Consideration of shareholder views
The Committee takes the views of shareholders seriously and these views are taken into account in shaping remuneration policy and practice. Shareholder views are considered when evaluating and setting remuneration strategy and the
majority shareholder was consulted regarding the proposed remuneration packages for EDs. The Committee welcomes an open dialogue with its shareholders on all aspects of remuneration.
Lynne Clow
Remuneration Committee Chair
Directors’ remuneration report continued
137ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
COMPANY
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
REPORT
FINANCIAL
STATEMENTS
ANNUAL REPORT AND ACCOUNTS 2023ITHACA ENERGY PLC
This Annual Report has been prepared for, and only
for, the members of the Company, as a body, and for
no other persons. The Company, its Directors,
employees, agents and advisors, do not accept or
assume responsibility to any other person to whom
this document is shown or into whose hands it may
come, and any such responsibility or liability is
expressly disclaimed.
Management report
The Directors’ report, together with the Strategic
Report set out on pages 8 to 91, form part of the
Management Report for the purposes of DTR 4.1.5R.
Company number
Ithaca Energy plc is registered in England with the
Company number 12263719.
Directors
The Directors’ of the Company and their profiles are
detailed on pages 93 to 95. In accordance with the UK
Code, all Directors will retire at the AGM being held on
16 May 2024 and may offer themselves for re-election.
Dividends
In addition to the dividend of $133 million paid to
shareholders on 9 March 2023, the Board paid a second
interim dividend of $133 million on 29 September
2023. A third interim dividend of $134 million will be
paid following the publication of the full-year results
delivering a total dividend of $400 million for 2023.
Political donations
No political donations were made during the
financial year.
Director indemnities
During the financial year, the Company had in place
an indemnity to each of its Directors under which the
Directors of the Company may be indemnified out
of the assets of the Company against certain costs,
charges, expenses, losses or liabilities which may be
sustained or incurred in or about the execution of their
duties. The indemnity was in force for all Directors who
served during the year.
Directors’ interests
The interests of the Directors in the Ordinary Shares of
the Company as at 31 December 2023 are set out on
pages 123 and 124.
Directors’ report
The Directors present their Annual Report with the
audited Group and Company financial statements for the
year ended 31 December 2023.
The Directors’ report comprises pages 92 to 139 and the
sections of the Annual Report incorporated by reference,
as set out below:
Directors during 2023 financial year see pages 93 to 95
Employee diversity and inclusion see pages 74 and 75
Financial Risk management see pages 84 to 91
Employee involvement and engagement see pages 70 and 71
Streamlined Energy and Carbon Reporting (SECR) see page 50
Principal risks and uncertainties see pages 84 to 91
TCFD report see pages 52 to 68
Disability reporting see pages 70 and 71
Corporate Governance report see pages 92 to 139
Post-balance sheet events see page 214
Future developments and research and development see pages 24 and 25
Interest capitalisation see note 9 of the
financial statements
Waiver of emoluments see page 124
138 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Capital structure
1. Share capital
The issued share capital of the Company comprises of
1,014,372,281 Ordinary Shares of £0.01 each, all of
which are fully-paid and freely transferable. The liability
of each Shareholder is limited to the amount, if any,
unpaid on the shares held by that shareholder. Since
incorporation, the Company’s share capital has been
issued in conformity with the laws of England and Wales.
Details of the Company’s issued share capital, together
with details of any movement in the issued share capital
during the year, are shown in note 5 to the Company
financial statements.
The Company did not purchase any of its own shares
during 2023 or up to and including 26 March 2024,
being the date of this Directors’ Report.
2. Significant shareholders
The significant holdings in the Company’s issued
share capital (in addition to the shares held, indirectly,
by Delek Group Limited, (holding 88.55%)) as at
31 December 2023 are as follows:
– Fidelity Investments (3.60%)
– Mizrahi Tefahot Bank (1.10%)
3. Articles of Association
The Company’s Articles of Association may only be
amended by special resolution at a General Meeting of
shareholders. The Company’s Articles of Association
contain provisions regarding the appointment,
retirement and removal of Directors along with their
powers and duties. A Director may be appointed by an
ordinary resolution of shareholders in a general meeting
following nomination by the Board or a member (or
members) entitled to vote at such a meeting.
4. Registrar
In connection with the Ordinary Shares traded
on the London Stock Exchange, the Registrar
is Computershare.
5. Significant agreements which would
be affected by a change of control
The following agreements will, in the event of
a change of control of the Company, be affected
as follows:
• Under the up to $1,225m senior secured revolving
borrowing base facility agreement between, among
others, Ithaca Energy (E&P) Limited and certain
subsidiaries and a syndicate of financial institutions,
upon a change of control (save for certain
exceptions) each lender has the right to serve notice.
• Upon the occurrence of a ‘Change of Control’, IENS
plc will be required to offer to repurchase the 2026
Notes at a purchase price equal to 101% of their
aggregate principal amount, plus accrued and unpaid
interest (if any) to the date of the purchase.
• The Deeds of Indemnity all provide that, in the event
of a change of control, the surety will be entitled to
make demand for the payment of cash to cover a
deposit in an amount equal to an amount the relevant
surety determines is the amount of the maximum
aggregate liability of the surety in connection with
any outstanding bond or bonds.
Company share schemes (LR 9.8.4)
In 2022, the Company put in place a long-term
incentive plan (LTIP) to align with best practice and the
terms of the remuneration policies for the Directors.
The LTIP enables the Executive Directors and selective
employees of the Group to be granted awards over
Ordinary Shares. As at 31 December 2023, 2,560,537
awards had been granted under the LTIP. Details of
the share based awards are set out in note 32 to the
consolidated financial statements.
Auditor information
Each person who is a Director at the date of approval
of this Annual Report and Financial Statements
confirm that:
• So far as the Director is aware, there is no relevant
audit information of which the Company’s auditor is
unaware; and
• Each Director has taken all steps that they ought to
have taken as Directors to make themselves aware of
any relevant audit information and to establish that
the auditor is aware of that information
This confirmation is given and should be interpreted in
accordance with the provisions of section 418 of the
Companies Act 2006. By order of the Board.
Julie McAteer
Company Secretary
26 March 2024
Directors’ report continued
139ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
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OVERVIEW
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FINANCIAL
STATEMENTS
Statement of Directors’ responsibilities
The Directors are responsible for preparing the Annual
Report and Financial Statements in accordance with
applicable United Kingdom laws and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the
Directors have prepared the Group financial statements
in accordance with UK-adopted International Accounting
Standards and the Company financial statements in
accordance with United Kingdom Generally Accepted
Accounting Practice (including United Kingdom
Accounting Standard FRS 101 ‘Reduced Disclosure
Framework’) and applicable laws.
Under Company law, Directors must not approve
the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of
the Group and Company and of the profit or loss of
the Group for that period. In preparing the Group
and Company financial statements, the Directors
are required to:
• Select suitable accounting policies in accordance
with IAS 8 Accounting Policies, Changes in
Accounting Estimates and Errors and then apply
them consistently;
• Make judgements and accounting estimates that
are reasonable and prudent;
• Present information, including accounting policies,
in a manner that provides relevant, reliable,
comparable and understandable information;
• Provide additional disclosures when compliance with
specific requirements in International Accounting
Standards (and in respect of the Company financial
statements, FRS 101) is insufficient to enable users to
understand the impact of particular transactions, other
events and conditions on the Group and Company
financial position and financial performance;
• State whether applicable United Kingdom-adopted
International Accounting Standards have been
followed for the Group financial statements and
United Kingdom Accounting Standards, including
FRS 101 have been followed for the Company
financial statements, subject to any material
departures disclosed and explained in the
financial statements;
• Prepare the financial statements on the going
concern basis unless it is inappropriate to presume
that the Group will continue in business;
• The Directors are responsible for safeguarding
the assets of the Group and Company and hence
for taking reasonable steps for the prevention and
detection of fraud and other irregularities; and
• The Directors are also responsible for keeping
adequate accounting records that are sufficient
to show and explain the Group’s and Company’s
transactions and disclose with reasonable accuracy
at any time the financial position of the Group
and Company and enable them to ensure that the
financial statements comply with the Companies
Act 2006.
The Directors are also responsible for preparing the
Strategic Report, the Directors’ Report, the Directors’
Remuneration Report and the Corporate Governance
Statement in accordance with the Companies Act
2006 and applicable regulations, including the
requirements of the Listing Rules and the Disclosure
and Transparency Rules.
In accordance with the principles of the UK Corporate
Governance Code, the Directors are responsible
for establishing arrangements to evaluate whether
the information presented in the Annual Report is
fair, balanced and understandable and provides the
information necessary for shareholders to assess the
Group’s position and performance, business model and
strategy, and making a statement to that effect. This
statement is set out on page 98 of the Annual Report.
Each of the Directors, whose names and functions are
set out in Board of Directors on pages 93 to 95 confirm
that to the best of their knowledge:
• The Group financial statements, which have been
prepared in accordance with United Kingdom-
adopted International Accounting Standards, give
a true and fair view of the assets, liabilities, financial
position and profit of the Group;
• The Company’s financial statements, which have
been prepared in accordance with United Kingdom
Accounting Standards including FRS 101, give a true
and fair view of the assets, liabilities and financial
position of the Company; and
• The Strategic Report includes a fair review of the
development and performance of the business
and the position of the Group and Company,
together with a description of the principal risks and
uncertainties that it faces.
This responsibility statement was approved by the Board
of Directors on 26 March 2024 and is signed on its
behalf by:
Iain Lewis
Chief Financial Officer and
Interim Chief Executive Officer
140 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Independent auditor’s report to the members of Ithaca Energy plc
Report on the audit of the financial statements
1. Opinion
In our opinion:
• the financial statements of Ithaca Energy Plc (the ‘Company’) and its subsidiaries (the ‘Group’) give a true and fair view of the state of the Group’s and of the Company’s affairs as at 31 December 2023 and of the Group’s
profit for the year then ended;
• the Group financial statements have been properly prepared in accordance with United Kingdom adopted international accounting standards;
• the Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice, including Financial Reporting Standard 101 “Reduced Disclosure Framework”;
and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements which comprise:
• the consolidated statement of profit or loss;
• the consolidated statement of comprehensive income;
• the consolidated statement of financial position;
• the consolidated statement of changes in equity;
• the consolidated statement of cash flows;
• the related notes 1 to 34 to the consolidated financial statements;
• the Company statement of financial position;
• the Company statement of changes in equity; and
• the related notes 1 to 7 to the Company financial statements.
The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and United Kingdom adopted international accounting standards. The financial reporting framework that
has been applied in the preparation of the Company financial statements is applicable law and United Kingdom Accounting Standards, including FRS 101 “Reduced Disclosure Framework” (United Kingdom Generally Accepted
Accounting Practice).
2. Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the
financial statements section of our report.
We are independent of the Group and the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical
Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The non-audit services provided to the Group and Company for the year are disclosed
in note 7 to the financial statements. We confirm that we have not provided any non-audit services prohibited by the FRC’s Ethical Standard to the Group or the Company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
141ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
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OVERVIEW
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GOVERNANCE
REPORT
FINANCIAL
STATEMENTS
3. Summary of our audit approach
Key audit
matters
The key audit matters that we identified in the current year were:
• Carrying value of Cambo
• Carrying value of other oil and gas assets
• Decommissioning provision
• Deferred tax asset recoverability
Within this report, key audit matters are identified as follows:
Newly identified
Increased level of risk
Similar level of risk
Decreased level of risk
Materiality The materiality that we used for the Group financial statements was $50 million (2022: $40 million) which represents 2.9% (2022: 2.1%) of Adjusted Earnings Before Interest, Tax, Depreciation,
Amortisation and Exploration (EBITDAX
1
) and 2% (2022: 1.6%) of net assets.
Scoping Consistent with the way the Group is centrally managed from the Aberdeen office, we consider the Group to be one component. Consequently, all audit work was carried out by the Group
engagement team.
Significant changes in
our approach
A new key audit matter has been identified in the current year in respect of the carrying amount of the exploration and evaluation ("E&E") asset relating to the Cambo oil field (“Cambo”). Acquisition
accounting was identified as a key audit matter in the prior year, however in the current year, the Group has not completed any significant acquisitions.
1 Adjusted EBITDAX is a non GAAP measure comprising earnings before interest, tax, put premiums on oil and gas derivative instruments, revaluation of forex forward contracts, revaluation of commodity hedges, depletion, depreciation and amortisation, impairment (charge)/reversal, exploration
and evaluation expenditure, fair-value gains/(losses) on contingent consideration, and historic claims relating to acquisitions.
4. Conclusions relating to going concern
Our evaluation of the Directors’ assessment of the Group’s and Company’s ability to continue to adopt the going concern basis of accounting included:
• assessing the Group’s financing facilities including the nature of facilities, repayment terms and covenants;
• considering the linkage of the going concern assessment to the Group’s business model and short and medium term risks;
• challenging the assumptions used in the forecasts, in particular commodity prices, production levels, capital expenditure (including consideration of any discretionary capital expediture) and debt facilities;
• considering the amount of headroom in the forecasts (both liquidity and covenants);
• challenging management’s sensitivity analysis and mitigating actions, with sensitivities run in relation to production, commodity prices and operating and capital expenditure, and consideration of reverse stress tests on commodity prices;
• assessing the sophistication of the model used to prepare the forecasts, testing of clerical accuracy of those forecasts and our assessment of the historical accuracy of forecasts prepared by management; and
• assessing the Group’s going concern related financial statement disclosures.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group's and Company’s ability to continue as a
going concern for a period of at least twelve months from when the financial statements are authorised for issue.
In relation to the reporting on how the Group has applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the Directors’ statement in the financial statements about whether the
directors considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.
142 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
5. Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
5.1. Carrying value of Cambo
Key audit matter description The Group has an Exploration & Evaluation (“E&E”) asset with a carrying amount of $391 million (2022: $364 million) in respect of the Cambo exploration asset. A key audit matter has been identified
relating to management’s judgment over whether there were any indicators of impairment in relation to this asset under IFRS 6 Exploration and Evaluation of Mineral Resources, given that the licence was
due to expire shortly after year end. Prior to the balance sheet date the Group applied to the North Sea Transition Authority (“NSTA”) for an extension to the licence term and on 19 March 2024 they
received confirmation from the NSTA of a two-year extension of the licence from 31 March 2024 to 31 March 2026. The Group are also engaging with potential farm-in partners to jointly progress the
development to Final Investment Decision (“FID”).
In responding to the above, management performed an assessment of impairment indicators on Cambo by reference to IFRS 6. Management have concluded that there are no indicators of impairment
relating to Cambo at 31 December 2023. In making this judgment, management have considered a number of factors including, but not limited to, the status of discussions with the NSTA at (and
subsequent to) the balance sheet date in relation to their request for a licence extension, receipt of the licence extension on 19 March 2024, the Group’s wider plans to proceed with the development,
the expected future cash flows associated with such development, and the Group's engagement with potential farm-in partners to secure a joint venture arrangement to progress the project towards a FID.
In reaching this conclusion, management has also considered the need to secure additional funding and the wider fiscal uncertainties, including the outcome of the 2024 UK General Election, in respect
of oil and gas investments in the UK.
Given the level of management judgment applied in assessing whether there are any indicators of impairment at 31 December 2023 in respect of Cambo and the importance of the asset to the Group’s
longer term growth strategy, this has been identified as an area of potential management bias, and therefore gives rise to a potential fraud risk in the period.
Further details of this matter have been disclosed in the “Critical accounting judgements” disclosure in note 3 of the financial statements and in note 14 of the financial statements.
How the scope of our
audit responded to the
key audit matter
Our procedures comprised the following:
• Obtaining an understanding of the relevant controls relating to the identification of indicators of impairment of E&E assets;
• Evaluating management’s impairment indicator assessment of Cambo at 31 December 2023, with reference to the criteria of IFRS 6;
• Holding discussions with management, including those outside of finance, to understand the Group’s plans in place to develop the asset through to FID;
• Obtaining an understanding from management of the licence extension process and status of discussions with the NSTA throughout the audit process in the lead up to the Group obtaining the licence
extension approval from the NSTA on 19 March 2024;
• Reading written communications between the Group and the NSTA in respect of the licence extension process, including the initial formal extension request submitted in December 2023, subsequent
clarification requests from the NSTA and related management responses, and the written confirmation of the licence extension received on 19 March 2024;
• Understanding the Group’s wider plans in place to progress the asset to FID after receipt of the licence extension, with reference to the Group’s submissions made to the NSTA through the licence
extension process. This included the status of discussions with potential farm-in partners and management’s plans for securing the additional funding that will be required once the farm-out process has
been completed;
• Obtaining management’s assessment of the recoverable amount of the asset, to determine if there is sufficient data to indicate that the carrying amount will be recovered in full if it proceeds to FID;
• Understanding the potential impact of both climate change and climate change related regulation on the asset, including consideration of whether the cost assumptions in the estimate of recoverable
amount take account of the cost to meet the Group’s Net Zero ambition. This included assessing whether amounts are included to reflect the cost of constructing the Cambo Floating Production
Storage Offtake (“FPSO”) vessel to be electrification-ready and understanding the risks to full electrification as set out in note 3 of these financial statements; and
• Assessing the appropriateness of management’s disclosures and whether these are fair, balanced and reflective of the risks and uncertainties that could impact on the Group’s ability to recover the
carrying amount of the asset in full.
Independent auditor’s report to the members of Ithaca Energy plc continued
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5. Key audit matters continued
5.1. Carrying value of Cambo continued
Key observations We are satisfied that there is no indicator of impairment in respect of the Cambo asset at 31 December 2023 and that the associated disclosures relating to this judgement are appropriate.
Whilst management’s valuation model in respect of Cambo includes their best estimate of expenditure required to construct the Cambo FPSO to be electrification-ready, it does not include any
additional costs that might be required to fully electrify the asset, due to technological and/or infrastructure constraints, as outlined further in section 7.3 of this report.
5.2. Carrying value of other oil and gas assets
Key audit matter description The Group had property, plant and equipment (being primarily oil and gas assets) of $3,258 million as at 31 December 2023 (2022: $3,635 million). A key audit matter was identified in respect of
determining the recoverability of the Group’s oil and gas assets due to the significance of management’s judgements and estimates relating to their estimated recoverable amounts.
The following inputs into estimation of the recoverable amounts were identified as key focus areas:
• Forecast commodity prices;
• Discount rate applied;
• Oil and gas reserve and resource estimates, and management’s risking assumptions thereon.
Included within the carrying value of the oil and gas assets which are assessed for impairment are estimated costs relating to the decommissioning of each cash generating unit (“CGU”). See the
decommissioning provision key audit matter below for further details.
Management performed an impairment assessment for oil and gas assets, by reference to IAS 36 Impairment. In conducting their impairment assessment at year end, management used their internal best
estimate of reserves and resources and undertook a process to compare their estimate to those of a third-party firm of reserves consultants, assessing any differences arising.
Management concluded that a pre-tax impairment charge of $558 million (2022: $31 million) was required. The charge primarily related to the Alba CGU of $141 million and Greater Stella Area (GSA)
CGU of $373 million. The impairment was due to a reduction in short term forward commodity prices in the year and, additionally for Alba, a reduction in the estimate of remaining reserves.
Further details of this matter have been disclosed in the Audit and Risk Committee report on page 105, in the “other areas of estimation” disclosure in note 3 of the financial statements and in notes 15
and 19 of the financial statements.
144 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
How the scope of our
audit responded to the
key audit matter
Our procedures comprised the following:
Internal controls and overall impairment review:
• Obtaining an understanding of relevant controls over management’s process for identifying indicators of impairment and for performing their impairment assessment and related valuations;
• Assessing management’s forecasting accuracy through a retrospective review of management’s forecasts;
• Assessing whether forecast cash flows were consistent with Board approved forecasts and budgets, and forecasts used elsewhere, including those prepared for going concern and viability purposes and
those assessing the recoverability of the deferred tax asset recognised (see key audit matter 5.4. below);
• Challenging and evaluating the adequacy of the operating and capital cost assumptions within the model by reference to operator data and other third-party documentation;
• Working with our modelling specialists to evaluate the arithmetical accuracy of the impairment and valuation models;
• Obtaining an understanding of how the risk of climate change has been considered in the impairment assessments, including the risk of reduced commodity prices (as discussed further below) and the
extent of additional expenditure management believes is required to meet the Group’s published CO
2
emissions reductions targets; and Evaluating management’s disclosures in relation to impairment,
including related sensitivity analysis.
Forecast commodity prices
• Obtaining input from our valuations specialists to assess the appropriateness of management’s forecast commodity prices and develop an independent reasonable range, through benchmarking against
forward curves, peer information and market data;
• As one commodity price (oil) was outside of our reasonable range, performing sensitivity analysis in respect of commodity prices and discount rate to determine for each of Ithaca Energy's CGUs,
a lower end recoverable amount (applying commodity prices at the lower end of our range and discount rate at the higher end of our range) and a higher end recoverable amount (applying commodity
prices at the higher end of our range and discount rate at the lower end of our range), and comparing the results of this analysis to the carrying amount of each CGU;
• Performing additional sensitivity analysis on the pricing assumptions to determine the impact on the impairment conclusion of reasonably possible changes; and
• Considering the potential impact on headroom by using a range of third-party price curves described as being consistent with a pathway to keep global temperature rises below 1.5ºC (“Paris consistent”).
Discount rate applied
• Obtaining input from our valuations specialists to assess management’s discount rate by comparison to our assessment of a reasonable range.
Oil and gas reserves and resource estimates
• Comparing management’s estimates of reserves and resources to those of their third-party reserves consultant and, with input from our reserves specialists, understanding the reasons for and
evaluating the reasonableness of any significant differences; and
• Obtaining input from our reserves specialists to challenge and assess the risking levels applied by management to their reserve and resource estimates.
5. Key audit matters continued
5.2. Carrying value of other oil and gas assets continued
Independent auditor’s report to the members of Ithaca Energy plc continued
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5. Key audit matters continued
5.2. Carrying value of other oil and gas assets continued
Key observations We are satisfied with management’s conclusions in respect of impairment charges required in the year of $558 million, and that the associated disclosures are reasonable.
In reaching this conclusion we observed that:
• Forecast oil prices were optimistic, falling outside the top end of our reasonable range from 2026 onwards;
• Forecast gas prices were, overall, conservative with reference to our reasonable range;
• The results of our sensitivity analysis in respect of oil and gas commodity prices and discount rates did not result in the identification of any additional impairment exposures;
• The sensitivity of impairment conclusions to a Paris consistent price curve is disclosed in the “Impact of climate change on the financial statements and related notes” section of note 3 of the financial
statements and the related disclosures in note 19, and indicate that the potential additional post-tax impairment is not material; and
• Whilst management’s impairment models in respect of the Group’s development and production assets include their best estimate of expenditure required to meet the Group’s CO
2
emissions
reductions targets, the level of estimation uncertainty is heightened for some of the Group’s longer term development projects due to technology and/or infrastructure constraints, as outlined further
in section 7.3 of this report and note 3 of the financial statements.
5.3. Decommissioning provision
Key audit matter description The decommissioning provision at 31 December 2023 was $1,860 million (2022: $1,721 million). The provision represents the present value of decommissioning costs which are expected to be incurred
up to the 2060s with the majority of spend in the next 15-20 years. The liability arises in respect of both the Group’s operated and non-operated assets.
Decommissioning provisions are inherently judgemental areas, particularly in relation to cost estimates for operated assets and the assumptions that these are based on, including assumptions regarding
day rates for vessels and rigs, and duration (“norms”) of decommissioning activities. The key assumptions and judgements underpinning the provisions include:
• Rates and norms assumptions for operated assets;
• Cost estimates for non-operated assets;
• Cessation of production dates;
• Risk free discount rate; and
• Long term Inflation rate.
Further details of this matter have been disclosed in the Audit and Risk Committee report on page 106, in the “Key sources of estimation uncertainty” disclosure in note 3 of the financial statements
(which includes details on the sensitivity of the provision to changes in discount rates), and in note 23 of the financial statements.
146 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
How the scope of our
audit responded to the
key audit matter
Our procedures included the following:
Internal controls and decommissioning model
• Obtaining an understanding of the relevant controls relating to the decommissioning provision, including management’s review controls over the decommissioning cost estimation process;
• Obtaining an understanding of any key changes in underlying assumptions and methodology applied; this included performing inquiries with the Group’s internal specialists responsible for determining
the 2023 decommissioning estimates, scrutiny of the associated models, and assessing their technical competence, capability and objectivity;
• Assessing decommissioning calculations for clerical accuracy and compliance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets;
• Assessing the consistency of the cessation of production dates with those used in management’s impairment models for oil and gas assets, as discussed in section 5.2;
• Working with our modelling specialists to evaluate the arithmetical accuracy of the decommissioning cost estimate model;
• Considering the impact of climate change in the estimation of the decommissioning provision, including the risk that cessation of production dates are brought forward if commodity prices were to fall
within a range of third party Paris consistent price curves;
• Testing a sample of the actual decommissioning spend incurred during the period for accuracy and performing a retrospective review of management’s forecasting accuracy, including an assessment of
whether actual spend during the year gives rise to contradictory evidence of current forecast rates; and
• Evaluating the appropriateness of management's disclosures including in the key sources of estimation uncertainty and associated sensitivity of decommissioning assumptions.
Rates and norms for operated assets
• Challenging the Group’s rig and vessel rate assumptions (“rates”) within the cost estimate by reference to available third-party data and benchmarking to peer and market rates;
• Assessing the duration (“norms”) assumptions for plug and abandonment of wells, by comparison to available benchmarking data and contradictory evidence available from active decommissioning
projects or operator estimates; and
• Assessing the driver(s) of changes in key assumptions on specific assets and differences between actual and forecast expenditure in recent years and considering whether these provide contradictory
evidence of rates and norms assumptions in the year end provision.
Non-operated assets
• Reconciling cost assumptions to operator estimates received in the year; and
• Understanding any differences arising and challenging the reasonableness of any adjustments made.
Other macro-economic assumptions
• Comparing management’s risk free discount rate to relevant market data, including US and UK government bond yields and peer data; and
• Comparing management’s inflation assumptions to market data, including the Bank of England long term inflation target.
Key observations We are satisfied that the key assumptions in respect of discount rate, cessation of production dates, long term inflation rate and cost estimates fall within a reasonable range and that the overall provision is
fairly stated. We also consider that the associated disclosures are reasonable, including the impact if the energy transition causes cessation of production dates to be brought forward for all significant assets
by two years.
5. Key audit matters continued
5.3. Decommissioning provision continued
Independent auditor’s report to the members of Ithaca Energy plc continued
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5. Key audit matters continued
5.4. Deferred tax asset recoverability
Key audit matter description The Group has a $628 million (2022: $392 million) net deferred tax asset. The increase in the net deferred tax asset in the year is principally due to the net impact of the following:
• $450 million increase due to accelerated depreciation;
• $107 million decrease arising from derivative assets;
• $216 million decrease due to utilisation of tax losses; and
• $70 million increase in the deferred Petroleum Revenue Tax (“PRT”) asset on Alba field.
A key audit matter was identified in respect of the recoverability of the deferred tax asset. This includes the recoverability of deferred tax assets arising from tax losses which is dependent on the availability
of future taxable profits and the feasibility of restructuring plans required to utilise those losses. The associated risk is lower in the current year as the Group has completed the majority of the asset
transfers required to utilise the losses and recover the deferred tax asset.
Further details of this matter have been disclosed in the Audit and Risk Committee report on page 105, in the “Other areas of estimation” disclosure in note 3 of the financial statements and in note 27
of the financial statements.
How the scope of our
audit responded to the
key audit matter
Our procedures included the following:
• Obtaining an understanding of the relevant controls relating to the measurement of deferred tax assets;
• Evaluating, with input from our tax specialists, the methodology applied in calculating the Group’s deferred tax assets and liabilities;
• Obtaining an update of management’s actions and remaining restructuring plans supporting the recognition of deferred taxation; and
• Assessing whether the forecasts that support the recoverability of the Group’s deferred tax assets are consistent with the cash flow forecasts used for the purposes of impairment testing and going concern.
Key observations We are satisfied that the deferred tax asset recognised in the financial statements and the related disclosures are appropriate. The cashflows used in assessing the carrying value of the Group’s oil and gas
assets are consistent with those utilised to support the recoverability of the Group’s deferred tax asset. See key observations on carrying value of other oil and gas assets key audit matter at section 5.2 for
further details.
148 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
6. Our application of materiality
6.1. Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in
planning the scope of our audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group financial statements Company financial statements
Materiality $50 million (2022: $40 million) $18.0 million (2022: $18.2 million)
Basis for determining
materiality
2.9% of adjusted EBITDAX.
Adjusted EBITDAX is an alternative performance measure and a key performance indicator.
The selected materiality also represents 2% of net assets.
1.5% of net assets
Rationale for the
benchmark applied
Adjusted EBITDAX was considered to be the most relevant benchmark as it is a key performance
measure used by the business and excludes a number of significant items that are non-recurring
in nature or are adjustments made to normalise the Group’s performance.
The Company acts principally as a holding Company and therefore net assets is a key measure for
this business.
Independent auditor’s report to the members of Ithaca Energy plc continued
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6. Our application of materiality continued
6.1. Materiality continued
Group materiality Adjusted EBITDAX
Audit and
Risk Commi�ee
repor�ng threshold
$2.5m
Group
materiality
$50m
Adjusted EBITDAX
$1,723m
6.2. Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected misstatements exceed the materiality for the financial statements as a whole.
Group financial statements Parent Company financial statements
Performance materiality 60% (2022: 60%) of Group materiality 60% (2022:60%) of Company materiality
Basis and rationale
for determining
performance
materiality
In determining performance materiality, we considered the following factors:
a. The quality of the control environment and conclusions from our testing of Group- wide internal controls;
b. The size, nature and volume of uncorrected and any corrected misstatements identified in our previous audits; and
c. Macro-economic factors such as commodity price volatility and geo-political instability.
6.3. Error reporting threshold
We agreed with the Audit and Risk Committee that we would report to the Committee all audit differences in excess of $2.5 million (2022: $2.0 million), as well as differences below that threshold that, in our view, warranted reporting
on qualitative grounds. We also report to the Audit and Risk Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.
150 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
7. An overview of the scope of our audit
7.1. Identification and scoping of components
Our audit was scoped by obtaining an understanding of the Group and its environment, including Group wide controls, and assessment of the risks of material misstatement at the Group level. Our audit planning identified the Group’s
business to be a single component, and therefore all of the operations of the Group were subject to a full scope audit in Aberdeen.
7.2. Our consideration of the control environment
We obtained an understanding of the relevant controls in relation to key business processes as well as the IT systems that were relevant to the audit, being the financial reporting system.
As set out in the Audit and Risk Committee’s report on page 106, progress has been made in addressing a number of the control observations that were identified in the prior year. However, the Group’s control environment continues to
mature and therefore is not yet at a stage that would enable us to place reliance on controls for the purposes of our audit testing. Observations raised in the current year included control recommendations in respect of commodity price
forecasting and decommissioning estimates and we amended the nature, timing and extent of our substantive procedures in these areas accordingly.
7.3. Our consideration of climate-related risks
We performed enquiries of management to understand the impact of climate-related risks and controls relevant to the Group. We evaluated the climate change risk assessment and related documentation prepared by management
and considered the completeness and accuracy of the climate-related risks identified and summarised in the Task Force on Climate-related Financial Disclosures report on pages 52 to 68. The Group identified in the “Impact of climate
change on the financial statements and related notes” section of note 3 of the financial statements a number of key judgements and estimates with elevated climate-change and energy transition related risks, relating to: impairment of
goodwill and property, plant and equipment; depreciation and useful economic lives of property, plant and equipment, intangible assets (exploration and evaluation assets); and decommissioning provisions.
We considered whether the risks identified by management within their climate change risk assessment and related documentation are consistent with our own analysis and challenged the key climate related assumptions impacting
the financial statements. The key market-related matter which could have a material impact on the carrying value of the items noted above is the future demand for, and pricing of, oil and gas as the energy mix evolves in response to
climate change risk and other matters. In addition, management has set a number of goals to reduce Scope 1 and 2 CO
2
emissions, including a 25% reduction by 2025 in gross Scope I and II emissions from operated assets and achieving
Net Zero by 2040 on a net equity basis, and there is a risk that the forecast costs associated with these goals are understated or difficult to estimate reliably due to technology and/or infrastructure constraints. These constraints include,
but are not limited to, the ability to fully electrify a number of the Group’s longer life offshore assets, specifically the Rosebank and Cambo developments and the Captain field. We also assessed the disclosures within the front half of the
Annual Report, with the involvement of our climate specialists, and considered whether these were materially consistent with the financial statement disclosures, complete and consistent with our understanding of the climate-related risks,
assumptions and judgements during the year. All of our key audit matters are considered to be impacted to at least some degree by the impact of the energy transition on future demand for, and the pricing of, oil and gas, resulting in an
impact on both costs and revenues, and in turn a risk of future impairment and/or failure to develop exploration prospects. Our consideration and response to this is discussed in the key audit matters section above.
8. Other information
The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. The Directors are responsible for the other information contained within the
annual report.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise
appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have
performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
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9. Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control
as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Company’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going
concern basis of accounting unless the Directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.
10. Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
11. Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud.
The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.
11.1. Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, we considered the following:
• the nature of the industry and sector, control environment and business performance including the design of the Group’s remuneration policies, key drivers for directors’ remuneration, bonus levels and performance targets;
• the Group’s own assessment of the risks that irregularities may occur either as a result of fraud or error that was considered by the Audit and Risk Committee on 11 March 2024;
• results of our enquiries of management both in and out of finance, internal audit, the Directors and the Audit and Risk Committee about their own identification and assessment of the risks of irregularities, including those that
are specific to the Group’s sector;
• any matters we identified having obtained and reviewed the Group’s documentation of their policies and procedures relating to:
• identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance;
• detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud;
• the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations;
• the matters discussed among the audit engagement team and relevant internal specialists, including tax, valuations, financial instruments, impairment, analytics and modelling, climate, IT, forensic, and reserves specialists,
regarding how and where fraud might occur in the financial statements and any potential indicators of fraud.
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11. Extent to which the audit was considered capable of detecting irregularities, including fraud continued
11.1. Identifying and assessing potential risks related to irregularities continued
As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and identified the greatest potential for fraud in the key audit matter in relation to the carrying amount
of Cambo.
In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of management override.
We also obtained an understanding of the legal and regulatory framework that the Group operates in, focusing on provisions of those laws and regulations that had a direct effect on the determination of material amounts and disclosures
in the financial statements. The key laws and regulations we considered in this context included the UK Companies Act, the Listing Rules of the UK Listing Authority and relevant tax compliance legislation.
In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements but compliance with which may be fundamental to the Group’s ability to operate or to avoid a material
penalty. These included the Market Abuse Regulation, licence terms for the Group’s oil and gas assets and environmental regulations.
11.2. Audit response to risks identified
As a result of performing the above, we identified management’s judgment in determining whether there is an impairment indicator on the Cambo asset as a key audit matter related to the potential risk of fraud. The key audit matters
section of our report explains this matter in more detail and also describes the specific procedures we performed in response to that key audit matter.
In addition to the above our procedures to respond to risks identified included the following:
• reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of relevant laws and regulations described as having a direct effect on the financial statements;
• enquiring of management, the Audit and Risk Committee and in-house legal counsel concerning actual and potential litigation and claims;
• performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud;
• reading minutes of meetings of those charged with governance and reading correspondence with HMRC and the UK oil and gas licencing authority; and
• in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other adjustments; assessing whether the judgements made in making accounting estimates are indicative
of a potential bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members including internal specialists and remained alert to any indications of fraud or non-compliance with laws and
regulations throughout the audit.
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Report on other legal and regulatory requirements
12. Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the Directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
• the strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and the Company and their environment obtained in the course of the audit, we have not identified any material misstatements in the strategic report or
the Directors' report.
13. Corporate Governance Statement
The Listing Rules require us to review the Directors' statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement relating to the Group’s compliance with the provisions of the
UK Corporate Governance Code specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially consistent with the financial statements and our knowledge
obtained during the audit:
• the Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertainties identified set out on page 83, 162 and 163;
• the Directors’ explanation as to its assessment of the Group’s prospects, the period this assessment covers and why the period is appropriate set out on page 91;
• the Directors' statement on fair, balanced and understandable set out on page 98;
• the Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 85;
• the section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on pages 84 to 90 and 106 to 107; and
• the section describing the work of the Audit and Risk Committee set out on pages 104 to 107.
14. Matters on which we are required to report by exception
14.1. Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from branches not visited by us; or
• the Company financial statements are not in agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
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14. Matters on which we are required to report by exception continued
14.2. Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of Directors’ remuneration have not been made or the part of the Directors’ remuneration report to be audited is not in agreement with
the accounting records and returns.
We have nothing to report in respect of these matters.
15. Other matters which we are required to address
15.1. Auditor tenure
We were appointed by the Board in November 2022 to audit the Group financial statements for the year ending 31 December 2022 and subsequent financial periods. Prior to the Group’s initial public offering in November 2022, we were
previously appointed in March 2022 to audit the Company financial statements for the year ended 31 December 2021. The period of total uninterrupted engagement including previous renewals and reappointments of the firm is 3 years,
covering the years ending 31 December 2021 to 31 December 2023.
15.2. Consistency of the audit report with the additional report to the Audit and Risk Committee
Our audit opinion is consistent with the additional report to the Audit and Risk Committee we are required to provide in accordance with ISAs (UK).
16. Use of our report
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those
matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members
as a body, for our audit work, for this report, or for the opinions we have formed.
As required by the Financial Conduct Authority (FCA) Disclosure Guidance and Transparency Rule (DTR) 4.1.15R – DTR 4.1.18R, these financial statements will form part of the Electronic Format Annual Financial Report filed on
the National Storage Mechanism of the FCA in accordance with DTR 4.1.15R – DTR 4.1.18R. This auditor’s report provides no assurance over whether the Electronic Format Annual Financial Report has been prepared in compliance
with DTR 4.1.15R – DTR 4.1.18R.
David Paterson ACA (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
26 March 2024
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Consolidated statement of profit or loss
For the year ended 31 December
Note

|  | 2023 | 2022
|  | US$’000 | US$’000
Revenue | 5 | 2 , 31 9, 811 | 2, 598 ,4 82
Cost of sales | 6 | (1,317,010) | (1,35 2,3 2 4)
Gross profit |  | 1,0 0 2, 8 01 | 1,24 6 ,15 8
Impairment charges on development and production assets | 19 | (5 57, 9 3 6) | (31,4 67)
Exploration and evaluation expenses | 14 | (13 ,634) | (9, 0 4 0)
Administrative expenses | 7 | (34, 259) | (8 7, 8 5 1)
Other gains/(losses) | 8 | 89 ,091 | (9,42 9)
Gain on bargain purchase | 17 | – | 1, 33 5 ,171
Profit from operations before tax, finance income and finance costs |  | 486, 063 | 2 ,4 4 3, 5 42
Finance income | 9 | 5,6 8 8 | 695
Finance costs | 9 | (1 8 9 , 7 2 4) | (2 03 ,70 8)
Profit before tax |  | 302, 027 | 2 ,24 0 , 529
Income tax | 27 | (8 6, 39 2) | (1,208,9 97)
Profit for the year |  | 215 ,635 | 1, 031,532
|  | 2023 | 2022
Earnings per share | Note | Cents | Cents
Basic | 10 | 21 .4 | 102.6
Diluted | 10 | 21 .2 | 10 2.1

The results above are entirely derived from continuing operations.
The accompanying notes on pages 162 to 214 are an integral part of the financial statements.
156 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Note

|  | 2023 | 2022
|  | US$’000 | US$’000
Profit for the year |  | 215 ,635 | 1, 031,532
Items that may be reclassified to profit and loss |  |  |
Fair value gains on cash flow hedges | 29 | 92,4 8 4 | 453, 862
Fair value gains on cost of hedging |  | 3,116 | 14 , 2 31
Deferred tax charge on cash flow hedges and cost of hedging | 27 | (71,70 0) | (200, 455)
Other comprehensive income |  | 23,9 0 0 | 2 6 7, 6 3 8
Total comprehensive income for the year |  | 23 9, 53 5 | 1, 2 9 9, 170

The accompanying notes on pages 162 to 214 are an integral part of the financial statements.
Consolidated statement of comprehensive income
For the year ended 31 December
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Consolidated statement of financial position
As at 31 December
Note

|  | 2023 | 2022
|  | US$’000 | US$’000
Assets |  |  |
Current assets |  |  |
Cash and cash equivalents |  | 153,215 | 253,8 22
Trade and other receivables | 11 | 334,29 0 | 359, 9 9 4
Decommissioning reimbursements | 11 | 3 0 , 417 | 38 ,11 5
Prepaid expenses and decommissioning securities | 12 | 3 7, 6 7 8 | 9,05 5
Inventories | 13 | 150, 49 6 | 176 , 8 81
Derivative financial instruments | 30 | 13 9,4 97 | 15 0,8 58
|  | 84 5, 593 | 9 88,725
Non-current assets |  |  |
Decommissioning reimbursements | 11 | 16 5,0 6 4 | 16 2,71 0
Exploration and evaluation assets | 14 | 54 8,354 | 775, 773
Property, plant and equipment | 15 | 3 ,2 58,2 06 | 3,634,896
Deferred tax assets | 27 | 627 ,738 | 392,4 56
Derivative financial instruments | 30 | 1 7, 8 1 0 | 21,1 91
Goodwill | 18 | 783 ,848 | 7 83, 84 8
|  | 5,4 01, 020 | 5,770,87 4
Total assets |  | 6,246,613 | 6,759,59 9
Liabilities and equity |  |  |
Current liabilities |  |  |
Borrowings | 20 | (29 ,913) | –
Trade and other payables | 22 | (478,607) | (7 11 , 41 2)
Current tax payable | 27 | (3 21 ,11 6) | (106,678)
Decommissioning liabilities | 23 | (107,026) | (1 46,829)
Lease liability | 24 | (1 9 ,898) | (41, 6 37)
Contingent and deferred consideration | 25 | (1 01,669) | (107 ,680)
Derivative financial instruments | 30 | (13,70 8) | (136,668)
|  | (1,071,93 7) | (1 , 2 5 0 , 9 0 4)

158 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Note

|  | 2023 | 2022
|  | US$’000 | US$’000
Non-current liabilities |  |  |
Borrowings | 20 | (71 8, 2 38) | (1 , 2 1 3 ,7 31)
Decommissioning liabilities | 23 | (1,752,6 52) | (1 , 5 7 3 ,7 1 1)
Lease liability | 24 | (66 0) | (1 7, 2 2 1)
Contingent and deferred consideration | 25 | (25 8 ,7 0 0) | (2 19, 12 0)
Derivative financial instruments | 30 | – | (2 7, 4 4 0)
|  | (2 ,73 0 , 25 0) | (3 ,05 1,223)
Total liabilities |  | (3, 8 0 2, 1 87) | (4, 3 02 ,127)
Net assets |  | 2,44 4,426 | 2,457 ,472
Shareholders’ equity |  |  |
Share capital | 26 | 11, 5 4 0 | 11, 4 45
Share premium | 26 | 308,845 | 2 93,712
Capital contribution reserve | 26 | 181,945 | 181,945
Own shares | 26 | (12 ,412) | –
Share-based payment reserve | 26 | 15,49 4 | 4, 920
Cash flow hedge reserve | 29 | 39, 81 8 | 1 6,7 10
Cost of hedging reserve | 29 | 4,06 8 | 3,27 5
Retained earnings |  | 1,895,128 | 1 ,94 5, 465
Total equity |  | 2,44 4,426 | 2,457 ,472

The accompanying notes on pages 162 to 214 are an integral part of the financial statements.
Approved on behalf of the Board on 26 March 2024:
Iain C S Lewis
Director
Consolidated statement of financial position continued
As at 31 December
159ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
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Consolidated statement of changes in equity
For the year ended 31 December
Note

|  |  |  | Capital |  |  |  |  |  |
|  | Share | Share | contribution |  | Share-based | Cash flow | Cost of |  |
|  | capital | premium | reserve | Own Shares | payment reserve | hedge reserve | hedging reserve | Retained earnings | Total
|  | US$’000 | US$’000 | US$’000 | US$’000 | US$’000 | US$’000 | US$’000 | US$’000 | US$’000
Balance at 1 January 2022 |  | 1 | 63 4,658 | 1 1 4 , 000 | – | – | (242,7 91) | (4, 8 6 2) | 17 5,503 | 67 6 ,509
Issuance of shares for capital reduction | 26 | 1 1 4,000 | – | (11 4, 000) | – | – | – | – | – | –
Reduction in capital | 26 | (11 4, 000) | (63 4 ,6 5 8) | – | – | – | – | – | 74 8 , 6 5 8 | –
Issuance of shares | 26 | 11 ,444 | 293, 712 | – | – | (3, 0 0 4) | – | – | (10 , 2 2 8) | 291 ,92 4
Capital contribution through debt cancellation | 26 | – | – | 181,945 | – | – | – | – | – | 181,945
Share-based payments | 26 | – | – | – | – | 7, 9 2 4 | – | – | – | 7, 9 2 4
Comprehensive income for the year: |  |  |  |  |  |  |  |  |  |
Profit for the year |  | – | – | – | – | – | – | – | 1,031,5 32 | 1, 031,5 32
Other comprehensive income |  | – | – | – | – | – | 2 59, 5 01 | 8,13 7 | – | 26 7, 6 3 8
Total comprehensive income for the year |  | – | – | – | – | – | 259, 5 0 1 | 8,137 | 1,0 31,532 | 1 , 2 9 9, 170
Balance at 31 December 2022 |  | 11,4 45 | 293,712 | 181,945 | – | 4,920 | 16 ,71 0 | 3, 275 | 1,94 5 ,465 | 2,45 7 ,4 72
Balance at 1 January 2023 |  | 11,4 45 | 293,712 | 181,945 | – | 4, 920 | 16 ,710 | 3, 275 | 1, 945 , 465 | 2,457 ,472
Dividends | 33 | – | – | – | – | – | – | – | (2 65,9 72) | (2 65,9 72)
Issuance of shares | 26 | 95 | 15,1 33 | – | (1 5, 2 2 8) | – | – | – | – | –
Share-based payments | 26 | – | – | – | 2,816 | 1 0 , 5 74 | – | – | – | 13, 390
Comprehensive income for the year: |  |  |  |  |  |  |  |  |  |
Profit for the year |  | – | – | – | – | – | – | – | 215,6 35 | 21 5,6 35
Other comprehensive income |  | – | – | – | – | – | 2 3,1 08 | 793 | – | 2 3,9 01
Total comprehensive income for the year |  | – | – | – | – | – | 23,10 8 | 7 93 | 215,6 35 | 2 39, 5 36
Balance at 31 December 2023 |  | 11,5 4 0 | 308,84 5 | 181,945 | (12,4 12) | 15,494 | 39, 81 8 | 4, 06 8 | 1, 8 95,1 28 | 2,4 4 4, 426

Detail on the movements in the capital contribution reserve can be found in notes 26 and 31.
The accompanying notes on pages 162 to 214 are an integral part of the financial statements.
160 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Note

|  | 2023 | 2022
|  | US$’000 | US$’000
Cash provided by/(used in): |  |  |
Operating activities |  |  |
Profit before tax |  | 302, 027 | 2 ,24 0 , 529
Adjustments for: |  |  |
Depletion, depreciation and amortisation | 15 | 74 0 , 3 0 0 | 66 2, 9 47
Impairment of capitalised exploration and evaluation expenditure | 14 | 13,63 4 | 9, 0 4 0
Impairment charges on development and production assets | 19 | 5 5 7, 9 3 6 | 31 , 4 6 7
Increase in contingent/deferred consideration |  | 8,008 | 4,295
Loan fee amortisation | 9 | 4,50 8 | 6 , 41 8
Fair value gains on derivatives | 29 | (43,0 59) | (1 6 ,7 8 7)
Gain on bargain purchase |  | – | (1,335,170)
Hedging resets 1 |  | – | (3 9, 6 8 0)
Accretion | 9 | 76 ,162 | 5 6 , 51 1
Finance costs | 9 | 10 9, 0 5 4 | 122,1 63
Interest income | 9 | (5,6 8 8) | –
Interest on related-party loan | 9 | – | 1 7, 9 2 4
Unrealised foreign exchange on cash and cash equivalents |  | (1 ,7 2 5) | 2,4 6 4
Share-based payment expenses |  | 13, 390 | 14, 0 69
Decommissioning expenditure |  | (95, 552) | (65,707)
Operating cash flows before movements in working capital |  | 1,678,995 | 1,710,4 83
Decrease in inventories |  | 26,386 | 4,05 1
Decrease/(increase) in trade and other receivables |  | 12,5 40 | (5 0 , 5 75)
(Decrease)/increase in trade and other payables |  | (24 9,76 0) | 141,275
Operating cash flows |  | 1,468,161 | 1, 8 05, 23 4
Corporation tax paid |  | (176, 3 0 5) | (81 ,9 14)
Settlement of foreign exchange and commodity derivative financial instruments | 29 | (6,7 39) | –
Interest received |  | 5,6 88 | –
Net cash from operating activities |  | 1, 29 0,8 05 | 1,7 2 3, 32 0

Consolidated statement of cash flows
For the year ended 31 December
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Note

|  | 2023 | 2022
|  | US$’000 | US$’000
Investing activities |  |  |
Capital expenditure |  | (478 , 83 8) | (38 0, 6 4 0)
Acquisition of subsidiaries net of cash acquired | 17 | – | (9 5 7, 4 5 2)
Deferred consideration payments | 25 | (6,3 67) | (5 5 ,0 92)
Contingent consideration payments | 25 | (7 ,200) | (11,0 4 0)
Net cash used in investing activities |  | (49 2 , 4 0 5) | (1, 4 0 4 , 2 2 4)
Financing activities |  |  |
Receipt from issue of equity |  | – | 2 9 9, 74 9
Dividends paid |  | (26 5, 9 72) | –
Payments for lease liabilities (principal) | 24 | (41 , 9 0 2) | (34,348)
Repayment of RBL loan |  | (600 , 000) | (5 00 , 000)
Repayment of shareholder loan |  | – | (273 ,055)
Drawdown of RBL loan |  | – | 550,00 0
Drawdown of bp loan |  | 1 00 ,000 | –
Bank interest and charges paid |  | (9 9, 8 2 5) | (1 42 , 8 20)
Interest rate swaps | 9 | 6, 967 | 8 51
Costs of share issue |  | – | (7, 8 2 5)
Net cash used in financing activities |  | (9 00,732) | (1 0 7, 4 4 8)
Currency translation differences relating to cash |  | 1,72 5 | (2, 6 75)
(Decrease)/increase in cash and cash equivalents |  | (10 0,6 07) | 20 8, 973
Cash and cash equivalents at 1 January |  | 253,8 22 | 4 4, 8 49
Cash and cash equivalents at 31 December |  | 153, 215 | 2 53,8 22

1. Hedging resets relate to the amortisation of the deferred reset gains which have been recycled to the current year profit and loss.
The accompanying notes on pages 162 to 214 are an integral part of the financial statements.
162 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
1. General information
Ithaca Energy plc (the Group or Ithaca Energy), is a Company limited by shares incorporated and domiciled in the UK and is a Group involved in the development and production of oil and gas in the North Sea.
The Group’s registered office is 33 Cavendish Square, London, United Kingdom, W1G 0PP.
2. Basis of preparation
The consolidated financial statements are prepared in accordance with United Kingdom adopted International Accounting Standards (IAS) and in conformity with the requirements of the Companies Act 2006.
The consolidated financial statements are presented in US Dollars as this is the functional currency of the business. All values are rounded to the nearest thousand (US$’000), except when otherwise indicated.
The principal accounting policies applied in the preparation of the financial statements are set out below. These policies have been consistently applied to all the periods presented.
3. Material accounting policies, judgements and estimation uncertainty
Basis of measurement
The consolidated financial statements have been prepared on a going concern basis using the historical cost convention, except for the revaluation of certain financial assets and financial liabilities, under International Financial Reporting
Standards (IFRS), to fair value, including derivative instruments. Historical cost is generally based on the fair value consideration given in exchange for the assets and liabilities.
Going concern
Management closely monitor the funding position of the Group including monitoring compliance with covenants and available facilities to ensure sufficient headroom is maintained to fund operations. Management have considered
a number of risks applicable to the Group that may have an impact on the Group’s ability to continue as a going concern. Short-term and long-term cash forecasts are prepared on a weekly and quarterly/annual basis respectively along
with any related sensitivity analysis. This allows proactive management of any business risk including liquidity risk.
The Directors consider the preparation of the financial statements on a going concern basis to be appropriate. This is due to the following key factors:
• Continuing robust commodity price backdrop and a well-hedged portfolio over the next 12 months;
• New unsecured loan arrangement of $100 million with bp which was fully drawn at 31 December 2023 and a new $150 million optional project specific capital expenditure carry arrangement available at the discretion of the Group
which was undrawn at 31 December 2023;
• Reserves Based Lending (RBL) liquidity headroom of $836 million ($nil drawn versus $836 million available), plus $303 million of cash as at 22 March 2024; and
• Robust operational performance and a well-diversified portfolio.

|  | Cash flow forecast – base case assumptions: 2024 | H1 2025
Average oil price | $/bbl | 81 | 77
Average gas price | p/th | 67 | 75
Average hedged oil price (including floor price for zero cost collars) | $/bbl | 78 | N/A
Average hedged gas price (including floor price for zero cost collars) | p/th | 137 | 123

Owing to the ongoing fluctuations in commodity demand and price volatility, management prepared sensitivity analyses to the forecasts and applied a number of plausible downside scenarios including decreases in production of
10%, reduced sales prices of 20% and increases in operating and capital expenditures of 10%. Management aggregated these scenarios to create a reasonable combined worst-case scenario. The sensitivity analysis showed that, after
consideration of mitigation strategies within management’s control, there were was no reasonably possible scenario that would result in the business being unable to meet its liabilities as they fell due. In addition, reverse stress tests have
been performed reflecting further reductions in commodity prices, prior to any mitigating actions, to determine at what levels prices would have to reach such that there is no liquidity headroom left. The stress test demonstrated that
the likelihood of the fall in prices required to cause a liquidity issue is considered sufficiently remote in the context of the mitigation strategies available to management. The mitigation strategies within the control of management include
a reduction in uncommitted capital expenditure and variable opex savings in the low production scenario. In addition to this, there is also further potential to refinance the Group’s borrowing arrangements. The analysis demonstrated
that the Group would still continue to comply with financial covenants and have sufficient liquidity throughout the period to 30 June 2025 to continue trading.
Notes to the consolidated financial statements
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3. Material accounting policies, judgements and estimation uncertainty continued
Based on their assessment of the Group’s financial position in the period to 30 June 2025, the Directors believe that the Group will be able to continue in operational existence for the foreseeable future. Accordingly, they continue
to adopt the going concern basis of accounting in preparing the financial statements.
Basis of consolidation
The consolidated financial statements of the Group includes the financial information of Ithaca Energy and all wholly-owned subsidiaries as listed per note 31. All intergroup transactions and balances have been eliminated on consolidation.
Subsidiaries are all entities over which the Group has control. The plc controls an entity when the Group is exposed to or has rights to variable returns from its investments with the entity and has the ability to affect those returns
through its power over the investee. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated on the date that control ceases.
Impact of climate change on the financial statements and related notes
Judgements and estimates made in assessing the impact of climate change and the energy transition
Climate change and the transition to a lower-carbon system were considered in preparing the consolidated financial statements. These may have the potential for significant impacts on the carrying values of the Group’s assets and
liabilities discussed below as well as on assets and liabilities that may be reflected in the future. There is also the potential for significant impact on future cash flows. There is generally a high level of uncertainty about the speed and
magnitude of impacts of climate change which, together with limited historical data, provides significant challenges in the preparation of forecasts and financial plans with a wide range of potential future outcomes.
The Group’s ambition is to have one of the lowest carbon emission portfolios in the UK North Sea and to achieve Net Zero (whereby the amount of CO
2
added by the Group’s activities is no greater than the amount taken away),
on a net equity basis (by applying the Group’s working interest in each respective asset to the total emissions of that asset), and in respect of Scope 1 and 2 emissions, by 2040, ten years ahead of the North Sea Transition Deal
commitment. This will be achieved by optimising the Group’s current portfolio in the short term and fundamentally transitioning the Group’s portfolio over the medium to long term whilst maintaining forecast levels of production.
Initiatives include, but are not limited to, operational improvements, offshore electrification, and the eventual cessation of production of mature fields which have higher carbon intensity. Where the Group cannot reduce Scope 1
and Scope 2 emissions, Ithaca Energy will invest in carbon offsets to achieve the Group’s goal of Net Zero. All new economic investment decisions include estimated costs of the energy transition based on existing technology and
estimated costs of carbon and these opportunities are assessed on their climate impact potential and alignment with Ithaca Energy’s Net Zero target, taking into account both greenhouse gas volumes and emissions intensity.
Specific considerations of the potential impacts of climate change on significant judgements and estimates used in the consolidated financial statements are considered below. The items outlined below are likely to manifest
themselves over a number of years and are therefore not generally considered to represent ‘key sources of estimation uncertainty’ as required by IAS 1 (being those which could have a material impact on the Group’s results in the
12 months following the reporting date) which are separately disclosed later in this note.
Impairment of goodwill and property, plant and equipment
The energy transition has the potential to significantly impact future commodity and carbon prices in that as the UK and global energy system decarbonises, reduced demand for oil and gas products in favour of low carbon
alternatives could cause oil and gas prices to fall which would, in turn, affect the recoverable amount of goodwill and property, plant and equipment. In the current period management’s estimate of the long-term commodity price
assumptions are, in real terms from 2028, $93/bbl for Brent Crude and 87p/therm for UK NBP gas. Further details of climate change including a sensitivity in this area are provided in note 19.
Recoverable values used for impairment testing for all cash-generating units (CGUs) include the estimated cost of UK carbon emissions allowances of £70 per tonne for CO
2
e. The recoverable value of CGU’s may be impacted by
future carbon pricing legislation changes, which could increase operating costs through higher emissions allowances or the introduction of other carbon pricing mechanisms. Electrification of offshore operations for specific assets
is planned in line with the Group’s 2040 Net Zero ambitions and where feasible based on existing technology, estimated electrification costs are included within the assessment of the recoverable value of the relevant CGU.
Property, plant and equipment – depreciation and useful economic lives
The energy transition has the potential to reduce the expected useful economic lives of assets and hence accelerate depreciation charges. Although no changes have been identified or recognised to date, as noted in the Strategic
Report on page 46, it is anticipated that certain higher emission-intensity assets such as FPF-1 and Alba will cease production in the medium term and will be replaced by new lower-emission intensity assets. Management does not
currently expect the useful economic lives of the Group’s reported property, plant and equipment to significantly change solely as a result of the energy transition. However, significant capital expenditure is still required for ongoing
projects and therefore the useful lives of future capital expenditure may be different.
164 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
3. Material accounting policies, judgements and estimation uncertainty continued
Intangible assets – exploration and evaluation assets
The impacts of climate change and the energy transition may affect the viability of exploration prospects. The recoverability of the existing intangibles was considered during 2023, however, no significant write-offs were identified
as a result of climate change considerations. Viability of these assets will continue to be assessed on a regular basis.
Decommissioning provisions
Most of the Group’s existing decommissioning obligations are estimated to be completed over the course of the next 20 years. The impacts of climate change and the energy transition may bring forward the expected timing
of decommissioning activity, increasing the present value of the associated decommissioning provisions. The potential impact of a reasonably possible acceleration of estimated decommissioning dates, which considers the potential
impact of the energy transition, is considered to be two years. The impact of such an acceleration of cessation of production across the Group’s entire producing portfolio would result in an increase in the decommissioning provision of
approximately $69 million (2022: $74 million). The risk in this area may increase if key assets within the Group’s existing exploration, appraisal and development portfolio proceed to the production stage, as this is likely to significantly
extend the life of the Group’s portfolio, in some cases to 2050 or beyond.
While the pace of the transition to a lower-carbon economy is uncertain, oil and gas demand is expected to remain a key element of the energy mix for many years based on stated policies, commitments and announced pledges to
reduce emissions. Therefore given the estimated useful lives of the Group’s oil and gas portfolio, a material adverse change is not anticipated to the carrying value of the Group’s assets and liabilities in the short-term as a result of
climate change and the transition to a lower-carbon economy.
Business combinations
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the fair value of the consideration given for the assets acquired, equity instruments issued and liabilities incurred or
assumed at the date of completion of the acquisition. Transaction costs incurred are expensed and included in administrative expenses. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination
are measured initially at their fair values at the acquisition date. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of the acquisition is less
than the Group’s share of the net assets acquired, the difference is recognised directly in the consolidated statement of profit or loss as a gain on bargain purchase.
Goodwill
Capitalisation
Goodwill is initially recognised and measured as set out above. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.
Impairment
Goodwill is tested annually for impairment and also when circumstances indicate that the carrying value may be at risk of being impaired. Impairment is determined for goodwill by assessing the recoverable amount of each CGU or Group of
CGUs to which the goodwill relates. If the recoverable amount of a CGU is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of goodwill allocated to the unit and then to the other assets of the
unit pro-rata based on the carrying amount of each asset in the unit. Any impairment loss is recognised in the consolidated statement of profit or loss. Impairment losses relating to goodwill cannot be reversed in future periods. The CGU for the
purposes of the goodwill test is the North Sea, i.e. the entire Group portfolio of oil and gas assets which is consistent with the operating segment view of the business .
Interest in joint ventures and associates
Under IFRS 11, joint arrangements are those that convey joint control which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. Investments in joint arrangements are
classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor. Associates are investments over which the Group has significant influence but not control or joint control, and
generally holds between 20% and 50% of the voting rights.
The Group’s interest in joint operations (e.g. exploration and production arrangements) are accounted for by recognising its assets (including its share of assets held jointly), its liabilities (including its share of liabilities incurred jointly),
its revenue from the sale of its share of the output arising from the joint operation and its expenses (including its share of any expenses incurred jointly).
Revenue
The sale of crude oil, gas or condensate represents a single performance obligation, being the sale of barrels equivalent on collection of a cargo or on delivery of commodity into an infrastructure. Revenue is accordingly recognised
for this performance obligation when control over the corresponding commodity is transferred to the customer. Revenue is recognized at a point in time and is measured based on the consideration to which the Group expects to be
entitled in a contract with a customer and excludes amounts collected for third parties. Details of hedging gains and losses presented in revenue are discussed in the hedging accounting policy set out below.
Notes to the consolidated financial statements continued
165ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
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3. Material accounting policies, judgements and estimation uncertainty continued
Tariff income is recognised as the underlying commodity is shipped through the pipeline network based on established tariff rates.
Foreign currency translation
Items included in these consolidated financial statements are measured using the currency of the primary economic environment in which the Group and its subsidiaries operate (the functional currency). The consolidated financial
statements are presented in US Dollars, which is the Group’s presentation currency as well as the functional currency of the Parent Company and each of its subsidiaries. In preparing the financial statements of the parent and its
subsidiaries, trans actions in currencies other than the entity’s functional currency (foreign currencies) are recognised at the rates of exchange prevailing on the dates of the transactions. At each reporting date, monetary assets and
liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the
date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the
statement of profit or loss.
Exchange differences are recognised in profit or loss in the period in which they arise except for:
• Exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those
foreign currency borrowings;
• Exchange differences on transactions entered into to hedge certain foreign currency risks (see below under financial instruments/hedge accounting).
Financial instruments
All financial instruments are initially recognised at fair value on the statement of financial position. Measurement in subsequent periods is dependent on the classification of the respective financial instrument.
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another
entity. The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial asset or financial liability
derecognised and the consideration received/receivable or paid/payable respectively is recognised in profit or loss.
IFRS 9 classifications
Cash and cash equivalents are classified at amortised cost which equates to its fair value. Accounts receivable and long-term receivables are classified and carried at amortised cost less expected credit losses as they have a business
model of held to collect and the terms of the financial instrument meet the solely payments of interest on principle outstanding. Accounts payable, accrued liabilities, certain other long-term liabilities, and borrowings are classified as
other financial liabilities and carried at amortised cost using the effective interest method. Amortised cost is calculated by taking into account any issue costs, discount or premium. Contingent consideration is measured at fair value
though profit or loss. Although the Group does not intend to trade its derivative financial instruments, they are required to be carried at fair value with the treatment of fair value movements explained further below.
Interest-free loans from parents are initially recognised at fair value. The difference between the fair value of the loans and the nominal value is accounted for as a capital contribution and is credited to equity. After initial recognition,
the loans are measured at amortised cost using implied interest rate of the notes.
Transaction costs that are directly attributable to the acquisition or issue of a financial asset or liability and original issue discounts on long-term debt have been included in the carrying value of the related financial asset or liability
and are amortised to consolidated net earnings over the life of the financial instrument using the effective interest method.
Impairment of financial assets
For trade receivables and accrued income, the Group applies a simplified approach in calculating expected credit losses (ECLs). Therefore, the Group does not track changes in credit risk, but instead, recognises any material loss
allowance based on lifetime ECLs at each reporting date. For all other financial assets, the Group measures the loss allowance using 12-month expected credit losses unless there was a significant increase in credit risk since initial
recognition in which case the loss allowance is measured using lifetime expected credit losses.
In making this assessment whether the credit risk increased significantly since initial recognition, the Group considers both quantitative and qualitative information that is reasonable and supportable, including historical experience
and forward-looking information that is available without undue cost or effort. The Group considers that the credit risk increased significantly since initial recognition when the credit rating changes, the debtor has significant financial
difficulty or if there was a breach of contract. For balances that are beyond 30 days overdue it is presumed to be an indicator of a significant increase in credit risk.
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The Group considers a financial asset in default when contractual payments are 90 days past due. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates
that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group.
A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows. Financial assets written off may still be subject to enforcement activities under the Group’s recovery procedures, taking
into account legal advice where appropriate. Any recoveries made are recognised in profit or loss.
Derivative financial instruments
The Group enters into a variety of derivative financial instruments to manage its exposure to commodity risks, interest rate and foreign exchange rate risks. These instruments include: commodity swaps, collars and options; foreign
exchange forward contracts and collars; and interest rate swaps. Further details of derivative financial instruments are disclosed in notes 29 and 30.
Derivatives are recognised initially at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. The resulting gain or loss on remeasurement of derivatives is
recognised in profit or loss immediately unless the derivative is designated in a hedge relationship and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the
hedge relationship.
A derivative with a positive fair value is recognised as a financial asset whereas a derivative with a negative fair value is recognised as a financial liability. Derivatives are not offset in the financial statements unless the Group has both a
legally enforceable right and intention to offset. A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is not due to be realised or settled within
12 months. Other derivatives maturing in less than 12 months and expected to be realised or settled in less than 12 months are presented as current assets or current liabilities.
Hedge accounting
The Group designates certain derivatives as hedging instruments in respect of commodity risks in cash flow hedges.
At the inception of the hedge relationship, the Group documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge
transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item
attributable to the hedged risk.
If a hedging relationship ceases to meet the hedge effectiveness requirement relating to the hedge ratio but the risk management objective for that designated hedging relationship remains the same, the Group adjusts the hedge ratio
of the hedging relationship (i.e. rebalances the hedge) so that it meets the qualifying criteria again.
The Group designates only the intrinsic value of option contracts as a hedged item, i.e. excluding the time value of the option. The changes in the fair value of the aligned time value of the option are recognised in other comprehensive
income and accumulated in the cost of hedging reserve. If the hedged item is transaction-related, the time value is reclassified to profit or loss when the hedged item affects profit or loss. If the hedged item is time-period related, then
the amount accumulated in the cost of hedging reserve is reclassified to profit or loss on a rational basis – the Group applies straight-line amortisation. Those reclassified amounts are recognised in profit or loss in the same line as the
hedged item. If the Group expects that some or all of the loss accumulated in the cost of hedging reserve will not be recovered in the future, that amount is immediately reclassified to profit or loss.
The effective portion of changes in the fair value of derivatives and other qualifying hedging instruments that are designated and qualify as cash flow hedges is recognised in other comprehensive income and accumulated under the
heading of cash flow hedge reserve, limited to the cumulative change in fair value of the hedged item from inception of the hedge. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss, and is
included in the ‘other gains and losses’ line item.
Notes to the consolidated financial statements continued
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Amounts previously recognised in other comprehensive income and accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss, in the same revenue line as the recognised hedged
item. However, when the hedged forecast transaction results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously recognised in other comprehensive income and accumulated in equity are
removed from equity and included in the initial measurement of the cost of the non-financial asset or non-financial liability. This transfer does not affect other comprehensive income. Furthermore, if the Group expects that some or all
of the loss accumulated in the cash flow hedge reserve will not be recovered in the future, that amount is immediately reclassified to profit or loss.
The Group discontinues hedge accounting only when the hedging relationship (or a part thereof) ceases to meet the qualifying criteria (after rebalancing, if applicable). This includes instances when the hedging instrument expires or is
sold, terminated or exercised. The discontinuation is accounted for prospectively. Any gain or loss recognised in other comprehensive income and accumulated in cash flow hedge reserve at that time remains in equity and is reclassified
to profit or loss when the forecast transaction occurs. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in the cash flow hedge reserve is reclassified immediately to profit or loss.
If a hedge of a transaction related item is discontinued part way through the life of the hedge (e.g. due to early termination of the swap, hedging resets), but the hedged item is still expected to occur, the amounts deferred in equity would
remain in equity until the earlier of: (i) the hedged transaction occurring; or (ii) expectation that the amount deferred in equity will not be recovered in the future periods.
Note 29 and note 30 set out details of the fair values of the derivative instruments used for hedging purposes and movements in the hedging reserve in equity are detailed in note 29.
Contingent and deferred consideration
Contingent consideration in relation to a business combination or asset acquisition is accounted for as a financial liability and measured at fair value at the date of acquisition with any subsequent remeasurements recognised in profit
or loss in accordance with IFRS 9. These fair values are generally based on risk-adjusted future cash flows discounted using appropriate discount rates. Changes in fair value of the contingent consideration that qualify as measurement
period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the ‘measurement period’
(which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date.
The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that
is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Other contingent consideration is remeasured to fair value at subsequent reporting dates with changes
in fair value recognised in profit or loss.
Deferred consideration is measured at amortised cost because the amount payable in the future is fixed.
Settlement of contingent consideration is recorded as investing outflows in the cash flow statement to the extent that cumulative amounts paid do not exceed the amount recognised at the date of acquisition, with any excess recorded
as an operating cash outflow. Settlement of deferred consideration is recorded as either an investing or financing outflow in the cash flow statement, depending on the substance of the arrangement at inception. Key considerations
in forming this judgment will include the extent of inferred financing costs included in the overall consideration arrangements at acquisition, the period of time over which the payments are made, the rationale for agreeing to defer
elements of the consideration and the general level of funding resources available to the Group at the time of acquisition.
Cash and cash equivalents
For the purpose of the statement of cash flow, cash and cash equivalents include investments with an original maturity of three months or less. In the statement of financial position, cash and bank balances comprise cash (i.e. cash on
hand and demand deposits) and cash equivalents. Cash equivalents are short-term (generally with original maturity of three months or less), highly-liquid investments that are readily convertible to a known amount of cash and which
are subject to an insignificant risk of changes in value. Cash equivalents are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes.
Inventories – hydrocarbon and materials
Inventories of materials are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their
present location and condition. Cost is determined on the first-in, first-out method. Current hydrocarbon inventories are stated at net realisable value, which is based on estimated selling price less any further costs expected to be
incurred to completion and disposal/sale. Non-current oil and gas inventories are stated at historic cost. Provision is made for obsolete, slow-moving and defective items where appropriate.
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Lifting or offtake arrangements
Lifting or offtake arrangements for oil and gas produced in certain of the Group’s oil and gas properties are such that each participant may not receive and sell its precise share of the overall production in each period. The resulting
imbalance between cumulative entitlement and cumulative volume sold is an ‘underlift’ included within inventories, and ‘overlift’ is included within trade and other payables in the statement of financial position. Both are stated at
net realisable value. Movements during an accounting period are adjusted through cost of sales in the consolidated statement of profit or loss.
Exploration and evaluation assets
Oil and gas expenditure – exploration and evaluation (E&E) assets
Geological and geophysical costs and costs incurred pre-licence are expensed as incurred. Costs directly associated with an exploration well are initially capitalised as an intangible asset until the drilling of the well is complete and the
results have been evaluated. These costs include employee remuneration, materials and fuel used, freight costs and payments made to contractors. If potentially commercial quantities of hydrocarbons are not found, the exploration
well costs are written off. If hydrocarbons are found and, subject to further appraisal activity, are likely to be capable of commercial development, the costs continue to be carried as an asset. If it is determined that development will
not occur, that is, the efforts are not successful, then the costs are expensed.
Costs directly associated with appraisal activity undertaken to determine the size, characteristics and commercial potential of a reservoir following the initial discovery of hydrocarbons, including the costs of appraisal
wells where hydrocarbons were not found, are initially capitalised as an intangible asset. Upon external approval for development and recognition of proved or sanctioned probable reserves, the relevant expenditure is first assessed
for impairment and, if required, an impairment loss is recognised. The remaining balance is then transferred to development and production (D&P) assets. If development is not approved and no further activity is expected to occur,
then the costs are expensed.
The determination of whether potentially economic oil and natural gas reserves have been discovered by an exploration well is usually made within one year of well completion, but can take longer, depending on the complexity of the
geological structure. Exploration wells that discover potentially economic quantities of oil and natural gas in areas where major capital expenditure (e.g. an offshore platform or a pipeline) would be required before production could begin
and where the economic viability of that major capital expenditure depends on the successful completion of further exploitation or appraisal work in the area remain capitalised on the balance sheet as long as such work is under way or
firmly planned.
Property, plant and equipment
Oil and gas expenditure – D&P assets
Capitalisation
Costs of bringing a field into production, including the cost of facilities, wells and subsea equipment, direct costs including staff costs together with E&E assets reclassified in accordance with the above policy, are capitalised as a D&P
asset. Normally each individual field development will form an individual D&P asset but there may be cases, such as phased developments, or multiple fields around a single production facility when fields are grouped together to form
a single D&P asset.
Depreciation
All costs relating to a development are accumulated and not depreciated until the commencement of production. Depreciation is calculated on a unit of production basis based on the proved and probable reserves of the asset generally
on a field-by-field basis. Any re-assessment of reserves affects the depreciation rate prospectively. Significant items of plant and equipment will normally be fully depreciated over the life of the field. However, these items are assessed
to consider if their useful lives differ from the expected life of the D&P asset.
Non-oil and natural gas operations
Non-oil and gas assets are initially recorded at cost and depreciated over their estimated useful lives on a straight-line basis as follows –
Buildings 10 years
Computer and office equipment 3 years
Furniture and fittings 5 years
Notes to the consolidated financial statements continued
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Impairment
For impairment review purposes the Group’s oil and gas assets are aggregated into CGUs typically on a field-by-field basis for development and production assets in accordance with IAS 36, and on a North Sea segment basis for
exploration and evaluation assets in accordance with IFRS 6. A review is carried out at each reporting date for any indicators that the carrying value of the Group’s assets may be impaired or previously impaired assets (excluding goodwill)
where a reversal of a previous impairment may arise. Such reviews are carried out on a field-by-field basis for both development and production assets and exploration and evaluation assets. For assets where there are such indicators, an
impairment test is carried out on the CGU. The impairment test involves comparing the carrying value with the recoverable value of an asset. The recoverable amount of an asset is determined as the higher of its fair value less costs to
sell and value in use. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to the recoverable amount. The resulting impairment losses are written off to the
consolidated statement of profit or loss. Previously impaired assets (excluding goodwill) are reviewed for possible reversal of previous impairment at each reporting date. The maximum possible reversal is capped at the net book value
had the asset not been impaired in the past. Where an exploration and evaluation licence is relinquished, amounts capitalised in respect of the licence are written off to profit or loss in the period in which the licence is relinquished.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those
assets until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are expensed as incurred. Borrowing costs directly attributable to E&E assets are not capitalised and are expensed directly to
profit or loss when incurred.
Decommissioning liabilities
The Group records the present value of legal obligations associated with the retirement of long-term tangible assets, such as producing well sites and processing plants, in the period in which they are incurred with a corresponding
increase in the carrying amount of the related long-term asset. Liabilities for decommissioning are recognised when the Group has an obligation to plug and abandon a well, dismantle and remove a facility or an item of plant and restore
the site on which it is located, and when a reliable estimate can be made. Where the obligation exists for a new facility or well, such as oil and gas production or transportation facilities, the obligation generally arises when the asset is
installed or the ground/environment is disturbed at the field location. In subsequent periods, the asset is adjusted for any changes in the estimated amount or timing of the settlement of the obligations. The amount recognised is the
present value of the estimated future expenditure determined in accordance with local conditions and requirements. The carrying amounts of the associated decommissioning assets are depleted using the unit of production method,
in accordance with the depreciation policy for development and production assets. Actual costs to retire tangible assets are deducted from the liability as incurred. The unwinding of discount in the net present value of the total expected
cost is treated as an interest expense. Changes in the estimates are reflected prospectively over the remaining life of the field.
Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, a reimbursement asset is recognised when, and only when, it is virtually certain that reimbursement will be received if the
entity settles the obligation. The amount recognised for the reimbursement may not exceed the amount of the provision.
Taxation
Current tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amounts are those that are enacted or substantively
enacted by the reporting date. Taxable profit differs from net profit, as reported in the consolidated statement of profit or loss, because it excludes items of income or expense that are taxable or deductible in other accounting periods
and it further excludes items of income or expenses that are never taxable or deductible.
Deferred tax
Deferred tax is recognised using the liability method, providing for temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax is measured at the tax
rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted at each balance sheet date. Deferred tax liabilities are not recognised if they arise
from the initial recognition of goodwill and deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than business combination that at the time of the transaction affects neither
accounting nor taxable profit or loss. Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. The carrying amount of
deferred tax assets is reviewed at each balance sheet date and all available evidence is considered in evaluating the recoverability of these deferred tax assets. Deferred tax assets and liabilities are offset where there is a legally enforceable
right to offset current tax assets and liabilities relating to taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
Deferred Petroleum Revenue Tax (PRT) assets are recognised where PRT relief on future decommissioning costs is probable.
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Leases
The Group assesses at contract inception all arrangements to determine whether it is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for
consideration. The Group is not a lessor in any transactions, it is only a lessee. The Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee. The Group
has elected to apply Paragraph 6 of IFRS 16 to short-term leases (defined as leases with a lease term of 12 months or less) and leases of low-value assets (such as tablets and personal computers, small items of office furniture and
telephones). Lease payments associated with these leases are expensed over the relevant lease term.
Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities
recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. The right-of-use asset is depreciated over the useful life of the asset.
The Group’s right-of-use assets are included in property, plant and equipment (note 15).
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. In calculating the present value of lease payments, the Group uses its
incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is generally not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the
accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g. changes to future
payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.
Maintenance expenditure
Expenditure on major maintenance refits or repairs is capitalised where it enhances the life or performance of an asset above its originally assessed standard of performance, replaces an asset or part of an asset which was separately
depreciated and which is then written off, or restores the economic benefits of an asset which has been fully depreciated. All other maintenance expenditure is charged to the statement of profit or loss as incurred.
Share-based payments
The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value at the date of grant. The fair value is expensed over the vesting term either on a straight-line
basis or as specified in the vesting terms, based on the Group’s estimate of shares that will eventually vest and is adjusted for the effects of non-market-based vesting conditions.
Fair value is measured by using a Black-Scholes or other appropriate valuation model. The expected life used in the model is adjusted based on management’s best estimate for the effects of non-transferability, exercise restrictions and
behavioural considerations.
Retirement benefit costs
The Group operates a defined contribution pension scheme and payments into this plan are charged as an expense as they fall due. There is no further obligation to pay contributions into the plan once the contributions specified in the
plan rules have been paid.
Short-term employee benefits
A charge or liability is recognised for benefits accruing to employees in respect of salaries, bonuses, annual leave and sick leave in the period the related service is rendered at the undiscounted amount of the benefits expected to be paid
for that service. Charges or liabilities recognised in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service.
Non-GAAP measures
In measuring the Group’s adjusted operating performance, additional financial measures derived from the reported results have been used by management in order to eliminate factors which distort year-on-year comparisons. The
Group’s adjusted performance is used to explain year-on-year changes when the effect of certain items is significant, including material impairment charges or reversals, non-cash bargain purchase credits, the tax effect of these items
where applicable and non-cash deferred tax charges on the initial application of EPL.
Adjusted EBITDAX, adjusted net income, adjusted EPS, unit operating expenditure, leverage ratio, adjusted net debt and certain other reported metrics are non-GAAP measures that are not specifically defined under IFRS or other
generally accepted accounting principles. Further details are set out on pages 221 to 223.
Notes to the consolidated financial statements continued
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C hanges in accounting pronouncements
The Group has adopted all new and amended IFRS Standards effective in the consolidated financial statements for the period 1 January 2022 to 31 December 2023 including IFRS 17 Insurance Contracts. There was no impact of this
or of any of the amendments to existing standards and interpretations which were effective from 1 January 2023.
New and revised IFRS Standards in issue but not yet effective
At the date of authorisation of these consolidated financial statements, the Group has not applied the following revisions to IFRS Standards that have been issued but are not yet effective.
Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
Amendments to IAS 1 Classification of Liabilities as Current or Non-current
Amendments to IAS 1 Non-current liabilities with Covenants
Amendments to IAS 7 and IFRS 7 Supplier Finance Arrangements
Amendments to IFRS 16 Lease Liability in a Sale and Leaseback
Amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates: Lack of Exchangeability
The Company does not expect that the adoption of the amendments listed above will have a material impact on the consolidated financial statements of the Group in future periods.
Critical judgements and key sources of estimation uncertainties
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within
the next financial year, are discussed below.
Decommissioning provision estimates
Amounts used in recording a provision for decommissioning are estimates based on current legal and constructive requirements and current technology and price levels for the removal of facilities and plugging and abandoning of wells.
Due to changes in relation to these items, the future actual cash outflows in relation to decommissioning are likely to differ in practice. To reflect the effects due to changes in legislation, requirements, technology and price levels,
the carrying amounts of decommissioning provisions are reviewed on a regular basis. The effects of changes in estimates do not give rise to prior year adjustments and are dealt with prospectively. For operated assets, cost estimates
are based on management’s assessment of work programmes (including durations) and supply chain conditions including, amongst other factors, applicable vessel and rig rates and durations. For non-operated assets, cost estimates are
arrived at by management’s review of the basis of estimates as provided by the respective operators.
While the Group uses its best estimates and judgement, actual results could differ from these estimates. Expected timing of expenditure can also change, for example in response to changes in laws and regulations or their interpretation,
and/or due to changes in commodity prices. The payment dates are uncertain and depend on the production lives of the respective fields. Management does not expect any reasonable change in the expected timing of decommissioning
to have a material effect on the decommissioning provisions, assuming cash flows remain unchanged. Decommissioning costs are expected to be incurred over the next 40 years. A nominal discount rate of 4.60% (2022: 4.25%),
based on the average risk-free rate over the second half of 2023, is used to discount the estimated costs. The inflation rate applied to estimated costs is 2.0% (2022: 2.0%). Given the long-term nature of the Group’s decommissioning
liabilities and the historic compounded inflation rates in the industry, management do not believe that the current short-term inflationary pressures will have a material impact on the decommissioning liabilities of the Group. A reduction
or an increase in this discount rate of 1% would increase or reduce the decommissioning liabilities by approximately $223 million or $188 million respectively (2022: $218 million or $201 million respectively), and is not expected to have
a material impact on the corresponding decommissioning reimbursement asset. For further details regarding the estimated value, inputs and assumptions refer to note 23. Given the large number of variables involved, management
consider that it is not practical to provide sensitivities for the various other individual assumptions.
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Contingent consideration
Liabilities for contingent consideration have been recognised on certain business combinations, which are measured at fair value at acquisition and remeasured at fair value through profit and loss at each reporting date.
The amounts of contingent consideration ultimately payable depend on several factors, including the progress of certain of the oil and gas properties acquired and the achievement of certain production and commodity price thresholds.
Management has estimated the fair value as the aggregate value of each element of the contingent consideration in each case using an appropriate valuation technique, taking into account the likelihood of occurrence of each contingent
event and the net present value of the amount potentially payable. Where applicable, risking assumptions applied in the measurement of contingent consideration were consistent with those applied in the fair valuation of the related oil
and gas properties.
A 20% decrease in probability of payment, with all other assumptions held constant, would result in a decrease in contingent consideration of $97.1 million (2022: $87.1 million). Whereas a 20% increase in probability of payment,
with all other assumptions held constant, would result in an increase in contingent consideration of $84.1 million (2022: $83.6 million).
Other areas of estimation
The key assumptions concerning the future, and other sources of estimation uncertainty at the reporting period, but are not expected to cause a material adjustment to the carrying amounts of assets and liabilities within the next
financial year, are discussed below:
Taxation estimates
The Group’s operations are subject to a number of specific tax rules which apply to exploration, development and production companies such as the Energy Profits Levy at 35%, ring-fenced Corporation Tax at 30%, the Supplementary
Charge of 10% and the application of investment allowances. In addition, the tax provision is prepared before the relevant companies have filed their tax returns with the relevant tax authorities and, significantly, before these have been
agreed. As a result of these factors, the tax provision process necessarily involves the use of a number of judgements and estimates including those required in calculating the effective tax rate. The Group recognises deferred tax assets
on unused tax losses where it is probable that future taxable profits will be available for utilisation. This requires management to make judgements and assumptions regarding the likelihood of future taxable profits and the amount of
deferred tax that can be recognised. Further details regarding the estimated value and related inputs are set out in note 27.
The Group’s deferred tax assets are recognised to the extent that taxable profits are expected to arise in the future against which tax losses and allowances in the UK can be utilised, including as a result of Group re-organisations and
asset transfers. In accordance with IAS 12 Income Taxes, the Group assesses the recoverability of its deferred tax assets at each period end. Consistent with the impairment sensitivity described above, as at 31 December 2023, a 20%
reduction in future revenues, with all other assumptions held constant, would eliminate current headroom and result in a deferred tax asset derecognition of $304 million (2022: $24 million). It should be noted that mitigating actions
are considered to be available to materially offset this impact. An increase in future revenues would result in no additional deferred tax asset recognition on the basis that deferred tax assets are already recognised in full. The $304 million
(2022: $24 million) derecognition assumes that cash flows are equivalent to taxable profits and that any reorganisation required to utilise certain deferred tax assets does not result in a displacement of other balances.
Estimates in oil and gas reserves and contingent resources
The Group’s estimates of oil and gas reserves and contingent resources, and the associated production forecasts, are used in the impairment testing of property plant and equipment and goodwill, in the measurement of depletion
and decommissioning provisions, the measurement of certain elements of contingent consideration, the going concern assessment, the viability assessment and in the determination of whether deferred tax assets are recoverable.
The business of the Group is to enhance hydrocarbon recovery and extend the useful lives of mature and underdeveloped assets and associated infrastructure in a profitable and responsible manner. Estimates of oil and gas reserves
and contingent resources require critical judgement. Factors such as the availability of geological and engineering data, reservoir performance data, drilling of new wells and estimates of future oil and gas prices all impact on the
determination of the Group’s estimates of its oil and gas reserves which could result in different future production profiles affecting prospectively the discounted cash flows used in impairment testing.
The Group’s estimates of reserves and resource volumes used for accounting purposes are built up from historically-matched models for operated assets and principally from operators’ estimates for non-operated assets.
A review process is undertaken to compare the results of the Group’s internal estimates to those of an independent consultant to understand any differences in underlying assumptions to ensure there are no material
unreconciled differences between the estimates.
For the purposes of depletion and decommissioning estimates, the Group uses proved and probable reserves; and for the purposes of the impairment tests performed and deferred tax asset recoverability, the Group considers the same
proved and probable reserves as well as risked resource volumes. These risking adjustments are reflective of management’s assessment of technical and commercial factors that reflect the value considerations of a market participant.
Changes in estimates of oil and gas reserves and resources resulting in different future production profiles will affect the discounted cash flows used in impairment testing, the anticipated date of decommissioning, the depletion charges
in accordance with the unit of production method and the recoverability of deferred tax assets. The sensitivity of the Group’s impairment tests and deferred tax recoverability assessments to key sources of estimation uncertainty
including reserves and resources is discussed below.
Notes to the consolidated financial statements continued
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3. Material accounting policies, judgements and estimation uncertainty continued
Estimates in impairment of oil and gas assets and goodwill
Determination of whether the Group’s oil and gas assets (note 15) or goodwill (note 18) have suffered any impairment requires an estimation of the recoverable amount of the CGU to which oil and gas assets and goodwill have been
allocated. Projected future cash flows are used to determine a fair value less cost to sell to establish the recoverable amount. Key assumptions and estimates in the impairment models relate to: commodity prices that are based on
internal view of forward curve prices that are considered to be a best estimate of what a market participant would use; discount rates which reflect management’s estimate of a market participant post-tax weighted average cost of capital;
and oil and gas reserves and resources on a risked basis as described above. Management’s estimates of a market participant’s view of pricing and discount rates are supported by an independent consultant.
The sensitivity of the Group’s carrying amounts to these assumptions is illustrated by the impairments and reversals disclosed in note 19, and by the sensitivity disclosures in note 19. Sensitivity disclosures include, in particular,
the impact of a 20% reduction in forecast revenues.
Critical accounting judgements
The following are the critical judgements, apart from those involving estimation (which are presented separately above), that the Directors have made in applying the Group’s accounting policies and that have the most significant effect
on the amounts recognised in the financial statements.
Cambo field carrying value
Management has reviewed the carrying value of the Cambo field of $391 million and has concluded that due to the recent licence extension to 31 March 2026 and the detailed plans in place for final investment decision (FID), there
are currently no indicators of impairment. The Group is actively engaging with potential farm-in partners to secure an aligned joint venture partnership that would progress the project towards FID and assist in obtaining the additional
funding required for the project. The Group is also mindful that the outcome of the 2024 General Election could have implications for the project as well as the wider fiscal uncertainties on oil and gas investment in general. Details of
contingent consideration in respect of Cambo are set out in note 17 and note 25.
174 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
4. Segmental reporting
The Group operates a single class of business being oil and gas exploration, development and production and related activities in a single geographical area, presently being the North Sea. The Group’s segmental reporting structure
remained in place for all periods presented and is consistent with the way in which the Group’s activities are reported to the Board and Chief Decision Making Officer. The Group’s activities are considered to be an individual operating
segment due to the nature of the Group’s operations being consistent, and such operations existing in a single geographical region that is covered by the same regulations.
5. Revenue

| 2023 | 2022
| US$’000 | US$’000
Oil sales | 1,329,751 | 1,692,697
Gas sales | 658,659 | 1,348,212
Condensate sales | 48,789 | 75,445
Other income | 32,341 | 40,617
Realised losses on oil derivative contracts | (31,676) | (211,636)
Put premiums on oil derivative instruments | (11,850) | (14,629)
Realised gains/(losses) on gas derivative contracts | 297,387 | (289,877)
Put premiums on gas derivative instruments | (3,590) | (42,347)
| 2,319,811 | 2,598,482

The majority of payment terms are on a specified monthly date, as detailed in the initial contract. Otherwise, payment is due within 30 days of the invoice date. No significant judgements have been made in determining the timing of
satisfaction of performance obligations, the transactions price and the amounts allocated to performance obligations. Other income relates to tariff income receivable in the year.
Revenue from two customers exceeded 10% of the Group’s consolidated revenue arising from hydrocarbon sales for the year ended 31 December 2023, representing $1,296 million and $436 million of revenue respectively
(2022: one customer representing $2,436 million of revenue).
Revenue from contracts with customers derives largely from customers within a single geographical region, being the United Kingdom. Revenue from contracts with customers out with the United Kingdom is immaterial and is therefore
not disclosed separately.
6. Cost of sales

| 2023 | 2022 |
| US$’000 | US$’000 |
Movement in oil and gas inventory (including underlift/overlift) | 20,582 | (130,295) |
Operating costs of hydrocarbon activities | (576,660) | (547,795) |
Materials inventory provision | (16,268) | – |
Royalties | (4,364) | (11,287) |
Depreciation on right-of-use assets (note 15) | (42,648) | (37,43 | 8)
Depletion, depreciation and amortisation (note 15) | (697,652) |  | (625,509)
| (1,317,010) |  | (1,352,324)

Royalty costs represent 3.34% of Stella and Harrier field revenue paid to the original licence holders. Ithaca holds a 100% interest in the Stella and Harrier fields.
Notes to the consolidated financial statements continued
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7. Administrative expenses

| 2023 | 2022
| US$’000 | US$’000
Administrative expenses excluding transaction costs | (34,259) | (41,762)
Transaction costs | – | (46,089)
| (34,259) | (87,8 51)

Transactions costs in 2022 relate to the acquisitions of Marubeni Oil & Gas Limited (MOGL), Summit Exploration and Production Limited (Summit) and Siccar Point Energy entities, and costs incurred in connection to the IPO.
Further details on the acquisitions can be found in note 17.
The total employee benefit expenses which are either capitalised or included in cost of sales, pre-licence exploration and evaluation expenses and administrative expenses are noted below.
Employee benefit expenses

| 2023 | 2022
| US$’000 | US$’000
Wages and salaries | (104,027) | (81,017)
Share-based payment charges (note 32) | (16,369) | (14,069)
Social security costs | (12,290) | (9,902)
Pension costs | (9,997) | (8,298)
| (142,683) | (113,286)

Disclosures on Directors’ remuneration, share options, long-term incentive schemes and pension entitlements required by the Companies Act 2006 are contained in the tables and notes within the Directors’ remuneration report on
pages 112 to 136. Directors’ emoluments in aggregate were $13.4 million (2022: $18.1 million).
The average number of employees during each year was as follows:

| 2023 | 2022
Onshore and administrative | 316 | 268
Offshore | 283 | 249
| 599 | 517

The increase in average employee numbers in 2023 reflects the full-year impact of acquisitions made in 2022 and the conversion of a number of contractor roles to staff positions.
176 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
7. Administrative expenses continued
Audit fees

| 2023 | 2022
| US$’000 | US$’000
Fees payable to the Company’s auditor for audit of the Company’s financial statements | 1,286 | 1,095
Audit of the Company’s subsidiaries pursuant to legislation | 326 | 324
Non-audit fees provided by the auditors | 205 | 4,707
| 1,817 | 6,126

Non-audit fees provided by the auditors for the year ended 31 December 2023 comprise audit-related assurance services of $205k (2022: $170k), other assurance services of $nil (2022: $990k) and other non-audit services of $nil
(2022: $3,547k), with the latter two captions in 2022 relating to reporting accountant workstreams in relation to the IPO.
8. Other gains and losses

| 2023 | 2022
| US$’000 | US$’000
Gain/(loss) on financial instruments (note 29) | 43,059 | (278)
Fair value losses on contingent consideration (note 25) | (8,008) | (4,295)
Remeasurements of decommissioning reimbursement receivables | 5,645 | –
Net foreign exchange | (1,673) | (4,856)
Settlement of historic claim relating to an acquisition | 50,068 | –
| 89,091 | (9,429)

On 12 February 2023, the Group reached agreement on the settlement of a historic claim relating to an acquisition. Under the terms of the agreement the Group received $50.1 million.
9. Finance costs and finance income

| 2023 | 2022
| US$’000 | US$’000
Loan interest and charges | (47,494) | (58,317)
Senior notes interest | (58,377) | (61,537)
Loan fee amortisation | (4,508) | (6,418)
Interest on lease liabilities (note 24) | (3,183) | (3,852)
Interest on related-party loan (note 31) | – | (17,924)
Accretion | (76,162) | (56,511)
Realised gains on interest derivative contracts (note 29) | – | 851
Total finance costs | (189,724) | (203,708)
Interest income | 5,688 | 695

There was no interest capitalised into qualifying assets in either the year to 31 December 2023 or the year to 31 December 2022.
Notes to the consolidated financial statements continued
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10. Earnings per share
The calculation of basic earnings per share is based on the profit after tax and the weighted average number of ordinary shares in issue during the year. Basic and diluted earnings per share are calculated as follows:

| 2023 | 2022
| US$’000 | US$’000
Earnings for the year: |  |
Earnings for the purpose of basic and diluted earnings per share | 215,635 | 1,031,532
Number of shares (million) |  |
Weighted average number of ordinary shares for the purpose of basic earnings per share | 1,006.7 | 1,005.2
Dilutive potential ordinary shares | 12.7 | 5.0
Weighted average number of ordinary shares for the purpose of diluted earnings per share | 1,019.4 | 1,010.2
Earnings per share (cents) |  |
Basic | 21.4 | 102.6
Diluted | 21.2 | 102.1

1
11. Trade and other receivables
Current

| 2023 | 2022
| US$’000 | US$’000
Trade receivables | 19,968 | 31,906
Other receivables | 24,369 | 14,210
Joint operations receivables | 91,960 | 99,800
Accrued income | 197,993 | 214,078
| 334,290 | 359,994

Materially all trade and other receivables, including receivables from joint operations are not overdue by more than 90 days. The credit risk associated with trade receivables, accrued income and other receivables is considered to be
insignificant. No ECL has been recognised in the current or prior year.
178 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
11. Trade and other receivables continued
Non-current

| 2023 | 2022
| US$’000 | US$’000
Decommissioning reimbursements | 165,064 | 162,710

Current

| 2023 | 2022
| US$’000 | US$’000
Decommissioning reimbursements | 30,417 | 38,115

Movements on decommissioning reimbursements were as follows:

| 2023 | 2022
| US$’000 | US$’000
At 1 January | 200,825 | 246,824
Accretion | 7,536 | 5,946
Reimbursements received | (22,101) | (23,418)
Change in reimbursement estimates | 9,221 | (28,527)
At 31 December | 195,481 | 200,825

The decommissioning reimbursements represent the equal and opposite of decommissioning liabilities (note 23), net of tax, associated with the Heather and Strathspey fields and relates to a contractual agreement as part of the
CNSL acquisition. As part of the terms of the CNSL acquisition, Chevron have the obligation to provide the security and remain financially responsible for the decommissioning obligations of CNSL in relation to these interests.
The Group pays the liabilities in respect of Heather and Strathspey and then receives full reimbursement from Chevron.
As these payments are virtually certain they have been accounted for under IAS 37 as a reimbursement asset.
12. Prepaid expenses and decommissioning securities
Current

| 2023 | 2022
| US$’000 | US$’000
Prepayments | 34,355 | 7,415
Decommissioning securities | 3,323 | 1,640
| 37,678 | 9,055

Notes to the consolidated financial statements continued
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13. Inventories
Current

| 2023 | 2022
| US$’000 | US$’000
Hydrocarbon underlift | 60,427 | 87, 563
Materials inventories | 125,674 | 124,755
Provision for obsolete materials inventory | (35,605) | (35,437)
| 150,496 | 176,881

14. Exploration and evaluation assets

| US$’000
At 1 January 2022 | 116,355
Additions | 42,168
Acquisitions (note 17) | 706,558
Transfers to development and production assets (note 15) | (75,005)
Write offs/relinquishments | (14,303)
At 31 December 2022 and 1 January 2023 | 775,773
Additions | 165,516
Transfers to right-of-use operating assets and development and production assets (note 15) | (379,301)
Write offs/relinquishments | (13,634)
At 31 December 2023 | 548,354

Following completion of geotechnical evaluation activity, certain North Sea licences were declared unsuccessful and certain prospects were declared non-commercial. This resulted in the carrying value of these licences being fully
written off to $nil with $13.6 million being expensed in the year to 31 December 2023 (2022: $14.3 million).
The transfers from exploration and evaluation assets to development and production assets in 2023 relates to the Rosebank development. Transfers in 2022 related to the Abigail and Jade South wells.
Included within additions in the year is equity acquired in the Cambo and Fotla developments acquired from Shell U.K. Limited and Spirit Energy Resources Limited respectively.
The write offs/relinquishments includes $nil (2022: $5.3 million) impairment relating to decommissioning revisions.
The principal component of exploration and evaluation assets at 31 December 2023 is the Cambo field with a carrying value of $391 million (2022: Cambo $364 million and Rosebank $315 million) which formed part of the
Siccar acquisition (see note 17).
180 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
15. Property, plant and equipment

| Right-of-use | Development and |  | Other |  |
| operating assets | production assets |  | fixed assets | Total |
| US$’000 | US$’000 |  | US$’000 | US$’000 |
Cost |  |  |  |  |  |
At 1 January 2022 | 9,210 | 5,838,178 |  | 40,293 | 5,887,681 |
Additions | 89,717 | 362,844 |  | 5,619 | 458,180 |
Acquisitions (note 17) | – | 1,115,023 |  | – | 1,115,023 |
Transfers from exploration and evaluation assets (note 14) | – | 75,005 |  | – | 75,005 |
Change in decommissioning estimates (note 23) | – | (278,398) |  | – | (278,398) |
At 31 December 2022 and 1 January 2023 | 98,927 | 7,112,652 |  | 45,912 | 7, | 257,491
Additions | 26,468 | 358,361 |  | 1,728 | 386,557
Transfers from exploration and evaluation assets (note 14) | 30,774 | 348,527 |  | – | 379,301
Change in decommissioning estimates (note 23) | – | 157,224 |  | – | 157,224
At 31 December 2023 | 156,169 | 7,976,764 | 47,64 | 0 | 8,180,573
Depletion, depreciation, amortisation and impairment |  |  |  |  |  |
At 1 January 2022 | (5,429) | (2,909,695) |  | (13,824) | (2,928,948)
Depletion, depreciation and amortisation charge for the year | (37,438) | (615,261) |  | (10,248) | (662,947)
Impairment charge (note 19) | – | (30,700) |  | – | (30,700)
At 31 December 2022 and 1 January 2023 | (42,867) | (3,555,656) |  | (24,072) | (3,622,595)
Depletion, depreciation and amortisation charge for the year | (42,648) | (693,573) |  | (4,079) | (740,300)
Impairment charge (note 19) | – | (559,472) |  | – | (559,472)
At 31 December 2023 | (85,515) | (4,808,701) |  | (28,151) | (4,922,367)
Net book value at 31 December 2022 | 56,060 | 3,556,996 |  | 21,840 | 3,634,896
Net book value at 31 December 2023 | 70,654 | 3,168,063 |  | 19,489 | 3,258,206 |

The transfers from exploration and evaluation assets to development and production assets in 2023 relates to the Rosebank development following consent being granted for the development by the North Sea Transition Authority
(NSTA) on 27 September 2023. Subsequent to this, environmental campaigners Uplift and Greenpeace UK announced that they are separately seeking judicial review by the Court of Session in Edinburgh with respect to the decision
by the NSTA and the Secretary of State for Energy to approve the Rosebank development. In 2022 the transfers related to the Abigail and Jade South wells. At the point of transfer these assets were tested for impairment and none
was found.
Additions to right of use assets in the year to 31 December 2023 principally relate to modifications to the Rosebank FPSO and will begin to be depreciated on commencement of production. The related lease will commence on delivery
of the FPSO to the joint venture partners at first oil which is currently anticipated to be 2026/27.
Other fixed assets includes buildings, computer equipment, office equipment and furniture and fittings.
Notes to the consolidated financial statements continued
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16. Interests in joint operations
The contractual agreement for the licence interests in which the Group has an investment do not typically convey control of the underlying joint arrangement to any one party, even where one party has a greater than 50% equity
ownership of the area of interest.
The Group’s material joint operations as at 31 December are as follows:

|  |  |  | Group net % interest |
Block | Licence | Field/discovery name | Operator | 2023 | 2022
9/11c | P.979 | Mariner | Equinor UK Limited | 8.89% | 8.89%
9/11b | P.726 | Mariner | Equinor UK Limited | 8.89% | 8.89%
30/2c | P.6 72 | Jade | Chrysaor Petroleum Company UK Limited | 25.50% | 25.50%
22/30c and 29/5c | P.666 | Elgin-Franklin | TotalEnergies E&P UK Limited | 6.09% | 6.09%
15/29b | P.59 0 | Callanish | Chrysaor Production (UK) Limited | 20.00% | 20.00%
204/25a | P.559 | Schiehallion | BP Exploration Operating Company Limited | 35.30% | 35.30%
204/19b and 204/20b | P. 556 | Suilven | Ithaca SP E&P Limited | 50.00% | 50.00%
29/5b | P. 362 | Elgin-Franklin | TotalEnergies E&P UK Limited | 6.09% | 6.09%
21/4a | P.3 47 | Callanish | Chrysaor Production (UK) Limited | 13.70% | 13.70%
16/27b | P.345 | Britannia | Ithaca MA Limited | 35.75% | 35.75%
9/11a | P. 335 | Mariner | Equinor UK Limited | 8.89% | 8.89%
13/22a | P.324 | Captain | Ithaca SP E&P Limited | 85.00% | 85.00%
22/18a | P.292 | Arbroath, Arkwright, Carnoustie, Wood | Repsol Sinopec Resources UK Limited | 41.03% | 41.03%
22/17s, 22/22a and 22/23a | P.291 | Arbroath, Arkwright, Brechin, Carnoustie, Cayley, Shaw | Repsol Sinopec Resources UK Limited | 41.03% | 41.03%
23/26b | P.26 4 | Erskine | Ithaca Energy (UK) Limited | 50.00% | 50.00%
9/11d and 9/12b | P. 2 5 0 8 | Mariner | Equinor UK Limited | 8.89% | 8.89%
22/1b | P. 2 37 3 | F Block (Fotla and Fortriu) | Ithaca Oil and Gas Limited | 100.00% | 60.00%
15/18b | P.2158 | Marigold | Ithaca Oil and Gas Limited | 100.00% | 100.00%
9/11g | P. 2151 | Mariner | Equinor UK Limited | 8.89% | 8.89%
16/26a A-ALB | P.21 3 | Alba | Ithaca Oil and Gas Limited | 36.67% | 36.67%
16/26a B-BRI | P.213 | Britannia | Ithaca MA Limited | 33.17% | 33.17%
16/26a | P.213 | N/A | Ithaca Oil and Gas Limited | 34.50% | 34.50%
3/7a | P.20 3 | Columba E | CNR International (UK) Limited | 20.00% | 20.00%
3/8a and 3/8a | P.1 9 9 | Columba B/D | CNR International (UK) Limited | 5.60% | 5.60%

182 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC182 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Notes to the consolidated financial statements continued

|  |  |  | Group net % interest |
Block | Licence | Field/discovery name | Operator | 2023 | 2022
22/30b | P.1 8 8 | Elgin-Franklin | TotalEnergies E&P UK Limited | 6.09% | 6.09%
21/20a | P.185 | Cook | Ithaca SP E&P Limited | 61.35% | 61.35%
8/15a | P.17 58 | Mariner | Equinor UK Limited | 8.89% | 8.89%
29/10b | P.16 65 | Abigail | Ithaca SP E&P Limited | 100.00% | 100.00%
30/7b | P.1589 | Jade | Chrysaor Petroleum Company UK Limited | 25.50% | 25.50%
30/1f | P.158 8 | Vorlich | Ithaca MA Limited | 100.00% | 100.00%
30/1c | P. 3 63 | Vorlich | Ithaca MA Limited | 34.00% | 34.00%
205/2a | P.1272 | Rosebank | Equinor UK Limited | 20.00% | 20.00%
205/1a | P.11 91 | Rosebank | Equinor UK Limited | 20.00% | 20.00%
15/29a | P.119 | Alder | Ithaca Energy (UK) Limited | 73.68% | 73.68%
15/29a | P.119 | Britannia | Ithaca MA Limited | 75.00% | 75.00%
204/4a and 204/5a | P.1189 | Cambo | Ithaca SP E&P Limited | 100.00% | 70.00%
21/3a | P.118 | Brodgar | Chrysaor Production (UK) Limited | 25.00% | 25.00%
23/22a | P.111 | Pierce | Enterprise Oil Limited | 34.01% | 34.01%
15/30a | P.10 3 | Britannia | Chrysaor Production (UK) Limited | 33.03% | 33.03%
21/5a | P.10 3 | Enochdhu | Chrysaor Production (UK) Limited | 50.00% | 50.00%
204/9a and 204/10a | P.1028 | Cambo | Ithaca SP E&P Limited | 100.00% | 70.00%
213/26b and 213/27a | P.1026 | Rosebank | Equinor UK Limited | 20.00% | 20.00%
23/26a | P.057 | Erskine | Ithaca Energy (UK) Limited | 50.00% | 50.00%
22/18n | P.020 | Montrose | Repsol Sinopec Resources UK Limited | 41.03% | 41.03%
22/17n, 22/17s, 22/22a and 22/23a | P.019 | Godwin, Montrose | Repsol Sinopec Resources UK Limited | 41.03% | 41.03%
30/6a and 29/10a | P.011 | Stella/Harrier | Ithaca Energy (UK) Limited | 100.00% | 100.00%
30/11a and 30/12d | P.18 20 | Isabella | Total Energies E&P North Sea UK Limited | 10.00% | 10.00%
204/8, 204/9c, 204/10c, 204/13, 204/14d | P.24 0 3 | Tornado | Ithaca SP E&P Limited | 50.00% | 50.00%
and 204/15 |  |  |  |  |

16. Interests in joint operations continued
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17. Business combinations
There were no acquisitions during 2023. In 2022, the fair values of the identifiable assets and liabilities as at the acquisition dates were:

| MOGL | Siccar | Summit
| 2022 | 2022 | 2022
| US$’000 | US$’000 | US$’000
Property, plant and equipment (note 15) | 322,590 | 668,700 | 101,933
Exploration and evaluation assets (note 14) | – | 706,558 | –
Cash | 170,629 | 88,638 | 18,799
Inventory | 2,781 | – | –
Trade and other receivables | 36,617 | 32,627 | 10,513
| 532,617 | 1,496,523 | 131,245
Trade and other payables | (5,436) | (52,616) | (20,407)
Oil inventory overlift | – | (2,626) | (2,806)
Decommissioning provisions | (253,393) | (121,022) | (16,116)
Financial instruments | – | (82,899) | –
Borrowings | – | (200,000) | –
| (258,829) | (459,163) | (39,329)
Deferred tax asset | 742,281 | 1,334,221 | 6,446
Deferred tax liability | (86,001) | (550,103) | (40,773)
| 656,280 | 784,118 | (34,327)
Total identifiable net assets at fair value | 930,068 | 1,821,478 | 57,589
Consideration satisfied by cash | (107,811) | (1,015,346) | (119,362)
Deferred consideration | (63,415) | – | –
Contingent consideration | (139,320) | (102,111) | –
Consideration | (310,546) | (1,117,457) | (119,362)
Gain on bargain purchase/(goodwill) arising on acquisition | 619,522 | 704,021 | (61,773)
Net cash flows relating to acquisition | 62,818 | (926,708) | (100,563)

1
1. Net cash flows relating to the MOGL acquisition includes a $7 million deposit paid in the year ended 31 December 2021.
184 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC184 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
17. Business combinations continued
MOGL
On 4 February 2022, the Group completed the acquisition of 100% of the issued share capital of MOGL. The transaction added a further non-operated share in nine producing field interests (known as MonArb) to the existing
Ithaca portfolio.
Taking into account the interim period cash flows generated by MOGL since the transaction effective date of 1 January 2021, the $7 million deposit paid at signing of the transaction in November 2021 and conventional working capital
adjustments, the price payable at completion of the acquisition was $108 million. A deferred consideration of $63 million and risked contingent consideration of $139 million, discounted at 2.5% were recognised at acquisition, resulting
in a gain on bargain purchase of $620 million.
The contingent consideration arrangement on MOGL depends on whether various milestones in the Sale and Purchase Agreement (SPA) are met as follows: set gross export production volume from Montrose Infill Project Phase 1,
set cumulative gross export production volume following Arbroath well reinstatements, set gross export production volume from next new well in the Shaw Field and, an amount payable during the Value Sharing Period (1 January 2022
to 31 December 2024) in relation to sales in excess of a set oil trigger price. The amount payable in relation to sales in excess of a set oil trigger price is capped under the terms of the SPA.
The contingent consideration is subsequently revalued at each year-end date.
The gain on bargain purchase arising on the MOGL acquisition was principally a result of recognising a deferred tax asset arising from tax losses of $745 million, which were not forecast to be utilised by MOGL, as allowed under IFRS 3
fair value accounting for business combinations. The gain was also partially attributed to the extended period from effective date of 1 January 2021 to the completion date of 4 February 2022 during which time hydrocarbon prices rose
significantly. The gain on bargain purchase of $620 million was credited to income in the year ended 31 December 2022.
Siccar Point Energy
On 30 June 2022, the Group completed the acquisition of 100% of the issued share capital of Siccar Point Energy (Holdings) Limited (Siccar Point Energy) and its UK subsidiaries. The transaction added a further two producing assets
(Mariner 8.89% and Schiehallion 11.75%), an additional 5.57% increase to the Group’s existing equity in Jade, and three development prospects (Rosebank 20%, Cambo 70% at date of acquisition and Tornado 50%) to the existing
Group portfolio.
Taking into account the interim period cash flows generated by Siccar since the transaction effective date of 1 January 2022 and conventional working capital adjustments, the price payable at completion of the acquisition was
$1.015 billion. A risked contingent consideration of $102 million was recognised, resulting in a gain on bargain purchase of $704 million.
The contingent consideration arrangement on Siccar Point Energy depends on whether various milestones of the SPA are met as follows: redemption of acquired bond as at repayment date, Final Investment Decision and the associated
reserves in respect of the Cambo and Rosebank fields and, an amount paid in relation to sales in excess of a set floor oil price. The amount payable in relation to sales in excess of a set oil trigger price is capped under the terms of the SPA.
The contingent consideration is subsequently revalued at each year-end date.
Notes to the consolidated financial statements continued
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17. Business combinations continued
The gain on bargain purchase arising on the Siccar Point Energy transaction was principally as a result of recognising a deferred tax asset arising from tax losses of $1,334 million as allowed under IFRS 3 fair value accounting
for business combinations. The gain on bargain purchase of $704 million was credited to income in the year ended 31 December 2022.
On acquisition of Siccar Point Energy, the Group acquired a $200 million bond. On 28 July 2022 a Group of bondholders exercised their right to redeem and subsequently $166.4 million was paid to these bondholders. Subsequently,
in September 2022, notes totalling $25.6 million were bought back at a premium of 6% by the Group. The remaining notes totalling $8.0 million were redeemed on 12 October 2022 and there was no remaining balance at 31 December 2022.
Summit
On 30 June 2022, the Group completed the acquisition of 100% of the issued share capital of Summit. The transaction added a further 2.1875% ownership of the Elgin Franklin field interest within the existing Group portfolio.
Taking into account the interim period cash flows generated by Summit since the transaction effective date of 1 January 2021, the $10 million deposit paid at signing of the transaction in February 2022 and conventional working capital
adjustments, the price payable at completion of the acquisition was $119 million and goodwill of $62 million was recognised. The goodwill recognised can be attributed to the increase in the Group’s equity interest in the Elgin Franklin
field and the corresponding impact of EPL, which was announced between effective date and completion, on the fair values at acquisition.
There are no contingent consideration arrangements under the Sale and Purchase Agreement of the Summit assets.
No contingent liabilities have been acquired on the business combinations detailed above.
The fair values of the oil and gas assets and the intangible assets acquired have been determined using valuation techniques based on discounted cash flows using forward curve commodity prices and estimates of long-term commodity
prices reflective of market conditions at each completion date, a discount rate based on observable market data and cost and production profiles generally consistent with the proved and probable reserves acquired with each asset.
The decommissioning liabilities recognised have been estimated based on operator cost estimates with reference to observable market data.
18. Goodwill

| 2023 | 2022
| US$’000 | US$’000
Balance at 1 January | 783,848 | 722,075
Additions (note 17) | – | 61,773
Balance at 31 December | 783,848 | 783,848

The goodwill is not tax deductible on any of the acquisitions.
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18. Goodwill continued
The goodwill on acquisition in the year to 31 December 2022 relates to the Summit acquisition, as detailed in note 17.
Annual impairment tests were performed at both 31 December 2023 and 31 December 2022. These reviews were carried out on a fair value less cost of disposal basis using risk adjusted cash flow projections from the approved
business plans including the same commodity prices, life of field cost profiles and production volumes used for impairment of oil and gas assets (see note 19), discounted at a post-tax discount rate of 10.3% (2022: 10.9%). Assumptions
and estimates in the Group impairment models are detailed in note 3. An increase of 1% in the discount rate assumption would not result in a post-tax impairment of goodwill. Goodwill is monitored, and tested for impairment, at the
operating segment level, being the North Sea (the entire Group portfolio of oil and gas assets). This is consistent with the operating segment view of the business which is presented to the Board and the Chief Decision Maker.
The Group’s activities are considered to be an individual operating segment due to the uniform nature of the Group’s operations within a single geographical area, overseen by the same management and subject to the same regulations.
The fair value estimate is categorised as level 3 in the fair value hierarchy.
19. Impairment charge on oil and gas assets

| 2023 | 2022
| US$’000 | US$’000
D&P assets | (559,472) | (30,700)
E&E assets | – | (1,867)
Other movements | 1,536 | –
Contingent consideration reversal | – | 1,100
North Sea oil and gas assets | (557,936) | (31,467)

The impairment charge on D&P assets of $559.5 million (2022: $30.7 million) primarily relates to Alba of $141.3 million and the Greater Stella Area (GSA) of $373.2 million. The charge in 2022 reflected revisions in decommissioning
provisions, principally on fields that are no longer producing.
Estimated production volumes and cash flows used in impairment reviews are considered up to the date of cessation of production on a field-by-field basis, including operating and capital expenditure and are derived from management
approved business plans.
An impairment review was carried out at the end of 2023 on the Group’s producing assets with the main triggers being a reduction in future reserves on Alba, a decrease in short-term forward oil prices against all oil producing CGUs and
a decrease in short-term gas prices for GSA and other predominantly gas-producing CGUs with relatively short remaining useful economic lives. The review was carried out on a fair value less cost of disposal basis using risk adjusted cash
flow projections discounted at a post-tax discount rate of 10.3%, and represents level 3 in the fair value hierarchy. The recoverable amount (post tax) for Alba and GSA was $nil and $29.7 million respectively.
The following assumptions, as supported by third-party analysis, were used at Q4 2023 in developing the cash flow model and applied over the expected life of the respective fields:

| Post-tax |  |  | Price assumptions (nominal) |  |
| discount rate |  |  |  |  |
| assumption | 2024 | 2025 | 2026 | 2027 | 2028
Oil | 10.3% | $85/bbl | $83/bbl | $87/bbl | $90/bbl | $93/bbl
Gas | 10.3% | 101p/therm | 96p/therm | 83p/therm | 85p/therm | 87p/therm

1
1. Post-2028 an annual 2% increase is applied to the price assumptions.
With all other assumptions held constant and supported by third-party analysis, a 20% decrease in the forecast revenues, illustrating lower commodity prices and/or production volumes, would result in an additional post-tax impairment
of PP&E of $22 million (2022: $13 million) at 31 December 2023. A 20% increase in forecast revenues would reduce the reported post-tax impairment by $26 million. An increase or decrease of 1% in the discount rate assumption
would not result in a material additional post-tax impairment or reversal of impairment of PP&E.
Notes to the consolidated financial statements continued
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19. Impairment charge on oil and gas assets continued
The Group has also conducted a sensitivity scenario on the climate-related risk of a reduction in demand and commodity prices for oil and gas due to changing consumer preferences and/or government regulations.
Utilising the Climate scenario’s average oil price while maintaining all other parameters in line with the base case would result in an immaterial effect on additional post-tax impairment as at 31 December 2023.
To calculate the Climate Scenario average oil price, the Group utilised data from both the International Energy Agency (IEA) climate scenarios (NZ, STEPS, APS) and the World Business Council for Sustainable Development
(WBCSD) data catalogue. Management’s base case assumption aligns substantially with climate-adjusted curves for gas and carbon emission prices; hence, no supplementary sensitivity analysis has been presented.
An impairment review was also carried out at the end of 2022 on the Group’s producing assets with the main trigger being the implementation of the Energy Profits Levy (EPL) in the second half of 2022. The review demonstrated that
there was no requirement to impair any of the Group’s producing assets. The review was carried out on a fair value less cost of disposal basis using risk adjusted cash flow projections discounted at a post-tax discount rate of 10.9%.
The following assumptions, as supported by third-party analysis, were used at Q4 2022 in developing the cash flow model and applied over the expected life of the respective fields:

| Post-tax |  |  | Price assumptions (nominal) |  |
| discount rate |  |  |  |  |
| assumption | 2023 | 2024 | 2025 | 2026 | 2027
Oil | 10.9% | $89/bbl | $84/bbl | $83/bbl | $83/bbl | $83/bbl
Gas | 10.9% | 315p/therm | 211p/therm | 99p/therm | 86p/therm | 86p/therm

1
1. Post 2027 an annual 2% is applied to the price assumptions.
Estimated production volumes and cash flows up to the date of cessation of production on a field-by-field basis, including operating and capital expenditure, are derived from the approved business plans and third-party reports.
20. Borrowings

| 2023 | 2022
| US$’000 | US$’000
Current |  |
Accrued interest costs on borrowings | (29,913) | –
| (29,913) | –
Non-current |  |
RBL facility | – | (600,000)
Senior unsecured notes | (625,000) | (625,000)
bp unsecured loan | (100,000) | –
Unamortised long-term bank fees | 4,555 | 7,591
Unamortised long-term senior notes fees | 2,207 | 3,678
Total debt | (718,238) | (1,213,731)

Accrued interest on borrowings has been re-classed in the current year from accruals (within trade and other payables) to borrowings, to reflect the current payable in respect of borrowings. The prior year equivalent of $21.7 million has
not been adjusted for this change as it is not material and remains within accruals for the year ended 31 December 2022.
Adjusted net debt, which does not include accrued interest on borrowings, lease liabilities or unamortised fees, is set out in non-GAAP measures on pages 221 to 223.
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20. Borrowings continued
Reserves Based Lending (RBL) facility
During 2021, the Group completed a refinancing to amend and extend the RBL facility. The RBL commitment was approximately $1.225 billion with a maturity to 2026, and subject to interest at a reference rate of SOFR plus 3.5%.
At 31 December 2023, due to the NPV cap described in the covenants section below, the total availability was $725 million (2022: $925 million), of which none (2022: $600 million) was drawn down, leaving an amount of $725 million
(2022: $325 million) being available for drawdown. Subsequent to 31 December 2023, RBL liquidity increased from $725 million to $836 million.
Loan fees of $15.2 million relating to the RBL were capitalised and are being amortised over the term of the loan, $4.6 million (2022: $7.6 million) remains to be amortised as at 31 December 2023.
The RBL facility is secured by the assets of the guarantor members of the Group, such security including share pledges, floating charges and/or debentures. Total assets pledged as security at 31 December 2023 was $6,247 million
(2022: $6,760 million).
Senior notes
In 2021, the Group completed the refinancing of its senior unsecured notes with the issuance of $625 million 9% senior unsecured notes due July 2026 and repayment in full of the notes issued during 2019. Loan fees of $7.4 million
relating to the new senior notes were capitalised and are being amortised over the life of the loan, $2.2 million (2022: $3.7 million) remains to be amortised as at 31 December 2023.
Covenants in relation to these senior notes are detailed below.
On acquisition of Siccar Point Energy on 30 June 2022, the Group acquired their existing $200 million 9% senior unsecured notes due March 2026. The Group also acquired $5.8 million of accrued interest in relation to these senior notes.
On 1 August 2022, a settlement was made as a result of the exercise of the put option on the notes and a combined holding of $166.4 million exercised the put option. Subsequently, in September 2022, notes totalling $25.6 million were bought
back at a premium of 6% by the Group. The remaining notes totalling $8.0 million were fully redeemed on 12 October 2022.
bp facility
During the year to 31 December 2023, a new $100 million five-year facility was entered into with bp which is subject to an interest rate of SOFR plus a commercially agreed margin. The loan is unsecured, is due for repayment in 2028
and was fully drawn at 31 December 2023 (2022: $nil). Fees of $0.5 million were incurred on drawdown.
Optional project capital expenditure facility
During the year to 31 December, a carry arrangement of up to $150 million was entered into relating to a field development. The carry is repayable by instalment expected to be from 2027. Under the terms of the arrangement,
interest is payable at a rate of SOFR (subject to a minimum of 5%) plus a commercially agreed margin. The carry arrangement was undrawn at 31 December 2023.
Covenants
The Group is subject to financial and operating covenants related to the RBL facility. Failure to meet the terms of one or more of these covenants may constitute an event of default as defined in the facility agreements, potentially
resulting in accelerated repayment of the debt obligations. The Group was in compliance with all its relevant quarterly financial and operating covenants during all periods shown for the RBL facility and acquired senior notes. There are
no ongoing maintenance or financial covenant tests associated with the $625 million unsecured notes.
In addition to the below financial covenants, the Group is subject to restrictive covenants under the RBL facility and 2026 notes, restricting the Group, to, amongst other things: make certain payments (including, subject to certain
exceptions, dividends and other distributions), with respect to outstanding share capital; repay or redeem subordinated debt or share capital; create or incur certain liens; make certain acquisitions and investments or loans; sell, lease
or transfer certain assets, including shares of any of the Group’s restricted subsidiaries; incur expenditure on exploration and appraisal activities in excess of approved levels; guarantee certain types of the Group’s other indebtedness;
expand into unrelated businesses; merge or consolidate with other entities; or enter into certain transactions with affiliates.
Notes to the consolidated financial statements continued
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20. Borrowings continued
The key financial covenants in the RBL are:
• The parent shall ensure that as at the end of each Relevant Period (starting with the Relevant Period ending on 30 November 2021) the ratio of adjusted net debt to adjusted EBITDAX shall be less than 3.5:1. ‘Adjusted net debt’
referred to is not an IFRS measure. The Company uses adjusted net debt as a measure to assess its financial position. Adjusted net debt comprises amounts outstanding under the Company’s RBL facility, bp facility and senior notes,
less cash and cash equivalents;
• Total projected sources of funds must exceed the total projected uses of funds for the following 12-month period (or a longer period to first production from development, if applicable);
• The ratio of the net present value of cash flows secured under the RBL for the economic life of the fields to the amount drawn under the facility must not fall below 1.15:1; and
• The ratio of the net present value of cash flows secured under the RBL for the life of the debt facility to the amount drawn under the facility must not fall below 1.05:1.
The Group was in compliance with all financial covenants of the RBL facility in all periods presented.
21. Changes in liabilities arising from financing activities

|  |  |  |  |  | Non-cash changes |  |  |
|  | Financing cash |  |  | Fair value |  |  | Other |
| 1 January 2023 | flows (i) | Additions | Imputed interest | movements | Amortisation | Debt waiver | movements (ii) | 31 December 2023
| US$’000 | US$’000 | US$’000 | US$’000 | US$’000 | US$’000 | US$’000 | US$’000 | US$’000
Borrowings (note 20) | 1,213,731 | (596,642) | – | – | – | 4,507 | – | 126,554 | 748,150
Lease liabilities | 58,858 | (45,085) | 3,603 | – | – | – | – | 3,183 | 20,559
Interest rate derivatives (note 29) | (7,125) | 6,967 | – | – | (479) | – | – | – | (637)
Total liabilities from financing activities | 1,265,464 | (634,760) | 3,603 | – | (479) | 4,507 | – | 129,737 | 768,072

|  |  |  |  |  | Non-cash changes |  |  |
|  | Financing cash |  |  | Fair value |  |  | Other |
| 1 January 2022 | flows (i) | Additions | Imputed interest | movements | Amortisation | Debt waiver | movements (ii) | 31 December 2022
| US$’000 | US$’000 | US$’000 | US$’000 | US$’000 | US$’000 | US$’000 | US$’000 | US$’000
Borrowings (note 20) | 954,616 | 50,000 | 200,000 | – | – | 4,508 | – | – | 1,213,731
Parent Company debt (note 31) | 437,076 | (273,055) | – | 17,924 | – | – | (181,945) | – | –
Lease liabilities | 3,489 | (38,200) | – | – | – | – | – | 93,569 | 58,858
Interest rate derivatives (note 29) | (133) | 851 | – | – | (7,8 43) | – | – | – | (7,125)
Total liabilities from financing activities | 1,395,048 | (260,404) | 200,000 | 17, 924 | (7,843) | 4,508 | (181,945) | 98,176 | 1,265,464

(i) The cash flows from borrowings, Parent Company debt, lease liabilities and interest rate derivatives make up the net amount of proceeds from borrowings and repayments of borrowings in the cash flow statement.
(ii) Other movements include interest accruals and new liabilities in the year.
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22. Trade and other payables

| 2023 | 2022
| US$’000 | US$’000
Trade payables | (34,559) | (14,917)
Hydrocarbon amounts owed to joint operations/overlift | (72,486) | (124,365)
Other payables | (68,034) | (185,720)
Accruals | (254,781) | (299,604)
Deferred income | (48,747) | (86,806)
| (478,607) | (711,412)

The Directors consider the carrying values of trade and other payables to approximate the fair value. Other payables mainly comprises amounts owed due to production adjustments and amounts owed to joint operations partners.
Deferred income represents receipts in advance of deliveries to customers. The prior year deferred income was recognised in revenue in the current year.
23. Decommissioning liabilities

| 2023 | 2022
| US$’000 | US$’000
Balance at 1 January | (1,720,540) | (1,641,489)
Business combination additions | – | (390,530)
Accretion | (74,621) | (52,592)
Additions and revisions to estimates | (160,069) | 298,564
Decommissioning provision utilised | 95,552 | 65,507
Balance at 31 December | (1,859,678) | (1,720,540)
Current |  |
Balance at 1 January | (146,829) | (94,640)
Balance at 31 December | (107,026) | (146,829)
Non-current |  |
Balance at 1 January | (1,573,711) | (1,546,849)
Balance at 31 December | (1,752,652) | (1,573,711)

Additions and revisions to estimates comprise $157,224k (2022: $(278,398)k) of development and production assets and $2,845k (2022: $(20,166)k) of exploration and evaluation assets.
The total future decommissioning liability represents the estimated cost to decommission, in situ or by removal, the Group’s net ownership interest in all wells, infrastructure and facilities, based upon forecast timing in future periods.
The Group uses a nominal discount rate of 4.60% (31 December 2022: 4.25%) and an inflation rate of 2.0% (31 December 2022: 2.0%) over the varying lives of the assets to calculate the present value of the decommissioning
liabilities. The impact of a change in discount rate is considered in note 3. Revisions to estimates in the years ended 31 December 2023 and 2022 were due to changes in both cost estimates and discount rate assumptions.
The estimated 2024 decommissioning spend of $107 million (2022: estimated 2023 decommissioning spend of $147 million) has been treated as a current liability as at 31 December 2023. Although the Group currently expects to
incur decommissioning costs over the next 40 years, it is estimated that approximately 47% of the decommissioning liability relates to assets which are expected to cease production in the next five years and which includes spend for
assets that will be reimbursed (see note 11 for further details).
Notes to the consolidated financial statements continued
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24. Lease liabilities
Current

| 2023 | 2022
| US$’000 | US$’000
Lease liabilities | (19,898) | (41,637)

Non-current

| 2023 | 2022
| US$’000 | US$’000
Lease liabilities | (660) | (17,221)

The following table sets out a maturity analysis of lease payments, showing the undiscounted lease payments to be paid after the reporting date. All lease liabilities are fully payable within two years from 31 December 2023.

| 2023 | 2022
| US$’000 | US$’000
Less than one year | (20,152) | (44,257)
One to two years | (669) | (17,439)
Total undiscounted lease payments | (20,821) | (61,696)
Future finance charges and other adjustments | 263 | 2,838
Lease liabilities in the financial statements | (20,558) | (58,858)

| 2023 | 2022
| US$’000 | US$’000
At 1 January | (58,858) | (3,489)
Additions | (3,603) | (89,717)
Interest | (3,183) | (3,852)
Payments | 45,086 | 38,200
At 31 December | (20,558) | (58,858)
Current | (19,898) | (41,637)
Non-current | (660) | (17,221)
| (20,558) | (58,858)

The additions in the year to 31 December 2023 relate to modifications of the Captain Emergency Response and Recovery Vehicle lease.
The addition in the year to 31 December 2022 relates to the Pioneer rig lease currently utilised on the Captain EOR project. The incremental borrowing rate applied to the lease is 6.07%.
If the Company were to terminate the use of the Pioneer rig early then termination fees would apply, escalating to 75% of total expected costs if within one month prior to commencement date of planned works. Remuneration for work
performed up to the date of termination, together with costs relating to demobilisation of the drilling unit to the demobilisation port would also be due.
Amounts recognised in profit and loss related to leases is detailed in notes 6 and 9.
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25. Contingent and deferred consideration
Current

| 2023 | 2022
| US$’000 | US$’000
Contingent consideration | (101,669) | (101,559)
Petrofac deferred consideration | – | (6,121)
| (101,669) | (107,680)

Non-current

| 2023 | 2022
| US$’000 | US$’000
Contingent consideration | (194,721) | (157,337)
MOGL deferred consideration | (63,979) | (61,783)
| (258,700) | (219,120)

| 2023 | 2022
| US$’000 | US$’000
Cash flows relating to contingent and deferred considerations | (13,567) | (66,132)

Movement in contingent consideration is as follows:

| 2023 | 2022
| US$’000 | US$’000
At 1 January | (258,896) | (19,480)
Business combinations (note 17) | – | (241,431)
Addition | (26,872) | –
Payments made | 7, 20 0 | 11,040
Reversal | – | 1,100
Accretion | (9,814) | (5,830)
Changes in fair value | (8,008) | (4,295)
At 31 December | (296,390) | (258,896)

Movement in deferred consideration consideration is as follows:

| 2023 |  | 2022
| US$’000 |  | US$’000
At 1 January | (67,90 | 4) | (55,610)
Business combinations (note 17) |  | – | (63,415)
Payments made |  | 6,367 | 55,156
Accretion |  | (2,442) | (4,035)
At 31 December |  | (63,979) | (67,904)

Notes to the consolidated financial statements continued
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25. Contingent and deferred consideration continued
Cash outflows in the year ended 31 December 2023 of $13.6 million (2022: $66.1 million) are in relation to the consideration payable on Petrofac GSA transaction and quarterly payments in consideration to the MOGL and Siccar oil
price triggers.
MOGL
During the year ended 31 December 2022 the Group acquired MOGL which included elements of consideration that are payable upon certain events occurring and contingent considerations have been recognised to reflect this.
Further details regarding the acquisition and the related contingent terms are set out in note 17. The carrying amount at 31 December 2023, discounted at 4.6% was $111 million (2022: $128 million using a discount rate of 4.25%).
The total undiscounted potential consideration as at 31 December 2023 is $230 million (2022: $241 million).
The MOGL deferred consideration of $64 million (2022: $62 million) relates to completion of the MOGL transaction in February 2022. It is payable on 1 July 2025 and is discounted to reflect the time value of money.
Siccar
During the year ended 31 December 2022 the Group acquired Siccar Point Energy which included elements of consideration that are payable upon certain events occurring and contingent considerations have been recognised to
reflect this. Further details regarding the acquisition and the related contingent terms are set out in note 17. The carrying amount at 31 December 2023, discounted at 4.6% was $130 million (2022: $102 million using a discount rate of
4.25%). The total undiscounted potential consideration as at 31 December 2023 is $362 million (2022: $362 million). As a result of the Rosebank field obtaining FDP approval during 2023, the carrying amount at 31 December 2023
has been increased.
Others
During the year ended 31 December 2023, the Group acquired a further 30% equity in the Cambo field from Shell. The acquisition included elements of consideration that are payable upon certain events occurring and contingent
consideration has been recognised to reflect this. The consideration value equates to $1.50 per barrel of oil equivalent of the P50 resource volumes of the field, and is payable on the earlier of receipt of proceeds of any subsequent sale
of a working interest in Cambo by the Group, or first oil. The carrying amount at 31 December 2023 was $12.7 million (2022: $nil).
During the year ended 31 December 2023, the Group acquired 40% equity in the Fotla field from Spirit. The acquisition included elements of consideration that are payable upon certain events occurring and contingent consideration
has been recognised to reflect this. The consideration comprises two capped amounts with approximately two-thirds payable on final investment decision and one-third on first production. The carrying amount at 31 December 2023
was $14.2 million (2022: $nil).
A further $3.0 million (2022: $6.4 million) relates to Yeoman/Marigold, with a remaining unrisked payment of $11.0 million (2022: $11.0 million) contingent on achieving FDP and a further $6.0 million (2022: $6.0 million) unrisked
on certain production criteria being met.
During the year ended 31 December 2023, further consideration of $5.7 million (2022: $6.4 million) was recognised as an additional payable due to changes in the variables in the calculation of the liability, resulting in $25.6 million
(2022: $19.9 million) liability on Strathspey in accordance with the Sale and Purchase Agreement with Chevron.
Revaluation of contingent consideration in the year to 31 December 2023 resulted in an increase of $8.0 million (2022: increase of $4.3 million).
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26. Reserves
(a) Issued share capital
The issued share capital is as follows:

| Number of | Amount
| common shares | US$’000
At 31 December 2022 | 1,006,564,976 | 11,445
At 31 December 2023 | 1,014,372,281 | 11,540

On 5 October 2023, 7,807,305 ordinary shares of £0.01 each were issue to the Ithaca Energy plc Employee Benefit Trust (EBT) to satisfy the exercise of share options during the year and in future years.
On 26 October 2022 the Company undertook a share capital reduction whereby 114,000,000 issued A ordinary shares of $1.00 each were cancelled and extinguished. In addition on this date the share premium account as at 31 December
2021 of $634,658,000 was cancelled. A number of further steps followed in preparation for the IPO including the conversion of $1.00 shares to £0.88 shares, the conversion of £0.88 shares to £0.01 shares, the issue of bonus shares principally
to existing shareholders and the issue of 105,000,000 new shares on the IPO. As a result the issued share capital of the Company immediately after the IPO was 1,005,162,217 ordinary shares of £0.01 each.
A reconciliation of the opening to closing number of shares in the year to 31 December 2022 is set out below:

|  |  | Number of shares |  |
| A ordinary | B1 ordinary | B2 ordinary | Ordinary | Total
A ordinary shares of $1.00 each at 1 January 2022 | 1,001 | – | – | – | 1,001
Issue of new $0.01 B1 shares and $0.01 B2 shares | – | 100 | 100 | – | 200
Issue of new $1.00 A ordinary shares | 114,000,000 | – | – | – | 114,000,000
Cancellation of $1.00 A ordinary shares relating to capital reduction | (114,000,000) | – | – | – | (114,000,000)
Conversion of $1.00 A ordinary shares, $0.01 B1 share and 0.01 B2 share to £0.01 A ordinary shares | 87,087 | (12) | (12) | – | 87,063
Bonus issue of new £0.01 A shares | 898,131,843 | – | – | – | 898,131,843
Bonus issue of new £0.01 B1 shares | – | 1,401,670 | – | – | 1,401,670
Bonus issue of new £0.01 B2 shares | – | – | 420,440 | – | 420,440
Conversion of £ 0.01 A ordinary shares, £0.01 B1 shares and £0.01 B2 shares to £0.01 ordinary shares | (898,219,931) | (1,401,758) | (420,528) | 900,042,217 | –
Bonus issues of £0.01 ordinary shares | – | – | – | 120,000 | 120,000
Issue of new £0.01 ordinary shares on IPO | – | – | – | 105,000,000 | 105,000,000
Issue of new £0.01 ordinary shares on exercise of share options | – | – | – | 1,402,759 | 1,402,759
Ordinary shares of £0.01 each at 31 December 2022 | – | – | – | 1,006,564,976 | 1,006,564,976

Notes to the consolidated financial statements continued
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26. Reserves continued
(b) Share premium

| 2023 | 2022
| US$’000 | US$’000
At 1 January | 293,712 | 634,658
Share premium cancellation | – | (634,658)
Additions | 15,133 | 293,712
At 31 December | 308,845 | 293,712

The share premium account represents the cumulative difference between the market share price and the nominal share value on the issuance of new ordinary shares multiplied by the number of shares issued.
Additions during 2023 represent the difference between the nominal value per share of £0.01 and the closing share price on the day before the shares were issued to the EBT multiplied by the number of shares.
During 2022, the additions represent the difference between the nominal value per share of £0.01 and IPO price of £2.50 per share multiplied by the number of shares issued (net of share issues expenses).
(c) Capital contribution reserve

| 2023 | 2022
| US$’000 | US$’000
At 1 January | 181,945 | 114,000
Capital reduction | – | (114,000)
Addition | – | 181,945
At 31 December | 181,945 | 181,945

During the year to 31 December 2022, the Company settled outstanding loan liabilities (including interest) of DKL Energy Limited (DKLE) out of IPO proceeds. As per the terms of the confirmation letter dated 29 November 2022
signed between DKLE and the Company, DKLE unconditionally and irrevocably released and forever discharged Ithaca Energy plc from any and all liabilities to the DKLE in respect of or in connection with the Capital and Subordinated
loan note agreements. The remaining loan balance of $181.9 million has been capitalised as Capital Contribution Reserve as per the requirements of IFRS 9.
(d) Own shares

| 2023 | 2022
| US$’000 | US$’000
At 31 December | (12,412) | –

Own shares comprise shares held in the Ithaca Energy plc EBT which are being used to satisfy the exercise of employee share options. During the year, 7,807,305 ordinary shares of £0.01 each were issued to the EBT and 1,443,561
ordinary shares were used to satisfy the exercise of share options. In addition, 1,822,286 ordinary shares of £0.01 each waived under the MEP (see note 32) were transferred into the EBT during the year. As a result, the EBT held
8,186,030 ordinary shares of £0.01 each at 31 December 2023.
(e) Share-based payment reserve (note 32)

| 2023 | 2022
| US$’000 | US$’000
At 31 December | 15,494 | 4,920

The share-based payment reserve represents the cumulative charge for share options, as described in note 32, less the cumulative cost of share option exercises.
196 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC196 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
27. Taxation

| 2023 | 2022
| US$’000 | US$’000
Current tax |  |
Current corporation tax charge | (39,308) | (54,557)
Current EPL tax charge | (333,425) | (131,389)
Current corporation tax (charge)/credit – prior year | (17,426) | 1,839
Total current tax charge | (390,159) | (184,107)
Deferred tax |  |
Adjustment in respect of prior period | 6,370 | (641)
Group tax credit/(charge) in consolidated statement of profit or loss | 227,360 | (1,013,817)
Group tax charge in consolidated statement of other comprehensive income | (71,700) | (200,455)
Total deferred tax credit/(charge) | 162,030 | (1,214,913)
Deferred Petroleum Revenue Tax |  |
Deferred PRT credit/(charge) in statement of profit or loss | 70,037 | (10,432)
Total tax charge through consolidated statement of profit or loss | (86,392) | (1,208,997)

Notes to the consolidated financial statements continued
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27. Taxation continued
The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the 40% statutory rate of tax applicable for UK ring fence oil and gas activities as follows:

| 2023 | 2022
| US$’000 | US$’000
Accounting profit before tax | 302,027 | 2,240,529
At tax rate of 40% (2022: 40%) | (120,811) | (896,211)
Non-deductible expense | (34,578) | (53,548)
Recognition of non-taxable gain on bargain purchase | – | 534,069
Financing costs not allowed for SCT | (704) | (1,958)
Ring Fence Expenditure Supplement | 102,866 | 155,113
Deferred tax effect of investment allowance | 56,930 | (20,615)
Prior year adjustment | (11,673) | 1,198
Deferred PRT net of corporation tax | 42,022 | (6,259)
Deferred tax on EPL | 215,910 | (766,489)
Current tax on EPL | (333,425) | (131,389)
Prior year adjustments on acquired entities | – | (3,165)
Share-based payments | 1,945 | –
Unrecognised tax losses | (4,874) | (19,743)
Total tax charge recorded in the consolidated statement of profit or loss | (86,392) | (1,208,997)

The Company is UK tax resident. The effective rate of corporation tax applicable for UK ring fence oil and gas activities in both 2023 and 2022, prior to the introduction of the EPL, was 40% (2022: 40%) consisting of a Ring Fence
Corporation Tax rate of 30% and the supplementary charge of 10%. Items affecting the tax charge include a 10% uplift on ring fence losses, Ring Fence Expenditure Supplement increasing the losses available to offset future profits subject
to Ring Fence Corporation Tax and Supplementary Charge. In addition, investment allowance, a 62.5% uplift on capital expenditure, is available reducing the profits subject to the supplementary charge only. The credit arising in 2023 of
$42.0 million was principally due the impairment of the Alba field due to forecast future production volumes. Petroleum Revenue Tax (PRT) is applied at 0% on certain oil and gas fields in the UK however adjustments to recognised deferred
PRT assets are made to reflect updated expectations of reversal against profits subject to the 0% PRT rate. The EPL was enacted in July 2022 with effect from 26 May 2022, at a headline rate of 25% which increased the effective UK Ring
Fenced oil and gas rate to 65% until 2025, resulting in additional current and deferred tax charges in the year to 31 December 2022. Further changes to the EPL were announced on 17 November 2022 and enacted in December 2022
whereby the Levy was increased to 35% from 1 January 2023 until 31 March 2028, increasing the effective UK Ring Fenced oil and gas tax rate to 75% resulting in an additional deferred tax charge during the year to 31 December 2022.
Deferred tax at 31 December relates to the following:

| 2023 | 2022
| US$’000 | US$’000
Deferred corporation tax liability | (1,944,941) | (2,258,813)
Deferred corporation tax asset | 2,480,921 | 2,629,548
Deferred PRT asset | 91,759 | 21,721
Net deferred tax asset | 627,738 | 392,456

Deferred tax assets primarily relate to decommissioning liabilities, brought forward tax losses and accumulated losses and profits related to derivative contracts. Deferred tax liabilities primarily relate to accelerated capital allowances
on property, plant and equipment and accumulated losses and profits related to derivative contracts. Deferred tax balances are presented net as they arise in the same jurisdiction and the Group has a legally-enforceable right to offset
as well as an intention to settle on a net basis.
198 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC198 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
27. Taxation continued
Non-oil and gas losses of $251 million (2022: $156 million), of which there is no expiry date, have not been recognised for deferred tax purposes as it is not sufficiently certain that there will be future non-oil and gas profits to offset
these losses.
The net movement on deferred tax in the statement of financial position, including deferred PRT, is as follows:

| 2023 | 2022
| US$’000 | US$’000
At 1 January | 392,456 | 220,918
Profit or loss credit/(charge) | 303,767 | (1,024,889)
Other comprehensive income charge | (71,700) | (200,455)
Deferred tax on decommissioning reimbursements (note 11) | 3,214 | –
Business combinations (note 17) | – | 1,396,882
At 31 December | 627,738 | 392,456

The net movement on deferred tax through the consolidated statement of profit or loss and consolidated statement of comprehensive income relates to the following:

| 2023 | 2022
| US$’000 | US$’000
Accelerated capital allowances | 438,359 | (490,246)
Tax losses | (216,937) | (386,819)
Decommissioning provision | 52,440 | (124,598)
Deferred PRT | (28,015) | 4,173
Hedging | (101,744) | (226,040)
Share schemes | 3,978 | –
Investment allowances | 13,950 | 8,617
| 162,030 | (1,214,913)

Notes to the consolidated financial statements continued
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27. Taxation continued
Gross deferred corporation tax liabilities

|  | Deferred |  |  |
|  | corporation tax on | Accelerated tax |  |
| Hedges | deferred PRT | depreciation | Total |
| US$’000 | US$’000 | US$’000 | US$’000 |
At 1 January 2022 | – | (12,861) | (675,279) | (688,140) |
Prior year adjustment | – | – | (4,347) | (4,347) |
Reclassification of decommissioning asset | – | – | (436,771) | (436,771) |
Business combinations | – | – | (647,743) | (6 47,74 | 3)
Origination and reversal of temporary differences | – | 4,173 | (485,985) |  | (481,812)
At 31 December 2022 and 1 January 2023 | – | (8,688) | (2,250,125) |  | (2,258,813)
Reclass to deferred corporation tax assets | (8,678) | – | – |  | (8,678)
Prior year adjustment | 2,721 | – | 8,307 |  | 11,028
Origination and reversal of temporary differences | (101,744) | (28,015) | 441,281 |  | 311,522
At 31 December 2023 | (107,701) | (36,703) | (1,800,537) |  | (1,944,941)

Gross deferred corporation tax assets

|  | Decommissioning |  |  |
| Share schemes | provision | Tax losses | Hedges | Total
| US$’000 | US$’000 | US$’000 | US$’000 | US$’000
At 1 January 2022 | – | 197,666 | 500,282 | 178,956 | 876,904
Prior year adjustment | – | – | 3,706 | – | 3,706
Reclassification of decommissioning asset | – | 436,772 | – | – | 436,772
Business combinations | – | 156,212 | 1,858,706 | 38,406 | 2,053,324
Origination and reversal of temporary differences | – | (124,598) | (390,520) | (226,040) | (741,158)
At 31 December 2022 and 1 January 2023 | – | 666,052 | 1,972,174 | (8,678) | 2,629,548
Reclass from deferred corporation tax liabilities | – | – | – | 8,678 | 8,678
Prior year adjustment | 177 | – | (4,989) | – | (4,812)
Origination and reversal of temporary differences | 3,802 | 55,654 | (211,949) | – | (152,493)
At 31 December 2023 | 3,979 | 721,706 | 1,755,236 | – | 2,480,921

200 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC200 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
27. Taxation continued

| Total
Deferred PRT asset | US$’000
At 1 January 2022 | 32,154
Origination and reversal of temporary differences | (10,433)
At 31 December 2022 and 1 January 2023 | 21,721
Origination and reversal of temporary differences | 70,037
At 31 December 2023 | 91,758

The carrying value of the net deferred tax asset (DTA) and the deferred PRT asset at 31 December 2023 of $536 million and $92 million respectively (2022: $371 million and $21 million respectively) are supported by estimates of
the Group’s future taxable income, based on the same price and cost assumptions as used for impairment testing. The Group has undertaken a restructuring exercise to move certain assets between Group entities which has now been
substantially completed. The recoverability of the deferred corporation tax asset is supported by this restructuring. The DTA relating to losses within the Group are expected to unwind against taxable profits before the end of 2029.
An EPL or ‘Levy’ was enacted on 14 July 2022 applying a Levy of 25% to the profits of oil and gas companies until 31 December 2025 or earlier if prices return to normalised levels. On 17 November 2022, the Levy was increased to
35% and extended to 31 March 2028 regardless of oil and gas prices. The Levy is charged upon oil and gas profits calculated on the same basis as Ring Fence Corporation Tax (RFCT), however, excludes relief for decommissioning and
finance costs. RFCT losses and investment allowance are not available to offset the EPL. On 9 June 2023 an Energy Security Investment Mechanism price floor was announced which would remove the EPL if both average oil and gas
prices fall to, or below, $71.40 per barrel for oil and £0.54 per therm for gas, for two consecutive quarters. It is not currently forecast that this price floor will be met for both oil and gas prices and therefore there is currently no impact
from this on tax carrying values. On 6 March 2024 an extension of the Levy until 31 March 2029 was announced. If this had been enacted at the balance sheet date, it is estimated that this would have increased the deferred tax liability
by $112.2 million.
On 20 June 2023, Finance (No. 2) Act 2023 was substantially enacted in the UK, introducing a global minimum effective tax rate of 15%. The legislation implements a domestic top-up tax and a multinational top-up tax, effective for
all accounting periods starting on or after 31 December 2023. The Group does not anticipate that the adoption of this will have a material impact as the prevailing rate of tax in the United Kingdom is in excess of the 15% minimum rate.
The Group has applied the exemption under IAS 12 to recognising and disclosing information about deferred tax assets and liabilities related to top-up income taxes and therefore there is no impact on the tax values reported.
28. Commitments and contingencies

| 2023 | 2022
| US$’000 | US$’000
Capital commitments |  |
Capital commitments incurred jointly with other venturers (Group’s share) | 506,959 | 52,309

The Group’s capital expenditure is driven largely by full phase expenditure on existing producing fields, new development projects and appraisal and development activities. As of 31 December 2023, the Group had commitments
for future capital expenditure amounting to $507 million (2022: $52.3 million). The key component of this relates to Rosebank, following FID approval in September 2023. Additionally, there are commitments in relation to AFEs
(authorisations for expenditure) signed for activities on Captain enhanced oil extraction.
Contingencies
The Group enters into letters of credit and surety bonds to provide security for the Group’s obligations under certain field and bi-lateral decommissioning security agreements, or equivalent, Sullom Voe Terminal Tariff Agreements and
deferred payment obligations. The instruments are either held by the Law Debenture Trust Corporation P.L.C. under a trust deed or EnQuest Heather Limited, as SVT Terminal Operator. At 31 December 2023 the Group had $450
million (31 December 2022: $469 million) in letters of credit and surety bonds outstanding relating to security obligations under certain decommissioning and security agreements.
Notes to the consolidated financial statements continued
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29. Financial instruments
To estimate the fair value of financial instruments, the Group uses quoted market prices when available, or industry accepted third-party models and valuation methodologies that utilise observable market data. In addition to market
information, the Group incorporates transaction specific details that market participants would utilise in a fair value measurement, including the impact of non-performance risk. The Group characterises inputs used in determining
fair value using a hierarchy that prioritises inputs depending on the degree to which they are observable. However, these fair value estimates may not necessarily be indicative of the amounts that could be realised or settled in a current
market transaction. The three levels of the fair value hierarchy are as follows:
• Level 1 – inputs represent quoted prices in active markets for identical assets or liabilities (for example, exchange-traded commodity derivatives). Active markets are those in which transactions occur in sufficient frequency and
volume to provide pricing information on an ongoing basis.
• Level 2 – inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly, as of the reporting date. Level 2 valuations are based on inputs, including quoted forward prices for commodities, market
interest rates and volatility factors, which can be observed or corroborated in the marketplace. The Group obtains information from sources such as the New York Mercantile Exchange and independent price publications.
• Level 3 – inputs that are less observable, unavailable or where the observable data does not support the majority of the instrument’s fair value.
In forming estimates, the Group utilises the most observable inputs available for valuation purposes. If a fair value measurement reflects inputs of different levels within the hierarchy, the measurement is categorised based upon the
lowest level of input that is significant to the fair value measurement. The valuation of over-the-counter financial swaps and collars is based on similar transactions observable in active markets or industry standard models that primarily
rely on market observable inputs. Substantially all of the assumptions for industry standard models are observable in active markets throughout the full term of the instrument. These are categorised as Level 2.
Gains or losses on financial instruments, that are not hedge accounted for, are recorded through the ‘other gains and losses’ line in the consolidated statement of profit or loss. Credit valuation adjustments (CVA) and debit valuation
adjustments (DVA) are calculated for each trade using two key inputs, being future exposures and credit spreads (incorporating both probability of default and loss given default). Future exposures have been estimated using an expected
exposure-based approach over the lifetime of the trades. For the risk associated with counterparties, the credit spread is calculated using market observable credit default spreads. For the own credit risk, the credit spread is calculated
using reference to a senior unsecured quoted publicly traded bond of the parent entity using appropriate tenor adjustments, except for out-of-the-money derivatives with counterparties which are in the Group’s RBL. These derivatives
rank higher than those with other counterparties as they are fully secured as part of the RBL agreement. Therefore for the own risk credit risk adjustment (DVA) it has been estimated that the loss given default is zero and hence there is
no DVA recognised for those derivatives which are with counterparties of the RBL.
All of the Group’s assets are pledged as security against borrowings.
The accounting classification of each category of financial instruments and their carrying amounts as at 31 December 2023 are set out below:

|  | Mandatorily | Derivatives |
|  | measured at fair | designated |
| Measured at | value through | in hedge | Total carrying
| amortised cost | profit or loss | relationships | amount
| US$’000 | US$’000 | US$’000 | US$’000
Financial assets |  |  |  |
Cash and cash equivalents | 153,215 | – | – | 153,215
Trade and other receivables | 330,351 | – | – | 330,351
Derivative financial instruments | – | 2,782 | 154,525 | 157,307
Financial liabilities |  |  |  |
Borrowings | (748,151) | – | – | (748,151)
Trade and other payables | (343,279) | – | – | (343,279)
Lease liability | (20,559) | – | – | (20,559)
Contingent and deferred consideration | (63,979) | (296,390) | – | (360,369)
Derivative financial instruments | – | (10,373) | (3,335) | (13,708)
|  |  |  | (845,193)

202 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC202 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Notes to the consolidated financial statements continued
29. Financial instruments continued
The accounting classification of each category of financial instruments and their carrying amounts as at 31 December 2022 are set out below:

|  |  | Mandatorily | Derivatives |
|  |  | measured at fair | designated |
| Measured at |  | value through | in hedge | Total carrying
| amortised cost |  | profit or loss | relationships | amount
| US$’000 |  | US$’000 | US$’000 | US$’000
Financial assets |  |  |  |  |
Cash and cash equivalents | 253,822 |  | – | – | 253,822
Trade and other receivables | 359,994 |  | – | – | 359,994
Derivative financial instruments | – |  | 7,125 | 164,924 | 172,049
Financial liabilities |  |  |  |  |
Borrowings | (1,213,731) |  | – | – | (1,213,731)
Trade and other payables | (618,460) |  | – | – | (618,460)
Lease liability | (58,858) |  | – | – | (58,858)
Contingent and deferred consideration | (67,9 | 0 4) | (258,896) | – | (326,800)
Derivative financial instruments |  | – | (57,546) | (106,563) | (164,109)
|  |  |  |  | (1,596,093)

The following table presents the Group’s material financial instruments measured at fair value for each hierarchy level as at 31 December 2023:

| Level 1 | Level 2 | Level 3 | Total Fair Value
| US$’000 | US$’000 | US$’000 | US$’000
Contingent consideration (note 25) | – | (24,039) | (272,351) | (296,390)
Derivative financial instrument asset | – | 157,307 | – | 157,307
Derivative financial instrument liability | – | (13,708) | – | (13,708)

Movements in level 3 financial instruments in the 12 months to 31 December 2023 were as follows:

| US$’000
At 1 January 2023 | (223,246)
Additions | (26,872)
Cash settlement | –
Accretion | (8,799)
Changes in fair value | (13,434)
At 31 December 2023 | (272,351)

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29. Financial instruments continued
The following table presents the Group’s material financial instruments measured at fair value for each hierarchy level as at 31 December 2022:

| Level 1 | Level 2 | Level 3 | Total Fair Value
| US$’000 | US$’000 | US$’000 | US$’000
Contingent consideration (note 25) | – | (35,650) | (223,246) | (258,896)
Derivative financial instrument asset | – | 172,049 | – | 172,049
Derivative financial instrument liability | – | (164,109) | – | (164,109)

Movements in level 3 financial instruments in the 12 months to 31 December 2022 were as follows:

| US$’000
At 1 January 2022 | (19,480)
Business combinations | (210,096)
Release of provision | 1,100
Accretion | (5,208)
Changes in fair value | 10,438
At 31 December 2022 | (223,246)

Management has considered alternative scenarios to assess the valuation of the contingent consideration including, but not limited to, the key accounting estimate relating to the oil price. A reduction or increase in the price assumptions
of 20% are considered to be reasonably possible changes. A 20% reduction in the oil price would result in a decrease in contingent consideration of $23.3 million (2022: $36.4 million). A 20% increase in the oil price would lead to an
increase in contingent consideration of $41.0 million (2022: $26.4 million).
The level three contingent consideration is valued based on the probability of the events occurring (“trigger events”) as set out in note 17. The forecast cash flows in the event of the trigger event occurring are discounted at a rate of 4.6%
(2022: 4.25%).
The following table summarises the sensitivity of 20% change in probability of trigger event occurring and conditions being met for payment of contingent consideration, with all other variables held constant, of the Group’s profit before
tax due to changes in the carrying value of level 3 financial instruments at the reporting date. The impact on equity is the same as the impact on profit before tax.
Change in probability

| 2023 | 2022
| US$’000 | US$’000
20% decrease in probability | 97,119 | 87,0 8 0
20% increase in probability | (84,086) | (83,612)

The following table summarises the sensitivity of 1% decrease in discount rate, with all other variables held constant, of the Group’s profit before tax due to changes in the carrying value of level 3 financial instruments at the reporting
date. The impact on equity is the same as the impact on profit before tax.
Change in discount rate

| 2023 | 2022
| US$’000 | US$’000
1% decrease in discount rate | (5,284) | (4,374)

A 1% increase in discount rate would have the equal but opposite effect to the amounts shown above, on the basis that all other variables remain constant.
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29. Financial instruments continued
Financial instruments of the Group consist mainly of cash and cash equivalents, receivables, payables, loans and financial derivative contracts, all of which are included in the financial statements. At 31 December 2023 and
31 December 2022, financial instruments and the carrying amounts reported on the balance sheet approximates the fair values with the exception of borrowings. The carrying amount of borrowing is at amortised cost of $748.2 million
(2022: $1,213.7 million) and the equivalent fair value is $781.4 million (2022: $1,257.9 million) per level 1 of the fair value hierarchy.
The table below presents the total gain on financial instruments that has been disclosed through the consolidated statement of profit or loss:

| 2023 | 2022
| US$’000 | US$’000
Revaluation of forex forward contracts | 7,313 | (28,172)
Revaluation of interest rate swaps | (6,488) | –
Revaluation of commodity hedges | 42,006 | 44,959
Total revaluation gain on financial instruments | 42,831 | 16,787
Realised loss on forex forward contracts | (6,282) | –
Realised gain on interest rate swaps | 6,967 | –
Realised loss on commodity hedges | (457) | (16,215)
Total gain on financial instruments | 43,059 | 572

Cash flow hedge reserve
The table below presents the movement in financial instruments that has been disclosed through the statement of comprehensive income relating to the cash flow hedge reserve:
Cash flow hedge reserve

| 2023 | 2022
| US$’000 | US$’000
At 1 January | 16,710 | (242,791)
Change in fair value of derivative instruments | 358,141 | (46,800)
Amounts recycled to revenue | (265,711) | 501,513
Amounts recycled to finance costs | – | (851)
Deferred tax on movement in year | (69,322) | (194,361)
Cash flow hedge reserve at 31 December | 39,818 | 16,710

Notes to the consolidated financial statements continued
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29. Financial instruments continued
Cost of hedging reserve
The table below presents the movement in financial instruments that has been disclosed through the statement of comprehensive income relating to the cost of hedging reserve:
Cost of hedging reserve

| 2023 | 2022
| US$’000 | US$’000
At 1 January | 3,275 | (4,862)
Change in fair value of the intrinsic value of derivative instruments | (12,269) | (42,745)
Amounts recycled to revenue – oil put premiums | 11,850 | 14,629
Amounts recycled to revenue – gas put premiums | 3,590 | 42,347
Deferred tax on movement in year | (2,378) | (6,094)
Cost of hedging reserve at 31 December | 4,068 | 3,275

The Group has identified that it is exposed principally to these areas of market risk.
i) Commodity risk
Commodity price risk related to crude oil prices is the Group’s most significant market risk exposure. Crude oil prices and quality differentials are influenced by worldwide factors such as OPEC actions, political events and supply
and demand fundamentals. The Group is also exposed to natural gas price movements on uncontracted gas sales. Natural gas prices, in addition to the worldwide factors noted above, can also be influenced by local market conditions.
The Group’s expenditures are subject to the effects of inflation, and prices received for the product sold are not readily adjustable to cover any increase in expenses from inflation. The Group may periodically use different types of
derivative instruments to manage its exposure to price volatility, thus mitigating fluctuations in commodity-related cash flows.
In all periods presented the Group has designated certain commodity options as a cash flow hedge of highly probable sales. Because the critical terms (i.e. the quantity, maturity and underlying price) of the commodity option and
their corresponding hedged items are the same, the Group performs a qualitative assessment of effectiveness and it is expected that the intrinsic value of the commodity option and the value of the corresponding hedged items will
systematically change in opposite direction in response to movements in the price of underlying commodity if the price of the commodity increases above the strike price of the derivative. The main source of hedge ineffectiveness in
these hedge relationships is the effect of the counterparty and the Group’s own credit risk on the fair value of the option contracts, which is not reflected in the fair value of the hedged item and if the forecast transaction will happen
earlier or later than originally expected. There was no hedge ineffectiveness in the current or prior year.
The Group’s target is to hedge oil and gas prices up to a maximum of 75% of the next 12 months’ production on a rolling annual basis, up to 50% in the following 12-month period and 25% in the subsequent 12-month period. On a rolling
12-month period under the RBL, the Group is required to hedge a minimum of 70% of volumes of net RBL entitlement production expected to be produced in the next 12 months, and 50% of volumes of net RBL entitlement produced
for the following 12 months on a best-effort basis.
The below represents total commodity hedges in place at the 2023 year-end:

Derivative | Term | Volume |  | Average price
Oil swaps | Jan 24 – Dec 24 | 1,931,500 | bbls | $82/bbl
Oil collars | Jan 24 – Dec 24 | 2,744,000 | bbls | $75/bbl floor – $87/bbl ceiling
Gas swaps | Jan 24 – Dec 24 | 53,175,000 | therms | 140p/therm
Gas swaps | Jan 25 – Sep 25 | 18,225,000 | therms | 120p/therm
Gas collars | Jan 24 – Dec 24 | 123,350,000 | therms | 135p/therm floor – 210p/therm ceiling
Gas collars | Jan 25 – Mar 25 | 9,000,000 | therms | 130/therm floor – 185p/therm ceiling

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29. Financial instruments continued
The below represents total commodity hedges in place at the 2022 year-end:

Derivative | Term | Volume |  | Average price
Oil swaps | Jan 23 – Jun 24 | 3,390,500 | bbls | $70/bbl
Oil collars | Jan 23 – Dec 23 | 4,560,000 | bbls | $68/bbl floor – $91/bbl ceiling
Gas swaps | Jan 23 – Jun 24 | 104,585,000 | therms | 188p/therm
Gas puts | Apr 23 – Sep 23 | 9,150,000 | therms | 220p/therm
Gas collars | Jan 23 – Mar 24 | 100,200,000 | therms | 244p/therm floor – 479p/therm ceiling

The following table summarises the sensitivity of 20% decrease in realised commodity prices, with all other variables held constant, of the Group’s profit before tax due to changes in the carrying value of monetary assets and liabilities at
the reporting date. The impact on equity is the same as the impact on profit before tax.
Change in realised commodity price

| 2023 | 2022
| US$’000 | US$’000
20% decrease in realised oil price | (177,151) | (246,914)
20% decrease in realised gas price | (146,794) | (330,285)

A 20% increase in realised commodity prices would have the equal but opposite effect to the amounts shown above, on the basis that all other variables remain constant.
ii) Interest risk
The calculation of interest payments for the RBL facility and bp unsecured loan incorporate SOFR. The Group is therefore exposed to interest rate risk to the extent that SOFR may fluctuate. The Group mitigates the risk of SOFR
fluctuations by entering into interest rate swaps on floating rates.
There were no material interest rate financial instruments in place at 31 December 2023.
The below represents interest rate financial instruments in place at the 2022 year end:

| Derivative Term | Value | Rate
Interest rate swap (floating to fixed) | Jan 22 – Dec 23 | $150 million | 0.398%

The following table summarises the sensitivity of an increase of 250 basis points in interest rate, with all other variables held constant, of the Group’s profit before tax due to changes in the carrying value of monetary assets and liabilities
at the reporting date.
Change in interest rate

| 2023 | 2022
| US$’000 | US$’000
Increase of 250 basis points | (22,370) | (11,126)

A decrease in 250 basis points in interest rates would have the equal but opposite effect to the amounts shown above, on the basis that all other variables remain constant.
iii) Foreign exchange rate risk
The Group is exposed to foreign exchange risks to the extent it transacts in various currencies, while measuring and reporting its results in US Dollars. Since time passes between the recording of a receivable or payable transaction and its
collection or payment, the Group is exposed to gains or losses on non-US Dollar amounts and on balance sheet translation of monetary accounts denominated in non-US Dollar amounts upon spot rate fluctuations from year-to-year.
Notes to the consolidated financial statements continued
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29. Financial instruments continued
As at 31 December 2023 the Group had an average of £10.2 million per quarter hedged at an average forward rate of $1.219:£1 for the period January to December 2024. As at 31 December 2023 the Group had an average of £30.3
million per quarter hedged at an average collar floor of $1.200:£1 and average collar ceiling of $1.230:£1 for the period January to December 2024.
As at 31 December 2022 the Group had an average of £5.5 million per quarter hedged at an average forward rate of $1.265:£1 for the period January to December 2023. As at 31 December 2022 the Group had no open FX collars.
The following table summarises the sensitivity to a reasonably possible change in the US Dollar to Sterling foreign exchange rate, with all other variables held constant, of the Group’s profit before tax due to changes in the carrying value
of monetary assets and liabilities at the reporting date. The impact on equity is the same as the impact on profit before tax. The Group’s exposure to foreign currency changes for all other currencies is not material.
Change in Sterling foreign exchange rate

| 2023 | 2022
| US$’000 | US$’000
10% weakening of Sterling against the US Dollar | (123,033) | (139,633)

A 10% strengthening of Sterling against the US Dollar would have had the equal but opposite effect to the amounts shown above, on the basis that all other variables remain constant.
iv) Credit risk
The majority of the Group’s trade and other receivables are with customers in the oil and gas industry are subject to normal industry credit risks and are unsecured. Customers of the Group are mainly oil and gas majors with good credit
ratings and low credit risk. Oil production from Stella, Vorlich, Jade and Abigail fields is sold to ENI, Columba is sold to Repsol, Mariner to Equinor ASA, Pierce to Shell International Trading, and Captain, Alba, Cook, Forties (including
MonArb) and Schiehallion fields to BP Oil International. Forties fields (including MonArb), Stella, Vorlich, Jade and Abigail gas is sold to BP Gas Marketing. Cook gas is sold to Shell International Trading and Esso Exploration,
and Schiehallion to EnQuest.
The Group assesses partners’ creditworthiness before entering into farm-in or joint venture agreements. In the past, the Group has not experienced credit loss in the collection of accounts receivable. As the Group’s exploration,
drilling and development activities expand with existing and new joint venture partners, the Group will assess and continuously update its management of associated credit risk and related procedures.
The Group regularly monitors all customer receivable balances outstanding in excess of 90 days for ECLs. As at 31 December 2023, substantially all accounts receivables are current, being defined as less than 90 days. The Group has
no allowance for doubtful accounts as at 31 December 2023 (31 December 2022: $nil).
The Group may be exposed to certain losses in the event that counterparties to derivative financial instruments are unable to meet the terms of the contracts. The Group’s exposure is limited to those counterparties holding derivative
contracts with positive fair values at the reporting date and these counterparties represent a very low risk of default. As at 31 December 2023, the Group’s exposure is $nil (31 December 2022: $nil).
Credit valuation adjustments (CVA) and debit valuation adjustments (DVA) are calculated for each trade using two key inputs, being future exposures and credit spreads (incorporating both probability of default and loss-given default).
Future exposures have been estimated using an expected exposure-based approach over the lifetime of the trades. For the risk associated with counterparties, the credit spread is calculated using market observable credit default
spreads. For the own credit risk, the credit spread is calculated using reference to a senior unsecured quoted publicly traded bond of the parent entity using appropriate tenor adjustments, except for out-of-the-money derivatives with
counterparties which are in the Group’s RBL. These derivatives rank higher than those with other counterparties as they are fully secured as part of the RBL agreement. Therefore for the own risk credit risk adjustment (DVA) it has
been estimated that the loss given default is zero and hence there is no DVA recognised for those derivatives which are with counterparties of the RBL.
The Group also has credit risk arising from cash and cash equivalents held with banks and financial institutions. The maximum credit exposure associated with financial assets is the carrying values.
v) Liquidity risk
Liquidity risk includes the risk that as a result of its operational liquidity requirements the Group will not have sufficient funds to settle a transaction on the due date. The Group manages liquidity risk by maintaining adequate
cash reserves, banking facilities, and by considering medium and future requirements by continuously monitoring forecast and actual cash flows. The Group considers the maturity profiles of its financial assets and liabilities.
As at 31 December 2022 and 2023 substantially all accounts payable are current.
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29. Financial instruments continued
The following table shows the timing of cash outflows, including future interest, relating to financial liabilities, excluding derivatives, at 31 December 2023:

| Weighted average | Within |  |  |  |
| effective interest | 1 year | Within 2 to 5 years | More than 5 years | Total | Carrying amount
| rate | US$’000 | US$’000 | US’000 | $’000 | $’000
Trade and other payables | – | (343,279) | – | – | (343,279) | (343,279)
Contingent and deferred consideration | – | (101,669) | (248,388) | (44,508) | (394,565) | (360,369)
Lease liabilities | 6.07% | (20,152) | (669) | – | (20,821) | (20,559)
Borrowings | 8.02% | (64,190) | (840,085) | – | (904,275) | (748,151)
|  | (529,290) | (1,089,142) | (44,508) | (1,662,940) | (1,472,358)

The following table shows the timing of cash outflows, including future interest, relating to financial liabilities, excluding derivatives, at 31 December 2022:

| Weighted average | Within |  |  |  |
| effective interest | 1 year | Within 2 to 5 years | More than 5 years | Total | Carrying amount
| rate | US$’000 | US$’000 | US’000 | $’000 | $’000
Trade and other payables | – | (618,460) | – | – | (618,460) | (618,460)
Contingent and deferred consideration | – | (107,680) | (226,842) | (23,668) | (358,190) | (326,800)
Lease liabilities | 6.38% | (44,257) | (17,439) | – | (61,696) | (58,858)
Borrowings | 8.85% | (98,250) | (1,474,528) | – | (1,572,778) | (1,235,454)
|  | (868,647) | (1,718,809) | (23,668) | (2,611,124) | (2,239,572)

The following table details the Group’s liquidity analysis for its derivative financial instruments based on contractual maturities. The table has been drawn up based on the undiscounted net cash inflows and outflows on derivative
instruments that settle on a net basis, and the undiscounted gross inflows and outflows on those derivatives that require gross settlement. When the amount payable or receivable is not fixed, the amount disclosed has been determined
by reference to the projected interest rates as illustrated by the yield curves existing at the reporting date.
At 31 December 2023

| Within |  |
| 1 year | Within 2 to 5 years | Total
| US$’000 | US$’000 | $’000
Net-settled (derivative liabilities): |  |  |
Commodity options | (2,290) | – | (2,290)
Gross-settled: |  |  |
Foreign exchange forwards – gross outflows | (113,342) | – | (113,342)
Foreign exchange collars – gross outflows | (155,071) | – | (155,071)
| (270,703) | – | (270,703)

Notes to the consolidated financial statements continued
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29. Financial instruments continued
At 31 December 2022

| Within |  |
| 1 year | Within 2 to 5 years | Total
| US$’000 | US$’000 | $’000
Net-settled (derivative liabilities): |  |  |
Commodity options | (51,654) | (15,402) | (67,056)
Gross-settled: |  |  |
Foreign exchange forwards – gross outflows | (83,529) | (107,235) | (190,764)
Foreign exchange collars – gross outflows | – | – | –
| (135,183) | (122,637) | (257, 820)

vi) Capital management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns to shareholders and benefits for other stakeholders and to maintain an optimal capital structure
to reduce the cost of capital. The Group regularly monitors the capital requirements of the business over the short, medium and long-term, in order to enable it to foresee when additional capital will be required.
The Group has approval from management to hedge external risks, commodity prices, interest rates and foreign exchange risk. This is designed to reduce the risk of adverse movements in market prices, interest rates and exchange rates
eroding the Group’s financial results.
30. Derivative financial instruments
The net carrying amount of each category of derivative is set out below:

| 2023 | 2022
| US$’000 | US$’000
Oil swaps – cash flow hedge | 9,913 | (28,685)
Oil swaps – non-cash flow hedge | – | (15,027)
Oil collars – cash flow hedge | 7,434 | (21,983)
Gas swaps – cash flow hedge | 47, 232 | 19,797
Gas swaps – non-cash flow hedge | (2,290) | (29,271)
Gas puts – cash flow hedge | – | 9,746
Gas collars – cash flow hedge | 89,944 | 79,489
Interest rate swaps – non-cash flow hedge | 637 | 7,125
FX forwards – non-cash flow hedge | (3,961) | (13,250)
FX collars – cash flow hedge | (3,335) | –
FX collars – non-cash flow hedge | (1,975) | –
| 143,599 | 7,941

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30. Derivative financial instruments continued

| 2023 | 2022
Maturity analysis of derivative financial instruments | US$’000 | US$’000
Non-current assets | 17,810 | 21,191
Current assets | 139,497 | 150,858
Non-current liabilities | – | (27,4 4 0)
Current liabilities | (13,708) | (136,668)
| 143,599 | 7,941

The fair value of commodity derivatives is estimated using a net present value model (commodity swaps) or an appropriate option valuation model (options and collars). These contracts are valued using observable market pricing data
including volatilities. A 20% reduction in future commodity prices, with all other assumptions held constant, would result in a decrease in the fair value of derivatives of $113 million (2022: $179 million). A 20% increase in future commodity
prices, with all other assumptions held constant, would result in an increase in the intrinsic value of option derivative instruments at 31 December 2023 of $88 million (2022: $188 million).
Derivative financial instruments that are with counterparties included within the RBL are subject to Master Netting Agreements, this includes the majority of the Group’s derivative financial instruments as at 31 December 2023 and 2022.
Financial instruments subject to enforceable master netting agreements and similar agreements at 31 December 2023 are detailed below:

|  | Related amounts not set off in balance |
| Amount recognised in balance sheet | sheet | Net amount
| $’000 | $’000 | $’000
Derivative assets | 157, 30 6 | (4,436) | 152,870
Derivative liabilities | (13,708) | 4,436 | (9,272)

Financial instruments subject to enforceable master netting agreements and similar agreements at 31 December 2022 are detailed below:

|  | Related amounts not set off in balance |
| Amount recognised in balance sheet | sheet | Net amount
| $’000 | $’000 | $’000
Derivative assets | 172,049 | (33,117) | 138,932
Derivative liabilities | (164,109) | 33,117 | (130,992)

31. Related-party transactions
The immediate parent undertaking is DKL Energy Limited (incorporated in Jersey) who owns 88.55% of the issued share capital of Ithaca Energy plc. The registered office address of the DKL Energy Limited is 47 Esplanade, St Helier,
Jersey, JE1 0BD.
The ultimate parent of the Group is Delek Group Limited (incorporated in Israel), an independent E&P Company listed on the Tel Aviv Stock Exchange. The Group and Delek’s ultimate controlling party is Mr Itshak Sharon Tshuva.
Notes to the consolidated financial statements continued
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31. Related-party transactions continued
The consolidated financial statements include the financial information of the Group, which comprises the Company and the subsidiaries listed in the following table:

|  |  |  | % equity interest at 31 December
| Registered office | Country of incorporation | 2023 | 2022
Ithaca Energy (E&P) Limited | 1 | Jersey | 100% | 100%
Ithaca Energy (UK) Limited | 2 | Scotland | 100% | 100%
Ithaca Minerals (North Sea) Limited | 2 | Scotland | 100% | 100%
Ithaca Energy (Holdings) Limited | 3 | Bermuda | 100% | 100%
Ithaca Energy Holdings (UK) Limited | 2 | Scotland | 100% | 100%
Ithaca Energy (North Sea) PLC | 2 | Scotland | 100% | 100%
Ithaca Oil and Gas Limited | 4 | England and Wales | 100% | 100%
Ithaca Petroleum Ltd | 4 | England and Wales | 100% | 100%
Ithaca Causeway Limited | 4 | England and Wales | 100% | 100%
Ithaca Gamma Limited | 4 | England and Wales | 100% | 100%
Ithaca Alpha (NI) Limited | 5 | Northern Ireland | 100% | 100%
Ithaca Epsilon Limited | 4 | England and Wales | 100% | 100%
Ithaca Exploration Limited | 4 | England and Wales | 100% | 100%
Ithaca Petroleum EHF | 6 | Iceland | 100% | 100%
Ithaca Dorset Limited | 4 | England and Wales | 100% | 100%
Ithaca SP UK Limited | 4 | England and Wales | 100% | 100%
Ithaca GSA Holdings Limited | 1 | Jersey | 100% | 100%
Ithaca GSA Limited | 1 | Jersey | 100% | 100%
Ithaca Energy Developments UK Limited | 4 | England and Wales | 100% | 100%
FPF-1 Limited | 7 | Jersey | 100% | 100%
Ithaca MA Limited | 4 | England and Wales | 100% | 100%
Ithaca SP Bonds PLC | 4 | England and Wales | 100% | 100%
Ithaca SP Finance Limited | 4 | England and Wales | 100% | 100%
Ithaca SP (Holdings) Limited | 4 | England and Wales | 100% | 100%
Ithaca SP E&P Limited | 4 | England and Wales | 100% | 100%
Ithaca SP O&G Limited | 4 | England and Wales | 100% | 100%
Ithaca SPE Limited | 4 | England and Wales | 100% | 100%
Ithaca Zeta Limited | 4 | England and Wales | 100% | 100%

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31. Related party transactions continued
Transactions between subsidiaries are eliminated on consolidation.
1. 47 Esplanade, St Helier, Jersey, JE1 0BD
2. 13 Queen’s Road, Aberdeen, Scotland AB15 4YL
3. Canon’s Court, 22 Victoria Street, Hamilton HM 12, Bermuda
4. Pinsent Masons LLP, 1 Park Row, Leeds, England, LS1 5AB
5. Pinsent Masons LLP, The Soloist, 1 Lanyon Place, Belfast, BT1 3LP
6. Borgartúni 26, 105 Reykjavík, Iceland
7. 26 New Street, St Helier, Jersey, JE2 3RA
Amounts owed to Delek Group Limited
An outstanding interest amount of $29 million with respect to a historic related party loan with Delek Group Limited was repaid in full on 4 October 2022.
The movement in capital loan notes during the year ended 31 December 2022 related to imputed interest of $18 million on the unwind of the capital contribution and subsequent settlement of the $392 million balance under
a waiver agreement.
On 8 November 2022, a waiver agreement was signed by DKL Energy Limited, the immediate parent Company of Ithaca Energy plc at that time, to partially waive a capital note balance and a subordinated loan balance (including interest)
totalling $469 million, such that, post-IPO these balances would no longer be due from Ithaca Energy plc.
A loan waiver of $181.9 million was recognised as a Capital Contribution on equity in the year to 31 December 2022.
Key management personnel
The following table provides remuneration to key management personnel, being persons having direct or indirect authority or responsibility of the Group, for the periods ended 31 December 2023 and 2022:
Key management personnel

| 2023 | 2022
| US$’000 | US$’000
Salaries and short-term employee benefits | 5,741 | 4,590
Payments made in lieu of pension contributions | 249 | 229
Company pension contributions | 106 | 106
Share-based payment | 5,863 | 12,623
| 11,959 | 17,5 4 8

Further detail regarding share-based payments received by key management personnel is set out below.
32. Share-based payments
The charge for share-based payment transactions in the year to 31 December 2023 was $16.4 million (2022: $14.1 million). Like other elements of compensation, this charge is processed through the time-writing system which allocates
costs, based on time spent by individuals, to various activities within the Ithaca Energy plc Group. Part of this cost is therefore capitalised as directly attributable to capital projects and part is charged to the statement of profit or loss as
operating costs of hydrocarbon activities, pre-licence exploration costs or administrative expenses.
Notes to the consolidated financial statements continued
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32. Share-based payments continued
Long-Term Incentive Plans (LTIPs)
Outstanding share options under LTIPs were as follows:

| Heritage awards | At-IPO awards | 2022 | LTIP awards | Total
Balance at 1 January 2022 | – | – |  | – | –
Granted during the year | 1,687,296 | 4,908,903 |  | 2,836,660 | 9,432,859
Balance at 31 December 2022 | 1,687,296 | 4,908,903 |  | 2,836,660 | 9,432,859
Awarded during the year in lieu of dividend payments | 191,401 | 190,426 |  | – | 381,827
Forfeited during the year | (127,880) | (296,966) |  | (276,123) | (700,969)
Exercised during the year | (921,882) | (521,679) |  | – | (1,443,561)
Balance at 31 December 2023 | 828,935 | 4,280,684 |  | 2,560,537 | 7,670,156
Exercisable at 31 December 2023 | 828,935 | 1,220,692 |  | – | 2,049,627
Share option exercise price | £nil | £nil |  | £nil | N/A
Weighted average share price on date of exercise | £1.56 | £1.56 |  | N/A | N/A
Weighted average remaining life | N/A | 1.9 years |  | 2.3 years | N/A

All LTIP awards are nil-cost options. There are no performance conditions attaching to the Heritage and At-IPO awards. Details of the performance conditions of the 2022 LTIP are set out in the Directors’ remuneration report.
The fair values of all the LTIP awards were determined based on the share price on date of award. The Heritage awards vested over the period to 14 November 2023, the At-IPO awards vest in three equal tranches over the period to
14 November 2025 and the 2022 LTIP awards vest over the period to 1 April 2026. It is anticipated that future exercises of LTIP awards will be settled by equity. The total charge for LTIP share options in the year to 31 December 2023
was $12.9 million (2022: $0.6 million).
IPO-related share options
Under the terms section 11.6 of the Prospectus, the Executive Chairman, Gilad Myerson (GM) and the former Chief Executive Officer, Alan Bruce (AB) were entitled to an award of share options worth 0.2% of the value of the
Group immediately on IPO which valued these awards at $5.0 million or 2,337,931 share options each. There are no performance conditions attaching to these share options. The exercise price of each of the share options is £0.01.
Mr Myerson’s share options vested immediately on IPO and Mr Bruce’s share options were vesting equally over the period 21 July 2021 to 20 July 2026. During the year to 31 December 2022 Mr Myerson exercised 1,402,759 share
options. The total charge for IPO-related share options in the year to 31 December 2023 was $0.5 million (2022: $7.3 million).

| GM options | AB options | Total
Balance at 1 January 2023 | 935,172 | 2,337,931 | 3,273,103
Exercised during the year | – | – | –
Balance at 31 December 2023 | 935,172 | 2,337,931 | 3,273,103
Exercisable at 31 December 2023 | 935,172 | 935,172 | 1,870,344
Share option exercise price | £0.01 | £0.01 | N/A
Weighted average remaining life | N/A | N/A | N/A

Mr Bruce left the business on 4 January 2024 and, as part of his termination arrangements, retained his 935,172 share options which had already vested.
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32. Share-based payments continued
Management Equity Plan (MEP)
During the year to 31 December 2022, Mr Myerson was also awarded share options under a Management Incentive Agreement (MIA) and Share Subscription and Bonus Agreement (SSBA), comprising 100 B1 shares of $0.01 each
and 100 B2 shares of $0.01 each. Following the changes in the issued share capital, as detailed in note 26, in the run up to the IPO, on 9 November 2022 these share options equated to 1,401,759 B1 shares of £0.01 each and 420,528
B2 shares of £0.01 each. Following the IPO Mr Myerson elected to retain these options but in so doing did not waive his right to receive the Aggregate Guaranteed Payment (AGP) of $10.0 million less any special bonus payments
since September 2021.
During the year to 31 December 2023, Mr Myerson elected to receive the AGP and $8.0 million (AGP of $10.0 million less special bonuses of $2.0 million) was paid to him on 1 December 2023. As a result, the MEP share options,
which would otherwise have vested over the period to 30 September 2026, were transferred back to the Company for nil payment.
There were no performance conditions attaching to either the MEP share options or the AGP.
The total share-based payment charge for MEP arrangements in the year to 31 December 2023 was $3.0 million (2022: $6.2 million).
The share-based payment reserve of $15.5 million (2022: $4.9 million) reflects the opening balance of $4.9 million (2022: $nil) plus the charge of $12.9 million (2022: $0.6 million) for LTIPs plus the charge of $0.5 million
(2022: $7.3 million) for IPO-related share options less the cost of satisfying exercises during the year of $2.8 million (2022: $3.0 million).
33. Dividends

| 2023 | 2022
| US$’million | US$’million
First interim dividend of $0.132 per ordinary share announced 16 February 2023 and paid 9 March 2023 | 133.0 | –
Second interim dividend of $0.132 per ordinary share announced 23 August 2023 and paid 29 September 2023 | 133.0 | –
Total dividends paid during year ended 31 December 2023 | 266.0 | –
Third interim dividend of $0.132 per ordinary share announced 21 March 2024 and payable in April 2024 (not accrued in the 2023 results) | 134.0 | –
Total dividends paid or payable relating to year ended 31 December 2023 | 400.0 | –

34. Subsequent events
On 6 March 2024 it was announced that EPL will be extended by a further year to 31 March 2029. If this had been enacted at the balance sheet date, it is estimated that this would have increased the deferred tax liability by $112.2 million.
On 19 March 2024, the North Sea Transition Authority sanctioned the extension of the licence on the Cambo field to 31 March 2026.
On 26 March 2024, the Group signed an exclusivity agreement between Eni S.p.A. and Ithaca Energy covering substantially all of Eni S.p.A.'s UK upstream assets, excluding Eni S.p.A. CCUS and Irish sea assets, under which Eni S.p.A.
has granted Ithaca exclusivity whilst a potential business combination is pursued. Under the terms of the proposed business combination Eni S.p.A. is anticipated to hold between 38% and 39% of the enlarged issued share capital of
Ithaca Energy following completion. If this progresses further, it will be subject to the issuance of both a Circular and a Prospectus and the related shareholder approvals and will also be subject to, amongst other things, regulatory approvals.
Notes to the consolidated financial statements continued
215ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023 215ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
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FINANCIAL
STATEMENTS
Note
2023
US$’000
2022
US$’000
Assets
Current assets
Cash and cash equivalent 140 21,126
Prepayments 1,165 –
1,305 21,126
Non-current assets
Investments
3 1,224,659 1,224,659
Total assets 1,225,964 1,245,785
Liabilities and equity
Current liabilities
Trade and other payables
4 (16,365) (37,955)
Net current liabilities (15,060) (16,829)
Total assets less current liabilities 1,209,599 1,207, 830
Net assets 1,209,599 1, 207,83 0
Shareholders’ equity
Share capital
5 11,540 11,445
Share premium
5 308,845 293,712
Capital contribution reserve
5 181,945 181,945
Own shares
5 (12,412) –
Share-based payment reserve
5 15,494 4,920
Retained earnings 704,187 715,808
Total equity 1,209,599 1, 207,83 0
As permitted by section 408 of the Companies Act 2006, the Company has elected not to present its own statement of profit or loss for the year. The Company reported comprehensive income and a profit of $254.4 million for the year
ended 31 December 2023 (2022: loss of $47.7 million).
Approved on behalf of the Board on 26 March 2024:
Iain C S Lewis
Director
Company number 12263719
Company statement of financial position
As at 31 December
216 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC216 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Share
capital
US$’000
Share
premium
US$’000
Capital
contribution
reserve
US$’000
Own shares
US$’000
Share-based
payment reserve
US$’000
Retained earnings
US$’000
Total
US$’000
Balance at 1 January 2022 1 634,659 114,000 – – 25,129 773,789
Issuance of shares for capital reduction 114,000 – (114,000) – – – –
Reduction in capital (114,000) (634,659) – – – 748,659 –
Issuance of shares 11,444 293,712 – – (3,004) (10,228) 291,924
Capital contribution through debt cancellation – – 181,945 – – – 181,945
Share-based payment charge – – – – 7,924 – 7,924
Loss for the year – – – – – (47,752) (47,752)
Balance at 31 December 2022 and 1 January 2023 11,445 293,712 181,945 – 4,920 715,808 1,207,830
Dividends paid – – – – – (265,972) (265,972)
Issuance of shares 95 15,133 – (15,228) – – –
Profit for the year – – – – – 254,351 254,351
Share-based payments – – – 2,816 10,574 – 13,390
Balance at 31 December 2023 11,540 308,845 181,945 (12,412) 15,494 704,187 1,209,599
Company statement of changes in equity
Year ended 31 December
217ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023 217ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
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1. Material accounting policies
Basis of preparation
The separate financial statements of the Company are presented as required by the Companies Act 2006. The financial statements have been prepared on a historical cost basis and on a going concern basis as described in the going
concern statement within note 3 of the consolidated financial statements.
The Company meets the definition of a qualifying entity under Financial Reporting Standard 101 (FRS 101) ‘Reduced Disclosure Framework’ issued by the Financial Reporting Council. These financial statements have therefore been
prepared in accordance with FRS 101.
As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available under this standard in relation to share-based payments, financial instruments, capital management, presentation of a cash flow
statement and certain related-party transactions.
Where relevant, equivalent disclosures have been given in the consolidated financial statements. Where applicable, the principal accounting policies adopted are the same as those set out in note 3 to the consolidated financial statements
on pages 162 to 173, except as noted below.
Investments
Investments in subsidiaries are shown at cost less provision for impairment.
Dividend distribution
Dividend distribution to the Company’s shareholders is recognised as a liability in the Company’s financial statements in the period in which the dividends are approved by the Company’s shareholders. Dividends receivable from
subsidiaries are recognised only when they are approved by shareholders. Details of dividends paid and declared are set out in note 33 of the consolidated financial statements.
Critical accounting judgements and key sources of estimation uncertainty
The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial
statements and the reported amount of expenses during the reporting period. Although these estimates are based on management’s best knowledge, actual results may ultimately differ from those estimates. The estimates and underlying
assumptions are reviewed on a regular and ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of revision and future periods
if the revision affects both current and future periods. In the current and prior year there were no critical accounting judgements or key sources of estimation uncertainty.
2. Profit/(loss) for the year
As permitted by section 408 of the Companies Act 2006, the Company has elected not to present its own statement of profit or loss for the year. The Company reported a profit of $254.4 million for the year ended 31 December 2023
(2022: loss of $47.7 million).
Fees payable to the Company’s auditors for the audit of the Company’s annual financial statements are disclosed in note 7 to the consolidated financial statements. The Company had no employees in the current or preceding financial year.
3. Investments
2023
US$’000
2022
US$’000
Investments in subsidiary undertakings 1,224,659 1,224,659
The carrying value of investments in subsidiary undertakings is reviewed for indicators of impairment on an annual basis. The recoverable amount is the higher of fair value less cost of disposal or the net present value of future cash flows
which are estimated based on the continued use of the assets in the business.
During the year ended 31 December 2023 the Company received $272 million of dividends from subsidiary undertakings (2022: $nil).
The subsidiaries of Ithaca Energy plc are set out in note 31 to the consolidated financial statements.
Notes to the Company financial statements
218 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC218 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Notes to the Company financial statements continued
4. Trade and other payables
2023
US$’000
2022
US$’000
Amounts owed to subsidiary undertakings (14,452) (23,261)
Trade creditors – (3,610)
Accruals (1,913) (11,084)
(16,365) (37,955)
Amounts owed to subsidiary are repayable on demand and do not bear interest.
5. Reserves
(a) Issued share capital
The issued share capital is as follows:
Number of
common shares
Amount
US$’000
At 31 December 2022 1,006,564,976 11,445
At 31 December 2023 1,014,372,281 11,540
On 5 October 2023, 7,807,305 ordinary shares of £0.01 each were issued to the Ithaca Energy plc Employee Benefit Trust (EBT) to satisfy the exercise of share options during the year and in future years.
On 26 October 2022 the Company undertook a share capital reduction whereby 114,000,000 issued A ordinary shares of $1.00 each were cancelled and extinguished. In addition on this date the share capital account as at
31 December 2021 of $634,658,000 was cancelled. A number of further steps followed in preparation for the IPO including the conversion of $1.00 shares to £0.88 shares, the conversion of £0.88 shares to £0.01 shares, the issue
of bonus shares principally to existing shareholders and the issue of 105,000,000 new shares on the IPO. As a result the issued share capital of the Company immediately after the IPO was 1,005,162,217 ordinary shares of £0.01 each.
A reconciliation of the opening to closing number of shares during the year to 31 December 2022 is set out below:
Number of shares
A ordinary B1 ordinary B2 ordinary Ordinary Total
A ordinary shares of $1.00 each at 1 January 2022 1,001 – – – 1,001
Issue of new $0.01 B1 shares and $0.01 B2 shares – 100 100 – 200
Issue of new $1.00 A ordinary shares 114,000,000 – – – 114,000,000
Cancellation of $1.00 A ordinary shares (114,000,000) – – – (114,000,000)
Conversion of $1.00 A ordinary shares, $0.01 B1 share and 0.01 B2 share to £0.01 A ordinary shares 87,087 (12) (12) – 87,0 63
Bonus issue of new £0.01 A shares 898,131,843 – – – 898,131,843
Bonus issue of new £0.01 B1 shares – 1,401,670 – – 1,401,670
Bonus issue of new £0.01 B2 shares – – 420,440 – 420,440
Conversion of £ 0.01 A ordinary shares, £0.01 B1 shares and £0.01 B2 shares to £0.01 ordinary shares (898,219,931) (1,401,758) (420,528) 900,042,217 –
Bonus issues of £0.01 ordinary shares – – – 120,000 120,000
Issue of new £0.01 ordinary shares on IPO – – – 105,000,000 105,000,000
Issue of new £0.01 ordinary shares on exercise of share options – – – 1,402,759 1,402,759
Ordinary shares of £0.01 each at 31 December 2022 – – – 1,006,564,976 1,006,564,976
219ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023 219ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
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5. Reserves continued
(b) Share premium
2023
US$’000
2022
US$’000
At 1 January 293,712 634,659
Share premium cancellation – (634,659)
Addition 15,134 293,712
At 31 December 308,846 293,712
The share premium account represents the cumulative difference between the market share price and the nominal share value on the issuance of new ordinary shares multiplied by the number of shares issued.
Additions during 2023 represent the difference between the nominal value per share of £0.01 and the closing share price on the day before the shares were issued to the EBT multiplied by the number of shares.
During 2022, the additions represent the difference between the nominal value per share of £0.01 and IPO price of £2.50 per share multiplied by the number of shares issued (net of share issues expenses).
(c) Capital contribution reserve
2023
US$’000
2022
US$’000
At 1 January 181,945 114,000
Issuance of ordinary shares – (114,000)
Addition – 181,945
At 31 December 181,945 181,945
During the year to 31 December 2022, the Company settled outstanding loan liabilities (including interest) of DKL Energy limited (DKLE) out of IPO proceeds. As per the terms of the confirmation letter dated 29 November 2022
signed between DKLE and the Company, DKLE unconditionally and irrevocably released and forever discharged Ithaca Energy plc from any and all liabilities to the DKLE in respect of or in connection with the capital and subordinated
loan note agreements. The remaining loan balance of $181.9 million has been capitalised as capital contribution reserve as per the requirements of IFRS 9.
(d) Own shares
2023
US$’000
2022
US$’000
At 31 December (12,412) –
Own shares comprise shares held by the Ithaca Energy plc EBT which are being used to satisfy the exercise of employee share options. During the year, 7,807,305 ordinary shares of £0.01 each were issued to the EBT and 1,443,561
ordinary shares were used to satisfy the exercise of share options. In addition, 1,822,286 ordinary shares of £0.01 each waived under the MEP (see note 32) were transferred into the EBT during the year. As a result, the EBT held
8,186,030 ordinary shares of £0.01 each at 31 December 2023.
220 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC220 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
5. Reserves continued
(e) Share-based payment reserve
2023
US$’000
2022
US$’000
At 31 December 15,494 4,920
The share-based payment reserve represents the cumulative charge for share options, as described in note 32, less the cumulative cost of share option exercises.
Details of share-based payments are set out in note 32 of the consolidated financial statements.
6. Related-party transactions
As the Company is a majority owned subsidiary of Delek Group Limited, it has taken advantage of the exemption given by Paragraph 8 of the Financial Reporting Standard (FRS) 101 which allows exemption from disclosure of related-party
transactions with other Group companies. The Company has also taken advantage of the exemption given by Paragraph 8 of FRS 101 which allows exemption from disclosure of compensation for key management personnel.
7. Ultimate Parent undertaking and controlling party
The immediate Parent undertaking is DKL Energy Limited (incorporated in Jersey) who owns 88.55% of the issued share capital of Ithaca Energy plc. The registered office address of the DKL Energy Limited is 47 Esplanade, St Helier,
Jersey, JE1 0BD.
The ultimate Parent Company is Delek Group Limited (incorporated in Israel), an independent E&P Company listed on the Tel Aviv Stock Exchange. The Company and Delek’s ultimate controlling party is Mr Itshak Sharon Tshuva.
The smallest and largest group for which consolidated financial statements are prepared is that of Ithaca Energy plc and Delek Group Limited respectively. A copy of the Delek Group Limited financial statements can be obtained from
19 Abba Edan Boulevard, POB 2054, Herzilia, 4612001, Israel.
Notes to the Company financial statements continued
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Non-GAAP measures
The Group uses certain performance metrics that are not specifically defined under United Kingdom adopted International Financial Reporting Standards or other generally accepted accounting principles. These measures are
considered to be important as they track both operational and financial performance and are used to manage the business and to provide an objective comparison to Ithaca Energy’s peer group. These non-GAAP measures which
are presented in the Annual Report and Accounts are defined below:
Adjusted EBITDAX: earnings before interest, tax, put premiums on oil and gas derivative instruments, revaluation of derivative contracts, depletion depreciation and amortisation, impairment (charge)/reversal, exploration and
evaluation expenditure, remeasurements of decommissioning reimbursement receivables, fair value losses on contingent consideration, gain on bargain purchase, transaction costs and historic claims relating to acquisitions. The Group
believes that adjusted EBITDAX is a useful measure for stakeholders because it is a measure closely tracked by management to evaluate the Group’s operating performance and to make financial, strategic and operating decisions and
because it may help stakeholders to better understand and evaluate, in the same manner as management, the underlying trends in the Group’s operational performance on a comparable basis, period-on-period.
Adjusted EBITDAX is reconciled to profit after tax as follows:
2023
$m
2022
$m
Profit after tax 215.6 1,031.5
Taxation charge 86.4 1,209.0
Gain on bargain purchase – (1,335.2)
Depletion, depreciation and amortisation 740.3 662.9
Impairment charges 557.9 31.5
Net finance costs 184.0 203.0
Oil and gas put premiums 15.4 56.9
Revaluation of derivative contracts (42.8) (16.8)
Transaction costs – 60.1
Exploration and evaluation expenses 13.6 9.0
Historic claim relating to an acquisition (50.1) –
Remeasurements of decommissioning reimbursement receivables (5.6) –
Fair value losses on contingent consideration 8.0 4.3
Adjusted EBITDAX 1,722.7 1,916.2
Adjusted net income: profit after tax excluding non-cash bargain purchase credits, material impairment charges or reversals, the tax effects of these items where applicable and non-cash deferred tax charges on initial application
of EPL. Adjusted net income, which is presented as it eliminates items which distort year-on-year comparisons, is reconciled to profit after tax as follows:
2023
$m
2022
$m
Profit after tax 215.6 1,031.5
Gain on bargain purchase – (1,335.2)
Impairment charges 557.9 –
Tax credit on impairment charges (403.9) –
EPL deferred tax charge – 766.5
Adjusted net income 369.6 462.8
Alternative Performance Measures
222 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC222 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Alternative Performance Measures continued
Adjusted earnings per share (EPS): Adjusted net income divided by average shares for the year of 1,006.7 million (2022: 1,005.2 million)
2023 2022
Adjusted EPS (cents) 36.7 46.0
Adjusted net debt: consists of amounts outstanding under RBL facility, senior unsecured loan notes and bp unsecured loan less cash and cash equivalents and excludes intragroup debt arrangements or liabilities represented by letters of
credit and surety bonds. Adjusted net debt, which excludes accrued interest on borrowings, lease liabilities and unamortised fees, comprises:
2023
$m
2022
$m
RBL drawn facility – (600.0)
Senior unsecured notes (625.0) (625.0)
bp unsecured loan (100.0) –
Cash and cash equivalents 153.2 253.8
Adjusted net debt (571.8) (971.2)
Leverage ratio: adjusted net debt at the end of the year divided by adjusted EBITDAX for the year then ended. The calculations are as follows:
2023 2022
Adjusted net debt ($m) 571.8 971.2
Adjusted EBITDAX ($m) 1,722.7 1,916.2
Leverage ratio 0.33x 0.51x
Available liquidity: the sum of cash and cash equivalents on the balance sheet and the undrawn amounts available to the Group using existing approved third-party facilities. Available liquidity comprises:
2023
$m
2022
$m
Cash and cash equivalents 153.2 253.8
Undrawn borrowing facilities 725.0 325.0
Undrawn optional project capital expenditure facility 150.0 –
Available liquidity 1,028.2 578.8
Subsequent to 31 December RBL liquidity increased from $725.0 million to $836.0 million.
223ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023 223ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
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STATEMENTS
Group free cash flow: net cash flow from operating activities less cash used in investing activities, adding back acquisition of subsidiaries net of cash acquired, less bank interest and interest rate swaps. This measure is considered a useful
indicator of the Group’s ability to make strategic investments, repay the Group’s debt and meet other payment obligations. Group free cash flow reconciles to net cash flow from operating activities as follows:
2023
$m
2022
$m
Net cash flow from operating activities 1,290.8 1,723.3
Net cash used in investing activities (492.4) (1,404.2)
Add back acquisitions – 957.5
Bank interest and charges (99.8) (142.8)
Interest rate swaps 7.0 0.8
Group free cash flow 705.6 1,134.6
Unit operating expenditure: operating costs (excluding over/underlift) including tariff expense but excluding tariff income and tanker costs, divided by net production for the year. This measure is considered a useful indicator of ongoing
operating costs and is also used to compare performance between assets. Operating costs for this calculation reconcile to note 6 as follows:
2023
$m
2022
$m
Operating costs of hydrocarbon activities per note 6 576.7 547. 8
Less tanker costs (included within operating costs of hydrocarbon activities in note 6) (20.7) (15.6)
Less tariff income (included within other income in note 5) (31.6) (36.2)
Operating costs used to calculate unit operating expenditure 524.4 496.0
DD&A rate per barrel: depletion, depreciation and amortisation charge for the year divided by net production for the year.
Other key performance indicators
Total production: historic production boe/d include volumes from date of acquisition of MOGL on 4 February 2022 and Siccar Point Energy and Summit on 30 June 2022.
Tier 1 process safety events: process safety incidents as defined by API 465 Process Safety-Recommended Practice On Key Performance Indicators.
Serious injury and fatality frequency: the number of serious injuries resulting in permanent impairment, as defined by IOGP, per million hours worked.
224 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC224 ANNUAL REPORT AND ACCOUNTS 2023 ITHACA ENERGY PLC
Notes
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ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2023
Ithaca Energy PLC
Registered office:
33 Cavendish Square
London
W1G 0PP
www.ithacaenergy.com