Eni UK, Ithaca Energy Agree to Merge

Eni SPA is combining its upstream oil and gas business in the United Kingdom with Ithaca Energy PLC, in a transaction expected to potentially give the Italian energy major a leading position in the UK continental shelf (UKCS).

Upon the closure of the merger agreement, expected in the third quarter, the resulting entity will have a production of over 100,000 barrels of oil equivalent per day (boepd), based on the figures of the merger parties as of yearend 2023, Eni and Ithaca Energy said in separate press releases Tuesday.With a potential to grow to more than 150,000 boepd in the early 2030s, the combined entity can become the “largest operator on the UKCS by production in 2030”, the Italian government-controlled Eni said.

Ithaca Energy, owned by Tel Aviv-listed Delek Group Ltd., will survive as the enlarged company with an increased proven and probable reserves plus best-estimate contingent resources of 658 million boe, based on the separate announcements by Eni and Ithaca Energy.After completion, Delek will hold the majority stake in the merged firm. To satisfy UK law, 10 percent of the share capital of the combined entity will be issued to the public. The rest will be owned by Eni.

“The Combination is being funded through the issue to Eni UK of such number of new ordinary shares that represents 38.5 percent of the enlarged issued share capital of Ithaca”, Eni said, referring to Eni UK Ltd. However, Delek has a call option to ask Eni to transfer to Delek shares in Ithaca Energy amounting to about one percent of Ithaca Energy’s enlarged issued share capital.

With the entry of Eni as a shareholder, the number of publicly held ordinary shares in Ithaca Energy would be seven percent. As this is below the minimum 10 percent under the Financial Conduct Authority’s listing rules, “Delek has undertaken to sell-down approximately 3 percent of the enlarged issued share capital of Ithaca prior to Completion”, Eni said.

“Once the Delek Sell Down is complete, 10 percent of Ithaca Energy’s ordinary shares will be held in public hands”, Ithaca Energy said. “Following this and assuming the Call Option is exercised, immediately after admission of the Consideration Shares to the Premium Listing segment, Delek will hold approximately 52.7 percent and Eni UK will hold 37.3 percent of Ithaca Energy’s ordinary shares”.The Ithaca Energy shares to be issued to Eni are valued at about GBP 754 million ($937.6 million), according to Ithaca Energy.

“The Combination is aimed at replicating the previous successful execution of upstream combinations that Eni has formed using its distinctive Satellite Model (including Var Energi in Norway and Azule Energy in Angola)”, Eni said. “The Satellite Model is a strategic response to the challenges and opportunities of energy markets, creating focused and lean companies able to attract new capital to create value through operating and financial synergies and the acceleration of growth.

“The Combination will allow Eni to continue pursuing its successful growth on the UKCS, thereby strengthening its commitment to the UK post the Neptune Energy acquisition”.

On January 31 Eni announced the completion of the Neptune acquisition, taking over the latter’s stakes in the Cygnus, Isabella and Seagull fields in UK waters.Currently, Eni’s UK portfolio includes a 38.75 percent operating interest in the producing Cygnus gas field and non-operating interests in 10 other producing fields.

“The combination with Ithaca represents an exciting opportunity for us to bring together complementary portfolios establishing a material position on the UKCS with significant growth and optimization opportunities”, Eni chief executive Claudio Descalzi said in a statement. “We have moved quickly after the acquisition by Eni of Neptune Energy to transform our competitive position in the UK and we see the opportunity for Eni and Ithaca to realize material long-term value in helping to address the key challenges of security, affordability and sustainability of energy supply.

“Indeed, establishing a leading position in the UK upstream market will mirror our equally strong position in CCS [carbon capture and storage] with our Hynet and Bacton Thames projects which together with 3 other CO2 [carbon dioxide] storage licenses give us around 1 Giga Ton of gross storage capacity and will see us become a key player in the decarbonization of the UK’s hard-to-abate industries.“With our significant investment as a partner in the giant Dogger Bank offshore wind farm, Eni is pleased to be a major player across key activities in the UK’s energy sector”.The combination, though, excludes Eni’s CCS activities, as well as Eni’s assets in the East Irish Sea.

Ithaca Energy executive chair Gilad Myerson said, “With Eni as a significant, long-term and supportive shareholder, the enlarged group will benefit from increased financial strength to support the execution of our BUY, BUILD and BOOST strategy and gain access to Eni’s world-class technical capabilities and operational support”.