THE STRENGTH OF THE NORTH SEA
ITHACA ENERGY PLC
ANNUAL REPORT 2022
ITHACA ENERGY PLC ANNUAL REPORT 2022
OUR STRATEGY DRIVES OUR AMBITION
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24
Read more on page
28
Read more on page
25
BUY
high-quality,
long-life assets
BOOST
field
performance
and enhance
margins
BUILD
a robust long-
term portfolio
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.
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INTRODUCTION
CONTENTS
NET CASH FLOW FROM OPERATIONS
$1,723m
LEVERAGE RATIO AT YEAR-END
0.5x
2022 STATUTORY NET INCOME
$1,032m
2022 ADJUSTED EXITDAX
$1,916m
2023 DIVIDEND TARGET
$400m
2022 STATUTORY EPS
103 cents
You can also read our
Annual Report online:
investors.ithacaenergy.com
Company overview 1
Strategic report 6 to 69
Chairman statement 6
CEO’s statement 8
2022 review, 2023 outlook and market overview 10
Q&A with John Mogford 16
Our vision, mission and values 18
Our business model and strategy 20
Strategy in action 24
Key performance indicators 30
Engaging with our Stakeholders 32
Environment, Social and Governance 37
Operations review 54
Financial review 58
Risk management 62
Governance report 70 to 116
Chair’s introduction 70
Board of Directors 71
Corporate governance report 74
Audit and Risk Committee report 80
Nomination and governance report 85
HSE Committee report 87
Directors’ remuneration report 89
Directors’ report 113
Statement of Directors’ responsibilities 116
Financial statements 117 to 199
Independent auditor’s report 117
Consolidated statement of profit or loss 133
Consolidated statement of comprehensive income 134
Consolidated statement of financial position 135
Consolidated statement of changes in equity 137
Consolidated statement of cash flows 138
Notes to the consolidated financial statements 140
Company statement of financial position 193
Company statement of changes in equity 194
Notes to the company financial statements 195
Alternative Performance Measures 200
A WARM WELCOME TO THE FIRST
ITHACA ENERGY PLC ANNUAL REPORT 2022.
You join our journey at an exciting time, following
our Premium listing on the London Stock Exchange
in November 2022, and inclusion in the FTSE 250
Index in March 2023.
2022 has been a transformational year for the Group,
with the completion of three significant transactions.
Today, we are one of the UK’s leading independent
oil and gas companies with material scale, portfolio
longevity and significant growth opportunities.
We believe in excelling responsibly and working safely,
efficiently and sustainably as we pursue our vision to
be the highest performing UK Continental Shelf (UKCS)
Independent oil and gas operator.
With a strong track record of material value creation
and a clear strategy to buy, build and boost assets,
supported by a robust capital allocation policy, we are
well placed to deliver increased value while generating
attractive and sustainable returns to shareholders.
OPERATIONAL HIGHLIGHTS
• Premium listing on the London Stock Exchange (with a 10% free float)
in November 2022, inclusion to the FTSE 250 Index in March 2023
• $1.1 billion acquisition of Siccar Point Energy (Holdings) Limited, doubling
the Group’s recoverable resources
• Acquisition of Summit Exploration and Production Limited and Marubeni
Oil and Gas UK Limited
• Second largest UKCS oil and gas independent by reserves and resources
with year-end 2P Reserves of 228 mmboe and 2C Resources of 284 mmboe
• Record 2022 production of 71.4 kboe/d (2021: 56.5 kboe/d)
• Significant ongoing activity at pioneering Captain Enhanced Oil Recovery
(EOR) Phase II
• First oil achieved from the Abigail subsea tieback to FPF-1 in October 2022,
only ten months after development consent
• Successful drilling campaign at Jade and Mariner and well work completed
at Erskine and Alba
FINANCIAL HIGHLIGHTS
Non-GAAP measures
Adjusted EBITDAX, leverage ratio 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 200 to 202.
2 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
INVESTMENT CASE
WHY INVEST IN ITHACA ENERGY?
A LEADER IN THE UK
ENERGY LANDSCAPE
Ithaca Energy is one of the largest
independent oil and gas companies in
the UKCS, ranking second by resources
and third by production.
• Material and long-life resource base,
operating the majority of our 2P reserves
and 2C resources
• Balanced portfolio between oil and gas
assets, with gas representing c.34%
of production in 2022
• Stakes in six of the top ten largest fields
in the UKCS, including the two largest
undeveloped discoveries
• Positioned to play an important role
in UK energy security
Mission: The Strength of the North Sea: page 18
In focus: page 24 In focus: pages 25 to 27Strategic link:
BUY ASSETS BUILD ASSETS
Strategic link:
STRONG PIPELINE OF
ORGANIC GROWTH
OPPORTUNITIES
Diversified portfolio of brownfield and
greenfield development opportunities
underpinning material organic,
long-term growth.
• Significant portfolio optionality with
a strong focus on maximising value
through targeted investment
• Disciplined approach to prioritisation
of capital allocation with established
investment criteria
• Access to pipeline of long -life
development opportunities
• Pursuing low-carbon intensity projects
that will transform our emissions footprint
TRACK RECORD OF
MATERIAL VALUE CREATION
THROUGH M&A
Transformational growth of the Group
driven by material M&A activity, with
the completion of five value-accretive
acquisitions over a period of three years.
• Proven M&A execution and integration
capabilities
• Focus on value-accretive M&A for further
growth and value-generation
• Consolidation opportunities supported
by portfolio optimisation, ESG drivers,
value-crystallisation and UK region exits
• Strongly positioned to lead consolidation
due to basin and operator expertise and
execution capabilities
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ATTRACTIVE CAPITAL
ALLOCATION POLICY
Robust and balanced capital allocation
framework that supports strong sustainable
returns with a dividend target of 15-30%
post-tax cash flow from operations through
the cycle.
• Targeting 2023 dividend of $400 million,
with first interim dividend of $133 million
paid in March 2023
• Supported by strong and resilient cash
flow generation through low leverage
and active hedging approach
• Clearly defined capital allocation
priorities – invest, protect, return and
evolve – focused on maximising
shareholder returns
In focus: page 12
In focus: pages 37 to 49 In focus: pages 28 to 29
Strategic link:
BOOST ASSETS ESG
FINANCIAL
FRAMEWORK
Strategic link:Strategic link:
DEEP OPERATIONAL
EXCELLENCE
Delivering organic growth across our existing
portfolio through operational excellence,
while always maintaining a staunch focus
on safety.
• Infrastructure-led investment strategy
focusing on high-value, near-term
developments
• Delivering value creation through
efficiency improvements
• Maximising reservoir recovery through
pioneering technologies
• Leadership team with over 200 years of
combined experience focused on safe,
efficient and value creative operations
supported by industry leading workforce
CLEAR FOCUS ON
DECARBONISATION
The energy transition is a substantial task
facing our industry but our commitment to
delivering attractive and sustainable returns
is 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.
• Embedded ESG mindset across operations
• Focus on delivering well-defined, short-
term emissions reductions initiatives
• Challenging goal to reduce CO
2
and CO
2
e
emissions by 25% by 2025 from operated
assets vs. 2019 baseline
• Ambition to transition the portfolio over
the medium to long-term, to lower
emission intensity assets supporting
our Net Zero by 2040 goal
4 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
AT A GLANCE
OUR GOALS
We are a company dedicated to growing sustainably. This means operating safely and responsibly, developing our people and sharing our success.
SAFETY
We strive to be a safety leader in everything
we do, ensuring no harm to our people
or environment.
PERFORMANCE
We will deliver scale with a long-term production
target of 100,000 barrels per day.
EMISSIONS
We will invest in low-carbon oil and gas to
help meet the UK’s long-term energy needs
into transition.
PEOPLE
We will recruit, retain and
develop a skilled, adaptable
and diverse workforce.
EFFICIENCY
We will drive high levels of operational efficiency
and operate with strong cost discipline.
Read more on page 50 Read more on pages 39 to 49
Read more on page 29
OUR VALUE PROPOSITION
For our people, shareholders, partners and
communities, Ithaca Energy is a new kind
of oil and gas operator.
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
critical role in securing domestic energy supply
for the UK, recognising that oil and gas will
continue to be an important part of the
long-term energy mix, as we navigate the
energy transition.
We are at the forefront of our industry’s
response, investing in sustainable, high-value
and long-term oil and gas production.
We are focused, innovative and adaptable.
We work efficiently, collaboratively and
responsibly, with our partners and suppliers,
building strong relationships based on
openness and respect. Collectively we will
harness our operational expertise and
innovative minds to challenge the norm,
deploying smarter technologies to deliver
exceptional results.
We acknowledge that the energy transition is
a fundamental challenge to our industry and
the targets we have set for decarbonisation
are difficult to achieve. However safety,
sustainability and compliance matter deeply
to us, giving confidence to all that
we are in the vanguard of our industry’s new
era, creating increased value for our people,
shareholders and communities, large and
small, today and tomorrow.
WHO WE ARE AND WHAT WE OFFER
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Non-operated assets
Operated assets
Schiehallion
Rosebank
Mariner
Britannia
Jade
Isabella
Pierce
Cambo
Tornado
Captain
Erskine
MonArb
Elgin Franklin
Alder
Fotla
Alba
Marigold
Enochdhu
Cook
GSA
Brodgar
Callanish
Our portfolio in numbers
With a diverse and high-value portfolio of
operated and non-operated assets across the
Northern & Central North Sea, Moray Firth
and West of Shetland, our focus continues to
be on maximising value for our shareholders
in a safe and sustainable manner from our
North Sea asset base.
Through a mix of organic and inorganic
growth, we have successfully doubled our
recoverable resources and increased our
average production to 71.4 kboe/d in 2022.
With a focus on maximising economic
recovery, the Group has no material near-term
decommissioning obligations.
OUR ASSETS
28
PRODUCING
UKCS FIELDS
9
OPERATED
PRODUCING
FIELDS
71.4
KBOE/D
AVERAGE 2022
PRODUCTION
512
MMBOE
2P RESERVES
AND 2C
RESOURCES
63%
% OF 2P RESERVES
AND 2C RESOURCES
OPERATED BY
ITHACA ENERGY
6 of 10
STAKES IN
6 OF THE 10
LARGEST
PRODUCING
FIELDS
IN UKCS
2 of 3
STAKES IN
2 OF THE 3
LARGEST
UNDEVELOPED
DISCOVERIES
IN UKCS
HARNESSING THE STRENGTH OF THE NORTH SEA
6 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
EXECUTIVE CHAIRMAN’S STATEMENT
2022 has been a transformational year for
Ithaca Energy, highlighted by material
M&A activity. It culminated in the Group’s
admission to the London Stock Exchange in
November, the largest UK IPO across any
sector in 2022.”
Dear Shareholder,
It is a pleasure to present the maiden Annual Report
of Ithaca Energy plc, and to record excellent results
as we open our account as a listed company.
On every metric – whether financial, operational,
strategic or reputational – 2022 has been a pivotal
year for the Group and could be seen as the
culmination of the first chapter in our story.
Ours has been a trajectory of continuous growth.
Building on the landmark acquisition of Chevron North
Sea Limited in 2019, consolidation has continued
to be a key theme for us in 2022. By leveraging our
proven M&A capabilities we have built a portfolio of
significant scale, having completed the acquisitions
GILAD MYERSON
EXECUTIVE CHAIRMAN
of Marubeni Oil & Gas UK Limited, Summit Exploration
and Production Limited and Siccar Point Energy
(Holdings) Limited (Siccar Point Energy) in the first
half of the year.
Throughout, we have been true to our strategy –
to buy, build and boost assets – and the year was
crowned by our IPO in November, to take us into the
next chapter of our growth story in 2023.
It has been a year that has brought many positives,
and I’d like to reflect here on four focus areas: the IPO,
our performance in numbers, our new Board and our
role in providing vital energy security to the UK.
1: IPO – our return to public markets
The plan of an IPO had been a long-held ambition
of Delek Group Limited (Delek), our parent, and now
majority shareholder, but as recently as January 2022
that goal appeared decidedly distant with capital
markets looking challenging.
It is a testament to the strength of our business case;
the ground we gained during the year, most notably
from M&A; and our growing stature for operational
excellence that we achieved a listing on the Premium
segment of the London Stock Exchange in November.
Any candidate for IPO must satisfy the same essential
criteria to be successful: a clearly visible track record,
strong leadership, a business that is in control of its
own destiny, a sharp focus on ESG and a compelling
pipeline of growth opportunities. We clearly
articulated our investment proposition across
all key areas, gaining support from investors.
It was also a feather in our cap that we successfully
listed on the London Stock Exchange at a time few
others felt able to do so. Indeed, this was the largest
IPO in the energy sector for four years, as well as the
most sizeable across any sector on the London Stock
Exchange in 2022.
Although this secondary placement was not intended
to generate capital for the business itself, it carries
many benefits for Ithaca Energy. Most notably, it
will help us to grow our business while establishing
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5.1x
3.9x
2.3x
2.4x
1x
2018 2019 2020 2021 2022
credibility with counterparties, ranging from banks
and suppliers to investors and regulators, while also
providing access to additional capital sources to
support potential future transactions and significantly
strengthened our Board.
2: Our performance in 2022
This productive year took many forms.
We completed three value-accretive acquisitions, with
one in particular – Siccar Point Energy– being nothing
less than transformative, adding scale and longevity to
our reserves base. Alongside these we drove increased
production and improved financial metrics, while also
focusing on reducing our net debt position.
This translated into an excellent FY2022:
• Production increased by 26.4% to 71.4 kboe/d
• Adjusted EBITDAX up by 85.1% in 2022 to
$1,916.2 million;
• Net income of $1,031.5 million;
• Significant increase in net-asset value up
$1.8 billion to $2.5 billion;
• Group free cash flow increased by 106.1%;
• Net debt of $971.2 million at year end; and
• Significant growth in net 2P reserves and 2C
resources up 76% to 512 mmboe.
3: A refreshed and boosted Board
Another significant advantage of being a listed
company is that it has enabled us to attract the highest
calibre of skills around our boardroom table.
Our new Board was convened in October, and for
sheer experience, coupled with a valuable blend of
complementary skills, we couldn’t wish for a stronger
line-up as we turn our attentions to 2023, and beyond.
Our Senior Independent Director, John Mogford,
brings a wealth of senior Board experience as well as
an extensive operational track record, private-equity
expertise and perspectives gained from leading
industrial companies.
As an oil and gas industry stalwart, Dave Blackwood
offers valuable experience and operational rigour
to his role as Chair of our Health, Safety, Environmental
and Security Committee.
Deborah Gudgeon brings adjacent experience from
the mining industry, together with UK public market
experience with a strong focus on risk and controls,
to her role as Chair of the Audit and Risk Committee.
Lynne Clow is an experienced HR and Operations
Director with significant oilfield services experience.
She Chairs the Remuneration Committee.
Assaf Ginzburg is an experienced finance professional
and an expert in alternative energies and will
contribute valuable insight as the Group shapes
its energy transition plans.
4: A proud UK asset
Ithaca Energy now ranks among the UK’s largest and
most successful independents in the oil and gas sector.
Crucially, we are a significant player in contributing
to the UK’s energy security, as well as providing
high-quality jobs, supporting our supply chain and
contributing tax revenues for the Exchequer.
We are proud to commit:
• to the UK economy, developing critical and large-
scale projects in the North Sea to deliver vital
domestic energy security;
• to the safety of our people, through our relentless
focus on operating as safety leaders and minimising
the potential for harm from operations;
• to the environment, through our aim to be among
the lowest carbon emitters in the UK North Sea,
and through rigorous and measured production
processes;
• to Scottish and UK communities, creating job
security and opportunities, and to supporting our
wider communities and charities with our time and
resources; and
• to our shareholders, delivering the highest
standards of governance and stewardship and
a relentless focus on maximising value in a safe
and sustainable manner.
Equally, we look to the UK government to create an
economic environment that encourages and rewards
investment and entrepreneurship that serves the UK.
In its revised form, the Energy Profit Levy (EPL), and
the fiscal uncertainty it has created, brings material
unintended negative consequences for financing
capacity, JV partner alignment and free cash flow
generation to support continued investment in the UK
North Sea.
We were pleased to be able to engage personally with
the Prime Minister and the Chancellor during 2022,
and we will continue to constructively engage with
the UK government, and opposition parties, in their
review of the long-term tax treatment of oil and gas
production in the UK North Sea. The Fiscal Review, to
be delivered by the end of 2023, aims to provide fiscal
stability and certainty to our industry while supporting
investment to deliver the UK’s energy security strategy.
Now to Chapter Two
We go into 2023 with great confidence.
Today, Ithaca Energy represents an attractive
investment opportunity with a track record of
material value-creation, a sizeable and highly cash-
generative portfolio, a strong pipeline of development
opportunities and a balanced capital allocation policy
that supports a visible growth trajectory.
With our enviable portfolio of brownfield and
greenfield development opportunities, such as
Rosebank, Cambo, Captain EOR, Fotla, Marigold,
K2 and Montrose Infill, and a relentless pursuit for
value creation, our core focus in 2023 will be on high-
grading investment across our current portfolio, while
keeping a watchful eye on consolidation opportunities,
to maximise shareholder returns.
I want to thank everyone who has helped to bring
us to this excellent position, as we set about creating
a safe, sustainable and rewarding future for each of
our stakeholders.
GILAD MYERSON
Executive Chairman
Track record of material value creation
Equity value > 5.1x vs. 2018
x = Equity value vs. 2018
Source: Company information, Duff & Phelps (as at year-end 2018, 2019, 2020) and Kroll (as at year-end 2021 and 2022)
8 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
CHIEF EXECUTIVE OFFICER’S STATEMENT
Dear Shareholder,
I believe we can look back on 2022 with a great deal
of satisfaction.
It was a year in which we completed three significant
transactions, cementing Ithaca Energy’s position
as one of the leading independent exploration and
production (E&P) companies operating in the UK
North Sea. We also continued to demonstrate our
ability to deliver projects, safely and responsibly,
while defining an emissions reduction roadmap
that reflects our ambition to have one of the lowest
carbon portfolios in the UKCS.
Our people are key to our growth
story and I’d like to recognise their
hard work and tireless dedication,
in what has been a successful year
for Ithaca Energy.”
ALAN BRUCE
CHIEF EXECUTIVE OFFICER
Our growth story continues
Our commitment to growth, both organic and through
carefully selected value-accretive M&A, has been
a hallmark of our business, and in 2022 we again
brought our M&A credentials to the fore.
The acquisition of Siccar Point Energy, with assets
across the West of Shetland, Northern North Sea
and Central North Sea, added significant production,
material growth potential and a long-life cycle to
our portfolio.
The transaction brought some of the UK’s largest oil
and gas fields into our portfolio, including Schiehallion
and Mariner, both of which are ranked in the UK’s
top ten producing fields, as well as two of the largest
undeveloped discoveries in the UKCS: Cambo
and Rosebank.
We also completed the acquisition of Marubeni Oil
& Gas UK, adding non-operated working interests in
the high-quality and cash-generative Repsol Sinopec-
operated MonArb assets, as well as the acquisition of
Summit Exploration and Production, which enhanced
our gas exposure through an increased stake in the
high-quality, long-life Elgin Franklin field.
Activity across our operations
2022 was a productive year for our existing asset
base, as we continued to invest across our portfolio
to maximise the value of our assets in a safe and
responsible manner.
Notable highlights in the year included reaching the
milestone of ten million barrels recovered from Phase I
of our pioneering enhanced oil recovery development
at the Captain Field.
In addition, we made significant progress on the
Captain EOR Phase II development; completed well-
work at Erskine and Alba; decommissioning activity
at Anglia and Athena; emissions reduction projects at
FPF1 and Alba; appraisal drilling at Isabella; infill drilling
at Mariner; and a large drilling campaign at Jade.
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Our hub and spoke strategy was once again successful
in building our reserves base with the development
and tie-in of the Abigail field to the FPF-1 facility.
This Ithaca Energy-operated subsea satellite field
tie-back achieved first production in October 2022.
It was developed on schedule and on budget, only
ten months after final development consent and is
producing at an average of approximately 4.5 kboe/d.
Solid platform for growth
After a busy 2022, we are now in a period of taking
stock. The acquisitions we made during the reporting
year are not only rich in potential but, importantly, are
very strong in terms of near-term developments.
We continue to work towards final investment
decisions across a number of projects in our high-value
development portfolio with a focus on delivering long-
term growth from these critical resources.
Together with other discoveries and exploration
acreage, we are in a strong position of owning
significant resources which will sustain the future of
the Group in the years to come, with the potential to
achieve production of 100 kboe/d in the medium to
long-term through continued investment.
While we are always open to further M&A should
value-accretive propositions arise, this depth of
portfolio means we no longer have a particular need
to act. The mid to late-life assets acquired from
Chevron in 2019, and the early-life fields brought by
Siccar Point Energy, have balanced our portfolio.
ESG
We believe a fundamental component of a good
year’s performance is to be able to show meaningful
progress against ESG goals. 2022 saw us addressing
this on multiple fronts.
Like many growing businesses we must achieve the
right balance. We seek to expand our business into
new assets and acreage, serving not only our investor
stakeholders but the UK as a whole, while being mindful
of the impact we make to our communities and the
environment. We acknowledge the growing desire
to transition from the use of hydrocarbons to new
energies and the sentiment towards exploration and
appraisal activity in particular, and the risks this could
create in relation to our business model. However we
also recognise the importance of delivering energy
security in an affordable manner.
The longer-term transition of our portfolio to lower-
emission intensity assets was a catalyst for the
acquisition of Siccar Point Energy. In Cambo and
Rosebank we have low-carbon intensity, long-life assets
which have the potential to support our ambition to
operate one of the lowest carbon-emitting portfolios
in the UK North Sea, while delivering critical security of
supply for the UK. The acquisition builds on our existing
emissions reduction efforts, where we are bringing
rigour, innovation and resources to reducing our carbon
emissions to the lowest possible levels, to support our
target of achieving Net Zero by 2040, on a Scope 1 and
2 net equity basis.
Our safety performance continues to be an area of
core focus. As a Board and leadership team, we are
fully committed to continuously improving our safety
performance and ensuring no harm to our people.
Our commitment to give back to our local community
is an area that fills me with real pride, particularly given
the exceptionally busy nature of the year, operationally.
In a world in which mental health conditions are
becoming more prevalent, we were delighted to
become a corporate partner to Aberdeen Association
of Social Services (VSA) in our hometown of Aberdeen.
This remarkable charity has more than 150 years of
history in helping vulnerable people in communities
across the North-East of Scotland.
We marked the beginning of a three-year partnership
with financial support for a major renovation project at
the charity’s Queen Mother House mental-wellbeing
facility while committing to raising further funds and
volunteering across VSA’s many facilities.
This partnership aligns closely with our commitment
to the mental health of our own people, with in-house
initiatives to appoint and train mental health first
aiders and wellbeing champions.
I echo our Executive Chairman’s comments on the
exceptional industry professionals we have added to
our new Board following our IPO as we strengthen our
corporate governance. As CEO, to be able to draw on
their unrivalled sector knowledge – and, specifically,
North Sea experience – will be invaluable.
2023: a busy agenda
With an exciting portfolio of producing assets and
development opportunities, our new status as a listed
company and a fresh perspective from our recently
appointed Independent Directors, we enter 2023
with real momentum.
My immediate priorities for the year are:
• Safety performance: Our commitment to safety
will always be my number-one priority. We will
maintain our sharp focus on process safety,
targeting a year free of Tier 1 or Tier 2 process
safety events;
• Production: We will focus on delivering high levels of
production efficiency, in a safe and reliable manner,
with a 2023 production target of 68-74 kboe;
• Project development: We will continue to mature
development projects in our portfolio towards final
investment decision, providing healthy competition
for capital as we strive to deliver superior returns;
• Our emissions roadmap: We will remain focused
on near-term emission reduction opportunities and
our transition to low-emission intensity assets; and
• Our people: We will invest in the continued
development of our people, seek to attract fresh
talent to the oil and gas industry and ensure a fair
and equitable workplace for all.
I would like to thank both our offshore and onshore
teams for their hard work and tireless dedication
throughout the year. Our people, supply-chain and
Joint Venture partners are living proof of our internal
mission to ‘Triumph Together’. They have enabled
us to deliver our most successful year yet and I look
forward to delivering more of the same, safely and
responsibly, in 2023.
ALAN BRUCE
Chief Executive Officer
10 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
2022 PERFORMANCE REVIEW AND 2023 OUTLOOK
Delivering material scale and portfolio
longevity
With three acquisitions completed in 2022, including
the transformative acquisition of Siccar Point Energy,
we continued to build our track record of delivering
material value creation, and positioned Ithaca Energy
as a substantial North Sea enterprise, with a portfolio
of significant scale and longevity. Our impressive
growth story, delivered through both organic growth
and value-accretive M&A activity, supported the
Group’s successful admission to the Premium segment
of the London Stock Exchange in November 2022.
In scale, we now rank as the second largest
independent in the UKCS by resources and third
largest by production. Our diverse portfolio includes
interests in six of the top ten assets by reserves in the
UKCS, more than any other player, including significant
stakes in two of the three largest undeveloped
discoveries in the UKCS, Cambo and Rosebank.
In 2022, we increased our 2P Proven and Probable
reserves to 228 mmboe at 31 December 2022
(2021: 184 mmboe). The addition of Siccar Point
Energy’s portfolio materially enhanced our portfolio
longevity with a highly competitive reserves-to-
production ratio of 19 years, among the highest
in the UKCS.
Production growth driven by acquisitions
Our production in 2022 rose to an average of
71.4 kboe/d (2021: 56.5 kboe/d). In the first half of
the year production averaged 66.7 kboe/d, increasing
to 76.1 kboe/d in the second half of the year, reflecting
material producing asset additions following the
completion of M&A transactions in the year, including
the acquisition of Marubeni Oil and Gas UK in Q1 2022
and both Summit Exploration and Production and
Siccar Point Energy in Q2 2022.
In Q4 2022, strong operational performance resulted
in average production of 80.8 kboe/d, delivering ahead
of management guidance of 77-80 kboe/d.
Operating costs, net of tariff income and excluding
tanker costs, in 2022 were $496.0 million, representing
a net unit opex cost of $19.0 /boe (2021: $18.0/boe),
increased from 2021 ($371.1 million) substantially
driven by higher cost of fuel gas and diesel. Q4 2022
net opex of $136.7 million, was toward the lower end
of management guidance of $130-$150 million.
Total net capital expenditure (excluding
decommissioning) in 2022 of $405 million (2021:
$388 million), reflected investment activity across
our asset base including the Captain EOR Phase II
development; Abigail subsea-tieback development,
well-work at Erskine and Alba; appraisal drilling
at Isabella; and a successful development drilling
campaign at Jade. Q4 2022 net capex (excluding
decommissioning) of $105 million was in-line with
management guidance of $100-$120 million.
Operational excellence, starting with safety
Safety is our non-negotiable, number-one priority
and is central to our business success. We empower
our people to be Safety Leaders, with the right
and responsibility to act in line with our Stop Work
Authority and always adhering to the Life Saving Rules.
During 2022, our serious incident and fatalities
frequency (SIF-F) record remained at zero, as it has
since 2019. There were no Tier 1 and two Tier 2
process safety events during the year. We saw an
increase in occupational safety events as activity
levels increased resulting in an expanded and less
experienced workforce across the industry. Further,
onsite management engagement has been more
challenging during the COVID-19 pandemic, and so our
focus has been on reducing the administrative burden
faced by work-site leaders to provide more time for
field verification of safety critical tasks.
TRACK RECORD
OF DELIVERING
BOTH ORGANIC
GROWTH AND
VALUE ACCRETIVE
M&A ACTIVITY
SAFETY
ZERO
SERIOUS INCIDENT AND
FATALITIES FREQUENCY
(SIF-F)
DAILY PRODUCTION
71 KBOE/D
+26% INCREASE ON 2021
ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022 | 11
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Development expertise and growth pipeline
Our expertise extends across the full life cycle of E&P
operations. In 2022, we have grown our reserves
base organically, through investment programmes
focused on production enhancement, satellite field
developments, and exploration and appraisal activities.
Our development expertise came to the fore in
2022, with large programmes focused around our
infrastructure hubs including the subsea tie-in of
the Abigail field to FPF-1, just ten months after final
development consent. We made material progress
during the year on Phase II of our pioneering polymer
enhanced oil recovery development programme,
to maximise recovery rates from the Captain field.
We have executed a significant proportion of the
project’s offshore work scope including the installation
of the process modules, pipework, B28 flow line and
riser caisson, drilling and completion of first stage II
well UB05P. In September 2022, Captain Enhanced Oil
Recovery Phase l reached a significant milestone of ten
million barrels of oil production through the polymer
flood enhanced oil recovery method.
Our production performance in 2022 has been
supported by strong production efficiency
performance, reflecting our commitment to maximise
asset value through operational excellence. Most
notably at FPF-1, where our focus on value and our
willingness to invest to drive operational efficiency and
uptime improvements, has resulted in a significant
increase in production efficiency in 2022 to above
90%, from an average of 60% in 2021. Across our
portfolio, we have launched digitalisation initiatives
to ensure safe and efficient operations, delivering
increased uptime and cost savings.
In response to the North Sea Transition Authority
(NSTA) call for applications in the UKCS 33rd Offshore
Oil and Gas Licensing Round, we drew on our in-house
exploration and appraisal expertise to apply ahead
of the closing date on 12 January 2023. Targeting
adjacent upside potential to existing infrastructure
and greenfield developments, we submitted nine
applications, five as proposed operator of the licence.
We expect the first licences will be awarded from
Q2 2023.
Decarbonisation focus with a well-defined
emissions-reduction strategy
We made significant progress in sharpening our
decarbonisation focus in 2022. We formalised our
plans to significantly reduce emissions and exceed
industry targets by optimising our current portfolio
in the short-term, and fundamentally transitioning
the portfolio in the medium to long-term.
We acknowledge that the energy transition is a
fundamental challenge to our industry and the
targets we have set for decarbonisation are difficult
to achieve. Our well-defined roadmap of emission
reduction initiatives supports an ambitious goal to
achieve a 25% reduction in Scope 1 and 2 CO
2
and
CO
2
e emissions from our operated assets by 2025
(against a 2019 baseline). Our medium-term target
is to shift from higher to lower-emission intensity
assets. As assets such as FPF-1 and Alba come to
the natural end of their life, they will be replaced by
lower-intensity fields such as Rosebank and Cambo.
In parallel, we are evaluating technologies which
could materially reduce emissions at Captain. In the
long-term, we are committed to supporting the North
Sea Transition Deal (NSTD) and intend to achieve Net
Zero by 2040 (on a Scope 1 and 2 net equity basis), ten
years ahead of current NSTD commitments.
Further details of our roadmap are provided on
page 40 and further information on climate related
risks and opportunities, including those relating to
our ability to meet our decarbonisation targets are
set out on page 45.
12 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
Illustrative post-tax CFFO Sustaining capex Balance sheet Ordinary dividends Extra cash flow
1. Invest 2. Protect 3. Return 4. Evolve
Dividend
commitment of
15-30%
of CFFO post-tax
Leverage below
1.5x
Grow
Growth Capex
Extend
M&A
Yield
Additional Distribution
2022 PERFORMANCE REVIEW AND 2023 OUTLOOK CONTINUED
Focus on maximising shareholder value
As we embark on our journey as a publicly listed
company, we have established a robust and balanced
capital allocation framework that will support our
ambition to deliver continued growth while providing
attractive shareholder returns.
We expect that, subject to no material downward
pressure on oil and gas prices and a stable fiscal
regime, our cash flow generation will satisfy capital
expenditure requirements to sustain current
production levels of between 70-90 kboed/d;
maintain a leverage position below 1.5x net debt to
adjusted EBITDAX; deliver shareholder returns; and
provide additional financial flexibility to facilitate
further value-accretive growth opportunities.
During 2022, our diversified, high-quality asset base
generated free cash flow of $1,135 million. This strong
cash flow generation supported a rapid deleveraging
trajectory, with the Group reporting net debt of
$971.2 million, representing a net debt to adjusted
EBITDA ratio of 0.5x at the year-end.
Achieving this deleveraging in a year when we
completed over $1 billion of transactions, and
deployed capital of $405 million to deliver continued
organic growth, reflects both the strength of our
portfolio and our ambitions for further growth.
With a balanced capital allocation policy, through the
cycle dividend target of 15-30% of post-tax cash flow
from operations, and proven track record of material
value creation, we believe Ithaca Energy represents
an attractive investment opportunity with significant
potential for growth.
Outlook for 2023 and beyond
We enter 2023 as a public company, with greater scale,
diversification, reserves and leadership expertise,
better positioned than ever to deliver growth.
With a diverse, high-value portfolio of producing
assets and significant brownfield and greenfield
development opportunities such as Rosebank,
Cambo, Marigold, Fotla and Tornado, and infill drilling
at Captain, Alba, Montrose, Schiehallion and Mariner
we have considerable investment optionality across
our portfolio. Our focus during the year will be on
prioritising investment across our current portfolio to
maximise shareholder returns.
We will maintain a watching brief on value-accretive
acquisition opportunities taking a selective and
disciplined approach, as we manage our capital
allocation priorities in line with our stated capital
allocation framework.
As a result of lower than estimated production in Q1
2023, primarily due to delayed start-up of the non-
operated Pierce field, lower than forecasted volumes
from Abigail and operational issues at Captain (that
have subsequently been resolved), and the impact of
the Energy Profit Levy to 2023 capital programmes we
provide updated 2023 full year production guidance of
68-74 kboe/d (revised from 72-80 kboe/d).
Capital allocation framework
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We continue to have a strong focus on costs and
provide updated net opex guidance of $560 million
– $630 million (reduced from $590 million –
$680 million). Updated guidance reflects a modest
rise in our average opex per barrel from 2022, due
to current inflationary pressures and increased fuel
and diesel costs. Our mid-term ambition is to drive
down our average operating cost per barrel as we
transition our portfolio to earlier-life assets with
lower operating costs.
As a result of a reduction in scheduled activity
across our non-operated portfolio, as a result of
the introduction of the Energy Profit Levy, and
deferral of activity from 2023 to 2024 we provide
updated 2023 net capex guidance of $400 million –
$460 million (excluding capital investment for projects
awaiting final investment decision), a reduction from
previous guidance of $450 million - $550 million.
Revisions in management guidance across production,
opex and capex are expected to have limited cash
impact at current commodity prices based on mid-
point guidance changes. The Group is recommitting
to its dividend target of 15-30% of post-tax cash flow
from operations and its targeted 2023 dividend of
$400 million, as communicated at the time of IPO.
We remain committed to investing in the UK North
Sea, however the impact of the revised Energy Profit
Levy announced in November 2022, in particular the
removal of the sunset clause, is constraining our ability,
and that of our JV partners, to invest. With a reduction
in borrowing capacity across the sector as a direct
result of the levy, the ability of the oil and gas industry
to unlock the benefits of investment programmes
across the UKCS to provide critical domestic energy
security and meet its Net Zero ambitions is under
threat. We continue to constructively engage with the
UK government in relation to the future fiscal policy in
pursuit of the stability required to make these critical
investment decisions.
14 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
MARKET OVERVIEW
Overview
2022 has been an eventful year for the oil and
gas industry.
Geopolitical tensions, domestic energy security
concerns, the subsequent cost-of-living crisis, UK
political instability, and a windfall tax on oil and gas
producers have all brought to a head an energy crisis
that has in fact been many years in the making.
Underinvestment in supply for the past several
years, combined with robust demand, has resulted
in structurally higher commodity prices than has
historically been the case. While demand for
hydrocarbons is predicted to peak at some point in
the coming decades, given the extractive nature of the
industry, further investment in supply, is required to
prevent a proliferation of energy crises.
Domestic energy security
In the UK, domestic energy security became centre
stage following Russia’s invasion of Ukraine and the
subsequent increase in European gas prices. The UK is
currently a net importer of both oil and gas, a position
which is not likely to change until around 2050.
Energy Profit Levy
With the UK experiencing a cost-of-living crisis due
to escalating commodity prices, the government
stepped in to provide support to consumers struggling
to pay their bills. In turn, it then looked to the oil
and gas industry to provide additional tax revenues,
announcing a windfall tax of 25% in May 2022.
Recognising the need to incentivise domestic
production, the initial windfall tax included an
investment allowance that was intended to align the
tax with the government’s energy security strategy.
However, fiscal and political instability became
the dominant force for the remainder of the year.
The investment allowance, introduced as part of
the Energy Profit Levy and designed to promote
investment in the basin, was unsuccessful in filling its
promise, with North Sea annual expenditure dropping
to a 22-year low with allocation of capital trending
to international regions with greater degrees of
fiscal stability.
The revision to the Energy Profit Levy, in the
Chancellor’s Autumn Statement, then increased the
levy to 35%, and removed the sunset clause that was
designed to withdraw the levy on a return to normal
commodity prices.
This has created a number of challenges and
unintended consequences for the UK’s independent
operators. Removing the sunset clause has had the
effect of reducing borrowing capacity in the industry
and constraining the ability of independents to invest,
encouraging the continued prioritisation of capital to
be redirected out with the UK.
It is our firm belief that, if the government does not
act swiftly to reaffirm that the levy is windfall in nature,
it risks jeopardising the industry’s vital work to bolster
UK energy security and, by extension, risks impacting
the planned future delivery of the Net Zero transition.
Outlook
Ithaca Energy has the potential to play an essential
role in delivering UK energy security with a robust
portfolio of long-life development assets. And while
the Energy Profit Levy favours companies, such as
Ithaca Energy, that have the depth of projects that
would benefit from investment incentives, we require
fiscal stability to support these critical investments.
To this end, we continue to engage with the UK
government, and opposition parties, to ensure that
the levy is legislated in a way that supports the Group’s
continued investment in the UK North Sea.
2022 HAS BEEN AN
EVENTFUL YEAR
FOR THE OIL AND
GAS INDUSTRY
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Brent prices
Brent price movements in 2022 can best be described
as a tale of two halves: they increased significantly in
the first half of the year before declining in the second
half. Over the year, the Brent crude oil spot price
averaged $99/bbl, compared to $71/bbl in 2021.
Its significant rise in H1 was due to geopolitical
tensions with Russia. In February 2022, the
country’s full-scale invasion of Ukraine followed
eight consecutive quarters of decreasing crude oil
inventories globally, driven by rising economic activity
following the pandemic. The net result was to push
Brent crude to its highest inflation-adjusted price
since 2014.
However, from June onwards crude oil prices
decreased as concerns about a possible global
economic recession reduced demand expectations.
High petroleum prices contributed to inflationary
pressures affecting consumer budgets and gasoline
demand. In addition, severe COVID-19 containment
measures in China contributed to lower global
demand for oil, and by the close of the year Brent
crude oil stood at $86/bbl.
Brent prices have continued to trend downwards in
the first quarter of the year, with an average Q1 2023
price of $82/bbl
1
.
1 Average to 24 March 2023
IN THE UK, DOMESTIC
ENERGY SECURITY
BECAME CENTRE-STAGE
FOLLOWING RUSSIA’S
INVASION OF UKRAINE
AND THE SUBSEQUENT
INCREASE IN EUROPEAN
GAS PRICES. THE UK IS
CURRENTLY A NET
IMPORTER OF BOTH OIL
AND GAS, A POSITION
WHICH IS NOT LIKELY TO
CHANGE UNTIL 2050.”
Gas prices
We entered the year with gas prices at record highs.
This was the result of tightening gas markets in the
second half of 2021, driven by a combination of
a robust recovery in demand following the global
pandemic, extreme weather events and unplanned
supply outages.
In 2022, gas markets experienced continued volatility,
and the significant impact of Russia’s full-scale invasion
of Ukraine resulted in an average gas price of 263
pence per therm in 2022. Following the invasion,
Russia reduced gas supplies to Europe as a counter
measure to the sanctions imposed.
The loss of Russian imports has structurally altered the
gas market in Europe resulting in a significant supply
imbalance. Price volatility is expected to be high and
persist over the medium term with LNG imports to
Europe now commanding a premium. The importance
of domestic gas production is now greater than ever.
With Ithaca Energy’s significant gas weighting of c.34%
of our total 2022 production, we continue to have
exposure to the buoyant commodity price outlook
for gas. During 2022, and as we moved into 2023, we
have actively managed our hedging portfolio to reflect
the current dynamics of the gas market, building
greater flexibility into our hedging programme.
Gas prices have fallen considerably in 2023, with an
average Q1 2023 price of 135 pence per therm
1
.
1 Average to 24 March 2023
REALISED 2022 BRENT PRICE
$100/boe
UK UPSTREAM M&A ACTIVITY IN 2022
$3.8bn
REALISED 2022 GAS PRICE
$149/boe
M&A activity
Upstream M&A activity in the UK slumped during
the year, with a recorded $3.8 billion of M&A
transactions announced.
This downturn reflected the state of flux felt by the
industry as it sought to digest the Energy Profit Levy
and its implications for investment plans.
Ithaca Energy bucked the trend as the most active
consolidator in the UK North Sea, completing three
acquisitions in the first half of the year including the
landmark acquisition of Siccar Point Energy.
As we move into 2023 and beyond, we expect to see
a wave of consolidation opportunities. There may
be an increased momentum for previously stated
UK divestment plans, as global operators continue
to weigh up the attractiveness of their UK portfolios
against other operating jurisdictions.
Our proven M&A capabilities and basin expertise
place Ithaca Energy in a strong position to lead further
consolidation in the market. And with a softening in oil
prices we believe that the M&A market may reopen
with more realistic seller expectations.
However, after a very active and successful 2022 in
M&A, Ithaca Energy has no pressing need to act. We
will take a selective and disciplined approach to any
opportunities and consider them on a value-add basis
and on their ESG merits, as we manage our capital
allocation priorities in 2023.
16 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
Q&A WITH JOHN MOGFORD
JOHN, YOU’RE AN OIL & GAS MAN OF
LONG STANDING. WHAT ATTRACTED
YOU TO ITHACA ENERGY?
A number of factors, really. I love the North Sea –
I must do, I’ve worked around it since 1977! I also
strongly believe in the growth strategy that the
leadership team has created to realise the Group’s
future potential. And I think the clincher for me is that
Ithaca Energy has, in my opinion, one of the most
attractive asset portfolios in the UK North Sea with
significant brownfield and greenfield development
opportunities that have the potential to create
material shareholder value, further complemented
by the Group’s proven ability to execute value-
driven M&A.
I am delighted to have joined the Board
of Ithaca Energy as Senior Independent
Director following its successful admission
to the London Stock Exchange. Our new
Board brings together a wealth of oil and
gas and public market experience that will
guide the business through its next phase
of growth as a public company.”
JOHN MOGFORD
SENIOR INDEPENDENT DIRECTOR
There’s a lot of life left in the North Sea basin, and
with a number of majors exiting, assets have moved
into the hands of lean and nimble independents like
Ithaca Energy who can maximise the potential to
come. I’m sure there will be some challenges, but we
are resilient and proactive with a Board that knows
how to manage the cyclical nature of our sector.
WHAT CHALLENGES DO YOU ENVISAGE?
You could say it’s a nice challenge to have, but we have
a portfolio of highly-attractive development assets
that we will work as a Board to prioritise our capital
allocation to maximise shareholder returns, reflecting
that there will be competition for capital across our
existing asset base. Projects vying for capital is not a
new challenge for our industry, but it is one that has
been somewhat heightened by the consequences of
the energy profit levy on borrowing capacity across
the industry. Our focus as a Board has to be on
value-creation, managing risks and being a long-term
responsible operator.
From a project perspective, we recognise that
new greenfield developments have inherent
risks, particularly those in deep water and harsh
environments, in a time that the world seeks to
change its energy mix. But I take comfort from the
substantial engineering work that has been executed
internally to mitigate these risks and the strength
of the experienced and highly capable projects team
who have a significant track record in delivering
similar development projects.
And let’s also remember that with challenge comes
opportunity. Projects such as Cambo and Rosebank
could materially transform the emissions intensity of
our asset base. This will deliver sustainable production,
contributing to the UK’s long-term energy security.
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WITH YOUR EXPERIENCE AND FRESH
PAIR OF EYES, HOW DO YOU SEE
SAFETY AT ITHACA ENERGY?
Offshore oil and gas is a hazardous business and
I think there is a good safety culture within Ithaca
Energy. Indeed, we have a strong track record of
completing complex projects extremely well and,
most importantly, without any serious incidents.
We must of course remain vigilant to the major
risks that never go away in our business.
At the same time, like a lot of operators in the
North Sea, we’ve had a number of low-level accidents
and injuries. We must be mindful for any signs of
complacency creeping into routine tasks, and target
zero-harm to our people and our environments.
But I see the right behaviours for us to continue
to be a leader in safety.
CAN YOU DESCRIBE WHAT A
SENIOR INDEPENDENT DIRECTOR –
A ‘SID’ – DOES?
Yes, the SID role is part of our commitment to uphold
the highest standard of corporate governance and to
maintain a sound framework for our growth plans.
Under the UK Corporate Governance Code, the Senior
Independent Director acts as a sounding board for
the Chair of the Board, providing them with support
in the delivery of their objectives, and to serve as an
intermediary for the other Directors when necessary.
AND SPECIFICALLY IN RELATION
TO ITHACA ENERGY ITSELF, HOW
DO YOU SEE YOUR ROLE?
My role is to work closely with the Board and Gilad
Myerson, our Executive Chairman, to provide robust and
independent challenge. We have a slightly different Board
composition to many, because, before our IPO, Ithaca
Energy was a wholly owned subsidiary of Delek.
Immediately following Admission, Delek held 89.4% of
the Group’s issued ordinary share capital. And having
previously been employed by Delek, Gilad is considered,
in governance parlance, to be an ‘associated person’.
Taking this into consideration, the Group’s relationship
with its major shareholder, Delek, is rightly a key area
of focus for the Board in establishing our corporate
governance framework.
WHAT BEARING DOES THIS HAVE
ON YOUR APPROACH?
My top priority as SID is to ensure we have a robust
framework in place to operate independently of our
majority shareholder, in accordance with the highest
standards required of a Premium-listed entity. As the
SID, shareholders should look to me to ensure that
Ithaca Energy is being run for the benefit of all its
shareholders, not just its majority shareholder.
In all the decisions we make, the minority shareholders
of the Group have the right to feel comfortable that
the Board is run as an independent company, with
their best interests also at heart.
HOW WILL THE RELATIONSHIP WITH
DELEK BE GOVERNED FOLLOWING IPO?
Due to the size of Delek’s shareholding, they are
deemed to be a controlling shareholder for the
purposes of the Listing Rules. The Group therefore
entered into a Relationship Agreement with Delek
at the point of Admission. Its principal purpose is
to ensure that Ithaca Energy is capable of carrying
on its business independently of Delek.
AND HOW DOES BOARD INDEPENDENCE
WORK IN PRACTICE?
The new Board has strong independent
representation, with five Independent Directors and
four Non-Independent Directors around the table,
all with considerable Board experience.
The key Board committees, the Remuneration
Committee and the Audit and Risk Committee are
populated solely by Independent Directors, both in
their Chairs and members. So with the comfort of this
rigorous governance framework, the SID role is one
I’ve been very happy to take on, joining the Board
as we begin life as a public company.
WHAT’S DIFFERENT ABOUT
BEING A PUBLIC COMPANY IN
GOVERNANCE TERMS?
A significant difference is that we must have a firmer
grip on viability criteria. We have to look at mid to
long-term timeframes, and a wider range of scenarios,
to ensure that we can fund our commitments, pay
our people, meet our costs and invest for growth.
So depending on our performance and the sector’s
climate, this might mean we can’t be quite as
aggressive in our approach as a private company.
During the IPO roadshow, we shared with potential
investors our clear capital allocation policy, setting
out our capital priorities of: (1) investing in sustaining
capex; (2) protecting our balance sheet; (3) providing
sustainable returns to our shareholders; and
(4) reinvesting surplus cash flows to support the
continued growth of the business.
An important part of the Board’s role is to strike
the balance between what we can or need to invest,
acknowledging the commitments we have made
to the market with the overall goal of maximising
shareholder value.
WHAT ARE YOUR THOUGHTS GOING
INTO 2023?
It’s a very exciting time. We have a compelling portfolio,
and near-term high-quality development opportunities.
As a Board, our priority is delivering on the Group’s
growth ambitions in a safe and responsible manner
while maximising shareholder value.
I am confident we have the Board, the leadership
team and the people to cement our position as the
‘Strength of the North Sea’.
18 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
OUR VISION, MISSION AND VALUES
OUR VISION
As we conduct our business in a new era for
the UKCS, Ithaca Energy will redefine what it
means to be a leading oil and gas operator.
Our vision is to be the highest -performing UKCS
independent oil and gas company, focused on
growing value sustainably.
By putting our people’s safety, environmental
responsibility and operational excellence at the
heart of everything we do, we will deliver strong
shareholder returns.
In so doing, we will change perspectives on oil
and gas production, making a positive difference
by delivering low-emission energy security into
the Net Zero transition.
OUR MISSION
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.
Together.
We can only succeed if we work together, harnessing the
collective expertise and experience of our people and partners.
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OUR VALUES
If our mission is the ‘what’ we aim for, our values are the ‘how’.
They guide how we work resiliently, collaboratively, openly and considerately.
Bring strength
We are resilient, agile and committed.
We bring our collective talent, expertise
and determination to bear daily.
• Demonstrate excellence in safety leadership
• Take the initiative to strengthen our business
• Be adaptable, working in pursuit of continuous
improvement
Express yourself
We are empowered to question, sharing
the right and responsibility to challenge
and to use our voices in pursuit of ‘best’.
• Promote an inclusive organisation with openness,
respect and trust
• Challenge each other and our partners to act
• Encourage different perspectives and be confident
to build on ideas
Be considered
We genuinely care about making a positive
impact for our people, shareholders,
and communities.
• Show integrity in all our relationships
• Support and energise one another to make a difference
• Actively engage in our role and responsibility towards
energy transition
Deliver results
We control our destinies by harnessing
our ambition and pragmatism to deliver
successful outcomes.
• Take accountability and ownership for our actions
• Work collaboratively, with a united purpose to succeed
• Embrace innovation to create sustainable value
20 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
OUR BUSINESS MODEL AND STRATEGY
SUPPORTING
OUR GOAL
GENERATING
VALUE
OUR STRATEGIC
PILLARS
OUR OPERATING
SPACE
BUY
ASSETS
In action: page 24
BUILD
ASSETS
In action: pages 25 to 27
BOOST
ASSETS
In action: pages 28 to 29
MAXIMISING RETURNS FOR SHAREHOLDERS
THROUGH THE SAFE AND RESPONSIBLE
PRODUCTION OF OUR ASSETS, MEETING
THE UK’S ENERGY NEEDS AS WE NAVIGATE
THE ENERGY TRANSITION
NORTH SEA OIL AND GAS EXCELLENCE
FULL CYCLE OPERATOR
EXPLORATION PRODUCTIONDEVELOPMENT DECOMMISSIONING
INVESTING SUSTAINABLY
Recognising that oil and gas will continue to play an important part of the long-term energy mix into the
energy transition, we are focused on investing in organic and inorganic opportunities, supported
by our capital allocation framework, that will realise value and deliver against our
sustainability target of achieving Net Zero by 2040.
ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022 | 21
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BALANCED CAPITAL
ALLOCATION POLICY
• Deliver committed organic capex that sustains production
in the medium term at 70 -90 kboe/d range meeting the
UK’s energy needs
Our robust and balanced capital
allocation framework maximises
growth while protecting the business
from risks and supporting strong
sustainable shareholder returns.
The framework will support the
transition of our portfolio to lower-
emission intensity assets.
PROTECT
RETURN
EVOLVE
• Strong focus on the robust protection of our assets
• Maintain leverage position below 1.5x
• Resilient through the cycle through hedging and portfolio diversity
• Committed to distributing attractive dividends to shareholders
• Dividend target of 15 -30% CFFO post-tax through the cycle
• Pursue growth capex opportunities that provide portfolio
longevity and lower-emission intensity
• Deliver value-accretive M&A, in a disciplined manner
DELIVERING
VALUE FOR
Our shareholders
TARGET OF
15-30%
POST-TAX CFFO
Our suppliers
$496m
Operating costs
Our people
573
Offshore and onshore
employees
Our communities
£270k
Donations
INVEST
22 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
OUR STRATEGY
BUY
ASSETS
In focus: page 24
OUR STRATEGIC PILLARS
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 where we can apply our proven expertise
• Leverage our full cycle capabilities to deliver value from a range of opportunities
• Take a measured approach to M&A opportunities, following stringent investment criteria including
emission intensity
BUILD
ASSETS
In focus: pages 25 to 27
BOOST
ASSETS
In focus: pages 28 to 29
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 prioritisation
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
ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022 | 23
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OUR STRATEGIC ENABLERS
Our success is underpinned by the safe, efficient and responsible production of our Group’s assets and
supported by a robust and solid financial framework. Our people are core to our success. We will only
succeed if we work together, harnessing the collective expertise and experience of our people.
2022 HIGHLIGHTS
A robust and balanced framework
supports strong sustainable returns
• Preserve balance sheet strength with a
targeted leverage position below 1.5x
• Maintain a balanced capital allocation
framework to maximise growth while
providing material shareholder returns
• Take a disciplined approach to financial
risk management, hedging, budgeting
and long-term investment planning
We put our people, their safety and environmental
responsibility at the heart of everything we do
• Ensure no harm to our people or environment, by excelling
as safety leaders
• Focus on delivering our well-defined, short-term emissions
reduction initiatives
• Transition the portfolio over the medium to long-term,
targeting Net Zero by 2040, on a Scope 1 and 2 net equity basis
• Recruit, retain and develop a skilled, adaptable and
diverse workforce
• Align our people goals and performance management to
our Group values and behaviours
• Give back to the communities in which we operate, to make
a positive difference
SAFETY, SUSTAINABILITY
AND OUR PEOPLE
ROBUST FINANCIAL
FRAMEWORK
TARGETED LEVERAGE
<1.5X
DIVIDEND TARGET
15-30%
POST TAX CFFO
TIER ONE
ZERO
PROCESS SAFETY EVENTS
NET ZERO BY
2040
ON A SCOPE 1 AND 2
NET EQUITY BASIS
ABIGAIL FIRST
OIL ACHIEVED
TEN MONTHS
AFTER FDP
CONSENT
THREE
MATERIAL
ACQUISITIONS
COMPLETED
IN 2022
10 MMBBLS
RECOVERED
FROM CAPTAIN
EOR PHASE I
24 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
STRATEGY IN ACTION
BUY ASSETS
Delivering organic growth across
our portfolio through operational
excellence, while always maintaining
a staunch focus on value
LEVERAGE OUR PROVEN M&A EXECUTION
CAPABILITIES AND DEEP INTEGRATION
EXPERTISE TO BUY AND BUILD A
PORTFOLIO OF SIGNIFICANT SCALE
Ithaca Energy has been successful in delivering material value-
creation through M&A. In 2022, the acquisition of Siccar Point Energy
cemented our position as a leading independent operator in the
North Sea. The transaction ultimately provided scale and longevity
to our portfolio, with a strong mix of attractive producing assets and
material greenfield development opportunities, enabling us to launch
our IPO in the second half of the year.
We take a measured approach to M&A, with each opportunity
reviewed against our stringent investment criteria. In 2022, we
reviewed over 16 acquisition opportunities, with nine progressing
to full due diligence exercises, resulting in the completion of three
acquisitions in the year.
The oil and gas sector continues to offer various consolidation
opportunities with majors increasingly reallocating capital into new
forms of energy to achieve their ESG targets, as well as looking to
streamline global portfolios to improve efficiency.
We believe that there are now only a few independent operators,
of both operational and financial strength, supported by proven
M&A execution capabilities, that can acquire assets from these
players, therefore strengthening our position as a lead consolidator
in the market. However, we believe it is important we maintain our
disciplined approach to M&A and that all future opportunities will
be considered in line with our ESG ambitions and our clearly defined
capital allocation policy, and their merits considered in line with
existing investment opportunities across our established portfolio.
OUR STRATEGY
IN ACTION
ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022 | 25
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BUILD ASSETS
approaches, we have arrived at a substantially more cost-effective solution that
adapts the existing infrastructure, through the installation of further decks on
the existing platform and adding modular units to accommodate the equipment
required to facilitate the subsea expansion. Through innovative engineering we
have reduced the cost of the development by over 50%, ultimately unlocking
a commercial solution to maximise the recovery of reserves.
The full scope of the Captain EOR II project, which was sanctioned in April 2021,
covers the drilling of six new subsea polymer injection wells across two new drill
centres, and one new production well at an existing drill centre as well as the
installation and commissioning of the required subsea infrastructure flowlines
and umbilicals connected to the Captain Bridge Linked Platform (BLP). Across
the existing infrastructure activities include modifications to the three Captain
Installations – Captain Well Protection Platform, ‘A’ (WPPA), the Captain BLP
and the Captain FPSO.
Material progress has been made during 2022 on the Phase II project and we
are delighted to report that the project is on schedule and on budget. During
2022, we have executed a significant proportion of the project’s offshore work
scope including the installation of the process modules, pipework, B28 flow
line and riser caisson, drilling and completion of first stage II Well UB05P. During
2023, project activity will include the drilling of further wells, installation of the
required flowlines and umbilical, and completion of the topsides construction
and commissioning.
Captain EOR Phase II is expected to double net production at the field to
approximately 40 kboe/d and provide gross 2P reserves of approximately
28 mmboe. Beyond this, material potential upside exists from the Captain
EOR II activity, with the field having STOIIP of c.1 billion boe with approximately
36% of volumes recovered. Captain EOR Phase II is expected to achieve first
injection from new polymer wells in 2024 and peak production in 2025.
Captain EOR Phase II demonstrates our commitment to investing in existing
brownfield opportunities while also illustrating our strength in executing large-
scale development projects.
INVEST IN BROWNFIELD OPPORTUNITIES CLOSE
TO EXISTING INFRASTRUCTURE WITH
ATTRACTIVE RETURNS
Following a successful Phase I Enhanced Oil Recovery Project, Ithaca Energy
sanctioned the second phase of Captain EOR, a prime adage of the phrase that
‘big fields get bigger’.
The Captain Field is currently the biggest contributor to the Group’s production
(contributing approximately 26% of the Group’s daily production in 2022) with
top quartile production efficiency. Through the ongoing Captain EOR project,
the Group is driving maximum economic recovery of reserves utilising the
Group’s proven innovative polymer technology, achieving a more efficient
reservoir sweep.
Phase II 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.
The expansion project was first envisaged to require a further bridge-linked
platform at an estimated cost of $1 billion. Today, through novel engineering
26 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
BUILD ASSETS
The Group’s medium-term target is to shift to lower-emission intensity assets
by ceasing production on, and decommissioning, higher-emission intensity
assets and bringing on stream lower emission intensity assets such as Rosebank
and Cambo.
Our current operating assets are forecast to produce with an emissions intensity
broadly in line with the UKCS average (21 kgCO
2
/boe). New developments, such
as Rosebank and Cambo, are expected to be 65-85% lower-emissions intensity
due to their modern, energy efficient design and potential for electrification.
Emissions levels targeted by Cambo, which are significantly lower than the global
average, are enabled by the FPSO design which includes features such as being
fully ready for electrification (subject to grid connection availability), zero routine
flaring and Sevan FPSO hull design reducing power demand. Electrification itself
is dependant upon joint industry initiatives in the West of Shetland group as well
as technical constraints being overcome by technological advancement.
We intend to utilise our significant reserves and operational capabilities to play
a key role in providing energy security to the UK, maximising economic recovery
of UKCS resources as part of reducing reliance on higher-emission imported
fossil fuels.
PURSUE LOW-CARBON INTENSITY GREENFIELD
PROJECTS THAT SIGNIFICANTLY TRANSFORM
OUR EMISSIONS FOOTPRINT
As part of the Siccar Point Energy acquisition, the Group acquired interests in
the Rosebank field (20% working interest) and the Cambo field (Operator and
70% working interest), two of the largest undeveloped discoveries in the UKCS,
doubling our recoverable resources base.
Activity continues on the Cambo and Rosebank developments to validate costs,
mature engineering and progress commercial and contractual frameworks.
With gross 2C resources of approximately 146 mmboe and 325 mmboe for
Cambo and Rosebank fields respectively, these flagship assets provide Ithaca
Energy with visible production growth trajectory at a lower-emissions intensity
and lower expected unit operating cost per barrel.
STRATEGY IN ACTION CONTINUED
ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022 | 27
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BUILD ASSETS
BUILD ASSETS
INVEST IN BROWNFIELD OPPORTUNITIES CLOSE TO EXISTING
INFRASTRUCTURE WITH ATTRACTIVE RETURNS
We believe there is significant value to be generated from leveraging our existing infrastructure by enhancing
production and accessing additional reserves through continued investment in high-value infill drilling
opportunities across our portfolio. Through the hub and spoke strategy the Group is able to minimise
incremental capital costs for satellite feeder field developments and lower unit operating costs across the hub.
The FPF-1 floating production facility, that serves the Greater Stella Area (GSA) fields, is an excellent example
of the Group’s hub and spoke strategy that looks to tie-back smaller subsea fields into a central processing
hub. In January 2022, we received approval for the field development plan to tie-back the Abigail subsea field
to the FPF-1 facility, that already hosts the Group’s 100% owned and operated Stella and Harrier fields, and
34% owned Vorlich Field.
Just ten months following the field’s development plan approval, the Group achieved first production from
the Abigail field on 20 October 2022, illustrating that as a nimble independent operator we can make rapid
investment decisions and deliver brownfield projects at pace.
We see further value in the GSA hub with the current proposed development plan of Abigail covering two
production wells. In addition, further infill wells have been identified at Harrier.
Ithaca Energy’s pipeline of high-value and lower-risk brownfield assets includes Marigold and Fotla, with gross
2P reserves plus 2C resources of 29 mmboe and 16 mmboe respectively. These represent potential low-cost
developments which are expected to be tied-back to existing infrastructure.
TARGET ADJACENT UPSIDE POTENTIAL TO EXISTING
GREENFIELD DEVELOPMENTS
In exploration, the Group’s strategy focuses on basin modelling, geoscience interpretation and prospect
economic evaluation in the West of Shetland and Central North Sea regions.
We have an infrastructure led approach to exploration, and rank opportunities on the basis of prospect size,
geological chance of success and likelihood of commercial development. The hub-driven strategy focuses
on near-field prospects close to existing infrastructure with an exploration and appraisal funnel of over
150 opportunities which we believe hold approximately 1.9 billion boe of gross Pmean prospective resources
across multiple geographic hub areas.
The Group expects near-term exploration and appraisal activity with a target of one to two exploration
wells per year and investment of approximately $40 million (on average) in exploration per annum in the
short-term. In 2023, we will drill the high-potential, Ithaca Energy operated K2 prospect in Block 22/14c of
the Central North Sea.
In response to the NSTA’s recent call for applications in the UKCS 33rd Offshore Oil and Gas Licensing Round,
we submitted nine applications, five as operator.
28 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
STRATEGY IN ACTION CONTINUED
BOOST ASSETS
DEVELOP AND DEPLOY INNOVATIVE TECHNOLOGY TO MAXIMISE FIELD RECOVERY
Ithaca Energy intends to use established technologies to target increased recovery volumes and maximise the recovery of
in-place hydrocarbons. At our operated Captain field, we have deployed our advanced Enhanced Oil Recovery technology to
maximise recovery rates. The first phase of the EOR programme, with an estimated ultimate recovery of 16 mmboe, has
resulted in a production response which has tracked or exceeded expectations. The first phase of the EOR programme
currently contributes approximately 40% of Captain’s current production and, in September 2022, the project reached
a significant milestone of 10 mmboe recovered through the polymer flood EOR method.
The innovative polymer flood EOR technology involves the injection of a water-soluble polymer into the reservoir which
sweeps previously bypassed and stranded oil towards adjacent production wells. Our pioneering Captain EOR Stage I is the
largest offshore EOR development of its type in the Western world and has consistently demonstrated the acceleration
of oil production and oil-field recovery.
The proven effectiveness of the technology has supported the Group’s investment in Phase II of its deployment at the
Captain field and provides the potential to enhance resource recovery from other fields across our portfolio, while
reducing the need for additional infrastructure development and installations.
DELIVER DIGITALISATION INITIATIVES TO
REDUCE RISK AND DRIVE DOWN COSTS
Ithaca Energy employs digitalisation initiatives to ensure safe and efficient
operations, achieve increased uptime performance and realise cost savings
across its operations.
We have effectively deployed advanced laser-scanning technology to enable
digital asset management. Through the creation of 3D digital twin models we
are able to fabricate replacement parts based on the 3D assets alone, reducing
repair times from days to hours with a significant reduction to costs.
In addition, we have implemented onshore-offshore links that have enabled
real-time connectivity between on-site operators and offshore teams which
has boosted intervention efficiency and reduced the requirement for site visits,
freeing up capacity offshore. An example of this is in relation to verification
activities where all safety-critical equipment needs to be independently
verified. Through the use of camera technology, we utilise our existing offshore
manpower to complete and film safety equipment tests that can be witnessed
onshore and verified by independent verification bodies. By leveraging new
technologies we can continuously redefine existing processes and challenge
the conventional norm.
BOOST ASSETS
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BOOST ASSETS
FOCUS ON PRODUCTION EFFICIENCY
INITIATIVES TO OPTIMISE REVENUE
REALISATION AND LOWER UNIT
OPERATING COSTS
Ithaca Energy has an unwavering focus on the operational value
levers within our control. We focus on value, not just cost, and
we are prepared to invest to drive operational efficiency and
uptime improvements.
Our powerful operational capabilities were demonstrated by the
significant improvement in the performance track record on the FPF-1
floating production facility, which improved from approximately 60%
to approximately 95% production efficiency within six months.
Following periods of low production efficiency, we took the strategic
decision to inhouse operations and become the duty holder, as we
are on other operated installations. It was quickly identified that the
previous contracting strategy had focused solely on driving down
costs with limited focus on maintenance optimisation, reliability and
redundancy, resulting in the asset operating at low product efficiency.
The decision was taken to invest in the asset to optimise performance
with a refreshed focus on value-creation.
By in-housing the duty holder status of the asset, it enabled us to
drive efficiencies and leverage our deep operatorship capabilities and
discipline to focus on reliability and maintenance optimisation. We did
so by refreshing the asset management team, carrying out a rigorous
peer review across our multidiscipline teams, conducting a vulnerability
study, repairing and upgrading key systems and adopting a condition-
based maintenance philosophy. These disciplined measures, combined
with the new simplified and streamlined arrangements with long-
standing partner Petrofac, resulted in significant improvements
in production efficiency, adding value to our portfolio.
PERFORMANCE TRACK RECORD
95%
+35% WITHIN 6 MONTHS
30 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
FY22
FY21
FY20
40
482,792
497,929
483,325
FY22
FY21
FY20
40
66,360
56,486
71,403
FY22
FY21
FY20
10
21.5
24.6
23.8
KEY PERFORMANCE INDICATORS
SAFETY, PRODUCTION AND EMISSIONS KPIs
0
FY22, FY21, FY20
TIER 1 PROCESS SAFETY EVENTS
Description
Tier 1 process safety incidents as defined by
API 465 Process Safety-Recommended practice
on Key Performance Indicators.
SERIOUS INJURY AND FATALITY FREQUENCY
Description
Serious injury and fatality frequency is calculated
as the number of serious injuries resulting in
permanent impairment as defined by IOGP per
million hours worked.
0/m hrs
FY22, FY21, FY20
SCOPE 1 AND 2 EMISSIONS (tCO
2
e)
483,325
Description
Emissions owned by the Group from operated assets
measured in tonnes of carbon dioxide equivalent.
TOTAL PRODUCTION
71,403 boe/d
Description
Historic production boe/d include volumes from date
of acquisition of Marubeni on 4 February 2022 and
Siccar Point Energy and Summit on 30 June 2022.
GREEN HOUSE GAS (GHG) INTENSITY (kgCO
2
e/boe)
23.8
Description
Mass of Scope 1 and 2 emissions divided by barrels
of oil equivalent from all operated assets.
NON-GAAP MEASURES
Adjusted EBITDAX, unit operating expenditure, available liquidity, leverage ratio, 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 200 to 202.
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FY22
FY21
FY20
40
347.2
619.8
578.8
FY22
FY21
FY20
0
742.9
1,035.4
1,916.2
FY22
FY21
FY20
40
1,218.8
930.2
971.2
FY22
FY21
FY20
0
735.3
912.7
1,723.3
FY22
FY21
FY20
10
16.1
18.0
19.0
FY22
FY21
FY20
1
1.6x
0.9x
0.5x
AVAILABLE LIQUIDITY ($M)
$578.8m
Description
Available liquidity of the Group consists of the sum
of cash and cash equivalents on the balance sheet
and the undrawn amounts available to the Group
using existing approved third-party facilities less
restricted cash.
GROUP ADJUSTED EBITDAX ($M)
$1,916.2m
Description
Group adjusted EBITDAX consists of profit for the year
before income tax, net finance costs, put premiums
on oil derivative instruments, put premiums on
gas derivative instruments, revaluation of forex
forward contracts, revaluation of commodity hedges,
depletion, depreciation and amortisation, impairment
(charge)/reversal, exploration and evaluation
expenditure, fair-value gains/(losses) on contingent
consideration and gain on bargain purchase.
This measure is used as an indicator of underlying
financial performance.
NET DEBT ($M)
$971.2m
Description
Net debt consists of amounts outstanding under
Reserves Based Lending facility and the senior
unsecured loan notes, less cash and cash equivalents
(and excludes intragroup debt arrangements
or liabilities represented by letters of credit or
surety bonds).
NET CASH FLOW FROM OPERATING ACTIVITIES ($M)
$1,723.3m
Description
Net cash flow from operating activities comprises
profit before tax adjusted for non-cash items such as
depletion, depreciation and amortisation, impairment
charge/(reversal) and gain on bargain purchase and
excludes investing and financing activities. Net cash
flow from operating activities is also stated after
decommissioning expenditure, working capital
movements and corporation tax payments.
UNIT OPERATING EXPENDITURE ($/boe)
$19.0
Description
Unit operating expenditure consists of operating costs
(excluding over/underlift) including tariff expense less
tariff income and tanker costs, divided by net total
production for the year.
LEVERAGE RATIO – NET DEBT/GROUP ADJUSTED EBITDAX
0.5x
Description
The net debt to Group adjusted EBITDAX ratio is
calculated as net debt at the end of the year divided
by Group adjusted EBITDAX for the year then ended.
FINANCIAL PERFORMANCE KPIs
FINANCIAL POSITION KPIs
32 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
ENGAGING WITH OUR STAKEHOLDERS
Section 172(1) statement
The Board recognises the importance of engaging with
all our stakeholders, as delivering value for them is
directly linked to the success of the Group. In order to
successfully deliver our strategy and create value for
our stakeholders, it is important we understand what
matters to them.
Through regular engagement, we gain insight into the
different perspectives of our diverse stakeholders and
ensure our objectives are understood. Considering
their feedback on our strategy, business model and
performance builds strong, constructive relationships
and enables robust decision-making at Board level.
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.
AT ITHACA ENERGY, WE GENUINELY CARE
ABOUT MAKING A POSITIVE IMPACT
FOR OUR PEOPLE, SHAREHOLDERS AND
COMMUNITIES. ACTIVE ENGAGEMENT WITH
OUR STAKEHOLDERS IS AT THE HEART OF
OUR COMPANY VALUES WITH THE OVERALL
GOAL OF MAKING A POSITIVE DIFFERENCE.
Disclosure Alignment and next steps
a The likely consequence of any decisions in the
long-term
• Our vision and mission – page 18
• Our business model and strategy – pages 20 to 23
• Our strategy in action – pages 24 to 29
b The interests of employees • Our values – page 19
• ESG: social – pages 50 and 51
c Fostering the company’s business relationships
with suppliers, customers and others
• Our vision and mission – page 18
• Our business model and strategy – pages 20 to 23
• Our strategy in action – pages 24 to 29
• Engaging with our stakeholders – pages 32 to 36
d Impact of operations on the community and
the environment
• ESG: environmental – pages 39 to 49
• ESG: social – pages 50 and 51
e Maintaining a reputation for high standards of
business conduct
• Q&A with John Mogford, Senior Independent
Director – pages 16 and 17
• ESG: governance – pages 52 and 53
• Corporate governance – pages 70 to 116
f Acting fairly between members of the company • Engaging with our stakeholders – pages 32 to 36
ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022 | 33
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Key decisions in 2022
A number of material decisions were made during
2022. The following key decisions were made by
(1) the Board of Directors (as listed on page 113),
supported by the leadership team, prior to the
admission of the Group to the London Stock Exchange;
and (2) the current Board of Directors following
the Group’s IPO:
Decisions to pursue and complete
material acquisitions
The Board of Directors had a mandate to grow the
business through M&A prior to IPO, in order to
provide scale and longevity to the portfolio. The Board
considered the risks and benefits of each acquisition
opportunity. All potential acquisition candidates were
considered in line with the Group’s strict investment
criteria, including the impact of the transaction to the
Group’s emission intensity. The Board of Directors
made the decision to approve three acquisitions in
the year, Marubeni UK, Summit E&P and Siccar Point
Energy, concluding that the transactions would be
value-accretive to the Group, provide material scale
and further diversification to its asset portfolio and
provide a platform to fundamentally transition the
emission intensity of the Group’s portfolio in the
medium to long-term.
Decision to review the Vision and Values
framework of the Group
Following a period of material transformational
growth via acquisitions, the Board of Directors made
the decision to review the Group’s Vision and Values
framework. The Board of Directors, supported by
the leadership team, created focus groups within
the business to understand the key drivers of our
people and considered the feedback in the creation
and roll-out of its renewed vision and values. The
Board of Directors continues to regularly engage
informally with employees from across the business,
both offshore and onshore, and with the Employee
Consultation Forum in order to ensure a strong
positive culture within the organisation.
Decision to proceed with the listing of the
Company on the London Stock Exchange
The Board of Directors made the decision to list on the
Premium Segment of the London Stock Exchange in
mid-2022. The Board considered, amongst a number
of matters, alongside the Group’s parent company
Delek Group Limited, the appointment of advisors
and bookrunners to lead the offer, the size of free
float offered to the market on IPO, with the ultimate
decision to offer 10% of the Group’s ordinary share
capital for purchase, and approved the prospectus
published at the point of listing.
As part of the Group’s IPO, the Board made a number
of key decisions in relation to the governance of the
relationship with its majority shareholder post listing,
taking into consideration the Listing Rules. The Group
entered into a Relationship Agreement with Delek, as
a controlling shareholder, at the point of admission
that governs the day-to-day relationship between
the Group and the Controlling Shareholder. Further
information in relation to the Relationship Agreement
can be found on page 77.
The Board of Directors also considered the
appointment of new Board Members prior to listing to
ensure the requisite mix of skills and experience were
added to the Board, in line with expectations of a UK
publicly listed company.
AT ITHACA ENERGY, WE
PLACE SIGNIFICANT
IMPORTANCE ON THE
NEED FOR TRANSPARENT
COMMUNICATIONS
WITH OUR PEOPLE,
SUPPORTING A CULTURE
OF TRUST AND RESPECT.”
Our people
Our people are core to our success and we are
committed to maintaining our reputation as an
employer of choice. We will only succeed if we
work together, harnessing the collective expertise
and experience of our people. We are focused on
creating an environment that is dynamic, inclusive and
equitable. A workplace with a new, strong set of core
values where our people will thrive, be recognised and
where there are no barriers to their progression.
How are we engaging?
In October 2022, following a period of material
M&A and integration activity, Ithaca Energy took the
decision to revisit and launch our renewed vision and
values. The launch provided the opportunity to reflect
on what had been accomplished to date and how we
work together to deliver the next phase of our vision.
Under our mission ‘Triumph. Together.’ we recognise
that our desire for operational success can only be
delivered by creating a strong unity of purpose of our
people. This shared ambition is supported by holding
regular town halls and village halls, weekly messages
from our CEO, regular leadership team offshore trips
and breakfast briefings onshore, and recognising and
sharing in the successes of our people in line with our
Company vision and values.
At Ithaca Energy, we place significant importance on the
need for transparent communications with our people,
supporting a culture of trust and respect. Through
active engagement with the Employee Consultation
Forum, and our other Committees, our leadership
teams seek to provide a platform that enables all
voices to be heard equally, addressing concerns or
issues in an open, transparent and timely manner.
Focus areas of engagement:
• Strategy and vision
• Our values and behaviours
• Development and progression
• Reward and recognition
34 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
ENGAGING WITH OUR STAKEHOLDERS CONTINUED
Shareholders
Following our listing on the London Stock Exchange
in November, the Group is seeking to develop and
maintain an investor base of long-term institutional
shareholders, while continuing its strong relationship
with its existing majority shareholder, Delek.
Through engaging regularly with our shareholders we
continue to ensure alignment and long-term backing
for our growth strategy as presented during our
investor roadshow and in the Company’s prospectus.
How are we engaging?
Following the Company’s investor roadshow, and
subsequent admission, we continue to engage in a
regular and transparent manner with our existing
shareholders and potential investors through holding
one-to-one meetings, roadshow presentations and
through regular attendance at investor conferences.
This engagement has allowed us to build upon the
new investor relationships built at the time of IPO.
The responsibility for shareholder engagement is led
by the Group’s Executive Chairman and supported
by the CEO, CFO and Investor Relations. Shareholder
access to the wider Board will be managed during the
year, including engagement with the Company’s SID
and Chair of Remuneration Committee ahead of the
Company’s first Annual General Meeting in May 2023.
During the IPO roadshow, we shared a clear strategy
to buy, build and boost assets, supported by a
balanced capital allocation framework to deliver strong
sustainable shareholder returns. Following admission
we have reiterated our commitment to our strategy to
shareholders, including to our targeted 2023 dividend,
in light of the fiscal uncertainty created by EPL.
Focus areas of engagement:
• Strategy
• Capital allocation policy
• Company performance
• ESG performance
Lenders
With an active investment programme in a capital
intensive industry, we place significant importance
on our relationship with our lending group. Their
continued support enables the Group to invest across
the three pillars of our corporate strategy in order
to maximise returns to our shareholders.
We have long established relationships with our
lending banks and bond holders, which we continue
to build and expand upon in order to provide the
financial strength and capacity the Group requires
to deliver continued growth.
How are we engaging?
We regularly engage throughout the year with our
syndicate banks and bond holders. Our engagement is
not limited to quarterly reporting cycles, recognising
the need to foster strong working relationships to
support our growth plans.
The Group’s Reserve Based Lending (RBL) facility
is redetermined on a bi-annual basis in June and
December. A redetermination of our RBL was
completed in December 2022, with $325 million of
headroom. Following the amendment to the Energy
Profit Levy in the Autumn Statement 2022, we are
working with our RBL lenders to determine the impact
to future RBL capacity.
To satisfy the terms of the Bond Agreement, the Group
reports on a quarterly basis and interacts with bond
holders through a quarterly scheduled webcast.
The responsibility for day-to-day management with
the Company’s lending group is managed by the Chief
Financial Officer and Head of Corporate Finance.
Focus areas of engagement:
• Financial risk management
• Financial performance
• Compliance with covenant suite
• ESG performance
Government and Regulators
The Group’s ability to operate depends on satisfying
licensing and other regulatory requirements. We have
established strong and transparent relationships with
the regulators to ensure we comply with regulations
and maintain our license to operate.
How are we engaging?
Following the announcement of the Energy Profit Levy,
the Group has actively engaged in dialogue with the
Chancellor of the Exchequer and His Majesty’s Treasury
to discuss the potential unintended implications of the
levy to independent operators, such as Ithaca Energy.
These engagements have been led by our Executive
Chairman, Chief Executive Officer and Chief Financial
Officer, and have been constructive in nature.
In addition, to our direct contact with the UK
government, the Group has worked with industry
bodies such as Offshore Energies UK (OEUK) to deliver
a consistent message on the potential impacts of the
levy to investment across the North Sea basin.
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. In relation to the North
Sea Transition Deal, we recognise the environmental
issues associated with oil and gas production and we
are actively pursuing emissions reduction initiatives
across our portfolio, supported by a well-defined
emissions reduction roadmap, including the transition
from late-life assets to lower-emission intensity assets,
and reviewing M&A opportunities on their ESG merits,
as a catalyst to achieve Net Zero by 2040.
Focus areas of engagement:
• ESG performance
• Field development plans
• Decommissioning programmes
THROUGH ENGAGING
REGULARLY WITH OUR
SHAREHOLDER BASE
WE WILL SEEK TO GAIN
ALIGNMENT AND LONG-
TERM BACKING FOR OUR
GROWTH STRATEGY,
SUPPORTING OUR
OVERRIDING AMBITION
TO MAXIMISE VALUE FOR
OUR SHAREHOLDERS.”
ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022 | 35
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Joint Venture Partners
We pride ourselves on our strong relationships with
our joint venture partners. Whether acting as the
Operator or as joint venture partner, we actively
engage and challenge to ensure we maximise the
value of our assets, in a safe and responsible manner.
How are we engaging?
Across our asset portfolio we engage on a regular and
open basis with our joint venture partners. Scheduled
Operating Committee Meetings (OCMs) and Technical
Committee Meetings (TCMs) are 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.
We work collaboratively with our partners,
encouraging open dialogue and different perspectives
in order to deliver alignment across all activities
in our assets plans and budgets. The strength of
these relationships and the power of harnessing
the collective talent and expertise of our partners,
will position us to deliver successful outcomes and
maximise value. All interactions with our joint venture
partners will focus on the delivery of our asset plans
in a manner that is consistent with our safety and
emissions reduction goals.
Where we do not operate the asset, we are
committed to working in a productive manner with
the Operator by sharing our own knowledge and
experience from our operated base.
Focus Areas of Engagement:
• Operational efficiency and performance
• Safety & ESG performance
• Work programmes and budgets
• Long-term asset strategy
Suppliers
Effective engagement and collaboration with our
supply chain is key to the performance and growth of
our business. Through engagement of the appropriate
suppliers, proactive management of, and collaboration
with those suppliers, we should ensure our operations
are delivered safely and efficiently.
How are we engaging?
Supplier management, both performance and
relationship, as well as collaboration are central to
our contracting strategies, applying measures that are
appropriate for the services provided by the supplier.
At a working level the business regularly engages
with our suppliers through scheduled reviews and
meetings, seeking opportunities for improvements
and to anticipate potential issues and put in
place mitigation measures. At a senior level,
management engages with counterparts in supplier
organisations, at an appropriate frequency, to
strengthen relationships and support the working
level operations.
Ithaca Energy non-financial 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 (governance and risk management)
• Our ESG Strategy – pages 37 to 53
• TCFD Disclosures – pages 43 to 49
b Employees • Our Code of Conduct
• Our Company Vision and Values
• S172 Statement – pages 32 to 36
• Environmental, Social and Governance – pages 37 to 53
• Corporate Governance Statement – pages 74 to 77
• Nomination and Governance Report – pages 85 and 86
c Social matters • Our ESG Policy (Online) • S172 Statement – pages 32 to 36
• Environmental, Social and Governance – pages 37 to 53
d Respect for human rights • Modern slavery statement (online)
• Modern slavery and human trafficking policy
• Code of conduct
• Vision, mission and values – pages 18 and 19
• Our People – pages 50 and 51
e Anti-corruption and anti-bribery • Anti-bribery and corruption policy (online)
• Code of conduct
• Governance – pages 52 and 53
Description of principal risks relating to matters (a-e above) • Risk Management – pages 62 and 63
• Principal Risks – pages 64 to 68
• TCFD Disclosures – pages 43 to 49
Relevant information
Our business model can be found in Our Business Model and Strategy – pages 20 to 23
The description of non-financial KPIs can be found on page 30
36 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
ENGAGING WITH OUR STAKEHOLDERS CONTINUED
WE BELIEVE IN GIVING
BACK. THE GROUP BUILDS
RELATIONSHIPS THAT
SUPPORT THE ECONOMIC
AND SOCIAL FABRIC OF ITS
LOCAL COMMUNITIES.”
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, under which a collection of services are
provided, and avoids reliance on any single provider.
In recognition of the matters important to the
supply chain, the NSTA set out an expectation that
all customers would adopt and adhere to ‘industry’
standard payment terms; provide visibility of
forthcoming projects on the identified portal; use
‘industry’ standard contract terms; ensure flow-
down of obligations throughout the supply chain;
and adhere to the NSTA’s principles in supply chain
operations. In our engagement with the supply chain
we fulfil all these expectations.
The Group monitors and manages the Serious Injury
and Fatality Frequency and process safety events
associated with its operated assets as a means of
evaluating the health and safety performance of
the Group and its suppliers, working on the assets.
Improving our safety performance, within an open and
transparent incident reporting culture, is a continual
focus of the business and we work with our supplier
base through setting targets, reviewing risk mitigations
and completing safety audits to facilitate this goal.
Focus Areas of Engagement:
• Project visibility
• Safety performance
• Payment and contracting terms
Customers
We recognise that the oil and gas we produce is vital
to meeting energy demand in the UK, particularly in
light of ongoing geopolitical tensions. Our marketing
agreements with our customers facilitate the delivery
of our products in a safe and responsible manner
to meet end-user demands.
How are we engaging?
Ithaca Energy utilises established specialised marketers
to sell our oil and NGL products under various term
offtake and marketing agreements with prices linked
to typical price benchmarks. Our UK terminal grades
(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.
Our experienced commercial team negotiate the
offtake agreements with the market and our buyers,
ensuring competitive attractive terms are in place.
In addition, for our operated offshore grade assets,
tankers are provided under a long-term contract
of affreightment with management of tanker
arrangements undertaken in house within the
commercial team.
Focus Areas of Engagement:
• Reliability and continuity of supply
• Quality of product
• Longevity of asset base
• Safe and responsible operations
Communities
We believe in giving back. The Group builds
relationships that support the economic and social
fabric of its local communities. We have established
a Charity Committee to oversee our charitable
commitments and assist in co-ordinating volunteering
efforts to give back to our local communities.
How are we engaging?
During the year, we entered a three-year corporate
partnership with VSA, who help to support the
most vulnerable people and their families, living in
communities across the North-East of Scotland.
VSA is the largest provider of mental health services
and support in Aberdeen, providing a range of
outreach and residential services across the city.
As part of our charitable partnership, we have made
a corporate donation that will fund the renovation
of three of the 17 rooms at the charity’s new mental
wellbeing facility. Our support extends beyond our
financial contribution, including volunteering across
VSA’s multiple facilities.
To support our volunteering efforts, each onshore
employee has the opportunity 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 2022, the Group employed eight interns in a
newly-launched summer programme, and typically
hires six apprentices for offshore roles each year.
These investments in people are part of the Group’s
commitment to growing and developing talent in the
communities in which it operates.
Focus Areas of Engagement:
• Engagement across our local
community
• STEM initiatives
• Apprenticeship programmes
ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022 | 37
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OUR ESG STRATEGY
Introduction
Sustainability, the communities in which we operate,
and governance matter deeply to us and are
interwoven into our balanced business strategy.
We aim to do the right things in the right way.
We are clear and confident about what ESG means
to us. It regulates our social licence to operate.
Performance and sustainability are not mutually
exclusive. So for as long as the world needs oil and
gas, Ithaca Energy will provide it, efficiently, safely,
competitively and by minimising our environmental
impact. We are responding to the challenge by
harnessing our deep engineering and environmental
expertise to take action. Our Environmental
Management System (EMS) processes identify and
address the environmental impact of all aspects of
our operations, driving continuous improvement
in environmental performance and reducing our
environmental impact.
We are focused on the reduction of greenhouse gases,
with clear ambitions and targets as set out in our
greenhouse gas emissions policy. To achieve this, we
are fully engaged with the NSTA and OEUK as we work
towards delivering Net Zero targets.
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 a real and constructive contribution
to make, to the energy security of the UK and
protecting the environment. We are passionate about
giving back, and care about creating shared value
for our people, shareholders and communities. By
pursuing low carbon intensity developments, we are
well-positioned to deliver oil and gas for decades to
come while providing employment and prosperity for
our communities.
“The Group’s Environmental, Social and Governance
framework is well-integrated into its business
management and asset operating culture.”
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
38 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
Social
Safe operations that invest
in our people and
communities
Environment
Responsible operations
that protect ecosystems
in which we operate
Our commitment
Sustainable Development
Goals alignment
Governance
Running our business with
integrity and transparency
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.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONTINUED
ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022 | 39
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ENVIRONMENT
Globally there is an increasing need for urgent action
to address climate change. Ithaca Energy has a sharp
focus on emissions reduction with clear targets
and the ambition to have one of the lowest carbon
emission intensity portfolios in the UK North Sea.
We support the UK’s Net Zero targets as outlined in
the North Sea Transition Deal (NSTD), supported by
NSTA Stewardship Expectation 11.
Energy transition
To achieve these goals, we established an Energy
Transition Team in 2022 to lead the Group’s emission
reduction activities and engage with the wider
workforce to drive improvements. We plan to reduce
emissions, exceed or align to industry targets, by
optimising the performance of our current portfolio
in the near-term and fundamentally transition the
portfolio over the medium to long -term.
In the short-term, our focus is on delivering
operational improvements within our current portfolio
of producing fields. Through these initiatives, we are
aiming to achieve a target of reducing our Scope 1
and Scope 2 carbon dioxide (CO
2
) and carbon dioxide
equivalent (CO
2
e) emissions, from our operated assets,
by 25% in 2025 (against a 2019 baseline), which would
exceed the NSTD target of a 10% reduction (against a
2018 baseline).
Identification of opportunities is ongoing to reduce
CO
2
e emissions and help achieve this target, with
additional activities planned to deliver further
reductions in the longer-term.
In the medium term we plan to shift to lower-
emission intensity assets. As higher-emission intensity
assets such as FPF-1 and Alba come to the natural
end of their life, they will be replaced by bringing
on stream lower-emission intensity assets such as
Rosebank and Cambo. This revitalisation of Ithaca
Energy’s portfolio, with a focus on efficient, low
emissions-intensity assets, will be key to achieving a
50% reduction in emissions on a Scope 1 and 2 basis,
by 2030 in line with NSTD targets (on a net equity
interest basis versus 2018 baseline).
In the long-term, Ithaca Energy aims to achieve
Net Zero by 2040 on a Scope 1 and 2 basis (based
on net equity interests in all of our operated
and non-operated fields), ten years ahead of the
NSTD commitments.
The key enabler of achieving this target is anticipated
to be electrification of our long-life producing fields,
where technically and commercially viable. These
plans are subject to investment decisions which will
be made on an asset-by-asset basis considering factors
such as regulatory and fiscal stability, in addition to
assessment of the environmental benefits and regular
investment approval metrics. Targeted use of carbon
offsets will also be considered for residual long-term
emissions where physical abatement is not
deemed viable.
In addition to our carbon dioxide and carbon dioxide
equivalent emission reduction targets, we are also
aiming to achieve 0.20 % methane intensity by 2025
and zero routine flaring by 2030, aligned with NSTD.
Net Zero by 2040
Achieve 0.20% methane
intensity by 2025
Zero routine flaring
by 2030
Net equity targets ( Scope 1 and 2 Basis)
We aim to exceed or align to the industry targets in the short and long-term
NSTD commitments to reducing GHG Emissions (versus 2018)
Operated assets targets
10% reduction
by 2025
25% reduction
by 2027
50% reduction
by 2030
Net Zero
by 2050
Reduce emissions from oil and gas
production in line with NSTD
commitments up to 2030
Reduce all Scope 1 and 2
CO
2
e emissions from
operated assets by 25% by
2025 from 2019 baseline
Figure 1 – Group Greehouse Gas (GHG) Emissions targets
40 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
During 2023, we will begin establishing processes to
record and monitor emissions from our net equity
interests in non-operated joint ventures such that
we can move to reporting emissions and emissions
intensity for our portfolio on a net equity basis, in line
with the NSTD targets. Our Greenhouse Gas Emissions
Policy endorsed by our leadership team and signed
by our Chief Executive Officer, sets out our clear
ambitions, targets and roadmap to delivery.
Our roadmap to
delivery of our
GHG Emissions
targets
Strong leadership
• Clear emissions roles and
responsibilities
• Communicate our
commitment externally
• Inspire our workforce to
achieve our emissions reduction
• Incorporate emissions targets
and KPIs into performance
contracts
Setting internal standards
• Embed emissions plans into
processes and capital decisions
• Assess new developments
including M&A for opportunities
through an emissions lens
• Encourage staff to maintain
emissions best practices
• Foster a workplace where
emissions control is valued
Measurement and control
• Measure our emissions
accurately and transparently
• Consider alignment of our
energy management to ISO
50001 Energy Management
standard
• Control environmental
discharges to minimise impact
• Track abatement actions
through to completion
Operational improvements
• Identify emissions abatement
opportunities e.g. flare gas
recovery
• Invest in asset base to reduce
emissions
• Use renewable sources to power
our office and installations
• Collaborate with peers to
identify new methodologies
• Embed best practice working
techniques
Digitalisation and new
technology
• Digitise operations, helping
understanding of emissions
• Use technology to record
emissions and data to enable
smart, lower- emission choices
• Work with industry partners
to develop and test new
technology in support of
emissions reductions
• Explore targeted electrification
of offshore facilities
ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONTINUED
ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022 | 41
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• Participated actively in industry workgroups
exploring regional offshore electrification hubs
which have the potential to deliver emissions
reductions by facilitating electrification of some
of Ithaca Energy’s operated and non-operated
assets; and
• Matured the design of the operated Cambo and
non-operated Rosebank production facilities such
as to enable potential future electrification of
these fields.
Streamlined Energy and Carbon Reporting
(SECR)
A breakdown of our energy and carbon reporting
has been provided on page 47 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 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’. Approximately 100%
of 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 Operational Excellence
Management System. The EMS is designed to
implement the Group’s HSE Policy, including
emissions management and environmental
stewardship. 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.
Our emissions reductions initiatives
In 2022, we have focused on progressing the following
emissions reduction initiatives:
• Switched away from using hydrocarbon based
blanket gas within storage vessels on the FPF-1
asset to using nitrogen as blanket gas, thus
avoiding hydrocarbons being vented to the
atmosphere when purging the blanket gas.
• Conducted engineering studies, trials and
implementation of new processes enabling
the FPF-1 asset to be operated using a single
gas turbine generator rather than past practice
of using two gas turbine generators for
regular operations;
• Completed feasibility studies for flare gas
recovery on Alba and Captain;
• Completed feasibility studies for Captain
electrification;
• Commenced pre-FEED engineering design
activities on electrification and flare gas
recovery projects;
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 AN EVER-
CLEANER MANNER.
42 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
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 environmental management system.
In 2022, Ithaca Energy complied with permitting
requirements for produced water across all producing
operated assets, with produced water discharged
volumes summarised below.
2021 2022
Produced water
metric tonnes
9,500,568 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 2022, 17,799,594 m
3
of produced
water was re-injected.
Waste returned onshore is shown in the following
table.
2021 2022
Waste tonnage
2,147 3,020
Our performance with regard to events reported
to the Regulator as spills (PON 1s) is shown in the
following table.
Spills reported
2021 2022
Total PON1s 12 22
PON1 hydrocarbon 6 13
PON1 chemical 6 9
The increase in PON1s in 2022 is linked to increased
activity levels and are seen as an area of focus and
improvement for the Group.
To address the increase of spills reported in 2022,
the Group has put in place an environmental
improvement plan:
• Increasing awareness of environmental
compliance: ensure 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;
• Reviewing risk processes: giving the environment
a higher priority in terms of permits and protection;
• Control of work and work-site risk controls:
standardising handover processes and reviewing
control measures for well activity; and
• Check assurance: part of “Plan, Do, Check,
Act”, aligned with the externally accredited
Environmental Standard 140001.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONTINUED
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Introduction
Following the Group’s admission to the London Stock Exchange in November 2022 and in compliance with
Listing Rule 9.8.6R(8), Ithaca Energy plc is required to disclose against the recommendations of the Task Force
on Climate-related Financial Disclosures (TCFD). We refer to the recommendations of the TCFD to support the
identification, assessment and management of climate-related impacts to the Group.
The Group is fully or partially aligned with each of the recommendations of the TCFD for 2022, with disclosures
across the four thematic areas included in the table below.
We are fully aligned in the areas of Governance and Risk Management and partially aligned in the areas of Strategy
and Metrics & Targets. In the areas where we are not fully aligned, the table includes details of planned steps to
improve alignment. Further information on the Group’s Energy Transition strategy can be found in the ESG section.
The Group recognises the importance of managing climate-related transitional and physical risks to the success
of our business. This is Ithaca Energy’s first year of TCFD reporting and we acknowledge the importance of
improving our reporting and communications to further align with the TCFD recommendations and expectations
of the Financial Reporting Council.
TCFD Disclosures
Disclosure Alignment and next steps
Governance
a) Describe the Board’s oversight of climate-related risks and opportunities Fully aligned
The Board has ultimate responsibility and oversight for managing climate-related issues.
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 manage
risk; and
• Health, Safety, Environment and Security Committee: Responsibility for reviewing
and assessing climate-related issues, risks and opportunities, working closely with
the Energy Transition & HSE Teams, tracking GHG emissions vs. corporate targets
and ensuring compliance with regulations and reporting requirements.
The Board also receives regular updates from the leadership team, which includes two
Board members, on climate-related matters, risks and opportunities. Data on GHG
emissions performance vs. targets is included in monthly reports which are provided to
the Board to enable monitoring of progress implementing reductions vs. the corporate
targets and strategy.
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 strategy.
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.
b) Describe management’s role in assessing and managing climate-related risks and opportunities Fully aligned
The management of climate-related issues risks and opportunities is 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 manages overall climate-related issues, risks and
opportunities, establishes and tracks GHG emissions KPIs and identifies emissions
reduction opportunities. The energy transition team works closely with our asset teams
to manage emissions performance and identify improvement opportunities and with
the HSE team who manages emissions data and associated regulatory reporting.
The energy transition team meets with the leadership team regularly to ensure that
they are informed of emissions reduction performance, major climate-related issues,
risks and opportunities and that these are managed appropriately across the wider
organisation of functional and asset teams. Material climate-related issues and progress
towards GHG emissions targets are communicated to the Health, Safety, Environment
and Security Committee and Audit and Risk Committees as described above.
The energy transition team, supported by the HSE team, formally evaluates and
updates its Climate Risk Register on an annual basis through internal workshops,
with additional updates possible on an ad-hoc basis should material changes occur.
The energy transition 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 look to further integrate climate-
related risks and opportunities into decision-
making at the management level and to
ensure continued identification of climate risks
through the Climate Risk Register.
44 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
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 Partially Aligned
Ithaca Energy considers the time horizons of short (0-5 years), medium (5-10 years),
and long-term (10+ years) as appropriate for examination of climate -related risks and
opportunities as this aligns with the maturity mix of our asset portfolio (late-life, mid-life
and long-life assets).
Ithaca Energy has established an emissions reduction strategy focused on short-term
operational improvements, mid-term portfolio revitalisation and long-term targeted
electrification as described earlier in the strategic report. The energy transition team has
undertaken a climate-related risks and opportunities assessment against this strategy.
This assessment integrates with the Group’s broader risk management procedures and
will be reviewed and updated at least annually.
The assessment considered the climate-related risks and opportunities as per the TCFD
implementation guidance to identify key climate risks and opportunities which may
have a material financial impact on the Group’s performance, resulting in the Climate
Risk Register.
The Group’s primary climate-related risks are policy and legal risks relating to product
and carbon pricing and an increasingly complex regulatory landscape affecting the
Group in the short to medium-term. Market risk identified in the short-term include
potential access to, and cost of, capital challenges with the potential for reputational
risk identified in the short to medium-term relating to investment appetite and
stakeholder pressures for the UK oil and gas sector. Technology risks identified in the
short and medium-term include the Group’s reliance on the deployment of new and
different technologies that have not yet matured or been commercialised. A low level of
physical risk has been identified in the long-term with low levels of likely impact to our
assets and operations.
However, it was identified that these risks also present further opportunities for
portfolio growth. The Group’s primary climate-related opportunities are market
opportunities in the short-term relating to developing a positive ESG reputation and
leveraging this to drive further mergers, acquisitions, and investment opportunities
within the UKCS exploration and production market. The possibility of higher than
expected product prices is also a possible opportunity that may arise due to reduced
industry investment as a result of climate-related concerns. Additionally, climate
regulation and commitments may trigger new business opportunities in the short-term.
Further detail on these risks and opportunities are included in the Strategy disclosure
(b) below.
Ithaca Energy does not consider it appropriate to consider risks on a sectoral or
geographic basis as our business has a clear focus on upstream oil and gas production
in the UK North Sea.
Ithaca Energy continually monitors and evaluates existing and future possible climate-
related risks and opportunities and updates the Climate Risk Register on an annual basis.
Further information on how the materiality of climate-related risks is assessed can be
found in the Risk Management disclosure (b) below.
Ithaca Energy is partially aligned with this
recommendation.
Our initial focus in our first few months as
a listed business has been to conduct a
preliminary risk and opportunity assessment.
In 2023 we aim to define materiality for
climate-related risks and opportunities,
and conduct a more detailed assessment
to identify what is material over the three
identified time frames. We will also reassess
whether considering the different risks and
opportunities by geography is beneficial.
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Strategy continued
b) Describe the impact of climate-related risk and opportunities on the organisation’s businesses, strategy and financial planning Partially Aligned
Ithaca Energy’s business activities, strategy and financial planning are anticipated to be impacted by the climate-related risks and opportunities identified above in the short,
medium, and long-term. Our plans to support the energy transition are described in the emissions section within ESG above on page 41. The potential impacts for material
risks have been prioritised using Ithaca Energy’s Risk Prioritisation Matrix. These risks, and a summary of their short-term impacts, are outlined in the following table:
Risk area
Impact in
short term Comments
Policy & Legal: Increasing carbon pricing costs and reduction of allowances through the UK ETS scheme
and other mechanisms may lead to increased operational costs for higher-emission intensity assets in
the short to medium-term, potentially accelerating cessation of production at some mature assets.
Increasing climate-relating reporting obligations, plus industry and regulatory commitments, towards
the energy transition may incur additional resourcing, advisory and legal fees to ensure compliance.
Inadequate policy support may limit access to capital for portfolio growth, including for delivering
carbon emission reduction projects.
Likely, in respect
of increased
ETS costs and
regulatory costs
Increase in allowance costs through increased ETS pricing
or reduced free allowances considered likely in short to
medium term.
Whilst cost impact could be significant, materiality of
ETS and regulatory costs is modest compared with the
Group’s overall business operating cost levels.
Markets: In the short-term, product pricing volatility resulting from energy transition driven supply
and demand impacts may create both risks and opportunities for Ithaca Energy. A shift in investor
preferences may, in the short to medium-term, lead to reduced access to debt financing, increased
cost of capital, and reduced asset and company valuations. Industry and internal energy transition
and emissions objectives may restrict growth and/or acquisition opportunities over the medium-
term; however, a well-regulated transition could yield growth opportunities for Ithaca Energy to
become a leader in low-emission hydrocarbon production in the UK.
Likely, in respect
of product
pricing volatility
and potentially
access to capital
Commodity price fluctuations are clearly material for
Ithaca Energy. The robustness of our business to these is
assessed through modelling of different pricing scenarios.
Possible impact on investor appetite and access to capital
also possible in short to medium-term, with potential to
restrict capital availability to grow the business.
Reputational: A shift in consumer preferences and expectations could impact the Group’s licence to
operate, while negative publicity and anti-fossil fuel sentiments from activist groups may, in the short-
term, cause disruption and delays in our operations, thereby delaying the development of our projects,
delaying production and revenue growth and increasing costs.
Likely Potential to cause delays and increased costs for material
projects such as Rosebank and Cambo in particular,
for example, due to judicial reviews.
Physical: The increased frequency and severity of extreme weather events may cause direct damage
to physical assets or cause disruption in operational and supply chain activities over the long-term,
resulting in increased development and maintenance costs, a loss in revenue, increased insurance costs,
or early decommissioning.
Unlikely Whilst the North Sea is susceptible to extreme weather,
it is not considered likely that climate change related
impacts will be material within five years.
Technology: Ithaca Energy’s emissions reduction targets are dependent on the ability to deploy new
and different technologies offshore; however, our ability to achieve this is contingent, to some extent,
on technologies that have not yet been fully matured or commercialised. For example, targeted
electrification of certain long-life fields is key to our plans to achieve Net Zero operations by 2040.
Electrification of future development projects within our portfolio could also become a regulatory
requirement, with an impact on field economics and potentially on the Group’s investment decisions
in relation to these fields.
Likely Delayed maturation of new technologies versus
expectations could result in a risk to achieving
the Group’s emissions reduction targets,
particularly if technologies cannot be deployed
in a cost-effective manner.
Ability to deliver electrification is key to delivering Ithaca
Energy’s longer-term emissions reduction targets and
may impact key development assets within our portfolio.
Ithaca Energy is partially aligned with this
recommendation.
As outlined in Strategy (a), we aim to
undertake a more detailed risk and
opportunity assessment during 2023. In doing
so we will also seek to quantify the financial
impacts of the identified material risks and
opportunities, and subsequent influence in
areas such as financial planning and strategy.
Our intention is also to further mature and
communicate our plans for transitioning in line
with the net zero targets outlined elsewhere
in our annual report. This area requires
on-going consideration and attention given
the complexities of the energy transition
landscape, including emerging technologies
and evolving regulations.
46 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
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 Partially Aligned
Ithaca Energy assessed its resilience to climate risks by using a combination of qualitative
scenario and quantitative sensitivity analysis. 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 hypothetical constructs and 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. The Group used hydrocarbon price scenarios from the following models developed
by the International Energy Agency (IEA) World Outlook (2021) as reference scenarios to
assess its business outlook:
• Sustainable Development Scenario (SDS);
• Stated Policies Scenario (STEPS);
• Announced Pledges Scenario (APS); and
• Net Zero Emissions by 2050 Scenario (NZE)
The key inputs to the above models are based on differing macroeconomic drivers such as
population, economic developments and prices as well as techno-economic inputs such as
fossil fuel resources or technology costs up until 2050.
We based our qualitative scenario analysis on the SDS and STEPS scenarios with carbon
costs and commodity prices used as two key factors in considering resilience.
The SDS scenario assumes measures are taken globally to limit global warming to well
below 2°C by the end of the century, thereby mitigating the worst, but not all, physical
climate change impacts. Transition risks 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 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 -terms. The Group has plans to support the energy transition, as described
in the emissions section within ESG above (see page 41) 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.
The STEPS scenario assumes that emissions targets and related policies are either not
widely adopted or are insufficiently adhered to, resulting in global warming in the likely
range of 2.5 -3.5°C. Under this scenario, physical risks resulting from climate change
can be event driven or longer-term shifts in climate patterns in the long-term, while
transition risks are significantly reduced compared with the SDS scenario.
Financially, the Group may not be as negatively affected by transition risks due to lower
carbon costs and higher commodity costs (when compared with the SDS scenario),
resulting in lower operational costs and increased revenues, profit margins, cessation of
production dates and Company valuations. However, this scenario implies increased risk
of damage to assets or supply chain disruptions due to increased physical risk in the long-
term. This may not only lead to financial losses from production and operational delays,
but may increase insurance costs and contingency planning and design, resulting in lower
profits and asset valuations. Ithaca Energy will look to build robustness and resilience,
through management and planning to mitigate the worst impacts of physical risk, through
effective contingency designs and response plans for offshore development projects to
mitigate storm damage and the effects of sea level rise.
For the quantitative sensitivity analysis, Ithaca Energy used all the IEA scenarios above
with their forecasted commodity prices and internal carbon costs as two key factors
in evaluating the resilience of its current portfolio reserves at mid-year 2022. The APS
scenario assumes countries will fully implement and achieve their national climate
targets in the medium to long-term, including Nationally Determined Contributions
(NDCs), longer-term Net Zero targets, and targets for increasing access to electricity
and clean cooking. This scenario will likely see increased transition risks in the short to
medium-term due variable commodity prices. The NZE scenario assumes a pathway
for the global energy sector to achieve Net Zero emissions by 2050, with universal
energy access by 2030 and major improvements in air quality, thereby limiting the
global temperature rise to 1.5°C, with no or limited temperature overshoot. Under this
scenario, the Group would likely face significant transition risks in the short-term due
to the lower commodity prices assumed.
Significant commodity price reductions within some of the IEA scenarios analysed
were seen to have a material adverse impact on portfolio reserves and values. Ithaca
Energy has also defined alternative internal price scenarios, which we consider to be
more reflective of the likely range of future commodity prices given reduced levels of
investment in oil and gas over recent years.
Ithaca Energy is partially aligned with this
recommendation.
We will consider further integration of different
climate scenarios and related commodity
price forecasts once we have completed the
detailed risk assessments per the strategy (a)
and (b) disclosures. We will look to incorporate
these into existing models and seek to provide
more granular disclosure regarding Ithaca’s
resilience in areas including financial resilience
and strategy.
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Risk Management
a) Describe the organisation’s processes for identifying and assessing climate-related risks Fully Aligned
Ithaca Energy identifies and evaluates climate-related risks at the organisational level
and the asset and investment level.
At the organisation level, the energy transition team developed its first Climate Risk
Register in 2022 to identify climate-related risks and opportunities that the Group faces
over the short, medium and long-term (as defined in Strategy disclosure a). This initial
assessment was completed during a workshop then reviewed and finalised with the
Chief Financial Officer providing final approval. Risks were evaluated and given a Current
Risk Level Score based on our existing Enterprise Risk Management framework and Risk
Prioritisation Matrix considering the potential impact to the Group, the likelihood of
occurrence, the timing of the risk and current risk mitigations. Each risk was evaluated
further to account for additional planned mitigation measures before calculating 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 on-going
basis in conjunction with other significant business risks. This process will be repeated
annually to ensure that Ithaca identifies new and emerging risks.
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.
The energy transition team has on-going responsibility for identifying new or changing
climate-related risks, including in relation to existing and emerging climate change
related regulatory requirements, and ensuring that these are added to the Climate Risk
Register and communicated to the leadership team as appropriate.
We will seek opportunities to further embed
and integrate process for managing climate-
related risks to inform corporate decision-
making and financial planning for existing and
future assets.
b) Describe the organisation’s processes for managing climate-related risks Fully Aligned
Ithaca’s energy transition team reviewed and considered each risk identified and
included in the Climate Risk Register described above to identify possible options to
mitigate, transfer, accept or control each risk. Current and additional planned risk
mitigation measures were then defined for each risk based on the team’s assessment
of the most viable or attractive options to mitigate, transfer, accept or control each risk.
This process will be repeated for any new climate related risks identified and reviewed
on an annual basis for existing risks.
Risks identified in the TCFD’s implementation guidance have been considered and
materiality assessed according to Ithaca Energy’s Risk Prioritisation Matrix, with minor
modifications to suit the unique nature of climate risks.
Risks are 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.
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.
48 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
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 Fully Aligned
At the organisational level, material climate-related and energy transition risks are
embedded into the Group’s Enterprise Risk Management procedures under the “Energy
Transition and Net Zero Delivery” Principal Risk (see page 66) along with other business
risks to be managed appropriately. Longer-term physical risks from climate change are
included within this Principal Risk.
Further information on the Group’s Enterprise Risk Management Section can be found in
the Risks Management section (see page 63). Material climate-related risks are brought
forward periodically by the energy transition team and Chief Financial Officer to the
leadership team and the Board to guide corporate decision-making, business strategy
and financial planning.
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 & 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 Partially Aligned
As per the climate risks identified within the Climate Risk Register described above,
the Group has financial exposure around transition issues related to GHG emissions.
We considered the all-sector and sector-specific metrics suggested by the TCFD
implementation guidance and selected the below set of metrics as appropriate to the
climate-related risks and opportunities faced by our business.
Ithaca Energy uses the following key metrics to measure and manage climate-related
risks and opportunities:
• Risk Level Scores for climate-related risks and opportunities: The Group
measures the current and residual risk level scores for each climate-related
risk and opportunity based on impact, likelihood, time horizon and mitigation
measures. Further information on the Climate Risk Register can be found in the Risk
Management sections above.
• Scope 1 and 2 GHG emissions: The Group collects and tracks Scope 1 and 2 GHG
emissions for each of its operated assets and onshore facilities, 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, process
emissions, 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.
• 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 kilograms of carbon dioxide equivalent per barrel of oil
equivalent (kgCO
2
e/boe).
• 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).
Emissions metrics are included in the suite of Company-level KPIs used in the calculation
of the employee annual bonus scheme. Milestones related to emissions reduction
project delivery are also included in the individual objectives for relevant employees,
further influencing their future remuneration.
Ithaca Energy currently holds an Internal Carbon Price assumption of £80/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.
Ithaca Energy is partially aligned with this
recommendation.
Further work will be undertaken to include
non-operated asset emissions which are
considered material for the Group, with a
target of being able to report on a net equity
basis (including emissions from non-operated
Joint Ventures) from the end of calendar year
2023.
Upon completion of the detailed risk and
opportunity assessment per strategy (a) and
(b) we will consider further metrics linking to
any material risks identified and informed by
the All-sector and sector specific guidance per
TCFD tables 1.1 and 1.2.
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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.
Note: Metrics are on a 100% basis for Ithaca Energy’s operated assets (emissions at tie back facilities accounted for at host platforms)
Partially Aligned
Metric 2021 2022
Scope 1 GHG Emissions (tCO
2
e) 497,362 482,647
Scope 2 GHG Emissions (tCO
2
e) (Office energy purchased) 567 678
Total Scope 1 & 2 GHG Emissions (tCO
2
e) 497,929 483,325
Amount of Scope 1 emissions from flared hydrocarbons (tCO
2
e) 82,312 67,362
Amount of Scope 1 emissions from other combustion (tCO
2
e) 391,977 375,775
Amount of Scope 1 emissions from process emissions (tCO
2
e) 0 0
Amount of Scope 1 emissions from vented emissions (tCO
2
e) 22,125 39,510
Amount of Scope 1 emissions from fugitive emissions (tCO
2
e) 949 949
Carbon Intensity (kgCO
2
e/boe) 24.6 23.8
Energy Intensity (TJ/Mboe) 0.36 0.33
Percentage change in Scope 1 and 2 emissions, compared with 2019 baseline -10% -15%
Energy consumption MWh 2,040,278 1,879,541
Scope 3 emissions are considered material by the Group; however, Scope 3 emissions data is not available to be disclosed due to the complexity associated with the calculation of
Scope 3 emissions and the lack of a consistent basis for Scope 3 emissions calculations.
Ithaca Energy is partially aligned with this
recommendation.
Further work is being undertaken to include
Scope 1 and Scope 2 non-operated asset
emissions data with a target of being able to
achieve this by the end of calendar year 2023.
The Group will continually monitor the
appropriateness of the metrics disclosed.
Ithaca does not intend to report scope 3
emissions until a wider industry consensus
on Scope 3 disclosures is reached
c) Describe the targets used by the organisation to manage climate-related risks and opportunities and performance against targets Partially Aligned
Ithaca Energy has a target of achieving Net Zero operations on a Scope 1 and Scope 2
basis by 2040, ten years ahead of the NSTD commitments, with several interim targets.
The Group is targeting a reduction of Scope 1 and 2 emissions of 25% from operated
assets by 2025 using a 2019 baseline, 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 2022, the Group has reduced its Scope 1 and Scope 2 emissions
by 15 % compared with 2019 baseline.
Additionally, we are aiming to achieve a 0.20% methane intensity by 2025, set by OGCI
and adopted by the NSTA and OEUK, and in line with OEUK targets of 50% methane
emission reduction by 2030 (against a 2018 baseline), set out in their methane action
plan. 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 completion of further detailed risk
and opportunity analysis (per strategy a) and
b)) consideration will be given to any additional
targets that are material and relevant to the
risks Ithaca Energy faces, and that are aligned
to the TCFD’s all-sector and sector-specific
guidance. An update will be provided in
this regard following the end of the 2023
calendar year.
50 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
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.
We protect people working for, and with, the Group
through the effective identification, understanding and
management of risk and the implementation of systems
to manage process safety and asset integrity.
Ithaca Energy has developed, and maintains, a
Company Management System (the CMS) which
implements the Safety Management System (the
SMS) and the EMS as documented in our HSE policy.
The CMS formally describes the responsibilities of the
organisation, and individuals within the organisation,
and incorporates the Group’s EMS and SMS.
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, we will continue to mature
our leadership focus, investing in a programme
of immersion of safety leadership expectations,
developing our process safety culture with
implementation of Process Safety Fundamentals,
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:
2021 2022
Serious Injury and Fatalities 0 0
Process Safety Events Tier 1 0 0
Process Safety Events Tier 2 2 2
Total Recordable Case
Frequency per million
hours 1.04 3.38
In 2022, we successfully delivered many high risk scopes
with zero incidents. We saw an increase in injuries
associated with routine tasks, perceived low risk scope
where hazard identification could have been improved
and incident involving transiting to and from worksites.
Our 2023 focus to improve both process safety events
and recordable case rates includes:
• Leadership: Supporting our frontline teams with
regard to active monitoring and setting our safety
leadership expectations.
• Controls: Improving our control of work processes.
• Assurance: strengthening our Lines of Defence
Model regarding assurance and auditing.
• Process Safety: implementing Process Safety
Fundamentals, enhancing process safety Key
Performance Indicators (KPIs), and improving
visualisation of cumulative risks.
Ithaca Energy strives for continuous improvement in
its HSE performance. The Group undertakes audits
and annually reviews its HSE policies to help ensure
compliance with all applicable regulations, as well
as its policies, principles, processes and procedures,
and to identify areas for improvement. The Group’s
risk-based audit and assurance program is designed
to measure the conformance and effectiveness of
HSE management across its operations, as well as its
contractor and supplier organisations, as applicable.
Other assurance activities are also periodically
conducted to enable the Group to learn from previous
challenges and proactively identify opportunities to
improve its HSE performance.
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 2022, we were a complement of
573 people, employing men and women spanning
ages ranging from 18 years to 68 years. In terms of
people and culture, the year brought significant waves
of positive change. In particular, the acquisition of
Siccar Point Energy further strengthened the operating
capabilities of the Group and acted as a catalyst to
refresh the Group’s vision, values and behaviour
framework, recognising the need for renewed clarity
following a period of accelerated M&A.
SOCIAL
and completing training for our senior leaders in
process safety leadership;
• 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.
• Monitoring of performance, with planned
improvements in 2023 including updates to Process
Safety KPIs, development of cumulative risk barrier
model and digitalisation of HSE performance metrics;
• 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.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONTINUED
ENVIRONMENT CONTINUED
ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022 | 51
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Our people continued
In addition, we became a public Company and all that
entails in terms of accountability, formalising processes
and transparent reporting. Our people priorities in
2022, and continuing into 2023 include:
• Continuing to embed our vision and values,
launched during the year and showing the clear
culture we seek to create;
• Introducing visible development paths with a strong
focus, not just on attracting talent, but retaining it;
• Relaunching our formal graduate recruitment
programmes, whilst putting in place an effective
mentoring structure to help and guide them over
three to four years;
• Building solid structures around reward and
recognition, 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 2022, we launched a
managers and supervisors training matrix and
extended our e-learning platform which provides
organised training to all employees and contractors,
in the areas of behavioural skills, project management,
and leadership and management skills. Our annual
performance review process has also developed to
include our core values and a focus on empowering
our employees to take control of their own
career progression.
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, our Employee Assistance
Programme, seminars on financial wellbeing, or
‘indirect’, e.g. Rig Run participation that promotes
wellbeing, health and camaraderie for our offshore
employees. We also have flex days that enable
onshore employees to accrue an additional day’s leave
every month. Support is also provided by our trained
mental health first aiders and wellbeing champions.
Our community neighbours
In October 2022, we were delighted to enter into
a corporate partnership with the VSA, the largest
provider of mental health support in the North-
East of Scotland. Over its 150-year history, VSA 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.
Awareness of the importance of good mental health,
and numbers of people looking for support has
increased. Resources and facilities are stretched,
and Ithaca Energy is proud to be able to help.
Our support to our charity partner is both financial
and practical: we have committed £150,000 to fund
part of a major renovation project of the charity’s
Queen Mother House, which will provide 24-hour
support for people living with severe or enduring
mental health conditions.
Following several years of hiatus due to COVID-19,
The Group was delighted to sponsor VSA’s Christmas
Concert, bringing festive joy to those that utilise
VSA’s services. Beyond our initial donations we are
committed to raise additional funds for the charity
and providing volunteers in company time to give their
energies and skills. Each of our onshore employees
can take up to four paid days each year to help a
community cause.
Supporting positive mental health and wellbeing
is a cause that Ithaca Energy is passionate about.
To highlight our commitment to the mental health
of our own people, we have appointed and trained
mental health first aiders and wellbeing champions
to provide support across the organisation.
In light of the terrible events that unfolded in early
2022 in Ukraine, Ithaca Energy donated £100,000
to the Disaster Emergency Committee Ukraine
Humanitarian Appeal and further matched funded
employee donations to the appeal of a further £6,000.
Also during the year, we:
• Welcomed eight interns for a return of our
summer programme, launched in 2021;
• Took on six new apprentices to add to our offshore
population; and
• Donated over £10,000 in support of other
community projects including:
Ê sponsorship of various employees in relation to
their participation in the Inverness Marathon,
the Great North Run and St Cyrus 10K run;
Ê donation awards to local youth sports groups
including Bervie Youth FC, Because Everyone
Counts-Inverurie, Doric Dolphins Swimming
Club, Buckie Ladies Football Development Team
and Culter Youth Boys Football Club;
Ê supported local schools and youth groups
including Bucksburn Academy Friends of
Additional Support Needs Wing, Chapel of
Garioch Primary School and the 3rd Ellon
Guides; and
Ê charitable groups assisting with older
generations including Stonehaven and District
Lions Club, the Mintlaw and district Mens Shed,
Re-Engage, Aberdeen Street Pastors and Home
Start Aberdeen.
The Company also supported employees and
contractors to participate in various activities
in support of Aberdeen Cyrenians and Instant
Neighbour’s Giving Tree Appeal.
Our role as an employer, contributor and supporter
of our community contributes to the following
Sustainable Development Goals (SDGs):
52 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
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. 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, equity 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.
Our focus is wide-ranging, looking at gender,
nationality, and generation. To make progress in this
area, our DE&I policy confirms our commitment to a
continuous programme of equity and inclusion, which
supports our core values of ‘Express Yourself’, ‘Be
Considered’ and ‘Bring Strength’, in turn helping to
‘Deliver Results’. Our policy was published in Q1 2023
and also applies to the Board and its sub-committees.
Our aim is that our workforce is truly representative of
all areas of society and each employee feels respected,
listened to, comfortable to be themselves and able to
give their best. Additionally, the Group established a
DE&I committee in 2022 made up of members from
across the organisation who support the Group in
establishing and sustaining a supportive and welcoming
workplace environment, and who are committed to
ensuring 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 Committee.
GOVERNANCE
Throughout 2023, we will be introducing online
awareness sessions on diversity and inclusion for
employees and contractors. In addition, online
unconscious bias training will be mandatory for all
supervisors and managers, and 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 committee to
build on our ongoing action plan and gather feedback
from our employees to evaluate 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 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.
All this builds on our commitment to specific actions
and outcomes from our employee engagement survey
in Q4 2021. We have made an effort to listen to our
employees, our stakeholders and our partners and,
from this, we will be able to track our progress and
achievements.
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. We will work towards completion of DE&I data
from our workforce, in order to understand and enable
us to make better decisions and action plans.
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, we will launch a mandatory online bullying and
harassment courses for all employees and contractors
which will provide 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 2022, we recorded a mean gender pay gap
of 17.1% and a median of 11.9% 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. 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.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONTINUED
SOCIAL CONTINUED
ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022 | 53
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Male
Female
50
93.5
93.2
Female employees hold around 38.8% of senior and
middle management roles, while holding around
36.5% of all onshore roles. This distinction is something
we are committed to working on through conscious
recruitment and promotion, and in the training,
mentoring and working arrangements for staff, to
attract and retain more women into senior positions.
As at 5 April 2022 93.5% of females received a bonus
and 93.2% of males received a bonus.
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
Given the importance and impact of the Non-
Executive Director positions, and those of the
Executive Directors and our leadership teams, we
recognise that it is critical for us to have clear and
credible succession plans in place, particularly in the
current challenging business environment. This will
ensure that we are covered for all eventualities,
safeguarding our organisation by providing continuity
and minimising disruption, as we pursue our strategic
plans for growth.
A regular review of the Board and our leadership team
by the Nomination and Governance Committee is a
key part of this process, as it will allow 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
Bonuses
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.
Succession planning will strategically support our
leadership development and a pipeline of leaders
who are ready to step in when needed.
Anti-bribery & corruption policy
The Group expects its employees, contractors, officers
and Directors to conduct business in an honest and
ethical manner. The Group takes a zero-tolerance
approach to bribery and corruption and we are
committed to acting professionally, fairly and with
integrity in all our business dealings and relationships
wherever they operate; and implementing and
enforcing effective systems to counter bribery
and corruption.
The Group’s Anti-Bribery and Corruption Policy
specifically prohibits the offering, giving, solicitation or
the acceptance of any bribe (whether in cash or in the
form of any other inducement) 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 by any individual employee, agent or other
person or body acting on its behalf in order to gain any
commercial, contractual or regulatory advantage for the
Group in a way which is unethical or in order to gain any
personal advantage, pecuniary or otherwise. Any breach
of this policy will be regarded as a serious matter and
will result in disciplinary action for employees, including,
where appropriate, summary dismissal and any third
parties associated with the Group who are found to be
exposing Ithaca Energy to bribery and corruption risk
will be investigated and appropriate action will be taken.
This zero-tolerance extends to any of the Group’s
employees, contractors or business partners working
on its behalf.
Whistleblowing
It is the policy of the Group to conduct business in an
honest and ethical manner and that all employees,
contractors, Directors and officers are able to work
in a safe, lawful and ethical environment. The Group
is committed to operating at all times to the highest
standard of integrity and therefore we encourage
senior managers, officers, Directors, employees,
consultants, contractors and all persons associated
with us, wherever their location in the world 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. This includes
discrimination, bullying, illegality, suspicion
of criminality, modern slavery and unsafe practices.
The Group’s Whistleblower Policy encourages anyone
who wishes to raise a concern to do so openly and
with anonymity, if preferred. 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.
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, either now or in hindsight.
We are committed to working with honesty, integrity
and transparency and ask that those 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
information that we hold or process, and we provide
a compliant and consistent approach to protect all
such data. We recognise our obligations to meet the
requirements of (GDPR) and take every reasonable
measure to safeguard the 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
When we set out to recruit our Board members, we
began by evaluating the skills and experience that we
would need to help us deliver our strategic business
plan. This was done by considering the nature of our
industry, the goals and challenges currently faced by the
organisation, as well as our planned strategic direction.
A brief was developed and relevant materials
describing the organisation and its history, alongside
a role description were created to capture potential
candidates’ interest and their intentions relating
to Board membership. It was important that those
appointed brought an independent and challenging
perspective to our business. The Group engaged a
specialist consultant to assist us with the recruitment
process of Independent Directors.
The Board consists of members with a blend of diverse
and proven success within their respective fields,
varied perspectives, knowledge of our sector and
a balance of skills that align with, and support, the
strategic objectives of the Group, not just for now but
also for our future. Shortly after appointment, the
Board were taken through an onboarding programme
to ensure they were informed of their roles, and to
allow them to start operating as quickly and effectively
as possible.
Percentage of employees that received bonuses
Schiehallion
Rosebank
Mariner
Britannia
Jade
Isabella
Pierce
Elgin Franklin
Cambo
Tornado
Captain
Erskine
MonArb
Alder
Fotla
Alba
Marigold
Enochdhu
Cook
GSA
Brodgar
Callanish
54 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
Operated assets
Non-operated assets
OPERATIONS REVIEW
OUR
OPERATING
REVIEW
Diverse and high-value
portfolio of operated
and non-operated assets
in the UKCS
DAILY PRODUCTION
71.4 KBOE/D
GSA (Stella,
Harrier, Vorlich
and Abigail)
& Other
West of Shetland
GBA & Alba
MonArb & Cook
Captain
Marigold
Mariner
ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022 | 55
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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 of these producing fields
and a majority of its 2P reserves and 2C resources,
providing significant control and flexibility over
execution of the Group’s strategic, operational and
financial priorities.
Our 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.
Through acquisition, the Group has diversified its
portfolio, reducing its reliance on its flagship asset,
Captain, that contributed 26% of Group production
in 2022 (31%: 2021).
Net production split
(Operated and Non-operated)
Net production split
(Liquids and Gas)
Operated
Non-operated
Liquids
Gas
57.4%
OPERATED
65.9%
LIQUIDS
57.4% 65.9%
42.6%
34.1%
56 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
OPERATIONS REVIEW CONTINUED
OPERATED ASSETS
Operator of nine fields, including our flagship Captain field that contributes 26% of the Group’s total production.
Captain Alba FPF-1
Production efficiency from the Captain field averaged 91% in 2022. The field experienced
a significant upturn in activity (post lifting of COVID-19 restrictions) with items of note
including the Captain Wellhead Protection Platform (WPPA) Drilling Campaign and large
maintenance scopes on power generation and water injection rotating equipment, to
ensure future reliability. Significant engineering, fabrication and construction activities
associated with the Enhanced Oil Recovery Project Phase II on the Well Protection
Platform, ‘A’, the Bridge Link Platform (BLP) and Captain FPSO Vessel ran throughout the
year and were completed safely and on schedule. This included the installation of four
new modules on BLP plus a water injection manifold, hydraulic power unit and new
structural platforms. In addition, the installation of a 52”, 113m long, ~238 tonne EOR
riser caisson was safely installed on the BLP Jacket in December 2022. The COSL Pioneer
Mobile Drilling Unit (MODU) arrived in the Captain field and completed the suspension
of Area C Well A2Y and the drilling of a new production Well UB05P (A4), which was then
brought online earlier than planned, in November 2022.
Production at Alba in 2022 was impacted by planned shutdown and main generator
maintenance campaigns. Further impact to production came from an extended
water injection outage during the second and third quarters.
During the fourth quarter an extensive water injection logging campaign was
undertaken to assure well integrity and water injection operations were restarted.
Platform drilling rig maintenance was completed readying the field for the
sanctioned 2023 infill drilling activity.
Production efficiency from the FPF-1 asset averaged 92%, excluding TAR
(Turnaround activity).
TAR activity in May and June coincided with a scheduled Norpipe outage, with
several complex scopes delivered both safely and efficiently. This included an
integrated control and safety system upgrade, seawater rectification project,
comprehensive emergency shut down system testing, hull repairs on C1/C4 columns
and essential topsides modifications required for the Abigail field.
In addition, a dry-gas seal replacement and replacement of critical valves required
to achieve the isolations to operate on a single-train, were completed that will
minimise future production losses associated with planned maintenance on the
FPF-1 gas compressors.
During the second half of the year, the vent purge gas was changed from fuel gas
to nitrogen, reducing vent emissions significantly. The Abigail subsea tie-back was
completed safely with the well brought online on the 20th October, producing an
initial 4.5 kboe/d.
WORKING INTEREST
85%
WORKING INTEREST
36.67%
WORKING INTEREST
100%
STELLA, HARRIER, ABIGAIL
WORKING INTEREST
34%
VORLICH
OTHER OPERATED ASSETS:
Erskine: Production efficiency from the Erskine field averaged 79%, excluding TAR, mainly impacted by the performance of a single well that remained offline in 2022 due to productivity impairment and the safely executed reperforation campaign was
unsuccessful in restoring production.
Cook: Production efficiency from the Cook field averaged 89%. Water injection was restored at the Cook field following a DSV intervention to replace the injection choke valve and dissociate hydrate that had formed in the wellbore. It is currently injecting 30,000
bwpd, providing long-term pressure support for the producer.
ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022 | 57
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NON-OPERATED ASSETS
The Group’s non-operated asset base consists of a diverse portfolio of assets, representing 42.6% of 2022 production.
We work closely and proactively with the field operators and licence partners.
Greater Britannia Area Montrose Arbroath Schiehallion Elgin Franklin Jade
Comprising of assets: Britannia (32.38%), Alder
(Operated 73.68%), Callanish (16.5%), Brodgar
(6.25%) and Enochdhu (50%), the Greater
Britannia area production was supported by
the strong performance of the Callanish F5
well that came online in February 2021 and
the completion of a Britannia suction pressure
reduction project in April 2022.
Further development of the area progressed with
joint venture approval of the sixth Callanish well
to be spud in 2023, technical work on a potential
fifth Brodgar well and pre-development studies
on the Leverett discovery, where Ithaca Energy
has a non-operated equity position.
Ithaca Energy acquired a 41.03% equity stake in
the Montrose Arbroath (MonArb) area as part of
acquisition of Marubeni Oil and Gas UK, which
completed 4th February 2022.
We are continuing to evaluate development
options in the MonArb area and are progressing
engineering on the North Cayley and Montrose
infill projects.
Ithaca Energy acquired a 11.754% equity stake
in the field through the acquisition of Siccar
Point Energy, which completed 30th June 2022.
In 2022, progress was made towards the
continued development of the asset, with the
approval of the Phase A drilling campaign on the
Ocean Great White rig.
Ithaca Energy increased its equity interest
in Elgin Franklin from 3.9% to 6.09% through
the acquisition of Summit Exploration and
Production Limited, which completed
30 June 2022. The asset delivered reliable
production in 2022.
Ithaca Energy increased its equity interest in
Jade field from 19.93% to 25.5% with the Siccar
Point Energy acquisition, which completed
30 June 2022.
It was a significant year for the Jade field,
with the successful delivery of the Jade South
exploration well and the J14 well, which
were both delivered ahead of schedule by
the operator, contributing to a strong year of
production for the asset.
WORKING INTEREST
6.25%-73.68%
WORKING INTEREST
41.03%
WORKING INTEREST
11.754%
WORKING INTEREST
6.09%
WORKING INTEREST
25.5%
OTHER NON-OPERATED ASSETS:
Ithaca Energy owns interests less than 10% in the Mariner, Pierce and Columba assets. The Mariner field saw four new wells added in 2022, as production continues to ramp up on this asset. The Pierce project operated by Shell was
offline nearly all of 2022 to execute the Pierce depressurisation project. The Columba asset was acquired as part of the Marubeni Oil and Gas UK acquisition.
58 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
FINANCIAL REVIEW
AN ASSET PORTFOLIO
GENERATING STRONG
OPERATING CASH
FLOWS AND EARNINGS
GROUP ADJUSTED EBITDAX
$1,916.2m
NET CASH FLOW FROM OPERATING ACTIVITIES
$1,723.3m
STATUTORY NET INCOME
$1,031.5m
ADJUSTED NET INCOME
$462.8m
LEVERAGE RATIO – NET DEBT
TO GROUP ADJUSTED EBITDAX
0.5x
STATUTORY EARNINGS PER SHARE
102.6 cents
Summary of financial results
Key financial performance indicators (KPIs)
2022 2021
Group adjusted EBITDAX
1
($m) 1,916.2 1,035.4
Net cash flow from operating
activities ($m) 1,723.3 912.7
Available liquidity
1
($m) 578.8 619.8
Unit operating expenditure
1
($boe) 19.0 18.0
Basic EPS (cents) 102.6 42.4
Net debt
1
($m) 971.2 930.2
Net debt/Group adjusted
EBITDAX
1
0.5x 0.9x
Other KPIs
Total production (boe/d) 71,403 56,486
1 Non-GAAP measure
Definitions of the key financial performance indicators
are set out on pages 30 and 31.
The Group reported average production of
71,403 boe/d for 2022 (2021: 56,486 boe/d) driving
Group adjusted EBITDAX of $1,916.2 million, net cash
from operations of $1,723.3 million and net income of
$1,031.5 million. Comparing the financial results for
2022 with 2021 demonstrates the transformational
nature of 2022 and the direct impact of The Group’s
buy, build, boost strategy.
Transformational growth whilst maintaining financial
discipline has been the story of 2022. We have
reduced leverage to 0.5x net debt to adjusted
EBITDAX whilst materially increasing production,
maintaining operating cost discipline and adding
quality reserves and resources. Our asset portfolio
has been strengthened by the addition of further
long-lived asset equity positions with low operating
costs delivering strong adjusted EBITDAX growth (up
85.1% on 2021) and free cash flow growth (up 106.1%
on 2021), as well as the addition of material large
project equity positions providing organic portfolio
growth opportunities. As we move forward, our
financial commitment to investors is to deliver value
through a transparent capital allocation framework
that guides our corporate decision-making. Through
the framework we commit to allocate cash flow in a
prioritised order to:
1. INVEST – to sustain production in the 70-90 kboe/d
range in the medium term
2. PROTECT – to maintain prudent leverage ratios,
(<1.5x) and reduce exposure to commodity price
downturns through an active hedging strategy
3. RETURN – to share the results of operational
performance with investors by delivering 15-30%
post-tax CFFO in dividends annually
4. EVOLVE – to deploy residual free cash flow to grow
our assets organically, extend the business through
M&A or yield additional distributions to investors
The introduction of the Energy Profits Levy (EPL) is
extremely disappointing for the industry as it reduces
the free cash flow available for reinvestment. However,
despite this we have created significant organic and
inorganic value through 2022 and we believe our
capital allocation framework should give investors
confidence as we seek to continue to grow value
through 2023, and beyond.
NON-GAAP MEASURES
Adjusted EBITDAX, adjusted net income,
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 200 to 202.
ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022 | 59
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Financial performance: adjusted EBITDAX
Adjusted EBITDAX is a key measure of operational
performance delivery in the business and
increased by 85.1% in 2022 to $1,916.2 million
(2021: $1,035.4 million) mainly driven by revenue
growth of $1,170.3 million to $2,598.5 million
(2021: $1,428.2 million). Revenue growth was
principally due to acquisitions made during the year
which contributed an additional $552 million of
revenue, improved production efficiency as well as
higher commodity prices year-on-year. Increased
production was delivered from new field equity
production from acquisitions including from the
MonArb area fields (from February 2022), and from
Jade, Elgin Franklin, Mariner and Schiehallion fields
(from July 2022).
Substantial price volatility was experienced through
2022, with historically exceptional movements in
the European gas markets and continued volatility in
the international oil markets. Ithaca Energy’s value
constructive hedging policy enabled substantial
participation in price upside through the year whilst
protecting downside risk. Average realised oil prices
for the year were $100/boe before hedging results
and $91/boe after hedging results (2021: $69/boe
before hedging results and $66/boe after hedging
results). Average realised gas prices for the year were
$149/boe before hedging results and $137/boe after
hedging results (2021: $96/boe before hedging results
and $77/boe after hedging results).
Cost discipline was maintained during the year with
unit operating expenditure marginally increasing to
$19.0/boe (2021: $18.0/boe) as inflationary pressures
and higher commodity price based operating costs,
such as fuel gas and diesel, outweighed our disciplined
cost management approach across the portfolio.
Revenue, opex and adjusted EBITDAX are as follows:
2022 2021
Production (boe/d) 71,403 56,486
$m $m
Oil sales 1,692.7 856.5
Gas sales 1,348.2 724.5
NGL sales 75.4 52.5
Other income 40.6 32.7
Realised losses on oil derivative
contracts (211.6) (48.8)
Put premiums on oil derivative
instruments (14.6) (27.2)
Realised losses on gas derivative
contracts (289.9) (147.4)
Put premiums on gas derivative
instruments (42.3) (14.6)
Total revenue 2,598.5 1,428.2
Operating costs (547.8) (424.0)
Inventory movements and other
items (134.5) 31.2
Adjusted EBITDAX 1,916.2 1,035.4
Financial performance: net income
2022 2021
Profit before tax ($m) 2,240.5 763.1
Tax ($m) (1,209.0) (337.1)
Net income after tax ($m) 1,031.5 426.0
Gain on bargain purchase ($m) (1,335.2) (10.5)
EPL deferred tax charge ($m) 766.5 -
Adjusted net income
1
($m) 462.8 415.5
Earnings per share (cents) 102.6 42.4
Adjusted earnings per share
1
(cents) 46.0 41.3
1 Non-GAAP measure
OUR FINANCIAL COMMITMENT TO
INVESTORS IS TO DELIVER VALUE
THROUGH A TRANSPARENT CAPITAL
ALLOCATION FRAMEWORK:
Illustrative
post-tax CFFO
Sustaining
capex
Balance
sheet
Ordinary
dividends
Extra cash
flow
Dividend
commitment of
15-30%
of CFFO post-tax
Leverage below
1.5x
Grow
Growth Capex
Extend
M&A
Yield
Additional
Distribution
2. Protect 3. Return 4. Evolve1. Invest
60 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
FINANCIAL REVIEW CONTINUED
Liabilities
At 31 December 2022, total liabilities amounted to
$4,302.1 million (2021: $4,055.3 million) including
decommissioning provisions of $1,720.5 million
(2021: $1,641.5 million) and borrowings of
$1,213.7 million (2021: $1,391.7 million). The increase
in total liabilities during the year was primarily due to
additional decommissioning liabilities of $390.5 million
and contingent and deferred consideration of
$286.8 million from the acquisitions made during
the year, partly offset by reduced borrowings due
to settlement of the parent debt position and lower
commodity derivative contract liabilities.
Equity and reserves
At 31 December 2022, total equity and reserves
amounted to $2,457.5 million (2021: $676.5 million)
The increase in equity and reserves during the year
was primarily due to the retained profit for the year,
IPO related capital movements and favourable hedging
reserve movements.
Financial position: cash
2022
$m
2021
$m
Opening cash 44.8 1.2
Operating cash flows 1,723.3 912.7
Investing cash flows (1,404.2) (220.2)
Financing cash flows (107.4) (650.7)
Foreign exchange (2.7) 1.8
Net cash flow 209.0 43.6
Closing cash 253.8 44.8
Undrawn borrowing
facilities 325.0 575.0
Available liquidity 578.8 619.8
Movements in oil and gas inventories was a charge
of $130.3 million (2021: credit of $7.0 million)
representing movements in underlift/overlift
entitlement imbalances.
Impairment charges of $31.5 million (2021: reversal
of $465.3 million) principally reflect revisions to asset
retirement obligations, primarily on fields that are no
longer producing.
Exploration and evaluation costs amounted to
$9.0 million (2021: $0.2 million) and principally
related to licence relinquishments during the year.
Other losses of $9.5 million (2021: gains of
$3.7 million) comprise fair value losses on
contingent consideration and adverse foreign
exchange movements.
Administrative expenses were $87.9 million (2021:
$15.2 million) with the increase principally due
to non-recurring costs associated with the IPO of
$20.3 million, acquisition costs of $25.8 million and
share-based payment charges of $14.1 million relating
to new share option awards.
Gain on bargain purchase arose on the Marubeni and
Siccar Point Energy acquisitions (see note 17
for further details).
Net finance costs were $203.0 million (2021:
$250.1 million) with the reduction principally due
to lower interest on related party loans which
were repaid during the year and lower loan fee
amortisation.
Taxation
The tax charge for the year was $1,209.0 million (2021:
$337.1 million) including an exceptional EPL deferred
tax charge of $766.5 million and a current EPL tax
charge of $131.4 million.
Net income in 2022 represented significant value
delivery with $1,031.5 million of profit compared with
$426.0 million in 2021. Net income 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.
Total costs
Total costs amounted to $358.0 million
(2021: $665.1 million) and comprised:
2022
$m
2021
$m
Depletion, depreciation and
amortisation (662.9) (455.9)
Operating costs (547.8) (424.0)
Movement in inventory (130.3) 7.0
Royalties (11.3) (6.2)
Impairment (31.5) 465.3
Exploration and evaluation (9.0) (0.2)
Other (losses)/gains (9.5) 3.7
Administrative expenses (87.9) (15.2)
Gain on bargain purchase 1,335.2 10.5
Net finance costs (203.0) (250.1)
Total costs (358.0) (665.1)
Depletion, depreciation and amortisation charges
were $662.9 million (2021: $455.9 million). The year-
on-year increase is principally due to the acquisitions
made during the year. Depletion, depreciation and
amortisation per barrel was $25 (2021: $21).
Operating costs amounted to $547.8 million (2021:
$424.0 million) with the increase driven mainly by the
acquisitions made during the year. As set out above,
unit operating expenditure marginally increased year-
on-year.
Earnings per share
Earnings per share of 102.6 cents (2021: 42.4 cents)
and when adjusted for exceptional items (after
excluding an exceptional non-cash bargain purchase
credit of $1,335.2 million and exceptional non-cash
EPL deferred tax charges of $766.5 million) was
46.0 cents (2021: 41.3 cents).
Dividends
The Board did not propose a dividend for 2022 but
reaffirmed the target of a $400 million dividend
for 2023 financial year. An interim dividend of
$133 million, or $0.1321 per share, was paid to
shareholders on 9 March 2023.
Financial position: assets/liabilities/equity
2022
$m
2021
$m
Total assets 6,759.6 4,731.8
Total liabilities (4,302.1) (4,055.3)
Net assets and
shareholders’ equity 2,457.5 676.5
Assets
At 31 December 2022, total assets amounted
to $6,759.6 million (2021: $4,731.8 million), of
which current assets were $988.7 million (2021:
$560.9 million) and non-currents assets were
$5,770.9 million (2021: $4,170.9 million). The increase
in total assets during the year was primarily due to
organic capital investment and recognition of oil and
gas assets from acquisitions accounted for as business
combinations under IFRS 3 which added $1,115.0
million to development and production assets and
$706.6 million to exploration and evaluation assets.
In addition there were increases in the valuation of
commodity derivative contract assets.
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Principal risks
The principal and emerging risks facing the Group are
set out on pages 64 to 68.
Derivative financial instruments
Derivative financial instruments are utilised to manage
commodity price risk in a substantive financial hedging
programme for future oil and gas production volumes.
As at 31 December 2022, the following hedges were
in place:
2023 2024
Oil
Volume hedged (mmboe) 7.6 0.4
Weighted average floor
hedged price ($/bbl) 68 77
Gas
Volume hedged (mmboe) 3.4 0.3
Weighted average floor
hedged price (p/therm) 220 175
Subsequent events
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 will receive approximately $51 million which
will be reflected in the 2023 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:
• Strong commodity markets in 2022, continuing
robust commodity price backdrop despite lower
prices in March 2023 and a well hedged portfolio
over the next 12 months;
• Reserves Based Lending headroom of $475 million
($450 million drawn versus $925 million available),
plus $210 million of cash at 24 March 2023; and
• Strong operational performance and well-
diversified portfolio which has been further
strengthened by the acquisitions of Siccar Point
Energy and Summit as at 30 June 2022 and with
Abigail coming online in November 2022.
The Group’s base case going concern assessment
assumes an average oil price of $77/bbl and a gas
price of 119p/therm in 2023 and an oil price of
$72/bbl and a gas price of 130p/therm in the six
months to 30 June 2024 with production in line with
approved asset plans.
Owing to 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 there was no
reasonably possible scenario that would result in the
business being unable to meets its liabilities as they fall
due in the context of the mitigation strategies available
to management. The Group would still continue to
comply with financial covenants and have sufficient
liquidity throughout the period to 30 June 2024 to
continue trading.
In addition reverse stress tests have been performed
reflecting further reductions in commodity prices and
production volumes, prior to any mitigating actions,
to determine at what levels each 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
and production volumes required to cause a breach
of covenants or liquidity issue, is considered
sufficiently remote in the context of the mitigation
strategies available to management.
Mitigation strategies within the control of
management include the reduction in uncommitted
capital expenditure, variable opex savings in the low
production scenario, the cancellation or deferral of
future dividends and 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 2024, 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.
Operating cash flows
Net cash from operating activities amounted
to $1,723.3 million (2021: $912.7 million) after
accounting for working capital movements of
$94.8 million (2021: $74.2 million) with the increase
being driven by higher production and prices partly
offset by higher operating costs.
Investing cash flows
Cash flow used in investing activities amounted to
$1,404.2 million (2021: $220.2 million) reflecting
increased capital expenditure of $380.6 million
(2021: $269.6 million) driven mainly by the Captain
and Abigail development projects as well as investing
cash flows related to acquisitions (net of cash
acquired) of $957.4 million being primarily driven by
the Siccar Point Energy ($926.7 million) acquisition.
Financing cash flows
Cash outflow from financing activities of $107.4 million
(2021: $650.7 million) with increased interest costs
and lease payments of $177.2 million (2001: 2021:
$88.7 million) and a net increase in principal debt
of $50.0 million (2021: reduction of $554.8 million).
In line with the IPO Prospectus, there were no
substantive net cash flows as a result of the IPO with
IPO proceeds used to repay a shareholder loan.
Cash balances were $253.8 million (2021:
$44.8 million) at the end of the year and available
liquidity was $578.8 million (2021: $619.8 million).
62 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
Board/Audit
and Risk
Committee
ERMC/ELT
Business Units
Top down
Strategic risk management
Review external environment
Robust assessment of principal and
emerging risks
Determine strategic action points
Bottom up
Operational risk management
Assess effectiveness of
risk management system
Report on principal and emerging risks
and uncertainties
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
Execute strategic actions
Report on key risk indicators
Report current and emerging risks
Identify, evaluate and mitigate
operational risks
RISK MANAGEMENT
RISK MANAGEMENT
Risk management process
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.
The importance of robust risk management has been
highlighted by the recent significant volatility in the
risk profile of the UK Oil & Gas sector and the wider
economy, which has in part been due to the Ukraine/
Russian conflict and subsequent market disruption.
To manage these specific challenges and the wider
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.
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. 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).
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.
Proposed risk management framework that the Group will work to in 2023
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At an operational level, formal risk registers are
maintained throughout the Group including
operational, HSE and project registers. These are
monitored and challenged on a regular basis and are
escalated within the defined governance structure
so they can be used to inform the principal risks of
the Group.
In 2022, and into 2023, additional resources have been
engaged in order to further develop and enhance both
the risk management and internal audit functions
within the Group. This will increase the maturity of
risk management and further formalise the top-down/
bottom-up linkage between the principal risks and
operational level risks as illustrated in the Group’s
Proposed Risk Management Framework.
Monitoring and effectiveness of the risk
management framework and emerging risks
The effectiveness of the risk management framework
is being monitored on a regular basis by the Audit and
Risk Committee. The Board resolved in February 2023
that selected principal risks and associated mitigations
will be presented and discussed at each regular
meeting of the Board such that all principal risks and
associated mitigations will be reviewed by the Board
on an annual basis.
Risk management in Ithaca Energy
In December 2021, an Enterprise Risk Management
Committee (ERMC) was established in the Group with
representation from the leadership team (including
the CEO and CFO) and Risk Management function.
The ERMC met six times in 2022 and will continue
to meet at least quarterly in 2023. The principal risks
facing the Group are determined and reviewed by
the ERMC at each meeting and revised and updated
as required. Horizon scanning is also undertaken at
the meetings to help anticipate future events that
may impact existing principal risks or 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. Principal risks and
emerging risks are reviewed and discussed regularly
by the Board and the ERMC.
The Audit and Risk Committee was established in
November 2022, and at that time the extant principal
risks were reviewed by the Committee and further
advised to the newly established Group Board.
Updates and amendments to the principal risks and
mitigations were identified in the following months
with revised principal risks and mitigations being
approved by the Audit and Risk Committee and the
Board of Directors in February 2023.
The Internal Audit Plan for 2023 was reviewed
and approved by the Audit and Risk Committee in
December 2022. 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 are identified and considered as part of
the Group’s risk management framework. These risks
cannot be fully assessed as their scope, impact and
likelihood is uncertain.
The current UK Government’s Energy and Fiscal
Policies is such an area of such uncertainty, which
may lead to the introduction of onerous regulation
and legislation that may result in an increasingly
challenging Group environment. This emerging risk is
closely monitored with current mitigation including
engagement with the UK Government, His Majesty’s
opposition and His Majesty’s Treasury.
64 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
RISK MANAGEMENT CONTINUED
Risk title Risk description Key risk mitigations
Major HSE incident
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 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.
• In 2023, we will continue to mature our leadership focus, investing in a programme of immersion of safety leadership
expectations, developing our process safety culture with implementation of Process Safety Fundamentals, and
completing training for our senior leaders in process safety leadership.
Cyber security breach
Cyber security is an ongoing risk to the Group due to the constantly evolving and
intensifying threat landscape, which has heightened since the Russian invasion
of Ukraine. Examples of specific threats include production downtime caused
by disabled control system from an attack or a ransomware attack that encrypts
critical Group data.
A cyber attack could lead to significant 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.
• Workforce education and ongoing awareness activities are in place with industry best practice controls implemented.
• Effective operation of cyber security systems with 24/7 monitoring and detection by Security Operation Centre and
associated incident response capabilities.
• Oversight and review of Group policies, procedures and controls by the Information and Risk Management function to
ensure continuous improvement with regulatory requirements and the evolving threat landscape.
• Regular business continuity/disaster recovery planning and testing.
• Regular penetration testing undertaken by 3rd party experts.
PRINCIPAL RISKS
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Risk title Risk description Key risk mitigations
Access to capital
The Group does not have access to sufficient capital to fund the capital investment
required to deliver the core strategy of the Group.
The current unstable UK fiscal landscape also potentially erodes access to future
capital. A number of banks have announced plans to no longer offer Reserves
Based Lending to oil and gas companies.
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 net debt/EBITDAX cap, 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.
Capital project execution and
delivery
The Group is currently engaged in a significant level of capital project activity
(e.g. Captain EOR II). The Group also has future capital project plans for greenfield
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.
• Robust investment appraisal process to ensure that project cost and time estimate are sufficiently mature to make
investment decisions and, where appropriate, independent benchmarking has been undertaken.
• Project leadership team meet weekly to discuss key issues and actions across all project disciplines.
• Monthly discipline risk meetings are held and consolidated at a project level, mitigation actions are identified and
tracked to conclusion.
• Contract placement follows a formal tender board process ensuring control and value realisation.
• Contracts are well understood by the project team and contractor surveillance/management is performed at all levels.
• Project reporting is prepared monthly and presented to all project stakeholders, internal and external.
• Summary report on project progress and cost overruns where applicable are presented to the leadership team
monthly and discussed at Board meetings.
Commodity price exposure and
volatility
Oil and gas prices have seen unprecedented levels of volatility since the Russian
invasion of Ukraine in February 2022. 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.
66 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
RISK MANAGEMENT CONTINUED
PRINCIPAL RISKS CONTINUED
Risk title Risk description Key risk mitigations
Production delivery issues
As the Group’s oil and gas fields mature, well performance can become more
uncertain and the volumes and quality of oil and gas produced may differ from
what was forecast. In addition, as the Group’s offshore assets age, maintaining high
operational and production performance becomes more challenging. Therefore,
there is a risk of significant unexpected shutdowns and unplanned expenditure
which can all impact production targets. Also, uncertainties introduced by
introducing new chemicals to improve reservoir performance may have an adverse
impact on topside facility performance.
The Group may be unable to deliver oil and gas forecast production volumes
which could then undermine the Group’s overall strength and 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.
• Ongoing evaluation of process topsides including bottlenecks caused by equipment or chemistry issues to ensure
timely remediation.
• Key metrics including HES and other performance 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.
• Ongoing investment in key assets for drilling, production enhancement and equipment reliability and availability.
• Continuous engagement with JV partners and regulatory bodies directly involved with North Sea oil and
gas production.
Energy transition and
Net Zero delivery
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.
We have identified transitional risks on the route to Net Zero, 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 as a result of climate change
are also included.
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 CEO and Board.
• Progress versus targets regularly reviewed by CEO, leadership team and by Health, Safety, Environment and
Security Committee.
• Emission reduction targets linked to performance compensation.
• Emissions metrics incorporated into investment decisions.
• Emission forecasts built into annual Group planning processes, including analysis of carbon costs.
• Processes established ensuring compliance with regulatory emissions reporting requirements, including independent
verification by UKAS appointed verifier as part of UK ETS Order.
• Working towards alignment with TCFD framework, including Climate Risk Assessment.
ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022 | 67
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Risk title Risk description Key risk mitigations
Workforce recruitment and
retention
The heightened commodity prices have increased demand for key, experienced,
quality talent. 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.
A loss of mature and key personnel may conflict with the requirements of a robust
emergency preparedness organisation. 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.
Employee retention will prevent high turnover and our people strategy and
developing plans will assist in increasing employee satisfaction, retaining our best
employees. Our frameworks will allow for improved decision-making, including
paying to market and applying supplements for key roles or individuals where
appropriate, so that we attract the best qualified and skilled employees. This will
help to complement our current workforce, creating a culture of success as a high-
calibre, motivated and productive organisation where individuals feel invested in
and thrive.
Board Oversight: The Board reviews workforce planning status and initiatives
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.
• Performance management process in place with plans to enhance our annual performance reviews, linking them to
our core values.
• DE&I Committee in place with the aim to improve awareness across the organisation and create a more inclusive
environment.
• Revised recruitment policy to be more inclusive, working alongside our DE&I Committee to develop a plan with the
aim of being an employer of choice.
• Refreshed vision, values and behaviours developed in 2022 with input from a cross section of the organisation.
• Employee consultative forum providing direct access for onshore and offshore employees to senior management.
• Monthly reporting to identify patterns and trends that will mitigate potential risks to the business.
• Nurture our talent across all levels, by designing learning and development programmes that demonstrate career
growth and progression.
Supply chain capacity and
capability
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.
• Order delivery and cost overruns are monitored through pro-active contractor management and expediting of orders.
• Enhanced liaison, communication and management of key suppliers throughout capital projects lifecycle.
• Specific contractual requirements and obligations (which are stated as Special Conditions within Contracts) in relation
to (i) Data Privacy – GDRP; (ii) Information Management; and (iii) Cyber Security.
68 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
RISK MANAGEMENT CONTINUED
PRINCIPAL RISKS CONTINUED
Risk title Risk description Key risk mitigations
Governmental regulatory,
political policy and fiscal risk
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. The EPL
rate has already been increased since it was first announced, and future changes
may arise.
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.
Major compliance breach
The Group is subject to extensive legislative and regulatory requirements including
HSE, Environmental, Corporate Governance, Financial and Taxation, HR, Legal, etc.
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.
This could increase scrutiny from regulators and restrict the Group’s ability to operate
effectively impacting the overall delivery of the strategic objectives.
Board Oversight: The Board sets the expectations of compliance with legislative
and regulatory requirements and seeks regular assurance over compliance with
Group policies.
• Robust HSE policies and procedures are reviewed and approved by the Board. Regulatory portal competence and
training, together with necessary safety culture, embedded across the Group.
• Corporate compliance policies include: Anti Bribery and Corruption policy in place with training (refreshed annually),
Conflict of Interest Policy, Anti-Facilitation of Tax Evasion Policy, Anti-Money Laundering Policy, Modern Slavery and
Human Trafficking Policy, Outsourcing Process Policy, Whistleblowing Policy, Sanctions Policy, Ithaca Energy Code of
Conduct.
• Comprehensive system of internal controls over financial reporting with ongoing work to enhance and develop the
robustness of material processes and controls.
• Appropriate joint venture management and support from commercial and legal with respect to Joint Operating
Agreement/Unitisation and Unit Operating Agreement compliance.
• Procedures in place for Group breaches i.e., Disclosure Policy, Share Dealing Code, Share Dealing Procedure Manual,
Group-Wide Dealing Policy.
• Established governance committees with defined roles and responsibilities for Audit & Risk, HSE, Nomination,
Remuneration and Disclosure.
ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022 | 69
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The Directors have assessed the viability of the Group
over a three year period to 31 December 2025 (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 2024 as
set out in note 3 of the financial statements with the
additional assumption of a crude oil price of $77/bbl
and a UK NBP gas price of 128p/therm in the second
half of 2024 and a crude oil price of $73/bbl and UK
NBP gas price of 111p/therm in calendar year 2025.
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.
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 our TCFD disclosures
on pages 43 to 49.
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. The
sensitivities reflect the combined impact of reductions
in crude oil prices and UK natural gas prices of 20%
and reductions in production levels of 10% throughout
the period to 31 December 2025. In addition, a 10%
increase in both opex and capex was modelled across
the viability statement period. In these combined
downside scenarios the Group is forecast to have
sufficient financial headroom and to operate within
the requirements of its financial covenants throughout
the viability statement period in the context of the
mitigation strategies available to management.
In addition, reverse stress tests have been performed
on the base case cash flows reflecting further
reductions in commodity prices and production
volumes, prior to any mitigating actions and strategies,
to determine at what levels each would need to fall by,
whereby either lending covenants would be breached
or liquidity headroom would run out. These reverse
stress tests demonstrated that the likelihood of the
commodity price reductions or production volume
reductions which would cause either a covenant
breach or a lack of facility headroom, is remote in
the context of the mitigation strategies available to
management (see Going Concern disclosures on
pages 61 and 140).
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
64 to 68 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
that 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 2025. In reaching
our conclusion on viability, it has also been assumed
that the Group’s RBL facility 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 2025 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 30 March 2023.
ALAN BRUCE
Director
VIABILITY STATEMENT
70 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
CORPORATE GOVERNANCE
CHAIR’S INTRODUCTION
Dear Stakeholder,
I am pleased to present the Governance report for
Ithaca Energy plc for the year ended 31 December 2022,
following the Group’s admission to the London Stock
Exchange in November 2022. This section will enable you
to gain an understanding of Ithaca Energy’s governance
framework and responsibilities, and the areas of focus
and performance of the Board over the past year.
We recognise the importance of corporate governance
across the organisation and apply and report under
the 2018 UK Corporate Governance Code (the Code).
Corporate governance
The Board is committed to delivering the highest
standards of corporate governance and to maintaining
a sound framework for the control and management
of the Group. The Board holds a deep understanding
of their role and responsibilities in terms of delivering
results to shareholders and acting in accordance
with the requirements expected of a UK premium
listed company.
Immediately prior to the Group’s admission to the
premium segment of the London Stock Exchange,
Ithaca Energy assembled a world class Board of
Directors with significant oil and gas and public
markets experience. We were delighted to have
appointed John Mogford to the role of Senior
Independent Director and are already seeing the
benefits of his significant industry experience and his
rigour and independent challenge in the boardroom.
Since the new Board was establishment in late
October 2022, they have met on several occasions
to establish, discuss and prioritise the key areas of
focus for the Board, and the Group, to continue Ithaca
Energy’s success. The Group’s Non-Executive Directors
meet regularly on a one-on-one basis with members
of the leadership team and as a group of Independent
Directors without management present. On 30 March
2023, the Board approved the appointment of
Mr Itshak Sharon Tshuva, the controlling shareholder
of Delek, as a Non-Executive Director of the Company.
We welcome Mr Tshuva, and the wealth of experience
he brings, to the Board. The Board remains committed
to delivering the highest standards of corporate
governance, and while we remain in compliance with
provision 11 of the Code in relation to composition
of the Board, following Mr Tshuva’s appointment, the
Company will seek to recruit a further Independent
Non-Executive Director to the Board.
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 delivering operational
excellence while embedding the Group’s new vision and
values across the organisation, highlighting the need to
act safely in all areas of operations and to strive to be
the ‘Strength of the North Sea’.
The Group’s relationship with its major shareholder,
Delek Group Limited is rightly a key focus for the Board
in relation to establishing our corporate governance
framework. Upon admission to the London Stock
Exchange, we entered into a relationship agreement
with DKL Energy Limited, the immediate parent of
Ithaca Energy plc, to regulate the relationship between
ourselves and our majority shareholder, to ensure that
the Group operates independently and in accordance
with the highest standards of governance. Further
information in relation to the relationship agreement
can be found on page 77.
Sustainability and balancing
stakeholder interests
Our vision is to be a leading independent exploration
and production company in the UK North Sea,
balancing meeting the energy needs of the UK with
operating in a sustainable manner. Through the safe,
efficient and responsible production of our assets
we aim to maximise value for our shareholders. As a
Board, we place acting sustainably and responsibly for
the benefit or our people and our wider communities
at the heart of our strategy. 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 & 2 net equity basis.
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. As required
by s414CZA of the Companies Act 2006, we have
included a s172(1) statement on pages 32 to 36 of
this report detailing how we actively engage with all
key stakeholders of the Group. Having considered
the views of a range of stakeholders including our
shareholders, lenders, employees, suppliers and the
wider community in which we operate, the Board has
approved goals in the key areas of delivering against
our sustainability goals.
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.
Board activities during 2022
and effectiveness
As a newly established Board, we are in the early
stages of our journey in establishing our Board
activities. But with significant, UK public market
experience around the Board table we have begun
this journey in a highly effective manner, recognising
the importance of corporate governance to achieving
our goal of maximising value for our shareholders.
A summary of our key activities, since establishment
in October 2022, is set out on page 79 along with the
reports of the various Committees. In line with the
Code, a Board effectiveness review will be undertaken
by an external facilitator.
Board priorities for 2023
One of our key objectives for 2022 was to build
significant scale and longevity in our portfolio and
achieve a listing on the London Stock Exchange,
positioning the Group for future growth. Having
achieved our return to public markets, our focus now
shifts to delivering against our strategy and being
effective stewards of capital investing across our
portfolio to maximise returns to shareholders.
It has been a busy year for Ithaca Energy, and I would
like to take the opportunity to thank all of our
Directors, employees, shareholders, partners and
contractors for their continued support in our growth
and making 2022 a very successful year for the Group.
GILAD MYERSON
Executive Chairman
ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022 | 71
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WE ARE DELIGHTED TO
HAVE APPOINTED THE
BOARD OF DIRECTORS,
AS PART OF OUR RECENT
LONDON STOCK
EXCHANGE LISTING,
PROVIDING THE DEPTH
AND BREADTH OF PUBLIC
MARKET EXPERIENCE
TO STEER THE GROUP
THROUGH ITS NEXT
PHASE OF GROWTH.”
GILAD MYERSON
Executive Chairman
We have an exceptionally high-quality, complementary
and ambitious Board of Directors, supplemented
by a strong leadership team with a significant track
record, that together are well-positioned to drive the
Group forward in the pursuit of continued growth
and shareholder value creation.
As of 30 March 2023, Mr Itshak Sharon Tshuva was
appointed to the Board of Directors as a Non-Executive
Director. For further information on his appointment,
see page 74 of the Corporate Governance Statement.
GILAD MYERSON
Executive Chairman and Chair of the Nomination and
Governance Committee
ALAN BRUCE
Chief Executive Officer
Date of Joining:
January 2020
Experience & 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
Date of Joining:
October 2022
Experience & Board contribution:
Alan joined the Group in August 2021 as Chief Operating
Officer and in January 2022 assumed the role of Chief
Executive Officer. Alan brings an in-depth knowledge of
the energy industry and has significant technical and
management expertise having held leadership positions in
Subsurface, Operations, Asset Management and Business
Planning in the UK, Canada, and USA with ConocoPhillips.
His experience in strategic planning and capital allocation
has supported the transformational growth of the Group.
In previous roles, he has led organisations in delivering
improved safety and financial performance. Alan is
passionate about creating a diverse and inclusive work
environment and has implemented a programme focused
on culture within the Group.
Principal External Appointments:
Member of the board of Offshore Energy UK
Committee Membership:
Disclosure Committee
BOARD OF DIRECTORS
72 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
IAIN LEWIS
Chief Financial Officer
IDAN WALLACE
Non-Executive Director
Date of Joining:
October 2022
Experience & Board contribution:
Iain joined the Group in July 2022 and is a Chartered
Accountant with over 20 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 and insight in
midstream, infrastructure and the wider energy value
chain means that Iain is well positioned to drive cost
efficiency and long-term value as the Group CFO.
Principal External Appointments:
None
Committee Membership:
Disclosure Committee
Date of Joining:
October 2022
Experience & 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 Yitzhak 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. Mr Wallace 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 & 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 & 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 Petra Diamonds Limited, Evraz plc,
Highland Gold Mining Limited and Acacia Mining plc.
As well as being an Independent Non-Executive Director,
Deborah was 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
Committee Membership:
Audit and Risk Committee – Chair; and
Remuneration Committee
CORPORATE GOVERNANCE CONTINUED
BOARD OF DIRECTORS CONTINUED
ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022 | 73
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LYNNE CLOW
Non-Executive Independent Director and Chair of the
Remuneration Committee
ASSAF GINZBURG
Non-Executive Independent Director
JULIE MCATEER
General Counsel and Company Secretary
DAVE BLACKWOOD
Non-Executive Independent Director and Chair of the
Health, Safety, Environment and Security Committee
Date of Joining:
October 2022
Experience & 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. Lynne is
also a member of the Children’s Panel in Scotland and
a member of the Remuneration Committee for Robert
Gordons University. Lynne has a wealth of strategic and
commercial experience obtained in KCA Deutag which,
in addition to her experience on the remuneration
committee of Robert Gordons University and 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 Limited;
We Are With You; and Scottish Prison Service
Committee Membership:
Remuneration Committee – Chair; and Nomination
and Governance Committee
Date of Joining:
October 2022
Experience & Board contribution:
From 2004 until May 2020, Assaf held a number of senior
positions at Delek US Energy and Delek Logistics Partners
LP, 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 B.A. 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.
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:
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.
Date of Joining:
October 2022
Experience & Board contribution:
Dave has over 47 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
74 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
The Board is committed to the highest standards of corporate governance 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 77. 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 follows.
The Board is responsible for leading and controlling the Company and has overall authority for the management
and conduct of the Group’s business, strategy and development. The Board monitors the culture of the Group
as well as how the Group is working in line with its purpose and how it aligns with Ithaca Energy’s vision and
values. The Board is also responsible for ensuring the maintenance of a sound system of internal controls and risk
management (including financial, operational and compliance controls) and for reviewing the overall effectiveness
of systems in place as well as for the approval of any changes to the capital, corporate and/or management
structure of the Group.
The Board will meet at such times as are necessary, but not less than four times a year. We note that as of 30 March
2023, Mr Tshuva was appointed to the Board and therefore has not been included in the table of attendance to
meetings of the Board.
Table of meeting attendance since 9 November 2022
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 1/1 N/A
John Mogford 10/10 6/6 3/3 1/1 2/2
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 6/6 2/3 N/A N/A
Lynne Clow 10/10 N/A 3/3 1/1 N/A
Dave Blackwood 10/10 N/A N/A N/A 2/2
Assaf Ginzberg 9/10 5/6 2/3 1/1 1/2
Idan Wallace 9/10 N/A N/A 1/1 N/A
CORPORATE GOVERNANCE REPORT
STATEMENT OF COMPLIANCE
1. Board Leadership and Company purpose
Principles How we have applied the principle
A. A Board’s Role.
The Board’s role is to promote the long-term sustainable success of the Group. 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.
Ithaca Energy is committed to the highest standard of corporate governance and to maintaining a sound framework for the control and management of the Group. The Board of Directors hold the
Executive Chairman, the Chief Executive Officer and the Executive Leadership Team to a high standard. The Executive Chairman works with fellow Board members to ensure the highest standards of
corporate governance with a robust, comprehensive corporate framework. For more information, please see pages 71 to 73 (Board of Directors) and 78 (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.
A key focus for the Board is the continued establishment of these values within the business through the establishment of the Employee Engagement Group to be led by the Employee Engagement
Director, Lynne Clow, and 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.
For more information, please see pages 50 to 51 (Strategic Report)
C. Resources and controls
Ensuring that the Group has in place robust processes and systems is a key responsibility of the Board and the Audit and Risk Committee. In 2022, the Audit and Risk Committee undertook a review of the
in internal controls and processes and the outcomes of that review remains a key focus for 2023.
Following the establishment of the Remuneration Committee, the Board is working with the leadership team to establish new performance measurement tools in line with the Group’s visions and values.
For more information, please see pages 89 to 112 (Directors’ Remuneration Report)
D. Stakeholder engagement
The Board recognises the value that our stakeholders bring to the Group and care about the positive impact for our people, shareholders and communities. Active engagement with our stakeholders is at
the heart of Ithaca Energy’s values. The Board seeks to ensure there are numerous opportunities to engage with stakeholders whether that be one-to-one meetings with shareholders, dialogue with our
lending institutions, monthly meetings with our suppliers or town halls with our employees. For more information, please see pages 32 to 36 (Strategic Report)
E. Workforce policies
As part of the preparation for listing, a significant review of the Group’s policies and procedures was undertaken. The Board is committed to ensuring that these policies remain in line with our visions and
values. For more information, please see pages 52 to 53 (Strategic Report)
CORPORATE GOVERNANCE CONTINUED
ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022 | 75
Governance
report
Financial
statements
Strategic
report
Company
overview
2. Division of responsibility
Principles How we have applied the principle
F. Chair The Executive Chairman, Mr Myerson, is responsible for the overall effectiveness in directing the Group. Mr Myerson was appointed to the Board in January 2020, and whilst not considered as
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 significant experience of Mr Myerson to seek to ensure the ongoing commercial success of the Group. The Executive Chairman works alongside the Senior Independent Director, Mr John Mogford,
who brings a depth of experience and calibre and serves as an intermediary for the Non-Executive Directors with respect to the Executive Chairman. For more information, please see pages 71 to 73 (Board
of Directors) and 77 (other governance disclosure)
G. Board composition, independence and
division of responsibilities
The Board consists of three Executive Directors (of whom one is the Executive Chairman), five independent Non-Executive Directors who bring an independent view to the Board, one of whom acts as
Senior Independent Director and who brings significant experience and one Non-Executive Director, Mr Idan Wallace, who is not deemed independent as appointed by Delek Group Limited, the Group’s
largest shareholder and therefore complies with the Governance Code. 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 in addition to the matters reserved for the Board and delegation authorities to the CEO. For more information, please see pages
71 to 73 (Board of Directors) and 77 (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 71 to 73 (Board of Directors)
I. Company Secretary The Company Secretary provides support to the Board and its Committees to ensure they receive accurate and timely information to carry out their function effectively. Procedures have been set out in
the terms of reference to ensure that information and relevant papers are provided to the relevant members of the committees and Non-Executive Directors in a timely manner. The Company Secretary
has frequent communication with the Executive Directors and the Senior Independent Director and with other members of the Board when required. Furthermore, advice from external advisers can be
provided at the expense of the Group if required. For more information, please see pages 71 to 73 (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. It is also responsible for reviewing the succession
plans for Directors, including the Chairman and Executive Directors and other senior executives, and also oversees the development of a diverse pipeline for succession. All Directors will retire at the AGM
and may offer themselves for re-election by the shareholders. For more information, please see pages 85 to 86 (Nomination and Governance Report)
K. Skills, experience and knowledge The Board ensures that each of the Committees comprise of a number Non-Executive Directors whose skill, diversity, experience and knowledge are appropriate. For more information, please see pages 71
to 73 (Board of Directors)
L. Board evaluation The Board and Committees were established ahead of the initial listing of the Company on the Main Market of the London Stock Exchange and so it is yet to undertake an annual review.
The Directors therefore intend to put themselves up for re-election at the Company’s next Annual General Meeting (expected to be held in the second quarter of 2023) . Further, it is intended that the
Directors will continue to put themselves up for annual re-election at each further Annual General Meeting of the Company. For more information, please see pages 71 to 73 (Board of Directors)
76 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
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, the appointment, re-appointment and removal of the Group’s external auditors.
Since its establishment on 31 October 2022, the Audit and Risk Committee has met 6 times and has devoted a significant amount of time to the discussion of the Company’s internal policies and
procedures and the effectiveness of the external and internal audit functions of the Group. For more information, please see pages 80 to 84 (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 80 to 84 (Audit and Risk Committee Report) and pages 113 to 116 (Directors’ report and
Statement of Directors’ responsibilities)
O. Risk management The Board is responsible for the Group’s system of risk management system and internal controls. As part of the preparation for listing process, the Group underwent a review of its internal control
frameworks and following its’ establishment, the Audit and Risk Committee has continued to assess its principal risks and processes and internal controls framework to ensure they are appropriate and
aligned with the Board’s expectations. For more information, please see pages 80 to 84 (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 89 to 112 (Directors’
Remuneration Report)
Q. Developing executive remuneration policy Since its establishment in October 2022, the Remuneration Committee has been working to establish a Directors’ Remuneration Policy which will 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. 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 89 to 112 (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 89 to 112
(Directors’ Remuneration Report)
CORPORATE GOVERNANCE CONTINUED
CORPORATE GOVERNANCE REPORT CONTINUED
STATEMENT OF COMPLIANCE CONTINUED
ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022 | 77
Governance
report
Financial
statements
Strategic
report
Company
overview
Other governance disclosure
The Company was fully compliant with the
Governance Code since the date of listing on the
Main Market of the London Stock Exchange in
November 2022, with the exception of Provision 9
regarding the independence of the Chairman on
appointment. The Company’s Executive Chairman,
Mr Myerson, is not considered to be independent
and therefore the Company does not comply with
the requirements of the Governance Code in relation
to the requirement for the Chair to be independent
on appointment. On listing, the Board unanimously
supported, and continues to support, Mr Myerson’s
appointment. 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 the proven leadership
qualities and significant experience of Mr Myerson
to seek to ensure the ongoing commercial success
of the Group and the Board is of the view that there
is sufficient independent challenge and judgement
within the Board to ensure highly effective,
independent governance.
Relationship agreement
Delek Group Limited, through its wholly owned
subsidiary DKL Energy Limited, owns a 89%
shareholding in the Company and so is deemed
a controlling shareholder for the purposes of the
Listing Rules. As a result, the Company and Delek
Group Limited entered into a relationship agreement
dated 9 November 2022 (the Relationship Agreement)
upon the listing of the Company on the Main Market
of the London Stock Exchange, which records the
basis on which the Company and Delek regulate the
relationship between them.
Notwithstanding Delek’s position as a controlling
shareholder, the Directors believe the Company is
still able to carry on an independent business. 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 (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:
Ê Appoint one observer to the Board, the
Remuneration Committee and the Audit and
Risk Committee; and
Ê 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.
As at the current time, Itshak Tshuva (Non-Executive
Director) and Idan Wallace (Non-Executive
Director) are the Delek nominated appointed directors
and 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.
Gender Diversity
Consistent with our peers, there is gender imbalance
in technical and operations roles in our business which
we are taking steps to address. In senior management,
women represent 36% of the Leadership Team and
its direct reports. The Company recognises that there
is a need for continued focus and action to improve
representation, and has made conscious decisions
over the past year in the areas of recruitment,
promotion and career development opportunities to
accelerate progress and mitigate the imbalance.
Diversity, Equity and Inclusion
In 2022, the Company established a Diversity, Equity
and Inclusion Committee and adopted a Diversity
Policy under which the Company committed 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, equity 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.
As a newly established committee, the Company is
focused on embedding these values in the Company
and assisting with the further awareness training
which is being provided to the workforce.
78 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
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 shall be 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 Ginzberg
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 Ginzberg
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 Ginzberg
Deborah Gudgeon
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 144
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 to the individual and
the Company.
4. Health, Safety, Environment and Security
Committee
Chair: David Blackwood
Members: John Mogford
Assaf Ginzberg
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 Health,
Safety and Environment 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
Alan Bruce
Ross Mitchell
Kathryn Reid
Observers: N/A
The Board has established a Disclosure Committee,
chaired by the General Counsel and members from
the leadership team, in order to ensure timely and
accurate disclosure of all information that is required
to be so 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.
BOARD LEADERSHIP AND COMPANY PURPOSE
CORPORATE GOVERNANCE CONTINUED
ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022 | 79
Governance
report
Financial
statements
Strategic
report
Company
overview
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
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 table below sets out the matters that the Board have discussed at each meeting and the key activities
that have taken place since the listing of the Company in November 2022.
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
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
2022 performance
and budget reviews
Risk, going concern
and long-term
viability reviews
Senior debt planning
Risk
Management
Organisational
effectiveness
Debt covenants
compliance and
dividends
Directors’ duties
training
Business
Development
Opportunities
Board evaluation
and composition
Legal and HR
Updates
Principal risks analysis
Financial Reporting
DIVISION OF RESPONSIBILITIES
The Board is responsible for leading and controlling
the Company and has overall authority for the
management and conduct of the Group’s business,
strategy and development. 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
holds 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 and reports 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.
80 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
AUDIT AND RISK COMMITTEE REPORT
• Deferred tax recognition and recovery;
• Adequacy of decommissioning provisions; and
• Going concern.
Further details of these significant risks are set out on
pages 64 to 68.
The Committee comprises:
Member Date of appointment
Meetings
since IPO
Deborah Gudgeon 31 October 2022 6/6
John Mogford 31 October 2022 6/6
Assef Ginzburg 31 October 2022 5/6
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 and Mr Ginzburg is the
Chief Financial Officer of a global operator and
developer of renewable energy projects.
In addition to the Committee members, the Executive
Chairman, the Chief Executive Officer, the Chief
Financial Officer, the Company Secretary, the Assistant
Company Secretary, the Chief Accountant, the Finance
Manager, the Financial Reporting Accountant, the
Interim Head of Internal Audit, the External Audit
Partner and an independent 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 since the IPO broadly
fell into three main areas and is summarised below:
Financial reporting
• Reviewed and approved the Q3 financial
statements and trading update statement;
• Reviewed and approved the Group’s annual results
and considered the significant accounting policies,
principal estimates and accounting judgements
used in their preparation, the transparency
and clarity of the disclosures within them, and
compliance with international and other 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 the Audit and Risk Committee
report for the year ended 31 December 2022. The
Committee, as it currently stands, has been in place
since the Initial Public Offering (IPO) on 9 November
2022 and this report is primarily focused on activities
since that date.
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, 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 2022 Annual Report and Financial Statements:
• Oil and gas reserves;
• Business combinations;
• Carrying value of oil and gas assets and goodwill;
• Reviewed and assessed whether the Annual Report
and Financial Statements, taken as a whole, were
fair, balanced and understandable;
• Reviewed and approved business combination
accounting assumptions and treatments and
related disclosures;
• Reviewed and approved assumptions on
deferred taxation recognition and recovery
and related disclosures;
• 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.
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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 FY 2022;
• 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 2022 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.
Business combinations
During the year the Group made three material acquisitions. The accounting for
these acquisitions involves a significant degree of judgement including future
commodity prices and therefore the fair value of the assets acquired, deferred
taxation assets recognised and, where relevant, the fair value of contingent
consideration.
In assessing the accounting for these business combinations the Committee
reviewed and challenged:
• Management’s key assumptions for valuing the assets including crude oil
prices and UK NBP gas prices;
• Valuations of exploration and evaluation assets;
• Management’s key assumptions for decommissioning liabilities; and
• The taxation treatment of these items.
The Committee concluded that these assumptions and valuation techniques
were reasonable.
Details of these business combinations are set out in note 17 to the consolidated
financial statements.
82 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
Significant risks and judgements How the Committee addressed these risks
Carrying value of oil and gas assets (including goodwill)
Significant judgement is required in determining whether there are indications
of impairment, and if applicable and annually in the case of goodwill, 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 $89/bbl in 2023, $84/bbl in 2024 and $83/bbl thereafter
for crude oil and 315p/therm in 2023, 211p/therm in 2024 and 86p/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 the acquisitions made by the Group and the
introduction of the EPL.
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 2022.
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
$392.5 million at 31 December 2022. 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.
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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 2021.
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 $1,720.5 million at 31 December 2022.
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 61 of the Annual Report and
Financial Statements.
Internal controls and risk management
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 that identifies principal
risks and managements response; and
• Risk based internal audit programme.
This is discussed more fully on pages 62 and 63 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.
As part of the IPO process, historic financial
information was prepared for inclusion in the
Prospectus. The external auditor raised financial
control deficiency observations during this process
and a third party was engaged to support the Group
in developing a control improvement plan to address
these deficiencies. Significant progress has been made
against this plan with all the high priority observations
and the majority of the medium priority ones having
been addressed by the year-end.
The Committee receives regular updates on the
Group’s system of internal control including progress
made to the overall improvement programme and
conclusions on the design and effectiveness of
key controls mitigating financial, operational and
compliance risk. Management intends to continue to
improve the standardisation and documentation 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 effectively
as at the year-end. The Committee will continue to
oversee the improvement programme that has been
put in place to further enhance the internal control
framework.
Internal audit
In recognition of the increased scope and complexity
of the Group’s operations, and in line with best practice
and corporate governance for listed companies, the
Board appointed a plc-experienced Interim Head of
Internal Audit to assess the roles and responsibilities
of the existing internal audit function. The Committee
considered a proposal for expanding the remit of the
internal audit function to implement an approach and
plan, that going forward, will provide independent
assurance of the adequacy and effectiveness of its
governance, risk management and internal controls.
An assessment of options to resource and implement
the proposal, with the appointment of a permanent
Head of Internal Audit, is underway. The proposed
internal audit plan will be focused on the principal risks
facing the Group and take account of other providers
of assurance to avoid duplication, including the work
being completed in support of the enhancement of
internal controls over financial reporting.
84 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
During 2022, internal audit completed a review of
the Group’s Cyber Security controls; two audits were
also in progress at year-end. Additionally internal
audit facilitated the Group’s Risk Management
process and supported the review and response to
potential contractual exposures arising from Russia’s
invasion of Ukraine. Audits of Ithaca Energy’s non-
operated interests in two producing fields and a field
development were also completed.
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 2022
audit being his first 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 2022 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 next Committee
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 Deloitte acting 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.
Whistleblowing policy
The Group has a formal Whistleblowing policy (see
page 53 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.
Fair, balanced and understandable
The fair, balanced and understandable statement is
set out on page 76 of the Annual Report. In making
this statement the Committee and Directors have
taken comfort from the IPO process and the level
of diligence and other verification applied to the
information contained in the Prospectus.
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 will be reviewed by the
Committee at the next meeting, can be found on our
website.
Committee evaluation
The Committee’s performance will be considered
through the annual Board evaluation process.
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
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2022 was a pivotal year for the Group with the
inclusion of a new Board to the Company and the
establishment of the Nomination and Governance
Committee on 31 October 2022 ahead of the listing
of the Company. The main responsibility of the
Nomination and Governance Committee is to ensure
that the Board and its Committees support the
strategy of the Group by undertaking to:
• Review the structure, size and composition of the
Board (including skills, knowledge, experience
and diversity) and make recommendations to the
Board in relation to any changes;
• Ensure plans are in place for orderly succession to
the Board and senior management positions;
• Oversee the development of a diverse pipeline
for succession;
• 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;
• Keep fully informed about strategic issues and
commercial changes affecting the Group and
market in which it operates;
• Identifying and nominating candidates to the Board;
• Reviewing the results of Board performance
evaluation processes and time requirements for
Non-Executive Directors; and
NOMINATION AND GOVERNANCE REPORT
Dear shareholder,
Chair: Gilad Myerson
Members: John Mogford
Lynne Clow
Idan Wallace
Assaf Ginzberg
• Liaising with the other Committees of the Board to
ensure that there is consistency with the Group’s
strategy.
Following on from the transformational acquisitions
and listing of the Company, we launched our renewed
visions, values and behaviours framework and the
Nomination and Governance Committee endorses
the culture which the Board is looking to instil in
the workforce. The Group has a well-established
Employment Consultation Forum which is made up
of a diverse range of employees both on and offshore
which meets regularly in the year with members of the
leadership team, to provide top-down and bottom-up
communication, enabling employees to voice their
ideas as well as their concerns on issues which directly
affect them in their workplace.
In addition to this, we recently established 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 Group Limited (Delek), Delek
has nominated Mr Itshak Tshuva, the controlling
shareholder of Delek, to the Board of the Company.
as one of its two nominated directors. On 27 March
2023, the Nomination and Governance Committee
recommended the appointment of Mr Tshuva to the
Board as a Nominated Director from the Delek Group.
Mr Tshuva brings to the board extensive experience
in the international oil and gas market markets.
We welcome the appointment of Mr Tshuva as
a Non-Executive Director of the Company as of
30 March 2023.
86 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
The Nomination and Governance Committee also
recognises the requirements of Principle J of the Code
in relation to appointments to the Board promoting
the diversity of gender, social and ethnic backgrounds.
The Board will commence a recruitment process
(including appointing external advisers to assist in the
recruitment process) to find suitable candidates to
enhance not only the independence of our Board, but
bringing complementary skills and experience to the
Company.
As a newly established Nomination and Governance
Committee, we look forward to further developing
our understanding of the Group and the role that the
Committee will play in that.
For 2023, the Nomination and Governance Committee
will be focused on:
• Succession planning for the Directors and senior
management: In particular, the recruitment of
additional Independent Non-Executive Directors,
which will assist with the promotion of diversity on
our Board. We shall be appointing external advisers
to assist the Company in the search of suitable
diverse candidates to enhance our Board.
• Company strategy: The Nomination and
Governance Committee will continue to monitor
that the Company’s strategy is aligned with its
vision and values.
• On-going reviews of the terms of reference for
the committees: Throughout 2023, we will be
reviewing the terms of reference adopted by
the Committees of the Board in late 2022 to
ensure that the Committees have access to all
the information and decision-making needed to
provide efficient information to the Board and the
workforce.
• Workforce engagement: Our people are our
priority, and so in 2023, the Nomination and
Governance Committee will look to work with the
Employee Consultation Forum and the business
to undertake an engagement survey from the
workforce and further understand the objectives
and wishes of our employees and how we can
work together to bring out the best in people.
The Board and the leadership team recognise
the benefits of engaging openly with our people
through our various forums, and we have acted
on the outputs from our first engagement survey,
carried out in October 2021, with a focus on career
development. Lynne Clow has been appointed as
the Employee Engagement Director and will Chair
the Employee Engagement Group, meeting with a
representation of our workforce for their insights,
incorporating their feedback into the Board’s
decision-making and providing guidance across the
Group’s workforce engagement programme.
• Diversity, equity and inclusion: Ensuring that
our workforce bring a diverse mix of skills and
experience is key to our strategy. The Nomination
and Governance Committee will build on the work
undertaken during 2022 to establish a Diversity,
Equity and Inclusion committee and the adoption
of a Diversity Policy, 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.
GILAD MYERSON
Chair
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HSE
Committee
Highlights HSE
incidents and other HSE
matters which have
risk implications
Audit & Risk
Committees
Refers HSE risks, audit
findings or other HSE
matters
HEALTH, SAFETY
AND ENVIRONMENT
COMMITTEE REPORT
• 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.
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 2022.”
DAVE BLACKWOOD
Committee Chair
The terms of reference of the Health, Safety,
Environment and Security Committee is to:
• Review and monitor the Groups’s HSE strategy
on an annual basis;
• Evaluate the effectiveness of the Group’s
policies and systems in delivering the Groups’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 framework 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 framework;
Relationship between the HSE Committee
and the Audit and Risk Committee
88 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
LOD3 Plan
• Verification
• Well Examiner
• UK ETS Verification
• ESG External Reporting
• ISO14001
• Insurance Audits
• Independent Risk Reviews
LOD2 Plan
• Technical Authority Audits
• HES Owners of Procedures Audits
• Environmental Permit Compliance
• External Support to Procedure
Compliance
LOD1 Plan
• Self-Assurance and Monitoring
• Key MAH Controls
• Control of Work Focus
• Includes Active Monitoring
3
rd
Line of Defence
Independent Challenge
2
nd
Line of Defence
Oversight, owners of procedures
Independent to day-to-day activities
Assure/
Monitor
Assurance over
Risk Management
Core Risk
Management
Assure/
Monitor
Self
Assurance
Perform
Perform
1
st
Line of Defence
Day-to-day Risk controls
Technical and HES Lines of Defence – Self assurance and auditing
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
Figure 3 IOGP Process safety fundamentals
5. Proposed 2023 HSE Improvement Plan; and
6. Development HSE Committee annual agenda
and work plan.
As Committee Chair, I have also reviewed industry
benchmarking information regarding both operational
safety and process safety to inform the setting of our
2023 performance metrics.
Looking ahead to 2023, 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;
• Any 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; and
• Results of HSE focused audits and actions
proposed to be taken.
In 2023 we will complete further reviews of:
• Safe Operations: progress regarding control
of work improvements and embedding
improvements with regard to safety leadership
and human performance. The Committee
will also review progress with reducing
maintenance backlog.
• Occupational Health: progress with wellness
and health promotion plan.
• Environment: review of road map to GHG
emission targets, including emission reduction
projects at various stages of maturity.
• Environment: Methane policy, measuring and
management.
• Process Safety: launch of Process Safety
Fundamentals, improvements with process safety
KPIs, cumulative risk visualization.
• Assurance: in addition to HSE Audit plan, feedback
and learning from regulatory activity.
DAVE BLACKWOOD
Committee Chair
* IOGP 456 Process safety – recommended practice on key
performance indicators
The HSE committee will also review output from HSE
internal audit and reviews, which are also discussed
at the Audit and Risk Committee. The Audit and
Risk Committee retains overall responsibility for
monitoring and reviewing the effectiveness of the
Groups’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 referred to the Audit and Risk Committee.
In the first meeting of the HSE Committee held in Q4
2022, the committee reviewed:
1. 2022 HSE Performance, including operation safety
performance, environmental compliance, and
process safety event learning;
2. Planned improvements to enhance HSE & technical
auditing, including implementation of a three Lines
of Defence approach. Improvements include focus
on front line self assurance as first line of defence,
LOD 1 and also risk approach to our second line
and third line of defence LOD 2 and 3;
3. Status of process safety risks, planned
improvement regarding management of process
safety, including leadership training, process
safety Key performance indicators (KPIs),
cumulative risk tool and launch for frontline teams
of Process Safety Fundamentals (PSFs). The PSFs
are a set of basic principles for frontline teams
that emphasise existing good practices to prevent
process safety events;
4. Regulatory activity, learning and themes being
progressed in conjunction with industry bodies
Step Change in Safety and OEUK;
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DIRECTORS’ REMUNERATION REPORT
Dear shareholders,
On behalf of the Remuneration Committee (the Committee), I am pleased to present Ithaca Energy’s first Directors’ Remuneration Report (the Report) as a listed Company for the period from Admission on 9 November 2022 until
31 December 2022.
The Report is in three sections:
Section Pages
Chair’s letter to shareholders 89 to 91
Directors’ Remuneration Policy 92 to 103
Annual Report on Remuneration 104 to 112
Committee composition
The Remuneration Committee was formed prior to Admission and comprises four Non-Executive Directors (NEDs). The Committee works hard to ensure alignment with shareholder interests and that our approach to remuneration
fully supports our strategy.
Business and remuneration context
2022 was a decisive year for the Group; the three acquisitions, including Siccar Point Energy, and operational excellence enabled the Company’s listing in November 2022. Whilst a majority shareholder owning 89% of issued share
capital is a unique corporate structure, the Committee is mindful of the need to align with best practice in terms of corporate governance standards and transparency as well as Ithaca Energy’s history of private ownership.
Our ambition is to be ‘the Strength of the North Sea’ and we aim to achieve this through our strategic pillars of Buy, Build and Boost; this is underpinned by a robust financial framework and a clear focus on safety, sustainability and
our people.
In anticipation of Admission and in this context, the Company undertook a review of the remuneration policy for senior employees, including the Executive Directors (EDs), to ensure it was appropriate.
The principal objectives were to attract, retain and motivate the EDs and senior employees, incorporating incentives that align with and support the Group’s ambition and strategic pillars and the creation of long-term shareholder
value. The Policy is clear that financial, strategic and/or operational metrics, linked to our KPIs, will be used.
The Committee has, since Admission, reflected on the Company’s proposals and is pleased to put the proposed Directors’ Remuneration Policy (the Policy), pages 92 to 103, forward for shareholder approval at the 2023 Annual
General Meeting (AGM). The Policy is consistent with remuneration for other employees and includes features aligned with shareholders’ interests:
• Half of any annual bonus is deferred into shares for three years;
• A post-vesting holding period for LTIP awards gives a five-year minimum term until release;
• Malus and clawback provisions;
• An in-employment shareholding requirement and post-cessation requirement directly aligns interests of EDs with shareholders over the longer-term; and
• Company pension contributions aligned with the wider workforce.
Some legacy and one-off remuneration arrangements were in place for the EDs before the IPO, that reflected historical contractual retention agreements, to recognise performance leading up to IPO or to incentivise growth
post-IPO. Although the arrangements will be honoured, and any remuneration disclosed in the relevant Reports, they do not form part of the ongoing and regular elements of the proposed Policy. Details of the arrangements are
included in this Report for completeness.
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Company Performance
We delivered excellent financial results together with growth and business transformation in the year:
• There was strong operating cash flow and earnings (EBITDAX up 85% and free cash flow up 106%) whilst maintaining strong financial discipline (net debt/EBITDAX down 44%);
• The acquisition of Siccar Point Energy has added significant production, material growth potential and longevity to our portfolio which culminated in the successful IPO in November 2022;
• Total production increased as a result of acquisitions and improvements in asset efficiency;
• Our Serious Injury and Fatality Frequency remained at zero and there were no Tier 1 process safety events; nonetheless, we must build on the existing safety culture and reduce the number of recordable injuries and high
potential events to acceptable levels, whilst maintaining an open and transparent incident reporting ethos; and
• A renewed organisational vision, values and behaviour framework was launched in October to provide clarity on our purpose and strategy following a period of significant M&A activity.
Remuneration outcomes for 2022
These are consistent with the arrangements detailed in the IPO Prospectus.
Annual bonus
The existing 2022 annual bonus continued to operate for the remainder of the year post-IPO. The bonus was subject to the achievement of a scorecard of measures, covering health and safety, financials, operations, organisation
and growth. The maximum bonus opportunity was 50% of salary for EDs.
2022 performance resulted in an annual bonus for the EDs of 78% of their maximum opportunity, except for Gilad Myerson who was not eligible to receive a bonus given his participation in certain legacy arrangements. As detailed
in the Prospectus, the Committee determined that the existing bonus structure should remain, i.e. there would be no increase in the maximum opportunity in 2022 and any bonuses should be fully paid in cash. Deferral provisions
will only apply for any bonuses earned with effect from 1 January 2023.
The Committee considered that the bonus outcome was appropriate in terms of business performance and therefore no discretion was applied to the scorecard outcome.
Further details on the bonus outcomes are on page 106.
IPO bonuses
One-off bonuses of £50,000 were awarded in 2022 after Admission to Gilad, Alan Bruce and Iain Lewis, as part of a group of around 35 senior employees who received discretionary cash bonuses, to recognise their exceptional
contribution prior to Admission.
Management Equity Plan
Gilad participated in a Management Equity Plan (MEP), see pages 98 and 99, under which he received a contractual one-off payment of $1,000,000 for the accounting period ending 30 September 2022.
Initial share awards
Along with 30 other senior employees, an initial grant of LTIP awards was made in December 2022 to the CEO and CFO at 225% and 200% of salary respectively. Vesting of the awards is subject to performance conditions measured
over the period from 1 December 2022 to 31 December 2025.
Iain also received a one-off award,under the LTIP, at 100% of salary, which is intended to align his interests with shareholders and act as a retention mechanism. The award will become exercisable subject to continued service in
three equal tranches on the first, second and third anniversaries of Admission.
All share awards held by the EDs which vest with effect from the date of Admission will be subject to the shareholding requirements within the Directors’ Remuneration Policy.
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Executive Director remuneration for 2023
Base salary: The EDs will not receive a base salary increase and their salaries are shown on page 112. The average increase for the wider workforce was 5.6%.
2023 Annual bonus and LTIP opportunities:
Annual Bonus
1
Target Opportunity
Maximum
opportunity
LTIP opportunity
2
Executive Chair 75% 150% –
CEO 75% 150% –
CFO 75% 150% –
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 112.
2 It is proposed that the next LTIP awards will be made in the first half of 2024. Gilad is not eligible to participate in the LTIP whilst unvested awards remain in certain legacy arrangements.
As a Committee we were mindful, when considering metrics for the 2023 annual bonus, of our desire to grow sustainably. The inclusion of safety, emissions, production and operating expenditure metrics directly support this
goal. Performance against the financial and strategic metrics will be a measure of the value we deliver for our shareholders. The Committee will continue to review the bonus and LTIP metrics during 2023, to ensure they remain
appropriate and in line with delivering the business plan.
Conclusion
The Committee looks forward to engaging with shareholders and stakeholders on an ongoing basis and welcomes any feedback or comments on the Directors’ Remuneration Report. I look forward to seeing shareholders at the
upcoming AGM.
Lynne Clow
Chair of the Remuneration Committee
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DIRECTORS’ REMUNERATION POLICY
This Policy will govern Ithaca Energy’s future remuneration for EDs and NEDs, and is intended to apply for up to three years from the date of the AGM on 24 May 2023, subject to approval by shareholders.
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 100).
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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.
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.
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.
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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 150%
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 225% 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.
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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 following shareholding:
• CEO and Executive Chair: 225% of base salary
• Other EDs: 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.
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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.
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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, around 30 individuals participated in 2022, 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
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DIRECTORS’ REMUNERATION REPORT CONTINUED
Legacy Policy provisions
The Company may honour any outstanding remuneration commitments entered into with current or former Directors (as disclosed to shareholders) before the IPO, before this Policy took effect or before the individuals become
Directors, even where not aligned to this Policy.
The following arrangements were put in place for Directors prior to or at IPO and may give rise to payments post the approval of this Policy. All were disclosed in the IPO prospectus and any payments under these arrangements will
be disclosed in future Reports.
Success-based compensation
• Since July 2021, Gilad has been entitled to compensation linked to a successful outcome of a historic claim relating to an acquisition. Payment is up to 1.8% of any net proceeds received and is subject to his being in service at the
date of payment and not being under notice.
• Idan Wallace, the CEO of the Delek Group and a NED of the Company, is entitled to a payment of up to 1% of any net proceeds in respect of the same claim on the same terms as Gilad.
• The Company reached agreement on the settlement in February 2023, triggering a payment, which will be disclosed in the 2023 Report.
Management Equity Plan (MEP) awards
• In July 2021 Gilad was granted an award of shares in the Company which, on Admission, were converted into 1,822,286 Ordinary Shares at a value equal to 1.3% of the market value of the Company above a fixed hurdle of $2.5
billion (the Hurdle). These were split into 1,401,758 B1 Ordinary Shares (1%) and 420,528 B2 Ordinary Shares (0.3%). The MEP Shares will be released annually from their restrictions over a five-year period as follows:
Release Date B1 Ordinary Shares
1
B2 Ordinary Shares
1
1 October 2022 15% –
1 October 2023 15% –
1 October 2024 15% 45%
1 October 2025 15% 15%
1 October 2026 40% 40%
1 or Ordinary Shares received in respect of the B1 or B2 Ordinary Shares
• On each vesting date, Gilad may receive further Ordinary Shares so as to ensure that the aggregate value of the original number of MEP Shares granted is maintained at 1.3% of the value of the Company above the Hurdle.
• Whilst any of the MEP Shares remain unvested, Gilad will not be eligible to participate in the LTIP.
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The following treatment applies in the event of termination of employment in various circumstances:
Exit circumstance Treatment
Bad leaver: fraud, gross misconduct, conviction of a criminal offence or voluntary resignation prior to
1 September 2023
All MEP Shares, whether vested or unvested, are subject to transfer back to the Company for nominal payment.
As a result of involvement from an activist minority shareholder 50% of unvested shares and 100% of vested shares are retained.
Change of control of the Company, material disposal or termination of employment before 1 October 2023
1
One-off payment in lieu of all shares of $9 million, minus any bonuses received after 29 September 2022
(including a $1m one-off bonus payment made in respect of 2022).
2
Good leaver: any other reason Unvested shares are subject to transfer back to the Company for nominal payment.
Vested shares are retained based on the date of cessation as follows:
• Prior to 1 October 2024: 40% of B1 Ordinary Shares;
• Between 1 October 2024 and 30 September 2025: 60% of all Ordinary Shares;
• Between 1 October 2025 and 30 September 2026: 80% of all Ordinary Shares; and
• After 30 September 2026: 100% of all Ordinary Shares.
1 If such an exit has not occurred by this time, Gilad may elect to receive the one-time payment.
2 The payment is in lieu of all MEP Shares, which must be transferred back to the Company for nil payment. The payment is intended to operate as a floor on the value that Gilad 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.
Option awards
• Both Gilad and Alan were granted one-off options on 21 July 2021.
Ê Gilad’s award, 2,337,931 options in total, vested in full on Admission.
Ê 2,337,931 options are held by Alan; 20% of these vested on Admission and the remaining 80% will vest and become exercisable over a four-year period i.e. 20% on each anniversary of grant.
• Under the terms of both awards, dividend equivalents will be payable on any options that have vested but not been exercised.
• Iain received a one-off grant of 120,000 nil-cost options in December 2022 (100% of salary, based on the share price at Admission) (At-IPO Award). The award is intended to enable Iain to build up his shareholding over the
period following Admission and will become exercisable subject to continued service in three equal tranches on the first, second and third anniversaries of Admission. The value of the shares as at grant was £234,720 based on
the closing share price of £1.956 on 21 December 2022.
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Illustrations of the application of the Policy
The charts which follow illustrate the remuneration that would be paid to the Executive Chair, CEO and 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
0
£0.50m
£1.00m
£1.50m
£2.00m
£2.50m
Minimum On-target Maximum Maximum with
50% Share Price
apprecia�on
56%56%
39%
£0.60m
£0.97m
£1.34m £1.34m
100% 61% 44% 44%
56%56%
39%
Chief Executive Officer
0
£0.50m
£1.00m
£1.50m
£2.00m
£2.50m
Minimum
On-target
Maximum
Maximum with
50% Share Price
apprecia�on
25%
30%
24%
55%
46%
37%
£2.42m
£1.97m
£1.22m
£0.48m
20%24%39%100%
Chief Financial Officer
0
£0.50m
£1.00m
£1.50m
£2.00m
£2.50m
Minimum
On-target
Maximum
Maximum with
50% Share Price
apprecia�on
21%26%41%100%
32% 26%
53%
42%
25%
34%
£1.71m
£1.41m
£0.89m
£0.36m
Key Element Minimum performance On-target performance Maximum performance Maximum performance with 50% share price growth
Fixed remuneration 2023 base salary, benefits and pension 2023 base salary, benefits and pension 2023 base salary, benefits and pension 2023 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 150% of base salary for all EDs
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 225% of base salary for the CEO and 200% of salary for the CFO.
4 Whilst Gilad has unvested shares in the MEP he is not entitled to an LTIP award and the scenario charts reflect this position.
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.
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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.
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 CEO and CFO, given their relatively short tenure, the following time-bound conditions apply:
• If the CEO’s employment is terminated prior to 8 August 2023 as a result of the IPO, then a sum equivalent to three years’ base salary would become payable.
• 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.
102 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
CORPORATE GOVERNANCE CONTINUED
DIRECTORS’ REMUNERATION REPORT CONTINUED
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.
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
Salary (CEO only) • If there is a change of control before 16 August 2024 and the Company terminates the CEO’s employment as a result of the change of control within nine months, then a sum of three years’
base salary becomes payable.
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 have entered into letters of appointment with Ithaca Energy which last for an initial period of three years and are subject to annual re-election. As at 31 December 2022, the unexpired term of the letters of appointment
is two years and 10 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.
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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.
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 (page 103); the ratio of CEO pay to that of employees
(page 104); spend on pay compared with, for example net income and dividends (page 104); and gender pay gaps. The Committee also reviewed the advice the Company received prior to Admission on executive remuneration
matters from FIT Remuneration Consultants LLP (FIT), which included 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 prior to IPO regarding the proposed remuneration packages for EDs. The Committee welcomes an open dialogue with its shareholders on all aspects of remuneration.
104 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
CORPORATE GOVERNANCE CONTINUED
DIRECTORS’ REMUNERATION REPORT CONTINUED
ANNUAL REPORT ON REMUNERATION
This section of the report sets out how Ithaca Energy has implemented its proposed Policy and legacy arrangements for EDs since Admission in November 2022. This is in accordance with the requirements of the Large & Medium
Sized Companies and Groups (Accounts and Reports) Regulations 2008 (as amended).
The full terms of reference for the Committee can be found on the Company’s website at https://www.ithacaenergy.com/ 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.
Date of appointment Meetings since IPO
Lynne Clow
1
31 October 2022 3/3
Assaf Ginzburg 31 October 2022 2/3
Deborah Gudgeon 31 October 2022 2/3
John Mogford 31 October 2022 3/3
1 Chair from 31 October 2022. Lynne has been Chair of the Remuneration Committee at Robert Gordon University since August 2020.
The Committee met three times during 2022.
The Company’s Executive Chair attended all meetings of the Committee. The Group General Counsel and General Manager, Business Affairs acted as secretary to the Committee. The Chair of the Committee reported to subsequent
meetings of the Board on the Committee’s work and the Board received 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 and
the Head of People and Culture.
No person was present during any discussion relating to their own remuneration.
Prior to Admission, the Company appointed FIT to provide advice on executive remuneration matters and views on shareholder perspectives as part of the review of its Remuneration Policy for senior employees, including EDs.
From January 2023, PricewaterhouseCoopers LLP (PwC) were approved by the Committee and appointed as its advisers. The Committee regularly reviews and satisfies itself that the advice received is independent and objective.
The Committee notes that both FIT and PwC are members of the Remuneration Consultants Group and voluntarily adhere to its Code of Conduct in relation to executive remuneration consulting in the UK. Pinsent Masons LLP
(Pinsent), appointed by the Company, provided advice on share incentive plan-related matters, including on senior executive remuneration issues.
During the year, FIT were paid £35,000 and Pinsent Masons LLP were paid fees of £48,000 for their advice to the Company and Committee on these matters. Fees were charged on a time-spent plus expenses basis. Other services
provided to the Company by Pinsent 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.
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Committee Activities during 2022 since Admission
Senior Management pay decisions
• Reviewed and approved the grant of awards under the Company’s Long Term Incentive Plan (LTIP) to senior managers including two of the EDs.
• Approved Gilad’s partial exercise of a share option (granted in 2021) and the accelerated payment of his contractual payment under the MEP (to have been paid in April 2023). This was permitted, on an exceptional basis, so that
Gilad could meet the tax liability on exercise, without needing to sell any shares. This would help mitigate any risk of a decrease in the Ithaca Energy share price arising directly from such a sale.
Incentive and share plan operation
• Reviewed and approved the Company’s Annual Bonus Plan rules.
• Reviewed and approved the rules of the Company’s Deferred Share Bonus Plan, the LTIP and the Company’s Share Incentive Plan.
• Approved the establishment of an employee benefit trust to facilitate the acquisition of Company Shares so that liabilities under share plan awards could be met.
Single total figures of remuneration (audited)
Executive Directors
1,2
Base Salary
£’000
Benefits
3
£’000
Annual bonus
£’000
LTIP
£’000
Pension
4
£’000
Other
5
£’000
Total
£’000
Total Fixed Pay
£’000
Total Variable Pay
£’000
Gilad Myerson 458 79 – – 60 7,229 7,826 597 7,229
Gilad Myerson (2021) 257 43 – – 35 763 1,098 335 763
Alan Bruce 91 2 36 – 12 5,895 6,036 106 5,930
Alan Bruce (2021) – – – – – – – – –
Iain Lewis 68 2 27 – 9 285 391 80 311
Iain Lewis (2021) – – – – – – – – –
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 2021 figures for Gilad are for the period from 19 April 2021, the date from when he started to receive remuneration as a Director of the Company.
3 Benefits includes the cost, where relevant, of private medical insurance, accommodation, travel and car allowance. Benefits with a value over £5,000 include: Gilad’s car allowance (£9,300) and the gross taxable value of expenses relating to accommodation, travel and subsistence incurred whilst
travelling on company business (£68,000).
4 Pension provision is 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 IPO prospectus:
Gilad (2022): value of 2,337,931 nil-cost options (awarded July 2021) and the value of 210,263 MEP shares (15% of the B1 Ordinary Shares under the MEP, see page 98), both of which vested on Admission (using Admission share price of £2.50), 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).
Gilad (2021): a contractual payment of $1,000,000 as part of the MEP (using the exchange rate at the time of payment in March 2022 of GBP 1 = USD 1.31)
Alan: value of 2,337,931 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. Also included is a one-off IPO bonus (£50,000).
Iain: 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).
106 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
CORPORATE GOVERNANCE CONTINUED
DIRECTORS’ REMUNERATION REPORT CONTINUED
2022 Annual bonus outcomes
The annual bonus arrangements that existed prior to IPO continued to operate for the remainder of 2022. The maximum bonus opportunity for the CEO and CFO in 2022 was 50% of salary and subject to a qualitative assessment of
achievements against a scorecard of measures. Any bonus earned in respect of 2022 is payable in cash following the year-end.
Performance against scorecard (audited)
Category Achievement Weighting Outcome Contribution
HSE
• No Tier 1 process safety events and zero SIF-F; greater focus required on recordable injuries and high potential events
• Control of work audit completed, rolled out Institute of Oil & Gas Producers Life Saving Rules
• Strengthened onshore and offshore HSE capability
20% 35% 7%
Organisation
• Launched refreshed vision and values in Q4
• Strengthened organisational capability through key senior leadership team appointments
• Enhanced process and procedures in support of IPO
20% 90% 18%
Operations
• Operated production at 71,403 boe/d
• Captain EORII and Abigail project progressed in line with plan
• Operated assets production efficiency at 89%
20% 70% 14%
Financial
• EBITDAX at $1,916.2 million up 85.1%
• Unit operating expenditure $19.0/boe
• Cost reduction initiatives helped offset inflation in fuel and emissions relative to budget
20% 95% 19%
Growth
• Three acquisitions completed, including stakes in long life assets such as Cambo, Rosebank, Scheihallion, Mariner and Jade
• Completed Captain development drilling programme and sanctioned Alba 2023 campaign
• Successful IPO in November
20% 100% 20%
Overall outcome 100% 78%
Performance in each category was assessed out of 100% and multiplied by the category weighting to give a contribution to the total scorecard.
Bonus outcomes for EDs
Bonusable salary
1
£
Maximum bonus
% of salary Scorecard
Outcome
% of salary
Annual bonus
value £
Alan Bruce £91,282 50% 78% 39% £35,600
Iain Lewis £68,462 50% 78% 39% £26,700
1 Bonusable salary relates to the period served as a Director during the performance year; both Alan and Iain served from 10 October 2022.
2 Under the terms of the MEP, no annual bonus was payable to Gilad for 2022.
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 the Committee was of the view that these outcomes are appropriate
and no discretion was exercised.
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LTIP vesting in respect of performance period ending 2022
Not applicable
Awards granted during 2022 (audited)
Awards granted since IPO in 2022 under the LTIP are conditional upon the Policy and the LTIP rules being approved at the 2023 AGM. Awards were:
Date of award Award type
1
Basis of award Face value of award
4
Vesting for threshold/
maximum performance End of performance period End of vesting/holding period
Alan Bruce 21 Dec 2022 LTIP
2
225% of salary £900,000 25%/100% 31 Dec 2025 21 Dec 2027
Iain Lewis 21 Dec 2022 LTIP
2
200% of salary £600,000 25%/100% 31 Dec 2025 21 Dec 2027
21 Dec 2022 One-off LTIP
3
100% of salary £300,000 N/A N/A 9 Nov 2025
1 Awards may include additional shares (or, at the discretion of the Committee, cash) equivalent to the value of the dividend roll-up.
2 LTIP awards granted as nil-cost options, which will vest and become exercisable when the Committee determines whether the performance conditions have been met. The shares from any options exercised cannot be sold until after five years from the grant date, except to meet any tax liability.
3 Iain’s one-off award was granted as nil-cost options, which will become exercisable subject only to continued service in three equal tranches on the first, second and third anniversaries of Admission.
4 Face value of the awards has been calculated using a share price of £2.50, the Admission share price. The closing share price on 21 December 2022 was £1.956.
Targets for 2022 LTIP awards
The 2022 targets are provided below.
Category Weighting Metric Weighting
Threshold
1
(25% vesting)
Maximum
(100% vesting)
TSR 50% TSR versus comparator group
2
50% Median
Upper quartile
or above
Balanced scorecard 50%
Safety and Environment Aggregate Tier 1 and 2 process safety events 5% 6 2
Average gross operated emissions intensity (kg CO
2
e/boe) 5% 23.9 19.6
Operational
3
Cumulative Reserves Replacement Ratio
3
10% 100% 150%
Average Production (kboe/d) 10% 72.3 88.3
Financial
3
Cumulative Group Adjusted EBITDAX
3
20% $5.0bn $6.0bn
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, Aker BP, Apache Corp, Capricorn Energy, Diversified Gas & Oil, DNO, Energean, EnQuest, Genel Energy, Harbour Energy, Hibiscus, Kosmos Energy, Marathon Oil, Maurel & Prom, Murphy Oil, Okea, Orron Energy, Santos,
Seplat Energy, Serica, Tullow Oil and Vermillion Energy.
3 Targets for these metrics are cumulative over the performance period.
Payments to past Directors (audited)
No payments were made to past Directors during the year.
Payments for loss of office (audited)
No payments for loss of office were made during the year.
108 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
CORPORATE GOVERNANCE CONTINUED
DIRECTORS’ REMUNERATION REPORT CONTINUED
Remuneration for Non-Executive Directors (audited)
The table below sets out the total remuneration earned by each NED who served during 2022 since their appointment date:
Non-Executive Directors
1
Fees
2022
£’000
Benefits
2022
£’000
Other
3
2022
£’000
Total
2022
£’000
Fees
2021
£’000
Benefits
2021
£’000
Total
2021
£’000
David Blackwood 24 — 50 74 – – –
Lynne Clow 24 — 50 74 – – –
Assaf Ginzburg 24 — 50 74 – – –
Deborah Gudgeon 24 — 50 74 – – –
John Mogford 26 — 100 126 – – –
Idan Wallace
2
— — — — – – –
1 All NEDs were appointed with effect from 31 October 2022; fees and benefits since this date are shown.
2 Idan Wallace, CEO of Delek, was appointed to the Board on 10 October 2022. He receives no additional fee from Delek for his Directorship of the Company.
3 Represents the value of the shares that each NED subscribed to on Admission, using the Admission share price of £2.50.
Percentage change in remuneration of the Directors
Gilad was the only individual to serve as a Director for the whole of the year. As the other Directors did not serve for the whole year they have been excluded from this table, but will be included going forward. The change in Gilad’s
salary, bonus and benefits and that of the wider workforce is set out below.
2021-22
Salary
2
Benefits
3
Bonus
4
Executive Chair
Gilad Myerson 11.1% 28.6% 6.2%
All UK-based employees
1
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 2021 and 31 December 2022 has been used to calculate the change in remuneration.
2 Gilad’s salary increased from £450,000 as interim CEO to £500,000 as Executive Chair.
3 The change in benefits value for Gilad reflects the increase in the gross taxable value of travel-related expenses incurred whilst travelling on company business during 2022. The increase for UK employees is mainly due to the harmonisation of benefits in 2022.
4 The increase in bonus for Gilad reflects the IPO bonus of £50,000 paid in 2022 in addition to the contractual payments under the MEP for 2021 and 2022.
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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)
2022 Option B 65:1 57:1 44:1
• Option B, using Gender Pay Gap (GPG) reporting data, was chosen to calculate the CEO pay ratio as it was the most practical approach given the timeframe between date of Admission and the end of the financial year. Under this
approach the employees at the quartiles were identified using the April 2021 GPG snapshot data. 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 Company will review the methodology for future years to ensure that the employees identified at the quartiles and their remuneration are as representative as possible.
• The single figure for Alan (£6,036,535) was used to calculate the ratio; this was in respect of service since his appointment as a Director on 10 October 2022 and included the value of some legacy arrangements. As a
consequence, the ratio may not be representative of what would be seen in a typical year. An additional ratio has, therefore, been provided on the basis of Alan being CEO and a Director for all of 2022 and receiving ‘on target’
remuneration, i.e. fixed pay and variable pay at 50% of maximum opportunity (bonus and LTIP vesting at 75% and 112.5% of salary respectively).
Year P25 (lower quartile) P50 (median) P75 (upper quartile)
2022 (illustrative based on notional ’target’ remuneration) 13:1 11:1 9:1
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)
Salary
1
£69,309 £79,180 £95,797
2022 Total remuneration £93,279 £106,611 £138,669
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 net income, dividends paid to shareholders and share buybacks, compared to overall spend on pay in total. Net income is shown, as this is one of the Group’s key measures of performance.
2022
$m
2021
$m
Adjusted net income 462.8 415.5
Ordinary dividends paid to shareholders — —
Share buybacks — —
Total staff costs 99.2 77.2
110 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
CORPORATE GOVERNANCE CONTINUED
DIRECTORS’ REMUNERATION REPORT CONTINUED
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
Released
and held
in trust
1
Vested but not
exercised
2
Unvested and
subj. to continued
employment
3
Unvested and
subj. to perf.
conditions
4
Shareholding
requirement
(% of salary)
Current
shareholding
5
(% of salary) Requirement met
Gilad Myerson 3,225,045 210,263 935,172 — 1,612,023 225% 1480% Yes
Alan Bruce — — 467,586 1,870,345 360,000 225% 561% Yes
Iain Lewis — — — 120,000 240,000 200% 38% No
1 Represents Gilad’s MEP shares which were released from their restrictions on Admission.
2 Options granted to Gilad and Alan in July 2021 which vested on Admission, but have not yet been exercised.
3 These are options granted to Alan in July 2021 which will vest and become exercisable over a four-year period i.e. 20% on each anniversary of grant and the At-IPO award granted to Iain in December 2022.
4 These represent the balance of Gilad’s MEP shares at 31 December 2022, and the LTIP awards granted to Alan and Iain in December 2022.
5 Current shareholding has been calculated using shares held (beneficially or in trust), and options (on a net of tax basis) that are vested, or unvested and subject to continued employment, using a share price of £1.829, the closing share price on 30 December 2022.
NED shareholdings (audited)
NEDs
Shares held at
31 Dec 2022
Shareholding requirement
(% of fees)
Current shareholding
1
(% of fees) Requirement met
David Blackwood 20,000 100% 49% No
Lynne Clow 20,000 100% 49% No
Assaf Ginsburg 20,000 100% 49% No
Deborah Gudgeon 20,000 100% 49% No
John Mogford 40,000 100% 98% No
1 Current shareholding has been calculated using shares held (beneficially or in trust) using a share price of £1.829, the closing share price on 30 December 2022.
There were no changes to the EDs or NEDs interests in Ithaca Energy Shares during the period 1 January 2023 to 29 March 2023.
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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 0.94% of the
Company’s total issued share capital on 31 December 2022.
Statement of voting at AGM
There is no historical voting to disclose on Directors’ remuneration as the 2023 AGM will be the Company’s first as a publicly listed company. AGM voting outcomes will be disclosed in future Reports.
Approach to NED fees for 2023
NED fees are reviewed annually and were set prior to Admission
Role Fee from 1 January 2023 Fee from 14 November 2022
Board membership fee £75,000 £75,000
Additional fees paid:
Senior Independent Director £30,000 £30,000
Committee Chair
1
Audit & Risk, Remuneration, HSE £20,000 £20,000
1 Gilad’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.
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.
0
50
100
150
96.72
73.16
Ithaca
TSR (rebased to 100)
FTSE 350 Oil & Gas
09/11/2022 31/12/2022
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:
2022
Annual bonus payout (as a % of maximum opportunity) 78%
LTIP vesting (as a % of maximum opportunity) —
Group CEO single figure of remuneration (£000)
1
6,036
1 Remuneration earned since appointment as a Director of the Company, 10 October 2022
112 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
CORPORATE GOVERNANCE CONTINUED
DIRECTORS’ REMUNERATION REPORT CONTINUED
Implementation of Policy in 2023
The implementation of the Policy will be consistent with that outlined in the Policy table on pages 93 to 103
Remuneration element Implementation Performance Category (weighting) Metric (weighting)
Salary
Executive Chair £500,000 (0% increase)
CEO £400,000 (0% increase)
N/A N/A
CFO £300,000 (0% increase)
Annual bonus
Maximum 150% of salary
Health, Safety and Environmental (25%)
• Tier 1 & Tier 2 process safety events (15%)
One-year performance
• Emissions plan (10%)
50% paid as cash
Operations (35%)
• Production (17.5%)
50% deferred into shares for three years
• Total operating expenditure (17.5%)
Growth (10%) • Reserves maturation (10%)
Financial (20%) • Free cash flow (20%)
Strategic (10%)
• Strategy (10%)
LTIP The next award is anticipated to be made in 2024
LYNNE CLOW
Remuneration Committee Chair
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DIRECTORS’ REPORT
The Directors present their annual report together with
the audited Group and Company financial statements
for the year ended 31 December 2022.
Directors
The Directors’ biographical details are set out on
pages 71 to 73.
Changes to the Directors during the year and up to
the date of this report are set out in the table.
Each of the Directors of the Company will
offer themselves for re-election at the Annual
General Meeting.
Name Role Effective date of resignation or appointment
Resignations
Leora Pratt Levin Non-Executive Director 10 October 2022
Appointments
Alan Bruce Executive Director, Chief Executive Officer 10 October 2022
Iain Lewis Executive Director, Chief Financial Officer 10 October 2022
Idan Wallace Non-Executive Director 10 October 2022
John Mogford Independent Non-Executive Director, Senior Independent
Director
31 October 2022
Deborah Gudgeon Independent Director 31 October 2022
Lynne Clow Independent Director 31 October 2022
Assaf Ginzberg Independent Director 31 October 2022
Dave Blackwood Independent Director 31 October 2022
Itshak Sharon Tshuva Non-Executive Director 30 March 2023
Julie McAteer Company Secretary 3 October 2022
114 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
DIRECTORS REPORT CONTINUED
Capital Structure
1. Share capital
The issued share capital of the Company comprises
of 1,006,564,976 Ordinary Shares. The Ordinary
Shares are fully paid and freely transferable. The
Ordinary Shares have a nominal value of £0.01. 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 26.
The Company did not purchase any of its own shares
during 2022 or up to and including 30 March 2023,
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) as at 31 December 2022 are
as follows:
– Chase Nominees Limited (2.66%)
– Hanover Nominees Limited (1.67%)
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 2022, 2,836,660 awards had
been granted under the LTIP. Details of the share based
awards are set out in note 33 to the consolidated
financial statements.
Dividends
The Board did not propose a dividend for 2022.
The Directors paid a dividend of $133 million to the
shareholders on 9 March 2023.
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.
Political donations
No political donations were made during this
financial year.
Directors’ Interests
The interests of the Directors in the Ordinary Shares
of the Company as at 31 December 2022 are shown
below:
– Gilad Myerson: 3,225,045 ordinary shares
– John Mogford: 40,000 ordinary shares
– Deborah Gudgeon: 20,000 ordinary shares
– Lynne Clow: 20,000 ordinary shares
– Assaf Ginzberg 20,000 ordinary shares
– Dave Blackwood: 20,000 ordinary shares
Annual General Meeting
The Company anticipates to hold the inaugural
Annual General Meeting of the Company on 24 May
2023. Notice of the AGM, together with details of all
resolutions which will be placed before the meeting
will be published in due course.
CORPORATE GOVERNANCE CONTINUED
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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
30 March 2023
Information elsewhere in the Annual Report
In accordance with section 414C(11) of the Companies
Act 2006, the Directors have chose to set out certain
information required to be included in the Directors’
Report (including in relation to the information
required to be disclosed by Listing Rule 9.8.4 R), in
the Strategic Report and notes to the consolidated
financial statements, including:
• Financial Risk Management, see note 29 of the
financial statements;
• Subsequent Events since 31 December 2022, see
note 34 of the financial statements;
• Future developments and research and
development, see our strategy in action on pages
24 to 29;
• Disabled employees see our ESG Report on pages
51 and 52;
• Employee engagement, see Our Stakeholders an
ESG Reports on pages 33, 51 and 52;
• Greenhouse Gas Emissions, Energy Consumption
and Energy Efficiency, see page 49 of the Strategic
Report;
• Interest capitalisation, see note 9 of the financial
statements; and
• Waiver of emoluments, see page 111 of the
Directors’ Remuneration Report.
116 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
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 76 of the Annual Report.
Each of the Directors, whose names and functions
are set out in Board of Directors on pages 71 to 73,
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 30 March 2023 and is signed on
its behalf by:
ALAN BRUCE
Chief Executive Officer
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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 ‘parent company’) and its subsidiaries (the ‘group’) give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 December 2022 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 parent 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 and parent company statements of financial position;
• the consolidated and parent company statements of changes in equity;
• the consolidated cash flow statement; and
• notes 1 to 34 of the consolidated financial statements and notes 1 to 8 of the parent 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 parent 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 parent 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 parent 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 parent company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
118 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF ITHACA ENERGY PLC CONTINUED
3. Summary of our audit approach
Key audit
matters
The key audit matters that we identified in the current year were:
• Acquisition accounting
• Carrying value of oil and gas assets and goodwill
• Decommissioning provision
• Deferred tax asset recognition and recoverability
Materiality
The materiality that we used for the group financial statements was $40m which represents 2.1% of Adjusted Earnings Before Interest, Tax, Depreciation, Amortisation and Exploration (EBITDAX)
1
and
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 assets, liabilities, income and expenses are subject
to a full scope audit.
1 Adjusted EBITDAX is a non GAAP measure comprising profit before tax, net finance costs, 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, gain on bargain purchase and transaction costs.
4. Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Our evaluation of the directors’ assessment of the group’s and parent company’s ability to continue to adopt the going concern basis of accounting included:
• assessing the financing facilities including nature of facilities, repayment terms and covenants;
• considering the linkage to business model and short-term risks;
• challenging the assumptions used in the forecasts, in particular commodity prices, production levels, capital expenditure (including consideration of any discretionary capex) 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 capital expenditure and consideration of reverse stress tests;
• 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;
• 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 parent 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.
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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. Acquisition accounting
Key audit
matter description
The group recorded a gain on bargain purchase of $1,335m in the consolidated statement of profit or loss mainly from the following transactions completed during the year:
• Marubeni acquisition which completed on 4 February 2022 – $620m gain on bargain purchase; and
• Siccar Point acquisition which completed on 30 June 2022 – $704m gain on bargain purchase.
A key audit matter in respect of accounting for the acquisitions was identified with specific focus on:
• Valuation of acquired development and production oil and gas assets, with focus on:
Ê commodity price forecasts adopted in the fair valuation of the assets acquired and valuation of certain elements of the contingent consideration which are subject to management estimation;
Ê judgements and estimates made on reserves and resources, which were based on estimates made by management’s third party reserves consultants with a risking adjustment then applied by
management;
Ê appropriateness of the discount rate utilised in the fair value model;
Ê the completeness of identified assets and liabilities in the context of the significant gain on bargain purchase recognised; and
Ê appropriateness of the deferred tax assets recognised;
• Contingent consideration fair value measurement judgements made in respect of both acquisitions, including the impact of forecast commodity prices and assumptions over future development
activity; and
• Valuation of the $707m exploration and evaluation assets acquired from Siccar Point, mainly in respect of the Rosebank and Cambo fields. These assets are subject to significant management
judgement on:
Ê the risking of contingent resources, which require consideration of the likelihood of final investment decisions and execution of complex development plans to progress the assets to development
stage; and
Ê forecast commodity prices and discount rates as outlined above.
The importance of the success of the acquisitions to the group’s growth strategy also gives rise to the risk of management bias in determining the fair value of the assets and liabilities acquired and the
resulting gain on bargain purchase, therefore this gives rise to a potential fraud risk in the period.
Further details of this matter have been disclosed in the Audit and Risk Committee report on page 81, in the “Critical accounting judgements” disclosure in note 3 of the financial statements and in note
17 of the financial statements.
120 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF ITHACA ENERGY PLC CONTINUED
5.1. Acquisition accounting continued
How the scope
of our audit
responded
to the key
audit matter
Our procedures on each of the acquisitions involved:
Procedures on internal control and valuation of acquired oil and gas assets
• Obtaining an understanding of relevant controls over accounting for acquisitions;
• Assessing the appropriateness of management’s forecast commodity prices, through benchmarking against forward curves, peer information and market data;
• Obtaining input from our valuations specialists to assess management’s discount rate by comparison to an independent range;
• Comparing management’s production profiles against those of an external reserves consultant appointed by management;
• Assessing the competence, capabilities and objectivity of management’s reserves specialist;
• Obtaining input from our internal reserves specialists to challenge and assess the plausibility of the reserves and resources estimated by management and management’s third party reserves
consultant and the appropriateness of management’s risking levels applied to the resource estimates;
• Testing the integrity/mechanical accuracy of the fair value cashflow models;
• In respect of the Siccar Point acquisition, assessing with the assistance of our tax and valuation specialists the appropriateness of management’s estimate of the impact of the Energy Profits Levy
(EPL) on the fair value model; and
• Obtaining input from our tax specialists to challenge the appropriateness of the tax restructuring assumptions made by management in assessing whether a deferred tax asset can be recognised
under IAS 12, including assessing the feasibility of management’s restructuring plans.
Contingent consideration
• Evaluating the valuation of the contingent consideration recognised and assessing whether this is consistent with other judgements made as part of the purchase price allocation; and
• Assessing the appropriateness of management’s judgements in estimating the value of contingent consideration.
Rosebank and Cambo
• Obtaining the most recent draft field development plans (FDPs) and comparing the cost assumptions and estimates therein to management’s valuation models;
• Gaining an understanding of the status of discussions with the respective joint venture partners in respect of the draft FDPs and the expected timeframe and risks to achieving Final Investment
Decision; and
• Obtaining input from our reserves specialists in respect of estimated reserves and resources and associated risking levels, as outlined above.
Procedures on overall acquisition accounting
• Challenging the completeness of the assets and liabilities identified by management through review of the due diligence reports and management’s board presentations obtained as part of the
acquisition process;
• Obtaining an understanding of how the risk of climate change has been considered in the valuation of the development and production oil and gas assets and exploration and evaluation assets
recognised, including the risk to future commodity prices; and
• Assessing the adequacy of disclosures included in the annual report, including whether appropriate disclosures have been made regarding the key sources of estimation uncertainty and critical
judgements.
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Key
observations
We are satisfied that the fair values of assets and liabilities acquired in respect of each acquisition, the associated gain on bargain purchase and the financial statement disclosures were reasonable.
In reaching this conclusion, we observed that:
• The discount rates for both acquisitions were within our reasonable range, albeit towards the lower (less conservative) end;
• The commodity price assumptions for Siccar Point and oil prices for Marubeni were all within our reasonable range;
• Gas prices for the Marubeni acquisition were conservative and fell below the bottom our reasonable range in some years;
• In assessing reasonable ranges for commodity prices, these were based on market consensus data at the acquisition date which were typically higher than third party price curves described as being
consistent with a pathway to keep global temperature rises below 1.5˚C (“Paris consistent”);
• Risking levels applied to resources in respect of Rosebank and Cambo were considered to be within a reasonable range, with management’s judgement significantly influenced by both the technical
status of each FDP and also the extent of joint venture partner alignment; and
• Based on our stand-back assessment the valuation of acquired oil & gas assets fell within a reasonable range of fair values.
5.2. Carrying value of oil and gas assets and goodwill
Key audit matter
description
The group has $5,771m of non-current assets, including property, plant & equipment (being primarily oil and gas assets) of $3,635m, exploration and evaluation assets of $776m and goodwill of $783m.
A key audit matter related to the recoverability of the carrying value of these assets has been identified reflecting the significance of management’s judgement and estimation related to the assets’
estimated recoverable values. Specifically the key audit matter is focused on the following:
Oil and gas assets and goodwill
• Forecast commodity prices;
• Discount rate applied; and
• Oil and gas reserve and resource estimates, and management’s risking assumptions thereon.
Included within the carrying value of the oil & gas assets which are assessed for impairment are estimated costs relating to the decommissioning of each CGU. See decommissioning provision key audit
matter below for further details in this regard.
Exploration and evaluation assets
The extent to which there are impairment indicators under IFRS 6 – Exploration and Evaluation of Mineral Resources – in respect of Rosebank and Cambo.
In responding to the above, management performed an impairment assessment for oil and gas assets and goodwill carrying value, by reference to IAS36 – Impairment, and for exploration and
evaluation assets by reference to IFRS 6. Goodwill is required to be tested for impairment at least annually while oil and gas assets and exploration expenditure are required to be reviewed for indicators
of impairment, and then tested for impairment where indicators are identified.
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 estimates to those of a third
party firm of reserves consultants, and rationalised any differences arising.
122 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF ITHACA ENERGY PLC CONTINUED
5.2. Carrying value of oil and gas assets and goodwill continued
Key audit matter
description continued
Management concluded that no impairment of the oil and gas assets, goodwill or exploration and evaluation expenditure was required, except for a charge of $31m relating to a revision of
decommissioning expenditure estimates for assets that have ceased production.
Given the level of management judgment applied in determining the recoverable value of the group’s oil and gas assets and the importance of a number of the oil and gas assets to the group’s 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 Audit and Risk Committee report on page 82, in the “Other areas of estimation” disclosure in note 3 of the financial statements and in notes 18
and 19 of the financial statements.
How the scope
of our audit
responded
to the key
audit matter
Our procedures comprised the following:
Procedures on internal control 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 & budgets, and forecasts used elsewhere, including for going concern / viability purposes;
• 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;
• Assessing, with input from our tax specialists, whether the fair value model appropriately incorporates the recently introduced Energy Profits Levy;
• 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 CO
2
emissions reductions targets published at the time of the IPO; and
• Evaluation of management’s disclosures including in relation to impairment, including related sensitivity analysis.
Procedures related to oil and gas assets and goodwill
Our procedures related to the key assumptions in this area are set out in the following subsections:
Forecast commodity prices
• Assessing the appropriateness of management’s forecast commodity prices, through benchmarking against forward curves, peer information and market data;
• Sensitivity analysis on the pricing assumptions to determine the impact on the impairment conclusion of reasonably possible changes; and
• Considering the extent to which such sensitivity analysis can be considered as capturing the potential impact on headroom of using a range of third party price curves described as being consistent
with a pathway to keep global temperature rises below 1.5˚C (“Paris consistent”).
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How the scope
of our audit
responded
to the key
audit matter
continued
Discount rate applied
Obtaining input from our valuations specialists to assess management’s discount rate by comparison to an independent range.
Oil and gas reserve 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.
Procedures related to exploration and evaluation assets
• Updating, as of the balance sheet date, the procedures described in the key audit matter in relation to acquisition accounting outlined above; and
• Challenging management on the activities required in respect of the Rosebank and Cambo developments to meet the group’s CO
2
emissions reductions targets published at the time of the IPO and
understanding the extent to which the related expenditure was included in their impairment assessment.
Key observations
We are satisfied with management’s conclusions in respect of impairment charges required in the year of $31 million, and that the associated disclosures are reasonable.
In reaching this conclusion we observed that:
• Forecast oil prices were within, but towards the top end, of our reasonable range;
• Forecast gas prices were, overall, conservative with reference to our reasonable range;
• In assessing reasonable ranges for oil and gas prices, these were based on year end market consensus data which were in general higher than third party Paris consistent price curves;
• 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, with it being consistent with the impact of decreasing forecast revenues by 20%, resulting in a post-tax impairment $13m;
• Discount rates were within our reasonable range;
• Risking levels applied to reserves and resources were considered to be within a reasonable range and determined applying a consistent approach; and
• Whilst management’s impairment models in respect of the group’s exploration, 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.
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INDEPENDENT AUDITOR’S REPORT
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5.3. Decommissioning provision
Key audit matter
description
The decommissioning provision at 31 December 2022 was $1,721m (2021: $1,416m). The provision represents the present value of decommissioning costs which are expected to be incurred up to the
mid 2050s with the majority of spend in the next 15-20 years. The liability arises in respect of both the group’s operated assets ($773m) and non-operated assets of ($948m).
Decommissioning liabilities 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 of decommissioning activities. The key assumptions and judgements underpinning the provisions include:
• Rates and norms assumptions for operated assets;
• Cessation of production dates;
• Risk free discount rate; and
• Inflation rate.
Other less significant judgements made by management include the costs incurred post cessation of production.
Further details of this matter have been disclosed in the Audit and Risk Committee report on page 83, 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 key assumptions such as discount rates) and in note 23 of the financial statements.
How the scope
of our audit
responded
to the key
audit matter
Our procedures included the following:
Procedures on internal control and the decommissioning model
• Obtaining an understanding of the relevant controls relating to the decommissioning provision;
• Obtaining an understanding, including through inquiries with the group’s internal specialists responsible for determining the 2022 decommissioning estimates and scrutiny of the associated models,
of any key changes in underlying assumptions and methodology applied; and assessing their technical competence, capabilities and objectivity;
• Assessing decommissioning calculations for clerical accuracy and compliance with IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’;
• Confirming that the cessation of production dates are consistent with those used in management’s impairment models for oil and gas assets, as discussed in section 5.2;
• 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 fall to
align with a range of third party Paris consistent price curves;
• Testing a sample of the actual decommissioning spend incurred during the period and performing a retrospective review of management’s forecasting accuracy, including an assessment of whether
actual spend gives rise to contradictory evidence of current forecast rates; and
• Evaluating management’s disclosures including in the key sources of estimation uncertainty and associated sensitivity of decommissioning assumptions.
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Procedures on rates and norms for operated assets
• Challenging the group’s rig rate assumptions (“rates”) within the cost estimate by reference to available third party data and benchmarking to peer and market rates; and
• 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.
Procedures on discount rates
• Comparing management’s risk free discount rate to relevant market data, including US and UK long term government bond yields; and
• Benchmarking and considering contradictory evidence from peers.
Procedures on inflation
• Challenging management’s inflation assumptions, including benchmarking against independent sources of inflation projections.
Key observations
We are satisfied that the key assumptions in respect of rates and norms, cessation of production dates, discount rate and inflation rate fall within a reasonable range and that the overall provision
is fairly stated. We also consider that the associated disclosures, including the impact if the energy transition causes cessation of production dates to be brought forward for all significant assets by
2 years, are reasonable.
5.4. Deferred tax asset recognition and recoverability
Key audit matter
description
The group has a $392m (2021: $220m) net deferred tax asset. The increase in the year is due to the net impact of the following:
• $1,406m net increase arising from acquisitions in the year;
• $766m reduction due to the implementation of the Energy Profits Levy (“EPL”);
• $260m reduction arising from current year taxable profits; and
• $208m reduction due to a decrease in unrealised derivative liabilities.
A key audit matter was identified in this regard, specifically in respect of the following:
• Recognition of deferred tax assets arising on current year acquisitions, specifically Marubeni and Siccar Point. Management judgement and estimation is required in assessing the availability
of future taxable profits and the feasibility of restructuring plans required to utilise the tax losses giving rise to the deferred tax assets;
• Recoverability of the deferred tax assets at 31 December 2022; and
• Appropriate recognition of the impact on deferred taxation due to the EPL.
Further details of this matter have been disclosed in the Audit and Risk Committee report on page 82, in the “Other areas of estimation” disclosure in note 3 of the financial statements
(which includes details on the sensitivity of the provision to changes in key assumptions such as a reduction in future revenues) and in note 27 of the financial statements.
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How the scope
of our audit
responded
to the key
audit matter
Our procedures included the following:
Procedures on internal control and deferred tax asset recognition
• Obtaining an understanding of the relevant controls relating to the recognition and 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; and
• Obtaining an update of management’s actions and remaining restructuring plans supporting the recognition of deferred taxation, with reference to the requirements of IAS 12. See above in section
5.1 acquisition accounting for further detail on our procedures in this regard.
Recoverability of deferred tax assets
• 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;
EPL impact on deferred taxation
• Assessing, with input from our tax specialists, the extent to which the EPL figures in the financial statements have been appropriately calculated.
Key observations
We are satisfied that the deferred tax asset recognised in the financial statements and the related disclosures are appropriate. We confirmed that the cashflows used in assessing the carrying value
of the group’s oil and gas assets and goodwill are consistent with those utilised to support the recoverability of the group’s deferred tax asset. See key observations on key audit matter at 5.2 for
further details.
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 Parent company financial statements
Materiality
$40m $18.2m
Basis for determining
materiality
2.1% of adjusted EBITDAX
Adjusted EBITDAX is an Alternative Performance Measure and a Key Performance Indicator.
The selected materiality also represents 1.6% 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 parent company acts principally as a holding company and therefore net assets is a key measure
for this business.
5.4. Deferred tax asset recognition and recoverability 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
$2m
Group
materiality
$40m
Adjusted EBITDAX
$1,916m
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% of group materiality 60% of parent company materiality
Basis and rationale
for determining
performance
materiality
We determined performance materiality considering a number of factors including the following:
a. The quality of the control environment and conclusions from our testing of Group- wide internal controls;
b. The history of material misstatements identified in our previous audits; and
c. Changes in the business during the year, including the impact of the 3 acquisitions and the listing of the parent company
on the London Stock Exchange.
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 $2m , 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.
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INDEPENDENT AUDITOR’S REPORT
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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 83, we identified a number of control deficiencies during the course of the year. While the group has made progress in remediating a number of these control
deficiencies at year end, this was not done on a sufficiently timely basis to enable us to place reliance on controls for the purposes of our audit testing, and we have amended the nature, timing and extent of our substantive
procedures 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 43 to 49. The group identified on pages
141 and 142, a number of key judgements and estimates with elevated climate-related risk, 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 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 their longer life offshore assets. We also assessed the disclosures within the Annual Report, with the involvement of our climate specialists, and considered whether these were materially
consistent with the financial 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, resulting in 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.
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We have nothing to report in this regard.
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 parent 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 parent 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 28 March 2023;
• 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 sector;
• any matters we identified having obtained and reviewed the group’s documentation of their policies and procedures relating to:
Ê identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance;
Ê detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud;
Ê the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations;
130 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF ITHACA ENERGY PLC CONTINUED
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
• 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, regarding
how and where fraud might occur in the financial statements and any potential indicators of fraud.
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 following areas, also identified as key
audit matters:
• acquisition accounting
• carrying value of oil and gas assets and goodwill
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, UK Corporate Governance Code, 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 acquisition accounting and the carrying value of oil and gas assets and goodwill as key audit matters related to the potential risk of fraud. The key audit matters section of our report
explains the matters in more detail and also describes the specific procedures we performed in response to those key audit matters.
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;
• obtaining confirms from external legal counsel;
• 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 reviewing 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 parent 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 pages 61 and 140;
• 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 69;
• the directors’ statement on fair, balanced and understandable set out on page 76;
• the board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 69;
• the section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on pages 62 to 68 and 83; and
• the section describing the work of the Audit and Risk Committee set out on pages 80 to 83.
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 parent company, or returns adequate for our audit have not been received from branches not visited by us; or
• the parent company financial statements are not in agreement with the accounting records and returns.
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14. Matters on which we are required to report by exception continued
14.1. Adequacy of explanations received and accounting records continued
We have nothing to report in respect of these matters.
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 financial statements for the year ending 31 December 2022 and subsequent financial periods. The period of total uninterrupted engagement including previous
renewals and reappointments of the firm is 2 years, covering the years ending 31 December 2021 and 31 December 2022.
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) 4.1.14R, these financial statements will form part of the European Single Electronic Format (ESEF) prepared Annual Financial
Report filed on the National Storage Mechanism of the UK FCA in accordance with the ESEF Regulatory Technical Standard (‘ESEF RTS’). This auditor’s report provides no assurance over whether the annual financial report has been
prepared using the single electronic format specified in the ESEF RTS.
DAVID PATERSON ACA (SENIOR STATUTORY AUDITOR)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
30 March 2023
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF ITHACA ENERGY PLC CONTINUED
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CONSOLIDATED STATEMENT OF PROFIT OR LOSS
FOR THE YEAR ENDED 31 DECEMBER
Note
2022
US$’000
2021
US$’000
Revenue 5 2,598,482 1,428,240
Cost of sales
6 (1,352,324 ) (879,181 )
Gross profit 1,246,158 549,059
Impairment (charge)/reversal
19 (31,467 ) 465,271
Exploration and evaluation expenses
14 (9,040 ) (156 )
Administrative expenses
7 (87,851 ) (15,180 )
Other (losses)/gains
8 (9,429 ) 3,827
Gain on bargain purchase
17 1,335,171 10,454
Profit from operations before tax and net finance costs 2,443,542 1,013,275
Net finance costs
9 (203,013 ) (250,136 )
Profit before tax 2,240,529 763,139
Income tax
27 (1,208,997 ) (337,150 )
Profit attributable to owners of the parent 1,031,532 425,989
Earnings per share for profit attributable to the ordinary equity holders of the Company Note
2022
Cents
2021
Cents
Basic earnings per share 10 102.6 42.4
Diluted earnings per share
10 102.2 42.3
The results above are entirely derived from continuing operations.
The accompanying notes on pages 140 to 192 are an integral part of the financial statements.
134 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
Note
2022
US$’000
2021
US$’000
Profit for the year 1,031,532 425,989
Items that may be reclassified to profit and loss
Fair value gain/(loss) on cash flow hedges and cost of hedging
29 468,093 (486,579 )
Deferred tax (charge)/credit on cash flow hedges and cost of hedging
27 (200,455 ) 194,632
Other comprehensive profit/(loss) 267,638 (291,947 )
Total comprehensive profit attributable to owners of the parent 1,299,170 134,042
The accompanying notes on pages 140 to 192 are an integral part of the financial statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER
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CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER
Note
2022
US$’000
2021
US$’000
Assets
Current assets
Cash and cash equivalents 253,822 44,849
Trade and other receivables
11 359,994 228,290
Decommissioning receivable
11 38,115 94,640
Prepaid expenses and decommissioning securities
12 9,055 10,536
Inventories
13 176,881 177,619
Derivative financial instruments
30 150,858 4,975
Non-current assets
Decommissioning receivable
11 162,710 152,184
Long-term inventories
13 – 532
Exploration and evaluation assets
14 775,773 116,355
Property, plant and equipment
15 3,634,896 2,958,733
Deferred tax assets
27 392,456 220,918
Derivative financial instruments
30 21,191 133
Goodwill
18 783,848 722,075
Total assets 6,759,599 4,731,839
Liabilities and equity
Current liabilities
Borrowings
20 – (437,076 )
Trade and other payables
22 (711,412 ) (484,268 )
Current tax payable
27 (106,678 ) –
Decommissioning liabilities
23 (146,829 ) (94,640 )
Lease liability
24 (41,637 ) (3,211 )
Contingent and deferred consideration
25 (107,680 ) (49,806 )
Derivative financial instruments
30 (136,668 ) (438,006 )
(1,250,904 ) (1,507,007 )
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Note
2022
US$’000
2021
US$’000
Non-current liabilities
Borrowings
20 (1,213,731 ) (954,616 )
Decommissioning liabilities
23 (1,573,711 ) (1,546,849 )
Lease liability
24 (17,221 ) (278 )
Contingent and deferred consideration
25 (219,120 ) (25,284 )
Derivative financial instruments
30 (27,440 ) (21,296 )
(3,051,223 ) (2,548,323 )
Total liabilities (4,302,127 ) (4,055,330 )
Net assets 2,457,472 676,509
Shareholders’ equity
Share capital
26 11,445 1
Share premium
26 293,712 634,658
Capital contribution reserve
26 181,945 114,000
Share-based payment reserve
26 4,920 –
Cash flow hedge reserve
29 16,710 (242,791 )
Cost of hedging reserve
29 3,275 (4,862 )
Retained earnings 1,945,465 175,503
Total equity 2,457,472 676,509
The accompanying notes on pages 140 to 192 are an integral part of the financial statements.
Approved on behalf of the Board on 30 March 2023:
IAIN LEWIS,
Director
CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONTINUED
AS AT 31 DECEMBER
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER
Note
Share
capital
US$’000
Share
premium
US$’000
Capital
contribution
reserve
US$’000
Share-based
payment reserve
US$’000
Cash flow
hedge reserve
US$’000
Cost of
hedging reserve
US$’000
Retained
earnings/
(accumulated
losses)
US$’000
Total
US$’000
Balance at 1 January 2021 1 634,658 114,000 – 4,416 39,878 (250,486 ) 542,467
Profit for the year – – – – – – 425,989 425,989
Other comprehensive expense – – – – (247,207 ) (44,740 ) – (291,947 )
Total comprehensive (expense)/income for the year – – – – (247,207 ) (44,740 ) 425,989 134,042
Balance at 31 December 2021 1 634,658 114,000 – (242,791 ) (4,862 ) 175,503 676,509
Balance at 1 January 2022 1 634,658 114,000 – (242,791 ) (4,862 ) 175,503 676,509
Issuance of shares for capital reduction
26 114,000 – (114,000 ) – – – – –
Reduction in capital
26 (114,000 ) (634,658 ) – – – – 748,658 –
Issuance of shares
26 11,444 293,712 – (3,004 ) – – (10,228 ) 291,924
Capital contribution through debt cancellation
26 – – 181,945 – – – – 181,945
Share-based payment charge
33 – – – 7,924 – – – 7,924
Total comprehensive income for the year:
Profit for the year – – – – – – 1,031,532 1,031,532
Other comprehensive income – – – – 259,501 8,137 – 267,638
Total comprehensive income for the year – – – – 259,501 8,137 1,031,532 1,299,170
Balance at 31 December 2022 11,445 293,712 181,945 4,920 16,710 3,275 1,945,465 2,457,472
Detail on the movements in the capital reduction reserve can be found in notes 26 and 32.
The accompanying notes on pages 140 to 192 are an integral part of the financial statements.
138 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
Note
2022
US$’000
2021
US$’000
Cash provided by/(used in):
Operating activities
Profit before tax 2,240,529 763,139
Adjustments for:
Depletion, depreciation and amortisation
15 662,947 455,913
Exploration and evaluation expenses
14 9,040 156
Impairment charge/(reversal)
19 31,467 (465,271 )
Reduction/(increase) in contingent/deferred consideration 4,295 (8,250 )
Loan fee amortisation
9 6,418 35,343
Revaluation of financial instruments
29 (16,787 ) 8,261
Gain on bargain purchase (1,335,170 ) (10,454 )
Hedging resets
1
(39,680 ) (115,362 )
Accretion
9 56,511 38,348
Bank interest & charges
9 123,014 120,891
Interest on related party loan
9 17,924 48,278
Interest rate swaps
9 (851 ) 7,276
Unrealised foreign exchange on cash and cash equivalents 2,464 (1,871 )
Share-based payment expenses 14,069 –
Decommissioning expenditure (65,707 ) (27,930 )
Operating cash flows before movements in working capital 1,710,483 848,467
Decrease/(increase) in inventories 4,051 (65,302 )
Increase in trade and other receivables (50,575 ) (110,955 )
Increase in trade and other payables 141,275 250,456
Corporation tax paid (81,914 ) (10,004 )
Net cash from operating activities 1,723,320 912,662
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER
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Note
2022
US$’000
2021
US$’000
Investing activities
Capital expenditure (380,640 ) (269,606 )
Reverse consideration on acquisition – 56,456
Acquisition of subsidiaries net of cash acquired
17 (957,452 ) (7,000 )
Contingent/deferred consideration payment
25 (66,132 ) –
Net cash used in investing activities (1,404,224 ) (220,150 )
Financing activities
Receipt from issue of equity 299,749 –
Payments for lease liabilities (principal)
24 (34,348 ) (3,503 )
Loan repayment (third party) (500,000 ) (809,776 )
Loan repayment (shareholder) (273,055 ) –
Loan drawdown 550,000 254,999
Bank interest & charges (142,820 ) (85,181 )
Interest rate swaps
9 851 (7,276 )
Costs of share issue (7,825 ) –
Net cash used in financing activities (107,448 ) (650,737 )
Currency translation differences relating to cash (2,675 ) 1,872
Increase in cash & cash equivalents 208,973 43,647
Cash and cash equivalents, beginning of period 44,849 1,202
Cash and cash equivalents, end of period 253,822 44,849
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 140 to 192 are an integral part of the financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS CONTINUED
FOR THE YEAR ENDED 31 DECEMBER
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3. Significant accounting policies, judgements and estimation uncertainty continued
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3. Significant accounting policies, judgements and estimation uncertainty continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
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3. Significant accounting policies, judgements and estimation uncertainty continued
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3. Significant accounting policies, judgements and estimation uncertainty continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
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3. Significant accounting policies, judgements and estimation uncertainty continued
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
3. Significant accounting policies, judgements and estimation uncertainty continued
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3. Significant accounting policies, judgements and estimation uncertainty continued
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
3. Significant accounting policies, judgements and estimation uncertainty continued
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3. Significant accounting policies, judgements and estimation uncertainty continued
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
3. Significant accounting policies, judgements and estimation uncertainty continued
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3. Significant accounting policies, judgements and estimation uncertainty continued
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3. Significant accounting policies, judgements and estimation uncertainty continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
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7. Administrative expenses continued
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
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11. Trade and other receivables continued
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
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16. Interests in joint operations continued
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
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17. Business combinations continued
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17. Business combinations continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
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18. Goodwill continued
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19. Impairment (charge)/reversal on oil and gas assets continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
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20. Borrowings continued
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20. Borrowings continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
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25. Contingent and deferred consideration continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
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26. Reserves continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
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27. Taxation continued
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27. Taxation continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
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27. Taxation continued
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27. Taxation continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
29. Financial instruments continued
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29. Financial instruments continued
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
29. Financial instruments continued
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29. Financial instruments continued
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
29. Financial instruments continued
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29. Financial instruments continued
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
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32. Related party transactions continued
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
32. Related party transactions continued
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33. Share-based payments continued
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33. Share-based payments continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
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Note
2022
US$’000
2021
US$’000
Assets
Current assets
Cash and cash equivalent 21,126 –
Non-current assets
Investments
3 1,224,659 1,224,659
1,224,659 1,224,659
Total assets 1,245,785 1,224,659
Liabilities and equity
Current liabilities
Trade and other payables
4 (37,955) (450,870)
(37,955) (450,870)
Net current liabilities (37,955) (450,870)
Total assets less current liabilities 1,207,830 773,789
Net assets 1,207,830 773,789
Shareholders’ equity
Share capital
5 11,445 1
Share premium
5 293,712 634,659
Capital contribution reserve
5 181,945 114,000
Share-based payment reserve
5 4,920 –
Retained earnings 715,808 25,129
Total equity 1,207,830 773,789
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 loss of $47.7 million for the year ended 31 December 2022
(2021: loss of $39.8 million).
Approved on behalf of the Board on 30 March 2023:
IAIN LEWIS,
Director
Company number 12263719
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER
194 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
Share
capital
US$’000
Share
premium
US$’000
Capital
contribution
reserve
US$’000
Share based
payment reserve
US$’000
Retained
earnings/
(accumulated
loss)
US$’000
Total
US$’000
Balance at 1 January 2021 1 634,659 114,000 – 64,935 813,595
Loss for the year – – – – (39,806) (39,806)
Balance at 31 December 2021 1 634,659 114,000 – 25,129 773,789
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 11,445 293,712 181,945 4,920 715,808 1,207,830
STATEMENT OF CHANGES IN EQUITY
YEAR ENDED 31 DECEMBER
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1. Significant 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 the Strategic report on page 61.
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. The principal accounting policies adopted are the same as those set out in note 3 to the consolidated financial statements on pages
140 to 152, 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.
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.
NOTES TO THE COMPANY FINANCIAL STATEMENTS
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2. 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 loss of $47.7 million for the year ended 31 December 2022
(2021: loss of $39.8 million).
Fees payable to the Company’s auditors for the audit of the Company’s annual financial statements are disclosed in note 7 to the consolidated financial statements. The Company had no employees in the current or preceding
financial year.
3. Investments
2022
US$’000
2021
US$’000
Investments in subsidiary undertakings 1,224,659 1,224,659
The carrying value of investments in subsidiary undertakings is reviewed for 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 2022 the Company received nil dividends from subsidiary undertakings (2021: $15 million).
The subsidiaries of Ithaca Energy plc are set out in note 32 to the consolidated financial statements.
4. Trade and other payables
2022
US$’000
2021
US$’000
Amounts owed to fellow Group companies (23,261) (15,676)
Trade creditors (3,610) –
Accruals (11,084) –
Subordinated loan – (61,118)
Capital loan note – (374,076)
(37,955) (450,870)
Amounts owed to fellow Group companies
During 2021, amounts owed to fellow Group companies were repayable on demand, interest-free and unsecured. During 2022, loan agreements with interest clauses were introduced between the Company and its subsidiaries.
Subordinated loan
On 4 November 2019, the Company issued a subordinated loan note worth $198m to the parent company, DKL Energy Limited. The interest terms up to May 2021 matched those of an external loan with BNP Paribas entered
into by DKL Energy Limited on which a margin ranging from 6.5% to 11.5% above LIBOR was charged. Subsequent to repayment of the BNP Parabis loan by DKL Energy Limited in May 2021, the subordinated loan was interest
free. The subordinated loan was due for repayment at the date of issuance no later than May 2022, after which date it was repayable on demand. The Company paid $120m of the subordinated loan in 2020, $15m in 2021.
The remaining balance was repaid out of proceeds of the IPO in November 2022.
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
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4. Trade and other payables continued
Capital loan note
On 4 November 2019 the Company issued interest-free capital loan notes worth a nominal value of $392m to the parent company, DKL Energy Limited. At the date of issuance, the capital loan notes were due for repayment
on May 2022, after which point they were repayable on demand. On initial recognition, on 4 November 2019, the capital loan notes were recorded at a fair value of $278m estimated based on a 14.7% market rate of interest.
The difference between the fair value and nominal value was recorded as a capital contribution on issuance in 2019 (note 5 (c)). In subsequent periods the capital contribution has been unwound to the statement of profit or loss
as imputed interest. The full amount of the loan notes remained outstanding at 31 December 2021. The capital notes were partly waived (see note 5 C) with the balance being repaid out of proceeds of the IPO.
5. Reserves
(a) Issued share capital
The issued share capital is as follows:
Number of
common shares
Amount
US$’000
At 31 December 2021 1,001 1
At 31 December 2022 1,006,564,976 11,445
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 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, $0.01 B1 share and 0.01 B2 share to £0.01 A ordinary shares 87,087 (12) (12) – 87,063
Bonus Issue of new £0.01 A shares 898,131,843 – – – 898,131,843
Bonus Issue of new £0.01 B1 shares – 1,401,670 – – 1,401,670
Bonus Issue of new £0.01 B2 shares – – 420,440 – 420,440
Conversion of £ 0.01 A ordinary shares, £0.01 B1 shares and £0.01 B2 shares to £0.01 ordinary shares (898,219,931) (1,401,758) (420,528) 900,042,217 –
Bonus issues of £0.01 ordinary shares – – – 120,000 120,000
Issue of new £0.01 ordinary shares on IPO – – – 105,000,000 105,000,000
Issue of new £0.01 ordinary shares on exercise of share options – – – 1,402,759 1,402,759
Ordinary shares of £0.01 each at 31 December 2022 – – – 1,006,564,976 1,006,564,976
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5. Reserves continued
(b) Share premium
2022
US$’000
2021
US$’000
Balance at 01 January 634,659 634,659
Share premium cancellation (634,659) –
Addition 293,712 –
Balance at 31 December 293,712 634,659
Addition during the year represents the difference between the nominal value of share £0.01 and IPO price of £2.50 per share (net of share issues expenses).
(c) Capital contribution reserve
2022
US$’000
2021
US$’000
Balance at 01 January 114,000 114,000
Issuance of ordinary shares (114,000) –
Addition 181,945 –
Balance at 31 December 181,945 114,000
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 $181.9m has been capitalised as Capital Contribution Reserve as per the requirements of IFRS 9.
(d) Share-based payment reserve
2022
US$’000
2021
US$’000
Balance at 31 December 4,920 –
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 exception given by Paragraph 8 of FRS 101 which allows exemption from disclosure of compensation for key management personnel.
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
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7. Ultimate parent undertaking and controlling party
The immediate parent undertaking is DKL Energy Limited (incorporated in Jersey) who owns 89.24% 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 Yitzhak (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.
8. Subsequent events
An interim dividend of $133 million, or $0.1321 per share was declared after the end of the year and was paid to shareholders on 9 March 2023.
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Non-GAAP measures
The Group uses certain performance metrics that are not specifically defined under International Financial Reporting Standards or other generally accepted accounting principles. 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 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, gain on bargain purchase and transaction costs. This measure is considered as an indicator of underlying financial
performance. Adjusted EBITDAX is reconciled to profit after tax as follows:
2022
$m
2021
$m
Profit after tax 1,031.5 426.0
Taxation charge 1,209.0 337.2
Gain on bargain purchase (1,335.2) (10.5)
Depletion, depreciation and amortisation 662.9 455.9
Impairment charge/(reversal) 31.5 (465.3)
Net finance costs 203.0 250.1
Oil and gas put premiums 56.9 41.8
Revaluation of foreign exchange forward contracts 28.2 8.3
Revaluation of commodity hedges (45.0) –
Transaction costs 60.1 –
Exploration and evaluation expenses 9.0 0.2
Fair value charge/(gain) on contingent consideration 4.3 (8.3)
Adjusted EBITDAX 1,916.2 1,035.4
Adjusted net income: Profit after tax excluding non-cash bargain purchase credits and non-cash EPL deferred tax charges. Adjusted net income is reconciled to profit after tax as follows:
2022
$m
2021
$m
Profit after tax 1,031.5 426.0
Gain on bargain purchase (1,335.2) (10.5)
EPL deferred tax charge 766.5 –
Adjusted net income 462.8 415.5
Adjusted earnings per share (EPS): Adjusted net income divided by average shares for the year of 1,005.2m (2021: 1,005.2m)
Adjusted EPS (cents) 46.0 41.3
ALTERNATIVE PERFORMANCE MEASURES
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Net debt: consists of amounts outstanding under RBL facility and senior secured loan notes less cash and cash equivalents and excludes intragroup debt arrangements or liabilities represented by letters of credit and surety bonds.
Net debt comprises:
2022
$m
2021
$m
RBL drawn facility (600.0) (350.0)
Senior unsecured notes (625.0) (625.0)
Cash and cash equivalents 253.8 44.8
Net debt (971.2) (930.2)
Leverage ratio: net debt at the end of the year divided by adjusted EBITDAX for the year then ended. The calculations are as follows:
2022 2021
Net debt ($m) 971.2 930.2
Adjusted EBITDAX ($m) 1,916.2 1,035.4
Leverage ratio 0.5x 0.9x
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 less restricted cash. Available liquidity comprises:
2022
$m
2021
$m
Cash and cash equivalents 253.8 44.8
Undrawn borrowing facilities 325.0 575.0
Available liquidity 578.8 619.8
202 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
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. Group free cash flow
reconciles to net cash flow from operating activities as follows:
2022
$m
2021
$m
Net cash flow from operating activities 1,723.3 912.7
Net cash used in investing activities (1,404.2) (220.2)
Add back acquisitions 957.5 7.0
Reverse consideration on acquisitions – (56.5)
Bank interest and charges (142.8) (85.2)
Interest rate swaps 0.8 (7.3)
Group free cash flow 1,134.6 550.5
Unit operating expenditure: operating costs (excluding over/underlift) including tariff expense tariff income and tanker costs divided by net production for the year.
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.
ALTERNATIVE PERFORMANCE MEASURES CONTINUED
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204 | ITHACA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2022
Printed by a carbon balanced, FSC
®
-recognised printer, certified to ISO
14001 environmental management system using 100% renewable
energy. This product has been made of material from well-managed,
FSC
®
-certified forests and other controlled sources. Both paper and
production are measured and carbon balanced, based on a third party,
audited, calculation.
100% of the inks used are HP Indigo ElectroInk which complies with
RoHS legislation and meets the chemical requirements of the Nordic
Ecolabel (Nordic Swan) for printing companies, 95% of press chemicals
are recycled for further use and, on average 99% of any waste
associated with this production will be recycled and the remaining
1% used to generate energy.
The printer contributes to the World Land Trust’s ‘Conservation Coast’
project in Guatemala. This scheme supports many landowners and local
communities to register and obtain their own land and thereby protect
thousands of acres of threatened coastal forest. The local organisation
FUNDAECO works with over 3000 families to help transform local
livelihoods through job creation and ecotourism.
ITHACA ENERGY PLC ANNUAL REPORT 2022
Ithaca Energy PLC
Registered office:
23 College Hill
London
EC4R 2RP
www.ithacaenergy.com