Shareholders of Ithaca Energy Inc. (TSX: IAE.TO) were none to pleased with the oil and gas exploration, development and production company’s news on Monday as shares have nosedived from a 1.83 closing on Friday down to 1.52 today, a six-month low, following an operational update regarding their Athena field in which they said only three of the four production wells are flowing as a result of a “suspected downhole restriction” in one of the wells.
According to IAE’s press release on Monday “Testing has shown that there are no issues with the integrity of the well or performance of the reservoir in the area of the field drained by the well. The changeable flow rates achieved from the well during testing indicate that the restriction is likely attributable to a blockage in the production tubing located within the well. Diagnostic work is ongoing to identify the nature of the blockage and the most effective course of action for eliminating it.”
While IAE has said they are evaluating remote intervention methods to restore the well to its full production potential they acknowledged that a rig based workover may be required and that wouldn’t be conducted until later this year.
Likely upsetting to some shareholders is the fact that on June 7, 2012 John Woods, Chief Developments Officer of IAE, stated “The successful start-up of all the Athena wells and completion of commissioning activities on the FPSO mark major milestones for both the Athena development and the continued growth of the Company. These achievements are testament to the expertise of our project team and contractors who have created an efficient and highly valuable development solution for the field.” With that news shares of IAE jumped from a close of 1.72 the previous day to a high of 1.89 and got as high as 1.93 on June 19, 2012 before today’s revelation.
Making matters more troubling for investors is the fact that IAE also pointed out on Monday that planned maintenance shutdowns are scheduled for the third quarter of this year on their operated Beatrice Area infrastructure (approximately 20 days) and the Shell operated Anasuria FPSO that receives production from the Cook field (approximately 50 days) to complete scheduled asset integrity works designed to maintain the longer term operating efficiency of the facilities.
Those who have followed IAE are already familiar with the Cook field given the fact it experienced downtime in April and June due to integrity issues with the gas treatment and compression equipment on the host facilities. Full production from this field is expected in the first week of July and if it isn’t then IAE could be facing a serious backlash from shareholders.
IAE has said that once the Cook field returns to production in early July they expect net daily export production rate potential to be approximately 7,200 boepd not including the expected production of the restricted Athena well. This would be a significant step up from the total net export production in the second quarter of 2012 which amounted to a net average rate of 4,076 barrels of oil equivalent per day coming from the operated Beatrice, Jacky, Anglia and Athena fields and the non-operated Cook, Broom and Topaz fields.
The next few weeks should be an interesting time for IAE as the industry has taken a serious hit due to economic concerns in Europe and with their own internal problems Ithaca could see their share price fall further which in turn could attract more investors when they feel like they are getting a bargain.