Ithaca set to embark on expansion into Venture's vacant niche

Published on Sunday 4 October 2009 21:49

ITHACA, the North Sea oil company, is considering bidding for a rival, as it seeks to slot into a gap in the market left by Venture Production.

Speaking on the Beatrice platform in the Moray Firth, chief development officer John Woods said the company, which buys and develops discoveries too small for major players, is now debt free and is seeking to do deals to allow it to expand.

A number of packages of North Sea discoveries and fields are up for sale this year, which Ithaca is looking over.

As well as taking part in auctions of assets, Woods said the company was also considering bidding to buy a rival.

"We're looking at both," Woods said. "But we're not looking at 'what is the right way to buy', we're looking at 'what are the optimum assets'".

Ithaca's business model is similar to that of Venture Production, the Aberdeen-based FTSE 250 firm being taken over by Centrica in a 1.3 billion deal.

Woods said Venture's removal from the market was expected to leave a gap for smaller rivals to move into. On top of buying existing discoveries, the company also plans to buy stakes in more high risk exploration projects, which, if successful, could see its value increase quickly.

A lack of exploration potential was one of the reasons analysts believe Venture's shareholders were willing to accept Centrica's offer, despite the Aberdeen company's board strongly rejecting it.

Conditions for raising money in the oil and gas sector appear to be good. Banks, which reined in lending for the entire sector earlier this year, have been contacting Ithaca in recent months about a willingness to provide credit facilities.

The company is also keeping in contact with its brokers about tapping the markets for cash if needed to fund acquisitions.

Ithaca's board was encouraged by the ease with which larger rival Valiant Petroleum raised 66.5 million last week to fund its development programme, rather than to snap up assets.

"We were surprised, in particular because there wasn't a (deal] story behind it," Woods said.

Ithaca, which is registered an Calgary but operates only in Scotland, took over Beatrice from Talisman last year.

The Aim-listed group has increased production from the platform, its only producing asset, by more than 10,000 barrels a day after bringing the Jacky discovery into production, a project Talisman deemed too risky.

Ithaca is also looking at potentially poaching staff from Venture Production, who are believed to have had their share options paid out by Centrica.

Venture's staff might be tempted to move because uncertainty over the future of the business, Woods said.