(Finance) – Eni SpA (“Eni”) reached a agreement For aggregate almost all of its Exploration and Production assets located in the UKexcluding those located in the East Irish Sea and those linked to CCUS projects (“Eni UK Business”), to the assets of Ithaca Energy plc (“Ithaca”), taking a strategic step in significantly strengthening its presence in the UK Continental Shelf ( “UKCS”) (“Combination”).
Under the terms of the business combination agreement, Eni and Ithaca will proceed with the aggregation of Eni UK Business and Ithaca’s existing business. Following this combination, Eni UK will receive new ordinary shares of the share capital of Ithaca so that, upon completion of the operation, Eni UK will hold a 38.5% stake of Ithaca’s share capital following the issue of the new shares. The transaction will be effective from June 30, 2024, with completion expected in the third quarter of 2024, subject to the issuance of the necessary regulatory authorizations and other conditions typical for transactions of this nature.
With interests in six of the ten largest fields and two of the largest pre-development fields in the UKCS, Ithaca now represents one of the largest independent oil & gas groups in the area, with a significant resource base and key to the security of energy supplies in the region.
There Combination will allow you to immediately create a larger and more solid Aggregate Groupwith production in 2024 exceeding 100,0001 barrels of oil equivalent per day Ithaca Energy (NSAI CPR), Eni UK (NSAI Top-Up Report) and NEGHL (ERCE CPR), each as of December 31, 2023 (boe/d), and un-risked organic production growth potential of up to 150,0001 boe /g starting from the beginning of the next decade. The operation also aims to replicate the success of previous business combinations carried out by Eni in the upstream sector, in application of its distinctive satellite business model (including Var Energi in Norway and Azule Energy in Angola). The satellite model represents a strategic response to the challenges and opportunities posed by energy markets and is aimed at creating focused, streamlined companies capable of attracting new capital, dedicated to the creation of value through operational and financial synergies, and through acceleration of growth. The combination will allow Eni to continue pursuing its successful growth strategy in the UKCS, strengthening its commitment in the UK following the acquisition of Neptune Energy. Eni will be a strategic and long-term shareholder of Ithaca, and will be committed to bringing its world class technical capabilities and operational support to the benefit of the combination.
L’CEO of Eni, Claudio Descalzicommented: “This operation represents a further example of Eni’s response to the evolution of energy markets, and in this case a further step in the success of our satellite model. This aggregation allows us to increase the size of our portfolio and guarantee efficient growth in the upstream, as well as the maximization of their value also thanks to the support of a dedicated management structure that will be able to count on Eni’s experience and resources. The combination with Ithaca also represents an excellent opportunity to combine two complementary asset portfolios and thus consolidate our presence in UKCS where we see significant opportunities for growth and optimization. Following the acquisition of Neptune Energy, we have moved quickly to further consolidate our competitive position in the UK, where we believe there is a great opportunity for Eni and Ithaca to create long-term value by helping to address security, accessibility and and sustainability in energy supply. Achieving leadership in the UK Upstream market reflects our equally strong positioning in CO2 Capture and Storage activities, with our Hynet and Bacton Thames Net Zero projects which, together with our other three CO2 storage licenses, give us the availability of approximately 1 GT of gross storage capacity in the country, positioning us as one of the leading operators dedicated to the decarbonization of hard-to-abate industrial clusters. Also considering our important investment as a partner in the Dogger Bank offshore wind farm, Eni appears to be one of the most relevant players in the energy sector in the UK”.
The combination will allow Eni to become a minority shareholder of a leading independent operator in the UKCSwith the following advantages: expanded and diversified asset portfolio, Eni will have strategic holdings in key assets in the UKCS, with expected pro forma production of between 100,000 and 110,000 barrels of oil equivalent per day in 2024 and the potential to become the leading operator in the area by 2030. Furthermore, there will be a combination significant amount of long-term reserves and resources with a remaining life of more than 15 years based on projected production for 2023. Increase in cash generation, the combination will lead to an immediate increase in cash generation from operating activities, providing greater flexibility for shareholder compensation and growth. There will also be significant potential for long-term organic growth through operational and financial synergies. Benefits from the partnership with Eni, the Combined Group will obtain tangible benefits from Eni’s entry as a strategic and long-term shareholder, including a technical services agreement that will allow it to benefit from Eni’s technical and operational excellence to support future growth plans. Governance agreements, upon completion of the transaction, Eni will sign a Relationship Agreement with Ithaca, giving Eni the right to appoint representatives to the Board of Directors and committees of the Combined Group based on its shareholding.
Furthermore, Eni will have the right to indicate the next CEO of the Combined Group, in accordance with the rules and processes of the Ithaca Nominating and Governance Committee. Further details on the composition of the Board of Directors and senior management will be announced later.
As a consequence of the issue of the new Ithaca shares in favor of Eni UK and of Ithaca’s current capital structure, upon completion of the operation the free float would be equal to 7% and therefore lower than the minimum threshold of 10% required by the rules of the Financial Conduct Authority. Therefore, in order to ensure that the free float remains equal to or above the 10% threshold, Delek undertakes to sell a number of shares equal to approximately 3% of the pro-forma share capital of Ithaca, to be carried out by the completion of the operation.
Delek will also sign a call option agreement with Eni UK, under which Delek will have the option to request Eni UK to transfer to Delek a number of shares representing up to 1% of the pro-forma share capital of Ithaca (“Call Option”). Once Delek has completed the sell-down and in the case of exercise of the call option, Delek will hold 52.7% and Eni will hold 37.3% of Ithaca’s ordinary shares, while the free float will be equal to 10% of the ordinary shares of Ithaca.