UK’s Market-Defying North Sea Oil IPO Falls Flat

After braving high-level market volatility in Britain’s biggest IPO of the year, North Sea oil and gas producer Ithaca Energy warned that any further boost to a UK windfall tax would render the aging basin uneconomical as an energy crisis engulfs Europe. 

“The government has structured the EPL in a very thoughtful manner to continue to promote investment in the North Sea [...],” Ithaca Chairman Gilad Myerson told Reuters on Wednesday, the day the company went public. 

However, Myerson continued, if the windfall tax is strengthened, and if “they take away the investment allowance, then obviously it will become uneconomical to develop fields in the North Sea”. 

In May, the UK implemented a 25% windfall tax on oil and gas producers in the North Sea amid soaring energy costs and intense media pressure headlining North Sea profits. 

The UK Energy Profits Levy was intended to fund measures to support households. 

While the market watched with excitement given the absence of any IPOs in Europe since Russia’s war on Ukraine, Ithaca’s IPO (IPO_IHEG.L, LON:ITH) on Wednesday fell flat, with shares opening 2% below issuing price and then fell by up to 6% before recouping losses, closing at 230 GBX. 

Ithaca’s was also the first IPO in five years featuring an oil and gas exploration and production company. 

Myerson was hoping that the IPO would be proof of the North Sea’s investment attractiveness in the face of Russia’s war on Ukraine and despite the current windfall tax. 

“The fact that we’ve listed. It’s five years in the UK without an (E&P) IPO. It just demonstrates that there is a lot of willingness from investors to support E&P companies and support domestic supply. We hope this will also be a turning point for other companies to increase investor interest in the North Sea,” Myerson told Energy Voice on Wednesday. 

Ithaca says it is also planning to make a final investment decision on the Cambo field next year, according to Reuters, though Shell is simultaneously seeking to divest its own 30% stake in the same field. 

By Charles Kennedy for Oilprice.com

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