Centrica sells significant stake in Cygnus gas field to Ithaca Energy

Centrica PLC on Tuesday said it has agreed to sell a 46.25% stake in the Cygnus gas field to a subsidiary of Ithaca Energy PLC, with the value of the deal to reach around £215 million in total.

Centrica is a Windsor, England-based energy and services company. Ithaca Energy is a London-based oil and gas company operating in the North Sea. Cygnus is the largest UK continental shelf gas field and a key contributor to the UK’s energy security.

Subsidiaries of Centrica’s Spirit Energy Ltd have made the disposal for a headline consideration of £116 million, plus a transfer of £99 million in decommissioning liabilities associated with the interest. Spirit Energy’s 2P reserves will be reduced by 19.4 million barrels of oil equivalent per day.

Centrica’s 69% share of the headline consideration is expected to be £80 million. The sale has a commercial effective date of January 1, 2025, and is expected to complete during the second half of 2025.

‘Through this disposal we are taking another step in reducing our exposure to gas production while accelerating the delivery of enhanced value to shareholders, allowing the Spirit team to further focus on delivering the largest carbon storage project in Europe at Morecambe Net Zero,’ said Centrica Chief Executive Officer & Spirit Energy Chair Chris O’Shea.

The deal increases Ithaca Energy’s stake in the Cygnus gas field to 85%, and is expected to add 23 million barrels of oil equivalent to Ithaca’s 2P reserves, as well as pro forma production between 12,500 to 13,500 barrels of oil equivalent per day.

The sale price equates to less than $7 per barrel of oil equivalent on 2P reserves, which Ithaca believes to be ‘good value for equity in a producing field that we know and understand’.

‘Today’s transaction with Spirit Energy provides further equity in a high-margin, high-quality producing gas asset that we understand deeply through our operatorship,’ said Ithaca Executive Chair Yaniv Friedman.

‘This deal follows our Japex (Seagull) deal announced just two months ago and further demonstrates our growth strategy in action. By increasing our stake in Cygnus we add incremental reserves and production to our portfolio at attractive valuation metrics that ticks all of our investment criteria, without adding any complexity. We also see significant upside potential through further infill drilling beyond the next three approved wells. This is the type of deals we like.’

Production at Cygnus began in 2016 with 11 wells currently producing. Three further infill wells have been approved, with the first two firm wells to be spud within the second quarter of 2025, and expected onstream during the first half of 2025 and the first half of 2026.

Centrica shares were up 1.4% at 154.05 pence each in London on Tuesday morning. Shares in Ithaca Energy rose 1.1% at 134.80p.

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