Ithaca Energy is to join forces with the Italian oil company in a £750 million deal

Ithaca Energy’s “transformational” combination with Italian oil giant Uni will leave the company “very well positioned” to deliver growth and high shareholder returns, analysts said.

The North Sea-focused group has agreed to buy most of Eni UK’s upstream oil and gas assets for around £754 million, it told shareholders after the market closed on Tuesday.

The partnership, in which Eni UK will take a 38.5 percent stake, with the remaining shares held by Ithaca shareholders and its chairman Gilad Myerson, will allow production of up to 87,000 barrels of oil per day this year. This number is expected to rise to 150,000 over the next ten years.

Ithaca has only recently scaled back investment in UK projects, with the group blaming the UK’s Energy Windfall Levy, which cost $333.4 million last year alone.

Shrinking profits have sent Ithaca shares down nearly 25 percent over the past year, with their value now about 49 percent below their November 2022 listing price.

But Peel Hunt analysts say the partnership leaves Ithaca ‘very well positioned to deliver organic and future inorganic growth’, having upgraded its ‘buy’ rating to a price target of 214p – almost 80 per cent higher than current levels.

They said: ‘The merger demonstrates Ithaca’s ambition to grow and diversify.

‘By combining portfolios, the expanded business should benefit from long-term production cash flows with material growth from new developments.

‘Ithaca brings the growth potential of development projects at Fotla, Rosebank and Cambo, and ENI brings the long-term, low capex production cash flows to finance these.

“The net result is a well-balanced, comprehensive business, which should generate significant cash flows to support continued portfolio reinvestment and meaningful distributions to shareholders, while also maintaining a debt-free balance sheet that can pursue additional selective acquisitions.”