As Ithaca Energy share price plummets, is it safe to buy?

By:
on Aug 24, 2023
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  • Ithaca Energy stock price has dropped by over 38% from its highest point in December.
  • The company warned that it will slash production this year, citing windfall taxes.
  • The stock has more downside in the coming months.

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Ithaca Energy (LON: ITH) share price has underperformed the market as the company goes through major headwinds.  The stock plunged by more than 4% on Thursday to a low of 145.8p. It has dropped by more than 38% from the highest point in 2022.

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Headwinds remain

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Ithaca Energy and other smaller oil and gas companies in the UK are going through major headwinds. For example, the UK, under Rishi Sunak, has implemented windfall taxes on energy companies.

At the same time, these firms have to operate under more regulations compared to their American and Middle East peers. This is happening because UK was one of the first countries to pass net zero ambitions into law.

Companies like Ithaca and Harbour Energy have complained about these measures. In a note this week, the head of Ithaca warned that there were no windfall profits in the sector this year. He also warned that the company will need to slash production.

For example, it expects that its FY production will be between 68 and 74 Kboe/day while its net producing asset capex will be between $390 million and $435 million. Its statement said:

“Lack of UK North Sea investment will impact medium-term production outlook with 2024 production anticipated to fall below 2023 levels.”

Ithaca Energy’s average group production came in at 75.8 kboe/d with the unit operating cost of $19.8/boe. Its adjusted EBITDAX came in at $979.7 million while its net income came in at over $253.2 million. The company has over $791 million in available liquidity.

So, is Ithaca Energy a good investment? I believe that investors interested in the energy industry should focus on American companies. Historically, US companies like ExxonMobil and Chevron have consistently outperformed European firms like Total and Shell.

Ithaca Energy share price forecast

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Ithaca energy share price

The 4H chart shows that the ITH stock price has been in a strong bearish trend in the past few weeks. This decline saw the shares plunge below the important support level at 162.4p, the highest level in May this year. The stock has dropped below the 25-day and 50-day moving averages.

Ithaca stock price has seen its Relative Strength Index (RSI) drop below the oversold level. Therefore, the outlook of the stock is bearish, with the next key level to watch being at 140p, the lowest level on July 10th. This price is about 6.5% below the current level.

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