Ithaca Energy plc (ITH) Earnings Call Transcript & Summary

Hello, everyone. Thank you for joining the Ithaca Energy plc Q1 2025 Results Investors and Analyst webcast. My name is Sammy, and I'll be coordinating your call today. [Operator Instructions] I'll now hand over to your host, Yaniv Friedman, Executive Chairman, to begin. Please go ahead, Yaniv.

Thank you, Sammy. Good morning, everyone. Thank you for joining Q1 2025 results. Before we jump into the results, as you can see as first slide of our presentation, you can see our Cygnus Bravo project. We're going to show off a little bit of Cygnus today. We've announced yesterday an acquisition that's going to take our stake to 85% and obviously, operatorship of Cygnus. So we're proud of this project and the efficiency of this project. So we'll talk about it later. Let's move to the next slide. Here with me today are Luciano Vasques, our Chief Executive Officer; and Iain Lewis, our Chief Financial Officer. Next slide, we'll cover Q1 2025 highlights, strategic and operational highlights, financial overview, and we'll obviously open for questions. We can jump two slides ahead to the Q1 2025 highlights. And I think bottom line is that this is a record quarter for us on all parameters, reaffirming and upgrading guidance for acquisition announcement yesterday. But if we'll go into the details, and Iain will touch on the more financial aspects of this later, record quarterly production and EBITDAX performance with over 127,000 barrels oil equivalent a day of production, supporting our full year 2025 production guidance. On safety, very proud, we have zero incidents. We're focusing on perfect day, delivering improved production efficiencies, safety and environmental performance, and Luciano will speak to that later. Record quarterly adjusted EBITDAX, $653.2 million, and this is really supported by a reduction in OpEx per barrel. We're spending a lot of time and effort on reducing costs and not less important, delivering strategic priorities and return to our shareholders. So we're -- we are optimizing our business. We have material activity across our portfolio, sustain and optimize production, including drilling campaigns at Captain and Cygnus. And we're consolidating. So we're executing on our strategy. We've announced two acquisitions in the past 2 months. The JAPEX UK and the Spirit's ownership in Cygnus. On pro forma basis, we're going to add about 17,000, 18,000 barrels of oil equivalent per day through these acquisitions in 2025. And we're committed to delivering attractive shareholder return, demonstrated with our third interim dividend that was paid in April, and reaffirming our dividend commitment for 2025. Next slide, please. So speaking about guidance. So following completion of the JAPEX UK acquisition and the additional 46.25% stake in Cygnus, we do expect a production exit rate at the end of '25 that could reach around 135,000 barrels per day. If you look at the left side of the slide, so that's our 2025 guidance that we gave at our Capital Markets Day in end of March. And if you look at the right side, what you can see is really a revised guidance to take into account the Cygnus acquisition. So 109,000 to 119,000 barrels per day of production. We've increased by $10 million the net OpEx range; $20 million the net producing asset CapEx; no change into Rosebank; and we're reaffirming our target dividend at $500 million. Next slide. So we'll talk a bit about strategic and operational highlights, and Luciano will join me in this. But I think, first and foremost, we're investing. And when I say investing, it's not always monetary. It's really sometimes just a tension and internal resource that we have in looking at efficiency improvements and targeting infrastructure-led opportunities that offer high return and short payback periods. If you're looking at our Q1 highlights. So Perfect Day, we'll talk about that. We're not going to sing, I promise, but we're going to talk about that, and production efficiency performance. We did some rapid turnaround of tieback opportunities that are delivering near-term barrels and program of infill drilling across multiple assets ongoing and supporting our production outlook. If we move to the next slide, record quarter of production in Q1 of 2025. Average production 127,400 barrels per day, confirming the enhanced operating capacity of the group post combination, but also demonstrate the focus that we have on levels of efficiencies across our portfolio. New wells and EOR Phase 2 performing ahead of expectation at Captain and the J Area tieback developments. So all of this production supports reaffirmed and upgraded our full year 2025 guidance, also for the asset additions that we had. And as you know, we are just ahead of our summer shutdown maintenance periods. So that gives you a really, really good picture of how we're managing production these days. I'll hand over to Luciano for the next slide to speak about the Perfect Day -- Days.

All right, and good morning, everybody. Thanks for being here. Well, two of the key elements that have allowed us to achieve this performance in Q1 are fundamentally, method and focus. This is what we have behind what we call the Perfect Day. The Perfect Day is the day in which we do not register any safety or environmental event, and we make or we exceed our expected production on that day. Now focus because we achieve it by making the daily result visible to the entire workforce. So it makes the team realize how important it is what they do and they contribute to the objective that we have in mind, and of course, it directs their mind and also their pride. And method because of what lies behind it, whether it is the attention to its components, is production efficiency, the core is identifying improvement action, implementing them and measuring the results. I'll talk about it a little bit later. But what we do, we break down the Perfect Day to the asset level. So everybody can take even more recognition of their achievement. And now as a result, we had 7 out of our 10 operated assets, which not only had a Perfect Day, they had a perfect quarter, that means the entire period throughout the 30 days -- the 90 days of the first quarter were perfect days. And we can go to the next slide. Now a Perfect Day can only be such if it is incident-free. And again, this is achieved with the greatest attention and continuous improvement. And we are never satisfied unless we zero all our HSE metrics, but we are clearly moving into the right direction, as you can tell. Now what -- the basis of it is HSE leadership, personal responsibility, but also -- and this is a theme very important after business combination, simplification, standardization, effective system, all that can be achieved with a unified company. And so we can drive further improvements in HSE performance. Now this quarter, we have celebrated the 22nd year LTI free in Erskine. And as you can tell, we've more than halved our total recordable incident frequency in 18 months, which is not easy to achieve. So the trend is dramatically going in the right direction. Again, we can only be pleased when we get to zero, but that is the right direction of travel. On the emission side of things, we are also proving again the quality of the combined portfolio. We recorded the record low emission with 15.5 kilogram per BOE of CO2 emission, down from a pro forma of 19.1 in 2024. And you keep in mind, this compares to the average in the basin, which is around 25 kilograms per BOE and growing. So the trend -- our trend is in the opposite direction. We can go to the next slide now and talk about, in fact, the improved operational performance. So how do we achieve the best production efficiency? It's not a coincident clearly that HSE performances and operational performance are all going hand-in-hand because once you improve, you improve all across the board. Now as I said earlier, this is about a structured method, which is the tool of the basis of the improvement. For us, this means fundamentally three things. We focused on three different areas in three different ways. One area is the unplanned downtime where we identified the weakest link, what we call the bad actors and look at preventive action to enhance the reliability. The second area is the planned downtime where we look at ways to reduce the execution time of the maintenance interventions and the turnaround maintenance. And then the third area, which is the locked-in potential, where we look at ways to improve the performance of each single system, from the reservoir, to wells, to facilities. So the combination of this eventually brings us to have the results that we've observed in Q1 2020 -- Q1 this year. So we are able to continue the improvement trend already observed in Q4 2024. And of course, we have some points of excellence like the Cygnus line we will talk about, which had a record production efficiency of 97% in Q1. Now as a reference, again, if you look at the entire basin of the UKCS, it is at around 75% of production efficiency. So we are moving in a different space. Of course, this reflects, as Iain will explain later, in better OpEx results as well. And I have to say that while we are doing this on our operated assets, also our partners in the non-operated assets are adopting a similar focus, different methods, but same focus to obtain high production efficiency. Now going into our assets, and we can go to the next slide, we have Captain. This is the largest producer among our operated ones. And again, we have focused in three areas here. One is the drilling campaign, which is in support of growth and in support of the EOR that has performed much better than we had planned for Q1, with a 25% increase compared to our plan. I'm talking about the enhanced oil recovery. You probably remember, Capital Market Day, we talked about the two patents that had already responded. Now we are four patents responding positive out of seven, so we are looking at it very, very positively. And during the Q1, we've drilled two wells. And we have -- and we've moved on and there are new ones coming online in the quarters to come. Like all assets, also in Captain, we had a focus in production efficiency, which has been 2% higher than we had planned. And so this also helped increasing our production performance in Captain. And in the end, I want to talk about the fact that the Flotel is moving now to the site, is expected to arrive at the end of May for the maintenance campaign, which, of course, is a key activity to optimize the facility, reduce the maintenance backlog and extend the life of an asset that we consider very valuable. Then we move to the Cygnus asset, which is, in fact, the star of the moment. Production of Cygnus started in 2016 with 11 wells, which are now producing, and there are three additional wells, C12, 13 and 14, which make the current approved well campaign. The first of the two wells has been drilled in 2025 and is spud in Q2 2025 and expected to be on stream in the second half. And the second well is expected to be on stream at the beginning of next year. And now we are also starting the opportunity to further expand the infill drilling with three more wells, C15 to C17, following the current campaign. Cygnus is a modern facility with low emission. The Q1 performance in emission for Cygnus is at 5.9 kilograms per BOE. Remember the numbers I was talking about earlier. So it's really low emission -- a low emission field, 1/3 of our company average, and of course, 1/5 of the basin, if you want to look at it in a wider way. Probably one of the best fields, if not the best field in the basin. And going to our next field I want to focus on, that is the J Area, where Q1 saw the first production of Jocelyn South in mid-March, which I remind was discovered in December last year. So a very quick turnaround, and its initial rate has overcome the expectation at half the rate of Talbot, another field that was put in production in November. And both are providing us with better rates and also an extended plateau compared to the plan. So this has been a big contributor to our improvement in production in Q1 2025. And the good results of these two fields, of course, of these two tiebacks, affirm the quality, the value that can be extracted on the asset, and there is a further infilling well, which is ongoing, and there is another one sanctioned which is coming in, in Q1 2026. So a lot of value to be extracted yet from J Area. And with that, I pass the ball back again to Yaniv.

Thank you, Luciano. So talk a bit about strategy and looking at our -- keep saying we have a lot of optionality around our portfolio and how we unlock material organic growth opportunities. So if we look at the Q1 highlights, and Luciano mentioned this around Jocelyn South and Talbot, but looking at kind of future projects that we have. So Rosebank development progressing as planned with a 2025 campaign commenced in April 2025. We're doing some refresh work on Cambo, which is nearing completion. That's another benefit of the Eni relationship, of this combination that we're utilizing technical capabilities of Eni through our technical service [Audio Gap] concept with draft Field Development Plan submitted to the NSTA during April 2025. So when we're looking at our organic portfolio, as I said, optimizing, and Luciano went through kind of the key assets that we have, our main contributors to production. So we're seeing that and obviously, looking at the future, our organic growth opportunities. If we look at, what we call inorganic, but some of them are in a way, organic because it's assets that we like. So we're consolidating in our core UKCS market, as we've said, and I think we're demonstrating this. We're actively pursuing further value-accretive opportunities, adding stakes in well understood and liked assets across our existing portfolio. So we spoke about this in our Capital Markets Day. We've announced the acquisition of JAPEX, increasing our stake in the high-quality, well-understood Seagull asset, from 35% to 50%. We're not operators on that asset. But in Q2, from the transaction we've announced yesterday, the acquisition of over 46% in Cygnus Field from Spirit Energy, that's increasing our operator working interest in a high-margin, high-quality gas field to 85%. And Luciano mentioned the efficiency in Cygnus, which is really outstanding. And for us, increasing our position, being an operator that allows -- what's allowing us to really focus and make changes to improve efficiency, that's even more value for us, right? Now we can do this at 85%. So this is the type of things that we would like to do. I think we're demonstrating that we can do that. And part of it is also the fact that Ithaca grew through acquisition in the past, and I believe our counterparties know that we can move quickly, we can execute opportunities and be agile as we keep saying. So to be more specific, and I've covered this in last presentation. So I wouldn't spend too much time on this. But the JAPEX acquisition, increased stake in the high-quality Seagull field, that adds about 4,000 to 4,500 barrels per day pro forma production this year, cash-generative assets that's going to produce until the mid-2030s. We've inherited some historical tax losses here as well. Effective date was January 1, 2024. So completed on track for 1 July 2025. And so effective date 2024 means we're benefiting from the cash flows from January 1, 2024. And if you remember, our investment criteria metrics, so this ticks the box on all of them, IRR, payback periods, operating cash margins, DPI, breakeven and emissions. So that's an easy one for us to digest as well. And again, announced yesterday, increasing the stake in Cygnus, attractive investment metrics, under $7 per BOE of 2P reserves, high margin, low emission, as Luciano mentioned, our operated Cygnus gas field, largest gas field in the U.K. We're ongoing infill drilling in the area where we see further upside potential, further drilling potential. So we really, really like this asset. On pro forma basis, this is going to add around 13,000 barrels of net production in 2025. Effective date here is January 2025, and we're targeting completion of this in October. Obviously, waiting for NSTA consent. Again, delivering on key investment metrics for us. IRR, short payment period, this is under 2 years of payback. So very attractive operating cash margins, DPI, breakeven and emissions. I'll hand over to Iain, next slide, for the financial overview. Iain, please.

Thanks, Yaniv. Yes. So moving to Slide 21. Good morning, everyone. So calling out some of the key financial performance metrics for the quarter, so the 127,400 barrels a day production. You see the split of that of 59% oil or liquids and 41% gas. Now obviously, that's one of the additional benefits of additional Cygnus interest coming towards the end of the year. At 1 October, our forecast for completion, as Yaniv has mentioned. It adds to our gas weighting and so brings us back more towards 50-50 in the gas oil split. You can see that the high production, together with good cost management, has driven a $16.50 per BOE OpEx for the quarter and the $653 million of EBITDAX as referenced before, record production and record EBITDAX in the quarter. Now the cash flow from operations before working capital of $625 million and relatively close to EBITDAX, which in a quarter where very little cash tax is paid is kind of a reasonably good calibration. Net cash from ops after working capital is $435 million. The biggest reason for the difference there is an underlift build of $160 million through the quarter that will reverse through the year, but affecting cash flow from ops directly in the quarter. On the bottom left, you have the loss for the period. So in a really good operational quarter, but there is the deferred tax, the one-off noncash deferred tax charge of $327 million that comes through the quarter. Now this was flagged in our year-end results. All our peers obviously are taking the same. This is the 2-year extension of the EPL from March '28 to March 2030, and comes through as a deferred tax charge uplift on the PP&E balance. So it's an accounting technical adjustment that was always going to come through in Q1, and that's resulted in the loss for the period. Adjusted for that, of course, were $69 million in terms of net income for the quarter, so reflecting strong delivery and strong profits as adjusted. The bottom two figures on this chart, liquidity, over $1.1 billion at the end of the quarter, and pro forma leverage, 0.38x, and of course, that's on the basis of a net debt figure, which was slightly higher than it would have been if the under-lift hadn't been built and the cash had been brought through from that. So low leverage, high liquidity, just underpinning our strong financial position and performance closing out the quarter. Moving to Slide 22 and our standard breakdown of EBITDAX so that you can see all the details here, a really great set of numbers in terms of performance in the quarter. You can see the movement in oil and gas stocks called out there in the kind of middle row, the $161 million impact. And you can see that including that, the value from production generated in the quarter of $74 per barrel, a total of $852 million before operating costs of $16.50 a barrel, $189 million in total. So kind of a net back after OpEx of $57 a barrel and $653 million EBITDAX. So you can see the strong ability to deliver cash flow, deliver low cost and high netback through these assets and adding additional stakes in Seagull from 1 July, and Cygnus from 1 October will just help improve all of these metrics as they're high quality, high netback assets. Moving to Slide 23, a bit of a summary of our OpEx per barrel position. So our guidance at the start of the year was around $20 a barrel in the kind of low 20s, and we were aiming to bring that under $20 a barrel. The guidance operate for the deal that we announced with Cygnus yesterday takes us to $19.7 a barrel at the midpoint on the guidance. And to put that in context, you can see the Q1 number of $16.5 in this slide here. So -- and as Luciano has mentioned, there's the benefits of smooth operations and of high production efficiency. It means that you have high production, but also smoother cost execution. I would say just in context, the strengthening of the pound versus the dollar in the quarter clearly goes in a negative direction for our cost base. So we have a GBP primary cost base that's converted in dollars for reporting purposes. We have been well protected by good hedging that we did, but there is a bit of hedge gain in here and some upward pressure on costs due to exchange rate that we have more than managed by our good execution and cost management through the quarter. So really good numbers and showing a well-controlled cost base as we move through the year with an aim to get below $20 for the full year. Moving on to Slide 24 and a bit of an overview of our leverage position. And again, just calling out the key number in the slides that we normally show. You can see at the end of March, on the first graphic that we are down at $792 million. And as mentioned, that includes $160 million of underlift build. So clearly it could have been materially lower. We expect that really to unwind through the year. So you can see just with that in the middle column, you have a liquidity of $1.1 billion. Again, we look to maintain liquidity and capacity so that we can move, as Yaniv mentioned, with agile response to opportunities in the market with firepower for growth maintained, and we continue to work through that in the quarter. You can see that brings us at the bottom right to a leverage of 0.38x, maintaining our financial capacity. In terms of the next slide, Slide 25, just a bit of a call out on our hedge position. So clearly, since the end of the quarter, there's been an adjustment in macro environment and oil price has dipped in the front end. I would call out that actually, given the backwardation in the oil market before those moves, the now contango position that we're in, the actual '26, '27 plus oil price hasn't really moved much at all. But the 2025 prices have, and this is why this -- it's so important that we have this good strong hedge book for '25, which is being called out here. So we have a strong oil hedge position with weighted average floor above $70 a barrel. So that's collar floors and swaps. So it's the kind of minimum pricing for our instruments there of collars and swaps of over $70 a barrel. You can see that the profile there of strong Q2 through Q4 oil hedging and then a really full gas book in terms of the rest of the year with weighted average floors of about 90p a therm and ceilings going up to 130p. So lots of upside opportunity with downside protection on the gas book and on the oil book, which is all about our delivery of cash flow and protection of the short-term business. So again, continuing to show material hedge strength, underpinning our confidence as we move through the rest of the year. Okay. I'll hand back to Yaniv to close out.

Thank you, Iain. And if we'll all move to Slide 27. Just before we open for Q&A, just again to highlight and recap what was said on this call. So record quarterly production, 127,400 barrels per day production, over $653 million adjusted EBITDAX, which reflects the material scale that we have today, the diversification, the operating capacity and the focus that we have on operations efficiency. HSE improvements, production efficiency, our perfect day, and we're seeing this. And I think that's another message that we're seeing. We're seeing this trending into Q2 as well. So as we said at the Q4 results, we're seeing this trend continuing of increased efficiency into Q2. Q4 cost per barrel, $16.5 BOE, demonstrates the high netback capability of our combined group, it's obviously Q1. And material activity ongoing on sustaining and optimizing production. And at the same time, we're executing on our growth strategy on the U.K. consolidation high-margin, high-value opportunities. So this gives you a really good picture of where our business is right now, where we're headed. I've mentioned the optionality in our organic growth opportunities and putting us in a really, really interesting position as we head into the rest of 2025. So with that, I will open for questions.

[Operator Instructions] Our first question comes from Sasikanth Chilukuru, Morgan Stanley.

I had two, please. The first was on M&A. You've been very busy here in this space. I was just wondering if you could talk about the M&A market in the U.K., more specifically, the quantity and the quality of the assets available in the market more recently, especially in the context of the criteria that you have for acquisitions as well. Do you classify this as either a buyers market or the sellers market? The second was on the Captain project. Good to see improved performance at the field. I was wondering if you could highlight what the current production level was or the production level was in 1Q. And remind us of your expectations of the production levels by the year-end and the peak production rate as well?

Thanks, Sasi. I'll take the first question on M&A. Look, we can look around, I guess, and since the autumn budget, we've seen kind of increased interest in the UKCS. So this was the Shell Equinor announcement. Obviously, we had our combination with Eni. There were a few kind of other rumors about deals and discussions, et cetera. But I think the way -- and I can't really categorize this if this is a buyers market or a sellers market. When we look at this, we look at this from a value lens, right? So for us, it's important to meet our investment metrics. I think we have a really high-quality portfolio. And it's quite obvious that we're trying to high grade and add assets that will contribute or be accretive to our portfolio. And the more you do, the less opportunities you have, but we still think and we still see value in the UKCS. We hope that the current consultations around the future of the North Sea fiscal Scope 3 guidelines will lead to sensible outcomes that would allow us to keep growing our business. I think we're doing a lot of work on the M&A side. This is how, we, Ithaca became what it is today. So we see value in that, and we're trying to be very methodical in the way we analyze this. And it's -- I don't think there are a lot of companies that have done 11, 12 acquisitions in 5 years, 2 in 2 months. So yes, we're active, and we keep looking for accretive opportunities.

Answering on the Captain production. As I said, we are pleased with the performance that we've observed in Q1. Production overall has been with an efficiency which -- with a performance was 15% higher than we had planned, around 21,000 BOE net, with which the particularly good performance of the EOR response contributed significantly together with a production efficiency, as I mentioned earlier, of 2% ahead of our plan. So all in all, all the metrics are looking good for -- on Captain.

Our next question comes from Cian Evans-Cowie from Bank of America.

So today, you've reiterated your dividend target of 30% post-tax cash from operations and also the $500 million target for the year. Now given the current oil price environment we're in, I wonder if you could perhaps comment on how and if your thinking has changed on this front. And then with the two targets, could you tell us maybe about how you're thinking about the relative importance of each of them? And then, say, maybe at the end of the year, if the $500 million was slightly above that 30%, how comfortable would you be in paying that $500 million? And how confident should we be in that monetary target? And then perhaps if you could comment on a related note. For '26 and beyond, could you maybe elaborate on what goes into the decision-making process on where you fall between that 15% to 30% range?

Sure. So let me take that, Cian. In terms of dividends, I think there's no change in what we've said before. We have committed to 30% post tax cash from operations as what we will distribute, and the target is $500 million. There are a number of ways to get to $500 million as being 30% post-tax cash from operations. So -- and clearly, operational performance like we've had in Q1 will help us to get there. So it's too early in the year to even consider, I think the differences in those, and in fact, $500 million is a reasonable place to peg us, especially given the hedging position. So yes, strong hedging and strong performance on both cost management and production takes us to where we expected to be in terms of our policy for the year. In terms of future, again, the call out on our capital allocation framework is consistent here. 15% to 30% is our range. That's always giving us opportunity to flex up and down based upon prices in the market and also our capital program and plans, but it's, I think, the clearest policy out there in UKCS upstream. So no more detail to be given for future years now. We'll update that at the end of '25, but I think a pretty clear policy.

Cian, on the M&A question, it's -- we've announced two transactions in assets that we're already in. So when we look at this and when we analyze this, these are assets that we like, that we know very well. So it's really reducing the risk when we're executing on these acquisitions. We may be in this situation, see something that others can't see in those projects. So we're seeing potential upsides or even upsides in these projects. So we like the fact that it's easy for us to analyze. It's reducing the risk, but it's also easy to digest, right? These come with very limited, if at all, organizational burden, if you wish. So there's really no integration per se of these assets. It's same team, same people understanding the assets and in assets that we like, and we believe that there is upside, we would like to take more working interest. So I think that plays into your question.

Our next question comes from Werner Riding from Peel Hunt.

A question on Slide 6 or a couple of questions. First, I was wondering if you could perhaps break down how the producing assets CapEx is allocated per asset? And of the cash tax payment, how much is EPL versus CT and SCT? Is it 100% EPL?

Sorry, yes. So to the first one, first in terms of CapEx, and we don't obviously give breakdown by asset. But we've always said that despite Rosebank being the biggest single commitment capital spend, Captain is the second, and that's because we're doing drilling on the Captain field and we're also upgrading and extending the life of lots of aspects over the field through the Flotel campaign that we're kicking off this summer with the Safe Caledonia coming in and a number of kind of major upgrades scopes. So Captain is material. So when you add the polymer injection in, you're well over $150 million of investment in Captain. So that's a big program. Cygnus clearly is a drilling program on the field as the Seagull continues. So these are the kind of operating positions and then you've got the non-operated investments in like the J Area, et cetera, that comes through. So I think the guidance is as per the year-end, but the adjustments for Cygnus, so a consistent story of kind of capital investment or core assets. In terms of the tax question, just restate that one, Werner, so I make sure I got that one right.

Yes. So just wanting to know, of the combined cash tax payments you're expecting to make, how much of it is EPL versus CT and SCT? Is it pretty much all EPL?

Yes. As per our kind of track record, it's very largely EPL. So what was paid in Q1 was $20-odd million, of which about $16 million was EPL, another $6 million or so SCT or CT and SCT. So there will be some CT to pay as well. And clearly, the deals move things around as well in terms of assets in the group. But yes, it must be 90% EPL on the cash tax forecast.

Our next question comes from Chris Wheaton from Stifel.

Well done on the production uptime in 1Q. I think huge pat on the back to Odin and his perfect day plan because it's clearly paying dividends. My first question is around that. Is it possible for you to give some more detail on the particular assets to bridge from the 116,000 a day you did in 4Q to the 127,000 a day in 1Q? It feels like most of that upside was from Talbot and Jocelyn, but that also means the decline was offset by better performance in the base. I'm kind of interested, is that characterization accurate? Then a couple of questions for Iain, if I may. Firstly, can you give us numbers on cash tax and working capital outflow to bridge from that operating cash flow to net cash flow? And secondly, in your commentary, you talked about underlying OpEx inflation. I'm interested in what you think that OpEx inflation is because clearly, the windfall tax is having an impact on activity, it's driving up costs. What kind of cost inflation are you starting to see in the North Sea?

Yes. I'll maybe -- let me start with the first thing and give work back on the production to Luciano. But so in terms of inflation, I guess, we're already seeing cost inflation in our base, as I said of FX impact, which is -- it's relatively minor, but you move from the high $1.20s to $1.33, $1.34. And we're well hedged on FX actually, but it still has some impact in terms of the flow-through of the numbers. But I think we're continuing to see our very active cost management and supply chain management working with our vendors and long-term suppliers in terms of arrangements. That means that we've got a very stable cost base. And in fact, with the Eni and Neptune assets coming in, we've been looking at all of our contracts, again, as part of that integration process as normal. And again, just seeing the day-by-day small synergistic aspects of building a wider portfolio with the same supplier. So I think in terms of OpEx, it's primarily a bit of FX noise rather than basin wide inflation, I think, coming in. We are seeing less suppliers in the basin able to offer services, still competition but not significant inflation in costs. In terms of the operating cash flow bridge, few people get so interested in the bridge details, Chris, but I know you do. So in the...

[Technical Difficulty].

Not at all, not at all. I think on Page 16 of our financial report, if you dig around in there, you'll see that there's $21.7 million of cash tax paid in the quarter. As I said, $16 million of that was EPL. And you can see the inventory movement as well of $140 million negative in the working capital with some kind of other adjustments, minor in terms of receivables and payables. So I think it's pretty well bridged on Page 16 of the financial statements, but happy to expand more as required either online or off-line.

Well, back on the question for -- on the performances. In reality, we had very good -- pretty good performances distributed across several fields. I mean, you don't make that from one field only. As much as we are protected because there are several fields and so the downsides are typically distributed, but also the upside have to be pretty distributed. So going to the specifics, both our operated major fields, Captain as I spoke earlier, and Cygnus, with its pretty high efficiency, were a bigger contributor, but also the J Area, as I mentioned earlier, with increased performance or enhanced performance of Talbot and Jocelyn South. Elgin Franklin also had a pretty good performance, with an optimized management of rig movements that had been planned and then eventually were reduced in terms of the downtime. And Seagull as well had good performance. So most fields had better performances and particularly the big ones had better performances. So that is how we made the number in the first quarter.

[Operator Instructions] Next question comes from Mark Wilson from Jefferies.

Obviously, we're seeing Ithaca continuing with its strategy of consolidation in the U.K. North Sea with the deals. And arguably, you seem to be something of an outlier in that regard. So that would probably be my first question. Do you agree with that statement? And what sort of competition have you been seeing for some of these recent deals you've done? And then the next point would be, I think, really a big catalyst would be to see farm-ins to some of the assets that you have, obviously, notably Cambo would be one of those. But if we could -- you could speak to that, secondly, and what kind of -- is there a potential time line that anyone should think of that? Or do we have to have clarity on the environmental and the tax situation longer term before anything like that could happen?

Thanks, Mark. I'll take these. So in terms of growth in the UKCS, if we're an outlier, I think it's a -- sometimes reality is, I guess, is the best way to look at things, right? So I think we're being active. In the last year, we've completed the Eni combination and to other, albeit smaller, but not insignificant deals. So we're active. I think -- and I've said this publicly, the places, I believe that when you look at the UKCS and the cost base you operate in, consolidation is important, right? So scale, the ability to get to scale gives you a lot of advantages. And you're seeing this through our numbers, right? So we have a great team, and we're focused and we know what we're doing. But obviously, the scale helps. So it helps driving costs down, it helps in kind of diversification. So we see consolidation as something that's really important. And in terms of competition, so we know there were other players that were looking at the assets that we were looking at. I can't tell you that we see this as competition per se. As I said, we're focused on meeting our investment criteria. We're very rigorous and -- when we analyze this. And I think counterparties or sellers, because of track record Ithaca has, sees us as a serious counterparty that can move quickly. You have to take decision quickly, be agile. We have our balance sheet that allows us to move quickly on opportunities as we've mentioned earlier. So I think from that perspective, I guess we're more active than others, yes. On farm-in opportunities, specifically, you mentioned Cambo. So again, we've said we look -- we'll not do Cambo at 100%. Where Ithaca is right now, we would look for farm-in partners. We do think that with the overall environment towards the North Sea potentially changing and some sensible decisions from the government, hopefully, in fiscal and future of the North Sea, I believe we'll have a few candidates that will look at this as part of their West of Shetland strategy. So -- but we do need to see where we're post-EPL environment lands and how it looks before taking a final investment decision, that's for sure. So we would like to see farm-in partners that could support, obviously, the project from the financial perspective, but also via technical sanity check for us. So yes, we're -- as we've said, we would like to bring in partners for that.

We currently have no further questions. So I'd like to hand back to Yaniv Friedman for some closing remarks.

Thank you very much for joining and for the questions. We appreciate that, and we'll see you next quarter. Thank you very much.

This concludes today's call. Thank you very much for joining. You may now disconnect your lines.