Ithaca Energy plc ($ITH)

[Audio Gap] Q1 2026 Results Investor and Analyst Call. My name is Seb, and I'll be the operator for your call today. [Operator Instructions] I will now hand the floor over to Yaniv Friedman, Executive Chairman, to begin the call. Please go ahead.

Thank you, Seb. Good morning, everyone. Thank you for joining our Q1 2026 results presentation. I'm Yaniv Friedman, I'm the Executive Chairman of Ithaca Energy plc. With me on our call today is Luciano Vasques, our CEO; and Iain Lewis, our CFO. A strong Q1, as the first slide says, delivering on our strategy. And in today's agenda, we'll cover our Q1 2026 highlights, strategic and operational highlights and financial highlights. And as always, we'll close with Q&A. If you at Q4 -- if you'll move to Slide 4. So our capital allocation policy supports our attractive shareholder return. So what we wanted to show you is how this plays into this quarter. As mentioned, strong production, robust production that is supporting strong cash flow generation and we're seeing the strong performance trending into Q2 -- in Q1, 126,000 barrels a day of production. It took a hard look in optimizing and accelerating activity across our portfolio in this elevated commodity price environment. So that's been a focus of the business in the past 3 months on really how to optimize and look for opportunities in this market. On the profit side, we have a strong hedge book that underpins our shareholders' returns and our investment plans. We are taking advantage of volatility. So Iain will speak to this later, but we're now able to also hedge at attractive prices into [ 2028 ] keeping upside exposure. Full year dividends trending to the upper end of our range, and we expect it to be above $500 million for full year 2026. And with this enhanced cash flow generation, this gives us capital to unlock and accelerate growth opportunities and we'll speak to that later. If you move to Slide 6. So I'm always proud to say that we're executing across all of our strategic pillars. So we're optimizing production, as I said, in these elevated commodities prices where we took a thorough review of our portfolio and try to identify every upside opportunity that we had this year, Luciano will give an example to that. We're building strong momentum in unlocking organic development opportunities with projects that meet all of our robust and certain investment metrics, we're pushing them closer to a final investment decision. We've concluded the Tobermory farm-in in Q1 and farm down of 45% stake in Fotla to Harbour Energy that further supports organic growth opportunities and value creation. And we're continuing to be active but disciplined in pursuit of M&A opportunities, both in the U.K. and internationally. Bottom line, at the same time, delivering attractive shareholders' return and as mentioned, expected dividend to be at the higher range -- at the higher end of the range for 2026. With this, I'll hand over to Luciano on Slide 7 to talk about our safe and robust production.

Thank you, Yaniv, and good morning, everybody, and I will focus -- yes. Can you hear me? And thank you, everybody, for joining. We'll focus on the activities that we have put in, in Q1, has been a very intense quarter activities spanning in various directions to deliver our strategy. In particular, we have kept on with a strong operational performance in all key metrics. We have created space for a number of additional key activities in support of our organic growth, such a long-term rig sharing agreement and in a period of elevated commodity prices, we have intensely reviewed options to maximize our output in this period, accelerate investments, defer optimizing the plants, deferring some activities. So we can go to next slide, which is Slide #8. And of course, this has happened always with a very strong focus on HSE, where we have continued delivering an excellent safety and environmental performance. This meant zero Tier 1 and Tier 2 process safety events, just like our last 2 years, and a continued strong personal safety performance, showing a positive trend in our incident frequency. In particular, we are registering a 3-month long run without any recordable incident throughout our activities. And our emission level, which is measured, as you remember in intensity of CO2 versus barrel oil equivalent continues to be substantially lower than the average in the UKCS basin, and it will be expected to improve with the cessation of production of 2 late-life assets in 2026. We can move to the next slide now and focus on our production which has been of 126,000 barrels per day in the first quarter, in line with our full year 2026 guidance. despite we have extraordinarily challenging conditions with weather or a severity that had never been experienced in decades, which has impaired our ability to operate regularly for several weeks across January and mid-February. But even so, after an average of 120,000 barrels per day in January, which were only weather related, we reached a 2-month average of 129,000 barrels equivalent per day. reflecting a strong recovery that continued into Q2 and allowing us to support our 2026 guidance of 120,000, 130,000 barrel per day. Moving to next slide. I mentioned earlier about a strategic agreement for long-term sharing commitment to secure a rig for our operations. This was with a view of supporting various activities across the spectrum of our strategy. So we have finalized an agreement with Harbour Energy, which foresees the sharing on a 50-50 basis. of the use of the semi submersible rig, PBLJ for a period spans from 2026 to 2030. And this agreement serves actually several purposes in our strategy, will be utilized on multiple assets. It will allow to perform in fuel drilling activities whenever we identify opportunities or where there are requirements, but a quick call. So short-term intervention. It supports our organic growth plans, and in particular, it is planned to be utilized for the development of our Fotla project that Yaniv just mentioned, also in partnership with Harbour, and also will allow to deliver in an efficient and flexible way our P&A program as we have committed to, and we have shared it with the regulators. In all, the rig offers efficient commercial condition, of course, thanks to the long-term commitment, flexibility of intervention, sharing of the associated costs, specifically logistically, and added to proven performance record of this rig in the area. We can go to next slide now. And one of the assets that sees an example of our activities -- intense activities in Q1 is, of course, Captain where several actions have been ongoing. On one hand, we are having good progress with our drilling campaign. One well has been put in production at the beginning of the year. One is at its final steps right now expected to come online meaningfully, and we have one more workover for a third new well expected to come online in summer, and further activities towards the end of the year plan then to come on stream early '27. Coming to the PBLJ that I just mentioned, it is in fact planned to intervene on well B15, one of those cases where the immediate availability of a rig makes it possible to add locked in production as a response to a favorable commodity price environment, as we mentioned. And lastly, to reaffirm the strategic and long-term value of the asset, we have successfully completed our maintenance campaign and the Fotla Safe Caledonia left the site in February, after completing an extensive activity plan to safeguard the environmental and operational performance of the asset in its continued life. If we go to next slide, Slide #12, to move to our Cygnus asset, where the infill well campaign continued at pace. After the spudding of well C13 in Q4 last year, production started in early May with a quite efficient well operation on a first-of-its-kind well for Ithaca, giving now better performance than we have prognosed. And then we have moved to the next scheduled well, C14, as part of the 3-well program in the year with C15 planned to spud in Q4 this year. in support of an asset that is performing rather well. And we are currently maturing business cases for subsequent infill wells that are expected to be sanctioned during the summer. We move to next slide. And this year also sees an increase of our decommissioning activities, in particular, the cessation of production of the group Greater Stella area, comprising of Stella, Higher and Abigail fields, bringing the end of the operator hub, FPF1 after 9 years of production, which occurred on the 27th of March and then also the imminent COP of the Alba field coming in the next weeks. One example of agility and value-driven planning has been, in fact, the Greatest Stella Area where we managed to modify it at a short call the complex schedule. And we got a temporary extension to the COP date by 27 days ahead of the FPF1 platform sailing to Norway for dismantling and recycling and the benefit of the strong commodity price environment. And this operation alone allowed to gain $7 million additional dollars in cash flow with no impact to the overall plan. If we go to the next slide with a focus on Rosebank -- moving to Rosebank, the development project has entered its final full year of development activity, and it's progressing towards first production within the operator stated window of 2026-2027. Rosebank FPSO successfully sailed away from Dubai in Q1, having undertaken major refurbishment works over the past 2.5 years. Remaining scope are planned later this year as part of the program to hook up and commission the asset in field ahead of its first production. The drilling campaign commenced also end of Q1 this year with a campaign due to extend over 18 months, targeting 7 wells. An equipment handling incident has seen the rig come offline in April with the rig operator now estimating a period of 3 to 4 months remediation before returning the rig to hire. As more data becomes available in the coming weeks, this schedule will be refined. And with that, I hand it over back to Yaniv.

Yes. Thank you, Luciano. And as Luciano mentioned, this is exactly the thing -- the type of things this quarter. looking specifically on our existing assets and how can you optimize and maximize the Greater Stella Area as an example, Cygnus infill and Captain infill wells that will provide additional cash flows in this high commodity environment. If we move on, I'm on Slide 15. So as we've said, strong cash flow generation supporting the advancement of the group's material pipeline of organic growth opportunities. We have high-value infrastructure-led investments. We'll talk in a bit more detail on tornado in the next couple of slides that we've decided to accelerate in this climate and we look to mature and prioritize infrastructure-led exploration in the Greater Cygnus and Western Shetland area. I mentioned the firm out of agreement on the Fotla development that was signed with Harbour Energy and again, building on the existing infrastructure partnership in the Greater Butani area and establishing the commercial framework to move projects towards sanction in 2026. If I move to Slide 16, and this is a slide that we wanted to focus on, gives you kind of FID corridors for our projects, but more importantly, shows the optionality that we have in our portfolio, the strength of our portfolio. So we have over 200 million barrels of oil equivalent of resources that we're taking towards FID within the next 24 months. So it's a material pipeline of organic growth opportunities that we're advancing. And if we'll focus on the 2 first ones here. There are a lot of colors from but we will take it from -- or we assess projects, select concept, design and prepare for FID and then our FID corridor with execution. So we're looking here at our opportunity and the opportunity. It just gives you a sense of the strength and optionality that we have within our portfolio. So last time we spoke more about Cambo. This time, we want to focus on the 2 projects that we're pushing towards FID in 2026. And if you look at Fotla at next slide in more detail, so Slide 17, it's really a demonstration of how we work. So it's a strong -- it's a journey of strong conviction and really leading projects into execution and pushing them towards FID. So this with Fotla is an interesting story. It's an investment in an exploration well, countercyclical, right through COVID with a rig that was mobilized then and achieved exploration success. We further bought our partner's interest in 2023 and had 100% in this. Fotla field development and environmental statement was submitted in 2025, including long lead and recontract. So we're moving this project into the execution phase. And the farming agreement with Harbour builds on, as we said, existing partnership in the Greater Britannia area and establishing a strong commercial framework to move projects towards final investment decision. So you could say, hey, this is 10 million barrels of oil equivalent, but these are the type of things that the business. These are high-value opportunities that we're taking towards to FID increasing resources and production. Tornado, another example of a project that we're accelerating and pushing in 2026, which is part of our West of Shetland strategy, in this case gas strategy, and it's getting momentum -- gaining momentum with a material opportunity set. So progressing through the regulatory approval thresholds. It will serve as a key enabler for future tiebacks and foundation for additional value creation and other tiebacks and serve really as a gas hub and it's catalyst for further infrastructure-led exploration. is one example of prospects that can identify as a leading opportunity, but really supporting upside in a strategically important U.K. gas resource. And yes, this is a larger project in terms of net resources. But again, these are all building blocks of the future of production in our home market, which is the UKCS. If we move to Slide 19, just to show how we think about these things, right? So all projects are competing for capital within the organization across our portfolio and writing favorably. So if we look at kind of a snapshot of economics of the projects that we've just mentioned, so you're seeing here that gross resource, the net capital cost in Fotla and the estimated projected investment rate of return -- rate of return and really ticking the box on all of our investment criteria. Same with Tornado, obviously, a larger project. So capital costs around $450 million, estimated IRR above 50%, but again, ticking the box on all of our investment criteria. And if you're really curious on what that means, there in our previous presentations in more detail. Moving to financial highlights, I'll hand over to Iain Lewis, our CFO. Iain, please.

Many thanks, Yaniv. Good morning, everyone. So Slide 21, please. I'll just call out some of the key numbers for the quarter financially and starting with 126,000 barrels average production for the quarter and $18 per barrel of OpEx. Again, this is our kind of reset cost per barrel, which we expect through the year and demonstrates a high netback portfolio. And of course, that delivers on EBITDAX at $0.6 billion for the quarter and cash from operations of $0.4 billion, $67 million of profit in the period after tax and $151 million of free cash flow. So the delivery of cash from strong production and low cost per barrel and low taxes as our portfolio delivers and capital invests across the basin. Now in terms of investment, which Yaniv talked to adjusted net debt is at $1.1 billion, leaving us with a low pro forma leverage ratio of 0.54x and $1.6 billion of liquidity. And this speaks to the opportunity the business has to continue to invest and to continue to deliver cash flow and dividends to shareholders. So moving on to the next slide, Slide 22, which gives us some of the details of EBITDAX. Just a couple of things I would call out here. We talk about stability in terms of production and the top line there. You can see the full year 2025, 119, and you can see the Q1 '26 number of 126 and our guidance range for the year of 120 to 130, stable production across the period continuing to uplift from 2025 outturn. As you go through the next slide, which talks about the revenue recognized per barrel, you can see an uplift clearly in Q1 and before hedge adjustments, $85 per barrel average and then $7 per barrel adjustment for hedging losses in the quarter. So still a strong $78 per barrel coming off of the revenue line. Oil and gas stock movements, inventory draws at different prices being the numbers overall in terms of production value, but those stable operating costs of $18 per barrel delivers a strong outturn for the quarter. So as prices have escalated in March, we're starting to deliver on higher cash flow and higher EBITDAX, which we expect to come through in the remaining part of the year. Moving to Slide 23. And the financial framework, just restated here, just to confirm the details, the adjusted net debt figure with a low $1.1 billion at the close of the quarter as net debt ticks down with cash generation, continued very high available liquidity with $1.6 billion available to us. And I was calling out again the unused accordion facility, which we have already taken part of our RBL, but still available to us. And that ticked down in net debt to EBITDAX, which is a reflection of the cash generation of the business. So on to hedging and clearly, very interesting commodity markets. And what we have been doing in the business is ensuring that we have stable cash delivery for dividend, but upside exposure. And we balance in oil and gas. And as we reflected on in our March year-end result release, we call oil in the short term, but there is upside in the oil book, but there's also very significant upside in the gas book. And these 2 things offset each other. We, of course, in the quarter are really 50-50 in terms of oil and gas production. So gas delivery of upside value is very relevant to us. And what we've been doing in the past couple of months, particularly is focusing on delivering cash flow out into the future and out to '28 as prices evolve in the market, clearly volatile and moving. But you can see on the left hand side in the oil hedge book in the dark green dotted lines that the upward tick in our colors have been able to be moved through in the 2028, including a $60 to nearly $100 oil color position through 2028. And this, of course, the short-term changes in commodity markets impact us. We are looking for a long-term stable cash flows with obviously optionality and delivery. And that's what we're seeing in the hedge book as we move forward through '27 and into '28. Details of this is on Slide 25 and 26, which we always give to the market being very transparent. Key thing here is really on '25 and '26. If we move to Slide 25, the wide collar positions on as well as the unhedged positions on oil, giving the material upside, but given base cash flow delivery as we move through the next cycle of commodity prices depending on events in Middle East and obviously, global economic outcome. Next slide, Slide 26, again, shows the very significant upside in gas that we've left in the element in the bar chart showing the significant upside on white colors. For example, in Q2, just now, we're at 124 as well as the unhedged volumes. We're delivering that on a white color up at nearly 100p average for everything else. So very high gas price delivery through the hedge book and solid oil delivery. And that leads us to Page 27. Slide 27 on the dividend. And the scale, the stability and the strength of the business is around longevity and seeing barrels brought through from continued resources to reserves. It's about developing and of M&A, but it's about stable delivery of returns to shareholders. And this is where the slide has showed the history from '23, '24, '25 and where we are today, we committed to 30% post tax cash from operations. That enables us to share the upside at the market with our shareholders. And the range we gave at the first results release for the year at the year-end was $470 million to $520 million. We can see that now with the higher prices expected to be above $500 there's obviously a strong trajectory upwards. And our long-term distribution range is 20% to 35% of post-tax cash from operations. Again, this is about confirming to our investors that we plan and we deliver and we hedge to ensure that we can continue to deliver strong returns to shareholders and in this environment that is different with upside available on that 30% post-tax cash from operations commitment for the year. Okay. I'll hand back to Yaniv to close it.

Thank you, Iain. So as you can see, a strong quarter with robust operational performance, as mentioned, trending into Q2 and strong financial performance. We have confidence in our operations. We're seeing strong execution of our strategy and capital to invest for longer-term growth. A strong focus in the last 3 months on optimizing and accelerating organic investment to deliver incremental barrels during high commodity price environment. So this has been a focus of the business that we expect that will pay off in the future. Material evolution, as mentioned of our organic operated and non operated portfolio, that's benefiting from this elevated commodity prices with a strong momentum towards FID. Iain mentioned our dividend. So upper end of the guidance expectation of delivering above $500 million for the full year. 2026 on the current trajectory with a very strong balance sheet that also gives us the firepower for further opportunities. Before we move to Q&A, sometimes I will tell people dropped, so I would like to take the opportunity, first of all, to thank everyone that joined and also thank the great Ithaca team that have been doing all the work behind the scenes. So as I always say, this is a work of many. So thank you for another really strong quarter. With that, let's move to questions and answers.

[Operator Instructions] And our first question on the line is from Cian Evans-Cowie from Bank of America.

I just have 2, please. I wonder if I can kick off by tackling the high-level U.K. question and ask a bit of a nasty one first. So we're all aware of the uncertainty in the state of play of domestic politics in the U.K. I wonder if you can tell us how you feel about the level of risk, if any, you see to consensus that you're waiting from the government. And related to that, do you think it's having an impact in the -- on the level of interest in Cambo from potential partners at the moment? And then secondly, please, you've talked quite a bit about your hedging in there. I wonder if you can tell us where the market dynamics are at the moment in terms of where you're managing to sell your unhedged barrels versus benchmark prices that we're able to track on our screens. And also it would be very useful if you're able to say how that has changed quarter to date.

Thanks, Cian. Yes. So I'll take both of those in here. Yes. So in terms of politics, obviously, we don't comment on politics, and you wouldn't expect us to. I think in terms of regulatory process, look, they're clear, they're legal processes and they're being worked through. So we have a clear framework laid out including the Scope 3 framework laid out as we need to work through now with our developments, which we're doing, and they're running their course with public and responses are being provided, et cetera, through decision-making. So I think it's probably a straightforward process answer to be honest, Cian, and we continue to operate under the licenses as provided to us by the government and expect to be able to do so appropriately as we move these projects forward, including.

In terms of hedging, so yes, very volatile margins and indeed a lot of has been made of the difference between the Brent futures market and the fact that the dated Brent market where we sell our oil. In terms of what we are receiving generally, it's above the Brent futures, but obviously, we have hedged a lot of oil. The interest in oil continues understandably I'd just say keep your eye on gas, the MVP prices have been very strong and are not watched in quite the same way, but as I said in my section of the presentation, half of our production is gas deliberately moved to that balance last year with the acquisition of additional Cygnus interest and that delivers a lot of upside in the MVP side. So we're seeing strong pricing, and we're seeing Brent particularly strong. And of course, there's questions about where that goes. but subject to a lot of geopolitical decisions and movements.

To add to that Yes, maybe to add to that, I think, Cian, what we're trying to do, hopefully, successfully is really prepare the business on a forward-looking basis and make sure that we have the stability and profitability in our -- in the ability to invest in our assets and of course, distributions. As Iain mentioned, taking advantage of volatility when it's there. So hopefully, you see that as well.

Next question is from Sasikanth Chilukuru from Jefferies.

I had 2, please. First, I just wanted to revert back to Cambo. You highlighted FID next expected next year. Just wondering what else would you require to take FID here and expand on how the project compares on your investment criteria? Or are you just waiting for a farm-in partner and -- yes, I was asked as well, what's the latest here? The second was regarding acquisitions. There have been unconfirmed press reports of a major looking to divest part or all of its assets in the U.K. Just wanted to understand your position on whether you have the appetite to do a material acquisition of any U.K. asset portfolio.

Yes, Good to hear from you. On Cambo, we're progressing the project, and we spoke a lot about this last time, we're progressing the project towards FID, ticking the box on everything that we need to do, obviously, technically prepare for it financially, including financing and at the same time, pushing forward all the regulatory aspects that and as you can imagine, we need consent to move the project forward. We expect we'll get them. This is a robust project. We've shown last time, the effect that this has on the U.K. going forward, and we expect the right decision will be taken and allow us to take this to fund investment decision next year. But we're progressing this, and we believe that this project will materialize economically. It's breaking favorably in our list of projects. We saw the slide I was talking to earlier. So all these projects are projects that meet our very rigorous investment criteria, and our intention is to take a final investment decision on all of them and including, as you mentioned, bringing in a farm in partner into Cambo. On the M&A side, I'm not going to comment on anything specific. Again, the point that I want to reiterate is that we're looking at opportunities from a value angle perspective and I think needs to meet our investment criteria. We would like to do more in our core market. And as you can see, we're, I think definitely one of the players who keep investing in the U.K. So -- but at the same time, we're comparing and looking at other opportunities on how we grow and diversify the business going forward. So do we want to do further consolidation in our core UKCS market? Yes, but it needs to meet our investment criteria and kind of high-grade hybrid portfolio. So it's not just a scale for the sake of scale.

Next question on the line is from Nash Cui with Barclays.

I have 2, please. The first one relates to Slide 8, and I'm really impressed by your safety data, 0 safety events for 30 days, as you mentioned during the presentation. And I wonder what have you done right to improve this substantially over the last few years? And my second question is more on macro and your view for the market. So the market recently seems to expect oil prices to remain elevated for longer. And I wonder how does that align with your own outlook and linked to that, how would a sustained higher price environment lead you to adjust your own growth strategy or capital allocation plans?

All right. Thank you. Well, of course, we are very pleased with the results. But what we have done, we've gone back to basics and we have looked at the root cause of everything. We've looked at all our events. We've looked at all our incidents. We have looked at all our actions that were outstanding to be worked on. We've looked at our culture. We've spent a lot of time in elevating the attention, the way the people communicate, the transparency, the openness and so try to understand exactly what was happening in all directions. And so that -- we've worked fundamentally what you call the leading indicators, the things that make your life better. And then this eventually has delivered on the lagging indicators, which are the ones that we measure. So this is fundamentally the action of a long period of attention, and we have elevated that at all levels in the company. We talk about it and we act on it a lot throughout our different assets and departments.

Yes. I'll take the second question, but thank you for the question of safety because people don't often ask about this. And I think that as Luciano said, that's a real focus for us and thank you for bringing it. So I appreciate it. On commodities prices, we're not speculators. We plan our business and as mentioned and Iain could further talk about this on our hedging strategy, again, take advantage of volatility. But I think what we're seeing right now, as you said, is a prolonged kind of elevated prices. Now I don't know if that's going to stay at the $100-plus barrel or settle down somewhere lower than that. But I think what we're doing in the business is this is what I tried to emphasize earlier is we took a very hard look at this conflict started and through March and everything that we can do to get more out of the business, especially in these elevated prices. The GSA example that Luciano gave earlier is a perfect one. It's not a huge contribution to our cash flow, but every dollar counts, right? So the ability to extend production even by 10 days or 2 weeks generated more for us than these elevated prices. We've -- we're accelerating some projects that we were looking to do potentially in advance during the year. So we're accelerating this in this environment because we see the potential for higher returns. So overall, it's a focus of the organization on how to maximize value and allocate capital in a disciplined manner in this environment. Do you want to add something on hedging?

Yes. I would just add, Nash, to that, I mean as Yaniv said, this is short term and long term. Short term, it's all about maximum delivery of barrels, clearly in a high price environment. It wouldn't always be like this. And we hedge and use the market forward positions to secure cash flow for capital delivery when prices will be lower than this. And so I think we've always believed in long-term oil and gas demand in the West, particularly in growing globally. You've seen obviously, in the last 6 months, the world has changed in terms of the view of that within the that's just aligned our view that oil and gas are going to be critical and responsible delivery of that by good operators is going to be very valuable. That's where we see ourselves, what we're investing for. So it's very much a long-term view and we plan the business around that and the cash flow protection around that. But obviously, short-term delivery. And the thing we do -- what we did with our asset, keeping it on for an extra month to deliver extra cash flow is a great example of short-term intervention that delivered value, but it's really the long-term capital.

Next question is from Werner Riding with Peel Hunt.

Apologies if my question has already been answered. I had technical issues. But depending on the day you're able to produce, I guess, roughly in and around and up to about 150,000 BOEs a day from the current portfolio. As you mentioned, Rosebank other FIDs, Fotla, Tornado, potentially Cambo will help you grow and sustain those rates into the 2030s. But can you elaborate a little bit on future expansion beyond the portfolio? And Yaniv perhaps set out your corporate ambitions in terms of size, scale. How are you going to get there, especially in the context of your potential inclusion in the FTSE 100?

Thanks, Werner. Yes, so we're -- we kind of are pillars of growth, right around organic and the strength and optionality that we have in our portfolio. And when you look at this and as we said, we're looking to take final investment decision in the next 24 months on over 200 million barrels of oil equivalent, which is significant, and at the same time, keep looking for growth opportunities through acquisitions. I answered that earlier, but we now see the value in diversification. So we're -- as we said, we're not shy about this. We're saying that we're looking, but we're being very disciplined and looking at what can high-grade our portfolio and where can we focus and replicate the Ithaca success going forward. So that's something that's very important for us and especially in this environment. So I'm not going to talk on in terms of barrels a day of production of growth, but we said last time that we're working internally on getting to 1 billion barrels of resources. So that's in our core UKCS market. And ideally, we would like to diversify out of the U.K. and into a basin that we can grow in and sort of building a similar story to what Ithaca did in the U.K.

Next question is from James Carmichael with Berenberg.

Again, apologies if you've been answered. Some technical issues on my side, just had 2. Just firstly, on Rosebank, you obviously flagged the issue with government handling on the rig and how long that might be a way getting fixed. Just wondering if there are any costs associated with that or potential penalties due to you just the financial implications, I guess, aside from the obvious delay. And then thinking more broadly on the U.K. and the EPL, Obviously, earlier this year, there was thoughts that it was going to be, cancellation was going to be bought forward to next year. part of that was the energy security investment mechanism kicking in through '27. I was just wondering if how the tone of conversations with the government has changed given the commodity price view and whether there's still that expectation that the UPL conversation will be brought forward.

Yes, sure. Let me start on the second question. on EPL. And you're right, it's -- there's been discussions within the government. I think right now in the current commodities prices, obviously, even the we -- this would previously be a tax environment anyway. We believe that longer term, this will need to change, right, to really motivate and create an investment environment going forward, and most importantly. Now we said this in our November conference call in Q3 last year. We think that the is a sensible solution. perfect is of the very good in this case, right? So we think it's a sensible solution that we can operate under. And we expect this will be legislated and implemented by the government to allow us, but also other operators to take material in investment decisions in the basin and in backdrop of everything that's happening right now globally, geopolitically, especially in our sector, commodities prices and seeing where the U.K. is ranked in terms of production and U.K. energy security going forward and the volatile and unpredictable world that we're in. we think that would be very wise of the government to really implement the and provide the certainty that we're looking for. Iain, do you want to talk about the effect of the Rosebank incident on costs?

Sure. Happy to. So yes, I'll just add in terms of tax, I think we've been very constructive with the government. We think there's a real opportunity here for the U.K. to deliver on security of supply, but it requires the right environment. And credit to the government, they've come up with the right tax environment. It just needs to be implemented earlier. So Yaniv, in terms of Rosebank, clearly, there's -- with the rig off hire, there's a kind of short-term delay in some of the capital. We haven't amended our guidance yet on that as we reconfirm guidance at the moment. Clearly a lot of work on Rosebank going on this year. It's not just drilling through the hookup on the activity that will be ongoing as well as the continued work on the FPSO commissioning, et cetera. So there will be a reduction in capital, but probably not a hugely material change, but that's to be determined based upon when the rig coming back, obviously. And that's part of the recovery plan as we work through with.

Next question is from Ashley Kelty with Panmure Liberum.

Congrats on good set of numbers today. Just question on Rosebank. Just wondering if you could give us an indication on...

Can you speak louder please? You have a bad connection, if you could just raise your voice a little bit so we can hear you better.

Sorry, is that better?

Yes.

Yes, it was just a quick question on Rosebank. I was wondering if you can tell us sort of how close the vessel is to come in on location. And if you're able to give us any indication around the hookup and commissioning time line and also if the delay with the rig going off higher, if that has any impact on the time line to first production.

Good morning. Well, yes, the -- the FPSO is at this moment in a yard in completing. So the move to location is imminent. The schedule has been reviewed with the operator continuously. And so there is always an arbitration of how much work you better do onshore and how much you leave to be carried out offshore. But definitely, the plan is to having moved on location in Q2 and then start all the activities which are already planned with the vessels for the other hook up and mooring and starting of commissioning. So this is still there in the plan. As Iain said, the FPSO activities are moving on. And as far as the impact of the rig incident is concerned, as we said, the rig operator had indicated a window of when the rig can become available but at this moment, all the assessments are being completed because, of course, there are several moving parts in a handling incident like that. And so the schedule has been refined. So we are not at this moment, in position of saying anything more specific, but the overall picture is that this can be accommodated within the project schedule as it been declared by the operator.

No further questions on the line. So I will hand back to Yaniv to close out the call.

Thank you, everyone, for joining our Q1 numbers and results. Thank you for your questions, and we'll see you again next quarter. Thank you very much. Have a good day.