Berenberg has initiated coverage of Ithaca Energy plc with a "buy" rating and set a 270 pence price target, pointing to the company’s recent production growth and the outlook for shareholder returns as the primary investment case.
The broker expects Ithaca’s production to be maintained above 120,000 barrels of oil equivalent per day (kboe/d) into the 2030s, a level the bank says will generate the cash flow necessary to support the company's dividend and distribution guidance.
Berenberg noted that Ithaca achieved pro-forma production growth of 87% between 2023 and 2025, an increase it says was driven mainly by the merger with Eni’s UK business. Reported production rose to 119,000 boe/d in 2025, up from 70,000 boe/d in 2023.
On reserves and developments, the broker projects the current 2P portfolio together with the Fotla, Tornado and Cambo projects can sustain production until 2032. That timeline is central to Berenberg’s view on the company’s forward cash-generation potential.
Turning to the balance sheet, Ithaca finished the first quarter with net debt of $1.1 billion, which Berenberg says equates to leverage of less than 0.6 times, and with committed liquidity of $1.6 billion. The bank expects net debt to rise over the next two to three years, attributing the increase to higher capital expenditure - principally at the Cambo development - and to its assumption of lower European gas prices. Despite the anticipated rise in net debt, Berenberg maintains that leverage should remain below 1.0 times EBITDA.
Since 2023, Ithaca has returned $1.2 billion to shareholders in the form of dividends, and the company has recently raised its cash-from-operations (CFFO) distribution guidance to 20-35% from a prior 15-30% range. Berenberg models a cash dividend yield of 11% for both 2026 and 2027, and forecasts a medium-term yield range of 7-10%.
Policy developments in the United Kingdom also factor into Berenberg’s analysis. The bank says the government has appeared more receptive to favourable fiscal adjustments, specifically mentioning the potential removal of the Energy Profits Levy. The analysts caution that recent leadership changes create uncertainty around the timing and outcome of any fiscal decisions, but state their view that March 2030 remains the worst-case timing scenario for repeal.
In a scenario where the levy expires two years earlier than assumed, Berenberg’s model implies a 72% increase in free cash flow to equity (FCFE) for 2027-2030 and a 12% rise in risked net asset value (NAV).
Berenberg highlights key risks to its outlook: commodity price volatility given ongoing disruption in the Middle East; the potential for underperformance at crucial assets; and the possibility Ithaca may not secure accretive M&A opportunities on attractive terms. These risks inform the broker’s valuation and sensitivity analysis.
The bank values Ithaca using a combination of net asset value and target multiples based on 2027 forecasts, specifically 2027 EV/EBITDA and EV/DACF. Under current market pricing, Berenberg states the shares trade on a 2027 EV/EBITDA multiple of 3.6 times and an EV/DACF multiple of 5.1 times.
Summary
Berenberg starts coverage of Ithaca with a buy rating and a 270p price target, citing sustained production above 120kboe/d into the 2030s, a strong dividend record and potential upside from UK fiscal changes, while noting near-term increases in capex-driven net debt and several operational and commodity risks.