Investors Eye Ithaca Energy’s 12.4% Yield Amid Market Turbulence

Investors are taking a closer look at Ithaca Energy, a North Sea oil and gas producer, which now offers a substantial dividend yield of 12.4%. This comes after a significant drop in the company’s share price, following announcements from two major shareholders, DKL Energy and Eni UK, regarding a sale of their shares at a 10% discount. The sale on September 2, 2025, contributed to a staggering decline of over 18% in the stock’s value over just four days.

Despite the recent volatility, Ithaca Energy’s high yield is attracting income-focused investors. As of early September, the FTSE 250 index yields 3.38%, slightly outperforming the FTSE 100, which offers 3.36%. This differential is partly attributed to share buybacks, with members of the FTSE 100 having spent £39 billion on repurchasing their own shares instead of returning cash to shareholders directly.

Financial Performance and Tax Challenges

Ithaca Energy’s recent financial results reveal both strengths and weaknesses. For the six months ending June 30, 2025, the company reported a profit before tax of $513 million. However, the effective tax charge reached an astonishing $731 million, reflecting an effective tax rate of 143%. This figure is significantly influenced by a windfall tax levied on North Sea profits, which has placed additional strain on the sector.

The tax burden includes $292 million in deferred tax, which does not require immediate payment and may be settled in the future. This accounting treatment complicates the assessment of Ithaca’s current financial health. Nevertheless, the company generated $1 billion in operating cash flow during the first half of 2025, allowing it to reduce net debt by $214 million.

Ithaca Energy’s production is also on the rise, increasing by 133% compared to the same period in 2024, thanks to a series of strategic acquisitions. The company plans to return $500 million to shareholders for the financial year 2025 and has announced it will accelerate the timing of its next two dividend payments, citing “excellent operational performance.”

Future Outlook and Industry Advocacy

The company is actively engaging with the government to advocate for an alternative to the current energy profits levy, which has been a point of contention in the industry. The outcome of these discussions may become clearer in November when the Chancellor is expected to address the sector’s concerns.

Despite prevailing low oil and gas prices, Ithaca Energy demonstrates resilience and potential for income investors. With its attractive yield and ongoing efforts to adapt to regulatory challenges, the company may warrant further consideration for those seeking dividend-paying stocks in a complex financial landscape. Investors should weigh these factors carefully before making decisions, especially given the inherent volatility in the energy sector.