Annual Information Form

Year Ended

December 31, 2012

March 25, 2013

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TABLE OF CONTENTS

Page No.

ABBREVIATIONS ..........................................................................................................................................2 CONVERSION ...............................................................................................................................................2 FORWARD LOOKING STATEMENTS ..........................................................................................................2 EXCHANGE RATES AND CURRENCY ........................................................................................................4 GLOSSARY ...................................................................................................................................................6 THE CORPORATION ....................................................................................................................................8 GENERAL DEVELOPMENT OF THE BUSINESS.........................................................................................8 DESCRIPTION OF THE BUSINESS AND OPERATIONS...........................................................................10 STATEMENT OF RESERVES DATA AND OTHER OIL AND GAS INFORMATION...................................13 PRINCIPAL PROPERTIES ..........................................................................................................................14 RISK FACTORS...........................................................................................................................................21 DIVIDEND POLICY......................................................................................................................................31 DESCRIPTION OF CAPITAL STRUCTURE................................................................................................31 MARKET FOR SECURITIES .......................................................................................................................31 DIRECTORS AND EXECUTIVE OFFICERS ...............................................................................................32 AUDIT COMMITTEE INFORMATION..........................................................................................................36 LEGAL PROCEEDINGS AND REGULATORY ACTIONS ...........................................................................37 INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS ......................................38 TRANSFER AGENT AND REGISTRAR ......................................................................................................38 MATERIAL CONTRACTS............................................................................................................................38 INTERESTS OF EXPERTS .........................................................................................................................38 ADDITIONAL INFORMATION......................................................................................................................38 SCHEDULE "A" – AUDIT COMMITTEE CHARTER ................................................................................ A–1 SCHEDULE "B" – FORM 51-101 F1 – STATEMENT OF RESERVES DATA AND OTHER OIL AND GAS INFORMATION ....................................................................................................................................... B–1 SCHEDULE "C" – FORM 51-101 F2 – REPORT ON RESERVES DATA BY INDEPENDENT QUALIFIED RESERVES EVALUATOR ....................................................................................................................... C–1 SCHEDULE "D" – FORM 51-101 F3 – REPORT OF MANAGEMENT AND DIRECTORS ON OIL AND GAS DISCLOSURE.......................................................................................................................................... D–1

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ABBREVIATIONS

Oil and Natural Gas Liquids Natural Gas

bbls barrels mcf thousand cubic feet mmbbls million barrels mcf/d thousand cubic feet per day bbls/d barrels per day scf standard cubic foot bopd barrels of oil per day mmscf millions of standard cubic feet NGLs natural gas liquids mmscf/d millions of standard cubic feet per day bcf billion cubic feet Other 2P proven and probable boe

(1) barrel of oil equivalent of crude oil and natural gas on the basis of 1 bbl of crude oil for 6 mcf of natural gas

boe/d barrel of oil equivalent per day mboe/d thousand barrels of oil equivalent per day WTI West Texas Intermediate API a measure established by the American Petroleum Institute of the density or gravity of liquid petroleum

products derived from a specific gravity m meters km kilometers km

2 square kilometers

Note:

(1) The term “boe” may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf:1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

CONVERSION

The following table sets forth certain standard conversions from Standard Imperial Units to the International System of Units (or metric units) or vice versa.

To Convert From To Multiply By

mcf Cubic meters 28.317 Cubic meters Cubic feet 35.315 Cubic meters Barrels 6.289 Feet Meters 0.305 Meters Feet 3.281 Miles Kilometers 1.609 Kilometers Miles 0.621 Acres Hectares 0.405 Hectares Acres 2.471 Gigajoules MMBTU 0.948 MMBTU Mcf 0.970

FORWARD LOOKING STATEMENTS

This annual information form ("AIF") contains certain forward-looking statements and forward-looking information (collectively, “forward-looking statements”) which are based on Ithaca Energy Inc.’s (“Ithaca” or the “Corporation”) internal expectations, estimates, projections, assumptions and beliefs as at the date of such statements or information, including, among other things, assumptions with respect to production, future capital expenditures and cash flow. The reader is cautioned that assumptions used in the preparation of such information may prove to be incorrect. The use of any of the words "anticipate", "continue", "estimate", "expect", "may", "will", "project", "plan", "should", "believe", "could", "scheduled", "targeted" and similar expressions are intended to identify forward-looking statements and forward-looking information. These statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements or information. The Corporation believes that the expectations reflected in those forward-looking statements are reasonable but no assurance can be given that these expectations, or the assumptions underlying these expectations, will prove to be correct and such forward-looking statements and information included in this AIF should not be unduly relied upon. Such forward-looking statements and information speak

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only as of the date of this AIF and the Corporation does not undertake any obligation to publicly update or revise any forward-looking statements or information, except as required by applicable laws.

In particular, this AIF contains specific forward-looking statements pertaining to the following:

• the quality of and future net revenues from the Corporation's reserves;

• oil, NGLs and natural gas production levels;

• commodity prices, foreign currency exchange rates and interest rates;

• capital expenditure programs and other expenditures;

• the sale, farming in, farming out or development of certain exploration properties using third party resources;

• supply and demand for oil, NGLs and natural gas;

• the Corporation's ability to raise capital;

• the Corporation's acquisition strategy, the criteria to be considered in connection therewith and the benefits to be derived therefrom;

• the Corporation's ability to continually add to reserves;

• the Corporation's future obligations under existing contracts with industry participants;

• schedules and timing of certain projects and the Corporation's strategy for growth;

• the Corporation's future operating and financial results;

• the ability of the Corporation to optimize operations and reduce operational expenditures;

• treatment under governmental and other regulatory regimes and tax, environmental and other laws;

• production rates and targeted production levels;

• timing and cost of the development of the Corporation's reserves; and

• estimates of production volumes and reserves in connection with acquisitions.

With respect to forward-looking statements contained in this AIF, the Corporation has made assumptions regarding, among other things:

• Ithaca’s ability to obtain additional drilling rigs and other equipment in a timely manner, as required;

• that access to third party hosts and associated pipelines can be negotiated and accessed within expected timeframes;

• that operational construction and development is achieved within expected timeframes; • the Corporation’s development plan for its properties will be implemented as planned; • reserves volumes assigned to Ithaca’s properties; • the ability to recover reserves volumes assigned to Ithaca’s properties;

• revenues not decreasing below anticipated levels and operating costs not increasing significantly above anticipated levels;

• future oil, NGLs and natural gas production levels from Ithaca’s properties and the prices obtained from the sales of such production;

• the level of future capital expenditure required to exploit and develop reserves; • Ithaca’s ability to obtain financing on acceptable terms, in particular, the Corporation’s ability to

access the loan facility with BNP Paribas; • Ithaca’s reliance on partners and their ability to meet commitments under relevant agreements; and

• the state of the debt and equity markets in the current economic environment.

The Corporation's actual results could differ materially from those anticipated in these forward-looking statements and information as a result of assumptions proving inaccurate and of both known and unknown risks, including the risk factors set forth under "Risk Factors" in this AIF and those set forth below:

• risks associated with the exploration for and development of oil and natural gas reserves in the North Sea;

• risks associated with offshore development and production including offshore production and transport facilities;

• operational risks and liabilities that are not covered by insurance;

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• volatility in market prices for oil, NGLs and natural gas;

• the ability of the Corporation to fund its substantial capital requirements and operations;

• risks associated with ensuring title to the Corporation's properties;

• changes in environmental, health and safety or other legislation applicable to the Corporation's operations, and the Corporation's ability to comply with current and future environmental, health and safety and other laws;

• the accuracy of oil and gas reserve estimates and estimated production levels as they are affected by the Corporation's exploration and development drilling and estimated decline rates;

• the Corporation's success at acquisition, exploration, exploitation and development of reserves;

• the Corporation's reliance on key operational and management personnel;

• the ability of the Corporation to obtain and maintain all of its required permits and licenses;

• competition for, among other things, capital, drilling equipment, acquisitions of reserves, undeveloped lands and skilled personnel;

• changes in general economic, market and business conditions in Canada, North America, the United Kingdom, Europe and worldwide, specifically being the availability of the debt and equity markets to the Corporation;

• actions by governmental or regulatory authorities including changes in income tax laws or changes in tax laws, royalty rates and incentive programs relating to the oil and gas industry;

• adverse regulatory rulings, orders and decisions; and

• risks associated with the nature of the common shares in the capital of the Corporation.

Statements relating to reserves are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described can be profitably produced in the future. Many of these risk factors, other specific risks, uncertainties and material assumptions are discussed in further detail throughout this AIF and in the Management’s Discussion and Analysis for the year ended December 31, 2012. Readers are specifically referred to the risk factors described in the AIF under "Risk Factors" and in other documents the Corporation files from time to time with securities regulatory authorities. Copies of these documents are available without charge from the Corporation or electronically on the internet on Ithaca's SEDAR profile at www.sedar.com.

EXCHANGE RATES AND CURRENCY

The following table shows the average rates of exchange of Canadian dollars for one British pound sterling, expressed in Canadian dollars, in effect during the periods noted; the high and low rates of exchange during such periods; and the rates of exchange at the end of such periods, in each case based on the Bank of Canada average noon spot rate of exchange.

Canadian Dollars per British Pound Sterling

Time Period Average High Low Close Month February 2013 1.5623 1.5844 1.5511 1.5623

January 2013 1.5831 1.6025 1.5717 1.5842

Calendar Year Ended

December 31, 2012 1.5840 1.6187 1.5502 1.6178

December 31, 2011 1.5861 1.6332 1.5297 1.5799

December 31, 2010 1.5918 1.7268 1.4876 1.5513

The following table shows the average rates of exchange of Canadian dollars for one United States dollar, expressed in Canadian dollars, in effect during the periods noted; the high and low rates of exchange during such periods; and the rates of exchange at the end of such periods, in each case based on the Bank of Canada average noon spot rate of exchange.

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Canadian Dollars per United States Dollar Time Period Average High Low Close Month

February 2013 1.0098 1.0285 0.9960 0.9723

January 2013 0.9921 1.0078 0.9839 1.0027

Calendar Year Ended December 31, 2012 0.9996 1.0418 0.9710 1.0051

December 31, 2011 0.9891 1.0604 0.9449 0.9833

December 31, 2010 1.0299 1.0778 0.9946 0.9946

In this AIF, all dollar amounts are expressed in United States dollars, unless otherwise noted.

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GLOSSARY

In this AIF, unless the context otherwise requires, the following words and phrases shall have the meaning set forth below:

"ABCA" means the Business Corporations Act (Alberta), R.S.A. 2000, c. B-9, as amended, including the regulations promulgated thereunder;

"AIF" means this annual information form;

"AIM" means the Alternative Investment Market operated by the London Stock Exchange plc;

"Board of Directors" or "Board" means the Board of Directors of the Corporation, as constituted from time to time;

"Bibby Offshore" means Bibby Offshore Limited;

“BNPP” means BNP Paribas;

"BOS" means Bank of Scotland plc;

“CMNSL Acquisition” means the agreement dated October 19, 2011 to acquire Challenger Minerals (North Sea) Limited, ("CMNSL") subsequently renamed Ithaca Minerals (North Sea) Ltd (“Ithaca Minerals”) from Transocean Drilling U.K. Limited for a consideration of US$35 million;

"Common Shares" means one or more common shares in the capital of the Corporation;

“Dana” means Dana Petroleum (E&P) Limited;

"DECC" means Department of Energy and Climate Change in the United Kingdom;

"Dyas" means Dyas UK Limited;

“EnQuest” means EnQuest Heather Limited;

“Esso” means Esso Exploration and Production UK Limited;

“EWE” means EWE Energie AG;

“Facility” means the $430 million credit facility provided by BNPP

“Faroe” means Faroe Petroleum UK Limited;

"FDP" means field development plan;

“First Oil” means First Oil Expro Limited;

“FPF-1” means FPF-1 Limited, a corporation incorporated in Jersey and an associate of the Corporation;

"FPSO" means Floating Production Storage and Offloading vessel;

“FPU Services” means FPU Services Limited, a corporation incorporated in Jersey and an associate of the Corporation;

"GDF Acquisition" means the agreement dated August 4, 2010, to acquire certain UK North Sea gas interests from GDF SUEZ E&P UK Ltd. for a cash consideration of £11.25 million (approximately $16.9 million);

"Gemini" means Gemini Oil & Gas Fund II, L.P.;

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“GSA” means the Greater Stella Area

"Ithaca" or the "Corporation" or the "Company" means Ithaca Energy Inc., a corporation incorporated in Canada under the ABCA, and to the extent the context requires, its wholly-owned subsidiaries, Ithaca Holdings, Ithaca UK and Ithaca Minerals and its associates FPU Services and FPF-1;

“Ithaca Holdings” means Ithaca Energy (Holdings) Limited, a corporation incorporated in Bermuda and a wholly-owned subsidiary of the Corporation;

"Ithaca Minerals" means Ithaca Minerals (North Sea) Limited (previously Challenger Minerals (North Sea) Limited), a corporation incorporated in Scotland (SC274666) under the UK Companies Act 2006 and a wholly-owned subsidiary of the Corporation;

"Ithaca UK" means Ithaca Energy (UK) Limited, a corporation incorporated in Scotland (SC272009) under the UK Companies Act 2006 and a wholly-owned subsidiary of the Corporation;

"NGLs" or "Natural Gas Liquids" means those hydrocarbon components that can be recovered from natural gas as liquids including, but not limited to, ethane, propane, butanes, pentanes plus condensate and small quantities of non-hydrocarbons;

“Noble” means Noble Energy Capital Limited, a subsidiary of Noble Energy Inc.;

"NSE" means North Sea Energy (UK) Limited;

"NI 51-101" means National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities;

"Pounds Sterling" or "£" means British Pounds Sterling;

"RWE" means RWE Dea UK SNS Ltd;

"SEDAR" means the System for Electronic Document Analysis and Retrieval;

"Sproule" means Sproule International Limited, independent geological and petroleum engineering consultants with offices in Calgary, Alberta;

"Statement of Reserves Data" means the Corporation's Statement of Reserves Data and Other Oil & Gas Information in Form 51-101F1 dated effective December 31, 2012;

“Summit” means Summit Petroleum Limited;

“Trap Oil” means Trap Oil Group plc;

“TSX” means the Toronto Stock Exchange operated by TMX Group

"TSXV" means the TSX Venture Exchange Inc.;

"UKCS" means the United Kingdom Continental Shelf;

“Valiant” means Valiant Petroleum plc;

“Wintershall” means Wintershall (UK North Sea) Limited; and

“Zeus” means Zeus Petroleum Limited.

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THE CORPORATION

General

Ithaca is an oil and gas operator focused on North Sea production, appraisal and development activities.

Ithaca was incorporated under the ABCA on April 27, 2004.

The Corporation’s business and head office is located at 8 Rubislaw Terrace, Aberdeen, Scotland, AB10 1XE and its registered office is located at Suite 1600, 333 – 7

th Avenue S.W., Calgary, Alberta, Canada, T2P 2Z1.

Intercorporate Relationships

The Corporation had three wholly-owned subsidiaries and two associates at December 31, 2012:

Name of subsidiary % Equity interest Jurisdiction of incorporation

Ithaca Energy (UK) Limited 100% Scotland Ithaca Minerals (North Sea) Limited 100% Scotland Ithaca Energy (Holdings) Limited 100% Bermuda

Name of associate % Equity interest Jurisdiction of incorporation

FPF-1 Limited 49% Jersey FPU Services Limited 49% Jersey

GENERAL DEVELOPMENT OF THE BUSINESS

The Corporation commenced operations in April 2004. On June 5, 2006, upon the completion of its initial public offering by way of prospectus, Ithaca’s Common Shares began trading on the TSXV and AIM on June 6, 2006 under the symbol "IAE". As of November 1, 2011, the Common Shares commenced trading on the TSX under the Corporation's existing trading symbol "IAE". The Common Shares were delisted from the TSXV on the same day.

Three Year History

Year Ended December 31, 2012

During the first quarter of 2012 the Corporation completed its formal application for UK Government approval of the joint Stella and Harrier FDP, resulting in the FDP being approved by the DECC in April 2012. In May 2012, the Corporation completed the various transactions entered into on 19 October 2011 concerning the Company's GSA assets. Completion of the transactions resulted in Ithaca transferring various field interests to Petrofac and Dyas and acquiring a shareholding interest in FPF-1 Limited, the company that owns the "FPF-1" floating production unit that will be used as the GSA production hub. Start up of oil production from the Ithaca operated Athena field was achieved in late May 2012. The field has been developed via five subsea wells (four producers, one water injector) tied back to the “BW Athena” floating production, storage and offloading vessel. In May 2012, the Corporation agreed a $430 million fully underwritten senior secured borrowing base facility with BNPP. The Facility was syndicated by BNPP, with the syndication process being oversubscribed, to six other leading international banks, underlining the value of the Corporation’s existing asset portfolio and development execution strategy. This Facility replaces the previous undrawn $140 million debt facility and is on similar conventional oil and gas industry borrowing base financing terms, with a loan term of up to five years.

In September 2012 the Corporation completed an appraisal well on the Hurricane discovery, which lies within the GSA. The well encountered hydrocarbons in two reservoirs, the Rogaland and Andrew intervals, and a successful drill stem test was performed on the Andrew reservoir.

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In October 2012, the Company announced that it had entered into agreements with Noble Energy Capital Limited (a subsidiary of Noble Energy Inc., NYSE: NBL) to acquire two wholly owned UK subsidiary companies that hold non-operated interests in two UK North Sea producing fields, for a total consideration of $38.5 million; a 12.885% interest in the Cook field resulting in the Company increasing its existing Cook field interest from 28.46% to 41.345%, furthering its position as the field's largest owner, and a 14% interest in the MacCulloch field. The Cook acquisition was completed in February 2013. The MacCulloch acquisition is yet to complete.

Also in October 2012, Ithaca was offered two operated licenses as part of the 27th Licensing Round: Block

29/5e in the vicinity of the Company’s existing GSA interests and Block 15/17b in the Outer Moray Firth. The license offers are based on the completion of technical studies, leading to a drill or drop decision on each license within two years of formal license award.

Year Ended December 31, 2011

On April 4, 2011, the Corporation announced the acquisition of a 28.46% non-operated interest in the Cook oil field from Hess Limited (“Hess”), effective from January 1, 2011. The acquisition was completed on August 25, 2011, for an adjusted consideration of $57 million and the transfer from Ithaca to Hess of a 10% interest in each of exploration blocks 42/25b, 43/16a and 43/21c in the Southern North Sea.

On October 19, 2011, the Corporation announced the acquisition of Challenger Minerals (North Sea) Limited (“CMNSL”), subsequently renamed Ithaca Minerals (North Sea) Ltd from Transocean Drilling U.K. Limited for a cash consideration of $35 million; $25 million payable immediately and $10 million upon approval of the Stella and Harrier FDP by DECC. This transaction resulted in the Corporation increasing its interests in the Stella and Harrier fields, obtaining a non-operated interest in the producing Broom field and gaining access to additional undeveloped North Sea discoveries.

On October 19, 2011 the Corporation, Dyas and CMNSL, (now Ithaca Minerals), a subsidiary of Ithaca, entered into various transactions with Petrofac Limited and a number of its subsidiary companies (collectively “Petrofac”), effective October 1, 2011. These transactions included the transfer of ownership interests in the “FPF-1” floating production unit to the Corporation, Dyas and CMNSL, while granting Petrofac the right to earn a 20% interest in Stella and Harrier (Blocks 30/6a) and the transfer of 20% interests in Hurricane (Block 29/10b) and Helios (Block 29/10d). On the same day, the Corporation agreed to divest a 25.34% interest in Hurricane to Dyas UK Limited with an effective date of January 1, 2011.

On November 1, 2011, the Common Shares commenced trading on the TSX under the Corporation's existing trading symbol "IAE". The Common Shares were delisted from the TSXV on the same day.

Year Ended December 31, 2010

On April 15, 2010, Ithaca announced that an appraisal well on the Stella field (30/6a-8) had proved the presence of significant volumes of hydrocarbons and excellent quality reservoir. A successful drill stem test was performed providing critical information to enable planning for the development of the field to fully commence. As planned, a sidetrack well (30/6a-8Z) was subsequently drilled and confirmed a fully hydrocarbon-saturated reservoir interval in the Andrew sandstone.

On July 12, 2010, the Corporation signed and completed an agreement for up to $140 million Senior Secured Borrowing Base Facility with BOS to principally fund the development of the Stella and Harrier fields and fund potential acquisitions of producing assets in the North Sea.

On July 28, 2010, the Corporation completed a "bought deal" equity issue, with a syndicate of underwriters led by CIBC World Markets Inc., of 47.6 million Common Shares in Ithaca at a price of C$1.70 per Common Share for aggregate gross proceeds of C$81 million. At the same time completion took place of a "private placement" of 45.1 million Common Shares in Ithaca to purchasers in the United Kingdom at a price of £1.07 per Common Share (approximately equivalent to C$1.70 per Common Share) for aggregate proceeds of approximately C$77 million. Together, the equity issues generated gross proceeds of C$158 million (approximately $153 million).

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On September 20, 2010, the Corporation entered into an agreement with Gemini whereby in exchange for and in consideration of Gemini’s waiver of any right to proceeds from the disposal of equity interest in the Athena discovery and in substitution for any previously awarded or agreed warrants, Ithaca granted Gemini warrants to acquire up to 2,500,000 Common Shares. The warrants were exercisable at C$2.25 per share on or before March 21, 2011. The agreement terminated all rights that Gemini had in respect of the Corporation’s interests. The warrants were subsequently exercised by Gemini on March 2, 2011.

On September 21, 2010, FDP approval was received from the DECC for the Athena oil field permitting the Corporation to progress the execution of the project.

On November 1, 2010, the Corporation announced success in the UKCS 26th Seaward Production Licence

Round, by being offered, as operator, Block 29/10d in partnership with Dyas. The Block, which contains the Helios discovery expanded the Corporation’s portfolio in the Greater Stella Area. On December 17, 2010, the Corporation completed the acquisition of certain North Sea gas interests from GDF SUEZ E&P UK Ltd, effective January 1, 2010. The acquisition included an operated interest in the producing Anglia Field and a non-operated interest in the producing Topaz field.

DESCRIPTION OF THE BUSINESS AND OPERATIONS

Overview

Ithaca is an oil and gas operator focused on North Sea production, appraisal and development activities.

The Corporation’s management team includes experienced oil and gas industry professionals with extensive international experience and a proven track record in growing the Company and delivering upon the Corporation’s strategic objectives.

Ithaca has built a diversified portfolio of producing, development and appraisal assets through acquisitions and participation in recent UKCS Licence Rounds. The diversity of the asset base is evidenced by the geographical dispersion of the Corporation’s field interests, which lie across the Moray Firth, Southern, Central and Northern North Sea areas of the UKCS, and the variety of play types (including both oil and gas assets). Strategy Ithaca’s strategy is to grow shareholder value by building a highly profitable 25kboe/d North Sea oil and gas company. The execution of this plan is centred on:

• Maximising production and cashflow from its existing assets;

• Delivering material growth by appraising and developing existing hydrocarbon discoveries; and,

• Continuing to increase and diversify the Company’s portfolio and cashflows through acquisitions.

Operations

Ithaca’s production in 2012 averaged 5,862 mmboe, including production from the Cook and MacCulloch field interests being acquired from Noble Energy Inc. (effective January 1, 2012).

Operating Segments

All of Ithaca’s oil and gas revenue is from properties in the UKCS. Revenue, split by commodity type, is set out in Note 4 of the Corporation’s audited consolidated financial statements for the year ended December 31, 2012 filed on SEDAR at www.sedar.com. Total revenue from the sale of hydrocarbons in 2012 totalled $166.2 million.

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2012 Investment Program Total capital expenditure incurred by the Corporation in 2012 was approximately $178 million. The capital expenditure program was primarily focused on execution of the Greater Stella Area development. The main areas of GSA expenditure were on (i) engineering, manufacture and fabrication of the subsea infrastructure that is to be installed by Technip UK Limited, (ii) preparation and procurement of long lead items for commencement of the development drilling campaign, and, (iii) engineering, procurement and pre-modification works preparation of the “FPF-1” floating production unit that is being modified by Petrofac for use at the centre of the GSA production hub. Capital expenditure was also incurred on completion of the Athena development and drilling of the Hurricane appraisal well. Valiant Petroleum PLC Acquisition

On March 1, 2013 the Boards of Ithaca and Valiant Petroleum plc announced they had reached agreement on the terms of a recommended acquisition (the “Acquisition”) under which Ithaca Energy Holdings (UK) Limited will acquire the entire issued and to be issued share capital of Valiant. The total acquisition price is approximately $309 million, which equates to approximately £4.75 per Valiant share. Approximately $200 million of the consideration is payable in cash (being approximately £3.07/ Valiant share) and approximately $109 million in new Ithaca shares (approximately 57.01 million shares, equating to 1.33 Ithaca shares per Valiant share). The Company will also repay ~$150 million Valiant debt/working capital bringing the total enterprise value to approximately $459 million. The Acquisition is anticipated to result in:

• the establishment of Ithaca as a leading mid cap North Sea oil and gas operator, with 2P reserves of approximately 74MMboe, of which approximately 50% relates to currently producing assets;

• a more than doubling of Ithaca's current forecast 2013 production to 14-16kboe/d (90% oil), rising to approximately 27kboe/d in 2015; and,

• approximately a four fold increase in Ithaca's anticipated 2013 cash flow from operations to $400 million, rising to over $700 million in 2015.

Further details of the proposed acquisition were published on the Company’s website on March 1, 2013. The acquisition is subject to approval by Valiant shareholders and certain regulatory approvals. 2013 Work Program Focus

The Corporation has a number of key areas on which it is particularly focused in 2013:

o Completion of the Valiant acquisition

o Execution of the GSA development, involving commencement of the development drilling campaign, completion of the main offshore subsea infrastructure installation works by Technip and the FPF-1 modifications program by Petrofac at the Remontowa shipyard in Poland;

o Optimisation of production from existing fields; and

o Increasing the Corporation’s reserves and asset base by executing accretive asset and/or corporate transactions.

Debt Facility

In October 2012 the Company agreed and signed a $430 million Facility with BNPP as Bookrunner and Mandated Lead Arranger. The syndication process was oversubscribed, underlining the value of the Company's existing asset portfolio and development execution strategy.

The seven banks participating in the facility syndicate are:

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• BNPP and Lloyds TSB Bank plc (as Bookrunners and Mandated Arrangers);

• Bank of America N.A., Deutsche Bank AG, The Bank of Nova Scotia and The Royal Bank of Scotland (as Mandated Lead Arrangers); and,

• NIBC Bank N.V. (as Manager).

This Facility replaces the previous undrawn $140 million debt facility and is on similar conventional oil and gas industry borrowing base financing terms, with a loan term of up to five years and will attract interest at London Interbank Offered Rate (“LIBOR”) plus 3-4.5%. The Facility is available to fund ongoing development activities and future asset acquisitions. As of the date hereof, the Corporation is in compliance with the financial and operating covenants of the Facility with the first drawdown having been made in Q1 2013.

Human Resources

As at December 31, 2012, the Corporation had a total of 40 full-time employees and also utilized the services of a range of professionals on a contract or consulting basis. Of the full-time employees, 5 were management and 35 were geologists, geophysicists, engineers, commercial, financial and administrative support staff. Ithaca seeks to employ individuals and utilize the services of consultants who have extensive oil and gas experience as needed. All employees were UK based.

Marketing and Other Commitments

The Corporation has an agreement with BP plc (“BP”) for the marketing and sale of crude oil from the Beatrice and Jacky fields. The oil is priced according to the Brent benchmark, typically receiving a slight premium, and involves payment being made by BP on a monthly basis according to the volume of crude exported into the storage tank at the Nigg terminal each month, irrespective of when BP elects to lift the oil. The Corporation also has a similar agreement with BP for the sale of crude oil from Athena, which has broadly the same terms but takes into account the nature of the Athena crude and makes comparison against two other traded commodities, namely the Urals benchmark and high sulphur fuel oils, in addition to Brent.

Oil production from Cook and Broom is sold to Shell Trading International Limited. The crude trades broadly in line with the Brent blend benchmark, with payment received on a monthly basis.

Gas production from the Anglia field is sold under two contracts. Until September 30, 2012, approximately 80% of the Corporation’s production from the field was sold under a legacy “Buyer’s Nomination” contract, which fixed the sales price for each gas year (primarily indexed linked to inflation). This contract was renegotiated and the gas is now sold at “Seller’s Nomination”, at the prevailing UK gas market price less an agreed discount. The remaining 20% of production is priced and sold daily at the prevailing UK gas market price.

The Corporation’s gas sales contract for the Topaz field has volumes nominated daily by Ithaca UK with the production priced daily at the prevailing UK gas market price.

Cook gas is sold to Shell UK Ltd and Esso Exploration & Production UK Ltd.

Tax Horizon

Ithaca was not required to pay trade-related income taxes for the year ended December 31, 2012.

The Corporation has a UK tax allowances pool of $415 million at end-2012. This tax allowances pool, combined with the Corporation’s anticipated production, future capital expenditure program and commodity price forecasts, mean that no UK trade related cash income taxes are expected to be paid in the short or medium term.

UK government incentives to encourage the future development of, amongst other things, smaller oil and gas fields means that certain tax allowances are available to the Corporation and its field partners. On 21 March 2012 the UK Government increased and extended the application of the Small Field Allowance (“SFA”) tax shelter available against the payment of the 32% Supplemental tax charge for future small developments.

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The size of fields which qualify for the full SFA was increased to include all fields with reserves of under 6.25 million tonnes (approximately 45Mboe) and the tax allowance available to each field was doubled from approximately $120million to $240 million. This change brings the Stella field under the SFA tax shelter and increases that previously applicable to the Harrier field. The relief is also expected to be applicable to all other potential future developments of the Corporation including Hurricane, Scolty Area and South West Heather.

Competitive Conditions

The oil and natural gas industry is intensely competitive in all its phases. Ithaca competes with numerous other participants in the search for, and the acquisition of, oil and natural gas properties and in the marketing of oil and natural gas. Ithaca's competitors include resource companies which have greater financial resources, staff and facilities than those of Ithaca. Competitive factors in the distribution and marketing of oil and natural gas include price and methods and reliability of delivery. Ithaca believes that its competitive position is equivalent to that of other oil and gas issuers of similar size and at a similar stage of development.

Environmental Requirements

UK environmental legislation provides for restrictions and prohibitions on releases or emissions and regulation on the storage and transportation of various substances produced or utilized in association with oil industry operations, and can affect the location and operation of wells and facilities and the extent to which exploration and development is permitted. In addition, legislation requires that well and facility sites are abandoned and reclaimed to the satisfaction of regulatory authorities. Applicable environmental laws may impose remediation obligations with respect to property designated as a contaminated site upon certain responsible persons, which include persons responsible for the substance causing the contamination, persons who caused the release of the substance and any past or present owner, tenant or other person in possession of the site. Compliance with such legislation can require significant expenditures and a breach of such legislation may result in the suspension or revocation of necessary licences and authorizations, civil liability for pollution damage, the imposition of fines and penalties or the issuance of clean-up orders. Environmental legislation and policy is periodically amended. Such amendments may result in stricter standards and enforcement and in more stringent fines and penalties for non-compliance. Environmental assessments of existing and proposed projects carry a heightened degree of responsibility for companies and their directors, officers and employees. The costs of compliance associated with changes in environmental regulations could require significant expenditures, and breaches of such regulations may result in the imposition of material fines and penalties. In an extreme case, such regulations may result in temporary or permanent suspension of production operations and associated activities.

STATEMENT OF RESERVES DATA AND OTHER OIL AND GAS INFORMATION

Reference is made to the Corporation's Statement of Reserves Data in Form 51-101 F1 (dated effective December 31, 2012), the Form 51-101 F2, Report on Reserves Data by Qualified Reserves Evaluator, prepared by Sproule, independent petroleum reservoir engineers, and the Form 51-101 F3 Report of Management and Directors on Oil and Gas Disclosure, all of which were prepared pursuant to NI 51-101 and are attached to this AIF as Schedule “B”, “C”, and “D” respectively.

In accordance with AIM Guidelines, John Horsburgh, BSc (Hons) Geophysics (Edinburgh), MSc Petroleum Geology (Aberdeen) and Subsurface Manager at Ithaca is the qualified person that has reviewed the technical information contained in this AIF.

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Sproule 2P Reserve estimates December 31, 2012

Anglia/Topaz 1.8 Athena 5.1 Beatrice/Jacky 1.7 Broom/SW Heather 1.2 Cook 5.1 GSA 33.8 Scolty/Crathes/Torphins 1.7 MacCulloch 1.4 Total 51.9

PRINCIPAL PROPERTIES

Overview

The following section provides a description of the Corporation’s principal properties held as at December 31, 2012.

Ithaca has established interests in five general areas within the UK sector of the North Sea. From north to south these areas comprise: the Northern North Sea (Broom and SW Heather); the Outer Moray Firth (Athena, Piper Isles and MacCulloch*); the Inner Moray Firth (the Greater Beatrice Area); the Central North Sea (the GSA plus Cook, Crathes, Scolty & Torphins); and the Southern North Sea (Anglia and Topaz).

*Acquisition of 14% interest in MacCulloch field to be completed in 2013

Development AssetsProducing Assets

Oil Assets Gas Assets

United Kingdom

Beatrice (WI 50.0%)Operator

Jacky (WI 47.5%)Operator

Topaz (WI 35%)

Athena (WI 22.5%)Operator

Broom (WI 8.0%)

NIGG Oil Terminal (WI 50.0%)Operator

Anglia (WI 30%)Operator

GSA (WI 54.7%)Operator

Cook (WI 41.3%)

SW Heather (WI 8.0%)

Scolty Area (WI 10.0%)

Piper Isles (WI 50.0%)Operator

MacCulloch (WI 14.0%)

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Greater Stella Area

The GSA comprises the Corporation’s interests in the Stella, Harrier and Hurricane fields in the Central North Sea.

During the first quarter of 2012 the Corporation completed its formal application for Government approval of the joint Stella and Harrier FDP, resulting in the FDP being approved by DECC in April 2012. The development involves the creation of a production hub based on deployment of the “FPF-1” floating production unit located over the Stella field, with onward evacuation of oil and gas through existing pipeline infrastructure. The FPF-1 will serve as the processing hub for production from the Stella and Harrier fields, plus incremental production from Hurricane and other potential tie-backs in the area.

Development Update

First hydrocarbons from the GSA hub are forecast for 1H 2014 at an initial gross annualised rate of approximately 30,000 boepd gross, approximately 16,000 boepd net to Ithaca. To maximise initial oil and condensate production and fill the gas processing facilities on the FPF-1, four Stella wells are planned for the start-up of production from the hub. Further wells on Stella and Harrier, plus other potential targets, including Hurricane, will then be drilled post first hydrocarbons from Stella to maintain the gas processing facilities on plateau.

Drilling Programme

A contract was signed with Ensco Offshore UK Limited ("Ensco") in November 2011 for use of the Ensco 100 heavy duty jack-up drilling rig on the Stella and Harrier development drilling campaign. The rig is currently anticipated to be on location at the Stella field in Q2-2013.

FPF-1 Modification Works

A lump sum incentivised contract for the modification of the FPF-1 was awarded by the GSA co-venturers to Petrofac in October 2011. During 2012, the primary focus of the Petrofac work programme has been on completion of detailed design studies, award of the yard contract for completion of the FPF-1 modification works and preparation and transfer of the vessel to the selected modifications yard.

Based on the results of the design studies completed in 2012, the decision was made by Petrofac to install new processing equipment on the vessel, rather than partially re-use the existing facilities. This is to ensure the delivery of a higher quality vessel; one that is capable of achieving the high operational uptime performance that is stipulated in the Duty Holder contract under which Petrofac will operate the FPF-1 once it is deployed in the field. Preparation of the vessel for completion of the modifications work was undertaken in Teeside, UK, with all the redundant processing equipment being removed from the main deck of the vessel.

Petrofac awarded the contract for completion of the FPF-1 modification works in 2012 to the Remontowa shipyard in Gdansk, Poland, which is located approximately 10 days towing time from the Stella field. The FPF-1 was moved to the yard in Q4-2012.

Work is currently ongoing on the vessel to prepare for its transfer to dry dock in Q2-2013 for the marine systems workscope to be completed, following which the new topsides processing plant will be installed on the main deck.

Subsea Infrastructure Works

An Engineering, Procurement, Installation and Construction (“EPIC”) contract was awarded to Technip in July 2012 for completion of the major subsea works required to deliver first hydrocarbons from the GSA hub. Engineering for the subsea infrastructure has been completed and the subsea facilities construction programme is progressing as planned and remains on target for the main installation works to be performed in 2013.

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• Manufacture of all the required 10-inch linepipe for the development has been completed and the application of coatings and delivery of the pipe to Technip’s Evanton spool base in NE Scotland, for subsequent welding, is nearing completion.

• Construction of all six subsea structures required to deliver first hydrocarbons are advancing well at Global Energy Group’s Isleburn facilities at Invergordon and Nigg in NE Scotland. All the necessary valves that are to be fitted on the structures have been delivered on time.

• All the flanges, fittings and pipework required for subsea structures have been manufactured on time and fabrication of the pipeline spools is ongoing.

• Manufacturer of the static umbilicals that will connect the drill centres to the FPF-1 and the flexible flowlines and risers are progressing to plan.

Development Capital Expenditure

The Corporation’s net share of remaining capital expenditure prior to first hydrocarbons from the GSA production hub is $385 million, with ~$300 million forecast to be incurred in 2013 and the balance in the first half of 2014. This capital expenditure will be funded from the Corporation’s existing financial resources.

Stella (54.66% Working Interest)

The Stella field comprises a large domal structural trap covering approximately 22km2. Stella is a rich gas

condensate field discovered and appraised by five wells, three of which have been drill stem tested. The field lies 15 km northwest of the Joanne field and was discovered in 1979 by well 30/6-2, which encountered gas and condensate throughout a 25ft section of Paleocene Andrew sand. Oil was also observed in the Ekofisk Chalk reservoir. Subsequent appraisal wells 30/6-3 and 3Z were drilled in 1996, up-dip from the discovery well and on the crest of the structure. The 3Z well achieved flow rates of 2800 bopd and 22.75 mmscf/day of gas from the Andrew sands. In 2005 Maersk Oil, the operator, drilled well 30/06-5 and sidetracks to further appraise the Chalk and Andrew reservoirs. Gas condensate bearing Andrew and oil bearing Chalk were encountered. The sidetrack well, 30/6-5Y, tested at a maximum rate of 17 mmscf/d and 3000 bopd in the Andrew sands.

Following the completion of various transactions in 2008/09 to acquire its interest in and operatorship of the Stella and Harrier fields, the Corporation drilled an appraisal well, 30/6a-8, and sidetrack 30/6a-8z on the Stella discovery in early 2010. The well was tested and flowed in excess of 5,000 bbls of liquid per day (oil plus water), 2,850 bbls of light oil per day and 2,150 bbls of water per day. The sidetrack penetrated an 18 ft thick, good quality Andrew Sandstone reservoir, equivalent to all other Stella wells and other wells in the area, with an average porosity of 22%.

Harrier (54.66% Working Interest)

The Harrier field, which comprises oil and gas in the Ekofisk and Tor Chalk formations, lies approximately 10km immediately south of the Stella field. The Harrier field is being jointly developed with the Stella field as noted above.

Hurricane (54.66% Working Interest)

Hurricane consists of an accumulation of light oil (41° API) in channelized Eocene age Rogaland sands, situated approximately 10km west of Stella and Harrier.

In September 2012, the Company successfully completed drilling of the Hurricane appraisal well in Block 29/10b. The well identified hydrocarbons in two reservoir intervals, the Eocene Rogaland sandstone and the Palaeocene Andrew reservoir. Pressure data and fluid samples were recovered from both intervals and a drill stem test (“DST”) was performed on the Andrew reservoir. During the main DST flow period, lasting approximately 24 hours, the Andrew interval achieved an average gross flow rate of approximately 17MMscf/d with associated condensate of 870 bopd (52° American Petroleum Institute “API” Gravity) from a half inch choke. A gross maximum flow rate of approximately 24 MMscf/d with associated condensate of 1,200 bopd

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from a 44/64-inch fixed choke was also achieved with the full production potential of the well being limited by surface equipment.

The appraisal well has been suspended for future potential use as a production well for the Andrew reservoir, with the capability of also being used for future production from the Rogaland reservoir. A work program, involving seismic reprocessing, is ongoing to assess the ultimate recoverable volumes associated with each of Hurricane’s reservoir intervals and assess the development options for the field. This work is being conducted in conjunction with a wider regional subsurface analysis that is focused on evaluating other future feeder fields for the hub. The results of the Hurricane work are anticipated later in 2013.

Athena (22.5% Working Interest)

The licence containing the Athena field was awarded to the Corporation in the 23rd

Licence Round in December 2005.

The Athena oil field is located in Block 14/18b, 18 km west of the Claymore and Scapa fields, and commenced production in Q2 2012. The reservoir consists of Lower Cretaceous sandstones which stratigraphically thin up-dip and to the north of the Athena accumulation.

Development Update

DECC approval for the Athena Field Development Plan was received in September 2010. The development consists of four production wells, fitted with dual electrical submersible pumps, supported by one water injection well. Production is processed on the BW Athena FPSO, with oil shuttled to the Nigg oil terminal for storage and subsequent sale to market as larger cargoes.

Following completion of the BW Athena FPSO conversion and mobilisation operations by BW Offshore, start-up of production from the Athena field commenced in May 2012. This represents the third major development delivered by the Corporation.

Since the completion of post start-up commissioning activities, production from the field has been stable at a gross daily rate of between 10,000 and 11,000 bopd, 2,250 to 2,475 bopd net to Ithaca. Strong operational performance by the BW Athena has resulted in a vessel uptime in excess of 95%.

The field continues to produce “dry” oil, with total gross production of nearly 3MMbbl having been produced by late March 2013, 0.675MMbbl net to Ithaca.

Reservoir performance to date, including the continued production of dry oil, provides a positive signal for the longer term potential of the field. The timing of water breakthrough, along with the efficiency of the sweep of oil through the reservoir assisted by water injection, will be key to predicting the ultimate field production profile.

Cook (41.345% Working Interest)

The Corporation acquired a non-operated 28.46% interest in the Cook field from Hess in August 2011 and a further 12.885% from Noble in February 2013, increasing the Corporation’s field interest in Cook to 41.345%.

The Cook field is located in Block 21/20a of the Central North Sea, approximately 175km east of Aberdeen and 20km north of the Gannet Cluster development. The field was discovered in 1983 by well 21/20a-2, which was drilled in a down flank position on the Cook structure. The well encountered oil in the Fulmar Formation and tested 7,330 bopd of 40.6 API oil and 6.7 Mmscf/d of gas. Oil is trapped in a single sandstone reservoir, with an oil/water contact defined in the discovery well, without a gas cap.

Production from the field is from a single development well, 21/20a-P1, drilled on the crest of the structure. The well has been tied back via a subsea manifold to the Shell operated Anasuria FPSO. Following processing on the FPSO, oil is exported by shuttle tanker to market, while gas production is exported to St Fergus via the Shell-Esso Gas and Liquids pipeline. First hydrocarbons from the field were achieved in April

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2000.

Beatrice and Nigg (50% Working Interest)

The Beatrice oil field produces from early and middle Jurassic sandstones. The Beatrice oil field lies approximately 12 miles from shore in a water depth of 120 feet. The field was an early discovery in the overall development of the North Sea and has been in production since 1981.

Since taking operatorship of the Beatrice field from Talisman Energy Inc. (“Talisman) in November 2008, through the execution of a lease agreement that leaves the decommissioning liabilities for the field with Talisman, the Corporation has enhanced overall production from the field through various initiatives. In May 2009 production from the Beatrice Bravo platform was restored, having been shut-in by Talisman in 2007. In addition, a number of well workovers have been performed since 2009 and the water injection capacity for the fields has been increased in order to increase production and enhance overall recovery from the field.

The Beatrice area facilities include the onshore Nigg oil terminal in the Cromarty Firth, which is directly connected to the Beatrice Alpha platform via a dedicated oil export pipeline. The terminal processes and stores oil from the Beatrice and Jacky oil fields for onward shipment.

The oil storage capacity of the terminal is sufficient to enable tank space to be rented to third parties. A contract is currently in place for the Athena field to use the facility to build up larger oil cargoes for onward transportation to market than would otherwise be achieved from selling cargoes directly from the FPSO servicing the field.

The terminal possesses a sheltered deepwater jetty that is used, for agreed fees, by third parties to conduct ship to ship oil transfer operations. In addition, the on-site water processing facilities are also used to treat oily water discharges from visiting tankers for agreed fees.

Jacky (47.5% Working Interest)

The licence containing the producing Jacky oil field was awarded to the Corporation in the 23rd

Licence Round in December 2005.

The Jacky discovery well, 12/21-5, was drilled in April 2007. The well encountered the Beatrice sands at 6,729 feet true vertical depth with 32 feet of net pay, 175 feet above the oil/water contact in the nearby 12/21-2 well (drilled by BritOil plc in 1982).

The Jacky discovery is located approximately 10km northeast of the Beatrice Alpha field facilities. The Corporation completed the fast track development of the field following the drilling of the discovery well, resulting in the delivery of first oil in April 2009. The field development involved re-entering and completing the discovery well as a producer (“J01”), fitted with dual electrical submersible pumps, the installation of a four slot unmanned platform (suction piled) tied back to the Beatrice Alpha facilities. Production is processed on Beatrice Alpha and exported with Beatrice production through an existing 16" pipeline to the Nigg terminal. To increase production and enhance overall oil recovery, a water injection well was drilled on the western flank of the field in October 2009.

A further well (“J03”) was drilled in 1H 2011 in an area to the north of the existing production well, with the objective of adding a second producer on the field. However, the well encountered a smaller than anticipated oil column in the Beatrice ‘A’ Sand reservoir and was suspended pending further analysis of the options for the well to be undertaken. Technical work is ongoing regarding the opportunity to sidetrack the well.

In June 2011, a workover operation was completed on the J01 well to replace the original electrical submersible pumps that were installed in the well following their failure during routine operations. The opportunity was taken to reperforate the Beatrice A sands and additionally perforate the Beatrice B sands.

Anglia (30% Working Interest)

The Corporation acquired a 30% operated interest in the Anglia field from GDF SUEZ E&P UK Ltd. (“GDF”)in

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December 2010.

The Anglia field lies approximately 60 km from the UK coastline and approximately 11 km southwest of the Clipper field in Blocks 48/18b, 48/19b and 48/19e in the southern North Sea. The field was discovered in 1972 by well 48/18b-1 which found gas in the Rotliegendes Formation.

Development of the Anglia field involved the installation of an unmanned platform tied back via a 24 km pipeline to the Lincolnshire Offshore Gas Gathering System transportation system, with gas exported to the Theddlethorpe terminal in Lincolnshire. Production from the field commenced in 1993.

A planned seismic reprocessing is included within the 2013 work program to optimize the drilling location of a well on the ”Pop-up” structure in the southeast area of the main field, captured as probable reserves by Sproule.

Topaz (35% Working Interest)

The Corporation acquired a 35% operated interest in the Topaz field from GDF in December 2010.

The Topaz field, operated by RWE, lies approximately 145 km from the UK coastline and 15 km southeast of the Schooner field in the North Sea Gas Basin. The field was discovered in 1987 by the 49/1a-3 well which encountered a 130 ft section of gas bearing Carboniferous Westphalian C/D and Ketch sands. An appraisal well was drilled in 2004 which encountered a 215 ft section of gas bearing sands. The current producing well (49/2a-6Z) was drilled in 2009 as a twin to this discovery well and tested at 30 mmscf/d. The field was developed as a subsea tie-back to the Schooner platform, from which gas is exported via the Caister Murdoch System to the Theddlethorpe terminal. First gas from the field was delivered in December 2009.

Subsurface studies performed by the Topaz operator in 2011 showed the field to have significantly higher initial gas in place than that originally anticipated at the time the field development was sanctioned. A second production well is being planned to improve overall recovery, which is captured in the probable reserves category by Sproule.

Broom (8% Working Interest)

The Corporation acquired an 8% non-operated interest in the Broom field through its acquisition of CMNSL in October 2011.

The Broom field is located in blocks 2/4a and 2/5 of the Northern North Sea, approximately 500km from Aberdeen. The field comprises the shallower West Heather structure and the deeper North Terrace structure. The North Terrace discovery wells, 2/5-5 and 2/5-6, were drilled in 1974. The West Heather discovery well 2/5-8z was drilled in 1978. The field has been developed as a subsea tie-back to the nearby Heather platform, with the oil subsequently exported via the Ninian pipeline system to the Sullom Voe oil terminal. First oil from the Broom Field was achieved in August 2004. There are currently four oil-producing wells on the field (2/5-20, 2/5-23, 2/5-24 and 2/5-25) and two shut-in wells (2/5-18 and 2/5-19y). Pressure support is provided via two water injector wells (2/5-21, 2/5-22z). Three of the active producers are located in the West Heather area, while well 2/5-23 is in the North Terrace.

MacCulloch (14% Working Interest – acquisition from Noble yet to complete)

The Corporation announced in October 2012 that it had entered into agreements to acquire a wholly owned UK subsidiary from Noble Energy Capital Limited that holds a 14% non-operated interest in the MacCulloch field. This acquisition is yet to complete.

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The MacCulloch oil field, currently operated by ConocoPhillips, lies in Blocks 15/24b in the Central North Sea. The field produces from four subsea wells tied back to the North Sea Producer FPSO, with processed oil and gas exported via pipelines to shore.

Scolty Area (10% Working Interest)

The Scolty Area consists of the Scolty, Crathes and Torphins discoveries, located within 20km of each other in the Central North Sea.

The Corporation acquired its 10% non-operated interest in the discoveries through its acquisition of CMNSL in October 2011. The Scolty Area is operated by EnQuest and lies in the vicinity of the Forties and Kittiwake fields in the Central North Sea. Following the successful Crathes appraisal well that was drilled in late 2011, execution of a joint development of all three discoveries is currently under active consideration.

Scolty

The Scolty discovery is located in Block 21/08a. The discovery well, 21/08-3, was drilled in 2007 by Lundin Petroleum and encountered a 56 ft oil column, containing light oil in the Cromarty sandstone reservoir. Crathes

The Crathes discovery is located in Block 21/13a and was discovered by the EnQuest operated well, 21/13a-5, in November 2011. The well encountered a 52-ft light oil column in excellent quality reservoir sands in the Palaeocene age Cromarty.

Torphins

The Torphins discovery is located in Block 21/08a. The discovery well, 21/8-4, drilled in June 2008 by Lundin Britain Ltd. The initial wellbore in “Torphins West” encountered a 30 ft hydrocarbon column, with a subsequent sidetrack into “Torphins East” encountering a 29 ft hydrocarbon column. South West Heather (8% Working Interest)

The Corporation acquired an 8% non-operated interest in the SW Heather (“SW Heather”) field through its acquisition of CMNSL in October 2011.

The SW Heather field is located in Block 2/5 in the Northern North Sea, approximately 8km south of the Broom field.

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RISK FACTORS

An investment in Ithaca should be considered speculative due to the nature of Ithaca’s involvement in oil and gas exploration, acquisition and development. The Corporation is subject to a number of risk factors. The principal risks which may cause material loss to Ithaca or cause future results to differ materially from those anticipated are outlined below. However, it should not be assumed that this list is exhaustive or that material loss could not occur as a result of other factors. Additional risks not currently known to Ithaca or that Ithaca currently considers immaterial, may also have an adverse effect on Ithaca's business, financial condition, results of operations and prospects.

Stage of Development

An investment in the Corporation is subject to certain risks related to the nature of the Corporation’s business in the acquisition, development and production of oil and natural gas and its early stage of development. The Corporation has a limited history of operations and earnings generation and there can be no assurance that the Corporation’s business will continue to be successful or profitable.

The Corporation generated net earnings of $61.9 million in 2010 (restated for IFRS), net earnings of $35.9 million in 2011, followed with net earnings of $93.4 million in the year to December 31, 2012 producing an accumulated surplus of $154.0 million at December 31, 2012. No assurance can be given that the Corporation will not experience operating losses in the future.

The Corporation may be subject to growth-related risks, capacity constraints and pressure on its internal systems and controls, particularly given the early stage of the Corporation’s development. The ability of Ithaca to manage growth effectively will require it to continue to implement and improve its operational and financial systems and to expand, train and manage its employee base. Any inability of Ithaca to deal with this growth could have a material adverse impact on its business, operations and prospects.

Financing Risks

The Corporation will require substantial capital expenditures for the exploration, development and production of its oil and natural gas reserves and the acquisition of additional oil and gas properties. The Corporation’s reserves are categorized by Sproule as proved, probable and possible. See the Statement of Reserves Data attached as Schedule “B” hereto for details. As a result, obtaining future production from these reserves is conditional on the continued availability of financing to fund the expenditures necessary to develop the reserves. The development of the Corporation’s properties and the acquisition of additional properties including the proposed Valiant Acquisition may depend upon the Corporation’s ability to obtain financing through the joint venture of projects, farmouts, equity financing, debt financing or other means. Such financing may not be available on favorable terms or at all. In addition the continued macro-economic debt situation may affect the industry’s access to debt financing.

Any future revenues from the Corporation’s reserves may not provide the necessary capital for the Corporation to replace its reserves or to maintain its production. If the Corporation’s cash flow from operations is not sufficient to satisfy its capital expenditure requirements, there can be no assurance that additional debt or equity financing will be available to meet these requirements on favorable terms or at all.

Any additional equity financing may be dilutive to existing shareholders and debt financing, if available, may involve restrictions on financing and operating activities. Failure to obtain additional financing on a timely basis could cause the Corporation to forfeit its interest in certain properties, miss certain acquisition opportunities, and reduce or terminate its operations.

From time to time, the Corporation may enter into transactions to acquire assets or the shares of other corporations. These transactions may be financed partially or wholly with debt, which may increase the Corporation’s debt levels above industry standards. Neither the Corporation’s articles nor its by-laws limit the amount of indebtedness that the Corporation may incur. The level of the Corporation’s indebtedness from time to time could impair the Corporation’s ability to obtain additional financing in the future on a timely basis to take advantage of business opportunities that may arise.

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Exploration, Drilling and Operational Risks

The Corporation’s oil and natural gas exploration and development activities are primarily focused on mature producing and/or depleted oil and natural gas fields which are high-risk ventures with uncertain prospects for success. The Corporation will have no earnings to support it should the wells drilled or its properties prove not to be commercially viable.

The Corporation’s rights to exploit its oil and gas assets are limited in time. There is no guarantee or assurance that such rights can be extended or that new rights can be obtained to replace any rights that expire.

The business of exploration and production of oil and gas involves a high degree of risk which a combination of experience, knowledge and careful evaluation may not be able to prevent. Few properties that are explored are ultimately developed into producing oil and gas fields.

Significant expenditure is required to establish the extent of oil and gas reserves through seismic surveys and drilling and there can be no certainty that oil and gas reserves will be found. The exploration and development of oil and gas assets may be curtailed, delayed or cancelled by unusual or unexpected geological formation pressures, oceanographic conditions, hazardous weather conditions or other factors.

It is difficult to project the costs of implementing drilling programs due to the inherent uncertainties of drilling in unknown formations, the costs associated with encountering various drilling conditions such as over-pressured zones and tools lost in the hole, and changes in drilling plans and locations as a result of prior wells or additional seismic data and interpretations thereof.

Oil and natural gas exploration, development and production activities are dependent on the availability of drilling and related equipment in the particular areas where such activities will be conducted. Demand for such limited equipment or access restrictions may affect the availability of such equipment to the Corporation and may delay exploration, development and production activities. In particular, the Corporation is subject to the availability of drilling rigs at an economic price to proceed with its North Sea drilling program.

There are numerous risks inherent in drilling and operating wells, many of which are beyond the Corporation’s control. The Corporation’s operations may be curtailed, delayed or cancelled as a result of weather conditions, environmental hazards, industrial accidents, occupational and health hazards, technical or operational failures, shortage or delays in the delivery of rigs and/or other equipment, labor disputes and compliance with governmental requirements.

Drilling may involve unprofitable efforts, not only with respect to dry wells, but also with respect to wells which, though yielding some petroleum, are not sufficiently productive to justify commercial development or cover operating and other costs. Completion of a well does not assure a profit on the investment or recovery of drilling, completion and operating costs. In addition, drilling hazards or environmental damage could greatly increase the cost of operations, and various field operating conditions may adversely affect the production from successful wells. These conditions include delays in obtaining governmental approvals or consents, shut-ins of connected wells resulting from extreme weather conditions, insufficient storage or transportation capacity, or other geological and mechanical conditions. While close well supervision and effective maintenance operations can contribute to maximizing production rates over time, production delays and declines from normal field operating conditions cannot be eliminated and can be expected to adversely affect revenue and cash flow levels to varying degrees.

Although the Corporation currently operates the majority of its production, from time to time other companies may operate some or all of the Corporation's oil and natural gas properties. To the extent that the Corporation does not operate all of its oil and natural gas properties, the Corporation may have limited ability to exercise influence over the operation of these assets or their associated costs, which could adversely affect the Corporation's financial performance. The Corporation's return on assets operated by others will therefore depend upon a number of factors that may be outside of the Corporation's control, including the timing and amount of capital expenditures, the operator's expertise and financial resources, the approval of other participants, the selection of technology, and risk management practices.

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Project delays may delay expected revenues from operations. Significant project cost over-runs could make a project uneconomic. The Corporation’s ability to execute projects and market oil and natural gas depends upon numerous factors beyond the Corporation’s control, including the availability of drilling and related equipment; the availability and proximity of pipeline capacity; the availability of processing capacity; the availability and productivity of skilled labor; the effects of inclement weather; unexpected cost increases; currency fluctuations; the supply of and demand for oil and natural gas; the availability of alternative fuel sources; accidental events; and regulation of the oil and natural gas industry by various levels of government and governmental agencies. Because of these factors, the Corporation could be unable to execute projects on time, on budget or at all, and may not be able to effectively market the oil and natural gas that it hopes to produce.

Offshore Exploration

The Corporation faces additional risks due to its concentration on offshore activities. Exploration and development of offshore hydrocarbon reserves and the infrastructure required to produce them involves an increased degree of risk relative to onshore activity, and may result in additional costs relating to the technical difficulties of operating offshore. In particular, drilling conditions, drilling hazards or environmental damage could greatly increase the cost of operations, and various field operating conditions may adversely affect the production from successful wells. These conditions include delays in obtaining governmental approvals or consents, shut-ins of connected wells resulting from extreme weather conditions, insufficient storage or transportation capacity, or other geological and mechanical conditions. Sub-sea tiebacks in the UK North Sea, while common, are also affected by weather conditions in the UK North Sea, and potential pipeline tie-back installations can be more challenging in winter months. The Corporation’s offshore production facilities are also subject to hazards inherent in marine operations, such as capsizing, sinking, grounding, collision and damage from severe weather or tidal conditions. These hazards can cause substantial damage to facilities and interrupt production. Further, the Corporation has a relatively small number of production facilities and operational problems in any one facility could have a materially adverse effect on the Corporation. Offshore oil and gas activities can also be affected by ocean phenomena arising from occurrences such as hurricanes and tsunamis.

Access to facilities to process field production is an important consideration when developing fields in the North Sea. Such access is not guaranteed and directly affects the economics of a project. The UK government with the assistance of the DECC has a policy which has been adopted by the major operators of facilities in the North Sea that allows access to facilities to be negotiated at a reasonable rate. These types of initiatives are intended to ensure that reserves that cannot support stand-alone facilities can be developed.

Reserves and Production Risks

There are numerous uncertainties inherent in estimating quantities of oil and natural gas reserves and the future cash flows attributed to such reserves. The reserve and resource data included in this document are expressions of judgment based on knowledge, experience and industry practice. In general, estimates of economically recoverable oil and natural gas reserves and the future net revenue therefrom are based upon a number of variable factors and assumptions, such as expected reservoir characteristics based on geological, geophysical and engineering assessments; ultimate reserve recovery; timing and amount of capital expenditures; future production rates based on historical performance and expected future operating and investment activities; future oil and natural gas prices and quality differentials; marketability of oil and gas; royalty rates; assumed effects of regulation by governmental agencies; and future development and operating costs, all of which may vary materially from actual results.

Classifications of reserves are only attempts to define the degree of speculation involved. They are therefore imprecise and depend to some extent on interpretations, which may prove to be inaccurate. The nature of reserve quantification studies means that there can be no guarantee that estimates of quantities and quality of oil and gas disclosed will be available for extraction. Estimates that were reasonable when made may change significantly when new information from additional analysis and drilling becomes available.

Estimates for reserves that may be developed and produced in the future are often based upon volumetric calculations and upon analogy to similar types of reserves rather than actual production history. Estimates based on these methods are generally less reliable than those based on actual production history.

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Subsequent evaluation of the same reserves based upon production history will result in variations, which may be substantial, in the estimated reserves.

For those reasons, estimates of the economically recoverable oil and natural gas reserves attributable to any particular group of properties, classification of such reserves based on risk of recovery, and estimates of future net revenues associated with reserves prepared by different engineers, or by the same engineers at different times, may vary. The Corporation’s actual production, revenues, cash flows, taxes, royalties and development and operating expenditures may vary from these estimates. Such variances may be material. The Corporation is currently reliant upon the success of the production from Athena, Jacky, Beatrice Alpha and Bravo, Anglia, Topaz, Cook and Broom to meet its forward budgeted expenditure program.

The Corporation’s crude oil and natural gas reserves and production, and therefore its operating cash flows and results of operations, are highly dependent upon the Corporation’s success in exploiting the current reserve base and acquiring or discovering additional reserves. Without reserve additions through exploration, acquisition or development activities, the Corporation’s reserves and production will decline over time as reserves are produced. Maintenance of or a future increase in the Corporation’s reserves will depend not only on the Corporation’s ability to develop any properties it has from time to time, but also on its ability to select and acquire suitable producing properties or prospects. The business of exploring for, developing or acquiring reserves is capital intensive. To the extent cash flows from operations are insufficient and external sources of capital become limited or unavailable, the ability to make the necessary capital investments to maintain and expand the Corporation’s oil and natural gas reserves will be impaired. There can be no assurance that the Corporation’s exploration, development, production and acquisition efforts will result in the discovery and development of commercial accumulations of oil and natural gas.

If the assumptions upon which the estimates of Ithaca's reserves or resources have been based prove to be incorrect, Ithaca may be unable to recover and produce the estimated levels or quality of oil and gas and Ithaca's business, prospects, financial condition or results of operations could be materially and adversely affected.

Transportation of Hydrocarbons

All modes of transportation of hydrocarbons involve inherent risks. An explosion or fire or loss of containment of hydrocarbons or other hazardous material could occur during transportation by sea or pipeline. This is a significant risk due to the potential impact of a release on the environment and people and given the high volumes involved.

Foreign Operations

Presently, all of Ithaca’s oil and gas producing operations and assets and all of its exploration activities are located in the UK and held through Ithaca UK and Ithaca Minerals. As a result, the Corporation is subject to political, economic and other uncertainties, including but not limited to changes, sometimes frequent, in energy policies or the personnel administering them, nationalization, expropriation of property without fair compensation, cancellation or modification of contract rights, foreign exchange restrictions, currency fluctuations, royalty and tax increases, and other risks arising out of foreign governmental sovereignty over the areas in which the Corporation’s operations are conducted. Changes in legislation may affect the Corporation’s oil and natural gas exploration and production activities. The Corporation’s international operations may also be adversely affected by laws and policies of Canada as they pertain to foreign trade, taxation and investment.

In the event of a dispute arising in connection with its foreign operations, the Corporation may be subject to the exclusive jurisdiction of foreign courts or may not be successful in subjecting foreign persons to the jurisdiction of courts in Canada or enforcing Canadian judgments in foreign jurisdictions. In addition, Ithaca UK and Ithaca Minerals were formed pursuant to, and their operations are governed by, a number of legal and contractual relationships. The effectiveness of and enforcement of such contracts and relationships with parties in these jurisdictions cannot be assured. Consequently, the Corporation’s foreign exploration, development and production activities could be substantially affected by factors beyond the Corporation’s control, any of which could have a material adverse effect on the Corporation.

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Write-Off of Unsuccessful Properties and Projects

In order to realize the carrying value of its oil and gas properties and ventures, the Corporation must produce oil and gas in sufficient quantities and then sell such oil and gas at sufficient prices to produce a profit. The Corporation has a number of non-producing oil and gas properties. The risks associated with successfully developing such oil and gas properties are even greater than those associated with successfully continuing development of producing oil and gas properties, since the existence and extent of commercial quantities of oil and gas in unevaluated properties have not been fully established. The Corporation could be required to write-off some or all of its non-producing oil and gas properties if such projects prove to be unsuccessful.

Completion of a well does not assure a profit on the investment or recovery of drilling, completion and operating costs and expenses. In addition, drilling hazards or environmental damage could greatly increase the cost of operations. Various field operating conditions may also adversely affect the production from successful wells, including delays in obtaining governmental approvals, permits, licenses, authorizations or consents, shut-ins of connected wells resulting from extreme weather conditions, insufficient storage or transportation capacity or other geological and mechanical conditions. While close well supervision and effective maintenance operations can contribute to maximizing production rates over time, production delays and declines from normal field operating conditions cannot be eliminated. Any such productions, delays and declines could be expected to adversely affect revenue and cash flow levels.

Dependence on Key Executives and Personnel

The Corporation’s development and future potential are dependent upon the continued services and performance of its senior management and other key personnel. The loss of the services of any of the senior management or key personnel may have an adverse impact on the Corporation. There is significant demand for management and employees skilled in the areas of the exploration, development, production and acquisition of oil and natural gas reserves, and the Corporation may not be able to attract or retain qualified individuals, or its key personnel, in the future.

Certain of the directors and officers of the Corporation are also directors and officers of other companies involved in oil and natural gas exploration, development, production and acquisition, and conflicts of interest may arise between their duties as officers and directors of the Corporation and as officers and directors of such other companies. Situations may arise where directors or officers of the Corporation will be in direct competition with the Corporation. Conflicts, if any, in respect of the Corporation and its directors and officers must be disclosed in accordance with, and will be subject to the procedures and remedies under the ABCA. Conflicts, if any, in respect of the Ithaca UK and its directors and officers will be subject to the procedures and remedies under the UK Companies Act 2006.

Conflicts of Interest

Certain of the directors and officers of the Corporation are also directors and officers of other companies involved in oil and natural gas exploration, development, production and acquisition, and conflicts of interest may arise between their duties as officers and directors of the Corporation and as officers and directors of such other companies. Situations may arise where directors or officers of the Corporation will be in direct competition with the Corporation. Conflicts, if any, in respect of the Corporation and its directors and officers must be disclosed in accordance with, and will be subject to the procedures and remedies under the ABCA. Conflicts, if any, in respect of Ithaca UK and Ithaca Minerals, as applicable, and their respective directors and officers will be subject to the procedures and remedies under the UK Companies Act 2006.

Competition

The oil and natural gas industry is intensely competitive. There is strong competition for the discovery and acquisition of properties considered to have commercial potential as well as for the contracting of equipment and the recruitment and retention of skilled personnel. Ithaca competes with a substantial number of other companies, many of whom have greater financial resources. Many such companies not only explore for and produce oil, natural gas and NGLs, but also carry on refining operations and market petroleum and other products on a world-wide basis. There is also competition between the petroleum industry and other industries supplying energy and fuel to industrial, commercial and individual customers. Such competition

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may result in the Corporation being unable to secure or develop new exploration areas or recruit and retain staff. There is no assurance that Ithaca will be able to successfully compete against its competitors.

Commodity Prices

The profitability and cash flow of the Corporation’s operations will be dependent upon the market price of oil and gas. This has fluctuated widely, particularly in recent years. Crude oil and natural gas are commodities that are generally sold at contract or posted prices. Ithaca’s crude oil prices are based on various reference prices, primarily the dated Brent crude oil reference price. UK gas prices are generally referenced to the UK National Balancing Point. Adjustments are made to the reference price to reflect quality differentials and transportation. Quality differentials are affected by local supply and demand factors.

Brent and other oil and gas indices are affected by numerous factors beyond the Corporation’s control, including economic and political conditions, levels of supply and demand, the policies of the Organization of Petroleum Exporting Countries, currency exchange rates and the availability of alternative fuel sources. If the price of oil and gas products should drop significantly, the economic prospects of the projects in which the Corporation has an interest could be significantly reduced or rendered uneconomic, leading to a reduction in the volume of oil and natural gas reserves. Also, the operator or the Corporation might elect not to produce from certain wells at lower prices, or to explore on or develop certain properties.

All of these factors could result in a material decrease in the Corporation’s future net production revenue, causing a reduction in its oil and gas acquisition, exploration, development and production activities. In addition, bank borrowings available to the Corporation are in part determined by the borrowing base of the Corporation. A sustained material decline in prices from historical average prices could limit or reduce the Corporation’s borrowing base, therefore reducing the bank credit available to the Corporation, and could require that a portion of any existing bank debt of the Corporation be repaid.

From time to time the Corporation may enter into agreements to receive fixed prices on its oil and natural gas production to offset the risk of revenue losses if commodity prices decline; however, if commodity prices increase beyond the levels set in such agreement, the Corporation will not benefit from such increases. Alternatively options may be entered in to provide the Corporation the certainty of future pricing whilst retaining some or all of the upside.

Volatility in the oil price also affects the ability of asset transactions to complete as value expectations between sellers and buyers may differ substantially.

Market Risk

The marketability of any oil and gas which may be produced or acquired by the Corporation will be affected by numerous factors beyond the control of the Corporation. These factors include market fluctuations, proximity and capacity of oil and gas pipelines and processing equipment, availability of transportation capacity, and government regulations including regulations relating to price, taxation, royalties, production levels, imports and exports, land tenure and the environment, the effect of which cannot be accurately predicted. The Corporation will be affected by the differential between the price paid by refiners for light quality oil and the grades of oil that may in the future be produced by the Corporation. The Corporation has no direct experience in the marketing of oil and natural gas.

The Corporation has entered in to marketing agreements with BP and Shell, leading industry players that have significant capacity to place oil products in the markets and as such achieve competitive pricing for the Corporation’s production.

As a condition of the GDF Acquisition, Ithaca UK entered into two contracts for the sale of gas (with sales volume split 80% to 20% between the two) from the Anglia field and also required a new contract for the sale of gas from the Topaz field. The Anglia gas sales contracts were legacy contracts that give the gas buyer (RWE Trading Ltd) the ability to nominate the daily production from the field, however, over the contract year the gas buyer is obliged to take an amount approximating to the field owners’ annual nomination. The price for the larger volume Anglia contract was indexed linked to inflation and other items and was not at UK gas market price, thus offering Ithaca UK certainty of pricing, however, the price attained under this contract could be

27

materially below or above the market rate for extended periods. Ithaca UK’s gas sales contract for the Topaz field has volumes nominated daily by Ithaca UK and is priced daily at the UK gas market price. From October 1, 2011, the second Anglia buyers nomination contract was terminated and a new contract entered into on the same terms as the existing Topaz contract. From 1 October 2012 the remaining Anglia sales contract was renegotiated and a new contract entered into which volumes nominated daily by Ithaca UK and is priced daily at the UK gas market price less an agreed discount.

Concentration of Oil and Gas Assets

In the event of exploration success the Corporation’s prospective production will come from its interests in oil or gas fields and will remain dependent on a relatively small number of fields. Operational problems in any one field could have a materially adverse effect on the Corporation.

Interests in Licenses

The Corporation’s properties will be generally held in the form of licenses, concessions, permits and regulatory consents (the "Authorizations"). The Corporation’s activities are dependent upon the grant and maintenance of appropriate Authorizations, which may not be granted; may be made subject to limitations which, if not met, will result in the termination or withdrawal of the Authorization; or may be otherwise withdrawn. Also, in the majority of its licenses, the Corporation is often a joint interest-holder with another third party over which it has no control. An Authorization may be revoked by the relevant regulatory authority if the other interest-holder is no longer deemed to be financially credible. There can be no assurance that any of the obligations required to maintain each Authorization will be met. Although the Corporation believes that the Authorizations will be renewed following expiry or granted (as the case may be), there can be no assurance that such Authorizations will be renewed or granted or as to the terms of such renewals or grants. The termination or expiration of the Corporation’s Authorizations may have a material adverse effect on the Corporation’s results of operations and business.

In addition, the areas covered by the Authorizations are or may be subject to agreements with the proprietors of the land. If such agreements are terminated, found void or otherwise challenged, the Corporation may suffer significant damage through the loss of opportunity to identify and extract oil or gas.

Currency Risks

The Corporation’s operations are subject to exchange rate fluctuations and may become subject to exchange control or similar restrictions. Such fluctuations may affect the cash flows that the Corporation may realize from its operations, as the market for oil is principally denominated in US Dollars. The Corporation’s costs are incurred primarily in Pounds Sterling and to a lesser extent US Dollars and Euro.

The Board of Directors of the Corporation has agreed on a hedging policy to mitigate foreign exchange rate risk on committed expenditures.

Government and Environmental Regulation

The petroleum industry is subject to regulation, enforcement and intervention by governments in such matters as the awarding and licensing of exploration and production interests, the imposition of specific drilling obligations, environmental protection and pollution controls, health and safety aspects of on and off-shore activity and operations, control over the development, decommissioning and abandonment of fields (including restrictions on production) and possibly expropriation or cancellation of contract rights. As well, governments may regulate or intervene with respect to price, taxes, royalties and the exportation of oil and natural gas. Such regulation may be changed from time to time in response to economic or political conditions. The implementation of new legislation or regulations or the modification of existing legislation or regulations affecting the oil and gas industry could reduce demand for natural gas and crude oil, increase costs and may have a material adverse impact on the Corporation. Export sales are subject to the authorization of provincial and federal government agencies and the corresponding governmental policies of foreign countries.

Development of reserves and rates of return are also susceptible to changes in national fiscal policy. The

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current tax regime in the UK allows full deductions of appraisal and development expense before any tax is payable. On December 5, 2005, the UK Chancellor of the Exchequer delivered a Pre-Budget Report to the UK House of Commons. The Pre-Budget Report provided for an increase to the supplementary tax rate applicable to North Sea oil companies from 10% to 20% effective January 1, 2006. This change resulted in an effective rate of corporation tax of 30% on profits after all capital and operating costs have been recovered, and an effective supplementary rate of 20% on profits after all capital and operating costs (excluding finance costs) have been recovered, resulting in an effective combined base and supplementary tax rate of no less than 50%. In 2009 a number of reforms were introduced to the North Sea fiscal regime aimed at fostering developments in smaller fields as well as more complex high pressure/high temperature and heavy oil fields. The Small Field Allowance (“SFA”) was granted in respect of fields of less than 2.75 million tonnes (approximately 20Mboe). In January 2010 tax reforms were announced in which the additional tax allowances were extended to gas fields in frontier areas. On March 23, 2011, the UK government announced that the rate of supplementary tax applicable to North Sea oil companies would rise from 20% to 32% from March 24, 2011, resulting in an effective combined base and supplementary tax rate of no less than 62%. On March 21, 2012 the UK Government announced an increase in the SFA tax shelter for future small developments to approximately $240 million and an increase in qualifying field size to 6.25 million tonnes (approximately 45Mboe). The SFA allows qualifying fields exemption from the payment of the 32% Supplementary Charge. Any changes to these laws would impact the net present worth of the Corporation’s reserves.

All phases of the oil and natural gas business present environmental risks and hazards and are subject to environmental regulation pursuant to a variety of international conventions, federal, regional, national, state and local laws and regulations. Environmental legislation provides for, among other things, restrictions and prohibitions on spills, releases or emissions and discharges of various substances and materials (including wastes) produced in association with or otherwise arising from oil and gas operations. The legislation also requires that wells and facility sites be operated, maintained, decommissioned, abandoned and reclaimed in accordance with relevant laws and permits and including, where relevant, to the satisfaction of applicable regulatory authorities. Existing and possible future environmental legislation, regulations and actions could cause additional expense, capital expenditure, restrictions and delays in the activities of the Corporation, the extent of which cannot be predicted. Before exploration and/or production activities can commence, the Corporation must obtain regulatory approval and relevant licenses and there is no assurance that such approvals or licenses will be obtained.

Environmental legislation and enforcement policy is evolving in a manner expected to result in more onerous and stricter requirements, standards and enforcement, larger fines and greater liability and potentially increased capital expenditures and operating costs. While the directors believe that the Corporation’s current provision for compliance with environmental laws, regulations and liabilities (including decommissioning) in the countries in which it operates is reasonable, no assurance can be given that new rules and regulations will not be enacted or existing legislation, rules and regulations will not be applied in a manner which could limit or curtail the Corporation’s production or development or result in increased liabilities. No assurance can be given that environmental laws will not result in a curtailment of production or a material increase in the costs of acquisition, exploration, development or production activities or otherwise adversely affect the Corporation’s financial condition, results of operations or prospects.

The Corporation is committed to meeting its responsibilities to protect the environment wherever it operates and procedures are in place to ensure utmost care is taken in the day-to-day management of its properties. The Corporation believes in well abandonment and site restoration in a timely manner to ensure minimal damage and overall costs to the Corporation.

Uninsured Risks

Industry operating risks include the risk of fire, explosions, blow-outs, pipe failure, abnormally pressured formations and environmental hazards such as accidental spills, releases or leakage of petroleum liquids, gas leaks, ruptures or discharges of toxic gases, the occurrence of any of which could result in substantial losses to the Corporation due to injury to or loss of life; severe damage to or destruction of property, natural resources and equipment; pollution or other environmental damage; clean-up responsibilities; regulatory investigation and penalties; and suspension of operations. Damages and losses occurring as a result of such risks may give rise to claims against the Corporation.

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Although the Corporation believes that it, or where applicable the operator, carries adequate insurance with respect to its operations in accordance with industry practice, in certain circumstances the Corporation’s, or where applicable the operator’s, insurance may not cover or be adequate to cover the consequences of such events. The payment of such uninsured liabilities would reduce the funds available to the Corporation. The occurrence of a significant event that is not covered or not fully covered by insurance, or the insolvency of the insurer of such event, could have a materially adverse effect on the business, financial condition and results of operations of the Corporation. Moreover, there can be no assurance that the Corporation will be able to maintain adequate insurance in the future at rates that it considers reasonable.

Cyclical and Seasonal Impact of Industry

Ithaca’s operating results and financial condition are dependent on the prices received for oil and natural gas production. Oil and natural gas prices have fluctuated widely during recent years and are determined by supply and demand factors and geopolitical events, most of which are outside of the Corporation’s control, including weather, general economic conditions and conditions in other oil and natural gas regions. Natural gas prices fluctuate in accordance with seasonal demand. A decline in oil and natural gas prices could have an adverse effect on the Corporation’s financial condition.

The Corporation’s offshore production facilities are subject to damage from severe weather or tidal conditions, especially in the winter months. Sub-sea tiebacks in the UK North Sea, while common, are also affected by weather conditions in the UK North Sea, and potential pipeline tie-back installations can be more challenging in winter months.

Conflicting Interests with Partners

Joint venture, acquisition, financing and other agreements and arrangements must be negotiated with independent third parties and, in some cases, must be approved by governmental agencies. These third parties generally have objectives and interests that may not coincide with and may conflict with Ithaca’s interests. Unless the parties are able to compromise these conflicting objectives and interests in a mutually acceptable manner, agreements and arrangements with these third parties will not be consummated or maintained.

In certain circumstances, the concurrence of co-venturers may be required for various actions. Other parties influencing the timing of events may have priorities that differ from Ithaca’s, even if they generally share Ithaca’s objectives. Demands by or expectations of governments, co-venturers, customers and others may affect Ithaca’s strategy regarding the various projects. Failure to meet such demands or expectations could adversely affect Ithaca’s participation in such projects or its ability to obtain or maintain necessary licenses and other approvals.

Acquisition Risks

The Corporation intends to acquire additional oil and gas properties, including pursuant to the proposed Valiant Acquisition.. Although the Corporation performs a review of properties prior to acquiring them that it believes is consistent with industry practice, such reviews are inherently incomplete. It is generally not feasible to review in depth every individual property involved in each acquisition. Generally, the Corporation will focus its due diligence efforts on higher valued properties and will sample the remainder. However, even an in-depth review of all properties and records may not necessarily reveal existing or potential problems, nor will it permit a buyer to become sufficiently familiar with the properties to assess fully their deficiencies and capabilities. The Corporation may be required to assume pre-closing liabilities, including environmental liabilities, and may acquire interests in properties on an "as is" basis.

Risks commonly associated with acquisitions of companies, businesses or properties include the difficulty of integrating operations and personnel in relation to any such business or property, problems with minority shareholders if the transactions are structured as the acquisition of companies, the potential disruption of Ithaca's own business, the diversion of management's time and resources from the existing business of Ithaca and its subsidiaries and the possibility the indemnification agreements with sellers may be unenforceable or insufficient to cover potential liabilities and difficulties arising out of integration. Furthermore, the value of any business, company or property that Ithaca acquires or invests in may actually

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be less than the amount it pays for it or its estimated production capacity or potential may be lower than expected, especially given that it is not always possible to conduct a high level of due diligence on the acquisition target.

Reliance on Industry Partners

The Corporation relies on industry partners with respect to the evaluation, acquisition and development of, and future production from, its properties and a failure or inability to perform by such partners could materially affect the prospects of the Corporation.

Regulatory Approvals

The further development of the Corporation’s properties requires the approval of applicable regulatory authorities to the plans of the Corporation with respect to the drilling and development of such properties. A failure to obtain such approval on a timely basis or material conditions imposed by such authority in connection with the approval would materially affect the prospects of the Corporation.

Common Share Price Volatility

The market price of the Common Shares could be subject to wide fluctuations in response to Ithaca’s results of operations, changes in earnings estimates by analysts, changing conditions in the oil and gas industry, or changes in general market, economic or political conditions.

Force Majeure

The Corporation’s projects may be adversely affected by risks outside the control of the Corporation including labor unrest, civil disorder, war, subversive activities or sabotage, fires, floods, explosions or other catastrophes, epidemics or quarantine restrictions.

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DIVIDEND POLICY

The declaration and payment of dividends on the Common Shares is at the discretion of the Board.

It is the present policy of the Board of Directors to re-invest any net earnings to finance the growth and expansion of the Corporation’s business and accordingly it is not intended that the Corporation shall pay any dividends in the foreseeable future.

If, in the future, the Board makes the decision to pay a dividend on the Common Shares, any declaration and payment of dividends by the Corporation will be dependent upon the Corporation’s consolidated results, financial position, cash requirements, future prospects, profits available for distribution and other factors regarded by the Directors as relevant at the time.

The Corporation has not paid any dividends on the Common Shares since its incorporation to the date hereof.

DESCRIPTION OF CAPITAL STRUCTURE

The authorized share capital of the Corporation consists of an unlimited number of Common Shares and an unlimited number of Preferred Shares issuable in series (the "Preferred Shares"). As at December 31, 2012, there were 259,920,003 Common Shares issued and outstanding. No Preferred Shares are issued and outstanding.

The following is a summary of the rights, privileges, restrictions and conditions attaching to each class of shares of the Corporation.

Common Shares

The holders of Common Shares are entitled to: (i) receive notice of and to vote at every meeting of shareholders of Ithaca and shall have one vote thereat for each such Common Share so held, (ii) receive any dividend declared on the Common Shares by Ithaca subject to the rights of the holders of Preferred Shares; and (iii) subject to the rights, privileges, restrictions and conditions attached to the Preferred Shares, receive the remaining property of Ithaca on dissolution, liquidation or winding up.

Preferred Shares

Preferred Shares may, from time to time, be issued in one or more series, each series to consist of such number of shares as may, before the issue thereof, be fixed by the directors of Ithaca. The directors may additionally determine the designation, rights, privileges, restrictions and conditions attaching to the Preferred Shares, including, without limiting the generality of the foregoing, the rate or amount of preferential dividends and the date of payment thereof, the redemption purchase and/or conversion price and conditions of redemption, purchase and/or conversion, if any, and any sinking fund or other provisions. The Preferred Shares rank in priority to the Common Shares as to payment of dividends and the distribution of assets in the event of dissolution, liquidation or winding-up.

MARKET FOR SECURITIES

The Common Shares of the Corporation are listed for trading on the TSX under the symbol "IAE" and on the AIM under the symbol "IAE".

The price ranges and traded volumes of the Common Shares on the TSX, for each month of the most recently completed financial year, as reported by the TSX, are shown below:

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Price Range ($) Monthly(1)

High Low Trading Volume 2012 January 2.89 2.10 28,598,000 February 3.03 2.50 34,686,000 March 3.26 2.96 86,083,000 April 3.20 2.87 31,059,000 May 3.00 1.68 85,373,000 June 1.93 1.43 58,033,000 July 2.09 1.62 43,388,000 August 2.18 1.95 21,398,000 September 2.18 1.86 23,694,000 October 2.02 1.79 21,554,000 November 2.11 1.91 17,588,000 December 2.09 1.96 10,050,000 Note:

(1) Monthly trading volume is rounded to the nearest one-thousand.

DIRECTORS AND EXECUTIVE OFFICERS

Background Information

The following table sets forth the names, municipalities of residence, positions with Ithaca, time served as a director (if applicable) and the principal occupation during the last five years of the directors and executive officers of Ithaca as of December 31, 2012. Directors are elected at the annual meetings of shareholders and serve until the next annual meeting or until a successor is elected or appointed.

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Name, Position with Ithaca and

Municipality of Residence

Principal Occupation in the Last Five Years

Director Since

(9)

Number of Common Shares

Beneficially Owned,

Controlled or Directed

(7)

Iain McKendrick(6)(12)

Chief Executive Officer

and Director Aberdeen, Scotland

Chief Executive Officer of the Corporation since December 1, 2008, previously Chief Operating Officer of the Corporation since February 2008. With Total S.A. from 1991, most recently as Vice-President Business Development and Strategy, USA.

December 1, 2008

175,465

Brad Hurtubise(1)(4)

Director Calgary, Alberta

Non-Executive Director of the Corporation. Chief Executive Officer and director of Eaglewood Energy Inc. since November 2008. Managing Director of Investment Banking Tristone Capital Inc. since 2004 and before that Executive Managing Director, Investment and Corporate Banking at BMO Nesbitt Burns. Currently on the board of Direct Cash Payments Inc.

February 15, 2008

100,000

Jack C. Lee Lee(1)(3)(13)

Director and Non-Executive Chairman Calgary, Alberta

Non-Executive Chairman since February 22, 2011. Previously Vice-Chairman of the Board of Directors and director of Penn West Energy Trust, Chairman of Board of Canetic Energy from inception in January 2006 until January 2008. Prior thereto, President and Chief Executive Officer of Acclaim Energy Trust, all in Canada. Currently Lead Director of Sprott Inc. and director and Chairman Alaris Royalty Corp., both listed on the TSX and a director and Chairman of Canera Energy Inc. and Gryphon Petroleum Corp., both private oil and gas companies.

February 15, 2008

700,000(8))

John P. Summers Summers

(1)(2)(6)

Director London, England

Non-Executive Director of the Corporation. Chief Executive of JPS Finance Limited, a financial advisory services corporation, since April 1980.

July 1, 2005

214,700(11)

Franklin M. Wormsbecker

(2)(3)

Director Calgary, Alberta

Non-Executive Director of the Corporation. Previously Vice President, Operations of Harvard Energy, a private oil company from 2006 to 2011. President of Pancho Resources Limited, an engineering consulting corporation, from 2003 to 2006.

April 12, 2006

200,000

Jay M. Zammit(2)(4)(5)

Director Calgary, Alberta

Non-Executive Director of the Corporation. Partner, Burstall Winger LLP, Barristers and Solicitors, and Managing Partner from 2001 to 2003 and in 2005. Currently on the boards of Cathedral Energy Services Ltd. (TSX), Antrim Energy Inc. (TSX/AIM), and Iona Energy Inc. (TSXV).

April 27, 2004

448,332

Ron Brenneman(2)(3)(4)(5)

Director Calgary, Alberta

Non –Executive Director of the Corporation. Previously , Executive Vice President of Suncor from 2009 to 2010, and President and Chief Executive Officer of Petro-Canada from 2000 to 2009

May 3, 2010

60,000

John Woods Chief Developments Officer Aberdeen, Scotland

Chief Developments Officer of the Corporation since February 2006. From 2003 through 2005 Production Services Director with Wood Group Engineering North Sea Ltd.

N/A 111,445

Nick Muir Chief Technical Officer Aberdeen, Scotland

Chief Exploration Officer of the Corporation since February 2006. Prior to February 2006, Exploration Commercial Lead for Shell Europe Business Unit.

N/A 16,445(8)

Graham Forbes(6) (12) (13)

Chief Financial Officer Aberdeen, Scotland

Chief Financial Officer of the Corporation since May 2010. Prior thereto, Finance Director then subsequently Executive Director of First Oil plc.

N/A 49,645

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Name, Position with Ithaca and

Municipality of Residence

Principal Occupation in the Last Five Years

Director Since

(9)

Number of Common Shares

Beneficially Owned,

Controlled or Directed

(7)

Mike Travis Chief Production Officer Aberdeen, Scotland

Chief Production Officer of the Corporation since January 2012. Prior thereto Asset Manager for Premier Oil Vietnam (2011), Asset Manager for Premier Oil North Sea (2010), and Asset Manager and member of executive management team for Venture Production (2006-2009)

N/A

53,687

Notes:

(1) Member of the Corporation’s Audit Committee of which John P. Summers is Chair.

(2) Member of the Corporation’s Remuneration Committee of which Jay Zammit is Chair.

(3) Member of the Corporation’s Reserve Committee which Frank Wormsbecker is Chair.

(4) Member of the Corporation’s Corporate Governance Committee of which Brad Hurtubise is Chair.

(5) Member of the Corporation’s Special Committee of which Brad Hurtubise is Chair.

(6) Messrs. McKendrick, Summers and Forbes are also directors of Ithaca UK.

(7) These amounts do not include any Common Shares issuable upon the exercise of stock options.

(8) 615,000 Common Shares are held by Facet Resources Ltd., a private investment company owned as to 70% by Mr. Lee and 30% by his wife Irene L. Lee and 85,000 are held by Mr. Lee personally.

(9) 5,000 of these shares are held by Nick Muir’s wife, Susan N. Muir.

(10) The term of office of each Director is from the date of the meeting at which he is elected or appointed until the next annual meeting of shareholders or until his successor is elected or appointed.

(11) 3,000 of these shares are held by John P. Summers’ wife.

(12) Messrs. McKendrick and Forbes are also directors of Ithaca Minerals.

(13) Messrs. Lee and Forbes are also directors of Ithaca Holdings.

Ownership of Shares

As of the date hereof the directors and executive officers of the Corporation and its subsidiaries, as a group, own or control, directly or indirectly, an aggregate of 2,129,719 Common Shares representing 0.8% of the issued and outstanding Common Shares.

Cease Trade Orders, Bankruptcies, Penalties or Sanctions

Other than as set out below, to the knowledge of management, no director or executive officer of the Corporation is, as of the date of this AIF, or was, within the 10 years before the date hereof, a director, chief executive officer or chief financial officer of any company (including Ithaca) that was the subject of a cease trade order, an order similar to a cease trade order or an order that denied the company access to any exemption under securities legislation that was in effect for a period of more than 30 consecutive days, that was issued (i) while such person was acting in that capacity, or (ii) after such person was acting in such capacity and which resulted from an event that occurred while that person was acting in such capacity.

On August 30, 2005 Jay Zammit became a director of Marine Bioproducts International Corp. ("Marine"), a Corporation listed on the NEX Board of the TSXV that was the subject of a cease trade order in British Columbia and Alberta prior to Mr. Zammit’s appointment. Mr. Zammit was appointed to the board to assist in the reinstatement of Marine to good standing. The cease trade orders against Marine were subsequently lifted and Marine completed a plan of arrangement (the "Plan") with Phoenix Oilfield Hauling Ltd. on May 9, 2006. Mr. Zammit is no longer a director of Phoenix Oilfield Hauling Inc., the resulting corporation under the Plan.

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Other than as set forth below, to the knowledge of management, no director or executive officer of the Corporation, or shareholder holding a sufficient number of securities to affect materially the control of the Corporation is, as of the date of this AIF, or has been, within 10 years before the date hereof, a director or executive officer of any company that (including Ithaca), while such person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets.

Mr. Zammit was Corporate Secretary of Alternative Fuel Systems Inc. when it made an application under the Companies’ Creditors Arrangement Act (Canada) ("CCAA"). Alternative Fuel Systems Inc. completed a Statutory Plan of Arrangement under the CCAA and the ABCA on June 30, 2004 whereby it was reorganized into two companies: Alternative Fuel Systems (2004) Inc. and AFS Energy Inc. AFS Energy Inc., completed a transaction to convert to an oil and gas corporation and changed its name to Flagship Energy Inc. effective May 2005. Alternative Fuel Systems (2004) Inc. completed a private placement financing in the summer of 2005 and was listed on the TSXV. Mr. Zammit was a director of Alternative Fuel Systems (2004) Inc. but is not associated with AFS Energy Inc. or any successor companies to AFS Energy Inc. Alternative Fuel Systems (2004) Inc. was acquired by a U.S. based company in 2011 and in connection with that acquisition Mr. Zammit resigned as a director.

Mr. Lee was a director of Darian Resources Ltd. ("Darian"), a private company, when it made an application under the CCAA. The Court of Queen’s Bench of Alberta granted an initial order on February 12, 2010. The order provided certain relief including the imposition of a stay of proceedings against Darian and its assets, which stay was subsequently extended to May 18, 2010. Darian was subsequently sold to Crescent Point Energy in July 2010. As a result of the transaction, creditors of Darian were paid 100% of their outstanding debts and the common shareholders received approximately $26.8 million for their shares.

To the knowledge of management, no director or executive officer of the Corporation, or shareholder holding a sufficient number of securities to affect materially the control of the Corporation has, within the 10 years before the date of this AIF, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the director, executive officer or shareholder.

To the knowledge of management, no director or executive officer of the Corporation, or shareholder holding a sufficient number of securities to affect materially the control of the Corporation has been subject to any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority, or has been subject to any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable investor in making an investment decision.

Conflicts Of Interest

There are potential conflicts of interest to which the directors and officers of the Corporation or a subsidiary of the Corporation may be subject in connection with the operations of the Corporation or a subsidiary of the Corporation. Certain of the directors and officers of the Corporation are also directors and officers of other companies involved in oil and natural gas exploration, development, production and acquisition, and conflicts of interest may arise between their duties as officers and directors of the Corporation and as officers and directors of such other companies, and situations may arise where directors or officers of the Corporation will be in direct competition with the Corporation. Conflicts, if any, in respect of the Corporation and its directors and officers must be disclosed in accordance with and will be subject to the procedures and remedies under the ABCA. Conflicts, if any, in respect of Ithaca UK and its directors and officers will be subject to the procedures and remedies under the UK Companies Act 2006. To the knowledge of the Corporation, no material conflicts of interest currently exist between the Corporation, Ithaca Holdings, Ithaca UK or Ithaca Minerals and any director or officer of the Corporation, Ithaca Holdings, Ithaca UK or Ithaca Minerals.

Jay M. Zammit, a Director of the Corporation, is a partner of Burstall Winger LLP, which provides legal services to the Corporation on a fee-for-service basis.

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AUDIT COMMITTEE INFORMATION

Audit Committee Charter

The full text of the Audit Committee charter is included in Schedule "A" of this AIF.

Composition of the Audit Committee

The Audit Committee currently consists of three members, all of whom are financially literate and independent. The relevant education and experience of each audit committee member is outlined below.

John P. Summers

Mr. Summers has over 40 years of experience as a Chartered Accountant and international financial consultant, providing financial and accounting advisory services to select high net worth individuals and international trust funds.

Mr. Summers has served as a Non-Executive Director of Ithaca since July 2005 and currently serves on the board of several private companies as well as advising several non-profit organizations.

Mr. Summers is a Registered Chartered Accountant.

Jack C. Lee

Mr. Lee has over 39 years of experience working in the oil and gas industry, leading both private and listed companies and delivering significant Shareholder value through corporate transactions. Mr Lee is currently Lead Director of Sprott Inc., a TSX listed fund manager with over $10 billion under management, and a leading investor in Canadian energy companies. He serves as Chairman of Alaris Royalty Corp, a TSX listed company that provides alternative financing to private companies. Mr Lee was previously Vice Chairman of Penn West Energy Trust, Chairman of Canetic Resources Trust, President and CEO and Chairman of Acclaim, a predecessor of Canetic, and President and Chief Executive Officer of Danoil Energy Ltd. ("Danoil"), a predecessor of Acclaim. During Mr. Lee's tenure at Danoil/Acclaim and Canetic the enterprise value of the company was grown from less than $100 million to $5 billion, largely through acquisitions and development drilling.

Mr. Lee has served as Ithaca's Non-Executive Chairman since February 2011, having been a Non-Executive Director of Ithaca since February 2008. Mr. Lee currently serves as Chairman of two private oil and gas companies, CanEra Energy Inc. and Gryphon Petroleum Corp, and is also a board member and major investor in a private service company that operates in the oil and gas sector.

Mr. Lee received Bachelor of Arts and Bachelor of Commerce degrees from the University of Saskatchewan and holds an ICD.D designation from the Institute of Corporate Directors.

Brad Hurtubise

Mr. Hurtubise is the Chief Executive Officer of Eaglewood Energy Inc. ("Eaglewood"), an international oil and gas exploration company operating in Papua New Guinea. Mr. Hurtubise has extensive oil and gas industry experience, having worked in the sector for over 25 years both as an investment banker and more recently as head of a number of listed energy companies. Prior to joining Eaglewood in 2008, Mr. Hurtubise held positions as Managing Director and Head of Global Investment Banking at Tristone Capital Inc. and Executive Managing Director, Investment and Corporate Banking at BMO Nesbitt Burns, responsible for its North American energy practice. Mr Hurtubise has also served as Chairman and interim Chief Executive officer of Westcastle Energy Trust, which he subsequently sold to Direct Energy Marketing, serving as the company's Executive Vice President and Chief Financial officer until its sale to Centrica, a UK based international energy company.

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Mr. Hurtubise has served as a Non-Executive Director at Ithaca since February 2008 and currently serves on the boards of Eaglewood and Direct Cash Payments, as well as being a member of the Advisory Board of Marsh Canada Limited. Further, Mr. Hurtubise has previously served on the boards of several TSX, TSX-V, AIM and NYSE listed companies.

Mr. Hurtubise received Bachelor of Commerce degree from the University of Calgary and a Master Business Administration from the Schulich School of Business at York University in Toronto and is a Chartered Financial Analyst.

Pre-approval Policies

Pursuant to the Audit Committee charter, the Audit Committee shall approve all non-audit services to be provided by the independent auditor prior to the services being performed, including the amount of any related fees. To the extent deemed necessary by the Audit Committee, it shall have the authority to engage outside counsel and/or independent accounting consultants to review any matter under its responsibility.

External Auditor Service Fees (By Category)

The following table provides information about the fees billed to the Corporation for professional services rendered by PricewaterhouseCoopers LLP, Chartered Accountants, during the years ended December 31, 2012 and December 31, 2011 and were paid or estimated to be payable for services in the year indicated:

PricewaterhouseCoopers LLP 2012

($’000) 2011

($’000)

Audit Fees(1)

176 191

Audit-Related Fees(2)

93 133

Tax Fees(3)

47 36

All Other Fees 2 2

Total:(4)

318 362

Notes:

(1) Audit fees were for professional services rendered by PricewaterhouseCoopers LLP, Chartered Accountants for the audit of the Corporation’s annual financial statements as well as services provided in connection with statutory and regulatory filings.

(2) Audit-related fees are for services related to performance of limited procedures performed by the Corporation’s auditors related to interim quarterly reports and IFRS transition activities.

(3) Professional services fee for tax compliance, tax advice and tax planning.

(4) These fees only represent professional services rendered and do not include any out-of-pocket disbursements or fees associated with filings made on the Corporation’s behalf. These additional costs are not material as compared to the total professional services fees for each year.

The Audit Committee met quarterly in 2012 to fulfill its mandate. The Audit Committee has discussions with the Corporation’s auditors regularly, independent of management, and has direct communication channels with the external auditors to discuss and review specified issues as appropriate.

LEGAL PROCEEDINGS AND REGULATORY ACTIONS

On December 13, 2010 Ithaca announced that it planned to drill a second production well in the Jacky field in Q1 2011 to access additional production and reserves (‘Jacky J03’). On December 20 2010, Jacky co-venturer NSE published an announcement on its website that NSE was ‘seeking to withdraw from investing in the Jacky J03 well’. In order to have the participating interests of the Jacky co-venturers in this well clarified, on January 31, 2011 Ithaca commenced proceedings in the High Court of Justice in London for a declaration that the Jacky J03 well was a joint operation. In July 2012, the Company received notice that the Commercial Court of the High Court of Justice had confirmed Ithaca's position in concluding that the Jacky J03 well was drilled as a "Joint Operation" under the joint operating agreement. Accordingly, North Sea Energy (UK) Limited (“NSE”) remained obliged to contribute to the Jacky J03 well costs in accordance with its field equity (10%). NSE did not request leave to appeal the judgment and subsequently paid a share of Ithaca's legal costs of the proceedings.

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Management of Ithaca is not aware of any other existing or contemplated legal proceedings material to Ithaca, to which Ithaca is, or during the financial year ended December 31, 2012 was, a party or of which any of its property is, or during the financing year ended December 31, 2012 was, subject.

Management of Ithaca is not aware of any penalties or sanctions imposed against Ithaca by a court relating to securities legislation or by a securities regulatory authority during the financial year ended December 31, 2012 or any other penalties or sanctions imposed by a court or regulatory body against Ithaca that would likely be considered important to a reasonable investor in making an investment decision.

INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS

No director or executive officer of the Corporation, or shareholder that beneficially owns, or controls or directs, directly or indirectly, more than 10 percent of any class or series of voting securities of the Corporation, or associate or affiliate of any of the foregoing persons has had any material interest, direct or indirect, in any transaction within the three most recently completed financial years or during the current financial year that has materially affected or is reasonably expected to materially affect the Corporation.

TRANSFER AGENT AND REGISTRAR

Computershare Trust Company of Canada, Suite 600, 530 - 8th Avenue S.W., Calgary, Alberta, Canada, T2P 3S6, is the transfer agent and registrar for the Common Shares at its principal offices in Calgary, Alberta, Canada and in Bristol, England.

MATERIAL CONTRACTS

In October 2012, the Corporation signed a $430 million facility as described above, the details of which have been filed on SEDAR. Neither the Corporation nor any subsidiary of the Corporation has entered into any other material contracts within the financial year ended December 31, 2012 or prior thereto.

INTERESTS OF EXPERTS

The Corporation's auditors are PricewaterhouseCoopers LLP, Chartered Accountants, who have prepared an independent auditors' report dated March 25, 2013 in respect of the Corporation's consolidated financial statements as at December 31, 2012 and 2011 for each of the years ended December 31, 2012 and 2011. PricewaterhouseCoopers LLP, Chartered Accountants, has advised that they are independent with respect to the Corporation.

Sproule prepared the independent report filed with the Form 51-101F1 – Statement of Reserves Data and Other Oil & Gas Information attached hereto as Schedule “B” in which it evaluated as at December 31, 2012 the oil and natural gas reserves attributable to the principal properties of the Corporation.

The partners, employees and consultants of Sproule hold, directly or indirectly, in aggregate, less than 1% of any securities or other property of the Corporation or of one of its associates or affiliates either at the time of such report or since that time.

No director, officer or employee of any of the experts referred to herein is or is expected to be elected, appointed or employed as a director, officer or employee of Ithaca or of any associate or affiliate of Ithaca.

ADDITIONAL INFORMATION

Additional information regarding the Corporation may be found on SEDAR at www.sedar.com. Additional information, including directors’ and officers’ remuneration and indebtedness to the Corporation, principal holders of securities of the Corporation and securities authorized for issuance under equity compensation plans will be contained in the Corporation’s most recent information circular that will be prepared in connection with the 2013 annual and special meeting of shareholders of the Corporation. Additional financial information is provided in the Corporation’s comparative financial statements for its financial year ended December 31, 2012, together with the accompanying report of the auditor and management’s discussion and analysis filed on SEDAR at www.sedar.com

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SCHEDULE A - AUDIT COMMITTEE CHARTER

ITHACA ENERGY INC.

AUDIT COMMITTEE CHARTER

General

The Audit Committee is a committee of the Board of Directors (the "Board") of Ithaca Energy Inc. (the "Corporation") to which the Board delegates its responsibility for oversight of the financial reporting process. Responsibilities of the Audit Committee include:

• Review the financial reporting process to ensure the accuracy of the financial statements of the Corporation;

• Evaluate the independent auditor’s qualifications, performance and independence;

• Facilitate the independence of the independent auditor;

• Assess the processes relating to the determination and mitigation of risks and the maintenance of an effective control environment; and

• Review the processes to monitor compliance with laws and regulations.

The Audit Committee will provide communication among the independent auditor, senior management of the Corporation and the Board. The Audit Committee has the sole authority to approve any non-audit engagement by the Corporation’s independent auditors and to approve all audit engagement fees and terms.

Responsibilities of the Audit Committee

1. Financial Reporting

(a) Review, with management and the independent auditor, the Corporation’s annual financial statements, independent auditor reports, and disclosures under "Management’s Discussion and Analysis" before they are reviewed by the Board. Review interim financial information before it is released to the public. Review all public disclosure documents containing audited or unaudited financial information before release, including any prospectus, the annual report, the annual information form and management’s discussion and analysis.

(b) The Audit Committee Chair, as a representative of the Committee, shall consult directly with the independent auditor to obtain their comments with respect to interim reports including related "Management’s Discussion and Analysis" (as a result of their limited scope review of the interim reports).

(c) Conduct an investigation sufficient to provide reasonable grounds for believing that the financial statements and reports referred to in a) above are complete in all material respects and consistent with the information known to Committee members, and assess whether the financial statements reflect appropriate accounting principles.

(d) Review with senior management of the Corporation and the independent auditor, management’s handling of any proposed audit adjustments identified by the independent auditors.

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(e) Meet with the independent auditor to review the results of the annual audit, their judgments about the quality and appropriateness of the Corporation’s accounting principles, and any audit problems or difficulties and management’s response.

(f) Review and resolve any significant disagreement among the Corporation’s management and the independent auditors in the financial reporting process.

(g) Review the integrity of the Corporation’s internal and external financial reporting process, in consultation with the independent auditors.

(h) Consider, evaluate and recommend to the Board such changes as are appropriate to the Corporation’s auditing and accounting principles and practices as suggested by the independent auditors or the Corporation’s senior management.

(i) Review with independent auditors and the Corporation senior management the extent to which changes and improvements in financial and accounting practices, as approved by the Audit Committee, have been implemented.

2. Independent Auditor

(a) Approve the independent auditors’ proposed audit scope, approach and fees

(b) At least annually, obtain and review a report by the independent auditor describing:

(c) the firm’s internal quality-control procedures, and

(d) any material issues raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the firm, and any steps taken to deal with any such issues.

(e) Confirm the independence of the independent auditor by discussing and reviewing all significant relationships that the independent auditors have with the Corporation and obtaining their assertion of independence in accordance with professional standards.

(f) Review the performance of the independent auditor.

(g) Engage the Corporation’s independent auditor and present recommendations on the appointment or discharge of the independent auditor to the Board for presentation to the shareholders.

(h) Approve in advance of the Corporation’s final commitment all consulting arrangements and any other non-audit service with the Corporation’s independent auditors other than services related to reviews of interim reports and tax services.

(i) Approve all audit fees and terms.

(j) When there is to be a change in the auditor, review all issues relating to the change including any reportable events.

(k) Review any engagements for non-audit services to be provided by the independent auditor’s firm or affiliates, together with estimated fees and consider the independence of the auditor.

(l) Risk Assessment and Risk Management

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(m) Discuss with Corporation management guidelines and policies governing the risk assessment and risk management processes.

(n) Review with Corporation management, the independent auditors, significant risks and exposures. Review management’s plans and processes to minimize such risks, including insurance coverage.

(o) Evaluate whether Corporation management is adequately communicating the importance of internal control to all relevant personnel.

(p) Periodically privately consult with the independent auditor about internal controls and the completeness and accuracy of the Corporation’s financial statements.

(q) Review whether the internal control recommendations made by the internal auditors and the independent auditor are being implemented by Corporation management and, if not, why not.

3. Compliance with Relevant laws and regulations

(a) Periodically obtain updates from the Corporation’s senior management regarding procedures and processes to ensure compliance with applicable laws and regulations (including but not limited to, securities, tax and environmental matters).

4. Other Responsibilities

(a) Meet at least five times annually (for review of Q1, Q2 and Q3 interim reports as well as pre and post audit) with senior management and the independent auditors in separate sessions.

(b) Institute special investigations, if necessary, and hire special counsel or experts to assist, if appropriate.

(c) Review and update this Charter at least annually, and obtain approval of changes from the Board.

(d) Set clear hiring policies for employees or former employees of the independent auditors.

(e) Review the procedures established for the receipt, retention, and treatment of complaints received by the Corporation regarding accounting, internal accounting controls, or auditing matters.

(f) Review the procedures established allowing the confidential, anonymous submission by Corporation employees of concerns regarding questionable accounting or auditing matters and resolution of such concerns, if any.

(g) Review with the Board, any issues that arise with respect to the quality or accuracy of the Corporation’s financial statements, the Corporation’s compliance with legal or regulatory requirements and the performance and independence of the Corporation’s independent auditors.

(h) Perform other oversight functions as requested by the Board.

(i) As considered necessary in the course of fulfilling Audit Committee duties, obtain advice and assistance from outside legal, accounting or other advisors.

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(j) Report after each meeting to the Board regarding actions taken and matters discussed by the Committee.

Organization of the Audit Committee

The Audit Committee shall be comprised of a minimum of 3 Directors including a Committee Chair all of which, in the opinion of the Board, are independent directors. Each member of the Committee shall have a working knowledge of basic finance and accounting practices. The Chair of the Committee must have accounting or related financial management experience. The members of the Committee and its Chair shall be appointed by the Board of Directors. Appointments shall be made in accordance with procedures established by the Governance Committee of the Board of Directors from time to time.

The Corporation will adequately fund the budget of the Audit Committee. The budget will include, at a minimum, payments to the independent auditors for audit services and, if necessary, other professionals retained by the Audit Committee from time to time.

The Committee shall meet at five times annually (for review of Q1, Q2 and Q3 interim reports as well as pre and post audit), or more frequently as circumstances dictate. On an annual basis, the Committee shall report to the Board on the Committee’s performance against its charter and the goals established annually by the Committee for itself.

Procedure Governing Errors or Misstatements in Financial Statements

In the event a director or an officer of the Corporation has reason to believe, after discussion with management, that a material error or misstatement exists in financial statements of the Corporation, that director or officer shall forthwith notify the Audit Committee and the auditor of the error or misstatement of which the director or officer becomes aware in a financial statement that the auditor or a former auditor has reported on.

If the auditor or a former auditor of the Corporation is notified or becomes aware of an error or misstatement in a financial statement on which the auditor or former auditor has reported, and if in the auditor’s or former auditor’s opinion the error or misstatement is material, the auditor or former auditor shall inform each director accordingly.

When the Audit Committee or the Board is made aware of an error or misstatement in a financial statement the Board shall prepare and issue revised financial statements or otherwise inform the shareholders and file such revised financial statements as required.

Limitation on Audit Committee Members’ Duties

Nothing in this Charter is intended, or may be construed, to impose on any member of the Audit Committee a standard of care or diligence that is in any way more onerous or extensive than the standard required by law.

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SCHEDULE B – STATEMENT OF RESERVES DATA AND OTHER OIL AND GAS INFORMATION OF ITHACA ENERGY INC.

FORM 51-101F1

PART 1 DATE OF STATEMENT

Item 1.1 Relevant Dates

This Statement of Reserves Data and Other Oil and Gas Information (the “Statement”) is dated March 19, 2013. The effective date of the information provided in the Statement is December 31, 2012 unless otherwise indicated. The preparation date of the information in the Statement is January - March 2013. The estimates of reserves and future net revenue for individual properties may not reflect the same confidence level as estimates of reserves and future net revenue for all properties, due to the effects of aggregation. The information is presented on a consolidated basis for Ithaca Energy Inc., Ithaca Energy Holdings Limited, Ithaca Energy (UK) Limited and Ithaca Minerals (North Sea) Limited, collectively “Ithaca”, the “Company” or the “Corporation”.

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PART 2 DISCLOSURE OF RESERVES DATA

Sproule International Limited (“Sproule”) has prepared a report dated March 19, 2013 (the “Sproule Report”), in which it has evaluated as at December 31, 2012 the oil and natural gas reserves attributable to the principal properties of the Corporation. The reported Sproule numbers assume completion of the Cook and MacCulloch acquisitions from Noble Energy Capital Limited (Cook completed in February 2013).

The Sproule Report also presents the estimated net value of future revenue of Ithaca’s properties before and after taxes, at various discount rates. Assumptions and qualifications relating to costs, prices for future production and other matters are summarized in the notes to the following tables.

The extent and nature of all information supplied by Ithaca and/or the operator of its properties, which may have included ownership data, well information, geological information, reservoir studies, timing and future production, gas sales contract information, current product prices, operating cost data, capital budget forecasts and future operating plans, have been relied upon by Sproule in preparing the Sproule Report and were accepted as represented without independent verification. In the absence of such information, Sproule relied, with the approval of Ithaca, upon its opinion of reasonable practice in the industry. All information provided to Sproule was as at December 31, 2012 and, accordingly, certain of such information may not be representative of current conditions.

The definitions of the various categories of reserves and expenditures are those set out in National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities (“NI 51-101”).

Barrels of oil equivalent or “boes” may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Statements relating to reserves are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described can be profitably produced in the future

Item 2.1 Reserves Data - Forecast Prices and Costs

The following table discloses, in the aggregate, the Corporation’s gross and net proved reserves, all of which are located in the United Kingdom, estimated using forecast prices and costs, by product type. “Forecast prices and costs” means future prices and costs used by Sproule in the Sproule Report that are generally accepted as being a reasonable outlook of the future, or fixed or currently determinable future prices or costs to which the Corporation is bound.

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*

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The following table discloses, in the aggregate, the net present value of the Corporation’s future net revenue attributable to the reserves categories in the previous table, estimated using forecast prices and costs, before and after deducting future income tax expenses, and calculated without discount and using discount rates of 5%, 10%, 15% and 20%.

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The following table discloses, in aggregate, certain elements of the Corporation’s future net revenue attributable to its proved reserves, its proved plus probable reserves, and its proved plus probable plus possible reserves estimated using forecast prices and costs, and calculated without discount.

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This table discloses, by production group, the net present value of the Corporation’s future net revenue attributable to its proved reserves, its proved plus probable, and its proved plus probable plus possible reserves, before deducting future income tax expenses, estimated using forecast prices and costs, and calculated using a 10% discount rate.

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Item 2.3 Reserves The reserves information includes Ithaca Energy Inc. and its wholly-owned subsidiaries, Ithaca Energy (UK) Limited, Ithaca Minerals (North Sea) Limited and Ithaca Energy Holdings Limited.

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PART 3 PRICING ASSUMPTIONS

Item 3.2 Forecast Prices Used in Estimates

The forecast reference prices used in preparing Ithaca’s reserves data, supplied by Sproule, are provided in the below table.

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PART 4 RECONCILIATION OF CHANGES IN RESERVES AND FUTURE NET REVENUE

Item 4.1 Reserves Reconciliation

The following table provides a reconciliation of Ithaca’s gross reserves, all of which are located in the UK, based on forecast prices and costs.

Principally, there were positive technical revisions in four assets, Anglia, Topaz, Stella and Harrier. Additional drilling is now anticipated on Anglia and Topaz, while an additional natural gas liquids stream can now be considered reserves in Stella and Harrier following signature of gas processing agreements in 2012. Downward revisions were recorded in the Athena, Cook and Jacky fields. The modest revisions in Athena and Jacky can be attributed to revised forecasts based on well performance in 2012. On Cook, a revised forecasting methodology was employed at year end which predicts accelerated production but lower ultimate recovery resulting in increased value despite the reserves decline.

Gas condensate was discovered in the eastern side of the Hurricane field in August 2012.

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Additional oil and associated gas reserves were acquired in the Cook and MacCulloch fields during 2012. The Carna discovery was relinquished after detailed commercial and technical review and associated reserves were removed.

The Sproule gas forecast at year end 2012 has higher predicted gas prices from 2015 than forecast at year end 2011. Consequently, those assets with predominantly gas production beyond 2014 benefit from improved economics towards the end of field life and increased reserves,

The Company has interests in eight producing assets located in the United Kingdom: Anglia, Athena, Beatrice, Broom, Cook, Jacky, MacCulloch (yet to complete), and Topaz.

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PART 5 ADDITIONAL INFORMATION RELATING TO RESERVES DATA

Item 5.1 Undeveloped Reserves

Table 5.1

Proved Net Undeveloped Reserves

Most Recent Three Years

Forecast Prices and Costs

Light & Medium Oil Natural Gas (1)

Natural Gas Liquids

(MBbbl) (MMcf) (MBbbl)

Prior 3,570 46,453 1,654

2010 5,690 66,622 2,633

2011 2,165 71,778 2,854

2012 2,165 57,853 4,242

(1)

Includes Associated and Non-Associated Gas

Proved Net Undeveloped Reserves are attributed to pools of hydrocarbons that have demonstrable productivity via a surface well test and are of an economic size (eg Stella, Harrier field).

Table 5.1.2

Probable Net Undeveloped Reserves

Most Recent Three Years

Forecast Prices and Costs

Light & Medium Oil Natural Gas (1)

Natural Gas Liquids

(MBbbl) (MMcf) (MBbbl)

Prior 6,633 64,939 2,284

2010 8,144 72,613 2,528

2011 7,020 60,415 2,480

2012 4,817 66,572 3,872

(1)

Includes Associated and Non-Associated Gas

Probable Undeveloped Reserves are attributed to pools of Hydrocarbons that are likely to be productive, although not necessarily demonstrated by a well test. The probable areas are typically extensions of the proven area, outwith which reservoir characteristics are slightly less certain. The Stella and Harrier fields constitute most of the Probable Undeveloped Reserves tabulated.

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Development Plans

Refer to “Description of the Business and Operations” and “Principal Properties” sections of the Annual Information Form for the year ended December 31, 2012 (the “AIF”) for details of development plans on a field by field basis.

Item 5.2 Significant Factors or Uncertainties Affecting Reserves Data

The reserve data included herein are expressions of judgment based on knowledge, experience and industry practice. In general, estimates of economically recoverable oil and natural gas reserves and the future net revenue there from are based upon a number of variable factors and assumptions, such as expected reservoir characteristics based on geological, geophysical and engineering assessments; ultimate reserve recovery; timing and amount of capital expenditures; future production rates based on historical performance and expected future operating and investment activities; future oil and natural gas prices and quality differentials; marketability of oil and gas; royalty rates; assumed effects of regulation by governmental agencies; and future development and operating costs, all of which may vary materially from actual results. It should not be assumed that estimated future net revenue is representative of the fair market value of Ithaca's properties. In addition, estimated reserves may change from time to time based on new or reprocessed information or new interpretations of existing or new information.

Ithaca’s future crude oil and natural gas reserves and production, and therefore its operating cash flows and results of operations, are highly dependent upon Ithaca’s success, and the success of their joint venture partners, in exploiting the current reserve base and acquiring or discovering additional reserves. Without reserve additions through exploration, acquisition or development activities, Ithaca’s reserves and production will decline over time as reserves are produced. The business of exploring for, developing or acquiring reserves is capital intensive. To the extent cash flows from operations are insufficient and external sources of capital become limited or unavailable, the ability to make the necessary capital investments to maintain and expand Ithaca’s oil and natural gas reserves will be impaired.

Item 5.3 Future Development Costs

Total development costs for proved reserves is estimated to be $600 million with total estimated development costs for proved and probable reserves of $978 million. The following table provides information regarding the development costs deducted in the estimation of future net revenue attributable to the Corporations reserves for each of the first five years estimated.

Table 5.3

Future Development Costs(1)

Year Forecast Prices and Costs for

Proved Reserves (M$US)

Forecast Prices and Costs for Proved + Probable Reserves

(M$US)

2013 361,182 376,609

2014 100,453 195,746

2015 98,001 116,309

2016 2,380 117,236

2017 1,762 107,861

(1)

Future Development Costs shown are associated with booked reserves in the reserves report and do not necessarily represent the Corporation's full exploration and development budget.

The Corporation expects that such funds will be obtained from existing cash balances, utilization of the $430 million Facility and cash flow from production.

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PART 6 OTHER OIL AND GAS INFORMATION

Item 6.1 Oil and Gas Properties and Wells

The following table sets out Ithaca UK’s offshore development and exploration holdings:

Ithaca Energy (UK) Limited UKCS License Holdings as at December 31, 2012

Area and Prospect

Classification Block License Type and

Number and Licensing

Round

Licensed Area

(Km2)

Ithaca UK Share

Annual License

Fee

Interests Operator Promote Part 1

End Date

Promote Part 2 End Date

Near Term Development Projects

Inner Moray Firth

Beatrice Producing Field

11/25a Traditional P.1031 (OOR)

1.8 £5,076 Ithaca UK 50%, Dyas

50%

Ithaca UK N/A N/A

Beatrice Producing Field

11/30a Traditional P.187 (4th)

61.6 £10,778 Ithaca UK 50%, Dyas

50%

Ithaca UK N/A N/A

Jacky Producing Field

12/21c Traditional P.1392 (23rd)

20 £37,050 Ithaca UK 47.5%, Dyas

42.5%, NSE 10%

Ithaca UK N/A N/A

Beatrice Producing Field

12/21a Traditional P.1031 (OOR)

1.8 £5,076 Ithaca UK 50%, Dyas

50%

Ithaca UK N/A N/A

Beatrice Producing Field

12/26a Traditional P.982 (18th)

1.8 £4,230 Ithaca UK 50%, Dyas

50%

Ithaca UK N/A N/A

Polly Ithaca drilled, awaiting further

evaluation

12/26c Traditional P.1392 (23rd)

20 £31,200 Ithaca UK 40%, Dyas 40%, NSE

20%

Ithaca UK N/A N/A

Outer Moray Firth

Athena Producing Field

14/18b Traditional P.1293 (23rd)

79 £69,323 Ithaca UK 22.5%, Dyas

32.5%, EWE 20%, Zeus 10%,

Trap Oil 15%

Ithaca UK N/A N/A

Central North Sea

Hurricane Ithaca drilled, awaiting further

evaluation

29/10b Traditional P.1665 (25th)

31.9 £5,224 Ithaca UK 54.66%,

Dyas 25.34%, Petrofac

20%

Ithaca UK N/A N/A

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Stella / Harrier

Existing Discovery in development

stage

30/6a (Upper)

Traditional P.011 (1st)

126.1 £9,994 Ithaca UK 40.26%, Ithaca

Minerals 14.4%, Dyas

25.34%, Petrofac

20%

Ithaca UK N/A N/A

Greater Stella Area

(GSA)

Existing Discovery in development

stage

29/10a (Upper)

Traditional P.011 (1st)

15 £1,189 Ithaca UK 40.26%, Ithaca

Minerals 14.4%, Dyas

25.34%, Petrofac

20%

Ithaca UK N/A N/A

Scolty/ Torphins

Existing Discovery

awaiting further evaluation

21/8a Traditional P.1107 (21st)

63 £35,910 Ithaca UK 10%,

Enquest 40%,

Wintershall 50%

Enquest N/A N/A

Crathes Existing Discovery

awaiting further evaluation

21/13a Traditional P.1617 (25th)

14.7 £442 Ithaca UK 10%,

Enquest 40%,

Wintershall 50%

Enquest N/A N/A

Cook Producing Field

21/20a Traditional P.185 (4th)

11.6 £1,676 IthacaUK 41.345%,

Shell 25.77%, Summit

20%, Esso 12.885%

Shell N/A N/A

Helios Existing Discovery

awaiting further evaluation

29/10d Traditional P.1814 (26th)

165.9 £13,602 Ithaca UK 54.66%,

Dyas 25.34%, Petrofac

20%

Ithaca UK N/A N/A

Southern North Sea

Anglia Producing Field

48/18b Traditional P.128 (3rd)

43 £4,516 Ithaca UK 30%, First Oil 32.8%, Dana 25%,

RWE 12.2%

Ithaca UK N/A N/A

Anglia Producing Field

48/19b Traditional P.128 (3rd)

38.9 £4,089 Ithaca UK 30%, First Oil 32.8%, Dana 25%,

RWE 12.2%

Ithaca UK N/A N/A

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Anglia Producing Field

48/19e Traditional P.1011 (18th)

4.1 £5,781 Ithaca UK 30%, First Oil 32.8%, Dana 25%,

RWE 12.2%

Ithaca UK N/A N/A

Topaz Producing Field

49/2a Traditional P.1013 (18th)

26.2 £61,500 Ithaca UK 35%, RWE

57.5%, Faroe 7.5%

RWE N/A N/A

Northern North Sea

Broom Producing Field

2/4a Traditional P.902 (16th)

7.9 £3,876 Ithaca UK 8%,

Enquest 63%,

Wintershall 29%

Enquest N/A N/A

Broom Producing Field

2/5 Traditional P.242 (4th)

21.9 £614 Ithaca UK 8%,

Enquest 63%,

Wintershall 29%

Enquest N/A N/A

SW Heather

Existing discovery

awaiting further evaluation

2/5 Traditional P.242 (4th)

106.9 £2,992 Ithaca UK 8%,

Enquest 55%,

Wintershall 29%,

Dyas 8%

Enquest N/A N/A

Exploration Properties

Inner Moray Firth

N/A Greater Beatrice

Area (GBA)

Exploration 11/29a Traditional P.1392 (23rd)

36.5 £65,157 Ithaca UK 45.84%,

Dyas 40.84%,

NSE 13.33%

Ithaca UK N/A

N/A Greater Beatrice

Area (GBA)

Exploration 17/4a Traditional P.1392 (23rd)

14.5 £28,275 Ithaca UK 50%, Dyas

50%

Ithaca UK N/A

Piper Isles

Exploration 15/17b Traditional P.1994 (27th)

82.8 £6,212 Ithaca UK 50%,

Premier 50%

Ithaca UK N/A N/A

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Central North Sea

Twister Exploration 29/5e Traditional P.2064 (27th)

33.8 £1,285 Ithaca UK 54.66%,

Dyas 25.34%, Petrofac

20%

Ithaca N/A N/A

Crathes Exploration 21/12c Traditional P.1617 (25th)

7.4 £221 Ithaca UK 10%,

Enquest 40%,

Wintershall 50%

Enquest N/A N/A

Crathes Exploration 21/13c Traditional P.1618 (25th)

125.1 £3,753 Ithaca UK 10%,

Enquest 40%,

Wintershall 50%

Enquest N/A N/A

Northern North Sea

Broom Exploration 2/4a Traditional P.902 (16th)

8.8 £4,282 Ithaca UK 8%,

Enquest 63%,

Wintershall 29%

Enquest N/A N/A

Total Gross Licensed Area 1,172.00

Source: Ithaca UK.

The following table shows information regarding the Corporation’s wells at December 31, 2012.

TABLE 6.1.2

OIL AND GAS WELLS

Producing Non-producing

Gross(1)

Net(2)

Gross(1)

Net(2)

United Kingdom

Oil 27 9.7 29 14.2

Gas 6 1.9 4 1.8

TOTAL 33 11.6 33 16.0

(1)

Gross wells means the number of wells in which the Corporation has a working interest or a royalty interest that may be converted to a working interest.

(2) Net wells means the aggregate number of wells obtained by multiplying each gross well by the Corporation's percentage working interests therein.

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Item 6.2 Properties with No Attributed Reserves

The following table sets forth information respecting Ithaca’s undeveloped lands as at December 31, 2012.

TABLE 6.2

PROPERTY WITH NO ATTRIBUTED RESERVES

Unproved Properties (1)

2012 Expiring

Gross km2 Net km2 Net acres

Location

United Kingdom 495 196 0

TOTAL 495 196 0

(1)

Unproved properties have no attributed reserves as of December 31, 2012 (includes licences: 2/4a, 11/29a, 12/26c, 17/4a, 21/12c, 21/13c, 29/10d, 15/17b & 29/5e). Undeveloped acreage within properties where reserves have been booked as of December 31, 2012 has not been included.

As of December 31, 2012, Ithaca had no firm well commitments for the above property. All other significant expenditures are discretionary.

Item 6.2 .1 Significant Factors or Uncertainties Relevant to Properties with no Attributed Reserves

The presence of economic quantities of hydrocarbons on lands with no attributed reserves is uncertain until drilled and tested. Beyond the need to drill and test exploration areas, additional factors may influence Ithaca’s ability to develop these lands, including escalation of capital costs and operating costs, the potential requirement to expand existing infrastructure and a material drop in commodities prices.

Item 6.3 Forward Contracts

As at December 31, 2012, the Corporation was not party to any forward sales contracts other than those disclosed in note 23 of the 2012 consolidated financial statements.

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Item 6.4 Additional Information Concerning Abandonment and Restoration Costs

TABLE 6.4

ABANDONMENT AND RECLAMATION COSTS (Forecast Prices and Costs)

Total Abandonment and Reclamation Costs including Well Abandonment

and Disconnect Costs (M$US)

Undiscounted Discounted at 10%

2013 - -

2014 - -

2015 9,956 7,480

2016 and later 128,012 34,681

Decommissioning costs are calculated by the Corporation’s management based on its net ownership interest in all wells and facilities, estimated costs to reclaim and abandon wells and facilities and the estimated timing of the costs to be incurred in future periods. The above costs are based on the decommissioning of 12.1 net wells.

Abandonment and reclamation costs of $74.9 million deducted in estimating the future net revenue disclosed under Table 3 of Part 2 only include well decommissioning costs whereas the above figures include well and facilities decommissioning costs.

The above figures differ from the discounted cost of $52.8 million disclosed in the 2012 Annual Financial Statements due to the fact that they include all estimated future costs, whereas the figure of $52.8 million in the financial statements reflects only costs for which a current obligation exists and does not include any wells not yet drilled, in accordance with accounting requirements.

Item 6.5 Tax Horizon

Ithaca was not required to pay trade-related income taxes for the year ended December 31, 2012.

The Corporation has a UK tax allowances pool of $415 million at end-2012. This tax allowances pool, combined with the Corporation’s anticipated production, future capital expenditure program and commodity price forecasts, mean that no UK trade related cash income taxes are expected to be paid in the short or medium term.

UK government incentives to encourage the future development of, amongst other things, smaller oil and gas fields means that certain tax allowances are available to the Corporation and its field partners. On March 21, 2012 the UK Government increased and extended the application of the Small Field Allowance (“SFA”) tax shelter available against the payment of the 32% Supplemental tax charge for future small developments. The size of fields which qualify for the full SFA was increased to include all fields with reserves of under 6.25 million tonnes (approximately 45Mboe) and the tax allowance available to each field was doubled from approximately $120 million to $240 million. This change brings the Stella field under the SFA tax shelter and increases that previously applicable to the Harrier field. The relief is also expected to be applicable to all other potential future developments of the Corporation including Hurricane, Scolty Area and South West Heather.

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Item 6.6 Costs Incurred

The following table summarizes certain expenditures for the Corporation for the year to December 31, 2012.

TABLE 6.6

PROPERTY ACQUISITION/DISPOSITION COSTS AND

CAPITAL EXPENDITURES FOR THE YEAR ENDING DECEMBER 31, 2012

Amount (M$US)

Property Acquisition

Proved -

Unproved -

Capital Expenditures

Exploration costs 36,104

Development costs 129,626

Total 165,730

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Item 6.7 Exploration and Development Activities

The following table sets forth the number of gross and net wells completed by Ithaca during the year ended

December 31, 2012.

TABLE 6.7

OIL AND GAS WELL ACTIVITIES IN THE YEAR 2012(1)

Well Activity

Wells Gross(2)

Net(3)

Development

Gas - -

Oil - -

Service - -

Dry - -

TOTAL - -

Exploratory

Gas 1 0.547

Oil - -

Service - -

Dry - -

TOTAL 1 0.547

TOTAL 1 0.547

(1)

Results of development and exploratory activities during the financial year ended December 31, 2012. (2)

Gross wells means the number of wells in which the Corporation has a working interest or a royalty interest that may be converted to a working interest.

(3)

Net wells means the aggregate number of wells obtained by multiplying each gross well by the Corporation's percentage working interests therein.

Item 6.8 Production Estimates

The proved and probable reserves include a forecast production of 2.533mmbbls of oil, 1,792 mmscf of gas and 0.004mmboe of natural gas liquids in 2013. The main producing fields are expected to be Athena (899 mmbls) and Cook (899 mmboe).

The Proved Reserves include a forecast of 2.394mmbbls of oil, 1,530 mmscf of gas and 0.004mmboe of natural gas liquids in 2013. The main producing fields are expected to be Athena (898 mmbls) and Cook (803 mmboe).

Item 6.9 Production History

The Corporation produced 1.5 million net bbls of oil from the Athena, Beatrice, Jacky, Cook and Broom fields and 0.2 million net bbls of oil equivalent of gas from the Anglia, Topaz and Cook fields in 2012.

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SCHEDULE C – FORM 51-101 F2 REPORT ON RESERVES DATA BY INDEPENDENT QUALIFIED RESERVES EVALUATOR

ITHACA ENERGY INC.

To the Board of Directors of Ithaca Energy UK Limited (the “Company”): 1. We have evaluated the Company’s reserves data as at December 31, 2012. The reserves data are estimates of proved reserves and probable reserves and related future net revenue as at December 31, 2012, estimated using forecast prices and costs. 2. The reserves data are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Reserves Data based on our evaluation. We carried out our evaluation in accordance with standards set out in the Canadian Oil and Gas Evaluation (COGE) Handbook, prepared jointly by the Society of Petroleum Evaluation Engineers (Calgary Chapter) and the Canadian Institute of Mining, Metallurgy & Petroleum (Petroleum Society). 3. Those standards require that we plan and perform an evaluation to obtain reasonable assurance as to whether the reserves data are free of material misstatement. An evaluation also includes assessing whether the reserves data are in accordance with principles and definitions presented in the COGE Handbook 4. The following table sets forth the estimated future net revenue (before deduction of income taxes) attributed to proved plus probable reserves, estimated using forecast prices and costs and calculated using a discount rate of 10 percent, included in the reserves data of the Company evaluated by us as of December 31, 2012, and identifies the respective portions thereof that we have audited, evaluated and reviewed and reported on to the Company’s management and Board of Directors:

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5. In our opinion, the reserves data respectively evaluated by us have, in all material respects, been determined and are presented in accordance with the COGE Handbook, consistently applied. We express no opinion on the reserves data that we reviewed but did not audit or evaluate. 6. We have no responsibility to update the report referred to in paragraph 4 for events and circumstances occurring after its preparation date. 7. Because the reserves data are based on judgments regarding future events, actual results will vary and the variations may be material.

Executed as to our report referred to above: Sproule International Limited Calgary, Alberta

March 19, 2013

Original signed by Oluyemisi Jeje, P.Eng.. _____________________________ Oluyemisi Jeje, P.Eng. Project Leader, Petroleum Engineer Original signed by Barrie F. Jose, P.Geoph. _____________________________ Barrie F. Jose, P.Geoph. Vice-President, Geoscience, International and Partner Original signed by Greg D. Robinson, P.Eng. _____________________________ Greg D. Robinson, P. Eng. Vice-President, Engineering and Director

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SCHEDULE D - REPORT OF MANAGEMENT AND DIRECTORS ON OIL AND GAS DISCLOSURE

FORM 51-101F3

Management of Ithaca Energy Inc. (the “Corporation”) are responsible for the preparation and disclosure of information with respect to the Corporation’s oil and gas activities in accordance with securities regulatory requirements. This information includes reserves data which are estimates of proved reserves and probable reserves and related future net revenue as at December 31, 2012, estimated using forecast prices and costs.

An independent qualified reserves evaluator has evaluated the Corporation’s reserves data. The report of the independent qualified reserves evaluator will be filed with securities regulatory authorities concurrently with this report.

The Reserves Committee of the board of directors of the Corporation has:

(a) reviewed the Corporation’s procedures for providing information to the independent qualified reserves evaluator;

(b) met with the independent qualified reserves evaluator to determine whether any restrictions affected the ability of the independent qualified reserves evaluator to report without reservation; and

(c) reviewed the reserves data with management and the independent qualified reserves evaluator.

The Reserves Committee of the board of directors has reviewed the Corporation’s procedures for assembling and reporting other information associated with oil and gas activities and has reviewed that information with management. The board of directors has, on the recommendation of the Reserves Committee, approved:

(a) the content and filing with securities regulatory authorities of Form 51-101F1 containing reserves data and other oil and gas information;

(b) the filing of Form 51-101F2 which is the report of the independent qualified reserves evaluator on the reserves data; and

(c) the content and filing of this report.

Because the reserves data are based on judgments regarding future events, actual results will vary and the variations may be material. However, any variations should be consistent with the fact that the reserves are categorized according to the probability of their recovery.

"Iain McKendrick" "Graham Forbes"

Iain McKendrick, Chief Executive Officer Graham Forbes, Chief Financial Officer

"Frank M. Wormsbecker" "Jack C. Lee"

Frank M. Wormsbecker, Director Jack C. Lee, Non Executive Chairman,

Director

March 25, 2013