One of the biggest surprises on the FTSE 250 this year has come from the North Sea oil and gas player Ithaca Energy (LSE: ITH). While the wider index has been climbing steadily, Ithaca’s share price has soared 70% over the past six months, including a blistering 38% rise in just the past month.
That makes it the second-best performing stock on the FTSE 250 in 2025, just behind Chemring Group.
For investors chasing momentum and income, Ithaca may look irresistible. With an impressive 9.4% dividend yield and exposure to potentially rising oil prices, it certainly checks a few boxes. But dig a little deeper, and some cracks begin to show.
New kid on the block
Ithaca’s a relatively young name on the London market. Originally a Canadian company, it pivoted to the North Sea in the 2010s and has since become one of the largest independent producers in UK waters. The firm has grown quickly through acquisitions, most notably its takeover of Siccar Point Energy in 2022, and now plays a key role in Britain’s domestic energy strategy.
That said, the fundamentals tell a more complex story. Despite the recent share price rally, Ithaca’s financial performance has been heading in the wrong direction. Between 2022 and 2024, earnings collapsed from £837m to £119m, with net margins shrinking from 40% to just 7%. The company’s latest Q1 2025 results revealed a £210m loss, even though revenue jumped 48% compared to Q1 2024.
This suggests rising costs, write-downs or operational challenges that aren’t visible in top-line growth alone.
There are also regulatory risks. Ithaca was recently fined £300,000 for a safety breach, raising questions about its operational discipline and governance. In an industry as tightly regulated as offshore oil and gas, safety lapses can quickly lead to reputational and financial damage.
A high yield — but little else
While Ithaca’s 9.4% yield sounds enticing, the payout ratio sits at an unsustainable 164%. Worse still, the dividend was almost halved between 2023 and 2024, and it has no track record of steady or growing payments. For anyone relying on passive income, that kind of volatility should be a major red flag.
Of course, there’s always the macroeconomic backdrop to consider. Oil prices have remained resilient in 2025, partly due to supply concerns stemming from ongoing Middle East conflicts. If prices spike further, Ithaca could benefit. But oil markets are notoriously volatile, and relying on geopolitical shocks to justify an investment rarely ends well.
My verdict?
If I’d bought some Ithaca shares six months ago, I’d be more than happy with the returns. But from where I’m sitting now, the rising share price doesn’t reflect the company’s weakening fundamentals.
The dividend, while generous on paper, lacks coverage and reliability. For me, this isn’t the kind of FTSE 250 stock I’d consider buying for reliable, long-term gains.
For income seekers, Greencoat UK Wind could be a more stable dividend stock to consider, supported by regulated assets and inflation-linked returns. It has clearer financial visibility, a better track record and less reliance on volatile commodity markets.
