North Sea giant EnQuest cashes in on surging oil prices

EnQuest has highlighted a huge boost to its cash generation from the soaring price of oil and gas as the energy giant returned to the black in its latest financial year, sending its share price up seven per cent.

The North Sea player said it generated nearly $400 million ($396.8m) of free cash flow in the year ended December 31, up 88.5 per cent on 2020, on the back of oil prices lifted higher by resurgent demand as economies reopened after lockdowns. The price of oil has continued to rise since Russia invaded Ukraine one month ago, and was trading at around $121 per barrel last night. Oil prices dropped below $10 per barrel after economies around the world moved into lockdown in March 2020.

EnQuest said higher prices had helped boost its revenue by 54.4% to $1.32 billion, allowing it to offset a fall in production, which dipped to 44,415 barrels of oil equivalent per day from 59,116 boepd the year before. The company made a profit after tax of $377m for the year, following a loss of $469.9m in 2020.

 EnQuest highlighted a strong performance by the giant Kraken field and a contribution from Golden Eagle, in which it completed the acquisition of a 26.69% stake for an initial $325m last year. This was offset by outages at the Magnus field, planned maintenance, a subsea power umbilical failure at the Greater Kittiwake Area, and expected natural declines across the portfolio. GKA comprises five offshore oil fields: Kittiwake, Mallard, Gadwall, Goosander and Grouse.

The company said yesterday that it expects net production for 2022 to be in the region of 44,000 and 51,000 boepd, noting that production in the year to February had averaged 54,408 boepd.

EnQuest made three acquisitions last year, adding stakes in the Bressay and Bentley fields to the portfolio, as well as the interest in Golden Eagle. The company acquired a 40.81% and operatorship in the Bressay oil field, and completed the purchase of a 100% equity interest in the Bentley heavy oil field.

 The company said it had cut its net debt to $1.22 billion by year-end, its lowest level since 2014, and has continued to chip away at its borrowings this year.

“We have also started 2022 well, with production to the end of February averaging 50,408 boepd, towards the top end of our full year guidance range,” said Amjad Bseisu, chief executive of EnQuest. “We have also continued to reduce our net debt, down to $1.09bn at the end of February, in line with our strategic priorities. With a supportive oil price environment and an active programme of nine wells and seven workovers in 2022, our largest sanctioned programme since 2014 and our first new wells in over two years, we remain confident on delivering a good performance this year.”

Mr Bseisu added: “The acquisition of Golden Eagle has strengthened our portfolio, building on our track record of value creation through innovative, disciplined M&A (mergers and acquisitions). The acquisitions of Bressay and Bentley have added almost 250 MMboe of 2C resources, adding to those already in place at Magnus, Kraken, PM8/Seligi and PM409, providing EnQuest with longer-term potential development opportunities.

“We remain focused on continuing to reduce our net debt while selectively investing in our low-cost, quick payback well portfolio in order to sustain our production base.

“EnQuest’s business is strongly positioned to play an important role in the energy transition. We will do so by responsibly optimising production, leveraging existing infrastructure, delivering decommissioning and exploring new energy and decarbonisation opportunities.”

 EnQuest said chief financial officer Jonathan Swinney would be leaving to join Tullow Oil. He will be replaced by Salaman Malik, currently managing director for corporate development, infrastructure and new energy.

Shares closed up 2.05p at 31.25p.

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