EnQuest maintains guidance after strong start to year

Independent oil and gas producer EnQuest left its full-year guidance unchanged in an operations update on Tuesday.

The London-listed company said average group production in the four months through April exceeded expectations, reaching 47,725 barrels of oil equivalent per day.

It said it had initiated the 2023 Magnus well work programme, with three wells returning to service following P seal repairs and replacement.

Progress on the North West Magnus injector was positive, with the firm expecting to provide support to the producer by the end of May.

Additionally, EnQuest recently entered into an agreement with Petronas to supply additional gas from the Seligi field through existing infrastructure until the end of 2025.

The collaboration was projected to boost EnQuest's gas production by around 25 million standard cubic feet per day, or by 50 million standard cubic feet per day on a gross basis.

Looking at its liquidity and net debt, EnQuest reported a net debt position of $678m as of April, making for a decrease of $39m since December, although it was also an increase of $54m compared to February.

The board said the uptick in net debt was driven by the unwinding of the positive working capital position from February, amounting to about $50m.

EnQuest said it had cash and available facilities totaling around $276m.

The directors said the company had taken steps to manage oil price volatility through hedging, reporting that it had hedged 3.6 million barrels of oil for the May-to-December period, employing a combination of 2.7 million barrels of put options and 0.9 million barrels of costless collars.

It said the put options had an average floor price of $59 per barrel, while the costless collars had a ceiling price of about $76 per barrel.

Looking ahead to 2024, EnQuest said it had hedged 3.2 million barrels of oil through put options, with an average floor price of around $60 per barrel.

EnQuest maintained its guidance for the full year, with an expected average net group production between 42,000 and 46,000 barrels of oil equivalent per day.

It noted that scheduled shutdowns and periods of single train operations at Magnus and Kraken were planned for the third quarter, which could impact production levels during the period.

The firm estimated operating expenditure to be around $425m, cash capital expenditure to be about $160m, and decommissioning expenditure to come in at $60m.

“EnQuest has continued to deliver strong operational performance across our operated portfolio during the early part of the year, with production to the end of April above the top end of 2023 guidance,” said chief executive officer Amjad Bseisu.

“Production enhancement at Magnus is continuing, following the successful execution of our 2022 planned shutdown and well programme, including the drilling of North West Magnus well.

“We are now drilling the North West Magnus injector well, which is expected to come online at the end of May.”

Bseisu said the company expected to drill two further infill wells later in the year.

“We have improved asset reliability and integrity across our operated assets, resulting in delivery of strong uptime across our portfolio, including production efficiency of 89% at Magnus, 94% at the Greater Kittiwake Area and at Kraken, where we continue to deliver top quartile FPSO performance, and over 92% at PM8/Seligi in Malaysia.

“We are building a strong track record in decommissioning with 24 well abandonments executed at Heather and Thistle last year and another 23 well abandonments planned for this year, while we have also reached an important milestone in the Thistle project by awarding the contract for the topsides and jacket removal and disposal to Saipem.”

Bseisu said EnQuest was also making good progress on its new energy and decarbonisation plans at the Sullom Voe Terminal, noting that the company was offered of four carbon storage licences as part of the first round of UK sequestration licences issued by the North Sea Transition Authority.

“In response to changes in the UK Energy Profits Levy, we are optimising our capital allocation by prioritising organic investments with quick pay backs while remaining focused on deleveraging and pursuing accretive merger and acquisition opportunities.”

At 1118 BST, shares in EnQuest were down 0.89% at 16.47p.

Reporting by Josh White for Sharecast.com.