EnQuest positions itself for long-term growth

The London-listed company also said it saw higher production volumes and market prices during the period, though they were partially offset by the impact of hedging.

Unit operating costs stood at $22.6/boe, down from $24.9/boe in 2017, while gross costs at SVT were on track to reduce from £200m in 2017 to £150m in 2018, which the board said reflected its operating model and focus on efficiencies.

The firm reported a “material increase” in cash generated from operations to $318.3m from $136.9m, and lower cash capital expenditure of $125.8m, compared to $205.1m.

At 30 June, net debt had reduced to $1.97bn, with cash and available bank facilities of $256.8m.

The company made a financing agreement for $175m during the period, with funds managed by Oz Management.

It said the financing was ring-fenced on a 15% share of Kraken, with repayment made out of the cash flows from that 15% share.

The group said its improved cash generating capacity enabled the early cancellation of $50m of its credit facility in May, with an additional $25m voluntary prepayment in August.

It said the term facility had consequently reduced to $1.05bn.

EnQuest said it was continuing to prioritise maximising cash flow, to facilitate the reduction of net debt, adding that it had put options in place for around 5.3 MMbbls of oil for the second half of 2018 at an average price of $66/bbl.

“As we have announced today, the board is proposing to exercise its option to acquire the remaining 75% interest in the Magnus field, with the cash consideration for Magnus to be funded through a rights issue, which will also provide funds to drill two infill wells in 2019,” said EnQuest chief executive Amjad Bseisu.

“Our view of Magnus as a high quality asset has been enhanced since acquiring our initial 25% interest.

“The option is on attractive economic terms and upon completion, our increased ownership will provide the group with an immediate and material increase to the group's existing 2P reserves and annual production.”

Bseisu said that in EnQuest’s existing business, recent performance at Kraken had been improving, with production in July and August averaging around 33,000 bopd.

“The successful drilling and workover campaigns we have undertaken this year at Magnus, PM8/Seligi Heather and Alma/Galia, combined with robust underlying production performance across the portfolio underpins our confidence in delivering within our full year guidance range of 50,000 to 58,000 boepd.”

Bseisu added that the company was continuing to focus on debt reduction and liquidity, and had seen the early cancellation of $75m of its credit facility and the execution of a ring-fenced financing agreement in relation to a 15% interest in Kraken.

“The group's improved cash generating capacity will further support a reduction in debt.

“The group's significant potential within the portfolio, underpinned by Magnus, PM8/Seligi and Kraken, ensure EnQuest is well positioned for long-term sustainable growth.”