TIDMENQ
RNS Number : 5244U
EnQuest PLC
02 August 2022
EnQuest PLC, 02 August 2022
Operations update
Strong production and cash generation, supporting
deleveraging
EnQuest Chief Executive, Amjad Bseisu, said :
"We have made a good start to the year, delivering production of
49,726 Boepd and generating $332 million in free cash flows ($474
million pre-hedging) that have enabled us to significantly reduce
net debt to c.$880 million at the end of June, resulting in a net
debt to EBITDA ratio of around 1.0x, and representing a significant
step towards our 0.5x target.
" Performance has been strong at Kraken and in Malaysia, where
we have seen the positive impact of our well workover programme.
Our drilling and workover programmes are underway at both Magnus
and PM8/Seligi to deliver production in the second half, offset by
our maintenance shutdowns at Magnus and Kraken.
"We remain on track to deliver our operational targets and, in
the prevailing price environment, are focused on driving an
accelerated debt reduction programme.
"EnQuest has a long track record of investment in the North Sea.
We remain focused on continuing to improve performance and extend
the lives of assets within our portfolio, delivering value to all
of our stakeholders as we increase production, reduce emissions and
support energy security."
Operating performance
-- Average net Group production in the six months to end June
2022 was 49,726 Boepd, an 8% increase over the same period last
year, driven by strong production efficiency across the portfolio;
full year guidance remains unchanged
-- Kraken delivered average gross production of 27,698 Boepd,
above the top end of full year guidance of 22,000 to 26,000 Boepd;
planned shutdown on track for the third quarter
-- Infill drilling campaigns have commenced at Magnus and
PM8/Seligi
-- Well work campaigns at Magnus and PM8/Seligi are progressing
well, with two wells returned to service and three well workovers
completed, respectively
-- Excellent progress in reducing absolute Scope 1 and 2
emissions, with CO2 equivalent emissions reduced by 16.8% from the
2020 baseline; since 2018, UK Scope 1 and 2 emissions have reduced
by 42.6%
Liquidity and net debt
-- Net debt of c.$880 million at 30 June 2022 is down c.$342
million, inclusive of c.$10 million of foreign exchange movement,
from 31 December 2021, driven by strong free cash flow
generation
-- At the end of June, $115 million remained outstanding on the
Group's senior secured debt facility ('RBL') following accelerated
repayments totalling $300 million in the six months to end June
2022
-- EnQuest's net debt to EBITDA ratio as at 30 June 2022 is
around 1.0x, down from 1.6x at the end of 2021.
-- EnQuest has executed $14.4 million (1.7%) of buy backs of the
2023 7% high yield bonds
-- For the period July to December 2022, the Group has hedged
c.3.4 MMbbls of oil with an average floor price of c.$60/bbl and an
average ceiling price of $79/bbl. For 2023, the Group has hedged a
total of approximately c.3.5 MMbbls with an average floor price of
c.$57/bbl and an average ceiling price of c.$77/bbl
Guidance unchanged
-- 2022 net production guidance of between 44,000 and 51,000
Boepd
-- Kraken gross production still expected to be between 22,000
Boepd and 26,000 Boepd (15,500 Boepd to 18,500 Boepd net)
-- Operating expenditure is expected to be approximately $430
million
-- Cash capital expenditure is expected to be around $165
million
-- Abandonment expense is expected to total approximately $75
million
Board change
-- As previously announced, on 24 March 2022 Jonathan Swinney
notified the Board of his intention to step down from the Board as
Chief Financial Officer ('CFO') and Executive Director. Following a
successful period of transition, Jonathan will step down from the
Board on 15 August 2022 and Salman Malik will join the Board as CFO
on the same day.
Production details
Average daily production For the For the
on a net working period to period to
interest basis 30 June 2022 30 June 2021
-------------------------- -------------- --------------
(Boepd) (Boepd)
UK Upstream
- Magnus 12,754 13,847
- Kraken 19,527 23,690
- Golden Eagle(1) 7,060 -
- Other Upstream
(2) 4,081 3,504
-------------- --------------
UK Upstream 43,422 41,041
UK Decommissioning -
(3) 337 337
-------------- --------------
Total UK 43,422 41,378
Total Malaysia 6,304 4,809
-------------- --------------
Total EnQuest 49,726 46,187
-------------- --------------
(1) Golden Eagle completion date was 22 October 2021
(2) Other Upstream: Scolty/Crathes, Greater Kittiwake Area and
Alba
(3) UK Decommissioning: the Dons
Magnus
Average production for the first six months of 2022 was 12,754
Boepd, impacted by a pump and well integrity failure in June . T he
2022 well work campaign is underway, with the North West Magnus
well expected online in the coming weeks. The long-term plan to
enhance production and mitigate risk of future well failures is
progressing, with two wells successfully returned to service in the
first half of 2022 and with further well work planned in the second
half of the year .
Preparations are underway for the three week shutdown planned in
the third quarter, with the key workscope being a compressor
overhaul.
Kraken
During the first half of 2022, average gross production was
27,698 Boepd, which is above the top end of full year guidance of
22,000 to 26,000 Boepd. The floating, production, storage and
offloading vessel continues to deliver top quartile performance,
with production efficiency of 92% and water injection efficiency of
95%.
The Group continues to assess optimisation opportunities for the
planned shutdown scheduled in the third quarter of 2022.
Golden Eagle
Year to date June production was 7,060 Boepd. Production
efficiency remains strong at 95%, partially offset by gas lift
maintenance and natural decline. The joint venture has approved a
two infill well drilling campaign to commence in the fourth quarter
of 2022, with first oil expected in the first quarter of 2023.
Other upstream assets
Production for the first six months of 2022 averaged 4,081
Boepd. This was driven by uptime of 92% at the Greater Kittiwake
Area, and the continued positive impact of work completed in the
first quarter to optimise gas lift delivery pressure.
Alba continues to perform in line with Group expectations.
EnQuest is working with its partners to progress field
development studies for Bressay and the Bentley team is focused on
re-evaluation of the existing subsurface data.
UK Decommissioning
Heather and Thistle plug and abandonment ('P&A') campaigns
are progressing well with six wells completed at Heather and nine
wells completed at Thistle. The Group remains on track to complete
the P&A of 16 wells at each installation in 2022.
The tender processes for heavy lift vessels for Heather and
Thistle topsides and jacket removals has concluded. Contracts to
complete those scopes, which are scheduled for 2024 and 2025
respectively, are expected to be awarded in the second half of
2022.
At the Dons, subsea infrastructure removal within the 500-metre
zone is progressing as expected, with two phases completed during
the first half of the year, and the final phase scheduled for
completion in August.
Infrastructure and New Energy
The Sullom Voe Terminal and its related infrastructure continues
to maintain safe and reliable performance, with 100% export service
availability during the first half of 2022. In June, the terminal
also reached the milestone of 12 months without any recordable HSE
incidents.
EnQuest continues to develop cost-effective and efficient plans
to transform the terminal and prepare and repurpose the site to
progress global scale decarbonisation opportunities, including
carbon capture and storage, electrification and green hydrogen.
EnQuest continues to work collaboratively with potential partners
and key stakeholders to progress these opportunities.
Furthermore, EnQuest has conducted initial phases of feasibility
and economic screening work in respect of a carbon storage concept.
The Group expects to make an application in respect of carbon
capture and storage ('CCS') licence areas accessible from EnQuest's
existing infrastructure in the forthcoming North Sea Transition
Authority ('NSTA') UK offshore CCS licensing round.
The Group has continued to make excellent progress in reducing
its absolute Scope 1 and 2 emissions during the first half of 2022,
with CO2 equivalent emissions reduced by 16.8% from the 2020
baseline, reflecting operational improvements and increased
workforce awareness driving lower flaring, fuel gas and diesel
usage. Since 2018, UK Scope 1 and 2 emissions have reduced by
42.6%, which is significantly ahead of the UK Government's North
Sea Transition Deal target of achieving a 10% reduction in Scope 1
and 2 CO2 equivalent emissions by 2025 and is close to the 50%
reduction targeted by 2030.
Malaysian operations
For the first six months of 2022, average production in Malaysia
was 6,304 Boepd, representing a 31% increase over the same period
last year, following reinstatement of the riser pipeline during the
first quarter of 2022 and three workovers, on budget and ahead of
schedule. The fourth well workover is in progress with completion
anticipated in July.
Following the mobilisation and installation of the drilling rig
at the Seligi-C satellite platform, and the drilling of a pilot
hole during June, the infill drilling campaign has commenced with
the first horizontal well due onstream imminently.
Develeraging
The Group generated strong free cash flows during the first half
of 2022, resulting in net debt of c.$880 million at 30 June 2022,
down c.$342 million since the end of 2021. This reduction was
driven by accelerated repayments totalling $300 million on the
Group's RBL facility, with drawings at $115 million at 30 June
2022, significantly ahead of the required amortisation schedule.
EnQuest's net debt to EBITDA ratio at 30 June 2022 was c.1.0x.
In line with EnQuest's continued focus on deleveraging, during
July, the Group has bought back and cancelled $14.4 million of its
2023 7% high yield bonds, leaving $813 million outstanding. The
Group may, from time to time, purchase its outstanding notes in
open-market purchases and/or privately negotiated transactions and
upon such terms and at such prices as it may determine. The Group
will evaluate any such transactions in light of then-existing
market conditions, taking into account the Group's current
liquidity and prospects for future access to capital. The amounts
involved in any such transactions, individually or in the
aggregate, may be material.
2022 outlook
The Group remains on track to achieve net production between
44,000 and 51,000 Boepd, with a significant well work and drilling
campaign underway across the portfolio, partially offset by natural
declines and planned maintenance shutdowns at Magnus and Kraken in
the third quarter.
Full year expectations for operating, cash capital and
abandonment expenditures remain unchanged from the Group's original
guidance at approximately $430 million, $165 million and $75
million, respectively. EnQuest remains focused on cost discipline
and has been proactive in engagement with its global supply chain
to mitigate the impacts of cost inflation within the current
year.
Following the enactment of the Energy Profits Levy, EnQuest
remains committed to investment in the North Sea and is reviewing
future capital expenditure programmes in light of the additional
investment allowances available under the levy.
EnQuest hedged a total of c.8.7 MMbbls for 2022 predominantly
using costless collars, with an average floor price of c.$63/bbl
and an average ceiling price of c.$77/bbl. For the period July to
December 2022, c.3.4 MMbbls of production remains hedged with an
average floor price of c.$60/bbl and an average ceiling price of
c.$79/bbl.
Cash flows in the second half of the year will be affected by
planned maintenance shutdowns, phasing of work programmes and the
impact of the Energy Profits Levy.
The Group continues to explore options to refinance its high
yield bond ahead of maturity in October 2023.
EnQuest expects to announce its 2022 half year results in
September 2022.
Ends
For further information please contact:
EnQuest PLC Tel: +44 (0)20 7925
4900
Amjad Bseisu (Chief Executive)
Jonathan Swinney (Chief Financial Officer)
Ian Wood (Head of Communications & Investor
Relations)
Craig Baxter (Senior Investor Relations &
Communications Manager)
Tulchan Communications Tel: +44 (0)20 7353
4200
Martin Robinson
Martin Pengelley
Harry Cameron
Notes to editors
ENQUEST
EnQuest is providing creative solutions through the energy
transition. As an independent production and development company
with operations in the UK North Sea and Malaysia, the Group's
strategic vision is to be the operator of choice for maturing and
underdeveloped hydrocarbon assets by focusing on operational
excellence, differential capability, value enhancement and
financial discipline.
EnQuest PLC trades on both the London Stock Exchange and the
NASDAQ OMX Stockholm.
Please visit our website www.enquest.com for more information on
our global operations.
Forward-looking statements: This announcement may contain
certain forward-looking statements with respect to EnQuest's
expectations and plans, strategy, management's objectives, future
performance, production, reserves, costs, revenues and other trend
information. These statements and forecasts involve risk and
uncertainty because they relate to events and depend upon
circumstances that may occur in the future. There are a number of
factors which could cause actual results or developments to differ
materially from those expressed or implied by these forward-looking
statements and forecasts. The statements have been made with
reference to forecast price changes, economic conditions and the
current regulatory environment. Nothing in this announcement should
be construed as a profit forecast. Past share performance cannot be
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END
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