TIDMENQ
RNS Number : 4010H
EnQuest PLC
24 November 2022
EnQuest PLC, 24 November 2022
Operations update
EnQuest Chief Executive, Amjad Bseisu, said :
"The Group has delivered good production performance from its
operated assets since the beginning of the year and we expect full
year production around the mid-point of our guidance range. During
the fourth quarter, the Group successfully completed the North West
Magnus well, which is delivering strong performance since
completion. During the planned shutdown at Magnus we made
modifications to enable additional gas production of up to 20
mmscfd. Further workover activities at Magnus and drilling
activities at PM8/Seligi and Golden Eagle are ongoing.
"Building on our excellent operational performance and
deleveraging during the first half of the year, we are on track to
deliver on our 2022 targets. Supported by the successful
refinancing of our capital structure, we continue to progress
towards our net debt to EBITDA target of 0.5x, which will enable us
to consider our broader capital allocation priorities, including
potential returns to shareholders in the longer term.
"Looking ahead towards 2023, we will maintain our disciplined
approach, focusing on low-cost and quick payback organic
opportunities as we plan our well work programmes for Magnus,
PM8/Seligi and Golden Eagle. We continue to make good progress in
maturing our infrastructure and new energy business in a capital
light manner.
"While the recently announced increase and extension of the
duration of the Energy Profits Levy is particularly disappointing
and threatens the delivery of UK's twin objectives of long-term
energy security and decarbonisation, we remain committed to the UK
North Sea and delivery of value to our stakeholders."
Operating performance
-- Average net Group production in the ten months to end October
2022 was 46,593 Boepd, an increase of 5.2% against the same period
last year
-- The North West Magnus well came online in mid-October, with
oil and gas production rates in line with expectations.
Modifications were made during the planned maintenance shutdown to
allow for indigenous Magnus gas exports of up to 20 mmscfd
-- Kraken and PM8/Seligi continue to deliver strong uptime of
92% and 89%, respectively
-- Successfully executed the extensive planned maintenance
shutdowns at Magnus and Kraken
-- Golden Eagle production for the year to date is lower than
expected
-- The Group continues to see inflationary pressure across the
supply chain. Disciplined cost management and the benefit of a
weakened pound, with around 80% of EnQuest's cost base being
denominated in Sterling, provide the offset to inflationary
increases to date
Liquidity and net debt
-- In October 2022, the Group successfully executed the
refinancing of its capital structure, redeeming its $792 million
outstanding 2023 7% high yield bond through a combination of a $400
million cash draw down from the new $500 million reserves-based
lending ('RBL') facility, issuance of a new $305 million high yield
bond, and cash on the balance sheet
-- As at 30 September 2022, the Group's net debt position was
$750 million, down from $880 million at 30 June 2022
-- The increase in the Energy Profits Levy will impact free cash
flow generation and the pace of deleveraging for the Group.
However, the Group will continue to exercise strong cost discipline
and optimise its capital programmes to mitigate the impact of the
levy, with particular focus on the organic investment opportunities
at Magnus and Kraken
Hedging
-- c.1.6 MMbbls have been hedged with an average floor price of
$54/bbl and an average ceiling price of c.$73/bbl for the last two
months of 2022
-- 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 first half of
2023, the Group has hedged a total of c.3.5 MMbbls with an average
floor price of c.$57/bbl and an average ceiling price of
c.$77/bbl
-- In line with the requirements of the RBL facility, the Group
intends to enter into additional hedges representing 45% of its net
entitlement production for the first 12 month period and up to 35%
for the subsequent 12 month period
Guidance
-- 2022 average net Group production is expected to be around
the mid-point of the existing guidance range of 44,000 Boepd to
51,000 Boepd
-- Kraken production is expected to be around the upper end of
guidance of 22,000 Boepd to 26,000 Boepd gross (15,500 Boepd to
18,500 Boepd, net)
-- Operating expenditure, cash capital and decommissioning
expenditures are all expected to be lower than originally guided at
c.$400 million, c.$120 million and c.$60 million, respectively.
These reductions are driven by a combination of favourable foreign
exchange rates, changes in work programmes, particularly with
regard to Magnus well activity, and cash phasing of
expenditures
Production details
Average daily 1 Jan' 2022 1 Jan' 2021
production on a to to
net working interest 31 Oct' 31 Oct'
basis (Boepd) 2022 2021
----------------------- ------------ ------------
(Boepd) (Boepd)
UK Upstream
- Magnus 11,493 12,640
- Kraken 18,591 22,544
- Golden Eagle
(1) 6,542 328
- Other Upstream
(2) 3,542 3,516
UK Upstream 39,028 39,028
UK Decommissioning
(3) - 200
------------ ------------
Total UK 40,168 39,228
------------ ------------
Total Malaysia 6,425 5,078
------------ ------------
Total EnQuest 46,593 44,306
------------ ------------
(1) Golden Eagle comparator represents contribution for the
period 22 to 31 October 2021, averaged over the ten months to the
end of October 2021
(2) Other Upstream: Scolty/Crathes, Greater Kittiwake Area and
Alba
(3) UK Decommissioning: The Dons, Alma/Galia
Magnus
Production at Magnus has averaged 11,493 Boepd for the ten
months to end October 2022. The planned annual shutdown was
completed in 24 days and all major scopes were executed, with the
primary focus on compressor maintenance activities to underpin
future improved production efficiency. Additional modifications
were also undertaken to allow for indigenous Magnus gas exports of
up to 20 mmscfd.
Following the successful completion of the North West Magnus
infill well, early production rates have been strong, with average
Magnus production during October of c.17,000 Boepd. Accordingly,
the Group is progressing plans to drill a water injection well in
the first quarter of 2023 to provide pressure support to this
well.
The Group's well intervention programme returned two wells to
service in the first half of 2022 and work is ongoing to reinstate
production from a third producer around the end of the year.
Kraken
During the ten months to end October 2022, average gross
production was 26,370 Boepd (net 18,591 Boepd), which is around the
upper end of guidance. The floating production, storage and
offloading vessel ('FPSO') continues to deliver top quartile
performance, with production efficiency of 92% and water injection
efficiency of 93%, with the reduction in production from 2021
reflecting the impact of the third quarter shutdown and natural
decline.
The planned shutdown was optimised to facilitate single
processing train operations for one week of the two-week programme
of activities, with all key scopes executed ahead of schedule.
Golden Eagle
Year to date October production was 6,542 Boepd. While
production efficiency remained strong at over 95%, production is
lower than expected due to higher than anticipated rates of
decline. EnQuest is working with the operator to identify and
implement mitigations.
The two well infill drilling campaign commenced as planned in
early September. The first well did not locate reservoir-quality
sands above oil water contact and was subsequently plugged and
abandoned dry. Drilling of the second well has begun, but progress
is slower than expected.
Other upstream assets
Production for the ten months to end October 2021 averaged 3,542
Boepd, in line with expectations.
Infrastructure and New Energy
The Sullom Voe Terminal ('SVT') and its related infrastructure
continues to maintain safe and reliable performance, with 100%
export service availability during the year to date.
EnQuest continues to develop cost-effective and efficient plans
to repurpose the terminal site and connected offshore
infrastructure and is well positioned to harness the significant
renewable energy potential in the area, exemplified by the award of
2.8GW of nearby offshore wind licences in the recent Scotwind
licensing round (NE1 Area). The Group continues to mature a number
of global scale decarbonisation opportunities, including carbon
capture and storage, electrification and green hydrogen. Having
secured an exclusivity agreement with the Shetland Islands Council
to progress new energy opportunities at SVT, EnQuest is well placed
to deliver on these new energy ambitions in conjunction with
potential strategic and financial partners.
In September, EnQuest submitted applications to the North Sea
Transition Authority ('NSTA') for two carbon capture and storage
('CCS') licences areas. Licences are anticipated to be awarded in
the first quarter of 2023 and the Group hopes for a positive
outcome in respect of these areas which are accessible from
EnQuest's existing owned and operated infrastructure. Initial
development plans are progressing around significant infrastructure
reuse and repurposing to optimise capital cost and minimise
environmental impact, targeting development of a flexible storage
hub capable of accommodating up to ten million tonnes of CO2 per
annum from emitters in UK, Europe and beyond.
UK Decommissioning
Heather and Thistle plug and abandonment ('P&A') campaigns
are progressing well with 11 wells completed at Heather and 10
wells completed at Thistle. The Group remains on track to complete
the P&A of a total of 30 wells across the two installations in
2022.
During September, EnQuest awarded the Heather topsides removal
contract with a single lift operation scheduled in 2025. A separate
process is underway in relation to the Heather jacket removal
scope, while advanced negotiations continue with a preferred
partner to execute the combined Thistle topsides and jacket
removals scopes.
At Dons, subsea infrastructure removal within the 500-metre zone
has been completed on time and budget, with the final phase
executed in October.
Malaysian operations
For the ten months to end October 2022, average production in
Malaysia was 6,425 Boepd, representing a 26.5% increase over the
same period last year. This increase has been driven by the
successful four-well workover campaign and the delivery of the
Group's first horizontal well at PM8/Seligi being brought on
stream, both of which were completed in July.
During November, a further horizontal well was brought online,
with drilling to commence on a third horizontal well in the coming
days with first oil expected during December.
Liquidity and net debt
Net debt of $750 million at 30 September 2022 represents a
significant improvement versus net debt of $880 million as at 30
June 2022. As of 30 September 2022, cash and cash equivalents were
$322.8 million, including $9.2 million of restricted cash and
$178.3 million of ring-fenced funds held in joint venture
operational accounts.
The increase in the Energy Profits Levy will impact the free
cash flow generation and the pace of deleveraging for the Group,
with the first payment on account in December 2022. The Group will
continue to exercise strong cost discipline and optimise its
capital programmes to mitigate the impact of the levy.
Ends
For further information please contact:
EnQuest PLC Tel: +44 (0)20 7925
4900
Amjad Bseisu (Chief Executive)
Salman Malik (Chief Financial Officer)
Ian Wood (Head of Investor Relations, Communications
& Reporting)
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
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reference to forecast price changes, economic conditions and the
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