EnQuest has delivered a strong operational and financial performance in 2014, with provisional production of 28 267 boe/d, up 17% on the prior year, at the high end of EnQuest’s guidance. This reflects the continuing strength of field reservoir performance, top quartile production efficiency from EnQuest’s existing producing assets and an initial contribution from PM8/Seligi in Malaysia, the first production from outside the North Sea. With this level of production, EnQuest expects EBITDA for 2014 to be in the range of US$530 million to US$580 million.
In addition, with hedging in place for 2015, EnQuest has responded expeditiously to the low oil price environment. The 2015 total Group cash capital expenditure programme has been cut further and is anticipated to be in the region of US$600 million, with capital expenditure reductions from both new developments and existing fields. Operating cost per bbl is expected to be reduced by at least 10%, both as the result of cost savings and high margin bbls coming onstream. Control of the cost base has always been a focus for EnQuest and in this new macro environment, it is continuing to work with the supply chain and contractors to achieve additional cost savings.
Given changes in the oil price environment, EnQuest’s lending banks have agreed to raise the net debt/EBITDA covenant on the credit facility to 5 times, and the ratio of financial charges to EBITDA is reduced to 3 times, both until mid-2017. EnQuest’s financial position remains resilient, with net debt of approximately US$1.0 billion at the year end. The US$1.2 billion committed credit facility with the US$500 million accordion remains in place, with only a net US$100 million of utilisation, at the year end, after cash.
The lenders’ continued commitment recognises the considerable cash flow generating potential of EnQuest’s business, in particular from the Alma/Galia and the Kraken developments coming on stream in the next two years. Both of these projects remain on schedule. On Alma/Galia, mechanical completion on the vessel was achieved before Christmas and sailaway continues to be expected in March. The project remains on track for first oil in mid-2015. Production for 2015 is expected to be an average of between 33 000 boe/d and 36 000 boe/d.
Amjad Bseisu, Chief Executive, EnQuest PLC said:
“The rapid change in the macro environment with respect to the oil price has affected all in the industry, not least EnQuest. However, with our strong production growth, the new developments coming on stream in the next two years and our available US$1.1 billion in funding under our facilities, we continue to demonstrate the strength and sustainability of EnQuest’s production growth model.
I am very pleased that our production efficiency for 2014 has been approximately 90%, which is an exceptional performance and ranks EnQuest as one of the best operators in the North Sea. The business continues to perform very well operationally and is on course for another year of strong production growth.”
Adapted from press release by Joe Green