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EnQuest announces 1H19 results

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Oilfield Technology,

EnQuest, an independent production and development company with operations in the UK North Sea and Malaysia, has announced its financial results for 1H19.

Highlights and outlook

  • Group net production up 27.0%, averaging 68 548 bpd in the six months to end June 2019; full year 2019 guidance of 63 000 bpd to 70 000 bpd unchanged.
  • - Improved production efficiency at Kraken in the second quarter resulted in average gross production of 32 776 bpd in the first half of 2019. Full year guidance of 30 000 bpd to 35 000 bpd remains unchanged. Worcester two-well drilling programme planned for 2020 as the first Western Flank development.
    - Magnus performance in line with expectations. Planned maintenance shutdown completed in the period. Two-well drilling programme to commence in the fourth quarter.
    - PM8/Seligi performance above expectations reflecting the ongoing successful idle well restoration programme and high production efficiency. Two-well drilling programme commenced in July.
  • Increased revenue of US$858.2 million (2018: US$548.3 million) and EBITDA of US$525.9 million (2018: US$311.9 million) driven by higher production volumes and realised prices, including the impact of the Group’s hedge programme.
  • Operating expenditure increased to US$248.4 million (2018: US$220.6 million) with unit operating costs reduced to US$20.1/boe (2018: US$22.6/boe), reflecting the acquisition of additional interest in Magnus.
  • Material increase in cash generated from operations at US$426.2 million (2018: US$318.3 million); cash capital expenditure of $124.6 million (2018: US$125.8 million), with guidance unchanged.
  • - Free cash flow** generation of US$138.3 million (2018: US$53.6 million) has enabled continuing debt reduction

End June net debt reduced by US$136.6 million from year end; net debt: EBITDA ratio* of 1.8x

  • At 30 June 2019, net debt was reduced to US$1637.9 million (end 2018: US$1774.5 million) with cash and available bank facilities amounting to US$248.5 million (end 2018: US$309.0 million).
  • - At the end of July, the Group’s credit facility had reduced to US$615.0 million following the early repayment of US$65.0 million of the scheduled amortisation, with US$55.0 million repaid in June and US$10.0 million repaid in July. The remaining US$35.0 million of the scheduled amortisation will be paid by 1 October
    - Net debt: EBITDA ratio* at the half year was 1.8x (end 2018: 2.5x), ahead of target to be below 2x by the end of 2019
    * based on last twelve months EBITDA to end June 2019 and net debt at 30 June 2019
    ** Free cash flow: net change in cash and cash equivalents less net (repayments)/proceeds from loan facilities

2019 cash flow supported by oil price hedges

  • For full year 2019, the Group’s hedge programme covers approximately 12.5 million bbl. For the second half of 2019, the Group has approximately 4.6 million bbl of oil hedges in place. Approximately 3.9 million bbl are hedged at an average floor price of approximately US$66/bbl, with a further estimated 0.7 million bbl hedged with an average floor price of approximately US$56/bbl in accordance with the Oz Management facility agreement.

Board change

  • EnQuest has appointed Martin Houston as Chairman of the Group with effect from 1 October 2019, replacing Jock Lennox who will step down from the Board on 30 September 2019 (See separate announcement)

EnQuest Chief Executive, Amjad Bseisu, said: “The Group has delivered a strong performance in the first half of 2019. Production was towards the top end of our full year guidance range and we continue to control our operating expenditures, with unit OPEX of $20/boe in the period.

“We have generated strong cash flows in the period and significantly reduced our debt, with our net debt:EBITDA ratio at 1.8x, ahead of our target to be below 2x by the end of 2019.

“We remain confident in achieving our 2019 production guidance of 63 000 to 70 000 bpd. Our two pipeline projects have been completed ahead of schedule and budget and our annual maintenance programme is expected to be concluded around the end of the third quarter. Drilling is underway in Malaysia with our two-well campaign and drilling at Magnus is due to start in the fourth quarter.

“The Worcester development at Kraken, planned for 2020, will utilise our existing infrastructure and is the first step in developing the material resource present in the Western Flank. We continue to assess options to develop the significant potential within our reserves and resources across our portfolio, particularly at Kraken, Magnus and PM8/Seligi.”

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