A material operating cost and CAPEX reduction programme will aim to lower EnQuest’s cost base, with Group free cash flow breakeven targeted at approximately US$38/boe in 2020 and US$35/boe in 2021.
Production this year to 17 March has averaged approximately 65 500 boe/d, with Kraken in particular performing ahead of expectations at approximately 39 000 bpd (gross). As a result of the field shutdowns outlined above, 2020 full year production guidance is now expected to be in the range of 57 000 to 63 000 boe/d. Kraken forecast gross production remains unchanged at 30 000 to 35 000 boe/d.
Cost control and capital discipline
For 2020, the Group is targeting base operating expenditure savings of approximately US$150 million, which would lower operating costs by approximately 30% to approximately US$375 million. In 2021, the Group is targeting unit operating expenditures of approximately US$15/Boe. These savings are driven primarily by cost savings at Heather and Thistle/Deveron, but also through the removal of non-critical and discretionary operating expenditures and support costs.
2020 cash CAPEX is also expected to be reduced by approximately US$80 million to approximately US$150 million. The majority of the Group’s 2020 programme relates to the recently concluded drilling programme at Magnus and the two-well programme now underway at Kraken, with approximately US$50 million of 2020 cash CAPEX relating to the phasing of cash payments into 2020.
The Group’s 2021 CAPEX programme is expected to reduce further, although production is also likely to be impacted as a result.
Liquidity and net debt
The Group retains significant liquidity with cash and available facilities of US$268.2 million at 29 February 2019. There are no further repayments of the Group’s senior credit facility due in 2020, with the facility maturing in October 2021. Net debt was US$1367 million at the end of February 2020.
EnQuest has hedged approximately 20% of 2020 entitlement production with approximately 2.9 MMbbls of oil at an average floor price of approximately US$65/bbl and, in accordance with the Sculptor Capital facility agreement (previously known as the Oz Management facility), approximately 1.1 MMbbls hedged at an average floor price of approximately US$52/bbl.
EnQuest Chief Executive, Amjad Bseisu, said: “Over the last few years, EnQuest has made significant progress in strengthening the business with our three world-class assets in Kraken, Magnus and PM8/Seligi, and a materially reduced debt position. Given the prevailing low oil price environment, we are taking decisive action to reduce operating and capital expenditure in 2020 and beyond, with a view to targeting cash flow breakeven of approximately US$35/Boe in 2021. While these actions have reduced our production expectations, free cash flow has improved and with no senior credit facility amortisations due in 2020 and long-dated bond maturities, we are positioning ourselves to manage through the current low oil price environment.”
Read the article online at: https://www.oilfieldtechnology.com/drilling-and-production/20032020/enquest-to-halt-production-at-two-north-sea-fields/