UPDATED: EnQuest streamlines, Kraken remains on track, BP acquisitions progressing

EnQuest made a marginal profit last year after streamlining its operations by reducing overheads and increasing production.

The UK operator’s full-year earnings before interest, tax, depreciation and amortisation (EBITDA) rose to $477 million, up from $474 million in 2015.

In addition the company’s flagship Kraken project remains “on track” to produce first oil in Q2 of 2017

And the acquisitions from energy giant BP of the Sullom Voe processing terminal on Shetland and interests in the Magnus field are “progressing to plan”.

EnQuest chief executive Amjad Bseisu said: “EnQuest further streamlined its operations in 2016 and delivered cash capital expenditure at $609 million and unit opex at $24.6/bbl, both well down on the previous year.

“Operationally EnQuest worked at high levels of production efficiency and safely delivered production averaging 39,751 Boepd, our highest annual production figure, supporting our financial objectives.

“2016 saw the successful restructuring of our balance sheet, designed to strengthen EnQuest’s liquidity position, to reduce the level of its cash debt service obligations and to enable it to bring the Kraken development onstream.”

The firm’s earnings before tax in 2016 amounted to $477.1 million, with production up nearly 9%.

The company said a comprehensive financial restructuring significantly improved its liquidity position.

Operating costs were also reduced from nearly $30 boe to under $25 boe. The firm hopes to reduce its opex further this year driven by cost reductions across the supply chain.

EnQuest said the Kraken FPSO development continues “under budget and on track” for first oil in Q2 this year.

Cash capex is set to be in the range $375 million to $425 million in 2017, the majority of which is being invested in the Kraken development

The proposed acquisition of interests in the Magnus oil field and the Sullom Voe terminal from BP was announced in January.

Transition activities have begun and are ongoing. EnQuest say the process is expected to take 6 to 12 months, with no cash outlay.

Total revenue for 2016 was $849.6 million compared to $906.6 million for 2015.

EBITDA for the year ended December 31, 2016, was $477.1 million compared with $474.2 million in 2015.

Net debt at 31 December 2016 amounted to $1,796.5 million compared with net debt of $1,548.0 million at 31 December 2015.

The company’s year end report stated: “Increased production and lower operating costs have driven a higher EBITDA, although this was partially offset by the impact of lower oil prices in 2016, as partially mitigated through the contribution of the $255.8 million from the commodity hedge portfolio.

“On a per barrel basis, the group’s average operating cost per barrel has decreased by 17% to $24.6 per barrel, reflecting the cost reductions and foreign exchange benefits above, together with the impact of 9% higher production.”

However the cost of sales including realised losses on foreign currency derivatives related to capital expenditure of $47.3 million.

This was put down to the significant devaluation of sterling against the US dollar since June 2016.

Profit after tax and net finance costs was $121.5 million, reflecting a tax credit for the year of $5.2 million and net finance costs of $120.8 million.

In early 2017, EnQuest securely moored the Kraken FPSO on station in the North Sea, where commissioning work continues on the vessel and the subsea infrastructure; preparations for the handover to operations are ongoing.

The project remains below budget and on track to deliver first oil in Q2 2017.

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