EnQuest Provides Operations Update

Source: www.gulfoilandgas.com 2/3/2022, Location: Europe

- EnQuest today provides an update on its operational performance for the year ended 31 December 2021
- Full year 2021 operations update and 2022 guidance
- Debt reduction continues with strong cash flow and improved macro conditions
- c.46% reduction in UK emissions, ahead of North Sea targets

EnQuest Chief Executive, Amjad Bseisu, commented:
"EnQuest delivered free cash flow of around $395 million in 2021 with a realised price of c.$69/bbl, resulting in a stronger balance sheet with net debt reduced to $1,222 million.

“High uptime at Kraken, the contribution from Golden Eagle and the accelerated recovery of wells at PM8/Seligi was offset by underperformance at Magnus. Magnus compression and water injection plants are now online and performing on target. Other assets, including Kraken and Golden Eagle are performing well and Malaysia is off to a strong start with the PM8/Seligi riser replacement now in place ahead of schedule, with all wells online. With an active programme of nine wells and seven workovers in 2022, our largest sanctioned program since 2014 and our first new wells in over two years, I am confident we will deliver a good performance this year. Our production to the end of January 2022 was 50,810 Boepd.

“Our decommissioning business performed better than expected, while our emissions were 45.7% below the North Sea Transition Deal 2018 baseline, and close to the 2030 target of 50%. I am very pleased we are industry leading in emission reductions and am excited about our new energy initiatives around Sullom Voe.

“The supportive macro environment and higher oil prices allow us to look forward to organic growth to offset natural declines. We remain focused on continuing to reduce our net debt while selectively investing in our low-cost, quick payback well portfolio. At the same time, we will continue to be disciplined with respect to M&A opportunities.

“EnQuest’s business is strongly positioned to play an important role in the energy transition. We will do so by responsibly optimising production, leveraging existing infrastructure, delivering strong decommissioning performance and exploring new energy and further decarbonisation opportunities.”

2021 performance
- Average Group production was 44,415 Boepd
- Kraken average gross production of 31,155 Boepd (net 21,964 Boepd) was within guidance, reflecting high FPSO uptime throughout the year
- Golden Eagle net production for the full year was 10,220 Boepd, contributing 1,701 Boepd1 net to EnQuest post acquisition completion on 22 October 2021
- Magnus production of 11,870 Boepd reflected well integrity and topside related outages
- Net production of 5,028 Boepd at PM8/Seligi reflected optimised well delivery offsetting the impact of the detached riser system
- Operating expenditure is expected to be approximately $325 million, slightly higher than guidance; primarily reflecting higher emissions trading scheme costs. Unit opex is expected to be c.$21/Boe
- Cash capital and abandonment expenditures are expected to be approximately $120 million, including c.$13 million associated with the PM8/Seligi riser replacement
- Strong free cash flow generation2 of approximately $395 million
- In June, the Group entered into a new senior secured debt facility (‘RBL’) of up to $750 million, including letters of credit of $150 million
- At 31 December 2021, cash drawings under the RBL were $415 million following the early voluntary repayment in December 2021 of $70 million
- At 31 December 2021, net debt including PIK was $1,222 million, with cash and available facilities of $319 million

2022 outlook
- Average net Group production is expected to be between 44,000 Boepd and 51,000 Boepd
- Operating expenditure is expected to be approximately $430 million. The increase primarily reflects a full year of Golden Eagle operating costs, the four-well workover programme at PM8/Seligi, additional integrity and maintenance spend at Magnus, significantly higher emissions trading costs and higher diesel costs
- Cash capital expenditure is expected to be approximately $165 million, reflecting planned drilling programmes (three wells at Magnus, two wells at Golden Eagle and four wells at PM8/Seligi), with abandonment expenditure expected to be around $75 million
- EnQuest has hedged 8.6 MMbbls of oil, primarily using costless collars, with an average floor price of c.$63/bbl and an average ceiling price of c.$78/bbl. In addition, for 2023, the Group has hedged a total of 3.5 MMbbls with an average floor price of c.$57/bbl and an average ceiling of c.$77/bbl

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