The Press and Journal (Aberdeen and Aberdeenshire)
EnQuest posts loss after first full year of the windfall tax
North Sea operator EnQuest posted a loss in its 2023 full-year financial results, reflecting the impact of the windfall tax on oil and gas firms.
EnQuest’s after-tax loss of £24.36 million was an improvement on the £32.59m loss posted in 2022.
The firm recorded total revenues of just under £1.19 billion, with adjusted earnings before interest, taxes, depreciation and amortisation reaching £653m, below the levels seen last year.
Total production also fell to about 43,800 barrels of oil equivalent per day (boepd), compared to 47,300 boepd last year.
EnQuest said it paid £207.7m in tax, including £61.06m relating to the Energy Profits Levy (EPL) windfall tax, an effective tax rate of 113.3%, it said.
In total, EnQuest said it recorded UK North Sea corporate tax losses of just over £1.58bn at the end of 2023, “the reduction in the period reflecting utilisation of ring-fence corporation tax losses” against its profits before tax.
As a result, EnQuest said it expects to pay no corporation tax or supplementary charge on UK operational activities “for the foreseeable future”.
CEO Amjad Bseisu said the company achieved its 2023 targets, delivering “strong operational performance” and reducing net debt “against the backdrop of a challenging UK fiscal environment”.
“We have set the foundations for a pivot to growth during 2024 and continue to perform well against our full-year targets, with production to 29 February 2024 averaging around 44,500 Boepd,” Mr Bseisu said.
Operationally, he said, decommissioning activities saw EnQuest complete 25 plug and abandonment (P&A) wells.
The firm will push on with a pipeline of some of the UK North Sea’s largest developments, with plans to “prove up” its heavy oil capabilities.
The “funnel of opportunities” cover Bentley and Bressay in the east of Shetland, some of the largest untapped developments in UK waters.
First on the list, due for a field development plan and final investment decision this year, is a gas project at the Bressay field, before a phased approach to recover its heavy oil.
That first stage will produce the gas cap at the oilfield before tapping into its wider resources of around 200 million barrels of oil equivalent.
EnQuest North Sea manager Steve Bowyer said: “We’re moving forward with the gas development of Bressay, which is effectively producing the gas cap on the Kraken emissions reduction project.
“We’re looking to move that through field development planning phase and FID through the latter part of this year.
“That will create the fairway of the phasing of the oil development which will follow. So key priority at the moment is getting the gas development moving and then we’ll look at timings on the oil development phase.”
Bressay’s initial gas project will help decarbonise the Kraken FPSO.
When operating the project will open the next opportunity in Bentley – an even larger field estimated to have up to 300 million barrels using enhanced oil recovery techniques.
Mr Bowyer said: “It’s almost like a funnel in terms of progressing. We’re looking at potential enhanced oil recovery on Kraken and keep optimising the Kraken asset. We’ll then take Bressay through via the gas development, then a phased oil development. Then we’ll see Bentley following thereafter.”
Even with those projects London-listed EnQuest is still keen to grow its portfolio, said Mr Bowyer.
“We’re very focused on M&A so, having de-levered the balance sheet we’re looking for transformational growth. UKCS focused, then we’ll pivot internationally once we successfully grow the UK business.”
Elsewhere, EnQuest subsidiary Veri Energy is progressing a carbon capture and storage (CCS) shipping solution for isolated emitters in the UK and Europe centred on the group’s Sullom Voe Terminal (SVT) on Shetland.
Mr Beisu said the award of four carbon storage licences during 2023 was a key milestone.
“Work is under way to right-size the terminal site and transform its carbon footprint, with delivery of the new stabilisation facility and power generation projects expected to reduce future CO2 emissions at SVT by c.90%,” he said.
Veri is also progressing evaluation of a 50 megawatt green hydrogen project at SVT, with the company receiving £1.74m in grant funding from the UK Government’s Net Zero Hydrogen Fund for a frontend engineering and design study for the project.