British North Sea-focused oil producer EnQuest said on Wednesday that its 2022 free cash flow jumped 31% from the previous year to $519 million on the back of higher prices, beating guidance, but a windfall tax weighed on its accounts.
EnQuest has deferred drilling on its Kraken field, and reported a loss after tax of $41 million, compared with a $377 million profit in 2021, in the wake of windfall taxes introduced on oil and gas producers in the British North Sea last year.
EnQuest has so far paid around half of its $72 million in UK windfall tax bill for 2022, a spokesperson said, and booked a $178 million non-cash accounting charge to cover the life of the windfall tax through 2028, adding that the final cash tally will likely be higher. EnQuest has for years been shielded from UK tax payments as it could offset past losses against tax bills.
This year, it expects to produce 42,000-46,000 barrels of oil equivalent per day (boepd), slightly down from 47,300 boepd last year. EnQuest, with a market cap of around $441 million, reduced its net debt to $624 million at the end of February, compared with $1.2 billion in late 2021. It has refinanced the vast bulk of its debt to mature in 2027.
It has hedged 7.9 million barrels of its 2023 output at an average floor price of $58 a barrel, of which about half has a costless price ceiling of $75 a barrel.
For 2024, it has hedged 3.2 million barrels at an average floor of $60 a barrel. It reiterated it expected to spend $160 million this year, with operating costs of $425 million and decommissioning spending of $60 million.
As of end-February, EnQuest had cash and available lending facilities, some of which had shrunk with the windfall tax, of $330.1 million.
(Reuters - Reporting by Shadia Nasralla in London and Muhammed Husain in Bengaluru; Editing by Subhranshu Sahu and Louise Heavens)"