TIDMENQ
RNS Number : 2491G
EnQuest PLC
24 November 2020
EnQuest PLC, 24 November 2020
Operations update
Strong Kraken performance continues
-- Group production averaged 60,777 Boepd in the ten months to
end October 2020; full year production expected to be slightly
below the mid-point of the 57,000 to 63,000 Boepd guidance
range
-- As previously guided, Group production is lower in the second
half compared to the first half of the year, reflecting the
maintenance shutdown schedule as well as an unplanned outage at
PM8/Seligi. The PM8/Seligi outage has no material impact on cash
flow due to the Production Sharing Contract cost recovery
mechanism
-- Strong production performance at Kraken resulted in average
gross production of 37,783 Bopd. Full year production is expected
to be slightly above the 30,000 Bopd to 35,000 Bopd (gross)
guidance range
-- Operations continue to be materially unaffected by
COVID-19
Positive free cash flow generation
-- At 31 October 2020, net debt was c.$1,388 million (30 June
2020: c.$1,351 million) with cash and available bank facilities
amounting to c.$268 million (30 June 2020: c.$270 million)
-- Free cash flow generation of c.$95 million for the ten months
to 31 October 2020
-- The Group's senior credit facility has reduced to c.$385
million (excluding payment in kind) following the voluntary early
repayment of $40 million in November
-- Retail and High Yield bond interest paid in kind
-- By the end of October, c.11.4 MMbbls of oil hedges had been
settled, with c.10.3 MMbbls achieving an average floor price of
c.$43/bbl. For the remaining two months of 2020, c.0.7MMbbls of oil
hedges are in place at an average floor price of c.$41/bbl
EnQuest Chief Executive, Amjad Bseisu, said :
"The Group has delivered production in line with guidance year
to date, with Kraken continuing to perform well. We expect
production to be slightly below the mid-point of the 57,000 to
63,000 Boepd guidance range for the full year 2020, reflecting the
impact of the unplanned outage at PM8/Seligi.
"We have continued to generate positive free cash flows in the
period and have again made a voluntary early payment of $40 million
against the April 2021 scheduled amortisation of our senior credit
facility. We remain focused on cost control and capital discipline
to maintain free cash flow breakeven at around $33/Boe in
2020."
Production details
Net daily average 1 Jan' 2020 1 Jan' 2019
production on a to to
working interest 31 Oct' 31 Oct'
basis 2020 2019
------------------- ------------ ------------
(Boepd) (Boepd)
Magnus 17,569 18,645
Kraken 26,637 24,172
Other North Sea 9,456 17,294
------------ ------------
Total UKCS 53,662 60,111
------------ ------------
Total Malaysia 7,115 8,390
------------
Total EnQuest 60,777 68,501
------------ ------------
Magnus
Production has been slightly lower than last year due to natural
declines and sea water lift pump system issues, which have now been
resolved. The Group completed its planned maintenance shutdown in
October. Year to date production efficiency is 81% and water
injection efficiency is 84%. The Group continues to focus on
activities to improve production, including well interventions
reservoir management and gas compression optimisation .
Kraken
Average gross production at 37,783 Bopd in the ten months to the
end of October remains ahead of the top end of guidance and has
increased c.10% year on year. Production efficiency year to date
remains high at 86% with the floating, production, storage and
offloading vessel continuing to perform well. In September, the
shutdown was successfully completed, with essential maintenance
undertaken as planned.
Overall subsurface and well performance remains good and
production optimisation activities continue through improved
injector-producer well management. Water cut rate evolution remains
stable. The Group expects Kraken production to be slightly above
the 30,000 Bopd to 35,000 Bopd (gross) full year guidance
range.
Due to its low sulphur content, the Group continues to optimise
sales into the shipping market and pricing has continued to
improve, with recent cargoes returning to a premium to Brent.
Other North Sea operations
Average production in the ten months to end October of 9,456
Boepd was 45% lower compared to the same period in 2019. This was
primarily driven by cessation of production ('CoP') at the
Thistle/Deveron and Heather/Broom fields, which during the same
period last year contributed c.7,000 Boepd. At the Dons, production
continued to be impacted by a lack of gas lift which is no longer
available from Thistle, combined with underlying natural declines.
Alma/Galia ceased production at the end of June. These reductions
were partially offset by continued strong performance on
Scolty/Crathes, whilst Alba has performed in line with
expectations. Stable operations and plant availability continue to
drive a good performance at the Sullom Voe Terminal.
At Heather, preparations for decommissioning have continued with
front end engineering activities being undertaken ahead of the
resumption of the well abandonment programme in 2021.
On Thistle/Deveron, the CoP application has been accepted and
the decommissioning phase has begun, with preservation visits to
the Thistle platform taking place ahead of the planned well
abandonment programme in 2021.
At the Dons, the Group remains focused on working with its
partners and the regulator as it seeks the necessary
approvals for CoP in the second quarter of 2021.
Following CoP at Alma/Galia on 30 June 2020, the EnQuest
Producer FPSO moved off station in September and sailed to the oil
terminal jetty at Nigg, where it is currently moored. The Group
continues to evaluate options for the FPSO and will give further
updates in due course.
Malaysian operations
Average production in Malaysia in the ten months to end October
2020 was 7,115 Boepd, 15% lower than the same period in 2019. This
decrease was primarily driven by a detached riser at the Seligi
Alpha platform which provides gas lift and injection to the Seligi
Bravo platform. This resulted in a release of gas and a subsequent
fire which initiated an automatic emergency shutdown of the
PM8/Seligi field. The Group's safety systems and emergency response
procedures were successfully implemented, with the fire
extinguished quickly and all personnel onboard mustered safely.
Following an initial investigation and safety assessment, partial
operations were able to be recommenced within two days, with wells
flowing under natural pressures. Production is currently at c.40%
of normal levels with a single compressor train operational.
Remediation activities to allow production to be returned to normal
levels are currently being assessed, although production is
expected to remain constrained through the first half of next
year.
Business development and growth opportunities
Good progress has been made following the announcement in July
that the Group had signed a binding sale and purchase agreement
with Equinor for a 40.81% share in the Bressay oil field. The
partners and the regulator have approved the Group as operator of
the field and well abandonment activities that were scheduled to
take place by Equinor have been completed. The Group continues to
work closely with the regulator to extend the Bressay licenses as
it progresses towards completion of the transaction.
Bressay is expected to offer the Group significant 2C resources
of up to 115 MMbbls, net to EnQuest and provides the opportunity
for a long-term, low cost, phased sub-sea tie back project,
potentially to the Kraken field.
In addition to the 2C resources potential at Bressay, EnQuest
has a large volume of reserves and resources within its portfolio,
which provide opportunities for long term and low-cost drilling
when conditions are supportive. At Magnus there remains a
significant 2C resource base of c.38 MMbbls and around 250 million
barrels of movable oil to evaluate. Kraken continues to offer
further near-field opportunities through the evaluation and
development of the western area, which holds an estimated 70-130
MMbbls of STOIIP and the Group will look to develop these prospects
when oil prices are supportive. In Malaysia, the Group has c.22
MMboe of 2P reserves and c.76 MMboe of 2C resources.
On Block PM409 in Malaysia, we have been progressing prospects
through geotechnical studies. These opportunities will be high
graded ahead of potential drilling in the future.
COVID-19 Update
The health and safety of our employees is our top priority. The
Group remains compliant with Dubai, Malaysia and UK government and
industry policy. The Group has also been working with a variety of
stakeholders, including industry and medical organisations, to
ensure its operational response and advice to its workforce is
appropriate and commensurate with the prevailing expert advice and
level of risk. As part of EnQuest's ongoing assessment and
evolution of its response, point of care testing has been made
available on the Group's Magnus, Kraken, Northern Producer, Heather
and Sullom Voe Terminal assets. The Group's day-to-day operations
continue without being materially affected by COVID-19.
Liquidity and net debt
At the end of October 2020, net debt was c.$1,388 million, an
increase of c.$37 million from c.$1,351 million at 30 June 2020.
Free cash flow generation of c.$95 million for the ten months to 31
October 2020 has been partially offset by bond interest being paid
in kind and strengthening of Sterling in respect of the retail
bond. In September, the second payment of $17 million in relation
to the Tanjong Baram termination was received from PETRONAS. Total
cash and available facilities were c.$268 million, including
ring-fenced accounts associated with Magnus, the Sculptor Capital
facility and other joint venture accounts totalling c.$81
million.
EnQuest continues to focus on reducing its debt and to meet its
senior credit facility amortisations early. In November, the Group
voluntarily repaid $40 million of the scheduled $65 million April
2021 amortisation. This payment has reduced the Group's outstanding
credit facility to c.$385 million (excluding payment in kind).
By the end of October, c.11.4 MMbbls of oil hedges had been
settled. Approximately 10.3 MMbbls had an average floor price of
c.$43/bbl, while c.1.1 MMbbls associated with the Sculptor Capital
facility had an average floor price of c.$52/bbl. For the remaining
two months of 2020, EnQuest has c.0.7 MMbbls of oil hedges in place
at an average floor price of c.$41/bbl.
In October, under the existing terms of the 7.00 per cent.
Extendable PIK Toggle Notes originally due 2022 (the "Retail Bond")
and under the existing terms of the 7.00 per cent. PIK Toggle
Senior Notes originally due 2022 (the "High Yield Bond"), the
maturity date of the Retail Bond and that of the High Yield Bond
were both automatically extended to 15 October 2023 (from 15 April
2022) as EnQuest's senior credit facility had not been repaid or
refinanced in full.
2020 outlook
Performance at Kraken and Scolty/Crathes is expected to
partially offset lower production at PM8/Seligi, Magnus and the
Dons. As such, the Group expects full year production to be
slightly below the mid-point of the 57,000 to 63,000 Boepd guidance
range.
EnQuest continues to expect to achieve its 2020 targets with
free cash flow breakeven for the full year of c.$33/Boe.
Board update
Farina Khan was appointed as a Non-Executive Director of the
EnQuest Board with effect from 1 November 2020. She also became a
member of the Audit Committee and the Safety and Risk Committee.
Farina has over 20 years' experience in the oil and gas industry
and was previously chief financial officer of the largest listed
entity of PETRONAS.
Ends
For further information please contact:
EnQuest PLC Tel: +44 (0)20 7925
4900
Amjad Bseisu (Chief Executive)
Jonathan Swinney (Chief Financial Officer)
Ian Wood (Head of Communications & Investor
Relations)
Jonathan Edwards (Senior Investor Relations
& Communications Manager)
Tulchan Communications Tel: +44 (0)20 7353
4200
Martin Robinson
Martin Pengelley
Harry Cameron
Notes to editors
ENQUEST
EnQuest is providing creative solutions through the energy
transition. As an independent production and development company
with operations in the UK North Sea and Malaysia, the Group's
strategic vision is to be the operator of choice for maturing and
underdeveloped hydrocarbon assets by focusing on operational
excellence, differential capability, value enhancement and
financial discipline.
EnQuest PLC trades on both the London Stock Exchange and the
NASDAQ OMX Stockholm.
Please visit our website www.enquest.com for more information on
our global operations.
Forward-looking statements : This announcement may contain
certain forward-looking statements with respect to EnQuest's
expectations and plans, strategy, management's objectives, future
performance, production, reserves, costs, revenues and other trend
information. These statements and forecasts involve risk and
uncertainty because they relate to events and depend upon
circumstances that may occur in the future. There are a number of
factors which could cause actual results or developments to differ
materially from those expressed or implied by these forward-looking
statements and forecasts. The statements have been made with
reference to forecast price changes, economic conditions and the
current regulatory environment. Nothing in this announcement should
be construed as a profit forecast. Past share performance cannot be
relied upon as a guide to future performance.
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