8th Dec 2015 07:52
LONDON (Alliance News) - Oil and gas firm Enquest PLC Tuesday said production should significantly rise in 2016 after experiencing strong production in the second half of 2015, and said it will complete its cost reduction programme ahead of schedule.
The company said production between July and the end of November averaged 35,022 barrels of oil equivalent per day, which was up 26% from the same period a year ago. It is also a huge leap from the 29,665 barrels per day being produced on average in the first half of 2015.
Enquest reiterated its production guidance for the whole of 2015, which will average between 33,000 to 36,000 barrels of oil equivalent per day.
One of the contributors to the increase in production is the Alma/Galia field in the UK North Sea, which began producing in late August. Enquest said the field is performing as anticipated, with the field producing an average of 4,000 barrels per day in November, predominantly from the first two Alma wells.
The Galia well was also brought onstream in the second half of November and this well alone has produced approximately 7,000 barrels per day gross since late November, the company said.
Production will continue to soar, with Enquest forecasting production to be between 44,000 to 48,000 barrels of oil equivalent per day in 2016 - which would be a significant jump compared to 2015 levels.
Although production has grown ahead of schedule, Enquest said cash capital expenditure for the full year will be around USD150.0 million higher than expected because it brought forward the drilling of the first Galia well, it said.
In addition, Enquest has accelerated its cost reduction programme and said unit costs should fall ahead of target to a range of USD31 to USD32 per barrel in 2015 before falling further to USD26 to USD28 per barrel in 2016.
Those unit costs are significantly below current Brent prices, which have hit multi-year lows in the last two weeks, trading at USD41 per barrel on Tuesday morning.
Enquest has other development projects in the pipeline, with the North Sea Kraken field remaining on track to produce first oil in the first half of 2017. The company said capital expenditure for the project has fallen 10% to total around USD2.86 billion.
However, Enquest warned net debt will rise during 2016 ahead of first oil from Kraken, with debt repayments due to begin from the second half of 2017 when Kraken and other projects come online.
Net debt at the end of 2015 is expected to be around USD1.55 billion. Enquest plans to spend between USD700.0 to USD750.0 million in capital expenditure in 2016, most of which will be focused on the Kraken development.
The North Sea Scotty/Cratches field development plan has now been approved and sanctioned, which will also produce first oil sometime in 2017. Enquest said it will not have to spend much capital expenditure on the field until first oil and highlighted it will also extend the life of the nearby GKA field.
Enquest is aiming to have initial unit costs of only USD20 per barrel from those fields, before falling to USD15 per barrel in the "initial peak volume years," it said.
In addition, general and administrative costs for the 2015 year are expected to be at the lower end of its guidance range of USD15.0 to USD20.0 million.
By Joshua Warner; [email protected]; @JoshAlliance
Copyright 2015 Alliance News Limited. All Rights Reserved.
Related Shares:
Enquest