19th Mar 2015 09:25
LONDON (Alliance News) - Enquest PLC saw its shares rise Thursday after it reported a wider pretax loss for 2014 as the drop in oil prices more than offset higher production, but it said it had moved quickly to cut costs and revise its hedging programme in response to the oil price decline and also predicted that production would rise by about a quarter in 2015.
The oil and gas producer, which is currently focused on the UK North Sea but is also set to start producing from a field in Malaysia in the middle of this year, reported a pretax loss of USD578.7 million for 2014, compared with a loss of USD330.9 million in 2013, as it booked an impairment of USD678.8 million related to the oil price decline.
Its closely-watched earnings before interest, tax, depreciation and amortisation fell to USD581.0 million, from USD621.3 million a year earlier, as its realised oil price fell to USD100.6 a barrel, from USD109.7 a barrel in 2013, and tariffs and transportation costs rose.
Revenue rose to USD1.00 billion, from USD961.2 million, as production rose 15% to 27,895 barrels of oil equivalent per day, from 24,222. The figure also included a higher overlift and USD31.7 million of income related to oil hedges and call options.
"During the latter part of 2014, EnQuest acted quickly to counter lower oil prices, implementing a new hedging programme, significantly cutting 2015 cash capital expenditure and taking action across the board to reduce operating costs materially," Chief Executive Amjad Bseisu said.
Enquest confirmed a 2015 cash capital expenditure target of about USD600 million, and also a cut of about 10% to its unit operational expenditure to an average of about USD38 a barrel.
It said it already has price hedging in place for 2015 and 2016, with 10 million barrels hedged in the second year through puts averaging USD68 a barrel. For 2015, EnQuest restructured the hedging programme, realising a gain of USD100 million, and now has 10 million barrels hedged in 2015 at about USD65 per barrel.
Some of the company's planned unit cost reductions will come from the new fields it is bringing into production, which will also boost its production significantly over the next two years.
Its production guidance for 2015 is for an average of between 33,000 and 36,000 barrels of oil equivalent a day, lifted by the first oil from the Alma/Galia field in the North Sea that's expected in the middle of the year and first oil from the Tanjong Baram field in Malaysia.
It also expects to draw first oil from the Kraken field in the North Sea in 2017.
"EnQuest is ... set to benefit from the material increases in production from both Alma/Galia and Kraken in the next two years, delivering significant additional cash flow. Despite the uncertain markets, we are well placed for the future," Bseisu said.
Cash generated from operations rose to USD637.1 million in 2014, from USD562.7 million in 2013.
EnQuest also said it successfully negotiated a relaxation of covenants to its revolving credit facility. "and ongoing continued compliance with its covenants is a priority for 2015 and beyond".
Its shares were up 14.3% at 38.88 pence Thursday morning, although they remain down 72% over the past 12 months.
By Steve McGrath; [email protected]; @stevemcgrath1
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