Enquest swings to loss on North Sea assets writedowns; maintains production guidance

Oil company Enquest swung to a loss as higher revenue and production was offset by a writedown in its North Sea assets amid a slump in oil prices.

For 2019, the company reported a pre-tax loss of $729.1m, compared with a profit of $94.0m on-year, and revenue rose to $1,711.8m from $1,201.0m.

Group production averaged 68,606 boepd in 2019, up 23.7% on 2018 thanks to the combination of improved Kraken performance, a full year contribution at Magnus and strong performances at Scolty/Crathes and PM8/Seligi, the company said.

But the impairment of $637.5m related to North Sea assets weighed on results.

'The impairments are attributable primarily to changes to the long-term oil price from $75.0 a barrel to $70.0 a barrel, revision to production profiles in the Heather/Broom, Thistle/Deveron and the Dons fields and the anticipated cessation of production at Alma/Galiam' the company said.

Looking ahead, the company said year-to-date production performance remained good with the group's day-to-day operations continuing without being materially affected by Covid-19.

Full year production guidance remained in range of 57,000 to 63,000 Boepd.

'Given the prevailing low oil price environment, we have taken decisive action to lower our cost base, targeting $190 million of operating cost savings in 2020, equating to unit operating expenses of c.$15/Boe,' Enquest said. 'With these significant cost reductions, cash flow breakeven is estimated at c.$33/Boe in 2020.'

'With realisations in the first quarter of 2020, the cash flow breakeven falls to c.$25/bbl for the remainder of the year. 2021 cash flow breakeven is now forecast at c.$27/Boe, with unit operating expense of around $12/Boe. With these significant reductions, we are well positioned to manage through a sustained low oil price environment,' it added.

At 8:25am: (LON:ENQ) EnQuest Plc share price was +2.14p at 13.32p