EnQuest Slashes Spending, Keeps Platforms Closed
North Sea-focused EnQuest has become the latest producer to announce steep cuts to capital and operating expenditure in response to the market downturn, which has hit the UK hard.
The London-listed player aims to lower its operating expenditure by $150mn to $375mn, it said in a stock filing on March 19. Its goal is to achieve unit costs of around $15/boe. The company has opted against restarting its Heather and Thistle platforms, which were shut down in October because of a fire and equipment problems respectively. This will lead to savings, as will the cutting of non-critical and discretionary operating expenditure and support costs, EnQuest said.
The producer is targeting a $80mn reduction in capital expenditure to $150mn. Most of its planned spending this year relates a drilling campaign recently completed at the Magnus oilfield northeast of the Shetlands, and a two-well programme currently underway at the Kraken project, also in the UK North Sea.
EnQuest now expects production this year to average 57,000-63,000 boe/day, versus a previous guidance of 61,000-68,000 boe/day. The company extracted 68,606 boe/day in 2019, up 24% year on year.
The company stressed it had significant liquidity, with cash and available facilities totalling $286.2mn at the end of February, adding it does not need to make any further repayments of its senior credit facility this year, due to mature in 2021. Its net debt was at $1.37bn at the end of last month. EnQuest has also hedged 20% of its production, with 2.9mn barrels of oil to be sold at an average floor price of $65/b and 1.1mn barrels at $52/b.
"Given the prevailing low oil price environment, we are taking decisive action to reduce operating and capital expenditure in 2020 and beyond, with a view to targeting cash flow breakeven of circa $35/boe in 2021," CEO Amjad Bseisu said.
Brent hit a 17-year low when US markets opened on March 18 of $25.40/boe, as the Covid-19 crisis continues to sap fuel demand. The benchmark rebounded on March 19, and is trading at $27.14 as of press time.