Enquest PLC (AIM:ENQ) is mulling new investments to make the most of tax reliefs built into the so-called ‘windfall tax’ on UK oil and gas firms.
The London-listed independent producer - which today confirmed first half production of 49,726 barrels per day from the North Sea and Malaysia, generating US$332mln of cash flow – is focussing on de-leveraging but noted a desire to increase its investment in the UK.
It comes after the ‘Energy Profits Levy’ was introduced by Rishi Sunak, at that time chancellor of the exchequer, and it saw taxes on oil and gas profits increase sharply but with larger tax relief on new investments than before (allowing 91p per pound invested to be claimed back, with the benefit brought forward to the year of investment not when future production is sold).
“Following the enactment of the Energy Profits Levy, EnQuest remains committed to investment in the North Sea and is reviewing future capital expenditure programmes in light of the additional investment allowances available under the levy,” the North Sea oil producer said, ahead of the release of its interim results in September.
Debt repayment is meanwhile being prioritised during this time of strong cashflow, reducing some US$342mln in the first half of 2022 down to US$880mln by the end of June, and, EnQuest told investors it is exploring options to refinance its high yield bonds ahead of their maturity in October 2023.
The high yield debt securities represent the majority of the group’s debt, some US$813mln of bonds are outstanding after US$14.4mln were bought back and cancelled in July, the company noted.
Amjad Bseisu, EnQuest chief executive, highlighted: "We remain on track to deliver our operational targets and, in the prevailing price environment, are focused on driving an accelerated debt reduction programme.
"EnQuest has a long track record of investment in the North Sea.
“We remain focused on continuing to improve performance and extend the lives of assets within our portfolio, delivering value to all of our stakeholders as we increase production, reduce emissions and support energy security."
He added: "Performance has been strong at Kraken and in Malaysia, where we have seen the positive impact of our well workover programme. Our drilling and workover programmes are underway at both Magnus and PM8/Seligi to deliver production in the second half, offset by our maintenance shutdowns at Magnus and Kraken.”
EnQuest maintained production guidance of between 44,000 and 51,000 barrels oil equivalent per day (boepd), based on expectations for gross production of 22,000 to 26,000 boepd from the Kraken heavy oil field in the North Sea.