Highlights
Production in H1 2013 was 21,455 Boepd, up 5.9% on H1 2012. Development drilling at our core hub assets delivered good results in H1 2013, this has continued into H2 2013 with a new well on the Thistle Western Fault Block and with a new producer/injector pair at Don Southwest. Reservoir performance of all producing assets has been good.
Revenue was $455.9 million, with EBITDA of $273.0 million and strong cash flow of $234.7 million generated from operations.
Gross profit was $175.0 million, down 14.3% on the prior period, reflecting a lower oil price, a number of one-off operating costs and a change in the production mix, resulting in a higher depletion charge.
Alma/Galia first oil is currently expected in Q1 2014, mainly due to the increase in scope of refurbishment of the existing FPSO marine and process systems.
With Alma/Galia first oil expected in Q1 2014 and stronger Thistle production in H2 2013, average 2013 EnQuest production should be in the lower half of the range indicated in March this year; 22,000 Boepd to 27,000 Boepd. With initial net production anticipated of approximately 13,000 Boepd, the Alma/Galia development will deliver a substantial increase in EnQuest's production in 2014.
A field development plan ('FDP') for Kraken was submitted to the Department of Energy and Climate Change ('DECC') during H1 2013, gross reserves are 137 MMboe and sanction is expected in H2 2013. The Kraken appraisal well confirmed a separate second field, to be known as 'Kraken North'; a second heavy oil tax allowance of £800 million is therefore anticipated. With the sanction of Kraken and the associated capital investment, EnQuest does not expect to pay cash tax before 2018.
EnQuest has acquired a 50% interest in the Avalon prospect, close to the Scolty and Crathes discoveries. KUFPEC UK Limited and Spike Exploration UK Limited have farmed into the Cairngorm discovery on a promoted basis, EnQuest retains a 45% interest and operatorship.
Business development and new development project activity in 2013 are expected to result in a substantial addition to 2P reserves, with an increase of more than 70 MMboe to net 2P reserves, largely driven by the sanction of Kraken.
EnQuest CEO Amjad Bseisu said:
"EnQuest is delivering sustainable growth through increasing production and increasing reserves, and our assets are performing well.
In H1 2013, with good operational progress, EnQuest delivered a 6% increase in production, up to 21,455 Boepd; resulting in $235 million of cash flow from operations. Production was enhanced by the performance of the new West Don producer/injector pair and by operational efficiency and good well performance at Heather/Broom. Development drilling at our new Thistle Western Fault Block well and the new Dons Southwest producer/injector pair has been successful. The Thistle well came in better than expected and will lead to stronger Thistle production in H2.
Most of the Alma/Galia subsea work is now complete. The scope of the refurbishment of the marine and process systems at the FPSO has been extensive and we now anticipate first oil being rescheduled to Q1 2014. Alma/Galia is set to deliver a significant increase in EnQuest's production in 2014. The Kraken FDP has been submitted and Kraken remains on track for sanction in the second half of this year. Beyond that, EnQuest's recent first move into North Africa is providing us with short term infill drilling opportunities at Didon and with further major development opportunities at Zarat.
Through asset acquisitions and new development projects in 2013, we already expect to increase our net 2P reserves by more than 70MMboe, including over 60MMboe from Kraken. We continue to look at opportunities to acquire assets in the UK and other regions, where our expertise and capabilities can be applied to maturing assets and development opportunities."
