EnQuest Chief Executive, Amjad Bseisu, said: 
“We made good progress against our strategic objectives in 2021, concluding three acquisitions, refinancing our senior secured debt facility, generating significant free cash flow of $396.8 million and reducing our year end net debt to $1,222.0 million, its lowest level since 2014. We have made strong progress on emissions reduction, which continues to be a focus for the Group.

“We have also started 2022 well, with production to the end of February averaging 50,408 Boepd, towards the top end of our full year guidance range. We have also continued to reduce our net debt, down to $1,090.0 million at the end of February, in line with our strategic priorities. With a supportive oil price environment and an active programme of nine wells and seven workovers in 2022, our largest sanctioned programme since 2014 and our first new wells in over two years, we remain confident on delivering a good performance this year. 

“The acquisition of Golden Eagle has strengthened our portfolio, building on our track record of value creation through innovative, disciplined M&A. The acquisitions of Bressay and Bentley have added almost 250 MMboe of 2C resources, adding to those already in place at Magnus, Kraken, PM8/Seligi and PM409, providing EnQuest with longer-term potential development opportunities.

“We remain focused on continuing to reduce our net debt while selectively investing in our low-cost, quick payback well portfolio in order to sustain our production base. 

“EnQuest’s business is strongly positioned to play an important role in the energy transition. We will do so by responsibly optimising production, leveraging existing infrastructure, delivering decommissioning and exploring new energy and decarbonisation opportunities.”

2021 performance

• Group net production averaged 44,415 Boepd(1) (2020: 59,116 Boepd) 
• Revenue and other operating income of $1,320.3 million (2020: $855.1 million) and adjusted EBITDA of $742.9 million (2020: $550.6 million) reflects materially higher oil prices, partially offset by lower production
• Cash generated from operations was $756.9 million (2020: $567.2 million)
• Cash expenditures of $117.6 million (2020: $173.0 million); cash capital expenditure of $51.8 million (2020: $131.4 million) and cash abandonment expenditure of $65.8 million (2020: $41.6 million)
• Strong free cash flow generation(2) of $396.8 million (2020: $210.5 million)
• Cash and available facilities amounted to $318.7 million at 31 December 2021 (2020: $284.1 million), with net debt reduced to $1,222.0 million (2020: $1,279.7 million)
• Statutory reported profit after tax was $377.0 million (2020 (restated): loss after tax of $469.9 million)

(1) Includes Golden Eagle contribution for the period 22 October to 31 December, averaged over the 12 months to the end of December 
(2) Net change in cash and cash equivalents less net (repayments)/proceeds from loan facilities, acquisition costs ($258.6 million), the accelerated repayment of the BP vendor loan ($58.7 million) and net proceeds from the firm placing, placing and open offer ($47.2 million)

Significant business development

• Successfully completed the acquisition of a 26.69% non-operated interest in the producing Golden Eagle area in October, for an initial consideration of $325.0 million; a highly cash generative asset providing significant value enhancement through the addition of c.18 MMbbls to year end 2021 net 2P reserves and c.3 MMbbls to net 2C resources
• Completed purchase of 40.81% equity interest in the Bressay heavy-oil field for an initial consideration of £2.2 million, adding c.115 MMbbls of net 2C resources
• Completed purchase of 100.0% equity interest in the P1078 licence containing the proven Bentley heavy-oil discovery, adding c.131 MMbbls of 2C resources

Board changes

Jonathan Swinney has notified the Board of his intention to step down from the Board as Chief Financial Officer and Executive Director at a date to be determined in due course

2022 performance and outlook

• Year to date February production averaged 50,408 Boepd, in line with full year guidance
• Net debt amounted to $1,090.0 million at 28 February
• Hedges in place for c.8.6 MMbbls of oil with an average floor price of c.$63/bbl and an average ceiling price of c.$78/bbl
• Full year average net Group production expected to be between 44,000 and 51,000 Boepd
• Full year operating costs of c.$430 million
• Cash capital expenditure of c.$165 million, with cash abandonment expenditure of c.$75 million

2021 performance summary

During the year, EnQuest strengthened its portfolio through the Golden Eagle acquisition and, supported by an improving oil price environment, generated material free cash flow enabling the Group to simplify its balance sheet and further reduce net debt. The Group also made good progress on its decommissioning programmes, significantly reduced Scope 1 and 2 CO2 equivalent emissions and established an Infrastructure and New Energy business to explore renewable energy and decarbonisation opportunities.

Production of 44,415 Boepd reflected a strong performance at Kraken and the contribution from Golden Eagle following completion of the acquisition, offset by topside and well integrity related outages at Magnus, planned maintenance and a subsea power umbilical failure at the Greater Kittiwake Area (‘GKA’) and expected natural declines across the portfolio. The natural declines were to a large extent a consequence of the necessary pause in the Group’s drilling programme following materially lower oil prices experienced in 2020 and into 2021.

Adjusted EBITDA, cash generated by operations and free cash flow were $742.9 million, $756.9 million and $396.8 million, respectively, with the material increase from 2020 primarily reflecting higher market prices. Cash capital and abandonment expenditures totalled $117.6 million Capital expenditure of $51.8 million primarily reflected the Magnus production enhancement campaign and the PM8/Seligi riser replacement. Cash abandonment expenditure of $65.8 million was focused on decommissioning activities at Heather, Thistle and the Dons.

Business development

In January 2021, the Group completed the acquisition of a 40.81% equity interest in and operatorship of the Bressay oil field. This acquisition provides a low-cost addition of 115 MMbbls (net) 2C resources. The initial consideration was £2.2 million, payable as a carry against 50% of Equinor's net share of costs from the point EnQuest assumed operatorship.

In July 2021, the Group completed the acquisition of the 100.00% equity interest in the P1078 licence containing the proven Bentley heavy-oil discovery from Whalsay Energy Holdings Limited ('WEL'). This discovery, which has added 131 MMboe (net) 2C resources, is within c.15 kilometres of the Group's existing Kraken and Bressay operated interests, offering further long-term potential development opportunities and other synergies. Upon completion, EnQuest funded certain accrued costs and obligations of WEL, which amounted to less than $2.0 million.

In October 2021, the Group completed the acquisition of a 26.69% non-operated interest in the producing Golden Eagle area from Suncor Energy UK, for an initial consideration of $325.0 million. The transaction has added 18 MMboe to net 2P reserves.

Reserves and resources

Net 2P reserves at the end of 2020 were c.194 MMboe (2020: c.189 MMboe) and have been audited on a consistent basis with prior years. During the year, the Group produced 8.2% of its year-end 2020 2P reserves base but this was more than offset by the acquisition of Golden Eagle, which resulted in an addition of c.18 MMboe. Net 2C resources were c.402 MMboe (2020: c.164 MMboe), an increase of 145.1% compared to the end of 2020 primarily as a result of the acquisitions of equity interests in the Bressay field and Bentley discovery, which combined added 246 MMboe.

2022 performance and outlook

Group net production averaged 50,408 Boepd for the year to date February. For the full year, the Group’s net production is expected to be between 44,000 and 51,000 Boepd. The infill drilling and workover campaigns at Magnus, Golden Eagle and PM8/Seligi are expected largely to mitigate natural declines at these fields. At PM8/Seligi, the outlook is positive with the acceleration of securing a dive support vessel resulting in the riser being connected ahead of schedule and all the wells now onstream. Extensive maintenance shutdowns are also planned at both Magnus and Kraken. Kraken gross production is expected to be between 22,000 Boepd and 26,000 Boepd (15,500 Boepd to 18,500 Boepd net), reflecting the planned shutdown and natural decline.

At current foreign exchange rates and oil prices, operating costs are expected to be approximately $430 million. The increase versus 2021 includes a full year of Golden Eagle operating costs, planned well workover activities in Malaysia, an enhanced maintenance programme on Magnus and significantly increased emissions and diesel costs as a result of higher market prices.

Cash capital expenditure is expected to be around $165 million, primarily relating to drilling campaigns at Magnus (three wells), Golden Eagle (two wells) and in Malaysia (four wells), as well as preparatory activities ahead of future drilling at Kraken. Abandonment expense is expected to total approximately $75 million, primarily reflecting well P&A decommissioning programmes at the Heather/Broom and Thistle/Deveron fields.

EnQuest has hedged a total of 8.6 MMbbls for 2022 primarily using costless collars, with an average floor price of c.$63/bbl and an average ceiling price of c.$78/bbl. For 2023, the Group has hedged a total of 3.5 MMbbls with an average floor price of c.$57/bbl and an average ceiling of c.$77/bbl.

The Group continues to explore options to refinance its Retail and High Yield Bonds ahead of maturity in October 2023.

KeyFacts Energy: EnQuest UK country profile