Strong production performance, cost control and the supportive commodity price environment underpinned record free cash flow generation. This enabled the Group to refinance its debt facilities, rebalancing the capital structure between secured and unsecured debt and extending maturities until 2027, and reduce EnQuest net debt to $717.1 million. The EnQuest net debt to adjusted EBITDA ratio at the end of 2022 was 0.7x, down from 1.6x at the end of 2021, which shows excellent progress towards the target of 0.5x. The Group also advanced its new energy and decarbonisation ambitions at the Sullom Voe Terminal, identifying and maturing three discrete and scalable decarbonisation opportunities of carbon capture and storage (‘CCS’), electrification and green hydrogen and derivative production, while continuing to reduce total Group Scope 1 and 2 CO2 equivalent emissions. In Decommissioning, 24 wells at Heather and Thistle were decommissioned during the year, one of the most productive campaigns seen in the UK North Sea.

Production of 47,259 Boepd reflected a full year’s contribution from Golden Eagle and improved performances at Magnus and PM8/Seligi following successful well programmes and improved uptime at Magnus, while production at Kraken was at the top end of its guidance range. These improvements were partially offset by well integrity issues at Magnus, compressor downtime at PM8/Seligi and natural declines across the portfolio.

Adjusted EBITDA, cash generated by operations and free cash flow were $979.1 million, $1,026.1 million and $518.9 million, respectively, with the material increases from 2021 reflecting higher production and market prices. Capital expenditure of $115.8 million primarily reflected the well programmes at Magnus, PM8/Seligi and Golden Eagle, while cash decommissioning expenditure of $59.0 million was focused on well plug and abandonment (‘P&A’) activities at Heather and Thistle.

EnQuest Chief Executive, Amjad Bseisu, said:
“Throughout 2022, we continued to demonstrate progress against our strategic priorities of “deliver, de-lever and grow”. Production was at the mid-point of our guidance range, we generated significant free cash flow of $518.9 million and reduced our year end net debt to $717.1 million, its lowest level since 2014. We also refinanced our debt facilities, materially extending their maturities.

“We continue to progress our new energy and decarbonisation ambitions at the Sullom Voe Terminal and delivered a 24 well abandonment programme, the largest multi-asset well decommissioning campaign seen in the UK Northern North Sea, demonstrating strong capability as a transition company. Our integrated, capability-led business model and our advantaged tax position in the UK enhance our ability to pursue accretive M&A.

"We have continued to perform well against our full year targets. Production to the end of March has averaged around 47,800 Boepd and we have further reduced our net debt, which was down to $624.3 million at the end of February.

“Throughout 2023, we will remain focused on driving performance in our Upstream and Decommissioning businesses while pursuing our decarbonisation and new energy opportunities in a capital-light manner. We also intend to pursue balanced and disciplined capital allocation that will include shareholder returns in the near future.

“With our differentiated business model and the resilience, creativity and adaptability of our people, we are well positioned to deliver on our plans for the future.”

2022 performance

• Group net production averaged 47,259 Boepd (2021: 44,415 Boepd(1)), reflecting improved performances at Magnus and PM8/Seligi and the contribution from Golden Eagle
• Revenue and other operating income of $1,839.1 million (2021: $1,320.3 million) and adjusted EBITDA of $979.1 million (2021: $742.9 million) reflecting materially higher oil prices and higher production
• Cash generated from operations was $1,026.1 million (2021: $756.9 million)
• Cash capital expenditure of $115.8 million (2021: $51.8 million)
• Cash decommissioning expenditure of $59.0 million (2021: $65.8 million)
• Strong free cash flow generation(2) of $518.9 million (2021: $396.8 million)
• Cash and available facilities amounted to $348.9 million at 31 December 2022 (2021: $318.7 million), with EnQuest net debt reduced to $717.1 million (2021: $1,222.0 million)
• Statutory reported loss after tax was $41.2 million (2021: profit after tax of $377.0 million), primarily driven by the recognition of a non-cash deferred tax liability associated with the UK Energy Profits Levy

(1) 2021 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 acquisition costs and net repayments/proceeds from loans and borrowing and share issues

2023 performance and outlook

• Year to date March production averaged around 47,800 Boepd
• Net debt amounted to $624.3 million at 28 February 2023
• During the first quarter of 2023, the Group repaid $118.0 million of its reserves-based lending facility, with drawings reduced to $282.0 million
• Hedges in place for c.7.9 MMbbls of oil, predominantly through the combination of puts and costless collars. The average floor price is $58/bbl and the ceiling associated with the 3.3 MMbbls of costless collars is $75/bbl
• 2023 full year average net Group production expected to be between 42,000 and 46,000 Boepd
• Full year operating costs are expected to be c.$425.0 million
• Cash capital expenditure is expected to be c.$160.0 million
• Cash decommissioning expenditure is expected to be c.$60.0 million

Reserves and resources

Net 2P reserves at the end of 2022 were c.190 MMboe (2021: reported c.194 MMboe). During the year, the Group produced c.17 MMboe. This reduction was partially offset by transfers from 2C resources net of other technical revisions, combined with the Group changing its reporting of 2P reserves in Malaysia to an equity working interest basis (from an entitlement basis) to align with peers. This change in reporting added c.11 MMboe to the year-end 2022 balance (c.11 MMboe was also added to the previously reported 2021 figure to align comparatives). Net 2C resources were c.393 MMboe (2021: c.402 MMboe), with the decrease a result of progression to 2P reserves, as noted above.

2023 performance and outlook

Group net production averaged around 47,800 Boepd to the end of March. For the full year, the Group’s net production is expected to be between 42,000 and 46,000 Boepd, including the drilling campaigns at Magnus and Golden Eagle. Required maintenance activities are planned to be executed during two separate ten-day periods of single train operations at Kraken, with further extensive shutdowns at each of Magnus and GKA.

Operating expenditures are expected to be approximately $425.0 million, with the increase from 2022 largely due to inflationary pressures and phasing of activities.

Cash capital expenditure is expected to be around $160.0 million. The Group plans to execute a three-well drilling campaign at Magnus and complete the 2022 drilling campaign at Golden Eagle, where two further platform wells are expected to be drilled, commencing later in the year, subject to joint venture approval.

Decommissioning expenditure is expected to total approximately $60.0 million, primarily reflecting ongoing well P&A decommissioning programmes at the Heather/Broom and Thistle/Deveron fields.

For 2023, EnQuest has hedged c.7.9 MMbbls of oil, predominantly through the combination of puts and costless collars. The average floor price is $58/bbl and the ceiling associated with the 3.3 MMbbls of costless collars is $75/bbl. For 2024, EnQuest has hedged c.3.2 MMbbls of oil with an average floor price of c.$60/bbl in the form of puts, with the call element of the existing costless collars having been bought back during the first quarter of 2023.

KeyFacts Energy: EnQuest Malsysia country profile   l   KeyFacts Energy: EnQuest UK country profile