EnQuest Chief Executive, Amjad Bseisu, said:

“EnQuest achieved its 2023 targets, delivering strong operational performance across the operated portfolio and continuing to de-lever its balance sheet, with year-end EnQuest net debt reduced to $481 million. Against the backdrop of a challenging UK fiscal environment, EnQuest has reduced net debt by c.$1.5 billion since its peak and with significant tax assets remaining, the business has a strong base, and successful track record of executing quick payback, life-extending acquisitions, from which to pursue value-accretion and production growth through M&A.

“Our top quartile operating capability, demonstrated through high production uptimes across our operated asset portfolio, underpinned 2023 production of 43.8 Kboed, which was in line with the mid-point of guidance. This operational excellence extends to our decommissioning activities, with 2023 seeing the Group complete the plug and abandonment (‘P&A’) of 25 wells, delivering top quartile well P&A performance across its Heather and Thistle projects and executing another record-breaking year of northern North Sea multi-asset well abandonments at sector-leading cost.

“We also realised value within the existing portfolio by selling a 15.0% share of both the Bressay licence and the EnQuest Producer FPSO to RockRose Energy; a transaction which represents an important step in moving the Bressay project forward.

“As we further enhance our position as a key player in the energy transition, we continue to progress our new energy and decarbonisation ambitions at the Sullom Voe Terminal under the management of our newly established subsidiary, Veri Energy. The award of four carbon storage licences during 2023 represented a key milestone for our future ambitions. Work is underway to right-size the terminal site and transform its carbon footprint, with delivery of the new stabilisation facility and power generation projects expected to reduce future CO2 emissions at SVT by c.90%. We have already reduced our total UK emissions by more than 40% from the 2018 benchmark, significantly ahead of the UK's North Sea Transition Deal targets, while our credible net zero transition plan was a key factor in EnQuest securing a B rating in the 2023 CDP Climate Change Survey.

“We have set the foundations for a pivot to growth during 2024 and continue to perform well against our full year targets, with production to 29 February 2024 averaging around 44,500 Boepd. The Group also fully paid down its RBL facility post year-end and has further reduced net debt to $409.6 million at the end of February 2024.

“Reflecting the strength of our core business, confidence in the opportunities ahead and the Group’s commitment to delivering shareholder returns during 2024, we have committed to deploy $15.0 million of capital in a share buyback programme during 2024.”

2023 performance

• Statutory revenue and other income totalled $1,487.4 million (2022: $1,853.6 million) and adjusted EBITDA totalled $824.7 million (2022: $979.1 million).
  • Against a backdrop of continued geopolitical tension, inflation and Sterling volatility, Brent prices averaged $82.5/bbl (18.2% below 2022: $100.8/bbl) and day ahead gas prices decreased to 98.9p/Therm (51.4% below 2022: 203.5p/Therm).
  • Group production (delivered at the mid-point of guidance) averaged 43,812 Boepd (2022: 47,259 Boepd), with high levels of asset uptime across the portfolio and efficient execution of maintenance activities partially offsetting natural field declines.
• Reflecting the above drivers and cash tax timing, net operating cash flow totalled $754.2 million, 19.0% below 2022 ($931.6 million).
  • Operating expenditure of $347.2 million was 12.4% below 2022 ($396.5 million). Unit opex declined to $21.9/boe (2022: $22.7/boe).
  • Capital investment of $152.2 million (2022: $115.8 million) was focused on low cost, quick payback projects that enhanced production and lowered emissions. Decommissioning expenditure totalled $58.9 million (2022: $59.0 million) and focused on well P&A.
• Free cash flow generation1 remained strong, totalling $300.0 million (2022: $518.9 million).
  • Statutory reported loss after tax $30.8 million (2022: $41.2 million loss), reflecting the impact of the UK Energy Profits Levy.
• Group liquidity (cash and available facilities) rose to $498.8 million (31 December 2022: $348.9 million). EnQuest net debt totalled $480.9 million at 31 December 2023, a 32.9% reduction versus 2022 ($717.1 million).
• Having delivered on the Group’s strategic aims to deliver and de-lever, EnQuest is pleased to announce its first shareholder distribution, a $15.0 million buyback that will be completed in 2024.

1 Net change in cash and cash equivalents less acquisition costs and net repayments/proceeds from loans and borrowing and share issues

2024 performance and guidance

• Net Group production expected to average between 41,000 and 45,000 Boepd (c.44,500 Boepd YTD to end-February).
• Capital investment expected to total c.$200 million; Operating expenditure expected to total c.$415 million; and Decommissioning expenditure expected to total c.$70 million.
  • Investment is scaled to maintain production, maximise cash flow, drive capital efficiency and reduce future emissions and costs.
• At 29 February 2024, EnQuest net debt totalled $409.6 million and the Group fully repaid the outstanding $140.0 million of its drawn reserve based lending facility (‘RBL’).

Outlook – 2025 and beyond

• Capital-efficient investment programme; targeting organic production growth in 2025.
• Kraken FPSO lease rate reduces by c.70% from 1 April 2025 and major projects at SVT are expected to crystallise significant emissions and operating cost reductions in 2026 and beyond.

2023 performance summary

Strong production performance, a lower but relatively stable commodity price environment and the Group’s commitment to disciplined, low cost, quick payback investment underpinned $300.0 million of free cash flow generation during 2023 (2022: $518.9 million). This enabled the Group to end the year with liquidity of c.$0.5 billion and reduce EnQuest net debt to $480.9 million (2022: $717.1 million). At 31 December 2023, the EnQuest net debt to adjusted EBITDA ratio was down to 0.6x, (31 December 2022: 0.7x), which shows continued progress towards the target of 0.5x.

Production of 43,812 Boepd (2022: 47,259 Boepd) reflected improved performance at Magnus and close to 100% production efficiency at Kraken following transformer upgrades, with top quartile production uptime across the operated portfolio helping to partially offset natural field declines. The Group demonstrated its differentiated operating capability by minimising the impact of the anomalous failure of the HSP transformers by reinstating Kraken production efficiently and in a short-time frame.  

Adjusted EBITDA, net cash flow from operating activities and free cash flow were $824.7 million (2022: $979.1 million), $754.2 million (2022: $931.6 million) and $300.0 million (2022: $518.9 million), respectively, with the decreases from 2022 reflecting lower production and market prices. Capital expenditure of $152.2 million (2022: $115.8 million) primarily reflected the Magnus, Golden Eagle and Malaysia well campaigns and Sullom Voe Terminal projects, while cash decommissioning expenditure of $58.9 million (2022: $59.0 million) was focused on well plug and abandonment (‘P&A’) activities at Heather and Thistle, with a record 25 wells being decommissioned during the year.

Following the establishment of the New Energy business in 2021 and having progressed three significant new energy and decarbonisation opportunities at Sullom Voe Terminal, the Group launched Veri Energy (‘Veri’), a wholly owned subsidiary of EnQuest. Veri represents the logical next step in the strategic evolution of EnQuest's new energy and decarbonisation ambitions, enabling the project team to move forward with a focused management structure and the potential to leverage financial and strategic partnerships.

In December, EnQuest announced the sale of a 15.0% equity share in the Bressay licence and the EnQuest Producer FPSO for a total consideration of £46.0 million (c. $57.0 million). Subsequently the Group received $85.6 million for a 15.0% farm-down of capital items identified for potential use on the Bressay development. Through these transactions the Group has realised near-term value, expecting to yield c.$58.0 million post-tax cash flow in 2024, and delivered an important step in moving the Bressay project forward.

Liquidity and net debt

At 31 December 2023, EnQuest net debt was $480.9 million, down $236.2 million from $717.1 million at 31 December 2022. During the year, EnQuest repaid the Group’s £111.3 million Sterling retail bond at maturity and put in place a term loan facility of up to $150.0 million. Following these steps, all the Group’s debt maturities are now aligned in 2027.

At 31 December 2023, cash drawings under the reserve based lending (‘RBL’) facility were $140.0 million against an original commitment of $500.0 million, while total cash and available facilities were $498.8 million (2022: $348.9 million) (including restricted funds and ring-fenced funds held in joint venture operational accounts totalling $172.7 million (2022: $174.3 million)).

EnQuest net debt as at 29 February 2024 was further reduced to $409.6 million, with cash and available facilities of $479.7 million. The Group also fully repaid the $140.0 million outstanding balance on the RBL facility during February 2024, reducing cash drawn to zero.

EnQuest remains focused on its strong balance sheet and its ongoing deleveraging strategy. From a position of balance sheet strength, EnQuest is pleased to announce the first shareholder distribution since its inception, a $15.0 million buyback that will be completed in 2024.

Reserves and resources

Net 2P reserves at the end of 2024 were c.175 MMboe (2022: c.190 MMboe). During the year, the Group produced c.16 MMboe (2022: c.17 MMboe). This reduction was partially offset by transfers from 2C resources at Magnus, net of other technical revisions. Net 2C resources were c.389 MMboe (2022: c.393 MMboe), with the decrease a result of progression to 2P reserves at Magnus, as noted above.

2024 performance and guidance

Group net production averaged around 44,500 Boepd to the end of February. For the full year, the Group’s net production is expected to be between 41,000 and 45,000 Boepd, reflecting the drilling campaigns at Magnus, PM8/Seligi and Golden Eagle. Planned maintenance activities include two ten-day periods of single train operations at Kraken, with 21-day and ten-day shutdowns at each of Magnus and GKA, respectively.

Operating expenditures are expected to be approximately $415.0 million, with the increase from 2023 largely due to phasing of activities at Magnus and SVT and inflationary pressures.

Cash capital expenditure is expected to be around $200.0 million. The Group plans to execute a two-well drilling campaign at Magnus in the second half of the year, following the five-yearly rig recertification, and expects to complete the ongoing drilling campaign at Golden Eagle, where two further HDJU wells are planned. EnQuest’s Midstream team is progressing two major right-sizing projects at SVT, which together are expected to reduce terminal emissions by c.90%.

Decommissioning expenditure is expected to total approximately $70.0 million, primarily reflecting the final full year of well P&A decommissioning programmes at the Heather/Broom and Thistle/Deveron fields and preparations for removal of the topsides production facilities. This work will be completed by EnQuest’s dedicated in-house team which, per North Sea Transition Authority review data, has delivered a probabilistic average cost per well for P&A of c.£2.5 million, versus an industry benchmark of c.£4.3 million.

From 1 April 2024, EnQuest has hedged c.5.0 MMbbls of oil, with 4.1 MMbbls hedged through the use of put options with an average floor price of c.$60/bbl and 0.9 MMbbls through swaps at an average price of c.$86/bbl. The Group has hedged a total of c.1.6 MMbbls for 2025 using put options at an average floor price of c. $60/bbl.

Outlook – 2025 and beyond

The Group’s 2024 capital-efficient investment programme targets organic production growth in 2025. From 1 April 2025, the Kraken FPSO lease rate reduces by c. 70% and major projects at SVT are expected to crystallise significant operating cost and emission reductions in 2026 and beyond.

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