Neptune Energy today announced its financial results for the first half of 2020.

Good safety and operational performance despite challenges posed by COVID-19 pandemic

• Improved safety performance, with LTIF rate of 0.6, TRIR of 2.1 and PSER of 2.1, with no impact from COVID-19 on operations
• Q2 production of 149.6 kboepd, reflecting planned shutdowns and prioritisation of value over volume
• H1 production of 155.8 kboepd; full year production guidance unchanged at 145-160 kboepd
• Operational handover of Touat gas facility completed, with improved performance achieved since April

Robust financial performance, supported by hedging and lower operating costs

• EBITDAX of $537.6 million and cash flow of $417.3 million in H1 2020, reflecting weaker commodity prices, partially offset by hedging gains and cost reductions; tax refunds to increase cash flows in H2
• Lower operating costs of $8.5/boe in Q2, further reduced FY guidance to <$9.5/boe
• Better than expected net debt of $1.6 billion and leverage of 1.31x at 30 June 2020
• Non-cash pre-tax net impairments of $125 million and reorganisation costs of $34 million recognised in Q2

Resilience plan on track to achieve FY 2020 cost savings of $300-400 million

• Operating and G&A cost savings of $50 million achieved in H1. On track for FY savings of $85 million in 2020
• Revised capex guidance for 2020 of $700-800 million on track
• Expected exploration spend increased marginally to $135 million, reflecting positive drilling results and a further appraisal study at Isabella
• Reduced exploration and development drilling activity in H2

Decisive action taken to reflect more focused activity set, while preserving long-term value

• Reduced costs – announced proposals in June to reduce the organisation by 400 roles in 2020/21
• Sharpened strategic focus – tighter capital plan focused on low-cost near-term projects
• High-graded exploration – Dugong discovery in Norway a potential material new operated growth project
• New Energy – formation of New Energy team to scale partnerships and investment in low carbon technologies; increased focus on ESG

Neptune’s Executive Chairman, Sam Laidlaw, said: 
"As the world contends with the COVID-19 pandemic, global economic recovery is unlikely to be smooth or predictable. Concerns about a second wave of the pandemic will restrict the return to normal life and may therefore impact oil demand and price recovery.

"While we adapt to greater uncertainty and a more volatile price environment, society is looking to the energy sector to step up its efforts to provide lower carbon, more secure and affordable energy in a socially-conscious way.

"Neptune is well-positioned to be part of the solution. Our differentiated, long-life, low cost and lower carbon intensity portfolio enables us to generate value, even in a lower price environment, while we retain material opportunities for longer-term growth. Our creation of a New Energy team and increased focus on ESG will enable us to increase the role we play in the energy transition, by scaling partnerships and investment in hydrogen, CCS and offshore electrification to further reduce carbon emissions.”

Neptune’s Chief Executive Officer, Jim House, said: 
"Neptune delivered a solid safety, operational and financial performance in the second quarter. In response to the continued challenges of COVID-19 and weaker commodity prices, we have taken prudent measures to protect our people, maintain our operations and strengthen our balance sheet. We achieved robust operating profit and cash flow, with lower price realisations offset by our hedging programme and cost reductions.

"The changes to the business we announced in the first half of the year will enhance our financial resilience, efficiency, effectiveness and adaptability, while retaining core capabilities and optionality for growth. This will result in a more focused activity set in the short term, but positions us better to still generate value, even in a lower commodity price environment.

"Our strategy is to prioritise value over volume – and we continue to be disciplined about capital allocation. Longer-term, recent discoveries in Norway and in the UK provide us with material, value-creating growth opportunities that will strengthen our portfolio going forward.”

KeyFacts Energy: Neptune Energy UK country profile