NORTH Sea-focused EnQuest expects to ramp up cash generation in coming month with the giant Kraken heavy oilfield due to come onstream off Shetland but wants to make further cost cuts across its supply chain.
EnQuest, one of the biggest players in the North Sea, said the Kraken project remains below budget and on track to deliver first oil in the second quarter of this year.
Chief executive Amjad Bseisu noted the start of production from Kraken should mark a turning point for Enquest. The money made on the output from the field should allow the firm to start cutting the debts it has accumulated by investing in UK assets.
“Following delivery of Kraken, EnQuest will begin moving from a period of heavy capital investment into one focused on cash generation and deleveraging the balance sheet,” said Mr Bseisu.
The start of production from Kraken should provide a boost for the North Sea industry, which is still grappling with the fall out from the crude price plunge that started in 2014.
EnQuest’s experience will increase confidence that firms can make good money in the North Sea even if oil prices remain low.
EnQuest reckons its production cost will fall to as low as $21 (£16.80) per barrel this year, from $24.60/bbl in 2016 helped by the use of modern facilities on Kraken. Brent crude sold for around $51.20/bbl yesterday.
But the company said: “In the current oil price environment and with investment in the North Sea, EnQuest does not expect a material cash outflow for UK corporation tax on operational activities.”
EnQuest said it continues to seek further cost reductions across the supply chain.
It generated $408m cash from operations in 2016, compared with $222m in 2015.
In January Enquest agreed to buy a basket of North Sea assets, including a stake in the Sullom Voe oil terminal on Shetland, from BP for $85 million.
It said yesterday the acquisition is expected to take up to 12 months to complete with no cash outlay up front.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here