North Sea focused EnQuest reports higher production from core assets

London — North Sea specialist EnQuest announced Sept. 3 higher first-half production from its two main assets, the Kraken heavy oil field and the formerly BP-operated Magnus field, as it sheds several late-life assets.

In a first-half results statement, EnQuest said it had reduced its operating costs to $14.40/barrel of oil equivalent produced in the first half of the year, from $20.10/boe a year earlier.

Its overall oil and gas production fell by nearly 4% to 66,000 boe/d, of which nearly 90% was in the North Sea, with a small portion in Malaysia, and the company said it expected its full-year output to be at the upper end of a previous guidance range of 57,000-63,000 boe/d, down from 69,000 boe/d last year.

EnQuest's production has been dented by the cessation of production at a number of small fields for economic and technical reasons, including a fire at the Heather field last year in which two people were injured.

However, it reported a 6% increase in production from Magnus, which it took over from BP in 2017-18, thanks to efficiency improvements, particularly with water injection, with two new wells that came on stream in March offsetting a gas compressor performance issue in the first quarter. Magnus feeds into the Brent crude blend loaded at Sullom Voe and produced 18,800 boe/d in the first half. At the end of 2018 Magnus had still to produce around half its original 2 billion boe of "in place" resources, according to EnQuest.

Likewise, EnQuest boosted production from its Kraken ultra-heavy oil field, which came on stream in 2017, by 19% in the first half to 39,000 boe/d on a gross basis, with a new pair of producer and injection wells coming on stream at the end of the first half. The company said pricing for the crude remained "robust" as it had become a "key component" in low-sulfur fuel oil used by the shipping industry to comply with International Maritime Organization fuel regulations.

The company forecast full-year Kraken oil output to be at the upper end of a 30,000-35,000 b/d range, and noted it had recently bought an operating interest in the undeveloped Bressay heavy oil field from Norway's state-controlled Equinor, with a view to a potential new development project.

"With our ongoing focus on operational excellence, we have continued to exceed our operational targets. Our difficult and early decisions to shut down our higher cost assets have resulted in a substantial cost reduction program, which is on track," CEO Amjad Bseisu said.

The company booked a $252 million impairment due to lower oil price assumptions, while also reporting a further reduction in its net debt to $1.35 billion.

It said its operations had been "materially unaffected" by COVID-19, and the shutdown of late-life fields was resulting in a 40% workforce reduction, comprising both employees and contract workers.

The company generated cash from operations of $283 million in the first half, down from $426 million a year earlier, and free cash flow of $88 million.