First full year of windfall tax drives EnQuest to loss

North Sea operator EnQuest (LON:ENQ) posted a loss in its 2023 full year financial results, reflecting the impact of the UK government’s windfall tax on oil and gas firms.

EnQuest posted a loss after tax of $30.8 million, a slight improvement on the $41.2 million loss it posted in 2022.

EnQuest recorded total revenues of just under $1.5bn, with adjusted earnings before interest, taxes, depreciation and amortisation reaching $825m, below the levels seen last year.

Total production also fell, reaching approximately 43,800 barrels of oil equivalent per day (boepd), compared to around 47,300 boepd last year.

EnQuest said it paid a total of $262.6m in tax, including $77.2m relating to the Energy Profits Levy (EPL) windfall tax, which the company said amounted to an effective tax rate of 113.3%.

In total, EnQuest said the company recorded UK North Sea corporate tax losses of just over $2bn at the end of 2023, “the reduction in the period reflecting utilisation of ring-fence corporation tax losses” against the company’s profits before tax.

As a result, EnQuest said it expects to pay no corporation tax or supplementary charge on UK operational activities “for the foreseeable future”.

EnQuest ‘achieved its targets’

EnQuest chief executive Amjad Bseisu said the company achieved its 2023 targets, delivering “strong operational performance” and reducing net debt “against the backdrop of a challenging UK fiscal environment”.

“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,” Mr Bseisu said.

© EnQuest

Operationally, Mr Bseisu said EnQuest decommissioning activities saw the company complete 25 plug and abandonment (P&A) wells.

At Bressay, EnQuest said it continues to actively explore further farm-down opportunities and development planning of the asset after a recent farm-out of 15% of the licence to Viaro Energy.

In 2024, EnQuest said it also aims to progress the tie-back of the Bressay field’s gas cap to Kraken, displacing diesel that currently powers Kraken operations.

Elsewhere, EnQuest subsidiary Veri Energy is progressing a carbon capture and storage (CCS) shipping solution for isolated emitters in the UK and Europe centred on the group’s Sullom Voe Terminal (SVT) on Shetland.

Mr Beisu said the award of four carbon storage licences during 2023 represented a key milestone for the company’s 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%,” he said.

Veri is also progressing evaluation of a 50 megawatt green hydrogen project at SVT, with the company receiving £1.74 million in grant funding from the UK government’s Net Zero Hydrogen Fund to support a front-end engineering and design study for the project.

Veri Energy is also exploring the potential to develop renewable power to provide electrification for existing and prospective oil and gas facilities.