EnQuest saw its shares rise almost 25% yesterday after it confirmed it had sufficient funding to complete its major North Sea Kraken development and it has successfully shaved costs from operations.
Directors of the firm also set out how the firm will benefit from the chancellor’s assurances on decommissioning made in this week’s Budget.
The company revealed how pre-tax losses have mounted as it is affected by the collapse in out prices.
The listed firm’s pre-tax losses widened to loss amounted to £925million in 2015, more than doubleing the £400million loss in 2014.
The losses included a non-cash impairment of £918million on its assets which was “in line with the whole industry, particularly in the North Sea”,” the firm said, adding: “It is purely a result of the decrease in the oil price.”
Neil McCulloch, President, North Sea said of the £1billion in tax breaks delivered to North Sea firms added up to a “pretty positive budget”.
“They are sticking to the plan, which is good,” he said.
“We see that they have clearly identified that infrastructure is important. there are some things in there which will really help infrastructure at least survive and potentially thrive,” he added.
As part of the support package announced for oil and gas firms this week, the budget documents outlined how firms will be able to access tax relief on their costs when they retain decommissioning liabilities for an asset after a sale. This was aimed at encouraging “new entrants for late-life assets”.
Mr McCulloch said the support would clear the way for EnQuest to make further acquisitions of aging assets: “It is important to say that is going to help assets transfer from people who can’t make the necessary investment today because they have other priorities and helping those assets get to the right hands.
“We will always be very selective about acquisitions. But if something comes along, like Kittiwake as we did in the past, this should make this that more straightforward.
“There’s always a deal to be done. It makes the process of looking at transfer from typically larger companies to typically smaller more agile companies more straight forward.
“Where there has been a value gap in the past driven by the decommissioning tax treatment that will reduce that value gap. We see that as a facilitator of that and an important one.”
Last month EnQuest upped its stake in Kraken after its partner, First Oil was put into administration.
Amjad Bseisu, the company’s chief executive, said the firm was still looking for other investors in the field.
He said: “We are never happy when somebody fails,” he said of First Oil.
“They were colleagues and we worked very closely with them. We were sad to see them go as a company. They have a good business model. The price hit them. I don’t think they did anything wrong
“We were trying to reduce the interest in Kraken to diversify our portfolio. We are still trying to reduce our interest if we get the right offer.”
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