EnQuest (LON:ENQ) has reported a loss after tax for the first half of the year, citing the impact of the UK’s windfall tax, the Energy Profits Levy (EPL).
Before tax, the company put profit at $112.9 million, down from the same period in 2022 when this reached $182.6mn. After tax, this figure fell to a loss of $21.2mn, down from a profit of $203.5mn in 2022.
“The UK’s oil and gas sector faces significant challenges and loss of competitiveness due to uncertainty following the adverse changes to the fiscal regime,” said EnQuest CEO Amjad Bseisu.
“While we appreciate the Government’s intentions to improve the attractiveness of the sector through the Energy Security Investment Mechanism, we believe timely legislative reform is required to restore confidence in the UK oil and gas sector to protect jobs and deliver both energy security and decarbonisation.”
OEUK fiscal and investor relations manager Francesca Bell said EnQuest’s results were “another worrying example of the negative impacts the [EPL] is having on UK energy production and with it, the jobs, economic growth, and the reliable supplies of energy it supports. We’re proud to pay our taxes and have always been clear that when the windfall conditions go, the windfall tax should go.”
While the company blamed the UK taxes, production was down as were prices. In the first half, the company produced 45,480 barrels of oil equivalent per day net, down from 49,726 boepd.
Oil prices fell to $75.8 per boe, from $89.9 per boe.
Revenue was down to $732.7mn, from $943.5mn, while adjusted EBITDA was $399.2mn, from $536.3mn.
Down debt
Bseisu noted a strong operational performance from the company, including the return to service of Kraken. This, he said, had driven free cash flow generation to $140mn in the first half.
As a result, the company paid down its net debt by $125mn from year end, reducing this to $591.2mn.
“Within the core business, we have a significant work programme in the second half of the year, including further drilling at Magnus and at Golden Eagle and a continuation of well plug and abandonment activities at Heather and Thistle, which we expect to deliver in line with 2023 guidance,” said the CEO.
EnQuest has won carbon capture and storage (CCS) licences, he continued, with the company committing to scope 1 and 2 net zero by 2040.
“As we navigate the challenges posed by the EPL, we remain focused on further strengthening our Balance sheet, to unlock organic and inorganic growth opportunities, as well as our differentiated tax advantage, to grow the business and deliver returns to shareholders.”
Making moves
The company also announced the appointment of a new non-executive director, Michael Borrell, as of September 5.
Borrell previously worked for TotalEnergies in Europe, Asia, North and South America.
In addition, the company has announced plans to cancel its Stockholm listing, citing the increased regulatory burden linked to the UK’s departure from the European Union.
OEUK’s Bell went on to say the introduction of the Energy Security Investment Mechanism “was a step in right direction, but many more will need to be taken to restore confidence to our sector. The Treasury’s fiscal review is a key opportunity for policymakers to listen to the sector and ensure it can continue to play a key role in the UK economy.
“Tomorrow, our Economic Report will set out why the UK must maintain a competitive fiscal environment if we are to be successful in the global race for homegrown energy investment.”
Updated at 10:53 am with OEUK comment.
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