TIDMENQ
RNS Number : 9514X
EnQuest PLC
30 November 2017
ENQUEST PLC, 30 November 2017.
OPERATIONAL UPDATE.
KRAKEN PRODUCTON RATE ON PLAN
Highlights
-- Kraken production rate on plan
o Kraken is achieving month on month increases in production and
by early November average production rates were around 23,000 Bopd
gross. The second production processing train was brought onstream
later in November, with rates of over 40,000 Bopd gross being
achieved.
o The second and third cargo offloads were completed in October
and November respectively. The quality of the crude has been well
received by buyers; the latest sale of a cargo was contracted at a
discount to Brent of less than $5 per barrel, this level of pricing
has been achieved earlier than targeted.
o The final DC2 production well has been brought online.
Excellent drilling performance has continued with the drilling of
the DC3 wells nearing completion and ahead of time. The process of
bringing the DC3 wells onstream has commenced early and plans to
drill DC4 in 2018 are being developed.
o On the basis of this strong performance and subject to
continued progress on plant uptime, EnQuest continues to expect
production at Kraken to reach 50,000 Bopd gross during H1 2018.
-- Group production averaged 35,410 Boepd in the ten months to
end October 2017, reflecting Q3 scheduled maintenance shutdowns of
around two to four weeks at most of the existing producing assets
and one additional unscheduled two week shutdown at Thistle. The
fields also experienced natural declines where there has been no
recent drilling. EnQuest confirms 2017 full year average production
guidance range remains unchanged.
-- EnQuest has continued its close dialogue with its lending
banks and as part of EnQuest's ongoing liquidity management
strategy, it has proactively sought and has agreed relaxation of
covenants and the amortisation schedule of its Term Loan and
Revolving Credit Facility.
-- Available bank facilities and cash amounted to $179 million
as at 31 October 2017, compared to $213 million as at the end of
June 2017. Net debt at 31 October 2017, was $1,991 million compared
to $1,922 million as at the end of June 2017. This is prior to
receipt of the additional liquidity of over $100m announced on 26
October 2017.
-- Hedging of c.4 million barrels in place for H1 2018, at an average of c.$59/bbl.
-- The Magnus/Sullom Voe Terminal acquisition remains on course
for completion before the end of 2017.
EnQuest CEO Amjad Bseisu said:
"We are making good progress in delivering the ramp up of
Kraken, with average Kraken production increasing each month. We
have now achieved production rates of over 40,000 bopd gross with
DC3 wells online earlier than planned. We are on track to deliver a
Kraken production rate of 50,000 Bopd gross during H1 2018.
We had a significant planned maintenance programme in Q3 2017,
which reduced production in the ten months to the end of October by
c.1,800 Bopd. Overall, our non-Kraken assets are now delivering as
per our plan post this programme.
We have hedged c.4 mm bbls at c.$59bbl for H1 2018 and with our
large capital programmes behind us, are on plan to reduce our debt
in 2018."
Production statistics
Production on a Net daily Net daily
working interest average average
basis 01.01.17 01.01.16
to to
31.10.17 31.10.16
(Boepd) (Boepd)
-------------------- ----------- ----------
Northern North
Sea 15,251 20,629
Central North Sea 8,725 11,171
Kraken 2,709(1,2)
Total UKCS 26,685 31,800
-------------------- ----------- ----------
Total Malaysia 8,725 9,057
------------------------- ----------- ----------
Total EnQuest 35,410 40,857
------------------------- ----------- ----------
(1) Net production since first oil on 23 June, averaged over the
ten months to end October 2017.
(2) Rates of over 40,000 Bopd gross have been achieved in
November.
Scheduled production shutdowns: Most of EnQuest's existing
production hubs completed scheduled shutdowns during Q3 (lasting
around two to four weeks each) for planned maintenance work
programmes. Planned shutdowns in Q3 therefore reduced EnQuest's net
production in the ten months to end of October 2017 by
approximately 1,800 Bopd.
UK North Sea
Northern North Sea production (Thistle/Deveron, Heather/Broom,
Dons/Ythan)
Whilst water injection performance has improved at
Thistle/Deveron, issues with the produced water system led to an
outage of approximately two weeks. Well performance was above
expectations at Don Southwest, with high levels of production
efficiency across all the Don fields. Production improving chemical
treatments have been completed at West Don and Don Southwest.
Lower water injection at Heather/Broom has impacted production
year on year, partially offset by high levels of production
efficiency.
Central North Sea Production (Alma/Galia, Greater Kittiwake
Area, Scolty/Crathes, Alba)
The work programme in the Greater Kittiwake Area ('GKA') and
Scolty/Crathes for 2017 continues to be focused on optimising
production across the assets. Good production has been delivered
from the GKA fields, with high levels of plant uptime and
production efficiency. The Mallard/Gadwall water injection flowline
replacement is complete and in service.
Wax issues remain at Scolty/Crathes, however the reservoir is
outperforming expectations and production uptime has been very
high. Treatments to keep the flowline in service continue
successfully whilst work is finalised on longer term solutions,
such as flowline replacement.
At Alma/Galia, finalisation of the optimisation projects for
power, produced water and sea water injection, have led to very
high uptimes in Q3 on the EnQuest Producer. As expected at the time
of EnQuest's full year 2016 results announcement in March, 2017
production from Alma/Galia has been lower than in 2016, reflecting
wells having been shut in, production outages in Q1 due to storm
damage and natural declines. A workover programme to replace
certain ESPs is expected to be undertaken in 2018.
The Kraken development
First oil from Kraken was delivered on 23 June 2017. The four
wells from drill centre 1 ('DC1') and the three wells from drill
centre two ('DC2'), have produced at initial gross rates above
expectations and with stabilised flow rates which confirm the Field
Development Plan. The sum of DC1 maximum individually tested well
rates have been approximately 24,000 Bopd, with stabilised combined
well rates at approximately 15,000 Bopd. One DC2 well has been
tested at a rate well above 10,000 Bopd, demonstrating excellent
reservoir properties and completion efficiency. Water injection
wells have performed in line with expectations.
DC3 wells are nearing completion, substantially ahead of
schedule. The process of bringing the DC3 wells onstream has
commenced early and plans to drill DC4 in 2018 are being developed.
The second production processing train was brought online during
November. This second train and DC3 are both further facilitating
reaching the expected 50,000 Bopd during H1 2018.
Full cycle gross Kraken project capex is estimated to be c.$2.4
billion, 25% down on the original sanctioned cost of $3.2 billion.
The previously announced latest c.$100m of capex savings on the
project resulted from the excellent delivery of the DC3 drilling
programme and also the lower market rates for the remaining subsea
campaign.
Malaysia
The scheduled August shut down at PM8/Seligi was completed early
and production has been in line with expectations. Key work scopes
such as separator clean outs have been completed. In addition, a
compression reliability improvement plan has been executed in 2017
and underpins volume delivery from PM8/Seligi.
Longer term, EnQuest will extend field life through further
investment in idle well restoration, facility improvements and
upgrades, well workovers, new drilling and secondary recovery
projects to increase ultimate recovery.
At Tanjong Baram, the focus remains on steady, safe and low cost
operations. Operational uptime continues to be very good.
Financing
Term Loan and Revolving Credit Facility Amendments
EnQuest has continued its close dialogue with its lending banks
and has proactively sought and agreed additional amendments to its
Term Loan and Revolving Credit Facility. These changes include:
-- Deferral of the scheduled $140 million reduction in the Term
Loan facility from 1 April 2018 to 1 October 2018
-- An increase in the level of the Leverage Ratio* to March
2019, with the remaining life of the facility set at 1.5 times
compared to 1.0 times
-- Reductions in the level of the Finance Charges Ratio* covenant in 2017 and 2018
These changes provide additional flexibility while Kraken
continues its positive production ramp-up trajectory.
*Note
Leverage Ratio: The ratio of consolidated net financial
indebtedness to EBITDA (Earnings before interest, tax, depreciation
and amortisation). Consolidated net financial indebtedness relates
only to amounts drawn on the Term Loan and Revolving Credit
Facility net of cash and cash equivalents.
Finance Charges Ratio: The ratio of EBITDA to forecast finance
charges.
Liquidity enhanced by over $100 million
As announced on 26 October 2017, EnQuest has agreed the
execution of an $80 million crude oil prepayment transaction and a
$37.25 million refinancing for its Tanjong Baram project in
Malaysia. These transactions directly provide EnQuest with over
$100 million of additional financial resources.
2017 guidance
2017 full year opex and capex guidance also remain
unchanged:
-- Full year 2017 unit opex is expected to be around c.$27/bbl; and
-- Full year 2017 cash capex is expected to be in the $375 million to $400 million range.
Ends
For further information please contact:
EnQuest PLC Tel: +44 (0)20 7925 4900
Amjad Bseisu (Chief Executive)
Jonathan Swinney (Chief Financial Officer)
Communications & Investor Relations:
Michael Waring
Ian Wood
Tulchan Communications Tel: +44 (0)20 7353 4200
Martin Robinson
Martin Pengelley
Notes to editors
ENQUEST
EnQuest is one of the largest UK independent producers in the UK
North Sea. EnQuest PLC trades on both the London Stock Exchange and
the NASDAQ OMX Stockholm. Its operated assets include
Thistle/Deveron, Heather/ Broom, the Dons area, the Greater
Kittiwake Area, Scolty/Crathes Alma/Galia and Kraken; EnQuest also
has an interest in the non-operated Alba producing oil field. At
the end of June 2017, EnQuest had interests in 24 UK production
licences and was the operator of 22 of these licences.
EnQuest believes that the UKCS represents a significant
hydrocarbon basin, which continues to benefit from an extensive
installed infrastructure base and skilled labour. EnQuest believes
that its assets offer material organic growth opportunities, driven
by exploitation of current infrastructure on the UKCS and the
development of low risk near field opportunities.
EnQuest is replicating its model in the UKCS by targeting
previously underdeveloped assets in a small number of other
maturing regions; complementing its operations and utilising its
deep skills in the UK North Sea. In which context, EnQuest has
interests in Malaysia where its operated assets include the
PM8/Seligi Production Sharing Contract and the Tanjong Baram Risk
Services Contract.
Forward looking statements: This announcement may contain
certain forward looking statements with respect to EnQuest's
expectation and plans, strategy, management's objectives, future
performance, production, reserves, costs, revenues and other trend
information. These statements and forecasts involve risk and
uncertainty because they relate to events and depend upon
circumstances that may occur in the future. There are a number of
factors which could cause actual results or developments to differ
materially from those expressed or implied by these forward looking
statements and forecasts. The statements have been made with
reference to forecast price changes, economic conditions and the
current regulatory environment. Nothing in this presentation should
be construed as a profit forecast. Past share performance cannot be
relied on as a guide to future performance.
Glossary
DC Drill centre
ESP Electrical submersible pump
FPSO Floating production, storage and offloading vessel
GKA Greater Kittiwake Area
SVT Sullom Voe Terminal
UKCS United Kingdom Continental Shelf
This information is provided by RNS
The company news service from the London Stock Exchange
END
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