EnQuest posts another loss after the blow from the windfall tax on oil and gas

EnQuest has once again suffered a significant annual loss thanks to the British government’s windfall tax on North Sea operators.

The London-based petroleum group reported a loss of $30.8 million in 2023, down from last year’s loss of $41.2 million, as it paid a $77.2 million charge from the Energy Profits Levy.

Before taxes, the company posted a profit of $231.8 million last year, up $28.6 million from 2022, even as revenues fell by about a fifth to $1.49 billion due to lower oil and gas prices .

Like other UK oil and gas companies, EnQuest’s results and investment plans have been heavily affected by the EPL, a 35 percent tax on North Sea profits paid on top of the nominal 40 percent rate.

Then-Chancellor Rishi Sunak introduced the EPL in May 2022 after oil and gas prices soared following the easing of Covid-related restrictions and Russia’s large-scale invasion of Ukraine.

Although the levy has raised significant sums, the UK offshore energy sector blames it for discouraging investment in the North Sea.

Oil and gas production in the North Sea totaled about 1.26 million barrels of oil equivalent (boepd) in 2023, the lowest level since the mid-1970s, according to the North Sea Transition Authority (NSTA).

Average energy prices have also fallen significantly over the past year due to a subdued economic outlook, mild winter conditions and increasing production in the United States.

EnQuest has responded in part to the windfall tax by accelerating the repayment of its debt, fully paying off the outstanding $140 million on a reserve-based credit facility in February.

As a result, total net debt fell by about $1.5 billion from its peak of $409.6 million last month.

“We have made significant progress since we established our strategic priorities to deliver, deploy and grow at the end of 2018,” said CEO Amjad Bseisu.

He added that EnQuest “consistently pursued its production, operations and cost targets, which in turn has enabled us to generate material free cash flows even during periods of lower commodity prices.”

Following the strong performance, the company is planning its first-ever capital return to investors in the form of a $15 million share repurchase program.

For the coming year, the group predicts production will average between 41,000 and 45,000 boepd and operating costs will be around $415 million.

EnQuest shares were up 5 percent late Thursday morning at 2:7 p.m., though they are still down more than half since May 2022.