North Sea oil company EnQuest criticizes ‘windfall tax without windfall conditions’

EnQuest has finally returned to profitability after two consecutive years of losses, largely due to the UK’s Energy Profits Levy (EPL).

The North Sea exploration and production company posted an after-tax profit of $30.3m (£23m) for the six months to June 30, after losses of $30.8m and $41.2m in 2023 and 2022 respectively.

London-listed EnQuest owed HM Treasury $34.1 million in connection with the EPL, down sharply from $73.8 million in the same period last year.

Enquest was helped by higher oil prices in the first half, but prices remain well below 2022 peaks

The government plans to extend the EPL for “exceptional” income from November, raising the tax rate from 35 to 38 percent and increasing the nominal tax rate for upstream oil and gas activities to 78 percent.

Amjad Bseisu, CEO of EnQuest, said: “We are disappointed with the continued application of the Energy Profits Levy despite operating in a windfall-free environment.”

EnQuest, which produced 6 percent fewer barrels of oil in the first half of the year than a year earlier, benefited from higher prices during that period.

The group reported that realised oil prices for the first half of the year stood at $83.40 a barrel, up 10 percent from $75.80 a year ago.

Brent crude oil prices rose about 11 percent in the first six months of the year to $84.30 a barrel, but have fallen more than 30 percent from a peak of $112.24 in June 2022 since Russia’s invasion of Ukraine.

It is currently trading at $72.73/bl.

The EPL was introduced after Covid measures were relaxed and Russia’s invasion of Ukraine led to rising energy prices and huge profits for oil and gas companies.

Plans to extend the EPL, despite lower wholesale energy prices, have prompted industry warnings it would lead to thousands of job losses and undermine Britain’s progress towards net zero emissions.

Bseisu said: ‘The current tax regime is causing irreparable damage to an indigenous and strategically important British industry.

‘The UK energy sector needs a progressive tax system that takes into account the maturity of the North Sea and puts the UK back on the map as a globally competitive investment area.’

EnQuest shares fell 0.3 percent to 12.26p in early trading, taking their losses since the start of the year to more than 20 percent.

Shore Capital analyst James Hosie said Bseisu’s comments “highlight the impact the continuation of the EPL has on the competitiveness of the UK North Sea”.

He added: ‘The company remains committed to the UK, where it is seeking acquisition opportunities that will allow it to leverage its operating capabilities and accumulated tax losses to realise additional value.

However, the press release also emphasises that the focus is on deals to acquire UK assets with limited future capital expenditure.

‘At the same time, EnQuest continues to look for opportunities to expand its activities in Southeast Asia.’

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