EnQuest shares plummet after oil and gas producer takes losses
EnQuest shares plummet after oil and gas producer takes losses
- The London-listed company reported a loss of $21.2 million for the six months ended June
- It said the result was caused by a $76 million charge related to the energy profit tax
- Declining production levels and oil and gas prices depressed the company’s sales
Shares of EnQuest plummeted Tuesday after windfall taxes and falling prices left the energy producer a first-half loss.
The London-listed company reported a loss of $21.2 million for the six months ended June, compared to a profit of $203.5 million for the same period last year.
It said the result was driven by a $76 million charge related to the Energy Profits Levy (EPL), which accounts for more than half of the total tax bill.
Losses: London-listed EnQuest reported a loss of $21.2 million for the six months ended June
Excluding the EPL, the company still saw pre-tax earnings fall about 38 percent to $112.9 million, due to falling oil and gas prices impacting sales, which fell more than $200 million to $732 .7 million.
After the trade update EnQuest Shares fell 15.8 percent, or 2.75p, early Tuesday afternoon to 14.7p, making them the biggest faller on the FTSE All-Share Index.
Petroleum prices skyrocketed for much of 2022 due to the Russian invasion of Ukraine, straining energy supplies across Europe and easing Covid-related restrictions, allowing factories to reopen and people to travel more regularly .
They have since fallen significantly amid a global economic slowdown and governments imposing energy efficiency measures.
Wholesale gas prices have also been hit by mild weather conditions, improved storage levels and weak demand from China.
In the first half of 2023, global petroleum prices averaged $75.8 per barrel, up from $89.9 a year earlier, while the average day-ahead gas price fell from 182 pence to 108 pence per British thermal unit.
Enquest’s results were further impacted by average production levels falling 8.5 percent to 45,480 barrels of oil equivalent per day.
Production at the Kraken field fell by about a third after the failure of some hydraulic submersible pump transformers in May, while production at Golden Eagle also fell.
In February, the company said it would halt new drilling in the Kraken field due to the impact of the EPL.
The windfall tax, introduced in May last year by then Chancellor Rishi Sunak, is a 35 percent surcharge on the profits of North Sea oil and gas companies, which now pay an effective tax rate of 75 percent.
Amjad Bseisu, CEO and co-founder of EnQuest, warned that the industry faces “significant challenges and loss of competitiveness” due to the uncertainty posed by the recent tax changes.
He added that “timely legislative reform is needed to restore confidence in the UK oil and gas sector, protect jobs and achieve both energy security and decarbonisation.”
Fellow North Sea producer Ithaca Energy announced a fortnight ago that it had to postpone and cancel a number of domestic projects due to the EPL.
Russ Mould, investment director at AJ Bell, said: “The treatment of taxation is an accounting issue, and it certainly behooves UK oil and gas companies to highlight the impact of the new taxes they face – it is through their decisions to invest suspend and withdraw. that they give a credible signal of unrest.’
In response to industry criticism of the tax, the UK government has pledged to abolish it if oil and gas prices fall below historically normal levels for an extended period of time.
Under the Energy Security Investment Mechanism, the levy would end when the average oil price falls to or below $71.40 per barrel and the gas price reaches 54 pence per therm for two consecutive quarters.