EnQuest cash flow up 30% but windfall tax weighs

By Shadia Nasralla

(Reuters) -British North Sea-focused oil producer EnQuest's free cash flow in 2022 rose by 31% from the previous year, spurred by high prices and beating guidance, although its results statement on Wednesday said a windfall tax resulted in an accounting loss.

Following Britain's introduction of a tax on excess energy company profits, EnQuest deferred drilling on its Kraken field, and reported a loss after tax of $41 million, compared with a $377 million profit in 2021.

Its free cash flow, a measure of balance sheet health, rose to $519 million.

EnQuest has for years been shielded from UK taxes as it could offset bills against reported losses.

Chief Financial Officer Salman Malik said $2.5 billion in tax losses will continue to shield EnQuest against any non-windfall tax bills in Britain.

EnQuest has so far paid around half of its $72 million windfall tax bill for 2022, a spokesperson said, and booked a $178 million non-cash charge to cover the tax through 2028, adding that the final cash tally will likely be higher.

Production meanwhile is expected to fall slightly, the company said, predicting 42,000-46,000 barrels of oil equivalent per day (boepd) this year, down from 47,300 boepd last year.

EnQuest, with a market cap of around $441 million, reduced its net debt to $624 million at the end of February, compared with $1.2 billion in late 2021.

It has refinanced the bulk of its debt to mature in 2027.

Chief Executive Amjad Bseisu told Reuters the company, which has never paid dividends, will look at shareholder distributions next year, adding it was too early to give details.

It has hedged 7.9 million barrels of its 2023 output at an average floor price of $58 a barrel, of which about half has a price ceiling of $75 a barrel. For 2024, it has hedged 3.2 million barrels at an average floor of $60 a barrel.

It reiterated it expected to invest $160 million this year, with operating costs of $425 million and decommissioning spending of $60 million.

(Reporting by Shadia Nasralla in London and Muhammed Husain in Bengaluru; Editing by Subhranshu Sahu, Louise Heavens and Barbara Lewis)