The operational progress reported by EnQuest (ENQ) at the half-year mark was completely overshadowed by the negative outlook on Brent crude prices. Adjusted gross profits were down by a third to $108m (£69.2m) as the North Sea driller’s average realised oil price, including hedging gains, fell to $77.50 a barrel, from $109.98 in the corresponding period in 2014. That’s actually a reasonably solid return compared to that of some industry peers, but EnQuest's management still realises that a renewed focus on cost savings is the only way forward in the current trading environment.
To this end, EnQuest managed to reduce its operating costs to $39 a barrel - a saving of $6.90 from the first half of 2014. The sharp fall in unit costs was driven primarily by a 17 per cent increase in average daily production to 29,665 barrels of oil equivalent (boe). With first oil from the long awaited Alma/Galia development expected within a few weeks, EnQuest now expects to push unit costs down towards $30 a barrel by the end of next year. Management is also on track with direct cost savings.
Reported earnings were hit by a marked increase in finance costs as EnQuest bumped up borrowings to meet is capital obligations on the Alma/Galia and Kraken developments. The latter promises to add another 30,000 boe to daily production by 2017.
| ENQUEST (ENQ) | ||||
|---|---|---|---|---|
| ORD PRICE: | 31.5p | MARKET VALUE: | £253m | |
| TOUCH: | 31.5-31.75p | 12-MONTH HIGH: | 123p | LOW: 22p |
| DIVIDEND YIELD: | NIL | PE RATIO: | NA | |
| NET ASSET VALUE: | 177¢* | NET DEBT: | 90% | |
| Half-year to 30 June | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 504 | 78.6 | 7.9 | nil |
| 2015 | 415 | -34.6 | 12.8 | nil |
| % change | -18 | - | +62 | - |
Ex-div:- Payment:- £1 = $1.56. *Includes intangible assets of $269m, or 33p a share. | ||||
