When EnQuest (ENQ) announced first oil from its long-awaited Kraken field in June, it did so with the pomp and ceremony of a state opening, supplemented with gushing praise from UK business and energy secretary Greg Clark.
Last month, the North Sea producer's party balloons deflated. While the field had indeed reached first production (or brought “onstream” to quote the company), the initial triumph wasn’t the whole picture. Complexities associated with Kraken’s FPSO (floating production storage and offloading unit) had led to worse-than-expected operating efficiency, and a warning that – sorry! – full-year production would likely fail to meet guidance. Unsurprisingly, the admission precipitated a big mark down in the shares.
Half-year results provided a tad more colour. Production averaged 37,015 barrels a day in the six months to June, and should stay within 10 per cent of that rate between now and January. The year-on-year drop in output partly explains the slump in the top line, although a lower contribution from hedging contracts didn’t help, either. And while another $100m (£77m) saving has been identified in Kraken’s full cycle capital expenditure, lower oil price expectations has forced a further $79.6m impairment of the balance sheet, which accounts for the statutory loss.
On average, analysts are guiding for a full-year pre-tax loss of $66.2m and a loss per share of 4.8¢, swinging to a profit of $166m and 6.1¢ in 2018.
| ENQUEST (ENQ) | ||||
| ORD PRICE: | 25.3p | MARKET VALUE: | £293m | |
| TOUCH: | 25-25.3p | 12-MONTH HIGH: | 56p | LOW: 23p |
| DIVIDEND YIELD: | nil | PE RATIO: | 6 | |
| NET ASSET VALUE: | 73.6¢* | NET DEBT: | $1.9bn | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
| 2016 | 382 | 74.9 | 19.5 | nil |
| 2017 | 342 | -21.3 | 2.6 | nil |
| % change | -10 | - | -87 | - |
| Ex-div: | n/a | |||
| Payment: | n/a | |||
| £1=$1.30. *Includes intangible assets of $241m, or 20.7¢ a share | ||||
