EnQuest approves $125 million North Sea oil field despite weak prices
By Karolin Schaps
LONDON (Reuters) - EnQuest approved the development of a $125 million oil field in the North Sea on Tuesday in an unusual move in a sector that is slashing costs due to oil prices close to seven-year lows.
The company, which specialises in maximising oil output from old fields using new technology, said approving the Scolty/Crathes field "makes sense" as it ties into existing infrastructure at low upfront costs.
The field will start delivering oil in the first half of 2017, EnQuest said.
Oil industry revenue has been battered by weak oil prices, prompting companies across the globe to slash investment, jobs and pay to rein in costs.
EnQuest itself has adjusted maintenance schedules, cut rates for contractors and linked service providers' payment to performance, it said.
It has lowered its operating expenditure to $31-32 per barrel from around $38, and the figure is expected to fall to $26-28 in 2016, EnQuest said.
The ramp-up of new oil fields will mean the company will increase 2016 production to 44,000-48,000 barrels of oil equivalent a day (boepd) from 33,000-36,000 boepd this year.
"Strong production growth and excellent results on cost reduction should be acknowledged, but are likely to be offset by increased capex and ongoing net debt concerns in the current oil price environment," said analysts at Cenkos Securities.
Shares in EnQuest were up 7.8 percent at 0900 GMT.
As a result of some 2016 investments brought forward into 2015, EnQuest now expects full-year cash capital expenditure to reach $750 million, $150 million higher than previously expected.
This will mean net debt at the end of the year will rise to around $1.55 billion, EnQuest said.
The company has hedged 10 million barrels of its 2016 production, a strategy to shield itself from a further decline in oil prices. It expects to continue to hedge around 75 percent of yearly production.
"We'll certainly be looking at hedging for 2017 over the next months. We keep a daily watch on the oil price, unsurprisingly," Chief Financial Officer Jonathan Swinney told Reuters.
(Editing by Jason Neely)
