LONDON (ShareCast) - (Sharecast News) - Petroleum exploration and production company EnQuest reported a 48.2% improvement to its average group production in its final results on Thursday, to 55,447 barrels of oil equivalent per day.
The London-listed firm said its revenue rose to $1.2bn in the year ended 31 December, from $635.2m a year earlier, while EBITDA surged to $716.3m thanks to an uptick in both volumes and realised prices, partially offset by the impact of commodity hedges.

Cash generated from operations increased to $788.6m from $327m year-on-year, reflecting the higher EBITDA, while the company's cash capital expenditure narrowed to $220.2m from $367.6m.

EnQuest said cash and available bank facilities amounted to $309.0m as at 31 December, with net debt standing at $1.77bn, down from $1.99bn year-on-year.

Net 2P reserves stood at 245 million barrels of oil equivalent, and net 2C resources were 198 million barrels of oil equivalent at the end of 2018m up from 2P reserves of 210 million barrels and 2C resources of 164 million barrels at the end of 2017, with that growth driven by the acquisition of Magnus.

The firm acquired additional interests in Magnus and the Sullom Voe Oil Terminal during the period, completing on the transactions in December.

Looking at 2019, EnQuest said average group production was expected to grow by around 20% to between 63,000 and 70,000 barrels of oil equivalent per day, with production averaging 67,700 barrels of oil equivalent per day in the first two months of the year.

Operating expenditure was expected to be around $600m, including the additional interest in Magnus.

Cash capital expenditures were expected to be about $275m, which would include a combined total of approximately $100m related to deferred payments from prior periods and the phasing of spend from 2018, mainly on the DC4 drilling programme.

EnQuest had hedges in place for around eight million barrels of oil, with approximately 6.5 million of those hedged at an average floor price of $66 per barrel.

In accordance with the Oz Management facility agreement, the group had a further 1.5 million barrels hedged across 2019 with an average floor price of about $56 per barrel.

The group said its credit facility had been reduced to $730m, following the early repayment of $55m.

It expected to end 2019 with a net debt-to-EBITDA ratio approaching 2x, with the board's target being between 1x and 2x.

"In 2018, the group met its financial and operational targets," said chief executive Amjad Bseisu.

"Production increased by 48%, just above the midpoint of our guidance, which, along with strong cost control, drove a significant improvement in cash generation allowing the group to reduce net debt.

"[Floating production storage and offloading] performance has been the main limiting factor in achieving Kraken's full production potential," Bseisu explained.

He said that as such, the company's "clear operational priority" was to improve Kraken's FPSO uptime and efficiency.

"We are working with the FPSO operator on a number of improvement initiatives.

"We are committed to further reducing our debt, and expect our net debt to EBITDA ratio to trend towards 2x this year and intend to operate within our 1-2x target in the future.

"The acquisition of Magnus has added material value to the business through significant production and reserve growth, and the application of our production enhancing capabilities are already improving performance above original expectations."

Bseisu said in the near term, the board remained focused on investing in short-cycle projects which maximised cash flow and allowed EnQuest to deliver on its plans to reduce debt.

He said the company had opportunities for low-cost material growth in near-field, short-cycle infill and tie-back investments, particularly at Magnus, PM8/Seligi and Kraken.

"Longer term, our capital allocation will balance investment to develop our asset base, returns to shareholders and the acquisition of suitable growth opportunities."

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