EnQuest Cuts Capital Spending by 40%

North Sea-focused independent producer EnQuest said Friday that it would spend only around $600 million on capital spending in 2015.

In November EnQuest had said it expected to spend up to $800 million this year on its North Sea operations, with an additional amount for international projects. The new budget represents a reduction of more than 40 percent compared to the business plan prior to the decline in oil prices, the firm said in a trading update Friday.

EnQuest reported a strong performance for 2014, with production of 28,267 barrels of oil equivalent per day – which was 17 percent greater than the previous year. The firm said its increased production reflected the continuing strength of its field reservoir performance, top-quartile production efficiency from its existing producing assets and an initial contribution from its PM8/Seligi project in Malaysia – the company's first production from outside of the North Sea.

Based on this level of production, EnQuest expects its operating profit at the EBITDA level to be in the range of $530 to $580 million during 2014.

In addition, EnQuest said that it has responded "expeditiously" to the low oil price thanks to hedging it has put in place for 2015. The firm also said it has renegotiated with creditors to relax the terms of its existing credit facility covenants in order to give it fleixbility for its capital investement program.

EnQuest Chief Executive Amjad Bseisu commented in a company statement:

"The rapid change in the macro environment with respect to the oil price has affected all in the industry, not least EnQuest. However, with our strong production growth, the new developments coming on stream in the next two years and our available $1.1 billion in funding under our facilities, we continue to demonstrate the strength and sustainability of EnQuest's production growth model.
"I am very pleased that our production efficiency for 2014 has been approximately 90 percent, which is an exceptional performance and ranks EnQuest as one of the best operators in the North Sea. The business continues to perform very well operationally and is on course for another year of strong production growth."

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