Neptune Energy Posts First Quarter Profit Jump
Neptune Energy has posted a major jump in financial figures with net profit soaring as well as EBITDAX and operating cash flow. The company posted a net profit of $493.6 million, during the quarter, which compares to $77.9 million in Q1, 2021.
EBITDAX reached $956.0 million and post-tax operating cash flow hit $741.3 million. This compares to EBITDAX of $323.2 million and post-tax operating cash flow of $314.1 million, in the first quarter of last year.
“Neptune delivered strong operating and financial results in the first quarter while continuing to invest in energy security across Europe. We will invest more than $700 million this year in new sources of supply, which will support the delivery of 47 kboepd of new production from next year,” said Neptune Energy’s Chief Executive Officer, Pete Jones.
“We continue to make progress with our low carbon strategy and are on track to complete the electrification of our second asset in Norway by the end of this year. CCS is key to us going beyond net zero by 2030 – and we are maturing existing opportunities while evaluating additional possibilities in the UK, Norway, and the Netherlands,” he added.
In the first quarter of 2022, Neptune Energy invested $128.9 million in development capex (including Touat) and a further $28.1 million in exploration spending. The majority of its investment was in its projects in Norway and the UK.
Partly as a consequence of the war in Ukraine, commodity markets in the first quarter of 2022 tightened considerably as geopolitical uncertainties restricted oil and gas flows in key markets, Neptune Energy highlighted. The company outlined that, as governments in Europe prioritize energy security, it welcomed the UK Government’s publication of its Energy Security Strategy, which it said helps bring clarity to energy investors. Further follow-up actions and policy changes are required across Europe to diversify oil and gas supplies and re-prioritize investment in indigenous resources to reduce energy costs and achieve independence from Russian supplies, according to Neptune Energy.
In response, the company said it has increased production from Duva (Norway) by around 6.5 kboepd, and is reviewing further opportunities to bring forward additional energy supplies where possible. It also said it is progressing its development projects at Njord (Norway), Fenja (Norway), and Seagull (UK), which together are expected to contribute around 47 kboepd of net new production at the plateau.
With commodity prices remaining at high levels, Neptune has added hedges to protect cash flow in 2022 and 2023. Its post-tax hedge ratio of 62% in 2022 and 34% in 2023 provides good protection against near-term price volatility, while the company retains exposure to the upside, its quarterly report reads.
Operating costs in the period remained broadly flat at $11.6/boe and G&A costs were $17.6 million.
Looking forward, the company is committed to operating its business prudently to protect people and operations during this period of uncertainty. Seasonal maintenance activities and the end of gas sales to third parties from Altmark (Germany) are expected to reduce average production in the second quarter of 2022, although with the return of Snøhvit, Neptune expects to exit the quarter at higher rates.
Production guidance for the full year remains unchanged at 135-145 kboepd (140-150 kboepd including production equivalent insurance income), subject to the return of Snøhvit and Touat.
With commodity prices remaining at current levels, Neptune expects to continue to deliver a strong financial performance in the second quarter of 2022. This will be offset partially by high tax charges. For the full year, Neptune expects a post-tax operating cash flow of around $2.0 billion and cash taxes of $1.4 billion. Operating costs are expected to increase marginally to more than $12/boe due to seasonally lower production and inflationary pressures on our supply chain.
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