EnQuest Seeks Tax Allowances to Develop Small Oilfields

LONDON (Dow Jones Newswires), Apr. 5, 2011

EnQuest will look into developing small, so far commercially unviable, oil and gas fields in the North Sea if the U.K. government offers incentives to offset the U.K. tax hike on oil production, Chief Executive Amjad Bseisu said Tuesday.

Bseisu told journalists on a conference call that the firm is discussing the matter with the government, but didn't go into further detail.

EnQuest will continue to study options outside of the U.K. if the tax regime here isn't palatable, he said.

Bseisu said that one positive effect from the tax hike is that other companies are looking to sell their U.K. North Sea assets. Prices--especially where large amounts of capital are required for development --have fallen in the last few weeks, he noted.

"We will continue to look at acquisitions in the U.K. and I think we will be able to succeed in acquiring either assets or companies," the CEO said. EnQuest doesn't have any specific targets as yet, but is examining opportunities and has a lot of firepower, he added.

Bseisu said the firm has "cash flow of several hundred million and credit lines of several hundred million," and so could manage an acquisition in the half billion-to-billion dollar range quite easily.

The group's 2010 pretax profit soared to $55.8 million, from $11.0 million in 2009 and revenue rose to $583.5 million from $234.0 million, as oil and gas prices and oil and gas production levels rose significantly.

The company has raised its 2011 production target by 26% to 26,500 barrels of oil equivalent a day, after 2010 pro forma average production increased 55% to 21,074 BOE/D. Bseisu said he is confident of meeting the 2011 target organically.

EnQuest's proven-plus-probable reserves rose around 10% to 88.5 million barrels of oil equivalent.

The company has earmarked around $300 million for capital expenditure in 2011, with $250 million to go on development drilling and facilities and $50 million on exploration and appraisal. In 2010, capital expenditure was around $196.3 million on a pro forma basis.

At the end of 2010, the company had net cash of $41.4 million, after repaying $88.8 million of net debt.

Copyright (c) 2011 Dow Jones & Company, Inc.