NORTH Sea focused-EnQuest has said tax changes in The Budget will encourage deals in the area as the company revealed losses doubled to $1.3 billion last year following the crude price plunge.

The London-based firm slashed $1.2bn off the valuation of its portfolio of assets to reflect the oil price fall.

This has prompted EnQuest to cut spending in the North Sea, where it is targeting economies in areas such as staffing.

Chief executive Amjad Bseisu said EnQuest's priority is to continue delivering a business which is robust in a low oil price environment.

The company said it is seeking costs reductions across the board, highlighting areas such as production operations and manpower.

It employs 300 in Aberdeen, after reducing job numbers there by around 15 per cent last year.

“Contracts are being cancelled, projects are being reduced in scope and deferrals of cash payment are being agreed,” said EnQuest.

However, the company said it has been making strong progress with the giant Kraken heavy oil field off Shetland, which it is developing with Cairn Energy.

EnQuest expects to invest a further $600m on Kraken this year ahead of the expected start of production in 2017.

With EnQuest sitting on $2.5bn UK losses, the company said it does not anticipate paying material UK cash tax in the foreseeable future at current oil prices.

This means it will not get short term benefit from the cuts in North Sea tax rates included in The Budget on Wednesday, following demands George Osborne help the hard-pressed North Sea industry.

But EnQuest welcomed moves to provide oil and gas firms with more certainty that tax relief will be available in respect of future decommissioning costs.

Chief financial officer Jonathan Swinney said: "The tax changes facilitate late-life asset transfers because decommissioning tax relief is a big part of the transfer."

He added: "Over the medium term it will be positive."

The Oil & Gas authority said greater certainty on decommissioning tax relief overcomes what has been a stumbling block to asset transfers.

EnQuest’s chairman Jim Buckee noted: “Assets need to be in the hands of the right owners, owners who are operationally competent and who have the financial capability to make the level of investment required to fund not only current cost efficiency and investment programmes, but also to fund longer term growth.”

He echoed fears that vital infrastructure could be lost if firms shut down fields.

Mr Buckee said despite facing challenges and making “considerable reductions in previously planned levels of spending” EnQuest achieved an excellent operational performance in 2015.

The company increased output by 31 per cent annually helped by starting production from the Alma Galia development in October.

EnQuest said the Kraken development has consistently been on schedule. The project costs have now been reduced by around $425 million, to $2.8bn from $3.2bn. Enquest recently acquired a further 10.5 per cent interest from First Oil Expro for a nominal consideration before Ian Suttie put the Aberdeen business into administration.

Oil and gas firms have benefited from a big drop in the cost of services such as drilling amid the downturn in activity in the North Sea.

Enquest said it is working with other firms that own North Sea oil and gas fields to centralise procurement to help achieve savings.

The company lost $1.34bn before tax in 2015, compared with $0.6bn the preceding year.

EnQuest recorded a $1.2bn impairment charge against the value of its oil and gas assets, after writing off around $0.7bn in 2014.

Revenues fell to $0.9bn from $1bn.

The company made $465m underlying profit, down from $581m.

David Round at BMO Capital Markets said:"EnQuest has delivered a robust set of results, in our view demonstrating its ability to squeeze value out of its producing asset base."

Shares in EnQuest closed up 4.5p at 19p.

Production averaged 36,567 barrels oil equivalent per day, up from 27,895 boepd. The company produced more than 50,000 boepd on average in November and December.