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EnQuest calls for stable tax regime in North Sea

ENQUEST has said there must be a stable tax regime in the UK North Sea to maximise the recovery of oil and gas in an area where it expects to invest around $1 billion (£600 million) this year.

CONFIDENT: Amjad Bseisu said EnQuest was set to deliver a 'material increase in cash flow' by realising the potential of its North Sea portfolio,
CONFIDENT: Amjad Bseisu said EnQuest was set to deliver a 'material increase in cash flow' by realising the potential of its North Sea portfolio,

The biggest UK independent operating in the North Sea, EnQuest, said it has been engaging with the Scottish Government on subjects like tax. The company said it "welcomes statements that, in the event of there being an independent Scotland, the Scottish Government plans a stable and predictable fiscal and regulatory regime".

However, announcing that it made an underlying profit of $621m in 2013, EnQuest also noted the risks of changes in the regulatory or fiscal environment had increased last year.

Led by chief executive Amjad Bseisu, the company said the likelihood of changes occurring had risen to medium, from low in 2012.

The potential impact of such changes increased to high, from medium in 2012.

EnQuest said: "The increase in likelihood and impact reflects the possibility of a change in the regulatory and fiscal regimes following the referendum on Scottish independence in 2014."

It added: "In respect of the referendum on Scottish independence, senior management liaises with Scottish politicians and others to ensure that third parties are aware of EnQuest's trading and investment activities and the importance of the oil industry in general to the local and national economies."

EnQuest also said it continues to engage with the UK Government, seeking to optimise the fiscal structure of the UK North Sea.

The company's chairman, James Buckee ,welcomed the findings of the recent report by oil services veteran Sir Ian Wood into the North Sea. He noted this recommended greater collaboration between firms that operate oil and gas fields and between UK Government departments and the industry.

Mr Buckee said existing operators have little incentive to let others use their infrastructure, such as pipelines. "Without action, UK North Sea oil production will decline prematurely," said Mr Buckee.

Mr Bseisu said companies like EnQuest are the future of the UK North Sea.

He said EnQuest was set to deliver a "material increase in cash flow" in coming years by realising the potential of a North Sea portfolio that includes a range of existing fields and discoveries that other firms had not developed.

Of the $1bn EnQuest expects to spend on developing new assets this year, $400m will be used on production facilities for the Kraken heavy oil field off Shetland, which it hopes to bring onstream by 2017.

EnQuest has a 60% stake in Kraken.

EnQuest plans to invest around $200m this year revitalising the former Argyll field. This was the first to start production in the UK, in 1975.

Renamed Alma/Galia, the field is expected onstream in the second half of 2014, with production to peak at 13,000 barrels oil equivalent daily.

EnQuest said it is on course to produce around 50,000 boed in the UK North Sea from existing assets and those it has approved for development.

EnQuest increased production to 24,222, from 22,802 in 2013 helped by the acquisition of an 8% stake in the Alba field from Cieco of Japan for up to £19m.

It expects to produce between 25,000 boed and 30,000 boed this year.

The company signalled its appetite for more acquisitions, noting it had a new $1.7bn credit facility in place.

It said: "As a company of substantial size, with high levels of cash generated from operations, EnQuest has good access to capital and has a strong balance sheet, providing capacity to acquire new assets."

EnQuest said the flow of assets available for possible acquisition had increased.

The $621m profit EnQuest made before interest, tax, depreciation and amortisation in 2013 was down 2% on the $635m the company made in 2012. Brent crude fetched an averaged $108.7 per barrel in 2013 and $111.7pb in 2012. EnQuest said the costs of routing production through the BP-operated Sullom Voe terminal had increased.

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