NORTH Sea-focused EnQuest has seen its shares plunge around six per cent as the oil and gas firm warned its production would be at the lower end of expectations after facing challenges on a field acquired from BP.

However, the company underlined its belief in the potential of a big undeveloped find off Shetland which it bought recently.

EnQuest posted an eight per cent increase in first half profits yesterday, which reflected the benefit of the rise in oil and gas prices fuelled by the rollout of coronavirus vaccines.

This will likely have boosted directors’ confidence in a strategy that has involved expanding in the North Sea by acquiring assets that other firms appear to have lost interest in.

READ MORE: Plans for development of billion barrel oil find off Shetland set to be revived

EnQuest recently won strong backing from investors for a $395m deal to acquire a stake in the huge Golden Eagle development from Canada’s Suncor, which it struck in February.

However, the fall in the company’s share price yesterday suggests investors were concerned by the update provided by EnQuest about developments on the Magnus field north of Shetland.

EnQuest bought Magnus from BP in 2018 along with an interest in the Sullom Voe terminal on Shetland in a $185 million deal.

The company has been pleased by the performance of Magnus since the acquisition but it said yesterday that first half production from Magnus was down 26% on the same period last year. The fall, to 13,847 barrels oil equivalent per day (boepd), followed well issues. The company cited “slower execution and an increase in scope” of a well intervention programme it launched, combined with “an unplanned third-party outage, power related failures and natural declines associated with the new wells that were brought onstream in early 2020”.

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Production has improved since three wells were returned to service in June and the trend is expected to continue. EnQuest plans to drill two wells on Magnus next year.

The company said: “2021 average net Group production is expected to be at the lower end of the guidance range of 46,000 Boepd and 52,000 Boepd.”

EnQuest said the undeveloped Bentley heavy oil field East of Shetland offered “long-term potential development opportunities and other synergies”.

In April EnQuest bought control of Bentley from Whalsay Energy, in a deal that involved an initial outlay of less than $2m.

Bentley was discovered in 1977 by Amoco and is estimated to contain around a billion barrels of heavy oil. Xcite Energy spent years working on plans to develop the field but went into liquidation in 2016 amid the fallout from the sharp fall in oil prices from 2014.

HeraldScotland: EnQuest chief executive Amjad Bseisu Picture: EnQuestEnQuest chief executive Amjad Bseisu Picture: EnQuest

EnQuest bought an interest in the undeveloped Bressay heavy oil field East of Shetland from Equinor for an initial £2m in July last year. It said yesterday that the deal had provided a low-cost addition of up to 115 million barrels of resources.

Environmental campaigners want the Government to block a bid by Siccar Point Energy to develop the Cambo find off Shetland with Shell.

The Kraken heavy oil field East of Shetland performed well in the first half. EnQuest developed the field with Cairn Energy.

EnQuest achieved $345m (£250m) underlying earnings in the first half compared with $321m last time.

The price of Brent crude has risen from $58.50 per barrel when EnQuest announced the Golden Eagle deal to around $72/bbl.

In March last year, EnQuest said it had decided not to restart production from the Heather and Thistle fields under a cost-reduction drive that resulted in around 500 North Sea job losses.The company has a workforce of around 600 in the UK. The vast majority are based in Aberdeen or offshore.

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Analysts at Barclays said the production setback was a minor negative and that EnQuest was on track to continue to generate “meaningful levels of free cash flow”. Shares in EnQuest closed down 1.55p at 23.7p yesterday.

Separately another North Sea independent, Serica Energy, has increased production from a big gas field it acquired a stake in from BP.

Serica has brought a third well into production on the Rhum field off Shetland, following a challenging process.

The well was drilled by BP in 2005 but not brought into use. Serica had to clear equipment that had been left in the well.

The third well has boosted production from Rhum by the equivalent of around 8,000 barrels oil equivalent daily, to around 34,000 boed.

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Serica’s chief executive Mitch Flegg said: “The addition of a third prolific Rhum well is excellent news. Despite the challenges we faced, the additional production and accelerated cash flows will lead to a rapid payback on the capital invested, particularly as we are immediately benefitting from the current high gas prices.”

Shares in Serica Energy closed up 4%, 6p, at 170p.