NORTH SEA heavyweight Neptune Energy has increased its UK profits by around 90 per cent and looks set to maintain a strong growth rate as it prepares for a dramatic increase in production.
Neptune revealed that it grew profits from UK operations to $65.8 million (£52m) in the first quarter from $34.8m in the same period last year.
The increase will help to offset the impact of the windfall tax that was introduced in the UK last year on the company’s bottom line.
Neptune, which is owned by international investors, has echoed warnings by industry leaders that the tax may lead firms to reduce North Sea investment.
However, the company is set to reap the rewards for its decision to invest in a major North Sea development before the tax was introduced.
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Neptune said it expects to start production from the Seagull development it is completing with BP around 240 miles east of Aberdeen in July.
The company expects to net around 12,000 barrels oil equivalent daily (boed) production initially from Seagull.
With Brent crude selling for $75.69 per barrel yesterday that will put it in line to grow UK revenues by around $330m a year, or $82.5m a quarter.
The company generated $95m first quarter revenues in the UK, against $69.9m last time. Average UK production fell to 14,200 boed, from 16,900 boed, following development work on the giant Cygnus gas field.
Chief executive Pete Jones said the start-up of Seagull could help Neptune maintain the good operational and financial performance achieved in the first quarter.
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Neptune said it will focus investment on “shorter-cycle projects and near-term returns in countries with [a] favourable investment climate”.
This might make it hesitant to commit to a project like Seagull, on which development work started in 2019.
However, Neptune has identified opportunities to achieve a quick pay back on UK projects. It has completed two additional wells on Cygnus this year which will boost output.
The company indicated it expects market conditions to remain favourable. North Sea operators have benefited from the surge in oil and gas prices fuelled by Russia’s war on Ukraine, although this has moderated amid fears about the global economic outlook.
Neptune said: “While gas prices weakened in the first quarter of 2023, prices are likely to remain above long-term trends, with tight international markets resulting in continued price volatility.”
It expects operating costs to remain at around $12 to $13 per barrel oil equivalent.
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Signalling confidence in its prospects and in the outlook for investor interest in the oil and gas sector, Neptune said it is still considering a stock market flotation and might make further acquisitions.
Neptune developed a portfolio that includes production assets in countries ranging from the UK to Indonesia with backing from China Investment Corporation and US private equity giants.
Neptune said it delivered a robust first quarter financial performance.
Total revenues increased to $1.4bn, from $1.1bn. Underlying operating profits fell to $0.74bn from $0.8bn.
Average daily production increased to 142,100 boed from 133,700 boed.
Neptune said it paid $395m cash taxes globally in the first quarter, up from $121m, without providing a geographic breakdown.
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