NORTH Sea giant EnQuest has declared profits have been hit by the windfall tax as it revealed details of its first shareholder distribution since the company was established 2010.

The company cited the impact of the energy profits levy as it reported a statutory loss after tax of $30.8m for 2023, down from $41.2m in 2022, stating that the windfall tax had also affected its ability to access capital. It paid $175.1m under the levy, which has lifted the headline rate of tax on oil and gas company profits to 35%, in 2023, up from $72.15m the year before.

The windfall tax was introduced by the UK Government in May 2022 in response to the extraordinary profits energy companies began making after Russia's invasion of Ukraine led gas prices to spiral.

But despite being subject to a first full year of the levy in 2023, Enquest, which holds stakes in North Sea assets such as Magnus, Kraken, and Golden Eagle, said it will complete a share buyback of $15 million (£11.9m) during 2024, although it will not pay a dividend for 2023.

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EnQuest revealed the buyback as it told the City it had slashed net debt by 32.9% to $481 million by December 31, despite a “challenging UK fiscal environment”, and has cut debt further since year-end. Net debt had fallen to $409.6m at the end of February.

EnQuest said it had reduced borrowings in 2023 amid a strong operational performance, which saw production average 43,812 barrels of oil equivalent per day, at the midpoint of guidance, down from 47,259 boepd the year before.

This came against a backdrop of what the company described as “continued geopolitical tension, inflation, and sterling volatility”, with Brent prices 18.2% below 2022 levels at £82.5 per barrel of oil, and gas prices down 51.4% at 98.9p per therm. Commodity prices eased over 2023 after rising sharply in light of Russia’s full-scale invasion of Ukraine, which began in February 2022.

EnQuest is forecasting net production guidance between 41,000 and 45,000 boepd in 2024, which includes impacts from drilling campaigns at Magnus and Golden Eagle assets in the North Sea, and the PM8/ Seligi field in Malaysia, as well as maintenance activities across its portfolio.

Despite the challenges posed by the UK windfall tax, the company signalled its appetite for acquisitions.

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Chief executive Amjad Bseisu said: “EnQuest achieved its 2023 targets, delivering strong operational performance across the operated portfolio and continuing to de-lever its balance sheet, with year-end EnQuest net debt reduced to $48m.

“Against the backdrop of a challenging UK fiscal environment, EnQuest has reduced net debt by c.$1.5 billion since its peak and with significant tax assets remaining, the business has a strong base, and successful track record of executing quick payback, life-extending acquisitions, from which to pursue value-accretion and production growth through M&A (mergers and acquisitions).”

Mr Bseisu noted the company had in 2023 realised value within its portfolio by selling a 15% share in the Bressay licence and the EnQuest Producer FPSO (floating production, storage and offloading) facility to RockRose Energy for £46m in December. It then received $85.6 million for a 15% farm-down of capital items identified as suitable for use on the Bressay development, with the company stating that the two transactions “delivered an important step” in bringing the Bressay heavy oil field eat of Shetland into production.

Mr Bseisu added: “We have set the foundations for a pivot to growth during 2024 and continue to perform well against our full year targets, with production to 29 February 2024 averaging around 44,500 boepd. The group also fully paid down its RBL (reserved-based lending) facility post year-end and has further reduced net debt to $409.6m at the end of February 2024.

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"Reflecting the strength of our core business, confidence in the opportunities ahead and the group's commitment to delivering shareholder returns during 2024, we have committed to deploy $15m of capital in a share buyback programme during 2024.”

EnQuest was formed in 2010 through the merger of the UK North Sea assets of Petrofac and Lundin Premium. It acquired its interests in Malaysia in 2014.

Shares in EnQuest closed up 0.71%, or 0.1p, at 14.1p.