EnQuest PLC (ENQ) - Interim Management Statement RNS Number : 7155Q EnQuest PLC 09 November 2012 EnQuest PLC, 09 November 2012. Interim Management Statement PRODUCTION AND PROJECT EXECUTION ON TRACK INTERIM MANAGEMENT STATEMENT HIGHLIGHTS Production summary · Production from 1 January to 31 October 2012 averaged 21,569 Boepd, in line with EnQuest's expectations and reflecting the second half weighted phasing of the 2012 drilling programme · EnQuest anticipates delivering 2012 average production around the middle of previous full year guidance of between 20,000 Boepd and 24,000 Boepd Major projects are on track · The Alma/Galia development remains on schedule for first oil in Q4 2013 and the farm out to KUFPEC has been completed · The proposed development of the Kraken discovery is on schedule for field development plan ('FDP') submission in H1 2013 · The Heather rig reactivation is progressing according to plan, ahead of new drilling in early 2013 · The next stage of the Thistle field life extension project is moving ahead and an application for the new Brown Field Allowance (as recently announced by HM Treasury) will be made shortly UK licensing round · DECC has offered EnQuest eleven licences in the 27^th UK licensing round EnQuest has started to establish a presence in two new oil basins outside the UK North Sea, as part of executing its long term growth strategy · Norway: EnQuest has applied to pre-qualify as an operator in the Norwegian North Sea · Malaysia: EnQuest has acquired Nio Petroleum (Sabah) Limited ('Nio') - including an appraisal opportunity at the Bambazon oil discovery and other exploration targets - for initial cash payments of approximately $3m, plus a further contingent consideration up to $20m Amjad Bseisu, Chief Executive, said EnQuest continues to deliver on our targets with a successful 14 well programme for 2012. Our execution in all of our major programmes at Thistle, the Dons and Alma is on track, which is a testament to the skills and technical strength of our people. Our financial performance,production and cash generation are on track for another strong year. The execution of our major development projects Alma and Kraken will secure our medium term production and reserves growth. We have also announced today our first steps outside of the UK North Sea, preparatory moves to replicate our existing model by targeting previously underdeveloped assets in a small number of other maturing regions; complementing our operations and utilising our deep skills in the UK North Sea. BOARD NEWS EnQuest PLC co-founder and COO Nigel Hares Nigel Hares has decided that after the assembly of a world class operations team in Aberdeenand the successful implementation of EnQuest's strategy in its critical first years, he is now planning to reduce the amount of time dedicated to EnQuest - to be balanced by more time spent on personal affairs. Therefore with effect from today, Nigel is standing down from the Board and will be working four days a week for EnQuest, advising on future strategy and development. Operations will continue to be managed by David Heslop, General Manager UKCS and his team. EnQuest Chief Executive, Amjad Bseisu said "The Board and I are very grateful to Nigel for the excellent contribution he has already made to EnQuest. I look forward to continuing to work closely with Nigel in shaping and implementing our strategy for future growth in his new role." FURTHER INTERIM MANAGEMENT STATEMENT DETAILS NET PRODUCTION Daily average Daily average 1 Jan' 2012 to 1 Jan' 2011 to 31 Oct' 2012 31 Oct' 2011 (Boepd) (Boepd) Thistle/Deveron 7,845 5,246 Dons/Conrie 10,203 13,145 Heather/Broom 3,521 5,553 Total 21,569 23,944 · Thistle: Reliable power and enhanced water injection rates have delivered better than expected base oil production, supplemented with oil production from two installed electric submersible pumps (ESP's) and the new A59/45 ESP, which was brought online in October · Dons: The sidetrack of Don Southwest Well S1 to the Horst target (now designated Well S11) came on line in July with a good initial rate on prognosis at 15,000 Boepd. S10 is anticipated to come on stream soon · Heather/Broom: Performance improved with the return to two compressor operation in late July. Improvements in plant management resulted in a period of high production efficiency. There was a month long planned shutdown of Heather/Broom during September/October · The Northern Producer was shutdown mid-August for a planned 19 day shutdown for maintenance work which was executed on time DEVELOPMENT PROJECTS Alma / Galia · EnQuest's development of its new Alma/Galia hub remains on track for first oil in Q4 2013 · EnQuest has completed the farm out of 35% of Alma/Galia to the Kuwait Foreign Petroleum Exploration Company ('KUFPEC') · On completion EnQuest received a cash payment of $124.5m from KUFPEC, being their share of costs incurred from 1 January to 30 September. As previously announced, from 1 October onwards, KUFPEC is paying its 35% share and up to $182m in future contributions for past costs and development carry, in relation to EnQuest's remaining interest in Alma/Galia and if KUFPEC does not recover its costs by 1 January 2017, then it will receive 50% of revenue less operating costs until those costs have been recovered · The Department of Energy and Climate Change ('DECC') has approved the FDP for the Galia field. The Galia Environmental Statement has also been approved · As planned, the wells batch drilled in H1 2012 (K1, K2 and K3) are currently suspended pending installation of completions. The results from these wells met or exceeded expectations · Also as planned, the wells batch drilled in H2 2012 (K4, K5 and K6) are suspended pending further drilling and completion · The key elements of the project execution required to deliver first oil in Q4 2013 are proceeding within schedule · Modification of the FPSO in Hamburg continues with the first dry dock related work nearing completion as planned · Other key elements of the project are also proceeding as required to meet the target timeline · Pipeline works authorisations approved for both Alma and Galia fields · Subsea trenching operations completed · Subsea flowlines laid between Alma and Galia and the FPSO location along with umbilical between Alma and Galia · Riser clump weights installed · Mooring installation contract awarded · Pile fabrication sub-contract awarded and progressing to plan · Equipment factory acceptance testing programs commencing as planned Kraken · The proposed development of the Kraken discovery is on track for submission of its FDP in H1 2013 · Having formally taken over as operator in September 2012, EnQuest remains supportive of the development concept proposed by Nautical Petroleum - essentially a conventional rather than a heavy oil type of development · EnQuest anticipates that first oil should be deliverable in 2016 · EnQuest is finalising new seismic interpretation; as part of this process, EnQuest has decided not to exercise its option on the Ketos prospect · Following its acquisition of Nautical, Cairn Energy has now been fully integrated into the partnership INTERNATIONAL EnQuest is now establishing early positions in two mature oil basins outside the UK North Sea, with the intention of continuing to pursue its development and production model in these regions. Norway · EnQuest has applied to pre-qualify as an operator in the Norwegian North Sea and in advance of becoming qualified has been permitted to and has submitted an application as part of the current Norwegian APA field licence round Malaysia · EnQuest has acquired Nio Petroleum (Sabah) Limited ('Nio') from Nio Petroleum Limited (the 'Seller') for initial cash payments of $3m, plus a further contingent consideration up to $20m, which will be determined based on 2P reserves associated with an approved FDP on blocks SB307 and SB308 offshore in Sabah, Malaysia (the 'Sabah Blocks'). Nio's principal asset is a 42.5% interest in the Sabah Blocks, with one existing near field appraisal opportunity at the oil discovery Bambazon and five prospects. The partners on the Sabah Blocks are Lundin Petroleum and PETRONAS Carigali. The Nio acquisition also provides EnQuest with an office base in Kuala Lumpur and a management team with extensive experience in South East Asia, including the Seller's CEO Richard Hall.Richard is to join EnQuest as its new General Manager, International PRODUCING OIL FIELDS - additional information Dons / Conrie · The up-dip sidetrack of West Don Well W2 (now designated Well W5) came on line on 8 October at an initial rate of 2,000 Boepd · S10 is anticipated to come on stream soon at Don Southwest Thistle / Deveron · Drilling on the new A59/45 well (a side track of well A46/45 to Area-6) was completed in late September and the third Thistle platform electric submersible pump (ESP) came on stream in mid October · The power project completed the safe and successful delivery of a new generator to the platform. The turbine is due to commence full time operation early 2013 · The offshore drilling team achieved a major industry safety milestone during the period, five years operation without a lost time injury Heather / Broom · The Heather rig reactivation is progressing well and is on track for drilling in early 2013, following the start-up of drilling operations around the 2012 year end EXPLORATION AND APPRAISAL Kildrummy · The Kildrummy well is drilling at the time of this announcement · EnQuest completed the acquisition for $3m in contingent consideration for an additional 20% interest in the Kildrummy discovery, as announced in May 2012. This takes the total interest to 60% UK Licensing round EnQuest has been offered eleven licences in the 27th Oil and Gas Licensing Round of the UK's Department of Energy and Climate Change,providing a raft of interesting new opportunities for growth. EnQuest applied for fourteen blocks, it has been offered eleven of those fourteen with the results of two applications not as yet announced. The licences offered to EnQuest in October included EnQuest Operated · 2/4b - obligations to drill or drop · 2/10a, 3/6 & 11c - (100%) - obligations to drill or drop · 8/5 & 9/1b - West of Kraken - obligations to drill or drop · 9/2d - (100%) - East of Kraken - obligations to drill or drop · 15/17c - (100%) - Kilravock - obligations to drill or drop · 21/7a - West of Scolty - obligations to drill or drop · 21/17b - (100%) - Winchat - obligations to drill or drop · 21/26 & 27c, 28/2b & 3 - (100%) - Elke/Pilot area - obligations to drill or drop Not EnQuest Operated · 22/11b - Contingent well · 14/30c - Buffalo - obligations to drill or drop · 20/14,19 & 20 - Cromwell - obligations to drill or drop · All of these licences are 'Traditional' Discovery updates · Cairngorm: work is being undertaken to prepare for a proposed appraisal well in 2013 · Crawford and Porter: EnQuest and its partners have concluded that the original development plan of a tie back to East Brea is not the best way to proceed and are considering alternative development concepts. A broad range of development options is being evaluated Additional information on the Nio transaction announced today · Under the proposed transaction, EnQuest has acquired o All of the shares in Nio and the assets of that entity, comprised of a Malaysian branch and office, the Production Sharing Contract ('PSC'), and related contractual commitments o Certain staff previously employed in other Seller entities · In May 2010, Nio together with Lundin Petroleum BV signed a new PSC with PETRONAS over Blocks SB307 and SB308, offshore Sabah, Borneo, Blocks SB307 and SB308 cover an area of over 6,230 square kilometres. This includes the oil discovery Bambazon, which is currently being reviewed for appraisal. Prospects have also been identified in the blocks from previous 2D and 3D seismic campaigns · Nio was originally established as a development company, with principal funding from Barclays Natural Resource Investments, a division of the investment bank of Barclays Bank PLC · Nio holds a 42.5% participating interest in each of SB307 and SB308, Lundin Petroleum (the PSC Operator) and PETRONAS Carigali hold a 42.5% and 15.0% interest respectively. · This initial PSC is for 4 years, expiring in Q2 2014, and is extendable by negotiation ENDS For further information please contact: EnQuest PLC Tel: +44 (0)20 7925 4900 Michael Waring (Head of Communications & Investor Relations) RLM Finsbury Tel: +44 (0)20 7251 3801 James Murgatroyd Conor McClafferty Dorothy Burwell Notes to editors EnQuest is the largest UK independent producer in the UK North Sea. EnQuest PLC trades on both the London Stock Exchange and the NASDAQ OMX Stockholm. It is a constituent of the FTSE 250 index. Its assets include the Thistle, Deveron, Heather, Broom, West Don, Don Southwest and Conrie producing fields and the Alma and Galia development. At the end of June 2012, EnQuest had interests in 29 production licences covering 36 blocks or part blocks in the UKCS, of which 22 licences are operated by EnQuest. EnQuest believes that the UKCS represents a significant hydrocarbon basin in a low risk region, which continues to benefit from an extensive installed infrastructure base and skilled labour. EnQuest believes that its assets offer material organic growth opportunities, driven by exploitation of current infrastructure on the UKCS and the development of low risk near field opportunities. Forward looking statements: This announcement may contain certain forward-looking statements with respect to EnQuest's expectation and plans, strategy, management's objectives, future performance, production, costs, revenues and other trend information. These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that may occur in the future. There are a number of factors which could cause actual results or developments to differ materially from those expressed or implied by these forward looking statements and forecasts. The statements have been made with reference to forecast price changes, economic conditions and the current regulatory environment. Nothing in this presentation should be construed as a profit forecast. Past share performance cannot be relied on as a guide to future performance. This information is provided by RNS The company news service from the London Stock Exchange END IMSEAPFPEAKAFFF -0- Nov/09/2012 07:00 GMT
EnQuest PLC ENQ Interim Management Statement
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