EnQuest Plc, the North Sea oil and gas producer, said profit almost doubled in the first half as new investments allowed the company to reduce its tax rate.
Profit after tax climbed to $129 million from $69 million a year earlier, while tax losses increased to about $580 million, the company said in a statement in London today. The company’s effective tax rate will be 31.5 percent this year, compared with a typical rate of about 70 percent, Chief Financial Officer Jonathan Swinney said in an interview.
Chancellor of the Exchequer George Osborne promised to increase tax allowances for smaller oil and gas fields to encourage investment after he introduced a surprise tax increase on oil production profits in 2011. EnQuest said today it’s on track to increase production 20 percent a year through 2014.
“We’re pleased with the small fields allowance, it’s added to incentives to invest,” Chief Executive Officer Amjad Bseisu said in an interview. “We’re confident in the future.”
Output in the first half slipped 20 percent to 20,253 barrels of oil equivalent a day as the company had to replace a well in the Don fields. Production will pick up in the second half, it said. The Heather/Broom field was hit by the closing of the Ninian pipeline, which has since reopened, it said.
The shares slipped 1 percent to 114.9 pence in London. The stock has gained 24 percent this year.
EnQuest increased its stake in the Kraken discovery to 60 percent in the first half, which it is developing with Cairn Energy Plc. It will also start appraisal drilling on the Kildrummy discovery in the fourth quarter.
Bseisu said the company’s production targets don’t take into account any potential output from undeveloped discoveries. EnQuest will seek more acquisitions after making six in the first half, he said. The company also sold a 35 percent stake in the Alma/Galia field to Kuwait Foreign Petroleum Exploration Co. in May.
“We continue to look for opportunities,” Bseisu said. “We had a busy first half, but I can’t predict what will happen in the second half.”