ENQUEST PLC, 17 November 2010 Interim Management Statement

EnQuest remains on track for 2010 production targets

 

HIGHLIGHTS

-          Affirming full year production guidance of 20,000 boepd

-          First well in Thistle in 20 years drilled and on production

-          Completed acquisition of Stratic Energy Corporation

-          Offered all five licences sought in 26th round with four as operator

Amjad Bseisu, Chief Executive, said

“I am pleased to report that EnQuest is performing well.   In the ten months to the end of October 2010, we achieved production growth of 47 per cent over the same period in 2009 and can confirm that we remain on track to deliver our overall 2010 production target of 20,000 boepd, having increased that target from 18,000 boepd in August.  We completed our first acquisition, which provides us with a meaningful increase in our 2P reserves and increases our equity in the West Don field.  This year we have completed five production wells in three different fields and finished upgrading the drilling rig on the Thistle platform.   We are also pleased with our success in the 26th license round.   The above results give us further confidence in EnQuest’s strategy of delivering sustainable growth in shareholder value through the exploitation of existing reserves, development opportunities and selective acquisitions.”

Production & Development Summary

 

  Pro-forma*
Daily Average
Pro-forma*
Daily Average
Pro-forma*Cumulative Pro-forma*
Cumulative
  1 Jan 2010 to
31 Oct 2010
1 Jan 2009 to
31 Oct 2009
1 Jan 2010 to
31 Oct 2010
1 Jan 2009 to
31 Oct 2009
  Net production (boepd) Net production (boepd) Net production (bbls) Net production (bbls)
Thistle/Deveron 4,737 3,835 1,440,117 1,165,844
The Don Fields 10,612 3,172 3,225,916 964,371
Heather/Broom 4,527 6,522 1,376,188 1,982,709
Total 19,876 13,529 6,042,221 4,112,924

-          Produced 19,876 boepd net pro-forma daily average to the end of October 2010, up 46.9% on   the same period in 2009

-          Produced 6.0m bbls net pro-forma cumulative to the end of October 2010, including 2.7m bbls in the first four months of the second half of 2010

Within the second half of 2010, EnQuest’s cumulative net production from 1 July 2010 to 31 October 2010 was 2,656,137bbls.

-          Our first well in Thistle (and the first in the field for 20 years) is a success.  To date we have only tested the poorer lower part of the reservoir which started production at 800 boepd.  Further production zones will be added later. 

-          The West Don W4 production well was completed in September and following a sub-sea hook-up is expected to start production within the next few weeks

-          Broom pipeline replacement and augmentation project was completed on time.

* ‘Pro-forma’ data reflects the results for first six calendar months of 2010 and 2009, as if the assets previously owned by Petrofac Limited and Lundin Petroleum AB were owned by EnQuest throughout the period.  The results reported under IFRS reflect the related pooling of interests and acquisition accounting – for further details see ‘Pro-forma note’ in EnQuest’s 2010 Half Year Results.

Summary Report

On 27 October 2010, EnQuest was offered all five of the blocks it had sought in the 26th licensing round, these included; a 100 per cent interest 3/1b (split) (small exploration block adjacent to Heather), a 100 per cent interest in 21/27a (part) and 28/2 (part) (a  heavy oil discovery), a 100 per cent interest in 30/24, 30/25 part blocks (potential redevelopment of the Ardmore field) and a 33.33 per cent interest in 3/17 (exploration block operated by Apache).  

On 5 November 2010, the acquisition of Stratic Energy Corporation was completed, increasing EnQuest’s North Sea 2P reserves and consolidating EnQuest’s previous 27.7 per cent West Don holding to 44.95 per cent.  The acquisition also provides a 19 per cent interest in the proposed Crawford development. Following several months of preparation prior to the completion of the acquisition, the integration of this business into EnQuest is now well underway.

The drilling programme in the second half of 2010 has delivered the start of production from our first well (A55) in the Thistle field, drilled into the Southern Fault Block of the field.  It is the first new production well drilled and completed in 20 years from the Thistle platform.  This follows an extensive upgrade programme on the drilling rig with approximately $70 million already invested in advance of the new drilling activities.  Current indications from the well are encouraging with 800 boepd of initial production from the poorer lower part of the well.

OUTLOOK

In the first half of 2010 pro-forma unit cost of sales for production and transport costs were running at just over $28 per boe.  The full year pro-forma unit costs are expected to increase as a result of a number of factors. These include the costs of maintaining and operating the Sullom Voe Terminal where the operator of the facility has advised that these costs will be greater than previously expected.  Related to this EnQuest’s full year pro-forma cost of sales for production and transport are expected to increase by approximately $0.5 per boe.  A ‘one-off’ workover on the W2 well in the West Don field, completed in November 2010, will increase unit costs by approximately $1 per boe.  Other miscellaneous costs incurred are expected to result in a further increase of approximately $1 to $2 per boe.

Pro-forma capital expenditure for 2010 is now expected to be  approximately $200 million rather than the $240 million previously estimated.  This decrease is partly a consequence of rephasing, with $40 million of expenditure now moving to 2011.  As an example of the rephasing, the Thistle rig has started a programme of two partial well abandonments prior to returning to drilling the North West Fault Block, now to be in early 2011.   The 2011 drilling and capital programmes, including exploration and appraisal expenditure, will be set out in more detail at the time of EnQuest’s preliminary full year results.

EnQuest remains confident of delivering the increased overall 2010 net production target of 20,000 boepd, representing growth of 47 per cent over 2009.

                                                                       Ends

 

EnQuest PLC                                                                                  Tel: +44 (0)20 7925 4943

Jonathan Swinney (Chief Financial Officer)

Michael Waring (Head of Communications & Investor Relations)                                              

Finsbury                                                                                         Tel: +44 (0)20 7251 3801

Andrew Mitchell

Conor McClafferty

Notes to editors

EnQuest PLC (www.enquest.com) is an independent oil & gas production and development company focused on the UK Continental Shelf (“UKCS”).  On 6 April 2010, EnQuest was formed from the demerged UK North Sea assets of Petrofac Limited and Lundin Petroleum AB.  EnQuest was admitted to trading on both the London Stock Exchange and the NASDAQ OMX Stockholm.  On listing, EnQuest PLC went into the FTSE 250 index and OMX Nordix Index.  Its assets include the Thistle, Deveron, Heather, Broom, West Don and Don Southwest fields. 

EnQuest intends to deliver sustainable growth in shareholder value by focusing on exploiting its existing reserves, commercialising and developing discoveries, converting its significant contingent resources into reserves and pursuing selective acquisitions.  EnQuest is focused on increasing production from its existing assets in its core hub areas. It believes that it has excellent operational, execution, subsurface and integration skills and it seeks to become the development partner of choice in the UKCS.   EnQuest believes that it has the technical skills, the operational scale and the financial strength to achieve its objectives and to take advantage of the production and development opportunities in the UKCS.

Definitions of technical terms used in this release are available in a glossary on the EnQuest website (www.enquest.com) and within the Prospectus EnQuest issued in advance of flotation.  This prospectus is also available on the EnQuest website.

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