Reports related to this article:
Plant(s): View 3 related plants in PECWeb
en
Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--Oil producer EnQuest is abandoning restarts at two oil fields in the U.K. North Sea as global oil prices continue to plummet.
The news comes as the U.K.'s North Sea oil and gas sector moves to "minimal manning" of offshore facilities due to coronavirus.
The company will not restart the ageing Heather and Thistle/Deveron fields which were closed last year over safety concerns. Total combined production from these fields in 2019 was roughly 6,000 barrels of oil equivalent per day (boe/d). EnQuest is heavily indebted and is aiming to slash its base operating costs by $150 million this year and its cash capital expenditure by an additional $80 million.
EnQuest Chief Executive Amjad Bseisu said: "Over the last few years, EnQuest has made significant progress in strengthening the business with our three world-class assets in Kraken, Magnus and PM8/Seligi, and a materially reduced debt position. Given the prevailing low oil price environment, we are taking decisive action to reduce operating and capital expenditure in 2020 and beyond, with a view to targeting cash flow breakeven of c.$35/Boe in 2021. While these actions have reduced our production expectations, free cash flow has improved and with no senior credit facility amortisations due in 2020 and long-dated bond maturities, we are positioning ourselves to manage through the current low oil price environment."
At the same time, the U.K. government has been warned that the oil price wars and a public health pandemic could "drive the North Sea oil and gas industry over the cliff edge," putting tens of thousands of offshore workers out of work, increasing the U.K.'s reliance on imported fossil fuels and extinguishing prospects of a just transition for oil and gas workers. Industry body Oil and Gas U.K. (OGUK) said that it is experiencing the most dramatic fall in oil price in almost 30 years and a halving of gas prices. It expects drilling levels to fall back to the lows experienced in 2016, down more than a third on previous forecasts. It also warned of a possible 20-30% decrease in capital investment for 2020 as well as the potential that the operators in the sector will experience negative cash flow this year.
OGUK Market Intelligence Manager Ross Dornan said: "The first week of March saw the most dramatic fall in oil price in almost 30 years and it remains uncertain as to how the market is going to evolve in the coming months as the coronavirus impact increases each day. Alongside this, the gas price has more than halved in the last 12 months, and we face a situation where E&P production revenues are set to be almost 50% lower than they were two years ago despite the same level of output."
He added: "The [U.K. continental shelf] has seen significant improvement in its competitiveness, efficiency and productivity in recent years. These improvements will help performance, however in this harsh environment we expect companies to take significant steps to preserve cash flow and ensure business continuity. This will have a very negative impact on the supply chain, which has not yet seen much recovery from the previous downturn and doesn't have the capacity to absorb much more pain."
Industrial Info reported last week that workers were being banned from travelling to North Sea oil and gas rigs and platforms in the U.K. after Equinor revealed the oil industry's first coronavirus infection on the Martin Linge offshore installation. For additional information, see March 23, 2020, article - North Sea Oil Struck by Coronavirus.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Our European headquarters are located in Galway, Ireland. Follow IIR Europe on: Facebook - Twitter - LinkedIn For more information on our European coverage send inquiries to info@industrialinfo.eu or visit us online at Industrial Info Europe.
The news comes as the U.K.'s North Sea oil and gas sector moves to "minimal manning" of offshore facilities due to coronavirus.
The company will not restart the ageing Heather and Thistle/Deveron fields which were closed last year over safety concerns. Total combined production from these fields in 2019 was roughly 6,000 barrels of oil equivalent per day (boe/d). EnQuest is heavily indebted and is aiming to slash its base operating costs by $150 million this year and its cash capital expenditure by an additional $80 million.
EnQuest Chief Executive Amjad Bseisu said: "Over the last few years, EnQuest has made significant progress in strengthening the business with our three world-class assets in Kraken, Magnus and PM8/Seligi, and a materially reduced debt position. Given the prevailing low oil price environment, we are taking decisive action to reduce operating and capital expenditure in 2020 and beyond, with a view to targeting cash flow breakeven of c.$35/Boe in 2021. While these actions have reduced our production expectations, free cash flow has improved and with no senior credit facility amortisations due in 2020 and long-dated bond maturities, we are positioning ourselves to manage through the current low oil price environment."
At the same time, the U.K. government has been warned that the oil price wars and a public health pandemic could "drive the North Sea oil and gas industry over the cliff edge," putting tens of thousands of offshore workers out of work, increasing the U.K.'s reliance on imported fossil fuels and extinguishing prospects of a just transition for oil and gas workers. Industry body Oil and Gas U.K. (OGUK) said that it is experiencing the most dramatic fall in oil price in almost 30 years and a halving of gas prices. It expects drilling levels to fall back to the lows experienced in 2016, down more than a third on previous forecasts. It also warned of a possible 20-30% decrease in capital investment for 2020 as well as the potential that the operators in the sector will experience negative cash flow this year.
OGUK Market Intelligence Manager Ross Dornan said: "The first week of March saw the most dramatic fall in oil price in almost 30 years and it remains uncertain as to how the market is going to evolve in the coming months as the coronavirus impact increases each day. Alongside this, the gas price has more than halved in the last 12 months, and we face a situation where E&P production revenues are set to be almost 50% lower than they were two years ago despite the same level of output."
He added: "The [U.K. continental shelf] has seen significant improvement in its competitiveness, efficiency and productivity in recent years. These improvements will help performance, however in this harsh environment we expect companies to take significant steps to preserve cash flow and ensure business continuity. This will have a very negative impact on the supply chain, which has not yet seen much recovery from the previous downturn and doesn't have the capacity to absorb much more pain."
Industrial Info reported last week that workers were being banned from travelling to North Sea oil and gas rigs and platforms in the U.K. after Equinor revealed the oil industry's first coronavirus infection on the Martin Linge offshore installation. For additional information, see March 23, 2020, article - North Sea Oil Struck by Coronavirus.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Our European headquarters are located in Galway, Ireland. Follow IIR Europe on: Facebook - Twitter - LinkedIn For more information on our European coverage send inquiries to info@industrialinfo.eu or visit us online at Industrial Info Europe.
