EnQuest shares plummet after the oil and gas producer posts losses

EnQuest shares tumbled on Tuesday after the windfall tax and falling prices pushed the energy producer into losses for the first half of the year.

The London-listed company reported a loss of $21.2 million for the six months ended June, compared to a profit of $203.5 million for the same period last year.

The result was due to a $76 million Energy Profits Levy (EPL) charge, more than half of the total tax burden.

Losses: London-listed EnQuest reported a loss of $21.2 million for the six months to June

Excluding EPL, the company still reported a roughly 38 percent decline in pre-tax profit to $112.9 million as falling oil and gas prices impacted sales, which grew by over $200 million to $732.7 million dollars collapsed.

Following the trading update, EnQuest shares fell 15.8 percent, or 2.75 pence, to 14.7 pence early Tuesday afternoon, making it the biggest loser in the FTSE All-Share Index.

Oil prices soared throughout 2022 as Russia’s invasion of Ukraine tightened supplies across Europe and as Covid-related restrictions were eased, allowing factories to reopen and people to travel more regularly.

Since then, they have declined significantly due to the global economic slowdown and the introduction of energy efficiency measures by governments.

Wholesale gas prices were also impacted by mild weather conditions, improved inventories and weak demand from China.

In the first half of 2023, global oil prices averaged $75.8 per barrel, up from $89.9 a year earlier, while the average day-ahead gas price fell from 182p to 108p per UK thermal unit.

Enquest’s results were further impacted by an 8.5 percent decline in average production to 45,480 barrels of oil equivalent per day.

Production at the Kraken field fell by about a third following the failure of some hydraulic submersible pump transformers in May, while production at the Golden Eagle operation also fell.

Back in February, the company announced that it was shelving new drilling in the Kraken field due to the impact of the EPL.

The windfall tax, introduced by then-Chancellor Rishi Sunak last May, is a 35 percent surcharge on the profits of North Sea oil and gas companies, which now pay an effective tax rate of 75 percent.

Amjad Bseisu, CEO and co-founder of EnQuest, warned that the industry is facing “significant challenges and a loss of competitiveness” due to uncertainty stemming from recent tax changes.

He added that “timely legislative reform is needed to restore confidence in the UK oil and gas sector, protect jobs and ensure both energy security and decarbonisation.”

North Sea colleague Ithaca Energy announced two weeks ago that it was forced to postpone and cancel some domestic projects due to the EPL.

Russ Mold, investment director at AJ Bell, said: “The treatment of taxes is an accounting issue and it is certainly fitting for UK oil and gas companies to highlight the impact of the new levies they are facing – namely through their decisions to defer and withdraw investments.” that they are sending a credible signal of unrest.”

In response to industry criticism of the tax, the UK government has promised to abolish it if oil and gas prices fall below historically normal levels for an extended period.

Under the Energy Security Investment Mechanism, the levy would end if the average oil price falls to or below $71.40 a barrel and gas prices reach 54 pence a barrel for two consecutive quarters.