EnQuest Chief Warns of Irreversible Damage of UK Windfall Tax
September 5, 2024
Britain's windfall tax on North Sea oil and gas companies' profits is causing irreversible damage to the industry, EnQuest's CEO said on Thursday, adding his voice to critics of the levy the government is poised to increase.
On Thursday, EnQuest reported a profit after taxation of $30.3 million for the six months ended June 30, missing analysts' estimates, and compared with a loss of $21.2 million last year.
Its share price slipped at the opening, but was 0.7% higher by 0857 GMT.
CEO Amjad Bseisu said the company was looking at opportunities in Southeast Asia, where he said "the return on capital investment is compelling".
In Britain, he said he was "disappointed with the ongoing application of the Energy Profits Levy (EPL), despite operating in an environment where no windfall conditions exist".
Following a spike in energy prices in 2022 that led to record profits for many big oil companies, Britain imposed an EPL, raising the tax rate to 75%.
For smaller players, including EnQuest, the rate wiped out profits.
As it seeks to shift investment into carbon-free energy, Britain's Labour government, elected in July, said last month it would raise the EPL by 3% to 38% starting Nov. 1, bringing the headline rate of tax on oil and gas activities to 78%, among the highest in the world.
An industry group said on Monday that would mean a nearly 12 billion pound ($15.77 billion) drop in revenue for the government, as well as accelerating a decline in output in the mature North Sea.
EnQuest's first-half production fell 6% to 42,771 barrels of oil equivalent per day (boepd) and it expects full-year production to be in the lower half of the guided 41,000 to 45,000 boepd range.
The company attributed this to delays in well interventions at Magnus and a failed infill well at Golden Eagle operations in the North Sea.
However, positive free cash flow generation and the completion of a stake sale in the Bressay North Sea field reduced net debt to $321 million by June-end, EnQuest said.
($1 = 0.7607 pounds)
(Reuters - Reporting by Arunima Kumar in Bengaluru; Editing by Varun H K and Barbara Lewis)
