EnQuest eyes North Sea potential as profits rise

British oil and gas group EnQuest (ENQ) unveiled a sharp rise in profit last year, as it shrugged off the UK government's recent North Sea tax hike.

Pre-tax profit shot to $169.4 million in 2010, significantly above the $24.6 million recorded in 2009, fuelled by a 55% jump in production to 21,074 barrels of oil equivalent per day (boepd) and higher oil prices.

The company said it had notched up notable drilling successes during the year including the Don Southwest Area 22 S2Z, S5 and S6 which were all completed ahead of schedule and under budget.

Its year-end net 2P reserves were increased by 10% to 88.5 million barrels of oil equivalent.

Despite stating that it was "very disappointed" by the recent unexpected UK Budget decision to increase the supplementary charge levied on North sea oil and gas production from 20% to 32%, EnQuest said there nevertheless remains "significant potential" in its development and production programme.

Furthermore, the strong set of 2010 results prompted chief executive Amjad Bseisu to say the company was confident of its ability to deliver not only its 2011 targets, but also its medium and longer-term growth objectives from its UK Continental Shelf production.

"In our first year as a listed company, EnQuest has performed well against its key objectives, delivering strong results with significant increases in reserves and production. This performance marks a great beginning for EnQuest," he said.

The company has set a production target of 26,500 barrels of oil equivalent per day in 2011, signalling a 26% increase over 2010, underpinned by its 2011 drilling programme of eight wells.

Following the early success at Area E, the 2011 drilling programme will now include five production wells, two on Don Southwest and three of Thistle.

EnQuest has set itself a full-year capex guidance of $300 million; $250 million on development drilling and facilities and a further $50 million on exploration and appraisal.