Interactive Investor

Dramatic changes to Enquest forecasts

14th August 2014 10:49

Lee Wild from interactive investor

Enquest has had a bad run since June, and while Wednesday's half-year numbers were largely in line with expectations, delays at the oil producer's Alma and Galia fields in the North Sea have hit confidence. They've also forced a big downgrade by broker UBS.

"EnQuest's first half results were close to our expectations but disappointing updates on projects and cost guidance drive sizeable cuts to our forecasts," analysts wrote Thursday.

Start-up at Alma/Galia has slipped to mid-2015 from the second half of this year, and an extra $100 million (£59.92 million) of costs will take total overruns since project sanction in 2011 to $650 million. Management now thinks 2014 production costs will be about $545 million, or $54 per barrel of oil equivalent (boe) from $425 million and $42/boe previously.

That's why UBS has slashed current-year underlying earnings per share (EPS) forecasts by a third to just 9p compared with consensus of 11.3p. It halves EPS estimates for 2015 to 7p and by 6% for 2016 to 18p. Things take off in 2017, however, with EPS tipped to hit 32p.

"Our risked net asset value (NAV) falls to 134p per share (-19%) reflecting the Alma/Galia delay, higher embedded operating costs and roll forward of net financials," explains the broker, which slashes its target price from 144p to a more modest 125p.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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