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EnQuest to be comfortably within debt covenants with production set to soar

Average gross production in 2018 at the Kraken field was 30,310 barrels of oil per day, which was below expectations. Production was limited by a number of weather-related and production system outages
North Sea oil rig
Kraken had a few production problems

North Sea oil producer EnQuest PLC (LON:ENQ) expects production to grow by 20% year-on-year in 2019.

Production is expected to grow to between 63,000 barrels of oil equivalent per day (boepd) and 70,000 boepd from 55,447 boepd in 2018, which itself was up 48% year-on-year and above the midpoint of the company's revised guidance.

READ: RBC takes back EnQuest debt warning but keeps heavy downgrade

Operating expenditure in 2019 is expected to be roughly US$600mln, including the additional interest in the Magnus oilfield in the North Sea.

"The group delivered on its operational targets for 2018, growing production by 48%. This performance and higher realised prices have facilitated accelerated repayments of the group's credit facility,” revealed Amjad Bseisu, the chief executive officer of EnQuest.

Net debt at the end of 2018 was roughly US$1.77bn. This year, the net debt to annual underlying earnings (EBITDA) ratio is expected to be around 0.9, which is comfortably below the group's debt covenant threshold of 1.5.

“Completing the acquisition of additional interests in assets from BP has delivered a set of assets with a strong strategic fit into our portfolio, with the Magnus asset, in particular, bringing a significant step change in the group's ability to generate positive cash flow,” the company's boss said.

"Our capital programme includes new wells at Magnus, Kraken and PM8/Seligi as well our pipeline projects at Thistle/Deveron and the Dons and Scolty/Crathes. The successful delivery of this programme will underpin production during 2019 and beyond. Our focus on cost control and capital discipline, combined with our improved cash generation capability enables further repayment of debt, which remains the priority for the group," he added.

Shares in EnQuest were up 4.7% at 19.9p in early deals.

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