North Sea oil company EnQuest criticises ‘unconditional windfall tax’

EnQuest has finally returned to profitability after suffering two consecutive years of losses, largely as a result of the UK’s Energy Profits Tax (EPL).

The North Sea exploration and production company posted a post-tax profit of $30.3m (£23m) for the six months to June 30, after suffering losses of $30.8m and $41.2m in 2023 and 2022 respectively.

London-listed EnQuest owed $34.1 million to HM Treasury in relation to the EPL, down sharply from $73.8 million in the same period last year.

The government is currently planning to extend the EPL on “extraordinary” profits from November, raising the tax rate from 35 to 38 percent and raising the main tax rate on upstream oil and gas activities to 78 percent.

EnQuest CEO Amjad Bseisu said: “We are disappointed with the continued application of the Energy Profit Tax despite operating in an environment where no windfall conditions exist.”

EnQuest, which produced 6 percent fewer barrels of oil year-over-year in the first half, benefited from higher prices during the period.

The group reported that oil prices achieved were $83.40 per barrel during the semester, 10 percent higher than the $75.80 of last year.

However, while Brent crude rose about 11 percent during the first six months of the year to $84.30 a barrel, it has fallen more than 30 percent from its June 2022 peak of $112.24 in the wake of Russia’s invasion of Ukraine.

It is currently trading at $72.73 a barrel.

The EPL was implemented after the easing of Covid restrictions and Russia’s invasion of Ukraine led to spiralling energy prices and windfall profits for oil and gas companies.

Plans to extend the EPL, despite lower wholesale energy prices, have led industry to warn it would lead to thousands of job losses and undermine Britain’s progress towards net-zero emissions.

Bseisu said: ‘The current tax regime is causing irreversible damage to an indigenous and strategically important UK industry.

‘The UK energy industry needs a progressive tax regime that recognises the maturity of the North Sea and re-establishes the UK as a globally competitive investment basin.’

EnQuest shares fell 0.3 percent to 12.26 pence in early trading, down more than 20 percent since the start of the year.

Shore Capital analyst James Hosie said Bseisu’s comment “highlights the impact that the continuation of the EPL is having on the competitiveness of the UK North Sea.”

He added: “The company remains committed to the UK, where it is seeking acquisition opportunities that leverage its operational capabilities and tax loss carryforwards to unlock additional value.

‘However, the statement also notes that the focus is on deals to acquire UK assets with limited future capital expenditure requirements.

‘At the same time, EnQuest continues to look for opportunities to expand its operations in Southeast Asia.’