The CEO of North Sea operator EnQuest has warned that windfall taxes are causing North Sea operators to “vote with their feet”.
Amjad Bseisu, CEO, claims that while EnQuest remains committed to the UK, high windfall taxes are pushing other energy companies away.
Bseisu told The Times: “There is a clear indication that things have deteriorated in terms of investment projects and companies which have said they are no longer investing in the UK. People are voting with their feet, so hopefully that will ring a bell in Westminster so they can look at an industry that has been critical to the UK for so many years.”
EnQuest released its 2022 full year results on Wednesday, showing a revenue of $1.84bn, 39.3% higher than in 2021’s result of $1.32bn.
Earlier this year, EnQuest deferred drilling on its Kraken oil field, blaming windfall taxes. The company reported a loss after tax of $41 million in 2022, compared with a $377 million profit in 2021.
EnQuest has so far paid approximately half of its $72 million windfall tax bill for 2022 and booked a $178 million non-cash charge up until 2028. The company claims that windfall taxes take 75% of the company’s profits.
The company had a strong free cashflow in 2022, closing the year with a net debt of $717m, compared with $1.2bn a year earlier.
Production averaged 47,800 barrels a day, in the three months up until March this year. The company’s forecasts predict this falling to 42,000 to 46,000 a day across the year as a result of maintenance shutdowns. During 2022 production was at an average of 47,300 barrels per day.
Higher windfall taxes
Speaking with CNBC at the Davos Summit in January, Bseisu said that EnQuest is looking to move more business to Asia due to high taxation. He accused the UK government’s decision to raise windfall taxes in November to 75% of “short-termism”.
Bseisu’s statement comes as a growing number of oil and gas majors are accusing the UK of overly-high taxation. Harbour Energy claimed last month that windfall tax “all but wiped out” its coming profits, which surged from $315m in 2021 to $2.5bn in 2022.
Harbour also announced that it will shed 350 UK jobs, citing the windfall tax as responsible. The company went on to say that it will “reassess” future activity level in the UK.
The UK government introduced the Energy Profits Levy or “windfall tax” amid the European energy crisis and reduced oil and gas imports following Russia’s invasion of Ukraine, aiming to lower household bills. At the same time, it increased tax benefits for new investments in the UK North Sea.
According to the UK treasury, “the Energy Profits Levy strikes a balance between funding cost of living support from excess profits while encouraging investment in order to bolster the UK’s energy security”.
Energy companies recorded huge profit increases for 2022 with the combined profits of Chevron, ExxonMobil, BP, Shell and TotalEnergies reaching almost $200bn.