North Sea-focused oil producer EnQuest reported a small rise in annual core earnings on March 21 despite weak oil prices, as it brought down costs and hedged its output against low prices.
The British company, which is set to bring its large Kraken oil field onstream in the second quarter, said it would lower costs further in 2017 and 2018 as it negotiates discounts with suppliers.
"People see us as the future of the North Sea so they're very happy to work with us as we're expanding," CFO Jonathan Swinney told Reuters.
EnQuest is targeting unit operating costs in the low $20s per barrel (bbl) once Kraken is onstream. It brought costs down 17% in 2016 to $24.60/bbl.
This helped the company maintain profits together with a successful hedging program that generated revenue of $256 million as it locked in prices at an average of $63.80/bbl compared with Brent prices of about $44/bbl.
EnQuest's full-year EBITDA rose to $477 million from $474 million and topped the $469 million expected by analysts polled by Reuters.
Earnings per share returned to positive territory after two years of losses, reaching 22.7 cents.
"Performance has been a pleasant surprise, and it is good to see the company returning to profit ahead of a large project start-up," said analysts at Cenkos Securities.
EnQuest shares were up 1.8% at 0847 GMT.
The company, which targets production between 45 Mbbl/d and 51 Mbbl/d for 2017, said the North Sea would benefit from further deals like one it concluded in January with BP Plc (NYSE: BP) when it bought a 25% stake in BP's Magnus oil field and surrounding assets.
Swinney said the U.K. government's review of its decommissioning tax and transfer of asset losses was positive for deal making in the mature basin.
EnQuest's strategy has been to buy up interests in mature fields for bargain prices and to apply new technologies and stricter spending programs to squeeze more out of aging infrastructure.
"Pushing out decommissioning and getting more out of mature fields is absolutely what we do extremely well. Anything that the government does to help that, I think we are very keen to be part of," Swinney said.
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