The EnQuest (LSE:ENQ) share price took a bit of a tumble this month following some fairly lacklustre half-year results. Disappointed investors caused the stock to fall as much as 15% within a few days after the news was published. Despite this recent downturn, the EnQuest share price has still managed to deliver a 96% return over the last 12 months.
So were these latest results as bad as investors think? And moving forward, can the stock continue to provide similar long-term performance? Let’s take a closer look.
The EnQuest share price drops on earnings
Looking at the latest set of numbers, investors may be correct in being concerned. Daily oil production volumes fell to 46,187 barrels, following several disruptions at its upstream operations. That’s a 30% decline compared to the 66,055 barrels produced in 2020. So what happened?
Its Magnus project suffered from an unplanned third-party outage and power failures. Meanwhile, production at its Kraken oil field was also adversely impacted due to necessary maintenance and repairs. To make matters worse, production from its Malaysian operations also dropped by 42.1% due to a severe incident. A riser at its Seligi Alpha platform had detached, resulting in a gas leak which in turn triggered a fire. The platform was automatically shut down by safety procedures, and fortunately, the fire was extinguished with no personnel being injured. Repairs didn’t take too long. But the platform remains at limited production capacity.
Revenue still managed to grow by around 9.7%, thanks to rising oil prices. But this wasn’t sufficient to push the group back into the black, with losses for the first six months of 2021 coming in at $56.4m. This is a substantial improvement on the $472.4m loss incurred in 2020. But it seems investors were simply expecting more. As a result, the EnQuest share price took a hit.
The road ahead
Combined, these disruptions have led to management estimating full-year production guidance to be between 46,000 and 52,000 barrels per day. That’s obviously lower than 2020 levels. However, as maintenance is completed across its various platforms, production will likely improve in 2022.
A replacement for the damaged riser on the Seligi Alpha platform is expected to be installed in October. After this process is completed, the platform should be able to return to full production capacity. What’s more, the disruptions experienced at its other sites ultimately appear to be short-term problems rather than permanent production issues.
Providing that oil prices can maintain their current level, and there are no further disruptions, the EnQuest share price could be set to have an explosive 2022.
The bottom line
It’s been a rough year or so for EnQuest and its share price. But it seems that the problems caused by the pandemic and various site incidents are coming to an end. Having said that, I’m personally not interested in adding this business to my portfolio since I believe there are far better investment opportunities to be found elsewhere.
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Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.