Enterprise Oil warns it will miss its reduced production targets

Enterprise oil, the UK's leading oil independent, admitted yesterday that it would miss its already reduced production targets for this year and said it would be a "challenge" to meet its longer-term targets.

The company has set itself a five-year goal of growing production by 5 per cent a year from last year's 280,000 barrels of oil equivalent per day (boepd). It is aiming for output of some 350,000 to 360,000 boepd in 2005.

However, a series of operational setbacks meant that in March it was forced to warn production would actually contract this year and would come in at 250,000-260,000 boepd. The company has been hit by problems at its Nelson and Pierce fields in the North Sea, which have cut production.

Yesterday, Enterprise said that production would come in slightly below that, at around 247,000 boepd.

The company's shares closed down 28p at 553p. In January, the stock reached a year high of 657p.

For the six months to 30 June, production dropped from 277,056 boepd last year to 255,116 boepd. Post-tax profits for the interim period came in at £204m, up from £162m last year, helped by the high oil price and favourable exchange rate movements. The average realised oil price was $26.79 in the first half.

With the on-going operational problems, production is expected to fall further in the second half of this year. Enterprise missed the production target it set for 1999.

Pierre Jungels, the chief executive, insisted Enterprise's five-year target remained attainable. He said: "It's a tough but achievable target. It requires enormous effort but through exploration successes and the buying and selling of assets, we can get there." He said new projects due to come on-stream over the next five years would take production to 300,000-310,000. The rest would be met by acquiring new assets.

Tony Alves, an analyst at Investec Henderson Crosthwaite, said that yesterday's news on production meant that the 2005 target was in danger of being missed.

He added that pre-tax profits would fall sharply at Enterprise next year, from £833m in 2001 to £514m, if the oil price fell to $22 a barrel.