Enquest Plc · LSE:ENQ
Enquest — H1 2017 Earnings Presentation
34 slides from Enquest's earnings presentation, Sep 7, 2017
Slide 1: EnQuest 2017 Half Year Results
EnQuest 2017 Half Year Results
Slide 2: Amjad Bseisu, Chief Executive
Amjad Bseisu Chief Executive
Slide 3: Agenda
Agenda Overview Amjad Bseisu, CEO Financials Jonathan Swinney, CFO Kraken Richard Hall, Head of Major Projects Operations Neil McCulloch, COO Summary Amjad Bseisu 2
Slide 4: EnQuest 2017: H1 highlights and latest full year outlook
EnQuest 2017 H1 highlights and latest full year outlook H1 2017 Delivered Kraken first oil on schedule and under budget Agreed to acquire Magnus/Sullom Voe Terminal EBITDA of $151m, cash capex of $205m Outlook 2017 full year and beyond Full year production guidance at 37,015 Boepd +/- 10% To date Kr
Slide 5: Financial discipline
Financial discipline Performance focused on driving cash flow Cash capex materially down again at $205.1m in H1 2017, from $261.6m in H1 2016 Guidance confirmed within lowered range of $375m-$400m range across full year Kraken full project capex further reduced to c.$2.4bn Net debt was $1,92
Slide 6: Jonathan Swinney, Chief Financial Officer
Jonathan Swinney Chief Financial Officer
Slide 7: Results summary
Results summary Half year to 30 June 2017 Unless otherwise stated all figures are before exceptional items and depletion of fair value uplift and are in US dollars US dollars H1 2017 H1 2016 Change % Export production (Boepd) 37,015 42,520 (12.9) Average realised price per barrel ($) 1 52 62 (16.1)
Slide 8: Summary income statement
Summary income statement Half year to 30 June 2017 H1 2017 H1 2016 US dollars Business Business performance performance $m’s $m’s Revenue 294.8 391.3 Cost of sales (248.6) (273.6) Gross profit 46.1 117.7 Exploration and evaluation expenses - - General and administration expenses (1.3) (5.4) Other (e
Slide 9: Focus on cost efficiency
Focus on cost efficiency Continuing to reduce costs across the supply chain H1 2017 H1 2016 Change % Cost of sales ($ million) 248.6 273.6 (9.1) Unit operating cost1 ($ per barrel) - Production costs 21 19 10.5 - Tariff and transportation costs 4 4 - - Operating costs 25 23 8.7 1 Adjusted for over/u
Slide 10: Group taxation position
Group taxation position No material UK cash CT/SCT on operational activities expected UK Tax Allowances $m’s Tax losses at 31 December 2016 2,894 2017 net additions plus RFES 282 Tax losses at 30 June 2017 3,176 Tax allowances carried forward 205 Total tax losses and allowances at 30 June 2017 3,381
Slide 11: Net debt and cash flow
Net debt and cash flow Half year to 30 June 2017 US$m 718 151 (1,797) (205) (34) (37) (1,922) Net debt Net cash flow Net financing & other Non-cash interest Net debt from operations Capex 31 Dec 2016 (excludes borrowings) capitalisation & FX 30 June 2017 10
Slide 12: $205 million cash capital expenditure
$205 million cash capital expenditure Half year to 30 June 2017 US$m 121 30 26 11 2 10 3 1 1 Kraken Scolty/Crathes Alma/Galia Thistle/Deveron Malaysia Exploration Alba Heather/Broom GKA Dons 11
Slide 13: Guidance to the market
Guidance to the market Outlook Production guidance for full year 2017 at 37,015 Boepd, plus or minus 10% Absolute FYR 2017 opex anticipated to be within expected range • Post August reduction in production guidance, unit opex to be around c$27bbl for FYR2 2017 Cash capex in 2017 is expected to
Slide 14: Richard Hall, Head of Major Projects
Richard Hall Head of Major Projects
Slide 15: Kraken – overview
Kraken – overview Reservoir above expectations First oil delivered on 23 June 2017, on schedule and under budget Downhole Hydraulic Submersible Pumps (HSPs), subsea production systems/risers and turret all performed at or above expectations Wells being brought on in phased manner. Production w
Slide 16: Kraken – well production performance
Kraken – well production performance Less than half of the well stock has already delivered c.60% of gross plateau production Wells being brought on in phased manner DC1 – 4 production wells all online; 3 WI wells all online DC2 – 3 production wells – 2 online; 1 still to be commissioned; 3 WI
Slide 17: Kraken - FPSO
Kraken - FPSO FPSO has been performing with reduced operational uptime, while crew are being familiarised with systems and instrumentation, which were being fine tuned Fluid processing capacity of the FPSO is 500,000 bbls per day; operations designed to be highly integrated FPSO is designed to
Slide 18: Kraken – next steps
Kraken – next steps Systematic and measured approach to resolution of issues Offload first cargo in the next few days Run plant at higher throughput on one production processing train (up to 40kbopd) Bring second processing train onstream Restore levels of back up equipment Commission re
Slide 19: Neil McCulloch, Chief Operating Officer
Neil McCulloch Chief Operating Officer
Slide 20: Kraken: Data Acquisition Programme Confirms FDP
Kraken State-of-the-art Data Acquisition Programme Confirms FDP Ultra-deep resistivity imaging used in 17 horizontal wells has confirmed the reservoir static model to a high degree of confidence pre-production Early dynamic data from DC1 and DC2 producers and injectors is in line with reservoir
Slide 21: Kraken – Wells
Kraken – Wells 17 wells completed to date: 9 x Producers; 8 x Injectors Currently batch drilling / completing 4 wells on DC3 Total footage drilled: 200,733ft (38 miles) Gross Reservoir interval drilled: 38,719ft World record: Longest Optipac (alternate-path) gravel pack - 4,347ft (Jun 2017
Slide 22: H1 production results to 30 June
H1 production results to 30 June Net production (Boepd) H1 2017 H1 2016 H1 2017 H1 2016 50000 10000 8,966 45000 9000 42,520 8,152 7,966 40000 8000 7,417 37,015 35000 7000 6,600 6,433 6,114 6000 30000 5,122 5000 25000 4,560 4000 3,738 20000 3,362 3,259 2,916 15000 3000 2000 10000 1,311 1,236 1,281 1,
Slide 23: Central North Sea
Central North Sea H1 2017: Greater Kittiwake Area (GKA): Good production delivered from GKA fields, high levels of plant uptime and production efficiency Scolty/Crathes production rates constrained due to wax build up in pipeline. Production continued at reduced rates following chemical treatmen
Slide 24: Northern North Sea
Northern North Sea H1 2017: Thistle/Deveron: Improved production and water injection efficiency through ongoing improvement project Successful water shut off intervention on a high water-cut well Don fields: High levels of production efficiency Good Don Southwest well performance Productio
Slide 25: PM8/Seligi
PM8/Seligi Low cost wellwork continues to arrest field decline, providing a base for future growth H1 2017 Combined 2015-17 well intervention programmes 10,000 8,000 boepd from idle wells averaged 8,000 boepd during H1 2017 8,000 Reservoir surveillance, including fluid contact 6,000 boepd loggin
Slide 26: Acquisition of Magnus
Acquisition of Magnus Avenue for growth in a capital constrained world EnQuest is a life extension expert, with the right integrated technical skills, operational scale and high level of operating efficiency Well placed to extend the lives of Magnus and SVT Will provide new opportunities for t
Slide 27: Summary
Summary Successful idle well restoration programme on PM8/Seligi Production efficiency remains high Institutionalised lower operating cost structure Industry leading drilling performance Minimising net cash outflow Magnus excellent new opportunity for growth 26
Slide 28: Outlook 2017 full year and beyond
Outlook 2017 full year and beyond Magnus completion anticipated by year end Kraken on course for gross 50,000 Boepd in H1 2018 Substantial potential in existing portfolio, net 2P 215 Mmboe Deleveraging the balance sheet remains a key post Kraken start up objective 27
Slide 29: Q&A
Q&A EnQuest : from 6 to 8 hubs, a growing & increasingly diversified portfolio Heather/Broom Kraken Thistle/Deveron The Dons Magnus Alma/Galia Greater Kittiwake Area PM8/Seligi 28
Slide 30: Strong reserves growth in first seven years
Strong reserves growth in first seven years Reserve life of 17 years Net 2P reserves 2010 to end of 2016 202 215 MMboe MMboe 81 (68) MMboe MMboe Additions to Production reserves Net 2P reserves 2010 to 2016 2010 to end 2016 Net 2P reserves at end 2016 start 2010 29
Slide 31: EnQuest's North Sea asset base
EnQuest’s North Sea asset base As at 30 June 2017 Licence Block(s) Name P901 21/12a Goosander P209 16/26a Alba P220 / P250 / P585 211/18a Thistle, & Deveron P19962 211/18a Don SW & Conrie P2148 211/18b West Don Kittiwake, Grouse, Mallard, Gadwall P2173 21/18a, 21/19a & 21/19b (Eagle³) P2176 2/5a Bro
Slide 32: Group taxation position: Effective Tax Rate reconciliation
Group taxation position Effective Tax Rate reconciliation ETR % $m’s Loss Before Tax (21) UK CT Rate 40 (9) RFES 236 (50) UK and overseas tax rate differences 21 (4) Permanent items (25) 5 Other (160) 34 Tax Credit 112 (25) Exceptional Tax Items 125 (26) HY 2017 Tax Credit 238 (51) 31
Slide 33: Exceptionals
Exceptionals Net $6m credit post-tax Main pre-tax items $63.2m : Impact of unrealised gains on commodity and FX contracts $(79.7)m : Oil and gas impairments $1.3m : Gain on disposal of Ascent Resources Loan note $(4.8)m : Other losses – mainly $4m crude marketing contract cancellation costs
Slide 34: Forward Looking Statements
Forward Looking Statements This presentation may contain certain forward looking statements with respect to EnQuest’s expectation and plans, strategy, management’s objectives, future performance, production, costs, revenues, reserves and other trend information. These statements and forecasts involv