Enquest Plc · LSE:ENQ

Enquest — FY2015 Earnings Presentation

67 slides from Enquest's earnings presentation, Mar 17, 2016

  1. Slide 1: EnQuest 2015 Full Year Results

    EnQuest 2015 Full Year Results

  2. Slide 2: Amjad Bseisu, Chief Executive

    Amjad Bseisu Chief Executive

  3. Slide 3: Agenda

    Agenda  Overview Amjad Bseisu, CEO  Financials Jonathan Swinney, CFO  UK North Sea Neil McCulloch, President North Sea  Kraken Richard Hall, Head of Major Projects  Malaysia Amjad Bseisu & Summary 2

  4. Slide 4: Key themes

    EnQuest 2015 Results Key themes  Delivering on our current priorities  Further capex and opex reductions  Unit opex in low $20s/bbl post Kraken  Kraken is on track, additional $125m capex cut  Excellent operational performance in 2015  Strong 2015 production growth 3

  5. Slide 5: Strategic priorities in a low oil price environment

    Strategic priorities in a low oil price environment Delivering on execution  Strong 36,567 Boepd production in 2015  Averaged over 50,000 Boepd in Nov & Dec with Alma/Galia onstream  Malaysia delivered 9,062 Boepd in 2015, 25% of EnQuest  In 2015, three Alma/Galia wells were onstream  A total o

  6. Slide 6: Restructuring EnQuest's operating cost base

    Strategic priorities in a low oil price environment Restructuring EnQuest’s operating cost base  Further improvements to streamlining of operations, ahead of previous targets  Delivered opex of $29.7/bbl in 2015, down from $42.1/bbl in 2014  Anticipating unit opex in $25-27/bbl range in 2016  Fu

  7. Slide 7: Strengthening the balance sheet

    Strategic priorities in a low oil price environment Strengthening the balance sheet - good operational performance  Kraken full project capex had previously been reduced by c.10%  Now down by a further c.$125m, through optimisation of drilling plans  Overall 2016 cash capex has been cut again  N

  8. Slide 8: Production results to year end 2015

    Production results to year end 2015 Above top of 33,000 Boepd to 36,000 Boepd guidance range Net production (Boepd) 2014 2015 2014 2015 40000 10000 9,025 8,930 9000 8,835 8,689 35000 36,567 8000 7,690 30000 27,895 7000 25000 6000 5000 20000 4,643 4,081 3,981 4000 3,4593 15000 3000 10000 2000 1,2811

  9. Slide 9: Strong reserves and production growth in first six years

    Strong reserves and production growth in first six years Reserve life of over 18 years Net 2P reserves 2010 to start of 2016 Ave’ net annual production (Boepd) 190 216 2009 to 2015 MMboe MMboe 40000 36,567 35000 30000 25000 81 (55) 20000 MMboe MMboe 15000 13,613 10000 5000 Production Additions to 20

  10. Slide 10: Jonathan Swinney, Chief Financial Officer

    Jonathan Swinney Chief Financial Officer

  11. Slide 11: Results summary

    Results summary Year to 31 December Unless otherwise stated all figures are before exceptional items and depletion of fair value uplift and are in US dollars US dollars 2015 2014 Change % Export production (Boepd) 36,567 27,895 31.1 Average realised price per barrel ($)1 72.0 103.8 (30.7) Revenue ($

  12. Slide 12: Summary income statement

    Summary income statement Year to 31 December 2015 2014 US dollars Business Business performance performance $m’s $m’s Revenue 906.6 1,009.9 Cost of sales (733.4) (654.1) Gross profit 173.2 355.8 Exploration and evaluation expenses (0.3) (4.0) General and administration expenses (14.4) (16.5) Other i

  13. Slide 13: Focus on cost efficiency

    Focus on cost efficiency Unit operating costs on course for low $20s/bbl post Kraken Unless otherwise stated all figures are before exceptional items and depletion of fair value uplift and are in US dollars 2015 2014 Change % Cost of sales ($ million) 733.4 654.1 12.1 Unit operating cost1 ($ per bar

  14. Slide 14: Group taxation position

    Group taxation position No material UK cash CT/SCT on operational activities expected UK Tax Allowances $m’s Recognised at 31 December 2014 1,818 2015 net additions plus RFES 693 Prior year adjustment 25 Tax losses at 31 December 2015 2,536  No cash tax expected to be paid on UK operation activitie

  15. Slide 15: $751.1 million cash capital expenditure

    $751.1 million cash capital expenditure Year to 31 December 2015 US$m 310 158 95 68 51 30 24 29 33 Office sale 22 Kraken Alma/Galia Thistle/Deveron Tanjong Baram Dons Heather/Broom GKA PM8/Seligi Other Office build (69) 14

  16. Slide 16: Cash flow

    Cash flow Year to 31 December US$m 718 245 (967) (751) (75) (1,548) Cash & equivalents less Net cash flow Financing & other Cash & equivalents less Capex borrowings at from operations (excludes borrowings) borrowings at 1 January 2015 31 December 2015 15

  17. Slide 17: Guidance to the market

    Guidance to the market Outlook  Production guidance between 44,000 Boepd and 48,000 Boepd for 2016  Average unit opex anticipated to be in the range of $25-27/bbl for 2016  Into low $20s/bbl post Kraken and Scolty/Crathes  Cash capex in 2016 is expected to be at low end of $700m- $750m  Predomi

  18. Slide 18: Neil McCulloch, President, North Sea

    Neil McCulloch President, North Sea

  19. Slide 19: Strategic priorities in a low oil price environment

    Strategic priorities in a low oil price environment  Production performance on track Delivery  Upper Quartile drilling performance  Ythan delivered one year after taking license  Production efficiency remains strong Streamlining  Continued programme of unit opex reduction operations  Positive

  20. Slide 20: EnQuest Producer

    EnQuest Producer Project to producing asset Opex per bbl of $22.5 in 2015 2015 Highlights  First oil safely achieved on 27 October 2015  Commissioning progressed smoothly  First three wells operating with temporary diesel power 2016  Second cargo offload in January  All six Alma/Galia wells com

  21. Slide 21: Greater Kittiwake Area

    Greater Kittiwake Area Transformed performance after taking operatorship Opex per bbl in 2015 reduced by 61% from 2014 2015 Highlights  Average full year production increased by 140% from 2014-2015  Gadwall successfully brought online – initial production c.15,000 Boepd GKA production from Q2 2014

  22. Slide 22: Scolty/Crathes

    Scolty/Crathes On track and on budget Summary  Two-well, 25km subsea tie-back development, north of Kittiwake – first oil by H1 2017  Lump-sum contracts for topside and subsea, milestone payments deferred to first oil  Stena Spey commenced Crathes drilling  Development capex <$20/bbl, opex/bbl <

  23. Slide 23: Thistle/Deveron

    Thistle/Deveron High production efficiency, cash flow returned from drilling programme Opex per bbl in 2015 reduced by 19% from 2014 2015 Highlights  Excellent drilling performance:  initial three well programme successful - extended to six activities  paid back on first three wells in 2015 (inc.

  24. Slide 24: Ythan, Dons & Conrie

    Ythan, Dons & Conrie Ythan performance ahead of expectations Ythan - 2015  Fast track development schedule  Production significantly above expectation, production decline less than expected 2016 - Future development being re-evaluated following increased oil in place and better well performance Do

  25. Slide 25: Heather/Broom

    Heather/Broom High operational uptime, benefitting from improved water injection Opex per bbl in 2015 reduced by 23% from 2014 2015 Highlights  Heather Field’s production rate doubled following 2014 drilling and improved water injection efficiency  Broom rate restored after injection line replacem

  26. Slide 26: Northern North Sea (NNS) Infrastructure

    Northern North Sea (NNS) Infrastructure Operational Gas Group (OGG)  Reliable, cost-effective source of fuel gas secured by innovative industry “group buy”  Cost reduced by more than 50% for Heather/Broom Sullom Voe Terminal (SVT)  NNS transportation costs reduced by 20% from 2014 to 2015  SVT p

  27. Slide 27: Summary

    Summary  Opex/bbl ahead of guidance and set to be in mid- $20s/bbl in 2016  Drilling costs/performance ahead of industry - upper quartile benchmarks  Strong production delivery - Kittiwake now delivering upper quartile performance in line with NNS assets  Alma/Galia project complete with minor a

  28. Slide 28: Richard Hall, Head of Major Projects

    Richard Hall Head of Major Projects

  29. Slide 29: The Kraken development

    The Kraken development Successfully delivering extensive drilling and subsea programmes FPSO on track

  30. Slide 30: Kraken development: project status

    Kraken development Project status  FPSO conversion on schedule for 2017 first oil  Drilling/well programme ahead of schedule  Excellent reservoir correlation with subsurface expectations  Submerged turret/buoy fabricated and installed successfully  Full 2015 SURF 1 campaign completed under budg

  31. Slide 31: Kraken development: wells/drilling

    Kraken development Wells/drilling: two already completed D3 D2 B2 Wells drilled through reservoir 30

  32. Slide 32: Installation of Submerged Turret Production buoy and DC1 risers

    Installation of Submerged Turret Production (STP) buoy and Drill Centre 1 (‘DC1’) risers Buoy/turret lift from transportation vessel STP buoy/turret pre-ballasting DC1 riser and buoyancy module installation 31

  33. Slide 33: Kraken FPSO recent activities

    Kraken development FPSO recent activities – power modules lift on board 32

  34. Slide 34: 2016 drilling programme revision, moving to three drill centres

    Kraken development 2016 drilling programme revision, moving to three drill centres  Drill wells from DC1, DC2, DC3 locations, no DC4  Development becomes 23 well development DC3  12 producers & 11 Injectors vs. 14 & 11 respectively  Maintaining existing schedule until final well completed.  Add

  35. Slide 35: Revised Kraken infrastructure

    Revised Kraken infrastructure Three drill centres 34 34

  36. Slide 36: 2016 subsea programme to first oil

    Kraken development 2016 subsea programme to first oil  Subsea programme/timings – “Subsea  Drill Centre DC3 Umbilicals, Risers, Flowlines” (SURF)  Install water injection & production “Integrated Template Structures” (ITS)  Drill Centre DC2  Install water injection & production  Install water

  37. Slide 37: Schedule of work for 2016

    Kraken development Schedule of work for 2016, continuing on schedule Wells available pre-first oil : 4 producers & 4 injectors  Rig Programme – Transocean Leader  Drill Centre 1 (DC1)  Drill and complete six wells to finish DC1 drilling programme  DC3  Batch drill and run intermediate casing in

  38. Slide 38: Malaysia

    Malaysia

  39. Slide 39: Malaysia: 25% of EnQuest's production in 2015

    Malaysia: 25% of EnQuest’s production in 2015 PM8/Seligi: material production increase since EnQuest took over ▪ EnQuest assumed operatorship October 2014 ▪ Production efficiency enhanced from 82% to over 90% ▪ Improved by focusing on:  Facility integrity  Gas compressor reliability  Idle well re

  40. Slide 40: PM8/Seligi well interventions

    PM8/Seligi Well interventions have already added 3,000 Boepd from idle wells 2015  Added 3,000 Boepd gross by restoring idle wells to production  Focus on mechanical jobs only – sand cleanout, gas lift reinstatement, surface valve repairs  Reservoir surveillance to support future work  Reinstate

  41. Slide 41: Tanjong Baram field

    Tanjong Baram field Leveraging EnQuest’s proven execution capability  March 2014 – signed RSC  Feb 2015 – platform substructure installed and spud of first well  April 2015 – completed installation of subsea pipeline  May 2015 – platform topsides installed  June 2015 – initial production  750,

  42. Slide 42: Summary

    Summary @nQuest

  43. Slide 43: Turning field decline into production growth

    EnQuest Turning field decline into production growth and economic field life extension PM8/Seligi gross production GKA production from January 2014 until end December 2015 Thistle gross production Heather net production SVT Shutown SVT Shutdown 6 wells drilled by EnQuest from 2010 -2013 4 wells in 2

  44. Slide 44: Addressing the challenges of low oil prices

    Addressing the challenges of low oil prices High operating efficiency, great execution, low cost capabilities are all essential  Strong operational performance  Record production growth, high operational efficiency  Generating positive cashflows at current oil prices  Strong execution  Alma/Gal

  45. Slide 45: Repositioned for resilience now and for sustainable growth

    Repositioned for resilience now and for sustainable growth Delivering strong compound annual growth rates 31% increase in 2015, c.26% in 2016, then further substantial increases beyond Average net production (Boepd) Q&A 50000 50,000+ 4,000 45000 44,000 40000 36,567 35000 30000 25000 20000 15000 1000

  46. Slide 46: Delivering on core competencies of operational efficiency and cost control

    Delivering on core competencies of operational efficiency and cost control  Existing UK hubs performing well Thistle/Deveron Heather/Broom Field life  Transforming GKA production and GKA extensions operational efficiency, ahead of plan PM8/Seligi  Material Malaysian production contribution  Firs

  47. Slide 47: EnQuest's sustainable growth model

    EnQuest’s sustainable growth model Delivering solutions for maturing/marginal fields Growing track record of delivery Right owner for maturing / Subsurface late life assets North Sea: expertise - Thistle Investment & Ability to execute - Heather Cost control - Ythan Process Operational - Greater Kit

  48. Slide 48: EnQuest's producing hubs

    EnQuest’s producing hubs From 3 to 6 hubs, a growing & increasingly diversified portfolio Thistle/Deveron The Don fields Heather/Broom Greater Kittiwake Area PM8/Seligi (Malaysia) Alma/Galia 47

  49. Slide 49: Largest UK Independent Producer in the UK North Sea

    Largest UK Independent Producer in the UK North Sea Government data (DECC) for UK North sea independent producers Total Production for the year ending September 2015 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 - EnQuest Ithaca Premier Oil Fairfield Tullow Oil First Oil Endeavour 48

  50. Slide 50: EnQuest's North Sea asset base

    EnQuest’s North Sea asset base As at 31st December 2015 Licence Block(s) Name P073 21/12a Goosander P213 1 16/26a Alba P236 211/18a & b Thistle, Deveron, Don SW, Conrie, West Don P238 21/19a & 21/19b Grouse, Mallard, Gadwall P242 / P902 2/4a & 2/5a Broom & Heather P351 21/18a Kittiwake P475 21/19s T

  51. Slide 51: EnQuest Malaysia

    EnQuest Malaysia World class resource; sustainable growth World class resource  2.2 Bnboe in-place; only 31% recovered to date Multiple avenues for material growth  Interventions from c. 230 idle strings  Workovers, infill drilling, waterflood Already delivering  PM8/Seligi production increased

  52. Slide 52: Delivering sustainable growth

    Delivering sustainable growth On course for over 50,000 Boepd Exploiting our Commercialising existing reserves & developing discoveries Dons, Thistle/Deveron, Heather/Broom, Ythan Alba Scolty/Crathes Alma/Galia Kraken PM8/Seligi Greater Kittiwake Area, PM8/Seligi Converting contingent Making selecti

  53. Slide 53: Greater Kittiwake Area opportunity

    Greater Kittiwake Area opportunity 50 km tie-back radius & competitor infrastructure 52

  54. Slide 54: Alba

    Alba 8% non-operated, 1,178 Boepd in 2015 (1,214 Boepd in 2014) 2015  Strong well and plant performance during the year with an average production of 1,178 Boepd  Production enhancement / base ADW protection opportunities have significantly contributed to production in 2015 • A50 returned to produ

  55. Slide 55: EnQuest Malaysia: world class resource

    EnQuest Malaysia World class resource with significant remaining upside PM8/Seligi fields (50% WI)  2.2 Bnboe HIIP  Produced 680 MMboe (31% recovery factor)  Gross reserves: 2P 38 MMboe; 2C 105 MMboe  Peak production 160,000 Boepd – once the largest field in peninsular Malaysia PM8 fields Seligi

  56. Slide 56: PM8/Seligi

    PM8/Seligi A producing hub with capacity for future growth PM8 fields  5 producing fields: Lawang, Langat, Serudon, Yong, North Raya  4 unmanned platforms – supported from Seligi  10 producing, 25 idle oil well strings  All production flows to Seligi, lift gas from Seligi Seligi field  2 manned

  57. Slide 57: PM8/Seligi: multiple avenues for growth

    PM8/Seligi Multiple avenues for growth Serudon near Pantai field development cluster development PM8 gas development Peta & Peta-Kiri cluster development East Raya cluster development Seligi field  Idle well restoration  Workovers  Infill drilling  Waterflooding 56

  58. Slide 58: Tanjong Baram field

    Tanjong Baram field First oil production in only 14 months Net pay exceeded pre-drill expectations  EnQuest (operator, 70%), Uzma (30%)  Developed under a risk services contract (RSC)  Located 6 km off the coast of Miri, Sarawak in 10 m water depth  Wellhead platform with 2 wells tied- back to W

  59. Slide 59: All wells drilled to date in line with expectations

    All wells drilled to date in line with expectations Well B2 Dataset: BBK2012 – PGS Extended Far JJB Pseudo Density Geosphere canvas at TD 10/8/15 Depth 58

  60. Slide 60: Kraken development: capex reductions

    Kraken development Capex reductions achieved through planning and project execution  Extensive planning pre-sanction including 2  Well defined contracts/contractual scopes FEEDS1 for FPSO and subsea FEED with attractive payment profiles  Comprehensive detailed WBS2 for total project  Third party

  61. Slide 61: FPSO Armada Kraken

    FPSO Armada Kraken Construction continues Installed greenwater protection Installed flare tower E-House & laydown installed on main deck Helideck & loading hose/reel installed 60

  62. Slide 62: Kraken development: FPSO overall view

    Kraken development FPSO overall view 61 61

  63. Slide 63: Thistle, Conrie and The Dons infrastructure

    Thistle, Conrie and The Dons infrastructure 62

  64. Slide 64: Heather / Broom infrastructure

    Heather / Broom infrastructure 6363

  65. Slide 65: Greater Kittiwake Area (GKA)

    Greater Kittiwake Area (GKA) A key hub  Platform installed 1990 (CRINE)  16 well slots (rig removed)  Oil capacity 36,000 Boepd (pumps 27,500)  Water injection 50,000 Boepd  Oil via Forties Pipeline System  Gas to Fulmar 64

  66. Slide 66: Appendix – Effective tax rate reconciliation

    Group taxation position Appendix – Effective tax rate reconciliation ETR % $m’s Loss Before Tax (1,341) UK CT Rate 50 (670) PRT 6 (83) RFES 8 (109) UK and overseas tax rate differences (1) 17 Permanent items (7) 88 Prior year adjustments 1 (13) Other (0) 6 Tax Credit 57 (764) Exceptional Tax Items (

  67. Slide 67: 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

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