Enquest Plc · LSE:ENQ
Enquest — H1 2020 Earnings Presentation
30 slides from Enquest's earnings presentation, Sep 3, 2020
Slide 1: EnQuest 2020 Half Year Results
EnQuest 2020 Deliver Half Year Results De-lever Grow
Slide 2: Introduction
EnQuest 2020 half year results Introduction Amjad Bseisu Chief Executive 2 EnQuest PLC Half Year Results 2020
Slide 3: Key H1 2020 messages
Key H1 2020 messages Strong production performance; cost reduction programme on track H1 production of 66 kboed; full year production guidance of c.57 to c.63 kboed maintained1 On track to deliver previously announced cost savings Deliver - Unit opex reduced to $14/Boe Free cash flow breakeven of c.
Slide 4: Good performance in a challenging environment
EnQuest H1 2020 performance Good performance in a challenging environment Net production1 Production averaged 66 kboed1 during (Boepd) the period 70,000 68,548 66,055 50,000 - Strong performance on Kraken with gross Deliver production of c.39 kbopd 30,000 H1 2019 H1 2020 Unit opex reduced to $14.4/B
Slide 5: Cost reduction programme on track
EnQuest H1 2020 performance Cost reduction programme on track Opex reduction plans underway Capex reduction plans - Heather CoP accepted by regulator - 2020 drilling programmes at Kraken and Magnus complete - Thistle/Deveron CoP submitted to regulator - Seeking partner and regulatory approval for Co
Slide 6: Continued focus on debt reduction
EnQuest H1 2020 performance Continued focus on debt reduction Net debt1 Net debt:EBITDA ratio2 Group net debt1 is $1,351 million; ($m) 2,200 8 4% lower vs year end 2019 1,991 7 De-lever Net debt:EBITDA ratio2 at 1.8x 2,000 6 1,797 6.6 Tanjong Baram Project Finance Facility 1,800 1,774 5 of c.$32 mil
Slide 7: Replenishing 2C resources
EnQuest H1 2020 performance Replenishing 2C resources Bressay: Potential net 2C resources of >250 MMboe1 - Capability enabled transaction 140 - Acquiring a 40.81% equity interest in the Bressay 120 oil field Grow - Initial consideration of £2.2 million 100 - Payable as a carry against 50% of Equinor
Slide 8: Committed to succeed through the energy transition
Environment, social and governance Committed to succeed through the energy transition - Expect Scope 1 and 2 emissions to be c.15% lower in 2020 compared to 2019, with c.10% further reduction over the next three years Environment - Kraken cargoes sold as component of IMO 2020 compliant fuel to shipp
Slide 9: Operations overview – North Sea
EnQuest H1 2020 performance Operations overview Bob Davenport Managing Director – North Sea 9 EnQuest PLC Half Year Results 2020
Slide 10: Transforming our North Sea business
Transformation 2020 Transforming our North Sea business Re-organisation completed - Re-organisation followed decisions to progress CoP at the Heather, Thistle and the Dons assets - Reduction in workforce of around 40% - Created three operating directorates supported by functional teams - Upstream: M
Slide 11: Production ahead of the top end of guidance
H1 2020 production performance Production ahead of the top end of guidance - Strong production performance, particularly H1 2020: 66,055 Boepd1 at our three world-class assets H1 2019: 68,548 Boepd1 - Magnus achieved high production efficiency and high water injection efficiency Delivered - Strong K
Slide 12: Solid Magnus performance; Kraken ahead of expectations
H1 2020 operational delivery Solid Magnus performance; Kraken ahead of expectations Magnus Kraken - Good Magnus performance - Good performance from the FPSO; high production efficiency - High production efficiency of 86% and water injection of 86% and water injection efficiency of 91% efficiency of
Slide 13: Scolty/Crathes improved performance; PM8/Seligi high production efficiency
H1 2020 operational delivery Scolty/Crathes improved performance; PM8/Seligi high production efficiency Other North Sea operations Malaysia Scolty/Crathes | Kittiwake | Alma/Galia | Alba | The Dons | PM8/Seligi | PM409 Thistle/Deveron | Heather/Broom - Heather and Thistle shut in since October 2019
Slide 14: Financial review
EnQuest H1 2020 performance Financial review Jonathan Swinney Chief Financial Officer 14 EnQuest PLC Half Year Results 2020
Slide 15: Good H1 2020 performance
Results summary Good H1 2020 performance Unless otherwise stated, all figures are on a Business performance basis and are in US Dollars Comparative figures for the income statement relate to the period ended 30 June 2019 and the Balance Sheet as at 31 December 2019 Production Revenue1 Unit opex EBIT
Slide 16: Cash generative in a low oil price environment
Operating cash flow Cash generative in a low oil price environment Robust cash generation: Net cash flow from/(used) in operations $m - Lower realised oil prices 500 - Mitigated by the positive impact of the Group’s commodity hedge programme 400 - Lower sales volumes offset by lower cash operating 4
Slide 17: Focused investment programme on track
Cash capital expenditure Focused investment programme on track 2020 capex weighted to H1: H1 2020: $101 million H1 2019: $125 million - New Kraken producer-injector pair onstream in Q2 - Two new Magnus wells onstream during Q1 63 50 43 30 26 10 2 2 0 0 Magnus Kraken Other NS Malaysia Other operation
Slide 18: Strong operational performance driving debt reduction
Net debt Strong operational performance driving debt reduction Cash flow generation reducing net debt Movement in net debt $m - Free cash flow generation of $87 million 1,800 - Bond interest settled through issue of additional notes (‘PIK’) due to oil price <$65/bbl 1,600 - H1 hedges of c.5.9 MMbbls
Slide 19: Repayment structure
Debt Repayment structure Debt structure (end Jun 2020)1 Debt structure (end Dec 2019)2 Future expected repayment profile (balances at end June 2020)3 $ million $ million $ million 2,500 2,500 1,200 1,000 2,000 2,000 11 64 64 11 800 1,500 91 1,500 123 123 91 600 1,000 991 1,000 972 972 991 991 400 50
Slide 20: Summary
EnQuest 2020 half year results Summary Amjad Bseisu Chief Executive 20 EnQuest PLC Half Year Results 2020
Slide 21: Key H1 2020 messages
Key H1 2020 messages Strong production performance; cost reduction programme on track H1 production of 66 kboed; full year production guidance of c.57 to c.63 kboed maintained1 On track to deliver previously announced cost savings Deliver - Unit opex reduced to $14/Boe Free cash flow breakeven of c.
Slide 22: Q&A
Q&A
Slide 23: Operator of choice for maturing hydrocarbon assets
Appendix Operator of choice for maturing hydrocarbon assets Production breakdown1 Annual production CAGR of c.17% since IPO 80,000 Malaysia 8.3 kboepd 13% 60,000 40,000 UK 57.7 kboepd 87% 20,000 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 1 Year to date June 2020 5 offshore production h
Slide 24: A redefined purpose, refocused organisation, with a clear vision
Appendix A redefined purpose, refocused organisation, with a clear vision Purpose - Providing creative solutions through the energy transition Strategic vision - To be the operator of choice for maturing and underdeveloped hydrocarbon assets Business model - A production and development led business
Slide 25: Post-tax non-cash charges
Appendix Post-tax non-cash charges Impairment Driven by $251.6 million tangible oil and gas assets Reduction in oil price assumptions - Primarily at Kraken Deferred tax de-recognition Driven by $432.6 million de-recognition of the undiscounted deferred tax asset Reduction in oil price assumptions 25
Slide 26: No material UK cash CT/SCT on operational activities expected
Appendix No material UK cash CT/SCT on operational activities expected UK Tax losses $m Tax losses at 31 December 2019 2,903.4 2020 net increase 194.9 Prior year adjustment (11.5) Tax losses at 30 June 2020 3,086.8 - No material cash tax expected to be paid on UK operation activities for the foresee
Slide 27: Effective tax rate reconciliation
Appendix Effective tax rate reconciliation % $m Loss Before Tax (373.4) Notional UK Corporation Tax 40.0% (149.3) 2020 RFES (44.7) UK and overseas tax rate differences 9.9 Permanent items (2.8) Tax losses not recognised 432.6 Other 0.1 2020 Tax Charge/(Credit) (65.8%) 245.7 27 EnQuest PLC Half Year
Slide 28: Deferred tax de-recognition
Appendix Deferred tax de-recognition Charged/credited to Remeasurements At 1 January At 30 June income statement on and exceptional Note 2020 2020 ordinary activities items US$ million US$ million US$ million US$ million UK deferred corporation tax: Fixed assets and allowances (1,006) (5) 159 (852)
Slide 29: Significant growth in reserves
Appendix Significant growth in reserves North Sea operation breakdown Malaysia operation breakdown c.110 c.14 7 operated MMboe produced (net) 13 operated MMboe Produced (net) hubs offshore platforms 68 c.221 wells drilled and 74 idle wells returned c.33 completed by MMboe of net 2P to production MMb
Slide 30: Forward-looking statements
Appendix 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 forecas