Enquest Plc · LSE:ENQ
Enquest — H1 2015 Earnings Presentation
58 slides from Enquest's earnings presentation, Aug 19, 2015
Slide 1: EnQuest 2015 Half Year Results
EnQuest 2015 Half Year Results Strong production growth of 17%, 29,665 Boepd
Slide 2: Amjad Bseisu, Chief Executive
Amjad Bseisu Chief Executive
Slide 3: Agenda
Agenda Overview Amjad Bseisu, CEO Financials Jonathan Swinney, CFO UK North Sea Neil McCulloch, President North Sea Malaysia Amjad Bseisu & summary 2
Slide 4: Key themes
2015 Half Year Results Key themes Good financial result, given current environment - cost reduction programme on track Strong operational performance - high production efficiency - successful drilling programme Major developments progressing well Material Malaysian contribution 3
Slide 5: 2015 half year results
2015 half year results Driven by strong production performance Production Production up 17.3%, included 7,777 Boepd from Malaysia 29,665 Boepd Maintained full year 2015 production guidance 33,000 Boepd and 36,000 Boepd, strong H2 expected Revenue Realised oil price of $77.5/bbl, including real
Slide 6: Delivering on core competencies of operational efficiency and cost control
Delivering on core competencies of operational efficiency and cost control Existing UK hubs performing well Thistle/Deveron Heather/Broom Field life Transforming GKA production and GKA extensions operational efficiency, ahead of plan PM8/Seligi Material Malaysian production contribution Firs
Slide 7: Further improvement in EnQuest production efficiency
Further improvement in EnQuest production efficiency High PE performance is key to the future of the UK North Sea 100.0% 2014 operator rankings Like for like EnQuest 2014 88% UK North Sea production efficiency task force (O&G UK) (excluding GKA) 90.0% Total EnQuest 2014 81% (including GKA) 80.0% 70.
Slide 8: Jonathan Swinney, Chief Financial Officer
Jonathan Swinney Chief Financial Officer
Slide 9: Results summary
Results summary Half year to 30 June Unless otherwise stated all figures are before exceptional items and depletion of fair value uplift and are in US dollars US dollars H1 2015 H1 2014 Change % Export production (Boepd) 29,665 25,292 17.3 Average realised price per barrel ($) 77.5 110.0 (29.5) Reve
Slide 10: Summary income statement
Summary income statement Half year to 30 June 2015 2015 2015 2014 US dollars Business Exceptionals Reported Reported performance $m’s $m’s $m’s $m’s Revenue 444.0 (29.4) 414.6 503.6 Cost of sales (335.6) 12.8 (322.8) (380.4) Gross profit 108.4 (16.6) 91.8 123.2 Exploration and evaluation expenses -
Slide 11: Focus on cost efficiency
Focus on cost efficiency Unit operating costs on course for targeted reduction to $38/bbl in 2015 $/bbl 50.0 Production Transportation Unit opex cost down 15% 45.0 Absolute costs of sales flat 10.5 40.0 Increased level of production 35.0 7.6 30.0 Reduced costs of transportation Lower SVT c
Slide 12: $404 million cash capital expenditure
$404 million cash capital expenditure Outflow in H1 2015, including approx.$100 million re work done in 2014 US$m 100 95 50 53 41 39 23 3 Alma/Galia Kraken Thistle/Deveron Heather/Broom GKA Dons Malaysia Other 11
Slide 13: Cash flow
Cash flow Half year to end June 2015 US$m Funding facilities: $1.7bn credit facility, £155m retail bond, $650m high yield bond 718 (933) (1,282) 83 (304) (c.100) 2014 work done (28) Cash & equivalents less Net cash flow Capex Cash & equivalents less borrowings per Financing & other from operations b
Slide 14: Group taxation position
Group taxation position No material UK cash CT/SCT on operational activities expected before 2025 ETR $m’s UK Tax Allowances $m’s Loss Before Tax (35) Recognised at 31 December 2014 1,818 2015 net additions plus RFES 470 At UK CT Rate (17) RFES (49) Tax losses at 30 June 2015 2,288 Other 44 Tax allo
Slide 15: Outlook
Outlook Full Year 2015 EBITDA will further benefit from hedging Confirming 2015 cash capex of around $600m, plus cash capex in respect of the 2014 programme Confirming production and transportation costs expected to achieve targeted $38/bbl Depletion anticipated to be slightly higher than in
Slide 16: Neil McCulloch, President, North Sea
Neil McCulloch President, North Sea
Slide 17: Alma/Galia first oil
Alma/Galia first oil In final stages, commissioning of first oil systems nearing completion The Alma/Galia programme for the year to date has been successfully completed largely as planned Moored the FPSO Pulled in the risers Tested production systems In process of final commissioning of f
Slide 18: H1 2015 production results
H1 2015 production results Reaffirming full year guidance 33,000 to 36,000 Boepd H2 includes Alma + a significant scheduled increase from existing UK producing assets Net production (Boepd) 2014 2015 29,665 30000 25,292 25000 20000 15000 9,789 10000 9,281 7,690 7,777 6,419 5000 4,041 3,615 2,915 1,2
Slide 19: Thistle / Deveron
Thistle / Deveron Strong production efficiency of over 90% Drilling successful wells economically Drilling rig reactivated and Phase II drilling commenced in Q2: A61 (WFB-P2) drilled, completed and on production by mid-May. Nearly a full oil column of high quality pay A59 w/o Area 6 P2 encountered
Slide 20: Thistle / Deveron
Thistle / Deveron Compelling cost per barrel economics, average c.£4/bbl Well Reserves (mmstb) Capex Actual £M Budget £M A61 (WFB-P2) 2.0 £9.0M £6.4M (actual) A62 (WFB-P3) 4.0 £8.7M £8.3M (actual) A59 ESP Workover 0.5 (protection) £4.6M £2.0-3.7M (estimated) Deveron-P2 1.0 £11.1M Crestal WFB 1.9 £8.
Slide 21: Dons / Conrie
Dons / Conrie Integration of Ythan into Dons infrastructure Strong production efficiency, over 90% pre-shutdown, also with high levels of water injection efficiency Scale treatments carried out on West W1 Conrie – S7 Don W4 and W1, allowing reinstatement of W4 and enhancing W2 production W5 W3Z
Slide 22: Ythan
Ythan Swift agile delivery, well performing ahead of expectations S15 drillled, completed and tied-in by May Initial evaluation of the S15 well results encouraging with the potential for additional oil in place NE Extension Production start-up late May at initial rates exceeding expectation
Slide 23: Heather / Broom
Heather / Broom High levels of operational uptime H66 drilled and completed, brought on line in March. The well results were encouraging with a thicker oil column encountered than expected 2/0 Else 5- Rig crew then moved to Thistle 15 H42 H33 Erica 2/05-21 H61Z 2/0 Replacement Broom water inje
Slide 24: Adding value to the Greater Kittiwake Area (GKA)
Adding value to the Greater Kittiwake Area (GKA) From a gross ave’ rate of c.2,500 Boepd to over 6,000 Boepd - before Gadwall 20000.0 GKA gross production from Q2 2014 until 12 August 2015 18000.0 Re-instated Gadwall 16000.0 Production 14000.0 Re-instated Mallard 12000.0 Production Shutdown for fire
Slide 25: UK drilling programme 2015
UK drilling programme 2015 The successful delivery of this programme is a substantial achievement Alma/Galia Galia production well Kraken Alba Tyrone/Tiree New production appraisal well Batch drilling This successful drilling programme is making a material contribution to EnQuest’s production of hig
Slide 26: Kraken
Kraken 6 Successfully delivering extensive Tiree drilling and subsea programmes Sidetrack 2 Geotech Primary FPSO on track 5z Tyrone 1 5 4 4z
Slide 27: The Kraken development
The Kraken development On budget and on schedule The Kraken FPSO vessel is at the shipyard in Singapore and the conversion programme is continuing on plan. Equipment procurement and fabrication of the modules is in progress. The turret/mooring buoy has been manufactured and is being transported
Slide 28: The Kraken development
The Kraken development On budget and on schedule The fixed pipelines for the first two drill centres have been installed on the seabed. Installation of the mooring system for the FPSO also started in the first half. The drilling rig moved to the field location and completed the batch drilling of
Slide 29: Malaysia
Malaysia ~
Slide 30: Malaysia: 26% of EnQuest's production in H1 2015
Malaysia: 26% of EnQuest’s production in H1 2015 PM8/Seligi: material production increase since EnQuest took over Take-over in mid Oct 2014 Monsoon drive 20 lower OEE 1.00 18 0.95 16 0.90 Overall Equipment Effectiveness (OEE) 14 0.85 12 0.80 10 0.75 kbd Anticipated field decline 8 arrested with buil
Slide 31: Tanjong Baram
Tanjong Baram First production delivered on time Platform topsides installed in May 2015. First production flowed in June 2015, drilling rig demobilised. Host platform requested changes to receiving vessel to accommodate higher volumes of liquids in associated gas, this required the field to b
Slide 32: Summary
Summary
Slide 33: 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
Slide 34: Turning field decline into production growth and economic field life extension
EnQuest Turning field decline into production growth and economic field life extension PM8/Seligi gross production 20000.0 Take-over in mid Oct 2014 GKA gross production from Q2 2014 until 12 August 2015 20 1.00 18000.0 Overall Equipment Effectiveness (OEE) 18 0.95 16000.0 Re-instated 16 0.90 14000.
Slide 35: Delivering strong compound annual growth rates
Delivering strong compound annual growth rates 15% to end 2014, expecting c.17% in 2015, then further substantial increases Average net production Average (Boepd) (Boepd) net production 50,000 50,000+ 45,000 40,000 35,000 3,000* 3,000* 33,000 30,000 25,000 20,000 15,000 10,000 5,000 0 2009 2010 2011
Slide 36: Q&A
Q&A Thistle/Deveron Dons Northern Producer Heather/Broom Alma/Galia EnQuest Producer 35
Slide 37: 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
Slide 38: 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 37
Slide 39: EnQuest's growing North Sea asset base
EnQuest’s growing North Sea asset base As at 30th June 2015 The Dons Production and Thistle / Deveron developments Discoveries Other licences Heather/Broom Kraken Alba Avalon Scolty / Crathes Greater Kittiwake Area Alma/Galia
Slide 40: 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 April 2015 1,200,000 1,000,000 800,000 600,000 400,000 200,000 - EnQuest Ithaca Fairfield Premier Oil Tullow Oil First Oil Endeavour 39
Slide 41: Five years of strong reserves growth
Five years of strong reserves growth 514% reserve replacement ratio Net 2P reserves 2010 - 2014 182.3 220.0 MMboe MMboe 80.5 (42.8) MMboe MMboe Production Additions to 2010 to 2014 reserves 2010 to 2014 Net 2P reserves Net 2P reserves start 2010 start 2015 40
Slide 42: Alba
Alba 8% non-operated, 1,249 Boepd in H1 2015 (1,214 Boepd in 2014) 2015 ADW Production for first half 2015: 1,249 Boepd 1 Planned Platform Well (ADW) to spud in Q4 New 4D seismic reinterpretation available (from 2014 seismic survey) Key input for maturing future drilling targets Reinstatem
Slide 43: Greater Kittiwake Area opportunity
Greater Kittiwake Area opportunity 50 km tie-back radius & competitor infrastructure 42
Slide 44: Alma / Galia
Alma / Galia ALMA GALIA N-Dev W2 W1 G1 K3 GB K1 K4 GE EQ Development wells Drilled / completed producer K5 Future producer Potential future producer K2 K6 Alma abandoned at low water cut of 70% EQ Development wells Prudent base case with upside Drilled / completed producer The right facilities
Slide 45: Alma
Alma Subsurface -10 -105 52 00 5 -1047 -104 5 -1 50 04 25 -1 -10400 -100375 -1 3 -10032550 300 -10 -10-1 -10 2202275 5 50 500205 17 -102 5 -9878-59-999 00 -101 50 -9 5 0 12 0 -1 00 5 80 -10 1 -982 -9 484000 484400 484800 485200 485600 486000 486400 486800 505 487200 -977 -97 -9725 -9700 575487600 48
Slide 46: Alma
Alma Seismic SW 30/24-2 30/24-1 3 0/24-5 30/24-3 30/25a-2 NE 45
Slide 47: Alma Development
0 0 0 -9 -985 45 -94 -9 -9300 -9 6229200 0 00 -925 -98 0 Alma Development -980 0 -9 -9 75 70 0 Wells Trajectory Schematic -8 50 6228800 60 7 -8 0 30/25a-02 -94 50 00 -940 0 -94 -9 65 0 0 -8 60 65 -9 50 0 00 0 -955 -94 -9 5 6228400 -9350 0 90 Development wells optimised to 0 -9 -8 -895 3 00 0 60 00 -
Slide 48: Galia
Galia STOIIP & Reserves Only 50% Water Cut Galia Main 2 Well Sampled 30/24-15 Galia 1 Bubble Point Pressure 1900 psia Main 1 Differential Gas-Oil Ratio 631 scf/stb outline 9 29 Galia East 3 30Z outline Formation Volume Factor 1.33 b/stb 0 04 Oil Viscosity 0.49 Degrees 30Y 15 API Gravity 38 Degrees F
Slide 49: Kraken 9/2b Appraisal Well
Kraken 9/2b Appraisal Well Well objectives and results • Investigate Heimdal III sand development to SW of Kraken • Oil bearing Heimdal III sand at sidetrack (Tiree) location • Prove up Heimdal I sand development 6 • Found on depth and with expected OWC in both primary and sidetrack legs • Thicker s
Slide 50: Kraken overview
Kraken overview Field summary 2 fields located in Block 9/2b 350km NE of Aberdeen Field area ~12 x 3.5 km Water Depth of 110m Heavy Oil (14 Deg API) but good flow properties Low sulphur content and not waxy FDP approved by DECC with two heavy oil tax allowances confirmed Developing 1
Slide 51: Kraken subsurface
Kraken subsurface STOIIP, reserves & recovery factor FDP STOIIP Produced RF% North 68 20 30% Central 85 38 45% South 268 89 33% Kraken Area 421 147 35% Conservative Recovery Factor Viscosity in cP Kraken Ultimate Recovery Factor from Heavy oil Fields 50
Slide 52: Kraken subsurface
Kraken subsurface Gross production profile & reserves – FDP MMstb South Central North Total Produced 89 38 20 147 Fuel 10 Sales 137 Gross Produced Oil stb/d 51
Slide 53: Thistle life extension projects
Thistle life extension projects Power & Electricity Upgrade Project New D turbine Complete Topsides Structural Interim Projects PC2 Installed Q2 2014 PC1 Installed Q3 2014 Topsides Structural Integrity Projects MOD 12A, 6A and 3A laydown areas complete Controls and Safety Systems Installation of PCS
Slide 54: Kraken infrastructure
Kraken infrastructure ©nQuest + ALL FLOWLINES TRENCHED AND ROCK DUMPED + ALL STRUCTURES FISHING FRIENDLY DESIGN oe s< rate rewwrnn ——— STRUCTURES —=, pen => pc2 INJECTION BRESsAY HSP POWER FLUID TOTeeCeCOe pea PRODUCTION/INJECTION (COMBINED MANIFOLD) 12" WATER INJECTION —\ FLOWLINE CONTROL UMBILICAL
Slide 55: Thistle, Conrie and The Dons infrastructure
Thistle, Conrie and The Dons infrastructure 54
Slide 56: Heather / Broom infrastructure
Heather / Broom infrastructure 5555
Slide 57: GKA infrastructure
GKA infrastructure ‘e] Quest ' faaanbonen) i333 ee ee MANIFOLD ©Q_ GREATER KITTIWAKE AREA 56
Slide 58: 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