Enquest Plc · LSE:ENQ
Enquest — H1 2019 Earnings Presentation
37 slides from Enquest's earnings presentation, Sep 5, 2019
Slide 1: EnQuest 2019 Half Year Results
EnQuest 2019 Half Year Results
Slide 2: Amjad Bseisu, Chief Executive
Amjad Bseisu Chief Executive
Slide 3: A clear purpose and strategy with a focused business model
EnQuest A clear purpose and strategy with a focused business model Purpose With hydrocarbons expected to remain a key element of the global energy mix for many years, EnQuest is focused on enhancing hydrocarbon recovery and extending the useful lives of assets in a profitable and responsible manne
Slide 4: EnQuest priorities: Deliver, de-lever, grow
EnQuest priorities “Deliver, de-lever, grow” Production Deliver Cost control Capital discipline Scheduled bank amortisation De-lever Targeting net debt:EBITDA ratio of 1-2x Develop asset base Grow Consider selective, value enhancing acquisitions 3
Slide 5: H1 2019 performance: On track to meet operational and financial targets
EnQuest H1 2019 performance On track to meet operational and financial targets Net production1 (Boepd) Unit opex ($/Boe) Cash capex ($m) 80,000 24 140 68,548 22.6 70,000 22 130 126 60,000 53,990 125 20.1 50,000 20 120 40,000 18 110 30,000 20,000 16 100 Deliver H1 2018 H1 2019 H1 2018 H1 2019 H1 2018
Slide 6: Debt reduction continuing; net debt:EBITDA at 1.8x
EnQuest H1 2019 performance Debt reduction continuing; net debt:EBITDA at 1.8x1 Net debt:EBITDA ratio 8 7 6.6 6 5 4 3 3.8 3.3 2 2.5 1.8 1 1.7 De-lever 0 1 2014 2015 2016 2017 2018 1H 2019 ✔ Group net debt is $1,638 million; 8% lower vs year end 2018 Net debt:EBITDA ratio1 at 1.8x, ahead of targe
Slide 7: Magnus acquisition driving growth
EnQuest H1 2019 performance Magnus acquisition driving growth Material increase in production to 68,548 Boepd Grow Full year guidance of 63,000 to 70,000 Boepd unchanged Annual net production1 (Boepd) 80,000 ✔ Developing reserves and resources 70,000 68,548 70,000 through low cost drilling and worko
Slide 8: Responsibly extending the useful lives of assets
Responsibly extending the useful lives of assets Focused on Safe Results Environmental Social Governance Board Senior Management Policies Procedures Minimising emissions Active management of Flaring c.45% below Malaysia leadership team Board composition regulatory limits in is 27% female R
Slide 9: Operations overview
Operations overview Bob Davenport Managing Director - North Sea
Slide 10: Production performance
Production performance Growth of c.27%; within the guidance range H1 2019: 68,548 Boepd1 Production growth: H1 2018: 53,990 Boepd1 30,215 ✔ Delivered Strong production efficiency Additional equity interest, well 21,655 23,107 work and plant de-bottlenecking at Magnus 18,002 2018 Alma/Galia ESP
Slide 11: H1 2019 operational delivery
H1 2019 operational delivery Strong Magnus performance; pipeline projects completed early Magnus performance in line with expectations Net production (Boepd) Northern 68% High production efficiency; reservoir North Sea management; well work; plant debottlenecking 30,215 Future prospects under
Slide 12: H1 2019 operational delivery cont.
H1 2019 operational delivery cont. Kraken performance improved; successful IWR in Malaysia Improving production efficiency Net production (Boepd) 7% Power engine performance; plant stability; spares management DC4 wells producing ahead of expectations 23,107 21,655 Kraken Further improvement
Slide 13: Enhancing performance at Magnus
Enhancing performance at Magnus Improving efficiency, lowering costs and enhancing production Improved efficiency with PE at c.80% Improved power system reliability Increased water handling capacity Focused maintenance management Unit opex down from c.$60/Boe to c.$20/Boe Revised reservoir m
Slide 14: Kraken field development
Kraken field development Subsurface & wells performing; Western Flank project planned Continued strong reservoir and well Water cut trend performance 100% Water cut has remained stable 90% 80% Coning Channelling Efficient sweep DC4 start-up DC4 wells delivered above pre-drill projections 70% F
Slide 15: Financial review
Financial review Jonathan Swinney Chief Financial Officer
Slide 16: Results summary
Results summary Strong H1 2019 performance Unless otherwise stated all figures are on a Business performance basis and are in US Dollars Comparative figures for the income statement relate to the period ended 30 June 2018 and the Balance Sheet as at 31 December 2018. Production Revenue1 Unit opex EB
Slide 17: Operational expertise
Operational expertise Growing production while maintaining cost discipline 2016 2017 2018 H1 2019 2019 Outlook Production (Boepd) 39,751 37,405 55,447 68,548 63,000 to 70,000 Operating expense ($ million) 357 349 466 248 c.550 Unit operating cost ($/Boe) - Production costs 20.4 21.0 19.6 16.9 - Tari
Slide 18: Capital discipline
Capital discipline Focused development spend to drive returns $m 80 H1 2019 vs H1 2018 cash capex H1 2019 cash capex of 74 H1 2019: $125m $125 million: 70 H1 2018: $126m 63 ✔ Delivered 60 Kraken DC4 wells and prior 50 period deferrals 50 Dunlin bypass construction 40 and installation 30 27 H2 20
Slide 19: Magnus enters profit share in H2 2019
Magnus enters profit share in H2 2019 EnQuest $100m cash consideration repaid during H2 2019 Illustrative Magnus cash waterfall ✔ Strong performance at Magnus driving: Accelerated repayment of BP Vendor loans 25% vendor loan fully Payments to BP repaid in August EnQuest $100 million cash consi
Slide 20: Net debt and cash flow
Net debt and cash flow Strong cash generation and cost control driving debt reduction $m Movement in net debt 2,000 Debt reduction: 1,900 ✔ Delivered 1,800 Net debt down by 11% 1,774 ✔ H2 2019 outlook 1,700 2 c.4.6 MMbbls hedged (c.3.9 109 1,638 1,600 37 MMbbls at average floor price 1,500 125 o
Slide 21: Repaying ahead of amortisation schedule
Repaying ahead of amortisation schedule Facilitated by strong cash generation RCF repayments1 $m ✔ De-levering ahead of 300 schedule Early repayment saves 250 incremental interest costs Demonstrates capital discipline 200 ✔ Debt reduction remains the 195 priority 150 50 270 100 175 35 125 100 50
Slide 22: 2019 Outlook
2019 Outlook On track to meet targets; debt reduction remains the priority GroupProduction production (net) KrakenCash production capex(gross) Net debt:EBITDA 63,000-70,000 Boepd 30,000-35,000 Bopd Below 2x Operating expense Cash Hedging capex Hedging c.$550 million c.$275 million c.12.5 MMbbls for
Slide 23: Amjad Bseisu, Chief Executive
Amjad Bseisu Chief Executive
Slide 24: EnQuest performance summary
EnQuest performance summary Strong first half performance; de-levering prioritised Production growth: H1 2019 up 27% at 68,548 Boepd Cost control: H1 2019 unit opex down 11% at $20/boe Deliver Capital discipline: Completed Kraken DC4 programme and Dunlin bypass and Scolty/Crathes pipeline proj
Slide 25: Future resource maturation opportunities
Future resource maturation opportunities Part of a balanced capital allocation process 2C resources – 50 MMboe Future upside Annual drilling programme with strong economics Further drilling upside with target maturation in c.270 MMbbls of movable Magnus progress oil Production, reservoir and
Slide 26: Questions & Answers
EnQuest A clear strategy with a focused business model Questions & Answers 25
Slide 27: Appendices
Appendices @nQuest
Slide 28: Group tax position
Group tax position No material UK cash CT/SCT on operational activities expected UK Tax Allowances $m Tax losses at 31 December 2018 3,125.3 2018 utilisation (217.8) 2018 RFES 80.3 Prior year adjustment 11.3 Tax losses at 30 June 2019 2,999.0 Tax allowances carried forward 91.4 Total tax losses and
Slide 29: Group tax position: Effective tax rate reconciliation
Group tax position Effective tax rate reconciliation ETR % $m’s Profit Before Tax 38.7 UK CT Rate (40.0) (15.5) RFES 32.1 UK and overseas tax rate differences (13.0) Permanent items (7.4) Other, including IFRS interim reporting adjustment 9.3 1H 2019 Tax (Charge)/Credit 14.2 5.5 28
Slide 30: Post-tax remeasurements and exceptional items
Post-tax remeasurements and exceptional items As at 30 June 2019 $78.3 million post-tax loss was primarily made up of: Increased contingent consideration associated with the acquisition of 75% interest in Magnus of $33.0 million, comprising $26.9 million associated with additional fair value rec
Slide 31: Debt structure
Debt structure Long-dated, manageable repayment structure $m Debt structure $m Debt structure $m Future repayment profile 2,500 (end Dec 2018)1 2,500 (end June 2019)2 (end July 2019)3 17 1,000 72 72 2,000 2,000 49 179 49 179 165 165 1,500 1,500 965 32 965 500 964 964 964 1,000 1,000 440 500 500 874
Slide 32: IFRS 16 impact summary for H1 2019
IFRS 16 impact summary for H1 2019 Minimal overall impact New lease assets EBITDA PBT Financing cash flow and liabilities $2.2 million $2.2 million $87.7 million $3.2 million Immaterial increase in EBITDA / decrease in PBT Operating cost is replaced with DD&A and finance interest charge At 1 J
Slide 33: EnQuest: 8 Hubs
EnQuest: 8 Hubs A strong platform for growth Heather/Broom Kraken Thistle/Deveron The Dons Magnus Alma/Galia Greater Kittiwake Area PM8/Seligi 32
Slide 34: Well set for substantial growth
Well set for substantial growth Strong CAGR (c.17.2% to 2019 mid-point) Average net production (Boepd) 80,000 70,000 70,000 63,000 60,000 50,000 40,000 30,000 20,000 10,000 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Guidance range for 2019 is an average of between 63,000 Boepd and 70,0
Slide 35: Strong reserves growth since creation
Strong reserves growth since creation Reserve life c. 13 years MMboe Net 2P Reserves 400 350 263 300 250 245 (99) 200 150 100 81 50 0 Net 2P reserves Reserve additions Production Net 2P reserves start 2010 2010-2018 2010-2018 end 2018 34
Slide 36: Operational growth beyond 2019
Operational growth beyond 2019 Selected portfolio opportunities Deliver 2P Reserves Late-life asset / Platform Well Plant Sub-sea Infill drilling life extension drilling intervention improvements tie-back Magnus ✔ ✔ ✔ ✔ ✔ Kraken ✔ ✔ ✔ PM8/Seligi ✔ ✔ ✔ Thistle/Deveron ✔ ✔ ✔ ✔ Heather/Broom ✔ ✔ ✔ ✔ Gr
Slide 37: 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