Enquest Plc · LSE:ENQ
Enquest — FY2018 Earnings Presentation
39 slides from Enquest's earnings presentation, Mar 21, 2019
Slide 1: EnQuest 2018 Full Year Results
EnQuest 2018 Full Year Results
Slide 2: Amjad Bseisu, Chief Executive
Amjad Bseisu Chief Executive
Slide 3: Agenda
Agenda Overview Amjad Bseisu, CEO Operations overview Bob Davenport, Managing Director - North Sea Kraken subsurface Martin Mentiply, Chief Petroleum Engineer Financials Jonathan Swinney, CFO Summary Amjad Bseisu, CEO
Slide 4: A clear strategy with a focused business model
EnQuest A clear strategy with a focused business model Strategic vision To be the operator of choice for maturing and underdeveloped hydrocarbon assets Focused business model A production and development led E&P business Utilises EnQuest core strengths Strategically aligned Value-accretive
Slide 5: 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 4
Slide 6: 2018 performance: Operational and financial targets met
EnQuest 2018 performance Operational and financial targets met Net production (Boepd) Unit opex ($/boe) Cash capex ($m) 60,000 55,447 26 26 400 368 50,000 300 24 220 37,405 23 40,000 200 22 30,000 100 20,000 20 0 Deliver 2017 2018 2017 2018 2017 2018 ✔ Strong safety performance Acquired remainin
Slide 7: 2018 performance: Debt reduction on track
EnQuest 2018 performance Debt reduction on track Net debt:EBITDA ratio 7 6.6 6 5 4 3.8 3 3.3 2 2.5 1.7 1 De-lever 0 2014 2015 2016 2017 2018 ✔ 75% Magnus acquisition brings significant cash generation Gross bank debt lower by $340 million Group net debt: $1,774 million; 11% lower vs 2017 6
Slide 8: Magnus acquisition provides growth and portfolio balance
EnQuest 2018 performance Magnus acquisition provides growth and portfolio balance Grow ✔ Material increase in production Significant 2P and 2C resource additions Net production (Boepd) Reserves and resources (MMboe) 60,000 500 450 50,000 8,432 400 350 198 40,000 9,148 21,369 300 146 151 164 9,062 8,
Slide 9: Operations overview
Operations overview Bob Davenport Managing Director - North Sea
Slide 10: Production performance: Growth of 48%, in line with guidance
Production performance Growth of 48%, in line with guidance 2018: 55,447 Boepd1 Production growth: 2017: 37,405 Boepd1 ✔ Delivered 21,369 19,293 Full year contribution from Kraken and Magnus 15,627 Drilling at Heather, Magnus and Seligi Alma/Galia ESP replacements Magnus wellwork and plant d
Slide 11: 2018 operational delivery: Malaysia and Central North Sea
2018 operational delivery Successful drilling in Malaysia; ESP replacements at Alma Net production (Boepd) Malaysia Drilled 2 wells at PM8/Seligi; delivered target production volumes PM8/Seligi: idle well restoration and compression PM8/Seligi train rejuvenation campaigns 8,938 8,432 Tanjong Bar
Slide 12: 2018 operational delivery cont.: Magnus and Kraken
2018 operational delivery cont. Magnus and Kraken drive production growth Net production (Boepd) Northern Maintained high production and injection efficiency North Sea Magnus: drilling, well interventions and plant 19,293 de-bottlenecking 15,627 Magnus Heather: strong H-67 well performance Hea
Slide 13: Magnus: Unlocking production and reserve growth potential
Magnus Unlocking production and reserve growth potential Magnus A giant field with c.2.0 billion boe HIIP and significant remaining potential Secured early wins Production increased >20% in first year Plant de-bottlenecking increased water handling capacity by 40 Mbwpd Drilled 2 wells; bar
Slide 14: Kraken: Improve FPSO performance; realise long-term value
Kraken Improve FPSO performance; realise long-term value Kraken Multiple areas improved since first oil Water injection system including seawater filters Power load management Steam and heating systems Separation stability Fuel gas availability FPSO uptime has been poor; improvement Kr
Slide 15: Kraken subsurface
Kraken subsurface Martin Mentiply Chief Petroleum Engineer
Slide 16: Kraken field water cut evolution
Kraken field water cut evolution Field data indicates effective reservoir sweep Voidage recovery through water flood provides Water cut trend the primary approach to maximising reserves 80% of the field volumes are now at voidage Coning Channelling Efficient sweep Positive water cut trend 3
Slide 17: Kraken reserves: Life of field reserves substantially unchanged
Kraken reserves Life of field reserves substantially unchanged Kraken well locations Field-wide STOIIP and reservoir properties remain largely unchanged since FDP High-quality seismic Extensive drilling completed Confirmed pressure communication Injection and producer well performance is b
Slide 18: Financial review
Financial review Jonathan Swinney Chief Financial Officer
Slide 19: Results summary: Strong 2018 performance
Results summary Strong 2018 performance Unless otherwise stated all figures are before exceptional items and depletion of fair value uplift and are in US Dollars Production Revenue1 Unit opex EBITDA2 55,447 Boepd $1,201 million $23/boe $716 million 48% 89% 10% 136% Cash generated by Cash capex Net f
Slide 20: Cash flow: Strong cash generation
Cash flow Strong cash generation $m Net cash flow from operating activities Improved cash generation: 900 ✔ Delivered 50 800 50 794 Favourable prices (20) 203 Material increase in volumes 700 Improved asset mix 600 Thistle decommissioning option 500 210 Favourable working capital 400 302 3
Slide 21: Capital discipline
Capital discipline Materially lower capex requirement post Kraken development $m $m 300 2018 vs 2017 cash 1,200 Cash capex trend 2018 cash capex: capex 1,058 252 ✔ Delivered 1,000 Focused on drilling at Kraken, 250 Magnus, Heather and 2018: $220m 200 2017: $368m 800 751 PM8/Seligi 609 150 600 121
Slide 22: Net debt and cash flow
Net debt and cash flow Improved cash generation facilitating debt reduction $m Movement in net debt 2,200 Debt reduction: 2,100 ✔ Delivered 2,000 1,991 794 Strong cash flow from 1,900 operations 1,800 37 1,774 Offset by 320 1,700 Production enhancing capex 1,600 Higher financing costs 1,500
Slide 23: Deleveraging remains a priority
Deleveraging remains a priority Portfolio cash generation underpinned by hedges ✔ De-levering underway $m Net debt metrics 1,991 Ratio 2,000 7 End of high capex phase 1,797 1,774 1,800 6 Production volumes increasing 1,600 1,548 6.6 from improved portfolio mix 1,400 5 ✔ 2019 outlook1 1,200 c.8
Slide 24: Debt structure
Debt structure Long-dated, manageable repayment structure $m Debt structure1 $m 5-year repayment profile1 2,500 2,000 72 72 2,000 179 1,500 179 1,500 965 965 1,000 1,000 32 500 965 500 874 799 25 439 205 155 0 0 2019 2020 2021 2022 2023 Facilities Drawn Credit facility Bonds Oz Mgt Other loans Credi
Slide 25: Magnus generates strong cash flow
Magnus generates strong cash flow 75% interest cash waterfall1 Cash flow waterfall pre repayment of Cash flow waterfall post repayment of EnQuest’s $100m consideration EnQuest cash consideration 50% 50% 50% 50% Free cash flow Vendor loan EnQuest Profit share Free cash flow Vendor Loan Profit share r
Slide 26: 2019 outlook: Prioritising debt reduction
2019 outlook Prioritising debt reduction Production Cash capex Net debt:EBITDA 63,000-70,000 Boepd $275 million Approaching 2x 20% Operating expense Hedging Oil price sensitivity EBITDA increases $600 million c.8 MMbbl c.$150 million at $70/bbl vs $60/bbl Deliver Operational performance and financia
Slide 27: Amjad Bseisu, Chief Executive
Amjad Bseisu Chief Executive
Slide 28: 2019 outlook: Focused on projects that maximise cash flow
2019 outlook Focused on projects that maximise cash flow Operating costs and Near-term opportunities Production capital spend Target: 63,000-70,000 Boepd Evaluation underway On track YTD Feb: 67,700 Boepd ✔ ✔ ✔ Maintain low unit costs Kraken: infill drilling and Operational priority to Western
Slide 29: 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 30: EnQuest priorities: Debt reduction remains the priority
EnQuest priorities Debt reduction remains the priority Deliver De-lever Grow Production growth Scheduled amortisation Potential for near-field, Cost control Targeting net short-cycle opportunities Capital discipline debt:EBITDA of 1-2x Substantial 2C resources 29
Slide 31: Questions & Answers
EnQuest A clear strategy with a focused business model Questions & Answers 30
Slide 32: Appendices
Appendices @nQuest
Slide 33: Well set for substantial growth
Well set for substantial growth Q&A Strong CAGR (c.17.2% to 2019 mid-point) Average net production (Boepd) 70000 63,000 - 70,000* 60000 50000 40000 30000 20000 10000 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 70,000 Bo
Slide 34: 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 2017 3,121.3 2018 net additions plus RFES 42.8 Prior year true up (38.8) Tax losses at 31 December 2018 3,125.3 Tax allowances carried forward 100.0 Total tax losses and al
Slide 35: Group tax position: Effective tax rate reconciliation
Group tax position Effective tax rate reconciliation ETR % $m’s Loss Before Tax 94.0 UK CT Rate 40% 37.6 RFES 68% (64.2) UK and overseas tax rate differences 22% 20.3 Permanent items (23%) (21.7) Prior year adjustments (2%) (1.4) Other 4% (3.8) 2018 Tax Charge/(Credit) (35%) (33.3) 34
Slide 36: Post-tax exceptional items
Post-tax exceptional items Year to 31 December 2018 $49.1 million post-tax gain on exceptionals, primarily made up of: Net uplift associated with the 25% interest ‘step-acquisition’ of $74.3 million, comprising $123.9 million associated with PP&E; partially offset by $49.6 million deferred tax
Slide 37: 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 36
Slide 38: Strong reserves growth in first nine years
Strong reserves growth in first nine years Reserve life c. 13 years MMboe Net 2P Reserves 300 263 245 250 200 150 100 81 50 0 (99) -50 Net 2P reserves Production 2010- Reserve additions Net 2P reserves start 2010 2018 2010-2018 end 2018 37
Slide 39: 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