Enquest Plc · LSE:ENQ
Enquest — FY2014 Earnings Presentation
57 slides from Enquest's earnings presentation, Mar 19, 2015
Slide 1: EnQuest 2014 Full Year Results
EnQuest 2014 Full Year Results PM8/Seligi, Malaysia
Slide 2: Agenda
Agenda Overview Amjad Bseisu, CEO Financials Jonathan Swinney, CFO Operations Neil McCulloch, President, North Sea Summary Amjad Bseisu
Slide 3: Key themes
EnQuest 2014 Results Key themes Strong operational performance in 2014 Continued good reserves growth Ongoing action in response to low oil prices Major developments on track Material international business Well positioned for current environment 2
Slide 4: Strong operational performance
EnQuest 2014 Results Strong operational performance Production Up 15% on 2013 27,895 Boepd 88% production efficiency on existing UK assets (top quartile) First international production contributed 3,459 Boepd Net 2P reserves Up 25.2 MMboe. Reserves replacement ratio of over 350% 220.0 MMboe
Slide 5: Action in response to low oil prices
Action in response to low oil prices Ongoing efficiency measures across the board Hedging in 2016: 10 million barrels, puts averaging c.$68 place 2015: realised $100m of gains; now 10 million barrels hedged, puts averaging c.$65/bbl Unit opex down 2014: Full year $42.1/bbl (Vs $45.9/bbl in H1
Slide 6: Delivering on asset plans
Delivering on asset plans Core competencies of cost control and operational efficiency • Existing UK hubs performing well Thistle/Deveron Heather/Broom • Transforming GKA production and GKA Field life operational efficiency, ahead of plan PM8/Seligi extensions • Submitting FDP for Scolty/Crathes • M
Slide 7: 2014 Production results by hub
2014 Production results by hub Year of record production Net production (Boepd) 2013 2014 30000 27,895 25000 24,222 20000 15000 11,014 10000 9,024 8,835 7,925 5000 4,339 4,081 3,4592 1,2811 922 1,284 0 Thistle/Deveron The Dons Heather/Broom Kittiwake Alba PM8/Seligi Total EnQuest 1 This is based on
Slide 8: Further improvement in core UK production efficiency
Further improvement in core UK production efficiency 100% 2013 operator rankings EnQuest 2014 like for like UK North Sea production efficiency task force (O&G UK) production efficiency at 88% 90% EnQuest 2013 80% 70% Average North Sea production efficiency in 2013 was 64% 60% 50% 40% 30% Source: O&G
Slide 9: Malaysia: 23% of EnQuest production in H2 2014
Malaysia: 23% of EnQuest production in H2 2014 Opportunity to increase production significantly in the future Seligi 2014 was a transformational year for EnQuest’s international business First Tanjong Baram small field risk service contract Then the PM8/Seligi Production Sharing Contract, the
Slide 10: 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
Slide 11: Financials
Financials @nQuest
Slide 12: 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 2014 2013 Change % Export production (Boepd) 27,895 24,222 15.2 Average realised price per barrel ($) 100.6 109.7 (8.3) Revenue ($
Slide 13: Summary income statement
Summary income statement Year to 31 December 2014 2014 2014 2013 US dollars Business Exceptional Reported Reported performance items $m’s $m’s $m’s $m’s Revenue 1,009.9 18.6 1,028.5 955.2 Cost of sales (654.1) (57.8) (711.9) (527.1) Gross profit 355.8 (39.2) 316.6 428.1 Exploration and evaluation ex
Slide 14: Exceptional impairment post tax of $335.3m
Exceptional impairment post tax of $335.3m Non-cash items $678.8m : impairment of oil and gas assets (pre-tax) $152.0m : impairment of oil and gas intangible assets Cash cost $32.8m is SVT tariff actualisation 13
Slide 15: Focus on cost efficiency
Focus on cost efficiency EnQuest historical operating costs Vs doubling in UKCS costs over last 5 yrs $/bbl 40.0 Cost of operations Unit production costs 35.0 Impact of GKA acquisition, $3.3/bbl 30.0 3.3 25.0 20.0 15.0 26.9 27.4 27.2 28.2 26.3 23.5 10.0 5.0 0.0 2009 2010 2011 2012 2013 2014 15.0 S
Slide 16: 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 (579) Recognised at 31 December 2013 1,087 2014 net additions plus RFES 768 UK CT Rate 62 (359) Prior year adjustment* (37) PRT (3) 20 Tax losses at 31
Slide 17: $1,060 million cash capital expenditure
$1,060 million cash capital expenditure Year to 31 December US$m 399 229 108 99 70 58 39 39 19 Alma/Galia Kraken Thistle/Deveron Heather/Broom GKA Dons E&E Malaysia Other 16
Slide 18: Cash flow
Cash flow Year to 31 December US$m Funding facilities: $1.7bn credit facility, £155m retail bond, $650m high yield bond 718 (381) (64) (53) (1,060) (590) (58) (100) (52) (933) Cash & equivalents less Net cash flow Capex Acquisitions Prepayments Financing & other Cash & equivalents less borrowings at
Slide 19: Outlook
Outlook Full Year 2015 EBITDA will benefit from hedging • $120m from resetting the 2015 puts • $80m from call premiums received 2015 cash capex of around $600m Production and transportation costs expected to be approximately $38/bbl Depletion anticipated to be slightly higher than in 2014
Slide 20: Operations
Operations 19
Slide 21: Thistle / Deveron
Thistle / Deveron Delivering production levels not seen since the ‘90s 2014 Production up 14% on 2013. No drilling rig operations on Thistle in 2014 Continuing benefit from H2 2013 wells, outperforming A59 w/o Area 6 P2 expectations, watercut rising slower than anticipated. Ongoing intervent
Slide 22: Dons/Conrie
Dons/Conrie Continuing very strong production efficiency 2014 Production efficiency of 89% Don South West S14 (TJ) drilled, on production Successful acid treatments carried out W1 Conrie – S7 West Don W2 West Don W4 shut-in at year end due to scale build up W5 W3Z S6 S13 S9 2015 S12Z S10
Slide 23: The Don fields: Ythan
0 17 -1 -11750 0 -1150 The Don fields: Ythan 2 00 -11 -11 80 0 -11450 30 0 -11250 -1 -11 14 00 -1 -1 13 13 00 Ythan first production expected by mid-2015 -1 50 12 0 50 85 -11 -1120 0 50 11 -11400 -1 -11 90 0 S6 Don North East Area (‘Don NE’) (60%) -1 12 50 00 18 00 -1 19 850 -1 -11 Ythan - FDP appro
Slide 24: Heather / Broom
Heather / Broom Highest production efficiency in 5 years 2014 Included a 136 day period without production interruption Accommodation upgrade completed 2/0 Else Rig reactivation completed and the drilling programme 5- enhanced production. Recompletion of H56 producer 15 H42 H33 H64 injector
Slide 25: Greater Kittiwake Area
Greater Kittiwake Area Delivering production, efficiency and opex ahead of expectations 2014 Production was increased from just over 2,500 Boepd in the first few months, to over 5,500 Boepd in October The Mallard workover was successfully completed and the well was brought online in September
Slide 26: Outline UK drilling programme 2015
Outline UK drilling programme 2015 Existing commitments plus focus on high margin barrels Alma/Galia Galia production well Kraken Alba Tyrone/Tiree New production appraisal well Batch drilling GKA Thistle Reinstatement of Three production Gadwall wells Heather Dons Completion of Ythan H48, as H66 pr
Slide 27: Alma/Galia
Alma/Galia The EnQuest Producer has left the yard, on track for first oil mid-2015 Construction on the FPSO is complete Five production wells are fully complete, available to come onstream and are awaiting FPSO tie-in The subsea infrastructure is in place, with risers and mooring systems await
Slide 28: Kraken proceeding on budget and on schedule
Kraken proceeding on budget and on schedule First oil in 2017 Conversion work continuing at shipyard in Singapore Drilling rig contract for the Transocean Leader has been executed. The drilling rig contract is a four year contract, with the fourth year at EnQuest’s option All major Kraken supp
Slide 29: Tanjong Baram
Tanjong Baram Two well development programme, on track for production in mid-2015 Thunder Crane Installed in February Drilling TBRM-A1, preliminary analysis indicates well results better than anticipated Host modifications works ongoing Expediting equipment packages for well head pressure Lo
Slide 30: PM8/Seligi
PM8/Seligi 2015 focus on well interventions and improving the field infrastructure Seligi Near term Field and reservoir management review and optimisation of existing production Review Yong & North Raya Medium term Seligi Water Flood pilot Evaluate value of 4D over Seligi Review PM8 undeve
Slide 31: Summary
Summary @nQuest
Slide 32: 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 31
Slide 33: 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 (Boepd) 50,000+ 3,000* 33,000* 27,895 24,222 23,698 22,800 21,074 13,613 2009 2010 2011 2012 2013 2014 2015 Post Kraken * Guidance range for 2015 is an a
Slide 34: Q&A
Q&A Thistle/Deveron Dons Northern Producer Heather/Broom Alma/Galia EnQuest Producer 33
Slide 35: 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 Greater Kittiwake Area, PM8/Seligi Converting contingent Making selective resource
Slide 36: EnQuest's growing North Sea asset base
EnQuest’s growing North Sea asset base As at 31 December 2014, plus 28th UK licensing awards The Dons Thistle / Deveron Heather/Broom Kraken Alba Avalon Crathes / Scolty Greater Kittiwake Area Alma/Galia 35
Slide 37: 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 November 2014 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 36
Slide 38: Alba
Alba 8% non-operated, 1,214 Boepd in 2014 2014 Two new producers drilled (A68 & A69) ADW New 4D seismic survey acquired 2015 A69 Production for January: 1,374 Boepd A68 1 Planned Platform Well (ADW) New 4D seismic reinterpretation Key input for maturing future drilling targets Rein
Slide 39: Greater Kittiwake Area opportunity
Greater Kittiwake Area opportunity 50 km tie-back radius & competitor infrastructure 38
Slide 40: Alma/Galia infrastructure
Alma/Galia infrastructure Proven fields Alma abandoned at low water cut of 70% Prudent base case with upside The right facilities for the fields Dedicated completions for Devonian/Rotliegend/Zechstein Variable speed drive ESPs 39 Water injection 3939
Slide 41: Alma / Galia
Alma / Galia ALMA GALIA N-Dev W2 W1 GA K3 GB K1 K4 GE EQ Development wells 2015 Planned 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 for th
Slide 42: 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 43: Alma
Alma Seismic SW 30/24-2 30/24-1 3 0/24-5 30/24-3 30/25a-2 NE 42
Slide 44: 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 45: 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 46: 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 47: Kraken subsurface: STOIIP, reserves & recovery factor
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 46
Slide 48: Kraken subsurface: gross production profile & reserves
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 47
Slide 49: Kraken 9/2b Appraisal Well
Kraken 9/2b Appraisal Well 6 Tiree 2 Sidetrack Geotech Primary 5z Tyrone 1 5 Geotechnical well resistivity and seismic 4 4z
Slide 50: 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 51: Greater Kittiwake Area opportunity
Greater Kittiwake Area opportunity Avalon Scolty Crathes Kittiwake 50
Slide 52: Alma/Galia infrastructure
Alma/Galia infrastructure Proven fields Alma abandoned at low water cut of 70% Prudent base case with upside The right facilities for the fields Dedicated completions for Devonian/Rotliegend/Zechstein Variable speed drive ESPs 51 Water injection 5151
Slide 53: 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 54: Thistle, Conrie and The Dons infrastructure
Thistle, Conrie and The Dons infrastructure 53 Unless otherwise specified all details as per 2014 half year results, where appropriate updated by H2 IMS
Slide 55: Heather / Broom infrastructure
Heather / Broom infrastructure 5454 Unless otherwise specified all details as per 2014 half year results, where appropriate updated by H2 IMS
Slide 56: GKA infrastructure
GKA infrastructure 55 Unless otherwise specified all details as per 2014 half year results, where appropriate updated by H2 IMS
Slide 57: 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