Enquest Plc · LSE:ENQ
Enquest — Debt Investor Presentation (March 2022)
47 slides from Enquest's debt investor presentation, March 2022
Slide 1: EnQuest FY 2021 Credit Update
Page EnQuest FY 2021 Credit Update March 2022
Slide 2: Strong free cash flow driving debt reduction; Golden Eagle acquisition adds significant value
March 2022 Page 2 Strong free cash flow driving debt reduction; Golden Eagle acquisition adds significant value Production at 44,415 Boepd1,2 Successfully completed the Golden Eagle, Bressay and Bentley acquisitions Achieved top quartile LTIF of 0.213 Deliver Significant reduction in Scope 1 and 2 C
Slide 3: Emissions performance well ahead of Company and industry targets
March 2022 Page 3 Emissions performance well ahead of Company and industry targets Company target: 10% reduction in emissions Industry targets: UK North Sea Transition Deal over three-years1 linked to Focused reward on absolute - Scope 1 and 2 CO2 equivalent emission reduction targets2: - Scope 1 an
Slide 4: EnQuest: Creating value in the energy transition
March 2022 Page 4 EnQuest: Creating value in the energy transition Upstream - Proven capability and strong cash generation Decommissioning – A natural next phase - EnQuest’s core business – proven track record - Extensive in-house expertise aiming to deliver safe, cost- - Maximising production effic
Slide 5: EnQuest: Creating value in the energy transition cont.
March 2022 Page 5 EnQuest: Creating value in the energy transition cont. Infrastructure and New Energy Sullom Voe Terminal - Exploring strategic operational and financial partnerships - Minimal capital expenditure Existing brownfield 1,000 acre industrial acreage COMAH1 site - Focused on three main
Slide 6: Performance Review
March 2022 Page 6 Performance Review
Slide 7: Full year 2021 financial performance
March 2022 Page 7 Full year 2021 financial performance Revenue1 Unit opex Cash generated from Free cash flow5 operations c.$1,320 million c.$21/Boe c.$757 million c.$397 million 54% 35% 33% 89% Cash EBITDA2 expenditures3 Net debt4 c.$743 million c.$117 million c.$1,222 million 35% 32% 4% Unless othe
Slide 8: Executed a focused activity programme
March 2022 Page 8 Executed a focused activity programme Capex: $52 million Abex: $66 million - Production enhancement and topside maintenance programmes - Heather well P&A programme at Magnus - Thistle platform preparation, subsea integrity campaign and - Kraken tether repair hydrocarbon removal com
Slide 9: Free cash flow of c.$397 million enabled Golden Eagle acquisition and debt reduction
March 2022 Page 9 Free cash flow of c.$397 million enabled Golden Eagle acquisition and debt reduction Net cash flow from operations up 29% Movement in net debt $m - Simplified balance sheet FCF $397 million - Repaid Sculptor capital facility early 21 1,280 674 - Repaid Magnus Vendor loan early 59 2
Slide 10: Continued debt reduction
March 2022 Page 10 Continued debt reduction Focused on debt reduction Net debt ($ million) - Continued early voluntary repayments Net debt: 2.5 1.4 2.3 1.6 EBITDA - End February 2022 net debt reduced to $1,090 million 2,000 - RBL drawdown at c.$330 million in March 1,774 1,800 - c.$85 million early
Slide 11: 2022 performance and outlook: increased activity set
March 2022 Page 11 2022 performance and outlook: increased activity set Net production1,2 (Boepd) Production 60,000 50,408 51,000 44,415 - February YTD at 50,408 Boepd 40,000 44,000 - Full year Group guidance of 44,000 to 51,000 20,000 0 2021 February 2022 YTD 2022 Guidance Opex Operating expense ($
Slide 12: Operations Overview
March 2022 Page 12 Operations Overview
Slide 13: Production
March 2022 Page 13 Production 2021: 44,415 Boepd1 Summary: 2020: 59,116 Boepd1 - Kraken production in line with guidance, reflecting high FPSO uptime 26,450 - Magnus production impacted by well integrity and topside issues 21,964 - Golden Eagle completion date of 22 October 2021, with 1,701 Boepd ad
Slide 14: Kraken in line with guidance; Magnus impacted by operational challenges
March 2022 Page 14 Kraken in line with guidance; Magnus impacted by operational challenges Kraken Magnus 2021 2021 - Strong FPSO performance; production efficiency of 88% and - Volumes impacted by well integrity and topside issues, an water injection efficiency of 89% unplanned third-party outage an
Slide 15: Golden Eagle acquisition completed; GKA project successfully executed
March 2022 Page 15 Golden Eagle acquisition completed; GKA project successfully executed Golden Eagle Other UK Upstream Greater Kittiwake Area | Scolty/Crathes | Alba 2021 2021 - Acquisition completed on 22 October 2021 - GKA including Scolty/Crathes - High uptime and strong well performance from 20
Slide 16: PM8/Seligi riser reinstatement completed
March 2022 Page 16 PM8/Seligi riser reinstatement completed Malaysia PM8/Seligi | PM409 2021 - Performance in line with expectations: - Accelerated initial production recovery activities - Innovative production optimisation solutions - EnQuest project team executed work under difficult COVID-19 rela
Slide 17: Demonstrating decommissioning capability
March 2022 Page 17 Demonstrating decommissioning capability Decommissioning Heather/Broom | Thistle/Deveron | Alma/Galia | The Dons 2021 - The Dons ceased production in March as planned - Ongoing activities at Heather/Broom: - Well abandonment programme - Engagements with potential topside removal c
Slide 18: Leveraging drilling capability to deliver new production in 2022
March 2022 Page 18 Leveraging drilling capability to deliver new production in 2022 North Sea Malaysia Magnus PM8/Seligi - Deliver low-cost, quick-payback wells - Deliver low-cost, quick-payback wells - 3 infill wells - 4 infill wells - 2 well workovers - 4 well workovers Golden Eagle - 2 infill wel
Slide 19: Looking Forward
March 2022 Page 19 Looking Forward
Slide 20: Upstream asset opportunity set
March 2022 Page 20 Upstream asset opportunity set Magnus - 2 billion Boe of in place resources; c. 50% recovered to date - Multi-year infill drilling and well workover programme planned - Low-cost, quick-payback wells - Cost per well c. $12-14 million - Track record of production-enhancing well work
Slide 21: Upstream asset opportunity set cont.
March 2022 Page 21 Upstream asset opportunity set cont. Kraken - 3D seismic assessment underway to optimise future drilling - Drilling opportunities including side-track and western area Bressay and Bentley - Potential hub utilising existing infrastructure - Bressay has c.115 MMboe (net) 2C - Bentle
Slide 22: Upstream asset opportunity set cont.
March 2022 Page 22 Upstream asset opportunity set cont. Golden Eagle PM8/Seligi - Multi-year drilling programme planned - Multi-year infill drilling and well workover programme planned - Cost per well c. $10 million - 4 infill wells and 4 workovers in 2022 - 3 subsea infill wells in 2022/23, then po
Slide 23: Core strengths underpin strategic delivery
March 2022 Page 23 Core strengths underpin strategic delivery Strategic Financial Discipline Financial Discipline Differential Capability Differential Capability Differential Capability Pillars Operational Excellence Value Enhancement Operational Excellence Operational Excellence Value Enhancement S
Slide 24: Our strategic pillars
March 2022 Page 24 Our strategic pillars Operational Value Excellence Enhancement Deliver De-lever Grow Differential Financial Capability Discipline
Slide 25: Appendix
March 2022 Page 25 eQ ©nQuest Appendix
Slide 26: EnQuest at a Glance
March 2022 Page 26 EnQuest at a Glance UK North Sea Malaysia Upstream Magnus Undeveloped offshore licence Midstream Producing asset Decommissioning Dons Thistle/Deveron PM8/Seligi Heather/Broom 4 UK Production Hubs PM409 Kuala Kraken, Magnus, The Greater Kittiwake Area and Golden Eagle Sullom Voe Te
Slide 27: Magnus Overview
March 2022 Page 27 Magnus Overview EnQuest operated, located in the Northern North Sea 100.00% 11.8 Kboepd 60% Reduction Working Interest 2021 Production In unit Opex¹ • Acquired by EnQuest in 2017 from BP • No cash outlay for initial 25% equity interest • Further 75% acquired in 2018 for $300mm² an
Slide 28: Kraken Overview
March 2022 Page 28 Kraken Overview EnQuest operated, located in the Northern North Sea 70.50% 22.0 Kboepd 88%¹ Working Interest 2021 Production 2021 Production Efficiency • EnQuest first acquired a stake in Jan-2012 from Canamens Ltd for $90mm and subsequently increased its stake to 70.5% following
Slide 29: Golden Eagle Overview
March 2022 Page 29 Golden Eagle Overview CNOOC operated, located in the Central North Sea 26.69% 10.2 Kboepd¹ $10/boe Working Interest 2021 Production Unit Opex • Acquired by EnQuest in 2021 from Suncor for an initial consideration of $325mm • The acquisition contributes to the shift in EnQuest’s po
Slide 30: PM8 / Seligi Overview
March 2022 Page 30 PM8 / Seligi Overview EnQuest operated, located in Malaysia 50.00% 5.0 Kboepd 32% Reduction Working Interest 2021 Production In unit Opex¹ • Acquired by EnQuest in 2014 from ExxonMobil for c.$25mm cash • Achieved payback in 12 months • Lowered unit operating costs from c.$30/boe i
Slide 31: EnQuest Evolution Over Time
March 2022 Page 31 EnQuest Evolution Over Time EnQuest’s portfolio has evolved considerably since its debut bond issuance with leverage levels at their lowest in the past 5 years Issuer 2014 Issuance¹ 2016 Issuance² 2020 2021 LTM Revenue 961 876 855 1,320 ($mm) LTM EBITDA ($mm) 621 481 551 743 Net D
Slide 32: Key Credit Highlights
March 2022 Page 32 Key Credit Highlights 1 • Leading netbacks, underpinned by oil-weighted, operated 4 • Balance sheet strength and financial discipline remain top High-Margin, Prudent assets and a significant UK tax shelter priority for the company vs. chasing growth Operated Capital • Numerous low
Slide 33: High-Margin, Operated Portfolio Delivering Sector-Leading Metrics
March 2022 Page 33 High-Margin, Operated Portfolio Delivering Sector-Leading Metrics Leading Free Cash Flow Netbacks Material, Operated Reserves in a Low-Risk Jurisdiction • Oil-focussed, operated portfolio with significant UK tax shelter • 2021 Breakeven¹ of $40/boe 2021 Free Cash Flow² per boe 194
Slide 34: Strong, Resilient Cash Flow Generation Facilitating Rapid Deleveraging
March 2022 Page 34 Strong, Resilient Cash Flow Generation Facilitating Rapid Deleveraging Strong and Resilient Cash Flow Generation… …Fuelling Rapid Deleveraging ($mm) ($mm) 800 100 2,500 6.6 x 700 80 2,000 600 500 60 3.8 x 1,500 3.3 x 400 40 1,000 2.5 x 2.3 x 300 1.6 x 1.5 x1 200 1.4 x 20 500 100 0
Slide 35: Operator of Choice for Maturing and Underdeveloped Assets
March 2022 Page 35 Operator of Choice for Maturing and Underdeveloped Assets Successful Reserves Replacement Demonstrated Cost Management Industry Leading Safety Metrics (MMboe) Lost Time Incident Frequency 1.7x RRR Top quartile LTI of 0.21 400 Kraken Development 201 1.28 5 350 Completed $1 billion
Slide 36: Prudent Capital Allocation and Risk Management
March 2022 Page 36 Prudent Capital Allocation and Risk Management Prudent Capital Allocation Policy Prioritising Deleveraging Robust Hedging Programme Ensures Cash Flow and Balance Sheet Strength Over Growth Visibility and Mitigates Price Risk ($mm) 1,000 6.6 x 8.6 MMboe 800 3.8 x 600 3.3 x 2.5 x 2.
Slide 37: Responsible Operator, Well-Positioned for the Energy Transition
March 2022 Page 37 Responsible Operator, Well-Positioned for the Energy Transition Emissions Performance Well Ahead of Internal and Leveraging Brownfield Project Execution Experience Industry Targets for a Low-Carbon Future • Reduced emissions by 44% between 2018 and 2021, ahead of • Opportunities a
Slide 38: Proven Track Record of Value Delivery
March 2022 Page 38 Proven Track Record of Value Delivery Track Record of Continuous Improvement… … Supported by Highly-Accretive, Opportunistic Acquisitions with Limited Upfront Costs Production (Kboepd) Delivering on Nil $100mm $350mm 2015 37 Magnus Cash outflow for Cash outflow for Net cash flow t
Slide 39: Lead by an Experienced Management Team
March 2022 Page 39 Lead by an Experienced Management Team Amjad Bseisu Jonathan Swinney Salman Malik Bob Davenport Richard Hall Chief Executive Officer Chief Financial Officer Incoming Chief Financial Officer Managing Director, North Sea Managing Director, Malaysia • Amjad formed EnQuest in • Jonath
Slide 40: Operator of choice for maturing hydrocarbon assets
March 2022 Page 40 Operator of choice for maturing hydrocarbon assets Production breakdown1 Annual production CAGR of c.10% since IPO 80,000 Malaysia 5.0 kboed 11% 60,000 40,000 UK 39.4 kboed 89% 20,000 0 1 Year to date December 2021 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 S
Slide 41: Significant contribution to Scope 3 emission reductions
March 2022 Page 41 Significant contribution to Scope 3 emission reductions Contributing Comparative North Sea emissions to Scope 3 - Kraken cargoes sold directly to the shipping fuel market. (kgCO2e/Boe) 70 reductions - Key environmental benefits: 64 - avoids emissions related to refining; and 60 -
Slide 42: Focused on SAFE results underpinned by strong governance
March 2022 Page 42 Focused on SAFE results underpinned by strong governance People and communities Governance - Health, safety and wellbeing of employees top priority Focused on absolute - Robust risk management framework reductions; management - LTIF of 0.211 – top quartile performance - Board Comm
Slide 43: Material reserves and resources
March 2022 Page 43 Material reserves and resources 2P reserves of 194 MMboe 2C resources of 402 Mmboe MMboe MMboe 400 140 131 120 273 160 115 300 100 80 86 200 194 60 40 100 33 34 81 20 3 0 0 Net 2P reserves start Net reserve additions Production Net 2P reserves end Kraken Magnus Bressay Bentley Oth
Slide 44: No material UK cash CT/SCT on operational activities
March 2022 Page 44 No material UK cash CT/SCT on operational activities UK Tax losses $m Tax losses at 31 December 2020 3,183.9 2021 net decrease (181.5) Prior year true up 8.6 Tax losses at 31 December 2021 3,011.0 - 2021 decrease driven by tax losses utilised against taxable profits in the year -
Slide 45: Effective tax reconciliation
March 2022 Page 45 Effective tax reconciliation % $m Profit Before Tax 352.4 Notional UK Corporation Tax 40.0% (141.0) RFES 113.6 UK and overseas tax rate differences (48.4) Permanent items 1.4 Deferred tax asset recognised 104.5 Other (5.6) Tax Credit 7.0% 24.5
Slide 46: Prior Year Restatement – Deferred Tax
March 2022 Page 46 Prior Year Restatement – Deferred Tax 31 Dec 2020 Deferred Tax Asset previously reported 503,946 Additional Tax Losses recognised for period to 31 December 2020 155,857 Deferred Tax Asset as restated 659,803 - Restatement arises due to a difference in the calculation of the deferr
Slide 47: Forward-looking statements
March 2022 Page 47 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 a