Enquest Plc · LSE:ENQ
Enquest — FY2016 Earnings Presentation
38 slides from Enquest's earnings presentation, Mar 21, 2017
Slide 1: EnQuest 2016 Full Year Results
EnQuest 2016 Full Year Results
Slide 2: Amjad Bseisu, Chief Executive
Amjad Bseisu Chief Executive
Slide 3: Agenda
Agenda Overview Amjad Bseisu, CEO Financials Jonathan Swinney, CFO Kraken Richard Hall, Head of Major Projects Operations Neil McCulloch, COO Summary Amjad Bseisu 2
Slide 4: EnQuest 2016 results and 2017 outlook
EnQuest 2016 results and 2017 outlook Key themes 2016 Strengthened balance sheet, provided additional liquidity Further capex and opex reductions High production efficiency Revenue of $849.6m and EBITDA of $477.1m 2017 and beyond Kraken on track and ahead of budget Unit opex $21/bbl to $25/bbl this
Slide 5: Differential capability: The 'right assets' in the 'right hands'
Differential capability The ‘right assets’ in the ‘right hands’ Production of 39,751 Boepd in 2016, up 8.7% on 2015 and highest annual figure yet North Sea up 11.3%, Scolty/Crathes 6,422 Boepd between first oil and year-end End 2016, PM8/Seligi delivering at highest levels since EnQuest became
Slide 6: Low cost operator
Low cost operator EnQuest has institutionalised new ways of doing business Further improvements to streamline operations, ahead of previous targets Delivered opex of $24.6/bbl in 2016, down from $29.7/bbl in 2015 Anticipating unit opex in $21/bbl-$25/bbl range in 2017 A materially lower oper
Slide 7: Financial discipline
Financial discipline Performance focused on driving cash flow Cash generated from operations up to $408.3m, up from $221.7m in 2015 Kraken full project capex now at c.$2.5bn, down c.22% Cash capex materially down again in 2016 at $609.2m, set to be down again in 2017 and beyond Anticipated t
Slide 8: Acquisition of Magnus
Acquisition of Magnus Avenue for growth in a capital constrained world EnQuest is a life extension expert, with the right integrated technical skills, operational scale and high level of operating efficiency Well placed to extend the lives of Magnus and SVT Will provide new opportunities for t
Slide 9: 'Cashless' and financially 'riskless'
‘Cashless’ and financially ‘riskless’ Operatorship and acquisition of an initial 25% interest in Magnus oil field and 3% of Sullom Voe terminal Base consideration $85 million, subject to working capital and other adjustments 2P reserves of 63.4 MMboe gross (15.9 MMboe net) and production of 16
Slide 10: Jonathan Swinney, Chief Financial Officer
Jonathan Swinney Chief Financial Officer
Slide 11: Results summary
Results summary Year to 31 December Unless otherwise stated all figures are before exceptional items and depletion of fair value uplift and are in US dollars US dollars 2016 2015 Change % Export production (Boepd) 39,751 36,567 8.7 Average realised price per barrel ($)1 63.8 72.0 (11.4) Revenue and
Slide 12: Summary income statement
Summary income statement Year to 31 December 2016 2015 US dollars Business Business performance performance $m’s $m’s Revenue 849.6 906.6 Cost of sales (653.5) (733.4) Gross profit 196.1 173.2 Exploration and evaluation expenses (0.1) (0.3) General and administration expenses (10.9) (14.4) Other inc
Slide 13: Focus on cost efficiency
Focus on cost efficiency Continuing to reduce costs across the supply chain 2016 2015 Change % Cost of sales ($ million) 653.5 733.4 (10.9) Unit operating cost1 ($ per barrel) - Production costs 20.4 23.4 (12.8) - Tariff and transportation costs 4.2 6.3 (33.3) - Operating costs 24.6 29.7 (17.2) 1 Ad
Slide 14: Group taxation position
Group taxation position No material UK cash CT/SCT on operational activities expected UK Tax Allowances $m’s Recognised at 31 December 2015 2,536 2016 net additions plus RFES 329 Prior year adjustment 29 Tax losses at 31 December 2016 2,894 Tax allowances carried forward 204 Total tax losses and all
Slide 15: Cash flow
Cash flow Year to 31 December US$m 718 379 (1,548) (609) (19) (1,797) Cash & equivalents less Net cash flow Capex Cash & equivalents less borrowings at from operations Net financing & other borrowings at 1 January 2016 (excludes borrowings) 31 December 2016 14
Slide 16: $609 million cash capital expenditure
$609 million cash capital expenditure Year to 31 December 2016 US$m 429 58 50 44 8 9 4 4 1 2 Kraken Scolty/Crathes Alma/Galia Thistle/Deveron Malaysia Exploration Alba Heather/Broom GKA Dons 15
Slide 17: Guidance to the market
Guidance to the market Outlook Production guidance between 45,000 Boepd and 51,000 Boepd for 2017 Average unit opex anticipated to be in the range of $21-25/bbl for 2017 Cash capex in 2017 is expected to be in the range of $375m- $425m Predominantly focused on Kraken, approx. 75% of the tota
Slide 18: Richard Hall, Head of Major Projects
Richard Hall Head of Major Projects
Slide 19: Kraken development update: Field entry – 13th February 2017
Kraken development update Field entry – 13th February 2017 Kraken FYR March 2017 1818
Slide 20: Kraken development
Kraken development Progress update: March 2017 FPSO: The FPSO departed the Singapore deepwater anchorage for the North Sea on 23rd November 2016 Voyage from Singapore was concluded on schedule and the vessel arrived in Rotterdam in January for a planned post voyage inspection FPSO departed Rot
Slide 21: Kraken development update: Plug removal preparations
Kraken development update Plug removal preparations Kraken FYR March 2017 20
Slide 22: Kraken development update: Pulling in STP buoy
Kraken development update Pulling in STP buoy 21
Slide 23: Neil McCulloch, Chief Operating Officer
Neil McCulloch Chief Operating Officer
Slide 24: Production results to year end 2016
Production results to year end 2016 Production up 8.7% year on year Net production (Boepd) 2015 2016 2015 2016 10000 40000 39,751 36,567 8,930 9000 8,689 35000 7,960 8000 7,533 7,690 30000 7000 6,740 5,948 25000 6000 5,404 5000 4,643 20000 3,981 4000 15000 2,988 3000 10000 2000 1,0832 1,271 1,188 1,
Slide 25: Central North Sea
Central North Sea First full year of production for Alma Galia and Scolty/Crathes delivered 2016 Carry over scopes on EnQuest Producer complete, e.g. steam power generation Alma negatively impacted by well performance, including ESP reliability Interventions on K1, K3Z to improve production. K
Slide 26: Northern North Sea
Northern North Sea Delivering positive margins benefitting from prior investments 2016 Heather production up 28% from 2015; production efficiency – above 90% Ythan production above expectations Thistle Life Extension Project substantially complete Brent Pipeline System delayed shutdown negat
Slide 27: Malaysia
Malaysia Material gains from efficiency and low cost well work at PM8/Seligi 2016 Combined 2015-16 intervention programmes yielded 5,000 Boepd average during H2 2016 Fluid contact logging for re-perforations and reservoir surveillance 2017 Focus areas:- Facility integrity Gas compressor re
Slide 28: Institutionalising low cost base
Institutionalising low cost base 2015 2016 2017 2018 H1 H2 H1 H2 H1 H2 H1 H2 2014 Operations Excellence $42.1/bbl Centralised Procurement Open Book Contracts 2015 $29.7/bbl Supplier Forum Should Cost' Modelling 2016 $24.6/bbl Alternate Sourcing Integrated Logistics Shared Services Org Inventory Assu
Slide 29: Summary
Summary North Sea production up 11.3% on 2015 Successful idle well restoration programme on PM8/Seligi Production efficiency remains high Institutionalised lower operating cost structure Excellent drilling performance Scolty/Crathes delivered ahead of schedule and under budget Kraken o
Slide 30: Summary
Summary @nQuest
Slide 31: Differential capability
Differential capability Magnus confirms EnQuest as Operator of Choice for maturing assets 2016 2015 2017 and beyond 2015 Differential capability Delivering on 2017 production guidance: 45,000 - 51,000 Boepd execution Kraken on target for first oil Q2 2017 Integrated technical capabilities: Mag
Slide 32: Q&A: EnQuest value creation: continuous improvement
Q&A EnQuest value creation: continuous improvement PM8/Seligi gross production Greater Kittiwake Area gross production EnQuest assumed Shutdown for operatorship maintenance May October 2014 & Nov 2016 Thistle gross production Heather net production 16,000 5,000 14,000 4,500 4,000 12,000 3,500 10,000
Slide 33: Repositioned for resilience now and for sustainable growth
Repositioned for resilience now and for sustainable growth Delivering strong compound annual growth rates c.17% C.A.G.R. by 2017. Average net production (Boepd) 60000 6,000 50000 45,000 40000 39,751 30000 20000 10000 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 Guidance range for 2017 is an aver
Slide 34: Strong reserves growth in first seven years
Strong reserves growth in first seven years Reserve life of 17 years Net 2P reserves 2010 to end of 2016 202 215 MMboe MMboe 81 (68) MMboe MMboe Additions to Production reserves Net 2P reserves 2010 to 2016 2010 to end 2016 Net 2P reserves at end 2016 start 2010 33
Slide 35: EnQuest's North Sea asset base
EnQuest’s North Sea asset base As at 31st December 2016 Licence Block(s) Name P073 21/12a Goosander P213 1 16/26a Alba Thistle, Deveron, Don SW, Conrie, P236 211/18a & b West Don P238 21/19a & 21/19b Grouse, Mallard, Gadwall (Eagle ³) P242 / P902 2/4a & 2/5a Broom & Heather P351 21/18a Kittiwake P47
Slide 36: Group taxation position: Effective Tax Rate reconciliation
Group taxation position Effective Tax Rate reconciliation ETR % $m’s Profit Before Tax 217 UK CT Rate 40 87 PRT (2) (4) RFES (47) (102) UK and overseas tax rate differences 9 21 Permanent items 15 33 Prior year adjustments 2 4 Other 6 14 Tax Credit 24 51 Exceptional Tax Items (9) (19) 2016 Tax Charg
Slide 37: Exceptionals
Exceptionals Net $64m credit post-tax, $(11)m of total is cash Main pre-tax items $(51.5)m : Revenue impact of unrealised commodity contracts $147.9m : Reversal of oil and gas impairments $(16.2)m : Loss on disposal of Avalon $ 31.5m : Other income including $22.9m credit from derecognition
Slide 38: 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