Enquest (LSE:ENQ) — Interim Results

0:01 Good afternoon, ladies and gentlemen, and welcome to the ENQUEST PLC investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged. They can be submitted at any time via the q and a tab that's just situated on the right hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today, and we'll publish those responses where it is appropriate to do so. Before we begin, as usual, we would just like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I would now like to hand you over to head of investor relations and corporate affairs, Craig Baxter. Craig, good afternoon, sir. Thank you very much, Jake, and, good afternoon, ladies and gentlemen, and, welcome to today's retail focused presentation.

0:50 As Jake has already introed me, my name is Craig Baxter, and I'm the head of Investor Relations and Corporate Affairs at ENQUEST. The purpose of today's meeting is to provide an additional forum outside of that of the formal results period and the AGM for existing and potential non institutional holders to engage directly with our story. It also gives me an opportunity to answer any questions you may have. So with that in mind, I'll ask Jake to move on to the next slide, and I'll start with an overview of our business model and strategy. So for those who may be less familiar with ENQUEST and our operations, this slide hopefully provides an easy to understand overview of our business model. ENQUEST is a top quartile operator with upstream at our core, and we have a really strong track record of exceptional uptime performance, cost discipline, and reserve replacement, all of which means we've extended the economic lives of all of the assets we've operated.

1:46 In recent years, we've enhanced our position as a full cycle energy transition company through the addition of complementary strands, most notably at VERY ENERGY, which is a wholly owned subsidiary of ENQUEST and where we aim to repurpose an existing infrastructure, primarily the Selimbo Terminal in Shetland in the first instance to support delivery of our renewable energy and decarbonization ambitions. Also, decommissioning, which is becoming a more and more important part of the North Sea story, and where we're delivering market leading performance, particularly with regard to well plug and abandonment. Our focus here is to ensure that we manage the tail end of production correctly. This helps mitigate cost and, you know, helps avoid extended timelines for future decommissioning activity. Right across this life cycle, we can leverage our core capabilities, which are already established.

2:36 We see this as the key to protect and enhance value within our existing portfolio and those assets which we'll acquire going forward. If you can move forward, please, Jake, that'd be great. Those of you, on the call who are more familiar with our story will know that our strategy has for some time been anchored around the three pillars of deliver, delever, and grow. Following consistent delivery against our targets and the significant deleveraging of the balance sheet, ENQUEST remains prime now to deliver growth. From an operational standpoint, following the completion of our five yearly rig research at Magnus, the continued strong production uptime across the portfolio, and it's worth noting here, our operating efficiency is 93%, across our operated fields for the first half of the year, which is fairly exceptional.

3:27 And also following the execution of the well work programs in The UK and in Malaysia, production to the end of June is at 42,771 barrels of oil equivalent per day. With an active work program planned in the second half of this year, including the shutdown activities at Magnus and at Kraken, which we're currently wrapping up, We remain confident in delivering our twenty four twenty twenty four targets, but we have acknowledged publicly now that the production is likely to be in the lower half of the range. As I've touched on already, sector leading decommissioning performance has become business as usual at ENQUEST, and that continues with our in house team remaining on track to execute the plug and abandonment of a further 25 wells across Thistle and Heather this year. That equals our own record, and it's a record for the Northern North Sea as well.

4:15 Our expertise in this area has been further vindicated by the recent announcement. We we issued a press release last week that we've taken on full decommissioning management of the Greater Kittywake area, assuming Shell's responsibilities. Reflecting our continued strong operational delivery and against the backdrop of supported commodity prices, we generated $55,000,000 of free cash flow in the first half of the year, but we also received the cash receipt of 109,000,000 following the completion of the Bresse Farmdon transaction that we announced and completed at the end of last year. As such, our trajectory of deleveraging continues with net debt now reduced by a further GBP 160,000,000 to GBP $321,000,000 as at June 30. And reminder here that we also repaid in full the group's RBL facility, that was in q one.

5:05 Our deleverage story, which now takes us about $1,700,000,000 paid back since peak debt, It underpins our pivot to growth, and it was also central to our decision to return capital to shareholders during 2024. Our $50,000,000 share buyback program is progressing with over 30,000,000 shares repurchased and cancellations commenced, and I have a feeling there'll be some questions that you'd like me to answer on that when we get to the q and a section. Looking ahead, the work we have done to strengthen the balance sheet gives us choices, particularly important in today's environment given the punitive changes made to the fiscal regime by the new labor government. We have a low cost, quick payback opportunity set that remains within our core assets, and we will remain disciplined in evaluating work programs in order to efficiently manage our capital.

5:56 With strong liquidity and our 1,900,000,000 UK at $1,900,000,000, should I say, UK tax asset providing an advantaged foundation from which to transact, our growth strategy remains robust. I can assure you that Amjad, his leadership team, and all my colleagues across the business are working very hard across several credible options to deliver a value accretive transaction. Jake, if you can move forward, please. I thought it would be worth putting this slide back up just as a reminder. We showed this at the full year presentation. And when we talk about our growth strategy, I think it's worth returning to the proof points that we covered back then in March. You've also heard these consistently from us in the intervening months and over recent years. We're a top quartile top quartile operator.

6:43 We have differentiated capabilities across all facets of our business, and that fact, coupled with our differentiated tax position in The UK, makes now the ideal time to pivot to our next growth phase. Next slide, please. I've tried to provide you a simplified view, of where we sit today in the in The UK in terms of the tax regime. What that means for the sector, I'll cover in a second, but this this slide seeks to lay out, in a in a digestible fashion what it actually means for ENQUEST. So you'll you'll probably be aware of the recent changes to EPL, which were announced by the government in Rachel Reeves' fiscal policy letter. Essentially, what this does is it increases the rate of EPL from 35% to 38%, which was something we were aware was a a possibility based on the labor manifesto.

7:40 There's also an extension of the duration of EPL now by a further year out to 03/31/2030. And quite significantly, there's also removal of the e EPL investment allowance, which is a 29% uplift on an on capital investment. That that's now been taken away or will be taken away as of 11/01/2024. Again, that was something that was kind of earmarked in in the manifesto. So where we stand now is that The UK is now the only country worldwide levying a windfall tax in its oil and gas sector, and it's clear to us that no windfall conditions exist. Despite this, we're still not clear on what the government plans to do with first year capital allowances.

8:28 We ourselves have been very clear that full deductibility in year one is a foundational principle of The UK economy across all sectors. And also beyond The UK, it's a fundamental principle of all OECD countries which don't operate under a royalty system. These changes, in our view, will undoubtedly stifle the North Sea investment. It will accelerate the production declines, which are already reaching record levels, and will adversely impact The UK's transition ambitions. Essentially, when you look at the resulting loss of jobs, that's actually a loss of jobs for the transition. Skills and equipment are also migrating out of The UK to other geographies which are more supportive. The reality here is that Scottish and British ingenuity will probably deliver a energy transition.

9:18 It's just very unlikely now to happen in The UK unless changes are made to the fiscal regime. For ENQUEST, however, our strategy remains credible and actionable, particularly as yet more operators are gonna look to to leave the basin. As we screen opportunities, we're focused on three things, growing scale, delivering value, and reducing emissions. As a reminder, and hopefully, this slide lays out quite succinctly, ENQEST is sheltered from aggregated 40 corporation tax and supplementary charge due to our tax loss position, which currently on the balance sheet sits at $1,900,000,000. Therefore, despite the challenges introduced by EPL and the and these these further changes, our fiscal competitiveness has actually been enhanced with cash generative assets now worth 280% in our hands versus those that have don't have a tax loss position and are thus full UK taxpayers.

10:15 So that's really the difference between ENQEST retaining 62% of cash flows based on a 38% tax rate and others who are retaining 22% cash flows based on a 78% headline rate. As we deliver transformative UK growth, our tax assets yield material free cash flow, helping us to target further flowing barrels with robust decline curves and low CapEx investment requirements. As we look to diversify, we will reinvest free cash flow internationally, most likely in Southeast Asia where we have a strong presence and where this year awarded operator of the year in the upstream awards. Jake, if you could move forward to the next slide, please. I don't I don't intend to go through this. This is a slide we've we've shown before.

11:05 It really just highlights though that that that we are really a transition company. We are seeing that transition in action, and I think actually SVT provides a really good microcosm of what a UK energy transition should look like. We've got significant existing infrastructure. As as I've covered in previous presentations, SVT was at one time the most was with with the largest oil and gas processing terminal in Europe. We've got projects in flight today, so this is not a promise about what's gonna come tomorrow. We've got projects happening today to repurpose the site, to rightsize the facilities at the site for for the future, both the throughput of oil and gas and also for what comes next in terms of renewables.

11:51 So those projects we have in flight today, they're expected to reduce carbon emissions by 90%, and they're supposed they they will help us get to zero routine flaring by 2030, which is the NSTA target. There'll also be an associated significant reduction operating cost as the site is right sized for future operations. That really opens up the opportunities that are are in front of Vet Energy, our wholly owned subsidiary that we really builds on our infrastructure and new energy division that we've had for a number of years, but it really has evolved into energy, which is a a sort of standalone subsidiary with its own dedicated management team that we announced back at the end of twenty twenty three. So I've kind of just highlighted the key things we're prosecuting there. So that's onshore wind.

12:38 We've already talked a little bit around our CCS ambitions. We have the opportunity to have a 10,000,000 ton per annum operation at at at Sullivanville, and we already have the four carbon storage licenses in place to help us progress that that endeavor. And we're also looking at study work on on the feasibility of hydrogen production at Sullivanville, and that's that's that has been backed by some FEED study funding that that was generated by a grant from the previous government. If you wouldn't mind, Jake, if you could move forward to the next slide. So I've I've talked a little bit about decommissioning earlier in the presentation, and I think it's a really important part of our offering as we move forward.

13:27 I'm quite comfortable sitting here saying that ENQUEST is is effectively the North Sea market leader in decommissioning. We're doing the most activity. We're doing it quicker than everyone else. We're doing it cheaper than everyone else. And while we're doing that, we're doing it with a dedicated in house team. And what that allows us to do is learn lessons from every project we undertake and build a real capability and a real skill set that can be deployed in future projects, you know, already within our portfolio and as we look to acquire. And I think it's fair to say that with an estimate of £50,000,000,000 worth of decommissioning activity still to be done in the North Sea, a company who is very, very adept in executing such projects stands a real good competitive advantage when it comes to being an enabler to take other assets into the portfolio.

14:15 We believe this is a real differentiator for ENQUEST, particularly as we look to grow the business. Next slide, please, Jake. If I if I cover just some of the financials now, in terms of our position at 06/30/2024, our net debt, as I've mentioned, was 321,000,000. And this brings us again to that that that very, very impressive figure of 1,700,000,000 in in re in repayments since our peak net debt. The chart on the left hand side kinda tries to illustrate the pace and quantum of that deleveraging, which has continued into this year. This has taken a lot of focus and discipline and is a pretty remarkable achievement, for everyone involved in ENQUEST. Gross debt at June 30 was 658,000,000, cash and cash equivalents of 337,000,000 at that same juncture.

15:07 We've now moved beyond our stated leverage target of 0.5 x net debt to EBITDA and sit at the half year with a ratio of 0.4 x. Importantly, though, the group also has enhanced its liquidity, and that's transactable liquidity. We have cash and cash equivalents totaling 566,000,000, which is 67,000,000 rise in 30 since the 12/31/2023. The importance of this figure can't be understated. It's it's important for us as we look to grow the business to be able to negotiate in as simple a way as possible. In the past, when ENQUEST had a a big debt pile on its on its balance sheet, a lot of our negotiations were quite difficult because we were having to tell counterparties all the things we couldn't do with our balance sheet. But now we've got a simplified approach, and now it's really about focusing on those assets that deliver the most accretive value to the group.

16:04 Together, this level of net debt and liquidity provide a really strong platform. And and and as I've mentioned before, key to unlocking this growth are our tax assets, which are immediately accessible and are at 1,900,000,000. Next slide, please, Jake. In terms of this year, the focus is obviously on delivering our targets that we've set out, and we remain on track to deliver within our price guidance range sorry, our production guidance range, although I have noted that that will be in the lower half of the range. CapEx costs, OpEx costs, and AbEx costs all remain on track, and we're undertaking a busy program of operational activity in the second half of the year. Tax also falls in the second half of the year, and you will see that we have an estimated current liability of $20.24 of 171,000,000 sit in the financial statements.

16:55 Now we'd say this figure does move around and only be finalized when we submit our tax return. More generally, we continue to work diligently to optimize our financial efficiency both this year and going forward. Next slide, please, Jake. So overall, I would say we've delivered a very solid first half of the year from both an operational and financial perspective. We're continuing to demonstrate progress against our established strategic priorities against a challenging backdrop. The combination of our track record of delivery in addition to our advantaged tax vision in The UK and the changing M and A landscape does still give me confidence we can produce transformative growth through acquisition. This will further enhance our position as a responsible operator, making the best use of the resource and assets that have already been developed to ensure we play a leading part in the transition.

17:48 As we move forward on the next slide, please, Jake, what I'm gonna do actually is ask Jake to leave this slide on the screen. I think it's a reminder of what the core principles which undertake which underpin, sorry, our our decision making. And I think it'd be useful that for that just remain on while I cover the the the q and a section. Thank you very much for for your your attention in the main part. There have been Jake, do you want to to jump in there, or do you want me to move on to to the q and a that's been presubmitted? Craig, if I jump in and then well, I'll be able to just give you a few moments there just to review some of the questions that have come in. But in the meantime, firstly, Craig, thank you very much indeed for your presentation this afternoon. And ladies and gentlemen, please do continue to submit your questions just by using the q and a tab that's just situated on the right hand corner of your screen. But just while Craig takes a few moments to review those questions that were submitted already, I would just like to remind you that a recording of this presentation along with a copy of the slides and the published q and a can all be accessed via your investor dashboard.

18:47 Craig, as you can see there, we have received a number of questions throughout your presentation this afternoon. And thank you to all of those on the call for taking the time to submit their questions. But, Craig, at this point, if I may just hand back to you just to read out those questions and give your responses where it's appropriate to do so, then I'll pick up from you at the end. Thank you. Sure. Thank you. Thanks, Jacob. And and thanks for all your questions. I've had a quick scan of the ones that have come in while I've been talking your ears off. So I'll cover the ones that have been presubmitted first, then we'll move into the the live questions. That's okay. So there there were a couple of questions presubmitted on the subject of buybacks, and I think there's maybe been a couple more submitted live. So, essentially, one of the one of the the questions, I think this is actually a pretty good summary of the others, is why are buybacks not conducted more aggressively? So I think this is this is consistent with some concerns that have been raised to me directly over the last few months about the the cadence of our buyback program and and whether we're gonna be able to to achieve it by the end of the year. So in answer to that, I would just remind everyone that the the buyback program is governed by the market abuse regulation safe harbor rules.

19:55 So as a result of that, Merrill Lynch who are acting as principal in each transaction, so they're very definitely not an agent of ENQUEST. Essentially, we set parameters to them upfront, but they're largely based on the safe harbor rules, and then they just move through the program. And what that allows us to do is in the event of any closed periods, such as the one we just had for half year results, that enables Merrill Lynch to keep buying even in a closed period. So so we that's what we did. One nuance that maybe is not widely understood is that the the the the the harbor rules apply across all tradable platforms. So effectively, the limit of 25% does cover each individual trading trading platforms. That's LSE, BATS, etcetera, etcetera.

20:45 So and this limit is based on twenty day average volumes. So if you see a particularly high level of volatility in traded volumes, that can have a major impact on what we're allowed to do or what Merrill Lynch, sorry, should I say, allowed to do on a particular day on a particular platform. So that's why it's not quite as easy as saying x amount of, traded volumes in the day. Why didn't Merrill Lynch buy 25%? The other issue here is they have to trade on traded values as opposed to assumed volumes. So they can't say, well, you know, we're gonna buy 50% of the morning's volumes because we think there'll be plenty in the afternoon, you know, and and that'll that'll cover us on on the 25%. They have to just see what's being traded and react to that.

21:35 So there's always gonna be a natural lag in the pros in the process, and that's another reason why it's it's it's basically impossible to get to 25% of of of traded volumes on each day. What I can assure you though is that the process is being pushed as hard as we can, and Merrill Lynch regularly buy their daily limits and are allowed under regulation. So hopefully that that gives a bit of context. If there's anything else that anyone would like to know about the the program, please contact me directly. And like I say, my my details will will will be showing up at the end of this at the end of this presentation. Second pre submitted question is around the tax asset and how how do we plan to unlock the value. So I think it's a really good question. I've talked about it numerous times already today, but actually how we go about it, I think, is a really good question. So, essentially and simplistically, the value in our tax asset is unlocked through acceleration, I e, increasing our short term utilization of the tax asset to offset corporation tax and supplementary charge.

22:41 Remember that the tax assets can't be used to offset EPL. So the NPV zero value of the 1,900,000,000 loss that sits in our balance sheet and is immediately accessible, that's around 750,000,000. But while it's not reasonable to assume that even with a transaction, we could burn through this position in one year, the NPV 10 value, which has obviously a time value of money component, increases significantly the quicker we flow profits through the business. So, essentially, our contention here and our strategy is to add barrels, value adding barrels, cash flowing barrels, which allow us to utilize the tax asset quicker and effectively achieve a a significant margin in each barrel because of our diff differentiated tax position compared to full taxpayers. It's also worth noting that we have a further 1,200,000,000 tax asset associated with the Bentley entity, which we do very much expect to be able to utilize in the future. This is not yet recognized on our balance sheet, however, but there is a timeline at which that that would come into play, and and we believe we're meeting all the requirements to do so.

23:47 In terms of the next question, will Labor's proposals affect our ability to reclaim our tax losses? So no is the simple answer. There's no indication that historic tax losses, are under any challenge. And, certainly, the the latest round of changes, which I think is now its fifth set of changes in the last two and a half years, but that that latest set of changes do not impact our ability to utilize the the what the the the tax asset which sits in our balance sheet. And as I've pointed out, actually, in a very short term view, the worst that the tax regime gets in The UK for full taxpayers actually increases our advantage. So bizarrely, it kinda helps us as we look to transact. In terms of the the final there was there was two more pre submitted. So one of them actually was asked multiple times, and it was around what why are we focused on adding incrementally to our our our gas component of our portfolio versus oil and and really as by extension, why do we prefer gas over oil for acquisitions?

24:51 So I think the the main thing to say there is that gas is recognized as a transitional fuel and aligns with our view of the future of energy. So as I noticed in as I noted earlier in the slides, we're a transition company that's increasing production and re re reducing carbon intensity. And it's carbon intensity that which which is the second point here. So scope one and scope two emissions associated with gas are lower than oil, and that remains true as a scope three end user emission requirements, and that's becoming a bigger bigger part of our reporting burden. Stakeholders, including institutions, certain banks, and others, obviously, I guess, regulatory bodies are very keen for us to to increase our our our scope three reporting, and and that's what we're doing. So so gas essentially just gives us a a lower carbon intensity commodity to work with and thus help smooth the emissions on our portfolio.

25:53 So that's the pre oh, so there was other one further one. Apologies. And that's what's the plan for the ENQUEST producer FPSO. So plan a is still that that very valuable piece of infrastructure, is utilized as an early oil production system at at Bresse. So if you if you recall and I think there's a question on this. I'm just gonna double check. I'm answering this at the same time. There's a question around the the the timeline of the Bresi gas line back to Kraken. So where we are at the moment is we're working through a field development plans for that that tieback. Those are being worked with the NSTA at the moment, and we're looking to submit sort of final FTPs alongside our own internal view of funding plans.

26:44 That will be end of this year, start of next year. And then it really depends on what the approvals process is and how long it takes for the NSTA to to approve or to challenge that submission. If they approve it, we can absolutely see it being feasible that first gas from Bresse into Kraken would would would occur in 2026. What that then opens up is the conversation around a phased oil development, and it's at that stage, really, the ENQEST producer becomes, it comes off the bench, if you like. It's currently on warm stack at, at Nig beside Aberdeen. And, at that point, that would be an early production system for the oil development, which would then hopefully, all being well, scale up and and and effectively outgrow the the the FPSO. But that's still the primary thought for the ENQUS producer.

27:33 If for any reason, whether it's regulatory or whatever else may occur between now and then, if for whatever reason, BRESI doesn't move forward, the ENQRS producer remains a very valuable piece of infrastructure, and it's something we could use on a an an alternate project. But like I say, plan a is certainly to use it at Bresi. So now if you excuse me. I'll just sort bear with me as I move through the the the q and a at this stage. So there's another question here around with the buyback, how are we balancing capital returns to shareholders with the need for investment and growth and debt reduction? What additional measures will be taken to ensure sufficient liquidity for growth while continuing to reduce debt? So I think that's a a really, really good question that kinda encapsulates all all of our thinking.

28:20 So we are we are absolutely committed to to to growing the business. And as I've said, having liquidity on hand that's transactable liquidity makes things a lot easier as as we as we negotiate. For those of you who read maybe some comments in the press or or or viewed the the the webcast we did with the institutions, it's safe to say we have a number of of of significant negotiations ongoing both in The UK and and in Southeast Asia. So having that liquidity is very, very important in order to to to move move some of those forward. But, absolutely, we've been very clear around seeing the the 50,000,000 buyback as a start for our shareholder returns program, and we want to have sustainable and increasingly material shareholder returns as as far as possible moving forward. So it it is a balance, and and that the balance is in the question and balance is in the answer.

29:20 We just need to make sure that we have the right capital allocation, which allows us to grow the business, invest in our assets in an in an efficient way. And let's be quite honest, the the latest view from government and the the disincentivization to to invest in capital projects does mean that that that some assets will receive less of a capital allocation. So that's all that's all part of our thinking. So hope hopefully, that's clear. Question here from Mohammed around how long the tax loss benefits will last. So that really depends on two factors. One is how quickly we can we can bring new production and new value into the business that will obviously accelerate the use of the 1,900,000,000 that's on the balance sheet. And it also depends on our ability to utilize the further 1,200,000,000 from from the Bentley acquisition the Bentley entity, should I say. So it really depends on what our production profile is, mark our profit profile is, but, I mean, it they will definitely be around for a a number of years out towards the end of the decade.

30:24 And but but we're we're very focused on accelerating the use of them, and we want to use them. It'd be a real bonus for us to use them as quickly as possible. Question from John around the development of Bentley and whether we're gonna develop that anytime soon. So I think we've been fairly clear over the years, John, that Bentley sits after Bressey in terms of our our thinking. As I've just laid out, Bressey itself is a sort of multiphase development starting with the gas line and then hopefully moving on to a phased oil development. So so Bentley is definitely further down the line, but we do have people looking at it. It is moving forward with the same sort of project team as as as Bressey, and then we'll we'll keep you updated as to any progress that that that develops in terms of of Bentley.

31:18 And I have a question from from David here on the slide around robust growth strategy, and this this really centers on diversification internationally. To David, we like to do how much of the free cash will be reinvested and how much of the free cash will be distributed to shareholders, buybacks, or dividends. So, again, that all that all comes back to the my previous answer on on capital allocation and the need to remain balanced. What I would say, though, is that the nature of any transaction we execute in The UK, given that ENQUEST will will generate 2.8 x the cash flows versus any other full taxpayer, what that tells me and what that should should give you all comfort is that we would expect any transaction to be extremely cash accretive. And it's that cash flow that we expect to fund both international diversification, which obviously comes with some commodity diversification. We've already touched on our attraction to gas, but that also should give us funds available for shareholder returns.

32:22 Just want to make sure I'm catching everything here. How can a question from from Vaskor. How can growing scale be compatible with reducing emissions in terms of your strategy? So what I would say here is it's it's less about reducing overall emissions. It's about reducing our carbon intensity. So our intention is that we are a very responsible operator, and we have the ability to reduce emissions on any asset that that that's under our operatorship. We've done that consistently. You know, in The UK, our emission reduction has been about 41% since 2018. Across the group, we've done in excess of 20% in the last four years. So it's really about taking in assets which allow us to continue reducing overall emissions, but for ENQUEST, it's about it's about reducing that carbon intensity across the portfolio. I think that's where we can demonstrate real progress.

33:24 In terms of a question now on tax, is the tax of 170,000,000 on the balance sheet only EPL, or does it contain other tax elements? So that doesn't include other tax elements. So it's it's EPL from sort of core activities, if you like, so so the normal operations of the business. It's the EPL associated with the Bressey farm down transactions. So if you remember, when we announced that transaction, we stated that the net cash effect to ENQEST in 2024 would be $59,000,000, and it also includes an element of a Malaysia tax. Couple of questions here. Any update on the status of Saligi Carry Gas?

34:11 So, yes, I mean, so we have the Saligi one a gas agreement in place. Those who are less familiar with the company, that's an agreement whereby gas at our PM eight well, Saligi gas from our PM eight Saligi asset, which to which PETRONACE have the entitlement. ENQUEST, where we used to inject that back into the reservoir, we now produce and transport it for for the market on Peninsular Malaysia. So that's a foundational agreement. We're effectively paid a sort of transportation tariff fee for that that production. But, yes, the next stages are being discussed. We are in constant negotiation with Petronas with whom we have an excellent relationship. And, yeah, we'd be hopeful to to sign further phased agreements to, access some of that huge gas opportunity which exists at Saligi.

35:07 A question here on decommissioning. Bear in mind your expertise in decommissioning. Has the company considered offering this in other geographies? Australia stands out in terms of cost. So yes is the answer. Lots of companies have tried to come up with a commercial model for decommissioning, and and most of them have failed. We we are we are looking at decommissioning in in in sort of three ways. One is that it it decreases ENQUEST exposure to cost. Two, it enables us to be a really attractive acquirer of assets. So for example, if a major was looking to offload some assets, they really want to know they can they can send those assets off to an operator who can can successfully, efficiently, safely execute decommissioning. So it's an enabler for m and a. And also, as you've seen from the from the recent announcement with with the GKE responsibilities, Although we don't get paid a huge amount for that, what we do do is take we we assume all the responsibility. So we don't assume any more costs. There's no more reliability that comes our way, but we're being entrusted by that JV JV partnership, including Shell, who held the responsibility before. We're So obviously seen as a very safe pair of hands.

36:29 So, absolutely, we we think those skills are transferable. Any other geography that that we we move into as we as we grow the business, we would absolutely look to become a decommissioning operator of of, you know, high standing in any of those geographies. And I think, you know, conversations will absolutely develop in terms of how we can, you know, develop maybe, like, a service company model with our decommissioning offering, but that's that's for for the future. It's not not right there today, but I think all of our building blocks are very, very encouraging in this area. Looking at some additional questions now. There's there's quite a lot. Are we still in a closed period due to m and a, and that is why we haven't seen end directors buying stock? So I obviously can't comment on anything around ongoing m and a, but what I would say is we're no longer in the close period associated with our half year results.

37:27 We do have directors who hold significant holdings in ENQUEST, and, absolutely, I know that AMJAD and the chairman have have are very encouraging of our directors. Some of them who are very new, remember, will will build a holding. So, yeah, that that message is is heard loud and clear at that level. There's a couple of questions here. So there's one around are we pushing forward with the gas cap at Bresi's? I think I've answered that one. So so, yes, absolutely. We were looking to get FTP in place at the end of this year, start next year, and move forward with that. And there's there's a question here, and I I kind of expected this question from Martin. How far out in time, days, weeks, months, and years would you expect an acquisition to be announced? How will it be funded?

38:17 So on on the first part of that question, I hope it's imminent. We are working very, very hard across a number of very credible opportunities. The team are working extremely hard led by Amjad, Steve Boyer, who's got a lot of experience. John and Cope is the same, and we have a dedicated BD team both in The UK and a and a separate team in Malaysia who are hunting down the opportunities we've kinda talked to over over recent months. I can't put a timeline on it because simply nothing is is an announceable stage. But certainly, what I would say is there are a number of very credible opportunities, some of which are we deliver the transform the transformative acquisition that we've kind of as publicly said we're aiming for. They would they would do that in in one step, but, obviously, we're we're trying to build momentum to get that done.

39:09 How will it be funded? So I've I've talked a little bit about we have liquidity on the balance sheet. I think all negotiations are are ongoing on the basis that people understand there's volatility within the fiscal regime, so there would probably be some element of sort of contingent consideration around oil price, tax regime, etcetera. So I guess, you know, we would have some sort of structure to those deals, but they would definitely be relatively simple compared to some of the the deals we did in the past. Equally, what I would also say is we've done all this really great and disciplined work to delever the balance sheet. Our our thinking here is not to add a huge level of debt to the balance sheet, something manageable and that keeps us in a in a good leverage space. If I can move on.

40:00 The the the statement you're poised to pivot to growth has been repeated over previous results announcements, but the share price continues to slide to near record lows. This suggests that your principal shareholders are not buying the story and dumping stock. How has your main shareholder base changed, and what is it you're taking to support how you support they are going forward? So so, actually, no, I I would disagree wholeheartedly with that statement. Our the top end of our our shareholder register is extremely solid. We've had great support from all our major holders. Of course, the CEO is a is a major holder as well. And we've actually seen some of those major holders increasing, and they're holding far less and decreasing. So we haven't seen a big sell off for major shareholders at all. All the conversations I've had with our major holders, which I've done both with the CEO and the chairman, suggest there's very, very strong alignment, with our strategy around growth in The UK, using that to fund international diversification, and also keeping shareholder returns at the forefront of our mind. So, yes, look, I I absolutely understand that that the share price is is depressed at the moment.

41:10 And we're seeing that obviously across all our sector peers as well. We're in a difficult position, with our fiscal regime in The UK, which is extremely punitive and getting worse. And, obviously, commodity prices have have have softened, in recent weeks. So, yeah, it's a really challenging place to be, but I would remind everyone on this call that ENQUEST is well placed to meet those challenges. We have relative advantages versus those who are undoubtedly gonna see this as the final straw and look to leave the the basin and look for a more supportive supportive geographies, and that's the point at which, you know, we can really start to to become a consolidator and grow our business in The UK. How much of the profit sharing agreement with BP at Magnus is still to be paid?

41:55 So fairly significant portion of that, Angus, who asked the question. I think it's I think it's we're we're around halfway through. I think what what we're seeing is that when we model Magnus and, of course, this is dependent on the vagaries of assumptions around production, around further developments, around oil price, etcetera, etcetera. But, essentially, that that cap doesn't isn't isn't reached until pretty much the end of of Magnus life, which is in the second half of the next decade, so I 2036 or or or or around that time. And and, actually, there's some scenarios where we don't actually reach the cap. So expect that profit share mechanism to to remain in place, pretty much for the duration of of of the Magnus assets life with us. There's a there's a question around how does lowering carbon intensity affect tax and profits.

42:48 So well, one very simple way is that we we would pay less on a proportionate basis in terms of UK ETS. So that's the emissions trading schemes, which is effectively a tax on emissions. I think also it it stands us in good stead with our regulator who are demanding, you know, emission reductions. And, actually, it would help us meet our stated aims in terms of our our net zero commitment for 2040 and also our commitments to the North Sea transition deal, which we are accelerating well well beyond those those timelines. Sorry. I'm just checking. Some of these questions are repeats.

43:41 There's a question from Hemat. Hi, Hemat. I've obviously I know I know Hemat very well, and he's a shareholder who has deep knowledge of Kraken. So his his question is around the lower lease charter rates and and whether we're considering purchasing the FPSO to support the production plateau. So the point that Hemat's making here is that the Kraken FPSO vessel, the the lease rate that we pay for that at the moment nets to ENQUEST at a $115,000,000 per annum. From the first of April next year, twenty twenty five, that that figure drops by 70%, 70%. So on an annualized basis, that's about an 80,000,000 reduction.

44:27 So the answer to your question, Hema, is absolutely yes. We are considering options around purchasing the vessel. There's an there's an economic model which effectively underpins the the the agreement that that we had with Bumi when the vessel was built. So ENQUEST holds options around that vessel purchase. And they're, you know, again, based on certain assumptions around investment in the field, etcetera, there are optimal dates at which, that would work best for ENQUEST from an economic standpoint. So absolutely something we're considering and absolutely something that that could well come to pass in the coming years. I'm I'm actually just scrolling back to the top here to make sure there's there's there's nothing I missed.

45:13 Question from Eric here around the hedged barrels related to cracking production and VLSFO sales, or is it other part of production? That's quite a specific question, Eric. If it's okay with you, I'll take that away and speak to our our expert marketing and trading team, and I'll come back to you. Eric, I I know I know who you are. I've got your contact details, And I'll also publish my response on the the investor meets company platform so that everyone can see. But, say, that's a little bit too specific for my my level of hedging knowledge, Eric, I'm afraid. Question here from Thomas around shareholders obviously seeing depressed share price at the moment and how could we cut costs. So I I think for those who know ENQUEST well, cost management is part of our DNA. I don't think that's a cliche. I think it's absolutely fundamental to everything we do. It's why when we've seen commodity price crashes in the past, ENQUEST has been able to be very agile, very nimble, dramatically reduce activity and operating cost to suit the environment.

46:23 So, yes, we absolutely continue to look at at cost across the business, and and we have a real focus on any operational change that we can make in in which to to be more efficient in terms of an OpEx per barrel or a a cost per barrel metric. So, it's it's constant vigilance, a very focused application of our supply chain expertise, Thomas. So, yeah, across the whole business, this is ingrained in everything we do, and that that's driven from the top by. So I can assure you that any opportunity to cut cost, ENQUEST will take. Another question from Hemat around the progress of the net stabilization facility at SVT.

47:11 Will it be an onshore plant or offshore? So it's onshore, Hemat. It's a it's a very different scale to the previous facility, which was which was tooled up essentially for, you know, north of a a million barrels per day throughput. The new facility is much, much smaller, which aligns to the the the commodity throughput that's occurring today and in the future. So that's really why we can massively scale this this onshore facility down and significantly reduce the the emissions footprint of SVT, as I say, by by 90%. What it also does is allows it it provides more space for our new energy and decarbonization projects and allows us now to start decommissioning other other infrastructure, other facilities at the site, which are are no longer required.

48:04 Steve Boyer talked about enhanced oil recovery, so polymer flushing for Kraken. What year could that commence, and what could that bring in terms of production? So I think this is, something David, who asked the question, this is something that's being trialed, where we're we're we see ourselves, and I think, you know, the the the work we're doing suggests that we're that Kraken is a is a pretty sound and pretty good candidate for EUR. So that that study work and that sort of feasibility work will be done in in the coming months. I think it's probably a bit too early to talk about what that could bring in terms of production, but it it could have a material impact on the the level of recovery from the the reservoirs at at Kraken.

48:49 And in terms of timing, I mean, if this is feasible, this is obviously something we'd like to build into our capital allocation planning for for for the the the relatively short term. So in the next couple of years, I think it could be feasible. I'm just having a quick there's there's a a question around it it's it's it's quite a specific question around another company. It mentions ENQUEST being a competitor in Thailand, and the assertion here from from the person asking the question is we're working in different countries, and he he'll he's he's positive on that. So I guess what I would reiterate is that we have a a good footprint already in in Southeast Asia.

49:37 We're operator of the year in Malaysia. We've got a great relationship with Petronas. We were just awarded a a HSE excellence award, and we've done great things at PMH Saligi. As I also touched on, we've got this great opportunity to work with Petronas further to to enhance our sort of opportunity around the Saligi gas. But, yeah, we we're absolutely looking in other parts of Southeast Asia as well. I know Amjad has touched on some early conversations around, you know, study joint study agreements in Indonesia. But, yeah, it's it's a native of the the the world. We are comfortable doing business. We see it very stable, compared to our own, UK fiscal regime. And, so, yeah, absolutely, in that part of the world is is eminently possible as we move forward.

50:31 Other than the some quite detailed hedging questions, which I will which I will come to separately if that's okay. I think that's pretty much it. One further one from Angus. I think I've answered one of Angus' questions already, but it's around will the delay in in Magnus rig recertification result in a reduction of CapEx this year? So the delays associated with the rig recert, Angus, were were pretty minor. I think what's more likely to impact our CapEx for the year is the the the likely impact from from the October 30 statement whereby the government have basically said that you don't get any investment allowance enhancement on the EPL against capital expenditure from 11/01/2024.

51:17 And, of course, they have been noncommittal yet about what they're gonna do on first year allowances. I think, to be honest, that is our greater motivation around what we do from a capital perspective. I I think I'm I think I'm speaking on behalf of effectively the whole North Sea operator peer group when I say that everyone is kind of waiting to see factually what comes through in the October 30, and that will, define capital plans for the next couple of years. I think with that, and just judging on where we are with time, I think I'll take it as a close there if that's okay. I I I will apologize in advance for anyone whose question I haven't seen, I haven't covered. I know there's those ones in hedging that I will get to.

52:03 But I'll I'll also thank you for all the questions. There there was a lot in there. Hopefully, that was informative. And if you don't mind, Jake, if you wouldn't mind just flashing up the slide that has my contact details on it, please. Absolutely. That's where you can reach me, and I'm I'm very happy. I'm at your disposal to cover any questions you'd like to ask me directly. So thank you very much for your for your for your time and for your your engagement with this this session. Thank you. Craig, that's great. And thank you very much indeed for being so generous of your time there and addressing all of those questions that came in for investors this afternoon. And, of course, we will be able to give you back all of the questions that were submitted this afternoon. We'll give you those back immediately after the presentation has ended just for you to review to then add any additional responses, of course, where it's appropriate to do so.

52:48 And we'll publish all those responses out on the platform. But, Craig, perhaps before really just looking to redirect those on the call to provide you with their feedback, which I know is particularly important to yourself and the company. If I could please just ask you for a few closing comments to wrap up with, that'd be great. Yeah. Absolutely. Thanks thanks again, Jake. So to to summarize, no one is, shirking away from the the fact that we're operating in a very difficult environment in The UK just now. Hopefully, what I've told you today gives you some comfort that as bad as things are from a taxation and a fiscal take point of view, ENQUEST is is relatively, better off than most, and that actually underpins the fact we've got a really strong growth strategy. Now I'm very much aware we've been telling you for a number of months now that we're targeting growth, and I can assure you everyone in the business is is focused on delivering that growth.

53:39 So I'm I'm very much looking forward to announcing that when when the time is right and when we've executed a deal that I'm sure will be very value accretive to all of you shareholders. So with that, I'll thank you again for your time and hand over to Jake to close. Thank you. Perfect. Craig, that's great. And thank you once again for updating investors this afternoon. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order that the management team can really better understand your views and expectations. This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of management team of ENQUEST PLC, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all.