EnQuest PLC

Okay, good morning, ladies and gentlemen, and welcome to our 2023 full year result presentation. Thank you for joining us on the Thursday before Easter, and I hope you and your families are well and enjoy a happy Easter. My name is Amjad Besejso. I am the chief executive officer of Enquest. Joining me today are our new chief financial officer, Jonathan Kopas, and Steve Boyer, our North Sea general manager, as well as investor relations head Craig Baxter and Bernadette in the crowd. Salman Malik, who is not with us today and is now our new chief executive of Avery Energy, turned over the CFO role to Jonathan Kopas last December. Jonathan will present the financial results after me, and then Steve will cover the global operations performance. I've known and worked with Steve for a while, when he was a young man at Talisman and Synergy, maybe 10 or 15 years ago, and also with his role as CEO at First Oil, our original partner in Kraken, and then laterally at Cypher as CEO. I've also worked with Jonathan's organization of Salamander many years ago in Southeast Asia. They both are part of our refreshed leadership team who will help us drive forward in our new era, our new pivot to our new growth phase. We'll talk about our journey a little bit more today. So. Just start up with a less familiar people, give it a little bit of a history about Inquest. We started in 2010 when we listed, having been a part of another company for three years beforehand and merging the Petfac and Lundin assets in 2010. Our focus from the beginning was taking underdeveloped producing assets and mature assets and from mostly majors and increasing the value of those assets. As you can see from the slide, we've had a number of assets, up to nine assets. We've operated in the North Sea with material reserves and resources in place. We also have taken over the Salam boat terminal, which is in Shetland Islands. It's both important for upstream as well as our new energy ambition, which I will outline shortly. We've also taken the full cycle of our assets from development to production, to decommissioning over the last few years as five of our assets have reached the end of their useful economic life. This gives us expertise and capability across the platform from development all the way to decommissioning and even beyond repurposing to new energy. We also are aware we've moved in that area and repurposing by setting up a sister organization, Very Energy, where we have acquired four CCS licenses, and we've just been awarded 148 megawatts of electrification for the Shetland Selimbo terminal. Our combination of assets and core capabilities really put us apart from our peers as we're able to offer not only a full offering across the spectrum, but also differentiated operational, drilling, execution, and decommissioning capability. We're driven by our values of respect, collaboration, innovation, growth and learning, and focus on results. And that's really the driver behind our differentiation. In many of our assets, improving uptime, lowering costs, being able to drill new wells, we were able to extend the life by at least 10 years. And we'll talk a little bit more and show you that in the presentation. Pretty much all of the nine assets that we've operated. This has also enabled us to add almost one and a half times our reserves since inception, producing almost 200 million barrels of reserves since our inception. This approach aligns well with the sustainability goals, making the best use of resources and assets that have already been discovered and developed and managing them responsibly. You've seen this slide type before. We have been focused on delivering, delivering and growing since 2018 when we established our strategy on those three pillars. We are now very much primed for growth in the third phase of our journey. You've seen that we've reached our target of 43,800 43,800 barrels in line with a midpoint of guidance. This was really excellent considering the return of production at Kraken with the transformer downtime to be able to deliver the midpoint of production guidance with those 30 to 60 days of reduced production at Kraken. I also am very proud that we've had another year of record breaking decommissioning performance executing 25 wells during 2023 and 49 wells on Thistle and Heather in the last two years. This is a demonstration of our decommissioning capability, but it was also very much underpinned by excellent exceptional performance. underpinned by the NSTA data, the North Sea Transition Authority data, which publishes average cost per well for plug and abandonment in the Northern North Sea. Our costs are 2.5 million pounds versus an average of 4.3 million pounds, 42% lower than industry average. This gives me great hope and confirmation that we are actually now also developing our third leg of our capability in decommissioning. With our strong operational delivery and with the backdrop of supportive but lower commodity prices versus 2022, we generated 300 million of free cash flow in 2023. We're also able to deliver slightly lower OPEX per barrel as we continue our ethos of cost control. As such, our delivering continued and has gotten us now to 480 million at the end of 2023, with a further reduction to 410 million by the end of February 2024. This is close to our target of 0.5 times net debt to EBITDA. At the end of the year, standing at 0.6 times net debt to EBITDA. I'm also pleased that we have fully repaid our RBL facility in the early part of this year, which was a $500 million facility that we took in October 2022. All of our debt maturities are now aligned to 2027, providing clear runway for value creation and the ability for us to execute growth transactions. This has been a difficult journey, but it's been something we're extremely proud of that we have paid down almost one and a half billion dollars since our peak of debt, meaning that we are in a position now to return also capital to shareholders. I'm very pleased to announce our maiden return of 15 million share buyback program this year. As we've said, and we have delivered, This will take a part of our capital allocation program in the future and will figure in our capital allocation going forward. Looking ahead, our stronger balance sheet, coupled with our differentiated operating capability, which does set us apart, and advantaged tax position through our tax credits, delivers a very strong platform for growth. We will remain disciplined in our investment decision and we will be value led when evaluating all opportunities. We are a top quartile operator, which enables us to be differentiated also in our acquisition and our aspirations to become a top quartile producer. This is a summary slide that really kind of embodies what we're all about. As I mentioned, we are a top quartile operator, and safety underpins everything that we do. The upper quartile performance in this area is not only our license to operate, it's our license to exist. And I'm very proud that we are, again, at 0.525. loss time incident frequency below the average of 1.31 for the UK. We have exceptional production efficiency given the vintage of our assets, Magnus being around 40 years old and KittyWake having lots of history with many different operators but being operated more efficiently now than decades in the past. Our track record of asset extension, of adding 10 years plus to every asset we've taken over, is clear in the nine assets that we have taken from others, mostly majors. When we take over an asset, we provide focus on the operation and are consistently successful in applying this differentiated capability to lower cost and increase production time. The capabilities on the left hand side including becoming a decommissioning leader and our strong wells and top quartile UK drilling experience as well as our Rushmore survey differentiation in terms of being a quartile or upper quartile operator in drilling wells and in decommissioning gives us also the ability to do the transformational growth to the right. This is the foundation for our growth, our infield drilling in core portfolios, our ability to access additional core 2C resources in Brescia and Bentley, our tax credits, which prioritize transactions in the North Sea, which gives us the ability to do transformative acquisitions. Also, extensive opportunity hopper in Southeast Asia, where we're viewed as the largest independent operator in Malaysia. And we're also targeting gas to lower our emission barrels and have increased our gas production from near zero to about 7% last year. Whilst we continue to execute opportunities which provide organic growth within our existing hopper, we are also focused on delivering a transformative transaction. Given our significant tax advantage in the UK, I expect that we will look at those types of opportunities first And alongside executing international M&A opportunities, we will diversify our portfolio in time and improve our overall carbon intensity by adding more carbon, lower carbon gas to our portfolio, as mentioned. We have a credible plan to progress our business towards net zero. This is a key for us. And we've been able to do that quite significantly through the startup of Vary Energy, where we've made significant progress in that area. We have projects to right-size Salam Vo, reducing the footprint to enable us to use that COMA-approved site for new energy projects. We're already reducing the size of the plant, of the 1.5 million barrel-a-day plant, to two facilities, one which services east of Shetland, which is the new stabilization facility, and one which will service west of Shetland. This will also help us reduce the emissions in the terminal by over 90%. We also plan to utilize the Bresse gas to tie back to displaced diesel. and power Kraken, which would also significantly reduce our emissions and our costs, given Kraken represents 20% of our group emissions. This takes our emissions down 50% in Kraken. The articulation of these opportunities, as well as our impressive track record of reducing emission in recent years, helped us achieve a B rating with the Climate Change Survey, the preeminent ESG rating. This is a great validation of our work in this area. I've also mentioned an exciting opportunity of the electrification and the ability to attract 148 of megawatt green power into Salambo, which we'll look at capitalizing on in the future. These opportunities ahead of us are alongside the valuable infrastructure can help us decarbonize at many levels. And we are looking at multiple opportunities in that regard. I will now turn over to Jonathan to take you through the financials.

Thanks very much, Amjad, and good morning, everyone. I've been at Enquest now for almost four months, and I think the thing that struck me the most is the quality of the team. And that high-quality team, I've also been very impressed by the respect that they receive from across the industry. And that respect is built on being exceptional operators of late life assets. So it means that, you know, I'm very excited to stand here today because we're a group that is at a pivotal point in terms of its history. And what I mean by that is that we're looking towards growing our operational footprint and building value. I think just thinking about where to start in terms of talking about the group finances, I thought it was probably a good place to start is where the team left off last time that they presented results. And that's about discussing our financial priorities. So first of all, our priority has been to reset the capital structure. Now, in recent years, we have refinanced our debt facilities and all of our debt maturities are now extended to 2027. Our second priority has been to de-lever. And in 2023, we've reduced Enquest's net debt by 33%. And our net debt to EBITDA ratio at 0.6 times is now very close to the 0.5 target that we've laid out. The third point here is about cost discipline and capital optimisation. And those things are really at the heart of everything that we do as an organisation. And alongside the energy profits levy, we will continue to optimise the execution of our portfolio and the delivery of our capital programme as well. Fourthly, and this is, of course, new news in terms of the update today, is shareholder returns. And from a position of balance sheet strength, we've today launched our first share buyback program. And that's a major milestone for us as a company and, of course, also for our supportive shareholder base as well. And the last point really underpins competition. pretty much all we're doing this year and how we think about the future and strategy, and that's about unlocking M&A. And if you take all the points I've talked about on this slide from one to four, they prime us for growth, and we continue to explore a range of value-led M&A opportunities within our core upstream business. As you just heard from Anjad, we are a top quartile operator, And I think the prize here is to be a top quartile producer in the UK. And we believe that the majority of the barrels in the North Sea are transactable. And that is a belief that's built on the public statements of our peers. So now turning to the income statement. Brent fell by 18% year on year to average $82.50 a barrel. As we've also mentioned earlier, commodity prices were also less volatile in the period as well. So in the period, we delivered revenue of about $1.5 billion, and our hedging losses fell to about $11 million. Our cost of sales were reduced by 21%, and our unit operating costs reduced to $21.9 per BOA. Now, this reduction reflects strong cost management against the backdrop of FX volatility and also, of course, inflationary pressures as well. Our adjusted EBITDA totaled $825 million, and we recognized an impairment charge of $117 million and an income statement tax charge of $263 million. And looking at that tax charge for a moment, that's an effective tax rate of 113%. Now, this income statement rate, of course, contrasts with the 35% rate on which we pay cash tax. And really underlying it, it's showing the impact of the items that are not deductible under EPL. Moving beyond the income statement, though, The real thing that underpins this story is how we've lowered our debt and reshaped its maturities. And in this chart on the left, you can see how we've reduced net debt by $1.5 billion since 2017. Now, that's required really high levels of focus and really high levels of discipline, and it is a huge achievement. We finished 2023 with net debt of $481 million. At the end of February, we've updated that we've reduced our net debt further to $410 million. We've also announced today that we've fully repaid our IBL, another important milestone for us as an organisation. This all provides a very significant runway for within which we can grow the business. And in doing that, we plan to utilize our advantage tax position, our tax credits totaling $2 billion at the 31st of December, 2023. Translating all of this to cashflow, our net operating cashflow for 2023 totaled $754 million. from which we delivered free cash flow of $300 million. Within our net debt, our gross debt totalled $795 million, and we had cash of $314 million. In the period, we also sold a 15% interest in the Bresse licence and the Enquest producer, and some equipment and capital spares that we expect to use on the Bresse development. Now, that transaction was net debt neutral at the 31st of December 2023, and we're expecting to receive $58 million of net cash benefit from the transaction in 2024. And then lastly, but of course very, very importantly, alongside our greatly reduced net debt, We also finished the year with group liquidity of $500 million. And that liquidity is a really strong platform from which we as a group plan to transact. I want to finish the finance section really looking ahead at Enquest capital priorities for 2024 and 2025. In 2024, we expect production to lie between 41,000 and 45,000 BOE a day, and that's largely in line with the 2023 levels. We expect operating expenditures to be $415 million, and that's a year-on-year increase, but it really reflects a normalisation of costs and higher uptime at the Kraken project. Looking to 2025, with a 70% reduction in the crack in FPSO lease costs from the 1st of April, we expect our cash margins there to expand. And the net savings to Enquest in that period will be about $80 million a year. Cash capital expenditure, we are guiding towards $200 million in 2024. Steve will cover the detail of this investment, but we expect these activities to grow organic production in 2025, whilst also lowering costs and emissions, as Amjad has just outlined. And DCOM expenditure, we are expected to total $70 million, and that primarily reflects the closing stages of the WELD programme, the P&A programme at Heather and Thistle. The last point, of course, is part of the new news today as well, though. Now, we really understand that distributions are valued by our shareholders. And having launched our first buyback program today, we are aiming to make shareholder returns a sustainable part of our capital allocation framework. So I'll now hand over to Steve, and Steve will talk you through the detail of our operational performance and the outlook in 24.

Thank you, Jonathan. Thank you, Amjad. Good morning, everyone. I'm Steve Boyer. I'm our general manager at North Sea. I'm also head of business development at Enquest. A bit of background about myself. So I'm a reservoir engineer by background, been in the industry approaching 30 years. In the 90s, I was with Talisman, which was the first of the mature operators, extending the life of assets, trying to drive top quartile performance. Having joined Enquest, I'm very impressed with the teams in terms of what we have. As Jonathan says, there's an entrepreneurial spirit, but the teams are also empowered to deliver. And I'll give you some proof points as to why we think we're differentiated in this market. And with a challenging market as the North Sea is with EPL, it's really important that you are good at operating and you are top quartile. So we'll show that as we go through the various asset performance. I'll talk a bit through 23 and 24 as well and how that's performed through the year. So if we just look here. So just going to focus in on our key assets. So Kraken. One of our heritage assets, one we've developed ourselves. This really sets us aside from others in terms of us demonstrating our top quartile development and operating capability. Very strong in terms of bringing forward what was a complex asset. So Kraken's about half a billion barrels of oil in place, discovered in 1985. And Enquest have come along, developed that. They not only developed what is a complex asset, but developed it below the CAPEX budget. So original CAPEX budget, $3.2 billion. Enquest delivered that in at 2.2. So a huge reduction in the CAPEX. That came through good planning, good teams, and effective execution of the project. But not only have we taken it through top quartile in terms of the development performance, but we've done that through the operating capability as well. We've introduced a new UKCS duty holder, brought them up to speed, and you can see the uptimes on the assets. So in 2018, commissioning is always a bit of a challenge around FPSOs, so uptime a little bit lower, but you can see we've now driven uptime up to 86% in 2023, and in 2022 you can see we're up above 90%. And just underlining the strength of the team's inquest, effectively we had an unplanned HSP, which is our hydraulic submersible pump transformer unit failure, which was on the FPSO. We basically turned around those unplanned failures within 30 days and brought the field back on production. So often that would have you down for a much longer period. So really strong performance by the teams back to full production within 60 days. So that's within the uptime. So you can see we've still, despite that unplanned event, we've still driven uptime of 86%. UKCS averages 77%, which is why we are top quartile. And you can see through the last four months of 2023, we've delivered uptimes just close to 100% and carried that performance right through into 2024. In terms of the production levels, you can see they're down about 2023 versus 2022. Part of that is the uptime and part of its natural field decline. We are, though, focused on investing in the asset. So you'll see in 2024, we're starting to prepare for a two-well drilling campaign on Kraken. Really nice targets identified. One of them's got a 20 million barrel stope up to around the target area. And we're also looking at the Brescia gas development, as Amjad mentioned. So Brescia is a key part of our contingent resources. We see the development of the Bressey gas cap as being a Kraken emissions reduction project. That brings the emissions right down on the Kraken asset and also opens up the fairway to develop Bressey. So we're progressing that through to FID and FDP through 2024, and we'll be looking to progress with the project thereafter. We also see Kraken as a really good analogue for Captain in terms of enhanced oil recovery. Really nice reservoir sands, nice thick homogeneous sands with a nice underlying shale. We've commenced studies around enhanced oil recovery and we see that as one of the future potential upsides in Kraken. So you'll hear more of that in the coming years as we progress through that project. So really strong capability across Enquest on Kraken. Then if you go to the other end of the scale, so as Amjad mentioned, Magna celebrated 40 years last year. That's quite a material and mature life for an asset. We've picked that up from BP and transformed its performance and extended the life of the asset. And if you're going to operate in the North Sea or in any of the markets around our Southeast Asia footprint, you need to be able to operate mature assets efficiently, effectively, do everything that's top quartile about inquest and cost discipline, lower your operating costs. That allows you to push out the life of the asset and invest in incremental projects. So if we just go through Magnus, we've unlocked over a billion dollars of incremental revenue to date just through extending that field life 10 years and investing in quick return, low cost, infowell programs and well intervention. So very strong performance across the board. You can also see the uptimes. So as a mature asset, the uptimes on the asset were down at 59% when it was in BP's hands. We've taken it across to Enquest. It's taken a bit of time to get the uptime up to the right level, but you can see through 2023, through investment in the asset, through maintenance, integrity, and investing in the right parts of the facility, we've got the uptimes up to 88%. And we see that performance continuing through 2024 and life afield. So now we've put in that upfront investment, we'll continue to invest in that asset and keep the performance strong. And that sees a fair way for that asset through into the 2030s. So very strong performance. Again, if you look at where we are on our operations and production capability, we've driven the OPEX per BOE, which is one of your key metrics, down from $60 per BOE down to $25 per BOE, so a 58% reduction. So that opens up the full life extension and all of the incremental projects of the asset. 23 performance, so that just kind of underlines the history and where we've taken the asset to. So uptime continuing through 88%. We've drilled three wells and brought them on, an injector and two infill wells, good performance from all of those. You can see the production uplift where we've taken production up 26% from 2022 up to 2023. A lot of that is the increase in uptime, but it's also our infill well activity and optimising the existing well stock. In terms of future plans for Magnus, so we're in the process of finishing off our five-year rig recertification program. That would effectively give us a five-year continuous activity set on Magnus thereafter. So really working the asset hard, keeping the ops uptime high at top quartile efficiency and pushing hard around the infill program, identifying the right opportunities to keep those production levels up. And not only, so we've obviously proven our model since we started up in the North Sea, but we've also replicated it internationally. So our Malaysian assets. So what you'll see on our key assets is they're all big fields. So Magnus is about 1.7 billion barrels in place. Malaysia is up about a billion barrels in place. We've taken what we've done in the UK and we're replicating it in Malaysia. And we see Malaysia as a great footprint to grow around in terms of Southeast Asia. We're established there. We're already a preferred operator in Malaysia. So we've got a great opportunity. As Jonathan says, as we grow the UK footprint, we can then dovetail and start to grow internationally around Malaysia. So again, transformative life extensions. So we've extended life by 10 years in the Malaysian asset. Very similar model to how we've performed on Magnus, driving through low cost, quick payback, cost discipline across the portfolio, getting the uptimes up. So you can see we've driven the unit cost down from $30 per BOE down to $22 per BOE. And we've got the uptimes up, and we've actually executed the first successful horizontal well program in Malaysia. So very much focused on working that asset hard and growing around that asset. 2023 is a really strong year operationally across the board, but you can see in Malaysia we're up at 90% uptime. So if you compare that to what I quoted as the North Sea average, we don't have the averages in Malaysia, but at 77%, you can see we're way above average across all our asset portfolio. And as we look to grow the business, that sort of performance is going to be key in terms of driving forward the assets that we bring into the portfolio. There's also a huge opportunity around supplying gas, so there's been a huge gas injection programme through PM8 and Seligi through Time. We started gas export and selling gas into the market through the last year or so, and we're working on future gas supply contracts for our Malaysian asset, which is a big upside, and would obviously diversify our portfolio. So focused on that at the moment. And you can see we've taken production up 15% into 2023 from 2022 through the InfoWell programmes. Going forward, it's much the same, so we want to maintain our really strong operating performance and uptimes. We've got a three-well infill programme and three workovers planned. There is a huge subset and opportunity hopper on our Malaysian asset around bringing back wells, so a huge well reactivation programme. And we'll continue our expansion on Saligi gas. So going alongside all of that, so that's the operating piece, which we're top quartile across the board. In this market, you do need to be strong on the decommissioning side. If you're picking up mature assets, the aim is to extend them 10 plus years. But you do need to be able to execute the decommissioning programs well. And we've been basically demonstrated over the last couple of years sector leading well P&A performance. We're coming in, our P50 well duration is 27 days versus an industry average of 32 days. That doesn't sound huge, but when you look at the actual effect of well cost, our P50 cost per well is £2.5 million versus £4.3 million. That's through the way we contract the wells and the way we execute the programmes. And we've got huge capability in that. So we've completed 49 wells running dual strings on Heather and Thistle. 2024 will be the last full year of heather and thistle dual-string operation. We've basically delivered record-breaking northern North Sea performance, and we're actually positioned ourselves. So some of our partners, BP, Shell, recognize our top quartile performance and have inquired about a decommissioning operator service. So that's something we may look at as we progress the business. But more importantly, in my view, it reduces our direct costs around our own decommissioning costs. It enables us to acquire late-life assets and effectively demonstrates our capability on the operator service. As we go forward and as we start to look at mature assets, part of our acquisition strategy will involve decommissioning, either on behalf of the party that's holding the decommissioning liability or taking on a small portion of that ourselves. Working through 2024 and our future plans, so Heather and Thistle will be able to conclude in early 2025. We'll then look to downman the facilities that were in the heavy lift programme. And from there we'll be into more managed decommissioning. But we'll keep that track record and capability in the team in place as we progress forward. So that's kind of the upstream side of the business. On midstream and new energy, so Sullivanville Terminal is a key piece of infrastructure for the North Sea. It's a really nice piece of land. We've got a 24-metre deep port, four deep water jetties. We can repurpose those for liquid carbon. It's natural that we focus on carbon capture and sequestration as our first move into new energies, given that uses all of our existing upstream core capabilities. We were awarded four UKCS licenses in the first CCS round. We're in the process of studying those licenses and looking at the potential of those. And we're also at the early stage of studying green hydrogen production and renewable energy, potentially looking at onshore renewable energy. And as I mentioned, we're looking at grid connection. One, to provide power into SVT, but also to potentially export that power. So a very strong strategy in place for the Sullivanville terminal. It's being right-sized, so the right size of the terminal is really important for existing operations. That allows us to bring the operating costs down significantly. We're in the process of installing the new stabilisation facility which right-sizes the throughput of the facility from what was a large throughput facility down to one that's right-sized for the future oil and gas production needs of the fields coming through that area. And also importantly, we're going to be reducing carbon emissions by over 90%. So we're very focused, not just in delivering barrels, but also in our emissions footprint and targeting reductions in total emissions. So very important strategic asset, which I think we're setting up in the right framework for our existing assets and also enabling new energy projects to run through there. So I think just to close, I think we are top quartile. Hopefully you've seen that through the presentation. We've got top quartile performance across all of our assets. We're looking to leverage that top quartile capability as we look to grow the business. As Jonathan says, I believe the market's there in terms of transactability. We have our competitive advantages around our tax assets, and through leveraging our core capabilities and our differentiated capability, I believe we've got a real potential to do something exciting in this market. Very much focused UK, but with then a growth into the international side once we spin off the free cash flow from the UK business. Thank you, everybody. I'll hand back to Amjad.