EnQuest PLC

Good morning, everyone. Thank you for joining us today as we present Enquest's interim results for the first half of the year. Through this webcast, you will have the opportunity to submit questions at any time, and we will look to answer as many of these as possible during your Q&A session at the end. Without further ado, I'll hand you over to our CEO, Amjad Bezezu.

Thank you very much, Craig, and good morning, ladies and gentlemen. Welcome to our interim first half results for 2024. Thank you, first, for taking the time to join us today. My name is Amjad Besseysou. I am the Chief Executive Officer at Enquest. Joining me today is our Chief Financial Officer, Jonathan Kopas, and Steve Boyer, our North Sea General Manager. Both Steve and Jonathan continue to provide great leadership as we drive Enquest forward towards growth, despite this challenging fiscal environment in the UK, which we will talk about. So let's start by taking just a look at the Enquest and what the story of Enquest is from the beginning. Some of you who may be less familiar with Enquest. Enquest is a late life and a development company that started in 2010. We have about 175 million barrels of 2P reserves, 389 million barrels of 2C resources, and we operate 95% of our 2P resource assets. We have replaced one and a half times our reserves since our IPO in 2010. We're a top quartile operator with Upstream at the core, and we have a track record of exceptional uptime performance, cost discipline, and reserve replacements. We've also enhanced our business model in recent years to look at a full cycle energy transition. We have notably started Very Energy, which we're very excited about, repurpose our existing infrastructure namely in salambo the east of shetland and west of shetland pipeline systems and to deliver a renewable energy and decarbonization company with significant ambitions we've taken four offshore licenses for carbon capture and sequestration and we are working diligently on in salambo on offshore electrification on electrification on Salambo as a site, and also on various other projects. We've also moved very much at pace with decommissioning, where we help to manage the end of life assets. We've gone from nine assets hubs to four assets hubs, and we are clearly making inroads with another 25 well program, which is industry leading in the Northern North Sea completed this year. If we go to the next slide now. For some time, we have talked from 2017 about tripartite strategy, delivering, delivering, and growing. I'm pleased to say that we are finally at the final chapter of our strategy, and we are primed to deliver growth. We have reduced our debt significantly, as you've seen, with the end of June net debt figure of 320 million, significantly below the peak of 1.7 million that we've had a few years ago. We've also achieved a net debt to EBITDA target of 0.4, also below our target of 0.5. Great operational performance. We have completed the five yearly recertification of Magnus, and we continue strong production uptimes across the portfolio with operating efficiency being very high at 93% for the first half. We've executed all of our world programs in the UK and Malaysia. And as you've seen, production is in line with our guidance at 42,700. an active program planned for the second year including a lot of shutdown activities at magnus and kraken and maintenance planned for the second half we acknowledge that production is likely to be in the lower half of the range overall our strong sector leading decommissioning performance continues and we've dedicated an in-house team to execute and plug the plug-in abandonment program of a further 25 wells this year as i've mentioned at Heather and Thistle. Our expertise and delivery in this area has been further vindicated by the announcement by Shell that they will be giving us the full decommissioning management of the greater Kittywick area, assuming all responsibility for decommissioning there. Also reflecting our continued strong performance is our generation of cash flow. where we generated $55 million of free cash flow in the first half of the year. We've had $160 million of reduction in our net debt, given the additional receipts following the completion of the Brest Farm Down transaction. Our trajectory for deleveraging continues, and we have repaid fully the RBL earlier this year. Looking ahead, The work we've done to strengthen the balance sheet gives us choices, and particularly important given the very punitive changes made to the UK fiscal regime by the government. A low-cost, quick payback opportunity remains within our core assets, and we will be disciplined in evaluating work programs to efficiently manage our capital. We are also very focused on opportunities in Southeast Asia, which give us significant return on capital. And you will be hearing more on our developments there, including the gas developments that we've talked about for a long time in Malaysia. With our strong liquidity, we still are looking at the UK tax assets as providing an advantaged foundation to transact and to grow. Our growth strategy remains intact and the leadership team and I are fully committed to deliver a value accretive acquisition both in the UK as well as acquisitions in the Southeast Asia region. All that will be significantly accretive hopefully to our shareholders. With that, I'll turn over to... Sorry, one second. Our growth strategy remains robust in a fiscally volatile environment. As you've seen, we are having lower cash flow generations from the North Sea, but we are looking to invest with our tax asset. So the UK remains a very core area for us, even with the significant challenges given the fiscal regimes. Our strategy remains robust. in both the UK and looking internationally at development opportunities. We are driven by our competitive advantages of capability, our competitive advantage of having great people, and our competitive advantage of now having strong liquidity with 566 million of liquid assets available to us. Next slide. With that, I'll turn it over to Jonathan.

Great. Thank you, Amjad. If I could have the first slide, please. I thought it would be good to return to this slide because it reiterates our financial priorities. And it also highlights the good work that we've done to prepare the business and build a strong foundation that will take us into the next phase of our journey, which is that growth path that Amjad has spoken about. First thing here is we've reset our capital structure. So we refinanced our debt and we have no debt maturities before 2027. Secondly, we've continued to delever. And that really is very, very core to us as a group and that preparation for growth. As Amjad mentioned, net debt was $321 million at the 30th of June. And we moved beyond our leverage target of 0.5 times. Net debt to EBITDA was 0.4 times at that 30th of June point. As I've said before, cost discipline is absolutely central to everything that we do. And executing our work programs and our investment programs in an efficient and cost constrained way is really important. And of course, it's even more important given the fiscal volatility that we are seeing around us at the moment as well. And at the last results, we announced shareholder returns. And that was a significant step for us as an organization and a significant step for our shareholders. It marks the point at which we'd resize the balance sheet, and then we were moving to look at distributions. And we will continue to look at those in the context of our full capital allocation programs. And if I take all of these points one to four and add them together, they are what is building this strong foundation for growth. And we see our role as being a consolidator within the North Sea, but also as Amjad said, we have this vitally important position in Southeast Asia, and we're looking to diversify and grow internationally as well. If we turn to the statements now and begin with the income statement. So in the period Brent prices strengthened year on year, and that was a very supportive backdrop to us financially. And Enquest delivered a net profit of $30 million for the first half of 2024. Now driving that, we saw oil revenue that was approximately flat year on year. And in that you see the slightly lower year on year production numbers being offset by higher Brent prices. Gas revenues fell, and that was on significantly lower prices. Obviously, we've seen a lot of volatility in gas markets in recent years. I'd also reduced third-party volumes west of Shetland volumes that are crossing the Magnus facility. But those lower volumes, of course, are offset within cost of sales, and cost of sales fell significantly period on period as well. In line with our expectations, Unis OPEX was a bit higher at $22.8 per BOE. And this reflects higher tariffs that we're paying. And that's basically just a function of the fact that we have a larger share of throughput through the Southern Vaux terminal today. Adjusted EBITDA was $368 million, and alongside that, we had an impairment of $21 million, and that was driven by changes in the production profiles of our Golden Eagle non-operated asset, as well as revisions to EPL that were undertaken at the balance sheet date by the prior government. The income statement tax charge of $74 million shows actually a reduced effective tax rate for the period. But of course, with the revisions to EPL that are ahead, we expect that effective tax rate, income statement tax rate, to be higher for the full year. If we turn to cash flow, though, And in this period, we generated operating cash flow of USD$324M. Our capex totaled USD$95M and that was covering the Magnus five-year rig recertification, the Golden Eagle drilling program and obviously our decarbonisation work at SVT. Our Magnus profit share was USD$48M and Reflecting the significant progress we've made in terms of reducing our debt, our net interest costs of 40 million were 19% lower year on year. We also made lease payments of $85 million. And as you will remember, those lease payments stepped down significantly next year when the day rates on Kraken fall by about 70%. The result of all of these cash movements was a reduction in net debt of $160 million. If we now turn to look at net debt, I thought, again, it would be useful just to put up this chart because it illustrates that tremendous pathway that we've had in terms of focusing free cash flow from the group on reducing our net debt balances. So in 2018, we had $1.8 billion of net debt and a net debt to adjusted EBITDA ratio of 2.5 times. I think we're all very proud to stand here today on the 30th of June with net debt of $321 million and our net debt to adjusted EBITDA ratio down at 0.4 times. In the period, we also fully repaid our RBL as well, and that was a $140 million repayment. Gross debt at the 30th of June was $658 million. Our cash and cash equivalents were $337 million. And that left us with not just lower net debt, but a significantly enhanced liquidity position and cash and available facilities. That's our undrawn facilities with $566 million, which was an increase of $67 million versus the position at the end of last year. And of course, alongside all of this, we have our historic tax assets. These total $1.9 billion. They are held within our Inquest Heather entity, and they are there in a very clean structure and ready to be deployed. We have a further $1.2 billion of tax assets, which we're working to progressively move through the business as well. And lastly, I thought it'd just be good to touch back on guidance. So as Amjad has said, we remain on track to deliver production within our guidance range for 2024. But of course, as he's noted, this is now going to be within the lower half of that range. CAPEX, OPEX and ABEX guidance is all on track, and we have a busy programme of operational activity in the second half of 2024, which Steve will be talking about in his section. Tax, of course, falls due in the second half of 2024, and you'll see that we have an estimated current tax liability for 2024 of $171 million. Now, this figure does move around and it's only finalized when we submit our tax return. And more generally, we're continuing to work diligently to optimize our capital programs and our fiscal efficiency as a group with a focus on delivering that growth portfolio and also internationalizing our portfolio as well. So now I'd like to just hand over to Steve and Steve will give you more details in terms of our operational activity during the period.