Harbour Energy plc

Good morning, everyone. Thanks for joining. I'm here with Phil Kirk, President and CEO of Europe, and our CFO, Alexander Crane. We're glad to have you with us for what is Harbor Energy's maiden financial results presentation. As you might imagine, the first half of the year has been a very busy time for us. We closed the reverse merger with Premier just under six months ago, which made us a public company. Of course, that was all very exciting, but clearly the work doesn't stop at completion of the transaction. Since then, we've been engaged with the integration of people and assets, and also addressing some operational challenges over the summer. We're the first to admit the first few months weren't perfect, but we feel good about the progress we've made. We've delivered strong cash flow. We're executing against our strategy, and as I think you'll see in today's presentation, we've built some solid momentum going into the second half of the year. On the next page, you can see our disclaimer, of course, very important. And of course, I won't go through it. So if we can move on to the next page, please, you'll see our agenda. After I get us started, I'll turn it over to Phil to talk about operations. I'll then update you on our portfolio outside the UK before turning it over to Alexander to go through the financials. And after that, I'll wrap it up and hopefully we'll have plenty of time left for questions. One more thing before we get started. The fact that we closed a merger halfway through the first half of the year does complicate our reporting because there are different ways to look at the period, whether on a pro forma or reported basis. What we'll focus on today are the reported results, which includes six months of Harbor and only three months of Premier. And if anyone has questions about this, I just encourage you to save those for Alexander. Before jumping into results, and since we are a new company, I would like to start by reminding everyone of our strategy. So the next page, please. Thank you. We started about five years ago with the aim to build a strong, diverse, global, independent oil and gas company and establish ourselves as a reliable and responsible operator. We've made a lot of progress on the journey, and given everything going on in the sector, we believe our strategy remains relevant to this day. We've gone from zero to 200,000 barrels a day of production and built a large portfolio of reserves that generate significant cash flow, as evidenced by our first half results. Even though Harbor has completed three multi-billion dollar acquisitions during the last five years, which isn't an easy thing to do, we've done so carefully, leaving us with a strong balance sheet and material liquidity. Today, we're reinvesting in our existing asset base in order to sustain production, in particular in the UK. And at the same time, we're continually assessing a wide range of organic and inorganic investment options. Next page, please. Here we have what we refer to as our list of harbor dos and don'ts. We include it because I think it can be helpful to bring strategy to life a bit, not just by talking about what we will do, but also by what we won't. So let me cover just a few of the points. First, we're an oil and gas producer, and for now, we don't have the intention to divert a lot of capital to infrastructure or renewables. This doesn't mean we don't have a commitment to be responsive to the energy transition. We're aiming for net zero by 2035, and we'll say more about that later. Next, given the size of our company and the natural limitations of the UK North Sea, we do feel it's important to consider adding scale in another region. This will provide diversification and broaden our reinvestment options. But we're not in a hurry. We'll be very deliberate and disciplined and focused first and foremost on long-term value creation, just as we have been over the past few years as we've built our position in the UK. Another point is that we favor a certain degree of operational control. We've demonstrated an ability to create value from past acquisitions by driving efficiency, allocating capital to low risk near field drilling opportunities. These projects typically have very high returns and they also serve to extend field life. Without operational control over the assets, these things would be much harder to do. Next, we do not intend to spend much money on high-risk greenfield exploration or multibillion-dollar developments. In today's environment, it doesn't make sense for our company to allocate large sums of capital to projects that won't deliver first revenue for 10 years or more. We feel we have better value opportunities to pursue instead. Finally, we'll keep our focus on maintaining a strong balance sheet and a conservative approach to risk management. I hope this was helpful because as a new company, we do get a lot of questions on strategy. We're planning to share more on this and other topics, including capital allocation and a dividend policy at our first Capital Markets Day, which we've decided to accelerate from next year into early December. Next page please. So now turning to the first half of the year during which we made significant progress on many aspects of our strategy. First, we completed the acquisition of Premier on schedule on March 31st and the integration effort is well underway. We're now in the heavy lift part of merging of two organizations aiming for this work stream to be largely complete by year end. Even though there's still a lot to do, the work is on track and we're already starting to realize synergies, in particular on the financial side. Turning to operations, like others in our industry, we've had challenges related to COVID. When the pandemic broke out in early 2020, Harbor took the decision to reduce activity levels offshore as a way to protect the health and safety of our workforce and our assets. That was without a doubt the right thing to do, but the impact was the deferral of a lot of non-critical maintenance from 2020 into this year, and also a reduced level of drilling activity. The result was lower production and higher unit costs this year, but the good news is the heavier than normal 2021 maintenance programs are now behind us, and as you'll see later, production and drilling activity are now both rebounding. In spite of these challenges, financial performance was good. As Alexander will illustrate, we generated positive cash flow and we reduced net debt in the three months since merger completion, putting us in a strong financial position. Finally, we've already taken firm steps to align the combined portfolio with our strategy, including decisions to exit a number of positions while at the same time continually assessing a variety of potential growth options. Next page. Earlier I mentioned our commitment to net zero by 2035. A summary of all we are doing is shown on this page. Our most important priority is to do all we practically can to reduce emissions from our existing asset base. We help drive that by incorporating the cost to offset emissions in our investment guidelines and screening all investment opportunities for emissions intensity. Where we can't fully eliminate our emissions, we have a plan to acquire high quality offsets over time so that by 2035 we'll be carbon neutral. We believe this is important and the right thing to do and we're incentivized to act. Emissions reduction targets are embedded in our incentive pay program as well as into our cost of financing through the RBL. In addition to all of this, we're playing a leading role in projects that have the potential to deliver a step change to our emissions in the UK, including through electrification of our assets in the Central North Sea, as well as through CO2 capture and storage. And Phil will say more about one of those projects in particular in a few minutes, and I'll turn it over to him now.

Thank you, Linda. Good morning, everybody. I'm going to take us through a little bit on the operational and safety performance and talk through some of the assets. You can probably look forward to more detail in December. We'll start with safety, which is everybody's responsibility, but primarily something that I look after. And making money safely is top of our list. You can see two charts here. We can show incident frequency and you can also see our process containment record. Historically, Harbour's performance has been good, generally better than the global averages, and that's continued into this year. But we have seen in common with a lot of heavy industries such as mining and oil and gas an uptick in some of the minor incidents. So we really do stay focused on trying to keep people safe and aware of their surroundings, the work that they're doing and what's going on. This year our outside operated portfolio incident rates are running significantly higher than us and we're working to see what lessons we can bring from our own portfolio and keep people safe across the piece. If we move on to the next slide, please, I'll talk briefly about production performance and where we were versus last year. Linda's already explained that we have both pro forma and we have reported. So I'll quickly take you through. We have a number of 187 for the first half of 2020. You can see where we think our natural decline is running just over 10, 10 to 15%. Let's say that's where that is. We had our premier merger numbers, which is only one quarter. So again, you have to remember that. And as we head to the full year, there'll be three quarters of premier numbers and a full year of crystal, which does take some working out. And then you can see we've split between unplanned outages and then the planned and deferred maintenance. And we have some commentary on this in the update. And you can see just a little bit of a contribution from New Wales. The first half of the year, we were just over 150,000 on a reported basis. And then we began to step up, which is our key message to you today, and as Linda said. through 1.59 in July and the mid 1.80s in August. And fingers crossed, Churchwood, month to date in September, we're at 210,000 BOE per day. You can see we're looking at keeping that rate for the rest of the year. And we'll talk a little bit about bringing toll mount on at the end, around that year end later. If we go to the next slide please. I just want to show you another set of statistics, two looks at operating efficiency. On the bottom you can see excluding planned maintenance, so all the days that we expected to be up and producing, and on the top you can see taking account of those planned shutdowns, and you can see the delta between. Traditionally, the J area has performed really strongly and you can see that that has actually improved. Britannia has always been around top quartile and Elgin Franklin has traded places with Britannia as first and second in the UK. So generally really strong performances. The international portfolio recently as well performed really well. But you can see then the gap when you look with planned maintenance and also particularly Elgin Franklin and the unplanned hits that we've had with the 40s shut down, the Gale and Unity issues that have been well publicised. Hopefully that gives you a little bit of comfort and an understanding of the underlying performance, what was unplanned and what was planned. Okay, if we move to the next slide, please. This is just reinforcing where we are, our growth over the last few years, which Linda's talked about through acquisitions, where we are in this first half, where we're looking for the second half. And you can see a map, which people always like, showing the split of oil and gas production in the UK, where it comes from, and the diversification of the portfolio. not really reliant on any one piece of infrastructure with quite a few offshore-loaded oil cargoes. If you move on to the next slide, I'm going to walk quickly through some of the things that are happening on the hubs. I'm not going to dwell on this. You will have more detail later in the year. J Area, busy time at the moment. We're now running two rigs as we speak. Just finished the appraisal drilling on Talbot, just about to spud the Donata exploration well. Cautiously optimistic on Talbot. Jade South drilling ahead at the minute, and we're looking at an active programme over the next couple of years that we've discussed with the market before. Britannia, positive news at the moment, we brought the Calanish well on and looking forward to bringing in the third party volumes from Fenlagan. Catcher area we've managed successfully at the council in Naphthenate, I can't help but touch wood as I say that and some good performance and you'll have heard that we've approved three further wells for 2022 and the team managing that asset really well at the moment. Armada Everest Lowman, the Ailey Hub, we've just got the LAD well down to TD, and again, optimistic about what we'll see from that well when we bring it on to production. And we'll remind you that those wells not only make good money, but also defer decommissioning on these assets, which really goes hand in hand with the story. If we go over the page, I will skip us through our non-operated portfolio. We've talked about Elgin Franklin and I just want to remind you that Elgin Franklin normally is really top quartile performance but has been hampered by not just the 40s planned shutdown but unplanned outages on Gale and the Unity valves. We're drilling there at the minute. got a big well eig which we look forward to completing and bringing on soon but a really great flagship asset claire we've had good news through the through the last few months the last after a couple of disappointing walls we've had some really strong wells recently but don't forget we're only maybe 12 wells through a three dozen well program so that's going to keep generating news and additional volumes over the next few years Buzzard, we're waiting for two wells to come on, the phase two wells. That'll be later on in the year, so we'll update you on that. And some interesting times on Quad 9 and the Apache operated asset around Beryl. Got the store well going down at the moment with a couple of expiration targets and a development leg. And again, cautiously optimistic about that and what we're seeing on the tertiary inject type play cross-border. If we walk on to the next slide, I'll just update you all a little bit on Tollmount, where we've reiterated that we're expecting startup around the end of the year. We're probably around three quarters of our way through our inspection campaign. The team working well in parallel with drilling at the moment, so there's quite a lot going on. Once we've finished the drilling campaign, we'll bring another unit in to help with accommodation, which is why I'm now pretty happy to say around the end of the year for first gas from Tallmount. We have sanctioned Tallmount East, which is a tie-back with our partners, and that is pretty good rates of return, and we'll talk more about that later in the year. If we go over the page, this is just to remind everybody, which Linda's already said, how much we've stepped up in terms of operations from last year. You can see that big lump of white space on J Area, A-League, Great Britannia, and with the Toll Mount drilling. and how we've restarted. We now have five operated rigs working in the UK, another two operated rigs working internationally, and we probably have another four or five outside operated rigs drilling at the moment at various levels of equity. It's a very busy programme and a significant step up from last year and even the first half, which you'll see through in CapEx and also hopefully in results as they come through. If you go over to the next page, we've got a very nice picture of the S7000 Saipan vessel, just reminding you how successful we're doing at the moment on our decommissioning programme in the UK, where we've got a pretty consistent level of execution for the next few years. We've just finished a safe heavy lift campaign in the Southern North Sea with a logs complex, and we're now probably past two-thirds of the way through, just about two-thirds of the way through the heavy lift campaign. And we're 120 odd wells through our P&A campaign, which is 150 wells. So a really strong set of execution results. We finished the McCulloch P&A programme and we moved Balmoral off location and are already investigating the P&A wells, which will just fit into the timeline and the team's workload. If we go over the page, I'll talk just quickly about synergies, where we are with bringing the company together. You know this is something that we've been through a couple of times before. We're still pulling things together. This is an exercise that will take us into next year. We're still dealing with COVID and the return to the office and people working from home, but actually really good progress on integrating the organisations We're already beginning to see what we may be doing in the supply chain with contracts, logistics and materials and some of the back office. So again, when you look at some of our numbers, our operating numbers, you must remember we have slightly more offices and more back office costs than we may have in a year's time. Good work with aligning operating models. That will take a while, but then we will see efficiencies. And we've also begun to move some of our assets around the group, particularly to reinforce some of the weaker Premier subsidiaries that have perhaps been in loss-making positions. And We've strengthened their balance sheet and we should begin to see us burn through some of those tax loss positions as a corollary of those moves. That's probably all I would say on this. And then as Linda said, I'll give you a little bit of a flavour about one of our carbon capture projects that we generally, we've not made a lot of public statements about this, but this is one of the most interesting things for the organisation. So we're in Acorn, as you know, around St. Fergus, the Scottish cluster. But we also have the VNet0 cluster based around the Humber, where we have a group of really significant emitters. And we're looking to handle up to around about 50% of the region's emissions. And this is the highest level of CO2 intensity in the UK is around the Humber, the north and the south region. We're working with P66, who run the Humber Refinery, and the Vitol with the VPI, Immigrant Power Plant, who are already entering to feed with government money. And now we've been joined by EP UK and Prax with Lindsay Orwell Refinery. We're waiting to hear what the government does next, but a really strong, robust project aiming to reuse infrastructure that's fit for reuse, but lay new pipelines where that's the best and safe or most economic thing to do. but watch this space, really exciting project. Thank you, Linda. I'll hand back to you.

Thanks, Phil. So now, just a few words on our assets outside the UK. Our producing assets are in Indonesia and Vietnam. Together, they contributed 14,000 barrels a day in the second quarter following completion of the merger. The assets are high quality, and our local teams do a really great job, as Phil mentioned earlier, delivering over 95 percent operating efficiency this year. in spite of the challenges of covid which you know in particular have hit indonesia pretty hard in addition to these assets in indonesia we're currently drilling the second appraisal well on our tuna discovery following a successful first well We're also making preparations to drill the Timpan well next year with our partners BP and Mubadala. It's a large exploration prospect which, if successful, has the potential to be a new source of natural gas in a region with continued demand growth. Moving to Mexico, we have a 12% interest in the Zama discovery, a development with fairly robust economics. But before we get to an investment decision, we do need to reach agreement with Pemex and our other partners on the unit operating model and a development plan. Our team's actually in Mexico this week for a series of meetings, which we hope will help move the project forward. On this next page, we have a summary of some steps taken to align the portfolio with our strategy. As I said earlier, our strategy does not include greenfield exploration or exploring in areas where we don't have an existing producing presence. Consistent with that, we recently took decisions to exit exploration licenses in the Burgos Basin of Mexico and the Seara in Brazil. And also, after a thorough review, we decided to look for the options to exit the sea lion discovery and other licenses in the Falkland Islands, as pursuing development of these resources just was not deemed a strong fit with our strategy. These are never easy decisions to take, but we are committed to being very disciplined in our approach to capital allocation and execution of our strategy. And speaking of capital allocation, over to Alexander.