Enquest Plc Ord

Please note that during the presentation, you can submit questions to management that will be taken at the end. You can submit these at any time during the webcast. Without further ado, I'll hand you over to Amjad Zezou, Chief Executive of Enquest PLC.

Thank you, Craig, and good morning, ladies and gentlemen, and welcome to our 2023 half-year results presentation. My name is Amjad Zezou, and I am the Chief Executive of Enquest. Joining me today At the presentation is Salman Malik, our Chief Financial Officer, as well as Richard Hall, our Chief Operating Officer. Also with us today from Inquest is Craig Baxter, Head of our Investor Relations. As usual, Salman will present the financial results and Richard cover the global operation performance. As we've seen uncertainty in the UK fiscal environment, as well as continued volatility in global financial and commodity markets, it is more important now for us as Inquest to deliver the two goals of the UK, affordable and security energy supplies, which of course incorporate the long-term transition to renewable energy. The sector faces significant challenges, as competitive option for investment is primarily now fixed to the tax regime. With the uncertainty in the tax regime, this has created a more difficult environment for the sector. While we appreciate the government's attempt to encourage investments through the ESIM, I think a timely legislative reform is required to restore confidence in the sector. We at Enquest remain committed to the UK and we continue to play an important role in making most of the resources that we have to meet the energy demand as well as the transition to low carbon economy over time, as you will hear through our presentation. For some time now, our strategy has been anchored around three pillars, deliver, deliver and grow. The slide here lays out the summary of our key areas where we progressed in the first half. With a continued focus on safety, which has our license to operate and our license to exist, I'm pleased that our lost time injury frequency remains upper quartile in the business and considerably better than the OE UK benchmark of 1.27. Following the efficient return to production at Kraken, strong production uptime at all other assets and the successful execution of our well program in the UK and Malaysia, we are very much on track to deliver on our 2023 guidance targets. Production to the end of June is towards the top end of our guidance range with an active work program planned in the second half, including shutdowns in Magnus, GKA, Golden Eagle and Malaysia. We remain optimistic about the delivery of the ongoing programs, both at Magnus and Golden Eagle. With our strong operational delivery and a quick turnaround, as Richard will mention on the Kraken downtime, we generated 140 million of free cash flow in the first half of the year. As such, our trajectory to deliver continues with net debt in the half year at $592 million, and our net debt to EBITDA target at 0.7. We move towards our stated target of 0.5x. I'm pleased also that we've put in place a terminal to cover the reduced borrowing capacity within our RBL, which was impacted by the energy profits levy. This provides us with additional liquidity and aligns our capital structure structure with no debt maturity until 2027 giving us a clear runway ahead to focus on value creative investments both organic and inorganic looking ahead our stronger balance sheet will provide a platform to balance the organic and inorganic investments further deleveraging And in due course, return to shareholders as part of our capital allocation framework, which we'll put in place in 2024. While remaining disciplined in our investment decision, we continue to assess our future organic opportunities across our business, as well as targeting value-accretive inorganic growth opportunities. We have a unique model as a transition company operating through the asset life cycles to deliver on both energy security and the decarbonization objectives. We are maximizing the life of our existing assets, acting as a late life asset company through a strong commitment to cost management and selective investment. We're also significantly reducing our emissions on all the assets that we have, driving our commitment to reach net zero by 2040. You'll hear more detail in Richard's section on our differentiated capabilities that really cut across both the upstream business, the DCOM business, as well as the new energy business. This capability remains core to our ambitions. Magnus has particularly benefited from our focus on operational improvement, as you've seen in our performance production levels, with uptime over 91% in the first half of 2023. We're well set to progress our plans to invest further at Magnus once we've completed the rig recertification program, which is planned for later this year, which will allow us to recertify the rig for five years of further operations. With regard to decarbonization, we aim to be at the forefront of the UK drive to net zero by repurposing existing infrastructure, pipelines and reservoirs to deliver material emission reductions. We're demonstrating this ambition and capability at Salon Vogue, which I will discuss a bit more shortly. Lastly, we are demonstrating a very strong capability in delivering significant decommissioning projects, following the most prolific and largest multi-asset program for plugging and abandoning in the Northern North Sea during 2022. We are well on track to complete the campaigns both on Thistle and Heather by the end of 2024, involving around 100 wells. These three complementary strands, which maximize on our skills and capabilities, see us as well placed in the transition and sustainable energy future. It's our core capabilities coupled with our tax advantage in the UK that will provide us opportunity for growth as others look to exit the UK. On the new energy front, The key to our future is the progress we make in our new energy business. We continue to develop cost-effective and capital-efficient plans to transform Salamvo, right-sizing its footprint, repurposing the site to progress decarbonization, and focusing on carbon capture and storage opportunities, as well as production of green hydrogen derivatives and electrification. The award of the carbon capture licenses presents an opportunity, an important one, to permanently store material quantities of CO2 from isolated emitters, both in the UK, Europe and further afield. The UK and Norway are the natural sites for storing carbon in Europe. This quantity of carbon storage represents a multiple of the group's existing direct emissions and points to a project which can run for decades. On hydrogen production, we're working closely with strategic partners to explore opportunities, which are at an early phase, and look at local wind power on the islands, both onshore and offshore, to produce hydrogen and its derivatives, given our existing footprint in Salamboa. We're also looking at decarbonizing local industry and to expand customer services globally by leveraging the export capabilities with the renewable power potential. Finally, we continue to progress proposals on electrification solutions with the security of a grid backup to facilitate new asset developments in the North Sea Basin. These projects will take time, but we expect to unlock these opportunities by leveraging our infrastructure and working with strategic and financial partners to move capital deployed by others in this area. In summary, we have a unique business model that's geared towards our net zero aspirations and anchored in our core competence and capabilities and infrastructure position. This will establish us as a player in a sustainable energy future. I now hand over to Salman to take you through the financial results.

Thank you, Amjad, and good morning, everyone. Let's begin with a summary of our financial performance. Turning to slide seven. During the first half of the year, we achieved revenue of $733 million, representing a 22% decrease relative to the same period last year. This decrease was primarily driven by lower commodity prices the impact of Kraken outage, and natural decline in production. Our sales barrels were lower than production barrels, following an increase in our underlift position during the first half of the year. During this period, we delivered a 13% reduction in our operating cost per barrel. This reduction was primarily driven by higher lease credits of Kraken and lower maintenance and well intervention costs at Magnus and PMX Elite. In the first half of the year, our P&L reflected a non-cash impairment charge of $96.5 million, primarily relating to a reduction in our short-term commodity price assumptions. We also recognized a tax charge of $132 million, representing an effective tax rate of 118.8%. This essentially reflects a blend of statutory corporation tax, supplementary charge, and the energy profit slip. Of the $132 million tax charge, $48 million represent non-cash items. These elements contributed towards a statutory loss position of $21 million during the first half of the year. However, cash generation during the period remained strong, with cash generated from operations of $370 million and free cash flow generation of $140 million. Accordingly, we continued deleveraging our balance sheet bringing our net debt down from $717 million at the beginning of the year to $592 million at the end of June. This performance reflects our continued focus on cost control, capital discipline, and drive to further deliver the balance sheet. Turning over to slide eight, where I'll talk about our balance sheet and hedging strategies. The red chart on the left hand side shows the key components that help deliver $125 million reduction in our net debt since the beginning of the year. We generated cash from operations of $370 million. We spent $80 million on CapEx and $29 million on decommissioning. Cash interest on our debt facilities was $49 million and lease payments mainly relating to the Kraken FPSO were $63 million. We also made a $38 million payment to BP in relation to the Magnus profit-share arrangement. Overall, we delivered a $125 million reduction in our net debt. Net debt at the end of June was $592 million, and at the end of August increased slightly to $615 million following the $50 million payment in relation to Golden Eagle contingent consideration. Now I would like to talk about the different elements of our capital structure. Starting with our reserve-based lending facility, we reduced drawings under the RBL from $400 million at the beginning of the year to $247 million by mid-year, bringing the outstanding balance well below the available borrowing base capacity under the RBL. In July, we further reduced the drawn balance under the RBL to $240 million. Concurrently, in response to the impact of the energy profits levy on the borrowing base capacity, we have strengthened our balance sheet by bolstering liquidity and extending our debt maturity profile by executing a term loan facility of $150 million with bullet maturity in 2027. Following the payment of the 111 million pound retail bond that is due in October this year, we would have effectively extended maturities on all our debt instruments to 2027. Turning now to our hedging strategy, as you may recall last year, we decided to employ a hedge strategy that protects downside, but provides exposure to higher commodity prices. We've done this through the use of put options, which now represent our entire hedge program. We've hedged 3.8 million barrels for the second half of 2023 and 3.2 million barrels for 2024 at an average floor price of $60 a barrel. Turning now to slide nine, Here I would like to articulate the implications of the energy profits levy, which remains a key challenge for our business and the wider industry. EPL was initially introduced in May last year at a rate of 25% with expiration in 2025. At that time, the government had also provided an indicative oil price trigger range of $60 to $70 a barrel. This meant that if prices were to drop below this level, EPL would fall away. However, in November last year, the government introduced several adverse changes to the EPL regime. The tax rate was increased from 25% to 35%. The duration of the levy was extended from 2025 to 2028. And the investment allowance on capital expenditures was decreased from 80% to 29%. And the reference to the oil price trigger range was removed entirely. these changes resulted in a substantial reduction in RVL borrowing capacities for the sector. The government has recently announced a dual lock price trigger under the energy security investment mechanism, where EPL will fall away if both oil and gas prices are below $71.4 a barrel and 54 pence per term respectively. While we welcome the government's desire to support the industry, the level of these thresholds and non-deductibility of significant costs, the dual block nature of this trigger has not resulted in an improvement in capital availability for the sector. The energy security investment mechanism is currently in consultation and we would encourage the government to make appropriate adjustments to this mechanism to provide fiscal certainty and improve the attractiveness of UKCS to support both energy security and decarbonization. We do not believe that current commodity prices represent a windfall price environment, especially given significant inflationary pressures witnessed by our industry. While EPL has a stated rate of 35%, non-deductibility of cost elements such as decommissioning and interest expense translate into a higher effective tax rate. As a reminder, Enquest is sheltered from the 40% corporation tax and supplementary charge payments due to our substantial tax loss position of over $2.3 billion. Several of our peers are effectively paying a marginal cash tax rate of over 80%. Consequently, several companies have declared an intent to redirect capital investments outside the UK and signaled a desire to leave the UK CS altogether. Overall, despite the challenges introduced by EPL, Enquest's fiscal competitiveness has significantly improved, whereby cash-generated assets are worth 260% in Enquest's hand compared to companies that do not have a tax loss position. This fiscal advantage, coupled with our strong operating capability in upstream decommissioning and repurposing of assets, provides a unique platform to unlock accretive M&A through win-win transactions. We've demonstrated a strong record in delivering a creative M&A with quick paybacks at Magnus, Golden Eagle, and PMH Saligi acquisitions. And we would love to build on that track record and leverage our strong competitive positioning to unlock value enhancing M&A through creative transaction structures. Organically, EPL has impacted our cash generation and the pace of the leveraging. Therefore, we're focusing on low cost, quick payback investments, such as the ongoing drilling program at Magnus. Turning now to slide 10. Here I will provide an update on progress against the key financial priorities that I outlined last year. Number one, reset of the capital structure. As I mentioned earlier, we've secured a new $150 million term loan facility to supplement the reduced borrowing base capacity under our RBL. This has helped bolster liquidity and effectively extended our debt maturities to 2027. Number two, continuing the deleveraging of our balance sheet as we drive towards our leverage target of 0.5 times net debt to EBITDA. As I mentioned before, since the beginning of the year, we've reduced our net debt from $717 million to $592 million in mid-year. Number three, exercising cost discipline and optimizing our capital program in light of the energy profits levy by focusing on low-cost, quick payback opportunities, such as the drilling program at Magnus. Number four, unlocking M&A through win-win transaction structures by leveraging our strong fiscal advantage and the depth and breadth of our business model that encompasses upstream decommissioning and repurposing of mature assets. And number five, creating a pathway to deliver shareholder returns following further deleveraging of the balance sheet. Turning now to slide 11. We're on track to deliver our guidance for 2023. We expect production to be between 42,000 and 46,000 barrels per day, following the successful restoration of full production at Kraken and the drilling program at Magnuson Golden Eagle. In terms of costs, CAPEX and decommissioning expenditure are on track at $160 million and $60 million respectively. As Richard will outline in further detail, our CAPEX program is largely focused on our drilling campaigns in the UK. Our decommissioning expenditure is predominantly focused on the well P&A campaigns at Heather and Thistle. In terms of operating expenditure, we incurred $163 million during the first half of the year, but are on track to deliver the full year guidance of $425 million. The expected increase in the second half of the year is driven by shutdown activity at Magnus, GKA, Golden Eagle, and PMH Saligi. We also expect to see limited lease credits at Kraken during the second half following the full restoration of production. Overall, we continue to focus on delivery of our targets by exercising cost control, capital discipline, and pursuing quick payback organic opportunities. We are also exploring the creative or inorganic growth options that leverage our differentiated tax position and advantage business model. I will now hand over to Richard to take you through the detailed operational performance of the group.

Thank you very much Salman and good morning to everyone. Let me talk operationally first. I mean overall we've delivered a very strong performance in the first half of this year with production towards the top end of our full year guidance range. If you look on the chart there you will see the performance there at 46,000 barrels a day. In general, the big feature of our operational performance has been strong uptime, and this has been a feature across the whole portfolio of our assets, including Magnus at over 91%, which is the result of our focused management of critical components and work scopes, sensible and key investment, and mitigation of shortages of personnel and equipment within the industry as a whole. At Quacken, you've already heard that there have been a couple of prolonged periods of top quartile production efficiency, but then set back by some shutdowns following the anomalous failures of the topside hydraulic submersible pump transformer units. From the 20th of May this year when we shut in production, the response from the asset team, working in conjunction in particular with our FPSO contractor, has been exceptional. and we've beaten each target milestone on the phase return to full production such that we can still maintain our guidance for the year. Magnus and Malaysia well intervention programmes during the first half of this year represented low-cost production enhancement scopes and we will see the second half production benefits from these scopes especially from Magnus and also at Golden Eagle where there's a further drilling programme. I will now turn to the assets in more detail starting with Kraken and as I've mentioned already the production outage was a setback that occurred initially in March and two more incidents occurred in May so we had three HSP topside transformer failures. All three failures were similar in nature and we've taken very positive action since then for rectification. During the outage, I've been very, very pleased with the Enquest team response alongside and working very, very closely together with our contractors, our key contractors from the FPSO and also other contractors who have helped us out knowing. This combined team response was so effective that we actually met or improved upon all the subsequent project milestones. We initially thought this could be a six to nine month outage and we really come back online within two and a half months. The initial return to service was after three weeks. That got us back to 50% of production. On the 20th of July, which was two months later, we had a rebuild of the transformers using the parts that were salvaged. And we got back to 90% production capacity. And then we got a further production boost back up to 100% after another refurbishment, which was done out of Recife. So that took us back to 100% capacity. Longer term, we've got additional transformer units on order. The first one is expected to be with us by the beginning of September and that will give us added security of spareage. The only upside to this was that we have managed now to do away with the planned shutdown for the third quarter of this year, so there will be no more outages or certainly planned outages for Kraken. Magnus, I really want to emphasise the success story here that we have production efficiency above 91%. And if you take out the downtime with our legacy issues from wellhead seal repairs, that would be in excess of 95%. Do bear in mind, this is a 40-year-old asset. And so we've done a really exceptional job here, driven by improvements to our rotating equipment performance, as I said, including sensible investment, our gas compressors and our power gin, all the essential types of kit that we need to keep this platform alive and well. Other significant improvements, we've got our test separator system now repurposed and functioning in accordance with the high water cuts we see these days, which helps with our reservoir understanding and our well composition understanding. And most importantly, the Magnus drilling program is ongoing. The Northwest Magnus injector necessary to support a very, very promising production well was brought online in May. In addition, we've drilled a further well since then, which came online at the start of August. So we've yet to see the benefits of production from that well. So the programme in the second half of the year also includes the drilling and completion of one more infill well. With regards to shutdown, it's a necessary thing to do. We are currently in the middle of the shutdown of Magnus, which we've timed to coincide with the Ninian Central outage, which is part of our export route. And that is currently going well, and we hope to beat our targets for that. If I could go now to the next slide, please, which is, we'll talk briefly about Golden Eagle, where the production efficiency for this non-operated asset continues to be strong, 91% for the first half of the year. The annual shutdown was deferred and optimized and was executed in 12 days rather than the planned 14, so that was very good. There was a new well brought online in the first half of 2023, and there's further drilling underway for infill prospects using a heavy duty jack up, which will locate over the platform in the third quarter of this year. As for our other upstream assets, we have the GKA Greater Kittywake area. I'm pleased to report that the performance there again has been exceptional, 95% uptime. and we managed to get the key grouse well back online and it's sustaining production at the moment. Sculpting practice is also part of that complex and it's also performing in line with our expectations from declines, as is ALBA, which is our non-operated interest there. RESE is our potential new project, and we continue to progress the evaluation of that project, which needs now to conform to the new regulations. And we're looking at those with creative development options in mind with potential partners in the light of EPL and the new regulations. If I move next to Malaysia, average production in Malaysia during the first half of the year increased 30%. We're up to 8,000 barrels a day net. Production efficiency here, again I keep emphasising the production efficiency over our portfolio is 92% and we've seen the benefit of the campaign from 2022 which saw three horizontal wells successfully drilled. We've got more intervention work that we've been doing this year, work overs have added around about two and a half thousand barrels a day alongside well intervention work. And production for the first half of the year also included around 650 barrels of oil equivalent per day of gas sales. We're getting paid a small fee for this. And whilst it generates relatively small revenue at this stage, we see this as a foundational strategic alignment with the regulatory authorities for us to endeavour to unlock this significant gas volumes that are there absolutely for the future. As regards next year, we continue to undertake our preparatory work and we've got a multi-well infill programme at drilling and currently we are just in the process of drilling our PM409 commitment well which is adjacent to the Saligi field. There's also P&A work going on, plugging an abandonment well going on in Malaysia. Very, very busy there. We've got one well done so far with a further five to go in the second half of 2023. And next, very importantly, I want to address our, if you go to the next slide, please, our repurposing efforts at Salon Road Terminal. Now, Amjad had spoken about this earlier, as has Salman, and we are continuing at Sun & Vo to operate as efficiently as possible and to explore options to repurpose areas of the Sun & Vo terminal to progress some very, and many, exciting energy transition opportunities there. Now also foremost on our agenda here is the right sizing of the plant. This was a plant that was built to process 1.3 million barrels a day of oil and is currently processing under 50,000 barrels a day. So we want to right size the plant to bring efficiencies and cost reductions for us in particular as one of the main users and provide space for our decarbonisation ambitions. And to that end, we've started the project there to right-size the facility with a new stabilisation facility. Procurement and site preparation activities are already ongoing. And this project will right-size us and be more appropriate for the expected future throughput of oil. Also, in terms of the progress being made at Sun and Bow, we've started a feed study, which has been completed for the electrical grid network. and final projects or approvals are ongoing on this. So this project, the grid project, combined with the new stabilisation facilities are expected to reduce CO2 emissions from the terminal by over 90%. Amjad also mentioned our other skill set, which is in decommissioning. In terms of the extensive decommissioning work we're undertaking at both Heather and Thistle, these are large, large platforms, we continue to use our top quartile drilling expertise to progress the ongoing plugging and abandonment campaigns on both platforms. And we remain on track to complete the P&A of these 23 wells across the projects this year and expect to finish the programme by the end of 2024 on both platforms. We also are planning to do some subsea P&A of wells from our fields, Alma, Gallia, Dons and the Broome, which have now been mothballed. We aim to be execution-ready for this campaign during the second quarter of next year, and we will be looking to put in place a WIC. In summary then, we've had a very good first half of the year, and the delivery of key work scopes mean that we remain confident in delivering our near-term targets while progressing further barrel-adding opportunities. We remain focused at all times on delivering value and maximising value from our existing assets through targeted maintenance, investment and enhancement programmes and identifying repurposing opportunities with it. I will now hand you back to Amjad for some closing remarks. Thank you.

Thank you very much, Richard. As you've heard from Richard and Salman, we've delivered strong first half operational as well as financial results continuing to demonstrate progress against our strategic priorities to deliver, deliver and grow, deliver, deliver and grow. The combination of our track record of delivery in addition to our advantage tax position in the UK and the changing M&A landscape gives us confidence that we can also pursue production growth through targeted M&A opportunities, as we have done in the past. This will further enhance our position as a responsible operator, making the best use of resources and assets that have already been developed to ensure we play a leading role in the energy transition and taking late life assets off majors. We have clearly proven our capability to do that and will continue to do that in the future. As I've said before, Enquest is a differentiated energy transition company with the core capabilities across upstream decommissioning and infrastructure and new energy. We look forward to continuing to deliver our key targets across the various strands of our enhanced business model. focusing on operational excellence to deliver sustained cash generated production to facilitate further deleveraging, capital investments and return to shareholders. With our commissioning function, we will further demonstrate, as we have so far, our position as a leading decommissioning partner by delivering on targets and continuing to challenge industry average. as i've said we've done the largest program in the northern north sea and we will be doing almost 100 pna wells over the period between when we started decommissioning pistol and heather and in new infrastructure new energy we continue the positive momentum generated by our recent carbon storage licenses and repurposing the terminal with a new stabilization facility in salambo that's just fit for purpose for the old So going down from a one and a half million barrel a day facility to a 40,000 barrel a day facility. This gives us a compelling suite of economic projects while we committed to each net zero in 2040. These elements come together to enable us to focus on creating value to our shareholders, including return to shareholders. We're well-placed to create this value through our experience, our track record, and our win-win approach with our partners, as well as our M&A advantage tax position. Thank you all for your time. I'll now move to the Q&A session for this presentation.

Thank you very much, Amjad, and thank you, gentlemen. We do have a number of Q&A questions which have come into the inbox. So we'll start immediately. That's all right, Amjad. If we kick off with some questions from Matt Smith from Bank of America. Matt's really asking around the climate for investment and M&A in the UK. So it's a three-pronged question, if you don't mind. Firstly, could you characterise the current UK market? Are bid-ask spreads narrowing with less commodity price volatility? Secondly, how much competition do you think Enquest faces as a buyer, especially given the need for more creative consideration structures? And finally, given the lack of improvements to the UK fiscal regime, does international M&A become a greater consideration for Enquest? Thanks, Matt.

Thank you very much, Matt. I mean the three-pronged question, the investment climate, the current UK market is clearly less competitive, we have fewer players, private equity has reduced its footprint and continues to reduce its footprint, so we see fewer competitors in the market, indeed we are in four processes and we see just generally less people in these processes than before. In terms of competition, we maintain our competitive advantage as an operator. Our capability as an operator over the last decade and a half is differentiated. We have proven that we've taken nine assets from late life, from operators, and we are better holders of those assets and have been able to add value on those nine assets, each one of them. by reducing costs, by investing more, by reducing the breakeven, and more importantly, by delaying the decommissioning of the asset. The experience that we have in that space is clearly a competitive advantage that we have, as we see fewer and fewer operators in the UK specifically that want to engage in acquiring additional assets. And in terms of the last question, the uncompetitiveness of the UK, fiscal regime. It's true that we continue to look outside the UK, but we do have a competitive advantage with the 4 billion that we've invested in the UK, where we pay less than others in terms of corporate tax and supplementary corporate tax. So we pay the EPL, which is a 35% tax rate, but we do not pay the 40% tax rate from CT and SCT, which gives us a competitive advantage. So we are looking outside and we have added to our asset base internationally in Southeast Asia, but we continue to look at the UK as a competitive market for us to bid in.

Thank you, Amjad. Second question, and there's actually a couple of questions on this subject. I guess to summarise them, could you give a bit of colour, Amjad, on the thinking behind the application to delist from NASDAQ Stockholm in Sweden?

Yes, I think it's a two pronged answer. First, our share of listed shareholders has moved from around 55, 45 when we first listed to around 10 or 15% in Sweden. And so the number of our shareholders in Sweden had reduced significantly over the last decade. And more importantly, with Brexit, we became primary listed in two markets, in the UK as well as in Sweden, on NASDAQ in Sweden. And for us to have two primary listings and the cost of having two primary listings and the issues associated with prospectuses and results and so on and so forth were quite compelling for us to look at just one primary listing rather than two primary listings. We do, I think we have, we very much want our Swedish shareholders to novate their shares to our to our London listing. And I think we've provided a segue to do that very easily. And we will provide plenty of time and we'll continue wanting to have our shareholders in Sweden backing us as they have in the last decade and a half.

Thank you, Amjad. If you don't mind, I'll go directly to Salman on this one, please. It's a question from Kate Somerville at JP Morgan. Thanks for the question, Kate. Salman, could you please provide a little bit more information regarding the first half impairment charge, including any colour you can provide in terms of price assumptions?

Sure. Thank you for the question, Kate. So we had a $96.5 million impairment charge, which relates entirely to our production assets in the UK. This was essentially driven by a decrease in our short-term oil price assumptions for 2023, a reduction from $84 a barrel to $80 a barrel. And you can see this is outlined in two of the financial statements. We also assumed a more conservative pricing differential on Kraken, decreasing it from a $3 premium to a $2 discount for the next 18 months, and then parity thereafter. And in terms of the composition, the breakdown of the impairment bulk of it relates to 69 million of the 96 relates Thank you, Salman.

Richard, I'll put this question to you, if I may. This is really just a request for clarification, actually, that the operational downtime experienced at Kraken is not expected to have any medium or long-term impact on the production level or efficiency of the field following the restart.

Yeah, I'm happy to confirm that. So the performance has been very good. We've got a little bit of flush production back when we got the three transformer units back online. We're back up at normal levels right now. And we don't see any long-term issues there. Like I said, we're engaging additional spareage to make sure that we have some security of supply there. But performance-wise, everything's good.

Many thanks, Richard. Thanks for that clarification. Amjad, if I may, I'll come back to you. There's another question that's come in, and it's also on the theme of M&A, around how we might move forward with that in terms of how we would plan to fund any acquisition, given the need to keep some liquidity in the system around RBL amortisation, bond maturities and EPL charges. If you wouldn't mind expanding a little bit on that, please, Amjad.

Yeah, thank you. Thank you very much. I mean, first of all, many of the acquisition we've made have required very little or no cash up front. And so, again, they were driven by capability and we continue to look at those. And then secondly, we have RBL capacity. I mean, we have a 500 million dollar RBL of which 240 is drawn. and that capacity can be used for the new assets. So, I think between our existing liquidity as well as this deal structure, we are looking to minimize really our cash upfront in terms of the deals that we're looking at. But we also can use our RBL capacity.

Thank you, Amjad. And that's covered all of the questions that have been submitted. I don't know if you want to give a closing remark, please. Yeah, thank you very much, Greg.

Again, I just want to reiterate that our competitive advantage really lies in our capability. And then we are repurposing that capability to our both decommissioning depth and breadth, as well as our new energy depth and breadth. We see ourselves as an ideal energy transition company. having the ability to take late life assets and extract more value out of them, extend their life, reduce their footprint in the meantime and reduce the amount of capital that needs to be spent in the meantime to produce those barrels. Very little capital produced, very little footprint produced incrementally to produce those barrels. Decommissioning those assets responsibly and then also repurposing the infrastructure that we have around those assets, around the terminals to be able to move into the new energy space which again is the future of the uk i do have to say though the the transition between old oil and gas and new energy has to be a smooth one and will involve continuing investment in the oil and gas space the our ability to reduce the carbon footprint of the production in the uk is much more compelling than the footprint of anything that's imported from outside the UK. So we are actually being more responsible by producing in the UK and reducing our footprint by almost 50% over the last four years, rather than the imports which generally have four times the carbon footprint when those are imported into the UK. With that, thank you very much and looking forward to seeing everybody in early and after our full year results next year.

Thank you, Amjad, and thank you once again for your attendance, ladies and gentlemen. Our next planned update to the market will be our usual operations update during November. Thank you.