Half-year Report

Fri, Sep 07, 2018 08:01 CET

Material growth in production and cash generation; all 2018 guidance reaffirmed.
Repayment of debt remains a priority

Results for the six months ended 30 June 2018

7 September 2018

Unless otherwise stated, all figures are on a Business performance basis and are in US Dollars.

Highlights and outlook

§ EnQuest is proposing to undertake a Rights Issue for $138 million to facilitate the exercise of its option to acquire the remaining 75% interest in the Magnus field (see separate announcement).
- § The acquisition would bring approximately 60 MMboe of 2P reserves, a material increase to production and provide an additional net present value to the Group of approximately $500 million
- § Funds from the Rights Issue will primarily be used for the $100 million cash consideration and to deliver a two-well 2019 infill drilling programme
- § Group net production up 45.9%, averaging 53,990 Boepd in the six months to end June 2018; full year 2018 guidance of 50,000 Boepd to 58,000 Boepd reaffirmed
  - § Kraken average gross production was c.31,000 Bopd in the first half of 2018 and has subsequently improved following increased water injection; DC4 subsea infrastructure installed ahead of drilling programme
  - § New wells at Heather, Magnus and PM8/Seligi are onstream and producing in line with the Group’s expectations; second Magnus well due online in the coming days
  - § Three Alma/Galia workovers completed in August; aggregate production increased as planned
  - § Increased revenue of $548.3 million (2017: $294.8 million) and EBITDA of $311.9 million (2017: $151.0 million); higher production volumes and market prices partially offset by the impact of hedging
  - § Unit operating costs at $22.6/boe (2017: $24.9/boe)
  - § Gross costs at SVT on track to reduce from c.£200 million in 2017 to c.£150m in 2018, reflecting EnQuest’s operating model and focus on efficiencies
  - § Material increase in cash generated from operations at $318.3 million (2017: $136.9 million); lower cash capital expenditure of $125.8 million (2017: $205.1 million)
  - § At 30 June 2018, net debt had reduced to $1,973.4 million (excluding Payment in Kind interest, net debt was
    $1,845.8 million), with cash and available bank facilities of $256.8 million
  - § Financing agreement for $175 million with funds managed by Oz Management. The financing is ring-fenced on a 15% share of Kraken with repayment made out of the cash flows from this 15% share
  - § The Group’s improved cash generating capacity enabled the early cancellation of $50 million of the Group’s credit facility in May, with an additional $25 million voluntary prepayment in August. The term facility has consequently reduced to $1,050 million
  - § The Group continues to prioritise maximising cash flow to facilitate the reduction of net debt
  - § Put options in place for c.5.3 MMbbls of oil for the second half of 2018 at an average price of c.$66/bbl

EnQuest Chief Executive, Amjad Bseisu, said:

“As we have announced today, the Board is proposing to exercise its option to acquire the remaining 75% interest in the Magnus field, with the cash consideration for Magnus to be funded through a Rights Issue, which will also provide funds to drill two infill wells in 2019. Our view of Magnus as a high quality asset has been enhanced since acquiring our initial 25% interest. The option is on attractive economic terms and upon completion, our increased ownership will provide the Group with an immediate and material increase to the Group’s existing 2P reserves and annual production.

“In our existing business, recent performance at Kraken has been improving with production in July and August averaging around 33,000 Bopd. The successful drilling and workover campaigns we have undertaken this year at Magnus, PM8/Seligi Heather and Alma/Galia, combined with robust underlying production performance across the portfolio underpins our confidence in delivering within our full year guidance range of 50,000 to 58,000 Boepd.

“We continue to focus on debt reduction and liquidity and have seen the early cancellation of $75 million of the Group’s credit facility and the execution of a ring-fenced financing agreement in relation to a 15% interest in Kraken. The Group’s improved cash generating capacity will further support a reduction in debt.

“The Group’s significant potential within the portfolio, underpinned by Magnus, PM8/Seligi and Kraken, ensure EnQuest is well positioned for long-term sustainable growth.”

Material growth in production and cash generation; all 2018 guidance reaffirmed.
Repayment of debt remains a priority

Results for the six months ended 30 June 2018

7 September 2018

Unless otherwise stated, all figures are on a Business performance basis and are in US Dollars.

Highlights and outlook

§ EnQuest is proposing to undertake a Rights Issue for $138 million to facilitate the exercise of its option to acquire the remaining 75% interest in the Magnus field (see separate announcement).

§ The acquisition would bring approximately 60 MMboe of 2P reserves, a material increase to production and provide an additional net present value to the Group of approximately $500 million

§ Funds from the Rights Issue will primarily be used for the $100 million cash consideration and to deliver a two-well 2019 infill drilling programme

§ Group net production up 45.9%, averaging 53,990 Boepd in the six months to end June 2018; full year 2018 guidance of 50,000 Boepd to 58,000 Boepd reaffirmed

§ Kraken average gross production was c.31,000 Bopd in the first half of 2018 and has subsequently improved following increased water injection; DC4 subsea infrastructure installed ahead of drilling programme

§ New wells at Heather, Magnus and PM8/Seligi are onstream and producing in line with the Group’s expectations; second Magnus well due online in the coming days

§ Three Alma/Galia workovers completed in August; aggregate production increased as planned

§ Increased revenue of $548.3 million (2017: $294.8 million) and EBITDA of $311.9 million (2017: $151.0 million); higher production volumes and market prices partially offset by the impact of hedging

§ Unit operating costs at $22.6/boe (2017: $24.9/boe)

§ Gross costs at SVT on track to reduce from c.£200 million in 2017 to c.£150m in 2018, reflecting EnQuest’s operating model and focus on efficiencies

§ Material increase in cash generated from operations at $318.3 million (2017: $136.9 million); lower cash capital expenditure of $125.8 million (2017: $205.1 million)

§ At 30 June 2018, net debt had reduced to $1,973.4 million (excluding Payment in Kind interest, net debt was
$1,845.8 million), with cash and available bank facilities of $256.8 million

§ Financing agreement for $175 million with funds managed by Oz Management. The financing is ring-fenced on a 15% share of Kraken with repayment made out of the cash flows from this 15% share

§ The Group’s improved cash generating capacity enabled the early cancellation of $50 million of the Group’s credit facility in May, with an additional $25 million voluntary prepayment in August. The term facility has consequently reduced to $1,050 million

§ The Group continues to prioritise maximising cash flow to facilitate the reduction of net debt

§ Put options in place for c.5.3 MMbbls of oil for the second half of 2018 at an average price of c.$66/bbl

EnQuest Chief Executive, Amjad Bseisu, said:

“The Group’s significant potential within the portfolio, underpinned by Magnus, PM8/Seligi and Kraken, ensure EnQuest is well positioned for long-term sustainable growth.”

Please refer the PDF document to view the full announcement.

Half-year Report

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