Trading and Operations Update

ENQUEST PLC, 24 January 2017
Trading and Operations Update

Key 2016 highlights

• Production averaged 39,751 Boepd in 2016, up 8.7% on 2015, with production in the UK North Sea up 11.3%

       o  This was EnQuest's highest annual production since the company started in 2010. Final production was adversely affected by the shutdown period at the end of the year, where the maintenance shutdown of the Brent Pipeline System took over a week longer than was anticipated, with winter weather also hampering the work necessary to bring production fully back onstream.

• Final reported 2016 unit opex is expected to be around the lower end of latest full year guidance range of          $25/bbl to $27/bbl. 
• Reported 2016 cash capex is also expected to be around the lower end of the range, of $620 million to  $670 million.
• Net debt as at 31 December 2016 expected to be approximately $1.8 billion

Outlook Highlights

• The Kraken FPSO has arrived in the North Sea on schedule and is continuing under budget and on track for delivery of first oil in Q2 2017
•  EnQuest's production in 2017 is expected to average in the range of 45,000 Boepd to 51,000 Boepd for the full year and will be dependent on the timing of Kraken first oil 
•  EnQuest is on course to further reduce average unit opex, in 2017 in the range of $21/bbl to 25/bbl including Kraken production.  EnQuest continues to seek cost reductions across the supply chain 
• Cash capital expenditure will reduce in 2017 and is expected to be in the range $375 million to $425 million, the majority of which is being invested in the Kraken development
• Hedging of 6 million barrels is in place for 2017, at an average of c.$51/bbl
• EnQuest is also pleased to announce an agreement to acquire from BP an initial 25% interest in the Magnus oil field as well as a 3.0% interest in the Sullom Voe oil terminal and supply facility, 9.0% of the Northern Leg Gas Pipeline and 3.8% of the Ninian Pipeline System.  See separate announcement for details

Note: The 2017 guidance in this announcement excludes the impact of the proposed acquisition announced separately today.

EnQuest CEO Amjad Bseisu said:

"EnQuest is delivering reductions in operating and capital expenditure and we continue to streamline our operations. Our low cost operating structure and our low cost approach to operatorship are integral parts of our way of doing business - whilst always retaining safe operations as our number one priority. 

The average production of 39,751 Boepd in 2016 included good performance at Heather/Broom and at PM8/Seligi with a promising start after first oil from Scolty/Crathes. Delayed and extended third party shutdowns reduced production at the end of the year, and productivity from Alma/Galia has been negatively impacted by well performance including ESP reliability. Discussions with the ESP supplier on rectification plans are ongoing. The Kraken development remains under budget and on schedule for first oil in Q2 2017."

Production statistics

1 Net production since first oil on 21 November 2016, averaged over the twelve months to the end of Dec' 2016; equates to an average of 6,422 Boepd from first oil to the end of 2016.
2 Net production since first oil on 27 October 2015, averaged over the twelve months to the end of Dec' 2015
3 Net production since first production in June 2015, averaged over the twelve months to end of Dec' 2015

Note: In 2016, production from Malaysia averaged 6,524 Boepd on an equivalent entitlement basis.

UK North Sea

Thistle/Deveron

Across 2016, average production from Thistle/Deveron was 7,533 Boepd. 

2016 reflected the benefit of the 2015 drilling programme; the planned Southern Fault Block P2 sidetrack was however halted at the start of the year due to slot recovery issues.  In Q1 2016, one of the Thistle power generation turbines was overhauled and other maintenance and integrity projects continued throughout the year.  Further production enhancing field life extension work was scheduled for the middle of 2016, during a Thistle production shutdown planned to coincide with a third party shutdown of the Brent Pipeline System ('BPS').  However the BPS shutdown was delayed to the end of the year, thereby delaying Thistle production enhancements. The BPS shutdown itself proved to be considerably longer than expected resulting directly in four weeks of lost production. Bad weather in late December then also affected production start up by a further week. In December, Thistle started and successfully commissioned new process plant and associated controls. Water injection remained offline during this period to support essential electrical maintenance and to address flexible flowline integrity. 

The Don fields

Across 2016, average production from the Don fields was 5,404 Boepd. 

2016 reservoir performance for the Don wells was above expectations, particularly with the benefit of the Ythan production well, drilled last year.  However the delay and extension of the third party BPS shutdown also affected the Don fields, with planned Dons production enhancement projects considerably delayed and with an extended 32 day Dons shutdown at the end of H2 2016.  The 2016 Dons work programme included chemical treatment programmes and routine maintenance throughout the year.  The start of gas import benefitted production in the first half of the year, increasing plant efficiency and reducing production costs.  A water injection line failure on Don South West reduced production with a temporary repair being successfully completed in November. 

Heather/Broom

Across 2016, average production from Heather/Broom was 5,948 Boepd.

The strong production performance resulted from a combination of work to increase water injection reliability and increased injectivity from the wells drilled and worked over in 2015. The Heather Alpha platform also had outstanding reliability with no unplanned outages.  Maintenance and integrity projects continued as normal.

Greater Kittiwake Area

Across 2016, average production from GKA was 2,988 Boepd. 

 Production at the start of the year benefitted from continuing improvements in production efficiency, strong performance of the Gadwall well and from chemical treatments on Goosander conducted in 2015.  The work programme at the start of the year focused on operational upgrades and on offshore construction on the Kittiwake platform in readiness for the tie-back of the Scolty/Crathes fields. H2 2016 included the planned three week shutdown, which included preparation for Scolty/Crathes delivering production on 21 November. GKA encountered gas compressor issues which resulted in Grouse being shut in for part of H2 2016, before being brought back online after the compressor was reinstated.  In Q2 2016, EnQuest undertook the drilling of the nearby Eagle exploration well, which was confirmed as a discovery.  Ongoing evaluation is continuing.

Alma/Galia

Across 2016, average production from Alma/Galia was 6,740 Boepd, following delivery of first oil on 27 October 2015.

By Q2 2016, six production wells were onstream. After analysis of the initial results, a production performance enhancing work programme was established.  The K2 (AP5) well cleaned up naturally after a number of weeks of production resulting in significantly better performance.  K1 (AP4) required a chemical treatment which was successful and the workover of the K3Z (AP1) well further increased production.  Well K6 was not completed and was replaced by well K7 (AP6) which came onstream late in Q4.  K7 (AP6) overall productivity has been broadly as anticipated.

Productivity from Alma/Galia has been negatively impacted by well performance including ESP reliability. Discussions with the ESP supplier on rectification plans are ongoing.  In October 2016, the EnQuest Producer was brought onto permanent power with the boiler and steam turbines online. 

 Malaysian operations

PM8/Seligi

Across 2016, average production from PM8/Seligi was 7,960 Boepd.

Overall 2016 performance was strong. Average annual production volumes were reduced by 21 days of shutdowns, compared to a single shutdown of 3.5 days in 2015. 

A total of seventeen idle well strings were re-activated during 2016, adding an additional 5 kBoepd gross production. This included two add-perforation jobs in November which added over 1,000 bpd gross production. As a result of the successful idle well activation programme - and improvements to plant stability at Seligi-A platform, the field achieved very strong levels of production.

Tanjong Baram

 Across 2016, average production from Tanjong Baram was 1,188 Boepd.

Tanjong Baram operational efficiency and uptime remained high throughout the year.

 Presentation to analysts and investors

EnQuest will host a slide presentation and conference call for investors and analysts starting today at 9:00 AM London time, focusing mainly on the acquisition which is being announced today and also covering this Operations Update.  The presentation will be accessible via a live audio webcast, available from the investor relations pages of the EnQuest website at http://www.enquest.com/investors.aspx - go to the 2017 tab of the presentations section and select the 'audio' icon, this is a listen only facility.  If investors or analysts wish to participate in questions and answers they should dial in to the conference call facility (details below); using the link above, the slides can be accessed directly - select 'presentation'.  Note that in both cases, participants should move the slides on manually during the presentation.

The conference call facility will be available on the following numbers:

Confirmation Code:                                            EnQuest

London, United Kingdom:                                 +44(0)20 3427 1904

New York, United States of America:              +1646 254 3361

Later in the day, the audio webcast will be available for playback.

Ends

This announcement has been determined to contain inside information.

For further information please contact:

EnQuest PLC                                                                                                  Tel: +44 (0)20 7925 4900

Amjad Bseisu (Chief Executive)

Jonathan Swinney (Chief Financial Officer) 

Michael Waring (Head of Communications & Investor Relations)                                                                   

Tulchan Communications                                                                               Tel: +44 (0)20 7353 4200

Martin Robinson           

Martin Pengelley

Notes to editors

EnQuest is one of the largest UK independent producers in the UK North Sea.  EnQuest PLC trades on both the London Stock Exchange and the NASDAQ OMX Stockholm. Its operated assets include Thistle/Deveron, Heather/ Broom, the Dons area, the Greater Kittiwake Area, Scolty/Crathes and Alma/Galia, also the Kraken development; EnQuest also has an interest in the non-operated Alba producing oil field.  At the end of December 2016, EnQuest had interests in 25 UK production licences, covering 35 blocks or part blocks and was the operator of 23 of these licences.

EnQuest is replicating its model in the UKCS by targeting previously underdeveloped assets in a small number of other maturing regions; complementing its operations and utilising its deep skills in the UK North Sea.  In which context, EnQuest has interests in Malaysia where its operated assets include the PM8/Seligi Production Sharing Contract and the Tanjong Baram development.

Forward looking statements: This announcement may contain certain forward-looking statements with respect to EnQuest's expectation and plans, strategy, management's objectives, future performance, production, reserves, costs, revenues and other trend information.  These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that may occur in the future.  There are a number of factors which could cause actual results or developments to differ materially from those expressed or implied by these forward looking statements and forecasts.   The statements have been made with reference to forecast price changes, economic conditions and the current regulatory environment.  Nothing in this presentation should be construed as a profit forecast.  Past share performance cannot be relied on as a guide to future performance.

Glossary

GKA        Greater Kittiwake Area

FPSO     Floating production, storage and offloading vessel

ESP        Electrical submersible pump