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2022-09-06

EnQuest PLC: Half-year Report

EnQuest PLC

Results for the six months ended 30 June 2022

6 September 2022

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

Comparative figures for the Income Statement relate to the period ended 30 June 2021 and the Balance Sheet as at 31 December 2021. Alternative performance measures are reconciled within the `Glossary - Non-GAAP measures' at the end of the Financial Statements.

EnQuest Chief Executive, Amjad Bseisu, said:

"Strong production, together with high commodity prices saw the Group generate free cash flow totalling $332 million in the first half of 2022, driving a significant reduction in net debt to $880 million. Consequently, our net debt to 12-month EBITDA ratio has reduced to 0.9x, demonstrating excellent progress towards our 0.5x target.

"We have a significant work programme to deliver in the second half of the year but remain on track to deliver our operational targets in our core business.

"We are also committed to supporting the UK's twin objectives of delivering energy security and decarbonisation. Through our Infrastructure and New Energy business, we intend to repurpose and utilise existing assets to progress new energy and decarbonisation opportunities, including carbon capture and storage, electrification, and the production of green hydrogen.

"We remain focused on further strengthening our balance sheet, which will position us well to utilise our capability to unlock organic and inorganic growth opportunities, including the capital-light infrastructure and new energy business, and deliver returns to shareholders in the future."

H1 2022 performance

  • Group net production averaged 49,726 Boepd (2021: 46,187 Boepd)
  • Revenue and other operating income of $943.5 million (2021: $518.3 million) and adjusted EBITDA of $536.3 million (2021: $345.4 million) reflects materially higher realised oil prices of $89.9/Boe (2021: $62.8/Boe), including the impacts of the Group's hedge programme, and higher production
  • Operating costs increased to $208.4 million (2021: $153.0 million), primarily reflecting the addition of Golden Eagle to the portfolio, increased maintenance and well intervention activity, and increased diesel and emissions trading certificate prices
  • Cash generated from operations was $522.7 million (2021: $287.9 million); with cash capital expenditure of $54.7 million (2021: $15.9 million) and cash abandonment expenditure of $28.2 million (2021: $38.7 million)
  • Strong free cash flow generation of $332.1 million (2021: $144.5 million)

End June net debt reduced by $342.0 million from year end; net debt to adjusted EBITDA reduced to 0.9x

  • At 30 June 2022, net debt reduced to $880.0 million (end 2021: $1,222.0 million) reflecting strong free cash flow generation. Group net debt to last-12 months adjusted EBITDA ratio as at 30 June 2022 is 0.9x, down from 1.6x at the end of 2021
  • At the end of June, $115.0 million remained outstanding on the Group's senior secured debt facility (`RBL') following accelerated repayments totalling $300.0 million
  • Completed partial refinancing and extended the maturity of the Sterling retail bond on 20 April, with the new October 2027 9% retail bond issue totalling £133.3 million. The remaining October 2023 7% retail bond in issue is £111.3 million
  • At the end of June, total cash and available facilities were $467.0 million (end 2021: $318.7 million)

  • At 31 August 2022, net debt had been further reduced to $817.6 million

  • The outstanding RBL was reduced to $90.0 million
  • Executed $33.4 million (4.0%) of buy backs of the October 2023 7% high yield bonds in July and August bringing the total outstanding at the end of August down to $793.8 million

Guidance and outlook

  • 2022 average net Group production is expected to be within the guidance range of 44,000 Boepd and 51,000 Boepd reflecting strong first half performances across the portfolio and the impacts of the planned well programme and maintenance shutdowns in the second half of the year
  • Operating costs, cash capital and abandonment expenditures are all expected to be in line with prior guidance
  • EnQuest has hedged a total of c.3.4 MMbbls with an average floor of c.$60/bbl and ceiling price of c.$79/bbl in the second half of 2022. For the first half of 2023, the Group has hedged a total of c.3.5 MMbbls with an average floor price of c.$57/bbl and an average ceiling price of c.$77/bbl
  • Following the enactment of the Energy Profits Levy, EnQuest expects to pay cash tax in the UK in 2022 and for the duration of the levy period

Production and financial information

[][][][][][][][][]
Business performance For the period For the period Change%
measures to 30 June 2022 to 30 June 2021
Production (Boepd) 49,726 46,187 7.7
Revenue and other operating 943.5 518.3 82.0
income ($m)[1]
Realised oil price 89.9 62.8 43.2
($/bbl)[1,2]
Average unit operating costs 22.7 19.3 17.6
($/Boe)[2]
Adjusted EBITDA ($m)[2] 536.3 345.4 55.3
Cash expenditures[ ]($m) 82.9 54.6 51.8
Capital 54.7 15.9 244.0
Abandonment 28.2 38.7 (27.1)
Free cash flow[ ]($m)[2] 332.1 144.5 129.8
30 June 2022 31 December
2021
Net (debt)/cash ($m)[2] (880.0) (1,222.0) (28.0)

Statutory measures For the period For the period Change%
to 30 June 2022 to 30 June 2021
Reported revenue and other 838.8 481.3 74.3
operating income ($m)[3]
Reported gross profit ($m) 252.8 148.1 70.7
Reported profit/(loss) after 203.5 (56.4) -
tax ($m)
Reported basic 11.1 (3.4) -
earnings/(loss) per share
(cents)
Cash generated from 522.7 287.9 81.6
operations ($m)
Net increase/(decrease) in 99.5 53.3 86.7
cash and cash equivalents
($m)

Notes:

[1] Including realised losses of $162.3 million (2021: realised losses of $32.9 million) associated with EnQuest's oil price hedges

[2] See reconciliation of alternative performance measures within the `Glossary - Non-GAAP measures' starting on page 31. Note, EnQuest defines net debt as excluding finance lease liabilities

[3] Including net realised and unrealised losses of $267.0 million (2021: net realised and unrealised gains of $69.9 million) associated with EnQuest's oil price hedges

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