TIDMENQ
RNS Number : 3991Y
EnQuest PLC
06 September 2022
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 GBP133.3 million. The remaining October
2023 7% retail bond in issue is GBP111.3 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.$77/bbl
-- Following the enactment of the Energy Profits Levy, EnQuest
expects to pay cash tax in the UK in 2022 and for the duration of
the levy period
Production and financial information
Business performance measures For the For the Change
period to period to %
30 June 2022 30 June 2021
Production (Boepd) 49,726 46,187 7.7
----------------------------------------- -------------- -------------- -------
Revenue and other operating income
($m)(1) 943.5 518.3 82.0
----------------------------------------- -------------- -------------- -------
Realised oil price ($/bbl)(1,2) 89.9 62.8 43.2
----------------------------------------- -------------- -------------- -------
Average unit operating costs ($/Boe)(2) 22.7 19.3 17.6
----------------------------------------- -------------- -------------- -------
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 ($m)(2) 332.1 144.5 129.8
----------------------------------------- -------------- -------------- -------
30 June 31 December
2022 2021
----------------------------------------- -------------- -------------- -------
Net (debt)/cash ($m)(2) (880.0) (1,222.0) (28.0)
----------------------------------------- -------------- -------------- -------
Statutory measures For the For the Change
period to period to %
30 June 2022 30 June 2021
----------------------------------------- -------------- -------------- -------
Reported revenue and other operating
income ($m)(3) 838.8 481.3 74.3
----------------------------------------- -------------- -------------- -------
Reported gross profit ($m) 252.8 148.1 70.7
----------------------------------------- -------------- -------------- -------
Reported profit/(loss) after tax
($m) 203.5 (56.4) -
----------------------------------------- -------------- -------------- -------
Reported basic earnings/(loss) per
share (cents) 11.1 (3.4) -
----------------------------------------- -------------- -------------- -------
Cash generated from operations ($m) 522.7 287.9 81.6
----------------------------------------- -------------- -------------- -------
Net increase/(decrease) in cash
and cash equivalents ($m) 99.5 53.3 86.7
----------------------------------------- -------------- -------------- -------
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
Summary financial review
(all figures quoted are in US Dollars and relate to Business
performance unless otherwise stated)
Revenue for the six months ended 30 June 2022 was $943.5
million, 82.0% higher than the same period in 2021 ($518.3
million), reflecting the materially higher oil prices and the
contribution of Golden Eagle. Revenue is predominantly derived from
crude oil sales, which for the first half of 2022 totalled $851.2
million, 73.5% higher than in the same period of 2021 ($490.5
million). Revenue from the sale of condensate and gas in the period
was $252.9 million (2021: $57.9 million), primarily reflecting
higher market prices for condensate and gas. Gas revenue mainly
relates to the onward sale of third-party gas purchases not
required for injection activities at Magnus.
The Group's commodity hedges and other oil derivatives
contributed $162.3 million of realised losses (2021: losses of
$32.9 million), as a result of the timing at which the hedges were
entered into. The Group's average realised oil price excluding the
impact of hedging was $111.0/bbl for the six months ended 30 June
2022, compared to $67.3/bbl received during the first half of 2021.
The Group's average realised oil price including the impact of
hedging was $89.9/bbl in the first half of 2022, 43.2% higher than
during the first half of 2021 ($62.8/bbl).
Total cost of sales were $585.6 million for the six months ended
30 June 2022, 75.7% higher than in same period of 2021 ($333.3
million).
Operating costs increased by $55.4 million to $208.4 million
(2021: $153.0 million) primarily as a result of higher production
costs reflecting the Golden Eagle acquisition in October 2021,
higher maintenance and workover activities and the impact of higher
market prices on diesel and emissions trading certificates. Unit
operating costs increased by 17.6% to $22.7/Boe (2021: $19.3/Boe)
reflecting higher costs partially offset by higher production.
Total cost of sales included non-cash depletion expense of
$174.2 million, 13.8% higher than in the same period in 2021
($153.1 million), mainly reflecting the impact of the Golden Eagle
acquisition.
Also within cost of sales, the credit relating to the Group's
lifting position and hydrocarbon inventory for the six months ended
30 June 2022 was $29.9 million (2021: credit of $26.1 million). The
credit in the period reflects a switch to a $5.2 million net
underlift position at 30 June 2022 from an $18.0 million net
overlift position at 31 December 2021.
Other cost of sales, which forms part of the total cost of sales
balance, of $232.9 million were higher than the same period in 2021
($53.3 million), reflecting the higher cost of Magnus-related
third-party gas purchases following the increase in the market
price for gas which is offset by gas sales presented in revenue
.
Adjusted EBITDA for the six months ended 30 June 2022 was $536.3
million, up 55.3% compared to the same period in 2021 ($345.4
million), driven by higher revenue.
The tax charge for the six months ended 30 June 2022 was $142.4
million (2021: $19.4 million tax credit). The tax charge in the
period is largely non-cash and reflects the tax impact on the
Group's increased profit before tax. Ring Fence Expenditure
Supplement ('RFES') on UK activities, which would historically have
provided an offset to the UK tax charge, ceased to be available to
claim from the end of 2021. Had the Energy Profits Levy ('EPL')
been enacted in the interim period, a cash tax liability of $5.6
million would have been recognised in respect of Business
Performance in the period 26 May 2022 to 30 June 2022.
Remeasurements and exceptional items were a net post-tax profit
of $23.5 million for the six months ended 30 June 2022 (2021: loss
of $164.6 million). Revenue included unrealised losses of $104.7
million in respect of the mark-to-market movement on the Group's
commodity contracts (2021: unrealised losses of $37.0 million).
Other remeasurements and exceptional items includes a non-cash
impairment reversal of $10.1 million (2021: nil) and a $31.0
million loss (2021: $27.5 million gain) in relation to the fair
value recalculation of the Magnus contingent consideration
reflecting a forecast increase in Magnus future cash flows, both as
a result Group's increased short-term oil price forecast . A net
tax credit of $163.4 million (2021: charge of $124.9 million) has
been presented as exceptional, representing the non-cash
recognition of $107.9 million of undiscounted deferred tax assets
due to the Group's increased short-term oil price assumptions and
the tax impact of the above items. Had the EPL been enacted in the
interim period, a cash tax liability of $14.4 million would have
been recognised in respect of Remeasurements and exceptional items
in the period 26 May 2022 to 30 June 2022.
The Group continues to have unrestricted access to its UK North
Sea corporate tax losses, subject only to generating suitable
future profits, which at 30 June 2022 were $2,627.7 million (2021:
$3,011.0 million).
The Group's reported net cash flow from operations for the six
months ended 30 June 2022 was $498.4 million (2021: $246.9
million). Free cash flow for the six months ended 30 June 2022 was
$332.1 million (2021: $144.5 million) reflecting the materially
higher oil price resulting in higher cash receipts. Strong free
cash flows enabled the Group to make early voluntary repayments
totalling $300.0 million of the Reserve Based Lending (RBL)
facility.
Net debt at 30 June 2022 was $880.0 million, a decrease of 28.0%
compared to 31 December 2021 ($1,222.0 million) and includes $202.5
million of payment in kind interest ("PIK interest") that has been
capitalised to the principal of the facility and bonds pursuant to
the terms of the Group's November 2016 refinancing (31 December
2021: $225.0 million). As at 31 August 2022, net debt had been
further reduced to $817.6 million.
Operating review
Production details
Average daily production For the For the
on a net working period to period to
interest basis 30 June 2022 30 June 2021
-------------------------- -------------- --------------
(Boepd) (Boepd)
UK Upstream
- Magnus 12,754 13,847
- Kraken 19,527 23,690
- Golden Eagle(1) 7,060 -
- Other Upstream(2) 4,081 3,504
-------------- --------------
UK Upstream 43,422 41,041
UK Decommissioning
(3) - 337
-------------- --------------
Total UK 43,422 41,378
Total Malaysia 6,304 4,809
-------------- --------------
Total EnQuest 49,726 46,187
-------------- --------------
(1) Golden Eagle acquisition completion date was 22 October
2021
(2) Other Upstream: Scolty/Crathes, Greater Kittiwake Area and
Alba
(3) UK Decommissioning: the Dons
Upstream operations
UK operations
Magnus
Average production for the first six months of 2022 was 12,754
Boepd, 7.9% lower than the first half of 2021. Production was
impacted by a seawater lift pump failure and a well integrity
failure in June. The pump was replaced in July with additional
spares purchased to mitigate potential future risks. The Group's
well intervention programme is ongoing, with two wells successfully
returned to service in the first half of 2022. The North West
Magnus production well, which is the longest reservoir section
drilled this century at 1,914 metres with the longest liner ever
run at Magnus, has been successfully drilled and logged in late
July and is expected online around the end of September. The
programme in the second half of the year continues to evolve as
EnQuest focuses on the most value-accretive opportunities,
resulting in the Group prioritising a number of interventions to
mitigate well failure risk and the return to service of the June
well failure. Further infill drilling is now expected in 2023.
The planned three-week maintenance shutdown is underway, with
production expected to resume later this month.
Kraken
Average production of 19,527 Boepd (27,698 Boepd gross) (2021:
23,690 Boepd net; 33,603 Boepd gross) is above the top end of the
Group's 2022 guidance. The floating production, storage and
offloading vessel ('FPSO') delivered top quartile performance, with
production efficiency of 92% and water injection efficiency of 95%,
with the reduction in production from 2021 reflecting the impact of
natural decline. The Group has optimised its planned third-quarter
maintenance activities, which are scheduled to start in early
September, allowing Kraken to continue to operate on a single
processing train for one week of the two-week programme duration.
Dual-train operations are expected to resume later in
September.
Near-field drilling and subsea tie-back opportunities are being
assessed. Following completion of a 3D seismic campaign in 2021,
work is ongoing to interpret the seismic data in order to evaluate
fully the development potential of the western area of the field,
in addition to supporting ongoing optimisation of the main Kraken
field, including potential infill opportunities. The current
expectation is the execution of an initial side-track opportunity
in 2024, before future drilling of wells in the western area.
Equipment orders are likely to be placed during 2022 in order to
accommodate significant supply chain lead times.
Golden Eagle
Year to date June production was 7,060 Boepd. Production
efficiency remained strong at 95%, including an optimised annual
shutdown which was executed in two days instead of four, partially
offset by plant instability caused by gas turbine trips and natural
decline. These issues are being addressed by the operator, with
further optimisation activities, including well work, planned in
the second half of the year.
The joint venture has approved a two infill well drilling
campaign to commence at the end of the third quarter of 2022, with
first oil expected around the end of the first quarter of 2023.
EnQuest is proactively working with the operator to share insights
to optimise drilling performance and future well work.
Other Upstream assets
Production for the first six months of 2022 averaged 4,081 Boepd
(2021: 3,504 Boepd). This was driven by uptime of 92% at the
Greater Kittiwake Area ('GKA'), and the continued positive impact
of work completed in the first quarter to optimise gas lift
delivery pressure. The planned 11-day GKA shutdown was completed
three days ahead of schedule, with the asset back online in August.
EnQuest has also implemented a gas accumulator to mitigate the need
for import gas to support GKA's re-start requirements.
Alba continues to perform in line with Group expectations.
EnQuest is working with its partners to progress field
development studies for Bressay and the Bentley team is focused on
re-evaluation of the existing subsurface data.
Malaysia operations
For the first six months of 2022, average production in Malaysia
was 6,304 Boepd, representing a 31% increase over the same period
last year. This increase was driven by the riser pipeline
replacement during the first quarter of 2022 and completion of
three out of the four planned workovers. The fourth workover was
completed in July. In aggregate, the workover programme was
delivered on budget and ahead of schedule with production in line
with expectations. The Group has also successfully executed a
three-well plug and abandonment ('P&A') campaign at PM8/Seligi.
In recognition of this workover and P&A performance, EnQuest
received three Petronas Recognition Awards centred on a commitment
to safety, application of new technology to leverage efficiencies
in schedule and cost savings.
Following the mobilisation and installation of the drilling rig
at the Seligi-C satellite platform, and the drilling of a pilot
hole during June, the infill drilling campaign has commenced with
the Group's first horizontal well at PM8/Seligi being brought on
stream in July, with higher than expected initial production rates.
The drilling rig subsequently mobilised to the Seligi-D satellite
platform, where two more horizontal wells are expected to be
delivered in 2022.
Looking ahead, the Group has sanctioned a three well infill
drilling programme in 2023, in alignment with the established asset
strategy.
On Block PM409, an area containing several undeveloped
discoveries and situated close to the Group's existing PM8/Seligi
PSC hub, geotechnical studies have been completed, and a proposed
exploration well has been identified. The Group has a commitment to
drill the exploration well by the end of the PM409 exploration
period, which ends in December 2023.
Decommissioning
Heather and Thistle P&A campaigns are progressing well with
six wells completed at Heather and nine wells completed at Thistle.
The Group continues to demonstrate and develop capability in
delivering these significant decommissioning projects and remains
on track to complete the P&A of 16 wells at each installation
in 2022.
The tender processes for heavy lift vessels for Heather and
Thistle topsides and jacket removals has concluded. Contracts to
complete those scopes, which have scheduled windows between 2024
and 2026, are expected to be awarded in the second half of 2022.
The Group is aware of increased competition in the heavy lift
vessel market, with the evolution of several large-scale renewable
projects being sanctioned by the governments of European countries,
and has moved to manage execution of heavy lift scopes within
multi-year windows in order to retain flexibility and mitigate
availability concerns.
At the Dons, subsea infrastructure removal within the 500-metre
zone is progressing as expected, with two phases completed during
the first half of the year, and the final phase scheduled for
completion in September. The North Sea Transition Authority
('NSTA') recently recognised the floating production facility off
station project as an example of exemplary execution and
best-in-class performance in the North Sea for prompt asset
removal, reduction of post-cessation of production operating
expense and CO(2) reduction.
The EnQuest Producer FPSO remains in warm stack at Nigg Energy
Park while the Group continues to evaluate options, which include
utilisation on a future project or sale.
Infrastructure and New Energy
The Sullom Voe Terminal ('SVT') and its related infrastructure
maintained safe and reliable performance, with 100% export service
availability during the first half of 2022.
EnQuest continues to develop cost-effective and efficient plans
to transform the terminal and prepare and repurpose the site to
progress decarbonisation opportunities at scale, focused on carbon
capture and storage ('CCS'), electrification and green hydrogen.
The terminal site offers several unique competitive advantages,
including a 1,000-acre industrial site with access to existing oil
and gas pipeline infrastructure, a deep-water port and jetties, the
highest wind capacity factor across Europe, and a highly skilled
workforce and local supply chain . In advancing its Infrastructure
and New Energy business, the Group will maintain its focus on
capital discipline and, having secured exclusivity from the
Shetland Islands Council to progress new energy opportunities on
the site to achieve value for the Council, the Shetland community
and EnQuest, the Group is well placed to deliver on its new energy
ambitions alongside strategic delivery partners.
Carbon Capture and Storage
The availability of the deep-water port and jetties and a
pipeline network linked to several well-understood offshore
reservoirs presents the opportunity to repurpose infrastructure to
import and permanently store material quantities of CO(2) from
isolated emitters in the UK, Europe or further afield.
EnQuest has conducted initial phases of feasibility and economic
screening work in respect of this carbon storage concept. These
studies have indicated the capability of the existing
infrastructure, including the EnQuest operated East of Shetland
pipeline system, and storage sites to support a project of up to 10
million tonnes per annum of CO(2) . In May 2022, the Group made two
CCS licence area nominations in locations which are both accessible
from EnQuest's existing infrastructure. These were both accepted
and EnQuest expects to make two applications in respect of these
licence areas in the forthcoming NSTA UK offshore CCS licensing
round, with results expected to be announced in the first quarter
of 2023.
Electrification
EnQuest is assessing the potential to leverage its existing
infrastructure and subsea projects expertise to facilitate the
electrification of nearby offshore oil and gas assets and planned
developments by way of a grid connection supplemented with
renewable power. This would lead to significant emissions
reductions for platforms which are expected to operate into the
2050's. In addition, the Group is also currently assessing onshore
wind potential and a new power solution for the Sullom Voe
Terminal, which has the potential to significantly reduce the
Group's carbon footprint.
Green Hydrogen
The Group is exploring the potential for repurposing areas of
the existing SVT site and harnessing the advantaged natural wind
resource around Shetland for the production of green hydrogen and
derivatives at export scale to provide a low carbon alternative
fuel which could help to decarbonise a number of industries.
Liquidity and net debt
The Group generated strong free cash flows during the first half
of 2022, resulting in net debt of $880.0 million at 30 June 2022,
down $342.0 million since the end of 2021. This reduction was
driven by accelerated repayments totalling $300.0 million on the
Group's RBL facility, with drawings of $115.0 million at 30 June
2022, significantly ahead of the required amortisation schedule.
EnQuest's 12-month net debt to adjusted EBITDA ratio at 30 June
2022 was 0.9x and the Group had total cash and available facilities
of $467.0 million, including restricted funds and ring-fenced funds
held in joint venture operational accounts totalling $286.1 million
(31 December 2021: $318.7 million and $191.4 million,
respectively).
In line with EnQuest's continued focus on deleveraging, the
Group has further reduced its net debt to $817.6 million at the end
of August. The outstanding RBL facility was reduced to $90.0
million and the Group bought back and cancelled $33.4 million of
its 2023 7% high yield bonds across July and August, leaving $793.8
million outstanding. The Group may, from time to time, purchase its
outstanding notes in open-market purchases and/or privately
negotiated transactions and upon such terms and at such prices as
it may determine. The Group will evaluate any such transactions in
light of then-existing market conditions, taking into account the
Group's current liquidity and prospects for future access to
capital. The amounts involved in any such transactions,
individually or in the aggregate, may be material. At the same
time, the Group continues to explore options to refinance its high
yield bond ahead of maturity in October 2023.
2022 outlook
The Group remains on track to achieve net production between
44,000 and 51,000 Boepd, with a significant well work and drilling
campaigns progressing across the portfolio, partially offset by
natural declines and planned maintenance shutdowns at Magnus and
Kraken in the third quarter.
Full year expectations for operating, cash capital and
abandonment expenditures remain unchanged from the Group's original
guidance at approximately $430 million, $165 million and $75
million, respectively, with capital and abandonment spend in
particular expected to be higher during the second half of the
year, in line with activity. EnQuest remains focused on cost
discipline and has been proactive in engagement with its global
supply chain to mitigate the impacts of cost inflation within the
current year.
Following the enactment of the EPL, EnQuest expects to pay cash
tax in the UK in 2022 and for the duration of the levy period. The
first payment on account under the EPL will be paid in December
2022. EnQuest remains committed to investment in the North Sea and
is reviewing future capital expenditure programmes in light of the
additional investment allowances available under the levy.
EnQuest hedged a total of c.8.7 MMbbls for 2022 predominantly
using costless collars, with an average floor price of c.$63/bbl
and an average ceiling price of c.$77/bbl. For the period July to
December 2022, c.3.4 MMbbls of production remains hedged with an
average floor price of c.$60/bbl and an average ceiling price of
c.$79/bbl.
Environmental, Social and Governance
The health, safety and wellbeing of EnQuest's people is its top
priority and the Group has continued to perform well in this regard
in the six months to end June, recording a Lost Time Incident
('LTI') frequency(1) of zero (Full year 2021: 0.21). However,
during August the Group saw its first LTI in 10 months. EnQuest has
a strong safety culture and will remain focused on continuous
improvement to prevent personal injuries, dangerous occurrences and
hydrocarbon releases.
In line with EnQuest's purpose of delivering creative solutions
through the energy transition and society's need for fossil fuels
to meet today's energy demand while moving towards lower carbon
energy in the future, the Group is engaged across the energy
spectrum. Managing existing assets in a responsible and sustainable
manner is a key part of the energy transition. EnQuest has a
disciplined strategy of acquiring existing hydrocarbon assets,
safely driving production and cost efficiencies, maturing
additional reserves and extending asset lives through focused
maintenance and enhancement programmes and identifying repurposing
opportunities. This strategy supports security of energy supply and
helps to maximise economic recovery of those assets.
Emissions reductions are clearly a core focus area for the Group
and EnQuest is committed to playing its part in the achievement of
national emissions reduction targets and the drive to 'net-zero',
with the Infrastructure and New Energy business having overall
responsibility for delivering the Group's emission reduction
objectives. Since 2018, UK Scope 1 and 2 emissions
(1) Lost Time Incident frequency represents the number of
incidents per million exposure hours worked (based on 12 hours for
offshore and eight hours for onshore)
have reduced by more than 40%, which is significantly ahead of
the UK Government's North Sea Transition Deal target of achieving a
10% reduction in Scope 1 and 2 CO(2) equivalent emissions by 2025
and is close to the 50% reduction targeted by 2030.
Corporate governance is an essential part of EnQuest's
governance framework, supporting both risk management and the
Group's core Values. The Board remains focused on Board and
executive succession planning. In January 2022, Rani Koya joined
the EnQuest Board, bringing extensive industry and renewable energy
experience. As part of the Group's planned rotation of Directors,
Philip Holland stepped down from the Board of Directors and as
Chair of the Safety, Climate and Risk Committee following the
Group's AGM in June, with Liv Monica Stubholt assuming the role of
Chair. Following Philip's departure, EnQuest's Board diversity is
in line with the original Hampton-Alexander recommendations. Also
in June, Martin Houston notified the Board of his intention to step
down as Non-Executive Chairman to focus on his other business
interests. The search process for Martin's successor is underway
and is being led by the Group's Senior Independent Director, Howard
Paver. In August, Salman Malik, previously the Group's Managing
Director - Corporate Development, Infrastructure and New Energy and
a member of the Group's Executive Committee, joined the Board as
Chief Financial Officer, replacing Jonathan Swinney who informed
the Board of his intention to step down in March 2022.
- Ends -
For further information, please contact:
EnQuest PLC Tel: +44 (0)20 7925
4900
Amjad Bseisu (Chief Executive)
Salman Malik (Chief Financial Officer)
Ian Wood (Head of Investor Relations, Communications
& Reporting)
Craig Baxter (Senior Investor Relations &
Communications Manager)
Tulchan Communications Tel: +44 (0)20 7353
4200
Martin Robinson
Martin Pengelley
Harry Cameron
Presentation to Analysts and Investors
A presentation to analysts and investors will be held at 10.30
today - London time. The presentation will be accessible via a
webcast by clicking here . A conference call facility will also be
available at 10.30am and dial-in details can be found by clicking
here .
Notes to editors
This announcement has been determined to contain inside
information. The person responsible for the release of this
announcement is Paul Massie, General Counsel Delegation of
Authority and Interim Company Secretary.
ENQUEST
EnQuest is providing creative solutions through the energy
transition. As an independent energy company with operations in the
UK North Sea and Malaysia, the Group aims to responsibly optimise
production, leverage existing infrastructure, deliver a strong
decommissioning performance and explore new energy and further
decarbonisation opportunities by focusing on operational
excellence, differential capability, value enhancement and
financial discipline.
EnQuest PLC trades on both the London Stock Exchange and the
NASDAQ OMX Stockholm.
Please visit our website www.enquest.com for more information on
our global operations.
Forward-looking statements: This announcement may contain
certain forward-looking statements with respect to EnQuest's
expectations 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 announcement should
be construed as a profit forecast. Past share performance cannot be
relied upon as a guide to future performance.
Financial review
Financial overview
All figures quoted are in US Dollars and relate to Business
performance unless otherwise stated.
Production on a working interest basis increased by 7.7% to
49,726 Boepd, compared to 46,187 Boepd in 2021.
Revenue for the six months ended 30 June 2022 was $943.5
million, 82.0% higher than the same period in 2021 ($518.3
million), reflecting the materially higher oil prices and the
contribution of Golden Eagle. The Group's commodity hedge
programme, predominantly entered into during the second half of
2021, resulted in realised losses of $162.3 million in the first
half of 2022 (2021: losses of $32.9 million).
The Group's operating costs of $208.4 million were 36.1% higher
than in the same period in 2021 ($153.0 million). This increase
primarily reflects the addition of Golden Eagle to the portfolio,
well intervention work at Magnus and PM8/Seligi, additional
maintenance spend at Magnus and higher diesel and emissions credit
prices. Unit costs increased to $22.7/Boe (2021: $19.3/Boe),
primarily reflecting higher costs partially offset by higher
production.
Other cost of sales, which forms part of the total cost of sales
balance, for the six months ended 30 June 2022 of $232.9 million
were 337.0% higher than the same period in 2021 ($53.3 million),
principally as a result of higher Magnus-related third-party gas
purchases reflecting the increase in associated market prices and
which is offset by higher gas sales, presented within revenue. The
average day ahead gas price increased from 52p/Therm for the six
months ended 30 June 2021 to 182p/Therm for the six months ended 30
June 2022.
Adjusted EBITDA for the six months ended 30 June 2022 was $536.3
million, up 55.3% compared to the same period in 2021 ($345.4
million), driven by higher revenue.
H1 2022 H1 2021
$ million $ million
--------------------------------- ----------- -----------
Profit/(loss) from operations
before tax and finance
income/(costs) 416.2 175.4
--------------------------------- ----------- -----------
Depletion and depreciation 177.5 157.0
--------------------------------- ----------- -----------
Change in provision (32.3) 5.7
--------------------------------- ----------- -----------
Change in well inventories (0.4) 1.0
--------------------------------- ----------- -----------
Net foreign exchange (gain)/loss (24.7) 6.3
--------------------------------- ----------- -----------
Adjusted EBITDA 536.3 345.4
--------------------------------- ----------- -----------
EnQuest's net debt decreased by $342.0 million to $880.0 million
at 30 June 2022 (31 December 2021: $1,222.0 million) as a result of
strong free cash flow generation of $332.1 million. Net debt
includes $202.5 million of payment in kind ('PIK') interest that
has been capitalised to the principal of the facilities pursuant to
the terms of the Group's November 2016 refinancing (31 December
2021: $225.0 million).
Net debt/(cash)(1)
----------------------------- ------------------------
30 June
31 December
2022 2021
$ million $ million
----------------------------- ----------- -----------
Bonds 1,126.4 1,083.8
----------------------------- ----------- -----------
Senior secured debt facility
('RBL') 115.0 415.0
----------------------------- ----------- -----------
SVT Working Capital Facility 8.3 9.9
----------------------------- ----------- -----------
Cash and cash equivalents (369.7) (286.7)
----------------------------- ----------- -----------
Net debt 880.0 1,222.0
----------------------------- ----------- -----------
Note:
1 See reconciliation of net debt within the 'Glossary - Non-GAAP
measures' starting on page 31
The Group's strong free cash flow generation during the first
half of 2022 enabled the Group to make early voluntary repayments
of the RBL totalling $300.0 million, well ahead of the required
amortisation schedule. As at the end of August, the Group had
further reduced the amount outstanding under the RBL to $90.0
million.
During the period, the Group also successfully refinanced its 7%
Sterling Retail Bond ('7% Retail Bond') through an exchange and
open offer which concluded on 27 April 2022. The principal of the
new 9% Sterling Retail Bond ('9% Retail Bond') raised was GBP133.3
million, made up of GBP79.3 million of exchanges from the 7% Retail
Bond and GBP54.0 million from new bond holders.
In July and August, the Group bought back and cancelled $33.4
million of its 2023 7% high yield bonds, leaving $793.8 million
outstanding.
The Group continues to have unrestricted access to its UK North
Sea corporate tax losses, subject only to generating suitable
future profits, which at 30 June 2022 were $2,627.7 million (2021:
$3,011.0 million). In the current environment, no significant
corporation tax or supplementary charge is expected to be paid on
UK operational activities for the foreseeable future, although had
the Energy Profits Levy ('EPL') been considered in the interim
period, a cash tax liability of $20.0 million would be recognised
of which $5.6 million would have been in respect of the Business
Performance in the period 26 May 2022 to 30 June 2022. The Group
paid cash corporate income tax on the Malaysian assets, which will
continue throughout the life of the production sharing
contract.
Income statement
Revenue
On average, market prices for crude oil in the first half of
2022 were significantly higher than in the same period of 2021. The
Group's average realised oil price excluding the impact of hedging
was $111.0/bbl for the six months ended 30 June 2022, compared to
$67.3/bbl received during the first half of 2021. Revenue is
predominantly derived from crude oil sales, which for the first
half of 2022 totalled $851.2 million, 75.3% higher than in the same
period of 2021 ($490.5 million), reflecting the materially higher
oil prices and the contribution of Golden Eagle. Revenue from the
sale of condensate and gas in the period was $252.9 million (2021:
$57.9 million), primarily reflecting higher market prices. Gas
revenue mainly relates to the onward sale of third-party gas
purchases not required for injection activities at Magnus. Tariffs
and other income generated $1.7 million (2021: $2.8 million). The
Group's commodity hedges and other oil derivatives contributed
$162.3 million of realised losses (2021: losses of $32.9 million),
as a result of the timing at which the hedges were entered into.
The Group's average realised oil price including the impact of
hedging was $89.9/bbl in the first half of 2022, 43.2% higher than
during the first half of 2021 ($62.8/bbl).
Note: For the reconciliation of realised oil prices see
'Glossary - Non-GAAP measures' starting on page 31
Cost of sales(1)
H1 2022 H1 2021
$ million $ million
---------------------------- ----------- ----------
Production costs 181.2 139.5
---------------------------- ----------- ----------
Tariff and transportation
expenses 23.4 21.7
---------------------------- ----------- ----------
Realised loss/(gain) on
derivatives related to
operating costs 3.8 (8.2)
---------------------------- ----------- ----------
Operating costs 208.4 153.0
---------------------------- ----------- ----------
(Credit)/charge relating
to the Group's lifting
position and hydrocarbon
inventory (29.9) (26.1)
---------------------------- ----------- ----------
Depletion of oil and gas
assets 174.2 153.1
---------------------------- ----------- ----------
Other cost of sales 232.9 53.3
---------------------------- ----------- ----------
Cost of sales 585.6 333.3
---------------------------- ----------- ----------
Unit operating cost(2) $/Boe $/Boe
---------------------------- ----------- ----------
- Production costs 20.1 16.7
---------------------------- ----------- ----------
- Tariff and transportation
expenses 2.6 2.6
---------------------------- ----------- ----------
Average unit operating
cost 22.7 19.3
---------------------------- ----------- ----------
Notes:
1 See reconciliation of alternative performance measures within
the 'Glossary - Non-GAAP measures' starting on page 31
2 Calculated on a working interest basis
Cost of sales were $ 585.6 million for the six months ended 30
June 2022, 75.7% higher than in same period of 2021 ($333.3
million).
Operating costs increased by $55.4 million, primarily reflecting
higher production costs for the first half of 2022. This increase
was driven by the addition of Golden Eagle to the portfolio, well
intervention work at Magnus and PM8/Seligi, maintenance spend at
Magnus and higher diesel and emissions credit prices. Unit
operating costs increased by 17.6% to $22.7/Boe (2021: $ 19.3 /Boe)
primarily reflecting higher costs partially offset by higher
production.
The credit relating to the Group's lifting position and
hydrocarbon inventory for the six months ended 30 June 2022 was
$29.9 million (2021: credit of $26.1 million). The credit in the
period primarily reflects a switch to a $5.2 million net underlift
position at 30 June 2022 from a $18.0 million net overlift position
at 31 December 2021. This was primarily driven by the unwind of the
overlift at Magnus from year end.
Depletion expense of $174.2 million was 13.8% higher than in the
same period in 2021 ($153.1 million), mainly reflecting the
addition of Golden Eagle to the portfolio.
Other cost of sales, which forms part of the total cost of sales
balance, for the six months ended 30 June 2022 of $232.9 million
were higher than the same period in 2021 ($53.3 million),
reflecting the higher cost of Magnus-related third-party gas
purchases following the increase in the market price for gas which
is offset by gas sales presented in revenue.
Other income and expenses
Net other income of $61.3 million (2021: net other expense of
$9.5 million) is primarily due to $32.3 million change in
decommission estimate of fully impaired assets (including the
Thistle linked decommissioning liability, see note 11) and $24.7
million of net foreign exchange gains. 2021 primarily reflected the
recognition of $6.3 million expenses in relation to the increase in
the decommissioning provision of fully impaired assets and foreign
exchange losses of $6.4 million, partially offset by other
income.
Finance costs
Finance costs of $94.1 million were 8.7% higher than in the
comparative period (2021: $86.6 million). This increase was
primarily driven by a $14.2 million increase in amortisation of
finance fees associated with the Group's loans and bonds (2022:
$17.9 million; 2021: $3.7 million) reflecting accelerated RBL
repayments, partially offset by a $6.0 million decrease in bond
interest payable (2022: $31.5 million; 2021: $37.5 million). Other
finance costs included loan interest payable of $8.6 million (2021:
$10.8 million), $8.9 million on unwinding of discount on
decommissioning provisions and other liabilities (2021: $8.5
million) and other financial expenses of $3.4 million (2021: $2.6
million), primarily being the cost for surety bonds to provide
security for decommissioning liabilities.
Taxation
The tax charge for the six months ended 30 June 2022 of $142.4
million (2021: $19.4 million tax credit), excluding exceptional
items. The tax charge in the period is largely non-cash and
reflects the tax impact on the Group's increased profit before tax.
Ring Fence Expenditure Supplement ('RFES') on UK activities, which
would historically have provided an offset to the UK tax charge,
ceased to be available to claim from the end of 2021. Had the
Energy Profits Levy ('EPL') been enacted in the interim period, a
cash tax liability of $5.6 million would have been recognised in
respect of Business Performance in the period 26 May 2022 to 30
June 2022.
Remeasurements and exceptional items
Remeasurements and exceptional items resulting in a post-tax net
profit of $23.5 million have been disclosed separately for the six
month period ended 30 June 2022 (2021: loss of $164.6 million).
Revenue included unrealised losses of $104.7 million in respect
of the mark-to-market movement on the Group's commodity contracts
(2021: unrealised losses of $37.0 million).
A net impairment reversal of $10.1 million has been disclosed in
remeasurements (2021: nil). The increase in EnQuest's near-term
future oil price assumptions were largely offset by the increase in
discount rate from 10% to 11% and the impact of tax, including the
recently introduced UK EPL.
Other expense included a $31.0 million loss in relation to the
fair value recalculation of the Magnus contingent consideration
reflecting a forecast increase in Magnus future cash flows as a
result Group's increased short-term oil price forecast (2021: $27.5
million gain). Other finance costs mainly relate to the unwinding
of contingent consideration from the acquisition of Magnus and
associated infrastructure of $17.9 million (2021: $30.3
million).
A net tax credit of $163.4 million (2021: charge of $124.9
million) has been presented as exceptional, representing the
non-cash recognition of $107.9 million of undiscounted deferred tax
assets due to the Group's increased short-term oil price
assumptions and the tax impact of the above items. Had the EPL been
enacted in the interim period, a cash tax liability of $14.4
million would have been recognised in respect of Remeasurements and
exceptional items in the period 26 May 2022 to 30 June 2022.
The Group continues to have unrestricted access to its UK North
Sea corporate tax losses, subject only to generating suitable
future profits, which at 30 June 2022 were $2,627.7 million (2021:
$3,011.0 million).
IFRS results
The Group's results on an IFRS basis are shown on the Group
Income Statement as 'Reported in period', being the sum of
EnQuest's Business performance results and its Remeasurements and
exceptional items, both of which are explained above.
EnQuest IFRS revenue reflects the Group's Business performance
revenue, but it is adjusted for the impact of unrealised movements
on derivative commodity contracts. Business performance cost of
sales is similarly adjusted for the impact of unrealised movements
on derivative contracts, together with any exceptional provisions
as noted previously. Taking account of these items, and the other
exceptional items included within the Group income statement which
are principally related to impairment charges and the change in
fair value of contingent consideration payable, the Group's IFRS
profit from operations before tax and finance costs was $294.2
million (2021: profit of $165.9 million), IFRS profit before tax
was $182.6 million (2021: profit of $49.1 million), and IFRS profit
after tax was $203.5 million (2021: loss of $56.4 million).
Earnings per share
The Group's Business performance basic profit per share was 9.8
cents (2021 profit per share: 6.6 cents) and diluted profit per
share was 9.6 cents (2021 profit per share: 6.5 cents).
The Group's reported basic profit per share was 11.1 cents (2021
loss per share: 3.4 cents) and reported diluted profit per share
was 10.9 cents (2021 loss per share: 3.4 cents).
Cash flow and liquidity
Net debt at 30 June 2022 amounted to $880.0 million, including
PIK of $202.5 million, compared with net debt of $ 1,222.0 million
at 31 December 2021, including PIK of $ 225.0 million. The movement
in net debt was as follows:
$ million
------------------------------- ---------
Net debt 1 January 2022 1,222.0
------------------------------- ---------
Net cash flows from operating
activities 498.4
------------------------------- ---------
Cash capital expenditure (54.7)
------------------------------- ---------
Net interest and finance costs
paid (52.3)
------------------------------- ---------
Finance lease payments (59.3)
------------------------------- ---------
Other movements, primarily net
foreign exchange on cash and
debt 9.9
------------------------------- ---------
Net debt 30 June 2022(1) 880.0
------------------------------- ---------
Note:
1 See reconciliation of alternative performance measures within
the 'Glossary - Non-GAAP measures' starting on page 31
The Group's reported net cash flows from operating activities
for the six month period ended 30 June 2022 were $498.4 million, up
101.8% compared to comparative period of 2021 ($246.9 million),
primarily driven by materially higher revenue.
Cash outflow on capital expenditure is set out in the table
below:
H1 2022 H1 2021
$ million $ million
--------------------------- ----------- ----------
North Sea 43.7 11.0
--------------------------- ----------- ----------
Malaysia 8.9 3.9
--------------------------- ----------- ----------
Exploration and evaluation 2.1 1.0
--------------------------- ----------- ----------
54.7 15.9
--------------------------- ----------- ----------
Cash capital expenditure in the period ended 30 June 2022
primarily related to Magnus and PM8/Seligi well campaigns. Cash
capital expenditure in 2021 primarily related to Magnus well
interventions and the PM8/Seligi pipeline replacement projects.
Balance sheet
Property, plant and equipment ('PP&E')
PP&E has decreased by $149.1 million to $2,672.9 million at
30 June 2022 from $2,822.0 million at 31 December 2021 (see note
7). This decrease encompasses capital additions to PP&E of
$55.1 million and net impairment reversal of $10.1 million, more
than offset by depletion and depreciation charges of $177.5 million
and a decrease in decommissioning estimate of $35.3 million.
The PP&E capital additions during the period, including
capitalised interest, are set out in the table below:
1H 2022 H1 2021
$ million $ million
---------- ----------- ----------
North Sea 42.0 20.8
---------- -----------
Malaysia 13.1 7.2
---------- ----------- ----------
55.1 28.0
---------- ----------- ----------
Trade and other receivables
Trade and other receivables increased by $15.3 million to $311.4
million at 30 June 2022 compared with $296.1 million at 31 December
2021. The increase is driven by the timing and pricing of cargo
settlements.
Cash and net debt
The Group had $369.7 million of cash and cash equivalents at 30
June 2022 and $880.0 million of net debt, including PIK and
capitalised interest of $202.5 million (2021: $286.7 million,
$1,222.0 million and $225.0 million, respectively).
Net debt comprises the following liabilities:
-- $136.1 million principal outstanding on the Sterling 7%
retail bond, including interest capitalised as PIK of $25.4 million
(2021: $256.2 million and $47.9 million, respectively);
-- $163.1 million principal outstanding on the Sterling 9% retail bond;
-- $827.2 million principal outstanding on the high yield bond,
including interest capitalised as PIK of $ 177.2 million (2021:
$827.2 million and $177.2 million, respectively);
-- $115.0 million drawn down on the RBL (2021: $415.0 million); and
-- $8.4 million relating to the SVT Working Capital Facility (2021: $9.9 million).
Provisions
The Group's decommissioning provision decreased by $71.0 million
to $764.7 million at 30 June 2022 (2021: $835.7 million), primarily
reflecting a favourable foreign exchange rate movement and the
ongoing decommissioning programmes at Heather and the Dons.
Other provisions, including the Thistle decommissioning
provision, decreased by $10.2 million in the period to 30 June 2022
to $49.0 million (2021: $59.2 million). The Thistle decommissioning
provision of $33.8 million (2020: $43.9 million) is in relation to
EnQuest's obligation to make payments to BP by reference to 7.5% of
BP's decommissioning costs of the Thistle and Deveron fields.
Contingent consideration
The contingent consideration related to the Magnus acquisition
increased by $44.8 million. In the period to 30 June 2022, EnQuest
paid nil to BP (2021: $1.0 million) under the profit sharing
mechanism, reflecting the unwind of the early vendor loan repayment
in 2021 and timing of cargos in 2022. A change in fair value charge
of $26.9 million was recognised in the period (2021: $27.5 million)
together with finance costs of $17.9 million (2021: $30.3
million).
The contingent consideration payable associated with the
acquisition of Golden Eagle increased from $45.2 million at 31
December 2021 to $46.7 million at 30 June 2022.
Income tax
The Group had a net income tax payable of $12.0 million (2021:
$3.6 million payable) primarily related to taxable income in
Malaysia.
Deferred tax
The Group's net deferred tax asset has increased from $699.6
million at 31 December 2021 to $732.1 million at 30 June 2022. This
is driven by higher short-term oil price assumptions. Had the EPL
been fully enacted before 30 June 2022, these half-year results
would have recognised an additional net deferred tax liability of
$106.6 million at the period end.
EnQuest continues to have unrestricted access to its UK
corporate tax losses carried forward at 30 June 2022 amounting to
$2,627.7 million (31 December 2021: $3,011.0 million), subject only
to generating suitable future profits.
Trade and other payables
Trade and other payables of $400.3 million at 30 June 2022 are
$20.2 million lower than at 31 December 2021 ($420.5 million). The
full balance is payable within one year.
Financial risk management
The Group's activities expose it to various financial risks
particularly associated with fluctuations in oil price, foreign
currency risk, liquidity risk and credit risk. The disclosures in
relation to financial risk management objectives and policies,
including the policy for hedging, and the disclosures in relation
to exposure to oil price, foreign currency and credit and liquidity
risk, are included in note 27 of the Group's 2021 Annual
report.
Going concern disclosure
The Group has generated strong cash flows in the first half of
2022 and materially reduced its net debt through the repayment of
its RBL significantly ahead of the required amortisation schedule,
as outlined below. The Group continues to closely monitor and
manage its funding and liquidity position, including monitoring
forecast covenant results, to ensure that it has access to
sufficient funds to meet forecast cash requirements. Cash forecasts
are regularly produced and sensitivities considered for, but not
limited to, changes in crude oil prices (adjusted for hedging
undertaken by the Group), production rates and costs. These
forecasts and sensitivity analyses allow the Group to manage
liquidity.
In 2021, EnQuest entered into a new RBL of $600.0 million and an
additional amount of $150.0 million for letters of credit for up to
seven years. The RBL is initially repaid based on an amortisation
schedule and via a cash sweep mechanism, whereby any unrestricted
cash in excess of $75.0 million is swept to repay outstanding
amounts at calendar quarter ends. Application of the amortisation
schedule ensures the RBL is fully repaid by June 2023.
Upon refinancing of the Group's high yield bond, the maturity of
the RBL is extended to seven years from its signing date (11 June
2021), or the point at which the remaining economic reserves for
all borrowing base assets are projected to fall below 25% of the
initial economic reserves forecast, if earlier.
Strong free cash flow in the first six months of the year
allowed the Group to repay $300.0 million of the RBL, with the
available and outstanding RBL facility at $115.0 million at 30 June
2022, significantly ahead of the amortisation schedule. As at the
end of August, the Group had further reduced the amount outstanding
under the RBL to $90.0 million.
On 20 April 2022, the Group completed an exchange and cash offer
to partially refinance its October 2023 7% GBP retail bond with an
October 2027 9% GBP retail bond. The 9% retail bond attracted
GBP54.0 million through the cash offer and GBP79.3 million through
the exchange offer, which together resulted in a principal issue of
GBP133.3 million. The exchange offer has resulted in GBP111.3
million of the October 2023 7% retail bond remaining in issue.
The Group continues to explore options to refinance its high
yield bond ahead of maturity in October 2023. As at 31 August 2022,
$793.8 million remained outstanding following buy back and
cancellation of $33.4 million of the bonds in July and August. For
the purposes of assessing going concern, it is assumed that the
refinancing of the remaining high yield bond and the settlement of
the remaining 7% retail bond will occur outside of the going
concern period in line with their maturities in October 2023.
The Group's latest assessment of the 2022 and 2023 forecast
underpins management's base case ('Base Case') and uses oil price
assumptions of $100.0/bbl from July to December 2022 and $90.0/bbl
for 2023, adjusted for hedging activity undertaken by the Group.
These oil prices are broadly in line with current consensus.
The Base Case has been subjected to stress testing by
considering the impact of the following plausible downside risks
(the 'Downside Case'):
-- 10.0% discount to Base Case prices resulting in Downside Case
prices of $90.0/bbl from July to December 2022 and $81.0/bbl for
2023;
-- Production risking of 5.0% for the remainder of 2022 and for 2023; and
-- A 5.0% increase to operating and capital costs for 2023.
The Base Case and Downside Case indicate that the Group is able
to operate as a going concern and remain covenant compliant for 12
months from the date of publication of this interim report. Having
already part refinanced the retail bond, initiated buy back and
cancellations of the high yield bond and following discussions with
several financiers, the Directors are confident the Group will be
able to refinance the high yield bond and generate sufficient cash
flow to repay the outstanding amount due on the retail bond as they
fall due under both the Base case and Downside Case assumptions.
However, the Group may conclude a refinancing within the next 12
months to increase the maturity of its debt, and therefore further
support the going concern assessment.
Should circumstances arise that differ from the Group's
projections, the Directors believe that a number of mitigating
actions, including asset sales or other funding options, can be
executed successfully in the necessary timeframe to meet debt
repayment obligations as they become due and in order to maintain
liquidity.
After making appropriate enquiries and assessing the progress
against the forecast, projections, the Directors have a reasonable
expectation that the Group will continue in operation and meet its
commitments as they fall due over the going concern period.
Accordingly, the Directors continue to adopt the going concern
basis in preparing these financial statements.
Risks and uncertainties
The Group's risks and uncertainties were set out in the Annual
Report and Accounts 2021 which was published in March 2022.
Following the enactment of the Energy Profits Levy by the UK
Government, the fiscal risk and government take risk and
uncertainty likelihood has increased when compared to that which
was disclosed in the Group's Annual Report and Accounts 2021. All
of the Group's other risks and uncertainties remain unchanged from
those published in March 2022.
For the purposes of meeting the disclosure requirements of DTR
4.2.7(2), the Board believes that the Group's principal risks and
uncertainties for the remaining six months are:
Principal risks and uncertainties
-- Health, Safety and Environment ('HSE')
-- Oil and gas development, production and exploration
activities are by their very nature complex, with HSE risks
covering many areas, including major accident hazards, personal
health and safety, compliance with regulatory requirements, asset
integrity issues and potential environmental impacts, including
those associated with climate change.
-- Oil and gas prices
-- A material decline in oil and gas prices adversely affects
the Group's operations and financial condition as the Group's
revenue depends substantially on oil prices.
-- Production
-- The Group's production is critical to its success and is
subject to a variety of risks, including: subsurface uncertainties;
operating in a mature field environment; potential for significant
unexpected shutdowns; and unplanned expenditure (particularly where
remediation may be dependent on suitable weather conditions
offshore).
-- Lower than expected reservoir performance or insufficient
addition of new resources may have a material impact on the Group's
future growth.
-- The Group's delivery infrastructure in the UK North Sea is,
to a significant extent, dependent on the Sullom Voe Terminal.
-- Longer -- term production is threatened if low oil prices or
prolonged field shutdowns and/or underperformance requiring high --
cost remediation bring forward decommissioning timelines.
-- Financial
-- Inability to fund financial commitments or maintain adequate
cash flow and liquidity and/or reduce costs.
-- Significant reductions in the oil price or material
reductions in production will likely have a material impact on the
Group's ability to repay or refinance its existing credit
facilities. Prolonged low oil prices, cost increases, including
those related to an environmental incident, and production delays
or outages, could threaten the Group's liquidity and/or ability to
comply with relevant covenants. Similar conditions could impact the
Group's ability to refinance its outstanding bonds which mature in
October 2023. Further information is contained in the Financial
review, particularly within the going concern disclosure on page
12.
-- Competition
-- The Group operates in a competitive environment across many
areas, including the acquisition of oil and gas assets, the
marketing of oil and gas, the procurement of oil and gas services
and access to human resources.
-- IT security and resilience
-- The Group is exposed to risks arising from interruption to,
or failure of, IT infrastructure. The risks of disruption to normal
operations range from loss in functionality of generic systems
(such as email and internet access) to the compromising of more
sophisticated systems that support the Group's operational
activities. These risks could result from malicious interventions
such as cyber-attacks or phishing exercises.
-- Portfolio concentration
-- The Group's assets are primarily concentrated in the UK North
Sea around a limited number of infrastructure hubs and existing
production (principally oil) is from mature fields. This amplifies
exposure to key infrastructure (including ageing pipelines and
terminals), political/fiscal changes and oil price movements.
-- Subsurface risk and reserves replacement
-- Failure to develop its contingent and prospective resources
or secure new licences and/or asset acquisitions and realise their
expected value.
-- Project execution and delivery
-- The Group's success will be partially dependent upon the
successful execution and delivery of potential future projects,
including decommissioning and Infrastructure and New Energy
opportunities in the UK, that are undertaken.
-- Fiscal risk and government take
-- Unanticipated changes in the regulatory or fiscal environment
can affect the Group's ability to deliver its strategy/business
plan and potentially impact revenue and future developments. The
implementation of the UK Government's EPL is expected to affect
EnQuest's cash flow for the period in which the levy is
applied.
-- International business
-- While the majority of the Group's activities and assets are
in the UK, the international business is still material. The
Group's international business is subject to the same risks as the
UK business (e.g. HSEA, production and project execution); however,
there are additional risks that the Group faces, including security
of staff and assets, political, foreign exchange and currency
control, taxation, legal and regulatory, cultural and language
barriers and corruption.
-- Joint venture partners
-- Failure by joint venture parties to fund their obligations.
-- Dependence on other parties where the Group is non-operator.
-- Reputation
-- The reputational and commercial exposures to a major offshore
incident, including those related to an environmental incident, or
non -- compliance with applicable law and regulation and/or related
climate change disclosures, are significant. Similarly, it is
increasingly important EnQuest clearly articulates its approach to
and benchmarks its performance against relevant and material ESG
factors.
-- Human resources
-- The Group's success continues to be dependent upon its
ability to attract and retain key personnel and develop
organisational capability to deliver strategic growth. Industrial
action across the sector, or the availability of competent people,
could also impact the operations of the Group.
Group Income Statement
For the six months ended 30 June 2022
2022 2021
----------------------- ----- ------------------------------------------ ------------------------------------------
Remeasurements Remeasurements
and exceptional and exceptional
Business items (note Reported Business items (note Reported
performance 4) in period performance 4) in period
Notes $'000 $'000 $'000 $'000 $'000 $'000
----------------------- ----- ------------ ---------------- ---------- ------------ ---------------- ----------
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
----------------------- ----- ------------ ---------------- ---------- ------------ ---------------- ----------
Revenue and other
operating
income 5 943,507 (104,672) 838,835 518,287 (36,973) 481,314
----------------------- ----- ------------ ---------------- ---------- ------------ ---------------- ----------
Cost of sales (585,601) (481) (586,082) (333,262) - (333,262)
----------------------- ----- ------------ ---------------- ---------- ------------ ---------------- ----------
Gross profit/(loss) 357,906 (105,153) 252,753 185,025 (36,973) 148,052
----------------------- ----- ------------ ---------------- ---------- ------------ ---------------- ----------
Net impairment reversal - 10,122 10,122 - - -
----------------------- ----- ------------ ---------------- ---------- ------------ ---------------- ----------
General and
administration
expenses (3,063) - (3,063) (130) - (130)
----------------------- ----- ------------ ---------------- ---------- ------------ ---------------- ----------
Other income 62,300 4,061 66,361 4,333 27,490 31,823
----------------------- ----- ------------ ---------------- ---------- ------------ ---------------- ----------
Other expenses (1,019) (30,996) (32,015) (13,873) - (13,873)
----------------------- ----- ------------ ---------------- ---------- ------------ ---------------- ----------
Profit/(loss) from
operations
before tax and finance
income/(costs) 416,124 (121,966) 294,158 175,355 (9,483) 165,872
----------------------- ----- ------------ ---------------- ---------- ------------ ---------------- ----------
Finance costs (94,107) (17,870) (111,977) (86,603) (30,299) (116,902)
----------------------- ----- ------------ ---------------- ---------- ------------ ---------------- ----------
Finance income 391 - 391 102 - 102
----------------------- ----- ------------ ---------------- ---------- ------------ ---------------- ----------
Profit/(loss) before
tax 322,408 (139,836) 182,572 88,854 (39,782) 49,072
----------------------- ----- ------------ ---------------- ---------- ------------ ---------------- ----------
Income tax (142,382) 163,353 20,971 19,411 (124,855) (105,444)
----------------------- ----- ------------ ---------------- ---------- ------------ ---------------- ----------
Profit/(loss) for the
year
attributable to owners
of the parent 180,026 23,517 203,543 108,265 (164,637) (56,372)
----------------------- ----- ------------ ---------------- ---------- ------------ ---------------- ----------
Total comprehensive
profit/(loss)
for the period,
attributable
to owners of the
parent 203,543 (56,372)
----------------------- ----- ------------ ---------------- ---------- ------------ ---------------- ----------
There is no comprehensive income attributable to the
shareholders of the Group other than the profit for the period.
Revenue and operating (loss)/profit are all derived from continuing
operations.
Earnings per share 6 $ $ $ $
------------------- ------ ------ ------ -------
Basic 0.098 0.111 0.066 (0.034)
------------------- ------ ------ ------ -------
Diluted 0.096 0.109 0.065 (0.034)
------------------- ------ ------ ------ -------
The attached notes 1 to 14 form part of these condensed Group
financial statements.
Group Balance Sheet
At 30 June 2022
30 June
31 December
2022 2021
Notes $'000 $'000
Unaudited Audited
------------------------------ ----- ---------- -----------
ASSETS
------------------------------ ----- ---------- -----------
Non-current assets
------------------------------ ----- ---------- -----------
Property, plant and equipment 7 2,672,877 2,821,998
------------------------------ ----- ---------- -----------
Goodwill 134,400 134,400
------------------------------ ----- ---------- -----------
Intangible oil and gas assets 40,193 47,667
------------------------------ ----- ---------- -----------
Deferred tax assets 735,049 702,970
------------------------------ ----- ---------- -----------
Other long term assets 9 6 6
------------------------------ ----- ---------- -----------
3,582,525 3,707,041
------------------------------ ----- ---------- -----------
Current assets
------------------------------ ----- ---------- -----------
Inventories 90,110 73,023
------------------------------ ----- ---------- -----------
Trade and other receivables 311,373 296,068
------------------------------ ----- ---------- -----------
Current tax receivable 2,050 2,368
------------------------------ ----- ---------- -----------
Cash and cash equivalents 369,720 286,661
------------------------------ ----- ---------- -----------
Other financial assets 9 1,203 472
------------------------------ ----- ---------- -----------
774,456 658,592
------------------------------ ----- ---------- -----------
TOTAL ASSETS 4,356,981 4,365,633
------------------------------ ----- ---------- -----------
EQUITY AND LIABILITIES
------------------------------ ----- ---------- -----------
Equity
------------------------------ ----- ---------- -----------
Share capital and premium 392,196 392,196
------------------------------ ----- ---------- -----------
Share-based payment reserve 8,859 6,791
------------------------------ ----- ---------- -----------
Retained earnings 325,312 121,769
------------------------------ ----- ---------- -----------
TOTAL EQUITY 726,367 520,756
------------------------------ ----- ---------- -----------
Non-current liabilities
------------------------------ ----- ---------- -----------
Borrowings 8 50,000 191,109
------------------------------ ----- ---------- -----------
Bonds 8 1,125,069 1,081,596
------------------------------ ----- ---------- -----------
Lease liabilities 403,171 442,500
------------------------------ ----- ---------- -----------
Contingent consideration 10 402,433 380,301
------------------------------ ----- ---------- -----------
Provisions 11 730,821 754,266
------------------------------ ----- ---------- -----------
Deferred tax liabilities 2,932 3,418
------------------------------ ----- ---------- -----------
2,714,426 2,853,190
------------------------------ ----- ---------- -----------
Current liabilities
------------------------------ ----- ---------- -----------
Borrowings 8 65,676 210,505
------------------------------ ----- ---------- -----------
Lease liabilities 136,874 128,281
------------------------------ ----- ---------- -----------
Contingent consideration 10 54,704 30,477
------------------------------ ----- ---------- -----------
Provisions 11 82,842 140,676
------------------------------ ----- ---------- -----------
Trade and other payables 400,298 420,544
------------------------------ ----- ---------- -----------
Other financial liabilities 9 161,789 55,247
------------------------------ ----- ---------- -----------
Current tax payable 14,005 5,957
------------------------------ ----- ---------- -----------
916,188 991,687
------------------------------ ----- ---------- -----------
TOTAL LIABILITIES 3,630,614 3,844,877
------------------------------ ----- ---------- -----------
TOTAL EQUITY AND LIABILITIES 4,356,981 4,365,633
------------------------------ ----- ---------- -----------
The attached notes 1 to 14 form part of these condensed Group
financial statements.
Group Statement of Changes in Equity
For the six months ended 30 June 2022
Share capital Share-based
and share payments Retained
premium reserve earnings Total
$'000 $'000 $'000 $'000
Unaudited Unaudited Unaudited Unaudited
------------------------------------------ ------------- ----------- --------- ---------
Balance at 1 January 2021 345,420 1,016 (255,219) 91,217
------------------------------------------ ------------- ----------- --------- ---------
Profit/(loss) for the period - - (56,372) (56,372)
------------------------------------------ ------------- ----------- --------- ---------
Total comprehensive loss for the period - - (56,372) (56,372)
------------------------------------------ ------------- ----------- --------- ---------
Share-based payment - 3,515 - 3,515
------------------------------------------ ------------- ----------- --------- ---------
Balance at 30 June 2021 345,420 4,531 (311,591) 38,360
------------------------------------------ ------------- ----------- --------- ---------
Balance at 1 January 2022 392,196 6,791 121,769 520,756
------------------------------------------ ------------- ----------- --------- ---------
Profit/(loss) for the period - - 203,543 203,543
------------------------------------------ ------------- ----------- --------- ---------
Total comprehensive profit for the period - - 203,543 203,543
------------------------------------------ ------------- ----------- --------- ---------
Share-based payment - 2,068 - 2,068
------------------------------------------ ------------- ----------- --------- ---------
Balance at 30 June 2022 392,196 8,859 325,312 726,367
------------------------------------------ ------------- ----------- --------- ---------
The attached notes 1 to 14 form part of these condensed Group
financial statements.
Group Statement of Cash Flows
For the six months ended 30 June 2022
30 June 30 June
2022 2021
Notes $'000 $'000
Unaudited Unaudited
------------------------------------------------------ ----- --------- ---------
CASH FLOW FROM OPERATING ACTIVITIES
------------------------------------------------------ ----- --------- ---------
Cash generated from operations 13 522,664 287,879
------------------------------------------------------ ----- --------- ---------
Cash received from insurance 8,268 -
------------------------------------------------------ ----- --------- ---------
Cash received/(paid) on sale/(purchase) of financial
instruments (139) -
------------------------------------------------------ ----- --------- ---------
Decommissioning spend (28,194) (38,661)
------------------------------------------------------ ----- --------- ---------
Income taxes paid (4,224) (2,276)
------------------------------------------------------ ----- --------- ---------
Net cash flows from/(used in) operating activities 498,375 246,942
------------------------------------------------------ ----- --------- ---------
INVESTING ACTIVITIES
------------------------------------------------------ ----- --------- ---------
Purchase of property, plant and equipment (52,113) (14,986)
------------------------------------------------------ ----- --------- ---------
Purchase of intangible oil and gas assets (2,578) (936)
------------------------------------------------------ ----- --------- ---------
Repayment of Magnus contingent consideration - Profit
share 10 - (968)
------------------------------------------------------ ----- --------- ---------
Acquisitions - (3,000)
------------------------------------------------------ ----- --------- ---------
Interest received 256 83
------------------------------------------------------ ----- --------- ---------
Net cash flows (used in)/from investing activities (54,435) (19,807)
------------------------------------------------------ ----- --------- ---------
FINANCING ACTIVITIES
------------------------------------------------------ ----- --------- ---------
Proceeds of loans and borrowings 67,440 -
------------------------------------------------------ ----- --------- ---------
Repayment of loans and borrowings (300,089) (88,170)
------------------------------------------------------ ----- --------- ---------
Repayment of Magnus contingent consideration - Vendor
loan 10 - (11,362)
------------------------------------------------------ ----- --------- ---------
Repayment of obligations under leases (59,279) (57,286)
------------------------------------------------------ ----- --------- ---------
Interest paid (52,513) (15,795)
------------------------------------------------------ ----- --------- ---------
Other finance costs paid - (1,236)
------------------------------------------------------ ----- --------- ---------
Net cash flows from/(used in) financing activities (344,441) (173,849)
------------------------------------------------------ ----- --------- ---------
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 99,499 53,286
------------------------------------------------------ ----- --------- ---------
Net foreign exchange on cash and cash equivalents (16,441) (1,082)
------------------------------------------------------ ----- --------- ---------
Cash and cash equivalents at 1 January 286,662 222,830
------------------------------------------------------ ----- --------- ---------
CASH AND CASH EQUIVALENTS AT 30 June 369,720 275,034
------------------------------------------------------ ----- --------- ---------
Reconciliation of cash and cash equivalents
------------------------------------------------------ ----- --------- ---------
Cash and cash equivalents 360,241 244,331
------------------------------------------------------ ----- --------- ---------
Restricted cash(1) 9,479 30,703
------------------------------------------------------ ----- --------- ---------
Cash and cash equivalents per balance sheet 369,720 275,034
------------------------------------------------------ ----- --------- ---------
(i) At 30 June 2022, restricted cash includes $7.8 million on
deposit relating to bank guarantees for the Group's Malaysian
assets and $1.7 million related to cash collateralised letters of
credit
The attached notes 1 to 14 form part of these condensed Group
financial statements.
Notes to the Half Year Condensed Financial Statements
For the period ended 30 June 2022
1. Corporate information
EnQuest PLC ('EnQuest' or the 'Company') is a public company
limited by shares incorporated in the United Kingdom under the
Companies Act and is registered in England and Wales and listed on
the London Stock Exchange and on the Stockholm NASDAQ OMX.
The principal activities of the Company and its subsidiaries
(together the 'Group') are responsibly to optimise production,
leverage existing infrastructure, deliver a strong decommissioning
performance and explore new energy and further decarbonisation
opportunities. The Group's half year condensed financial statements
for the six months ended 30 June 2022 were authorised for issue in
accordance with a resolution of the Board of Directors on 5
September 2022.
2. Basis of preparation
The interim condensed consolidated financial statements of the
Group for the six months ended 30 June 2022 have been prepared in
accordance with IAS 34 'Interim Financial Reporting' as adopted by
the UK. The presentation currency of the Group financial
information is US Dollars and all values in the Group financial
information are rounded to the nearest thousand ($'000) except
where otherwise stated.
The interim report does not include all the information and
disclosures required in the annual financial statements and should
be read in conjunction with the Group's annual financial statements
as at 31 December 2021.
The financial information contained in this announcement does
not constitute statutory financial statements within the meaning of
section 434 of the Companies Act 2006.
Consolidated statutory accounts for the year ended 31 December
2021, on which the auditor gave an unqualified audit report, have
been filed with the Registrar of Companies.
The financial statements have been prepared on the going concern
basis. Further information relating to the use of the going concern
assumption is provided in the 'Going Concern' section of the
Financial Review as set out on page 12. The interim financial
statements have been reviewed by the auditor and its report to the
Company is included within these interim financial statements.
Accounting policies
The accounting policies adopted in the preparation of the
interim condensed financial statements for the six months ended 30
June 2022 are materially consistent with those followed in the
preparation of the Group's financial statements for the year ended
31 December 2021. Any other standard, interpretation or amendment
that was issued but not yet effective has not been adopted by the
Group. Critical accounting judgements and key sources of estimation
uncertainty were disclosed in the Group's 2021 annual report and
accounts. These are reconsidered at the end of each reporting
period to determine if any changes are required to judgements and
estimates as a result of current market conditions.
Recoverability of asset carrying values - Oil price
The Group's un-hedged oil price assumptions were revised during
the first half of 2022 as shown below. The assumptions up to 2024
were increased to reflect the material increase in oil prices in
the first half of 2022 following the Russia-Ukraine conflict and
improved demand outlook. For periods after 2025, the Group's longer
term price assumption is unchanged from that disclosed in the
Group's 2021 annual report and accounts at $60/bbl (in real 2021
terms) inflated at 2% per annum from 2025.
Second
half 2022 2023 2024
------------------ ----------- ----- -----
Brent oil ($/bbl) 100 90 80
------------------ ----------- ----- -----
The price assumptions used at the end of 2021 were $75.0/bbl
(2022), $70.0/bbl (2023), $70.0/bbl (2024) and $60.0/bbl real
thereafter, inflated at 2.0% per annum from 2025.
The discount rate used in impairment testing has been increased
to 11% following the market volatility in the first half of 2022
and the increase in interest rates (2021: 10%).
New and amended standards adopted by the Group
The following new standards became applicable for the current
reporting period. No material impact was recognised upon
application.
Amendments to IFRS 3 Reference to the Conceptual Framework
Amendments to IAS 16 Property, Plant and Equipment - Proceeds before
Intended Use
Amendments to IAS 37 Onerous Contracts - Cost of Fulfilling a Contract
Annual Improvements to Amendments to IFRS 1 First-time Adoption of
IFRS Standards 2018-2020 International Financial Reporting Standards,
Cycle IFRS 9 Financial Instruments, IFRS 16 Leases,
and IAS 41 Agriculture
3. Segment information
Segment information for the six month period is as follows:
Adjustments
Period ended 30 June 2022 Total and
North All other eliminations
$'000 Sea Malaysia segments segments (i) Consolidated
-------------------------------------- ---------- -------- --------- ---------- ------------- ------------
Revenue and other operating income:
-------------------------------------- ---------- -------- --------- ---------- ------------- ------------
Revenue from contracts with customers 1,032,192 72,471 - 1,104,663 - 1,104,663
-------------------------------------- ---------- -------- --------- ---------- ------------- ------------
Other operating income 1,029 - 138 1,167 (266,995) (265,828)
-------------------------------------- ---------- -------- --------- ---------- ------------- ------------
Total revenue and other operating
income 1,033,221 72,471 138 1,105,830 (266,995) 838,835
-------------------------------------- ---------- -------- --------- ---------- ------------- ------------
Segment profit/(loss) (ii) 536,871 27,042 1,527 565,440 (271,282) 294,158
-------------------------------------- ---------- -------- --------- ---------- ------------- ------------
Adjustments
Period ended 30 June 2021 Total and
All other
$'000 North Sea Malaysia segments segments eliminations(i) Consolidated
-------------------------------------- --------- -------- --------- --------- ---------------- ------------
Revenue and other operating income:
-------------------------------------- --------- -------- --------- --------- ---------------- ------------
Revenue from contracts with customers 502,071 46,782 - 548,853 - 548,853
-------------------------------------- --------- -------- --------- --------- ---------------- ------------
Other operating income(i) 2,232 - 110 2,342 (69,881) (67,539)
-------------------------------------- --------- -------- --------- --------- ---------------- ------------
Total revenue and other operating
income 504,303 46,782 110 551,195 (69,881) 481,314
-------------------------------------- --------- -------- --------- --------- ---------------- ------------
Segment profit/(loss) (ii) 215,805 15,617 (3,826) 227,596 (61,724) 165,872
-------------------------------------- --------- -------- --------- --------- ---------------- ------------
(i) Finance income and costs and gains and losses on derivatives
are not allocated to individual segments as the underlying
instruments are managed on a Group basis
(ii) Inter-segment revenues are eliminated on consolidation. All
other adjustments are part of the reconciliations presented further
below
Reconciliation of profit/(loss):
Period Period
ended ended
30 June 30 June
2022 2021
$'000 $'000
------------------------------ --------- ---------
Segment profit/(loss) 565,440 227,596
------------------------------ --------- ---------
Finance income 391 102
------------------------------ --------- ---------
Finance expense (111,977) (116,902)
------------------------------ --------- ---------
Gain/(loss) on derivatives(i) (271,282) (61,724)
------------------------------ --------- ---------
Profit/(loss) before tax 182,572 49,072
------------------------------ --------- ---------
(i) Includes $166.1 million realised losses (2021: $24.7 million
realised losses) on derivatives and $105.2 million unrealised
losses (2021: $37.0 million unrealised losses) on derivatives
4. Remeasurements and exceptional items
Impairments
Period ended 30 June 2022 Fair value and
remeasurement write Other
$'000 (i) offs (ii) (iii) Total
--------------------------------------------------- -------------- ----------- -------- ---------
Revenue and other operating income (104,672) - - (104,672)
--------------------------------------------------- -------------- ----------- -------- ---------
Cost of sales (481) - - (481)
--------------------------------------------------- -------------- ----------- -------- ---------
Net impairment reversal - 10,122 - 10,122
--------------------------------------------------- -------------- ----------- -------- ---------
Other income 4,061 - - 4,061
--------------------------------------------------- -------------- ----------- -------- ---------
Other expense (30,996) - - (30,996)
--------------------------------------------------- -------------- ----------- -------- ---------
Finance costs - - (17,870) (17,870)
--------------------------------------------------- -------------- ----------- -------- ---------
(132,088) 10,122 (17,870) (139,836)
--------------------------------------------------- -------------- ----------- -------- ---------
Tax on items above 54,461 (4,049) 5,046 55,458
--------------------------------------------------- -------------- ----------- -------- ---------
Recognition of undiscounted deferred tax asset(iv) - 107,895 - 107,895
--------------------------------------------------- -------------- ----------- -------- ---------
(77,627) 113,968 (12,824) 23,517
--------------------------------------------------- -------------- ----------- -------- ---------
Impairments
Period ended 30 June 2021 Fair value and
write
$'000 remeasurement(i) offs(ii) Other(iii) Total
------------------------------------------- ----------------- ----------- ---------- ---------
Revenue and other operating income (36,973) - - (36,973)
------------------------------------------- ----------------- ----------- ---------- ---------
Other income 27,490 - - 27,490
------------------------------------------- ----------------- ----------- ---------- ---------
Finance costs - - (30,299) (30,299)
------------------------------------------- ----------------- ----------- ---------- ---------
(9,483) - (30,299) (39,782)
------------------------------------------- ----------------- ----------- ---------- ---------
Tax on items above 3,315 - 11,350 14,665
Derecognition of undiscounted deferred tax
asset(iv) - (139,520) - (139,520)
------------------------------------------- ----------------- ----------- ---------- ---------
(6,168) (139,520) (18,949) (164,637)
------------------------------------------- ----------------- ----------- ---------- ---------
(i) Fair value remeasurements include unrealised mark-to-market
movements on derivative contracts and other financial instruments
and the impact of recycled realised gains and losses out of
'Remeasurements and exceptional items' and into Business
performance profit or loss of $104.7 million (2021: $37.0 million).
Net other expense relates to the fair value remeasurement of
contingent consideration relating to the acquisition of Magnus and
associated infrastructure of $26.9 million (note 10) (2021: Other
income $27.5 million)
(ii) Net impairments reversal totalling $10.1 million (note 7) (2021: nil)
(iii) Other items mainly relate to unwinding of discount on
contingent consideration on the 75% acquisition of Magnus and
associated infrastructure of $17.9 million (note 10) (2021: $30.3
million)
(iv) Non-cash deferred tax credit (2021: charge) following a
reassessment of deferred tax balances reflecting revisions to
forecast assumptions
5. Revenue
Revenue and other operating income
The Group generates revenue through the sale of crude oil, gas
and condensate to third parties, and through the provision of
infrastructure to its customers for tariff income. Further details
are described in the last annual financial statements.
Period Period
ended ended
30 June 30 June
2022 2021
$'000 $'000
---------------------------------------------------------- ---------- --------
Revenue from contracts with customers:
---------------------------------------------------------- ---------- --------
Revenue from crude oil sales 851,206 490,536
---------------------------------------------------------- ---------- --------
Revenue from gas and condensate sales(i) 252,907 57,850
---------------------------------------------------------- ---------- --------
Tariff revenue 550 467
---------------------------------------------------------- ---------- --------
Total revenue from contracts with customers 1,104,663 548,853
Rental income from vessels - 702
Realised (losses)/gains on oil derivative contracts (162,323) (32,908)
---------------------------------------------------------- ---------- --------
Other 1,167 1,640
---------------------------------------------------------- ---------- --------
Business performance revenue and other operating income 943,507 518,287
---------------------------------------------------------- ---------- --------
Unrealised (losses)/gains on oil derivative contracts(ii) (104,672) (36,973)
---------------------------------------------------------- ---------- --------
Total revenue and other operating income 838,835 481,314
---------------------------------------------------------- ---------- --------
(i) Includes onward sale of third-party gas purchases not
required for injection activities at Magnus
(ii) Unrealised gains and losses on oil derivative contracts are
disclosed as fair value remeasurement items in the income statement
(note 4)
6. Earnings per share
The calculation of earnings per share is based on the profit
after tax and on the weighted average number of Ordinary shares in
issue during the period. Diluted earnings per share is adjusted for
the effects of Ordinary shares granted under the share-based
payment plans, which are held in the Employee Benefit Trust, unless
it has the effect of increasing the profit or decreasing the loss
attributable to each share.
Basic and diluted earnings per share are calculated as
follows:
Weighted average
Profit/(loss) number of Earnings per
after tax Ordinary shares share
-------------------------------------- ------------------ ------------------ -----------------
Period ended Period ended Period ended
30 June 30 June 30 June
------------------ ------------------ -----------------
2022 2021 2022 2021 2022 2021
$'000 $'000 million million $ $
-------------------------------------- -------- -------- -------- -------- ------- --------
Basic 203,543 (56,372) 1,833.9 1,649.3 0.111 (0.034)
-------------------------------------- -------- -------- -------- --------- ------ --------
Dilutive potential of Ordinary shares
granted under share-based incentive
schemes - - 36.9 26.7 - -
-------------------------------------- -------- -------- -------- --------- ------ --------
Diluted(i) 203,543 (56,372) 1,870.8 1,676.0 0.109 (0.034)
-------------------------------------- -------- -------- -------- --------- ------ --------
Basic (excluding remeasurements and
exceptional items) 180,026 108,265 1,833.9 1,649.3 0.098 0.066
-------------------------------------- -------- -------- -------- --------- ------ --------
Diluted (excluding remeasurements and
exceptional items)(i) 180,026 108,265 1,870.8 1,676.0 0.096 0.065
-------------------------------------- -------- -------- -------- --------- ------ --------
(i) Potential ordinary shares granted under share-based
incentive schemes are not treated as dilutive when they would
decrease a loss per share
7. Property, plant and equipment
Office
furniture,
Oil fixtures
and gas and Right-of-use
assets fittings assets Total
$'000 $'000 $'000 $'000
---------------------------------------------------- ---------- ----------- ------------ ----------
Cost:
---------------------------------------------------- ---------- ----------- ------------ ----------
At 1 January 2022 8,997,353 65,385 867,893 9,930,631
---------------------------------------------------- ---------- ----------- ------------ ----------
Additions 38,027 532 16,558 55,117
---------------------------------------------------- ---------- ----------- ------------ ----------
Disposal - - (12,869) (12,869)
---------------------------------------------------- ---------- ----------- ------------ ----------
Change in decommissioning provision (35,301) - - (35,301)
---------------------------------------------------- ---------- ----------- ------------ ----------
At 30 June 2022 9,000,079 65,917 871,582 9,937,578
---------------------------------------------------- ---------- ----------- ------------ ----------
Accumulated depreciation, depletion and impairment:
---------------------------------------------------- ---------- ----------- ------------ ----------
At 1 January 2022 6,650,304 53,829 404,500 7,108,633
---------------------------------------------------- ---------- ----------- ------------ ----------
Charge for the year 145,524 1,489 30,491 177,504
---------------------------------------------------- ---------- ----------- ------------ ----------
Net impairment reversal (10,122) - - (10,122)
---------------------------------------------------- ---------- ----------- ------------ ----------
Disposal - - (11,314) (11,314)
---------------------------------------------------- ---------- ----------- ------------ ----------
At 30 June 2022 6,785,706 55,318 423,677 7,264,701
---------------------------------------------------- ---------- ----------- ------------ ----------
Net carrying amount:
---------------------------------------------------- ---------- ----------- ------------ ----------
At 30 June 2022 2,214,373 10,599 447,905 2,672,877
---------------------------------------------------- ---------- ----------- ------------ ----------
At 31 December 2021 2,347,049 11,556 463,393 2,821,998
---------------------------------------------------- ---------- ----------- ------------ ----------
At 30 June 2021 2,030,409 12,569 468,857 2,511,835
---------------------------------------------------- ---------- ----------- ------------ ----------
Impairments
Impairments to the Group's producing assets and reversals of
impairments are set out in the table below:
Impairment reversal Recoverable amount(i)
------------------------ -----------------------
Year ended Year ended
31 December 31 December
Period
Period ended
ended 30 30 June
June 2022 2021 2022 2021
$'000 $'000 $'000 $'000
-------------------------------- ---------- ------------ --------- ------------
North Sea 10,122 39,715 104,465 1,496,219
-------------------------------- ---------- ------------ --------- ------------
Net pre-tax impairment reversal 10,122 39,715
-------------------------------- ---------- ------------ --------- ------------
(i) Recoverable amount has been determined on a fair value less
costs of disposal basis. The amounts disclosed above are in respect
of assets where an impairment (or reversal) has been recorded.
Assets which did not have any impairment or reversal are excluded
from the amounts disclosed
The 2022 net impairment reversal of $10.1 million relates to
producing assets in the UK North Sea. The increase in EnQuest's
near-term future oil price assumptions were largely offset by the
increase in discount rate from 10% to 11% and impact of tax
including the recently introduced UK Energy Profit Levy. The CGUs
on which impairment reversals relate was $14.6m for the GKA and
Scolty/Crathes CGU. Impairment losses of $4.5 million were incurred
relating to the Alba CGU.
The 2021 net impairment reversal of $39.7 million relates to
producing assets in the UK North Sea. Impairment reversals were
primarily driven by an increase in EnQuest's near-term future oil
price assumptions. The CGUs on which impairment reversals relate
were $53.7 million for Kraken and $6.1 million for Alba. In
addition, impairment losses of $20.1 million were incurred relating
to the GKA and Scolty/Crathes CGU, primarily as a result of
forecast increased costs and lower production.
Sensitivity analyses
Management tested the impact of a change in cash flows in FVLCD
impairment testing arising from a 10% change in price
assumptions.
Price reductions of this magnitude in isolation could
indicatively lead to a reduction in the carrying amount of
EnQuest's oil and gas properties by approximately $244.0 million,
which is approximately 9% of the net book value of property, plant
and equipment as at 30 June 2022. Price increases could
indicatively lead to an increase in the carrying amount of
EnQuest's oil and gas properties by approximately $202.2
million.
The oil price sensitivity analysis above does not, however,
represent management's best estimate of any impairments that might
be recognised as they do not fully incorporate consequential
changes that may arise, such as changes in costs and to business
plans, phasing of development, levels of reserves and resources,
and production volumes. As the extent of a price reduction
increases, the more likely it is that costs would decrease across
the industry. The oil price sensitivity analysis therefore does not
reflect a linear relationship between price and value that can be
extrapolated.
Management also tested the impact of a one percentage point
change in the discount rate used for FVLCD impairment testing of
oil and gas properties. If the discount rate was one percentage
point higher across all tests performed, a net impairment would
have been recognised in first half of 2022 of approximately $34.6
million, a difference of $44.7 million on the net impairment
reversal recognised at 30 June 2022. If the discount rate was one
percentage point lower, the net impairment reversal recognised
would have been approximately $37.7 million higher.
8. Loans and borrowings
30 June
31 December
2022 2021
$'000 $'000
----------- --------- -----------
Borrowings 115,676 401,614
----------- --------- -----------
Bonds 1,125,069 1,081,596
----------- --------- -----------
1,240,745 1,483,210
----------- --------- -----------
Borrowings
The Group's borrowings are carried at amortised cost as
follows:
30 June 31 December
2022 2021
----------------------------- ---------------------------- -----------------------------
Principal Fees Total Principal Fees Total
$'000 $'000 $'000 $'000 $'000 $'000
----------------------------- --------- ------- -------- --------- -------- --------
RBL(i) 115,000 (7,673) 107,327 415,000 (23,250) 391,750
----------------------------- --------- ------- -------- --------- -------- --------
SVT Working Capital facility 8,349 - 8,349 9,864 - 9,864
----------------------------- --------- ------- -------- --------- -------- --------
Total borrowings 123,349 (7,673) 115,676 424,864 (23,250) 401,614
----------------------------- --------- ------- -------- --------- -------- --------
Due within one year 65,676 210,505
----------------------------- --------- ------- -------- --------- -------- --------
Due after more than one year 50,000 191,109
----------------------------- --------- ------- -------- --------- -------- --------
Total borrowings 115,676 401,614
----------------------------- --------- ------- -------- --------- -------- --------
(i) During the period to 30 June 2022, the Group repaid $300.0
million of the outstanding principal, well ahead of the planned
amortisation schedule. At 30 June 2022, after allowing for letter
of credit utilisation of $52.7 million, $97.3 million remained
available for drawdown under the facility.
Bonds
The Group's bonds are carried at amortised cost as follows:
30 June 31 December
2022 2021
-------------------------------- ------------------------------- -------------------------------
Principal Fees Total Principal Fees Total
$'000 $'000 $'000 $'000 $'000 $'000
-------------------------------- ---------- ------- ---------- ---------- ------- ----------
High yield bond(i) 827,166 (1,254) 825,912 827,166 (1,725) 825,441
-------------------------------- ---------- ------- ---------- ---------- ------- ----------
Retail bond 7%(ii) 136,096 - 136,096 256,574 (419) 256,155
-------------------------------- ---------- ------- ---------- ---------- ------- ----------
Retail bond 9%(iii) 163,061 - 163,061 - - -
-------------------------------- ---------- ------- ---------- ---------- ------- ----------
Total bonds due after more than
one year 1,126,323 (1,254) 1,125,069 1,083,740 (2,144) 1,081,596
-------------------------------- ---------- ------- ---------- ---------- ------- ----------
(i) The total carrying value of the high yield bond as at 30
June 2022 is $825.9 million (2021: $825.4 million). This includes
bond principal of $827.2 million (2021: $827.2 million) less
unamortised fees of $1.3 million (2021: $1.7 million). The high
yield bond does not include accrued interest, including IFRS 9 EIR
adjustment, of $14.1 million (2021: $14.8 million) which is
reported within trade and other payables.
(ii) During the period, following the successful exchange and
cash offer, GBP79.3 million of the Retail bond 7% were exchanged
for the Retail Bond 9%. This resulted in a reduction of principal
by $104.4 million. The total carrying value of the Retail bond 7%
at 30 June 2022 is $136.1 million (2021: $256.2 million). This
includes bond principal of $136.1 million (2021: $256.6 million)
less unamortised fees of nil (2021: $0.4 million). The Retail bond
7% does not include accrued interest, including IFRS 9 EIR
adjustment, of $3.8 million (2021: $13.5 million), which is
reported within trade and other payables.
(iii) On 27 April 2022, the Group issued a new 9% retail bond
('Retail bond 9%'), following a successful exchange and open offer.
The principal of the Retail Bond 9% raised by the exchange and open
offer totalled GBP133.3 million. This was made up of GBP79.3
million exchanging from the Retail Bond 7% and GBP54.0 million new
bond holders. The total carrying value of the Retail bond 9% as at
30 June 2022 is $163.1 million. This does not include accrued
interest, including IFRS 9 EIR adjustment, of $2.2 million, which
is reported within trade and other payables.
9. Other financial assets and financial liabilities
(a) Summary as at 30 June 2022
30 June 31 December
2022 2021
-------------------------------------- ------------------- -------------------
Assets Liabilities Assets Liabilities
$'000 $'000 $'000 $'000
-------------------------------------- ------ ----------- ------ -----------
Fair value through profit or loss:
-------------------------------------- ------ ----------- ------ -----------
Derivative commodity contracts 1,203 161,780 - 55,245
-------------------------------------- ------ ----------- ------ -----------
Derivative foreign exchange contracts - - 382 -
-------------------------------------- ------ ----------- ------ -----------
Commodity futures - - - 2
-------------------------------------- ------ ----------- ------ -----------
Derivative UKAs contracts - 9 90 -
-------------------------------------- ------ ----------- ------ -----------
Total current 1,203 161,789 472 55,247
-------------------------------------- ------ ----------- ------ -----------
Fair value through profit or loss:
Quoted equity shares 6 - 6 -
Total non-current 6 - 6 -
-------------------------------------- ------ ----------- ------ -----------
(b) Income statement impact
The income/(expense) recognised for derivatives are as
follows:
Revenue and
other operating
income Cost of sales
--------------------------- --------------------- --------------------
Realised Unrealised Realised Unrealised
Period ended 30 June 2022 $'000 $'000 $'000 $'000
--------------------------- --------- ---------- -------- ----------
Commodity options (165,053) (105,977) - -
--------------------------- --------- ---------- -------- ----------
Commodity swaps 1,387 1,303 - -
--------------------------- --------- ---------- -------- ----------
Commodity futures 1,343 2 - -
--------------------------- --------- ---------- -------- ----------
Foreign exchange contracts - - (3,546) (382)
--------------------------- --------- ---------- -------- ----------
UKA contracts - - (260) (99)
--------------------------- --------- ---------- -------- ----------
(162,323) (104,672) (3,806) (481)
--------------------------- --------- ---------- -------- ----------
Revenue and
other operating
income Cost of sales
-------------------------- -------------------- --------------------
Realised Unrealised Realised Unrealised
Period ended 30 June 2021 $'000 $'000 $'000 $'000
-------------------------- -------- ---------- -------- ----------
Commodity options (28,600) (35,786) - -
-------------------------- -------- ---------- -------- ----------
Commodity swaps (3,610) (1,187) - -
-------------------------- -------- ---------- -------- ----------
Commodity futures 1,693 - - -
-------------------------- -------- ---------- -------- ----------
EUA/UKA contracts - - 8,157 -
-------------------------- -------- ---------- -------- ----------
(30,517) (36,973) 8,157 -
-------------------------- -------- ---------- -------- ----------
(c) Fair value measurement
Quoted
prices Significant Significant
in active observable unobservable
markets inputs inputs
(Level (Level (Level
Total 1) 2) 3)
30 June 2022 Notes $'000 $'000 $'000 $'000
-------------------------------------------- ------ ------------- ------------- --------------- ---------------
Financial assets measured at fair value:
-------------------------------------------- ------ ------------- ------------- --------------- ---------------
Other financial assets at FVPL
-------------------------------------------- ------ ------------- ------------- --------------- ---------------
Oil commodity derivative contracts 1,203 - 1,203 -
-------------------------------------------- ------ ------------- ------------- --------------- ---------------
Quoted equity shares 6 6 - -
-------------------------------------------- ------ ------------- ------------- --------------- ---------------
Total financial assets measured at
fair value 1,209 6 1,203 -
-------------------------------------------- ------ ------------- ------------- --------------- ---------------
Liabilities measured at fair value:
Derivative financial liabilities at
FVPL
-------------------------------------------- ------ ------------- ------------- --------------- ---------------
Oil commodity derivative contracts 161,789 - 161,789 -
-------------------------------------------- ------ ------------- ------------- --------------- ---------------
Forward UKA contracts 9 - 9 -
-------------------------------------------- ------ ------------- ------------- --------------- ---------------
Other financial liabilities measured
at FVPL
-------------------------------------------- ------ ------------- ------------- --------------- ---------------
Contingent consideration 457,137 - - 457,137
-------------------------------------------- ------ ------------- ------------- --------------- ---------------
Total liabilities measured at fair
value 618,935 - 161,798 457,137
-------------------------------------------- ------ ------------- ------------- --------------- ---------------
Liabilities measured at amortised cost
for which fair values are disclosed
below:
-------------------------------------------- ------ ------------- ------------- --------------- ---------------
Interest-bearing loans and borrowings 8 123,349 - - 123,349
-------------------------------------------- ------ ------------- ------------- --------------- ---------------
Obligations under leases 540,045 - - 540,045
-------------------------------------------- ------ ------------- ------------- --------------- ---------------
Retail bond 7% 8 132,353 132,353 - -
-------------------------------------------- ------ ------------- ------------- --------------- ---------------
Retail bond 9% 8 158,789 158,789 - -
-------------------------------------------- ------ ------------- ------------- --------------- ---------------
High yield bond 8 740,876 740,876 - -
-------------------------------------------- ------ ------------- ------------- --------------- ---------------
Total liabilities measured at amortised
cost for which fair values are disclosed 1,695,412 1,032,018 - 663,394
-------------------------------------------- ------ ------------- ------------- --------------- ---------------
Quoted prices Significant Significant
in active observable unobservable
markets inputs inputs
Total (Level 1) (Level 2) (Level 3)
30 June 2021 Notes $'000 $'000 $'000 $'000
----------------------------------- ------ --------------- --------------- ---------------- ---------------
Financial assets measured at fair
value:
----------------------------------- ------ --------------- --------------- ---------------- ---------------
Other financial assets at FVPL
----------------------------------- ------ --------------- --------------- ---------------- ---------------
Forward UKA contracts 90 - 90 -
----------------------------------- ------ --------------- --------------- ---------------- ---------------
Forward foreign currency contracts 382 - 382 -
----------------------------------- ------ --------------- --------------- ---------------- ---------------
Quoted equity shares 6 6 - -
----------------------------------- ------ --------------- --------------- ---------------- ---------------
Total financial assets measured
at fair value 478 6 472 -
----------------------------------- ------ --------------- --------------- ---------------- ---------------
Liabilities measured at fair value:
Derivative financial liabilities
at FVPL
----------------------------------- ------ --------------- --------------- ---------------- ---------------
Oil commodity derivative contracts 55,247 - 55,247 -
----------------------------------- ------ --------------- --------------- ---------------- ---------------
Other financial liabilities
measured
at FVPL
----------------------------------- ------ --------------- --------------- ---------------- ---------------
Contingent consideration 410,778 - - 410,778
----------------------------------- ------ --------------- --------------- ---------------- ---------------
Total liabilities measured at fair
value 466,025 - 55,247 410,778
----------------------------------- ------ --------------- --------------- ---------------- ---------------
Liabilities measured at amortised
cost for which fair values are
disclosed
below:
----------------------------------- ------ --------------- --------------- ---------------- ---------------
Interest-bearing loans and
borrowings 8 424,864 - - 424,864
----------------------------------- ------ --------------- --------------- ---------------- ---------------
Obligations under leases 570,781 - - 570,781
----------------------------------- ------ --------------- --------------- ---------------- ---------------
Retail bond 7% 8 244,387 244,387 - -
----------------------------------- ------ --------------- --------------- ---------------- ---------------
High yield bond 8 773,499 773,499 - -
----------------------------------- ------ --------------- --------------- ---------------- ---------------
Total liabilities measured at
amortised
cost for which fair values are
disclosed 2,013,531 1,017,886 - 995,645
----------------------------------- ------ --------------- --------------- ---------------- ---------------
Fair value hierarchy
All financial instruments for which fair value is recognised or
disclosed are categorised within the fair value hierarchy, based on
the lowest level input that is significant to the fair value
measurement as follows:
Level 1: Quoted (unadjusted) market prices in active markets for
identical assets or liabilities;
Level 2: Valuation techniques for which the lowest level input
that is significant to the fair value measurement is directly (i.e.
as prices) or indirectly (i.e. derived from prices) observable;
Level 3: Valuation techniques for which the lowest level input
that is significant to the fair value measurement is
unobservable.
Derivative financial instruments are valued by counterparties,
with the valuations reviewed internally and corroborated with
readily available market data (Level 2). Contingent consideration
is measured at FVPL using the Level 3 valuation processes disclosed
in note 10. There have been no transfers between Level 1 and Level
2 during the period (2021: no transfers).
For the financial liabilities measured at amortised costs but
for which fair value disclosures are required, the fair value of
the bonds classified as Level 1 was derived from quoted prices for
that financial instrument. Interest-bearing loans and borrowings
and obligations under finance leases were calculated using the
discounted cash flow method to capture the present value (Level
3).
10. Contingent consideration
Magnus Magnus
Linked Golden
decommissioning Eagle Contingent
75% liability Consideration Total
$'000 $'000 $'000 $'000
---------------------- ------- ----------------- ------------------ --------
At 31 December 2021 344,627 20,976 45,175 410,778
---------------------- ------- ----------------- ------------------ --------
Change in fair value 30,996 (4,061) - 26,935
---------------------- ------- ----------------- ------------------ --------
Unwinding of discount 16,821 1,049 1,554 19,424
---------------------- ------- ----------------- ------------------ --------
At 30 June 2022 392,444 17,964 46,729 457,137
---------------------- ------- ----------------- ------------------ --------
Classified as:
---------------------- ------- ----------------- ------------------ --------
Current 52,024 2,680 - 54,704
---------------------- ------- ----------------- ------------------ --------
Non-current 340,420 15,284 46,729 402,433
---------------------- ------- ----------------- ------------------ --------
392,444 17,964 46,729 457,137
---------------------- ------- ----------------- ------------------ --------
75% Magnus acquisition contingent consideration
The contingent consideration was fair valued at 30 June 2022,
which resulted in an increase in fair value of $31.0 million
reflecting a change in the Groups short term oil price assumptions
partially offset by a 1% increase in the discount rate to 11%
(2021: decrease of $28.7 million reflecting the change in the
payment profiles). The fair value accounting effect and finance
costs of $16.8 million (2021: $29.6 million) on the contingent
consideration were recognised through remeasurements and
exceptional items in the Group income statement. Within the
statement of cash flows, the profit share element of the repayment,
nil (2021: $1.0 million), is disclosed separately under investing
activities. At 30 June 2022, the contingent consideration was
$392.4 million (31 December 2021: $344.6 million). The contingent
profit sharing arrangement cap of $1 billion was not met as at 30
June 2022 in the present value calculations (2021: cap was not
met).
Magnus decommissioning-linked contingent consideration
As part of the Magnus and associated interests acquisition, BP
retained the decommissioning liability in respect of the existing
wells and infrastructure and EnQuest agreed to pay additional
consideration in relation to the management of the physical
decommissioning costs of Magnus. At 30 June 2022, the amount due to
BP calculated on an after-tax basis by reference to 30% of BP's
decommissioning costs on Magnus was $18.0 million (31 December
2021: $21.0 million).
Golden Eagle contingent consideration
Part of the Golden Eagle acquisition consideration included an
amount that was contingent on the average oil price between July
2021 and June 2023. The contingent consideration is payable in the
second half of 2023, if between July 2021 and June 2023 the Dated
Brent average crude price equals or exceeds $55/bbl, upon which
$25.0 million is payable, or if the Dated Brent average crude price
equals or exceeds $65/bbl, upon which $50.0 million is payable. The
contingent consideration liability is discounted at 7% and is
calculated principally based on the oil price assumptions as
disclosed in note 2. At 30 June 2022, the contingent consideration
was valued at $46.7 million.
11. Provisions
Thistle
Decommissioning decommissioning
provision provision Other provisions Total
$'000 $'000 $'000 $'000
---------------------- --------------- ---------------- ---------------- --------
At 31 December 2021 835,721 43,930 15,291 894,942
---------------------- --------------- ---------------- ---------------- --------
Additions 1,450 - 1,223 2,673
---------------------- --------------- ---------------- ---------------- --------
Changes in estimates (58,333) (9,260) (730) (68,323)
---------------------- --------------- ---------------- ---------------- --------
Unwinding of discount 8,500 439 - 8,939
---------------------- --------------- ---------------- ---------------- --------
Utilisation (22,657) (1,247) (500) (24,404)
---------------------- --------------- ---------------- ---------------- --------
Other - (86) (78) (164)
---------------------- --------------- ---------------- ---------------- --------
At 30 June 2022 764,681 33,776 15,206 813,663
---------------------- --------------- ---------------- ---------------- --------
Classified as:
---------------------- --------------- ---------------- ---------------- --------
Current 58,433 9,203 15,206 82,842
---------------------- --------------- ---------------- ---------------- --------
Non-current 706,248 24,573 - 730,821
---------------------- --------------- ---------------- ---------------- --------
764,681 33,776 15,206 813,663
---------------------- --------------- ---------------- ---------------- --------
Decommissioning provision
The Group's total provision represents the present value of
decommissioning costs which are expected to be incurred up to 2048,
assuming no further development of the Group's assets. The Group's
decommissioning provision has reduced by $71.0 million in the
period, primarily reflecting a favourable foreign exchange rate
movement and the ongoing decommissioning programmes at Heather and
the Dons. At 30 June 2022, an estimated $322.7 million is expected
to be utilised between one and five years (31 December 2021: $409.6
million), $60.1 million within six to ten years (31 December 2021:
$81.4 million), and the remainder in later periods.
The Group enters into surety bonds principally to provide
security for its decommissioning obligations. At 30 June 2022, the
Group held surety bonds totalling $230.2 million (31 December 2021:
$240.8 million).
Thistle decommissioning provision
At 30 June 2022, the amount due to BP by reference to 7.5% of
BP's decommissioning costs on Thistle and Deveron was $33.8 million
(31 December 2021: $43.9 million), with the reduction mainly
reflecting the change in estimate and utilisation in the period.
Unwinding of discount of $0.4 million is included within finance
income for the year ended 30 June 2022 (2021: $0.5 million).
Other provisions
During 2020, a riser at the Seligi Alpha platform which provides
gas lift and injection to the Seligi Bravo platform detached. A
provision with respect to required repairs to remedy the damage
caused was established. To date $4.4 million has been utilised and
at 30 June 2022, the provision was $1.5 million (31 December 2021:
$1.5 million).
During 2021, the Group recognised $8.2 million in relation to
disputes with third-party contractors. In 2022, one dispute was
settled for $0.5 million and the other dispute is ongoing. At 30
June 2022, the provision was $7.3 million (31 December 2021: $8.2
million).
12. Commitments and contingencies
Capital commitments
At 30 June 2022, the Group had capital commitments amounting to
$11.0 million (31 December 2021: $1.9 million).
Other commitments
In the normal course of business, the Group will obtain surety
bonds, letters of credit and guarantees. At 30 June 2022, the Group
held surety bonds totalling $230.2 million (31 December 2021:
$240.8 million) to provide security for its decommissioning
obligations.
Contingencies
The Group becomes involved from time to time in various claims
and lawsuits arising in the ordinary course of its business. The
Group is not, nor has been during the past 12 months, involved in
any governmental, legal or arbitration proceedings which, either
individually or in the aggregate, have had, or are expected to
have, a material adverse effect on the Group's financial position
or profitability, nor, so far as the Group is aware, are any such
proceedings pending or threatened.
13. Cash flow information
Cash generated from operations
Period Period
ended ended
30 June 30 June
2022 2021
Notes $'000 $'000
---------------------------------------------------------- ----- -------- ---------
Profit/(loss) before tax 182,572 49,072
---------------------------------------------------------- ----- -------- ---------
Depreciation 7 3,295 3,915
---------------------------------------------------------- ----- -------- ---------
Depletion 7 174,209 153,085
---------------------------------------------------------- ----- -------- ---------
Net impairment reversal (10,122) -
---------------------------------------------------------- ----- -------- ---------
Net disposal/write down of inventory (360) 983
---------------------------------------------------------- ----- -------- ---------
Change in fair value of investments - 1
---------------------------------------------------------- ----- -------- ---------
Share-based payment charge 2,068 3,515
---------------------------------------------------------- ----- -------- ---------
Change in contingent consideration 46,359 2,810
---------------------------------------------------------- ----- -------- ---------
Change in provisions (22,860) 14,754
---------------------------------------------------------- ----- -------- ---------
Amortisation of option premiums 658 -
---------------------------------------------------------- ----- -------- ---------
Unrealised (gain)/loss on commodity financial instruments 104,672 36,973
---------------------------------------------------------- ----- -------- ---------
Unrealised (gain)/loss on other financial instruments 481 -
---------------------------------------------------------- ----- -------- ---------
Unrealised exchange (gain)/loss (20,686) 4,796
---------------------------------------------------------- ----- -------- ---------
Net finance expense 84,777 78,042
---------------------------------------------------------- ----- -------- ---------
Operating profit before working capital changes 545,063 347,946
---------------------------------------------------------- ----- -------- ---------
Decrease/(increase) in trade and other receivables 2,214 (121,006)
---------------------------------------------------------- ----- -------- ---------
Decrease/(increase) in inventories (17,771) 470
---------------------------------------------------------- ----- -------- ---------
(Decrease)/increase in trade and other payables (6,842) 60,469
---------------------------------------------------------- ----- -------- ---------
Cash generated from operations 522,664 287,879
---------------------------------------------------------- ----- -------- ---------
Changes in liabilities arising from financing activities
Loans and
borrowings Bonds Lease liabilities Total
$'000 $'000 $'000 $'000
----------------------------------- ----------- ----------- ----------------- -----------
At 31 December 2021 (402,065) (1,109,920) (570,781) (2,082,766)
----------------------------------- ----------- ----------- ----------------- -----------
Cash movements:
----------------------------------- ----------- ----------- ----------------- -----------
Repayments of loans and borrowings 300,089 - - 300,089
----------------------------------- ----------- ----------- ----------------- -----------
Drawdown of loans and borrowings - (71,163) - (71,163)
----------------------------------- ----------- ----------- ----------------- -----------
Repayment of lease liabilities - - 59,279 59,279
----------------------------------- ----------- ----------- ----------------- -----------
Cash interest paid in period 7,775 39,444 - 47,219
----------------------------------- ----------- ----------- ----------------- -----------
Non-cash movements:
----------------------------------- ----------- ----------- ----------------- -----------
Additions - - (16,294) (16,294)
----------------------------------- ----------- ----------- ----------------- -----------
Interest/finance charge payable (8,589) (31,477) (20,045) (60,111)
----------------------------------- ----------- ----------- ----------------- -----------
Fee amortisation (15,577) (889) - (16,466)
----------------------------------- ----------- ----------- ----------------- -----------
Foreign exchange adjustments 1,426 28,941 6,364 36,731
----------------------------------- ----------- ----------- ----------------- -----------
Disposal - - 1,432 1,432
----------------------------------- ----------- ----------- ----------------- -----------
Other non-cash movements 45 - - 45
----------------------------------- ----------- ----------- ----------------- -----------
At 30 June 2022 (116,896) (1,145,064) (540,045) (1,802,005)
----------------------------------- ----------- ----------- ----------------- -----------
Reconciliation of carrying value
Loans and
borrowings Bonds Lease liabilities Total
$'000 $'000 $'000 $'000
----------------- ----------- ----------- ----------------- -----------
Principal (123,349) (1,126,323) (540,045) (1,789,717)
----------------- ----------- ----------- ----------------- -----------
Unamortised fees 7,673 1,254 - 8,927
----------------- ----------- ----------- ----------------- -----------
Accrued interest (1,220) (19,995) - (21,215)
----------------- ----------- ----------- ----------------- -----------
At 30 June 2022 (116,896) (1,145,064) (540,045) (1,802,005)
----------------- ----------- ----------- ----------------- -----------
14. Subsequent events
Energy Profits Levy
On 26 May 2022, the UK Government announced the introduction of
an Energy Profits Levy ('EPL') on the profits earned from the
production of oil and gas in the UK with effect from that date. The
EPL enabling legislation, the Energy (Oil and Gas) Profits Levy Act
2022, was substantively enacted on 11 July 2022. The EPL is charged
at the rate of 25 per cent on taxable profits in addition to ring
fence corporation tax of 30 per cent and the Supplementary Charge
of 10 per cent. The EPL tax is a temporary measure and as enacted
will cease to apply on 31 December 2025.
As the legislation was not substantively enacted as at 30 June
2022, the tax charge in the half-year results does not include the
impact of EPL for the period which will instead be reflected in the
second half of 2022. If the EPL had been considered in the interim
period, a cash tax liability of $20.0 million would be recognised
of which $5.6 million would have been in respect of Business
Performance in the period 26 May 2022 to 30 June 2022.
Had the EPL been fully enacted before 30 June 2022, these
half-year results would have recognised an additional net deferred
tax liability of $106.6 million at the period end.
The amounts disclosed above are provisional and the overall
current and deferred tax impact for the year will be included in
the full-year results.
Statement of Directors' Responsibilities
We confirm that to the best of our knowledge:
a) the condensed set of financial statements, which has been
prepared in accordance with the applicable set of accounting
standards, gives a true and fair view of the assets, liabilities,
financial position and profit or loss of the issuer, or the
undertakings included in the consolidation as a whole as required
by DTR 4.2.4R;
b) the interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
and their impact during the first six months and description of
principal risks and uncertainties for the remaining six months of
the year); and
c) the interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein).
A list of current Directors is maintained on the EnQuest PLC
website which can be found at www.enquest.com .
By the order of the Board
Amjad Bseisu
Chief Executive
5 September 2022
Independent review report to EnQuest PLC
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2022 which comprises the Group Income
Statement, the Group Balance Sheet, the Group Statement of Changes
in Equity, the Group Statement of Cash Flows and related notes 1 to
14.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2022 is not prepared, in all material respects, in accordance
with United Kingdom adopted International Accounting Standard 34
and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410 "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" issued by the Financial Reporting Council for use in the
United Kingdom (ISRE (UK) 2410). A review of interim financial
information consists of making inquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with
International Standards on Auditing (UK) and consequently does not
enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
As disclosed in note 2, the annual financial statements of the
group are prepared in accordance with United Kingdom adopted
international accounting standards. The condensed set of financial
statements included in this half-yearly financial report has been
prepared in accordance with United Kingdom adopted International
Accounting Standard 34, "Interim Financial Reporting".
Conclusion Relating to Going Concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
Conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410; however future events or conditions
may cause the entity to cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the directors are
responsible for assessing the group's ability to continue as a
going concern, disclosing as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial
information
In reviewing the half-yearly financial report, we are
responsible for expressing to the company a conclusion on the
condensed set of financial statement in the half-yearly financial
report. Our conclusion, including our Conclusion Relating to Going
Concern, are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with
ISRE (UK) 2410. Our work has been undertaken so that we might state
to the company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the company, for our review work, for this
report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
London, United Kingdom
5 September 2022
Glossary - Non-GAAP measures
The Group uses Alternative Performance Measures ('APMs') when
assessing and discussing the Group's financial performance, balance
sheet and cash flows that are not defined or specified under IFRS.
The Group uses these APMs, which are not considered to be a
substitute for or superior to IFRS measures, to provide
stakeholders with additional useful information by adjusting for
exceptional items and certain remeasurements which impact upon IFRS
measures or, by defining new measures, to aid the understanding of
the Group's financial performance, balance sheet and cash
flows.
Period Period
ended ended
30 June 30 June
2022 2021
Business performance net profit attributable to EnQuest PLC
shareholders $'000 $'000
------------------------------------------------------------- --------- ---------
Reported net profit/(loss) (A) 203,543 (56,372)
------------------------------------------------------------- --------- ---------
Adjustments - remeasurements and exceptional items:
------------------------------------------------------------- --------- ---------
Unrealised (losses)/gains on derivative contracts (note 9b) (105,153) (36,973)
------------------------------------------------------------- --------- ---------
Net impairment (charge)/reversal to oil and gas assets (note
4) 10,122 -
------------------------------------------------------------- --------- ---------
Unwind and interest on contingent consideration (note 10) (17,870) (30,299)
------------------------------------------------------------- --------- ---------
Change in fair value of contingent consideration (note 10) (26,935) 27,490
------------------------------------------------------------- --------- ---------
Pre-tax remeasurements and exceptional items (B) (139,836) (39,782)
------------------------------------------------------------- --------- ---------
Tax on remeasurements and exceptional items (note 4) (C) 163,353 (124,855)
------------------------------------------------------------- --------- ---------
Post-tax remeasurements and exceptional items (D = B + C) 23,517 (164,637)
------------------------------------------------------------- --------- ---------
Business performance net profit attributable to EnQuest PLC
shareholders (A - D) 180,026 108,265
------------------------------------------------------------- --------- ---------
Adjusted EBITDA is a measure of profitability. It provides a
metric to show earnings before the influence of accounting (i.e.
depletion and depreciation) and financial deductions (i.e.
borrowing interest). For the Group, this is a useful metric as a
measure to evaluate the Group's underlying operating performance
and is a component of a covenant measure under the Group's RBL
facility. It is commonly used by stakeholders as a comparable
metric of core profitability and can be used as an indicator of
cash flows available to pay down debt. Due to the adjustment made
to reach adjusted EBITDA, the Group notes the metric should not be
used in isolation. The nearest equivalent measure on an IFRS basis
is profit/(loss) from operations before tax and finance
income/(costs).
Period Period
ended ended
30 June 30 June
2022 2021
Adjusted EBITDA $'000 $'000
-------------------------------------------------------------- -------- --------
Reported profit/(loss) from operations before tax and finance
income/(costs) 294,158 165,872
-------------------------------------------------------------- -------- --------
Adjustments:
-------------------------------------------------------------- -------- --------
Remeasurements and exceptional items 121,966 9,483
-------------------------------------------------------------- -------- --------
Depletion and depreciation (note 7) 177,504 157,000
-------------------------------------------------------------- -------- --------
Inventory revaluation (360) 983
-------------------------------------------------------------- -------- --------
Change in provision (32,292) 5,718
-------------------------------------------------------------- -------- --------
Net foreign exchange (gain)/loss (24,693) 6,360
-------------------------------------------------------------- -------- --------
Adjusted EBITDA (E) 536,283 345,416
-------------------------------------------------------------- -------- --------
Total cash and available facilities is a measure of the Group's
liquidity at the end of the reporting period. The Group believes
this is a useful metric as it is an important reference point for
the Group's going concern assessment, see page 12.
Period
ended Year ended
30 June 31 December
2022 2021
Total cash and available facilities $'000 $'000
-------------------------------------------- --------- ------------
Available cash 360,241 276,970
-------------------------------------------- --------- ------------
Restricted cash 9,479 9,691
-------------------------------------------- --------- ------------
Total cash and cash equivalents (F) 369,720 286,661
-------------------------------------------- --------- ------------
Available facilities 265,000 500,000
-------------------------------------------- --------- ------------
RBL - Drawn down (115,000) (415,000)
-------------------------------------------- --------- ------------
Letter of credit (52,700) (53,000)
-------------------------------------------- --------- ------------
Available undrawn facility (G) 97,300 32,000
-------------------------------------------- --------- ------------
Total cash and available facilities (F + G) 467,020 318,661
-------------------------------------------- --------- ------------
Net debt is a liquidity measure that shows how much debt a
company has on its balance sheet compared to its cash and cash
equivalents. With de-leveraging a strategic priority, the Group
believes this is a useful metric to demonstrate progress in this
regard. It is also an important reference point for the Group's
going concern assessment, see page 12.
Period
ended Year ended
30 June 31 December
2022 2021
Net debt $'000 $'000
------------------------------------------ ---------- ------------
Borrowings (note 8):
------------------------------------------ ---------- ------------
RBL 107,327 391,750
------------------------------------------ ---------- ------------
SVT Working Capital facility 8,349 9,864
------------------------------------------ ---------- ------------
Borrowings (H) 115,676 401,614
------------------------------------------ ---------- ------------
Bonds (note 8):
------------------------------------------ ---------- ------------
High yield bond 825,912 825,441
------------------------------------------ ---------- ------------
Retail bond 7% 136,096 256,155
------------------------------------------ ---------- ------------
Retail bond 9% 163,061 -
------------------------------------------ ---------- ------------
Bonds (I) 1,125,069 1,081,596
------------------------------------------ ---------- ------------
Non-cash accounting adjustments (note 8):
------------------------------------------ ---------- ------------
Unamortised fees on loans and borrowings 7,673 23,250
------------------------------------------ ---------- ------------
Unamortised fees on bonds 1,254 2,144
------------------------------------------ ---------- ------------
Non-cash accounting adjustments (J) 8,927 25,394
------------------------------------------ ---------- ------------
Debt (H + I + J) (K) 1,249,672 1,508,604
------------------------------------------ ---------- ------------
Less: Cash and cash equivalents (E) 369,720 286,661
------------------------------------------ ---------- ------------
Net debt/(cash) (K - F) (L) 879,952 1,221,943
------------------------------------------ ---------- ------------
The Net debt/adjusted EBITDA metric is a ratio that provides
management and users of the Group's Consolidated financial
statements with an indication of how many years it would take to
service the Group's debt. This is a helpful metric to monitor the
Group's progress against its strategic objective of
de-leveraging.
Period
ended Year ended
30 June 31 December
2022 2021
Net debt/adjusted EBITDA $'000 $'000
---------------------------------------------------------- -------- ------------
Net debt (L) 879,952 1,221,943
---------------------------------------------------------- -------- ------------
Business performance adjusted EBITDA (last 12 months) (E) 933,737 742,868
---------------------------------------------------------- -------- ------------
Net debt/adjusted EBITDA (L/E) 0.9 1.6
---------------------------------------------------------- -------- ------------
Cash capex monitors investing activities on a cash basis, while
cash abandonment monitors the Group's cash spend on decommissioning
activities. The Group provides guidance to the financial markets
for both these metrics given the materiality of the work programmes
and the focus on the Group's liquidity position and ability to
reduce its debt.
Period Period
ended ended
30 June 30 June
2022 2021
Cash capital and decommissioning expense $'000 $'000
------------------------------------------------------------ -------- --------
Reported net cash flows (used in)/from investing activities (54,435) (19,807)
------------------------------------------------------------ -------- --------
Adjustments:
------------------------------------------------------------ -------- --------
Repayment of Magnus contingent consideration - Profit share - 968
------------------------------------------------------------ -------- --------
Acquisitions - 3,000
------------------------------------------------------------ -------- --------
Interest received (256) (83)
------------------------------------------------------------ -------- --------
Cash capital expenditure (54,691) (15,922)
------------------------------------------------------------ -------- --------
Decommissioning spend (28,194) (38,661)
------------------------------------------------------------ -------- --------
Cash capital and decommissioning expense (82,885) (54,583)
------------------------------------------------------------ -------- --------
Free cash flow ('FCF') represents the cash a company generates,
after accounting for cash outflows to support operations, to
maintain its capital assets. Currently this metric is useful to
management and users to assess the Group's ability to reduce its
debt.
During 2021, the Group updated the definition of FCF to adjust
for the impact of share issues and acquisitions. The definition of
free
cash flow is now net cash flow adjusted for net
repayment/proceeds of loans and borrowings, net proceeds of share
issues and
cost of acquisitions. This has resulted in a $3.0 million
increase to 30 June 2021 FCF.
Period Period
ended ended
30 June 30 June
2022 2021
Free cash flow $'000 $'000
--------------------------------------------------- --------- ---------
Net cash flows from/(used in) operating activities 498,375 246,942
--------------------------------------------------- --------- ---------
Net cash flows from/(used in) investing activities (54,435) (19,807)
--------------------------------------------------- --------- ---------
Net cash flows from/(used in) financing activities (344,441) (173,849)
--------------------------------------------------- --------- ---------
Adjustments:
--------------------------------------------------- --------- ---------
Proceeds of loans and borrowings (67,440) -
--------------------------------------------------- --------- ---------
Repayment of loans and borrowings 300,089 88,170
--------------------------------------------------- --------- ---------
Acquisitions - 3,000
--------------------------------------------------- --------- ---------
Free cash flow 332,148 144,456
--------------------------------------------------- --------- ---------
Period Period
ended ended
30 June 30 June
2022 2021
Revenue from sales $'000 $'000
---------------------------------------------------------- --------- --------
Revenue from crude oil sales (note 5) (M) 851,206 490,536
---------------------------------------------------------- --------- --------
Revenue from gas and condensate sales (note 5) (N) 252,907 57,850
---------------------------------------------------------- --------- --------
Realised (losses)/gains on oil derivative contracts (note
5) (P) (162,323) (32,908)
---------------------------------------------------------- --------- --------
Period Period
ended ended
30 June 30 June
2022 2021
Barrels equivalent sales kboe kboe
------------------------------- -------- --------
Sales of crude oil (Q) 7,667 7,288
------------------------------- -------- --------
Sales of gas and condensate(i) 1,607 1,314
------------------------------- -------- --------
Total sales (R) 9,274 8,602
------------------------------- -------- --------
(i) Includes volumes related to onward sale of third-party gas
purchases not required for injection activities at Magnus
Average realised price is a measure of the revenue earned per
barrel sold. The Group believes this is a useful metric for
comparing performance to the market and to give the user, both
internally and externally, the ability to understand the drivers
impacting the Group's revenue.
Period Period
ended ended
30 June 30 June
2022 2021
Average realised prices $/Boe $/Boe
---------------------------------------------------------- -------- --------
Average realised oil price, excluding hedging (M/Q) 111.0 67.3
---------------------------------------------------------- -------- --------
Average realised oil price, including hedging ((M + P)/Q) 89.9 62.8
---------------------------------------------------------- -------- --------
Operating costs ('opex') is a measure of the Group's cost
management performance. Opex is a key measure to monitor the
Group's alignment to its strategic pillars of financial discipline
and value enhancement and is required in order to calculate opex
per barrel (see below).
Period Period
ended ended
30 June 30 June
2022 2021
Operating costs $'000 $'000
--------------------------------------------------------- --------- ---------
Reported cost of sales 586,082 333,262
--------------------------------------------------------- --------- ---------
Adjustments:
--------------------------------------------------------- --------- ---------
Remeasurements and exceptional items (481) -
--------------------------------------------------------- --------- ---------
Depletion of oil and gas assets (174,209) (153,085)
--------------------------------------------------------- --------- ---------
Credit/(charge) relating to the Group's lifting position
and inventory 29,896 26,060
--------------------------------------------------------- --------- ---------
Other cost of sales (232,904) (53,137)
--------------------------------------------------------- --------- ---------
Operating costs 208,384 153,100
--------------------------------------------------------- --------- ---------
Less realised (gain)/loss on derivative contracts (S) 3,806 (8,157)
--------------------------------------------------------- --------- ---------
Operating costs directly attributable to production 204,578 161,257
--------------------------------------------------------- --------- ---------
Comprising of:
--------------------------------------------------------- --------- ---------
Production costs (T) 181,166 139,537
--------------------------------------------------------- --------- ---------
Tariff and transportation expenses (U) 23,412 21,720
--------------------------------------------------------- --------- ---------
Operating costs directly attributable to production 204,578 161,257
--------------------------------------------------------- --------- ---------
Period Period
ended ended
30 June 30 June
2022 2021
Barrels equivalent produced kboe kboe
-------------------------------------- -------- --------
Total produced (working interest) (V) 9,000 8,360
-------------------------------------- -------- --------
Unit opex is the operating expenditure per barrel of oil
equivalent produced. This metric is useful as it is an industry
standard metric allowing comparability between oil and gas
companies. Unit opex including hedging includes the effect of
realised gains and losses on derivatives related to foreign
currency and emissions allowances. This is a useful measure for
investors because it demonstrates how the Group manages it's risk
to market price movements.
Period Period
ended ended
30 June 30 June
2022 2021
Unit opex $/Boe $/Boe
--------------------------------------------------- -------- --------
Production costs (T/V) 20.1 16.7
--------------------------------------------------- -------- --------
Tariff and transportation expenses (U/V) 2.6 2.6
--------------------------------------------------- -------- --------
Total unit opex ((T + U)/V) 22.7 19.3
--------------------------------------------------- -------- --------
Realised (gain)/loss on derivative contracts (S/V) 0.4 (1.0)
--------------------------------------------------- -------- --------
Total unit opex including hedging ((S + T+ U)/V) 23.1 18.3
--------------------------------------------------- -------- --------
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END
IR ZZGGLDVLGZZG
(END) Dow Jones Newswires
September 06, 2022 02:00 ET (06:00 GMT)
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