TIDMENQ
RNS Number : 4761K
EnQuest PLC
02 September 2021
EnQuest PLC
Results for the six months ended 30 June 2021
2 September 2021
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 2020 and the Balance Sheet as at 31 December
2020. Alternative performance measures are reconciled within the
'Glossary - Non-GAAP measures' at the end of the Financial
Statements.
EnQuest Chief Executive, Amjad Bseisu, said:
" The Group delivered strong free cash flow in the first half
which reduced net debt. Performance at Kraken has been good with
the FPSO performing well, while production at PM8/Seligi has been
better than expected as a result of the acceleration of initial
restoration activities following the riser detachment. Production
at Magnus has been impacted by topside related well performance but
our production enhancement programme has partially recovered the
well potential and we expect further recovery over the remainder of
the year. We remain focused on improving production across our
existing portfolio.
"The Golden Eagle acquisition remains on track to complete
around the end of September and will add production, reserves and
cash flow to the Group, while the Bressay and Bentley acquisitions,
offer further long-term potential development opportunities."
H1 2021 performance
-- Group net production averaged 46,187 Boepd (2020: 66,055 Boepd)
-- Kraken production of 23,690 Boepd (33,603 Boepd gross) was in
line with the Group's guidance reflecting strong production and
water injection efficiency and a good performance from the Floating
Production, Storage and Offloading vessel ('FPSO')
-- Improved production at PM8/Seligi as a result of the
acceleration of initial production recovery activities following
the riser detachment in late 2020
-- Lower production at Magnus reflected the slower execution and
an increase in scope of the well intervention programme, an
unplanned third-party outage, power related failures and natural
declines
-- Revenue and other operating income of $518.3 million (2020:
$450.0 million) and EBITDA of $345.4 million (2020: $320.8 million)
reflects materially higher oil prices, partially offset by lower
production
-- Operating costs decreased to $153.0 million (2020: $174.3
million) primarily reflecting lower tariff expenditure
-- Cash generated from operations of $287.9 million (2020:
$282.6 million); cash expenditures of $54.6 million (2020: $108.5
million)
-- Strong free cash flow generation of $141.5 million (2020:
$86.8 million) reflecting materially lower cash expenditures
End June net debt reduced by $96.5 million from year end
-- At 30 June 2021, net debt reduced to $1,183.2 million (end
2020: $1,279.7 million) reflecting strong free cash flow
generation. Total cash and available facilities were $303.4 million
(end 2020: $284.1 million)
-- Signed a new senior secured borrowing base debt facility (the
'RBL') of $600 million with an additional amount of $150 million
for letters of credit for up to seven years
Significant business development
-- Agreed to acquire Suncor Energy UK Limited's 26.69%
non-operated interest in the producing Golden Eagle area for an
initial consideration of $325.0 million with completion expected
around the end of September
-- Signed a Share Purchase agreement ('SPA') with Whalsay Energy
Holdings Limited to purchase its 100.0% equity interest in the
P1078 licence containing the proven Bentley heavy-oil discovery.
Bentley offers long-term potential development opportunities and
other synergies, with the transaction completed in July
Guidance and outlook
-- 2021 average net Group production is expected to be at the
lower end of the guidance range of 46,000 Boepd and 52,000 Boepd.
This reflects expected performances at Magnus, the Greater
Kittiwake Area and PM8/Seligi over the course of the second half of
the year. Kraken gross production is expected to be between 30,000
Boepd and 35,000 Boepd (21,150 Boepd to 24,675 Boepd net)
-- Operating costs are expected to be approximately $300
million, reflecting lower lease charter credits driven by higher
uptime at Kraken, additional production enhancement scopes and
topside maintenance activities at Magnus, higher diesel costs and
sterling strength
-- Combined cash capital and abandonment expenditure, excluding
costs associated with the PM8/Seligi riser repair, is expected to
be broadly around $120 million
-- EnQuest has hedged a total of c.11 MMbbls for full year 2021
predominantly using costless collars, with an average floor price
of c.$59/bbl and an average ceiling price of c.$69/bbl, with c.6
MMbbls hedged with an average floor of c.$62/bbl and ceiling price
of c.$73/bbl in the second half of 2021. For 2022, EnQuest has
hedged a total of c.6 MMbbls using similar structures, with an
average floor price of c.$61/bbl and an average ceiling price of
c.$75/bbl. For 2023, the Group has hedged a total of approximately
c.1 MMbbls with an average floor price of c.$55/bbl and an average
ceiling price of c.$73/bbl
Production and financial information
Business performance measures For the period For the period Change
to 30 June to 30 June %
2021 2020
Production (Boepd) 46,187 66,055 (30.1)
----------------------------------------- ---------------- --------------- -------
Revenue and other operating income
($m)(1,2) 518.3 450.0 15.2
----------------------------------------- ---------------- --------------- -------
Realised oil price ($/bbl)(1,3) 62.8 43.6 44.0
----------------------------------------- ---------------- --------------- -------
Average unit operating costs ($/Boe)(3) 19.3 14.4 34.0
----------------------------------------- ---------------- --------------- -------
EBITDA ($m)(3) 345.4 320.8 7.7
----------------------------------------- ---------------- --------------- -------
Cash expenditures ($m) 54.6 108.5 (49.7)
----------------------------------------- ---------------- --------------- -------
Capital(3) 15.9 101.4 (84.3)
----------------------------------------- ---------------- --------------- -------
Abandonment 38.7 7.1 445.1
----------------------------------------- ---------------- --------------- -------
Free cash flow ($m)(3) 141.5 86.8 63.0
----------------------------------------- ---------------- --------------- -------
30 June 2021 31 December
2020
----------------------------------------- ---------------- --------------- -------
Net (debt)/cash ($m)(3) (1,183.2) (1,279.7) (7.5)
----------------------------------------- ---------------- --------------- -------
Statutory measures For the period For the period Change
to 30 June to 30 June %
2021 2020
----------------------------------------- ---------------- --------------- -------
Reported revenue and other operating
income ($m)(2,4) 481.3 438.7 9.7
----------------------------------------- ---------------- --------------- -------
Reported gross profit ($m) 148.1 18.7 692.0
----------------------------------------- ---------------- --------------- -------
Reported profit/(loss) after tax
($m)(2) (56.4) (472.4) 88.1
----------------------------------------- ---------------- --------------- -------
Reported basic earnings/(loss)
per share (cents)(2) (3.4) (28.6) 88.1
----------------------------------------- ---------------- --------------- -------
Cash generated from operations
($m)(2) 287.9 282.6 1.9
----------------------------------------- ---------------- --------------- -------
Net increase/(decrease) in cash
and cash equivalents 53.3 (32.1) -
----------------------------------------- ---------------- --------------- -------
Notes:
(1) Including realised losses of $32.9 million (2020: realised
gains of $35.2 million) associated with EnQuest's oil price
hedges
(2) Comparative information for 2020 has been restated. See Note
2 Basis of preparation - Restatements
(3) See reconciliation of alternative performance measures
within the 'Glossary - Non-GAAP measures' starting on page 31.
Note, during the second half of 2020, the Group's definition of
EBITDA was updated. Comparative information for 2020 has been
updated to reflect the changes, which are outlined in the
Glossary.
Note, EnQuest defines net debt as excluding finance lease
liabilities
(4) Including net realised and unrealised losses of $69.9
million (2020: net realised and unrealised gains of $23.9 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 and other operating income for the six months ended 30
June 2021 was $518.3 million, 15.2% higher than the same period in
2020 ($450.0 million), reflecting the materially higher oil prices
offset by a reduction in production. Revenue is predominantly
derived from crude oil sales, which for the first half of 2021
totalled $490.5 million, 30.6% higher than in the same period of
2020 ($375.5 million). Revenue from the sale of condensate and gas
in the period was $57.9 million (2020: $27.6 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 $32.9 million of realised losses (2020: gains of $35.2
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 $67.3/bbl for the six months ended 30 June
2021, compared to $39.9/bbl received during the first half of 2020.
The Group's average realised oil price including the impact of
hedging was $62.8/bbl in the first half of 2021, 44.0% higher than
during the first half of 2020 ($43.6/bbl).
Total cost of sales were $333.3 million for the six months ended
30 June 2021, 18.9% lower than in same period of 2020 ($410.9
million).
Operating costs decreased by $21.3 million, primarily reflecting
low tariff and transportation costs due to lower production for the
first half of 2021, with production costs broadly flat year on year
as lower costs following asset cessation of production ('CoP') have
been offset by remediation costs at Magnus and lower lease charter
credits reflecting higher uptime at Kraken driven by the continued
strong performance of the FPSO. Unit operating costs increased by
34.0% to $19.3/Boe (2020: $14.4/Boe) as a result of lower
production.
Total cost of sales included non-cash depletion expense of
$153.1 million, 38.4% lower than in the same period in 2020 ($248.4
million), mainly reflecting the decisions to cease production at
Dons and Alma/Galia and a decrease in the unit-of-production rate
arising from impairments booked in the period ended 31 December
2020.
Also within cost of sales, the credit relating to the Group's
lifting position and hydrocarbon inventory for the six months ended
30 June 2021 was $26.1 million (2020: credit of $48.5 million).
This reflects an increase in the net underlift position from $3.0
million at 31 December 2020 to $32.0 million at 30 June 2021.
Other cost of sales, which forms part of the total cost of sales
balance, of $53.3 million were higher than the same period in 2020
($36.7 million), reflecting the higher cost of Magnus-related
third-party gas purchases following the increase in the market
price for gas.
EBITDA for the six months ended 30 June 2021 was $345.4 million,
up 7.7% compared to the same period in 2020 ($320.8 million),
driven by higher revenue.
The tax credit for the six months ended 30 June 2021 was $19.4
million (2020: $71.5 million tax credit).
Remeasurements and exceptional items were a net post-tax loss of
$164.6 million for the six months ended 30 June 2021 (2020
restated: loss of $ 478.7 million). Revenue included unrealised
losses of $37.0 million in respect of the mark-to-market movement
on the Group's commodity contracts (2020: unrealised losses of $
11.3 million). Other remeasurements and exceptional items includes
a $27.5 million gain in relation to the fair value recalculation of
the Magnus contingent consideration reflecting a change in the
payment profile. The Group recognised a non-cash deferred tax
charge of $139.5 million (2020 restated: $286.0 million see Note 2
Basis of preparation - Restatements), following a reassessment of
deferred tax balances reflecting revisions to forecast
assumptions.
The Group's reported cash generated from operations for the six
months ended 30 June 2021 was $287.9 million (2020: $282.6
million). Free cash flow for the six months ended 30 June 2021 was
$141.5 million (2020: $86.8 million) reflecting the materially
lower cash capital expenditure in 2021, partially offset by higher
decommissioning spend.
In January 2021, EnQuest made a voluntary early repayment of
$25.0 million on the Multi-currency revolving credit facility
('RCF'). The strong production performance at Kraken combined with
higher oil prices enabled the full repayment of the $67.7 million
outstanding balance on the Sculptor Capital facility in the period
to 30 June 2021.
Net debt at 30 June 2021 was $1,183.2 million, a decrease of
7.5% compared to 31 December 2020 ($1,279.7 million). This includes
$244.4 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 2020: $205.8 million).
In July 2021, $360.0 million was drawn down from the Group's new
senior secured borrowing base debt facility. The proceeds were used
to repay the entire outstanding balance on the RCF, which at the
time of repayment was $354.5 million, including PIK and accrued
interest. In addition, $58.7 million, representing the full amount
of the outstanding principal and interest on the Magnus vendor
loan, was repaid.
Operating review
Production details
Average daily production For the period For the period
on a net working to 30 June to 30 June
interest basis 2021 2020
-------------------------- --------------- ---------------
(Boepd) (Boepd)
UK Upstream
- Magnus 13,847 18,806
- Kraken 23,690 27,472
- Other Upstream
(1) 3,504 7,700
--------------- ---------------
UK Upstream 41,041 53,978
UK Decommissioning
(2) 337 3,771
--------------- ---------------
Total UK 41,378 57,749
Total Malaysia 4,809 8,306
--------------- ---------------
Total EnQuest 46,187 66,055
--------------- ---------------
(1) Other Upstream: Scolty/Crathes, the Greater Kittiwake Area
and Alba
(2) UK Decommissioning: Heather/Broom, Thistle/Deveron, the Dons
and Alma/Galia
UK Upstream operations
Magnus
Production of 13,847 Boepd was 26.4% lower than in 2020,
primarily reflecting slower execution and an increase in scope of
the well intervention programme, combined with an unplanned
third-party outage, power related failures and natural declines
associated with the new wells that were brought onstream in early
2020. Given the challenges that have been presented during the
first half of the year, a proactive production enhancement
programme was initiated comprising various well intervention
techniques, including a coiled tubing campaign, alongside
additional topside maintenance activities. Since June, three wells
have been returned to service and production performance has
improved. The coiled tubing campaign is expected to continue during
the second half of the year, with the Group expecting production
performance to improve further in the fourth quarter, with a
two-well drilling campaign anticipated in 2022.
Kraken
Average production of 23,690 Boepd (33,603 Boepd gross) remains
in line with the Group's 2021 guidance, which remains unchanged.
The reduction from 2020 reflects the impacts of a riser tether
repair and natural declines. Production and water injection
efficiency remained strong at 90% and 92%, respectively, and the
FPSO continues to perform well. To date, a number of maintenance
activities have been undertaken allowing for the deferral of the
planned shutdown to 2022. Subsurface and well performance remains
good, with aggregate water cut evolution in line with expectations.
A successful 3D seismic campaign was completed in July, providing
valuable data for the Group 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.
Other Upstream assets
Production of 3,504 Boepd was materially lower than in 2020. At
the Greater Kittiwake Area ('GKA'), the reduction was driven by a
planned four-week shutdown that was concluded in late June, lower
production following the failure of a power umbilical to the
Mallard and Gadwall wells, as well as natural declines. Performance
from Scolty/Crathes in the period was good, reflecting the positive
impact of compression and gas lift being introduced in February,
although gas compression suffered an outage from late June until
mid-August. The power umbilical replacement, which commenced in
August, is expected to further improve performance later in
September.
Alba has continued to perform broadly in line with Group
expectations.
UK Midstream operations
The Sullom Voe Terminal ('SVT') and its related infrastructure
has delivered safe and reliable performance, with 100% service
availability continuing. The Group continues to work in close
collaboration with its stakeholders to ensure the terminal meets
existing and future customer needs, while remaining focused on
simplification and cost management, which is progressing in line
with expectations.
In pipelines, good progress has been made undertaking planned
repair and remediation work on delivery infrastructure relating to
Kraken, Magnus and Thistle, in addition to in-line pipeline
inspection evaluations at GKA. These activities will ensure
continued smooth operations across the Group's assets.
To support the ongoing transformation of SVT and EnQuest's
energy transition ambitions, the Company established an
Infrastructure and New Energy business in August, replacing the
former Midstream directorate. The new business will focus on
strengthening and extending the life of operations and assessing
and delivering new energy opportunities through innovative
commercial structures over the medium to long-term to create a hub
of growth in infrastructure and renewables at SVT.
UK Decommissioning
Average production from the Dons fields was 337 Boepd, with
production ceasing as planned in March 2021. In April 2021, the
Northern Producer Floating Production Facility departed the Dons
and was handed back to its owners.
Following acceptance by the regulator of the CoP application at
Heather during 2020, good progress has been made on decommissioning
activities, with sub-sea inspections having been completed ahead of
the resumption of the well abandonment programme. At Broom, the
application for CoP was approved by the regulator in March
2021.
At Thistle, the first phase of the re-habitation of the platform
was successfully completed in June 2021 in line with expectations,
with a permanent team now situated on the asset ahead of the well
abandonment programme planned for the fourth quarter.
Malaysia operations
In Malaysia, average production was 4,809 Boepd, 42.1% lower
than in 2020. This decrease reflects the impact of a riser
detachment in late 2020. Production has since improved and been
better than expected as a result of the accelerated progress of
initial production recovery activities. It is anticipated that
replacement of the pipeline and riser will occur in October 2021,
returning production to normal levels shortly thereafter.
In late July 2021, a planned five-day maintenance shutdown was
successfully completed at PM8/Seligi one day ahead of schedule.
Business development
In January 2021, the Group completed the acquisition of a 40.81%
equity interest in and operatorship of the Bressay Oil Field. This
acquisition provides a low-cost addition of up to 115 MMbbls (net)
2C resources, around a 65% increase in EnQuest's 2C resources from
164 MMbbls as at 31 December 2020 to 279 MMbbls. The initial
consideration was GBP2.2 million, payable as a carry against 50% of
Equinor's net share of costs from the point EnQuest assumed
operatorship.
In February 2021, the Group announced the acquisition of a
26.69% non-operated interest in the producing Golden Eagle area
from Suncor Energy UK, for an initial consideration of $325
million. The transaction will add incremental production of c.10
kboed, c.19 MMbboe to net 2P reserves and c.4 MMbboe to net 2C
resources, in addition to creating c.$170 million NPV (10)(1) .
Shareholders approved the acquisition at the General Meeting held
on 23 July 2021, with the remaining conditions precedent
anticipated to be met or waived ahead of the expected completion
around the end of September 2021.
In April 2021, the Group signed a SPA with Whalsay Energy
Holdings Limited ('WEL') to purchase their entire 100.00% equity
interest in the P1078 licence containing the proven Bentley
heavy-oil discovery. This discovery is within c.15 kilometres of
the Group's existing Kraken and Bressay operated interests,
offering further long-term potential development opportunities and
other synergies. Upon completion in July, EnQuest funded certain
accrued costs and obligations of WEL, which amounted to less than
$2 million.
(1) Per GCA CPR estimates and oil price assumptions of: 2021:
$51/bbl, 2022: $54/bbl, 2023: $57/bbl, 2024:+: $60/bbl
Liquidity and net debt
Free cash flow generation in the period to 30 June 2021 totalled
$141.5 million (2020: $86.8 million), primarily reflecting
materially lower cash capital expenditure, partially offset by
higher decommissioning spend. During the period, the Sculptor
Capital facility was repaid. At 30 June 2021, net debt was $1,183.2
million, down $96.5 million from $1,279.7 million at 31 December
2020. Total cash and available facilities at 30 June 2021 of $303.4
million, including restricted funds and ring-fenced funds held in
operational accounts totalling $102.0 million.
In June, the Group announced that it had signed a new senior
secured borrowing base debt facility (the 'RBL') of $600 million
with an additional amount of $150 million for letters of credit for
up to seven years. In July 2021, $360.0 million was drawn down from
the RBL. The proceeds were used to repay the entire outstanding
balance, including PIK, of $354.5 million on the RCF. In addition,
$58.7 million, representing the full amount of the outstanding
principal and interest on the BP vendor loan, was repaid. Following
shareholder approval of the acquisition of the Golden Eagle assets
at the Group's general meeting on 23 July 2021, it is anticipated
the remaining funds in the RBL will be used to part finance the
required consideration.
In July, the Group successfully completed a capital raise
consisting of gross proceeds of approximately GBP36.1 million
($50.0 million), by way of a firm placing and placing and open
offer of 190,122,384 new ordinary shares, at an issue price of 19
pence per new ordinary share.
2021 outlook
Full year production is expected to be at the lower end of the
guidance range of between 46,000 and 52,000 Boepd. This reflects
expected performances at Magnus, GKA and PM8/Seligi over the course
of the second half of the year.
The Group expects operating costs to be approximately $300
million, reflecting lower lease charter credits driven by higher
uptime at Kraken, additional production enhancement scopes and
topside maintenance activities at Magnus, higher diesel costs and
sterling strength . Combined cash capital and abandonment
expenditure, excluding costs associated with the PM8/Seligi riser
repair where most costs are anticipated to be covered by insurance,
is expected to be broadly around $120 million.
As at the end of August, EnQuest has hedged a total of
approximately 11 MMbbls for full year 2021 predominantly using
costless collars, with an average floor price of approximately
$59/bbl and an average ceiling price of approximately $69bbl, with
c.6 MMbbls hedged with an average floor of c.$62/bbl and ceiling
price of c.$73/bbl in the second half of 2021. For 2022, EnQuest
has hedged a total of approximately 6 MMbbls using similar
structures, with an average floor price of approximately $61/bbl
and an average ceiling price of approximately $75/bbl. For 2023,
the Group has hedged a total of approximately 1 MMbbls with an
average floor price of approximately $55/bbl and average ceiling
price of approximately $73/bbl. This ensures that the Group
receives a minimum oil price for its production. The Group
continues to layer in hedging over the longer term.
Environmental, Social and Governance
EnQuest has continued to make good progress in reducing its
Scope 1 and 2 emissions. Having reduced emissions by 26% between
2018 and 2020, the Group is ahead of the 2025 target set out in the
UK Government's North Sea Transition Deal ('NSTD') to reduce
emissions by 10% from a 2018 baseline. As previously outlined, the
Group has set its own target to reduce emissions by a further 10%
from its existing portfolio by the end of 2023 and is on track to
achieve this having materially reduced flaring in 2021. Delivering
this additional reduction in emissions would also position EnQuest
favourably against the 2027 target set out in the NSTD.
The health, safety and wellbeing of EnQuest's employees is the
Company's top priority. Following recent COVID-19 related
announcements in the UK, a phased approach back to the office has
commenced with the necessary precautions in place, while testing of
the offshore workforce continues to be undertaken regularly by the
Group. In Malaysia, the Group has evolved its strategy to
accommodate the requirement by the local government for all
personnel to quarantine for 14 days ahead of deployment to an
asset. The Group has amended its shift patterns to facilitate this
whilst maintaining safe operations. The Group remains compliant
with UK, Malaysia and Dubai government and industry policy and will
continue working closely with a variety of stakeholders, including
industry and medical organisations, to ensure its operational
response and advice to its workforce is appropriate and
commensurate with the prevailing expert advice. The Group's
day-to-day operations continue without being materially affected by
COVID-19. During the period, the Group also achieved a lost time
incident frequency ('LTI') rate of zero, with Heather achieving two
years LTI free in July, which remains materially below the UKCS
benchmark. There continues to be a focus on asset integrity and the
Group remains committed to ensuring that the ongoing asset
integrity review appropriately identifies key focus areas.
In July, EnQuest published its Diversity & Inclusion global
strategy and accompanying policy update to help the Group achieve
specific improvements. Set out in the strategy were seven distinct
commitments ranging from committing to challenging personal bias,
to ensuring that diversity within EnQuest remains a key focus area.
In addition, EnQuest has set some specific targets for women in
senior grade and management positions, as well as ethnic minorities
in Executive leadership roles. The aim is to meet these targets by
2025.
In February, the Board was pleased to appoint Liv Monica
Stubholt as a Non-Executive Director of the EnQuest Board. Liv
Monica also became a member of the Audit Committee and the Safety,
Climate and Risk Committee. Her appointment builds on the Board's
extensive experience in the energy industry and further strengthens
its governance position.
- Ends -
For further information, please contact:
EnQuest PLC Tel: +44 (0)20 7925
4900
Amjad Bseisu (Chief Executive)
Jonathan Swinney (Chief Financial Officer)
Ian Wood (Head of Investor Relations, Communications
& Reporting)
Jonathan Edwards (Senior Investor Relations
& Communications Manager)
Tulchan Communications Tel: +44 (0)20 7353
4200
Martin Robinson
Harry Cameron
Presentation to Analysts and Investors
A presentation to analysts and investors will be held at 09.00
today - London time. The presentation will be accessible via a
webcast by clicking here . A conference call facility will also be
available at 09.00 on the following numbers:
Conference call details:
UK : +44 (0) 800 279 6619
International: +44 (0) 207 192 8338
Confirmation Code: 11104072
Notes to editors
This announcement has been determined to contain inside
information. The person responsible for the release of this
announcement is Stefan Ricketts, General Counsel and Company
Secretary.
ENQUEST
EnQuest is providing creative solutions through the energy
transition. As an independent production and development company
with operations in the UK North Sea and Malaysia, the Group's
strategic vision is to be the operator of choice for maturing and
underdeveloped hydrocarbon assets 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 decreased by 30.1% to
46,187 Boepd, compared to 66,055 Boepd in 2020.
Revenue for the six months ended 30 June 2021 was $518.3
million, 15.2% higher than the same period in 2020 ($450.0
million), reflecting the materially higher oil prices offset by the
reduction in production. The Group's commodity hedge programme
resulted in realised losses of $32.9 million in the first half of
2021 (2020: gains of $35.2 million).
The Group's operating costs of $153.0 million were 12.2% lower
than in the same period in 2020 ($174.3 million). This reduction
primarily reflects reduced tariff and transportation costs due to
lower production for the first half of 2021. Production costs are
broadly flat year on year as lower costs due to the cessation of
production at the Dons in March 2021 and Alma/Galia in June 2020
have been offset by remediation costs at Magnus and lower lease
charter credits reflecting higher uptime at Kraken driven by the
continued strong performance of the FPSO. Unit costs increased to
$19.3/Boe (2020: $14.4/Boe), primarily reflecting lower
production.
Other cost of sales for the six months ended 30 June 2021 of
$53.3 million were 45.2% higher than the same period in 2020 ($36.7
million), reflecting the higher cost of Magnus-related third-party
gas purchases following the increase in the market price for
gas.
EBITDA for the six months ended 30 June 2021 was $345.4 million,
up 7.7% compared to the same period in 2020 ($320.8 million),
driven by higher revenue.
H1 2021 H1 2020
$ million $ million
--------------------------------- ---------- -----------
Profit/(loss) from operations
before tax and finance
income/(costs) 175.4 24.6
--------------------------------- ---------- -----------
Depletion and depreciation 157.0 252.3
--------------------------------- ---------- -----------
Change in provision 5.7 45.9
--------------------------------- ---------- -----------
Change in well inventories 1.0 19.0
--------------------------------- ---------- -----------
Net foreign exchange (gain)/loss 6.3 (21.0)
--------------------------------- ---------- -----------
EBITDA 345.4 320.8
--------------------------------- ---------- -----------
EnQuest's net debt decreased by $96.5 million to $1,183.2
million at 30 June 2021 (31 December 2020: $1,279.7 million). This
includes $244.4 million of interest that has been capitalised to
the principal of the facilities pursuant to the terms of the
Group's November 2016 refinancing ('PIK') (31 December 2020: $205.8
million) (see note 8 for further details).
Net debt/(cash)(1)
----------------------------- -----------------------
30 June
31 December
2021 2020
$ million $ million
----------------------------- ---------- -----------
Bonds 1,091.0 1,048.3
----------------------------- ---------- -----------
Multi-currency revolving
credit facility ('RCF') 353.1 377.3
----------------------------- ---------- -----------
Sculptor Capital facility - 67.7
----------------------------- ---------- -----------
SVT Working Capital Facility 14.1 9.2
----------------------------- ---------- -----------
Cash and cash equivalents(2) (275.0) (222.8)
----------------------------- ---------- -----------
Net debt 1,183.2 1,279.7
----------------------------- ---------- -----------
Note:
1 See reconciliation of net debt within the 'Glossary - Non-GAAP measures' starting on page 31
2 Cash and cash equivalents includes $30.7 million of restricted
cash (2020: $1.6 million), of which $29.1 million is held under
decommissioning security agreements, which was transferred to
unrestricted cash in July 2021 after the initial drawdown of the
RBL
In January 2021, EnQuest made a voluntary early repayment of
$25.0 million on the RCF. In July 2021, $360.0 million was drawn
down from the Group's new RBL. The proceeds were used to repay the
entire outstanding balance on the RCF, which at the time of
repayment was $354.5 million, including PIK and accrued interest.
Also in July, $58.7 million, representing the full amount of the
outstanding principal and interest on the Magnus vendor loan, was
repaid.
The strong production performance at Kraken combined with higher
oil prices enabled the full repayment of the $67.7 million
outstanding balance on the Sculptor Capital facility in the period
to 30 June 2021.
$37.8 million of bond interest was settled through the issue of
additional notes ('PIK') and capitalised to the principal of the
facilities in the period, reflecting an average oil price of less
than $65/bbl over the relevant cash payment condition period in
accordance with the terms of the bonds.
The Group continues to have unrestricted access to its UK
corporate tax losses, which at 30 June 2021 were $3,173.0 million
(2020: $3,183.9 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.
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
2021 were significantly higher than in the same period of 2020. The
Group's average realised oil price excluding the impact of hedging
was $67.3/bbl for the six months ended 30 June 2021, compared to
$39.9/bbl received during the first half of 2020. Revenue is
predominantly derived from crude oil sales, which for the first
half of 2021 totalled $490.5 million, 30.6% higher than in the same
period of 2020 ($375.5 million), reflecting the materially higher
oil prices offset by the reduction in production. Revenue from the
sale of condensate and gas in the period was $57.9 million (2020:
$27.6 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. Tariffs and other income generated $2.8 million (2020:
$11.7 million). The Group's commodity hedges and other oil
derivatives contributed $32.9 million of realised losses (2020:
gains of $35.2 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 $62.8/bbl in the first half of
2021, 44.0% higher than during the first half of 2020
($43.6/bbl).
Note: For the reconciliation of realised oil prices see
'Glossary - Non-GAAP measures' starting on page 31
Cost of sales(1)
H1 2021 H1 2020
$ million $ million
---------------------------- ---------- ----------
Production costs 139.5 137.7
---------------------------- ---------- ----------
Tariff and transportation
expenses 21.7 36.1
---------------------------- ---------- ----------
Realised loss/(gain) on
derivatives related to
operating costs (8.2) 0.5
---------------------------- ---------- ----------
Operating costs 153.0 174.3
---------------------------- ---------- ----------
(Credit)/charge relating
to the Group's lifting
position and hydrocarbon
inventory (26.1) (48.5)
---------------------------- ---------- ----------
Depletion of oil and gas
assets 153.1 248.4
---------------------------- ---------- ----------
Other cost of sales 53.3 36.7
---------------------------- ---------- ----------
Cost of sales 333.3 410.9
---------------------------- ---------- ----------
Unit operating cost(2) $/Boe $/Boe
---------------------------- ---------- ----------
- Production costs 16.7 11.4
---------------------------- ---------- ----------
- Tariff and transportation
expenses 2.6 3.0
---------------------------- ---------- ----------
Average unit operating
cost 19.3 14.4
---------------------------- ---------- ----------
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 $ 333.3 million for the six months ended 30
June 2021, 18.9% lower than in same period of 2020 ($410.9
million).
Operating costs decreased by $21.3 million, primarily reflecting
low tariff and transport costs due to lower production for the
first half of 2021. Production costs are broadly flat year on year
as lower costs due to assets ceasing production have been offset by
remediation costs at Magnus and lower lease charter credits driven
by higher uptime at Kraken . Unit operating costs increased by
34.0% to $19.3/Boe (2020: $ 14.4 /Boe) as a result of lower
production.
The credit relating to the Group's lifting position and
hydrocarbon inventory for the six months ended 30 June 2021 was
$26.1 million (2020: credit of $48.5 million). This reflects an
increase in the net underlift position from $3.0 million, at 31
December 2020 to $32.0 million at 30 June 2021.
Depletion expense of $153.1 million was 38.4% lower than in the
same period in 2020 ($248.4 million), mainly reflecting the
decisions to cease production at the Dons and Alma/Galia and a
decrease in the unit-of-production rate arising from impairments
recognised in the period ended 31 December 2020.
Other cost of sales for the six months ended 30 June 2021 of
$53.3 million were higher than the same period in 2020 ($36.7
million), reflecting the higher cost of Magnus-related third-party
gas purchases following the increase in the market price for
gas.
Other income and expenses
Net other expense of $9.5 million (2020: net other expense of
$11.0 million) is primarily due to recognising $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. 2020 primarily
reflected a $45.9 million recognition of an increase in the
decommissioning provision of the fully impaired assets offset by
foreign exchange gains of $21.0 million and the $10.4 million gain
on the termination of the Tanjong Baram risk service contract.
Finance costs
Finance costs of $86.6 million were 4.7% lower than in the
comparative period (2020: $90.9 million). This decrease was
primarily driven by a $7.9 million decrease in interest charges
associated with the Group's loans (2021: $10.8 million; 2020: $18.7
million) offset by a $3.4 million increase in bond interest (2021:
$37.5 million; 2020: $34.1 million). Other finance costs included
lease liability interest of $23.5 million (2020: $26.1 million),
$8.5 million on unwinding of discount on decommissioning provisions
and other liabilities (2020: $7.5 million), $3.7 million
amortisation of arrangement fees for the Sculptor Capital financing
facility and bonds (2020: $2.8 million) and other financial
expenses of $2.6 million (2020: $1.7 million), primarily being the
cost for surety bonds to provide security for decommissioning
liabilities.
Taxation
The tax credit for the six months ended 30 June 2021 of $19.4
million (2020: $71.5 million tax credit), excluding exceptional
items, is mainly due to the Ring Fence Expenditure Supplement
('RFES') on UK activities generated in the year.
Remeasurements and exceptional items
Remeasurements and exceptional items resulting in a post-tax net
loss of $ 164.6 million have been disclosed separately for the six
month period ended 30 June 2021 (2020 restated: loss of $478.7
million).
Revenue included unrealised losses of $37.0 million in respect
of the mark-to-market movement on the Group's commodity contracts
(2020: unrealised losses of $11.3 million).
Other income included a $27.5 million gain in relation to the
fair value recalculation of the Magnus contingent consideration
reflecting a change in the payment profile (2020: $161.9 million
gain). Finance costs mainly relates to the unwinding of contingent
consideration from the acquisition of Magnus and associated
infrastructure and interest charged on the vendor loan of $30.3
million (2020: $39.7 million).
A net tax charge of $124.9 million (2020 restated: $170.6
million see Note 2 Basis of preparation - Restatements) has been
presented as exceptional, representing the tax impact of the above
items and a non-cash derecognition of undiscounted deferred tax
assets reflecting changes in the Group's forecast assumptions.
EnQuest continues to have unrestricted access to its full
unrecognised UK North sea corporate tax losses of $3,173.0 million
at 30 June 2021.
IFRS results
The Group's results on an IFRS basis are shown on the Group
Income Statement as 'Reported in the 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, 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 (applicable to first half 2020 only). Taking
account of these items, and the other exceptional items included
within the Group income statement which are principally related to
the change in fair value of contingent consideration payable and
2020 impairment charges, EnQuest's IFRS profit from operations
before tax and finance costs was $165.9 million (2020: loss of
$243.8 million), IFRS profit before tax was $49.1 million (2020:
loss of $373.4 million), and IFRS loss after tax was $56.4 million
(2020 restated: loss of $472.4 million).
Earnings per share
The Group's Business performance basic profit per share was 6.6
cents (2020 profit per share: 0.4 cents) and diluted profit per
share was 6.5 cents (2020 profit per share: 0.4 cents).
The Group's reported basic loss per share was 3.4 cents (2020
loss per share restated: 28.6 cents) and reported diluted loss per
share was 3.4 cents (2020 loss per share restated: 28.6 cents).
Cash flow and liquidity
Net debt at 30 June 2021 amounted to $1,183.2 million, including
PIK of $244.4 million, compared with net debt of $1,279.7 million
at 31 December 2020, including PIK of $205.8 million. The movement
in net debt was as follows:
$ million
------------------------------------ ---------
Net debt 1 January 2021 (1,279.7)
------------------------------------ ---------
Net cash flows from operating
activities 246.9
------------------------------------ ---------
Cash capital expenditure (15.9)
------------------------------------ ---------
Net interest and finance costs
paid (16.9)
------------------------------------ ---------
Finance lease payments (57.3)
------------------------------------ ---------
Repayments on Magnus financing
and profit share (12.3)
------------------------------------ ---------
Non-cash capitalisation of interest (30.2)
------------------------------------ ---------
Other movements, primarily net
foreign exchange on cash and
debt (17.8)
------------------------------------ ---------
Net debt 30 June 2021(1) (1,183.2)
------------------------------------ ---------
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 2021 were $246.9 million,
down 10.0% compared to comparative period of 2020 ($274.4 million).
Key drivers are materially higher decommissioning spend and
negative working capital movements, partially offset by the higher
revenue and lower cost of sales.
Cash outflow on capital expenditure is set out in the table
below:
H1 2021 H1 2020
$ million $ million
--------------------------- ---------- ----------
North Sea 11.0 99.4
--------------------------- ---------- ----------
Malaysia 3.9 1.9
--------------------------- ---------- ----------
Exploration and evaluation 1.0 0.1
--------------------------- ---------- ----------
15.9 101.4
--------------------------- ---------- ----------
Cash capital expenditure in the period ended 30 June 2021
primarily related to Magnus well interventions and the PM8/Seligi
pipeline replacement projects. Cash capital expenditure in 2020
primarily related to drilling campaigns undertaken at Kraken and
Magnus.
Balance sheet
The Group's total asset value has decreased by $72.7 million to
$3,789.9 million at 30 June 2021 (2020 restated: $3,862.6
million).
Net current liabilities have decreased to $443.4 million as at
30 June 2021 (2020: $536.9 million). Included in the Group's net
current liabilities are $65.9 million of estimated future
obligations where settlement is subject to the financial
performance at Magnus (2020: $73.7 million).
Property, plant and equipment ('PP&E')
PP&E has decreased by $122.1 million to $2,511.8 million at
30 June 2021 from $2,633.9 million at 31 December 2020 (see note
7). This decrease encompasses the capital additions to PP&E of
$28.0 million, a net increase of $7.1 million for changes in
estimates for decommissioning and other provisions, more than
offset by depletion and depreciation charges of $157.0 million.
The PP&E capital additions during the year, including
capitalised interest, are set out in the table below:
1H 2021 H1 2020
$ million $ million
---------- ---------- ----------
North Sea 20.8 71.8
---------- ----------
Malaysia 7.2 0.7
---------- ---------- ----------
28.0 72.5
---------- ---------- ----------
Trade and other receivables
Trade and other receivables increased by $62.2 million to $180.9
million at 30 June 2021 compared with $118.7 million at 31 December
2020. The increase is driven by the increase in the Group's
underlift position ($29.0 million) and timing of settlements.
Cash and net debt
The Group had $275.0 million of cash and cash equivalents at 30
June 2021 and $1,183.2 million of net debt, including PIK and
capitalised interest of $244.4 million (2020: $222.8 million,
$1,279.7 million and $214.2 million, respectively). Cash and cash
equivalents includes $30.7 million of restricted cash (2020: $1.6
million). Restricted cash of $29.1 million was released in July
2021 following the initial drawdown from the RBL.
Net debt comprises the following liabilities:
-- $263.9 million principal outstanding on the GBP155.0 million
retail bond, including interest capitalised as PIK of $49.2 million
(2020: $249.2 million and $39.4 million, respectively);
-- $827.2 million principal outstanding on the high yield bond,
including interest capitalised as PIK of $177.2 million (2020:
$799.2 million and $149.2 million, respectively);
-- $353.1 million of credit facility, comprising amounts drawn
down of $335.0 million and interest capitalised as PIK of $18.1
million (2020: $377.3 million, $360.0 million and $17.3 million,
respectively);
-- nil on the Sculptor Capital facility (2020: $67.7 million); and
-- $14.1 million relating to the SVT Working Capital Facility (2020: $9.2 million).
The Group continues to review its capital structure and longer
term solutions.
Provisions
The Group's decommissioning provision decreased by $9.8 million
to $768.4 million at 30 June 2021 (2020: $778.2 million).
The Thistle decommissioning provision decreased by $13.8 million
in the six months ended 30 June 2021 to $39.3 million (2020: $53.1
million) primarily related to utilisations. Other provisions also
decreased in the period to $4.5 million (2020: $9.1 million).
Contingent consideration
The contingent consideration related to the Magnus acquisition
decreased by $13.5 million. In the first six months of 2021,
EnQuest paid $16.3 million to BP (2020: $30.1 million). The payment
primarily related to the $15.0 million partial repayment of the 75%
interest vendor loan and interest and $1.0 million relating to BP's
entitlement to share in the cash flows from the 75% interest. A
change in fair value estimate charge of $27.5 million (2020: $161.9
million) and finance costs of $30.3 million (2020: $39.7 million)
was recognised in the period.
Income tax
The Group had an income tax receivable of $1.3 million (2020:
$5.6 million receivable) related to UK corporation tax repayments
and North Sea research and development expenditure credits.
Deferred tax
The Group's net deferred tax asset has decreased from $653.4
million at 31 December 2020 (restated) to $554.3 million at 30 June
2021. This is driven by the derecognition of undiscounted deferred
tax assets reflecting changes in the Group's forecast assumptions,
and movements in relation to unrealised hedging, capital
expenditure and UK RFES. The restatement for the period ended 30
June 2020 movement relates to a previous inconsistency in the
calculation of deferred tax and the future cash flows used to
support the recognition of that deferred tax and the deferred tax
asset associated with other available losses, see Note 2 Basis of
preparation - Restatements. EnQuest continues to have access to its
full UK corporate tax losses carried forward at 30 June 2021
amounting to $3,173.0 million (31 December 2020: $3,183.9
million).
Trade and other payables
Trade and other payables of $310.1 million at 30 June 2021 are
$54.9 million higher than at 31 December 2020 ($255.2 million). The
full balance is payable within one year.
Leases obligations
As at 30 June 2021, the Group held lease liabilities of $620.1
million (31 December 2020 $647.8 million).
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 30 of the Group's 2020 Annual
report.
Going concern disclosure
The Group closely monitors and manages its funding position and
liquidity risk throughout the year, 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 management to mitigate liquidity or covenant
compliance risks in a timely manner.
The Group continues to monitor actively the impact on operations
from COVID-19 and the health, safety and wellbeing of its employees
is its top priority. The Group remains compliant with UK, Malaysia
and Dubai government and industry policy. The Group has also been
working with a variety of stakeholders, including industry and
medical organisations, to ensure its operational response and
advice to its workforce is appropriate and commensurate with the
prevailing expert advice. At the time of publication of this
interim report, the Group's day-to-day operations continue without
being materially affected by COVID-19.
On 11 June 2021, the Group announced it had signed a new senior
secured borrowing base debt facility (the 'RBL') of $600 million
and an additional amount of $150 million for letters of credit, for
up to seven years. The RBL contains covenants related to the ratio
of net financial indebtedness to EBITDA and minimum cash headroom
requirements. The RBL also includes a cash sweep mechanism, whereby
any unrestricted cash in excess of $75 million is swept to repay
outstanding amounts at calendar quarter ends. The new facility
enables the Group to simplify its existing capital structure and
finance the acquisition of a 26.69% interest in the Golden Eagle
assets.
Drawdown of the new facility is in two steps:
-- Step 1 - Refinancing existing debt; On 21 July 2021, the
Group drew down $360.0 million from the new facility and repaid in
full its existing senior credit facility and the outstanding BP
vendor loan associated with the acquisition of the 75% interest in
Magnus;
-- Step 2 - Financing the acquisition of the interest in the
Golden Eagle assets. The Base Case assumes the step 2 drawdown on
the new facility and related completion of the acquisition of
Golden Eagle at the end of third quarter 2021. In addition to the
RBL, the initial consideration of $325.0 million will be funded
through the combination of the equity raise and the interim period
post-tax cash flows generated from the economic date of 1 January
2021.
In accordance with the amortisation schedule of the RBL, there
is a $300 million reduction in the utilisation limit from the $600
million facility occurring within the going concern period. The
amortisation schedule is structured so that the RBL is fully repaid
by June 2023 in the event the Group's existing high yield bond is
not refinanced by this time.
Upon refinancing of the Group's high yield bond (which, given
the bond matures in October 2023, is anticipated to occur outside
the going concern period), the maturity of the new facility is
extended to seven years from its signing date, 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.
The Group's latest assessment of the 2021 and 2022 forecast
underpins management's base case ('Base Case') and uses oil price
assumptions of $70.0/bbl from August to December 2021 and $68.0/bbl
for 2022, 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 $63.0/bbl from August to December 2021 and $61.2/bbl for
2022;
-- Production risking of c.5.0% for 2022; and
-- A 2.5% increase to operating costs for 2022.
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. The
Directors have also performed reverse stress testing on the Base
Case and a price of less than $55.0/bbl is required to maintain $75
million of headroom as required by the RBL in the going concern
period.
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 2020. This was published in April 2021 and the
below risks and uncertainties reflect the impacts of climate change
and COVID-19 on the business, where relevant. Following the
successful signing of a new senior secured borrowing base debt
facility in June 2021, which has enabled the Group to repay the
entire outstanding amount due, including payment in kind, on the
Group's RCF ahead of maturity in October 2021, the financial risks
and uncertainties for the Group have decreased when compared to
those disclosed in the Group's Annual Report and Accounts 2020. All
of the Group's other risks and uncertainties remain unchanged from
those published in April 2021.
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'):
o 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:
o A material decline in oil and gas prices adversely affects the
Group's operations and financial condition.
-- Production:
o 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).
o Lower than expected reservoir performance or insufficient
addition of new resources may have a material impact on the Group's
future growth.
o The Group's delivery infrastructure in the UK North Sea is, to
a significant extent, dependent on the Sullom Voe Terminal.
o Longer-term production is threatened if low oil prices or
prolonged field shutdowns and/or underperformance requiring
high-cost remediation bring forward decommissioning timelines.
-- Project execution and delivery:
o The Group's success will be partially dependent upon the
successful execution and delivery of potential future projects that
are undertaken (including decommissioning of certain fields in the
UK).
-- Subsurface risk and reserves replacement:
o Failure to develop its contingent and prospective resources or
secure new licences and/or asset acquisitions and realise their
expected value.
-- Financial:
o 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 the terms of its new senior secured borrowing base debt
facility.
o Similar conditions could impact the Group's ability to
refinance the bonds ahead of maturity in October 2023.
-- Human resources:
o 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 given the
potential impacts of COVID-19, could also impact the operations of
the Group.
-- Reputation:
o 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.
o It is increasingly important EnQuest clearly articulates its
approach to and benchmarks its performance against relevant and
material ESG factors.
-- Fiscal risk and government take:
o 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.
-- Joint venture partners:
o Failure by joint venture parties to fund their obligations
.
o Dependence on other parties where the Group is
non-operator.
-- Competition:
o 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 .
-- Portfolio concentration:
o The Group's assets are primarily concentrated in the UK North
Sea around a limited number of infrastructure hubs and some
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.
-- International business:
o 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.
-- IT security and resilience:
o 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.
For full details of these risks and uncertainties, please see
the Group's Annual Report and Accounts 2020 .
Group Income Statement
For the six months ended 30 June 2021
2021 2020 restated(i)
----------------------- ----- ------------------------------------------ ------------------------------------------
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(i) 5 518,287 (36,973) 481,314 450,004 (11,278) 438,726
----------------------- ----- ------------ ---------------- ---------- ------------ ---------------- ----------
Cost of sales (333,262) - (333,262) (410,870) (9,201) (420,071)
----------------------- ----- ------------ ---------------- ---------- ------------ ---------------- ----------
Gross profit/(loss) 185,025 (36,973) 148,052 39,134 (20,479) 18,655
----------------------- ----- ------------ ---------------- ---------- ------------ ---------------- ----------
Net impairment to oil
and
gas assets - - - - (409,800) (409,800)
----------------------- ----- ------------ ---------------- ---------- ------------ ---------------- ----------
General and
administration
expenses (130) - (130) (3,538) - (3,538)
----------------------- ----- ------------ ---------------- ---------- ------------ ---------------- ----------
Other income(i) 4,333 27,490 31,823 34,974 161,908 196,882
----------------------- ----- ------------ ---------------- ---------- ------------ ---------------- ----------
Other expenses (13,873) - (13,873) (45,964) - (45,964)
----------------------- ----- ------------ ---------------- ---------- ------------ ---------------- ----------
Profit/(loss) from
operations
before tax and finance
income/(costs) 175,355 (9,483) 165,872 24,606 (268,371) (243,765)
----------------------- ----- ------------ ---------------- ---------- ------------ ---------------- ----------
Finance costs (86,603) (30,299) (116,902) (90,909) (39,733) (130,642)
----------------------- ----- ------------ ---------------- ---------- ------------ ---------------- ----------
Finance income 102 - 102 1,050 - 1,050
----------------------- ----- ------------ ---------------- ---------- ------------ ---------------- ----------
Profit/(loss) before
tax 88,854 (39,782) 49,072 (65,253) (308,104) (373,357)
----------------------- ----- ------------ ---------------- ---------- ------------ ---------------- ----------
Income tax 19,411 (124,855) (105,444) 71,469 (170,550) (99,081)
----------------------- ----- ------------ ---------------- ---------- ------------ ---------------- ----------
Profit/(loss) for the
year
attributable to owners
of the parent 108,265 (164,637) (56,372) 6,216 (478,654) (472,438)
----------------------- ----- ------------ ---------------- ---------- ------------ ---------------- ----------
Total comprehensive
profit/(loss)
for the period,
attributable
to owners of the
parent (56,372) (472,438)
----------------------- ----- ------------ ---------------- ---------- ------------ ---------------- ----------
(i) See Note 2 Basis of preparation - Restatements
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 0.066 (0.034) 0.004 (0.286)
------------------- ------ ------- ------ -------
Diluted 0.065 (0.034) 0.004 (0.286)
------------------- ------ ------- ------ -------
The attached notes 1 to 14 form part of these condensed Group
financial statements.
Group Balance Sheet
At 30 June 2021
30 June
31 December
2021 2020 restated(i)
Notes $'000 $'000
Unaudited Audited
------------------------------ ----- ------------- -----------------
ASSETS
------------------------------ ----- ------------- -----------------
Non-current assets
------------------------------ ----- ------------- -----------------
Property, plant and equipment 7 2,511,835 2,633,917
------------------------------ ----- ------------- -----------------
Goodwill 134,400 134,400
------------------------------ ----- ------------- -----------------
Intangible oil and gas assets 33,003 27,546
------------------------------ ----- ------------- -----------------
Deferred tax assets 560,035 659,803
------------------------------ ----- ------------- -----------------
Other long term assets 9 34,817 7
------------------------------ ----- ------------- -----------------
3,274,090 3,455,673
------------------------------ ----- ------------- -----------------
Current assets
------------------------------ ----- ------------- -----------------
Inventories 58,563 59,784
------------------------------ ----- ------------- -----------------
Trade and other receivables 180,910 118,715
------------------------------ ----- ------------- -----------------
Current tax receivable 1,307 5,601
------------------------------ ----- ------------- -----------------
Cash and cash equivalents 275,034 222,830
------------------------------ ----- ------------- -----------------
515,814 406,930
------------------------------ ----- ------------- -----------------
TOTAL ASSETS 3,789,904 3,862,603
------------------------------ ----- ------------- -----------------
EQUITY AND LIABILITIES
------------------------------ ----- ------------- -----------------
Equity
------------------------------ ----- ------------- -----------------
Share capital and premium 345,420 345,420
------------------------------ ----- ------------- -----------------
Share-based payment reserve 4,531 1,016
------------------------------ ----- ------------- -----------------
Retained earnings (311,591) (255,219)
------------------------------ ----- ------------- -----------------
TOTAL EQUITY 38,360 91,217
------------------------------ ----- ------------- -----------------
Non-current liabilities
------------------------------ ----- ------------- -----------------
Borrowings 8 - 37,854
------------------------------ ----- ------------- -----------------
Bonds 8 1,088,328 1,045,041
------------------------------ ----- ------------- -----------------
Lease liabilities 513,522 548,407
------------------------------ ----- ------------- -----------------
Contingent consideration 10 442,837 448,384
------------------------------ ----- ------------- -----------------
Provisions 11 741,938 741,453
------------------------------ ----- ------------- -----------------
Deferred tax liabilities 5,691 6,385
------------------------------ ----- ------------- -----------------
2,792,316 2,827,524
------------------------------ ----- ------------- -----------------
Current liabilities
------------------------------ ----- ------------- -----------------
Borrowings 8 367,164 414,430
------------------------------ ----- ------------- -----------------
Lease liabilities 106,618 99,439
------------------------------ ----- ------------- -----------------
Contingent consideration 10 65,928 73,877
------------------------------ ----- ------------- -----------------
Provisions 11 70,360 98,954
------------------------------ ----- ------------- -----------------
Trade and other payables 310,083 255,155
------------------------------ ----- ------------- -----------------
Other financial liabilities 9 38,980 2,007
------------------------------ ----- ------------- -----------------
Current tax payable 95 -
------------------------------ ----- ------------- -----------------
959,228 943,862
------------------------------ ----- ------------- -----------------
TOTAL LIABILITIES 3,751,544 3,771,386
------------------------------ ----- ------------- -----------------
TOTAL EQUITY AND LIABILITIES 3,789,904 3,862,603
------------------------------ ----- ------------- -----------------
(i) See Note 2 Basis of preparation - Restatements
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 2021
Merger
Share
capital Share-based
and share payments Retained
premium reserve(i) reserve earnings Total
$'000 $'000 $'000 $'000 $'000
Unaudited Unaudited Unaudited Unaudited Unaudited
------------------------------------------ ---------- ----------- ----------- --------- ---------
Balance at 1 January 2020 345,420 662,855 (1,085) (448,129) 559,061
------------------------------------------ ---------- ----------- ----------- --------- ---------
Profit/(loss) for the year (restated)(ii) - - - (472,438) (472,438)
------------------------------------------ ---------- ----------- ----------- --------- ---------
Total comprehensive loss for the year
(restated) (ii) - - - (472,438) (472,438)
------------------------------------------ ---------- ----------- ----------- --------- ---------
Share-based payment - - 2,616 - 2,616
------------------------------------------ ---------- ----------- ----------- --------- ---------
Balance at 30 June 2020 (restated) (ii) 345,420 662,855 1,531 (920,567) 89,239
------------------------------------------ ---------- ----------- ----------- --------- ---------
Balance at 1 January 2021 345,420 - 1,016 (255,219) 91,217
------------------------------------------ ---------- ----------- ----------- --------- ---------
Profit/(loss) for the year - - - (56,372) (56,372)
------------------------------------------ ---------- ----------- ----------- --------- ---------
Total comprehensive loss for the year - - - (56,372) (56,372)
------------------------------------------ ---------- ----------- ----------- --------- ---------
Share-based payment - - 3,515 - 3,515
------------------------------------------ ---------- ----------- ----------- --------- ---------
Balance at 30 June 2021 345,420 - 4,531 (311,591) 38,360
------------------------------------------ ---------- ----------- ----------- --------- ---------
(i) In the second half of 2020, the merger reserve was released
to retained earnings as the assets which gave rise to its original
recognition were fully written down.
(ii) See Note 2 Basis of preparation - Restatements
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 2021
30 June 30 June
2021 2020
$'000
Notes $'000 restated(i)
Unaudited Unaudited
------------------------------------------------------- ----- --------- -------------
CASH FLOW FROM OPERATING ACTIVITIES
------------------------------------------------------- ----- --------- -------------
Cash generated from operations 13 287,879 282,560
------------------------------------------------------- ----- --------- -------------
Cash received/(paid) on sale/(purchase) of financial
instruments - 4,417
------------------------------------------------------- ----- --------- -------------
Decommissioning spend (38,661) (7,082)
------------------------------------------------------- ----- --------- -------------
Income taxes paid (2,276) (5,458)
------------------------------------------------------- ----- --------- -------------
Net cash flows from/(used in) operating activities 246,942 274,437
------------------------------------------------------- ----- --------- -------------
INVESTING ACTIVITIES
------------------------------------------------------- ----- --------- -------------
Purchase of property, plant and equipment (14,986) (101,385)
------------------------------------------------------- ----- --------- -------------
Purchase of intangible oil and gas assets (936) -
------------------------------------------------------- ----- --------- -------------
Net cash received on termination of Tanjong Baram risk
service contract - 17,086
------------------------------------------------------- ----- --------- -------------
Repayment of Magnus contingent consideration - Profit
share 10 (968) (21,088)
------------------------------------------------------- ----- --------- -------------
Deposit for Golden Eagle acquisition (3,000) -
------------------------------------------------------- ----- --------- -------------
Interest received 83 696
------------------------------------------------------- ----- --------- -------------
Net cash flows (used in)/from investing activities (19,807) (104,691)
------------------------------------------------------- ----- --------- -------------
FINANCING ACTIVITIES
------------------------------------------------------- ----- --------- -------------
Repayment of loans and borrowings (88,170) (118,906)
------------------------------------------------------- ----- --------- -------------
Repayment of Magnus contingent consideration - Vendor
loan 10 (11,362) (4,675)
------------------------------------------------------- ----- --------- -------------
Repayment of obligations under financing leases (57,286) (56,139)
------------------------------------------------------- ----- --------- -------------
Interest paid (15,795) (21,000)
------------------------------------------------------- ----- --------- -------------
Other finance costs paid (1,236) (1,118)
------------------------------------------------------- ----- --------- -------------
Net cash flows from/(used in) financing activities (173,849) (201,838)
------------------------------------------------------- ----- --------- -------------
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 53,286 (32,092)
------------------------------------------------------- ----- --------- -------------
Net foreign exchange on cash and cash equivalents (1,082) (4,989)
------------------------------------------------------- ----- --------- -------------
Cash and cash equivalents at 1 January 222,830 220,455
------------------------------------------------------- ----- --------- -------------
CASH AND CASH EQUIVALENTS AT 30 June 275,034 183,374
------------------------------------------------------- ----- --------- -------------
Reconciliation of cash and cash equivalents
------------------------------------------------------- ----- --------- -------------
Cash and cash equivalents 244,331 181,800
------------------------------------------------------- ----- --------- -------------
Restricted cash (ii) 30,703 1,574
------------------------------------------------------- ----- --------- -------------
Cash and cash equivalents per balance sheet 275,034 183,374
------------------------------------------------------- ----- --------- -------------
(i) See Note 2 Basis of preparation - Restatements
(ii) At 30 June 2021, restricted cash includes $29.1 million
held under decommissioning security agreements, which was
transferred to unrestricted cash in July 2021 after the initial
drawdown of the RBL.
The attached notes 1 to 14 form part of these condensed Group
financial statements.
Notes to the Half Year Condensed Financial Statements
For the period ended 30 June 2021
1. Corporate information
EnQuest PLC ('EnQuest' or the 'Company') is a public company
limited by shares incorporated in the United Kingdom under the
Companies Act and is registered in England and Wales and listed on
the London Stock Exchange and on the Stockholm NASDAQ OMX.
The principal activities of the Company and its subsidiaries
(together the 'Group') are to enhance hydrocarbon recovery and
extend the useful lives of mature and underdeveloped assets and
associated infrastructure in a profitable and responsible
manner.
The Group's half year condensed financial statements for the six
months ended 30 June 2021 were authorised for issue in accordance
with a resolution of the Board of Directors on 1 September
2021.
2. Basis of preparation
The interim condensed consolidated financial statements of the
Group for the six months ended 30 June 2021 have been prepared in
accordance with IAS 34 'Interim Financial Reporting' as adopted by
the UK. The presentation currency of the Group financial
information is US Dollars and all values in the Group financial
information are rounded to the nearest thousand ($'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 2020.
The financial information contained in this announcement does
not constitute statutory financial statements within the meaning of
section 435 of the Companies Act 2006.
Consolidated statutory accounts for the year ended 31 December
2020, on which the auditor gave an unqualified audit report, have
been filed with the Registrar of Companies. The report contained a
material uncertainty related to going concern, which is no longer
the case given the Group signed a new RBL facility in June
2021.
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 7. 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 2021 are materially consistent with those followed in the
preparation of the Group's financial statements for the year ended
31 December 2020, except for the change in accounting policy
related to the presentation of rental income as noted under
restatements below and the adoption of new standards effective as
of 1 January 2021 as set out below. 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 2020 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.
Impairment testing assumptions
The Group's oil price assumptions were revised during the first
half of 2021 as shown below. The assumptions up to 2023 were
increased to reflect an improved demand outlook. For periods after
2023, the Group's longer term price assumption is unchanged from
that disclosed in the Group's 2020 annual report and accounts at
$60/bbl (in real 2020 terms) inflated at 2% per annum from
2024.
Second
half 2021 2022 2023
------------------ ----------- ----- -----
Brent oil ($/bbl) 70 66 62
------------------ ----------- ----- -----
The discount rate used in impairment testing is unchanged from
that disclosed in the Group's 2020 annual report and accounts.
Restatements
Change in accounting policy - presentation of rental income
EnQuest receives rental income for subleasing space in its
corporate offices. The Group previously presented the rental income
associated with office subleases within revenue and other operating
income in the income statement. The Group has determined that the
revenue derived from this income is not related to the principal
activities of the Group and should be presented within other income
in the income statement. Comparative information has been restated
resulting in a $0.7 million reduction in revenue and other
operating income and a $0.7m increase in other income. There is no
impact on comparative information for profit/(loss) from operations
before tax and finance income/(costs) or earnings per share.
Presentation of Group Statement of Cash Flows
Following a review of the Group's primary statements, the Group
has updated the presentation of the Group Statement of Cash Flows
to reconcile to cash and cash equivalents per the balance sheet. In
previous years, the Group Statement of Cash Flows was reconciled to
cash and cash equivalents excluding restricted cash. Following this
change, the presentation of the Group Statement of Cash Flows in
2020 has been restated which has resulted in a $0.7 million
reduction in cash flows from operating activities.
Deferred Tax Asset Restatement:
Subsequent to the publication of the Group's 2020 consolidated
financial statements and as part of the preparation of this interim
report, the Group has determined there was an inconsistency in the
calculation of the deferred tax asset recognised on the balance
sheet associated with Magnus contingent consideration and the
relevant estimated future cash flows used in the calculation of
future taxable profits to support the recognition of this deferred
tax asset and the deferred tax asset associated with other
available tax losses. This inconsistency resulted in excess
deferred tax being derecognised within Remeasurements and
exceptional items of $146.6 million with respect to the period
ended 30 June 2020 and $155.9 million as at and for the year ended
31 December 2020. There are no changes to the underlying amounts
recognised in relation to contingent consideration or to amounts
recognised in respect of deferred tax in earlier periods. The
tables below reflect the corrections to the comparative periods
which are disclosed in this interim report.
Group income statement
Restatement
2020 (As previously reported) adjustment 2020 restated
--------------- ----------------------------------------- ----------- -----------------------------------------
Remeasurements Remeasurements
and exceptional and exceptional
Business items (note Reported Business items (note Reported
performance 4) in period performance 4) in period
$'000 $'000 $'000 $'000 $'000 $'000
--------------- ------------ --------------- ---------- ----------- ------------ --------------- ----------
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
--------------- ------------ --------------- ---------- ----------- ------------ --------------- ----------
Profit/(loss)
before
tax (65,253) (308,104) (373,357) (65,253) (308,104) (373,357)
--------------- ------------ --------------- ---------- ----------- ------------ --------------- ----------
Income tax 71,469 (317,120) (245,651) 146,570 71,469 (170,550) (99,081)
--------------- ------------ --------------- ---------- ----------- ------------ --------------- ----------
Profit/(loss)
for
the year
attributable
to owners of
the
parent 6,216 (625,224) (619,008) 146,570 6,216 (478,654) (472,438)
--------------- ------------ --------------- ---------- ----------- ------------ --------------- ----------
Total
comprehensive
profit/(loss)
for
the period,
attributable
to owners of
the
parent (619,008) 146,570 (472,438)
--------------- ------------ --------------- ---------- ----------- ------------ --------------- ----------
Earnings per
share $ $ $ $
------------- ------ ------- ----- ------ -------
Basic 0.004 (0.374) 0.088 0.004 (0.286)
------------- ------ ------- ----- ------ -------
Diluted 0.004 (0.374) 0.088 0.004 (0.286)
------------- ------ ------- ----- ------ -------
Group balance sheet
2020 (As
previously
reported)
Restatement 2020 restated
$'000 adjustment $'000
Audited Audited
----------------------------- ----------- ----------- -------------
ASSETS
----------------------------- ----------- ----------- -------------
Non-current assets
----------------------------- ----------- ----------- -------------
Deferred tax assets 503,946 155,857 659,803
----------------------------- ----------- ----------- -------------
TOTAL ASSETS 3,706,746 155,857 3,862,603
----------------------------- ----------- ----------- -------------
EQUITY AND LIABILITIES
----------------------------- ----------- ----------- -------------
Equity
----------------------------- ----------- ----------- -------------
Retained earnings (411,076) 155,857 (255,219)
----------------------------- ----------- ----------- -------------
TOTAL EQUITY (64,640) 155,857 91,217
----------------------------- ----------- ----------- -------------
TOTAL EQUITY AND LIABILITIES 3,706,746 155,857 3,862,603
----------------------------- ----------- ----------- -------------
New and amended standards adopted by the Group
Interest Rate Benchmark Reform - Phase II: Amendments to IFRS 9,
IAS 39, IFRS 7, IFRS 4 and IFRS 16
The amendments provide temporary reliefs and include practical
expedients which address the financial reporting effects when an
interbank offered rate is replaced with an alternative nearly
risk-free interest rate. The Group is currently assessing the
impact on contracts and arrangements that are linked to existing
interest rate benchmarks, for example, borrowings.
These amendments had no impact on the interim condensed
consolidated financial statements of the Group. The Group intends
to use the practical expedients in future periods if they become
applicable.
3. Segment information
Segment information for the six month period is as follows:
Adjustments
Period ended 30 June 2021 Total and
North All other eliminations
$'000 Sea Malaysia segments segments (ii) Consolidated
-------------------------------------- -------- -------- --------- --------- ------------- ------------
Revenue:
-------------------------------------- -------- -------- --------- --------- ------------- ------------
Revenue from contracts with customers 502,071 46,782 - 548,853 - 548,853
-------------------------------------- -------- -------- --------- --------- ------------- ------------
Other operating income 2,232 - 110 2,342 (69,881) (67,539)
-------------------------------------- -------- -------- --------- --------- ------------- ------------
Total revenue 504,303 46,782 110 551,195 (69,881) 481,314
-------------------------------------- -------- -------- --------- --------- ------------- ------------
Segment profit/(loss) (iii) 215,805 15,617 (3,826) 227,596 (61,724) 165,872
-------------------------------------- -------- -------- --------- --------- ------------- ------------
Restated Period ended 30 June Adjustments
2020(i) Total and
All other
$'000 North Sea Malaysia segments segments eliminations(ii) Consolidated
-------------------------------------- --------- -------- --------- --------- ----------------- ------------
Revenue:
-------------------------------------- --------- -------- --------- --------- ----------------- ------------
Revenue from contracts with customers 377,808 33,277 - 411,085 - 411,085
-------------------------------------- --------- -------- --------- --------- ----------------- ------------
Other operating income(i) 3,480 - 210 3,690 23,951 27,641
-------------------------------------- --------- -------- --------- --------- ----------------- ------------
Total revenue 381,288 33,277 210 414,775 23,951 438,726
-------------------------------------- --------- -------- --------- --------- ----------------- ------------
Segment profit/(loss) (iii) (291,439) 10,847 16,443 (264,149) 20,384 (243,765)
-------------------------------------- --------- -------- --------- --------- ----------------- ------------
(i) Comparative information for 2020 has been restated for the
changes to the presentation of rental income effective 1 January
2021. For more information, see Note 2 Basis of preparation -
Restatements
(ii) 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
(iii) 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
2021 2020
$'000 $'000
------------------------------ --------- ---------
Segment profit/(loss) 227,596 (264,149)
------------------------------ --------- ---------
Finance income 102 1,050
------------------------------ --------- ---------
Finance expense (116,902) (130,642)
------------------------------ --------- ---------
Gain/(loss) on derivatives(i) (61,724) 20,384
------------------------------ --------- ---------
Profit/(loss) before tax 49,072 (373,357)
------------------------------ --------- ---------
(i) Includes $24.7 million realised losses (2020: $34.7 million
realised gains) on derivatives and $37.0 million unrealised losses
(2020: $14.3 million unrealised losses) on derivatives
4. Remeasurements and exceptional items
Impairments
Period ended 30 June 2021 Fair value and
remeasurement write Other
$'000 (i) offs (ii) (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)
------------------------------------------- -------------- ----------- -------- ---------
Impairments
and
Period ended 30 June 2020 restated Fair value write
$'000 remeasurement(i) offs(ii) Other(iii) Total
-------------------------------------------- ----------------- ----------- ---------- ---------
Revenue and other operating income (11,278) - - (11,278)
-------------------------------------------- ----------------- ----------- ---------- ---------
Cost of sales (3,039) - (6,162) (9,201)
-------------------------------------------- ----------------- ----------- ---------- ---------
Net impairment (charge)/reversal on oil and
gas assets - (409,800) - (409,800)
-------------------------------------------- ----------------- ----------- ---------- ---------
Other income 161,908 - - 161,908
-------------------------------------------- ----------------- ----------- ---------- ---------
Finance costs - - (39,733) (39,733)
-------------------------------------------- ----------------- ----------- ---------- ---------
147,591 (409,800) (45,895) (308,104)
-------------------------------------------- ----------------- ----------- ---------- ---------
Tax on items above (58,090) 158,188 15,372 115,470
-------------------------------------------- ----------------- ----------- ---------- ---------
Derecognition of undiscounted deferred tax
asset (restated)(iv) - (286,020) - (286,020)
-------------------------------------------- ----------------- ----------- ---------- ---------
89,501 (537,632) (30,523) (478,654)
-------------------------------------------- ----------------- ----------- ---------- ---------
(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 $37.0 million (2020: $11.3 million).
Other income relates to the fair value remeasurement of contingent
consideration relating to the acquisition of Magnus and associated
infrastructure of $27.5 million (note 10) (2020: $161.9
million)
(ii) Impairments and write offs include an impairment of
tangible oil and gas assets totalling nil (note 7) (2020:
impairment of $409.8 million)
(iii) Other items mainly relate to unwinding of discount on
contingent consideration on the 75% acquisition of Magnus and
associated infrastructure of $30.3 million (note 10) (2020: $39.7
million). (2020 also included a redundancy provision in relation to
the Group's transformation programme of $6.1 million)
(iv) Non-cash deferred tax charge (2020 restated (see Note 2
Basis of preparation - Restatements) 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
2021 2020
$'000 $'000
----------------------------------------------------------- -------- --------
Revenue from contracts with customers:
----------------------------------------------------------- -------- --------
Revenue from crude oil sales 490,536 375,518
----------------------------------------------------------- -------- --------
Revenue from gas and condensate sales(i) 57,850 27,574
----------------------------------------------------------- -------- --------
Tariff revenue 467 7,993
----------------------------------------------------------- -------- --------
Total revenue from contracts with customers 548,853 411,085
Rental income from vessels(ii) 702 2,865
Realised (losses)/gains on oil derivative contracts (32,908) 35,229
----------------------------------------------------------- -------- --------
Other 1,640 825
----------------------------------------------------------- -------- --------
Business performance revenue and other operating income 518,287 450,004
----------------------------------------------------------- -------- --------
Unrealised (losses)/gains on oil derivative contracts(iii) (36,973) (11,278)
----------------------------------------------------------- -------- --------
Total revenue and other operating income 481,314 438,726
----------------------------------------------------------- -------- --------
(i) Includes onward sale of third-party gas purchases not
required for injection activities at Magnus
(ii) Comparative information for 2020 has been restated for the
changes to the presentation of rental income effective 1 January
2021. For more information, see Note 2 Basis of preparation -
Restatements
(iii) 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 Ordinary Earnings per
after tax shares share
-------------------------------------- -------------------- --------------------- -----------------------
Period ended Period ended Period ended
30 June 30 June 30 June
-------------------- --------------------- -----------------------
2020
2021 restated 2021 2020 2021 2020 restated
$'000 $'000 million million $ $
-------------------------------------- -------- ---------- ----------- -------- -------- -------------
Basic (56,372) (472,483) 1,649.3 1,654.8 (0.034) (0.286)
-------------------------------------- -------- ---------- ----------- -------- -------- -------------
Dilutive potential of Ordinary shares
granted under share-based incentive
schemes - - 26.7 6.9 - -
-------------------------------------- -------- ---------- ----------- -------- -------- -------------
Diluted(i) (56,372) (472,483) 1,676.0 1,661.7 (0.034) (0.286)
-------------------------------------- -------- ---------- ----------- -------- -------- -------------
Basic (excluding remeasurements and
exceptional items)(ii) 108,265 6,216 1,649.3 1,654.8 0.066 0.004
-------------------------------------- -------- ---------- ----------- -------- -------- -------------
Diluted (excluding remeasurements and
exceptional items)(i) (ii) 108,265 6,216 1,676.0 1,661.7 0.065 0.004
-------------------------------------- -------- ---------- ----------- -------- -------- -------------
(i) Potential ordinary shares granted under share-based
incentive schemes are not treated as dilutive when they would
decrease a loss per share
(ii) 2020 comparative restated see Note 2 Basis of preparation - Restatements
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 2021 8,552,171 64,220 858,489 9,474,880
---------------------------------------------------- ---------- ----------- ------------ ----------
Additions 22,734 575 4,669 27,978
---------------------------------------------------- ---------- ----------- ------------ ----------
Change in decommissioning provision 7,086 - - 7,086
---------------------------------------------------- ---------- ----------- ------------ ----------
At 30 June 2021 8,581,991 64,795 863,158 9,509,944
---------------------------------------------------- ---------- ----------- ------------ ----------
Accumulated depreciation, depletion and impairment:
---------------------------------------------------- ---------- ----------- ------------ ----------
At 1 January 2021 6,428,559 50,357 362,047 6,840,963
---------------------------------------------------- ---------- ----------- ------------ ----------
Charge for the year 122,877 1,869 32,254 157,000
---------------------------------------------------- ---------- ----------- ------------ ----------
Other 146 - - 146
---------------------------------------------------- ---------- ----------- ------------ ----------
At 31 June 2021 6,551,582 52,226 394,301 6,998,109
---------------------------------------------------- ---------- ----------- ------------ ----------
Net carrying amount:
---------------------------------------------------- ---------- ----------- ------------ ----------
At 30 June 2021 2,030,409 12,569 468,857 2,511,835
---------------------------------------------------- ---------- ----------- ------------ ----------
At 31 December 2020 2,123,612 13,863 496,442 2,633,917
---------------------------------------------------- ---------- ----------- ------------ ----------
At 30 June 2020 2,263,794 14,723 530,618 2,809,135
---------------------------------------------------- ---------- ----------- ------------ ----------
There were no impairment reversals or charges in the period.
8. Loans and borrowings
30 June
31 December
2021 2020
$'000 $'000
----------- --------- -----------
Borrowings 367,164 452,284
----------- --------- -----------
Bonds 1,088,328 1,045,041
----------- --------- -----------
1,455,492 1,497,325
----------- --------- -----------
Borrowings
The Group's borrowings are carried at amortised cost as
follows:
30 June 31 December
2021 2020
--------------------------------------------- --------------------------- ----------------------------
Principal Fees Total Principal Fees Total
$'000 $'000 $'000 $'000 $'000 $'000
--------------------------------------------- --------- ------ -------- --------- ------- --------
Credit facility(i) 353,051 - 353,051 377,270 - 377,270
--------------------------------------------- --------- ------ -------- --------- ------- --------
Sculptor Capital facility(ii) - - - 67,701 (1,925) 65,776
--------------------------------------------- --------- ------ -------- --------- ------- --------
SVT Working Capital facility 14,113 - 14,113 9,238 - 9,238
--------------------------------------------- --------- ------ -------- --------- ------- --------
Reserves based lending ('RBL') facility(iii) - - - - - -
--------------------------------------------- --------- ------ -------- --------- ------- --------
Total borrowings 367,164 - 367,164 454,209 (1,925) 452,284
--------------------------------------------- --------- ------ -------- --------- ------- --------
Due within one year 367,164 414,430
--------------------------------------------- --------- ------ -------- --------- ------- --------
Due after more than one year - 37,854
--------------------------------------------- --------- ------ -------- --------- ------- --------
Total borrowings 367,164 452,284
--------------------------------------------- --------- ------ -------- --------- ------- --------
(i) At 30 June 2021, the total carrying amount of the credit
facility on the balance sheet was $353.5 million, comprising the
loan principal drawn down of $335.0 million, $18.1 million of
interest capitalised to the PIK amount and $0.4 million accrued
interest (2020: full carrying amount $377.8 million, comprising the
loan principal drawn down of $360.0 million, $17.3 million of
interest capitalised to the PIK amount and $0.5 million accrued
interest ). The maturity date of the credit facility was October
2021, with the facility being fully repaid in July 2021 as outlined
in note 14. Further details on the credit facility are included in
the Group's Annual Report and Accounts 2020.
(ii) During the period, the Group repaid its outstanding debt on the Sculptor Capital facility.
(iii) On 11 June 2021, the Group signed a new RBL facility of
approximately $600 million and an additional amount of $150 million
for letters of credit for up to seven years. Upon refinancing of
the Group's existing high yield bonds, the maturity of the new
facility is extended to the earlier of seven years from its signing
date, 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. In the event the maturity of
the new facility is not extended, any amounts drawn amortise such
that they are fully repaid by June 2023. As at 30 June 2021, the
facility was undrawn. Transaction costs in relation to the new
facility have been deferred within other long term assets on the
balance sheet and will be reclassified to borrowings upon drawdown
of the facility. For further details of the new RBL see note
14.
Bonds
The Group's bonds are carried at amortised cost as follows:
30 June 31 December
2021 2020
-------------------------------- ------------------------------- -------------------------------
Principal Fees Total Principal Fees Total
$'000 $'000 $'000 $'000 $'000 $'000
-------------------------------- ---------- ------- ---------- ---------- ------- ----------
High yield bond(i) 827,166 (2,196) 824,970 799,194 (2,666) 796,528
-------------------------------- ---------- ------- ---------- ---------- ------- ----------
Retail bond(ii) 263,891 (533) 263,358 249,161 (648) 248,513
-------------------------------- ---------- ------- ---------- ---------- ------- ----------
Total bonds due after more than
one year 1,091,057 (2,729) 1,088,328 1,048,355 (3,314) 1,045,041
-------------------------------- ---------- ------- ---------- ---------- ------- ----------
(i) The total carrying value of the high yield bond as at 30
June 2021 is $825.0 million (2020: $796.5 million). This includes
bond principal of $827.2 million (2020: $799.2 million) less
unamortised fees of $2.2 million (2020: $2.7 million). The high
yield bond does not include accrued interest of $12.1 million
(2020: $11.8 million) and liability for the IFRS 9 Financial
Instruments loss on modification of $4.6 million (2020: $4.6
million), which are reported within trade and other payables.
(ii) The total carrying value of the retail bond as at 30 June
2021 is $263.4 million (2020: $248.5 million). This includes bond
principal of $263.9 million (2020: $249.2 million) less unamortised
fees of $0.5 million (2020: $0.6 million). The retail bond does not
include accrued interest of $6.8 million (2020: $6.3 million) and
liability for the IFRS 9 Financial Instruments loss on modification
of $11.9 million (2020: $11.9 million), which are reported within
trade and other payables.
9. Other financial assets and financial liabilities
(a) Summary as at 30 June 2021
30 June 31 December
2021 2020
-------------------------------------- ------------------- -------------------
Assets Liabilities Assets Liabilities
$'000 $'000 $'000 $'000
-------------------------------------- ------ ----------- ------ -----------
Fair value through profit or loss:
-------------------------------------- ------ ----------- ------ -----------
Derivative commodity contracts - 38,980 - 2,007
-------------------------------------- ------ ----------- ------ -----------
Derivative foreign exchange contracts - - - -
-------------------------------------- ------ ----------- ------ -----------
Total current - 38,980 - 2,007
-------------------------------------- ------ ----------- ------ -----------
Fair value through profit or loss:
Quoted equity shares 6 - 7 -
Amortised cost:
Other receivables (i) 34,811 - - -
-------------------------------------- ------ ----------- ------ -----------
Total non-current 34,817 - 7 -
-------------------------------------- ------ ----------- ------ -----------
(i) Transaction costs of $34.8m in relation to the Golden Eagle
asset acquisition, refinancing and equity raise have been deferred
within other long term assets on the balance sheet. The balance
will be reclassified to the following line items upon completion of
the relevant Golden Eagle transaction components: oil and gas
assets, borrowings and equity.
(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 2021 $'000 $'000 $'000 $'000
-------------------------- -------- ----------- -------- ----------
Commodity options (28,600) (35,786) - -
-------------------------- -------- ----------- -------- ----------
Commodity swaps (3,610) (1,187) - -
-------------------------- -------- ----------- -------- ----------
Commodity futures 1,693 - - -
-------------------------- -------- ----------- -------- ----------
Carbon forwards - - 8,157 -
-------------------------- -------- ----------- -------- ----------
(30,517) (36,973) 8,157 -
-------------------------- -------- ----------- -------- ----------
Revenue and
other operating
income Cost of sales
--------------------------- -------------------- --------------------
Realised Unrealised Realised Unrealised
Period ended 30 June 2020 $'000 $'000 $'000 $'000
--------------------------- -------- ---------- -------- ----------
Commodity options 20,711 4,972 - -
--------------------------- -------- ---------- -------- ----------
Commodity swaps 9,556 (16,223) - -
--------------------------- -------- ---------- -------- ----------
Commodity futures 4,962 (27) - -
--------------------------- -------- ---------- -------- ----------
Foreign exchange contracts - - (528) (3,039)
--------------------------- -------- ---------- -------- ----------
35,229 (11,278) (528) (3,039)
--------------------------- -------- ---------- -------- ----------
(c) Fair value measurement
Quoted
prices Significant Significant
in active observable unobservable
markets inputs inputs
(Level (Level (Level
Total 1) 2) 3)
30 June 2021 $'000 $'000 $'000 $'000
-------------------------------------------- --- -------- ---------- ----------- -------------
Financial assets measured at fair value:
Other financial assets at FVPL
Quoted equity shares 6 6 - -
Liabilities measured at fair value:
Derivative financial liabilities at FVPL
Oil commodity derivative contracts 38,980 - 38,980 -
Other financial liabilities measured at
FVPL
Contingent consideration 508,765 - - 508,765
Liabilities measured at amortised cost
for which fair values are disclosed below:
Interest-bearing loans and borrowings 367,164 - - 367,164
Obligations under leases 620,140 - - 620,140
Retail bond 322,819 322,819 - -
High yield bond 775,468 775,468 - -
------------------------------------------------- -------- ---------- ----------- -------------
Quoted
prices Significant Significant
in active observable unobservable
markets inputs inputs
(Level (Level (Level
Total 1) 2) 3)
31 December 2020 $'000 $'000 $'000 $'000
-------------------------------------------- --- -------- ---------- ----------- -------------
Financial assets measured at fair value:
Other financial assets at FVPL
Quoted equity shares 7 7 - -
Liabilities measured at fair value:
Derivative financial liabilities at FVPL
Oil commodity derivative contracts 2,007 - 2,007 -
Other financial liabilities measured at
FVPL
Contingent consideration 522,261 - - 522,261
Liabilities measured at amortised cost
for which fair values are disclosed below:
Interest-bearing loans and borrowings 454,209 - - 454,209
Obligations under leases 647,846 - - 647,846
Retail bond 225,943 225,943 - -
High yield bond 537,602 537,602 - -
------------------------------------------------- -------- ---------- ----------- -------------
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 a whole, 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 (2020: 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 decommissioning-linked
75% liability Total
$'000 $'000 $'000
------------------------ -------- ----------------------------- --------
At 31 December 2020 507,660 14,601 522,261
------------------------ -------- ----------------------------- --------
Change in fair value (28,685) 1,195 (27,490)
------------------------ -------- ----------------------------- --------
Unwinding of discount 24,778 729 25,507
------------------------ -------- ----------------------------- --------
Interest on vendor loan 4,792 - 4,792
------------------------ -------- ----------------------------- --------
Utilisation (16,028) (277) (16,305)
------------------------ -------- ----------------------------- --------
At 30 June 2021 492,517 16,248 508,765
------------------------ -------- ----------------------------- --------
Classified as:
------------------------ -------- ----------------------------- --------
Current 65,119 809 65,928
------------------------ -------- ----------------------------- --------
Non-current 427,398 15,439 442,837
------------------------ -------- ----------------------------- --------
492,517 16,248 508,765
------------------------ -------- ----------------------------- --------
75% Magnus acquisition contingent consideration
The contingent consideration was fair valued at 30 June 2021,
which resulted in a decrease in fair value of $28.7 million
reflecting a change in the payment profiles (2020: decrease of
$159.5 million reflecting the change in oil price assumptions). The
fair value accounting effect and finance costs of $29.6 million
(2020: $38.9 million) on the contingent consideration were
recognised through remeasurements and exceptional items in the
Group income statement. The contingent profit sharing arrangement
cap of $1 billion was not met as at 30 June 2021 in the present
value calculations (2020: cap was not met). Within the statement of
cash flows: the profit share element of the repayment, $1.0 million
(2020: $21.1 million), is disclosed separately under investing
activities; the repayment of the vendor loan, $11.4 million (2020:
$4.7 million), is disclosed under financing activities; and the
interest paid on the vendor loan, $3.6 million (2020: $3.1
million), is included within interest paid under financing
activities. At 30 June 2021, the contingent consideration was
$492.5 million (31 December 2020: $507.7 million).
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 2021, the amount due to
BP calculated on an after-tax basis by reference to 30% of BP's
decommissioning costs on Magnus was $16.2 million (31 December
2020: $14.6 million).
11. Provisions
Thistle
Decommissioning decommissioning Other
provision provision provisions Total
$'000 $'000 $'000 $'000
---------------------- --------------- ---------------- ----------- --------
At 31 December 2020 778,204 53,066 9,137 840,407
---------------------- --------------- ---------------- ----------- --------
Changes in estimates 13,381 (577) (271) 12,533
---------------------- --------------- ---------------- ----------- --------
Unwinding of discount 7,928 531 - 8,459
---------------------- --------------- ---------------- ----------- --------
Utilisation (31,066) (13,887) (4,201) (49,154)
---------------------- --------------- ---------------- ----------- --------
Foreign exchange - 197 (144) 53
---------------------- --------------- ---------------- ----------- --------
At 30 June 2021 768,447 39,330 4,521 812,298
---------------------- --------------- ---------------- ----------- --------
Classified as:
---------------------- --------------- ---------------- ----------- --------
Current 56,307 9,532 4,521 70,360
---------------------- --------------- ---------------- ----------- --------
Non-current 712,140 29,798 - 741,938
---------------------- --------------- ---------------- ----------- --------
768,447 39,330 4,521 812,298
---------------------- --------------- ---------------- ----------- --------
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. At 30 June
2021, an estimated $302.9 million is expected to be utilised
between one and five years (31 December 2020: $329.2 million),
$148.1 million within six to ten years (31 December 2020: $145.1
million), and the remainder in later periods.
The Group enters into surety bonds principally to provide
security for its decommissioning obligations. At 30 June 2021, the
Group held surety bonds totalling $164.9 million (31 December 2020:
$151.7 million).
Thistle decommissioning provision
At 30 June 2021, the amount due to BP by reference to 7.5% of
BP's decommissioning costs on Thistle and Deveron was $39.3 million
(31 December 2020: $53.1 million), with the reduction mainly
reflecting utilisation in the period. Unwinding of discount of $0.5
million is included within finance income for the year ended 30
June 2021 (2020: $0.4 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. At 30 June 2021, the provision was $4.5
million (31 December 2020: $5.9 million). During the first half of
2021, $1.5 million of the provision was utilised.
Other provisions from 31 December 2020 were fully utilised in
the period to 30 June 2021. These included a redundancy provision
in relation to the transformation programme undertaken during
2020/2021 (31 December 2020: $1.2 million) and payment of partners'
share of pipeline oil stock following cessation of production at
Heather (31 December 2020: $1.5 million).
12. Commitments and contingencies
Capital commitments
At 30 June 2021, the Group had capital commitments amounting to
nil (31 December 2020: nil).
Other commitments
In the normal course of business, the Group will obtain surety
bonds, letters of credit and guarantees. At 30 June 2021, the Group
held surety bonds totalling $164.9 million (31 December 2020:
$151.7 million) to provide security for its decommissioning
obligations. See note 11 for further details.
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 Company's and/or 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
2021 2020
Notes $'000 $'000(i)
---------------------------------------------------------- ----- --------- ---------
Profit/(loss) before tax 49,072 (373,357)
---------------------------------------------------------- ----- --------- ---------
Depreciation 7 3,915 3,941
---------------------------------------------------------- ----- --------- ---------
Depletion 7 153,085 248,384
---------------------------------------------------------- ----- --------- ---------
Net impairment charge to oil and gas assets - 409,800
---------------------------------------------------------- ----- --------- ---------
Net disposal/write down of inventory 983 18,959
---------------------------------------------------------- ----- --------- ---------
Change in fair value of investments 1 8
---------------------------------------------------------- ----- --------- ---------
Share-based payment charge 3,515 2,616
---------------------------------------------------------- ----- --------- ---------
Gain on termination of Tanjong Baram risk service
contract - (10,412)
---------------------------------------------------------- ----- --------- ---------
Change in contingent consideration 2,810 (122,175)
---------------------------------------------------------- ----- --------- ---------
Change in provisions 14,754 13,676
---------------------------------------------------------- ----- --------- ---------
Amortisation of option premiums - (5,587)
---------------------------------------------------------- ----- --------- ---------
Unrealised (gain)/loss on commodity financial instruments 36,973 11,278
---------------------------------------------------------- ----- --------- ---------
Unrealised (gain)/loss on other financial instruments - 3,039
---------------------------------------------------------- ----- --------- ---------
Unrealised exchange (gain)/loss 4,796 (18,371)
---------------------------------------------------------- ----- --------- ---------
Net finance expense 78,042 82,345
---------------------------------------------------------- ----- --------- ---------
Operating profit before working capital changes 347,946 264,144
---------------------------------------------------------- ----- --------- ---------
Decrease/(increase) in trade and other receivables (121,006) 51,972
---------------------------------------------------------- ----- --------- ---------
(Decrease)/increase in inventories 470 3,129
---------------------------------------------------------- ----- --------- ---------
(Decrease)/increase in trade and other payables 60,469 (36,685)
---------------------------------------------------------- ----- --------- ---------
Cash generated from operations 287,879 282,560
---------------------------------------------------------- ----- --------- ---------
(i) See Note 2 Basis of preparation - Restatements
Changes in liabilities arising from financing activities
Loans and
borrowings Bonds Lease liabilities Total
$'000 $'000 $'000 $'000
----------------------------------- ----------- ----------- ----------------- -----------
At 31 December 2020 (452,774) (1,079,692) (647,846) (2,180,312)
----------------------------------- ----------- ----------- ----------------- -----------
Cash movements:
----------------------------------- ----------- ----------- ----------------- -----------
Repayments of loans and borrowings 88,170 - 88,170
----------------------------------- ----------- ----------- ----------------- -----------
Repayment of lease liabilities 57,286 57,286
----------------------------------- ----------- ----------- ----------------- -----------
Cash interest paid in year 10,000 - 10,000
----------------------------------- ----------- ----------- ----------------- -----------
Non-cash movements:
----------------------------------- ----------- ----------- ----------------- -----------
Additions - - (4,670) (4,670)
----------------------------------- ----------- ----------- ----------------- -----------
Interest/finance charge payable (10,836) (37,521) (23,532) (71,889)
----------------------------------- ----------- ----------- ----------------- -----------
Fee amortisation (1,925) (585) - (2,510)
----------------------------------- ----------- ----------- ----------------- -----------
Foreign exchange adjustments (344) (5,182) (1,377) (6,903)
----------------------------------- ----------- ----------- ----------------- -----------
Other non-cash movements 139 1 - 140
----------------------------------- ----------- ----------- ----------------- -----------
At 30 June 2021 (367,570) (1,122,979) (620,140) (2,110,689)
----------------------------------- ----------- ----------- ----------------- -----------
Reconciliation of carrying value
Loans and
borrowings Bonds Lease liabilities Total
$'000 $'000 $'000 $'000
----------------- ----------- ----------- ----------------- -----------
Principal (367,164) (1,091,057) (620,140) (2,078,361)
----------------- ----------- ----------- ----------------- -----------
Unamortised fees - 2,729 - 2,729
----------------- ----------- ----------- ----------------- -----------
Accrued interest (406) (34,651) - (35,057)
----------------- ----------- ----------- ----------------- -----------
At 30 June 2021 (367,570) (1,122,979) (620,140) (2,110,689)
----------------- ----------- ----------- ----------------- -----------
14. Subsequent events
In July 2021, $360.0 million was drawn down from the new RBL
facility and the outstanding debt on the credit facility, as
detailed in note 8, was repaid. In addition, $58.7 million,
representing the full amount of the outstanding principal and
interest on the BP vendor loan, which forms part of the contingent
consideration balance as disclosed in note 10, was repaid.
In July 2021, the Group raised gross proceeds of GBP36.1 million
($50 million) through the issuance of 190,122,384 new ordinary
shares at an issue price of 19 pence per ordinary share via a firm
placing, placing and open offer.
In July 2021, the Group completed the acquisition of the entire
100% equity interest in the P1078 licence containing the proven
Bentley heavy-oil discovery from Whalsay Energy Holdings Limited
('Whalsay'). The transaction was effected through the acquisition
of Whalsay's subsidiary, Whalsay Energy Limited ('WEL') which holds
the licence as its only asset, on a cash, liability and debt free
basis. On completion, consideration of c.$2 million was paid to
fund certain accrued costs and obligations of WEL. No other upfront
consideration was payable. EnQuest will make deferred payments to
Whalsay based on future revenues generated by WEL which are capped
at $40 million.
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
1 September 2021
Independent review report to EnQuest PLC
We have been engaged by EnQuest PLC ('the Company') to review
the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2021 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. We have read the other information
contained in the half yearly financial report and considered
whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of
financial statements.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, 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.
The annual financial statements of the Group will be prepared in
accordance with United Kingdom adopted International Financial
Reporting 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".
Our Responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 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. 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.
Conclusion
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 2021 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.
Use of Report
This report is made solely to the company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. 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
1 September 2021
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
2021 2020 restated
Business performance net profit attributable to EnQuest PLC
shareholders $'000 $'000
------------------------------------------------------------- --------- --------------
Reported net profit/(loss) (A)(i) (56,372) (472,438)
------------------------------------------------------------- --------- --------------
Adjustments - remeasurements and exceptional items:
------------------------------------------------------------- --------- --------------
Unrealised (losses)/gains on oil derivative contracts (note
9b) (36,973) (11,278)
------------------------------------------------------------- --------- --------------
Unrealised (losses)/gains on foreign exchange derivative
contracts (note 9b) - (3,039)
------------------------------------------------------------- --------- --------------
Net impairment (charge)/reversal to oil and gas assets (note
4) - (409,800)
------------------------------------------------------------- --------- --------------
Unwind and interest on contingent consideration (note 10) (30,299) (39,733)
------------------------------------------------------------- --------- --------------
Change in fair value of contingent consideration (note 10) 27,490 161,908
------------------------------------------------------------- --------- --------------
Redundancy provision (note 11) - (6,162)
------------------------------------------------------------- --------- --------------
Pre-tax remeasurements and exceptional items (B) (39,782) (308,104)
------------------------------------------------------------- --------- --------------
Tax on remeasurements and exceptional items (note 4) (C)(i) (124,855) (170,550)
------------------------------------------------------------- --------- --------------
Post-tax remeasurements and exceptional items (D = B + C)(i) (164,637) (478,654)
------------------------------------------------------------- --------- --------------
Business performance net profit attributable to EnQuest PLC
shareholders (A - D) 108,265 6,216
------------------------------------------------------------- --------- --------------
(i) 2020 comparatives have been restated see Note 2 Basis of
preparation - Restatements
Period Period
ended ended
30 June 30 June
2021 2020 restated
EBITDA $'000 $'000
-------------------------------------------------------------- -------- --------------
Reported profit/(loss) from operations before tax and finance
income/(costs) 165,872 (243,765)
-------------------------------------------------------------- -------- --------------
Adjustments:
-------------------------------------------------------------- -------- --------------
Remeasurements and exceptional items 9,483 268,371
-------------------------------------------------------------- -------- --------------
Depletion and depreciation (note 7) 157,000 252,325
-------------------------------------------------------------- -------- --------------
Inventory revaluation 983 18,959
-------------------------------------------------------------- -------- --------------
Change in provision(i) 5,718 45,879
-------------------------------------------------------------- -------- --------------
Net foreign exchange (gain)/loss 6,360 (20,971)
-------------------------------------------------------------- -------- --------------
Business performance EBITDA (E) 345,416 320,798
-------------------------------------------------------------- -------- --------------
(i) During the second half of 2020, the Group's definition of
EBITDA was changed to exclude the impact of changes in the
decommissioning provision of fully impaired assets. Comparative
information for 2020 has been updated to reflect this change.
EBITDA is calculated on a 'Business performance' basis, and is
calculated by taking profit/(loss) from operations before tax and
finance income/(costs) and adding back depletion, depreciation,
foreign exchange movements, inventory revaluation, change in
provision and the realised gain/(loss) on foreign currency and
derivatives related to capital expenditure.
Period
ended Year ended
30 June 31 December
2021 2020
Total cash and available facilities $'000 $'000
-------------------------------------------- --------- ------------
Available cash 173,027 113,185
-------------------------------------------- --------- ------------
Ring-fenced cash 71,304 107,970
-------------------------------------------- --------- ------------
Restricted cash 30,703 1,675
-------------------------------------------- --------- ------------
Total cash and cash equivalents (F) 275,034 222,830
-------------------------------------------- --------- ------------
Available credit facilities 410,000 450,000
-------------------------------------------- --------- ------------
Credit facility - Drawn down (335,000) (360,000)
-------------------------------------------- --------- ------------
Letter of credit (46,629) (28,778)
-------------------------------------------- --------- ------------
Available undrawn facility (G) 28,371 61,222
-------------------------------------------- --------- ------------
Total cash and available facilities (F + G) 303,405 284,052
-------------------------------------------- --------- ------------
Ring-fenced cash includes joint venture accounts and cash held
in operational accounts
Period
ended Year ended
30 June 31 December
2021 2020
Net debt $'000 $'000
------------------------------------------ --------- ------------
Borrowings (note 8):
------------------------------------------ --------- ------------
Credit facility - Drawn down 335,000 360,000
------------------------------------------ --------- ------------
Credit facility - PIK 18,051 17,270
------------------------------------------ --------- ------------
Sculptor Capital facility - 65,776
------------------------------------------ --------- ------------
SVT Working Capital facility 14,113 9,238
------------------------------------------ --------- ------------
Borrowings (H) 367,164 452,284
------------------------------------------ --------- ------------
Bonds (note 8):
------------------------------------------ --------- ------------
High yield bond 824,970 796,528
------------------------------------------ --------- ------------
Retail bond 263,358 248,513
------------------------------------------ --------- ------------
Bonds (I) 1,088,328 1,045,041
------------------------------------------ --------- ------------
Non-cash accounting adjustments (note 8):
------------------------------------------ --------- ------------
Unamortised fees on loans and borrowings - 1,925
------------------------------------------ --------- ------------
Unamortised fees on bonds 2,729 3,314
------------------------------------------ --------- ------------
Non-cash accounting adjustments (J) 2,729 5,239
------------------------------------------ --------- ------------
Debt (H + I + J) (K) 1,458,221 1,502,564
------------------------------------------ --------- ------------
Less: Cash and cash equivalents (E) 275,034 222,830
------------------------------------------ --------- ------------
Net debt/(cash) (K - F) (L) 1,183,187 1,279,734
------------------------------------------ --------- ------------
EnQuest defines net debt as excluding finance lease liabilities
of $620.1 million (2020: $647.8 million)
Period
ended Year ended
30 June 31 December
2021 2020
Net debt/EBITDA $'000 $'000
------------------------------------------------- --------- ------------
Net debt (L) 1,183,187 1,279,734
------------------------------------------------- --------- ------------
Business performance EBITDA (last 12 months) (E) 575,194 550,606
------------------------------------------------- --------- ------------
Net debt/EBITDA (L/E) 2.1 2.3
------------------------------------------------- --------- ------------
Period Period
ended ended
30 June 30 June
2021 2020
Cash capital expenditure $'000 $'000
--------------------------------------------------------------- -------- ---------
Reported net cash flows (used in)/from investing activities (19,807) (104,691)
--------------------------------------------------------------- -------- ---------
Adjustments:
--------------------------------------------------------------- -------- ---------
Repayment of Magnus contingent consideration - Profit share 968 21,088
--------------------------------------------------------------- -------- ---------
Net cash received on termination of Tanjong Baram risk service
contract - (17,086)
--------------------------------------------------------------- -------- ---------
Deposit for Golden Eagle acquisition 3,000 -
--------------------------------------------------------------- -------- ---------
Interest received (83) (696)
--------------------------------------------------------------- -------- ---------
Cash capital expenditure (15,922) (101,385)
--------------------------------------------------------------- -------- ---------
Period Period
ended ended
30 June 30 June
2021 2020
Free cash flow $'000 $'000
--------------------------------------------------- --------- ---------
Net cash flows from/(used in) operating activities 246,942 274,437
--------------------------------------------------- --------- ---------
Net cash flows from/(used in) investing activities (19,807) (104,691)
--------------------------------------------------- --------- ---------
Net cash flows from/(used in) financing activities (173,849) (201,838)
--------------------------------------------------- --------- ---------
Adjustments:
--------------------------------------------------- --------- ---------
Repayment of loans and borrowings 88,170 118,906
--------------------------------------------------- --------- ---------
Free cash flow 141,456 86,814
--------------------------------------------------- --------- ---------
Free cash flow is the net change in cash and cash equivalents
less net (repayments)/proceeds from loan facilities
Period Period
ended ended
30 June 30 June
2021 2020
Revenue sales $'000 $'000
---------------------------------------------------------- -------- --------
Revenue from crude oil sales (note 5) (M) 490,536 375,518
---------------------------------------------------------- -------- --------
Revenue from gas and condensate sales (note 5) (N) 57,850 27,574
---------------------------------------------------------- -------- --------
Realised (losses)/gains on oil derivative contracts (note
5) (P) (32,908) 35,229
---------------------------------------------------------- -------- --------
Period Period
ended ended
30 June 30 June
2021 2020
Barrels equivalent sales kboe kboe
------------------------------- -------- --------
Sales of crude oil (Q) 7,288 9,417
------------------------------- -------- --------
Sales of gas and condensate(i) 1,314 1,923
------------------------------- -------- --------
Total sales (R) 8,602 11,340
------------------------------- -------- --------
(i) Includes volumes related to onward sale of third-party gas
purchases not required for injection activities at Magnus
Period Period
ended ended
30 June 30 June
2021 2020
Average realised prices $/Boe $/Boe
---------------------------------------------------------- -------- --------
Average realised oil price, excluding hedging (M/Q) 67.3 39.9
---------------------------------------------------------- -------- --------
Average realised oil price, including hedging ((M + P)/Q) 62.8 43.6
---------------------------------------------------------- -------- --------
Period Period
ended ended
30 June 30 June
2021 2020
Operating costs $'000 $'000
--------------------------------------------------------- --------- ---------
Reported cost of sales 333,262 420,071
--------------------------------------------------------- --------- ---------
Adjustments:
--------------------------------------------------------- --------- ---------
Remeasurements and exceptional items - (9,201)
--------------------------------------------------------- --------- ---------
Depletion of oil and gas assets (153,085) (248,384)
--------------------------------------------------------- --------- ---------
Credit/(charge) relating to the Group's lifting position
and inventory 26,060 48,535
--------------------------------------------------------- --------- ---------
Other cost of sales (53,137) (36,755)
--------------------------------------------------------- --------- ---------
Operating costs 153,100 174,266
--------------------------------------------------------- --------- ---------
Less realised (gain)/loss on derivative contracts (8,157) 528
--------------------------------------------------------- --------- ---------
Operating costs directly attributable to production 161,257 173,738
--------------------------------------------------------- --------- ---------
Comprising of:
--------------------------------------------------------- --------- ---------
Production costs (S) 139,537 137,650
--------------------------------------------------------- --------- ---------
Tariff and transportation expenses (T) 21,720 36,088
--------------------------------------------------------- --------- ---------
Operating costs directly attributable to production 161,257 173,738
--------------------------------------------------------- --------- ---------
Period Period
ended ended
30 June 30 June
2021 2020
Barrels equivalent produced kboe kboe
-------------------------------------- -------- --------
Total produced (working interest) (U) 8,360 12,022
-------------------------------------- -------- --------
Period Period
ended ended
30 June 30 June
2021 2020
Unit opex $/Boe $/Boe
----------------------------------------- -------- --------
Production costs (S/U) 16.7 11.4
----------------------------------------- -------- --------
Tariff and transportation expenses (T/U) 2.6 3.0
----------------------------------------- -------- --------
Total unit opex ((S + T)/U) 19.3 14.4
----------------------------------------- -------- --------
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END
IR UPURABUPGPPG
(END) Dow Jones Newswires
September 02, 2021 02:00 ET (06:00 GMT)
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