Enquest (LSE:ENQ) — Results for the six months ended 30 June 2025

0:01 Good afternoon, ladies and gentlemen, and welcome to the ENQUEST PLC investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged. They can be submitted at any time via the Q and A tab that's just situated on the right hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today, and we'll publish your responses where it's appropriate to do so on the Investor Meet company platform. Before we begin, as usual, we would just like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I would now like to hand you over to Craig Baxter, head of investor relations. Craig, good afternoon, sir. Thank you very much, Jake, and, good afternoon, ladies and gentlemen. Thank you, everyone for joining.

0:48 Welcome to today's retail shareholder presentation. As Jake's already laid out, my name is Craig Baxter, for those of you who don't know me. I'm the head of investor relations and corporate affairs at ENQUEST.

1:01 The purpose of today's meeting is to provide an additional opportunity to you as current or potential shareholders of ENQUEST to engage directly with our story and to enable you to ask some questions of me about the business or any pressing concerns that you have. With that in mind, I will start with an overview of our global footprint and strategy.

1:28 So ENQUEST is an independent energy company. We have operations which are focused in The UK North Sea. That's been, you know, part of our DNA since we formed back in 2010. And we've got an expanding operation across Southeast Asia. When we were first listed back in 2010, our foundations were based on acquiring mature and underdeveloped producing assets, and we did that primarily from the majors and super majors that were operating in the North Sea at the time. We've also repeated that model in Malaysia, which I'll talk more about. Our expertise is founded in late life asset management. We drive efficiencies, we optimize operations and we do that in order to extend the useful lives of all the assets that we touch.

2:15 We have a very, very strong operational track record and in 1H twenty twenty five, we yet again delivered exemplary production efficiency of 89%, and that included a five week, third party outage of of infrastructure. Over the years, our capability mix has expanded. It's we now, you know, we maximize recovery of oil and gas through top quartile drilling and major project execution, and we are proud to be recognized as a sector leading decommissioning operator. As I've mentioned, in the past twelve months, we've expanded our Southeast Asia business, building on the strong reputation we have forged over eleven years of successful operations in Malaysia. In fact, with the recent acquisition of Harbor Energy's Vietnam business, we now have seven assets in production with material reserves and resources in place.

3:09 Importantly, we operate nearly all of our assets, so we have the opportunity to deploy our operating expertise to maximize value. In The UK, we're primarily focused on delivering growth through acquisition, and we have a strong balance sheet from which to transact with 578,000,000 of liquidity in place at the half year. By lowering costs and improving uptime, we are able to run our assets for longer than they would have run-in the hands of their previous owners. Since our inception, we have extended the useful lives of all nine assets which we've operated. As we look to transact, this capability is more important than ever and serves as a reminder to interested sellers that ENQUEST is a safe period of hands to take on established assets. We believe our combination of assets and core capabilities sets us apart from any of our peers as we are able to provide an offering across the entire energy transition spectrum.

4:10 Turning to Southeast Asia, first of all, we've been really active out with The UK over the last twelve months, adding scale to our business across Southeast Asia. Conditions there are conducive to investment across the asset life cycle, so you'll see a bit of a mix of of of assets here. In The UK, we're very much focused on established, mature assets moving towards the end of their lives, but and you'll see it across Southeast Asia, we've got a wider spectrum of opportunities. Over the past twelve months, we've executed five growth transactions in the region, and we've stated clearly now that we see this part of the business reaching 35,000 barrels of oil equivalent production by the end of this decade. And the the slide here aims to kind of step you through that.

4:58 These transactions include a a full corporate acquisition. That's the the Harbor Energy business in Vietnam, which brings with it flowing barrels, just over 5,000 barrels a day at the moment. We've got the development of existing infrastructure to unlock significant gas volumes. So that's in our established Malaysia asset, whereby we're now accessing additional gas through Seligie, which we'll be able to produce through minor modifications to existing infrastructure, and that will serve Peninsular Malaysian demand and increase ENQUEST net production by around 6,000 barrels a day net to us. Now we announced that a while back, but that doesn't mean we just announce it and rest on laurels. And in fact, we've actually done a lot of work on on this project, and we're accelerating that gas provision. We originally said it would be three q twenty twenty six. We're now looking to have that up and running in the early part of next year.

5:58 We've also got some exciting developments. Now these are focused in Brunei and in Malaysia where we've got the DWA cluster. And these are proven reserves, but they need a development concept, and that's where ENQUEST has come in. So we've got DEWA whereby we're the operator, and that's looking the first phase of that is looking like it'd be about seven to seven and a half thousand barrels of oil equivalent a day to us. And in Brunei, we've got the option there of a development that that that would look like about 12,000 barrels a day to enquest net. So in in Brunei, we're we've we've currently, we hold a 100% of the of the license, but we're working closely with the Brunei government, and we expect to form a fifty fifty joint venture company with them in in the short term.

6:50 Sitting alongside these very defined and clear production adding opportunities, we also have an exploration appraisal opportunity in Indonesia, another new country entry for us over the last twelve months. And this is pretty exciting in that in that we are partnering here with the BP Tangu partnership, and we're we're very close proximity to the the Tangu LNG plant. So, essentially, that partnership comprises of all the the the Japanese LNG players and, you know, it's it's a great option value for ENQUEST. We're the operator. This is the fruits of labors we've talked about for a couple of years now in terms of setting up joint study agreements in Indonesia.

7:37 And we're really excited about the opportunity and with working with our partners to see what is possible as we look to access the in excess of a 100 TCF that the government is very confident is in place.

7:51 I think it's it's fair to say that that this this is a crystallization of efforts that we've made over the last ten, eleven years of successful operations in Malaysia, whereby we've been twice named, consecutively named Malaysia operator of the year. And sometimes these things sound a little bit glib, but that's a really important data point for our journey in Southeast Asia because actually these transactions have been bookended by the the original and then the follow-up successive operator of the year awards. And I think what it demonstrates here is that the way in which ENQUEST has gone into Malaysia, the way in which we've gone about our business, our operating credentials, the way in which we've dealt with the government means that we have a very strong relationship and and reputation in country. And of course, patronas' feedback and and kind of their their vouching for us travels very well in the region. So I think we're seeing the fruits of those labors now.

8:54 And it's worth saying that this we don't we don't stop here. You know, we've laid out a plan to 15,000 barrels a day next year by 35,000 by the end of the decade, but we don't rest on our laurels and the Southeast Southeast Asia team continues to deliver against their growth aims and the intent to build on recent deal momentum with further M and A.

9:17 We'll just move into some slides on the sort of financial robustness of the business, which I think is really important to touch on at this time. As a reminder, and again, for those of you who are new to our story, we've done a lot of work over recent years to simplify and strengthen our financial position. In fact, we've worked very hard to reduce our debt by $1,600,000,000 since its peak in 2017, and we've since been able to simplify our capital structure. As shown here, we we've we've got a very simple, and flexible arrangement with our RBL. And, following the successful tap of the high yield bond this time last year, we removed the term loan facility that was in place until that point. We're now left with simply the RBL, underpinned by our high yield and retail bonds.

10:11 It is from this platform that we are looking to grow the business, while at the same time providing commodity and geographic diversification. We're focused on value accretive deals, which will increase our capacity to return capital to shareholders. While we're fortunate in in the in, I guess, in the EPL environment, we don't have any major commitments related to capital projects, we are rational investors, and we'll always look to execute fast cycle investments where possible. We're also clear that we can only maintain the top quartile production efficiency across our portfolio that we've become accustomed to by ensuring that we optimize asset investment.

10:54 I won't spend too long on this slide, but I think it's worth reminding ourselves of the key components of cash generation in our business. It's something I get asked about quite a lot in in in investor conversations and and when you guys email me, so I thought it worth putting this slide up to remind you of the key components. As the chart on the right lays out, we generated 33,000,000 of free cash flow in one h twenty five, and we used that to pay the 15,000,000 made in dividend and also a deposit on the Vietnam acquisition. The rest went to paying down debt. With reduced commodity prices and the continued challenges within The UK fiscal system, we have a fight a very solid financial base, but we must now put that to work and scale the business through acquisition. I think it's also worth saying this presentation will be available on on investor meets. If you want to go back and remind yourselves of some of these components of the financials, then it will be available for you to do so.

11:51 This slide outlines our expectations for the outturn of 2025 and our priorities as we look to next year and beyond. We shouldn't overlook the fact that we are again on track to meet our stated targets, both in terms of production volumes and cost, and that is testament to the great work being done across the business by teams in all departments. Delivering against targets provides the foundation for shareholder returns and the wider capital allocation framework. There is, of course, much work to be done to ensure a positive conclusion to the year, and we are never complacent. However, we do look forward, and we are concluding a program of asset strategy sessions, which sit alongside the normal course of group business planning and the budget process.

12:37 These strategy sessions provide a point of focus for the significant opportunities across our major assets, which we'll touch on in a second, and we're excited about getting after them in the new year. With that in mind, I propose taking a quick canter through the the group operations.

12:56 So this summary slide, I I won't spend too much time on it. I'd rather delve into each asset individually with you, but it's it's worth noting some of the the the high spots here. I mean, I I referenced early on, you know, we've got a group production efficiency of 89%, but it's worth noting that without a a third party infrastructure over which, of course, we've got no control, that figure would have been 94%. And that is really exceptional. You're talking about the very, very top end of of the sector performance. When we look at other responsibilities we have beyond safety, of course, and production and and financial, we're of course a responsible operator and we are committed to all aspects of the energy transition. In fact, you know, we we say very openly that we believe that all of the areas of the of of our business very much interact with the energy transition.

13:52 So we are still committed to national decarbonization objectives where we're running well ahead of the NSTD, the North Sea transition deal, and that's the the the national target which has been set by the regulator, the NSTA. You know, I think we're at 40% reduction versus the 2018 baseline for The UK. We're also progressing material projects at SVT, which look to decarbonize, plus we've got some really exciting opportunities still on the slate for VERI Energy, our wholly owned subsidiary. Another area which I'll touch on in a little bit more detail is decommissioning, which is becoming obviously a much bigger part of the the North Sea story as as assets are are unfortunately reaching the end of their lives. And ENQUEST has carved out a tremendous reputation and and really is delivering the top end of the sector in terms of decommissioning performance.

14:46 It's it's very useful and a very good calling card to be considered the the the foremost, I guess, decommissioning operator in the North Sea, particularly when we're looking to transact in this basin. I'll touch on some of the asset highlights. There might well be asset specific questions that pop up in the Q and A, which I'm happy to address. But I'll pick out some highlights for me that I think are really important to communicate at this time. So starting off with Kraken, which is really an exemplar asset. For those of you who less familiar with ENQUEST and the sector, you're maybe just tuning in to an oil and gas company for the first time, it's really important to note here that your operations are fundamentally underpinned by your ability to keep your assets and your equipment online and producing.

15:42 And that's what we mean by production efficiency. So when when looking at the North Sea, it's it's more often than not you would find a you'd have fixed platforms and you have floating platforms, which are effectively vessels like the FPSO at Kraken. And in the norm, fixed platforms have higher uptime. Now Kraken bucks that trend. Kraken production efficiency has been around 96% in the first half of the year, and that continues a long running track record of 90 plus percent uptime on this vessel. And that is absolutely sector leading performance. It's fair to say that it it bucks the trend so much, actually, to be 30% above the NST's benchmark for what they would expect to see and from what the other stats of floating hubs across the North Sea are. So really outstanding performance by the ENQUEST team working alongside the BOOMY Armada team.

16:44 When we look at Kraken, you know, we're in this period now of very well established operations. You know, as I say, we're ticking along at 90 plus percent production efficiency and that is absolutely fantastic. But the team again does not rest in its laurels and continues to look forward to how we optimize Kraken. And the way I would sort of put this forward is we're now entering a new phase of Kraken operations. In the very early days, you know, you're kind of, you're feeling around with the equipment, you're trying to make sure everything works properly. We're now eight years in and everything is working extremely well and very harmoniously. What we're looking at now is how you optimize the delivery of Kraken and how you optimize what the reservoir can deliver. With that, you read in enhanced oil recovery, which is a very exciting project we've been talking about now for a little while.

17:37 And this is this is being progressed right now. We're very much in the testing phase. We're looking at polymers. We're looking at the deployment options we have. And by that, really what I mean is we're looking at the reservoir plumbing and deciding the best way to inject and and move the polymer through the reservoir in order to to to sort of sweep

18:02 the the hydrocarbons in an optimal way. So that takes time and we certainly don't want to make a misstep there, right? I mean we've got very high performing kits. We've got very high performing topsides, and we don't want to do anything that jeopardizes that. However, we are moving this forward, something we're very excited about in the business, and we could see a path to sort of, you know, phased deployment of that kicking off next year. Another big development at Kraken, again, it kind of speaks to this this transition angle that everyone, of course, has to take now, and certainly it talks to our our position as a rational investor. So we have a a neighboring license, which is called Bresi. It's another heavy oil license.

18:48 But Bresi sits with a above the oil, sits with a gas cap, and that gas cap is provides us with a big opportunity for Kraken. So essentially, what ENQUEST is proposing to do is produce that gas cap via a single well gas tieback and transport that gas to Kraken where we will look to essentially displace the diesel that's currently used to to to to power Kraken and use gas instead. Now that that's got a number of benefits for ENQUEST and the NSTA and the environment. Essentially what it does is it reduces emissions significantly, so it would it would take about 80% of the the diesel we're currently burning on Kraken out of play because you'd be replacing that with gas, which is a cleaner fuel.

19:37 It would lower operating costs in the long term of Kraken, and it would also de risk the future Bresi oil development by because producing out the gas cap would make it easier to access the oil. So it's a it's a kind of investment we would do all day every day. We have done everything we can at this stage. We've submitted a field development plan to the NSCA, and we're waiting on regulator feedback on how we progress, but we're very much looking forward to moving this forward. On a cost standpoint as well, Kraken is also looking even better than it was previously because of a contractual step down in lease rate. So previously, net to ENQEST, we were paying around $115,000,000 as $11.05 per annum to lease the vessel from its from Bumi Armada.

20:31 But as at 04/01/2025, that stepped down by 70%. So on an annualized basis, that's 80,000,000 per annum in saved cost.

20:45 In The UK, certainly, our other sort of pillar asset is Magnus, very, very different to Kraken. It it it is one of the sort of grand old ladies in the North Sea. It's over 40 years old and it is a fixed platform. This is an asset we purchased from BP back in '27 and finalized to the whole 100% in 2018. And this is an asset where, you know, we've we've brought to bear our operational expertise, and we've really optimized this asset from where where it was originally. You know, it was a good asset. It was always a good asset, but it was it was sort of non core to to to BP. They were on to looking at other things. But when Magnus came into ENQUEST, of course, we were able to apply a great deal of focus and our expertise to get it working as it should.

21:32 So what we've done at Magnus is we've lowered operating costs from about $60 per barrel down into the mid twenties. And what you'll see on this graph on the top right here is that we've massively increased production efficiency from sub 60% when we took the asset on to, you know, high eighties as the norm. And even with the the the the five week infrastructure outage that we had, third party infrastructure outage that we had earlier this year, we were still in the mid seventies. You strip that out of things, we'd be in the mid nineties and and Magnus would be operating it at absolutely, you know, top end levels. Having seen that outage, however, we've had to deal with that.

22:19 And in doing so, we proactively executed all of the maintenance scopes that we planned for later on this year, so there will be no Magnus shutdown now, no planned shutdown until into 2026. The team has also done some really good work in optimizing the reservoir at Magnus. We've seen good drilling completed in the first half of this year with wells coming on at or above expected rates. And we've also optimized water cut. So we're now seeing water cut at this asset down around 85%, which is equivalent to what it was back in 2017. When you add those things together, strong uptime, new wells coming on well and and optimizing the reservoir performance, that's when you see peaks and then we've seen we've seen an oil production, so not not not gas, but oil alone tipping at 19,000 barrels a day during July. And we've seen the the best sort of three month quarterly rate since we did back during COVID time.

23:23 So really, really good performance at Magnus by by the teams across ENQUEST and and and something that really speaks to the the capability that we can bring to late life assets. Looking at Southeast Asia, we've obviously touched on the growth opportunities and the growth transaction that we've completed over the last twelve months, but it's worth pointing out that the core operations in Malaysia are also going very well. We've completed a four well infill drilling program this year and we've also done quite a lot of well restoration work, which is all part of our strategic plan to increase production at PM8 Seligie and we expect to see an increase in 2025 versus 2024.

24:13 We've also got a really strong safety record across the business and that's exemplified in Malaysia as well, where we now hit 6,000,000 man hours without a lost time incident. As I touched on, one of the opportunities and the first one that really yields additional barrels beyond the purchase of of Vietnam is the, the the the Seligy gas enhancements that we've done. And again, we're looking at adding about 6,000 barrels of oil equivalent, in q one of next year.

24:49 Touching on Vietnam, obviously, this is, the most recent acquisition that we've completed, and this is buying exactly what we said we would. We're buying flowing barrels with robust decline curves and little or no CapEx requirements, and and that's exactly what Vietnam delivers. It's a really good asset. It was a strong asset within Harbor Energy's portfolio. It was just subscale. They're moving on to, you know, bigger developments and and as they've grown as a company, this has become non core to them, but it's exactly the type of asset that ENQUEST would buy day in, day out. We've seen good process through the completion. We've seen production as expected, possibly even a little bit higher than expected. We were at five one three five as at one each.

25:35 And I think we're we're very pleased with having a highly motivated, highly skilled team, an in country team that have been together for quite a long time, and they're now super motivated by having a new owner that is very much motivated to enhancing and growing the the the production both from block 12 w, but also doing more things in Malaysia to keep them occupied. So I think all in all, this is the kind of kind of purchase we would do all the time. We have there's some great deal fundamentals as well here. You've got a a breakeven of around 60 doll sorry, dollars 40 per BOE. That's the life of field breakeven and oil is still attracting a premium of about 10% to Brent that's coming from this asset. So there's lots we can do both on the asset, we're already looking at drilling options and we're looking further around the field itself where there's multiple gas discoveries and other targets.

26:39 And then, of course, we we now have a an office and a base in Vietnam, so we're looking to see what else we can do in country.

26:50 Back to The UK now, and in terms of other assets in that we operate, we are the operator of the Sullenville Terminal, which is a strategically important piece of infrastructure in The UK. And it's kind of got two facets to it now, the life of SVT. On one hand, we're we're still producing we're we're throughputing oil and gas through these facilities, albeit on a much reduced scale from peak production back in the early eighties. But we are producing, you know, a 100% service availability to to our customers, and we're doing two major projects at the moment, a new stabilization facility and then connecting the site to The UK grid. And together, those will reduce the carbon footprint of of SVT by over 90%.

27:41 Now the relevance to that, of course, is that that helps us from a carbon footprint point of view, but also from an operating cost point of view, and it sets SVT up to to provide service to our customers for decades to come. The other side of life at SVT is looking to the future and we are looking at a number of renewable and decarbonization opportunities through our Veri Energy subsidiary. We're we're approaching FID on a on a electrification project and that's onshore wind, so we'll be building a couple of turbines at site. And again, that will even beyond the 90% decarbonization, that will supplement the power requirements of the terminal with green power.

28:30 We talked a little bit about in our half year results around carbon storage, so that's been like the flagship project for Veri and SVT and I think there's still huge optimism around the potential for that at site. But the government at the moment is kind of pointing to the track one projects that are that are ongoing, and it's gonna be, I think, quite difficult for us to see funding over the next couple of years. Now importantly, ENQUEST itself is not asking the government for subsidies here. We've got a merchant model which stands on its own two feet. However, what we do know is our potential customers, so stranded emitters across The UK and into Europe, they're gonna need some sort of help from governments across Europe in order to bridge the gap between carbon capture and storage as a as one of their options rather than just paying the the the tax associated with emissions. So there's work to be done there. Our team are still progressing what they can, and we you know, we're still confident that there's a there's a a project there and that it's got a really optimal future at SVT. There's so many natural attributes of the the terminal that set it up well for this type of project going forward.

29:49 Let me touch now on decommissioning. So another really important part of the energy transition, particularly in The UK, albeit we're we're doing a lot of decommissioning activity in in Malaysia as well. And I think it's fair to say that we are considered, I guess, the preeminent and certainly a leading decommissioning operator in the North Sea, having completed now 81 well plugging and abandonment scopes since 2022. So using our NSTA data, that's more than a third of the activity that's been done across the the Northern And Central North Sea, and that's been done by ENQUEST as a single company. So really quite impressive. And we're also doing each scope on average at about 35% below benchmark cost. So that that's a really important capability as we look forward to taking on more assets in the North Sea. I mean, you're a seller in the North Sea, what you really want is, of course, you want a consideration for your asset, but you want to make sure it's being handed on to a responsible operator, particularly one that's going to be able to decommission it successfully and safely at the end of its life.

30:56 In terms of the two major projects we've got ongoing at the the in The UK, Thistle and Heather are both reaching their end stages. Thistle, we expect to disembark early next year with the topside lifts to follow. And actually, don't know. Hopefully, some of you have seen on our website the the video of the the Heather topsides lift, which maybe I'm a bit of a a a an engineering geek, but it's it's it's pretty phenomenal to watch the capability that exists in this basin and to watch a 15,000 ton structure being lifted off its off its platform in fourteen seconds was was was pretty impressive. Of course, this is what what we bring to the party when it comes to negotiations around taking on new assets, and it's a very, very important part of our business. Looking forward, we've we've put a contract in place.

31:48 It's got multiyear options through the next phase of our decommissioning requirements. So that's a a package of subsea wells, which are associated with the likes of Almaglia and the Dons and Broome, which have already been COP'd. Almaglia and Dons, the floating production facilities have been moved away long ago and now we're going to get after the subsea wells. These are very low integrity risk wells, but now we get after them in a in a in a safe and efficient manner. That's the the the kind of formal part of of the presentation, what I wanted to cover today. I'll leave this this slide on rather than going to a generic q and a slide. I'll leave this slide on which which talks to some of the proof points around ENQUEST and our capability and and and really outlines why we're well positioned to pivot to growth at this phase in our life.

32:45 And at that stage, I will now bring Jake back in and we'll go through the q and a if that's possible.

32:52 Perfect, Craig. Absolutely. That's great. And thank you very much indeed for your presentation this afternoon. Ladies and gentlemen, please do continue to submit your questions just by using the q and a tab that's situated on the right hand corner of your screen. But just while Craig takes a few moments just to review those questions that have been submitted already, I'd just like to remind you that a recording of this presentation, along with a copy of the slides and the published q and a, can all be accessed via your investor dashboard. Craig, as you can see there, we have received a number of questions that are both presubmitted ahead of today's event as well as those that have made their way through throughout your presentation as well. So firstly, thank you to all of those on the call for taking the time to submit their questions. And, Craig, at this point, if I may just hand back to you to read out those questions and give your responses where appropriate. And if I pick up from you at the end, that'd be great. Thank you. Absolutely. Thanks very much, Jake. And and there there have been a lot of questions submitted while I've been talking.

33:42 And but what what I'll do first of all is there was a number of investors also who took time to pre submit questions, so I will go through those first of all, then I'll come to the the questions that have been submitted live, and there's bound to be some crossover, so bear with me just a second. So so the first question that was submitted was, please can you elaborate on the UK government's involvement with creating this new tool to revitalize the fiscal system? Is this just a is this just a proposal presented to them, or have they helped create it? Are they on board with it? So I think that's a a really good question. It's obviously very timely. So we're now in a position whereby we know that the government in The UK is going to announce its autumn budget statement on the November 26, but what we also now know is they're gonna present a North Sea strategy around the same time or potentially a little bit before the budget, which is gonna outline our belief is it's gonna outline the the outcomes of the two consultations which took place this spring.

34:42 The first of which was was about building the future of the North Sea, which related primarily to licensing and and and new developments in the North Sea. And the second of which was around the fiscal structure, which taxes North Sea oil and gas companies. So I'll touch probably primarily on on on the fiscal here because I think that's the the specific question. And what I would say is it was a really well run consultation. Myself, AMJAD, John Copa, Steve Boyer, we're all heavily involved in it. And we I think we'd all agree it was a very well run process by treasury. We had certainly had our chance to input. We which we did so on behalf of ENQUEST and also we did as part of combined sector representations via OUK.

35:34 But to answer the question, would say absolutely. The government and treasury was very much at the table. They were very involved. I think it would be fair to say they came with some preconceptions and some preconceived ideas, but they were very willing to talk around those and were very open to to areas whereby the likes of ENQUEST and our sector peers were were, you know, promoted a different view. I think I think what I would say is that, you know, all parties have walked away with a fairly clear shared understanding of what comes next. So as the government calls it the EPL successor regime, and we think it works. So we think there will be a permanent component of The UK tax system, which addresses windfall pricing, and windfall pricing will be redefined.

36:24 It'll be defined using government parlance. It's it's unusually high prices. And what we've really sought to clarify there is let's take a motion out of this and use mathematics. So for example, if you were to use a single standard deviation from from the the historic average, then you're talking about $94 a barrel. And I think that's the kind of level we're talking here in terms of a a threshold at which a windfall would be would be designated. But importantly, only the amount of whether it's revenue or profit, only the component above that threshold would be would be taxed. So it's a top slice tax as opposed to EPL at the moment, which taxes you entirely based on whether you're above the threshold or not, and we could get into all the issues at the moment. Of course, we're significantly below the oil threshold of the the EPL, but, yeah, the dual lock gas and oil triggers mean that we're we're still operating under the EPL environment.

37:27 I think in terms of the mechanics of of where we'll land on, we feel positive and confident that we'll land on a position that works for government, it works for industry, and it works for ENQUEST. And we believe it would stimulate significant investment versus where we are today. The reality is it doesn't work if we wait to 2030. You know, we we we were quite forthright in our half year results where we said, you know, we we need an answer, we need an acceleration of the of the of the response, and we believe government now has the tool to do that. The, you know, we're this this sector is losing a thousand jobs a month and that can't go on. We need to stimulate investment now and and all this will do is increase tax revenue for the exchequer. So we see it as a win win situation. We're hoping and we're cautiously cautiously optimistic for some positive news in the autumn statement or immediately before it, but ultimately, we know we need change in the short term.

38:32 The second question relates to the Vietnam purchase and says, in relation to the Vietnamese access assets acquired officially in July, the production figures were used in the half year results. Was the financial metrics slash profitability merged into the half year results? The answer to that is no. We showed production with and without the one each twenty twenty eight five impact of Vietnam, and that was just to give investors and the market a view of, you know, where we were without it, which is our reported numbers of of 38 over 38,000. And then we added in Vietnam to display, you know, that that Vietnam was as expected adding over 5,000 barrels a day. The transaction completed in early July, so no financials at all were included in the one h numbers other than a small deposit of about 3,500,000 that we paid in one h upon complete agreement of the deal. We paid the remainder of that 25,700,000 consideration.

39:32 So when you strip off the deposit, that was around 22,000,000. We paid that on upon completion in July. The next question. Thinking about the next twenty four months, what is the breakeven range anticipated to be? Taking into account CapEx, is it expected to fall between $50 and $55 per barrel? So we don't give specific breakeven forecast as that could be construed to be a profit forecast, but we do provide all the component parts for investor to construct their own view. And I've kinda covered some of these already during this presentation. So we have pro form a guidance, so including a full year of Vietnam, we have guidance in the market of 40,000 to 45,000 barrels of oil a day. You can apply your own view on price on that. We've got we've reaffirmed our guidance, So we've got 450,000,000 of OpEx, again, including 50,000,000 of pro form a Vietnam OpEx.

40:29 We've got circa one ninety million of CapEx and 60,000,000 of AbEx. Beyond that, we've got interest costs, which are outlined on our website. We have the crack in lease costs, which I've explained earlier on, kicked to a much lower level earlier this year. And we have the Magnus profit share. So those are the the key components to get you there and should give you a pretty good idea of where breakeven sits. Next question. The cash in undrawn facility stands at 577,000,000. How much of this can be tapped to weather sustained negative cash flow in the event of low oil prices? So we're obviously in a period today of of low prices. I think we're below $62 a barrel last time I looked.

41:15 But to be honest, we don't expect to endure sustained negative cash flows. We've got a demonstrable track record of tailoring our activities and costs to the prevailing price environment. The best example of this was that we remained significantly cash flow positive during COVID, a time when, you know, oil hit lows that are well beneath where we are today. And we did that by focusing on must do work, you know, safety critical, production protecting work, and the sort of nice to haves kinda got got got deferred. Now that allowed us absolutely to trim budgets and trim OpEx per barrel and and stay profitable. But we there's a balance to be struck there and we're very, very conscious of that balance in all our decision making. So when we did that in 2020 under under the sort of crazy world that we were in with COVID, the fact we couldn't get people off to some of our platforms as well had an impact.

42:14 But what we did is, yes, we cut costs, but we also reduced uptime because we needed to we created a backlog of work that we needed to then get after. So there's a balance to be struck there. Right? We we we are very, very adamant that we must keep our production efficiency where it is. And in order to do that, you've you've got to invest in these assets. So there's a balance to be struck, we believe we're very well placed to do that. We've also got a robust hedging program in place, so that that obviously helps us in periods of of low commodity prices as well. And the the question also referred to liquidity. So of our stated liquidity, we've got cash and cash equivalents of over 330,000,000 at at half year with a balance of that 578,000,000 coming from the undrawn RBL headroom.

43:03 And these funds is you know, these funds are in place. They're there for us to use, and they provide a strong platform from which to transact. Moving on to the next question. Actually, this is this one kind of aggregates, excuse me, a number of questions around m and a and the timeline for us to execute a UK transaction. Another specific question asks how many oil and gas deals were currently progressing at this stage. So what I would say is we're busy. We regained we remain engaged in discussions across a range of options, everything from asset packages, combinations, and corporate transactions. The board, which obviously includes Amgen and Jonathan as well, and also the executive team, which Amgen runs, are ex are totally clear that the growing The UK business is our number one strategic priority.

43:57 In terms of timeline, I'm afraid I can't give you the answer that I'm I'm sure you're all hoping for. Unfortunately, you know, we're not in control of both sides of the equation here. All we can do is make an offer or offers to to sellers, which compel them to agree a sale. One thing we can say categorically is we are ready to transact today. The business is set up to transact. We have the funds ready to deploy. We've just talked a little bit about liquidity that's in place. And and there's a huge motivation across the whole organization to do so. I mean, my colleagues across the business are very excited and and and we'd love to bring new assets in to get their hands on into this organization. So there's there's alignment and a and a total motivation across the business. What we won't do, however, is abandon the disciplined approach, which is fundamental to all of our key decision making. We're committed to value.

44:58 Okay. Next question. There are two questions focused on major projects covering Kraken EUR, drilling at Kraken, Magnus Reservoir opportunities, and then the projects that we've lined up across Southeast Asia. To be to be honest, there is an assertion within the question that that that we are not accountable to shareholders or we don't demonstrate ourselves to be accountable to shareholders for delivery of our plans and that dates consistently move to the right. So in answer to that, I guess I'd start by saying that we're very proud of our commitment to delivery and I think we've done a very good job of delivering against our stated targets over a number of years. Beyond Kraken drilling, which was deferred, but not through our own choice, it was deferred because our partner has a parent that's in administration and we simply couldn't get the approval to to move that project forward.

45:48 I mean, beyond that, we've executed all of our recent drilling plans including well p and a across the various decommissioning projects. Like, we've done that across several years. In addition, you know, we're reaching the final stages of major infrastructure projects at SVT. The new stabilization facility, which will be online early next year is is that that by itself is reducing terminal emissions by about 80%. You'll remember I said overall, the program will take care of more than 90%. The NSF alone will take care of 80% of of of the current carbon footprint. And we're also progressing to final investment decision on the the project, as I mentioned, to build the wind turbines and we accept that we expect that decision to be taken in the early months of next year.

46:36 As I mentioned earlier, we've submitted a draft field development plan for the Bresse tieback, the gas tieback to Kraken, and that's that's with the regulator. So that's that's logged and lodged. And, you know, we're also we're we're excited about EUR, as I mentioned earlier on at Kraken. So we're advancing testing. We're progressing everything here. I mean, is this isn't about delaying. This is about making sure that we make the right decisions for the asset and making sure that we don't compromise the exemplary performance that that that Kraken is producing at the moment. So, basically, you know, there's things we need to be sure of before we push the button, but I think it's likely that project will proceed in a a phased basis next year. So, I mean, I think that gives an overview of all the the kind of major things we're working on. Of course, it goes without saying that we're working on anything that is safety critical, key maintenance. You know, that's that that's the the absolute bread and butter of our jobs day in, day out. But and, yeah, I I must admit, I don't recognize that that kind of feeling that that we don't we're not accountable and we don't deliver on our stated timelines. So hopefully that goes some way to to answering that point.

47:48 Next question. What are your plans for production over time? You mentioned 35 k, 35,000 barrels in Asia by 2030. What about The UK? Assuming no transformation comes, where do you see total company production by 2030, and what are the timelines to get to wherever that total is? So I think we've been very clear, and I hopefully, I've been clear on this call as well that we are we are targeting significant production growth in The UK via acquisition, and that remains, you know, primary amongst our strategic priorities. With the existing portfolio, our focus is on continuing to deliver sector leading production efficiencies and where possible, we'd look to optimize asset output through investment. Again, we're talking here about EOR.

48:33 There's some opportunities for further drilling at Magnus. We're talking about Bresse gas here. All of these projects can boost production reserves with a long term aim being to offset natural field declines. I mean, remember with late life assets, the the success is being able to maintain a stable production. What I should also point out as well is like were the fiscal and regulatory landscape to change meaningfully, whether that's in November or whether it's next year or whether it's a year after, then we do have Bresi and Bentley as opportunities waiting in the wings. We're progressing the the the Bresi gas tieback as I've referenced a couple of times, but the phased oil development is not something that that we will progress while EPL is being implemented.

49:20 While EPL is in place, it it doesn't really work to take on a big project like that, but we're still doing the work in the background. We still believe we have development concepts. And if the fiscal and regulatory environment in The UK is conducive to it, then that's something we would certainly look to progress. The final submitted question, again, it kind of aggregates a couple of questions is what was the reason behind not activating buybacks for for a so there's a bit of a typo here, but for a small smaller amount. Considering the low share value versus intrinsic value. So, I mean, what I would say there is, you know, we we we set out on a journey three years ago to deliver shareholder returns, and we were very clear with shareholders that up until that point, you know, we hadn't done any shareholder distributions.

50:10 But having put more than 1,500,000,000 into our balance sheet to reduce the net debt, we were cognizant that was the the time to to start, you know, returning funds to our our our shareholders who have been very loyal to us over that period. So we embarked on our first shareholder distribution June 2024. This year, the board took the decision they wanted to give more certainty to the to the award and then thus switch from a buyback to a dividend, and, of course, that was paid in in in June. So we've always been clear that when we initiated returns, we wanted them to be sustainable. And I think I laid out earlier that remains a key priority for our capital allocation thinking. So we haven't made the decision to take on another distribution during this year, but I'd expect the next shareholder return to be aligned to our twenty twenty five full year results.

51:04 So that is the pre submitted. I'm gonna go through some of the the live questions now. Bear with me just a second. I'm I'm trying to cover find some that I haven't covered already. There's a request here to provide a slide to show average annual production for the last ten years. Can you arrange this to be included in future presentations? Yeah. I mean, I'm very happy to to add that. Going forward, I'll I'll add a sort of asset view and and a company wide view. That's not a problem. Are you still profitable and able to pay down debt in a low oil price environment as at present? So, yeah, I mean, that's a question from from Jason. So so, yeah, Jason, mean, I think I've I've taken I've I've certainly tried to to answer that. I think we're we're still in a position where we're robust financially. We're still, you know, we've generated cash in the first half of the year.

52:02 Yes. We've had some additional outgoings in early two h, so we've paid our tax bill, and we've paid the balance on the Vietnam acquisition. So, you know, that was obviously a cash outflow in the month of July, but, you know, we're working very hard to make sure that we make further further inroads into net debt for the remainder of the year. And and the production that we're seeing at Magnus, the production we're seeing across the portfolio, you know, suggests that we'll do that. So I think actually even at low prices, we're robust. We're also operator of 96% of our reserves and volumes, so that gives us optionality, right? Were we to see a prolonged period of soft oil prices, then we could we can take steps, and we have the operational control with which to take steps to reduce our our cost. Now, of course, as I mentioned earlier, there's a balance there, and we don't want to tip the scales into seeing, you know, production outages by doing that, but we want to make sure we have a balanced approach to investing in our assets.

53:09 Let's have a look here. I mean, I think it's fair to say that there's a number of questions and some of them statements around, you know, the the where where the equity value is and and share value. And, of course, you as shareholders are are upset about that, and I I can completely understand it. I'm an ENQUEST shareholder myself. And, you know, and I think that what we've what we've got to understand here is is that we're we're operating in a a a sector that has taken a bit of a bashing in The UK. We we're under operating under very difficult fiscal conditions, and we we have we have a stated desire to to stay in this jurisdiction. One thing we haven't really talked about is our tax asset. It's been a feature of a a number of the presentation we've done in recent times. So hopefully, people on the call are aware that ENQUEST sits on a on a UK tax asset, a recognized tax asset of 2,000,000,000, and there's a further 1,200,000,000 that's that's waiting in the wings to to become recognized and starting in in in 2026.

54:17 So that's a huge amount of value for us to protect against tax. And what we're looking to do is accelerate the value of those tax assets as we look to transact in The UK. So we're very clear that that what this this business needs I mean, we've got the capability. We've got the skills. We've got the people. We've got the balance sheet. We've got the other assets as in the tax assets, but what we are lacking is scale. We need to do transactions in The UK, which increase scale in the business, accelerate the value of the tax asset, and the cash that that throws off will be used to diversify the business further, to return funds to shareholders, and also to make sure that we're we're investing the right amount in our core portfolio. So, look, you know, AMJAD is the is the who's our CEO, is the is the largest shareholder in the business. You know, he is hugely motivated across every, you know, facet of his of his connection with ENQUEST to get this right, and we're working very, very hard to do so. So look. I we appreciate, you know, there are some there's some disappointment around at the moment in terms of where we are with an equity value, but we think the future is bright and we do think we will see a rebasing of our value as we as we transform the business through acquisition.

55:38 There's a question here from Marcus around how production uptime influences the availability of 2P reserves. That's a really interesting question. Right? And and we do we are audited every year by Gaffney Klein. They do an audit of our reserves. And and where where the factors in, Marcus, is, you know, we have to present a case and a scenario to to those auditors around what we can reasonably expect to extract from each asset. And if we were running it production efficiencies of 60%, then they absolutely would not support, you know, our our view of how these assets are performing. So the fact that we deliver year on year in terms of production uptime definitely helps the recognition of our reserves and also helps present a case that, you know, we as an operator are best placed to optimize and maximize the output from our assets. So that's a really good question. Thank you for that.

56:38 Question, Paul, was the 2025 final dividend I mean, 2024 final dividend paid in '25, was it a one off, or do you envisage that this will be repeated? We've been very clear from the start, Paul, that we see sustainable sort of capital allocation towards shareholder returns as being sustainable, something we want to do year on year. And as I mentioned in my answer to the last question of the pre submitted questions, I would expect to see that addressed alongside our twenty twenty five full year results. There's a couple of questions here around, specific M and As, M and A transactions where, you know, I've got there's there's there's people questioning, you know, specific purchases that we might be able to make, and I hope you'll understand. I I can't go into those in this forum.

57:33 I think what I would say, though, is we are knowledgeable buyers in the North Sea. As you'd expect, we're looking at everything. We are not only waiting for things to to become available, but we're, you know, we are the creators and we're the instigators of certain conversations, many of which are bilateral. So, look, I think we we are we are very we're covering a a wide range of of options. I've talked about, you know, we're looking at asset packages. We're looking at corporate transactions. So we're looking we're looking at everything. The team are are busy. And his executive team are extremely busy. We've got BD colleagues who are, you know, running full tilt across a number of options. So, you know, at the moment, we we accept it's a it's a trust me exercise until we actually do the deal, but, yeah, we're looking at everything.

58:29 Let me see. There's a question here from Jonathan. I think it's possibly Jonathan Allen, who's someone who contacts me a lot and I speak to you a lot, and he's a long standing shareholder. And I think the question from Jonathan is, do you think the autumn budget, excuse me, will be the catalyst for potential m and a to actually happen? So I think I think there there's definitely the potential for that, Jonathan. I think if you go back a year from where we are today to to to 2024, you know, we were approaching an autumn statement with open ended downside risk. We knew it wasn't gonna be a good budget for our sector. We just didn't know how bad it was gonna be. As you remember at that time, I updated that, you know, ENQUEST were directly involved. We we had a lot of conversations with treasury, with James Murray, other areas of government, and as did our peers and our industry bodies, and we and we averted the worst case scenario by by stopping the government taking away first year capital allowances.

59:29 So a year on from that, you know, we're we're in that same countdown to the autumn statement, but it feels more cautiously optimistic. It feels like there are there are upside potential outcomes. We just don't know how far the government is willing to go. Now the autumn statement 2024 did fire the starting gun for a couple of deals. So Shell Equinor, for example, was executed extremely quickly once the certainty of of of of the audit budget was was released. And then you saw some other follow on transactions like reps on Neo to create Neo Next, etcetera. So I think there's definitely the potential, Jonathan, that the clarity brought about by the autumn statement or the Northeast strategy, whichever comes first, definitely has the potential to to to crystallize discussions very quickly.

1:00:27 Can you explain how the bond market has changed so we are not going to be under pressure to refinance next year, please? That's a question from Sam. Yeah. Thanks, Sam. I think I think that's a really timely question. So obviously, we're in a nice position at the moment where our we don't have any maturities until second half of twenty twenty seven. But you would all think us negligent if if Amgen, John well, obviously, Jonathan as CFO leading it. You you know, you would be surprised if we weren't looking at our options going forward. I think the the interesting thing about the the bond market and actually even the RBL market is that if I'd been talking to you three to five years ago, I'd have been talking about the the the huge pressure being applied to that and the availability of those kind of funds because of of of banks in particular and institutions leaving the space and no longer being willing to to lend into oil and gas.

1:01:27 Now fast forward to 2025, that is simply not the case. We have we we personally as ENQUEST have really strong support among our lending syndicate. There are there are other, I guess, could call them disruptors, new institutions coming into the space and they're writing quite large tickets and forcing everyone else to to to follow suit. You know, we saw that ten years ago with the likes of DNB coming into the space. We're seeing that again with some other new institutions. So the conversations we're having are very positive. We're looking to optimize our own view of what our capital stack looks like, you know, how much of it's flexible, I e r b l, how much of it is bonds, and what the makeup of that is. So we believe we've got options there. We're we're not concerned about that, and actually, we see really strong indications in the market. You know, Ithaca recently did a refinancing and an upsizing and that went very well.

1:02:30 They were able to lock in some good rates. So the market is very much open for business and very much open for business for ENQUEST. Thank you for that, Sam. I'm just gonna have one other go through. There there's there's a number of questions here around free cash flow. I've talked a little bit about, you know, we we can't give, you know, specific breakeven guidance because it could be construed as a profit forecast. But, hopefully, in this call, I've given you component elements to help you form your own view, and I'm very happy to to discuss, you know, if anyone wants to to run run past me, then then that's absolutely fine. There's another question here from Patrick around the refinancing of the bonds. Hopefully, I've just covered that. We've talked about m and a.

1:03:16 Future drilling at Kraken, that's a question from John. Can you bring us up to date on future Kraken drilling? So I think we we said at the half year results, and I think the the key to think about with Kraken is it's kind of a a two sided coin. Right? We've got EUR, which is organic, obviously, and that's an OpEx project, if you like, as opposed to capital project. And then we've got the drilling opportunities that still exist at the at the at the field. And I think the reality is we'll look to do a combination of both. We're still in a situation whereby, you know, we're working well with our partner whose payment remains in administration. You know, they're having their their own issues in in resolving that situation, but, you know, from an operational standpoint, there's no there's no issue. You we're working well with them. They continue to be partners in good standing. So I think it's you know, we haven't made a a firm decision on on the date of Kraken drilling, but absolutely, there there there's drilling in the future of Kraken.

1:04:18 There's a question from Christopher here around whether we would consider dual listing or secondary market listings in Asia given the company's growing exposure and recognition in Southeast Asia. I think that's a good a good point, Christopher. I think at the moment, that's probably a little bit premature, but I think what you are doing there is you're kind of recognizing the fact that, you know, moving from a a company, albeit with a very good reputation, but producing at the moment, like, 8,000 barrels a day to 35 in a few years' time, absolutely is increasing our visibility in the country and in the region. And I think that's to to our to the positive of the group as a whole. And, you know, we're we're looking to build on that momentum and grow our footprint and grow our exposure in Southeast Asia further. I'm just looking at some want to make sure I've captured pretty much everything.

1:05:16 I think there's I think I've I think I've covered pretty much everything here in one way or the other. Apologies if I haven't answered your specific question. Of course, as part of the investor meets platform, I have the opportunity to revisit every question in detail and make sure that everyone gets answered. As I say, there are there are a couple of questions, which are a little bit, you know, repeating what I've already covered. So so I I think at that's at that point, Jake, I'll probably close the q and a here with a commitment to revisit any any questions I haven't managed to cover in this time. Perfect. Craig, that's great. Thank you. And thank you very much indeed for being so generous of your time and addressing all of those questions that came in from investors this afternoon.

1:06:01 And, of course, if there are any further questions, we'll make these available to you as well. But, Craig, perhaps before really now just looking to redirect those on the call to provide you with their feedback, which I know is particularly important to yourself and the company. If I could please just ask you for a few closing comments just to wrap up with, that'd be great. Yeah. Well, look, I I thank everyone for taking the time to to join this this presentation today. Hopefully, what you've heard today has has has been clear and and a good representation of where ENQUEST is. You know, I I understand we're in a difficult position in terms of of of equity value at the moment. You know, we're we're we're certainly trading at a discount, and we want to rectify that. So I'd ask you to to to to be patient and and and trust in the the team as I do, the the the AMJAD and the execs and and the board.

1:06:48 We will will do the deal that is right for ENQUEST. You know, we're gonna maintain discipline. It's it's stood us in good stead as we navigate in a very difficult debt position. We're gonna maintain that discipline, and we're gonna do a deal or deals that are very value accretive for you shareholders. So thank you for your attention today. Perfect, Craig. That's great. And thank you once again for updating investors this afternoon. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order the management team can really better understand your views and expectations? This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of ENQUEST PLC, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all.