TIDMENQ
RNS Number : 8834X
EnQuest PLC
03 September 2020
Results for the six months ended 30 June 2020
Strong production performance and targeted free cash flow
breakeven on track
3 September 2020
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 2019 and the Balance Sheet as at 31 December
2019.
Alternative performance measures are reconciled within the
'Glossary - Non-GAAP measures' at the end of the Financial
Statements.
Good performance in a challenging environment
-- Group net production averaged 66,055 Boepd in the six months
to end June 2020; full year production guidance range of 57,000
Boepd to 63,000 Boepd maintained, although currently expect to be
towards the upper part of this range
-- Operations materially unaffected by COVID-19
-- Strong performance on Kraken with gross production of 38,967
Bopd (net 27,472 Bopd), c.19% higher than the same period in the
prior year. Full year production is expected to be towards the
upper part of the 30,000 Bopd to 35,000 Bopd (gross) guidance
range
-- Revenue of $450.7 million (2019: $858.2 million) and EBITDA
of $274.9 million (2019: $525.9 million), reflecting strong
production volumes and the benefit of the Group's hedging
programme, partially offset by lower market prices
-- Operating expenditure decreased to $174.3 million (2019:
$248.4 million) with unit operating costs reduced to $14.4/Boe
(2019: $20.1/Boe), reflecting strong production and cost
control
-- Robust cash generated from operations at $283.2 million
(2019: $426.2 million); cash capital expenditure of $101.4 million
(2019: $124.6 million), with full year guidance of c.$120 million
unchanged
-- Free cash flow generation of $87.5 million (2019: $138.3
million) has enabled further debt reduction
-- Lower oil price assumptions resulted in non-cash post-tax
impairments of $251.6 million, and non-cash de-recognition of
undiscounted deferred tax assets of $432.6 million. EnQuest retains
access to its tax losses and allowances
End June net debt reduced by $61.9 million from year end
-- At 30 June 2020, net debt was reduced to $1,351.1 million
(end 2019: $1,413.0 million) with cash and available bank
facilities amounting to $269.5 million (end 2019: $288.6
million)
-- Tanjong Baram Project Finance Facility of $31.7 million fully
repaid in June; Sculptor Capital Facility reduced by $31.8 million
in the period to end June
-- For full year 2020, the Group's hedge programme covers c.11.4
MMbbls. Approximately 10.3 MMbbls are hedged at an average floor
price of $43/bbl, with a further 1.1 MMbbls hedged with an average
floor price of c.$52/bbl in accordance with the Sculptor Capital
facility agreement
Significant, low-cost 2C resource addition in the UK North
Sea
-- Signed sale and purchase agreement for 40.81% equity interest
in and operatorship of Bressay licences in July
-- Low-cost addition of up to 115 MMbbls (net) 2C resources;
opportunity for long-term, low-risk, phased sub-sea tie-back
project
EnQuest Chief Executive, Amjad Bseisu, said :
"The Group continues to perform well in challenging conditions,
including COVID-19 and the early shutdown of a number of our
assets. The safety of our people and our assets remains our
priority. With our ongoing focus on operational excellence, we have
continued to exceed our operational targets, including production
of around 66,000 Boepd in the first half of 2020.
"Our difficult and early decisions to shut down our higher cost
assets have resulted in a substantial cost reduction programme,
which is on track. We remain confident that we will achieve our
2020 targets, with free cash flow breakeven for the full year at
c.$33/Boe. We continue to target free cash flow breakeven of
c.$27/Boe in 2021.
"Even with the most challenging macro and oil price environment
since our genesis as a company, we have been able to generate
around $87 million of free cash flow in the period and reduced our
net debt. We remain focused on continuing to reduce our debt and
strengthening our balance sheet.
"Looking further ahead, I am delighted we have agreed the
acquisition of a material operating interest in the Bressay field.
The addition of up to 115 MMbbls of net 2C resources materially
increases our 2C resource base and provides EnQuest an opportunity
to demonstrate further its proven capabilities in low-cost drilling
and heavy oil."
Production and financial information
H1 2020 H1 2019 Change
%
Production (Boepd) 66,055 68,548 (3.6)
------------------------------------------ -------------- ---------- -------
Revenue and other operating income
($m)(1) 450.7 858.2 (47.5)
------------------------------------------ -------------- ---------- -------
Statutory reported revenue and
other operating income ($m)(2) 439.4 815.4 (46.1)
------------------------------------------ -------------- ---------- -------
Realised oil price ($/bbl)(1) 43.6 66.1 (34.0)
------------------------------------------ -------------- ---------- -------
Average unit operating expenditure
($/Boe) 14.4 20.1 (28.3)
------------------------------------------ -------------- ---------- -------
Gross profit ($m) 39.8 269.9 (85.3)
------------------------------------------ -------------- ---------- -------
Statutory reported gross profit
($m) 19.3 223.0 (91.3)
------------------------------------------ -------------- ---------- -------
Profit before tax & net finance
costs ($m) 24.6 264.5 (90.6)
------------------------------------------ -------------- ---------- -------
EBITDA ($m) 274.9 525.9 (47.7)
------------------------------------------ -------------- ---------- -------
Statutory reported profit/(loss)
after tax ($m) (619.0) 44.3 -
------------------------------------------ -------------- ---------- -------
Statutory reported basic earnings/(loss)
per share (cents) (37.4) 2.7 -
------------------------------------------ -------------- ---------- -------
Cash generated from operations
($m) 283.2 426.2 (33.6)
------------------------------------------ -------------- ---------- -------
Cash capex ($m) 101.4 124.6 (18.6)
------------------------------------------ -------------- ---------- -------
End June 2020 End 2019
------------------------------------------ -------------- ---------- -------
Net (debt)/cash ($m) (1,351.1) (1,413.0) (4.4)
------------------------------------------ -------------- ---------- -------
(1) Including net realised gains of $35.2 million (2019: net
realised gains of $7.6 million) associated with EnQuest's oil price
hedges
(2) Including net realised and unrealised gains of $23.9 million
(2019: net realised and unrealised losses of $35.3 million)
associated with EnQuest's oil price hedges
Summary financial review of H1 2020
Revenue was $450.7 million for the six months ended 30 June 2020
compared with $858.2 million for the same period in 2019. This
decrease was primarily driven by the material reduction in the oil
price and moving from a net overlift to a net underlift position at
the end of 30 June 2020. Group revenue is predominantly derived
from crude oil sales and for the six months ended 30 June 2020,
crude oil sales totalled $375.5 million compared with $761.9
million for the comparative period in 2019. Revenue from the sale
of gas and condensate in the period was $27.6 million (2019: $79.9
million), reflecting significantly lower market prices for gas.
The commodity hedge programme resulted in realised gains of
$35.2 million in the first half of 2020 (2019: realised gains of
$7.6 million). Consequently, the Group's average realised oil price
was $43.6/bbl for the six months ended 30 June 2020, compared to
$66.1/bbl received during the first half of 2019. Excluding the
impact of hedging, the average realised oil price was $39.9/bbl in
the first half of 2020, compared to $65.4/bbl received during the
first half of 2019.
Cost of sales were $410.9 million for the six months ended 30
June 2020 compared with $588.3 million for the same period in 2019.
Operating costs decreased by $74.1 million to $174.3 million,
primarily reflecting the Group's focus on cost control, including
the decision to cease production at Heather and Thistle. The
Group's average unit operating cost has decreased by 28.3% to
$14.4/Boe (2019: $20.1/Boe). Other cost of sales decreased by
$103.3 million to $236.6 million (2019: $339.9 million), reflecting
the change from a net overlift to a net underlift position, and the
lower cost of Magnus-related third-party gas purchases following
the reduction in the market price for gas, partially offset by a
$19.0 million inventory write down recognised in the first half of
the year, which primarily relates to inventory held at assets
scheduled for decommissioning.
EBITDA for the six months ended 30 June 2020 reduced to $274.9
million compared with $525.9 million for the same period in 2019.
This was driven by lower revenue partially offset by lower cost of
sales.
The tax credit for the six months ended 30 June 2020 was $71.5
million (2019: $36.2 million tax charge).
Remeasurement and exceptional items were a net loss of $308.1
million before tax for the six months ended 30 June 2020 (2019:
loss of $120.0 million). Revenue included unrealised losses of
$11.3 million in respect of the mark-to-market movement on the
Group's commodity contracts (2019: unrealised losses of $42.9
million). Pre-tax non-cash impairment charges of $409.8 million on
the Group's tangible oil and gas assets were recognised, reflecting
a reduction in oil price assumptions. Other remeasurement and
exceptional items in the first half of 2020 also includes a $161.9
million gain in relation to the fair value recalculation of the
Magnus contingent consideration reflecting the reduction in oil
price assumptions and a $6.2 million provision in relation to the
Group's transformation programme referred to below.
The Group's reported cash generated from operations for the six
months ended 30 June 2020 was $283.2 million (2019: $426.2 million)
primarily as a result of lower revenue. Free cash flow for the six
months ended 30 June 2020 was $87.5 million (2019: $138.3
million).
EnQuest's net debt decreased by $61.9 million from $1,413.0
million at the end of 2019 to $1,351.1 million at 30 June 2020. Net
debt at 30 June 2020 includes $166.2 million of inception to date
interest that has been capitalised to the principal of the senior
credit facility and bonds ('PIK'), compared to $133.3 million at 31
December 2019.
In January 2020, EnQuest voluntarily repaid $35.0 million of the
senior credit facility early, resulting in no further amortisations
due in 2020. The next amortisation payment of $65.0 million is due
by 1 April 2021.
In June 2020, EnQuest made an early voluntary repayment of the
entire $31.7 million of the Tanjong Baram project finance facility
having received the first of three instalments from PETRONAS for
reimbursement of outstanding net capital expenditure of around $50
million relating to the Tanjong Baram project. The remaining two
reimbursement instalments are due from PETRONAS in the second half
of the year.
The strong production performance at Kraken has driven a $31.8
million reduction in the Sculptor Capital facility in the first six
months of the year.
The Group continues to have access to its full UK corporate tax
losses of $3,086.8 million at 30 June 2020 (2019: $2,903.4
million).
Operating review
Production details
Net daily average 1 Jan' 2020 1 Jan' 2019
production on a to to
working interest 30 Jun' 30 Jun'
basis 2020 2019
------------------- ------------ ------------
(Boepd) (Boepd)
Magnus 18,806 17,774
Kraken 27,472 23,107
Other North Sea 11,471 19,068
------------ ------------
Total UKCS 57,749 59,949
------------ ------------
Total Malaysia 8,306 8,599
------------ ------------
Total EnQuest 66,055 68,548
------------ ------------
Magnus
Average production in the six months to end June was 18,806
Boepd, 5.8% higher than the same period in 2019. This increase was
driven by high production efficiency of 86% and also high water
injection efficiency of 91%. Combined with two new wells coming
onstream in March, which are performing in line with expectations,
this has partially offset gas compressor performance issues
experienced in the first quarter. Production optimisation
activities are continuing and the Group expects to complete a
one-week maintenance shutdown in the fourth quarter to carry out
essential works,
Kraken
Gross production during the first six months of 2020 averaged
38,967 Bopd (net 27,472 Bopd), an increase of 18.9% and ahead of
the top end of guidance. This was driven by a good performance from
the floating, production, storage and offloading ('FPSO') vessel,
with high production efficiency of 86%. Overall subsurface and well
performance remains good and the Group continues to optimise
production through improved injector-producer well management
following the completion of well testing in May and June. Drilling
at Worcester was completed during the first half of the year, with
the new producer-injector pair coming onstream late in the second
quarter.
In June 2020, Kraken reached three years since the delivery of
first oil, with output significantly increasing from 7.7 MMbbls in
the first 12 months of operation to over 14.2 MMbbls in its third
year. Cargo pricing has improved over the same period and remains
robust, with the Group continuing to optimise sales into the
shipping market with Kraken oil being a key component of IMO 2020
compliant low-sulphur fuel oil.
In the third quarter, repairs were required to the DC1 riser,
resulting in two producer wells shut in for approximately two
weeks. In addition, a one-week planned shutdown of operations is
planned in the third quarter to allow for essential maintenance
work to be undertaken.
With the better than expected performance so far this year,
production is currently expected to be towards the upper part of
the 30,000 Bopd and 35,000 Bopd (gross) full year guidance
range.
Other North Sea operations
Production in the six months to end June averaged 11,471 Boepd,
39.8% lower than the same period in 2019. This decrease was
primarily driven by the decision not to restart production at the
Heather/Broom and Thistle/Deveron fields, which contributed c.9,000
Boepd in the same period in 2019. Elsewhere, lower water injection
and a lack of gas lift, along with gas compressor downtime and
underlying natural declines, impacted production at the Dons. These
reductions were partially offset by strong production efficiency at
Alma/Galia, with production in line with expectations, while
performance was significantly improved at Scolty/Crathes following
the completion of the pipeline replacement project during the third
quarter of 2019. Alba continues to perform in line with the Group's
expectations, with the Group continuing to deliver stable
operations and plant availability at the Sullom Voe Terminal.
In June, a cessation of production ('CoP') application for the
Heather asset was accepted by the regulator, which allows
preparations to begin for decommissioning and lowers EnQuest's
share of costs to 37.5% (from 100.0%). The platform remains
shutdown and is depressurised. The Group expects to recommence the
well abandonment programme in 2021.
The Thistle/Deveron CoP application was lodged with the
regulator in July and once accepted, the decommissioning phase will
begin, resulting in EnQuest's share of post-tax costs reducing to
6.1% (from 99.0%). Project activities related to the removal of the
redundant crude oil storage tanks at Thistle continued, with the
successful removal of the tanks completed in July. The facility is
expected to remain permanently unmanned for the remainder of 2020,
with a well abandonment programme targeted for 2021.
At the Dons, given the impacts on gas supply for gas lift as a
result of the shutdown at Thistle and the resulting lower
production, the Group is working with its partners and the
regulator to seek the necessary regulatory approvals in respect of
CoP. Operations are expected to cease in the second quarter of
2021.
At Alma/Galia, CoP occurred on 30 June 2020 as planned. The
EnQuest Producer FPSO will shortly move off station and sail to the
oil terminal jetty at Nigg. The Group continues to explore a number
of options regarding its future.
Following the decisions to pursue CoP at the Heather,
Thistle/Deveron and the Dons assets, the Group has re-organised its
UK North Sea business into three directorates that report to Bob
Davenport, Managing Director - North Sea. These directorates are
Upstream, Midstream and Decommissioning(1) . With the changing
operational footprint of the Group, support functions have also
been reviewed. Given the scale of change, with the number of
employee and contractor roles in the UK reduced by approximately
40%, the UK workforce has undergone an open and transparent
collective consultation process to ensure all employees were
treated fairly and with respect. This consultation process, which
included the appointment of employee representatives to work with
management to ensure the proposed changes did not compromise safety
and to minimise the impact on the Group's people and operations,
gave all employees at EnQuest the opportunity to nominate
themselves for relevant roles within the new organisation
structure. Feedback received from the employee representatives was
positive . This transformation enables the Group's directorates to
focus on the most appropriate activities that deliver operational
excellence and safe results at each of its assets.
(1) Upstream includes: Magnus, Kraken, the Greater Kittiwake
Area and Scolty/Crathes, and Alba. Midstream includes: the Sullom
Voe Terminal and the Group's pipeline operations. Decommissioning
includes Heather/Broom, Thistle/Deveron, the Dons and
Alma/Galia
Malaysian operations
Average production in Malaysia in the six months to end June
2020 of 8,306 Boepd was broadly in line with the same period in
2019. Continued high production efficiency, which averaged c.96%,
and the impact of idle well restoration activities, combined with
higher gas sales, largely offset the loss of volumes from Tanjong
Baram, which was shut-down ahead of the termination of the small
field risk service contract.
In June, a short planned maintenance shutdown was successfully
completed on PM8/Seligi, with a total production outage of around
two days being achieved, well within the original planned five day
outage.
Business development and growth opportunities
In July, the Group announced that it had signed a binding sale
and purchase agreement with Equinor for an equity interest in the
Bressay licenses. Under the agreement, EnQuest will assume
operatorship of the licenses with a participating interest of
40.81% for an initial consideration of GBP2.2 million, payable as a
carry against 50% of Equinor's net share of costs. It is expected
that up to115 MMbbls, net to EnQuest, will be added to the Group's
2C resources. With no near-term capital commitments, Bressay offers
the Group the opportunity for a long-term, low-risk, phased sub-sea
tie-back project, potentially to the Kraken field, which could
reduce emissions, costs and extend Kraken's field life.
Further to the addition of 2C resources potential at Bressay,
EnQuest has a large volume of reserves and resources within its
portfolio, providing opportunities for long term and low-cost
drilling when conditions are supportive. Magnus offers 2C resources
of c.38 MMbbls and around 250 million barrels of movable oil still
to evaluate. Kraken continues to offer further near-field
opportunities through the evaluation and development of the western
area, which holds an estimated 70-130 MMbbls of STOIIP. In
Malaysia, EnQuest has c.22 MMboe of 2P reserves and c.76 MMboe of
2C resources. Subsurface studies are ongoing on Block PM409, which
is a proven hydrocarbon area containing several undeveloped
discoveries contiguous to the Group's existing PM8/Seligi PSC.
Environmental, Social and Governance
The safety of its people will always be a top priority for
EnQuest. The Group continues to monitor actively the impact on
operations from COVID-19 and has implemented a number of
mitigations to minimise the impact, adopting an approach based upon
the principles of safety and welfare of people and security of
supply. The Group has remained aligned and supportive of the
government position and remained compliant with Dubai, Malaysia and
UK 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 and level of risk. Appropriate restrictions on
offshore travel have been implemented, such as self-declaration by,
and isolation of, individuals who are symptomatic. Pre-mobilisation
testing and temperature checks are also in operation for all
operational staff prior to travelling to the Group's UK North Sea
onshore and offshore operating facilities. EnQuest's normal
communicable disease process has been updated specifically in
respect of COVID-19, with additional offshore isolation capability
and agreements in place to transport impacted individuals back
onshore in dedicated helicopters. At the Sullom Voe Terminal, the
same processes have also been implemented, with isolation
capability at local accommodation. These measures have been robust,
resulting in EnQuest having a strong record of minimising the
impact of COVID-19 on our people, with only three cases of COVID-19
confirmed offshore, across all producing assets. Across the Group's
onshore office locations, appropriate risk assessments have been
undertaken with any necessary procedural and office layout
alterations implemented to minimise the risk as the Group's
workforce gradually returns to the office in line with relevant
government guidelines. At the time of publication of EnQuest's half
year results, the Group's day-to-day operations continue without
being materially affected by COVID-19.
The Group expects its Scope 1 and 2 emissions to be around 15%
lower in 2020 compared to 2019, reflecting the pursuit of several
emission reduction projects and the Group's decisions to cease
production at its Heather, Thistle/Deveron and Alma/Galia assets.
Based on current estimates for the existing portfolio, the Group
expects to deliver a reduction in emissions of c.10% over the next
three years. EnQuest is also a participant in the Energy Hub, an
initiative being developed by the Shetland Islands Council and the
Oil and Gas Technology Centre aiming to deliver a clean,
sustainable energy future for Shetland and the UK. In the meantime,
the Group continues voluntarily to limit emissions in Malaysia
below the regulatory limit and optimise sales of Kraken cargoes
directly to the shipping market, avoiding emissions related to
refining and helping reduce sulphur emissions in accordance with
the IMO 2020 regulations. The Group Safety & Risk Committee has
also concluded its assessment of whether 'climate change' should be
categorised as a standalone risk area within the Group's risk
management framework (in addition to the recognition already
accorded to climate change related issues across the existing
principal risk areas) and concluded that it should be categorised
as such.
The Group remains committed to improving workforce diversity
across the business. At present, around 20% of EnQuest's country
leadership teams are female and the Group is committed to improving
this further.
EnQuest has continued to provide support to the communities in
which it works. In Malaysia, EnQuest is sponsoring one university
student to study STEM-related subjects at University Malaya and has
also signed a Memorandum of Agreement to sponsor the IChemE
accreditation of the Chemical Engineering programme at The National
University of Malaysia. This accreditation is expected to improve
the employability of graduating students, anticipated to be some
80-100 individuals for each intake year.
In March, Howard Paver was appointed as the Senior Independent
Director, replacing Helmut Langanger who retired from the Board,
while in May, Howard replaced Laurie Fitch as Chair of the
Remuneration Committee. Laurie remains a member of the
Committee.
Liquidity and net debt
At the end of June 2020, net debt was $1,351.1 million, down
$61.9 million from $1,413.0 million at 31 December 2019, reflecting
strong operational performance and the impact of the Group's
commodity hedge programme in the first quarter, partially offset by
the settlement of the Group's high yield and retail bond interest
as payment in kind through the issuance of additional notes. Total
cash and available facilities were $269.5 million, including
ring-fenced accounts associated with Magnus, the Sculptor Capital
facility and other joint venture accounts totalling $89.3
million.
In June, the Group made an early voluntary repayment of the
remaining $31.7 million of the Tanjong Baram project finance
facility, having received the first of three instalments from
PETRONAS for settlement of the outstanding net capital expenditure
of around $50 million relating to the Tanjong Baram project. The
remaining two reimbursement instalments are due from PETRONAS in
the second half of the year.
As a result of the material decline in the oil price in the
first quarter, the Group pre-emptively sought a waiver of the
liquidity test for the remainder of 2020 from the lenders in the
Senior Credit Facility which was granted in the second quarter.
By the end of June, c.5.9 MMbbls of oil hedges had been settled.
Approximately 5.2 MMbbls had an average floor price of c.$49/bbl,
while c. 0.7 MMbbls associated with the Sculptor Capital facility
had an average floor price of c.$52/bbl. For the remaining six
months of 2020, EnQuest has c. 5.5 MMbbls of oil hedges in place.
Approximately 5.1 MMbbls are hedged at an average price of
c.$36/bbl, with a further c.0.4 MMbbls hedged with an average floor
price of c.$52/bbl in accordance with the Sculptor Capital facility
agreement.
2020 outlook reaffirmed
Group production performance in the period was above the top end
of guidance at 66,055 Boepd. Full year production guidance of
57,000 and 63,000 Boepd is maintained, although the Group currently
expects to be towards the upper part of this range. During the
second half of 2020, the strong production performance from the
first half of the year is expected to be partially offset by
planned maintenance shutdowns, the cessation of production at
Alma/Galia in June, lower expected production from the Don's and
natural field declines.
Implementation of the Group's 2020 cost savings and reduction in
free cash flow breakeven remain on track, with operating
expenditure expected to be around $335 million and cash capital
expenditure around $120 million, in line with previous
guidance.
While debt repayment remains the priority, the Group continues
to assess its large and low-cost 2C resource base for future
development when conditions are supportive.
- 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 Communications & Investor
Relations)
Jonathan Edwards (Senior Investor Relations
& Communications Manager)
Tulchan Communications Tel: +44 (0)20 7353
4200
Martin Robinson
Martin Pengelley
Harry Cameron
Presentation to Analysts and Investors
A presentation to analysts and investors will be held at 09:00
today - London time. The presentation and Q&A will also be
accessible via an audio webcast, available on the investor
relations section of the EnQuest website at www.enquest.com . A
conference call facility will also be available at 09:00 on the
following numbers:
Conference call details:
UK: +44 (0) 800 376 7922
International: +44 (0) 207 192 8000
Confirmation Code: EnQuest
Notes to editors
This announcement has been determined to contain inside
information.
Identity of the person making this notification: Stefan
Ricketts, Company Secretary
ENQUEST
EnQuest is 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. Its UK operated assets include
Thistle/Deveron, Heather/Broom, the Dons area, Magnus, the Greater
Kittiwake Area, Scolty/Crathes, Alma/Galia and Kraken; EnQuest also
has an interest in the non-operated Alba producing oil field. At
the end of June 2020, EnQuest had interests in 17 UK production
licences and was the operator of 15 of these licences. EnQuest's
interests in Malaysia include the PM8/Seligi and PM409 production
sharing contracts, both of which the Group operates.
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
Unless otherwise stated, all figures are on a Business
performance basis and are in US Dollars.
Comparative figures for the Statement of Comprehensive Income
relate to the period ended 30 June 2019 and the Balance Sheet as at
31 December 2019.
Alternative performance measures are reconciled within the
'Glossary - Non-GAAP measures' at the end of the Financial
Statements.
Production on a working interest basis decreased by 3.6% to
66,055 Boepd, compared to 68,548 Boepd in the first half of
2019.
Revenue for the six months ended 30 June 2020 was $450.7
million, 47.5% lower than the comparative 2019 six month period
(2019: $858.2 million).
The Group's operating expenditures of $174.3 million were 29.8%
lower than the comparative period (2019: $248.4 million). Unit
operating costs decreased by 28.3% to $14.4/Boe (2019:
$20.1/Boe).
EBITDA for the six months ended 30 June 2020 was $274.9 million,
47.7% lower than the comparative period (2019: $525.9 million).
Business performance
-----------------------
H1 2020 H1 2019
$ million $ million
Profit from operations before tax and finance income/(costs) 24.6 264.5
Depletion and depreciation 252.3 255.4
Inventory write-down 19.0 5.7
Net foreign exchange (gains)/losses (21.0) 0.3
EBITDA 274.9 525.9
=========== ==========
EnQuest's net debt decreased by $61.9 million from $1,413.0
million at the end of 2019 to $1,351.1 million at 30 June 2020. Net
debt at 30 June 2020 includes $166.2 million of inception to date
interest that has been capitalised to the principal of the
facilities pursuant to the terms of the Group's November 2016
refinancing ('PIK'), compared to $133.3 million at 31 December
2019.
Net debt/(cash)
------------------------
30 June 31 December
2020 2019
$ million $ million
Bonds 991.4 971.9
Multi-currency revolving credit facility ('RCF') 440.8 475.1
Sculptor Capital facility(1) 91.1 122.9
Tanjong Baram Project Finance Facility - 31.7
SVT Working Capital Facility 11.2 31.9
Cash and cash equivalents(2) (183.4) (220.5)
Net debt 1,351.1 1,413.0
========== ============
Notes:
1 Sculptor Capital facility was previously known as the Oz Management facility
2 Includes restricted cash of $1.6 million (see note 10)
In January 2020, EnQuest voluntarily repaid $35.0 million of the
RCF early, resulting in the Group having repaid all the
amortisations due in 2020. The next amortisation payment of $65.0
million is due 1 April 2021.
In June, EnQuest made an early voluntary repayment of the entire
$31.7 million of the Tanjong Baram Project Finance facility having
received the first of three instalments from PETRONAS for
reimbursement of outstanding net capital expenditure of around $50
million relating to the Tanjong Baram project. The remaining two
reimbursement instalments are due from PETRONAS in the second half
of the year.
$32.2 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 strong production performance at Kraken has driven a $31.8
million reduction in the Sculptor Capital facility in the first six
months of the year.
The Group continues to have full access to its UK corporate tax
losses of $3,086.8 million at 30 June 2020 (31 December 2019:
$2,903.4 million). In the current environment, no material
corporation tax or supplementary corporation tax 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
2020 were lower than in the same period in 2019. The Group's
average realised oil price excluding the impacts of hedging was
$39.9/bbl for the six months ended 30 June 2020, 39.0% lower than
the comparative period (2019: $65.4/bbl). Revenue is predominantly
derived from crude oil sales, which for the six months ended 30
June 2020 totalled $375.5 million, 50.7% lower than the comparative
period (2019: $761.9 million), primarily reflecting the
significantly lower oil prices and moving from a net overlift to a
net underlift position at the end of 30 June 2020. Crude oil sales
for the period ended 30 June 2020 were 9.4 MMbbls (2019: 11.6
MMbbls). Revenue from the sale of condensate and gas in the period
was $27.6 million (2019: $79.9 million), reflecting significantly
lower market prices for gas. Tariff and other income generated
$12.4 million (2019: $8.9 million). The Group's commodity hedges
and other oil derivatives contributed $35.2 million of realised
gains (2019: gains of $7.6 million), including a gain of $5.6
million of non-cash amortisation of option premiums (2019: gain of
$4.7 million).
Cost of sales
Business performance
-----------------------
H1 2020 H1 2019
$ million $ million
Production costs 137.7 210.2
Tariff and transportation expenses 36.1 39.2
Realised loss/(gain) on FX derivatives related
to operating costs 0.5 (1.0)
Operating costs 174.3 248.4
Change in lifting position and inventory (48.5) 29.4
Depletion of oil and gas assets 248.4 250.4
Other cost of sales 36.7 60.1
----------- ----------
Cost of sales 410.9 588.3
----------- ----------
$/Boe $/Boe
Operating cost per barrel
- Production costs 11.4 16.9
- Tariff and transportation expenses 3.0 3.2
Average unit operating cost 14.4 20.1
----------- ----------
Cost of sales were $410.9 million for the six months ended 30
June 2020, 30.2% lower than the comparative period (2019: $588.3
million). Operating costs decreased by $74.1 million, primarily
reflecting the Group's focus on cost control, including the
decision to cease production at Heather and Thistle. The Group's
average unit
operating cost has decreased by 28.3% to $14.4/Boe.
The credit relating to the Group's lifting position and
inventory was $48.5 million (2019: $29.4 million debit). This
reflects a switch to a $23.5 million net underlift position at 30
June 2020 from a $28.6 million net overlift position at 31 December
2019.
Depletion expense of $248.4 million was 0.8% lower than the
comparative period (2019: $250.4 million).
Other cost of sales of $36.7 million was lower than the
comparative period (2019: $60.1 million). This primarily reflects
the lower cost of Magnus-related third-party gas purchases
following the reduction in the market price for gas partially
offset by the $19.0 million inventory write down recognised in the
first half of the year, which primarily relates to inventory held
at assets scheduled for decommissioning.
Other income and expenses
Net other expense of $11.7 million (2019: net other expenses of
$0.3 million) is primarily $45.9 million recognition of the
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 and income
Finance costs of $90.9 million were 14.9% lower than the
comparative period (2019: $106.8 million). The charges include
$52.8 million of interest payable on loans and borrowings and bonds
(2019: $69.7 million), $26.1 million of finance charges related to
lease liabilities (2019: $26.8 million), $7.1 million unwinding of
discount on provisions and liabilities (2019: $7.0 million),
together with other facility fees such as commitment fees, and the
amortisation of bond fees.
Finance income was a total of $1.1 million for the six months
ended 30 June 2020 (2019: $1.1 million).
Taxation
The tax credit for the six months ended 30 June 2020 is $71.5
million (2019: $36.2 million tax charge).
Remeasurements and exceptional items
Remeasurements and exceptional items resulting in a net loss of
$308.1 million before tax have been disclosed separately for the
six months ended 30 June 2020 (2019: loss of $120.0 million).
Revenue included unrealised losses of $11.3 million in respect
of the mark-to-market movement on the Group's commodity contracts
(2019: unrealised losses of $42.9 million). Pre-tax non-cash
impairment charges of $409.8 million on the Group's tangible oil
and gas assets were recognised, reflecting a reduction in oil price
assumptions. Other remeasurement and exceptional items in the first
half of 2020 also includes a $161.9 million gain in relation to the
fair value recalculation of the Magnus contingent consideration
reflecting the reduction in oil price assumptions and a $6.2
million redundancy provision in relation to the Group's
transformation programme (2019: increase in contingent
consideration on the 75% acquisition of Magnus and associated
infrastructure of $26.9 million, $28.1 million unwinding of
discount on the end 2018 contingent consideration balance and the
provision for settlement of the historical KUFPEC claim of $15.6
million).
A net tax charge of $317.1 million (2019: credit of $41.7
million) has been presented as exceptional, representing the
non-cash de-recognition of undiscounted deferred tax assets of
$432.6 million given the Group's lower oil price assumptions,
partially offset by the tax impact of the above items. The
exceptional de-recognition of the undiscounted deferred tax asset
balance is made up of de-recognition of previously recognised tax
losses and allowances of $363.5 million and the immediate
de-recognition of the notional tax-credit of $24.4 million arising
on business performance in the six months to June 2020 and
ring-fenced expenditure supplement uplift of $44.7 million
recognised in the period to 30 June 2020. EnQuest continues to have
access to its full UK corporate tax losses of $3,086.8 million at
30 June 2020.
Profit/(loss) for the period
Total pre-tax losses for the period to 30 June 2020 were $373.4
million (2019: profit of $38.7 million), primarily reflecting
non-cash impairments. Total post-tax losses for the period to 30
June 2020 were $619.0 million (2019: profit of $44.3 million), and
include the partial de-recognition of deferred tax assets.
Cash flow and liquidity
Net debt at 30 June 2020 amounted to $1,351.1 million, including
PIK of $166.2 million, compared with net debt of $1,413.0 million,
including PIK of $133.3 million, at 31 December 2019. The Group has
remained in compliance with financial covenants under its debt
facilities throughout the six month period. The movement in net
debt was as follows:
$ million
Net debt 1 January 2020 (1,413.0)
Net cash flows from operating activities 275.1
Cash capital expenditure (101.4)
Net cash received on termination of Tanjong Baram risk service contract 17.1
Lease payments (56.1)
Magnus contingent consideration (25.8)
Net interest and finance costs paid (21.4)
Non-cash capitalisation of interest to principal of bond and debt facilities (33.3)
Other movements, primarily net foreign exchange loss on cash and debt 7.7
Net debt 30 June 2020 (1,351.1)
==========
The Group's reported net cash flows from operating activities
for the six months ended 30 June 2020 were $275.1 million, 32.7%
down compared to the comparative period (2019: $409.0 million). The
main drivers for this decrease are the impact of a significantly
lower oil price and lower sales volumes.
Cash outflow on capital expenditure is set out in the table
below:
H1 2020 H1 2019
$ million $ million
North Sea 99.4 122.8
Malaysia 1.9 1.7
Other 0.1 0.1
101.4 124.6
========== ==========
Cash capital expenditure primarily relates to Kraken and Magnus
drilling activities.
Balance Sheet
The Group's total asset value has decreased by $974.8 million to
$3,801.8 million at 30 June 2020 (31 December 2019: $4,776.6
million), mainly due to impairment charge on the Group's tangible
oil and gas assets, the non-cash partial de-recognition of the
Group's undiscounted deferred tax assets and depletion of oil and
gas assets. Net current liabilities have decreased by $69.1 million
to $213.6 million as at 30 June 2020 (31 December 2019: $282.7
million). Included in the Group's net current liabilities are $88.6
million of estimated future obligations where settlement is
ring-fenced to the financial performance at Kraken and Magnus (31
December 2019: $178.7 million).
Property, plant and equipment ('PP&E')
Property, plant and equipment has decreased to $2,809.1 million
at 30 June 2020 from $3,450.9 million at 31 December 2019. This
decrease is explained by impairment charges of $409.8 million,
depletion and depreciation charges of $252.3 million, change in
decommissioning provision of $10.6 million and the termination of
the Tanjong Baram risk service contract ($41.6 million), offset by
capital additions of $72.5 million. Capital additions are set out
in the table below:
H1 2020
$ million
North Sea 71.8
Malaysia 0.7
72.5
==========
Intangible oil and gas assets
Intangible oil and gas assets have remained consistent at $27.6
million at 30 June 2020 (31 December 2019: $27.6 million).
Trade and other receivables
Trade and other receivables have decreased by $17.7 million to
$261.8 million at 30 June 2020 compared to $279.5 million at 31
December 2019. The decrease is driven by a reduction in joint
venture debtors, due to timing, partially offset by an increase in
the Groups underlift position.
Cash and net debt
The Group had $183.4 million of cash and cash equivalents and
$1,351.1 million of net debt, including PIK and capitalised
interest of $174.1 million, at 30 June 2020 (31 December 2019:
$220.5 million cash and cash equivalents and $1,413.0 million of
net debt, including PIK and capitalised interest of $140.7
million). Net debt comprises the following liabilities:
-- $219.2 million principal outstanding on the GBP155 million
retail bond, including interest capitalised as PIK of $28.2
million;
-- $772.2 million principal outstanding on the high yield bond,
including interest capitalised as PIK of $122.2 million;
-- $440.8 million of the credit facility, comprising amounts
drawn down of $425.0 million and interest capitalised as PIK of
$15.8 million;
-- $91.1 million on the Sculptor Capital facility, comprising
amounts drawn down of $83.2 million and capitalised interest of
$7.9 million; and
-- $11.2 million relating to the SVT Working Capital Facility.
Provisions
The Group's decommissioning provision increased by $27.9 million
to $739.8 million at 30 June 2020 (31 December 2019: $711.9
million). The movement is driven primarily by change in estimate
$20.4 million, interest unwinding of $7.1 million and additions of
$7.5 million offset by utilisation of $7.1 million.
Contingent consideration
The contingent consideration relating to the Magnus acquisition
decreased by $152.3 million to $505.0 million at 30 June 2020 (30
December 2019: $657.3 million). In the six months ended 30 June
2020, EnQuest repaid $28.9 million to BP and recognised a change in
fair value estimate charge of $161.9 million, offset by an
unwinding of discount of $39.7 million.
Income tax
The Group has a corporation tax liability at 30 June 2020 of
$2.8 million, compared to $4.1 million at 31 December 2019. This
primarily represents tax payable in relation to the activity in
Malaysia.
Deferred tax
The Group's net deferred tax asset has decreased from $555.1
million at 31 December 2019 to $311.8 million at 30 June 2020,
primarily reflecting the non-cash partial de-recognition of
undiscounted deferred tax assets given the Group's lower oil price
assumptions. The exceptional de-recognition of the undiscounted
deferred tax asset balance is made up of de-recognition of
previously recognised tax losses and allowances of $363.5 million
and the immediate de-recognition of the notional tax-credit of
$24.4 million arising on business performance in the six months to
June 2020 and ring-fenced expenditure supplement uplift of $44.7
million recognised in the period to 30 June 2020. EnQuest continues
to have access to its full UK corporate tax losses carried forward
at the half year amounting to $3,086.8 million (31 December 2019:
$2,903.4 million).
Trade and other payables
Trade and other payables of $305.7 million at 30 June 2020
decreased from $419.9 million at 31 December 2019, reflecting
settlement of previously deferred capital expenditures and a
reduced cost base following the Group's transformation
programme.
Lease obligations
As at 30 June 2020, the Group held a lease liability of $680.6
million (31 December 2019: $716.2 million).
Financial Risk Management
Oil price
The Group is exposed to the impact of changes in Brent crude oil
prices on its revenue and profits. EnQuest's policy is to manage
the impact of commodity prices to protect against volatility and
allow availability of cash flow for reinvestment in capital
programmes that are driving business growth.
During the six months ended 30 June 2020, commodity derivatives
generated a total gain of $24.0 million, with revenue and other
operating income including a realised gain of $35.2 million. The
unrealised losses of $11.2 million relate mostly to open swaps.
Foreign exchange
EnQuest's functional and presentational currency is US Dollars.
Foreign currency risk arises on purchases and the translation of
assets and liabilities denominated in currencies other than US
Dollars. To mitigate the risks of large fluctuations in the
currency markets, the hedging policy agreed by the Board allows for
up to 70% of the non-US Dollar portion of the Group's annual
capital budget and operating expenditure to be hedged. For specific
contracted capital expenditure projects, up to 100% can be
hedged.
EnQuest continually reviews its currency exposures and, when
appropriate, looks at opportunities to enter into foreign exchange
hedging contracts. During the six months ended 30 June 2020, these
contracts resulted in an unrealised loss of $3.0 million recognised
in the income statement.
Surplus cash balances are deposited as cash collateral against
in-place letters of credit as a way of reducing interest costs.
Otherwise, cash balances can be invested in short-term bank
deposits and AAA-rated liquidity funds, subject to Board-approved
limits and with a view to minimising counterparty credit risks.
Going concern
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 are designed to allow management to mitigate liquidity or
covenant compliance risks in a timely manner. Management has also
repaid the term loan on or ahead of schedule, with no further
scheduled payments due in 2020.
The Group continues to monitor actively the impact on operations
from COVID-19 and has implemented a number of mitigations to
minimise the impact, adopting an approach based upon the principles
of safety and welfare of people and security of supply. The Group
has remained aligned and supportive of the government position and
remained compliant with Dubai, Malaysia and UK 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 and
level of risk. Appropriate restrictions on offshore travel have
been implemented, such as self-declaration by, and isolation of,
individuals who are symptomatic. Pre-mobilisation testing and
temperature checks are also in place for all operational staff
prior to travelling to the Group's UK North Sea onshore and
offshore operating facilities. EnQuest's normal communicable
disease process has been updated specifically in respect of
COVID-19, with additional offshore isolation capability and
agreements in place to transport impacted individuals back onshore
in dedicated helicopters. At the Sullom Voe Terminal, the same
processes have also been implemented, with isolation capability at
local accommodation.
At the time of publication of EnQuest's Half year Report and
Accounts, the Group's day-to-day operations continue without being
materially affected by COVID-19.
The Group reviewed each of its assets and related spending plans
in response to the material decline in oil price in March 2020. The
plan remains not to restart production at the Heather/Broom and
Thistle/Deveron fields and CoP at the Dons field is planned in Q2
2021. At the same time, the Group continues to implement its
operating cost and capital expenditure reduction programme and this
is assumed in the Base case.
The Base case is in line with the Group's production guidance
and uses an oil price assumption of $40/bbl for the remainder of
2020, $47/bbl for 2021, with a longer-term price assumption of
$60/bbl and 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;
-- Corporate production risking of circa 2.0% for 2020 and circa 3.5% for 2021; and
-- Potential restriction of cash associated with additional
decommissioning security agreements.
The Base case and Downside case indicate that the Company is
able to operate within its existing borrowing facilities for 12
months from the date of approval of the Half year Report and
Accounts. The Directors have also performed reverse stress testing
with the breakeven price for liquidity in the Going Concern period
being c.$17/bbl.
The quarterly liquidity covenant in the facility (the 'Liquidity
Test') requires that the Group shows it has sufficient funds
available to meet all liabilities when due and payable for the
period commencing on each quarter and ending on the date falling 12
months after the final maturity date which is 1 October 2021. The
Liquidity Test assumptions include a price deck of the average
forward curve oil price, minus a 10% discount, of 15 consecutive
business days starting from approximately the middle of the
previous quarter.
Under these prices the Group forecasts no breaches in the Base
case for the Liquidity Test. The Group also obtained pre-emptive
waivers for the remaining quarters in 2020 meaning the next
applicable test date is 31 March 2021. By applying the 10% discount
stipulated in the Liquidity Test and an additional reduction in
excess of 9% on Base case prices, across all periods, the Group
would breach this covenant, prior to any mitigations such as asset
sales or other funding options. Under a lower oil price scenario,
there is a risk of a potential covenant breach, which would
therefore require a further covenant waiver to be obtained. The
Directors are confident that obtaining further waivers from the
facility providers would be forthcoming. Should circumstances arise
that differ from the Group's projections, the Directors believe
that a number of mitigating actions, including refinancing, 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.
Outside of the going concern period, the RCF expires in October
2021 (see note 12). The Directors are confident the Group will be
able to repay or refinance the RCF based on the Group's Base case
cash flow projections.
After making appropriate enquiries and assessing the progress
against the forecast, projections and the status of the mitigating
actions referred to above, 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.
The Group's risks and uncertainties were set out in the Annual
Report and Accounts 2019. This was published in April 2020 and the
below risks and uncertainties reflect the impacts of COVID-19 on
the business, where relevant. Although the Group's risks and
uncertainties are substantially unchanged from those disclosed in
the Group's Annual Report and Accounts 2019, the Safety & Risk
Committee has now concluded its assessment of whether 'climate
change' should be categorised as a standalone risk area within the
Group's risk management framework (in addition to the recognition
already accorded to climate change related issues across the
existing principal risk areas) and concluded that it should be
categorised as such.
For the purposes of meeting the disclosure requirements of DTR
4.2.7(2) we believe that the Group's principal risks and
uncertainties for the remaining six months are:
-- Health, Safety and Environment ('HSE'):
o Oil and gas development, production and exploration activities
are by their 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 impact, 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 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 development projects.
-- 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 Inability to fund financial commitments or maintain adequate
cash flow and liquidity and/or reduce costs.
o The Group's term loan and revolving credit facility contains
certain financial covenants (based on the ratio of indebtedness
incurred under the term loan and revolving facility to EBITDA,
finance charges to EBITDA and a requirement for liquidity testing).
Prolonged low oil prices, cost increases, including those related
to an environmental incident, and production delays or outages,
could threaten the Group's liquidity and/or ability to comply with
relevant covenants.
o Inability to provide appropriate security for decommissioning
liabilities.
o Further information is contained in the going concern
paragraph in the Financial Review.
-- 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, are
significant.
-- 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 not the
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 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 2019.
HALF YEAR GROUP STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2020
2020 2019
------------- ---------------- ----------- -------------- --------------- -----------
Remeasurements Remeasurements
and and
Business exceptional Reported Business exceptional Reported
Notes performance items (note 4) in period performance items (note 4) in period
$'000 $'000 $'000 $'000 $'000 $'000
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
Revenue and
other
operating
income 5 450,671 (11,278) 439,393 858,248 (42,859) 815,389
Cost of sales (410,870) (9,201) (420,071) (588,317) (4,098) (592,415)
---------------- ------ ------------- ---------------- ----------- -------------- --------------- -----------
Gross
profit/(loss) 39,801 (20,479) 19,322 269,931 (46,957) 222,974
Net impairment
(charge)/
reversal to
oil and gas
assets - (409,800) (409,800) - (3,186) (3,186)
General and
administration
expenses (3,538) - (3,538) (5,137) - (5,137)
Other income 6 34,307 161,908 196,215 490 1,256 1,746
Other expenses 6 (45,964) - (45,964) (787) (43,049) (43,836)
---------------- ------ ------------- ---------------- ----------- -------------- --------------- -----------
Profit/(loss)
from
operations
before tax and
finance
income/(costs) 24,606 (268,371) (243,765) 264,497 (91,936) 172,561
Finance costs (90,909) (39,733) (130,642) (106,839) (28,088) (134,927)
Finance income 1,050 - 1,050 1,115 - 1,115
---------------- ------ ------------- ---------------- ----------- -------------- --------------- -----------
Profit/(loss)
before tax (65,253) (308,104) (373,357) 158,773 (120,024) 38,749
Income tax 71,469 (317,120) (245,651) (36,203) 41,746 5,543
---------------- ------ ------------- ---------------- ----------- -------------- --------------- -----------
Profit/(loss)
for the period
attributable
to owners of
the parent 6,216 (625,224) (619,008) 122,570 (78,278) 44,292
================ ====== ============= ================ =========== ============== =============== ===========
Total comprehensive income/(expense)
for the period, attributable
to owners of the parent (619,008) 44,292
=========================================== ========== ======= =======
Earnings per share 7 $ $ $ $
Basic 0.004 (0.374) 0.075 0.027
Diluted 0.004 (0.374) 0.074 0.027
There was no other comprehensive income/(expense) in the current
or prior period.
GROUP BALANCE SHEET
At 30 June 2020
Notes 30 June 2020 31 December 2019
$'000 $'000
ASSETS Unaudited Audited
Non-current assets
Property, plant and equipment 8 2,809,135 3,450,929
Goodwill 134,400 134,400
Intangible oil and gas assets 9 27,546 27,553
Deferred tax assets 322,254 576,038
Other financial assets 14 2 11
------------- -----------------
3,293,337 4,188,931
------------- -----------------
Current assets
Inventories 56,371 78,644
Trade and other receivables 261,823 279,502
Current tax receivable - -
Cash and cash equivalents 10 183,374 220,456
Other financial assets 14 6,889 9,083
508,457 587,685
------------- -----------------
TOTAL ASSETS 3,801,794 4,776,616
EQUITY AND LIABILITIES
Equity
Share capital and premium 15 345,420 345,420
Merger reserve 662,855 662,855
Share-based payment reserve 1,531 (1,085)
Retained earnings (1,067,137) (448,129)
------------- -----------------
TOTAL EQUITY (57,331) 559,061
------------- -----------------
Non-current liabilities
Borrowings 12 438,443 493,424
Bonds 13 987,025 966,231
Leases liability 18 568,165 614,818
Contingent consideration 16 442,541 545,550
Provisions 17 690,397 706,190
Deferred tax liabilities 10,498 20,919
------------- -----------------
3,137,069 3,347,132
------------- -----------------
Current liabilities
Borrowings 12 102,374 165,589
Leases liability 18 112,447 101,348
Contingent consideration 16 62,472 111,711
Provisions 17 108,792 56,769
Trade and other payables 305,687 419,855
Other financial liabilities 14 27,492 11,073
Current tax payable 2,792 4,078
------------- -----------------
722,056 870,423
------------- -----------------
TOTAL LIABILITIES 3,859,125 4,217,555
TOTAL EQUITY AND LIABILITIES 3,801,794 4,776,616
============= =================
GROUP STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2020
Share capital and share Merger Share-based payments
premium reserve reserve Retained earnings Total
$'000 $'000 $'000 $'000 $'000
Unaudited Unaudited Unaudited Unaudited Unaudited
Balance at 31 December
2018 (as previously
reported) 345,331 662,855 (6,884) (17,750) 983,552
Adjustment on adoption
of IFRS 9/IFRS 16 - - - 18,922 18,922
------------------------ ------------------------ --------- ------------------------ ----------------- ----------
Balance at 1 January
2019 345,331 662,855 (6,884) 1,172 1,002,474
Profit/(loss) for the
period - - - 44,292 44,292
Total comprehensive
income/(expense) for
the period - - - 44,292 44,292
Share-based payment - - 2,141 - 2,141
Balance at 30 June 2019 345,331 662,855 (4,743) 45,464 1,048,907
======================== ======================== ========= ======================== ================= ==========
Balance at 1 January
2020 345,420 662,855 (1,085) (448,129) 559,061
Profit/(loss) for the
period - - - (619,008) (619,008)
------------------------ ------------------------ --------- ------------------------ ----------------- ----------
Total comprehensive
income/(expense) for
the period - - - (619,008) (619,008)
Share-based payment - - 2,616 - 2,616
------------------------ ------------------------ --------- ------------------------ ----------------- ----------
Balance at 30 June 2020 345,420 662,855 1,531 (1,067,137) (57,331)
======================== ======================== ========= ======================== ================= ==========
GROUP STATEMENT OF CASH FLOWS
For the six months ended 30 June 2020
2020 2019
Notes $'000 $'000
Unaudited Unaudited
CASH FLOW FROM OPERATING ACTIVITIES
Cash generated from operations 20 283,227 426,170
Cash (paid)/received on sale/(purchase) of financial instruments 4,417 4,936
Decommissioning spend (7,082) (5,997)
Income taxes paid (5,458) (16,114)
------------------------------------------------------------------------- ------
Net cash flows from/(used) operating activities 275,104 408,995
------------------------------------------------------------------------- ------ ---------- ----------
INVESTING ACTIVITIES
Purchase of property, plant and equipment (101,385) (122,904)
Purchase of intangible oil and gas assets - (1,661)
Net cash received on termination of Tanjong Baram risk service contract 6 17,086 -
Payment of Magnus contingent consideration - Profit share 16 (21,088) -
Interest received 696 472
Net cash flows (used)/from in investing activities (104,691) (124,093)
------------------------------------------------------------------------- ------ ---------- ----------
FINANCING ACTIVITIES
Repayment of loan facilities 20 (118,906) (200,675)
Repayment of Magnus contingent consideration - Vendor loan 16 (4,675) (33,077)
Repayment of obligations under leases 18 (56,139) (60,623)
Interest paid (21,000) (51,919)
Other finance costs paid (1,118) (944)
Net cash flows (used)/from financing activities (201,838) (347,238)
------------------------------------------------------------------------- ------ ---------- ----------
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS (31,425) (62,336)
Net foreign exchange on cash and cash equivalents (4,974) 2,616
Cash and cash equivalents at 1 January 218,199 237,200
------------------------------------------------------------------------- ------ ---------- ----------
CASH AND CASH EQUIVALENTS AT 30 JUNE 181,800 177,480
========================================================================= ====== ========== ==========
Reconciliation of cash and cash equivalents
Cash and cash equivalents per statement of cash flows 10 181,800 177,480
Restricted cash 10 1,574 2,645
------------------------------------------------------------------------- ------ ---------- ----------
Cash and cash equivalents per balance sheet 183,374 180,125
========================================================================= ====== ========== ==========
1. Corporate information
EnQuest PLC ('EnQuest' or the 'Company') is a public limited
company incorporated and domiciled in England and Wales, whose
shares are publicly traded on the London Stock Exchange plc's main
market for listed securities 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 2020 were authorised for issue in accordance
with a resolution of the Board of Directors on 2 September
2020.
2. Summary of significant accounting policies
Basis of preparation
The interim condensed consolidated financial statements of the
Group for the six months ended 30 June 2020 have been prepared in
accordance with IAS 34 'Interim Financial Reporting' as adopted by
the European Union. The presentation currency of the Group
financial information is United States 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 2019. The principal risks and uncertainties have
not substantially changed since the date of the last annual report,
which are detailed in the Group's annual financial statements as at
31 December 2019.
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
2019, on which the auditors gave an unqualified audit report, have
been filed with the Registrar of Companies. The report contained a
material uncertainty related to going concern.
The financial statements have been prepared on the going concern
basis. Further information relating to the use of the going concern
assumption is provided in the 'Going Concern' section of the
Financial Review as set out on page 12. The interim financial
statements have been reviewed by the auditor and its report to the
Company is included within these interim financial statements.
Accounting policies
The accounting policies adopted in the preparation of the
interim condensed financial statements for the six months ended 30
June 2020 are materially consistent with those followed in the
preparation of the Group's financial statements for the year ended
31 December 2019, except for the adoption of new standards
effective as of 1 January 2020. 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 remain consistent with those
disclosed in the 2019 annual report and accounts.
New and amended standards adopted by the Group
The following new standards became applicable for the current
reporting period, no material impact was recognised upon
application:
-- Amendments to References to Conceptual Framework in IFRS Standards
-- Definition of a Business (Amendments to IFRS 3)
-- Definition of Material (Amendments to IAS 1 and IAS 8)
3. Segment information
Segment information for the six month period is as follows:
Period ended 30 June Adjustments and
2020 North Sea Malaysia All other segments Total segments eliminations(i) Consolidated
$'000
--------------------- ---------- --------- ------------------- --------------- ------------------- -------------
Revenue:
Revenue from
contracts with
customers 377,808 33,277 - 411,085 - 411,085
Other income 4,147 - 210 4,357 23,951 28,308
Total Group revenue 381,955 33,277 210 415,442 23,951 439,393
========== ========= =================== =============== =================== =============
Segment
profit/(loss) (ii) (291,439) 10,847 16,443 (264,149) 20,384 (243,765)
========== ========= =================== =============== =================== =============
Period ended 30 June Adjustments and
2019 North Sea Malaysia All other segments Total segments eliminations (i) Consolidated
$'000
--------------------- ---------- --------- ------------------- --------------- ------------------- -------------
Revenue:
Revenue from
contracts with
customers 773,493 71,643 - 845,136 - 845,136
Other income 5,285 - 262 5,547 (35,294) (29,747)
Total Group revenue 778,778 71,643 262 850,683 (35,294) 815,389
========== ========= =================== =============== =================== =============
Segment
profit/(loss) (ii) 180,999 28,484 1,482 210,965 (38,404) 172,561
========== ========= =================== =============== =================== =============
The following table presents total assets for the Group's
operating segments as at 30 June 2020 and 31 December 2019:
Period ended 30 June Adjustments and
2020 North Sea Malaysia All other segments Total segments eliminations(i) Consolidated
$'000
--------------------- ---------- --------- ------------------- --------------- ------------------- -------------
Assets
--------------------- ---------- --------- ------------------- --------------- ------------------- -------------
30 June 2020 3,620,819 164,802 16,173 3,801,794 - 3,801,794
--------------------- ---------- --------- ------------------- --------------- ------------------- -------------
31 December 2019 4,593,665 173,175 9,776 4,776,616 - 4,776,616
--------------------- ---------- --------- ------------------- --------------- ------------------- -------------
(i) Finance income and costs and gains and losses on derivatives
are not allocated to individual segments as the underlying
instruments are managed on a Group basis
(ii) Inter-segment revenues are eliminated on consolidation. All
other adjustments are part of the reconciliations presented further
below
Reconciliation of profit/(loss):
Period ended Period ended
30 June 30 June
2020 2019
$'000 $'000
Segment profit/(loss) (264,149) 210,965
Finance costs (130,642) (134,927)
Finance income 1,050 1,115
Gains/(losses) on oil and foreign exchange derivatives 20,384 (38,404)
Profit/(loss) before tax (373,357) 38,749
============= =============
4. Remeasurements and exceptional items
Period ended 30 June 2020 Fair value
$'000 remeasurement (i) Impairments and write 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
De-recognition of undiscounted
deferred tax asset(iv) - (432,590) - (432,590)
-------------------- -------------------------------- ------------ -------------
89,501 (684,202) (30,523) (625,224)
==================== ================================ ============ =============
Period ended 30 June 2019 Fair value
$'000 remeasurement (i) Impairments and write offs (ii) Other (iii) Total
Revenue and other operating
income (42,859) - - (42,859)
Cost of sales (4,074) (24) - (4,098)
Net impairment (charge)/reversal
on oil and gas assets - (3,186) - (3,186)
Other income - - 1,256 1,256
Other expenses (26,900) (519) (15,630) (43,049)
Finance costs - - (28,088) (28,088)
-------------------- -------------------------------- ------------ -------------
(73,833) (3,729) (42,462) (120,024)
Tax on items above 29,510 1,492 10,744 41,746
(44,323) (2,237) (31,718) (78,278)
==================== ================================ ============ =============
(i) Fair value remeasurements include unrealised mark-to-market
movements on derivative contracts and other financial instruments
and the impact of recycling realised gains and losses (including
option premiums) out of 'Remeasurements and exceptional items' and
into 'Business performance' profit or loss. Other income includes
the fair value adjustment relating to the contingent consideration
on the 75% acquisition of Magnus and associated infrastructure of
$161.9 million (note 16) (2019: Other expenses include the fair
value adjustment relating to the contingent consideration on the
75% acquisition of Magnus and associated infrastructure of $26.9
million (note 16))
(ii) Impairments and write offs include an impairment of
tangible oil and gas assets totalling $409.8 million (2019: $3.2
million) (note 8)
(iii) Other expenses mainly relate to unwind of discounting on
contingent consideration on the 75% acquisition of Magnus and
associated infrastructure of $39.7 million (note 16) and the
redundancy provision in relation to the Group's transformation
programme of $6.1 million (2019: Other expenses mainly includes the
unwind of discounting on contingent consideration on the 75%
acquisition of Magnus and associated infrastructure of $28.1
million (note 16) and the provision for settlement of the
historical KUFPEC claim of $15.6 million)
(iv) Non-cash partial de-recognition of undiscounted deferred
tax assets given the Group's lower oil price assumptions
5. 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 ended Period ended
30 June 30 June
2020 2019
$'000 $'000
Revenue from contracts with customers
Revenue from crude oil sales 375,518 761,850
Revenue from gas and condensate sales 27,574 79,941
Tariff revenue 7,993 3,345
------------- -------------
Total revenue from contracts with customers 411,085 845,136
Rental income 3,532 3,524
Realised gains on oil derivative contracts (note 14) 35,229 7,565
Other operating revenue 825 2,023
Business performance revenue 450,671 858,248
Unrealised losses on oil derivative contracts(i) (note 14) (11,278) (42,859)
------------- -------------
Total revenue and other operating income 439,393 815,389
============= =============
(i) Unrealised gains and losses on oil derivative contracts are
disclosed as fair value remeasurement items in the income statement
(see note 4)
6. Other income/expense
(a) Other income
Period ended Period ended
30 June 30 June
2020 2019
$'000 $'000
Net foreign exchange gains 20,971 -
Gain on termination of Tanjong Baram risk service contract 10,412 -
Other 2,924 490
------------- -------------
Business performance other income 34,307 490
Change in fair value of contingent consideration (note 16) 161,908 -
Write down of receivable - 1,203
Other exceptional items - 29
Total other income 196,215 1,746
============= =============
On 3 March 2020, the Group terminated the Tanjong Baram small
field risk service contract with PETRONAS. Following the
termination, the Group will receive three instalments from PETRONAS
for the reimbursement of net outstanding capital expenditure of
c.$50 million. The Group received $24.4 million from Petronas in
June 2020, of which $7.3 million was received on behalf of the
non-operating partner and immediately transferred. The amount has
been presented net in the statement of cash flows to represent the
substance of the transaction, with the remaining two instalments
due from PETRONAS in the second half of the year and recognised net
within receivables. On termination, the Tanjong Baram assets were
carried at c.$40 million resulting in the $10.4 million gain (see
note 8).
(b) Other expense
Period ended Period ended
30 June 30 June
2020 2019
$'000 $'000
Net foreign exchange losses - (308)
Change in provisions (note 17) (45,879) -
Exploration and evaluation expenses: Pre-licence costs expenses (66) (30)
Other (19) (449)
------------- -------------
Business performance other income (45,964) (787)
Change in fair value of contingent consideration (note 16) - (26,900)
KUFPEC provision (note 17) - (15,630)
Exploration and evaluation expenses: Written off and impaired - (519)
Total other expense (45,964) (43,836)
============= =============
7. 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.
Basic and diluted earnings per share are calculated as
follows:
Weighted average number of Ordinary
Profit /(loss) after tax shares Earnings per share
Period ended Period ended Period ended
30 June 30 June 30 June
2020 2019 2020 2019 2020 2019
$'000 $'000 million million $ $
Basic (619,008) 44,292 1,654.8 1,628.6 (0.374) 0.027
Dilutive potential of
Ordinary shares
granted under
share-based incentive
schemes - - 6.9 30.7 - -
Diluted (619,008) 44,292 1,661.7 1,659.3 (0.374) 0.027
=============== ============ ================= ================= ============ =========
Basic (Business
performance) 6,216 122,570 1,654.8 1,628.6 0.004 0.075
=============== ============ ================= ================= ============ =========
Diluted (Business
perfomance) 6,216 122,570 1,661.7 1,659.3 0.004 0.074
=============== ============ ================= ================= ============ =========
8. Property, plant and equipment
Office furniture, fixtures
Oil and gas assets and fittings Right-of-use assets Total
$'000 $'000 $'000 $'000
Cost:
At 1 January 2020 8,547,769 62,453 857,089 9,467,311
Additions 71,452 1,016 - 72,468
Disposals/termination of
Tanjong Baram risk service
contract (83,312) (143) (936) (84,391)
Change in decommissioning
provision (note 17) (10,591) - - (10,591)
At 30 June 2020 8,525,318 63,326 856,153 9,444,797
------------------- ------------------------------ -------------------- -----------
Accumulated depletion and
impairment:
At 1 January 2020 5,797,924 46,568 171,890 6,016,382
Charge for the period 204,461 2,148 45,716 252,325
Disposals/termination of
Tanjong Baram risk service
contract (42,501) (113) (231) (42,845)
Impairment charge for the
period 301,640 - 108,160 409,800
At 30 June 2020 6,261,524 48,603 325,535 6,635,662
------------------- ------------------------------ -------------------- -----------
Net carrying amount:
At 30 June 2020 2,263,794 14,723 530,618 2,809,135
=================== ============================== ==================== ===========
At 31 December 2019 2,749,845 15,885 685,199 3,450,929
=================== ============================== ==================== ===========
At 30 June 2019 3,527,479 17,006 737,582 4,282,067
=================== ============================== ==================== ===========
Impairment testing of oil and gas assets
Impairments to the Group's producing oil and gas assets and
reversals of impairments are set out in the table below:
Impairment
(charge)/reversal Recoverable amount(i)
---------------------------------- ---------------------------
Period ended Year ended 30 June
30 June 2020 31 December 2019 2020 31 December 2019
$'000 $'000 $'000 $'000
North Sea 409,800 (637,500) 628,090 46,462
Malaysia - - - -
-------------- ------------------ -------- -----------------
Net impairment reversal/(charge) (409,800) (637,500)
(i) Recoverable amount has been determined on a fair value less
costs of disposal basis. The amounts disclosed above are in respect
of assets where an impairment (or reversal) has been recorded.
Assets which did not have any impairment or reversal are excluded
from the amounts disclosed
The 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 2019. The key sources of estimation uncertainty
and the discount rate applied have not changed since the date of
the last annual report. Future oil prices are a key driver of
estimation and the oil price assumptions based on an internal view
of forward curve prices at 30 June 2020 are $40.0/bbl (2020),
$47.0/bbl (2021) and $60.0/bbl real thereafter, inflated at 2.0%
per annum from 2023 (30 December 2019: $63.0/bbl (2020), $65.0/bbl
(2021), $67.0/bbl (2022) and $70.0/bbl real thereafter, inflated at
2.0% per annum from 2024). The impairment in the period related to
North Sea assets, mainly reflecting these changes in oil price
assumptions.
The Group's recoverable value of assets is highly sensitive,
inter alia, to oil price achieved and production volumes.
Sensitivities have been run on the oil price assumption, with a 10%
change being considered to be a reasonable possible change for the
purposes of sensitivity analysis. A 10% reduction in oil price
would increase the net pre-tax impairment by approximately $440.1
million, with the additional impairment attributable to the fields
in the North Sea and goodwill.
9. Intangible oil and gas assets
Cost Accumulated impairment Net carrying amount
$'000 $'000 $'000
At 1 January 2020 174,964 (147,411) 27,553
Additions 175 - 175
Change in decommissioning provision (note 17) (182) - (182)
Write-off of relinquished licences previously impaired (12,858) 12,858 -
--------- ----------------------- --------------------
At 30 June 2020 162,099 (134,553) 27,546
========= ======================= ====================
10. Cash and cash equivalents
Period ended Year ended
30 June 2020 31 December 2019
$'000 $'000
Available cash
Cash at bank 91,323 137,365
Short-term deposits 2,753 6,849
-------------- ------------------
Total available cash 94,076 144,214
-------------- ------------------
Ring-fenced cash
Joint venture accounts 66,211 32,365
Operational accounts 21,513 41,620
-------------- ------------------
Total ring-fenced cash 87,724 73,985
-------------- ------------------
Cash at bank and in hand 181,800 218,199
============== ==================
Restricted cash - Cash subject to currency controls or other legal restrictions
Cash held in escrow 1,574 1,611
Cash collateral - 646
-------------- ------------------
Total restricted cash - Cash subject to currency controls or other legal
restrictions 1,574 2,257
-------------- ------------------
Total cash and cash equivalents 183,374 220,456
============== ==================
11. Fair value measurement
The following table provides the fair value measurement
hierarchy of the Group's assets and liabilities:
Quoted prices in active Significant observable Significant unobservable
30 June 2020 Total markets inputs inputs
(Level 1) (Level 2) (Level 3)
$'000 $'000 $'000 $'000
-------------------------- --------- ------------------------- ------------------------- -------------------------
Financial assets measured
at fair value:
Derivative financial
assets at FVPL
Oil commodity derivative
contracts(i) 4,510 - 4,510 -
Other financial assets at
FVPL
Quoted equity shares 2 2 - -
Liabilities measured at
fair value:
Derivative financial
liabilities at FVPL
Oil commodity derivative
contracts(i) 26,385 - 26,385 -
Foreign currency
derivative contracts(i) 1,107 - 1,107 -
Other financial
liabilities measured at
FVPL
Contingent
consideration(ii) 505,012 - - 505,012
Liabilities for which
fair values are disclosed
Interest-bearing loans
and borrowings 543,092 - - 543,092
Obligations under leases 680,612 - - 680,612
Retail bond 174,900 174,900 - -
High yield bond 467,316 467,316 - -
Quoted prices in active Significant observable Significant unobservable
31 December 2019 Total markets inputs inputs
(Level 1) (Level 2) (Level 3)
$'000 $'000 $'000 $'000
-------------------------- --------- ------------------------- ------------------------- -------------------------
Financial assets measured
at fair value:
Derivative financial
assets at FVPL
Oil commodity derivative
contracts(i) 288 - 288 -
Foreign currency
derivative contracts(i) 1,932 - 1,932 -
Other financial assets at
FVPL -
Quoted equity shares 11 11 - -
Liabilities measured at
fair value:
Derivative financial
liabilities at FVPL
Oil commodity derivative
contracts(i) 11,073 - 11,073 -
Other financial
liabilities measured at
FVPL
Contingent
consideration(ii) 657,261 - - 657,261
Liabilities for which
fair values are disclosed
Interest-bearing loans
and borrowings 661,638 - - 661,638
Obligations under leases 716,166 - - 716,166
Retail bond 195,948 195,948 - -
High yield bond 655,462 655,462 - -
(i) Valued by the counterparties, with the valuations reviewed
internally and corroborated with readily available market data
(ii) Contingent consideration is measured at fair value through
profit/loss ('FVPL') using level 3 valuation process (see note
14)
There have been no transfers between Level 1 and Level 2 during
the period (2019: no transfers).
12. Loans and borrowings
The Group's loans are debt instruments carried at amortised cost
as follows:
30 June 2020 31 December 2019
------------------------------- -------------------------------
Principal Fees Total Principal Fees Total
$'000 $'000 $'000 $'000 $'000 $'000
Credit facility(i) 440,792 - 440,792 475,097 - 475,097
Sculptor Capital facility 91,055 (2,275) 88,780 122,912 (2,625) 120,287
SVT Working Capital Facility 11,245 - 11,245 31,899 - 31,899
Tanjong Baram loan - - - 31,730 - 31,730
Total loans 543,092 (2,275) 540,817 661,638 (2,625) 659,013
========== ======== ========= ========== ======== =========
Due within one year 102,374 165,589
Due after more than one year 438,443 493,424
--------- ---------
Total loans 540,817 659,013
========= =========
(i) At 30 June 2020, the total carrying amount of the credit
facility on the balance sheet was $441.7 million, comprising the
loan principal drawn down of $425.0 million, $15.8 million of
interest capitalised to the PIK amount and $0.9 million accrued
interest (2019: full carrying amount $477.4 million, comprising the
loan principal drawn down of $460.0 million, $15.1 million of
interest capitalised to the PIK amount and $2.3 million accrued
interest). The maturity date of the credit facility is October
2021. Further details on the credit facility are included in the
Group's Annual Report and Accounts 2019.
13. Bonds
The Group's bonds are debt instruments carried at amortised cost
as follows:
30 June 2020 31 December 2019
------------------------------- -------------------------------
Principal Fees Total Principal Fees Total
$'000 $'000 $'000 $'000 $'000 $'000
High yield bond(i) 772,168 (3,487) 768,681 746,056 (4,483) 741,573
Retail bond(ii) 219,191 (847) 218,344 225,747 (1,089) 224,658
---------- -------- --------- ---------- -------- ---------
Total bonds due after more than one year 991,359 (4,334) 987,025 971,803 (5,572) 966,231
========== ======== ========= ========== ======== =========
(i) The total carrying value of the bond as at 30 June 2020 is
$782.4 million. This includes bond principal of $772.2 million,
bond interest accrual of $11.3 million and liability for the IFRS 9
Financial Instruments loss on modification of $2.4 million less
unamortised fees of $3.5 million (2019: $754.8 million. This
includes bond principal of $746.1 million, bond interest accrual of
$11.0 million and liability for the IFRS 9 Financial Instruments
loss on modification of $2.2 million less unamortised fees of $4.5
million )
(ii) The total carrying value of the bond as at 30 June 2020 is
$233.9 million. This includes bond principal of $219.2 million,
bond interest accrual of $5.7 million and liability for the IFRS 9
Financial Instruments loss on modification of $9.8 million less
unamortised fees of $0.8 million (2019: $241.1 million. This
includes bond principal of $225.7 million, bond interest accrual of
$6.0 million and liability for the IFRS 9 Financial Instruments
loss on modification of $10.5 million less unamortised fees of $1.1
million )
14. Other financial assets and financial liabilities
(a) Summary
30 June 2020 31 December 2019
--------------------- ---------------------
Assets Liabilities Assets Liabilities
$'000 $'000 $'000 $'000
Fair value through profit or loss:
Derivative commodity contracts 4,510 26,385 288 11,073
Derivative foreign exchange contracts - 1,107 1,932 -
Amortised cost:
Other receivables 2,379 - 6,863 -
------- ------------ ------- ------------
Total current 6,889 27,492 9,083 11,073
======= ============ ======= ============
Fair value through profit or loss:
Quoted equity shares 2 - 11 -
Total non-current 2 - 11 -
======= ============ ======= ============
(b) Commodity contracts
The Group uses derivative financial instruments to manage its
exposure to the oil price, including put and call options, swap
contracts and futures.
During the six months ended 30 June 2020, gains totalling $24.0
million (2019: losses of $34.2 million) were recognised in respect
of commodity contracts designated as FVPL. This included realised
gains totalling $35.2 million (2019: gains of $8.7 million) on
contracts that matured during the period, and mark-to-market losses
totalling $11.2 million (2019: losses of $42.9 million). Of the
realised amounts recognised during the period in Business
performance revenue, $5.6 million (2019: $4.7 million) was in
respect of the amortisation of premiums on these options. The
premiums received and paid are amortised into Business performance
revenue over the life of the option.
(c) Foreign currency contracts
The Group enters into a variety of foreign currency contracts,
primarily in relation to Sterling. During the six months ended 30
June 2020, these contracts resulted in an unrealised loss of $3.0
million recognised in the income statement (2019: loss of $2.0
million).
(d) Income statement impact
The income/(expense) recognised for commodity, currency and
interest rate derivatives are as follows:
Revenue and other operating income Cost of sales
--------------------------------------- ----------------------
Period ended Realised Unrealised Realised Unrealised
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 swaps - - (528) (3,039)
35,229 (11,278) (528) (3,039)
================= ==================== ========= ===========
Revenue and other operating income Cost of sales
--------------------------------------- ----------------------
Period ended Realised Unrealised Realised Unrealised
30 June 2019 $'000 $'000 $'000 $'000
-------------------------------------------- ----------------- -------------------- --------- -----------
Commodity options 8,053 (47,649) - -
Commodity swaps 2,604 4,848 - -
Commodity futures (1,985) (58) - -
Commodity collar on prepayment transaction (1,107) - - -
Foreign exchange swaps - - (42) (2,012)
Carbon forward contracts - - 1,006 (2,062)
7,565 (42,859) 964 (4,074)
================= ==================== ========= ===========
(e) Other receivables
Other receivables
$'000
At 1 January 2020 6,874
Change in fair value (8)
Utilised/(collected) during the period (4,760)
Unwinding of discount 275
At 30 June 2020 2,381
==================
Comprised of:
BUMI receivable 2,379
Other 2
Total 2,381
==================
Classified as:
Current 2,379
Non-current 2
------------------
2,381
==================
Other receivables
In August 2016, EnQuest agreed with Armada Kraken PTE Ltd
('BUMI') that BUMI would refund $65 million (EnQuest's share being
$45.8 million) of a $100.0 million lease prepayment made in 2014
for the FPSO for the Kraken field.
This refund was receivable during 2018 and onwards. Included
within other receivables at 30 June 2020 is an amount of $2.4
million representing the discounted value of EnQuest's share of
these repayments (31 December
2019: $6.9 million). A total of $4.8 million was collected during the period.
15. Share capital and premium
The share capital of the Company as at 30 June 2020 was $118.3
million (31 December 2019: $118.3 million) comprising 1,695,801,955
Ordinary shares of GBP0.05 each (31 December 2019: 1,695,801,955)
and share premium of $227.1 million (31 December 2019: $227.1
million).
16. Contingent consideration
Magnus 75% Magnus decommissioning-linked liability Total
$'000 $'000 $'000
At 1 January 2020 641,400 15,861 657,261
Change in fair value (159,527) (2,380) (161,907)
Unwinding of discount 38,940 793 39,733
Paid (28,900) (1,174) (30,074)
At 30 June 2020 491,913 13,100 505,013
=========== ======================================== ==========
Classified as
Current 61,643 829 62,472
Non-current 430,270 12,271 442,541
----------- ---------------------------------------- ----------
491,913 13,100 505,013
=========== ======================================== ==========
75% Magnus acquisition contingent consideration
On 1 December 2018, EnQuest completed the acquisition of the
additional 75% interest in the Magnus oil field ('Magnus') and
associated interests (collectively the 'Transaction assets') which
was part funded through a vendor loan and profit share arrangement
with BP. This acquisition followed from the acquisition of initial
interests completed in December 2017.
The consideration for the acquisition was $300 million,
consisting of $100 million cash contribution, paid from the funds
received through the rights issue undertaken in October 2018, and
$200 million deferred consideration financed by BP. The deferred
consideration, which is repayable solely out of cash flows which
are in excess of operating cash outflows, including capital
expenditure, from Magnus, is secured over the interests in the
Transaction assets and accrues interest at a rate of 7.5% per annum
on the deferred consideration. The consideration also included a
contingent profit sharing arrangement whereby EnQuest and BP share
the net cash flow generated by the 75% interest on a 50:50 basis,
subject to a cap of $1 billion received by BP. Together, the
deferred consideration and contingent profit sharing arrangement
are known as contingent consideration.
The contingent consideration was fair valued at 30 June 2020,
which resulted in a decrease in fair value of $159.5 million and
unwinding of discount of $38.9 million was charged to finance costs
during the period, both recognised through remeasurements and
exceptional items in the consolidated income statement. The
contingent profit sharing arrangement cap of $1 billion is not
forecast to be reached in the latest life of field present value
calculations. A total of $28.9 million was repaid during the first
half of 2020. At 30 June 2020, the fair value of the contingent
consideration was $491.9 million (31 December 2019: $641.4
million).
Magnus decommissioning-linked contingent consideration
As part of the Magnus and associated interests acquisition,
EnQuest agreed to pay additional consideration in relation to the
management of the physical decommissioning costs of Magnus. At 30
June 2020, the amount due to BP by reference to 30% of BP's
decommissioning costs on Magnus on an after-tax basis was $13.1
million (31 December 2019: $15.9 million).
17. Provisions
Decommissioning provision Other provisions Total
$'000 $'000 $'000
At 1 January 2020 711,898 51,061 762,959
Additions 7,462 6,162 13,624
Changes in estimates 20,377 - 20,377
Changes in fair value - 7,267 7,267
Unwinding of discount 7,116 398 7,514
Utilisation (7,082) (5,625) (12,707)
Foreign exchange - 155 155
At 30 June 2020 739,771 59,418 799,189
========================== ================= =========
Classified as
Current 77,908 30,884 108,792
Non-current 661,863 28,534 690,397
-------------------------- ----------------- ---------
739,771 59,418 799,189
========================== ================= =========
Decommissioning provision
An additional provision of $20.4 million was recognised mainly
in relation to the accelerated decommissioning profile of Heather
offset by the impact of exchange rates on the Group's underlying
Sterling and Malaysian Ringgit cost estimates. At 30 June 2020, an
estimated $77.9 million is expected to be utilised within the next
year, $223.5 million between one and five years, $161.0 million
between six and ten years, and the remainder in later periods.
Other provisions
At 30 June 2020, the amount due to BP by reference to 7.5% of
BP's decommissioning costs on Thistle and Deveron on an after-tax
basis was $47.6 million (31 December 2019: $39.8 million). The
increase was primarily driven by the earlier than expected
cessation of production at Thistle/Deveron.
During 2019, the Group finalised and settled the historical
breach of warranty claims with KUFPEC , the Group's field partner
in respect of Alma/Galia. The settlement completed all outstanding
claims and a provision of $22.5 million was recognised, in 2019,
for the payments to be made to KUFPEC. A total of $5.6 million was
paid by June 2020, with $5.6 million disclosed within current
provision as scheduled for repayment (31 December 2019: $11.3
million).
At 30 June 2020 the Group recognised a redundancy provision of
$6.2 million in relation to its transformation programme. The Group
expects to settle this liability by year end.
18. Leases
Right-of-use assets and lease liabilities
Set out below are the carrying amounts of the Group's
right-of-use assets and lease liabilities and the movements during
the period:
Right-of-use Lease
assets liabilities
$'000 $'000
--------------------------- ------------ ------------
As at 31 December 2019 685,199 716,166
Depreciation expense (45,716)
Impairment (108,160) -
Disposal/de-recognition (705) (726)
Interest expense - 26,093
Payments - (56,139)
Foreign exchange movements - (4,782)
--------------------------- ------------ ------------
As at 30 June 2020 530,618 680,612
--------------------------- ------------ ------------
Current - 112,447
Non-current - 568,165
--------------------------- ------------ ------------
- 680,612
--------------------------- ------------ ------------
Amounts recognised in profit or loss
Period
ended
30 June
2020
$'000
-------------------------------------------- ---------
Depreciation expense of right-of-use assets 45,716
Impairment of right-of-use assets (108,160)
Interest expense on lease liabilities 26,093
Rent expense - short-term leases 1,988
Rent expense - leases of low-value assets 21
Total amounts recognised in profit or loss (34,342)
-------------------------------------------- ---------
19. Contingencies
Contingencies
The Group becomes involved from time to time in various claims
and lawsuits arising in the ordinary course of its business. The
Company 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 Company is
aware, are any such proceedings pending or threatened.
20. Cash flow information
Cash generated from operations
Period ended Period ended
30 June 30 June
2020 2019
$'000 $'000
Profit/(loss) before tax (373,357) 38,749
Depreciation 3,941 5,077
Depletion 248,384 250,366
Exploration costs impaired/(reversed) and written off - 519
Net impairment charge/(reversal) to oil and gas assets 409,800 3,186
Write down of inventory 18,959 5,679
Write down/(back) of asset - (1,203)
Impairment (reversal)/charge to investments 8 -
Share-based payment charge 2,616 2,141
Gain on termination of Tanjong Baram risk service contract (10,412) -
Change in deferred consideration (122,175) 54,988
Unwind of decommissioning provision 7,116 6,713
Change in other provisions 6,560 15,936
Amortisation of option premiums (5,587) (4,654)
Unrealised (gain)/loss on commodity financial instruments 11,278 42,859
Unrealised loss/(gain) on other financial instruments 3,039 4,074
Unrealised exchange (gain)/loss (18,371) (412)
Net finance (income)/expense 82,345 98,675
Operating profit before working capital changes 264,144 522,693
(Increase)/decrease in trade and other receivables 52,639 (42,353)
(Increase)/decrease in inventories 3,129 5,786
Increase/(decrease) in trade and other payables (36,685) (59,956)
------------- -------------
Cash generated from operations 283,227 426,170
============= =============
Changes in liabilities arising from financing activities
Period ended 30 June 2020 Lease
Loans and borrowings Bonds liabilities Total
$'000 $'000 $'000 $'000
--------------------- ------------ ------------- ------------
At 1 January 2020 (661,282) (995,983) (716,166) (2,373,431)
Cash movements:
Repayments of loans and borrowings 118,906 - - 118,906
Repayment of lease liabilities - - 56,139 56,139
Cash interest paid in year 17,863 - - 17,863
Non-cash movements:
Unwinding of finance discount (18,711) (34,117) (26,093) (78,921)
Fee amortisation (350) (1,241) - (1,591)
Foreign exchange adjustments 809 15,176 4,782 20,767
Disposal/de-recognition of leases - - 726 726
Other non-cash movements 1,074 3 - 1,077
At 30 June 2020 (541,691) (1,016,162) (680,612) (2,238,465)
===================== ============ ============= ============
Reconciliation of carrying value Lease
Loans and borrowings Bonds liabilities Total
$'000 $'000 $'000 $'000
--------------------- ------------ ------------- ------------
Principal (543,092) (991,359) (680,612) (2,215,063)
Unamortised fees 2,275 4,334 - 6,609
Accrued interest (874) (29,137) - (30,011)
At 30 June 2020 (541,691) (1,016,162) (680,612) (2,238,465)
===================== ============ ============= ============
The Directors confirm that, to the best of their knowledge, the
condensed set of financial statements for the six months ended 30
June 2019 has been prepared in accordance with IAS 34 'Interim
Financial Reporting' as adopted by the European Union, and that the
half year management report includes a fair review of the
information required by
DTR 4.2.7R and a true and fair review of the information
required by DTR 4.2.8R of the Disclosure and Transparency
Rules.
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
2 September 2020
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2020 which comprises the Group statement
of comprehensive income, the Group balance sheet, the Group
statement of changes in equity, the Group statement of cash flows
and related notes 1 to 20. 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.
As disclosed in note 2, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, "Interim
Financial Reporting", as adopted by the European Union.
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 enquiries, 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 2020 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union 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
London, United Kingdom
2 September 2020
Glossary - Non-GAAP measures
The Group uses Alternative Performance Measures ('APMs') when
assessing and discussing the Group's financial performance,
financial position 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 a clear and consistent presentation of the
underlying operating performance of the Group's ongoing business.
The Group believes these APMs provide 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, financial
position and cash flows.
Period Period
ended ended
30 June 30 June
2020 2019
Business performance net profit attributable to EnQuest
PLC shareholders $'000 $'000
-------------------------------------------------------------- --------- ---------
Reported net profit/(loss) (A) (619,008) 44,292
Adjustments - remeasurements and exceptional items (note
4):
Unrealised gains/(losses) on oil derivative contracts
(note 5) (11,278) (42,859)
Unrealised (gains)/losses on foreign exchange derivative
contracts (3,039) (2,012)
Unrealised (gains)/losses on carbon derivative contracts - (2,062)
Net impairment (charge)/reversal to oil and gas assets
(note 8) (409,800) (3,186)
Redundancy provision (note 17) (6,162) -
Unwind of contingent consideration (note 16) (39,733) (28,088)
Change in contingent consideration (note 16) 161,908 (26,900)
KUFPEC provision (note 17) - (15,630)
Write down of receivable - 1,203
Exploration and evaluation expenses: Written off and impaired - (519)
Other exceptional items - 29
-------------------------------------------------------------- --------- ---------
Pre-tax remeasurements and exceptional items (B) (308,104) (120,024)
Tax on remeasurements and exceptional items (C) (317,120) 41,746
-------------------------------------------------------------- --------- ---------
Post-tax remeasurements and exceptional items (D = B +
C) (625,224) (78,278)
-------------------------------------------------------------- --------- ---------
Business performance net profit attributable to EnQuest
PLC shareholders (A - D) 6,216 122,570
-------------------------------------------------------------- --------- ---------
Period Period
ended ended
30 June 30 June
2020 2019
EBITDA $'000 $'000
------------------------------------------------------ --------- --------
Reported profit/(loss) from operations before tax and
finance income/(costs) (243,765) 172,561
Adjustments:
Pre-tax remeasurements and exceptional items 268,371 91,936
Depletion and depreciation (note 8) 252,325 255,443
Inventory revaluation 18,959 5,679
Net foreign exchange (gain)/loss (20,971) 308
------------------------------------------------------ --------- --------
Business performance EBITDA (E) 274,919 525,927
------------------------------------------------------ --------- --------
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 and the realised
gain/(loss) on foreign currency and derivatives related to capital
expenditure.
Glossary - Non-GAAP measures (continued)
Period
ended Year ended
30 June 31 December
2020 2019
Total cash and available facilities $'000 $'000
-------------------------------------------- --------- ------------
Available cash 94,076 144,214
Ring-fenced cash 87,724 73,985
Restricted cash 1,574 2,257
-------------------------------------------- --------- ------------
Total cash and cash equivalents (F) 183,374 220,456
Available credit facilities 513,900 535,000
a. RCF- Tranche A 425,000 460,000
b. RCF- Tranche B 75,000 75,000
c. Trade creditor facility 13,900 -
Credit facility - Drawn down (appendix) (425,000) (460,000)
Letter of credit (2,754) (6,849)
-------------------------------------------- --------- ------------
Available undrawn facility (G) 86,146 68,151
-------------------------------------------- --------- ------------
Total cash and available facilities (F + G) 269,520 288,607
-------------------------------------------- --------- ------------
Period
ended Year ended
30 June 31 December
2020 2019
Net debt $'000 $'000
----------------------------------------- --------- ------------
Borrowings (note 12):
Credit facility - Drawn down 425,000 460,000
Credit facility - PIK 15,792 15,097
Sculptor Capital facility 88,780 120,287
SVT working capital facility 11,245 31,899
Tanjong Baram project financing facility - 31,730
Borrowings (H) 540,817 659,013
----------------------------------------- --------- ------------
Bonds (note 13):
High yield bond 768,681 741,573
Retail bond 218,344 224,658
----------------------------------------- --------- ------------
Bonds (I) 987,025 966,231
----------------------------------------- --------- ------------
Non-cash accounting adjustments:
Unamortised fees on loans and borrowings 2,275 2,625
Unamortised fees on bonds 4,334 5,572
Non-cash accounting adjustments (J) 6,609 8,197
----------------------------------------- --------- ------------
Debt (H + I + J) (K) 1,534,451 1,633,441
Less: Cash and cash equivalents (F) 183,374 220,456
----------------------------------------- --------- ------------
Net debt/(cash) (K - F) (L) 1,351,077 1,412,985
----------------------------------------- --------- ------------
Glossary - Non-GAAP measures (continued)
Period
ended Year ended
30 June 31 December
2020 2019
Net debt/EBITDA $'000 $'000
----------------------------------------- --------- ------------
Net debt (L) 1,351,077 1,412,985
12-month Business performance EBITDA (E) 739,472 1,006,535
----------------------------------------- --------- ------------
Net debt/EBITDA (L/E) 1.8 1.4
----------------------------------------- --------- ------------
Period Period
ended ended
30 June 30 June
2020 2019
Cash capex $'000 $'000
------------------------------------------------------------ --------- ---------
Reported net cash flows from/(used in) investing activities (104,691) (124,093)
Adjustments:
Net cash received on termination of Tanjong Baram risk
service contract (17,086) -
Payment of Magnus contingent consideration - Profit share 21,088 -
Interest received (696) (472)
------------------------------------------------------------ --------- ---------
Cash Capex (101,385) (124,565)
------------------------------------------------------------ --------- ---------
Period Period
ended ended
30 June 30 June
2020 2019
Free cash flow $'000 $'000
--------------------------------------------------- --------- ---------
Net cash flows from/(used in) operating activities 275,104 408,995
Net cash flows from/(used in) investing activities (104,691) (124,093)
Net cash flows from/(used in) financing activities (201,838) (347,238)
Adjustments:
Repayment of loans and borrowings 118,906 200,675
Free cash flow 87,481 138,339
--------------------------------------------------- --------- ---------
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
2020 2019
Revenue sales $'000 $'000
---------------------------------------------------------- -------- --------
Revenue from crude oil sales (note 5) (M) 375,518 761,850
Revenue from gas and condensate sales (note 5) (N) 27,574 79,941
Realised (losses)/gains on oil derivative contracts (note
5) (P) 35,229 3,345
---------------------------------------------------------- -------- --------
Total revenue 438,321 845,136
---------------------------------------------------------- -------- --------
Glossary - Non-GAAP measures (continued)
Period Period
ended ended
30 June 30 June
2020 2019
Barrels equivalent sales kboe kboe
---------------------------- -------- --------
Sales of crude oil (Q) 9,417 11,645
Sales of gas and condensate 1,923 2,302
---------------------------- -------- --------
Total sales (R) 11,340 13,947
---------------------------- -------- --------
Period Period
ended ended
30 June 30 June
2020 2019
Average realised prices $/Boe $/Boe
---------------------------------------------------------- -------- --------
Average realised oil price, excluding hedging (M/Q) 39.9 65.4
Average realised oil price, including hedging ((M + P)/Q) 43.6 66.1
Average realised blended price, excluding hedging ((M
+ N)/R) 35.5 60.4
Average realised blended price, including hedging ((M
+ N + P)/R) 38.7 60.9
---------------------------------------------------------- -------- --------
Period Period
ended ended
30 June 30 June
2020 2019
Operating costs $'000 $'000
--------------------------------------------------------- --------- ---------
Reported cost of sales 420,071 592,415
Adjustments:
Pre-tax remeasurements and exceptional items (9,201) (4,098)
Depletion of oil and gas assets (248,384) (250,366)
(Credit)/charge relating to the Group's lifting position
and inventory 48,535 (29,438)
Other cost of sales (36,755) (60,077)
--------------------------------------------------------- --------- ---------
Operating costs 174,266 248,436
Realised (gain)/loss on derivative contracts (528) 964
--------------------------------------------------------- --------- ---------
Operating costs directly attributable to production 173,738 249,400
--------------------------------------------------------- --------- ---------
Comprising of:
Production costs (S) 137,650 210,200
Tariff and transportation expenses (T) 36,088 39,200
--------------------------------------------------------- --------- ---------
Operating costs directly attributable to production 173,738 249,400
--------------------------------------------------------- --------- ---------
Period Period
ended ended
30 June 30 June
2020 2019
Barrels equivalent produced kboe kboe
--------------------------------------------------------- --------- ---------
Total produced (working interest) (U) 12,022 12,407
--------------------------------------------------------- --------- ---------
Period Period
ended ended
30 June 30 June
2020 2019
Unit opex $/Boe $/Boe
----------------------------------------- -------- --------
Production costs (S/U) 11.4 16.9
Tariff and transportation expenses (T/U) 3.0 3.2
----------------------------------------- -------- --------
Total unit opex ((S + T)/U) 14.4 20.1
----------------------------------------- -------- --------
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