EnQuest PLC (3EQ.F) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the EnQuest PLC Half Year Results Conference Call. [Operator Instructions] I would now like to hand the conference over to your speaker today, Amjad Bseisu. Please go ahead.

Good morning, ladies and gentlemen, and welcome to our 2021 half year results presentation. First, I hope you and your families are safe and well, as we continue to live within the confines of our COVID pandemic. Safety is our top priority. And given the challenges all of us have faced during the COVID-19 pandemic, we've been continuously monitoring the evolving situation. Management has ensured the right response and advice is in place to protect our workforce while continuing to maintain safe operations. At present in Malaysia, for example, we've amended our shift patterns to facilitate the requirement by the government for all personnel to quarantine for 14 days ahead of deployment to our assets in accordance with the MCO, the movement control order, in place. Clearly, as a responsible operator, we remain watchful and aware and I'd like to thank our teams for their professionalism and adaptability throughout this difficult pandemic period, both last year and this year. Joining me today for this presentation are Jonathan Swinney, our Chief Financial Officer and Bob Davenport, our Managing Director for North Sea operations. I'll first take you through the first half performance that has been delivered, provide an update on our guidance and outline the progress we continue to make with regards to ESG. Bob will then cover the operations in detail, with Jonathan presenting the financial results as usual. I will then return to summarize before we move to the Q&A session of today's proceedings, for which the operator will provide you instructions on how to ask a question. Moving to the next slide. With safety being our top priority, I'm particularly pleased that we've maintained our excellent safety record with 0 lost time injuries across the group. As you will have seen from our results announcement, we've delivered production of over 46,000 barrels of oil per day during the first half of the year. We've seen strong production from Kraken and better-than-expected performance in Malaysia, partially offset by disappointing production at Magnus, reflecting poor topside-related well performance, as we have outlined in the previous announcements. However, we're confident that the production enhancement program we have in place, Magnus will increase as we move through the second half of the year. Similarly, we expect an improved performance from the Greater Kittiwake area and PM8/Seligi through the latter part of 2021 with specific reinstatement works already underway in each of these assets. And of course, the Golden Eagle acquisition and the volumes associated with Golden Eagle will further boost our production, replacing some of the production lost due to our COP decisions last year. Our focus on cost control and capital discipline, along with the higher oil prices, ensured that we have generated strong free cash flow, which has allowed us to further reduce the debt, with net debt improving to 2.1x net debt to EBITDA at midyear. Clearly, also the signing of the new RBL was an important milestone for us, providing funds to repay previous senior credit facilities, the BP vendor loan and facilitate the Golden Eagle acquisition. To provide some cash flow protection in accordance with the terms of the RBL, we've also continued to layer in hedging. For 2021, for example, we have around 11 million barrels of production now hedged with around 6 million barrels hedged in the second half of the year at an average floor price of $62 a barrel. We continue to hedge over the long term. As we look to the future of the company, I'm very pleased with the progress we've made on Golden Eagle and the acquisition there, with completion now slated for the end of September. This acquisition will immediately add significant production, reserves, resources and value to our business. Additionally, the acquisitions of Bressay and Bentley completed this year with almost 2 billion barrels of oil in place and within 10 to 15 kilometers of our Kraken infrastructure will help -- will provide great opportunities for the future growth. Moving now to Slide 4. I've already outlined our production performance for the period, which was towards the lower end of our guidance range. This reduction in production alongside higher oil-related costs, has meant that our unit operating costs have increased to $19 a barrel from $14 a barrel last year. However, we've maintained our focus on capital discipline and aggregate cash expenditures, which have decreased by almost 50%. Jonathan will take you through this in more detail. Turning to the next slide. You've seen in our results announcement. We've slightly amended our full year guidance. As Slide 5 shows, we now expect group production from existing assets to be at the lower end of our original guidance range. This is largely driven by the lower-than-expected performance from Magnus in the topside during the first half of the year, combined with a positive impact of production enhancement initiatives in Magnus, we expect to have a higher production over the second half of 2021. It's also important to note that the Golden Eagle acquisition is expected to add 2,000 barrels a day to our 2021 production following completion, which will bring our total production towards the middle part of our guidance. Operating expenditures are now expected to be around $300 million, reflecting higher uptime at Kraken, our work program at Magnus and a higher diesel cost and the impact of a stronger count. I'd still point out that this level of cost is still around 10% lower than our full year 2020 after. Cash capital and abandonment expenditures are expected to be broadly in line with the original guidance of around $120 million, which represents a 30% reduction from 2020. Again, I should point out that this guidance excludes the costs associated with the PM8/Seligi rise reinstatement, given we expect to recover the majority of that cost in time from insurance. Going to the next slide. As a responsible operator, environmental, social and governance performance has been an area of great importance since the start of the company. It was one of our original tenants when we started. On this Slide 6, you can see the progress we've made to date. We recognize that the industry must contribute to reducing absolute emissions while ensuring our people and communities are safe and that we maintain a strong governance position. Having reduced emissions by 26% between 2018 and 2020, the group is ahead of the 2025 target set out for the U.K. government's North Sea Transition Deal to reduce emissions by 10% from the 2018 baseline to 2025. Additionally, the group has set its own targets to reduce emissions by a further 10% from the existing portfolio by the end of 2023 and is on track to achieve the material reduction in flaring so far this year. Delivering this additional reduction in emissions will also position us favorably against a 25% reduction by 2027 and 50% by 2030 set out in the North Sea Transition Deal. Furthermore, we've decided to integrate Sullom Voe into an infrastructure and new energy business. Under this new structure, we will focus on strengthening and extending the life of operations. At the same time, we'll assess new energy opportunities to create a hub of growth in infrastructure and renewables at SVT. This will help us over the medium and long term to find new opportunities in this area. While this is a longer-term project, we believe we have a competitive advantage given the location, scale and nature of our site at Sullom Voe. Elsewhere, good progress has been made on diversity and inclusion with an introduction of a global strategy and policy being published. This sets out 7 distinct commitments that we will help -- that will help us achieve specific improvements and provide clear 2025 targets for women in senior management and senior grades, as well as ethnic minorities in executive leadership roles. Additionally, building on the Board's extensive energy experience, we welcomed Liv Monica Stubholt, highly respected professional in the Norwegian energy industry and a previous Deputy Energy Minister as a Non-Executive Director. Liv Monica will also become a member of the Audit Committee and Safety Climate and Risk Committee, further strengthening the Board's governance and increased board diversity. I will now hand over to Bob to cover our operation performance in more detail.

Thank you, Amjad, and good morning, everyone. I'll begin with an overview of the group's operational delivery during the first half of the year, followed by some supporting details. But first, on our response to the ongoing pandemic, I'm very proud of the way our EnQuest teams offshore and onshore globally have responded to the many challenges presented by COVID-19. Their dedication and hard work have enabled our operations to run smoothly right throughout the period. So now on to our first half 2021 production performance on Slide 8. As Amjad outlined, the group has delivered production within guidance at 46,187 barrels equivalent per day. At Kraken, production was firmly in line with guidance and around 4,000 barrels equivalent per day lower than first half of 2020. Magnus was down about 5,000 barrels equivalent per day compared to the first half of 2020. And on the next slide, I'll provide some detail about our activities there. Production at the Greater Kittiwake Area was also lower and impacted by a 5-week maintenance shutdown. The volumes in our decommissioning business in 2021 reflects some production from the Dons, which ceased production at the end of March as planned. And in Malaysia, production was better than forecasted in the first half, but was down by about 3,500 barrels equivalent per day versus first half of 2020, reflecting the impact of the riser detachment at the end of 2020. Next, I'll provide more detail, beginning with Kraken on Slide 9. At Kraken, production was in line with guidance with daily average at just over 33,600 barrels equivalent per day gross. Production and water injection efficiency were very strong at 90% and 92%, reflecting excellent FPSO performance. A number of maintenance activities were completed including the full replacement of all the original subsea riser tethers, which reduces the risk of future failures and allows for the deferral of the planned September shutdown to 2022. Subsurface and well performance remains very positive with water cut evolution remaining stable. We continue to focus on optimizing production and we recently completed a successful seismic campaign acquiring valuable data to fully evaluate the development potential at the western area. We have now produced over [ 48 ] million barrels from Kraken since first oil in June 2017. And cargo pricing remains robust as we continue to sell directly to the shipping fuel market as a component of IMO 2020-compliant fuel oil. Turning to Magnus, production of 13,847 barrels equivalent per day was 26% lower than the same period in 2020. There, we initiated a well work and coiled tubing program to repair a number of wells with three wells already restored to production since June. The campaign is ongoing and will deliver further production increases. At the same time, improvements to the power and water injection systems have yielded excellent oil and water injection efficiency since midyear, with the asset recently achieving an impressive 100-day continuous run without a planned trip. Importantly, the Magnus subsurface continues to perform according to our models, so all told, the asset is set up for an improved second half. Finally, to mention, a maintenance shutdown is planned for September to implement some improvements to gas compression. Turning now to Slide 10. At our other upstream assets, which include the Greater Kittiwake area, Scolty/Crathes and Alba, average production was 54% lower. This reflected some natural declines, but also deferred production from a planned maintenance shutdown, which extended to 5 weeks due to third-party issues and the offline Mallard/Gadwall power umbilical. With the umbilical replacement nearing completion and the maintenance shutdown behind us, production is expected to improve in the second half. As I mentioned earlier, production from our decommissioning assets was lower than 2020 due to cessation of production decisions taken at Alma/Galia in 2020 and the Dons in March 2021. Following the acceptance of COP applications at Heather and Broom, decommissioning activities are progressing well with planned subsea inspections completed at Heather ahead of the well abandonment program starting later this month. At Thistle, the Phase I re-habitation program was successfully completed in June, in line with expectations. The team are now making offshore preparations for the well abandonment program beginning in the fourth quarter. Moving now on to Slide 11. In Malaysia, production at PM8/Seligi was better than forecasted in the first half of 2021. We've had really good success restoring production thus far, having accelerated initial production recovery activities. In July, we successfully completed the planned maintenance shutdown ahead of schedule, and we remain on track to deliver the replacement pipeline and riser with the job scheduled to complete in October, returning production to normal levels shortly thereafter. In summary, then, performance at Kraken and Malaysia was strong in the first half of 2021, while Magnus was lower, driven by well challenges. With three Magnus wells recently stored to production and excellent uptime at Magnus, Kraken and PM8/Seligi since June, production will strengthen further in the second half of 2021 from the ongoing Magnus well program, restarting Mallard/Gadwall this month and from the PM8/Seligi pipeline and riser replacement in October. This all adds up to a positive finish to the year. Longer term, we see plenty of drilling opportunities at our three core assets, Magnus, Kraken and PM8/Seligi, and we look forward to completing the Golden Eagle acquisition, adding another high-quality asset to our portfolio. So now I'll hand over to Jonathan to take you through the financial results.

Thank you very much, Bob, and good morning, ladies and gentlemen. Turning first to the summary slide on Page 13. For the first half of 2021, group revenue was up 15.2% on last year. This reflects materially higher oil prices, partially offset by the reduction in production outlined earlier and includes gas and condensate sales of $58 million, mainly derived from Magnus gas sales. During the period, we achieved an average realized oil price, including the impact of hedging of $62.8 a barrel in the first half of 2021, 44% higher than during the first half of 2020. This increase reflects higher market prices offset by the impact of our hedging program, for which we recognized $32.9 million of hedge losses in the first half of 2021 compared to $35.2 million of gains realized in 2020. The realized oil price, excluding the impact of hedging was $67.3 a barrel for the 6 months ended 30th of June '21 compared to $39.9 a barrel during the first half of 2020. We continue to be in a net underlift position and our saleable barrels are also affected by the entitlement barrels in Malaysia being around 66% of the working interest production and in addition, shrinkage of around 1%. Operating costs decreased by $21.3 million, primarily reflecting lower tariff and transportation costs due to lower production for the first half of 2021 with production costs broadly flat year-on-year as lower costs from our decisions to cease production at a number of our assets has been offset by remediation costs at Magnus and lower Kraken lease charter credits reflecting the continued strong performance of the FPSO. The increase in operating cost per barrel from $14.4 per barrel to $19.3 per barrel reflects these costs and lower production. In aggregate, cash capital and abandonment expenditures reduced significantly compared to the prior year to $55 million. I will discuss our cash expenditure program in the next slide. The higher revenue resulted in increased EBITDA and cash generated from operations increasing to $345 million and $288 million, respectively. Free cash flow is significantly up from the prior year with strong cash generated from operations and lower CapEx. Net financing costs decreased in the first half of 2021, mainly reflecting a reduction in bank debt and bank interest as a result of the group's ongoing accelerated repayment of the senior credit facility and Sculptor facility. This was partially offset by an increase in the bond interest due to payment in kind settlements in the period with these PIK payments added to the group's issued debt. The payment of PIK reflected the low oil prices during late 2020. In the second half of this year, the retail bond was paid in cash in August and the high-yield bond payment is also expected to be settled this way. At the end of the first half of 2021, our net debt had reduced to $1.18 billion. The strong production performance at Kraken combined with higher oil prices has enabled the full repayment of the $68 million outstanding balance on the Sculptor Capital facility in the period to 30th of June 2021. I will talk more about our facilities and the refinancing in a later slide. Turning to Slide 14, our cash expenditure. Our cash capital expenditure for the period was $16 million, which mainly relates to Magnus well intervention campaigns, Kraken tether repairs and PM8/Seligi riser repairs, where we have spent around $4 million. Abandonment spend increased in 2021 to around $39 million following the cessation of production at the Dons and the work at Heather and Thistle that Bob outlined a little bit earlier. We continue to expect cash capital abandonment expenditure to be broadly around $120 million. This excludes costs associated with PM8/Seligi rise repair where most costs are anticipated to be covered by insurance, although there is likely to be a timing difference between the expenditure and insurance proceeds receipts. Slide 15 shows our net debt position has improved from around $1.28 billion at the end of 2020 to $1.18 billion at 30th of June 2021. As mentioned earlier, we generated cash from operations of $288 million, which after deducting abandonment expenditure and tax results in $247 million net cash flow from operations. In addition, we incurred $16 million of cash CapEx. We also paid BP a total of $12 million in relation to the vendor loan associated with the acquisition of the additional equity interest in Magnus and the BP profit share. Net financing and other costs are primarily made up of cash interest paid on our debt facilities, the Kraken FPSO lease payments and the Magnus vendor loan. As mentioned earlier, both the retail and high-yield bond interest payments were paid in kind during the first half of the year, which increases our net debt. Strong free cash flow generation of around $141 million has allowed for a reduction in our period end net debt. Looking forward to the second half of the year, following the recent drawdown of the $360 million from the new $600 million RBL facility, both the full outstanding amount on the existing RCF and the Magnus vendor loan have been repaid with the remaining balance from the RBL available to part-finance the Golden Eagle acquisition. In accordance with the terms of the new RBL, the group has laid in additional hedges over the longer term. For 2021, we have hedged a total of approximately 11 million barrels, with an average floor price of approximately $59 a barrel, with around 6 million barrels hedged in the second half of the year at a floor price of $62 a barrel. For 2022, we've also hedged approximately 6 million barrels with an average floor price of approximately $62 a barrel; while for 2023, we have hedged approximately 1 million barrels with an average floor price of approximately $55 a barrel. This ensures that we have received a minimum oil price for our production, protecting cash flows in order to facilitate repayment of the RBL. Turning now to Slide 16. This chart shows the change in the group's available facilities following our successful refinancing. Once we have completed the acquisition of Golden Eagle, we would expect net debt to increase before we return to our path of rapid deleveraging. It is worth remembering that the new facility is structured so the loan is fully repaid in June 2023 until the high-yield bond has been refinanced. In addition to the new RBL, we successfully completed an equity raise consisting of gross proceeds of approximately $50 million. I'd like to thank this opportunity to thank our shareholders who participated for their continued support of the company. I will now hand you back to Amjad.

Thank you very much, Jonathan. Turning now to the last slide. And as you heard through the presentation, I think EnQuest is a transformed company, delivering on strategy, but also having a runway for growth. We've delivered production within guidance, albeit at the lower end. We expect this to improve following the execution of work programs at Magnus, GK and PM8/Seligi and the addition of the Golden Eagle volumes. We've generated strong free cash flow. We've simplified our capital structure. We've reduced our net debt to its lowest level since 2014 when we embarked on the Kraken project. We look forward to completing the acquisition of Golden Eagle, which will help transform the business and generate significant cash flows for the business going forward. The low-cost of this asset materially also helps us with our cash generation and rapid deleveraging. We've acquired also significantly large 2C assets in Bressay and Bentley and have a significant amount of oil, almost 2 billion barrels within a catchment area of Kraken for longer-term development at the right time. Over the years, we proved ourselves to be a strong, responsible operator, driving operational and financial efficiencies. We are clear about our core capabilities and believe our focus on extending useful life of existing assets through operational improvements and reducing emissions is well suited to operating through the energy transition period. Our ESG agenda is progressing well with continued reduction in emissions, our first step in exploring new energies, and we continue to strive to create more diverse and inclusive culture. I'm excited by the transformed company and the future and long-term opportunities that our recent acquisitions will bring. And I believe that we are well placed to add value and continue to grow in the future. Thank you for listening. I will now hand back to the operator to start the Q&A session.

[Operator Instructions] The first question comes from the line of Mark Wilson from Jefferies.

A few questions from me. The first would be, could you give us an expectation on -- internal expectation on timing and what conditions you would see necessary to enter into refinancing for the 2023 bonds? That's the first point. And the second, if you could give us some Golden Eagle update on how that asset is performing and any drilling expected in 2022? And if there's a completion adjustment that we should factor in for -- against the 325 headline on completion. And then my final point is you talked about PM8/Seligi getting back to normal levels once the rise is replaced after October. And what would be -- we consider those normal levels to be in terms of productions? Those are the three questions.

Okay. I will -- I'll start with maybe the Malaysia question and then turn over to -- also answer the Golden Eagle update in terms of drilling expectations and then turn it over to Jonathan to talk about timing of the refinancing as well as any adjustments for the Golden Eagle for -- from a financial perspective. So on Malaysia, we would expect a few thousand barrels a day more as we haven't drilled any wells recently, as you may recall. And so we -- that would be expected in the second half. I have to outline, we are looking to drill significantly next year, we have four wells slated for drilling and additional workovers around 3 to 4 workovers in PM8/Seligi. So we're hoping to sustain the decline with the additional wells going forward next year. On Golden Eagle, I think the program has yet to be completed for next year, but we are hoping that there will be some drilling next year of 1 or 2 wells. I will turn over to Jonathan to talk about timing on refinancing as well as adjustments for the Golden Eagle acquisition.

Thanks very much, Amjad. So with regard to timing, Mark, obviously, there's a natural tension between -- as we produce more cash flow over time, clearly, with the deleveraging effect that we will have with that is the smaller any kind of refinancing would need to be -- the later you leave it. Obviously, the earlier you go, the larger the size of any potential refinancing of a high-yield bond. So I think from my perspective, obviously, with oil prices and the bond market are key components of that. So if oil prices stay constructive and bond markets stay constructive and clearly makes sense for us to do it as soon as we can. But to the extent that if we go early, then clearly, the size of that refinancing will be larger. So I think we need to be -- make sure that we're ready and normal times that we would be able to do that with regard to our results and financials that need to be published at the same time, as any offering memorandum will be just after our half year and full year results. So these are the kind of timing, but clearly, we need to make sure that we're going to be ready to take advantage of any potential improvement, say, in either the bond markets or indeed the oil price overall. Secondly, with regards to the question on Golden Eagle completion, so the $325 million acquisition price, I think we said in the prospectus itself, that we expect by the time we get to complete a $75 million completion adjustments, so reducing around about $250 million or so million acquisition by the time we get to completion, it will depend on exactly when we do complete, but that's the adjustment overall.

The next question comes from line of James Thompson from JPMorgan.

Thanks very much for the presentation. Amjad, I guess, first of all, maybe thinking sort of bigger picture. The balance sheet is as strong as it's been for several years now and at least from a leverage perspective, macro conditions is better and cash CapEx is only $16 million in the first half of 2021. I mean that's obviously unsustainable. Can you maybe just talk a little bit about how you're thinking about development of the contingent resource base in the portfolio? You mentioned sort of timing wise and Jonathan obviously alluded to that in terms of debt being a priority short term. But just maybe you could paint a picture of how you're going to grow or how you're going to capture these contingent resources over the next few years, particularly given clearly, the stronger commodity backdrop at the moment?

Okay. Thank you. Thank you very much, James. So you're absolutely right. I think the company is in the strongest position since 2014. We have our lowest debt since 2014 since we embarked on the Kraken project and finished our Alba project. In terms of development resources, our best resources still lie in Magnus, and we feel the Magna subsurface has significant upside. We will be drilling two wells in Magnus next year. And we will start the drilling program going forward, and we will continue with the workover program there with wireline as well as coil program as needed. We see those as investments we've quickly within the year. So I think that to me is quite positive. The cost of each of those wells, as we've talked in the past, is around $10 million, maybe or so, depending on FX, $10 million to $12 million. So we will -- additionally, we have obviously the wells in Malaysia. We are 50% shareholders there, as you may recall. We are looking to drill four wells next year and do 3 or 4 workovers there next year. So I think we'll continue to look at those two assets as the key assets for development. We are looking -- in Kraken, we're doing seismic, which will be reinterpreted next year to better understand the areas for us to drill, including western flank. We are also doing work on Bressay to try and sanction an early well test in Bressay, probably around the '24, '25 time frame. So I think in the next couple of years, the projects we're looking at are relating to Magnus and PM8/Seligi and those would be within the confines of pay back very quickly. So I think they will add resources standard declines. But as you know, quite well when we haven't drilled wells, the declines are quite significant in our portfolio. So that's why we have to start investing again. The long-term options in Bressay, Bentley as well as PM8/Seligi are very, very good. And then we can -- we still have a rich opportunity set in Magnus given the slots available, but we may even look at beyond just existing slots what to do there in Magnus and Kraken. So I think -- our priority is still debt reduction. We want to get to a position where we have a much stronger balance sheet. And once we get there, then I think we will look at the acceleration of investments. And it's actually the right time because we would have had the seismic on Kraken. [indiscernible] cargo, which will be lifted very soon. So almost 15 million barrels will be produced in Kraken, which is a great achievement for a heavy oil, which is a first heavy oil subsea developments anywhere in the world and one of the premier developments in U.K., having 2.5 billion barrels around the catchment area there with our existing infrastructure gives us a runway to invest relatively low amounts for tiebacks into our infrastructure.

Okay. So still prioritizing the debt for next year, CapEx will be relatively low. I guess, we'll see sort of flat to slightly down production next year and then maybe ramp after that. I guess just in terms of the sort of nearer term and your guidance sort of for the full year in terms of production. I mean is the expectation there that obviously, the remedial work being completed on various assets means that H2 production should be higher than H1? Or is it the case of sort of natural decline on the asset? It means H2 is going to be very, very similar to H1. I'm just trying to get a sense of whether the second half is more a kind of 49-50 type outcome versus the [ 46 ] in the first half?

So I think we had five wells on Magnus that we had to reinstate. We reinstated 3 of those. I think we've got 1,500 barrels a day net there already over first half. We also are looking at GK and adding wells there, Mallard and Gadwall, which come back on production. And as we discussed earlier, with Mark, we will add production in Malaysia. So the expectation will be for a higher second half. But just remember, the number of months is low. And so the overall impact on the year will be low because, again, we have a few months with higher production. But we also have to take into consideration the addition of the Golden Eagle production, which we are expecting to be a couple of thousand barrels. So I think that will bring us back to the middle of the range.

[Operator Instructions] There are no further questions over the phone. I would like to hand over the conference back to Ian for any webcast questions.

Thanks. Good morning, folks. First set of questions all from a number of participants relates to EnQuest producer. And if there is any update on our activities there.

Okay. Thank you very much. The EnQuest producer is a Nigg and is -- I think we are seeing more offers for sale -- for outright sale on the EnQuest producer. But we're also looking at some options internally for seeing if we can look at using it as a way to leverage into development ourselves and take an equity interest. So that is ongoing. I think that we have said that we're going to keep it now until sometime next year and look at the best opportunities for it. There are a few, a few offers out there for it, and we are waiting for those to crystallize and then decide what to do going forward?

Thank you very much, Amjad. The next set of questions come from [indiscernible] three more questions here. Given today's oil prices and production, hedging and financing, he believes EnQuest will achieve its target of net debt to EBITDA soon and we get a clear and specific schedule and size of the intended dividend. If not now, when could we expect this information? That's question one. The second question relates to environmental work. Has EnQuest any ongoing planned projects within CCS or other green projects to diversify its income for instance, using Magnus as a storage field? And question 3 is will EnQuest present long-term plans, including revenues, free cash flow production and net debt instead of shorter-term forecasts carry forward?

Okay. I will take the first 2, and Jonathan can take the third on the longer-term forecast. In terms of dividend, we have said the dividend will feature in our catalyst going forward once we achieve our targets. So we are continuing to look for that as part of our capital allocation going forward. So we will look at that when we get close to achieving our targets. And we are very hopeful that with the -- with the positive macro conditions and the higher prices that we will continue to delever, as you've seen in many analyst reports very quickly. On ESG, we feel we have a strong base in a competitive advantage in Sullom Voe. And thus, we have created a group reporting to me, which runs infrastructure, both East and West of Shetlands and the Sullom Voe Terminal and looking at new energies at the same time. So with the existing gas pipelines, both East and West of Shetlands, which we operate with the existing terminal at Sullom Voe and with the Ireland being one of the best candidates for wind. We are looking at wind projects. We are looking at very early projects in CCS but -- CCUS, but at present, these are more studies and look to crystallize over the medium to long term. Jonathan?

Thanks, Amjad. And thank you for the question. There are a couple of issues with the question you raised. I think the one on the technical side, if you have what's called a profit forecast out even for a year, but if it's longer than that, under the London Stock Exchange rules, if you end up having to do any kind of Class 1 transaction along the lines of Golden Eagle, where you are asking shareholders for approval of the transaction, you have to have accountants reports around any kind of profit forecast. And that can potentially safely hamstring you when doing a transaction. So for that, I'm very glad that we didn't have anything like that out in the marketplace, if you like, whilst doing Gold Eagle because it would have been even more complicated than it was in any event. And it potentially does hamper your ability to do transactions, which clearly you wouldn't want to do. I think on the second point, if the last 18 months has shown, the world can be a very changeable place. If we put out anything like those long-term forecasts in 2019, they have all been changed drastically from that period of time. So I think it's reasonable to give the kind of the 1-year out guidance. I think the marketplace takes from that and gives forecast for longer term themselves anyway. And clearly, we are cognizant of those as well and to the extent that they are materially incorrect that we're under obligation to make sure that the understanding of our longer-term production forecast, OpEx, CapEx, et cetera, are reasonable. So I think overall, the market gets a lot of information, but I think there are a couple of reasons why potentially would be unhelpful for us to give out longer-term guidance.

The next question on the webcast comes from a private investor Ron Smith-Galer. I am not an accountant, but I would like to know if previous impairments can be revoked or partly revoked as the higher oil price appears to be holding and OPEC signals are encouraging?

I think this question is for Jonathan.

Yes. So any impairments can be reversed, absolutely as long as you're not reversing it to a higher level than it was kind of previously, if you like. So yes, you can reverse those impairment numbers.

Thank you very much. The next question is from Michael Boam. It's fair to say that without the RBL refinancing, you would have failed to meet the required amortization of the senior secured facility. How confident are you on being able to pay down a new RBL ahead of the bond maturity? And a question I think you've already answered, but I will ask anyway, why not undertake a refinancing now?

I think, Jonathan, this question is for you.

Yes. In terms of the refinancing question, I think as I said before, there is clearly a natural tension as you create a lot of cash flow at current oil prices to repay and pay down debt. If we go now, clearly, the size of any kind of bond would be large, which obviously has an effect on the ability to execute that and also at sensible pricing. The smaller the size of any bond refinancing gets the easy it would be and also a much better pricing for the company. So there is that natural tension. But we, as I said before, want to make sure that we are ready to take advantage of any particular positive market dynamics, and that's what we're essentially making sure that we can do that. With regard to the ability to repay the amortization of the new RBL, that was very much agreed with the lenders so that the amortization profile shows very significant deleveraging and repayment by June 2023. So we're very comfortable that we can do that as well the banks because clearly, they want to agree something that they felt so there was a reasonable amount of headroom for us to be able to do that. So I'm certainly confident that we'll be able to meet that amortization profile.

Thank you very much. Our final question on the webcast comes from Paul Davy. How much of production has been impacted by nondecline rate issues? And how should we think about decline rate on the current producing assets?

Bob, I think this one is for you.

Yes. Thank you, Paul, for your questions. So as we've described, the biggest part of the production deferrals that we've referred to have been non-decline related deferrals. And I'm pleased to say, as we've described that we've made improvements in all those areas already. And I think the way to think about declines similar to other operators in the North Sea, our fields have a range of decline rates and decline rates will vary from year-to-year depending on activity, for example, whether we're drilling in the asset or in the field at the time. But generally speaking, our fields and our assets have a range of natural declines from the high single digits to the low teens to, in some cases, the mid-teens.

Many thanks, Bob. That concludes all the questions on the webcast. I'll hand back to the operator for an additional question from the phones.

We have received just the final question on the line from James Hosie at Barclays.

Yes. Yes, just for me. I appreciate you're still in the process of completing the Golden Eagle deal. Just how do you see the outlook for acquiring further production assets either in the U.K. or elsewhere?

Thanks, James. Again, we're in the market, as you know, for looking at assets. And so we continue to look at assets. I think the focus will be on leveraging our capability to acquire assets going forward, which means looking at the Magnus and PM8/Seligi type deals, where there will be little or no equity upfront and looking at where we leverage our capability to take over assets. Otherwise, we'll be focused on the assets we have and the 2C resources, that I think James asked about, and investing in our 2 resources where the paybacks are very quick.

There are no further questions. I would like to hand over back to presenters for closing remarks.

Okay. Well, thank you, everyone, for listening in and being interested in the company. Again, I'll reiterate, we have a transformed company. We have closed on an asset or will close on an asset, which I think will accelerate our goal of deleveraging. We have continued to deliver, albeit disappointingly with our existing issues at Magnus or the past issues at Magnus. We will try and fix those. We have not invested in drilling wells since the pandemic, as you know. And so that has impacted the decline. This will start being less strong in terms of decline once we start drilling next year in Magnus and PM8/Seligi. We still have a low breakeven. If you -- when we had a working capital adjustment, we continue to have a focus on cost. And I think you have seen our cash flows have been significant in the first half and continue to be significant over the next couple of years. And so we are on our path to delevering, which I think is clearly important. And thank you for all the support in terms of helping us with the equity raise, and looking forward to having a very strong future for the company. Thank you.

That does conclude our conference for today. Thank you for participating. You may all disconnect. Have a nice day.