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

Good afternoon, ladies and gentlemen, and welcome to the EnQuest plc Investor Presentation. [Operator Instructions] The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all questions submitted today and publish responses where it's appropriate to do so, and these will be available via your Investor Meet company dashboard. Before we begin, I would like to submit the following poll. And if you could give that your kind attention. I'm sure the company would be most grateful. And I would now like to hand over to the Head of Investor Relations, Craig Baxter. Good afternoon, sir.

Many thanks, Jake. Thank you, and good afternoon, ladies and gentlemen, and welcome to today's retail shareholder focused presentation on EnQuest. As Jake said, my name is Craig Baxter. I'm the Head of Investor Relations at EnQuest. The purpose of this session is to provide an additional forum outside of the formal results and AGM cycle, for existing and potential noninstitutional holders to engage directly with our story and to ask any questions you may have about the business. I anticipate the presentation will take 20 to 30 minutes and then I'll address your questions, which can be submitted throughout the presentation. So with that in mind, I'll go into the presentation now, and we'll start with an overview of EnQuest. EnQuest is an independent energy company with operations focused on the U.K. North Sea and in Malaysia. Having been first listed back in 2010, we've excelled at taking on mature and underdeveloped producing assets from majors and other operators and driving efficiencies in order to extend their useful lives and maximize recovery of oil and gas before eventually, these assets cease production and are either repurposed or moved into the decommissioning phase. As you can see from this slide, we have a number of assets in production, primarily in the U.K. North Sea, with reserves and resources totaling almost 600 million barrels in place at the start of the year. We also have the Sullom Voe Terminal which is based on the Shetland Islands. And this remains very important to both our upstream business and is representative of the fundamental component to our new energy and decarbonization ambitions. We also have a number of assets that we've now moved into the decommissioning phase over the last few years as they've reached the end of their useful economic lives. As we are all aware, the global and local energy landscape is in transition. To ensure that we are set up for the long-term success, we recognize the business must continue to show resilience, creativity and adaptability as it has since its inception. We believe our combination of assets and core capabilities sets EnQuest apart from any of its peers as we were able to provide an offering across the entire energy transition spectrum. This slide shows our enhanced business model, and it shows our position as a unique transition company which is founded in our operations through the asset life cycle to deliver on the U.K.'s twin objectives of energy security and decarbonization. We are contributing positively to the nation's energy security by developing and maximizing the operating life of existing fields through a strong commitment to cost management and selective investment while also reducing emissions as we drive towards our commitment to reach net zero by 2040. We continue to bring our differentiated capabilities to bear across the upstream business, which remains core to our ambitions. With regard to decarbonization, we aim to be at the forefront of the U.K.'s drive net zero by repurposing existing infrastructure, pipelines and reservoirs in and around the Sullom Voe Terminal area to deliver material emission reductions. Lastly, we are demonstrating and building capability and delivering significant decommissioning projects and following delivery of the most prolific multi-asset well P&A campaign in the Northern North Sea during 2022, we are well on track to complete the platform-based campaigns at both Thistle and Heather by the end of 2024. These 3 complementary strands, which maximize our core capabilities set EnQuest well placed to be an important player in the transition and a sustainable energy future. These core capabilities, coupled with our relative tax advantage in the U.K. also provide a great opportunity for growth as peers look to exit the UKCS. Looking at the first half of the year. In our upstream business, we remain focused on operational efficiency, cost control and capital discipline while also enhancing the recovery of oil and gas reserves through targeted organic investments. All of this is underpinned by a foundational prioritization of health and safety, where our people come first and improving CO2 emissions performance were possible. Overall, we've delivered a strong performance in the first half of the year with production towards the top end of our full year guidance range. In general, strong uptime has been a feature across the portfolio including tremendous performance at Magnus, which is over 91% PE so far this year. This is the result of the investment and focus applied to operational improvement, driven by our COO, Richard Hall and his operational teams. At Kraken, following a prolonged period of top quartile production efficiency, we experienced a shutdown following the failures of the topside hydraulics submersible pump transformer units. From the 20th of May, when we shut in production, the response from the asset team has been a major highlight of the first half of the year, and we have met or beaten in each target milestone on the phased return to full production. We are committed to quick payback investments in the post EPL environment, and this is exemplified by the 1H Magnus and Malaysia well intervention programs, which represented the low-cost production enhancement scopes. We also expect to see the second half production benefits from the additional wells being brought online at Magnus and at Golden Eagle. The second strand to discuss here is decommissioning and our ability to manage and execute large-scale decommissioning projects as both an effective means to mitigate our future cost exposure in this area, but also is a key enabler for us to access late-life M&A assets. When we look at our decommissioning business, we're already demonstrating how our drilling capability can be applied in this arena. Our extensive U.K. decommissioning work program saw this successful execution of 24 well P&As across Heather and Thistle last year, which is the most productive multi-asset P&A campaign seen in the Northern North Sea. This year, we are well on track to deliver a further 23 well P&As with 14 completed in the first half. That was 7 each at Heather and at Thistle. With well P&A work estimated by OE UK to make up around half of the cost of decommissioning projects, we have a clear opportunity to drive value through our top quartile drilling capability driving a few years of effective drilling execution in our upstream business. We also employ relevant and effective evolving decommissioning technologies, and this approach will drive efficiencies and cost optimization through the lives of our decom projects. With efficiencies and competitive advantages in mind, let's now turn to the third strand of our business model, infrastructure and new energy. Key to the future as we support the energy transition is the progress we're making in this area. We continue to develop cost-effective and capital-efficient plans to transform the Sullom Voe Terminal on Shetland, rightsizing and repurposing the site to progress decarbonization opportunities at scale. We're currently focused on carbon capture and storage, the production of green hydrogen and its derivatives and electrification. The award of 4 carbon storage license in the recent NSTA licensing round presented the opportunity -- presents the opportunity, sorry, to import and permanently store material quantities of CO2 from isolated emitters in the U.K., Europe and potentially further field. This represents a major milestone for our CCS ambitions with the capability of the existing infrastructure, including the EnQuest owned and operated East of Shetland pipeline system as well as storage sites expected to support a project with significant capacity in excess of EnQuest's current carbon footprint. The quantity of potential carbon storage represents a multiple of the group's existing emissions and points to a project which could run into several decades. With regard to hydrogen production, the group is working closely with strategic partners to explore opportunities to aggregate and use the excess energy produced by local wind power in Shetland to produce green hydrogen and its derivatives. Initially, we are looking to decarbonize local industry on Shetland with intent to expand the service to customers globally, leveraging the existing export capabilities and advantaged renewable power potential. This is also an area where we're in discussions with government around matched funding opportunities. Finally, EnQuest continues to progress innovative proposals to harness local renewable power and SVT's advantaged location to offer robust and commercially attractive electrification solutions with the security of a grid backup. This may help facilitate new asset developments in the North Sea Basin, which will also go to support U.K. energy security. In each of these cases, we expect to unlock these opportunities by leveraging our infrastructure and working with strategic and financial partners, and we continue to progress this area of the business, employing limited capital. In summary, we have a unique business model geared towards our net-zero aspirations and anchored in our core capabilities and infrastructure position that will establish us as an important player in a sustainable energy future. We have been laser focused on reducing our debt in recent years, with the ultimate aim to strengthen the balance sheet and reduce EnQuest reliance on a diminishing access to capital within the sector. The bridge chart, you can see on the left-hand side of the slide shows the key components that helped deliver a $125 million reduction in our net debt since the beginning of 2023. In summary, we generated cash from operations of $370 million. We spent $80 million on CapEx and $29 million on decommissioning. Cash interest on our debt facilities was $49 million and lease payments, primarily relating to crack an FPSO were $63 million. We also made a $38 million payment to BP in relation to the Magnus profit share -- share arrangements. Overall, this $125 million reduction in our net debt took us from $717 million at the beginning of the year to $592 million at the end of June. Net debt at the end of August have increased slightly to $615 million, following the $50 million payment in relation to the Golden Eagle contingent consideration, which sees the end of our payments to -- with regards to that acquisition. Looking at our capital structure now. I'll start with our reserve-based lending facility, where we reduced our drawings under the RBL from $400 million at the beginning of the year to $247 million by midyear, bringing the outstanding balance well below the available borrowing capacity under the RBL. In July, we further reduced the drawn balance to where it is now, which is $240 million. Alongside this and in response to the impact of the energy profits levy on the borrowing base capacity, we've strengthened our balance sheet by bolstering liquidity and extending our debt maturity profile by executing a term loan facility of $150 million with bullet maturity in 2027. Following the repayment of the GBP 111 million retail bond that is due in October this year, we would have effectively extended maturities of all our debt instruments out to 2027. Turning to our hedging strategy. We've noted for probably 9 months now that we plan to employ a strategy that protects the downside but provides better exposure to higher commodity prices. We've done this through the use of put options, which now represent the entirety of our hedging program. We've hedged 3.8 million barrels for the second half of 2023 and 3.2 million barrels for '24 at an average floor price of $60 per barrel. If we can turn now to Slide 8, please. As an issue, which has pervaded the vast majority of investor queries that I fielded over the past 18 months, I thought it would be useful to articulate the implications of the energy profits levy, which remains a key challenge for our business and also the wider industry. EPL was initially introduced on 26th of May 2022 at an initial rate of 25%, with expected expiration at the end of 2025. At that time, the government had also noted an indicative oil price trigger range of $60 to $70 per barrel, meaning that if prices were to drop below this level, EPL would [indiscernible] fall away. However, in the autumn statement in November last year, the government introduced several adverse changes to the EPL regime. Firstly, the rate was increased from 25% to 35%. Secondly, the duration of the levy was extended from 2025 out to March 2028. And thirdly, there were reductions in the capital investment allowance. These are all challenging amendments for EnQuest, but most damaging of all, the reference to the price trigger was removed entirely and explicitly. As bank debt capacities are calculated using conservative price assumptions, particularly in the long term, these changes resulted in a substantial reduction in RBL borrowing capacity for the sector. Media reports suggest between 40% and 60% of borrowing capacities were wiped out across the sector and EnQuest were not immune to that. After months of media and industry speculation, on the ninth of June this year, the government announced a dual lock price trigger under the Energy Security Investment mechanism, whereby EPL will fall away if both oil and gas prices are below $71.40 per barrel and 54p per therm, respectively. While we welcome the sentiment intended to boost industry investment, the level of threshold applied here, the nondeductibility of significant elements of the cost base and the geo-lock nature of these triggers has severely diluted any positive uptick in capital availability for the sector. The ESIM is currently in consultation and we've worked directly and through industry bodies to urge the government to make appropriate adjustments to the mechanism in order to provide fiscal certainty and to improve the attractiveness of the investment in the UKCS. Most recently, we've submitted responses to the call for evidence on the long-term oil and gas fiscal review as well as the HMRC's ESIM discussion paper. We do not believe that the current commodity price environment represents a windfall price environment, especially given significant inflationary pressures witnessed by our industry. While EPL has a stated rate of 35%, the nondeductibility of cost elements such as decommissioning and interest expenses translate into a higher effective tax rate. As a reminder, EnQuest is sheltered from the 40% corporation tax and supplementary charge payments due to our substantial tax loss position of over $2.3 billion. That's where it sits at the half year. Several of our peers are paying effective marginal cash tax of over 80%. Consequently, several companies have declared an intent to redirect capital investments outside the U.K. and have actually signaled the desire to lead the UKCS altogether. Overall, despite these challenges introduced by EPL, EnQuest fiscal competitiveness has significantly improved, whereby cash-generative assets are now worth 260% in EnQuest hands compared to that of a full taxpayer. To put this into perspective, an asset generating $150 million in cash flow in the hands of a full taxpayer, we generate $350 million in our hands. This fiscal advantage coupled with our strong operating capability in upstream, decommissioning and the repurposing of assets provides a unique platform to unlock accretive M&A through win-win transaction structures. We've demonstrated a strong track record in delivering accretive M&A with quick paybacks on Magnus, Golden Eagle and PM8/Seligi acquisitions. We would look to build on that track record and leverage our strong competitive positioning to unlock value-enhancing M&A through these creative structures. Shortly after becoming the CFO of EnQuest, Salman Malik set out financial priorities for the company, and we've continued to progress these. Firstly, reset of the capital structure. As I mentioned earlier, we've secured a new $150 million term loan facility to supplement the reduced borrowing base under our RBL. This has helped bolster liquidity and effectively extends our debt maturities to 2027. Number two, continuing the deleveraging of our balance sheet, which is something we're very, very strongly focused on. And as we drive towards our leverage target of 0.5x net debt to EBITDA, since the start of the year, we reduced our net debt from $717 million to $592 million. Thirdly, exercising cost discipline and optimizing our capital program in light of the energy profits levy by focusing on low-cost, quick payback opportunities, such as the ongoing drilling program at Magnus. Number four, unlocking M&A few win-win transaction structures by leveraging our strong fiscal advantage and the depth and breadth of our business model that encompasses upstream, decom and repurposing of mature assets. In relation to our infrastructure new energy business, we continue to mature our renewables and decarbonization opportunity side of SVT. And number five, creating a pathway to deliver shareholder returns further -- following further deleveraging of the balance sheet. And we talked about creating a pathway to do so in 2024. Turning now to Slide #10. This is a subject which I think will be of interest to many on the call, which is our recent decision to apply for delisting from the NASDAQ Stockholm. There are 4 primary reasons for this decision, which was certainly not taken lightly by senior management or the Board. Firstly, there is a cost burden associated with the day-to-day requirements of a NASDAQ Stockholm listing, including listing fee, registrar services, AGM assistance and additional costs attached to regulatory announcements. In addition, costs arising through legal counsel increased since Brexit, at which point the U.K. cease to be considered -- ceased to be considered our primary -- at which point, Sweden cease to be considered our primary U.K. -- our primary listing and was replaced by Stockholm. In this reality of having 2 primary listings, this means the combined cost profile as well as the significant administrative burden is likely to increase going forward and which is no longer appropriate for a company the size of EnQuest. More significantly, the reality of Stockholm being a primary listing means that the prevailing EU and country listing rules must be followed independently of our U.K. compliance. While the U.K. was in the EU, London is the company's primary listing for EU purposes, and therefore, the Swedish listing requirements were minimal. However, post-Brexit, the group has encountered several issues relating to listing rule compliance largely in relation to actions not required prior to Brexit. EnQuest has no direct legal or physical presence in Sweden and are, therefore, aligned on external advisers to support resolution of any issues arising. This is not efficient and ultimately could create additional unexpected risks and certainly cost. Finally, and very importantly, the European ESG regulatory environment is changing at a faster pace than the U.K. and the advent of the Corporate Sustainability Reporting Directive, or CSRD, brings with it a previously unseen level of reporting requirement. With over 1,100 metrics requiring independent assurance and double materiality assessment. This represents a sea change in nonfinancial reporting and is likely to require new systems, processes and governance structures to be put in place at the heart of in-scope organizations. Our Swedish listing would immediately confirm EnQuest requirement to report against CSRD from 1st January, 2024. I hope this explanation provides some context for our decision. Now as we look forward, we believe that the delisting need not preclude any Swedish holders from owning EnQuest shares. Having consulted with our legal advisers and registrars, we would recommend the existing holders who wish to retain their shares to transfer them into nominee accounts within a Swedish bank. From the initial research our advisers have done, we believe there are 10 Swedish institutions which operate nominee accounts and 8 of those, which can facilitate trading in the U.K. We'll continue to work with our in-country advisers on this, and I'd be happy to support any impacted holders as further information is available. Taking us back to company performance. We're on track to deliver our guidance for 2023. We expect production to be between 42,000 and 46,000 barrels per day following the successful restoration of full production at Kraken as well as the drilling programs at Magnus and Golden Eagle. In terms of cost, CapEx and decommissioning expenditures are on track at $160 million and $60 million, respectively. Our CapEx program is largely focused on our drilling campaigns in the U.K. while DCOM is predominantly focused on the well P&A campaigns I've mentioned previously at Heather and Thistle. In terms of operating expenditure, we incurred $163 million during the first half of the year but remain on track for our full year guidance of $425 million. The expected increase in the second half of the year is driven by shutdown activity at Magnus, GKA, Golden Eagle and at PM8/Seligi in Malaysia. We also expect to see limited lease credits at Kraken following full restoration of production. Overall, we continue to focus on delivery of our targets by exercising cost, capital discipline and pursuing quick payback opportunities. We are also exploring accretive inorganic growth opportunities that leverage our differentiated tax position and advance its business model. In summary, EnQuest is a truly differentiated energy transition company with core capabilities across the life cycle. We look forward to delivery of our key targets across the various strands of our enhanced business model. We're focused on continued operational excellence to deliver sustained cash generative production to facilitate further deleveraging, targeted capital investment and hopefully, in the coming year, returns to shareholders. Within our decommissioning function, we will further demonstrate our position as a leading decommissioning partner by delivering on our targets and continuing to challenge industry averages. And in infrastructure and new energy, we will look to continue the positive momentum generated by our recent carbon storage license awards and delivered a compelling suite of economic projects while we are committed to reach net zero by 2040. All of these elements come together to enable us to focus on creating value for our shareholders, including shareholder returns. I believe we are well placed to create such value through the leveraging of our experience, our track record in creating win-win transactions and our advantaged tax vision in order to grow the business through M&A. Thank you very much for your time, and I will now move to the Q&A section of the presentation.

Craig, that's great. Thank you very much indeed for your presentation. [Operator Instructions] But just while the team take a few moments to review those questions that were submitted already. I would like to remind you that recording of this presentation, along with a copy of the slides and the published Q&A can be accessed via your investor dashboard. Craig, as you can see, we have received a number of questions throughout your presentation this afternoon and thank you for all of those on the call for taking the time to submit their questions. But Craig, if I may just hand back to you just to make your way through the Q&A tab and just respond to those questions, of course, where it's appropriate to do so. And then I'll pick up from you at the end.

Absolutely. Thanks very much, Jake, and thank you, everyone, for submitting your questions. So apologies if these have come through in a slightly different order than they were submitted, but I'll take them as I see them if that's all right. So the first question I've got is, after the September draw, the second $150 million term loan. The company is expected to pay around $100 million yearly in interest payments. How does EnQuest see the risk management around having interest payments at this level? And the hypothesis here that is $60 headline oil price, the company would be making a loss at current cost structure. So firstly, what I'd say is that we see the stock being undervalued given the strong operational performance we have seen and the pipeline of opportunity we have ahead that I've kind of outlined in the presentation. As a result, I suggested the most meaningful metric you should use to judge our leverage is net debt to EBITDA, which is the metric we use most commonly. And we've maintained that below 1. We're currently at 0.7, and it's tracking towards our stated target of 0.5x. Addressing the oil price component of that question. In the event that we saw a negative commodity price shock, we've shown ourselves to be a depth in reducing the cost base of the organization before in order to suit the macro environment. I'd point more specifically at the example, where EnQuest continued to generate positive cash flows during the COVID-19 pandemic primarily through rationalization of activities and rates and by leveraging our supply chain. And actually, from memory, we brought the unit OpEx down from somewhere in the mid-$20s per barrel down to $13 per barrel. But ultimately, to answer the first part of the question, we stated quite clearly our target is to continue to delever the business. So while we're paying in the realms of $100 million interest today, our intention is to as quickly as possible ramp down our debt position and make -- get ourselves into a much more manageable per annum interest payment. So I know that's a multifaceted question. So hopefully, that gives an answer to the majority of it. I see also there's been several questions around Sweden and the delisting from NASDAQ Stockholm, just glancing at these now, the background. So I hope I've provided the background and the rationale for the decision, which was taken recently. In terms of the cross -- there's a question here, specifically about whether the company's research to cross-board or transfer of shares and whether we anticipated the outturn on the share price. And maybe that's an opportunity for me to talk a little bit about where we were limited in the process. So there are very, very strict rules around the delisting, which mean that essentially, it's quite difficult to get categorical upfront advice because the minute you start engaging with institutions in country, essentially compliance rules and listing rules require that you make an announcement to the market, and we certainly weren't ready to do that. This is a discussion that was quite long ranging between executive management and the Board, and we had to make the announcement as soon as the Board have made their final decision on it, which is exactly what we did. So it's difficult to do masses of upfront research. But certainly, we feel confident and we remain confident that any existing holders in Sweden who wish to retain their EnQuest shares, can do so through the use of nominee accounts within Swedish institutions. I do understand that actually, the cross-border transfer of shares is actually very difficult and particularly difficult in Sweden given the prevailing tax regime that we do believe the nominee accounts provide our holders with an option that's credible, fairly straightforward and gives them the independence to do so at any time in the next roughly 3 months before any application for delisting would be executed. I'm just seeing if I've covered all of that. In terms of savings that the company can make, it's difficult to be too specific, but certainly in the several hundreds of thousands in our normal day-to-day operations, where this will become a more material impact on the company as we move forward in the regulatory environment. And certainly, if we were to execute any sort of transaction, M&A, for example, which I've outlined is a focus area for the business. Then there's significant costs with having 2 primary listings in that event. So yes, it's a fairly onerous cost profile. And just scrolling through some additional questions, just one second. So we've got some questions relating to dividends. So when can we expect detailed information on dividends. So we're currently going through our business planning process, which will, when finalized, lay out our capital plans for next year. And I think it would be fair to say that we would look to have something in place by the time we come to the market with our 2023 full year results, which would be end of March 2024. So we're certainly looking to create a pathway for returns and create a mechanism for returns during 2024. So there's still a lot to be decided. Of course, we need Board ascent to do so. So there's some internal work to be done on that. But certainly, we'll keep the market abreast of any movement on that decision. In terms of repayments, there was a question around repayments during 2024. So as I noted, that will largely focus on our RBL. And I've already noted, we've taken the RBL from $400 million at the start of the year or at the end of 2022 to $240 million as we sit here today. That keeps us significantly ahead of the headroom within the borrowing capacity, which is redetermined on a semiannual basis and has been obviously influenced by EPL 2.0. Essentially, it's that continued redetermination, which will define the payments we make in 2024, unless, of course, we decide proactively to accelerate payments, which is something we've done a fair bit over the last few years. So the next redetermination will happen at the end of the year, and then there'll be another one in June 2024. So that will define the payments we make. But we are significantly ahead of the original amortization schedule of the RBL, and it's really down to what the borrowing base looks like following those redeterminations, which will define what we pay. There's a question here around expectations around first oil from Bentley or Bressay. So essentially, I think we've noted before that Bressay sits ahead of Bentley on the timeline. And work continues internally to come up with a development concept and a technical solution for Bressay, which works not only for EnQuest and potential partners who would come into the license but also for the regulator. So EnQuest has already put forward some development scenarios, which we saw as credible but those have not, at this stage, gained support from the regulator. And we understand the regulators in a very difficult position at the moment, trying to balance the drive towards net zero against the call for energy security. But we would say that probably -- and I think this has been widely commented on offshore Europe and in other forums, over the last 6 months is we definitely had a bit of certainty and a bit of clarity from the regulators to how to move forward with some of these developments to unlock them. And Bressay would fall into that camp. Bentley is still something we continue to progress work on, but Bentley we'd certainly sit behind Bressay in the timeline. In terms of opportunities outside the U.K. Yes, we absolutely maintain a watching brief, and we have certainly got some interest in assets out with the U.K. As you know, we already are a preferred operator in Malaysia. So assets in Southeast Asia are quite appealing. But the fundamental difficulty for any prospect outside of the U.K. is that it's very difficult for it to screen economically against the fairly overwhelming advantage derived from our tax position in the U.K. So as I mentioned in the presentation, we have a 2.6x advantage essentially over our competitors and our fellow operators in the U.K. who are full taxpayers. So it's quite difficult with our historic tax losses for anything outside the U.K. to screen as well as an opportunity. But absolutely, it's something we look at and particularly with the lens of diversification into increased gas production is certainly something we've looked at out with the U.K. As I scroll through these additional questions. There's a question around what is the anticipated impact of the EPL on cash generation over the next 5 years. So that's a fairly difficult one to give a specific answer to. But what I can point to is that we're essentially looking to -- in the absence of M&A, and if you exclude M&A from this point, we're looking to obviously spend capital, which helps maintain our current production range. So if you were to look at -- if you were to take that on board and you were to take on our OpEx. So essentially, we start off with the headline of U.K. revenue, including hedging impact. You then take off OpEx which excludes any depreciation and interest costs, you take away your view of our Magnus profit share and the crack and lease principal element, which is roughly half of the $150 million that I alluded to earlier. That then gives you a pre-CapEx taxable profit. So from that number, you take off your view of CapEx as well as the 0.29x CapEx tax relief for the enhanced allowance, which gives you your taxable profit and EPL is applied 35% of that. So I guess what I can try and guide a little bit to you is the component parts, but it's difficult to give an overall view. What I can say is that the $76 million that we expect to pay in October of this year relates to the period 26th of May 2022 to 31st December 2022 and that's how it will progress for EnQuest because we have historic tax losses. Instead of making 3 payments per annum, we make on payment, which is in the October following the year in which the liability is incurred. So it would be -- it stand to reason then that the 2024 payment that we make will be in excess of $76 million. I know that's not a specific answer, but it's quite difficult to me to do so because I'm not allowed to give anything that could be construed as a profit forecast. But hopefully, if you have any homemade models, the template that I just laid out for calculating EPL will allow you to make your own judgment on that. There's a question here from Ashley B around whether an acquirer -- a potential acquirer could use EnQuest's tax losses. And the answer is theoretically, yes. As long as the revenue, which was being offset or the cash flow that's being offset was within the same legal entity. So our tax losses are all captured under EnQuest Heather Limited. So anything that's generated to EnQuest Heather Limited can be offset. So in theory, it's possible. What I would note is that, that can't be done instantly. And we know of other operators in the UKCS at the moment who have -- they have headline tax losses that can currently access them. And that's one of the other reasons why we feel we're quite differentiated in the $2.3 billion of losses that we have are accessible straightaway essentially. And looking at have -- so I'm looking at another question here on the 33rd licensing round, we're Waldorf have bid on a license post crack, and I'm not going to comment on what other companies have done. In terms of overall news, we are aware that the licensing round has been delayed, which is consistent with the CCS, the carbon storage licensing round was also delayed by several months. So I'm not aware of when a final decision on that licensing round is going to be arrived at. But I do know it's consistent with other licensing rounds that happened in the U.K. recently. And in terms of the interest rate, it's a question on the term loan, the $150 million term loan we put in place last month, the interest rate is SOFR plus 7.90%. So it's about 350 basis points above our RBL. It sits well inside as well, the prices that are being quoted in the bond market. A question around the EnQuest producer. Is it still up for sale and what do we value that. So essentially, the asset itself is written -- fully written down. But it does remain for sale potentially. It's also -- we see as a low-cost option for future developments. So that could be either as an early production system for use, for example, at Bressay or at Bentley, but it also could be utilized as an equity offering in terms of an acquisition elsewhere, but I think it would be fair to say, and I think Amjad has made it quite clear in the past that if a compelling offer was received, then the executive and the Board would consider that offer to sell the asset. That offer has not yet been forthcoming. I'm just looking at -- okay, another question here on Malaysia. So is there any update on the arbitration case? And is there a likelihood of the Seligi gas being monetized. If so, what's the process and expected timeline. So if I deal with the gas first, so back in May, we signed an agreement with PETRONAS to produce, handle and transport the gas to which they are entitled from Seligi, EnQuest through the PSC currently has entitlement to the PM8 gas. But on Seligi specifically, we're effectively being paid a transportation handling fee for that gas. So impact on revenue is fairly minimal. At the time of doing that, I stated to a number of investors you asked about it, that we saw this as a foundational strategic agreement, and we still see it that way because what it does is it keeps us in communication with PETRONAS on the much larger gas volume at Seligi and if there is a market for that gas and if that gas is to be produced and marketed in Malaysia, then that's really going to have to be done through EnQuest infrastructure. So we believe there is a future for that opportunity, and we continue to work with PETRONAS to try and arrive at a mutually beneficial commercial arrangement and technical arrangement actually for that gas. So that's still to watch this space, but absolutely something we're progressing. And on the arbitration, so I must confess, I don't have the full detail on this. There certainly has been no settlement made. There's been no adjudication made. And the last I heard, I think there was -- it was the case was due to be heard late 2023 or early 2024. So that would be something that we would certainly make part of our next market announcement. Should there be any movement on that. But no movement to report at this stage. I think that's -- in terms of what I can see, oh, there's a -- so I think we can -- we can probably -- I'll deal with the questions we have on board at the moment and take anything else away as part of the sort of written responses that we can make through the IMC platform. And so if you just give me one second, I'll have a quick look at the last few. There was -- what are your plans for decommissioning, recycling of jackets and topsides Heather and Thistle. So over the last 6 to 9 months, we've placed contracts with both heavy lift vessels and organizations who are going to support with that endeavor. So as I mentioned earlier on, we're expecting to disembark the platforms by the end of 2024, both Thistle and the Heather well P&A campaigns are expected to be done by that time frame, and we'll be off the platform. And at that stage, that's where we move into the phase of heavy lift and removal. So you'd be looking at our 2025/'26 timeline to do that. So looking at my Q&A box, that's all of the questions I have. Hopefully, I've answered them. If there's anything that anyone would like to follow up on, my contact details will flash up at the end of this presentation. Please feel free to contact me directly. Thank you, back to you, Jake.

Craig, that's great. And thank you very much indeed for being so generous of your time then addressing all of those questions that came in from net this afternoon. And of course, as you kindly did just mention, we'll be able to give you back all of the questions submitted today as well as any further ones that do come through, just for you to review, to then add any additional responses, of course, where it's appropriate to do so, and we'll publish all those responses out on the Investor Meet Company platform. But Craig, perhaps before really just looking to redirect those on the call to provide you their feedback, which I know is particularly important to yourself and the company. If I could please just ask you for a few closing comments to wrap up with, that would be great.

Yes, absolutely. So overall, we feel 1H was a solid set of results. Obviously, we're disappointed with the shareholder -- share price reaction, sorry, in the market. And we believe there's a number of reasons for that, some of which I've touched on today. But in terms of going forward, we think we've got a really good set of opportunities and a differentiated opportunity set. And I think we look to now exercise both our operational capability as well as our fiscal advantage over our peers to try and grow the company. So with that being said, I thank you once again for your time and for your engaging questions. Our next planned update to the market will be our usual ops update in November. So all that leads me to do is thank you very much for your time, and I'll come back on any additional questions that may arise. Thank you very much.

Craig, that's great. And thank you once again for updating investors this afternoon. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order that the management team can better understand your views and expectations. It is going to take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of EnQuest PLC, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all.