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 can review all questions submitted today and will publish responses where it is appropriate to do so. Before we begin, as usual, we would just like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I would now like to hand you over to Head of Investor Relations and Corporate Affairs, Craig Baxter, Craig good afternoon, sir.

Thank you very much, Jake, and good afternoon, ladies and gentlemen, and welcome to today's retail-focused presentation. As Jake has already introduced me, my name is Craig Baxter, and I'm the Head of Investor Relations and Corporate Affairs at EnQuest. The purpose of today's meeting is to provide an additional forum outside of that of the formal results period and the AGM for existing and potential noninstitutional holders to engage directly with our story. It also gives me an opportunity to answer any questions you may have. So with that in mind, I'll ask Jake to move on the next slide, and I'll start with an overview of our business model and strategy. So for those of you may be less familiar with EnQuest and our operations, this slide hopefully provides an easy to understand overview of our business model. EnQuest is a top quartile operator with upstream at our core, and we have a really strong track record of exceptional uptime performance, cost discipline and reserve replacement, all of which means we've extended the economic lives of all of the assets we've operated. In recent years, we've enhanced our position as a full cycle energy transition company through the addition of complementary strands, most notably at Veri Energy, which is a wholly owned subsidiary of EnQuest and where we aim to repurpose an existing infrastructure, primarily at Sullom Voe terminal in Shetland and -- in the first instance to support delivery of our renewable energy and decarbonization ambitions. Also, decommissioning, which is becoming a more and more important part of the North Sea story and where we're delivering market-leading performance, particularly with regard to well plug and abandonment. Our focus here is to ensure that we manage the tail end of production correctly. This helps mitigate cost and helps avoid extended time lines for future decommissioning activity. Right across this life cycle, we can leverage our core capabilities, which are already established. We see this as the key to protect and enhance value within our existing portfolio and those assets which we'll acquire going forward. If you can move forward, please, Jake, that would be great. Those of you on the call who are more familiar with our story will know that our strategy has for some time been anchored around the 3 pillars of deliver, delever and grow. Following consistent delivery against our targets and the significant deleveraging of the balance sheet, EnQuest remains prime now to deliver growth. From an operational standpoint, following the completion of our 5-yearly rig research at Magnus, continued strong production uptime across the portfolio. And it's worth noting here, our operating efficiency was 93% across our operated fields for the first half of the year, which is fairly exceptional. And also following the execution of the well work programs in the U.K. and in Malaysia, production at the end of June is at 42,771 barrels of oil equivalent per day. With an active work program planned in the second half of this year, including the shutdown activities at Magnus and at Kraken, which we are currently wrapping up, we remain confident in delivering our 2024 targets but we have acknowledged publicly now that the production is likely to be in the lower half of the range. As I have touched on already sector-leading decommissioning performance has become business as usual at EnQuest and that continues with our in-house team remaining on track to execute the plug and abandonment of a further 25 wells across Thistle and Heather this year. That equals our own record and it's a record for the Northern North Sea as well. Our expertise in this area has been further vacated by the recent announcement we issued a press release last week that we have taken on full decommissioning management of the Greater Kittiwake Area, assuming Shell's responsibilities. Reflecting our continued strong operational delivery and against the backdrop of supported commodity prices, we generated $55 million of free cash flow in the first half of the year, but we also received a cash receipt of $109 million following the completion of the Bressay foreign transaction that we announced and completed at the end of last year. As such, our trajectory of deleveraging continues with net debt now reduced by a further $160 million to $321 million as of the 30th of June. And a reminder here that we also repaid in full the group's RBL facility, that was in Q1. Our deleverage story, which now takes us about $1.7 billion paid back since peak debt. It underpins our pivot to growth, and it was also central to our decision to return capital to shareholders during 2024. Our $15 million share buyback program is progressing with over 30 million shares repurchased and cancellations commenced. And I have a feeling there'll be some questions that you would like me to answer on that when we get to the Q&A section. Looking ahead, the work we have done to strengthen the balance sheet gives us choices, particularly important in today's environment given the punitive changes made to the fiscal regime by the new labor government. We have a low-cost quick payback opportunity set that remains within our core assets, and we will remain disciplined in evaluating work programs in order to efficiently manage our capital. With strong liquidity and our $1.9 billion -- $1.9 billion, should I say, U.K. tax asset, providing an advantaged foundation from which to transact, our growth strategy remains robust. I can assure you that Amjad, his leadership team and all my colleagues across the business are working very hard across several credible options to deliver a value-accretive transaction. Jake, if you can move forward, please? I thought it would be worth putting this slide back up just as a reminder. We showed this at the full year presentation. And when we talk about our growth strategy, I think it's worth returning to the proof points that we covered back then in March. You've also heard these consistently from us in the intervening months and over recent years. We're a top quartile operator. We have differentiated capabilities across all facets of our business. And that fact, coupled with our differentiated tax position in the U.K. makes now the ideal time to pivot to our next growth phase. Next slide, please. I've tried to provide you a simplified view of where we sit today in the U.K. in terms of the tax regime. What that means for the sector, I'll cover in a second, but this -- this slide seeks to lay out in a digestible fashion, what it actually means for EnQuest. So you'll probably be aware of the recent changes to EPL, which were announced by the government in Rachel Reeves' fiscal policy letter. Essentially, what this does is it increases the rate of EPL from 35% to 38%, which was something we were aware was a possibility based on the labor manifesto. There's also an extension of the duration of EPL now by a further year out to 31 March 2030. And quite significantly, there's also a removal of the EPL investment allowance, which is a 29% uplift on capital investment, that's now been taken away or will be taken away as of 1st November 2024. Again, that was something that was kind of earmarked in the manifesto. So where we stand now is that the U.K. is now the only country worldwide levying a windfall tax in its oil and gas sector. And it's clear to us that no windfall conditions exist. Despite this, we're still not clear on what the government plans to do with first year capital allowances. We ourselves have been very clear that full deductibility in year 1 is a foundational principle of the U.K. economy across all sectors. And also beyond the U.K., it's a fundamental principle of all OECD countries, which don't operate under a royalty system. These changes, in our view, will undoubtedly stifle North Sea investment. It will accelerate the production declines, which are already reaching record levels and will adversely impact the U.K.'s transition ambitions. Essentially, when you look at the resulting loss of jobs, that's actually a loss of jobs for the transition. Skills and equipment are also migrating out of the U.K. to other geographies, which are more supportive. The reality here is that Scottish and British ingenuity will probably deliver our energy transition. It's just very unlikely now to happen in the U.K. unless changes are made to the fiscal regime. For EnQuest, however, our strategy remains credible and actionable particularly as yet more operators are going to look to leave the basin. As we screen opportunities, we're focused on 3 things: growing scale, delivering value and reducing emissions. As a reminder, and hopefully, this slide lays out quite succinctly, EnQuest is sheltered from aggregated 40% corporation tax and supplementary charge due to our tax loss position, which currently on the balance sheet sits at $1.9 billion. Therefore, despite the challenges introduced by EPL and these further changes, our fiscal competitiveness has actually been enhanced with cash-generative assets now worth 280% in our hands versus those that don't have a tax loss position and are thus full U.K. taxpayers. So that's really the difference between EnQuest retaining 62% of cash flows based on a 38% tax rate and others who are retaining 22% cash flows based on a 78% headline rate. As we deliver transformative U.K. growth, our tax assets yield material free cash flow, helping us to target further flowing barrels with robust decline curves and low CapEx investment requirements. As we look to diversify, we will reinvest free cash flow internationally, most likely in Southeast Asia where we have a strong presence, and we're this year awarded Operator of the Year in the Upstream Awards. Jake, if you can move forward to the next slide, please. I don't intend to go through this. This is a slide we've shown before. It really just highlights though that we are really a transition company. We are seeing that transition in action. And I think actually, SVT provides a really good microcosm of what a U.K. energy transition should look like. We've got significant existing infrastructure. As I've covered in previous presentations, SVT was at one time the most -- was the largest oil and gas processing terminal in Europe. We've got projects in flight today. So this is not a promise about what's going to come tomorrow. We've got projects happening today to repurpose the site to right-size the facilities at the site for the future, both the throughput of oil and gas and also for what comes next in terms of renewables. So those projects we have in flight today are expected to reduce carbon emissions by 90%, and they're supposed to -- they will help us get to 0 routine flaring by 2030, which is the NSTA target. There'll also be an associated significant reduction in operating costs as the site is rightsized for future operations. That really opens up the opportunities that are in front of Veri Energy, our wholly owned subsidiary that we -- really builds on our infrastructure in a new energy division that we've had for a number of years. but it really has evolved into Veri Energy, which is the sort of stand-alone subsidiary with its own dedicated management team that we announced back at the end of 2023. So I've kind of just highlighted the key things we're prosecuting there. So that's onshore wind. We've already talked a little bit around our CCS ambitions. We have the opportunity to have a 10 million tonne per annum operation at Sullom Voe. And we already have the 4 carbon storage licenses in place to help us progress that endeavor. And we're also looking at study work on the feasibility of hydrogen production at Sullom Voe and that -- that has been backed by some FEED study funding that was generated by a grant from the previous government. If you wouldn't mind, Jake, if you could move forward to the next slide. So I've talked a little bit about decommissioning earlier in the presentation, and I think it's a really important part of our offering as we move forward. I'm quite comfortable sitting here saying that EnQuest is effectively the North Sea market leader in decommissioning. We're doing the most activity. We're doing it quicker than everyone else. We're doing it cheaper than everyone else. And while we're doing that, we're doing with a dedicated in-house team. And what that allows us to give you is learn lessons from every project we undertake and build a real capability and a real skill set that can be deployed in future projects already within our portfolio and as we look to acquire. And I think it's fair to say that with an estimate of GBP 50 billion worth of decommissioning activity still to be done in the North Sea, a company who is very, very adept in executing such projects stands a real good competitive advantage when it comes to being an enabler to take other assets into the portfolio. We believe that this is a real differentiator for EnQuest, particularly as we look to grow the business. Next slide, please, Jake. If I cover some of the financials now. In terms of our position at 30 June 2024, our net debt, as I've mentioned, was $321 million. And this brings us again to that very, very impressive figure of $1.7 billion in repayments since our peak net debt. The chart on the left-hand side kind of tries to illustrate the pace and quantum of that deleveraging, which has continued into this year. This has taken a lot of focus and discipline and is a pretty remarkable achievement for everyone involved at EnQuest. Gross debt at 30th of June was $658 million, cash and cash equivalents of $337 million at that same juncture. We've now moved beyond our stated leverage target of 0.5x net debt to EBITDA and sit at the half year with a ratio of 0.4x. Importantly, though, the group also has enhanced its liquidity and that's transactable liquidity. We have cash and cash equivalents totaling $566 million, which is a $67 million rise since the 31st of December 2023. The importance of this figure can't be understated. It's -- it's important for us as we look to grow the business to be able to negotiate in a simple way as possible. In the past, when EnQuest had a big debt pile on its balance sheet, a lot of our negotiations are quite difficult because we were having to tell counterparties all the things we couldn't do with our balance sheet. But now we've got a simplified approach and now it's really about focusing on those assets that deliver the most accretive value to the group. Together, this level of net debt and liquidity provide a really strong platform. And as I've mentioned before, key to unlocking this growth are our tax assets, which are immediately accessible and are $1.9 billion. Next slide, please, Jake. In terms of this year, the focus is obviously on delivering our targets that we've set out, and we remain on track to deliver within our price guidance range -- sorry, our production guidance range, although I have noted that, that will be in the lower half of the range. CapEx costs, OpEx costs and average costs all remain on track, and we're undertaking a busy program of operational activity in the second half of the year. Tax also falls in the second half of the year, and you will see that we have an estimated current liability of 2024 $171 million stated in the financial statements. Now we'd say this figure does move around and only be finalized when we submit our tax return. More generally, we continue to work diligently to optimize our financial efficiency both this year and going forward. Next slide, please, Jake. So overall, I would say we've delivered a very solid first half of the year from both an operational and financial perspective. We're continuing to demonstrate progress against our established strategic priorities against a challenging backdrop. The combination of our track record of delivery in addition to our advantaged tax is in the U.K. and the changing M&A landscape does still give me confidence we can produce transformative growth through acquisition. This will further enhance our position as a responsible operator, making the best use of the resources and assets that have already been developed to ensure we play a leading part in the transition. As we move forward on the next slide, please, Jake. What I'm going to do actually is ask Jake to leave this slide on the screen. I think it's a reminder about the core principles, which undertake -- which underpin, sorry, our decision making. And I think it would be useful back to that just remain on while I cover the Q&A section. Thank you very much for your attention in the main part.

There have been -- Jake, do you want to jump in there? Or do you want me to move on to the Q&A that's been pre-submitted?

Craig, if I jump in and then what I'll be able to just give you a few moments just to review some of the questions that have come in. But in the meantime, firstly, Craig, thank you very much indeed for your presentation this afternoon. [Operator Instructions] But just while Craig takes a few moments to review those questions that were submitted already, I would just like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A can all be accessed via your investor dashboard. Craig, as you can see there, we have received a lot of questions throughout your presentation this afternoon. And thank you to all of those on the call for taking the time to submit their questions, but Craig, at this point, if I may just hand back to you just to read out those questions and give your responses where it's appropriate to do so, and then I'll pick up from you at the end.

Sure. Thank you. Thanks, Jake. And thanks to all your questions. I've had a quick scan of the ones that have come in while I've been talking your ears off. So I'll cover the ones that I mean pre-submitted first, and then we'll move into the live questions, if that's okay. So there were a couple of questions pre-submitted on the subject of buybacks, and I think there's maybe been a couple more submitted live. So essentially, one of the questions -- I think this is actually a pretty good summary of the others is why are buybacks not conducted more aggressively? So I think this is consistent with some concerns that have been raised to me directly over the last few months about the cadence of our buyback program and whether we're going to be able to achieve it by the end of the year. So in answer to that, I would just remind everyone that the buyback program is governed by the market use regulation safe harbor rules. So as a result of that, Merrill Lynch who are acting as principal in each transaction. So they are very definitely not an agent of EnQuest. Essentially, we set parameters to them upfront, but they're largely based on the safe harbor rules, and then they just move through the program. And what that allows us to do is in the event of any closed periods such as the one we just had for half year results, that enables Merrill Lynch to keep buying even in a closed period. So that's what we did. One nuance that maybe is not widely understood is that the harbor rules apply across all tradable platforms. So effectively, the limit of 25% does cover each individual trading platform, so that's LSE, BATS, CHIEX, et cetera, et cetera. So -- and this limit is based on 20-day average volumes. So if you see a particularly high level of volatility in traded volumes that can have a major impact on what we're allowed to do -- on what Merrill Lynch or should I say like to do on a particular day on a particular platform. So that's why it's not quite as easy as saying x amount of traded volumes in the day, why didn't Merrill Lynch buy 25%. The other issue here is they have to trade on traded values as opposed to assumed volumes. So they can't say, well, we're going to buy 50% of the morning's volumes because we think there'll be plenty in the afternoon and -- and that will cover us on the 25%. They have to just see what's being traded and react to that. So there's always going to be a natural lag in the process. And that's another reason why it's basically impossible to get to 25% of traded volumes on each [ to fit ]. What I can assure you, though, is that the process is being pushed as hard as we can and Merrill Lynch regularly by their daily limits and they're allowed under regulation. So hopefully, that gives a bit of context. If there's anything else that anyone would like to know about the program, please contact me directly. And like I said, my details will be shown up at the end of this presentation. Second, pre-submitted question is around the tax asset and how do we plan to unlock the value. So I think it's a really good question. I've talked about numerous times already today. but actually how we go about it, I think is a really good question. So essentially and simplistically, the value in our tax asset is unlocked through acceleration i.e., increasing our short-term utilization of the tax asset to offset corporation tax and supplementary charge. Remember that the tax assets can be used to offset EPL. So the NPV-0 value of the $1.9 billion loss that sits in our balance sheet and is immediately accessible, that's around $750 million. But while it's not reasonable to assume that even with the transaction, we could burn through this position in 1 year, the NPV-10 value, which has obvious time value of money component, increases significantly the quicker we flow for profits through the business. So essentially, our contention here and our strategy is to add barrels value-adding barrels, cash flowing barrels, which allow us to utilize the tax asset quicker and effectively achieve a significant margin in each barrel because of our differentiated tax position compared to full taxpayers. It's also worth noting that we have a further $1.2 billion tax asset associated with the Bentley entity, which we do very much expect to be able to utilize in the future. This is not yet recognized on our balance sheet, however, but there is a time line at which that would come into play. And we believe we're meeting all the requirements to do so. In terms of the next question, will Labor's proposals affect our ability to reclaim our tax losses? So no is the simple answer. There's no indication that historic tax losses are under any challenge. And certainly, the latest round of changes, which I think is now the fifth set of changes in the last 2.5 years, with that later set of changes do not impact our ability to utilize the tax asset, which sits in our balance sheet. And as I pointed out, actually in a very short-term view, the worst that the tax regime gets in the U.K. for full tax payers actually increases our advantage. So bizarrely, it kind of helps us as we look to transact. In terms of the final -- there's 2 more pre-submitted. So one of them actually was asked multiple times, and it was around why are we focused on adding incrementally to our gas component of our portfolio versus oil? And really by extension, why do we prefer gas over oil for acquisitions. So I think the main thing to say there is that gas is recognized as a transitional fuel and aligns with our view of the future of energy. So as I noted earlier in the slides, we are a transition company that's increasing production and reducing our carbon intensity. And its carbon intensity, which is the second point here. So Scope 1 and Scope 2 emissions associated with gas are lower than oil, and that remains true a Scope 3 end user emission requirements, and that's becoming a bigger, bigger part of our end reporting burden and stakeholders, including institutions, certain banks and others, obviously, I guess, regulatory bodies are very keen for us to increase our Scope reporting, and that's what we're doing. So gas essentially just gives us a lower carbon intensity commodity to work with and thus help smooth the emissions on our portfolio. So that's the -- so there was other one -- further one, apologies, and that's what's the plan for the EnQuest producer FPSO. So [ planning ] is still that very valuable piece of infrastructure is utilized as an early oil production system at Bressay. So if you recall, -- and I think there's a question on this. I'm just going to double check. I'm answering this at the same time. There's a question around the time line of the time line of the Bressay gas line back to Kraken. So where we are at the moment is we're working through field development plans for that tie back. Those are being worked with the NSTA at the moment, and we're looking to submit sort of final FTPs alongside our own internal view of funding plans. That will be end of this year, start of next year and it really depends on what the approvals process and how long it takes for the NSTA prove or to challenge that submission. If they approve it, we can absolutely see it being feasible that first gas from Bressay into Kraken would occur in 2026. What that then opens up is the conversation around a phased oil development, and it's at that stage, we the EnQuest producer becomes it comes off the bench, if you like, it's currently a warm stack at [ Nik ] beside Aberdeen and at that point, that would be an early production system for the oil development, which would then, hopefully, all being well scaled up and effectively outgrow the FPSO. But that's still the primary thought for the EnQuest producer. If for any reason, whether it's regulatory or whoever else may occur between now and then, if for whatever reason, Bressay doesn't move forward, the EnQuest producer remains a very valuable piece of infrastructure and it's something we could use on an alternate project. But like I say, [ planning ] is certainly huge at Bressay. So no -- excuse me as I -- sort of bear with me as I move through the Q&A at this stage. So there's another question here around with the buyback, how are we balancing capital returns to shareholders we need for investment in growth and debt reduction. What additional measures will be taken to ensure if liquidity for growth while continuing to reduce debt. So I think that's a really good question that kind of encapsulates all of our thinking. So we are absolutely committed to growing the business. And as I've said, having liquidity on hand that's transactable liquidity makes things a lot easier as we negotiate. For those of you who read maybe some of Amjad's comments in the press or viewed the webcast we did and with the institutions, it's safe to say we have a number of significant negotiations ongoing, both in the U.K. and Southeast Asia. So having that liquidity is very, very important in order to move some of those forward. But absolutely, we've been very quickly around seeing the $50 million buyback as a start for our shareholder returns program. And we want to have sustainable and increasingly material shareholder returns as far as possible moving forward. So it is a balance. And the balance is in the question and balance is in the answer. We just need to make sure that we have the right capital allocation, which allows us to grow the business, invest in our assets in an efficient way. And let's be quite honest, the latest view from government and the disincentivization to invest in capital projects does mean that some assets will receive less of a capital allocation. So that's all part of our thinking. So hopefully, that's clear. question here from [ Mohamed ] around how long the tax loss benefits will last. So that really depends on 2 factors. One is how quickly we can bring new production and new value into the business. That will obviously accelerate the use of the $1.9 billion that's on the balance sheet. And it also depends on our ability to utilize the further $1.2 billion from the Bentley acquisition, the Bentley entity, should I say. So it really depends on what our production profile is, what our profit profile is. But I mean they will definitely be around for a number of years out towards the end of the decade. And -- but we're very focused on accelerating the use of them and we want to use it. It'd be a real bonus for us to use them as quickly as possible. Question from [ John ] around the development of Bentley and whether we're going to develop that anytime soon. So I think we've been fairly clear over the years, [ John ], that Bentley sits after Bressay in terms of our thinking. And as I've just laid out, Bressay itself is a sort of multiphase development, starting with the gas line and then hopefully moving on to a phased oil development. So Bentley is definitely further down the line. But we do have people looking at it. It is moving forward with the same sort of project team as Bressay, and we'll keep you updated as to any progress that develops in terms of Bentley. Question from David here on the slide around robust growth strategy and the business really centers on diversification internationally. So David would like to know how much of the free cash flow will be reinvested and how much of the free cash flow will be distributed to shareholders, buybacks or dividends. So again, that comes back to the previous answer on capital allocation and the need to remain balanced. What I would say, though, is that the nature of any transaction we execute in the U.K., given that EnQuest will generate 2.8x the cash flows versus any other full taxpayer, what that tells me and what that should give you all comfort is that we would expect any transaction to be extremely cash accretive. And it's that cash flow that we expect to fund both international diversification, which obviously comes with some commodity diversification. We've already touched on our attraction to gas. But that also should give us funds available for shareholder returns. Just want to make sure I'm catching everything here. How can -- a question from [ Vascor ], how can growing scale be compatible with reducing issues in terms of your strategy? So what I would say, [ Vascor ], here is it's less about reducing overall emissions. It's about reducing our carbon intensity. So our intention is that we are a very responsible operator and we have the ability to reduce emissions on any asset that's under our operatorship. We've done that consistently. In the U.K., our emission reduction has been about 41% since 2018 across the group. We've done in excess of 20% in the last 4 years. So it's really about taking in assets which allow us to continue reducing overall emissions. But for EnQuest, it's about reducing that carbon intensity across the portfolio. And I think that's where we can demonstrate real progress. In terms of a question now on tax, is the tax of $170 million on the balance sheet only EPL or does it contain other tax elements? So that doesn't include other tax elements. So it's EPL from sort of core activities, if you like, so the normal operation of the business. It's the EPL associated with the resi farm-down transaction. So if you remember, when we announced that transaction, we stated that the net cash effect to EnQuest in 2024 would be $59 million, and it also includes an element of Malaysia tax. A couple of questions here. Any update on the status of Seligi caddy gas. So yes, I mean, so we have Seligi 1A gas agreement in place. For those who are less familiar with the company, that's an agreement whereby gas at our PM8 well -- Seligi gas from our PM8 Seligi asset, which -- to which Petronas have the entitlement, EnQuest where we used to inject that back into the reservoir, we now produce and transport it for the market on Peninsular Malaysia. So that's a foundational agreement. We're effectively paid a sort of transportation tariff fee for that production. But yes, the next stages are being discussed and we are in constant negotiations with Petronas with whom we have an excellent relationship. And yes, we'd be hopeful to sign further phase agreements to access some of that huge gas opportunity which exists at Seligi. A question here on decommissioning. Bearing in mind your experts in decommissioning has the company considered offering this in other geographies. Australia stands out in terms of cost. So yes, is the answer. Lots of companies have tried to come up with a commercial model for decommissioning and most of them have failed. We are looking at decommissioning in sort of 3 ways. One is that it decreases EnQuest exposure to cost. Two, it enables us to be a really attractive acquirer of assets. So for example, if a major was looking to offload some assets, they really want to know they can send those assets off to an operator who can successfully efficiently safely execute decommissioning. So it's an enabler for M&A. And also, as you've seen from the recent announcement with the GKA responsibilities, although we don't get paid a huge amount for that, what we do, do is take -- we assume all the responsibility. So we don't assume any more cost. There's no more liability that comes our way, but we're being entrusted by that JV partnership, including Shell, who held the responsibility before. So we're obviously seen as a very safe pair of hands. So absolutely, we think those skills are transferable. Any other geography that we move it as we grow the business, we would absolutely look to go a decommissioning operator of high standing in any of those geographies. And I think conversations develop maybe like a service company model with our decommissioning offering, but that's for the future. It's not right there today. But I think all of our building blocks are very, very encouraging in this area. Looking at some additional question now there's quite a lot. Are we still in a closed period due to M&A, and that is why we haven't seen any directors buying stock? So I obviously can't comment on anything around ongoing M&A. But what I would say is we're no longer in the closed period associated with our half year results. We do have directors who hold significant holdings in EnQuest. And absolutely, I know that Amjad and the Chairman are very encouraging of our directors, some of them who are very new, remember, will build a holding. So yes, that message is heard loud and clear at that level. There's a couple of questions here. So there's one around -- are we pushing forward with the gas cap at Bressay? So I think I've answered that one. So yes, absolutely, we're looking to get FTP in place at the end of this year, start of next year and move forward with that. There's a question here. I kind of expected this question from [ Martin ]. How far out in time, days, weeks, months and years, would you expect an acquisition to be announced, how will it be funded? So on the first part of that question, I hope it's imminent. We are working very, very hard across a number of very credible opportunities. The team are working extremely hard, led by Amjad, Steve Bowyer, who's got a lot of transaction experience, Jonathan Copus the same, and we have a dedicated BD team, both in the U.K. and a separate team in Malaysia who are hunting down the opportunities we've kind of talked to over recent months. I can't put a time line on it because simply nothing is an announceable stage. But certainly, what I would say is there are a number of very credible opportunities some of which are -- we deliver the transformative acquisition that we've kind of publicly said we're aiming for, they would do that in one step. But obviously, we're trying to build momentum to get that done. How will it be funded? So I've talked a little bit about we have liquidity on the balance sheet. I think all negotiations are ongoing on the basis that people understand there's volatility within the fiscal regime. So there would probably be some element of contingent consideration around oil price, tax regime, et cetera. So I guess we'd have some sort of structure to those deals, but they would definitely be relatively simple compared to some of the deals we did in the past. Equally, what I'd also say is we've done all this really great and disciplined work to delever the balance sheet. Our thinking here is not to add a huge level of debt to the balance sheet, something manageable and that keeps us in a good leverage space. If I can move on. The statement you're poised to pivot to growth has been repeated over previous results announcements. The share price continues to slide to near record lows. This suggests that your principal shares are not buying a story and dumping stock. How has your main shareholder base changed? And what is it you taking support -- how are you supporting it going forward? So actually, no, I would disagree wholeheartedly with that statement. Our -- the top end of our shareholder register is extremely solid. We've had great support from all our major holders. Of course, the CEO is a major holder as well. And we've actually seen some of those major holders increasing and they're holding -- far less decreasing. So we haven't seen a big sell off for major shareholders at all. All the conversations I've had with our major holders, which have done both with the CEO and the Chairman, suggests there's very, very strong alignment with our strategy around growth in the U.K. using that to fund international diversification and also keeping shareholder returns at the forefront of our minds. So yes, look, I absolutely understand that the share price is depressed at the moment. We're seeing that obviously across all our sector peers as well. We're in a difficult position with our fiscal regime in the U.K., which is extremely punitive and getting worse. And obviously, commodity prices have softened in recent weeks. So yes, it's a really challenging place to be, but I would remind everyone on this call that EnQuest is well placed to meet those challenges. We have relative advantages versus those who are undoubtedly going to see this as the final straw and look to leave the basin and look for a more supportive geographies, and that's to the point at which we can really start to become a consolidator and grow our business in the U.K. How much of the profit-sharing agreement with BP at Magnus is still to be paid? So a fairly significant portion of that, Angus, who asked the question. I think it's -- we're around halfway through. I think what we're seeing is that when we model Magnus -- and of course, this is dependent on the vagaries of assumptions around production, around further developments around oil price, et cetera, et cetera. But essentially, that cap doesn't -- isn't reached until pretty much the end of Magnus Life, which is in the second half of the next decade, so about 2036 or around that time. And actually, there are some scenarios where we do actually reach the cap. So expect that profit share mechanism to remain in place. pretty much for the duration of the Magnus assets like with us. And there's a question around how does lowering carbon intensity affect tax and profits. So well, one very simple way is that we would pay less on a proportionate basis in terms of U.K. ETS, so that's the emissions trading schemes, which is effectively a tax on emissions. I think also, it stands us in good stead with our regulator who are demanding emission reductions. And actually, it would help us meet our stated aims in terms of our net zero commitment for 2040 and also our commitment to the North Sea transition deal which we are accelerating and well beyond those time lines. Sorry, I'm just some of these questions are repeats. There's a question from [ Himmat ]. Obviously I know him very well and he's a shareholder who has deep knowledge of Kraken. So this question is around the lower lease charter rates and whether we're considering at the FPSO to support the production plateau. So the point that [ Himmat ] is making here is that the Kraken FPSO vessel, the lease rate that we pay for that at the moment, nets to EnQuest at $115 million per annum from the 1st of April next year, 2025, that figure dropped almost by 70%, 7-0 percent. So on an annualized basis, that's about an $80 million reduction. So the answer to your question, Hima is absolutely yes. We are considering options around purchasing the vessel. There's an economic model, which effectively underpins the agreement that we had with Bumi when the vessel was built. So EnQuest holds options around that vessel purchase. And there -- again, based on certain assumptions around investment in the field, et cetera, there are optimal dates at which that would work best for EnQuest from an economic standpoint. So absolutely something we're considering and absolutely something that could well come to pass in the coming years. I'm actually scrolling back to the top here to make sure there's nothing I missed. A question from [ Eric ] here around the hedged barrels related to Kraken production and VLSFO sales? Or is it other part of production. That's quite a specific question, [ Eric ], if it's okay with you, I'll take that away and to our expert marketing and trading team, and I'll come back to you, [ Eric ], I know who you are. I've got your contact details. And I'll also publish my response on the investor meets company platform so that everyone can see. But that's a little bit too specific for my level of hedging knowledge, [ Eric ], I'm afraid. Question here from [ Thomas ] around shareholders, obviously seeing a depressed share price at the moment and how could we cut costs. So I think for those who know EnQuest well, cost management is part of our DNA. I do think that's a cliche, I think it's absolutely fundamental to everything we do. It's why when we've seen commodity price crashes in the past, EnQuest has been able to be very agile, very nimble, dramatically reduce activity and operating cost to suit the environment. So yes, we absolutely continue to look at cost across the business. And we have a real focus on any operational change that we can make and which to be more efficient in terms of OpEx per barrel or cost per barrel metric. So it's constant vigilance, a very focused application of our supply chain expertise, Thomas. So yes, across the whole business, this is ingrained in everything we do, and that's driven from the top by Amjad. So we can assure you that any opportunity to cut costs, EnQuest will take. Another question from [ Hemant ] at around the progress of the net stabilization facility at SVT. Will it be an onshore plant or offshore? So it's onshore, [ Hemant ], it's a very different scale to the previous facility, which was tooled up essentially for north of 1 million barrels per day throughput. The new facility is much, much smaller, which aligns to the commodity throughput that's occurring today and in the future. So that's really why we can massively scale this onshore facility down and significantly reduce the emissions footprint of SVT as I say, by 90%. What it also does allows -- it provides more space for our new energy and decarbonization projects, and it allows us now to start decommissioning other infrastructure, other facilities at the site, which are no longer required. Steve Bowyer talked about enhanced oil recovery, sort of polymer flushing for Kraken, what year could that commence and what could that bring in terms of production? So I think this is something, [ David ], you asked the question. This is something that's being trialed. We see ourselves, and I think the work we're doing suggests that Kraken is a pretty sound and pretty good candidate for EUR. So that study work and that sort of feasibility work will be done in the coming months. I think it's probably a bit too early to talk about what that could bring in terms of production, but it could have a material impact on the level of recovery from the reservoirs at Kraken. And in terms of timing, I mean, if this is feasible, this is obviously something we'd like to build into our capital allocation planning for the relatively short term. So the next couple of years, I think it could be feasible. There's a question around -- it's quite a specific question around another company it mentions EnQuest being a competitor in Thailand and the assertion here from the person asking the question is we're working in different countries. I mean he's positive on that. So I guess what I would reiterate is that we have a good footprint already in Southeast Asia. We're an operator of the year in Malaysia. We've got a great relationship with Petronas. We were just awarded an HSE Excellence Award, and we've done great things at PM8 Seligi. As I also touched on, we've got this great opportunity to work with Petronas further to enhance our sort of opportunity around the Seligi gas. But yes, we were absolutely looking at other parts of Southeast Asia as well. I know Amjad has touched on some early conversations around study -- joint study agreements in Indonesia. But yes, it's an area of the world we are comfortable doing business. We see it very stable compared to our own U.K. fiscal regime. And so yes, absolutely, diversification in that part of the world is eminently possible as we move forward. Other than some quite detailed hedging questions, which I will come to separately, if that's okay. I think that's pretty much it. One further one is from [ Angus ], I think I've answered one of [ Angus's ] question already, but it's around will the delay in Magnus rig recertification result in the reduction of CapEx this year. So the delays associated with the rig greaser, [ Angus ], were pretty minor. I think what's more likely to impact our CapEx for the year is the likely impact from 30th of October outcome statement whereby the government have basically said that you don't get any investment allowance enhancement on EPL and its capital expenditure from 1 November 2024. And of course, they have been noncommitted yet about what they're going to do on first year allowances. I think, to be honest, that is our greater motivation around what we do from a capital perspective. I think I'm speaking on behalf of effectively the whole North Sea operator peer group when I say that everyone is kind of waiting to see actually what comes through in the 30th of October, and that will define capital plans for the next couple of years. I think with that and just touching on where we are with time, I think I'll take it as a close there, if that's okay. I will apologize in advance for anyone whose question, I haven't even seen, I haven't covered. I know there's those ones in hedging I will get to, but I also thank you for all the questions that there was a lot in there. Hopefully, that was informative. And if you don't mind, Jake, if you wouldn't mind just flashing up the slide has my contact details on it, please. that's where you can reach me, and I'm very happy about your disposal to cover any questions you'd like to ask me directly. So thank you very much for your time and for your engagement with this session. Thank you.

Great. That's great. And thank you very much indeed for being so generous with your time and addressing all of those questions that came in for investors this afternoon. And of course, we will be able to give you back all of the questions that were submitted this afternoon. We'll give you those back immediately after the presentation has ended, just for you to review, to then add any additional responses, of course, where it's appropriate to do so. And we'll publish with those responses out on the platform. But Craig, perhaps before really just looking to redirect those on the call to provide you their feedback, which I know it's 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. Thanks again, Jake. So to summarize, no one is shirking away from the fact that we're operating in a very difficult environment in the U.K. just now. Hopefully, what I've told you today gives you some comfort that as bad as things are from a taxation and a fiscal take point of view, EnQuest is relatively better off than most. And that actually underpins the fact we've got a really strong growth strategy. Now I'm very much aware we've been telling you for a number of now that we're targeting growth and I can assure you everyone in the business is focused on delivering that growth. So I'm very much looking forward to announcing that when the time is right. And when we've executed a deal that I'm sure will be very value-accretive to all of you shareholders. So with that, I'll thank you again for your time and hand over to Jake to close.

Perfect. Craig, that's great. And thank you once again for updating investors this afternoon. Could I please ask investors not to close this session will now be automatically redirected to the opportunity to provide a in or that the management team commonly better understand your views and expectations. I just want only take a few moments to complete, but I'm sure 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.