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

Good morning, ladies and gentlemen, and welcome to EnQuest PLC's results for the first half of 2025. Throughout this webcast, you will have the opportunity to submit questions at any time, and we will look to answer as many of these as possible during the Q&A session at the end of the presentation. Without further ado, I will hand you over to our Chief Executive Officer, Amjad Bseisu.

Thank you very much, Craig, and good morning, ladies and gentlemen. Welcome to our 2025 half year results presentation. Thank you very much for the time joining us today. My name is Amjad Bseisu. I'm the CEO of EnQuest. Joining me today is our Chief Financial Officer, Jonathan Copus; and Steve Bowyer, our U.K. North Sea Managing Director. Craig Baxter is also joining us, Head of Investor Relations and Corporate Affairs. Steve and Jonathan lead the high-performing teams across our business, and our operational performance has remained very strong in the first half of the year, as you will see. Let's start with the backdrop of U.K. The U.K. North Sea remains one of the most challenging environments in oil and gas as evolving fiscal and regulatory pressure continue to undermine global competitiveness. With the sector losing 1,000 jobs every month according to our industry OEUK outfit, crucial that the government urgently reforms energy profit study, which now delivers a fraction of the originally projected revenue. Only a fair, more predictable tax environment can help companies like ours to invest and secure a U.K. energy supply that protects jobs in this critical energy transition environment and allows success of the business. The opportunity is there now and today to enact positive change in the upcoming autumn budget. We are poised to play a leading part in enhancing the U.K.'s energy security and protecting the jobs that are vital to our country and also the energy transition ambitions. So let's start by looking at our fundamentals, which have been strong and that underpin the business. For those who are less familiar with EnQuest, EnQuest is an independent energy company with operations focused on the U.K. North Sea and Southeast Asia. We are listed in 2010, and our foundations are based on acquiring mature underdeveloped assets and from the majors and developing those assets and producing more out of those assets. We've done that in 9 hubs and continue now with the new expansion in Southeast Asia to have 7 operating assets. We've built a strong expertise in mature asset management, driving efficiencies, optimizing operations to extend lives. Over the years, our capability mix has expanded also to maximize recovery of oil through top quartile drilling and major project execution. We are also now proud to be recognized as we've built a very strong sector-leading decommissioning business. Over the past 12 months, we've also expanded our Southeast Asia business significantly. We are now in 4 countries, building on a strong reputation that we have forged over 11 years of successful operations in Malaysia and having been chosen the Operator of the Year 2 years in a row in Malaysia, something I think is the first to have. With the recent acquisition of Harbour's Vietnam business, we now have 7 assets, as I mentioned, with material reserves and resources in place, and we operate nearly all of our assets, deploying our operating expertise to maximize our value, which is our big business proposition. We also operate the Sullom Voe Terminal in the Shetland Island in Scotland, which is a very critical asset for us, both upstream as well as for our new energy decarbonization and renewable business, which is [ varied ]. We've got a number of assets which have also moved into decommissioning over the last few years and have reached the end of their useful economic life. So we have had from taking the assets to decommission the assets, a full cycle of asset management. As we're all aware, the energy transition -- the energy landscape is in transition. And to ensure our long-term success, we recognize that the business must continue to show resilience, creativity and adaptability. The combination of the core capabilities set for EnQuest set us apart from any of our peers. We are able to take these assets and produce more out of these assets and have proven that over the last 15 years. By lowering cost, improving uptime, these assets last longer and run in the hands of us as a better operator. Since our inception, we've extended the useful life of all 9 assets that we've operated. Next slide. Our strategy is underpinned by us being established as a top quartile operating company, both in the U.K. and in Southeast Asia. This is demonstrable across the whole life cycle, as I mentioned, of the assets from the beginning through decommissioning. During the first half of 2025, our production efficiency was 89% and would have been 94%, excluding a third-party infrastructure outage in Magnus, which is certainly upper quartile and maybe even best-in-class. With 96% of our 2P reserves under our operatorship, we maintain control over our asset management, which is a key factor for our excellence over the years. The operational control has been pivotal in our ability to extend the lives of every asset that we've operated and also provide us with a line of sight of material organic opportunities around our assets for optimizing our core assets. We've done that in Magnus, Kraken, PM8/Seligi and our other assets. We can now proudly say that our expertise extends to the decommissioning performance, where we've executed 81 wells since 2022. And the activity has been mostly focused on Thistle and Heather, where we recently completed also the largest lift of topsides in the U.K. of 15,300 tonnes in 2025, the heaviest lift planned in 2025. We have now completed the Heather disembarkation and look forward disembarkation of Thistle in early 2026. And again, as I said, we're very proud to have now the ability to say we are sector leading in the decommissioning area also alongside the other areas like drilling, project execution and operations. This new capability is a key enabler for us, both to transact in the U.K. and to maximize the value of our assets. As you will see from Jonathan's presentation, we've had a significant continuing deleveraging path during which we've directed our free cash flow to repay around $1.6 billion of debt. We remain very much ready for our transformative growth and looking to utilize our tax assets. Our net debt, as mentioned, continues to go down and was $377 million on the 30th of June. And our liquidity has increased from $475 million at the end of last year to $578 million at the end of June. We've been clear on our strategic focus on executing transactions, which we have done in Southeast Asia and using our U.K. tax asset of $3.3 billion to execute another transaction in the U.K. It's a matter of public records that we were in discussions with Serica earlier this year about a combination, which didn't come to fruition, but we remain engaged in negotiations across several other U.K. growth opportunities, and everyone at EnQuest is motivated to complete a value-accretive U.K. deal in the coming months, similar to the deals that we've done in Southeast Asia. We also remain active outside of the U.K., adding scale to our business in Southeast Asia. Next slide, where conditions are conducive to investments across the life cycle. Over the past 12 months, we've executed 5 growth transactions across Southeast Asia, and we've stated that we see this as part of a business reaching 35,000 barrels of oil equivalent production by the end of the decade. We have visibility now on getting to our goal through the acquisitions that we've made. These transactions include a full corporate acquisition in Vietnam, which brings flowing barrels which have produced over 5,000 barrels in the first half of this year. Development of existing infrastructure to unlock significant gas volumes. That's done in PM8 Seligi, where we have signed a gas sales agreement, and we will be starting to produce 70 million scfs a day early next year for production into the system. New developments like DEWA in Sarawak as well as in Brunei with -- the joint venture with the government -- 50-50 joint venture, which we've announced recently, which will be gas weighed into gas sales agreement and into LNG plants and a significant exploration and appraisal opportunity in Indonesia with us being as operator and bp and the LNG Tangguh Alliance being our very strategically important partner because we have access to the infrastructure there. Our growth in the region sees EnQuest in these new areas, adding 3 new countries to our main hub of Vietnam and emphasizing the strong reputation we've built over 10 years operating in Malaysia. I was extremely proud to see EnQuest again named as Operator of the Year in Malaysia, the first of any operator to achieve this accolade. And this is clear that PETRONAS' recognition of our credentials has opened the doors for us in many other countries. We've also received the award for decommissioning excellence in Southeast Asia, of which I'm extremely proud. The Southeast Asia team continues to deliver against our strategic growth aims, and we intend to build on our recent deal momentum with further M&A activity. I'll hand over to Jonathan to cover the financial performance for the first half of the year.

Thanks, Amjad. So just moving to my first slide. I think the first thing to say here is that financially speaking, the foundation of everything we do is our capital structure, and we are committed to maintaining both a strong and flexible capital structure. Now to that end, in the last 12 months, we have taken steps to simplify our balance sheet as well as continue paying down or reducing our net debt. At the moment, we have -- well, now we have a structure that is built primarily around our flexible RBL and also our foundation of bonds as well. When we think about capital discipline, we are focused on a few things. First of all, fast payback investment. That is where we can see opportunity organically within the portfolio. And alongside that, of course, we're also focused on growth, diversification and internationalization. And Amjad spoke about our transactional activity in Vietnam, but also ambitions both in the North Sea and Southeast Asia. And of course, we also paid our maiden dividend in June of this year. If we move on to the income statement, Amjad mentioned that in the first half, we had disruption at the -- third-party disruption at the Ninian facility. And that meant that we lost about 3,500 barrels a day of production in the first half. Now that's equivalent to about one cargo deferred and the value of that at prevailing prices would have been something like $40 million to $50 million. We also saw a 14% year-on-year reduction in Brent. However, we have a strong commodity hedge position and gains on that hedge book mean that in the period, we reported revenue of $549 million, which was a strong delivery. Cost of sales totaled $389 million. And within that, we held operating costs flat year-on-year, and that was despite an 11% weakening in the U.S. dollar. So again, a strong performance here in terms of costs. On a unit basis, of course, the numbers are again impacted by the Magnus outage. And including hedging, our unit OpEx for the period was $26.4 per BOE. Our adjusted EBITDA was $235 million. And the other number that jumps out of the income statement is our tax charge, which is significantly distorted by the 2-year extension to EPL and the deferred tax impact that we see coming through the income statement. So within that $239 million tax charge, $50 million of it was current and $189 million was deferred, $124 million of that figure being this 2-year extension to EPL, which has impacted our numbers, and you would have seen that impact across the sector as well. However, if you move to free cash flow, we delivered free cash flow in the period of $33 million. And from that, we paid our $15 million dividend, and we reduced our net debt to $377 million. CapEx in the period was $83 million. We spent $31 million on decommissioning. And at the 30th of June, our cash and available facilities had increased to $578 million, which is about $100 million rise on the position at the end of 2024. Now driving that increase was a positive redetermination outcome on our RBL, which we detail on the next slide. So through our year-end redetermination, we saw a 34% uplift in terms of our capacity on the RBL. And that reflects the tangibility, but also the consistent delivery and high levels of uptime on our assets as well. As Amjad mentioned, you can see that in recent years, we have reduced our net debt position by $1.6 billion. And that has taken very significant focus and very significant discipline, and it's something we're proud of. We have no debt maturities before 2027. And of course, the other key asset that we have as well are our tax assets. And those at the 30th of June totaled $2 billion in the recognized category with a further $1.2 billion that are yet to be recognized. Finally, turning to our guidance. We are reiterating all of our guidance points today. These are given on a pro forma basis: production 40,000 to 45,000 BOE a day; operating expenditure, $450 million for the year; CapEx of $190 million; decommissioning of $60 million; and of course, as I said, we paid our maiden dividend of $15 million. Looking to 2026, organic growth is our focus in terms of the core portfolio, and we have projects such as the Kraken EOR project and the optimization of Magnus production. In terms of operating expenditure, we are consistently focused on maintenance and maximizing our asset uptime and continuing the excellent production efficiencies, which we continue to see across the portfolio, both in the North Sea and Southeast Asia. And in terms of CapEx, we remain very focused on low-cost, quick payback opportunities. And in terms of shareholder returns, these sit within our capital priorities, and we aim to deliver every year a sustainable capital allocation framework that builds value for our shareholders. So now just handing over to Steve, who will cover the operations.

Good morning, everyone. Thank you, Jonathan. I'm Steve Bowyer, U.K. Managing Director. I'm pleased to report on a very strong operational year for the business. Our operational performance has been exceptional across all facets of the energy transition, and I'll talk you through how we've managed to do that and through the first part of the year, with the only blip in the year being the third-party outage at NCP and what I'm pleased to report that we worked very well and collaboratively with CNRI, the holder and operator of the Ninian Central platform to resolve the minor [indiscernible] on NCP in short order and making sure we delivered an alarm solution and got production back on within 5 weeks. Just to talk through our operating performance, underpinning everything we do is delivering safe results. We continue to strive for continuous improvement on our health and safety performance. As Amjad mentioned already, we've received awards in Malaysia, not just for our operating performance, but also for our HSE excellence where it's been very strong, and I'll talk through that when we get to the Southeast Asia section. And we've delivered 3-plus years LTI-free on Kraken, and we're 19-plus years LTI-free on GPA. So very strong performance across the assets. Our operational excellence comes through very strongly in our production efficiencies. Production efficiency of 94% is best-in-class. That excludes the NCP outage. But if you look at what we're in control of as EnQuest as operator, a phenomenal performance by the teams. And that's focused on prioritizing the right operational activities, making sure we understand the asset fully, invest in integrity and making sure our assets run as well as they possibly can. And when you consider within that portfolio is Magnus, which is over 40 years old, that's a phenomenal performance. Production is right in line with guidance for the first half of the year despite the NCP outage. Obviously, if you exclude Vietnam, which is 5,000 BOEs a day, so we're right in the middle of the range if you exclude Vietnam. And Amjad already mentioned, we're very proud again to be awarded Malaysia Operator of the Year, which I believe is the first. And I think in the market we're in, we all know the North Sea is quite difficult at the moment with the continued application of EPL and obviously, commodity prices being lower than potentially we'd expected, our strong cost discipline comes to the fore. So we have a track record of extending field lives significantly of 10-plus years. We've used that cost discipline and work very closely with the teams and good collaboration across all teams from supply chain through operations to ensure that we maintain costs flat despite material inflationary pressures and material FX impacts across the business. So really good work by the teams in a particularly challenging market. We remain at the forefront of the energy transition, decarbonizing our existing oil and gas assets and also making good progress on our SVT projects to reduce emissions by 90%. And at Veri Energy, although the transition takes a little bit longer than anyone had anticipated, we're making good progress on onshore wind and continuing to study carbon storage and excited about the potential through e-fuels. And as Amjad mentioned, it's key to be good at decommissioning. If you're going to be active in the energy transition and it's a key part of any future acquisition we do, our performance has been exceptional in decommissioning. We've P&A'd over 81 wells and since 2022, and that's effectively more than 35% of the Northern and Central North Sea P&A across the basin, and we've done that at 35% below the basin average cost. Big achievements as well. So although our wells P&A team is exceptional, good decommissioning comes down to strong project management. And our team there, as you'll see, have safely disembarked the Heather platform, and I'll show you a video later, which highlights how strong our operational capability is as you'll see the Heather fast lift actually in action. And as I talk through each of the assets, we'll start with Kraken. So Kraken continued its exceptional performance from 2024 and 2025. You can see production efficiency. Kraken is up at 96%, which is 30% above the basin average for FPSOs, which is phenomenal. We continue to optimize our emissions through going direct to the marine market for sales. We've managed to take the Bressay Gas tieback and progress that through towards FID. We're not at FID yet, but we have submitted a draft FDP to the NSTA, and we're clearly working with our partner, Waldorf to ensure we can get to an FID point. That project is really important for the future of Kraken. Not only does it reduce our emissions on Kraken, also delivers a material cost saving by reducing our reliance on diesel. In terms of future investment on Kraken, we're working on EOR, as Jonathan has mentioned, to enhance oil recovery. We see good potential upside through that, and we're also continuing to study infill drilling. So the future for Kraken will be EOR or infill drilling or a combination of the 2, and it may well end up being a combination of the 2 that we work on. And just to focus on costs again, the FPSO lease costs reduced at the start of 2Q 2025, which is an $80 million per annum saving, which is clearly very helpful. So really strong performance on Kraken and thanks to Bumi Armada for working very collaboratively with the teams on that asset. Flipping to Magnus. Late-life management asset expertise in play. The asset is over 40 years old. And as I mentioned earlier, we're way up at 95% if you exclude the NCP outage in terms of our operating efficiency, which is phenomenal. And that comes down to the teams really understanding the asset, great collaboration from the offshore teams right through the onshore teams. And if you look at our production that we managed to deliver through the early part of this year, post the NCP outage, we were up at 19,000 BOEs a day. We've sustained production around that level since mid-July, and that's a peak 3-month oil rate that we've seen on Magnus since 2020. But further than that, we've actually managed to take the water cut of the field, which is a measure of how efficient you are in terms of your reservoir recovery. We've taken that back to 85%, which was at pre-acquisition levels. So that's been done by excellent performance on drilling where we've brought the drilling and the well interventions of the recent wells in at cost and on target and tremendous work by the subsurface team working with the operations team and the production teams to ensure that we fully maximize delivery from that asset. And as you look forward on Magnus, obviously buoyed by recent performance, we're planning a future infill drilling program, looking to reestablish drilling back on Magnus later in 2026 and looking at potentially up to 6 wells in that program. Oil production, as we say, has been at peak rates. There's no planned maintenance. So being as efficient as we are, we actually took the opportunity to complete any Magnus shutdown work that we needed to do in 2025 during the NCP outage. So there's no further maintenance outages planned until 2026. And as I've mentioned, our reservoir management strategy has been extremely successful, ensuring that we maximize water injection and throughput and get the water into the right places and sweep as many barrels as we can out of that Magnus reservoir. Flipping into Southeast Asia, where our operating efficiency and our capability has been very well transferred across, you can see production efficiency of the assets at 93%. We've also completed the 4 infill well campaign and well restoration program and well workovers, increasing production by around 10% versus the first half 2024 average. Important as well is the Seligi 1B gas agreement, which expands our gas footprint and expands our reserves and our production. We've managed to accelerate first gas of that project Q1 2026, which will add 6,000 BOEs a day of gas from that point, which is really good work by the teams in Southeast Asia. And just to mention the strong HSE performance, 3 years and over 6 million man hours LTI fees is a great performance by the team. Amjad mentioned how we're expanding our Southeast Asia footprint. So we've got the DEWA PLC now. We're at early stages of studying that opportunity, but it's up to 500 Bcf gas in place, which is a really exciting expansion opportunity for the company. And we've got 2 further gas infill wells planned to be drilled in 2026 in our Malaysian portfolio. So really good performance, not just in the North Sea, but across Southeast Asia. Flipping to Vietnam, which we successfully completed the acquisition of in early July. Pleased to say that the operators handed the asset over in good shape with above expectation production through the first half of the year. We'll now, as Jonathan has mentioned, take our EnQuest skills to bear around getting into fast payback opportunities. We've seen an opportunity and the Vietnam team have highlighted that to bring back some wells into production early on [indiscernible] phase of the asset. So we'll be active on that asset now in terms of getting after the fast quick win payback opportunities. The team have come across and are fully energized and pleased to be part of the EnQuest team. So we're looking forward to extending the life of that asset and making sure we exploit the asset fully. It's a very accretive asset, life of field asset breakeven is about $40 per BOE, and it's high-value crude at a 10% premium to Brent. Just moving on to SVT. So this is a great example for the U.K. government as to how the energy transition should work. And so we're in play at the moment with 2 key projects. We've got the new stabilization facility and the connection to the U.K. grid. They allow us to extend the life of SVT and extend the life of the oil and gas facility and oil and gas production as far as possible. As I mentioned, we're very focused on energy transition projects and new energy projects through Veri Energy. As we all understand in the market now, they'll take a little bit longer to bring to bear, although we are making good progress on onshore wind. So clearly, we need to maintain the life of oil and gas assets as long as we can. We're very focused on that SVT where we can see life going out into the 2050s and that allows more than sufficient time for the new energy projects to come through, hopefully in late 2020s into the 2030s and start to actually act on the energy transition in the way it should be done with a managed and effective transition. In terms of decommissioning, so very strong performance, good validation by our peers who are very impressed with our performance. As I think I mentioned last time I spoke, we were awarded additional P&A operatorship and well abandonment operatorship by one of our peers, which is very good. The Heather P&A was successfully completed by the teams. We also completed safely the disembarkation from the platform. And I'll show you in a minute the Heather top size lift, which was completed with a fast lift. It took about 14 seconds to lift the full topsize facility from the jacket, which is very impressive and done safely. And more impressively, we're looking at basically 95% recycling of that topside facility at the Maersk yard in Denmark. So great work by Heather, and I'll talk a bit more about that before we launch the video. On Thistle, we've now completed all of the platform P&A operations, which is great in terms of Phase 1, 2 and all the conductor recoveries that we needed to do from the platform. As Amjad mentioned, we're on target to disembark in early 2026. And again, very successful performance across that asset. Both projects have remained pretty close to budget within about 5% of the original budgets, and that's been done in a very high inflationary market. So really good performance by the team to control the [indiscernible] costs. And again, Southeast Asia, we transfer our skills across. So really good to see the abandonment excellence award being given to the teams from PETRONAS and the Emerald awards, and that's a good benchmark for the teams. We've also, as I've mentioned, completed the P&A of 81 wells since 2022. We've done that at 35% of the benchmark cost, and we're pleased to have signed up a contract with Well-Safe, which is a multiyear contract, which allows us to complete decommissioning. As always, with EnQuest, our decommissioning, we keep operated control but very low exposure to the decommissioning cost, which is really important from a business management perspective. And we'll commence with low equity but very well-executed decommissioning on the Magnus field with some subsea well P&A, which is due to commence in 2027. In terms of going forward, we keep 95% operatorship of our decom. We've got our decom plans carefully managed. We've got excellent teams in place, and we're very comfortable with the capability we've delivered, which I think is seen as best-in-class across the industry. And just to mention Heather. So Heather was an exemplar asset in its production phase. It went through production of 47 years. The asset is 47 years old now, and I'm pleased to say that it's been an exemplar through the decommissioning phase as well. It's been many workers' homes for a long time. I think one of the employees remained on the asset for the full 47 years. So clearly, it's quite sad to see people moving on and losing their jobs as we P&A assets. But we do it in the right way and we do it as an exemplar of how the decommissioning field should be done, then it's something to be proud of. And you'll see through the video that's just a way to play how strong our decommissioning capability is and how good we are at executing decommissioning with our key supply chain providers. And clearly, the Pioneering Spirit, which executed the work did a phenomenal job of the fast lift. [Presentation]

I'll now pass you back to Amjad to conclude the presentation.

Thank you very much, Steve. And that's, I guess, just a great video showing examples of exceptional work where things are very complex, but for everything to fit in exactly at the right time in the right place and the right conditions and the right measurements is, again, just something that shows how we have tremendous attention to detail and the ability to execute these very complex projects. Next slide. So again, delivering organic growth is key. We'll continue to progress and execute opportunities, which provide these growth both organically now that we have a much wider business set, including the acquisitions in Asia that give us more organic opportunities in Malaysia, where we have signed for access to the gas in PM8/Seligi, have signed the first agreement there. We have over 2 Tcf of resource there in the PM8/Seligi fields that we're able to access given the new commercial framework. And we have a ready partner in PETRONAS that needs gas. So I think we're very excited about that. DEWA, transformative opportunity in Sarawak to try and develop gas resources, as Steve mentioned, 500 Bcf. Brunei, a significant opportunity also to develop a gas field and get LNG production there, too. And in the U.K., we're looking forward to the Bressay development that Steve mentioned which again is -- gives us production, but also reduces -- importantly, reduces our emissions in our path to net zero as we've talked about. So we continue also to focus on our relative tax advantage in the U.K. and reemphasizing the expectation that we will grow the North Sea business materially, enable us to release these tax assets, and I think that's one of our key and primary goals and remains our primary goals. We remain committed to growth, as you've seen, but not at any cost. We're focused on creating value for shareholders, and we'll continue to be very disciplined in our M&A, underpinned by a strategy to invest capital where we identify the most favorable terms and returns. This way, we can bring our wide skill sets to bear and continue our track record of extending the economic life of all assets under the execution and operatorship that we have. Of course, our decommissioning expertise now is increasingly important and has become another tenet of our enablers going forward, both in looking at assets and in M&A. In all our endeavors, we also look to diversify the portfolio to improve our overall carbon intensity. And as you've seen, we're shifting a lot more to gas in the future in the commodity mix. We have a clear path in place to add value accretive scale to our business, and I'm energized by the opportunities which are ahead of us. As you've seen, we've seen tremendous growth in Asia, almost 300% growth from last year to next year, and we are continuing to look at growth opportunities in the U.K. and in Southeast Asia. Next slide. In conclusion, you can see our operational strengths are well suited to very mature oil and gas basins and are able -- we are able to transfer for this across geographies. At our core, EnQuest is an agile independent energy company focused on asset-rich regions in the U.K. and Southeast Asia. Since our listing 15 years ago, we have a proven model, acquiring mature and underdeveloped assets from majors and have enabled us to drive operational efficiencies to extend asset lives, maximize value even in complex operating conditions. With our deleveraged balance sheet, enhanced liquidity and significant U.K. tax assets, our strong fundamentals see us very well positioned to deliver transformative continuing value-accretive growth opportunities to our shareholders. Thank you all for your attention. We'll now move to Q&A, and I'll hand over to Craig on the Q&A section. Thank you, everyone.

Thank you very much, Amjad, and thank you, gentlemen, for the presentation. I'm pleased to say we have a number of questions that have been submitted through the presentation. I'm going to keep you busy for a little bit longer, if that's all right. And we'll start off, if I may, with Alejandra Magana from JPMorgan. And Jonathan, I'll maybe come to you first, and I'm sure Amjad will want to comment on the second part of this question. Alejandra has asked us with regard to transformational U.K. acquisitions to expand a little bit on the financial flexibility that we have today in terms of balance sheet strength, liquidity and the undrawn facilities we can access to act on opportunities as they arise. And maybe this is one more for Amjad. She's looking for a bit of a sense of what we're seeing in the current market and what the sort of bid-ask spreads are in terms of valuation?

Sure. Yes. Let me kick off. Yes. So a lot of -- the aim of our deleverage pathway has been to not just reduce our net debt, but to simplify our balance sheet as well, and we've been successful in doing that. We had net debt of $377 million at the 30th of June. And within that figure, our cash balances were $331 million. As I mentioned, we also had a positive redetermination on our RBL. And that meant that the cash and available facilities at the 30th of June was $578 million. Now that provides a great platform to use for transacting. But more to the point, because our debt and our capital structure are simplified, it means that we can also act simply in terms of structuring deals. And that is a great positive in terms of derisking the kind of transactional pathway. I think the other thing that I would point to is that a number of these deals also have quite a long period between the effective date and completion. And you can see this in Vietnam, where the consideration paid was $85 million. The final cash payment was $22 million. So another moving part in terms of financing these deals are those interim cash flow pathways as well. So we certainly have the capacity to transact from a balance sheet point of view. Everything in our ethos around it, not just financially, but in terms of positioning is about being simple and straightforward. And we believe that gives us the best pathway in terms of engagement, but also moving conversations through to completion as well. Amjad, just hand over to you for other comments.

Yes. So the comment on what do we see in current environment on M&A. I mean I think we see a slightly slowed down environment in the U.K. because of the fiscal uncertainty. And so there's been more joint ventures, and that's been kind of the M&A transaction of choice. We've seen a few transactions there with Repsol, NEO and Equinor, Shell and indeed, even Eni is more of a JV there, too. So we've seen that in the past. But I do think we're still seeing opportunities. We're still seeing our asset as a very critical asset and tax asset to move forward, and we are still in discussions on several fronts. In Southeast Asia, as you note, we have had 4 opportunities that we closed: 1 production, 2 developments and 1 appraisal exploration opportunity. And we continue to look at opportunities there. And we have -- we are now in 4 countries in Southeast Asia. So our footprint is growing quite rapidly. I would say we're probably one of the leading independents now in Southeast Asia. We've also tripled our production there in the last -- between last year and next year, so in the last 2 years effectively. And that also is a great testament to ability to grow quickly when we have the balance sheet to do it, as Jonathan mentioned.

Thanks, Amjad. That's actually a perfect segue into Alejandra's other question, which is around Southeast Asia. And she's looking for a bit of color from you on the sort of the relative cash and cash flow and economic attractiveness of the growth. We've mentioned today in Southeast Asia versus what we see in the U.K., particularly when you factor in fiscal regimes, reinvestment requirements, et cetera. And as a bolt-on to that question, we've talked a little bit about the upside opportunities now that we have our hands on the Vietnam asset, there's obviously some upside there, both with the current assets and across the field. So maybe if you could touch on some of those, that would be very helpful?

Okay. So on the U.K. versus Asia, I mean, they are very different propositions in terms of investment. U.K. gives you full access to cash flow with tax being paid. There is no royalty being paid in the U.K., but it's very sensitive to oil price. And as we've seen this year, the cash flows are lower because the oil price is lower. In Southeast Asia, the opportunities are more production sharing contract types where the cost recovery takes a big load of the contractor, which would be ourselves. So it's less sensitive to oil price movements versus the U.K. So U.K. is very sensitive to oil price movement. And with a high tax rate in the U.K., the investment -- organic investment gets much more challenging because, again, it's the volatility to oil price is very high. So I mean, we're still investing in the U.K., but we would invest more and we would like to invest more if the U.K. fiscal conditions improve. We continue to look at Asia opportunities. I think in Vietnam, we took over in July, and we are looking now to have a full field model analysis and opportunity analysis. I'm confident in the next few months, we'll see a segue to a program. We're already starting a program with our first workover in Southeast Asia in Vietnam, but we will look at a drilling program in the future. And we are looking to expand the Malaysia gas [indiscernible] phase. Our first phase is 70 million standard cubic foot a day from PM8/Seligi. We're looking to expand that significantly. And as you've seen in our analysis -- our results analysis, we also have a contract -- first phase of the DEWA, the development contract; also the first phase of Brunei. These are development opportunities subject to final investment decisions. But we get great comfort that those resources have been certified. And again, we -- in our hands, it will be lower cost to develop them. And that's why they are in our hands because we'll have a much more efficient development approach to them.

Thanks, Amjad. And staying with the new developments, a question from James Hosie at Shore Capital around the developments at DEWA and Block C in Brunei, whether EnQuest will be selling gas at a price linked to LNG spot prices and what you see the market is for those resources? And James' follow-up is also reverting back to Vietnam. It's around EnQuest's appetite to extend the license beyond the 2030 sunset that's currently in place.

Yes. So on gas prices, in Malaysia, there's this Malaysian reference price. So as we've negotiated the first contract on PM8/Seligi, it's related -- the price would be related to Malaysian reference price, which is probably around $7 or $8 in Peninsular Malaysia. In Sarawak, it could be a multiple of that, but it's usually also relating to the Malaysian reference price. There is -- I mean, obviously, there's -- in Sarawak, there is an LNG plant and PETRONAS could buy the gas for the LNG, but the purchase is relating to the Malaysian reference price. In Brunei, the access is to LNG and the plan is to produce into the LNG plant in BSP, the Brunei LNG plant. So commercial discussions would be ongoing post the first phase of front-end engineering design and when we get to the CapEx and the economics of the project. So that would be the segue into that. And indeed, this is a very early phase in Indonesia, very, very early phase, but that would be the -- also access to the LNG plant in Tangguh is key for developing that resource -- the gas resources once those are in commercial quantities. So again, that would be an LNG development. Hence, the push for us to bring in the LNG partners -- Tangguh LNG partners. On the Vietnam extension, we are keen on looking to expand there, both our investment and extending the PSC. So I think we are -- we will get into discussions on that in the future once our investment program is crystallized.

Thanks, Andrew. finishing up on Southeast Asia for the moment, unless other questions, of course, come in. Sam at Peel Hunt has asked a little bit about your thoughts on the CapEx required to sort of develop out these resources. And obviously, we haven't put any numbers out there publicly. But just your thoughts, Amjad, how you see the investment landscape between the U.K. and Southeast Asia going forward?

Yes. So you've seen the cash flows from Malaysia and Vietnam. So I think we actually have assets there now that have significant cash flow. So as Jonathan mentioned, between first of '24 and middle of '25, there was over $50 million cash flow from Vietnam. And the numbers in Malaysia are also very robust. And they will -- with the increase in production and the gas sales agreement, they will become robust. So the first thing I want to outline is we have 15,000 barrels a day next year of production. And so our cash flows will have gone up by the same factor of production roughly. So I think we'll have significant cash flows generated in the region itself. And so that will go a long way to actually providing the CapEx. Indeed, our first phase development, the first phase that we've had for the gas development, the 70 million standard cubic feet a day, which was contractually around $100 million, that has been generated internally, and we did not call on resources from corporate or external debt. And so that will be in place for gas to start next year. Now it's too early to identify both DEWA where we're a 40% partner -- 43%, and Brunei we're a 50% partner. But I feel the cash flows will be reasonable, and it's fit for purpose for EnQuest. That's why we're in those developments. So I think we -- between our cash flow and our facilities, we will be able to finance our share of those.

Thanks, Amjad. That's very clear. Switching to the U.K. now, we've got a number of questions, and some of them I kind of aggregate up because they're on similar themes. A question, I guess, for Steve and Amjad. So we've got a few questions on the scale of Kraken EOR. Obviously, you've talked about that a little bit over the last few months and certainly today. And Steve, I think touched on the combination of infill drilling and EOR. But it would be interesting and there's a number of people asking to get a bit more from you on EOR as a project and how that fits for the next phase of Kraken operations. Let me start with you, Steve.

Yes. So we've made good progress on Kraken EOR. We're currently studying polymers, testing polymers and we've been updating reservoir models. And the sweep efficiency of Kraken without EOR has been pretty good. So it's complex. There are new polymers coming on the market as well. So I think we previously mentioned we're progressing that towards a decision tail end of this year. We're still on track with that, but we may push that into early next year as we start to study further the polymers and optimize that fully, but we still see quite a bit of upside through Kraken EOR. There's still infill drilling opportunities on Kraken as well. You know we drill-ready infill opportunities previously. They still exist and are still strong. So I think EOR will either apply across the whole reservoir once we've selected the right polymer or it will be selective in certain areas of the reservoir where we'll instead go after infill drilling. So still excited by EOR. It's still a great potential opportunity for Kraken. It's just it's complex in terms of understanding the polymer, understand how it reacts within the reservoir and making sure we get the right optimized way forward.

Thanks, Steve. Anything you want to add to that, Amjad?

I just think the opportunities in U.K. organically are still very strong. I think we believe -- I mean, as you've seen from Steve's presentation, Magnus has had a great performance due to the wells drilled there and also to the increase in efficiencies that we've had. And in Kraken, as Steve mentioned, there were 2 drill-ready wells, which we had delayed because of our partner issues, but I think those will be coming in the future. And I think we're still excited about the EOR. The EOR is a material opportunity. The numbers are very significant. It has been tried elsewhere, and we're going to -- we're going to be focused on getting that, like Steve said, maybe in the early part of the next year.

Thanks, Amjad. So sticking with the U.K., but switching from Kraken to Magnus. Both Charlie at Canaccord and Mark Wilson at Jefferies have asked about the 6 well program planned at Magnus. And talking a little bit -- there's a request to kind of give a feel of what that could generate for Magnus production and also just the sort of cost versus return trade-off with that obviously being a U.K. investment program. And maybe start again with Steve and Amjad, you can give your views if you wouldn't mind?

Yes. So we run an active well hopper across all of our assets. We've always got well opportunities there. Obviously, we've got some very successful well results. The 2 wells were above our expectations that we drilled this year, and that just shows the strength of the subsurface team we've got. We've focused on the LKCF, which is a less exploited part of the Magnus reservoir, which is a lower water cut. We've had some success in that. We've got water injection going in there. And we do still see plenty of Magnus opportunities, which we would look to drill. The wells we've drilled recently, they have paybacks within about 12 months. The future wells identified are very similar. And obviously, with those returns, we see healthy returns through our Magnus infill drilling program. When we go back, we tend to want to drill in the sequence and batch of wells. The team have already got a number of those opportunities matured, and we'll be working to mature up the opportunities with a return of drilling probably mid- to end 2026 on Magnus, where we'll mobilize and there will be a bit of time to get the rig back up and ready to run. But we're pretty confident we've got good opportunities already identified and more to mature on Magnus. So quite excited about the future of Magnus. And there'll be similar scale to the existing opportunities we drill where they're somewhere between about 1 million to 3 million barrel recovery wells, and those work out very well economically with our position in terms of our financial and fiscal position. So they are very robust in respect for VPL.

Amjad, are you going to add?

No, I'll just add that we're quite excited about the LKCF, which we've just drilled a recent well. The recovery factor there is relatively low. It's 24%. So a very rich opportunity for growth. It's almost 400 million barrels of stope there, and we're very excited about looking at that further as Steve mentioned.

Thanks. Staying with Magnus, [indiscernible] from Sona has asked a question. Obviously, we've seen the third-party outage that's affected Magnus production in the first half of the year. So Steve, maybe coming to you. Do you have any sort of update on the future of the Ninian infrastructure, the time line to decommissioning and what EnQuest is doing to mitigate that and obviously secure future production of Magnus?

Yes. So I think it's understood in the market that Ninian Central is due to COP 2027. It may be later than that. We've clearly been progressing a bypass opportunity, which is a subsea -- basically a rerouting of the subsea pipe work. And we're progressing feed on that and we'll be well ahead. So we're ready to bypass the Ninian platform long before it gets to COP. So working very collaboratively with CNR and Total. Obviously, the all wind field comes through the same system, and we're very well progressed so far with our design around how we would bypass Ninian. So the future of Magnus is pretty much secured. We're still to FID the project, but it's a no-brainer in terms of FID. And so good progress by the teams in terms of being prepared for that. And obviously, that's a key facet of extending the life of SVT and the projects we're doing there. So we see a very strong life for Magnus going forward. The subsea operation is kind of routine, it's bypass pipe work. So it's basically a subsea rerouting of the pipe work where we've already got block and bleeds where we can tie into. So pretty solid and robust project that we're progressing forward.

Thanks, Steve. Jonathan, coming to you, if I may, a couple of questions from Mr. Wilson at Jefferies. We've talked a little bit around -- and Steve touched on material cost inflation has been managed in the business. You yourself, Jonathan talked about the group managing to keep operating costs flat. Can you talk a little bit to EnQuest's kind of approach there and which areas have been the most pleasing for you in terms of that achievement? And also, Mark has asked just for you to give a quick summary and reminder for those listening around the way in which our GBP 3.2 billion U.K. tax asset is split up into the 2 component parts?

Sure. Yes. I mean, cost management is sort of absolutely core to what we do. We talk about it being in our sort of DNA, right? And operating in the basin we do and focus on extending the life of late-life assets or underdeveloped assets. A huge part of this is about delivering these things at optimal cost as well. Now in an inflationary environment, one way we can manage that is through activity in supply chain. And so certainly, across our sort of production operation business, but also our decommissioning business, we are good at securing equipment and securing equipment for extended pieces of work. Steve talked about the 6 wells grouping. We've also talked on this call about the Well-Safe contract, which has multiyear options. So that means that because we can give service providers visibility on extended periods of usage, it means we get good prices for that equipment. So I think the team does a great job in terms of all of that. I think the other thing though that goes hand-in-hand with cost management is also making sure that we manage costs in the right way. What we're not interested in doing is undermining the production uptime on the assets as well. So it's also really important to be on top of maintenance and things like that. And one thing that really helps us in this respect is the fact that we operate 96% of our 2P reserves. So that means that we're in very strong control of how we spend our time and also how we spend our money and that puts us in a good place in terms of managing costs. And just to sort of reiterate that point that I made, which is holding operating costs flat despite the weaker U.S. dollar. That's a combination of cost optimization. It's also a product of being proactive in terms of hedging out our dollar position as well. So I think both have kind of helped us in that respect. Turning to the tax assets. So these are very simply held. They sit within 2 entities. And that is a really important point because the value of these tax assets is not just their value sitting in our organization, it's their value deployed, so principally transaction. So Lion's share of that $3.2 billion tax loss sits within EnQuest Heather Limited and that is where all of our producing assets sit, and those tax assets are $2 billion that sit within that EHL entity. And these are what are called recognized tax losses, which means they sit on our balance sheet. So you can see that in our accounts and our notes. The other portion are what are called unrecognized tax losses, and they're only unrecognized because it's about the pathway to recovery, which means we don't recognize deferred tax assets alongside them. Now they total a further $1.2 billion, but they also are on a pathway to recognition, and we would expect to be bringing those into our recognized tax loss pool in the coming periods. So I think there's 2 really important things to focus on the tax losses. One is the size, but the second one is the simplicity of how they're held, which means that they can be deployed quickly and efficiently. And that, of course, is a big part of creating value around production in our portfolio and production that we can bring into the portfolio as well through transactions.

Thanks for that, Jonathan. That was very, very clear. James, a question coming from [indiscernible], is around, James acknowledges we're not going to talk too much around other companies' processes, but he's asked whether we're seeing any issues arising from the parent Waldorf being in administration of agreement work programs, et cetera, and whether there's an opportunity here. I do understand we can't be too specific about this, but I think it's worth maybe reiterating the way in which the Kraken JV is moving forward. Amjad, do you want to take that one?

Yes. So I mean, I think clearly, the administration process delayed our Kraken wells that we were planning to do. And obviously, we came into a settlement late '23, early '24. So we -- so we will continue looking at those prospects in the future. I would say the discussions on the Bressay Gas and the submission of the FTP, as mentioned by Steve, has been more constructive. And I think we've had a more constructive dialogue with the new management now that the new management has changed in Waldorf. So I think we see progress, but it's tough to say anything more than that at present. I do think that the Bressay Gas going into Kraken is strategically important, but also important from an emissions perspective and meeting emission standards in the U.K. So I think there's an impetus for that going forward. And I do feel that -- again, it's a question of time, but I do feel that the new approach that Waldorf is taking is more constructive. I don't know, Steve, do you want to add anything to that?

Yes, no. At a working level, I think relations are good, and we're making good progress on discussions around Bressay Gas. So as you say, the new management certainly improved things, and we're seeing good engagement from Waldorf. So on a day-to-day basis, which I think was the question, there's no real impact. And as you've mentioned, Amjad, Bressay Gas is really important to both companies in terms of the emissions reduction and obviously reducing cost for the asset and also for us, secures the Bressay license, which is important for future oil development once we're in a market where we can invest in large developments again.

Thanks, gentlemen. I'll wrap up with a couple of wider questions that I'll put to you, please, Amjad. And these are based on a number of questions we've received today in the Q&A. So the first of which is -- and I guess you knew this one was probably coming, but it was around the U.K. fiscal system and our engagement with government and whether you see any positive moves on the horizon as we head towards the late November autumn statement. If you could give some thoughts, Amjad, I'm sure that would be appreciated by those joining.

Yes. No. So I think we -- I'm part of the fiscal forum, the U.K. fiscal forum, which discusses the new tax system. Steve has also been very involved with the OEUK as well as being on the Board of the OEUK, but as well as with the government on these discussions and setting up these discussions, both from an industry perspective and from an individual company perspective. And I would say the government, it has been very constructive -- the discussions with the government have been very constructive. I think the government understands the needs of the business and has indeed come up with a framework that is very palatable to the business in terms of the new type of windfall tax, which we are very much supportive of as an industry, I think. So the question is how quickly that's put in place. And if we can get something put in place relatively quickly, I think we would kind of reduce the risks that are significant on the business. Obviously, the U.K. fiscal environment now is very difficult for the business, and it's one of the most challenging in the world. And I think a change of that fiscal regime is needed. The government, I think, framework for the future is that they've discussed would be palatable. And I think it needs to be put in place as quickly as possible to just reduce the challenges of this -- of our industry, where we're losing 1,000 jobs a month according to the OEUK analysis and our basin is declining. So I do feel that we are part of the transition. We have reduced our emissions by 40%. We're going to reduce them further by these projects in NSF that are very clear and critical. We -- with the new stabilization facility, we're reducing the footprint from 1.5 million barrels a day to 40,000 barrels a day. So we'll decrease the size of the facility significantly. And with the long-term power, we're taking out the gas turbines and removing and moving to wind power, both either on the terminal or supplied by the terminal for backup power. So we will reduce our emissions there by 90%. So we need the investments in the U.K. to be generated from our upstream business, so we can actually enact these very important reduction measures. But more importantly, we don't want to export jobs. I mean the U.K. will continue to use oil and gas for many, many decades to come. And instead of importing those resources and exporting our jobs, it's important that we produce those resources internally in the U.K. and keep our jobs in the U.K.

Thank you, Amjad. Amjad, I'm going to ask you to close, please. And this is in response to a number of questions that have been raised today from long-standing holders that you know like [ David Larson ] and [indiscernible] you met at AGMs over the years and others. And it's around -- it's around shareholders. And obviously, we're trading at a discount to our valuation. So it's a bit of an outlook from you, Amjad, as to what our shareholders can look forward to in the future with EnQuest?

Well, I mean, we, at EnQuest have a very unique proposition because we have proven that we can take assets that are underdeveloped and late life or mature life assets and extract value out of them. And you can see we've done that over and over again. We've done that in 9 operated assets that we've taken. We've now also proven that we can be the best decommissioning company for assets in our area, but also in Southeast Asia. I think we have done, as Steve mentioned, a tremendous job in the U.K., the largest decommissioning company in the Central and Northern North Sea by a long shot, 81 wells decommissioned, 35% below the NSTA standards. We've got the award in Southeast Asia for the best decommissioning company in Malaysia. And so I think the -- with us being the right shepherd of these assets, even in decommissioning cycle, which I think is important, but all through from their mid-life to the decommissioning, I think we have a unique set of skills. Our acquisition costs when we have the right assets are low. As you've seen in Vietnam, we can actually acquire assets for relatively low amount, similar to what we did in Malaysia and similar to what we've done in the U.K. with Greater Kittiwake and Thistle and Heather. So I think the impetus is on the government to make the basin actually investable. And I think we have the capability and expertise that is clearly world-class and clearly best-in-class in the U.K. to invest in these new opportunities. So I'm looking forward to the U.K. when we're prodding the government to make a change because, again, we've seen a handful of companies either fail or stop production, and there's no need for that. It's self-inflicted wounds. And we also see the platform in Southeast Asia now that we are in 4 countries and continue growing in those 4 countries. So I do see -- I'm very hopeful for the future. I think our financial position is strong, and it's clearly improved significantly from 5 years ago when our debt levels are high. And I mean, the impetus and the catalyst will be -- in the U.K. will be a change in the fiscal regime, which we're looking forward to. But in the meantime, we're redeploying our capital in Asia where the returns are attractive and the risk reward is high.

Thank you, Amjad. That's very clear. Thanks for that. Thank you for all your time, gentlemen, through the Q&A. So I propose we close here. Thank you very much.

Thank you, everyone.

Thank you.

Thank you.