Negative Points

• Production guidance for 2026 was narrowed to 41,000-43,000 barrels per day, the lower half of the original range, due to third-party infrastructure downtime at Magnus.

• Magnus production was reduced by more than 4,000 barrels per day in the first half due to unplanned third-party infrastructure issues, impacting cash flow by $60 million.

• Diesel costs rose 40% due to higher oil prices and restricted refining capacity, increasing operating costs, though partially mitigated by proactive management.

• The company incurred $43 million in costs related to refinancing and bond redemptions, including $20 million in early redemption fees and OID issuance costs.

• The company continues to trade at a discount to net asset value, reflecting broader sector undervaluation and investor sentiment towards UK-listed oil and gas companies.

• The UK fiscal and regulatory environment remains challenging, limiting the development of large-scale projects like Bressay and Bentley, which are contingent on a more favorable climate.

• The Malaysia acquisition adds significant complexity and integration risks, with operatorship transfer not expected until January 1, 2027.

• The company's reliance on third-party infrastructure for Magnus remains a vulnerability until the NCP bypass is completed, with first oil expected only in the second half of 2027.

• The company's strategic pivot towards Southeast Asia may reduce focus on the UK, potentially leaving valuable tax assets and decommissioning liabilities underutilized.

• The elevated commodity price environment, while beneficial, introduces volatility and uncertainty, with hedging adjustments impacting reported revenue and costs.

Q & A Highlights

Q: When the Malaysia deal completes, how quickly will the production of 100,000 barrels be attributed to EnQuest financials? Will it be immediately upon completion? A: Amjad Bseisu (CEO): Yes, our expectation is that from January 1, we can accrue those barrels on completion. We are looking to include the 57,000 barrels a day in 2025 that would be on stream from January 1.

Q: Should investors view the new EnQuest as primarily a Southeast Asia growth story or a diversified international consolidator that will continue to look in the North Sea? A: Amjad Bseisu (CEO): Southeast Asia and the UK represent areas of focus and will continue to do so. Southeast Asia has better fiscal terms and significant growth opportunities. We will deploy capital where we have the highest returns. We still see highly accretive opportunities in the UK, mainly the EOR project at Kraken, which is one of the most accretive opportunities we have globally. Larger UK developments require a change in the fiscal regime, and we are hopeful the government will take a pragmatic approach.

Q: Can you talk more about the group-wide investment review and how you are prioritizing the opportunity set? Should capital be concentrated on the highest return opportunities, or are there other considerations like PSC extension or infrastructure dependency? A: Jonathan Copus (CFO): We have a very broad opportunity set and a "conveyor belt" of low-cost, high-return opportunities. We have two precious resources: capital and people's time. We sift through opportunities using returns and payback metrics, but we also take a strategic view of the business's future. The first rank of winners will always be fast-payback, high-returning opportunities, which are our bread and butter. Amjad Bseisu (CEO) added that the opportunity set is strong, with very fast payback and high investment efficiency, citing Vietnam as an example that paid back in 12 months.

Q: Why did PETRONAS trust EnQuest for these highly valuable assets? A: Amjad Bseisu (CEO): We have been in Malaysia for over 10 years, with my involvement spanning almost 20 years. We have exhibited very strong performance, winning the platinum operator award twice in a row and receiving awards for best gas supplier, best Malaysianization, and best decom operator multiple times over 12 years. These achievements carry significant weight with PETRONAS. We were competitive in price, but the relationship is special given our performance and our integration into the fabric of the region.

Q: What is your comfort level with UK acquisition activity and taking on additional decommissioning liabilities within the group? A: Jonathan Copus (CFO): Historically, our business model has been to leave as much of the decommissioning liability behind as possible, as exemplified by Magnus, where we have 100% of operating equity and cash flows but only 9% of the decommissioning liability. We prefer to put capital to work in high-margin hydrocarbon production rather than decommissioning. In Southeast Asia, decommissioning costs are prefunded through cess contributions, which is a totally different equation.

Q: How would you finance further transformative M&A, and which markets would you go to? A: Jonathan Copus (CFO): We have simplified our capital structure to an RBL and a single tranche of US dollar bonds. Our RBL is supported by eight relationship banks with an $800 million facility and a $300 million accordion. We have the right ingredients. The key is buying assets that are in production, so cash flow grows alongside leverage, keeping leverage metrics in the same zone. We will not lose discipline through acquisitional growth.

Q: What is your view on the company's relative undervaluation versus analyst NAVs, and would you consider relisting in a more supportive jurisdiction? A: Amjad Bseisu (CEO): The industry generally trades at a discount to NAV, and we continue to do so. As we scale up and attract more investors, we hope to close that gap. On relisting, we were previously listed in the UK and Sweden but delisted from Sweden due to limited shareholder holding and new EU regulations. We will look at this in the future, especially as we pivot assets away from the UK, but there is no current plan to do so.

Q: Do you sense a preference among shareholders for buybacks or dividends, and how might shareholder returns evolve as the company grows? A: Amjad Bseisu (CEO): We have tried both. We started with buybacks and have moved to dividends in recent years. Our slight preference is dividends as they are now part of our capital allocation framework. If excess returns of capital are justified by the share price, we will consider buybacks. Jonathan Copus (CFO) added that there is a persistent structural discount, but the focus is on delivering the business and telling the story to new investors. The dividend is a structural part of our capital allocation, and we are focused on delivering value growth at both the company level and in the shareholder's pocket.

Q: Do you have any comment or update on the Gaea and Gaea 2 prospects in Indonesia and the future of the EnQuest Producer? A: Amjad Bseisu (CEO): On Gaea, we were opportunistic and leveraged local team expertise and data access. The area proved important when bids came in, with the bp Tangguh Alliance joining us. The program will be approved by partners in the next month for next year, initially focusing on seismic to identify exploration areas. The blocks are very large, with prospectivity of around 100 Tcf, but we are focused on the highest chance factor of success from existing well data. The EnQuest Producer remains in Nigg and is part of the Bressay field development project. Phase 1 involves gas going from Bressay to Kraken to reduce emissions, with sanctioning targeted for the 2030 reduction. Phase 2 is an early production facility to prove Bressay's oil, which would include the EnQuest Producer.

Q: When you look at the enlarged group, what excites you most about the new assets joining the business? A: Amjad Bseisu (CEO): The new assets are significantly different from our past assets, with the lowest recovery factors we have acquired. Balingian has a 19% recovery factor and 2.2 billion barrels in place, while D35 has a 16% recovery factor. These are low-hanging fruit that fit our business model well. I am also excited about the gas component

For the complete transcript of the earnings call, please refer to the full earnings call transcript .