ENQUF (ENQUF) Q2 2026 Earnings Report, Transcript and Summary

Good morning, and welcome to the EnQuest PLC's Half Year Results Investor Presentation. [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself. The company can review all questions submitted today and publish responses where appropriate to do so. Before we begin, we'd like to submit the following poll. I'd now like to hand over to the EnQuest PLC team. Good morning.

Good morning. Thank you, ladies and gentlemen, and welcome to our 2026 half year results presentation. My name is Amjad Bseisu, I'm the Chief Executive Officer of EnQuest. Joining me today is our Chief Financial Officer, Jonathan Copus. I'm very pleased today to cover our performance across the first half of the year while also providing key operational activities. Of course, this is a very important presentation for EnQuest, and this is a seminal moment for the company. That's why I'm very glad that you're with us today. So we will look at also the future of the enlarged group, highlighting the progress that we've made in our transformational deal and the delivery of the acquisition in Malaysia, which more than doubles the size of the company. Craig also joins us for his last results presentation as Head of IR and will marshal us through your Q&A. So let's start by taking a look at where the business is today and the strong fundamentals which we carry forward into the future. So EnQuest is built on a set of values and principles that define us and have defined us since our IPO 16 years ago and the genesis of the company more than 20 years ago. The most important one is safety, which is our first priority. It's not only our license to operate, but it's also our license to exist. We also want to operate our assets ourselves, both in the U.K. and Southeast Asia in order to deploy really a tremendous competitive advantage that has been developed in the company over the last 2 decades. That is our differentiated capability. Today, we operate 97% of our 2P reserves, and those are at roughly 90% of production efficiency, given a great feat given that many of our assets are actually over 40 years old. We've also built a highly tangible 2P reserve base, proven and probable reserve base with 78% of our 163 million barrels being in the 1P category or the proven category. This 2P reserve base will increase to 300 million with our Malaysia acquisition. These fundamental tenants make us the right operator of mature assets and undervested assets and underpins our track record of extending the useful lives of assets that we have taken over. This over the last 10 years. And we are very excited about the new assets, which are less mature that we will be able to hopefully take into the future. Building on this foundation, our first half performance represents another safe, strong period of delivery, overcoming operational challenges and delivering against key financial and strategic targets. Our production was 9% up versus the first half of 2025 with incremental production additions in Vietnam and at Seligi, where our accelerated 1b gas project more than doubled our gas output, resulting in increase in total production net to 12,500 barrels a day. Together, this production enhancement more than offset the third-party infrastructure downtime, reducing Magnus's production for the period by more than 4,000 barrels a day. Fundamentally, our differentiated capability is underpinned by an established top quartile operating capability. For the first 6 months of the year, the production efficiency of our assets was 89%, excluding third-party impacts and 83% when including the unplanned infrastructure at Ninian South Central. Putting this into perspective, the sector average for 2025 was 76%. So we are significantly above the average. Also from a financial perspective, we've taken significant steps to simplify and strengthen our balance sheet, as Jonathan will cover in more detail. With the refinance and upsized RBL, refinanced bonds and the settlement of the Magnus contingent consideration in the first half, all contributing to a financial platform that has enabled us to deliver on our strategic aim, most importantly, through our transformational acquisition in Malaysia, which we will deliver through -- without materially impacting our leverage. By accessing the accordion in the RBL, we also retain transaction-ready liquidity from which to execute further acquisitional growth in Malaysia or beyond with our focus at all times on creating and providing value to our shareholders. The disciplined approach that we have taken has been pivotal throughout EnQuest's history and has enhanced our ability to consistently optimize value from mature and -- as we transform the scale of the group, we're highly confident that our key skills are transferable across geographies and can be deployed to optimize asset value. Our next slide shows that strategically, we operate under the same principle by getting the right hand -- right assets into the right hands. The first half of the year provided more opportunities for us to demonstrate our capabilities in this action. Three very different projects, we get after value-enhancing opportunities quickly and are proactive in our approach to optimizing outcomes. Year-on-year group production, as I said, is up 9%, driven by the addition of Block 12W in Vietnam, following the acquisition of Harbour Vietnam's business. Having completed in July 2025, Vietnam added 5,000 barrels a day to the group, while our proactive approach to production enhancement came through proactive well intervention last year, which was primarily driven by our team and allowed us to extend the PSC by 4 years on the existing terms. That's an important accomplishment given others have seen dilution in working interest when extending in January. The Vietnam acquisition is a classic EnQuest deal and achieved payback within 1 year. At our existing operated PM8/Seligi field in Malaysia, we delivered the Seligi 1b gas project 9 months ahead of schedule, and that was only an 18-month schedule, so almost half the schedule, adding more than 6,200 barrels of oil equivalent of gas production. With global supply volatility impacting Malaysia's fast-growing economy, we are now proud to have been able to supply volumes 40% above our committed rates of 70 million standard cubic feet a day for much of this year. And at times, we are supplying 150 million standard cubic feet a day, 10% of the Peninsula. Together, these projects have contributed significantly to enhanced production in Southeast Asia, taking the component of production in Southeast Asia to 41%. Together, in the North Sea, Magnus's production performance has been held back by third-party infrastructure disruption, both in '25 and 2026. With Ninian Central heading towards cessation of production next year, we've led a project alongside NEO energy, our partner, the operator of the Alwyn field to create new direct export routes to Sullom Voe Terminal. Having matured the project since inception in 2025, we've now sanctioned the NCP bypass with offshore execution expected to commence in the fourth quarter of 2026 and first oil for the export solution will be delivered by next half of the year, completely eliminating the dependency on the third-party infrastructure that we have today. These types of projects reflect our commitment to disciplined investment with fast payback and proper quick execution. We're very excited also about our Kraken project as we move into the next phase of operations. And a key focus of Kraken is the enhanced oil recovery project that seems to have matured significantly in the last year. The project aims to use polymer flooding to help push the oil through the reservoir, increasing our ability to recover additional volumes from the field. This is the largest single organic opportunity within the U.K. portfolio, and we are encouraged by the latest project results and updates. We expect the project to be significantly equity enhancing. We've deployed improved polymer chemistry, which enables the design to be simplified that reduced also the topside complexity changes and lowered the cost of required modifications as well as the cost of the polymer itself. The work to ensure compatibility of reservoir chemicals with topside process equipment is now also complete with specialist third-party testing generating positive results, as you can see in the little slide above. Phase 1, which will be a pilot polymer delivery with a single drill center is expected to add approximately 5 million barrels of recoverable reserves and is a subject of a further investment decision. Phase 2, which represents the full field development, is currently estimated to add from 30 million to 40 million barrels gross, which is around 20% of the group's existing 2P reserves, a very significant addition. The project also will not be highly capital intensive as it requires really just a polymer, and we've already made allowances for the tanks, the polymer tanks in our original design when we designed the vessel. The project is working towards the next decision gate later this year, and we've challenged the team to accelerate the delivery into early 2027. Over the past 2 years, EnQuest has been clear in our focus on scaling the business and bringing in a transformational acquisition. We have delivered that through the last Malaysia acquisition, but we have also completed 4 other acquisitions in Southeast Asia, including 3 new country entries in Vietnam, Indonesia and Brunei. We've also executed a very highly accretive settlement of the Magnus contingent consideration in the U.K., a credit-enhancing deal that is very accretive, and we'll continue to work hard to crystallize the value of our U.K. tax asset via North Sea transaction or a structured transaction. Immediately ahead of us, however, is our most seminal transaction announced in June, an acquisition of offshore Malaysian assets that transforms us to a much enlarged group. The proposed acquisition adds production assets materially with material scale reserves and cash generation. Based on trailing 2025 numbers, the acquisition is expected to take the group revenues to around $1.8 billion for 2025 with more than $900 million of EBITDA and strong cash flow generation. Also, it gives us almost 1 billion barrels equivalent of total 2P and 2C resources, making us a very significant group in terms of resources. Our net working interest production increases to more than 100,000 barrels a day of oil equivalent, over 130% increase, delivering a significant rescaling of the group. Just as importantly, these are very low-cost barrels with production from the new interest carrying a unit operating cost around $10 a barrel. and we plan to deliver the new 2P volumes with a very low CapEx of about $170 million, less than $2 a barrel. This drives our overall OpEx group to $16 a barrel overall, a $10 per barrel reduction of our OpEx. Overall, this is a high-impact, strategically aligned acquisition that drives material growth while maintaining discipline to our balance sheet. This slide provides a forward view of how important this transaction is and how it demonstrates the step change in production delivered by the Malaysia acquisition with the enlarged group production remaining above 100,000 barrels a day through to the end of the decade. On the production chart, the navy blue represents our existing Southeast Asia production. The lighter blue, the additional production from the acquired assets from the Malaysia acquisition. This provides resilient base for group cash flows, both from our existing assets plus from the new assets. These are large volume, low-cost, low CapEx assets with structural commercial protections inherent in PSC operations, underpinning our confidence in future returns and future cash flows. Furthermore, the U.K. production shown in green can be maintained around current levels through continued fast payback investment in infill drilling, well intervention and reservoir management as well as continued commitment to maintaining key asset equipment to protect our top quartile performance. Our focus will be beyond this, focusing on exciting organic opportunities, just like the EOR Kraken project that we mentioned and the potential to progress Bressay and Bentley 2C resources into 2P. These are 2 giant fields of 1 billion barrels in place. And I have confidence that our team, if allowed to develop these fields, will be able to do so given the right regulatory and fiscal climate. You can also see that we've materially increased and diversified our 2C resource base, as well as adding 65 million to 100 million barrels in recovery factor enhancement volumes in Malaysia. Importantly, these recovery factor improvements correlate directly with our core skills and come at low capital costs. The slide highlights the shift in balance within the portfolio mix with Southeast Asia becoming increasingly important alongside the U.K. base and the relative contribution of Southeast Asia and gas adding to the production mix and growing it. The transaction not only delivers diversification in our portfolio, in our gas share, but both in numbers of fields and geographically also. An emerging change in our calculus of our asset reviews is now competition for capital within our expanded portfolio, which ensures that we allocate our investment to projects which generate the best value for shareholders. This last slide that I have talks about our 2C resource and recovery factor enhancement, which is really the future. Building on the previous slide, you can see the detailed evolution of our resource base with the enlarged group now materially less reliant on the North Sea field development, it was once. Bressay and Bentley, each being 1 billion barrels remain part of our opportunity set, but no longer dominate the opportunity set. Given the prevailing fiscal regulatory environment in the U.K., that is very important. We look forward to more positive investment climate in the U.K. that would enable us to develop these outstanding fields and resources. However, with a robust long-life 2P production profile, this 725 million barrels of contingent resources provide the volume engine that will enable us not only to mitigate natural field declines, but also look at increasing production in low recovery fields like the ones being acquired in Malaysia with some as low as 16% recovery factor and 19% recovery factor and more than 2 billion barrels in place in Balingian field, for example. In particular, recovery factor enhancement will come from low-cost well intervention, reservoir optimization and topside process improvements, exactly the kind of activities we deliver routinely as top quartile operator of assets. offering material low CapEx opportunities that we can pursue upon assuming operatorship of the assets on the 1st of January 2027. I'll now hand over to Jonathan, who will take you through our first half financials.

Great. Thanks very much, Amjad. So as you've heard from Amjad, the first half of 2026 was a period of strong cash flow generation. It's also a period where we took a number of strategic steps where we continue to simplify and strengthen the balance sheet and focus on growth. That was delivered against the backdrop of 9% production growth, but also the commodity price environment was both elevated and volatile. Revenue that we reported in the period totaled $530 million, and that includes a $79 million noncash unrealized hedging adjustment. Stripping that out, cash revenue was $609 million, and that was up 18% year-on-year. We also, as Amjad mentioned, had the impact of the downside -- sorry, of the downtime on Magnus. And the way that is expressed in the financial results is that a cargo was deferred out of the first half of 2026, and that had a cash impact of about $60 million. Cost of sales were $480 million. Now this was a rise year-on-year, but about $40 million of that rise accounts for noncash or mark-to-market adjustments on our hedges and 75% of that $40 million was noncash. If we focus on the underlying production costs, there are 2 important moving parts to highlight. First of all, we include Vietnam production for the first 6 months, and those weren't present, those volumes in the first half of 2025. The addition of Vietnam production added $25 million of operating costs to the group portfolio. The other significant moving part in the period were diesel costs. In this environment of higher oil prices that restricted refining capacity, diesel costs have risen significantly, up 40%. Now we use diesel across our facilities, but the team has proactively been managing our diesel usage and has managed to reduce it significantly as well. And the benefit of that will be seeing in the second half of 2026. Adjusting for the new contribution of Vietnam and these diesel costs, our underlying production costs for the period actually reduced year-on-year. We also, on the income statement report a tax charge of $15 million, and this reflects taxation both in the U.K., where we pay EPL and also in Southeast Asia. Adjusted EBITDA for the period was $273 million, which is a 13% rise year-on-year. I think the best way, though, to tell the story of the first half of '26 is to look at cash flow. Operating cash flow in the period was $281 million, and that's a 31% rise year-on-year. In the first half, we invested $78 million in CapEx and $28 million in decommissioning. And then after our interest costs, lease payments and taxation, we generated $71 million of free cash flow. And that without any additional costs would have translated to a net debt of $383 million. It's also important again to pause and just reflect on the fact that the impact of the Magnus downtime impacted these cash numbers by $60 million. Now in the first half, on top of that operating performance, we also made a number of strategic investments. The first of these was the purchase of the Magnus contingent consideration for $60 million. We also refinanced our bonds and extended our RBL through the activation of the accordion. Costs associated with this were $43 million, but $20 million of that were early redemption fees on the older bonds and the OID issuance. We also, in the period, paid a deposit on our Malaysia acquisition, which was $28 million. At the end of the period, reflective of that combination of strong operating cash flow and those strategic items of spend, net debt totaled $517 million, and the cash balance was $206 million. As we move towards the acquisition of the strategic acquisition in Malaysia, of course, it's really important to reflect on our capital structure. That capital structure is the foundation from which we deliver our company, and our focus in the last 2 years has been on simplifying the capital structure and building strong liquidity in order to deliver a transformational transactional step change in our operations. You'll remember that in the fourth quarter of last year, we refinanced our RBL. And then the acquisition of the Magnus contingent consideration was a strongly credit-enhancing transaction, which unlocked a 38% increase in the borrowing capacity on our existing assets within the portfolio. At the 30th of December, our RBL was undrawn at -- sorry, 30th of June, our RBL was undrawn at $400 million. And as previously reported, we have expanded the loan tranche, the $400 million loan tranche to $700 million through the exercising of the accordion -- partial exercise of the accordion option on the RBL. In the period, we refinanced our U.S. dollar bonds -- and through that process, we extended the maturity to 2031, both our RBL and bond maturities are out in 2031 now, and we reduced our borrowing cost by 175 basis points. We also took the opportunity there to redeem our sterling-denominated bonds, and we now have a simple capital structure, which is distributed between dollar bonds and RBL. As I mentioned, cash on hand at the 30th of June was $206 million, and we had transaction-ready liquidity of $759 million, which was an $80 million expansion versus the 31st of December 2025. An absolute pillar though, of our growth strategy, of course, is to be acquiring cash-producing assets. And as is summarized on the right of this slide using the prospectus information, although we are utilizing our balance sheet to buy the Malaysian assets, this has a very significant increase on our EBITDA generation. And so our net debt-to-EBITDA ratio on the basis of the enlarged group post the transaction would be 1.1x, which is only a very small rise over the 0.9x that we reported at the 31st of December 2025. Moving to the transaction time line. We've made a number of really important steps in recent weeks. We received the strong support of our shareholders through the vote to approve the acquisition. And in very short order, we then received the PETRONAS approvals, which means all of the conditions precedent have now been met for completion to proceed on the 31st December. Between now and the 31st of December, our focus is on work streams that are all built around operatorship transfer so that we are ready to operate from that 31st December completion date. Post completion, almost immediately, our enlarged group will be readmitted to trading. But stepping back from all of this, I think it's worth also just thinking again about that growth pathway, which we have been outlining. On calls like this over the last year or 2, we've consistently talked about what our acquisitional template is. We've talked about being very, very focused on buying assets that are in production, which have robust production profiles and low levels of CapEx and also low or no decommissioning liabilities. And I think at times when we talked about that, it's almost looked like a wish list of the perfect. However, that is exactly what we have delivered through this Malaysian acquisition. This is a deal that not only increases the volume metrics of our business, but it very clearly is a step change in value as well. Volumetric, production will rise 134% and reserves and resources 56%. But as Amjad has already said, we would see group costs falling -- operating costs falling by 35% to about $16 a barrel and very low levels of forward CapEx to deliver those profiles and a near doubling of our EBITDA. So these -- as we look to the future, both operationally and financially, we are on the cusp of completing this deal, which will rescale the business. It fundamentally diversifies our earnings and operations, and it is a step that will deliver robust, predictable cash flow throughout the commodity cycle. So I'll hand back to Amjad now for some concluding remarks.

Thank you very much, Jonathan. And as you can see, we've had also a transformational shift in our balance sheet and then the simplicity and the robustness of our balance sheet. I want to just kind of finish with reiterating our targets for 2026. As we announced this morning, we are narrowing our expected production to 41,000 to 43,000 barrels a day, which is the lower half of our original 41,000 to 45,000. And this has been really driven by the NCP impact on Magnus, the 4,000 barrels a day reduction in the first half. To counter that, we have seen a 50% increase in Seligi, which is 4,500 barrels a day, and that has been outperforming our expectations. The cost guidance at $670 million, while the shareholders among you will also be aware that we paid out an increased dividend in June of $20 million. This has been a busy period as we close out planned production shutdowns and the return to drilling at both Magnus and at PM8/Seligi in the coming weeks. We're also progressing the NCP bypass, which we recently sanctioned to eliminate, as we discussed, the third-party risk on Magnus production. We remain highly across our portfolio, and we'll continue to challenge our teams to maximize outputs ahead of the upcoming period of production growth. We're also benefiting from the period of elevated commodity prices, as you've seen at our realization of $87 a barrel for the first half pre-hedging and $84 post hedging. The last slide was used as an introduction to the company in the past. But really, it looks to me now that it's a new introduction to a new EnQuest with 100,000 barrels a day and 300 million of 2P resources and 1 billion barrels of 2C plus 2P resources. This really reestablishes the group as a diversified international operator that can deliver value-accretive scale. It's no small feat that we entered 3 new countries across Southeast Asia in 18 months. That speaks highly about our strategic relationships in the region and our ability to enter the region. But what speaks most highly is really the latest transaction with Malaysia, where PETRONAS has put their faith and significant assets in our hands. The group's metrics are all enhanced by this transaction, and it's clear that it's not just growth for Post, highly accretive. It's a disciplined expansion. It's high-quality assets with recovery factors that are very low, like I've said, where EnQuest's operating model and differentiated capability can unlock significant additional value. As we embark on the next phase of EnQuest's journey with production of over 100,000 barrels a day for the remaining part of the decade and around 1 billion barrels of reserves and resources to deliver. I'm excited and energized by these opportunities ahead and motivated to convert significant shareholder value. Thank you for being with us this morning. I'll now pass over to Craig to cover your questions.

Thank you very much indeed for your presentation to while Craig to review submitted I'd like to remind you the recording of the presentation along with a copy of the slides and the published Q&A can be accessed via your investor dashboard. As you can see, we've had a number of questions throughout today's presentation also pre-submitted. I'd now like to hand you over to Craig Baxter, Head of Investor Relations, to host the Q&A. Craig, put up your camera, if you don't mind. Lovely. Thank you very much indeed. Craig, please, if you could just read out the questions where appropriate to do so written from the team, I'll pick up from you at the end.

We do. Thanks very much, Paul, and thanks, Amjad and Jonathan for the presentation. So we've got a number of questions to get through, so I'll dive straight in, if I may. So starting with Malaysia and the transaction we've obviously talked about in this presentation. Just for clarification, Amjad, when the deal completes, how quickly will the production of 100,000 be attributed to EnQuest Financials? Basically, the question is, will it be immediately upon completion?

Yes, our expectation is from the 1st of January, we can accrue those barrels on completion. So yes, we are looking to include the 57,000 barrels a day in 2025 that would be on stream in -- from the 1st of January.

Great. I'll stay with you, if I may, a question from Sam at Peel Hunt. So obviously, this transaction changes the mix within the business geographically, particularly. And Sam is asking you, should investors view the new EnQuest, EnQuest 2.0, if you like, should that company is primarily a Southeast Asia growth story or a diversified international consolidator that will continue to look in the North Sea?

So as I mentioned earlier in one of the questions, I mean, you can be good to -- you can have more than one child and be focused on more than one child. So I feel that Southeast Asia and the U.K. represent areas of focus and will continue to represent the areas of focus. Now there is no question that Southeast Asia has better fiscal terms and the growth opportunities there are significant given also the new portfolio that we have. And the new calculus with us competing for capital is extremely important. So we will deploy the capital where we have the highest returns. We do still see some highly accretive opportunities in the U.K., mainly the EOR. That's why we've highlighted it. That's probably one of the most accretive opportunities that we have across the globe. And so we will continue allocating capital to the U.K. in accordance with the accretion. Now larger developments, larger CapEx requires the U.K. to have a change in fiscal regime and growth incentives for investment in the U.K., as we all know. And so we're very much hopeful that the government will take a pragmatic approach as it seems to be signaling through Minister Fahnbulleh and Prime Minister that they can see this as the lifeline that needs to be given to the industry for it to continue growing.

I think this is a question I'd probably like to hear from both of you gentlemen on actually. It's a question that came from Alejandra at JPMorgan, who was asking around -- it's building on this view of the competition for capital across the enlarged group, right? And the question is, can you talk a little bit more about the sort of group-wide investment review that we talked about in the RNS today and give a sense of how we're kind of prioritizing the opportunity set and what ultimately will determine which of these sort of incoming high-quality projects move first. And should we expect capital to be concentrated on the highest return opportunities? Or there are other considerations around PSC extension or infrastructure dependency that could influence the sequencing of these things?

I'll leave that to Jonathan to start. If I need to add something, I'll add something.

Great. Yes. No, I mean, I think the sort of stand-alone pie chart slide that Amjad presented really highlights this point, right, which is that we have a very broad opportunity set now. And I think the best way to think about it really is that we now have in place something of a sort of conveyor belt that is a series of low-cost, high-return opportunities. Now we have 2 precious resources inside our organization, which is our capital and our people's time, and we need to make sure that we're applying both in the most appropriate way. I think the simple answer is that as we go through capital project ranking, then of course, we are sifting through these opportunities using the measures you expect in terms of returns and payback and that kind of filtering process. We do also, though, in parallel with that, take a very sort of strategic view about the future of the business. We are building on this platform, a company which we want to grow significantly from this point, right? This is not the end of the journey. This is the beginning of the journey. And so we always drive our investment decisions through fundamental asset strategy. But of course, the first rank of winners are always going to be what we've always focused on, which are those fast payback, high-returning opportunities, which really are our bread and butter and have been the engine of the group to date.

Thanks, Jonathan, you want to add on that, Amjad?

I mean, just to say that the opportunity set looks really very strong now. And we are looking at -- the opportunities we're looking at are very, very fast payback and have very high investment efficiency. So it's -- I think we're very pleased with the ability both to expand the opportunity set and for the returns to be much higher. I mean Vietnam is a great example, and we will -- that's paid back in 12 months for acquisition. So strategically, sometimes we look at strategic acquisitions, which would have paid -- would have been a longer payback. But entry -- country entry was important, like Jonathan was saying. And so we probably made a decision there to enter with maybe a 2-year, 3-year payback, but we were able to achieve that in 1 year given the additional wells we put in place and the higher oil prices.

So there are other questions on Malaysia, as you probably expect. I think a lot of them have been answered through the presentation, particularly around the completion time line. So I won't focus too much on that. I'll come to you for the moment to finish up on Malaysia. James at Shore wants to know, essentially, his question is, why did -- in your view, why did PETRONAS and Petronas Carigali trust EnQuest for these highly valuable assets?

So I mean, we've been in Malaysia for over 10 years. But even as myself, it's been almost 20 years in our first project in 2005, where we introduced also the first mobile production unit, which reduced costs and was taken by Malaysia. But also in our history there, over the last 12 years. We have exhibited very strong performance, winning several times, but twice in a row, the operator of choice or the highest -- the platinum operator award twice in a row, which is -- and again, several times throughout the last 12 years, getting also an award for the best gas supplier in Peninsula Malaysia award, the best Malaysianization award several times, not just once, not just twice, the best decom operator several times. So I think these things have a lot of weight when PETRONAS looks at things. And it's not a 1-year thing. It's a 12-year thing, awards in the dozens. And I think that that's part of the calculus. So obviously, we were competitive in the price we offered, and it was a competitive process. But I do feel that the relationship with PETRONAS is a special one given our performance and given that we're part of the fabric there now that we've been there for 12 years plus.

Thanks, Amjad. So switching geography a little bit. You probably won't be surprised to learn that there have been a number of questions around additional M&A beyond the transformational deal we've announced in Malaysia. So I think the summary of those questions really is, how are things progressing in the North Sea? What opportunity do you see there? And obviously, we're now aware there's a large package on the market and it -- I think shareholders would be interested to hear your thoughts on BP's decision to leave the North Sea and what that might mean for EnQuest going forward.

Okay. I'll start with that. But Jonathan, please feel free if you want to add anything. So I mean, the U.K. still is a focus area for EnQuest. We have a large asset, which is GBP 3.4 billion of tax credits, which were earned through more than GBP 4 billion, I mean, $5.5 billion, $6 billion of investment over the last 16 years. So we have an asset which is very important, which gives us a competitive advantage of paying a lower tax because we've invested so much in the U.K. And we've developed heavy oil fields in the U.K., which have been not invested in for many decades. So I think that asset is very valuable. It allows us to have a lower tax rate than others. And that asset is becoming even more valuable as the prices are high and as less and less companies with the tax history exist. So I think we have a competitive advantage. In terms of BP, we don't comment on transactions. Clearly, there's only a handful of players in the North Sea, and there's only a handful of players that would be involved in these types of transactions. Jonathan, anything for you to add?

No. I mean, I think you summed it up. I mean we clearly have the operational skill set to build and grow value in the North Sea, and we have the fiscal advantage as well. So as -- and said, the growth parts between Southeast Asia and the North Sea are not a choice. They're parallel parts that actually reinforce each other. So I think you put it right, Amjad.

Staying to you, Jonathan, because I mean, ultimately, you're the guy who writes the checks for these things. James asking what is your comfort level when it comes to U.K. acquisition activity? What's comfort's your comfort level taking on additional decommissioning liabilities within the group?

I mean, clearly, historically, our business model has been to leave as much of the decommissioning liability behind as possible. And I guess, the example -- the sort of the best example of that is Magnus, where we have 100% of the operating equity, 100% of the cash flows, but only 9% of the decommissioning liability. And I think our way of looking at the world is that if we're putting time and capital to work, from a capital point of view, we really want to be putting it to work in high-margin hydrocarbon production and using all of our skills that we have to lower cost and extend asset lives rather than putting that capital to work in that decommissioning step. The business model means that we have all of those highly evolved skills in decommissioning, but the cost is on someone else's balance sheet. So I think our preference always would be to leave as much of the decommissioning liability behind as possible. And just reflecting back on the deal in Malaysia, of course, the characteristic of Southeast Asia is that the decommissioning costs are prefunded through cess contributions across the life of the PSC. So it's just a totally different equation there. So I guess the simple answer is wherever possible, we would like to focus capital on high-margin production growth.

Thanks, Jonathan. And obviously, we've talked about the Malaysian transaction and the fact that -- because we're buying producing assets, our leverage doesn't change markedly post completion. There's a few questions -- or something that I would sort of summarize and say, how would you expect to finance further transformative M&A? For example, if we did were to do something in the North Sea, Jonathan, which markets would you go to, to fund such a transaction?

Well, I think the first point is that we've spent our time focusing on simplifying and strengthening the balance sheet. The simplification is expressed by the fact that we now have an RBL, and we have a single tranche of U.S. dollar bonds. Our RBL is very strongly supported by our syndicate of 8 relationship banks. So 8 banks, $800 million and then the accordion adding another $300 million to that. So clearly, no tail in terms of banking relationships. All of our bank relationships are core. And in the bond market, we went through a very successful refinancing and those bonds are trading well. So I think we have the right ingredients for that. But I think alongside that, then the question is, what are you buying, right? And again, we're very, very focused on how we see acquisitional growth. And that is about buying assets that are in production. So I think the key thing here is that if you're using the balance sheet to finance that growth, what's essential to it is that your cash flow is also growing alongside your leverage, right? So your leverage metrics remain in the same zone. Now we've also always demonstrated great discipline and focus in terms of managing the balance sheet. And that is also reflected in the fact that we're not going to lose discipline here through acquisitional growth. And as we then digest those assets and go through the step changes in terms of free cash flow, of course, that's also a pathway to then make sure that we're delivering a strong balance sheet, which gives us a great platform for further organic investment and acquisition growth as well.

Thanks, Jonathan. And I'll come to you for the next one. And obviously, in this format of presentation as well as the analyst questions, we obviously get a lot of questions from our retail holders, some of them, of course, we know and have been with us for a long time. One of the themes that come through the questions, A, is about the valuation of the company and the relative undervaluation of the company versus a lot of analyst models and NAVs and things like that. And I guess the summary of the question would be, what's your view on that and how we can close that gap? And also, would you consider ever relisting EnQuest in a jurisdiction that's perhaps more openly supportive to the oil and gas industry?

So on the valuation, I mean, generally, the industry has been trading at a discount to NAV, and we continue to trade at discount to NAV. So I'm hopeful as we get more and more investors interested in the company and as we scale up more and more, we will get more demand for our shares, and that will try and rebalance and try and close the gap on the discount to NAV. So again, little to control there other than continue to do well and continue to expand and continue to allocate capital correctly. On the second question, we were listed in 2 locations in the U.K. and in Sweden when we started, we delisted in Sweden primarily because there was very limited shareholder holding there and also the new EU regulations are coming into effect, which would complicate our reporting. But I think we would always -- we will look at that. We can look at that in the future, especially as we pivot more and more of our assets away from the U.K. But at present, there is no plan to do that. I do think we are a unique company in the U.K. There's less companies as fewer independents in the U.K. There's 5 listed companies that are kind of our size. And so I feel that we still will be -- either way, we will still be listed in the U.K.

Okay. I mean coming to both of you and sort of sticking to the theme, again, this has come up from a lot of our retail holders, but also key that the Bank of America has asked a sort of similar question. So I'll kind of structure it for you in that way. So the first question is, in your experience and your interaction, Amjad and Jonathan with shareholders across the register, do you sense a preference for buybacks or dividends? That's sort of question number one. And question number two is how we might think about the way shareholder returns might evolve as the company grows. I think Amjad, when we announced the transaction back in June, I think you talked about shareholder returns growing as the company grows. So maybe a few words from you, gentlemen, on that would be helpful to participants in the call today.

So I guess on shareholder returns, dividend versus buyback, I mean, we have tried both. When we first started the shareholder returns, they were primarily share buybacks. And in the last couple of years, they've been more dividends. I think it just depends on where you stand on the NAV discount versus others. And yes, if it makes -- if it becomes compelling to do one versus the other. Otherwise, we will continue to look at both. Our slight preference is dividend because now that's become part of our capital allocation. And so we'll continue with our dividend as a basis. If we see there's excess returns to capital -- returns of capital to shareholders and the price is such that it justifies partially doing it, we'll leave that under consideration. And then I mean, I'll leave Jonathan to maybe comment on that, too, because this is his area of expertise, but also on the second question.

Yes. No, I mean, I think that -- I mean, I totally agree with what Amjad says, I mean, there may be -- there is a persistent structural discount between where companies like ourselves are trading and analyst NAVs. But quite honestly, that's kind of cold comfort for investors and things like that, right? So the question comes back to the same point, right, which is what are we doing to close that and how can we be proactive, right? And I think there's 2 principal things that we need to focus on as a leadership team and the Board, right? One is about delivering the business and the other one is about telling the story and making sure people understand the value proposition and that we meet new people. I think one of the things that we noticed strongly is a very, very significant expansion in the range of conversations that we're having with investors. And that really has been products of 2 things. I think broader research. We have 7-plus people writing on us producing quality notes and numbers. And we have a good story to tell, right, which has just been turbocharged by the acquisition in Malaysia. And as I said, that's the beginning, not the end, right? We want to kind of keep growing the business and having delivered a significant transaction, it's about delivering momentum, both operational and deal momentum. I think the dividend buyback thing, I think it is a journey. I mean we started with the buybacks. We've moved to paying a GBP 15 million dividend that we lifted to GBP 20 million -- it's not an either/or choice. I think Amjad is right in that there are other sort of considerations. But I think Amjad hit the nail on the head, right, which is that the dividend is a structural part of our capital allocation considerations and framework. So it's something that we will take forward into the future. And as we move through capital allocation and things, we're very focused on how we deliver value growth at the company level, but also value growth in the shareholders' pocket.

Thanks that was a very fulsome answer. Amjad, I'll come to you with a couple of stand-alone questions, if I may. The first is whether you have any comment or update on the Gaea and Gaea II prospects in Indonesia. Obviously, we put an update in the RNS, which is any comments from yourself. And of course, I'm pleased to see in my last presentation of results with us, great to see Robin Smith Taylor not let me down and asking a question about plans for the EnQuest producer, and how the future of that asset looks.

Okay. So always a question to be asked. So on Gaea and Gaea II, this is slightly unusual in terms of the fairway of EnQuest, but we -- we're very -- we're opportunistic and opportunity driven, and we found this is an area we had a team that had -- that was a local team that had expertise on the area, expertise by having data, which we had access to. And so we were able to do a joint study through -- on that area with another company, another local company. And then clearly, that area turned out to be quite important when the bids came for the PSC, we had obviously the bp Tangguh Alliance joining us, which is a great -- effectively a litmus test on how important these assets were they wanted to come in with us, we were operator and they wanted to be -- to also carry some of the costs going forward to just participate with us. So we're very excited about the opportunities, and I think we're moving them forward. But -- and so the program will be approved by the partners in the next month or so for next year. And the program is based on initially doing seismic to try and identify the areas that will further be explored. And there are discoveries in discovery wells in the block, but clearly, it's very -- the 2 blocks are very, very large onshore and offshore. And then we're looking at the opportunities, which probably they're talking about 100 Tcf of prospectivity there. But really, we are focused on the highest chance factor of success from the existing well data there. In terms of the EnQuest producer, that remains in Nigg, and it's part of the project, which is the Bressay field development project. This was the field development project in Bressay is 2 phases. Phase 1 is the gas going from Bressay to Kraken to reduce the emission of Kraken. That project is the first phase. We are looking at that, doing feasibility studies on that and sanctioning that in time for the 2030 reduction in emissions. And the second phase is an early production facility for proving the oil of Bressay, and that would include the EnQuest producer as the available vessel to do the early production facility. And that was submitted with the field development plan in the past. So that the use -- the main plan for us, both on Bressay as well as Bentley.

Thanks. And maybe to -- given in the interest of time, we're coming up on the hour. So I'll come back on any questions that we haven't got to you in this session, and I can do that offline. But if I could maybe ask you to close -- and instead of closing remarks, maybe ask a closing question that kind of came from Sam at Peel Hunt, which is when you look at the enlarged group, I'm looking ahead a little bit here. When you look at the enlarged group, what is it that excites you most about the new assets joining the business?

I mean what excites me most is they are different than the assets that we've had in the past. They're significantly different. And the reason they're different is they are the lowest recovery factor assets that we've been acquiring. Balingian has a 19% recovery factor, D35 has a 16% recovery factor. And then there are many and Balingian has 2.2 billion barrels. It's the largest field that we have in terms of oil in place by a long shot, both Thistle and Magnus were around 1 billion barrels in place, and those are the largest fields we had, but they had much higher recovery factors. They had 50% recovery factors, and we're pushing them to the 60 level. But these have low recovery factors, low-hanging fruits. They fit our business extremely well. And I'm also excited about the gas component in our assets. I mean we are now building our gas components. These are gas and oil. And that will also enable us to be a player in an important area, not only pipe gas, but I'm also looking forward to thinking about LNG because again, and the Balingian block with its field, Temana supplies gas to Malaysia LNG. So it gives us expertise in LNG. The Brunei 2 fields that we're looking at developing in Brunei, PABD, those are also going into the Brunei LNG plant. So again, I think that is exciting that we will have exposure to an area of growth and an area of the future of the energy industry.

Thank you, Amjad. Thanks, Jonathan, also for your time and obviously answering all the questions. So yes, I'll hand back to Paul now to close out and we've gone over the hour. Thank you.

Indeed and thank you all for covering those questions, as Craig said. Thanks for updating investors today. I please ask investors not to close this session to be automatically redirected to provide your feedback in order the team can better understand your views and expectations. This will only take a few moments to complete and will be greatly valued by the company. Thank you, and good afternoon to you all.

Thank you, everyone.