2018 performance

• Acquisition of additional interests in Magnus and the Sullom Voe Oil Terminal completed in December
• Group production averaged 55,447 Boepd in 2018, up 48.2% on 2017
• Revenue of $1,201.0 million (2017: $635.2 million) and EBITDA of $716.3 million (2017: $303.6 million); higher volumes and realised prices, partially offset by the impact of commodity hedges
• Cash generated from operations of $788.6 million (2017: $327.0 million) reflecting higher EBITDA
• Cash capital expenditure of $220.2 million (2017: $367.6 million)
• Cash and available bank facilities amounted to $309.0 million at 31 December 2018, with net debt of
• $1,774.5 million (2017: $1,991.4 million)
• Net 2P reserves of 245 MMboe and net 2C resources of 198 MMboe at the end of 2018 (2017: 2P reserves of 210 MMboe; 2C resources of 164 MMboe); growth driven by acquisition of Magnus

2019 performance and outlook

• Average Group production expected to grow by around 20% to between 63,000 to 70,000 Boepd; production has averaged 67,700 Boepd in the first two months of the year
• Operating expenditure expected to be approximately $600 million, including additional interest in Magnus
• Cash capital expenditures expected to be approximately $275 million; includes a combined total of approximately $100 million related to deferred payments from prior periods and phasing of spend from 2018, mainly DC4
• EnQuest has hedges in place for c.8.0 MMbbls of oil. Approximately 6.5 MMbbls are hedged at an average floor price of c.$66/bbl. In accordance with the Oz Management facility agreement, the Group has a further c.1.5 MMbbls hedged across 2019 with an average floor price of c.$56/bbl
• Group's credit facility reduced to $730.0 million following early repayment of $55.0 million
• End 2019 Net debt to EBITDA ratio expected to be approaching 2x; EnQuest's target is between 1x and 2x

EnQuest Chief Executive, Amjad Bseisu, said:
"In 2018, the Group met its financial and operational targets. Production increased by 48%, just above the midpoint of our guidance, which, along with strong cost control, drove a significant improvement in cash generation allowing the Group to reduce net debt.

"FPSO performance has been the main limiting factor in achieving Kraken's full production potential. As such, our clear operational priority is to improve Kraken's FPSO uptime and efficiency. We are working with the FPSO operator on a number of improvement initiatives.

"We are committed to further reducing our debt, and expect our net debt to EBITDA ratio to trend towards 2x this year and intend to operate within our 1-2x target in the future.

"The acquisition of Magnus has added material value to the business through significant production and reserve growth, and the application of our production enhancing capabilities are already improving performance above original expectations.

"In the near term, we remain focused on investing in short-cycle projects which maximise cash flow and allow us to deliver on our plans to reduce our debt. We have opportunities for low-cost material growth in near-field, short-cycle infill and tie-back investments, particularly at Magnus, PM8/Seligi and Kraken.

"Longer term, our capital allocation will balance investment to develop our asset base, returns to shareholders and the acquisition of suitable growth opportunities."

2018 performance summary

During 2018, the Group was focused on meeting its financial and operational targets and facilitating debt reduction. The successful acquisition of Magnus, the Sullom Voe Terminal and related infrastructure assets from BP was a great testament to our people's focus on delivery and excellent team collaboration. The Group's collective efforts delivered a set of assets with a strong strategic fit into the portfolio. EnQuest's cash generation capability has improved through the acquisition of Magnus in particular and the Group is well positioned to meet its debt repayment schedule and capital programme in 2019 and beyond.

In line with the Group's guidance, EnQuest's average production increased by 48.2% to 55,447 Boepd, primarily reflecting the contributions from Kraken and Magnus, a better than expected performance at Heather, Alma/Galia and Scolty/Crathes, partially offset by natural declines.

The combination of significantly higher production, higher realised prices and the Group's focus on cost control resulted in EBITDA and cash generated by operations more than doubling in 2018 compared to 2017, reaching $716.3 million and $788.6 million, respectively.

As expected, cash capital expenditure of $220.2 million was materially lower than 2017. The majority of the expenditure was at Kraken, although the delayed arrival of the Transocean drilling rig resulted in the DC4 drilling programme and associated costs being phased into 2019, with the remaining spend largely reflecting drilling activities at Heather/Broom and PM8/Seligi.

Liquidity and net debt

During the year, EnQuest continued to manage its liquidity position actively and ensuring the Group is able to deploy capital and resources to those key projects which maximise cash flow to facilitate debt reduction.

In January, the Group agreed to receive $30.0 million in cash from BP in exchange for undertaking the management of the physical decommissioning of the Thistle and Deveron fields and making payments by reference to 4.5% of BP's decommissioning costs of these fields when spend commences. Following shareholder approval at the General Meeting held in October, EnQuest received a further $20.0 million in cash in exchange for increasing its total payment obligation of BP's decommissioning costs of the Thistle and Deveron fields by 3.0% to 7.5%.

In February, the Group completed the $37.25 million refinancing agreement in relation to its Tanjong Baram project, providing approximately $25.0 million in additional liquidity.

In September, the Group agreed $175 million of financing with funds managed by Oz Management. The financing is ring-fenced on a 15% interest in the Kraken oil field and will be repaid out of the cash flows associated with the 15% ring-fenced interest over a maximum of five years.

In October, following shareholder approval at the General Meeting, net proceeds of around $128.9 million were raised through a rights issue in which the Group received valid acceptances in respect of 95.5% of the total number of new ordinary shares offered pursuant to the rights issue. $100.0 million of the proceeds were used to fund EnQuest's share of the consideration in relation to acquiring the remaining 75% interest in Magnus and additional interests in the Sullom Voe Terminal and associated infrastructure. The balance will be used to fund a two-well infill drilling programme in 2019.

During the year, the Group's improved cash generation and the Kraken financing agreement facilitated the cancellation and repayment of $340.0 million of the Group's credit facility.

At the end of the year, net debt was reduced by 10.9% to $1,774.5 million, with total cash and available facilities of $309.0 million, including ring-fenced accounts associated with Magnus, the Oz Management facility and other joint venture accounts totalling $107.3 million.

Reserves and resources

Net 2P reserves at the end of 2018 were 245 MMboe (2017: 210 MMboe) and have been audited on a consistent basis with prior years. This represents a reserve life of 13 years. The reserve replacement ratio was 184%, driven by the acquisition of an additional 75% equity interest in Magnus. Net 2C resources at the end of 2018 were 198 MMboe (2017: 164 MMboe) and included an additional 40 MMboe of 2C resources associated with the Magnus acquisition.

2019 performance and additional outlook details

At Magnus, performance has remained strong through the first two months of the year. FPSO performance has continued to limit production performance at Kraken. All DC4 wells are now onstream and, as FPSO maintenance activities are completed, production is expected to significantly improve. We continue to expect to deliver gross production of between 30,000 and 35,000 Bopd from Kraken. Elsewhere across the portfolio, aggregate production has been broadly in line with the Group's expectations.

2019 production is expected to grow by around 20% to between 63,000 and 70,000 Boepd, primarily driven by Magnus. Production from DC4 at Kraken, where all three wells are now onstream, and the anticipated improvement in performance at Scolty/Crathes following the installation of the replacement pipeline scheduled for the third quarter of 2019 are expected to offset natural declines elsewhere across the portfolio.

The successful delivery of the capital programme, which includes drilling at Kraken, Magnus and PM8/Seligi combined with project-related expenditures at Scolty/Crathes and Thistle/Deveron and the Dons, will underpin production during 2019 and beyond.

Debt repayment remains the priority for the Group, and will be enabled through its improved cash-generation capability combined with its focus on cost control and capital discipline. In March, the Group reduced its credit facility by $55.0 million to $730.0 million, ahead of the scheduled amortisation due in April, which now has a balance due of $50.0 million. At the end of 2019, the Group expects overall net debt to EBITDA to be approaching 2x, with the Group intending to operate between 1x and 2x in the future.

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