EnQuest : 2020 Full Year Results (Report)

Providing creative solutions through the energy transition

Annual Report and Accounts 2020

Our purpose

Providing creative solutions through the energy transition

Our strategy

EnQuest's strategic vision is to be the operator of choice for maturing and underdeveloped hydrocarbon assets by focusing on operational excellence, differential capability, value enhancement and financial discipline.

Our business model

Contents

STRATEGIC REPORT 01 Highlights

1. Stakeholder engagement

1. Key performance indicators

1. Our purpose

1. Protecting our people

1. Chairman's statement

1. Chief Executive's report

1. Transforming our business

1. Operating review

1. Reserves and resources
2. Hydrocarbon assets
3. Financial review

1. Environmental, Social and Governance
   34 A responsible operator
   38 Our people and communities
   46 Robust risk management framework

1. Business conduct
2. Task Force on Climate-related Financial Disclosures

CORPORATE GOVERNANCE

64	Board of Directors
66	Executive Committee
68	Chairman's letter
70	Corporate governance statement
75	Audit committee report

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STRATEGIC

PILLARS

BUSINESS

FOCUS

BUSINESS

MODEL

Deliver

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82	Directors' remuneration report
102	Governance and nomination
105	committee report
Safety, climate and risk
107	committee report
Technical and reserves
109	committee report
Directors' report

FINANCIAL STATEMENTS

1. Statement of Directors' Responsibilities for the Group Financial Statements
2. Independent Auditor's Report

to the Members of EnQuest PLC

125	Group Income Statement
126	Group Balance Sheet
127	Group Statement of Changes

De-lever Grow

in Equity

128 Group Statement of Cash Flows

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129 Notes to the Group Financial

Statements

169	Statement of Directors'
	Responsibilities for the Parent
170	Company Financial Statements
Company Balance Sheet
171	Company Statement of Changes
172	in Equity
Notes to the Financial Statements

Read more

See pages 01, 06 to 07, 10 to 23 and 26-33

1. Glossary - Non-GAAP measures

1. Company information

Strategic report

Corporate governance

Financial statements

Highlights

EnQuest's quick and decisive actions in early 2020 have transformed the Company, materially lowering its cost base and free cash flow breakeven1. Production for the year was in line with guidance, reflecting a better than expected performance

at Kraken offset by lower production in Malaysia, while operating and capital expenditures were reduced by $296 million. Free cash flow generation of $211 million was strong, facilitating a further reduction in net debt. Business performance gross profit of $71.4 million was 84.8% lower than 2019, primarily reflecting lower market prices for oil. The Group recorded a Business performance loss before finance costs and tax of $20 million, reflecting the increased non-cash decommissioning provision for fully impaired assets.

The proposed acquisition of the Golden Eagle assets in the UK North Sea will strengthen the business, adding material low-cost production and cash flows.

2020 statutory reporting metrics

2020 performance

Net production (Boepd)

59,116

-14%

Unit opex1

($/Boe)

15

-26%

EBITDA1

($ million)

551

-45%

Free cash flow breakeven2

($/Boe)

32

-35%

2021 outlook3

Net production range (Boepd)

c.46,000 to 52,000

Operating expenditure

($ million)

c.265

Cash capital and abandonment expenditure

($ million)

c.120

Read more

See pages 04, 10 to 23 and 26 to 31

2020	2019	Change
$m	$m	%

Revenue and other operating income	865.6	1,646.5	(47.4)
Profit/(loss) before tax	(566.0)	(729.1)	22.4
Basic earnings/(loss) per share (cents)	(37.8)	(27.4)	(38.0)
Net cash flow from operating activities	522.1	962.3	(45.7)
Net assets/(liabilities)	(64.6)	559.1	(114.0)

Notes:

1. See reconciliation of alternative performance measures within the 'Glossary - Non-GAAP measures' starting on page 176
2. Based on the Group's aggregate cash outflows prior to any debt repayments and $37.3 million of Magnus-relatedthird-party gas purchases divided by net working interest production
3. Based on the Group's existing portfolio

This Strategic report includes details of EnQuest's strategy, business model, capabilities, Values, performance and key risks. The Group's performance since the last Annual Report and current outlook is covered within the Chairman's statement, the Chief Executive's report, the Operating and Financial reviews and the Environmental, Social and Governance section.

Unless otherwise stated, all figures quoted in the Strategic report are on a Business performance basis and are in US Dollars.

EnQuest PLC

Annual Report and Accounts 2020

01

Stakeholder engagement

Section 172

Statement

The Directors have always had regard for the potential impact of the Group's activities on its various stakeholders.

In the majority of cases, information and feedback are provided throughout the year to the Directors by the Group's Executive Directors, senior and functional management and external advisers through a variety of Board reports, presentations and ad hoc correspondence. When appropriate, the Directors may advise further engagement is required, which could potentially be direct engagement by the relevant Director, and/or request additional information to ensure they have a full appreciation of a given situation prior to making any decisions. As such, the Directors are able to fulfil their duty to promote the long-term success of the Company for its stakeholders.

The Directors consider the items disclosed on the following page to be principal decisions on the basis of materiality of the incremental impact these are anticipated to have on

a number of stakeholders and/or the Company.

Stakeholder	Why they are important	Direct Board-level
engagement in 2020
A. Workforce	Our employee and contractor workforce is critical to	Employee forum; video
	the delivery of SAFE Results and EnQuest's success.	messages; subject matter
	As such, we are committed to ensuring EnQuest	expert virtual attendance at
	remains a great place to work. We have a strong set	Board and Board Committee
	of Values that underpin our way of working and are	meetings; physical and virtual
	dedicated to delivering SAFE Results. We provide a	safety leadership
	rewarding work environment, with opportunities for	engagement visits, corporate
	growth and learning while contributing to the	purpose evolution; and
	delivery of our strategy.	interactive virtual town halls.
B. Investors	Our investors support management in the execution	Virtual meetings, calls and
	of EnQuest's business strategy, including the	direct correspondence in
	provision of capital for management to develop	relation to the Group's
	the business in order to deliver returns in a	financial and operating
	responsible manner.	performance, purpose
		statement, ESG philosophy,
		emissions reduction targets
		and the Group's proposed
		Remuneration Policy updates.
C. Partners	We collaborate with our joint venture partners,	None.
	securing their support to deliver our asset plans. We
	value their contribution to the effective operational
	and financial management of our assets as we
	deliver on our business strategy.

D. Host	EnQuest works closely with the host governments	Video meetings and calls with
governments	and regulators in the jurisdictions in which it	the Oil and Gas Authority in the
and regulators	operates. The Group complies with the necessary	UK and Malaysian Petroleum
regulatory requirements, including those related to	Management in Malaysia.
	environmental matters such as reducing emissions,
	to ensure the Company maintains a positive
	reputation and licence to operate, enabling the
	effective delivery of the Group's plans for its existing
	portfolio and providing access to appropriate
	growth opportunities.
E. Suppliers	EnQuest relies on its suppliers to provide specialist	None.
	equipment and services, including skilled
	manpower, to assist in the delivery of SAFE Results.

1 Based on the Group's existing portfolio at 1 January 2021

F. Communities	Making a positive contribution and appropriately	None.
	managing our environmental impact in the
	communities in which we live and work around the
	world remains a key part of our activities. Our
	communities provide a potential source of
	employees, contractors and support services, and
	are important in supporting EnQuest's social licence
	to operate and maintaining a positive reputation.
G. Customers	Our customers help facilitate the provision of	None.
	hydrocarbon-related products to meet a variety of
	consumer demands and, as such, require a reliable
	supply of hydrocarbons to meet their needs.

02

Annual Report and Accounts 2020

EnQuest PLC

Strategic report

Corporate governance

Financial statements

Other 2020 activities

See pages 16 and 17 for an overview of the UK's Transformation 2020 programme and pages 38 to 43 of the ESG section which detail the various people-related initiatives implemented during the year, including the employee survey results and our people's safety and wellbeing, particularly in relation to the asset integrity issues faced in 2020, combined with the dual impacts of EnQuest's response to COVID-19 (also see pages 08 to 09) and the UK Transformation programme.

See the Strategic report on pages 01 to 63 which explains the Company's performance and investment decisions during 2020.

Page 72 of the Corporate governance statement outlines how the Group engages with its investors.

The Group has regular engagement with its joint venture partners on day-to-day asset management and the execution of the longer-term asset strategy. This occurs through a combination of formal interactions, governed by joint operating agreements, and via informal engagement, including sharing of relevant industry experience, insights and best practice and/or developing performance improvement initiatives.

See pages 18 to 23 of the Strategic report for further details on operational and financial activities and decisions undertaken across our assets.

Joint venture partners are recognised as one of the Group's principal risks and uncertainties on page 57.

For further details, see pages 08 to 09 for our COVID-19 response which was aligned to government and regulatory advice, the Strategic report on pages 01 to 63 and the Group's Principal Risks and Uncertainties on pages 46 to 59, which outline EnQuest's strong relationships with governments and regulators. Pages 32, 33 and 63 of the ESG section and pages 110 to 113 of the Directors' Report outline further details on the Group's regulatory compliance activities.

The Group has continued its active and positive engagement with its suppliers through various supplier forums, performance reviews, ad hoc virtual meetings and industry events, including those related to the Group's future decommissioning programmes. The Company continues to monitor and report its supplier payment performance. Please also see the Group's Principal Risks and Uncertainties on pages 46 to 59, a number of which are impacted by the Group's supplier relationships.

For further details on the Group's community engagement and environmental considerations, see pages 32, 33 and 45 of the ESG section, with the importance of maintaining a positive reputation outlined in the Group's Principal Risks and Uncertainties on page 50.

The Company has maintained strong relationships with its existing customers, including fuel oil blenders to whom it supplies Kraken oil as an unrefined constituent of IMO 2020 compliant low-sulphur bunker fuel. By selling directly to the fuel oil market, Kraken cargoes avoid refining‑related emissions.

Principal decision and impacted	Stakeholder impacts considered
stakeholders
Cessation of production	Separate cessation of production decisions were made
decisions	for the Heather and Thistle assets in early 2020, however
	the stakeholders impacted and the associated
Impacted stakeholders:	considerations are the same
Role reductions and change in day-to-day activities
A, B, C, D, E, F and G
balanced by new decommissioning and/or other
	asset/office roles
	Lowering of production targets and reserves and
	resources balanced by re-focusing the Group's
	operations on the lowest cost assets; impacts on
	near-term cash flow and liquidity balanced with
	long-term reserve and resource maturation and
	development
	Decommissioning activities impacting production and
	cash flows
	Change in focus for supply chain, sector employment
	and lower UK North Sea CO2e emissions
	Changing focus for and timing of supply chain activities
	Impacts on the local economy
	Potential cargo delivery interruption and impact on
	product blend
Business transformation and	Role reductions and change in day-to-day activities
deferral of investment	balanced by new decommissioning and/or other
programmes	asset/office roles
	Lowering of production targets and reserves and
Impacted stakeholders:	resources; impacts on near-term cash flow and liquidity
A, B, C, D, E and F	balanced with long-term reserve and resource
maturation and development
	Decommissioning activities impacting production and
	cash flows
	Change in focus for supply chain and sector
	employment
	Changing focus for and timing of supply chain activities
	Impacts on the local economy
Environmental, Social and	Clear and transparent articulation of EnQuest's
Governance ('ESG') strategy,	approach to ESG, demonstrating that its business
and particularly committing to	model is the right one from a financial perspective, and
a 10% reduction in Scope 1 and 2	that it makes a positive contribution to society by
supporting government, regulators' and societies' goals
emissions over three years from	and objectives in a prudent and economic manner,
a year-end 2020 baseline1, with	allowing informed decisions to be made by all
the achievement linked to	stakeholders
reward	Commitment from the Group's workforce to ensure
Impacted stakeholders:	delivery of carbon reduction in the Group's existing
operational portfolio
A, B, C, D, E, F and G	Developing a carbon reduction strategy and
	incorporating a carbon price in our investment
	evaluations when considering potential acquisitions
Revised Company purpose	Ensure there is a clear and transparent articulation of
	EnQuest's purpose that underpins delivery of the
Impacted stakeholders:	Group's strategy, goals and objectives to enable
A, B, C, D, E, F and G	stakeholder groups to assess the alignment of interests
and consequently impact on their likelihood of
	engagement with EnQuest
	Establishing workforce focus groups during the
	purpose development process to provide insight,
	review and challenge

EnQuest PLC

Annual Report and Accounts 2020

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