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DOCUMENT BY KEYWORD CONTENTS STRATEGIC REPORT IFC Uniquely positioned 01 Highlights 02 Our year in review 04 Our strategy 05 Our business model PRINT A SINGLE PAGE 06 Growing EnQuest’s asset base 07 Key performance indicators OR WHOLE SECTIONS 08 Operations – Thistle and Heather 10 Developments – Kraken 12 Acquisitions – Greater Kittiwake Area 14 Chairman’s statement 16 Chief Executive’s report 20 Risks and uncertainties 24 Operating review 33 Oil and gas reserves and resources RETURN BACK TO THE 34 Financial review CONTENTS AT THE BEGINNING 40 Corporate social responsibility review OF THE DOCUMENT GOVERNANCE 44 Board of Directors 46 Senior management 48 Chairman’s letter 49 Corporate governance statement 52 Audit committee report 56 Directors’ remuneration report 75 Nomination committee report NEXT PAGE 77 Directors’ report PREVIOUS PAGE FINANCIAL STATEMENTS 81 Statement of Directors’ responsibilities in relation to the Group financial statements 82 Independent Auditor’s report on the annual report and accounts to the members of EnQuest PLC 85 Group statement of comprehensive income 86 Group balance sheet 87 Group statement of changes in equity 88 Group statement of cash flows 89 Notes to the Group financial statements 122 Statement of Directors’ responsibilities for the Parent Company financial statements 123 Independent Auditor’s report to the members of EnQuest PLC 124 Company balance sheet 125 Notes to the financial statements 133 Company information Links Throughout this report there are links to pages, other sections and web addresses for additional information. The web links are recognisable by the light blue underline simply click to go to web URL www.enquest.com UNIQUELY POSITIONED FOR GROWTH EnQuest PLC Annual Report and Accounts 2013 An independent oil and gas development and production company CONTENTS EnQuest is an oil and gas STRATEGIC REPORT IFC Uniquely positioned development and production 01 Highlights 02 Our year in review company focused on turning 04 Our strategy 05 Our business model opportunities into value by 06 Growing EnQuest’s asset base 07 Key performance indicators targeting maturing assets and 08 Operations – Thistle and Heather 10 Developments – Kraken 12 Acquisitions – Greater Kittiwake Area undeveloped oil fields. 14 Chairman’s statement 16 Chief Executive’s report 20 Risks and uncertainties 24 Operating review 33 Oil and gas reserves and resources 34 Financial review 40 Corporate social responsibility review GOVERNANCE 44 Board of Directors 46 Senior management 48 Chairman’s letter UNIQUELY 49 Corporate governance statement 52 Audit committee report 56 Directors’ remuneration report POSITIONED 75 Nomination committee report 77 Directors’ report FINANCIAL STATEMENTS 81 Statement of Directors’ responsibilities in relation TECHNICAL SKILLS to the Group financial statements 82 Independent Auditor’s report on the annual report and accounts to the members of EnQuest PLC The Alma/Galia and Kraken developments exemplify 85 Group statement of comprehensive income 86 Group balance sheet how EnQuest is a leading force in integrated 87 Group statement of changes in equity development. The Greater Kittiwake Area transaction 88 Group statement of cash flows 89 Notes to the Group financial statements fits within EnQuest’s goals of managing maturing 122 Statement of Directors’ responsibilities for the fields and exploiting nearby discoveries and near field Parent Company financial statements 123 Independent Auditor’s report to the members exploration opportunities; it demonstrates EnQuest’s of EnQuest PLC skills as a proven acquirer of assets. 124 Company balance sheet 125 Notes to the financial statements See pages 5, 10, 12, 17, 18 and 24 et seq 133 Company information OPERATING SCALE At the end of 2013, EnQuest had a direct workforce of approximately 600, or 1,800 including offshore contractors. EnQuest has a breadth and depth of in-house expertise which is matched by few, if any, UK oil companies of its size. See pages 4, 5, 6, 8, 10, 12, 17, 18 and 24 et seq FINANCIAL STRENGTH With its strong balance sheet and strong cash flow generation, combined with its technical skills and operating scale, EnQuest is reinforcing its position as one of the top independent development partners of choice in the UK North Sea. See pages 5, 7, 14, 15, 19 and 34 et seq 01 STRATEGIC GOVERNANCE FINANCIAL EnQuest PLC Annual Report and Accounts 2013 REPORT STATEMENTS LARGEST UK HIGHLIGHTS INDEPENDENT PRODUCER Reserves 2013 IN THE UK (MMboe) ``A 52% increase in net 2P reserves, including the positive impact of delivering the sanction of the Kraken NORTH SEA +51.6% development and increasing the life of the Alma/Galia field. A reserves replacement ratio of over 850%. Total production for the ``6.2% year on year production growth, underpinned by year ending November 2013 194.8 Total production in mass units high operational up-times and strong reservoir (’000 Tonnes) performance. A well executed 2013 drilling programme, with a strong performance from Thistle, 1,200 128.5 including a new production well. Broom also delivered good well performance. 1,000 ``Good $563 million cash flow from operations and strong $621 million EBITDA1 pre-exceptionals and fair 800 2012 2013 value adjustments. `` 600 The agreed acquisition of 50% of the Greater Kittiwake Area (‘GKA’) assets, close to EnQuest’s Scolty/Crathes Production discoveries and to the Avalon prospect; providing an 400 (Boepd) additional UK hub and adding 4.7 MMboe to reserves and c.2,000 Boepd of net production. 200 +6.2% ``A further strengthened funding position, with a new credit facility for up to $1.7 billion and a £155 million 0 retail bond. 24,222 22,802 Ithaca First Oil First Fairfield EnQuest 2014 AND BEYOND Tullow Oil Tullow Endeavour Premier Oil Premier ``EnQuest plans to deliver over 15 wells in 2014. Source: Department of Energy and Climate ``Alma/Galia production to start up in H2 2014, adding Change Statistics approximately 50% to EnQuest’s average daily production. 2012 2013 ``Targeting net average 2014 EnQuest production of between 25,000 Boepd and 30,000 Boepd. ``Kraken vessel conversion to commence and further Cash flow from appraisal drilling to assess upside potential. operations `` ($ million) Integration into EnQuest of production operations on the Greater Kittiwake Area in the UKCS and the Didon -5.3% field in Tunisia. ``Drilling of Cairngorm appraisal well. ``Drilling of an exploration well on Avalon. 593.9 562.7 ``EnQuest’s end 2013 reserves have a life of over 20 years. ``With its differentiated strong development execution capability, EnQuest is well placed to continue to For more information visit capture and realise new development opportunities, www.enquest.com assuring our medium and long term growth. 2012 2013 1. EBITDA is calculated by taking profit/loss from operations before tax and finance income/(costs) and adding back depletion (adjusted for depletion of fair value uplift), depreciation, impairment, write-off of intangible oil and gas assets and foreign exchange movements. For more information visit: www.enquest.com 02 EnQuest PLC Annual Report and Accounts 2013 OUR YEAR IN REVIEW Q1 KEY ACHIEVEMENTS “EnQuest is well positioned Achievements ``Successfully issued £145 million of retail for sustainable growth” bonds. The first such UK bonds to be Amjad Bseisu Chief Executive issued in the Oil & Gas sector. ``Sanctioned the next phase of the Thistle LLX extension, following confirmation the project was eligible for a ‘brownfield’ tax allowance. ``Acquired 8% interest in the Alba producing oil field, providing net 2P reserves of 5.9 MMboe. ``Increased gross 2P reserves for Alma/ Galia from 29 MMboe to 34 MMboe by extending the field life. ``Tied-in the new W6 injector well on West Don. ``Secured the formal award of the licences offered to EnQuest in the 27th UK licensing round. ``Took on direct duty holder responsibility for EnQuest’s UK operations. ``Achieved one million man-hours without any lost time incidents (‘LTI’s) on the EnQuest Producer project. ENQUEST VALUES CREATIVITY My definition of creativity is the ability to Set to deliver C.A.G.R.1 of over 15% manipulate ideas to meet a need or solve between 2009 and 2014 a problem; the ability to explore and think Well ahead of long term target of an average of 10% growth p.a. freely and to create ideas. These define you Average net production (Boepd) as a person or in a team environment. At EnQuest, our daily business is dynamic and in the world of offshore operations being creative in our thinking is key to problem C.A.G.R. approximately 15% solving on a daily basis to deliver our targets. One of the many reasons I enjoy working for EnQuest is the opportunities the company 24,222 gives you to express yourself, both as an 23,698 25,000–30,000 individual and as part of a team of 22,802 21,074 energetic professionals. 13,613 10,150 2009 2010 2011 2012 2013 2014 John Telford Operations Manager 1. Compound annual growth rate 03 STRATEGIC GOVERNANCE FINANCIAL EnQuest PLC Annual Report and Accounts 2013 REPORT STATEMENTS Q2 Q3 Q4 Achievements Achievements Achievements ``Submitted the Field Development Plan ``Farmed out 55% of the Cairngorm ``Secured the regulator’s sanction of (‘FDP’) for the Kraken development. Drilled discovery on a promoted basis. EnQuest the Kraken Field Development Plan; a Kraken appraisal well, the results of which remains as the operator. EnQuest and its partners then sanctioned confirmed the North Kraken area; a second the Kraken development, increasing ``Acquired a 50% interest in the Avalon separate field, with a second separate £800 EnQuest’s net 2P reserves by over prospect, close to the Scolty and Crathes million heavy oil tax allowance.