ENQUEST PLC — Regulatory Filings 2016

Oct 14, 2016

THIS DOCUMENT AND ACCOMPANYING DOCUMENTS ARE IMPORTANT AND REQUIRE YOUR IMMEDIATE ATTENTION. If you are in any doubt as to the action you should take, you are recommended to seek your own financial advice immediately from your stockbroker, bank manager, solicitor, accountant or other independent financial adviser authorised under the Financial Services and Markets Act 2000 (as amended) (the ''FSMA'') if you are resident in the United Kingdom or, if not, from another appropriately authorised independent financial adviser.

This document comprises (i) a circular prepared in accordance with the Listing Rules of the FCA made under section 73A of the FSMA and (ii) a prospectus relating to the Company prepared in accordance with the Prospectus Rules of the FCA made under section 73A of the FSMA. This document has been approved by the FCA in accordance with section 85 of the FSMA, will be made available to the public and has been filed with the FCA in accordance with the Prospectus Rules. This document together with the documents incorporated into it by reference (as set out in Part 11 (''Documents Incorporated by Reference'')) will be made available to the public in accordance with Prospectus Rule 3.2.1 by the same being made available, free of charge, at www.enquest.com, at the Company's registered office and at the offices of Ashurst LLP, Broadwalk House, 5 Appold Street, London EC2A 2HA, United Kingdom.

If you sell or have sold or otherwise transferred or do transfer all your Existing Ordinary Shares before 8.00 a.m. (London time) on 20 October 2016, being the date the shares are treated as ''ex'' the entitlement to the Open Offer, or, in the case of the Swedish Open Offer, before 9:00 a.m. (Stockholm time) on 18 October 2016, being the date the shares are treated as ''ex'' the entitlement to the Swedish Open Offer, please forward this document together with the accompanying Form of Proxy and, if relevant, Application Form that you may receive as soon as possible to the purchaser or transferee, or the stockbroker, bank or other agent through whom the sale or transfer was effected, for transmission to the purchaser or transferee except that such documents should not be forwarded or transmitted into any jurisdiction where to do so might constitute a violation of local securities law or regulation, including, but not limited to, the United States and the Excluded Territories. If you have sold or otherwise transferred part of your holding of Existing Ordinary Shares prior to such date, please consult the stockbroker, bank or other agent through whom the sale or transfer was effected and refer to the instructions regarding split applications set out in the Application Form. If your registered holding(s) of Existing Ordinary Shares which were sold or transferred were held in uncertificated form and were sold or transferred before 6.00 p.m. on 19 October 2016, a claim transaction will automatically be generated by CREST which, on settlement, will transfer the appropriate number of Open Offer Entitlements to the purchaser or transferee. Instructions regarding split applications are set out in the Application Form.

The Existing Ordinary Shares are listed on the premium listing segment of the Official List maintained by the FCA (the ''Official List'') and traded on the London Stock Exchange plc's main market for listed securities (the ''Main Market'') and listed on NASDAQ Stockholm. Application will be made to the FCA for the New Ordinary Shares to be admitted to the premium listing segment of the Official List and to the London Stock Exchange for the New Ordinary Shares to be admitted to trading on the Main Market (''LSE Admission''). It is expected that LSE Admission will become effective and that dealings will commence in the New Ordinary Shares at 8.00 a.m. (London time) on 21 November 2016. Application will also be made to NASDAQ Stockholm AB for the New Ordinary Shares to be settled under the Swedish Open Offer to be listed on NASDAQ Stockholm (''Stockholm Admission'' and together with LSE Admission, ''Admission''). The prospectus has been passported into Sweden pursuant to Chapter 2, Section 36 of the Swedish Financial Instruments Trading Act (Sw: lagen (1991:980) om handel med finansiella instrument). It is expected that Stockholm Admission will become effective and that dealings on NASDAQ Stockholm in the New Ordinary Shares will commence on or around 21 November 2016.

The distribution of this document and/or any documents issued by the Company in connection with the Placing and Open Offer and/or the accompanying documents, and/or the transfer of New Ordinary Shares in jurisdictions outside the United Kingdom or Sweden may be restricted by law and therefore persons into whose possession this document and/or any accompanying documents come should inform themselves about and observe such restrictions. Any failure to comply with any of these restrictions may constitute a violation of the securities law of any such jurisdiction. In particular, subject to certain exceptions, this document and any documents issued by the Company in connection with the Placing and Open Offer should not be distributed, forwarded or transmitted in or into the United States or any Excluded Territory. All Overseas Shareholders and any person (including, without limitation, agents, custodians, nominees or trustees) who has a contractual or other legal obligation to forward any documents issued by the Company in connection with the Placing and Open Offer, if and when received, to a jurisdiction outside the United Kingdom or Sweden should read paragraph 7 of Part 10 (''Terms and Conditions of the Placing and Open Offer'').

The Company and the Directors, whose names appear on page 59 of this document, accept responsibility for the information contained in this document. To the best of the knowledge and belief of the Company and the Directors (who have taken all reasonable care to ensure that such is the case), the information contained in this document is in accordance with the facts and does not omit anything likely to affect the import of such information.

(Incorporated and registered in England and Wales under the Companies Act 2006 with registered no. 7140891)

Proposed Placing and Open Offer of in aggregate 356,738,114 New Ordinary Shares at 23.0 pence (SEK 2.48) per New Ordinary Share, Related Party Transaction

and

Notice of General Meeting

BofA Merrill Lynch J.P. Morgan Cazenove

Joint Bookrunner Sponsor and Joint Bookrunner

The whole of the text of this document should be read in its entirety by any Shareholder and any other person contemplating a purchase of New Ordinary Shares. Your attention is drawn to the letter of recommendation from the Chairman of EnQuest PLC which is set out in Part 1 (''Letter from the Chairman of EnQuest PLC''). Your attention is also drawn to the section headed ''Risk Factors'' at the beginning of this document which sets out certain risks and other factors that should be considered by Shareholders when deciding on what action to take in relation to the Placing and Open Offer, and by others when deciding whether or not to purchase New Ordinary Shares.

The Placing and Open Offer is conditional, inter alia, on (i) the passing without amendment of the Resolutions at the General Meeting (and not, except with the prior written agreement of the Joint Bookrunners, acting jointly, at any adjournment of such meeting) on 14 November 2016 (or such later date as the Joint Bookrunners may agree) and the Resolutions remaining in force; (ii) the Company having complied with its obligations under the Sponsor and Placing Agreement and under the terms and conditions of the Placing and Open Offer which fall to be performed on or prior to LSE Admission and such agreement having become unconditional save as otherwise agreed by the Joint Bookrunners, acting jointly, and the Sponsor and Placing Agreement not having been terminated prior to LSE Admission; (iii) save for any condition in relation to Admission, the Proposed RCF Amendments and the Amendment and Restatement Agreement becoming unconditionally effective prior to LSE Admission; (iv) save for any condition in relation to Admission, the renewal of the Surety Bond Facilities becoming unconditionally effective prior to LSE Admission; (v) save for any condition in relation to Admission, the Scheme and the Proposed Note Amendments becoming unconditionally effective prior to LSE Admission; (vi) LSE Admission becoming effective by not later than 8.00 a.m. on 21 November 2016 (or such later time and/or date as the Company may agree with the Joint Bookrunners, not being later than 8.00 a.m. on 24 November 2016) and application for Stockholm Admission having been made and no notification having been received that Stockholm Admission has been refused or will not become effective on or before 24 November 2016; and (vii) the Double A Placing Letter and associated Letter of Credit being entered into by the parties thereto and having, and continuing to have, full force and effect and not having been terminated, varied, modified, supplemented or lapsing before LSE Admission. The New Ordinary Shares will, on Admission, rank in full for all dividends and other distributions declared, made or paid on the Existing Ordinary Shares by reference to a record date on or after Admission and will otherwise rank pari passu with the Existing Ordinary Shares.

In addition to this document, subject to the passing of the Resolutions, Qualifying Non-CREST Shareholders (other than, subject to certain exceptions, Excluded Overseas Shareholders and Shareholders with registered addresses in the United States or who are otherwise located in the United States) will be sent an Application Form on 20 October 2016. Qualifying CREST Shareholders (other than, subject to certain exceptions, Excluded Overseas Shareholders and Shareholders with registered addresses in the United States or who are otherwise located in the United States), none of whom will receive an Application Form, will receive a credit to their appropriate stock accounts in CREST in respect of the Open Offer Entitlements which will be enabled for settlement at 8.00 a.m. on 21 October 2016. Qualifying Swedish Directly Registered Shareholders (other than, subject to certain exceptions, Excluded Overseas Shareholders and Shareholders with registered addresses in the United States or who are otherwise located in the United States) will be sent a Pre-Printed Issue Account Statement on or about 20 October 2016. Qualifying Swedish Nominee Registered Shareholders (other than, subject to certain exceptions, Excluded Overseas Shareholders and Shareholders with registered addresses in the United States or who are otherwise located in the United States) will be provided information in relation to the Swedish Open Offer and procedures as to how to participate in it by their respective nominees. Qualifying CREST Shareholders who are CREST sponsored members should refer to their CREST sponsors regarding action to be taken in connection with this document and the Placing and Open Offer. Applications under the Open Offer may only be made by Qualifying Shareholders originally entitled or by a person entitled by virtue of a bona fide market claim arising out of a sale or transfer of Existing Ordinary Shares prior to the date on which the Existing Ordinary Shares were marked ''ex'' the entitlement by the London Stock Exchange.

The latest time and date for acceptance and payment in full under the Open Offer is 11.00 a.m. (London time) on 16 November 2016, provided that the latest time and date for acceptance and payment in full under the Swedish Open Offer is 11.00 a.m. (Stockholm time) on 16 November 2016. The procedures for acceptance and payment are set out in Part 10 (''Terms and Conditions of the Placing and Open Offer'') and, where relevant, in the Application Form, in the Pre-Printed Issue Account Statement or in the Swedish Application Form.

Holdings of Existing Ordinary Shares in certificated and uncertificated form will be treated as separate holdings for the purpose of calculating entitlements under the Open Offer. Fractional entitlements will not be allotted to Qualifying Shareholders and, where applicable, fractional entitlements will be rounded down to the nearest whole number of Open Offer Shares.

Notice of a General Meeting of EnQuest PLC to be held at Ashurst LLP, Broadwalk House, 5 Appold Street, London, EC2A 2HA, on 14 November 2016 at 9.00 a.m. (London time), is set out at the end of this document. You will find enclosed a Form of Proxy for use at the meeting. To be valid, any Form of Proxy or other instrument appointing a proxy must be received by post or by hand (during normal business hours only) in accordance with the instructions printed on the form of proxy to arrive no later than 9.00 a.m. (London time) on 10 November 2016. Completion of a Form of Proxy, or other instrument appointing a proxy or any CREST proxy instruction will not preclude a member from attending and voting in person at the meeting if he/she wishes to do so. Shareholders may also submit their proxy electronically via the internet. Details on how to do this can be found on the Form of Proxy. Holders of Existing Ordinary Shares listed on NASDAQ Stockholm held with a bank or other nominee must request a temporary registration of the voting rights in order to be able to participate at the General Meeting, such requests to be made in advance of 10 November 2016.

J.P. Morgan Securities plc (which conducts its investment banking activities in the United Kingdom as J.P. Morgan Cazenove, ''J.P. Morgan Cazenove''), which is authorised by the Prudential Regulatory Authority (''PRA'') and regulated in the UK by the Financial Conduct Authority (''FCA'') and the PRA, is acting exclusively for the Company and no one else in connection with the contents of this document, the Placing and Open Offer, Admission or any other matters referred to in this document and will not regard any other person (whether or not a recipient of this document) as a client in relation to the Placing and Open Offer, Admission or any other matters referred to in this document and will not be responsible for providing the protections afforded to its clients nor for giving advice in relation to the contents of this document, the Placing and Open Offer, Admission or any other matter or arrangement referred to in this document.

Merrill Lynch International (''BofA Merrill Lynch''), which is authorised by the PRA and regulated in the UK by the FCA and the PRA, is acting exclusively for the Company and no one else in connection with the contents of this document, the Placing and Open Offer, Admission or any other matters referred to in this document and will not regard any other person (whether or not a recipient of this document) as a client in relation to the Placing and Open Offer, Admission or any other matters referred to in this document and will not be responsible for providing the protections afforded to its clients nor for giving advice in relation to the contents of this document, the Placing and Open Offer, Admission or any other matter or arrangement referred to in this document.

Apart from the responsibilities and liabilities, if any, which may be imposed upon BofA Merrill Lynch and/or J.P. Morgan Cazenove by the FSMA or the regulatory regime established thereunder, BofA Merrill Lynch and/or J.P. Morgan Cazenove do not accept any responsibility and disclaim any liability for the accuracy, completeness or verification, or concerning any other statement made or purported to be made by it, or on its behalf, in connection with the Company, the New Ordinary Shares, the Open Offer Entitlements, the Placing and Open Offer, Admission or Stockholm Admission in this document. No representation or warranty, express or implied, is made by BofA Merrill Lynch and/or J.P. Morgan Cazenove as to the accuracy, completeness or verification of the information set forth in this document and nothing in this document is, or shall be relied upon as, a promise or representation in this respect, whether as to the past or future. Each of BofA Merrill Lynch and/or J.P. Morgan Cazenove accordingly disclaims to the fullest extent permitted by applicable law all and any responsibility and liability whether arising in tort, contract or otherwise (save as referred to herein) which it might otherwise have in respect of this document or any such statement.

In making an investment decision, each investor must rely on its own examination, analysis and enquiry of the Company and the terms of the Placing and Open Offer, including the merits and risks involved.

Overseas Territories

SUBJECT TO CERTAIN EXCEPTIONS, THE PLACING AND OPEN OFFER DESCRIBED IN THIS DOCUMENT IS NOT BEING MADE TO SHAREHOLDERS OR INVESTORS IN THE UNITED STATES OR ANY EXCLUDED TERRITORY. Neither this document nor the Application Form constitutes or forms part of any offer to sell or issue, or any solicitation of any offer to acquire, the New

Ordinary Shares offered to any person with a registered address, or who is resident or located in, any jurisdiction in which such an offer or solicitation is unlawful.

The New Ordinary Shares and the Open Offer Entitlements have not been and will not be registered under the applicable securities laws of any Excluded Territory. Accordingly, subject to certain exceptions, the New Ordinary Shares and the Open Offer Entitlements may not be offered or sold in such jurisdictions or to, or for the account or benefit of, any resident of such jurisdictions. There will be no public offer of the New Ordinary Shares or the Open Offer Entitlements in any of the Excluded Territories.

All Overseas Shareholders and any person (including, without limitation, an agent custodian, nominee, or trustee) who is holding Existing Ordinary Shares for the benefit of such persons or who has a contractual or other legal obligation to forward any documents issued by the Company in connection with the Placing and Open Offer including this document or any Application Form, if and when received, to a jurisdiction outside the United Kingdom, should read paragraph 7 of Part 10 (''Terms and Conditions of the Placing and Open Offer'') entitled ''Overseas Shareholders''.

Subject to certain exceptions, this document and the Application Form should not be distributed, forwarded or transmitted in or into the United States or the Excluded Territories or in or into any jurisdiction or to any person where the extension or availability of the Placing and Open Offer would breach any applicable law.

The New Ordinary Shares and the Open Offer Entitlements have not been and will not be registered under the US Securities Act of 1933, as amended (the ''US Securities Act''), or under the securities laws of any state or other jurisdiction of the United States and, subject to certain exceptions, may not be offered, sold, resold, taken up, transferred, delivered or distributed, directly or indirectly, in, into or within the United States. There will be no public offer of the New Ordinary Shares or the Open Offer Entitlements in the United States. The New Ordinary Shares made available pursuant to the Placing and Open Offer outside the United States are being offered and sold in offshore transactions in reliance on Regulation S. For a description of these and certain further restrictions on offers, sales and transfers of the New Ordinary Shares and the distribution of this document, see paragraph 7 of Part 10 (''Terms and Conditions of the Placing and Open Offer'').

Until the expiry of 40 days after the commencement of the Placing and Open Offer, an offer or sale of New Ordinary Shares within the United States by a dealer (whether or not it is participating in the Placing and Open Offer) may violate the registration requirements of the US Securities Act if such offer or sale is made otherwise than in accordance with an applicable exemption from registration under the US Securities Act.

The New Ordinary Shares and the Open Offer Entitlements have not been approved or disapproved by the United States Securities and Exchange Commission, any state securities commission in the United States or any US regulatory authority, nor have any of the foregoing authorities passed upon or endorsed the merits of the offering of the New Ordinary Shares or the Open Offer Entitlements or the accuracy or adequacy of this document. Any representation to the contrary is a criminal offence in the United States.

The New Ordinary Shares are subject to selling and transfer restrictions in certain jurisdictions. Prospective purchasers should read the restrictions that apply to the New Ordinary Shares as described in paragraph 7 of Part 10 (''Terms and Conditions of the Placing and Open Offer''). Each purchaser of the New Ordinary Shares outside the United States will be deemed to have made the relevant representations described therein and elsewhere in Part 10 (''Terms and Conditions of the Placing and Open Offer'').

General Notice

In connection with the Placing and Open Offer, BofA Merrill Lynch, J.P. Morgan Cazenove and/or any of their affiliates may, in accordance with applicable legal and regulatory provisions, take up a portion of the New Ordinary Shares in the Placing and Open Offer as a principal position and in that capacity may retain, purchase, sell, offer to sell or otherwise deal for its or their own account(s) in relation to the New Ordinary Shares and/or related instruments in connection with the Placing and Open Offer or otherwise. Accordingly, references in this document to New Ordinary Shares being issued, offered, subscribed, acquired, placed or otherwise dealt in should be read as including any issue or offer to, or subscription, acquisition, placing or dealing by, BofA Merrill Lynch, J.P. Morgan Cazenove and/or any of their affiliates acting in such capacity. In addition, BofA Merrill Lynch, J.P. Morgan Cazenove and/or their affiliates may enter into financing arrangements (including swaps or contracts for difference) with investors in connection with which BofA Merrill Lynch, J.P. Morgan Cazenove and/or their affiliates may from time to

time acquire, hold or dispose of New Ordinary Shares. None of BofA Merrill Lynch, J.P. Morgan Cazenove and/or any of their affiliates intends to disclose the extent of any such investment or transactions otherwise than in accordance with any legal or regulatory obligation to do so.

The Joint Bookrunners and their respective affiliates have from time to time engaged in, and may in future engage in, various commercial banking, investment banking and financial advisory transactions and services in the ordinary course of their business with the Company. They have received and will receive customary fees and commissions for these transactions and services. In addition, an affiliate of BofA Merrill Lynch and an affiliate of J.P. Morgan Cazenove are Existing RCF Lenders (as defined herein) and each such affiliate may have performed its own credit analysis on the Company. The Company does not intend to use proceeds from the Placing and Open Offer to repay bank debt.

Subject to the FSMA, the Listing Rules, the Prospectus Rules, the DTRs, the Swedish Financial Instruments Trading Act, the Swedish Listing Rules and the Swedish Securities Act, neither the delivery of this document nor any acquisition or sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since the date of this document or that the information in this document is correct as at any time after this date.

This document is dated 14 October 2016.

TABLE OF CONTENTS

	Page
SUMMARY	1
RISK FACTORS	20
IMPORTANT INFORMATION	54
DIRECTORS, COMPANY SECRETARY, REGISTERED OFFICE AND ADVISERS	59
EXPECTED TIMETABLE OF PRINCIPAL EVENTS	61
PLACING AND OPEN OFFER STATISTICS	63
PART 1—LETTER FROM THE CHAIRMAN OF ENQUEST PLC	64
PART 2—INFORMATION ON THE GROUP	90
PART 3—OVERVIEW OF ENQUEST'S MARKET	120
PART 4—OPERATING AND FINANCIAL REVIEW	126
PART 5—FINANCIAL INFORMATION ON THE GROUP .	166
PART 6—UNAUDITED PRO FORMA FINANCIAL INFORMATION	167
PART 7—CAPITALISATION AND INDEBTEDNESS	171
PART 8—TAXATION	173
PART 9—ADDITIONAL INFORMATION	178
PART 10—TERMS AND CONDITIONS OF THE PLACING AND OPEN OFFER	247
PART 11—DOCUMENTS INCORPORATED BY REFERENCE	275
PART 12—TECHNICAL TERMS	276
PART 13—DEFINITIONS	279
NOTICE OF GENERAL MEETING .	288

SUMMARY

Summaries are made up of disclosure requirements known as ''Elements''. The Elements are numbered in Sections A–E (A.1–E.7).

This summary contains all the Elements required to be included in a summary for this type of securities and Issuer (defined below). Because some Elements are not required to be addressed, there may be gaps in the numbering sequence of the Elements.

Even though an Element may be required to be inserted in the summary because of the type of securities and Issuer, it is possible that no relevant information can be given regarding the Element. In this case a short description of the Element is included in the summary with the mention of ''not applicable''.

	Section A—Introduction and Warnings
A.1	Introduction and warning to investors:	This summary should be read as an introduction to this document. Any decision to invest in the new ordinary shares of 5 pence each in the share capital of the Company (''New Ordinary Shares'') should be based on consideration of this document as a whole. Where a claim relating to the information contained in this document is brought before a court, the plaintiff investor might, under the national legislation of the relevant member state of the European Economic Area, have to bear the costs of translating this document before the legal proceedings are initiated. Civil liability attaches only to those persons who have tabled the summary including any translation thereof, but only if the summary is misleading, inaccurate or inconsistent when read together with other parts of this document or if it does not provide, when read together with the other parts of this document, key information in order to aid investors when considering whether to invest in the New Ordinary Shares.
A.2	Consent for intermediaries:	Not applicable. The Company has not given its consent to the use of the document for subsequent resale or final placement of securities requiring a prospectus by financial intermediaries.
	Section B—Issuer
B.1	Legal and commercial name:	EnQuest PLC (''EnQuest'' or the ''Company'').
B.2	Domicile and legal form, applicable legislation and country of incorporation:	The Company was incorporated and registered on 29 January 2010 in England and Wales as a public company limited by shares under the Companies Act 2006 with registered number 7140891.

B.3	Current operations/ principal activities and markets:	EnQuest is the largest independent UK oil producer in the UK North Sea (as last measured for the twelve months ended 31 May 2016) and had interests in 29 UK production licences, 26 of which the Group operates, covering 41 blocks or part blocks in the UKCS as of 30 June 2016. In addition, the Group has interests in Malaysia through its PM8/Seligi PSC and the Tanjong Baram SFRSC. The Group's average daily production on a working interest basis for the six months ended 30 June 2016 was 42,520 boepd. The Group's average daily production on a working interest basis for the year ended 31 December 2015 was 36,567 boepd and its net 2P reserves were 203 MMboe as of 31 December 2015. As a result of the increase in the Group's interest in the Kraken development from 60 per cent. to 70.5 per cent., its net 2P reserves increased to 216 MMboe as of 1 January 2016. In the six years since EnQuest's inception, it has increased its net 2P reserves to 216 MMboe as of 1 January 2016, representing a net 167 per cent. increase or a growth of 18 per cent. per annum, and converted the equivalent of 68 per cent. of its original 81 MMboe reserves into produced oil. As of 31 December 2015, the Group's assets had a reserve life of 18 years.
		EnQuest's strategic intention is to deliver sustainable growth by focusing on exploiting its existing reserves, commercialising and developing discoveries, pursuing selective acquisitions and converting contingent resources into reserves. In the current low oil price environment, the Company's priorities are to deliver on execution, streamline operations and strengthen its balance sheet. The Group's producing assets generated EBITDA of \$464.8 million during 2015. During the first half of 2016, the Group's producing assets generated EBITDA of \$242.9 million, representing an increase of \$16.2 million, or 7.1 per cent., over the first half of 2015.
B.4a	Significant recent trends affecting the Company:	Since 30 June 2016, the date of the Group's most recent unaudited interim financial statements, the Group has delivered against its strategic priorities in the continuing lower price environment. Further action to reduce operating and capital expenditure has been accompanied by sustained strength in operations.
		The Group announced in September 2016 that as a result of the further phasing of milestone payments and despite additional capital expenditure on drilling the Eagle discovery it was expecting to reduce full year 2016 cash capital expenditure by approximately \$30 million. The Kraken and Scolty/Crathes development projects are continuing ahead of budget; the Kraken FPSO is on track for sail away in the second half of 2016 and for first oil in H1 2017. In October 2016, the Group is now reducing its gross full cycle capital expenditure estimate for Kraken by approximately a further \$100 million, down to approximately \$2.5 billion, mainly as a result of better performance on drilling and subsea production systems. The Kraken FPSO is very close to mechanical completion, with the focus now on pre-commissioning and commissioning activities. All four engines and boilers are mechanically complete. The latest reductions in the overall full cycle gross capex estimates for Kraken reduce EnQuest's 2016 net cash capital expenditure by a further \$50 million, now down to between \$620 million and \$670 million. The Scolty/Crathes development is also ahead of schedule, with first oil expected to be delivered around the end of 2016. Average production guidance for the full year 2016 continues to be in the range of 42,000 Boepd to 44,000 Boepd. Unit operating expenditure for the first half of 2016 was \$23/bbl, ahead of target. The Company anticipates full year unit operating expenditure around the lower end of the \$25-\$27/bbl guidance for the full year 2016. The Company continues to seek cost reductions across the supply chain.

		Substantial works have continued on Alma/Galia. The K1 (AP4) well required a chemical treatment which has been successful and the workover of the K3z (AP1) well, was carried out by early August, further increasing production. The drilling of well K7, the replacement for the uncompleted K6, is in progress, with completion operations underway. K7 should be online around the 2016 year end. On GKA, the planned shutdown during the second half of the year was delivered securely and successfully.
		In line with its internal financial policies, the Group has continued to enter into hedging arrangements. Since 30 June 2016, the Group has hedged 1MMbbl of 2017 production (83kbbls/month) at a fixed price of \$51.50/bbl. The Group has also sold 500,000 bbls per month for the first half of 2017 (3 MMbbls total) at a fixed price of \$49/bbl and has bought a call (nil cost) for the same notional quantity, with a strike price of \$57.25/bbl. Should the price rise above \$57.25/bbl, the Group will receive the difference to offset the loss it would make on the \$49/bbl swaps. In addition, the Group has hedged 500,000 bbls for the first half of 2017 at \$54.50/bbl.
		The Directors have also proposed the Restructuring, including the Placing and Open Offer, to improve the Group's capital structure and to improve the ongoing liquidity position of the Group. The Directors expect that the proceeds of the Placing and Open Offer will enable the Group to complete the developments of Kraken and Scolty/Crathes, which the Directors expect will lead to both significant increases in production and significant decreases in average operating costs across the Group.
B.5	Description of the Group and the Company's position therein:	The Company was incorporated in 2010 and is the ultimate parent company of the Group, which comprises the Company and its subsidiaries.

B.6	Interests in the Company and voting rights:	As at the Latest Practicable Date, the interests (all of which are or will be beneficial unless otherwise stated) of the Directors and Senior Managers (and their connected persons) in the share capital of the Company are as follows:
		Director/ Senior Manager	Ordinary Shares held prior to the Placing and Open Offer(1)	Percentage of issued Ordinary Share capital prior to the Placing and Open Offer(1) (%)	Ordinary Shares held after the Placing and Open Offer(2)	Percentage of issued Ordinary Shares capital after the Placing and Open Offer(2) (%)
		Chairman and Executive
		Directors
		Amjad Bseisu(3)	71,405,331	8.90	194,365,112	16.76
		Jock Lennox	20,000	0.00	28,889	0.00
		Jonathan Swinney	62,033	0.01	89,603	0.01
		Non-Executive Directors
		Philip Holland	74,999	0.01	108,332	0.01
		Helmut Langanger	200,000	0.02	288,889	0.02
		Philip Nolan Senior Managers	150,000	0.02	216,667	0.02
		Stefan Ricketts	38,106	0.00	38,106	0.00
		Graeme Cook	44,460	0.01	44,460	0.00
		Richard Hall	160	0.00	160	0.00
		Faysal Hamza	430,814	0.05	430,814	0.04
		Neil McCulloch	15,122	0.00	15,122	0.00
		Bob Davenport	None	N/A	None	N/A
		Imran Malik	None	N/A	None	N/A
		Notes:
		(1) Details of the options and awards over Ordinary Shares and interests in the long-term incentive plan held by the Directors are set out in paragraph 7 of Part 9 (''Additional Information''). They are not included in the interests of the Directors shown in the table above.
		(2) Assuming (i) that no awards vest and no share options are exercised between the Latest Practicable Date and Admission; (ii) that the Directors and (and connected persons) take up their Open Offer Entitlements in full and that the Senior Managers do not take up any of their Open Offer Entitlements; (iii) that the Directors and Senior Managers (and their connected persons) will not take up any Ordinary Shares pursuant to the Placing, save for the 91,224,079 Ordinary Shares that Double A Limited has agreed to take up pursuant to the Placing; and (iv) that none of the 91,224,079 Ordinary Shares that Double A Limited has agreed to take up pursuant to the Placing are clawed back to satisfy valid applications by Qualifying Shareholders under the Open Offer. (3) These shares are held by Double A Limited, a company beneficially owned by the
		extended family of Amjad Bseisu.

		So far as the Company is aware, as at the Latest Practicable Date, the following persons (other than the Directors and Senior Managers) had notifiable interests in three per cent. or more of the issue share capital of the Company:
		Shareholder	Ordinary Shares held prior to the Placing and Open Offer	Percentage of issued Ordinary Share capital prior to the Placing and Open Offer (%)	Ordinary Shares held after the Placing and Open Offer(2)	Percentage of issued Ordinary Shares capital after the Placing and Open Offer (%)(2)
		Double A Limited(1)	71,405,331	8.90	194,365,112	16.76
		Aberforth Partners LLP Baillie Gifford & Co	58,695,203	7.31	84,781,960	7.31
		Limited	52,574,549	6.55	75,941,015	6.55
		Aberdeen Asset Managers Limited	49,645,322	6.19	71,709,910	6.19
		Swedbank Robur Fonder
		AB Schroders Plc	49,100,811 38,699,409	6.12 4.82	70,923,394 55,899,146	6.12 4.82
		EnQuest Employee Benefit Trust(3)	24,452,136	3.05	35,222,424	3.04
		Note:
		(1) Double A Limited is a company beneficially owned by the extended family of Amjad Bseisu.
		(2) Assuming (i) that no awards vest and no share options are exercised between the Latest Practicable Date and Admission; (ii) that each of the Shareholders listed above (other than EnQuest Employee Benefit Trust) takes up its Open Offer Entitlements in full; (iii) that the Shareholders listed above will not take up any Ordinary Shares pursuant to the Placing, save for the 91,224,079 Ordinary Shares that Double A Limited has agreed to take up pursuant to the Placing; and (iv) that none of the 91,224,079 Ordinary Shares that Double A Limited has agreed to take up pursuant to the Placing are clawed back to satisfy valid applications by Qualifying Shareholders under the Open Offer.
		(3) EnQuest Employee Benefit Trust have agreed to take up their entitlements in full in respect of the Unallocated Shares.
		So far as the Company is aware, no person or persons, directly or indirectly, jointly or severally own or exercise or could exercise control over the Company. There are no differences between the voting rights enjoyed by the Shareholders described above and those enjoyed by any other holder of Ordinary Shares.
B.7	Selected key historical financial information:	The tables below set out the Group's summary financial information for the periods indicated. The consolidated financial information for the Group for each of the three years ended 31 December 2013, 31 December 2014 and 31 December 2015 has been extracted without material adjustment from the 2013 Financial Statements, the 2014 Financial Statements and the consolidated financial information for the Group as at and for the six months ended 30 June 2016 (and comparative information for the six months ended 30 June 2015) is unaudited and has been extracted without material adjustment Statements.	2015 from the	Financial Statements, 2016 Unaudited	respectively. Interim	The Financial

	Group Statement of Comprehensive Income
							Reported in period
				Reported in year		Six months ended 30 June	Six months ended 30 June
			2013 (Audited) US\$'000	2014 (Audited) US\$'000	2015 (Audited) US\$'000	2015 (Unaudited) US\$'000	2016 (Unaudited) US\$'000
	Revenue and other operating income Cost of sales Gross profit		955,245 (527,143) 428,102	1,028,495 (711,858) 316,637	908,514 (748,538) 159,976	414,619 (322,793) 91,826	382,247 (317,663) 64,584
	Profit from operations before tax and finance income/(costs) Profit/(loss) before tax Income tax Profit/(loss) for the year		367,735 330,935 (141,331)	402,279	(478,134) (1,115,424) (578,688) (1,340,941) 581,457	67,520 (34,618) 133,786	123,027 74,896 76,387
	attributable to owners of the parent Total comprehensive income for the year, attributable		189,604	(176,409)	(759,484)	99,168	151,283
	to the owners of the parent		190,048	(117,420)	(684,672)	74,391	67,030
	Group Balance Sheet
				As at 31 December
		2013 (Audited) US\$'000		2014 (Restated) (Audited) US\$'000	2015 (Audited) US\$'000	As at 30 June 2015 (Unaudited) US\$'000	2016 (Unaudited) US\$'000
	Assets
	Non-current assets .	3,148,925		3,594,665	2,826,429	3,994,624	3,307,965
	Current assets Total assets	401,533 3,550,458		664,546 4,259,211	950,909 3,777,338	720,584 4,715,208	660,690 3,968,655
	Total equity Non-current	1,484,709		1,346,170	667,199	1,424,338	738,129
	liabilities Current liabilities	1,524,226 541,523		2,369,768 543,273	2,530,813 579,326	2,724,019 566,851	2,571,501 659,025
	Total liabilities Total equity and	2,065,749		2,913,041	3,110,139	3,290,870	3,230,526
	liabilities	3,550,458		4,259,211	3,777,338	4,715,208	3,968,655
	Group Statement of Cash Flows
				Year ended 31 December			Six months ended 30 June
			2013 (Audited) US\$'000	2014 (Audited) US\$'000	2015 (Audited) US\$'000	2015 (Unaudited) US\$'000	2016 (Unaudited) US\$'000
	Profit/(loss) before tax Operating profit before		330,935	(578,688)	(1,340,941)	(34,618)	74,896
	working capital changes Cash generated from		629,493	555,698	242,058	111,238	230,652
	operations		562,690	632,211	221,694	83,310	182,591
	Net cash flows from operating activities		551,412	712,657	244,553	70,691	170,214
	Net cash flows used in investing activities		(983,688)	(1,215,447)	(753,656)	(404,099)	(261,299)
	Net cash flows from financing activities . . Net increase in cash and		376,903	609,484	596,221	444,603	(7,924)
	cash equivalents Cash and cash		(55,373)	106,694	87,118	111,195	(99,009)
	equivalents at end of period		72,809	171,932	257,540	293,518	156,338

		The Group's revenue during the period covered by the historical financial information was mainly derived from sales of oil lifted from its producing assets in the UKCS and Malaysia. Although the Group's revenues from oil sales declined in 2015 as a result of the significant fall in oil prices that started in the second half of 2014, it was able to maintain relatively stable cash flows in 2015 through a combination of continuing strong production (primarily as a result of the newly acquired PM8/Seligi, GKA and Alma/ Galia), hedging activities and an ongoing cost optimisation programme. Despite having extensive operations in the relatively higher cost operating environment of the northern North Sea, the Group reduced average unit operating costs from \$36/bbl in 2013 to \$30/bbl in 2015 and from \$39/bbl in the first half of 2015 to \$23/bbl in the first half of 2016. As a result of the decline in oil prices and the resulting reduction in expected future revenues and reserves, the Group made substantial impairments to its oil and gas assets, recording a charge of \$679 million in 2014 and
		\$1,224 million in 2015. In addition, the Company has actively managed its commodity hedge portfolio which generated cash flows of \$68.6 million and revenue and other operating income of \$264.0 million in 2015.
		The Group's capital investment from 2013 to 2015 principally related to the continued development of Kraken, including work on the subsea systems and risers, and drill centres 1 and 2, and the Group's currently owned producing fields. In light of the low oil price environment, capital investment was reduced for both the Group's development and producing assets as part of its cost optimisation programme. Capital expenditure decreased from \$984.3 million in 2013 to \$751.1 million in 2015, primarily as a result of the reduction in the capital expenditure budget for Kraken.
		Significant financing activities during the period covered by the historical financial information include the Group's completion of the offering of the Existing High Yield Notes in the principal amount of \$650 million in April 2014, the \$35 million Tanjong Baram Project Finance Loan in June 2015, the £155 million Retail Notes in February and December 2013 and the \$1.2 billion (with the ability to increase to \$1.7 billion) Existing RCF in October 2013.
		Save to the extent disclosed above, there has been no significant change in the financial condition or operating results of the Group during the period covered by the historical financial information and since 30 June 2016, being the date of the Group's latest unaudited financial statements:
B.8	Selected key pro forma financial information:	The unaudited pro forma balance sheet set out below has been prepared for the purpose of illustrating the effect of the Placing and Open Offer and the Proposed Note Amendments on the net assets of the Company as at 30 June 2016 as if it had taken place on that date. The unaudited pro forma balance sheet has been prepared for illustrative purposes only and, by its nature, addresses a hypothetical situation and, does not, therefore, represent the Group's actual financial position or results.
		The pro forma balance sheet has been prepared on the basis set out in the notes below and has been prepared in a manner consistent with the accounting policies adopted by the Group as at and for the year ended 31 December 2015 and in accordance with the requirements of item 20.2 of Annex I and items 1 to 6 of Annex II to the EU Prospectus Regulations.

	As at 30 June 2016(1) US\$ '000	Placing and Open Offer adjustments(2) US\$ '000	Existing Notes restructuring adjustments(3) US\$'000	Pro forma US\$ '000
Non-current assets Property, plant and equipment	2,777,561	—	—	2,777,561
Goodwill	189,317	—	—	189,317
Intangible oil and gas assets	65,740	—	—	65,740
Investments Deferred tax asset	73 265,060	— —	— —	73 265,060
Other financial assets	10,214	—	—	10,214
	3,307,965	—		3,307,965
Current assets
Inventories Trade and other receivables	72,657 318,246	— —	— —	72,657 318,246
Current tax receivable	1,196	—	—	1,196
Cash and cash equivalents	163,290	95,299	—	258,589
Other receivables	—	—	—	—
Other financial assets	105,301	—	—	105,301
	660,690	95,299	—	755,989
Total assets	3,968,655	95,299	—	4,063,954
Equity and liabilities
Share capital Share premium	113,433 —	21,756 78,320	— —	135,189 78,320
Merger reserve	662,855	—	—	662,855
Cash flow hedge reserve	49,946	—	—	49,946
Share based payment reserve	(8,095)	—	—	(8,095)
Retained earnings	(80,010)	(4,777)	—	(84,787)
Total equity	738,129	95,299	—	833,428
Non-current liabilities
Borrowings Bonds	958,969 849,615	— —	— 11,639	958,969 861,254
Obligations under finance leases	10,763	—	—	10,763
Provisions	724,370	—	—	724,370
Other financial liabilities	8,067	—	—	8,067
Deferred tax liabilities	19,717	—	—	19,717
Current liabilities	2,571,501	—	11,639	2,583,140
Borrowings	9,951	—	—	9,951
Bonds	11,639	—	(11,639)	—
Trade and other payables	578,209	—	—	578,209 —
Obligations under finance leases Other financial liabilities	— 52,715	— —	— —	52,715
Current tax payable	6,511	—	—	6,511
	659,025	—	(11,639)	647,386
	3,230,526	—	—	3,230,526
Total liabilities		95,299	—	4,063,954
Total Equity and liabilities Notes:	3,968,655
(1) The consolidated statement of financial position of the Group as at 30 June 2016 has been extracted without material adjustment from the 2016 Unaudited Interim Financial Statements of EnQuest PLC.
(2) Reflects the net estimated proceeds of the Placing and Open Offer:
			US\$'000
Placing and Open Offer proceeds			100,076
Placing and Open Offer expenses Estimated net proceeds of the Placing			(4,777)

B.9	Profit forecast or estimate:	The proceeds of the Placing and Open Offer of US\$100,076,100 are based on 357 million Ordinary Shares being issued by the Company at an Issue Price of US\$0.28 based on a nominal value of US\$0.06 and a premium of US\$0.22. Costs and expenses of the Placing and Open Offer are the estimated costs and fees incurred, in respect of the Placing and Open Offer relating principally to investment banking, underwriting, legal and accounting fees. The exchange rate used of £:US\$ equals 1.22 on 12 October 2016, being the Latest Practicable Date. (3) Reflects restructuring of the Existing Notes: EnQuest have agreed to add a payment condition which makes payment of interest on the Existing Notes on any interest payment date conditional on the prevailing oil price. As the payment condition is linked to the oil price this represents an embedded derivative. (4) No account has been taken of any trading or other transactions since 30 June 2016. Not applicable.
B.10	Nature of any qualifications in audit report on the historical financial information:	Not applicable. There are no qualifications included in any audit report on the historical financial information included in this document.
B.11	Insufficient working capital:	The Company is of the opinion that the Group does not have sufficient working capital available for its present requirements, that is, for at least 12 months from the date of this document.
		Without further action, the Directors believe that the Group would experience a maximum working capital shortfall of approximately \$150 million in May 2017 and that the Group will be unable to pay the interest due in respect of the Group's Existing High Yield Notes on 17 October 2016. If not remedied within the applicable 30 day grace period and there is no interest payment standstill agreed by the requisite majority of Noteholders (90 per cent. or more), this would constitute a default under the Existing High Yield Notes and a cross default under certain of the Group's key debt instruments and facilities, including the Existing RCF and the Existing Retail Notes. In addition, the Group has, since January 2015, obtained waivers from the Existing RCF Lenders in respect of the liquidity covenant contained in the Existing RCF and the current waiver from this covenant expires on 31 December 2016. To the extent the Group is unable to improve its liquidity position or obtain further waivers from the Existing RCF Lenders, the Group could fail to meet the liquidity covenant in the Existing RCF when next tested on 31 December 2016 or on a subsequent test date, which would constitute an event of default under the Existing RCF. In either of these circumstances, there is a risk that the Company may become subject to enforcement action (including, for example, the filing of a winding up petition against the Company) which if not terminated or withdrawn could result in the majority Existing RCF Lenders enforcing their security in respect of the Company and/or the Group by (amongst other things) appointing an administrator to the Company, with a view to commencing (and/or continuing, if already commenced by the Company at such time) a marketing process for the sale of the Group on an accelerated basis. In this scenario, the Directors consider that there is likely to be little or no value for Shareholder or Noteholders. However, the Ad Hoc Committee may propose an alternative debt restructuring and seek to engage in negotiations with the Existing RCF Lenders (which may involve providing a standstill of the October Interest Payment if the requisite majority has approved such standstill) and the Existing RCF Lenders may or may not accept such proposal or may consider such proposal in the context of the sales process.

	In order to address the Company's working capital shortfall, the Directors have undertaken a number of measures prior to the announcement of the Restructuring, including:
	• agreeing with the Existing RCF Lenders further utilisations of approximately \$20 million and \$26 million under the Existing RCF, in September 2016 and October 2016, respectively; and
	• agreeing the deferral of certain payments to trade suppliers until between October 2016 and April 2019.
	The Directors have now proposed the Restructuring, including the Placing and Open Offer, to improve the Group's capital structure and to improve the ongoing liquidity position of the Group. The Proposed Note Amendments would capitalise the Group's cash interest expense under the New High Yield Notes and the Amended Retail Notes unless the oil price is equal to or above an average of \$65.00/bbl for the six-month period ending one month prior to the interest payment date (and certain other conditions are met) and the Proposed RCF Amendments and Proposed Note Amendments would extend the maturity date for the repayment of the Existing RCF to October 2021, extend the scheduled maturity in respect of New High Yield Notes and Amended Retail Notes to April 2023, further automatically extend the maturity date in respect of the New High Yield Notes and the Amended Retail Notes to October 2023 if the Company has not repaid or refinanced the Existing RCF by 15 October 2020, amend the Group's financial covenants to provide additional flexibility under the RCF, remove certain financial covenants from the Existing Retail Notes and amend certain financial indebtedness baskets under the New High Yield Notes. The proceeds of the Placing and Open Offer, expected to be £78.1 million net of expenses, are expected to enable the Group to complete the Kraken development and bring it to first oil on schedule in the first half of 2017, which the Directors believe will considerably improve the Group's cash flows.
	Assuming and following completion of the Restructuring and the Proposed RCF Amendments, the maximum remaining facilities available to the Group under the Existing RCF will be \$197.7 million, less any further interim utilisations agreed with the Existing RCF Lenders between the date of this document and completion of the Restructuring and the Proposed RCF Amendments.
	If the Placing and Open Offer and the rest of the Restructuring do proceed, and taking into account the facilities available to the Group under the Existing RCF, the Company is of the opinion that the Group will have sufficient working capital for its present requirements, that is, for at least 12 months from the date of this document.
	However, as each of the components of the Restructuring is inter conditional, the Restructuring cannot proceed if the Placing and Open Offer or any other component of the Restructuring does not proceed. The completion of the Placing and Open Offer and the rest of the Restructuring is therefore subject to the following conditions among others that remain outstanding as of the date of this document: (i) the passing of the Resolutions related to the Placing and Open Offer by Shareholders at the General Meeting; (ii) the approval of the Proposed RCF Amendments by Existing RCF Lenders and Hedging Banks representing 100 per cent. of the aggregate principal amount of the Existing RCF and the Existing Hedging Liabilities; (iii) the Scheme being passed by more than 50 per cent. in number and at least 75 per cent. in value of Scheme Creditors attending and voting in person or by proxy at the meeting of Scheme Creditors convened with the permission of the Court and a recognition order in connection with the Scheme being granted under Chapter 15 of Title 11 of the US Code; and (iv) and certain other procedural steps.

As of the date of this document, all of the Existing RCF Lenders and all of the Hedging Banks have entered into, or acceded to, the Lock-Up Agreement pursuant to which they have agreed to vote in favour of the Proposed RCF Amendments. Additionally, Existing High Yield Noteholders representing approximately 61 per cent. in value of the Existing High Yield Notes have entered into, or acceded to, the Lock-Up Agreement pursuant to which they have agreed to attend the Scheme Meeting in person or by proxy and to vote in favour of the Scheme. Due to the diverse nature of the holdings of the Existing Retail Notes, it was not possible for the Company to approach all of the Existing Retail Noteholders in advance of announcement of the Restructuring and the Scheme. However, the Company has consulted on a confidential basis with a number of holders who together hold a significant proportion of the Existing Retail Notes, in order to obtain their indicative support for the proposals contemplated by the Scheme and the Restructuring. The feedback from such Existing Retail Noteholders was positive and indicated support for the Restructuring from professional investors.

The long stop date for completion of each of the Restructuring steps, as set out in the Lock-Up Agreement, is 2 December 2016. If any of these steps does not take place by the long stop date (as it may be amended or extended), then neither the Placing and Open Offer nor the rest of the Restructuring will proceed. In these circumstances, the Group would not have sufficient working capital for its present requirements.

In such a case, the Group would seek to enter into further negotiations to amend and/or obtain waivers in respect of the default provisions in the Group's debt arrangements, including the Existing RCF, the Existing High Yield Notes and the Existing Retail Notes. However, there can be no assurance that any such negotiations would be successful. In these circumstances, the Group would also seek to manage its ongoing working capital requirements and trading activities through exploring such measures as disposing of certain assets, further cost reductions and negotiating new credit arrangements with existing or new lenders or raising funding from third parties. However, there can be no assurance that the Group would be able to complete such measures or that any such measures would be sufficient to remedy the Group's working capital shortfall, particularly in the current low oil price environment. Additionally, any disposal of assets or reduction in capital expenditure would be likely to reduce the Group's aggregate production and could lead to the Group being unable to bring its current developments, including Kraken and Scolty/Crathes, onstream, all of which would have a material adverse impact on the Group's cash flows going forward.

Even if the Placing and Open Offer and the rest of the Restructuring do proceed, the ability of the Group to succeed in the longer term and to be in a position to return value to Shareholders for their investment is highly dependent on oil prices. The Group's realised oil prices would need to increase above current levels for Shareholders to receive a return on their investment, and this is out of the Group's control. If oil prices remain at their current levels or decline further, it is highly likely that the Company would be unable to return any value to its Shareholders.

For Shareholders, the main benefit of the Placing and Open Offer and the Restructuring is to enable the Group to continue to trade, complete the Kraken development and bring it on production, as well as allowing time for a recovery in oil prices, while also allowing Shareholders to retain their investment in the Company.

		The Directors consider that if and shortly after it becomes apparent that the Restructuring is not capable of being implemented (for example, if the Resolutions necessary to complete the Placing and Open Offer are not approved at the General Meeting or if the requisite majority of Scheme Creditors do not vote in favour of the Scheme or the Court decides not to exercise its discretion to sanction the Scheme), it is likely that the Company will commence a marketing and sales process of the Company and/or its subsidiaries with a view to effecting the sale in a short period of two to three months. Completion of the sale may involve the appointment of administrators to the Company. The Directors believe that if the Placing and Open Offer and the Restructuring do not proceed and a marketing process for the sale of the Group on an accelerated basis is undertaken, there is likely to be little or no value for Shareholders or Noteholders. In addition, if the Company is unable to pay the October Interest Payment on the Existing High Yield Notes within the 30 day grace period as described above, the Company may become subject to enforcement action (including, for example, the filing of a winding up petition against the Company) which if, not terminated or withdrawn, could result in the majority Existing RCF Lenders enforcing their security in respect of the Company and/or the Group by (among other things) appointing an administrator to the Company, with a view to the administrator commencing and/or continuing a marketing process for the sale of the Group on an accelerated basis. In this scenario, the Directors believe that there is a significant risk that the return to Shareholders would be less than would be achieved pursuant to a marketing and sales process commenced by the Company, rather than an administrator. The Ad Hoc Committee may propose an alternative debt restructuring and seek to engage in negotiations with the Existing RCF lenders (which may involve providing a standstill of the October Interest Payment if the requisite majority has approved such standstill) and the Existing RCF Lenders may or may not accept such proposal or may consider such proposal in the context of the sales process.
	Section C— Securities
C.1	Type and class of the securities being offered and admitted to trading, including the security identification number:	The Company is proposing to issue in aggregate up to 356,738,114 New Ordinary Shares pursuant to the Placing and Open Offer. When admitted to trading, the New Ordinary Shares will be the same as that of the Existing Ordinary Shares, being GB00B635TG28. The ISIN for the Open Offer Entitlements is GB00BYM55387.
C.2	Currency of the securities issue:	All New Ordinary Shares being offered will be denominated in pounds sterling. The New Ordinary Shares are being offered to Qualifying Shareholders at the Issue Price of 23.0 pence per New Ordinary Share in the Open Offer and are being offered to Qualifying Swedish Shareholders at the Issue Price of SEK 2.48 per New Ordinary Share in the Swedish Open Offer (equivalent to 23.0 pence per New Ordinary Share at the exchange rate of SEK1.00 = GBP 0.0928 on 12 October 2016). The New Ordinary Shares are being offered at the Issue Price of 23.0 pence per New Ordinary Share in the Placing.

C.3	Number of shares in issue and par value:	As at the Latest Practicable Date, the Company had 802,660,757 fully paid Ordinary Shares in issue. The par value of each Ordinary Share is 5 pence.
C.4	Rights attached to the securities:	The New Ordinary Shares, when issued and fully paid, will be identical to and rank pari passu with the Existing Ordinary Shares, including the right to receive all dividends and other distributions declared, made or paid on the Existing Ordinary Shares by reference to a record date on or after Admission.
		Shareholders are entitled to participate in the assets of the Company attributable to their Ordinary Shares on a winding-up of the Company or other return of capital attributable to the Ordinary Shares.
C.5	Restrictions on free transferability of the securities:	Save as described below, there are no restrictions on the free transferability of the New Ordinary Shares. However, the making of the proposed offer of New Ordinary Shares to persons located or resident in, or who are citizens of, or who have a registered address in, countries other than the United Kingdom and Sweden, may be affected by the law or regulatory requirements of the relevant jurisdiction, which may include restrictions on the free transferability of such New Ordinary Shares. Restrictions on transfer of Ordinary Shares under the Articles
		The Directors may, in their absolute discretion and without giving any reason, refuse to register the transfer of a share which is not fully paid (whether certificated or uncertificated) provided that where such shares are admitted to the Official List of the FCA or admitted to AIM, such discretion may not be exercised in a way which the FCA or the London Stock Exchange regards as preventing dealings in the shares of the relevant class or classes from taking place on an open and proper basis.
C.6	Admission to trading on regulated market:	Applications will be made to: (i) the FCA for the New Ordinary Shares to be admitted to the premium listing segment of the Official List; (ii) the London Stock Exchange for the New Ordinary Shares to be admitted to trading on its main market for listed securities; and (iii) NASDAQ Stockholm AB for the New Ordinary Shares to be admitted to listing and trading on NASDAQ Stockholm.
		No application has been or is currently intended to be made by the Company for the New Ordinary Shares to be admitted to listing or trading on any other exchange.
C.7	Dividend policy:	The Company has not declared or paid any dividends since incorporation in January 2010 and does not intend to pay dividends in the near future. Any future payment of dividends is expected to depend on the earnings and financial condition of the Company and on such other factors as the Directors of the Company considers appropriate. The proposed Note Amendments would include a restriction on certain payments to shareholders (and their affiliates) if the Company has not redeemed in cash at par an aggregate principal amount of the Existing High Yield Bonds or the Amended Retail Notes (as applicable) equal to any capitalised interest together with any accrued and unpaid interest thereon.

	Section D—Risks
D.1	Key information on the key risks related to the Company and its industry:	• If the Resolutions are not passed and the Placing and Open Offer and the Restructuring do not proceed, the Group's financial position will be materially adversely affected and there is a significant risk that a marketing process could be commenced for the sale of the Group or its assets on an accelerated basis (which may involve the appointment of administrators to the Company), following completion of which the Company would be likely to be placed into insolvent liquidation.
		• The completion of the Placing and Open Offer is conditional upon, among other things, the successful implementation of the Restructuring.
		• The Group may default on the Existing High Yield Notes following a failure to make interest payments under the Existing High Yield Notes and/or the commencement of the Scheme which may also lead to cross defaults under the Group's other financing arrangements.
		• The Group will remain highly indebted even after the Restructuring, if completed, and its leverage and debt service obligations, its credit standing as well as general market conditions could adversely affect its business, financial condition, results of operations and its ability to procure additional financing or satisfy its debt obligations.
		• The Group is subject to restrictive debt covenants that may limit its ability to finance its future operations and capital needs and to pursue business opportunities and activities.
		• Volatility and further decreases in oil prices could materially adversely affect the Group's business, prospects, financial condition and results of operations.
		• The levels of the Group's 2P reserves and contingent resources, their quality and production volumes may be lower than estimated or expected.
		• The Group faces drilling, exploration and production risks and hazards that may affect the Group's ability to produce oil at expected levels, quality and costs and that may result in additional liabilities to the Group.
		• The Group faces significant uncertainty as to the success of any drilling appraisal, exploration and development activities.
		• If the Group is unable to replace the 2P reserves that it produces, the Group's reserves and revenues will decline.
		• All of the Group's production comes from a small number of offshore assets in the UKCS and Malaysia, making it vulnerable to risks associated with having significant production in two countries and regions and only a small number of assets.
		• Much of the Group's future growth depends on successful development of Kraken and the Group's production at Alma/Galia.
		• The Group relies on third party infrastructure such as the Sullom Voe Terminal and the Terengganu Crude Oil Terminal that it does not control and is subject to tariff charges that it does not control.

		• A significant proportion of third party infrastructure upon which the Group's operations rely is old, and if it lacks proper maintenance and repair it could harm the Group's operations in the UKCS.
		• The Group's business is subject to licensing and other regulatory requirements, which are subject to change, in the countries in which it operates, and it is subject to the risks of licences or other agreements being withheld, suspended, revoked or terminated and of the Group's failing to comply with relevant licences, agreements or other regulatory requirements.
		• The Group conducts most of its operations with commercial partners which may increase the risk of delays, additional costs and the suspension or termination of the licences or the agreements that govern the Group's assets.
		• The Group may face unanticipated increased or incremental costs in connection with decommissioning obligations.
		• The Group's commodity hedging activities may not be effective.
		• The Group could incur material costs to comply with, or as a result of liabilities under, health and safety and environmental regulations.
		• The Group's international operations will require it to comply with various regulatory regimes and subject it to the challenges of running a business with global operations.
D.3	Key information on the key risks	• The market value of listed securities may fluctuate and may not reflect the underlying asset value of the Group.
	related to the New Ordinary Shares:	• Shareholders who do not acquire New Ordinary Shares in the Open Offer will experience dilution in their ownership.
		• There is no guarantee that there will be an active trading market for the Ordinary Shares.
		• Any future Ordinary Share issues and sales of Ordinary Shares by major Shareholders may further dilute the holdings of current Shareholders and may also have an adverse effect on the market price of the Ordinary Shares.
	Section E—Offer
E.1	Total net proceeds and estimate of total expenses of the issue/offer, including estimated expenses charged to investors:	The total gross proceeds of the Placing and Open Offer are expected to be approximately £82.0 million (equivalent to SEK 884.2 million at exchange rate of SEK 1.00 = GBP0.0928 on 12 October 2016). The costs and expenses of, or incidental to, the Placing and Open Offer will be payable by the Company in full and are estimated to be approximately £3.9 million (equivalent to SEK 42.2 million at exchange rate of SEK 1.00 = GBP 0.0928 on 12 October 2016). No such costs will be directly charged to the purchasers of the New Ordinary Shares in connection with the Placing and Open Offer. The net proceeds receivable by the Company are therefore expected to be approximately £78.1 million (equivalent to SEK 842.0 million at exchange rate of SEK 1.00 = GBP 0.0928 on 12 October 2016). As the proceeds of the Swedish Open Offer will be based on the Swedish Kronor Issuer Price, the actual proceeds received by the Company will depend on the exchange rate between the Swedish krona and pounds sterling on the date of Admission and the take up of New Ordinary Shares under the Swedish Open Offer.

E.2a	Reasons for the offer, use of proceeds and estimated net amount of proceeds:	Against the backdrop of challenging market conditions, the Group has achieved a robust operational performance in its most recent financial periods, as demonstrated by its increasing production and cost efficiency, as it continues to pursue its strategy of turning opportunities into value by targeting maturing assets and undeveloped oil fields and exploiting its existing reserves. Nevertheless, the decline in oil prices during and since 2014 and the continuing low oil price environment have had a significant negative impact on the Group's revenues, liquidity and available cash resources. This situation has been exacerbated by the Group's level of debt and the significant cash resources required to service the interest on this debt, as well as by the significant capital expenditure required for development assets including, in particular, the Group's Kraken development asset, the Group's largest project to date. These factors combined have put considerable pressure on the Group's cash flows. As a result, the Directors are now of the view that, without substantial changes to the Group's capital and debt structure, the Group will have insufficient cash resources to bring Kraken to first oil and to meet all of its payment obligations as they fall due. In particular, if the Placing and Open Offer and the Restructuring as described in this document do not proceed, the Directors believe that there is a substantial risk that the Group will be unable to pay the October Interest Payment on the Group's Existing High Yield Notes on 17 October 2016. If not remedied within the applicable 30 day grace period, this would constitute a default under the Existing High Yield Notes. Non-payment of such interest on the Group's Existing High Yield Notes would trigger cross defaults across the Group's other debt instruments and facilities. In addition, the Group has, since January 2015, obtained waivers from the Existing RCF Lenders in respect of the liquidity covenant contained in the Existing RCF and the current waiver from this covenant expires on 31 December 2016. To the extent the Group is unable to improve its liquidity position or obtain further waivers from the Existing RCF Lenders, the Group could fail to meet the liquidity covenant in the Existing RCF when next tested on 31 December 2016 or on a subsequent test date, which would constitute an event of default under the Existing RCF. Although the Group has already undertaken a number of measures to mitigate the impact of the low oil price environment (as described further below), the Directors believe that in order to continue its operations as currently envisioned the Group must strengthen its balance sheet, reduce the impact of the Group's current debt on its cash flows and increase the Group's cash resources. The Directors are therefore proposing the Restructuring, of which the Placing and Open Offer forms an integral part, and are recommending that Shareholders approve the Resolutions required to complete the Placing and Open Offer. The Directors expect that the proceeds of the Placing and Open Offer will enable the Group to complete the developments of Kraken and Scolty/Crathes, which the Directors expect will lead to both significant increases in production and significant decreases in average operating costs across the Group. The Directors believe that the completion of the Restructuring, including the Placing and Open Offer, will put the Group in a stronger position to meet current oil market conditions, as they continue to believe that the Group's fundamental business, with its strategy of targeting mature and marginal oil assets and its focus on cost efficiency, is well placed to withstand a prolonged period of low oil prices, and will be even better placed to do so after completion of the Kraken development. The Group intends to use the net proceeds of the Placing and Open Offer (being approximately \$95.3 million, or approximately £78.1 million (equivalent to SEK 842.0 million at exchange rate of SEK 1.00 = GBP 0.0928 on 12 October 2016), assuming full subscription under the Placing and Open Offer and after expenses in connection with the Placing and Open Offer) as follows:
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		(a) continue the development of the Group's Kraken asset with the aim of achieving first oil in the first half of 2017;
		(b) continue the development of the Group's Scolty/Crathes asset; and
		(c) provide general corporate and working capital for the Group.
		The Company does not intend to use proceeds from the Placing and Open Offer to repay bank debt.
E.3	Terms and conditions of the offer:	The Company intends to raise gross proceeds of approximately £82.0 million (equivalent to SEK 884.2 million at exchange rate of SEK 1.00 = GBP 0.0928 on 12 October 2016) (or approximately £78.1 million net of estimated expenses (equivalent to SEK 842.0 million at exchange rate of SEK 1.00 = GBP 0.0928 on 12 October 2016) through the Placing and Open Offer. The Company is proposing to issue 356,738,114 New Ordinary Shares at the Issue Price pursuant to the Placing and Open Offer.
		Qualifying Shareholders are being given the opportunity to apply for the Open Offer Shares at the Issue Price on and subject to the terms and conditions of the Open Offer, pro rata to their holdings of Ordinary Shares on the Record Date on the following basis:
		4 New Ordinary Shares for every 9 Existing Ordinary Shares
		and so in proportion to any other number of Existing Ordinary Shares then held.
		The Joint Bookrunners have, pursuant to the Sponsor and Placing Agreement, placed conditionally all the Open Offer Shares (other than the Committed Shares) at the Issue Price to Placees. The commitments of these Placees are subject to clawback in respect of valid applications for Open Offer Shares by Qualifying Shareholders pursuant to the Open Offer. Subject to waiver or satisfaction of the conditions and the Placing and Open Offer not being terminated, any Open Offer Shares which are not applied for in respect of the Open Offer will be issued to the Placees and/or other subscribers procured by the Joint Bookrunners or, failing which (other than the New Ordinary Shares which the Trustees have undertaken to subscribe for pursuant to the EnQuest EBT Irrevocable Undertaking and which Double A Limited has undertaken to subscribe for pursuant to the Double A Irrevocable Undertaking and the Double A Placing Letter, which are not being underwritten), to the Joint Bookrunners subject to the terms and conditions of the Sponsor and Placing Agreement, with the net proceeds retained for the benefit of the Company.
		The Placing and Open Offer is conditional, inter alia, upon:
		• the passing without amendment of the Resolutions at the General Meeting (and not, except with the prior written agreement of the Joint Bookrunners, acting jointly, at any adjournment of such meeting) on 14 November 2016 (or such later date as the Joint Bookrunners may agree) and the Resolutions remaining in force;
		• the Company having complied with its obligations under the Sponsor and Placing Agreement and under the terms and conditions of the Placing and Open Offer which fall to be performed on or prior to LSE Admission and such agreement having become unconditional save as otherwise agreed by the Joint Bookrunners, acting jointly, and the Sponsor and Placing Agreement not having been terminated prior to LSE Admission;
		• save for any condition in relation to Admission, the Proposed RCF Amendments and the Amendment and Restatement Agreement becoming unconditionally effective prior to LSE Admission;

• save for any condition in relation to Admission, the renewal of the Surety Bond Facilities becoming unconditionally effective prior to LSE Admission;
• save for any condition in relation to Admission, the Scheme and the Proposed Note Amendments becoming unconditionally effective prior to LSE Admission;
• LSE Admission becoming effective by not later than 8.00 a.m. on 21 November 2016 (or such later time and/or date as the Company may agree with the Joint Bookrunners, not being later than 8.00 a.m. on 24 November 2016) and application for Stockholm Admission having been made and no notification having been received that Stockholm Admission has been refused or will not become effective before on or before 24 November 2016; and
• the Double A Placing Letter and associated Letter of Credit being entered into by the parties thereto having, and continuing to have, full force and effect and not having been terminated, varied, modified, supplemented or lapsing before LSE Admission.
The Open Offer Shares will, on Admission, rank in full for all dividends and other distributions declared, made or paid on the Ordinary Shares by reference to a record date on or after Admission and will otherwise rank pari passu with the Existing Ordinary Shares.
It is intended that: (i) Application Forms will be despatched to Qualifying Non-CREST Shareholders (other than, subject to certain limited exceptions, Excluded Overseas Shareholders and Shareholders with registered addresses in the United States or who are otherwise located in the United States) on or about 20 October 2016; (ii) the stock accounts of Qualifying CREST Shareholders (other than, subject to certain limited exceptions, Excluded Overseas Shareholders and Shareholders with registered addresses in the United States or who are otherwise located in the United States) will be credited with Open Offer Entitlements with effect from 8.00 a.m. (London time) on 21 October 2016; (iii) Pre-Printed Issue Account Statements will be despatched to Qualifying Swedish Directly Registered Shareholders (other than, subject to certain limited exceptions, Excluded Overseas Shareholders and Shareholders with registered addresses in the United States or who are otherwise located in the United States) together with the summary of this document on or about 20 October 2016; (iv) Qualifying Swedish Nominee Registered Shareholders (other than, subject to certain exceptions, Excluded Overseas Shareholders and Shareholders with registered addresses in the United States or who are otherwise located in the United States) will be provided information in relation to the Swedish Open Offer and procedures as to how to participate in it by their respective nominees; (v) the New Ordinary Shares will be credited to the stock accounts in CREST of relevant Qualifying CREST Shareholders who validly apply for Open Offer Shares as soon as practicable after 8.00 a.m. (London time) on 21 November 2016; (vi) the share certificates for the New Ordinary Shares to be held in certificated form will be despatched to relevant Qualifying Non-CREST Shareholders, who validly take up their Open Offer Entitlements by not later than 28 November 2016; and (vii) New Ordinary Shares will be credited to the VP Accounts in the VPC System of relevant Qualifying Swedish Directly Registered Shareholders and of relevant nominees of Qualifying Swedish Nominee Registered Shareholders who validly apply for Open Offer Shares under the Swedish Open Offer on 23 November 2016. The Placing will also complete within this timetable (subject to prior satisfaction of the conditions) with LSE Admission of the New Ordinary Shares expected to occur on 21 November 2016.

		The New Ordinary Shares (other than the Committed Shares) have been placed with Placees by the Joint Bookrunners subject to clawback to satisfy valid applications under the Open Offer, subject to, and in accordance with, the Sponsor and Placing Agreement.
E.4	Interests material to the issue/offer, including conflicting interests:	Not applicable. There are no interests material to the Placing and Open Offer, including conflicting interests.
E.5	Name of person offering to sell the securities and lock-up agreement details:	There are no selling shareholders. Pursuant to the terms of the Sponsor and Placing Agreement, the Company has undertaken that it will not without the prior written consent of the Joint Bookrunners, during the period ending six months from the date of Admission: (i) directly or indirectly, issue, allot, offer, pledge, sell, contract to sell, lend, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, deposit into any depositary receipt facility or otherwise transfer or dispose of any Ordinary Shares or any interest in Ordinary Shares or any securities convertible into or exercisable or exchangeable for, or substantially similar to, Ordinary Shares or file any registration statement under the US Securities Act with respect to any of the foregoing (or publicly announce the same or any intention to do the same); or (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly, or indirectly, the economic consequences of ownership of the Ordinary Shares (or publicly announce the same or any intention to do the same), whether any such swap or transaction described in (i) or (ii) above is to be settled by delivery of the Ordinary Shares or such other securities, in cash or otherwise. The foregoing is subject to certain customary carve-outs.
E.6	Amount and percentage of immediate dilution resulting from the offer:	Upon Admission, the Enlarged Issued Share Capital is expected to be 1,159,398,871 Ordinary Shares. On this basis, the New Ordinary Shares will represent approximately 30.77 per cent. of the Enlarged Issued Share Capital. A Qualifying Shareholder (or a Shareholder in an Excluded Territory or the United States who is not eligible to participate in the Open Offer) that does not take up any Open Offer Shares under the Open Offer will experience a dilution of 30.77 per cent. as a result of the Placing and Open Offer.
E.7	Estimated expenses charged to the investor by the Company:	Not applicable. No expenses will be directly charged to the investor by the Company.

RISK FACTORS

The Placing and Open Offer and any investment in the New Ordinary Shares is subject to a number of risks. Accordingly, Shareholders and prospective investors should carefully consider the factors and risks associated with any investment in the New Ordinary Shares, the Group's business and the industry in which the Group operates, together with all other information contained in this document and all of the information incorporated by reference into this document, including, in particular, the risk factors described below, and their personal circumstances prior to making any investment decision. Some of the following factors relate principally to the Group's business. Other factors relate principally to the Placing and Open Offer and an investment in the New Ordinary Shares. The Group's business, prospects, financial condition and results of operations could be materially adversely affected by any of the risks described below.

Prospective investors should note that the risks relating to the Group, its industry and the New Ordinary Shares summarised in the section of this document headed ''Summary'' are the risks that the Directors believe to be the most essential to an assessment by a prospective investor of whether to consider an investment in the New Ordinary Shares. However, as the risks which the Group faces relate to events and depend on circumstances that may or may not occur in the future, prospective investors should consider not only the information on the key risks summarised in the section of this document headed ''Summary'' but also, among other things, the risks and uncertainties described below.

The Directors consider the following risks to be material for prospective investors in the Company. However, the following is not an exhaustive list or explanation of all risks which investors may face when making an investment in the New Ordinary Shares and should be used as guidance only. Additional risks and uncertainties relating to the Group that are not currently known to the Group, or that it currently deems immaterial, may individually or cumulatively also have a material adverse effect on the Group's business, prospects, financial condition and results of operations. If any such risk, or any of the risks described below, should materialise, the price of the Ordinary Shares may decline and investors could lose all or part of their investment. Investors should consider carefully whether an investment in the New Ordinary Shares is suitable for them in the light of the information in this document and their personal circumstances. The order in which risks are presented is not necessarily an indication of the likelihood of the risks actually materialising, of the potential significance of the risks or of the scope of any potential harm to the Group's financial condition, business, prospects and results of operations.

Prospective investors should read this section in conjunction with this entire document (including the information incorporated into this document by reference).

SECTION A: RISKS RELATING TO THE RESTRUCTURING AND THE GROUP'S FINANCING ARRANGEMENTS

If the Resolutions are not passed and the Placing and Open Offer and the Restructuring do not proceed, the Group's financial position will be materially adversely affected and there is a significant risk that a marketing process could be commenced for the sale of the Group on an accelerated basis (which may involve the appointment of administrators to the Company), following completion of which the Company would be likely to be placed into insolvent liquidation.

If Shareholders do not approve the Resolutions to be proposed at the general meeting of the Company to be held at 9.00 a.m. on 14 November 2016, the Placing and Open Offer cannot proceed and the Company will not receive any of the expected net proceeds of the Placing and Open Offer.

Additionally, due to the inter-conditionality of the respective elements of the Restructuring (as described further in Part 1 (''Letter from the Chairman of EnQuest PLC'')), if the Resolutions are not passed and the Placing and Open Offer does not proceed, the Proposed Notes Amendments, the Proposed RCF Amendments and the renewal of the Surety Bond Facilities will not become effective.

The Company is of the opinion that the Group does not have sufficient working capital available for its present requirements, that is, for at least 12 months from the date of this document.

Without further action, the Directors believe that the Group would experience a maximum working capital shortfall of approximately \$150 million in May 2017 and that the Group will be unable to pay the interest due in respect of the Group's Existing High Yield Notes on 17 October 2016. If not remedied within the applicable 30 day grace period and there is no interest payment standstill agreed by the requisite majority of Noteholders (90 per cent. or more), this would constitute a default under the Existing High Yield Notes and a cross default under certain of the Group's key debt instruments and facilities, including the Existing RCF and the Existing Retail Notes. In addition, the Group has, since January 2015, obtained waivers from

the Existing RCF Lenders in respect of the liquidity covenant contained in the Existing RCF and the current waiver from this covenant expires on 31 December 2016. To the extent the Group is unable to improve its liquidity position or obtain further waivers from the Existing RCF Lenders, the Group could fail to meet the liquidity covenant in the Existing RCF when next tested on 31 December 2016 or on a subsequent test date, which would constitute an event of default under the Existing RCF. In either of these circumstances, there is a risk that the Company may become subject to enforcement action (including, for example, the filing of a winding up petition against the Company) which if not terminated or withdrawn could result in the majority Existing RCF Lenders enforcing their security in respect of the Company and/or the Group by (among other things) appointing an administrator to the Company, with a view to commencing (and/or continuing, if already commenced by the Company at such time) a marketing process for the sale of the Group on an accelerated basis. In this scenario, the Directors consider that there is likely to be little or no value for Shareholders or Noteholders. However, the Ad Hoc Committee may propose an alternative debt restructuring and seek to engage in negotiations with the Existing RCF Lenders (which may involve providing a standstill of the October Interest Payment if the requisite majority has approved such standstill) and the Existing RCF Lenders may or may not accept such proposal or may consider such proposal in the context of the sales process.

In order to address the Company's working capital shortfall, the Directors have undertaken a number of measures prior to the announcement of the Restructuring, including:

• agreeing with the Existing RCF Lenders further utilisations of approximately \$20 million and \$26 million under the Existing RCF, in September 2016 and October 2016, respectively; and
• agreeing the deferral of certain payments to trade suppliers until between October 2016 and April 2019.

The Directors have now proposed the Restructuring, including the Placing and Open Offer, to improve the Group's capital structure and to improve the ongoing liquidity position of the Group. The Proposed Note Amendments would capitalise the Group's cash interest expense under the New High Yield Notes and the Amended Retail Notes unless the oil price is equal to or above an average of \$65.00/bbl for the six-month period ending one month prior to the interest payment date (and certain other conditions are met) and the Proposed RCF Amendments and Proposed Note Amendments would extend the maturity date for the repayment of the Existing RCF to October 2021, extend the scheduled maturity in respect of New High Yield Notes and Amended Retail Notes to April 2023, further automatically extend the maturity date in respect of the New High Yield Notes and the Amended Retail Notes to October 2023 if the Company has not repaid or refinanced the Existing RCF by 15 October 2020, amend the Group's financial covenants to provide additional flexibility under the RCF, remove certain financial covenants from the Existing Retail Notes and amend certain financial indebtedness baskets under the New High Yield Notes. The proceeds of the Placing and Open Offer, expected to be £78.1 million net of expenses, are expected to enable the Group to complete the Kraken development and bring it to first oil on schedule in the first half of 2017, which the Directors believe will considerably improve the Group's cash flows.

Assuming and following completion of the Restructuring and the Proposed RCF Amendments, the maximum remaining facilities available to the Group under the Existing RCF will be \$197.7 million, less any further interim utilisations agreed with the Existing RCF Lenders between the date of this document and completion of the Restructuring and the Proposed RCF Amendments.

If the Placing and Open Offer and the rest of the Restructuring do proceed, and taking into account the facilities available to the Group under the Existing RCF, the Company is of the opinion that the Group will have sufficient working capital for its present requirements, that is, for at least 12 months from the date of this document.

However, as each of the components of the Restructuring is inter-conditional, the Restructuring cannot proceed if the Placing and Open Offer or any other component of the Restructuring does not proceed. The completion of the Placing and Open Offer and the rest of the Restructuring is therefore subject to the following conditions among others that remain outstanding as of the date of this document: (i) the passing of the Resolutions related to the Placing and Open Offer by Shareholders at the General Meeting; (ii) the approval of the Proposed RCF Amendments by Existing RCF Lenders and Hedging Banks representing 100 per cent. of the aggregate principal amount of the Existing RCF and the Existing Hedging Liabilities; (iii) the Scheme being passed by more than 50 per cent. in number and at least 75 per cent. in value of Scheme Creditors attending and voting in person or by proxy at the meeting of Scheme Creditors convened with the permission of the Court and a recognition order in connection with the Scheme being granted under Chapter 15 of Title 11 of the US Code; and (iv) and certain other procedural steps.

As of the date of this document, all of the Existing RCF Lenders and all of the Hedging Banks have entered into, or acceded to, the Lock-Up Agreement pursuant to which they have agreed to vote in favour of the Proposed RCF Amendments. Additionally, Existing High Yield Noteholders representing approximately 61 per cent. in value of the Existing High Yield Notes have entered into, or acceded to, the Lock-Up Agreement pursuant to which they have agreed to attend the Scheme Meeting in person or by proxy and to vote in favour of the Scheme. Due to the diverse nature of the holdings of the Existing Retail Notes, it was not possible for the Company to approach all of the Existing Retail Noteholders in advance of announcement of the Restructuring and the Scheme. However, the Company has consulted on a confidential basis with a number of holders who together hold a significant proportion of the Existing Retail Notes, in order to obtain their indicative support for the proposals contemplated by the Scheme and the Restructuring. The feedback from such Existing Retail Noteholders was positive and indicated support for the Restructuring from professional investors.

The long stop date for completion of each of the Restructuring steps, as set out in the Lock-Up Agreement, is 2 December 2016. If any of these steps does not take place by the long stop date (as it may be amended or extended), then neither the Placing and Open Offer nor the rest of the Restructuring will proceed. In these circumstances, the Group would not have sufficient working capital for its present requirements.

In such a case, the Group would seek to enter into further negotiations to amend and/or obtain waivers in respect of the default provisions in the Group's debt arrangements, including the Existing RCF, the Hedging Banks, the Existing High Yield Notes and the Existing Retail Notes. In particular, the Ad Hoc Committee may propose an alternative debt restructuring and seek to engage in negotiations with Existing RCF Lenders (which may involve providing a standstill of the October Interest Payment if the requisite majority has approved such standstill) and the Existing RCF Lenders may or may not accept such proposal or may consider such proposal in the context of the sales process. However, there can be no assurance that any such negotiations would be successful. In these circumstances, the Group would also seek to manage its ongoing working capital requirements and trading activities through exploring such measures as disposing of certain assets, further cost reductions and negotiating new credit arrangements with existing or new lenders or raising funding from third parties. However, there can be no assurance that the Group would be able to complete such measures or that any such measures would be sufficient to remedy the Group's working capital shortfall, particularly in the current low oil price environment. Additionally, any disposal of assets or reduction in capital expenditure would be likely to reduce the Group's aggregate production and could lead to the Group being unable to bring its current developments, including Kraken and Scolty/Crathes, onstream, all of which would have a material adverse impact on the Group's cash flows going forward. Please see paragraph 4.7 of Part 1 (''Letter from the Chairman of EnQuest PLC'') entitled ''Consequences of a failure to implement the Restructuring'' for further detail on the consequences of the Placing and Open Offer and the rest of the Restructuring not proceeding.

Even if the Placing and Open Offer and the rest of the Restructuring do proceed, the ability of the Group to succeed in the longer term and to be in a position to return value to Shareholders for their investment is highly dependent on oil prices. The Group's realised oil prices would need to increase above current levels for Shareholders to receive a return on their investment, and this is out of the Group's control. If oil prices remain at their current levels or decline further, it is highly likely that the Company would be unable to return any value to its Shareholders.

For Shareholders, the main benefit of the Placing and Open Offer and the Restructuring is to enable the Group to continue to trade, complete the Kraken development and bring it on production, as well as allowing time for a recovery in oil prices, while also allowing Shareholders to retain their investment in the Company.

The Directors consider that if and shortly after it becomes apparent that the Restructuring is not capable of being implemented (for example, if the Resolutions necessary to complete the Placing and Open Offer are not approved at the General Meeting or if the requisite majority of Scheme Creditors do not vote in favour of the Scheme or the Court decides not to exercise its discretion to sanction the Scheme), it is likely that the Company will commence a marketing and sales process of the Company and/or its subsidiaries with a view to effecting the sale in a short period of two to three months. Completion of the sale may involve the appointment of administrators to the Company. The Directors believe that if the Placing and Open Offer and the Restructuring do not proceed and a marketing process for the sale of the Group on an accelerated basis is undertaken, there is likely to be little or no value for Shareholders or Noteholders. In addition, if the Company is unable to pay the October Interest Payment on the Existing High Yield Notes within the 30 day grace period as described above, the Company may become subject to enforcement action (including, for example, the filing of a winding up petition against the Company) which if, not terminated or withdrawn, could result in the majority Existing RCF Lenders enforcing their security in respect of the Company and/or the Group by (among other things) appointing an administrator to the Company, with a view to the administrator commencing and/or continuing a marketing process for the sale of the Group on an accelerated basis. In this scenario, the Directors believe that there is a significant risk that the return to Shareholders would be less than would be achieved pursuant to a marketing and sales process commenced by the Company, rather than an administrator. The Ad Hoc Committee may propose an alternative debt restructuring and seek to engage in negotiations with the RCF lenders (which may involve providing a standstill of the October Interest Payment if the requisite majority has approved such standstill) and the RCF Lenders may or may not accept such proposal or may consider such proposal in the context of the sales process.

The Placing and Open Offer forms part of the Restructuring, which the Company announced on 13 October 2016, following negotiation with relevant stakeholders including the Existing RCF Lenders, the Hedging Banks and the Ad Hoc Noteholder Committee. The key features of the Restructuring are: (i) the Proposed Note Amendments; (ii) the Proposed RCF Amendments; and (iii) the renewal of the Surety Bond Facilities.

All of the elements of the Restructuring are inter-conditional, meaning that none of the components of the Restructuring will be completed if the Placing and Open Offer is not approved by Shareholders and that the Placing and Open Offer will not proceed if the other components of the Restructuring are not consented to and/or completed.

The completion of the Restructuring remains subject to a number of conditions that remain outstanding as of the date of this document and which are out of the control of both of the Company and Shareholders. The Proposed Note Amendments are proposed to be effected pursuant to an English scheme of arrangement, which must be approved by more than 50 per cent. in number and at least 75 per cent. in value of Scheme Creditors attending and voting in person or by proxy at the meeting of Scheme Creditors convened with the permission of the English Court. The Scheme Meeting is anticipated to take place on 14 November 2016. Although Existing High Yield Noteholders representing approximately 61 per cent. in value of the Existing High Yield Notes have entered into, or acceded to, the Lock-Up Agreement pursuant to which they have agreed to attend the Scheme Meeting in person or by proxy and to vote in favour of the Scheme, there is no assurance that sufficient further votes in favour of the Scheme will be received to enable it to be approved. Due to the diverse nature of the holdings of the Existing Retail Notes, it was not possible for the Company to approach all of the Existing Retail Noteholders in advance of announcement of the Restructuring and the Scheme. However, the Company has consulted on a confidential basis with a number of holders who together hold a significant proportion of the Existing Retail Notes, in order to obtain their indicative support for the proposals contemplated by the Scheme and the Restructuring. The feedback from such Existing Retail Noteholders was positive and indicated support for the Restructuring from professional investors. The Proposed Note Amendments are also conditional upon the granting of a recognition order in connection with the Scheme under Chapter 15 of Title 11 of the US Code. Although the Company does not foresee any difficulties in obtaining this approval and anticipates that this approval will be given shortly after the sanction of the Scheme (if it is approved by the requisite percentages of Existing Noteholders), the Company ultimately has no control over the granting of such a recognition order or the timing thereof and there can be no assurance that it will be given on a timely basis or at all.

If the Scheme is not passed by the requisite majorities of Scheme Creditors and/or the Court does not exercise its discretion to sanction the Scheme and/or the Company is not granted a recognition order in connection with the Scheme under Chapter 15 of Title 11 of the US Code and/or the Proposed Note Amendments are not effected, and/or the Proposed RCF Amendments are not approved by all of the Existing RCF Lenders and Hedging Banks then neither the Placing and Open Offer nor the rest of the Restructuring will proceed, which would have a material adverse effect on the Group's financial position. In these circumstances, the Directors are of the opinion that, the Group's financial position will be materially adversely affected and there is a significant risk that a marketing process could be commenced for the sale of the Group on an accelerated basis (which may involve the appointment of administrators to the Company), following completion of which the Company would be likely to be placed into insolvent liquidation and that, as a result, there would likely be little or no residual value for Shareholders or Noteholders. See paragraph 4.7 of Part 1 (''Letter from the Chairman of EnQuest PLC'').

The Group may default on the Existing High Yield Notes following a failure to make interest payments under the Existing High Yield Notes and/or the commencement of the Scheme which may also lead to cross defaults under the Group's other financing arrangements.

The Directors expect that the Group will be unable to pay the interest due on the Existing High Yield Notes on 17 October 2016. The terms and conditions governing the Existing High Yield Notes allow a grace period of 30 days for the October Interest Payment to be made (i.e., up to and including 16 November 2016), following which non-payment will trigger an event of default under the Existing High Yield Notes (the ''October Interest Event of Default''). The October Interest Event of Default would entitle holders of the Existing High Yield Notes representing at least 25 per cent. in aggregate principal amount of the then outstanding Existing High Yield Notes to declare all of the then outstanding Existing High Yield Notes to be due and payable immediately unless an interest payment stand still is agreed by the requisite majority of Noteholders (90 per cent. or more). As of the date of this document, High Yield Noteholders representing approximately 61 per cent. in value of the Existing High Yield Notes have entered into the Lock-Up Agreement pursuant to which they have agreed not to take any enforcement action in relation to the October Interest Payment.

The Proposed Note Amendments provide that, among other things the October Interest Payment will not be payable by the Group in cash and will be capitalised and added to the principal amount of the New High Yield Notes to be issued pursuant to the Scheme. The Proposed Note Amendments also provide that, among other things, future interest payments on the Amended Retail Notes and the New High Yield Notes will not by payable in cash on any interest payment date, unless a payment condition is met. This payment condition includes that (i) during the six months immediately preceding the day which is one month prior to the relevant interest payment date, the average end of the daily Dated Brent Future (as published by Platts) (or such equivalent price that may replace the dated Brent price from time to time) is equal to or above \$65.00/bbl and (ii) in respect of such interest payment date, no payment event of default is outstanding under the Existing RCF (which shall include any such event of default arising as a result of the loans and letters of credit outstanding under the Existing RCF exceeding the aggregate commitments applicable at such time). As this condition will not have been met in respect of the October Interest Payment, the October Interest Payment will not be payable by the Group in cash within the applicable grace period if the Proposed Note Amendments are passed at the Scheme Meeting, and the relevant amount of interest will instead be capitalised and comprise principal of the New High Yield Notes. However, if the Proposed Note Amendments are not passed at the Scheme Meeting or otherwise do not become effective (including as a result of another condition to the Restructuring not being met), the October Interest Payment will be due and payable in cash and there is a significant risk that the Company will be unable to pay it within the applicable grace period, which will trigger the October Interest Event of Default.

In addition, certain subsidiaries of the Company have guaranteed the Company's obligations in respect of the Existing High Yield Notes. Upon the Company failing to make the October Interest Payment, the Existing High Yield Note Guarantors would be jointly and severally obliged to pay the October Interest Payment. A failure by the Existing High Yield Note Guarantors to make the October Interest Payment may result in the Existing High Yield Note Guarantors being in default of their obligations under the guarantee (a ''Guarantee Default'').

In addition, under the terms of the Existing Retail Notes, an event of default will occur upon the Company making a formal application to the English Court for an order to convene a meeting of Scheme Creditors to vote on the Scheme, and under the terms of the Existing High Yield Notes, an event of default or a potential event of default may occur upon the Court making an order to sanction the Scheme (the ''Scheme Defaults''). The Scheme will include a waiver of the Scheme Defaults (and any other potential or actual events of default which may arise as a result of or in connection with the Scheme) and, therefore, the Company believes that it is unlikely that any dissenting Existing Noteholders could seek to delay or compromise the Scheme by relying on the Scheme Defaults to accelerate and enforce the Existing Notes. Should any Existing Noteholders seek to rely on the Scheme Defaults prior to the completion of the Scheme process, the Company may, depending on the relevant circumstances at the time, apply to the English Court for a stay on those proceedings whilst the Scheme is pursued. However, there can be no assurances that the Company will be successful in obtaining such a stay.

Non-payment or acceleration of any of the Group's material indebtedness following the occurrence of any of an October Interest Event of Default, a Guarantee Default or one of the Scheme Defaults could trigger cross-defaults under any of the Group's other material indebtedness, including the Existing Notes, the Existing RCF and certain of the Group's hedging arrangements, and a default under the Tanjong Baram Project Finance Loan. In such circumstances, the Company would seek to enter into further negotiations with the relevant lenders, Existing Noteholders and hedge counterparties to amend and/or obtain waivers in respect of the default and cross-default provisions in these agreements. In particular, the Ad Hoc Committee propose an alternative debt restructuring and seek to engage in negotiations with the Existing RCF Lenders (which may involve providing a standstill of the October Interest Payment if the requisite majority has approved such standstill) and the Existing RCF Lenders may or may not accept such proposal or may consider such proposal in the context of the sales process. However, there can be no assurance that any such negotiations would be successful. In the event that the Group is unable to successfully negotiate the necessary amendments and/or waivers in respect of the cross-default provisions in such agreements, the agreements could be accelerated and/or terminated, resulting in a material adverse impact on the Group's business, prospects, financial condition and results of operations, leading to a significant risk that a marketing process could be commenced for the sale of the Group on an accelerated basis (which may involve the appointment of administrators to the Company), following completion of which the Company would be likely to be placed into insolvent liquidation and that, as a result, there would be little or no residual value for Shareholders or Noteholders. Please see paragraph 4.7 of Part 1 (''Letter from the Chairman of EnQuest PLC'') entitled ''Consequences of a failure to implement the Restructuring'' for further detail on the consequences of the Placing and Open Offer and the rest of the Restructuring not proceeding.

The Group will remain highly indebted even after the Restructuring, if completed, and its leverage and debt service obligations, its credit standing as well as general market conditions could adversely affect its business, financial condition, results of operations and its ability to procure additional financing or satisfy its debt obligations.

The Group is highly leveraged. As of 31 July 2016, the Group's total debt, excluding unamortised arrangement fees, was \$1,858.0 million, including \$956.3 million under the Existing RCF, \$871.7 million under the Existing Notes and \$30.1 million under the Tanjong Baram Project Finance Loan. Since 30 June 2016, the Group has drawn down a further approximately \$46 million under the Existing RCF. Assuming and following completion of the Restructuring and the Proposed RCF Amendments, the maximum remaining facilities available to the Group under the Existing RCF will be \$197.7 million less any further interim utilisations agreed with the Existing RCF Lenders between the date of this document and completion of the Restructuring and the Proposed RCF Amendments. See paragraph 18.6 of Part 9 (''Additional Information'').

The degree to which the Group is leveraged and is required to pay interest under these financing arrangements, its credit standing as well as market conditions and confidence in the industry in which the Group operates, could have important consequences to its business, including:

• increasing the Group's vulnerability to, and reducing its flexibility to respond to, general adverse economic and industry conditions (including changes in the oil price);
• requiring the dedication of a substantial portion of the Group's cash flow from operations to make interest and principal payments on its debt, thereby reducing the availability of such cash flow for other purposes;
• limiting the Group's ability to obtain additional financing to fund working capital, capital investments, acquisitions, debt service requirements, business ventures, or other general corporate purposes;
• limiting the Group's ability to post security to sufficiently cover its decommissioning liabilities, as is periodically required in relation to certain of its existing field facilities;
• limiting the Group's flexibility in planning for, or reacting to, changes in its business, the competitive environment and the industry in which it does business; and
• adversely affecting the Group's competitive position due to its debt burden being higher than that of its competitors.

The Group's high level of indebtedness has had a significant negative impact on its liquidity and cash flow position in recent years, particularly in the low oil price environment. Due to a combination of the Group's high level of indebtedness and the impact of the fall in oil prices on the Group's EBITDA, the Group had to negotiate temporary amendments to certain of its financial covenants in the Existing RCF in January 2015 in order to ensure that these covenants would not be breached, raising the net debt/EBITDA

covenant to five times and reducing the ratio of EBITDA to financing charges to a minimum of three times, both until mid-2017. In May 2015, following approval by the holders of the Existing Retail Notes, the financial covenants in the Existing Retail Notes were amended for consistency with the amendments to the Existing RCF. The Group has also needed to obtain waivers from the Existing RCF Lenders in respect of the liquidity covenant in the Existing RCF since January 2015.

Additionally, the Group has been required to devote a significant portion of its cash flow from operations to making interest payments under the Existing RCF and under the Existing Notes. Due to the Group's current liquidity position, the Directors expect that the Group will be unable to pay the interest due on the Existing High Yield Notes on 17 October 2016, which if not remedied during a 30-day grace period could give rise to a default under the Existing High Yield Notes and cross-defaults under the Group's other indebtedness. See ''Risk Factors—The Group may default on the Existing High Yield Notes following a failure to make interest payments under the Existing High Yield Notes and/or commencement of the Scheme, which may also lead to a cross default on the Group's other financing arrangements.''

The Group is seeking to improve the ongoing liquidity position of the Group by means of the Restructuring, which includes, inter alia, the Placing and Open Offer, the Proposed RCF Amendments and the Proposed Note Amendments. The Proposed Note Amendments would capitalise the Group's cash interest expense under the New High Yield Notes and the Amended Retail Notes unless the oil price is equal to or above an average of \$65.00/bbl for the six-month period ending one month prior to the interest payment date (and certain other conditions are met). The Proposed Note Amendments would also allow the Company to extend, at any time, the scheduled maturity dates for the repayment of the New High Yield Notes and Amended Retail Notes for one year at its discretion and would automatically extend the maturity dates for one and a half years if the Company has not repaid or refinanced the Existing RCF by 15 October 2020. The Proposed RCF Amendments would extend the maturity date for repayment of the Existing RCF. In addition, the Proposed RCF Amendments and the Proposed Note Amendments would amend the Group's financial covenants to provide additional flexibility under the RCF, remove existing financial covenants from the Existing Retail Notes, amend certain financial indebtedness baskets in the New High Yield Notes and include a restriction on certain payments to shareholders (and their affiliates) if the Company has not redeemed in cash at par an aggregate principal amount of the New High Yield Notes or Amended Retail Notes (as applicable) in an amount equal to any capitalised interest, together with any accrued and unpaid interest thereon. However, there can be no assurance that the Restructuring will successfully complete. See ''Risk Factors—The completion of the Placing and Open Offer is conditional upon, among other things, the successful implementation of the Restructuring''. Additionally, even if the Restructuring successfully completes, it will not reduce the overall amount or level of the Group's indebtedness and the Group will remain highly leveraged. The Proposed Note Amendments, if implemented, are likely to have the effect of increasing the Group's overall indebtedness, as any interest that is capitalised in respect of the New High Yield Notes or the Amended Retail Notes (for example, because the oil price has not reached an average of \$65.00/bbl during the period of six months ending one month prior to the interest payment date) will be added to the principal amount of the New High Yield Notes or Amended Retail Notes that ultimately must be repaid by the Group and interest will continue to accrue on the increased aggregate principal amount of the New High Yield Notes or Amended Retail Notes (as the case may be). If the price of oil remains at current depressed levels, the Group may not, in the longer term, generate sufficient cash flow to satisfy payment of principal on the New High Yield Notes and Amended Retail Notes when ultimately due (with the originally scheduled maturity date for each being 15 April 2022, assuming the Proposed Note Amendments are implemented) and to repay the principal on the Existing RCF when it falls due (with the final maturity date being 1 October 2021, assuming the Proposed RCF Amendments are implemented). Although the Directors expect that the Group will seek to refinance its significant indebtedness when it falls due, there can be no assurance that the Group will be able to do so on favourable terms or at all. In addition, if the Group's credit standing were to deteriorate, it would be more difficult for the Group to obtain adequate refinancing and/or such refinancing might be more costly than the Group's existing financing.

Further, if certain events occur, including breach of financial covenants, the Group's borrowings (and any hedging arrangements entered into in respect of them) may be repayable prior to the date on which they are originally scheduled for repayment. If the Group is required to repay borrowings early or is unable to comply with its financial covenants, it may not have sufficient financial resources to do so and could be forced to sell assets when it would not otherwise choose to do so in order to make the payments. It could also be subject to pre-payment and other penalties which would further aggravate the situation. If the Group is not able to access sufficient financing when required, its creditors could also force the sale of an asset through foreclosure or through the Company being put into administration.

In the event of an administration or winding up, the Group's creditors would rank prior to Shareholders and, therefore, the higher the Group's level of indebtedness the more likely it is that Shareholders would not realise any value for their investment in the Company in such a scenario.

Any one, or a combination, of the foregoing events and factors could have a material adverse effect on the Group's business, prospects, financial condition and results of operations and the Group's ability to satisfy its debt obligations, as well as on the Company's ability to return value to Shareholders.

The Group is subject to restrictive debt covenants that may limit its ability to finance its future operations and capital needs and to pursue business opportunities and activities.

Certain of the Group's existing financing arrangements, including the Existing RCF and Existing Notes, restrict, and should the Restructuring be completed successfully, the New High Yield Notes, the Amended Retail Notes and the Existing RCF as amended by the Proposed RCF Amendments will (individually or together) restrict, among other things, the Group's ability to:

• incur additional debt and issue guarantees and preferred stock;
• make certain payments, including dividends and other distributions, with respect to outstanding share capital;
• repay or redeem subordinated debt or share capital;
• create or incur certain liens;
• in the case of the Existing High Yield Notes and the New High Yield Notes, allow subsidiaries to pay dividends or make other payments to the Company and other subsidiaries;
• make certain acquisitions and investments or loans;
• sell, lease or transfer certain assets, including shares of any of the Company's restricted subsidiaries, or incur expenditure on exploration and appraisal activities;
• in the case of the Existing High Yield Notes, the New High Yield Notes and the Existing RCF as amended by the Proposed RCF amendments, guarantee certain types of the Group's other indebtedness;
• expand into unrelated businesses;
• merge or consolidate with other entities; and
• enter into certain transactions with affiliates.

All these limitations are subject to significant exceptions and qualifications. The Group's compliance with these and other covenants could reduce its flexibility in conducting its operations, particularly by:

• affecting the Group's ability to react to changes in market conditions, whether by increasing its vulnerability in relation to unfavourable economic conditions or by preventing it from profiting from an improvement in those conditions;
• affecting the Group's ability to pursue business opportunities and activities that may be in its interest;
• limiting the Group's ability to obtain certain additional financing in order to meet the Group's working capital requirements, make investments, or acquisitions or exploration and appraisal activities and carry out refinancings; and
• forcing the Group to dedicate a significant portion of its cash flows to payment of the sums due for such loans, thus reducing the Group's ability to utilise its cash flows for other purposes.

In addition, the Group is subject to affirmative financial covenants contained in the Existing RCF, and will be subject to amended affirmative covenants if the Proposed RCF Amendments become effective including the requirement to maintain no more than a specified ratio of consolidated net financial indebtedness to EBITDA, no less than a specified ratio of consolidated EBITDA to finance charges and, in the Existing RCF (but not following the Proposed RCF Amendments becoming effective) the reserve and resource base value at or above the amount of utilisations outstanding together with interest, fees and other amounts accrued in relation thereto. See paragraph 18.7 of Part 9 (''Additional Information''). The Group's ability to meet financial ratios and other tests can be affected by events beyond its control. A breach of any of those covenants, ratios, tests or restrictions could result in an event of default under the Existing RCF and, should any or all utilisations under the Existing RCF be accelerated, the New High Yield Notes and the Amended Retail Notes. Upon the occurrence of any event of default under the Existing RCF, subject to applicable cure periods and other limitations on acceleration or enforcement, the relevant creditors could cancel the availability of the facilities and elect to declare all amounts outstanding, together with accrued interest, immediately due and payable. Furthermore, the Existing RCF prohibits the Group from withdrawing funds from bank accounts that consist of amounts that the Group has received in connection with certain assets or any disposal of such assets or of any subsidiary that holds, whether directly or indirectly, any such asset.

In addition, any default under the Existing RCF, the New High Yield Notes or the Amended Retail Notes could lead to an event of default and acceleration under other of the Group's indebtedness that contain cross-default or cross-acceleration provisions, including the Tanjong Baram Project Finance Loan. If the Group's creditors, including the creditors under the Existing RCF, the New High Yield Notes or the Amended Retail Notes, accelerate the payment of those debts, the Company cannot assure you that the Group's cash flows or its assets and the assets of its subsidiaries would be sufficient to repay in full such amounts, to satisfy all other liabilities of the Company's subsidiaries which may be due and payable and to repay amounts outstanding under the Existing RCF, the New High Yield Notes, the Amended Retail Notes, the Tanjong Baram Project Finance Loan or any of the Group's other indebtedness. If the Group is unable to repay the amounts due and payable under the Existing RCF, the New High Yield Notes, the Amended Retail Notes, the Tanjong Baram Project Finance Loan or any of its other indebtedness, the Group's creditors thereunder could proceed against the collateral that secures such debt. Accordingly, the Group could be forced into bankruptcy or liquidation, and the Company and its subsidiary guarantors under these agreements may not be able to fulfil their respective obligations. In the event that the Group is unable to successfully renegotiate such agreements following an event of default, the Group's business, prospects, financial condition and results of operations will be adversely affected, leading to a significant risk that a marketing process could be commenced for the sale of the Group on an accelerated basis (which may involve the appointment of administrators to the Company), following completion of which the Company would be likely to be placed into insolvent liquidation and that, as a result, there would likely be little or no residual value for Shareholders.

SECTION B: RISKS RELATING TO THE OIL AND GAS INDUSTRY

Volatility and further decreases in oil prices could materially adversely affect the Group's business, prospects, financial condition and results of operations

The Group's business, prospects, financial condition and results of operations depend substantially upon oil prices, which may be adversely impacted by unfavourable global, regional and national macroeconomic conditions. Oil prices declined significantly beginning in the second half of 2014 and, although they have stabilised somewhat, remain volatile and significantly below the levels that prevailed in 2013 and the first half of 2014. There can be no assurance that oil prices will not remain at currently suppressed levels or decrease further. Oil is a commodity for which prices are determined based on world demand, supply and other factors, all of which are beyond the Group's control. Historically, prices for oil have fluctuated widely for many reasons, including:

• global and regional supply and demand, and expectations regarding future supply and demand, for oil products;
• decrease in demand with weak macro-economic growth;
• increased production due to new extraction developments and improved extraction and production methods;
• geopolitical uncertainty;
• the threat of terrorism from which some producing areas suffer periodically;
• weather conditions, natural disasters and environmental incidents;
• access to pipeline systems, storage platforms, shipping vessels and other means of transporting and storing oil;

• prices and availability of and competition from alternative fuels and energy sources;

• prices and availability of new technologies;

• the ability of the members of OPEC, and other oil producing nations, to set and maintain specified levels of production and prices;
• political, economic and military developments in oil producing regions generally;
• governmental regulations and actions, including the imposition of export restrictions and taxes and environmental requirements and restrictions; and
• market uncertainty and speculative activities by those who buy and sell oil on the world markets.

Oil prices are continually subject to volatility as a result of market uncertainties over the supply and demand of this commodity due to the current state of the world's economies, actions of OPEC and ongoing global credit and liquidity concerns.

Historically, crude oil prices have been highly volatile and subject to large fluctuations in response to relatively minor changes in the demand for oil. During 2015, prices for ICE Brent crude oil decreased from a daily peak of \$67.77/bbl in May 2015 to a daily low of \$36.11/bbl in December 2015. The monthly average price for Brent crude oil in 2015 was \$52/bbl, a decrease of 47.5 per cent. from the monthly average price of \$99/bbl in 2014. Price volatility was even more prominent in other recent years: in 2014 the daily maximum and minimum Brent prices were approximately \$115.06/bbl and \$57.33/bbl while in 2013 they were approximately \$118.90/bbl and \$97.69/bbl. The Company can provide no assurance as to the level of oil prices that will be achievable in the future.

The Group's revenues, operating results, profitability, future rate of growth and the carrying value of its oil properties depend heavily on the prices the Group receives for oil sales. Oil prices also affect the Group's cash flows available for capital investments and other items, including the amount and value of the Group's oil reserves. In addition, the Group may face property impairments if prices fall significantly. No assurance can be given that oil prices will remain at levels which enable the Group to do business profitably or at levels that make it economically viable to produce from certain wells and any material decline in oil prices could result in a reduction of the Group's net production volumes and revenue, a decrease in the Group's reserves and a decrease in the valuation of the Group's exploration, appraisal, development and production properties.

The decrease in oil prices that commenced in the second half of 2014 impacted the Group's revenue and other financial results considerably in 2014 and 2015. The Group has engaged in a degree of hedging to mitigate against fluctuations in oil prices, with realised gains from commodity derivatives contracts offsetting the decline in the Group's revenue by \$261.2 million in 2015. During the six months ended 30 June 2016, the Group entered into a ''chooser option'' in respect of the first half of 2017: the counterparty can choose to sell £47.5 million to EnQuest at an exchange rate of \$1.4:£1.0 or purchase 1,320,000 barrels of oil at US\$58/bbl. Based on current oil prices and exchange rates, the Group expects the counterparty would currently choose to exchange currency and the chooser option has therefore been presented with other foreign currency contracts. Since 30 June 2016, the Group entered hedging arrangements over 1MMbbl of 2017 production (83kbbls per month) at a fixed price of \$51.50/bbl. The Group has also sold 500,000 bbls per month for the first half of 2017 (3 MMbbls total) at a fixed price of \$49/bbl and has bought a call (nil cost) for the same notional quantity, with a strike price of \$57.25/bbl. Should the price rise above \$57.25/bbl, the Group will receive the difference to offset the loss it would make on the \$49/bbl swaps. In addition, the Group has hedged 500,000 bbls for the first half of 2017 at \$54.50/bbl. There can be no assurance that the Group's existing hedging arrangements will be effective or sufficient, or that the Group will be able to effectively hedge further declines in oil prices in the future. If prices for the oil the Group produces fall further or remain at suppressed levels, this could materially adversely affect the Group's business, prospects, financial condition and results of operations.

The levels of the Group's 2P reserves and contingent resources, their quality and production volumes may be lower than estimated or expected

The 2P reserves and contingent resources set forth in this document represent estimates only and are based on the Group's internal assessments as audited by GCA. The standards utilised to prepare the 2P reserves and contingent resources information set forth in this document are in accordance with resource definitions jointly set out by the Society of Petroleum Engineers, the World Petroleum Council, the American Association of Petroleum Geologists and the Society of Petroleum Evaluation Engineers in March 2007 in the ''Petroleum Resources Management System'', which may be different from the standards of reporting adopted in the United States and other jurisdictions. Investors, therefore, should not assume that the data found in the reserves and resources information set forth in this document is directly comparable to similar information that has been prepared in accordance with the reserve and resource reporting standards of other jurisdictions.

In general, estimates of economically recoverable oil reserves are based on a number of factors and assumptions made as of the date on which the reserves estimates were determined, all of which may vary considerably from actual results. Underground accumulations of hydrocarbons cannot be measured in an exact manner and estimates thereof are a subjective process aimed at understanding the statistical probabilities of recovery. The variables and assumptions upon which estimates of economically recoverable oil reserves depend, include, among others, the following:

• production history from the properties compared with production from other comparable producing areas;
• quality and quantity of available data;
• interpretation of the available geological and geophysical data;
• geological and engineering estimates (which have inherent uncertainties);
• effects of regulations adopted by governmental agencies;
• future percentages of international sales;
• future oil and other commodity prices;
• capital investments;
• effectiveness of the applied technologies and equipment;
• future operating costs, tax on the extraction of commercial minerals, development costs and workover and remedial costs; and
• the judgement of the persons preparing the estimates.

As all reserve estimates are subjective, each of the following items may differ materially from those assumed in estimating reserves:

• the quantities and qualities of oil reserves that are ultimately recovered;
• the timing of the recovery of oil reserves;
• the production and operating costs incurred;
• the amount and timing of additional exploration and future development expenditures; and
• future hydrocarbon sales prices.

Many of the factors in respect of which assumptions are made when estimating reserves are beyond the Group's control and therefore these estimates may prove to be incorrect over time. Evaluations of reserves necessarily involve multiple uncertainties. The accuracy of any reserves or resources evaluation depends on the quality of available information and oil engineering and geological interpretation. Exploration drilling, interpretation, testing and production after the date of the estimates may require substantial upward or downward revisions in the Group's reserves or resources data. Moreover, different reserve engineers may make different estimates of reserves and cash flows based on the same available data. Actual production, revenues and expenditures with respect to reserves and resources will vary from estimates and the variations may be material. Therefore, potential investors should not place undue reliance on reserves or resources data contained herein or on any specific field, reservoir, fluid or production profile or reserve estimate.

The uncertainties in relation to the estimation of reserves summarised above also exist with respect to the estimation of resources. The probability that 2C contingent resources will be economically recoverable is considerably lower than for 2P reserves. Volumes and values associated with contingent resources should be considered highly speculative.

If the assumptions upon which the estimates of the Group's oil reserves and resources have been based prove to be incorrect or if the actual reserves or recoverable resources available to the Group are otherwise less than the current estimates or of lesser quality than expected, the Group may be unable to recover and produce the estimated levels or quality of oil set out in this document and this may materially adversely affect the Group's business, prospects, financial condition and results of operations.

The Group faces drilling, exploration and production risks and hazards that may affect the Group's ability to produce oil at expected levels, quality and costs and that may result in additional liabilities to the Group

The Group's oil exploration and production operations are subject to numerous risks common to the Group's industry, including premature decline of reservoirs, invasion of water into producing formations, encountering unexpected formations or pressures, low permeability of reservoirs, contamination of oil and gas, blowouts, oil and other chemical spills, explosions, fires, equipment damage or failure, natural disasters, geological uncertainties, unusual or unexpected rock formations and abnormal geological pressures, uncontrollable flows of oil, gas or well fluids, adverse weather conditions, shortages of skilled labour, pollution and other environmental risks.

As all of the Group's production is offshore, its facilities are also subject to hazards inherent in marine operations, such as capsizing, sinking, grounding, vessel collision and damage from natural catastrophes, severe storms or other severe weather conditions. The offshore drilling the Group conducts could involve increased risks due to risks inherent in the nature of drilling in complicated and harsh environments and complex geological formations including blowouts, encountering formations with abnormal pressure and oil spills. In particular, the Group's hub-based model requires that substantially all the Group's production is produced through offshore facilities, so any technical failure or accident involving these facilities could have a material negative impact on the Group's production from multiple fields and its resulting cash flow therefrom. Such technical failure or accident may also result in unplanned expenditure, in particular where remediation may be dependent on suitable weather conditions offshore.

If any of these events occur, environmental damage, including biodiversity loss or habitat destruction, injury to persons and other species and organisms, loss of life, failure to produce oil in commercial quantities or an inability to fully produce discovered reserves could result. These events could also cause substantial damage to the Group's property and the Group's reputation and put at risk some or all of the Group's interests in licences, which enable it to explore and produce, and could result in fines or penalties, criminal sanctions against the Group and its management and other governmental and third party claims. Consequent production delays and declines from normal field operating conditions and other adverse actions taken by host governments and third parties may result in revenue and cash flow levels being adversely affected. Moreover, should any of these risks materialise, the Group could incur legal defence costs, remedial costs and substantial losses, including those due to injury or loss of life, human health risks, severe damage to or destruction of property, natural resources and equipment, environmental damage, unplanned production outages, clean-up responsibilities, regulatory investigations and penalties, increased public interest in the Group's operational performance and suspension of operations. Similar hazards and impacts from third party operations also could result in increased regulatory costs and operational restrictions impacting the Group's operations.

The Group faces significant uncertainty as to the success of any drilling appraisal, exploration and development activities

The Group's success depends in part on its bringing both re-developments and new developments of oil fields to production on budget and on schedule. Oil development activities are capital intensive and subject to financing limitations and successful outcomes cannot be assured. For example, first oil at Alma/Galia was pushed back from an initial target of the second half of 2014 to the fourth quarter of 2015 primarily due to delays on the EnQuest Producer FPSO. The Group undertakes development activities, which may be subjected to unexpected problems and delays, and incurs significant costs, which can differ significantly from estimates, with no guarantee that such expenditure will result in the recovery of oil in sufficient quantities to justify the Group's investments. The Group may be required to curtail, delay or cancel any development operations because of a variety of factors, including unexpected drilling conditions, pressure or irregularities in geological formations, equipment failures or accidents, breaches of security, title problems, adverse weather conditions, compliance with governmental requirements and shortages or delays in the availability of drilling rigs and the delivery of equipment. Any such curtailment, delay or cancellation could delay or prevent production, which reduces cash flows and can lead to impairment charges.

In addition, the Group's exploration activities may not be successful. Although historically the Group has undertaken lower-risk exploration activities in the neighbouring regions to the Group's existing producing assets and development projects (or to other producing oil fields) to take advantage of existing infrastructure, the Group may still incur unexpected costs that differ significantly from estimates. Further, appraisal results for discoveries are uncertain. Appraisal and development activities involving the drilling of wells across a field may be unpredictable and may not result in the outcome planned, targeted or predicted, as only by extensive testing can the properties of an entire field be more fully understood. The Group may also be required to curtail, delay or cancel any drilling operations because of a variety of factors, including unexpected drilling conditions, pressure or irregularities in geological formations, equipment failures or accidents, breaches of security, adverse weather conditions, compliance with governmental requirements and shortages or delays in the availability of drilling rigs and the delivery of equipment.

Even if the Group's development operations lead to wells that are productive, these wells may not produce sufficient net revenues to return a profit after drilling, operating and other costs. Completion of the Group's development plans does not assure a profit on the investment or recovery of drilling, completion and operating costs and drilling hazards and environmental damage can further increase the cost of operations to be recovered. In addition, various field operating conditions may also adversely affect production from successful wells including delays in obtaining governmental approvals, permits, licences, authorisations or consents, shut-ins of connected wells, insufficient storage or transportation capacity or other geological and mechanical conditions.

If the Group is unable to replace the 2P reserves that it produces, the Group's reserves and revenues will decline

The Group's future success depends on its ability to develop or acquire additional 2P reserves that are economically recoverable, which depends in part on oil prices. While well supervision and effective maintenance operations can contribute to sustaining production rates over time, production delays and declines from normal field operating conditions cannot be eliminated and the Group targets maturing fields that typically have fewer reserves than could be expected in new discoveries. Although the Group's current assets have a reserve life of 18 years, in the longer term without continued successful exploration, development and acquisition activities, the Group's reserves and revenues will decline over time as a result of the Group's current reserves being depleted by production.

As the Group's strategy depends in part on acquiring relatively mature assets, the Group frequently holds assets with declining production that, prior to the Group's ownership, have not been drilled, developed or maintained for significant periods of time. The Group seeks to use improved recovery methods to increase the production of oil at these fields, including the injection of water into formations to provide pressure support and sweep oil towards production wells and the injection of gas into production wells to facilitate lifting of oil and water. If the Group's recovery methods do not allow for the extraction of oil in the manner or to the extent that it anticipates, its future results of operations and financial condition could be materially adversely affected.

Future increases in the Group's reserves will depend not only on its ability to appraise, develop and explore the Group's existing assets but also on the Group's ability to select and acquire suitable additional assets either through awards at licensing rounds or through acquisitions. The Group may seek to increase its 2P reserves and contingent resources through acquisitions. Although the Group continues to evaluate further acquisition opportunities, it has not entered into any binding or non-binding agreements, memoranda of understanding or other commitments in respect of any such opportunities, and there can be no assurances that the Group will be successful in identifying and completing further acquisitions. Successful acquisitions require an assessment of a number of factors, including estimates of recoverable reserves and resources, exploration potential, future oil prices, operating costs and potential environmental and other liabilities. Such assessments are imprecise and cannot be made with a high degree of accuracy. While the Group routinely performs due diligence reviews of all potential acquisition targets, such reviews will not reveal all existing or potential problems or liabilities. In addition, the Group's review may not permit it to become sufficiently familiar with the assets or properties to fully assess their deficiencies and capabilities.

Any failure by the Group to successfully replace reserves, whether through further exploring and developing its existing assets or through the award or acquisition of additional assets, could materially adversely affect the Group's business, prospects, financial condition and results of operations.

The Group carries out business in a highly competitive industry

The oil industry is highly competitive, including in the Group's key jurisdictions of operation, the UKCS and Malaysia. The key areas in respect of which the Group faces competition include:

• engagement of third party service providers whose capacity to provide key services may be limited;
• purchasing, leasing, hiring, chartering or other procuring of equipment that may be scarce;
• acquisition of existing hydrocarbon assets;
• acquisition of exploration and production licences, or interests in such licences, at auctions or sales run by governmental authorities;
• ability to sell assets;
• access to key skilled personnel;
• differentiating technologies; and
• access to bank lending capacity.

Competition in the Group's markets is intense and depends, among other things, on the number of competitors in the market, their financial power, their degree of geological, geophysical, engineering and management expertise, their degree of vertical integration, pricing policies, their ability to develop properties on time and on budget, their ability to select, acquire and develop reserves and their ability to foster and maintain relationships with host governments of the countries in which they have assets. The Group's competitors include entities with greater technical, physical and financial resources. When looking at acquisition opportunities, the Group also competes with major national and state-owned enterprises, which typically possess significant financial resources and are able to offer attractive and favourable prices to sellers. Larger and better capitalised competitors may be in a position to outbid the Group for particular licences and acquisition opportunities.

The effects of operating in a competitive industry may include higher than anticipated prices for the acquisition of licences or assets, the hiring by competitors of key management or other personnel, competitors being able to secure rigs for drilling operations preferentially to the Group and restrictions on the availability of equipment or services.

Larger and better capitalised competitors may also be better able to withstand sustained periods of suppressed oil prices. They may also be more successful in diversifying and reducing risk and may be able to absorb the burden of any changes in law and regulations more easily than the Group, which would adversely affect the Group's competitive position. In addition, many of the Group's competitors have been operating for a much longer time and have demonstrated the ability to operate through industry cycles.

If the Group is unsuccessful in competing against other companies, its business, prospects, financial condition and results of operations could be materially adversely affected.

The results of the United Kingdom's referendum on withdrawal from the European Union may have a negative effect on global economic conditions, financial markets and the Group's business

A majority of the Group's producing assets are located in the UKCS, within the territory of the United Kingdom. On 23 June 2016, a majority of voters in the United Kingdom voted in favour of the United Kingdom withdrawing from the European Union in a national referendum. The referendum was advisory, and the United Kingdom's actual withdrawal from the European Union depends upon the government of the United Kingdom triggering Article 50 of the Lisbon Treaty (''Article 50''). The terms of any withdrawal would then be subject to a negotiation period that could last two years or more after the government of the United Kingdom formally initiates a withdrawal process. Therefore, the timing and manner of the United Kingdom's exit from the European Union (if such exit proceeds) remain uncertain. Nevertheless, the referendum has created significant uncertainty about the future relationship between the United Kingdom and the European Union, including with respect to the laws and regulations that will apply as the United Kingdom determines which European Union-derived laws to replace or replicate in the event of a withdrawal. This may significantly affect the fiscal, monetary and regulatory landscape in the United Kingdom. The result of the referendum has also had significant political implications in the United Kingdom, with Prime Minister David Cameron resigning and a new prime minister, Theresa May, being appointed on 13 July 2016. On 2 October 2016, Prime Minister May announced that her government would trigger Article 50 by the end of March 2017. The referendum has also given rise to calls for the governments of other European Union member states to consider withdrawal. These developments have had and may continue to have an effect on UK, European and global market conditions and the stability of global financial markets, and it is possible that they may reduce global market liquidity and restrict the ability of key market participants to operate in certain financial markets. These developments may make it more difficult for the Group to access capital, and it is possible that they could also result in reduced economic activity, which could give rise to a reduction in the demand for oil and a downward pressure on oil prices. If such events come to pass, this could have a material adverse effect on the Group's business, prospects, financial condition and results of operations.

Additionally, since the result of the referendum held on 23 June 2016, there has been some speculation that a second referendum could be held in Scotland to decide whether it should remain part of the United Kingdom or become independent. To date, no such referendum has been called. However, should such a referendum be called in the future and result in Scotland leaving the United Kingdom, this would give rise to further risks for the Group's business as a majority of the Group's producing assets are located in the UKCS, which might be considered the territorial waters of any future Scottish state. Should Scotland become an independent state in the future, there may be changes in laws, rules and regulations that could result in increased costs for the Group, changes in its operating standards which adversely affect the Group's production and costs, increased taxes or other negative consequences.

Climate change abatement legislation or protests against fossil fuel extraction may have a material adverse effect on the Group's industry

Continued political attention to issues concerning climate change, the role of human activity in it and potential mitigation through regulation could have a material impact on the Group's business. International agreements, national and regional legislation, and regulatory measures to limit greenhouse emissions are currently in various stages of discussion or implementation. Like other oil companies, given that the Group's operations involve, and the Group's products are associated with, emissions of greenhouse gases, these and other greenhouse gas emissions-related laws, policies and regulations may result in substantial capital, compliance, operating and maintenance costs. The level of expenditure required to comply with these laws and regulations is difficult to accurately predict and will vary depending on, among other things, the laws enacted by particular countries. As such, climate change legislation and regulatory initiatives restricting emissions of greenhouse gases may materially adversely affect the Group's operations and increase its cost structure. Such legislation or regulatory initiatives could also have a material adverse effect by diminishing the demand for oil, increasing the Group's cost structure or causing disruption to the Group's operations by regulators. In addition, the Group may be subject to activism from groups campaigning against fossil fuel extraction, which could affect its reputation, disrupt the Group's operations or development programmes or otherwise negatively impact the Group's business.

For example, as a company incorporated in England and Wales, the Group is currently subject to European Union climate change abatement legislation. Due to the requirements of the European Union's Emissions Trading Scheme (the ''EU ETS''), Member States' governments, including the United Kingdom, have put forward national plans that set carbon dioxide emission reduction requirements for various industrial activities, including offshore oil exploration and production facilities incorporating combustion plants (including flaring) with aggregate thermal ratings of greater than 20 megawatts (thermal input).

Under the currently applicable EU ETS, Member States allocate emissions allowances to installations within the scheme. Therefore, if the Group's verified emissions are less than its prescribed allocation, then the Group may sell its excess allocations by means of a market auction. However, if the Group's verified emissions from an installation exceed its allocated allowances, then the Group will have to purchase extra allowances to cover those excess emissions from the market.

During Phase II EU ETS (which ran from 2008 to 2012, coinciding with the applicable time period of the Kyoto Protocol to the United Nations Framework Convention on Climate Change), the majority of allowances for emissions were allocated to individual installations free of charge based on forecast emissions. However, under the current Phase III of EU ETS (which runs from 2013 to 2020), an increasing level of an installation's allowances will have to be purchased at market auctions. Furthermore, the number of allowances available to installations will decrease and allocations will be managed centrally by the EU Commission rather than by Member States. The costs of emissions allowances to which the Group may be subject are built into the life-of-field cost forecasts for the Group's assets.

Although a majority of voters in the United Kingdom voted in favour of the United Kingdom leaving the European Union in the referendum held on 23 June 2016, the timing and manner of the UK's exit from the European Union (if such exit proceeds), as well as the implications for European Union legislation currently applicable in the United Kingdom, including the climate change abatement legislation, remain uncertain. Pending its exit from the European Union, the United Kingdom remains party to the EU ETS. Further, as the United Kingdom will still be subject to various commitments in respect of climate change, including the Kyoto protocol, following its exit from the European Union, it may put in place a replacement emissions trading scheme once it is no longer party to the EU ETS in order to help it meet such commitments. It is currently unknown what the terms and requirements of any such replacement emissions trading scheme would be and whether it would be linked to the EU ETS. It is possible that the terms and requirements of any such replacement emissions trading scheme could be more onerous than those of the EU ETS. The EU ETS, as well as any applicable replacement trading scheme following the UK's exit from the European Union, may change considerably if a successor to the Kyoto Protocol is agreed. Additional requirements may also be enacted in the jurisdictions in which the Group operates in the future.

In addition, the Group's operations in Malaysia are subject to Malaysia's environmental laws and regulations, such as the Environmental Quality Act 1974, which prohibits industrial activities which cause pollution without obtaining a valid licence, and the Occupational Health and Safety Act 1974. The level of expenditure required to comply with such laws and regulations, including to obtain any licence, permit or approval required under such laws and regulations, is difficult to accurately predict and may result in substantial capital, and operating costs. Any amendments to current laws, regulations, licences, permits or approvals could also have a material adverse effect on the Group's operations and increase its cost structure.

The Group may not be able to keep pace with technological developments in its industry

The oil industry is characterised by rapid and significant technological advancements and introductions of new products and services using new technologies. As others use or develop new technologies, the Group may be placed at a competitive disadvantage or may be forced by competitive pressures to implement those new technologies at substantial costs. In addition, other oil companies may have greater financial, technical and personnel resources that allow them to enjoy technological advantages, which may in the future allow them to implement new technologies before the Group can. The Group may not be able to respond to these competitive pressures or implement new technologies on a timely basis or at an acceptable cost. If one or more of the technologies the Group uses now or in the future were to become obsolete, the Group's business, prospects, financial condition and results of operations could be materially adversely affected. In addition, any new technology that the Group implements may have unanticipated or unforeseen adverse consequences, either to the Group's business or the industry as a whole.

SECTION C: RISKS RELATING TO THE GROUP'S BUSINESS

All of the Group's production comes from a small number of offshore assets in the UKCS and Malaysia, making it vulnerable to risks associated with having significant production in two countries and regions and only a small number of assets

The Group's six offshore assets in the UKCS and two offshore assets in Malaysia accounted for 75.2 per cent. and 24.8 per cent. of its production in the year ended 31 December 2015, respectively. From 1 January 2015 to 31 December 2015, the Group's net average daily production was 36,567 boepd of which 27,505 boepd were produced from its assets in the UKCS and 9,062 boepd were produced from its assets in Malaysia. As this demonstrates, the Group's operations are limited to a small number of geographic areas and, in particular, the UKCS. The Group is, therefore, exposed disproportionately to the impact of regional supply and demand factors, delays or interruptions of production from wells in these areas caused by processing or transportation capacity constraints, governmental regulation, political changes, availability of equipment, facilities, personnel or services, infrastructure disruptions, natural disasters, weather events or interruption of the processing or transportation of oil. The UKCS and Malaysia are prone to difficult weather conditions that can in some cases prevent the Group from shipping supplies, personnel and fuel to the Group's facilities, each of which can cause production shut downs or slowdowns. Unusually difficult weather conditions may lead to a heightened risk of floating facilities detaching from their moorings and difficulties in supplying these facilities with fuel and the Company cannot assure you that its floating facilities will not be affected in the future. Adverse changes in weather and natural hazards, including the occurrence of monsoon seasons, typhoons and tsunamis in Malaysia, may cause damage to the Group's vessels resulting in delays or suspension in the Group's operations. If mechanical problems, storms or other events curtail a substantial portion of the Group's production in the UKCS or cause damage to any

of the Group's facilities, the Group's results of operations and financial condition could be adversely affected.

Mechanical problems, accidents, oil leaks or other events at any of the Group's installations, FPSOs or the related pipeline systems or subsea infrastructure or third party operated-infrastructure on which the Group relies, may cause a widespread, unexpected production shut down of the Group's operations in the UKCS. The Group's hub-focused model means that it leverages its infrastructure to service multiple fields, which magnifies the impact of any unexpected shut downs at its infrastructure. Most of the Group's producing assets in the UKCS are connected via pipeline systems or subsea tieback so that the Group exports oil from multiple fields to shore. For instance, oil produced at the Broom field is transported to the Heather platform via a subsea tie-back and oil from the Don fields is exported through the Thistle Alpha platform at the Thistle oil field. Any unplanned production shut down of the Group's facilities could have a material adverse effect on the Group's business, prospects, financial condition and results of operations if the shutdown impairs the Group's ability to export oil from connected fields.

Due to the concentration of the Group's assets in two regions, a number of its assets could experience any of the same conditions at the same time, resulting in a relatively greater impact on the Group's results of operations than they might have on other companies that have a more diversified portfolio of producing assets and wider geographic exposure. Such conditions could have a material adverse effect on the Group's business, prospects, financial condition and results of operations. See also ''—The Group's business is subject to licensing and other regulatory requirements, which are subject to change, in the countries in which it operates, and it is subject to the risks of licences or other agreements being withheld, suspended, revoked or terminated and of the Group's failing to comply with relevant licences, agreements or other regulatory requirements.''

Much of the Group's future growth depends on successful development of Kraken and the Group's production at Alma/Galia

The Group expects that a significant proportion of its future production will be from its largest development asset, Kraken, and from production at Alma/Galia. Alma/Galia achieved first oil on 27 October 2015 and Kraken is scheduled to achieve first oil in the first half of 2017. Future production at Kraken and/or Alma/Galia may not be substantially in line with the Group's projections. Any decrease in production volumes or reserve estimates would adversely affect the Group's results of operation and financial condition. Moreover, the Group has made significant capital expenditures with regard to the development of Kraken. The gross full cycle capital expenditure for the Kraken development is currently estimated to be approximately \$2.5 billion. The Group's capital expenditures may not guarantee the successful production of oil in line with its projections. The Company also cannot guarantee that unexpected conditions, such as unexpected drilling conditions, equipment failures or accidents, adverse weather, breaches of security and the unavailability of drilling rigs, among others, will not delay or curtail future production. See ''—Risks relating to the oil and gas industry—The Group faces significant uncertainty as to the success of any drilling appraisal, exploration and development activities.''

The Group relies on third party infrastructure such as the Sullom Voe Terminal and the Terengganu Crude Oil Terminal that it does not control and is subject to tariff charges that it does not control

A significant proportion of the Group's current production in the UKCS passes through some third party owned and controlled infrastructure. In particular, a substantial majority of the Group's UKCS production is sold after processing through the Sullom Voe Terminal (''SVT''), an oil terminal located in the Shetland Islands that receives oil from the Brent and Ninian pipeline systems. SVT was the terminal through which the Group shipped 2015 production for all of its UKCS producing assets with the exception of Alba, Alma/ Galia and GKA. If SVT (or any infrastructure connecting to the terminal) experiences mechanical problems, an explosion, adverse weather conditions, a terrorist attack or any other event that causes an interruption in operations or a shutdown, the Group's ability to transport its oil could be severely affected. Any decrease in the Group's ability to transport its oil through SVT or other key infrastructure could have a material adverse effect on the Group's business, prospects, financial condition and results of operations.

Production from PM8/Seligi is transported via the Tapis pipeline (operated by ExxonMobil) to the Terengganu Crude Oil Terminal for processing and sale. If the Terengganu Crude Oil Terminal (or any infrastructure connecting to the terminal) experiences mechanical problems, an explosion, adverse weather conditions, a terrorist attack or any other event that causes an interruption in operations or a shutdown, the Group's ability to transport its oil could be severely affected. Any decrease in the Group's ability to transport its oil through Terengganu Crude Oil Terminal or other key infrastructure could have a material adverse effect on the Group's business, prospects, financial condition and results of operations.

Additionally, the Group's use of third party infrastructure in general and SVT in particular is subject to tariff charges. These charges can be substantial and the per barrel charge is not subject to the Group's direct control. SVT tariff costs increased from approximately \$4.4/bbl in 2011 to \$8.9/bbl in 2014, with a large part of the increase taking effect in 2013, when the tariff rate was \$10.9/bbl. Since 2013, unit costs at SVT have been reduced substantially. While the Company continues to work with the SVT operator to reduce gross cost levels, there can be no assurances tariffs will not increase.

A significant proportion of the Group's equipment has substantial prior use and any unplanned failures or outages could harm the Group's operations

As the Group's strategy depends in part on acquiring relatively mature assets, the Group frequently holds assets which utilise equipment that has had substantial prior use. In addition, many of the assets, prior to the Group's ownership, had not been drilled, developed or maintained for significant periods of time and in some cases the equipment at such assets had been subject to lengthy periods out of commercial operation. Such equipment can be subject to higher levels of wear and tear, can be subject to a greater risk of failure and outage, can give rise to higher maintenance costs and may need to be replaced more quickly than newer assets There are inherent risks involved with the operation of this equipment, and any unexpected failures or outages leading to additional expenses could have a negative impact on the Group's production in both UKCS and Malaysia. In addition, part of the Group's business strategy is to re-use, retrofit or refurbish producing assets where possible to maximise the efficiency of its operations while avoiding significant expenses associated with purchasing new equipment. The Company cannot guarantee that such re-use, retrofitting or refurbishment will be commercially feasible to undertake in the future and the Company cannot assure you that it will not face unexpected costs during the re-use, retrofitting or refurbishment process. The Company cannot assure you that it will not be subject to such unexpected costs in the future and such costs could negatively impact the Group's results of operation and financial condition.

A significant proportion of third party infrastructure upon which the Group's operations rely is old, and if it lacks proper maintenance and repair it could harm the Group's operations in the UKCS

A significant proportion of the Group's current production in the UKCS relies on some third party owned and controlled infrastructure that is old. The Brent and Ninian pipeline systems, for instance, were first constructed in the 1970s. The Group relies on the Brent pipeline system for the transport of produced oil at Thistle/Deveron and Dons and the Ninian pipeline system for the transport of produced oil at Thistle/ Deveron. As the Brent and Ninian pipeline systems have been extensively used, they require frequent maintenance and repair to maintain efficiency. The pipeline systems may also need to be shut down to stop oil and gas leaks. For example, in January 2013, the Brent pipeline was shut down for three days because of a leak at a pumping station. If the owners or operators of these pipeline systems, as well as of other, old third party infrastructure upon which the Group's operations rely, fail to adequately maintain their integrity, the Group may not be able to efficiently transport oil to onshore terminals for sale. A reduction or potential stoppage in the transport of the Group's oil or the efficiency of its operations could have a material adverse effect on the Group's business, prospects, financial condition and results of operations.

The Group's business is subject to licensing and other regulatory requirements, which are subject to change, in the countries in which it operates, and it is subject to the risks of licences or other agreements being withheld, suspended, revoked or terminated and of the Group's failing to comply with relevant licences, agreements or other regulatory requirements

The Group's current operations are, and its future operations will be, subject to licences, approvals, authorisations, consents and permits from governmental authorities for exploration, development, construction, operation, production, marketing, pricing, transportation and storage of oil, taxation and environmental and health and safety matters. Relevant legislation provides that fines may be imposed and a licence may be suspended or terminated if a licence holder, or party to a related agreement, fails to comply with its obligations under such licence or agreement, or fails to make timely payments of levies and taxes for the licensed activity, provide the required geological information or meet other reporting requirements. It may from time to time be difficult to ascertain whether the Group has complied with obligations under licences as the extent of such obligations may be unclear or ambiguous and regulatory authorities may not be forthcoming with confirmatory statements that work obligations have been fulfilled,

which can lead to further operational uncertainty. In addition, the Group and its commercial partners, as applicable, have obligations to develop the fields in accordance with specific requirements under certain licences and related agreements, field development plans, laws and regulations. If the Group or its commercial partners were to fail to satisfy such obligations with respect to a specific field, the licence or related agreements for that field might be suspended, revoked or terminated.

With regard to the Group's operations in the UKCS, UK authorities are typically authorised to, and do from time to time, inspect to verify compliance by the Group or the Group's commercial partners, as applicable, with relevant laws and the licences or the agreements pursuant to which the Group conducts its business. The views of the relevant government agencies regarding the development of the fields that the Group or its commercial partners operate or the compliance with the terms of the licences pursuant to which the Group conducts such operations may not coincide with the Group's views, which might lead to disagreements that may not be resolved.

With regard to the Group's operations in Malaysia, upstream petroleum activities in Malaysia are primarily regulated by PETRONAS, which derives its powers from the Petroleum Development Act 1974 and the Petroleum Regulations 1974. Pursuant to the terms of the PM8/Seligi PSC and the Tanjong Baram SFRSC, PETRONAS regulates the petroleum operations through its approval of well locations, area and field development plans, production operations, annual work programmes and budget, and procurement of goods and services above a certain monetary threshold. PETRONAS' approval is also required for the disclosure of any data from the PM8/Seligi PSC and/or the Tanjong Baram SFRSC contract areas, for any public announcement or for the sale or assignment of any of the interest in the PM8/Seligi PSC and/or the Tanjong Baram SFRSC. The PM8/Seligi PSC, the Tanjong Baram SFRSC and the PETRONAS Procedures and Guidelines for Upstream Activities contain strict provisions relating to procurement of goods and services. The Petroleum Regulations 1974 of Malaysia stipulates that all goods and services for upstream petroleum operations in Malaysia can only be supplied by companies which are licensed by PETRONAS. Non-compliance with the guidelines or procurement of goods and/or services from non-licensed companies would bar the relevant PSC contractor from recovering their costs under a PSC or the relevant RSC contractor from reimbursement of costs under a RSC. All PSC and RSC accounts are subject to annual audits by PETRONAS.

The Group's rights to exploit many of the Group's oil and gas assets are limited in time. There can be no assurance that such rights can be extended or that new rights can be obtained to replace any rights that expire. A portion of the licences pursuant to which the Group conducts operations are solely exploration licences, and as such the assets which are the subject of such licences are not currently producing, and may never produce commercial quantities of oil. Rather, these licences have a limited life before the Group is obliged to seek to convert the licence to a production licence, extend the licence or relinquish the licence area. If hydrocarbons are discovered during the exploration licence term, the Group or its commercial partners, as applicable, may be required to apply for a production licence before commencing production. If the Group or its commercial partners, as applicable, comply with the terms of the relevant licence, the Group would normally expect that a production licence would be issued; however, no assurance can be given that any necessary production licences will be granted by the relevant authorities.

Each of the exploration and production licences or related agreements pursuant to which the Group conducts operations have incorporated detailed work programmes which are required to be fulfilled, normally within a specified timeframe. These may include seismic surveys to be performed, wells to be drilled, production to be attained, limits to production levels and construction matters. Material non-compliance with these work programmes within the required timeframes, or failure to successfully negotiate extensions to the time permitted to carry out these work programmes, could result in the premature termination, suspension or withdrawal of licences and the Group's losing the associated resource potential therein. It may also restrict the ability to obtain new licences in the relevant jurisdictions.

The suspension, revocation, withdrawal or termination of any of the licences or related agreements pursuant to which the Group conducts business, as well as any delays in the continuous development of or production at the Group's fields caused by the issues detailed above, or by similar issues caused by a third party incident (such as a significant spill), could materially adversely affect the Group's business, prospects, financial condition and results of operations. In addition, failure to comply with the obligations under the licences or agreements pursuant to which the Group conducts business, whether inadvertent or otherwise, may lead to fines, penalties, restrictions, withdrawal of licences and termination of related agreements, which could materially adversely affect the Group's business, prospects, financial condition and results of operations.

Moreover, the Group is subject to extensive government laws and regulations governing prices, taxes, royalties, allowable production, waste disposal, pollution control and similar environmental laws, the export of oil and many other aspects of the oil and gas business. These laws and regulations are subject to change as the political and regulatory landscape evolves, and any amendments to or reforms of the laws and regulations to which the Group is subject could make compliance with them more challenging, onerous or expensive. The actions of present or future governments in the countries in which the Group does business or of governments of other countries in which the Group may acquire assets in the future may materially adversely affect the Group's business, prospects, financial condition and results of operations.

The Group's oil exploration and production operations are principally subject to the laws and regulations of the United Kingdom and Malaysia, including those relating to health and safety and the production, pricing and marketing of oil. The grant, continuity and renewal of the necessary approvals, permits, licences and contracts, including the timing of obtaining such licences and the terms on which they are granted, are subject to the discretion of the relevant governmental and local authorities in the United Kingdom and Malaysia.

In addition, the laws and regulations applicable to the Group's UKCS operations are potentially subject to change as a result of the vote in favour of the UK leaving the European Union in the referendum held on 23 June 2016. The timing and manner of the UK's exit from the European Union, as well as the implications for laws and regulations regarding licensing and other matters applicable to oil and gas companies, remain uncertain.

If the Group is unable to obtain, maintain or comply with necessary licences or comply with other applicable regulatory requirements, or if any of the licensing or other regulatory requirements to which the Group's business is subject are amended in a way that makes compliance with them more difficult or expensive, this could have a material adverse effect on the Group's business, prospects, financial condition and results of operations.

There are risks inherent in the Group's acquisitions of exploration, development and production properties

The Group has historically undertaken a number of acquisitions of oil and gas assets (and of companies holding such assets) as part its strategy in maintaining and growing the Group's reserves. The Directors may consider further acquisition opportunities in maturing hydrocarbon basins both inside and outside of the UKCS, in respect of assets that fit within the Group's overall strategy. Although the Group continues to evaluate further acquisition opportunities, it has not entered into any binding or non-binding agreements, memoranda of understanding or other commitments in respect of any such opportunities, and there can be no assurances that the Group will be successful in identifying and completing further acquisitions. Prior to entering into an agreement to acquire an oil and gas asset (or companies holding such assets), the Group performs due diligence on the proposed acquisition. However, reviews of properties prior to acquisitions in the oil industry are inherently incomplete, even if consistent with market practice. Even an in-depth review of all properties and records may not reveal existing or potential problems, nor will it always permit a buyer to become sufficiently familiar with the properties to assess fully their deficiencies and capabilities. Physical inspections may not be performed on every well and other infrastructure, and structural or environmental problems are not necessarily observable even when an inspection is undertaken. There can be no assurance that the due diligence carried out by the Group or by third parties on its behalf in connection with any acquisition will reveal all of the risks associated with that asset, or the full extent of such risks. To the extent that the Group or third parties acting on the Group's behalf underestimate or fail to identify risks and liabilities associated with an acquisition or overestimate the value of an acquisition to the Group's business, it may be subject to one or more of the following risks:

• environmental, structural or operational defects or liabilities requiring remediation or decommissioning;
• an inability to obtain (or secure the transfer of) or maintain licences or other relevant agreements enabling the Group to use or develop the asset as intended;
• defects in title;
• the asset containing less oil reserves than anticipated or not being commercially viable to develop; and

• acquiring assets that are not consistent with the Group's strategy or that fail to perform in accordance with the Group's expectations.

The Group may be required to assume pre-closing liabilities with respect to an acquisition, including known and unknown environmental and decommissioning liabilities, and may acquire interests in properties on an ''as is'' basis without recourse to the seller of such interest.

If the Group's acquisitions, whether acquired historically or in the future, fail to perform as expected, or give rise to significant unforeseen costs or liabilities, this could have a material adverse effect on its business, prospects, financial condition and results of operations.

If the Group fails to integrate acquisitions successfully, its financial condition and future performance could be adversely affected

Historically, the Group has acquired interests in additional assets on a regular basis. Although, in the current low oil price environment, it is not the Group's intention to purchase assets that would affect cash flows negatively, the Directors will continue to consider acquisition opportunities that fit within the Group's overall strategy. Although the Group continues to evaluate further acquisition opportunities, it has not entered into any binding or non-binding agreements, memoranda of understanding or other commitments in respect of any such opportunities, and there can be no assurances that the Group will be successful in identifying and completing further acquisitions. Integrating operations, technology, systems, management, personnel and pre or post-completion costs for future acquisitions may prove more difficult or expensive than anticipated, thereby rendering the value of any company or assets acquired less than the amount paid. The integration of acquired businesses requires significant time and effort on the part of the Group's management. Integration of new businesses can be difficult and disrupt the Group's own business because its operational and business culture may differ from the cultures of the businesses it acquires, unpopular cost-cutting measures may be required, internal controls may be more difficult to maintain and control over cash flows and expenditures may be difficult to establish. The Group could experience difficulties in successfully integrating future acquisitions, which could materially adversely affect its business, prospects, financial condition and results of operations.

The Group conducts most of its operations with commercial partners which may increase the risk of delays, additional costs and the suspension or termination of the licences or the agreements that govern the Group's assets

The Group has entered into business ventures with commercial partners in respect of most of the Group's assets. While the Group is typically the operator of the Group's assets, the Group requires cooperation from its commercial partners in obtaining approval of field development plans and in funding the development of and production from an asset. The relevant operating agreement typically provides that the project partner(s) must be consulted or that they must provide their consent in relation to significant matters. In an industry where there is often a lack of collaboration and overzealous legal and commercial behaviour between operators, there are often increased costs and delays that lead to the poorer recovery of oil as a result of such behaviour. There is also a risk that a commercial partner with interests in the Group's properties may elect not to participate in certain activities relating to those properties that require that party's consent (including decisions relating to drilling programmes, including the number, identity and sequencing of wells, appraisal and development decisions and decisions relating to production). In these circumstances, it may not be possible for such activities to be undertaken by the Group alone or in conjunction with other commercial partners at the desired time or at all or, to the extent permitted, such activities may need to be undertaken with the Group bearing a greater proportion of the risks and costs involved.

Where the Group is not the operator of an asset (currently the case with respect to one of the Group's assets, Alba), the Group is dependent on a commercial partner (in the case of Alba, Chevron) acting as operator. The Group is thus not be able to direct or control operations, the timing and performance of activities or the costs thereof as it often would if it were the operator. The terms of the Group's operating agreement generally impose standards and requirements in relation to the operatorship of the oil field. However, there can be no assurance that the operator will observe such standards or requirements.

For other producing assets, some of the Group's partners retain voting rights that are greater than their equity interests in those assets. For instance, Britoil Limited, the Group's partner at Thistle, retains a 1 per cent. working interest but also retains a 50 per cent. voting interest with respect to decommissioningrelated decisions. The Group's partner at Thistle may not vote in accordance with or uphold the standards or requirements of the agreements that apply to operations at Thistle or vote in accordance with the Group's own objectives.

The Group's exit strategy in relation to any particular oil interest may also be subject to the prior approval of its commercial partners. The terms of operating agreements often require commercial partners to approve of an incoming participant to the business venture or provide the Group's commercial partners with pre-emption rights with respect to the transfer of the Group's interest, either of which could affect the Group's ability to sell or transfer an interest.

The Group may suffer unexpected costs or other losses if a commercial partner does not meet obligations under agreements governing the Group's relationship. For example, other commercial partners who have invested in the Group's properties may default in their obligations to fund capital or other funding obligations in relation to such properties. In such circumstances, the Group may be required under the terms of the relevant operating agreement to contribute all or part of any such funding shortfall, regardless of the percentage interests that it agreed with such commercial partner under such arrangements. Additionally, the Group may be required to increase its ownership stake and fundraising commitments in respect of assets to the extent its commercial partners exit their investment sooner than anticipated. For example, in respect of Kraken, as a result of the Group's partner First Oil plc going into administration, the Group was obliged to take up an additional 10.5 per cent. interest in Kraken in February 2016, which at the time increased the proportion of the development costs on Kraken that the Group was required to bear. The Group may also be subject to claims by its commercial partners regarding potential non-compliance with the Group's obligations. It is also possible that the Group's interests, on the one hand, and those of its commercial partners, on the other, may not be aligned, resulting in possible project delays, additional costs or disagreements.

Failure by the Group's commercial partners to comply with obligations under relevant licences or the agreements pursuant to which it operates may lead to fines, penalties, restrictions and withdrawal of licences or the agreements under which it operates. If any of the Group's commercial partners becomes insolvent or otherwise unable to pay debts as they come due, licences or agreements awarded to them may revert to the relevant governmental authority who will then reallocate the licence. Although the Group anticipates that the relevant governmental authority may permit it to continue operations at a field during a reallocation process, there can be no assurances that the Group will be able to continue operations pursuant to these reclaimed licences or that any transition related to the reallocation of a licence would not materially disrupt the Group's operations or development and production schedule. The occurrence of any of the situations described above could materially adversely affect the Group's business, prospects, financial condition and results of operations.

Failure by the Group, its contractors or its offtakers to obtain access to necessary equipment, services and transportation systems could materially adversely affect its business, prospects, financial condition and results of operations

The Group relies on oil field suppliers and contractors to provide materials and services in conducting its exploration and production activities. Any competitive pressures on the oil field suppliers and contractors, or substantial increases in the worldwide prices of commodities, such as steel, could result in a material increase of costs for the materials and services required to conduct the Group's business. Such equipment, personnel and services can be scarce and may not be readily available at the times and places required. Future cost increases could have a material adverse effect on the Group's operating income, cash flows and borrowing capacity and may require a reduction in the carrying value of the Group's properties, the Group's planned level of spending for exploration and development and the level of the Group's reserves. Prices for the materials and services that the Group depends upon to conduct its business may not be sustained at levels that enable it to operate profitably. In certain cases, the Group may extend or provide financing to such parties in connection with the equipment or services they provide, sell or lease to it.

Oil development and exploration activities are dependent upon the availability of drilling rigs and related third party equipment. High demand for equipment such as drilling rigs or access restrictions may affect the availability and cost of, and the Group's access to, such equipment and may delay the Group's development and exploration activities. Additionally, the wage rates of qualified drilling rig crews generally rise in response to the increased number of active rigs in service and could increase sharply in the event of a shortage. Failure by the Group or its contractors to secure necessary equipment and services or a material increase in the costs of such equipment and services could materially adversely affect the Group's business, prospects, financial condition and results of operations.

The availability of materials, services and equipment is also subject to changes in the oil and gas industry. In respect of the UKCS, there has been speculation that a number of oil and gas producers may accelerate the decommissioning of oil fields as a result of the decline in oil prices during and since 2014. As the number of actively producing oil fields in the UKCS declines, the number of suppliers of materials, services and equipment may decrease and such materials, services and equipment may become more scarce and expensive to procure.

Any future offtakers will rely upon the availability of storage tanks and transportation systems, such as pipeline systems and oil tankers, including such infrastructure systems that are owned and operated by third parties. The Group may be unable to access such infrastructure and systems that the Group uses currently or alternative infrastructure or systems, or may otherwise be subject to interruptions or delays in the availability of infrastructure which could result in disruptions to the Group's projects thereby impacting its ability to deliver oil to commercial markets. See ''—A significant proportion of the Group's equipment has substantial prior use and any unplanned failures or outages could harm the Group's operations.''

The Group may face unanticipated increased or incremental costs in connection with decommissioning obligations

The Group is obliged under UK law to dismantle and remove equipment, to cap or seal wells and generally to remediate production sites. Although the Group typically aims to and has contracted for limited decommissioning liabilities, typically assuming responsibility for a portion of the costs relative to the Group's working interest, it may retain additional potential liability to third parties under applicable regulations. Once the Group is required to submit a decommissioning plan, it will be jointly and severally liable for implementing that plan with former or current commercial partners. If the Group's commercial partners default on their obligations, the Group will remain liable and its decommissioning liabilities could be magnified significantly through such default. Where the UK Secretary of State deems that a party with liability for a decommissioning programme is unlikely to be able to fulfil that liability, it is empowered to require the provision of appropriate financial security to cover those decommissioning costs.

In Malaysia, PETRONAS regulates decommissioning of oil and gas structures through PSCs and PETRONAS' Guidelines for Decommissioning of Upstream Installations as part of its Procedure and Guidelines for Upstream Activities. The Group's obligation under the PM8/Seligi PSC includes the decommissioning of all assets approved by PETRONAS under the PM8/Seligi PSC as well as an annual contribution of a decommissioning fund for the PM8/Seligi PSC assets. This obligation to decommission the assets ceases at the expiry of the PM8/Seligi PSC or when the assets are being used by other PSC operators for their petroleum operations or by PETRONAS. As at the Latest Practicable Date, no asset under the PM8/Seligi PSC has been approved for decommissioning. Any decommissioning activity must be approved by PETRONAS before commencement and must be performed pursuant to a work programme and budget, which must include detailed decommissioning plans and itemised cost estimates, approved by PETRONAS. If the Group is required to undertake decommissioning works during the term of the PM8/Seligi PSC, the Group may request from PETRONAS an amount equal to the lower of the cumulative decommissioning fund paid by the Group and the actual cost of the decommissioning operations. Under the PM8/Seligi PSC, the Group is liable for any damages, costs, claims or expenses arising out of any decommissioning operations caused by its wilful misconduct or negligence. PETRONAS has the sole obligation to decommission any facilities under a RSC.

Under the law of the jurisdictions in which the Group operates, the United Kingdom included, the Group may be liable for up to 100 per cent. of decommissioning liabilities with respect to enhancements that it makes to assets after it acquires them. In connection with the sale or transfer of the Group's assets, the Group may retain or be liable for decommissioning liabilities, even if it has not contractually agreed to accept these liabilities.

The Group's financial statements for the year ended 31 December 2015 include a provision of \$506.8 million for decommissioning liabilities, based on internal and third party estimates taking into account current legal and constructive requirements and current technology and price levels for the removal of facilities and plugging and abandoning of wells. These estimates include the application of an annual inflation rate of 2 per cent. and an annual discount rate of 3 per cent. The ultimate costs of decommissioning wells and sites are difficult to accurately predict and may depend on a number of factors. The Group's decommissioning provisions may not be sufficient and it may be required to provide new or increased financial security to the UK government or to its counterparties. Any increase in estimated

decommissioning liability or in the amount of financial security the Group is required to provide could materially adversely affect the Group's business, prospects, financial condition and results of operations.

In addition, the oil and gas industry currently has limited experience in decommissioning petroleum infrastructure in the UKCS as few such structures have been removed in the region to date. The costs of decommissioning may exceed the value of the long-term provision set aside to cover such decommissioning costs. These costs may rise further as decommissioning activity in the oil and gas industry accelerates and competition for decommissioning equipment and services increases. The Group may have to draw on funds from other sources to fund such decommissioning costs.

It is also possible that the Group could incur decommissioning liabilities sooner than anticipated, if further declines in oil prices resulted in production from certain oil fields no longer being economically viable, although the Directors do not currently anticipate that the Group will have any material decommissioning costs in the short to medium term.

To the extent the Group's costs in connection with decommissioning are higher than anticipated, this could have a material adverse effect on the Group's business, prospects, financial condition and results of operations.

The Group's commodity hedging activities may not be effective

The nature of the Group's operations results in exposure to fluctuations in commodity prices. The Group's policy is to have the flexibility to hedge oil prices up to a maximum of 75 per cent. of the next 12 months' productions on a rolling annual basis, up to 60 per cent. in the following 12 month period and 50 per cent. in the subsequent 12 month period. The Group uses financial instruments and physical delivery contracts to hedge its exposure to these risks and may continue to do so in the future. As of 31 December 2015, the Group's commodity hedging contracts included bought put options over 8 MMbbl maturing throughout 2016 with an average strike price of \$68/bbl, oil swap contracts to sell 2 MMbbl at an average price of \$66.64/bbl maturing throughout 2016 and net sold call options in respect of 2 MMbbl maturing throughout 2016. In addition, during the six months ended 30 June 2016, the Group entered into a ''chooser option'' in respect of the first half of 2017: the counterparty can choose to sell £47.5 million to EnQuest at an exchange rate of \$1.4:£1.0 or purchase 1,320,000 barrels of oil at US\$58/bbl. Based on current oil prices and exchange rates, the Group expects the counterparty would currently choose to exchange currency and the chooser option has therefore been presented with other foreign currency contracts. Since 30 June 2016, the Group entered hedging arrangements over 1MMbbl of 2017 production (83kbbls per month) at a fixed price of \$51.50/bbl. The Group has also sold 500,000 bbls per month for the first half of 2017 (3 MMbbls total) at a fixed price of \$49/bbl and has bought a call (nil cost) for the same notional quantity, with a strike price of \$57.25/bbl. Should the price rise above \$57.25/bbl, the Group will receive the difference to offset the loss it would make on the \$49/bbl swaps. In addition, the Group has hedged 500,000 bbls for the first half of 2017 at \$54.50/bbl.

However, hedging could fail to protect the Group or could adversely affect the Group due to, among other reasons:

• the available hedging instruments failing to correspond directly with the risk for which protection is sought;
• the duration or nominal amount of the hedge failing to match the duration or amount of the related liability;
• the Group's hedge counterparty defaulting on its obligation to pay the Group;
• the credit quality of the Group's hedge counterparty being downgraded to such an extent that it impairs the ability of the relevant member of the Group to sell or assign its side of the hedging transaction; and
• the value of the derivatives used for hedging being adjusted from time to time in accordance with applicable accounting rules to reflect changes in fair value, and any downward adjustments reducing the Group's net assets and profits.

In addition, hedging involves transaction costs. These costs may increase as the period covered by the hedging increases and during periods of volatility. In periods of extreme volatility, it may not be commercially viable to enter into hedging transactions due to the high costs involved, which may in turn increase the Group's exposure to financial risks. The Company does not yet have hedging arrangements in place beyond 2017, and there can be no assurance that the Group will be able to enter into hedging contracts on suitable terms in the future.

If the Group experiences losses as a result of its hedging activities, or if it is unable to hedge its commodity price effectively in the future, this could have a material adverse effect on its business, prospects, financial condition and results of operations.

The Group depends on its board of directors, key members of management, independent experts and technical and operational service providers and on its ability to retain and hire such persons to effectively manage its business

The Group's future operating results depend in significant part upon the continued contribution of the Group's board of directors, key senior management and technical, financial and operations personnel. The loss of the services of any of these key personnel could have a material adverse effect on the Group's business and prospects. Management of the Group's business requires, among other things, stringent control of financial systems and operations, the continued development of its management control, the ability to attract and retain sufficient numbers of qualified management and other personnel, the continued training of such personnel and the presence of adequate supervision.

In addition, the expertise and relationships of the Group's board of directors and key management are important to the conduct of its business. If the Group was to unexpectedly lose a member of its key management or fail to maintain one of the strategic relationships of its key management team, the Group's business and results of operations could be materially adversely affected.

The Group uses independent contractors to provide the Group with certain technical assistance and services. In certain cases, the Group may exercise limited control over the activities and business practices of these providers and any inability on its part to maintain satisfactory commercial relationships with them or their failure to provide quality services could materially adversely affect the Group's business, prospects, results of operations and financial condition.

Attracting and retaining appropriate skilled personnel will be fundamental to the execution of the Company's strategy continued growth of the Group's business. The Group requires skilled personnel in the areas of exploration and development, operations, engineering, business development, oil marketing, finance and accounting relating to the Group's projects. The competition for qualified personnel in the oil and gas industry was, and may be in the future, intense. The Group may not successfully attract new personnel and retain existing personnel required to continue to operate its business effectively and to successfully execute and implement its business strategy; and any inability to do so could have a material adverse effect on its business, prospects, financial condition and results of operations.

The Group's business reputation is important to its continued viability and any damage to such reputation could materially adversely affect its business

The Group's reputation is important to its business for reasons including, but not limited to, finding commercial partners for business ventures, securing licences with governments, attracting contractors and employees and negotiating favourable terms with suppliers. In addition, as a publicly listed company, the Group may be subject to shareholder activism, which may have adverse consequences for its reputation and business.

Any damage to the Group's reputation, whether arising from litigation, regulatory, supervisory or enforcement actions, matters affecting the Group's financial reporting, alleged non-compliance with administrative agencies in the jurisdictions in which it does business or environmental or safety incidents, negative publicity, including from environmental activists, or the conduct of the Group's business or otherwise, could materially adversely affect its business, prospects, financial condition and results of operations.

The Group does not insure against certain risks and its insurance coverage may not be adequate for covering losses arising from potential operational hazards and unforeseen interruptions

Oil and gas development and production operations are inherently risky and hazardous and involve environmental, technical and logistical difficulties. Losses resulting from the occurrence of any such risks could result in delays, or interruption (permanent or temporary) to production, cost overruns, substantial losses and/or exposure to substantial environmental and other liabilities. The Group believes that the extent of its insurance cover is reasonable based on the costs of cover, the risks associated with its business, availability of insurance and industry practice. However, insurance is subject to limitations on liability and, as a result, may not be sufficient to cover all of the Group's losses. In addition, the risks and hazards associated with the Group's operations may not in all circumstances be insurable or, in certain circumstances, the Group may elect not to obtain insurance to deal with certain events due to the high premiums associated with such insurance or for other reasons. Consistent with insurance coverage generally available to the industry, the Group's insurance currently includes cover for damage to physical assets, operator's extra expense (well control, seepage and pollution clean-up and re-drill costs) and third party liabilities for the Group's global exploration and production activities, in each case subject to excesses, exclusions and limitations. The Group does not carry business interruption insurance. There can be no assurance that the Group's insurance will be adequate to cover any losses or exposure for liability, or that the Group will continue to be able to obtain insurance to cover such risks.

The Group is unable to give any guarantee that expenses relating to losses or liabilities will be fully covered by the proceeds of applicable insurance. Consequently, the Group may suffer material losses from uninsurable or uninsured risks or insufficient insurance coverage. The Group is also subject to the future risk of unavailability of insurance, increased premiums or excesses, and expanded exclusions.

The Group's operations are subject to the risk of litigation

From time to time, the Group may be subject to litigation or arbitration arising out of the Group's operations. Damages claimed under such proceedings may be material or may be indeterminate, and the outcome of such litigation or arbitration could materially adversely affect the Group's business, results of operations and financial condition. While the Group assesses the merits of each lawsuit and defends accordingly, the Group may be required to incur significant expenses in defending against such litigation or arbitration and there can be no guarantee that a court or tribunal finds in its favour. The Group is currently engaged in a dispute with KUFPEC with respect to an alleged breach of warranty provided by the Group pursuant to the Alma/Galia Farm-in Agreement as well as a dispute relating to variation works with EMAS, one of its contractors for the Kraken development. For further details about these disputes, see paragraph 13 of Part 2 (''Information on the Group'') and paragraph 19 of Part 9 (''Additional Information'').

The Group is subject to both transactional and translational foreign exchange risks, which might adversely affect its financial condition and results of operations

Substantially all of the Group's revenues are in, and most of its working capital is in, US dollars. However, the Group's operations are entirely outside the United States and substantially all of the Group's operating costs, including labour and employee costs, are typically incurred in local currencies other than US dollars, in particular, pounds sterling and Malaysian ringgits. The Group also incurs capital expenditure costs in both Euro and Norwegian Kroner in connection with the Kraken development.

The Group's transactional foreign currency risk arises primarily from sales or purchases in currencies other than its functional currency, the US dollar. The Group converts funds to foreign currencies to meet its payment obligations in jurisdictions where the US dollar is not an accepted currency as required. Additionally, a significant proportion of the Group's debt is denominated in currencies other than the US dollar. In particular, a portion of the Group's borrowings under the Existing RCF are denominated in pounds sterling and Euro and the Existing Retail Notes are denominated in pounds sterling. The Group's outstanding debt requires the payment of interest in currencies other than US dollars and will ultimately need to be repaid in currencies other than US dollars. The Group's translational foreign currency exposure arises from the translation of assets and liabilities denominated in currencies other than US dollars into US dollars in the Group's financial statements and results.

Exchange rates between pounds sterling and US dollars have fluctuated significantly in the past and may do so in the future. As of the Latest Practicable Date, the exchange rate was £1.00/\$1.22. Consequently, construction, exploration, development, administration and other costs may be lower in terms of US dollars or other relevant currencies. However, if pounds sterling were to strengthen against US dollars, these costs would increase.

The Group engages in certain currency hedging activities to hedge the risk of substantial fluctuations in the currency markets. The hedging policy agreed by the Board allows for up to 70 per cent. of non-US dollar denominated operating and capital expenditures to be hedged. The Group has entered into a number of foreign exchange currency forward contracts and structures products to hedge the Group's foreign currency risk. The Group had foreign exchange hedge contracts in place totalling over £463.6 million, expiring throughout 2016 and with a negative net fair value of \$9.2 million at 31 December 2015. However, the Group's hedging activities do not cover the entirety of the currency exchange risks that the Group faces, there can be no guarantee that these hedging activities will be effective.

The Group may be unable to dispose of assets on attractive terms and may be required to retain liabilities for certain matters

The Group regularly reviews its asset base to assess the market value versus holding value of existing assets, with a view to best managing its capital structure. For example, in 2015 the Group disposed of interests in Norway, Egypt and Tunisia and sold its exploration assets in Malaysia. The decision to dispose of an asset may be influenced by a variety of factors, including the Group's overall development and production strategy, prioritisation of projects and the commercial viability of development or production (which is affected by factors such as the oil price and expected costs). However, there can be no guarantee that the Group will be able to dispose of assets at the times it wants to do so on attractive terms. The Group's ability to dispose of non-strategic assets could be affected by various factors, including the availability of purchasers willing to purchase such assets at prices acceptable to the Group. Further, sellers typically retain certain liabilities or agree to indemnify buyers for certain matters and in order to divest certain assets the Group may provide an indemnity to a buyer. The magnitude of any such retained liability or indemnification obligation may be difficult to quantify at the time of the transaction and ultimately may be material. Also, as is typical in divestiture transactions, third parties may be unwilling to release the Group from guarantees or other credit support provided by the Group while the owner of the divested assets. As a result, after a sale, the Group may remain secondarily liable for the obligations guaranteed or supported to the extent that the buyer of the assets fails to perform these obligations. See ''—Risks relating to the Group's business—The Group may face unanticipated increased or incremental costs in connection with decommissioning obligations.''

The Group could incur material costs to comply with, or as a result of liabilities under, health and safety and environmental regulations

The Group operates in an industry that is inherently hazardous and consequently subject to comprehensive health and safety and environmental regulation, including that governing discharges of pollutants to air and water, the management of produced water and wastes and the cleaning of contamination. Failure to adequately mitigate health and safety and environmental risks may result in loss of life, injury, or adverse impacts on health of employees, contractors and third parties or the environment. Such failure, whether inadvertent or otherwise, by the Group to comply with applicable legal or regulatory requirements may give rise to significant liabilities, reputational damage and/or the loss of or delays in obtaining necessary licences or other permits. As a result, the Group could incur material costs, including clean-up costs, civil and criminal fines and sanctions and third party claims for personal injury, wrongful death and natural resource and property damages, as a result of violations of the Group's obligations under environmental, health and safety requirements.

Further, health, safety and environment laws and regulations may expose the Group to liability for the conduct of others and legal and regulatory changes that are applied retroactively may expose it to liability for acts that complied with all applicable health, safety and environment laws when they were performed.

The terms of licences or permissions necessary for the Group's operations may include more stringent environmental and/or health and safety requirements over time. Since the Group's operations have the potential to impact air and water quality, biodiversity and ecosystems, obtaining exploration, development or production licences and permits may become more difficult or may be delayed due to governmental, regional or local environmental consultation, scientific studies, approvals or other considerations or requirements.

The Group incurs, and expects to continue to incur, substantial capital and operating costs in an effort to comply with increasingly complex health and safety and environmental laws and regulations and to develop and implement robust HSE&A systems to enable the Group to ensure compliance with all applicable requirements as the duty holder at many of the Group's operated interests. The Group has taken over the duty holdership of many of the Group's operated interests. This has increased the Group's liability to the UK government with respect to its interests in the UKCS, and the failure to comply with current health, safety and environment laws and regulations may result in regulatory action, the imposition of fines or the payment of compensation to third parties which each could in turn have a material adverse effect on the Group's business, prospects, financial condition and results of operations. Although the Group believes that the assumption of duty holdership mitigates some of the risk associated with the lack of direct control over these conditions when the responsibility for them lies with other entities, it may expose the Group to more direct liability for HSE&A conditions.

With regard to the Group's operations in Malaysia, the PM8/Seligi PSC and the Tanjong Baram SFRSC requires the Group as contractor to conduct an initial assessment of the environment, health and safety risks involved in the execution of petroleum operations in the relevant contract area. Under the PM8/Seligi PSC and the Tanjong Baram SFRSC, the Group is also required to take appropriate measures to prevent any environment, health and safety incidents from occurring offshore and to minimise the consequences of such incidents in the event they do occur. The Group has to ensure that all its personnel are competent, fully trained, experienced, skilled and certified to carry out the tasks of operating all machinery, equipment and tools offshore, and that its personnel comply with PETRONAS' environment, health and safety requirements and all safety manual policies and procedures. These requirements are subject to an annual audit by PETRONAS and, to the extent any gaps are identified, the Group will be required to ensure that all such gaps are addressed to PETRONAS' satisfaction.

New laws and regulations, the imposition of tougher requirements in licences, increasingly strict enforcement of, or new interpretations of, existing laws, regulations and licences, or the discovery of previously unknown contamination may require further expenditures to, for example:

• modify operations;
• install pollution control equipment;
• perform site clean ups;
• curtail or cease certain operations; or
• pay fees or fines or make other payments for pollution, discharges or other breaches of environmental requirements.

Although the costs of the measures taken to comply with environmental regulations have not had a material adverse effect on the Group's business, prospects, financial condition or results of operations to date, the costs of such measures and liabilities for any environmental damage caused by the Group's operations in the future may increase, which could materially adversely affect the Group's business, prospects, financial condition and results of operations. In addition, it is not possible to predict with certainty what future environmental regulations will be enacted or how current or future environmental regulations will be applied or enforced in the future. Environmental laws may result in a curtailment of production and/or a material increase in the cost of production, development or exploration activities.

The Group is also affected by international treaties on the environment to which the United Kingdom is a party such as the OSPAR Commission. Controls on the quantities of oil that can be discharged in process waters in the course of offshore operations have been implemented in the United Kingdom by the Offshore Petroleum Activities (Oil Pollution Prevention and Control) Regulations 2005 (the ''OPPC''). The OPPC was amended by the Offshore Petroleum Activities (Oil Pollution Prevention and Control) (Amendment) Regulations 2011 which, among other things, extends the scope of the OPPC to apply to all emissions of oil from pipelines used for offshore oil and gas activities and for gas storage and unloading activities. The Group may incur material expenditure to comply with the OPPC if it is required to modify the Group's operations, specifically with regard to the Kittiwake, Heather Alpha and Thistle Alpha platforms, the Northern Producer FPF and the EnQuest Producer FPSO.

The Offshore Combustion Installations (Pollution Prevention and Control) Regulations 2013 (the ''PPC'') have been implemented in the United Kingdom and apply to the Heather Alpha and Thistle Alpha platforms, the Northern Producer FPF and EnQuest Producer FPSO. Permits under the PPC have been issued to the Group by the UK Department for Business, Energy and Industrial Strategy (formerly the Department of Energy and Climate Change). Applications for these PPC permits normally contain an energy efficiency survey. Energy efficiency surveys that the Group has conducted as part of the PPC application process have identified potential energy efficiency measures and other upgrades to the installations that may be implemented by the Group, which have been built into the assets' life-of-field opportunity registers maintained by it, for future investment opportunities for improved performance. The PPC revoked the Offshore Combustion Installations (Prevention and Control of Pollution) Regulations 2001 and The Offshore Combustion Installations (Prevention and Control of Pollution) (Amendment) Regulations 2007. The costs associated with the PPC permit compliance and other measures to be undertaken are material for the Group.

Although a majority of voters in the United Kingdom voted in favour of the United Kingdom leaving the European Union in the referendum held on 23 June 2016, pending the UK's exit from the European Union, as a company incorporated under the laws of England and Wales, the Group remains subject to the provisions of European Union environment laws. The potential withdrawal from the European Union by the United Kingdom may have an impact on the above mentioned regulations which apply to the Group. For example, although the OPPC does not specifically transpose EU legislation, its permit conditions are likely to reflect the requirements of EU law. The PPC partially transposes EU legislation through the Industrial Emissions Directive 2010 and the Environmental Impact Directive. Both sets of regulations may therefore be modified expressly and/or in the way they are applied when the Brexit process has been completed, although the substance and manner of implementation of these changes remains uncertain.

To the extent the Group incurs material costs to comply with, or as a result of liabilities, under HSE&A regulations, this could have a material adverse effect on the Group's business, prospects, financial condition and results of operations.

The Group may be subject to work stoppages or other labour disturbances, and the Group's employees and those employed by its contractors may become unionised

Work stoppages or other labour disturbances, such as industrial action, with the Group's employees or those of the Group's contractors, suppliers and customers, may occur in the future. Such disturbances could have a material adverse impact on the Group's production and development activities in the periods during which they occur. In addition, the Group's employees, and those employed by the Group's contractors, may become members of or represented by labour unions. If this occurred, the Group or its contractors may not be able to negotiate acceptable collective bargaining agreements or future restructuring agreements or may become subject to material cost increases or additional work rules imposed by such agreements. The occurrence of any of the foregoing could materially adversely affect the Group's business, prospects, financial condition and results of operations.

The Group's website and internal systems may be subject to intentional and unintentional disruption, and its confidential information may be misappropriated, stolen or misused, which could adversely impact its reputation and future sales

The Group could be a target of cyber-attacks designed to penetrate its network security or the security of its internal systems, misappropriate proprietary information and/or cause interruptions to the Group's services. Such attacks could include hackers obtaining access to the Group's systems, the introduction of malicious computer code or denial of service attacks. If an actual or perceived breach of the Group's network security occurs, it could adversely affect its business or reputation, and may expose it to the loss of information, litigation and possible liability. Such a security breach could also divert the efforts of the Group's technical and management personnel. In addition, such a security breach could impair its ability to operate its business. If this happens, the Group's reputation could be harmed, its revenues could decline and its business could suffer.

In addition, confidential information that the Group maintains may be subject to misappropriation, theft and deliberate or unintentional misuse by current or former employees, third party contractors or other parties who have had access to such information. Any such misappropriation and/or misuse of the Group's information could result in it, among other things, being in breach of certain data protection and related legislation. The Group expects that it will need to continue closely monitoring the accessibility and use of confidential information in its business, educate its employees and third party contractors about the risks and consequences of any misuse of confidential information and, to the extent necessary, pursue legal or other remedies to enforce its policies and deter future misuse.

The Group does not register trademarks, service marks and trade names that it uses in conjunction with the operation of its business

The image and reputation of the Group constitutes a significant part of its business. The Group does not currently register trademarks, service marks and trade names that it uses in its business, including the ''EnQuest'' name and logo. In addition, the Group cannot assure you that third parties will not infringe on or misappropriate its rights or assert rights in, or ownership of, its trademarks and other intellectual property rights or in trademarks that are similar to trademarks that the Group uses. Litigation may be necessary to enforce the Group's intellectual property rights or to defend it against claimed infringement of the rights of third parties. If the Group is unable to protect its intellectual property rights against infringement or misappropriation, or if others assert rights in or seek to invalidate its intellectual property rights, this could materially harm the Group's future financial results and the Group's ability to develop its business.

The Group's tax liability is subject to estimation and the Group may be adversely affected by changes to tax legislation or its interpretation or increases in effective tax rates in the jurisdictions in which it does business

The Group is subject to corporate tax and production tax in the United Kingdom and oil sale tax in Malaysia. Fluctuations in these tax rates can have an impact on projects and make certain projects less economically viable. The Group's tax rate, including its effective tax rate and VAT, may be affected by changes in tax laws or interpretations of tax laws in any jurisdiction in which the Group operates and in any financial year will reflect a variety of factors that may not be present in succeeding financial years. During periods of high profitability in the oil industry, there are often calls for increased or windfall taxes on oil revenue. Taxes have increased or been imposed in the past and may increase or be imposed again in the future. As a result, the Group's tax rate may increase or tax allowances may be withdrawn or curtailed in future periods, which could have a material adverse effect on the Group's financial results and, specifically, its net income, cash flow and earnings may decrease.

Tax regimes in certain jurisdictions can be subject to differing interpretations and tax rules in any jurisdiction are subject to legislative change and changes in administrative and regulatory interpretation. The interpretation by the Company's relevant subsidiaries of applicable tax law as applied to their transactions and activities may not coincide with that of the relevant tax authorities. As a result, transactions may be challenged by tax authorities and any of the Group's profits from activities in those jurisdictions in which the Group operates may be subject to additional tax or additional unexpected transactional taxes (e.g., stamp duty, VAT or capital gains tax), which, in each case, could result in significant legal proceedings and additional taxes, penalties and interest, any of which could have a material adverse effect on the Group's business, prospects, financial condition and results of operations. In addition, taxing authorities could review and question the Group's tax returns leading to additional taxes and penalties which could be material. For example, the Group has engaged in an exchange of correspondences with HMRC in respect of leasing arrangements for equipment entered into by it, having initially disclosed such arrangements pursuant to UK laws requiring that transactions meeting certain criteria be notified to HMRC. If additional taxes were assessed on the Group as a result of such arrangements, the Group's cumulative tax loss position could be negatively affected and the Group could potentially become liable to pay cash tax at an earlier date than expected. In addition, interest and penalties could apply.

Additionally, the Group's tax provision is subject to estimation. In the UK, the Group prepares its tax provision before it files its UK corporation tax and supplementary charge returns with HMRC and thus it must make estimates and judgements on factors in the tax provision process. Such estimates and judgements include those required in calculating the effective tax rate. In considering the tax on exceptional items, the Group applies the appropriate statutory tax rate to each exceptional item to calculate the relevant tax charge. The Group also makes judgements and assumptions regarding the likelihood of future taxable profits and the amount of deferred tax that can be recognised on unused tax losses where it is probable that future taxable profits will be available for utilisation. Although the Company does not expect to pay material UK cash corporation tax on operational activities within the ring fence for the foreseeable future, the Company cannot assure you that it will not be required to pay taxes under current or future laws.

The Group may not have good title to all its assets and licences

There can be no assurance that the Group has good title to all of its assets and the rights to explore for, develop and produce oil from the Group's assets. Moreover, the Group's predecessors from which it acquired its interests in the Group's assets may not have had good title to those interests.

There may be disputes concerning the validity of the Group's production and exploration licences in the UKCS and in other countries in the future. Changing regulatory and environmental conditions may create disputes with the BEIS in the United Kingdom or other oil companies with operations in the UKCS. Similarly, the same may occur with other regulatory bodies and oil companies in other countries where the Group has assets (currently Malaysia).

The Group's international operations will require it to comply with various regulatory regimes and subject it to the challenges of running a business with global operations

The Group currently operates its business in the United Kingdom and in Malaysia. Accordingly, the Group is subject to political, economic and social factors affecting Malaysia, regional diplomatic developments affecting Malaysia and changes in Malaysian laws, regulations and policies implemented by the local government from time to time.

In addition, the Group's Malaysian operations are potentially subject to some or all of the following risks of doing business internationally, among others:

• foreign laws and governmental regulation, including those governing tax, worker immigration and customs;
• expropriation, confiscatory taxation and nationalisation of the Group's assets;
• unfavourable changes in foreign monetary and tax policies, and unfavourable and inconsistent interpretation and application of foreign tax laws; and
• foreign currency fluctuations and restrictions on currency repatriation.

The Group's Malaysian operations are subject to the laws and regulations of Malaysia. If the existing body of laws and regulations in Malaysia are interpreted or applied, or relevant discretions exercised, in an inconsistent manner by the courts or applicable regulatory bodies, this could result in ambiguities, inconsistencies and anomalies in the enforcement of such laws and regulations, which in turn could hinder the Group's long-term planning efforts and may create uncertainties in the Group's operating environment. Additionally, the Group's ability to compete in international markets may be adversely affected by governmental regulations or other policies that favour the awarding of contracts to contractors in which nationals of those countries have substantial ownership interests. The Group's international operations may also face governmentally imposed restrictions or taxes from time to time on the transfer of funds to it.

Various national and local taxing authorities may also periodically examine the Group's operations. Such examinations, including audits, may result in an assessment of additional taxes and other costs payable in relation to prior periods.

Any acts of terrorist activity, piracy, social and civil unrest, political upheaval and armed conflicts causing disruptions of oil and gas exports could materially adversely affect the Group's business, prospects, financial condition and results of operations.

Certain emerging and developing market economies have been, and may continue to be, adversely affected by market downturns and economic slowdowns elsewhere in the world. As has happened in the past, financial problems outside countries with emerging or developing economies or an increase in the perceived risks associated with investing in such economies could discourage foreign investment in and adversely affect the economies of these countries (including countries in which the Group has assets).

SECTION D: RISKS RELATING TO THE PLACING AND OPEN OFFER AND AN INVESTMENT IN THE ORDINARY SHARES

The market value of listed securities may fluctuate and may not reflect the underlying asset value of the Group

Prospective investors should be aware that the value of an investment in EnQuest may go down as well as up. The market value of the Ordinary Shares could be subject to significant fluctuations and may not always reflect the underlying value of the Group. A number of factors outside the control of the Group may impact on its performance and the price of the Ordinary Shares. Such factors include the operating and share price performance of other companies in the industry and markets in which the Group operates, speculation about the Group's business in the press, media or investment community, market perceptions to changes affecting the Group's operations or variations in the Group's profit estimates, the publication of research reports by analysts and general market or economic conditions. The market price of the Ordinary Shares may be adversely affected by any of the preceding or other factors regardless of the Group's actual results of operations and financial condition. Moreover, the financial results and prospects of EnQuest may be below the expectations of market analysts and investors from time to time. Any of these events could result in a decline in the market price of the Ordinary Shares.

Upon the issuance of New Ordinary Shares pursuant to the Placing and Open Offer, Shareholders who do not acquire New Ordinary Shares in the Open Offer will experience dilution in their ownership

A Qualifying Shareholder (or an Excluded Overseas Shareholder or a Shareholder with a registered address in the United States or who is otherwise located in the United States who is not eligible to participate in the Open Offer) that does not take up any Open Offer Shares under the Open Offer will experience a dilution of 30.77 per cent. as a result of the Placing and Open Offer.

There is no guarantee that there will be an active trading market for the Ordinary Shares

Admission should not be taken as implying that there will be a liquid market for the Ordinary Shares and there is no guarantee that there will be an active trading market after Admission. If an active trading market is not maintained, the liquidity and trading price of the Ordinary Shares may be adversely affected.

Even if an active trading market is sustained, the market price of the Ordinary Shares may not reflect the underlying asset value of the Group.

Any future Ordinary Share issues and sales of Ordinary Shares by major Shareholders may further dilute the holdings of current Shareholders and may also have an adverse effect on the market price of the Ordinary Shares

Other than pursuant to the Placing and Open Offer, the Group has no current plans for a subsequent offering of Ordinary Shares. However, it is possible that the Group may decide to offer additional Ordinary Shares in the future. If Shareholders did not take up any such offer of Ordinary Shares or were not eligible to participate in such offering, their proportionate ownership and voting interests in EnQuest would be reduced. An additional offering or a significant sale of Ordinary Shares by any of the Group's major Shareholders could have an adverse effect on the market price of the outstanding Ordinary Shares.

The Group's ability to pay dividends on the Ordinary Shares will depend on the availability of distributable reserves

The level of any dividend paid in respect of the Ordinary Shares is within the discretion of the Board and is subject to a number of factors, including the business and financial condition of, earnings and cash flow of, and other factors affecting, the Group, as well as the availability of funds from which dividends can be legally paid. Subject to the successful completion of the Restructuring, the Group will also be subject to a covenant limiting its ability to pay dividends. See ''—The Company's ability to pay dividends in the future may be limited by covenants under the New High Yield Notes or other borrowings.'' The level of any dividend in respect of the Ordinary Shares is also subject to the extent to which EnQuest receives funds, directly or indirectly, from its operating subsidiaries and divisions in a manner which creates funds from which dividends can be legally paid. The ability of its subsidiaries to pay dividends to EnQuest and its ability to receive distributions from its investments in other entities are subject to applicable local laws and regulatory requirements and other restrictions. These laws and restrictions could limit the payment of dividends and distributions to EnQuest by its subsidiaries, which could in the future restrict EnQuest's ability to fund its operations or to pay a dividend to its Shareholders. Any reduction in dividends paid on Ordinary Shares from those historically paid, or the failure to pay dividends in any financial year, could adversely affect the market price of Ordinary Shares.

Exchange rate fluctuations may impact the price of Ordinary Shares or the value of any dividends paid

The Ordinary Shares admitted to trading on the London Stock Exchange, and any dividends to be announced in respect of such shares, will be quoted in pounds sterling, while the Ordinary Shares listed on NASDAQ Stockholm, and any dividends announced in respect of such shares, will be quoted in Swedish kronor. An investment in Ordinary Shares by an investor in a jurisdiction whose principal currency is not pounds sterling exposes the investor to foreign currency rate risk. Any depreciation of pounds sterling or the Swedish krona in relation to such foreign currency will reduce the value of the investment in the Ordinary Shares in foreign currency terms and may adversely impact the value of any dividends.

The Company's ability to pay dividends in the future may be limited by covenants under the New High Yield Notes or other borrowings

The Company has not declared or paid any dividends since incorporation in January 2010 and does not intend to pay dividends in the near future. Any future payment of dividends is expected to depend on the earnings and financial condition of the Company and on such other factors as the Directors of the Company considers appropriate.

In addition to the foregoing, the New High Yield Notes will contain a restriction on the Company declaring or paying a dividend or distribution or making any other payment on any of its shares or redeeming, purchasing or otherwise acquiring any of its shares, unless or until the Company has redeemed in cash at par an aggregate principal amount of the New High Yield Notes that is equal to any capitalised interest, together with any accrued and unpaid interest thereon. See paragraph 5 of Part 1 (''Letter from the Chairman of EnQuest PLC'') for a more detailed discussion of the proposed changes to the Existing High Yield Notes.

The Company's ability to institute and pay dividends may be further limited by covenants contained in the agreements governing any indebtedness that the Group may incur in the future, including the terms of any credit facilities the Group may enter into with third party lenders. As a result of the foregoing factors, purchasers of the Ordinary Shares may not receive any return on an investment in the Ordinary Shares unless they sell such Ordinary Shares for a price greater than that which they paid for them.

The Issue Price paid by Qualifying Swedish Shareholders who hold their Ordinary Shares through Euroclear Sweden will be subject to fluctuations in the exchange rates between pounds sterling and Swedish krona prior to the end of the Open Offer Period

As part of the Swedish Open Offer, the price for Qualifying Swedish Shareholders who hold their Ordinary Shares through Euroclear Sweden will be determined based on currency exchange rates between pounds sterling and Swedish kronor at the time the price of the Open Offer Shares is set. Subsequent fluctuations in the exchange rates between pounds sterling and Swedish kronor prior to the end of the Open Offer Period could result in Qualifying Shareholders outside of Sweden paying more, or less, per Open Offer Share than Qualifying Swedish Shareholders who hold Open Offer Shares through Euroclear Sweden and vice versa.

Admission of the New Ordinary Shares may not occur when expected

Application for Admission of the New Ordinary Shares is subject to the approval (subject to satisfaction of any conditions to which such approval is expressed to be subject) of the UK Listing Authority and, in respect of New Ordinary Shares proposed to be admitted to trading on NASDAQ Stockholm, the approval of NASDAQ Stockholm AB, and LSE Admission will become effective as soon as a dealing notice has been issued by the UK Listing Authority and the London Stock Exchange has acknowledged that the New Ordinary Shares will be admitted to trading, and in respect of the Stockholm Admission, it will become effective on the date NASDAQ Stockholm sets as the first day of trading on NASDAQ Stockholm. There can be no guarantee that any conditions to which Admission is subject will be met or that the UK Listing Authority will issue a dealing notice or that NASDAQ Stockholm will admit the New Ordinary Shares to trading on NASDAQ Stockholm.

In addition, the Placing and Open Offer is conditional upon, among other things: (i) the passing without amendment of the Resolutions at the General Meeting (and not, except with the prior written agreement of the Joint Bookrunners, acting jointly, at any adjournment of such meeting) on 14 November 2016 (or such later date as the Joint Bookrunners may agree) and the Resolutions remaining in force; (ii) the Company having complied with its obligations under the Sponsor and Placing Agreement or under the terms and conditions of the Placing and Open Offer which fall to be performed on or prior to LSE Admission and such agreement having become unconditional save as otherwise agreed by the Joint Bookrunners, acting jointly, and the Sponsor and Placing Agreement not having been terminated prior to LSE Admission; (iii) save for any condition in relation to Admission, the Proposed RCF Amendments and the Amendment and Restatement Agreement becoming unconditionally effective prior to LSE Admission; (iv) save for any condition in relation to Admission, the renewal of the Surety Bond Facilities becoming unconditionally effective prior to LSE Admission; (v) save for any condition in relation to Admission, the Scheme and the Proposed Note Amendments becoming unconditionally effective prior to LSE Admission; and (vi) LSE Admission becoming effective by not later than 8.00 a.m. on 21 November 2016 (or such later time and/or date as the Company may agree with the Joint Bookrunners, not being later than 8.00 a.m. on 24 November 2016) and application for Stockholm Admission having been made and no notification having been received that Stockholm Admission has been refused or will not become effective on or before 24 November 2016. As each of the components of the Restructuring is inter-conditional, the Restructuring cannot proceed if the Placing and Open Offer does not proceed. The Resolutions must be passed by

Shareholders at the General Meeting in order for the Placing and Open Offer to proceed. If the Resolutions are not passed at the General Meeting, then neither the Placing and Open Offer nor the Restructuring will proceed. See the ''Expected Timetable of Principal Events'' on page 61 of this document for further information on the expected dates of these events.

The ability of Overseas Shareholders to bring actions or enforce judgments against the Group or its directors or officers may be limited

The ability of an Overseas Shareholder to bring an action against the Group may be limited under law. EnQuest is a public limited company incorporated in England and Wales. The rights of Shareholders are governed by English law and the Articles. These rights differ front the rights of shareholders in typical US corporations and some other non-UK corporations. In particular, English law significantly limits the circumstances under which shareholders of English companies may bring derivative actions. Under English law, in most cases, only the Company can be the proper claimant for purposes of maintaining proceedings in respect of wrongful acts committed against it. Neither an individual shareholder nor any group of shareholders has any right of action in such circumstances. In addition, English law does not afford approvals rights to dissenting shareholders in the form typically available to shareholders on a US corporation. An Overseas Shareholder may not be able to enforce a judgement against some or all of the Directors and/or Senior Managers. The majority of the Directors and Senior Managers are and will continue to be residents of the UK. Consequently, it may not be possible for an Overseas Shareholder to effect service of process upon the Directors and/or the Senior Managers in any original action based solely on foreign securities laws brought against the Group or the Directors and/or the Senior Managers in a court of competent jurisdiction in England or other countries.

Pre-emptive rights may not be available to Overseas Shareholders

Under the Articles (save for certain exceptions set out therein) and pursuant to the Listing Rules, prior to the issue of any new share, the Company must offer holders of its Existing Ordinary Shares pre-emptive rights to subscribe and pay for a sufficient number of Ordinary Shares to maintain their existing ownership percentages.

Overseas Shareholders may not be able to exercise their pre-emptive rights for Ordinary Shares whether as part of the Placing and Open Offer or (even if pre-emption rights were not waived in respect of it) a future issue of Ordinary Shares for cash, unless the Group decides to comply with applicable local laws and regulations. Securities laws of certain jurisdictions may restrict the Group's ability to allow participation by Shareholders in the Placing and Open Offer or any future issue of Ordinary Shares. In particular, US holders of Ordinary Shares may not be able to receive, trade or exercise pre-emptive rights for New Ordinary Shares under the laws of the United States unless a registration statement under the US Securities Act is effective with respect to such rights or an exemption from the registration requirements of the US Securities Act is available thereunder. None of the New Ordinary Shares will be registered under the US Securities Act and there can be no assurance that the Group will file any such registration statements for future share issues, or that an exemption to the registration requirements of the US Securities Act will be available in any case, or that the Group would seek to avail itself of any such exemption, absent which the US Shareholders would be unable to participate in such an issue.

If Overseas Shareholders are not able to receive, trade or exercise pre-emptive rights granted in respect of their Ordinary Shares in any rights offering by the Group, then they may not receive the economic benefit of such rights. In addition, their proportional ownership interests in the Group will be diluted. Furthermore, this limitation on the ability of Overseas Shareholders to exercise pre-emptive rights could adversely affect the Group's ability to attract future investors, could restrict any future acquisition structures of the Group and could generally impair the Group's ability to offer Ordinary Shares as consideration in relation to such acquisitions.

IMPORTANT INFORMATION

Any decision in connection with the Placing and Open Offer should be made solely on the basis of the information contained in this document (and the documents incorporated by reference). Without limitation to the foregoing, reliance should not be placed on any information in announcements released by the Company prior to the date hereof, except to the extent that such information is repeated or incorporated by reference into this document.

A letter from the Chairman of the Company, which contains the recommendation of the Board to vote in favour of the Placing and Open Offer is set out in Part 1 (''Letter from the Chairman of EnQuest PLC''). A General Meeting to consider the proposals contained in this document will be held at Ashurst LLP, Broadwalk House, 5 Appold Street, London, EC2A 2HA on 14 November 2016 at 9.00 a.m.

Notice to all investors

The distribution of this document and/or the transfer of the New Ordinary Shares into jurisdictions other than the UK or Sweden may be restricted by law. Persons into whose possession these documents come should inform themselves about and observe any such restrictions and should consider (to the extent relevant to them) the notices to residents of various countries set out in paragraph 7 of Part 10 (''Terms and Conditions of the Placing and Open Offer''). Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction. In particular, subject to certain exceptions, such documents should not be distributed, forwarded or transmitted in or into the United States or the Excluded Territories. No action has been taken by the Company or the Joint Bookrunners that would permit an offer of the New Ordinary Shares or rights thereto or possession or distribution of this document or any other offering or publicity material in any jurisdiction where action for that purpose is required, other than in the UK or Sweden.

Any reproduction or distribution of this document and the accompanying documents, in whole or in part, and any disclosure of its contents in jurisdictions other than the UK or Sweden is prohibited. Any use of any information herein for any purpose other than in considering an investment in the New Ordinary Shares offered or otherwise made available hereby is prohibited. Each offeree of the New Ordinary Shares by accepting delivery of this document agrees to the foregoing.

Notice to investors in European Economic Area (other than UK and Sweden)

In relation to each member state of the European Economic Area which has implemented the Prospectus Directive (each, a ''relevant member state'') except for the United Kingdom and Sweden, with effect from and including the date on which the Prospectus Directive was implemented in that relevant member state (the ''relevant implementation date'') no New Ordinary Shares have been offered or will be offered pursuant to the Placing and Open Offer to the public in that relevant member state prior to the publication of a prospectus in relation to the New Ordinary Shares which has been approved by the competent authority in that relevant member state or, where appropriate, approved in another relevant member state and notified to the competent authority in the relevant member state, all in accordance with the Prospectus Directive, except that, with effect from and including the relevant implementation date, offers of New Ordinary Shares may be made to the public in that relevant member state at any time:

• (a) to any legal entity which is a qualified investor as defined in the Prospectus Directive;
• (b) to fewer than 100, or, if the relevant member state has implemented the relevant provisions of the 2010 PD Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospective Directive), subject to obtaining the prior consent of the Joint Bookrunners;
• (c) in any other circumstances falling within Article 3(2) of the Prospectus Directive,

provided that no such offer of New Ordinary Shares shall result in a requirement for the Company, J.P. Morgan Cazenove and/or BofA Merrill Lynch to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive and each person who initially acquires any New Ordinary Shares or to whom any offer is made on the basis of paragraphs (a), (b) or (c) above will be deemed to have represented, warranted and agreed to and with J.P. Morgan Cazenove and BofA Merrill Lynch, and with the Company, that it is a qualified investor within the meaning of the law in that relevant member state implementing Article 2(1)(e) of the Prospectus Directive.

For the purpose of this provision, the expression an ''offer of any New Ordinary Shares to the public'' in relation to any New Ordinary Shares in any relevant member state means the communication in any form and by any means of sufficient information on the terms of the Placing and Open Offer and any New Ordinary Shares to be offered so as to enable an investor to decide subscribe for or to purchase any New Ordinary Shares as the same may be varied in that relevant member state by any measure implementing the Prospectus Directive in that relevant member state.

In the case of any New Ordinary Shares being offered to a financial intermediary, as that term is used in Article 3(2) of the Prospectus Directive, such financial intermediary will also be deemed to have represented, acknowledged and agreed that the New Ordinary Shares acquired by it in the Placing and Open Offer have not been acquired on a non-discretionary basis on behalf of, nor have they been acquired with a view to their offer or resale to persons in circumstances which may give rise to an offer of any New Ordinary Shares to the public other than their offer or resale in a relevant member state to qualified investors as so defined in the Prospectus Directive or in circumstances in which the prior consent of the Company, J.P. Morgan Cazenove and BofA Merrill Lynch has been obtained to each such proposed offer or resale. Each of the Company, J.P. Morgan Cazenove, BofA Merrill Lynch and their respective affiliates, and others, will rely upon the truth and accuracy of the foregoing representation, acknowledgement and agreement. Notwithstanding the above, a person outside the UK and Sweden who is not a qualified investor and who has notified the Company, J.P. Morgan Cazenove and/or BofA Merrill Lynch of such fact in writing may, with the consent of the Company, J.P. Morgan Cazenove and/or BofA Merrill Lynch, be permitted to subscribe for or purchase New Ordinary Shares in the Placing and Open Offer.

Information not contained in this document

No person has been authorised to give any information or make any representation other than those contained in or incorporated by reference into this document and, if given or made, such information or representation must not be relied upon as having been authorised by the Company, J.P. Morgan Cazenove and/or BofA Merrill Lynch. Subject to the requirements of the FSMA, the Listing Rules, DTRs and the Prospectus Rules, neither the delivery of this document nor any subscription or sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since the date of this document or that the information in or incorporated by reference into this document is correct as of any time subsequent to the date hereof.

Recipients of this document acknowledge that (i) they have not relied on J.P. Morgan Cazenove, BofA Merrill Lynch or any person affiliated with them in connection with any investigation of the accuracy of any information contained in or incorporated by reference into this document or their investment decision; and (ii) they have relied only on the information contained in or incorporated by reference into this document, and that no person has been authorised to give any information or to make any representation concerning the Company or its subsidiaries, the Placing and Open Offer or the New Ordinary Shares (other than as contained in or incorporated by reference into this document) and, if given or made, any such other information or representation should not be relied upon as having been authorised by the Company, J.P. Morgan Cazenove or BofA Merrill Lynch.

Any information that is incorporated by reference into documents, which in turn are incorporated into this document, is not incorporated by reference into and does not form part of this document.

No incorporation of website information

The contents of the Company's website or any website directly or indirectly linked to the Company's website have not been verified and do not form part of this document and investors should not rely on it or any of them.

Information regarding forward-looking statements

This document includes statements that are, or may be deemed to be, ''forward-looking statements''. The words ''believe,'' ''estimate,'' ''target,'' ''anticipate,'' ''expect,'' ''could,'' ''would,'' ''intend,'' ''aim,'' ''plan,'' ''predict,'' ''continue,'' ''assume,'' ''positioned,'' ''may,'' ''will,'' ''should,'' ''shall,'' ''risk'' their negatives and other similar expressions that are predictions of or indicate future events and future trends identify forward-looking statements. These forward-looking statements include all matters that are not historical facts. In particular, the statements under the headings ''Summary,'' ''Risk Factors,'' ''Information on the Group'', ''Overview of EnQuest's Market'' and ''Operating and Financial Review'' regarding the Company's or the Group's strategy, plans, objectives, goals and other future events or prospects are forward-looking statements. An investor should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors that are in many cases beyond the Company's or the Group's control. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. The Company cautions investors that forward-looking statements are not guarantees of future performance and that its actual results of operations and financial condition, and the development of the industry in which it operates, may differ materially from those made in or suggested by the forward-looking statements contained in this document and/or information incorporated by reference into this document. In addition, even if the Company's or the Group's results of operation, financial position and growth, and the development of the markets and the industry in which the group operates, are consistent with the forward-looking statements contained in this document, these results or developments may not be indicative of results or developments in subsequent periods. The cautionary statements set forth above should be considered in connection with any subsequent written or oral forward-looking statements that the Company, or persons acting on its behalf, may issue. Factors that may cause the Company's and/or the Group's actual results to differ materially from those expressed or implied by the forward-looking statements in this document include but are not limited to the risks described under ''Risk Factors'' on pages 20 to 53 of this document.

Each forward looking statement speaks only as of the date it was made and are not intended to give any assurances as to future results. Furthermore, forward-looking statements contained in this document that are based on past trends or activities should not be taken as a representation that such trends or activities will continue in the future. Except as required by the FSMA, the Listing Rules, the DTRs, the Prospectus Rules, the Swedish Financial Instruments Trading Act, the Swedish Listing Rules and/or the Swedish Securities Act, none of the Company, J.P. Morgan Cazenove or BofA Merrill Lynch undertakes any obligation to update or revise these forward-looking statements, and will not publicly release any revisions it may make to these forward-looking statements that may result from new information, events or circumstances arising after the date of this document. The Company will comply with its obligations to publish updated information as required by the FSMA, the Listing Rules, the DTRs, the Prospectus Rules, the Swedish Financial Instruments Trading Act, the Swedish Listing Rules and/or the Swedish Securities Act or otherwise by law and/or by any regulatory authority, but assumes no further obligation to publish additional information.

Neither the delivery of this document nor any sale made hereunder shall under any circumstances imply that there has been no change in the Company's and/or the Group's affairs or that the information set forth in this document is correct as of any date subsequent to the date hereof.

Profit forecasts

No statement in this document is intended as a profit forecast or a profit estimate and no statement in this document should be interpreted to mean that earnings per Ordinary Share for the current or future financial years would necessarily match or exceed the historical published earnings per Ordinary Share.

Presentation of financial information

Unless otherwise indicated, financial information presented in this document relating to the Group as at and for the years ended 31 December 2013, 31 December 2014 and 31 December 2015 and as at and for the six months ended 30 June 2016 (and comparative information for the six months ended 30 June 2015), is presented in US dollars, has been prepared in accordance with IFRS as adopted by the EU and has been extracted without material adjustment from the published annual financial reports for the years ended 31 December 2013, 31 December 2014 and 31 December 2015 and the unaudited interim consolidated financial statements for the six months ended 30 June 2016, respectively.

The Group's historical consolidated financial statements include:

• (a) the 2013 Financial Statements;
• (b) the 2014 Financial Statements;
• (c) the 2015 Financial Statements; and
• (d) the 2016 Unaudited Interim Financial Statements.

Percentages in tables may have been rounded and accordingly may not add up to 100 per cent. Certain financial data have been rounded. As a result of this rounding, the totals of data presented in this document may vary slightly from the actual arithmetic totals of such data.

Non-IFRS measures

This document contains measures that are not recognised under IFRS as adopted by the EU, namely EBITDA.

EBITDA is a non-IFRS measure and refers to operating profit calculated on a business performance basis by taking profit/loss from operations before tax and finance income/(costs) and adding back depletion, depreciation and foreign exchange movements. Although EBITDA is not a measure of operating profit, operating performance or liquidity in accordance with IFRS as adopted by the EU, the Company uses this financial measure because it understands that EBITDA is used by some investors to determine a company's ability to service indebtedness and fund ongoing capital expenditures. EBITDA should not, however, be considered in isolation or as a substitute for operating profit as determined by IFRS as adopted by the EU, or as an indicator of the Group's operating performance or of its cash flows from operating activities as determined in accordance with IFRS as adopted by the EU.

The following table sets forth a reconciliation from EBITDA to profit from operations before tax and finance income/(costs) for the years ended 31 December 2013, 2014 and 2015 and the six month periods ended 30 June 2015 and 30 June 2016.

	Year ended 31 December			Six months ended 30 June
	2013	2014	2015	2015	2016
	USD '000	USD '000	USD '000	USD '000	USD '000
EBITDA	621.3	581.0	464.8	226.7	242.9
Depletion and depreciation	(224.0)	(245.1)	(305.9)	(123.3)	(130.5)
FX gains/(losses)	(20.5)	27.2	15.0	(4.3)	37.3
Intangible impairment and write offs	(2.0)	(0.6)	—	—	—
Profit from operations before tax and finance
income/(costs)	374.8	362.5	173.9	99.1	149.7

Currency and Exchange Rate Information

In this document, unless otherwise indicated, references to ''pounds sterling'', ''sterling'', ''pounds'', ''GBP'', ''pence'', ''p'' or ''£'' are to the lawful currency of the United Kingdom, references to ''E'', ''Euros'' or ''Euro'' are to the single currency of those relevant adopting member states of the European Union, references to ''kronor'' and ''SEK'' are to the lawful currency of Sweden and references to ''US dollars'', ''USD'', ''\$'' or ''US\$'' are to the lawful currency of the United States.

The Issue Price will be stated in pounds sterling and SEK.

Unless otherwise specified, this document contains certain translations of US dollars into amounts in pounds sterling and pounds sterling into amounts in SEK for convenience of the reader based on the exchange rate of £1.00 = \$1.2197 and £1.00 = SEK 10.7762, being the relevant exchange rate at 4:30 p.m. London time on the Latest Practicable Date. These exchange rates were obtained from Bloomberg.

Market, Economic and Industry Data

Where third party information has been used in this document, the source of such information has been identified. Unless the source is otherwise stated, the market, economic and industry data in this document constitute the Group's own estimates. The Group has obtained the market data and certain industry forecasts used in this document from internal surveys, reports and studies, as well as, publicly available information, market research and industry publications. Industry publications generally state that while the information they contain has been obtained from sources believed to be reliable, the accuracy and completeness of such information is not guaranteed. All market, economic and industry data contained in this document has been accurately reproduced and, as far as the Group is aware and able to ascertain from information published by third parties, no facts have been omitted which would render the reproduced information inaccurate or misleading.

Presentation of Reserves

This document presents information concerning the Group's reserves which are audited annually by GCA. This document presents information concerning reserves using SPE PRMS as the standard for classification and reporting. All reserves information in this document is presented on the basis of SPE PRMS standards, unless otherwise indicated.

The information on reserves in this document is based on economic and other assumptions that may prove to be incorrect. Prospective investors should not place undue reliance on the forward-looking statements in this document or on the ability of the information on reserves in this document to predict actual reserves.

Prospective investors should read the whole of this document for more information on the Company's reserves and the reserves definitions the Company uses.

Defined terms and technical terms

Certain terms used in this document, including all capitalised terms, are defined and explained in Part 13 (''Definitions''). Certain technical terms are explained in Part 12 (''Technical Terms'').

Times

All references in this document that are references to time in Stockholm, Sweden will specifically state that fact. All other times referred to in this document are, unless otherwise stated, references to time in London, United Kingdom.

DIRECTORS, COMPANY SECRETARY, REGISTERED OFFICE AND ADVISERS

Directors	Amjad Bseisu (Chief Executive) Jock Lennox (Chairman) Philip Holland (Non-Executive Director) Helmut Langanger (Senior Independent Director) Philip Nolan (Non-Executive Director) Jonathan Swinney (Chief Financial Officer)
General Counsel and Company Secretary	Stefan Ricketts
Registered Office of the Company	EnQuest PLC 5th Floor Cunard House 15 Regent Street London SW1Y 4LR United Kingdom
Sponsor	J.P. Morgan Securities plc 25 Bank Street London E14 5JP United Kingdom
Joint Bookrunners	J.P. Morgan Securities plc 25 Bank Street London E14 5JP United Kingdom
	Merrill Lynch International 2 King Edward Street London EC1A 1HQ United Kingdom
Legal Advisers to the Company as to English and US law	Ashurst LLP Broadwalk House 5 Appold Street London EC2A 2HA United Kingdom
Legal Advisers to the Company as to Swedish law	Hamilton Advokatbyra KB ˚ Hamngatan 27 Box 715 101 33 Stockholm Sweden
Legal Advisers to the Sponsor and Joint Bookrunners	Simmons & Simmons LLP CityPoint One Ropemaker Street London EC2Y 9SS United Kingdom
Auditor of the Company	Ernst & Young LLP 1 More London Place London SE1 2AF United Kingdom

Receiving Agent	Capita Asset Services Corporate Actions The Registry 34 Beckenham Road Beckenham Kent BR3 4TU United Kingdom
Registrars	Capita Asset Services The Registry 34 Beckenham Road Beckenham Kent BR3 4TU United Kingdom
Swedish Issuer Agent	Skandinaviska Enskilda Banken AB (publ) Rissneleden 110 106 40 Stockholm Sweden
Swedish Registrar	Euroclear Sweden AB Box 191 101 23 Stockholm Sweden

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

Each of the dates and times in the table below is indicative only and may be adjusted by the Company, in which event details of the new times and dates will be notified to the UK Listing Authority, the London Stock Exchange and, where appropriate, to Qualifying Shareholders by way of an announcement issued via a RIS provider.

Announcement of the Placing and Open Offer and the Scheme	13 October 2016
Publication of this document	14 October 2016
Ex-entitlement date for the Swedish Open Offer	18 October 2016
Record Date for entitlements under the Open Offer and right to participate in the Swedish Open Offer	6.00 p.m. on 19 October 2016
Ex-entitlement date for the Open Offer	20 October 2016
Posting of this document, the Forms of Proxy and the Application Forms and distribution of the Practice Statement Letter in connection with the Scheme and posting in Sweden of the summary of this combined circular and prospectus and Pre-Printed Issue Account Statements, and subscription period of Swedish Open Offer begins	20 October 2016
Open Offer Entitlements credited to stock accounts in CREST of Qualifying CREST Shareholders	As soon as practicable after 8.00 a.m. on 21 October 2016
Subscription rights, as set out in the Pre-Printed Issue Account Statements, are credited to the VP Accounts of Qualifying Swedish Directly Registered Shareholders and, pursuant to the procedures of the relevant nominee, to the nominee accounts of Qualifying Swedish Nominee Registered Shareholders	As soon as practicable after 9.00 a.m. (Stockholm time) on 21 October 2016
Court hearing for permission to convene the Scheme Meeting	24 October 2016
Latest recommended time and date for requesting withdrawal of Open Offer Entitlements from CREST (i.e. if your Open Offer Entitlements are in CREST and you wish to convert them into certificated form)	3.00 p.m. on 9 November 2016
Subscription period of Swedish Open Offer ends	9 November 2016
Latest time and date for receipt of Forms of Proxy or submission of proxy votes electronically	9.00 a.m. on 10 November 2016
Latest recommended time and date for depositing Open Offer Entitlements into CREST (i.e. if your Open Offer Entitlements are represented by an Application Form and you wish to convert them to uncertificated form)	3.00 p.m. on 10 November 2016
Latest time and date for splitting Application Forms (to satisfy bona fide market claims)	3.00 p.m. on 11 November 2016
General Meeting	9.00 a.m. on 14 November 2016
Scheme Meeting	14 November 2016

Announcement of the results of the General Meeting	14 November 2016
Latest time and date for receipt of payment in full under the Swedish Open Offer in accordance with (i) the Pre-Printed Payment Notices or (ii) completed Swedish Application Forms	11.00 a.m. (Stockholm time) on 16 November 2016
Latest time and date for receipt of completed Application Forms and payment in full under the Open Offer or settlement of relevant CREST instructions (as appropriate)	11.00 a.m. on 16 November 2016
Court hearing to consider sanctioning the Scheme	16 November 2016
Chapter 15 hearing to obtain New York recognition of the English judgment in relation to the Scheme	17 November 2016
Announcement of the results of the Placing and Open Offer	17 November 2016
Effective date of the Scheme	21 November 2016
LSE Admission and commencement of dealings in respect of New Ordinary Shares and CREST stock accounts credited in respect of New Ordinary Shares	8.00 a.m. on 21 November 2016
Stockholm Admission and commencement (for normal settlement) of dealings in respect of New Ordinary Shares	on or around 21 November 2016
Despatch of share certificates in respect of New Ordinary Shares in certificated form	on or around 28 November 2016

Notes:

(1) References to times are to London time unless otherwise stated.

⁽²⁾ The ability to participate in the Placing and Open Offer is subject to certain restrictions relating to Shareholders with a registered address or located or resident outside the UK or Sweden, details of which are set out in Part 10 (''Terms and Conditions of the Placing and Open Offer'').

⁽³⁾ If you have any queries on the procedure for acceptance and payment in respect of the Open Offer or on the procedure for splitting Application Forms, you should refer to Part 10 (''Terms and Conditions of the Placing and Open Offer'') which contains the Terms and Conditions of the Placing and Open Offer. Should you require further assistance please call Capita Asset Services on 0371 664 0321. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. The helpline is open between 9.00 am to 5.30 pm, Monday to Friday excluding public holidays in England and Wales. Please note that Capita Asset Services cannot provide any financial, legal or tax advice and calls may be recorded and monitored for security and training purposes.

PLACING AND OPEN OFFER STATISTICS

Issue Price per New Ordinary Share	23.0 pence (SEK 2.48)
Open Offer Entitlement	4 New Ordinary Shares for 9 Existing Ordinary Shares
Number of Existing Ordinary Shares in issue as at 12 October 2016 (being the Latest Practicable Date)	802,660,757
Number of New Ordinary Shares to be issued pursuant to the Placing and Open Offer	356,738,114
Enlarged Issued Share Capital upon completion of the Placing and Open Offer(1)	1,159,398,871
New Ordinary Shares as a percentage of the Enlarged Issued Share Capital	30.77%
Gross proceeds of the Placing and Open Offer	£82.0 million (equivalent to SEK 884.2 million at exchange rate of SEK 1.00 = GBP 0.0928 on 12 October 2016)
Estimated net proceeds of the Placing and Open Offer receivable by the Company(2)	£78.1 million (equivalent to SEK 842.0 million at exchange rate of SEK 1.00 = GBP 0.0928 on 12 October 2016)
Notes:

⁽¹⁾ The Enlarged Issued Share Capital assumes that, other than the Placing and Open Offer, no further Ordinary Shares are issued by the Company between the posting of this document and Admission.

⁽²⁾ The estimated net proceeds receivable by the Company, assuming Admission occurs, are stated after the deduction of estimated costs and expenses (exclusive of VAT) of, or incidental to, the Placing and Open Offer payable by the Company, estimated to be approximately £3.9 million (equivalent to SEK 42.3 million at exchange rate of SEK 1.00 = GBP 0.0928 on 12 October 2016).

PART 1—LETTER FROM THE CHAIRMAN OF ENQUEST PLC

Registered in England and Wales No: 07140891

Directors: Registered Office: Amjad Bseisu (Chief Executive) 5th Floor Jock Lennox (Chairman) Cunard House Philip Holland (Non-Executive Director) 15 Regent Street Helmut Langanger (Senior Independent Director) London Philip Nolan (Non-Executive Director) SW1Y 4LR Jonathan Swinney (Chief Financial Officer)

14 October 2016

To: the holders of Ordinary Shares and, for information only, option holders

Dear Shareholders,

Proposed Placing and Open Offer of in aggregate 356,738,114 New Ordinary Shares at 23.0 pence (SEK 2.48) per New Ordinary Share, Related Party Transaction and Notice of General Meeting

1. Introduction

On 13 October 2016, the Company announced a proposed capital raise, by way of a Placing and Open Offer of, in aggregate, 356,738,114 New Ordinary Shares at an issue price of 23.0 pence per New Ordinary Share (SEK 2.48 per New Ordinary Share for Qualifying Swedish Shareholders in the Swedish Open Offer) to raise gross proceeds of approximately £82.0 million (equivalent to SEK 884.2 million at exchange rate of SEK 1.00 = GBP 0.0928 on 12 October 2016) (approximately £78.1 million net of estimated expenses (equivalent to SEK 842.0 million at exchange rate of SEK 1.00 = GBP 0.0928 on 12 October 2016)). The Placing and Open Offer forms part of the Restructuring, which the Company announced on 13 October 2016, following negotiation with relevant stakeholders, including the Existing RCF Lenders, the Hedging Banks, and the Ad Hoc Noteholder Committee. The key features of the Restructuring are (i) the Placing and Open Offer; (ii) the Proposed RCF Amendments extending the final maturity date of the Existing RCF to October 2021, splitting the Existing RCF commitments into a term loan facility and a revolving credit facility, amending the amortisation profile, amending and resetting certain of the financial covenants in the Existing RCF to allow the Group sufficient headroom, amending the margin in each of the facilities and cancel the existing accordion feature and incorporating terms allowing for new super senior hedging; (iii) the Proposed Note Amendments to be effected by way of an English scheme of arrangements amending the Existing Notes, among other things, to provide that interest will only be payable in cash on any interest payment date if certain conditions are met (including that the prevailing average oil price is equal to or above \$65.00/bbl) for a six-month period, otherwise interest will be capitalised, to enable the Company (at its absolute discretion) to extend, at any time, the scheduled maturity dates to April 2023 and automatically to extend the scheduled maturity dates to October 2023 if the Company has not repaid or refinanced the Existing RCF by 15 October 2020, to remove the existing financial covenants from the Existing Retail Notes, to amend certain financial indebtedness baskets in the New High Yield Notes and to include a restriction on certain payments to shareholders (and their affiliates) if the Company has not redeemed (in cash at par pursuant to a new optional redemption right) the New High Yield Notes or the Amended Retail Notes (as the case may be) in an amount equal to any capitalised interest thereon, together with any accrued but unpaid interest; and (iv) the renewal of the Surety Bond Facilities.

The New Ordinary Shares (other than the Committed Shares) have been placed with Placees by the Joint Bookrunners, subject to clawback to satisfy valid applications under the Open Offer.

The Placing and Open Offer is conditional upon, among other things, (i) the passing without amendment of the Resolutions at the General Meeting (and not, except with the prior written agreement of the Joint Bookrunners, acting jointly, at any adjournment of such meeting) on 14 November 2016 (or such later date as the Joint Bookrunners may agree) and the Resolutions remaining in force; (ii) the Company having

complied with its obligations under the Sponsor and Placing Agreement and under the terms and conditions of the Placing and Open Offer which fall to be performed on or prior to LSE Admission and such agreement having become unconditional, save as otherwise agreed by the Joint Bookrunners acting jointly and the Sponsor and Placing Agreement not having been terminated prior to LSE Admission; (iii) save for any condition in relation to Admission, the Scheme and the Proposed Note Amendments becoming unconditionally effective prior to LSE Admission; (iv) save for any condition in relation to Admission, the Proposed RCF Amendments and the Amendment and Restatement Agreement becoming unconditionally effective prior to LSE Admission; (v) save for any condition in relation to Admission, the renewal of the Surety Bond Facilities becoming unconditionally effective prior to LSE Admission; (vi) LSE Admission becoming effective by not later than 8.00 a.m. on 21 November 2016 (or such later time and/or date as the Company may agree with the Joint Bookrunners, not being later than 8.00 a.m. on 24 November 2016) and application for Stockholm Admission having been made and no notification having been received that Stockholm Admission has been refused or will not become effective on or before 24 November 2016 and (vii) the Double A Placing Letter and associated Letter of Credit being entered into by the parties thereto having, and continuing to have, full force and effect and not having been terminated, varied, modified, supplemented or lapsing before LSE Admission, and no right to terminate or rescind the Double A Placing Letter and associated Letter of Credit having arisen before LSE Admission.

Double A Limited, a company beneficially owned by the extended family of Amjad Bseisu, is proposing to participate in the Placing and Open Offer. Double A Limited has agreed to be a Placee in the Placing for 91,224,079 New Ordinary Shares subject to clawback in the Open Offer as explained in paragraph 8 of this Part 1 (''Letter from the Chairman of EnQuest PLC'') below. In addition, Double A Limited has undertaken to take up 31,735,702 New Ordinary Shares in the Open Offer, representing its pro rata share of the amount to be raised in the Open Offer. Without prejudice to its obligations to subscribe for New Ordinary Shares in the Placing as set out in this document, Double A Limited may enter into back to back or other arrangements with pre-identified persons and/or the Company, as the case may be, for the Company to issue to such third parties certain of the New Ordinary Shares which Double A Limited is required to subscribe for in the Placing (following clawback in the Open Offer). The New Ordinary Shares to be subscribed for in the Placing and Open Offer by Double A Limited are not being underwritten by the Joint Bookrunners.

As Amjad Bseisu is a Director, the participation of Double A Limited in the Placing and Open Offer constitutes a ''related party transaction'' for the purposes of Chapter 11 of the Listing Rules and therefore requires the approval of Shareholders. Pursuant to the requirement of Chapter 11 of the Listing Rules, Double A Limited, as a Related Party, will not vote and has undertaken to take all reasonable steps to ensure that its associates (as defined in the Listing Rules) do not vote on the Related Party Resolution at the General Meeting.

This document has been prepared to provide you with the details of the reasons for, and procedures for participating in, the Placing and Open Offer, to convene the General Meeting, to explain why the Board considers the Placing and Open Offer to be in the best interests of the Company and its Shareholders and to recommend that Shareholders vote in favour of the Resolutions. In particular, your attention is drawn to paragraph 18 of this Part 1 (''Letter from the Chairman of EnQuest PLC'') entitled ''Importance of the vote and working capital''.

2. Summary information on EnQuest

EnQuest is an oil and gas production and development company focused on turning opportunities into value by targeting maturing assets and undeveloped oil fields. It is the largest independent UK oil producer in the UK North Sea (as last measured for the twelve months ended 31 May 2016). with production from offshore oil fields in the UKCS and Malaysia. The Company's shares trade on both the London Stock Exchange and the NASDAQ Stockholm.

Most of the Group's existing assets are located in the UKCS in the North Sea. The producing operated assets in the UKCS include the Thistle/Deveron fields, the Heather/Broom fields, the Don fields, the GKA fields and the Alma/Galia fields. In addition, the Group has an interest in the non-operated Alba producing oil field. As of 30 June 2016, the Group had interests in 29 UK production licences, covering 41 blocks or part blocks and was the operator of 26 of these production licences. The Group also has two currently producing assets located in Malaysia, PM8/Seligi and Tanjong Baram.

The Group's average daily production on a working interest basis for the six months ended 30 June 2016 was 42,520 boepd and its net 2P reserves were 216 MMboe as of 1 January 2016.

The Group's primary development asset is the Kraken development, in which it owns a 70.5 per cent. working interest. The Group is the operator of the Kraken development. It is the Group's largest project to date and one of the largest projects in the UKCS in recent years. The Directors expect it to deliver first oil in the first half of 2017. The Group also owns a 50 per cent. working interest in, and is the operator of, the Scolty/Crathes development, which was the only offshore pure oil field approved by the Oil & Gas Authority in 2015. The directors expect that the Scolty/Crathes fields will deliver first oil around the end of 2016.

3. Background to and reasons for the Placing and Open Offer

Against the backdrop of challenging market conditions, the Group has achieved a robust operational performance in its most recent financial periods, as demonstrated by its increasing production and cost efficiency, as it continues to pursue its strategy of turning opportunities into value by targeting maturing assets and undeveloped oil fields and exploiting its existing reserves. Nevertheless, the decline in oil prices during and since 2014 and the continuing low oil price environment have had a significant negative impact on the Group's revenues, liquidity and available cash resources. This situation has been exacerbated by the Group's level of debt and the significant cash resources required to service the interest on this debt, as well as by the significant capital expenditure required for development assets including, in particular, the Group's Kraken development asset, the Group's largest project to date. These factors combined have put considerable pressure on the Group's cash flows. As a result, the Directors are now of the view that, without substantial changes to the Group's capital and debt structure, the Group will have insufficient cash resources to bring Kraken to first oil and to meet all of its payment obligations as they fall due. In particular, if the Placing and Open Offer and the Restructuring as described in this document do not proceed, the Directors believe that there is a substantial risk that the Group will be unable to pay the October Interest Payment on the Group's Existing High Yield Notes on 17 October 2016. If not remedied within the applicable 30 day grace period, this would constitute a default under the Existing High Yield Notes. Non-payment of such interest on the Group's Existing High Yield Notes would trigger cross defaults across the Group's other debt instruments and facilities. In addition, the Group has, since January 2015, obtained waivers from the Existing RCF Lenders in respect of the liquidity covenant contained in the Existing RCF and the current waiver from this covenant expires on 31 December 2016. To the extent the Group is unable to improve its liquidity position or obtain further waivers from the Existing RCF Lenders, the Group could fail to meet the liquidity covenant in the Existing RCF when next tested on 31 December 2016 or on a subsequent test date, which would constitute an event of default under the Existing RCF. If any of the circumstances described above were to occur, this could give rise to the consequences referred to in paragraph 4.7 of this Part 1 (''Letter from the Chairman of EnQuest PLC'') entitled ''Consequences of a failure to implement the Restructuring''. Although the Group has already undertaken a number of measures to mitigate the impact of the low oil price environment (as described further below), the Directors believe that in order to continue its operations as currently envisioned the Group must strengthen its balance sheet, reduce the impact of the Group's current debt on its cash flows and increase the Group's cash resources. The Directors are therefore proposing the Restructuring, of which the Placing and Open Offer forms an integral part, and are recommending that Shareholders approve the Resolutions required to complete the Placing and Open Offer. The Directors expect that the proceeds of the Placing and Open Offer will enable the Group to complete the developments of Kraken and Scolty/Crathes, which the Directors expect will lead to both significant increases in production and significant decreases in average operating costs across the Group. The Directors believe that the completion of the Restructuring, including the Placing and Open Offer, will put the Group in a stronger position to meet current oil market conditions, as they continue to believe that the Group's fundamental business, with its strategy of targeting mature and marginal oil assets and its focus on cost efficiency, is well placed to withstand a prolonged period of low oil prices, and will be even better placed to do so after completion of the Kraken development.

The recent significant decline in oil prices began in the second half of 2014, with the average realised price for the Group's UKCS and Malaysian oil sales (excluding hedging) together decreasing from \$100.6 per barrel for the year ended 31 December 2014 to \$50.9 per barrel for the year ended 31 December 2015, and from \$58 per barrel for the six months ended 30 June 2015 to \$41 per barrel for the six months ended 30 June 2016. The Brent crude oil benchmark (which is the benchmark against which the Group's UKCS production is priced) reached a low of \$27.88/bbl on 20 January 2016. Although oil prices have stabilised somewhat, they remain significantly below the levels that prevailed in 2013 and the first half of 2014 (with the Brent crude oil benchmark at a high of \$118.9/bbl on 8 February 2013). The Brent crude oil benchmark was \$51.7/bbl as of 12 October 2016. This reduction in oil prices has had a negative impact on the Group's revenues and cash flows from operating activities.

In response to the decline in oil prices, the Group has set a number of strategic priorities, including delivering on execution, streamlining operations and strengthening the Group's balance sheet. The Group has continued to focus on delivering a strong operational performance, as demonstrated by the 31.1 per cent. increase in the Group's net daily average production in 2015 and a 43.3 per cent. increase in net daily average production in the six months ended 30 June 2016 (compared to the same period in the prior year) and reduced operating costs described in more detail below. The Group has also taken a number of additional measures to address the impact of the decline in oil prices and the Group's cash flow constraints, including the following:

• Negotiating amendments to certain financial covenants in the Existing RCF and the Existing Retail Notes: In January 2015, the Group negotiated temporary amendments to certain of its financial covenants in the Existing RCF, raising the net debt/EBITDA covenant to five times and reducing the ratio of EBITDA to financing charges to a minimum of three times, both until mid-2017, providing the Group with additional headroom in the low oil price environment. In May 2015, following approval by the holders of the Existing Retail Notes, the financial covenants in the Existing Retail Notes were amended for consistency with the amendments to the Existing RCF. The Company is seeking further changes to the Existing RCF and Existing Retail Notes as part of the Restructuring as mentioned above.
• Engaging in commodity hedging activities: In line with its financial policies, the Group entered into a number of commodity hedging contracts in 2014, partially hedging the Group's exposure to fluctuations in oil prices, and entered into additional hedging contracts in 2015 as a response to the continued low oil price environment. As of 31 December 2015, the Group's commodity hedging contracts included bought put options over 8MMbbls, maturing throughout 2016, with an average strike price of \$68/bbl and oil swap contracts to sell 2MMbbls at an average price of \$66.64/bbl maturing throughout 2016. These hedging arrangements considerably mitigated the fall in the Group's revenues in 2015, as the Group recognised \$261.2 million in realised gains from its hedging activities (relating to the portion of the Group's commodity hedging contracts that were ineffective for hedging purposes or held for trading purposes) during the year ended 31 December 2015. As of 30 June 2016, the Group's commodity hedging contracts included bought put options over 4.3MMbbls at an average price of \$68/bbl maturing throughout 2016 and oil swap contracts to sell 1.3MMbbls at an average price of \$67/bbl maturing throughout 2016. During the first six months of 2016, the Group realised \$128.1 million in revenue relating to its commodity hedging activities, which partially offset the decline in oil sales. Since 30 June 2016, the Group entered hedging arrangements over 1MMbbl of 2017 production (83kbbls per month) at a fixed price of \$51.50/bbl. The Group has also sold 500,000 bbls per month for the first half of 2017 (3 MMbbls total) at a fixed price of \$49/bbl and has bought a call (nil cost) for the same notional quantity, with a strike price of \$57.25/bbl. Should the price rise above \$57.25/bbl, the Group will receive the difference to offset the loss it would make on the \$49/bbl swaps. In addition, the Group has hedged 500,000 bbls for the first half of 2017 at \$54.50/bbl.
• Divesting non-core assets: In 2015, as part of its investment prioritisation programme, the Group disposed of its interests in assets in Norway, Egypt and Tunisia and its exploration assets in Malaysia. The Group also relinquished its interests in a number of exploration licences in the UK. These divestments have allowed the Group to focus on enhancing production at its currently producing assets, including bringing Alma/Galia into full production, and developing its core development assets, being Kraken and Scolty/Crathes.
• Reducing operating costs: Although the Group has always been focused on cost efficiency, it has made further significant cuts to its cost base since the decline in oil prices, including through lowering supply chain, contractor and staff costs, moving its procurement team to Dubai to take advantage of lower cost structures and working with the SVT operator to reduce gross cost levels. EnQuest reduced average unit operating costs in 2015 to \$30/bbl (compared to \$42/bbl in 2014) and in the first half of 2016 to \$23/bbl (compared to \$39/bbl in the first half of 2015). The Directors expect average unit operating costs for the full year 2016 to be around the lower end of the guidance of \$25–\$27/bbl and expect that unit operating costs will decrease to the low \$20s per barrel when Kraken comes fully on-stream.
• Reducing capital expenditure on the Kraken development: The gross full cycle capital expenditure estimate for Kraken has been reduced by approximately \$675 million since the development was

sanctioned in 2013, including the latest reduction of a further \$100 million being announced in October 2016. The gross full cycle capital expenditure estimate has therefore been reduced from approximately \$3.2 billion at sanction to approximately \$2.5 billion.

• Improving future cash flows through the development of Kraken and Scolty/Crathes: The Directors expect that Kraken will deliver first oil in the first half of 2017 and that the Scolty/Crathes fields will deliver first oil around the end of 2016. The increase in production and, as a result, revenues brought about by the completion of these developments, combined with reduced capital expenditure and operational costs, would improve the Group's cash flow position.
• Deferring certain trade creditor obligations: The Group has also recently agreed the deferral of certain payments owed to several of its trade suppliers, particularly those involved in the Kraken development, which the Directors believe demonstrate trade suppliers' willingness to support the Company. Pursuant to these arrangements, these trade suppliers have agreed for outstanding liabilities to be deferred in accordance with agreed repayment profiles, allowing the Group to repay these liabilities through periodic payments extending to between October 2016 and April 2019.

These measures have been significant steps in maintaining the Group's viability in the current environment.

The Directors recognise, however, that in order to allow the Group to continue to pursue its current strategy (and, in particular, to bring Kraken to first oil) and to maintain the viability of the Group's business going forward, a longer term solution is needed to strengthen the Group's liquidity position and reduce the burden of the Group's debt service obligations on its business. Having negotiated with relevant stakeholders, including the Existing RCF Lenders, the Hedging Banks and the Ad Hoc Noteholder Committee, the Directors have proposed the measures comprised in the Restructuring. The terms of the various components of the Restructuring are set out in more detail in paragraph 4 below. The key features of the Restructuring are: (i) the Placing and Open Offer; (ii) the Proposed RCF Amendments amending the Existing RCF to, among other things, extend the final maturity date of the Existing RCF to October 2021, split the maximum aggregate commitments into a term loan facility and a revolving credit facility, amend the amortisation profile, relax certain of the financial covenants in the Existing RCF and incorporate terms allowing for new super senior hedging; (iii) the Proposed Note Amendments to be effected by way of an English scheme of arrangement amending the Existing Notes among other things, to provide that interest will only be payable in cash on any interest payment date if certain conditions are met (including that the prevailing average oil price is equal to or above \$65.00/bbl) for a six-month period, otherwise interest will be capitalised, to enable the Company (at its absolute discretion) to extend, at any time, the scheduled maturity dates to April 2023 and automatically to extend the scheduled maturity dates to October 2023 if the Company has not repaid or refinanced the Existing RCF by 15 October 2020, to remove certain financial covenants from the Existing Retail Notes, to amend certain financial indebtedness baskets in the New High Yield Notes and to include a restriction on certain payments to shareholders (and their affiliates) if the Company has not redeemed (in cash at par pursuant to a new optional redemption right) the New High Yield Notes or the Amended Retail Notes (as the case may be) in an amount equal to any capitalised interest thereon, together with any accrued but unpaid interest; and (iv) the renewal of the Surety Bond Facilities.

All of the elements of the Restructuring are inter-conditional, meaning that none of the components of the Restructuring will be completed if the Placing and Open Offer is not approved by Shareholders and that the Placing and Open Offer will not proceed if the other components of the Restructuring are not consented to and/or completed.

The Placing and Open Offer is conditional as summarised in paragraph 7 below.

The Directors believe that the Restructuring, including the Placing and Open Offer, is in the best interests of Shareholders as it will improve the Group's capital structure and improve the ongoing liquidity position of the Group. The Proposed Note Amendments will capitalise the Group's cash interest expense unless the oil price is equal to or above an average of \$65.00/bbl for a six-month period ending one month prior to the interest payment date and certain other conditions are met. The Proposed Note Amendments will also allow the Company to extend, at any time, the scheduled maturity dates for the repayment of the Existing Notes by one year at its discretion and automatically extend the maturity dates by one and a half years if the Company has not repaid or refinanced the Existing RCF by 15 October 2020. The Proposed RCF Amendments would extend the final maturity date for repayment of the Existing RCF to October 2021. In addition, the Proposed RCF Amendments and the Proposed Note Amendments amend the Group's

financial covenants to provide additional flexibility under the RCF, remove the existing financial covenants from the Existing Retail Notes, amend certain financial indebtedness baskets in the New High Yield Notes and include a restriction on certain payments to shareholders (and their affiliates) if the Company has not redeemed (in cash at par pursuant to a new optional redemption right) the New High Yield Notes or the Amended Retail Notes (as the case may be) in an amount equal to any capitalised interest thereon, together with any accrued but unpaid interest. Together with the above and other measures, the proceeds of the Placing and Open Offer, expected to be £78.1 million net of expenses, are expected to enable the Group to complete the Kraken development and bring it to first oil on schedule in the first half of 2017, which the Directors believe will considerably improve the Group's cash flows. Kraken is expected to increase the Group's current production substantially and has a productive life of over 20 years. It is also expected to benefit from lower unit operating costs which the Directors expect will reduce the Group's average unit operating costs to the low \$20s/bbl once Kraken is fully on-stream. The Directors believe that this will put the Group in a stronger position to withstand a prolonged period of low oil prices and deliver value to Shareholders.

Without the Restructuring and other measures, the Directors believe that the Group would experience a maximum working capital shortfall of approximately \$150 million in May 2017 and that the Group could be unable to pay the October Interest Payment, which (if not remedied within the applicable 30 day grace period) would constitute a default under the Existing High Yield Notes. In addition, certain subsidiaries of the Company have guaranteed the Company's obligations in respect of the Existing High Yield Notes. Upon the Company failing to make the October Interest Payment, the Existing High Yield Note Guarantors would be jointly and severally obliged to pay the October Interest Payment. A failure by the Existing High Yield Note Guarantors to make the October Interest Payment would result in the Existing High Yield Note Guarantors being in default of their obligations under the guarantee. The Proposed Note Amendments would, among other things, provide that interest on the New High Yield Notes and the Amended Retail Notes will not be payable in cash unless certain payment conditions are met, which would effectively eliminate the requirement for the Group to make the October Interest Payment in cash as the payment conditions will not have been met in respect of the relevant interest period.

The Group has, since January 2015, obtained waivers from the Existing RCF Lenders in respect of the liquidity covenant contained in the Existing RCF and the current waiver from this covenant expires on 31 December 2016. To the extent the Group is unable to improve its liquidity position or obtain further waivers from the Existing RCF Lenders, the Group could fail to meet the liquidity covenant in the Existing RCF when next tested on 31 December 2016 or on a subsequent test date, which would constitute an event of default under the Existing RCF.

The Directors consider that if and shortly after it becomes apparent that the Restructuring is not capable of being implemented (for example, if the Resolutions necessary to complete the Placing and Open Offer are not approved at the General Meeting or if the requisite majority of Scheme Creditors do not vote in favour of the Scheme or the Court decides not to exercise its discretion to sanction the Scheme), it is likely that the Company will commence a marketing and sales process of the Company and/or its subsidiaries with a view to effecting the sale in a short period of two to three months. Completion of the sale may involve the appointment of administrators to the Company. The Directors believe that if the Placing and Open Offer and the Restructuring do not proceed and a marketing process for the sale of the Group on an accelerated basis is undertaken, there is likely to be little or no value for Shareholders or Noteholders. In addition, if the Company is unable to pay the October Interest Payment on the Existing High Yield Notes within the 30 day grace period as described above and there is no interest payment standstill agreed by the requisite majority of Noteholders (90 per cent. or more), the Company may become subject to enforcement action (including, for example, the filing of a winding up petition against the Company) which if, not terminated or withdrawn could result in the majority Existing RCF Lenders enforcing security in respect of the Company and/or the Group by (among other things) appointing an administrator to the Company, with a view to the administrator commencing and/or continuing a marketing process for the sale of the Group on an accelerated basis. In this scenario, the Directors believe that there is likely to be little or no return for Shareholders or Noteholders. However, the Ad Hoc Committee may propose an alternative debt restructuring and seek to engage in negotiations with the Existing RCF lenders (which may involve providing a standstill of the October Interest Payment if the requisite majority has approved such standstill) and the Existing RCF Lenders may or may not accept such proposal or may consider such proposal in the context of the sales process. See paragraph 4.7 of this Part 1 (''Letter from the Chairman of EnQuest PLC'') entitled ''Consequences of a failure to implement the Restructuring'' below.

Accordingly, it is very important that Shareholders vote in favour of the Resolutions so that the Placing and Open Offer and the Restructuring can proceed and the Group can continue trading.

4. Overview of the Restructuring

On 13 October 2016, the Company announced that it had agreed the key terms of the Restructuring with its Existing RCF Lenders, the Hedging Banks and the Ad Hoc Noteholder Committee (which is from time to time comprised of certain of the largest Existing High Yield Noteholders).

Shareholders should note that the steps required to be taken to effect the various elements of the Restructuring, including the Placing and Open Offer, are inter-conditional. None of the components of the Restructuring will be completed if the Placing and Open Offer is not approved by Shareholders and the Placing and Open Offer will not proceed if the other components of the Restructuring are not consented to and/or completed.

The Directors have now proposed the Restructuring, including the Placing and Open Offer, to improve the Group's capital structure, to reduce the cost of the Group's debt service and to improve the ongoing liquidity position of the Group. The Proposed Note Amendments would capitalise the Group's cash interest expense under the New High Yield Notes and the Amended Retail Notes unless the oil price is equal to or above an average of \$65.00/bbl for the six-month period ending one month prior to the relevant interest payment date (and certain other conditions are met) and the Proposed RCF Amendments and Proposed Note Amendments would extend the maturity dates for the repayment of the Existing RCF, New High Yield Notes and Amended Retail Notes and amend the Group's financial covenants to provide additional flexibility under the RCF, remove the existing financial covenants from the Existing Retail Notes, amend certain financial indebtedness baskets in the New High Yield Notes and include a restriction on certain payments to shareholders (and their affiliates) if the Company has not redeemed in cash at par an aggregate principal amount of the New High Yield Notes or Amended Retail Notes (as applicable) in an amount equal to any capitalised interest, together with any accrued and unpaid interest thereon. The proceeds of the Placing and Open Offer, expected to be £78.1 million net of expenses, are expected to enable the Group to complete the Kraken development and bring it to first oil on schedule in the first half of 2017, which the Directors believe will considerably strengthen the Group's operating results.

More specifically, the key features of the proposed Restructuring (each of which are inter-conditional) are:

• the Proposed RCF Amendments, pursuant to which the Existing RCF would be amended to, among other things, extend the final maturity date of the Existing RCF to October 2021, split the maximum aggregate commitments into a term loan facility and a revolving credit facility, amend the amortisation profile, relax certain of the financial covenants in the Existing RCF and incorporate terms allowing for new super senior hedging;
• the Proposed Note Amendments, pursuant to which the Existing Notes would be amended, among other things, to add a payment condition which provides that interest will only be payable in cash on an interest payment date if certain conditions are met (including that the prevailing average oil price is equal to or above \$65.00/bbl) for a six-month period, otherwise interest will be capitalised; to enable the Company (at its absolute discretion) to extend, at any time, the scheduled maturity dates to April 2023 and to automatically extend the maturity dates to October 2023 if the Existing RCF is not fully repaid or refinanced by 15 October 2020; to remove the existing financial covenants from the Existing Retail Notes; to amend certain financial indebtedness baskets in the New High Yield Notes; and to include a restriction on certain payments to shareholders (and their affiliates) if the Company has not redeemed (in cash at par pursuant to a new optional redemption right) the New High Yield Notes or the Amended Retail Notes in an amount equal to any capitalised interest thereon, together with any accrued but unpaid interest;
• renewal of the Surety Bond Facilities; and
• the Placing and Open Offer, pursuant to which the Company expects to raise gross proceeds of approximately £82.0 million (approximately \$100 million).

As each of the components of the Restructuring is inter-conditional, the Restructuring cannot proceed if the Placing and Open Offer or any other component of the Restructuring does not proceed. The completion of the Placing and Open Offer and the rest of the Restructuring is therefore subject to the following conditions among others that remain outstanding as of the date of this document: (i) the passing of the Resolutions related to the Placing and Open Offer by Shareholders at the General Meeting; (ii) the approval of the Proposed RCF Amendments by Existing RCF Lenders and Hedging Banks representing 100 per cent. of the aggregate principal amount of the Existing RCF and the Existing Hedging Liabilities; (iii) the Scheme being passed by more than 50 per cent. in number and at least 75 per cent. in value of Scheme Creditors attending and voting in person or by proxy at the meeting of Scheme Creditors convened with the permission of the English Court and a recognition order in connection with the Scheme being granted under Chapter 15 of Title 11 of the US Code; and (iv) and certain other procedural steps.

As of the date of this document, all of the Existing RCF Lenders and all of the Hedging Banks have entered into, or acceded to, the Lock-Up Agreement pursuant to which they have agreed to vote in favour of the Proposed RCF Amendments. Additionally, Existing High Yield Noteholders representing approximately 61 per cent. in value of the Existing High Yield Notes have entered into, or acceded to, the Lock-Up Agreement pursuant to which they have agreed to attend the Scheme Meeting in person or by proxy and to vote in favour of the Scheme. Due to the diverse nature of the holdings of the Existing Retail Notes, it was not possible for the Company to approach all of the Existing Retail Noteholders in advance of announcement of the Restructuring and the Scheme. However, the Company has consulted on a confidential basis with a number of holders who together hold a significant proportion of the Existing Retail Notes, in order to obtain their indicative support for the proposals contemplated by the Scheme and the Restructuring. The feedback from such Existing Retail Noteholders was positive and indicated support for the Restructuring from professional investors.

The long stop date for completion of each of the Restructuring steps, as set out in the Lock-Up Agreement, is 2 December 2016. If any of these steps does not take place by the long stop date (as it may be amended or extended), then neither the Placing and Open Offer nor the rest of the Restructuring will proceed. In these circumstances, the Group would not have sufficient working capital for its present requirements.

If the Placing and Open Offer and the rest of the Restructuring do proceed, and taking into account the facilities available to the Group under the Existing RCF, the Company is of the opinion that the Group will have sufficient working capital for its present requirements, that is, for at least 12 months from the date of this document.

4.1 Restructuring process with stakeholders

In light of the current market environment, the Group has been closely monitoring and managing its funding position and liquidity risk and has been engaged in discussions with its Existing RCF Lenders to explore a range of opportunities for debt reduction, refinancing and/or restructuring alongside the various cost saving, strategic hedging and asset disposal initiatives described in paragraph 3 above.

The Company subsequently extended these discussions to include the Ad Hoc Noteholder Committee, acknowledging that the Company would need to address its ongoing debt service obligations in respect of the Existing Notes in order to achieve a stable and sustainable Group debt structure, particularly in light of the Group's capital expenditure commitments to bring Kraken to first oil and the prevailing low oil price environment.

Following negotiation with the Existing RCF Lenders, the Hedging Banks and the Ad Hoc Noteholder Committee, the Company announced that it had agreed the key terms of the Restructuring. As at the date of this document:

• All of the Existing RCF Lenders have entered into, or acceded to, the Lock-Up Agreement, the terms of which contain, among other things, provisions outlining the obligation of the consenting Existing RCF Lenders to vote in favour of the Proposed RCF Amendments; and
• All of the Hedging Banks have entered into, or acceded to, the Lock-Up Agreement, the terms of which contain, among other things, provisions outlining the obligations of the consenting Hedging Banks to vote in favour of the Proposed RCF Amendments;
• Existing High Yield Noteholders representing approximately 61 per cent. in value of the Existing High Yield Notes have entered into, or acceded to, the Lock-Up Agreement pursuant to which they have agreed to attend the Scheme Meeting in person or by proxy and to vote in favour of the Scheme and have agreed to take all steps to support the Restructuring, including not taking any enforcement action in relation to the October Interest Payment; and
• Due to the diverse nature of the holdings of the Existing Retail Notes, it was not possible for the Company to approach all of the Existing Retail Noteholders in advance of announcement of the

Restructuring and the Scheme. However, the Company has consulted on a confidential basis with a number of holders who together hold a significant proportion of the Existing Retail Notes, in order to obtain their indicative support for the proposals contemplated by the Scheme and the Restructuring. The feedback from such Existing Retail Noteholders was positive and indicated support for the Restructuring from professional investors.

The Scheme must be approved by more than 50 per cent. in number and at least 75 per cent. in value of Scheme Creditors attending and voting in person or by proxy at the Scheme Meeting convened with the permission of the Court. The Proposed RCF Amendments require the approval of Existing RCF Lenders and Hedging Banks representing 100 per cent. of the outstanding principal amount of the Existing RCF and the Existing Hedging Liabilities.

4.2 Proposed RCF Amendments

The Proposed RCF Amendments include the Existing RCF commitments being split into two facilities:

• a term loan facility of \$1.125 billion (the ''Term Facility''); and
• a revolving credit facility of up to \$75 million, to be utilised either by way of loans or for the issuance of the letters of credit subject to a sub-limit of \$50 million (the ''RCF Facility'').

Outstanding loans and letters of credit under the term loan facility and the revolving credit facility that in aggregate exceed the Group's Reserve and Resource Base Value (''RRBV''), which will be fixed at \$890,700,000 for the life of the Existing RCF, have super senior status and benefit from an interest rate of LIBOR (subject to a minimum of zero) plus 5.25 per cent. per annum in cash and (with the balance to be added to the PIK amount (as described below) every six months) 3.75 per cent. per annum PIK (the ''PIK Margin''). Outstanding loans and letters of credit under the term loan facility and the revolving credit facility up to the RRBV and the PIK Amount (as defined below) have senior status and benefit from an interest rate of LIBOR (subject to a minimum of zero) plus 4.75 per cent. per annum in cash. LIBOR shall not apply to letters of credit and on certain letters of credit (being Performance LCs, as defined in the Existing RCF), only 50 per cent. of the applicable margin will apply. In addition, the ability to increase the Aggregate Commitments by way of the accordion is to be cancelled;

The PIK amount (the ''PIK Amount'') shall be zero on the date the amendments to the Existing RCF become effective. The PIK Amount will then increase as follows:

• (a) in respect of any utilisation to which a PIK Margin applies, the PIK Margin shall accrue on that utilisation and shall be capitalised and be added to the PIK Amount on each 30 June and 31 December; and
• (b) the PIK Amount Interest (being 900 bps) shall accrue on the PIK Amount and shall be capitalised and added to the PIK Amount on each 30 June and 31 December.

In exchange, the maturity date of the Existing RCF will be extended to 1 October 2021, a revised amortisation Schedule will apply, certain financial covenants will be reset and the leverage ratio will become a senior secured leverage ratio to allow the Group sufficient headroom following the Restructuring Effective Date and a framework for new super senior hedging liabilities will be provided. Restrictions will also be imposed on activities of the Group, including requiring a minimum two-thirds majority of lenders to approve certain acquisitions and disposals, applying restrictions on exploration and appraisal expenditure and requiring proceeds from further bond issuances to be used to prepay the Term Facility and the RCF Facility. In addition, there will be a fee of 100 bps payable to Existing RCF Lenders who have entered into the Lock-Up Agreement by 5.00 p.m. (London time) on 11 October 2016 (or such later time as the Company may agree) on their proportionate share of the Aggregate Commitments of US\$1.2 billion on the first scheduled amortisation date, being 31 March 2018, in consideration for the various consents necessary and provided by the Existing RCF Lenders in order to implement the Restructuring. The Proposed RCF Amendments are subject to conditions summarised in paragraph 18.6(a) of Part 9 (''Additional Information'').

4.3 Proposed Note Amendments

The impact of the Proposed Note Amendments are set out in the sections entitled ''Overview of the Scheme'' below.

4.4 Renewal of Surety Bond Facilities

The Surety Bond Providers have issued six surety bonds at the Company's request under the Surety Bond Facilities, one of which was renewed for 12 months in September 2016. The other surety bonds expire in December 2016 and the Company signed a renewal commitment letter with each Surety Bond Provider on 5 October 2016, under which the Surety Bond Providers commit to renew: (1) the surety bonds which expire in December 2016 for 12 months and then for a further 12 months when they expire in December 2016 and December 2017, respectively; and (2) the surety bond which expires in September 2017 for 12 months upon its expiry. The renewal commitments become effective on: (i) the approval of the Scheme; (ii) the Existing RCF Lenders having agreed to make available further utilisations to the Company under the Existing RCF; and (iii) the placing of an issuance of new equity by the Company being effected. The renewal of each surety bond is subject to there being at the time of each renewal no insolvency event affecting the Company or EnQuest Heather Limited and no event of default outstanding under the Senior Facility Agreement or the Existing Notes entitling the Existing RCF Lenders to take enforcement action thereunder or the Existing Noteholders to accelerate repayment.

4.5 Placing and Open Offer

The Company also proposes to raise aggregate gross proceeds of approximately £82.0 million (equivalent to SEK 884.2 million at exchange rate of SEK 1.00 = GBP 0.0928 on 12 October 2016, (approximately \$100 million), before expenses, of additional equity capital pursuant to the Placing and Open Offer. Double A Limited, a company beneficially owned by the extended family of Amjad Bseisu, is proposing to participate in the Placing and Open Offer. Double A Limited has (i) pursuant to the Double A Irrevocable Undertaking, agreed to participate in the Open Offer by taking up 31,735,702 New Ordinary Shares, being its pro rata share of the amount to be raised in the Open Offer and (ii) pursuant to the Double A Placing Letter, agreed to participate in the Placing, as explained in paragraph 8 of this Part 1 (''Letter from the Chairman of EnQuest PLC'') below.

Shareholders should note that Double A Limited has agreed, pursuant to the Double A Placing Letter, to subscribe for 91,224,079 New Ordinary Shares in the Placing (subject to clawback in the Open Offer).

4.6 Objectives of the Restructuring

The primary objectives of the Restructuring are to:

• (a) avoid the adverse consequences of an accelerated marketing and sale process of the Group, or parts of the Group, which may prove value destructive to the operating business and following completion of which the Directors expect the Company would be placed into insolvent liquidation. The recovery for Shareholders, among others, in such a scenario would be unpredictable and are likely to significantly less than if the Restructuring is successfully completed;
• (b) ensure a stable and sustainable Group capital structure, so that the Group will possess a strengthened balance sheet and more appropriate debt service and maturity profile in light of the current market environment, including the prevailing depressed oil price;
• (c) enable the Group to direct its cash resources towards bringing its Kraken development to first oil as soon as possible, which the Directors believe will considerably strengthen the Group's operations. Kraken is expected to increase the Group's current production substantially and has a productive life over 20 years. It is also expected to benefit from lower unit operating costs, which the Directors expect will reduce the Group's average unit operating costs to the low US\$20s per barrel once Kraken is fully on stream. This will put the Group in a stronger position to withstand a prolonged period of low oil price and deliver value to all stakeholders invested in the Company;
• (d) service the Group's general corporate and working capital requirements; and
• (e) improve the on-going liquidity position of the Group, putting it in a stronger position to withstand a period of low oil prices.

4.7 Consequences of a failure to implement the Restructuring

If the Placing and Open Offer does not complete, the Scheme is not approved by the requisite majorities of Scheme Creditors or any of the other inter-conditional requirements or conditions to the Restructuring are not satisfied (or, where possible, waived) to enable the Restructuring to be implemented in accordance with the presently proposed timetable, the Restructuring is not likely to be consummated. The Directors

believe that, in light of the considerable effort and time which it has taken for the Company to agree the Restructuring with its key stakeholders (including the Existing RCF Lenders, the Existing Noteholders, Double A Limited, the Surety Bond Providers and various other key stakeholders), the prospects of the Company and such key stakeholders agreeing an alternative transaction which would leave the Group with a viable capital structure before it would become necessary to place the Company (and possibly other companies in the Group) into an insolvency procedure are unlikely. The Board has based its assessment that the Group continues to be a going concern on the basis that the Group can continue to rely on the ability to access adequate funds under the Existing RCF, agree necessary amendments across its debt and credit facilities and with certain vendors, and/or access alternative sources of funding. The Company has enjoyed the support of its Existing RCF Lenders throughout the negotiation of the Restructuring. The continued support of the RCF Lender group is now predicated upon and would be in accordance with the Restructuring as currently proposed.

The Directors consider that if and shortly after it becomes apparent that the Restructuring is not capable of being implemented (for example, if the Resolutions necessary to complete the Placing and Open Offer are not approved at the General Meeting or if the requisite majority of Scheme Creditors do not vote in favour of the Scheme or the Court decides not to exercise its discretion to sanction the Scheme), it is likely that the Company will commence a marketing and sales process of the Company and/or its subsidiaries with a view to effecting the sale in a short period of two to three months. Completion of the sale may involve the appointment of administrators to the Company. The Directors believe that if the Placing and Open Offer and the Restructuring do not proceed and a marketing process for the sale of the Group on an accelerated basis is undertaken, there is likely to be little or no value for Shareholders or Noteholders. Following the sale of Directors expect that the Company would be placed into insolvent liquidation.

Additionally, as mentioned above, if the Placing and Open Offer and the Restructuring as described in this document do not proceed, the Group may be unable to pay the October Interest Payment due on 17 October 2016 in respect of the Group's Existing High Yield Notes. If the October Interest Payment is not made within the applicable 30 day grace period and there is no interest payment standstill agreed by the requisite majority of Noteholders (90 per cent. or more), this would constitute a default under the High Yield Notes and a cross default under certain of the Group's other key debt instruments and facilities, including the Existing RCF and the Existing Retail Notes. In these circumstances, there is a risk that the Company may become subject to enforcement action (including, for example, the filing of a winding up petition against the Company) which if not terminated or withdrawn could result in the majority Existing RCF Lenders enforcing their security in respect of the Company and/or the Group by (among other things) appointing an administrator to the Company, with a view to the administrator commencing and/or continuing a marketing process for the sale of the Group on an accelerated basis. In this scenario, the Directors believe that there is likely to be little or no return for Shareholders or Noteholders. However, the Ad Hoc Committee may propose an alternative debt restructuring and seek to engage in negotiations with the Existing RCF lenders (which may involve providing a standstill of the October Interest Payment if the requisite majority has approved such standstill) and the Existing RCF Lenders may or may not accept such proposal or may consider such proposal in the context of the sales process.

See ''Risk Factors—Risks Relating to the Restructuring and the Group's Financing Arrangements''.

For Shareholders, the main benefit of the Restructuring is to enable the Group to continue to trade, to provide funding for the capital expenditure necessary to bring Kraken to first oil and to provide time for a possible oil price recovery while also allowing Shareholders to retain their investment in the Company.

4.8 Position after the Restructuring

The Directors anticipate that the proposed amended debt profile of the Group (including the amended interest payment arrangements in respect of the Existing Notes) and the injection of additional equity capital into the Group will reduce the financial burden on the business, enabling the Group to continue to trade despite the current weak macroeconomic climate in the oil industry.

However, even if the Restructuring does proceed, the Group cannot give any assurance that the business will be successful in the future. The Group's realised oil prices would need to increase above current levels for Shareholders to receive a return on their investment, and this is out of the Group's control. If oil prices remain at their current levels or decline further, it is highly likely that the Company would be unable to return any value to its Shareholders. In particular, Shareholders should be aware that, if the Placing and Open Offer and/or the Restructuring do not proceed, the working capital available to the Group may not be sufficient for its present requirements, that is, for at least the next 12 months following the date of publication of this document. Your attention is drawn to paragraph 18 of this Part 1 (''Letter from the Chairman of EnQuest PLC'') entitled ''Importance of the vote and working capital'' for further details. In the present circumstances, the Directors consider that the implementation of the Restructuring is in the best interests of all Group stakeholders.

5. Overview of the Scheme

The Proposed Note Amendments will be effected pursuant to an English scheme of arrangement. The holders of the Existing High Yield Notes and the Existing Retail Notes will form a single class of creditors for the purpose of voting on the Scheme. The Scheme must be approved by more than 50 per cent. in number and at least 75 per cent. in value of Scheme Creditors attending and voting in person or by proxy at the meeting of scheme creditors convened with the permission of the English Court.

As noted above, all of the elements of the Restructuring are inter-conditional, meaning that the Scheme will not become effective unless each of the other components of the Restructuring are approved and/or completed, including the Placing and Open Offer. In addition, the Scheme is subject to the Company obtaining recognition of the Scheme under Chapter 15 of Title 11 of the US Code (see paragraph 5.4 of this Part 1 (''Letter from the Chairman of EnQuest PLC'') entitled ''Recognition of the Scheme under Chapter 15 of Title 11 of the US Code'' below).

5.1 New High Yield Notes

Pursuant to the Scheme, all Existing High Yield Notes will be exchanged on a dollar-for-dollar basis for New High Yield Notes. Subject to the Proposed Note Amendments, the New High Yield Notes will be governed by terms and conditions substantially the same as those governing the Existing High Yield Notes.

Pursuant to the Proposed Note Amendments, the New High Yield Notes will accrue a fixed coupon of 7 per cent. per annum payable semi-annually in arrear. Interest under the New High Yield Notes will only be payable in cash on an interest payment date if (i) during the six months immediately preceding the day which is one month prior to the relevant interest payment date under the New High Yield Notes, the average end of day daily Dated Brent Future (as published by Platts) (or such equivalent price that may replace the dated Brent price from time to time) is equal to or above \$65.00/bbl and (ii) in respect of such interest payment date, no payment event of default is outstanding under the Existing RCF (which shall include any such event of default arising as a result of the aggregate amount of the loans and letters of credit outstanding under the Existing RCF exceeding the aggregate commitments applicable at such time) (collectively, the ''Cash Payment Condition''). If the Cash Payment Condition is not satisfied in respect of an interest payment date, interest will not be paid in cash on that interest payment date and will be capitalised and satisfied by the issue of additional New High Yield Notes to holders of the New High Yield Notes outstanding at such time. The Cash Payment Condition in the New High Yield Notes will cease to apply (and thereafter all payments of interest will be made in cash) upon the earlier of (a) the repayment in full of the Existing RCF from cash generated from assets of the Group or (b) the repayment or refinancing in full of the Existing RCF on terms that enable the disapplication of the Cash Payment Condition and future interest on the New High Yield Notes and the Amended Retail Notes to be paid in cash.

Any interest due but not paid on the Existing High Yield Notes prior to the effective date of the Restructuring will be capitalised and added to the principal amount of the New High Yield Notes to be issued pursuant to the Scheme.

The New High Yield Notes will also contain amendments to certain financial indebtedness baskets and a restriction on certain payments to shareholders (and their affiliates) if the Company has not redeemed (in cash at par pursuant to a new optional redemption right) the New High Yield Notes in an amount equal to any capitalised interest thereon, together with any accrued but unpaid interest. The Placing and Open Offer will not constitute an ''Equity Offering'' for the purpose of the optional redemption provisions of the New High Yield Notes and will not build up the Restricted Payments (under and as defined in the New High Yield Notes) build up basket or be used to make any Restricted Payments.

The New High Yield Notes will have an originally scheduled maturity of 15 April 2022. The Company will have the option (at its absolute discretion) to extend, at any time, the maturity date to 15 April 2023. In addition, the maturity of the New High Yield Notes will be automatically extended to 15 October 2023 if the Existing RCF is not repaid or refinanced in full prior to 15 October 2020.

The New High Yield Noteholders will receive the benefit of a new cross default provision such that an event of default under the Amended Retail Notes will give rise to an event of default under the New High Yield Notes.

Existing High Yield Noteholders will also waive and release any claims they might have under and in connection with the Existing High Yield Notes once these have been exchanged for New High Yield Notes pursuant to the Scheme. The Existing High Yield Notes will then be cancelled.

5.2 Amended Retail Notes

Pursuant to the Scheme, the Existing Retail Notes will be amended to reflect the Proposed Note Amendments. All other terms and conditions governing the Existing Retail Notes will remain the same.

Pursuant to the Proposed Note Amendments, the Amended Retail Notes will accrue a fixed coupon of 7 per cent. per annum payable semi-annually in arrear. Interest under the Amended Retail Notes will only be payable in cash on an interest payment date if the Cash Payment Condition is satisfied. As with the Existing High Yield Notes, if the Cash Payment Condition is not satisfied in respect of an interest payment date, interest will not be paid in cash on that interest payment date and will be capitalised and satisfied by the issue of additional Amended Retail Notes to holders of the Amended Retail Notes outstanding at such time. The Cash Payment Condition in the Amended Retail Notes will cease to apply (and thereafter all payments of interest will be made in cash) upon the earlier of (a) the repayment in full of the Existing RCF from cash generated from assets of the Group or (b) the repayment or refinancing in full of the Existing RCF on terms that enable the disapplication of the Cash Payment Condition and future interest on the New High Yield Notes and the Amended Retail Notes to be paid in cash.

Interest on the Amended Retail Notes will continue to accrue from the immediately preceding interest payment date of 15 August 2016 and be paid on the next interest payment date of 15 February 2017 in cash (subject to the Cash Payment Condition being satisfied) or capitalised.

The Amended Retail Notes will also contain a restriction on certain payments to shareholders (and their affiliates) if the Company has not redeemed (in cash at par pursuant to a new optional redemption right) the Amended Retail Notes in an amount equal to capitalised interest thereon, together with any accrued but unpaid interest.

The Amended Retail Notes will have an originally scheduled maturity of 15 April 2022 (extended from 15 February 2022). The Company will have the option (at its absolute discretion) to extend, at any time, the maturity date to 15 April 2023. In addition, the maturity of the Amended Retail Notes will be automatically extended to 15 October 2023 if the Existing RCF is not repaid or refinanced in full prior to 15 October 2020.

The Amended Retail Noteholders will receive the benefit of a new cross default provision such that an event of default under the New High Yield Notes will give rise to an event of default under the Amended Retail Notes. In addition, the financial covenants under the Existing Retail Notes will be removed pursuant to the Proposed Notes Amendments.

Amended Retail Noteholders will also waive and release certain claims they might have under and in connection with the Existing Retail Notes but, for the avoidance of doubt, they shall not be required to waive and release any claims in relation to their beneficial interest in the principal, accrued interest and any other amounts due and payable to them in respect of the Existing Retail Notes once these have been amended pursuant to the Scheme.

5.3 Treatment of Cash Payment Condition in the event of a refinancing of the Existing RCF

As an alternative to full repayment of the Existing RCF by its maturity date, the Company may wish to pursue a refinancing option. Where the Company is able to obtain a refinancing on open market terms that enables the Cash Payment Condition in respect of the New High Yield Notes and the Amended Retail Notes to be terminated, and future interest in respect of the New High Yield Notes and the Amended Retail Notes to be paid in cash, then provided that such option is on commercial terms that are acceptable to the Company, the Company shall use all reasonable efforts to pursue that option, as an alternative to a refinancing based upon retention of Cash Payment Condition until maturity of the New High Yield Notes and the Amended Retail Notes.

5.4 Recognition of the Scheme under Chapter 15 of Title 11 of the US Code

The Company intends to file a petition in the United States for recognition of the Scheme under Chapter 15 of Title 11 of the US Code, which provides for the recognition of foreign insolvency proceedings in the United States. An order from a United States bankruptcy court recognising the Scheme under Chapter 15 of Title 11 of the US Code is a condition to the implementation of the Restructuring and the Scheme.

Recognition of the Scheme under Chapter 15 of Title 11 of the US Code is necessary to give effect in the United States to the Scheme and will, among other things: (a) ensure that all of the Scheme Creditors affected by the Scheme are treated consistently, regardless of whether they are located in the UK or the United States; (b) protect the Company and its property from lawsuits in the United States from those who are bound by the terms of the Scheme; and (c) minimise the risk of indemnification and other claims that might exist under the High Yield Note Indenture in respect of the Company's Existing High Yield Notes, which is governed by New York law.

6. Structure of the Placing and Open Offer

The Company proposes to raise an aggregate of £82.0 million (equivalent to SEK 884.2 million at exchange rate of SEK 1.00 = GBP 0.0928 on 12 October 2016) (approximately \$100 million), before expenses, by way of a Placing and Open Offer. The decision to structure the equity capital raising by way of a combination of a Placing and Open Offer takes into account a number of factors, including the total net proceeds to be raised. While recognising the importance of pre-emption rights, the Directors are also cognisant that there may be a limit to the amount of additional capital that can be sought from existing Shareholders. The Directors therefore believe that it will be beneficial to the Company as a whole to attract new investors and therefore intends to invite such investors to participate in the Placing (subject to clawback to satisfy valid applications under the Open Offer).

Subject to the conditions to the Placing and Open Offer being satisfied, Qualifying Shareholders will be offered the opportunity to apply for the Open Offer Shares at the Issue Price pro rata to their holdings of Existing Ordinary Shares on the Record Date on the basis of 4 New Ordinary Shares for every 9 Existing Ordinary Shares and so in proportion to any other number of Existing Ordinary Shares then held.

See paragraph 8 of this Part 1 (''Letter from the Chairman of EnQuest PLC'') below for further details in respect of the proposed participation by Double A Limited a company beneficially owned by the extended family of Amjad Bseisu in the Placing and Open Offer.

7. Principal terms and conditions of the Placing and Open Offer

The Company intends to raise total gross proceeds of an aggregate of approximately £82.0 million (equivalent to SEK 884.2 million at exchange rate of SEK 1.00 = GBP 0.0928 on 12 October 2016) (approximately \$100 million) (approximately £78.1 million, (equivalent to SEK 842.0 million at exchange rate of SEK 1.00 = GBP 0.0928 on 12 October 2016) or \$95.3 million, net of estimated expenses) through the issue of 356,738,114 New Ordinary Shares by way of the Placing and Open Offer at the Issue Price. The Placing and Open Offer is conditional upon, among other things, LSE Admission becoming effective by not later than 8.00 a.m. on 21 November 2016 (or such later time and/or date as the Company may agree with the Joint Bookrunners, not being later than 8.00 a.m. on 24 November 2016) application for Stockholm Admission having been made and no notification having been received that Stockholm Admission has been refused or will not become effective before on or before 24 November 2016.

The Issue Price represents a discount of 4.8 pence (17.12 per cent.) to the closing middle market price of 27.8 pence per Existing Ordinary Share on the London Stock Exchange on 12 October 2016 (being the last trading day prior to the announcement of the Placing and Open Offer) and a discount of SEK 0.54 (17.93 per cent.) to the closing middle market price of SEK 3.02 per Existing Ordinary Share on NASDAQ Stockholm on 12 October 2016 (being the last trading day prior to the announcement of the Placing and Open Offer).

Irrevocable undertakings to take up entitlements under the Open Offer have been received from Double A Limited, a company beneficially owned by the extended family of Amjad Bseisu, and the Trustees, representing in aggregate 11.9 per cent. of the New Ordinary Shares.

The Joint Bookrunners have, pursuant to the Sponsor and Placing Agreement, conditionally placed all the Open Offer Shares (other than the Committed Shares) at the Issue Price with Placees. The commitments of these Placees are subject to clawback in respect of valid applications for Open Offer Shares by

Qualifying Shareholders pursuant to the Open Offer. Subject to the Placing and Open Offer not being terminated, any Open Offer Shares which are not applied for in respect of the Open Offer will be issued to Placees procured by the Joint Bookrunners or, failing which (other than the New Ordinary Shares which the Trustees have undertaken to subscribe for pursuant to the EnQuest EBT Irrevocable Undertaking and which Double A Limited has undertaken to subscribe for pursuant to the Double A Irrevocable Undertaking and the Double A Placing Letter, which are not being underwritten), to the Joint Bookrunners, in each case at the Issue Price, with the net proceeds retained for the benefit of the Company. For the avoidance of doubt, the New Ordinary Shares to be subscribed for by Double A Limited in the Placing and Open Offer are not being underwritten by the Joint Bookrunners.

Qualifying Shareholders are being given the opportunity to apply for the Open Offer Shares at the Issue Price on and subject to the terms and conditions of the Open Offer, pro rata to their holdings of Existing Ordinary Shares on the Record Date on the following basis:

4 New Ordinary Shares for every 9 Existing Ordinary Shares

and so in proportion to any other number of Existing Ordinary Shares then held.

Fractions of New Ordinary Shares will not be allotted and each Qualifying Shareholder's entitlement under the Open Offer will be rounded down to the nearest whole number. Fractional entitlements will be aggregated and will be placed pursuant to the Placing for the benefit of the Company. Accordingly, Qualifying Shareholders with fewer than 3 Existing Ordinary Shares will not have the opportunity to participate in the Open Offer.

The New Ordinary Shares issued under the Placing and Open Offer, when issued and fully paid, will be identical to, and rank pari passu with, the Existing Ordinary Shares, including the right to receive all dividends and other distributions declared, made or paid on the Existing Ordinary Shares by reference to a record date on or after Admission.

Qualifying Shareholders may apply for any whole number of New Ordinary Shares up to their maximum entitlement which, in the case of Qualifying Non-CREST Shareholders, is equal to the number of Open Offer Entitlements as shown on their Application Form or, in the case of Qualifying CREST Shareholders, is equal to the number of Open Offer Entitlements standing to the credit of their stock account in CREST or, in the case of Qualifying Swedish Directly Registered Shareholders, is shown on their Pre-Printed Issue Account Statement. Qualifying Shareholders with holdings of Existing Ordinary Shares in both certificated and uncertificated form will be treated as having separate holdings for the purpose of calculating their Open Offer Entitlements.

No application in excess of a Qualifying Shareholder's Open Offer Entitlement will be met, and any Qualifying Shareholder so applying will be deemed to have applied for its Open Offer Entitlement only.

Applications will be made (i) to the FCA for 356,738,114 New Ordinary Shares to be issued under the Placing and Open Offer to be admitted to the premium listing segment of the Official List; (ii) to the London Stock Exchange for 356,738,114 New Ordinary Shares to be issued under the Placing and Open Offer to be admitted to trading on its main market for listed securities; and (iii) to NASDAQ Stockholm AB for the New Ordinary Shares to be settled under the Swedish Open Offer to be listed on NASDAQ Stockholm. Subject to the conditions below being satisfied, it is expected that LSE Admission will become effective on 21 November 2016 and that dealings for normal settlement in the Open Offer Shares will commence at 8.00 a.m. on the same day and Stockholm Admission will become effective on or around 21 November 2016 and that dealings for normal settlement in the Open Offer Shares will commence on the same day.

Application will be made for the Open Offer Entitlements to be admitted to CREST. It is expected that the Open Offer Entitlements will be admitted to CREST at 8.00 a.m. on 21 October 2016, and that the Open Offer Entitlements will also be enabled for settlement in CREST at 8.00 a.m. on 21 October 2016. Qualifying Swedish Shareholders will not receive Open Offer Entitlements but instead will receive a Pre-Printed Issue Account Statement and Swedish Application Form if Qualifying Swedish Directly Registered Shareholders or will need to follow instructions from their nominees if Qualifying Swedish Nominee Registered Shareholders.

Shareholders should note that the Open Offer is not a rights issue. Qualifying CREST Shareholders should note that the Open Offer Entitlements will not be tradeable or listed and that, although the Open Offer Entitlements will be admitted to CREST and be enabled for settlement, applications in respect of entitlements under the Open Offer may only be made by the Qualifying Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim raised by Euroclear's Claims Processing Unit. Qualifying Non-CREST Shareholders should note that the Application Form is not a negotiable document and cannot be traded. Qualifying Swedish Shareholders should note that they will not receive Open Offer Entitlements and Qualifying Swedish Directly Registered Shareholders should note that neither the Pre-Printed Issue Account Statement or the Swedish Application Form is a negotiable document and that neither of them can be traded. Any trading in the Pre-Printed Issue Account Statement or the Swedish Application Form will be void and any acquirer thereof will have no rights thereunder.

Qualifying Shareholders should be aware that in the Open Offer, unlike in a rights issue, any Open Offer Shares not applied for will not be sold in the market or placed for the benefit of Qualifying Shareholders who do not apply under the Open Offer, but will be subscribed for under the Placing with the net proceeds retained for the benefit of the Company and Qualifying Shareholders who do not apply to take up their Open Offer Entitlements will have no rights under the Open Offer to receive any proceeds from it.

A Qualifying Shareholder that does not take up any Open Offer Shares under the Open Offer (or a Shareholder in the United States or an Excluded Territory who is not eligible to participate in the Open Offer) will experience a dilution of 30.77 per cent. as a result of the Placing and Open Offer.

Further information on the Placing and Open Offer, and the terms and conditions on which they are made, including the procedure for application and payment in the Open Offer, are set out in Part 10 (''Terms and Conditions of the Placing and Open Offer'') of this document and, where relevant, in the Application Form.

The Placing and Open Offer is conditional, inter alia, upon:

• (a) the passing without amendment of the Resolutions at the General Meeting (and not, except with the prior written agreement of the Joint Bookrunners, acting jointly, at any adjournment of such meeting) on 14 November 2016 (or such later date as the Joint Bookrunners may agree) and the Resolutions remaining in force;
• (b) the Company having complied with its obligations under the Sponsor and Placing Agreement and under the terms and conditions of the Placing and Open Offer which fall to be performed on or prior to LSE Admission and such agreement having become unconditional save as otherwise agreed by the Joint Bookrunners, acting jointly, and the Sponsor and Placing Agreement not having been terminated prior to LSE Admission;
• (c) save for any condition in relation to Admission, the Proposed RCF Amendments and the Amendment and Restatement Agreement becoming unconditionally effective prior to LSE Admission;
• (d) save for any condition in relation to Admission, the renewal of the Surety Bond Facilities becoming unconditionally effective prior to LSE Admission;
• (e) save for any condition in relation to Admission, the Scheme and the Proposed Note Amendments becoming unconditionally effective prior to LSE Admission;
• (f) LSE Admission becoming effective by not later than 8.00 a.m. on 21 November 2016 (or such later time and/or date as the Company may agree with the Joint Bookrunners, not being later than 8.00 a.m. on 24 November 2016) and application for Stockholm Admission having been made and no notification having been received that Stockholm Admission has been refused or will not become effective on or before 24 November 2016; and
• (g) the Double A Placing Letter and associated Letter of Credit being entered into by the parties thereto having, and continuing to have, full force and effect and not having been terminated, varied, modified or supplemented or lapsing before LSE Admission, and no right to terminate or rescind the Double A Placing Letter and associated Letter of Credit having arisen before LSE Admission.

Accordingly, if any such conditions are not satisfied the Placing and Open Offer will not proceed, any Open Offer Entitlements admitted to CREST will thereafter be disabled and application monies received under the Open Offer will be refunded to the applicants, by cheque (at the applicant's risk) in the case of Qualifying Non-CREST Shareholders, by way of a CREST payment in the case of Qualifying CREST Shareholders. In the case of Qualifying Swedish Directly Registered Shareholders or Qualifying Swedish Nominee Registered Shareholders, the Swedish Issuer Agent or the relevant nominee, as the case may be, will refund the amount paid by the relevant shareholder, without interest, as soon as practicable thereafter

8. Related Party Transaction

Double A Limited, a company beneficially owned by the extended family of Amjad Bseisu, is proposing to participate in the Placing and Open Offer. As Amjad Bseisu is a Director, the participation of Double A Limited in the Placing and Open Offer constitutes a ''related party transaction'' for the purposes of Chapter 11 of the Listing Rules and therefore requires the approval of Shareholders

Pursuant to the terms of the Double A Irrevocable Undertaking, Double A Limited has irrevocably undertaken to take up in full its entitlement to 31,735,702 New Ordinary Shares, representing 8.90 per cent. of the New Ordinary Shares to be issued pursuant to the Open Offer. No commission is payable by the Company in respect of the Double A Irrevocable Undertaking.

Double A Limited has also agreed:

• (a) to vote and/or procure the vote of all of its holdings of Ordinary Shares in favour of the Resolutions (other than the Related Party Resolution); and
• (b) not to vote on the Related Party Resolution and take all reasonable steps to ensure that its associates (as defined in the Listing Rules) do not vote on the Related Party Resolution.

In addition, Double A Limited has agreed not to sell, transfer, or otherwise dispose of (including undertaking any transaction with the same economic effect as disposing of), nor enter into any agreement (whether conditional or not) for the sale, transfer or other disposal of any of its Ordinary Shares or any interest therein prior to 3.00 p.m. on the latest date for acceptance and payment in full under the Open Offer.

The Double A Irrevocable Undertaking contains certain customary acknowledgements and undertakings from Double A Limited. The Double A Irrevocable Undertaking is governed by English law.

In addition, Double A Limited has agreed, pursuant to the Double A Placing Letter, to subscribe for 91,224,079 New Ordinary Shares at the Issue Price under the Placing (subject to clawback to satisfy valid applications under the Open Offer). In consideration of Double A Limited's commitment under the Double A Limited Placing Letter, the Company has agreed to reimburse Double A Limited 1.50 per cent. of the US dollar amount equal to the product (i) the Issue Price; and (ii) the number of New Ordinary Shares subscribed for in the Placing and Open Offer for costs incurred by Double A Limited in connection with the issue of the Letter of Credit (the ''Reimbursement''). In addition, the Company has agreed to pay Double A Limited a commission equal to 1 per cent. of the product of (i) the number of New Ordinary Shares subscribed for in the Double A Placing Letter which are subsequently clawed back following completion of the Open Offer to satisfy valid acceptances of New Ordinary Shares by Qualifying Shareholders in the Open Offer and (ii) the Issue Price (the ''Commission'').

Without prejudice to its obligations to subscribe for New Ordinary Shares in the Placing as set out in this document, Double A Limited may enter into back to back or other arrangements with pre-identified third parties and/or the Company, as the case may be, for the Company to issue to such third parties certain of the New Ordinary Shares which Double A Limited is required to subscribe for in the Placing (following clawback in the Open Offer).

In connection with the proposed participation by Double A Limited, a company beneficially owned by the extended family of Amjad Bseisu, in the Placing and Open Offer, Credit Suisse AG has agreed to issue a standby letter of credit to be dated on or around the date of this document in favour of the Company in an amount of up to £28.3 million, which may be called upon by the Company in order to satisfy the consideration payable by Double A Limited under the Placing and Open Offer.

The Company is required by Chapter 11 of the Listing Rules to seek Shareholder approval for any ''related party transaction'' which it proposes to enter into. Resolution 4 set out in the Notice of General Meeting seeks, by way of ordinary resolution, the approval of Shareholders (excluding Double A Limited and its associates) for Double A Limited to participate in the Placing and Open Offer (including the payment of a commission to Double A Limited). Following completion of the Placing and Open Offer, it is expected that Double A Limited would be interested in between 103,141,033 and 194,365,112 Ordinary Shares representing between 8.90 per cent. and 16.76 per cent. of the Enlarged Issued Share Capital of the Company.

Pursuant to the requirements of Chapter 11 of the Listing Rules, Double A Limited, as a Related Party, will not vote on the Related Party Resolution and has undertaken to take all reasonable steps to ensure that its associates (as defined in the Listing Rules) do not vote on the Related Party Resolution.

9. Use of proceeds of the Placing and Open Offer

It is intended that the net proceeds of the Placing and Open Offer (being approximately £78.1 million (equivalent to SEK 842.0 million at exchange rate of SEK 1.00 = GBP 0.0928 on 12 October 2016) assuming full subscription under the Placing and Open Offer and after expenses in connection with the Placing and Open Offer), will be applied by the Group to:

• (a) continue the development of the Group's Kraken asset with the aim of achieving first oil in the first half of 2017;
• (b) continue the development of the Group's Scolty/Crathes asset; and
• (c) provide general corporate and working capital for the Group.

The Company does not intend to use proceeds from the Placing and Open Offer to repay bank debt.

10. Current trading and future prospects, including trend information

Since 30 June 2016, the date of the Group's most recent unaudited interim financial statements, the Group has delivered against its strategic priorities in the continuing lower price environment. Further action to reduce operating and capital expenditure has been accompanied by sustained strength in operations.

The Group announced in September 2016 that as a result of the further phasing of milestone payments and despite additional capital expenditure on drilling the Eagle discovery it was expecting to reduce full year 2016 cash capital expenditure by approximately \$30 million. The Kraken and Scolty/Crathes development projects are continuing ahead of budget; the Kraken FPSO is on track for sail away in the second half of 2016 and for first oil in the first half of 2017. In October 2016, the Group is now reducing its gross full cycle capital expenditure estimate for Kraken by approximately a further \$100 million, down to approximately \$2.5 billion, mainly as a result of better performance on drilling and subsea production systems. The Kraken FPSO is very close to mechanical completion, with the focus now on pre-commissioning and commissioning activities. All four engines and boilers are mechanically complete. The latest reductions in the overall full cycle gross capex estimates for Kraken reduce EnQuest's 2016 net cash capital expenditure by a further \$50 million, now down to between \$620 million and \$670 million. The Scolty/Crathes development is also ahead of schedule, with first oil expected to be delivered around the end of 2016. Average production guidance for the full year 2016 continues to be in the range of 42,000 Boepd to 44,000 Boepd. Unit operating expenditure for the first half of 2016 was \$23/bbl, ahead of target. The Company anticipates full year unit operating expenditure around the lower end of the \$25-\$27/bbl guidance for the full year 2016. The Company continues to seek cost reductions across the supply chain.

Substantial works have continued on Alma/Galia. The K1 (AP4) well required a chemical treatment which has been successful and the workover of the K3z (AP1) well, was carried out by early August, further increasing production. The drilling of well K7, the replacement for the uncompleted K6, is in progress, with completion operations underway. K7 should be online around the 2016 year end. On GKA, the planned shutdown during the second half of the year was delivered securely and successfully.

In line with its internal financial policies, the Group has continued to enter into hedging arrangements. Since 30 June 2016, the Group has hedged 1MMbbl of 2017 production (83kbbls per month) at a fixed price of \$51.50/bbl. The Group has also sold 500,000 bbls per month for the first half of 2017 (3 MMbbls total) at a fixed price of \$49/bbl and has bought a call (nil cost) for the same notional quantity, with a strike price of \$57.25/bbl. Should the price rise above \$57.25/bbl, the Group will receive the difference to offset the loss it would make on the \$49/bbl swaps. In addition, the Group has hedged 500,000 bbls for the first half of 2017 at \$54.50/bbl.

The Directors have also proposed the Restructuring, including the Placing and Open Offer, to improve the Group's capital structure and to improve the ongoing liquidity position of the Group. The Directors expect that the proceeds of the Placing and Open Offer will enable the Group to complete the developments of Kraken and Scolty/Crathes, which the Directors expect will lead to both significant increases in production and significant decreases in average operating costs across the Group. For additional details, see paragraph 4 of this Part 1 (''Letter from the Chairman of EnQuest PLC'').

11. Financial effects of the Placing and Open Offer

On a pro forma basis and assuming that the Placing and Open Offer had taken place on 30 June 2016, the Group would have had net assets of approximately \$833.4 million, compared with net assets of \$738.1 million reported as at 30 June 2016. Please refer to Part 6 (''Unaudited Pro Forma Financial Information'') which contains an unaudited pro forma balance sheet, prepared to illustrate the effect of the Placing and Open Offer and the Proposed Note Amendments on the net assets of the Group as if these events had taken place on 30 June 2016.

As set out in paragraph 3 above, the Directors believe that the proposed Restructuring, including the injection of additional equity capital in the Company pursuant to the Placing and Open Offer, will improve the Group's capital structure and improve the ongoing liquidity position of the Group, putting it in a stronger position to withstand a prolonged period of low oil prices.

12. Risk factors

You should consider fully the risk factors associated with the Group, its industry, the Placing and Open Offer and the Restructuring. Your attention is drawn to the risk factors set out on pages 20 to 53 of this document.

13. General Meeting

The Notice of General Meeting to be held at Ashurst LLP, Broadwalk House, 5 Appold Street, London, EC2A 2HA, on 14 November 2016 at 9.00 a.m. is set out at the end of this document. The purpose of this meeting is to seek shareholders' approval to the Resolutions set out in the Notice of General Meeting. The following resolutions will be proposed at this meeting:

• (a) Resolution 1 is proposed as an ordinary resolution to authorise the Directors pursuant to section 551 of the 2006 Act to allot shares and grant rights to subscribe for, or convert any security into, shares up to an aggregate nominal amount of £17,836,906 in connection with the Placing and Open Offer or otherwise, up to 356,738,114 shares, representing approximately 44.4 per cent. of the existing issued share capital of the Company, provided that this authority shall expire at the conclusion of the next annual general meeting of the Company or, if earlier, the date 15 months from the date of passing of Resolution 1, save that the Company may before such expiry make an offer or agreement which would or might require shares to be allotted or rights to be granted after such expiry and the Directors may allot shares, or grant rights to subscribe for or to convert any securities into shares, in pursuance of such offer or agreement as if the authority conferred by this resolution had not expired. This authority is supplementary to the existing authority;
• (b) Resolution 2, which is conditional upon the passing of Resolution 1, is proposed as a special resolution to authorise the Directors to allot equity securities pursuant to the authority conferred by Resolution 1 otherwise than to existing shareholders pro rata to their holdings, such power, subject to the continuance of the authority conferred by Resolution 1, to expire on the conclusion of the next annual general meeting of the Company or, if earlier, the date 15 months from the date of the passing of this Resolution 2;
• (c) Resolution 3 is proposed as an ordinary resolution to approve the issue of the New Ordinary Shares pursuant to the Placing and Open Offer at an issue price of 23.0 pence per share (SEK 2.48 per New Ordinary Share for Qualifying Swedish Shareholders in the Swedish Open Offer), representing a discount of 4.8 pence (17.12 per cent.) to the closing middle market price of 27.8 pence per Existing Ordinary Share (as derived from the Daily Official List of the London Stock Exchange) on 12 October 2016 (being the last trading day prior to the announcement of the Placing and Open Offer) and a discount of SEK 0.54 (17.93 per cent.) to the closing middle market price of SEK 3.02 per Existing Ordinary Share on NASDAQ Stockholm on 12 October 2016 (being the last trading day prior to the announcement of the Placing and Open Offer); and
• (d) Resolution 4, which is conditional upon the passing of Resolutions 1, 2 and 3, is proposed as an ordinary resolution to approve, as a related party transaction, the participation of Double A Limited, a company beneficially owned by the extended family of Amjad Bseisu, in the Placing and Open Offer (including the Commission and the Reimbursement).

The Directors intend to use the authorities granted at the General Meeting to allot New Ordinary Shares pursuant to the Placing and Open Offer. Other than in connection with the Placing and Open Offer, and upon the vesting of share awards or the exercise of options under the Share Option Plans, the Directors have no present intention to utilise these authorities.

As described in paragraph 8 above, Double A Limited, a company beneficially owned by the extended family of Amjad Bseisu, will abstain, and has undertaken to take all reasonable steps to ensure that its associates (as defined in the Listing Rules) will abstain, from voting on Resolution 4 at the General Meeting.

14. Action to be taken

14.1 General Meeting

A Form of Proxy for use at the General Meeting is enclosed with this document. Whether or not you intend to be present at that meeting, you are requested to complete and return the Form of Proxy, in accordance with the instructions printed thereon, as soon as possible and in any event so that it may be received by the Company's registrars, Capita Asset Services at PXS, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU, by no later than 9.00 a.m. on 10 November 2016. Completion and return of a Form of Proxy will not preclude you from attending the General Meeting and voting in person if you so wish.

14.2 Placing and Open Offer

(a) Qualifying Non-CREST Shareholders (i.e. holders of Existing Ordinary Shares who hold their Existing Ordinary Shares in certificated form)

If you are a Qualifying Non-CREST Shareholder you will receive an Application Form which gives details of your maximum entitlement under the Open Offer (as shown by the number of Open Offer Entitlements set out in Box 5). If you wish to apply for Open Offer Shares under the Open Offer, you should complete the Application Form in accordance with the procedure for application set out in paragraph 5 of Part 10 (''Terms and Conditions of the Placing and Open Offer'') and on the Application Form itself. Your completed Application Form, accompanied by full payment in accordance with the instructions in paragraph 5 of Part 10 (''Terms and Conditions of the Placing and Open Offer''), should be returned by post in the accompanying pre-paid envelope or returned by post to Capita Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU so as to be received by not later than 11.00 a.m. on 16 November 2016. If you do not wish to apply for any New Ordinary Shares under the Open Offer, you should not complete or return the Application Form.

(b) Qualifying CREST Shareholders

If you are a Qualifying CREST Shareholder no Application Form will be sent to you and you will receive a credit to your appropriate stock account in CREST in respect of the Open Offer Entitlements representing your maximum entitlement under the Open Offer. You should refer to the procedure for application set out in paragraph 5 of Part 10 (''Terms and Conditions of the Placing and Open Offer''). The relevant CREST instructions must have settled in accordance with the instructions in paragraph 5 of Part 10 (''Terms and Conditions of the Placing and Open Offer'') by no later than 11.00 a.m. on 10 November 2016. Qualifying CREST Shareholders who are CREST sponsored members should refer to their CREST sponsors regarding the action to be taken in connection with this document and the Open Offer.

If you sell or have sold or otherwise transferred all of your Existing Ordinary Shares (other than ex-entitlements) held in certificated form before the Record Date, please forward this document and any Application Form received at once to the purchaser or transferee or the bank, stockbroker or other agent through whom the sale or transfer was effected for delivery to the purchaser or transferee, except that such documents should not be sent to any jurisdiction where to do so might constitute a violation of local securities laws or regulations, including, but not limited to, the United States or any of the Excluded Territories.

If you sell or have sold or otherwise transferred only part of your holding of Existing Ordinary Shares (other than ex-entitlements) held in certificated form before the Record Date, you should refer to the instruction regarding split applications in Part 10 (''Terms and Conditions of the Placing and Open Offer'') and the Application Form.

CREST members who wish to appoint a proxy or proxies by utilising the CREST electronic proxy appointment service may do so by utilising the procedures described in the CREST Manual. CREST personal members or other CREST sponsored members, and those CREST members who have appointed a voting service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf.

In order for a proxy appointment by means of CREST to be valid, the appropriate CREST message (a CREST Proxy Instruction) must be properly authenticated in accordance with Euroclear's specification and must contain the information required for such instructions, as described in the CREST Manual. The message must be transmitted so as to be received by the Registrar (ID RA10) by 9.00 a.m. on 10 November 2016. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST applications host) from which the Registrar is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST.

CREST members and, where applicable, their CREST sponsors or voting service provider(s) should note that Euroclear does not make available special procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST members concerned to take (or, if the CREST member is a CREST personal member or sponsored member or has appointed a voting service provider(s), to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting service provider(s) are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings.

The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001.

The latest time and date for receipt of Application Forms and payment in full under the Open Offer and the settlement of relevant CREST Instructions (as appropriate) is expected to be 11.00 a.m. on 16 November 2016, unless otherwise announced by the Company. Details of the further terms and conditions of the Placing and Open Offer are set out in Part 10 (''Terms and Conditions of the Placing and Open Offer'') and, where relevant, will also be set out in the Application Forms.

For Qualifying Non-CREST Shareholders, the Open Offer Shares will be issued in certificated form and will be represented by definitive share certificates, which are expected to be despatched by not later than 28 November 2016 to the registered address of the person(s) entitled to them.

For Qualifying CREST Shareholders, the Receiving Agent will instruct Euroclear to credit the stock accounts of the Qualifying CREST Shareholders with their Open Offer Shares. It is expected that this will take place by not later than 21 November 2016.

For Qualifying Swedish Directly Registered Shareholders, the Swedish Issuer Agent will instruct Euroclear Sweden to credit the VP Accounts of the Qualifying Swedish Directly Registered Shareholders with their Open Offer Shares. For Qualifying Swedish Nominee Registered Shareholders, the Swedish Issuer Agent will instruct Euroclear Sweden to credit the VP Accounts of the nominees of the Qualifying Swedish Nominee Registered Shareholders with their Open Offer Shares. It is expected that this will take place by not later than 23 November 2016.

Qualifying CREST Shareholders who are CREST sponsored members should refer to their CREST sponsor regarding the action to be taken in connection with the Open Offer.

If you are in any doubt as to what action you should take, or the contents of this document, you are recommended to consult immediately your stockbroker, bank manager, solicitor, accountant, fund manager or other appropriate independent financial adviser being, if you are resident in the United Kingdom, a firm authorised under FSMA or if you are in a territory outside the United Kingdom, from another appropriately authorised independent financial adviser.

If you have any further queries regarding the Open Offer, please call Capita Asset Services on 0371 664 0321. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. The helpline is open between 9.00 a.m. to 5.30 p.m., Monday to Friday excluding public holidays in England and Wales. Please note that Capita Asset Services cannot provide any financial, legal or tax advice and calls may be recorded and monitored for security and training purposes.

(c) Qualifying Swedish Directly Registered Shareholders (i.e. holders of Existing Ordinary Shares registered in the VPC System)

If you are a Qualifying Swedish Directly Registered Shareholder you will receive a Pre-Printed Issue Account Statement which gives details of your maximum entitlement under the Swedish Open Offer. If you wish to apply for Open Offer Shares under the Swedish Open Offer, you should either use the Pre-Printed Payment Notice or complete the Swedish Application Form in accordance with the procedure for application set out in paragraph 5 of Part 10 (''Terms and Conditions of the Placing and Open Offer'') and on Pre-Printed Payment Notice or the Swedish Application Form itself. If used, your completed Swedish Application Form, accompanied by full payment in accordance with the instructions in paragraph 5 of Part 10 (''Terms and Conditions of the Placing and Open Offer'') and on the Swedish Application Form itself, should be returned by post in the accompanying pre-paid envelope or returned by post to Skandinaviska Enskilda Banken AB (publ), Rissneleden 110, 106 40 Stockholm, Sweden so as to be received by not later than 11.00 a.m. (Stockholm time) on 16 November 2016. If you do not wish to apply for any New Ordinary Shares under the Swedish Open Offer, you should not use the Pre-Printed Payment Notice or complete or return the Swedish Application Form.

(d) Qualifying Swedish Nominee Registered Shareholders (i.e. holders of Existing Ordinary Shares held with a bank or other nominee in the VPC System)

If you are a Qualifying Swedish Nominee Registered Shareholder you will not receive a Pre-Printed Issue Account Statement. Application for Open Offer Shares under the Swedish Open Offer will be made in accordance with instructions from your nominee.

15. Taxation

Your attention is drawn to Part 8 (''Taxation'') in relation to taxation matters. If you are in any doubt as to your tax position, you should consult your own professional adviser without delay.

16. Employee Share Schemes and EnQuest Employee Benefit Trust

In accordance with the rules of the Share Option Plans, the number of Ordinary Shares subject to subsisting options and awards under such plans and/or the exercise price (if any) shall be adjusted to take account of the issue of the New Ordinary Shares pursuant to the Open Offer unless the Remuneration Committee determines that, in its opinion, the adjustments are not reasonable or appropriate. No adjustments shall be made under the Share Option Plans unless and until all elements of the Restructuring and Placing and Open Offer are approved, consented to and/or completed. Participants will be informed of any such adjustments in due course.

In addition to the proposed adjustments to options and awards held under the Share Option Plans, the Directors have requested that the Trustees, acting in their capacity as trustees of the EnQuest EBT, consider voting in favour of all of the Resolutions proposed at the General Meeting in respect of the Unallocated Shares. The Directors have also requested that the Trustees apply to take-up in full their entitlements in respect of the Unallocated Shares under the Open Offer, subject to and to the extent that the Company and/or another member of the Group provides the Trustees with sufficient funds to do so and provided that no more than five per cent. of the issued ordinary share capital is held in the EnQuest EBT at anytime. In this regard, the directors of the Company, have agreed to provide the Trustees with an interest free loan up to the amount of £2.48 million so that the Trustees can take up and pay for their entitlements under the Open Offer. Additional funding may also be provided to the Trustees by the Company or any other subsidiary. Any funding provided to the Trustees by the Company and/or a subsidiary shall be on the condition that it is used only to pay for New Ordinary Shares under the Open Offer and that any New Ordinary Shares so acquired shall be used for the benefit of the beneficiaries of the EnQuest EBT and to satisfy outstanding and future options and awards granted to employees under the Share Option Plans and any other employees' share scheme or share incentive plan operated by the Company or a member of its group from time to time. The Trustees have considered the Directors requests and have agreed in writing to vote and to take-up their entitlements under the Open Offer in respect of the Unallocated Shares.

17. Further information

You should read the whole of this document (including the information incorporated into this document by reference) and not just rely on the information contained in this letter.

18. Importance of the vote and working capital

The Company is of the opinion that the Group does not have sufficient working capital available for its present requirements, that is, for at least 12 months from the date of this document.

Without further action, the Directors believe that the Group would experience a maximum working capital shortfall of approximately \$150 million in May 2017 and that the Group will be unable to pay the interest due in respect of the Group's Existing High Yield Notes on 17 October 2016. If not remedied within the applicable 30 day grace period and there is no interest payment standstill agreed by the requisite majority of Noteholders (90 per cent. or more), this would constitute a default under the Existing High Yield Notes and a cross default under certain of the Group's key debt instruments and facilities, including the Existing RCF and the Existing Retail Notes. In addition, the Group has, since January 2015, obtained waivers from the Existing RCF Lenders in respect of the liquidity covenant contained in the Existing RCF and the current waiver from this covenant expires on 31 December 2016. To the extent the Group is unable to improve its liquidity position or obtain further waivers from the Existing RCF Lenders, the Group could fail to meet the liquidity covenant in the Existing RCF when next tested on 31 December 2016 or on a subsequent test date, which would constitute an event of default under the Existing RCF. In either of these circumstances, there is a risk that the Company may become subject to enforcement action (including, for example, the filing of a winding up petition against the Company) which if not terminated or withdrawn could result in the majority Existing RCF Lenders enforcing their security in respect of the Company and/or the Group by (among other things) appointing an administrator to the Company, with a view to commencing (and/or continuing, if already commenced by the Company at such time) a marketing process for the sale of the Group on an accelerated basis. In this scenario, the Directors consider that there is likely to be little or no value for Shareholder or Noteholders. However, the Ad Hoc Committee may propose an alternative debt restructuring and seek to engage in negotiations with the Existing RCF Lenders (which may involve providing a standstill of the October Interest Payment if the requisite majority has approved such standstill) and the Existing RCF Lenders may or may not accept such proposal or may consider such proposal in the context of the sales process.

In order to address the Company's working capital shortfall, the Directors have undertaken a number of measures prior to the announcement of the Restructuring, including:

• agreeing with the Existing RCF Lenders further utilisations of approximately \$20 million and \$26 million under the Existing RCF, in September 2016 and October 2016, respectively; and
• agreeing the deferral of certain payments to trade suppliers until between October 2016 and April 2019.

The Directors have now proposed the Restructuring, including the Placing and Open Offer, to improve the Group's capital structure and to improve the ongoing liquidity position of the Group. The Proposed Note Amendments would capitalise the Group's cash interest expense under the New High Yield Notes and the Amended Retail Notes unless the oil price is equal to or above an average of \$65.00/bbl for the six-month period ending one month prior to the interest payment date (and certain other conditions are met) and the Proposed RCF Amendments and Proposed Note Amendments would extend the maturity date for the repayment of the Existing RCF to October 2021, extend the scheduled maturity in respect of New High Yield Notes and Amended Retail Notes to April 2023, further automatically extend the maturity date in respect of the New High Yield Notes and the Amended Retail Notes to October 2023 if the Company has not repaid or refinanced the Existing RCF by 15 October 2020, amend the Group's financial covenants to provide additional flexibility under the RCF, remove certain financial covenants from the Existing Retail Notes and amend certain financial indebtedness baskets under the New High Yield Notes. The proceeds of the Placing and Open Offer, expected to be £78.1 million net of expenses, are expected to enable the Group to complete the Kraken development and bring it to first oil on schedule in the first half of 2017, which the Directors believe will considerably improve the Group's cash flows.

Assuming and following completion of the Restructuring and the Proposed RCF Amendments, the maximum remaining facilities available to the Group under the Existing RCF will be \$137.7 million, less any further interim utilisations agreed with the Existing RCF Lenders between the date of this document and completion of the Restructuring and the Proposed RCF Amendments.

If the Placing and Open Offer and the rest of the Restructuring do proceed, and taking into account the facilities available to the Group under the Existing RCF, the Company is of the opinion that the Group will have sufficient working capital for its present requirements, that is, for at least 12 months from the date of this document.

However, as each of the components of the Restructuring is inter-conditional, the Restructuring cannot proceed if the Placing and Open Offer or any other component of the Restructuring does not proceed. The completion of the Placing and Open Offer and the rest of the Restructuring is therefore subject to the following conditions among others that remain outstanding as of the date of this document: (i) the passing of the Resolutions related to the Placing and Open Offer by Shareholders at the General Meeting; (ii) the approval of the Proposed RCF Amendments by Existing RCF Lenders and Hedging Banks representing 100 per cent. of the aggregate principal amount of the Existing RCF and the Existing Hedging Liabilities; (iii) the Scheme being passed by more than 50 per cent. in number and at least 75 per cent. in value of Scheme Creditors attending and voting in person or by proxy at the meeting of Scheme Creditors convened with the permission of the Court and a recognition order in connection with the Scheme being granted under Chapter 15 of Title 11 of the US Code; and (iv) and certain other procedural steps.

As of the date of this document, all of the Existing RCF Lenders and all of the Hedging Banks have entered into, or acceded to, the Lock-Up Agreement pursuant to which they have agreed to vote in favour of the Proposed RCF Amendments. Additionally, Existing High Yield Noteholders representing approximately 61 per cent. in value of the Existing High Yield Notes have entered into, or acceded to, the Lock-Up Agreement pursuant to which they have agreed to attend the Scheme Meeting in person or by proxy and to vote in favour of the Scheme. Due to the diverse nature of the holdings of the Existing Retail Notes, it was not possible for the Company to approach all of the Existing Retail Noteholders in advance of announcement of the Restructuring and the Scheme. However, the Company has consulted on a confidential basis with a number of holders who together hold a significant proportion of the Existing Retail Notes, in order to obtain their indicative support for the proposals contemplated by the Scheme and the Restructuring. The feedback from such Existing Retail Noteholders was positive and indicated support for the Restructuring from professional investors.

The long stop date for completion of each of the Restructuring steps, as set out in the Lock-Up Agreement, is 2 December 2016. If any of these steps does not take place by the long stop date (as it may be amended or extended), then neither the Placing and Open Offer nor the rest of the Restructuring will proceed. In these circumstances, the Group would not have sufficient working capital for its present requirements.

In such a case, the Group would seek to enter into further negotiations to amend and/or obtain waivers in respect of the default provisions in the Group's debt arrangements, including the Existing RCF, the Existing High Yield Notes and the Existing Retail Notes. However, there can be no assurance that any such negotiations would be successful. In these circumstances, the Group would also seek to manage its ongoing working capital requirements and trading activities through exploring such measures as disposing of certain assets, further cost reductions and negotiating new credit arrangements with existing or new lenders or raising funding from third parties. However, there can be no assurance that the Group would be able to complete such measures or that any such measures would be sufficient to remedy the Group's working capital shortfall, particularly in the current low oil price environment. Additionally, any disposal of assets or reduction in capital expenditure would be likely to reduce the Group's aggregate production and could lead to the Group being unable to bring its current developments, including Kraken and Scolty/ Crathes, onstream, all of which would have a material adverse impact on the Group's cash flows going forward. Please see paragraph 4.7 of this Part 1 (''Letter from the Chairman of EnQuest PLC'') entitled ''Consequences of a failure to implement the Restructuring'' for further detail on the consequences of the Placing and Open Offer and the rest of the Restructuring not proceeding.

Even if the Placing and Open Offer and the rest of the Restructuring do proceed, the ability of the Group to succeed in the longer term and to be in a position to return value to Shareholders for their investment is highly dependent on oil prices. The Group's realised oil prices would need to increase above current levels for Shareholders to receive a return on their investment, and this is out of the Group's control. If oil prices remain at their current levels or decline further, it is highly likely that the Company would be unable to return any value to its Shareholders.

For Shareholders, the main benefit of the Placing and Open Offer and the Restructuring is to enable the Group to continue to trade, complete the Kraken development and bring it on production, as well as allowing time for a recovery in oil prices, while also allowing Shareholders to retain their investment in the Company.

The Directors consider that if and shortly after it becomes apparent that the Restructuring is not capable of being implemented (for example, if the Resolutions necessary to complete the Placing and Open Offer are not approved at the General Meeting or if the requisite majority of Scheme Creditors do not vote in favour of the Scheme or the Court decides not to exercise its discretion to sanction the Scheme), it is likely that the Company will commence a marketing and sales process of the Company and/or its subsidiaries with a view to effecting the sale in a short period of two to three months. Completion of the sale may involve the appointment of administrators to the Company. The Directors believe that if the Placing and Open Offer and the Restructuring do not proceed and a marketing process for the sale of the Group on an accelerated basis is undertaken, there is likely to be little or no value for Shareholders or Noteholders. In addition, if the Company is unable to pay the October Interest Payment on the Existing High Yield Notes within the 30 day grace period as described above, the Company may become subject to enforcement action (including, for example, the filing of a winding up petition against the Company) which if, not terminated or withdrawn, could result in the majority Existing RCF Lenders enforcing their security in respect of the Company and/or the Group by (among other things) appointing an administrator to the Company, with a view to the administrator commencing and/or continuing a marketing process for the sale of the Group on an accelerated basis. In this scenario, the Directors believe that there is a significant risk that the return to Shareholders would be less than would be achieved pursuant to a marketing and sales process commenced by the Company, rather than an administrator. The Ad Hoc Committee may propose an alternative debt restructuring and seek to engage in negotiations with the Existing RCF Lenders (which may involve providing a standstill of the October Interest Payment if the requisite majority has approved such standstill) and the Existing RCF Lenders may or may not accept such proposal or may consider such proposal in the context of the sales process.

Accordingly, it is very important that Shareholders vote in favour of the Resolutions so that the Placing and Open Offer and the Restructuring can proceed and so that the Group can continue trading.

19. Directors' Intentions

The Directors (other than Amjad Bseisu) currently beneficially own, in aggregate, 507,032 Ordinary Shares representing approximately 0.06 per cent. of the issued ordinary share capital of the Company and currently intend to take up (or procure the taking up of) their respective entitlements to New Ordinary Shares in full.

In addition, the Directors (other than Amjad Bseisu) currently intend to vote and/or to procure the vote in favour of the Resolutions to be proposed at the General Meeting in respect of their beneficial holdings of Ordinary Shares amounting to 507,032 Ordinary Shares and 0.06 per cent. of the total number of votes available to be cast at the General Meeting.

Double A Limited, a company beneficially owned by the extended family of Amjad Bseisu, currently owns 71,405,331 Ordinary Shares, representing approximately 8.90 per cent. of the issued ordinary share capital of the Company, has irrevocably undertaken to take up its entitlement to New Ordinary Shares in full. In addition, Double A Limited has irrevocably undertaken to vote in favour of Resolutions 1 to 3 (inclusive) at the General Meeting and not to vote on Resolution 4 which proposes the approval of the Related Party Transaction. Double A Limited has also undertaken to take all reasonable steps to ensure that its associates will not vote on Resolution 4 which proposes the approval of the Related Party Transaction.

20. Recommendation

The Board considers the Placing and Open Offer to be in the best interests of the Company and its Shareholders as a whole.

The Board, which has been so advised by J.P. Morgan Cazenove, in its capacity as the Company's sponsor, believes that the Related Party Transaction is fair and reasonable so far as Shareholders are concerned. In providing such advice to the Board, J.P. Morgan Cazenove has taken into account the Board's commercial assessment of the Related Party Transaction. Amjad Bseisu has not taken part in the Board's consideration of this matter.

Accordingly, the Board unanimously recommends that you vote in favour of the Resolutions to be proposed at the General Meeting as the Directors (other than Amjad Bseisu) currently intend to do in respect of their own beneficial holdings of Ordinary Shares amounting to 507,032 Ordinary Shares and 0.06 per cent. of the total number of votes available to be cast at the General Meeting and Double A Limited, a company beneficially owned by the extended family of Amjad Bseisu, has irrevocably undertaken to do so in respect of its Ordinary Shares amounting to 71,405,331 Ordinary Shares and 8.90 per cent. of the total number of votes available to be cast at the General Meeting, although Double A Limited will abstain, as required, and has undertaken to take all reasonable steps to ensure that its associates will abstain, from voting on the Related Party Resolution.

Yours faithfully

Jock Lennox

Chairman

PART 2—INFORMATION ON THE GROUP

The following information should be read in conjunction with the information appearing elsewhere in, or incorporated by reference in, this document, including the financial and other information in, or incorporated by reference in, Part 4 (''Operating and Financial Review'') and Part 5 (''Financial Information on the Group'').

1. Introduction

EnQuest is an oil and gas production and development company focused on turning opportunities into value by targeting maturing assets and undeveloped oil fields.

EnQuest was founded in 2010 through a combination of PEDL and certain assets of Lundin. The Company purchased PEDL and the UKCS assets of Lundin in exchange for shares. Following the Company's initial public offering in April 2010, its shares are listed and trade on both the London Stock Exchange and the NASDAQ Stockholm.

2. Business overview

EnQuest is the largest independent UK oil producer in the UK North Sea (as last measured for the twelve months ended 31 May 2016) and had interests in 29 UK production licences, 26 of which the Group operates, covering 41 blocks or part blocks in the UKCS as of 30 June 2016. In addition, the Group has interests in Malaysia through the PM8/Seligi PSC and the Tanjong Baram SFRSC. The Group's average daily production on a working interest basis for the six months ended 30 June 2016 was 42,520 boepd. The Group's average daily production on a working interest basis for the year ended 31 December 2015 was 36,567 boepd and its net 2P reserves were 203 MMboe as of 31 December 2015. As a result of the increase in the Group's interest in the Kraken development from 60 per cent. to 70.5 per cent., its net 2P reserves increased to 216 MMboe as of 1 January 2016. In the six years since EnQuest's inception, it has increased its net 2P reserves to 216 MMboe as of 1 January 2016, representing a net 167 per cent. increase or a growth of 18 per cent. per annum, and converted the equivalent of 68 per cent. of its original 81 MMboe reserves into produced oil. As of 31 December 2015, the Group's assets had a reserve life of 18 years.

EnQuest's strategic intention is to deliver sustainable growth by focusing on exploiting its existing reserves, commercialising and developing discoveries, pursuing selective acquisitions and converting contingent resources into reserves. In the current low oil price environment, the Company's priorities are to deliver on execution, streamline operations and strengthen its balance sheet. The Group's producing assets generated EBITDA of \$464.8 million during 2015. During the first half of 2016, the Group's producing assets generated EBITDA of \$242.9 million, representing an increase of \$16.2 million, or 7.1 per cent., over the first half of 2015.

In 2015, as part of its investment prioritisation programme, the Group disposed of its interests in assets in Norway, Egypt and Tunisia and its exploration assets in Malaysia. The Group also relinquished its interests in a number of exploration licences in the UK.

Most of the Group's existing assets are located in the UKCS in the North Sea. The Group's currently producing operated assets in the UKCS include the Thistle/Deveron fields, the Heather/Broom fields, the Don fields, the GKA fields and the Alma/Galia fields. In addition, the Group has an interest in the non-operated Alba producing oil field. The Group also has two currently producing assets located in Malaysia, PM8/Seligi and Tanjong Baram.

Asset	Field	Working interest
UKCS
Thistle/Deveron	Thistle	99%
	Deveron	99%
Dons	Don Southwest	60%
	Conrie	60%
	West Don	78.6%
	Ythan	60%
Heather/Broom	Heather	100%
	Broom	63%
GKA	Kittiwake	50%
	Grouse	50%
	Mallard	50%
	Gadwall	50%
	Goosander	50%
Alma/Galia	Alma	65%
	Galia	65%
Alba(1)	—	8%
Malaysia
PM8/Seligi	—	—
	PM8	50%
	Seligi	50%
Tanjong Baram	Tanjong Baram	70%

The following table sets forth the Group's working interests in its producing assets:

Notes:

(1) Non-operated

The following table sets forth the net daily average production on a working interest basis for each of the Group's producing assets for the years ended 31 December 2013, 2014 and 2015 and the six month periods ended 30 June 2015 and 30 June 2016:

	Net daily average production (boepd)
		Year ended 31 December	Six months ended 30 June
Asset	2013	2014	2015	2015	2016
Thistle/Deveron	7,925	9,025	8,930	7,690	8,966
Dons	11,014	8,835	7,690	6,419	6,600
Heather/Broom	4,339	4,081	4,643	3,615	6,114
GKA	—	1,281(1)	3,981	2,915	3,738
Alma/Galia	—	—	1,083(2)	—	6,433
Alba .	922(3)	1,214	1,178	1,249	1,236
Total UKCS	24,200	24,436	27,505	21,888	33,087
PM8/Seligi	—	3,459(4)	8,689	7,777	8,152
Tanjong Baram	—	—	373(5)	—	1,281
Total Malaysia	—	3,459	9,062	7,777	9,433
Total	24,200	27,895	36,567	29,665	42,520

Notes:

(1) Production since the completion of the acquisition on 1 March 2014, averaged over the twelve months to 31 December 2014.

(2) Production since first oil on 27 October 2015, averaged over the twelve months to the end of 2015.

(3) Production since the completion of the acquisition on 22 March 2013, averaged over the twelve months to the end of 2013.

(4) Production since the completion of the acquisitions on 13 June 2014, averaged over the twelve months to 31 December 2014.

(5) Production since first oil in June 2015, averaged over the twelve months to 31 December 2015.

The Group's primary development asset is the Kraken development, in which it owns a 70.5 per cent. working interest. EnQuest is the operator of the Kraken development. It is the Group's largest project to date and one of the largest projects in the UKCS in recent years. The Directors expect it to deliver first oil in the first half of 2017. EnQuest also owns a 50 per cent. working interest in, and is the operator of, the Scolty/Crathes development, which was the only offshore pure oil field approved by the Oil & Gas Authority in 2015. The Scolty/Crathes development comprises two wells tied back to the GKA hub. The Directors expect that the Scolty/Crathes fields will deliver first oil around the end of 2016.

3. Strengths

The Directors believe that the UKCS represents a significant hydrocarbon basin, which continues to benefit from an extensive installed infrastructure base and skilled workforce. The Directors believe that the Group's assets offer significant organic growth opportunities, driven by exploitation of current infrastructure on the UKCS and the development of low risk near field opportunities.

The Company has begun to successfully replicate its UKCS model by targeting previously underdeveloped assets in another maturing region, Malaysia, complementing the Group's UKCS operations and utilising the Group's substantial experience in the North Sea.

The Directors believe that the Group's operational capabilities and experienced technical staff and management have allowed it to grow continuously since 2010 and that through further development in the UKCS and other geographic regions, EnQuest has substantial opportunities to continue to grow, while maintaining a focus on health and safety and the environmental impact of its operations.

Large diversified asset base with substantial reserves

The Directors believe the Group's large diversified asset base provides substantial potential for growing its production through extending the field life of producing assets, realising the reserves and resources of development assets and integrating infrastructure. As of 1 January 2016, the Group had net 2P reserves of 216 MMboe and net contingent resources of 146 MMboe and the reserve life of its assets as at 31 December 2015 was 18 years. As of 30 June 2016, the Group had interests in 29 UK production licences, covering 41 blocks or part blocks and was the operator of 26 of these production licences.

The table below sets forth the changes in the Group's net 2P reserves for the years ended 31 December 2013, 31 December 2014 and 31 December 2015 and at 1 January 2016.

(MMboe)	2P reserves 1 January	Production(1)	Additions	2P reserves 31 December	Reserve life (years)
2013 .	129	(9)	75	195	22
2014 .	195	(10)	35	220	22
2015 .	220	(12)	(5)	203	18
2016 .	216(2)	—	—	—	—

(1) Sales volume for the period.

(2) Includes the acquisition of an additional 10.5 per cent. working interest in Kraken, which was economically effective as of 1 January 2016.

Production from the Group's existing assets is diversified across six main hubs. During the first half of 2016, the Group's production was primarily sourced from Thistle/Deveron (21 per cent.), PM8/Seligi (19 per cent.), Dons (16 per cent.), Heather/Broom (14 per cent.), Alma/Galia (15 per cent.) and GKA (9 per cent.). The production from Alma/Galia for the first half of 2015 is not representative, as first oil production only occurred on 27 October 2015 and during the first half of 2016 the asset was still in the process of building up to peak production. Post-first oil optimisation of production levels at Alma/Galia has continued in the second half of 2016, including two well interventions and acid treatments, following which, between 5 and 31 August 2016, gross Alma/Galia production averaged 18,785 boepd. The Directors expect to further diversify the Group's production in 2016 and 2017, with first oil from Scolty/Crathes expected around the end of 2016 and first oil from Kraken expected in the first half of 2017.

High Potential Development Assets

In addition to its current producing assets, the Group's portfolio includes certain development assets. The Group's most substantial development asset is Kraken, which is expected to achieve first oil in the first half of 2017. The field development plan for Kraken was approved by the DECC in 2013. According to the Group's estimates, which are annually audited by independent reserve engineering firm, GCA, Kraken has a productive life of over 20 years. In addition, Scolty/Crathes is a significant development adjacent to the

Group's GKA assets, utilising existing GKA infrastructure to unlock profitable production. Production from the Scolty/Crathes fields is expected to commence around the end of 2016 and continue until 2025, which also extends the life of GKA to 2025.

In the second quarter of 2016, the Group undertook the drilling of the Eagle exploration well. Eagle was acquired along with the Group's other interests in GKA in 2014. The Eagle exploration well was completed in the second quarter of 2016 and confirmed as a discovery. Preliminary analysis of the results indicated that a Fulmar oil bearing reservoir was encountered with a vertical thickness of 67 feet and excellent reservoir properties. Additionally no oil water contact was encountered, representing potential upside volumes on the flank of the structure. The encouraging results of the initial analysis lead the Company to anticipate gross total recoverable reserves to be of a similar order of magnitude to those in the nearby Gadwall producing oil field; it is estimated that total gross ultimate recovery from Gadwall will be approximately 6 MMstb. Further evaluation of the Eagle results is ongoing, but given the expected low cost of the tie back, it is expected to be commercial.

There are also potential development opportunities in other assets in which the Group holds a working interest. In addition, the Group's existing producing assets have further development potential with substantial stock tank oil initially in place, in particular at Thistle/Deveron, Heather/Broom and PM8/Seligi, which means that a small increase in the recovery factor can lead to a large increase in oil reserves.

Operator status and significant control over capital expenditure plan

The Group generally seeks to be the operator of its assets and currently operates 26 of its 29 UK production licences, including those in respect of each of the Group's six main production hubs, the major Kraken development and the Scolty/Crathes development. The Group also typically seeks to hold a significant equity interest in its producing assets and developments, with a 100 per cent. working interest at Heather; 99 per cent. at Thistle/Deveron; 78.6 per cent. at West Don; 63 per cent. at Broom; 60 per cent. at Don Southwest; 50 per cent. at GKA; 65 per cent. at Alma/Galia; 70.5 per cent. at Kraken; and 50 per cent. at Scolty/Crathes. Through operatorship and holding a significant equity interest, EnQuest is better able to shape the development plan of an asset and thus has a significant degree of control over the timing and magnitude of capital expenditures at that asset.

The Company has also achieved a degree of control over capital expenditures on its development assets through disciplined acquisition structures. Under the structures used to acquire interests in, among others, Kraken, it was agreed that, subject to achieving certain milestones such as commercial viability, EnQuest would carry the selling partners initially only up to a certain cap, thus reducing the initial consideration and only committing to additional cash consideration once higher levels of reserves have been de-risked and confirmed. These arrangements reduce the initial capital investment the Company is required to make and, combined with operatorship, allow EnQuest to better determine the timing and feasibility of development expenses and thus execute its strategy of developing new assets.

Proven operational track record and significant technical and operating experience

The Group's in-house technical and operations teams underpin its development and operations-focused strategies. The Group is differentiated by the breadth and depth of these teams, their knowledge and experience in engineering, subsurface, execution and operations and the Group's leadership in innovative integrated developments. The spectrum of integrated technical capabilities present in the Group, combining subsurface, facilities planning and drilling, provide the Group with the right mix of capabilities to successfully deliver new oil field developments and strong production from producing assets in maturing basins. Through the Company's proven skills, it delivers industry leading levels of production efficiency and of cost control, creating opportunities for it to add value to the assets it manages.

In a low oil price environment in which development of new production is constrained, the Company's low cost approach is a competitive advantage. The Company is continuing to adapt its business model to address the possibility of an extended period of low oil prices through its cost optimisation programme (as described further below at ''Significant cash flow generation from producing assets and strong cost control capabilities''). The Group reduced average unit operating costs in 2015 to \$30/bbl (compared to \$42/bbl in 2014) and in the first half of 2016 to \$23/bbl (compared to \$39/bbl in the first half of 2015). The Directors believe average unit operating costs for the full year 2016 should be around the lower end of the guidance of \$25–\$27/bbl and expect that unit operating costs will decrease to the low \$20s per barrel when Kraken comes fully on-stream.

The Group's strong production performance in 2015 (demonstrated by a 31.1 per cent. increase in net daily average production) was underpinned by high operational uptimes and strong levels of production efficiency. The Group's North Sea operations achieved excellent levels of production efficiency in 2015. In 2014, the Group had a top quartile position in Oil & Gas UK's rankings with a total EnQuest production efficiency of 81 per cent. compared to a UKCS average rating of 65 per cent. Oil & Gas UK's ranking for production efficiency is a measure of a field's performance by comparing actual production as a percentage of the maximum production potential, after allowing for, among other things, the natural decline of a reservoir, the reliability of infrastructure, the effects of shutdowns and major maintenance. The production efficiency data for UKCS operators is not yet available for 2015. However, despite a longer than normal planned maintenance shutdown period, the Group delivered a very strong performance and its internal data assesses its 2015 production efficiency rate to be 77 per cent. and, without the losses due to planned maintenance shut downs, 82 per cent.

The Group has demonstrated the ability to improve the performance of maturing assets which have had historically high operating costs and low levels of production efficiency. The following graphs illustrate the increased production trends experienced by four of the Group's assets after the Group took over operatorship.

The Group's work programme for Thistle, which began in 2010, included the use of modern seismic technology, the successful reactivation of the old drill rig, the drilling of new wells, a major power supply upgrade, the introduction of new and simplified process controls and safety systems and integrity work on the platform topsides. These measures returned Thistle to production levels it had not achieved since the 1990s. In 2015, five years after the Group started this programme, Thistle was still delivering very high levels of production efficiency; based on the Group's data and analysis, the rate of production efficiency for Thistle in 2015 is estimated to have been in the mid-80s per cent.

The Group adopted a similar approach at Heather/Broom, with the successful completion of the Heather rig reactivation programme in the fourth quarter of 2013. Rig reactivation, drilling workovers and new wells, a new injection flowline and significantly increased water injection have all materially increased production levels. Heather/Broom also achieved high levels of production efficiency; based on the Company's data and analysis, the rate of production efficiency for Heather/Broom in 2015 is estimated to have been in the mid-80s per cent.

In 2014, the Group acquired interests in both GKA in the North Sea and PM8/Seligi in Malaysia. In respect of both of these assets, the Group has already recouped its original investment and the assets achieved strong production growth in 2014 and 2015.

At GKA, EnQuest's first priorities were to rejuvenate the well stock, raise production efficiency and significantly reduce unit operating costs (which exceeded \$100 per barrel at the time of the acquisition in 2014). Workover operations were carried out on the Mallard well, the Gadwall well was side-tracked and dissolver treatments were implemented, all of which has driven gross production levels from 2,000 boepd in 2014 to between 12,000 boepd and 14,000 boepd for much of the last quarter of 2015. Production efficiency was taken from low levels in 2014 to approximately 80 per cent. in 2015, with unit operating costs substantially down from over \$100/bbl prior to March 2014 to below \$30/bbl by the fourth quarter of 2015.

At PM8/Seligi in Malaysia, the Group assumed operatorship in October 2014 and through a programme focusing on improving facility integrity, gas compressor reliability and idle well restoration, EnQuest increased gross production from 12,400 boepd in 2014 to 15,100 boepd in 2015. These improvements were achieved before any new drilling had taken place. Production efficiency has also been enhanced, from 82 per cent. in 2014, to over 90 per cent. in 2015.

In addition to its technical, development and operational expertise, the Group's extensive focus on HSE&A operations supports its operating success. EnQuest is committed to operating responsibly and has a public HSE&A policy that commits it to never knowingly compromising its health, safety or environmental standards.

In the UK, the Group had strong HSE&A performance levels in 2015. Most of the Group's assets achieved its Lost-Time Incident Frequency Rate target of 0.7 and Recordable Injury Frequency Rate target of 3.5, although Thistle recorded a Lost-Time Incident Frequency Rate of 4.07 (three events) and Recordable Injury Frequency Rate of 5.53 (four events), respectively and Northern Producer recorded a Recordable Injury Frequency Rate of 8.57 (two incidents). Overall rates of High-Potential Incidents and Dangerous Occurrences were lower than the targeted rate of two events (one event recorded by the Group) and the targeted frequency of 5.00 (4.28 recorded by the Group (six events)). As of 31 December 2015, EnQuest had no backlog of safety critical maintenance issues. In Malaysia, EnQuest completed its first full year of operations in 2015 with no lost-time incidents. EnQuest completed 700,000 man hours on the Tanjong Baram project with no accidents or injuries. Total long-term incident-free man-hours for Malaysia in 2015 were 1.7 million, with one medical treatment case at Seligi.

Significant cash flow generation from producing assets and strong cost control capabilities

The Group generated EBITDA of \$621.3 million, \$581.0 million and \$464.8 million during 2013, 2014 and 2015, respectively and \$242.9 million during the first half of 2016. The Group's revenue for 2015 and for the first half of 2016 were derived principally from the sale of oil from six main production assets (Thistle/ Deveron, Dons, Heather/Broom, GKA, Alma/Galia and PM8/Seligi) as well as from Alba, where it has an 8 per cent. interest, and from Tanjong Baram in Malaysia, where it has a 70 per cent. interest. The Company has not paid a dividend since its incorporation in 2010.

Although the Group's revenues from oil sales declined in 2015 as a result of the significant fall in oil prices that started in the second half of 2014, it was able to maintain relatively stable cash flows in 2015 through a combination of continuing strong production, hedging activities and an ongoing cost optimisation programme. The Company has actively managed its commodity hedge portfolio during 2015, which has generated cash flows of \$68.6 million and revenue and other operating income of \$264.0 million (including \$119.1 million of gains realised in 2014 and deferred until 2015 to match the timing of the underlying production the options were hedging).

EnQuest seeks to obtain the most efficient return on its assets by limiting the costs within its control. The Group's unit operating costs (i.e. operating expenses before third party transportation costs) were broadly flat during EnQuest's first five years of operation beginning in 2010, a period when the average unit operating costs for North Sea operators doubled. Since the fall of the oil price during the second half of 2014, EnQuest has implemented further cost saving measures, which, together with production increases, have resulted in lower unit operating costs, and EnQuest continues to work with its supply chain and contractors to achieve additional savings. Despite having extensive operations in the relatively higher cost operating environment of the North Sea, EnQuest reduced average unit operating costs in 2015 to \$30/bbl (compared to \$42/bbl in 2014) and in the first half of 2016 to \$23/bbl (compared to \$39/bbl in the first half of 2015). The Directors expect average unit operating costs for the full year 2016 to be around the lower end of the guidance of \$25–\$27/bbl and expect that unit operating costs will decrease to the low \$20s per barrel when Kraken comes fully on-stream.

The Group's production efficiency and cost control skills are especially essential in the current low oil price environment. The Directors believe the Group is managing its cost base in a manner that provides it with resilience in a prolonged period of low oil prices.

The Group's unit operating costs (i.e. operating expenses before third party transportation costs) were broadly flat during EnQuest's first five years of operation beginning in 2010 and since 2014, new cost saving measures have been put in place and existing measures have been increased across the business. In 2015, for example, the Group's cost optimisation programme included the following key areas:

• lowering unit operating costs: the Group has seen improvements in unit operating costs as a result of scale treatments, subsea inspections, regular repairs and maintenance, logistics, equal time rotas, employee headcount reductions and reduced contractor rates;
• incentivising contract structures: the Group has implemented KPI structures for some of the Group's service providers to ensure payment is linked to performance; and
• enhancing contract and procurement practices: the Group has moved its procurement team to Dubai to take advantage of lower costs in that location.

The Company has also reduced its transportation costs, primarily through a reduction in tariff expenses paid through its use of SVT. The oil from the majority of the Group's producing assets in the UKCS is transported through SVT in the Shetland Islands. The Group's use of third party infrastructure in general and SVT in particular is subject to tariff charges. These charges can be substantial and the per barrel charge is not subject to the Group's direct control. SVT tariff costs increased from approximately \$4.4/bbl in 2011 to \$8.9/bbl in 2014, with a large increase having taking effect in 2013, when the tariff rate was \$10.9/bbl. Since then, unit costs at SVT were reduced substantially. These SVT costs are the predominant element of tariff and transportation costs and the continued scale of the reduction was evident in the fact that total tariff and transportation costs reduced from \$10.6/bbl in 2014 to \$6.3/bbl in 2015. The Company continues to work with the SVT operator to reduce gross cost levels, although there can be no assurances tariffs will not increase.

General and administration expenses for 2015 were \$18.0 million, an increase of 9.1 per cent. from \$16.5 million for 2014. This increase was primarily due to a \$3.6 million provision for costs relating to a rent free period in connection with the sub-let of the Group's Aberdeen office. General and administration expenses before depletion of fair value uplift, re-measurements, impairments and other exceptional items was \$14.4 million for 2015 as compared to \$16.5 million in 2014. This decrease reflected further savings initiatives under the Group's cost optimisation programme, including reductions in the size of the direct workforce and decreased contractor related costs. The overall 2015 drilling programme was below budget, with high efficiency levels across the Group's operated rigs and with significantly lowered supplier rates. General and administration expenses for the six months ended 30 June 2016 were \$5.4 million, compared to \$5.2 million for the same period in 2015.

In addition the Group has limited future cash tax liability and with the investment allowances that were set in connection with its continuing investment in the Group's existing assets and major developments (in particular, the Kraken development), the Group does not expect to pay material cash income tax for the foreseeable future. Additionally, the Group does not expect material decommissioning spending in the short to medium term.

Lower risk business model and growth strategy

The Directors believe that the Group's production and development-focused approach exposes it to fewer risks than other oil and gas companies which focus on exploration activities. EnQuest targets assets that are more likely to have commercial production solutions by developing marginal fields and seeking to acquire assets with known production potential. The Group's exploration activities are generally limited to appraisal and evaluation of assets in close proximity to its existing producing fields so as to utilise existing infrastructure and therefore minimise development costs. In the case of assets in close proximity to the Group's own existing fields, the Group's existing knowledge of the subsurface in these locations also reduces the risks associated with the exploration and development.

The Group's assets are principally located in the UKCS, which the Directors believe is an attractive and mature operating region. The UKCS has a robust supply of industry infrastructure and personnel and the Directors believe that the UK has a constructive, positive and reasonably manageable regulatory climate. The Group also benefits from governmental support through fiscal incentives. As of 30 June 2016, the Group has a cumulative tax loss equivalent to approximately \$2.73 billion and it benefits from UK tax incentive programmes known as investment allowances. This regime basically provides for a reduction in ring fence SCT (10 per cent.) for qualifying investments in new or existing UKCS assets. Investment allowances are only triggered when production from the field commences. The Group is eligible for a number of investment allowances which will materially reduce the level of future supplementary corporation taxation. Investment allowances are recognised as a reduction in the charge to taxation in the

years claimed. Prior to the implementation of the Finance Act 2015, the Group received tax relief on certain of its UKCS assets in the form of field allowances. These existing field allowances have been reclassified as investment allowances as of 1 April 2015. As a result, with the Group's continuing investment in its existing assets and major developments, the Group does not expect to pay material corporation tax or supplementary corporation tax on UK operational activities before for the foreseeable future.

The Group also holds assets in Malaysia, which shares many characteristics of the UK in terms of the oil and gas industry, such as a developed oil and gas infrastructure, a progressive regulator, an attractive and incentivising fiscal regime, a large established oil and gas industry with many local and international companies, a steady supply of skilled industry professionals and a substantial quantity of reserves remaining in place in this maturing basin. Malaysia has the added attraction of being a low operating cost environment. In Malaysia, the Group pays cash corporate income tax on PM8/Seligi assets which will continue throughout the life of the PM8/Seligi PSC.

Several of the Group's assets have long production histories and the Directors believe that these established, proven and mature fields have the potential for lower-risk growth through application of modern technology, including seismic mapping, improvements on existing technology, infill drilling and near-field appraisals.

Highly-experienced innovative leadership team with a proven track record of success

EnQuest's board of directors and senior management team has significant oil and gas experience, both collectively and individually. Amjad Bseisu, the Company's co-founder and chief executive officer, was a founder of Petrofac's operations and investment business in 1998, with responsibility for Petrofac's development business in North Africa and Southeast Asia. Mr Bseisu has substantial experience in operating globally and, in particular, in the key regions where the Group seeks to execute its strategy of pursuing lower-risk development opportunities, including the UKCS and Malaysia. Collectively, EnQuest's board of directors and senior management team has over 150 years of experience in the energy, oil and gas industries. See also paragraph 6 of Part 9 (''Additional Information'') for further information on the experience of EnQuest's board of directors and senior management team.

In addition to its extensive experience in the energy, oil and gas industries, the Company's leadership team features individuals with extensive experience in finance and law that the Directors believe is vital to managing a company that identifies value-creating opportunities in maturing oil field assets. The Directors believe that the Group's leadership team has the varied experience and proven track record in the oil and gas industry necessary to provide a strong platform to deliver long-term growth and identify new production and development opportunities.

4. Strategy

EnQuest's overall strategy is to deliver sustainable growth by focusing on exploiting the Group's existing reserves, commercialising and developing new fields, converting contingent resources into reserves and pursuing selective acquisitions particularly maturing assets and undeveloped oil fields.

EnQuest's overall strategy is implemented through a number of specific strategies, discussed below. Since the second half of 2014, in light of the low oil price environment, the Group's strategic priorities have been focused on delivering on execution targets, streamlining operations and strengthening its balance sheet:

• Delivering on execution: Production in 2015 and in the first half of 2016 was strong across the Group's portfolio, averaging 36,567 boepd and 42,520 boepd, respectively. The Kraken project continued on schedule, with the gross full cycle capital expenditure estimate reduced to \$2.5 billion from the \$3.2 billion level at the time of project sanction. The Scolty/Crathes development is progressing both ahead of schedule and below budget. At the mid-point of EnQuest's guidance range for average full year production for 2016, it is forecasting a further 18 per cent. growth in production over 2015.
• Streamlining operations: Despite having extensive operations in the relatively higher cost operating environment of the North Sea, EnQuest reduced average unit operating costs in 2015 to \$30/bbl (compared to \$42/bbl in 2014) and in the first half of 2016 to \$23/bbl (compared to \$39/bbl in the first half of 2015). The Directors believe average unit operating costs for the full year 2016 should be around the lower end of the guidance of \$25–\$27/bbl and expect that unit operating costs will decrease to the low \$20s per barrel when Kraken comes fully on-stream.

• Strengthening the balance sheet: In addition to the Restructuring, the Company is seeking to continue to improve its balance sheet through good operational and production performance, the implementation of cost saving measures and operating efficiencies and potential asset sales. For example, the gross full cycle capital expenditure estimate on the Kraken development has been reduced to \$2.5 billion from \$3.2 billion at sanction in 2013, a reduction of approximately 22 per cent. The 2015 drilling programme was below budget and the 2016 drilling programme has been ahead of schedule, with high operational efficiency levels across the Group's operated rigs and lowered supplier rates.

The Group's capital investment in 2015 was 29 per cent. less than in 2014 and capital investment for the first six months of 2016 was 35 per cent. less than for the same period in 2015. Although capital investment is expected to remain at substantial levels through the rest of 2016 and into 2017 as a result of the Group's focus on the Kraken development, the Directors expect that after Kraken is brought on-stream in 2017, there will be an initial reduction in capital investment levels, followed by the completion of the full Kraken development.

Extending the lives of maturing assets and optimising production: Turning opportunities into value by targeting maturing assets and undeveloped oil fields

EnQuest primarily targets opportunities in maturing basins and acquires development and production assets which are not large enough to be of interest to the major global oil companies. In-house, EnQuest has the full spectrum of integrated technical capabilities needed to successfully deliver new oil field developments and to enhance the performance of assets which are already in production. These capabilities include subsurface, facilities planning and drilling. In 2015, the Group delivered a level of production efficiency levels which the Directors believe ranks EnQuest as one of the top operators in the North Sea. These levels of performance are being replicated in Malaysia. Already in Malaysia, the Company has had considerable success with its programme to revitalise previously idle wells. The Directors believe that these technical skills, its operational scale and high levels of operating and cost efficiency all leave EnQuest well positioned to deliver its sustainable growth strategy.

Grow production, reserves and cash flow from the Group's existing assets

The Group intends to continue to generate the best return that it can from its existing assets through pro-active management and lower-risk upgrades using proven technologies. The Group's status as operator and its substantial equity positions at key assets enhance its ability to pursue this strategy and the Group intends to continue to seek operational control as it obtains or acquires additional assets and interests.

The Group aims to increase production at its producing assets by investing in drilling new wells and workovers of existing wells. The Directors also believe that there remains potential to find new accumulations at the Group's producing assets through the use of modern seismic technology.

Deliver sustainable growth through selective acquisitions

The Group intends to continue to consider opportunities to acquire additional oil and gas assets and related infrastructure in maturing hydrocarbon basins, both inside and outside of the UKCS, in respect of assets that fit within the Group's overall strategy and is currently evaluating additional opportunities, although it has not entered into any binding or non-binding agreements, memoranda of understanding or other commitments in respect of any such opportunities. The Directors believe that pursuing strategic acquisitions, in a disciplined and prudent manner, can form a part of the Group's effort to deliver sustainable growth. It is the Group's current intention that during the period in which the Group remains capital constrained, it would seek to structure any acquisitions to avoid negative cash flows. In the current low oil price environment, it is not the Group's intention to purchase assets which would affect cash flows negatively. There can, however, be no assurances that the Group will be successful in identifying and completing further acquisitions.

In the past, EnQuest has been successful in pursuing an acquisition strategy. An example of this is the acquisition of its interest in GKA in 2014. This acquisition gave EnQuest not only GKA's production (average of approximately 2,000 boepd net to prior owners) and approximately 4.7 MMboe of 2P reserves, but also the possibility of further developing the production hub centred on the Kittiwake platform. For example, the Mallard well was worked over, the Gadwall well was side-tracked and dissolver treatments were implemented. Gadwall was successfully returned to production by the Group in the second half of 2015. The potential for the Scolty and Crathes fields to be tied back to the Kittiwake platform was part of

the rationale for the acquisition of GKA. Production for the Scolty/Crathes fields is expected to continue until 2025, which would also extend the life of GKA itself to 2025. The Group's interests in the GKA platform and the pipeline connecting GKA to the Forties Pipeline provide a potential commercial solution for these nearby fields.

In the past few years the Group has begun to replicate its UKCS model in another maturing region, Malaysia. In June 2014, the Group acquired an interest in the Seligi oil field and the production sharing contract for PM8. EnQuest also signed an agreement to extend the term of the PM8/Seligi PSC in respect of these assets to 2033. This acquisition was a good strategic fit and offered considerable potential for EnQuest to use its core skills in enhancing value from maturing fields. The Group assumed operatorship in October 2014 and through a programme focusing on improving facility integrity, gas compressor reliability and idle well restoration, increased gross production from 12,400 boepd in 2014 to 15,100 boepd in 2015. These improvements were achieved before any new drilling had taken place. Net production increased from 3,459 boepd in 2014 (being the net production from June 2014, when the Group acquired its 50 per cent. working interest in PM8/Seligi, to December 2014, averaged over the full year) of which the Group was entitled to 2,078 boepd, to 8,689 boepd in 2015, of which the Group was entitled to 5,958 boepd. Including the Group's additional interest in Tanjong Baram, Malaysian operations represented 25 per cent. of the Group's entire production in 2015. The Directors believe that the success of PM8/Seligi demonstrates the exportability of the Group's model outside of the UKCS.

5. The Group's Operations and Assets

The Group's principal UKCS assets as of 30 June 2016 were its interests in the producing operated oil fields Heather/Broom, Thistle/Deveron, Dons, GKA and Alma/Galia, its interests in the Kraken and Scolty/Crathes developments and its non-operating interest in the producing Alba oil field. The Group's principal Malaysian assets as of 30 June 2016 were its interests in the producing operated oil fields PM8/Seligi and Tanjong Baram.

In 2015, as part of its programme of investment prioritisation and asset disposals, the Company disposed of its interests in Egypt, Tunisia and Norway and also sold its exploration assets in Malaysia. As of 30 June 2016, the Group had interests in 29 UK production licences, covering 41 blocks or part blocks and was the operator of 26 of these production licences. See ''Risk factors—Risks relating to the Company's business— The Company's plans for expansion through acquisitions beyond the UKCS may not be successful.''

The following maps set forth the locations of the Group's assets in the UKCS and Malaysia.

6. Summary of historical reserves, resources and operating data

The Company retains GCA as its independent reserve engineer for the purpose of auditing the Group's 2P reserves. The Company estimates the Group's reserves and resources internally. The Group's 2P reserve estimates, but not its contingent resource estimates, are audited by GCA. The Group's 2P reserves and contingent resources are estimated using the classifications as defined by the SPE PRMS and supporting guidelines issued by the Society of Petroleum Engineers.

Typical to the industry in which the Group operates, there are a number of uncertainties inherent in estimating quantities of 2P reserves. The reserve information, which is audited annually by GCA, is based on the Company's assessments of the Group's asset base and its opinion as to the reasonableness of such assessments and represent only estimates. Reserve assessment is a subjective process of estimating underground accumulations of oil and natural gas that cannot be measured in an exact manner. The accuracy of any reserve estimate is a function of a number of variable factors and assumptions, many of which are beyond the Group's control, including the quality of available data and of engineering and geological interpretation and judgement and assumptions as to oil price. As a result, estimates of different reserve assessors may vary. In addition, results of drilling, testing and production subsequent to the date of an estimate may justify revising the original estimate. Accordingly, due to the inherent uncertainties and the limited nature of reservoir data and the inherently imprecise nature of reserves estimates, the initial reserve estimates are often different from the quantities of oil and natural gas that are ultimately recovered. The significance of such estimates depends primarily on the accuracy of the assumptions upon which they were based. Thus, investors should not place undue reliance on the accuracy of the reserves information in this document in predicting actual reserves or on comparisons of similar estimates/ information concerning companies established in other economic systems. In addition, except to the extent that the Group acquires additional properties containing 2P reserves or conduct successful exploration and development activities, or both, the Group's 2P reserves will decline as reserves are produced. The following reserve information should be read along with the section entitled ''Risk factors—Risks relating to the oil and gas industry.''

2P reserves are defined as those quantities of oil which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be commercially recoverable, from a given date forward, from known reservoirs and under defined economic conditions, operating methods and government regulations (''proved reserves''), plus those additional reserves which analysis of geoscience and engineering data indicate are less likely to be recovered than proved reserves but more certain to be recovered than possible reserves (''probable reserves''); it is equally likely that actual remaining quantities recovered will be greater than or less than the sum of the estimated proved plus probable reserves (2P reserves).

The following table sets forth certain information with respect to the Group's 2P reserves for the years ended 31 December 2013, 31 December 2014 and 31 December 2015 and as at 1 January 2016.

(MMboe)	2P reserves 1 January	Production(1)	Additions	2P reserves 31 December	Reserve life (years)
2013 .	129	(9)	75	195	22
2014 .	195	(10)	35	220	22
2015 .	220	(12)	(5)	203	18
2016 .	216(2)	—	—	—	—

(1) Sales volume for the period.

(2) Represents the acquisition of an additional 10.5 per cent. in the Group's working interest in Kraken, which was economically effective as at 1 January 2016.

Internal controls over reserves estimates

EnQuest's policy regarding internal controls over the recording of reserves is structured to objectively and accurately estimate the Group's oil reserve quantities and values in compliance with SPE PRMS. These definitions and guidelines are designed to provide a common reference for the international petroleum industry, including national reporting and regulatory disclosure agencies, and to support petroleum project and portfolio management requirements. They are intended to improve clarity in global communications regarding petroleum resources. Each of the Group's assets is managed by a dedicated asset team staffed with technically qualified industry professionals and led by a highly experienced team leader. Preliminary reserve estimates are prepared by the asset teams for review with the regional senior management and with technical advisers based in the Company's head office. All staff are graduates in a relevant technical discipline and have substantial industry experience. The review teams in particular are typically comprised of individuals with over thirty years' experience in reservoir and petroleum engineering and include experts in reserves auditing standards.

2P reserves are estimated using standard recognised evaluation techniques. The estimates for each asset are reviewed by GCA annually or more frequently upon the occurrence of a material change or acquisition. The Company provides GCA technical information including production, geological, geophysical, petrophysical, engineering and financial data as well as fiscal terms applicable to the various assets. Future development costs are provided consistent with the activities required to produce the 2P reserves. GCA audits the information provided and recommends changes to the technical assumptions as required. Approved profiles and cost estimates are used to carry out economic modelling to determine economic cut-offs of profiles. These models are provided to GCA, which then reports 2P reserve figures.

Qualifications of third party engineers

The technical personnel responsible for auditing the reserve estimates at GCA meet the requirements regarding qualifications, independence, objectivity and confidentiality set forth in the Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information promulgated by SPE PRMS. GCA is an independent international energy advisory company; it does not own an interest in the Group's properties and is not employed on a contingent fee basis.

7. Production and development

As of 30 June 2016, the Group had interests in 29 UK production licences, covering 41 blocks or part blocks and was the operator of 26 of these production licences. The Group's average daily production on a working interest basis in 2015 was 36,567 boepd and in the first half of 2016 was 42,520 boepd.

The following table sets out the Group's licences as of 30 June 2016.

United Kingdom

Production & Development

Licence	Block(s)	Working Interest (%)	Field Name
P073	21/12a	50	Goosander (GKA)
P213(1)	16/26a	8	Alba
P236	211/18a	99	Thistle and Deveron
P236	211/18a	60	Don Southwest and Conrie
P236	211/18b		61.6(5) West Don
P238	21/19a & 21/19b	50	Grouse, Mallard and Gadwall (GKA)
P242	2/5a	63 & 100	Broom and Heather
P351	21/18a	50	Kittiwake
P475	211/19s	99	Thistle
P902	2/4a	63	Broom
P1077	9/2b	70.5	Kraken and Kraken North
P1200	211/13b		100(5) West Don
P1765/P1825	30/24c & 25c, 30/24b	65	Alma and Galia
P2137	211/18e & 19c	60	Ythan (Dons)
P1107/P1617	21/8a, 21/12c & 13a	50	Scolty and Crathes
Discoveries	Block(s)	Working Interest (%)	Name
P238	21/19a & 21/19b	50	Eagle
P220/P250/P585 P2006	15/12b, 17a & 17n 21/6b	60 50	Kildrummy Avalon
Other Licences	Block(s)	Working Interest (%)	Name
P90	9/15a	33	—
P209	9/28a	19	—
P1976	8/5 & 9/1b	60	—
P1996(2)	28/2b & 28/3b	100	—
P2005	22/11b	50	—
P2143	3/1b	100	—
P2148	9/2c	60	—
P2173	20/15b, 21/11 & 21/16a	50	—
P2176	21/8b	100	—
P2177	21/14b, 19c & 20b	50	—
P2201	211/13c & 211/18c	60	—

Malaysia

Licence	Block(s)	Working Interest (%)			Name
PM8/ Seligi(3)	PM8 Extension	50	Seligi,	North	Raya,	South Lawang, Langat, Yong and Serudon	Raya,
Tanjong Baram SFRSC(4)	Tanjong Baram	70		Tanjong Baram

Notes:

(1) Not operated.

(2) The disposal of this licence was agreed at the end of 2015. However, the transaction is still subject to completion.

(3) Official reference PM-8 Extension PSC.

(4) Small Field Risk Service Contract. PETRONAS remains the asset owner.

(5) On 2 August 2016, the Group's working interest in the West Don unitised area increased to 78.6 per cent. following the transfer to the Group of the holding previously owned by First Oil PLC.

The following table sets forth certain information with respect to the Group's production volumes and realised pricing (which reflects the impact of derivatives) for the years ended 31 December 2013, 2014 and 2015.

	Year ended 31 December
	2013	2014	2015
Production/Sales:
Production volume (boepd)	24,200	27,895	36,567
Average realised oil price (\$/boe)	109.7	100.6	72.0(1)

(1) \$72.0 is the realised oil price including realised revenue of \$263 million associated with the effective portions of the Company's oil price hedges.

7.1 Thistle/Deveron

The Group's offshore operations at the oil fields of Thistle and Deveron produced an average of 8,930 boepd in 2015, a 95 boepd, or a 1.05 per cent., decrease from an average production of 9,025 boepd in 2014. The Group's average production in the first half of 2016 was 8,966 boepd, up 17 per cent. a 1,276 boepd, or a 16.6 per cent., increase from an average production of 7,690 boepd in the first half of 2015.

	Thistle	Deveron
Location	Offshore, UKCS,	Offshore, UKCS
Production Facility	Thistle Alpha platform	Thistle Alpha platform
EnQuest Working Interest	99.00%	99.00%
Operator	EnQuest	EnQuest
Field Partners	Britoil Limited	Britoil Limited
Decommissioning liabilities	Original liabilities remain with former owner

Overview

Thistle and Deveron are adjacent offshore oil fields in the UKCS, located approximately three kilometres from each other. Thistle is located approximately 201 kilometres northeast of Sumburgh in the Shetland Islands and approximately 443 kilometres northeast of Aberdeen, Scotland, in blocks 211/18a and 211/19s in the UKCS. Thistle was first discovered in 1973 and achieved first oil production in 1978. In 1978, Thistle had 43 producing wells and 15 water injection wells. Prior to the Group's involvement, Thistle's oil production declined over time. However, the Directors believe that the Group's improvements at Thistle have prolonged the production capabilities of the oil field.

Deveron lies to the west of Thistle in block 211/18a and is a separate, smaller accumulation. Deveron was discovered in 1972 and first produced oil in 1984.

The Group obtained a 99 per cent. working interest in both the Thistle and Deveron fields from Lundin upon EnQuest's formation in 2010. Britoil Limited, whose ultimate parent company is BP plc, retains the remaining 1 per cent. working interest in each of Thistle and Deveron. The Group has no decommissioning liability for Thistle/Deveron as acquired and is liable for 99 per cent. of any costs incurred to the extent they arise solely as a result of the decommissioning of property the Group purchased for field operations since completion of the acquisition.

Field and processing technical background

Thistle has an offshore platform, Thistle Alpha, which was first installed on the jacket in 1978. The platform stands in a water depth of approximately 162 metres and is a 60 slot drilling and production installation. The platform comprises a conventional steel jacket with four main legs, equipment and machinery that constitute the production, utilities, drilling systems and facilities. The remaining eight modules, situated on the southeast end of the installation, contain living quarters, offices, the central control room, the helideck and workshops.

Thistle Alpha processes oil from both Thistle and Deveron reservoirs. The Deveron reservoir is immediately adjacent to the Thistle reservoir and both reservoirs lie at a depth of 2,800 metres and are accessed by wells drilled from the Thistle Alpha platform. There are 14 active producing wells and 7 active water injection wells in Thistle/Deveron. After oil recovery, the commingled Thistle and Deveron oil flows through the two-stage production separation system. Following the separation process, the Group metres and exports the stabilised oil using the main oil line pumps to the Brent pipeline system. Because the original gas compression system for Thistle and Deveron was decommissioned, the Group flares a small volume of gas that is separated from the oil. The Group treats any produced water and then discharges it back into the sea. Once the oil is separated from both gas and water, the Group exports the oil, along with oil produced from Dons, in a 16 oil export pipeline through the Brent Pipeline System via the Dunlin and Cormorant platforms to SVT.

Developments

The Group has undertaken numerous projects at Thistle/Deveron to improve production at these maturing oil fields, an important element of which is the Thistle life extension project. As part of the first stage of the project, the Group reactivated the platform rig and drilled five new wells to improve production at Thistle. The Group also installed one new generator and modified another to improve its uptime. Since undertaking these developments, Thistle has generated its highest production levels since the 1990s.

In 2014, a new production well was drilled in the West Fault Block. The A61/34 well was brought on-stream in May 2015 and has been performing well. An additional production well A62/53 was drilled and was placed on production in August 2015. An ESP workover on well A59/45 was completed successfully in August 2015, with the well reinstated to production. Due to the strong performance of the drilling programme, two wells which were expected to be drilled in 2016 were brought forward into 2015. Well A64/40 was drilled in the crest of the Western Fault Block and was brought online in October 2015. This was followed by completion of the Deveron A63/07 well with a dual ESP, which was brought online in November 2015 and the workover of the Deveron A58 well to upgrade the ESP. The strong drilling performance has delivered considerable savings against budgeted costs.

Recent performance and activity programme

Thistle/Deveron's production of 8,966 boepd during the first half of 2016 represented a 17 per cent. increase over the same period in 2015 with the benefit of the 2015 work programme and a further phase of the field life extension programme. The latest programme of Thistle drilling activities was brought to a close in January 2016. Maintenance, integrity and life extension projects are continuing throughout 2016, including a routine planned shutdown of approximately two weeks in the second half of the year, which will include further field life extension work which will increase the plant's capacity to handle produced water.

7.2 Dons

The Group's offshore operations at Dons produced an average of 7,690 boepd in 2015, a 1,145 boepd, or a 12.96 per cent., decrease from an average production of 8,835 boepd in 2014. The Group's average production in the first half of 2016 was 6,600 boepd, a 181 boepd, or a 3 per cent., increase from an average production of 6,419 boepd in the first half of 2015.

	Don Southwest	West Don	Conrie	Ythan
Location	Offshore, UKCS	Offshore, UKCS,	Offshore, UKCS	Offshore, UKCS
Production Facility .	Northern Producer	Northern Producer	Northern Producer	Northern Producer
	floating platform	floating platform	floating platform	floating platform
EnQuest Working
Interest	60%	78.6%	60%	60%
Operator	EnQuest	EnQuest	EnQuest	EnQuest
Field Partners	Ithaca Energy (UK)	Ithaca Energy (UK)	Ithaca Energy (UK)	Ithaca Gamma
	Limited	Limited	Limited	Limited
Decommissioning
liabilities		As per working interests

Overview

Dons are a collection of offshore oil fields located in blocks 211/13b (West Don), 211/18a (Don Southwest, West Don and Conrie) and 211/18e and 211/19c (Ythan) in the UKCS and approximately 150 kilometres northeast of the Shetland Islands. Don Southwest was first discovered in 1976 and developed by BP, with first oil produced in 1993. BP ceased production in 2001. West Don was discovered in 1976, but it was not

developed for production until 2009 by one of the Company's predecessor companies, PEDL. The Group first discovered the smaller Conrie oil field in January 2011 and developed the field for production.

The Group first acquired its working interest in West Don and Don Southwest through the acquisition of PEDL. PEDL had acquired a 40 per cent. working interest in West Don in February 2006 and a 60 per cent. working interest in Don Southwest in December 2006, in each case from Britoil Limited and ConocoPhillips. In May 2007, PEDL acquired a further 3.12 per cent. working interest in West Don. Following the unitisation of West Don in 2008, PEDL's corresponding interest in West Don under the unitisation agreement became 27.7 per cent. after accounting for added acreage. The Group acquired this working interest upon its acquisition of PEDL in 2010. The Group also acquired a 17.25 per cent. working interest upon its acquisition of Stratic Energy Corporation in 2010, bringing the Group's total working interest in West Don to 44.95 per cent. On 29 March 2012, the Group acquired an additional 18.5 per cent. working interest in West Don from JX Nippon Exploration and Production (U.K.) Limited, resulting in the Group's total working interest in West Don increasing to 63.45 per cent. Following the default of First Oil PLC in February 2016, a process was initiated which resulted in the transfer to the Group of 15.15 per cent. of First Oil's previous 19.275 per cent. working interest in the West Don Field for nil consideration. The transfer was completed on 2 August 2016. Production from this additional 15.15 per cent. interest became effective from August 2016 onwards. Following completion of the transfer, the Group has a 78.6 per cent. working interest in the West Don field.

In the first quarter of 2014, EnQuest applied for and was offered an 'out of round' licence (P.2137) in the Don North East area for blocks 211/18e and 211/19c, including the Area 23 and Area 24 discovered oil accumulations and an undrilled extension to the Don North East field. The Area 24 discovery, which lies adjacent to the Don Southwest field, progressed rapidly to development with the Field Development Plan, for the renamed 'Ythan' field approved by DECC and the first well spudded in November 2014.

The Group's partner at West Don is Ithaca Energy (UK) Limited which holds a 17.28 per cent. working interest. The Group's partner at both Don Southwest and Conrie is Ithaca Energy (UK) Limited, with a 40 per cent. working interest in each case. The Group's partner at Ythan is Ithaca Gamma Limited, with a 40 per cent. working interest. The Group's decommissioning liability for Dons is in each case equivalent to its working interest. The Group does not have full control over operations at the Don fields as all development and production plans and budgets must be submitted to a management committee for approval. See the summary of the shared facilities operating agreement at paragraph 18.5(b)(ii) of Part 9 (''Additional Information'') for further information.

Field and processing technical background

The water depth of Dons is 160 metres, while the oil reservoir lies at a depth of approximately 3,200 metres. Don Southwest comprises eight producing wells and four injectors, while West Don comprises three producing wells and two injectors and Conrie and Ythan comprise one producing well each.

The Don fields are all connected via subsea tieback to the Northern Producer FPF. The Group does not own the Northern Producer FPF, but it has contracted with Sea Production Ltd., the owner of the facility, to use the Northern Producer FPF to process oil from Dons. Once the oil is processed at the Northern Producer FPF, the processed oil is exported via pipeline to the Thistle Alpha platform where it is exported with the processed oil from Thistle and Deveron through the Brent pipeline system to SVT. Natural gas liquids are separated from oil at SVT. The Group also uses the Northern Leg gas pipeline for the purchase of fuel for use on the Thistle platform.

Developments

The new Ythan production well was completed in April 2015 and tied in and brought online in late May 2015, and continues to deliver oil rates above expectations. Production efficiency in Dons was strong in 2015, with high levels of water injection efficiency also supporting production. Production at Dons in 2015 was down year on year due partly to the planned maintenance shutdown in June and to the operational shut-in of a well in the West Don oil field in January and February 2015 due to scale build up.

Recent performance and activity programme

The Don fields' production of 6,600 boepd during the first half of 2016 represented an increase of 3 per cent. over the same period in 2015. This increase related to strong reservoir performance generally, the benefit of the Ythan well which was drilled in 2015 as well as the positive impact of the start of gas import, which has increased plant efficiency and reduced platform fuel costs.

The 2016 Dons work programme includes chemical treatment programmes and routine maintenance, including a planned two week shutdown during the second half of the year. The shutdown is being planned to coincide with a Brent pipeline system maintenance outage.

7.3 Heather/Broom

The Group's offshore operations at Heather and Broom had an average production of 4,643 boepd in 2015, a 562 boepd, or a 13.77 per cent., increase from an average production of 4,081 boepd in 2014. The Group's average production in the first half of 2016 was 6,114 boepd, a 2,498 boepd, or a 69.1 per cent., increase from an average production of 3,615 boepd in the first half of 2015.

	Heather	Broom
Location	Offshore, UKCS,	Offshore, UKCS
Production Facility	Heather A platform	Heather A platform
EnQuest Working Interest	100.00%	63.00%
Operator.	EnQuest	EnQuest
Field Partners	None	MOL GROWEST (I) Limited, MOL
		GROWEST (II) Limited and Ithaca
		Minerals (North Sea) Limited
Decommissioning liabilities	37.50%(1)	63.00%

(1) The Company's decommissioning liability for Heather as acquired is 37.50 per cent., with 100 per cent. decommissioning liability for any developments it undertakes.

Overview

Heather and Broom are adjacent oil fields located in blocks 2/5a and 2/4a in the UKCS. Heather is located approximately 145 kilometres northeast of the Shetland Islands. The oil field was discovered in 1973, with first oil achieved in 1978. Broom is located seven kilometres west of Heather at the western edge of the North Viking Graben. The oil field was originally known as West Heather and its oil deposits were discovered in 1976 and 1977. Broom first produced oil in 2004.

The Group acquired its working interests in Heather/Broom from Lundin upon EnQuest's formation. The Group owns a 100 per cent. working interest in Heather and a 63 per cent. working interest in Broom. Its partners at Broom include MOL GROWEST (I) Limited, MOL GROWEST (II) Limited and Ithaca Minerals (North Sea) Limited, with 26 per cent., 3 per cent. and 8 per cent. working interests, respectively. The Group's decommissioning liability for Heather as acquired is 37.5 per cent. with 100 per cent. decommissioning liability for any new developments it undertakes. The Group's decommissioning liability for Broom is equivalent to its working interest. Although they no longer retain a working interest in Heather, each of BG Great Britain Limited and Chevron North Sea Limited remain a party to the Heather Joint Operating Agreement and retain voting rights in relation to their interests in the Ninian pipeline systems and SVT and in respect of any matters relating to decommissioning (including health, safety and environmental matters).

Field and processing technical background

The water depth at Heather and Broom is approximately 143 metres while the oil reservoir lies at a depth of 3,210 metres. A total of 66 wells have been drilled at Heather, the majority of which were initially completed as gas-lifted production wells. Heather currently has 13 producing wells and five water injection wells in operation. Broom has four gas-lifted producing wells and two water injection wells.

The Heather oil field contains a fixed steel offshore platform, the Heather A platform, constructed in 1977. This installation accepts production fluids from both Heather and Broom via subsea tieback from the wells at each oil field. At this installation, the Group processes the production fluids from both oil fields and separates them into oil, gas and water. The Group passes the produced oil through a single train, two stage separation process. The Group then exports the processed oil to SVT via the Ninian pipeline system.

After the separation process, the Group treats any produced water and then discharges it back into the sea. The Group routes produced gas through compression trains for artificial lift and also uses produced gas for fuel gas requirements. The Group imports fuel gas from the Western Leg Gas pipeline system as required to meet any fuel gas deficiencies. Finally, the Group injects sea-water into both Heather and Broom to optimise production and maintain the fields' pressure.

Developments

The Heather H66 production well was brought onstream in March 2015 and has performed well. The rig crew on Heather has since moved to Thistle. The water injection flowline at the Broom field failed at the end of August 2014. Following the replacement of a flowline, water injection was reinstated to the Broom field as planned in the second quarter of 2015. Overall production at Heather/Broom in 2015 was ahead of 2014 reflecting the increase in production at Heather following 2014 drilling, offset by the water injection outage on Broom and the planned maintenance shutdown of the Heather and Broom fields in June 2015. High levels of operational uptime have been achieved. Overall levels of water injection improved in 2015 and this increased production rates on both Heather and Broom.

Recent performance and activity programme

Heather/Broom's production of 6,114 boepd for the six months ended 30 June 2016 represented a 69.1 per cent. increase over the same period in 2015. This increase was due to the Heather production well that was brought onstream in March 2015, the reinstatement of water injection to the Broom field in the second quarter of 2015 and very high levels of production efficiency. The Heather platform recently completed one year without an unplanned production outage. The Heather/Broom hub has proved to be particularly responsive to water injection.

7.4 Greater Kittiwake Area

GKA had an average production of 3,981 boepd in 2015, a 2,700 boepd, or a 210.77 per cent., increase, compared to an average production of 1,281 boepd in 2014 (based on the net production since the acquisition at the start of March 2014, as averaged over the full year). The Group's average production in GKA for the first half of 2016 was 3,738 boepd, a 823 boepd, or a 28.2 per cent., increase from the Group's average production of 2,915 boepd in the first half of 2015.

	Kittiwake	Gadwall	Grouse	Goosander	Mallard
Location			Offshore, UKCS
Production Facility			Kittiwake platform
EnQuest Working Interest	50.00%	50.00%	50.00%	50.00%	50.00%
Operator			EnQuest
Field Partners				Dana Petroleum (E&P) Limited
Decommissioning liabilities	25.00%	50.00%	50.00%	50.00%	30.50%

Overview

GKA is located in UKCS blocks 21/12a, 21/18a, 21/19a and 21/19b, and the Group's assets there comprise five offshore oil fields: Kittiwake, Mallard, Gadwall, Goosander and Grouse. The Group also has exploration opportunities in the Eagle and Duck prospects, also located at GKA.

The Group completed its acquisition of a 50 per cent. working interest in GKA on 1 March 2014 and assumed the role of operator of the fields from Centrica North Sea Oil Limited. The Group's partner at GKA is Dana Petroleum (E&P) Limited with a 50 per cent. working interest. The Group's decommissioning liability is 25 per cent. for Kittiwake, 30.5 per cent. for Mallard and 50 per cent. for Grouse, Gadwall and Goosander, in each case for the assets as acquired, and equivalent to its working interest for any developments it undertakes. The Group does not have full control over operations at GKA as a joint operating committee of interest holders has been established to prepare and approve programmes, budgets and authorisations for expenditures proposed by it as operator. See the summary of the GKA joint operating agreement at paragraph 18.5(g)(ii) of Part 9 (''Additional Information'') for further information.

Field and processing technical background

GKA lies in water at depths ranging from 85 to 90 metres while the oil reservoir lies at a depth of approximately 85 metres. These fields have been developed as subsea tie-backs to a steel offshore platform located at Kittiwake. Oil from GKA is processed at the offshore platform and then exported via a 33 kilometre 10 pipeline, in which the Group has taken a 100 per cent. interest following its acquisition of its working interest in GKA, to the Forties Unity platform. From there, the oil is exported to shore at Cruden Bay via the Forties Unity Pipeline system and then on to Grangemouth for further processing

Developments

GKA has demonstrated continual improvement in production efficiency since its acquisition in March 2014, achieving a production efficiency level of approximately 80 per cent. during 2015, including the impact of a planned maintenance shutdown. The redundant Gadwall production well was successfully side-tracked to an up-dip location and was brought onstream in August 2015 with encouraging results. A successful chemical treatment has also been undertaken on Goosander raising production levels substantially. The planned three week GKA maintenance shutdown was successfully completed in September 2015. Gross production in 2015 was over three times the level in 2014, with Gadwall's gross daily peak reaching over 19,000 boepd.

The Directors believe the success of GKA demonstrates the transferability of the EnQuest model and of its ability to create value from mature assets.

Recent performance and activity programme

GKA's production of 3,738 boepd for the six months ended 30 June 2016 represented a 28 per cent. increase over the same period in 2015, with continuing improvements in production efficiency. Gadwall was brought back onstream in August 2015 and has performed well. GKA production is continuing to benefit from chemical treatments on Goosander made in 2015. The 2016 shutdown was delivered securely and successfully during the second half of the year.

In the second quarter of 2016, the Group undertook the drilling of the Eagle exploration well. The Group acquired Eagle along with its other interests in GKA in 2014. The Eagle exploration well was completed in the second quarter of 2016 and was confirmed as a discovery. The preliminary analysis of the results indicated a Fulmar oil bearing reservoir was encountered with a vertical thickness of 67 feet with excellent reservoir properties. In addition, no oil water contact was encountered, representing potential upside volumes on the flank of the structure. The encouraging results of the initial analysis lead the Group to anticipate gross total recoverable reserves to be a similar order of magnitude to those in the nearby Gadwall producing oil field. It is estimated that total gross ultimate recovery from Gadwall will be approximately 6 MMstb. Further evaluation of the Eagle results is ongoing, but given the expected low cost of the tie back, it is expected to be commercial.

On 4 July 2016, Dana Petroleum Limited, the Group's field partner in GKA, issued a press release in respect of a dispute it had recently entered into with the Group regarding the Eagle exploration well. At issue is whether the Group followed the sole risk process in the Joint Operating Agreement relating to GKA correctly and, if not, whether Dana would retain its 50 per cent. interest in the Eagle well discovery without any obligation to contribute to cost. Dana has alleged that, prior to the Group's proceeding to drill the Eagle exploration well, Dana had asserted to the Group that the Group did not have authority to do so. Dana further stated in the press release that it remains its position that it has a 50 per cent. ownership interest in the Eagle well discovery and that Dana has reserved its rights under the relevant licence, under the Joint Operating Agreement and at law. The Group disputes the allegations put forward by Dana, maintains that it has followed the sole risk process in the Joint Operating Agreement and maintains that Dana's position is not supported by the provisions of the Joint Operating Agreement. The Directors believe that, to date, Dana has failed to provide a clear basis for its assertion that it retains a 50 per cent. interest in Eagle without any obligation to contribute to cost. No formal court action has been commenced or threatened by Dana, but the Group and Dana have been corresponding and meeting in respect of these allegations and assertions.

7.5 Alma/Galia

First oil from the Alma/Galia development was achieved on 27 October 2015. Net production at Alma/ Galia since first oil to 31 December 2015, averaged over the twelve months to 31 December 2015, was 1,083 boepd. The Group's average production in the first half of 2016 was 6,433 boepd.

	Alma	Galia
Location	Offshore, UKCS	Offshore, UKCS
Production Facility	EnQuest Producer FPSO	EnQuest Producer FPSO
EnQuest Working Interest	65.00%	65.00%
Operator .	EnQuest	EnQuest
Field Partners	KUFPEC	KUFPEC
Decommissioning liabilities .		As per working interest

Overview

Alma and Galia were dormant offshore oil fields that were previously known as Argyll and Duncan, respectively. Alma was the first oil field to be developed in the UKCS and first produced oil in 1975. Alma and Galia lie 5.4 kilometres from each other, approximately 310 kilometres southeast of Aberdeen, Scotland, in blocks 30/24b, 30/24c and 30/25c.

The Group was awarded a 100 per cent. working interest in Alma/Galia in 2011 through the 26th licensing round conducted by the DECC. In 2012, the Group farmed out a 35 per cent. interest in each field to KUFPEC, who became its commercial partner in development. The Group's decommissioning liability for Alma/Galia is equivalent to its working interest. The Group is currently engaged in a dispute with KUFPEC in relation to the farm out. For further details, see paragraph 13 of Part 2 (''Information on the Group'') and paragraph 19 of Part 9 (''Additional Information'').

Field and processing technical background

The water depth at the Alma and Galia fields is approximately 80 metres, while the Alma oil reservoir lies at a depth of approximately 2,740 metres. Six wells were originally drilled on Alma, although one was subsequently abandoned due to well blockage and is in the process of being replaced. All of the wells on Alma/Galia feature dual ESP completions which provide the wells with artificial lift. In addition, there is a water injection well at the Alma water injection drill centre. Oil from Alma/Galia is transmitted through a series of flowlines to the EnQuest Producer FPSO, where it is processed and stored. From there, the oil is offloaded onto a tanker and transported to buyers. Offloading is scheduled for once every four weeks and is subject to change depending on production levels.

Developments

In the first half of 2015, the EnQuest Producer FPSO left the yard in Newcastle, successfully completed marine performance trials and was towed out to the field, where it was securely moored. It was first made ''storm safe'' and then all the remaining anchor chains were installed. All the risers were then pulled in and the ship was able to weathervane. The subsea equipment was successfully function tested from the vessel via the umbilicals. The Galia production well was also completed and tied into the production manifold.

First oil from the Alma/Galia development was achieved on 27 October 2015, following the safe delivery of final commissioning of all the required systems. In the second half of November 2015, production from the first two Alma ESP wells was increased as the Galia well was also brought onstream.

The EnQuest Producer FPSO has performed consistently well since first oil. High levels of uptime have been achieved on the EnQuest Producer FPSO, with 77 per cent. in 2015 and over 90 per cent. in early 2016.

Recent performance and activity programme

Six Alma/Galia production wells were commissioned by March 2016. All of these wells were brought onstream by early second quarter 2016 and after analysis of the initial results, a production performance enhancing work programme was established. This programme is now complete. The K2 (AP5) well cleaned up naturally after a number of weeks of production, resulting in a substantial increase in production, K1 (AP4) required a chemical treatment which was successful, and the workover of another production well, K3z (AP1), was carried out in early August, further increasing production, taking gross Alma/Galia production levels to around 18,785 boepd between 5 August 2016 and 31 August 2016.

The drilling of well K7, the replacement for the uncompleted K6, is on track, with completion operations underway. K7 should be online by around the end of 2016.

7.6 Alba

Alba had an average production of 1,178 boepd in 2015, a 36 boepd decrease from an average production of 1,214 boepd in 2014. Alba had an average production of 1,236 boepd in the first half of 2016, a 13 boepd, or a 1.0 per cent., decrease from an average production of 1,249 boepd in the first half of 2015.

Location	Offshore, UKCS
Production Facility	Alba Northern platform
EnQuest Working Interest	8.00%
Operator	Chevron North Sea Limited
Field Partners	Chevron North Sea Limited, Centrica Resources
	Limited, Endeavour Energy UK Limited, Mitsui
	E&P UK Limited and Statoil (U.K.) Limited
Decommissioning liability .	As per working interest

Overview

Alba is located in block 16/26a in the UKCS, approximately 209 kilometres northeast of Aberdeen, Scotland. Alba was discovered in 1984 and first produced oil in 1994. Chevron is the operator of the Alba oil field.

In January 2013, the Group acquired an 8 per cent. working interest in Alba upon acquiring two affiliate companies of CIECO Energy (UK) Limited. The Group's partners at Alba include Chevron North Sea Limited, the operator (23.37 per cent. working interest), Centrica Resources Limited (12.65 per cent.), Endeavour Energy UK Limited (25.68 per cent.), Mitsui E&P UK Limited (13.3 per cent.) and Statoil (U.K.) Limited (17 per cent.). The Group's decommissioning liability for Alba is equivalent to its working interest.

Field and processing technical background

As of 30 June 2016, there were 21 active platform production wells, five injector wells and ten active producing wells, consisting of eight producing wells and two injector wells, at Alba. The Alba Northern offshore platform is located in the northern area of the oil field, and there are two subsea manifolds located in the south of the field that are tied back to the platform. Oil is exported from the Alba Northern platform by offload tankers and delivered to onshore oil terminals.

Recent performance and activity programme

Production at Alba during the six months ended 30 June 2016 was 1,236 boepd, closely in line with production for the first six months ended 30 June 2015. This reflected the net effect of the A70 production well being brought online in April, with its performance exceeding expectations, and the two week shutdown early in the year as a consequence of bad weather, followed subsequently by high operational uptime. The A71 production well was drilled in August 2016 and is anticipated to be online later in the second half of 2016.

7.7 PM8/Seligi

The Group's offshore operations at PM8/Seligi had an average production of 8,689 boepd in 2015, of which it was entitled to 5,958 boepd, compared to an average production of 3,459 boepd in 2014 (being the net production from June 2014, when the Group acquired its 50 per cent. working interest in PM8/Seligi, to December 2014, averaged over the full year), of which it was entitled to 2,078 boepd.

	North Raya, South Raya, Lawang, Langat, Yong and Serudon	Seligi
Location	Offshore Malaysia	Offshore Malaysia
Production Facility	Raya Alpha, Raya Bravo,	Seligi platforms (Alpha, Bravo,
	Lawang, Serudon platforms	Charlie, Delta, Echo, Foxtrot,
		Golf, Hotel)
EnQuest Working Interest	50.00%	50.00%
Operator	EnQuest	EnQuest
Field Partners	PETRONAS Carigali Sdn Bhd	PETRONAS Carigali Sdn Bhd
Decommissioning liabilities	As per working interest	Based on proportionate share of
		remaining oil reserves from
		1 January 2014 plus as per
		working interest for new
		platforms, facilities and wells
		installed after 1 January 2014

Overview

The production sharing contract for PM8/Seligi covers a group of oil fields, including the producing Seligi oil field. The Seligi oil field is located in the Malay basin, approximately 240 kilometres offshore Peninsular Malaysia in a water depth of 73 metres. The field was discovered in 1971 through the Seligi-1 exploration well, and a total of 11 appraisal wells were drilled to delineate the fields. First oil at Seligi oil field was achieved in 1988. The Seligi oil field encompasses approximately 80 square kilometres.

PM8 comprises six developed fields, Lawang, Langat, Serudon, North Raya, South Raya and Yong. The fields were discovered between 1990 and 1994 and were progressively developed between 1998 and 2003, with first oil production occurring in 1998. PM8 fields together encompasses approximately 20 square kilometres. PM8 fields are developed with unmanned minimum facility type platforms which are linked back to the Seligi oil field. A total of 26 wells have been drilled to date.

The Group acquired a 50 per cent. working interest in the Seligi oil field and the PSC in respect of PM8 from ExxonMobil Exploration and Production Malaysia Inc. in June 2014. It also entered into an agreement with the state-owned PETRONAS for the continuing development and production of petroleum resources from the PSC in respect of PM8 and the Seligi oil field until 2033. The Group's working interest in the PM8/Seligi PSC is 50 per cent. The Group's partners under the PM8/Seligi PSC are PETRONAS Carigali Sdn Bhd and E&P Malaysia Venture Sdn Bhd, with working interests of 40 per cent. and 10 per cent., respectively.

Field and processing technical background

The Seligi oil field encompasses approximately 80 square kilometres and was developed via eight platforms which were installed between 1988 and 2001. A total of more than 228 wells have been drilled to date. The manned Seligi-A complex, which includes a main production platform and separate bridge-linked gas compression platform, serves as the main hub. Seven unmanned, minimum facilities satellite platforms are tied back to the Seligi-A platform complex via full well-stream producing pipelines and lift gas supply pipelines.

The adjacent PM8 fields together encompass approximately 20 square kilometres and were developed with four unmanned, minimum facility type platforms which are linked back to the Seligi-A platform via full well-stream producing pipelines and lift gas supply lines. A total of 26 wells have been drilled to date.

After separation, crude oil from PM8/Seligi is transported via the Tapis pipeline (operated by ExxonMobil) to the Terengganu Crude Oil Terminal for processing and sale to the domestic market or export.

Developments

The Group assumed offshore field operations in October 2014 and the overall transition was completed in December 2014. The PM8/Seligi asset has delivered strong production performance, well above target, due to improved production efficiency and to the successful idle well restoration activities completed since the Group assumed operatorship. In 2015, the Group was able to deliver material production improvements in both facility uptime and production.

The 2015 PM8/Seligi field infrastructure work programme focused on inspections to establish pipeline, vessel and structural integrity baselines and on overhauls and repairs to gas compression trains. As a result, compressor availability was improved from 70 per cent. to 95 per cent. and overall production efficiency was increased from approximately 80 per cent. to over 90 per cent., delivering an immediate boost to production. In addition, well intervention activities were completed to restore idle wells and optimise existing wells, leading to a production gain of approximately 3,000 gross boepd in the fourth quarter of 2015.

Recent performance and activity programme

Production of 8,152 boepd from PM8/Seligi during the first six months of 2016 was up 5 per cent. on production for the same period during 2015. Production in 2016 started strongly as a result of unusually calm January weather and a successful well intervention. In the second quarter of 2016, a pro-active 11-day shutdown was executed to complete safety checks and inspections that were deemed prudent, after which production returned to good levels. PM8/Seligi's performance is supported by strong production efficiency and the ongoing idle well restoration programme.

In the near term, the Group will continue to enhance production by investing in well interventions and facility integrity to maximise both reliability and production efficiency at low cost. Longer term, development drilling, secondary recovery and field life extension activities will contribute to improved recovery and additional reserves.

7.8 Tanjong Baram

The Tanjong Baram field had an average production of 373 boepd in 2015 (based on net production from first production in June 2015 averaged over the twelve months to the end of December 2015), of which the Group was entitled to 261 boepd.

Location	Offshore, Malaysia
Production Facility	Tanjong Baram wellhead platform
EnQuest Working Interest	70.00%
Operator	EnQuest
Field Partner	Uzma Energy Venture (Sarawak) Sdn Bhd
Decommissioning liability	No decommissioning liabilities under the RSC

Overview

The Tanjong Baram field was discovered in 1995 in the West Baram Delta province, in water depths of 10–20 metres and around 6 kilometres off the coast of Sarawak, East Malaysia. In March 2014, the Group signed a SFRSC with Uzma and PETRONAS to develop and produce the Tanjong Baram field for a period up to March 2023. See paragraph 18.5(m) of Part 9 (''Additional Information'') for further details.

Field and processing technical background

The Tanjong Baram field is designated by PETRONAS as a small marginal field.

The Tanjong Baram development currently consists of an unmanned lightweight wellhead platform located in 10 metres of water, a single flexible pipeline and two producing wells. Production is evacuated through an 8-kilometre tie-back to the West Lutong -A platform operated by PETRONAS under a Production Handling Agreement.

Developments

First production from the Tanjong Baram field was achieved on schedule in June 2015. The host platform operator PETRONAS requested changes to the receiving vessel to accommodate the volumes of liquids in the associated gas. This required the field to be shut-in two months while the work was completed. Tanjong Baram was successfully restarted on 18 August 2015 and the field was producing close to 3,000 gross boepd by the end of 2015 and 2,000 gross boepd at the end of the first half of 2016.

Recent performance and activity programme

Tanjong Baram produced 1,281 net boepd during the first six months of 2016, its first full six months of operation. Production had not yet commenced for the same period in 2015.

8. Operated development assets

All of the Group's operated development assets are offshore oil fields in the UKCS.

8.1 Kraken

The Kraken development asset is the Group's largest development project to date.

Location	Offshore, UKCS
Production Facility	Kraken FPSO
EnQuest Working Interest	70.50%(1)
Operator	EnQuest Heather
Field Partners	Cairn Energy PLC(1)
Decommissioning liability	As per working interest

(1) With economic effect from 1 January 2016, the Group increased its working interest in Kraken from 60 per cent. to 70.5 per cent.

Overview

Kraken is a large heavy oil accumulation in the East Shetland basin, located in block 9/2b to the west of the North Viking Graben located approximately 350 kilometres northeast of Aberdeen, Scotland. The Group is the operator of the asset with a 70.5 per cent. working interest and are continuing to progress it to development following appraisal and well test results with first oil expected in the first half of 2017. The Group's current partner at Kraken is Cairn Energy PLC, with a working interest of 29.5 per cent.

The Group acquired its first working interest in Kraken in January 2012 when it acquired two companies from Canamens Limited, whose assets included a 20 per cent. working interest in Kraken. Later that month, the Group acquired a further 25 per cent. working interest from Nautical Petroleum plc and it became the new operator of Kraken by way of vote of interest holders under the joint operating agreement. In September 2012, the Group acquired a further 15 per cent. working interest in Kraken from First Oil plc. Cairn Energy PLC became a field partner following its acquisition of Nautical Petroleum PLC, the Group's previous field partners at Kraken. As a result of First Oil plc going into administration, EnQuest and Cairn Energy PLC took up First Oil plc's interest pro rata to their then holdings and thus, the Group acquired an additional 10.5 per cent. interest, bringing its total interest to 70.5 per cent. The Group's decommissioning liability for Kraken is equivalent to its working interest. See also paragraph 18.5(j)(iii) of Part 9 (''Additional Information'').

Field technical background and development

Kraken has two separate heavy oil fields: Kraken and Kraken North. The oil fields lie at water depths ranging from approximately 107 to 125 metres. In 2013, the DECC approved the Group's field development plan for Kraken.

To date, the Company has conducted extensive subsurface analysis and has drilled an appraisal well at Kraken North with the aid of the Geostreamer Seismic Survey.

The fixed pipeline systems for the first two Kraken drill centres were installed on the seabed in the first half of 2015. Installation of the mooring system for the Kraken FPSO also commenced in the first half of 2015. Following manufacture, the submerged turret/buoy was transported to the field and successfully installed. Drill centre one and two were fully connected to the turret/buoy.

In the second half of 2015, following the completion of the Kraken batch top-hole drilling programme at drill centre one, the drilling rig progressed with the drilling of individual wells into the reservoir. Reservoir analysis of the two full well penetrations completed as of the end of 2015 correlated very closely with the previous subsurface prognosis based on the Group's subsurface analysis. Procurement, manufacture and installation are continuing in relation to the next phases of wells, subsea infrastructure and the Kraken FPSO.

Expected gross capex for the Kraken development was reduced by an additional approximately \$100 million in October 2016. The gross full cycle capital expenditure estimate has now been reduced to \$2.5 billion from \$3.2 billion at sanction in 2013.

The Group expects Kraken to have a long field life of over 20 years with the prospect of relatively low decommissioning costs.

Recent progress and activity programme.

Overall the project remains on schedule and below budget, with first oil anticipated in the first half of 2017.

The Kraken FPSO is nearing mechanical completion with focus now on pre-commissioning and commissioning activities. All four boilers are mechanically complete and commissioned. All four engines are mechanically complete and have been fully tested on load individually and in synchronised mode and the turret area is also mechanically complete. The accommodation module is fully operational and the operations crew are living on-board. Commissioning activities are ramping up at the quayside before sailing the vessel to deep-water anchorage in order to commission systems such as water injection pumps, HSP power fluid pumps, sulphate reduction package, fire water and deluge, lifeboats.

The subsea installation programme is now complete, with all three drill centres fully connected to the STP buoy for hook up to the FPSO. There is one short programme planned to install the last mooring pile and wire/chain.

The drilling programme continues to make excellent progress. A total of four producer and four injector wells have now been safely drilled and completed, with results meeting or exceeding pre-drill predictions. In October 2016, the Group announced a further approximately \$100 million reduction in the gross full cycle Kraken capital expenditure estimate to approximately \$2.5 billion. This reduction was primarily possible because of the progress on drilling, the execution of the subsea programme and contingency reductions these capital expenditure reductions will reduce cash outflow in 2017 and beyond.

8.2 Scolty/Crathes

Location	Offshore, UKCS
Production Facility	Kittiwake platform
EnQuest Working Interest	50%
Operator	EnQuest
Field Partner	MOL GROWEST (I) Limited
Decommissioning liability	As per working interest

Overview

The Scolty/Crathes development assets are in blocks 21/8a (Scolty) and 21/12c and 13a (Crathes) of the UKCS. Scolty was discovered in 2007 by well 21/8-3 and Crathes was discovered in 2011 by well 21/13a-5. The Group has a 50 per cent. working interest in each of Scolty and Crathes and is the operator of both. The Scolty/Crathes development received regulatory approval and was sanctioned by the Company in the second half of 2015. Scolty/Crathes was the only pure oil offshore development approved by the Oil & Gas Authority in 2015.

Field technical background and development

The Scolty/Crathes development consists of single horizontal wells, equipped with gas lift, to be drilled in each of the Scolty and Crathes fields. The fields will be tied back to the Kittiwake platform, in the Greater Kittiwake Area where the fluids will be processed and the oil exported to shore via the Forties pipeline system. The two fields will pay a processing tariff to GKA up to the end of 2020 after which they will share operating expenditure. Regional pressure history and partial pressure depletion in the wells supports the connectivity through an aquifer to the Forties field. A strong aquifer is expected to support well productivities and pressure maintenance with water injection is not planned.

Recent progress and activity programme

The Scolty/Crathes development remains ahead of schedule and under budget, with the subsea and topside programmes both progressing well. First oil is expected to be deliverable around the end of 2016. The execution of the Group's 2016 drilling programme has been particularly noteworthy with both wells being drilled and completed safely, ahead of time and under budget. The Scolty reservoir was on prognosis and the Crathes reservoir exceeded expectations, with a small reserves upgrade anticipated. The wells are complete and ready to deliver production through the subsea infrastructure to the Kittiwake Host platform. Construction work on the GKA platform has also progressed well, with all major units having now been installed offshore; the subsea scope is also progressing well. A planned shutdown is currently taking place, allowing essential tie-in work to be carried out in preparation for first oil.

9. Competition

The oil industry is competitive, and the Group competes with a substantial number of other companies, many of which have greater resources than it does. Many of these companies explore for, produce and market oil and natural gas, have refining operations and market the resulting products on a worldwide basis. EnQuest's competitors include national oil and gas companies, major international oil and gas companies and independent oil and gas companies. The oil and gas business is highly competitive in the search for and acquisition of reserves, in the procurement of rigs and other production equipment, in the production and marketing of oil and gas and in the recruitment and employment of qualified personnel. See ''Risk factors—Risks relating to the Group's business—The Group depends on its board of directors, key members of management, independent experts and technical and operational service providers and on its ability to retain and hire such persons to effectively manage its business.''

In addition, EnQuest competes with oil and gas companies in the bidding for production licences, farm-ins and other contractual interests in licences that are made available by governments or are for sale by third parties. Competition for such assets is likely to come from companies already present in the region in which the production licences are located as well as new entrants. Competition also exists between producers of oil and natural gas and other industries producing alternative energy and fuel, such as solar and wind energy.

Furthermore, competitive conditions may be substantially affected by various forms of energy legislation and/or regulation considered from time to time by the governments of the jurisdictions in which the Group operates. It is not possible to predict the nature of any such legislation or regulation that may ultimately be adopted or their effects upon the Group's future operations. Such legislation and regulations may, however, substantially increase the costs of developing, producing, marketing or exploring for oil and may prevent or delay the commencement or continuation of a given operation. The effect of these risks cannot be accurately predicted. See ''Risk factors—Risks relating to the Group's business—The Group's business is subject to licensing and other regulatory requirements, which are subject to change, in the countries in which it operates, and it is subject to the risks of licences or other agreements being withheld, suspended, revoked or terminated and of the Group's failing to comply with relevant licences, agreements or other regulatory requirements.''

10. Business Arrangements

10.1 Product lifting and distribution

Petroleum from Heather/Broom is processed at the Heather A offshore platform and then transported through the Ninian pipeline system to SVT. The Group also has the capability to import fuel gas from the Western Leg pipeline to the Heather A platform. Petroleum from Thistle/Deveron is processed at the Thistle Alpha offshore platform and then is transported to SVT through the Brent System pipeline via the Dunlin and Cormorant platforms.

The Group's participation in these pipeline systems and SVT is regulated by various operating agreements and the Group holds equity interests in these assets. The costs of maintaining and operating these facilities are shared among the users thereof on a throughput-related basis. The Group is party to a cross-user liability agreement that provides indemnities between the various groups of owners and between the individual owners for injury or damage caused by the performance or non-performance of their obligations in respect of SVT, the Ninian pipeline system, the Dunlin to Cormorant pipeline and the Brent system pipeline. See ''Risk factors—Risks relating to the Group's business—The Group relies on third party infrastructure such as the Sullom Voe Terminal and the Terengganu Crude Oil Terminal that it does not control and is subject to tariff charges that it does not control.''

Petroleum from Alba, where the Group holds a minority interest, is transported by offload tanker from the Alba Northern platform to onshore terminals. With respect to production from GKA (including future production from the tied-back Scolty/Crathes development), the Group holds an equity interest in an offshore platform at Kittiwake and a 100 per cent. interest in a pipeline linking this platform to the Forties Unity platform. GKA fields are tied via subsea infrastructure to the offshore platform at Kittiwake. Petroleum from the platform at Kittiwake is transported via pipeline to the Forties Unity platform where it

is then transported to shore at Cruden Bay via the Forties Unity pipeline system. The petroleum is taken from Cruden Bay to Grangemouth for further processing.

Production from Tanjong Baram is evacuated through an 8-kilometre tie-back to the West Lutong -A platform operated by PETRONAS under a Production Handling Agreement. Production from PM8/Seligi is transported via the Tapis pipeline (operated by ExxonMobil) to the Terengganu Crude Oil Terminal for processing and sale.

With respect to future production from Kraken, the Kraken FPSO will be connected to wells via subsea infrastructure. Offload tankers will transport produced oil from the Kraken FPSO to onshore oil terminals.

10.2 Sales and customers

The Company's entitlement to oil (in terms of Brent Blend) is made available for sale at SVT for the Group's UKCS production (excluding GKA and Alma/Galia), the Kinneil Oil Terminal for the Group's GKA production and the Terengganu Crude Oil Terminal for the Group's Malaysian production. Production from Alma/Galia is lifted by tanker and cargoes which have been sold are then delivered to the relevant buyer's terminal.

The Group's oil sales for its UKCS assets are primarily priced using the Platts Dated Brent crude oil benchmark and the majority of sales are priced on a month average basis. Differentials to the benchmark price are negotiated with customers. Fixed differentials are negotiated for term sales and differentials on spot sales are negotiated on a cargo-by-cargo basis. Prices for the Group's Malaysian oil sales are set by the Malaysian OSP, which is generally a significant premium to the Platts Dated Brent benchmark. A Tapis differential is then applied to the Malaysian OSP and further differentials are negotiated with customers.

As of 31 December 2015, the Group had three customers accounting for 65 per cent. of outstanding trade and other receivables (2014: three customers, 89 per cent.; 2013: two customers, 72 per cent.) and five joint venture partners accounting for 98 per cent. of joint venture receivables (2014, three joint venture partners, 95 per cent.; 2013: three joint venture partners, 99 per cent.). Substantially all of the Group's oil sales during 2015 were to three counterparties: Vitol (28.4 per cent.), TOTSA (18.7 per cent.) and Petron (11.2 per cent.). The Company is considering alternative sales and marketing options for its production, which may help it to diversify its customer base, in particular with respect to production from Alma/Galia and Kraken (where oil will also be lifted by tanker and delivered for sale to a port).

10.3 Suppliers and third party contractors

The Group relies on the services of various contractors and advisers in the performance of the Group's activities, including drilling and related operations.

The Group has an agreement with KCA Deutag, an international drilling contractor. KCA Deutag provides platform drilling services on Heather and Thistle under this framework agreement. This is a call-out services agreement and the value of these depend on the level of drilling activity performed during the year.

Engineering and construction services for the Heather, Broom and Thistle fields have been provided by the PSN Wood Group since November 2009. The annual value of the Group's contract with the PSN Wood Group varies dependent upon the level of activity performed during the year.

10.4 Field and commercial partners

The majority of the Group's assets are owned, explored and developed through commercial partnerships with international and national oil and gas companies. When EnQuest evaluates whether to enter into a commercial partnership or joint venture, it seeks prospective commercial partners who will complement the Group's existing strengths. EnQuest conducts thorough business and financial diligence on all its prospective commercial partners and strive to ensure they will be able to finance their portion of any development.

During the life-cycle of the commercial partnership or joint venture, EnQuest often has a very active role in the technical, financial and administrative management of operations including in situations in which it does not take on an official operator role. The Group typically maintains involvement with many aspects of operations and works closely with its commercial partners to ensure that it remains in compliance with the ongoing obligations under the licences or agreements pursuant to which the Group operates. For a discussion of certain risks associated with the Group's reliance on commercial partners, see ''Risk factors— Risks relating to the Group's business—The Group conducts most of its operations with commercial partners which may increase the risk of delays, additional costs or the suspension or termination of the licences or the agreements that govern the Group's assets.''

10.5 Seasonality

Seasonal weather conditions (particularly winter in the UKCS and the monsoon season in Malaysia) and licence stipulations can limit the Group's drilling and producing activities and other oil and natural gas operations in certain areas. These seasonal anomalies can increase competition for equipment, supplies and personnel during the spring and summer months, which can lead to shortages and increase costs or delay the Group's operations. These seasonal anomalies may also reduce the available weather windows for hooking up the Kraken FPSO.

10.6 Health, safety, environment and assurance

The Group is subject to a wide range of laws, regulations, directives and other requirements governing the protection of the environment and health and safety matters. See ''Risk factors—Risks relating to the Group's business—The Group could incur material costs to comply with, or as a result of liabilities under, health and safety and environmental regulations.'' One of its top priorities is to achieve and maintain high health, safety and environmental performance. The Directors believe the Group has robust management systems, a culture of positive engagement and a commitment to continuous improvement. It is committed to respecting the people and environments that its business may affect, and it aims to operate its business to achieve safe results, with minimal or no harm to people or the environment. To achieve this the Company aims to manage its business in compliance with legislation and industry standards, maintain high-quality systems and processes and seek to maintain safe and healthy workplaces.

(a) Health and safety

To help ensure that the Group maintains safe and healthy workplaces for all the Group's employees and contractors, the Group has developed a Health & Safety Management System that is aligned with the requirements of the Occupational Health and Safety Assessment Series Standard—OHSAS 18001:2007.

Each of the Group's assets are inspected periodically by the Health and Safety Executive. There have been three instances of non-compliance with health and safety legislation reported, with improvement notices issued. The non-compliance and remediation has not had and is not expected to have a material impact on the Group.

(b) Environmental

The Group has in place an Environmental Management System to ensure its activities are conducted in such a way that the Group manages and mitigates its impact on the environment.

The Group's system is aligned with the requirements of the International Organization for Standardization's environmental management system standard—ISO 14001:2004. The Group's Environmental Management System was verified under The Convention for the Protection of the Marine Environment of the North-East Atlantic OSPAR Recommendation 2003/5 and applicable guidance in October 2012.

(c) Assurance

The Group strives for continuous improvement in its HSE&A performance. EnQuest periodically audits and reviews the Group's HSE&A management system, to help ensure compliance with all applicable regulations, as well as the Group's policies, principles, processes and procedures, and to identify areas for improvement.

The Group's risk-based audit and assurance programme is designed to measure the conformance and effectiveness of HSE&A management across all operations, including contractor and supplier organisations as applicable. Other assurance activities are also periodically conducted to ensure that the Group learns, and proactively identifies areas to improve its HSE&A performance.

10.7 Insurance

The Group maintains the types and amounts of insurance coverage that it believes are consistent with customary industry practices in the jurisdictions in which the Group operates. The Group's oil and gas properties and liabilities are insured within an operational energy insurance package. Coverage under the terms of this insurance package includes physical damage, operators extra expense (well control, seepage, pollution clean-up and re-drill) and third party liabilities. Coverage is placed in respect of scheduled worldwide oil and gas exploration and production activities. The Directors believe limits and deductibles in force for the Group are in line with applicable oil industry insurance standards.

Where applicable, construction all risks insurance coverage is procured in respect of development projects. Such coverage is generally for works executed anywhere in the world in performance of contracts wherein the Group is at risk including loss of, or damage to, the pipeline systems, risers, umbilicals, christmas trees and completions to be installed and liabilities to third parties arising therefrom.

The Group's philosophy is to arrange such other insurance from time to time in respect of its other operations as required and in accordance with industry practice and at levels which it feels adequately provide for the Group's needs and the risks that it faces. The Group has not had any material claims under its insurance policies that would either make them void or materially increase their premiums. There can be no assurance, however, that the Group's insurance coverage will adequately protect it from all risks that may arise or in amounts sufficient to prevent any material loss. See ''Risk factors—Risks relating to the Group's business—The Group does not insure against certain risks and its insurance coverage may not be adequate for covering losses arising from potential operational hazards and unforeseen interruptions.''

11. Employees

As at 31 August 2016, the Group had 433 full-time equivalent employees. As of 31 December 2013, 2014 and 2015, the Group employed 514, 765 and 642 full-time employees, respectively. As of 30 June 2015 and 2016, the Group employed 731 and 625 full-time employees, respectively.

The following table sets forth the Group's full-time employees as of 31 December 2013, 2014 and 2015 and as of 30 June 2015 and 2016.

	As of 31 December			As of 30 June
	2013	2014	2015	2015	2016
Directors	7	7	8	7	7
Operational (onshore)	206	255	277	280	266
Operational (offshore)	13	120	137	140	130
Corporate	38	28	24	28	24
Contractors(1)	250	355	196	276	198
Total	514	765	642	731	625

Note:

(1) Excluding contractors who are employed through a third party.

	As of 31 December				As of 30 June
	2013	2014	2015	2015	2016
United Kingdom	507	648	491	590	458
Malaysia	4	112	138	128	152
Dubai	3	5	13	13	15
Total	514	765	642	731	625

The Directors believe that the Group has satisfactory working relationships with its employees and have not experienced any significant labour disputes or work stoppages. The Directors believe that the Group has good working relationships with its employees in all territories. There is no unionisation currently in place for EnQuest employees at any of the Group's locations and the Group has not suffered any labour disputes or stoppages.

12. Bribery laws

The Group has consolidated anti-bribery policies in light of the guidance provided by the UK authorities following the introduction of the UK Anti-Bribery Act. The Company has implemented company-wide training on these policies.

13. Legal and arbitration proceedings

The Group becomes involved from time to time in various claims and lawsuits arising in the ordinary course of its business. Other than as discussed below, the Company is not, nor has been during the past 12 months, involved in any governmental, legal or arbitration proceedings which, either individually or in the aggregate, have had, or are expected to have, a material adverse effect on the Company's and/or the Group's financial position or profitability, nor, so far as the Company is aware, are any such proceedings pending or threatened. See ''Risk factors—Risks relating to the Group's business—The Group's operations are subject to the risk of litigation.''

The Group is currently engaged in a dispute with KUFPEC, the Group's field partner in respect of Alma/ Galia. KUFPEC has commenced a court action in the High Court of Justice claiming an alleged breach of one of the Group's warranties provided under the Alma/Galia Farm-in Agreement and seeking damages of \$91 million (the maximum breach of warranty claim permitted under the Alma/Galia Farm-in Agreement), together with interest. The court proceedings are currently stayed as the parties attempt to resolve the disputed issues. In the event that no agreement is reached and the court proceedings are recommenced, the Directors believe that a considerable period will elapse before any decision is reached by the courts. The Directors consider the merits of the claim to be poor and the Group intends to vigorously defend itself. The Group has not made any provisions in respect of this claim as the Directors believe the claim is unlikely to be successful; and in any event the Directors believe the chances of an outcome exposing the Group to material damages are remote. There can, however, be no assurances that this claim will not ultimately be successful, or that the Group would not otherwise seek to enter into a settlement or compromise in respect of this claim, or that in the event of any such circumstances the Group would not incur costs and expenses in excess of its estimates.

The Group is also currently engaged in discussions with EMAS, one of the Group's contractors on Kraken who performed the installation of a buoy and mooring system, in relation to the payment of approximately \$20 million of variation claims which EMAS claims is due as a result of soil conditions at the work site being materially different from those reasonably expected to be encountered based on soil data previously provided. The Group is confident that such variation claims are not valid and that accordingly such amount is not due and payable by the Group under the terms of the contract with EMAS. No formal court action has been commenced or threatened by EMAS. The parties are currently in discussions pursuant to the dispute resolution process under the contract.

PART 3—OVERVIEW OF ENQUEST'S MARKET

Certain of the projections and other information set forth in this section have been derived from external sources including Oil & Gas UK (a non-profit organization whose members comprise oil and gas companies with active operations in the UKCS), International Energy Agency, PWC—The Malaysian Oil & Gas Industry, Malaysia Energy Statistics Handbook 2015, Factset, the U.K. government website (www.gov.uk), UKCS Maximising Recovery Review: Final Report and the Department of Energy and Climate Change. A member of the Company's Senior Management serves on the board of directors for Oil & Gas UK. Industry publications, surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. The Company believes that these industry publications, surveys and forecasts are reliable, but the Company has not independently verified them and cannot guarantee their accuracy or completeness.

The projections and forward-looking statements in this section are not guarantees of future performance and actual events and circumstances could differ materially from current expectations. Numerous factors could cause or contribute to such differences. See the sections entitled ''Risk factors'' and ''Information regarding forward-looking statements'' at the beginning of the document.

1. Introduction

Following years of stability, crude oil prices collapsed by approximately 77 per cent. with the Brent Global Spot ICE decreasing from a high of \$115/bbl in June 2014 to \$27.88/bbl in January 2016. The collapse in prices was largely driven by a combination of a slowdown in global demand and a surge in supply from countries outside of OPEC. However, prices recovered during the first half of 2016 peaking at approximately \$50/bbl in June 2016 following production outages due to wildfires in Canada and several attacks on Nigeria's oil network by rebel groups. (Source: International Energy Agency Oil Medium-Term Market 2015).

Global crude oil demand increased by 1.78 mbbl/day year on year (''YoY'') in 2015 with countries outside the Organization for Economic Cooperation and Development (''OECD'') accounting for approximately 51 per cent. of global demand and representing approximately 78 per cent. of the 1.78 mbbl/day increase. China was the largest contributor to Non-OECD demand, with 11.4 mbbl/day. OECD members' demand grew marginally in 2015 by 0.4 mbbl/day. (Source: International Energy Agency—Oil Market Report, July 2016).

The decision against a reduction in supply to rebalance the global oil markets in 2014 by OPEC member states resulted in crude oil prices spiralling downwards. OPEC members increased production in 2015 by 1.2 mbbl/day representing a significant step up given OPEC supply was flat between 2013 and 2014. Non-OPEC supply increased as well, however the YoY change between 2014 and 2015 of 1.3 mbbl/day was considerably lower compared to the 2.5 mbbl/day increase between 2013 and 2014. The slowdown in non-OPEC supply was a function of the lower oil price environment which rendered the costs involved with unconventional production, particularly in North America, too high to carry on with at the same rate in 2014. (Source: International Energy Agency Oil Market Report, January 2016).

2. United Kingdom Continental Shelf

2.1 Overview of the UKCS

The UKCS can be broadly divided into five main areas: the Central North Sea, the Northern North Sea, the Southern Gas Basin, the West of Britain and the Atlantic Margin. Amoco discovered the first oil in the U.K. sector of the North Sea in 1969 in what is now the Arbroath field and the first U.K. offshore oil production commenced in June 1975 from the Argyll field. BP discovered the first North Sea gas field in 1965 (West Sole) and production of gas in the UKCS began in March 1967 when the West Sole field was brought on-stream in the Southern Gas Basin. After the first exploration success, the surge in activity led to more than 25 billion boe being discovered by the mid-1970s. More than 43 bboe have been recovered from 1967 to 2015, with further overall recovery forecast to be up to 22 bboe. The UK has the potential to deliver 8 to 12 bboe in existing reserves, 1.5 to 4 bboe in potential additional resources and 2 to 6 bboe in yet-to-find potential. (Source: Oil & Gas UK Economic Report 2015)

2.2 Activity in the UKCS

Production from the UKCS averaged 1.64 million boepd in 2015, a 9.7 per cent. increase from 2014. This increase is the result of improved production efficiency and asset upgrades, as well as production from new field start-ups. Despite the improvement in production, revenues fell by 30 per cent. between 2014 and 2015 to £18.1 billion—a consequence of the lower oil price environment. The industry has made substantial progress in reducing costs and improving efficiency, with unit operating costs falling from \$29.30/bbl to \$20.95/bbl in 2015. Costs are expected to fall another 20 per cent. to around \$17/bbl during the course of 2016. (Source: Oil & Gas UK Activity Survey, 2016)

2.3 Exploration and appraisal activity

Exploration drilling is at its lowest since exploration on the UKCS began in 1964. In 2015, 13 exploration wells were drilled, discovering 150 MMboe of recoverable reserves (the best success per exploration well in ten years). From 2000 to 2015, 400 exploration wells were drilled, resulting in 4.4 bboe of reserves being discovered. Exploration has continued on its downward trend since 2008, with only 13 wells drilled in 2015 compared with 44 in 2008. This represents a 70 per cent. fall. Lack of funding has had a significant effect on exploration and appraisal activity. In 2015, 12 wells were affected by difficulties in obtaining capital. Just over £780 million was spent on exploration and appraisal activity in 2015, including seismic data acquisition and interpretation. exploration and appraisal activity is expected to fall in 2016, with 7 to 10 exploration wells and 6 to 9 appraisal wells expected. (Source: Oil & Gas UK Activity Survey, 2016)

2.4 Production history

In 2015, the production of 1.64 million bbld from the UKCS was 9.7 per cent. higher than the previous year. This represents the first annual production increase on the UKCS since 2000. The rise was driven by a combination of improved performance from existing assets, increased output from fields that came on-stream in 2014 and new start-ups in 2015.

Liquids & Gas Production in the UKCS

(Source: Oil & Gas UK Activity Survey 2016)

2.5 Unit operating costs have fallen significantly

Given the low oil price environment leading to a focus on costs and efficiencies, unit operating costs have fallen from almost \$30/bbl in 2014 to \$20.95/bbl in 2015. Unit operating costs are expected to continue to fall in 2016 to \$17/bbl—a total decrease of 43 per cent. in two years. Despite this reduction in costs and the 10 per cent. increase in production in 2015, if current prices prevail, nearly half of UKCS oil fields will not cover their operating costs in 2016. (Source: Oil & Gas UK Activity Survey 2016)

2.6 Sharp reduction in capital expenditures

Capital expenditures decreased by 22 per cent. in 2015 (£11.6 billion) as some large projects reached completion and increased capital discipline in the context of low oil prices saw investments in greenfield or brownfield developments drastically reduced. The majority of capital invested in 2015 was spent on projects which had been approved in previous years, and producing assets accounted for more than a third of total capital expenditures, mostly in order to maintain production levels. Capital expenditures are expected to continue falling and are likely to be below £10.0 billion in 2016, while already approved projects and maintenance investments will continue to represent the majority of capital expenditures in the near future. (Source: Oil & Gas UK Activity Survey 2016)

2.7 Significant potential remains

Despite more than 43 bboe of reserves already recovered, the UKCS still has substantial oil and gas resources and exploration potential. Based on the DECC's latest figures, Oil & Gas UK has estimated that there are up to 22 bboe still to be developed. Current investment plans have the potential to deliver 8 to 12 bboe of reserves from existing fields and already approved investments and an additional 1.5 to 4.0 bboe from incremental and new field developments that have not yet been approved. (Source: Oil & Gas UK Economic Report 2015).

Oil & Gas UK estimates that between 2 bboe and 6 bboe have yet to be discovered. Significant additional investment will be required if these undiscovered resources are to be recovered from the UKCS and recovery will rely, to a large extent, on the availability of existing infrastructure. (Source: Oil & Gas UK Economic Report 2015).

2.8 Government measures to encourage activities in the UKCS

Since 1970, the UKCS has seen over £590 billion of investment comprising of £375 billion of capital investment in exploration drilling and field development, £215 billion on production operations and £4 billion on decommissioning assets that have ceased production. In 2014 rising expenditure and falling revenues led to a £4.2 billion cash-flow deficit, the largest on the UKCS since 1976. UKCS capital investment in 2014 was at a record high of £14.8 billion. However, continued decline in production and oil prices has resulted in tax receipts falling sharply since reaching £14 billion in 2008-09. HM Treasury estimates tax receipts of £2.2 billion in the fiscal year 2015-15, which is expected to decline further to just £0.5 billion by 2021. (Source: Oil & Gas UK Economic Report 2015). In addition, rapid decline in exploration has led to fewer hydrocarbon discoveries. (Source: UKCS Maximising Recovery Review: Final Report, Sir Ian Wood, February 2014). A number of initiatives are under way which have the potential to increase the UKCS's competitiveness and to attract international investment.

2.9 The Wood Report

On June 10, 2013 Edward Davey MP, Secretary of State for Energy and Climate Change, announced a review of U.K. offshore oil and gas recovery and its regulation, led by Sir Ian Wood (ex-Chair of the Wood Group). Interim findings of this review were published in November 2013 and a final report was issued in February 2014. The report (the ''Wood Report'') identified key issues facing the UKCS:

• Lack of focus on maximizing economic recovery: Operators have pursued individual commercial objectives in isolation, with limited shared commitment or obligation to maximize economic recovery across fields. New resources and infrastructure are being designed for specific developments without taking into account wider potential demand.
• Fiscal policy: Fiscal instability has been identified as a significant factor in the basin underperformance.
• Government stewardship: The regulator situated within DECC (the ''Regulator''), is significantly under resourced and is not adequate to effectively respond to many of the demands of managing an increasingly complex business and operating environment.
• Industry stewardship: Rapid fall in production efficiency is an indication of poor asset stewardship which the Regulator has not been able to adequately confront. Industry participants must be encouraged to invest more in Enhanced Oil Recovery (''EOR'') and Improved Oil Recovery (''IOR'') techniques in order to avoid leaving significant value behind.
• Lack of collaboration and overzealous legal and commercial behaviour between operators: A lack of collaboration across the industry has increased costs, caused delays and led to poorer recovery.
• High quality strategic thinking by PILOT, but poor implementation: On issues such as exploration, infrastructure and decommissioning, the UKCS requires integrated planning and collaboration to ensure the most efficient approach is adopted across the UKCS. The Regulator and the industry must continue to work together through PILOT, a joint programme involving the Government and the UK oil and gas industry, to implement the strategies already developed in a number of key areas.

The Wood Report made the following recommendations:

• Government and industry to develop and commit to a new strategy for Maximizing Economic Recovery from the UKCS (''MER UK'');

• DECC to create a new arm's length independent regulatory body charged with effective stewardship and regulation of the UKCS hydrocarbon recovery, and maximizing collaboration in exploration development and production;
• The Regulator to take additional powers to facilitate implementation of MER UK;
• Develop and implement important sector strategies. The new Regulator should work with the industry to develop and implement strategies outlined in the report which build on the work undertaken within PILOT to underpin the MER UK strategy;
• Exploration (including access to data);
• Asset stewardship (including production efficiency and improved oil recovery);
• Regional development (starting with the southern North Sea);
• Infrastructure;
• Technology (including Enhanced Oil Recovery and Carbon Capture and Storage);
• Decommissioning.

(Source: UKCS Maximising Recovery Review: Final Report, February 24, 2014)

In July 2014, the Government published its response to the Wood Review. It accepted all the Wood Review's recommendations, and established the Wood Review Implementation Team to implement the recommendations. This includes:

• the foundation of OGA, a new regulatory body headquartered in Aberdeen with significant presence in London. On 1 April 2015, the OGA was established as an Executive Agency; and
• the formation of an interim advisory panel to advise on the implementation of the Wood Review, chaired by Sir Ian Wood.

2.10 Fiscal Regime and Tax Reforms

In the 2014 Budget, the government announced that they would revise the UK's oil and gas regime to ensure it continues to incentivise economic recovery as the basin matures. In December 2014, the government published a report titled Driving Investment: a Plan to Reform the Oil and Gas Fiscal Regime. In this report, the government recognised that the tax burden has to fall as the basin matures. It also addressed that fiscal policy should be internationally competitive, and that the UKCS would no longer be viewed as a revenue raising asset, but for the full economic value it could deliver across the oil & gas value chain.

In the March 2015 Budget, HM Treasury announced a range of tax reforms to help attract fresh investment. This received continued endorsement in the summer Budget 2015, with further measures announced in the March 2016 Budget. The SCT was reduced to 20 per cent. from 1 January 2015 and to 10 per cent. from 1 January 2016; the PRT was reduced from 35 per cent. to 0 per cent. from 1 January 2016. A new investment allowance was also introduced, which replaces various field allowances that previously existed (including small field allowances, a West of Shetland allowance, a heavy oil allowance, an HPHT allowance and a Brownfield allowance). The new investment allowance is based on capital expenditure and generates an allowance of 62.5 pence in the pound against adjusted ring fence profits for SCT purposes. This reduced the headline tax rate on a portion of production up to the Ring Fence Corporation Tax at 30 per cent.

3. Malaysia

3.1 Overview of the Malaysian Upstream Oil and Gas Sector

Malaysia's upstream oil and gas sector dates back to the early 1900s when the first oil well was drilled by Shell in Sarawak in 1910. Malaysia's initial oil and gas activities was governed by the 1966 legislation, primarily the Petroleum Mining Act which gave rights to Exxon and Shell to explore and produce resources in return for royalties and taxes paid to the government. However, in 1974 the Malaysian government introduced the Petroleum Development Act 1974, which saw the creation of PETRONAS, Malaysia's national oil company. Under the Petroleum Development Act 1974, all exclusive rights to all oil and gas resources in Malaysia were transferred to PETRONAS.

Malaysia's oil and gas industry makes a significant contribution to the Malaysian economy, accounting for 20 per cent. of the country's Gross Domestic Production in recent years. The domestic upstream sector is comprised broadly of three geographic areas: Peninsular Malaysia, Sabah and Sarawak. Existing assets have matured and focus has shifted towards under explored deepwater areas and EOR projects to extend the field life of mature assets.

Malaysia's upstream activities are governed by 101 PSCs and 6 RSCs. (Source: PWC—The Malaysia Oil and Gas Industry—Challenging times, but fundamentals intact, May 2016)

(Source: Malaysia Energy Statistic Handbook, 2015)

PETRONAS is the largest player in the Malaysian upstream sector. The company announced that they are aiming to reduce capital expenditure and operating expenses by RM50 billion due to the prolonged low oil price environment. Given PETRONAS' dominant position in the Malaysian upstream sector, this is expected to have a negative impact on investments across the country's upstream sector. (Source: PWC— The Malaysia Oil and Gas Industry—Challenging times, but fundamentals intact, May 2016)

3.2 Deepwater

Malaysia's deepwater acreage remains largely underexplored with an estimated 7 bboe of resources yet to be discovered. Almost half of the resources have been discovered to date. However, given the low oil price environment, there is pressure to reduce costs thus delaying the exploitation of Malaysia's deepwater resources. (Source: PWC—The Malaysia Oil and Gas Industry—Challenging times, but fundamentals intact, May 2016)

3.3 Marginal Fields

Malaysia introduced RSCs in the hope of unlocking approximately 0.6 bboe of resources spread across 100+ marginal fields, however with breakeven costs around \$55/bbl, these projects may face challenges in the current low oil price environment. (Source: PWC—The Malaysia Oil and Gas Industry—Challenging times, but fundamentals intact, May 2016)

3.4 Enhanced Oil Recovery

14 oilfields have been identified where EOR technology could be implemented. These projects have the scope to unlock 0.8 to 1 bboe of resources. There are 10 EOR projects in the pipeline to be developed, however these projects are expensive requiring an investment of \$14 billion to execute them, making them difficult to execute in the low commodity price environment. (Source: PWC—The Malaysia Oil and Gas Industry—Challenging times, but fundamentals intact, May 2016)

PART 4—OPERATING AND FINANCIAL REVIEW

The following review should be read in conjunction with Part 2 (''Information on the Group'') of this document and the financial information set out in Part 5 (''Financial Information on the Group'') of this document and the other financial information contained elsewhere in this document. Prospective investors should read the entire document (including information incorporated into this document by reference) and not just rely on the information set out below, and you should not rely solely on key and summarised information. Ernst & Young LLP issued an audit opinion in respect of the financial information for the Company for each of the financial years ended 31 December 2013, 31 December 2014 and 31 December 2015.

The Company encourages you to read the following discussion in conjunction with the Group's consolidated financial statements and the related notes thereto referred to in Part 5 (''Financial Information on the Group'') (which have been incorporated into this document by reference).

The 2P reserves data presented in this section have been audited by GCA in accordance with SPE PRMS guidelines and definitions. Estimated 2P reserves presented herein may differ from estimates made in accordance with guidelines and definitions used by other companies in the industry. See ''Presentation of financial information'' and ''Presentation of Reserves'' at the beginning of the document. Unless otherwise indicated, all production figures are presented on a net to the Group's working interest basis. Where gross amounts are indicated, they are presented on a total basis—i.e. the actual interest of the relevant licence holder in the relevant fields and licence areas without deduction for the working interest of the Group's commercial partners, taxes or royalty interests or otherwise. The Group's legal and working interests in the relevant fields and licence areas are separately disclosed. See paragraph 18.5 of Part 9 (''Additional Information'') for a more detailed discussion of the terms of the agreements governing the Group's interests. The following discussion includes forward-looking statements which, although based on assumptions that the Directors considers reasonable, are subject to risks and uncertainties which could cause actual events or conditions to differ materially from those expressed or implied by the forward-looking statements. For a discussion of some of those risks and uncertainties please refer to the sections entitled ''Information regarding forward-looking statements'' and ''Risk factors'' at the beginning of the document.

1. Overview

The Group is the largest independent UK oil producer in the North Sea (as last measured for the twelve months ended 31 May 2016) and, as of 30 June 2016, had interests in 29 UK production licences, covering 41 blocks or part blocks and was the operator of 26 of these production licences. The Group also has two currently producing assets located in Malaysia. The Group's average daily production on a working interest basis for the six months ended 30 June 2016 was 42,520 boepd. The Group's average daily production on a working interest basis for the year ended 31 December 2015 was 36,567 boepd and its 2P reserves were 203 MMboe as of 31 December 2015. As a result of the increase in the Group's interest in the Kraken development from 60 per cent. to 70.5 per cent., its net 2P reserves increased to 216 MMboe as of 1 January 2016. The Group's 2P reserves included 200 MMboe from the Group's UKCS operations and 16 MMboe from the Group's Malaysian operations. In the six years since EnQuest's inception, it has increased its net 2P reserves to 216 MMboe as of 1 January 2016, representing a net 167 per cent. increase or a growth of 18 per cent. per annum, and converted the equivalent of 68 per cent. of its original 81 MMboe reserves into produced oil. As of 31 December 2015, the Group's assets had a reserve life of 18 years.

EnQuest's strategic intention is to deliver sustainable growth by focusing on exploiting its existing reserves, commercialising and developing discoveries, pursuing selective acquisitions and converting contingent resources into reserves. In the current low oil price environment, the Company's priorities are to deliver on execution, streamline operations and strengthen its balance sheet. The Group's eight producing assets generated EBITDA of \$464.8 million during 2015 and \$242.9 million during the first half of 2016, in each case including the benefit of the Group's hedging activities.

Asset	Field	Working interest
UKCS
Thistle/Deveron	Thistle	99%
	Deveron	99%
Dons	Don Southwest	60%
	Conrie	60%
	West Don	78.6%
	Ythan	60%
Heather/Broom	Heather	100%
	Broom	63%
GKA	Kittiwake	50%
	Grouse	50%
	Mallard	50%
	Gadwall	50%
	Goosander	50%
Alma/Galia	Alma	65%
	Galia	65%
Alba Malaysia	—	8%
PM8/Seligi	—	—
	PM8	50%
	Seligi	50%
Tanjong Baram	Tanjong Baram	70%

The following table sets forth the Group's working interests in its producing assets:

The following table sets forth the net daily average production on working interest basis for each of the Group's producing assets for the years ended 31 December 2013, 2014 and 2015 and the six month periods ended 30 June 2015 and 30 June 2016:

	Net daily average production (boepd)
		Year ended 31 December	Six months ended 30 June
Asset	2013	2014	2015	2015	2016
Thistle/Deveron	7,925	9,025	8,930	7,690	8.966
Dons	11,014	8,835	7,690	6,419	6,601
Heather/Broom	4,339	4,081	4,643	3,615	6,114
GKA	—	1,281(1)	3,981	2,915	3,738
Alma/Galia	—	—	1,083(2)	—	6,433
Alba .	922(3)	1,214	1,178	1,249	1,236
Total UKCS	24,200	24,436	27,505	21,888	33,087
PM8/Seligi	—	3,459(4)	8,689	7,777	8,152
Tanjong Baram	—	—	373(5)	—	1,281
Total Malaysia	—	3,459	9,062	7,777	9,433
Total	24,200	27,895	36,567	29,665	42,520

Notes:

(1) Production since the completion of the acquisition on 1 March 2014, averaged over the twelve months to 31 December 2014.

(2) Production since first oil on 27 October 2015, averaged over the twelve months to the end of 2015.

(3) Production since the completion of the acquisition on 22 March 2013, averaged over the twelve months to 31 December 2013.

(4) Production since the completion of the acquisitions at 27 June 2014, averaged over the twelve months to 31 December 2014.

(5) Production since completion of the project in June 2015 and first oil on 18 August 2015, averaged over the twelve months to 31 December 2015.

All of the Group's assets, with the exception of the Group's Malaysian assets, PM8/Seligi and Tanjong Baram, are located in the UKCS in the North Sea. In 2015, in the context of low oil prices and as part of its investment prioritisation programme, the Group disposed of its interests in assets in Norway, Egypt and

Tunisia and its exploration assets in Malaysia. The Group also relinquished interests in a number of exploration licences in the United Kingdom.

The Group's primary development asset is the Kraken development, in which it currently owns a 70.5 per cent. interest. The Kraken development, of which the Group is the operator, is its largest development to date and one of the largest projects in the UKCS in recent years. The Directors expect it to deliver first oil in the first half of 2017. The Group is also the operator of the Scolty/Crathes development, which was the only offshore pure oil field approved by the Oil & Gas Authority in 2015. The Scolty/Crathes development comprises two wells tied back to the Group's GKA hub. The Directors expect that the Scolty/Crathes fields will deliver first oil around the end of 2016, with anticipated net peak oil of approximately 5,000 boepd.

The Company was founded in 2010 through a combination of PEDL and certain assets of Lundin. Following the Company's initial public offering in April 2010, its shares are listed and trade on both the London Stock Exchange and the NASDAQ Stockholm. The Directors believe that the Company's operational capabilities and experienced technical staff and management have allowed it to grow significantly since 2010. More recently, the Company has reacted to the current low oil price environment by implementing streamlining and cost controlling initiatives across the Company's business, prioritising the achievement of the Company's production and execution targets, disposing of selected assets and strengthening its balance sheet. The Company has pursued these objectives while maintaining a focus on the health, safety and environmental impact of its operations.

2. Significant factors affecting results of operations

2.1 Price of oil

The prevailing price of oil significantly affects the Group's operations and also affects the levels of the Group's reserves and, therefore, depreciation. Substantially all the Group's reserves are constrained by a commercial materiality threshold and therefore are impacted by changes in oil prices. Although Brent oil prices have recently recovered somewhat from the low of \$27.88/bbl reached on 20 January 2016, they still remain significantly below the levels that prevailed in 2013 and the first half of 2014. Further decreases in oil prices could lead to reduction in the economic life of a field, which will decrease the reserves. Oil prices have historically been volatile, dependent upon the balance between supply and demand and particularly sensitive to changes in OPEC and other production levels. The Group's policy is to attempt to manage the impact of oil prices to protect against volatility and to ensure the availability of cash flow for reinvestment in order to drive business growth. As part of this strategy, the Group entered into commodity hedging contracts in 2014 partially hedging the Group's exposure to fluctuations in oil prices. In response to the continued low oil price environment, the Group entered into additional hedging contracts in 2015, which will expire throughout 2016. During the six months ended 30 June 2016, the Group entered into a ''chooser option'' in respect of the first half of 2017: the counterparty can choose to sell £47.5 million to EnQuest at an exchange rate of \$1.4:£1.0 or purchase 1,320,000 barrels of oil at US\$58/bbl. Based on current oil prices and exchange rates, the Group expects the counterparty would currently choose to exchange currency and the chooser option has therefore been presented with other foreign currency contracts. Since 30 June 2016, the Group entered hedging arrangements over 1MMbbl of 2017 production (83kbbls per month) at a fixed price of \$51.50/bbl. The Group has also sold 500,000 bbls per month for the first half of 2017 (3 MMbbls total) at a fixed price of \$49/bbl and has bought a call (nil cost) for the same notional quantity, with a strike price of \$57.25/bbl. Should the price rise above \$57.25/bbl, the Group will receive the difference to offset the loss it would make on the \$49/bbl swaps. In addition, the Group has hedged 500,000 bbls for the first half of 2017 at \$54.50/bbl. See paragraph 8.4 of this Part 4 (''Operating and Financial Review'').

The Group's oil sales for its UKCS assets are primarily priced using the Platts Dated Brent crude oil benchmark and the majority of sales are priced on a month average basis. Differentials to the benchmark price are negotiated with customers. Fixed differentials are negotiated for term sales and differentials on spot sales are negotiated on a cargo-by-cargo basis. Prices for the Group's Malaysian oil sales are set by the Malaysian OSP, which is generally a significant premium to the Platts Dated Brent benchmark. A Tapis differential is then applied to the Malaysian OSP and further differentials are negotiated with customers. The average realised price for the Group's UKCS and Malaysian oil sales (excluding hedging) together decreased by 29.3 per cent. to \$41 per barrel for the six months ended 30 June 2016 from \$58 per barrel for the six months ended 30 June 2015. The average realised price per barrel sold (excluding hedging) decreased by 49.4 per cent. to \$50.9 per barrel for the year ended 31 December 2015 from \$100.6 per barrel for the year ended 31 December 2014 and decreased by 8.3 per cent. to \$100.6 per barrel for the year ended 31 December 2014 from \$109.7 per barrel for the year ended 31 December 2013.

The average quoted price decreased by 30.6 per cent. to \$41.21 per barrel for the six months ended 30 June 2016 from \$59.35 per barrel for the six months ended 30 June 2015. The average quoted price decreased by 46 per cent. to \$53.60 per barrel for the year ended 31 December 2015 from \$99.45 per barrel for the year ended 31 December 2014 and decreased by 9 per cent. to \$99.45 per barrel for the year ended 31 December 2014 from \$108.70 per barrel for the year ended 31 December 2013.

The following table sets forth information on Brent oil prices for the six month periods ended 30 June 2016 and 30 June 2015 and the years ended 31 December 2013, 2014 and 2015.

		Year ended 31 December			Six months ended 30 June
(in \$/bbl)	2013	2014	2015	2015	2016
Average price for the period	108.70	99.45	53.60	59.35	41.21
Highest price for the period	118.90	115.06	67.77	67.77	52.51
Lowest price for the period	97.69	57.33	36.11	46.59	27.88

Source: International Commodities Exchange

2.2 Production volumes

In addition to oil prices, production volumes are a primary revenue driver. The Group's production levels also affect the level of the Group's reserves and depletion charges. The volume of the Group's oil reserves and resources and production volumes may be lower than estimated or expected. See ''Risk factors—Risks relating to the oil and gas industry—The level of the Group's 2P reserves and contingent resources, their quality and production volumes may be lower than estimated or expected''. In addition, many of the Group's interests are in maturing fields that currently have or previously had declining production.

Based on the Group's anticipated production, volumes are nominated for lifting approximately two months in advance. Customers are then invoiced for the volume nominated as measured by the fiscal meter or for agreed payment quantities at SVT for the Group's UKCS production (excluding GKA and Alma/Galia), the Kinneil Oil Terminal for the Group's GKA production and the Terengganu Crude Oil Terminal for the Group's Malaysian production. Volumes lifted and sold out of the terminals will normally be lower than those fiscally measured as being produced at the Group's platforms, reflecting ''shrinkage''. Shrinkage may occur from three potential sources—process fuel, terminal flaring and value adjustment. The Group is required to contribute fuel necessary to process the hydrocarbons at the Kinneil Oil Terminals. There is also flaring at the terminals to which all pipeline entrants are required to contribute. Oil from Thistle/ Deveron and Dons is exported through the Brent pipeline and oil from Heather/Broom is exported through the Ninian pipeline. SVT uses commingled crude (Brent and Ninian), which results in a ''blend'' oil price being calculated. A value adjustment is then calculated based on the relative quality of the Group's crude against the blend as a whole and this normally results in a further element of shrinkage. Historically, the Group's shrinkage factor has been less than 3 per cent. of produced volumes for total gross production across all the Group's assets. The resulting invoice volume after deduction of shrinkage is the Group's sales volume. The following table sets forth information on the Group's oil production and sales volumes for the six month periods ended 30 June 2016 and 2015 and the years ended 31 December 2013, 2014 and 2015.

	Year ended 31 December			Six months ended 30 June
(boepd)	2013	2014	2015	2015	2016
Total average daily production for the period	24,200	27,895	36,567	29,665	42,520
Total average daily sales volume for the period	23,814	26,430	34,142	28,040	34,175

2.3 Reserves

The Group estimates its 2P reserves, which are reflected in the Group's financial statements, using standard recognised evaluation techniques. This estimate is reviewed internally at least annually and is also audited annually by GCA. The Group estimates future development costs taking into account the level of development required to produce the reserves the Group has elected to develop by reference to other similar operators, where applicable, reviews by external engineers and the Group's experience. The amount of development costs in turn influences the economic recoverability of resources and, therefore, what proportion of resources are recognised as reserves. See paragraph 2.1 of this Part 4 (''Operating and Financial Review'') above.

Separately, the depletion of oil assets charged to the Group's income statement under operating costs is dependent on the estimate of the Group's oil reserves. An increase in estimated reserves will cause a reduction in the charge to the Group's annual income statement because a larger base exists on which to depreciate the asset. Correspondingly, a decrease in estimated reserves will cause an increase in the charge to the Group's annual income statement. The estimate of oil reserves also underpins the net present value of a field used for impairment calculations, and in significant cases a reduction to the reserves estimate can lead to an impairment charge. These impairment charges would not impact the Group's cash flow nor the Group's UK tax charges.

2.4 Development and production success and impairment

The Group faces inherent risks in connection with its development and production activities. These risks include the difference between estimated and actual reserves, the Group's cost efficiency in development, timing of production activities and its level of production. The Group reviews its development and production projects at least semi-annually for indicators of impairment. Where such an indicator does exist, the Group compares the net present value of the asset (based on discounted cash flows) with the carrying value on the Group's balance sheet. If the net present value is lower than the carrying value, the Group records any impairment to the ''Impairment of oil and gas assets'' line of the Group's income statement.

The Group's success in developing Scolty/Crathes and, in particular, Kraken will significantly affect the Group's results of operations once production commences, which is expected to be in the first half of 2017. The Group is undertaking extensive capital expenditures in connection with these developments and its future production volumes are substantially dependent on whether it is successful in producing from these assets. See paragraph 5.3(b) of this Part 4 (''Operating and Financial Review''). The Company cannot assure you that these developments will be successful. See also ''Risk factors—Much of the Group's future growth depends on successful development of Kraken and the Group's production at Alma/Galia''.

For the years ended 31 December 2014 and 2015, the impairments to the Group's tangible oil and gas assets were \$679 million and \$1,224 million, respectively. The impairment charges in 2015 related to the Heather/Broom, Thistle/Deveron, Dons, Alma/Galia, Alba and Tanjong Baram assets, and were triggered by the continued decline in oil prices and the resulting reduction in expected future revenues and reserves. The impairments in 2014 related to both Alma/Galia and Dons and were caused by the significant fall of the price of oil in the latter half of 2014 and, in the case of Alma/Galia, a delay in the achievement of first oil and cost increases relating to higher than expected works on the EnQuest Producer FPSO. There were no such impairment charges during 2013.

2.5 Underlying operating costs

(a) Fixed

Fixed operating costs are substantially independent from production levels and therefore do not increase (or decrease) with an increase (or decrease) of the Group's level of production. Fixed operating costs include routine and non-routine maintenance costs, certain labour costs and power costs. Certain regular maintenance programmes also result in the temporary shut-in of production. An increase in fixed operating costs will result in an increase in underlying operating costs per barrel due to higher costs with no associated increase in production.

(b) Variable

The variable element of operating costs will increase (or decrease) with the level of production. An increase (or decrease) in production will result in an increase (or decrease) in underlying variable operating costs. The primary variable operating costs that affect the Group's results include the costs associated with the use of infrastructure (including third party infrastructure such as pipeline systems and terminals), consumable well supplies and fuel. The Group pays tariffs for use of third party infrastructure based on the Group's proportionate use of the infrastructure and such tariffs are likely to increase as the Group's production increases. Tariffs are set in part based on the infrastructure operator's total expenses.

The greatest portion of the Group's third party infrastructure costs arise through tariffs charged for the use of SVT, through which the oil from the Thistle, Heather and Northern Producer is transported and marketed. These charges are based on a cost share commercial model. These costs (calculated with reference to production from Thistle, Heather Broom and the Dons fields) increased from approximately \$4.4/bbl in 2011 to \$9.6/bbl in 2014, with most of the increase taking effect in 2013, where the tariff rate was \$10.9/bbl.

The higher rates attributable to years 2013 and 2014 were due to high terminal operating costs against a backdrop of declining throughput. The Group's production was also exposed to a surplus charge for gassy crude processing; this charge has since been abolished. Also, in both 2013 and 2014, there were prior year charges allocated as a result of an actualisation process, which also led to the high cost per bbl.

Costs at SVT are now trending downwards. In 2015, these charges decreased to \$8.46/bbl. The forecast rate for 2016 is \$5.10/bbl. This marked decrease is due to a substantial decrease in terminal operating costs, and the Group expects this trend to continue. Although the Company is working with the SVT operator to reduce gross cost levels and agree cost allocation based on usage, it cannot assure you tariffs will not increase. See ''Risk factors—Risks Relating to the Group's business—The Group relies on third party infrastructure such as Sullom Voe Terminal that it does not control and is subject to tariff charges that it does not control''.

Oil from certain of the Group's assets is and will be transported and marketed through infrastructure other than SVT. With respect to production from GKA, the Group holds an equity interest in an offshore platform at Kittiwake and a 100 per cent. interest in a pipeline linking Kittiwake to the Forties Unity pipeline. GKA fields are tied via subsea infrastructure to the offshore platform at Kittiwake. Oil from the platform at Kittiwake is transported via pipeline to the Forties Unity platform where it is then transported to shore at Cruden Bay through the Forties Unity pipeline system. The oil then continues through the pipeline to Hound Point, Scotland, where it is loaded on tankers, and raw gas and natural gas liquids are taken to Grangemouth, Scotland for further processing. Oil produced at Alma/Galia is loaded from the EnQuest Producer FPSO onto shuttle tankers and then delivered to buyers in Northwest Europe. Oil from Alba, where the Group holds a minority interest, is also transported by shuttle tanker from the Alba Northern platform to onshore terminals. With respect to future production from Kraken, the Group has contracted with Bumi Armada UK Limited for the construction, delivery, operation and maintenance of a FPSO. Bumi Armada UK Limited have secured a vessel for conversion and work is nearing completion at the Keppel yard in Singapore. The Kraken FPSO will be connected to wells via subsea infrastructure and shuttle tankers will transport produced oil to onshore terminals. Production from Tanjong Baram is transported through an 8-kilometre tie-back to the West Lutong A platform operated by PETRONAS under a Production Handling Agreement and production from PM8/Seligi is transported via the Tapis pipeline (operated by ExxonMobil) to the Terengganu Crude Oil Terminal for processing and sale.

2.6 Acquisitions and disposals

The Group's results will be affected by acquisitions and disposals of assets that take place during the period. Any acquisition of or sale of interests in producing assets will affect the Group's production volumes and revenues. If the Group elects to divest an asset, it could impact several line items in the Group's income statement depending, in part, on the stage of the asset's life in which the disposal occurs. For example, a farm-down during the development phase may result in either a gain or loss. When the Group enters the development phase of a project with a high equity stake and farm-down a portion of the equity in that licence in return for cash consideration and a carry of all, or a portion of, the Group's share of development costs, the cash consideration and/or the fair value of the carry will be assessed against the carrying value of the percentage disposal to calculate the gain or loss on disposal. The Group continually evaluates potential acquisitions and dispositions and the timing of any such transaction is uncertain.

The Group's results also may be affected by acquisitions, although the extent of the impact largely depends on the mix of assets acquired or sold. For example, the Group's acquisition of an 8 per cent. interest in Alba in 2013 resulted in limited additional production volume and revenues. Acquisitions and disposals also affect the Group's liquidity and cash position in the relevant period to the extent the purchase price is paid or received in cash.

Acquisitions and disposals during the periods presented included, among others, those set forth below.

• February 2016: Increased the Group's stake in Kraken from 60 per cent. to 70.5 per cent. through the acquisition of a portion of First Oil's interest;

• 2015: Exited investments in Egypt, Norway and Tunisia, sold exploration interests in Malaysia and relinquished a number of exploration licences in the UK;

• July 2014: Acquired interest in Didon field in Tunisia from PA Resources;

• June 2014: Acquired ExxonMobil Exploration and Production Malaysia Inc's interest in Seligi/PM8;
• March 2014: Acquired Centrica North Sea Oil Limited's share of GKA and its 100 per cent. interest in the Kittiwake to Forties oil export pipeline;
• August 2013: Acquired a 50 per cent. interest in Avalon, an exploration asset;
• January 2013: Acquired an 8 per cent. interest in Alba.

See paragraph 18.5 of Part 9 (''Additional Information'') for further details of the terms of the agreements governing the Group's interests.

2.7 Currency exchange rates

The Group's functional and presentational currency is the US dollar, primarily because the Group prices its oil sales in US dollars and substantially all of the Group's revenues are denominated in US dollars. However, because a significant percentage of the Group's staffing and other administration costs are denominated in pounds sterling, the Group's results are affected by changes in the US dollar/pounds sterling exchange rate. The Group also incurs capital expenditure costs in both Euro and Norwegian Kroner in connection with the Kraken development.

For the six months ended 30 June 2016, 79 per cent. of the Group's costs including capital expenditure were denominated in currencies other than the US dollar, as compared to 84 per cent. for the six months ended 30 June 2015. Costs denominated in currencies other than the US dollar were 85 per cent., 91 per cent. and 91 per cent. for the years ended 31 December 2015, 2014 and 2013, respectively.

		Year ended 31 December	Six months ended 30 June
(in £/\$)	2013	2014	2015	2015	2016
Average rate for the period	0.640	0.607	0.655	0.657	0.698
Highest rate for the period	0.673	0.645	0.683	0.683	0.757
Lowest rate for the period	0.604	0.583	0.630	0.630	0.675

See paragraph 8.3 of this Part 4 (''Operating and Financial Review'').

2.8 Derivative financial instruments

The Group's results are affected by commodity, foreign currency and interest rate hedging. The Group's commodity hedging policy allows it to hedge oil prices up to a maximum of 75 per cent. of the next 12 months' production on a rolling annual basis, up to 60 per cent. in the following 12 month period and up to 50 per cent. in the subsequent 12 month period. In 2014, as a response to the decrease in oil prices which began in the second half of the year, the Group entered into commodity hedging contracts, partially hedging its exposure to fluctuations in oil prices. The Group further hedged its exposure to oil price fluctuations by entering into additional hedging contracts in 2015, as a response to the continued low oil price environment. As of 31 December 2015, the Group's commodity hedging contracts included bought put options over 8MMbbls, maturing throughout 2016, with an average strike price of \$68/bbl and oil swap contracts to sell 2MMbbls at an average price of \$66.64/bbl maturing throughout 2016. As of 30 June 2016, the Group's commodity hedging contracts included bought put options over 4.3MMbbls at an average price of \$68/bbl maturing throughout 2016 and oil swap contracts to sell 1.3MMbbls at an average price of \$67/bbl maturing throughout 2016. In addition, the Group entered into a ''chooser option'' hedging contract on 28 June 2016, hedging either 0.2 MMbbls per month at \$58/bbl or £7.9 million per month at a fixed rate of \$1.40 for the first half of 2017. The Group's counterparty has the right to choose whether to settle the oil price hedge or the currency hedge each month. In addition, on 28 September 2016, the Group entered hedging arrangements over 1MMbbl of 2017 production (83kbbls per month) at a fixed price of \$51.50/bbl. The Group uses interest rate swaps to hedge interest rate risks relating to the Group's borrowings under the Tanjong Baram Project Finance Loan. The Group's foreign currency hedging policy generally allows for up to 70 per cent. of non-US dollar denominated operating and capital expenditure to be hedged (although the Group may hedge up to 100 per cent. of non-US dollar capital expenditure in relation to specific contracted capital expenditure projects). The Group has hedged its exposures to pounds sterling, Norwegian Kroner and the Euro in line with this policy. See paragraph 8 of Part 4 (''Operating and Financial Review'').

The Group categorises its derivative instruments for accounting purposes as follows:

(a) Cash flow hedge

The effective portion of the gain or loss on the hedging instrument is recognised in the cash flow hedge reserve, while the ineffective portion is recognised in the profit and loss under revenue for the Group's commodity hedges or under cost of sales for its foreign exchange hedges. A cash flow hedge only has measured ineffectiveness where the change in the fair value of the derivative instrument exceeds the change in the present value of the future cash flows of the hedged item. Amounts transferred to the cash flow hedge reserve are transferred to the income statement under other comprehensive income when the underlying hedged transaction affects profit or loss. When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the statement of comprehensive income. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately recognised in other comprehensive income.

(b) Derivatives that do not qualify for hedge accounting

When derivatives do not qualify for hedge accounting, changes in fair value are recognised immediately within revenue for commodity derivatives and within cost of sales for foreign exchange derivatives.

2.9 Exploration and evaluation success and exploration costs written-off or impaired

The Group faces inherent risks in connection with its exploration and evaluation activities. The success or failure of the Group's exploration and evaluation activities will affect the level of the Group's resources recognised and the Group's future development plans for a particular licence area. After the acquisition of an exploration licence, exploration costs (e.g. seismic purchase and evaluation and exploration drilling) are capitalised as intangible assets. The value of the Group's intangible assets is reviewed regularly throughout the year and, when appropriate, values are impaired or written off where the Company does not expect to make a sufficient economic return from the investment (e.g. if an exploration well is dry or has insufficient reserves to be commercial or if a licence has insufficient commercial prospectivity).

For the six months ended 30 June 2016 and 2015, the Group either wrote off or impaired costs totalling \$0.9 million and \$4.8 million, respectively, in relation to the Group's intangible exploration and evaluation assets following unsuccessful exploration and evaluation activities. For the years ended 31 December 2015, 2014 and 2013, the Group either wrote off or impaired such costs totalling \$9.1 million, \$152.0 million and \$2.0 million, respectively. The extent of the Group's write-offs and impairments in a period relates to the Group's success in evaluating assets prior to receipt of a licence. Such evaluations have become less significant to the Group's operations because of its decreased exploration and evaluation activities and its prioritisation of the ongoing developments at Kraken and Scolty/Crathes. Write-offs and impairments of intangible exploration and evaluation assets are expensed through the exploration and evaluation expenses line of the Group's income statement. For example, there was a \$152.0 million impairment charge to exploration and evaluation assets in 2014, primarily relating to the Crawford Porter, Kildrummy and Cairngorm fields as well as certain GKA acreage, which were impaired due to the significant decline in oil prices in the second half of 2014, as a result of which the Group determined commercial production in these fields to be unfeasible. The Group accounts for such write-offs and impairments using the successful efforts method of accounting. In line with the successful efforts method of accounting, all licence acquisition, exploration and evaluation costs are initially capitalised as intangible oil and gas assets in cost centres by field or exploration area, as appropriate, pending determination of commerciality of the relevant property. Directly attributable administration costs are capitalised insofar as they relate to specific exploration activities. Pre-licence costs and general exploration costs not specific to any particular licence or prospect are expensed as incurred. If prospects are deemed to be impaired on completion of the evaluation, the associated costs are charged to the income statement. If the field is determined to be commercially viable, the attributable costs are transferred to property, plant and equipment in single field cost centres. These costs are then depreciated on a unit of production basis. All field development costs are capitalised as property, plant and equipment. Property, plant and equipment related to production activities are amortised in accordance with the Group's depletion and amortisation accounting policy. See paragraph 10 of this Part 4 (''Operating and Financial Review'').

2.10 Interest rates

The Group's exposure to the risk of changes in market interest rates relates primarily to the Group's borrowings under the Existing RCF, which has a floating EURIBOR or LIBOR linked interest rate, and the Tanjong Baram Project Finance Loan, which has a floating USD LIBOR linked interest rate. In 2015, the Group entered an interest rate swap which effectively swapped 50 per cent. of floating USD LIBOR rate interest on the Tanjong Baram Project Finance Loan into a fixed rate of 1.035 per cent. until 2018. To the extent the Group has hedged its floating EURIBOR or LIBOR linked borrowings, it may be affected by changes in market interest rates at the time it seeks to refinance these borrowings.

2.11 Taxation

Taxation can have a significant impact on the Group's results of operations. The Group is subject to corporate income taxes in the UK as well as petroleum and corporate income taxes in Malaysia. The Group had a cumulative UK corporate tax losses of \$2,536 million as of 31 December 2015. The Group recognises deferred tax assets on unused tax losses where it is probable that future taxable profits will be available for utilisation. This requires the Group's management to make judgements and assumptions regarding the amount of deferred tax that can be recognised, as well as the likelihood of future taxable profits.

In respect of the Group's UKCS operations, it also has paid PRT, which is based on taxable profits of individual production fields. However, beginning on 1 January 2016, the PRT rate was reduced to 0 per cent. Therefore, during the first six months of 2016 the Group paid no PRT in relation to its UKCS operations. In 2015, the Group received a \$11,000 PRT refund relating to PRT losses at Alba. With respect to its Malaysian operations, the Group pays a 38 per cent. petroleum income tax on the profit oil derived from the production sharing agreement under which it operates its Malaysian assets in addition to a royalty payable on its oil sales. There are no tax losses carried forward in relation to the Group's Malaysian operations.

The Group's taxation is also affected by UK tax incentive programmes known as investment allowances. This regime basically provides for a reduction in ring fence supplementary corporation tax (10 per cent.) where investments in new or existing UKCS assets qualify for a relief known as investment allowances. Investment allowances are only triggered when production from the field commences. The Group is eligible for a number of investment allowances which will materially reduce the level of future SCT. Investment allowances are recognised as a reduction in the charge to taxation in the years claimed. Prior to the implementation of the Finance Act 2015, the Group received tax relief on certain of its UKCS assets in the form of field allowances. These existing field allowances have been reclassified as investment allowances as of 1 April 2015.

Asset	Unutilised Investment Allowance as at 31 December 2015 (millions)
Alma/Galia	\$293
Thistle/Deveron	\$399
Kraken North	\$720
Kraken South	\$720
Heather/Broom	\$133
Greater Kittiwake Area	\$ 22
West Don/Don South West	—
Alba	\$ 3
Ythan	\$135
Conrie	\$ 40
Crathes	—
Scolty	—

Investment allowances reduce payments of SCT, which the Company would only expect to be incurred if oil prices rise above \$75 per barrel. With continuing investment in the Group's existing assets and major developments (in particular, the Kraken development), the Group does not expect to pay material UK cash income tax for the foreseeable future, but will continue to pay petroleum income taxes in Malaysia throughout the life of the PSC.

The Group is subject to various tax claims which arise in the ordinary course of its business, including tax claims from tax authorities in the UK and Malaysia. For example, the Group has engaged in an exchange of correspondences with HMRC in the UK in respect of leasing arrangements for equipment entered into by it, having initially disclosed such arrangements pursuant to UK laws requiring that transactions meeting certain criteria be notified to HMRC. The Group assesses all such claims in the context of the tax laws of the countries in which the Group operates and, where applicable, make provision for any settlements which the Company considers to be probable. See also paragraph 13 of Part 2 (''Information on the Group''), paragraph 19 of Part 9 (''Additional Information'') and ''Risk Factors—Risks relating to the Group's business—The Group's tax liability is subject to estimation and the Group may be adversely affected by changes to tax legislation or its interpretation or increases in effective tax rates in the jurisdictions in which it does business''.

The Company may also be affected by how taxes impact its counterparties and contracts. For example, in 2014 the UK tax treatment of certain oil and drilling service providers was modified, resulting in an increased tax burden. This and other similar modifications may cause certain third parties with which the Group contracts to experience increased costs, which they may seek to pass on to the Group through contractual pass-through provisions or in future negotiations. The Group may be required to pay some or all of these increased costs.

2.12 Exceptional items and depletion of fair value uplift to property, plant and equipment on acquiring strategic investments

The Group's results are affected by exceptional items and depletion of fair value uplift. The effect of exceptional items and depletion of fair value uplift during the periods presented is set forth below.

		Year ended 31 December		Six months ended 30 June
(in millions of \$)	2013	2014	2015	2015	2016
Recognised in arriving at profit/(loss) from operations before tax:
Unrealised mark-to-market losses/(gains)	(1.7)	(19.2)	45.3	29.1	33.4
Write off and Impairment of Investments, oil and gas and
exploration and evaluation assets	0.3	832.1	1,234.1	4.8	0.9
Impairment of land and buildings .	—	—	—	5.9	—
Loss/(Gain) on disposal of assets	—	(2.0)	10.7	—	—
Write down of receivable and inventory	—	—	17.9	4.2	—
Depletion of fair value uplift	8.5	6.9	3.8	1.9	0.8
Change in surplus lease provision	—	—	26.6	—	(22.8)
Change in GKA contingent consideration	—	—	—	—	(3.3)
SVT tariff operator reconciliation	—	32.8	—	—	—
Negative goodwill	—	(28.6)	—	—	—
Other(1)	—	—	0.9	—	(0.6)
	7.1	821.9	1,339.4	46.0	8.5
Tax on items above	(5.3)	(508.1)	(634.4)	(111.4)	(6.4)
Change in tax rate	—	—	(56.8)	—	(13.1)
Reduction in the carrying amount of deferred tax assets	—	—	239.1	—	—
Total	1.8	(313.8)	887.3	(65.4)	(11.0)

(1) Includes the valuation of contingent consideration due from the Group to the former owner of the GKA assets, the recovery of an overcall from the operator of SB307/308 and an adjustment relating to the acquisition of the PM8/Seligi assets.

The income and costs represented by these items are not typical to the Group's results and in certain cases apply only in one period. For example, ''Change in surplus lease provision'' relates to a 20 year lease that the Company entered into for its office building in Aberdeen, Scotland, with part of the building being sub-let. A provision was recognised for the costs in relation to the sub-let space due primarily to a rent-free period that was offered.

IFRS requires that a fair value exercise is undertaken allocating the cost of acquiring controlling interests to the fair value of the acquired identifiable assets, liabilities and contingent liabilities. Any difference between the cost of acquiring the interest and the fair value of the acquired net assets, which includes identified contingent liabilities, is recognised as acquired goodwill and the Group's assets are increased by this fair value uplift. The fair value exercise is performed as at the date of acquisition. The Group is required to recognise depletion charges for the fair value uplift, which are accounted for as part of cost of sales.

3. Explanation of income statement items

3.1 Revenue and other operating income

Revenue is primarily derived from oil sales and is recognised to the extent that it is probable that economic benefits will accrue to the Group and the revenue can be measured reliably. The Group typically recognises revenue from oil sales on lifting and delivery of production to the purchaser, at which time it generates an invoice. Tariff revenue related to third party use of the Company's infrastructure is recognised in the period in which the services are provided at the agreed contract rates. Revenue also includes sales of any over-lifted positions, which are then recognised as a current liability.

Other operating income is comprised of realised gains and unrealised gains on the Group's commodity hedging contracts. See paragraph 8.4 of this Part 4 (''Operating and Financial Review'').

3.2 Cost of sales

The Group's cost of sales consists of the costs of operations, changes in lifting position, oil inventory movements, depletion of oil and gas assets and underlying operating costs such as tariff and transportation expenses charged back to the Group based on its proportionate use of third-party infrastructure and according to the total costs of the operator of such infrastructure. Inventories of consumable well supplies are stated at the lower of cost and net realisable value, cost being determined on a first in first out basis. Inventories of hydrocarbons are stated at the lower of cost and net realisable value. Oil assets are depleted, on a field-by-field basis, using the unit-of-production method based on 2P reserves, taking account of capital expenditures to date as well as an estimate of total future capital expenditure, in each case relating to those reserves.

The Group includes in cost of sales an amount for changes in lifting position. Changes in lifting position occur when there has been a change in the Group's cumulative ''over-lift'' or ''under-lift'' for the period ending on a balance sheet date. Over-lifts/under-lifts occur when there is an imbalance during a given period between the amount of saleable production (which is the Group's interest in gross production less shrinkage, e.g. due to process fuel used at the terminal or to value adjustments) and the Group's sales. Such an imbalance occurs because the Group typically nominates the volume to be lifted and invoiced approximately two months in advance and cannot estimate future saleable production volumes with certainty. Where multiple production companies share the pipeline and processing infrastructure, any over-lift is effectively a sale of another producer's production. Underlift for Alma/Galia, which does not utilise shared infrastructure, represents the Group's share of the oil which has been produced but has yet to be sold (i.e. stored on the EnQuest Producer FPSO or being transported to discharge). Under-lifted or over-lifted positions are valued at market prices prevailing at the balance sheet date. An under-lift of production from a field is included in current receivables and valued at the reporting date spot price or prevailing contract price and an over-lift of production from a field is included in current liabilities and valued at the reporting date spot price or prevailing contract price.

Cost of sales also includes gains or losses related to the ineffective portion of the Group's foreign exchange hedging contracts.

3.3 Exploration and evaluation expenses

The Group's exploration and evaluation expenses include write-offs and impairments in respect of expenditures on unsuccessful exploration and evaluation activities and pre-licence costs expensed. These expenses relate primarily to the write-off or impairment of costs such as exploration drilling and seismic purchase and evaluation previously capitalised and held in intangible oil and gas assets. The Group typically impairs or writes off such assets at the point it determines that commercial production from the asset is unlikely to be feasible and write down the value of those assets when a decision to relinquish the Group's interest is taken. Such charges are recognised as exploration and evaluation expenses. The Group also recognises as exploration and evaluation expenses costs associated with pre-licence activity, such as costs relating to the acquisition of seismic data and related geological and geophysical studies, and with evaluating potential licences and exploration and evaluation opportunities, such as seismic surveys, but only until a licence is awarded, after which costs are capitalised.

3.4 Impairment of investments and Impairment of oil and gas assets

At each balance sheet date, the Group reviews the carrying amounts of its investments and oil and gas assets to assess whether there is an indication that those assets may be impaired. If any such indication exists, the Group makes an estimate of the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's fair value less costs to sell and its value in use. In assessing value in use, the estimated future cash flows attributable to the asset are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and the Group recognises a non-cash impairment loss.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but only so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years.

3.5 Goodwill and Negative Goodwill

Goodwill acquired in a business combination is initially measured at cost, being the excess of the cost of the business combination over the net fair value of the identifiable assets, liabilities and contingent liabilities of the entity at the date of acquisition. Following initial recognition, goodwill is stated at cost less any accumulated impairment losses. Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that such carrying value may be impaired. If, subsequent to the transaction, the Group determines that the fair value of the identifiable assets, liabilities and contingent liabilities is higher than the consideration that was paid for the entity, the Group may recognise the difference between the two figures as a gain on its income statement under Negative Goodwill.

For the purposes of impairment testing, goodwill acquired is allocated to the cash-generating units that are expected to benefit from the synergies of the combination. Each unit or units to which goodwill is allocated represents the lowest level at which the goodwill is monitored for internal management purposes.

Impairment is determined by assessing the recoverable amount of the cash-generating unit to which the goodwill relates. Where the recoverable amount of the cash-generating unit is less than the carrying amount of the cash-generating unit and related goodwill, an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future periods.

Where goodwill has been allocated to a cash-generating unit and part of the operation within the unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating units retained.

3.6 Gain/loss on disposal of land and buildings and Gain/loss on disposal of intangible oil and gas assets

The Group recognises a non-cash gain or loss on the difference between the price at which it disposed of an asset or of property, plant and equipment and the carrying value of that asset prior to the sale.

3.7 General and administration expenses

General and administration expenses include administrative and head office staff costs, depreciation and other general and administration costs net of the recharge of costs to commercial partners. Staff costs are capitalised or expensed based on time writing entries. Capitalised staff costs are included within property, plants and equipment or intangible oil and gas assets based on the balance sheet classification on the underlying assets on which the employee has worked. With respect to the assets at which the Group is the operator, the Group's joint venture agreements typically allow it to charge back its expenses as operator to its partners at specified percentages and subject to certain conditions. These agreements typically allow the Group to charge to its commercial partners an additional amount up to a specified percentage of the total costs at an asset to compensate for parent company overhead. Payments received through such chargebacks offset general and administration costs.

General and administration expenses also include business development costs, such as the costs of evaluating potential acquisitions and disposals.

3.8 Other income

For the periods presented, other income is comprised mainly of net foreign exchange gains relating to the effective portion of the Group's foreign currency forwards and trades, as well as foreign exchange gains on other working capital.

3.9 Other expenses

For the periods presented, other expenses is comprised mainly of a change in surplus lease provision relating to a 20 year lease that the Group entered into for its office building in Aberdeen, Scotland, and a provision for the costs in relation to a rent-free period on the sub-let space, as well as net foreign exchange losses.

3.10 Finance costs

Finance costs primarily include loan and bond interest payable, unwinding of discount on decommissioning provisions, amortisation of premium on options designated as hedges of production and the unwinding of the KUFPEC cost recovery provision in relation to a receivable for the farm-out of Alma/Galia. As part of the agreement, a cost recovery protection mechanism was agreed under which, from 1 January 2017, the Group must pay KUFPEC 20 per cent. of net revenue from Alma/Galia to recoup its investment to the date of first production if its costs have not been recovered. A provision was made for the expected payments that the Group will make to KUFPEC under this arrangement. Finance costs also include commitment and letter of credit fees and amortisation of finance fees relating to arrangement fees for bank facilities and bonds.

3.11 Finance income

Finance income includes bank interest receivable, fair value gain on financial instruments at fair value through profit or loss, unwinding of financial assets, which includes the unwinding of a discount for deferred consideration due to the Group under the farm-out of Alma/Galia to KUFPEC, and other financial income.

3.12 Income tax

Income tax represents the sum of tax currently payable and deferred tax under the laws of each jurisdiction in which the Group do business. This includes UK corporation and SCT as well as PRT which is payable on profits from individual fields and Malaysian petroleum and corporate income taxes.

3.13 Other comprehensive income

(a) Cash flow hedges

For cash flow hedges, the effective portion of the gain or loss on the hedging instrument is recognised directly as other comprehensive income in the cash flow hedge reserve. Upon settlement of the hedged item, the change in fair value is transferred to the statement of comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in the profit or loss. Amounts accumulated in the cash flow hedge reserve are transferred to the profit or loss in the period when the hedged item will affect the profit or loss. When the hedged item no longer meets the requirements for hedge accounting, expires or is sold, any accumulated gain or loss recognised in the cash flow hedge reserve is transferred to profit and loss when the forecast transaction which was the subject of the hedge occurs.

(b) Available-for-sale financial assets

Listed and unlisted shares held by the Group that are traded in an active market are classified as being available-for-sale and are stated at fair value. Gains and losses arising from changes in fair value are recognised in other comprehensive income and accumulated in the available-for-sale reserve with the exception of impairment losses which are recognised directly in profit or loss. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously recognised in the available-for-sale reserve is reclassified to profit or loss.

4. Results of operations

4.1 Results of operations for the six months ended 30 June 2016 and 2015

The following table sets forth certain of the Group's historical revenue and expense items for the six month periods ended 30 June 2016 and 2015.

		Six months ended 30 June 2015	Six months ended 30 June
(in millions of \$, unless stated)	Business performance	Depletion of fair value uplift, re-measurements, impairments and other exceptional items	Reported in year	Business performance	2016 Depletion of fair value uplift, re-measurements, impairments and other exceptional items	Reported in year
Revenue and other operating
income Cost of sales	444.0 (335.6)	(29.4) 12.8	414.6 322.8	391.3 (273.6)	(9.1) (44.1)	382.2 (317.7)
Gross profit/(loss) Exploration and evaluation	108.4	(16.6)	91.8	117.7	(53.2)	64.6
expenses	—	(4.8)	(4.8)	—	(0.9)	(0.9)
Impairment of investments	—	—	—	—	—	—
Impairment of oil and gas assets Impairment of land and	—	—	—	—	—	—
buildings General and administration	—	(5.9)	(5.9)	—	—	—
expenses	(5.2)	—	(5.2)	(5.4)	(0.1)	(5.5)
Other income Other expenses	— (4.1)	— (4.2)	— (8.4)	37.3 —	27.6 —	64.9 —
Profit/(loss) from operations before tax and finance income (costs) Finance costs	99.1 (88.2)	(31.6) (14.4)	67.5 (102.6)	149.7 (66.8)	(26.7) 18.2	(123.0) (48.6)
Finance income	0.5	—	0.5	0.5	—	0.5
Profit/(loss) before tax Income tax	11.4 22.4	(46.0) 111.4	(34.6) 133.8	83.4 56.9	(8.5) 19.5	74.9 76.4
Profit/(loss) for the year attributable to owners of the parent	33.8	65.4	99.2	140.3	11.0	151.3
Other comprehensive income for the year, after tax: Cash flow hedges:
Reclassified to profit or loss May be classified subsequently to profit or loss when specific	—	—	(95.9)	—	—	(127.1)
conditions are met Deferred tax on gain on cash	—	—	8.9	—	—	(41.3)
flow hedges Available-for-sale financial assets	— —	— —	62.3 —	— —	— —	84.1 —
Total other comprehensive income for the year	—	—	(24.8)	—	—	(84.3)
Total comprehensive income for the year, attributable to owners of the parent	—	—	74.4	—	—	67.0

4.2 Comparison of results of operations for the six months ended 30 June 2016 and 2015

(a) Revenue and other operating income

Revenue and other operating income decreased by \$32.4 million, or 7.8 per cent., to \$382.2 million for the six months ended 30 June 2016, from \$414.6 million for the six months ended 30 June 2015, primarily due to the lower realised oil price in the six months ended 30 June 2016 compared to the six months ended 30 June 2015, partially offset by the increase in the volume of oil sold and the benefit of the Group's hedging activities.

Revenue is predominantly derived from oil sales and also includes gains or losses from the Group's commodity hedging activities. For the six months ended 30 June 2016, oil sales were \$256.5 million compared with \$294.1 million in the six months ended 30 June 2015. The decrease in oil sales reflected the decrease in the Group's blended average realised price per barrel of oil sold (excluding hedging) by \$17, or 29.3 per cent., to \$41 for the six months ended 30 June 2016 from \$58 for the six months ended 30 June 2015.

Revenue derived from sales from the Group's UKCS operations was \$211.4 million for the six months ended 30 June 2016, a decrease of \$7.7 million, or 3.5 per cent., from \$219.1 million for the six months ended 30 June 2015. This decrease was primarily due to the reduction in the average realised oil price, partially offset by an increase in the volume of oil sold from 3.7 MMboe in the six months ended 30 June 2015 to 4.9 MMboe in the six months ended 30 June 2016. The Group's UKCS production, on a working interest basis, increased by 11,199 boepd, or 51 per cent., to 33,087 boepd for the six months ended 30 June 2016 from 21,888 boepd for the six months ended 30 June 2015. This increase was primarily attributable to production from Alma/Galia (which only started producing in October 2015) plus increases in all other operated assets reflecting the results from new wells.

Revenue derived from the Group's Malaysian operations was \$51.7 million for the six months ended 30 June 2016, a decrease of \$26.6 million, or 34.0 per cent., from \$78.3 million for the six months ended 30 June 2015. This decrease was primarily due to the reduction in the average realised oil price, partially offset by an increase in the volume of oil sold. The Group's Malaysian production, on a working interest basis, for the six months ended 30 June 2016 averaged 9,433 boepd, an increase of 1,656 boepd, or 21 per cent., from 7,777 boepd for the six months ended 30 June 2015. The increase in production was primarily attributable to production from Tanjong Baram (which only started producing in June 2015).

The decrease in revenue during the six months ended 30 June 2016 was also partially offset by the benefit of the Group's hedging activities. The Group recognised \$128.1 million of realised gains and \$9.1 million of unrealised losses from its commodity derivatives contracts in the six months ended 30 June 2016, as compared to \$146.7 million and \$29.4 million, respectively, for the six months ended 30 June 2015.

(b) Cost of sales

Cost of sales decreased by \$5.1 million, or 1.8 per cent., to \$317.7 million for the six months ended 30 June 2016 from \$322.8 million for the six months ended 30 June 2015. Cost of sales before depletion for fair value uplift, re-measurements, impairments and other exceptional items decreased by \$62.0 million, or 18 per cent., to \$273.6 million for the six months ended 30 June 2016 from \$335.6 million for the six months ended 30 June 2015. The decrease in cost of sales was primarily due to the weakening of pounds sterling against US dollars and the Company's ongoing cost savings initiatives. A \$44.8 million change in the lifting position, reflecting the unwinding of an overlift balance that had accrued for Thistle and GKA at 31 December 2015, further reduced cost of sales . This was partially offset by \$8.7 million of additional depletion expense due to higher production. Due to these reasons, cost of sales before depletion for fair value uplift, re-measurements, impairments and other exceptional items fell to 69.9 per cent. of revenue for the six months ended 30 June 2016 from 75.6 per cent. of revenue for the six months ended 30 June 2015.

Operating costs, which include production costs, tariff and transportation costs and the effect of any realised foreign exchange hedging gains or losses relating to the ineffective portion of the Group's hedging arrangements, decreased by \$16.7 million, or 8.5 per cent., to \$178.9 million for the six months ended 30 June 2016 from \$195.6 million for the six months ended 30 June 2015, primarily as a result of the Group's ongoing cost saving initiatives as well as the favourable exchange rate fluctuations mentioned above. Tariff and transportation costs increased to \$31.8 million for the six months ended 30 June 2016 from \$28.0 million in the six months ended 30 June 2015, primarily due to higher volumes of oil sold. Production costs decreased to \$138.9 million for the six months ended 30 June 2016 from \$164.9 million for the six months ended 30 June 2015, primarily due to the Group's ongoing cost savings initiatives. As a result of the foregoing, the Group's unit operating costs per barrel decreased by \$16 to \$23 for the six months ended 30 June 2016 from \$39 for the six months ended 30 June 2015. The Group's depletion expense per barrel for the six months ended 30 June 2016 was \$18 per barrel, a decrease of \$6.0 from \$24 per barrel for the six months ended 30 June 2015. This decrease was primarily due to increases in production, partially offset by the impact of impairments recognised for the year ended 31 December 2015.

The Group's change in lifting position was a credit of \$34.8 million for the six months ended 30 June 2016, compared with an expense of \$10.0 million for the six months ended 30 June 2015. The net under-lift during the first half of 2016 was primarily due to the timing of liftings at Thistle and GKA.

(c) Exploration and evaluation expenses

Exploration and evaluation expenses amounted to \$0.9 million for the six months ended 30 June 2016, compared to \$4.8 million for the six months ended 30 June 2015. The expenses for the six months ended 30 June 2016 consisted primarily of impairment charges. The Group incurred impairment charges of \$4.8 million during the first six months of 2015, primarily relating to the write off of costs capitalised in respect of the Group's Norwegian licences.

(d) Impairment of land and buildings

The Group recognised impairment of land and buildings of \$5.9 million for the six months ended 30 June 2015, relating to the write down of the Group's Aberdeen office to the expected sales proceeds. There was no impairment for the six months ended 30 June 2016.

(e) General and administration expenses

General and administration expenses of \$5.5 million for the six months ended 30 June 2016 were in line with the charge of \$5.2 million for the six months ended 30 June 2015.

(f) Other income/expense

The following table sets forth details of the Group's other income/expense for the six months ended 30 June 2015 and the six months ended 30 June 2016.

	Six months ended 30 June
(in millions of \$)	2015	2016
Foreign currency exchange gains/(losses)	(4.3)	37.3
Other	0.2	—
Business performance	(4.1)	37.3
Release of provision for unused Stena Spey days.	—	22.8
Release of GKA contingent consideration provision .	—	3.4
Write down of receivable from PA Resources	(4.2)	—
Other	—	1.3
Total	(8.4)	64.9

Other income/expense moved from a loss of \$8.4 million for the six months ended 30 June 2015 to a gain of \$64.9 million for the six months ended 30 June 2016. The loss for the six months ended 30 June 2015 included foreign exchange losses on the Group's non-US dollar monetary assets and liabilities (predominantly the sterling denominated Retail Notes), and a \$4.2 million write down of a receivable from PA Resources following the unwinding of a Tunisian acquisition. The gain for the six months ended 30 June 2016 includes a \$37.3 million foreign exchange gain following the devaluation of pounds sterling against US dollars. The gain also included \$22.8 million for the release of the provision for unused Stena Spey drilling days following a revision to the drilling schedule and a \$3.4 million release of a portion of the contingent consideration provision in respect of the GKA acquisition, mainly following the results of the Eagle well.

(g) Finance costs

The following table sets forth details of the Group's finance costs for the six months ended 30 June 2016 and 2015.

		Six months ended 30 June
(in millions of \$)	2015	2016	% Change
Loan interest payable .	6.8	23.4	244%
Bond interest payable	29.3	28.6	(2)%
Unwinding of discount on decommissioning provisions.	9.7	6.2	56%
Unwinding of discount on other provisions	2.4	1.4	50%
Unwinding of discount on financial liabilities .	0.1	0.2	100%
Fair value loss on financial instruments at fair value through profit or loss	34.0	20.1	(41)%
Finance charges payable under finance leases	—	—	—
Amortisation of finance fees on loans and bonds	3.5	3.3	(6)%
Other financial expenses .	7.1	6.5	(8)%
	92.9	89.9	(3)%
Less: amounts included in the cost of qualifying assets	(4.7)	(23.1)	391%
Business performance finance expenses	88.2	66.8	(24)%
Fair value (gain)loss on financial instruments at fair value Unwinding of discount on other provisions.	14.4 —	(18.2) —	(226)% —
Finance costs	102.6	48.6	(53)%

Finance costs decreased by \$54.0 million, or 53 per cent., to \$48.6 million for the six months ended 30 June 2016 from \$102.6 million for the six months ended 30 June 2015. This decrease was caused by a reduction in the fair value movements on derivative financial instruments of \$46.5 million, or 96 per cent., to \$1.9 million due to mark to market movements on the time value of the Group's oil hedges, together with an increase of \$18.4 million, or 391 per cent., to \$23.1 million, in amounts capitalised on qualifying assets, representing the ongoing investment in Kraken.

(h) Finance income

The following table sets forth details of the Group's finance income for the six months ended 30 June 2016 and 2015.

	Six months ended 30 June
(in millions of \$)	2015	2016	% Change
Bank interest receivable	0.1	0.2	100%
Unwinding of discount on financial asset .	0.3	0.2	(33)%
Other financial income .	0.1	0.1	—
Finance income	0.5	0.5	—

Finance income for each of the six months ended 30 June 2016 and the six months ended 30 June 2015 was \$0.5 million.

(i) Income tax

Due to the fall in profits triggered primarily by the decline in oil prices, capital allowances from investment in UKCS assets and ring fence expenditure supplement, the Group had no UK corporation tax or SCT liability at 30 June 2016, which remains unchanged from 30 June 2015. The Group's income tax credit decreased by \$57.4 million, or 42.9 per cent., to \$76.4 million for the six months ended 30 June 2016 from \$133.8 million for the six months ended 30 June 2015. The credit in the six months ended 30 June 2016 primarily related to ring fence expenditure supplement and the impact of the reduction to PRT.

(j) Other comprehensive income

Other comprehensive income decreased by \$59.5 million, or 240 per cent., to a loss of \$84.3 million for the six months ended 30 June 2016 from a loss of \$24.8 million for the six months ended 30 June 2015, reflecting the higher mark to market value of the Group's hedges as at 31 December 2015, compared to 31 December 2014 which were subsequently released of profit in the subsequent six months. See paragraph 3.13(a) of this Part 4 (''Operating and Financial Review'').

(k) Total comprehensive income for the year attributable to owners of the parent

As a result of the factors described above, the Group's total comprehensive income attributable to owners of the parent for the six months ended 30 June 2016 was \$67.0 million, compared to income of \$74.4 million for the six months ended 30 June 2015.

4.3 Results of operations for the years ended 31 December 2013, 2014 and 2015

The following table sets forth certain of the Group's historical revenue and expense items for the years ended 31 December 2013, 2014 and 2015.

					For the year ended 31 December,
		2013			2014		2015
(in millions of \$, unless stated)	Business performance	Depletion of fair value uplift, re-measurements, impairments and other exceptional items	Reported in year	Business performance	Depletion of fair value uplift, re-measurements, impairments and other exceptional items	Reported in year	Business performance	Depletion of fair value, uplift, re-measurements, impairments and other exceptional items	Reported in year
Revenue and other operating income Cost of sales	961.2 (526.3)	(6.0) (0.8)	955.2 (527.1)	1,009.9 (654.1)	18.6 (57.8)	1,028.5 (711.9)	906.6 (733.4)	1.9 (15.1)	908.5 (748.5)
Gross profit/(loss) Exploration and evaluation	434.9	(6.8)	428.1	355.8	(39.2)	316.6	173.2	(13.2)	160.0
expenses Impairment of investments Impairment of oil and gas	(8.6) —	— (0.3)	(8.6) (0.3)	(4.0) —	(152.0) (1.3)	(156.0) (1.3)	(0.3) —	(9.1) (0.6)	(9.4) (0.6)
assets Negative goodwill	— —	— —	— —	— —	(678.8) 28.6	(678.8) 28.6	— —	(1,224.5) —	(1,224.5) —
Gain/(loss) on disposal of land and buildings Gain/(loss) on disposal of	—	—	—	—	—	—	—	(8.5)	(8.5)
intangible oil and gas assets General and administration	—	—	—	—	2.0	2.0	—	(2.3)	(2.3)
expenses Other income	(25.0) —	— —	(25.0) —	(16.5) 27.2	— —	(16.5) 27.2	(14.4) 15.4	(3.6) 1.9	(18.0) 17.4
Other expenses	(26.4)	—	(26.4)	—	—	—	—	(29.6)	(29.6)
Profit/(loss) from operations before tax and finance income (costs) Finance costs Finance income	374.8 (38.8) 2.0	(7.1) — —	367.7 (38.8) 2.0	362.5 (121.1) 1.8	(840.6) 18.7 —	(478.1) (102.4) 1.8	173.9 (176.4) 1.0	(1,289.3) (50.1) —	(1,115.4) (226.5) 1.0
Profit/(loss) before tax Income tax	338 (146.6)	(7.1) (5.3)	330.9 (141.3)	243.3 (105.8)	(821.9) 508.1	(578.7) 402.3	(1.5) 129.3	(1,339.4) 452.1	(1,340.9) 581.5
Profit/(loss) for the year attributable to owners of the parent Other comprehensive income for the year, after tax:	191.4	(1.8)	189.6	137.4	(313.8)	(176.4)	127.8	(887.3)	(759.5)
Cash flow hedges: Reclassified to profit or loss May be classified subsequently to profit or loss when	—	—	—	—	—	—	—	—	(244.4)
specific conditions are met . Deferred tax on gain on cash	—	—	0.1	—	—	156.3	—	—	356.5
flow hedges Available-for-sale financial	—	—	(0.08)	—	—	(96.9)	—	—	(37.3)
assets	—	—	0.4	—	—	(0.4)	—	—	—
Total other comprehensive income for the year	—	—	0.4	—	—	59.0	—	—	74.8
Total comprehensive income for the year, attributable to owners of the parent	—	—	190.0	—	—	(117.4)	—	—	(684.7)

4.4 Comparison of results of operations for the years ended 31 December 2014 and 2015

(a) Revenue and other operating income

Revenue and other operating income decreased by \$120.0 million, or 11.7 per cent., to \$908.5 million for the year ended 31 December 2015, from \$1,028.5 million for the year ended 31 December 2014, primarily due to a decrease in oil prices. This decrease was partially offset by increases in production and the recognition of gains from the Group's commodity derivatives contracts.

Revenue is predominantly derived from oil sales and also includes gains or losses from the Group's commodity hedging activities. For the year ended 31 December 2015, oil sales were \$634.3 million compared with \$970.5 million in the year ended 31 December 2014. The decrease in the price of oil was reflected by the decrease in the Group's blended average realised price per barrel of oil sold (excluding hedging) by \$49.7, or 49.4 per cent., to \$50.9 for the year ended 31 December 2015 from \$100.6 for the year ended 31 December 2014.

Revenue derived from sales from the Group's UKCS operations was \$528.2 million for the year ended 31 December 2015, a decrease of \$396.6 million, or 42.9 per cent., from \$924.8 million for the year ended 31 December 2014. This decrease was primarily due to the decline in oil prices and was partially offset by an increase in production. The Group's UKCS production, on a working interest basis, increased by 3,069 boepd, or 12.6 per cent., to 27,505 boepd for the year ended 31 December 2015 from 24,436 boepd for the year ended 31 December 2014. This increase was caused by additional production from Gadwall and Goosander in GKA due to improvements such as a chemical treatment and sidetracking as well as the impact of initial production from Alma/Galia, which was brought on-stream in October. This increase in production was partially offset by the expected natural decline in production from Dons.

Revenue derived from the Group's Malaysian operations was \$117.2 million for the year ended 31 December 2015, an increase of \$63.9 million, or 119.8 per cent., from \$53.3 million for the year ended 31 December 2014. The impact of the lower oil price was more than offset by increased production. The Group's Malaysian production, on a working interest basis, for the year ended 31 December 2015 averaged 9,062 boepd, an increase of 5,603 boepd, or 162.0 per cent., from 3,459 boepd for the year ended 31 December 2014. The increase in production was primarily caused by the impact of the first full year of production from PM8/Seligi and initial production from Tanjong Baram, which was brought on-stream in July.

The decrease in revenue during the year ended 31 December 2015 was also partially offset by the benefit of the Group's hedging activities with the recognition of \$261.2 million of realised gains and \$1.9 million of unrealised gains from the Group's commodity derivatives contracts, as compared to \$31.7 million and \$18.6 million, respectively, for the year ended 31 December 2014. These gains related to the portion of the Group's commodity hedging contracts that were ineffective for hedging purposes or held for trading purposes. Unrealised gains are recorded upon the closing of the contracts and realised to match the timing of the underlying production hedged by the contract.

(b) Cost of sales

Cost of sales increased by \$36.6 million, or 5.1 per cent., to \$748.5 million for the year ended 31 December 2015 from \$711.9 million for the year ended 31 December 2014. Cost of sales before depletion for fair value uplift, re-measurements, impairments and other exceptional items increased by \$79.3 million, or 12.1 per cent., to \$733.4 million for the year ended 31 December 2015 from \$654.1 million for the year ended 31 December 2014.

The increase in cost of sales was primarily due to an increase of \$61.2 million in depreciation, depletion and amortisation charges, driven by an increase in production in PM8/Seligi and GKA and the commencement of production in Alma/Galia. This was increased by an \$11.1 million addition in supplemental tax payments due on the Group's profit oil under the Group's PM8/Seligi PSC in Malaysia as a result of the inclusion of a full year of operations at PM8/Seligi as well as a \$15.8 million increase due to an increase in over-lift and inventory movements. These increases were partially offset by a \$67.2 million decrease in lifting costs and tariffs, reflecting the continuation of the Group's cost reductions programme, which includes logistical improvements, equal time rotas and reduced contractor rates, as well as the lower percentage of throughput at SVT, caused by an increase in utilisation by non-EnQuest operated fields in the area . Due to these reasons, as well as the decrease in revenues due to lower oil prices, cost of sales before depletion for fair value uplift, re-measurements, impairments and other exceptional items rose to 80.9 per cent. of revenue for the year ended 31 December 2015 from 64.8 per cent. of revenue for the year ended 31 December 2014.

Operating costs, which include production costs, tariff and transportation costs and the effect of any realised foreign exchange hedging gains or losses relating to the ineffective portion of the Group's hedging arrangements, decreased by \$8.7 million, or 2.2 per cent., to \$390.7 million for the year ended 31 December 2015 from \$399.4 million for the year ended 31 December 2014, primarily as a result lower production costs as well as reductions in tariff and transportation costs. Production costs decreased to \$318.5 million for the year ended 31 December 2015 from \$347.2 million for the year ended 31 December 2014, due to the Group's ongoing cost optimisation activities. This was partially offset by the impact of the first full year of production at PM8/Seligi and increased production from Alma/Galia. Tariff and transportation costs decreased to \$69.1 million for the year ended 31 December 2015 from \$107.5 million

in the year ended 31 December 2014, primarily due to lower unit costs per barrel at Sullom Voe Terminal resulting from cost reduction initiatives by the operator. As a result of the above, the Group's unit operating costs per barrel decreased by \$12 to \$30 for the year ended 31 December 2015 from \$42 for the year ended 31 December 2014. The Group's depletion expense per barrel for the year ended 31 December 2015 was \$25.0 per barrel, a slight increase over \$24.6 per barrel for the year ended 31 December 2014. This increase was due to the commencement of production on Alma/Galia, which has a higher depletion rate than the rest of the Group's hubs due to having been acquired at an earlier stage of development than the rest of the Group's hubs, which were typically acquired as mature assets. The decreases in the Group's operating costs were partially offset by the impact of the foreign exchange hedging gains in 2014 primarily relating to a negative movement on the currency swaps which the Group entered into in 2014, in order to swap \$550 million of the US dollar proceeds of the Existing High Yield Notes into sterling to enable it to repay sterling drawings under the Existing RCF.

The Group's change in lifting position was an expense of \$23.9 million for the year ended 31 December 2015, compared with an expense of \$8.2 million for the year ended 31 December 2014. The net over-lift during 2015 was primarily due to the timing of liftings at GKA, together with nominators of lifting volumes at Thistle for the last two months of 2015 exceeding production in those months due to some short-term performance issues which were subsequently remedied.

(c) Exploration and evaluation expenses

Exploration and evaluation expenses decreased by \$146.6 million, or 94.0 per cent., to \$9.4 million for the year ended 31 December 2015 from \$156.0 million for the year ended 31 December 2014. The decrease was primarily due to the decrease in impairment charges to \$9.1 million for the year ended 31 December 2015 from \$152.5 million for the year ended 31 December 2014. The impairment charges in 2015 consisted of charges of \$1.9 million, relating to the withdrawal from SB307/308 blocks in Malaysia, and unsuccessful exploration write-offs of \$7.2 million, primarily relating to the Cairngorm and Elke licences.

Exploration and evaluation expenses before depletion of fair value uplift, re-measurements, impairments and other exceptional items decreased by \$3.7 million, or 92.5 per cent., to \$0.3 million for the year ended 31 December 2015 from \$4.0 million for the year ended 31 December 2014 reflecting the significant decrease in the Group's exploration and evaluation activities in response to the current low-price oil environment. The expenses for the year ended 31 December 2015 consisted primarily of pre-licence costs in respect of the 28th licence round in the UK awarded in the first half of 2015. The expenses in 2014 primarily related to pre-licence costs in Norway and pre-licence costs relating to the application for UKCS licences under the 28th Licence Round in the UK.

(d) Impairment of investments

Impairment of investments decreased by \$0.7 million, or 53.8 per cent., to \$0.6 million for the year ended 31 December 2015 from \$1.3 million for the year ended 31 December 2014. This decrease was primarily due to a change in the value of the Group's investment in Ascent Resources plc, which was acquired in 2011 as consideration for an asset disposal.

(e) Impairment of oil and gas assets

Impairment of oil and gas assets increased by \$545.7 million, or 80.4 per cent., to \$1,224.5 million for the year ended 31 December 2015 from \$678.8 million for the year ended 31 December 2014.

Impairment of oil and gas assets for the Group's UKCS operations was \$1,217 million for the year ended 31 December 2015, an increase of \$538.2 million, or 77 per cent., from \$678.8 million for the year ended 31 December 2014. The impairments in 2015 related to Heather/Broom (\$120.3 million), Thistle/Deveron (\$263.1 million), Dons (\$182.4 million), Alma/Galia (\$595.5 million) and Alba (\$25.3 million).

Impairment of oil and gas assets for the Group's Malaysian operations for the year ended 31 December 2015 amounted to \$7.8 million. This consisted entirely of an impairment to Tanjong Baram (\$7.8 million). There were no such impairments for the year ended 31 December 2014.

The impairments to the Group's UKCS and Malaysian oil and gas assets were principally due to the continuing decline in the price of oil during 2015 and the resulting reduction in estimated future revenues and 2P reserves.

(f) Negative goodwill

There was no adjustment for negative goodwill in the year ended 31 December 2015, while in the year ended 31 December 2014 the Group recorded a gain of \$28.6 million in negative goodwill, relating to the Group's acquisition in 2014 of PM8/Seligi. The assets and liabilities on acquisition were fair valued and, as the fair value was greater than the deemed consideration, a gain of \$28.6 million was recognised.

(g) Gain/loss on disposal of land and buildings

The Group had a loss on disposal of land and buildings of \$8.5 million for the year ended 31 December 2015, relating to a sale and leaseback arrangement for the Aberdeen office. The loss of \$8.5 million represents the difference between the sale proceeds of \$69.5 million and the carrying value of the property. There was no gain/loss on disposal of land and buildings for the year ended 31 December 2014.

(h) Gain/loss on disposal of intangible oil and gas assets

Gain/loss on disposal of intangible oil and gas assets decreased by \$4.3 million to \$2.3 million for the year ended 31 December 2015 from a gain of \$2.0 million for the year ended 31 December 2014, due to a loss incurred from the disposal of the Group's Norwegian licences in October 2015.

(i) General and administration expenses

General and administration expenses increased by \$1.5 million, or 9.1 per cent., to \$18.0 million for the year ended 31 December 2015 from \$16.5 million for the year ended 31 December 2014. This increase was primarily due to a \$3.6 million provision for costs relating to a rent free period in connection with the sub-let of the Group's Aberdeen office. General and administration expenses before depletion of fair value uplift, re-measurements, impairments and other exceptional items was \$14.4 million for 2015 as compared to \$16.5 million in 2014. This decrease was primarily due to a reduction in the Group's contractor related expenses as a result of its cost optimisation activities, which included renegotiation of contractor rates and headcount reductions.

(j) Other income

Other income decreased by \$11.8 million, or 43.3 per cent., to \$15.4 million for the year ended 31 December 2015 from \$27.2 million for the year ended 31 December 2014. This was a result of negative foreign exchange movements relating to the revaluation of the Group's Norwegian Kroner, sterling and Euro balances (i.e. the Existing Retail Notes and other non-USD denominated payables).

(k) Other expenses

Other expenses amounted to \$29.6 million for the year ended 31 December 2015, primarily a result of a provision relating to the Group's agreement to hire the Stena Spey drilling vessel in 2016. Based on the Group's current drilling forecasts for 2016, the vessel will not be fully utilised over this period and as a result at 31 December 2015 a provision was made for the unavoidable costs and charged to other expenses. Other expenses for 2015 also included a \$4.4 million write down of a receivable from the Group's now discontinued Tunisian operations as well as a \$2.3 million change in deferred consideration in connection with the Group's acquisition of GKA in 2014. There were no other expenses for the year ended 31 December 2014.

The following table sets forth details of the Group's finance costs for the years ended 31 December 2015 and 2014.

	Year ended 31 December
(in millions of \$)	2014	2015	% Change
Loan interest payable	5.9	22.0	272.9%
Bond interest payable	46.2	58.2	26%
Unwinding of discount on decommissioning provisions	12.1	17.0	40.5%
Unwinding of discount on other provisions .	—	4.9	100%
Unwinding of discount on financial liabilities	0.1	0.3	200%
Fair value loss on financial instruments at fair value through profit or loss . .	22.7	70.0	208.3%
Finance charges payable under finance leases .	0.0	0.0	—
Amortisation of finance fees on loans and bonds	6.8	7.3	7.4%
Other financial expenses	11.8	11.0	(6.8)%
	105.5	190.8	80.9%
Less: amounts included in the cost of qualifying assets	(3.2)	(14.4)	(350)%
Business performance finance expenses	121.1	176.4	45.7%
Fair value (gain)/loss on financial instruments at fair value	(18.7)	49.8	366.3
Unwinding of discount on other provisions. .	—	0.3	—
Finance costs	102.4	226.5	121.2%

Finance costs increased by \$124.1 million, or 121.2 per cent., to \$226.5 million for the year ended 31 December 2015 from \$102.4 million for the year ended 31 December 2014. This increase was partly caused by an increase in loan and bond interest payables of \$16.1 million and \$12.0 million, respectively, as a result of increased borrowings under the Existing RCF, the execution of and initial utilisation under the Tanjong Baram Project Finance Loan in June 2015 and a full year of interest payments on the Existing High Yield Notes. More significantly, the Group also incurred a \$47.4 million increase in fair value losses on the Group's financial instruments at fair value through profit or loss caused by losses on the time value portion of the Group's commodity put option contracts as they relate to the amortisation of the option premium paid over the life of the contracts and a \$4.9 million increase in each of unwinding of discount on decommissioning provisions and unwinding of discount on other provisions, in each case from the year ended 31 December 2014. The increase in the unwinding of discount on decommissioning provisions was due to increased decommissioning provisions for Kraken, reflecting the subsea infrastructure which was put in place throughout 2015 as well as for Alma/Galia, reflecting revised cost estimates that were determined after first oil in October 2015.

Finance costs for 2015 also included a \$49.8 million fair value loss on financial instruments at fair value, a decrease of \$68.5 million from a gain of \$18.7 million for 2014. The loss in 2015 related to the decrease in the time value portion of the Group's commodity put option contracts below the premium paid for the options that did not relate to the amortisation of the option premium paid over the life of the contract. The gain in 2014 related to the increase in the time value portion of these options above the premium paid.

(l) Finance income

The following table sets forth details of the Group's finance income for the years ended 31 December 2014 and 2015.

		Year ended 31 December
(in millions of \$)	2014	2015	% Change
Bank interest receivable	0.3	0.3	0%
Unwinding of financial asset .	0.9	0.5	(44.4)%
Other financial income .	0.6	0.1	(83.3)%
Finance income	1.8	1.0	(44.4)%

Finance income decreased by \$0.8 million, or 44.4 per cent., to \$1.0 million for the year ended 31 December 2015 from \$1.8 million for the year ended 31 December 2014. Finance income for the year ended 31 December 2015 includes a \$0.5 million unwinding of discount on the financial asset created in 2012 as part of the consideration for the farm-out of Alma/Galia to KUFPEC.

(m) Income tax

Due to the fall in profits triggered primarily by the decline in oil prices, capital allowances from ongoing investment in UKCS assets and ring fence expenditure supplement, the Group has no UK corporation tax or SCT liability at 31 December 2015, which remains unchanged from 2014. The Group's income tax credit increased by \$179.2 million, or 44.5 per cent., to \$581.5 million for the year ended 31 December 2015 from \$402.3 million for the year ended 31 December 2014, primarily due to a higher tax credit relating to the increase in the ring fence expenditure supplement caused by the Group's increased investment in the Kraken development and the release of deferred tax liabilities following impairments of UK oil and gas assets. Current income tax charges increased by \$5.4 million, or 88.5 per cent., from \$6.1 million for the year ended 31 December 2014 to \$11.5 million for the year ended 31 December 2015, due to increased overseas current petroleum income tax charges due to the rise in production at the Group's Malaysian assets.

(n) Other comprehensive income

Other comprehensive income increased by \$15.8 million, or 26.8 per cent., to \$74.8 million for the year ended 31 December 2015 from \$59.0 million for the year ended 31 December 2014, due to gains relating to the effective portion of the Group's cash flow hedging of the Group's commodity hedging contracts. See paragraph 3.13(a) of this Part 4 (''Operating and Financial Review'').

(o) Total comprehensive income for the year for the year attributable to owners of the parent

As a result of the factors described above, the Group's total comprehensive income for the year ended 31 December 2015 was a loss of \$684.7 million, a decrease of \$567.3 million, or 483.2 per cent., from the loss of \$117.4 million for the year ended 31 December 2014.

4.5 Comparison of results of operations for the years ended 31 December 2013 and 2014

(a) Revenue and other operating income

Revenue and other operating income increased by \$73.3 million, or 7.7 per cent., to \$1,028.5 million for the year ended 31 December 2014 compared to \$955.2 million for the year ended 31 December 2013. This increase was primarily due to increases in production relating to the commencement of the Group's Malaysian operations and was partially offset by the significant decline in oil prices during the second half of 2014.

Revenue is predominantly derived from oil sales and also includes gains or losses from the Group's commodity hedging activities. For the year ended 31 December 2014, oil sales were \$1,002.2 million compared with \$953.7 million for the year ended 31 December 2013. The increase in revenue was due to higher production and an over-lift of \$8.2 million for the year ended 31 December 2014 compared with an over-lift of \$2.6 million for the year ended 31 December 2013 and was partly offset by the significant reduction in the oil price during the second half of 2014. The Group's blended average realised price per barrel of oil sold decreased by \$9.1 million, or 8.3 per cent., from \$109.7 during 2013 to \$100.6 during 2014.

Revenue derived from sales from the Group's UKCS operations was \$924.8 million for the year ended 31 December 2014, a decrease of \$36.4 million, or 3.8 per cent., from \$961.2 million for the year ended 31 December 2013. This decrease was primarily due to the decline in oil prices that began in the second half of 2014 and was partially offset by an increase in production. The Group's UKCS production, on a working interest basis, increased by 236 boepd, or 1.0 per cent., to 24,436 boepd for the year ended 31 December 2015 from 24,200 boepd for the year ended 31 December 2014. This increase was caused by higher production efficiency at Thistle and ten months of initial production from GKA, which was acquired during the first quarter of 2014. These production gains were themselves partially offset by an expected natural decline in production from Dons.

Revenue derived from sales from the Group's Malaysian operations was \$53.3 million for the year ended 31 December 2014. This revenue reflects the initial production from PM8/Seligi. The Group's Malaysian production, on a working interest basis, was 3,459 boepd for the year ended 31 December 2014. The Group had no production nor revenue from its Malaysian operations for the year ended 31 December 2013.

Included within revenue and other operating income for the year ended 31 December 2014 are realised gains of \$31.7 million and unrealised gains of \$18.6 million on the Group's commodity hedging contracts as compared to no unrealised gains and unrealised losses of \$6.0 million in the year ended 31 December 2013.

(b) Cost of sales

Cost of sales was \$711.9 million during the year ended 31 December 2014 compared with \$527.1 million in the year ended 31 December 2013. The increase of \$184.8 million, or 35.0 per cent., was primarily due to an increase in operating costs.

Operating costs, which include production costs, tariff and transportation costs. and the effect of any realised foreign exchange hedging gains or losses relating to the ineffective portion of the Group's hedging arrangements, increased by \$128.5 million, or 41.7 per cent., to \$436.5 million for the year ended 31 December 2014 from \$308.0 million for the year ended 31 December 2013 due to higher production, tariff and transportation costs. Tariff and transportation costs increased by \$66.8 million, or 90.9 per cent., to \$140.3 million for the year ended 31 December 2014 from \$73.5 million for the year ended 31 December 2013, primarily due to significantly higher unit costs per barrel at Sullom Voe Terminal. These costs increased by \$28.9 million during the year ended 31 December 2014, reflecting higher base level tariffs as well as increased throughput at SVT resulting from the Group's additional production. Production costs increased by \$61.7 million, or 26.3 per cent., to \$296.2 million for the year ended 31 December 2014 from \$234.5 million for the year ended 31 December 2013, due primarily to the Group's commencement of production at GKA and PM8/Seligi following their acquisition. This was partially offset by overall gains relating to both the Group's bond proceeds currency transactions and realised mark to market valuations on foreign exchange trades. The gain relating to the Group's bond proceeds currency transactions arose when it entered into a number of foreign exchange transactions to swap \$550 million of the US dollar proceeds of the Existing High Yield Notes into sterling to enable it to repay sterling drawings under the Existing RCF. The transactions required the Group to swap sterling back into US dollars between October and December 2014 at a fixed rate. In early October 2014 the transactions were closed out and the Group realised a gain of \$46.7 million.

As a result of the foregoing, the Group's unit operating costs per barrel increased by \$6 to \$42 for the year ended 31 December 2014 from \$36 for the year ended 31 December 2013.

The Group's depletion expense per barrel for the year ended 31 December 2014 was unchanged from the \$24.6 per barrel for the year ended 31 December 2013. An increased rate of depletion in Heather and Thistle due to a higher capital expenditure profile was offset by lower production from Dons.

The Group's change in lifting position was a \$8.2 million expense for the year ended 31 December 2014, compared with a \$2.6 million expense for the year ended 31 December 2013. The higher net over-lift during 2014 was primarily due to increased over-lift in the Group's UKCS operated assets, except for Alba in which there was an under-lift, and was partially offset by an under-lift at the Group's Malaysian assets.

Exceptional items in 2014 included Sullom Voe Terminal costs of \$32.8 million invoiced by the operator in 2014, but relating to 2012 and 2013 production, as well as depletion of the fair value uplift of Petrofac Energy Developments Limited's oil and gas assets on acquisition. The exceptional charge for SVT costs was driven by increased costs at SVT for maintenance/inspection work scopes together with the Group's share of throughput being higher than expected due to shut-ins at other user's fields.

(c) Exploration and evaluation expenses

Exploration and evaluation expenses increased by \$147.4 million to \$156.0 million for the year ended 31 December 2014 from \$8.6 million for the year ended 31 December 2013. This increase was due to an impairment charge of \$152.0 million, primarily relating to the Crawford Porter, Kildrummy and Cairngorm fields as well as certain GKA acreage, which were impaired due to the significant decline in oil prices in the second half of 2014, as a result of which the Group determined commercial production in these fields to be unfeasible. The impairment charge also included costs relating to relinquished licences, primarily the South West Heather licence. The Group had no such impairment charges in 2013.

Exploration and evaluation expenses before depletion of fair value uplift, re-measurements, impairments and other exceptional items decreased by \$4.6 million, or 53.5 per cent., to \$4.0 million for the year ended 31 December 2014 compared to \$8.6 million for the year ended 31 December 2013. The Group's exploration and evaluation expenses in 2014 primarily related to pre-licensing costs related to obtaining new licences in Norway, which were awarded in January 2014, and in the UK, in the 28th Licensing Round in April 2014. The decrease in pre-licencing costs of \$3.2 million, or 97.8 per cent., from \$6.7 million for the year ended 31 December 2013 to \$3.5 million for the year ended 31 December 2014 was primarily due to the decrease in Norwegian pre-licensing activities following the awarding of licences in Norway in January 2014.

(d) Impairment of investments

Impairment of investments increased by \$1.0 million, or 333.3 per cent., to \$1.3 million for the year ended 31 December 2014 from \$0.3 million for the year ended 31 December 2013. This increase was primarily due to a change in the value of the Group's investment in Ascent Resources plc, which was acquired in 2011 as consideration for an asset disposal.

(e) Impairment of oil and gas assets

Impairment of oil and gas assets was \$678.8 million for the year ended 31 December 2014. There was no impairment of oil and gas assets for the year ended 31 December 2013. These impairment charges were primarily caused by the significant fall in the price of oil in the second half of 2014 and the resulting reduction in expected future revenues from oil sales and 2P reserves. Impairments were recorded for Alma/Galia, with an impairment charge of \$675.6 million which, in addition to the factors mentioned above, also related to delays in first oil and cost increases, as well as a smaller charge to Dons assets.

(f) Negative goodwill

The adjustment for negative goodwill was \$28.6 million for the year ended 31 December 2014. The assets and liabilities relating to the PM8/Seligi acquisition were fair valued and, as the fair value was greater than the deemed consideration, a gain was recognised. There was no negative goodwill recorded for the year ended 31 December 2013.

(g) Gain/loss on disposal of intangible oil and gas assets

The Group had a gain on disposal of intangible oil and gas assets of \$2.0 million for the year ended 31 December 2014. The gain related to the Group's disposal of its interest in the P8a asset in the Dutch North Sea. There was no gain/loss on disposal of intangible oil and gas assets in 2013.

(h) General and administration expenses

General and administration expenses decreased by \$8.5 million, or 34 per cent., to \$16.5 million for the year ended 31 December 2014 compared to \$25.0 million for the year ended 31 December 2013, primarily due to a reduction in business development specific and higher parent company overhead recovery through the Kraken and Alma/Galia developments.

(i) Other income

Other income was \$27.1 million for the year ended 31 December 2014. Other income in 2014 was comprised of net foreign exchange gains in connection with positive foreign exchange movements relating to the revaluation of the Group's Norwegian Kroner, pound sterling and Euro balances (i.e. the Existing Retail Notes and other non-USD denominated payables). The Group had no other income for the year ended 31 December 2013.

(j) Other expenses

The Group had no other expenses for the year ended 31 December 2014. Other expenses of \$26.4 million for the year ended 31 December 2013 represented negative foreign exchange movements in connection with revaluation of the Company's non-USD denominated balances.

(k) Finance costs

Finance costs increased by \$63.6 million, or 163.9 per cent., to \$102.4 million for the year ended 31 December 2014 compared to \$38.8 million for the year ended 31 December 2013.

The following table sets forth details of the Group's finance costs for the years ended 31 December 2013 and 2014.

	Year ended 31 December
(in millions of \$)	2013	2014	% Change
Loan interest payable .	3.0	5.9	96.7%
Bond interest payable	10.4	46.2	344.2%
Unwinding of discount on decommissioning provisions	12.6	12.1	(3.9)%
Unwinding of discount on other provisions	—	—	—
Unwinding of discount on financial liabilities	—	0.1	100%
Fair value loss on financial instruments at fair value through profit or loss .	—	22.7	100%
Finance charges payable under finance leases	0.0	0.0	—
Amortisation of finance fees on loans and bonds	7.7	6.8	(11.7)%
Other financial expenses .	6.5	11.8	81.5%
	40.0	105.5	163.8%
Less: amounts included in the cost of qualifying assets	(1.2)	(3.2)	166.7%
Business performance finance expenses	38.8	121.1	212.1%
Fair value (gain)/loss on financial instruments at fair value through profit or
loss	—	(18.7)	100%
Unwinding of discount on other provisions.	—	—	—
Finance costs	38.8	102.4	163.9%

This increase in finance costs was primarily caused by a \$35.8 million increase in bond interest payable as a result of the issue of the Existing High Yield Notes as well as the impact of the first full year of interest under the Existing Retail Notes. The Group also incurred \$22.7 million of costs relating to fair value losses on the Group's financial instruments at fair value through profit or loss in connection with its hedging arrangements. These costs consisted of the realised loss on the time value portion of the Group's commodity hedging contracts of \$38.8 million, which was offset by an increase of \$16.2 million in the time value portion above the premium paid for the hedging contracts. The increase in finance costs in 2014 was partially offset by a \$18.7 million fair value gain on financial instruments at fair value through profit or loss. This gain related to the increase in the time value portion of the Group's commodity put option contracts above the premium paid for the options that did not relate to the amortisation of the option premium paid over the life of the contract.

(l) Finance income

Finance income decreased by \$0.2 million, or 10 per cent., to \$1.8 million for the year ended 31 December 2014 compared to \$2.0 million for the year ended 31 December 2013.

The following table sets forth details of the Group's finance income for the years ended 31 December 2013 and 2014.

		Year ended 31 December
(in millions of \$)	2013	2014	% Change
Bank interest receivable	0.4	0.3	(28)%
Unwinding of financial asset	1.4	0.9	(35.7)%
Other financial income	0.2	0.6	200%
Finance income	2.0	1.8	(10)%

The \$0.9 million charge for unwinding of financial asset in 2014, representing a decrease of \$0.5 million from 2013, relates to the unwinding of the discount on the financial asset created as part of the consideration for the farm out of the Alma/Galia development to KUFPEC.

(m) Income tax

The Group had no UK corporation tax or SCT liability for the year ended 31 December 2014 as the Group recorded losses from its operations in connection with the decline in oil prices during the second half of the year and the Group's ongoing investment in UKCS assets. The Group's reported income tax was a credit of \$402.3 million for the year ended 31 December 2014 compared to a charge of \$141.3 million for the year

ended 31 December 2013. The movement is primarily due to the release of deferred tax liabilities following impairment of UK oil and gas assets. Current income tax charges decreased by \$3.6 million, or 37.11 per cent., from \$9.7 million for the year ended 31 December 2013 to \$6.1 million for the year ended 31 December 2014, due to decreased PRT in relation to the Alba field due to lower profits in connection with the decline in oil prices. This decrease was partially offset by tax charges in connection with the Group's Malaysian assets, which came into operation during 2014.

Total comprehensive income for the year for the year attributable to owners of the parent

As a result of the factors described above, the Group's total comprehensive income for the year ended 31 December 2014 was a loss of \$117.4 million, a decrease of \$307.5 million from the gain of \$190.0 million for the year ended 31 December 2013. This was primarily due to the \$678.8 million impairment to the Group's oil and gas assets as a result of decreases in the price of oil during the second half of 2014.

5. Liquidity

The Group closely monitors and manages its funding position and liquidity risk throughout the year, including monitoring forecast covenant results to ensure the Group has sufficient funds to meet forecast cash requirements. The Group regularly produces cash forecasts and sensitivity tests relating to changes in crude oil prices, production rates and development project timing and costs.

The Group's liquidity requirements arise principally from its capital investment and working capital requirements. For the periods presented, the Group met its working capital requirements primarily from oil revenues from the Group's producing assets and debt financing through ongoing drawings on the Existing RCF, the issue of the Existing High Yield Notes and the Existing Retail Notes. The Group had headroom of \$235 million as of 31 December 2015. As of 30 June 2016, the Group had drawn down \$956.3 million under the Existing RCF.

Following the significant decline in oil prices in the second half of 2014, the Group implemented certain cost saving programmes with the aim of reducing planned operational expenditure, general and administrative spend and capital expenditure. In addition, the Group renegotiated certain liquidity covenant within the Existing RCF and the Existing Retail Notes in 2015.

The Company is of the opinion that the Group does not have sufficient working capital available for its present requirements, that is, for at least 12 months from the date of this document. In order to address the Company's working capital shortfall, the Directors have undertaken a number of measures, culminating in the proposal of the Restructuring (as described further in Part 1 (''Letter from the Chairman of EnQuest PLC''), including the Placing and Open Offer. The measures undertaken prior to the announcement of the Restructuring include:

• agreeing with the Existing RCF Lenders further utilisations of approximately \$20 million and \$26 million under the Existing RCF, in September 2016 and October 2016, respectively; and
• agreeing the deferral of certain payments to trade suppliers until between October 2016 and April 2019.

The Directors have now proposed the Restructuring, including the Placing and Open Offer, to improve the Group's capital structure and to improve the ongoing liquidity position of the Group. The Proposed Note Amendments would capitalise the Group's cash interest expense under the New High Yield Notes and the Amended Retail Notes unless the oil price is equal to or above an average of \$65.00/bbl for the six-month period ending one month prior to the interest payment date (and certain other conditions are met) and the Proposed RCF Amendments and Proposed Note Amendments would extend the maturity date for the repayment of the Existing RCF to October 2021, extend the scheduled maturity in respect of New High Yield Notes and Amended Retail Notes to April 2023, further automatically extend the maturity date in respect of the New High Yield Notes and the Amended Retail Notes to October 2023 if the Company has not repaid or refinanced the Existing RCF by 15 October 2020, amend the Group's financial covenants to provide additional flexibility under the RCF, remove certain financial covenants from the Existing Retail Notes and amend certain financial indebtedness baskets under the New High Yield Notes. The proceeds of the Placing and Open Offer are expected to enable the Group to complete the Kraken development and bring it to first oil on schedule in the first half of 2017, which the Directors believe will considerably improve the Group's cash flows.

The Group held cash and cash equivalents of \$93.3 million as of 31 July 2016, \$163.3 million and \$305.6 million as of 30 June 2016 and 2015, respectively and \$269.0 million, \$176.8 million and \$72.8 million as of 31 December 2015, 2014 and 2013, respectively.

5.1 Cash flow

The following table sets forth consolidated cash flow information for the years ended 31 December 2013, 2014 and 2015 and for the six month periods ended 30 June 2015 and 30 June 2016.

	Year ended 31 December				Six months ended 30 June
(in millions of \$)	2013	2014	2015	2015	2016
Cash flow from operating activities
Profit/(loss) before tax	330.9	(578.7)	(1,340.9)	(34.6)	74.9
Depreciation	6.9	7.4	7.0	3.5	2.0
Depletion	255.7	244.5	302.7	121.8	129.3
Exploration costs impaired and written off	2.0	152.6	9.1	4.8	0.6
Impairment of oil and gas assets	—	678.8	1,224.5	—	—
Loss on disposal of land and buildings	—	—	8.5	5.9	—
Write down of receivable	—	—	4.4	4,242	—
Write down of inventory	—	—	13.6	—	—
(Gain)/loss on disposal of intangible oil and gas assets	—	(2.0)	2.3	—	—
Impairment of available-for-sale investments	0.3	1.3	0.6	—	0.05
Negative goodwill	—	(28.6)	—	—	—
Share-based payment charge	8.2	8.5	5.7	3.8	3.9
Unwinding of discount on decommissioning provisions Unwinding of other discount	12.6 —	12.1 —	17.0 5.0	9.7 2.5	6.2 1.6
Change in deferred consideration	—	—	2.3	—	(3.5)
Change in surplus lease provision	—	—	26.6	—	(22.8)
Hedge accounting deferral	—	—	(119.1)	(63.9)	(1.8)
Amortisation of option premiums	—	(6.8)	(111.6)	(55.4)	(15.2)
Unrealised gains/(losses) on financial instruments	(5.9)	5.4	(3.9)	14.7	52.4
Unrealised exchange gains	26.4	(27.2)	(15.0)	4.3	(37.3)
Net finance costs	22.5	88.5	203.5	90.0	40.3
Operating profit before working capital changes (Increase)/decrease in trade and other receivables	629.5 (30.8)	555.7 91.4	242.1 (76.4)	111.2 (0.05)	230.7 (13.2)
(Increase)/decrease in inventories	(30.8)	(41.7)	10.1	(7.4)	(6.7)
Increase/(decrease) in trade and other payables	(5.1)	26.9	46.0	(20.6)	(28.2)
Cash generated from operations	562.7	632.2	221.7	83.3	182.6
Cash received on sale of financial instruments	—	100.1	29.6	(5.7)	(7.9)
Decommissioning spend	—	(7.2)	(5.3)	(3.9)	(4.3)
Income taxes paid	(11.3)	(12.5)	(1.4)	(3.0)	(0.1)
Net cash flows from operating activities	551.4	712.7	244.6	70.7	170.2
Investing activities
Purchase of property, plant and equipment	(950.3)	(990.6)	(807.0)	(386.3)	(259.4)
Purchase of intangible oil and gas assets	(36.6)	(69.8)	(19.6)	(18.0)	(2.2)
Proceeds from disposal of land and buildings Proceeds from disposal of intangible oil and gas assets .	— —	— 2.2	68.4 7.1	— —	— —
Acquisitions	—	(58.2)	(3.0)	—	—
Prepayment of finance lease	—	(100.0)	—	—	—
Proceeds from farm-out	2.6	—	—	—	—
Interest received .	0.6	0.9	0.4	0.2	0.3
Net cash flows used in investing activities	(983.7)	(1,215.5)	(753.7)	(404.1)	(261.3)
Financing activities Proceeds from bank facilities	182.7	42.0	736.1	— 474.7	— 49.1
Repayment of bank facilities	—	—	(48.5)	—	—
Proceeds from bond issue	246.3	650.0	—	—	—
Shares purchased by Employee Benefit Trust	(7.4)	(15.9)	—	—	—
Repayment of obligations under finance leases .	0.0	0.0	0.0	(0.04)	(0.04)
Interest paid	(9.0)	(43.6)	(76.1)	(21.5)	(50.5)
Other finance costs paid	(35.7)	(23.0)	(15.2)	(8.5)	(6.6)
Net cash flows from/(used) in financing activities	376.9	609.5	592.2	444.6	(7.9)
Net (decrease)/increase in cash and cash equivalents	(55.4)	106.7	87.1	111.2	(99.0)
Net foreign exchange on cash and cash equivalents	3.7	(7.6)	(1.5)	10.4	(2.2)
Cash and cash equivalents at January 1	124.5	72.8	171.9	171.9	257.5
Cash and cash equivalents at 31 December	72.8	171.9	257.5	293.5	156.3
Reconciliation of cash and cash equivalents
Cash and cash equivalents per cash flow statement Restricted cash .	72.8 —	171.9 4.9	257.5 11.5	293.5 12.1	156.3 7.0
Cash and cash equivalents per balance sheet	72.8	176.8	269.0	305.6	163.3

5.2 Net cash from operating activities

Net cash generated from operating activities was \$170.2 million generated for the six months ended 30 June 2016 compared to \$70.7 million generated for the same period of 2015. This was primarily due to higher profit/loss before tax relating to an increase in other income and expenses, comprised of net foreign exchange gains relating to the devaluation of pounds sterling against US dollars, from a gain of \$37.3 million during the six months ended 30 June 2016 from a loss of \$4.3 million for the same period in 2015.

Net cash generated from operating activities was \$244.6 million generated for the year ended 31 December 2015 compared to \$712.7 million generated for the year ended 31 December 2014. The decrease in operating cash flows was primarily due to the significant decrease in revenues stemming from the substantial decline in the price of oil.

Net cash generated from operating activities was \$712.7 million for the year ended 31 December 2014 compared to \$551.4 million generated for the year ended 31 December 2013. The increase in operating cash flows was mainly due to a \$100.1 million increase in cash received on sale of financial instruments, reflecting the net gain from the sale of certain commodity hedges.

5.3 Net cash used in investing activities

Net cash used in investment activities was \$261.3 million for the six months ended 30 June 2016 compared to \$404.1 million for the same period of 2015. Net cash used in investing activities was \$983.6 million for the year ended 31 December 2013, compared to \$1,215.5 million for the year ended 31 December 2014. The net cash used in investing activities for the six months ended 30 June 2016 and for the year ended 31 December 2015 primarily related to spending on development projects, including the following:

• the continued Kraken development, including completion of drill centres and the installation of the submerged turret/buoy and mooring system;
• the continued Scolty/Crathes development, including progression of the subsea and topside programmes as well as the execution of the drilling plan;
• the drilling and evaluation of the Eagle exploration well;
• the continued Alma/Galia development ahead of the achievement of first oil in the fourth quarter of 2015;
• the Thistle life extension project, as well as the commencement of the construction of additional wells;
• the chemical treatments at Goosander well in GKA;
• the ongoing programme of well intervention work in PM8/Seligi;
• the completion of the Tanjong Baram development;
• the completion of the Ythan production well in Dons; and
• the replacement of the Broom water injection flow line and the completion of the drilling programme on Heather.

Net cash used or generated in investing activities amounted to \$1,215.5 million used for the year ended 31 December 2014, compared to \$983.6 million of net cash used in investing activities for the year ended 31 December 2013. The net cash used in investing activities for the year ended 31 December 2014 was primarily related to spending on development projects, including the following:

• the completion of the GKA acquisition and subsequent operation improvements;
• the continued Alma/Galia development, including the completion of five production wells;
• the acquisition of PM8/Seligi;
• the continued Kraken development, including the installation of two subsea integrated template structures, water injection and production templates for the first drill centre, as well as the execution of the drilling rig contract; and
• the acquisition of Tanjong Baram.

The net cash used in investing activities for the year ended 31 December 2013 was primarily related to spending on development projects, including the following

• the Alma/Galia development including the FPSO and further drilling of the production wells;
• the Kraken development including drilling the head target well, FPSO FEED costs and project management activities;
• the Thistle life extension programme and drilling programme including the A60 well and A59 well work-over;
• the Dons drilling programme with the DS producer and the OB injector; and
• the Heather/Broom return to drilling programme and additional living quarters.

For a more detailed description of the Group's recent capital expenditure, see paragraph 5.3(b) of this Part 4 (''Operating and Financial Review'').

(a) Net cash from financing activities

Net cash from financing activities amounted to \$596.2 million, \$609.5 million and \$376.9 million in the years ended 31 December 2015, 2014 and 2013, respectively.

The Group's recent financing activities include the execution of the Tanjong Baram Project Finance Loan in 2015, the issue of the Existing High Yield Notes and the issue of the Existing Retail Notes in 2013. For a more detailed description of these activities, see paragraph 7 of this Part 4 (''Operating and Financial Review'').

(b) Capital investment

The primary objective of the Group's capital management is to optimise the return on investment, by managing its capital structure to achieve capital efficiency while maintaining flexibility for the investment of additional capital where required. The Group regularly monitors the capital requirements of the business over the short, medium and long term, in order to enable the Group to better anticipate the timing of requirements for additional capital.

Capital investment represents the Group's cash outflow on capital additions. The following table sets forth a reconciliation of the Group's capital investment to capital additions.

	Year ended 31 December			Six months ended 30 June
(in millions of \$)	2013	2014	2015	2015	2016
Capital additions	1,367.3	1,180.6	764.0	480.6	465.2
Cost carry (KUFPEC)	(95.3)	—	—	—	—
Cost carry (Kraken) (firm)	(164.2)	97.7	66.5	66.5	—
Cost carry (Kraken) (contingent)	(80.0)	—	80.0	—	(26.6)
GKA acquisition	—	(55.3)	—	—	—
PM8/Seligi PSC acquisition	—	(150.9)	—	—	—
Alba acquisition	(26.0)	—	—	—	—
Non-cash acquisition of 10.5% of Kraken	—	—	—	—	(33.6)
Proceeds on disposal of building	—	—	(68.4)	—	—
Other proceeds	—	(2.2)	(7.1)	—	—
Capitalised interest	(1.2)	(3.2)	(14.4)	(4.7)	23.1
Working capital (including deferrals)/Other	(16.3)	(8.6)	(69.5)	(138.2)	(120.3)
Capital investment	984.3	1,058.1	751.1	404.3	261.6

''Cost carry (KUFPEC)'' represents amounts capitalised due to KUFPEC's obligations to carry the Group's development costs at Alma/Galia. ''Cost carry (Kraken) (firm)'' relates to the Group's obligations to carry the development costs of Nautical Petroleum plc and First Oil plc in the event of approval of a field development plan, which took place in 2013. In 2013 this represents amounts capitalised due to these obligations (being the \$240 million initial value of the carry less \$75.8 million, being the amount of cash paid carrying the Group's partners during the year) and in 2014 and 2015 this represents the amount of cash paid carrying the Group's partners during the year. ''Cost carry (Kraken) (contingent)'' represents amounts capitalised due to the Group's obligations to carry Nautical Petroleum plc and First Oil plc based on the volume of 2P reserves in the field development plan for Kraken. ''Alba acquisition'' represents the value ascribed to oil and gas assets upon the Group's acquisition of Alba. ''Other'' primarily includes the movement in capital accruals.

Capital investment has historically comprised the costs of construction of oil and gas facilities, the acquisition of interests in new assets and farm-ins to additional equity in existing assets, costs of technical services and studies, seismic acquisition and interpretation, exploration, evaluation, development and productivity enhancement drilling and well testing.

The following tables set forth the Group's cash outflow on capital expenditure for the years ended 31 December 2015, 2014 and 2013 and the six month periods ended 30 June 2015 and 2016.

			Year ended Six months 31 December		Six months ended
(in millions of \$)	2013	2014	2015	ended 30 June 2015	30 June 2016
North Sea capital expenditure	926.5	927.0	677.7	314.9	251.5
Malaysia capital expenditure	—	19.1	90.0	53.0	6.9
Exploration and evaluation capital expenditure	36.6	69.7	19.6	18.0	2.2
Other capital expenditure	23.8	44.5	39.3	18.4	1.0
Proceeds on disposal of Aberdeen new buildings	—	—	(68.4)	—	—
Other proceeds	(2.6)	(2.2)	(7.1)	—	—
	984.3	1,058.2	751.1	404.3	261.6

The Group's capital investment during the six months ended 30 June 2016 primarily related to (i) Kraken development, including the continuation of the drilling programme and completion of the drill centre projects; (ii) execution of the Scolty/Crathes drilling programme; and (iii) the drilling and evaluation of the Eagle exploration well.

The Group's capital investment in 2015 principally related to the continued development of Kraken, including work on the subsea systems and risers, and drill centres 1 and 2, and the Group's currentlyowned producing fields. In light of the low oil price environment, capital investment was reduced for both the Group's development and producing assets as part of its cost optimisation programme.

The Group's capital investment in 2014 principally related to (i) the Alma/Galia development, including the FPSO and further drilling of the production wells (\$399.3 million); (ii) the Thistle life extension programme (\$50.2 million); (iii) the Dons drilling programme (\$45.9 million); (iv) GKA (\$40.8 million); and (vi) exploration (\$69.7 million).

The Group's capital investment in the year ended 31 December 2013 principally related to (i) Alma/Galia development, including the FPSO and further drilling of the production wells (\$460.5 million); (ii) Kraken including drilling the head target well, FPSO work and project management activities (\$171.5 million); and (iii) approximately \$294.5 million on the Group's currently-owned producing fields.

5.4 Future capital investment

The Group's capital investments are driven largely by its development of new oil and gas projects through to production. The Group's priorities for 2016 include delivering its investment programme, including sail-away of the Kraken FPSO and first oil at Scolty/Crathes, on time and on budget. The Group's 2016 capital expenditure budget was further reduced as a result of a decrease in the planned capital expenditure on Kraken, despite including additional capital expenditures associated with the 10.5 per cent. increase in its working interest in Kraken. This has been reduced from an original Kraken capital expenditure budget for 2016 of approximately \$950 million. The Group's predominant focus areas are the next phases of the Kraken development, with the FPSO being a critical path element. The Group intends to use the proceeds of the Placing and Open Offer to continue the development of the Group's Kraken and Scolty/Crathes assets.

6. Contractual obligations and contingent liabilities

The following table sets forth the Group's remaining contractual maturity for its non-derivative financial liabilities with contractual repayment periods as of 31 December 2015.

The table reflects the undiscounted cash flows of financial liabilities based on the earliest date on which the Group could be required to pay including interest projected to be paid thereon.

	Payments due by period
Contractual obligations (in millions of \$)	Total	On demand	Less than 1 year	1–2 years	2–5 years	More than 5 years
Loans and borrowings	1,065.0	—	52.0	56.5	956.5	—
Bond(1)	1,245.9	—	58.1	58.1	174.4	955.2
Obligations under finance leases .	0.0	—	0.0	—	—
Accounts payable and accrued liabilities	543.5	543.5	—	—	—	—
Other liabilities	8.3	—	—	8.3	—	—
Total	2,862.8	543.5	110.2	122.9	1,130.9	955.2

(1) Includes both the Existing High Yield Notes and the Existing Retail Notes.

As is common within the Group's industry, the Group has entered into various commitments related to the exploration and evaluation of, and production from, commercial oil and gas properties. As of 31 December 2015, 2014 and 2013, the Group had future capital commitments of \$433.5 million, \$788.3 million and \$447.3 million, respectively. These amounts represent the Group's obligations during the course of the following years to fulfil its contractual commitments.

The decrease in capital commitments from \$788.3 million as of 31 December 2014 to \$433.5 million as of 31 December 2015 is primarily due to decreased future expenses at Alma/Galia as the asset reached the production phase, as well as a general reduction in the Group's planned expenses as a result of its cost optimisation programmes.

As of 31 December 2015, potential future capital commitments, which relate to contingent future events, primarily in respect of the continued development of Kraken and Scolty/Crathes.

The Group also has potential liability for decommissioning the Group's assets. The Group makes full provision for the future costs of decommissioning the Group's oil production facilities and pipeline systems on a discounted basis based on the Group's decommissioning liability. With respect to Heather/Broom, GKA and PM8/Seligi, the decommissioning provisions are based on the Group's contractual obligations rather than its equity interest in the fields. These contractual obligations range from a low of 25 per cent. for the Kittiwake field to a high of 63 per cent. for the Broom field. Decommissioning provisions at Thistle/ Deveron remain with the former owner of the asset. The Group makes decommissioning provisions on a working interest basis for Dons, Alma/Galia and Alba. The provisions the Group makes represent the present value of decommissioning costs which are expected to be incurred up to 2034 assuming no further development of the Group's assets and are discounted at a risk-free rate based on the yields of government bonds. As of 31 December 2015, the Group has discounted this liability at a rate of 3.0 per cent., whereas previously it had discounted it at a rate of 5.0 per cent. The unwinding of the discount is classified as a finance cost.

These provisions have been created based on internal and third party estimates. Assumptions based on the current economic environment have been made which the Directors believe are a reasonable basis upon which to estimate the future liability. These estimates are reviewed regularly to take into account any material changes to the assumptions. The Company cannot assure you, however, that actual decommissioning costs will not be materially greater than its estimates. See ''Risk factors—Risks relating to the Group's business—The Group may face unanticipated increased or incremental costs in connection with decommissioning obligations''. See paragraph 10 of this Part 4 (''Operating and Financial Review'').

7. Financing

The Group's liquidity requirements arise principally from its capital investment and working capital requirements. For the periods presented, the Group met its capital investment and working capital requirements primarily from oil sales revenues, oil hedge proceeds and the proceeds of debt financing.

7.1 Equity financing

As of 30 June, 2016 and 31 December 2015, 2014 and 2013 the Group had 802.7 million allotted and fully paid ordinary shares of 5 pence each.

7.2 Debt financing

Total debt as of 31 July 2016, excluding unamortised arrangement fees, amounted to \$1,858.0 million.

(a) Notes

As of 31 July 2016, the Group's total debt in respect of the Existing Retail Notes together with the Existing High Yield Notes was \$871.7 million.

In April 2014, the Company issued the Existing High Yield Notes in an aggregate principal amount of \$650.0 million, which mature in 2022 and pay a coupon of 7 per cent., payable semi-annually in April and October.

On 24 January 2013, the Company established a £500,000,000 euro medium term note programme. On 15 February 2013, the Company issued an initial tranche of £145,000,000 5.50 per cent. Notes due 15 February 2022 pursuant to the EMTN Programme. On 2 December 2013, the Company issued a further tranche of £10,000,000 5.50 per cent. Notes due 15 February 2022 under the EMTN Programme, which were consolidated with and formed a single series with the initial tranche of £145,000,000 5.50 per cent. Notes and together form the Existing Retail Notes.

The Existing Retail Notes initially carried interest at a fixed rate of 5.50 per cent. per annum payable semi-annually in arrear. On 5 May 2015, the Company agreed, with the consent of the Existing Retail Noteholders, to amend the rate of interest payable from time to time in respect of the Existing Retail Notes for a limited period of time such that if the Company delivers to the Existing Retail Notes Trustee a compliance certificate certifying that the ratio of net financial indebtedness to EBITDA was more than 3.0:1.0 in respect of any test period, the rate of interest for the immediate next following interest period commencing after the date of such compliance certificate will be 7.00 per cent. per annum. This amended rate of interest only applies where compliance certificates are delivered in respect of the dates at which the Company produces its audited annual financial statements or unaudited semi-annual financial statements from 5 May 2015 to (and including) 31 December 2016.

Both the Existing High Yield Notes and the Existing Retail Notes require the Group to comply with certain financial covenants. See paragraph 18.6(h) of Part 9 (''Additional Information'').

The Proposed Note Amendments, which form part of the Restructuring, will, if approved, capitalise the Group's cash interest expense unless the oil price is equal to or above an average of \$65.00/bbl for a six-month period (and certain other conditions are met), extend the maturity dates for the repayment of such indebtedness and amend the Group's financial covenants to provide additional flexibility under the RCF, remove certain financial covenants from the Existing Retail Notes and amend certain financial indebtedness baskets under the New High Yield Notes. The Amended Retail Notes covenants would be aligned with the New High Yield Notes covenants. See paragraph 5 of Part 1 (''Letter from the Chairman of EnQuest PLC'') for a more detailed discussion of the proposed changes to the Existing Notes.

(b) Tanjong Baram Project Finance Loan

In July 2015, the Company entered into the Tanjong Baram Project Finance Loan with DBS Bank. The facility is a five year \$35.0 million senior secured loan facility with interest payable at USD LIBOR plus a margin of 2.25 per cent. Under the terms of the facility, the Company may only use loan proceeds in connection with the development of the Tanjong Baram field. The principal of the loan is repayable in three month intervals from 31 December 2015 to 31 March 2020. The facility requires the Group to comply with a debt service coverage ratio financial covenant and restricts its ability to incur additional indebtedness. The Company fully drew down \$35 million under the facility in June 2015, and the balance at 31 July 2016 amounted to \$30.1 million. See paragraph 18.6(b) of Part 9 (''Additional Information'').

(c) Revolving Credit Facility

The Company and certain of its subsidiaries entered into an agreement establishing the Existing RCF on 6 March 2012, subsequent to which the Company has amended and restated the agreement including on 29 January 2014. The mandated lead arrangers are BNP Paribas and The Bank of Nova Scotia and the facility agent is BNP Paribas. The Existing RCF may be utilised in US dollars, pounds sterling or Euro by drawing of cash advances or by issuances of letters of credit. Borrowings may be used for the purposes of funding oil and gas related expenditure of the Company and its subsidiaries from time to time. As of 31 July 2016, the Group had drawn \$956.3 million under the Existing RCF and utilised letters of credit of \$7.0 million. After netting off unamortised facility fees, the balance sheet amount for the Group's liability represented by the Existing RCF was \$940.0 million as of 31 July 2016.

Since 31 July 2016, the Group has drawn down an additional approximately \$46 million under the Existing RCF.

Assuming and following completion of the Restructuring and the Proposed RCF Amendments, the maximum remaining facilities available to the Group under the Existing RCF will be \$197.7, less any further interim utilisations agreed with the Existing RCF Lenders between the date of this document and completion of the Restructuring and the Proposed RCF Amendments.

One of the elements of the Restructuring is the Proposed RCF Amendments, which would amend the Existing RCF to, among other things, extend the final maturity date of the Existing RCF to October 2021, to split the maximum aggregate commitments into a term loan facility and a revolving credit facility, relax certain of the financial covenants in the Existing RCF and incorporate terms allowing for new super senior hedging. In addition, there will be a fee of 100 bps payable to Existing RCF Lenders who have entered into the Lock-Up Agreement by 5.00 p.m. (London time) on 11 October 2016 (or such later time as the Company may agree) on their proportionate share of the Aggregate Commitments of US\$1.2 billion on the first scheduled amortisation date, being 31 March 2018, in consideration for the various consents necessary and provided by the Existing RCF Lenders in order to implement the Restructuring.

The following table sets forth information on the Group's total debt as of 31 July 2016, excluding unamortised arrangement fees.

		as of 31 July 2016
(in millions of \$)	Current	Non-current
Revolving Credit Facility	—	956.3
Tanjong Baram Project Finance Loan	10.2	19.9
Bonds(1)	16.3	855.4
Total	26.3	1,831.6

(1) Includes both the Existing High Yield Notes and the Existing Retail Notes.

The following table sets forth the Group's remaining contractual maturity for debt as of 31 July 2016. The table has been compiled based on the undiscounted cash flows of financial liabilities on the earliest date on which the Group can be required to pay.

(in millions of \$)	as of 31 July 2016
Due within one year	26.3
Due within one to five years	976.2
Due after five years	855.4
Total	1,858.0

For a more detailed description of the Group's financing arrangements, see paragraph 18.6 of Part 9 (''Additional Information'').

7.3 Letters of credit and surety bonds

The Group enters into letters of credit and surety bonds principally to provide security for its leases and decommissioning obligations.

The Group has a letter of credit of £5.2 million in respect of the Group's lease at Annan House in Aberdeen, expiring 31 October 2019.

The Group has two surety bonds of £27.0 million and £45.0 million (expiring 31 December 2016) in respect of its decommissioning obligations in Heather and benefitting BG Great Britain Limited and two surety bonds of £12.9 million and £2.3 million (expiring 31 December 2016) in respect of its decommissioning obligations in Alba and benefitting Chevron North Sea Limited; the Group also has surety bonds of £5.0 million and £2.0 million expiring 31 December 2016 and 30 September 2017, respectively and benefitting Chevron North Sea Limited and TAQA Bratani Limited, respectively.

The renewal of Surety Bond Facilities comprises one of the elements of the Restructuring, (as described further in paragraph 4.4 of Part 1 (''Letter from the Chairman of EnQuest PLC'').

The Group does not currently have letters of credit or surety bonds in respect of its other assets. See ''Risk factors—Risks relating to the Group's business—The Group may face unanticipated increased or incremental costs in connection with decommissioning obligations''.

8. Qualitative and quantitative disclosures about market risk

8.1 Credit risk management

Credit risk refers to the risk that a counterparty will fail to perform or fail to pay amounts due, resulting in financial loss to the Group. The Group has a credit policy that governs the management of credit risk, including the establishment of counterparty credit limits and specific transaction approvals. The Group trades only with recognised international oil and gas operators and, as of each of 31 December 2013, 2014 and 2015, has no trade receivables past due. The Group has joint venture receivables past due but not impaired of \$2.0 million, \$0.5 million and \$1.5 million as of 31 December 2013, 2014 and 2015, respectively.

As of 31 December 2015, the Group had three customers accounting for 65 per cent. of outstanding trade and other receivables (2014: three customers, 89 per cent.; 2013: two customers, 72 per cent.) and five joint venture partners accounting for 98 per cent. of joint venture receivables (2014: three joint venture partners, 95 per cent.; 2013: three joint venture partners, 99 per cent.). Substantially all of the Group's oil sales during 2015 were to three counterparties: Vitol (28.4 per cent.), TOTSA (18.7 per cent.) and Petron (11.2 per cent.). The Company is considering alternative sales and marketing options for its production, which may help it to diversify its customer base. Following Alma/Galia coming onstream and with Kraken expected to come onstream in 2017, the Group will be able to diversify its customer base by selling its production lifted by tanker and delivering to buyers to ports in northwestern Europe.

With respect to credit risk arising from the Group's other financial assets, which comprise cash and cash equivalents, the Group's exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments.

The Group's cash balances can be invested in short term bank deposits and AAA rated liquidity funds, subject to Board approved limits and with a view to minimising counterparty credit risks.

With respect to the Group's decommissioning obligations, it is exposed to the risk of its commercial partners defaulting on their proportionate share of decommissioning costs once such costs became payable, which could result in the Group being required to bear such costs. The Group does not expect material decommissioning costs in the short to medium term.

8.2 Liquidity risk management

Liquidity and refinancing risks refer to the risk that the Group will not be able to obtain sufficient financing from lenders and the capital markets to meet the Group's working capital and project financing and refinancing requirements. The Group monitors its liquidity risk by reviewing the Group's cash flow requirements on a regular basis relative to the Group's existing bank facilities and outstanding debt instruments and the maturity profile of these facilities and instruments. The Group closely monitors and manages the Group's liquidity requirements through the use of both short-term and long-term cash flow projections, supplemented by maintaining debt financing plans and active portfolio management. Cash forecasts are regularly produced and sensitivities run for different scenarios including, but not limited to, changes in commodity prices, different production rates from the Group's portfolio of producing fields and potential delays in development projects. In addition to the Group's operating cash flows, portfolio management opportunities are reviewed to potentially enhance the Group's financial capacity and flexibility. Ultimate responsibility for liquidity risk management rests with the Company's Board, which has built a liquidity risk management framework which it believes to be appropriate for the management of all the Group's funding and liquidity management requirements. Throughout the year ending and as of 31 December 2015, the Group was in compliance with all applicable financial covenant ratios agreed.

As of 30 June 2016, the Group had drawn down \$956.3 million under the Existing RCF. The Group had headroom of \$235 million as of 31 December 2015. Assuming and following completion of the Restructuring and the Proposed RCF Amendments, the maximum remaining facilities available to the Group under the Existing RCF will be \$197.7 million less any further interim utilisations agreed with the Existing RCF Lenders between the date of this document and completion of the Restructuring and the Proposed RCF Amendments. See paragraph 18.6(a) of Part 9 (''Additional Information''). The Group held cash and cash equivalents of \$93.3 million as of 31 July 2016, \$163.3 million and \$305.6 million as of 30 June 2016 and 2015, respectively and \$72.8 million, \$171.9 million and \$257.5 million as of 31 December 2013, 2014 and 2015, respectively.

8.3 Foreign currency risk management

The Group is exposed to foreign currency risk arising from movements in currency exchange rates. The Group's functional currency is the US dollar, primarily because it prices its oil in US dollars and substantially all of the Group's revenues (99 per cent. in each of 2015, 2014 and 2013) are denominated in US dollars. However, the Group's operations are entirely outside the United States and the majority of the Group's costs are denominated in currencies other than the US dollar. Additionally, a significant portion of the Group's debt is denominated in currencies other than the US dollar. As a result, the Group is exposed to both transactional and translational foreign exchange risk.

The Group's transactional foreign currency risk arises primarily from sales or purchases in currencies other than the Group's functional currency, the US dollar. The Group manages this risk by converting US dollar receipts at spot rates periodically and as required for payments in other currencies. In 2015, approximately 1 per cent. (2014: 1 per cent.; 2013: 1 per cent.) of the Group's sales and 99 per cent. (2014: 91 per cent.; 2013: 91 per cent.) of costs were denominated in currencies other than the US dollar.

Additionally, the Group's £155.2 million Retail Notes require the payment of interest and principal in pounds sterling.

The Group's translational foreign currency exposure arises from the translation of assets and liabilities denominated in currencies other than US dollars. To mitigate the risks of substantial fluctuations in the currency markets, the hedging policy agreed by the Board allows for up to 70 per cent. of non-US dollar denominated operating and capital expenditure to be hedged.

The Group has entered into a number of foreign exchange currency forward contracts and structured products to hedge the Group's foreign currency risk. At the end of 2015, the Group had foreign exchange hedge contracts in place totalling over £463.6 million, with a protection rate of approximately \$1.49/£1.00, A13.0 million with a protection rate of approximately A1.12/£1.00 and forward contracts over NOK74.6 million at an average fixed rate of NOK7.84/£1.00. These contracts had a negative net fair value of \$9.2 million at 31 December 2015 and expire throughout 2016. For the year ended 31 December 2015, the Group's foreign currency hedging portfolio realised a loss of \$3.2 million, and it also recognised unrealised gains of \$2.3 million.

During the years ended 31 December 2015, 2014 and 2013, the Group entered into the following foreign currency hedging transactions:

• In December 2015, the Group entered into forward contracts to mitigate the foreign currency risk arising on £313.3 million of sterling based expenditure for 2016. Between the range of \$1.493 and \$1.43 they trade at spot, outside of this range the Group trades at \$1.493. Should the rate rise above \$1.65, then there is no trade. The contracts mature between December 2015 and December 2016;
• In January 2015, the Group entered into forward contracts in order to mitigate the foreign currency risk arising on £307.0 million of sterling based capital expenditure. Between the range \$1.505 and US\$1.42, they trade at spot, outside of this range the Group trades at US\$1.505. Should the rate rise above US\$1.611, then there is no trade. The contracts mature between January 2015 and February 2016;
• In January 2015, the Group entered into a series of forward contracts to purchase £283.3 million to fund the Group's sterling operations expenditure. The Group will trade at spot price between the range US\$1.532 and US\$1.42, outside of this range, the Group will trade at US\$1.532. The contracts mature between February 2015 and October 2016;

• In March 2015, the Group entered a series of forward contracts to purchase A32.6 million of the Group's Euro capital expenditure specifically in relation to the Kraken development project. The Group will trade at spot price when the Euro/USD rate is between US\$1.195 and US\$0.97. Outside of this range the Group will trade at US\$1.1195;

• In 2015, the Group entered into two forward contracts totalling NOK74.6 million with an average strike price of NOK7.84:£1, in order to hedge against currency fluctuations in the Group's capital expenditure in relation to the Kraken development project. These will mature in August and November 2016;

• In 2014, the Group hedged a total of £182.0 million of sterling exposure using a structured product with an average strike price of US\$1.46:£1.00. The remaining contracts matured during 2015. The same structure was also used to hedge the Group's Norwegian Krone exposure arising as part of the Kraken development project. In 2014, a total of NOK367.0 million was hedged and any remaining contracts matured during 2015; and
• Also during 2014, the Group entered several foreign exchange swap contracts when sterling was trading above \$1.66:£1.00. The realised impact of \$46.8 million was recognised in the income statement within cost of sales in the year ended 31 December 2014.

The Company will continue to consider opportunities to enter into foreign exchange hedging contracts.

The following table sets forth the impact on the Group's pre-tax profit (due to change in the fair value of monetary assets and liabilities) of the variations in the US dollar to pound sterling exchange rate covered below.

		Pre-tax profit
(in \$ millions)	+10% dollar rate increase	10% dollar rate increase
31 December 2015	(58.2)	58.2
31 December 2014	(76.0)	76.0
31 December 2013	(68.9)	68.9

The Company cannot assure you that its financial condition and results of operations will not be negatively affected by risks related to foreign currency movements. See ''Risk factors—Risks relating to the Group's business—The Group is subject to both transactional and translational foreign exchange risks, which might adversely affect its financial condition and results of operations''.

8.4 Commodity price risk management

The Group is exposed to the impact of changes in oil prices on the its revenue and profits. The Group's policy is to have the flexibility to hedge oil prices up to a maximum of 75 per cent. of the next 12 months' production on a rolling annual basis, up to 60 per cent. in the following 12 month period, and 50 per cent. in the subsequent 12 month period.

During 2014, the Group entered into commodity hedging contracts to hedge partially the Group's exposure to fluctuations in oil prices during 2015. The Group increased the amount of these hedging contracts during 2015 in response to the continued low oil price environment. As of 31 December 2015, the Group's commodity hedging contracts include bought put options over 8MMbbls, maturing throughout 2016 with an average strike price of \$68/bbl and a positive fair value of \$164.8 million (including deferred premiums of \$53.5 million). The Group also has oil swap contracts to sell 2MMbbls at an average price \$66.64/bbl maturing throughout 2016 with a positive fair value of \$49.7 million, and net sold call options which, based on the current forward curve, are not expected to result in any loss, and had a positive net fair value of \$42.0 million (including deferred premiums of \$44.4 million). The Group has actively managed this hedge portfolio during 2015, which has generated cash flows of \$68.6 million and revenue and other operating income of \$264.0 million. The revenue recognised in 2015 includes \$119.1 million of gains realised in 2014 which were deferred until 2015 to match the timing of the underlying production the options were hedging. In addition, the Group entered into a ''chooser option'' hedging contract in June 2016, hedging either 0.2 MMbbls per month at \$58/bbl or £7.9 million per month at a fixed rate of \$1.40 for the first half of 2017. The Group's counterparty has the right to choose whether to settle the oil price hedge or the currency hedge each month. Since 30 June 2016, the Group entered hedging arrangements over 1MMbbl of 2017 production (83kbbls per month) at a fixed price of \$51.50/bbl. The Group has also sold 500,000 bbls per month for the first half of 2017 (3 MMbbls total) at a fixed price of \$49/bbl and has bought a call (nil cost) for the same notional quantity, with a strike price of \$57.25/bbl. Should the price rise above \$57.25/bbl, the Group will receive the difference to offset the loss it would make on the \$49/bbl swaps. In addition, the Group has hedged 500,000 bbls for the first half of 2017 at \$54.50/bbl.

The mark to market of the intrinsic value portion of these contracts as of 31 December 2015 was \$217.2 million, which has been deferred as it relates to contracts hedging future production. Mark to market losses on the time value element of these put options, totalling \$119.8 million were recognised in finance costs in 2015. Of this amount, \$70.0 million has been recognised within the Group's business performance results as it relates to the amortisation of the option premium paid, over the life of the option. The balance of the mark to market losses have been recognised as an exceptional charge in line with the Group's accounting policy.

9. Interest rate risk management

Interest rate risk refers to the risk that market interest rates will increase, resulting in higher borrowing costs under the Group's Tanjong Baram Project Finance Loan and Existing RCF. In 2015, the Group entered an interest rate swap which effectively swapped 50 per cent. of the floating USD LIBOR rate interest on the Tanjong Baram Project Finance Loan into a fixed rate of 1.035 per cent. until 2018. The Group may be affected by changes in market interest rates at the time it needs to refinance any of its indebtedness.

10. Critical accounting estimates and judgements

This ''Operating and Financial Review'' discusses the Group's consolidated financial statements, which have been prepared in accordance with IFRS. Accounting estimates are an integral part of the preparation of the financial statements and the financial reporting process and are based upon current judgements. The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Certain accounting estimates are particularly sensitive because of their complexity and the possibility that future events affecting them may differ materially from the Group's current judgements and estimates. See ''Risk factors—Risks relating to the Group's business—The Group's tax liability is subject to estimation and the Group may be adversely affected by changes to tax legislation or its interpretation or increases in effective tax rates in the jurisdictions in which it does business''.

This listing of critical accounting policies is not intended to be a comprehensive list of all the Group's accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by IFRS, with no need for management's judgement regarding accounting policy. The Directors believe that of the Company's significant accounting policies, the following policies may involve a higher degree of judgement and complexity.

10.1 Reserves estimates

Reserves are estimated using standard recognised evaluation techniques. The Group reviews the estimate at least once annually and independent consultants annually review such estimate. The Group estimates future development costs taking into account the level of development required to produce the reserves by reference to other operators, where applicable, and internal engineers. Estimates of reserves are used in the calculations for impairment tests and accounting for depletion and decommissioning. Changes in estimates of reserves resulting in different future production estimates affect impairment testing, decommissioning and depletion charges.

10.2 Intangible oil and gas assets

Expenditure directly associated with the Group's evaluation or evaluation activities is capitalised as an intangible asset. Such costs include the costs of acquiring an interest, evaluation well drilling costs, payments to contractors and an appropriate share of directly attributable overheads incurred during the evaluation phase. For such evaluation activity, which may require drilling of further wells, costs continue to be carried as an asset while related hydrocarbons are considered capable of commercial development. Such costs are subject to technical, commercial and management review to confirm the continued intent to develop, or otherwise extract value. When this is no longer the case, the costs are impaired and any impairment loss is recognised in the statement of comprehensive income. When exploration licences are relinquished without further development, any previous impairment loss is reversed and the carrying costs are written off through the statement of comprehensive income. When assets are declared part of a commercial development, related costs are transferred to property, plant and equipment oil and gas assets. All intangible oil and gas assets are assessed for any impairment prior to transfer and any impairment loss is recognised in the statement of comprehensive income.

10.3 Carrying value of property, plant and equipment

Property, plant and equipment is stated at cost less accumulated depreciation and any impairment in value. Cost comprises the purchase price or construction cost and any costs directly attributable to making that asset capable of operating as intended. The purchase price or construction cost is the aggregate amount paid and the fair value of any other consideration given to acquire the asset.

Oil and gas assets are depleted, on a field-by-field basis, using the unit-of-production method based on entitlement to proven and probable reserves, taking account of estimated future development expenditure relating to those reserves.

The carrying amount of an item of property, plant and equipment is derecognised on disposal or when no future economic benefits are expected from its use or disposal. The gain or loss arising from the derecognition of an item of property, plant and equipment is included in the statement of comprehensive income when the item is derecognised. Gains are not classified as revenue.

10.4 Decommissioning costs

(a) Decommissioning

The Group makes for provisions for future decommissioning costs in full when it has an obligation to dismantle and remove a facility or an item of plant and to restore the site on which it is located, and when a reasonable estimate of that liability can be made. The amount recognised is the present value of the estimated future expenditure. An amount equivalent to the discounted initial provision for decommissioning costs is capitalised and amortised over the life of the underlying asset on a unit-of-production basis over proven and probable reserves. Any change in the present value of the estimated expenditure is reflected as an adjustment to the provision and the oil and gas asset. The unwinding of the discount applied to future decommissioning provisions is included under finance costs in the statement of comprehensive income.

(b) Other

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

10.5 Income tax

Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax rates and laws that are enacted or substantively enacted by the balance sheet date.

Deferred tax is provided in full on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the Group's financial statements. However, deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax is measured on an undiscounted basis using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised.

Deferred tax is provided in full on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the Group's financial statements. However, deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax is measured on an undiscounted basis using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. The Company's judgement is required to determine the value of the deferred tax asset, based upon the timing and level of future taxable profits.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date. Deferred income tax assets and liabilities are offset only if a legal right exists to offset current tax assets against current tax liabilities, the red income taxes relate to the same taxation authority and that authority permits the Group to make a single net payment.

10.6 Other tax provisions

The Group is subject to various claims which arise in the ordinary course of its business. The Group assesses all such claims and, where applicable, make provisions for any settlements which it considers probable. Estimating the amount of such claims is inherently uncertain, given the unpredictability of dispute resolution processes and other factors.

PART 5—FINANCIAL INFORMATION ON THE GROUP

1. Background

The consolidated financial statements of the Group as at and for the year ended 31 December 2013, as set out in the 2013 Financial Statements, the consolidated financial statements of the Group as at and for the financial year ended 31 December 2014, as set out in the 2014 Financial Statements, the consolidated financial statements of the Group as at and for the financial year ended 31 December 2015, as set out in the 2015 Financial Statements and the consolidated financial statements of the Group as at and for the six months ended 30 June 2016, as set out in the 2016 Unaudited Interim Financial Statements, are incorporated by reference into this document. See Part 11 (''Documents Incorporated by Reference''). A copy of each of these documents is available for inspection in accordance with paragraph 26 of Part 9 (''Additional Information'').

The audit reports for each of the financial years ended 31 December 2013, 31 December 2014 and 31 December 2015 were unqualified.

The consolidated financial statements for the financial years ended 31 December 2013, 31 December 2014 and 31 December 2015 and for the six months ended 30 June 2016 (unaudited) were prepared in accordance with IFRS as adopted by the EU.

2. Cross reference list

Investors are referred to Part 11 (''Documents Incorporated by Reference'') for specific items of information which have been incorporated by reference into this document.

PART 6—UNAUDITED PRO FORMA FINANCIAL INFORMATION

Section A: Unaudited Pro Forma Financial Information

The unaudited pro forma balance sheet set out below has been prepared for the purpose of illustrating the effect of the Placing and Open Offer and the Proposed Note Amendments on the balance sheet of the Company as at 30 June 2016 as if it had taken place on that date. The unaudited pro forma balance sheet has been prepared for illustrative purposes only and, by its nature, addresses a hypothetical situation and, does not, therefore, represent the Group's actual financial position or results.

The pro forma balance sheet has been prepared on the basis set out in the notes below and has been prepared in a manner consistent with the accounting policies adopted by the Group for the year ended 31 December 2015 and in accordance with the requirements of items 1 to 6 of Annex II to the EU Prospectus Regulations.

The unaudited pro forma balance sheet does not constitute financial statements within the meaning of section 434 of the Companies Act. The independent accountant's report on the unaudited pro forma balance sheet is set out in Section B of this Part 6 (''Unaudited Pro Forma Financial Information'').

Unaudited Pro Forma Balance Sheet

	As at 30 June 2016(1) US\$' 000	Placing and Open Offer adjustments(2) US\$' 000	Existing Notes restructuring adjustments(3) US\$'000	Pro forma US\$' 000
Non-current assets
Property, plant and equipment	2,777,561	—	—	2,777,561
Goodwill	189,317	—	—	189,317
Intangible oil and gas assets	65,740	—	—	65,740
Investments	73	—	—	73
Deferred tax asset	265,060	—	—	265,060
Other financial assets	10,214	—	—	10,214
	3,307,965	—	—	3,307,965
Current assets
Inventories	72,657	—	—	72,657
Trade and other receivables	318,246	—	—	318,246
Current tax receivable	1,196	—	—	1,196
Cash and cash equivalents	163,290	95,299	—	258,589
Other recievables *	—			—
Other financial assets	105,301	—	—	105,301
	660,690	95,299	—	755,989
Total assets	3,968,655	95,299	—	4,063,954
Equity and liabilities
Share capital	113,433	21,756	—	135,189
Share premium	—	78,320	—	78,320
Merger reserve	662,855	—	—	662,855
Cash flow hedge reserve	49,946	—	—	49,946
Share based payment reserve	(8,095)	—	—	(8,095)
Retained earnings	(80,010)	(4,777)	—	(84,787)
Total equity	738,129	95,299	—	833,428

	As at 30 June 2016(1) US\$' 000	Placing and Open Offer adjustments(2) US\$' 000	Existing Notes restructuring adjustments(3) US\$'000	Pro forma US\$' 000
Non-current liabilities
Borrowings	958,969	—	—	958,969
Bonds	849,615	—	11,639	861,254
Obligations under finance leases	10,763	—	—	10,763
Provisions	724,370	—	—	724,370
other financial liabilties	8,067	—	—	8,067
Deferred tax liabilities	19,717	—	—	19,717
	2,571,501	—	11,639	2,583,140
Current liabilities
Borrowings	9,951	—	—	9,951
Bonds	11,639	—	(11,639)	—
Trade and other payables	578,209	—	—	578,209
Obligations under finance leases	—	—	—	—
Other financial liabilities	52,715	—	—	52,715
Current tax payable	6,511	—	—	6,511
	659,025	—	(11,639)	647,386
Total liabilities	3,230,526	—	—	3,230,526
Total Equity and liabilities	3,968,655	95,299	—	4,063,954

Notes:

(1) The consolidated statement of financial position of the Group as at 30 June 2016 has been extracted without material adjustment from the unaudited interim financial statements of Enquest plc.

(2) Reflects the net estimate proceeds of the offer:

	US\$'000
Offer proceeds	100,076
Offer expenses	(4,777)
Net estimated proceeds of the offer	95,299

(3) Reflects bond restructuring

EnQuest have agreed to add a payment condition which makes payment of interest on bonds on any interest payment date conditional on the prevailing oil price. As the payment condition is is linked to the oil price this represents an embedded derivative.

No account has been taken of any trading or other transactions since 30 June 2016.

Section B: Reporting Accountant's report on the Unaudited Pro Forma Financial Information

The Directors EnQuest PLC 5th Floor, Cunard House 15 Regent Street London SW1Y 4LR

14 October 2016

Dear Sirs

We report on the pro forma financial information (the ''Pro Forma Financial Information'') set out in Part 6 (''Unaudited Pro Forma Financial Information'') of the combined circular and prospectus dated 14 October 2016 (the ''Prospectus'', which has been prepared on the basis described in notes 1 to 4, for illustrative purposes only, to provide information about how the effect of the Placing and Open Offer and the Proposed Note Amendments might have affected the financial information presented on the basis of the accounting policies adopted by EnQuest PLC (the ''Company'') in preparing the financial statements for the year ended 31 December 2015. This report is required by paragraph 7 of Annex II to Commission Regulation (EC) No 809/2004 and is given for the purpose of complying with those rules and for no other purpose.

Save for any responsibility arising under Prospectus Rule 5.5.3R (2)(f) to any person as and to the extent there provided, to the fullest extent permitted by law we do not assume any responsibility and will not accept any liability to any other person for any loss suffered by any such other person as a result of, arising out of, or in connection with this report or our statement, required by and given solely for the purposes of complying with item 23.1 of Annex I to Commission Regulation (EC) No 809/2004, consenting to its inclusion in the Prospectus.

Responsibilities

It is the responsibility of the directors of EnQuest PLC to prepare the Pro Forma Financial Information in accordance with item items 1 to 6 of Annex II of Commission Regulation (EC) No 809/2004.

It is our responsibility to form an opinion, as required by paragraph 7 of Annex II to the Commission Regulation (EC) No 809/2004 as to the proper compilation of the Pro Forma Financial Information and to report that opinion to you.

In providing this opinion we are not updating or refreshing any reports or opinions previously made by us on any financial information used in the compilation of the Pro Forma Financial Information, nor do we accept responsibility for such reports or opinions beyond that owed to those to whom those reports or opinions were addressed by us at the dates of their issue.

Basis of opinion

We conducted our work in accordance with the Standards for Investment Reporting issued by the Auditing Practices Board in the United Kingdom. The work that we performed for the purpose of making this report, which involved no independent examination of any of the underlying financial information, consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the Pro Forma Financial Information with the Directors of the Company.

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with reasonable assurance that the Pro Forma Financial Information has been properly compiled on the basis stated and that such basis is consistent with the accounting policies of the Company.

Our work has not been carried out in accordance with auditing or other standards and practices generally accepted in other jurisdictions and accordingly should not be relied upon as if it had been carried out in accordance with those standards and practices.

Opinion

In our opinion:

• the Pro Forma Financial Information has been properly compiled on the basis stated; and
• such basis is consistent with the accounting policies of the Company.

Declaration

For the purposes of Prospectus Rule 5.5.3R (2)(f), we are responsible for this report as part of the Prospectus and declare that we have taken all reasonable care to ensure that the information contained in this report is, to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import. This declaration is included in the Prospectus in compliance with paragraph 1.2 of Annex I to Commission Regulation (EC) No 809/2004.

Yours faithfully

Ernst & Young LLP

PART 7—CAPITALISATION AND INDEBTEDNESS

The following tables show the capitalisation and indebtedness of EnQuest as at 30 June 2016 and net indebtedness as at 31 July 2016. The following tables do not reflect the impact of the Placing and Open Offer or other components of the Restructuring on the Group's capitalisation and indebtedness. Please refer to Part 6 (''Unaudited Pro Forma Financial Information'') for an illustration of the impact of the Placing and Open Offer and other components of the Restructuring on the consolidated net assets of the Group.

1. Capitalisation and indebtedness

The information contained in this table sets out the unaudited capitalisation and indebtedness of EnQuest as at 30 June 2016, and has been extracted from the Group's 2016 Unaudited Interim Financial Statements.

	30 June 2016 US\$ '000
Current debt
Guaranteed	—
Secured (refer to Note 1)	9,951
Unguaranteed/Unsecured (refer to Note 2)	11,639
Total current debt Total Non-current debt (excluding current portion of long term debt)	21,590
Guaranteed	—
Secured (refer to Note 1)	958,969
Unguaranteed/Unsecured (refer to Note 2)	849,615
Total non-current debt Shareholders' equity	1,808,584
Share capital	113,433
Merger reserve	662,855
Cash flow hedge reserve	49,946
Share based payment reserve	(8,095)
Total shareholders' equity	818,139
Total capitalisation	2,648,313

There has been no material change in the Group's capitalisation and indebtedness since 30 June 2016.

Notes:

(1) Secured debt comprises:

• (a) The Existing RCF, which is secured by way of:
• fixed charges over (i) EnQuest's shares in EnQuest Britain Limited and EnQuest Global Limited; (ii) EnQuest Britain Limited's shares in EnQuest Heather, EnQuest ENS Limited, Nio Petroleum (Sabah) Limited, EnQuest Production Limited and EnQuest Energy Limited; (iii) EnQuest Heather's shares in EnQuest Heather Leasing Limited; and (iv) EnQuest Global Limited's shares in EnQuest NWO Limited;
• floating charges over the assets of the entities listed above; and
• pledge of EnQuest's shares in EnQuest Norge AS and charge over plant and machinery, as described more fully in paragraph 18.6 of Part 9 (''Additional Information'').
• (b) The Tanjong Baram Project Finance Loan in Malaysia
• (2) Unsecured debt represents the Existing High Yield Notes and the Existing Retail Notes, as described more fully in paragraph 18.6 of Part 9 (''Additional Information'').
• (3) Capitalisation and indebtedness does not include the fair value of the Group's derivatives.
• (4) The indebtedness amounts above include accrued interest and unamortized facility fees totalling \$35.7 million.

2. Net Indebtedness

The information contained in this table sets out the unaudited net indebtedness of EnQuest as at 31 July 2016.

	31 July 2016 US\$ '000
Cash (refer to Note 1) Cash equivalents	(93,253) —
Trading securities	—
Liquidity	(93,253)
Current financial receivable	—
Current bank debt Current portion of non current debt Other current financial debt	— 26,260 —
Current financial debt	26,260
Net current financial indebtedness	(66,993)
Non current bank loans Bonds issued Other non current loans	959,402 847,234 —
Non current financial indebtedness	1,806,636
Net financial indebtedness (refer to Note 2)	1,739,643

Notes:

(1) Cash includes the restricted cash in relation to cash held in escrow in respect of the unwound acquisition of Tunisian assets of PA Resources and cash collateral held to issue bank guarantees in Malaysia. See note 4 to the 2015 Financial Statements, as incorporated by reference in Part 5 (''Financial Information on the Group'').

(2) The Company did not have any indirect or contingent indebtedness as at 31 July 2016.

(3) Net financial indebtedness does not include the fair value of the Group's derivatives.

(4) The above amounts include accrued interest and unamortized facility fees.

PART 8—TAXATION

The statements on taxation referred to in this Part 8 (''Taxation'') are for general information purposes only and are not intended to be a comprehensive summary of all technical aspects of the structure and are not intended to constitute legal or tax advice to potential investors.

The statements on taxation below are intended to be a general summary of certain tax consequences that may arise for prospective investors in relation to the Ordinary Shares (which may vary depending upon the particular individual circumstances and status of prospective investors). These comments are based on the laws and published practices as at the time of writing and may be subject to future revision. This discussion is not intended to constitute advice to any person and should not be so construed.

Each prospective Shareholder should consult their own tax advisers as to the possible tax consequences of buying, holding or selling Ordinary Shares under the laws of their country of citizenship, residence or domicile or other jurisdictions in which they are subject to tax.

1. Sweden

The comments in this section concern certain Swedish tax considerations for Swedish resident (and in the case of individuals, domiciled) Shareholders.

The description does not deal comprehensively with all tax consequences that may occur in this context. For instance, the summary does not address securities held by partnerships or securities held as current assets in business operations. Moreover, the summary does not address the specific rules on tax-exempt capital gains and dividends (including non-deductibility for capital losses) in the corporate sector that may be applicable when shares are considered to be held for business purposes (Sw. naringsbetingade andelar ¨ ). Neither are the specific rules covered that could be applicable to holdings in companies that are, or have previously been, closely-held companies or shares acquired on the basis of so-called qualified shares in such companies. Moreover, the summary does not address shares or other equity-related securities that are held in a so-called Investment Savings Account (Sw. investeringssparkonto). Such accounts are subject to special rules and taxed on a notional basis. Furthermore, special tax rules apply to certain categories of taxpayers, for example, investment companies and insurance companies. The tax treatment of each individual Shareholder depends on such investor's particular circumstances.

The information applies only to persons who hold their shares directly and who are the absolute beneficial owners of the Ordinary Shares (and who do not hold their shares through a Self-Invested Personal Pension (individellt penssionsparande) or an equity-linked insurance policy (kapitalfors ¨ akring ¨ ).

Any prospective subscriber for Ordinary Shares who is in any doubt should consult their own professional tax advisers.

1.1 Acquisition of Ordinary Shares pursuant to the Swedish Open Offer

A Shareholder pursuing the Swedish Open Offer and thus is allotted Ordinary Shares is not considered to have made a disposal, and no tax is charged on the allotment of Ordinary Shares. To the extent that a Shareholder acquires Ordinary Shares allotted to him (pro rata), the sum of (i) the aggregate price paid for the New Ordinary Shares so acquired and (ii) the aggregate tax basis of the Existing Ordinary Shares held by the Shareholder, should be divided by the total number of Ordinary Shares held by the Shareholder after the issue, in order to obtain the new cost basis per Ordinary Share held.

1.2 A disposal of Ordinary Shares

(a) Individuals

Upon the sale or other disposal of listed shares, a taxable capital gain or deductible capital loss may arise. Capital gains are taxed as income from capital at a tax rate of 30 per cent. The capital gain or loss is calculated as the difference between the sales proceeds, after deducting sales costs, and the tax basis. The tax basis for all shares of the same class and type is calculated together in accordance with the average cost method. New Ordinary Shares should be considered to be of the same class and type as Existing Ordinary Shares. (Please note, however, that any interim shares allotted temporarily during the issuing process are normally not considered to be of the same class and type as Ordinary Shares). The tax basis for listed shares may as an alternative to the average cost method, be determined as 20 per cent. of the sales proceeds after deducting sales costs under the so-called ''notional rule''.

Capital losses on listed shares are fully deductible against taxable capital gains on shares and on other listed equity-related securities realised during the same year, with the exception of units in securities funds or special funds that consist solely of Swedish receivables (''interest funds''). Up to 70 per cent. of capital losses on shares that cannot be offset in this way are deductible against other capital income. If there is a net loss in the capital income category, a tax reduction is allowed against municipal and national income tax, as well as against real estate tax and municipal real estate charges. A tax reduction of 30 per cent. is allowed on the portion of such net loss that does not exceed SEK100,000 and of 21 per cent. on any remaining loss. Such net loss cannot be carried forward to future fiscal years.

(b) Corporate Shareholders

A corporate Shareholder (limited liability company) resident in Sweden for tax purposes is taxed on its worldwide income. All income, including taxable capital gains, is taxed as business income at a tax rate of 22 per cent. Capital gains and capital losses are calculated in the same manner as set forth above with respect to individuals, i.e. using the average cost method.

Capital losses on shares can only be deducted against taxable capital gains on shares and other equityrelated securities that are taxed in the same manner as shares. Under certain circumstances such capital losses may also be deducted against capital gains realised by other group companies (provided that the requirements for exchanging group contributions between the companies concerned are met). A capital loss that cannot be utilized during a given year may be carried forward and be offset against taxable capital gains on shares and other equity-related securities during subsequent fiscal years without any limitation in time.

1.3 Taxation of dividends

(a) Individuals

For individuals, dividends on listed shares are taxed as income from capital at a rate of 30 per cent. A preliminary tax of 30 per cent. is generally withheld on dividends paid to individuals resident in Sweden. The preliminary tax is withheld by Euroclear Sweden or, in the case of nominee-registered shares, by the Swedish nominee.

(b) Corporate Shareholders

A corporate Shareholder (limited liability company) resident in Sweden for Swedish tax purposes is taxed on its worldwide income as business income. Consequently, dividend income received on foreign holdings is considered as business income for a corporate shareholder and is thus subject to the ordinary income tax rate of 22 per cent.

1.4 Transaction tax

No Swedish stamp duty or other transaction taxes will be payable by a Shareholder on the allotment, issue, registration or disposal of Ordinary Shares.

2. United Kingdom

The comments in this section are intended as a general guide to certain UK tax considerations for UK resident (and in the case of individuals, domiciled) Shareholders and do not purport to be a complete analysis of all the potential UK tax consequences of acquiring and holding Ordinary Shares as investments and their subsequent disposal. The following statements are based on current UK tax law as applied in England and Wales, and the current published practice of HMRC (which may not be binding on HMRC) as at the date of this document. These may change, possibly with retrospective effect.

The tax position of certain Shareholders who are subject to special rules, such as persons who acquire (or are deemed to acquire) their Ordinary Shares by reason of an office or employment, dealers in securities, broker-dealers, insurance companies and collective investment schemes is not considered in this section. The statements summarise the position as described above and are intended as a general guide only. Any Shareholder who has any doubt as to his or her tax position or who is subject to tax in a jurisdiction other than the United Kingdom should consult a professional adviser without delay.

The statements apply only to persons who hold their shares directly and who are the absolute beneficial owner of the Ordinary Shares (and who do not hold their shares through a Self-Invested Personal Pension or an Individual Savings Account).

Any prospective subscriber for Ordinary Shares who is in any doubt about his tax position or who is subject to tax in any jurisdiction other than the United Kingdom should consult his own professional tax advisers.

2.1 Taxation of Chargeable Gains

(a) Acquisition of Ordinary Shares pursuant to the Placing

For the purpose of UK tax on chargeable gains, the purchase of Ordinary Shares on a placing will be regarded as an acquisition of a new holding in the share capital of the Company. To the extent that a Shareholder acquires Ordinary Shares allotted to him, the Ordinary Shares so acquired will, for the purpose of tax on chargeable gains, be treated as acquired on the date of the purchase becoming unconditional.

The amount of subscription monies paid for the New Ordinary Shares will constitute the capital gains base cost of the new shareholding.

(b) Acquisition of Ordinary Shares pursuant to the Open Offer

On a strict application of the law, the acquisition of Ordinary Shares under the Open Offer may not be regarded as a reorganisation of the share capital of the Company for the purposes of UK taxation on chargeable gains. Although HMRC's published practice to date has been to treat an acquisition of shares by an existing shareholder up to his pro-rata entitlement pursuant to the terms of an open offer as a reorganisation, it is understood that HMRC may not apply this practice in circumstances where an open offer is not made to all Shareholders.

If the issue of the New Ordinary Shares by the Company pursuant to the Open Offer is regarded as a reorganisation of the Company's share capital for the purposes of UK taxation on chargeable gains, to the extent that a Shareholder takes up all or part of their Open Offer Entitlement it should not be treated as acquiring a new asset nor will it be treated as making a disposal of any part of their corresponding holding of Existing Ordinary Shares. No liability to UK taxation on chargeable gains should arise on the issue of the New Ordinary Shares to the extent that the Shareholder takes up their Open Offer Entitlement. The New Ordinary Shares will be treated as acquired at the same time as the Existing Ordinary Shares in respect of which they are acquired and the cost of acquisition of the New Ordinary Shares will be pooled with the expenditure allowable on the Existing Ordinary Shares in respect of which they are acquired for the purposes of determining the amount of any chargeable gain arising on a subsequent disposal.

If, or to the extent that, the issue of New Ordinary Shares pursuant to the Open Offer is not regarded by HMRC as a reorganisation, the New Ordinary Shares acquired by each Qualifying Shareholder under the Open Offer will, for the purposes of the UK taxation of chargeable gains, be treated as acquired as part of a separate acquisition of Ordinary Shares. The amount of subscription monies paid for the New Ordinary Shares will constitute the capital gains base cost of the new shareholding.

(c) A Disposal or Deemed Disposal of Ordinary Shares

A disposal or deemed disposal of Ordinary Shares by a Shareholder who is resident in the UK for tax purposes, may give rise to a chargeable gain or an allowable loss for the purposes of UK taxation of chargeable gains, depending on the Shareholder's circumstances and subject to any available exemption or relief.

Shareholders who are not resident in the UK for tax purposes may not, depending on their personal circumstances, be liable to UK taxation on chargeable gains arising from the sale or other disposal of their Ordinary Shares (unless they carry on a trade, profession or vocation in the UK through a branch or agency or, in the case of a shareholder which is a body corporate, a permanent establishment with which their Ordinary Shares are connected).

An individual Shareholder who has ceased to be resident for tax purposes in the UK for a period of five complete tax years or less (or for a period of five years or less where split year treatment applies) and who disposes of all or part of his shares during that period of temporary non-residence may be liable on his return to the UK to UK tax on chargeable gains arising during the period of absence, subject to any available exemption or relief.

(i) Individuals

Where an individual Shareholder who is resident in the UK for tax purposes disposes of Ordinary Shares at a gain, capital gains tax will be levied to the extent that the gain exceeds the annual exemption (£11,100 for 2016/17) and after taking account of any capital losses or exemptions available to the individual. Capital gains tax at the rate of 10 per cent. (to the extent the gain falls within the basic rate band) or 20 per cent. (to the extent the gain falls within the higher or additional rate band) will be payable on any gain on the disposal of Ordinary Shares.

Where a Shareholder resident in the UK for tax purposes disposes of the Ordinary Shares at a loss, the loss should be available to offset against other current year gains or carried forward to offset against future gains. In certain circumstances the loss may be available to offset against taxable income in the current year (depending upon, inter alia, the circumstances of the Company and the Shareholder).

(ii) Shareholders Chargeable to UK Corporation Tax

Where a Shareholder is within the charge to corporation tax, a disposal or deemed disposal of Ordinary Shares may give rise to a chargeable gain (or allowable loss) for the purposes of UK corporation tax, depending on the circumstances and subject to any available exemption or relief. Indexation allowance may reduce the amount of chargeable gain that is subject to corporation tax by increasing the chargeable gains tax base cost of an asset in accordance with the rise in the retail prices index but indexation allowance cannot create or increase any allowable loss. Such Shareholders will be subject to corporation tax at their applicable corporation tax rate of 20 per cent. (reducing to 19 per cent. from 1 April 2017. It has been announced that the rate will further reduce to 17 per cent. from 1 April 2020 and this reduction is included in the Finance Act 2016).

2.2 Taxation of Dividends

No UK tax is required to be withheld from dividend payments by the Company.

(a) UK resident individual Shareholders

An individual Shareholder who is resident for tax purposes in the UK will pay no tax on the first £5,000 of dividend income received in a year (the ''dividend allowance''). The rates of income tax on dividends received above the dividend allowance are: (a) 7.5 per cent. for dividends taxed in the basic rate band; (b) 32.5 per cent. for dividends taxed in the higher rate band; and (c) 38.1 per cent. for dividends taxed in the additional rate band (2016/2017).

Dividend income that is within the dividend allowance counts towards an individual's basic or higher rate limits—and will therefore affect the level of savings allowance to which they are entitled, and the rate of tax that is due on any dividend income in excess of this allowance. In calculating into which tax band any dividend income over the £5,000 allowance falls, savings and dividend income are treated as the highest part of an individual's income. Where an individual has both savings and dividend income, the dividend income is treated as the top slice.

(b) Companies

Shareholders within the charge to UK corporation tax which are ''small companies'' (for the purposes of UK taxation of dividends legislation) will not generally expect to be subject to UK tax on dividends from the Company. Other corporate Shareholders (within the charge to UK corporation tax) will not be subject to tax on dividends from the Company provided the dividends fall within an exempt class and certain conditions are met. In general, almost all dividends received by corporate Shareholders will fall within an exempt class. Examples of dividends that fall within exempt classes include dividends paid on shares that are non-redeemable ordinary shares, and dividends paid to a person holding less than 10 per cent. of the issued share capital of the Company (or any class of that share capital), and who would be entitled to less than ten per cent. of the profits or assets of the Company available for distribution.

However, the exemptions are not comprehensive and are subject to anti-avoidance rules and other conditions. In the event that the dividends do not qualify for such exemption, Shareholders within the charge to corporation tax will be subject to corporation tax on them.

2.3 Stamp duty and Stamp Duty Reserve Tax (''SDRT'')

No UK stamp duty or SDRT will be payable by a Shareholder on the allotment, issue or registration of Ordinary Shares.

The transfer on sale of Ordinary Shares held in certificated form will generally be subject to stamp duty on the instrument of transfer at the rate of 0.5 per cent. of the amount or value of the consideration for the Ordinary shares (rounded up, if necessary, to the nearest multiple of £5). An exemption from stamp duty is available on an instrument transferring shares where the amount or value of the consideration is £1,000 or less, and it is certified on the instrument that the transaction effected by the instrument does not form part of a larger transaction or series of transactions for which the aggregate amount or value of the consideration exceeds £1,000. Stamp duty is normally paid by the purchaser of the shares.

An unconditional agreement to transfer Ordinary Shares will normally give rise to a charge to SDRT at the rate of 0.5 per cent. of the amount or value of the consideration for the ordinary shares. However, where, within six years of the date of the agreement or, in the case of a conditional agreement, within six years of the date of the agreement becoming unconditional, an instrument of transfer is executed and duly stamped or certified as exempt, the SDRT liability will automatically be cancelled and any SDRT which has been paid may be reclaimed. SDRT is normally the liability of the purchaser of the shares.

Paperless transfers of ordinary shares within CREST will generally be subject to SDRT, rather than stamp duty, at the rate of 0.5 per cent. of the amount or value of the consideration payable. CREST is obliged to collect SDRT on relevant transactions settled within the system. Deposits of ordinary shares into CREST will generally not be subject to SDRT or stamp duty, unless the transfer into CREST is itself for consideration.

The above comments are intended as a guide to the general UK stamp duty and SDRT position. Special rules apply to persons such as market intermediaries, charities, persons connected with depositary arrangements or clearance services and to certain sale and repurchase and stock borrowing arrangements.

PART 9—ADDITIONAL INFORMATION

1. Responsibility

The Company and its Directors, whose names appear in paragraph 6 of this Part 9 (''Additional Information''), accept responsibility for the information contained in this document. To the best of the knowledge and belief of the Company and the Directors (who have taken all reasonable care to ensure that such is the case), the information contained in this document is in accordance with the facts and does not omit anything likely to affect the import of such information.

2. Incorporation and Registered Office

• 2.1 The Company was incorporated and registered in England and Wales on 29 January 2010 under the name EnQuest PLC as a public company limited by shares under the Companies Act 2006 with the registered number 7140891. The principal legislation under which the Company operates and under which the New Ordinary Shares will be created is the Companies Act 2006.
• 2.2 The Company's registered office is at 5th Floor Cunard House, 15 Regent Street, London, SW1Y 4LR (telephone number +44 (0)20 7925 4900).

3. Share Capital

• 3.1 As at the Latest Practicable Date, the issued share capital of the Company was £40,133,037.85 divided into 802,660,757 Ordinary Shares of 5 pence each (all of which were fully paid or credited as fully paid). As at the Latest Practicable Date, the Company does not hold any shares in treasury.
• 3.2 There were no changes in the share capital of the Company in the years ended 31 December 2013, 31 December 2014 and 31 December 2015 and the six months ended 30 June 2016.

3.3 Existing Shareholder authorities

• (a) By an ordinary resolution at EnQuest's annual general meeting held on 1 June 2016, the Directors were generally and unconditionally authorised by the Shareholders pursuant to section 551 of the Companies Act to allot shares in the Company and to grant rights to subscribe for or to convert any security into shares in the Company:
• (i) up to an aggregate nominal amount of £13,377,679 (such amount to be reduced by the nominal amount allotted or granted under paragraph (ii) below in excess of such sum); and
• (ii) comprising equity securities (as defined in section 560 of the Companies Act) up to an aggregate nominal amount of £26,755,359 (such amount to be reduced by allotments or grants made under paragraph (i) above) in connection with an offer by way of a rights issue in favour of holders of Ordinary Shares in proportion (as nearly as may be practicable) to their respective existing holdings (and holders of any other class of equity securities entitled to participate therein or, if the Directors consider it necessary, as permitted by the rights of those securities, but subject to such exclusions or other arrangements as the Directors may consider necessary or appropriate to deal with fractional entitlements, treasury shares, record dates or legal, regulatory or practical difficulties which may arise under the laws of, or the requirements of any regulatory body or stock exchange in any territory or any other matter whatsoever,

these authorisations to expire at the conclusion of the next annual general meeting of the Company in 2017 (or, if earlier, on 30 June 2017), save that the Company may before such expiry make any offer or agreement which would or might require shares to be allotted or rights to subscribe for or convert any security into shares, in pursuance of any such offer or agreement as if the authorisations conferred had not expired).

• (b) By a special resolution at EnQuest annual general meeting held on 1 June 2016, the Directors were generally empowered, pursuant to sections 570 and 573 of the Companies Act, to allot equity securities (as defined in section 560 of the Companies Act) of the Company for cash pursuant to the authority conferred by the resolution in paragraph (a) above (or by way of a sale of treasury shares) as if section 561 of the Companies Act did not apply to such allotment. This power is limited to the allotment of equity securities for cash and the sale of treasury shares:
• (i) in connection with or pursuant to an offer of or invitation to acquire equity securities in favour of holders of Ordinary shares in proportion (as nearly as practicable) to the their respective existing

holdings but subject to such exclusions or other arrangements as the Directors may consider necessary or appropriate to deal with fractional entitlements, treasury shares, record dates or legal, regulatory or practical difficulties which may arise under the laws of or the requirements of any regulatory body or stock exchange in any territory or any other matter whatsoever; and

(ii) otherwise than pursuant to paragraph (i) above, up to an aggregate nominal amount of £2,006,652, and shall expire at the conclusion of the next annual general meeting of the Company in 2017 (or, if earlier, on 30 June 2017), save that the Company may before such expiry make any offer or agreement that would or might require equity securities to be allotted, or treasury shares to be sold, after such expiry and the Directors may allot equity securities, or sell treasury shares in pursuance of any such offer or agreement as if the power conferred had not expired.

3.4 Shareholder authorities to be proposed at the General Meeting

For the purpose of implementing the Placing and Open Offer, the following resolutions will be proposed at the General Meeting:

• (i) an ordinary resolution to authorise the Directors pursuant to section 551 of the Companies Act to allot shares in the Company and to grant rights to subscribe for or to convert any security into shares in the Company up to an aggregate nominal amount of £82.0 million (representing approximately 44.4 per cent. of the existing issued share capital of the Company) in connection with the Placing and Open Offer which authority shall be in addition to the existing authority conferred. This authority expires at the conclusion of the next annual general meeting of the Company or, if earlier, the date 15 months from the date of passing this resolution;
• (ii) a special resolution empowering the Directors to allot equity securities (as defined in section 560 of the Companies Act) of the Company pursuant to the authority conferred by paragraph (i) above for cash as if section 561 of the Companies Act did not apply to such allotment, such power is in addition to all other existing powers of the Directors under section 570 of the Companies Act and shall expire at the conclusion of the next annual general meeting of the Company or, if earlier, the date 15 months from the date of passing of this resolution;
• (iii) an ordinary resolution to approve the issue of the New Ordinary Shares at an issue price of 23.0 pence per share (equivalent to SEK 2.48 per share at the exchange rate of SEK 1.00 = GBP0.0928 on 12 October 2016); and
• (iv) an ordinary resolution to approve, as a related party transaction, the participation of Double A Limited in the Placing and Open Offer, including the payment of a commission to Double A Limited in consideration of its commitment under the Double A Placing Letter.

The full text of the resolutions is set out in the notice convening the General Meeting which is set out at the end of this document.

3.5 Pursuant to the Placing and Open Offer, 356,738,114 New Ordinary Shares will, subject to LSE Admission and Stockholm Admission, be issued at a price of 23.0 pence per New Ordinary Share. Following the issue of the New Ordinary Shares, Qualifying Shareholders who take up their pro rata entitlement will suffer no dilution to their interests in the Company. Qualifying Shareholders who do not take up any of their rights to subscribe for the New Ordinary Shares pursuant to the Placing and Open Offer will suffer an immediate dilution of 30.77% per cent. in their interests in the Company. 3.6 As at the Latest Practicable Date, the following options to subscribe for Ordinary Shares have been granted to employees and Directors under the Share Option Plans and remain outstanding:

Share Option Plan	Date of grant	Number of Ordinary Shares under option	Exercise price (£)	Exercisable from	Exercisable to
Sharesave Scheme (3 yr)	10 May 2013	20,700	1.00	10 May 2016	10 November 2016
Sharesave Scheme (5 yr)	10 May 2013	17,400	1.00	10 May 2018	10 November 2018
Sharesave Scheme (3 yr)	7 May 2014	32,645	1.02	7 May 2017	7 November 2017
Sharesave Scheme (5 yr)	7 May 2014	34,703	1.02	7 May 2019	7 November 2019
Sharesave Scheme (3 yr)	6 May 2015	1,986,861	0.32	6 May 2018	6 November 2018
Sharesave Scheme (5 yr)	6 May 2015	403,125	0.32	6 May 2020	6 November 2020
Sharesave Scheme (3 yr)	4 May 2016	7,396,920	0.20	6 May 2018	1 June 2019
Sharesave Scheme (5 yr)	4 May 2016	2,115,000	0.20	6 May 2020	1 June 2021

As at the Latest Practicable Date, the following awards to acquire Ordinary Shares have been granted to employees and Directors under the Share Option Plans and remain outstanding:

Share Option Plan	Date of grant	Number of Ordinary Shares subject to award	Vesting period	Expiry date
PSP NCO	19 April 2011	605,679	3 years	19 April 2021
PSP NCO	19 April 2012	572,833	3 years	19 April 2022
PSP NCO	29 April 2013	874,516	3 years	29 April 2023
PSP	29 April 2013	428,960	3 years	29 April 2016
PSP NCO	22 April 2014	1,700,825	3 years	22 April 2024
PSP	22 April 2014	2,157,497	3 years	22 April 2017
PSP NCO	27 March 2015	3,460,000	3 years	27 March 2025
PSP	27 March 2015	7,537,548	3 years	27 March 2018
PSP NCO	22 April 2016	15,020,072	3 years	22 April 2026
PSP	22 April 2016	26,296,553	3 years	22 April 2019
RSP NCO	1 April 2010	2,228,849	1 year then 25%, 25%, 50% yearly	1 April 2020
RSP NCO	19 April 2010	754,711	1 year then 25%, 25%, 50% yearly	19 April 2020
RSP NCO	19 April 2012	75,000	1 year then 25%, 25%, 50% yearly	19 April 2022
RSP	19 April 2012	45,000	1 year then 25%, 25%, 50% yearly	19 April 2016
RSP	20 August 2012	15,000	1 year then 25%, 25%, 50% yearly	20 August 2016
RSP	21 January 2013	7,014	1/3rd yearly	21 January 2016
RSP	29 April 2013	357,046	1 year then 25%, 25%, 50% yearly	29 April 2017
	23 October			23 October
RSP	2013	218,958	1 year then 25%, 25%, 50% yearly	2017
RSP NCO	22 April 2014	100,000	1 year then 25%, 25%, 50% yearly	22 April 2024
RSP	22 April 2014	32,750	1 year then 25%, 25%, 50% yearly	22 April 2018
RSP	20 August 2014	95,447	1 year then 25%, 25%, 50% yearly	20 August 2018
RSP	27 March 2015	420,000	1 year then 25%, 25%, 50% yearly	27 March 2019
RSP NCO	20 August 2015	200,000	1 year then 25%, 25%, 50% yearly	20 August 2025
RSP	20 August 2015	730,555	1 year then 25%, 25%, 50% yearly	20 August 2019
RSP	22 April 2016	1,218,647	1 year then 25%, 25%, 50% yearly	22 April 2020
RSP NCO	22 April 2016	5,750,000	1 year then 25%, 25%, 50% yearly	22 April 2026
DBSP	29 April 2013	99,018	1/3rd yearly	29 April 2016
DBSP	22 April 2014	339,903	1/3rd yearly	22 April 2017
DBSP	27 March 2015	1,462,967	1/3rd yearly	27 March 2018
DBSP	22 April 2016	993,046	1/3rd yearly	22 April 2019

Some awards under the RSP and PSP were granted on a nil cost basis. The vesting of awards under the PSP are subject to achievement of performance conditions. The vesting of awards under the PSP, RSP and DBSP are subject to completion of the vesting period. The awards under the PSP first vest on the third anniversary of the date of grant, subject to the achievement of performance.

Other than pursuant to the Placing and Open Offer and the vesting of awards and the exercise of options to be granted under the Share Option Plans, there is no present intention to issue any shares in the capital of the Company.

• 3.7 Save as disclosed in this paragraph 3:
• (a) no share capital of the Company has, since the date of incorporation of the Company, been issued or agreed to be issued, or is now proposed to be issued fully or partly paid, either for cash or for a consideration other than cash, to any person;
• (b) no commissions, discounts, brokerages or other special terms have been granted by the Company in connection with the issue or sale of any share capital of any such company; and
• (c) no share capital of the Company is under option or agreed conditionally or unconditionally to be put under option.
• 3.8 The Company will be subject to the continuing obligations of the Listing Rules with regard to the issue of shares for cash.

4. Articles of Association

The Articles were adopted pursuant to a special resolution passed on 22 February 2010 and subsequently amended by special resolution passed on 18 March 2010 and on 28 May 2014 and are available for inspection as set out in paragraph 26 of this Part 9 (''Additional Information''). The Articles contain provisions, inter alia, to the following effect:

4.1 Objects

In accordance with section 31 of the Companies Act, the objects of the Company are unrestricted.

4.2 Voting rights in respect of Ordinary Shares

• (a) Shareholders shall have the right to receive notice of, to attend and to vote at all general meetings of the Company. Save as otherwise provided in the Articles, on a show of hands each holder of shares present in person and entitled to vote shall have one vote and upon a poll each such holder who is present in person or by proxy and entitled to vote shall have one vote in respect of every share held by him.
• (b) No member shall be entitled to vote either in person or by proxy at any general meeting if any call or other sum presently payable by him in respect of shares remains unpaid or if a member has been served by the Directors with a restriction notice in the manner described in paragraph 4.3 of this Part 9 (''Additional Information'') below.

4.3 Restrictions on Ordinary Shares

If a member or any person appearing to be interested in shares in the Company has been duly served with a notice pursuant to section 793 of the Companies Act and is in default in supplying to the Company information thereby required within 14 days from the date of service of such notice the Company may serve on such member or on any such person a notice (a ''restriction notice'') in respect of the shares in relation to which the default occurred (the ''Default Shares'') and any other shares held at the date of the restriction notice directing that the member shall not be entitled to be present or to vote at any general meeting or class meeting of the Company. Where the Default shares represent at least 0.25 per cent. in nominal value of the issued shares of the Company of the same class the restriction notice may in addition direct, inter alia, that any dividend or other money which would otherwise be payable on the Default Shares shall be retained by the Company without liability to pay interest; where the Company has offered the right to elect to receive shares instead of cash in respect of any dividends any election by such member of such restricted shares will not be effective; and no transfer of any of the shares held by the member shall be registered unless the member is not himself in default in supplying the information requested and the transfer is part only of the member's holding and is accompanied by a certificate given by the member in a form satisfactory to the Directors to the effect that after due and careful enquiry the member is satisfied that none of the shares the subject of the transfer are restricted shares.

4.4 Variation of Class Rights

If at any time the share capital of the Company is divided into different classes of shares, the rights attached to any class of shares may, subject to the certain company law acts as defined in the Companies Act (for the purposes of this paragraph 4 only, the ''Statutes''), be abrogated or varied either with the consent in writing of the holders of three fourths in nominal value of the issued shares of that class (excluding any shares of that class held as treasury shares) or with the sanction of a special resolution passed at a separate general meeting of the holders of the shares of that class. To every such separate general meeting the provisions of Chapter 3 of part 13 of the Companies Act (save as stated in sections 334(2) to (3)) and the provisions of the Articles relating to general meetings shall apply, mutatis mutandis, but so that the necessary quorum at any such meeting other than an adjourned meeting shall be two persons holding or representing by proxy at least one third in nominal value of the issued shares of the relevant class (excluding any shares of that class held as treasury shares) and at an adjourned meeting one person holding shares of the class or his proxy. Any holder of shares of the relevant class present in person or by proxy may demand a poll upon which every holder of shares of that class shall be entitled to one vote for every such share held by him. The rights attached to any class of shares shall, unless otherwise expressly provided by the terms of issue of such shares or by the terms upon which such shares are for the time being held, be deemed not to be modified, abrogated or varied by the creation or issue of further shares ranking pari passu therewith.

4.5 Alteration of capital

• (a) The Company may by ordinary resolution increase its share capital, consolidate and divide all or any of its share capital into shares of larger amount, sub-divide all or any of its shares into shares of smaller amount.
• (b) Subject to the provisions of the Statutes, the Company may by special resolution reduce its share capital, any capital redemption reserve and any share premium account in any way.
• (c) Subject to the provisions of the Statutes, any shares may be allotted on terms that they are redeemed or liable to be redeemed at the option of the Company or the shareholders on the terms and in the manner provided for by the Articles.
• (d) Subject to the provisions of the Statutes, the Company may purchase its own shares (including any redeemable shares).

4.6 Transfer of Ordinary Shares

• (a) All transfers of certificated shares shall be effected by instrument in writing in any usual or common form or any other form which the Directors may approve. The instrument of transfer of a certificated share shall be signed by or on behalf of the transferor (and, in the case of a share which is not fully paid, by or on behalf of the transferee) and the transferor shall be deemed to remain the holder of the share until the name of the transferee is entered in the register in respect thereof. Subject to the provisions of the Articles, the Directors may, in their absolute discretion and without giving any reason, refuse to register the transfer of a share which is not fully paid (whether certificated or uncertificated) provided that where such shares are admitted to the Official List of the FCA or admitted to AIM, such discretion may not be exercised in a way which the FCA or the London Stock Exchange regards as preventing dealings in the shares of the relevant class or classes from taking place on an open and proper basis. The Directors may refuse to register any transfer of a share (whether certificated or uncertificated), whether fully-paid or not, in favour of more than four persons jointly.
• (b) In relation to a certificated share, the Directors may decline to recognise any instrument of transfer unless:
• (i) the instrument of transfer is left at the registered office of the Company, or at such other place as the Directors may from time to time determine, accompanied by the certificate(s) of the shares to which it relates and such other evidence as the Directors may reasonably require to show the right of the transferor to make the transfer (and, if the instrument of transfer is executed by some other person on his behalf, the authority of that person to do so); and
• (ii) the instrument of transfer is in respect of only one class of share.
• (c) Notwithstanding any other provision of the Articles to the contrary, unless otherwise determined by the Directors, any shares in the Company may be held in uncertificated form and all transfers of

uncertificated shares shall be made in accordance with and be subject to the provisions of the CREST Regulations and the facilities and requirements of the relevant system (as defined in the CREST Regulations) and, subject thereto, in accordance with any arrangements made by the Directors.

4.7 General Meetings

• (a) An annual general meeting shall be called by not less than 21 clear days' notice, and a meeting of the Company other than an annual general meeting shall be called by not less than 14 clear days' notice. If the Company is a traded company (as defined in section 360C of the Companies Act), the provisions of section 307A of the Companies Act must be complied with if the meeting is to be called by less than 21 clear days' notice). The notice shall specify the place, the day and time of meeting and, in the case of any special business, the general nature of that business. A notice calling an annual general meeting shall specify the meeting as such and a notice convening a meeting to pass a special resolution shall specify the intention to propose the resolution as such and shall include the text of the resolution.
• (b) The accidental omission to give notice of a meeting, or to issue an invitation to appoint a proxy with a notice where required by these Articles, to any person entitled to receive notice, or the non-receipt of notice of a meeting or of an invitation to appoint a proxy by any such person, shall not invalidate the proceedings at that meeting.
• (c) All shareholders present in person or by duly appointed corporate representative, and their duly appointed proxy or proxies shall be entitled to attend all general meetings of the Company.

4.8 Directors

• (a) Unless and until the Company in general meeting shall otherwise determine, the number of Directors shall be not more than 16 and not less than two. A Director shall not be required to hold any shares in the capital of the Company. A Director who is not a member shall nevertheless be entitled to receive notice of and attend and speak at all general meetings of the Company and all separate general meetings of the holders of any class of shares in the capital of the Company.
• (b) Subject to the provisions of the Statutes, a Director may hold any other office or place of profit with the Company, except that of auditor, in conjunction with the office of Director and may act by himself or through his firm in a professional capacity for the Company (otherwise than as auditor) on such terms as to remuneration and otherwise as the Directors may decide. No Director shall be disqualified by his office from entering into, or being otherwise interested in, any of the foregoing or any contract, arrangement, transaction or proposal with the Company or in which the Company has a direct or indirect interest. Subject to the provisions of the Statutes and save as therein provided, no such contract, arrangement, transaction or proposal shall be liable to be avoided on the grounds of the Director's interest, nor shall any Director be liable to account to the Company for any remuneration or other benefit which derives from any such contract, transaction or arrangement or interest by reason of such Director holding that office or of the fiduciary relationship thereby established, but he shall declare the nature of his interest in accordance with the requirements of the Statutes.
• (c) A Director shall (in the absence of some other material interest than is indicated below) be entitled to vote (and be counted in the quorum) in respect of any resolution concerning any of the following matters, namely:
• (i) the giving of any guarantee, security or indemnity in respect of money lent or obligations incurred by him or by any other person at the request of or for the benefit of the Company or any of its subsidiary undertakings;
• (ii) the giving of any guarantee, security or indemnity in respect of a debt or obligation of the Company or any of its subsidiary undertakings for which he himself has assumed responsibility in whole or in part under a guarantee or indemnity or by the giving of security;
• (iii) any proposal concerning an offer of securities of or by the Company or any of its subsidiary undertakings in which offer he is, or may be entitled to, participate as a holder of securities or in the underwriting or sub underwriting of which he is to participate;
• (iv) any contract, arrangement, transaction or other proposal concerning any other body corporate in which he is interested, directly or indirectly and whether as an officer or shareholder or otherwise howsoever, provided that he does not hold an interest (within the meaning of sections 820 to 825

of the Companies Act) in one per cent. or more of any class of the equity share capital of such body corporate or of the voting rights available to members of the relevant body corporate;

• (v) any contract, arrangement, transaction or other proposal for the benefit of employees of the Company which does not accord him any privilege or benefit not generally accorded to the employees to whom the scheme relates; and
• (vi) any contract, arrangement or transaction concerning any insurance which the Company is to purchase and/or maintain for the benefit of Directors or for the benefit of persons who include Directors.
• (d) If any question shall arise at any meeting as to the materiality of an interest or as to the entitlement of any Director to vote and such question is not resolved by his voluntarily agreeing to abstain from voting, such question shall be referred to the chairman of the meeting and his ruling in relation to any other Director other than himself shall be final and conclusive except in a case where the nature or extent of the interests of the Director concerned have not been fairly disclosed.
• (e) Save as provided in the Articles, a Director shall not vote or be counted in the quorum present on any motion in respect of any contract, arrangement, transaction or any other proposal in which he has an interest which is to his knowledge a material interest otherwise than by virtue of his interests in shares or debentures or other securities of, or otherwise in or through the Company. A Director shall not be counted in the quorum at a meeting in relation to any resolution on which he is debarred from voting.
• (f) Each of the directors shall be paid a fee at such rate as may from time to time be determined by the Directors, but the aggregate of all such fees so paid to the directors shall not exceed US \$5 million per annum or such larger amount as may from time to time be decided by ordinary resolution of the Company. Any director who is appointed to any executive office or who serves on any committee or who devotes special attention to the business of the Company, or who otherwise performs services which in the opinion of the Directors are outside the scope of the ordinary duties of a Director, shall be entitled to receive such remuneration (whether by way of salary, percentage of profits or otherwise) as the Directors may determine. Each director may be paid his reasonable travelling, hotel and other expenses incurred in attending and returning from meetings of the Directors, or any committee of the Directors or of the Company or of the holders of any class of shares or debentures of the Company or otherwise in connection with the business of the Company. The Articles do not permit a director to vote on, or be counted in the quorum in relation to, any resolution of the board concerning his own appointment.
• (g) There shall be no age limit for Directors.
• (h) Each Director shall have the power at any time to appoint as an alternate Director either (i) another director or (ii) any other person approved for that purpose by a resolution of the Directors, and, at any time, to terminate such appointment.
• (i) Each Director shall retire from office at the third annual general meeting after the annual general meeting at which he was last elected. A retiring Director shall be eligible for re-election.
• (j) The Directors may exercise all the powers of the Company to give or award pensions, annuities, gratuities or other retirement, superannuation, death or disability allowances or benefits to, inter alia, any Directors, ex-directors, employees or ex-employees of the Company or of any subsidiary undertaking or parent undertaking of the Company or to the wives, widows, children, other relations and dependants of any such person and may establish, maintain, support, subscribe to and contribute to all kinds of schemes, trusts and funds for the benefit of any such persons.

4.9 Borrowing Powers

• (a) The Directors may, save as the Articles otherwise provide, exercise all the powers of the Company to borrow money and to mortgage or charge its undertaking, property, assets and uncalled capital, or any part thereof, and, subject to the provisions of the Statutes, to issue debentures, debenture stock and other securities whether outright or as security for any debt, liability or obligation of the Company or of any third party.
• (b) The Directors shall restrict the borrowings of the Company and exercise all voting and other rights or powers of control exercisable by the Company in relation to its subsidiary undertakings (if any) so as to secure (so far, as regards subsidiary undertakings, as by such exercise they can secure) that the

aggregate amount for the time being remaining outstanding of all monies borrowed by the Group and for the time being owing to persons outside the Group shall not at any time, without the previous sanction of an ordinary resolution of the Company in general meeting, exceed a sum equal to the higher of US\$3,000,000,000 or three times the aggregate of (i) the amount paid up on the issued share capital of the Company and (ii) the total of the capital and revenue reserves of the Group (including any share premium account, capital redemption reserve and credit balance on the profit and loss or retained earnings account) in each case, whether or not such amounts are available for distribution, all as shown in the latest audited and consolidated balance sheet of the Group but after such adjustments and deductions (including any amounts attributable to intangibles) as are specified in the Articles.

4.10 Dividends and Distributions on Liquidation to Shareholders

• (a) The Company in general meeting may declare dividends, but no dividend shall exceed the amount recommended by the Directors. Subject to the Statutes and any priority, preference or special rights, all dividends shall be declared and paid according to the amounts paid up on the shares and shall be apportioned and paid proportionately to the amounts paid up on the shares during any portion of the period in respect of which the dividend is paid.
• (b) Subject to the provisions of the Statutes, the Directors may pay such interim dividends as they think fit and may pay the fixed dividends payable on any shares of the Company half yearly or otherwise on fixed dates.
• (c) The Directors may, with the sanction of an ordinary resolution of the Company in general meeting, offer the holders of Ordinary Shares the right to elect to receive new shares credited as fully paid instead of cash in respect of the whole or part of any dividend.
• (d) Any dividend unclaimed for a period of 12 years after it became due for payment shall be forfeited and shall revert to the Company.
• (e) On a liquidation, the liquidator may, subject to the Statutes, divide among the members in specie or in kind the whole or any part of the assets of the Company and may, for such purpose, set such value as he deems fair upon any property to be divided and may determine how such division shall be carried out.

4.11 Non-United Kingdom Shareholders

There are no limitations in the Articles on the rights of non-United Kingdom shareholders to hold, or to exercise voting rights attached to, the Ordinary Shares. However, non-United Kingdom shareholders are not entitled to receive notices unless they have given an address in the United Kingdom to which such notices may be sent.

5. Mandatory Bids, Squeeze-Out and Sell-out Rules

5.1 Mandatory Bid

The Takeover Code applies to the Company. Under Rule 9 of the Takeover Code, if an acquisition of interests in shares were to increase the aggregate holding of the acquirer and its concert parties to interests in shares carrying 30 per cent. or more of the voting rights in the Company, the acquirer and, depending on circumstances, its concert parties would be required (except with the consent of the Takeover Panel) to make a cash offer for the outstanding shares in the Company at a price not less than the highest price paid for interests in shares by the acquirer or its concert parties during the previous 12 months. This requirement would also be triggered by any acquisition of interests in shares by a person holding (together with its concert parties) shares carrying between 30 per cent. and 50 per cent. of the voting rights in the Company if the effect of such acquisition were to increase that person's percentage of the total voting rights in the Company.

5.2 Squeeze-Out

Under the Companies Act, if a ''takeover offer'' (as defined in section 974 of the Companies Act) is made for the shares and the offeror were to acquire, or unconditionally contract to acquire, not less than 90 per cent. in value of the shares to which the offer relates and not less than 90 per cent. of the voting rights carried by the shares to which the offer relates, it could, within three months of the last day on which its takeover offer can be accepted, compulsorily acquire the remaining 10 per cent. The offeror would do so

by sending a notice to outstanding shareholders telling them that it will compulsorily acquire their shares and then, six weeks later, it would execute a transfer of the outstanding shares in its favour and pay the consideration for the outstanding shares to the Company, which would hold the consideration on trust for outstanding shareholders. The consideration offered to the shareholders whose shares are compulsorily acquired under this procedure must, in general, be the same as the consideration that was available under the takeover offer.

5.3 Sell-Out

The Companies Act also gives minority shareholders a right to be bought out in certain circumstances by an offeror who has made a takeover offer. If a takeover offer relates to all the shares and, at any time before the end of the period within which the offer can be accepted, the offeror holds or has agreed to acquire not less than 90 per cent. in value of the shares and not less than 90 per cent. of the voting rights carried by the shares, any holder of shares to which the offer relates who has not accepted the offer could, by a written communication to the offeror, require it to acquire those shares. The offeror is required to give any shareholder notice of his/her right to be bought out within one month of that right arising. The offeror may impose a time limit on the rights of minority shareholders to be bought out, but that period cannot end less than three months after the end of the acceptance period or, if later, three months from the date on which notice is served on shareholders notifying them of their sell-out rights. If a shareholder exercises his/her sell-out rights, the offeror is entitled and bound to acquire those shares on the terms of the offer or on such other terms as may be agreed.

6. Directors and Senior Managers

6.1 Directors

The current Directors and their functions are as follows:

Name	Position	Date appointed to the Board
Amjad Bseisu	Chief Executive	22 February 2010
Jock Lennox	Chairman	22 February 2010
Philip Holland	Non-Executive Director	1 August 2015
Helmut Langanger	Senior Independent Director	16 March 2010
Philip Nolan	Non-Executive Director	1 August 2012
Jonathan Swinney	Chief Financial Officer	29 March 2010

The business address of each of the Directors (in such capacity) is 15 Regent Street, London, United Kingdom, SW1Y 4LR.

6.2 Profiles of the Directors

The business experience and principal business activities outside of EnQuest of each of the Directors are as follows:

(a) Amjad Bseisu (Chief Executive)

Amjad Bseisu holds a BSc Honours degree in Mechanical Engineering and an MSc and D.ENG degree in Aeronautical Engineering. From 1984 to 1998, Amjad worked for the Atlantic Richfield Company (ARCO), eventually becoming president of ARCO Petroleum Ventures and ARCO Crude Trading Inc. In 1998 Amjad founded and was the chief executive of Petrofac Energy Developments International Limited, the operations and investment business for Petrofac Limited, which organically grew an upstream and midstream oil and gas business in South East Asia, the UK and North America. In 2010 Amjad formed EnQuest PLC having previously been a founding non-executive chairman of Serica Energy plc and director of Stratic Energy Corporation.

Other principal external appointments include chairman of the World Economic Forum Independent Oil and Gas Community, British Business Ambassador for Energy, non-executive chairman of Enviromena Power Systems, a private company and the leading developer of solar services in the Middle East, and chairman of the Amjad and Suha Bseisu charity foundation.

Amjad is also a member of the Nomination Committee.

(b) Jock Lennox (Chairman)

Jock Lennox holds a law degree and in 1980 qualified as a chartered accountant with Ernst & Young LLP. He is a member of the Institute of Chartered Accountants of Scotland. In 1988 Jock became a partner at Ernst & Young LLP. In his time at Ernst & Young LLP Jock gained a wide range of experience working with multi-national clients, including projects in many countries and a secondment to Seattle, US in the early 1980s. He held a number of leadership positions in the UK and globally. Jock retired from Ernst & Young LLP in 2009.

Other principal external appointments include non-executive director of Barratt Developments plc, Dixons Carphone plc and A&J Mucklow Group plc (from which he will step down on 15 November 2016). He is senior independent director of Hill & Smith Holdings plc and a trustee of the Tall Ships Youth Trust.

Jock is also chairman of the Nomination Committee and a member of the Audit Committee.

(c) Philip Holland (Non-Executive Director)

Philip Holland holds a BSc in Civil Engineering from Leeds University as well as an MSc in Engineering and Construction Project Management from Cranfield School of Management. Philip has extensive experience in managing large scale oil and gas projects around the globe. In 1980 Philip joined Bechtel Corporation, where for over 20 years he managed major oil and gas projects in a wide range of international locations. In 2004 Philip joined Shell as vice president of projects, Shell Global Solutions International. In 2009 Philip became executive vice-president in Downstream Projects in Shell's newly formed Projects and Technology Business. In 2010 he was appointed as project director for Shell Development Kazakhstan's Kashagan Phase 2 Project, and subsequently the Shell/QP Al Karaana Petrochemicals Project. Since 2013 he has operated as an independent project management consultant.

Philip is also the chairman of the Risk Committee and a member of the Remuneration Committee.

(d) Helmut Langanger (Senior Independent Director)

Helmut Langanger holds an MSc degree in Petroleum Engineering and an MA in Economics. Between 1974 and 2010, Helmut was employed by OMV, Austria where he was a reservoir engineer until 1980. From 1981 to 1985, Helmut was an evaluation engineer for the technical and economic assessment of international E&P ventures, and from 1985 to 1989 he held the position of vice-president, planning and economics for E&P and natural gas projects. In 1989 Helmut was appointed as senior vice-president of international E&P and in 1992 became senior vice-president of E&P for OMV's global operations. From 2002 Helmut was the group executive vice-president for E&P, OMV until he retired in 2010. During his tenure, Helmut was in charge of 14 countries and production increased from 80,000 barrels per day to 320,000 barrels per day.

Other principal external appointments include non-executive director of Schoeller Bleckmann Oilfield Equipment A.G. (Austria), Serinus Energy Inc. (formerly Kulczyk Oil Ventures Inc.) (Poland and Canada) and MND (Czech Republic).

Helmut is also chairman of the Remuneration Committee, a member of the Audit Committee and a member of the Nomination Committee.

(e) Philip Nolan (Non-Executive Director)

Philip Nolan holds a BSc and PhD in Geology and has an MBA from the London Business School. Philip spent 15 years with BP working in the UK, the US, Australia and Southeast Asia. He was responsible for acquisition and disposals for BP Exploration worldwide and was managing director of Interconnector, UK which built and continues to operate the gas pipeline between Bacton and Zeebrugge. He joined BG plc where he was the chief executive of Transco, which runs the UK gas pipeline network, and sat as an executive member of the board of directors of BG plc. On demerger from BG, Philip was the chief executive of the Lattice Group, a FTSE 100 company. Subsequently, Philip became the chief executive of eircom, the national Irish telecommunications company. He was also a non-executive director of Providence Resources plc, an Irish oil explorer.

Philip is chairman of the John Laing Group plc, an international infrastructure developer and investor with operations in the UK, Europe, Australia, New Zealand, Canada and North America. He is also chairman of the Ulster Bank and Affinity Water Limited.

Philip is also chairman of the Audit Committee and a member of the Remuneration Committee.

(f) Jonathan Swinney (Chief Financial Officer)

Jonathan Swinney qualified as a chartered accountant with Arthur Andersen in 1992 and is a member of the Institute of Chartered Accountants of England and Wales. Jonathan qualified as a solicitor in 1997 and trained at Cameron McKenna LLP, joining the acquisition finance team upon qualification. In 1998 Jonathan joined Credit Suisse First Boston working within the corporate broking team. Jonathan later moved to Lehman Brothers where he advised on a wide range of transactions and in 2006 he became a managing director within the corporate broking team. Jonathan joined Petrofac Limited in April 2008 as head of mergers and acquisitions for the Petrofac Group and left in 2010 to join EnQuest PLC.

A list of the companies and partnerships of which the Directors are or have been a director or partner within the past five years is set out in paragraph 12 of this Part 9 (''Additional Information'').

6.3 Senior Managers

The Senior Managers of the Group are:

Position
General Counsel & Company Secretary
HR Director
Head of Major Projects
Managing Director—Corporate Development
President, North Sea
Managing Director, Malaysia
Vice President, Finance

6.4 Profiles of the Senior Managers

The business experience and principal business activities of each of the Senior Managers are as follows:

(a) Stefan Ricketts (General Counsel & Company Secretary)

Stefan joined EnQuest in 2012 and is responsible for all legal, Company secretarial matters and for EnQuest's Risk Management Framework.

Prior to joining EnQuest, Stefan was a partner at Fulbright & Jaworski, LLP heading its energy and natural resources practice in the Asia-Pacific region. He had previously been general counsel at BG Group plc. Stefan, who graduated from the University of Bristol with a degree in Law, began his early career as a solicitor with Herbert Smith LLP, has significant experience as a lawyer and in management working across the energy chain and in all phases of project development and operations. In previous roles he has been based in London, Paris, Dubai, Jakarta, Singapore and Hong Kong.

(b) Graeme Cook (HR Director)

Graeme holds an MA in Accountancy & Economics from the University of Dundee and has over 20 years' experience in both finance and HR leadership roles. Graeme's early career was spent predominantly with Schlumberger living and working in the UK, Africa, the Middle East and Asia. He returned to the UK in 2004 and was appointed as HR Director for BG Group's Mediterranean Basin and Africa region. Prior to this, Graeme was Group Head of Talent and Leadership for Legal & General PLC. Since joining EnQuest in April 2011, Graeme has had responsibility for ensuring that the Company has the necessary people and organisation in place to deliver EnQuest's ambitious growth agenda.

(c) Richard Hall (Head of Major Projects)

Richard Hall graduated from Leeds University with a BSc in Chemical Engineering and spent the first 10 years of his career gaining experience with operating oil companies (such as Amoco, Hess and Murphy Petroleum) as a supervisor in offshore field operations, petroleum engineering, project management and execution and commercial negotiations. Richard was one of four founders and operations directors of the service company UWG Group Ltd (now known as Acteon Group Limited) which won the Institute of Petroleum Platinum award in 2001. He formed and led a team which won the prestigious Queen's Award for Export. He subsequently went on to join Petrofac as vice president of operations & developments and

also became general manager in Malaysia. Before joining EnQuest, Richard was the chief executive and co-founder of Nio Petroleum which was acquired by EnQuest in 2012 when Richard joined the Senior Management Team as Head of Major Projects. His primary responsibility is the delivery of the Kraken development.

(d) Faysal Hamza (Managing Director—Corporate Development)

Faysal has an MBA from Georgetown University in Washington and over 26 years of experience in oil and gas finance, business development and private equity. Faysal joined EnQuest in 2011 and prior to that was managing director, private equity at Swicorp, a financial firm operating in the Middle East and North Africa. Faysal has also held roles as senior executive at Arab Petroleum Investment Corporation and group business development manager with the Alturki Group in Saudi Arabia in addition to management positions at Arco International Oil & Gas Company in the US, Saudi International Bank in London and the Saudi Arabian Oil Company (Saudi Aramco).

(e) Neil McCulloch (President, North Sea)

Neil is a graduate of Cambridge University and Heriot Watt University and holds a Master's degree in Petroleum Engineering. He began his career as a graduate trainee with British Gas E&P and from 1996 to 2001 worked in a variety of technical consultancy and investment banking roles. He then went on to spend 11 years with BG Group in a range of senior UK and international roles, latterly as vice president & asset general manager, UK Upstream, with accountability for the delivery of BG's UK North Sea business. Neil joined EnQuest in March 2014 from international oil and gas company OMV AG, where he held the global role of senior vice president production & engineering. Neil holds a number of external appointments, including operator co-chair of Oil and Gas UK, and is a member of the board of the Oil and Gas Innovation Centre.

(f) Bob Davenport (Managing Director, Malaysia)

Bob graduated from the University of Alabama with a BS in Mineral Engineering and holds an MBA from Florida International University. He began his early career in 1984 as a field engineer with Schlumberger and then gained broad international experience in petroleum engineering, project management, subsurface, operations and general management with Texaco, Shell, BP and Apache Corporation. In previous roles he has worked in Indonesia, Egypt, Pakistan, Kuwait, the United Arab Emirates, UK North Sea and the US Gulf Coast. Prior to joining EnQuest, Bob served as North Sea operations director for Apache Corporation and general manager for Khalda where he led the largest oil and gas producer in Egypt's western desert. Bob joined EnQuest in 2015 and is responsible for delivering the ambitious growth agenda in Malaysia.

(g) Imran Malik (Vice President, Finance)

Imran is a chartered accountant and holds a degree in Chemical Engineering from University College London. He has over 25 years of experience in oil and gas and joined the Group from the BG Group, where his most recent role was as Group Head of Planning and Risk. As Vice President, Finance at the Company, Imran has overall responsibility for ensuring that the Company has the necessary finance capacity and capabilities in place to deliver the Group's strategy.

A list of the companies and partnerships (other than EnQuest and its subsidiaries) of which the EnQuest Senior Managers are or have been a director or partner within the past five years is set out in paragraph 12 of this Part 9 (''Additional Information'').

7. Directors' and Senior Managers' Interests

7.1 Directors' and Senior Managers' interests in share capital

The following table sets out the interests in the share capital of the Company of the Directors and Senior Managers (including beneficial interests or interests of a person connected with a Director or a Senior Manager) (i) as at the Latest Practicable Date; and (ii) immediately following Admission of the New Ordinary Shares:

Director	Ordinary Shares held prior to the Placing and Open Offer(1)	Percentage of issued Ordinary Share capital prior to the Placing and Open Offer(1)	Ordinary Shares held after the Placing and Open Offer(2)	Percentage of issued Ordinary Share capital after the Placing and Open Offer(2)
Chairman and Executive Directors
Double A Limited(3)	71,405,331	8.90	194,365,112	16.76%
Jock Lennox	20,000	0.00%	28,889	0.00%
Jonathan Swinney	62,033	0.01%	89,603	0.01%
Non-Executive Directors
Philip Holland	74,999	0.01%	108,332	0.01%
Helmut Langanger	200,000	0.02%	288,889	0.02%
Philip Nolan	150,000	0.02%	216,667	0.02%
Senior Managers
Stefan Ricketts	38,106	0.00%	38,106	0.00%
Graeme Cook	44,460	0.01%	44,460	0.00%
Richard Hall	160	0.00%	160	0.00%
Faysal Hamza	430,814	0.05%	430,814	0.04%
Neil McCulloch	15,122	0.00%	15,122	0.00%
Bob Davenport	None	N/A	None	N/A
Imran Malik	None	N/A	None	N/A

Notes:

(1) Details of the options and awards over Ordinary Shares and interests in the Share Option Plans held by the Directors are set out in paragraph 7.2 of this Part 9 (''Additional Information''). They are not included in the interests of the Directors shown in the table above.

• (2) Assuming (i) that no share awards vest and no share options are exercised between the Latest Practicable Date and Admission and (ii) that the Directors and Senior Managers (and their connected persons) take up their Open Offer Entitlements in full and that the Senior Managers do not take up any of their Open Offer Entitlements; (iii) that the Directors and Senior Managers (and their connected persons) will not take up any New Ordinary Shares pursuant to the Placing, save for the 91,224,079 New Ordinary Shares that Double A Limited has agreed to take up pursuant to the Placing; and (iv) that none of the 91,224,079 New Ordinary Shares that Double A Limited has agreed to take up pursuant to the Placing are clawed back to satisfy valid applications by Qualifying Shareholders under the Open Offer.
• (3) These shares are held by Double A Limited, a company beneficially owned by the extended family of Amjad Bseisu.

Taken together, the combined percentage interest of the Directors and the Senior Managers in the issued share capital expected to subsist immediately following the Placing and Open Offer is approximately 16.9 per cent., assuming that the Directors and the Senior Managers take up their Open Offer Entitlements in full and that none of the 91,224,079 New Ordinary Shares that Double A Limited has agreed to take up pursuant to the Placing are clawed back to satisfy valid applications by Qualifying Shareholders under the Open Offer.

7.2 Directors' and Senior Managers' interests in Share Option Plans

As at the Latest Practicable Date, the Directors and Senior Managers have been granted the following options to subscribe for Ordinary Shares which remain outstanding:

Director/ Senior Manager	Share Option Plan	Number of Ordinary Shares under option
Jonathan Swinney	Sharesave	56,250
Stefan Ricketts	Sharesave	45,000
Graeme Cook	Sharesave	90,000
Neil McCulloch	Sharesave	150,000
Imran Malik	Sharesave	90,000

As at the Latest Practicable Date, the Directors and Senior Managers have been granted the following awards to acquire Ordinary Shares which remain outstanding:

Director/ Senior Manager	Share Option Plan	Number of Ordinary Shares subject to award
Amjad Bseisu	PSP	8,112,742
	RSP	2,200,387
Jonathan Swinney	PSP	5,201,907
	RSP	699,741
Stefan Ricketts	PSP	1,745,028
	RSP	1,075,334
	DBSP	90,630
Graeme Cook	PSP	1,075,526
	RSP	920,334
	DBSP	16,002
Richard Hall	N/A	N/A
Faysal Hamza	PSP	2,055,573
	RSP	1,000,334
	DBSP	500,038
Neil McCulloch	PSP	1,699,615
	RSP	1,850,000
	DBSP	289,630
Imran Malik	PSP	1,365,384
	RSP	200,000
Bob Davenport	PSP	819,306
	RSP	250,000

The awards under the PSP and RSP were granted on a nil cost basis. The vesting of awards under the PSP are subject to achievement of performance conditions. The vesting of awards under the PSP, RSP & DBSP are subject to completion of the vesting period. The awards under the PSP first vest on the third anniversary of the date of grant, subject to the achievement of performance.

7.3 Save as disclosed in paragraphs 7.1 and 7.2 of this Part 9 (''Additional Information'') above, no Director or Senior Manager has any interest in the share capital of the Company or any of its subsidiaries nor does any person connected (within the meaning of section 252 of the Companies Act) with the Directors or Senior Managers have any such interests, whether beneficial or non-beneficial.

8. Remuneration and Benefits

Executive Directors' base salaries and benefits are reviewed each year with any changes usually taking effect from January. The fees for the Chairman and Non-Executive Directors are reviewed against market practice from time to time and were last reviewed as of January 2014.

For the year ended 31 December 2015, the aggregate total remuneration paid (including contingent or deferred consideration) and benefits in kind granted (under any description whatsoever) to the directors of the Company by members of the Group was £2.0 million. The remuneration of the directors of the Company for the financial year ended 31 December 2015 is set out in the table below.

Name	Salary and fee (£'000)	All taxable benefits (£'000)	Annual bonus(1) (£'000)	LTIP(2) (£'000)	Pension(3) (£'000)	Total (£'000)
Executive Directors
Amjad Bseisu	430	1	262	95	40	828
Jonathan Swinney	280	1	334	58	30	703
Non-Executive Directors
Philip Holland(4)	21	—	—	—	—	21
Helmut Langanger	70	—	—	—	—	70
Jock Lennox(5)	60	—	—	—	—	60
Philip Nolan	50	—	—	—	—	50
Non-Executive Directors who held office in the year ended 31 December 2015 but have since stood down
Dr James Buckee(6)	220	—	—	—	—	220
Clare Spottiswoode(7)	50	—	—	—	—	50
Total	1,181	2	596	153	70	2,002

Notes:

(1) Annual bonus was based on base salary levels and payment was made in respect of the full financial year. The amount stated is the full amount (including the portion deferred). One third of the annual bonus for Amjad Bseisu and Jonathan Swinney is paid in shares, deferred for two years, and subject to continued employment.

(2) PSP awarded on 29 April 2013 vested on 29 April 2016. The LTIP value shown in the 2015 single figure is calculated by taking the number of performance shares that have vested (76.6 per cent. of the performance conditions were achieved) multiplied by the average value of the EnQuest share price between 1 October 2015 and 31 December 2015.

• (3) Cash in lieu of pension and other benefits. Executive Directors do not participate in the EnQuest Pension Plan and instead receive cash in lieu.
• (4) Philip Holland was appointed with effect from 1 August 2015. His fees were £50,000 per annum in line with the other Non-Executive Directors and the figure shown reflects the pro-rated amount earned during 2015.
• (5) Jock Lennox was appointed as chairman of the EnQuest Board with effect from 8 September 2016. With effect from 8 September 2016, Jock Lennox is entitled to a fee of £150,000 per annum (less tax and any necessary statutory deductions) in respect of his appointment as chairman.
• (6) Dr James Buckee retired as chairman of the Company with effect from 8 September 2016.
• (7) Clare Spottiswoode retired from the Board with effect from 1 June 2016.

For the year ended 31 December 2015, the aggregate total remuneration paid (including contingent or deferred consideration) and benefits in kind granted (under any description whatsoever) to the Senior Managers was £3.4 million in their capacity as EnQuest Senior Managers during the year ended 31 December 2015.

The total amount set aside or accrued by the Group to provide pension, retirement or similar benefits to the current Directors and the Senior Managers for the year ended 31 December 2015 was £0.1 million (which includes the pension numbers in the table above).

9. Directors' Service Contracts and Letters of Appointment

9.1 Executive Directors

The following table summarises the key terms of the Executive Directors' service contracts or terms of appointment:

Director	Date of service contract	Notice period	Base salary for the 2015 Financial Year	Annual bonus potential for the 2015 Financial Year (% of salary)
Amjad Bseisu	29 March 2010	12 months	£430,000	225%
Jonathan Swinney	29 March 2010	12 months	£280,000	225%

The Company follows best practice under the Corporate Governance Code with regard to annual re-election of its Directors. The Company's policy is that Executive Directors' service contracts should be capable of being terminated by the Company on not more than 12 months' notice. Each of the Executive Directors' service contract entitles the Company to terminate their employment by making a payment in lieu of notice. The Company may elect to make any such payment in equal monthly instalments payable in arrears. On termination, the Executive Directors forgo their entitlement to any bonus, however the Remuneration Committee can choose to approve a special bonus upon completion of agreed objectives under extraordinary circumstances.

A summary of the principal terms of the service agreements of each of the Executive Directors is set out below:

(a) Amjad Bseisu

Mr. Bseisu entered into a service agreement with EnQuest Britain, effective from 29 March 2010 pursuant to which he serves as the Chief Executive Officer and an Executive Director of the Company. Mr. Bseisu's basic salary is £430,000 per annum (less appropriate tax and other statutory deductions) and he is entitled to a benefit allowance of £40,000 per annum. EnQuest Britain offers Mr. Bseisu private health insurance and life assurance cover. The service agreement is terminable by either party giving to the other at least 12 months' notice in writing at any time. EnQuest Britain has the discretion to terminate Mr. Bseisu's employment with immediate effect by paying him certain contractual sums in lieu of his notice period or any remainder of his notice period. The service agreement contains a ''garden leave'' clause entitling EnQuest Britain to require Mr. Bseisu to remain away from work during his notice period. The service agreement also contains provisions protecting the Group's intellectual property and confidential information during his employment and after its termination.

(b) Jonathan Swinney

Mr. Swinney entered into a service agreement with Lundin Britain, effective from 29 March 2010 pursuant to which he serves as the Chief Financial Officer and an Executive Director of the Company. Mr. Swinney's basic salary is £280,000 per annum (less appropriate tax and other statutory deductions) and he is entitled to a benefit allowance of £30,000 per annum. EnQuest Britain offers Mr. Swinney private health insurance and life assurance cover. The service agreement is terminable by either party giving to the other at least 12 months' notice in writing at any time. EnQuest Britain has the discretion to terminate Mr. Swinney's employment with immediate effect by paying him certain contractual sums in lieu of his notice period or any remainder of his notice period. The service agreement contains a ''garden leave'' clause entitling EnQuest Britain to require Mr. Swinney to remain away from work during his notice period. The service agreement also contains provisions protecting the Group's intellectual property and confidential information during his employment and after its termination.

9.2 Non-Executive Directors

Jock Lennox is Chairman of the Company. Helmut Langanger is Senior Independent Director. Philip Holland and Philip Nolan have been appointed as Non-Executive Directors of the Company. The letters of appointment of all the Non-Executive Directors are governed by English law. Details of the letters of appointment are set out below, including the roles and the level of remuneration of the Non-Executive Directors for the financial year ended 31 December 2015.

Name	Role(s)	Date of appointment as a Director	Date of current appointment letters	Anticipated expiry of present term of appointment (subject to annual re-election)	Anticipated Fees for the 2016 Financial Year (£)
Philip Holland	Chairman of Risk Committee and member of Remuneration Committee	1 August 2015	24 June 2015	31 May 2018	£60,000
Helmut Langanger	Senior Independent Director, chairman of Remuneration Committee, member of Audit Committee and member of Nomination Committee	16 March 2010	29 May 2013	Conclusion of the Company's 2017 AGM	£70,000
Jock Lennox	Chairman of the Company, member of Audit Committee and chairman of the Nomination Committee	22 February 2010	2 September 2016	Conclusion of the Company's 2019 AGM	£88,000
Philip Nolan	Non-Executive Director, chairman of Audit Committee, member of Remuneration Committee, member of Risk Committee and member of Risk Committee	1 August 2012	26 May 2015	Conclusion of the Company's 2017 AGM	£53,000

Each appointment may be terminated at any time by either party on three months' written notice. During the notice period, the Non-Executive Director will continue to receive their normal fee. Each appointment may also be terminated in accordance with the Articles. The Non-Executive Directors are subject to confidentiality undertakings without limitation in time. Each of the Non-Executive Directors' letter of appointment entitles the Company to terminate their appointment by making a payment in lieu of notice. They are not entitled to participate in any of the Share Option Plans.

10. Corporate Governance

The Board is firmly committed to high standards of corporate governance. The principal governance rules applying to UK companies listed on the Main Market of the London Stock Exchange are contained in the UK Corporate Governance Code. The Board considers that as at the Latest Practicable Date the Company is in compliance with the principles and provisions of the UK Corporate Governance Code.

10.1 Board of Directors

A Director is appointed by ordinary resolution (i.e. a simple majority of votes cast) as a general meeting of ordinary shareholders of EnQuest. The Board also has the power to appoint a Director, but any person so appointed must stand for reappointment by shareholders at the first annual general meeting following his or her appointment by the Board. After appointment, Directors must offer themselves for reappointment at least every three years. It is EnQuest's policy to review rigorously the reappointment of non-executive directors who have served more than six years.

The Corporate Governance Code currently recommends that at least half of the board of directors (excluding the chairman) of a UK listed company should be independent in character and judgement and free from relationships or circumstances which are likely to affect, or could appear to affect their judgement.

As at the date of this document, the Board is composed of six members, consisting of the Chairman (Jock Lennox), two full-time Executive Directors (Amjad Bseisu and Jonathan Swinney), and three Non-Executive Directors, all of whom (that is, more than half of the Board excluding the Chairman) are considered by the Board to be independent: Philip Holland, Helmut Langanger and Philip Nolan.

The Corporate Governance Code also recommends that the board of directors should appoint one of its independent non-executive directors as the senior independent director and Helmut Langanger has been appointed to fill this role. The Senior Independent Director should be available to shareholders if they have concerns which have not been resolved through contact with the normal channels of Chairman, Chief Executive or Chief Financial Officer of EnQuest or for which contact is inappropriate.

The Board has established Audit, Remuneration, Nomination and Risk Committees, with formally delegated duties and responsibilities with written terms of references. The full terms of reference of the Audit, Remuneration and Nomination Committees are available on the Company's website www.enquest.com.

10.2 Audit committee

The Audit Committee currently comprises three Non-Executive Directors, all of whom are considered by the Board to be independent and have recent and relevant financial experience. The members of the Audit Committee currently are Philip Nolan (Chair), Helmut Langanger and Jock Lennox.

The main responsibilities of the Audit Committee include:

• Monitoring the integrity of the financial statements, including annual and interim reports and any other formal announcement relating to the Company's financial performance;
• Monitoring and reviewing the Company's internal control procedures and risk management systems;
• Monitoring and reviewing the effectiveness of the external and internal audit activities;
• Making recommendations to the Board, to be put to shareholders for approval, on the appointment, review and removal of external auditors;
• Establishing the external auditors' remuneration;

• Monitoring external auditors' independence;

• Monitoring the policy on external auditors' non-audit services; and

• Identifying any matters in respect of which it considers that action or improvement is needed and making recommendations to the Board as to the steps to be taken.

In fulfilling its responsibility to monitor the integrity of financial reports to shareholders, the Audit Committee review accounting principles, policies and the practises adopted in the presentation of public financial information.

The Audit Committee is expected to meet not less than three times a year and met three times during the financial year ended 31 December 2015.

Meetings are also normally attended by the General Counsel and Company Secretary, the Chief Financial Officer and other key finance team members and the external auditor. The Chief Executive and Chairman of the Board also attend the meetings when invited to do so by the Committee. PwC, in their role as internal auditor during 2015, attended the meetings as appropriate. The Chairman of the Committee regularly meets with the external audit partner and the internal audit partner to discuss matters relevant to the Company.

The Board considers that the Company complies with the requirements of the UK Corporate Governance Code.

10.3 Remuneration Committee

The Remuneration Committee currently comprises three Non-Executive Directors, all of whom are considered by the Board to be independent. The members of the Remuneration Committee currently are Helmut Langanger (Chair), Philip Holland and Philip Nolan.

The main responsibilities of the Remuneration Committee include:

• Setting the remuneration policy for the chief executive, the Chairman, all executive directors, the company secretary and such other members of the executive management as it is designated to consider;
• Assessing and determining total compensation packages available to the executive directors and other senior managers, giving due regard to any relevant requirements, provisions and recommendations of the UK Corporate Governance Code;
• Recommending and monitoring the remuneration of senior management;
• Reviewing the design of all share incentive plans for approval by the Board and shareholders and for any such plans, determining each year whether the awards will be made and if so, the overall amount of such awards, the individual awards to executive directors and other senior management, and the performance targets to be used; and
• Determining policy for and scope of pension arrangements for each executive director.

The Remuneration Committee is expected to meet not less than two times a year and met three times during the financial year ended 31 December 2015.

The UK Corporate Governance Code recommends that the members of the Remuneration Committee should be independent in character and judgement and free from any relationship or circumstance which may, or could or would be likely to, or which appears to affect their judgement. The Board therefore considers that the Company complies with the requirements of the UK Corporate Governance Code in this respect.

10.4 Nomination Committee

The Nomination Committee currently comprises the Chairman, one independent Non-Executive Director and, to ensure input from the executive, the Chief Executive. The independent Non-Executive Director on the Nomination Committee currently is Helmut Langanger.

The main responsibilities of the Nomination Committee include:

• Reviewing the size, structure and composition (including the skills, knowledge and experience) required of the Board and making recommendations to the Board with regard to any changes;

• Planning for succession of both executive and non-executive directors and giving full consideration to succession planning with regard to Board and senior management appointments;
• Identifying, evaluating and recommending candidates for appointment or reappointment as directors or company secretary, taking into account the balance of knowledge, skills and experience required to serve the Board; and
• Reviewing annually the time required from non-executive directors.

The Nomination Committee met once during the financial year ended 31 December 2015.

The UK Corporate Governance Code recommends that the majority of members of the nomination and governance committee be non-executive directors, independent in character and judgement and free from any relationship or circumstance which may, or could or would be likely to, or which appears to affect their judgement. The Board considers that the Company complies with the requirements of the UK Corporate Governance Code in this respect.

10.5 Risk Committee

The Risk Committee currently comprises two independent Non-Executive Directors and one Senior Manager. The independent Non-Executive Directors on the Risk Committee currently are Philip Holland (Chair) and Philip Nolan, and the Senior Manager is Neil McCulloch.

The main responsibilities of the Risk Committee include:

• undertaking an in-depth analysis of specific risks in relation to the Company, as may be requested by the Board or determined by the Committee from time to time; and
• at the request of the Board:
• advising the Board on the Company's overall risk appetite, tolerance and strategy, taking account of the current and prospective macroeconomic and financial environment;
• overseeing and advising the Board on the current risk exposures of the Company and future risk strategy;
• in relation to risk assessment and subject to overlap with the Audit Committee, keeping under review the Company's overall risk assessment processes that inform the Board's decision making;
• as required by the Board, setting a standard for the accurate and timely monitoring of large exposures and certain risk types of critical importance;
• reviewing the company's capability to identify and manage new risk types in conjunction with the Audit Committee;
• reviewing papers on risk from the CRO; and
• working and liaising as necessary with all other Board Committees and undertaking any additional risk related activities.

The Risk Committee was formed in late 2015. Consequently, no meetings were held in the financial year ended 31 December 2015.

11. Ethical Conduct

EnQuest maintains a Code of Conduct which applies to all employees and provides guidance regarding their conduct and how EnQuest conducts its business.

The Group has implemented internal policies and procedures designed to ensure it complies with the UK Bribery Act 2010. The Group maintains a whistle-blowing policy, including by re-issuing its anti-corruption programme to the Company to refresh the familiarity of its personnel with the Company's zero tolerance approach and with the Company specific policies.

12. Other Directorships

In addition to their directorships of EnQuest (in the case of the Directors), the Directors and the Senior Managers hold or have held the following directorships (other than directorships of subsidiaries of EnQuest), and are or were members of the following partnerships, within the past five years:

Name	Current directorship/ partnership	Previous directorship/ partnership
Chairman and Executive Directors
Amjad Bseisu	The Amjad and Suha Bseisu Foundation	Finiva UK Limited
	Enviromena Power Systems
	Alfanar
Jock Lennox	Barratt Developments P L C	Dixons Retail Group plc (now
	Dixons Carphone plc	known as Dixons Retail Group Limited)
	Hill & Smith Holdings plc	Oxford Instruments plc
	A&J Mucklow Group plc
	Tall Ships Youth Trust
Jonathan Swinney	Robinstone LLP	None
	Ursa Major Carbon Dioxide Reduction LLP
Non-Executive Directors
Philip Holland	Phil Holland & Associates Limited	None
	Lloyds Energy Limited
Helmut Langanger	Schoeller Bleckmann Oilfield Equipment A.G.	PPL Europe E&P Limited
	Serinus Energy Inc.
	MND a.s.
Philip Nolan	John Laing Group plc	Ulster Bank, Limited
	Affinity Water Limited	Providence Resources plc
	Affinity Water Acquisitions (Investments) Limited
	Ulster Bank Ireland DAC
Senior Managers
Stefan Ricketts	The Offshore Pollution Liability Association Limited	Fulbright & Jaworski International LLP
Graeme Cook	None	None
Richard Hall	Fathom Systems Group Limited	Nio Petroleum Limited
	Radico Energy Solutions Limited
	HF Consultants Pty Ltd
Faysal Hamza	None	None

Name	Current directorship/ partnership	Previous directorship/ partnership
Neil McCulloch	The UK Oil and Gas Industry Association Limited	Julie McCulloch Engineering Limited
	Oil & Gas Innovation Centre	Antin Cats Limited
		BG Central Holdings Limited
Bob Davenport	None	None
Imran Malik	None	None

13. Directors' and Senior Managers' Confirmations

As at the date of this document, none of the Directors or Senior Managers have, during the five years prior to the date of this document:

• (a) been convicted in relation to a fraudulent offence:
• (b) been associated with any bankruptcies, receiverships or liquidations while acting in the capacity of a member of the administrative, management or supervisory bodies or as a partner, founder or senior manager of any partnership or company;
• (c) been subject to any official public incrimination and/or sanctions by any statutory or regulatory authorities (including any designated professional bodies); or
• (d) been disqualified by a court from acting as a director of a company or from acting as a member of the administrative, management or supervisory bodies of any company or from acting in the management or conduct of the affairs of any company.

There are no potential conflicts of interest between each of the Directors' duties to the Company and their respective private interests and any other duties. There is no interest, including any conflicting interest that is material to the Company or the Placing and Open Offer.

None of the Director or Senior Managers were selected to act in such capacity pursuant to any arrangement or understanding with any major shareholder, customer, supplier or other person having a business connection with the Group.

As at the date of this document, no restrictions have been agreed by any Director or Senior Manager on the disposal within a certain time period of their holdings of their Ordinary Shares.

There are no family relationships between any of the Directors, between any of the Senior Managers or between any of the Directors and the Senior Managers.

14. Share Option Plans

On 18 March 2010, the Shareholders approved and adopted three share schemes for the benefit of Directors and employees, being a Deferred Bonus Share Plan, a Restricted Share Plan and a Performance Share Plan. A Sharesave Plan was approved in 2012.

14.1 Deferred Bonus Share Plan

(a) Introduction

Under the DBSP, participants may volunteer or may be required to invest a proportion of their annual bonuses in Ordinary Shares or to agree to acquire (out of their own resources) and retain Ordinary Shares, if the Remuneration Committee so permits. The Company will then grant matching awards over Ordinary Shares.

(b) Eligibility

Employees and executive directors will be eligible to participate in the DBSP. Participation will be at the discretion of the Remuneration Committee.

(c) Awards

Two types of award will be made under the DBSP.

If the Plan is operated in any year and a bonus is payable, the Remuneration Committee may determine that part of a participant's annual bonus is delivered in Ordinary Shares or may invite selected employees to elect to receive part of their bonus in Ordinary Shares. These Shares will be known as ''Invested Shares'' comprised in ''Invested Awards''.

If the Remuneration Committee so permits, participants may instead pledge Ordinary Shares they own as Invested Shares. A further award will then be granted over a number of Ordinary Shares bearing a specified ratio to the number of Invested Shares. These further awards are referred to below as ''Matching Awards''.

(d) Overall Limit

No award may be granted under the DBSP on any date if, as a result, either of the following limits would be exceeded:

• (i) the aggregate number of Ordinary Shares issued or remaining issuable pursuant to awards made after the Ordinary Shares become listed on the London Stock Exchange under the DBSP and pursuant to grants or appropriations made after the Ordinary Shares become so listed during the previous ten years under any share incentive plan would exceed ten per cent. of the issued Ordinary Share capital of the Company on that date; or
• (ii) the aggregate number of Ordinary Shares issued pursuant to awards made after the Ordinary Shares become listed on the London Stock Exchange under the DBSP and pursuant to grants or appropriations made after the Ordinary Shares become so listed during the previous ten years under any discretionary share incentive plan would exceed five per cent. of the issued Ordinary Share capital of the Company on that date.

(e) Vesting/Exercise of Awards

The Remuneration Committee has discretion at the date of grant to determine the vesting provisions for an award. Awards normally vest between one and three years after grant (in such proportions as the Remuneration Committee may determine at the date of grant), provided that the participant remains in employment (subject to certain good leaver exceptions (see below)). In addition, the vesting of Matching Awards may be subject to the satisfaction of performance conditions.

If events occur which cause the Remuneration Committee to consider that any performance conditions has become unfair or impractical, it may, if it considers it appropriate to do so, amend, relax or waive the performance condition.

(f) Cessation of Employment

If a participant dies, his awards will vest in full. If a participant is a good leaver (i.e. the sale or transfer of his employing company or business out of the Group, or cessation by reason of redundancy, retirement, injury, ill-health, disability or any other reason permitted by the Remuneration Committee) his Invested Awards will vest in full and his Matching Awards will vest on a pro-rated basis. Vesting of Matching Awards which are subject to performance conditions will be subject to satisfaction of those conditions at the end of the relevant performance period unless the Remuneration Committee, in its discretion, determines otherwise. Cessation of employment for any other reason will cause all unvested awards to be forfeited, except any Ordinary Shares which the participant has voluntarily purchased and/or pledged under the DBSP.

(g) Change of Control or Winding up

In the event of a change of control, scheme of arrangement for the reconstruction or amalgamation of the Company, voluntary winding up or a demerger, Invested Awards will vest in full but Matching Awards will usually vest on a pro-rated basis and taking into account the extent to which any performance conditions have been met. However, this is subject to the discretion of the Remuneration Committee to permit a greater number of Matching Awards to vest in exceptional circumstances.

(h) Variation of Capital

If there is a reconstruction, amalgamation, reorganisation, demerger or other change affecting the Company's issued share capital, the Remuneration Committee may make such adjustment as it considers appropriate to the number of Ordinary Shares subject to an award.

(i) Source of Ordinary Shares

Awards granted under the DBSP may be satisfied by the transfer of existing Ordinary Shares or by the issue of new Ordinary Shares or the transfer of Ordinary Shares from treasury.

(j) Voting, dividend and other rights

Until awards have vested participants have no voting or other rights in respect of the Ordinary Shares subject to their awards.

Ordinary Shares issued or transferred pursuant to the DBSP shall rank pari passu in all respects with the Ordinary Shares already in issue except that they will not rank for any dividend or other distribution paid or made by reference to a record date falling prior to the date of issue or transfer following the vesting of the awards. Benefits obtained under the DBSP shall not be pensionable. Awards are not assignable or transferable.

(k) Administration and Amendment

The DBSP will be administered by the Remuneration Committee which may amend the scheme by resolution provided that (a) prior approval of the Company in general meeting will be required for any amendment to those provisions of the scheme relating to eligibility, the limitations on the number of Ordinary Shares in respect of which awards may be granted, the basis for determining a participant's entitlement under the DBSP and the terms of Ordinary Shares to be provided under the DBSP, the periods during which awards may vest, any rights attaching to Ordinary Shares comprised in awards and the adjustment of awards in the event of a variation of capital, except in the case of minor amendments to benefit the administration of the DBSP and amendments to take account of changes in legislation or to obtain or maintain favourable tax, exchange control or regulatory treatment for participants or for any member of the Group; and (b) no amendment may be made which would adversely vary any awards granted prior to the amendment unless the written consent of participants holding awards of not less than 75 per cent. of the Ordinary Shares subject to awards is obtained or a resolution is passed at a meeting of participants of not less than 75 per cent. of participants who attend and vote either in person or by proxy.

(l) Termination

The DBSP may be terminated at any time by resolution of the Remuneration Committee or the Directors and shall in any event terminate on the tenth anniversary of the date on which the DBSP is approved by the Company in general meeting. Termination will not affect the outstanding rights of participants.

14.2 Restricted Share Plan

(a) Introduction

It is intended that selected employees will be granted awards under the RSP of Ordinary Shares on an ad hoc basis throughout the year, at the discretion of the Remuneration Committee. It is not intended that awards granted under the RSP will be subject to performance conditions. The Remuneration Committee does not intend on granting further awards under the RSP to Executive Directors other than on recruitment.

(b) Eligibility

Employees and Executive Directors will be eligible to participate in the RSP. Participation will be at the discretion of the Remuneration Committee.

(c) Awards

Awards granted under the RSP (''Awards'') may comprise (a) contingent awards (''Conditional Awards'') of Ordinary Shares and (b) interests (''Interests'') in Ordinary Shares.

(i) Conditional Awards

Conditional Awards will vest free of charge subject (in normal circumstances) to the continued employment of the participant and to the extent that performance conditions (where applicable) have been satisfied. On the vesting of a Conditional Award, the participant becomes entitled to receive the Ordinary Shares to which the Conditional Award relates.

As an alternative, the Remuneration Committee may grant a nil-cost option, which would become exercisable following vesting until the expiry of ten years from the date the Award was granted.

(ii) Interests

The RSP may be operated in conjunction with an employee benefit trust to permit the award interests in Ordinary Shares to be held jointly by RSP participants with the trustees of the employee benefit trust.

An Interest permits the participant to benefit from a proportion of the increase (if any) in the value of Ordinary Shares in the Company over the period the Interest is held. The amount of the increase from which the Participant will benefit will be determined by reference to a hurdle (the ''Hurdle'') and, if applicable, performance conditions. The Hurdle will be determined on the date that the Interest is awarded and will be equal to or at a premium to the market value of the Ordinary Shares at that time. An Interest therefore entitles the participant to participate in a proportion, subject to continuing employment within the Group and the achievement of the performance conditions (where applicable), of the growth in value of the Ordinary Shares above the Hurdle.

Participants may be required to pay an amount at the date of grant to acquire their Interests, in which case, the amount payable will be equal to the amount that the Remuneration Committee considers to be the unrestricted market value of each Interest at the date of grant. Alternatively, participants may not be required to make any payment for their Interests. In such circumstances, a participant will be liable to pay income tax on the unrestricted market value of an Interest at the date of grant.

(d) Plan and Individual Limits

No Award may be granted under the RSP on any date if, as a result, either of the following limits would be exceeded:

• (i) the aggregate number of Ordinary Shares issued or remaining issuable pursuant to Awards made after the Ordinary Shares become listed on the London Stock Exchange under the RSP and pursuant to grants or appropriations made after the Ordinary Shares become so listed during the previous ten years under any share incentive plan would exceed ten per cent. of the issued Ordinary Share capital of the Company on that date; or
• (ii) the aggregate number of Ordinary Shares issued or remaining issuable pursuant to Awards made after the Ordinary Shares became listed on the London Stock Exchange under the RSP and pursuant to grants or appropriations made after the Ordinary Shares became so listed during the previous ten years under any discretionary share incentive plan would exceed five per cent. of the issued Ordinary Share capital of the Company on that date.
• (iii) The value of the minimum number of Ordinary Shares that may be granted to any eligible employee in any financial year of the Company shall not exceed 200 per cent. of annual base salary or 300 per cent. in exceptional circumstances.

(e) Vesting/Exercise of Awards

The Remuneration Committee has discretion at the date of grant to determine the vesting provisions for an Award. Awards normally vest on the second, third and fourth anniversaries of the date of grant (in such proportions as the Remuneration Committee may determine at the date of grant), provided that the participant remains in employment (subject to certain good leaver provisions (see below)).

In addition, the vesting of awards may be subject to the satisfaction of such performance conditions as the Remuneration Committee may from time to time consider appropriate.

If events occur which cause the Remuneration Committee to consider that any performance conditions has become unfair or impractical, it may, if it considers it appropriate to do so, amend, relax or waive the performance condition.

(f) Cessation of Employment

If a participant dies, his Award will vest in full and the relevant number of Ordinary Shares will be transferred to his personal representatives as soon as practicable.

If a participant's employment ceases before the end of the vesting period, he will not automatically forfeit his Award provided he leaves by reason of injury, ill-health, disability, redundancy, retirement, as a result of the company by which he is employed being transferred or sold outside the Group, or in other circumstances which, in the view of the Remuneration Committee, justify him being treated as a good leaver. In such cases, the maximum number of Ordinary Shares which a participant may receive will usually be determined on a pro-rated basis by reference to the time elapsed since the date of the Award. However, vesting will not be accelerated as a result of leaving and such vesting will be subject, where applicable, to the satisfaction of the performance conditions at the end of the relevant performance period unless the Remuneration Committee, in its discretion, determines otherwise.

Cessation of employment for any other reason will cause all unvested Awards to be forfeited.

(g) Change of Control or Winding up

The vesting of Awards on a change of control, scheme of arrangement for the reconstruction or amalgamation of the Company, voluntary winding up or a demerger will usually be determined on a pro-rated basis and taking into account the extent to which any performance conditions have been met, subject to the discretion of the Remuneration Committee to permit a greater number of Awards to vest in exceptional circumstances.

(h) Variation of Capital

If there is a reconstruction, amalgamation, reorganisation, demerger or other change affecting the Company's issued share capital, the Remuneration Committee may make such adjustment as it considers appropriate to the number of Ordinary Shares subject to an Award.

(i) Sources of Ordinary Shares

Awards granted under the RSP may be satisfied by the transfer of existing Ordinary Shares or by the issue of new Ordinary Shares or the transfer of Ordinary Shares from treasury. It is anticipated that Awards under the RSP will generally be satisfied by the transfer of existing Ordinary Shares.

(j) Voting, dividend and other rights

Until awards have vested participants have no voting or other rights in respect of the Ordinary Shares subject to their awards.

Shares issued or transferred pursuant to the RSP shall rank pari passu in all respects with the Ordinary Shares already in issue except that they will not rank for any dividend or other distribution paid or made by reference to a record date falling prior to the date of issue or transfer following the vesting of the award. Benefits obtained under the RSP shall not be pensionable. Awards are not assignable or transferable.

(k) Administration and Amendment

The RSP will be administered by the Board's remuneration committee which may amend the scheme by resolution provided that (a) prior approval of the Company in general meeting will be required for any amendment to those provisions of the scheme relating to eligibility, the limitations on the number of Ordinary Shares in respect of which awards may be granted, the basis for determining a participant's entitlement under the RSP and the terms of Ordinary Shares to be provided under the RSP, the periods during which awards may vest, any rights attaching to Ordinary Shares comprised in awards and the adjustment of awards in the event of a variation of capital, except in the case of minor amendments to benefit the administration of the RSP and amendments to take account of changes in legislation or to obtain or maintain favourable tax, exchange control or regulatory treatment for participants or for any member of the Group; and (b) no amendment may be made which would adversely vary any awards granted prior to the amendment unless the written consent of participants holding awards of not less than 75 per cent. of the Ordinary Shares subject to awards is obtained or a resolution is passed at a meeting of participants of not less than 75 per cent. of participants who attend and vote either in person or by proxy.

(l) Termination

The RSP may be terminated at any time by resolution of the Remuneration Committee or the Directors and shall in any event terminate on the tenth anniversary of the date on which the RSP is approved by the Company in general meeting. Termination will not affect the outstanding rights of participants.

14.3 Performance Share Plan

(a) Introduction

Under the PSP, participants may be granted contingent awards over, or other interests in, Ordinary Shares.

(b) Eligibility

Awards will be made to employees and executive directors selected by the Remuneration Committee at its discretion.

(c) Awards

Awards granted under the PSP (''Awards'') may comprise (a) contingent awards (''Conditional Awards'') of Ordinary Shares and (b) interests (''Interests'') in Ordinary Shares.

(i) Conditional Awards

Conditional Awards will vest free of charge subject (in normal circumstances) to the continued employment of the participant and to the extent that performance conditions have been satisfied. On the vesting of a Conditional Award, the participant becomes entitled to receive the Ordinary Shares to which the Conditional Award relates.

As an alternative, the Remuneration Committee may grant a nil-cost option, which would become exercisable following vesting until the expiry of ten years from the date the Award was granted.

(ii) Interests

The PSP may be operated in conjunction with an employee benefit trust to permit the award of interests in Ordinary Shares to be held jointly by PSP participants with the trustees of the employee benefit trust.

An Interest permits the participant to benefit from a proportion of the increase (if any) in the value of Ordinary Shares in the Company over the period the Interest is held. The amount of the increase from which the Participant will benefit will be determined by reference to a hurdle (the ''Hurdle'') and performance conditions. The Hurdle will be determined on the date that the Interest is awarded and will be equal to or at a premium to the market value of the Ordinary Shares at that time. An Interest therefore entitles the participant to participate in a proportion, subject to continuing employment within the Group and the achievement of the performance conditions, of the growth in value of the Ordinary Shares above the Hurdle.

Participants may be required to pay an amount at the date of grant to acquire their Interests, in which case, the amount payable will be equal to the amount that the Remuneration Committee considers to be the unrestricted market value of each Interest at the date of grant. Alternatively, participants may not be required to make any payment for their Interests. In such circumstances, a participant will be liable to pay income tax on the unrestricted market value of an Interest at the date of grant.

(d) Plan and Individual Limits

No Award may be granted under the PSP on any date if, as a result, either of the following limits would be exceeded:

(i) the aggregate number of Ordinary Shares issued or remaining issuable pursuant to Awards made after the Ordinary Shares became listed on the London Stock Exchange under the PSP and

pursuant to grants or appropriations made after the Ordinary Shares became so listed during the previous ten years under any share incentive plan would exceed ten per cent. of the issued Ordinary Share capital of the Company on that date; or

(ii) the aggregate number of Ordinary Shares issued or remaining issuable pursuant to Awards made after the Ordinary Shares became listed on the London Stock Exchange under the PSP and pursuant to grants or appropriations made after the Ordinary Shares become so listed during the previous ten years under any discretionary share incentive plan would exceed five per cent. of the issued Ordinary Share capital of the Company on that date.

(e) Vesting/Exercise of Awards

The Remuneration Committee has discretion at the date of grant to determine the vesting provisions for an Award. It is currently intended that, provided the participant is still employed by the Group, Awards will vest on the third anniversary of the date of grant to the extent that testing performance criteria, determined by the Remuneration Committee at the date of grant, have been satisfied. In determining performance conditions, the Remuneration Committee will take into account the prevailing views of institutional investors and current market practice.

If events occur which cause the Remuneration Committee to consider that any performance conditions has become unfair or impractical, it may, if it considers it appropriate to do so, amend, relax or waive the performance condition.

(f) Cessation of Employment

If a participant dies, his Award will vest in full and the relevant number of Ordinary Shares will be transferred to his personal representatives as soon as practicable. Such vesting will not be subject to the satisfaction of the performance conditions.

If a participant's employment ceases before the end of the vesting period, he will not automatically forfeit his Award provided he leaves by reason of injury, ill-health, disability, redundancy, retirement, as a result of the company by which he is employed being transferred or sold outside the Group, or in other circumstances which, in the view of the Remuneration Committee, justify him being treated as a good leaver. In such cases, the maximum number of Ordinary Shares which a participant may receive will usually be determined on a pro-rated basis by reference to the time elapsed since the date of the Award. However, vesting will not be accelerated as a result of leaving and such vesting will be subject to the satisfaction of the performance conditions at the end of the relevant performance period unless the Remuneration Committee, in its discretion, determines otherwise.

Cessation of employment for any other reason will cause all unvested Awards to be forfeited.

(g) Change of Control or Winding up

The vesting of Awards on a change of control, scheme of arrangement for the reconstruction or amalgamation of the Company, voluntary winding up or a demerger will usually be determined on a pro-rated basis. However, vesting will be subject to the discretion of the Remuneration Committee, having regard inter alia to the progress to date in meeting the performance conditions.

(h) Variation of Capital

If there is a reconstruction, amalgamation, reorganisation, demerger or other change affecting the Company's issued share capital, the Remuneration Committee may make such adjustment as it considers appropriate to the number of Ordinary Shares subject to an Award.

(i) Sources of Ordinary Shares

Awards may be satisfied by the transfer of existing Ordinary Shares or by the issue of new Ordinary Shares or the transfer of Ordinary Shares from treasury.

(j) Voting, dividend and other rights

Until awards have vested participants have no voting or other rights in respect of the Ordinary Shares subject to their awards.

Ordinary Shares issued or transferred pursuant to the PSP shall rank pari passu in all respects with the Ordinary Shares already in issue except that they will not rank for any dividend or other distribution paid or made by reference to a record date falling prior to the date of issue or transfer following the vesting of the award. Benefits obtained under the PSP shall not be pensionable. Awards are not assignable or transferable.

(k) Administration and Amendment

The PSP will be administered by the Board's remuneration committee which may amend the scheme by resolution provided that (a) prior approval of the Company in general meeting will be required for any amendment to those provisions of the scheme relating to eligibility, the limitations on the number of Ordinary Shares in respect of which awards may be granted, the basis for determining a participant's entitlement under the PSP and the terms of Ordinary Shares to be provided under the PSP, the periods during which awards may vest, any rights attaching to Ordinary Shares comprised in awards and the adjustment of awards in the event of a variation of capital, except in the case of minor amendments to benefit the administration of the PSP and amendments to take account of changes in legislation or to obtain or maintain favourable tax, exchange control or regulatory treatment for participants or for any member of the Group; and (b) no amendment may be made which would adversely vary any awards granted prior to the amendment unless the written consent of participants holding awards of not less than 75 per cent. of the Ordinary Shares subject to awards is obtained or a resolution is passed at a meeting of participants of not less than 75 per cent. of participants who attend and vote either in person or by proxy.

(l) Termination

The PSP may be terminated at any time by resolution of the Remuneration Committee or the Directors and shall in any event terminate on the tenth anniversary of the date on which the PSP is approved by the Company in general meeting. Termination will not affect the outstanding rights of participants.

(m) Clawback

In accordance with the Directors' Remuneration policy, Awards held by executive directors of the Company shall be subject to clawback in the event of a material misstatement of the Company's accounts, errors in the calculation of performance, or gross misconduct by an individual for up to three years following the determination of performance.

14.4 Sharesave Plan

(a) Introduction

The Sharesave Plan is an approved savings related share option scheme. The Sharesave Plan is based on eligible employees being granted options and their agreement to opening a sharesave account with a nominated savings carrier and to save over a specified period, either three or five years. The right to exercise the option is at the employee's discretion at the end of the period previously chosen, for a period of six months.

(b) Eligibility

All employees (including directors working at least 25 hours per week excluding meal breaks) of the Company or any participating member of the Group who have completed a period of service determined by the Board (such period not to exceed five years) and who are UK tax resident are eligible to participate in the Sharesave Plan. The Board may in its discretion extend participation to other employees or directors of participating members of the Group who do not meet these requirements.

(c) Savings contract

Participating employees must enter into a Save-As-You-Earn savings contract with an approved savings carrier under which they agree to make monthly contributions from net salary for a period of either three or five years. On maturity of the savings contract, a tax-free bonus is added to the employee's savings. Monthly savings contributions must be between £5 and £500 (or such other limit as may be permitted by relevant legislation from time to time).

(d) Grant of options

Each employee who joins the scheme and enters into a savings contract is granted an option to acquire Ordinary Shares of 5 pence each in the Company. The number of Ordinary Shares under option is equal to that number of Ordinary Shares which may be acquired at the option price with the proceeds of the savings contract (including the bonus) at maturity. The Board may impose a limit on the number of Ordinary Shares over which options may be granted in which case applications from employees may be scaled down.

The option exercise price per share will be the market value of a share when invitations to participate in the scheme are issued less a discount of up to 20 per cent. (or, in the case of an option to subscribe, the nominal value of a share if higher). Market value is determined as the middle market quotation of a share as derived from the Daily Official List of the London Stock Exchange on the last dealing day before invitations to participate in the scheme are sent out or, if the Board so decides, the average of the middle market quotations over the three dealing days preceding that date.

No option may be granted later than ten years after the approval of the Sharesave Plan by HMRC.

(e) Timing of invitations

Invitations to participate in the scheme will only be issued within 42 days after (i) the announcement of the Company's results for any period, (ii) the date on which any change to the legislation affecting Sharesave schemes takes effect or (iii) the date on which a new savings contract prospectus is announced or takes effect. Invitations may also be issued at any other time at which the Board determines that there are exceptional circumstances which justify the grant of options.

(f) Limit on issue of new shares

No option may be granted under the scheme if, as a result, the aggregate number of Ordinary Shares issued or committed to be issued pursuant to grants made under the scheme and during the previous ten years under all other employee share schemes established by the Company would exceed 10 per cent. of the issued Ordinary share capital of the Company on that date. Ordinary Shares which have been the subject of options or rights granted under any share plan which have lapsed shall not be taken into account for the purposes of this limit.

Ordinary Shares transferred or committed to be transferred from treasury shall count towards this limit.

(g) Vesting/Exercise of Options

In normal circumstances, an option may be exercised within six months following the date on which a bonus is payable under the savings contract (the ''Maturity Date'') and any option not exercised within that period will lapse.

An option may be exercised earlier than the Maturity Date, for a limited period, on the death of a participant or on his ceasing to hold office or employment with the Group by reason of injury, disability, redundancy, retirement, the sale or transfer out of the Group of his employing company or business or for any other reason (provided in such case the option was granted more than three years previously) or as permitted by the legislation governing sharesave plans.

Options may be satisfied by the issue of new Ordinary Shares or by the transfer of existing shares, either from treasury or otherwise.

(h) Change of control

Rights to exercise options early for a limited period also arise if another company acquires control of the Company as a result of a takeover or a scheme of arrangement. An option may be exchanged for an option over Ordinary Shares in the acquiring company if the participant so wishes and the acquiring company agrees.

If the Company passes a resolution for a voluntary winding-up, any subsisting option must be exercised within six months of the passing of that resolution or it lapses.

(i) Variation of Capital

In the event of any variation in the share capital of the Company, adjustments to the number of Ordinary Shares subject to options and the option exercise price may be made by the Board in such manner and with effect from such date as the Board may determine to be appropriate.

(j) Voting, dividend and other rights

Until options are exercised, option holders have no voting or other rights in respect of the Ordinary Shares subject to their options.

Ordinary Shares issued or transferred pursuant to the Sharesave Plan shall rank pari passu in all respects with the Ordinary Shares already in issue except that they will not rank for any dividend or other distribution paid or made by reference to a record date falling prior to the date of issue or transfer following the exercise of the option. Benefits obtained under the plans shall not be pensionable. Options are not assignable or transferable.

(k) Administration and amendment

The Sharesave Plan will be administered by the Board's remuneration committee which may amend the scheme by resolution provided that (a) prior approval of the Company in general meeting will be required for any amendment to the advantage of participants to those provisions of the scheme relating to eligibility, the limitations on the number of Ordinary Shares, cash or other benefits subject to the scheme, a participant's maximum entitlement or the basis for determining a participant's entitlement under the scheme and the adjustment thereof in the event of a variation in capital, except in the case of minor amendments to benefit the administration of the scheme and amendments to take account of changes in legislation or to obtain or maintain favourable tax, exchange control or regulatory treatment for participants or for any member of the Group; and (b) no amendment may be made which would alter to the disadvantage of a participant any rights already acquired by him under the scheme without the prior approval of the majority of the affected participants.

(l) Overseas plans

The Board may at any time and without further formality establish further plans in overseas territories, any such plan to be similar to the scheme but modified to take account of local tax, exchange control or securities laws, regulation or practice. Ordinary Shares made available under any such scheme will count against the limit on the number of new Ordinary Shares which may be issued under the scheme.

(m) Termination

The Sharesave Plan may be terminated at any time by resolution of the Board or of the Company in a general meeting and shall in any event terminate on the tenth anniversary of the date on which the scheme is approved by HMRC. Termination will not affect the outstanding rights of participants.

14.5 Employee Benefit Trust

The trustee of the EnQuest EBT is independent of the Company and based offshore.

The beneficiaries of the EnQuest EBT are employees and former employees of the Group and their dependants. The EnQuest EBT is funded by way of loans from the Company to acquire Ordinary Shares to be used for the purposes of the PSP, the RSP, the DBSP and the Sharesave Plans. The Trustees has the power to subscribe for new Ordinary Shares or to acquire Ordinary Shares in the market but is not permitted to hold more than five per cent. of the Company's issued Ordinary Share capital at any one time (other than in a nominee capacity) without the prior approval of the Shareholders.

The EnQuest EBT will terminate on the earlier of 80 years from the date of the trust deed establishing the EnQuest EBT (the ''EBT Deed'') and such earlier date as the Trustees shall specify (provided such date shall not fall within any period during which the Trustee is or may be required to transfer Ordinary Shares pursuant to any obligation entered into by the Trustees pursuant to the EBT Deed).

The EBT Deed may be amended by deed between the Company and the Trustees provided that no such amendment shall (i) prevent section 86 of the Inheritance Tax Act 1984 applying to the trusts created by the EBT Deed, (ii) prejudice the status of the trusts created by the EBT Deed as an employees' shares

scheme, or (iii) confer on the Company any right to benefit or possibility of benefit in or out of the trust fund or income thereof.

15. Major Shareholders

15.1 So far as the Company is aware, as at the Latest Practicable Date, the following persons (other than the Directors and Senior Managers) had notifiable interests in three per cent. of the issued share capital of the Company:

Shareholder	Ordinary Shares held prior to the Placing and Open Offer	Percentage of issued Ordinary Share capital prior to the Placing and Open Offer	Ordinary Shares held after the Placing and Open Offer(2)	Percentage of issued Ordinary Shares capital after the Placing and Open Offer(2)
Double A Limited(1)	71,405,331	8.90%	194,365,112	16.76%
Aberforth Partners LLP	58,695,203	7.31%	84,781,960	7.31%
Baillie Gifford & Co Limited	52,574,549	6.55%	75,941,015	6.55%
Aberdeen Asset Managers
Limited	49,645,322	6.19%	71,709,910	6.19%
Swedbank Robur Fonder AB	49,100,811	6.12%	70,923,394	6.12%
Schroders Plc	38,699,409	4.82%	55,899,146	4.82%
EnQuest Employee Benefit Trust(3)	24,452,136	3.05%	35,222,424	3.04%

Note:

(1) Double A Limited is a company beneficially owned by the extended family of Amjad Bseisu.

• (2) Assuming (i) that no awards vest and no share options are exercised between the Latest Practicable Date and Admission; (ii) that each of the Shareholders listed above (other than EnQuest Employee Benefit Trust) takes up its Open Offer Entitlements in full; (iii) that the Shareholders listed above will not take up any Ordinary Shares pursuant to the Placing, save for the 91,224,079 Ordinary Shares that Double A Limited has agreed to take up pursuant to the Placing; and (iv) that none of the 91,224,079 Ordinary Shares that Double A Limited has agreed to take up pursuant to the Placing are clawed back to satisfy valid applications by Qualifying Shareholders under the Open Offer.
• (3) EnQuest Employee Benefit Trust has agreed to take up in full its entitlement under the Open Offer in respect of the Unallocated Shares.
• 15.2 Save as set out in this paragraph, the Company is not aware of any person who has or will immediately following Admission have a notifiable interest in three per cent. or more of the issued share capital of the Company.
• 15.3 The Company is not aware of any person who either as at the date of this document or immediately following Admission exercises, or could exercise, directly or indirectly, jointly or severally, control over the Company nor is it aware of any arrangements, the operation of which may at a subsequent date result in a change in control of the Company.
• 15.4 None of the major shareholders of the Company set out above has different voting rights from any other holder of Ordinary Shares in respect of any Ordinary Share held by them.

16. Related Party Transactions

Save as disclosed in note 25 to the 2015 Financial Statements, note 26 to the 2014 Financial Statements, note 26 to the 2013 Financial Statements and the 2016 Unaudited Interim Financial Statements, each as incorporated by reference in Part 5 (''Financial Information on the Group''), there are no related party transactions between the Group and its related parties that were entered into during the financial years ended 31 December 2013, 31 December 2014 and 31 December 2015 and the six months ended 30 June 2016 or during the period from and including 30 June 2016 to and including the Latest Practicable Date.

17. Subsidiaries, Investments and Principal Establishments

17.1 The Company is the holding company of the Group and EnQuest Heather Limited is its principal operating company. The significant subsidiaries and subsidiary undertakings of the Company are as follows:

Name	Country of incorporation / Principal place of business	Principal activity	Effective interest and proportion of equity held
EnQuest Britain Limited	England	Intermediate holding company and provision of Group manpower and contracting/procurement services	100%
EnQuest Heather Limited(1)	England	Exploration, extraction and production of hydrocarbons	100%
EnQuest Thistle Limited
(dormant)(1)	England	Extraction and production of hydrocarbons	100%
Stratic UK Holdings Limited(1)	England	Intermediate holding company	100%
Grove Energy Limited	Canada	Intermediate holding company and exploration of hydrocarbons	100%
EnQuest ENS Limited(1)	England	Exploration, extraction and production of hydrocarbons	100%
EnQuest UKCS Limited
(dormant)(1)	England	Exploration, extraction and production of hydrocarbons	100%
EnQuest Norge AS(1)	Norway	Exploration, extraction and production of hydrocarbons	100%
EnQuest Heather Leasing
Limited(1)	England	Leasing	100%
EQ Petroleum (Sabah) Limited(1)	England	Exploration, extraction and production of hydrocarbons	100%
EnQuest Dons Leasing Limited
(dormant)(1)	England	Dormant	100%
EnQuest Energy Limited(1)	England	Exploration, extraction and production of hydrocarbons	100%
EnQuest Production Limited(1)	England	Exploration, extraction and production of hydrocarbons	100%
EnQuest Global Limited	England	Intermediate holding company	100%
EnQuest NWO Limited(1)	England	Exploration, extraction and production of hydrocarbons	100%
EQ Petroleum Production Malaysia
Limited(1)	England	Exploration, extraction and production of hydrocarbons	100%
NSIP (GKA) Limited	Scotland	Construction, ownership and operation of an oil pipeline	100%
EnQuest Global Services Limited(1)	Jersey	Provision of Group manpower and contracting/ procurement services for the International business	100%
EnQuest Marketing and Trading
Limited	England	Marketing and trading of crude oil	100%
NorthWestOctober Limited(1)	England	Dormant	100%
EnQuest UK Limited(1) EQ Petroleum Developments	England	Dormant	100%
Malaysia SDN. BHD(1)	Malaysia	Exploration, extraction and production of hydrocarbons	100%

Note:

(1) Held by subsidiary undertaking.

17.2 In addition to the Group's assets described in Part 2 (''Information on the Group''), the following are the principal establishments of the Group:

Location	Use	Tenure
5th Floor Cunard House 15 Regent Street London United Kingdom SW1Y 4LR	Office	Leasehold
Annan House Palmerston Road Aberdeen United Kingdom AB11 5QP	Office	Leasehold

18. Material Contracts

The following contracts (not being contracts entered into in the ordinary course of business) have been entered into by members of the Group (a) in the two years immediately preceding the date of this document and are, or may be, material to the Group or (b) contain provisions under which EnQuest or any member of the Group has any obligation or entitlement which is material to the Group as at the date of this document.

18.1 Sponsor and Placing Agreement

The Company has entered into a Sponsor and Placing Agreement dated 13 October 2016 with the Joint Bookrunners.

Pursuant to the Sponsor and Placing Agreement, the Joint Bookrunners have procured Placees for the New Ordinary Shares (other than the Committed Shares) at the Offer Price on the basis that the New Ordinary Shares for which Placees are procured shall be the subject of clawback to the extent they are taken up in the Open Offer and failing which each of the Joint Bookrunners shall severally subscribe for any New Ordinary Shares (other than the New Ordinary Shares which the Trustees have undertaken to subscribe for pursuant to the EnQuest EBT Irrevocable Undertaking and which Double A Limited has undertaken to subscribe for pursuant to the Double A Irrevocable Undertaking and the Double A Placing Letter, which are not being underwritten) which are not placed with Placees at the Offer Price or taken up by Qualifying Shareholders under the Open Offer.

In consideration of the Joint Bookrunners' agreement to acquire any New Ordinary Shares not taken up (save for any New Ordinary Shares to be subscribed for by Double A Limited or the Trustees) the Company has agreed to pay a commission of 3.5 per cent. of the amount equal to the product of the Offer Price and the aggregate number of New Ordinary Shares (other than the New Ordinary Shares subscribed and paid for by Double A Limited, or entities or persons procured by Double A Limited to subscribe for all or some of such New Ordinary Shares, and the Trustees), provided that the aggregate amount of such commission shall not be less than \$2 million (after the payment of any commission to Placees by the Joint Bookrunners). All expenses incurred by the Joint Bookrunners will be paid by the Company, irrespective of whether Admission occurs. In addition, in connection with the Placing, the Joint Bookrunners shall pay each Placee (other than Double A Limited) a commission of 1 per cent. of the Offer Price multiplied by the number of New Ordinary Shares in their participation which are subsequently subject to clawback in respect of valid applications for Open Offer Shares by Qualifying Shareholders pursuant to the Open Offer out of the commission received by the Joint Bookrunners from the Company.

The Joint Bookrunners' obligation to subscribe for New Ordinary Shares is conditional on certain conditions including, among others:

• (a) save for any condition in relation to Admission, the Proposed RCF Amendments and the Amendment and Restatement Agreement becoming unconditionally effective prior to LSE Admission;
• (b) save for any condition in relation to Admission, the Surety Bond Facilities becoming unconditionally effective prior to LSE Admission;

• (c) save for any condition in relation Admission, the Scheme and the Proposed Note Amendments becoming unconditionally effective prior to LSE Admission;

• (d) the Double A Placing Letter and associated Letter of Credit being entered into by the parties thereto having, and continuing to have, full force and effect and not having been terminated, varied, modified, supplemented or lapsing before LSE Admission, and no right to terminate or rescind the Double A Placing Letter and associated Letter of Credit having arisen before LSE Admission;

• (e) the passing without amendment of the Resolutions at the General Meeting (and not, except with the prior written agreement of the Bookrunners, acting jointly, at any adjournment of such meeting) on 14 November 2016 (or such later date as the Bookrunners may agree) and the Resolutions remaining in force;
• (f) the Company having complied with its obligations under this Sponsor and Placing Agreement or under the terms and conditions of the Placing and Open Offer which fall to be performed on or prior to LSE Admission; and
• (g) LSE Admission becoming effective by not later than 8.00 a.m. on 21 November 2016 (or such later time and/or date as the Company may agree with the Joint Bookrunners, not being later than 8.00 a.m. on 24 November 2016) and application for Stockholm Admission having been made and no notification having been received that Stockholm Admission has been refused or will not become effective on or before 24 November 2016.

If, by the time specified in the Sponsor and Placing Agreement (or such later time and/ or date as the Joint Bookrunners may agree) any of the conditions have not been fulfilled or waived in writing by the Joint Bookrunners, the Sponsor and Placing Agreement and all obligations of each of the parties thereunder shall immediately cease to have any effect save that certain provisions survive. The Joint Bookrunners may in their discretion waive compliance with the whole or any part of certain of the conditions by notice in writing to the Company or extend the time provided for fulfilment of any such conditions but only prior to LSE Admission.

In addition the Joint Bookrunners may terminate the Sponsor and Placing Agreement in certain circumstances (such as a material adverse change or force majeure event) but only prior to LSE Admission. The Joint Bookrunners are not entitled to terminate the Sponsor and Placing Agreement after LSE Admission.

The parties have agreed that in the event a Supplementary Prospectus is published two or fewer Business Days prior to the Closing Date (or such later date as may be agreed by the Joint Bookrunners), the Closing Date shall be extended to the date which is three Business Days after the date of publication of the Supplementary Prospectus.

The Company has given certain customary warranties and undertakings to the Joint Bookrunners including, among other things, warranties in relation to the business, the historical financial information and the information contained in this document.

The Joint Bookrunners have agreed that they will not procure subscribers for any of the New Ordinary Shares other than in accordance with certain selling restrictions.

Pursuant to the terms of the Sponsor and Placing Agreement, the Company has undertaken that it will not without the prior written consent of the Joint Bookrunners, during the period ending six months from the date of LSE Admission: (i) directly or indirectly, issue, allot, offer, pledge, sell, contract to sell, lend, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, deposit into any depositary receipt facility or otherwise transfer or dispose of any Ordinary Shares or any interest in Ordinary Shares or any securities convertible into or exercisable or exchangeable for, or substantially similar to, Ordinary Shares or file any registration statement under the US Securities Act with respect to any of the foregoing (or publicly announce the same or any intention to do the same); or (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly, or indirectly, the economic consequences of ownership of the Ordinary Shares (or publicly announce the same or any intention to do the same), whether any such swap or transaction described in (i) or (ii) above is to be settled by delivery of the Ordinary Shares or such other securities, in cash or otherwise.

The foregoing undertaking does not apply to: (a) the issue and offer by or on behalf of the Company of the New Ordinary Shares; (b) any Ordinary Shares issued or to be issued by the Company upon the exercise of an option or warrant or the conversion of a security outstanding on the date hereof and disclosed in this document; and (iii) any Ordinary Shares issued or to be issued or options to subscribe for or acquire Ordinary Shares granted pursuant to existing or proposed employee benefit plans of the Company disclosed in this document.

18.2 Lock Up Agreements

All of the Existing RCF Lenders and all of the Hedging Banks have entered into, or acceded to, the Lock-Up Agreement pursuant to which they have agreed with the Company, among other things, to attend (or procure the attendance of) the Scheme Meeting in person or by proxy and to cast (or to procure the casting of) all of the votes in respect of the outstanding principal amount of the Existing RCF subject to such Lock-Up Agreement in favour of the Proposed RCF Amendments, as further described at paragraph 4 of Part 1 (''Letter from the chairman of EnQuest PLC'').

In addition, Existing High Yield Noteholders, representing approximately 61 per cent. in value of the Existing High Yield Notes, have agreed with the Company, among other things, to attend (or procure the attendance of) the Scheme Meeting in person or by proxy and to cast (or to procure the casting of) all of the votes in respect of the Existing High Yield Notes subject to such Lock-Up Agreement in favour of the Proposed Note Amendments, as further described at paragraph 5 of Part 1 (''Letter from the chairman of EnQuest PLC'').

18.3 Irrevocable Undertakings

(a) Double A Irrevocable Undertaking

Please see paragraph 8 of Part 1 (''Letter from the Chairman of EnQuest PLC'') for further details.

(b) EnQuest EBT Irrevocable Undertaking

Pursuant to the terms of the EnQuest EBT Irrevocable Undertaking, the Trustees have irrevocably undertaken to take up in full its entitlement under the Open Offer in respect of the Unallocated Shares held in the EnQuest EBT, subject to and to the extent that the Company and/or another member of the Group provides the Trustees with sufficient funds to do so. The Trustees have also agreed to vote and/or procure the vote of all of its holdings of Unallocated Shares in favour of the Resolutions in accordance with the terms of the EBT Deed.

The Trustees have also agreed not to sell, transfer, or otherwise dispose of (including undertaking any transaction with the same economic effect as disposing of), nor enter into any agreement (whether conditional or not) for the sale, transfer or other disposal of any of the Unallocated Shares (to the extent they remain unallocated) or any interest therein prior to, and will procure that the Unallocated Shares remain registered in the name of the Trustees until 3.00 p.m. on the latest date for acceptance and payment in full under the Open Offer.

The EnQuest EBT Irrevocable Undertaking contains certain customary acknowledgements and undertakings from the Trustees.

No commission is payable by the Company in respect of the EnQuest EBT Irrevocable Undertaking. The EnQuest EBT Irrevocable Undertaking is governed by English law.

18.4 Double A Placing Letter

Please see paragraph 8 of Part 1 (''Letter from the Chairman of EnQuest PLC'') for further details.

18.5 Agreements relating to EnQuest's assets

(a) Thistle and Deveron agreements

In September 2002, the Company, through Lundin Thistle Limited (''Lundin Thistle'') (currently known as EnQuest Thistle Limited), an entity that would later become the Company's subsidiary, signed agreements with Britoil Public Limited Company (''Britoil''), Conoco (U.K.) Limited (''Conoco'') and BP Exploration Operating Company Limited (''BP Exploration'') under which EnQuest Thistle acquired interests held by those parties in the Thistle and Deveron fields and related assets. As part of that transaction, the parties agreed that these interests would be transferred back to Britoil, Conoco and BP Exploration at a future date. The parties also entered into agreements relating to the (i) intervening period in which EnQuest Thistle has control of the interests, and (ii) future decommissioning liabilities relating to the Thistle and Deveron fields. There are four principal agreements relating to this transaction: (i) the Initial Sale and Purchase Agreement dated 27 September 2002 (''ISPA''); (ii) the Intervening Period Agreement dated 27 September 2002 (''IPA''); (iii) the Retransfer Sale and Purchase Agreement dated 1 January 2003 (''RSPA''); and (iv) the Decommissioning Liability Agreement dated 1 January 2003 (''DLA'' and, together,

the ''Thistle and Deveron Field Arrangement Agreements''). EnQuest Thistle subsequently sold its business and assets to EnQuest Heather on 1 January 2013 and EnQuest Heather acquired EnQuest Thistle's rights and obligations under the Thistle and Deveron Field Arrangement Agreements.

(i) Initial sale and purchase agreement

Under the ISPA, EnQuest Thistle (previously Lundin Thistle) acquired from Britoil and Conoco their interests in the Thistle and Deveron fields and from BP Exploration part of its interest in SVT (together, the ''Thistle Interests''). Under the ISPA, EnQuest Thistle indemnified Britoil, Conoco and BP Exploration against all costs, charges, expenses, liabilities and obligations in respect of the transferred interests, including any environmental liabilities but excluding decommissioning liabilities (other than decommissioning liabilities in respect of property EnQuest Thistle purchased for field operations following completion of the ISPA), arising on or after 1 May 2002. EnQuest Thistle also indemnified Britoil, BP Exploration and Conoco against any liabilities they incur as a result of EnQuest Thistle's failing to transfer the Thistle Interests to them (other than in circumstances beyond its control). EnQuest Thistle's liability under this indemnity is limited to £20 million, although the other parties retain the right to make a separate claim under contract or otherwise against EnQuest Thistle for sums in excess of this.

Lundin Petroleum AB provided a parent company guarantee on 13 February 2004 in favour of Britoil, Conoco and BP Exploration to secure Lundin Thistle's obligations under the Thistle and Deveron Field Agreements, which was released and discharged on 4 March 2010 following the Company's purchase of Lundin Thistle. The Company provided a replacement parent company guarantee dated 6 April 2010 to secure EnQuest Thistle's obligations under the Thistle and Deveron Field Arrangement Agreements. Following the transfer of EnQuest Thistle's business to EnQuest Heather, the Company entered a further replacement guarantee on 1 January 2013 to secure EnQuest Heather's obligations under the Thistle and Deveron Arrangement Agreements. The guarantee is limited to £20 million. On the Company's purchase of Lundin Thistle, the Company agreed to indemnify Lundin Petroleum AB in respect of any cost that Lundin Petroleum AB incurs arising out of, or in connection with, the original parent company guarantee dated 13 February 2004.

(ii) Intervening period agreement

The IPA sets out EnQuest Thistle's rights and obligations in relation to the Thistle Interests during the period between 1 January 2003 (the date of completion of the transfer under the ISPA) and the re-transfer of the Thistle Interests to Britoil, Conoco and BP Exploration at a future date upon a termination notice being duly served under the IPA and in accordance with the terms of the RSPA. EnQuest Thistle may serve a termination notice at any time on Britoil and Conoco with 12 months' notice (or 30 days' notice if (a) there has been damage to the facilities which requires the parties to spend at least £5 million to restore and will have a major adverse long term effect upon production, or (b) if the operations have become sub-economic at any time during the intervening period). Britoil and Conoco may serve a joint termination notice at any time on EnQuest Thistle with 12 months' notice (or on four months' notice in certain circumstances, including where EnQuest Thistle is in material breach of its obligations under the IPA or the DLA, or is in default, and has not remedied such breach or default within a specified time period, or immediately where there has been an insolvency event at the EnQuest Thistle or parent company level).

Where Britoil and Conoco serve a notice at any time, this is subject to EnQuest Thistle's right to counter that the operations are not likely to be sub-economic at the end of the 12 months. If EnQuest Thistle serves this counter-notice and the matter is disputed, it will be referred to an expert. The operations are deemed to have become sub-economic if EnQuest Thistle's interests in the Thistle and Deveron fields are agreed or determined to be likely to be loss making for at least three consecutive months, and the aggregate losses for those three months exceed £1.5 million. If it is determined that the operations are likely to be sub-economic upon expiry of the 12 month period, the termination notice is effective and EnQuest Thistle is not entitled to any early termination compensation with respect to the transfer. If it is determined (by expert or agreement) that the operations are likely to be sub-economic upon expiry of the 12 month period (save where the IPA is terminated as a result of EnQuest Thistle's default), the termination notice is still effective but EnQuest Thistle is entitled to early termination compensation from Britoil and Conoco, which is based on estimated future cash flows.

Ownership of field equipment transferred to use under the ISPA (including replaced equipment) reverts to Britoil, Conoco and BP Exploration upon re-transfer of the Thistle Interests for no additional consideration, while EnQuest Thistle retains any equipment which it has purchased for field operations since completion of the ISPA. EnQuest Thistle and Britoil each have a 50 per cent. voting interest in the Thistle Interests in respect of certain reserved matters, notwithstanding that the Group's working interest is 99 per cent. These reserved matters include the decommissioning of unit property, the approval of the annual programme and budget relating to major structural repairs and items noted as reserved matters in the DLA.

(iii) Retransfer Sale and Purchase Agreement (''RSPA'')

The RSPA provides the arrangements for the re-transfer by EnQuest Thistle back to Britoil, Conoco and BP Exploration of the Thistle Interests transferred under the ISPA. Under the RSPA, EnQuest Thistle has indemnified Britoil, Conoco and BP Exploration against all costs, charges, expenses, liabilities and obligations in respect of the Thistle Interests arising before the date specified in the termination notice delivered under the IPA, and Britoil, Conoco and BP Exploration have indemnified EnQuest Thistle against all costs, charges, expenses, liabilities and obligations in respect of the Thistle Interests, including any environmental liabilities but excluding decommissioning liabilities (other than decommissioning liabilities in respect of property EnQuest Thistle purchased for field operations during the intervening period), arising on or after the date specified in the termination notice.

(iv) Decommissioning liability agreement

The DLA apportions liability between Britoil, Conoco and EnQuest Thistle for the decommissioning of the Thistle and Deveron fields' facilities and provides for security to be given by the parties in respect of such liabilities. EnQuest Thistle is party to a trust deed dated 5 August 2004, under which it will pay sums in trust to meet its decommissioning obligations under the DLA.

If re-transfer of the Thistle Interests does not take place (other than in circumstances beyond EnQuest Thistle's control) then Britoil and Conoco will not have any liability under this agreement for decommissioning costs. If re-transfer of the Thistle Interests does take place, Britoil and Conoco are liable for field decommissioning costs (other than in respect of property EnQuest Thistle purchased for field operations since completion of the ISPA) together with site reinstatement. EnQuest Thistle is liable for 99 per cent. and Britoil is liable for 1 per cent. of any costs incurred to the extent they arise solely as a result of the decommissioning of property EnQuest Thistle purchased for field operations since completion of the ISPA. Britoil and Conoco may request that EnQuest Thistle undertakes field decommissioning during the intervening period, with Britoil and Conoco liable for the costs of such work.

(b) Dons agreements

(i) Transportation agreements

On 26 February 2010, the owners of Don Southwest and West Don (who are currently EnQuest Heather and Ithaca Energy (UK) Limited) (the ''Don Fields Group'') entered into an agreement with Lundin Thistle and Britoil (the ''Thistle Group'') for the provision of transportation services for the production from the Don Southwest and West Don fields through the Thistle facilities (the ''Thistle TA'').

The Thistle TA will terminate on 31 December 2018 unless terminated earlier in accordance with its terms. The Don Fields Group will be liable to make a termination payment to the Thistle Group in the event that the Thistle TA is terminated by the Thistle Group (except following a cessation of production in respect of the Thistle field) or by the Don Fields Group following a cessation of production in respect of Dons, provided that such termination occurs prior to either (a) the contracted volume of Don Fields Group liquids being delivered or (b) service by the Thistle Group of a notice from the Secretary of State approving cessation of production. The amount of the termination payment will reflect the quantity of undelivered Don Fields Group liquids.

The Don Fields Group is under a send-or-pay obligation amounting to 65 per cent. of its initial maximum daily quantity under the Thistle TA. The Don Fields Group is obliged to make shortfall payments to the extent that the actual volume of Don Fields Group liquids delivered is less than the send-or-pay volume.

The Don Fields Group has provided a guarantee to the Thistle Group in respect of the Don Field Group's decommissioning obligations under the Thistle TA (the ''Don Fields Group Guarantee''). The Don Fields Group is responsible under the Thistle TA for the decommissioning, abandonment, removal and disposal of the Don facilities and equipment upstream of the Thistle facilities, including the removal of all parts within a 500 metre distance of the Thistle platform.

Under a side letter to the Thistle TA entered into between Lundin Thistle and PEDL, dated 26 February 2010, Lundin Thistle agreed to reimburse the Don Fields Group in respect of certain events of early termination under the Thistle TA. Lundin Thistle is obliged to procure a parent company guarantee from Lundin Britain Limited in favour of the Don Fields Group in respect of the reimbursements which would become due under the side letter from Lundin Thistle to the Don Fields Group following early termination of the Thistle TA.

Separate transportation agreements have been entered into for the transportation of production from the Conrie and Ythan fields (which are tied-back through Don Southwest) dated 19 August 2011 and 7 April 2015 respectively. These are broadly similar to the Thistle TA save that the Ythan transportation agreement end date is 31 December 2023 and it has no termination payment.

The Don Fields Group has also entered into a transportation agreement and executed an SVT tariff agreement, each dated 26 February 2010, for the transportation of its hydrocarbons from Dons through the Brent system to SVT for processing and redelivery (''Brent TA''). The Brent TA expires at 24:00 hours on 31 August 2025 unless terminated earlier in accordance with its terms. The Don Fields Group is under a send-or-pay obligation amounting to 80 per cent. of the predicted annual quantity of Don fields liquids to be delivered to the Brent system pipeline. The Don Fields Group is obliged to make a deficiency payment to the extent that the actual volume of liquids delivered is less than the send-or-pay volume. The Conrie and Ythan fields have each entered transportation agreements dated 19 August 2011 and 7 April 2015 respectively, and SVT tariff agreements dated 19 August 2011 and 18 February 2015 respectively, each on broadly similar terms.

(ii) Shared facilities operating agreement

Upon the Company's acquisitions of its working interests in Don Southwest and West Don, EnQuest Heather became party to the shared facilities operating agreement previously entered into by the interest holders of those fields on 26 February 2010. The agreement provides for the operating and development of the facilities shared by both fields (including the Northern Producer floating production unit and other related infrastructure) under the supervision of a management committee, including how liabilities under the transportation agreements are shared between the West Don and Don Southwest fields (such as the Thistle TA and Brent TA), how capacity in the shared facilities is to be allocated and how costs in relation to the shared facilities are to be shared. EnQuest Heather is operator of both Don Southwest and West Don, in addition to having the role of operator under the shared facilities agreement for both fields. However, in its capacity as operator of the shared facilities, EnQuest Heather does not have unilateral control over operations at either Don Southwest or West Don. The operator must submit all development and production plans and budgets to the management committee for approval. The management committee must approve all decisions relating to joint operations by unanimous vote. For approval of budgets where unanimous consent is not achieved, the affirmative vote of three or more field group members whose voting interests total at least 75 per cent. of the interests at both fields is required. EnQuest Heather therefore does not have unilateral control over the operations under the shared facilities agreement.

(iii) West Don unitisation and unit operating agreement

PEDL entered into an unitisation agreement for West Don on 1 August 2008 covering operations in relation to a unit area located within the West Don area and additional acreage at Block 211/13b, which is now also owned by EnQuest Heather. The agreement assigned the role of unit operator of West Don to PEDL. Following the Company's acquisition of PEDL, EnQuest Heather is the unit operator under the agreement. A unit operating committee is responsible for, among other things, approving all authorisations for expenditure for production, development, exploratory and decommissioning operations to be undertaken by the unit operator in relation to the unit operations. The unit operating committee makes decisions through an affirmative vote by representatives appointed by two or more interest holders having in aggregate a percentage interest of at least 70 per cent. The West Don joint operating agreement (as described below) still continues to govern matters relating to West Don which fall outside of the unit area and if the terms of the unitisation agreement are inconsistent with the West Don joint operating agreement as it relates to the unit area, the terms of the unitisation agreement prevail.

(iv) West Don joint operating agreement

PEDL entered into a joint operating agreement for West Don on 23 February 2006. Following the Company's acquisition of PEDL, EnQuest Heather is the operator under the agreement. The agreement establishes a joint operating committee which is responsible for, among other things, approving production, development, exploratory and decommissioning plans submitted to the joint operating committee by the operator. The joint operating committee approves such plans with the affirmative vote of two or more interest holders whose aggregate interests total at least 81 per cent. EnQuest Heather has a 61.6 per cent. interest in West Don under the joint operating agreement outside the unitised area and therefore cannot exercise unilateral control over operations in respect of this area. Decisions relating to the sale, purchase or use of joint property to, from or by third parties, or the use of third party facilities for the joint operations, requires the unanimous vote of the participants.

(v) Don Southwest joint operating agreement

PEDL entered into a joint operating agreement for Don Southwest on 15 December 2006. Following the Company's acquisition of PEDL, EnQuest Heather is the operator under the agreement. The agreement establishes a joint operating committee which is responsible for, among other things, approving production, development, exploratory and decommissioning plans submitted to the joint operating committee by the operator. The joint operating committee approves such plans with the affirmative vote of two or more interest holders that have an aggregate percentage interest in Don Southwest of at least 75 per cent. EnQuest Heather has a 60 per cent. interest in Don Southwest and therefore cannot exercise unilateral control over operations at the field. Decisions relating to the sale, purchase or use of joint property to, from or by third parties, or the use of third party facilities for the joint operations, requires the unanimous vote of the participants.

(vi) Ythan joint operating agreement

EnQuest Heather entered into a joint operating agreement dated 24 September 2014 in respect of Blocks 211/18e and 211/19c. EnQuest Heather is the operator under the agreement. The agreement establishes a joint operating committee which is responsible for, among other things, determining all matters in general relating to policies, procedures and methods of operation, the approval of programmes and budgets and decisions relating to decommissioning. The joint operating committee makes decisions with the affirmative vote of two or more interest holders that have an aggregate percentage interest in Ythan of at least 75 per cent. EnQuest Heather has a 60 per cent. interest in Ythan and therefore cannot exercise unilateral control over operations at the field. Some decisions require the unanimous vote of the participants, including decisions to authorise the operator to prosecute or defend litigation outside of the UK, to abandon joint operations, amend the terms of the joint operating agreement or determine the licence.

(c) Heather/Broom agreements

(i) Broom JOA

EnQuest Heather is party to a joint operating agreement for the Broom field in respect of Block 2/4a and Block 2/5 (excluding the Heather field area) dated 16 July 2003. The agreement establishes a joint operating committee to consider and determine matters in general relating to the policies, procedures and methods of operation, including the approval of programmes and budgets proposed by the operator and decisions relating to decommissioning. The joint operating committee makes a majority of decisions with the affirmative vote of two or more interest holders whose aggregate interests total at least 50 per cent., except in the case of decisions relating to the termination of the licence or surrender of any part of the contract area, which require unanimous consent of the participants.

EnQuest Heather is the operator under the agreement and is therefore responsible for, subject to the overall supervision of the joint operating committee, carrying out the operations and activities relating to the joint venture, including the preparation of programmes, budgets and authorisations for expenditures, the provision of technical and advisory services and the planning for and obtaining of all requisite services and materials.

(ii) Heather Field Decommissioning Security Agreement

On 22 December 2014, the Company and EnQuest Heather entered into a revised Heather field decommissioning security agreement (''Heather DSA'') to regulate the arrangements for the decommissioning of the existing Heather field facilities. The Heather DSA superseded the original Heather field decommissioning security agreement dated 15 September 1999.

Pursuant to the Heather DSA, the parties are required to post security on an annual basis to cover its decommissioning liability in relation to the existing Heather field facilities (37.5 per cent. in relation to EnQuest Heather). As operator, the Company must submit a proposed decommissioning plan to the parties each year, including a reservoir review, an estimated date of commencement and completion of decommissioning and a cost estimate for the following calendar year. This proposed plan requires the unanimous approval of the parties.

(d) Amended Sullom Voe Terminal Operating Agreement

EnQuest Heather entered into the amended Sullom Voe Terminal operating agreement dated 21 October 2015 (the ''Amended SVTOA''), which amended and restated the original Sullom Voe Terminal operating Agreement dated 21 April 1999, with BP Exploration and TAQA Bratani Limited. The Amended SVTOA governs the rights and obligations in relation to the ownership and management of SVT, including the procedure for managing capacity in SVT, the procedures for allocating oil and gas produced at SVT, decommissioning responsibilities and the negotiation of tariff agreements.

The SVTOA establishes a terminal management committee to, among other things, consider and approve programmes, budgets and authorisations for expenditure. A majority of the decisions of the terminal management committee are made by an affirmative vote of at least 25 per cent. of the total SVT owners whose aggregate equity in SVT amounts to at least 70 per cent. However there are some decisions which require a higher threshold. Decisions to approve authorisation for expenditure in excess of £2 million requires an affirmative vote of 85 per cent. of all SVT owners. Decisions relating to decommissioning and the removal of the SVT operator without cause require an affirmative vote of at least 95 per cent. of all SVT owners. In addition, decisions including those relating to the disclosure of information outside of the confidentiality provisions, entering into agreements relating to tariffed production (which requires approval from all participating owners), the amendment of terminal regulations and the amendment of associated agreements requires unanimous approval. EnQuest Heather has a 2.974937 per cent. interest in SVT and thus cannot exercise unilateral or negative control over operations at SVT, unless the decision requires unanimity.

The SVT operator is BP Exploration. Subject to the overall supervision of the terminal management committee, the operator has the exclusive right to carry out all operations and activities relating to the operation, maintenance and decommissioning of SVT and receives a small management fee for providing its services, in addition to amounts received from SVT owners to meet operating costs. The SVT operator is also responsible for the negotiation of all tariff agreements, on behalf of the SVT owners, with non-SVT owner third parties wishing to deliver production to SVT.

The Amended SVTOA will terminate on the earliest of (i) 24:00 hours on 31 August 2025; (ii) the date on which operations of SVT permanently cease; and (iii) the date with effect from which the owners unanimously agree to terminate the agreement.

(e) Ninian Pipeline Operating Agreement

EnQuest Heather is a party to the Ninian Pipeline operating agreement dated 21 April 1999 (the ''NPOA'') together with BP Exploration, the Ninian field group participants and the other Ninian Pipeline owners. The NPOA governs the rights and obligations in relation to the ownership, management and operation of the Ninian Pipeline, including the procedure for managing capacity in the Ninian Pipeline, the procedures for sharing costs and expenditures incurred in connection with the operation of the Ninian Pipeline, decommissioning responsibilities and the negotiation of tariff agreements.

The NPOA establishes a pipeline management committee to, among other things, consider and approve programmes, budgets and authorisations for expenditure. A majority of the decisions of the pipeline management committee are made by an affirmative vote of at least 25 per cent. of the total Ninian Pipeline owners whose aggregate equity in the Ninian Pipeline amounts to at least 70 per cent. However there are some decisions which require a higher threshold. Decisions to approve authorisation for expenditure in excess of £2 million requires an affirmative vote of 85 per cent. of all Ninian Pipeline owners. Decisions relating to decommissioning and the removal of the Ninian Pipeline operator without cause require an affirmative vote of at least 95 per cent. of all Ninian Pipeline owners. In addition, decisions relating to the disclosure of information outside of the confidentiality provisions, entering into agreements relating to tariffed production (which requires approval from all participating owners) and the amendment of certain oil and gas quantity determination and value adjustments requires unanimous approval. EnQuest Heather has a 2.71212980 per cent. interest in the Ninian Pipeline and thus cannot exercise unilateral or negative control over operations in the Ninian Pipeline, unless the decision requires unanimity.

The Ninian Pipeline operator is BP Exploration. Subject to the overall supervision of the pipeline management committee, the operator has the exclusive right to carry out all operations and activities relating to the operation, maintenance and decommissioning of the Ninian Pipeline. The Ninian Pipeline operator is also responsible for the negotiation of all tariff agreements, on behalf of the Ninian Pipeline owners, with non-Ninian Pipeline owner third parties wishing to deliver production to the Ninian Pipeline.

The NPOA will terminate on the earliest of (i) 24:00 hours on 31 August 2025; (ii) the date on which operations of the Ninian Pipeline permanently cease; and (iii) the date with effect from which the owners unanimously agree to terminate the agreement.

(f) Brent System Operating Agreement

EnQuest Heather is a party to the Brent system operating agreement dated 21 April 1999 (the ''BSOA'') together with the other Brent system owners and the Cormorant-A platform owners. The BSOA governs the rights and obligations in relation to the ownership, management and operation of the Brent system, including the procedure for managing capacity in the Brent system, the procedures for sharing costs and expenditures incurred in connection with the operation of the Brent system, decommissioning responsibilities and the negotiation of tariff agreements with non-Brent system owner third parties wishing to deliver production to the Brent system.

The BSOA establishes a system management committee to, among other things, consider and approve programmes, budgets and authorisations for expenditure. A majority of the decisions of the system management committee are made by an affirmative vote of at least 25 per cent. of the total Brent system owners whose aggregate equity in the Brent system amounts to at least 70 per cent. However there are some decisions which require a higher threshold. Decisions to approve authorisation for expenditure in excess of £2 million requires an affirmative vote of 85 per cent. of all Brent system owners. Decisions relating to decommissioning and the removal of the Brent system operator without cause require an affirmative vote of at least 95 per cent. of all Brent system owners. In addition, decisions relating to the disclosure of information outside of the confidentiality provisions and entering into agreements relating to tariffed production (which requires approval from all participating owners) requires unanimous approval. EnQuest Heather has a 4.46 per cent. interest in the Brent system and thus cannot exercise unilateral or negative control over operations in the Brent system, unless the decision requires unanimity.

The Brent system operator is TAQA Bratani Limited. Subject to the overall supervision of the system management committee, the operator is authorised to represent and act as agent for and on behalf of the Brent system owners in all matters relating to the Brent system.

The BSOA will terminate on the earliest of (i) 24:00 hours on 31 August 2025; (ii) the date on which operations of the Brent system permanently cease; and (iii) the date with effect from which the owners unanimously agree to terminate the agreement.

(g) GKA agreements

(i) GKA acquisition agreement

On 21 October 2013, EnQuest Heather entered into an agreement (which completed on 1 March 2014) with Centrica North Sea Oil Limited (''Centrica'') to acquire its 50 per cent. working interest in each of the Kittiwake, Mallard, Goosander, Gadwall and Grouse fields in GKA (the ''GKA SPA''). The agreement also included the acquisition of Centrica's 50 per cent. interest in the Duck and Eagle prospect. EnQuest Heather agreed to pay a base consideration of \$39.8 million to Centrica pursuant to the agreement. In addition, EnQuest Heather agreed to pay a contingent consideration with respect to the Duck and Eagle prospect to be calculated based on the future estimate of 2P reserves of the prospect after submission of a field development plan. The agreement caps the amount of contingent consideration to be paid at \$100 million or, should the Secretary of State find that Duck and Eagle are separate accumulations or fields, \$100 million for each. EnQuest Heather also agreed to pay deferred consideration contingent upon government approval of a field development plan in respect of the Scolty and/or Crathes offshore fields which incorporates a tie back of the Scolty and/or Crathes offshore fields to the Kittiwake platform.

The structure of the deferred consideration payments under the GKA SPA was amended on 15 June 2015 such that the initial \$30 million payable upon Secretary of State approval of the Scolty/Crathes field development plan be reduced and reallocated such that (a) \$3 million is payable within 10 business days of Secretary of State approval; (b) \$9 million is payable on 30 January 2016 or, if later, within 30 days of first oil from Scolty/Crathes fields; (c) \$8 million is payable on 30 January 2018 or, if later, within 30 days of the first anniversary of first oil. There are also a number of contingent payments based on the oil price including a \$0.5 million payment for each dollar above the oil price threshold of \$75 per barrel in the first year of production and after at the Scolty/Crathes fields (capped at \$12.5 million in the first year of production and \$7.5 million in the second year of production).

(ii) GKA joint operating agreement

The interest holders in GKA, including EnQuest Heather, are subject to a joint operating agreement dated 12 January 2004. The GKA joint operating agreement establishes a joint operating committee to, among other things, prepare and approve programmes, budgets and authorisations for expenditures proposed by the operator. The joint operating committee makes decisions with the affirmative vote of two or more interest holders whose aggregate interests total more than 75 per cent., except in a limited number of circumstances, including a decision to surrender the licence, where unanimity is required. EnQuest Heather has a 50 per cent. interest in GKA and therefore cannot exercise unilateral control over operations at GKA.

EnQuest Heather is the operator under this agreement and is therefore responsible for, subject to the overall supervision of the joint operating committee, carrying out the operations and activities relating to the joint venture, including the preparation of programmes, budgets and authorisations for expenditures and the provision of technical and advisory services.

(h) Alma/Galia agreements

(i) Farm-out of 35 per cent. interest in Alma/Galia to KUFPEC

On 29 May 2012, EnQuest Heather agreed to transfer to KUFPEC a 35 per cent. working interest in the Alma/Galia development and associated licences and data. In exchange for this interest, KUFPEC agreed (in addition to paying its equity share of costs from the effective date, 1 January 2012) to carry EnQuest Heather in respect of its remaining share of development costs up to a maximum amount of \$182 million (the ''KUFPEC Cap''). As security for the payment by KUFPEC of such development costs, KUFPEC procured a letter of guarantee in EnQuest Heather's favour under which KUFPEC's payment obligations under this agreement up to the value of the KUFPEC Cap were guaranteed by Deutsche Bank. This carry amount has been exhausted.

This agreement also provides that, with effect from 1 January 2017, to the extent that KUFPEC have not recovered or are deemed (on the basis of an assumed oil price) not to have recovered their development costs incurred to first oil, EnQuest Heather must provide to KUFPEC an additional 20 per cent. share of revenue (net of operating expenditure) received from the sale of petroleum from the fields until such point as KUFPEC have recovered (or are deemed to have recovered) such costs.

(ii) Alma/Galia joint operating agreements

EnQuest Heather is party to a joint operating agreement with KUFPEC for each of the Alma and Galia fields that are each dated 12 October 2012. One agreement applies to operations at blocks 30/24c and 30/25c (Alma), whereas the other applies to operations at block 30/24b (Galia). Both agreements establish a joint operating committee to consider and determine matters in general relating to the policies, procedures and methods of operation, including the approval of programmes and budgets proposed by the operator, the contract strategy and decisions as to decommissioning. Both joint operating committees make a majority of decisions with the affirmative vote of two or more interest holders whose aggregate interests total at least 66 per cent. Decisions including the authorisation of the operator to prosecute or defend litigation outside the UK, those relating to decommissioning, the disclosure of confidential information, the amendment of the joint operating agreement or the determination of the licence require unanimity. EnQuest Heather has a 65 per cent. interest in Alma/Galia and thus cannot exercise unilateral control over operations at Alma/Galia, although it can exercise negative control in relation to decisions requiring unanimity.

EnQuest Heather is the operator under these agreements and is therefore responsible for, subject to the overall supervision of the joint operating committee, carrying out the operations and activities relating to the joint venture, including the preparation of programmes, budgets and authorisations for expenditures, the provision of technical and advisory services and the preparation of a decommissioning programme.

(iii) Alma/Galia Operation and Maintenance Services Agreement

EnQuest Heather entered into an operation and maintenance services agreement dated 12 October 2012 with KUFPEC. EnQuest Heather (in its capacity as the host operator) agreed to provide the EnQuest Producer FPSO to EnQuest Heather and KUFPEC (in their capacity as the Alma/Galia owners) and carry out operation and maintenance services in respect of the EnQuest Producer FPSO and subsea facilities. The term of the agreement continues until the date on which the EnQuest Producer FPSO is redelivered at the North West European port nominated by EnQuest Heather.

(i) Alba joint operating agreement

Interest holders in Alba are subject to a joint operating agreement dated 11 October 1990 in respect of Block 16/26a. Chevron is the appointed operator under the agreement, whose responsibilities include the preparation of programmes, budgets and authorisations for expenditures and the carrying out of technical and advisory services. The agreement establishes an operating committee that approves all production, development, exploratory and decommissioning operations plans and expenditure. The operating committee approves such plans through an affirmative vote of two or more interest holders that hold in aggregate at least two-thirds of all interests in Alba. The Group (through EnQuest Production Limited and EnQuest Petroleum Sabah Limited) has an 8 per cent. interest in Alba and thus cannot exercise unilateral control over operations at Alba. As an interest holder under the agreement, the Group has the right and obligation to take in kind and separately dispose of the Group's percentage interest share in the total quantities of produced oil. The operator may make monthly cash calls in pounds sterling and US dollars in relation to expenditure in connection with the operation of the field. The operator is also not liable to any interest holders for any act or omission in conducting field operations, unless such act or omission was the result of reckless or wilful misconduct on the part of the operator.

(j) Kraken agreements

The Company acquired its interests in the Kraken development through (a) the acquisition of Canamens Energy North Sea Limited (''CENSL'') from Canamens Limited (''Canamens'') (whose assets included a 20 per cent. working interest in Kraken); (b) the 24 January 2012 farm-in agreement with Nautical Petroleum PLC and Nautical Petroleum AG (together, ''Nautical'') for a 25 per cent. working interest; (c) the 25 April 2012 farm-in agreement with First Oil and Gas Limited (''First Oil'') for a 15 per cent. working interest; and (d) the acquisition of a further 10.5 per cent. working interest from First Oil on 22 February 2016.

(i) Canamens acquisitions

On 8 January 2012, the Company agreed to purchase from Canamens the entire issued share capital of CENSL, through which it acquired CENSL's 20 per cent. interest in the Kraken development. The Company completed the acquisitions on 31 January 2012.

The Company paid upfront cash consideration of \$35 million for the shares of CENSL. The Company also paid contingent consideration of \$45 million after the Secretary of State's authorisation of a field development plan with respect to the Kraken development.

Pursuant to the agreement to purchase CENSL, the Company is obligated to indemnify Canamens against any decommissioning liabilities for which it is pursued in relation to CENSL's decommissioning obligations.

(ii) Nautical agreement

On 24 January 2012, the Company entered into a farm-in agreement and related carried interest agreement with Nautical in respect of a 25 per cent. interest in the Kraken development, together with interests in surrounding exploration acreage.

In exchange for these interests, the Company agreed to pay the development costs incurred from 1 January 2012 in respect of a development programme for the Kraken field that would otherwise have been payable by Nautical in respect of its aggregate remaining 25 per cent. interest in Licence P.1077 in respect of the Kraken development, up to a maximum of \$150 million, plus a contingent amount of up to \$90 million dependent on the gross 2P reserves in the Kraken field as determined by an independent reserves calculation. The contingent carry amount was determined at \$26.591 million pursuant to a side letter with Nautical Petroleum Limited dated 29 July 2016, payable in instalments between July 2016 and January 2017. The initial carry amount has been exhausted.

If the Company defaults in its payment of the development costs payable by the Company, Nautical may, within 30 days of such event, require the Company to re-transfer to it the interests it purchased through this agreement. The contingent carry amount was determined at \$26.59 million pursuant to a side letter with Nautical Petroleum Limited dated 29 July 2016, payable in instalments between July 2016 and January 2017. The initial carry amount has been exhausted.

(iii) First Oil agreements

On 25 April 2012, EnQuest Dons Limited entered into a farm-in agreement with First Oil in respect of a 15 per cent. working interest in the Kraken development, together with interests in surrounding exploration acreage. The agreement was terminated pursuant to a termination deed dated 22 February 2016.

On 22 February 2016, EnQuest Heather agreed to purchase a further 10.5 per cent. working interest from First Oil for nominal consideration.

(iv) Kraken joint operating agreement

Interest holders in Kraken are subject to a joint operating agreement dated 29 September 2006 relating to Block 9/2b. The existing participating interests are held 70.5 per cent. by the Group (50.5 per cent. through EnQuest Heather and 20 per cent. through EnQuest ENS Limited, following intra-group assignments) and 29.5 per cent. by Cairn Energy PLC (through Nautical Petroleum Limited).

The Kraken joint operating agreement establishes a joint operating committee to approve programmes, budgets and authorisations for expenditures proposed by the operator and decisions as to decommissioning. The joint operating committee makes decisions with the affirmative vote of two or more interest holders whose aggregate interests total at least 71 per cent, with the exception of decisions to voluntarily relinquish or surrender all or part of the licence area, or to voluntarily terminate the licence, which requires a unanimous vote of all participants. The Group currently has a combined 70.5 per cent. interest in Kraken and therefore cannot exercise unilateral control over operations at Kraken.

EnQuest Heather is the operator under the agreement and is therefore responsible for, subject to the overall supervision of the joint operating committee, carrying out the operations and activities relating to the joint venture, including the preparation of programmes, budgets and authorisations for expenditures, the provision of technical and advisory services and the planning for and obtaining of all requisite services and materials.

(v) Kraken Operation and Maintenance of Services Agreement

The Company entered into an operation and maintenance of services agreement dated 20 December 2013 with Bumi Armada UK Limited in relation to the operation and maintenance of the Kraken FPSO. Bumi Armada UK Limited is contracted to provide services including but not limited to the supply of personnel, inspections, maintenance and repair of the FPSO and the provision of technical support and training. The term of the agreement continues until the date on which, following the termination of the FPSO charter period, the Kraken FPSO is uninstalled, disconnected, removed and redelivered to the area which is 500 metres from the Kraken field installations, known as the 500 metre safety zone.

(vi) Bareboat charter in respect of the Kraken FPSO

On 20 December 2013, EnQuest Heather (in its capacity as the Kraken operator) entered into a bareboat charter with the Kraken field owners (as charterers) and Armada Kraken PTE. Ltd. (''Armada''). Armada agreed, among other things, to construct, and perform the installation, commissioning and hook-up of, the Kraken FPSO at the Kraken field and thereafter charter the Kraken FPSO to the charterers (including, among others, EnQuest Heather and EnQuest ENS Limited).

The original charter period begins on the first production date and expires, unless terminated earlier in accordance with its terms (including the Charterer's ability to terminate for convenience on 180 days' notice), eight years after the earlier of (i) the first production date (i.e. the start date of any successful first production test); and (ii) the date falling 160 days after 16 February 2016. Upon expiry of the original charter period, the charter period is automatically extended on an annual basis for a period of 12 months up to a maximum of 17 years in addition to the original charter period, unless terminated earlier in accordance with its terms (including the Charterer's ability to terminate for convenience on 180 days' notice) or if the charterers notify Armada of its election to terminate the bareboat charter 12 months prior to the expiry of the original charter period. The charterers are obliged to pay Armada a specified termination fee on the charterer's failure to pay the hire rate or on becoming subject to an insolvency event, or upon its termination for convenience during the original charter period.

EnQuest Heather (as Kraken operator for and on behalf of the charterers) agreed to pay an initial payment of \$100 million to Armada for the work, split into three tranches (\$50 million once Armada demonstrated that it had committed financing in place to perform the work, \$25 million once Armada entered binding commitments with subcontractors for the provision of equipment and \$25 million upon arrival of the Kraken FPSO at the Singapore yard), and a commissioning fee of \$1 million once the Kraken FPSO is ready to accept hydrocarbons. In addition, EnQuest Heather (as Kraken operator for and on behalf of the charterers) is to pay a daily rate of \$223,776 from the date on which the Kraken FPSO accepts delivery of hydrocarbons for a period of 10 days. The commissioning fee and daily rate are expected to become payable 10 days before the expected first production date (1 February 2017). Hire rates per day are \$447,352 during the original charter period and \$139,860 during the extension hire period, payable by EnQuest Heather (subject to adjustments in the event of force majeure and availability).

On 10 August 2016, the Company and Armada agreed that Armada would pay \$65 million to the Company over its failure to meet the certain key dates, and specifically the failure to achieve first production as scheduled in the bareboat charter. This amount is payable in instalments, with \$38 million payable between February 2017 and February 2018 and the balance payable over a two year period commencing three months after the date of first production. These payments are in addition to the \$20 million of liquidated damages paid to the Company, in respect of which it recognised a \$14.1 million receivable (representing its net share of the damages) at 30 June 2016.

(vii) Contract for the provision of the Kraken development subsea facilities

EnQuest Heather is party to a contract dated 10 June 2014 and 1 July 2014 with Technip UK Limited (''Technip'') in relation to the provision of the Kraken development subsea facilities. Technip is contracted to provide subsea facilities which extend from the riser hang-off at the submerged turret production buoy/FPSO to the Manifold connections at the drill centres. The remuneration to be paid to Technip under the original contract is equal to the aggregate of approximately £194 million, A77 million and NOK 73 million. The total contract price was reduced by £2.181 million pursuant to a variation dated 25 January 2016.

The term of the contract is effective from 14 November 2013. There are a number of scheduled completion dates in respect of different stages of the works to be carried out by Technip, with the final scheduled completion date being 1 January 2017. The original contract was entered into by EnQuest Britain Limited and Technip but it was novated on 14 May 2015 to EnQuest Heather who assumed all obligations of EnQuest Britain Limited under the contract as if it had at all times been a party thereto.

The original contract was also amended by an amendment agreement dated 20 February 2015 and further amended on 7 September 2016, pursuant to which, among other things, the payment of certain invoices up to the aggregate amount of £68 million was deferred and a rate of 7 per cent. per annum was applied on such deferred amounts. The deferred invoices will become due and payable (together with accrued and new bonuses) by EnQuest Heather in part, on or before 1 January 2017, with the remainder of the balance due in accordance with specified payment schedules until 30 April 2018.

(viii) Contract for the provision of Transocean Leader

EnQuest Heather is party to a contract dated 29 September 2014 and 30 September 2014 with Transocean Drilling U.K. Limited (''Transocean'') in relation to the provision of the Transocean Leader drilling unit. The primary scope of work comprises the drilling and completion of approximately twenty five directional wells drilled across four drill centres. The remuneration to be paid to Transocean includes the operating rate of \$335,000 per day payable by EnQuest Heather during the first three years of the term of the contract. This daily operating rate is payable if the drilling unit is, among other things, anchored on location and ready to start the work. Lower rates apply in certain circumstances, including where Transocean is unable to proceed with the work because of adverse sea or weather conditions or force majeure.

The term of the contract is for an initial period of four years from the commencement date (i.e. the date no earlier than 1 March 2015 unless agreed by EnQuest Heather). EnQuest Heather has the right to extend the duration of the term by two further periods each of six months.

The original contract was amended by an amendment agreement dated 24 August 2015 pursuant to which, among other things, the payment of certain invoices was deferred and a rate of 7 per cent. per annum was applied on such deferred amounts. The deferred invoices will become due and payable by EnQuest Heather on the earlier of (a) 3 October 2016; or (b) the date falling 30 days after the date first oil is achieved.

(k) Scolty/Crathes agreements

(i) Scolty/Crathes joint operating agreement

EnQuest Heather is subject to a joint operating agreement dated 2 November 2005, together with MOLGROWEST (II) Limited, in respect of its interest in the Scolty/Crathes development. The joint operating agreement establishes an operating committee to, among other things, consider and approve programmes, budgets and authorisations for expenditures proposed by the operator and to consider business opportunities to provide services to third parties. The operating committee makes decisions with the affirmative vote of two or more interest holders whose aggregate interests total more than 61 per cent. EnQuest Heather has a 50 per cent. interest in Scolty/Crathes and therefore cannot exercise unilateral control over operations at Scolty/Crathes.

EnQuest Heather is the operator under this agreement and is therefore responsible for, among other things and subject to the overall supervision of the operating committee, the preparation of programmes, budgets and authorisations for expenditures, the conduct of day to day operations within the scope of the approved programmes and budgets and the provision of technical and advisory services.

(l) PM8 and Seligi agreements

(i) Sale and purchase agreement

On 13 June 2014, EP Malaysia entered into a sale and purchase agreement for the purchase of ExxonMobil's 50 per cent. interest in the Seligi field and its 80 per cent. interest in the PM8 field, offshore Malaysia (although EP Malaysia's interest in the PM8 field reduced to 50 per cent. from 1 July 2014 pursuant to the joint operating agreement (as described at paragraph 18.5(l)(iii) below)). EP Malaysia also agreed to purchase ExxonMobil's 50 per cent. interest in the gas rights available for sale from the PM8 producing fields. Pending completion of the acquisition, ExxonMobil agreed to provide EP Malaysia with transitional services to continue operating PM8 and Seligi until 15 December 2014, following which EP Malaysia took over full operatorship from ExxonMobil. EP Malaysia agreed to pay upfront cash consideration of \$67 million for the interests.

(ii) Production Sharing Agreement

EP Malaysia's interest in the PM8 and Seligi fields is held pursuant to a PSC with PETRONAS Carigali Sdn Bhd, E&P Malaysia Venture Sdn Bhd (as contractors) and PETRONAS dated 10 December 2014. Under the PSC, EP Malaysia, as the appointed operator, is required to perform petroleum operations in accordance with an annual work programme and budget which is approved by PETRONAS. The PSC establishes an operations committee for the purposes of managing operations and approving the work programme and budget. Revenues from production under the PSC are firstly set aside for payments to the Malaysian state and then applied to the contractor's cost recovery, both up to a specified percentage. The additional revenues are divided based on a contractor's profitability. EP Malaysia's profitability is determined using the R/C index. The R/C index is the ratio of contractor's cumulative revenue over contractor's cumulative costs. Under the PSC, EP Malaysia, as a contractor, gets a higher share of production when its profitability is low and PETRONAS' share of production increases when EP Malaysia's contractor's profitability increases.

The contractors are required to pay an annual decommissioning cess to PETRONAS based on annual production, estimated costs and estimated remaining production, which is cost recoverable, and also to facilitate the decommissioning of the facilities in accordance with an agreed programme and budget approved by PETRONAS. The PSC expires on 31 March 2033.

(iii) Joint operating agreement

EP Malaysia entered into a joint operating agreement on 10 December 2014 in respect of PM8/Seligi. From 1 July 2014 onwards, participating interests are held: 50 per cent. by EP Malaysia, 40 per cent. by PETRONAS Carigali Sdn Bhd and 10 per cent. by E&P Malaysia Venture Sdn Bhd. The role of operator is assigned to EP Malaysia. The agreement establishes a management committee charged with the supervision and direction of operations and approving work programmes and budgets. The management committee makes decisions with the affirmative vote of two or more interest holders (who are not related companies) whose aggregate interests total at least 65 per cent. As EP Malaysia has a 50 per cent. interest, it cannot exercise unilateral control over operations.

Pursuant to this agreement, and a subsequent extension, EP Malaysia agreed to bear all costs of the interest holders (of at least \$16 million) between 26 June 2014 and 26 June 2018 in relation to drilling one exploration well and one appraisal well.

(m) Tanjong Baram agreements

(i) Risk Service Contract

On 27 March 2014, EP Developments Malaysia signed a SFRSC with PETRONAS for the development and production of the Tanjong Baram field, offshore Malaysia. EP Developments Malaysia has a 70 per cent. interest in the Tanjong Baram SFRSC and the remaining 30 per cent. is held by Uzma. PETRONAS remains project owner and EP Developments Malaysia acts as a service provider responsible for implementing the field development plan and carrying out production operations. The Tanjong Baram SFRSC establishes a joint management committee for the purpose of general supervision and control of the project. Decisions are made by unanimous vote of all members.

EP Developments Malaysia's incurred upfront development and operations costs are to be reimbursed from field revenue upon commercial production. EP Developments Malaysia is also entitled to a per barrel remuneration fee which is not linked to oil prices. EP Developments Malaysia's remuneration fee is tied to cost, schedule and production performance. EP Developments Malaysia does not have any decommissioning liability upon expiry of the Tanjong Baram SFRSC or following the end of the life of the field. The Company has also provided a parent company guarantee in respect of EP Development Malaysia's participating share under the Tanjong Baram SFRSC. The term of the Tanjong Baram SFRSC is 9 years.

(ii) Joint operating agreement

EP Developments Malaysia entered into a joint operating agreement on 27 March 2014 with Uzma. The role of operator is assigned to it. The agreement establishes a joint management committee charged with the supervision and direction of operations and approving work programmes and budgets. Decisions require the affirmative vote of 100 per cent. of the participating interests, save for decisions to appoint an external auditor which require an affirmative vote by two or more interest holders having in aggregate a percentage interest of at least 70 per cent. The affirmative vote of both EP Developments Malaysia and Uzma is therefore required to approve decisions. However, deadlock can be resolved by EP Developments Malaysia (as operator) if a decision is required in order to comply with the Tanjong Baram SFRSC or applicable laws.

18.6 Description of certain financing arrangements

(a) Existing RCF

(i) Overview

The Company and certain of its subsidiaries entered into an agreement establishing the Existing RCF on 6 March 2012, which agreement the Company amended and restated including on 29 January 2014. The mandated lead arrangers are BNP Paribas and The Bank of Nova Scotia and the facility agent is BNP Paribas. The Existing RCF may be utilised in US dollars, pounds sterling or Euro by drawing of cash advances or by issuances of letters of credit. Borrowings may be used for the purposes of funding oil and gas related expenditure of the Company and its subsidiaries from time to time.

As of 31 July 2016, the Group had drawn \$956.3 million under the Existing RCF and utilised letters of credit of \$7.0 million. After netting off unamortised facility fees, the balance sheet amount for the Group's liability represented by the Existing RCF was \$940.0 million as of 31 July 2016.

(ii) Borrowers and guarantors

Each of the following companies is both a borrower and a guarantor under the Existing RCF: the Company, EnQuest Heather, EnQuest Heather Leasing Limited, EnQuest ENS Limited, EnQuest Norge AS, EnQuest Britain Limited, EnQuest Energy Limited, EQ Petroleum Sabah Ltd, EnQuest Production Limited, EnQuest NWO Limited and EnQuest Global Limited (each both an ''Existing RCF Borrower'' and an ''Existing RCF Guarantor''). Each of the follow companies is an Existing RCF Guarantor but not an Existing RCF Borrower: EnQuest Dons Leasing Limited, EQ Petroleum Production Malaysia Ltd, NSIP (GKA) Limited, Stratic UK Holdings Limited, EnQuest UKCS Limited, EnQuest Global Services Ltd, EnQuest Thistle, EnQuest Marketing and Trading Limited and NorthWestOctober Limited. A mechanism is included in the Senior Facility Agreement to enable certain of the Company's subsidiaries to accede as additional borrowers or additional guarantors with respect to the Existing RCF, subject to certain conditions.

(iii) Security

The Existing RCF is secured by way of (i) first ranking and second ranking English law share charges over the shares of EnQuest Heather, EnQuest Heather Leasing Limited, EnQuest ENS Limited, EnQuest Britain Limited, EnQuest Energy Limited, EQ Petroleum Sabah Ltd, EnQuest Production Limited and EnQuest NWO Limited; (ii) a first ranking English law share charge over the shares of EnQuest Global Limited; (iii) first ranking and second ranking floating charges over the Company, EnQuest Heather, EnQuest Heather Leasing Limited, EnQuest ENS Limited, EnQuest Energy Limited, EQ Petroleum Sabah Ltd, EnQuest Production Limited and EnQuest NWO Limited; (iv) a first ranking floating charge over EnQuest Global Limited and EnQuest Britain Limited; and (v) first ranking Norwegian law security consisting of a share pledge over the shares of EnQuest Norge AS, an account charge by EnQuest Norge AS, a general assignment agreement by EnQuest Norge AS, a charge over machinery and plant and a factoring agreement by EnQuest Norge AS.

Pursuant to a waiver letter dated 19 August 2016, the Company has granted the following additional security: (i) fixed security over the Company's interest in intercompany balances owed to it by any member of the Group; and (ii) fixed security over the Company's shares in EnQuest Marketing and Trading Limited, NSIP (GKA) Limited and Grove Energy Limited.

As a condition of the Bridge Finance Letter, EnQuest Britain and EnQuest Global Limited shall grant fixed charges over long-term intercompany balances, and EnQuest Global Limited shall grant a share charge over its shares in EP Production Malaysia.

(iv) Commitments and additional commitments

The Existing RCF provides a multicurrency revolving credit facility, the aggregate commitments of which are \$1.2 billion, which amount may be increased to \$1.7 billion provided that (i) the consent of the Majority Lenders has been obtained, (ii) no Event of Default is continuing or would result from such increase, (iii) the Lenders (whether existing or new) agree to make available such further amount, (iv) the Parties enter into and/or deliver any documentation, and take all such steps, as the Facility Agent or Security Trustee (each acting reasonably) may request for the purposes of effecting the increase in the aggregate commitments and ensuring the continuing effectiveness or validity of the Finance Documents, (v) all such information as is requested by any Finance Party is provided to the Facility Agent by the Company and (vi) no request for an increase in the aggregate commitments shall

be made later than 31 August 2017 (the ''Aggregate Commitments''). Funds may only be drawn under the Existing RCF to a maximum amount of the lesser of (i) the Aggregate Commitments, (ii) RRBV as at the most recent of 30 April and the most recent Interim Test Date and (iii) the maximum amount which could be outstanding on the most recent Test Reference Date taking into account the amount of the proposed utilisation without the Company being in breach of the Leverage Ratio or ratio of EBITDA to Finance Charges on that Test Reference Date (the ''Maximum Available Amount''). As of 30 June 2016, Aggregate Commitments were \$1.2 billion of which \$956.3 million was drawn. All capitalised terms used (and not defined) in this paragraph shall have the meaning given to them in the Existing RCF.

(v) Guarantees

Each of the Existing RCF Guarantors has (among other things) provided a guarantee of all amounts payable to the Finance Parties (as defined in the Senior Facility Agreement) by any Existing RCF Borrower in connection with the Senior Facility Agreement.

(vi) Reduction and repayment

The Aggregate Commitments reduce to zero on the date that is six years from the effective date, or 31 October 2019. The relevant Existing RCF Borrower must repay amounts such that the amount outstanding does not exceed the Maximum Available Amount. The Maximum Available Amount based on the RRBV is set on the most recent of 30 April or the most recent Interim Test date (as defined therein). The Maximum Available Amount based on the financial covenants is set on the most recent 30 June or 31 December. Each loan must be repaid on the last day of the relevant interest period relating thereto (which, subject to certain exceptions, may be one, three or six months or any other period agreed between us and the agent), subject to a netting mechanism against amounts drawn on such date. Amounts repaid by a borrower may be re-borrowed, subject to certain exceptions.

As a condition of the Bridge Finance Letter, utilisations under the Existing RCF after 26 September shall have an interest period of one month (subject to certain exceptions).

The relevant Existing RCF Borrower must also ensure that the aggregate dollar amount of the face value of all outstanding letters of credit does not at any time exceed the greater of \$600 million or 50 per cent. of Aggregate Commitments.

The Company must build up cash cover in respect of outstanding letters of credit as the final maturity date under the Existing RCF approaches as follows: 25 per cent. of the outstanding utilisations by way of letters of credit from 12 months before final maturity date, 50 per cent. of the outstanding utilisations by way of letters of credit from 9 months before final maturity date, 75 per cent. of the outstanding utilisations by way of letters of credit from 6 months before final maturity date and 100 per cent. of the outstanding utilisations by way of letters of credit from 3 months before final maturity date.

(vii) Mandatory prepayment

If it becomes unlawful in any applicable jurisdiction for a lender to perform its obligations under the Existing RCF or to fund or maintain its participation in a loan, the commitment of that lender will be immediately cancelled once that lender has notified the Group (through the facility agent) of that unlawfulness and, if applicable, all obligations under such commitment will be payable on the last day(s) of the relevant interest period(s) or earlier if required by the lender concerned in certain circumstances.

If the Group experiences certain change of control events, any lender may by notice to the Group and the agent cancel its commitments immediately and each borrower must within 15 business days of receiving such notice repay any such lender's participation in all outstanding loans, together with accrued interest and all other amounts due to that lender under the finance documents.

The Senior Facility Agreement also includes customary prepayment events and rights related to defaulting lenders, taxes and increased costs.

(viii) Voluntary prepayment and cancellation

Subject to payment of break costs (if any), an Existing RCF Borrower may voluntarily cancel the available commitments or prepay amounts outstanding under the Existing RCF without penalty or premium, at any time in whole or in part, subject to a minimum cancellation or repayment of \$1 million (with integral multiples of \$1 million), on not less than five business days' (or such shorter period as the Majority Lenders may agree) prior notice to the facility agent.

(ix) Interest and fees

The rate of interest payable on the loans under the Senior Facility Agreement is the rate per annum equal to the aggregate of a margin plus LIBOR (in the case of loans in US dollars or pounds sterling) or EURIBOR (in the case of loans in euros) and the mandatory cost (if any).

The borrowers are required to pay a commitment fee on available but unutilised commitments under the Existing RCF, at a rate equal to a percentage of the applicable margin.

(x) Representations and warranties

The Senior Facility Agreement includes certain customary representations and warranties, subject to certain exceptions and appropriate materiality qualifications, including representations with respect to:

• status;
• powers and authority;
• legal validity;
• non conflict with constitutional documents, laws or certain documents;
• ranking;
• no insolvency;
• no default;
• accuracy of most recent financial statements delivered;
• compliance with tax laws;
• maintenance of necessary insurances; and
• material adverse change.
• (xi) Negative covenants

The Senior Facility Agreement includes certain restrictive covenants, subject to certain agreed exceptions, including, but not limited to, covenants restricting the ability of each Existing RCF Borrower and Existing RCF Guarantor (and where expressly provided, certain other key companies that are neither borrowers nor guarantors) to, among other things:

• create security;
• dispose of petroleum assets;
• merge or consolidate with other companies or make acquisitions;
• make a substantial change to the general nature of its business;
• incur indebtedness or provide guarantees;
• allow its rights under certain project documents to be terminated, suspended or limited; and
• make loans or extend credit to third parties.

(xii) Affirmative covenants

The Senior Facility Agreement requires each Existing RCF Borrower and Existing RCF Guarantor (and in certain cases, certain other key companies that are neither borrowers nor guarantors) to observe certain affirmative covenants, subject to certain exceptions and including, but not limited to, covenants relating to:

• maintenance of corporate existence and relevant authorisations;
• compliance with laws, including environmental laws and regulations;

• payment of taxes;

• maintenance of insurance;

• ensuring that its obligations under certain finance documents rank at least pari passu with its other unsecured obligations;
• using reasonable efforts to incur certain agreed capital expenditures;
• maintenance of ownership of material subsidiaries;
• provision of financial (including annual audited and semi-annual unaudited consolidated financial statements of the Company), reserves and other information to lenders; and
• compliance with the agreed hedging policy.
• (xiii) Financial covenants

As amended pursuant to an amendment, waiver and consent letter dated 20 January 2015 (the ''January 2015 Waiver Letter''), the Existing RCF requires the Group to ensure that:

• in respect of the Test Reference Dates from and including 30 April 2015 to and including 30 April 2017, and on each Interim Test Date from and including 1 January 2015 to and including 31 December 2016, the ratio of consolidated net financial indebtedness to EBITDA (the ''Leverage Ratio'') is less than 5.0:1.0, and in respect of all other Test Reference Dates and Interim Test Dates, the ratio of consolidated net financial indebtedness to EBITDA is less than 3.0:1.0;
• in respect of the Test Reference Dates from and including 30 October 2014 to and including 30 April 2017, and on each Interim Test Date from and including 1 January 2015 to and including 31 December 2016, the ratio of EBITDA to forecast finance charges (the ''Finance Charges Cover Ratio'') for the following 12 months is not less than 3.0:1.0, and in respect of all other Test Reference Dates and Interim Test Dates, ratio of EBITDA to forecast finance charges for the following 12 months is not less than 5.0:1.0;
• in respect of all Test Reference Dates and Interim Test Dates, the Group's RRBV does not fall below the Group's total utilisations under the Existing RCF; and
• on each Test Reference Date and each Interim Test Date (or within five Business Days ending on such date) it is demonstrated to the satisfaction of the Majority Lenders that the Group has sufficient funds available to meet all liabilities of the Group when due and payable for the period commencing on such date and ending on the final maturity date (the ''Liquidity Test'').

The Bridge Finance Letter waived the requirement for the Company to comply with the Leverage Ratio and the Finance Charges Cover Ratio on the next Test Reference Date of 31 October 2016.

Pursuant to a waiver letter dated 29 January 2016 (the ''January 2016 Waiver Letter'') the Liquidity Test was waived for the Interim Test Date of 31 January 2016. The Liquidity Test was then deferred for the Test Reference Date of 30 April 2016 by one month to 31 May 2016 pursuant to a waiver letter dated 29 April 2016 (the ''April 2016 Waiver Letter''). The Liquidity Test continued to be waived on a rolling monthly basis, the last such waiver being obtained on 19 August 2016, deferring the Liquidity Test to 30 September 2016. The Bridge Finance Letter further deferred the Liquidity Test until 31 December 2016. Since the April 2016 Waiver Letter, the Company has also obtained rolling monthly waivers for the RRBV test referred to above (as a result of the Company and the Technical Banks having not yet finalised the RRBV). The Bridge Finance Letter adjusted the RRBV in the manner described in paragraph 18.6(a)(xvii) below and deferred the RRBV test until 31 December 2016.

''Test Reference Date'' is each 30 April and 31 October, and ''Interim Test Date'' includes each 31 July and 31 January from and including 31 July 2015 to and including 31 January 2017 as well as being triggered by certain specific events (such as disposals).

These financial terms are defined in the Senior Facility Agreement and may not correspond to similarly titled metrics in the Group's consolidated financial statements or this document.

(xiv) Events of default

The Senior Facility Agreement sets out certain events of default, the occurrence of which would allow the senior lenders (if the Majority Lenders so direct) to cancel their commitments or declare that all or part of the loans, together with accrued interest and other amounts outstanding are immediately due and payable and/or payable immediately on demand and/or declare that full cash cover in respect of each letter of credit is immediately due and payable. The events of default include, among other events and subject in certain cases to grace periods, thresholds and other qualifications:

• non payment of amounts due and payable under a finance document;
• breach of financial covenants or other obligations;
• inaccuracy of a representation in any material respect when made or deemed to be repeated;
• certain other cross defaults in respect of indebtedness equal to or in excess of \$10 million (or equivalent in other currencies);
• insolvency or insolvency proceedings;
• enforcement of security securing debt or attachment of assets;
• cessation of business;
• invalidity or unlawfulness of the finance documents or certain project documents;
• any Existing RCF Borrower or Existing RCF Guarantor ceasing to be wholly owned by us;
• nationalisation or expropriation (or announcement of intent in respect thereof) of all or any part of any petroleum asset or any oil and gas or revenues derived therefrom in a manner which would result in a material adverse change;
• any litigation, arbitration or administrative proceeding is commenced before any court, arbitral body or agency which is likely to be adversely determined and, if adversely determined would reasonably be likely in respect of any Existing RCF Borrower or Existing RCF Guarantor to have a material adverse effect; and
• material adverse change.
• (xv) Governing law

The Senior Facility Agreement is governed by English law.

(xvi)Amendments to Existing RCF contemplated under the Lock-Up Agreement

Pursuant to the Lock-Up Agreement, the following amendments to the Existing RCF and the Senior Facility Agreement have been agreed. The RCF Amendments, along with the other components of the Restructuring, are inter-conditional and cannot proceed if the Placing and Open Offer or any other component of the Restructuring does not proceed.

• extension of final maturity date to 1 October 2021;
• Aggregate Commitments to be split into two facilities, comprised of: (A) the Term Facility; and (B) the RCF Facility. The RRBV will be fixed at \$890,700,000 for the life of the Existing RCF;
• the ability to increase the Aggregate Commitments by way of the accordion to be cancelled;
• outstanding loans and letters of credit under the Term Facility and RCF Facility that in aggregate exceed the RRBV have super-senior status, and benefit from a higher margin. Outstanding loans and letters of credit under the Term Facility and RCF Facility up to the RRBV and the PIK Amount (as defined below) have senior status;
• the following updated amortisation schedule for the Term Facility:
• 1. From the Effective Date up to and including 31 March 2018: US\$1,200 million
• 1. From 1 April 2018 up to and including 30 September 2018: US\$1,060 million
• 1. From 1 October 2018 up to and including 31 March 2019: US\$930 million
• 1. From 1 April 2019 up to and including 30 September 2019: US\$755 million
• 1. From 1 October 2019 up to and including 31 March 2020: US\$655 million
• 1. From 1 April 2020 up to and including 30 September 2020: US\$535 million
• 1. From 1 October 2020 up to and including 31 March 2021: US\$500 million
• 1. From 1 April 2021 up to and including 30 September 2021: US\$435 million
• 1. On the Final Maturity Date: nil;
• mandatory repayment of the Existing RCF out of excess cash flow. Excess cash flow is defined as the amount by which the aggregate of: (A) cash on hand of the Group (excluding restricted cash); and (B) the available commitments under the RCF Facility, on the last day of each semi-annual period ending on 30 June and 31 December in each year, exceeds \$75 million, excluding any amounts required for capital expenditure included in the latest Liquidity Test, provided such amounts are applied for such purpose within 12 months, and provided that if the conditions permitting payment of a dividend by the Company to its shareholder (the ''Dividend Conditions'') are met, the Company can use up to 50 per cent. of such excess cash flow for the second part of the financial year to pay a dividend to its shareholders. The Dividend Conditions include:
• (A) the ratio of net debt to EBITDA has been no greater than 2:1 for the four immediately preceding consecutive quarters;
• (B) the Company is not in breach of the leverage ratio;
• (C) the Company has delivered a Liquidity Test taking into account the proposed dividend, demonstrating that the Group has sufficient funds available to meet all liabilities when due including all amounts on the Final Maturity Date with a surplus to the extent that debt service in each six month period is covered 1.2:1;
• (D) Aggregate Commitments under the Existing RCF are less than \$500 million;
• (E) no event of default is continuing under the Existing RCF; and
• (F) all capitalised interest on the Notes has been paid in cash.
• interest to be calculated as follows: Term Facility and RCF Facility less than or equal to the RRBV at LIBOR (with zero floor) plus 475bps and Term Facility and RCF Facility above RRBV at LIBOR (with zero floor) plus 525bps and (with the balance to be added to the PIK Amount every six months) 375bps PIK. LIBOR shall not apply to letters of credit and on certain letters of credit (being Performance LCs, as defined in the Senior Facility Agreement), only 50 per cent. of the applicable margin will apply;
• the PIK Amount shall be zero on the date the amendments to the Existing RCF become effective. The PIK Amount will then increase as follows:
• (A) in respect of any utilisation to which a PIK Margin applies, the PIK Margin shall accrue on that utilisation and shall be capitalised and be added to the PIK Amount on each 30 June and 31 December; and
• (B) PIK Amount Interest shall accrue on the PIK Amount and shall be capitalised and added to the PIK Amount on each 30 June and 31 December;
• the Leverage Ratio test will become a senior secured leverage ratio (i.e consolidated net financial indebtedness will take into account the drawn Existing RCF amounts net of cash and cash equivalents, with the Existing Notes excluded due to their coupon structure and the PIK Amount and the potential finance lease for the Kraken FPSO also to be excluded from the definition of indebtedness). The revised Leverage Ratio will be tested on a quarterly basis on and from

30 June 2017. The revised Leverage Ratio must be less than the ratios set out below when tested on the respective dates set out below:

Date	Ratio
30 June 2017	3.2x
30 September 2017	2.7x
31 December 2017	2.25x
31 March 2018	1.6x
30 June 2018	1.2x
30 September 2018	1.2x
31 December 2018	1.2x
31 March 2019	1.1x
30 June 2019	1.1x
30 September 2019	1.0x
31 December 2019	1.0x
31 March 2020	1.0x
30 June 2020	1.0x
30 September 2020	1.0x
31 December 2020	1.0x
31 March 2021	1.0x
30 June 2021	1.0x

• the revised Finance Charges Cover Ratio test shall exclude the PIK on Existing Notes but shall otherwise remain unchanged from the Senior Facility Agreement. The ratio will be increased to 7.5:1.0 for all periods;
• the Liquidity Test shall differ for phase 1 for the period prior to 31 December 2017 and phase 2 for the period from 31 December 2017.

Liquidity testing during phase 1 will consist of:

• (A) management case quarterly liquidity test: this will be the same as the Liquidity Test in the Senior Facility Agreement except that it will be based on management assumptions other than in relation to the price deck applicable to petroleum prices which will be the historic average forward curve oil price (''FWCs'') of the past 15 consecutive days for each remaining year until maturity minus a 10 per cent. discount;
• (B) available liquidity (unrestricted cash plus undrawn commitments) at the end of each month shall not fall below:
• (1) US\$50 million for the period from 1 January 2017 to 30 June 2017;
• (2) US\$40 million from 1 July 2017 to 30 November 2017; and
• (3) US\$50 million from 1 December 2017 to 31 December 2017;
• (C) short-term cash flow forecast to trigger an event of default if it demonstrates a shortfall (being a negative balance after deducting restricted cash), to be based on management assumptions, other than in relation to the price deck applicable to petroleum prices which will be the FWCs of the past 15 consecutive days for the relevant period (with no discount); and
• (D) Joint Technical Banks quarterly liquidity test: this will be the Joint Technical Bank version of the management case quarterly test. This is for information only, will not trigger an event of default, will cover the life of the loan including the amount due at maturity and will employ the same price deck as the management case but otherwise be based on assumptions of the joint technical banks.

Phase 2 will revert to the original Liquidity Test save that assumptions will include a price deck of historic average FWCs of the past 15 consecutive days for each remaining year until maturity (minus a 10 per cent. discount). The test will cover the life of the loan plus one year, and will include 75 per cent. of the amount due on the final maturity date (to be increased to 100 per cent from 1 January 2020) provided that no event of default will arise if the Liquidity Test demonstrates that such amount can be repaid from cash flow after debt service in one year after the final maturity date.

Restrictions on other activities of the Group are as follows:

• no acquisitions by a member of the Group without the consent of Existing RCF Lenders whose commitments aggregate at least 662⁄3 per cent. of the Aggregate Commitments (the ''Majority Lenders''), other than acquisitions post 1 February 2018, provided that an updated Liquidity Test is delivered to the satisfaction of the Majority Lenders and the Joint Technical Banks shall be given access to the appropriate information to be able to risk and comment on such Liquidity Test;
• no disposals by a member of the group of a petroleum asset without Majority Lenders consent;
• existing £1 billion basket for financial indebtedness under bonds to be maintained, provided that proceeds from further bond issuances shall be applied to prepay the Term Facility and RCF Facility;
• bond exchange offers or other forms of bond refinancing shall not be permitted while any amount is outstanding under the Existing RCF; and
• no exploration and appraisal expenditure to be incurred by a member of the Group other than expenditure on appraisal wells in relation to existing producing assets for the purpose of improving the performance of that asset.

The following security is to be granted by a member of the Group as a condition precedent to the amendments described above taking effect:

• (A) a floating charge by NSIP (GKA) Limited; and
• (B) a floating charge by EQ Petroleum Production Malaysia.
• (iii) Super-senior hedging

As set out in the Lock-Up Agreement, the Company and other members of the Group shall be granted the right to enter into certain new super senior hedging transactions in accordance with the hedging policy set out in the Existing RCF (the ''New Hedging''). The New Hedging will benefit from super-senior status ranking equally with the outstanding loans and letters of credit under the Term Facility and the RCF Facility that in aggregate exceed the RRBV. Voting rights will be the same as under the Existing RCF except that provisions will be included to require the consent of a majority of Hedging Banks which are party to New Hedging to any changes to the terms of the super senior facilities which (A) increase the maximum principal amount of such facilities; (B) affect the ranking or subordination of the liabilities under the super senior facilities; or (C) release any security. The voting threshold for these purposes to be 75 per cent. or more by value (on a mark-to-market basis) and over 50 per cent. in number of such Hedging Banks.

The New Hedging will be structured as follows:

In the case of commodity hedging:

• transactions shall relate in aggregate to no more than 14.39 million barrels of crude oil over 12 months from 1 January 2017 to 31 December 2017, with a sub-limit of a maximum of 4 million barrels of crude oil in the first and second calendar quarters during such year and 4.5 million barrels of crude oil in the third and fourth calendar quarters during such year;
• the Company to provide (in form and substance reasonably satisfactory to the Existing RCF Lenders) a monthly report to the Existing RCF Lenders listing the commodity hedging in place and total aggregate exposure; and
• to the extent there are potential aggregate hedging liabilities of more than US\$151 million, the Company shall procure within 10 Business Days that such aggregate liabilities are reduced to US\$151 million or less.

There will be a minimum hedging requirement set at 30 per cent. of 20.0 million barrels of crude oil at a minimum price per barrel of US\$45, which the Company shall use best endeavours (subject to prevailing market conditions at the time) to enter into by 31 December 2016 for production from 1 January 2017 to 31 December 2017.

(xvii)Bridge Finance

Pursuant to the Bridge Finance Letter, the Lenders have approved a RRBV of \$1,140,000,000 from 26 September 2016. In the event that the Company announces that it is commencing a corporate sale of the Group or any member of the Group, the RRBV will increase to \$1,200,000,000.

The Bridge Finance Letter also includes the following waivers of covenants:

• a waiver of the requirement to prepare and adopt a Projection in respect of the Interim Test Date of 31 July 2016 (which was previously postponed to 30 September 2016);
• a postponement of the Test Reference Date of 30 April 2016 (which was previously postponed to 30 September 2016) to 31 December 2016, for the purposes of the RRBV test;
• a postponement of the Liquidity Test from 31 July 2016 (which was previously postponed to 30 September 2016) to 31 December 2016; and
• a waiver of the Leverage Ratio Test and the Interest Cover Test for the next Test Reference Date of 31 October 2016.

Utilisations made on or after the date of the Bridge Finance Letter (''New Utilisations'') will have an interest period of one month (subject to certain exceptions) and an applicable margin of 5 per cent. The Company shall also pay to the Facility Agent (for the account of the Lenders) a fee of 5 per cent. per annum on the amount of utilisations made from 26 September 2016 (other than rollover loans) calculated on a daily basis.

As conditions to the waivers referred to above the Company has agreed the following:

• at any time the Majority Lenders may reduce the RRBV to any amount equal to or greater than \$845 million, which would require the Company to repay amounts drawn under the Existing Facility to the reduced RRBV amount;
• no request for a New Utilisation may be submitted: where if the New Utilisation were made the Group would have a cash balance (subject to certain exceptions) of \$20 million or more after the proposed New Utilisation; more than once in any seven day period; or where the Facility Agent on behalf of the Majority Lenders has notified the Company that no further New Utilisations are permitted;
• the proceeds of a New Utilisation may only be used to pay any coupon payment to any bondholder with the prior consent of the Majority Lenders;

if the Group's cash balance (subject to certain exceptions) exceeds \$20 million for any seven consecutive days the Company shall apply the excess to repaying New Utilisations and then to repaying other loans outstanding under the Existing RCF

As a further condition of the Bridge Finance Letter, EnQuest Britain and EnQuest Global Limited shall grant fixed charges over long-term intercompany balances and EnQuest Global Limited shall grant a share charge over its shares in EP Production Malaysia and members of the Group will enter into a subordination agreement, subordinating claims in respect of inter-company loans to the rights of the finance parties under the Existing RCF.

The Majority Lenders can under the Bridge Finance Letter request at any time that the Company either (i) starts a corporate sale process or takes other required steps in connection with the Restructuring or (ii) engages in discussions with the Lenders with its views on any such action or on the Restructuring generally if it does not want to take the action requested by the Majority Lenders.

(b) Tanjong Baram Project Finance Loan

(i) Overview

EP Developments Malaysia (as Borrower) entered into a limited recourse \$35,000,000 term loan facility with DBS Bank LTD, Labuan Branch (as facility agent, security agent, account bank, hedging bank and mandated lead arranger), dated 11 June 2015 (the ''TB Facility Agreement'').

(ii) Security

To secure the obligations of EP Developments Malaysia under the TB Facility Agreement: (i) EP Developments Malaysia has granted a general assignment over its interests in and to earnings, an assignment of its insurances, a charge over its accounts and a fixed and floating charge over its assets and undertakings; and (ii) EnQuest Global Limited, as sole shareholder of EP Developments Malaysia, has granted a first security interest in respect of all its shares in EP Developments Malaysia.

(iii) Sponsor's Undertaking

Pursuant to a sponsor's undertaking between the Company and the Security Agent (the ''Sponsor's Undertaking''), the Company undertakes to provide to EP Developments Malaysia, directly or indirectly, up to \$21,000,000 to cover any cost overruns in respect of the Tanjong Baram project. The Company has paid EP Developments Malaysia US\$19.4 million in accordance with the Sponsor's Undertaking.

(iv) Reduction and repayment

The final maturity date under the TB Facility Agreement is 31 March 2020. The Total Commitments are repaid in quarterly instalments. There is a cash sweep of either (i) 75 per cent. of permitted distributions if the Brent oil price is \$60 per barrel or less; or (ii) 50 per cent. of permitted distributions in all other circumstances, reducing the Total Commitments accordingly.

(v) Interest

Interest is calculated as LIBOR plus a margin (where the margin is: (i) from the date of the TB Facility Agreement until the First Oil Date (as defined in the TB Facility Agreement), 2.5 per cent. per annum; and (ii) on and after the First Oil Date, 2.25 per cent. per annum).

(c) Transocean deferral

EnQuest Heather has entered into a supply contract with Transocean which became effective on 30 September 2014 (as amended on 24 August 2015) under which Transocean provides drilling services for the Kraken Field development.

A deferral arrangement was entered into with Transocean on 28 September 2016, deferring up to \$60,000,000 of payments to Transocean over two years beginning 1 July 2016 with repayments to be made by EnQuest Heather (including interest) over a 12 month period from 1 May 2018 to 30 April 2019.

In consideration for such arrangement EnQuest Heather and EnQuest ENS Limited granted second ranking floating charges in favour of Transocean as security for EnQuest Heather's obligations under the deferral arrangement. An intercreditor deed was also entered into with Transocean and BNP Paribas as Facility Agent and Security Trustee under the Senior Facility Agreement, governing the ranking of the security. Under the terms of such intercreditor deed, the Company is not restricted from raising new financing or refinancing the Existing RCF.

(d) Existing Retail Notes

The following description of the Existing Retail Notes is based on their terms and conditions in effect as at the date of this document. Pursuant to the Restructuring, the Company proposes to make certain amendments to the Existing Retail Notes, as further specified in paragraph 4.3 of Part 1 (''Letter from the Chairman of EnQuest PLC''). The Retail Note Amendments, along with the other components of the Restructuring, are inter-conditional and cannot proceed if the Placing and Open Offer or any other component of the Restructuring does not proceed.

(i) Overview

On 24 January 2013, the Company established a £500,000,000 euro medium term note programme. On 15 February 2013, the Company issued an initial tranche of £145,000,000 5.50 per cent. Notes due 15 February 2022 (the ''Initial Tranche of Retail Notes'') under the EMTN Programme. On 2 December 2013, the Company issued a further tranche of £10,000,000 5.50 per cent. Notes due 15 February 2022 (the ''Further Tranche of Retail Notes'') under the EMTN Programme, which were consolidated with and formed a single series with the Initial Tranche of Retail Notes (the Initial Tranche of Retail Notes together with the Further Tranche of Retail Notes form the Existing Retail Notes).

The Existing Retail Notes are constituted under a trust deed dated 24 January 2013, as amended, novated, supplemented and/or restated from time to time (the ''Existing Retail Notes Trust Deed'') between, among others, the Company and U.S. Bank Trustees Limited, in its capacity as trustee for the holders of the Existing Retail Notes (the ''Existing Retail Notes Trustee''). The terms and conditions of the Existing Retail Notes are set out in a schedule to the Existing Retail Notes Trust Deed, as completed by the final terms dated 24 January 2013 (in respect of the Initial Tranche of Retail Notes) and the final terms dated 20 November 2013 (in respect of the Further Tranche of Retail Notes).

The Existing Retail Notes as originally issued had the following characteristics:

• Interest: a fixed rate of 5.50 per cent. per annum payable semi-annually in arrear on 15 February and 15 August in each year. The interest rate of the Existing Retail Notes was amended by the Company on 5 May 2015, as further described in paragraph 18.6(d)(iii) of this Part 9 (''Additional Information'') below;
• Form: registered form;
• Currency: pounds sterling;
• Maturity: 15 February 2022;
• Ranking: pari passu without preference or priority among themselves and in right of payment with all existing and future obligations of the Company that are not contractually subordinated in right of payment thereto;
• Negative pledge: so long as any Existing Retail Notes remain outstanding, neither the Company nor any of its subsidiaries will create or have outstanding any security interest upon the whole or any part of its present or future undertakings, assets or revenues to secure any indebtedness which is in the form of, or represented by, bonds, notes, debentures, loan stock, or other securities which for the time being are listed, quoted or dealt in or traded on any stock exchange or over the counter or other securities market, without at the same time or prior thereto according the same security to the Existing Retail Notes;
• Events of default: customary events of default, including those relating to (a) non payment of interest or principal, (b) breach of other obligations under the Existing Retail Notes or the Existing Retail Notes Trust Deed, (c) cross acceleration, (d) enforcement proceedings, (e) security enforcement, (f) insolvency, (g) winding up, (h) lack of authorisations and consents, and (i) illegality. The provisions include certain minimum thresholds and grace periods. In addition, in certain cases, a certification in writing that a particular event is materially prejudicial to the interests of the holders of the Existing Retail Notes is required from the Existing Retail Notes Trustee before the Existing Retail Notes can be accelerated;
• Final redemption: unless previously redeemed, purchased and cancelled, the Existing Retail Notes are due to be redeemed on 15 February 2022 at their nominal amount;
• Optional redemption: the Company has the right to redeem the Existing Retail Notes at any time at the make whole amount. The Existing Retail Noteholders have the right to redeem the Existing Retail Notes prior to their final maturity upon a change of control, as specified in the terms and conditions of the Existing Retail Notes. The Company may also (prior to the expected maturity date) redeem Existing Retail Notes as a result of changes in taxation such that the Company would be required to pay additional amounts to the holders of the Existing Retail Notes;
• Taxation: all payments in respect of Existing Retail Notes are made without withholding or deduction for, or on account of, any present or future taxes imposed by the United Kingdom unless and save to the extent that the withholding or deduction of such taxes is required by law. In that event, the Company will be obliged to pay additional amounts in respect of any such withholding or deduction, subject to certain exceptions;

• Covenants: the Existing Retail Notes Trust Deed as originally executed contains customary covenants for the type of issuance, which are subject to caveats and limitations, including covenants to notify the Existing Retail Notes Trustee in the event of an event of default and to deliver to the Existing Retail Notes Trustee the Company's audited financial statements;

• Financial covenants: the Existing Retail Notes as originally issued contained an obligation for the Company to ensure that as of each 30 June and 31 December, the Company's ratio of net financial indebtedness to EBITDA is less than 3.0:1.0, and the ratio of EBITDA to finance charges for the prior twelve months is not less than 4.0:1.0. The financial covenants described above were amended on 5 May 2015 (see paragraph 18.6(d)(iii) of this Part 9 (''Additional Information'') below for further information); and

• Governing law: English law.
• (ii) Existing Retail Note Guarantees

On 5 November 2014, the Company the Existing Retail Notes Trustee and certain subsidiaries of the Company, namely EnQuest NWO Limited, EnQuest Heather, EnQuest Britain Limited, EnQuest Heather Leasing Limited, EnQuest ENS Limited, EnQuest Global Limited and EQ Petroleum Sabah Limited (each a ''Guarantor'') entered into the First Supplemental Trust Deed pursuant to which each Guarantor gave a guarantee in respect of the Existing Retail Notes (the ''Existing Retail Note Guarantee'') on a subordinated basis. The Existing Retail Note Guarantees rank pari passu with the High Yield Notes Guarantees and are subordinated in right of payment to outstanding claims of certain senior creditors of the Guarantors. On 5 November 2014, the Existing Retail Notes Trustee acceded to the Guarantee Subordination Agreement dated 9 April 2014 (as amended by the Amendment Agreement to the Guarantee Subordinate Agreement dated 5 November 2014).

Pursuant to the First Supplemental Trust Deed and the Guarantee Subordination Agreement, the Existing Retail Note Guarantees are:

• each a direct, unconditional and irrevocable, joint and several guarantee by the relevant Guarantor to the Existing Retail Notes Trustee (for itself and on behalf of the holders of the Existing Retail Notes) of payment of principal and interest payable under the terms and conditions of the Existing Retail Notes and all other monetary obligations of the Company to the holders of the Existing Retail Notes or the Trustee under the Existing Retail Notes Trust Deed in respect of the Existing Retail Notes and any additional amounts payable pursuant to Condition 8 (Taxation) of the Existing Retail Notes;
• subordinated in right of payment to all existing and future senior obligations of the Guarantors, including under the Existing RCF;
• pari passu in right of payment with all existing and future senior subordinated obligations of the Guarantors, including the Existing High Yield Note Guarantees;
• senior in right of payment to all future obligations of the Guarantors that are expressly contractually subordinated to the Guarantors' Existing Retail Note Guarantees and Existing High Yield Note Guarantees; and
• effectively subordinated to all existing and future secured obligations of the Guarantors (including under the Existing RCF), to the extent of the value of the property and assets securing such obligations, unless such assets also secure the Retail Note Guarantees on an equal and rateable or senior basis.

For more information regarding the Existing High Yield Note Guarantees, see paragraph 18.6(h) of this Part 9 (''Additional Information'') below.

(iii) Amendments to the Existing Retail Notes

Amendment to Financial Covenants

On 5 May 2015, the Company, the Existing Retail Notes Trustee and the Guarantors entered into a second supplemental trust deed (the ''Second Supplemental Trust Deed'') with the consent of the holders of the Existing Retail Notes to amend the financial covenants in the Retails Notes in order to align them with the amended covenants in the Existing RCF, as announced by the Company on 23 January 2015. This involved amending the financial covenants so as to raise the ratio of net financial indebtedness to EBITDA to 5.0:1.0 and reduce the ratio of EBITDA to financial charges to 3.0:1.0. The financial covenants are due to revert to their original levels (as described in (c) above) from (and including) 30 June 2017.

Change to Interest Rate Provisions

In the Second Supplemental Trust Deed the terms and conditions of the Existing Retail Notes were amended so that the rate of interest in respect of the Existing Retail Notes would be increased to 7.00 per cent. per annum for a limited period of time if the ratio of net financial indebtedness to EBITDA was more than 3.0:1.0 in respect of any test period. At the date of this document, the Existing Retail Notes carry interest of 7.00 per cent. per annum.

These amendments were constituted by the Second Supplemental Trust Deed.

(e) Subordination Agreement

In the following summary of the subordination agreement dated 9 April 2014 between, among others, the Company and BNP Paribas (as senior facility agent and security trustee) as amended, novated, supplemented, extended and/or restated from time to time (the ''Guarantee Subordination Agreement''):

• ''Debt Documents'' refers to (among others) each of the Senior Finance Documents and the Notes Documents;
• each member of the Group (excluding any Notes Issuer) that is a borrower or guarantor under the Debt Documents is referred to as a ''Debtor'' and are collectively referred to as the ''Debtors'';
• ''Group'' refers to all of the Company's subsidiaries for the time being but, for the avoidance of doubt, not the Company itself;
• ''Liabilities'' refers to (among others) all present and future liabilities and obligations at any time of a Debtor to a creditor under the Debt Documents, both actual and contingent and whether incurred solely or jointly or as principal or surety or in any capacity, together with any of the following matters relating to or arising in respect of those liabilities and obligations:
• any refinancing, novation, deferral or extension;
• any claim for breach of representation, warranty or undertaking or an event of default or under any indemnity given under or in connection with any document or agreement evidencing or constituting any other liability or obligation falling within the definition of ''Liabilities'';
• any claim for damages or restitution; and
• any claim as a result of any recovery of any Debtor of a payment to a creditor on the grounds or preference or otherwise,

and any amounts which would be included in any of the above but for any discharge, non-provability, unenforceability or non-allowance of those amounts in any insolvency or other proceedings;

• ''Notes Creditors'' refers to the creditors of the Existing RCF, certain banks that act as counterparties to hedging agreements and the High Yield Notes Trustee on its own behalf and on behalf of the holders of the High Yield Notes.
• ''Notes Documents'' refers to each of the Guarantee Subordination Agreement, the Existing Retail Notes, the Existing Retail Note Guarantees, the Existing Retail Notes Trust Deed, the Existing High Yield Notes, the Existing High Yield Note Guarantees and the High Yield Note Indenture;
• ''Notes Issuer'' refers to the Company (in its capacity as issuer of the Existing Retail Notes and the Existing High Yield Notes) and any of its wholly-owned subsidiaries which may in the future issue bonds or notes and on-lend the proceeds of such issuance to the Company; and
• ''Senior Finance Documents'' refers to (among others) the Guarantee Subordination Agreement, the Senior Facility Agreement, certain hedging agreements and other documents evidencing the Senior Liabilities (as defined below).
• (i) Ranking and Priority

The Guarantee Subordination Agreement provides that the Liabilities owed by the Debtors to the Senior Creditors under the Senior Finance Documents (the ''Senior Liabilities'') and the Liabilities owed by the Guarantors to the Notes Creditors under the Notes Documents (the ''Notes Guarantee Liabilities'') will rank in right and priority of payment in the following order:

• first, the Senior Liabilities pari passu and without any preference between them; and

• second, the Notes Guarantee Liabilities, pari passu and without preference between them.

The parties to the Guarantee Subordination Agreement have agreed that the Liabilities owed by any Notes Issuer to the Notes Creditors under the Notes Documents, certain amounts owed to the Existing Retail Notes Trustee or the High Yield Notes Trustee under the Notes Documents and certain security enforcement and preservation costs relating to the High Yield Notes or the Existing Retail Notes (if any) are senior obligations (and are therefore not Notes Guarantee Liabilities) and the Guarantee Subordination Agreement does not purport to rank, postpone and/or subordinate any of them in relation to any other liability.

(ii) Permitted Payments

Until the Senior Discharge Date (as defined below), the Guarantee Subordination Agreement only permits Debtors to pay any amounts due to the Notes Creditors with respect to the Notes Guarantee Liabilities if:

• no Stop Notice (as defined below) is outstanding and no Senior Payment Default (as defined below) has occurred and is continuing; and
• the requisite consent of the Senior Facility Creditors has been obtained; or
• the payment is of:
• costs, commissions, taxes, fees payable to administrative service providers in connection with any consent process (provided that no portion of such fees may be payable to, or received by, the Existing Retail Noteholders or the High Yield Noteholders) and expenses incurred in respect of (or reasonably incidental to) the Notes Documents (or any of them);
• additional amounts payable as a result of the tax gross-up provisions relating to the Notes Guarantee Liabilities and amounts in respect of currency indemnities in the Notes Documents;
• any amount not exceeding US\$2,250,000 (or its equivalent in other currencies) in aggregate in any twelve-month period; or
• the principal amount of the liabilities in respect of the Existing Retail Notes or the High Yield Notes on or after the final maturity date thereof (provided that such maturity date is the date so stated in the Existing Retail Notes Trust Deed or High Yield Note Indenture (respectively) in its original form).

The ''Senior Discharge Date'' means the date on which all Senior Liabilities have been fully and finally discharged to the satisfaction of the relevant Representative (as defined below) and the Senior Creditors are under no further obligations to provide financial accommodation to any Debtor under any Senior Finance Document.

A ''Senior Payment Default'' refers to a default arising by reason of a failure by a Notes Issuer to pay on the due date any amount payable by them in connection with any of the Senior Finance Documents other than an amount not exceeding US\$1,000,000 (or its equivalent in any currency).

The agent representative (the ''Representative'') of the Senior Facility Creditors (in accordance with the underlying facility documentation) may serve a notice (a ''Stop Notice'') to the Existing Retail Notes Trustee or (as the case may be) the High Yield Note Trustee specifying that an event of default (other than a Senior Payment Default) under the Senior Facility is outstanding and suspend the payment of any Notes Guarantee Liabilities (subject to the exception described above) until the earliest of:

• the date on which such relevant event of default is waived, remedied or cured in accordance with the relevant document, is no longer continuing or otherwise ceases to exist;
• the date falling 179 days after the date of receipt by the Existing Retail Notes Trustee or (as the case may be) the High Yield Notes Trustee of the Stop Notice;

• the date on which the Senior Liabilities owed to the relevant Senior Creditors under the Senior Finance Documents under which such event of default occurred have been fully and finally discharged and the relevant Senior Creditors are under no further obligation to provide financial accommodation to any Debtor under any Senior Finance Document;

• the date on which the Representative that served the Stop Notice cancels such Stop Notice;

• if a Standstill Period (as defined below) is already in effect, the date on which the aforementioned Standstill Period expires; and
• the date on which the Existing Retail Notes Trustee or (as the case may be) the High Yield Notes Trustee takes any enforcement action that is permitted under the Guarantee Subordination Agreement.

Each Stop Notice is to be issued within 60 days of receipt of notice of such default, only one notice may be served within any 360 day period, not more than one such notice may be served in respect of the same event or set of circumstances and no such notice may be served in respect of an event of default which has been notified to the relevant Representative at the time at which an earlier Stop Notice was issued.

Notwithstanding the foregoing, the Notes Issuer is not prevented from making a payment from its own assets if such payment is in respect of any of its obligations under the Existing Retail Notes or the High Yield Notes in respect of which such Stop Notice has been delivered and such payment is not financed by a payment to such Notes Issuer by a member of the Group which is prohibited as described in the section entitled ''Permitted payments''.

(iii) Turnover—by the Notes Creditors

The Guarantee Subordination Agreement provides that if, at any time prior to the Senior Discharge Date, a Notes Creditor (subject to certain limited exceptions, including in respect of the Existing Retail Notes Trustee and the High Yield Notes Trustee) receives or recovers a payment or distribution of, on account of or in relation to any Notes Guarantees Liabilities which is not a permitted payment under the Guarantee Subordination Agreement, it will, in relation to receipts and recoveries from a Notes Guarantor:

• hold the received or recovered amount on trust for the Representative;
• promptly notify the Representative of such receipt or recovery and request that the Representative confirm the amount of Senior Liabilities outstanding under the relevant Senior Finance Document; and
• pay or distribute such amounts to the Representatives for application in accordance with the terms of the Senior Finance Documents.
• (iv) Turnover—by the Representatives

The Guarantee Subordination Agreement provides that, if the Representative collects, receives or recovers any amounts in following the taking of any enforcement action by the Existing Retail Notes Trustee (in respect of the Existing Retail Notes) or the High Yield Notes Trustee (in respect of the High Yield Notes) and, after the Senior Discharge Date, the Representative continues to hold any such amounts so collected, received or recovered, the Representative shall promptly pay all such amounts to the relevant trustee for application in accordance with the terms of the Notes Documents (or pro rata to the relevant representatives of any debt ranking pari passu with the Existing Retail Notes and the High Yield Notes).

(v) General

The Guarantee Subordination Agreement contains provisions dealing with:

• the incurrence of future debt that will allow (i) certain agents with respect to the creditors of senior debt to accede to the Guarantee Subordination Agreement and benefit from, and be subject to, the provisions described above (including, for the avoidance of doubt, as creditors in respect of Senior Liabilities) and (ii) certain trustees with respect to the creditors of debt ranking pari passu with the Existing Retail Notes and the High Yield Notes to accede to the Guarantee Subordination Agreement and have the same rights and obligations as the Existing Retail Notes Trustee and the High Yield Notes Trustee;
• when the Existing Retail Notes Trustee, the High Yield Notes Trustee or any other representative of any debt ranking pari passu with the Existing Retail Notes and the Existing High Yield Notes (a ''Notes Trustee'') may (i) demand, sue, prove and give receipt for any Guarantors' Notes Guarantees Liabilities; (ii) collect and receive all distributions on, or on account of, any

Guarantors' Notes Guarantees Liabilities; and (iii) file claims, take proceedings and do other things to recover any Guarantors' Notes Guarantees Liabilities;

• the circumstances in which any Notes Trustee may (and, in the case of the Existing Retail Notes Trustee, on instruction of the Retail Noteholders given in accordance with the Existing Retail Notes Trust Deed), by giving at least 10 business days' notice to the Representative, at any time when a Stop Notice is outstanding and any enforcement action has been taken by or on behalf of a Senior Creditor, require the transfer to it or all (and not part) of the rights and obligations in respect of the Senior Liabilities (subject to certain conditions);
• when a Notes Trustee will be required, pursuant to any enforcement action taken in relation to the Senior Finance Documents, to release any guarantees given by the Guarantors;
• notwithstanding any other provision of the Guarantee Subordination Agreement, no Notes Trustee shall have any obligation to take any action under the Guarantee Subordination Agreement unless it is indemnified and/or secured to its satisfaction in respect of all costs, expenses and liabilities which it would in its opinion thereby incur (together with any associated VAT); and
• customary protections, entitlements and exemptions from liability for Notes Trustees all as further set out in the Guarantee Subordination Agreement.
• (vi) Governing Law

The Guarantee Subordination Agreement is governed by and construed in accordance with English law.

(f) Letters of credit and surety bonds

The Group enters into letters of credit and surety bonds principally to provide security for its decommissioning obligations.

The Group has two surety bonds of £27.0 million and £45.0 million (expiring 31 December 2016) in respect of its decommissioning obligations in Heather and benefitting BG Great Britain Limited and two surety bonds of £12.9 million and £2.3 million (expiring 31 December 2016) in respect of its decommissioning obligations in Alba and benefitting Chevron North Sea Limited; the Group also has surety bonds of £5.0 million and £2.0 million expiring 31 December 2016 and 30 September 2017, respectively and benefitting Chevron North Sea Limited and TAQA Bratani Limited, respectively. The Group does not currently have letters of credit or surety bonds in respect of its other assets. See ''Risk factors—Risks relating to the Group's business—the Group may face unanticipated increased or incremental costs in connection with decommissioning obligations.''

The Surety Bond Providers have issued six surety bonds at the Company's request under the Surety Bond Facilities, one of which was renewed for 12 months in September 2016. The other surety bonds expire in December 2016 and the Company signed a renewal commitment letter with each Surety Bond Provider on 5 October 2016, under which the Surety Bond Providers commit to renew: (1) the surety bonds which expire in December 2016 for 12 months and then for a further 12 months when they expire in December 2016 and December 2017, respectively and (2) the surety bond which expires in September 2017 for 12 months upon its expiry. The renewal commitments become effective on: (i) the approval of the Scheme; (ii) the Existing RCF Lenders having agreed to make available further utilisations to the Company under the Existing RCF; and (iii) the placing of an issuance of new equity by the Company being effected. The renewal of each surety bond is subject to there being at the time of each renewal no insolvency event affecting the Company or EnQuest Heather Limited and no event of default outstanding under the Senior Facility Agreement or the Existing Notes entitling the Existing RCF Lenders to take enforcement action thereunder or the Existing Noteholders to accelerate repayment;.

(g) Hedging arrangements

The Group maintains certain commodity hedges to manage its exposure to movements in oil and gas prices. In addition, the Group holds a small portfolio of foreign exchange derivatives. In connection with these activities, the Group has entered into International Swaps and Derivatives Association master agreements with several hedging partners. Certain of the Initial Purchasers have entered and may from time to time enter into hedging arrangements with the Group and its affiliates.

(h) Existing High Yield Notes

The following description of the Existing High Yield Notes is based on their terms and conditions in effect as at the date of this document. Pursuant to the Scheme, all Existing High Yield Notes will be exchanged on a dollar-for-dollar basis for New High Yield Notes. Subject to the Proposed Note Amendments, as further specified in paragraph 5.1 of Part 1 (''Letter from the Chairman of EnQuest PLC''), the New High Yield Notes will be governed by terms and conditions substantially the same as those governing the Existing High Yield Notes. The Proposed High Yield Note Amendments, along with the other components of the Restructuring, are inter-conditional and cannot proceed if the Placing and Open Offer or any other component of the Restructuring does not proceed.

On 4 April 2014, EnQuest completed the offering of \$650,000,000 aggregate principal amount of its 7 per cent. Senior Notes due 2022. EnQuest pays interest on the Existing High Yield Notes semi-annually on 15 April and 15 October of each year, commencing 15 October 2014. The Existing High Yield Notes will mature on 15 April 2022.

At any time on or after 15 April 2017, EnQuest may redeem all or part of the Existing High Yield Notes by paying the redemption prices set forth in the offering memorandum. Prior to 15 April 2017, EnQuest will be entitled, at EnQuest's option, to redeem all or a portion of the Existing High Yield Notes by paying 100 per cent. of the principal amount of such Existing High Yield Notes, plus accrued and unpaid interest, if any, plus a ''make whole'' premium. In addition, prior to 15 April 2017, EnQuest may redeem, at EnQuest's option, up to 35 per cent. of the Existing High Yield Notes with the net proceeds from certain equity offerings. If EnQuest undergoes certain events defined as constituting a change of control, each holder may require EnQuest to repurchase all or a portion of its Existing High Yield Notes at 101 per cent. of their principal amount, plus accrued and paid interest, if any. In the event of certain developments affecting taxation, EnQuest may redeem all, but not less than all, of the Existing High Yield Notes.

The Existing High Yield Notes limit, among other things, the ability of the Company and its restricted subsidiaries to:

• incur additional debt and issue guarantees and preferred stock;
• make certain payments, including dividends and other distributions, with respect to outstanding share capital;
• repay or redeem subordinated debt or share capital;
• create or incur certain liens;
• impose restrictions on the ability of the Company's restricted subsidiaries to pay dividends or other payments to the Company or any of its other restricted subsidiaries;
• make certain investments or loans;
• sell, lease or transfer certain assets, including shares of any restricted subsidiary of the Company;
• guarantee certain types of other indebtedness of the Company or its restricted subsidiaries without also guaranteeing the Notes;
• expand into unrelated businesses;
• merge or consolidate with other entities; and
• enter into certain transactions with affiliates.

The Existing High Yield Notes are guaranteed on a senior subordinated basis (the ''Existing High Yield Note Guarantees'') by the Existing High Yield Note Guarantors. Each Existing High Yield Note Guarantee is a senior subordinated obligation of the respective Existing High Yield Note Guarantor; subordinated in right of payment to all existing and future senior obligations of that Existing High Yield Note Guarantor, including, where applicable, such Existing High Yield Note Guarantor's obligations under the Existing RCF; pari passu in right of payment with all existing and future senior subordinated obligations of that Existing High Yield Note Guarantor; senior in right of payment to all future obligations of that Existing High Yield Note Guarantor that are expressly contractually subordinated to that Existing High Yield Note Guarantee; and effectively subordinated to all existing and future secured obligations of that Existing High Yield Note Guarantor (including under the Existing RCF, where applicable), to the extent of the value of the property and assets securing such obligations, unless such assets also secure the Note Guarantees on an

equal and ratable or senior basis. The Existing High Yield Note Guarantees will be subject to release under certain circumstances.

The Existing High Yield Notes listed on the Official List of the Luxembourg Stock Exchange and trade on the Euro MTF.

19. EnQuest Litigation

The Group is currently engaged in a dispute with KUFPEC, the Group's field partner in respect of Alma/ Galia. KUFPEC has commenced a court action in the High Court of Justice claiming an alleged breach of one of the Group's warranties provided under the Alma/Galia Farm-in Agreement and seeking damages of \$91 million (the maximum breach of warranty claim permitted under the Alma/Galia Farm-in Agreement), together with interest. The court proceedings are currently stayed as the parties attempt to resolve the disputed issues. In the event that no agreement is reached and the court proceedings are recommenced, the Directors believe that a considerable period will elapse before any decision is reached by the courts. The Directors consider the merits of the claim to be poor and the Group intends to vigorously defend itself. The Group has not made any provisions in respect of this claim as the Directors believe the claim is unlikely to be successful; and in any event the Directors believe the chances of an outcome exposing the Group to material damages are remote. There can, however, be no assurances that this claim will not ultimately be successful, or that the Group would not otherwise seek to enter into a settlement or compromise in respect of this claim, or that in the event of any such circumstances the Group would not incur costs and expenses in excess of its estimates.

The Group is also currently engaged in discussions with EMAS, one of the Group's contractors on Kraken who performed the installation of a buoy and mooring system, in relation to the payment of approximately \$20 million of variation claims which EMAS claims is due as a result of soil conditions at the work site being materially different from those reasonably expected to be encountered based on soil data previously provided. The Group is confident that such variation claims are not valid and that accordingly such amount is not due and payable by the Group under the terms of the contract with EMAS. No formal court action has been commenced or threatened by EMAS. The parties are currently in discussions pursuant to the dispute resolution process under the contract.

Save as disclosed above, there are no, and have not been, any governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Company is aware) which may have, or have had during the 12 months preceding the date of this document, a significant effect on the Company's financial position or profitability.

20. Intellectual property

A key part of the Group's exploration programme is the acquisition of seismic data and its subsequent analysis, both of which form part of the Group's trade secrets. The Group relies on the confidentiality provisions in its employment agreements to protect these trade secrets. The Group does not own any other material intellectual property rights.

21. Working capital

The Company is of the opinion that the Group does not have sufficient working capital available for its present requirements, that is, for at least 12 months from the date of this document.

Without further action, the Directors believe that the Group would experience a maximum working capital shortfall of approximately \$150 million in May 2017 and that the Group will be unable to pay the interest due in respect of the Group's Existing High Yield Notes on 17 October 2016. If not remedied within the applicable 30 day grace period and there is no interest payment standstill agreed by the requisite majority of Noteholders (90 per cent. or more), this would constitute a default under the Existing High Yield Notes and a cross default under certain of the Group's key debt instruments and facilities, including the Existing RCF and the Existing Retail Notes. In addition, the Group has, since January 2015, obtained waivers from the Existing RCF Lenders in respect of the liquidity covenant contained in the Existing RCF and the current waiver from this covenant expires on 31 December 2016. To the extent the Group is unable to improve its liquidity position or obtain further waivers from the Existing RCF Lenders, the Group could fail to meet the liquidity covenant in the Existing RCF when next tested on 31 December 2016 or on a subsequent test date, which would constitute an event of default under the Existing RCF. In either of these circumstances, there is a risk that the Company may become subject to enforcement action (including, for

example, the filing of a winding up petition against the Company) which if not terminated or withdrawn could result in the majority Existing RCF Lenders enforcing their security in respect of the Company and/or the Group by (among other things) appointing an administrator to the Company, with a view to commencing (and/or continuing, if already commenced by the Company at such time) a marketing process for the sale of the Group on an accelerated basis. In this scenario, the Directors consider that there is likely to be little or no value for Shareholder or Noteholders. However, the Ad Hoc Committee may propose an alternative debt restructuring and seek to engage in negotiations with the Existing RCF Lenders (which may involve providing a standstill of the October Interest Payment if the requisite majority has approved such standstill) and the Existing RCF Lenders may or may not accept such proposal or may consider such proposal in the context of the sales process.

In order to address the Company's working capital shortfall, the Directors have undertaken a number of measures prior to the announcement of the Restructuring, including:

• agreeing with the Existing RCF Lenders further utilisations of approximately \$20 million and \$26 million under the Existing RCF, in September 2016 and October 2016, respectively; and
• agreeing the deferral of certain payments to trade suppliers until between October 2016 and April 2019.

The Directors have now proposed the Restructuring, including the Placing and Open Offer, to improve the Group's capital structure and to improve the ongoing liquidity position of the Group. The Proposed Note Amendments would capitalise the Group's cash interest expense under the New High Yield Notes and the Amended Retail Notes unless the oil price is equal to or above an average of \$65.00/bbl for the six-month period ending one month prior to the interest payment date (and certain other conditions are met) and the Proposed RCF Amendments and Proposed Note Amendments would extend the maturity date for the repayment of the Existing RCF to October 2021, extend the scheduled maturity in respect of New High Yield Notes and Amended Retail Notes to April 2023, further automatically extend the maturity date in respect of the New High Yield Notes and the Amended Retail Notes to October 2023 if the Company has not repaid or refinanced the Existing RCF by 15 October 2020, amend the Group's financial covenants to provide additional flexibility under the RCF, remove certain financial covenants from the Existing Retail Notes and amend certain financial indebtedness baskets under the New High Yield Notes. The proceeds of the Placing and Open Offer, expected to be £78.1 million net of expenses, are expected to enable the Group to complete the Kraken development and bring it to first oil on schedule in the first half of 2017, which the Directors believe will considerably improve the Group's cash flows.

Assuming and following completion of the Restructuring and the Proposed RCF Amendments, the maximum remaining facilities available to the Group under the Existing RCF will be \$197.7 million, less any further interim utilisations agreed with the Existing RCF Lenders between the date of this document and completion of the Restructuring and the Proposed RCF Amendments.

If the Placing and Open Offer and the rest of the Restructuring do proceed, and taking into account the facilities available to the Group under the Existing RCF, the Company is of the opinion that the Group will have sufficient working capital for its present requirements, that is, for at least 12 months from the date of this document.

However, as each of the components of the Restructuring is inter-conditional, the Restructuring cannot proceed if the Placing and Open Offer or any other component of the Restructuring does not proceed. The completion of the Placing and Open Offer and the rest of the Restructuring is therefore subject to the following conditions among others that remain outstanding as of the date of this document: (i) the passing of the Resolutions related to the Placing and Open Offer by Shareholders at the General Meeting; (ii) the approval of the Proposed RCF Amendments by Existing RCF Lenders and Hedging Banks representing 100 per cent. of the aggregate principal amount of the Existing RCF and the Existing Hedging Liabilities; (iii) the Scheme being passed by more than 50 per cent. in number and at least 75 per cent. in value of Scheme Creditors attending and voting in person or by proxy at the meeting of Scheme Creditors convened with the permission of the Court and a recognition order in connection with the Scheme being granted under Chapter 15 of Title 11 of the US Code; and (iv) and certain other procedural steps.

As of the date of this document, all of the Existing RCF Lenders and all of the Hedging Banks have entered into, or acceded to, the Lock-Up Agreement pursuant to which they have agreed to vote in favour of the Proposed RCF Amendments. Additionally, Existing High Yield Noteholders representing approximately 61 per cent. in value of the Existing High Yield Notes have entered into, or acceded to, the Lock-Up Agreement pursuant to which they have agreed to attend the Scheme Meeting in person or by

proxy and to vote in favour of the Scheme. Due to the diverse nature of the holdings of the Existing Retail Notes, it was not possible for the Company to approach all of the Existing Retail Noteholders in advance of announcement of the Restructuring and the Scheme. However, the Company has consulted on a confidential basis with a number of holders who together hold a significant proportion of the Existing Retail Notes, in order to obtain their indicative support for the proposals contemplated by the Scheme and the Restructuring. The feedback from such Existing Retail Noteholders was positive and indicated support for the Restructuring from professional investors.

The long stop date for completion of each of the Restructuring steps, as set out in the Lock-Up Agreement, is 2 December 2016. If any of these steps does not take place by the long stop date (as it may be amended or extended), then neither the Placing and Open Offer nor the rest of the Restructuring will proceed. In these circumstances, the Group would not have sufficient working capital for its present requirements.

In such a case, the Group would seek to enter into further negotiations to amend and/or obtain waivers in respect of the default provisions in the Group's debt arrangements, including the Existing RCF, the Existing High Yield Notes and the Existing Retail Notes. However, there can be no assurance that any such negotiations would be successful. In these circumstances, the Group would also seek to manage its ongoing working capital requirements and trading activities through exploring such measures as disposing of certain assets, further cost reductions and negotiating new credit arrangements with existing or new lenders or raising funding from third parties. However, there can be no assurance that the Group would be able to complete such measures or that any such measures would be sufficient to remedy the Group's working capital shortfall, particularly in the current low oil price environment. Additionally, any disposal of assets or reduction in capital expenditure would be likely to reduce the Group's aggregate production and could lead to the Group being unable to bring its current developments, including Kraken and Scolty/ Crathes, onstream, all of which would have a material adverse impact on the Group's cash flows going forward. Please see paragraph 4.7 of Part 1 (''Letter from the Chairman of EnQuest PLC'') entitled ''Consequences of a failure to implement the Restructuring'' for further detail on the consequences of the Placing and Open Offer and the rest of the Restructuring not proceeding.

Even if the Placing and Open Offer and the rest of the Restructuring do proceed, the ability of the Group to succeed in the longer term and to be in a position to return value to Shareholders for their investment is highly dependent on oil prices. The Group's realised oil prices would need to increase above current levels for Shareholders to receive a return on their investment, and this is out of the Group's control. If oil prices remain at their current levels or decline further, it is highly likely that the Company would be unable to return any value to its Shareholders.

For Shareholders, the main benefit of the Placing and Open Offer and the Restructuring is to enable the Group to continue to trade, complete the Kraken development and bring it on production, as well as allowing time for a recovery in oil prices, while also allowing Shareholders to retain their investment in the Company.

The Directors consider that if and shortly after it becomes apparent that the Restructuring is not capable of being implemented (for example, if the Resolutions necessary to complete the Placing and Open Offer are not approved at the General Meeting or if the requisite majority of Scheme Creditors do not vote in favour of the Scheme or the Court decides not to exercise its discretion to sanction the Scheme), it is likely that the Company will commence a marketing and sales process of the Company and/or its subsidiaries with a view to effecting the sale in a short period of two to three months. Completion of the sale may involve the appointment of administrators to the Company. The Directors believe that if the Placing and Open Offer and the rest of the Restructuring do not proceed and a marketing process for the sale of the Group on an accelerated basis is undertaken, there is likely to be little or no value for Shareholders or Noteholders. In addition, if the Company is unable to pay the October Interest Payment on the Existing High Yield Notes within the 30 day grace period as described above, the Company may become subject to enforcement action (including, for example, the filing of a winding up petition against the Company) which if, not terminated or withdrawn, could result in the majority Existing RCF Lenders enforcing their security in respect of the Company and/or the Group by (among other things) appointing an administrator to the Company, with a view to the administrator commencing and/or continuing a marketing process for the sale of the Group on an accelerated basis. In this scenario, the Directors believe that there is a significant risk that the return to Shareholders would be less than would be achieved pursuant to a marketing and sales process commenced by the Company, rather than an administrator. The Ad Hoc Committee may propose an alternative debt restructuring and seek to engage in negotiations with the Existing RCF Lenders (which

may involve providing a standstill of the October Interest Payment if the requisite majority has approved such standstill) and the Existing RCF Lenders may or may not accept such proposal or may consider such proposal in the context of the sales process.

22. No significant change

There has been no significant change in the financial or trading position of the Company or the Group since 30 June 2016, being the date to which the last published unaudited financial statements of the Group were prepared.

23. Dividends

The Company has not declared or paid any dividends since incorporation in January 2010 and does not currently intend to pay dividends in the near future. Any future payment of dividends is expected to depend on the earnings and financial condition of the Company and on such other factors as the Directors of the Company considers appropriate.

24. Miscellaneous

• 24.1 The Company expects to raise gross proceeds of approximately \$100.1 million (£82.0 million or equivalent to SEK 884.2 million at exchange rate of SEK 1.00 = GBP 0.0928 on 12 October 2016) (net of expenses) by way of the Placing and Open Offer. The total costs and expenses of, and incidental to, the Placing and Open Offer payable by the Company is estimated to amount to £3.9 million (excluding value-added tax).
• 24.2 Each of J.P. Morgan Cazenove and Merrill Lynch International has given and has not withdrawn its written consent to the issue of this document with the inclusion herein of references to its name in the form and context in which they appear.
• 24.3 Ernst & Young LLP has given and has not withdrawn its written consent to the inclusion of its name and its accountant's report on the unaudited pro forma financial information set out in Part 6 (''Unaudited Pro Forma Financial Information'') and the references thereto in the form and context in which they are included and has authorised the contents of its report for the purposes of Rule 5.5.3R(2)(f) of the Prospectus Rules. Ernst & Young LLP have given unqualified audit reports on the statutory accounts of the Company for the financial years ended 31 December 2013, 2014 and 2015.
• 24.4 Ernst & Young LLP is registered to carry out audit work by the Institute of Chartered Accountants in England and Wales.
• 24.5 Certain information has been obtained from external publications and is sourced in this document where the information is included. The Company confirms that this information has been accurately reproduced and, so far as the Company is aware and is able to ascertain from information published by third parties, no facts have been omitted which would render the reproduced information inaccurate or misleading. Unless otherwise stated, such information has not been audited.
• 24.6 The New Ordinary Shares are in registered form and will, on Admission, be capable of being held in uncertificated form. The ISIN for the New Ordinary Shares will be GB00B635TG28 and the ISIN for the Open Offer Entitlements will be GB00BYM55387.
• 24.7 Save in respect of the Placing and Open Offer, none of the New Ordinary Shares have been marketed or are available in whole or in part to the public in conjunction with the application for the New Ordinary Shares to be admitted to the premium listing segment of the Official List and to the Mid Cap segment of NASDAQ Stockholm.
• 24.8 The Company will make an appropriate announcement(s) to a Regulatory Information Service giving details of the results of the Placing and Open Offer on or about 17 November 2016.

25. Documents incorporated by reference

Details of documentation incorporated into this document by reference are set out in Part 11 (''Documents Incorporated by Reference'').

26. Documents available for inspection

Copies of the following documents will be published on the Company's website at http://www.enquest.com (other than the Explanatory Statement which will be published on the Company's information agent website at www.lucid-is.com/enquest) and will be available for inspection during normal business hours on any weekday (Saturday, Sundays and public holidays excepted) from the date of this document until Admission at the offices of Ashurst LLP, Broadwalk House, 5 Appold Street, London EC2A 2HA, United Kingdom and at the registered office of the Company and at the place of the General Meeting for 15 minutes prior to the meeting and during the meeting:

• (a) the Articles;
• (b) the 2013 Financial Statements, the 2014 Financial Statements and the 2015 Financial Statements;
• (c) the 2016 Unaudited Interim Financial Statements;
• (d) the report by Ernst & Young LLP on the unaudited pro forma financial information set out in Section B of Part 6 (''Unaudited Pro Forma Financial Information'');
• (e) Explanatory Statement;
• (f) copies of the letters of consent referred to in paragraphs 24.2 and 24.3 of this Part 9 (''Additional Information''); and
• (g) this document.

PART 10—TERMS AND CONDITIONS OF THE PLACING AND OPEN OFFER

1. Introduction

The Company is proposing, subject to certain conditions, to issue in aggregate up to 356,738,114 New Ordinary Shares through the Placing and Open Offer, raising gross proceeds of approximately £82.0 million (approximately £78.1 million, equivalent to SEK 842.0 million at exchange rate of SEK 1.00 = GBP 0.0928 on 12 October 2016) (net of expenses).

Upon completion of the Placing and Open Offer, the New Ordinary Shares will represent approximately 30.77 per cent. of the Enlarged Issued Share Capital and the Existing Ordinary Shares will represent approximately 69.23 per cent. of the Enlarged Issued Share Capital.

The Open Offer is an opportunity for Qualifying Shareholders to apply for, in aggregate, up to 356,738,114 Open Offer Shares pro rata to their current holdings at the Issue Price of 23.0 pence (equivalent to SEK 2.48 at exchange rate of SEK 1.00 = GBP 0.0928 on 12 October 2016) per New Ordinary Share in accordance with the terms of the Open Offer. The Open Offer Shares (other than the Committed Shares) have been placed conditionally with Placees at the Issue Price, subject to clawback to satisfy valid applications by Qualifying Shareholders under the Open Offer.

The Placing and Open Offer is conditional, as summarised under paragraph 4 of this Part 10 (''Terms and conditions of the Placing and Open Offer'') below.

A summary of the principal terms of the Sponsor and Placing Agreement is set out in paragraph 18.1 of Part 9 (''Additional Information'').

The Record Date for entitlements under the Open Offer for Qualifying CREST Shareholders and Qualifying Non-CREST Shareholders and the right for Qualifying Swedish Shareholders to participate in the Swedish Open Offer is 6.00 p.m. on 19 October 2016. Application Forms for Qualifying Non-CREST Shareholders accompany this document and Open Offer Entitlements are expected to be credited to stock accounts of Qualifying CREST Shareholders in CREST by 8.00 a.m. on 21 October 2016. The latest time and date for receipt of completed Application Forms and payment in full under the Open Offer and settlement of relevant CREST instructions (as appropriate) is expected to be 11.00 a.m. on 16 November 2016 with LSE Admission and commencement of dealings in Open Offer Shares expected to take place at 8.00 a.m. on 21 November 2016 (whereupon a RIS announcement will be made by the Company). The latest time and date for receipt of payment in full under the Swedish Open Offer and, where relevant, completed Swedish Application Forms, is expected to be 11.00 a.m. (Stockholm time) on 16 November 2016.

This document and, for Qualifying Non-CREST Shareholders only, the Application Form, and for Qualifying Swedish Directly Registered Shareholders only, Pre-Printed Issue Account Statement, the Pre-Printed Payment Notice and the Swedish Application Form, and for Qualifying Swedish Nominee Registered Shareholders only, the instructions from the respective nominees, contain the formal terms and conditions of the Placing and Open Offer. Your attention is drawn to paragraph 5 of this Part 10 (''Terms and Conditions of the Placing and Open Offer''), which gives details of the procedure for application and payment for the Open Offer Shares available under the Open Offer. The attention of Overseas Shareholders is drawn to paragraph 7 of this Part 10 (''Terms and Conditions of the Placing and Open Offer'').

The New Ordinary Shares, when issued and fully paid, will be identical to, and rank pari passu with, the Existing Ordinary Shares, including the right to receive all dividends and other distributions declared, made or paid on the Existing Ordinary Shares by reference to a record date on or after the relevant date of Admission. No temporary documents of title will be issued.

Applications will be made (i) to the FCA for the New Ordinary Shares to be admitted to listing on the premium listing segment of the Official List; (ii) to the London Stock Exchange for the New Ordinary Shares to be admitted to trading on the Main Market; and (iii) to NASDAQ Stockholm AB for the New Ordinary Shares to be admitted to listed on NASDAQ Stockholm. The New Ordinary Shares and the Existing Ordinary Shares are in registered form and can be held in certificated form or in uncertificated form in CREST or through the VPC System. It is expected that LSE Admission will become effective and that dealings in the New Ordinary Shares will commence at 8.00 a.m. on 21 November 2016 and that Stockholm Admission will become effective and that dealings in the New Ordinary Shares will commence on or around 21 November 2016.

Any Qualifying Shareholder who has sold or transferred all or part of his/her registered holding(s) of Existing Ordinary Shares prior to 8.00 a.m. on 20 October 2016 is advised to consult his or her stockbroker, bank or other agent through or to whom the sale or transfer was effected as soon as possible since the invitation to apply for New Ordinary Shares under the Open Offer may be a benefit which may be claimed from him/her by the purchasers under the rules of the London Stock Exchange.

Subject to the conditions referred to above being satisfied (as described in more detail in paragraph 4 of this Part 10 (''Terms and Conditions of the Placing and Open Offer'') and save as provided in paragraph 7 of this Part 10 (''Terms and Conditions of the Placing and Open Offer'') (in respect of Overseas Shareholders), it is intended that:

• (a) Application Forms in respect of the New Ordinary Shares to be offered under the Open Offer will be despatched to Qualifying Non-CREST Shareholders (other than, subject to certain limited exceptions, Excluded Overseas Shareholders and Shareholders with registered addresses in the United States or who are otherwise located in the United States) at their own risk on 20 October 2016;
• (b) Pre-Printed Issue Account Statements in respect of the New Ordinary Shares to be offered under the Swedish Open Offer will be despatched to Qualifying Swedish Directly Registered Shareholders (other than, subject to certain limited exceptions, Excluded Overseas Shareholders and Shareholders with registered addresses in the United States or who are otherwise located in the United States) at their own risk on or about 20 October 2016;
• (c) the Receiving Agent will instruct Euroclear UK & Ireland to credit the appropriate stock accounts of Qualifying CREST Shareholders (other than, subject to certain limited exceptions, Excluded Overseas Shareholders and Shareholders with registered addresses in the United States or who are otherwise located in the United States) with such Shareholders' entitlements to the Open Offer Entitlement with effect from 8.00 a.m. on 21 October 2016;
• (d) the relevant Open Offer Shares will be credited to the stock accounts in CREST of relevant Qualifying CREST Shareholders who validly apply for Open Offer Shares as soon as practicable after 8.00 a.m. on 21 November 2016;
• (e) share certificates for the Open Offer Shares to be held in certificated form will be despatched to relevant Qualifying Non-CREST Shareholders, who validly take up their Open Offer Entitlements by not later than 28 November 2016 at their own risk;
• (f) the relevant Open Offer Shares will be credited to the VP Accounts in the VPC System of relevant Qualifying Swedish Directly Registered Shareholders who validly apply for Open Offer Shares under the Swedish Open Offer on 23 November 2016; and
• (g) the relevant Open Offer Shares will be credited to the VP Accounts in the VPC System of the nominees of relevant Qualifying Swedish Nominee Registered Shareholders who validly apply for Open Offer Shares under the Swedish Open Offer on 23 November 2016. Open Offer Shares will be credited to the VP Accounts of the relevant nominees pursuant to applicable procedures of the relevant nominee.

Qualifying Shareholders taking up their Open Offer Entitlements or validly applying for Open Offer Shares under the Swedish Open Offer will be deemed to have given the representations and warranties set out in paragraph 8 of this Part 10 (''Terms and Conditions of the Placing and Open Offer'').

The Joint Bookrunners and any of their respective affiliates may engage in trading activity in connection with their roles under the Sponsor and Placing Agreement, and, in that capacity, may take up a portion of the New Ordinary Shares in the Placing and Open Offer as a principal position and in the capacity may retain, purchase, sell offer to sell or otherwise deal for their own account(s) in relation to the New Ordinary Shares and related or other securities and instruments in connection with the Placing and Open Offer or otherwise. In addition certain of the Joint Bookrunners or their affiliates may enter into financing arrangements (including swaps or contracts for differences) with investors in connection with which such Joint Bookrunners (or their affiliates) may from time to time acquire, hold or dispose of New Ordinary Shares. None of the Joint Bookrunners or any of their affiliates intend to disclose the extent of any such investment or transactions otherwise than in accordance with any legal or regulatory obligation to do so.

2. The Open Offer

Subject to the terms and conditions set out below (and, in the case of Qualifying Non-CREST Shareholders, in the Application Form) and, in case of Qualifying Swedish Directly Registered Shareholders, in the Pre-Printed Issue Account Statement and the Swedish Application Form), each Qualifying Shareholder is being given the opportunity to apply for any number of Open Offer Shares at the Issue Price (payable in full on application and free of all expenses) up to a maximum of their pro rata entitlement which shall be calculated on the basis of:

4 Open Offer Shares for every 9 Existing Ordinary Shares

registered in the name of the Qualifying Shareholder on the Record Date and so in proportion to any other number of Existing Ordinary Shares then registered.

Fractional entitlements to Open Offer Shares will not be allotted to Qualifying Shareholders in the Open Offer and, where necessary, fractional entitlements under the Open Offer will be rounded down to the nearest whole number of New Ordinary Shares.

Valid applications by Qualifying Shareholders will be satisfied in full up to the maximum amount of their individual Open Offer Entitlement.

Holdings of Existing Ordinary Shares in certificated and uncertificated form will be treated as separate holdings for the purpose of calculating entitlements under the Open Offer, as will holdings under different designations and in different accounts.

If you are a Qualifying Non-CREST Shareholder, the Application Form shows the number of Existing Ordinary Shares registered in your name on the Record Date (in Box 4) and also shows the maximum number of Open Offer Shares for which you are entitled to apply if you apply for your Open Offer Entitlement in full (Box 5).

Qualifying CREST Shareholders will have Open Offer Entitlements credited to their stock accounts in CREST and should refer to paragraph 5.2 of this Part 10 (''Terms and Conditions of the Placing and Open Offer'') and also to the CREST Manual for further information on the relevant CREST procedures.

If you are a Qualifying Swedish Directly Registered Shareholder, the Pre-Printed Issue Account Statement shows the number of Existing Ordinary Shares registered in your name on the Record Date and also shows the maximum number of Open Offer Shares for which you are entitled to apply.

Qualifying Shareholders may apply for any number of Open Offer Shares up to the maximum to which they are entitled under the Open Offer.

The attention of Overseas Shareholders or any person (including, without limitation, a custodian, nominee or trustee) who has a contractual or other legal obligation to forward this document or the Application Form, the Pre-Printed Issue Account Statement or the Swedish Application Form into a jurisdiction other the UK or Sweden is drawn to paragraph 7 of this Part 10 (''Terms and Conditions of the Placing and Open Offer''). The Placing and Open Offer will not be made into certain territories. Subject to the provisions of paragraph 7, Excluded Overseas Shareholders and Shareholders with registered addresses in the United States or who are otherwise located in the United States are not being sent this document and will not be sent an Application Form, a Pre-Printed Issue Account Statement or a Swedish Application Form or have their CREST accounts or VP Accounts credited with Open Offer Entitlements.

A Qualifying Shareholder (or a Shareholder in the United States or an Excluded Territory who is not eligible to participate in the Open Offer) that does not take up any Open Offer Shares under the Open Offer will experience a dilution of 30.77 per cent. as a result of the Placing and Open Offer.

Qualifying Shareholders should be aware that the Open Offer is not a rights issue. Qualifying Non-CREST Shareholders should also note that their Application Form is not a negotiable document and cannot be traded. Qualifying CREST Shareholders should note that the Open Offer Entitlements will not be tradeable or listed although the Open Offer Entitlements will be credited to CREST and be enabled for settlement, applications in respect of entitlements under the Open Offer may only be made by the Qualifying Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim raised by Euroclear UK & Ireland's Claims Processing Unit. Qualifying Swedish Shareholders should note that they will not receive Open Offer Entitlements and Qualifying Swedish Directly Registered Shareholders should note that neither of the Pre-Printed Issue Account Statement or the Swedish Application Form is a negotiable document and that neither of them can be traded. Any trading in the Pre-Printed Issue Account Statement or the Swedish Application Form will be void and any acquirer thereof will have no rights thereunder. Open Offer Shares not applied for under the Open Offer will not be sold in the market for the benefit of those who do not apply under the Open Offer and Qualifying Shareholders who do not apply to take up Open Offer Shares will have no rights under the Open Offer. Any Open Offer Shares which are not applied for in respect of the Open Offer will be issued to the placees and/or other subscribers procured by the Joint Bookrunners or, failing which (other than the New Ordinary Shares the subject of the EnQuest EBT Irrevocable Undertaking, the Double A Irrevocable Undertaking and the Double A Placing Letter, which are not being underwritten), to the Joint Bookrunners subject to the terms and conditions of the Sponsor and Placing Agreement, with the net proceeds retained for the benefit of the Company.

Application has been made for the Open Offer Entitlements to be credited to Qualifying CREST Shareholders' CREST accounts. The Open Offer Entitlements are expected to be credited to CREST accounts on 21 October 2016. The ISIN for the New Ordinary Shares will be the same as that of the Existing Ordinary Shares, being GB00B635TG28. The ISIN for the Open Offer Entitlements will be GB00BYM55387.

The Existing Ordinary Shares are already admitted to CREST and registered in the VPC System. No further application for admission to CREST or registration in the VPC System is accordingly required for the New Ordinary Shares. All such shares, when issued and fully paid, may be held and transferred by means of CREST or the VPC System.

The Open Offer Shares, when issued and fully paid, will be identical to, and rank pari passu with, the Existing Ordinary Shares, including the right to receive all dividends and other distributions declared, made or paid on the Existing Ordinary Shares by reference to a record date on or after Admission. The Open Offer Shares are not being made available in whole or in part to the public except under the terms of the Open Offer.

3. The Placing

The Joint Bookrunners have, pursuant to the Sponsor and Placing Agreement, placed conditionally all the Open Offer Shares (other than the Committed Shares) at the Issue Price to Placees. The commitments of these Placees are subject to clawback in respect of valid applications for Open Offer Shares by Qualifying Shareholders pursuant to the Open Offer. Subject to waiver or satisfaction of the conditions and the Placing and Open Offer not being terminated, any Open Offer Shares which are not applied for in respect of the Open Offer will be issued to the Placees and/or other subscribers procured by the Joint Bookrunners or, failing which (other than the New Ordinary Shares which the Trustees have undertaken to subscribe for pursuant to the EnQuest EBT Irrevocable Undertaking and which Double A Limited has undertaken to subscribe for pursuant to the Double A Irrevocable Undertaking and the Double A Placing Letter, which are not being underwritten), to the Joint Bookrunners subject to the terms and conditions of the Sponsor and Placing Agreement, with the net proceeds retained for the benefit of the Company.

For information on the Sponsor and Placing Agreement see paragraph 18.1 of Part 9 (''Additional Information'').

4. Conditions and Further Terms of the Placing and Open Offer

The Open Offer Shares (other than the Committed Shares) have been placed with Placees by the Joint Bookrunners, subject to clawback to satisfy valid applications under the Open Offer subject to, and in accordance with, the Sponsor and Placing Agreement.

The Placing and Open Offer is conditional, inter alia, upon:

• (a) the passing without amendment of the Resolutions at the General Meeting (and not, except with the prior written agreement of the Joint Bookrunners, acting jointly, at any adjournment of such meeting) on 14 November 2016 (or such later date as the Joint Bookrunners may agree) and the Resolutions remaining in force;

• (b) the Company having complied with its obligations under the Sponsor and Placing Agreement or under the terms and conditions of the Placing and Open Offer which fall to be performed on or prior to LSE Admission and such agreement having become unconditional save as otherwise agreed by the Joint Bookrunners, acting jointly, and the Sponsor and Placing Agreement not having been terminated prior to LSE Admission;

• (c) save for any condition in relation to Admission, the Proposed RCF Amendments and the Amendment and Restatement Agreement becoming unconditionally effective prior to LSE Admission;

• (d) save for any condition in relation to Admission, the renewal of the Surety Bond Facilities becoming unconditionally effective prior to LSE Admission;
• (e) save for any condition in relation to Admission, the Scheme and the Proposed Note Amendments becoming unconditionally effective prior to LSE Admission;
• (f) LSE Admission becoming effective by not later than 8.00 a.m. on 21 November 2016 (or such later time and/or date as the Company may agree with the Joint Bookrunners, not being later than 8.00 a.m. on 24 November 2016) and application for Stockholm Admission having been made and no notification having been received that Stockholm Admission has been refused or will not become effective before on or before 24 November 2016; and
• (g) The Double A Placing Letter and associated Letter of Credit being entered into by the parties thereto having, and continuing to have, full force and effect and not having been terminated, varied, modified, supplemented or lapsing before LSE Admission, and no right to terminate or rescind the Double A Placing Letter and associated Letter of Credit having arisen before LSE Admission.

Accordingly, if any such conditions are not satisfied or waived (where capable of waiver) or the Sponsor and Placing Agreement is terminated, the Placing and Open Offer will not proceed and any applications made by Qualifying Shareholders will be rejected. In such circumstances, application monies will be returned (at the applicant's sole risk, including any exchange rate risk), without payment of interest, as soon as practicable thereafter.

No temporary documents of title will be issued in respect of Open Offer Shares held in uncertificated form. Definitive certificates in respect of Open Offer Shares taken up are expected to be posted to those Qualifying Shareholders who have validly elected to hold their Open Offer Shares in certificated form by 28 November 2016. In respect of those Qualifying Shareholders who have validly elected to hold their Open Offer Shares in uncertificated form, the Open Offer Shares are expected to be credited to their stock accounts maintained in CREST by 21 November 2016. In respect of Qualifying Swedish Directly Registered Shareholders, the Open Offer Shares are expected to be credited to their VP Account in the VPC System on or around 21 November 2016. In respect of Qualifying Swedish Nominee Registered Shareholders the Open Offer Shares are expected to be credited to their respective nominee's VP Account in the VPC System pursuant to applicable procedures of the relevant nominee. Applications will be made (i) to the FCA for the Open Offer Shares to be admitted to listing on the premium listing segment of the Official List; (ii) to the London Stock Exchange for the Open Offer Shares to be admitted to trading on the Main Market; and (iii) to NASDAQ Stockholm AB for the Open Offer Shares to be admitted to listing on NASDAQ Stockholm. LSE Admission is expected to occur on 21 November 2016 and Stockholm Admission is expected to occur on or around 21 November 2016, when dealings in the New Ordinary Shares to be issued pursuant to the Placing and Open Offer are expected to begin. All monies received by the Registrar in respect of Open Offer Shares will be placed on deposit in an interest bearing account by the Registrar or trustee with any interest being retained for the Company until all conditions are met. After Admission, the Sponsor and Placing Agreement will not be subject to any conditions or rights of termination (including in respect of statutory withdrawal rights).

If for any reason it becomes necessary to adjust the expected timetable as set out in this document, the Company will make an appropriate announcement to a Regulatory Information Service giving details of the revised dates.

The Company reserves the right to decide not to proceed with the Placing and Open Offer at any time prior to Admission. Following Admission, the Company will not be entitled to revoke any offers made in connection with the Placing and Open Offer. Any decision not to proceed will be notified by means of an announcement through a Regulatory Information Service.

5. Procedure for Application and Payment

If you are in any doubt as to what action you should take, or the contents of this document, you are recommended to consult immediately your stockbroker, bank manager, solicitor, accountant, fund manager or other appropriate independent financial adviser being, if you are resident in the United Kingdom, a firm authorised under FSMA or, if you are in a territory outside the United Kingdom, otherwise from another appropriately authorised independent financial adviser.

The action to be taken by Qualifying Shareholders in respect of the Open Offer depends on whether, at the relevant time, such Qualifying Shareholder has received an Application Form in respect of his or her entitlement under the Open Offer, has had Open Offer Entitlements credited to his or her CREST stock account in respect of such entitlement or has received a Pre-Printed Issue Account Statement. Qualifying Shareholders who hold their Existing Ordinary Shares in certificated form will be allotted Open Offer Shares in certificated form. Qualifying Shareholders who hold part of their Existing Ordinary Shares in uncertificated form will be allotted Open Offer Shares in uncertificated form to the extent that their entitlement to Open Offer Shares arises as a result of holding Existing Ordinary Shares in uncertificated form. However, it will be possible for Qualifying Shareholders to deposit Open Offer Entitlements into, and withdraw them from, CREST. Further information on deposit and withdrawal from CREST is set out in paragraph 5.2 of this Part 10 (''Terms and Conditions of the Placing and Open Offer'').

CREST sponsored members should refer to their CREST sponsor, as only their CREST sponsor will be able to take the necessary action specified below to apply under the Open Offer in respect of the Open Offer Entitlements of such members held in CREST. CREST members who wish to apply under the Open Offer in respect of their Open Offer Entitlements in CREST should refer to the CREST Manual for further information on the CREST procedures referred to below.

Qualifying Shareholders who do not want to apply for, or are not eligible to apply for, the Open Offer Shares under the Open Offer should take no action and should not complete or return the Application Form or, if relevant, the Swedish Application Form or take any action under the Pre-Printed Issue Account Statement.

Should you require further assistance please call Capita Asset Services on 0371 664 0321. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. The helpline is open between 9.00 am to 5.30 pm, Monday to Friday excluding public holidays in England and Wales. Please note that Capita Asset Services cannot provide any financial, legal or tax advice and calls may be recorded and monitored for security and training purposes.

5.1 If you have an Application Form in respect of your entitlement under the Open Offer

(a) General

Subject as provided in paragraph 7 of this Part 10 (''Terms and Conditions of the Placing and Open Offer'') in relation to Overseas Shareholders, Qualifying Non-CREST Shareholders will receive an Application Form. The Application Form shows the number of Existing Ordinary Shares registered in their name on the Record Date in Box 4. It also shows the maximum number of Open Offer Shares for which they are entitled to apply under the Open Offer, as shown by the total number of Open Offer Entitlements allocated to them set out in Box 5. Box 6 shows how much they would need to pay if they wish to take up their Open Offer Entitlements in full. Qualifying Non-CREST Shareholders may apply for less than their entitlement should they wish to do so. Qualifying Non-CREST Shareholders may also hold such an Application Form by virtue of a bona fide market claim.

The instructions and other terms set out in the Application Form form part of the terms of the Open Offer in relation to Qualifying Non-CREST Shareholders.

The latest time and date for acceptance of the Application Forms and payment in full will be 11.00 a.m. on 16 November 2016. The Open Offer Shares are expected to be issued on 21 November 2016. After such date the Open Offer Shares will be in registered form, freely transferable by written instrument of transfer in the usual common form, or if they have been issued in or converted into uncertificated form, in electronic form under the CREST system.

(b) Bona fide market claims

Applications to subscribe for Open Offer Shares may only be made on the Application Form and may only be made by the Qualifying Non-CREST Shareholder named in it or by a person entitled by virtue of a bona fide market claim in relation to a purchase of Existing Ordinary Shares through the market prior to the date upon which the Existing Ordinary Shares were marked ''ex'' the entitlement to participate in the Open Offer. Application Forms may not be assigned, transferred or split, except to satisfy bona fide market claims up to 3.00 p.m. on 11 November 2016. The Application Form is not a negotiable document and cannot be separately traded. A Qualifying Non-CREST Shareholder who has sold or otherwise transferred all or part of his/her holding of Existing Ordinary Shares prior to the date upon which the Existing

Ordinary Shares were marked ''ex'' the entitlement to participate in the Open Offer, should consult his or her broker or other professional adviser as soon as possible, as the invitation to subscribe for Open Offer Shares under the Open Offer may be a benefit which may be claimed by the transferee.

Qualifying Non-CREST Shareholders who have sold or otherwise transferred all of their registered holdings prior to 8.00 a.m. on 20 October 2016, being the date upon which the Existing Ordinary Shares were marked ''ex'' the entitlement to participate in the Open Offer should, if the market claim is to be settled outside CREST, complete Box 8 on the Application Form and immediately send it (together with this document) to the stockbroker, bank or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee in accordance with the instructions set out in the Application Form, or directly to the purchaser or transferee, if known. Qualifying Non-CREST Shareholders who have sold or otherwise transferred some only of the Existing Ordinary Shares shown in Box 4 on the Application Form prior to 8.00 a.m. on 20 October 2016, being the date upon which the Existing Ordinary Shares were marked ''ex'' the entitlement to participate in the Open Offer, should contact the stockbroker, bank or other agent through whom the sale or transfer was effected to arrange for split Application Forms to be obtained. The Application Form should not, however be forwarded or transmitted in or into the United States or any other Excluded Territory. If the market claim is to be settled outside CREST, the beneficiary of the claim should follow the procedures set out in the accompanying Application Form. If the market claim is to be settled in CREST, the beneficiary of the claim should follow the procedures set out in paragraph 5.2 below.

(c) Application procedures

Qualifying Non-CREST Shareholders (other than, subject to certain exceptions, Excluded Overseas Shareholders or Shareholders with registered addresses in the United States or who are otherwise located in the United States) wishing to apply to subscribe for all or any of the Open Offer Shares in respect of their Open Offer Entitlement should complete the Application Form in accordance with the instructions printed on it.

Completed Application Forms should be posted in the accompanying pre-paid envelope to Capita Asset Services (who will act as receiving agent in relation to the Open Offer), by post or by hand (during normal business hours only) to Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU so as to be received by not later than 11.00 a.m. on 16 November 2016, after which time Application Forms will not be valid. Qualifying Non-CREST Shareholders should note that applications, once made, will be irrevocable and receipt thereof will not be acknowledged.

If an Application Form is being sent by post in the United Kingdom, Qualifying Shareholders are recommended to allow at least four Business Days for delivery. Although, should there be any postal delays or disruptions as a result of industrial action or otherwise, Qualifying Shareholders should act promptly and may need to make alternative delivery arrangements if they wish to participate in the Open Offer.

All payments must be in pounds sterling and made by cheque or banker's draft made payable to ''Capita Registrars Limited—re: EnQuest PLC Open Offer A/C'' and crossed ''A/C payee only''. Cheques or banker's drafts must be drawn on a bank in the UK which is either a member of the Cheque and Credit Clearing Company Limited or a member of the Scottish or Belfast Clearing Houses or the CHAPS Clearing Company Limited or which has arranged for its cheques and banker's drafts to be cleared through the facilities provided by any of those companies or committees and must bear the appropriate sort code in the top right hand corner and must be for the full amount payable for the application. Third party cheques will not be accepted with the exception of building society cheques or banker's drafts where the building society or bank has confirmed the name of the account holder by stamping or endorsing the cheque or draft to such effect. The account name should be the same as that shown on the application. Post-dated cheques will not be accepted.

Shareholders should note the information set out in paragraph 6 of this Part 10 (''Terms and Conditions of the Placing and Open Offer'') and in particular the consequences of any failure to comply with Money Laundering Legislation.

Cheques or banker's drafts will be presented for payment upon receipt. The Company reserves the right to instruct the Receiving Agent to seek special clearance of cheques and banker's drafts to allow the Company to obtain value for remittances at the earliest opportunity. It is a term of the Open Offer that cheques shall be honoured on first presentation and the Company may elect to treat as invalid acceptances in respect of which cheques are not so honoured. All documents, cheques and banker's drafts sent through the post will be sent at the risk of the sender. Payments via CHAPS, BACS or electronic transfer will not be accepted. If cheques or banker's drafts are presented for payment before all of the conditions of the Open Offer are fulfilled, the application monies will be kept in a separate non-interest bearing bank account. If the Placing and Open Offer does not become unconditional, no Open Offer Shares will be issued pursuant to the Placing and Open Offer and all monies will be returned (at the applicant's sole risk), without payment of interest, to applicants as soon as practicable, but within 14 days, following the lapse of the Placing and Open Offer.

The Company may in its sole discretion, but shall not be obliged to, treat an Application Form as valid and binding on the person by whom or on whose behalf it is lodged, even if not completed in accordance with the relevant instructions or not accompanied by a valid power of attorney where required, or if it otherwise does not strictly comply with the terms and conditions of the Placing and Open Offer. The Company may treat as valid Application Forms from which pages 3 and 4 have been removed. The Company further reserves the right (but shall not be obliged) to accept either:

• (i) Application Forms received after 11.00 a.m. on 16 November 2016 but not later than 11.00 a.m. on the dealing day next following 17 November 2016; and/or
• (ii) applications in respect of which remittances are received before 11.00 a.m. on 16 November 2016 from authorised persons (being in the case of Shareholders in the United Kingdom, an authorised person as defined in FSMA) specifying the Open Offer Shares applied for and undertaking to lodge the Application Form in due course but, in any event, within two Business Days.

Multiple applications will not be accepted. All documents and remittances sent by post by or to an applicant (or as the applicant may direct) will be sent at the applicant's own risk.

If Open Offer Shares have already been allotted to a Qualifying Non-CREST Shareholder and such Qualifying Non-CREST Shareholder's cheque or banker's draft is not honoured upon first presentation or such Qualifying Non-CREST Shareholder's application is subsequently otherwise deemed to be invalid, the Receiving Agent shall be authorised (in its absolute discretion as to manner, timing and terms) to make arrangements, on behalf of the Company, for the sale of such Qualifying Non-CREST Shareholder's Open Offer Shares and for the proceeds of sale (which for these purposes shall be deemed to be payments in respect of successful applications) to be paid to and retained by the Company. None of the Receiving Agent, the Joint Bookrunners or the Company, nor any other person shall be responsible for, or have any liability for, any loss, expense or damage suffered by such Qualifying Non-CREST Shareholder as a result.

If an Application Form is accompanied by a payment for an incorrect sum, the Company reserves the right:

• (i) to reject the application in full and return the cheque or bankers' draft or refund the payment to the Qualifying Non-CREST Shareholder in question (without interest); or
• (ii) in the case that an insufficient sum is paid, to treat the application as a valid application for such lesser whole number of Open Offer Shares as would be able to be applied for with that payment at the Offer Price, refunding any unutilised sum, without interest, to the Qualifying Non-CREST Shareholder in question (without interest), save that any sums of less than £5.00 will be retained for the benefit of the Company; or
• (iii) in the case that an excess sum is paid, to treat the application as a valid application for all of the Open Offer Shares referred to in the Application Form, refunding any unutilised sums, without interest, to the Qualifying Non-CREST Shareholder in question (without interest), save that any sums of less than £5.00 will be retained for the benefit of the Company.

(d) Effect of application

By completing and delivering an Application Form, the applicant:

(i) represents and warrants to the Company and each of the Joint Bookrunners that he/she has the right, power and authority, and has taken all action necessary, to make the application under the Open Offer and to execute, deliver and exercise his/her rights, and perform his/her obligations under any contracts resulting therefrom and that he/she is not prevented by legal or regulatory restrictions from applying for Open Offer Shares and/or acting on behalf of any such person on a non-discretionary basis;

• (ii) agrees with the Company and each of the Joint Bookrunners that all applications under the Open Offer and any contracts or non-contractual obligations resulting therefrom shall be governed by and construed in accordance with the laws of England and Wales;
• (iii) confirms to the Company and each of the Joint Bookrunners that in making the application he/ she is not relying on any information or representation in relation to the Company other than that contained in this document, and he/she accordingly agrees that no person responsible solely or jointly for this document or any part thereof, or involved in the preparation thereof, shall have any liability for any such information or representation not so contained and further agrees that, having had the opportunity to read this document, he/she will be deemed to have had notice of all the information in relation to the Company contained in this document;
• (iv) confirms to the Company and each of the Joint Bookrunners that no person has been authorised to give any information or to make any representation concerning the Company or the New Ordinary Shares (other than as contained in this document) and, if given or made, any such other information or representation should not be relied upon as having been authorised by the Company or any of the Joint Bookrunners;
• (v) represents and warrants to the Company and each of the Joint Bookrunners that he/she is the Qualifying Shareholder originally entitled to the Open Offer Entitlements or that he/she received such Open Offer Entitlements by virtue of a bona fide market claim;
• (vi) represents and warrants to the Company and each of the Joint Bookrunners that if he/she has received some or all of his Open Offer Entitlements from a person other than the Company, he/ she is entitled to apply under the Open Offer in relation to such Open Offer Entitlements by virtue of a bona fide market claim;
• (vii) unless otherwise agreed by the Company in its sole discretion (after agreement with the Joint Bookrunners), represents and warrants to the Company, each of the Joint Bookrunners and the Receiving Agent that such person and any person on whose behalf the applicant is making the application (a) is not located in the United States or any Excluded Territory; (b) is not in any jurisdiction in which it is unlawful to make or accept an offer to acquire the New Ordinary Shares; (c) is not applying for the account of any person who is located in the United States, unless (1) the instruction to apply was received from a person outside the United States and (2) the person giving such instruction has confirmed that (x) it has the authority to give such instruction and (y) either (A) it has investment discretion over such account or (B) it is an investment manager or investment company that is acquiring the New Ordinary Shares in an ''offshore transaction'' within the meaning of Regulation S; and (d) it is not acquiring the New Ordinary Shares with a view to the offer, sale, resale, transfer, delivery or distribution, directly or indirectly, of any such New Ordinary Shares into the United States, any of the Excluded Territories or any other jurisdiction referred to in (b) above;
• (viii)requests that the New Ordinary Shares, to which he/she will become entitled pursuant to the Open Offer, be issued to him/her on the terms set out in this document and the Application Form subject to the Memorandum of Association and Articles;
• (ix) represents and warrants to the Company and each of the Joint Bookrunners that he/she is not, and nor is he/she applying as nominee or agent for, a person who is or may be liable to notify and account for tax under the Stamp Duty Reserve Tax Regulations 1986 at any of the increased rates referred to in section 93 (depository receipts) or section 96 (clearance services) of the Finance Act 1986; and
• (x) confirms to the Company and each of the Joint Bookrunners that in making the application, he/ she is not relying and has not relied on any of the Joint Bookrunners or any person affiliated with any of the Joint Bookrunners in connection with any investigation of the accuracy of any information contained in this document or his/her investment decision.

Qualifying Shareholders who complete and deliver an Application Form must also make the representations and warranties set out in paragraph 8 of this Part 10 (''Terms and Conditions of the Placing and Open Offer'').

All enquiries in connection with the procedure for application and completion of the Application Form should be addressed to the Receiving Agent, Capita Asset Services on 0371 664 0321. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged

at the applicable international rate. The helpline is open between 9.00 a.m. to 5.30 p.m., Monday to Friday excluding public holidays in England and Wales. Please note that Capita Asset Services cannot provide any financial, legal or tax advice and calls may be recorded and monitored for security and training purposes.

Qualifying Non-CREST Shareholders who do not want to take up or apply for the Open Offer Shares under the Open Offer should take no action and should not complete or return the Application Form.

5.2 If you have Open Offer Entitlements credited to your stock account in CREST in respect of your entitlement under the Open Offer

(a) General

Subject as provided in paragraph 7 of this Part 10 (''Terms and Conditions of the Placing and Open Offer'') in relation to certain Overseas Shareholders, each Qualifying CREST Shareholder will receive a credit to his stock account in CREST of his or her Open Offer Entitlements equal to the maximum number of Open Offer Shares for which he or she is entitled to apply to subscribe for under the Open Offer.

The CREST stock account to be credited will be an account under the participant ID and member account ID that apply to the Existing Ordinary Shares held on the Record Date by the Qualifying CREST Shareholder in respect of which the Open Offer Entitlements have been allocated.

If for any reason the Open Offer Entitlements cannot be admitted to CREST by, or the stock accounts of Qualifying CREST Shareholders cannot be credited on 21 October 2016, or such later time and/or date as the Company and the Joint Bookrunners may decide, an Application Form will, unless the Company agrees otherwise, be sent to each Qualifying CREST Shareholder in substitution for the Open Offer Entitlements which should have been credited to his or her stock account in CREST. In these circumstances the expected timetable as set out in this document will be adjusted as appropriate and the provisions of this document applicable to Qualifying Non-CREST Shareholders with Application Forms will apply to Qualifying CREST Shareholders who receive such Application Forms. The Company will make an appropriate RIS announcement giving details of the revised dates but Qualifying CREST Shareholders may not receive any further written communication. CREST members who wish to apply to subscribe for some or all of their entitlements to Open Offer Shares should refer to the CREST Manual for further information on the CREST procedures referred to below. Should you need advice with regard to these procedures, please contact the Receiving Agent, Capita Asset Services, on 0371 664 0321. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. The helpline is open between 9.00 a.m. to 5.30 p.m., Monday to Friday excluding public holidays in England and Wales. Please note that Capita Asset Services cannot provide any financial, legal or tax advice and calls may be recorded and monitored for security and training purposes. If you are a CREST sponsored member you should consult your CREST sponsor if you wish to apply for Open Offer Shares as only your CREST sponsor will be able to take the necessary action to make this application in CREST.

(b) Bona fide market claims

The Open Offer Entitlements will constitute a separate security for the purposes of CREST and will have a separate ISIN. Although Open Offer Entitlements will be admitted to CREST and be enabled for settlement, applications in respect of Open Offer Entitlements may only be made by the Qualifying Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim transaction. Transactions identified by the CREST Claims Processing Unit as ''cum'' the Open Offer Entitlement will generate an appropriate market claim transaction and the relevant Open Offer Entitlement(s) will thereafter be transferred accordingly.

(c) USE instructions

Qualifying CREST Shareholders who are CREST members and who want to apply for Open Offer Shares in respect of all or some of their Open Offer Entitlements in CREST must send (or, if they are CREST sponsored members, procure that their CREST sponsor sends) an Unmatched Stock Event (''USE'') instruction (''USE Instruction'') to Euroclear UK & Ireland which, on its settlement, will have the following effect:

(i) the crediting of a stock account of the Receiving Agent under the participant ID and member account ID specified below, with a number of Open Offer Entitlements corresponding to the number of Open Offer Shares applied for; and

(ii) the creation of a CREST payment, in accordance with the CREST payment arrangements in favour of the payment bank of the Receiving Agent in respect of the amount specified in the USE Instruction which must be the full amount payable on application for the number of Open Offer Shares referred to in (i) above.

(d) Content of USE instruction in respect of Open Offer Entitlements

The USE Instruction must be properly authenticated in accordance with Euroclear's specifications and must contain, in addition to the other information that is required for settlement in CREST, the following details:

• (i) the number of Open Offer Shares for which application is being made (and hence the number of the Open Offer Entitlement(s) being delivered to the Receiving Agent);
• (ii) the ISIN of the Open Offer Entitlement. This is GB00BYM55387;
• (iii) the CREST participant ID of the accepting CREST member;
• (iv) the CREST member account ID of the accepting CREST member from which the Open Offer Entitlements are to be debited;
• (v) the participant ID of the Registrar in its capacity as a CREST receiving agent. This is 7RA33;
• (vi) the member account ID of the Registrar in its capacity as a CREST receiving agent. This is 28930ENQ;
• (vii) the amount payable by means of a CREST payment on settlement of the USE Instruction. This must be the full amount payable on application for the number of Open Offer Shares referred to in (i) above;

(viii)the intended settlement date. This must be on or before 11.00 a.m. on 16 November 2016; and

(ix) the Corporate Action Number for the Open Offer. This will be available by viewing the relevant corporate action details in CREST.

In order for an application under the Open Offer to be valid, the USE Instruction must comply with the requirements as to authentication and contents set out above and must settle on or before 11.00 a.m. on 16 November 2016.

In order to assist prompt settlement of the USE Instruction, CREST members (or their sponsors, where applicable) may consider adding the following non-mandatory fields to the USE Instruction:

• (i) a contact name and telephone number (in the free format shared note field); and
• (ii) a priority of at least 80.

CREST members and, in the case of CREST sponsored members, their CREST sponsors, should note that the last time at which a USE Instruction may settle on 16 November 2016 in order to be valid is 11.00 a.m. on that day.

In the event that the Placing and Open Offer does not become unconditional by 8.00 a.m. on 21 November 2016 or such later date and/or time as the Company may agree with the Joint Bookrunners, the Open Offer will lapse, the Open Offer Entitlements admitted to CREST will be disabled and the Receiving Agent will refund the amount paid by a Qualifying CREST Shareholder by way of a CREST payment, without interest, as soon as practicable, but within 14 days, thereafter.

(e) Deposit of Open Offer Entitlements into, and withdrawal from, CREST

A Qualifying Non-CREST Shareholder's entitlement under the Open Offer as shown by the number of Open Offer Entitlements set out in his/her Application Form may be deposited into CREST (either into the account of the Qualifying Shareholder named in the Application Form or into the name of a person entitled by virtue of a bona fide market claim). Similarly, Open Offer Entitlements held in CREST may be withdrawn from CREST so that the entitlement under the Open Offer is reflected in an Application Form. Normal CREST procedures (including timings) apply in relation to any such deposit or withdrawal, subject (in the case of a deposit into CREST) as set out in the Application Form.

A holder of an Application Form who is proposing to deposit the entitlement set out in such form into CREST (in accordance with the instructions contained in the Application Form) is recommended to ensure that the deposit procedures are implemented in sufficient time to enable the person holding or acquiring the Open Offer Entitlements following their deposit into CREST to take all necessary steps in connection with taking up the entitlement prior to 11.00 a.m. on 16 November 2016.

In particular, having regard to normal processing times in CREST and on the part of the Registrar, the recommended latest time for depositing an Application Form with the CREST Courier and Sorting Service, where the person entitled wishes to hold the entitlement under the Open Offer set out in such Application Form as Open Offer Entitlements in CREST, is 3.00 p.m. on 10 November 2016 and the recommended latest time for receipt by Euroclear UK & Ireland of a dematerialised instruction requesting withdrawal of Open Offer Entitlements from CREST is 3.00 p.m. on 9 November 2016, in either case so as to enable the person subscribing for or (as appropriate) holding the Open Offer Entitlements following the deposit or withdrawal (whether as shown in an Application Form or held in CREST) to take all necessary steps in connection with applying in respect of the Open Offer Entitlements prior to 11.00 a.m. on 16 November 2016. CREST holders inputting the withdrawal of their Open Offer Entitlements from their CREST account must ensure that they withdraw their Open Offer Entitlements.

Delivery of an Application Form with the CREST deposit form duly completed whether in respect of a deposit into the account of the Qualifying Shareholder named in the Application Form or into the name of another person, shall constitute a representation and warranty to the Company and the Registrar by the relevant CREST member that it/they is/are not in breach of the provisions of the notes under the section headed ''CREST Deposit Form'' on page 4 of the Application Form, and a declaration to the Company and the Registrar from the relevant CREST member(s) that it/they is/are not in the United States or any Excluded Territory or citizen(s) or resident(s) of the United States or any Excluded Territory or any jurisdiction in which the application for New Ordinary Shares is prevented by law and, where such deposit is made by a beneficiary of a market claim, a representation and warranty that the relevant CREST member(s) is/are entitled to apply under the Open Offer by virtue of a bona fide market claim.

(f) Validity of application

A USE Instruction complying with the requirements as to authentication and contents set out above which settles by not later than 11.00 a.m. on 16 November 2016 will constitute a valid application under the Open Offer.

(g) CREST procedures and timings

CREST members and (where applicable) their CREST sponsors should note that Euroclear does not make available special procedures in CREST for any particular corporate action.

Normal system timings and limitations will therefore apply in relation to the input of a USE Instruction and its settlement in connection with the Open Offer. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST sponsored member, to procure that his CREST sponsor takes) such action as shall be necessary to ensure that a valid application is made as stated above by 11.00 a.m. on 16 November 2016. In this connection CREST members and (where applicable) their CREST sponsors are referred in particular to those sections of the CREST Manual concerning practical limitations of the CREST system and timings.

(h) Incorrect sums

If a USE Instruction includes a CREST payment for an incorrect sum, the Company, through the Receiving Agent, reserves the right:

• (i) to reject the application in full and refund the payment to the CREST member in question (without interest);
• (ii) in the case that an insufficient sum is paid, to treat the application as a valid application for such lesser whole number of Open Offer Shares as would be able to be applied for with that payment at the Issue Price, refunding any unutilised sum to the CREST member in question (without interest) save than any sum less than £5.00 will be retained for the benefit of the Company; or
• (iii) in the case that an excess sum is paid, to treat the application as a valid application for all the Open Offer Shares referred to in the USE Instruction, refunding any unutilised sum to the CREST member in question (without interest) save than any sum less than £5.00 will be retained for the benefit of the Company.

(i) Effect of valid application through CREST

A CREST member or CREST sponsored member who makes or is treated as making a valid application in accordance with the above procedures thereby will be deemed to have:

• (i) represented and warranted to the Company and each of the Joint Bookrunners that he/she has the right, power and authority, and has taken all action necessary, to make the application under the Open Offer and to execute, deliver and exercise his/her rights, and perform his/her obligations, under any contracts resulting therefrom and that he/she is not prevented by legal or regulatory restrictions from applying for Open Offer Shares or acting on behalf of any such person on a non-discretionary basis;
• (ii) agreed with the Company to pay the amount payable on application in accordance with the above procedures by means of a CREST payment in accordance with the CREST payment arrangements (it being acknowledged that the payment to the Registrar's payment bank in accordance with the CREST payment arrangements shall, to the extent of the payment, discharge in full the obligation of the CREST member to pay to the Company the amount payable on application);
• (iii) agreed with the Company and each of the Joint Bookrunners that all applications and any contracts or non-contractual obligations resulting therefrom under the Open Offer shall be governed by, and construed in accordance with, the laws of England and Wales;
• (iv) confirmed to the Company and each of the Joint Bookrunners that in making the application he/ she is not relying on any information or representation other than that contained in this document, and he/she accordingly agrees that no person responsible solely or jointly for this document or any part thereof, or involved in the preparation thereof, shall have any liability for any such information or representation not so contained and further agrees that, having had the opportunity to read this document, he/she will be deemed to have had notice of all the information in relation to the Company contained in this document;
• (v) confirmed to the Company and each of the Joint Bookrunners that no person has been authorised to give any information or to make any representation concerning the Company or the New Ordinary Shares (other than as contained in this document) and, if given or made, any such other information or representation should not be relied upon as having been authorised by the Company or any of the Joint Bookrunners;
• (vi) represented and warranted to the Company and each of the Joint Bookrunners that he/she is the Qualifying Shareholder originally entitled to the Open Offer Entitlements or that he/she has received such Open Offer Entitlements by virtue of a bona fide market claim;
• (vii) represented and warranted to the Company and each of the Joint Bookrunners that if he/she has received some or all of his Open Offer Entitlements from a person other than the Company, he/ she is entitled to apply under the Open Offer in relation to such Open Offer Entitlements by virtue of a bona fide market claim;
• (viii)unless otherwise agreed by the Company in its sole discretion (after agreement with the Joint Bookrunners), represents and warrants to the Company, each of the Joint Bookrunners and the Receiving Agent that such person and any person on whose behalf the applicant is making the application (a) is not located in the United States or any Excluded Territory; (b) is not in any jurisdiction in which it is unlawful to make or accept an offer to acquire the New Ordinary Shares; (c) is not applying for the account of any person who is located in the United States, unless (1) the instruction to apply was received from a person outside the United States and (2) the person giving such instruction has confirmed that (x) it has the authority to give such instruction and (y) either (A) it has investment discretion over such account or (B) it is an investment manager or investment company that is acquiring the New Ordinary Shares in an ''offshore transaction'' within the meaning of Regulation S; and (d) it is not acquiring the New Ordinary Shares with a view to the offer, sale, resale, transfer, delivery or distribution, directly or indirectly, of any such New Ordinary Shares into the United States, any of the Excluded Territories or any other jurisdiction referred to in (b) above;

• (ix) requested that the New Ordinary Shares to which he/she will become entitled be issued to him/ her on the terms set out in this document and the Application Form, subject to the Memorandum of Association and Articles;

• (x) represented and warranted to the Company and each of the Joint Bookrunners that he/she is not, and nor is he/she applying as nominee or agent for, a person who is or may be liable to notify and account for tax under the Stamp Duty Reserve Tax Regulations 1986 at any of the increased rates referred to in section 93 (depository receipts) or section 96 (clearance services) of the Finance Act 1986; and

• (xi) confirmed to the Company and each of the Joint Bookrunners that in making the application he/ she is not relying and has not relied on any of the Joint Bookrunners or any person affiliated with any of the Joint Bookrunners in connection with any investigation of the accuracy of any information contained in this document or his/her investment decision.

Any CREST member or CREST sponsored member who makes, or is treated as making, a valid application in accordance with the above procedures will be deemed to have made the representations and warranties set out in paragraph 8 of this Part 10 (''Terms and Conditions of the Placing and Open Offer'').

(j) Company's discretion as to the rejection and validity of applications

The Company may in its sole discretion:

• (i) reject any acceptance constituted by a USE Instruction, which is otherwise valid, in the event of a breach of any of the representations, warranties and undertakings set out or referred to in paragraph 5.2(i) of this Part 10 (''Terms and Conditions of the Placing and Open Offer''). Where an acceptance is made as described in this paragraph 5 which is otherwise valid, and the USE Instruction concerned fails to settle by 11.00 a.m. on the 16 November 2016 (or by such later time and/or date as the Company may agree with the Joint Bookrunners), the Company shall be entitled to assume, for the purposes of their right to reject an acceptance as described in this paragraph 5.2(j), that there has been a breach of the representations, warranties and undertakings set out or referred to in this paragraph 5 above unless the Company is aware of any reason outside the control of the Qualifying CREST Shareholder or CREST sponsor (as appropriate) concerned for the failure of the USE Instruction to settle;
• (ii) treat as valid (and binding on the CREST member concerned) an application which does not comply in all respects with the requirements as to validity set out or referred to in this paragraph 5 of this Part 10 (''Terms and Conditions of the Placing and Open Offer'');
• (iii) accept an alternative properly authenticated dematerialised instruction from a CREST member or (where applicable) a CREST sponsor as constituting a valid application in substitution for or in addition to a USE Instruction and subject to such further terms and conditions as the Company may determine;
• (iv) treat a properly authenticated dematerialised instruction (in this sub-paragraph the ''first instruction'') as not constituting a valid application if, at the time at which the Registrar receives a properly authenticated dematerialised instruction giving details of the first instruction or thereafter, either the Company or the Registrar has received actual notice from Euroclear of any of the matters specified in Regulation 35(5)(a) of the CREST Regulations in relation to the first instruction. These matters include notice that any information contained in the first instruction was incorrect or notice of lack of authority to send the first instruction; and
• (v) accept an alternative instruction or notification from a CREST member or CREST sponsored member or (where applicable) a CREST sponsor, or extend the time for settlement of a USE Instruction or any alternative instruction or notification, in the event that, for reasons or due to circumstances outside the control of any CREST member or CREST sponsored member or (where applicable) CREST sponsor, the CREST member or CREST sponsored member is unable validly to apply for Open Offer Shares by means of the above procedures. In normal circumstances, this discretion is only likely to be exercised in the event of any interruption, failure or breakdown of CREST (or any part of CREST) or on the part of the facilities and/or systems operated by the Receiving Agent in connection with CREST.

(k) Lapse of the Placing and Open Offer

In the event that the Placing and Open Offer does not become unconditional by 8.00 a.m. on 21 November 2016 (not being later than 8.00 a.m. on 24 November 2016 or such later time and/or date as the Company may agree with the Joint Bookrunners), the Placing and Open Offer will lapse, the Open Offer Entitlements admitted to CREST will be disabled and the Receiving Agent will refund the amount paid by a Qualifying CREST Shareholder by way of a CREST payment, without interest, as soon as practicable, but within 14 days, thereafter.

5.3 If you have a Pre-Printed Issue Account Statement in respect of the Swedish Open Offer

(a) General

Subject as provided in paragraph 7 of this Part 10 (''Terms and Conditions of the Placing and Open Offer'') in relation to Overseas Shareholders, Qualifying Swedish Directly Registered Shareholders will receive a Pre-Printed Issue Account Statement with an attached Pre-Printed Payment Notice. The Pre-Printed Issue Account Statement shows, inter alia, the number of Existing Ordinary Shares registered in their name on the Record Date in the VPC System. It also shows the maximum number of Open Offer Shares for which they are entitled to apply under the Swedish Open Offer. The Pre-Printed Payment Notice shows how much they would need to pay if they wish to take up their maximum entitlement under the Swedish Open Offer. Qualifying Swedish Directly Registered Shareholders may apply for less than their entitlement set out in the Pre-Printed Issue Account Statement should they wish to do so.

The instructions and other terms set out in the Pre-Printed Issue Account Statement, the Pre-Printed Payment Notice and the Swedish Application Form form part of the terms of the Swedish Open Offer in relation to Qualifying Swedish Directly Registered Shareholders.

The latest time and date for acceptance of the Swedish Open Offer and payment in full thereunder will be 11.00 a.m. (Stockholm time) on 16 November 2016. The Open Offer Shares are expected to be issued on or around 21 November 2016. After such date the Open Offer Shares will be in registered form, freely transferable in electronic form in the VPC System.

(b) Application procedures

Subscription for Open Offer Shares by Qualifying Swedish Directly Registered Shareholders (other than, subject to certain exceptions, Excluded Overseas Shareholders or Shareholders with registered addresses in the United States or who are otherwise located in the United States) shall be made by cash payment, either by using the Pre-Printed Payment Notice or by submitting a Swedish Application Form, with simultaneous cash payment in accordance with one of the following alternatives:

• (i) the Pre-Printed Payment Notice should be used if the Qualifying Swedish Directly Registered Shareholder wishes to take up its maximum entitlement under the Swedish Open Offer according to the Pre-Printed Issue Account Statement. No additions or changes may be made to the Pre-Printed Payment Notice; or
• (ii) the Swedish Application Form should be used if the Qualifying Swedish Directly Registered Shareholder wishes to apply for less Open Offer Shares than those set out on the Pre-Printed Issue Account Statement. When the completed Swedish Application Form is submitted, payment for the Open Offer Shares so applied for shall be made to the Bank Giro account stated on the application form using the preprinted ID number as reference.

(c) Incorrect sums

If a payment pursuant to a Pre-Printed Payment Notice or a completed Swedish Application Form is for an incorrect sum, the Company, through the Swedish Issuer Agent, reserves the right:

• (i) to reject the application in full and refund the payment to the Qualifying Swedish Directly Registered Shareholder in question (without interest);
• (ii) in the case that an insufficient sum is paid, to treat the application as a valid application for such lesser whole number of Open Offer Shares as would be able to be applied for with that payment at the Issue Price, refunding any unutilised sum to the Qualifying Swedish Directly Registered Shareholder in question (without interest) save than any sum less than the SEK subscription price will be retained for the benefit of the Company; or
• (iii) in the case that an excess sum is paid, to treat the application as a valid application for all the Open Offer Shares referred to in the Pre-Printed Payment Notice or completed Swedish Application Form, as applicable, refunding any unutilised sum to the Qualifying Swedish Directly

Registered Shareholder in question (without interest) save than any sum less than SEK10 will be retained for the benefit of the Company.

(d) Effect of application

By using a Pre-Printed Payment Notice or completing and delivering a Swedish Application Form, the Qualifying Swedish Directly Registered Shareholder:

• (i) represents and warrants to the Company, the Swedish Issuer Agent and each of the Joint Bookrunners that he/she has the right, power and authority, and has taken all action necessary, to make the application under the Swedish Open Offer and to execute, deliver and exercise his/her rights, and perform his/her obligations under any contracts resulting therefrom and that he/she is not prevented by legal or regulatory restrictions from applying for Open Offer Shares and/or acting on behalf of any such person on a non-discretionary basis;
• (ii) agrees with the Company, the Swedish Issuer Agent and each of the Joint Bookrunners that all applications under the Swedish Open Offer and any contracts or non-contractual obligations resulting therefrom shall be governed by and construed in accordance with the laws of England and Wales;
• (iii) confirms to the Company, the Swedish Issuer Agent and each of the Joint Bookrunners that in making the application he/she is not relying on any information or representation in relation to the Company other than that contained in this document, and he/she accordingly agrees that no person responsible solely or jointly for this document or any part thereof, or involved in the preparation thereof, shall have any liability for any such information or representation not so contained and further agrees that, having had the opportunity to read this document, he/she will be deemed to have had notice of all the information in relation to the Company contained in this document;
• (iv) confirms to the Company, the Swedish Issuer Agent and each of the Joint Bookrunners that no person has been authorised to give any information or to make any representation concerning the Company or the New Ordinary Shares (other than as contained in this document) and, if given or made, any such other information or representation should not be relied upon as having been authorised by the Company or any of the Joint Bookrunners;
• (v) represents and warrants to the Company, the Swedish Issuer Agent and each of the Joint Bookrunners that he/she is the Qualifying Swedish Directly Registered Shareholder originally entitled to participate in the Swedish Open Offer;
• (vi) unless otherwise agreed by the Company in its sole discretion (after agreement with the Joint Bookrunners), represents and warrants to the Company,and each of the Joint Bookrunners and the Swedish Agent that such person and any person on whose behalf the applicant is making the application (a) is not located in the United States or any Excluded Territory; (b) is not in any jurisdiction in which it is unlawful to make or accept an offer to acquire the New Ordinary Shares; (c) is not applying for the account of any person who is located in the United States, unless (1) the instruction to apply was received from a person outside the United States and (2) the person giving such instruction has confirmed that (x) it has the authority to give such instruction and (y) either (A) it has investment discretion over such account or (B) it is an investment manager or investment company that is acquiring the New Ordinary Shares in an ''offshore transaction'' within the meaning of Regulation S; and (d) it is not acquiring the New Ordinary Shares with a view to the offer, sale, resale, transfer, delivery or distribution, directly or indirectly, of any such New Ordinary Shares into the United States, any of the Excluded Territories or any other jurisdiction referred to in (b) above;
• (vii) requests that the New Ordinary Shares, to which he/she will become entitled pursuant to the Swedish Open Offer, be issued to him/her on the terms set out in this document, the Pre-Printed Issue Account Statement and, if applicable, the Swedish Application Form, subject to the Memorandum of Association and Articles;
• (viii)represents and warrants to the Company, the Swedish Issuer Agent and each of the Joint Bookrunners that he/she is not, and nor is he/she applying as nominee or agent for, a person who is or may be liable to notify and account for tax under the Stamp Duty Reserve Tax

Regulations 1986 at any of the increased rates referred to in section 93 (depository receipts) or section 96 (clearance services) of the Finance Act 1986; and

(ix) confirms to the Company, the Swedish Issuer Agent and each of the Joint Bookrunners that in making the application, he/she is not relying and has not relied on any of the Joint Bookrunners or any person affiliated with any of the Joint Bookrunners in connection with any investigation of the accuracy of any information contained in this document or his/her investment decision.

Qualifying Swedish Directly Registered Shareholders who do not want to take up or apply for the Open Offer Shares under the Swedish Open Offer should take no action and should not complete or return the Swedish Application Form.

(e) Lapse of the Swedish Open Offer

In the event that the Swedish Open Offer does not become unconditional by 8.00 a.m. on 21 November 2016 (not being later than 8.00 a.m. on 24 November 2016 or such later time and/or date as the Company may agree with the Joint Bookrunners), the Swedish Open Offer will lapse and the Swedish Issuer Agent will refund the amount paid by a Qualifying Swedish Directly Registered Shareholder, without interest, as soon as practicable thereafter. The interest earned on such monies, if any, will be retained for the benefit of the Company.

5.4 If you are a Qualifying Swedish Nominee Registered Shareholder under the Swedish Open Offer

(a) General

Subject as provided in paragraph 7 of this Part 10 (''Terms and Conditions of the Placing and Open Offer'') in relation to Overseas Shareholders, Qualifying Swedish Nominee Registered Shareholders wishing to apply for the Open Offer Shares under the Swedish Open Offer must follow the instructions from its nominee or nominees.

(b) Effect of application

Each Qualifying Swedish Nominee Registered Shareholder applying for Open Offer Shares under the Swedish Open Offer:

• (i) represents and warrants to the Company, the Swedish Issuer Agent and each of the Joint Bookrunners that he/she has the right, power and authority, and has taken all action necessary, to make the application under the Swedish Open Offer and to execute, deliver and exercise his/her rights, and perform his/her obligations under any contracts resulting therefrom and that he/she is not prevented by legal or regulatory restrictions from applying for Open Offer Shares and/or acting on behalf of any such person on a non-discretionary basis;
• (ii) agrees with the Company, the Swedish Issuer Agent and each of the Joint Bookrunners that all applications under the Swedish Open Offer and any contracts or non-contractual obligations resulting therefrom shall be governed by and construed in accordance with the laws of England and Wales;
• (iii) confirms to the Company, the Swedish Issuer Agentand each of the Joint Bookrunners that in making the application he/she is not relying on any information or representation in relation to the Company other than that contained in this document, and he/she accordingly agrees that no person responsible solely or jointly for this document or any part thereof, or involved in the preparation thereof, shall have any liability for any such information or representation not so contained and further agrees that, having had the opportunity to read this document, he/she will be deemed to have had notice of all the information in relation to the Company contained in this document;

• (iv) confirms to the Company, the Swedish Issuer Agent and each of the Joint Bookrunners that no person has been authorised to give any information or to make any representation concerning the Company or the New Ordinary Shares (other than as contained in this document) and, if given or made, any such other information or representation should not be relied upon as having been authorised by the Company or any of the Joint Bookrunners;

• (v) represents and warrants to the Company, the Swedish Issuer Agent and each of the Joint Bookrunners that he/she is the Qualifying Swedish Nominee Registered Shareholder originally entitled to participate in the Swedish Open Offer;

• (vi) unless otherwise agreed by the Company in its sole discretion (after agreement with the Joint Bookrunners), represents and warrants to the Company, and each of the Joint Bookrunners and the Swedish Receiving Agent that such person and any person on whose behalf the applicant is making the application (a) is not located in the United States or any Excluded Territory; (b) is not in any jurisdiction in which it is unlawful to make or accept an offer to acquire the New Ordinary Shares; (c) is not applying for the account of any person who is located in the United States, unless (1) the instruction to apply was received from a person outside the United States and (2) the person giving such instruction has confirmed that (x) it has the authority to give such instruction and (y) either (A) it has investment discretion over such account or (B) it is an investment manager or investment company that is acquiring the New Ordinary Shares in an ''offshore transaction'' within the meaning of Regulation S; and (d) it is not acquiring the New Ordinary Shares with a view to the offer, sale, resale, transfer, delivery or distribution, directly or indirectly, of any such New Ordinary Shares into the United States, any of the Excluded Territories or any other jurisdiction referred to in (b) above;
• (vii) requests that the New Ordinary Shares, to which he/she will become entitled pursuant to the Swedish Open Offer, be issued to him/her on the terms set out in this document subject to the Memorandum of Association and Articles;
• (viii)represents and warrants to the Company, the Swedish Issuer Agent and each of the Joint Bookrunners that he/she is not, and nor is he/she applying as nominee or agent for, a person who is or may be liable to notify and account for tax under the Stamp Duty Reserve Tax Regulations 1986 at any of the increased rates referred to in section 93 (depository receipts) or section 96 (clearance services) of the Finance Act 1986; and
• (ix) confirms to the Company, the Swedish Issuer Agent and each of the Joint Bookrunners that in making the application, he/she is not relying and has not relied on any of the Joint Bookrunners or any person affiliated with any of the Joint Bookrunners in connection with any investigation of the accuracy of any information contained in this document or his/her investment decision.

Qualifying Swedish Nominee Registered Shareholders who do not want to take up or apply for the Open Offer Shares under the Swedish Open Offer should take no action.

(c) Lapse of the Swedish Open Offer

In the event that the Swedish Open Offer does not become unconditional by 8.00 a.m. on 21 November 2016 (not being later than 8.00 a.m. on 24 November 2016 or such later time and/or date as the Company may agree with the Joint Bookrunners), the Swedish Open Offer will lapse and the relevant nominee will refund the amount paid by a Qualifying Swedish Nominee Registered Shareholder, without interest, as soon as practicable thereafter. The interest earned on such monies, if any, will be retained for the benefit of the Company.

6. Money Laundering Legislation

6.1 Holders of Application Forms

To ensure compliance with the Money Laundering Legislation, the Receiving Agent may require, at its absolute discretion, verification of the identity of the person by whom or on whose behalf an Application Form is lodged with payment (which requirements are referred to below as the ''verification of identity requirements''). If the Application Form is submitted by a UK regulated broker or intermediary acting as agent and which is itself subject to the Money Laundering Legislation, any verification of identity requirements are the responsibility of such broker or intermediary and not of the Receiving Agent. In such case, the lodging agent's stamp should be inserted on the Application Form.

The person lodging the Application Form with payment and in accordance with the other terms as described above (the ''acceptor''), including any person who appears to the Receiving Agent to be acting on behalf of some other person, accepts the Open Offer in respect of such number of Open Offer Shares as is referred to therein (for the purposes of this paragraph 6 the ''relevant Open Offer Shares'') and shall thereby be deemed to agree to promptly provide the Receiving Agent with such information and other evidence as the Receiving Agent may require to satisfy the verification of identity requirements and to do all other acts and things as may reasonably be required as to comply with the Money Laundering Legislation.

If the Receiving Agent determines that the verification of identity requirements apply to any acceptor or application, the relevant Open Offer Shares (notwithstanding any other term of the Open Offer) will not be issued to the relevant acceptor unless and until the verification of identity requirements have been satisfied in respect of that acceptor or application. The Receiving Agent is entitled, in its absolute discretion, to determine whether the verification of identity requirements apply to any acceptor or application and whether such requirements have been satisfied, and neither the Receiving Agent nor the Company nor the Joint Bookrunners will be liable to any person for any loss or damage suffered or incurred (or alleged), directly or indirectly, as a result of the exercise of such discretion.

If the verification of identity requirements apply, failure to provide the necessary evidence of identity within a reasonable time may result in delays in the despatch of share certificates or in crediting CREST accounts or VP Accounts. If, within a reasonable time following a request for verification of identity, the Receiving Agent has not received evidence satisfactory to it as aforesaid, the Company may, in its absolute discretion, treat the relevant application as invalid, in which event the monies payable on acceptance of the Open Offer will be returned (at the acceptor's risk) without interest to the account of the bank or building society on which the relevant cheque or banker's draft was drawn.

Submission of an Application Form with the appropriate remittance will constitute a warranty to each of the Company, the Receiving Agent, and the Joint Bookrunners from the applicant that the Money Laundering Legislation will not be breached by application of such remittance and an undertaking by the applicant to provide promptly to the Receiving Agent such information as may be specified by the Receiving Agent as being required for the purpose of the Money Laundering Legislation. If the verification of identity requirements apply, failure to provide the necessary evidence of identity may result in delays in the despatch of share certificates or in crediting CREST accounts or VP Accounts.

The verification of identity requirements will not usually apply:

• (a) if the applicant is an organisation required to comply with the Money Laundering Directive (2005/60/EC of the European Parliament and of the EC Council of 26 October on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing); or
• (b) if the acceptor is a company whose securities are listed on a regulated market subject to specified disclosure obligations; or
• (c) the acceptor (not being an acceptor who delivers his application in person) makes payment through an account in the name of such acceptor with a credit institution that is subject to the EU Money Laundering Directive (2005/60/EC) or with a credit institution situated in a non-EEA state that imposes requirements equivalent to those laid down in the EU Money Laundering Directive (2005/60/EC); or
• (d) if the acceptor is a regulated UK broker or intermediary acting as agent and is itself subject to the Money Laundering Legislation; or
• (e) if the applicant (not being an applicant who delivers his application in person) makes payment by way of a cheque drawn on an account in the applicant's name; or
• (f) if the aggregate subscription price for the Open Offer Shares is less than A15,000 (approximately £13,539.10 as at 12 October 2016).

In other cases the verification of identity requirements may apply. Satisfaction of these requirements may be facilitated in the following ways:

(i) if payment is made by cheque or banker's draft in the UK of a bank or building society which bears an appropriate bank sort code number in the top right hand corner the following applies: Cheques should be made payable to ''Capita Registrars Limited—re: EnQuest PLC Open Offer A/C'' in respect of an application by a Qualifying Shareholder and crossed ''A/C Payee Only''. Third party cheques may not be accepted with the exception of building society cheques or bankers' drafts where the building society or bank has confirmed the name of the account holder by stamping or endorsing the cheque/bankers' draft to such effect. However, third party cheques will be subject to compliance with Money Laundering Legislation which would delay Shareholders receiving their Open Offer Shares. The account name should be the same as that shown on the Application Form; or

(ii) if the Application Form is lodged with payment by an agent which is an organisation of the kind referred to in (i) above or which is subject to anti-money laundering regulation in a country which is a member of the Financial Action Task Force (the non-European Union members of which are Argentina, Australia, Brazil, Canada, China, Gibraltar, Hong Kong, Iceland, India, Japan, Mexico, New Zealand, Norway, Russian Federation, Singapore, South Africa, Switzerland, Turkey, UK Crown Dependencies and the US and, by virtue of their membership of the Gulf Cooperation Council, Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates), the agent should provide with the Application Form written confirmation that it has that status and a written assurance that it has obtained and recorded evidence of the identity of the person for whom it acts and that it will on demand make such evidence available to the Receiving Agent. If the agent is not such an organisation, it should contact the Receiving Agent at Capita Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU.

To confirm the acceptability of any written assurance referred to in (b) above, or in any other case, the acceptor should contact Capita Asset Services on 0371 664 0321. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. The helpline is open between 9.00 a.m. to 5.30 p.m., Monday to Friday excluding public holidays in England and Wales. Please note that Capita Asset Services cannot provide any financial, legal or tax advice and calls may be recorded and monitored for security and training purposes.

If the Application Form(s) is/are lodged by hand by the acceptor in person, or if the Application Form(s) in respect of Open Offer Shares is/are lodged by hand by the acceptor and the accompanying payment is not the acceptor's own cheque, he/she should ensure that he/she has with him/her evidence of identity bearing his/ her photograph (for example, his/her passport) and separate evidence of his or her address.

If, within a reasonable period of time following a request for verification of identity, and in any case by not later than 11.00 a.m. on 16 November 2016, the Receiving Agent has not received evidence satisfactory to it as aforesaid, the Receiving Agent may, at its discretion, as agent of the Company, reject the relevant application, in which event the monies submitted in respect of that application will be returned without interest to the account at the drawee bank from which such monies were originally debited (without prejudice to the rights of the Company to undertake proceedings to recover monies in respect of the loss suffered by it as a result of the failure to produce satisfactory evidence as aforesaid).

6.2 Open Offer Entitlements in CREST

If you hold your Open Offer Entitlements in CREST and apply for Open Offer Shares in respect of all or some of your Open Offer Entitlements as agent for one or more persons and you are not a UK or EU regulated person or institution (e.g. a UK financial institution), then, irrespective of the value of the application, the Receiving Agent is obliged to take reasonable measures to establish the identity of the person or persons on whose behalf you are making the application. You must therefore contact the Receiving Agent before sending any USE Instruction or other instruction so that appropriate measures may be taken.

Submission of a USE Instruction which on its settlement constitutes a valid application as described above constitutes a warranty and undertaking by the applicant to provide promptly to the Receiving Agent such information as may be specified by the Receiving Agent as being required for the purposes of the Money Laundering Legislation. Pending the provision of evidence satisfactory to the Receiving Agent as to identity, the Receiving Agent may in its absolute discretion take, or omit to take, such action as it may determine to prevent or delay issue of the Open Offer Shares concerned. If satisfactory evidence of identity has not been provided within a reasonable time, then the application for the Open Offer Shares represented by the USE Instruction will not be valid. This is without prejudice to the right of the Company to take proceedings to recover any loss suffered by it as a result of failure to provide satisfactory evidence.

7. Overseas Shareholders

This document has been approved by the FCA as a prospectus which may be used to offer securities to the public for the purposes of section 85 of FSMA and of the Prospectus Directive. Arrangements may also be made with the competent authority in certain member states of the EEA that have implemented the Prospectus Directive for the use of this document as an approved prospectus in such jurisdictions to make a public offer in such jurisdictions. Issue or circulation of this document may be prohibited in countries other than those in relation to which notices are given below.

No action has been or will be taken in any jurisdiction (other than the United Kingdom and Sweden) that would permit a public offer of the New Ordinary Shares, or possession or distribution of this document or any other offering material, in any country or jurisdiction where action for that purpose is required. Accordingly, the New Ordinary Shares may not be offered or sold, directly or indirectly, and this document may not be distributed or published in or from any country or jurisdiction, except under circumstances that will result in compliance with any and all applicable rules and regulations of any such country or jurisdiction. Persons into whose possession this document comes should inform themselves about and observe any restrictions on the distribution of this document and the offer of New Ordinary Shares contained in this document. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.

The comments set out in this paragraph 7 are intended as a general guide only and any Overseas Shareholders who are in any doubt as to their position should consult their professional advisers without delay.

7.1 General

This document comprises a combined circular and prospectus relating to the New Ordinary Shares. Under no circumstance does this document generally constitute an offer to sell or issue or the solicitation of an offer to buy or subscribe for Open Offer Entitlements or New Ordinary Shares (whether Open Offer Shares or otherwise) in the United States or any Excluded Territories.

The distribution of this document, the Application Form, the Pre-Printed Issue Account Statement or the Swedish Application Form and the making of the Open Offer to persons who have registered addresses in, or who are resident or ordinarily resident in, or citizens of, or which are corporations, partnerships or other entities created or organised under the laws of countries other than the United Kingdom and Sweden or to persons who are nominees of, or custodians, trustees or guardians for, persons who are citizens or nationals of, or resident in, countries other than the United Kingdom and Sweden may be restricted by the laws or regulatory requirements of the relevant jurisdictions.

Any failure to comply with such restrictions may constitute a violation of the securities laws of the relevant jurisdiction. Those persons should consult their professional advisers as to whether they require any governmental or other consents or need to observe any applicable legal requirement or other formalities to enable them to apply for Open Offer Shares under the Open Offer.

No action has been or will be taken by the Company, the Joint Bookrunners or any other person, to permit a public offering in any jurisdiction where action for that purpose may be required, other than in the United Kingdom and in Sweden.

Receipt of this document and/or an Application Form and/or a credit of Open Offer Entitlements to a stock account in CREST or to a VP Account will not constitute an invitation or offer of securities for subscription, sale or purchase in those jurisdictions in which it would be illegal to make such an invitation or offer and, in those circumstances, this document and/or the Application Form and/or the Pre-Printed Issue Account Statement and/or the Swedish Application Form must be treated as sent for information only and should not be copied or redistributed.

Application Forms, Pre-Printed Issue Account Statements or Swedish Application Forms will not be sent to, and Open Offer Entitlements will not be credited to stock accounts in CREST or to a VP Account of, persons with registered addresses in the United States or any Excluded Territory or their agent or intermediary, except where the Company is satisfied that such action would not result in the contravention of any registration or other legal requirement in any jurisdiction.

No person receiving a copy of this document and/or an Application Form and/or a Pre-Printed Issue Account Statement and/or a Swedish Application Form and/or a credit of Open Offer Entitlements to a stock account in CREST or to a VP Account in any territory other than the United Kingdom and Sweden may treat the same as constituting an invitation or offer to him or her, nor should he or she in any event use any such Application Form and/or a Pre-Printed Issue Account Statement and/or a Swedish Application Form and/or credit of Open Offer Entitlements to a stock account in CREST or a VP Account unless, in the relevant territory, such an invitation or offer could lawfully be made to him or her and such

Application Form and/or a Pre-Printed Issue Account Statement and/or a Swedish Application Form and/or credit of Open Offer Entitlements to a stock account in CREST or to a VP Account could lawfully be used, and any transaction resulting from such use could be effected, without contravention of any registration or other legal or regulatory requirements. In circumstances where an invitation or offer would contravene any registration or other legal or regulatory requirements, this document and/or the Application Form and/or a Pre-Printed Issue Account Statement and/or a Swedish Application Form must be treated as sent for information only and should not be copied or redistributed.

It is the responsibility of any person (including, without limitation, custodians, agents, nominees and trustees) outside the United Kingdom or Sweden wishing to apply for Open Offer Shares under the Open Offer to satisfy himself or herself as to the full observance of the laws of any relevant territory in connection therewith, including obtaining any governmental or other consents that may be required, observing any other formalities required to be observed in such territory and paying any issue, transfer or other taxes due in such territory.

None of the Company, the Joint Bookrunners, nor any of their respective representatives, is making any representation to any offeree or purchaser of the New Ordinary Shares regarding the legality of an investment in the New Ordinary Shares by such offeree or purchaser under the laws applicable to such offeree or purchaser. Each investor should consult with his or her own advisers as to the legal, tax business, prospects, financial and related aspects of a purchase of the New Ordinary Shares.

Persons (including, without limitation, custodians, agents, nominees and trustees) receiving a copy of this document and/or an Application Form and/or a Pre-Printed Issue Account Statement and/or a Swedish Application Form and/or a credit of Open Offer Entitlements to a stock account in CREST or a VP Account, in connection with the Open Offer or otherwise, should not distribute or send either of those documents nor transfer Open Offer Entitlements in or into any jurisdiction where to do so would or might contravene local securities laws or regulations. If a copy of this document and/or an Application Form and/or a credit of Open Offer Entitlements to a stock account in CREST or a VP Account is received by any person in any such territory, or by his or her custodian, agent, nominee or trustee, he or she must not seek to apply for Open Offer Shares in respect of the Open Offer unless the Company and the Joint Bookrunners determine that such action would not violate applicable legal or regulatory requirements. Any person (including, without limitation, custodians, agents, nominees and trustees) who does forward a copy of this document and/or an Application Form and/or a Pre-Printed Issue Account Statement and/or a Swedish Application Form and/or transfers Open Offer Entitlements into any such territory, whether pursuant to a contractual or legal obligation or otherwise, should draw the attention of the recipient to the contents of this Part 10 (''Terms and Conditions of the Placing and Open Offer'') and specifically the contents of this paragraph 7.

The Company reserves the right to treat as invalid any application or purported application for Open Offer Shares that appears to the Company or its agents to have been executed, effected or dispatched from the United States or any Excluded Territory or in a manner that may involve a breach of the laws or regulations of any jurisdiction or if the Company or its agents believe that the same may violate applicable legal or regulatory requirements or if it provides an address for delivery of the share certificates of Open Offer Shares or in the case of a credit of Open Offer Entitlements to a stock account in CREST or to a VP Account, to a CREST member or to a VP Account holder whose registered address would be, in the United States or an Excluded Territory or any other jurisdiction outside the United Kingdom in which it would be unlawful to deliver such share certificates or make such a credit, or in the case of a VP Account, to a VP Account holder whose registered address would be, in the United States or an Excluded Territory or any other jurisdiction outside the United Kingdom in which it would be unlawful to deliver such share certificates or make such a credit.

The attention of Overseas Shareholders is drawn to paragraphs 5.1(d)(vii) and 5.2(i)(viii) above and 7.2 to 7.10 below.

Notwithstanding any other provision of this document or the Application Form or the Pre-Printed Issue Account Statement or the Swedish Application Form, the Company reserves the right (after agreement with the Joint Bookrunners) to permit any person to apply for Open Offer Shares in respect of the Open Offer if the Company, in its sole and absolute discretion, is satisfied that the transaction in question is exempt from, or not subject to, the legislation or regulations giving rise to the restrictions in question.

Overseas Shareholders who wish, and are permitted, to apply for Open Offer Shares should note that payment must be made in sterling denominated cheques or bankers' drafts or, where such Overseas Shareholder is a Qualifying CREST Shareholder, through CREST. Where such Overseas Shareholder is a Qualifying Swedish Directly Registered Shareholder, payment must be made in SEK in accordance with the procedures in paragraph 5.3 of this Part 10 (''Terms and Conditions of the Placing and Open Offer''), or, where the Overseas Shareholder is a Qualifying Swedish Nominee Registered Shareholder, payment shall be made in accordance with the instructions of the relevant nominee.

Due to restrictions under the securities laws of the United States and the Excluded Territories, and subject to certain limited exceptions, Qualifying Shareholders located in the United States or who have registered addresses in, or who are resident or ordinarily resident in, or citizens of, any Excluded Territory will not qualify to participate in the Open Offer and will not be sent an Application Form or a Pre-Printed Issue Account Statement or a Swedish Application Form nor will their stock accounts in CREST be credited with Open Offer Entitlements.

No public offer of New Ordinary Shares is being made by virtue of this document or the Application Form or the Pre-Printed Issue Account Statement or the Swedish Application Form into the United States or any Excluded Territory. Receipt of this document and/or an Application Form and/or a Pre-Printed Issue Account Statement and/or a Swedish Application Form and/or a credit of an Open Offer Entitlement to a stock account in CREST or to a VP Account will not constitute an invitation or offer of securities for subscription, sale or purchase in those jurisdictions in which it would be illegal to make such an invitation or offer and, in those circumstances, this document and/or the Application Form and/or the Pre-Printed Issue Account Statement and/or the Swedish Application Form must be treated as sent for information only and should not be copied or redistributed.

7.2 United States

None of the New Ordinary Shares nor the Open Offer Entitlements have been or will be registered under the US Securities Act or under the securities laws of any state or other jurisdiction of the United States and they may not be offered, sold, resold, taken up, transferred, delivered or distributed, directly or indirectly, within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States. There will be no public offer of the New Ordinary Shares or the Open Offer Entitlements in the United States. The New Ordinary Shares made available outside the United States pursuant to the Open Offer are being offered and sold in offshore transactions in reliance on Regulation S or pursuant to another exemption from the registration requirements of the US Securities Act.

Accordingly, the Company is not extending the Placing and Open Offer into the United States unless an exemption from the registration requirements of the US Securities Act is available and, subject to certain exceptions set out below, none of this document, the Application Form, the Pre-Printed Issue Account Statement, the Swedish Application Form nor the crediting of Open Offer Entitlements to a stock account in CREST or to a VP Account constitutes or will constitute an offer or an invitation to apply for or an offer or an invitation to acquire any New Ordinary Shares in the United States. Subject to certain exceptions, neither this document, the Application Form, the Pre-Printed Issue Account Statement nor the Swedish Application Form will be sent to, and neither Open Offer Entitlements nor New Ordinary Shares will be credited to a stock account in CREST or to a VP Account of, any Qualifying Shareholder with a registered address in the United States. Subject to certain exceptions, Application Forms, Pre-Printed Issue Account Statements or Swedish Application Forms sent from or postmarked in the United States, or including a United States registered address, will be deemed to be invalid and all persons acquiring Open Offer Shares and wishing to hold such Open Offer Shares in registered form must provide an address outside the United States for registration of the Open Offer Shares.

The Company reserves the right to treat as invalid any Application Form that appears to the Company or its agents to have been executed in, or despatched from, the United States, or that provides an address in the United States for the receipt of New Ordinary Shares, or which does not make the warranties set out in the Application Form, the Pre-Printed Issue Account Statement, the Swedish Application Form or where the Company believes acceptance of such Application Form or Swedish Application Form may infringe applicable legal or regulatory requirements. In addition, except as set out below, any person exercising Open Offer Entitlements must make the representations and warranties set out in paragraph 5 and paragraph 8 of this Part 10 (''Terms and Conditions of the Placing and Open Offer''), as appropriate. Accordingly, except as set out below, the Company reserves the right to treat as invalid (i) any Application Form which does not make the representations and warranties set out in paragraph 5.1(d) of this Part 10

(''Terms and Conditions of the Placing and Open Offer'') and (ii) any USE Instruction which does not make the representations and warranties set out in paragraph 5.2(i) of this Part 10 (''Terms and Conditions of the Placing and Open Offer''). The attention of persons holding for the account of persons located in the United States is directed to such paragraphs. In addition, the Company and/or the Joint Bookrunners reserve the right to reject any USE instruction sent by or on behalf of any CREST member with a registered address in the United States or that appears to the Company to have been despatched from the United States or any Excluded Territory, or that was sent in a manner which they or their agents believe may violate any applicable legal or regulatory requirement, or which does not make the representations and warranties set out in paragraph 5 or paragraph 8 of this Part 10 (''Terms and Conditions of the Placing and Open Offer''). Any person in the United States into whose possession this document comes should inform himself about and observe any applicable legal restrictions.

7.3 Canada

Neither the New Ordinary Shares (whether Open Offer Shares or otherwise) nor the Open Offer Entitlements have been or will be registered under the securities legislation of any province or territory of Canada and, therefore, subject to certain exceptions, neither the New Ordinary Shares nor the Open Offer Entitlements held in CREST or on a VP Account may be directly or indirectly offered for subscription or purchase, taken up, sold, delivered, renounced or transferred in or into Canada or to or for the benefit of a Canadian Person. Accordingly, the Placing and Open Offer will not be made within Canada and Application Forms will not be sent to, nor will any Open Offer Entitlements be credited to a stock account in CREST or to a VP Account of, any shareholder with a registered address in Canada.

7.4 Australia

No prospectus in relation to the New Ordinary Shares has been or will be lodged with, or registered by, the Australian Securities Commission. Neither the New Ordinary Shares nor the Open Offer Entitlements held in CREST or on a VP Account may be offered for subscription or purchase, taken up, sold, renounced, transferred or delivered, directly or indirectly, nor may any invitation to subscribe for or buy or sell New Ordinary Shares or Open Offer Entitlements held in CREST or on a VP Account be issued or any draft or definitive document in relation to any such offer, sale or invitation be distributed, in or into Australia or to or for the account or benefit of an Australian Person. Accordingly, no offer of New Ordinary Shares is being made under this document or the Application Forms to shareholders with registered addresses in, or to residents of, Australia. No Application Forms will be sent to, nor will any Open Offer Entitlements be credited to a stock account in CREST or to a VP Account of, Qualifying Shareholders who have registered addresses in Australia.

7.5 Japan

The relevant clearances have not been and will not be obtained from the Ministry of Finance of Japan and no prospectus has been or will be lodged with, or registered by, the Ministry of Finance of Japan. Therefore, subject to certain exceptions, neither the Application Forms nor the New Ordinary Shares nor any Open Offer Entitlements held in CREST or on a VP Account may, directly or indirectly, be offered or sold, taken up, or renounced in or into Japan or its territories or possessions. No Application Form, Pre-Printed Issue Account Statement or Swedish Application Form will be sent to, nor will any Open Offer Entitlements be credited to a stock account in CREST or to a VP Account of, Qualifying Shareholders whose registered address is in Japan.

The New Ordinary Shares have not been and will not be registered under the Financial Instruments and Exchange Law (Law No. 25 of 1948, as amended) and, accordingly, will not be offered or sold, directly or indirectly, in Japan, or for the benefit of any Japanese Person or to others for re-offering or resale, directly or indirectly, in Japan or to any Japanese Person, except in compliance with all applicable laws, regulations and ministerial guidelines promulgated by relevant Japanese governmental or regulatory authorities in effect at the relevant time. For the purposes of this paragraph, ''Japanese Person'' shall mean any person resident in Japan, including any corporation or other entity organised under the laws of Japan.

7.6 Republic of South Africa

In order to comply with South African law, Application Forms sent to Qualifying Shareholders with registered addresses in the Republic of South Africa will not be renounceable. Such persons may require the approval of the South African Exchange Control Authorities if they wish to take up their Open Offer Entitlements. Open Offer Entitlements will not be credited to any stock account in CREST or to a VP Account of any Qualifying CREST Shareholder with a registered address in South Africa. Instead, any such shareholder will be sent a non-renounceable Application Form.

7.7 DIFC

This document relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority (''DFSA''). This document is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this document nor taken steps to verify the information set forth herein and has no responsibility for the document. The shares to which this document relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the shares offered should conduct their own due diligence on the shares. If you do not understand the contents of this document you should consult an authorised financial advisor.

7.8 Switzerland

The New Ordinary Shares may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (''SIX'') or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the New Ordinary Shares or the offering may be publicly distributed or otherwise made publicly available in Switzerland.

Neither this document nor any other offering or marketing material relating to the offering, the Company, the New Ordinary Shares have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of Shares will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA, and the offer of New Ordinary Shares has not been and will not be authorised under the Swiss Federal Act on Collective Investment Schemes (''CISA''). The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of New Ordinary Shares.

7.9 Other overseas territories

Qualifying Shareholders resident in other overseas territories should consult their professional advisers as to whether they require any governmental or other consents or need to observe any other formalities to enable them to take up their Open Offer Entitlements.

7.10 Waiver

The provisions of this paragraph 7 and of any other terms of the Open Offer relating to Overseas Shareholders may be waived, varied or modified as regards specific Shareholders or on a general basis by the Company and the Joint Bookrunners in their absolute discretion. Subject to this, the provisions of this paragraph 7 supersede any terms of the Open Offer inconsistent herewith. References in this paragraph 7 to Shareholders shall include references to the person or persons executing an Application Form and, in the event of more than one person executing an Application Form, the provisions of this paragraph 7 shall apply to them jointly and to each of them.

8. Additional representations, warranties and agreements relating to US law made by purchasers outside the United States

Each purchaser to whom the New Ordinary Shares are distributed, offered or sold outside the United States will (on behalf of itself and on behalf of each investment account for which it is acting as fiduciary or agent) be deemed by its subscription for New Ordinary Shares to have represented, warranted and agreed as follows:

(a) it is acquiring the New Ordinary Shares in an offshore transaction meeting the requirements of Regulation S;

• (b) it is aware and acknowledges that the New Ordinary Shares have not been and will not be registered under the US Securities Act or with any securities regulatory authority of any state or other jurisdiction of the United States and may not be offered or sold in the United States absent registration or an exemption from, or in a transaction not subject to, registration under the US Securities Act;
• (c) if in the future it decides to offer, sell, transfer, assign or otherwise dispose of the New Ordinary Shares, it will do so only in compliance with an exemption from the registration requirements of the US Securities Act;
• (d) it is acquiring the New Ordinary Shares for its own account or for one or more investment accounts for which it is acting as a fiduciary or agent, in each case for investment only, and not with a view to or for sale or other transfer in connection with any distribution of the New Ordinary Shares in any manner that would violate the US Securities Act or any other applicable securities laws;
• (e) it has received, carefully read and understands this document, and has not, directly or indirectly, distributed, forwarded, transferred or otherwise transmitted this document or any other presentation or offering materials concerning the New Ordinary Shares to any persons in the United States, nor will it do any of the foregoing;
• (f) it is aware and acknowledges that the representations, undertakings and warranties contained in this document are irrevocable. It acknowledges that the Company, the Joint Bookrunners and their respective directors, officers, agents, employees, advisors and others will rely upon the truth and accuracy of the foregoing representations and agreements; and
• (g) if any of the representations or warranties made or deemed to have been made by its subscription or purchase of the New Ordinary Shares are no longer accurate or have not been complied with, it will immediately notify the Company and the Joint Bookrunners, and if it is acquiring any New Ordinary Shares as a fiduciary or agent for one or more accounts, it has sole investment discretion with respect to each such account and it has full power to make, and does make, such foregoing representations, warranties and agreements on behalf of each such account.

9. Withdrawal rights

Persons wishing to exercise or direct the exercise of statutory withdrawal rights pursuant to section 87Q(4) of FSMA after the issue by the Company of a prospectus supplementing this document must do so by lodging a written notice of withdrawal within two Business Days commencing on the Business Day after the date on which the supplementary prospectus is published (the ''Withdrawal Period''). The withdrawal notice must include the full name and address of the person wishing to exercise statutory withdrawal rights and, if such person is a CREST member, the participant ID and the member account ID of such CREST member. The notice of withdrawal must be delivered by hand (during normal business hours only) to the Receiving Agent, Capita Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU. Please call Capita Asset Services on 0371 664 0321. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. The helpline is open between 9.00 am to 5.30 pm, Monday to Friday excluding public holidays in England and Wales. Please note that Capita Asset Services cannot provide any financial, legal or tax advice and calls may be recorded and monitored for security and training purposes.

The terms and procedures for withdrawal rights under the Swedish Open Offer are set out in the Pre-Printed Issue Account Statement and the Swedish Application Form.

The Company will not permit the exercise of withdrawal rights after payment by the relevant person for the Open Offer Shares applied for in full and the allotment of such Open Offer Shares to such person becoming unconditional save to the extent required by statute. In such event, Shareholders are advised to seek independent legal advice.

10. LSE Admission, settlement and dealings

The results of the Placing and Open Offer is expected to be announced on or around 17 November 2016. Application will be made to the FCA for the Open Offer Shares to be admitted to listing on the premium listing segment of the Official List and to the London Stock Exchange for the Open Offer Shares to be admitted to trading on its main market for listed securities.

Subject to certain conditions being satisfied, as set out in this paragraph 10 of this Part 10 (''Terms and Conditions of the Placing and Open Offer''), it is expected that LSE Admission will become effective and that dealings in the Open Offer Shares, fully paid, will commence at 8.00 a.m. (London time) on 21 November 2016.

The Existing Ordinary Shares are already admitted to CREST. No further application for admission to CREST is accordingly required for the New Ordinary Shares. All such shares, when issued and fully paid, may be held and transferred by means of CREST. Open Offer Entitlements held in CREST are expected to be disabled in all respects after 11.00 a.m. on 16 November (the latest date for applications under the Open Offer). If the condition(s) to the Placing and Open Offer described above are satisfied, Open Offer Shares will be issued in uncertificated form to those persons who submitted a valid application for Open Offer Shares by utilising the CREST application procedures and whose applications have been accepted by the Company. On 21 November 2016, the Registrar will instruct Euroclear to credit the appropriate stock accounts of such persons with such persons' entitlements to Open Offer Shares with effect from LSE Admission (expected to be 21 November 2016). The stock accounts to be credited will be accounts under the same CREST participant IDs and CREST member account IDs in respect of which the USE Instruction was given.

Notwithstanding any other provision of this document, the Company reserves the right to send Qualifying CREST Shareholders an Application Form instead of crediting the relevant stock account with Open Offer Entitlements, and to allot and/or issue any Open Offer Shares in certificated form. In normal circumstances, this right is only likely to be exercised in the event of any interruption, failure or breakdown of CREST (or of any part of CREST) or on the part of the facilities and/or systems operated by the Registrar in connection with CREST.

For Qualifying Non-CREST Shareholders who have applied by using an Application Form, share certificates in respect of the New Ordinary Shares validly applied for pursuant to the Open Offer are expected to be despatched by post by 28 November 2016. No temporary documents of title will be issued and, pending the issue of definitive certificates, transfers will be certified against the share register of the Company. All documents or remittances sent by or to applicants, or as they may direct, will be sent through the post at their own risk. For more information as to the procedure for application, Qualifying Non-CREST Shareholders are referred to paragraph 5.1 above and their respective Application Form.

11. Stockholm Admission, settlement and dealings

The results of the Placing and Open Offer is expected to be announced on or around 17 November 2016. Application will be made to NASDAQ Stockholm for the Open Offer Shares to be admitted to trading on the Mid Cap segment of NASDAQ Stockholm.

Subject to certain conditions being satisfied, as set out in paragraph 4 of this Part 10 (''Terms and Conditions of the Placing and Open Offer''), it is expected that Stockholm Admission will become effective and that dealings in the Open Offer Shares on NASDAQ Stockholm, fully paid, will commence on or around 21 November 2016.

The Existing Ordinary Shares are already registered in the VPC System of Euroclear Sweden AB. No further application for admission to the VPC System is accordingly required for the New Ordinary Shares. All such shares, when issued and fully paid, may be held and transferred by means of the VPC System. If the condition(s) to the Placing and Open Offer described above are satisfied, Open Offer Shares will be issued in uncertificated form in the VPC System to those Qualifying Swedish Shareholders who submitted a valid application for Open Offer Shares and timely paid for such shares in full pursuant to the Swedish Open Offer. It is expected that on or around 21 November 2016 the appropriate VP Accounts of such persons will be credited with such persons' Open Offer Shares.

12. Times and dates

The Company shall, in agreement with the Joint Bookrunners and after consultation with its legal advisers, be entitled to amend the dates that Application Forms, Pre-Printed Issue Account Statements or Swedish Application Forms are despatched or amend or extend the latest date for acceptance under the Open Offer and all related dates set out in this document and in such circumstances shall notify the FCA and the London Stock Exchange and, where appropriate, Qualifying Shareholders by way of announcement issued via Regulatory Information Service. Qualifying Shareholders may not receive any further written communication. In this regard the attention of Shareholders is drawn to paragraph 18.1 of Part 9 (''Additional Information'').

13. Taxation

Certain statements regarding United Kingdom, Swedish and United States taxation in respect of the New Ordinary Shares to be issued under the Placing and Open Offer are set out in Part 8 (''Taxation''). Shareholders who are in any doubt as to their tax position in relation to taking up their entitlements under the Open Offer, or who are subject to tax in any jurisdiction other than the United Kingdom, Sweden or the United States, should immediately consult a suitable professional adviser.

14. Further information

Your attention is drawn to the further information set out in this document and also, in the case of Qualifying Non-CREST Shareholders and other Qualifying Shareholders to whom the Company has sent an Application Form, to the terms, conditions and other information printed on the accompanying Application Form.

15. Governing law and jurisdiction

The Terms and Conditions of the Placing and Open Offer as set out in this document, the Application Form, the Pre-Printed Issue Account Statement, the Swedish Application Form, and any non-contractual obligation related thereto shall be governed by, and construed in accordance with, the laws of England and Wales. The courts of England and Wales are to have exclusive jurisdiction to settle any dispute which may arise out of or in connection with the Open Offer, this document and/or the Application Form and/or the Pre-Printed Issue Account Statement and/or the Swedish Application Form including, without limitation, disputes relating to any non-contractual obligations arising out of or in connection with the Open Offer, this document and/or the Application Form and/or the Pre-Printed Issue Account Statement and/or the Swedish Application Form. By taking up Open Offer Shares in accordance with the instructions set out in this document and, where applicable, the Application Form, the Pre-Printed Issue Account Statement or the Swedish Application Form, Qualifying Shareholders irrevocably submit to the jurisdiction of the courts of England and Wales and waive any objection to proceedings in any such court on the ground of venue or on the ground that proceedings have been brought in an inconvenient forum.

PART 11—DOCUMENTS INCORPORATED BY REFERENCE

The table below sets out the documents of which certain parts are incorporated by reference into, and form part of, this document. The parts of these documents which are not incorporated by reference are either not relevant for investors or are covered elsewhere in this document. To the extent that any information incorporated by reference itself incorporates any information by reference, either expressly or impliedly, such information will not form part of this document for the purposes of the Prospectus Rules. Except as set forth below, no other portion of the below documents is incorporated by reference into this document.

Any statement contained in a document which is deemed to be incorporated by reference herein shall be deemed to be modified or superseded for the purposes of this document to the extent that a statement contained herein (or in a later document which is incorporated by reference herein) modifies or supersedes such earlier statement (whether expressly, by implication or otherwise).

These documents incorporated by reference are available for inspection in accordance with paragraph 26 of Part 9 (''Additional Information'').

Reference Document	Information Incorporated by reference	Page number in the reference documents
2013 Financial Statements	Independent Auditor's Report on the annual report and accounts to the members of EnQuest PLC	82 to 84
	Group statement of comprehensive income	85
	Group balance sheet	86
	Group statement of changes in equity	87
	Group statement of cash flows Notes to the Group financial statements	88 89 to 121
	Independent Auditor's report to the members of EnQuest PLC	123
	Company balance sheet	124
	Notes to the financial statements	125 to 130
2014 Financial Statements	Independent Auditor's Report on the Annual Report and accounts to the members of EnQuest PLC	79 to 82
	Group statement of comprehensive income	83
	Group balance sheet	84
	Group statement of changes in equity	85
	Group statement of cash flows	86
	Notes to the Group financial statements	87 to 118
	Company balance sheet	120
	Notes to the financial statements	121 to 124
2015 Financial Statements	Independent Auditor's Report to the members of EnQuest PLC	83 to 89
	Group statement of comprehensive income	90
	Group balance sheet	91
	Group statement of changes in equity Group statement of cash flows	92 93 to 94
	Notes to the Group financial statements	95 to 131
	Company balance sheet	133
	Company Statement of Changes in Equity	134
	Company Statement of Cash Flows	135
	Notes to the financial statements	136 to 144
2016 Unaudited Interim Financial		7
Statements	Half Year Group Statement of
	Comprehensive Income
	Group Balance Sheet	8
	Group Statement of Changes in Equity	9
	Group Cash Flow Statement	10 to 11
	Notes to the Group Half Year Condensed Financial Statements	12 to 24
	Independent review report to EnQuest PLC	27

PART 12—TECHNICAL TERMS

''2C''	best estimate contingent resources
''2P''	proved plus probable reserves;
''appraisal well''	a well drilled as part of an appraisal drilling programme which is carried out to determine the physical extent, reserves and likely production rate of a field;
''barrel'' or ''Bbl''	a unit of volume measurement used for petroleum and its products (7.3 barrels = 1 tonne: 6.29 barrels = 1 cubic metre);
''bboe''	billion barrels of oil equivalent;
''best estimate''	generic expression for the estimate considered to be the closest to the quantity that will actually be recovered from the accumulation between the date of the estimate and the time of abandonment;
''boe''	barrels of oil equivalent. One barrel of oil is the energy equivalent of 5,800cubic feet of natural gas;
''boepd''	barrels of oil equivalent per day;
''Brent Blend''	a blend of oil that is used as an international benchmark for the prices of other crude oils;
''condensate''	hydrocarbons which are in the gaseous state under reservoir conditions and which become liquid when temperature or pressure is reduced. A mixture of pentanes and higher hydrocarbons;
''contingent resources''	those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations by application of development projects, but which are not currently considered to be commercially recoverable due to one or more contingencies;
''discovery''	an exploration well which has encountered hydrocarbons for the first time in a structure;
''E&P''	exploration and production;
''ESP''	electrical submersible pump;
''field''	a geographical area defined by the boundary of an underlying oil or gas accumulation. Usually used in the context of a producing oil field;
''formation''	a layer or unit of rock. A productive formation in the context of reservoir rock;
''FPF''	floating production facility;
''FPSO''	floating, production and storage and offloading vessel;
''hydrocarbon''	a compound containing only the elements hydrogen and carbon. May exist as a solid, a liquid or a gas. The term is mainly used in a catch all sense for oil, gas and condensate;
''kilometre'' or ''km''	kilometre;
''km2 ''	square kilometres;
''licence''	a right to search for or to develop and produce hydrocarbons within a specific area, which may be exclusive or non-exclusive. Usually granted by the responsible government authority with conditions, including as to duration;
''m'' or ''metre''	metre;
''mbbl''	thousand barrels;

''mm''	million (when used to define oil volumes);
''MMbbl''	millions of barrels, i.e. oil barrels corresponding to 159 litres;
''MMboe''	million barrels of oil equivalents;
''MMstb''	million stock tank barrels;
''NGL''	natural gas liquid;
''operator''	the company that has legal authority to drill wells and undertake production of hydrocarbons. The operator may be part of a consortium and act on behalf of the consortium;
''petroleum''	a generic name for hydrocarbons, including crude oil, natural gas liquids, natural gas and their products;
''possible reserves''	those additional reserves which analysis of geoscience and engineering data indicate are less likely to be recoverable than probable reserves;
''probable reserves''	those additional reserves which analysis of geoscience and engineering data indicate are less likely to be recovered than proved reserves but more certain to be recovered than possible reserves;
''produced water''	the water extracted from the subsurface with oil and gas. It may include water from the reservoir, water that has been injected into the formation, and any chemicals added during the production/treatment process.
''prospect''	a defined geological structure that has been surveyed and defined, usually by seismic data, that could potentially act as a trap for hydrocarbons;
''prospective resources''	those quantities of petroleum which are estimated as of a given date to be potentially recoverable from undiscovered accumulations;
''proved reserves''	those quantities of petroleum which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be commercially recoverable, from a given date forward, from known reservoirs and under defined economic conditions, operating methods and government regulations;
''reserves''	those quantities of petroleum anticipated to be commercially recoverable by application of development projects to known accumulations from a given date forward under defined conditions. Reserves include proved, probable and possible reserve categories, which are defined elsewhere in this Part 12 (''Technical Terms'');
''reservoir''	a porous and permeable rock formation in which oil and gas has accumulated and can be produced;
''resources''	quantities of petroleum which include both contingent resources and prospective resources, each defined elsewhere in this Part 12 (''Technical Terms'');
''So''	oil saturation;
''SPE PRMS''	the resource definitions jointly set out by the Society of Petroleum Engineers, the World Petroleum Council, the American Association of Petroleum Geologists and the Society of Petroleum Evaluation Engineers in March 2007 in the ''Petroleum Resources Management System'';
''spud''	to commence drilling of a well, once the cement cellar and conductor pipe at the well-head have been constructed;
''tonne'' or ''t''	Oil: 1 tonne = 7.33 barrels of oil condensate: 1 tonne = 9 barrels of condensate;

''topside''	the superstructure of a platform;
''upstreams''	the exploration and production portions of the oil and gas industry; and
''workover''	the process of performing major maintenance or remedial treatment on an existing oil or gas well.

PART 13—DEFINITIONS

The following definitions apply throughout this document unless the context requires otherwise:

''2013 Financial Statements''	the audited consolidated financial statements of the Group prepared in accordance with IFRS as adopted by the EU as at and for the year ended 31 December 2013;
''2014 Financial Statements''	the audited consolidated financial statements of the Group prepared in accordance with IFRS as adopted by the EU as at and for the year ended 31 December 2014;
''2015 Financial Statements''	the audited consolidated financial statements of the Group prepared in accordance with IFRS as adopted by the EU as at and for the year ended 31 December 2015;
''2016 Unaudited Interim Financial Statements''	the unaudited condensed consolidated financial statements of the Group prepared in accordance with IFRS as adopted by the EU as at and for the six months ended 30 June 2016;
''Ad Hoc Noteholder Committee''	the ad hoc committee of the Existing High Yield Noteholders from time to time;
''Admission''	LSE Admission and Stockholm Admission;
''Admission and Disclosure Standards''	the requirements contained in the publication ''Admission and Disclosure Standards'' dated April 2016 containing, among other things, the admission requirements to be observed by companies seeking admission to trading on the London Stock Exchange's main market for listing;
''AGM''	an annual general meeting of the Company;
''Alma/Galia Farm-in Agreement''	the farm-in agreement dated 29 May 2012 between EnQuest Heather and KUFPEC, as further described in paragraph 18.5(h)(i) of Part 9 (''Additional Information'');
''Amended Retail Noteholders''	the holders of the Amended Retail Notes;
''Amended Retail Notes''	the Existing Retail Notes, as amended by the Proposed Note Amendments;
''Amendment and Restatement Agreement''	the amendment and restatement agreement to be entered into on or about Admission between, among others, the Company and BNP Paribas as facility agent, pursuant to which the Senior Facility Agreement shall be amended as part of the Restructuring;
''Announcement''	the announcement made by the Company on 13 October 2016 in relation to the Placing and Open Offer;
''Application Form''	the personalised application form being sent to Qualifying Non-CREST Shareholders for use in connection with the Open Offer;
''Articles''	the articles of association of the Company from time to time;
''Audit Committee''	the audit committee of the Company;
''Board''	the board of directors of the Company;
''Bookbuild''	the accelerated bookbuild carried out by the Joint Bookrunners in which the number of New Ordinary Shares to be issued in the Placing and Open Offer and the allocations of such New Ordinary Shares to Placees were determined;
''Bridge Finance Letter''	the waiver and amendment letter dated 26 September 2016 in relation to the Existing RCF, as further described in paragraph 18.6(a)(xvii) of Part 9 (''Additional Information'');

''Business Day''	a day on which each of the London Stock Exchange and the Stockholm Stock Exchange is open for the transaction of business;
''Canada''	Canada, its provinces and territories and all areas under its jurisdiction and political subdivisions thereof;
''Capita Asset Services''	a trading name of Capita Registrars Limited;
''CCSS''	the CREST Courier and Sorting Service established by Euroclear UK to facilitate, among other things, the deposit and withdrawal of securities;
''Closing Date''	21 November 2016;
''Closing Price''	the closing, middle market quotation of an Ordinary Share on 12 October 2016 (being the latest practicable date prior to the announcement of the Placing and Open Offer), as published in the Daily Official List;
''Committed Shares''	the Open Offer Shares which Double A Limited, a company beneficially owned by the extended family of Amjad Bseisu, and the Trustees have irrevocably undertaken to apply for under the Open Offer pursuant to the irrevocable undertakings as described in paragraph 18.3 of Part 9 (''Additional Information'');
''Commission''	as defined and described in paragraph 8 of Part 1 (''Letter from the Chairman of EnQuest PLC'');
''Company'' or ''EnQuest''	the public limited company named EnQuest PLC with company number 07140891 and with registered office address at 5th Floor Cunard House, 15 Regent Street, London, SW1Y 4LR;
''Companies Act'' or the ''Act''	the UK Companies Act 2006 (as amended);
''Court''	the High Court of Justice of England and Wales;
''Court Order''	the order of the Court sanctioning the Scheme under section 899 of the Companies Act;
''CREST''	the UK-based system for the paperless settlement of trades in listed securities, of which Euroclear UK & Ireland is the operator;
''CREST Manual''	the rules governing the operation of CREST, consisting of the CREST reference Manual, CREST International Manual, CREST Central Counterparty Service Manual, CREST Rules, Registrars Service Standards, Settlement Discipline Rules, CCSS Operations Manual, Daily Timetable, CREST Application Procedure and CREST Glossary of TERMS (all as defined in the CREST Glossary of Terms promulgated by Euroclear UK & Ireland on 15 July 1996 and as amended since);
''CREST Regulations''	the UK Uncertificated Securities Regulations 2001 (SI 2001/3755), as amended and for the time being in force;
''Daily Official List''	the daily record setting out the prices of all trades in shares and other securities conducted on the London Stock Exchange;
''Dana''	Dana Petroleum Limited;
''DBSP''	the EnQuest PLC Deferred Bonus Share Plan;
''DECC''	the UK Department of Energy & Climate Change, which became part of the UK Department for Business, Energy & Industrial Strategy in July 2016;
''Directors''	the directors of the Company;

''Double A Irrevocable Undertaking''	the irrevocable undertaking entered into by Double A Limited, a company beneficially owned by the extended family of Amjad Bseisu, dated 13 October 2016, as further described in paragraph 8 of Part 1 (''Letter from the Chairman of EnQuest PLC'');
''Double A Placing Letter''	the placing letter between the Joint Bookrunners and Double A Limited dated 13 October 2016 in which Double A Limited agreed to subscribe for up to 91,224,079 New Ordinary Shares in the Placing, subject to clawback to satisfy valid applications by Qualifying Shareholders in the Open Offer;
''DTRs''	the FCA's Disclosure Guidance and Transparency Rules;
''EBITDA''	as explained under ''Non-IFRS measures'' under ''Important Information'' above;
''EMTN Programme''	the £500,000,000 euro medium term note programme established by the Company on 24 January 2013;
''Enlarged Issued Share Capital''	the Existing Issued Share Capital together with the New Ordinary Shares to be issued pursuant to the Placing and Open Offer;
''EnQuest EBT''	the EnQuest PLC Employees' Benefit Trust;
''EnQuest EBT Irrevocable Undertaking''	the irrevocable undertaking entered into by the Trustees in respect of the Unallocated Shares, as further described in paragraph 18.3(b) of Part 9 (''Additional Information'');
''EnQuest Heather''	EnQuest Heather Limited;
''EnQuest Producer FPSO''	the FPSO for Alma/Galia;
''EnQuest Thistle''	EnQuest Thistle Limited;
''EP Malaysia''	EQ Petroleum Production Malaysia Limited;
''EP Developments Malaysia''	EQ Petroleum Developments Malaysia SDN BHD;
''EU''	the European Union first established by a treaty made at Maastricht on 7 February 1992;
''Euroclear UK & Ireland''	Euroclear UK & Ireland Limited, the operator of CREST;
''Euro'' or ''E''	the single currency of the Member States of the European Community that adopt or have adopted the euro as their lawful currency under legislation of the EU or European Monetary Union;
''Excluded Overseas Shareholders''	Shareholders who are resident or located in or have a registered address in an Excluded Territory;
''Excluded Territories''	Australia, Canada, Japan, the Republic of South Africa and any other jurisdiction where the extension or availability of the Placing and Open Offer (and any other transaction contemplated thereby) would breach applicable law;
''Executive Directors''	the executive directors of the Company from time to time, which at the date of this document are Amjad Bseisu and Jonathan Swinney;
''Existing Hedging Liabilities''	all present and future monies, debts and liabilities due, owing or incurred from time to time by an obligor under the Existing RCF to any Hedging Bank under or in respect of any Hedging Agreement;
''Existing High Yield Note Guarantors''	the subsidiaries of the Company who have guaranteed the Company's obligations in respect of the Existing High Yield Notes, being EnQuest NWO Limited, EnQuest Heather Limited, EnQuest Britain Limited, EnQuest Heather Leasing Limited, EnQuest ENS Limited, EnQuest Global Limited and EQ Petroleum Sabah Limited, as further detailed in paragraph 18.6(h) of Part 9 (''Additional Information'');

''Existing High Yield Note Indenture''	the indenture dated 9 April 2014 between among others, the Company as issuer and Deutsche Trustee Company Limited as trustee, governing the Existing High Yield Notes;
''Existing High Yield Noteholders''	the holders of the Existing High Yield Notes;
''Existing High Yield Notes''	the US\$650,000,000 7% senior notes due 15 April 2022 issued by the Company;
''Existing Issued Share Capital''	Ordinary Shares in issue as at the Latest Practicable Date;
''Existing Noteholders''	the Existing High Yield Noteholders and the Existing Retail Noteholders;
''Existing Notes''	the Existing High Yield Notes and the Existing Retail Notes;
''Existing Ordinary Shares''	the Ordinary Shares in issue at the date of this document;
''Existing RCF''	the senior secured revolving credit facility dated 6 March 2012, as amended, restated or otherwise modified or varied from time to time, entered into by, among others, EnQuest, as borrower, BNP Paribas, as facility agent, and certain lenders party thereto, as further described in paragraph 18.6(a) of Part 9 (''Additional Information'');
''Existing RCF Lenders''	the original lenders under the Existing RCF and any lender which has acceded as a lender thereunder, which in either case has not ceased to be a party to the Existing RCF in accordance with its terms;
''Existing Retail Noteholders''	the holders of the Existing Retail Notes;
''Existing Retail Notes''	the £155,000,000 5.5% notes due 15 February 2022 issued by the Company under its £500,000,000 euro medium term note programme;
''Explanatory Statement''	the document to be despatched or made available to Existing Noteholders pursuant to section 897 of the Companies Act containing, among other things, details of the Scheme and the notice of the Scheme Meeting;
''FCA''	the UK Financial Conduct Authority;
''Form of Proxy''	the enclosed form of proxy for use in connection with the General Meeting;
''FSMA''	the UK Financial Services and Markets Act 2000 (as amended);
''General Meeting''	the extraordinary general meeting of the Company to be held at Ashurst LLP, Broadwalk House, 5 Appold Street, London, EC2A 2HA on 14 November 2016 at 9.00 a.m.;
''GCA''	Gaffney, Cline & Associates Ltd;
''GKA''	Greater Kittiwake Area;
''Group''	the Company and its subsidiaries and subsidiary undertakings from time to time;
''Hedging Agreement''	each interest, currency or commodity swap, option, cap, collar, floor or similar arrangements or other hedging arrangements;
''Hedging Banks''	the Existing RCF Lenders and their affiliates which have acceded to the Existing RCF as ''Hedging Banks'', which satisfy certain qualifications under the Existing RCF and which have entered into Hedging Agreements which are secured by the Existing RCF security package;
''HMRC''	HM Revenue & Customs;
''HSE&A''	health, safety, environment and assurance;

''IFRS as adopted by the EU'' or ''IFRS-EU''	International Financial Reporting Standards as adopted by the European Union;
''Issue Price''	23.0 pence per New Ordinary Share (SEK 2.48 per New Ordinary Share for Qualifying Swedish Shareholders in the Swedish Open Offer);
''Japan''	Japan, its territories and possessions and any areas subject to its jurisdiction;
''Joint Bookrunners''	Merrill Lynch International and J.P. Morgan Cazenove;
''Kraken FPSO''	the FPSO for Kraken;
''KUFPEC''	KUFPEC UK Limited;
''Latest Practicable Date''	12 October 2016, being the latest practicable date prior to the publication of this document;
''Letter of Credit''	the standing letter of credit to be dated on or around the date of this document in an amount of up to £28.3 million issued by Credit Suisse AG in favour of the Company, as further described in paragraph 8 of Part 1 (''Letter from the Chairman of EnQuest PLC'');
''Listing Rules''	the listing rules of the FCA made under Part VI of the FSMA;
''Lock-Up Agreement''	a lock-up agreement between the Company, certain of the Existing RCF Lenders, the Hedging Banks and certain Existing Noteholders, as further described in paragraph 18.2 of Part 9 (''Additional Information'');
''London Stock Exchange''	London Stock Exchange plc;
''LSE Admission''	admission of the New Ordinary Shares to the premium listing segment of the Official List in accordance with the Listing Rules and/or admission to trading on the Main Market of the London Stock Exchange becoming effective in accordance with the Admission and Disclosure Standards, as the context may require;
''Lundin''	Lundin Petroleum AB;
''Main Market''	the London Stock Exchange's main market for listed securities;
''Malaysian OSP''	the Malaysian Crude Oil Official Selling Price;
''Member States''	member states of the EU;
''Memorandum of Association''	the memorandum of association of the Company;
''Money Laundering Regulations''	the UK Money Laundering Regulations 2007 (as amended from time to time);
''NASDAQ Stockholm''	NASDAQ Stockholm AB's main market;
''New High Yield Notes''	the new US\$650,000,000 7% senior notes issued by the Company to the Existing High Yield Noteholder in exchange for the Existing High Yield Notes on a dollar-for dollar basis;
''New High Yield Noteholders''	the holders of the New High Yield Notes;
''New Ordinary Shares''	356,738,114 new Ordinary Shares to be issued by the Company pursuant to the Placing and Open Offer;
''Nomination Committee''	the nomination committee of the Company;
''Non-Executive Chairman''	the non-executive chairman of the Company;
''Non-Executive Directors''	the non-executive directors of the Company from time to time, which at the date of this document are Philip Holland, Helmut Langanger, Jock Lennox and Philip Nolan;

''October Interest Payment''	the interest payment due in respect of the Existing High Yield Notes on 17 October 2016;
''Official List''	the Official List maintained by the FCA;
''OGA''	the UK Oil and Gas Authority;
''OPEC''	the Organization of Petroleum Exporting Countries;
''Open Offer''	the offer to Qualifying Shareholders constituting an invitation to apply for the Open Offer Shares on the terms and subject to the conditions set out in this document, and in the case of Qualifying Non-CREST Shareholders, the Application Form (including the Swedish Open Offer);
''Open Offer Entitlements	an entitlement of a Qualifying Shareholder to apply for 4 Open Offer Shares for every 9 Existing Ordinary Shares held by him or her on the Record Date pursuant to the Open Offer;
''Open Offer Shares''	the New Ordinary Shares to be offered to Qualifying Shareholders pursuant to the Open Offer and (other than the Committed Shares) to Placees pursuant to the Placing;
''Ordinary Shares''	the ordinary shares of 5 pence each in the capital of the Company;
''Overseas Shareholders''	Qualifying Shareholders who have registered addresses outside the UK;
''Payment Condition''	the payment condition relating to the New High Yield Notes and the Amended Retail Notes described in paragraph 5.1 of Part 1 (''Letter from the Chairman of EnQuest PLC'');
''PEDL''	Petrofac Energy Developments Limited;
''PETRONAS''	Petroliam Nasional Behad;
''PIK Amount''	as defined and described in paragraph 4.2 of Part 1 (''Letter from the Chairman of EnQuest PLC'');
''PIK Margin''	as defined and described in paragraph 4.2 of Part 1 (''Letter from the Chairman of EnQuest PLC'');
''Placees''	any persons (including Double A Limited) who have agreed or shall agree to subscribe for Open Offer Shares pursuant to the Placing subject to clawback to satisfy valid applications by Qualifying Shareholders pursuant to the Open Offer;
''Placing''	the conditional placing of the Open Offer Shares (other than the Committed Shares) with Placees, subject to clawback to satisfy valid applications by Qualifying Shareholders under the Open Offer;
''Placing and Open Offer''	the Placing and the Open Offer;
''PM8/Seligi PSC''	the production sharing contract between EP Malaysia, PETRONAS Carigali Sdn Bhd, E&P Malaysia Venture Sdn Bhd (as contractors) and PETRONAS dated 10 December 2014, as further described in paragraph 18.5(l)(ii) of Part 9 (''Additional Information'');
''PM8/Seligi''	the PM8/Seligi PSC assets and the Seligi oil field;
''PRA''	the UK Prudential Regulation Authority;
''Pre-Printed Issue Account Statement''	the personalised pre-printed issue account statement being sent to Qualifying Swedish Directly Registered Shareholders for use in connection with the Swedish Open Offer;

''Pre-Printed Payment Notices''	the personalised payment notice attached to the Pre-Printed Issue Account Statement being sent to Qualifying Swedish Directly Registered Shareholders for use in connection with the Swedish Open Offer;
''Proposed Note Amendments''	certain amendments of the Existing Notes as described in paragraph 5 of Part 1 (''Letter from the Chairman of EnQuest PLC'');
''Proposed RCF Amendments''	certain amendments of the Existing RCF, as described in paragraph 4.2 of Part 1 (''Letter from the Chairman of EnQuest PLC'');
''Prospectus Directive''	EU Prospectus Directive (2003/71/EC), as amended, and includes any relevant implementing measure in each relevant member state;
''Prospectus Rules''	the Prospectus Rules of the FCA made under Part VI of the FSMA;
''PRT''	Petroleum Revenue Tax;
''PSC''	a product sharing contract;
''PSP''	the EnQuest PLC Performance Share Plan;
''Qualifying CREST Shareholders''	Qualifying Shareholders whose Ordinary Shares on the register of members of the Company at the close of business on the Record Date are in uncertificated form;
''Qualifying Non-CREST Shareholders''	Qualifying Shareholders whose Ordinary Shares on the register of members of the Company at the close of business on the Record Date are in certificated form;
''Qualifying Shareholders''	holders of Existing Ordinary Shares on the register of members of the Company at 6.00 p.m. on the Record Date;
''Qualifying Swedish Directly Registered Shareholders''	holders of Existing Ordinary Shares listed on NASDAQ Stockholm in VP Accounts in their own name at the close of business on the Record Date;
''Qualifying Swedish Nominee Registered Shareholders''	holders of Existing Ordinary Shares listed on NASDAQ Stockholm held with a bank or other nominee at the close of business on the Record Date;
''Qualifying Swedish Shareholders''	Qualifying Swedish Directly Registered Shareholders and Qualifying Swedish Nominee Registered Shareholders;
''RCF Facility''	as defined and described in paragraph 4.2 of Part 1 (''Letter from the Chairman of EnQuest PLC'');
''Record Date''	19 October 2016;
''Regulation S''	Regulation S under the US Securities Act;
''Regulatory Information Service''	a regulatory information service that is approved by the FCA and that is on the list of regulatory information service providers maintained by the FCA;
''Reimbursement''	as defined and described in paragraph 8 of Part 1 (''Letter from the Chairman of EnQuest PLC'');
''Related Party Resolution''	resolution number 4 in the Notice of General Meeting as more particularly described in paragraph 8 of Part 1 (''Letter from the Chairman of EnQuest PLC'');
''Remuneration Committee''	the remuneration committee of the Company;
''Resolutions''	the resolutions set out in the notice of General Meeting;
''Restructuring''	the financial restructuring proposed by the Company, as further described in paragraph 4 of Part 1 (''Letter from the Chairman of EnQuest PLC'');

''Restructuring Effective Date''	the date on which the Restructuring becomes fully and unconditionally effective;
''Risk Committee''	the risk committee of the Company;
''RRBV''	as defined and described in paragraph 4.2 of Part 1 (''Letter from the Chairman of EnQuest PLC'');
''RSC''	risk service contract;
''RSP''	the EnQuest PLC Restricted Share Plan;
''Scheme''	the proposed scheme of arrangement under Part 26 of the Companies Act between the Company and the Scheme Creditors to implement the Proposed Note Amendments with, or subject to, any modification, addition or condition which the Court may consider fit to approve or impose;
''Scheme Creditors''	includes each Existing High Yield Noteholder and each Existing Retail Noteholder;
''Scheme Meeting''	the meeting of the Scheme Creditors to be convened by order of the Court pursuant to section 896 of the Companies Act for the purposes of considering and, if thought fit, approving the Scheme (with or without amendment) and any adjournment, or postponement, or reconvention thereof;
''SCT''	supplementary corporation taxation in the UK;
''Senior Facility Agreement''	the agreement dated 6 March 2012 establishing the Existing RCF, as amended and restated including on 29 January 2014;
''Senior Managers''	the persons named as senior managers in paragraph 6.3 of Part 9 (''Additional Information'');
''SFRSC''	small field risk service contract;
''Shareholders''	the holders of Ordinary Shares in the capital of the Company;
''Share Option Plans''	together, the DBSP, RSP, PSP and Sharesave Plan;
''Sharesave Plan''	EnQuest PLC 2012 Sharesave Scheme;
''Sponsor''	J.P. Morgan Cazenove;
''Sponsor and Placing Agreement''	the sponsor, placing and open offer agreement between the Company and the Joint Bookrunners dated 13 October 2016, as described in paragraph 18.1 of Part 9 (''Additional Information'');
''Stockholm Admission''	admission of the New Ordinary Shares to trading on NASDAQ Stockholm;
''Sullom Voe Terminal'' or ''SVT''	the oil terminal located in the Shetland Islands that receives oil from the Brent and Ninian pipeline systems;
''Surety Bond Facilities''	the surety bonds provided by the Surety Bond Providers aggregating to £89.2 million and US\$5.0 million, of which £2.0 million mature in September 2017 and with the remaining amount maturing in December 2016, and which the Company has recently entered into renewal arrangements in relation to, as described in paragraph 4.4 of Part 1 (''Letter from the Chairman of EnQuest PLC'')
''Surety Bond Providers''	HCC International Insurance Company PLC and Liberty Mutual Insurance Europe;
''Swedish Application Form''	the personalised application form attached to the Pre-Printed Issue Account Statement being sent to Qualifying Swedish Directly Registered Shareholders for use in connection with the Swedish Open Offer;

''Swedish Financial Instruments Trading Act''	the Swedish Financial Instruments Trading Act (Sw. lagen (1991:980) om handel med finansiella instrument);
''Swedish Listing Rules''	the NASDAQ Stockholm Rule Book for Issuers;
''Swedish Securities Act''	the Swedish Securities Act (Sw. lagen (2007:528) om ¨ vardepappersmarknaden );
''Swedish Open Offer''	the offer to Qualifying Swedish Shareholders constituting an invitation to apply for the Open Offer Shares on the terms and subject to the conditions set out in this document, and in the case of Qualifying Swedish Directly Registered Shareholders, the Pre-Printed Issue Account Statement and the Swedish Application Form;
''Tanjong Baram Project Finance Loan''	the limited recourse \$35,000,000 term loan facility dated 11 June 2015 between EP Developments Malaysia (as borrower) and DBS Bank LTD, Labuan Branch (as facility agent, security agent, account bank, hedging bank and mandated lead arranger);
''Tanjong Baram SFRSC''	the SFRSC dated 27 March 2014 between the Group, Uzma and PETRONAS to develop and produce the Tanjong Baram field for a period up to March 2023;
''Term Facility''	as defined and described in paragraph 4.2 of Part 1 (''Letter from the Chairman of EnQuest PLC'');
''Trustees''	Capita Trustees Limited, acting in their capacity as trustees of the EnQuest EBT;
''UK Corporate Governance Code''	''The UK Corporate Governance Code'' published in September 2014 by the UK Financial Reporting Council;
''UKCS''	United Kingdom Continental Shelf;
''Unallocated Shares''	the 24,233,150 unallocated Ordinary Shares held in the EnQuest EBT;
''United Kingdom'' or ''UK''	the United Kingdom of Great Britain and Northern Ireland;
''United States'' or ''US''	the United States of America, its territories and possessions, any state of the United States of America, and the District of Columbia;
''US Code''	United States Code, being a consolidation and codification by subject matter of the general and permanent laws of the United States of America;
''US Securities Act''	the US Securities Act of 1933, as amended;
''US\$'' or ''\$'' or ''USD'' or ''US dollars''	US dollars, the lawful currency of the United States;
''Uzma''	Uzma Energy Venture (Sarawak) Sdn Bhd;
''VAT''	value added tax;
''Voting Undertaking''	an undertaking given by the relevant account holders on behalf of a Noteholder in favour of the Company pursuant to which that Noteholder agrees to, among other things and subject to certain conditions, vote in favour of the Scheme;
''VP Account''	an account in the VPC System;
''VPC System''	the accounts-based system for clearing and settlement of securities maintained by Euroclear Sweden AB; and
''£'' or ''pounds sterling'' or ''sterling'' or ''GBP''	pounds sterling, the lawful currency of the United Kingdom.

NOTICE OF GENERAL MEETING

EnQuest PLC

(Registered in England and Wales with registered number 07140891)

NOTICE IS HEREBY GIVEN that a general meeting of EnQuest PLC (the ''Company'') will be held at Ashurst LLP, Broadwalk House, 5 Appold Street, London, EC2A 2HA on 14 November 2016 at 9.00 a.m. for the following purposes:

To consider and, if thought fit, to pass the following resolutions, of which resolution 1, resolution 3 and resolution 4 will be proposed as ordinary resolutions and resolution 2 as a special resolution:

• 1. That, the directors of the Company (the ''Directors'') be and they are hereby generally and unconditionally authorised pursuant to section 551 of the Companies Act 2006 (the ''Act'') to exercise all the powers of the Company to allot shares in the Company and to grant rights to subscribe for or to convert any security into such shares (all of which transactions are hereafter referred to as an allotment of ''relevant securities'') up to an aggregate nominal amount of £17,836,906, which authority shall be in addition to the existing authority conferred, which shall continue in full force and effect. The authority conferred by this resolution shall expire (unless previously revoked or varied by the Company in a general meeting) on the conclusion of the next annual general meeting of the Company or the date 15 months from the date of passing of this resolution, whichever is the earlier, save that the Company may before such expiry, revocation or variation make an offer or agreement which would or might require relevant securities to be allotted after such expiry, revocation or variation and the Directors may allot relevant securities in pursuance of such offer or agreement as if the authority hereby conferred had not expired or been revoked or varied.
• 1. That, conditional upon the passing of Resolution 1 above, in addition to all other existing powers of the Directors under section 570 of the Act which shall continue in full force and effect, the Directors are empowered under the said section 570 to allot equity securities as defined by section 560 of the Act for cash pursuant to the authority conferred by Resolution 1 above as if section 561 of the Act did not apply to any such allotment. Such power shall, subject to the continuance of the authority conferred by Resolution 1, expire on the conclusion of the next annual general meeting of the Company or the date 15 months from the date of passing of this resolution, whichever is the earlier, but may be revoked or varied from time to time by special resolution so that the Company may before such expiry, revocation or variation make an offer or agreement which would or might require equity securities to be allotted after such expiry, revocation or variation and the Directors may allot equity securities in pursuance of such offer or agreement as if such power had not expired or varied.
• 1. That, the issue of 356,738,114 New Ordinary Shares (as defined in the combined circular and prospectus dated 14 October 2016, of which this notice convening this General Meeting form part (the ''Prospectus'')) pursuant to the Placing and Open Offer (as defined in the Prospectus) for cash at an issue price of 23.0 pence per share (SEK 2.48 per New Ordinary Share for Qualifying Swedish Shareholders in the Swedish Open Offer), which is a discount of 4.8 pence (17.12 per cent.) to the closing middle market price of 27.8 pence per existing Ordinary Share (as derived from the Daily Official List of the London Stock Exchange) on 12 October 2016 (being the last trading day prior to the announcement of the Placing and Open Offer (as defined in the Prospectus)) and a discount of SEK 0.54 (17.93 per cent.) to the closing middle market price of SEK 3.02 per existing Ordinary Share on NASDAQ Stockholm on 12 October 2016 (being the last trading day prior to the announcement of the Placing and Open Offer (as defined in the Prospectus)) and otherwise on the terms set out in the Prospectus be approved;
• 1. THAT, conditional upon the passing of Resolutions 1, 2 and 3 above the proposed participation of Double A Limited, a company beneficially owned by the extended family of Amjad Bseisu (including the Commission and the Reimbursement, each as defined and described in the Prospectus to which this notice is attached) being a related party transaction for the purposes of the Listing Rules, be and is hereby approved.

By Order of the Board Registered Office: Stefan Ricketts EnQuest PLC Company Secretary 5th Floor Cunard House 14 October 2016 15 Regent Street London SW1Y 4LR

NOTES:

• 1. Members entitled to attend and vote at the General Meeting are also entitled to appoint one or more proxies to exercise all or any of their rights to attend and to speak and vote on their behalf at the meeting. A shareholder may appoint more than one proxy in relation to the General Meeting provided that each proxy is appointed to exercise the rights attached to a different share or shares held by that shareholder which must be identified on the form of proxy. A proxy need not be a shareholder of the company. A proxy form which may be used to make such appointment and give proxy instructions accompanies this notice. If you wish your proxy to speak at the meeting, you should appoint a proxy other than the chairman of the meeting and give your instructions to that proxy.
• 1. A form of proxy is enclosed for use by members. To be valid it should be completed, signed and delivered to the Company's registrars Capita Registrars, PXS, 34 Beckenham Road, Beckenham, BR3 4TU or submitted electronically via www.myenquestshares.com (see note 3), not later than 48 hours, excluding any day that is not a business day, before the time appointed for holding the General Meeting or any adjourned meeting or, in the case of a poll taken subsequently to the date of the General Meeting, or any adjourned meeting, not less than 24 hours before the time appointed for the taking of the poll. Shareholders who intend to appoint more than one proxy may photocopy the form provided prior to completion. The forms of proxy should be returned in the same envelope and each should indicate that it is one of more than one appointments being made.
• 1. You may submit your proxy vote electronically via www.myenquestshares.com. From there you can log in to your EnQuest share portal account or register for the EnQuest share portal if you have not already done so. To register, select ''Register'' then enter your surname, Investor Code, postcode and an e-mail address. Create a password and click ''Register'' to proceed. You will be able to vote immediately by selecting ''Proxy Voting'' from the menu. You can find your Investor Code on the Form of Proxy enclosed with this document.
• 1. Any person to whom this notice is sent who is a person nominated under section 146 of the Companies Act 2006 to enjoy information rights (a ''Nominated Person'') may, under an agreement between him/her and the shareholder by whom he/she was nominated, have a right to be appointed (or to have someone else appointed) as a proxy for the General Meeting. If a Nominated Person has no such proxy appointment right or does not wish to exercise it, he/she may, under any such agreement, have a right to give instructions to the shareholder as to the exercise of voting rights.
• 1. The statement of rights of shareholders in relation to the appointment of proxies in paragraphs 1 and 2 above does not apply to Nominated Persons. The rights described in these paragraphs can only be exercised by shareholders of the Company.
• 1. CREST members who wish to appoint a proxy or proxies by utilising the CREST electronic proxy appointment service may do so by utilising the procedures described in the CREST Manual. CREST personal members or other CREST sponsored members, and those CREST members who have appointed a voting service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf.

In order for a proxy appointment by means of CREST to be valid, the appropriate CREST message (a CREST Proxy Instruction) must be properly authenticated in accordance with Euroclear UK and Ireland Limited's (''Euroclear'') specifications and must contain the information required for such instructions, as described in the CREST Manual. The message must be transmitted so as to be received by the Registrar (ID RA10) by 9.00 a.m. on 10 November 2016. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST applications host) from which the Registrar is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST.

CREST members and, where applicable, their CREST sponsors or voting service provider(s) should note that Euroclear does not make available special procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST members concerned to take (or, if the CREST member is a CREST personal member or sponsored member or has appointed a voting service provider(s), to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting service provider(s) are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings.

The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001.

• 1. Completion and return of a form of proxy will not affect the right of such member to attend and vote in person at the meeting or any adjournment thereof.
• 1. Pursuant to regulation 41 of the Uncertificated Securities Regulations 2001 and section 360B(2) of the Companies Act 2006, the Company specifies that in order to have the right to attend and vote at the General Meeting (and also for the purpose of determining how many votes a person entitled to attend and vote may cast), a person must be entered on the register of members of the Company at 6.00 p.m. on 10 November 2016 or, in the event of any adjournment, at 6.00 p.m. on the date which is two days before the day of the adjourned meeting. Changes to entries on the register of members after this time shall be disregarded in determining the rights of any person to attend or vote at the meeting.
• 1. As at 13 October 2016 (being the last business day prior to the publication of this Notice) the Company's issued share capital consists of 802,660,757 Ordinary Shares, carrying one vote each. Therefore, the total voting rights in the Company as at 13 October 2016 are 802,660,757.
• 1. Any corporation which is a member can appoint one or more corporate representatives. Each representative may exercise on behalf of the corporation the same powers as the corporation could exercise if it were an individual member of the Company provided that they do not do so in relation to the same Ordinary Shares.
• 1. A copy of this notice of meeting, together with any members' statements which have been received by the Company after the dispatch of this notice and the other information required by section 311A of the Companies Act 2006 are all available on the Company's website at www.enquest.com.
• 1. Shareholders, proxies and authorised representatives have the right to ask questions at the meeting. The Company must cause to be answered any such questions concerning any business being dealt with at the meeting, except that a question need not be answered where it would interfere unduly with the preparation for the meeting, or involve the disclosure of confidential information, where the answer has already been given on a website in the form of an answer to a question or where it is undesirable in the interests of the Company or the good order of the meeting that the question be answered.
• 1. You may not use any electronic address (within the meaning of section 333(4) of the Companies Act 2006) provided in this Notice of General Meeting (or in any related documents including this combined circular and prospectus and proxy form) to communicate with the Company for any purposes other than those expressly stated.

Merrill Corporation Ltd, London 16ZCJ44401