Good morning, ladies and gentlemen, and welcome to our 2022 full year results presentation. My name is Amjad Bseisu, and I'm the Chief Executive Officer at EnQuest. Joining me today at this presentation is our CFO, Salman Malik, and Richard Hall, our Managing Director, Global Operations and Developments. Salman will present the financial results section, with Richard covering our global operations performance. 2022 saw our best financial performance since inception, driven by operations and higher prices in 2022. It was also a year of challenge and change, both globally as well as at EnQuest. With challenge comes opportunity, and it is the companies like EnQuest that demonstrate resilience, creativity, and adaptability that will stand the test of times and challenges. Since we set our strategic priorities of deliver, and grow at the end of 2018, we've progressed on all fronts.
Through our core capabilities, we've delivered strong production performance, controlled costs, and exercised strict capital discipline, as well as focusing on the most value accretive opportunities. We've also generated material cash flows, even with low oil prices during the COVID-19 pandemic, with record cash flows last year of around $520 million. We've also reduced our net debt by more than $1 billion during that period and delivered a net debt to EBITDA ratio of just under 0.7x, which is getting very close to our target. From a growth perspective, since our 2018 strategic delivery option, we've added both Magnus and Golden Eagle producing assets. The low-cost acquisitions of material resources also at Bressay and Bentley provide us with future near-field development opportunities linked to our core capabilities.
Our enhanced business model has also noted that the cash flow generating upstream business at its core will be complemented by infrastructure, new energy, and decommissioning. With infrastructure and new energy, we aim to repurpose our existing infrastructure to support delivery of our renewable energy and decarbonization ambitions. In decommissioning, we will help manage late-life mature assets to safe, cost-effective, and low-carbon decommissioning at the end of their useful lives. This also provides us an important capability for taking over late-life mature assets. With these trends, which all utilize our core capabilities, EnQuest has the potential to be an important player in the just energy transition and sustainable energy future. When we talk about sustainability, it's important to recognize that this relates to how we work today and how we work in the future.
We make the best use of our resources from assets that have already been developed and take them to a responsible decommission. It is this precise area that we have a strong track record of delivering. Since our inception, we've extended the useful life of all nine assets we've operated, taking 4 of those into the decommissioning phase and decommissioning them as we speak. This has also seen us deliver strong reserve replacement ratio of 160% since our inception. We started with roughly 80 million barrels. We produced almost 200 million barrels since inception, and we still have around 200 million barrels left to access in our 2P reserve case.
Upstream, we demonstrate our focus on cost control and capital discipline, which you can see in this slide, and our ability to lower costs when compared to the cost incurred by previous owners. We've delivered the initial field development, for example, at Kraken at $1 billion under budget, a 33% saving. We continue to target operational excellence as a key feature of our DNA. I'm pleased we've delivered upper quartile safety performance in 2022. We always note that safety is our license to operate. We also recognize that we must always challenge ourselves to deliver better safety outcomes. We aim also for production efficiency above the sector, 80% across all assets. At Kraken, we've seen exceptional performance at 93% last year, which is well ahead of U.K.CS average of 72% for floating hubs.
You'll also hear from Richard later that we've carried our strong 2022 performance into 2023, with both Magnus and Kraken living, delivering excellent uptime. We also strive to reduce our emission footprint, and with a 40% reduction from the 2018 baseline, our U.K. business already is close to achieving the 2030 target set out under the North Sea Transition Deal. The reserve base that I laid out earlier, along with our capability in drilling, underpins our confidence in delivering stable production and cash flow over the medium term. We will be drilling wells at Magnus, Golden Eagle this year, which will mitigate some of the declines expected elsewhere in the portfolio.
In addition to the wells at Magnus and PM8/Seligi, we have an extensive low-cost intervention program to pursue. These assets also have material 2C resources that could be matured into 2P reserves through further drilling opportunities. We're also continuing to explore options with Petronas, our great partner, on how to best unlock developments of material gas resources at Seligi. At Kraken, we continue to assess the seismic we've acquired last year, along with our ever-increasing knowledge of the reservoir, to enable us to optimize future drilling, which will include new wells and sidetracks. I'm confident that we can execute that in the not-too-distant future. From a non-operated asset perspective, further drilling opportunities are being assessed at Golden Eagle, and we are working with the operator and sharing our expertise in an effort to optimize future approved drilling programs.
Decommissioning has also increasingly become an important area for our capability offering in that our capability to manage and execute large-scale decommissioning projects is both an effective means to mitigate our future cost exposure and a key enabler for us to access mature late life M&A assets. When we look at our decommissioning business, we're already demonstrating how our drilling capability has been transformed and applied in this area. Our extensive U.K. decommissioning work saw the successful execution of 24 well plug and abandonment across our Heather and Thistle fields, which is the most productive multi-asset P&A campaign seen in the Northern North Sea ever. With well P&A estimated by Offshore Energies UK to make up around half the cost of decommissioning, we have a clear opportunity and segue to drive value through our decommissioning excellence.
We also employ relevant and effective evolving decommissioning technologies to drive efficiencies and cost optimization through the lives of our decomp projects. I'm particularly pleased to see that we have been recognized in our decommissioning area, and the EnQuest decommissioning team has been recognized for performance both in the U.K. and Malaysia. Turning now to new energy. Sullom Voe Terminal was once the largest oil terminal in Europe, processing up to one and a half million barrels of oil per day. You can see the scale of the site and opportunity for repurposing this asset in the photo that's presented.
Our strategy is to right-size the terminal for much smaller east of Shetland production and west of Shetland production, reduce the long-term CapEx requirements, further defer decommissioning costs, then regenerating this extensive brownfield site into one of the leading energy, new energy hubs in the U.K. We believe that strategically advantaged site and infrastructure at SVT provides us with a competitive advantage. With 1,000 acres, with site industrial coma site, with the four deep water jetties, with 10 gigawatts offshore and onshore wind potential, and with multiple CO2 storage assets accessible from the existing infrastructure, it's strategically located for as a great hub for new energy. The more we look, the more we are excited about the opportunities at Sullom Voe.
As we've laid out before, we're maturing 3 discrete scalable opportunities linked to the existing infrastructure, and we're establishing clear milestone in the future for this area of the business. In carbon capture and storage, this is a clear focus area for us and the U.K. government, which featured in the Chancellor's recent budget. We want to utilize our existing skill set and the infrastructure at Sullom Voe to enable us to import and permanently store material quantities of CO2 from isolated emitters in the U.K., Europe and further afield. This would be utilizing our existing piers and jetties and our existing infrastructure to access the CCS opportunities.
The chart on the right shows that our CCS project alone can potentially allow us not only to get to net zero, but to significantly negative carbon footprints. We can also further help others to lower their emission footprints by providing this as a service. The second stream is electrification from Sullom Voe. Our proposal is to utilize wind and grid power aggregated at the terminal to lead to significant emission reductions for platforms which are expected to operate well into the 2050s. Our third strand looks at on-site production of green hydrogen and derivatives that could be exported via the pipeline systems that we have and the jetty networks that also provide a low-cost alternative fuel. We expect to unlock these opportunities with limited expenditures of single-digit million and leveraging our infrastructure to secure support from strategic and financial partners.
I'm excited about our unique business model anchored on our core capabilities and our differentiated infrastructure position that will establish us as an important player in a just and sustainable energy future. I will now hand over to Salman to take you through the financial results.
Thank you, Amjad, and good morning, everyone. Let's begin with a summary of our financial performance. Turning to slide 13. During 2022, we achieved record revenue of over $1.8 billion, representing a 39% increase relative to the previous year. This increase was primarily driven by higher production volumes, incorporating a full year of production from Golden Eagle following its acquisition from Suncor in October 2021, as well as supportive commodity prices. During the year, our sales barrels were lower than our production barrels as we moved from an over-lift position at the end of 2021 to an under-lift position at the end of 2022. In terms of costs, we witnessed an increase during the year as a result of contribution from a few factors. In the Golden Eagle acquisition, an increase in diesel and chemical costs, and higher emission costs.
We also increased our spend on maintenance and well work activities on Magnus and PM8. Overall, despite the increase in costs, we witnessed a 36% increase in cash generated from operations of over $1 billion. We also generated record free cash flow of $519 million. This is the highest in any year since the inception of the company. Even with the strong cash generation, we remain focused on cost control, capital discipline, and deleveraging the balance sheet. This focus has allowed us to deliver a $500 million reduction in our net debt during 2022, and this is the largest reduction in the company's history in any single year.
We've reduced our net debt from $1.2 billion to $717 million, bringing our net debt to EBITDA ratio down to 0.7 times. I will cover this in more detail shortly, but I would first like to highlight our performance during 2022 against our guidance for the year. Turning over to slide 14. As you can see from the slide, we delivered strong performance relative to our key guidance indicators for the year. We delivered production at the midpoint of the guidance, reflecting contribution from Golden Eagle, improved performance at Magnus and PM8, and Kraken production being at the top end of our guidance. The group's operating expenditure of $396 million was lower than guidance as well, reflecting strong discipline and a weakness in sterling.
Our decommissioning expenditure was driven by extensive well P&A programs at Heather and Thistle, where we executed P&A of 24 wells, 13 at Heather and 11 at Thistle. We also optimized our capital expenditure program by 30% by focusing on quick payback drilling opportunities at both Magnus and PM8/Seligi. Turning now to slide 15. As you can see on the chart on the left-hand side of the slide, it shows the pace and quantum of our deleveraging, which is continuing into 2023. Our net debt position at the end of February was $624 million. In particular, we've now reduced the cash drawings under our RBL reserve-based lending facility to $282 million versus a commitment of $500 million.
As you can see from the chart, our leverage ratio has declined from 1.6 times to 0.7 times over the year. We continue to make good progress towards our leverage target of 0.5 times net debt to mid-cycle EBITDA. As I outlined in our half-year results, we explored a variety of options to refinance the group's capital structure. In October last year, we successfully delivered a comprehensive refinancing involving a reduction in our gross borrowings, an extension of the majority of our RBL and US high-yield bond to 2027. This was a significant achievement given the volatile backdrop in financial markets.
In accordance with our hedging policy and as outlined at the half-year, we've also optimized our hedging program, which now involves a significant use of put options to protect cash flows while providing reasonable exposure to higher oil prices. For 2023, we've hedged 7.9 million barrels, predominantly through a combination of puts and costless collars. 4.6 million barrels were hedged through puts at an average floor price of $60 a barrel, and the remaining 3.3 million barrels were hedged through costless collars at an average floor price of $56 a barrel and an average ceiling price of $75 a barrel. For next year, 2024, we've hedged another 3.2 million barrels entirely through the use of put options at an average floor price of $60 a barrel. Turning now to slide 16.
Let's now have a look at the Energy Profits Levy and its impact on our business. The introduction of the levy in May 2022 and subsequent amendment and extension in November has drastically changed the U.K. fiscal landscape, making it one of the more challenging oil and gas fiscal regimes in the world. It has also had a number of unintended consequences for our industry. Several challenges. Also opportunities. In terms of challenges, the extension and increase in EPL and the absence of a price trigger resulted in a reduction in the size of the borrowing base under our RBL. We repaid $118 million of the RBL in the first quarter of the year to bring the outstanding balance within the available capacity. Despite the challenges, the changes in the EPL regime also create opportunities for EnQuest.
As you can see from the bar charts at the bottom of the slide, our tax loss advantage has increased from 66% to 160% relative to full taxpayers. This means that cash flow from the assets is worth 260% in our hands relative to a company with no tax losses. This relative advantage, along with our capability, supports our ambitions to pursue accretive M&A opportunities, which I will talk a bit more about on the next slide. The enhancement of tax incentives associated with decarbonization expenditure could also support our ambitions to repurpose the Sullom Voe Terminal into one of the largest energy hubs in of Europe. Turning to slide 17 to talk a bit more about M&A.
Since the inception of the company, we've demonstrated a proven track record of delivering disciplined and accretive M&A transactions through innovative structures. We acquired the first 25% of Magnus for no cash consideration, and the payback of the remaining 75% acquisition of Magnus, as well as the PM8/Seligi acquisition, was less than 12 months. On the Golden Eagle acquisition, we have already recovered our initial investment. As I mentioned on the previous slide, our relative fiscal position and our strong track record of profitably extending life of assets has further improved our ability to pursue M&A opportunities with limited upfront consideration in the U.K. Turning now to slide 18.
Shortly after becoming the chief financial officer of EnQuest at the half year last year, I set out my financial priorities for the company, and I'm pleased with the progress we've made during 2022. Number one, reset of the capital structure. As I mentioned earlier, we have refinanced our debt facilities with longer-dated maturity profiles. Number two, continue to de-lever. We remain focused on further de-leveraging through 2023 and beyond as we drive towards our leverage target of 0.5 times net debt to mid-cycle EBITDA as quickly as possible. Number three, cost discipline and capital optimization. We continue to exercise capital discipline and optimize the execution and delivery of our capital program in light of the Energy Profits Levy. Number four, unlocking M&A. As I've already outlined, the levy actually enhances the value of assets in our hands compared to full taxpayers.
We will continue to explore accretive M&A opportunities in our core upstream business with limited cash consideration. In relation to our infrastructure and new energy business, the incentives available under the Energy Profits Levy for decarbonization provides a framework that can support the maturation of our renewables and decarbonization opportunity set at Sullom Voe. Last but not least, shareholder returns. As we continue to de-lever the balance sheet, we intend to create a pathway to deliver shareholder returns during 2024. Turning now to slide 19. I would like to conclude my section by discussing guidance for 2023. We expect production to be between 42,000 barrels per day and 46,000 barrels per day, including the drilling campaigns at both Magnus and Golden Eagle.
Our operating expenditures are expected to be approximately $425 million, with the increase from 2022 largely reflecting inflationary pressures and phasing of activities. Cash capital expenditure is expected to be around $160 million. We plan to execute a three-well drilling campaign at Magnus and a platform drilling campaign at Golden Eagle. Decommissioning expenditure is expected to total approximately $60 million, primarily reflecting the extensive well P&A programs at Heather and Thistle. I will now hand over to Richard to take you through the detailed operational performance of the group.
Okay. Thank you, Salman. Good morning, ladies and gentlemen, from not so sunny Aberdeen. As usual, I will start with an overview of our overall performance before moving to each of the assets in more detail.
If we go to slide 21, we talk about innovative well programs and strong uptime, which is a feature of our performance last year. We delivered a very strong and encouraging performance in 2022, with production up 6% from the previous year, and that was right in the middle of our full guidance, full year guidance range, which was 47,259 barrels oil equivalent per day. In general, strong uptime has been and continues to be a feature across our portfolio of assets. Performance so far this year has also been creditable, including the continuation of top quartile production efficiency at Kraken, which had a very good 2022. Our high uptime perform...
Our high uptime performance can in part be attributed to our focus management of critical components and work scopes, and we've had to take smart measures to mitigate shortages of personnel and equipment within the industry, which obviously was a result post-COVID. On Magnus and in our Malaysia asset, our well programs during the year represented innovative, low-cost production enhancement scopes. We've clearly benefited from the acquisition of Golden Eagle asset in terms of our production. I'll turn now to the assets in more detail, starting with Kraken. If we flip over to slide 22. As you can see, Kraken, top quartile uptime. It was the top end of its guidance range with average daily production just over 26,000 barrels of oil equivalent per day. That's on a gross basis, and we take 71% of that.
The FPSO, the Armada Kraken, continued to perform extremely well throughout the year. Top quartile production and top quartile water injection efficiency, 93%. Overall, subsurface and well performance was also good, with aggregate water cut evolution remaining in line with our expectations. This year, we've continued in this vein. We've got a production efficiency to date, that's up to the end of March, of 95%, despite the fact we've just been through the harsh winter weather. During the fourth quarter of 2022, Kraken gross production reached a milestone of over 60 million barrels produced since first oil. For 2023, we do have some maintenance to do. We have 2 separate 10-day periods of shutdown, but we will make those shutdowns single train, so we don't need to shut down the whole field.
That's an optimization from the previous scopes. We'll also continue to review seismic. We've acquired that over the last few years, and that will help us optimize future drilling locations at Kraken, which we still expect to execute in the next few years. If I turn now to Magnus. Production of 12,641 barrels oil a day equivalent was 6% higher than in 2021. Here we've embarked on a program now of simultaneous workover and drilling activities. It's a key highlight at Magnus, because we are able to now do work with the drill rig and also offline, not using wireline or other types of well intervention activities. A key highlight last year was the completion of the North West Magnus well and the associated gas production that came from that.
Perforation work at second target, which as I've explained earlier, was done simultaneously. That was successful in adding incremental volumes at significantly lower cost than infill drilling. That was the original plan, and we changed that. The North West Magnus well contributed very well and very strongly during the fourth quarter of last year. We're presently drilling an injection well to provide long-term pressure support to this well. We also drilled two further infill wells with the rig in 2023, and we're continuing simultaneous activities in order to restore wellhead integrity issues and add barrels. Subsequent to this North West Magnus well success, we have also remedied the wellhead failure previously highlighted at various other meetings at one of our other best production wells.
That was brought back on stream in November, and that was done during using a variety of permanent solution repair methods which we've developed, which are there to overcome the P seal design flaws which we've told you about previously. This work will continue into 2023 and provides us with increased confidence in the longer-term performance of Magnus. Just again on year to date, just to let you know that performance, production efficiency is 88% end of March, but that includes two wells which are offline, which we can't actually control. If you take that out, the overall production efficiency is greater than 95%. Turning now to GKA on the next slide. Golden Eagle and GKA are our other, principal assets.
If we look at the Greater Kittiwake Area first on the right-hand side of your slide, the production there was about 7% lower than in 2021, but that was really a function of natural declines. Further maintenance shutdown at GKA is planned for the 2Q of this year. Again, for essential maintenance purposes, and we are still aiming to improve uptimes. Again, on the theme of what's happening this year, so far that's 94%. On Alba, we're planning an infill drilling and workover program. In the U.K., we're also operator of the Bressay potential development, and we're still actively exploring farm-down opportunities on that while continue to progress the development planning of the asset.
Golden Eagle, our joint venture, enjoyed high uptimes and a very supportive price environment in 2022. It was a key contributor to the group's operational and financial performance. However, production rates were lower than forecast and the planned 2 well infill drilling campaign has been delayed due to a combination of operational and weather events. We're continuing to work with the operator and the JV partners to identify opportunities to maximize rates going forward. As Amjad mentioned, following completion of the current drilling program, subject to partner approval, we're looking at a potential platform well program later on in the year. I'll move quickly on to Malaysia on the next slide, which is slide 24. PM8 Seligi, the well campaign, or well campaigns, I should say, drove increased production last year.
The average net production to us was 6,458 barrels of oil equivalent. That was 28% higher than 2021. We had a very, very successful 4-well workover campaign, which used a hydraulic workover unit. We also delivered the EnQuest's first 3 horizontal wells at PM8/Seligi, which were brought on stream throughout the year and represented an excellent achievement given the highly challenging drilling conditions to do horizontal wells out there. As Amjad has already mentioned, the team also executed its first-ever 3-well plug and abandon campaign at PM8/Seligi. We had many things going on at the same time. This again was executed ahead of schedule, 30% below budget. This has been well-recognized by Petronas, who were very pleased and have asked us to do 6 more wells in the coming year.
Demonstrating decommissioning excellence here also enhances our global capability in addition to the U.K., where we are embarking on or embarked on a very active decommissioning project. Going over to talk about decommissioning, which is slide 25. We've had a very big year of activity in 2022, where we demonstrated our capability and we had public recognition as, again, as Amjad has already spoken about, of decommissioning excellence. We have delivered one of the most productive decommissioning campaigns seen in the U.K. North Sea, certainly in the northern North Sea, with 24 wells plugged on both Heather and Thistle combined so far. On these two projects, we've also made good progress in securing the top side removal heavy lift work scopes for both Heather and Thistle.
The Thistle contract should be scheduled for award in the next few weeks. The Heather one has already been awarded. These extensive well P&A campaigns will continue to be delivered again this year and beyond, and we remain on track regarding our targets for total well abandonments and platform disembarkation by around the middle of the decade. In summary, operationally, we had a year of high performance, and we remain confident in delivering our near-term targets for progressing further barrel adding opportunities. We remain focused on maximizing the value from our existing assets through targeted maintenance, targeted enhancement programs, and identifying repurposing opportunities for equipment and personnel. I'll quickly turn now to repurposing the Sullom Voe Terminal, which is key to our future, as you can see on slide 26.
Throughout 2022, we delivered top quartile operational and HSE performance at the terminal. That was 100% continuous uptime for East of Shetland and West of Shetland operations. We also executed a number of operational risk reduction projects, including major inspections and replacing sections of pipelines throughout the plant. We are now working on a multi-year program of projects which will right-size terminal facilities for expected future throughput and prepare the way for the next phase of Sullom Voe operation. This program of work will ensure that EnQuest reduces its emissions footprint on the site or the whole emissions footprint for the site and provides ongoing cost-effective and efficient support to both East of Shetland and West of Shetland operators. With that, I will hand you back to Amjad for some closing remarks.
Thank you very much, Richard, and appreciate the detailed discussion and operations review. As you've heard from Salman and Richard, we've had a very strong 2022, both from an operational and financial perspective, and we continue to make progress against our strategic priorities of deliver, and grow. The combination of this strong track record and our advantaged tax position in the U.K. and changing M&A landscape gives us confidence that we can pursue production growth through targeted M&A opportunities. This will further enhance our position as a responsible operator, making the best use of resources and assets that have already been developed to ensure we play our part in the just and sustainable energy transition. As we've discussed before, and as I said before, I believe EnQuest is a true transition company.
We are taking mature and undeveloped discoveries, decommissioning these assets, and repurposing infrastructure for new energy. This is exactly the fairway for a transition company. This achievement is only possible through our extensive and proven capabilities, our track record, and more importantly, our resilience, creativity, and adaptability over our many years. We have an extensive work program this year for our upstream assets, for our infrastructure and new energy, as well as our decommissioning business. We are focused on operational excellence in upstream to deliver sustained cash generative production, which will facilitate further deleveraging. We are focused on targeted capital investment and, in the near future, returns to shareholders.
In infrastructure and new energy, we look forward to the outcome of the carbon capture and storage license applications, we'll work towards milestones to secure counterparties and partners in the value chain with our tangible infrastructure-based proposition. In decommissioning, we will further demonstrate our position as a leading decommissioning partner by delivering our targets. I'm very excited about our future, both our base business and our new business as we pivot towards a new energy business over time. Thank you for your attendance and your time today, I will now move to the Q&A section of this presentation.
Thank you, Amjad and gentlemen. We have a number of Q&A questions come into the inbox. We'll start with some short sharp ones. The first one probably for you, Amjad, is around the EnQuest Producer. What are our plans there? Can we expect that to be sold this year?
Yeah. Thank you very much for the question. The EnQuest Producer is available for sale. We are looking at opportunities to sell it. We have also talked about repurposing it and using it for Bressay. That would require us, now that we have to look for a partner, that will require us to have a partner alongside. As you know, Harbour and Equinor have exited the block there.
Thank you, Amjad. A couple of questions then on our upstream operations. First one around Golden Eagle. How is the dry hole there affecting your view of the acquisition reserves? Second question relating to our drilling at PM409, will that well be available to tie back to PM8 infrastructure?
Okay, I'll take the both questions in brief. On, in terms of the dry hole, we have discussed the acquisition as paid back in roughly 14 months. We still look at the acquisition, which was made at $50 as very accretive and very positive. In terms of PM409, we are drilling a well this year. Depending on the outcome of that well and the size of the prospect that we're drilling or the area that we're drilling, then I think we will look at the options to tie it back to PM409.
Thank you, Amjad. A few financial questions perhaps here. The first one relates to our 7% retail bonds, from Michael Boam at Sona. Do you expect to repay the remaining bonds out of the free cash flow this year?
If I may, I will turn that over to Salman.
Thank you, Amjad. Thanks for the question, Michael. I mean, that is certainly one of the options. Given the backdrop of EPL, we continue to explore opportunities to optimize our capital structure options. We would look at all the options that are available, but certainly paying it out in cash is on the table as well.
Thank you, Salman. next question, probably for yourself again, is around abandonment expense. we stated previously Abex would lessen in the future, but how is Abex expected to develop over the period 2024 to 2026?
Yeah, thank you for the question. On Abex, I think we've said $400 million over the next five years, with $60 million this year. In the middle of the decade, we would see the numbers step up as we undertake heavy lift at Heather and Thistle and subsea well campaigns at Dons. We'll have a slowdown thereafter into the 2030s.
Thank you. The next one is around the tax loss position. Can you explain why your tax losses are more accretive to others due to EPL? Your existing tax losses relate to the ring-fence tax rate of 30% and 10%, I understand.
On EPL, we have the same obligations as all the other companies operating in the U.K. You know, however, as I outlined on slide 16 of the presentation, our corporation tax and supplementary charge tax loss position provides a larger relative tax advantage compared to companies with no tax losses. It's that relative advantage that's increased from 66% to 160%.
In other words, cash generative assets are worth 260% in our hands relative to a company that does not have CT and SCT losses. On EPL, we have the same obligations as all the other operators in the U.K.
Thank you, Salman. There are a number of questions from various parties on M&A linked to those statements. I'll try and summarize those into a couple of questions. First one, have you noticed a change in the U.K. M&A market since the introduction of EPL? Second one would be what are your plans to differentiate outside of the U.K. and increase production substantially in Malaysia or elsewhere, given the uncertainty of tax rules? Third one would be around, can you give us an idea of scale and how this may play into capital allocation decisions, particularly as this relates to the potential start of shareholder returns in 2024?
Okay, let me take those. Just again, in brief, we, as Salman mentioned, we see ourselves as differentiated because we have a competitive advantage in the M&A space with people leaving. We see fewer people bidding for opportunities. We have experience in structuring type arrangements in the past and continue to look at that in the future. We see that as a change in the M&A market in terms of the number of people that are looking at expanding in the U.K., and we still, with our tax advantage, are looking at expanding in the U.K. In terms of outside the U.K., we are an established operator in Southeast Asia, and we'll continue looking at opportunities there, albeit the competition is stronger there.
We are committed to pivoting to more gas, and we are committed to pivoting as a new, as part of the new energy mix, and we are committed to increasing our footprint internationally as we pivot to gas internationally and to new energy in the U.K. CS. In terms of CapEx, can you give us an idea of scale? We have, you know, we've been spending between $120 million and $200 million over the past cycle, and we would see us spending towards the lower end of the CapEx range. We continue to emphasize that shareholder returns will be part of that mix and will be a percentage of our free cash flow in the future.
Amjad, just one more came in the meantime on M&A as well. Do you see greater value in tax efficiencies in development or production assets? Is the latter, i.e. production assets, more competitive bidding environment than the former, meaning there's greater potential value creation from undeveloped assets?
We generally see more value in in production assets, but we also are cognizant of our capability with with development assets if we can find external partners and sources of finance. Again, those need to be the right size for our balance sheet.
Thank you. Part of capital allocation, questions again, this time around, development projects. Can you please elaborate a bit more on your plans to develop Bressay and Bentley and how the FDPs are going and any anticipated timeline to production?
On Bressay and Bentley, we are, I mean, the first port of call is to continue working, but also to find partners. We still have a significant amount of time to submit the FIDs on both and to decide whether we go forward. We clearly need to be cognizant of the changing landscape in terms of the emissions and ensure that our solution, our technical solution also is collaborating with, corroborating with the 2030 plus emission targets that the U.K. and NSTA has. There's no. I think there's nothing at present that we are looking at, but we are looking initially to bring in partners, so we're actively looking for partners, and then, into Bressay, and then we will consider our options going forward.
Many thanks, Amjad. We now move to a number of questions on the shareholder returns. Again, I'll summarize these together into 2 or 3 separate ones. Good to see that shareholder returns are on the agenda. Can you tell us any more about the plans? Is it dividends or buybacks? What sort of timeline are you expecting to pursue shareholder returns in?
I'll take that one. I think we will be looking at both just depending on where the valuations and the values are. Clearly the agenda is for shareholder returns in the near future.
Thank you, Amjad. Maybe linked to that, just a question on the current investor landscape. How do you view the investment landscape or the investor landscape, I should say, in the U.K. at present?
I guess what we've had some. We had some, a very stable shareholder register, and we continue to appreciate the loyalty of our shareholders. We continue to look for new shareholders as we pivot to new energy and make sure that we are able to also look at that business model as attractive to a new shareholder base. Then maybe going back to the shareholder returns, I think the ability to have shareholder returns in the future may give us access to a different shareholder base also in the future. I don't know, Salman, if you want to add anything to that.
Yeah. I think you've covered the shareholder as an element quite well, Amjad. We've certainly got a very significant position in the upstream business, but we're also a very responsible transition company with a significant opportunity set at Sullom Voe. We're looking to unlock those opportunities in a capital light manner and partnerships with financial as well as strategic partners. Maybe not-noteworthy to also highlight that in addition to the shareholders, we also have other stakeholders. Our senior banks have been committed and loyal and very supportive of the upstream business. Like I said, a very strong support for the transition opportunity set as well. We have a fairly diversified access to capital base with the US high-yield bond continuing to be a feature of our capital structure as well as the retail bond.
Thank you, gentlemen. Just moving back to kind of more specific EnQuest strategy. Around our hedging policy, given the progress on deleveraging and as you get closer to your targets, are you considering any changes to your oil hedging strategy? For instance, once you get to your leverage targets, would you consider having more flat price risk?
Salman, do you want to take that?
I'm happy to take that, Amjad. We continue to monitor our hedging strategy to maximize stakeholder value. As you're aware, we have refined our hedging strategy with an increased orientation towards the use of put options. In fact, for 2024, we've entirely used puts as the hedging instrument. However, we remain fairly dynamic in our approach to hedging, and we will continue to consider alternatives where appropriate.
Thank you. Moving to a more generic industry-based question around government and politics. Regarding increasing share of revenue in the U.K., how is the view of further increases in tax rates under a Labour suggestion, how would that affect your view of continuing to invest in the U.K.?
We talked a lot about the need for the U.K. to foster more investments in transition companies like ourselves and in energy companies that will be the investors for new energy in the future. As you can see, you know, repurposing both the capability as well as repurposing the assets is what transition is about. A stable tax regime is extremely important for the business, and the U.K. has now become one of the highest tax regimes in the world and clearly one of the most unstable. I think stability in tax, incentives for investments is important to foster investments in the U.K.
Thank you, Amjad. The, some questions thinking about the new energies in transition. Can you give us a status update on the CCS license applications? Similarly, can you explain how Sullom Voe contributes to current earnings or EBITDA and how that earnings streams, if there is one, can grow in the future through your energy transition initiatives?
Salman, I'll turn that over to you.
Thank you, Amjad. In relation to the status of CCS licenses, we've submitted an application for two, and we're waiting for the awards to be announced by the North Sea Transition Authority. They had indicated that those awards would be announced during the first half of this year. We're looking forward to the confirmation of the same. As far as Sullom Voe's contribution to earnings is concerned, the link now that we have with the upstream business is predominantly through the export route for Magnus. What we're essentially looking to do, as Richard outlined earlier, is right sizing the terminal to make it more fit for purpose for the throughput that goes through the terminal. In essence, it's about delivering sustainable cost reductions.
On a look-forward basis, CCS, hydrogen, electrification, all these new energy and decarbonization opportunities ultimately will flow through to earnings over the long term. However, the terminal is a very unique piece of infrastructure that used to sit at the heart of a large amount of oil and gas resource. Now it sits at the heart of an enormous amount of renewable resource, particularly floating wind. We would look to harness that value, unlock the value through the 1,000-acre site that we have, leveraging the deep water port, the 1,000-acre site, a whole host of pipeline infrastructure that connects us with reservoirs to develop that potential over time.
Thank you, Salman. Just linked to that, I suppose a question just come in. Are there any plans for a deep dive site visit, CMD type activity around infrastructure and new energy in the future?
Salman, you want to continue with that?
Sorry, could you repeat the question, Ian?
Sure. Just a question around are there any plans for a deeper dive, capital markets day type event in relation to infrastructure and new energy business?
Yes, I'll get that one. Thank you, Ian. I mean, we will look at a capital markets day when there is enough progress to warrant that.
Okay. The final question for today, relates to, financing activity again, and, this one is around bonds. Are there any, plans for bond buybacks if cash balances continue to grow?
That one's for Salman.
Yeah.
Thank you for the question. Like I said earlier, you know, our priority is to continue to deliver the balance sheet. Like we've done in the past, we do look at opportunities to optimize our capital structure. We're certainly open-minded about looking at a variety of options. Buybacks is something that we executed last year with the U.S. high-yield bond, buying back $34 million of those. We are going to look at the right allocation of capital on a go forward basis.
Many thanks, Salman. There are no further questions. I will now hand back to Amjad for some closing remarks.
Okay. Thank you very much, Ian. Thank you all, ladies and gentlemen, for attendance. Our next planned update to the market will be our usual operations update in May, and I look forward to seeing shareholders in person at our AGM later this year. Thank you very much and have a great day.