Government mulls support for North Sea explorer EnQuest

EnQuest holds a majority stake in Kraken oilfield. Picture: Contributed
EnQuest holds a majority stake in Kraken oilfield. Picture: Contributed
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Whitehall is understood to have made contingency plans to support North Sea explorer EnQuest amid the threat of a low oil price-induced bankruptcy crisis in the region.

The Oil and Gas Authority (OGA) is said to be concerned about EnQuest because of its majority stake in the huge Kraken oilfield in the North Sea, one of the region’s largest new projects.

Last March EnQuest posted a 20 per cent decrease in full-year core earnings, as it was forced to write down about $626 million (£433m) on the value of some of its assets due to the oil price slide. Around that time its credit rating was downgraded deeper into junk status by Moody’s Investor Services.

However, the company said at the time that its net debt at the financial year end was $1.55 billion (£1.08bn) and underlying earnings of $465 million (£323.9m), and therefore “well within” its net debt to underlying earnings banking covenant of five times.

One source familiar with the situation said yesterday: “I think the OGA is doing prudential monitoring of the situation facing North Sea players, including EnQuest, playing out theoretical scenarios.

“On the plus side, EnQuest has said it has sufficient funds to finance the Kraken project through to first oil in 2017.” EnQuest declined to comment yesterday, while the OGA was not available for comment.

The Kraken project has already lost one developer when First Oil Expro went into administrative receivership earlier this year, with partners EnQuest and Cairn Energy carving up its stake.