Debt-laden North Sea producer EnQuest hires Rothschild as advisers

North Sea explorer EnQuest is poised to hire blue-chip investment bank Rothschild as retained advisers on its £1 billion debt mountain against the backcloth of the oil price slump.

EnQuests main interest is in the Kraken project. Picture: Contributed
EnQuests main interest is in the Kraken project. Picture: Contributed

It follows the group, which announced last month it is to cut 45 jobs in Aberdeen amid the industry downturn, conducting a beauty parade of City debt specialists recently.

Last week EnQuest, whose major interest is the huge Kraken project east of Shetland, saw its credit rating downgraded deeper into junk status by Moody’s Investors Service. Its loans are now ten times its £119 million stock market capitalisation, as the oil price has slumped from $115 a barrel in summer 2014 to $39 now.

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It is understood that Rothschild has not been hired to do a fundamental financial restructuring of EnQuest, no debt repayments are imminent and no banking covenants have been breached.

EnQuest, which reports its annual results on 17 March, is set to be “cash flow negative” this year and next as it finishes off the £2bn Kraken development with partner Edinburgh-based Cairn Energy, owning 70.5 per cent and 29.5 per cent of the project respectively.

EnQuest told the market last December that it was confident of growing its production by one-third in 2016 before Kraken is due to produce its first oil in the first half of 2017.

One analyst said yesterday: “Rothschild on board looks to be prudent against the difficult backdrop, rather than a distress appointment.”

EnQuest declined to comment yesterday.