EnQuest in £82m fundraising to support North Sea projects

Oil and gas producer EnQuest is seeking to raise £82 million as it presses ahead with plans for one of the biggest projects in the North Sea.

EnQuest said the restructuring would put its finances on a 'stable and sustainable' footing. Picture: Contributed
EnQuest said the restructuring would put its finances on a 'stable and sustainable' footing. Picture: Contributed
EnQuest said the restructuring would put its finances on a 'stable and sustainable' footing. Picture: Contributed

The group, which has a stake in the £4 billion Kraken prospect east of Shetland, said the overhaul of its finances would put it on a “stable and sustainable” footing and reduce the burden of servicing its debt, which stood at almost $1.7bn (£1.4bn) at the end of June.

EnQuest is one of the North Sea’s biggest producers, pumping more than 42,000 barrels of oil a day, and has been hit hard by the global slump in prices, which have more than halved from their 2014 highs of above $100 a barrel to about $50 – having plunged as low as $28 at the start of the year. This situation has been exacerbated by its debt pile and the significant capital spending needed to develop Kraken, its largest ever project.

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Following an “extensive period of engagement and negotiation” with its stakeholders, EnQuest said it would be offering more than 356.7 million of new shares at a price of 23p each to raise £82m before expenses. It has also agreed a “range of improvements” on its debt facilities, including an extension to the final maturity date of its existing revolving credit facility to October 2021.

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The move comes after Enquest last month called off talks to sell a holding in Kraken – one of the biggest North Sea development projects – to Israeli outfit Delek. The firm signed a non-binding agreement in July to sell a 20 per cent interest in Kraken to Delek, but on 15 September it said discussions over the deal had been terminated.

Jock Lennox, chairman of the London-listed oil firm, said: “We are very pleased to announce today a comprehensive package of measures to place EnQuest on a strong footing to deliver our Kraken development in the first half of 2017 and ensure that we are well placed to deliver value to our shareholders in the medium term.”

He added: “Over the last two years, EnQuest has taken action to implement extensive cost-saving programmes to refocus the business for the low oil price environment, including reducing and re-phasing both capital and operating expenditures. Simultaneously, EnQuest has been working on a range of other funding and liquidity options, which culminate in the restructuring announced today.”

First oil from Kraken, in which EnQuest has a 70.5 per cent stake, is expected in the first half of next year. The floating production, storage and offloading vessel for the project is due to set sail by the end of this year. Edinburgh-based oil and gas firm Cairn Energy owns the remaining 29.5 per cent interest in Kraken, estimated to contain 140 million barrels of oil.

Law firm Ashurst is advising EnQuest on its financial restructuring and described it as the “largest and most complex” undertaken by a European oil company in recent years.

Giles Boothman, who heads up Ashurst’s restructuring and special situations team, said the refinancing involves senior debt, high-yield bonds, retail notes and a simultaneous equity raise.

“It has required a large team working across a complex range of equity, debt, restructuring and capital market issues in multiple jurisdictions and we are delighted to have played the central role acting alongside Rothschild,” he added.