Lloyds backs EnQuest with £180m deal

The deal, in conjunction with French bank BNP Paribas, is expected to be announced today and is the biggest in the UK upstream oil and gas sector this year.

Bank of Scotland, part of Lloyds, has put the deal together with Scotland's latest listed company, already a member of the FTSE 250, which was created from the demerged assets of oil services business Petrofac and Swedish explorer Lundin Petroleum this month.

Shares in EnQuest, valued at about 750m, began trading on 6 April and closed on Friday up 7.5p (7.69 per cent) at 105p.

Proceeds of the revolving credit facility will be used to fund the company's general corporate activities. Industry sources say EnQuest has identified a number of potential targets for acquisition as the sector consolidates.

Its activities are focused on the UK Continental Shelf and its portfolio of assets includes the Thistle, Deveron, Heather, Broom, West Don and Don Southwest fields.

Andrew Moorfield, head of oil and gas at Lloyds Banking Group, who has been working on the deal, said: "EnQuest has a superb asset profile and is run by a very experienced management team."

He added that the company had a "clear and strategic plan to grow the business".

Lloyds has enjoyed a close association with both Petrofac and Lundin over the years and will regard this latest deal as an opportunity to signal its continued commitment to support industry at a time when businesses generally are critical of lending policies at the banks.

Bank of Scotland is providing 100m and BNP Paribas 80m. Moorfield described it as "a very significant amount of money for a new business".

He said EnQuest was regarded as a promising addition to the Scottish corporate landscape with strong institutional backing.

"The darlings of the sector are the likes of Dana Petroleum and Premier. I would put EnQuest in that category because of the quality of the management team and the company's assets," he said.

The funding will support working capital requirements but sources in the sector say the management at EnQuest are keen to expand through acquisition.

One source said: "There is a lot of consolidation and I am confident they will always be looking at targets."

Petrofac, the FTSE 100 company, demerged its North Sea assets to maximise their earnings potential.

It offered its shareholders a 45 per cent stake in a newly listed independent exploration and production company with Lundin taking the rest.