NORTH Sea-focused Enquest has said it is in talks with lenders about potential assets sales and further cost cutting as the company looks to reduce debts amid the storms battering the oil and gas sector.
Chief executive Amjad Bseisu said Enquest’s priorities include strengthening its balance sheet and streamlining operations as it looks to keep costs to a minimum in the low oil price environment.
“EnQuest remains focused on its balance sheet strength and is pursuing a range of opportunities and mitigations in this respect, on which EnQuest continues to work closely with its facility providers,” said the company. “Potential measures include asset sales and further cost reductions.”
The comments in an update on operations highlight the challenges facing North Sea firms as they near the end of the second year of the downturn which began after the crude price started tumbling in June 2014.
Royal Dutch Shell is reported to have started talks with potential bidders for North Sea assets, including some of those it acquired through the £37bn takeover of BG.
Enquest and its lenders do not appear to expect there to be a recovery in the short term, in spite of the oil price rallying from $27 per barrel in January to around $48.
Brent crude fetched $115/bbl in June 2014.
The update came a day after a major report found that around a third of the jobs in the North Sea will be lost as a result of the oil price fall.
The Oil and Gas Survey by Aberdeen & Grampian Chamber of Commerce found firms expect to cut workforce numbers by 17 per cent in the year to 31 March, following a 15 per reduction last year.
The results of a study of collaboration in the North Sea by Deloitte published yesterday indicated the slump in the crude price has resulted in a marked change in behaviour in an area where cut-throat competition became the norm.
Trade body Oil & Gas UK said the findings showed the firms that own fields are working more closely with those that provide services for them in areas such as drilling.
Aberdeen-based services giant Wood Group said last week that the industry was facing unprecedented conditions in the mature North Sea.
Many fields have passed peak output and use ageing facilities, which makes them costly to operate.
London-based Enquest has focused on the area in the belief that it could make good returns from assets that bigger fish may not want to invest in.
The company expanded rapidly through acquisitions and in August said it was considering more deals in the North Sea.
Yesterday’s comments about potential disposals suggest it may have changed tack after incurring massive losses last year.
The company said then it was seeking costs reductions across the board, highlighting areas such as production operations and manpower.
Enquest employs 300 in Aberdeen, after reducing job numbers there by around 15 per cent last year.
Yesterday Mr Bseisu said: “EnQuest’s high operating efficiency and execution capability enable us to realise the optimal performance potential in maturing oil fields, with our low cost delivery vital in current market conditions.”
However, Enquest said it was making good progress with the development of the giant Kraken heavy oil field off Shetland, which it hopes to bring onstream next year.
The company recently increased its stake to 70.5 per cent after acquiring the 10.5 per cent held by First Oil Expro for a nominal consideration before Mr Suttie placed the Aberdeen business in administration.
Enquest has talked about selling down the Kraken stake.
It expects to be able to reduce its average production costs significantly when Kraken starts production, using modern facilities.
The company owed $1.6bn (£1.1bn) net debt at 30 April.
It expects production to average 44,000 to 48,000 barrels oil equivalent daily this year, up from 36,567 boed in 2015.
Enquest roduced around 9,000 boed in April from the Alma-Gallia complex, which it brought onstream last year. This was developed out of the North Sea's first producing field, Argyll.
The company owns the floating production vessel used on the field. It could raise cash through a sale and lease back deal involving the vessel.
Shares in Enquest closed down 1.5p at 35p.
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