THE chief executive of Enquest and his family are poised to pump up to £41 million into the North Sea-focused firm as it looks to keep plans to develop the giant Kraken field off Shetland on track.
Enquest said a company owned by the extended family of Amjad Bseisu will provide up to around half the £82m share capital it plans to raise from investors in a restructuring intended to stabilise the firm’s finances.
Debt laden Enquest announced the restructuring four weeks after talks to sell a stake in the Kraken field to Delek of Israel fell apart.
Highlighting the challenges posed by the crude price slump, Enquest said: “Directors are now
of the view that, without substantial changes to the Group’s capital and debt structure,
the Group will have insufficient cash resources to bring Kraken to first oil and to meet
all of its payment obligations as they fall due.”
Chairman Jock Lennox said: “The proposed Restructuring … will significantly improve the liquidity position of the Company so that EnQuest can deliver first oil from the Kraken development in H1 2017 in accordance with management’s projections.”
The restructuring will involve extending the repayment schedules applying to a revolving credit facility and high yield notes issued by the firm.
The company said directors believe the restructuring will put the firm in a stronger position to meet current oil market conditions.
It added: “They continue to believe that the Group’s fundamental business, with its strategy of targeting mature and marginal oil assets and its focus on cost efficiency, is well placed to withstand a prolonged period of low oil prices, and will be even better placed to do so after completion of the Kraken development.”
Enquest is developing the field with Edinburgh-based Cairn Energy, which has underlined its faith in the potential of the field.
Cairn’s chief executive Simon Thomson expects the firm to generate significant amounts of cash from Kraken even at current low crude prices.
Enquest said: “The decline in oil prices during and since 2014 and the continuing low oil price environment have had a significant negative
impact on the Group’s revenues, liquidity and available cash resources.”
The company has been able to cut the expected costs of the development work by more than $500m amid the resulting downturn in the oil services industry.
However, this may have made it harder for Enquest and Delek to reach agreement in the talks they had concerning the sale of a 20 per cent stake in Kraken.
Analysts have noted that the rise in crude prices this year, from $27 per barrel in January, to around $53 per barrel has made it harder to value assets. The outlook for crude prices remains uncertain, in spite of recent signals from Opec producers and Russia that they may cut output to help boost the market.
As EnQuest has been talking for some time about selling assets to reduce its $1.7 billion (£1.4bn) debts, Delek may have hoped to get a deal done quickly.
Enquest, said banks that provide the credit facility have agreed to support the restructuring.
Some 61 per cent of the holders of high yield notes have said they will back it, of 75 per cent required.
The company plans to raise the £82m equity through an open offer and placing at 23p per share.
Stephane Foucaud, an analyst at FirstEnergy,, said the fund raising would buy time to get Kraken onstream. It was very reassuring to see Mr Bseisu supporting it.
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