Heavily indebted North Sea oil producer EnQuest (ENQ) is down 2.7% at 27p as it unveils a financial restructuring. The company is looking to put itself on a sound footing to deliver its flagship Kraken project east of the Shetlands.

In September 2016 a plan to sell a portion of Kraken to Israel's Delek Oil to support the funding of its development fell apart.

EnQuest, created from the upstream assets of oil services play Petrofac (PFC) and Swedish firm Lundin Petroleum (LUPE:ST) in 2010, plans to raise £82m at 23p per share and make amendments to its lending facility after lengthy discussions with key stakeholders.

EnQuest loaded up on debt when oil was at $100 per barrel and has felt the squeeze on its cash flow from the subsequent collapse in oil prices despite efforts to reduce costs.

The shares, highly leveraged to oil prices, have recovered with crude, up 42% year-to-date, but are a still a long way from the levels they were at immediately following the demerger when the company briefly populated the FTSE 100.

FirstEnergy analyst Stephane Foucaud comments: 'Among the larger North Sea operators (Premier, Ithaca and EnQuest), we had always seen EnQuest as having the most risky balance sheet.

'While the new £80m new equity issue is small compared to the overall debt position of almost $1.7 bn at the end of June and does not change fundamentally the investment profile of EnQuest, it buys time and running room until Kraken is on stream.'


Issue Date: 13 Oct 2016