North Sea oilfield developer EnQuest Plc (LON:ENQ) has launched a £82mln equity funding to support the completion of work at the Kraken field.
Kraken is due to come online in the first half of 2017, though last month a possible deal to farm-out a portion of the project (and a share of the project’s costs) fell through.
EnQuest, which owes in the order of US$1.7bn, told investors it will not use any of the placing funds to repay debt.
The company says the equity placing is part of a financial restructuring, agreed with key stakeholders after an extensive period of engagement and negotiation. It is issuing some 356.7mln new shares, each priced at 23p.
This equity issue is interdependent on other elements of the restructuring, which includes a variety of changes to the group’s debt terms.
Together the measures are expected to give EnQuest a stable and sustainable capital structure, as well as reduced cash debt service obligations and greater liquidity.
"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 H1 2017 and ensure that we are well placed to deliver value to our shareholders in the medium term,” said Jock Lennox, EnQuest chairman.
He added: “The Board remains confident in the long term potential of the EnQuest business plan, and is of the view that the proposed Restructuring, including the placing and open offer, will enhance value for all stakeholders."
New debt arrangements
EnQuest’s revolving credit facility (RCF)has been extended to 2021 and certain financial covenants have been relaxed.
The amounts designated as ‘revolving’ has been split, with a portion now treated as a ‘term’ loan facility. The amortisation profile has also been amended, and terms have been put in place for ‘super senior hedging’.
Changes are also proposed for the group’s high yield and retail loan notes. Among numerous changes to the terms the maturity dates move to April 2022, cash interest payments have new terms linked to prevailing crude prices.
EnQuest has now called a shareholder meeting on November 14.
Cut to Kraken costs
The company also gave an update on the group’s operations, and revealed that better than budget performance with drilling and installing subsea production systems results in a US$100mln reduction for the project’s capex – which is now seen at US$2.5bn.
It also noted that Kraken’s floating production storage and offloading (FPSO) vessel is now very close to mechanical completion.
Meanwhile the smaller Scolty/Crathes development is also ahead of schedule, with first oil expected to be delivered around the end of 2016.
EnQuest’s production guidance for the year remains between 42,000 barrels oil equivalent per day (Boepd) to 44,000 Boepd.
Operating costs amounted to US$23 per barrel in the first half, which is ahead of target.