Barclays described the North Sea oil firm’s recent £107mln rights issue as a “necessary step” in addressing near-term debt repayments and the Magnus acquisition payment.
“However, the fact that it was necessary despite our prior estimates indicating otherwise highlights the sub-optimal nature of EnQuest's disclosures around what has become a complex operating and financial structure,” Barclays analysts said.
“Simplistically, EnQuest is a debt-levered North Sea oil producer that should be quickly paying down debt in the current macro environment.
“In reality, we forecast end-18E net debt being flat year-on-year at c$2.0bn as annual EBITDAX growth of c160% fails to translate into free cash flow.”
Barclays set a new price target of 45p, down from 60p, which compares to a market price of 36.85p.
“With other oil-levered producers appearing more attractive in our view, we downgrade the stock to ‘equal weight’ from ‘overweight’,” Barclays added.