EnQuest aborted sales talks for Kraken stake due to debt deadline - sources
* Bids from Polish entity, private group abandoned - sources
* EnQuest $2 bln net debt more than 3 times market value
* Opted for loan against ringfenced stake instead of sale
(Updates paragraph 10 on debt position)
By Ron Bousso and Shadia Nasralla
LONDON, Sept 12 (Reuters) - EnQuest switched from
plans to sell a stake in its flagship North Sea oilfield to
borrowing money against it after two sets of sale talks had to
be abandoned as a deadline for a debt repayment approached,
industry and banking sources said.
EnQuest, with almost $2 billion in debt, launched earlier
this year the sale of a 20 percent stake in the heavy oil Kraken
field, one of the largest North Sea developments which started
production in June last year.
The sale of the stake would have pumped welcome cash into
the coffers of the company which has to pay back just under $200
million in debt in October.
The sale process, initially expected to raise up to $400
million, was run by investment bank Jefferies.
London-based EnQuest received an offer for a stake in Kraken
from Lotos, a Polish state-backed oil and gas company,
several months ago, according to the sources.
The talks reached advanced stages, but dragged on and could
not be concluded in time, according to one source.
Lotos declined to comment.
A second offer from a private company was rejected by
EnQuest after the bidder revised its terms at the last minute,
the sources said.
After the two failed approaches, EnQuest decided to borrow
$175 million against 15 percent of Kraken's cashflow from Oz
(Och-Ziff) Management to be paid back within five years.
The move came as the company is saddled with net debt which
stood at $1.97 billion at the end of June. Its market value is
around $564 million.
"There was very significant interest in the farm-out process
for Kraken and we received a number of offers from both industry
participants and financial institutions," EnQuest said in a
statement to Reuters.
"The financing agreement with Oz Management was selected as
the preferred economic option for EnQuest at this time, allowing
us to retain significant exposure to the upside potential on
EnQuest, which specialises in squeezing more barrels out of
ageing fields, holds 70.5 percent of the Kraken field while
Cairn Energy owns the rest.
Oil production from Kraken averaged 31,000 barrels per day
(bpd) in the first six months of 2018, slightly below
expectations due to issues with water injection to increase oil
recovery and bad weather.
It has since picked up to as much as 36,000 bpd. Earlier
this year, it had reached as much as 50,000 bpd.
EnQuest shares tumbled around 13 percent on Friday after the
company announced a discounted share issue to buy the remaining
75 percent in the Magnus oilfield from BP to shore up
Its next debt repayments are $175 million due in April and
$100 million in October 2019, it said on Friday.
"The concern with Enquest's equity value remains its
sensitivity to $1.97 billion of net debt ... we cannot rule out
future approaches to the market," Jefferies said in a note on
(Editing by Mark Potter)
First Published: 2018-09-12 14:58:57
Updated 2018-09-12 15:55:29
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