18th Jul 2016 07:12
LONDON (Alliance News) - EnQuest PLC Monday said it is holding talks about selling a 20% stake in the Kraken development in the UK North Sea as the company looks to reduce debt and costs through asset sales and farm outs.
EnQuest owns a 70.5% stake in Kraken, which it claims to be one of the largest development projects in the region and "one of the cornerstones" to the company's long term production portfolio. Fellow London-listed oil firm Cairn Energy PLC owns the other 29.5% stake.
EnQuest, however, has signed a non-binding memorandum of understanding to sell a 20% stake to Delek Group Ltd, and the pair are now working toward signing formal and binding documentation.
Delek, an integrated energy company in Israel, would backdate its contribution of its share of capital expenditure on the asset from the start of 2016.
Once the deal is completed, Delek will advance USD20.0 million to EnQuest for a period of up to five years at an annual interest rate of 3.0%, which will be returned to Delek if its costs are not covered by revenue within five years of the completion date, it said.
EnQuest and Delek are discussing an "additional contingent consideration" to be added to the formal, legally binding deal.
EnQuest said there is potential that it may agree to allow Delek to "convert the transaction" so it can acquire a subsidiary of Enquest that holds a 20% working interest in the Kraken development.
"There is no guarantee that a final agreement will be reached. EnQuest announced previously that in addition to its ongoing cost reduction initiatives, it was also pursuing a range of further opportunities for debt reduction, including potential asset sales and farm outs," said the company.
"The transaction is subject to EnQuest's lending banks' consent. EnQuest continues to closely monitor and manage its funding and liquidity position in light of the current market environment and is engaging as appropriate with its credit facility providers (including banks and bondholders) in this regard," EnQuest added.
EnQuest shares were up 1.9% to 30.31 pence per share on Monday morning.
By Joshua Warner; [email protected]; @JoshAlliance
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