14th Jun 2018 15:59
LONDON (Alliance News) - Moody's Investors Service on Thursday upgraded EnQuest PLC corporate family rating to B3 from Caa1 while the senior unsecured rating climbed to Caa1 from Caa2, but outlook remained stable.
Moody's said the decision reflects the successful ramp-up of Kraken, a large heavy oil accumulation in the UK North Sea. EnQuest holds a 71% interest in the development with remaining stake held by Cairn Energy PLC.
For 2018, average daily production at Kraken is expected to total between 50,000 and 58,000 barrels of oil, while in 2017, the company was producing 37,405 barrels of oil per day.
The production increase is also supported by higher oil prices averaging at around USD70 per barrel in the first five months of 2018.
Timely, Kraken ramp-up has been a very important rating driver, Moody's said. The investor services said it now expects EnQuest to improve cash flow marginally in 2018 as well as maintain an adequate liquidity profile.
Moody's also said that further upgrade is likely if production increases above 60,000 barrels of oil daily, resulting in stronger cash flow. However, it will downgrade the company if there is a deterioration in the liquidity position or refinancing risks.
Meanwhile, the stable outlook reflects Moody's expectation that the company should be able to ramp-up Kraken production fully and improve its cash flow generation leading to deleveraging by the end of 2018.
Shares in EnQuest were trading 0.5% higher at 31.82 pence each on Thursday afternoon.
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