23rd Jan 2015 10:09
LONDON (Alliance News) - Shares in EnQuest PLC shot higher on Friday after the company's lenders agreed to relax the covenants on its revolving loan facility in response to the recent oil price decline, which also prompted the company to further slash spending plans for 2015.
Its 2014 production came in at the top end of guidance, but revenue and earnings dropped slightly on the back of the low oil price.
Shares in the company were up 30% to 39.00 pence on Friday morning, comfortably the best performers in the FTSE All-Share index. The gain was pared back from the open, when EnQuest shares surged 50% just after the bell.
The North Sea-focused oil and gas explorer, which was relegated from the FTSE 250 earlier this year following a sharp decline in its shares on the back of the declining oil price, said the lenders on its revolving credit facility have relaxed the covenants on its debt facilities owing to the lower oil price.
The net debt/earnings before interest, taxation, depreciation and amortisation covenant has been increased to five times and the ratio of financial charges to Ebitda is reduced to three times, both until mid-2017, EnQuest said. The company's net debt at the year-end was around USD1 billion.
The group slashed its 2015 capital expenditure plans again, down to USD600 million for the year. EnQuest had already cut its spending plans in its trading statement in November, when it said it was planning to spend around USD700 million to USD800 million in 2015, down from initial plans of USD1 billion.
The company added it expects to bring down its operating cost per barrel by at least 10%, both through cost savings and high margin barrels coming onstream. The group said it will keep a focus on controlling its cost base in 2015 and intends to work with its supply chain and contractors in order to further bring down costs.
EnQuest said its provisional production total for 2014 to the end of December was 28,267 barrels of oil equivalent per day, up 17% on its 2013 total. EnQuest said its 2014 production was driven by strong field reservoir performance across its portfolio, with 90% production efficiency from across it existing producing assets, and an initial contribution from the PM8/Seligi field in Malaysia, its first non-North Sea production. It acquired a stake in the field in June and it produced 3,831 barrels in the interim, against 24,436 barrels from EnQuest's North Sea assets.
It gave guidance for production of between 33,000 and 36,000 boepd for 2015. It said work on the Alma/Galia and Kraken developments in the North Sea remain on track, with plans to bring the two prospects on stream in the next two years. Alma/Galia is still on track for its first oil in mid-2015, EnQuest added.
But Enquest said 2014 revenue is set to fall year-on-year on the back of the lower oil price towards the end of the year, down to around USD950 million, against USD961 million last year, while Ebitda is expected to be USD530 million to USD580 million, down from USD621.3 million last year.
For 2015, the company has hedged around 8 million barrels at prices in the high USD80s per barrel, meaning it expects revenue in the coming year to face only a minimal impact from oil price volatility.
"The rapid change in the macro environment with respect to the oil price has affected all in the industry, not least EnQuest," said Chief Executive Amjad Bseisu.
"However, with our strong production growth, the new developments coming on stream in the next two years and our available $1.1 billion in funding under our facilities, we continue to demonstrate the strength and sustainability of EnQuest's production growth model," Bseisu added.
Numis, which has a Buy rating and 79 pence price target on EnQuest, said the relaxation of the lending covenants could act as a precedent for the company's bond holders to amend terms too.
By Sam Unsted; [email protected]; @SamUAtAlliance
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