The board of EnQuest plc announced Thursday the launch of a proposed financial restructuring of the group, which it has agreed with key stakeholders following an extensive period of engagement and negotiation.
The restructuring includes the implementation of proposed RCF amendments and proposed note amendments, the renewal of surety bond facilities and a placing and open offer. If successful, the company believes that the restructuring will provide it with a stable and sustainable capital structure, reduced cash debt service obligations and greater liquidity.
EnQuest’s restructuring is a response to the decline in oil prices since 2014 and the continuing “challenging oil price environment,” according to a company spokesperson. In response to this price decrease, EnQuest has set a number of strategic priorities, including delivering on execution, streamlining operations and strengthening the group's balance sheet.
“We are very pleased to announce today a comprehensive package of measures to place EnQuest on a strong footing to deliver our Kraken development in H1 2017 and ensure that we are well placed to deliver value to our shareholders in the medium term,” said Jock Lennox, chairman of EnQuest.
“Over the last two years, EnQuest has taken action to implement extensive cost saving programs to refocus the business for the low oil price environment, including reducing and re-phasing both capital and operating expenditures. Simultaneously, EnQuest has been working on a range of other funding and liquidity options, which culminate in the restructuring announced today,” he added.
Giles Boothman of International law firm Ashurst, which is advising EnQuest on its financial restructuring, believes the restructuring is one of the most significant undertakings of its type in the region.
''This is the largest and most complex European upstream oil company restructuring in recent years, involving senior debt, high yield bonds, retail notes and a simultaneous equity raise,” said Boothman, leader of Ashurst’s restructuring and special situations team.
“It has required a large team working across a complex range of equity, debt, restructuring and capital market issues in multiple jurisdictions and we are delighted to have played the central role acting alongside Rothschild."
Market reaction to the restructuring has been negative given the large discount of the issue price to yesterday close and the very material dilution, said oil and gas analysts at GMP FirstEnergy.
“This however address near term funding concerns and we note that EnQuest’s management could take over 32 percent of the overall placing; which we view as particularly reassuring,” GMP FirstEnergy analysts said in a brief research note sent to Rigzone.
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