The deal to acquire 10,000 barrels per day production plus development upside is classed as a reverse takeover.
EnQuest PLC () has struck a deal to acquire a 26.69% stake in a package of three producing North Sea oil fields.
It will pay the seller, Suncor Energy, an initial consideration of US$325mln – which at EnQuest’s current market value makes it a reverse takeover – meanwhile a further US$50mln may be payable in 2023 subject to crude oil prices.
The London-listed oiler intends to fund the transaction through new debt financing lead by banks BNP and DNB, which will also incorporate the refinancing of an existing senior credit facility.
EnQuest’s new assets – the stakes in the Golden Eagle, Peregrine and Solitaire fields – will immediately add 10,000 barrels of net oil equivalent production. The production is described as low cost, with operating expenditure seen at around US$5 per barrel in 2021.
The fields are operated by state-backed Chinese group CNOOC and are said to retain significant remaining development potential, with the field’s lifespan envisaged into the early 2030s.
Presently there’s an ongoing four well drill programme underway across the assets, albeit it is anticipated that this will be finished by the time the transaction completes.
“Upon completion, this acquisition will add immediate material production and cash flow to EnQuest and will allow us to accelerate use of our substantial tax losses,” said Amjad Bseisu, EnQuest chief executive.
“It also demonstrates our continued commitment to the UK North Sea and diversifies our existing production base.”
In a separate statement, Enquest said existing North Sea production measured 59,116 boepd in 2020 with the Kraken field producing 37,518 bopd gross, above top-end guidance thanks to high uptime for the field’s floating production facility.
The company told investors it expects to report free cash generation of around US$210mln for the year, whilst noting operating expenses of US$330mln which equates to US$15 per barrel.
Cash capex is expected to be reported at US$130mln for the year.
Net debt at year-end was marked at US$1.28bn.
Giving guidance for 2021, excluding the Suncor assets, the company said it expects average net production in the range of 46,000 to 52,000 barrels oil equivalent per day.
The company’s forecast for Kraken’s gross production is pitched at 30,000 to 35,000 boepd, which would be 21,150 to 24,675 boepd net.
Guidance for 2021 operating expenses is seen at US$265mln, notably below the US$330mln indicated for 2020.
The company meanwhile noted that it has some 4mln barrels of oil production hedged at an average floor price of US$53 per barrel and a ceiling price of US$62.
“We transformed our business in 2020, significantly lowering our operating costs and re-focusing the portfolio on the highest value assets. As such, I am confident we are well placed to succeed in a changing world,” Bseisu added.
“Our focus on cost control and capital discipline, combined with an improving oil price environment, saw the group deliver free cash flow breakeven of c.US$32/Boe and generate free cash flow of c.US$210mln.”