The chief executive of EnQuest has pledged to buy up to $50 million (40.98 million pounds) worth of new shares in the North Sea oil producer, a move that clinched a broader restructuring deal for the company struggling with mounting debt.
EnQuest, which had $1.7 billion in debt at the end of June, said the deal announced on Thursday would bring in $410 million of extra cash mainly to be used at its Kraken oil field, which is due to come on stream in the first half of next year.
“This underwriting is showing my personal commitment to the company. I’m putting my money where my mouth is,” EnQuest founder and CEO Amjad Bseisu told Reuters.
The company said it would issue 300 million new shares at 23 pence per share, a 17 percent discount to Wednesday’s closing price, and that lenders had agreed to relax some debt repayment terms.
EnQuest agreed with bondholders to only pay bond interest in cash when oil prices are above $65 a barrel for a six-month period. Below $65, bond interest payments will be capitalised instead.
Some of EnQuest’s bond maturity terms and covenants were also relaxed.
Brent crude is trading at about $52 a barrel and has not been above $65 since June 2015.
“The deal buys time and running room until Kraken is on stream,” FirstEnergy analyst Stephane Foucaud said.
Bseisu said the total costs for Kraken had fallen by another $100 million to $2.5 billion thanks to more efficient drilling techniques.
EnQuest said it was also reaping further windfalls from the decline in the pound following Britain’s vote in June to leave the European Union.
Chief Financial Officer Jonathan Swinney told Reuters the company could see cost reductions of $60 million to $80 million a year if the pound remains at its current level against the U.S. dollar.
EnQuest makes money in dollars, the currency used in the oil market, but the majority of its costs are in sterling.
By Karolin Schaps
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