EnQuest, Cairn Take Additional Interest in Kraken

EnQuest PLC has acquired an additional 10.5 percent interest in the Kraken development for nominal consideration. The acquisition from First Oil PLC brings EnQuest's total interest to 70.5 percent.  EnQuest and Cairn Energy PLC (CRNZF), the other current participant in the Kraken development, are both taking up First Oil's interests pro-rata, in proportion to their holdings prior to the transaction.

EnQuest has also waived its right to reclaim approximately $7 million of cash calls paid on behalf of First Oil in January and February 2016.  EnQuest acquires the reserves and resources associated with the additional interest.  In 2012, when EnQuest originally acquired its Kraken assets from First Oil, part of the consideration was in the form of a contingent development carry, based on the determination of the level of reserves. This contingent carry provision now ceases to be effective. Further, EnQuest is not reimbursing First Oil in respect of costs incurred by First Oil to date.
 
In December 2015, in its Operations Update, EnQuest highlighted that the Kraken development project was on schedule for first oil production in H1 2017 and that full cycle gross project costs had been reduced by c.10 percent.  The additional Kraken net capex to EnQuest is anticipated to be approximately $90 million to first production. In December 2015, EnQuest issued a 2016 cash capex guidance range of $700 million to $750 million. Since then further additional reductions have been made.  Consequently EnQuest expects to absorb the capex resulting from today's transaction without any net increase in its previous 2016 guidance range.
 
EnQuest said it expects that the additional reserves it is acquiring through this transaction will incrementally increase the amount available to it under its bank facility to $1.2billion (from $1,137 million as reported in August 2015).
 
In its most recent annual report, for 2014, EnQuest highlighted gross (100 percent) Kraken 2P reserves of 140 MMboe.
 
Prior to the transaction, EnQuest had a total interest in Kraken of 60 percent and Cairn had 25 percent.  Following completion, EnQuest will have a 70.5 percent interest and Cairn a 29.5 percent interest.

EnQuest is the operator of the Kraken Development. The two Kraken fields are located in block 9/2b, 350 km north east of Aberdeen, in a water depth of c.110m. The Field Development Plan includes 25 wells. First production is expected in H1 2017.  The project has a long field life, of approximately 25 years. A comprehensive update on the project's progress was included in EnQuest's Operations Update and associated Capital Markets Day presentations to investors on 8 December 2015.