EnQuest rises 13% as it denies government rescue talks

Heavily indebted North Sea oil producer EnQuest has denied media reports that it is in talks with the UK Oil and Gas Authority (OAG) about contingency plans.

The government body fears insolvencies at Enquest and mid-cap peer Premier Oil, the Sunday Telegraph reported, and is mulling plans "to guard against a North Sea bankruptcy crisis" as the pair are "wracked with debt following the oil market rout and now stand at the mercy of their lenders".

But on Monday EnQuest, which had $1.55bn of net debt at the end of last year, said it "routinely engages with the OGA and with the UK and Scottish Governments on industry matters, but is not involved in any company-specific discussions such as were implied by the article".

Last year, EnQuest renegotiated the covenants on its debts until mid-2017 and said it was well within them last year.

The OGA's hand-wringing is due to Enquest being the majority owner and lead developer of one of the North Sea’s largest new projects, the Kraken oil field, which is expected to provide around 20,000 jobs during the construction phase, as well as 1,000 jobs during its 25 year production lifetime.

Enquest, which is partnered with FTSE 250-listed Cairn Energy, took on a larger stake in the project this year after the collapse of the projects former owner, and first revenue-generating oil is expected next year.

A recent operational update from EnQuest revealed production from its other projects averaged 42,752 barrels of oil equivalent per day for the four months to the end of April 2016, while Kraken's development was said to remain "on schedule".

Shares in EnQuest were 13% higher at at 32.5p by 1000 BST on Monday.