EnQuest Acquires Further 15 pct Interest in Kraken Discovery

EnQuest PLC (‘EnQuest’) today announces that it has agreed with First Oil plc (‘First Oil’) the proposed acquisition of a further 15% interest in blocks 9/2b and 9/2c including the Kraken oil discovery (‘Kraken’), bringing EnQuest’s total interest in Kraken to 60%.

Today’s agreement is subject to the normal regulatory and partner consents and is also conditional on EnQuest shareholder approval.

In a similar arrangement to that for EnQuest’s previous acquisition of 25% of Kraken from Nautical Petroleum plc (‘Nautical’), EnQuest proposes to pay First Oil between $90 million and $144 million by way of a development carry in relation to First Oil’s remaining 15% interest in Kraken. EnQuest’s cash payments will be deferred and EnQuest will be entitled to receive the capital tax allowances normally available for investment in such a development project.

Prior to the proposed transaction being announced today, EnQuest had a total interest in Kraken of 45%. The amount payable by EnQuest is dependent on a future determination of the gross 2P reserves in Kraken. If the determination is less than or equal to 100 MMboe, EnQuest will only pay $90 million, by way of development carry. If the determination is less than 166 MMboe, but more than 100 MMboe, then the amount of the development carry will be increased by up to a further $54 million, calculated on a linear pro-rata basis. EnQuest will pay the maximum of $144 million if the future determination of gross 2P reserves is greater than 166 MMboe. Through today’s agreement EnQuest also acquires a 15% interest in blocks 9/6a and 9/7b, for no additional consideration.

 Amjad Bseisu, Chief Executive of EnQuest, said:

“EnQuest is pleased to increase further its interest in Kraken, we are enthusiastic about its potential. As with our purchase of a 25% interest from Nautical and based on the maximum carry, the cost per barrel to EnQuest is $6/bbl before tax effects and approximately $2.40/bbl post tax effects. EnQuest’s execution team is now leading this development and is taking on operatorship earlier than previously planned; we are combining forces with partners with deep expertise in this project. EnQuest is moving forward one of the most exciting development projects in the UK North Sea.”

Kraken is a large heavy oil accumulation in the UK North Sea, located in the East Shetland basin, to the west of the North Viking Graben. It is being progressed to development following successful appraisal and well test results. Following this transaction 15% of Kraken will be held by First Oil and 25% by Nautical.

Following this transaction EnQuest will have a 60% interest in blocks 9/2b, 9/2c, 9/6a and 9/7b, and a 55% interest in blocks 3/22a and 3/26. In addition EnQuest has a farm in option from Nautical for a 45% interest in block 9/1a (Ketos).

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Offshore Nieuws Staff, April 26, 2012; Image : EnQuest