FT article12 Mar 2019 11:17
Just a rehash of the RNS's really.
EnQuest hit by dispute over oil recovery at North Sea project
Shares in oil group fall after partner downgrades expected output from Kraken field.
Shares in EnQuest, the UK independent oil company, fell heavily on Tuesday morning following a dispute with its partner in a key North Sea field over how much oil can likely be extracted over the life of the project.
Cairn Energy on Tuesday booked a $166.3m impairment in its full-year results to reflect a 19 per cent reduction in its forecasts of how much oil the Kraken field is likely to yield.
Kraken, which is 70.5 per cent owned by EnQuest, with Cairn holding the remaining 29.5 per cent, started production in June 2017 and was heralded at the time as one of the most significant projects in the basin this decade. However, production, which was expected to reach 50,000 barrels per day at peak has disappointed, largely due to problems with the vessel used to extract oil from the field.
Cairn’s chief executive Simon Thomson on Tuesday said the company had decided to take a “prudent” approach to its estimate of Kraken’s reserves after problems with the vessel had led to “a decline in field performance”. The ratio of water produced compared to the volume of total liquids had been higher than expected in some of the Kraken wells, he said. “I think we are just being prudent managers of the asset from our perspective,” Mr Thomson told the Financial Times.
However, EnQuest issued a statement refuting Cairn’s view, saying its own estimate of how much oil can be extracted from Kraken “remains materially unchanged” following its own independent audit carried out by a third party.
“EnQuest and Cairn utilise different technical approaches to Kraken production forecasting in preparing their reserve profiles for their respective auditors, which has led to this difference in reserves estimates,” EnQuest added in a statement.
EnQuest will report its full-year results on March 21 but said it does not expect to recognise any impairment charge related to the Kraken asset.
Shares in EnQuest were down 10.6 per cent mid-morning on Tuesday at 16.52p while Cairn’s shares were trading 3.9 per cent lower at 167.9p.
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