20th Nov

EnQuest Returns to the Well with ‘Tap’ Retail Bond Offer

In February 2013 EnQuest became the first oil company to launch a retail bond on the LSE’s Order Book for Retail Bonds (ORB) exchange when it raised £145 million, a sum that was at the top end of its expectations (EnQuest Strikes a £145m Bond Success –Retail Bond Expert 11th Feb 2013)

The £1bn FTSE250 company focuses on realising the potential in mature assets and in undeveloped oil fields, and was established through combining the UK North Sea assets and operations of Lundin Petroleum AB and Petrofac Limited 

At the time Amjad Bseisu, Chief Executive Officer of EnQuest, commented: "We are delighted with the success of our retail bond, the first such bond on ORB issued by an oil company. The bond has received a strong response from investors and the issue allows us to extend the tenor of our borrowings and will complement our already strong balance sheet."  

Diversifying Fund

Jonathan Swinney, chief financial officer at EnQuest, adds that the money will help with the development of its 'Kraken' oil project off the Shetland Islands, which will cost the company some $1.4 billion. 'When you have long-term projects you don't want to be beholden to the bank market, so diversifying fund is important. The tap reflects that we have increased our borrowing facility,' he explains.

The bond pays a coupon of 5.5% bi-annually, on 15th August and 15th February, and matures in 2022. 

In a move designed to ‘continue to diversify its (EnQuest’s) funding base and complement its already strong balance sheet’, the company is now looking to top up the bond by issuing what is known as a ‘tap’, in a similar fashion to that recently offered by International Personal Finance.  

Numis Securities is acting as lead manager on the issue where Head of Fixed Income, Michael Dyson, commented, ‘When it launched in January the bond was well received; it’s a good sector and a good company and has traded quite well throughout the year, so there was a window to increase that original issue size.’ 

Trading Strongly  

Bonds on ORB have typically traded strongly in the secondary market, with the majority trading above par; since February EnQuest has been no exception, with an average mid-trade price of around 102.80p. 

Mr Dyson continued, ‘EnQuest is not looking to raise a fixed amount; it is a tap, so it’s not expecting to double the issue size. It will only be open for three or four days. Previous taps from other companies have raised £30 million or so, but it depends on demand – it could be more.’ 

Those investing a minimum of £2,000 in the bond will be buying it at a price of 101.65p, which includes interest accrued so far during the current interest period, in order for them to be paid a full coupon on 15th February 2014; this means that despite the fact that the bond is being issued at 5.5% in line with the earlier issue, the effective yield to those investing in the tap will be 5.25%. 

On ORB this afternoon EnQuest 5.50% 2022 was trading at 102.07 GBP on volume of 123,000 against a 52 week high of 105.6, whereas EnQuest shares are trading at 136.75p, a 52 week price improvement of 20.39%.    

Add Your Comment