EUR 228.00 For Business Accounts Only

EnQuest

Following last week’s operational update, we update our model to take into account the lower production guidance. However, whilst Kraken FY17 production will be lower than we had initially forecast (WHe c8kbopd net vs revised 1kbopd), given better production in Malaysia and some of the UK assets, plus lowered capex guidance for Kraken, the net effect is our RENAV doesn’t change. We believe we had been conservative relative to the rest of the sell side, hence the share price fall of 23% since the announcement (despite our numbers not changing much). Given the slower ramp up, there are clearly some concerns given EnQuest’s debt burden. However, assuming it’s just a timing issue, we would expect the banks to be relatively flexible. However, given that the share price is trading in line with our PT of 23p, and uncertainty around Kraken ramp up and the oil price, we remain with our HOLD recommendation and see more upside in the other E&Ps under our coverage. We note that updating the Kraken numbers, reduces our Cairn Energy RENAV by 1% from 242p to 239p.