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Market report: Investors disappointed as EnQuest brings Kraken field up from the deep

Sinking feeling: EnQuest shares slumped after it downgraded production forecasts
Sinking feeling: EnQuest shares slumped after it downgraded production forecasts

North Sea oil firm EnQuest has finally released the Kraken. But unlike the mythical sea monster of the same name, it has been more of a whimper than a roar from the giant oilfield off the Shetland Islands.

The company said prolonged commissioning at its prized asset, which is one of the largest North Sea fields to come on stream in the past 10 years, had caused production volumes to fall short of expectations since it started pumping black gold in June.

It said the company’s entire annual production rate would now be similar to that seen in the first six months of the year, give or take 10%.

UBS analysts said the middle of the new guidance range meant a 23% cut to production forecasts and would cost it $175 million (£137 million) in lost revenues for the second half of the year.

They also warned that unless the oil price recovers dramatically, debt-laden EnQuest will probably need its lenders to waive its covenants with cashflow drying up.

EnQuest, which has a 70.5% stake in Kraken, said it did not expect the hiccups to continue beyond 2017, but investors got that sinking feeling and shares plunged 3.25p, or 10%, to 29.5p.

Cairn Energy, which owns the remaining 29.5% of the development but is less reliant on Kraken’s success, shrugged off the disappointment as it edged up 0.9p to 181.1p. The shares also rose yesterday after first-half results revealed a return to profit.

Aside from a hefty fall at WPP — off 166.9p, or 11%, at 1423p — there was little action among blue-chip shares, with many traders taking the opportunity to take holidays during August.

The downtime was reflected by the FTSE 100, which was up just 5.48 points to 7387.22.

Provident Financial, whose 66% dive yesterday was one of the worst on record for a Footsie company, put on 33.83p, or 6%, to 605p as the City digested yesterday’s wave of bad news.

Liberum suggested that “the pain is not over” and said it believed the doorstep lender “could be facing a funding shortfall by June 2018”.

Provident’s house broker JPMorgan Cazenove took the unusual move of cutting its rating to Neutral, even though its target price is still double the present share price after yesterday’s crash.

It explained that it could not keep its Overweight stance because of “pending uncertainty from a business and regulatory perspective, and the associated challenges in determining value at this stage”.

Bwin.party and Sportingbet owner GVC rose 8.31p to 758p on reports that it had approached bookie Ladbrokes Coral, up 0.34p to 119.87p, about a merger. Talks between the two are, however, said to have ended already.

On the mid-cap index, healthy first-half results from UAE-focused private healthcare group NMC Healthcare spurred the shares on by 121.06p, or 5%, to 2543p.

Meanwhile, concerns that under-pressure builder Carillion was about to hit the market with a painful rights issue dragged the business down 1.87p, or 4%, to 46.17p.