North Sea firms may be forced to cut spending

Caitlin Morrison
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NORTH Sea oil firm Enquest declined to comment yesterday on reports that it is looking at job cuts as a way to reduce spending.

The company released an interim management statement in November last year, in an attempt to reassure investors. The firm revealed that it had hedged around 65 per cent of its projected 2015 oil production at the higher end of between $80 and $90 a barrel.

Analysts at Canaccord Genuity said this move had “gone some way to addressing our concerns regarding balance sheet strength in the current oil price environment”, but pointed out that if the price of oil continues to decline after this year, the company’s bonds and bank covenants “will be tested”.

And analysts at JP Morgan Cazenove stated: “The current low oil price environment will likely continue to be a headwind to Enquest shares, but we note that the effects of the lower oil price are starting to show benefit elsewhere, particularly on costs.”

Many companies based in the North Sea are struggling as oil prices continue to fall, and the government has been urged to cut taxes on firms operating in the region.