The independent British oil producer announced in July that it had signed a non-binding deal to sell a 20 per cent stake in the Kraken oilfield, east of the Shetland Islands, to Delek.
"EnQuest and Delek have ultimately been unable to reach an agreement and those discussions have now terminated," it said in a statement to the London Stock Exchange today.
The company's shares fell as much as 4.46 per cent to 26.75p per share this morning.
Analysts said that the deal would've helped the firm reduce its debt pile, which stood at $1.68bn (£1.27bn) at the end of June, by reducing costs related to the development of Kraken.
"The deal ... would have boosted the firm's balance sheet by reducing Enquest's net capital expenditure to first oil at Kraken," investment bank First Energy said in a note.
Delek, which is majority owned by Israeli billionaire Yitzhak Tshuva, would have backdated its share of the Kraken project's capital expenditure to the beginning of 2016 and given Enquest a conditional loan of $20m (£15m) for up to five years.
Tshuva made his fortune in energy and real estate, and has discovered major offshore natural gas reserves in Israel and Cyprus. He's also chairman of El-Ad Group which sold New York's landmark Plaza Hotel for $570m in 2012.