EnQuest Plc switched from plans to sell a stake in its flagship North Sea oil field to borrowing money against it after two sets of sale talks had to be abandoned as a deadline for a debt repayment approached, industry and banking sources said.

EnQuest, with almost $2 billion in debt, launched earlier this year the sale of a 20% stake in the heavy oil Kraken Field, one of the largest North Sea developments which started production in June last year.

The sale of the stake would have pumped welcome cash into the coffers of the company which has to pay back just under $200 million in debt in October.

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The sale process, initially expected to raise up to $400 million, was run by investment bank Jefferies.

London-based EnQuest received an offer for a stake in Kraken from Lotos, a Polish state-backed oil and gas company, several months ago, according to the sources.

The talks reached advanced stages, but dragged on and could not be concluded in time, according to one source.

Lotos declined to comment.

A second offer from a private company was rejected by EnQuest after the bidder revised its terms at the last minute, the sources said.

After the two failed approaches, EnQuest decided to borrow $175 million against 15% of Kraken's cash flow from Oz (Och-Ziff) Management to be paid back within five years.

The move came as the company is saddled with net debt which stood at $1.97 billion at the end of June. Its market value is around $564 million.

"There was very significant interest in the farm-out process for Kraken and we received a number of offers from both industry participants and financial institutions," EnQuest said in a statement to Reuters.

"The financing agreement with Oz Management was selected as the preferred economic option for EnQuest at this time, allowing us to retain significant exposure to the upside potential on Kraken."

EnQuest, which specializes in squeezing more barrels out of aging fields, holds 70.5% of the Kraken field while Cairn Energy Plc owns the rest.

Oil production from Kraken averaged 31,000 barrels per day (bbl/d) in the first six months of 2018, slightly below expectations due to issues with water injection to increase oil recovery and bad weather.

It has since picked up to as much as 36,000 bbl/d. Earlier this year, it had reached as much as 50,000 bbl/d.

EnQuest shares tumbled around 13% on Sept. 7 after the company announced a discounted share issue to buy the remaining 75% in the Magnus oil field from BP Plc (NYSE: BP) to shore up future output.

Its next debt repayments are $175 million due in April and $100 million in October 2019, it said Sept. 7.

"The concern with Enquest's equity value remains its sensitivity to $1.97 billion of net debt ... we cannot rule out future approaches to the market," Jefferies said in a note on Sept. 10.

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