NORTH Sea-focused EnQuest has seen its shares surge around 13 per cent after the company said it has been pumping 50,000 barrels of oil daily from a giant field off Shetland, on which it faced teething problems.

One of the biggest independents in the North Sea, EnQuest said operational efficiency has increased significantly on the Kraken field 75 miles East of Shetland in recent weeks.

The success has put London-based Kraken on track to fulfil the huge expectations of EnQuest, which developed the field with Edinburgh’s Cairn Energy.

EnQuest and Cairn started production from the heavy oil field in June amid fanfare.

Production lagged below target initially after work on commissioning the facilities used to process the output took longer than expected.

Yesterday EnQuest said production had hit the 50,000 barrels per day level that directors had predicted would be achieved in the first half of this year. Production exceeded 40,000 barrels on some days in the fourth quarter.

Chief executive Amjad Bseisu said the delivery of Kraken on schedule and below budget had been a huge achievement.

“As one of the largest developments in the North Sea in recent years, it demonstrated EnQuest's ability to deliver complex projects,” he noted.

Mr Bseisu also underlined EnQuest’s confidence in its ability to boost returns from mature North Sea fields.These include the Magnus field north of Shetland which it bought into in an $85m deal agreed with BP in January last year.

“Performance at Kraken continues to improve, and along with the full year impact of Magnus underpins our expectations for material production growth in 2018,” said Mr Bseisu.

Average Group production is expected to grow by up to 55 per cent, to up to 58,000 barrels of oil equivalent per day (boepd) this year.

Mr Bseisu reckons the success with Kraken and the acquisition of the Magnus interest helped make 2017 a transformational year.

The company expects to generate huge amounts of cash from the fields which it could use to reduce its $1.9bn debt pile.

The success will be welcomed by leaders of the North Sea oil and gas industry, which was hit hard by the downturn that was triggered by the sharp fall in the crude price since 2014.

The Kraken development was approved before the crude price plunge started.

While the Brent crude price has increased since late 2016, it is still around $50 per barrel lower than the $115/bbl peak reached in June 2014.

However, EnQuest expects to be able to generate big profits on the output from the field.

The company reckons its production costs will average $24/boe this year.

It has benefited from a sharp fall in the cost of services since 2014, amid cuts in investment by many firms in the area.

This has helped the partners in Kraken deliver the project for an expected $2.3bn, more than 25 per cent lower than originally approved.

EnQuest said it had recently renegotiated terms for the drilling rig used on Kraken, saving around $60 million cash payments for 2019.

EnQuest and Cairn increased their holdings in Kraken in 2016 by acquiring stakes held by First Oil Expro for a nominal consideration before Ian Suttie placed the Aberdeen business in administration.

However EnQuest has faced complications with another big North Sea development involving what was the first producing field in the area, Argyll.

In October 2015 Enquest restarted production from Argyll, under its Alma-Galia development. First oil was originally expected in 2013.

EnQuest said yesterday 2017 production in the Central North Sea was around 3,600 boepd lower than 2016, mainly due to lower volumes from Alma/Galia. It cited Electric Submersible Pump (ESP) related well shut-ins, storm related production outages and natural declines.

Group production averaged 37,405 boepd in 2017, in line with guidance, against 39,751 boepd in 2016.

Shares in EnQuest closed up 3.7p at 32.7p.

Analyst Victoria McCulloch at RBC said: “The continued improvements are Kraken are encouraging, however, we continue to expect the company to face liquidity and covenant challenges in H1/18 and therefore remain cautious.”

EnQuest completed a refinancing in 2016, which directors felt left it on a stable footing.

In November the firm said it had proactively agreed the relaxation of covenants and repayment schedules on credit facilities.