Premier Gets Better Terms for BP UK Assets
UK-listed Premier Oil has negotiated a lower price with BP for a group of UK North Sea assets and overcome opposition from its largest creditor Asia Research Capital Management (ARCM).
Oil and gas prices have fallen since the deal was first designed last year and the seller is to retain more of the assets' abandonment costs. The final price is still conditional on oil and gas prices rising, Premier said June 5. However it did not comment on the lesser-value deal with Dana.
The price payable on completion for the Andrew Area and Shearwater assets has been cut to $210mn from $625mn and the estimated revised abandonment obligations have been reduced to about $240mn (pre-tax) from about $600mn. BP retains all the existing Shearwater abandonment costs and half the existing Andrew Area abandonment costs, but also $300mn in interim cashflow from the oil and gas sales. A further $115mn only becomes payable if oil rises enough: once oil has reached $55/barrel, the cash is split equally between buyer and seller until the cap is reached.
Originally backdated to January 2019, the new completion date is September 30 but it cannot be guaranteed to go ahead, Premier said. The company has however restructured its debt with its major creditors as well, under a “stable platform agreement."
To secure ARCM’s agreement to drop its appeal against the court ruling allowing the greater debt accumulation, Premier is to issue it 82.2mn new shares at a 9.64% discount, bringing in about $27.5mn which will fund part of the proposed BP acquisitions.
CEO Tony Durrant said: "We are pleased to have agreed revised terms with BP for the proposed acquisition of the Andrew Area and Shearwater assets, which are materially value accretive for the company."
The assets are cash generative even at current commodity prices and will accelerate the use of Premier's $4.1bn of UK tax losses. The additional free cash flow generation will accelerate debt reduction and the deleveraging of Premier's balance sheet, it said.