Premier to Re-engage Stakeholders on North Sea Deals
Premier Oil plans to discuss its planned acquisitions in the North Sea with shareholders, creditors and brokers "in light of current market conditions," the UK-based oil company said in a trading update on May 13.
The London-listed company agreed in January to acquire BP's Andrew Area and Shearwater assets for $625mn as well as a 25% stake in the Tolmount field from South Korea's Dana Petroleum for up to $246mn. However, the deals are opposed by Premier's main creditor, Hong Kong-based Asia Research and Capital Management (ARCM), which took the matter to court. It argues that Premier's debt, estimated at $1.91bn net, is too great to support the transactions.
The Court of Session in Edinburgh approved the transactions in April, but ARCM has appealed against the ruling.
"While Premier remains confident in the strength of its legal case and expects the court to dismiss the appeal, the board believes it prudent to re-engage with its stakeholders regarding the proposed transactions and extension to its May 2021 credit maturities in light of current market conditions," the company said.
In its trading update, Premier said it expected to be broadly free cash flow neutral in 2020, having hedged 30% of its production at $60/boe. It has achieved $240mn in capital and operational spending savings and deferrals, it said.
Premier has $160mn in liquidity and $330mn of undrawn facilities, and is in discussions with its lenders to secure a waiver on covenant tests, used by banks to check whether the oil and gas producer's debt is under three times its core earnings.
Premier was producing 70,100 boe/d towards the end of April, with its output impacted by a recent unplanned outage at the Catcher field that has now ended, as well as the shutdown of production at the Huntington field. The company has cut its 2020 production guidance to 65,000-70,000 boe/d, from 70,000-75,000 boe/d, and has delayed first gas at the Tolmount project until the second quarter of 2021 as a result of the Covid-19 crisis.
"We are proactively managing the business in these challenging times and remain focused on the welfare, health and safety of our people," CEO Tony Durrant said. "We continued to generate free cash flow during the period and, based on the current forward curve, expect to be broadly free cash flow neutral for the full year, benefiting from our hedging programme and action taken to reduce our expenditure."