Premier Oil PLC (LON:PMO) have announced that they will be purchasing two North Sea assets from BP PLC (LON:BP).
Premier have said that they will be buying the Andrew Area and Shearwater assets from oil major BP for $625 million.
Andrew Area includes five fields which produce 18,000 barrels of oil equivalent per day. Shearwater in comparison accounts for 25 million barrels of oil equivalent of reserves.
Premier have said that they will be taking 50% to 100% stake in five Andrew Area fields, and a 28% stake in the Shearwater assets.
Premier added that they intend to raise the funds through a $500 million equity raise, and if needed a $300 million bridge operation.
The equity raise will encompass a share placing and rights issuance, and further details will be announced over the next few weeks.
Premier further updated shareholders by saying that it had taken a further 25% more of Tolmount off Dana Petroleum PLC (LON:DNX) for $191 million, and a potential $55 million more.
Tolmount, a gas field, is expected to come active at the end of 2020.
The firm said that by 2024, they can expect production to be around 100,000 barrels of oil equivalent per day which will beat the 2019 figure of 78,400 per day.
Comments
“These acquisitions are materially value accretive for Premier and are in line with our stated strategy of acquiring cash generative assets in the UK North Sea,” commented Premier Chief Executive Tony Durrant.
“We look forward to realising the significant long-term potential of the Andrew and Shearwater assets through production optimisation, incremental developments and field life extension projects. We are also pleased to have consolidated our interest in the high return Tolmount development where we see material upside. The cash flow generated from the acquired assets will also accelerate the deleveraging of Premier’s balance sheet,” Durrant continued.
“Premier’s strong operational performance in 2019 has generated significant free cash flow for the group enabling us to materially reduce our debt levels and to invest selectively in our portfolio for future growth,” said CEO Durrant.
“The Tolmount development is making good progress and will provide a step up in group production once on-stream at the end of this year. We also look forward to drilling our first well in Alaska, a potentially transformational well for Premier.”
Premier period of trading
The firm saw its shares climb at the start of November as it lifted its production forecast, and with the new purchases shareholders will be further pleased.
Average production was 79,400 barrels of oil equivalent per day for the 10 months to October end, up from 77,700 barrels in the comparative year ago period, underpinned by continued high operating efficiency of 94%.
Chief executive Tony Durrant commented on the results, “We continue to deliver on our strategic priorities. We are generating significant free cash flow, which is materially deleveraging our balance sheet.
“At the same time, we are actively managing our portfolio and selectively progressing growth projects at the right exposure. We also continue to create value through the drill bit and to build material new positions in emerging exploration plays at low cost.”
Certainly, significant progress has been made since the November announcement, and 2020 has started in good step for the firm.
As a result, the firm has seen its share spike on the announcement.
Shares of Premier jumped 14.54% to 116p. 7/1/20 10:55BST.
