It’s official. Premier Oil set to buy E.ON’s UK North Sea fields for $120 million

After several reports earlier on Wednesday claimed that the British independent oil company Premier Oil was in talks to acquire a rival company, with Premier Oil’s shares suspended pending an announcement, the announcement is finally here.

What Reuters hinted earlier today, citing sources close to the matter, Premier Oil has now confirmed. In a statement on the London Stock Exchange, Premier Oil said it has agreed to acquire the whole of E.ON’s UK North Sea assets for a net consideration of $120 million plus working capital adjustments.

Premier Oil said that the proposed acquisition, which will be funded from existing cash resources, adds immediate cash generative production, realises tax synergies on Premier’s current c.$3.5bn UK tax loss position and is accretive to lending covenants.

The assets being acquired are located in the Central North Sea, West of Shetlands and the Southern Gas Basin and add stable UK gas revenues to the portfolio rebalancing Premier’s commodity exposure.

Tony Durrant, Chief Executive, commented: “We are pleased to have agreed this value accretive deal as we continue to execute our strategy of focusing the portfolio on our core regions. Having recently completed the sale of our Norwegian assets for $120 million, this transaction allows us to further consolidate our interests in the UK North Sea where any acquisitions are immediately value enhancing as a result of our existing UK tax position.

Premier has historically been able to capture long term value through acquisitions in low oil price environments. The material increase in low cost production and cash flow generation in 2016 and 2017, is materially covenant accretive and strengthens Premier’s financial position in the current environment.”

Acquired asset interests include a 5 percent share Elgin-Franklin field, operated  by Total; Huntington oil field, where Premier’s interest will increase to 100%, Babbage field, where Premier will take operatorship with 47% stake, and Tolmount,  one of the largest discoveries in the Southern Gas Basin in recent years with estimated gross resources of 200Bcf-1Tcf, with 50% and operatorship.