Premier agrees discount in buying BP’s North Sea assets

Oil and gas company Premier Oil has agreed revised terms for the acquisitions of the Andrew Area and Shearwater assets from British oil major BP.

In January, Premier Oil made agreements to buy the Andrew Area and Shearwater assets from BP for $625 million.

The company also announced it would be buying an additional 25 per cent interest in its Tolmount Area from Dana for $191 million, plus contingent payments of up to $55 million.

At the time, the company said that the proposed acquisitions would be funded via a $500 million equity raise, which has been fully underwritten on a standby basis, existing cash resources and, if required, an acquisition bridge facility of $300 million.

According to Premier’s January statement, the acquisitions have an effective date of 1 January 2019, and completion of all three acquisitions is expected to occur by the end of 3Q 2020.

In its statement on Friday however, the company said that the amended terms for the Andrew Area and Shearwater acquisitions were agreed in principle.

Namely, cash payable at completion is reduced to $210 million while estimated revised abandonment obligations are reduced to around $240 million pre-tax from around $600 million.

Principal terms are being discussed with a subset of Premier’s creditors to waive its financial covenants through to 30 September and provide continued access to its revolving credit facilities. Once agreed and finalised, the terms will be put to the wider creditor group for approval.

Privately-owned asset management firm ARCM also supported the BP acquisitions and the agreement with the creditors through a lender consent process.

ARCM initially opposed the acquisition of both BP and Dana assets and even requested from the court to prevent the implementation of such a proposal via a scheme of arrangement.

The court held a hearing in January in connection with the schemes required to implement the proposed UK North Sea acquisitions, related funding arrangements, and extension of its credit facilities, at which the court granted Premier’s request to start the scheme process.

In Friday’s statement, Premier said that ARCM opted to withdraw its appeal of the court’s judgment approving the schemes.

The company also said that it would be issuing 82.2 million new shares, representing 8.91 per cent of the enlarged group, to ARCM for 26.69p per share, a 9.64 per cent discount to the volume-weighted average price over the last five days.

The proceeds from the issuing will be used to fund part of the proposed BP acquisitions.

Tony Durrant, Premier CEO, 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 stable platform agreement once agreed with and approved by lenders, will provide a basis for the company to continue discussions regarding proposed amendments to the group’s existing credit facilities“.