Premier Oil signs discount deals for BP’s North Sea assets buy
Oil and gas company Premier Oil has signed sale and purchase agreements with oil major BP for the acquisition of its interests in the Andrew Area and its Shearwater assets, under revised terms announced in June.
To remind, Premier and BP signed a $625 million acquisition of deals for Andrew and Shearwater assets in the UK North Sea. Oil prices then crashed and BP in June agreed to lower the sale price.
In June, Premier announced that it was able to amend terms for the acquisition of the assets. 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.
Premier Oil said on Monday that the signing of the amended deal with the oil major occurred after the receipt of creditor approval for the acquisitions.
According to the company, the BP acquisitions are conditional on agreeing with terms of the refinancing of Premier’s existing credit facilities, equity funding and customary other approvals, including shareholder approval.
Premier will pay BP $210 million upon completion. The company will fully fund the $210 million completion consideration via an equity raise, expected to include a pre-emptive component. The completion of the acquisitions is scheduled to occur by the end of September 2020.
Also, up to a further currently estimated $115 million would become payable by Premier to BP based on higher future oil and gas prices. This further consideration would be funded by revenues from the acquired assets.
The company stated that BP would retain 100 per cent of the existing Shearwater abandonment costs and 50 per cent of the existing Andrew Area abandonment costs resulting in around $240 million of pre-tax abandonment obligations to be taken on by Premier.
Premier claimed that the Andrew Area and Shearwater assets were immediately cash-generative and would accelerate the use of Premier’s $4.1 billion of UK tax losses. The additional free cash flow generation will accelerate Premier’s debt reduction and the deleveraging its balance sheet.
Tony Durrant, CEO of Premier, said: “The signing of the SPAs with BP is another important milestone in completing the value-accretive BP Acquisitions which consolidates the Group’s position in the UK North Sea, one of our core areas, while, at the same time, accelerates the deleveraging of our balance sheet”.
It is worth noting that Premier is working with a subset of its creditors to agree revised terms for a long-term extension to the group credit maturities which can be recommended to the full creditor group for approval by the end of July.