Premier pens Solan deals with Chyrsaor and FlowStream
Premier Oil, an independent oil and gas company based in the UK, has concluded two separate transactions in relation to its operated Solan project, West of Shetland.
The company has said it has Chyrsaor’s 40 per cent interest in the Solan field for nil upfront consideration. In return, Chrysaor will receive the following contingent payments from a notional 40 per cent interest in the field’s net operating cash flow:
– A payment of up to $3 million a year which will be offset against any subsequent royalty payments and net production interest (NPI);
– Royalty payments totalling up to $100 million after allowing for repayment to Premier of the notional outstanding loan of $530 million plus accrued interest;
– A NPI once Chyrsaor’s notional 40 per cent equity interest reaches a net positive position after allowing for the notional repayment of the loan and accrued interest and after deducting Chrysaor’s notional 40 per cent share of total project capex, opex and decommissioning costs.
As a result of this transaction, Premier will consolidate 100 per cent of the Solan field’s production, revenues and capex in its financial results. Premier currently estimates that the royalty payments and the NPI would become payable at an average oil price above $75/bbl and $100/bbl, respectively.
Separately, Premier has entered into a $100 million agreement with FlowStream Commodities, subject to DECC approval. FlowStream will make a $100 million upfront payment to Premier in return for the proceeds from 15 per cent of Premier’s production from the Solan field for a period of time, the duration of which is dependent on the Solan field’s production levels and future oil prices.
Project operational update
With improved weather, better progress has been made with the commissioning work on the Solan facilities, West of Shetland. The Victory flotel has now moved to a new location and will be replaced by another flotel from early August. In the meantime, it is anticipated that work will continue using a ‘walk-to-work’ vessel. The Ocean Valiant rig is now on location with the drilling of the second pair of producer-injector wells to commence imminently. First oil is still targeted for the fourth quarter this year.
Tony Durrant, Chief Executive, said: “We are pleased to have concluded these new arrangements over a key asset for Premier. The agreement with Chrysaor enables us to focus on delivering first oil from the Solan project without partner funding concerns, while the transaction with FlowStream reduces our balance sheet exposure to the project and releases capital to fund completion of the development. We continue to look at further opportunities to realise value from the project.”