Premier Oil, BP Revise North Sea Acquisition Terms

Premier and BP still plan to forge ahead on the proposed BP acquisitions of the Andrew Area and Shearwater assets by September 30. However, the structure of the consideration and phasing of payments are being adjusted to reflect developments in global commodity markets.

“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,” said Tony Durrant, Premier CEO. “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.”

Under the proposed revised arrangements, the original consideration of $625 million at the effective date of January 1 2019 would be set off by $300 million of estimated interim period cash flows to be retained by BP and a further $115 million would only become payable based on higher future oil and gas prices.

Revised cash payable at closing is anticipated to be $210 million and is expected to be funded with equity. In addition, BP would retain 100 percent of the existing Shearwater abandonment costs and 50 percent of the existing Andrew Area abandonment costs.

The Andrew Area and Shearwater assets, which will contribute to rising group production, are immediately cash generative even at current commodity prices and will accelerate the use of Premier’s $4.1 billion of UK tax losses.

Asset highlights:

• Andrew Area (50%-100% interests in 5 fields, operatorship): currently producing c.18 kboepd (net to BP) with material near term upside through further development of the Andrew Lower Cretaceous reservoir
• Shearwater (27.5% interest): significant producing and infrastructure hub, adding 25 mmboe of reserves and resources with incremental investment opportunities and tariff income

Meanwhile, Premier says it has made good progress in establishing the principal terms to the Stable Platform Agreement with a subset of its creditors representing over 40 percent of its debt to waive the company’s financial covenants through September 30 and to provide continued access to its revolving credit facilities.

To contact the author, email bertie.taylor@rigzone.com.