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(Alliance News) - Premier Oil PLC is to buy two North Sea assets from BP PLC, it said Tuesday, and has also built up its stake in a soon-to-be-producing field.
Shares in Premier were 13% higher in early trade in London at a price of 115.08 pence each, giving it a market capitalisation of just short of GBP1 billion. Shares in oil major BP were 0.6% lower at 501.30p for a GBP102 billion market cap.
Premier is buying the Andrew Area and Shearwater assets from oil major BP for USD625 million. Andrew Area includes five fields producing 18,000 barrels of oil equivalent per day, and Shearwater 25 million barrels of oil equivalent of reserves.
Premier is taking 50% to 100% stakes in the five Andrew Area fields, as well as 28% of the Shearwater assets.
The acquisition will be funded by a USD500 milion equity raise, and, if needed, a USD300 million bridge facility. Premier expects the equity raise to include both a share placing and a rights issue, with the details to be confirmed during the first quarter of 2020.
These assets will sit alongside Premier's existing Tolmount site in the North Sea.
The company also has, it said Monday, taken 25% more of Tolmount off Dana Petroleum PLC for USD191 million, and a potential USD55 million more. Tolmount, a gas field, is expected to come onstream at the end of 2020.
Overall, these acquisitions will add 23,000 barrels of oil equivalent per day of production to Premier's portfolio and are forecast to generate over USD1 billion of free cash flow to the end of 2023 which will help it reduce its heavy debt. In 2019, Premier said on Tuesday, net debt has reduced by more than USD330 million to USD1.99 billion.
The purchases also add 82 million barrels of oil equivalent to the company's reserves.
"These acquisitions are materially value accretive for Premier and are in line with our stated strategy of acquiring cash generative assets in the UK North Sea," commented Premier Chief Executive Tony Durrant.
"We look forward to realising the significant long-term potential of the Andrew and Shearwater assets through production optimisation, incremental developments and field life extension projects. We are also pleased to have consolidated our interest in the high return Tolmount development where we see material upside. The cash flow generated from the acquired assets will also accelerate the deleveraging of Premier's balance sheet," Durrant continued.
By 2024, Premier now hopes group production will top 100,000 barrels of oil equivalent per day. On Tuesday, the firm said 2019 production was 78,400 barrels per day, at the upper end of guidance of between 75,000 barrels and 80,000 barrels.
This was driven by good efficiency and performance from the Catcher Area in the North Sea.
"Premier's strong operational performance in 2019 has generated significant free cash flow for the group enabling us to materially reduce our debt levels and to invest selectively in our portfolio for future growth," said CEO Durrant.
"The Tolmount development is making good progress and will provide a step up in group production once on-stream at the end of this year. We also look forward to drilling our first well in Alaska, a potentially transformational well for Premier."
By George Collard; georgecollard@alliancenews.com
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