Member Info for Stevo12

SK. I should add that premier Newco needs a market cap of £5.2b (27p per share) to be an automatic entry to FTSE 100 and would require a number of tracker funds to buy shares. There will however be very few shares in circulation to the various lock in clauses for first 12 months. This could in of itself produce an interesting spike in share price as Trackers and institutional investors seek to hoover up the relatively small number of premier private investors.

SK my £9.5b (50p per share) estimate by 31 December 2021 would need a recovery in oil price to $60-65 and would represent a 50% premium to my estimate of the post merger share price (30-32p). In reality, Shell and BP will likely rise by at least 50% if oil prices recover to $65 and are a lower risk bet than Premier Newco in a rising market.

The combined group should be generating $2.5 -3b of EBITDAX per annum at current oil price which provides plenty of room to replenish reserves and pay dividend similar to BP Aker. However we have all been badly burnt by Premier and so understand the scepticism.

There have been lots of questions as to when the board will tell us what the combined group is worth. Well it will be Mr Market who will be the ultimate arbitrator. The current market value of premier of £190m is the best current proxy as to what 5% of the Combined group will be valued at, namely market cap of £3.8b for combined group.

However there will be various risk premiums built into current price and to predicted a post merger price we can look to the valuation of BP Aker which is listed in Norway and has very similar characteristics. BP Akers is a pure North Sea play producing 200k barrels per day, generating revenue and EBITBAX of $1.5b and $1.1b for 6 months to June 20, compared to The Combined Premier Newco of $1.8b and $1.3b. Looking at 2021 forecast they have very similar production targets. BP Aker 2P reserves are 900m barrels compared to 717m for Premier combined Newco. Premier combined Newco also has $2b more decommissioning liabilities (due to more mature fields) but balancing that is a tax advantage due to Premier losses.

BP Aker has similar debt levels ($3.2b) and a current market cap of £7b and has been as high as £9b pre Covid.

My best estimate is that post 31 March, the Premier combined Newco market cap will be approx £6b (a 15% ish discount to BP Aker which should close over time). This indicates a post merger share price of 30-32p based on current market conditions which should rise to 35p ish over time. If oil prices continue to improve then all boats will rise on a higher tide.

BP Aker also pays a very substantial dividend which was approaching $1b a year pre Covid and is forecast to be $1.2b by 2022 and There is no reason why Premier Newco can’t match this.

My personal position is to hold until towards the end of 2021 when oil price should have recovered, dividends will be happening or announced and the majority of shares are still under the lock in restrictions (this is really important as there will not be much liquidity in early months post merger). My personal exit price is 50p which would equate to a market cap of £9.5b.