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PREMIER OIL PLC

("Premier" or "the Group")

Announcement of the proposed refinancing

3 February 2017

Premier is pleased to announce:

- Agreement of representatives of its Private Lenders to a long form term sheet, subject to credit approvals

- Agreement of revised key terms between Premier and representatives of its convertible bondholders, subject to agreement by the Private Lenders

- Proposed amended terms to its retail bonds

Refinancing overview

The refinancing will provide a solid foundation for Premier to deliver its strategic plans through:

- Preserving the Group's debt facilities

- Resetting financial covenant headroom

- Extending Premier's debt maturities to 2021 and beyond

In return, the lenders will receive a revised security and covenant package, enhanced economics and certain governance controls. 

The long form term sheet will now be circulated to the lenders under the company's RCF, term loan, Schuldschein and US Private Placement notes (Private Lenders) for formal credit committee approval, with lock-up agreements requested by the end of February. Revised financing documentation will now be finalised with completion of the refinancing currently anticipated by the end of May 2017.

Revised funding structure allows for debt reduction and growth 

Year-to-date Premier's production has averaged around 80 kboepd. A significant step up in production is expected once Catcher is on-stream later this year, materially enhancing the Group's cash flows. The Group will prioritise these cash flows towards reducing its absolute debt levels and leverage ratio to 3x EBITDA. At the same time, Premier and its lenders envisage that the Group will selectively seek to invest in its unsanctioned projects, at the appropriate equity levels, with due regard to the commodity price environment.

With rising production and 700 mmboe of discovered but undeveloped reserves and resources, Premier has considerable portfolio optionality. Unsanctioned projects include infill drilling programmes, incremental developments and new projects such as Tolmount, Tuna and Sea Lion. Premier also has the potential for material value creation through its exploration acreage, including in Mexico, with drilling expected to commence in Q2.

Tony Durrant, CEO, commented

"The agreement of the long form term sheet with representatives of our Private Lenders marks a significant milestone for Premier. We are grateful for our lenders' continued support, which reflects the high quality nature of our asset base, the strong recent operating performance and our plans to deliver value for all of our stakeholders."

Key terms of the refinancing

The RCF, term loan, US Private Placement notes (USPP) and Schuldschein notes

Proposed amendments have been agreed with the Coordinating Committee of the RCF Group and representatives of the other Private Lenders as follows:

- Confirmation of total existing facilities of US$3.9bn with undrawn capacity preserved

- Alignment of final maturity dates to 31 May 2021

- Amendment of Premier's financial covenants, currently anticipated to be

· Net debt to EBITDA cover ratio reset to 7.5x until end 2017 reducing to 5.0x at the end of 2018, before returning to 3.0x in 2019

· Interest cover ratio reduced to 1.85x before increasing to 3.0x in 2019

· Covenant net debt (which includes issued letters of credit) to be less than US$2.95bn by end 2018

- Enhanced economics to lenders, including

· A margin uplift of 1.5% over existing pricing with an additional 1.0% for the Schuldschein lenders for conversion of their existing bilateral facilities into an English law syndicated facility

· Amendment fees of 1.0% with an additional 0.5% for the Schuldschein lenders

· Equity warrants representing up to 90 million new shares, being 15% of Premier's issued shares (enlarged for the potential new issue) at a price of 42.75 pence per share, equivalent to 7.6% dilution based on the latest closing share price. The warrants will have a five-year term. Alternatively, lenders will have the option to take up synthetic warrants in the form of a deferred fee of comparable value to the equity warrants. Take up of the synthetic warrants will reduce the number of underlying new shares to be issued under the equity warrants

· Crystallisation of the make-whole on the USPP to be calculated at the completion date of the refinancing

- A security package which provides priority over unsecured creditors; in addition a portion of the RCF and certain other debt obligations of up to US$800m will receive super senior status

- Certain governance controls including

· Annual approval of Premier's overall capex and exploration budgets

· Final sanction of significant new projects

· Certain approval rights in respect of acquisitions and disposals

The retail bonds

Substantially the same economic terms are being offered to the retail bondholders as to the Private Lenders. The key terms proposed are:

- Maturity date extended by six months to 31 May 2021

- Enhanced economics comprising an interest rate uplift of 1.50%, amendment fees of 1.0% and pro rata participation in the warrant offering as above

- Participation in the security package which gives priority over unsecured creditors, ranking alongside the private debt facilities (with senior status)

Positive feedback has been received from a number of significant retail bondholders who have been consulted on these terms. A prospectus will be issued for retail bondholders to elect between equity warrants and synthetic warrants.

Convertible bonds

Premier has agreed key amended terms with certain significant bondholders and advisers to an ad hoc committee of the convertible bondholders. Full details of these terms will be circulated to the wider convertible group. The amended terms remain subject to review and agreement by the Private Lenders and their representatives.

Implementation of the proposed refinancing

Premier plans to enter into lock up agreements in relation to the long form term sheet with Private Lenders by the end of February. Revised refinancing and implementation documents will now be finalised with completion for the refinancing anticipated by the end of May 2017.

The proposed RCF, term loan and USPP amendments will be effected through a Scottish scheme of arrangement of each of Premier and Premier Oil UK Limited (the Schemes), which must be approved by a majority in number and 75% in value of Scheme creditors attending and voting at the meetings (the Scheme Meetings). 

Schuldschein lenders and the convertible bondholders will each consent to the terms of the refinancing outside of the Scheme process.

The refinancing will require shareholder approval in respect of the potential issue of the warrant shares and shares that could be issued as a result of the change to the convertible bond conversion price. That approval will be sought at a general meeting.

Forward Looking Statements

Certain statements in this announcement are forward looking statements. These forward looking statements can be identified by the use of forward looking terminology including the terms "believes", "expects", "estimates", "anticipates", "intends", "may", "will" or "should" or in each case, their negative, or other variations or comparable terminology. These forward looking statements reflect Premier's current expectations concerning future events. They involve various risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Group, third parties or the industry to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. Such risks, uncertainties and other factors include, amongst other things, general economic and business conditions, industry trends, competition, changes in regulation, currency fluctuations, the Group's ability to recover its reserves or develop new reserves and to implement expansion plans and achieve cost reductions and efficiency measures, changes in business strategy or development and political and economic uncertainty. There can be no assurance that the results and events contemplated by these forward looking statements will in fact occur.