Premier Oil Agrees to Acquire EON's U.K. North Sea AssetsBy
Deal to be funded from existing cash resources, explorer says
Trading in Premier Oil shares suspended on Wednesday
The assets are located in the central North Sea, West of Shetlands and the Southern Gas Basin, Premier said Wednesday in a statement. The planned acquisition, to be funded from existing cash, will give the company net production of about 15,000 barrels of oil equivalent a day this year, it said.
“This transaction allows us to further consolidate our interests in the U.K. North Sea,” Chief Executive Officer Tony Durrant said in the statement. The acquisition, studied by the company for “some time,” will add gas as well as oil and generate profits for “many years,” he said.
Premier Oil’s interest in bidding for the assets was reported by Bloomberg in November. A month earlier, EON divested its Norwegian North Sea assets to Russian billionaire Mikhail Fridman’s Letter One for $1.6 billion. The utility has been forced to sell units and spin off fossil-fuel power plants after a slump in commodity prices and policy changes by the German government eroded earnings.
Premier itself has been hard hit by a 30 percent decline in oil prices over the past year. Its shares, suspended on Wednesday, have tumbled more than 60 percent since the start of 2016, leading losses among members of the FTSE All-Share Index. The value of Wednesday’s acquisition is just 14 percent less than the company’s $140 million market capitalization.
Yet the deal will give Premier more headroom to meet debt covenants -- conditions put in place by lenders -- the company said. Premier Oil’s net debt totaled $2.2 billion at the end of last year.
The company also published a trading and operations update Wednesday. Production last year averaged 57,600 barrels a day and is seen at 65,000 to 70,000 barrels a day in 2016, including the proposed acquisition.
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