Premier Oil Lifts Output Estimate as Talks With Lenders Continue

  • Full year output view raised to 68,000-73,000 barrels a day
  • Premier expects to complete refinancing talks by year-end

Premier Oil Plc raised its production estimate for the year as the oil explorer with operations in the North Sea said it’s still in negotiations with lenders to refinance its debt.

The anticipated production range for this year was raised to 68,000 to 73,000 barrels a day from 65,000 to 70,000 barrels a day previously, according to a statement Thursday. The company said it expects to complete talks to refinance its debt by the end of the year.

“Delivery of a step change in production levels and a leaner operating cost base has addressed the lower commodity-price environment,” Tony Durrant, chief executive officer of Premier, said in the statement.

Production in the first half averaged 61,000 barrels a day, driven by high efficiency, in particular at the North Sea’s Huntington field prior to maintenance over the summer, Premier said. A second well at the Solan field, which began operating in April, should start pumping Thursday, it said.

“Production shows very positive trends,” Mark Wilson, an analyst at Jefferies Group LLC, said in a note. If the second well at Solan “comes on as planned then Premier should be able to deliver a record production rate of over 100,000 barrels a day.”

Haggle Points

Premier said it is still holding refinancing negotiations with a group of bondholders and bankers, with the aim of extending the maturity of its debt and increasing the maximum leverage ratio in its loan covenants.

While the negotiations are “all heading in the right direction,” there are still some “haggle points” notably the new maturities, Durrant said in a phone interview. He expects lenders will agree to the new term sheets by the end of the third quarter and full completion of the refinancing to be done by year-end.

Premier has a revolving credit facility of $2.05 billion that matures in July 2019, according to data compiled by Bloomberg. Its net debt at the end of the first half rose to $2.63 billion from $2.2 billion at the end of December.

“I have no reason to doubt his confidence that the refinancing will be completed as he suggests, particularly with the production momentum we are seeing,” Jefferies’ Wilson said. Completion of the refinancing talks is taking longer than previous expectations, he said.

Premier Oil gained 2 pence, or 2.6 percent, to 78.50 pence a share at 10:15 a.m. in London. The shares have rallied 60 percent so far this year.

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