TIDMPMO
RNS Number : 7783L
Premier Oil PLC
13 January 2016
PREMIER OIL PLC
("Premier" or "the Company")
Proposed Acquisition of UK North Sea Assets from E.ON and
Temporary Suspension of Shares
13 January 2016
Premier Oil today announces it has agreed to acquire the whole
of E.ON's UK North Sea assets for a net consideration of $120
million plus working capital adjustments. The proposed acquisition,
which will be funded from existing cash resources, adds immediate
cash generative production, realises tax synergies on Premier's
current c.$3.5bn UK tax loss position and is accretive to lending
covenants.
The assets being acquired are located in the Central North Sea,
West of Shetlands and the Southern Gas Basin and add stable UK gas
revenues to the portfolio rebalancing Premier's commodity
exposure.
Tony Durrant, Chief Executive, commented:
"We are pleased to have agreed this value accretive deal as we
continue to execute our strategy of focusing the portfolio on our
core regions. Having recently completed the sale of our Norwegian
assets for $120 million, this transaction allows us to further
consolidate our interests in the UK North Sea where any
acquisitions are immediately value enhancing as a result of our
existing UK tax position.
Premier has historically been able to capture long term value
through acquisitions in low oil price environments. The material
increase in low cost production and cash flow generation in 2016
and 2017, is materially covenant accretive and strengthens
Premier's financial position in the current environment."
Rationale for the acquisition
The proposed acquisition will:
-- add c.15 kboepd of net production to Premier in 2016 and
c.64mmboe to Premier's net reserves and contingent resources, at an
implied cost of c.$1.9/boe
-- accelerate Premier's existing UK tax loss position of c.$3.5 billion
-- provide potential to generate significant operating and cost
synergies across the combined UK North Sea business
-- increase Premier's presence in the Central North Sea
including a stake in the producing world class Elgin-Franklin asset
and related fields
-- consolidate our interest in Huntington (pro-forma 100%) and
assume operatorship with potential to reduce costs and optimise
production
-- enlarge Premier's UK portfolio with the highly attractive Tolmount Area development
Financial benefits of the acquisition
The proposed acquisition:
-- adds significant production and associated cash flow in 2016
and 2017 even at current oil and gas prices
-- adds assets with a valuable hedging portfolio
o 2016: 32% estimated gas production @ 63p/therm, 33% estimated
liquids @$97/bbl
o 2017: 21% estimated gas production @ 57p/therm
-- will be materially covenant accretive for Premier, expected
to add headroom of c.$500 million at 30 June 2016 and 31 Dec 2016
at current oil and gas prices
-- will be financed out of existing cash flow with a rapid payback of around 2 years
-- allows Premier to share the abandonment cost exposure on
Ravenspurn North and Johnston with E.ON
-- includes c.GBP250 million of tax paid historically accessible
to offset against future decommissioning expenditure
Asset Highlights
Premier will acquire interests in licences concentrated in the
Central North Sea, West of Shetlands and the Southern Gas
Basin.
Acquired asset interests include:
-- Elgin-Franklin (5.2%, TOTAL Operated) - world class asset
currently producing 114kboepd with operating costs of c.$8/boe
-- Huntington (25%, Operatorship) - currently produces
c.15kboepd with remaining reserves of 10mmboe. Premier's interest
will increase to 100%.
-- Babbage (47%, Operatorship) - currently produces from five
wells with infield and near-field growth opportunities
-- Tolmount (50%, Operatorship) - one of the largest discoveries
in the Southern Gas Basin in recent years with estimated gross
resources of 200Bcf-1Tcf
The gross assets and loss attributable to the assets being
acquired were GBP670 million and GBP111 million respectively, as at
31 December 2014, the loss position driven largely by impairments
at the year end.
Acquisition Timetable/Temporary Suspension of Trading of
Ordinary Shares
Consideration for the acquisition is $120 million with an
effective date of 1 January 2015 plus an agreed working capital
adjustment. The entity to be acquired includes positive cash
balances which will be retained by Premier. The effect of the
adjustment to consideration may cause the transaction to be
classified as a reverse takeover under the FCA Listing Rules and
therefore the Company has requested the temporary suspension of
trading in its Ordinary Shares.
The Acquisition requires approval from the Company's
shareholders, US Private Placement holders and banks. A shareholder
circular and notice of meeting will be published in due course.
Enquiries
Premier Oil plc Tel: 020 7730 1111
Tony Durrant, Chief
Executive
Richard Rose, Finance
Director
Bell Pottinger Tel: 020 3772 2570
Gavin Davis
Henry Lerwill
There will be a conference call at 3 p.m. today for analysts and
investors, the details of which are as follows:
Dial in number: 020 3059 8125
Password: Premier Oil
A short presentation detailing the transaction and the assets
being acquired will be available on the Company's website before
the call.
This announcement may contain certain forward-looking statements
and information that both represents management's current
expectations or beliefs concerning future events and are subject to
known and unknown risks and uncertainties. These statements and
forecasts involve risk and uncertainty because they relate to
events and depend upon circumstances that may occur in the future.
There are a number of factors which could cause actual results or
developments to differ materially from those expressed or implied
by these forward looking statements and forecasts. Nothing in this
announcement should be construed as a profit forecast. Past share
performance cannot be relied on as a guide to future
performance.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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