The market reacted positively to Premier Oil's (PMO) half-year figures, even though earnings were pulled into the red by a $385m (£247m) impairment charge on the Solan field in the North Sea, which is expected to come on stream in the final quarter of this year. Predictably, revenues were held in check by the slump in Brent crude prices, but Premier still managed to drive up operating cash flows by paring back operating costs by 30 per cent.
Premier took full control of Solan at the beginning of June, and the new cash flows from the development can't come fast enough for the driller, which is struggling under a sizeable debt burden. Offtake arrangements, whereby buyers bag a share of future production, are in place - most notably with Flowstream Commodities - which will ease the driller's borrowing obligations.
Debt retrenchment will eventually be aided by new cash flows from the Catcher development, expected in 2017. Until then, Premier has agreed to stop dividend payments following a renegotiation with banks and bondholders designed to increase Premier's financial flexibility and ease some of the finance covenants currently in place. However, these could conceivably still be tested if oil prices continue to head south.
| PREMIER OIL (PMO) | ||||
|---|---|---|---|---|
| ORD PRICE: | 94.7p | MARKET VALUE: | £484m | |
| TOUCH: | 94.5-94.9p | 12-MONTH HIGH: | 354p | LOW: 94p |
| DIVIDEND YIELD: | nil | PE RATIO: | 369 | |
| NET ASSET VALUE: | 281¢* | NET DEBT: | 146% | |
| Half-year to 30 June | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 885 | 50.4 | 32.8 | nil |
| 2015 | 577 | -215 | -73.5 | nil |
| % change | -35 | - | - | - |
£1=$1.56. *Including intangible assets of $1.15bn, or 225¢ a share | ||||
