Last year's renegotiation with banks and bondholders was meant to settle concerns over Premier Oil 's (PMO) worrying debt pile. Yet the falling price of Brent crude and squeeze on cash flows means that the shares now carry a 2.7 per cent risk of default in the next year, according to Bloomberg analysis.
And that junk rating could get even worse. Some 30 per cent of this year's production is hedged at $68 a barrel, but if prices remain at the current level, "a further relaxation of our main financial covenants" would be required, according to chief executive Tony Durrant. New downgrades to oil price assumptions could also lead to post-tax impairments on top of the $584m recognised in 2015.
Premier is nonetheless determined to hunker down amid the gloom. The group exceeded its production guidance in 2015 by an average of 2,600 barrels a day, thanks to an improvement in operational efficiency, and is currently pinning its hopes on a post-period agreement to buy E.ON's (Ger: EOAN) North Sea assets. That deal - which requires shareholder and bank approval and could lead to a rights issue - is expected to provide significant extra cash flow through 15,000 new barrels of hedged oil a day.
PREMIER OIL (PMO) | ||||
|---|---|---|---|---|
| ORD PRICE: | 39p | MARKET VALUE: | £198m | |
| TOUCH: | 38.5-39p | 12-MONTH HIGH: | 191p | LOW: 19p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 144¢ | NET DEBT: | 305% | |
| Year to 31 Dec | Turnover ($bn) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 0.80 | 142 | 36.6 | nil |
| 2012 | 1.40 | 360 | 47.9 | 5.0 |
| 2013 | 1.50 | 285 | 44.2 | 5.0 |
| 2014* | 1.63 | -363 | -43.3 | nil |
| 2015 | 1.07 | -830 | -210 | nil |
| % change | -35 | - | - | - |
£=$1.39. *Restated. | ||||
