Join our community of smart investors

Premier buys BP North Sea assets

The deal would add 23,000 barrels of oil per day to Premier's production, while the producer also announced 2020 guidance and a new Sea Lion partner
January 7, 2020

Premier Oil (PMO) will take on a suite of BP (BP.) properties in the North Sea, upping its production by around 30 per cent once the deal goes through.

IC TIP: Hold at 114p

The supermajor said the sale would see the projects running for longer with an operator that is a “better strategic fit”. The sale gets BP closer to its $10bn (£7.6bn) target for asset sales in 2019 and 2020, which it now says it will hit by September. 

Premier will pay $625m (£474m) for the Andrew Area project and BP’s 27.5 per cent stake of the Shearwater asset. The company also announced the $191m purchase of an additional 25 per cent of the Tolmount asset. The two acquisitions would add 23,000 barrels of oil per day (bopd) of production. Premier also said that its 2019 production was 78,400 bopd, meeting guidance. It set 2020 guidance (before the new assets are added) at between 70,000 bopd and 75,000 bopd. The North Sea acquisitions will be funded by a $500m equity raise and new $300m loan, once shareholders have approved the deals. Premier said its debt load as of 31 December was $2bn, down from $2.3bn at the end of 2018. 

Helping the balance sheet will be the farm-out of part of the Sea Lion project in the Falklands. Premier said Israeli producer Navitas Petroleum had come on board with a 30 per cent stake. Premier will remain operator with a 40 per cent holding (down from 60 per cent). Panmure Gordon analyst Colin Smith said the North Sea deal had “attractive metrics”. Investors agreed, sending Premier's share price up 13 per cent to 115p, its highest level since late 2018.