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Premier Oil proposes critical debt restructure

New plan needs another $300m raised on the market, however, on top of the planned raise of $230m to pay for BP assets
August 20, 2020

Premier Oil (PMO) will go back to the market for another $300m (£227m) in order to get a life-or-death debt refinancing across the line. As it stands, the entirety of the oil and gas producer’s borrowings are due in May next year. 

IC TIP: Sell at 27.5p

The new equity raise is on top of the $230m it is asking shareholders for to complete the purchase of two BP (BP.) North Sea assets. Creditors have underwritten $200m of this new raise, although the whole creditor base has not yet backed the arrangement. Premier’s total debt, excluding lease liabilities, were $1.96bn as of 30 June, putting gearing at around 400 per cent. 

Premier's shares plunged by around a fifth on the news. Finance chief Richard Rose said there had been support from existing shareholders and possible new entrants for the additional raise. “We wouldn't have gone ahead unless we felt that there was support from our major shareholders to at least cover their position into the equity raise,” he said.

If all goes well and the BP deal is done, the company would focus on paying down debt. “Frankly [this] has been the area that has been holding us up for the last couple of years,” Mr Rose said. 

Premier also reported its interim results on Thursday. Its cash profits excluding exploration expenditure (Ebitdax) were down by almost half on a year ago, at $352m, and its bottom line was hit by both lower production, lower oil and gas prices and non-cash impairments, resulting in a pretax loss of $335m. The lion’s share of this came from $222m in exploration write-offs. 

In the first half, Premier put its exploration projects on the backburner, as well as development at the Sea Lion asset near the Falkland Islands. It has agreed to sell off part of its stake in the operated project to Navitas but this is still to be ticked off by authorities.