Last year, asset sales and the early exchange of a convertible bond allowed Premier Oil (PMO) to reduce its net debt by $393m (£298m) to $2.33bn. Borrowings less cash now stand at 3.1 times earnings before interest, tax, depreciation and amortisation, well within banking covenants, and “back in line with many of our peers” to quote preliminary results commentary.
This doesn’t make it a peer group investors should want to join. For while Premier speaks like a mid-market BP (BP.), full of bullish plans for its projects in Mexico, Indonesia, the North Sea, Brazil and the Falklands, the explorer-producer remains constrained by its capital structure.
In 2019, Premier hopes to reduce its debt pile by up to $350m (£269m), which it could almost do with the cash and for-sale assets currently on the balance sheet. Of course, this wouldn’t move the needle for net borrowings, and would interfere with an expected capital expenditure bill of $340m for the year – a figure softened by the continued deferral of “significant abandonment costs”.
Consensus forecasts are for 16¢ in 2019, down from an average forecast of 18¢ for 2018.
| PREMIER OIL (PMO) | ||||
| ORD PRICE: | 79p | MARKET VALUE: | £641m | |
| TOUCH: | 78.5-79p | 12-MONTH HIGH: | 147p | LOW: 54.7p |
| DIVIDEND YIELD: | nil | PE RATIO: | 8 | |
| NET ASSET VALUE: | 126¢* | NET DEBT: | 227% | |
| Year to 31 Dec | Turnover ($bn) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
| 2014 | 1.63 | -363 | -43.3 | nil |
| 2015 | 1.07 | -830 | -210 | nil |
| 2016 | 0.94 | -414 | 21.3 | nil |
| 2017 | 1.04 | -366 | -52.6 | nil |
| 2018 | 1.40 | 158 | 13.6 | nil |
| % change | +34 | - | - | - |
| Ex-div: | na | |||
| Payment: | na | |||
| £1=$1.32. *Includes intangible assets of $1.05bn, or 129¢ a share | ||||
