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Premier Oil gets closer to deal approval

Creditor and short-position holder ARCM is still fighting the $871m deal announced in January, filing an appeal after court approval
April 30, 2020

Premier Oil (PMO) has got the green light from a court to go through with its acquisition of BP (BP.) assets in the North Sea, although the deal cannot proceed before an appeal is heard. Shareholders also need to back the plan. 

IC TIP: Hold at 28p

The plan was challenged in court by Premier creditor and major short position holder Asia Research and Capital Management (ARCM), which said it would immediately appeal Wednesday’s decision. 

Premier announced in January it had set up an $871m (£700m) deal to take over BP’s Andrew Area and Shearwater operations and buy Dana Petroleum’s 25 per cent stake in the Tolmount Area field. 

Premier said it would raise $500m through an equity issue, although this has become much more expensive in share terms after the oil price crash in March. Since the acquisitions were announced on 7 January, Premier’s share price has fallen 76 per cent, to 28p. Additional funding will come from extending existing loans, Premier said in January. Its net debt stood at $2bn on 31 December. 

Premier said it “continues to assess the viability of satisfying [the deal] conditions and therefore of completing the proposed transactions in light of the current market conditions”. 

Chief executive Tony Durrant said he was pleased to receive the court’s endorsement, and expected the appeal to be dismissed. 

ARCM, which has said its massive short position in Premier (at 17 per cent, the largest short position on the London Stock Exchange) is a hedge for its loans to the company. In a statement, the fund complained that the Court of Session in Edinburgh had not heard “live evidence” from either party, and did not consider the change in Premier’s circumstances since the deal was announced when signing off on the deal.