Page 7 - Euroil Week 17 2020

EurOil INVESTMENT EurOil
Premier still struggles to close North Sea deals
UK
The company’s main creditor has launched a court appeal.
WRANGLING between Premier Oil and its main creditor over the acquisition of $871mn in North Sea assets continues, despite a court ruling in the oil company’s favour.
Premier announced a pair of deals in January to acquire BP’s shares in five fields in the Andrew and Shearwater areas, and buy a stake in the Tol- mount gas project it operates from South Korea’s Dana Petroleum. But Hong Kong-based hedge fund Asia Research and Capital Management (ARCM) has opposed the moves, citing their high risk.
Premier, ARCM argues, would do better to focus on reducing its sizeable net debt, valued at $2bn at the end of December. The fund has also taken issue with Premier’s plan to extend its debt maturities until 2023.
Premier’s acquisitions secured the backing of most of its creditors earlier this year. But ARCM, which holds more than 15% of Premier’s debt and has a short position of nearly 17% of its stock, took the matter to court.
The Court of Session in Edinburgh, Scot- land, heard the case in mid-March but has taken until now to announce its verdict. In a state- ment, Judge Sarah Wolffe said the deals had the “overwhelming” backing of creditors and that it should be left up to the market to decide whether Premier should follow through with the purchases.
But first Premier will need an equity raise to finance them.
“If the equity raise does not generate sufficient new capital, the acquisitions cannot be funded,” the judge explained. “The first step is the equity raise. There is no better predictor of the success of the schemes in the market than the market itself.”
ARCM has vowed to appeal against the
court’s decision in the coming days, however. “Sanction was granted without live evidence from either Premier Oil or ARCM’s witnesses and was granted in spite of the material change of circumstances arising [from] the collapse in oil and UK gas prices since November 2019, when the transactions were first proposed to creditors,”
the fund said.
It reiterated that it saw “no value” in the deals,
or Premier’s proposed $500mn rights issue, which it said were neither viable or executable. ARCM estimated that Premier would need an equity raise of at least $350mn to see the trans- actions through.
Until ARCM’s appeal process has concluded, Premier will be unable to register the court’s order with Companies House, the producer said in a statement. Besides the equity raise, the deals are also subject to a number of other conditions, including shareholder approval.
“Premier continues to assess the viability of satisfying those conditions and therefore of com- pleting the proposed transactions in light of the current market conditions,” it said.
“We are very pleased to have secured the court’s endorsement,” Premier CEO Tony Dur- rant said. “This underlines the strength of our legal case and demonstrates that we are able to use a scheme of arrangement as a mechanism to secure lender consent for transactions designed to improve the business.”
Premier performed well in 2019, boost- ing its post-tax profits by almost a quarter to $164mn, despite lower prices, after hedging a good deal of its oil production. The pro- ducer, active in the North Sea, the Asia-Pa- cific region and the Americas, has made cuts to spending in response to the price rout, like many of its peers. ™
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