Proposed UK North Sea Acquisitions

Source: RNS
RNS Number : 9158Y
Premier Oil PLC
07 January 2020
 

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF THAT JURISDICTION. THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND IS NOT AN OFFER OF SECURITIES IN ANY JURISDICTION.

 

Premier Oil plc

("Premier" or the "Group")

Proposed UK North Sea Acquisitions, Underwritten Financing and Extension of Credit Facilities

 7 January 2020

Premier is pleased to announce the proposed acquisitions of the Andrew Area and Shearwater assets from BP for US$625 million, and an additional 25 per cent. interest in the Premier operated Tolmount Area from Dana for US$191 million plus contingent payments of up to US$55 million (together the "Acquisitions"). Premier is also pleased to announce the proposed extension of its existing credit facilities to 30 November 2023.

In addition, Premier today provides a separate trading update ahead of its 2019 Full Year Results including the proposed farm-out of part of its Sea Lion and Tuna assets. 

Rationale and benefits of the Acquisitions

·    Add c.23 kboepd of cash generative production in 2019 with development upside; acquired assets forecast to generate over US$1 billion of free cash flow to end 2023

·    Add 82 mmboe of reserves and contingent resources at an implied cost of less than US$10/boe

·    Contribute to rising Group production out to 2024 with pro forma 2019 production in excess of 100 kboepd

·    Add low cost, low carbon emission assets with combined opex of less than US$20/boe

·    Accelerate the use of Premier's US$4.2bn tax losses

·    Materially strengthen Premier's financial position

Additional free cash flow accelerates debt reduction

Significantly reduce forward covenant leverage ratio towards 1x by 2022

·      Extension of existing, non-amortising facilities to late 2023

Asset highlights

·    Andrew Area (50%-100% interests in 5 fields, operatorship): currently producing c.18 kboepd (net to BP) with material near term upside through further development of the Andrew Lower Cretaceous reservoir

·    Shearwater (27.5% interest): significant producing and infrastructure hub, adding 25 mmboe of reserves and resources with incremental investment opportunities and tariff income

·    Tolmount (25% interest): consolidates interest in existing high return development, which is on schedule to deliver first gas by end-2020, with significant upside following recent drilling success at Tolmount East

The proposed Acquisitions will be funded via a US$500m equity raise (net of expenses) which has been fully underwritten on a standby basis, existing cash resources and, if required, an Acquisition Bridge Facility of US$300 million.  Premier expects that the equity raise will include both a placing and rights issue component with any shares issued under the placing qualifying for the subsequent pre-emptive rights issue. It expects to confirm the structure and terms in Q1 2020 following consultation with major shareholders.

Lender consent for the proposed Acquisitions, related funding arrangements and extension of credit facilities will be sought via two Court-approved schemes of arrangement (the "Schemes"). Of the creditors subject to the Schemes, 83.3 per cent. of Super Senior Commitments and 72.7 per cent. of the Senior Commitments have already committed to approve the Schemes. 

The Andrew and the Shearwater Acquisitions constitute a class 1 transaction. Shareholder approval for all of the Acquisitions and the equity raise will be sought at a general meeting expected to be held in Q1 2020.   The Directors believe that the Acquisitions represent a highly attractive opportunity and recommend that Premier's shareholders vote in favour of the resolutions, as the Directors intend to do in respect of their holdings, at the general meeting. Premier will send a combined prospectus and circular to its shareholders convening the general meeting in due course. 

The Acquisitions have an effective date of 1 January 2019 and completion of all three Acquisitions is expected to occur by the end of Q3 2020.

Tony Durrant, Chief Executive, commented:

"These acquisitions are materially value accretive for Premier and are in line with our stated strategy of acquiring cash generative assets in the UK North Sea.  We look forward to realising the significant long-term potential of the Andrew and Shearwater assets through production optimisation, incremental developments and field life extension projects.  We are also pleased to have consolidated our interest in the high return Tolmount development where we see material upside. The cash flow generated from the acquired assets will also accelerate the deleveraging of Premier's balance sheet."

A live audio webcast and conference call for analysts and investors will be held today at 9.30 a.m GMT.

Webcast access: www.premier-oil.com

Dial-in details are: +44 (0)20 3936 2999. Access code: 478690

 

This summary should be read in conjunction with the full text of this announcement and the Appendix.  Capitalised terms used in this announcement have the meanings given to them in the Appendix.

Enquiries 

Premier Oil Plc                                                                                                                 Tel: 020 7730 1111

Tony Durrant, Chief Executive

Richard Rose, Finance Director                                                                  

 

Jefferies International Limited                                                                                                 Tel: 020 7029 8000

Joint Corporate Broker and Joint Underwriter                   

Tony White

Lee Morton

William Soutar

 

RBC Capital Markets                                                                                                       Tel: 020 7653 4000

Financial Adviser, Sponsor, Joint Corporate Broker and Joint Underwriter                          

Matthew Coakes

Martin Copeland

Andrew Congleton

Duncan Smith

 

Camarco                                                                                                             

Financial PR to Premier

Billy Clegg                                                                                                                            Tel: 020 3757 4983

James Crothers


The information contained within this announcement is deemed by Premier to constitute inside information as stipulated under the Market Abuse Regulation. By the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain. The person responsible for arranging for the release of this announcement on behalf of Premier is Andy Gibb (Company Secretary and General Counsel).

Important notice

This announcement has been issued by and is the sole responsibility of Premier.  The information contained in this announcement is for information purposes only and does not purport to be complete. The information in this announcement is subject to change.

This announcement has been prepared in accordance with English law, the Market Abuse Regulation and the Disclosure Guidance and Transparency Rules and Listing Rules of the FCA and information disclosed may not be the same as that which would have been prepared in accordance with the laws of jurisdictions outside England.

RBC Europe Limited (trading as RBC Capital Markets) ("RBC") which is regulated by the FCA in the United Kingdom and is authorised and regulated by the PRA in the United Kingdom, and Jefferies International Limited ("Jefferies" and, together with RBC, the "Underwriters"), which is authorised and regulated by the FCA in the United Kingdom, are acting solely for Premier and no one else in connection with the Acquisitions, the proposed equity raise or any other matter referred to in this announcement and will not be responsible to anyone other than Premier for providing the protections afforded to clients of the Underwriters nor for providing advice in relation to the Acquisitions, the proposed equity raise or any other matter referred to in this announcement.

No person has been authorised to give any information or make any representations to shareholders with respect to the Acquisitions or the proposed equity raise other than the information contained in this announcement and, if given or made, such information or representations must not be relied upon as having been authorised by or on behalf of Premier or the Directors or by RBC or Jefferies or any other person involved in the Acquisitions or the proposed equity raise. None of the above take any responsibility or liability for, and can provide no assurance as to the reliability of, other information that you may be given. Subject to the Market Abuse Regulation and the FCA's Disclosure Guidance and Transparency Rules and Listing Rules, the delivery of this announcement shall not create any implication that there has been no change in the affairs of Premier since the date of this announcement or that the information in this announcement is correct as at any time subsequent to its date.

The contents of this announcement are not to be construed as legal, business or tax advice. Each shareholder should consult its own legal adviser, financial adviser or tax adviser for legal, financial or tax advice respectively.

Forward-looking statements

Certain statements in this announcement are forward-looking statements.  In some cases, these forward looking statements can be identified by the use of forward looking terminology including the terms "believes", "expects", "estimates", "anticipates", "intends", "may", "will" or "should" or in each case, their negative, or other variations or comparable terminology.  These forward looking statements reflect Premier's current expectations concerning future events and speak only as of the date of this announcement.  They involve various risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Group, third parties or the industry to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. Such risks, uncertainties and other factors include, amongst other things, general economic and business conditions, industry trends, competition, changes in regulation, currency and commodity price fluctuations, the Group's ability to recover its reserves or develop new reserves and to implement expansion plans and achieve cost reductions and efficiency measures, changes in business strategy or development and political and economic uncertainty. There can be no assurance that the results and events contemplated by these forward looking statements will in fact occur.

No statement in this announcement is intended as a profit forecast or estimate for any period and no statement in this announcement should be interpreted to mean that earnings, earnings per share or income, cash flow from operations or free cash flow for the Group or the Enlarged Group, as appropriate, for the current or future years would necessarily match or exceed the amount set out in any forward-looking statement or historical published earnings, earnings per share or income, cash flow from operations or free cash flow for the Group or the Enlarged Group, as appropriate.

Neither the content of Premier's website (or any other website) nor the content of any website accessible from hyperlinks on Premier's website (or any other website) is incorporated into or forms part of this announcement.

 

Expected timetable of key events

Schemes creditor meetings

February 2020

Court sanction hearings for the Schemes

March 2020

Publication of combined prospectus and circular and general meeting

Q1 2020

Completion of equity raise

Q2 2020

Amendment and extension of credit facilities becomes effective

Q2 2020

Completion of the Acquisitions

Q2 to Q3 2020

The dates in the table above are indicative only and may be subject to change.

 

 

Proposed Acquisitions, Underwritten Financing and Extension of Credit Facilities

1.            Introduction

Premier announces:

·   the proposed acquisition of:

o a portfolio of producing UK Central North Sea assets (Andrew Area and Shearwater) from BP for US$625 million;

o an additional 25 per cent. interest in the Premier operated Tolmount Area in the UK Southern North Sea from Dana for US$191 million, plus contingent deferred payments of up to US$55 million;

·   a fully underwritten US$500 million equity raise (net of expenses) to fund the Acquisitions; and

·   the proposed extension of its existing, non-amortising credit facilities to 30 November 2023.

2.            Asset highlights

The Directors believe that the Acquisitions represent a highly attractive opportunity to strengthen Premier's position in one of its core areas, the UK North Sea, and will continue Premier's track record of adding long-term value through acquisitions while accelerating the Group's debt reduction profile.

The Acquisitions relate to:

·    BP's operated interests in and relating to the Andrew, Arundel, Cyrus, Farragon and Kinnoull oil and gas fields located in Blocks 16/23a (Arundel), 16/23a (South), 16/23c (E), 16/23c (South), 16/24a (All), 16/28a (Cyrus), 16/28a (Rest), 16/28b (Andrew) and 16/28b (Rest) in the UK Central North Sea (the "Andrew Area", with the proposed acquisition being the "Andrew Acquisition");

·    BP's non-operated interest in and relating to the Shearwater high pressure, high temperature gas condensate field located in Block 22/30b in the UK Central North Sea (the "Shearwater Field", with the proposed acquisition being the "Shearwater Acquisition"); and

·    a 25 per cent. additional interest in and relating to the Premier operated Tolmount gas field located in Block 42/28d in the UK Southern North Sea, the Tolmount East and Mongour discoveries and the Tolmount Far East exploration prospect, (taken together, the "Tolmount Area" and the proposed acquisition being the "Tolmount Acquisition").

In relation to the Andrew Area, the BP Group holds operated stakes of between 50 per cent. and 100 per cent., with a combined net forecast 2019 production to BP of c.18 kboepd. Premier intends to assume the operatorship of the Andrew Area upon completion, subject to customary joint venture and regulatory approvals.

In relation to the Shearwater Field, the BP Group holds a non-operated interest of 27.5 per cent., with a net forecast 2019 production to BP of c.5 kboepd.

The Tolmount field is in the development stage with first gas expected by the end of 2020. Premier currently holds a 50 per cent. operated interest in the Tolmount Area and so the Tolmount Acquisition would take the Group's combined interest to 75 per cent. with Dana retaining its remaining 25 per cent. non-operated interest in the Tolmount Area, the related infrastructure joint venture and the related agreements consistent with its existing ownership in the Tolmount Area. Premier intends to sell the interest in respect of the Humber Gathering System, which is proposed to be acquired from Dana, to Kellas Midstream, subject to satisfaction of customary conditions precedent to completion.

The gross assets at 30 June 2019 and 2018 profits attributable to BP's interests in the Andrew Area were US$533 million and US$58 million respectively and the Shearwater Field were US$145 million and US$37 million respectively. The gross assets at 30 June 2019 and 2018 profits attributable to the 25 per cent. interest in the Tolmount Area to be acquired from Dana were US$121 million and nil respectively.

3.            Background to and rationale for the Acquisitions

The Directors believe that the Acquisitions will contribute significantly to the achievement of Premier's strategic, operational and financial objectives. The Acquisitions secure attractive, high quality North Sea assets, at a compelling valuation adding increased scale, with Group pro forma 2019 production of over 100 kboepd.  The Acquisitions will also enable the Enlarged Group to maintain rising production out to 2024 following the expected start-up of Tolmount in 2020. Pro forma 2P reserves of the Enlarged Group would be 250.7 mmboe as at 31 December 2018.

The Board believes that executing the Acquisitions in conjunction with the proposed equity raise will strengthen Premier's financial position with an increased, high quality asset base, while also adding to the range of growth projects available to Premier, strengthening its ability to allocate capital optimally across its enlarged portfolio. In addition, the Acquisitions will help to accelerate the deleveraging of the existing Premier balance sheet, materially improving the Group's ability to deliver future refinancings of its existing credit facilities. The financial effects of the Acquisitions in combination with the proposed equity raise are expected to be materially accretive to the Group's main financial covenants in its existing credit facilities, the maturities of which Premier is seeking to extend to 30 November 2023, as described below.

The Directors believe that the key benefits of the Acquisitions are that they will:

Strengthen Premier's existing UK North Sea business, through the addition of immediate and near-term producing assets as well as future development opportunities

The Acquisitions represent a continuation of Premier's strategy to focus its portfolio on its core regions, significantly growing the scale of its UK North Sea business. The Directors believe that acquiring high quality producing assets with demonstrable upside development opportunities, in close proximity to the Group's existing assets, will complement and enhance its position in one of its key operating areas in the UK. 

The Andrew Acquisition and the Shearwater Acquisition will provide Premier with mid-life producing fields with significant remaining field life, including material operated assets within the Andrew Area. The Andrew Assets are principally oil producing, while the interest in the Shearwater Field offers exposure to a long life gas field and a key hub field by virtue of its proximity to the SEAL pipeline to the Shell-operated Bacton gas processing terminal. Life extension development projects, including the development of the Lower Cretaceous reservoir at the Andrew field, and upside potential opportunities through infill wells and tie-back opportunities exist in both the Andrew Area and the Shearwater Field and there is limited decommissioning expenditure for either asset in the short term.

The Tolmount Acquisition provides the opportunity for Premier to deepen its position in one of its key development assets in the North Sea. Tolmount is one of the largest discoveries in the Southern Gas Basin in recent years and the development is progressing to budget and is on schedule to deliver first gas by the end of 2020. There is also considerable future upside in the area with demonstrable near-field opportunities including Tolmount East, which was announced as a commercial discovery on 17 October 2019, the nearby Mongour discovery and the Tolmount Far East exploration prospect.

The Acquisitions will add approximately 57 mmboe of net 2P reserves (36 mmboe relating to the Andrew Area and the Shearwater Field, as estimated by Lloyd's Register and TRACs, and 21 mmboe relating to Tolmount, as estimated by ERCE), representing 29 per cent. of Premier's existing 2P reserves as at 31 December 2018. The Andrew and Shearwater Assets would also add substantial production of approximately 23 kboepd (net), representing almost half of Premier's existing UK production and 29 per cent. of the Group's 2019 production of 78.4 kboepd (net).  The Enlarged Group is expected to achieve rising production levels out to 2024 following the expected start-up of Tolmount in 2020 and the development of the Lower Cretaceous area of the Andrew field. The Acquisitions also add contingent and prospective resources, in particular from the Andrew Lower Cretaceous area and the Tolmount East discovery and associated prospects, which offer future growth opportunities.

Capitalise on the Group's strong operating capability, providing economies of scale and the potential to generate operating and financial benefits across the Enlarged Group's combined UK North Sea business

Premier has a long history in the UK North Sea, having acquired its first interest in 1971.  Since then, the Group has built a significant operated production and development position through exploration success and acquisitions.

The Directors believe that the Acquisitions will complement Premier's key strengths and will provide the potential to create significant value and returns for Premier. The Enlarged Group would become the operator of assets producing more than 160 kboepd (gross) in 2019. BP's interests in the Andrew Area are currently operated by an experienced operating team in Aberdeen with UK-operated development and production competencies which, when merged with Premier's existing operations, will add new skills and knowledge, thereby enriching and strengthening Premier's organisation and enhancing its North Sea operating capacity.

The enlarged UK North Sea portfolio will provide future opportunities to derive additional benefits by augmenting Premier's existing operating team, by sharing best practices, through economies of scale and by placing greater emphasis on cost management and optimisation of production. As an experienced operator, Premier expects to be able to focus on low cost operations and optimise the production of operated assets in the Andrew Area. Premier has a demonstrable track record of successfully integrating similar material North Sea acquisitions, including Oilexco in 2009 and E.ON's UK North Sea assets in 2016.

Provide flexibility and resilience by further diversifying Premier's existing portfolio, adding low operating cost and low carbon emission assets as well as increasing the relative proportion of gas within the Enlarged Group's portfolio

Whilst the Andrew Assets are principally oil producing, the acquisition of an interest in the Shearwater Field offers exposure to a long life gas condensate field and a key gas hub in the UK North Sea. This, together with the additional Tolmount Interest, will further diversify Premier's portfolio by adding both oil and gas assets. The increased weighting of gas producing assets and low emissions generated by the Andrew Area facilities, will reduce the Group's net emissions per barrel in line with its stated strategy. Greenhouse gas intensity from the Andrew Area for 2018 was 13 (kgCO2/boe), one of the lowest of all BP's North Sea assets.

The addition of the Andrew Assets to Premier's existing portfolio also adds a new operated UK asset, which will provide further flexibility for Premier to control the pace and timing of operated capital expenditure programmes in response to varying economic and market conditions. The estimated operating costs for the Andrew Assets were US$17/boe in 2019 compared with US$18/boe for the Group. The combined opex of the Andrew Assets, the Shearwater Field and Tolmount is expected to be less than US$20/boe for the period 2019 to 2024.

The Shearwater Field is non-operated, but provides access to a strong operator and joint venture partners in Shell and ExxonMobil. It also opens the possibility for further value-creating activity in and around the key Central North Sea Shearwater hub area. The Andrew and Shearwater Assets will also provide resilience against potential future operational issues for Premier by diversifying the existing portfolio, thereby reducing Premier's operating risk profile, especially in the North Sea.

Allows shareholders to benefit from compelling acquisition values with the opportunity to accelerate the use of Premier's UK tax losses

The Andrew Acquisition and the Shearwater Acquisition will secure additional UK North Sea assets at attractive valuations of approximately US$13.1/boe and US$7.0/boe based on the 2P reserves and 2C resources attributable to the Andrew Assets and the Shearwater Field, respectively, as estimated by Lloyd's Register and TRACS. The value attributed to the Andrew Assets includes the 9 mmboe of 2C resources associated with the Lower Cretaceous development, which Premier expects to be sanctioned in the next 12 months, with estimated total capex associated with the development of US$120 million (net to BP's interest).

The Tolmount Acquisition provides Premier with an attractive opportunity to secure additional equity in an existing gas development project with demonstrable in-field technical upside. It adds an extra 21 mmboe of 2P reserves at a cost of US$9.1/boe and additional contingent resource in respect of two planned infill wells and the Mongour discovery, in each case as estimated by ERCE. Contingent resources associated with the Tolmount East field which was recently announced as a commercial discovery, have not been reviewed by ERCE as new data associated with the recent discovery is still under evaluation. 

The Directors believe that there are limited opportunities available in the UK North Sea to acquire high quality assets at such attractive valuations. The Andrew Acquisition and the Shearwater Acquisition have an aggregate purchase price of US$625 million, compared to the net asset value of the 2P reserves attributable to the Andrew and Shearwater Assets (as estimated by Lloyd's Register and TRACS) of approximately US$812.5 million (pre-tax) as at 31 December 2018. The Tolmount Acquisition has an attractive purchase price of US$191 million (excluding the potential deferred consideration payment), compared to the net asset value of 2P reserves attributable to the Tolmount Interest (as estimated by ERCE) of approximately US$240 million (pre-tax) as at 30 September 2019.  The Acquisitions will also allow Premier to create additional value for Premier shareholders through accelerating the utilisation of some of the Group's existing UK tax losses of approximately US$4.2 billion.

The value in the Andrew and Shearwater Assets will be underpinned by hedging in line with Premier's current policy.

Provide significant financial benefits to Premier in line with the Group's stated acquisition criteria

The Acquisitions will add both short-term and long-term financial benefits to the Group. The Andrew and Shearwater Assets will add significant low cost production and associated cash flow from completion. Given the cash generative nature of the Andrew and Shearwater Assets and the acquisition price and expected financing, the Andrew Acquisition and the Shearwater Acquisition are expected to be materially accretive to Premier's net asset value. The Tolmount Acquisition allows Premier to increase its interest in a high value gas development with future growth potential and with limited additional capital expenditure given the arrangements agreed with the joint venture's infrastructure partners. Together, the Acquisitions are forecast to generate over US$1 billion of pre-tax free cash flow to the end of 2023 even after taking account of associated development capital expenditure.

The Acquisitions will deliver significant benefits to Premier in line with the Group's stated acquisition criteria designed to ensure the Group's financial position is appropriate. Following completion, the financial effects of the Acquisitions in combination with the proposed equity raise are expected to be materially accretive to Premier's main financial covenants in its existing credit facilities.

The Andrew and Shearwater Assets are operated using platforms that were installed in the North Sea in the 1990s. There is limited near-term decommissioning expenditure expected by Premier, but a medium- to long-term liability of US$600 million (pre-tax) from 2025 onwards. It is Premier's intention to retain financial responsibility for the decommissioning expenditure associated with the Andrew and Shearwater Assets, and in respect of the Andrew Area to operate the abandonment of the Andrew Assets. However, Premier has a strong track record of maximising production and optimising costs both in acquired assets and assets which it has developed, in order to maximise value from those assets and delay cessation of production and associated abandonment expenditure. The BP Group will continue to provide security in respect of the decommissioning security arrangements for the Andrew field, Farragon and Kinnoull and, if required, in respect of any decommissioning security arrangement to be put in place for the Shearwater Field.

Strengthen the financial position of Premier and secure funding for future development growth projects

The Directors believe that the combination of the Acquisitions and the proposed equity raise will leave the Group in a stronger financial position with the addition of immediate cash generative production from the Andrew and Shearwater Assets and extra production in the near-term from the Tolmount Interest.  The addition of the proceeds of the proposed equity raise, combined with the material additional asset cash flows will accelerate the deleveraging of the existing Premier balance sheet, materially improving the Group's credit metrics. The Group's covenant net debt to EBITDA leverage ratio is projected to fall towards 1x by 2022 (based on current forecasts), thereby enhancing the execution of a future refinancing of Premier's existing credit facilities. In addition, the extension of the Group's existing, non-amortising facilities provides Premier with the flexibility to target the optimum time to execute a full refinancing which is currently anticipated during 2022.

The Acquisitions and the proposed equity raise together will allow the Enlarged Group to maintain the flexibility to execute its future development growth projects including Tolmount East and the Lower Cretaceous Project in the UK, as well as investing selectively, in its high impact exploration and appraisal programme in the UK, Mexico, Indonesia, Brazil and Alaska. As separately announced today, the Group will continue to prudently manage its equity exposure in respect of its Sea Lion and Tuna development projects, and other future development projects. Accordingly, the Directors are confident in their ability to sustain and grow the Enlarged Group while continuing to provide attractive shareholder returns alongside a clear deleveraging story.

4.            Conditions

The agreements with BP and Dana to implement the Acquisitions will be suspended through an escrow arrangement and will take effect following the sanction by the Court of the Schemes. The Schemes are being proposed to obtain various approvals required from lenders in connection with the Acquisitions, related funding arrangements and the extension of Premier's existing credit facilities.  Of the creditors who are subject to the Schemes, 83.3 per cent. of Super Senior Commitments and 72.7 per cent of the Senior Commitments have already committed to approve the Schemes. If the Schemes do not become effective, the proposed Acquisitions, equity raise and extension will not proceed in light of the consent requirements under the Company's existing credit facilities.

All of the Acquisitions will also be conditional upon, amongst other things, the completion of the equity raise, shareholder approval, satisfaction of regulatory requirements (including approvals from the OGA) and receipt of customary approvals and waivers from joint venture partners.

The Shearwater Acquisition will be conditional upon BP's joint venture partners waiving or not exercising contractual rights to make an offer to acquire BP's interests in the Shearwater Field and in the event the interests are acquired pursuant to the exercise of any such right, the Shearwater Acquisition will not proceed.

The Andrew and the Shearwater Acquisitions constitute a class 1 transaction under the Listing Rules. Premier will seek shareholder approval for all of the Acquisitions and for the resolutions required to implement the equity raise at a general meeting of shareholders which is expected to be held in Q1 2020. Premier will send a combined prospectus and circular to Premier shareholders convening the general meeting to approve the resolutions in due course.

The terms and conditions of the Acquisitions will be documented in three separate sale and purchase agreements. The completion of the Acquisitions involving BP will not be conditional upon the completion of the acquisition of the Tolmount interests from Dana (and vice versa), and completion of the acquisition of the Andrew Assets will not be conditional upon completion of the acquisition of BP's interests in the Shearwater Field (and vice versa). Completion of each of the Acquisitions will, however, be conditional upon the completion of the proposed equity raise. The terms and conditions of the sale and purchase agreements will be summarised in the combined prospectus and circular to be published by Premier in due course.

Completion of all three Acquisitions is expected to occur by the end of Q3 2020.

5.            Financing the Acquisitions

The consideration for the BP assets is US$625 million (subject to certain customary financial adjustments including working capital adjustments) payable in cash on Completion. The initial cash consideration for the additional 25 per cent. interest in Tolmount, together with related infrastructure, is US$191 million (subject to certain customary financial adjustments including working capital adjustments), plus a contingent deferred payment of up to US$40 million in the event that a new field development plan is approved in relation to Tolmount East or a revised field development plan is approved in relation to the Tolmount field and an additional consideration payment of up to US$15 million that is payable in certain circumstances by or on the first anniversary of Tolmount East first gas.

The Acquisitions will be funded through:

·    US$500 million (£385 million) equity raise (net of expenses), which Premier expects to include both a placing and rights issue component (further details will be announced in due course);

·    existing cash resources; and

·    if required, an Acquisition Bridge Facility of US$300 million.

RBC and Jefferies have entered into a standby underwriting agreement to fully underwrite the equity raise.  The standby underwriting agreement is expected to remain in place until the publication of the combined prospectus and circular, at which point it is to be replaced by a definitive underwriting agreement. The standby underwriting agreement provides that the price of the new Premier shares to be issued in connection with the equity raise will be agreed by Premier, RBC and Jefferies shortly before the definitive underwriting agreement is executed and will be set out in the combined prospectus and circular. The standby underwriting is conditional on the Schemes becoming effective. The standby agreement also contains customary representations and warranties, conditions and termination rights and the equity raise will be subject to customary conditions.

The Acquisition Bridge Facility will be fully committed and available for draw down following the Schemes becoming effective, subject to satisfaction of customary conditions precedent to utilisation. However, due to the materiality of the estimated financial adjustments in Premier's favour between the effective date and completion of the Acquisitions, the Directors do not currently anticipate that it will need to be drawn.

Further details of the proposed equity raise and the Acquisition Bridge Facility will be set out in the combined prospectus and circular to be published by Premier in due course.

6.            Extension of the Group's credit facilities and lender approvals

Proposed extension of credit facilities

The extension of the Company's existing non-amortising facilities allows Premier to continue to execute its business plan including the delivery of first gas at Tolmount, ahead of a full refinancing currently anticipated during 2022.

The amendments being proposed to Premier's existing credit facilities will, if implemented:

·    extend the maturity of all of Premier's facilities  to 30 November 2023; and

·    relax a number of existing covenant restrictions in relation to matters such as capital expenditure, exploration expenditure and acquisitions, providing Premier with greater operational flexibility.

In return, the lenders will receive enhanced economics including an average margin uplift of 1.6 per cent. over existing pricing, amendment fees of 0.25 per cent. and a repayment fee of 0.75 per cent[1].  The margin uplift will be applied for the period from the extension effective date until the full refinancing. A harmonised interest rate of 8.85 per cent., based on current LIBOR rates, will apply to all Premier's cash credit facilities from the extension effective date.

These amendments, including the extension of the facilities, are conditional on the Schemes becoming effective, the net proceeds from the equity raise having been received, the Andrew Acquisition or the Tolmount Acquisition having completed and satisfaction of customary documentary conditions. Accordingly, the extension and the other amendments will become effective when the last of the foregoing conditions is satisfied.

Lender approvals in relation to Acquisitions and related funding arrangements

Lender consents are also being sought in connection with the Acquisitions, the Acquisition Bridge Facility and the equity raise. These consents will become effective when the Schemes become effective. Pending the Schemes becoming effective, sufficient lenders have provided forbearances in respect of any defaults that may be argued to arise under Premier's existing credit facilities by virtue of the implementation of the Schemes and other aspects of the transactions. Accordingly, no resulting action can be taken to accelerate, or prevent drawings being made under, the Group's existing credit facilities in respect of this issue.

Schemes of arrangement

Premier is seeking to implement the proposed extension of its credit facilities and to obtain the approvals in relation to the Acquisitions and related funding arrangements by means of two Court-approved creditor Schemes and related implementation documents.  The Schemes, which will involve Scottish schemes of arrangement between each of Premier and Premier Oil UK Limited and their respective creditors, must be approved by a majority in number and 75 per cent in value by total drawn and undrawn commitments of scheme creditors in each class attending and voting at the meetings.  It is anticipated that the scheme meetings will be held in February 2020 and the court hearing to sanction the Schemes will be held in March 2020. The Schemes will become effective once they have been sanctioned by the Court and the corresponding court orders have been registered at Companies House. Further details of the timetable for the Schemes will be announced by Premier in due course.

Of the creditors who are subject to the Schemes, 83.3 per cent. of Super Senior Commitments and 72.7 per cent of the Senior Commitments have already committed to approve the Schemes.

7.            Further information

Further details in relation to the Acquisitions, the financing of the Acquisitions, and the extension of the Group's credit facilities will be set out in the combined prospectus and circular to be published by Premier in due course.

Premier has commissioned Lloyd's Register and TRACS to prepare independent technical reports on the Andrew Area and Shearwater Field, including full details of reserves and resources as at 1 January 2019, which is the effective date of the Andrew Acquisition and the Shearwater Acquisition, in addition to providing more recent information on, among other things, reserves and resources in accordance with regulatory guidance. Premier has also commissioned ERCE to prepare an independent technical report on the Tolmount area, for which Premier is the operator, reporting on the reserves and resources position as at 30 September 2019. References to estimates made by ERCE, Lloyd's Register and TRACS in this announcement have been extracted from those reports, which will be included as part of the combined circular and prospectus to be published by Premier in due course.

In the case of the Andrew Acquisition and the Shearwater Acquisition, the Directors have relied primarily on data provided by the operators, as well as the competent person's reports prepared by Lloyd's Register and TRACS, in their assessment of the value of the Andrew Assets or the Shearwater Assets. The gross asset amounts referred to in paragraph 2 above are given as at 30 June 2019, while the profit amounts are given in respect of the full year ended 31 December 2018.  The gross asset and profit amounts relating to the Andrew and Shearwater Assets are derived from BP's unaudited management accounts.

 

Appendix
Expected timetable of key events

Schemes creditor meetings

February 2020

Court sanction hearings for schemes

March 2020

Publication of combined prospectus and circular and general meeting

Q1 2020

Completion of equity raise

Q2 2020

Amendment and extension of credit facilities becomes effective

Q2 2020

Completion of the Acquisitions

Q2 to Q3 2020

The dates in the table above are indicative only and may be subject to change.

 

Definitions

The following definitions apply throughout this announcement unless the context otherwise requires:

"Acquisition Bridge Facility"

 

the term loans in an aggregate amount of US$300 million to be advanced by CIBC, DNB, Lloyds and Royal Bank of Canada pursuant to a bridge facility agreement which will take effect upon sanction of the Schemes being proposed by the Group;

"Acquisitions"

the Andrew Acquisition, the Shearwater Acquisition and the Tolmount Acquisition, as described in the announcement;

"Andrew Acquisition"

the proposed acquisitions of BP's interests in the Andrew Area;

 

"Andrew and Shearwater Assets"

the Andrew Assets and BP's interests in and relating to the Shearwater Field;

"Andrew Area"

 

the Andrew, Arundel, Cyrus, Farragon and Kinnoull oil and gas fields located in Blocks 16/23a (Arundel), 16/23a (South), 16/23c (E), 16/23c (South), 16/24a (All), 16/28a (Cyrus), 16/28a (Rest), 16/28b (Andrew) and 16/28b (Rest) in the UK Central North Sea;

"Andrew Assets"

BP's interests in and relating to the Andrew Area;

"BP"

BP plc and its affiliates;

"Directors"

the directors of Premier Oil plc;

"Disclosure Guidance and Transparency Rules"

 

the Disclosure Guidance and Transparency Rules made by the Financial Conduct Authority under section 73A of the Financial Services and Markets Act 2000, each as amended from time to time;

"Enlarged Group"

the Group as enlarged by the Acquisitions;

"ERCE"

ERC Equipoise Limited;

"FCA"

the Financial Conduct Authority, including in its capacity as the competent authority for the purposes of Part VI of FSMA;

"Group" or "Premier"

Premier Oil plc and its affiliates;

"Jefferies"

Jefferies International Limited;

"Dana"

Dana Petroleum (E&P) Limited and its affiliates;

"Listing Rules"

 

the Listing Rules made by the Financial Conduct Authority under section 73A of the Financial Services and Markets Act 2000, each as amended from time to time;

"Lloyd's Register"

Senergy (GB) Limited (trading as Lloyd's Register);

"Market Abuse Regulation"

Market Abuse Regulation (EU) No.596/2014;

"OGA"

the Oil and Gas Authority;

"PRA"

Prudential Regulation Authority;

"RBC"

RBC Europe Limited (trading as RBC Capital Markets);

"Shearwater" or "Shearwater Field"

the Shearwater high pressure, high temperature gas condensate field located in Block 22/30b in the UK Central North Sea;

"Shearwater Acquisition"

the proposed acquisitions of BP's interests in the Shearwater Field;

 

"Tolmount Acquisition"

the proposed acquisitions of Dana interests in the Tolmount Area;

 

"Tolmount Area"

the Tolmount gas field, the Tolmount East discovery and the exploration prospects, Tolmount Far East and Mongour, located in each case in Block 42/28d in the UK Southern North Sea;

"TRACS"

TRACS International Limited; and

"Underwriters"

RBC and Jefferies.

 

 

[1] In addition, an upfront equalisation fee will be payable to lenders whose margin is increasing by less than the average uplift or is reducing.


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
END
 
 
ACQEAAFKEFLEEAA