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BP’s plan to offload its stakes in some of the North Sea’s older oil and gasfields in a $625m (£477m) deal with Premier Oil could be derailed by a row over Premier’s $2bn debt pile.
BP agreed to sell its share in the Andrew and Shearwater fields to its smaller, debt-laden rival as part of a plan to pare its ageing North Sea portfolio.
Under the terms of the deal BP will hand Premier Oil the Andrew platform and its controlling stake in five surrounding fields, as well as its minority stake in the Shearwater field, which is operated by Shell.
In a separate deal, Premier Oil has also agreed to pay $246m to Dana Petroleum to buy a separate clutch of North Sea assets.
The FTSE 250 oil producer believes the fields, which together produce the equivalent of 23,000 barrels of oil a day, should help to generate $1bn of free cashflow to the end of 2023, which would help pay off its debts.
Shares in Premier Oil jumped by more than 16% after the announcement to reach 120p a share, its highest value since October 2018.
But one of Premier Oil’s largest creditors has warned it will “vigorously contest” the spending spree, which will require a $2.9bn refinancing and a $500m equity raise.
Hong Kong’s Asia Research and Capital Management (ARCM) said it would “take all steps to oppose the company’s proposal”, adding it was “deeply concerned” that Premier plans to invest in the North Sea basin.
The deals are the latest in a long line of North Sea sales totalling billions of dollars in which big oil companies have passed on their older fields to smaller offshore oil producers in favour of lucrative new projects.
Premier Oil has shouldered a giant debt burden since the global oil market crash forced the company into one of the largest and most complex debt restructurings in the history of the North Sea.
The company hopes to push back the deadlines on its loan facilities to the end of 2023 through a court-supervised scheme of arrangement that would give the company an extra two and a half years to pay back its debts.
ARCM warned the plan would raise the cost of Premier Oil’s debts by 9% and that falling gas prices in the UK market could make it harder to pay off its loans.
The asset manager has reportedly gone to war with Premier Oil by placing a significant bet against its share price.
A report from the Sunday Telegraph says Premier Oil has hired investment bankers from Rothschild to help defend the company after ARCM snapped up 19% of Premier Oil’s debt and built a £130m “short position” against the company’s share performance.
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