TIDMPMO
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
o Additional free cash flow accelerates debt reduction
o 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 Q1 2020
and general meeting
Completion of equity raise Q2 2020
Amendment and extension of credit facilities Q2 2020
becomes effective
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 (GBP385 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 Q1 2020
and general meeting
Completion of equity raise Q2 2020
Amendment and extension of credit facilities Q2 2020
becomes effective
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 the term loans in an aggregate amount of
Facility" 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 the Andrew Assets and BP's interests in and
Assets" 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 the Disclosure Guidance and Transparency
and Transparency Rules made by the Financial Conduct Authority
Rules" 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 the Shearwater high pressure, high temperature
"Shearwater Field" 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
(END) Dow Jones Newswires
January 07, 2020 02:01 ET (07:01 GMT)
Harbour Energy (LSE:HBR)
Historical Stock Chart
From Aug 2024 to Sep 2024
Harbour Energy (LSE:HBR)
Historical Stock Chart
From Sep 2023 to Sep 2024