Premier Oil PLC (LON:PMO) has agreed revised payment terms for its North Sea acquisitions from BP PLC (LON:BP.) and agreed a truce with its dissenting hedge fund investor.
Having agreed to pay US$625mln in January, before the crash in oil prices, Premier has now agreed in principle to pay cash of just US$210mln on completion, funded with equity.
Then roughly US$300mln of cash flows will be retained by BP from the 23,000 daily barrels of oil equivalent the assets produce on average, with a final US$115mln only payable if oil and gas prices recover further in the future.
As part of the new agreement, BP is retaining 100% of the existing abandonment costs for the Shearwater asset and 50% for Andrew Area, as Premier’s abandonment obligations are reduced to US$240mln from US$600mln.
Premier has also reached a settlement agreed with ARCM, its largest creditor, which has agreed to withdraw its appeal of April’s court approval of the acquisitions, with the Hong Kong hedge fund agreeing to support the deal and a stable platform agreement.
The London-listed company will also issue 82.2mln new shares, representing an 8.91% stake, to ARCM at a price of 26.69p per share, a 9.64% discount to the average price over the last five days, to fund part of the acquisitions.
Premier chief executive Tony Durrant said the revised terms are “materially value accretive” for the company.
“The stable platform agreement, once agreed with and approved by lenders, will provide a basis for the company to continue discussions regarding proposed amendments to the group's existing credit facilities.”
PMO shares shot up 11% to 35.3p in early trading on Friday.