July 15, 2020 / 7:12 AM / a month ago

Premier Oil in talks on longer debt extension, shares fall

LONDON (Reuters) - North Sea-focused Premier Oil is seeking a four-to-five year extension to debt due next year, about twice as long as first envisaged, its CEO said on Wednesday.

The oil and gas producer’s net debt stood at $1.97 billion at end-June, little changed from December, while its market capitalisation stands at about $524 million.

“We continue to have pretty productive discussions with creditors. We’re close, I would say, to final termsheets on that. We agreed a timetable with them for the end of July,” CEO Tony Durrant told Reuters.

“What we’ve actually been discussing - it’s not completely finalised yet - is a rather longer extension... The range we’re talking about is more like four to five years (from 2021).”

Premier also said it expects to book a $300-$500 million non-cash impairment at its first-half results due on Aug. 20 due to lower oil price expectations.

Premier shares were down around 2.9% at 44 pence at 0920 GMT versus an oil and gas companies index up 0.8%.

“The Group now expects to be free cash flow positive (after interest) for full year 2020 based on the current forward curve,” Premier said in a trading statement.

In May, Premier had said it expected to be cash flow neutral this year. It has hedged just over a fifth of its second-half output at around $56 a barrel of oil equivalent.

Durrant said the group’s cash flow would rise by $30 million for each $5 increase in benchmark oil prices, which currently stand at around $43 a barrel, above its break-even price of $32 per barrel.

He said the company sees long-term oil prices at $60-65 a barrel.

Premier expects output of between 65,000 and 70,000 barrels of oil equivalent per day (boepd) this year.

It expects its output to rise by 17,000 boepd from September after BP sweetened the sale of some of its North Sea fields to Premier last month.

Further growth is expected from the British Solan field at 10,000 boepd later this year and another 20,000 boepd when its Tolmount gas project comes online in the second quarter of next year.

Reporting by Shadia Nasralla; editing by Jason Neely and Barbara Lewis

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