Premier Oil to purchase BP’s North Sea assets to increase its stake in the Tolmount gas project

An independent UK oil company, Premier Oil, announced its decision to buy British Petroleum’s (BP) North Sea gas assets for $625 million. The Tolmount gas project, as per the announcement, will see a significant increase in Premier Oil’s stake following the investment. The project is funded by a rights issue valued at $500 million. Premier’s spokesperson also highlighted that the deal can be expected to generate as much as $1 billion in free cash by 2023. Share prices for Premier Oil caught steam following the announcement and were last seen trading 19% higher on Tuesday.

ARCM Says It Will Take All Necessary Steps To Oppose The Deal

As per the sources, the hedge fund ARCM is likely to give the UK’s oil company a hard time in its capacity as the largest creditor for Premier Oil. The hedge fund currently holds 15% of the company’s debt instruments. ARCM also has a 17% stake in the oil company’s stock – a figure four times the average for firms listed in London.

ARCM responded with a statement that it is set to take all necessary steps to counter the deal. However, Premier’s CEO, Tony Durrant, remarked the majority of the company’s stakeholders responded positively to the announcement of the deal.  

Premier said that it fully expects 75% of its stakeholders to support the decision and grant permission to go ahead with the transaction. Citing the reason for its opposition, however, ARCM stated that Europe imports more gas from the U.S and Russia, and hinted at the greater risk of rising decommissioning liabilities for Premier Oil which is already in debt. Premier’s representative expressed confidence that such concerns will be addressed in the first quarter.

Rockhopper Announces Plans To Buy 30% Of Navitas Petroleum Shares

Premier noted a growth of 47% in the stock market in the previous year, owing, in part, to the discovery of oil fields in Mexico and the success of its North Sea’s Catcher oilfield. The company said that it expects to bring up its output to more than 100,000 boed (barrel of oil equivalent) with support from this deal while also injecting 82 million barrels to its reserves and further resources to its portfolio.

The deal is also likely to be backdated to January 2019, limiting Premier’s access to cash flow until the deal closes, but bringing down the actual cost that Premier has to pay to an approximate $500 million.

Rockhopper, a prominent a partner for Premier Oil in the Sea Lion project, also announced on Tuesday that it has closed a deal with Navitas Petroleum to buy 30% of its shares. As per CEO Durrant, the deal will reduce the overall cost of the Sea Lion project for Premium Oil to $285 million from the previously estimated $500 million.