Premier Oil said yesterday it had struck a deal with administrators to acquire Oilexco North Sea (ONS) for £345million.
The agreement includes the transfer of all ONS assets and its entire 80-strong workforce, including employees working offshore and at offices in Aberdeen and Norwich to the UK oil and gas company.
The sum changing hands is substantially less than what was owed by ONS at the time of a recent creditors’ meeting. Administrators at Ernst and Young (E&Y) have never gone on record over the scale of debt at ONS, or the likelihood of creditors getting any money back, but a document sent out to them last month showed secured and unsecured creditors were owed more than £600million.
This was expected to rise as more claims came in and it is thought these were likely to be substantial.
Debts secured by floating charges came to nearly £479million, with the Royal Bank of Scotland owed the most, at more than £168million.
There were dozens of unsecured non-preferential creditors, owed sums up to £15mllion, including many top names in the industry.
E&Y warned the unsecured creditors not to expect any money back at a sale price of less than £586million.
A spokeswoman for the accountancy firm said yesterday it was too early to give a definitive answer on the prospects for any creditors.
A spokesman for one of the firms owed money said the terms of the Premier deal looked like “pennies in the pound for the banks” and nothing at all for the unsecured creditors.
He added, however, that it was a good deal for the North Sea, because Premier was well funded and taxpayers would not be lumbered with any future decommissioning costs.
The sale of ONS, conditional on approval by creditors, Canadian parent Oilexco and Premier’s shareholders plus a formal discharge of the administration, is expected to complete in May.
Premier, which has a registered address in Edinburgh and head office in London, has a fall-back option if any of these conditions is not met. It would then, with shareholder approval, acquire the ONS assets – recently estimated to be worth about £845million – for around £282million.
The lower of the two acquisition figures reflects the fact that Premier would not have the benefit of existing tax losses carried forward through an asset sale.
FTSE 250-listed Premier, which has production interests in the UK, Indonesia, Pakistan and Mauritania, and exploration and appraisal in the UK, Africa and south and south-east Asia, said the acquisition was the most exciting development in its history. Chief executive Simon Lockett said it secured an attractive, high-growth North Sea-focused business, complementing its existing assets in the basin, at a compelling valuation of less than $8.50 per barrel.
It also gave Premier critical mass in the North Sea, he said, adding: “I am also pleased to end the uncertainty around the administration process for the employees at ONS, who will have a continued and vital role in the future of Premier.”
Joint administrator Roy Bailey, of E&Y, said: “Once completed, this sale will be a great result that protects the employees and should enable a greater recovery for ONS creditors than otherwise expected.”
Premier, which employs about 360 people worldwide, is funding its acquisition via a £171million rights issue, new credit facilities and cash resources.
Canadian group Oilexco put its ONS subsidiary into administration because it ran out of options after bankers refused to continue financing the North Sea firm.
ONS activities are focused on the outer Moray Firth and central Graben areas of the central North Sea.