Premier Oil’s refinancing bid is a “positive” step despite bondholders public concerns, an analyst has claimed.
Ben Wilby of Douglas Westwood said that the complex deal laid out by the debt laden independent upstream firm showed potential.
His remarks come despite 10% bondholder Pyrrho Investments stating that its was “deeply dissatisfied” with the proposal.
Wilby said that although Pyrrho’s public condemnation of the deal would do little to help Premier Oil, as long as oil prices maintained and they lock in the outstanding stakeholders there was still hope.
Wilby said: “The news is definitely good news for the company as a whole and implies that it will be able to move forward with plans without the significant uncertainty that has been seen since this process started.
“The length of time that the refinancing has taken and the reported complexity of the refinancing deal have drawn a lot of attention and this level of uncertainty is something no public company wants.
“With this deal it seems that their future is a lot more certain and that can only be good for investor confidence in the company. The assurances that the deal will have a limited diluting effect for existing shareholders should also offer reassurances that the deal will allow it to emerge stronger.”
Wilby said Premier appear to be focusing on prioritising cash flows from existing projects which should go some way to reducing their debt.
He added: “This should go some way to reducing their debt, though much will depend on oil prices, as well as the future performance of the Solan field where issues with the flowrate are preventing it reaching expected production levels.
“The companies production increase in the last few years has been impressive and it’s production for the year should improve substantially when it’s upcoming Catcher project comes onstream – currently expected later this year.”
Premier also made reference to investment in select unsanctioned projects.
Wilby said: “It will be interesting to see which projects they target, with the Sea Lion field off of the Falklands Island arguably their most high profile field to date, being located in a country with no previous oil & gas developments.
“The projected breakeven on the project is around $45, which is very impressive considering earlier estimates of development and is in line with the reductions seen on the Catcher field. So as long as Premier maintains the production at its producing fields and is smart with its investments in new developments this news seems positive.”
To read the full in and outs of Premier Oil’s refinancing bid, click here.
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