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Premier Oil closing on bailout deal as it reveals improved flows

January 10, 2017

Premier Oil will offer fresh hope to weary investors by revealing a boost to its expected oil flows alongside evidence of progress on a long-awaited financial bailout.

The final terms of a painful restructuring are understood to be circulating among the company’s private lenders, and Premier’s board has promised the market an update on the debt refinancing drive on Thursday.

An agreement with lenders would prove a vital turning point for the beleaguered North Sea oil company. The debt-laden explorer has struggled for almost a year to agree a deal that would offer it a new lease of life as the industry emerges from one of its deepest downturns in history.

After a series of delays, the hard-fought financial lifeline is expected to be agreed before the end of the month. City sources believe that in addition to the deal the company’s new oil production guidance for the coming year could put the producer first in line to benefit from a recovery in the price of oil.

Crude prices have rebounded over 25pc higher to $57 a barrel since the world’s largest oil producers agreed to cut flows into the oversupplied market.

Oswald Clint, analyst at Sanford C. Bernstein, said Premier had the most to gain from the market recovery, which could reach $70 a barrel by the end of 2017.

It snapped up gas fields from German energy company Eon last year, and the first oil from its Catcher project in the central North Sea is anticipated in the second half of the year.

However, the debt deal is sorely needed to ensure survival until Catcher begins to bring in much-needed revenue. Premier has short-term financial liquidity but debts of $2.6bn (£2.08bn) following heavy investment in Catcher and its Solan fields, which began producing oil last year.

The debt pile stands at over five times EBITDA, well beyond the debt ratio of 4.75 agreed with the oil explorer’s lender syndicate.

Late last year, the board was forced to quash market speculation that Premier’s heavily delayed refinancing deal was close to falling apart, by publicly assuring investors that none of its senior lenders, including Lloyds Bank, were planning to exit the syndicate.

The company’s share price plunged to 48.5p in the wake of the market jitters but in the last three weeks the shares have rallied 17.5pc as the global oil price bounded higher.

City sources have said that “the sheer administrative task” of coordinating four different lender groups comprising the 40 banks and teams of advisers has proved to be more difficult than Premier imagined.

By Jillian Ambrose

Source: The Telegraph

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