Premier Oil is asking BP to cut the sale price of two North Sea oilfields in a proposed $625 million deal due to weak oil prices, Chief Executive Tony Durrant said on Wednesday.
The company is also talking to shareholders, creditors and brokers to adjust a plan to extend debt maturities and raise equity, Premier said in a trading statement.
Durrant told Reuters he was confident that Premier's banks would waive a so-called covenant test in June, a regular exercise by banks to check if the oil and gas producer's debt is less than three times its core earnings, which Premier is on course to breach.
Premier expects to be free cash flow neutral despite slumping prices due to its hedging programme, which sees 30% of its 2020 production protected at $60 a barrel. Its net debt stood at $1.91 billion at the end of April, dwarfing Premier’s market capitalisation of about $280 million.
Proposed acquisitions include BP's stake in the Andrew and Shearwater fields in the North Sea for $625 million and increasing Premier's stake in the Tolmount gas project, also in the North Sea, for $191 million. The deals are currently based on raising capital of at least $350 million.
A court last month approved a scheme with creditors to postpone Premier's debt maturities by more than two years to late 2023. But one debt holder, hedge fund ARCM, appealed against the plan, holding up further moves until the appeal is resolved.
Premier has $160 million of unrestricted cash and $330 million of undrawn debt facilities.
(Reporting by Shadia Nasralla; Editing by Edmund Blair)