PREMIER Oil, which has a big North Sea business, has said it is in talks about changing the conditions of its loan funding amid the crude price slump.
The London-based company said: “Due to the weak oil prices experienced year-to-date, it is possible that a relaxation of our main financial covenants may be required in respect of the testing periods ending 30 June 2016 and 31 December 2016.”
It added: “Premier continues to explore mitigating actions that can improve its forecast financial covenant position and, in addition, has entered into discussions with its lending group with a view to agreeing amendments to its financial covenants.”
In an update on trading Premier said it had $2.68 billion (£1.8bn) net debt at 30 April. The company said it had significant liquidity with cash and undrawn bank facilities of around $750 million.
Premier has invested heavily in developing assets in the North Sea, including the giant Solan field West of Shetland.
Solan came onstream last month around 18 months later than originally hoped.
The company has noted the impact of low productivity and bad weather on the project.
However, Premier noted yesterday that production from Solan is expected to reach up to 25,000 barrels per day in the third quarter.
Premier expects to be able to produce oil and gas at an average $17 per barrel oil equivalent this year. Brent crude traded at $46.71/bbl yesterday afternoon.
The company said work on the Catcher field off North East Scotland is progressing under budget ahead of the expected start of production next year.
The field is expected to cost $1.35bn to bring onstream, against a budget of around $1.6bn. The cost of services has fallen amid the downturn triggered by the fall in the oil price since 2014.
Chief executive Tony Durrant said Premier would benefit this year from strong production from its existing assets as well as Solan and the North Sea portfolio acquired recently from E.ON for $135m.
Premier also has assets in Asia.
Stephane Foucaud, analyst at FirstEnergy Capital, said: “The June 2016 Debt Covenant situation is not new and I believe it will be resolved at a cost of a few US$mm penalty.”
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