NORTH Sea heavyweight Premier Oil has won a victory in a courtroom battle with an investor that wants to thwart a bold expansion drive it launched in the area before the crude price plunged.
Premier announced in January that it had agreed to buy stakes in three big fields in deals worth around $900 million only to run into opposition from Asia Research and Capital Management (ARCM.)
Premier clinches $900m North Sea acquisitions amid shake up in area
Hong Kong-based ARCM said Premier’s acquisitions were based on over-optimistic assumptions and that the company should focus on reducing its debts. It is Premier’s biggest creditor.
The hedge fund stepped up criticism of the deals agreed by Premier with BP and Korea’s KNOC amid the sharp fall in the crude price triggered by the spread of the coronavirus.
North Sea at 'breaking point' as oil price turns negative in US
ARCM tried to persuade a Court of Session judge not to approve the legal schemes that would be used to implement the acquisitions and related funding arrangements.
Premier announced yesterday that the court had approved the schemes.
Its chief executive Tony Durrant welcomed the judgement.
However, Premier did not say whether it expected to proceed with the deals as proposed. It would require shareholder approval for them and its plan to raise $500m equity funding to help pay for the assets.
The company said it continued to assess the viability of satisfying the relevant conditions and “therefore of completing the proposed transactions in light of the current market conditions”.
ARCM said it would appeal against the court’s decision and reiterated its call for Premier to abandon the acquisitions.
The hedge fund noted previously that Premier negotiated the deals in the autumn of 2019 using forward prices of around $70 per barrel for Brent crude, which sold for around $22.80/bbl yesterday afternoon.
The International Energy Agency said yesterday that the coronavirus pandemic represented the biggest shock to the global energy system in seven decades.
North Sea oil firm to cut more than 500 jobs
The scale of the challenge facing firms in the North Sea was underlined when EnQuest announced plans to cut around 530 jobs to help it reduce operating costs by $190m annually.
ARCM has been holding a short position that has allowed it to benefit from a fall in Premier’s share price.
Premier Oil shares closed up 4.43p at 30.48p.
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