Oil price, Union Jack/Reabold, Premier, Block. And finally…

WTI $42.93 +4c, Brent $45.37 -9c, Diff -$2.44 -13c, NG $2.43 +1c

Oil price

Perfectly mixed yesterday as the EIA inventories did not match with those from the API the night before. Indeed whilst crude drew modestly it was the product numbers that were slightly odd, after the huge gasoline build from the API the EIA showed a 3.3m draw, an 8.3m swing which can only unwind in coming weeks.

At the JMMC meeting it was all very low key, with a rap over their members knuckles they suggested that the pace of the demand rebound was slower than expected and they were concerned about a second wave of COVID-19. Leaders praised the 97% adhesion rate but warned that it needs to stick.

Union Jack/Reabold

The companies say that Rathlin Energy as operator of PEDL 183 has submitted screening requests for two new potential hydrocarbon well sites West Newton C and West Newton D. These will determine whether they will require EIAs and screening options will be available following consideration of the East Riding of Yorkshire Council Planning Department.

The Humber region is the UKs largest energy hub, contributing £18bn towards the UK economy along with 27% of the UKs oil refinery capacity and is the companies believe that the West Newton field has the potential to provide local feedstock to the the project.

Given that these foreign imports come at a higher cost to the UK and with an increased carbon footprint, it seems like a pretty straightforward, even obvious opportunity for the local area to acknowledge.

Premier Oil- Dear Santa…

Interims today from Prems nothing new, production 67.3 kboepd in line with lowered estimates for full year guidance of 65-70 kboepd pre any BP assistance. Operationally, as has been the case for some time, Premier has been excellent and even feel able to say the S word as they say that the Solan P3 well will be onstream in September at c.10/- kboepd. Tolmount infrastructure is being wheeled out and its only the Covid that has pushed back first gas to Q2 2021. Net debt reduced to $1.97bn in the period with fcf of $25m.

Of much more significance was the first proper look at the refinancing and to me it looks like a once and for all change which should change Premier significantly if it gets through. First and foremost it deals with the funding of the BP acquisition, now on much better terms it allocates an equity raise of $230m for that and once done, shorter term production will be boosted.

There is also a further raise and to avoid any doubt, I quote a further $300 million of new equity concurrently raised to reduce debt of which $205 million will be underwritten by Premiers senior creditors who would convert existing debt into equity to the extent that the $300 million is not raised from existing shareholders in a pre-emptive offer or from new investors.

To raise up to $530m albeit partially underwritten will obviously be a stretch, the shares down 25% odd today leave a market cap of sub £250m. But there are significant mitigating circumstances and a view of Premier after the issues make interesting reading. They will be paying only 8.34% which is more than fair and certainly ticks the first box. Another tick is the senior creditors partially underwriting some of the deal, they know that it is in the companys best interest to reduce debt.

This will provide a much longer term debt scenario, viz until 2024, and I feel that the company are using perfectly conservative and acceptable forward oil prices and achievable hurdle rates. The covenant profile is <1x covenant leverage ratio by y/e 2024 (18m forward curve, $65/bbl LT) or 2.2x covenant leverage ratio by y/e 2024 (18m forward curve,$55/bbl LT).

Premier is already an efficient and very well operated play in the sector, it goes without saying that without the debt mountain it would be a much bigger company regardless to a certain degree of market situations. Current assets are subject to stringent operating costs and with the gradual cessation of its more expensive production, along with upcoming production growth such as at Tolmount with low levels of committed Read More – Source

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