UK independent Premier Oil has won a ruling in a Scottish court that will allow it to proceed with a creditor vote as it seeks to delay debt repayments and buy North Sea oil and gas fields.
The hearing took place on Thursday after one of the oil company’s main creditors — Hong Kong-based hedge fund ARCM — raised objections to Premier’s plans to buy new assets from BP and Dana Petroleum worth about $870 million.
The deals are set to be funded via a $500 million equity raise and a $300 million bridging loan if needed. Premier needs 75% of its creditors to approve the deals.
Premier said in a statement the court granted its request to start the so-called scheme of arrangement process and seek shareholder approvals for the acquisitions and the equity raise.
It will now hold a creditor meeting to vote on the scheme of arrangement on 12 February. A hearing to sanction the scheme is expected to take place in March.
ARCM has said it is “deeply concerned” about Premier’s intention to pursue new acquisitions that will “only serve to increase risk for stakeholders”.
ARCM holds more than 15% of Premier’s debt and is understood to have a short position representing about 17% of its stock.
It has said Premier should be prioritising deals that help cut debt from its "highly levered balance sheet" instead of “pursuing acquisitions that expose the company’s balance sheet to significant incremental risks”.
On 7 January, Premier said it agreed to take over BP's operating interests in the Andrew Area and the UK supermajor's interest in the Shell-operated Shearwater asset for a combined $625 million.
It also made a $191 million move for an additional 25% interest from Dana Petroleum in the Tolmount Area. Premier is already operator at Tolmount.
Premier, which for years has been struggling under a hefty debt pile, currently owes about $2 billion and has proposed extending maturities of all its debt facilities to 30 November 2023.
It last agreed a financial restructuring in 2017 when it extended its debt maturity to 2021 after months of wrangling with lenders.
Premier hopes it will not need to access the bridge loan as it expects income from the BP interests between the effective date of 1 January 2019 and the expected completion date by the third quarter to reduce the final price it will pay to about $500 million.
The BP assets will give Premier about 23,000 barrels of oil equivalent per day of “cash generative production”, with development upside, including a Lower Cretaceous gas project beneath the producing Andrew oil reservoir, along with 82 million boe of reserves and contingent resources.
It also forecast that the assets will generate about $1 billion of free cash flow to the end of 2023.