Monday, June 20, 2011
Premier Oil plc
Premier has agreed to acquire an interest of 17.715 percent in Wytch Farm (the "Wytch Farm Assets") for an initial cash consideration of $96 million. This follows a pre-emption notice received from BP on May 18, 2011. Premier intends to finance the acquisition from available cash resources.
The proposed transaction will increase Premier's interest in the Wytch Farm Assets from 12.38 percent to an aggregate 30.1 percent, adding approximately 12.5 mmboe of 2P and 2C reserves and resources as at 1 January 2011. The field is currently producing approximately 13,000 boepd (gross). Premier will support the transition of operatorship to Perenco UK Limited ("Perenco"), which will on completion of the transaction hold a 50.1 percent interest in the Wytch Farm Assets.
The acquisition is in line with Premier's stated strategy of acquiring high-quality assets in existing core areas and utilises its strong balance sheet. It provides an attractive opportunity to increase Premier's existing interests in a material package of producing oil assets with significant upside potential.
Background
On May 17, 2011, BP announced that it had reached an agreement with Perenco to dispose of its approximately 68 percent interest in a portfolio of onshore and offshore assets in Dorset, including licenses PL089 and P534 and associated tax allowances relating to Wytch Farm for a consideration of up to $610 million. Under the terms of the operating agreements over the Wytch Farm Assets (the "JOAs"), Premier has certain pre-emption rights in the event of a sale to a third party.
Premier has notified BP that it wishes to acquire an interest of 17.715 percent in the Wytch Farm Assets. Premier has also entered into an agreement with Perenco setting out the basis on which the acquisition of the Wytch Farm Assets will be carried out as between Premier and Perenco, including the basis on which tax allowances will be allocated.
Principal terms of the arrangements
Under the arrangements, Premier will pay an initial consideration of $96 million to acquire a 17.715 percent interest in the Wytch Farm Assets. Further payments of up to approximately $14.4 million in aggregate will be payable if the Secretary of State for Energy and Climate Change approves a field development in respect of the Beacon discovery located within block 98/7a and/or in accordance with an agreed methodology relating to the average oil price between 2011 and 2013. Premier will pay a deposit of approximately $86.5 million.
The acquisition is conditional upon satisfaction of certain customary conditions, which include: (a) various third party consents being obtained; (b) the consent of the Secretary of State for Energy and Climate Change to the assignment of the licences and to the appointment of the new operator of the assets; and (c) the amendment of certain planning consents relating to the Wytch Farm Assets.
Subject to JOA partner approval, Perenco will operate the Wytch Farm Assets from completion of the acquisition.
Premier is being advised by Deutsche Bank AG.
Simon Lockett, Chief Executive, commented, "We are pleased to have this opportunity to increase our equity stake in one of our quality core producing assets to over 30 percent. In addition, it allows us to make efficient use of Premier's large existing pool of tax allowances. We look forward to working with Perenco to deliver maximum value from Wytch Farm."
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