Asset A&D

BP and Premier Oil Revise Terms for North Sea Deal

By Deepak Sharma
June 05, 2020
2 minutes read
CNOOC Offshore Rig

BP Plc has agreed to reduce the consideration for the sale of North Sea assets to London-based independent Premier Oil Plc from the original purchase price of US$625 million down to approximately US$450 million in the wake of significantly lower prices.

Under the terms of the revised deal, the cash portion of the consideration has been reduced to US$210 million, and Premier Oil will also only assume abandonment obligations of approximately US$240 million against the US$600 million previously earmarked. Premier Oil will pay an additional US$115 million to BP only if oil prices recover to above US$55 per barrel.

“BP would also retain 100 per cent of the existing Shearwater abandonment costs and 50 per cent of the existing Andrew Area abandonment costs”, Premier Oil said in a statement.

The deal was originally announced in January, and includes BP’s operated interests in the Andrew Area assets, which further includes the Andrew (62.7%), Arundel (100%), Cyrus (100%), Farragon (50%) and Kinnoull (77.06%) fields, and a 27.5% non-operated interest in the Shearwater field.

The Andrew area fields are situated within water depths of 103 to 116 m and produce through the Andrew platform, which is located 140 mi. north-east of Aberdeen. In 2019, average daily production from the Andrew fields had been around 25,000 to 30,000 barrels of oil equivalent per day (boe/d). The Shearwater field is a deep gas-condensate accumulation and one of the biggest producing blocks in the North Sea, and is located approximately 140 mi. east of Aberdeen. The field is currently operated by Shell UK Ltd. and produced approximately 14,000 boe/d in 2019.

The revised deal has also been approved by the Hong Kong-based hedge fund Asia Research & Capital Management Ltd. (ARCM), which has been locked in a bitter feud with Premier Oil since the deal was announced in January. ARCM had taken a significant short position in the company’s shares at the time, but will now drop its planned appeal against a court ruling in favour of the deal and instead take a long equity position in the company to help it raise additional cash to fund the acquisition. Concluding the deal with BP will also now allow Premier to continue its discussions with creditors on waiving financial covenants through till September 30th.

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