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London-based Premier Oil is close to unveiling a £2.6-billion (around US$3.35 billion) restructuring agreement with lenders as it seeks to avoid defaulting on its loans amid the low crude oil prices, The Telegraph reports.
Premier Oil – the UK’s largest independent oil and gas group – is expected to announce details on its restructuring plan later this week, on August 18, when it reports its first-half results.
Earlier this month, the group said it had agreed to a further deferral of its financial covenants until August 31, 2016 from July 31, 2016 as it continued to hold talks with lenders on existing debt arrangements.
Premier Oil has taken on more loans to fund its ambitious projects in the North Sea. In April, the company announced its first test output from the offshore Solan field near Shetland. When maximum production rates at Solan are reached, it will yield about a third of Premier Oil’s current daily output, which at the end of 2015 stood at 57,600 barrels per day. For this year, the company projects average daily output of 65,000-70,000 bpd.
In its trading update in July, Premier Oil said that it expected to report on August 18 total revenues for the first six months of around US$390 million, compared to US$577 million for the same period of 2015. Net debt was estimated at some US$2.6 billion as of June 30, 2016.
Solan is currently producing at a rate of 11,000 barrels per day and is ramping up to 14,000 bpd from the first production well with water injection providing reservoir support, Premier Oil noted, expecting full-year production at or above the upper end of the previous guidance of 65,000-70,000 bpd.
Premier Oil’s current agreements with lenders envisage keeping below the net debt-to-earnings ratio of 4.75, but the crude price crash would make the company breach that threshold with a 5.2 ratio. According to The Telegraph, the restructuring deal would relax the debt covenant to a net debt-to-earnings ratio of 6.0 from 4.75.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.