• 3 minutes Could Venezuela become a net oil importer?
  • 7 minutes Reuters: OPEC Ministers Agree In Principle On 1 Million Barrels Per Day Nominal Output Increase
  • 12 minutes Battle for Oil Port: East Libya Forces In Full Control At Ras Lanuf
  • 19 hours Could Venezuela become a net oil importer?
  • 30 mins Reuters: OPEC Ministers Agree In Principle On 1 Million Barrels Per Day Nominal Output Increase
  • 24 mins Oil prices going Up? NO!
  • 23 hours Tesla Closing a Dozen Solar Facilities in Nine States
  • 19 hours Gazprom Exports to EU Hit Record
  • 21 hours EU Leaders Set To Prolong Russia Sanctions Again
  • 19 hours Could oil demand collapse rapidly? Yup, sure could.
  • 19 hours Oil Buyers Club
  • 1 day Saudi Arabia plans to physically cut off Qatar by moat, nuclear waste and military base
  • 23 hours Why is permian oil "locked in" when refineries abound?
  • 12 hours Oil prices going down
  • 22 hours EVs Could Help Coal Demand
  • 17 hours Saudi Arabia turns to solar
  • 10 hours Russia's Energy Minister says Oil Prices Balanced at $75, so Wants to Increase OPEC + Russia Oil by 1.5 mbpd
  • 1 day China’s Plastic Waste Ban Will Leave 111 Million Tons of Trash With Nowhere To Go
  • 5 hours Battle for Oil Port: East Libya Forces In Full Control At Ras Lanuf
Russia Pushes Ahead With Controversial Nord Stream 2

Russia Pushes Ahead With Controversial Nord Stream 2

Russia’s controversial Nord Stream 2…

Oil Rises On OPEC’s Production Decision

Oil Rises On OPEC’s Production Decision

Oil rallied after OPEC’s meeting…

This Company Just Got More Confident About North Sea Energy

Britain’s Premier Oil once was skeptical about the value of the Solan oil field in the North Sea west of the Shetland Islands, but now it has reversed course, taking full control of the project. The stock market reaction that followed was positive.

Already Premier owns 60 percent of Solan and so far has spent about $1.5 billion developing the Solan project. On June 2 it announced that it is buying up the 40 percent stake now owned by Chrysaor, a company focused on exploiting North Sea oil and gas.

Related: Could Middle East Switch From Oil To Renewable Superpower?

The move is something of an about-face for Premier. In February it dramatically reduced Solan’s value because of the equally dramatic plunge in the price of oil in the past year. It also cited work delays, many due to unusually inclement weather near the Shetlands – which always is challenging – and low productivity at the project during the past winter.

Yet Premier seemed to have been inspired by the actions of larger oil companies, including the Anglo-Dutch Royal Dutch Shell and Britain’s BP, which have been investing generously in large North Sea fields neighboring Solan.

But last month, Premier said it expected Solan to generate as much as 20,000 to 25,000 barrels of oil equivalent per day, which could net the company significant revenues.

Premier also was influenced by calming weather. “With improved weather, better progress has been made with the commissioning work on the Solan facilities,” it said in the statement announcing the buyout from Chrysaor. Still, Premier expects to produce the first oil from the field in the fourth quarter of 2015, not the second quarter as originally expected.

The transaction allows Chrysaor to receive payments of up to $3 million per year for the purchase of its stake in Solan and royalty payments of as much as $100 million once Chrysaor repays an outstanding loan from Premier, as well as accrued interest. As for Premier, it expects to raise $100 million by selling 15 percent of Solan’s output to FlowStream Commodities, an energy finance company.

Related: China Hopes To Setup New Oil Futures Contract By End Of Year

European stock markets have been shaky lately, in part because of the year-long plunge in the price of oil, as well as concern about Greece’s ability to repay a 300 million-euro loan to the International Monetary Fund by the June 5 deadline, and the conclusion of efforts to bail out the country by the end of the month. Yet the value Premier’s stock rose 3 percent the day the Solan transaction was announced.

Tony Durrant, Premier’s CEO, said the transaction enables his company “to focus on delivering first oil from the Solan project without partner-funding concerns, while the transaction with FlowStream reduces our balance sheet exposure to the project and releases capital to fund completion of the development. We continue to look at further opportunities to realize value from the project.”

Mark Henderson at Westhouse Securities, a financial services company in London, was a bit less positive. “The market may initially be pleased that Premier has bought out its partner in Solan as there have been concerns about Chrysaor’s ability to fund its share in the project.

Related: Cold Shoulder For Russia Could Hint At OPEC Decision June 5th

“However,” Henderson added, “the [financing scheme with Chryasaor] might also suggest that funding options are starting to get stretched at Premier. We maintain that Premier still has financing flexibility, but the market may [eventually] take a different view.”

By Andy Tully Of Oilprice.com

More Top Reads From Oilprice.com:



Join the discussion | Back to homepage

Leave a comment

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News