Premier Oil selling Babbage Area stake to cut debt
UK’s Premier Oil is selling its stake in the Babbage Area in the Southern North Sea off the UK to pay down debt. Verus Petroleum has been revealed as the buyer.
Verus will acquire a 47 percent interest in the Babbage gas field, a 50 percent interest in the Cobra discovery and certain outstanding exploration commitments.
The Babbage gas field is located in Block 48/2a in the UK Southern Gas Basin. Premier acquired its interest in the Babbage gas field as a result of its acquisition of E.ON’s UK North Sea assets in 2016.
The Babbage gas field consists of a 9 slot minimum facilities platform with horizontal multi-fracked wells.
Gas is exported to West Sole and on to Dimlington Gas Terminal. The platform was initially manned to support well drilling, fracking, and clean-up operations but moved to PAI (Not Permanently Attended Installation) on the 5th April.
According to information available on Premier Oil’s website, the field is currently producing above three kboepd (net) to Premier.
The deal
According to Premier Oil the transaction value comprises US$88.1 million in respect of the Babbage field interest. In addition, Verus will take on exploration commitments valued at US$23.8 million resulting in net cash proceeds of around US$64.3 million to Premier, before customary working capital adjustments.
Premier said further cash payments of up to US$7.7 million would be due to Premier if the Cobra discovery is developed.
Additional potential payments would also be due dependent upon future specific third-party business across the Babbage infrastructure. The transaction is subject to pre-emption rights by joint venture partners, Premier Oil said on the 30th April.
The effective date of the transaction is the 1st January 2018. Disposal proceeds will be used to pay down Premier’s existing debt. Completion of the transaction is expected in the second quarter of 2018.
Premier anticipates recording a book gain on disposal estimated at over us $70 million.
Tony Durrant, Chief Executive said: “The sale of our interests in the Babbage Area will immediately reduce our net debt and our committed exploration spend in 2019. This transaction further demonstrates our determination to restore our balance sheet strength. It also adds to the value realised from the E.ON portfolio, which we acquired for US$120 million in 2016 and has generated free cash flow and proceeds from announced disposals of around US$300 million to date.”
Source: Offshore Energy Today