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JAKARTA (RambuEnergy.com) – London-based Premier Oil announce on Thursday that the sale of its interests in Licences PL089 and P534 (containing the Wytch Farm field) to Verus Petroleum Ltd has now completed.
Both companies entered into sales and purchase agreement back in September for the sale of the Wytch field for US$200 million.
In addition, Premier will release letters of credit totaling approximately US$75 million, which were issued in relation to future decommissioning liabilities which have now been transferred to the purchaser.
Wytch Farm is an onshore oil field located in Dorset, United Kingdom that has been producing since 1979. Verus is a UK-focused independent E&P company backed by HitecVision, a Norway based private equity investor focused on the upstream offshore oil and gas industry.
Background of the Disposal
The Premier board believes that the disposal now is in the best long-term interest of Premier and its stakeholders.
“It represents an excellent opportunity to realize an attractive valuation well in excess of the implied valuation from the most recent transaction in Wytch Farm,” the company said in a statement.
The disposal will generate proceeds to accelerate de-leveraging of the balance sheet. Wytch Farm is non-operated, onshore and with fewer near-term growth prospects than elsewhere in Premier’s portfolio.
About Wytch Farm
Wytch Farm is a large onshore oil field although a significant area extends offshore. The field has been developed with 11 well sites linked to a central onshore gathering station and is operated by Perenco UK Limited. Production is exported via pipeline to the Hamble terminal near Southampton for tanker loading.
Premier acquired a 12.4% interest in the Wytch Farm field in 1984. In December 2011, Premier completed the acquisition of an additional 17.7% interest from Perenco UK Limited and in July 2017 announced an agreement to acquire a further 3.7% from Maersk Oil North Sea UK Ltd, taking its total interest to 33.8%.
As of Dec. 31, 2016, the estimated 2P reserves in Wytch Farm net to Premier were 14.9 mmboe. Wytch Farm production, net to Premier’s working interest, averaged 5.1 boepd for the first half of 2017.
For the 12 months ended Dec. 31, 2016, Wytch Farm generated profit before taxation of approximately $23.4 million and as at 30 June, 2017 had gross assets of approximately $90.2 million.
Use of Proceeds
Disposal proceeds will be used to pay down Premier’s existing debt. In addition, Verus will assume all of the abandonment liabilities and associated decommissioning security. Premier will, therefore, be released from letters of credit, amounting to approximately $75 million, currently held for future field abandonment liabilities.
Together, this will result in a reduction to Premier’s covenant net debt of approximately $275 million, taking into account cash flows retained post the effective date. (*)
