Premier Oil Agrees New Lending Terms In Exchange For Say In Projects
LONDON, Nov 17 (Reuters) - Premier Oil has pushed back its refinancing deal to the first quarter of 2017 but said lenders had largely agreed to new terms, including extending debt repayment dates in exchange for some control over which projects the company can invest in.
The London-listed firm, which has been struggling with a large debt pile in the face of weak oil prices, said it was continuing refinancing talks with lenders who last week proposed to extend debt repayment dates to 2021 or later and to preserve existing lending facilities.
The deal is expected to conclude early next year and includes a rise in the cost of debt for the oil company and granting lenders a say over new projects.
"We owe the banks a lot of money and therefore they are obviously going to want to approve some of that future investment," Premier Oil Chief Executive Tony Durrant told Reuters.
Talks with lenders have dragged on longer than expected and Premier Oil's share price plunged to a seven-month low last week on news that lenders were selling out of the company's syndicated loans.
The market welcomed news of the proposed terms on Thursday, however, with Premier Oil shares up 1.4 percent at 0825 GMT.
"The receipt of a revised term sheet from Premier's main group of lenders is a positive signal for those looking for closure to the drawn-out debt refinancing process," said analysts at Jefferies, who give the stock a "hold" rating.
While refinancing talks are continuing, Premier Oil has improved its operational performance, with production up 19 percent year-on-year and on track to meet its recently upgraded 2016 production target of 68,000-73,000 barrels of oil equivalent per day.
The oil producer, which is mainly spending money on new projects in Britain, also continues to benefit from weak sterling.
After a $250 million windfall thanks to the pound's depreciation in the aftermath of Britain's decision in June to leave the European Union, Premier Oil said its costs were coming down further.
Its 2016 capital expenditure budget is now expected to fall to around $700 million, from $730 million previously expected, thanks to the exchange rate and further cost reductions on its Catcher project.
The company expects to spend just $300 million in 2017.
A potential source of cash for Premier Oil is the sale of its Pakistan business. The company has reopened the process after its exclusive bidder failed to raise enough cash and it became clear the assets were performing better than expected.
"Frankly, why should we give away the benefit of the 2016 performance to a buyer? We'll keep that for ourselves," Durrant said.
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