Premier Oil has signed up Rothschild to lead negotiations with banks, as it prepares for the possibility that it may breach its financial covenants.
In its annual results published last week, chairman Mike Welton said the group had successfully renegotiated its financial covenants with its banks and bondholders: “Our long-term, unsecured debt structure and supportive banking relationships provide considerable balance sheet flexibility.
However, he added: “If current low oil prices persist, then a further relaxation of our main financial covenants may be required, which we are taking pre-emptive action to address.”
The price of oil has tumbled since June 2014, when it was trading at around $115 per barrel. Benchmark Brent crude is now trading at around $35.
Welton said Premier is “actively working on a number of mitigating initiatives”, including the proposed acquisition of E.On’s UK North Sea assets, “which is materially accretive to our lending covenants, and we retain strong relationships with our lending group, with whom we will continue to work closely as we have done throughout 2015”.