Premier Oil is targeting a huge £2.6bn restructuring deal with lenders, ahead of the release of its first half financial results this Thursday.
The FTSE 250-listed oil explorer has suffered poor fortunes since the oil price collapse of 2014 and 2015, with pre-tax losses deepening further to $830m in 2015.
It has been in talks with lenders over recent months about a possible restructuring deal which could secure its fate. The firm is currently weighed down with £2.6bn of debt which it took on to finance the development of two North Sea oil projects.
Last week, Davy Research announced that it is to hold its ‘neutral’ rating but the firm has received mixed reviews from analysts. Over the last month, Numis Securities rated the stock ‘under review’ while Deutsche Bank reiterated its ‘buy’ rating and Macquarie upgraded it to ‘outperform’.
Macquarie commented in a research paper: “As we expected, Premier announced strong production and expects to deliver above full-year guidance of 65-70 kboed [Thousand barrels of oil equivalent per day]. Operating costs of US$16/bbl are below budget, and we expect the weak pound to benefit Premier’s bottom line in the second half of 2016: 50 per cent of group opex is denominated in GBP.”
A successfully secured restructuring deal would enable the completion of the two projects, which are expected to reach their peak production rates by the end of next year.
Macquarie added: “Signals are that discussions with the banks are progressing and our best guess is that an announcement will be made in mid-August.”
Barclays has estimated that the company’s net debt will peak at approximately $2.7 dollars in the second half of this year before achieving cash free breakeven in 2017.