Friday 13 March 2020 11:07 am

Premier Oil defends state of finances amid low oil prices

Premier Oil has insisted its finances are strong after a major creditor called for it to cancel expensive North Sea oil projects with oil prices perilously low.

Premier Oil told investors today it has hedged 30 per cent of its full year gas and oil entitlement production at $60 a barrel. This includes 40 per cent for the first half of 2020 at $64 per barrel.

Read more: Oil giants slump as Trump EU travel ban makes COVID-19 and price war effect worse

Asia Research and Capital Management (ARCM), the firm’s biggest creditor, has urged the firm to focus on its balance sheet. The lender accused Premier of running out of money with oil prices under $40 per barrel.

Oil prices stood around $34 a barrel today after Saudi Arabia flooded the market with cheap oil as its alliance with Russia ended in acrimony over the weekend.

ARCM also warned Premier could burn through $1.2m in cash per day.

But Premier today revealed it has unrestricted cash of $135m and debt facilities of $330m at the end of last month.

In its update, Premier Oil also said its production remains planned at 70,000-75,000 barrels per day.

Premier listed its break even price at under $50 a barrel.

The firm said it could be cash flow neutral in 2020 if it makes savings of $100m in 2020 and the oil price remains around $35 a barrel.

“The group retains significant liquidity,” it added. Shares in the struggling oil firm soared 79 per cent from an incredibly low base to 22.6p.

Premier Oil released its results last week where it pledged to continue to expand.

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The planned purchases of the Andrew Area and Shearwater fields in the North Sea are subject to an Edinburgh court hearing next week.

Read more: Premier Oil creditor doubles down on opposition to acquisition plan

ARCM has campaigned against Premier’s North Sea expansion on grounds the costs of buying the assets are too high. However, the majority of Premier’s other credits have backed the plans.