Premier Oil proposes refinancing as production ramps up

3rd Feb 2017 10:06

(ShareCast News) - Premier Oil announced on Friday that its private lenders had agreed to a long form term sheet, subject to credit approvals.The London-listed firm also confirmed an agreement of revised key terms between Premier and representatives of its convertible bondholders, subject to agreement by the private lenders, and outlined a proposed amendment to the terms to its retail bonds.It said the refinancing will provide a "solid foundation" for Premier to deliver its strategic plans through preserving the group's debt facilities, resetting financial covenant headroom, and extending Premier's debt maturities to 2021 and beyond.In return, it said the lenders will receive a revised security and covenant package, enhanced economics and certain governance controls.The long form term sheet will now be circulated to the lenders under the company's RCF, term loan, Schuldschein and US Private Placement notes for formal credit committee approval, the board said, with lock-up agreements requested by the end of February.Revised financing documentation will now be finalised with completion of the refinancing currently anticipated by the end of May 2017.Looking at its revised funding structure, Premier said it would allow for debt reduction and growth after its year-to-date production average of around 80 kboepd.It said a significant step up in production is expected once Catcher is on-stream later this year, materially enhancing the group's cash flows.The board said it will prioritise those cash flows towards reducing its absolute debt levels and leverage ratio to 3x EBITDA.At the same time, Premier said it and its lenders envisage that the group will selectively seek to invest in its unsanctioned projects, at the appropriate equity levels, with due regard to the commodity price environment.With rising production and 700 mmboe of discovered but undeveloped reserves and resources, Premier said it has considerable portfolio optionality.Unsanctioned projects include infill drilling programmes, incremental developments and new projects such as Tolmount, Tuna and Sea Lion.Premier also has the potential for material value creation through its exploration acreage, including in Mexico, with drilling expected to commence in the second quarter."The agreement of the long form term sheet with representatives of our private lenders marks a significant milestone for Premier," said CEO Tony Durrant."We are grateful for our lenders' continued support, which reflects the high quality nature of our asset base, the strong recent operating performance and our plans to deliver value for all of our stakeholders."