Premier Oil rallies on Investec upgrade to 'buy'

11th Sep 2018 15:11

(Sharecast News) - Premier Oil rallied on Tuesday as Investec upped the stock to 'buy' from 'hold' and lifted the price target to 150p from 135p noting that the company has finally started to deleverage.The brokerage said it expects Premier to exit 2018 with net debt of $2.3bn and generate a further $500-600m of free cash flow in 2019."This matters because as debt falls, the call will become less about Brent and more about the assets and delivery. Importantly, the latter is going well with Catcher now likely to produce upgrades and Tolmount sanctioned. Sea Lion will continue to divide opinion, but at least at these levels you're not paying for it. In the background, UK gas pricing can provide a tidy tailwind."Investec said it's hard to overstate the importance of the Catcher field to Premier, as the company can't deleverage without the project. In addition, it drives a significant proportion of the tax loss value."As a result, news at the interims that the field is performing ahead of expectations was a particular boon," it said.Investec also highlighted a "tidy tailwind" from UK gas prices, which have risen through the summer period and now stand at around 75p per therm compared to the brokerage's previously assumed 45p a therm.At 1520 BST, the shares were up 4% to 119.10p.