Premier Oil to buy E.ON's North Sea assets for $120m

13th Jan 2016 14:45

(ShareCast News) - Exploration and production company Premier Oil has struck a deal to acquire E.ON's UK North Sea assets for a net $120m (£83.3m) plus working capital adjustments.The transaction, which Premier said adds immediate cash generative production and realises tax synergies on its current UK tax loss of around $3.5bn, will be funded from existing cash resources.The assets being bought are located in the Central North Sea, West of Shetlands and the Southern Gas Basin and add stable UK gas revenues to the portfolio rebalancing Premier's commodity exposure.Chief executive Tony Durrant said: "We are pleased to have agreed this value accretive deal as we continue to execute our strategy of focusing the portfolio on our core regions."Having recently completed the sale of our Norwegian assets for $120m, this transaction allows us to further consolidate our interests in the UK North Sea where any acquisitions are immediately value enhancing as a result of our existing UK tax position."Premier said the deal would add around 15,000 barrels of oil equivalent per day in 2016 and around 64m barrels of oil equivalent to the company's net reserve and contingent resources, at an implied cost of around $1.9 per barrel of oil.It will also give Premier the scope to generate significant operating and cost synergies across the combined UK North Sea business and expand its presence in the Central North Sea, including a stake in the producing Elgin-Franklin asset and related fields.The deal is expected to close in the first half of 2016.Premier had announced earlier in the day that it was suspending its shares from trading pending the announcement of a potential acquisition of assets which could be classed as a reverse takeover under the Financial Conduct Authority listing rules.Atif Latif, director of trading at Guardian Stockbrokers, said: "The deal allows PMO shareholders, that have suffered a tough year, a substantial foothold expansion into the North and Southern Sea."We would see this reverse takeover as a positive catalyst, rebalancing of the company with the growth of the North Sea portfolio, at a fair price even amidst some of the toughest times that we have seen for oil and gas name operators. "E.ON said on Wednesday that the sale of its North Sea assets will cut its net debt by about $620m.Premier also put out a separate trading and operations update.The company said production last year averaged 57,600 barrel of oil equivalent per day, compared with guidance for between 65,000 and 70,000 in 2016, including the proposed acquisition.Premier said progress on the commissioning of the Solan field continues, although first oil has been pushed back a touch to February due to unprecedented weather conditions.Meanwhile, the Catcher project is on budget and on target to deliver first oil next year.