BP to sell North Sea Interests in Andrew Area and Shearwater to Premier Oil – Energy Industry Review

Posted: January 8, 2020 at 5:42 pm

BP has agreed terms to sell its interests in the Andrew area in the central UK North Sea and its non-operating interest in the Shearwater field.

Under the terms of the deal, Premier Oil will pay BP USD 625 million.

BP has been reshaping its portfolio in the North Sea to focus on core growth areas, including the Clair, Quad 204 and ETAP hubs. Were adding advantaged production to our hubs through the Alligin, Vorlich and Seagull tieback projects, Ariel Flores, BP North Sea regional president, said. As a result of this focus, we have also now decided to divest our Andrew and Shearwater interests, believing them to be a better strategic fit for another owner. We are confident that Premier Oil, already a significant operator in the North Sea, is the right owner of these assets as they seek to maximise their value and extend their life.

The five fields in the Andrew area all produce through the Andrew platform, which is located about 140 miles north-east of Aberdeen. The hub started production in 1996. In 2019, average daily production has been around 25,000 to 30,000 barrels of oil equivalent per day.

The Shearwater field is a high pressure, high temperature reservoir produced through a process, utilities and quarters platform, located around 140 miles east of Aberdeen. Shearwaters 2019 production has been in the region of 14,000 barrels of oil equivalent per day gross.

The Andrew assets are expected to transition to Premier Oil as a fully operational entity with 69 staff who operate and support the assets. Their contractual terms and conditions are protected under UK Transfer of Undertakings (Protection of Employment) Regulations (TUPE). BP will now begin consultation with in-scope staff.

There is no transfer of staff associated with the Shearwater sale.

The sales are the latest step in BPs planned programme of USD 10 billion divestments by the end of 2020. Subject to the receipt of regulatory and other third-party approvals, BP aims to complete the sale and transfer of operatorship of the assets at the end of the third quarter of 2020.

The deal includes BPs operating interests in the Andrew area comprising the Andrew (62.75%), Arundel (100%), Cyrus (100%), Farragon (67%) and Kinnoull (77.06%) assets as well its non-operating 27.5% interest in the Shell-operated Shearwater.

Premier Oil confirmed the proposed acquisitions of the Andrew Area and Shearwater assets from BP, and an additional 25 per cent. interest in the Premier operated Tolmount Area from Dana for USD 191 million plus contingent payments of up to USD 55 million (together the Acquisitions). Premier also announced the proposed extension of its existing credit facilities to 30 November 2023.

The proposed acquisitions will be funded via a USD 500m equity raise (net of expenses) which has been fully underwritten on a standby basis, existing cash resources and, if required, an Acquisition Bridge Facility of USD 300 million. Premier expects that the equity raise will include both a placing and rights issue component with any shares issued under the placing qualifying for the subsequent pre-emptive rights issue. It expects to confirm the structure and terms in Q1 2020 following consultation with major shareholders.

Lender consent for the proposed acquisitions, related funding arrangements and extension of credit facilities will be sought via two Court-approved schemes of arrangement (the Schemes). Of the creditors subject to the Schemes, 83.3 per cent. of Super Senior Commitments and 72.7 per cent. of the Senior Commitments have already committed to approve the Schemes.

The Andrew and the Shearwater Acquisitions constitute a class 1 transaction. Shareholder approval for all of the acquisitions and the equity raise will be sought at a general meeting expected to be held in Q1 2020. The Directors believe that the acquisitions represent a highly attractive opportunity and recommend that Premiers shareholders vote in favour of the resolutions, as the Directors intend to do in respect of their holdings, at the general meeting. Premier Oil will send a combined prospectus and circular to its shareholders convening the general meeting in due course.

The acquisitions have an effective date of 1 January 2019 and completion of all three acquisitions is expected to occur by the end of Q3 2020.

These acquisitions are materially value accretive for Premier Oil and are in line with our stated strategy of acquiring cash generative assets in the UK North Sea. We look forward to realising the significant long-term potential of the Andrew and Shearwater assets through production optimisation, incremental developments and field life extension projects. We are also pleased to have consolidated our interest in the high return Tolmount development where we see material upside. The cash flow generated from the acquired assets will also accelerate the deleveraging of Premiers balance sheet, Tony Durrant, Chief Executive, commented.

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BP to sell North Sea Interests in Andrew Area and Shearwater to Premier Oil - Energy Industry Review

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