Amid a nervous market, Premier Oil is in demand after taking full ownership of a project west of the Shetlands.
The oil producer’s shares have climbed 4.7p to 160.9p as it took over a 40% stake in the Solan project - due to start production in the fourth quarter - from partner Chrysaor. Under the terms of the deal Chrysaor will be entitled to payments of up to $3m a year and royalty payments up to $100m offset against a $530m loan relating to capital expenditure for the field.
Premier also agreed a $100m contract with FlowStream Commodities for the proceeds from 15% of oil production from Solan for a certain period of time depending on crude prices and production levels. In a hold note, Stifel analysts said:
We value 40% of Solan at $565m which suggests the transaction with Chrysaor is overvaluing the stake slightly. However, given that refinancing of the loan to Chrysaor appeared to be proving problematic, Premier likely now has greater flexibility to farm down Solan to boost the balance sheet in the near term.
Mark Henderson at Westhouse Securities said:
The market may initially be pleased that Premier has bought out its partner in Solan as there have been concerns about Chrysaor’s ability to fund its share in the project, however the utilisation of a pre-production financing facility might also suggest that funding options are starting to get stretched at Premier. We maintain that Premier still has financing flexibility but the market may take a different view. We retain our add rating and 200p target price.
Elsewhere Cairn Energy has climbed 4.4p to 176.4p after Jefferies issued a buy note with a 222p price target.
Overall markets are still under pressure, with concerns about Greece continuing ahead of a deadline for a €300m IMF payment on Friday and the ending of its bailout at the end of the month. Investors are awaiting the outcome of Monday’s late night meeting of the country’s creditors to see if this could break the deadlock.
Eurozone inflation came in higher than expected, prompting concerns about the duration of the ECB’s supportive quantitive easing programme.
The FTSE 100 is currently down 56.04 points at 6897.54.
Tobacco companies are among the main fallers after Canadian smokers were awarded C$15.6bn of damages, with British American Tobacco losing 85p to 3507.5p.
Tesco is down 3.75p at 206.05p after it continued to lose market share and sales fell according to the latest Kantar Worldpanel report.
With gold and silver prices slipping, Randgold Resources is down 87p at £46.69 and Fresnillo is 16p lower at 738.5p.
Egyptian gold miner Centamin has lost 2.55p to 66.95p as RBC analysts moved from outperform to sector perform.
