As Premier Oil Plc makes progress on shrinking its debt pile, it is turning its attention to growth from its U.K. Tolmount gas field and by looking at buying existing production in the North Sea.
“We would aim to continue to participate in the U.K. North Sea going forward. And it does seem that there are going to be some opportunities coming up in the next six to twelve months to grow the business through acquisition,” Tony Durrant, Premier’s CEO, told Reuters in a phone interview.
“It’s going to be biased towards production... We want the cash flow from newly acquired assets,” he said, adding he would expect Premier’s banks to support such a move.
Oil majors such as BP (NYSE: BP) and Total (NYSE: TOT) have also shown renewed interest in investing in North Sea assets in recent months as the oil price has rebounded and energy companies recover after slashing production costs following the oil price slump of 2014.
In a trading statement on July 12, Premier said its board had approved its U.K. North Sea Tolmount project, which will exploit 540 billion cubic feet of gas and target peak production of 50,000 barrels of oil equivalent per day (boe/d).
“Letters of interim agreement [for Tolmount] have been signed with the platform and pipeline contractors and the terminal for onshore gas processing selected. Premier’s board approved the Tolmount project in June and formal sanction by partners is scheduled for the third-quarter,” Premier said.
Tolmount and projects in Mexico are crucial to the future growth of Premier’s output, which it reiterated would average 80,000 boe/d to 85,000 boe/d this year.
In Mexico, Premier snapped up much sought after blocks in the Zama basin containing up to 800 million barrels and said on July 12 that it expects regulatory approval for its appraisal program this quarter before starting to drill in the fourth-quarter.
It has been focusing on cutting debt, which stood at $2.65 billion at the end of June, down from around $2.7 billion at the end of 2017.
“Full-year debt reduction is estimated at between $300 million and $400 million at current oil prices,” Premier said in its trading statement.
It expects its covenant leverage ratio, calculated as net debt plus letters of credit over EBITDA, to fall to three times EBITDA by the end of this year and 2.5 times EBITDA by end of March 2019, it said.