Oil majors inject cash into Premier

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PREMIER OIL, the heavily indebted and loss-making exploration group, is to receive a cash injection of pounds 100m-pounds 130m following the announcement yesterday that two overseas oil companies are to take a 50 per cent stake in the business.

Amerada Hess, the US oil company and Petronas, the state-owned Malaysian oil and gas group, will each emerge with 25 per cent shareholdings in Premier by subscribing for shares at a premium to Wednesday's closing price of 19.75p.

The financial restructuring will prevent Premier having to renegotiate its current banking facilities or farm out some of its interests in the West Natuna gas project in Indonesia.

Charles Jamieson, Premier's chief executive, said he hoped to give shareholders details of the deal with Amerada Hess and Petronas in the next 10 days.

Premier has been under pressure from disgruntled shareholders to resolve its funding difficulties and examined several options, including a full- blown merger, before deciding on the three-way alliance.

Net debt, including $158m of project finance to cover Premier's share of development costs of the Yetagun gas field, stands at pounds 399m while it has gearing of 164 per cent.

Mr Jamieson said the capital injection would be enough to fund development of all its existing projects.

The biggest investment, involving some pounds 105m over the next two years will be in West Natuna, a project to pump 325 million cubic feet of gas a day by pipeline to Singapore. Premier is developing the project with Conoco and Gulf and has an interest of just under 29 per cent.

Net losses in the first half reached pounds 12.5m compared with a restated pounds 9.2m profit last year due to lower oil prices, reduced production and redundancy costs. A deal to hedge income at $12 a barrel, entered into at the start of the year, cost pounds 4m in lost profits.

Premier's shares closed 9 per cent higher at 21.5p, valuing the group at pounds 223m.