UK’s Premier Oil is selling its stake in the Babbage Area in the Southern North Sea off the UK to pay down debt. Verus Petroleum has been revealed as the buyer.
Verus will acquire a 47 percent interest in the Babbage gas field, a 50 percent interest in the Cobra discovery and certain outstanding exploration commitments.
The Babbage gas field is located in Block 48/2a in the UK Southern Gas Basin. Premier acquired its interest in the Babbage gas field as a result of its acquisition of E.ON’s UK North Sea assets in 2016.
The Babbage gas field consists of a 9 slot minimum facilities platform with horizontal multi-fracced wells.
Gas is exported to West Sole and on to Dimlington Gas Terminal. The platform was initially manned to support well drilling, fraccing, and clean-up operations but moved to PAI (Not Permanently Attended Installation) on 5 April. According to information available on Premier Oil’s website, the field is currently producing above 3 kboepd (net) to Premier.
The deal
According to Premier Oil the transaction value comprises $88.1 million in respect of the Babbage field interest. In addition, Verus will take on exploration commitments valued at $23.8 million resulting in net cash proceeds of around $64.3 million to Premier, before customary working capital adjustments.
Premier said further cash payments of up to $7.7 million would be due to Premier if the Cobra discovery is developed.
Additional potential payments would also be due dependent upon future specific third-party business across the Babbage infrastructure. The transaction is subject to pre-emption rights by joint venture partners, Premier Oil said on Monday.
The effective date of the transaction is 1 January 2018. Disposal proceeds will be used to pay down Premier’s existing debt. Completion of the transaction is expected in 2018 2H. Premier anticipates recording a book gain on disposal estimated at over $70 million.
Tony Durrant, Chief Executive said: “The sale of our interests in the Babbage Area will immediately reduce our net debt and our committed exploration spend in 2019. This transaction further demonstrates our determination to restore our balance sheet strength. It also adds to the value realized from the E.ON portfolio, which we acquired for $120 million in 2016 and has generated free cash flow and proceeds from announced disposals of around $300 million to date.”
Offshore Energy Today staff