Premier Oil makes slow progress on funds for Falklands project
The debt-wracked oil company has hired Standard Chartered to pull together a syndicate of banks to fund its hunt for more than 500m barrels of oil by the end of the year.
But City sources have warned that Premier’s slow progress means the beleaguered project is unlikely to meet a pressing financial deadline.
The Sea Lion project is a crucial source of future income for both Premier and the Falkland Islands government, which has given the firm until 2020 under its current production -licence.
Premier, led by chief executive Tony Durrant, is expected to reveal net debt of over $2.5bn in its interim results this week. The London-based oil company and its partner Rockhopper will make a final investment decision on Sea Lion only once its funding is in place after years of delay due to political tensions.
“There is a mutual understanding between Premier, the government and Rockhopper that they would have to have something in place by year-end,” said Alejandro Demichelis, of
Hannam and Partners. “We understand they are making progress, but slow progress. The UK Export Finance agency is prepared to offer some financing to the project but not all of what is needed. They could find a solution but I doubt it will be by year-end,” he added.
Premier has begun work securing contracts for the project ahead of the final funding deal to speed its progress once the funding is in place but the debt-hit oil firm will still need a hefty boost from lenders to begin drilling.
James Hosie of Barclays said: “Third-party funding solutions are key to moving pre-development assets forward during 2018”. The investment bank snipped its share price target for the oil company from 170p to 165p a share. It also warned that the firm’s market value remains highly sensitive to dips in oil market price forecasts.
The project has suffered repeated delays since Premier picked up its stake in the oil discovery in 2012, in part due to political tensions between the UK and the previous Argentinian regime over the British overseas territory.
Mr Demichelis said: “Any bank with operations in Argentina feared that there could be repercussions for their relationships in Argentina and the rest of South America. With that out of the way things are more open.”