Premier Oil to sell stake in Mexico project amid cost-cutting drive
Premier Oil has launched a formal process to sell its stake in an undeveloped project off the coast of Mexico and to also reduce its holding in a long-awaited scheme in waters north of the Falkland Islands as it continues to tackle its $2bn debt pile.
The UK independent oil explorer has decided to sell its roughly 15 per cent holding* in the Zama field, which was discovered in 2017 and was described at the time as “historic and significant”, after recently increasing its estimate of resources that could be recovered from the project.
The Zama sales process, which was announced as part of the company’s half-year results on Tuesday, would lead to a “material reduction” in debt levels, Premier said.
Mark Wilson, an analyst at Jefferies, has estimated the Zama stake could fetch more than $430m.
Last year Dea, the oil and gas company chaired by former BP boss John Browne, bought Mexico’s Sierra Oil and Gas which had a 40 per cent stake in Zama. The deal at the time was valued at around $500m by people familiar with the transaction.
Premier is also trying to sell part of its 60 per cent holding in the Sea Lion project in waters north of the Falkland Islands, which was discovered in 2010 and it yet to be developed. Discussions with senior lenders to try and secure funds to develop Sea Lion were “progressing”, the company added.
The divestments, if successful, will help Premier accelerate its debt-reduction plan. Net debt stood at $2.15 billion at June 30, down from $2.33bn at the end of December.
Premier was one of several UK-listed independent oil explorers that ran into trouble after the oil price crash of June 2014 as it had already committed to capital intensive projects while income was falling dramatically.
While the focus of its half-year results was its divestment plans, Premier also announced it had bought into an appraisal project in the North Slope of Alaska.
The company swung to a $119.9m pre-tax profit for the six months to June 30, from a $24.7m loss at the same point a year ago as production averaged 84,100 barrels of oil equivalent per day, up from 76,200 barrels a year ago and a record for the first half of the year.
*This post has been amended to clarify Premier’s holding in Zama.