Premier Oil has entered into a sale and purchase agreement to sell its entire interests in the Wytch Farm field to Verus Petroleum SNS Limited for a cash consideration of $200 million.
In addition, the operator will be able to release letters of credit totaling approximately $75 million which have been issued in relation to future decommissioning liabilities that are now being transferred to Verus.
The effective date of the Disposal is 1 July 2017.
Wytch Farm is an onshore oil field located in Dorset, United Kingdom that has been producing since 1979.
Verus is a UK-focused independent E&P company backed by HitecVision, a Norway based private equity investor focused on the upstream offshore oil and gas industry.
Premier’s board believes that the disposal is in the best long-term interest of the company and its stakeholders.
The firm said the sale represents an “excellent opportunity” to realise an attractive valuation well in excess of the implied valuation from the most recent transaction in Wytch Farm.
The disposal will generate proceeds to accelerate deleveraging of the balance sheet.
Wytch Farm is non-operated, onshore and with fewer near-term growth prospects than elsewhere in Premier’s portfolio.
Wytch Farm is a large onshore oil field although a significant area extends offshore.
The field has been developed with 11 well sites linked to a central onshore gathering station and is operated by Perenco UK Limited.
Production is exported via pipeline to the Hamble terminal near Southampton for tanker loading.
Premier acquired a 12.4% interest in the Wytch Farm field in 1984.
In December 2011, Premier completed the acquisition of an additional 17.7% interest from Perenco UK Limited and in July 2017 announced an agreement to acquire a further 3.7% from Maersk Oil North Sea UK Ltd, taking its total interest to 33.8%.
As of 31 December 2016, the estimated 2P reserves in Wytch Farm net to Premier were 14.91 mmboe.
For the 12 months ended 31 December 2016, Wytch Farm generated profit before taxation of approximately $23.42 million and as at 30 June 2017 had gross assets of approximately $90.22 million.
Disposal proceeds will be used to pay down Premier’s existing debt.
In addition, Verus will assume all of the abandonment liabilities and associated decommissioning security.
Tony Durrant, chief executive, said: “The disposal will allow for a significant reduction in Premier’s net debt and generates material value for shareholders.
“This is the latest in a series of disposals in line with Premier’s strategy of realising value for shareholders at the appropriate stage of an asset’s life cycle and at an attractive valuation.”