Premier completes Babbage sale to Verus, Spirit becomes operator

Tony Durrant, chief executive of Premier Oil
Tony Durrant, chief executive of Premier Oil

Premier Oil has completed the sale of its interests in the Babbage Area and nearby Cobra discovery in the North Sea to Verus Petroleum.

The firm, which had a 47% operating interest in Babbage and 50% in Cobra, has received £30.3m after adjustments since the effective sale date of January 1.

Aberdeen-based Verus is also taking on exploration commitments valued at £18.8m.

Production from Babbage in the southern North Sea has averaged 2,500 barrrels of oil equivalent per day in the year to date.

A series of further payments could be made to Premier, depending on development on Cobra and third-party business across Babbage infrastructure.

Premier first announced the sale in April in a bid to reduce it net debt, which stood at £2bn as of the firm’s latest financial results for the six months to June 30.

At the time the deal was announced, CEO Tony Durrant 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.”

The deal clears the way for Spirit Energy to take over operatorship of Babbage after making an agreement in July, which depended on this sale going through.

Spirit owns 13% of Babbage and 50% of Cobra, and intends to drill an exploration well at the Python prospect, adjacent to Cobra, in the area next year to further prove up reserves in the region.

Rune Martinsen, Spirit Energy’s North Sea asset director, said: “As operator we will be able to leverage our experience with this asset and area that we know well. We are looking forward to working with our new partner Verus, and existing partner Dana to maximize the value of the field.

“We will focus on safe cost-efficient operations to maximize recovery from the field. We are also hoping to add further resources in the Greater Babbage Area through planned drilling activities.”

Today’s announcement comes as Verus is buying up a series of stakes in the North Sea.

In September the firm struck a £300m deal to buy stakes in the Western Isles and Hudson field, as well as the Brent Pipeline System and Sullom Voe oil terminal in Shetland.

Premier is meanwhile focussing on other areas, announcing that production from its Catcher field has shown a strong performance, averaging 68,000 barrels of oil equivalent per day in November and December to date.