Premier Oil has confirmed it will acquire E.ON’s North Sea assets in a $120million deal.
The company said the deal had been funded from existing cash resources.
Earlier today the company confirmed it had suspended share on the London Stock Exchange.
Premier will acquire interests in licence in the Central North Sea, West of Shetland and the Southern Gas Basin.
This includes shares in Elgin-Franklin, Huntington, Babbage and Tolmount.
Speculation had begun building earlier today that E.ON was the subject of the reverse takeover.
The company said the deal would add significant production and associated cash flow this year and in 2017 even with the current low oil price.
It means the company will be operatorship in Huntington, Babbage and Tolmount.
The company also said the deal would allow it to share the abandonment cost of exposure on Ravenspurn North and Johnston with E.ON.
Premier Oil chief executive Tony Durant said:”In this challenging macro environment, maximising production whilst cutting costs is critical; both were achieved in 2015 and will continue in 2016.
“Selling our cash negative Norwegian business and re-investing in cash positive UK assets through the proposed E.ON acquisition, is value accretive and materially improves both our current and future financial position.”
Premier Oil said it had “significant liquidity” with cash and undrawn bank facilities of $1.2billion and a year-end covenant headroom in excess of $900million.
It added that the E.ON acquisition would be “materially covenant accretive”.
Premier said the deal allowed them to “generate significant operating and cost synergies across the combined UK North Sea business as well as increasing its presence in the Central North Sea.
The move also allows the company to consolidate its interest in Huntington and assume operatorship with the potential to “reduce cost and optimise” production.
The company also said the acquisition requires approval from the company’s shareholders, US private placement holders and banks.
It is expected a shareholder circular and notice of meeting will be published in due course.
Yesterday, Broker Jefferies cut Premier’s rating to hold and target price to 33p from 120p.
The firm’s shares fell 33% from 19p to 9.5p – a fraction of May 2014’s high of 358.6p.
Premier Oil’s debt is thought to be more than £1.83billion.
Its current market capitalization is £155million.
The company said progress was also continuing on its Solan project, with first oil now expected in February due to challenging weather conditions which Premier descirbed as “unprecedented”.
The deal comes days after the firm confirmed an oil find in the North Falkland basin.