Premier announces landmark acquisitions with BP and Dana for USD816 million

Premier announced the below this morning.

Premier is pleased to announce the proposed acquisitions of the Andrew Area and Shearwater assets from BP for US$625 million, and an additional 25 per cent. interest in the Premier operated Tolmount Area from Dana for US$191 million plus contingent payments of up to US$55 million (together the “Acquisitions”). Premier is also pleased to announce the proposed extension of its existing credit facilities to 30 November 2023.

In addition, Premier today provides a separate trading update ahead of its 2019 Full Year Results including the proposed farm-out of part of its Sea Lion and Tuna assets.

Rationale and benefits of the Acquisitions

• Add c.23 kboepd of cash generative production in 2019 with development upside; acquired assets forecast to generate over US$1 billion of free cash flow to end 2023
• Add 82 mmboe of reserves and contingent resources at an implied cost of less than US$10/boe
• Contribute to rising Group production out to 2024 with pro forma 2019 production in excess of 100 kboepd
• Add low cost, low carbon emission assets with combined opex of less than US$20/boe
• Accelerate the use of Premier’s US$4.2bn tax losses
• Materially strengthen Premier’s financial position
• Additional free cash flow accelerates debt reduction
• Significantly reduce forward covenant leverage ratio towards 1x by 2022
• Extension of existing, non-amortising facilities to late 2023

Asset highlights

• Andrew Area (50%-100% interests in 5 fields, operatorship): currently producing c.18 kboepd (net to BP) with material near term upside through further development of the Andrew Lower Cretaceous reservoir
• Shearwater (27.5% interest): significant producing and infrastructure hub, adding 25 mmboe of reserves and resources with incremental investment opportunities and tariff income
• Tolmount (25% interest): consolidates interest in existing high return development, which is on schedule to deliver first gas by end-2020, with significant upside following recent drilling success at Tolmount East

The proposed Acquisitions will be funded via a US$500m equity raise (net of expenses) which has been fully underwritten on a standby basis, existing cash resources and, if required, an Acquisition Bridge Facility of US$300 million. Premier expects that the equity raise will include both a placing and rights issue component with any shares issued under the placing qualifying for the subsequent pre-emptive rights issue. It expects to confirm the structure and terms in Q1 2020 following consultation with major shareholders.

RBC Capital Markets and Jefferies are acting as Joint Corporate Brokers and Joint Underwriters.

RBC Capital Markets is also acting as Financial Adviser and Sponsor.

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Blackrock and GIC acquires critical North Sea gas infrastructure

Blackrock and GIC have announced the acquisition of Kellas Midstream from Antin. Antin was expected to launch an auction process for Kellas Midstream at the end of the year and it appears that Blackrock and GIC moved quickly and were able to agree a deal ahead of the formal auction. No sale price was disclosed but believed to be in the range of £1.4-2.0 billion.

There will be a number of disappointed parties out there who were lining themselves up for the process including the runners-up on the NSMP sale of last year - widely reported as KKR, Macquarie, Partners Group and numerous pension funds.

Kellas owns the CATS pipeline and terminal, a majority stake in the ETS pipeline and is building the new HGS pipeline that serves Premier Oil's Tolmount Area. All of this is critical infrastructure for UK North Sea gas production, without which, the country would be crippled from a shortage of gas. Some of the key hubs that the infrastructure serves include the Cygnus Area (the largest and newest gas field in the Southern North Sea), the Culzean Area (another critical new gas field in the Central North Sea) and the up and coming Tolmount Area.

Kellas systems
Source: Kellas Midstream

CATS system
Source: Kellas Midstream

In addition, the CATS pipeline appears to be a key contender for export from the massive Glengorm field that was discovered at the beginning of this year and will become an important source of gas for the UK in the decades to come (see UK North Sea gets shot in the arm with Glengorm).

The advisers to Blackrock and GIC were listed as:

- RBC Capital Markets and Scotiabank as financial advisers

- Herbert Smith Freehills as legal advisers

- Xodus as technical advisers

The full press release below:

Antin sells Kellas Midstream to BlackRock and GIC

Antin Infrastructure Partners, a private equity firm focused on infrastructure investments, announced today that it had signed an agreement to sell Kellas Midstream to BlackRock’s Global Energy & Power Infrastructure Funds (GEPIF III) and GIC, a leading global institutional investor, in a joint venture.

Kellas Midstream owns and operates key gas infrastructure in the UK Central and Southern North Sea. Kellas Midstream comprises: (1) the Central Area Transmission System (‘CATS’): a major gas transportation and processing system which takes gas from the Central North Sea to the CATS reception and processing terminal at Teesside in the North East of England; (2) the Esmond Transportation System (“ETS”): a key subsea pipeline in the Southern North Sea connecting four producing fields to the Bacton gas terminal on the North Sea coast; and (3) the Humber Gathering System (“HGS”): a first-of-its-kind greenfield project to build the infrastructure required for the development of the large Tolmount gas field in the Southern North Sea.

Antin initially acquired a 63% stake in CATS from BG (now Shell) in 2014, later acquiring a 36% stake from BP in 2015. Having fully carved out the business and established a standalone entity, Kellas Midstream grew substantially both via organic growth with connection to new major gas fields such as Stella, Caley & Shaw, Culzean and Vorlich, and by expansion in the UK Southern North Sea with the ETS acquisition and the HGS development. Throughout Antin’s period of ownership, it focused on achieving outstanding operational performance whilst maintaining a clear focus on Health & Safety. Kellas Midstream maintained a perfect safety record with zero Lost Time Incidents for 16 consecutive years. The transaction is expected to close in early 2020.

“We are proud of the significant growth and strategic transformation accomplished during Antin’s ownership over the past five years. We are also grateful for the strong partnership and outstanding performance of Kellas Midstream’s talented management team and dedicated employees. We wish them continued success with their new owners” said Mark Crosbie, Antin’s Managing Partner.

Andy Hessell, Kellas Midstream’s Managing Director, said: “We thank Antin for their significant support over the past five years. GIC and the BlackRock GEPIF team recognise the growth potential of the business we have built and share our strategy to continue to invest, grow and build our portfolio of midstream assets and serve all our customers in the North Sea. We look forward to working with our new partners.”

Mark Florian, Group Head of the Global Energy & Power Infrastructure Funds Team at BlackRock, added: “A growing number of institutional investors are seeking exposure to energy and power investments. Within the sector, energy from gas is viewed as a necessary component of the energy transition as we move towards a lower carbon economy. This investment in Kellas Midstream reflects the focus of GEPIF III on making strong equity investments in mid-market energy and power infrastructure and partnering with outstanding management teams.”

Ang Eng Seng, Chief Investment Officer of Infrastructure at GIC, said: “We are pleased to invest in Kellas, a leading provider of high-quality midstream infrastructure with a strong track record. As a long-term investor, we look forward to partnering with BlackRock and Kellas’ management to support the future growth of the company.”

Bank of America Securities and Citi acted as financial advisers to Antin, and Weil, Gotshal & Manges acted as its legal adviser. RBC Capital Markets and Scotiabank acted as financial advisers to BlackRock Real Assets and GIC, and Herbert Smith Freehills and Xodus acted as their legal and technical advisers respectively.

Source: https://www.gic.com.sg/news-and-resources/antin-sells-kellas-midstream-to-blackrock-and-gic/

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The oil market is recovering

Oil inventories have been worked down and beginning to return to historical normalised levels, driven by a mix of robust demand growth on the one hand and concerted efforts by OPEC plus friends to cap production on the other.

While 12-18 months ago heightened geopolitical tensions and operational outages barely moved oil prices, such events are now needle moving news. The outage of Forties at the end of last year and intermittent headline grabbing conflicts in Libya which cause temporary spikes in oil prices are case in point.

However, RBC argues that understanding the breakdown of the inventory story is critical. Data shows that Asian inventories have been worked down which is key for “pulling” crude out of the Atlantic Basin. On the other hand European storage remains in surplus but the clearing of the Atlantic Basin will support drawdowns of European inventory.

Source: RBC Capital Markets, March 2018

It is therefore clear that while the global picture is moving in the right direction, there remains pockets of over and under supply in different regions. The clearing of North Sea crudes, which will be demonstrated by stronger pricing of regional blends such as Ekofisk vs. benchmark is therefore a secondary data point to monitor together with inventory levels for the next step of the global rebalancing story.

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