It’s been a long road for Premier Oil over the last few years, weighed down by high debt levels as oil prices collapsed in 2020. The collapse hit the Premier Oil share price hard, as it dropped from 116p to just 16p in March last year. There’s been a steady recovery since then, with the shares currently sitting around 30p.
As the company prepares to reveal its full-year numbers, the last before it becomes Harbour Energy in April, what will the results mean for the Premier Oil share price?
Premier Oil share price set for safe Harbour?
Premier Oil gained antitrust approval for its re-emergence as Harbour Energy earlier this year in a deal that has seen Chrysaor Holdings take a 77% stake in the new business. The deal sees Harbour Energy become the largest London-listed independent oil and gas company.
The legacy debt will be left behind, with the existing Premier Oil shareholders diluted. Chrysaor will cement its position as one of the biggest North Sea oil producers, as the newly-formed Harbour Energy begins trading at the beginning of April.
The timing is also good, as the recent rebound in oil prices could provide a platform for a host of new investment opportunities at a time when the bigger players in the industry are looking to divest their aging oil assets. Investors will be keeping a close eye on how the deal with Chrysaor impacts the Premier Oil share price.
Chrysaor deal to boost production?
One of the reasons Premier Oil ran into trouble was its high debt level, along with the collapse in oil prices and the Premier Oil share price, at a time when they were looking to acquire further assets from BP. Unsurprisingly the deal collapsed, however that doesn’t mean that other assets won’t become available.
Chrysaor has already acquired a range of assets from Shell over the past few years, and as a result of this deal, could well hope to boost the output capacity of the new company to 70,000 barrels a day.
While the cost of maintaining North Sea assets has seen the major corporations withdraw from this part of the oil business, it is still a fairly lucrative area, accounting for around £24bn in annual sales, as well as around 30,000 jobs. The emergence of these smaller players in the region is likely to mean that in the short term, despite a growing green agenda, there should be enough demand for crude oil to make the new venture worthwhile.
At its last trading update in December production averaged 62,500 barrels per day over the 11-month period, at a time when prices were cratering, before rebounding. A new field, Solan P3 was brought online in September with a production capacity of 10,000 barrels per day, though it came offline in December due to an emergency generator failure.
Will Premier Oil’s results meet its guidance?
The company said it was still on track to deliver on its full-year guidance of 61-64,000 barrels per day. In terms of its outlook, it said it expected 2021 production to come in between 61-66,000 barrels per day.
Premier Oil also has gas assets with the Tolmount Development of four wells, with the first gas output expected to come online in Q2 2021, which is expected to add 20-25,000 boe per day.
This week’s full-year numbers are expected to confirm what was laid out in December, along with progress on its operations in the Falkland Islands, and the Sea Lion project, and an update on the 3D seismic results in Mexico and Indonesia.
Premier Oil reveals its full-year numbers on Thursday. What will the numbers mean for the Premier Oil share price?
Find your flow: four principles for trading in the zone
Learn about the four trading principles of preparation, psychology, strategy, and intuition, and gain key trading insights from some of the world's top investors.
Get this free report
Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.
