Oil and gas firm Premier Oil (PMO) bounced from its record lows, up 46.3% to 18.5p, as it moved to reassure investors about its financial position.

The company said it was planning to cut capital expenditure by at least $100m as it works to conserve cash amid a collapsing oil price, though it concedes its debt covenant position could be impacted by ongoing oil price weakness.

The company said its assets were continuing to perform well and reiterated its annual production guidance of 70,000 to 75,000 barrels of oil equivalent per day.

Premier Oil said it had hedged about 30% of its full-year 2020 oil and gas entitlement production at an average oil equivalent price of $60 per barrel.

‘SIGNIFICANT LIQUIDITY’

It also said that it had 'significant liquidity', with unrestricted cash of $135m and undrawn facilities of about $330m, as at the end of February.

The company said its 2020 cash flow breakeven price was under $50 a barrel and a $5 barrel move in the oil price was expected to result in an around $50m move in free cash flow.

'Assuming a $100m reduction in planned 2020 capex and $35 per barrel oil price for the remainder of the year, the group would expect to be broadly cash flow neutral in 2020,' Premier added.

A court hearing on a plan to extend debt facilities and progress acquisitions in the North Sea is still scheduled for 17 March – with major creditor and shareholder ARCM continuing to oppose the transactions. It says Premier is ‘running out of money’.

Cantor Fitzgerald said: ‘The cash flow comments should calm a few nerves, but it sounds as though creditors (save for ARCM) will need to be supportive (again). Acquisitions must be in doubt, however.’

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Issue Date: 13 Mar 2020