Today's assassination with a pen from Zac Phillips at SP Angel is on Premier Oil (PMO) with a stark warning that things may be an awful lot worse than any share price rally might imply. Ouch. Zac writes:
I previously noted the importance of a successful conclusion to Premier Oil’s (PMO) bank lender discussions, and made the case that a very large equity raise was probably needed to put the company back on a sound footing. This morning finally sees some news on those lender discussions, made necessary by Premier’s inability to satisfy its covenants.
Yesterday in Part 1, I outlined the gravity of the situation facing Premier Oil’s (PMO) equity investors. In that piece, I presented my view that the purchase of E.ON’s North Sea assets was an attempt to temporarily fix a covenant breach situation, but that any profits it generates are unlikely to be material against Premier’s debt pile.
Anyone lucky enough to buy independent exploration and production company Premier Oil (PMO) around the January lows achieved a two-bagger in quick time as the shares rallied rapidly from around 20p to achieve a high of 75p last month. It is currently capitalised at £360 million ($500 million) and is a favourite on the bulletin boards. Sadly, it’s not yet clear that Premier has its house in order. There could be some serious pain yet to come.
Premier Oil (PMO) has today served up full year numbers and all things considered it is not quite the horror show it could have been. The E.On acqusition looks transformational but hang on...what is this in the final sentence of the opening verbage:
On Monday Premier Oil (PMO) announced the sale of its Norwegian assets for $120million cash. The company will use the money to help pay down some of its sizeable debts. According to its half yearly report, Premier had net debts of just over $2billion versus cash and undrawn debt facilities of $1.5billion. The business is clearly struggling, as reflected by its share price performance over the last eighteen months. On the verge of tumbling out of the FTSE250, Premier trades at 74p (last seen) and has a market cap of £376million. If things don’t improve for Premier in the near’ish term, this could have a nasty effect on Rockhopper (RKH) and, more specifically, commercialisation of the Sea Lion discovery in the North Falklands Basin.
If you want me to analyse a stock for you just drop me a line at sqmir@hotmail.com - Today I look at shares of Glencore (GLEN), Plethora Solutions (PLE), Premier Oil (PMO) and offer some share price targets.
With so many oil companies having been hit so hard it can be difficult to pick which ones offer the best value and a good chance of recovery. With its share price currently within 20% of the lows we saw when oil plummeted to around $45 late last year, I think Premier Oil (PMO) is worth a look.
FTSE-250 constituent Premier Oil (PMO) has this morning noted that exploration well 16/4-6S on the Luno II prospect (Premier: 30%) in the Norwegian North Sea “has resulted in a potentially significant oil discovery”. This has helped Premier’s shares up just over 5% to 381.4p at the time of writing. This is up from late 2008 lows of little more than 116p and 336.5p at which the shares commenced 2013. They did however hit 535p in early 2011 and the following updates on today’s announcement and its significance from an investment point of view.
