Premier Oil and BP have revised the consideration of their previously announced transaction pertaining to certain UK North Sea’s assets of the latter to $210m followed by $115m in target-based payments.

As per the deal signed in January 2020, Premier Oil agreed to acquire stakes of BP in the Andrew Area and Shearwater assets for $625m.

The companies, which are looking to close the deal by September end, have adjusted the structure of the consideration and phasing of payments in line with the material developments in global commodity markets.

As per the proposed revised arrangements, the original consideration is being set off by nearly $300m of estimated interim period cash flows to be retained by BP. The additional payment of $115m will only be paid based on higher oil and gas prices in the future.

Details of the North Sea assets being acquired by Premier Oil

Through the deal, Premier Oil will be acquiring BP’s operating interests in the Andrew area and the latter’s non-operating 27.5% stake in the Shell-operated Shearwater.

Included in the Andrew assets are the Andrew platform, five fields, and associated subsea infrastructure. The five fields in the Andrew Area, which are involved in the deal are Andrew, Arundel, Cyrus, Farragon, and Kinnoull, which produce via the Andrew platform, located about 225km north-east of Aberdeen.

Following the revised terms of the deal, BP will also retain 100% of the existing Shearwater abandonment costs and half of the existing Andrew Area abandonment costs.

In late April, Premier Oil secured approval from the Court of Session in Edinburgh in Scotland for the creditor schemes of arrangement required for implementing the acquisitions of the BP assets.

The company stated: “The proposed BP Acquisitions are in line with the Group’s stated strategy and will strengthen Premier’s business through the addition of operated, low cost, producing assets. The Andrew Area and Shearwater assets, which will contribute to rising Group production, are immediately cash generative even at current commodity prices and will accelerate the use of Premier’s $4.1 billion of UK tax losses.

“The additional free cash flow generation will accelerate debt reduction and the deleveraging of Premier’s balance sheet.”