Premier Oil and Noble Energy’s rig accord might pave way for Sea Lion deal – bankers

06 June 2014 – Premier Oil [LON: PMO] and Noble Energy’s [NYSE:NBL] Falkland Island rig-sharing deal may be a signal for further deals between the two companies, two sector bankers suggested.

On 4 June Premier Oil and Noble Energy announced a six well drilling campaign that will begin next year. “This rig deal suggests the will be more to come. Obviously the companies know each other well. They have to co-operate as you can’t fly in virgin territory alone. It’s too much in terms of capex,” said one of the bankers. “The drilling programme will add to the resource base and may make one company look like an attractive target to another.”

The second sector banker agreed the rig-share may help pave the way for Noble to farm in to Sea Lion, but added that he expected Premier Oil to complete its search for a new CEO before finalising such a deal. “It is a lengthy process to sell down,” he said. “And I would expect the firm to wait until a new CEO is in place – just out of courtesy.”

Premier Oil and Noble Energy declined to comment.

Mergermarket reported on 18 May that Noble Energy was in farm-in talks with Premier Oil and Rockhopper Exploration [LON:RKH] over the offshore Falkland Islands Sea Lion project. 

At that time, this news service said that the US group was looking to acquire an interest in the asset of between 15% and 20% from each company. Confidentiality agreements have been signed by all parties, and, if successful, the deal would be announced within four months, a source said at the time.

Premier oil owns 60% of the Sea Lion oil development project (458 mmbbls gross), and Rockhopper owns 40%. It is expected to have a peak output of 100,000 barrels per day (gross) but has been blighted by delays, with the first oil date pushed back to 2019 from 2017. A sector analyst estimated the value of the Sea Lion project, unrisked, at about USD 2.35bn. 

In January, Premier announced it wanted to sell up to a 30% stake in Sea Lion to reduce the group’s capex exposure.

Noble Energy has a 35% equity stake in a 10 million acre zone south and east of the Falkland Islands, after entering into a farm-in deal with Falkland Oil and Gas in 2012.

by Katie McQue

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