LONDON (ShareCast) - (Sharecast News) - Premier Oil reported operating cash flow of $324m (£247.61m) in its first half on Thursday, down from $545m year-on-year.
The London-listed firm said its free cash flow for the six months ended 30 June totalled $25m, sliding from $188m a year earlier, while its net debt narrowed to $1.97bn at period end, from $1.99b at the end of December.

It recorded a $32m loss after tax for the first half, before one off non-cash charges of $639m, resulting in a $672m loss after tax, swinging from a profit of $121m in the first half of 2019.

Premier Oil said its forecast 2020 total capital expenditure of $340m, operational expenditure of $12 per barrel of oil equivalent, and lease costs of $6 per barrel of oil equivalent, reflected $240m of savings and deferrals that had been secured.

The board said it was forecasting positive free cash flow for the full-year at its current forward curve, before any contribution from the cash-generative BP assets.

It also announced a proposed long-term refinancing to reset its capital structure, which the board said would allow the company to "materially reduce" debt over time.

"We have reduced our expenditure which, together with our hedging programme and the continued underlying performance of our assets, resulted in us generating free cash flow for the period, despite the collapse in commodity prices," said chief executive officer Tony Durrant.

"The BP acquisitions and our proposed long-term refinancing will position Premier to benefit from materially rising near-term production, additional free cash flow generation and a strengthening balance sheet, against a backdrop of a recovering oil price."

For its refinancing, Premier said its $2.9bn of gross committed debt facilities, including letters of credit and the mark-to-market liability of cross currency swaps used to hedge the historic currency and interest rates exposure, would be refinanced with non-amortising facilities, extending its credit maturities from May 2021 to March 2025.

Its covenant profile would also be reset, which would provide headroom in a prolonged lower commodity price environment.

A harmonised interest rate of 8.34% would be applied to Premier's cash credit facilities from the refinancing effective date, with the board also noting the previously-announced $230m equity raise to fund the proposed BP acquisitions, and to pay transaction costs.

Premier said a further $300m of new equity would be raised concurrently to reduce debt, of which $205m would be underwritten by the company's senior creditors, who would convert existing debt into equity so that the $300m was not raised from existing shareholders in a pre-emptive offer, or from new investors.

It said the refinancing would be conditional on total take-up under the equity raise being at least $325m, excluding the underwriting by creditors.

"The proposed refinancing remains subject to a number of matters including, among other things, finalisation of a detailed term sheet for credit committee approvals, the $325m minimum equity take-up, and long-form documentation," the Premier Oil board said in its statement.

"Completion of the BP acquisitions and the refinancing is anticipated to take place during the fourth quarter of 2020."

At 0926 BST, shares in Premier Oil were down 17.3% at 28.11p.

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