On 7 January 2020, Premier Oil announced a proposal for a scheme of arrangement to extend its debt maturities and approve certain acquisitions (available here). ARCM is deeply concerned about Premier Oil’s intention to pursue these acquisitions as they will further expose the Company’s already highly levered balance sheet to significant incremental risks.
ARCM, as the Company’s largest creditor, holding more than 15% across the Company’s debt instruments with blocking positions in two of them, is opposing the Company’s proposal and will vigorously contest any attempt to implement such proposal via a scheme of arrangement.
Until the recently announced proposed acquisitions, ARCM has never objected to any of the Company’s consent requests for investments since becoming a lender in 2016.
ARCM believes there are important questions relating to the acquisitions, the answers for which remain unclear. This site is intended to serve as a resource for other stakeholders of the Company through which these questions can be reviewed, along with ARCM’s observations on any of the responses that may be provided by the Company’s management team.
ARCM’s Involvement with Premier Oil
ARCM has been a supportive creditor of Premier Oil since 2016 and was involved in the Company’s extension of its debt maturities via a scheme of arrangement in 2017.
ARCM has a $455 million position in the Company’s $2.4bn net debt which becomes due in May 2021 (covenant net debt). In addition to its net debt, the Company has $1.2 billion of decommissioning liabilities as outlined on page 16 of its 2019 mid-year result announcement.
ARCM has on numerous occasions sought to engage with the Company and other creditors to find an appropriate strategy which comprehensively addresses the Company’s leverage and 2021 debt maturity. Notwithstanding the concerns that ARCM has repeatedly raised with the Company, the Company has decided to pursue this high risk strategy in lieu of addressing its highly levered balance sheet. As such, ARCM is left with no other option than to oppose the Company’s proposal and vigorously contest any attempt to implement such proposal via a scheme of arrangement.
About Asia Research & Capital Management Ltd. (ARCM)
ARCM is a Hong Kong based credit-focused investment firm with significant expertise and allocation in energy and natural resources. The firm was founded in 2011 and manages several long duration closed-end investment vehicles focused on credit and equity securities.