By Connor Campbell, Financial Analyst, Spreadex
Stock of the day: Premier Oil (LON:PMO) PLC
Despite a string of largely positive statements Premier Oil has struggled with the same issues plaguing the rest of the commodity sector in 2017, namely Brent Crude’s own overproduction/lower demand difficulties. Those difficulties have seen the stock go from a 16 month, 99p peak in January to a 14 month, sub-43p low in June – it now sits at a current trading price of 54p.
The main focus for Premier Oil this year has been its ongoing refinancing discussions. In January the company promised a deal would be forthcoming, while during March’s full year results – where Premier Oil shrank its pre-tax losses from $829.6 million to $390.6 million year-on-year – it said refinancing would be completed by the end of May despite one of its bondholders, Pyrrho Investments, voicing its disapproval.
Cut to May and, alongside stating it was nearing the end of the refinancing deal, Premier Oil claimed that it would be able to significantly slash its $2.8 billion debt pile (by an admittedly unspecified amount) in 2018 thanks to reduced spending and better than forecast production in 2017.
While none of this could help out the company’s stock price, an update in mid-July soon lifted Premier Oil away from its 43p to 45p lows. On July 12th the company revealed it had made a ‘world class’ oil discovery in the Gulf of Mexico that could potentially produce up to 2 billion barrels. And though Premier Oil only owns 25% of the block, compared to the 40% and 35% owned by Sierra Oil & Gas and Talos Energy respectively, investors were clearly delighted with the find, sending the stock 34% higher in a single session.
Just a day later the firm continued the run of good news, posting a 34.2% surge in first half production to 82,100 barrels of oil equivalent per day (boepd), with operation costs also down 11% to $14.70 per boe. Premier Oil then capped off a stellar July with the confirmation that it had finally completed its refinancing at the end of the month.
While Premier Oil kept its full year guidance at 75,000 boepd back in July, it is expected the company will hike that figure on Thursday, leaving plenty of room for an earnings upgrade as well. That’ll hopefully help out its stock, which has somewhat lagged since the Gulf of Mexico discovery was announced 6 or so weeks ago.
Premier Oil PLC has a consensus rating of ‘Hold’ with an average target price of 85.9p.
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