Business Overview
Premier Oil Plc (LON: PMO) is a London, United Kingdom-based multinational oil and gas exploration and production company. The company has oil and gas interests in Latin America, the Falkland Islands, South East Asia and the North Sea, where the group seeks to invest in high-quality opportunities.

Recent News
On 7th January 2020, the company announced the acquisitions of Andrew Area and Shearwater assets. They would be acquired from BP (BP Plc) for 625 million US dollar. It has also announced the acquisition of 25 per cent stake in the Tolmount Area assets from Dana for 191 million US dollar plus contingent payments of 55 million US dollar. These transactions will contribute to augment group’s production by 2024.

On 16^th January 2020, The Group has announced that its creditor meetings for the acquisition related Schemes would be held on 12 February 2020, and the meeting related to sanctioning of Schemes expected to take place in March.

Trading and Operations Update (as on 7th January 2020)
At the upper end of full-year guidance, the production was 78.4 kboepd in 2019, underpinned by continued high rates from the Premier-operated Catcher Area and high operating efficiency. The company continues to anticipate First Gas before year-end, with Tolmount adding 20-25 kboepd to Premier Oil production once on the plateau. During the first half of 2020, the company plans to select the optimal field development, through Tolmount East project sanction and aimed for the second half of 2020. For 2019, the company expects opex, excluding lease costs, of US$11/boe and total capex of US$300 million. Net debt decreased by more than US$330 million to US$1.99 billion from US$2.33 billion and was in line with the guidance.

The company will announce its final results for FY2019 on 5^th March 2020.

Share Price Performance

Daily Chart as on 3^rdFebruary 2020, before the market closed (Source: Thomson Reuters)

On February 3^rd, 2020, Premier Oil Plc shares were trading at GBX 99.31 at the time of writing before the market close (at 8:02 AM GMT), down by 1.0 per cent against the last day closing price. Stock's 52 weeks High and Low are GBX 120.70/GBX 64.48. The stock price has given38.42 per cent returns during the previous year. In the last three months, it has given15.03 per cent returns.

Conclusion
The company has witnessed a strong operational performance for the fiscal year 2019. For 2020, the total production and development capex will be US$320 million. Further, the company expects to spend US$30 million on abandonment and US$90 million on appraisal and exploration. The company's robust operational performance in the financial year 2019 has created substantial free cash flow for the company, enabling them to materially decrease the debt levels and to invest selectively in the portfolio for upcoming growth.  The Tolmount development will provide a step up in the company’s production once on-stream at the year-end 2020 and is also making good progress. These acquisitions are in line with the asserted strategy of acquiring cash-generative assets in the United Kingdom North Sea and are materially value accretive for the company. From the acquired assets, the cash flow generated will also hasten the deleveraging of the company's balance sheet. The company is also looking forward to drilling its first well in Alaskawhich could be a potentially transformational well for Premier Oil. The company’s prospects look good and it could provide an attractive opportunity to invest for the long term.

The company’s gross profit has grown from $406.2 million in FY 2015 to $897.50 million in FY 2018, delivering growth of 30.2 per cent on a CAGR basis.

Therefore, based on the above rationale, we have given a “Hold” recommendation at the current price of GBX 97.50 (as on 3rd February 2020, before the market close at 8:05 AM GMT).

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