Berenberg lowers target price on Premier Oil

Analysts at Berenberg more than halved their target price on exploration and production firm Premier Oil on Monday, stating that some positive refinancing headlines had been offset by a reduction in net asset value.

Berenberg said confirmation of Premier's debt refinancing terms was "positive" but highlighted that the increased equity raise, and muted net debt reduction due to settlement of currency swaps, had led to "a significant reduction" in NAV.

"The significant increase in the shares in issue, combined with limited debt reduction, results in a significant reduction in core NAV on a per-share basis," said Berenberg.

Berenberg incorporated Premier's first-half results and guidance into its forecasts, resulting in a net impact of an 11% reduction in core NAV to $647.0m - with the company now trading on a 2021 enterprise value/underlying earnings ratio of 4.3x and a free cash flow yield of 20%.

The German bank also said mark-to-market and settlement of cross-currency swaps were expected to cost Premier roughly $150.0m which, along with 1% amendment/repayment fees, should lead to around $120.0m in immediate net debt reduction.

Berenberg adjusted its price target on Premier down to 20.0p from 45.0p but kept its 'hold' rating on the company unchanged.