Berenberg bumps up target price on Premier Oil

Following confirmation of the revised terms for Premier Oil's acquisition of the Andrew Area and Shearwater assets from BP, Berenberg adjusted its valuation to highlight the net asset value impact of the deal completing.

Berenberg estimates that, if the acquisition of the Andrew Area and Shearwater assets from BP is completed, Premier's core net asset value at 1 January 2021 would increase from $174m to around $710m - a 310% uplift.

However, the German bank said this assumes that the $210m cash payment on completion was offset by the recent issue to Asia Research and Capital Management (ARCM) and a subsequent $185m equity raise.

"A key variable is the price at which the equity required to fund the deal is raised; in the context of the recent issue to ARCM, we use 30p as our base case," said Berenberg.

Berenberg highlighted that the net impact was an increase in its price target to 40p, in line with the firm's core net asset value.

"Upside exists both in the development portfolio and in the equity pricing, but our cautious approach reflects the steps still required to complete the deal – notably creditor and shareholder approval, and the equity raise itself."