RBC Capital upgrades Premier Oil after recent share price weakness

The bank said Premier’s FY17 results underlined the progress made by the business last year, refinancing and delivering first oil from the Catcher field.

"Premier remains one of our preferred deleveraging stocks and following recent share price weakness we are upgrading to outperform ahead of material debt repayment H2/18 as production ramps up from Catcher and capex tapers."

RBC said that based on the current oil price of around $65 a barrel, FY18 guidance on production and capex, it expects net debt to reach around $2.25bn by YE18, with the net debt/EBITDA multiple moving below 2.5x, which is well within 3x covenants.

It also said that following the accelerated conversion of the convertible bonds, the company is likely to achieve compliance even at $55/bbl average for 2018.

In addition to deleveraging, Premier has drilling catalysts, with appraisal drilling starting on the 400-800 million barrels Zama discovery as early as the second quarter of this year, depending on the rig contracting strategy. Meanwhile, four wells are planned over the coming 12/18 months on both blocks.

At 1450 GMT, the shares were up 7.5% to 76.26p.