Sticking with the theme of retail bond from my last blog, nice to see some decent numbers reported at Premier Oil.  I’m a fairly substantial holder of Premier Oil’s retail bonds which I bought into a few years ago when oil prices cratered – and the bonds halved in value.

I’ve sat tight and subsequently have also bought some additional warrants that came with a refinancing that came into effect on July 2017.

That refinancing pushed out the redemption date to 31 May 2021 and increased the coupon to 6.5%.

The retail bonds now trade at around £102 each.

That strikes me as a more than decent price given the duration of under two years. Why my optimism?  Premier Oil is steadily lowering the mountain of debt and is generating more and more cash.

More to the point the chances of the equity being entirely wiped out – and thus the bonds threatened – is fairly low in my opinion over the next two years. In sum, there is more than decent headroom and in the meantime, you are collecting a near 6.5% yield.

Of course, any number of things could go wrong, most pertinently a nasty global recession which pushed oil prices back below $50 a barrel. Equally some things could go right. Geopolitics could intervene and oil prices could shoot up. Premier might also execute well and increase cashflows.

In sum then I’m very happy to sit tight and pick up the yield.

The recent H1 results are summarised below. The key metric for me was that  Free cash flow generation hit $180m during the period, reducing net debt to $2.15 bn. Overall, I’d say the business is in decent shape.


  • 2019 1H production averaged 84.1 kboepd, up 11 per cent on the 2018 corresponding period
  • On track to meet previously increased full year production guidance of 75-80 kboepd
  • Free cash flow generation of $180m during the period, reducing net debt to $2.15 bn
  • Significant resource upgrade at Zama (Mexico) to 670-810-970 mmboe (P90-P50-P10) (gross)
  • Tolmount, Premier’s next UK growth project, on schedule for first gas end 2020
  • Tolmount East appraisal well spud imminent, targeting an additional 220 Bcf (gross)
  • Increased Andaman Sea acreage position; significant area potential
  • Forecast 2019 opex (ex-lease costs) reduced to $12/boe; capex guidance unchanged ($340m)
  • Continue to forecast full-year 2019 net debt reduction of over $300m