NORTH Sea heavyweight Premier Oil is trying to cut the price it will have to pay BP regarding a bumper North Sea deal as the fallout from the coronavirus poses huge challenges for firms operating in the area.

Premier agreed in January to acquire stakes in the Andrew area cluster of fields and the Shearwater development from BP for $625 million (£510m) weeks before the oil price went into freefall as the spread of the coronavirus hammered demand for crude.

The company has been under pressure to scrap the deal from a dissident investor but has appeared determined to press on.

Have big oil firms really got the message on climate change?

However, chief executive Tony Durrant yesterday told Reuters that Premier has asked BP to cut the price of the two fields.

In an update on trading Premier said it would re-engage with stakeholders about the proposed deal and related financing arrangements citing “the ongoing weak oil price environment”.

The talks with stakeholders will also cover a deal to buy a stake in the Tolmount gas field from Dana Petroleum for up to around $250m that was struck at the same time as the agreement with BP.

Premier did not elaborate on what the re-engagement will involve. The company still needs to obtain shareholder approval for the deals with BP and Korean-owned Dana.

It may be prepared to modify its plans to increase its chances of winning the required backing.

Hong Kong-based Asia Research and Capital Management (ARCM) has tried to drum up opposition to the acquisitions, which it reckons were based on over-optimistic assumptions.The hedge fund, which is Premier’s biggest creditor, has said the company should focus on reducing its debts.

North Sea heavyweight wins court victory in contested plan to ramp up expansion

Premier’s experience reflects the dramatic deterioration in trading conditions in the North Sea triggered by the oil price fall.

At the turn of the year the North Sea industry appeared to be established on the road to recovery from the downturn triggered by the crude price plunge that started in 2014.

Premier was one of a number of independents that were eyeing expansion in the area.

However, a trading update from Premier yesterday made clear that the company’s focus has shifted to conserving cash.

The company expects to cut budgeted running costs by around $100m.

Capital expenditure on new assets is set to fall by $140m to $330m.

The update also highlights the logistical challenges that oil and gas firms are facing in the North Sea as a result of the coronavirus.

The expected start of production from Tolmount has been pushed back from later this year to the second quarter of 2021.

The delay follows a temporary lockdown at the yard where the platform that will be used on the field will be built.

With other firms that operate North Sea oil and gas firms also slashing spending the outlook for the supply chain is bleak.

North Sea at 'breaking point' as oil price turns negative in US 

Premier’s chief executive Tony Durrant said the cost-cutting combined with the impact of hedging deals that offset the impact of the oil price fall should help the company to break even “broadly” in cash terms this year.

The group reckons it currently retains adequate liquidity. However, Premier said it has entered discussions with its lending group with a view to potentially securing waivers from some of the covenants attached to borrowings.

The company had net debt of $1.91 billion at April 30, compared with $1.99bn at December 31.

Last month Premier won court approval for the schemes of arrangement related to the planned North Sea acquisitions. ARCM has appealed against the court’s decision.

It has been holding a short position that has allowed it to benefit from a fall in Premier’s share price.

Premier Oil shares closed up 0.69p at 27.69p yesterday. They sold for 118p in January.