NORTH Sea heavyweight Premier Oil has passed a milestone in its expansion plan after formalising the terms of a cut-price deal to buy into two big developments.

Premier said it had signed sales and purchase agreements with BP for the acquisition of stakes in the Andrew and Shearwater assets.

The signing of the SPA will allow Premier to lock in the benefit of reductions in the price of the assets which it secured from BP amid the uncertainty triggered by the coronavirus.

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Premier agreed the deal originally in January, when it agreed to pay BP $625m cash on completion of the deal.

Following the plunge in commodity prices from March BP accepted big changes.

Premier will pay $210 million upon completion of the acquisitions and up to a further $115m depending on future oil and gas prices. Its share of the potential decommissioning liabilities has been cut to $240m from $600m.

Premier’s chief executive Tony Durrant said: “The signing of the SPAs with BP is another important milestone in completing the value-accretive BP Acquisitions which consolidates the Group’s position in the UK North Sea, one of our core areas.”

Premier expects to be able to use the cash generated from production from the Andrew and Shearwater assets to help reduce its debts. The deal will allow the firm to utilise tax losses it has accumulated.

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The acquisition provides evidence that some firms see long term potential in North Sea assets, but only at the right price. Premier scrapped a plan to buy an additional stake in the Tolmount gas field from Dana Petroleum, which it agreed in January.

The company has to win shareholder approval for the revised deal with BP and related funding plans.

Analysts at Arden Partners said: “We believe that the BP acquisitions stand a good chance of going through, and that this stands to benefit the (company’s) shares in the coming months.”