London Markets: Premier Oil surges after snapping up assets of BP and Dana

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Premier Oil shares jumped as much as 20% on Tuesday after announcing deals to buy assets from BP and Dana Petroleum.

Premier Oil PMO, +13.95%  said it’s reached a deal to buy the assets in the central U.K. North Sea from BP BP, -1.10%   in a $625 million deal as well as a 25% stake in the Tolmount area it operates from Korea National Oil Corp.’s Dana Petroleum for $191 million. Premier Oil said it will fund the deals by raising $500 million from shareholders.

Taken together, Premier Oil said the assets will generate over $1 billion in free cash flow by the end of 2023 and add 82 million barrels of oil equivalent of reserves and contingent resources at an implied cost of less than $10 per barrel of oil equivalent. Premier Oil also reported 2019 production at the upper end of full-year guidance.

“On the face of it, the deal to purchase $800 million of North Sea assets makes a lot of sense in that it is in an area Premier Oil understands, ensures efficient use of tax losses and improves borrowing covenants,” said Job Langbroek of Davy, which rates Premier at neutral.

Premier Oil was the best performing stock in the mid-cap FTSE 250. The worst was Aston Martin Lagonda AML, -16.55%  , which plummeted 15% as the struggling car maker reported lower sales, higher selling costs and lower margins in December and didn’t give an update on its expectations for fiscal 2020.

The large-cap FTSE 100 UKX, -0.02%  drifted in and out of positive territory, rising 0.21% to 7591.09 in Tuesday afternoon trade, as the overhang of U.S.-Iran tensions diminished somewhat.

The biggest FTSE 100 gainer was Ocado Group OCDO, +3.74%   , up 4.4% after the latest grocery market share figures from Kantar. Ocado’s sales rose 12.5% in the 12 weeks to Dec. 29.

J Sainsbury SBRY, +1.90%  and Wm Morrison Supermarkets MRW, +1.61%  also rose though each saw declining sales over the last quarter. Morrison separately said trading conditions remained challenging but cost control will allow it to report pretax profit before exceptional items in line with analyst forecasts.

Two targets of short-seller Muddy Waters had mixed days. NMC Health NMC, -7.00%   shares fell nearly 7%, its second day of losses, after announcing on Monday the four people to lead an independent review and confirming the cash on hand as of Dec. 15.

Litigation finance firm Burford Capital BUR, +2.41%   meanwhile rose 3% as it made a number of management changes, including announcing co-chief operating officers, and said a U.S. class-action lawsuit was dismissed. Muddy Waters issued a statement saying none of what the company announced counters its allegation of manipulating performance metrics.

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