Should you buy Premier oil shares? It is an interesting question and, as is usually the case, the answer comes down to balancing the pros and cons while considering the wider market. It is probably rather difficult for anyone who has followed the fortunes of oil over the past five years to approach such a question with an open mind when we consider the historic slump in oil prices that occurred from 2014 to 2016. Although there has been a slow recovery since then, the after-effects of the plummeting oil price are still being felt and will continue for some time. The fortunes of Premier oil shares have mirrored those of the wider oil market. For instance, you could have bought into Premier in 2015 with oil at $50 a barrel and seen the price nearly half the value of your stock fall even further. If you held on to your shares, then by May 2018 they would probably have almost regained their original value. As a reward for your steady nerves and refusal to be panicked, the forecast for 2018 to 2023 is for steadily increasing oil demand. It might look as if your Premier stock might not be such a loss after all. So, would it now be time for you to either increase your stake or get into Premier if you are new to the oil market?
To set against these good signs for the future of the company and for Premier oil shares is the aftermath of the slump in prices and what it brought with it, specifically growing debts and cutbacks in investment. Premier has been trying, albeit slowly, to reduce its debts. In 2017 it managed to bring them down a little, from £2,765 million to £2,724 million, and in the process increased its cash resources from £256 million to £365 million. Further asset disposals were planned for 2018, notably Premier’s sale of its stake in the Babbage region, which included a 50% interest in the promising Cobra discovery as well as a 47% interest in the main Babbage gas field. This sale, to Verus Petroleum, was slated to raise a minimum of £256 million, with an extra £5.5 million if the Cobra discovery was further developed. This, you might say, is all well and good but even £50 million plus is a drop in the ocean compared to over two billion in debt. It is, however, a further demonstration of the company’s determination to bring its balance sheet back under control. Does this determination indicate that the bad days are coming to an end for Premier? Certainly, the company’s oil assets will continue to increase in value as the demand for oil grows, and the company has reconfirmed all of its facilities until at least May 2021. To set against this, one of the balance sheet rectifying measures announced in 2018 was a cut in Premier exploration spend. This may too affect your decision or whether or not to buy Premier oil shares.
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