Following its acquisition of Oilexco in 2009, Premier Oil—the
independent UK-based oil and gas production and exploration
company—wanted to strengthen its financial analysis capabilities for
optimal due diligence, ahead of further potential transactions, ensuring any
new solutions were fully integrated with its existing economic systems.
From a portfolio perspective, acquisition activity must be accurately
planned—overall portfolio size is often dramatically expanded, upon deal
completion, by the assets of the acquisition target. Economic and financial
systems must handle this rapid portfolio growth, so the value of a potential
acquisition can be fully understood and leveraged.
Following the Oilexco acquisition—to ensure that, for the enlarged
group, optimal due diligence was undertaken for future deals—Premier
wanted to implement a financial and economic model which was
- scalable, so new fields could be added as required
- flexible, to allow fields to be moved into different groupings with immediate incorporation into all totals
- integrated with all corporate data sources
- user friendly—delivering the ability to access forecasts and reports at the touch of a button.
Merak integration
After meeting with Schlumberger to discuss requirements, it was agreed
that the Merak Fiscal Model Library (FML) would be introduced. Premier already
used Merak Peep petroleum economic evaluation and decline analysis software. In
addition, after a short pilot evaluation, Premier also added Merak Petroleum
Financials (MPF).
The implementation involved developing MPF models for the areas in which
Premier was active—the United Kingdom, Indonesia, Pakistan, Vietnam,
Mauritania, and Norway. These models allowed regional and group-level
operations to be consolidated to produce profit and loss, cashflow, and balance
sheet statements. Premier’s financing arrangements were fully
modeled.
Premier used the new, integrated system to evaluate the overall economic
and corporate impact of prospective deals to increase its stake in the Wytch
Farm Field in Dorset, UK, and fully acquire EnCore Oil—the North Sea
exploration company. The standardized fiscal models within Merak FML were
combined with consistent economic data from Merak Peep, then exported to MPF to
produce detailed intelligence reports, used to drive financial decision making.
All this proved crucial in the due diligence process for both deals.
Deal-closing intelligence
Through its hierarchical modeling capability MPF generated reliable,
standardized economic and financial reports reflective of Premier’s legal
and managerial structure and responsibilities. It allowed the prospective
portfolio asset data to be forecasted to ensure no bank covenants would be
breached.
Use of the Merak suite of software helped Premier evaluate and close
both deals—the company more than doubled its stake, to over 30% of the
Wytch Farm field, and fully acquired EnCore Oil. The new, integrated Premier
economic system—based on Merak software—delivered the required
scalability, agile reporting, and analysis required to conclude these deals
with a clear understanding of the range of uncertainty in various scenarios.
An unlimited number of new or prospective assets can now be easily
incorporated into the existing portfolio, and can be evaluated at multiple
price scenarios across multiple geographies with varying fiscal regimes.
MPF illustrative outputs:
