Question List 4 – Risks Related to the Magnitude and Timing of Decommissioning Liabilities
LONDON, Feb. 5, 2020 /PRNewswire/ — As detailed in ARCM’s recent statements (available here), we continue to pose questions to the Company relating to the proposed acquisitions. As previously emphasized, ARCM believes these acquisitions will expose the Company and its business to significant incremental risks.
For the benefit of all the Company’s stakeholders, we call upon the Company to provide full and transparent responses to these questions.
In this fourth set of questions, the focus is on the risks associated with the decommissioning liabilities that come with the proposed acquisitions. Specifically, i) the scale of the decommissioning liabilities of the proposed acquisitions which are incremental to the Company’s substantial pre-existing decommissioning liabilities; ii) the “true” acquisition price for the proposed assets, inclusive of this assumed liability; and iii) the risk that some of these liabilities cannot always be deferred.
Company Statements Regarding the Decommissioning Liabilities Associated with the Proposed Acquisitions
- The $600 million pre-tax decommissioning liabilities are not disclosed anywhere in the 17-page presentation that was used for the call with analysts on 7 January
- The “Aggregate Headline Price of $816 million” also does not seem to include the assumed decommissioning liabilities
- The RNS provided the following high level detail: “There is limited near-term decommissioning expenditure expected by Premier, but a medium to long-term liability of $600 million (pre-tax) from 2025 onwards. It is Premier’s intention to retain financial responsibility for the decommissioning expenditure associated with the Andrew and Shearwater Assets, and in respect of the Andrew Area to operate the abandonment of the Andrew Assets.”
- ARCM also understands that, during the Q&A session with analysts on 7 January, the Company said that it could reduce the $600 million pre-tax liability by up to $300 million due to BP’s tax history which will be transferred to the Company