CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure. CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure.

Premier Oil shares set to struggle despite support for $325m cap hike

Shares in the UK-based oil and gas company are likely to struggle despite it securing support for its planned $325 million capital raise, according to reports.

  • Premier Oil shares under pressure despite support for £325 million capital raise
  • IEA slashes forecast for global oil demand for H2 2020
  • Brent crude rebounds after slump, but demand concerns weigh on oil prices

Premier Oil shares are likely to struggle despite the company receiving support for a $325 million capital raise, according to a recent report by Reuters.

The capital hike will be linked to debt restructuring, with the company holding around $1.9 billion of net debt on its balance sheet.

The oil and gas company reportedly needs 75% of its creditors to agree to its restructuring plans for the book building process of its planned capital increase to kick-off.

‘We have taken decisive action to safeguard our people and our assets,’ Premier Oil CEO Tony Durrant said in the company’s half-year results in August. ‘We have reduced our expenditure which, together with our hedging programme and the continued underlying performance of our assets, resulted in us generating free cash flow for the period, despite the collapse in commodity prices.’

‘The BP Acquisitions and our proposed long-term refinancing will position Premier to benefit from materially rising near-term production, additional free cash flow generation and a strengthening balance sheet, against a backdrop of a recovering oil price,’ he added.

Premier Oil closed 1.3% lower on Thursday at 19p per share, with the stock down 80% year-to-date.

IEA cuts global oil demand forecast for H2 2020

The International Energy Agency (IEA) slashed its global oil demand forecast in the second half of 2020, with the organisation warning that energy demand is struggling to pick up due to the coronavirus pandemic.

The IEA lowered its forecast for oil demand growth in H2 2020 by 400,000 barrels a day, meaning that global demand is running at 8.4 million barrels a day below that of last year.

‘With the on-coming northern hemisphere winter, we will enter uncharted territory regarding the virulence of Covid-19,’ the IEA said.

‘In last month's report, we said that the market was in a state of ‘delicate re-balancing’. One month later, the outlook appears even more fragile,’ it added.

Brent crude: technical analysis

Brent crude has been clawing back lost ground, with the rise through $41.40 completing a double bottom formation, according to Josh Mahony, senior market analyst at IG.

‘That seems to have paved the way for a strong move higher, with an overnight pullback already being eroded as price moves higher,’ he said.

‘Watch for a break through the $42.78 level to signal another leg higher coming into play, with a bearish phase only emerging if we see the $41.86 level broken.

Brent crude is trading 2.75% higher to $43.38 at the time of publication, while the US West Texas Intermediate (WTI) is up 2.14% to $41.02 a barrel.

How to trade stocks with IG

Looking to trade Premier Oil and other stocks? Open a live or demo account with IG and buy (long) or sell (short) shares using derivatives like CFDs in a few easy steps:

  1. Create an IG trading account or log in to your existing account
  2. Enter ‘Premier Oil PLC’ in the search bar and select it
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
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