MARKET REPORT: Short-seller burned as Premier Oil shares soar

Premier Oil is facing a public showdown with its largest creditor over plans to refinance and go on a North Sea acquisition spree.

The FTSE 250-listed energy group yesterday revealed plans to buy BP oilfields in the region for £475million and an agreement worth up to £188million to buy assets from Korea’s Dana Petroleum.

The announcement came alongside £2billion refinancing proposals that would give it breathing room until 2023.

But its biggest creditor, Hong Kong-based hedge fund Asia Research & Capital Management (ARCM), has vowed to fight the strategy, urging Premier to ditch the deals and plough all its money into paying off debt.

City insiders say shareholders are furious that ARCM is kicking up a storm when it also has a huge short position against Premier.

Although ARCM has bought around 15 per cent of Premier Oil’s debt, it has also short-sold a whopping 17 per cent of its stock – meaning it would make a huge gain if its shares lost value.

It is quite a common strategy for hedge funds betting on a company’s long-term gain – by buying debt – to balance this out in the near-term by shorting some stock.

Premier argues that the North Sea deals would help bring in an extra £760million by 2023.

So the rabid fight back against what seems to many to be a good option has raised eyebrows.

And even if ARCM has pledged to disrupt the deals, it is not clear that it can, as Premier is just shy of the 75 per cent of its creditors needed to give their backing.

Premier closed up 16.1 per cent, or 16.3p, to 117.75p but the face-off is far from over yet. London’s two listed oil majors slid as crude prices went into reverse, falling by 1.4 per cent to around $68 a barrel.

BP fell 1.1 per cent, or 5.3 per cent, to 498.8p, while Royal Dutch Shell shed 0.6 per cent, or 14.5p, to close at 2299p.

Oil surged after a US drone strike last week killed a top Iranian general, raising the prospect of a conflict between the two countries.

The FTSE 100, which is sensitive to international events, was treading water, ending virtually flat by closing 0.02 per cent, or 1.49 points, lower at 7573.85. Meanwhile, the FTSE 250 rose 0.33 per cent, or 72.15 points, to 21,832.68.

NMC Health, which has been under siege from short-seller Muddy Waters, tumbled 10.6 per cent, or 177p, to 1494.5p. Finablr, a currency exchange firm which was also set up by NMC’s founder, fell 5.8 per cent, or 9.5p, to 154.5p.

After the stock market closed, it was revealed that two Middle Eastern businessmen were set to sell around £370million shares in NMC, and £57million in Finablr.

Saeed Mohamed Butti Mohamed Khalfan Al Qebaisi and Khaleefa Butti Omair Yousif Ahmed Al Muhairi said they were selling the shares to help pay off their own debts. 

But this will come as little comfort to shareholders in the firms, who are worried that Muddy Waters’ attack on NMC will continue to ward off new investors.

Marks and Spencer was given a boost by brokers at Berenberg, who bestowed on it a rare double upgrade from ‘sell’ to ‘buy’ ahead of its third-quarter trading update tomorrow. 

Berenberg analysts think there will be a ‘significant improvement’ in its clothing and home arm and shares rose 2.5 per cent, or 5.3p, to 218.4p.

Technology group BATM was on the up after it received its first commercial order for a new DNA-based medical diagnostics system from an Italian medical equipment distributor. Its stock edged 6.5 per cent higher, up 2.5p, to 41p.

Sirius Minerals closed at its highest point since September, with shares rising 12 per cent, or 0.4p, to 4.1p. Shares in the Yorkshire fertiliser miner are notoriously volatile.