When I bought some Premier Oil(LSE: PMO) shares back in September 2015 at 99p apiece, it was based on my thoughts that they were close to a maximum pessimism rating and that a recovering oil price would help the company get its huge debt burden under control.
And well, the price plunged further and trading was suspended, though we've seen something of a recovery -- but with oil stuck at around $50 per barrel, I'm still waiting for that to pick up.
This week's update has given me a little more confidence, as the company's debt refinancing plan is coming together, with everything set to be concluded within the next couple of months. Net debt does still stand at a lofty $2.8bn, but strong production continuing into 2017 has led chief executive Tony Durrant to say: "We plan to be cash flow positive in 2017 with more significant debt reduction in 2018."
On the production front, Premier reiterated its current full-year guidance at 75,000 barrels of oil equivalent per day, but told us that current production is averaging 82,600 barrels, and that it will "will provide updated production guidance once the summer maintenance period has been completed."
Many have taken that to mean guidance is likely to be upgraded, especially with Premier's Catcher field on track for first oil this year and its Zama exploration prospect looking set to spud this month.
As I write, Premier shares are trading at 59.75p, and I really am thinking this could be close to the end of sub-60p levels -- and the finalising of the refinance deal and any upgrading of 2017 expectations might just be the two events needed to bring about an upwards re-rating. I'll keep waiting for oil prices to rise.
Even bigger debt
The debt mountain pressing on Tullow Oil(LSE: TLW) makes Premier's seem almost like small change. At December of 2016, net debt stood at $4.8bn, though there has been a $750m rights issue since then.
That cash call shocked the market when it was announced, with observers still hoping that a renegotiated debt deal like Premier's might save the day, and the share price took a tumble. Since then it's recovered a little to 201p, but we're still looking at a decline in 2017 of 35% (while Premier shares are down 19% since the start of the year).
Cost savings and debt reduction are still the order of the day, and Tullow is critically dependent on its reserve-backed lending facilities. But there's pressure on those, with the firm having agreed to reduce its revolving credit usage significantly in the coming 18 months, and it's not at all certain that further rights issues won't be needed.
But in the other lane in the race against time is Tullow's production prospects. First oil from the firm's TEN project helping produce positive free cash in the final quarter of 2016 marked a key point -- and it will hopefully help accelerate debt reduction this year.
After three years of reported losses, Tullow is finally expected to turn in a pre-tax profit this year, admittedly of only around £165m. But that's expected to rise to £300m a year later, and it could be the pivot point.
In terms of liquidity, I can still see it coming down to the wire, but I think we're past the bottom for Tullow shares now.
Alan Oscroft owns shares of Premier Oil. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.