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Oil giant BP has agreed to heavily discount the price of North Sea assets it is planning to sell to Premier Oil.

The two companies reached a deal in January which would have seen Premier pay $625m (494m) for BP's interests in the Shearwater and Andrew fields.

Under new provisional terms drawn up following the slump in oil prices, the price has been cut to $210m (£166m).

A further $115m (£90m) will be payable to BP only if oil climbs above $55 a barrel. It currently stands at $41.

The new agreement ends a legal dispute with Premier's largest creditor, hedge fund Asia Research and Capital Management (ARCM), which had opposed plans by the energy firm to extend its debts and make acquisitions.

Premier said it would issue new shares to ARCM representing nearly 9% of the enlarged group, the proceeds of which will be used to fund part of the proposed BP deal.

'Good progress'

Meanwhile, Premier said it had made "good progress" in agreeing the principal terms of a "Stable Platform Agreement" with a subset of creditors representing more than 40% of its debt facilities.

Once agreed and finalised, the terms will be put to the wider creditor group for approval.

Premier chief executive Tony Durrant said: "We are pleased to have agreed revised terms with BP for the proposed acquisition of the Andrew Area and Shearwater assets, which are materially value accretive for the company.

"The Stable Platform Agreement, once agreed with and approved by lenders, will provide a basis for the company to continue discussions regarding proposed amendments to the group's existing credit facilities."

Premier and BP said they intended to complete the proposed acquisitions, subject to debt and shareholder approvals, by 30 September.

BP has a 28% share in the Shell-operated Shearwater gas field which lies about 200km (125 miles) east of Aberdeen.

The BP-operated Andrew Area is located 230km (140 miles) north east of Aberdeen.