TIDMPMO
RNS Number : 5332J
Premier Oil PLC
07 April 2015
Premier Oil plc (the "Company")
Annual Report and Financial Statements 2014
and Notice of Annual General Meeting 2015
7 April 2015
Further to the release of the Company's Annual Results on 26
February 2015, the Company announces that it has today published
its Annual Report and Financial Statements 2014. In addition, the
Company has posted to shareholders the Notice of Annual General
Meeting ("AGM") 2015. The AGM will be held at the Institute of
Directors, 116 Pall Mall, London SW1Y 5ED, at 11.00am on Wednesday
13 May 2015.
In accordance with Listing Rule 9.6.1., copies of the Annual
Report and Financial Statements 2014, the Notice of AGM and related
form of proxy have been submitted to the UK Listing Authority and
will shortly be available for inspection from the National Storage
Mechanism at www.morningstar.co.uk/uk/nsm. The documents (except
for the form of proxy) are also available to view on the Company's
website at www.premier-oil.com
A condensed set of financial statements and information on
important events that have occurred during the year ended 31
December 2014 and their impact on the financial statements were
included in the Company's 2014 Annual Results announcement on 26
February 2015. That information together with the information set
out below in Appendix 1, which is extracted from the Annual Report
and Financial Statements 2014, fulfil the requirements of DTR
6.3.5. This announcement is not a substitute for reading the full
Annual Report and Financial Statements 2014. Page and note
references in the text in Appendix 1 are made in reference to the
Annual Report and Financial Statements 2014. To view the 2014
Annual Results announcement, visit the Company website:
www.premier-oil.com/premieroil/investors
Further enquiries:
Company Secretariat:
Rachel Benjamin Tel: +44 (0)20 7730 1111
Investor Relations:
Elizabeth Brooks Tel: +44 (0)20 7730 1111
Disclaimer
This announcement contains certain forward-looking statements
that are subject to the usual risk factors and uncertainties
associated with the oil and gas exploration and production
business. Whilst the group believes the expectations reflected
herein to be reasonable in light of the information available to it
at this time, the actual outcome may be materially different owing
to factors beyond the group's control or otherwise within the
group's control but where, for example, the group decides on a
change of plan or strategy. Accordingly, no reliance may be placed
on the figures contained in such forward-looking statements.
APPENDIX 1
Company Risk Factors (required under DTR 4.1.8)
Premier's business may be impacted by various risks leading to
failure to achieve strategic targets for growth, loss of financial
standing, cash and earnings, and reputation. Not all of these risks
are wholly within the company's control and the company may be
affected by risks which are not yet manifest or reasonably
foreseeable.
Effective risk management is critical to achieving our strategic
objectives and protecting our personnel, assets, the communities
where we operate and with whom we interact and our reputation.
Premier therefore has a comprehensive approach to risk management
as set out in more detail in the Corporate Governance Report.
A critical part of the risk management process is to assess the
impact and likelihood of risks occurring so that appropriate
mitigation plans can be developed and implemented. Risk severity
matrices are developed across Premier's business to facilitate
assessment of risk. The specific risks identified by project and
asset teams, business units and corporate functions are
consolidated and amalgamated to provide an oversight of key risk
factors at each level from operations through business unit
management to Executive Committee and Board level.
For all the known risks facing the business, Premier attempts to
minimise the likelihood and mitigate the impact. According to the
nature of the risk, Premier may elect to take or tolerate risk,
treat risk with controls and mitigating actions, transfer risk to
third parties or terminate risk by ceasing particular activities or
operations. Premier has a zero tolerance to financial fraud or
ethics non-compliance, and ensures that health, safety, environment
and security (HSES) risks are managed to levels that are as low as
reasonably practicable, whilst managing exploration and development
risks on a portfolio basis.
Significant risk factors during 2014:
-- Oil price weakness at year-end (weak share price and North Sea impairments);
-- Project delivery challenges (schedule and cost);
-- Negative market sentiment.
Significant risk factors for 2015:
-- Continued oil price weakness
-- Cash flow and ability to fund existing and planned projects,
thereby deliver business strategy
-- Ability to maintain core competencies
-- Political and security instability in countries of current and planned activity
-- 'Alignment' with JV partners (in particular their ability to fulfil commitments)
-- Negative market sentiment
-- Potentially accelerated decommissioning liabilities
-- Reputational impact if we defer projects
Key risk factor Risk detail How is it managed? Key steps to
mitigate in
2014/15
---------------------- --------------------------- --------------------------- --------------------------
Health, safety, Major process Comprehensive Improved reporting
environment and safety incident HSES and operations and response
security (HSES) or operational management systems through implementation
accident, natural including emergency across the group
disasters, pandemics, response and oil of new electronic
social unrest, spill response incident-recording
civil war. capability and and action-tracking
Consequences asset integrity. system.
may include accidents Active security Improved asset
resulting in monitoring and integrity maintenance
loss of life, management and through implementation
injury and/or regular testing of new scorecard
significant pollution of business continuity methodology
of the local plans. (covering people,
environment, Learning from plant and process
destruction of company and third-party lead indicators)
facilities and incidents. at all operated
disruption to production assets.
business activities.
---------------------- --------------------------- --------------------------- --------------------------
Production and Uncertain geology Geoscience and Improved production
development delivery and reservoir reservoir engineering forecasting,
(Of particular performance leading management systems, enhanced reporting
significance to lower production including rigorous and monitoring
during 2014 - and reserves production forecasting through in-house
Solan, Huntington recovery. and independent development
- and into 2015) Availability reserves auditing and introduction
of services including processes. of near-real-time
FPSOs and rigs, Operations, development production analytics
availability and project execution platform.
of technology management systems Improved project
and engineering and cost controls planning and
capacity, availability together with delivery through
of skilled resources, capable project better co-ordination
maintaining project teams. and execution
schedules and Long-term development of cross-functional
costs as well planning to ensure review prior
as fiscal, regulatory, timely access to decision
political and to FPSOs, rigs gates.
other conditions and other essential Independent
leading to operational services. 'lessons learned'
problems and review of Solan
production loss project planned
or development for early 2015.
delay. Increased ExCo
Consequences engagement on
may include, contractor selection/
lower production, management.
lower recovery
of reserves,
production delays,
cost overruns
and/or failure
to fulfil contractual
commitments.
---------------------- --------------------------- --------------------------- --------------------------
Exploration success Failure to identify Strong portfolio Re-organised
and reserves and capture acreage management and Exploration
addition and resource alignment with team to improve
opportunities strategic growth delivery from
to provide a targets. Appropriate existing portfolio
portfolio of balance between and new ventures.
drillable exploration growth by exploration Corporate Exploration
prospects and and acquisition. team strengthened
sufficient development Exploration management to ensure greater
projects to achieve systems including focus on prospective
reserves addition comprehensive resource and
targets. peer review with risk assessment
Specific exploration focus on geologies (with associated
programmes may in core areas enhancement
fail to add reserves we know well and of Exploration
and hence value. in which we can management system
Failure to negotiate build a competitive content).
access rights advantage. Near-field exploration
or close transactions M&A effort focusing moved to business
could slow growth on geographical unit management
of reserves and and technical but with Exploration
production and areas aligned function endorsement
lead to loss with our strategy. retained.
of competitive Diligence in acquisition Majority of
advantage. process and post- low-impact,
acquisition integration high-risk North
to ensure targeted Sea opportunities
returns. removed from
portfolio.
---------------------- --------------------------- --------------------------- --------------------------
Host government Premier operates Premier's portfolio Improved provision
- political and in some countries includes operations of politico-economic/
fiscal risks where political, in both low and security/societal
economic and higher risk environments. risk assessment
social transition Premier actively informing investment
is taking place monitors the local decisions.
or there are situation and Strengthened
current sovereignty has business continuity Corporate Responsibility
disputes. Developments plans in each management system
in politics, area which can and improved
laws and regulations be activated depending Corporate Responsibility
can affect our on predefined reporting.
operations and levels of alert. Assessing cost/
earnings. Premier strives benefit of political
Consequences to be a good corporate risk insurance.
may include forced citizen globally,
divestment of and fosters reputation
assets; limits by strong and
on production positive relationships
or cost recovery; with government
import and export and communities
restrictions; where we do business.
international Premier engages
conflicts, including in respectful
war, civil unrest industry-wide
and local security lobby and sustainable
concerns that corporate responsibility
threaten the and community
safe operation investment programmes.
of company facilities; Rigorous adherence
price controls, to Premier's business
tax increases ethics policy
and other retroactive and code of conduct.
tax claims; expropriation Continuous monitoring
of property; of the external
cancellation environment for
of contract rights; emerging risks
and increase to the business.
in regulatory
burden. It is
difficult to
predict the timing
or severity of
these occurrences
or their potential
impact.
---------------------- --------------------------- --------------------------- --------------------------
Commodity price Oil and gas prices Oil and gas price Hedging programme
volatility are affected hedging programmes (continued into
(Of particular by global supply to underpin our 2015).
significance and demand and financial strength Economics of
in late 2014 price can be and to protect development
and into 2015) subject to significant our capacity to programmes re-worked
fluctuations. fund our future to reflect low
Factors that developments and oil price environment.
influence these operations. Discretionary
include operational Premier investment spend curtailed.
issues, natural guidelines ensure Contingency
disasters, weather, that our development planning for
political instability, programmes are accelerated
or conflicts robust to downside decommissioning
and economic sensitivity price of identified
conditions or scenarios. production assets.
actions by major
oil-exporting
countries. Price
fluctuations
can affect our
business assumptions
and can effect
investment decisions
and financial
capability.
---------------------- --------------------------- --------------------------- --------------------------
Organisational Risk that the Premier has created Continuous improvement
capability capability of a competitive of human resources
the organisation remuneration and management systems
is not adequate retention package and controls.
to deliver plans including bonus Review of long-term
for strategic and long-term incentive package.
growth. The capability incentive plans Phased function
of the organisation to incentivise roll-out of
is a function loyalty and good competency management
of both the strength performance from system commenced.
of its human the existing,
resources and highly skilled
its business workforce.
management systems. Premier is continuing
Inadequate systems to strengthen
or lack of compliance its organisational
may lead to loss capability to
of value and achieve strategic
failure to achieve objectives. This
growth targets. includes resource
Loss of personnel planning, competency
to competitors, development, training
inability to and development
attract and retain programmes, succession
quality human planning including
resources and leadership development.
competency gaps Continuous strengthening
could affect of business management
our operational systems and controls
performance and as appropriate
delivery of growth to the size and
strategy. market position
of the company.
---------------------- --------------------------- --------------------------- --------------------------
Joint venture Global operations Due diligence Heightened engagement
partner alignment in the oil and and continuous with joint venture
gas industry and regular engagement partners with
are conducted with partners regard to their
in a joint venture in joint ventures ability to fulfil
environment. in both operated commitments.
There is a risk and non-operated Implementation
that joint venture projects. Premier of new non-operated
partners are takes strategic ventures management
not aligned in acquisition opportunities system.
their objectives where appropriate
and drivers and to gain a greater
this may lead degree of influence
to inefficiencies and control.
and/or delays.
Several of our
major projects
are operated
by our joint
venture partners
and our ability
to influence
our partners
is sometimes
limited due to
our small interest
in such ventures.
---------------------- --------------------------- --------------------------- --------------------------
Financial discipline Risk that sufficient Strong financial Economics of
and Governance funds are not discipline and investment decisions
(Of particular available to balance sheet. and development
significance finance the business. Premier has an projects re-worked
in late 2014 Risk of financial established financial to reflect low
into 2015) fraud. management system oil price environment.
to ensure that Deferred discretionary
it is able to exploration
maintain an appropriate spend.
level of liquidity Contingency
and financial planning if
capacity and to development
manage the level projects deferred
of assessed risk (Vette, Sea
associated with Lion).
the financial Reduction of
instruments. Premier contractor spend.
maintains access Contingency
to capital markets planning for
through the cycle. right-sizing
The management and re-structuring
system includes of group to
policies and a deliver business
delegation of goals.
authority manual Careful management
to reasonably of covenant
protect against headroom on
risk of financial the group's
fraud in the group. debt facilities.
An insurance programme
is put in place
to reduce the
potential impact
of the physical
risks associated
with exploration
and production
activities. In
addition, business
interruption cover
is purchased for
a proportion of
the cash flow
from producing
fields. Cash balances
are invested in
short-term deposits
with minimum A
credit rating
banks, AAA managed
liquidity funds
and A1/P1 commercial
paper, subject
to Board approved
limits.
---------------------- --------------------------- --------------------------- --------------------------
Key Performance Indicators (required under DTR 4.1.9)
Premier measures its performance in line with its strategic
objectives of growing the value of the underlying assets of the
business and creating significant returns for shareholders in a
safe and responsible manner. Despite the challenging conditions
faced in the sector in 2014 Premier continued to deliver on a
number of its key metrics.
Operating safely
Premier believes that all accidents are preventable. Premier
recognises that its operations by their very nature have the
potential to cause major accidents and is committed to managing
them in order to provide a high level of protection to its
employees, contractors, visitors, neighbours and the
environment.
In 2014 Premier completed its new health, safety and environment
(HSE) management system, bringing it in line with the ten elements
system under the revised International Association of Oil & Gas
Producers (IOGP) framework. A new accident and incident reporting
system was also introduced across the company which, once fully
implemented, will provide an improved centralised reporting
function.
Health and safety performance is measured using a number of
metrics including total recordable injury rate (TRIR) per million
man-hours. Safety performance data includes both Premier employees
and contractors. In 2014, Premier achieved a TRIR performance of
1.5 per million man-hours (2013: 3.4), a 57 per cent decrease on
2013. Despite a period of intense construction activity, the UK
Business Unit's TRIR fell to a historical low of 2.0 and both the
global production operations and drilling functions achieved a TRIR
in line with the 2013 IOGP average (2013 IOGP Safety Performance
Indicators Report).
Building a strong production base
Premier aims to maximise production from its existing asset base
and, over time, to deliver production growth. This is measured
using daily average production and the number of development
projects being brought through to sanction. Average daily
production in 2014 was 63.6 kboepd, up 9.3 per cent on 2013 and a
record for the group.
Premier's production growth is underpinned by a pipeline of
development projects being progressed through the portfolio, and
the ability to commercialise and bring on-stream these projects is
key to the company's success. In 2014, Premier achieved first oil
from the UK North Sea field Kyle, following the completion of the
reinstatement project, from the Dua oil field in Vietnam and from
the Naga gas field in Indonesia. We also sold gas for the first
time into Indonesia under the new Domestic Swap Agreement. In
addition, the Solan and Pelikan projects were progressed towards
first oil and gas in 2015 while the Catcher project received
government approval and is now in the execution phase. Decisions on
the development of the next phase of growth projects, including the
Vette and Sea Lion fields, are expected to be taken over the next
12 months.
Shareholder returns
A key metric by which Premier's growth performance is measured
is the compound annual growth rate in NAV per share. Premier
targets a 10 per cent growth in NAV per share per year. Average NAV
per share growth since 2005 fell in 2014, the first recorded
reduction since the target has been introduced. This was primarily
driven by opting for a lower capex solution for the Sea Lion
project. The new concept will aim to develop over half of the
original reserves for less than half the cost. Despite improving
the internal rate of return of the project the consequence of a
smaller development (and indeed the effect of phasing a second
stage of development) is a natural reduction in the NAV of the Sea
Lion project.
Premier, however, recognises that its share price does not
always reflect the value of the underlying assets of the business.
In these instances, and after balancing the capital needs of the
business, Premier will look to return surplus cash flows to
shareholders via distributions. In 2014 Premier paid a dividend of
5 pence per share and completed a US$93 million share buyback
programme.
Delivering growth
Premier looks to access projects that will create future growth
through successful exploration and selective acquisitions. This
ambition is measured by reserve replacement, risked prospective
resource added and finding costs.
Reserves and resources at the end of 2014 were 794 mmboe (2013:
794 mmboe). The impact of production and the 2014 disposal
programme (the Scott area assets in the UK North Sea and the Luno
II discovery offshore Norway) on Premier's reserve and resource
base was offset by the booking of the Vette field as 2P reserves
and the Kuda/Singa Laut discovery in Indonesia. The sale of Block A
Aceh in Indonesia was completed in 2015 and the adjustment will
therefore be made in the current year.
2014 was a successful year for Premier's exploration teams with
two discoveries adding more than 100 mmboe of resource at a pre-tax
finding cost of less than US$2/boe.
Maintaining financial strength
A key strategic objective of the group is to maintain financial
strength in order to invest in the future of the business and
deliver significant returns to shareholders. Despite the difficult
macro environment and declining oil price the company registered a
strong operating cash flow in 2014 of US$924.3 million (2013:
US$802.5 million).
Premier's portfolio of crudes was sold at an average of
US$98.2/bbl (2013: US$109.0/bbl). Realised average gas prices, a
significant portion of which tracks oil price movement, achieved
US$8.4 per thousand standard cubic feet (mscf) in 2014 (2013:
US$8.3/mscf). Operating costs per barrel of oil equivalent (boe)
reduced to US$18.8 in 2014 (2013: US$19.7/boe). This reflects
higher operating efficiency as well as one-off credits in Vietnam
and Indonesia totalling US$20 million.
Premier's cash flows, which are protected by a rolling forward
hedging programme, together with the refinancing of the company's
principal credit facility in 2014, ensure that the group has
significant liquidity to fund its capital investment programme
going forward.
Directors' responsibility statements (required under DTR
4.1.12)
The directors are responsible for preparing the Annual Report
and Financial Statements in accordance with applicable law and
regulations.
Group financial statements
Company law requires the directors to prepare financial
statements for each financial year. Under that law the directors
are required to prepare the group financial statements in
accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union (EU) and Article 4 of the
International Accounting Standards (IAS) Regulation and have
elected to prepare the parent company financial statements in
accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards and applicable law).
Under company law the directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the company and of the profit or
loss of the company for that period.
In preparing the parent company financial statements, the
directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and accounting estimates that are reasonable and prudent;
-- state whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the company will
continue in business.
In preparing the group financial statements, International
Accounting Standard 1 - 'Presentation of Financial Statements' -
requires that directors:
-- properly select and apply accounting policies;
-- present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
-- provide additional disclosures when compliance with the
specific requirements in IFRSs are insufficient to enable users to
understand the impact of particular transactions, other events and
conditions on the entity's financial position and financial
performance; and
-- make an assessment of the company's and group's ability to continue as a going concern.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the company's
transactions and disclose with reasonable accuracy at any time the
financial position of the company and group and enable them to
ensure that the financial statements comply with the Companies Act
2006. They are also responsible for safeguarding the assets of the
company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
company's website (www.premier-oil.com). Legislation in the United
Kingdom governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Directors' responsibility statement
We confirm to the best of our knowledge:
1. the group financial statements, prepared in accordance with
International Financial Reporting Standards, as adopted by the EU,
give a true and fair view of the assets, liabilities, financial
position and profit or loss of the company and the undertakings
included in the consolidation taken as a whole;
2. the Strategic Report includes a fair review of the
development and performance of the business and the position of the
company and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties that they face; and
3. the Annual Report and Financial Statements, taken as a whole,
are fair, balanced and understandable and provide the information
necessary for shareholders to assess the company's performance,
business model and strategy.
Tony Durrant
Chief Executive Officer
Richard Rose
Finance Director
This information is provided by RNS
The company news service from the London Stock Exchange
END
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