TIDMPMO
RNS Number : 1133C
Premier Oil PLC
10 April 2017
Premier Oil plc (the "Company")
2016 Annual Report and Financial Statements
and Notice of Annual General Meeting 2017
10 April 2017
Further to the release of the Company's Annual Results on 9
March 2017, the Company announces that it has today published its
Annual Report and Financial Statements for the financial year ended
31 December 2016 (the "2016 Annual Report") and its 2016 Corporate
Responsibility Report. In addition, the Company has today posted to
shareholders the Notice of Annual General Meeting ("AGM") 2017. The
AGM will be held at No.11 Cavendish Square, London, W1G 0AN, at
11.00am on Wednesday 17 May 2017.
In accordance with Listing Rule 9.6.1., copies of the 2016
Annual Report, 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 2016 and their impact on the financial statements were
included in the Company's 2016 Annual Results announcement on 9
March 2017. That information together with the information set out
below in Appendix 1, which is extracted from the 2016 Annual
Report, fulfil the requirements of DTR 6.3.5. This announcement is
not a substitute for reading the full 2016 Annual Report. Page and
note references in the text in Appendix 1 are made in reference to
the 2016 Annual Report. To view the 2016 Annual Results
announcement, visit the Company website:
www.premier-oil.com/premieroil/investors
Further enquiries:
Company Secretariat:
Daniel Rose 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.
APPIX 1
Company Risk Factors (required under DTR 4.1.8)
Principal risk factor Risk detail How is it managed? Key steps to mitigate in
2016/17
--------------------------- ---------------------------- ----------------------------- ----------------------------
Commodity price Oil and gas prices are Oil and gas price hedging Hedging programme continued
volatility affected by global supply programmes to underpin our with fixed price term sales
and demand and price can be financial strength and and options to provide some
subject to significant protect our capacity protection
fluctuations. to fund our future during an extended period of
developments and operations. low oil prices.
Factors that influence these
include operational issues, Premier investment guidelines Economics of development
natural disasters, weather, are to ensure that our programmes re-worked to
long-term development programmes are reflect low oil price
impact of climate change, robust to environment.
political and security downside sensitivity price
instability, conflicts, scenarios. Discretionary spend
economic conditions curtailed.
or actions by major
oil-exporting countries. Contingency planning for
accelerated decommissioning
Price fluctuations can of identified production
affect our business assets.
assumptions and can affect
our ability to deliver
on our strategy.
Specific risks for 2017:
inability to execute a
satisfactory hedging
programme due to low
forward oil prices; lack of
credit lines for hedging.
--------------------------- ---------------------------- ----------------------------- ----------------------------
Financial discipline Risk of covenant breach and Strong financial discipline. Ongoing proactive dialogue
and governance that sufficient funds are Premier has an established with lenders.
not available to finance the financial management system
business. to ensure Economics of investment
that it is able to maintain decisions and development
Risk of financial fraud. an appropriate level of projects re-worked to
Breach of delegated liquidity and financial reflect low oil price
authority. capacity and to environment.
manage the level of assessed
Specific risks in 2017: risk associated with the Deferral of discretionary
reduced flexibility to financial instruments. The spend.
manage the business due to management
tighter controls system includes policies and Unsanctioned development
agreed with lenders post a delegation of authority projects deferred and
refinancing, including manual to reasonably protect re-shaped.
reduced ability to deliver against
M&A; ability to risk of financial fraud in Ongoing reduction of
comply with reset covenants. the Group. contractor spend.
Premier maintains access to Contingency planning for
capital markets through the right-sizing and
cycle through proactive re-structuring of Group to
engagement deliver business goals.
with banks and lenders as
evidenced by completion of Enhancement of Business
refinancing. Control Review process.
An insurance programme is put Continued non-core
in place to reduce the disposals.
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.
--------------------------- ---------------------------- ----------------------------- ----------------------------
Production and Uncertain geology and Geoscience and reservoir Improved production
development delivery reservoir performance engineering management forecasting, enhanced
and decommissioning leading to lower production systems, including rigorous reporting and monitoring
execution and reserves recovery. production forecasting through further refinement
and independent reserves of near-real-time production
Availability of services auditing processes. analytics platform.
including FPSOs and rigs,
availability of technology Effective contracting Improved project planning
and engineering strategy, operations, and delivery through better
capacity, availability of development and project coordination and execution
skilled resources, execution management of cross-functional
maintaining project systems and cost controls review prior to decision
schedules and costs as well together with capable project gates.
as fiscal, regulatory, teams.
political and other Continued ExCo, business
conditions leading to Long-term development unit and project engagement
operational problems and planning to ensure timely on contractor
production loss or access to FPSOs, rigs and selection/management.
development delay. other essential
services. Escrow account for Asian
Consequences may include development to fund future
lower production, lower Preference for operatorship, decommissioning liabilities.
recovery of reserves, as evidenced by 2016
production delays, acquisition of operatorship Expanded decommissioning
cost overruns and/or failure of Huntington resources for 2017/2018.
to fulfil contractual field.
commitments. Engagement with UK
Specialist decommissioning government on
Immaturity of team in place and continued decommissioning.
decommissioning in the North reduction in asset operating
Sea and low oil prices, costs
leading to aggressive to defer abandonment
cost and timing estimates liabilities.
for decommissioning of
assets.
Specific risks in 2017:
continued underperformance
of Solan field; timing of
first oil from
Catcher development; offtake
demand from Singapore.
--------------------------- ---------------------------- ----------------------------- ----------------------------
Joint venture partner Global operations in the oil Due diligence and regular Heightened engagement with
alignment and supply and gas industry are engagement with partners in joint venture partners and
chain delivery conducted in a joint venture joint ventures in both supply chain counterparties
environment. operated and with regard
non-operated projects. to their ability to fulfil
There is a risk that joint Premier pursues strategic commitments.
venture partners are not acquisition opportunities
aligned in their objectives where appropriate Various portfolio management
and drivers to gain a greater degree of options under review in
and this may lead to influence and control. 2017.
inefficiencies and/or
delays. Several of our major Non-operated ventures
projects are operated management system.
by our joint venture
partners and our ability to Enhance financial due
influence our partners is diligence of supply chain
sometimes limited providers. Monitor
due to our small interest in contractual performance
such ventures. and delivery.
We are heavily dependent on
supply chain providers to
deliver services and
products to time,
cost and quality criteria.
Heightened risk during
periods of downturn in the
upstream services
sector.
Specific risks in 2017:
financial viability of key
suppliers, causing delays or
cost over-runs
on projects or operations;
joint venture partner
misalignment on
decommissioning in UKCS.
--------------------------- ---------------------------- ----------------------------- ----------------------------
Organisational Risk that the capability of Premier has created a Continuous improvement of
capability the organisation is not competitive remuneration and human resources management
adequate to deliver plans retention package including systems and controls.
for strategic bonus and long-term
growth. The capability of incentive plans to New reward programme
the organisation is a incentivise loyalty and good implemented during 2016.
function of both the performance from the
strength of its human existing, highly skilled Succession planning
resources and its business workforce. reviewed.
management systems.
Inadequate systems or lack Premier continues to Improved Business Management
of compliance may strengthen its organisational System platform delivered in
lead to loss of value and capability to achieve 2016.
failure to achieve growth strategic objectives.
targets. Loss of personnel This includes resource
to competitors, planning, competency
inability to attract and development, training and
retain quality human development programmes,
resources and competency succession planning including
gaps could affect our leadership development.
operational performance and
delivery of growth strategy. Continuous strengthening of
business management systems
and controls as appropriate
to the
size and market position of
the Company.
--------------------------- ---------------------------- ----------------------------- ----------------------------
Exploration Failure to identify and Strong portfolio management Continued focusing of
success and capture acreage and resource and alignment with strategic exploration portfolio.
reserves addition opportunities to provide a growth targets.
portfolio Deepened equity interest in
of drillable exploration Appropriate balance between Mexico and plans to develop
prospects and future growth by exploration and prepared.
development projects. acquisition.
Specific exploration Mature portfolio acquired
programmes may fail to add Exploration management from E.ON in 2016.
reserves and hence value. systems including
comprehensive peer review Continued exiting of
Failure to negotiate access with focus on geologies non-core areas.
rights or close transactions in core areas we know well
could slow growth of and in which we can build a Proactive engagement with
reserves and competitive advantage. lenders on exploration
production and lead to loss strategies.
of competitive advantage. M&A effort focusing on
geographical and technical
Lender controls reduce areas aligned with our
ability to capture and strategy. Diligence
execute exploration in acquisition process and
programme. post-acquisition integration
to ensure targeted returns.
--------------------------- ---------------------------- ----------------------------- ----------------------------
Health, safety, Major process safety Comprehensive HSES and Further embedded electronic
environment incident or operational operations management systems incident-recording and
and security accident, natural disasters, including emergency and oil action-tracking system,
('HSES') pandemics, social spill response implemented HSES
unrest, civil war. capability and asset self-audit system.
integrity.
Consequences may include Further embedded
accidents resulting in loss Active security monitoring implementation of asset
of life, injury and/or and management and regular integrity scorecard
significant pollution testing of business methodology (covering
of the local environment, continuity plans. people,
destruction of facilities plant and process lead
and disruption to business Learning from Company and indicators) at all operated
activities. third-party incidents. production assets.
--------------------------- ---------------------------- ----------------------------- ----------------------------
Host government: Premier operates in some Premier's portfolio includes Improved provision of
political and fiscal risks countries where political, operations in both low and politico-economic
economic and social higher risk environments. /security/societal risk
transition is taking Premier assessment informing
place or there are current actively monitors the local investment
sovereignty disputes. situation and has business decisions.
Developments in politics, continuity plans in each area
laws and regulations which Strengthened Corporate
can affect our operations can be activated depending on Responsibility ('CR')
and earnings. pre-defined levels of alert. management system and
ongoing improvements to
Consequences may include Premier strives to be a good CR reporting.
forced divestment of assets; corporate citizen globally,
limits on production or cost and fosters reputation by Ongoing cost/benefit
recovery; strong assessment of political risk
import and export and positive relationships insurance on case-by-case
restrictions; changes in with government and basis.
legislation due to climate communities where we do
change; international business. Premier engages Engagement with Falkland
conflicts, including war, in respectful industry-wide Islands and UK governments
civil unrest and local lobbying and sustainable on fiscal terms.
security concerns that corporate responsibility and
threaten the safe community
operation of Company investment programmes.
facilities; price controls, Rigorous adherence to
tax increases and other Premier's business ethics
retroactive tax claims; policy and code of
expropriation of property; conduct.
cancellation of contract
rights; and increase in Continuous monitoring of the
regulatory burden. external environment for
It is difficult to predict emerging risks to the
the timing or severity of business.
these occurrences or their
potential Proactive engagement with
impact. regulatory authorities.
--------------------------- ---------------------------- ----------------------------- ----------------------------
Key Performance Indicators (required under DTR 4.1.9)
Working interest production (kboepd)
Objective
Premier aims to maximise production from its existing asset base
and, over time, to deliver production growth. Production growth is
measured using average daily production and the number of
development projects being brought through to sanction. The ability
to commercialise and bring those projects on-stream is key to the
Company's success.
2016 Progress
Average daily production in 2016 was 71.4 kboepd, a record for
Premier and in line with previously increased market guidance. The
increase in production on the prior year was driven by new
production from the E.ON assets, a new contribution from the Solan
field which was brought on-stream during 2016 and high operating
efficiency across the Group's existing production portfolio.
Premier sanctioned the development of the Bison, Iguana, Gajah
Puteri gas fields post period end which will support our long-term
contracts under which we deliver gas into Singapore. We have also
progressed Tolmount which is likely to provide the next phase of
growth beyond Catcher.
2017 Expectations
With a full-year contribution from the E.ON assets and also from
the Solan field. Premier expects a further step up in production in
2017 from its existing producing assets. Premier also expects to
bring on-stream the Catcher project in the second half of the year
which, once at plateau rates, will add at least a further 25 kboepd
to the Group's production.
Reserves and resources (mmboe)
Objective
Premier aims to grow its reserves and resources base through a
combination of successful exploration and selective
acquisitions.
2016 Progress
Proven and Probable ('2P') reserves at the end of 2016 were 353
mmboe (2015: 332 mmboe). The increase reflects 38 mmboe added as a
result of the acquisition of the E.ON assets. In addition, Premier
also revised upwards its estimates of Chim Sáo's reserves by 13
mmboe as a result of an extended field life facilitated by a lower
FPSO lease rate and better than expected reservoir performance.
These additions more than offset the impact of 2016 production and
a downward revision in reserves at Solan as a result of poorer than
anticipated reservoir performance. Premier also added 54 mmboe of
resources in respect of the Tolmount project which we acquired as
part of the E.ON acquisition.
2017 Expectations
Premier will look to progress and commercialise its
predevelopment projects, which account for a significant proportion
of its reserves and resource base, over the course of 2017.
Offsetting this will be production and the potential sale of our
Pakistan business which accounted for 2 per cent of our 2P reserves
as at the end of 2016. Premier also plans to drill its first well
on its Mexico acreage in 2017 which will target the Zama structure
and has the potential to increase significantly the Group's
resource base.
HSES Index
Objective
Premier is committed to managing its operations in a safe,
reliable and environmentally responsible manner to prevent major
accidents and to provide a high level of protection to its
employees, contractors and the environment. Premier measures
Health, Safety, Environment and Security ('HSES') performance using
a blended, weighted score covering a range of key HSES metrics.
2016 Progress
Overall performance was at or just above expectation. We
incurred more recordable injuries than in 2015, and although we had
a similar number of high potential events, none of these were in
the highest category from a safety perspective. We saw very strong
process safety performance, with no significant process safety loss
of primary containment ('LOPC') and strong process safety and asset
integrity audit results from our operated assets. Greenhouse gas
intensity also improved when compared to the previous year. We also
set targets for the first time for our senior management to visit
our operated facilities to visibly demonstrate their commitment to
our HSES values to our workforce.
2017 Expectations
Premier will continue to set a base target of delivering a
better HSES performance than the median HSES performance of our
peers in the International Oil & Gas Producers index with the
aim of driving continuous improvement year on year. In 2017 we will
introduce corporate targets for hydrocarbon spills and routinely
report performance alongside our other existing KPIs. We will also
focus our HSES resources in seeking to improve our hazard
recognition and the quality of our incident investigations and HSES
auditing.
Liquidity (US$ million)
Objective
Premier seeks to have sufficient liquidity to underpin the
Group's capital investment programme and to access new
opportunities for future growth. The Group is committed to
maintaining a disciplined approach to spending each year and where
necessary will seek farm-in partners for drilling programmes and
development projects to maintain this discipline.
2016 Progress
During 2016, Premier remained focused on reducing its operating
cost base and capital commitments from existing operations. This,
together with a record production performance and continued access
to our undrawn bank facilities, enabled us to deliver our capital
investment programme and to fund the acquisition of the E.ON assets
despite oil prices reaching a historic low. Premier also entered
into discussions with its lending groups to amend the terms of its
financing agreements, including extending maturities out to 2021
and resetting its financial covenants.
2017 Expectations
Premier will continue to take appropriate steps in 2017 to
ensure it maintains sufficient liquidity to deliver its operated
Catcher project. We expect to complete a comprehensive refinancing
of all our debt facilities by mid 2017 and will remain focused on
maximising our production while managing our operating costs and
our capital expenditure. Our cash flows will be prioritised toward
reducing our absolute debt levels and, when market conditions
allow, investing in our new projects for future growth while
maintaining sufficient liquidity such that we are well-placed to
withstand another downturn in the commodity price cycle.
Operating cash flow (US$ million)
Objective
Premier aims to maximise cash flow from operations in order to
maintain financial strength, ensuring we can meet our debt
obligations, invest in the future of the business and deliver
long-term returns to shareholders. Premier's cash flows are
protected by a rolling forward hedging programme.
2016 Progress
Premier's operating cash flow for 2016 of US$431.4 million
(2015: US$809.5 million) was impacted significantly by the external
macro environment which saw the oil price average US$43.7/bbl
(2015: US$52.4/bbl). Consequently, Premier realised an average
price for the year post hedge of US$52.2/bbl. This was only
partially mitigated by a strong production performance, tight cost
control and a hedging programme.
2017 Expectations
Future production growth together with Premier's low cost base
will underpin 2017 operating cash flow. In particular, Premier
anticipates a full year of tax-advantaged production from the E.ON
portfolio and the Solan field. In addition, new production from the
Catcher field will contribute materially to the Group's operating
cash flow from the second half of 2017. Premier will continue to
look to hedge to protect its future cash flows and our investment
programme. We have hedged 37 per cent of 2017 oil production at
US$51/bbl and 41 per cent of our UK gas production at 50
pence/therm.
Operating costs (US$/boe)
Objective
Premier aims to minimise costs from operations without
compromising on health, safety or asset integrity. Operating costs
per barrel of oil equivalent is a function of industry costs,
inflation, the efficiency and effectiveness of Premier's people,
technology, and production output. Operating costs are monitored
closely to ensure that they are maintained within pre-set annual
targets.
2016 Progress
Operating costs remained low at US$15.8/boe in 2016 (2015:
US$15.5/boe), 10 per cent below budget. This was driven by high
operating efficiencies across our producing portfolio, a weaker
sterling exchange rate as well as continued cost savings across the
business.
2017 Expectations
Premier expects operating costs in 2017 to stay flat at c.
US$16/ boe, despite more of the Group's production coming from the
relatively higher cost UK North Sea. This will be underpinned by
continued focus on maximising operating efficiencies and
controlling operating costs. Premier anticipates that further
significant reductions will originate from collaboration and
efficiency savings.
Net debt (US$ billion)
Objective
Premier aims to control the absolute levels of its net debt such
that it remains in compliance with its financial covenants.
Reducing our net debt is also critical in order to address the
imbalance of our capital structure and to provide the Company with
future financial flexibility. Premier anticipates reducing its net
debt by using cash flow generated from its producing assets and
disposals while maintaining tight cost controls.
2016 Progress
Net debt at year end was US$2.8 billion, and while below our own
internal forecasts this was up on the year-end 2015 position. This
was as a result of our significant capital expenditure programme of
US$678.1 million (driven by our sanctioned UK North Sea projects
and the completion of the Falkland Islands drilling programme) as
well as the continued depressed commodity prices.
2017 Expectations
Premier plans to be cash flow positive in 2017 at oil prices
above US$50/bbl (including planned disposals) enabling debt
reduction. With forecast low operating costs, a significantly
reduced capital expenditure of US$390 million and higher
production, driven by our UK tax advantaged assets, Premier is well
placed to deliver on this target.
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
also chosen to prepare the parent company financial statements in
accordance with Financial Reporting Standard 101 Reduced Disclosure
Framework. 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 Financial Reporting Standard 101 Reduced
Disclosure Framework has 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 position and
performance, business model and strategy.
This responsibility statement was approved by the Board of
Directors on 8 March 2017 and is signed on its behalf by:
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
ACSGGUQCCUPMGAU
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April 10, 2017 11:55 ET (15:55 GMT)
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