TIDMPMO
RNS Number : 5868S
Premier Oil PLC
09 July 2015
PREMIER OIL PLC
("Premier", "Company" or "Group")
Trading and Operations Update
9 July 2015
Premier today provides an update summarising recent operational
activities and guidance in respect of its half year financials to
30 June 2015. This is in advance of the Group's 2015 Half-Yearly
Results which will be published on Thursday 20 August 2015.
Tony Durrant, Chief Executive, commented:
"We have delivered a strong production performance in the first
half while further progressing our sanctioned developments and
achieving significant exploration success in the Falklands. We have
remained focused on minimising our cost base with forecast full
year operating expenditure below our already considerably reduced
budgets. Consequently, net debt during the first half has remained
flat despite our continuing investment programme. We remain
well-placed to generate long term cash flows to fund both our
committed developments and to manage our balance sheet, even in a
sustained low oil price environment."
Production
Premier delivered a robust production performance in the first
six months of the year, with production averaging 60.3 kboepd. Full
year guidance is reiterated at 55 kboepd (excluding new production
from Solan), taking into account planned maintenance work in the
second half and natural decline in a number of our fields.
Country Estimated 1H 2015 1H 2014
kboepd kboepd
----------------------- ------------------ ----------
Indonesia 13.1 14.0
Pakistan & Mauritania 10.8 13.8
UK 16.8 21.3(*)
Vietnam 19.6 15.8
----------------------- ------------------ ----------
Total 60.3 64.9
----------------------- ------------------ ----------
(*Includes assets sold in 2014)
The Premier-operated Chim Sáo field in Vietnam continues to
outperform, driven by high operating efficiency and better than
predicted reservoir performance. This was offset by lower
production from the Huntington field, caused by constraints on the
gas export route during the first quarter. Huntington resumed
unrestricted production on 15 April. Amendments to the gas
transportation agreement have now been finalised providing improved
certainty of Huntington gas export volumes going forward. Premier's
other production assets continue to perform in line with
expectations.
Development projects
Work on the Premier-operated Solan facilities continues. With
the Victory flotel on location in the second quarter, Premier was
able to make significant progress towards achieving habitation of
the facilities. Increased offshore productivity was realised,
partly due to improvement in the weather but also due to
organisational changes in the project execution team. The Victory
flotel went off contract as planned in mid-May and was replaced
with the Siem Spearfish 'walk-to-work' vessel, providing continuity
of resources on the platform until the larger Regalia flotel
arrives in early August. These two campaigns will enable habitation
of the platform and completion of the commissioning of the
production systems to allow first oil. Following the successful
tie-in of the first pair of producer-injector wells, commissioning
of the subsea infrastructure commenced in June and remains on-track
for completion in September. In parallel, drilling of the second
pair of producer-injector wells has commenced. First oil continues
to be targeted for the fourth quarter this year. Cash spend to 30
June on the Solan project stood at $1.6 billion.
In May, Premier successfully acquired Chrysaor's 40 per cent
interest in the Solan field for nil upfront consideration and
entered into an agreement with FlowStream whereby a US$100 million
payment was received in return for the proceeds from 15 per cent of
production from the field for a period of time. As a result,
partner funding concerns around the Solan project have been removed
while, at the same time, the Group's balance sheet exposure to the
project has been reduced.
The Premier-operated Catcher project remains within budget and
on schedule for first oil in 2017. Subsea installation work has
commenced with two templates already installed and gas export pipe
lay underway. The Ensco rig is now on hire and is on track to
commence development drilling shortly. Construction of the FPSO
remains on-going with the mating cone module completed and
delivered to the hull fabrication yard.
At the Premier-operated Vette development, alternative
lower-cost production facilities to a new build FPSO are being
evaluated while Premier is continuing to progress pre-FEED
activities and contractor selection on its Sea Lion project in the
Falkland Islands. A 2016 sanction decision is still targeted for
both developments.
Exploration and appraisal
Premier has had a successful start to its Falkland Islands
exploration campaign with discoveries at both Zebedee and Isobel
Deep. The Isobel Deep well encountered oil bearing sandstone at the
prognosed depth but was suspended due to unexpected overpressure.
Pre-drill, the un-risked Pmean resources of the Elaine/Isobel
complex were 400 mmbbls of oil and while this has not changed as a
result of the well, the risk has reduced. The Eirik Raude rig is
expected to return to the North Falklands basin in August to drill
the Jayne East and Chatham wells. Consideration is being given to
performing more drilling at Isobel Deep as part of the programme,
possibly replacing the Jayne East well.
In Indonesia, the Anoa Deep appraisal well spudded in April and
reached total depth in June. Following encouraging logging results,
preparations are now being made to test the well with results
expected later this month. Meanwhile, the Myrhauk well on the
eastern flank of the Mandal High offshore Norway is expected to
spud in mid-July with results anticipated in September.
During the period, Premier continued to re-shape its exploration
portfolio with 21 further licence relinquishments and disposals in
mature areas. At the same time, Premier is continuing to pursue its
strategy of adding acreage in emerging plays. Accordingly, Premier
has farmed into Block 661 in the Ceara basin in Brazil, subject to
government approval, and joined a consortium to evaluate Mexico's
Round 1 opportunities, with bidding scheduled for 15 July.
Premier's 2015 exploration & appraisal programme
--------------------------------------------------------------------------------------------
Country Well name Timing Licence Gross prospective Risk
interest resource (mmboe)
(%)
----------- ------------------------ --------- ---------- ------------------ ------------
Indonesia Anoa Deep appraisal(*) Q2 2015 28.67 8-13-40 Low
----------- ------------------------ --------- ---------- ------------------ ------------
Norway Myrhauk Q3 2015 40.00 10-50-135 Moderate
----------- ------------------------ --------- ---------- ------------------ ------------
Falklands Jayne East(**) Q3 2015 36.00 23-73-232 Low
----------- ------------------------ --------- ---------- ------------------ ------------
Falklands Chatham(**) Q3 2015 60.00 4-19-80 High
----------- ------------------------ --------- ---------- ------------------ ------------
(*) The Anoa Deep appraisal well will appraise the initial Anoa
Deep discovery as well as test the upside within the deeper part of
the Lama play
(**) Volumes quoted are unrisked prospective resources and
excludes volumes associated with appraisal of the main Sea Lion
field
Portfolio management
Following the receipt of an offer for Premier's Pakistan
business, the Company is initiating a process among interested
parties with a view to a possible disposal of Premier's Pakistan
interests.
Financials
Total revenues for the first six months of the year will be in
the order of $580million (2014 H1: $885 million), reflecting the
lower oil price environment and lower production year-on-year as a
result of the Scott area disposal. Premier continues to protect its
2015 revenues through an active hedging programme with 5.6 mmbbls
of dated Brent and 120 kmt of high sulphur fuel oil sold forward at
an average price of $97.6/bbl and $532.6/mt, respectively. Premier
has also hedged a portion of its 2016 forecast production with 3.5
mmbbls of dated Brent and 48 kmt of high sulphur fuel oil sold
forward at an average price of $68.7/bbl and $400.1/mt,
respectively.
The estimated average oil price realised for the first half of
2015 was $83.7/bbl (1H 2014: $110.2/bbl) (post hedge) compared with
an average spot Brent crude price of $57.8/bbl. Estimated average
gas prices (post-hedge) realised from our Indonesia and Pakistan
assets for the period were $11.8/mscf (2014: $16.9/mscf) and
$4.4/mscf (2014: $4.7 mmscf) respectively.
Operating costs are expected to be around 30 per cent lower at
circa $150 million (2014: $216.9 million) for the first half,
equating to around $14/boe across the group. This reflects the sale
of the high cost Scott area in the UK as well as significant
savings realised in on-going operations across the group. Group
G&A costs on a gross basis for the first half were
approximately 20 per cent lower at $115 million (2014: $140
million), with savings in contractor rates and reduced
headcount.
Premier's development capital expenditure forecast for 2015
remains unchanged. For accounting purposes, the loan to Chrysaor to
fund their share of Solan development costs was treated separately
to the Company's own expenditure. Now the acquisition of Chrysaor's
interest in Solan has completed, this will be consolidated into
Premier's capex forecast, resulting in anticipated full year
expenditure of around $900 million, previously guided as $750
million of development capex and $150 million loan to Chrysaor.
Planned exploration expenditure for 2015 has increased by $20
million to around $240 million primarily due to additional
expenditure on the Isobel Deep well in the Falklands.
As at 30 June, net debt was flat on the year-end position at
$2.1 billion, despite the continuing period of development
investment and the exploration campaign in the Falkland Islands.
This is primarily due to a combination of Premier's strong
production performance, lower operating costs, proceeds received
from disposals and the benefit of the company's hedging
programme.
Premier retains significant cash and undrawn facilities. As at
30 June, these were approximately $350 million and $1.1 billion
respectively. During the period, Premier bought back $148 million
and EUR40 million of its US private placement notes at a discount
to par and repaid a $300 million term loan maturing in the first
quarter of 2015.
The Group also continues to benefit economically from its
substantial UK tax loss and allowance position with estimated
losses and allowances of $3.3 billion carried forward at 30 June.
This includes the 2015 RFES claim and certain tax allowances
acquired as part of the Chrysaor transaction. The reduction in the
Supplementary Charge Tax rate from 32 per cent to 20 per cent as at
1 January 2015 has resulted in a reduction in the rate at which we
can value our tax losses and allowances for deferred tax asset
purposes. As a result, Premier expects to book a deferred tax
charge to its income statement in respect of this rate
reduction.
Management responsibility changes
As previously announced, Andrew Lodge retired as Exploration
Director on 30 June. Dean Griffin, previously Premier's Exploration
Geoscience Manager, has been appointed Head of Exploration and will
report to Robin Allan, who retains responsibility for the North Sea
and Pakistan business units. Responsibility for the South East Asia
business units has transferred from Robin to Neil Hawkings, who
retains responsibility for the Falkland Islands business unit.
Enquiries
Premier Oil plc Tel: 020 7730 1111
Tony Durrant, Chief Executive
Richard Rose, Finance Director
Bell Pottinger Tel: 020 3772 2570
Gavin Davis
Henry Lerwill
This information is provided by RNS
The company news service from the London Stock Exchange
END
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