TIDMPMO
RNS Number : 8550X
Premier Oil PLC
11 May 2016
PREMIER OIL PLC
("Premier" or "the Company")
Trading and Operations Update
11 May 2016
Premier today provides the following trading update for the
period 1 January to 30 April 2016. This update is issued in advance
of the Company's Annual General Meeting which is being held today
at 11 Cavendish Square, London at 11.00 am.
Highlights
-- Strong production to 30 April of 57.3 kboepd;
on track to deliver at or above upper end of
2016 guidance of 65-70 kboepd for the full
year
-- Completed acquisition of E.ON's UK North Sea
assets on 28 April
-- Oil production from the Solan field commenced
on 12 April; rates of over 14 kbopd achieved
from the first producer well; second well due
on-stream by mid-year
-- The Catcher project remains on schedule and
below budget; pre-first oil capex forecast
is 15 per cent lower due to significant cost
savings
-- Operating costs and gross G&A tracking 10-20
per cent below 2016 budget, year-to-date
-- Significant liquidity with cash and undrawn
bank facilities of c. $750 million; discussions
ongoing with lenders to secure financial covenant
waiver if required
Tony Durrant, Chief Executive, commented:
"Strong production performance from our existing assets,
together with the contribution from the E.ON assets and the Solan
field means that we now expect production for the year to be better
than we originally anticipated. This, along with continued cost
savings, positions us well to maximise our current cash flow as we
remain focused on managing our balance sheet in the current oil
price environment."
Premier Oil plc Tel: 020 7730 1111
Tony Durrant
Richard Rose
Bell Pottinger Tel: 020 3772 2570
Gavin Davis
Henry Lerwill
Production operations
Premier delivered a robust production performance of 57.3 kboepd
in the period, driven by further improvements in operating
efficiency across the portfolio and strong gas sales into
Singapore. The reduction from the prior corresponding period
reflects some natural decline in Pakistan and Vietnam, although the
Chim Sáo field in Vietnam continues to deliver ahead of
expectations, with high uptime and good reservoir performance.
Kboepd 1 January - 30 April 1 January - 30 April
2016 2015
------------- --------------------- ---------------------
Indonesia 14.0 13.2
Pakistan &
Mauritania 8.3 10.9
UK 17.6 16.1
Vietnam 17.4 20.0
------------- --------------------- ---------------------
Total 57.3 60.2
------------- --------------------- ---------------------
In the UK, excellent operating efficiency and lower than
anticipated decline levels at the Huntington field more than offset
the later than expected start-up of the Solan field and an
unplanned shut down on B block earlier in the period. In Indonesia,
production from the Premier-operated Natuna Sea Block A is ahead of
expectations due to continued strong gas demand from Singapore and
high market share of GSA1 of 44 per cent.
The UK assets acquired from E.ON performed well over the period,
delivering 17 kboepd which will be consolidated from completion.
This, combined with the robust production performance of the
existing portfolio and new production from the Solan field, means
that Premier now expects to be at or above the upper end of its
2016 production guidance of 65-70 kboepd for the full year.
Development projects
First oil from the Solan P1 production well was achieved on 12
April. The well achieved rates of 8 kbopd on natural flow before
rising to 14 kbopd following the successful commissioning of the
down hole pump ("ESP"). As planned, production was subsequently
shut down to complete the additional works required for second oil:
the tie-in of the second water injector was completed with final
commissioning of the water injection system underway, while the ESP
completion for P2 is being installed with tie in of the well
planned for early June. Resumption of production is scheduled
shortly after, with the Solan field expected to reach production
rates of 20-25 kbopd in the third quarter when both pairs of
producer-injector wells will be on stream.
The Premier-operated Catcher project is progressing under budget
and is scheduled to deliver first oil in the second half of 2017.
Forecast gross capex to first oil is now anticipated to be c.
$1.35bn, a reduction of c. 15 per cent below that original
sanctioned. Cost savings secured include reductions negotiated on
contracts, the release of contingencies as work programmes are
completed, and the re-phasing of some contractor payments and work
scopes, given the good progress made to date in the subsea
installation campaign and the drilling results.
The 2016 subsea installation campaign is progressing well. The
four remaining drilling templates are now in place while
installation of the flowline bundles, towheads and mid water arches
is in progress. The dynamic risers and umbilicals are on track for
delivery in June. Premier is targeting completion of subsea work in
2016 ahead of schedule. Meanwhile, the Buoy is transiting to North
East Scotland and, together with the mooring system, is on track
for installation this summer. Drilling on the first Catcher
template has been completed and all four wells have met or exceeded
pre-drill expectations. Drilling on the Burgman template is
expected to commence shortly, following the completion of drilling
at the Laverda/Slough exploration prospects.
Delivery of the FPSO hull to Singapore is expected by July and
progress in manufacturing of the topside units has been good.
Following integration and commissioning, the sail-away date of the
FPSO from Singapore for a 2017 field start up remains on track.
On the Sea Lion Phase 1 project in the Falkland Islands, the 18
month FEED programme, which commenced in January, is ongoing. The
draft Field Development Plan has been submitted to the Falkland
Islands Government and detailed discussions are progressing well.
Premier still intends to bring in an additional partner and further
cost savings are targeted - especially in light of the downturn in
the markets for production facilities, well construction and
offtake services - to further reduce the break-even oil price for
the project. The timing of the final investment decision remains
dependent on the evolution of project economics and the oil price
outlook.
Exploration and appraisal
The Ensco 100 rig spudded the Laverda/Slough prospect, near the
Catcher area in the UK North Sea, in April. The commitment well
encountered 13 feet of net oil bearing Tay sands at Laverda, in
line with pre-drill expectations, but did not encounter any
indications of hydrocarbons in the deeper, high risk Slough
prospect. The well is now being plugged and abandoned ahead of the
rig continuing development drilling at the Catcher area.
Premier plans to drill the Bagpuss heavy oil exploration
prospect in the Moray Firth in the UK North Sea in June, using the
Ocean Valiant rig, which is currently operating at Solan.
Premier will continue to high grade and rationalise its UK North
Sea exploration portfolio including those licences acquired as part
of the acquisition of E.ON's UK North Sea assets.
In Brazil, interpretation of the recently acquired 3D seismic
survey covering our licences in the Ceara Basin is ongoing while in
Mexico Premier is undertaking a detailed technical evaluation of
its Blocks 2 and 7 acreage, ahead of the first well on Block 7
expected next year.
Portfolio Management
Premier completed the acquisition of E.ON's UK North Sea assets
on 28 April. The integration process has commenced which will see
the transition of the assets into Premier's existing UK business
unit. In addition, the formal sales process for the Pakistan
business, initiated after an unsolicited approach, is ongoing. A
number of bids have been received which continue to be progressed.
In the exploration portfolio, Premier has now exited its licence
positions in the Saharawi Arab Democratic Republic.
Finance
In order to plan and protect future cash flows Premier continues
with its hedging programme. At 30 April the Company's hedge
position to the end of 2017 was as follows:
Hedge position 2016 2017
---------------- -------------------------- --------------------------
Oil hedges Volume Average Volume Average
(mbbls) price ($/bbl) (mbbls) price ($/bbl)
---------------- --------- --------------- --------- ---------------
Premier 4.76 62.0 1.53 45.8
E.ON 0.77 97.4 0 0
---------------- --------- --------------- --------- ---------------
Total 5.53 67.0 1.53 45.8
---------------- --------- --------------- --------- ---------------
For 2016, Premier has hedged 72,000 metric tonnes (mt) of high
sulphur fuel oil through forward sales at an average price of
$400/mt. In addition, 64.0 million therms of the E.ON assets 2016
gas production and 36.6 million therms of the 2017 gas production
has been sold forward at 63 pence per therm and 57 pence per therm,
respectively.
Operating costs continue to fall and are tracking 10-20 per cent
under budget, year-to-date. Operating cost per barrel for 2016
after taking these cost savings into account together with the
operating costs associated with the acquired E.ON UK assets and the
Solan field, are expected to be around $17/boe. Gross G&A costs
are also under budget and are on track to deliver previous guidance
of a 10 per cent reduction on 2015 excluding the impact of the E.ON
acquisition.
Capital expenditure for development and exploration for 2016 is
now expected to be c. $730 million, reflecting capex associated
with E.ON's UK assets.
Premier retains significant cash and undrawn facilities of c.
$750 million as at 30 April with net debt of $2.68 billion. Premier
does not have any significant debt maturity until late 2017 and the
nature of its corporate unsecured facility means that it is not
subject to any reserve base redeterminations. However, due to the
weak oil prices experienced year-to-date, it is possible that a
relaxation of our main financial covenants may be required in
respect of the testing periods ending 30 June 2016 and 31 December
2016. Premier continues to explore mitigating actions that can
improve its forecast financial covenant position and, in addition,
has entered into discussions with its lending group with a view to
agreeing amendments to its financial covenants.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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