TIDMPMO
RNS Number : 8728D
Premier Oil PLC
12 July 2016
PREMIER OIL PLC
("Premier" or "the Company")
Trading and Operations Update
12 July 2016
Premier today provides an update on recent operational
activities and guidance in respect of its half year financials to
30 June 2016. The Group's Half-Yearly Results will be published on
Thursday 18 August 2016.
-- Strong production of 61.0 kboepd, with recent
record rates above 80 kboepd; full year production
expected to be at or above the upper end
of earlier guidance of 65-70 kboepd
-- Solan ramping up to 14 kbopd from P1, currently
at 11 kbopd; P2 completed, successfully tested
and will be tied in shortly
-- Integration of E.ON UK assets completed;
portfolio performing strongly
-- Catcher on schedule with the FPSO hull now
in Singapore; further cost reductions secured,
with capex now 20 per cent lower than at
sanction
-- Opex for the period of $16/boe, 14 per cent
below budget; weaker sterling exchange rate
will reduce cost of sterling denominated
opex, capex and debt
-- Net debt of c. $2.6 billion at period end,
flat on end Q1 2016 position; as previously
announced, negotiations with lenders are
progressing well with the main covenant test
deferred while discussions are finalised
Tony Durrant, Chief Executive, commented:
"Over the period, we have delivered a robust production
performance, achieved first oil from Solan, completed the E.ON
acquisition and reached key milestones on the Catcher project. We
have continued to secure cost reductions across the business and
are set to benefit from recent foreign exchange movements. We now
look forward to a rising production profile and, with Solan
on-stream, significantly lower committed capital expenditure. At
current oil prices, we start to generate free cash flow later this
year which positions us well to manage the balance sheet whilst
retaining some optionality for future growth projects."
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
Production operations
Production averaged 61.0 kboepd for the first six months of the
year with a record rate of over 80 kboepd achieved post period end.
The newly acquired E.ON assets have continued to perform well and
the summer maintenance programme has been largely completed. With
Solan ramping up, Premier continues to expect full year production
to be at or above the upper end of its guidance of 65-70
kboepd.
Estimated 1H
kboepd 2016 1H 2015
------------- ------------- --------
Indonesia 13.8 13.2
Pakistan &
Mauritania 8.3 10.7
UK 22.2 16.9
Vietnam 16.7 19.6
------------- ------------- --------
Total 61.0 60.4
------------- ------------- --------
During the first six months of the year, production from
Indonesia averaged 13.8 kboepd, up 5 per cent on the prior period
driven by strong gas sales from Premier's operated Natuna Sea Block
A into Singapore and continued high market share (44 per cent)
within its principal gas sales agreement (GSA1). Production from
Premier's Pakistan and Vietnam assets remains in line with
expectations, supported by continued high operating efficiency and
good reservoir performance with the reduction from the prior
corresponding period reflecting some natural decline.
UK production was strong over the period, averaging 22.2 kboepd,
including a contribution from the newly acquired E.ON UK assets
from 28 April. The Huntington field has outperformed, producing at
consistent rates of c. 14 kboepd (gross) in H1 when not restricted
by summer maintenance, achieved by high uptime and lower than
predicted decline. The newly acquired E.ON UK assets are also
performing well. The Glenelg field (Premier 18.57 per cent) came
back on-stream at the end of May following a successful well
workover and has been producing over 20 kboepd (gross). The E.ON UK
portfolio is forecast to contribute over 17 kboepd during the
second half of the year.
First oil was achieved from the Solan field on 12 April. Premier
subsequently carried out a planned production shut down focused on
the final commissioning of the electrical systems, the control and
shut down systems and the water injection plant, taking advantage
of the availability of the flotel. The flotel has since departed
the field and production from the Solan field recommenced on 22
June. The field, which is currently producing at 11 kbopd, is
ramping up to 14 kbopd from the first production well with water
injection providing reservoir support. The drilling activities on
the second production well (P2Y) have been completed. A DSV is
scheduled to tie P2Y into production later this month after which
production from the field will build up to an anticipated plateau
rate of 20-25 kboepd.
Development projects
The Premier-operated Catcher project remains scheduled to
deliver first oil in the second half of 2017. Further cost savings
have been secured against the project estimates, with the release
of contingencies as work scopes are finished and drilling
activities are completed below budget. Premier now forecasts capex
to first oil of $1.3 billion and total project capex of $1.8
billion, a c. 20 per cent reduction on the original sanctioned
estimates. Further reductions in capex in dollar terms are
anticipated if the weak sterling dollar exchange rate persists with
c. 60 per cent of the project's remaining capex denominated in
sterling.
The subsea installation campaign continues apace and remains on
schedule for completion by Q4 2016: the flowline bundles, towhead
and midwater arches have all been installed while installation of
the buoy and mooring system is underway. Risers and umbilicals will
be installed this year. Five wells have now been drilled, including
the first Burgman production well, with all meeting or exceeding
pre-drill expectations. Well sequencing has also been modified to
avoid more costly winter rig moves and work continues to evaluate
the potential to reduce overall well count without impacting
production. The FPSO hull has now been delivered to the Keppel yard
in Singapore while fabrication of the topsides modules is
progressing well. The sail-away date of the FPSO from Singapore for
a 2017 field start up remains on track.
Premier continues to progress its pre-development projects. In
Indonesia, FEED has been completed on the Bison, Iguana and Gajah
Puteri gas fields and an investment decision on these projects is
targeted for the fourth quarter of this year. Work is ongoing on
the Tolmount gas field development project in which Premier
acquired a 50 per cent operated interest through its acquisition of
E.ON in April. Concept selection is targeted for the second half of
the year. In the Falklands, FEED on the Premier operated Sea Lion
project is progressing well and identified cost reductions continue
to lower the break-even oil price for the project.
Exploration and appraisal
Premier plans to spud the Bagpuss heavy oil exploration prospect
in the Moray Firth in the UK North Sea in July. The well will be
drilled using the Ocean Valiant rig, which is currently preparing
to move off location at the Solan field following completion of
drilling activities. The results of the Bagpuss well are expected
in early August.
In Brazil, interpretation of the new 3D seismic survey covering
Premier's licences in the Ceara Basin is progressing while in
Mexico Premier is undertaking a detailed technical evaluation of
its Block 2 and Block 7 acreage, ahead of the first well on Block 7
planned for next year.
During the period, Premier exited its licence position in the
Saharawi Arab Democratic Republic and is in the process of
finalising its exit from its Iraq licence. Premier expects to high
grade and rationalise the exploration portfolio acquired with the
E.ON portfolio during the course of the second half of the
year.
Portfolio Management
Premier completed the acquisition of E.ON's UK North Sea assets
on 28 April. Management of E.ON's UK portfolio transferred to
Premier's UK business unit in Aberdeen with effect from 1 July.
Elsewhere, Premier has agreed terms with a preferred bidder for the
sale of its Pakistan business. Completion of the transaction
remains subject to the purchaser putting in place necessary funding
arrangements.
Finance
Total revenues for the first six months of the year will be in
the order of $390 million (2015: $577.0). The estimated average oil
price realised for the first half of 2016 was $47.5/bbl (2015 1H:
$83.7/bbl) (post hedge) compared with an average spot Brent crude
price of $39.8/bbl. Estimated average gas prices (post-hedge)
realised from our Indonesia and Pakistan assets for the period were
$5.8/mscf (2015 1H: $12.3/mscf) and $3.1/mscf (2015 1H: $4.4/mscf)
respectively. Estimated average gas price (post hedge) realised
from our southern North Sea gas assets was 41 pence/therm.
Operating costs are expected to be c. $180 million for the first
half (2015: $149.8 million), 14 per cent under budget, and equating
to c. $16/boe across the group. The increase in absolute operating
costs on the prior period reflects the operating costs associated
with the E.ON UK assets, the Solan field and the Company's higher
equity interest in the Huntington field partially offset by c. $20
million of savings in underlying opex.
On 1 July, Ezra Holdings announced the sale of its 80 per cent
stake in the Chim Sao FPSO, to PetroFirst Infrastructure. Premier,
in its capacity as Block 12W operator, is in advanced discussions
with PetroFirst regarding revised terms, including reductions in
the cost of the FPSO lease rate. Negotiations are expected to
conclude during the third quarter.
Premier's exploration and development capital expenditure for
the period will be of the order of $310 million. 2016 full year
guidance remains unchanged at $730 million. Premier has taken
advantage of the recent weakness in the sterling dollar exchange
rate to lock in GBP110 million of forward expenditure in the second
half of the year at an average rate of 1.31. Premier expects
reductions in its operating costs and capital expenditure if the
current sterling dollar exchange rate weakness persists with over
half of the company's remaining 2016 capex and opex denominated in
sterling.
Expenditure related to decommissioning in the first half was
$56.8 million and included a one off $53 million catch up payment
into escrow for future decommissioning of Chim Sao.
Premier will report a deferred tax credit for the period in
relation to the expected recognition of its UK tax losses as a
result of anticipated future profitability from the acquisition of
E.ON's UK North Sea assets. Premier also expects to recognise
negative goodwill in relation to the acquisition of E.ON's UK North
Sea assets.
Premier retains cash and undrawn facilities of c. $800 million
as at 30 June with net debt of c. $2.6 billion at period end and
flat on end Q1 2016 position. The lower sterling exchange rate also
reduces the dollar value of Premier's GBP510 million sterling
denominated debt and Letters of Credit.
Negotiations with Premier's lenders continue to progress well.
The previously announced deferral of the covenant test to 31 July
2016 allows further time for Premier and its lender group to
finalise discussions around amendments to Premier's medium term
covenant profile and the extension of debt maturities. In return
for the proposed amendments, it is anticipated that Premier will
provide additional security for existing debt holders. Premier
expects negotiations to conclude during Q3 2016.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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