TIDMPMO
RNS Number : 5519B
Premier Oil PLC
11 January 2018
PREMIER OIL PLC
("Premier" or "the Group")
Trading and Operations Update
11 January 2018
Premier today provides the following Trading and Operations
Update ahead of its 2017 Full Year Results which will be announced
on Thursday 8 March 2018.
2017 Highlights
-- Full year production of 75 kboepd in line with guidance, up 5% on 2016
-- First oil achieved from Catcher on 23 December on schedule and under budget
-- World class Zama oil discovery, offshore Mexico
-- Successful disposal programme generating more than US$200 million of cash receipts in 2017
-- Significant progress on next generation of growth projects (BIGP, Tolmount, Sea Lion, Tuna)
-- Opex per barrel of US$16.5/bbl
-- Estimated total capex of US$305 million, below revised guidance of US$325 million
-- Positive free cashflow, net debt down to US$2.7 billion as at 31 December 2017
-- Comprehensive refinancing completed
Outlook
-- 2018 production guidance of 80-85 kboepd, allowing for the
ramp up from Catcher and adjusted for 2017 disposals
-- Catcher production planned to ramp up in 1H reaching peak
gross production of 60 kbopd, currently producing c20 kbopd in the
ramp up phase and ahead of plan
-- Tolmount development project sanction expected in 2018, will provide next phase of growth
-- Zama appraisal: planning for 2018/19 appraisal programme underway
-- 2018 opex per barrel expected to be US$17-18/bbl, reflecting changes in the portfolio
-- 2018 development and exploration capex guidance of cUS$300 million
-- Debt reduction will accelerate at current oil prices as Catcher production ramps up
Tony Durrant, Chief Executive, commented:
"First oil from Catcher and the completion of the Wytch Farm
disposal completed a highly successful year for Premier which
included our world class exploration success with the Zama
discovery. As Catcher builds up to 60,000 bopd, 2018 will bring
higher production and cashflow, continuing the debt reduction
programme. Alongside this, our portfolio of future projects is
being progressed for selective investment and further growth."
Enquiries
Premier Oil plc Tel: 020 7730 1111
Tony Durrant, Chief
Executive
Richard Rose, Finance
Director
Camarco Tel: 020 3757 4980
Billy Clegg
Georgia Edmonds
Production operations
Premier delivered production of 75.0 kboepd in 2017, in line
with full year guidance and up 5 per cent on the prior year (2016:
71.4 kboepd). Production in December was impacted by the unplanned
shutdown by INEOS of the Forties Pipeline System ("FPS") which has
now been resolved.
Kboepd 2017 2016
------------- ----- -----
Indonesia 14.1 14.3
Pakistan &
Mauritania 6.5 7.9
UK 39.5 33.0
Vietnam 14.9 16.2
------------- ----- -----
Total 75.0 71.4
------------- ----- -----
In the UK, production averaged 39.5 kboepd during 2017, up 20
per cent on the previous year, principally as a result of a full
contribution from the E.ON assets, which continue to perform above
expectations at the time of the acquisition. The unplanned shutdown
due to an integrity issue being identified in the onshore section
of FPS in December impacted production from a number of Premier's
UK fields principally Elgin-Franklin and the Balmoral area.
Following the successful repair of a hairline crack in the onshore
section of the pipeline, the system was brought back on line on 30
December and Premier's affected fields are all now back online at
pre-shutdown rates.
First oil from the Catcher Area development was successfully
delivered on 23 December. The first two production wells from the
Catcher field have been cleaned up and tested at rates in excess of
20 kbopd each, in-line with expectations and reflecting initial
high productivity. As planned, production will continue to be
ramped up in phases over the next few months with first oil from
Varadero expected imminently, followed by Burgman. Current
production levels are being deliberately constrained at around 20
kbopd which is ahead of plan, while commissioning of the full gas
processing modules and the water injection systems on the FPSO are
carried out. The first stage in commissioning of the gas systems,
flowing gas from the SEGAL pipeline system into and pressurising,
the gas import/export line is ongoing. The first export cargo of
Catcher oil is expected to be lifted in late January and has been
sold at a premium to Brent. Full production from the Catcher Area
of 60 kbopd is targeted in the first half of 2018.
The Huntington field remained the highest producer in the UK
portfolio in 2017 averaging 13.0 kboepd, significantly above
budget, as a result of high FPSO uptime and strong reservoir
performance. Production from the Elgin-Franklin field continues to
benefit from an ongoing infill drilling programme, averaging 5.4
kboepd. Further infill wells are planned for 2018. Babbage also
delivered a strong performance in 2017, averaging 3.1 kboepd
underpinned by a successful well intervention programme and
continued production optimisation of the existing well stock.
Production from the Premier-operated Solan field averaged 5.9
kboepd principally from the P1 well which continues with free flow
production. A number of options to improve production levels and
reserve recovery at Solan continue to be evaluated.
Premier's operated South East Asia assets performed well during
2017. The Chim Sáo field in Vietnam delivered a strong production
performance underpinned by high operating efficiency, better than
expected reservoir performance and a successful well intervention
programme which helped to mitigate natural decline from the field.
In addition, year-end production levels from the field were boosted
by approximately 6,500 boepd (gross) following the completion of a
successful two well infill drilling programme carried out in the
second half of the year. Across the border in Indonesia, Premier's
operated Natuna Sea Block A secured an increased market share
within its principal gas contract GSA1 of 49.6 per cent (2016: 44.4
per cent) against a contractual share of 47.25 per cent and
delivered record production under GSA2 of 91 BBtud during 2017.
Natuna Sea Block A's contractual share of GSA1 has increased to
51.7 per cent for 2018.
Production from Pakistan and Mauritania averaged 6.5 kboepd for
the year, in line with expectations. The decrease compared to the
prior year reflects natural decline in all of the fields.
Production in 2018 from Premier's existing producing assets is
expected to be between 80-85 kboepd reflecting the phased ramp up
from the Catcher Area, natural decline in certain of Premier's
fields and the impact of the 2017 Wytch Farm and Pakistan
disposals.
Development projects
Drilling activities on phase 2 of the Catcher Area development
wells is ongoing with the 14(th) well now being completed. Total
project capex, including remaining contingency, is forecast at
US$1.6 billion, 29 per cent lower than the sanctioned estimate as
previously guided.
Elsewhere in the UK, offshore and onshore FEED on the
Premier-operated Tolmount field in the Southern Gas Basin is
progressing well. Evaluation of the tenders received for the major
offshore project scopes including the pipeline and platform is
underway. Alongside the FEED process, the environmental assessment
for offshore aspects of the project was submitted in December and
the onshore assessment is planned to follow in due course. Fully
termed agreements with Dana Petroleum and CATS Management Limited
in respect of the infrastructure partnership for the Tolmount
development are being progressed ahead of Final Investment
Decision. Approval of project sanction remains on track for
2018.
In Indonesia, the BIGP development project in Natuna Sea Block A
is proceeding well and is on budget and schedule for first gas in
2019 and will backfill our existing Singapore and domestic market
contracts. Following the signing of the Memorandum of Understanding
between Petrovietnam, Premier and SKK Migas (on behalf of the
Indonesian Government) for future gas sales from the Tuna Field
(Premier equity share: 65 per cent) in Indonesia into Vietnam, a
farm out process has been launched ahead of further appraisal
drilling in the area planned for 2019.
In the Falkland Islands, work continues on the commercial and
fiscal work streams and on securing a financing solution for the
Premier-operated Sea Lion project. The latest draft of the Field
Development Plan was submitted to the Falkland Islands Government
in November 2017 and the public consultation for the Environmental
Impact Statement is expected to commence shortly. Premier is in
discussions with contractors for the provision of a range of
services including vendor finance in respect of the Sea Lion Phase
1 Development and letters of intent are being signed.
Exploration and appraisal
Premier continues to work with both its joint venture partners
Talos Energy (Operator) and Sierra Oil & Gas and with PEMEX in
the neighbouring block, to progress the appraisal programme for the
world class oil discovery at the Zama-1 well in Block 7 Sureste
Basin offshore Mexico. Plans are progressing well and it is
anticipated that the appraisal programme will commence in 2H 2018
or early in 2019.
In the UK, well operations on the Ravenspurn North Deep well
(Premier carried 5 per cent interest), are now complete. The well
has been plugged and abandoned and the drilling rig (Rowan Gorilla
VII) has been demobilised.
Portfolio management
As previously announced, the sale of Premier's interests in
Licences PL089 and P534 (containing the Wytch Farm field) to
Perenco UK Limited completed on 21 December generating a pre-tax
profit on disposal of approximately US$135 million.
Premier has also continued its programme of non-core asset
disposals principally from the E.ON portfolio acquired in 2016. On
11 December the sale of its 30 per cent interest in the Esmond
Transportation System (ETS) was announced and is expected to
complete in the first half of 2018. In addition, on 20 December,
Premier completed the transfer of its 5.12 per cent non-operated
interest in the Arran gas discovery to Dyas UK Limited for
repayment of costs incurred. A further payment of US$2.5 million
will be received on the approval of a Field Development Plan by the
Oil and Gas Authority.
In Indonesia, Premier signed a sale and purchase agreement with
Batavia Oil on 19 December to sell its entire 19.75 per cent
non-operated interest in the Kakap field for a consideration of
US$3.2 million. Completion is subject to receiving approval from
the Government of Indonesia.
Completion of the sale of the Pakistan business to Al-Haj Group
announced in April is subject only to final approvals from the
Pakistani authorities. The process is ongoing and in the meantime
Premier continues to collect the cashflows generated from the
Pakistan assets.
Finance
Total revenues for 2017 will be of the order of US$1,090 million
(2016: US$983 million) reflecting both higher production and
realised commodity prices.
2017 full year operating costs are estimated to have been
US$16.5/boe. In 2018, operating costs per barrel will be
US$17-18/boe reflecting the impact of the 2017 disposals and the
ramp up of production from the Catcher Area. It is anticipated that
these levels of operating costs per barrel will be maintained in
the medium term.
An impairment charge of US$200-250 million (post-tax) in respect
of the Solan field in the UK North Sea is expected to be recognised
in the 2017 Income Statement. The impairment charge is driven by a
reduction in the 2P reserves expected to be recovered from the
asset over its economic life. This does not take account of any
upside from the deeper Triassic play on the Solan licence or the
impact of any potential third party volumes across the Solan
infrastructure.
Development and exploration spend for the full year 2017 was
around US$280 million as a result of savings secured on the Catcher
project and in the Mexican drilling campaign and the deferral of
spend into 2018. 2018 development and exploration spend is expected
to be around US$300 million, of which cUS$170 million relates to
the Catcher development (including a cUS$55 million one off first
oil payment to the FPSO provider BW Offshore) and US$45 million to
exploration. Capex will be weighted to the first half of 2018 as
the spending on the Catcher project completes. Abandonment spend in
2017 was US$25 million and is expected to be approximately US$80
million in 2018, before taking into account the benefits of cost
recovery and tax relief.
A US$17 million payment into escrow is forecast for 2018 in
relation to future decommissioning of the Chim Sáo and Natuna Sea
Block A fields.
Premier continues to benefit from its substantial UK corporation
tax loss and allowance position with estimated losses and
allowances of over US$4 billion carried forward at 31 December
2017.
Net debt at the year-end was US$2.7 billion, reflecting positive
free cashflow generation including disposals offset by the impact
of the refinancing and non-cash foreign exchange movements on
non-dollar denominated debt. Net debt reduction would have been
even greater but for the phasing of certain liftings across the
portfolio following lower production in Q4 which results in cash
proceeds moving into 2018. The net debt number also does not
include the full impact of the announced Pakistan and ETS disposals
which are expected to complete in 2018. Cash and undrawn facilities
were around US$550 million at 31 December. This includes net
proceeds from the Wytch Farm disposal of approximately US$180
million which will be used to pay down and cancel super senior debt
facilities. Going forward, Premier expects debt reduction to
accelerate at current oil prices as production from Catcher ramps
up.
Premier has taken advantage of the recent improvement in the
commodity prices to increase its oil price hedges in 2018 through a
combination of both fixed price term sales and options that provide
a floor price but allow continuing exposure to increasing commodity
prices. The Company has currently hedged approximately 40 per cent
of its 2018 oil entitlement production through a mixture of swaps,
options and fixed price term sales. Specifically, approximately 10
per cent of Premier's 2018 oil production is covered by options
with a floor price of US$55/bbl and approximately 30 per cent has
been hedged through swaps and fixed term sales at an average price
of US$57/bbl. To date, Premier has also hedged around 24 per cent
of its 2018 UK gas entitlement production through fixed price term
sales at an average price of 47p/therm.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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