TIDMPMO
RNS Number : 3759U
Premier Oil PLC
12 July 2018
("Premier" or "the Group")
Trading and Operations Update
12 July 2018
Premier provides an update on recent operational activities and
guidance in respect of its half year financials to 30 June
2018.
Highlights
-- Production averaged 76.1 kboepd during 1H with recent run
rates over 90 kboepd; full year guidance of 80-85 kboepd is
unchanged
-- Catcher plateau production rates of 60 kbopd (gross)
consistently achieved following commencement of gas export and
water injectivity in May
-- Tolmount project Board approved; formal partner approval expected Q3
-- Zama discovery: pre-unitisation agreement notice submitted;
appraisal programme to commence Q4
-- New, attractive exploration licences offshore Mexico and
Indonesia signed; seismic work to start later this year
-- Sale of ETS (UK) and Kakap (Indonesia) completed; Babbage
Area (UK) and Pakistan transactions awaiting government
approvals
-- Forecast 2018 operating costs of $17-$18/boe; forecast
development, exploration and abandonment expenditure of $380
million, in line with previous guidance
-- Net debt reduced to $2.65 billion over period; full year net
debt reduction estimated at between $300 million and $400 million
at current oil prices with covenant leverage ratio forecast to fall
to 2.5x EBITDA by end Q1 2019
Tony Durrant, Chief Executive, commented:
"Catcher delivering stable plateau production is an important
milestone for Premier. This, coupled with the ongoing strong
performance from our underlying portfolio and our continued focus
on cost control, will result in significant free cash flow
generation and material debt reduction in the second half. We can
also look forward to the formal sanction of our high value Tolmount
project and the appraisal of our world class Zama discovery, both
of which have the potential to deliver significant future
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 and development operations
Production averaged 76.1 kboepd for the first six months of the
year, a reduction from the prior corresponding period due to asset
sales and natural field decline. First half production was also
impacted by planned shutdowns at the Huntington and Solan fields
and lower Singapore gas demand due to end-buyer maintenance. This
was offset by the ramp up of Catcher production and outperformance
from the Chim Sáo field.
With Catcher consistently producing over 60 kboepd (gross),
recent Group production run rates have been over 90 kboepd. Full
year group production guidance of 80-85 kboepd is maintained,
subject to the completion timetable of announced disposals.
kboepd Estimated 2018 2017 1H
1H
Indonesia 13.5 14.3
Pakistan 5.3 6.8(1)
UK 41.1 45.5
Vietnam 16.2 15.5
--------------- --------
Total 76.1 82.1
--------------- --------
(1) Includes 335 boepd from the Chinguetti field in Mauritania
which ceased production in December 2017
UK
In the UK, Premier's operated Catcher Area averaged 13.3 kboepd
(net) for the first half, reflecting constrained production as
commissioning of gas processing systems and the water injection
plant was completed. Plateau production rates of over 60 kbopd
(gross) were reached in May following the start-up of gas export
into the SEGAL gas pipeline.
The Catcher Area averaged over 50 kboepd (gross) during June
with plant availability continuing to increase as commissioning of
the secondary systems is being completed ahead of final acceptance
of the FPSO. Until then, Premier benefits from a reduced day rate
for the FPSO when plateau production is not achieved.
Production data from the three Catcher Area fields (Catcher,
Varadero and Burgman) continues to indicate delivery from the
available wells remains significantly in excess of the FPSO design
capacity. To date, 10 cargoes have been successfully offloaded with
over 5 mmbbls (gross) produced.
The DSV Falcon is currently in field completing tie-ins of the
four Phase 2 development wells, which are anticipated to be
available to flow later this month, further increasing
deliverability from the Catcher Area. The remaining two wells,
which are on the Burgman template, are currently being drilled with
the programme on track for completion later this quarter.
Huntington averaged 7.2 kboepd during the period, reflecting
natural decline in line with expectations and two shut downs during
the period. Conversion of a former production well into a water
injector will be undertaken later this month providing additional
reserves and pressure support to the remaining production wells.
This, together with the underlying reservoir performance of the
field, has resulted in Premier agreeing with Teekay a further
year's extension of the FPSO's lease to mid-April 2020.
Elsewhere in the UK, the field life of Kyle has been extended by
12 months following an agreement between CNR and Teekay to extend
the lease of the Banff FPSO, which handles Kyle's production, to
August 2019.
Premier's other UK assets have performed broadly in line with
expectations.
Asia
Production from Premier's Asian assets averaged 29.7 kboepd
during the first six months of the year. Premier's operated Chim
Sáo field in Vietnam was the highest net producer in the portfolio
averaging 16.2 kboepd, up on the prior corresponding period and
above budget. This strong performance was as a result of successful
infill drilling in 2017 which completed in December and recent well
intervention programmes which have brought on-stream new reservoir
zones within existing wells. Operating efficiency has also been
high at 94 per cent. Additional well intervention programmes are
planned for the second half of the year to further support
production.
In Indonesia, production for the period averaged 13.5 kboepd,
down on the prior corresponding period reflecting both the sale of
Premier's interest in the Kakap field which completed during the
period and lower Singapore gas demand due to re-phasing of
end-buyer maintenance into the first half of the year from the
second half. Premier's operated Natuna Sea Block A again increased
its market share within its principal gas contract GSA1 to 53.3 per
cent, against a contractual share of 51.7 per cent. Also on Natuna
Sea Block A, construction of the BIG-P development deck extensions
has been completed in the Batam fabrication yard and will be
delivered offshore shortly. BIG-P remains on track for first gas in
2019 and will help backfill the Group's contracts into Singapore
and maintain production from Natuna Sea Block A.
Pre-developments
On the Premier-operated Tolmount gas project, letters of interim
agreement have been signed with the platform and pipeline
contractors and the terminal for onshore gas processing selected.
Premier's Board approved the Tolmount project in June and formal
sanction by partners is scheduled for the third quarter. Premier
continues to target first gas in the fourth quarter of 2020.
In the North Falklands Basin, a pathfinder bank has been
appointed to assist with the development of the senior financing
structure for the Sea Lion project. Premier is also continuing to
put in place letters of intent with selected contractors for the
provision of key services and vendor funding. Premier's focus
remains on securing funding for the project ahead of a final
investment decision.
Exploration and appraisal
In Mexico, the Block 7 joint venture partnership and PEMEX have
agreed and submitted a notice of pre-unitisation agreement for the
Zama discovery to SENER, the Mexican Ministry of Energy, for
approval. In addition, the Block 7 joint venture partnership has
selected the Ensco 8503 rig to undertake the Zama appraisal
programme with the first well scheduled to spud in the fourth
quarter. Approval of the appraisal programme by the CNH, the
Mexican hydrocarbons regulator, is anticipated during the third
quarter.
On 27 June, Premier signed the PSCs for its three new Mexico
licences - Block 30 in the Sureste Basin and Blocks 11 and 13 in
the Burgos Basin. Work will now start on maturing the prospectivity
of these blocks with the Wahoo prospect on Block 30, which exhibits
DHIs analogous to those on Zama, being the priority for early
drilling.
As previously announced, Premier was awarded the Andaman II
licence in the North Sumatra basin offshore Aceh, Indonesia in
January 2018. Premier is in discussions with seismic contractors
with a view to initiating the acquisition of 2,000 square
kilometres of 3D seismic across the licence later this year.
Portfolio management
Premier continued its non-core disposal programme during the
first six months of the year with the announcement of the sale of
its interests in the Babbage Area assets for a total consideration
of $88 million which will result in net cash proceeds of $64
million (before working capital adjustments). Completion of the
transaction with Verus Petroleum is expected in the second half of
2018.
During the period, Premier completed the previously announced
sales of its interests in the Kakap field and its 30 per cent
non-operated interest in the Esmond Transportation System (ETS) for
total cash proceeds of $22.9 million (after working capital
adjustments).
Completion of the sale of Premier's Pakistan business to Al-Haj
Group remains subject to final approvals from the Pakistan
authorities. In the meantime, Premier continues to collect the
positive cashflows generated from these assets.
Finance
Premier continues to take advantage of the improved oil price
environment to increase its hedging position in 2019 to protect
future free cashflows and covenant compliance. The company's
current hedge position to the end of 2019 is as follows:
Oil swaps/forwards 2018 2019 2019
2H 1H 2H
Volume (mmbbls) 4.0 2.6 1.2
-------- -------- --------
Average price $60/bbl $66/bbl $68/bbl
-------- -------- --------
Premier has also hedged 28 million therms of its remaining 2018
UK gas volumes at an average price of 45 pence/therm. In addition,
Premier has hedged part of its Indonesian gas production through
the sale of 120,000 MT of HSFO Sing 180 in 2019 at an average price
of $394/MT.
Over the first six months of the year operating costs averaged
$17.3/boe, 5 per cent below budget. Full year guidance for
operating cost per barrel of oil equivalent of $17-$18 is
maintained. Guidance for 2018 full year development, exploration
and abandonment spend remains unchanged at $380 million.
Net debt reduced from $2.72 billion at the end of 2017 to $2.65
billion at period end. As previously guided, net debt reduction
during the period was impacted by the Catcher ramp up profile,
early exchange of the convertible bond, the movement in joint
venture balances and the signature bonus for the Mexico Round 3.1
award of Block 30. Full Year debt reduction is estimated at between
$300 million and $400 million at current oil prices and covenant
leverage ratio (calculated as accounting net debt plus letters of
credit over EBITDA) is forecast to fall to 3x EBITDA by year end
2018 and 2.5x EBITDA by end of March 2019.
During the first half there was an accounting net debt reduction
of $154 million arising from the early exchange of the convertible
bond. In the close period ahead of its half year results, Premier
has committed to issuing a mandatory conversion notice in respect
of its remaining $29 million convertible bonds provided that the
relevant conditions are satisfied
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END
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