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Premier Oil PLC (PMO)

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Thursday 16 November, 2017

Premier Oil PLC

Trading and Operations Update

RNS Number : 6444W
Premier Oil PLC
16 November 2017
 

PREMIER OIL PLC

("Premier" or "the Group")

Trading and Operations Update

16 November 2017

 

Premier provides a Trading and Operations Update for the period 1 January to 31 October 2017.

 

Highlights

·   Production averaged 76.6 kboepd year-to-date with planned 3Q maintenance completed; on track to meet previously increased full year guidance of 75-80 kboepd

 

·    Catcher on schedule for first oil during December; FPSO swivel and buoy successfully mated with the final rotation test imminent and final topsides system commissioning proceeding well

 

·     Heads of Terms signed for FPSO lease extension on Huntington field, extending the life of the field

 

·     Government agreement signed for the sale of Tuna field gas in Indonesia to Vietnam 

 

·   Zama appraisal: pre-unitisation discussions with Pemex underway; likely 4 well appraisal programme commencing late 2018

 

·     Disposal programme ongoing including sale of Wytch Farm field for $200 million; shareholder circular to be issued imminently

 

·     Forecast 2017 operating costs of c$16/bbl and gross G&A of $150 million, below budget and in line with previous guidance

 

·    Forecast 2017 development, exploration and abandonment expenditure expected to be $300-310 million, down from previous guidance of $325 million  

 

·    Net debt of $2.8 billion at 30 September; debt reduction forecast at year end, including effects of ongoing planned disposals  

 

 

Tony Durrant, Chief Executive, commented:

"Through strong production, cost control and disposal activity, cash generation is ahead of plan. The excellent progress on the Catcher project, combined with the recovering oil price, will accelerate debt reduction through 2018. The agreement to export Tuna gas to Vietnam, signed last week, adds to Premier's significant backlog of future growth opportunities." 

 

 

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

Production for the ten months to 31 October averaged 76.6 kboepd (2016: 68.2 kboepd) reflecting a period which included the now completed planned maintenance programmes on a number of fields.  Production in October averaged 77.0 kboepd.  Premier expects to deliver within its previously upgraded full year production guidance of 75-80 kboepd.

 

kboepd

1 January - 31 October 2017

1 January - 31 October 2016

Indonesia

14.0

14.0

Pakistan & Mauritania

6.6

8.0

UK

41.0

30.1

Vietnam

15.0

16.1

Total

76.6

68.2

 

Premier's operated Chim Sao field in Vietnam delivered a good production performance over the period underpinned by high operating efficiency, strong reservoir performance and a successful well intervention programme mitigating the natural decline from the field. The first of a two well infill drilling programme has been drilled and brought on-line. A second infill well will be completed by year end. Production was also robust from Premier's Indonesian assets which delivered 14.0 kboepd, with Natuna Sea Block A capturing a market share of 49 per cent of GSA1 deliveries, against a contractual market share of 47 per cent. The recent Anoa development well (WL-5X) was brought on production in August and is producing at 20-25 mmscf/d, helping to confirm and define the potential of the deeper Lama zones within the Anoa field.

 

UK production averaged 41.0 kboepd, up 35 per cent on the prior corresponding period, principally as a result of a full contribution from the former E.ON assets. Scheduled maintenance programmes were carried out during the third quarter in particular on Huntington (average 13.5 kboped), Solan (average 6.2 kboepd), the Elgin-Franklin area (average 5.5 kboepd) and Ravenspurn North (average 1.3 kboepd). All works have now been completed and the assets are performing in line with our forecasts.

 

Premier's operated Babbage field continues to outperform averaging 3.1 kboped, following a successful well intervention programme. On Huntington, a Heads of Terms has now been signed with Teekay, the owner of the FPSO, to extend the firm charter period for the Huntington field beyond April 2018 for a minimum of one year with an improved rate structure.

 

Production from Pakistan and Mauritania averaged 6.6 kboepd in line with expectations.  The reduction on the prior corresponding period reflects expected natural decline in all of the gas fields.

 

Development projects

In the UK, the Premier-operated Catcher project remains on schedule for first oil during December. The FPSO arrived on location on 18 October and the production buoy was successfully pulled into the hull. In the subsequent period the full hook-up process has been essentially finished with the risers, umbilicals and the installation of the ESDVs now complete. The swivel stack is in place and the geostationary pipework connected with the final rotation test due imminently. Testing of the offloading interface with the cargo tanker is underway. Commissioning activities including the running of main power generation, chemical bunkering, system filling, shutdown system testing and system leak testing, which commenced in parallel are ongoing and will be ready for the introduction of hydrocarbons from the Catcher field shortly.

 

The development drilling programme continues ahead of schedule. The 12 wells originally planned pre-first oil (eight producers and four injectors) have been drilled, completed and tied back to the FPSO and drilling activities on phase 2 of the Catcher development wells are ongoing. The first of these phase 2 wells (CCP9) continued the trend of delivering results on, or better than, prognosis in terms of reservoir quality and flow rates.  Total project capex, including remaining contingency is forecast at $1.6 billion, 29 per cent lower than the sanctioned estimate.

 

Elsewhere in the UK, offshore and onshore FEED on the Premier-operated Tolmount field in the Southern Gas Basin is progressing well. Tendering of the major project scopes is underway and proposals have been received for the pipeline, drilling rig and platform; these are now being evaluated. Alongside the FEED process, the draft Field Development plan has been submitted to the OGA and the Heads of Terms signed with Dana Petroleum and CATS Management Limited in respect of the infrastructure partnership for the Tolmount development, is being progressed into final documentation ready for development sanction planned for the first half of 2018.

 

In Indonesia, the BIGP development project in Natuna Sea Block A is proceeding well. The Indonesian Government formally approved the project in October and all major contracts have now been awarded. Premier is targeting first gas in 2019 to backfill our existing Singapore and domestic market contracts. On 10 November 2017 Petrovietnam, Premier and SKK Migas (on behalf of the Indonesian Government) entered into a Memorandum of Understanding for future gas sales from the Tuna Field in Indonesia into Vietnam. This represents a significant step forward in the potential development of the field envisaging using a new cross-border pipeline to connect the Tuna area to the existing Nam Con Son Pipeline system in Vietnam. Further appraisal in the area is planned for 2019.

 

Exploration and appraisal

Premier is working with its joint venture partners Talos Energy (Operator) and Sierra Oil & Gas to progress the appraisal and development of the world class oil discovery at the Zama-1 well in Block 7 Sureste Basin offshore Mexico. The Zama discovery extends into a neighbouring block operated by PEMEX. Discussions have commenced and are progressing well, to agree a pre-unitisation agreement with PEMEX to enable an appraisal programme to commence in late 2018 or early in 2019.

 

In the UK, operations on the Ravenspurn North Deep well (Premier carried 5 per cent interest), which is testing the potential of a deep Carboniferous age horizon underlying the Ravenspurn North field are ongoing and the well remains on tight hole status.

 

Portfolio management

As previously announced, Premier entered into a sale and purchase agreement to sell its interests in Licences PL089 and P534, which contain the Wytch Farm field, to Verus Petroleum (SNS) Limited ("Verus") for $200 million cash consideration. The transaction was subject to the pre-emption rights of existing joint venture partners and Premier subsequently received notification from Perenco UK Limited ("Perenco") of its intention to exercise those rights. It is therefore expected Premier will shortly enter into a sale and purchase agreement with Perenco on materially the same terms and conditions as were previously agreed with Verus, including unchanged cash consideration of $200 million. The disposal will be conditional, amongst other things, on shareholder approval and a circular will be issued to shareholders convening a general meeting as soon as possible. Subject to fulfilling the conditions, completion is expected by the end of December 2017.

 

In April, Premier announced the sale of its Pakistan business to Al-Haj Group for $65.6 million.  To date, Al-Haj has paid non-refundable deposits in accordance with the agreement of $25 million. In addition to the clearance received from the Competition Commission of Pakistan, engagement with the Pakistani authorities with respect to other approvals is progressing well and completion of the transaction is expected by year end. In the meantime Premier continues to collect the cashflows generated from the Pakistan assets.

 

Discussions are ongoing with a number of parties regarding potential non-core asset disposals principally from the E.ON portfolio acquired in 2016.

 

Finance
Premier anticipates 2017 full year operating expenses of c$16/boe in line with previous guidance. The increase from 1H 2017 reflects the expected lower production in the second half of the year as a result of the scheduled Q3 maintenance period.  Gross G&A costs are forecast at $150 million for 2017 below the budget for the year.

 

Premier's development, exploration and abandonment expenditure for 2017 is now expected to be between $300 - 310 million, down from previous guidance of $325 million.

 

Despite the forward curve being in backwardation, Premier has taken advantage of the improvement in the commodity prices to increase its hedge position into 2018 through a combination of fixed price and option sales. 

 

At 31 October, the Company's hedge position was as follows:

 

 

Q4 2017

H1 2018

H2 2018

Oil hedges

% hedged

Price ($/bbl)

%

hedged

Price ($/bbl)

%

hedged

Price ($/bbl)

Fixed price oil hedges

19%

52.4

30%

53.5

16%

55.7

Options (average floor price)

 

22%

 

51.1

 

20%

 

54.7

 

-

 

-

UK gas hedges

% hedged

Price (p/therm)

%

hedged

Price (p/therm)

%

Hedged

Price (p/therm)

Fixed price

40%

49.2

34%

48.4

13%

43.2

 

 

Net debt at 30 September was $2.8 billion, reflecting previously guided one off adjustments incurred in connection with the refinancing becoming effective, translation differences on non-dollar denominated debt and lower Q3 production. With the increase in production in Q4 and higher oil prices, Premier expects to generate positive free cash flow in Q4 despite ongoing capex at Catcher and to be cash flow positive for the full year including planned disposals. As at 30 September, Premier retains significant cash and undrawn facilities. As capex commitments (including the completion of the development phase of the Catcher field) reduce, debt reduction will accelerate through 2018.

 

Future announcements

The next Premier Trading and Operations Update will be provided on 11 January 2018. Premier's Full Year Results for 2017 will be announced on 8 March 2018.


This information is provided by RNS
The company news service from the London Stock Exchange
 
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