TIDMPMO
RNS Number : 3509V
Premier Oil PLC
05 April 2019
Premier Oil plc (the "Company")
2018 Annual Report and Financial Statements
and Notice of Annual General Meeting 2019
5 April 2019
Further to the release of the Company's Annual Results on 7
March 2019, the Company announces that it has today published its
Annual Report and Financial Statements for the financial year ended
31 December 2018 (the "2018 Annual Report"). In addition, the
Company has today posted to shareholders the Notice of Annual
General Meeting ("AGM") 2019. The AGM will be held at No.11
Cavendish Square, London, W1G 0AN, at 11.00am on Thursday 16 May
2019.
In accordance with Listing Rule 9.6.1., copies of the 2018
Annual Report, the Notice of AGM and related form of proxy have
been submitted to the UK Listing Authority and will shortly be
available for inspection from the National Storage Mechanism at
www.morningstar.co.uk/uk/nsm. The documents (except for the form of
proxy) are also available to view on the Company's website at
www.premier-oil.com
A condensed set of financial statements and information on
important events that have occurred during the year ended 31
December 2018 and their impact on the financial statements were
included in the Company's 2018 Annual Results announcement on 7
March 2019. That information together with the information set out
below in Appendix 1, which is extracted from the 2018 Annual
Report, fulfil the requirements of DTR 6.3.5. This announcement is
not a substitute for reading the full 2018 Annual Report. Page and
note references in the text in Appendix 1 are made in reference to
the 2018 Annual Report. To view the 2018 Annual Results
announcement, visit the Company website:
www.premier-oil.com/investors
Further enquiries:
Company Secretariat:
Daniel Rose Tel: +44 (0)20 7730 1111
Investor Relations:
Elizabeth Brooks Tel: +44 (0)20 7730 1111
Disclaimer
This announcement contains certain forward-looking statements
that are subject to the usual risk factors and uncertainties
associated with the oil and gas exploration and production
business. Whilst the Group believes the expectations reflected
herein to be reasonable in light of the information available to it
at this time, the actual outcome may be materially different owing
to factors beyond the Group's control or otherwise within the
Group's control but where, for example, the Group decides on a
change of plan or strategy. Accordingly, no reliance may be placed
on the figures contained in such forward-looking statements.
APPIX 1
Company Risk Factors (required under DTR 4.1.8)
Principal risk factor Risk detail How is it managed?
--------------------------- ------------------------------------------- --------------------------------------------
Commodity price Oil and gas prices are affected by global Oil and gas price hedging programmes to
volatility supply and demand and can be subject to underpin our financial strength and protect
significant our capacity
fluctuations. to fund future developments and operations.
Factors that influence these include Premier's investment guidelines ensure that
operational issues, natural disasters, our investment opportunities are robust to
adverse weather, downside
climate change regulations, political and price scenarios.
security instability, conflicts, economic Hedging of exposure to increasing carbon
conditions prices.
and actions by major oil-exporting
countries.
Price fluctuations can affect our business
assumptions and our ability to deliver on
our strategy.
Specific risks for 2019: inability to
execute a satisfactory oil hedging
programme due to
low forward oil prices; uncertainty in
implementation of IMO2020 regulations
impacting fuel
oil pricing.
--------------------------- ------------------------------------------- --------------------------------------------
Financial discipline Sufficient funds may not be available to Strong financial discipline. Premier has an
and governance finance the business and fund existing established finance management system to
operations ensure
and planned growth projects. that it is able to maintain an appropriate
Volatile credit markets and bank risk level of liquidity and financial capacity
appetite may impact ability to refinance and to
debt at maturity manage the level of assessed risk
on attractive terms. associated with the financial instruments.
Breach of delegated authority. The management
Financial fraud. system includes a defined delegation of
Specific risks for 2019: reduced authority to reasonably protect against
flexibility to manage the business under risk of financial
existing lender fraud in the Group.
controls; breach of banking covenants in Premier maintains access to capital markets
downside scenarios; inability to fund a through the cycle by proactive engagement
Sea Lion with
development. banks and lenders as evidenced by the
completion of its refinancing in 2017.
An insurance programme is maintained to
reduce the potential impact of the physical
risks
associated with exploration and production
activities. In addition, business
interruption
cover is purchased for a proportion of the
cash flow from producing fields. Cash
balances
are invested in short-term deposits with
minimum A credit rating banks, AAA managed
liquidity
funds and A1/P1 commercial paper, subject
to Board approved limits.
Economics of investment decisions are
tested against downside project scenarios.
Discretionary spend is actively managed.
--------------------------- ------------------------------------------- --------------------------------------------
Production and Uncertain geology, reservoir and well Effective management systems governing
development delivery performance. geoscience, reservoir and well engineering,
and decommissioning Availability of oilfield services and production
execution including FPSOs and drilling rigs, operations activities, including rigorous
technology and engineering production forecasting and reporting, field
capacity, and skilled resources. and
Adverse fiscal, regulatory, political, well performance monitoring, and
economic, social, security (including independent reserves auditing.
cyber) and weather Effective project execution management
conditions. systems, including contracting strategy and
Immaturity of decommissioning in the UK cost controls
resulting in uncertain cost and timing together with capable project teams and
estimates for functional oversight.
decommissioning of assets. Long-term development planning to ensure
Potential consequences include reduced or timely access to FPSOs, rigs and other
deferred production, loss of reserves, essential
cost overruns services.
and failure to fulfil contractual Preference for operatorship.
commitments. Specialist decommissioning team in place
Specific risks for 2019: reliance on coupled with continued focus on delivering
performance of Catcher asset; failure to asset
maintain schedule value to defer abandonment liabilities.
of Tolmount project; acceleration of
decommissioning of certain assets if they
underperform.
--------------------------- ------------------------------------------- --------------------------------------------
Joint venture partner Major operations and projects in the oil Due diligence and regular engagement with
alignment and supply and gas industry are conducted as joint partners in
chain delivery ventures. joint ventures in both operated and
The joint venture partners may not be non-operated operations and projects.
aligned in their objectives and this may Pursue strategic acquisition opportunities,
lead to operational where appropriate to gain a greater degree
inefficiencies and/or project delays. of
Several of our major operations are influence and control.
operated by our Defined management system for management of
joint venture partners and our ability to non-operated ventures.
influence is sometimes limited due to our Due diligence of supply chain providers,
small including diligence of financial solvency,
interest in such ventures. anti-bribery
Premier is heavily dependent on supply and corruption controls, and controls to
chain providers to deliver products and prevent facilitation of tax evasion.
services to Monitor contractual performance and
time, cost and quality criteria and to delivery, including periodic audit of the
conduct its business in a safe and ethical effectiveness
manner. of their management systems.
Specific risks for 2019: access to and Complete roll out of a comprehensive
cost of appropriate service providers if contract performance management programme
oil prices for major contracts.
strengthen.
--------------------------- ------------------------------------------- --------------------------------------------
Organisational The capability of the organisation may be Premier has created a competitive reward
capability inadequate for Premier to deliver its package including bonus and long-term
strategic incentive plans
objectives. The capability of the to incentivise loyalty and performance from
organisation is a function of both the the existing skilled workforce.
strength of its personnel Continue to strengthen organisational
and the effectiveness of its business capability to achieve strategic objectives.
management system. This includes
Premier may be unable to attract, engage resource and succession planning,
or retain personnel with the right skills competency and leadership development.
and competencies Continuous improvement of business
or to deliver suitable succession plans management system and related controls
for senior roles. appropriate to the
The business management system may be size and market position of the Company.
inadequate or may not be sufficiently Implementation of staff engagement plans
complied with. following the staff survey in 2018.
Specific risks for 2019: unable to Implementation of Staff Forum across the
attract, engage or retain key staff due Group to inform management and the Board on
increasing competition cultural
for talent, ageing demographic and an and people related issues.
ageing asset portfolio. Continued focus on Diversity & Inclusion
across the Group.
Continued phased rollout of the Talent
Management programme, including continued
senior level
succession at local and Group levels.
Implementation of recommendations emerging
from externally facilitated organisation
health
check conducted in 2018.
--------------------------- ------------------------------------------- --------------------------------------------
Exploration Premier may fail to identify and capture Focus on geologies we know well and in
success and new acreage and resource opportunities to which we can build a competitive advantage.
reserves addition provide Continuous improvement in exploration
a portfolio of drillable exploration management system with strong functional
prospects and future development projects. oversight.
Specific exploration programmes may fail Manage exploration portfolio to maintain
to add expected resource and hence value. alignment with strategic growth and spend
Lender controls may reduce ability to targets.
capture and execute the exploration Active new ventures activity and
programme. appropriate resourcing.
Specific risks in 2019: inability to
access quality global opportunity set due
to lender restrictions
in a highly competitive market; and
negative appraisal results on Zama and
Tolmount East appraisal
opportunities.
--------------------------- ------------------------------------------- --------------------------------------------
Health, safety, Significant asset integrity, process Comprehensive HSES management systems
environment safety or wells incident on operated including:
and security asset. HSES reporting and auditing with a focus on
('HSES') Significant incident arising from natural the identification and management of major
disaster, pandemic, social unrest or other hazards.
external Valid Safety Cases on all operated assets.
cause. Robust crisis management and emergency
Consequences may include injury, loss of response processes in place and tested
life, environmental damage and disruption against.
to business Senior management visits to operated
activities. facilities to demonstrate commitment to
HSES values.
Learning from internal and third-party
incidents.
Insurance against Business Interruption.
--------------------------- ------------------------------------------- --------------------------------------------
Host government: Premier operates or maintains interests in Premier strives to be a good corporate
political and fiscal risks some countries where political, economic citizen globally, and seeks to forge strong
and social and positive
transition is taking place or there are relationships with governments, regulatory
current sovereignty disputes. authorities and the communities where we do
Developments in politics, security, laws business.
and regulations can affect our operations Premier engages in respectful industry-wide
and earnings. lobbying and sustainable corporate
Consequences may include expropriation of responsibility
property; cancellation of contract rights; and community investment programmes.
limits Premier maintains a portfolio of interests
on production or cost recovery; import and which includes operations in both lower and
export restrictions; price controls, tax higher
increases risk environments.
and other retroactive tax claims; and Rigorous adherence to Premier's Business
increases in regulatory burden or changes Ethics Policy and Global Code of Conduct.
in local laws Monitor and adhere to local laws and
and regulations. regulations.
Consequences may also include threats to Active monitoring of the political,
the safe operation of Company facilities. economic and social situation in areas
Specific risk in 2019: monitor impact of where we do business,
change of Government in Mexico. including business continuity plans
tailored to pre-defined levels of alert.
--------------------------- ------------------------------------------- --------------------------------------------
Key Performance Indicators (required under DTR 4.1.9)
Working interest production (kboepd)
Objective
Premier aims to maximise production from its existing asset base
and, over time, to deliver production growth. Production growth is
measured using average daily production and the number of
development projects being brought through to sanction.
2018 Progress
-- Record production in 2018 of 80.5 kboepd (2017: 75 kboepd)
-- Tolmount Main gas project (UK) sanctioned, next phase of growth for the business
2019 Expectations
-- Expected production of 75 kboepd, an underlying increase on
2018, after adjusting for disposals
-- First gas from BIG-P expected late 2019
Reserves and resources (mmboe)
Objective
Premier aims to grow its reserves and resources base through a
combination of successful exploration and selective
acquisitions.
2018 Progress
-- Tolmount Main resources booked as 2P reserves
-- Upward revision in 2P reserves estimates at Chim Sáo,
Elgin-Franklin and the Catcher Area
-- Recategorisation of Sea Lion 2P reserves as contingent resources
2019 Expectations
-- Continue to evaluate acquisition opportunities
-- Progress senior funding structures for Sea Lion, ahead of a final investment decision
-- Complete sale of Pakistan business
Covenant Leverage ratio
Objective
Premier aims to have sufficient headroom against its covenant
leverage ratio to ensure continued covenant compliance and access
to liquidity throughout the commodity price cycle.
2018 Progress
-- Covenant leverage ratio (covenant net debt/ EBITDAX) reduced to 3.1x (2017: 6.0x)
-- Increased EBITDAX of US$882 million, up 50%
-- Early exchange of the Company's convertible bonds
-- Completion of non-core asset sales
2019 Expectations
-- Cash flows prioritised towards debt reduction
-- Maintain sufficient liquidity to withstand another downturn in the commodity price cycle
Operating cash flow (US$ million)
Objective
Premier aims to maximise cash flow from operations to maintain
financial strength, meet its debt obligations, invest in the future
of the business and deliver long-term returns to shareholders.
Premier's cash flows are protected by a forward hedging
programme.
2018 Progress
-- c.US$350 million of operating cash flow net to Premier generated by Catcher
-- Strong operating cash flow generation from the Group's
operated Asian assets driven by high uptime and continued tight
cost control
2019 Expectations
-- Improved cash margins at comparable commodity prices due to increased UK production
-- Substantial hedging programme protecting future cash flows and investment programmes.
Operating costs (US$/boe)
Objective
Premier aims to minimise costs from operations without
compromising on health, safety and integrity. Operating costs per
barrel of oil equivalent is a function of industry costs,
inflation, the efficiency and effectiveness of Premier's people,
technology and production output. Operating costs are monitored
closely to ensure that they are maintained within pre-set annual
targets.
2018 Progress
-- Operating costs of US$16.9/boe, of which US$10.4/boe related
to field opex and US$6.5/boe to FPSO lease costs
-- Low-cost base supported by high operating efficiency, tight
cost control and a weaker sterling dollar exchange rate
2019 Expectations
-- Slightly higher operating costs (US$13/boe field opex and
US$7/boe FPSO lease costs) reflecting the change in portfolio
mix
Net debt (US$ billion)
Objective
Premier aims to reduce the absolute level of its net debt in
order to address the imbalance in its capital structure, to ensure
compliance with its financial covenants and to provide the Company
with future financial flexibility. Premier anticipates reducing its
net debt by using cash flow generated from its producing assets and
disposals, while maintaining tight cost control.
2018 Progress
-- Net debt reduced by US$393 million to US$2.3 billion
-- Free cash flow generation of US$251 million (including cash receipts from disposals)
-- Early exchange of the US$181 million convertible bonds
2018 Expectations
-- Further debt reduction targeted, supported by an improved
portfolio mix and a strong hedging programme
-- Premier expects to generate free cash flow at oil prices above US$45/bbl during 2019
HSES
Objective
Premier is committed to managing its operations in a safe,
reliable and environmentally responsible manner to prevent major
accidents and to provide a high level of protection to its
employees, contractors and the environment.
2018 Progress
-- Strong environmental performance with no significant spills
-- Greenhouse Gas Intensity of our operating assets at the
lowest level in Premier's reporting history
-- Group recordable injury rate of 2.65 injuries per million man
hours; Solan, Gajah Baru and Chim Sáo recordable injury free
-- Tier 1 Process Safety Events of zero for the fifth consecutive year
-- 35 senior management HSES visits to our operated facilities
2019 Expectations
We aim to deliver upper quartile HSES performance compared with
our peers in the International Association of Oil & Gas
Producers ('IOGP')
Directors' responsibility statements (required under DTR
4.1.12)
The Directors are responsible for preparing the Annual Report
and Financial Statements in accordance with applicable law and
regulations.
Group financial statements
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
are required to prepare the Group financial statements in
accordance with International Financial Reporting Standards
('IFRSs') as adopted by the European Union ('EU') and Article 4 of
the International Accounting Standards ('IAS') Regulation and have
also chosen to prepare the Parent Company financial statements in
accordance with Financial Reporting Standard 101 Reduced Disclosure
Framework. Under company law the Directors must not approve the
financial statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Company and of
the profit or loss of the Company for that period.
In preparing the Parent Company financial statements, the
Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and accounting estimates that are reasonable and prudent;
-- state whether Financial Reporting Standard 101 Reduced
Disclosure Framework has been followed, subject to any material
departures disclosed and explained in the financial statements;
and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
In preparing the Group financial statements, International
Accounting Standard 1 - 'Presentation of Financial Statements' -
requires that Directors:
-- properly select and apply accounting policies;
-- present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
-- provide additional disclosures when compliance with the
specific requirements in IFRSs are insufficient to enable users to
understand the impact of particular transactions, other events and
conditions on the entity's financial position and financial
performance; and
-- make an assessment of the Company's and Group's ability to continue as a going concern.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and Group and enable them to
ensure that the financial statements comply with the Companies Act
2006. They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website (www.premier-oil.com). Legislation in the United
Kingdom governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Directors' responsibility statement
We confirm to the best of our knowledge:
1. the Group financial statements, prepared in accordance with
International Financial Reporting Standards, as adopted by the EU,
give a true and fair view of the assets, liabilities, financial
position and profit or loss of the Company and the undertakings
included in the consolidation taken as a whole;
2. the Strategic Report includes a fair review of the
development and performance of the business and the position of the
Company and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties that they face; and
3. the Annual Report and Financial Statements, taken as a whole,
are fair, balanced and understandable and provide the information
necessary for shareholders to assess the Company's position and
performance, business model and strategy.
This responsibility statement was approved by the Board of
Directors on 6 March 2019 and is signed on its behalf by:
Tony Durrant
Chief Executive Officer
Richard Rose
Finance Director
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
ACSUGUBPCUPBGQA
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April 05, 2019 12:33 ET (16:33 GMT)
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