TIDMPMO
RNS Number : 1849Z
Premier Oil PLC
16 May 2019
This announcement has been determined to contain inside
information
Premier Oil plc
("Premier" or "the Group" or "the Company")
Trading and Operations Update
16 May 2019
Premier today provides the following Trading and Operations
Update. This is issued ahead of the Company's Annual General
Meeting which is being held today at 11.00 at 11 Cavendish Square,
London.
Highlights
-- Year to date production of 85.1 kboepd, up 14 per cent on prior year corresponding period
-- 2019 full year production guidance increased to 75-80 kboepd
-- Guidance unchanged for 2019 opex ($13/boe, excluding lease costs) and capex ($340m)
-- Tolmount, Premier's next UK growth project, progressing to schedule and on budget
-- Tolmount East appraisal well to spud in July; Greater
Tolmount Area 3D seismic survey completed
-- Positive results from Block 7 Zama (Mexico) appraisal campaign, on track to complete in June
-- Net debt reduced to $2.25bn; forecast 2019 net debt reduction
at upper end of $250m to $350m guidance, at current oil prices
-- Forecast year end covenant leverage ratio of less than 2.3x, at current oil prices
Tony Durrant, Chief Executive, commented:
"We continue to deliver ahead of plan. Production and free cash
flow are ahead of forecast for 2019 and, consequently, we are
reducing our debt faster than anticipated. At the same time, we are
making good progress on our growth projects. We look forward to
concluding the Zama appraisal campaign and to spudding Tolmount
East, which has the potential to deliver a step change in value to
the already high return Tolmount Main project."
Enquiries
Premier Oil plc Tel: 020 7730 1111
Tony Durrant, Chief Executive
Richard Rose, Finance Director
Camarco Tel: 020 3757 4983
Billy Clegg
James Crothers
Group Production
Production has averaged 85.1 kboepd year to date, significantly
ahead of expectations. This is due to very high Group operating
efficiency of 97 per cent and includes an unbudgeted 3.4 kboepd
contribution from the Pakistan assets which were sold at the end of
March.
As a result of this strong performance, Premier has increased
its 2019 full year production guidance from 75 kboepd to 75-80
kboepd (including an annualised 1.3 kboepd contribution from
Pakistan).
Production
UK production averaged 57.4 kboepd, up 47 per cent on the
corresponding period in 2018. This was driven by an increased
contribution from the Premier-operated Catcher Area partially
offset by the sale of the Babbage Area in December 2018.
The Catcher Area has averaged 34.4 kboepd (net, Premier 50 per
cent) year to date, achieving 99 per cent operating efficiency.
Production from the Total-operated Elgin Franklin and
Premier-operated Huntington fields has been strong at 6.8 kboepd
(net, Premier 5.2 per cent) and 6.5 kboepd (Premier 100 per cent),
respectively. Elgin Franklin production continues to benefit from
on-going infill drilling and well intervention programmes.
The Premier-operated Solan field has averaged 4.1 kbopd (Premier
100 per cent) year to date. During the first quarter, Premier
sanctioned the drilling of a new producer (P3) in 2020 targeted at
increasing production from the central northern part of the Solan
field.
In May, Premier reinstated the Balmoral B-29 production well
which is currently producing 500-600 bopd (net, Premier 78.1 per
cent).
In Vietnam, the Premier-operated Chim Sao field averaged 12.5
kboepd (net, Premier 53.1 per cent), ahead of forecast and
supported by a successful well intervention programme during the
first quarter. A second well intervention programme is planned for
June. In Indonesia, Premier's operated Natuna Sea Block A has
captured a 52 per cent market share of its principal gas contract
year to date against a contractual share of 51.2 per cent.
Production was above take or pay levels but lower on the prior
corresponding period due to Singapore customers substituting
cheaper LNG for Natuna Sea pipeline gas. Lower Indonesia production
against the prior corresponding period also reflects the sale of
the Group's interest in the Kakap PSC in April 2018.
A full breakdown of production year to date is provided at the
end of this release.
Development activity
Premier continues to expect first gas from the Bison, Iguana and
Gajah-Puteri fields in Indonesia at the end of this year with the
first of the three development wells spudded at Bison earlier this
month by the Hakuryu-11 rig.
Formal project sanction of two Catcher satellite fields, Catcher
North and Laverda, is targeted for later this quarter. Ensco has
been contracted to provide the rig which will drill the development
wells immediately after completing the Varadero infill well (V5)
which is scheduled to spud in the second quarter of 2020.
Construction of the minimal facilities platform for Premier's
operated Tolmount development continues apace. Fabrication of the
primary structural steels and nodes is well progressed while
erection of the cellar deck and pre-assembly of the main deck has
now commenced. Preparatory work at the Easington terminal is also
well underway. The Ensco 123 drilling rig has been contracted to
spud the first well in the second quarter of 2020 ahead of first
gas in the fourth quarter of that year.
In the North Falkland Basin, technical definition and cost
optimisation of the Sea Lion project is nearing completion.
Preparation of the Preliminary Information Memorandum and the
related independent expert reports designed to secure senior debt
funding for the project is also well advanced.
Exploration and appraisal
The Tolmount East appraisal well is scheduled to spud in July
and is targeting 220 to 300 Bcf (P50 to P10) of gross unrisked
resource. A 3D seismic survey across the Greater Tolmount Area was
completed in April and the data is now being processed to further
define prospectivity in the area.
In Mexico, the results from the first two Talos Energy-operated
Block 7 (Premier, 25 per cent) appraisal wells (Zama-2 and
Zama-2ST) provided further evidence of the excellent quality and
well connected sands of the Zama reservoir and support a peak
production rate of up to 175 kboepd (gross). The third and final
Block 7 appraisal well, Zama-3, was re-entered late April and
results are expected in June. The data acquired from the appraisal
campaign is being integrated into the early engineering work ahead
of a decision on the optimal field development plan.
Elsewhere in Mexico, 3D seismic acquisition across Block 30
(Premier, 30 per cent non-operated), which contains the high impact
Wahoo and Cabrilla prospects, will commence later this month. The
survey is expected to complete by the end of June.
In Indonesia, the 3D seismic acquisition programme in the
Andaman Sea is on track to complete later this month. The data will
be used to mature the prospects identified on 2D data on Premier's
operated Andaman II licence (Premier, 40 per cent operated).
Finance
Premier has taken advantage of the strengthening of the oil
price to increase its hedging position to protect future free cash
flow. Premier has hedged 42 per cent of its remaining 2019 oil
volumes at $69/bbl and 10 per cent of its 2020 oil volumes at
$66/bbl. Premier has also hedged a significant proportion of its
remaining 2019 and 2020 Indonesian gas volumes. Premier's complete
hedging schedule is set out at the end of this release.
Operating costs and leases costs to the end of April averaged
$10/boe and $6/boe, respectively, reflecting strong production
(including an unbudgeted contribution from the low cost Pakistan
assets) and continued tight cost control across the Group. Full
year guidance of $13/boe operating costs and $7/boe lease costs is
maintained. Guidance for 2019 full year development, exploration
and abandonment spend remains unchanged at $340 million.
Net debt reduced from $2.33 billion at the end of 2018 to $2.25
billion at the end of April. This was driven by free cash flow
generation of c. $80 million, ahead of forecast due to strong
production and higher oil prices. Premier's 2019 free cash flow
generation is weighted towards the remainder of the year due to
phasing of capex and interest payments. Premier's leverage ratio
(covenant net debt/EBITDA) at the end of March was 2.7x. At current
oil prices, Premier is forecasting full year net debt reduction at
the upper end of the $250m to $350m guidance with a forecast year
end 2019 covenant leverage ratio of less than 2.3x.
Board update
As announced on 7 March, the Board of Directors have proposed
the election of Barbara Jeremiah to the Board as an independent
non-executive director at the Company's AGM today. It is the
directors' intention that Barbara will succeed Jane Hinkley as
Chair of the Company's remuneration committee following a short
transition period.
Group production breakdown
1 Jan to 15 May 2019 1 Jan to 15 May 2018
(kboepd) (kboepd)
UK 57.4 39.0
--------------------- ---------------------
Vietnam 12.5 16.3
--------------------- ---------------------
Indonesia 11.8 13.9
--------------------- ---------------------
Pakistan(1) 3.4 5.4
--------------------- ---------------------
Total 85.1 74.6
--------------------- ---------------------
(1) sold at 28 March 2019
Hedging schedules
Oil
Swaps/forward 2019 2H 2020
Volume (mmbbls) 3.99 1.63
-------- -----
% of forecast entitlement
production 42 10
-------- -----
Average price ($/bbl) 69 66
-------- -----
Indonesia gas
Swaps/forward 2019 2H 2020
Volume (HSFO k te) 102 228
-------- -----
% of forecast production 37 35
-------- -----
Average price ($/te) 380 361
-------- -----
UK gas
Swaps/forward 2019 2H 2020
Volume (million therms) 16 22
-------- -----
% of forecast production 16 11
-------- -----
Average price (p/therm) 63 53
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END
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