TIDMPMO
RNS Number : 9617Y
Premier Oil PLC
07 January 2020
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION.
Premier Oil plc
("Premier" or "the Group" or "the Company")
Trading and Operations Update
7 January 2020
Premier today provides a Trading and Operations Update ahead of
its 2019 Full Year Results, which will be announced on Thursday 5
March 2020. Separately, the Group today has announced accretive and
strategic UK North Sea acquisitions, underwritten financing and a
proposed extension of its credit facilities.
Highlights
-- 2019 production of 78.4 kboepd, at the upper end of full year
guidance, underpinned by high operating efficiency and continued
high rates from the Premier-operated Catcher Area
-- BIG-P (Indonesia) First Gas delivered on schedule and below
budget, supporting higher Singapore offtake in Q4 2019
-- Tolmount (UK) on budget and on track for First Gas by 2020
year end, adding 20-25 kboepd (net, Premier 50 per cent interest);
Tolmount East development planning underway ahead of targeted
sanction in 2020 2H
-- Sea Lion (Falkland Islands) Heads of Terms signed with
Navitas Petroleum to farm in for a 30 per cent interest in the Sea
Lion project; discussions progressing with senior lenders regarding
project financing
-- Tuna PSC (Indonesia): Heads of Terms signed for a full carry
on a two well appraisal campaign
-- Zama (Mexico): unitisation process progressed with the formal
notice confirming a shared reservoir submitted to the regulators in
December; sales process ongoing following successful appraisal
campaign
-- Exploration portfolio materially enhanced with the capture of
new acreage in the Andaman Sea (Indonesia) and on the Alaska North
Slope; pipeline of near-term high value E&A wells including
Malguk-1 appraisal (Alaska) and Berimbau/Maraca (Brazil).
-- Estimated 2019 total capex of US$300 million and opex
(ex-lease costs) of US$11/boe, both below original guidance
-- Net debt reduced by over US$330 million from US$2.33 billion
to US$1.99 billion, in line with guidance
Tony Durrant, Chief Executive, commented:
"Premier's strong operational performance in 2019 has generated
significant free cash flow for the Group enabling us to materially
reduce our debt levels and to invest selectively in our portfolio
for future growth. The Tolmount development is making good progress
and will provide a step up in Group production once on-stream at
the end of this year. We also look forward to drilling our first
well in Alaska, a potentially transformational well for
Premier."
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
Production operations
2019 production is estimated at 78.4 kboepd, at the upper end of
full year guidance of 75-80 kboepd and underpinned by continued
high Group operating efficiency. 2020 production is expected to
average 70-75 kboepd, before any contribution from the acquired
assets separately announced today.
UK production averaged 54.2 kboepd during 2019, a 16 per cent
increase on 2018, driven by a full year contribution from the
Catcher Area at increased rates. The Catcher Area continued to
outperform during 2019, averaging 33.6 kboepd (net, Premier 50 per
cent interest) and achieving excellent operating efficiency.
The Elgin-Franklin Area produced 6.0 kboepd (net, Premier 5.2
per cent interest) ahead of expectations. Production was supported
by well intervention and infill drilling campaigns, including the
F12 infill well, which was placed on-stream in December. Huntington
production averaged 5.8 kboepd (Premier 100 per cent interest).
Premier continues to discuss with the FPSO provider an extension of
field life beyond April 2020. Premier's operated Solan field
delivered 3.5 kboepd (Premier 100 per cent interest). A rig has
been contracted to drill a third producer (P3) in the central
northern part of the field, targeting an unswept part of the
reservoir. The well is expected to spud during the first half of
2020 and once on-stream is anticipated to provide a significant
step up in production levels from the Solan field.
In the Southern Gas Basin, the Borr Prospector-5 jack up rig has
been contracted to drill two horizontal wells on Ravenspurn North,
commencing later this quarter. The wells will access gas in
undrained areas of the field with the aim of extending field life
to 2028.
In Vietnam, Premier's operated Chim Sao field averaged 11.4
kboepd (net, Premier 53.13 per cent interest), ahead of budget with
natural decline from the existing wells mitigated by four well
intervention campaigns during the year. Preparations continue for a
2021 two well infill drilling campaign with regulatory approvals in
progress. Chim Sao cargoes remain well bid with an average premium
to Brent of more than US$4.70/bbl realised for cargoes lifted over
the course of the year.
Premier's Natuna Sea Block A gas fields in Indonesia delivered
11.5 kboepd (net, Premier 28.67 per cent interest) with offtake
under the two gas sales agreements at or around annual take or pay
levels. In December, Premier achieved First Gas from its operated
Bison, Iguana and Gajah Puteri (BIG-P) project, on schedule and
significantly below budget, increasing the deliverability from
Premier's operated Natuna Sea Block A. Deliverability was also
boosted following the successful tie-in of a Gajah Baru infill well
in December.
Natuna Sea Block A production increased in December, averaging
16.1 kboepd. This was driven by higher Singapore demand for
Premier's gas and the addition of condensate from Gajah Puteri
following start-up of the field in December.
Development activities
The Premier operated Tolmount development is on schedule and
tracking below budget. Construction and fit-out of the platform
ahead of load-out in April continues: the platform crane and all
major equipment packages, including the produced water treatment
unit, diesel generator and gas and water separator have been
installed on the platform with final piping, electrical
installation and pre-commissioning underway. Coating of the
linepipe is nearing completion and the offshore pre-anchor route
survey has been undertaken ahead of planned pipelay in June 2020.
Development drilling is on track to start mid-2020. Premier
continues to expect First Gas before year-end, with Tolmount adding
20-25 kboepd (net, Premier 50 per-cent interest) to Group
production once on plateau.
Following the Tolmount East discovery in October 2019, Premier
is undertaking FEED studies for both platform and subsea concepts
to develop the Tolmount East gas field via the Tolmount
infrastructure. Premier plans to select the optimal field
development during the first half of 2020 with Tolmount East
project sanction targeted for the second half of the year.
Elsewhere in the UK, development of the two Catcher Area
satellite oil fields, Catcher North and Laverda, is progressing to
plan with fabrication of the flexibles, umbilicals and modification
to the templates underway. The two development wells are scheduled
to be drilled mid-2020, along with an additional Vardero production
well. First oil from Catcher North and Laverda is targeted for
early 2021 and, together with the Varadero infill well, will help
to offset natural decline from the Catcher Area as the existing
wells come off plateau. In addition, a 4D seismic survey across the
Catcher Area is scheduled to take place mid-year to identify
further infill opportunities as well as to improve the imaging of
already identified near field prospects and discoveries.
In Mexico, the Block 7 joint venture partners progressed the
unitisation process in December by submitting an Aviso (notice of
shared reservoir) to the Mexican authorities for their approval.
Meanwhile, FEED on the joint venture's chosen development concept
continues ahead of project sanction which is targeted for the
second half of 2020. Following the successful appraisal of the Zama
field earlier in 2019, a sales process is underway for Premier's 25
per cent interest in Block 7 with the Group currently in
discussions with potential buyers.
In the Falkland Islands, Premier and Rockhopper have agreed a
detailed Heads of Terms with Navitas Petroleum to farm in for a 30
per cent interest in the 530 mmbo Sea Lion project which is
expected to be developed over several phases. Under the Heads of
Terms, the interests across the Sea Lion licences will be aligned
with Premier having a 40 per cent operated interest and Rockhopper
and Navitas a 30 per cent interest each. Rockhopper will be fully
funded for Sea Lion Phase 1 with its share of development costs
split pro rata between Premier and Navitas. Finalisation of a Sales
and Purchase Agreement is expected during the first quarter of 2020
with completion subject to regulatory approval and conclusion of
senior debt financing.
Exploration and appraisal
In November, Premier completed the farm in for a 60 per cent
interest in the conventional Area A Icewine project in the Alaska
North Slope. The Nordic-3 rig has been contracted to appraise the
Malguk-1 discovery which Premier estimates could contain over 1 bn
bbls of STOIIP. Construction of the ice road connecting the Dalton
Highway to the well site commenced in December with the rig on
track to arrive on location in time for a February spud.
In Brazil, the Valaris-DS9 rig has been contracted to drill the
Berimbau/Maraca stacked prospects on Premier's operated Block 717
in the Ceara Basin. The well is scheduled to spud in the third
quarter and is targeting unrisked resource of 300 mmbbls (gross,
Premier 50 per cent interest).
In Indonesia, Premier's farm in for a 20 per cent interest in
Andaman 1 and South Andaman completed in December. Premier
continues to mature the prospects identified on the fast track 3D
seismic data across its three Andaman Sea blocks, ahead of
receiving the fully processed seismic data. Preparations are
underway for a two well drilling campaign commencing in the second
quarter of 2021 which will include a well on Premier's operated
Andaman II and potentially a well on the South Andaman block.
Elsewhere in Indonesia, a Heads of Terms has been signed with a
new investor to farm in for a material interest in the Tuna PSC.
Under the Heads of Terms, the new investor will fully carry Premier
for its share of a two well appraisal campaign. The Tuna
discoveries are estimated to contain 100 mmboe (gross).
In Mexico, Premier expects to receive the Block 30 final
processed 3D seismic dataset in the second quarter of 2020.
Fast-track data already received confirms the prospectivity of the
amplitude-supported Wahoo structure which Premier plans to drill in
the first half of 2021. Premier also expects to receive the final
processed 3D seismic data across Blocks 11 and 13 in the Burgos
Basin during 2020.
In the UK, final processed 3D seismic data from the Greater
Tolmount Area seismic survey are expected by the end of the first
quarter of 2020 and will enable maturation of the Tolmount Far East
prospect and further assessment of the additional prospectivity in
the surrounding Tolmount Area.
Finance
Premier has hedged 37 per cent of its 2020 first half oil
entitlement volumes at US$64/bbl, 40 per cent of its UK gas volumes
at 56 pence/therm and 46 per cent of its Indonesian gas entitlement
volumes at US$382/te. The Group's complete hedging schedule is set
out at the end of this release.
Full year 2019 field operating costs are estimated to be below
full year guidance of US$20/boe at US$18/boe, of which US$11/boe
relates to field opex and US$7/boe to FPSO lease costs across the
Group. 2020 operating costs are forecast to be US$21/boe, of which
US$15/boe relates to field opex and US$6/boe to FPSO lease
costs.
Development, exploration and abandonment expenditure for the
full year 2019 is estimated at around US$300 million, below
original guidance of US$340 million, due to the release of
contingency spend related to the BIG-P drilling programme, the
Tolmount project tracking below budget and some deferral of spend
into 2020.
Total 2020 production and development capex is expected to be
US$320 million, principally relating to drilling at Tolmount, Solan
and Catcher. In addition, Premier expects to spend US$90 million on
exploration and appraisal and US$30 million on abandonment (pre-tax
relief).
Premier continues to benefit from its substantial UK corporation
tax loss and allowance position with estimated losses and
allowances of US$4.2 billion carried forward at 31 December
2019.
Premier reduced net debt by over US$330 million during the
period from US$2.33 billion at the end of 2018 to US$1.99 billion
as at the end of 2019. Estimated 2019 year-end leverage ratio
(covenant net debt / EBITDA) is 2.3x against a covenant of
3.0x.
Board changes
The Board is pleased to announce that, following Jane Hinkley's
retirement from the Board on 31 December 2019, Anne Marie Cannon
has been appointed as the Company's Senior Independent Director.
The Board would like to thank Jane for her significant contribution
to the Board during her nine years of service and wish her well for
the future.
Appendix
Group production breakdown
kboepd 2019 2018
Indonesia 11.5 13.2
Pakistan(1) 1.3 5.3
UK 54.2 46.8
Vietnam 11.4 15.2
----- -----
Total 78.4 80.5
----- -----
(1) sold at 26 March 2019
Hedging schedules
Oil
Swaps/forward 2020 1H 2020 2H
Volume (mmbbls) 3.32 1.23
-------- --------
% of forecast ent. production 37 14
-------- --------
Average price ($/bbl) 64 63
-------- --------
Indonesia gas
Swaps/forward 2020 1H 2020 2H
Volume (HSFO k te) 126 126
-------- --------
% of forecast production 46 46
-------- --------
Average price ($/te) 382 340
-------- --------
UK gas
Swaps/forward 2020 1H 2020 2H
Volume (million therms) 37 25
-------- -----------------------------------
% of forecast production 40 33
-------- -----------------------------------
Average price (p/therm) 56 51
-------- -----------------------------------
The information contained within this announcement is deemed by
Premier to constitute inside information as stipulated under the
Market Abuse Regulation. By the publication of this announcement
via a Regulatory Information Service, this inside information is
now considered to be in the public domain. The person responsible
for arranging for the release of this announcement on behalf of
Premier is Andy Gibb (Company Secretary and General Counsel).
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END
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