Premier Bucks Trend with Higher Profits in 2019
The UK's Premier Oil increased its after-tax profits by almost a quarter in 2019, according to results published on March 5, bucking a trend that has seen the earnings of many oil and gas producers slide with lower prices.
The company's post-tax income came to $164mn, compared with $133mn a year earlier. Core earnings (Ebitdax) grew by 12.7% to $1.23bn, and Premier also generated record free cash flow of $327mn in the period, versus $251mn in 2018. Its net debt at the end of December stood at $1.99bn, down from $2.33bn a year before. The company has a market capitalisation of around $850mn.
"Premier made significant progress against its strategic targets during 2019. Strong operational performance resulted in record free cash flows and reducing debt levels," CEO Tony Durrant commented.
Revenues were up 13.4% at $1.585bn, thanks to Premium hedging some oil production. The company sold its oil for $68.1/barrel on average last year, versus $63.5 in 2018, despite the decline in benchmarks over the year. While it also hedged much of its Indonesian gas output, the impact was offset by a 26.3% drop in its average released gas price in the UK to £4.2 ($5.3)/mn Btu.
Production also slipped 2.6% to 78,400 barrels of oil equivalent/day, as a result of declines in Indonesia, Pakistan and Vietnam. These losses were partly offset by a 15.8% growth in Premier's UK output to 54,200 boe/day, thanks to increased contributions from the Catcher area in the central North Sea.
Moving forward, the launch of the Premier-operated Tolmount gas project by year-end will help the company maintain its UK output at above 50,000 boe/day, the company said, while overall production will range between 70,000 and 75,000 boe/day this year. These forecasts do not account for gains from a pair of North Sea acquisitions Premier is working to close.
Premier announced in February it had struck deals to buy BP's Andrew Area and Shearwater assets in the UK North Sea for $625mn, and acquire an extra 25% stake in Tolmount from South Korea's Dana Petroleum, for an initial $191mn. However, its main creditor Asia Research and Capital Management (ARCM) has sought to block the transactions, viewing them as risky in light of Premier's already sizeable debt.
The majority of Premier's creditors voted to support the deals last month, but the company still needs approval from the Scottish Court of Session, which will hear the case on March 17. It aims to close both transactions in the third quarter of 2020.
Following on the heels of others producers, Premier has also announced a plan for scaling back its carbon emissions. It aims to become more than 65% carbon neutral by 2025 and 100% by 2030. The company will develop its operated projects on a carbon neutral basis regarding Scope 1 and Scope 2 emissions, it said.