Premier Reports H1 Profit, Lower Costs

UK-registered Premier Oil reported August 18 a first half profit of $167.1mn, a rebound from its first-half loss last year of $375.2mn.

The figure includes a $106.9mn negative goodwill credit, being the below-market price paid for E.ON’s UK assets. The $120mn deal (plus working capital adjustments) was approved in April. In January, the company said it would add "significant production and associated cash flow in 2016 and 2017 even at current oil and gas prices," noting that 32% of the assets' estimated 2016 gas production was hedged at 63p/therm with 21% of their 2017 gas hedged at 57p/th.

The deal includes a 5.2% stake in the Total-operated Elgin-Franklin gas-condensate field, 25% of the Huntingdon and 47% of the Babbage fields in both of which Premier will assume operatorship from E.ON, and 50% of the 0.2 trillion to 1 trillion ft³ Tolmount gas discovery now also to be Premier-operated.

CEO Tony Durrant said the results showed the “step change in production levels and a leaner operating cost base” that had addressed “the lower commodity price environment." Operating cost of $16.5/barrel of oil equivalent (boe) was 14% below budget, while the UK Catcher oil field remains on schedule for 2017 first oil and capex is a fifth lower than it was at sanction.

Premier CEO, Tony Durrant (Credit: Premier) 

He said: “Full year production guidance is now increased, which will drive free cash flow generation.  We have made substantial progress with our lending group on the principal terms of a refinancing.  Our project portfolio has been expanded, positioning Premier for future growth at lower cost."

Full year production guidance has been raised to 68-73,000 boe/d. Production has been flat year on year, at 61,000 boe/d, compared with 60,400 last year and efficiency has been running at 93%. Recent record production rates above 95,000 boe/d. Solan on-stream.Operating cash flow of $108.7mn (2015 H1: $513.0mn). The weaker sterling exchange rate positively impacts forward opex, capex and debt. Net debt is slightly lower on end-Q1 position at $2.63bn, compared with $2.2bn at the end of last year.

Premier also has production in Indonesia, Pakistan and Vietnam. Offshore Mauritania, however, its net H1 production from the offshore Chinguetti field was just 356 b/d and Premier said that it and partners are targeting cessation of production by end-2016, with operator Malaysian state Petronas having filed a formal decommissioning plan to the Mauritanian government on June 29. Separately, Premier said front-end engineering for its Sea Lion Phase 1 venture off the Falkland Islands is "progressing well" and that cost reductions have lowered the project's current breakeven oil price estimate to $45/bbl.

William Powell