TIDMPMO
RNS Number : 0707F
Premier Oil PLC
15 May 2017
This announcement has been determined to contain inside
information
PREMIER OIL PLC
("Premier" or "the Group")
Trading, Operations and Refinancing Update
15 May 2017
Premier today provides the following trading update for the
period 1 January to 30 April 2017. This update is issued in advance
of the Company's Annual General Meeting which is being held on 17
May at 11 Cavendish Square, London at 11.00 am.
Highlights
-- Production averaged 82.6 kboepd, up 44% on
prior corresponding period
-- Full year guidance of 75 kboepd (excluding
any contribution from Catcher) maintained;
updated production guidance to be provided
once the summer maintenance period has been
completed
-- $13.7/boe operating cost, 11% below budget;
full year capex guidance reduced from $390
million to $350 million
-- Catcher on schedule for 2017 first oil; improved
production profiles are now anticipated and
a review of the FPSO capacity is underway
-- All FEED contracts for the Tolmount project
now awarded; sanction expected 2018 1H
-- High impact Zama exploration prospect in
Mexico expected to spud by the end of May
-- Refinancing implementation underway, requisite
lock-ups achieved; Court Schemes of Arrangement
to formally commence today
-- Net debt of $2.8 billion; marginally positive
free cash flow for the period
Tony Durrant, Chief Executive, commented:
"Premier's strong operational performance continued into 2017.
Production is above budget, the E.ON transaction has already
reached payback, costs continue to be managed downwards and Catcher
is on track for first oil later this year. We plan to be cash flow
positive in 2017 with more significant debt reduction in 2018. We
look forward to the spudding of the Zama prospect in Mexico, a
potentially transformational well for Premier. Our refinancing,
shortly to be completed, incorporates a plan for net debt reduction
and, over time, selective investment in new projects. We are ahead
of plan."
Enquiries
Premier Oil plc Tel: 020 7730 1111
Tony Durrant, Chief
Executive
Richard Rose, Finance
Director
Bell Pottinger Tel: 020 3772 2570
Lorna Cobbett
Henry Lerwill
Production operations
Production averaged 82.6 kboepd, with all business units
tracking ahead of 2017 budget. While full year guidance of 75
kboepd (excluding any contribution from Catcher) is currently
maintained, Premier will provide updated production guidance once
the summer maintenance period has been completed. Pakistan
production is included in the Group's full year production guidance
as completion of the sale of the Pakistan business is expected at
year end.
kboepd 1 January - 1 January -
30 April 2017 30 April 2016
------------- --------------- ---------------
Indonesia 14.3 14.0
Pakistan &
Mauritania 6.9 8.3
UK 45.7 17.6
Vietnam 15.7 17.4
------------- --------------- ---------------
Total 82.6 57.3
------------- --------------- ---------------
UK production averaged 45.7 kboepd, up 160 per cent on the prior
corresponding period as a result of a full contribution from the
former E.ON assets and the Solan field. The former E.ON assets
continue to exceed expectations, averaging 19.4 kboepd for the
period. The Huntington field averaged 15.2 kboepd, 30 per cent
above budget, driven by high operating efficiency and continued
optimisation of reservoir management, which has increased the well
flow rates. The Babbage field, which successfully moved to NPAI
(Not Permanently Attended Installation) on 5 April, was also above
budget, averaging 3.2 kboepd, reflecting high operating efficiency
and a successful well intervention programme. The purchase of the
E.ON portfolio, which cost $120 million, reached payback in April
2017, earlier than anticipated as a result of stronger production
and higher commodity prices.
Production from the Premier operated Solan field averaged 7.3
kboepd, lower than anticipated as a result of the first production
well (P1) being shut in for the first half of February due to the
failure of the existing ESP. P1 was subsequently reinstated on free
flow with the intention of carrying out a summer well workover to
install two ESPs into the well. However, as a result of better
performance from P1 while on free flow, this has been deferred.
Production from the rest of Premier's UK portfolio was broadly in
line with expectations for the period.
In Asia, Premier's operated Chim Sao field averaged 15.7 kboepd,
underpinned by high operating efficiency and strong reservoir
performance mitigating natural decline from the field. The two well
infill drilling programme, which is on track to commence in August,
will help maximise production from the asset. Across the border in
Indonesia, Premier's operated Natuna Sea Block A increased its
market share within its principal gas contract GSA1 to 49 per cent
year to date against a contractual share of 47 per cent.
Production from Pakistan and Mauritania averaged 6.9 kboepd. The
decrease on the prior year reflects expected natural decline.
Development and pre-development projects
In the UK, the Premier-operated Catcher project continues to
target first oil later this year. Total capex forecast remains at
$1.6 billion, 29 per cent lower than the sanctioned estimate. Good
progress is being made on the FPSO with the construction work for
the installation and integration of the topsides complete while the
construction scope in the hull is nearing completion. Commissioning
is underway and this will continue up until sailaway. 10 wells
(seven producers and three injectors) have been drilled to date and
a short subsea campaign is scheduled to commence in June to tie in
the four recently completed Varadero wells. As a result of the
positive drilling results, Premier is optimistic that a higher
plateau production rate can be achieved and a review is underway to
understand the potential additional production capacity available
from the FPSO.
Elsewhere in the UK, FEED contracts for the Premier-operated
Tolmount field in the Southern Gas Basin have been awarded to Wood
Group for the offshore FEED, Land & Marine for the beach
crossing and Costain for the onshore FEED. A commercial heads of
terms has also been signed with the operator of the Dimlington
terminal to process the Tolmount fluids and to undertake terminal
modification works. Following FEED and tendering of the major
project scopes, development sanction is targeted for 2018 1H.
Subsurface studies continue to make good progress on Tolmount East
and Tolmount Far East ahead of any future appraisal drilling.
In Indonesia, long lead items have been purchased for the
sanctioned Bison, Iguana and Gajah Puteri fields. These fields are
targeted to come on-stream in 2019 and will support Premier's long
term gas contracts.
In the Falklands, the focus remains on negotiating funding
packages for the project and engagement with the Falkland Islands
government around commercial and regulatory approvals with a view
to being in a position to sanction the development in 2018.
Exploration and appraisal
Premier plans to spud its first exploration well offshore Mexico
before the end of May with the Ensco 8503 rig now on route to the
Zama well location. The large Zama structure is estimated to have a
P90-P10 gross unrisked resource range of 100-500 mmbbls and is
classified as low risk due to a well-defined flat spot on seismic,
an indicator for the presence of potential hydrocarbons. It is
anticipated that the well will take up to 90 days to drill both
Zama and the secondary target, Zama Deep.
In the UK, operations and data acquisition at the Ravenspurn
North Deep well (Premier carried 5 per cent interest), which is
testing the potential of a deep Carboniferous age horizon
underlying the Ravenspurn North field, are ongoing. Elsewhere in
the Southern Gas Basin, planning for the 2018 Cobra appraisal well,
which is adjacent to the Premier-operated Babbage producing field,
has commenced and, in parallel, Premier will look to farm down from
its 50 per cent interest.
Final processed broadband seismic data across Premier's three
blocks in the Ceara Basin in Brazil was received in April 2017.
Well locations will be selected from this data during 2017 in
advance of a potential drilling campaign in 2019. Premier has
initiated a planned farm down process to reduce its operated
interests in the Ceara Basin and continues to lead efforts with
other operators in the region to obtain well cost reduction
synergies.
Portfolio management
Premier has a continuing programme of asset disposals, including
certain assets from the E.ON portfolio where sales processes are
ongoing. Agreement has been reached for the sale of Premier's
interest in the Austen discovery in the Central North Sea.
Premier announced the sale of its Pakistan business to Al-Haj
Group for $65.6 million in April. Al-Haj has paid a deposit of
US$15 million with a further interim deposit of US$10 million due
shortly. Premier's reported production numbers will include
Pakistan production up to the completion date of the transaction,
which is expected by year end.
Post period end, Premier received $10 million in relation to a
milestone payment associated with its disposal of Block 07/03 in
Vietnam in 2013.
Finance
At 30 April, the Company's hedge position to the end of 2017 was
as follows:
Oil hedges % hedged Price ($/bbl)
--------------- --------- ----------------
Fixed price
oil hedges 24% 51.0
--------------- --------- ----------------
Oil option
sales 19% 50.9
--------------- --------- ----------------
UK gas hedges % hedged Price (p/therm)
--------------- --------- ----------------
Fixed price 42% 49.6
--------------- --------- ----------------
Over the period, operating costs averaged $13.7/boe, 11 per cent
ahead of budget. Gross G&A costs are also below budget for the
period.
2017 development, exploration and abandonment spend is expected
to be $350 million, reduced from $390 million, as a result of the
deferral of the Solan P1 workover.
Net debt is stable at $2.8 billion with small positive free cash
flows for the period being offset by translation differences on
non-dollar denominated debt. As at 30 April, cash (including joint
venture balances) and undrawn facilities stood at around $585
million. Premier continues to expect to be cash flow positive after
capex and planned disposals in 2017 at oil prices above $50/bbl,
driving net debt reduction.
Refinancing update
The Pre-Scheme Letter is being issued today to Scheme Creditors
today thereby commencing the Scottish Court Schemes of Arrangement
via which the amendments to the terms of the RCF, the term loan,
the USPP and the retail bonds will be effected. As previously
announced, the requisite majority by value of the Scheme Creditors
has already been obtained via the lock up agreements, committing
the locked up parties to vote in favour of the amended terms.
The Court Scheme convening meeting is scheduled for 30 May with
the posting of the scheme and convertible bond documentation,
shareholder circular, notice of shareholder meeting and the retail
bond prospectus, immediately thereafter. The Scheme meeting at
which the Scheme Creditors vote is expected to be on 26 June, being
approximately 3 weeks from the Court convening meeting. The Court's
final sanction hearing will follow the Scheme Creditors vote.
In parallel to the Schemes of Arrangement processes, the
amendments to the terms of the convertible bonds will be approved.
As already announced, holders representing more than 75% by value
of the $245 million convertible bonds have entered into lock up
agreements committing them to vote in favour of the proposed
refinancing.
Approval from Premier's shareholders will be sought in respect
of the potential issue of the warrant shares and shares that could
be issued as a result of the amendment to the convertible bond
conversion price. The shareholder meeting will be called with 14
days' notice at the same time that the documentation is posted
under the Schemes of Arrangement and therefore is expected to be
convened on 15 June.
The above processes are inter-conditional and will complete
simultaneously. It is anticipated that the Schemes sanction
hearings will be the last of the processes to complete shortly
after which the refinancing will become effective. The amendments
to the terms of the Schuldschein will be implemented contractually
as part of this completion process.
Forward Looking Statements
Certain statements in this announcement are forward looking
statements. These forward looking statements can be identified by
the use of forward looking terminology including the terms
"believes", "expects", "estimates", "anticipates", "intends",
"may", "will" or "should" or in each case, their negative, or other
variations or comparable terminology. These forward looking
statements reflect Premier's current expectations concerning future
events. They involve various risks, uncertainties and other factors
which may cause the actual results, performance or achievements of
the Group, third parties or the industry to be materially different
from any future results, performance or achievements expressed or
implied by such forward looking statements. Such risks,
uncertainties and other factors include, amongst other things,
general economic and business conditions, industry trends,
competition, changes in regulation, currency fluctuations, the
Group's ability to recover its reserves or develop new reserves and
to implement expansion plans and achieve cost reductions and
efficiency measures, changes in business strategy or development
and political and economic uncertainty. There can be no assurance
that the results and events contemplated by these forward looking
statements will in fact occur.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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