TIDMPMO
RNS Number : 6836M
Premier Oil PLC
10 January 2019
("Premier" or "the Group")
Trading and Operations Update
10 January 2019
Premier today provides the following Trading and Operations
Update ahead of its 2018 Full Year Results, which will be announced
on Thursday 7 March 2019.
Highlights
-- Estimated year-end net debt of US$2.3 billion, below previous
guidance of US$2.4 billion and a reduction of US$390 million on
2017
-- 2018 full year production of 80.5 kboepd, up 7 per cent on
2017 and a record year for the Group; production averaged 92
kboepd, above forecast, in November and December
-- Catcher FPSO producing at increased oil rates of 66 kbopd (gross)
-- Tolmount Main gas project sanctioned, platform construction
commenced in December; high value Tolmount East appraisal well
scheduled to spud mid-2019
-- Appraisal of giant Zama discovery (Mexico) underway; results
of first appraisal well (Zama-2) expected shortly
-- 3D seismic acquisition commenced in the Andaman Sea
(Indonesia); 3D seismic across Block 30 (Mexico) and Greater
Tolmount Area (UK) planned for 2019 1H
-- Estimated 2018 total capex of US$355 million, below
previously reduced guidance of US$365 million; 2018 opex estimated
at US$16.9/boe, below guidance
Tony Durrant, Chief Executive, commented:
"Our strong operational performance and disciplined expenditure
have enabled us to reduce our debt levels ahead of forecast. At the
same time, we have continued to build our portfolio for the future,
sanctioning our high value Tolmount Main gas project and capturing
highly prospective new acreage in Mexico and Indonesia. Looking to
the year ahead, we have a strong production base which is well
hedged and our priority remains to further reduce our debt levels
while progressing our future growth projects to final investment
decisions."
Enquiries
Premier Oil plc Tel: 020 7730 1111
Tony Durrant, Chief Executive
Richard Rose, Finance Director
Camarco Tel: 020 3757 4983
Billy Clegg
Georgia Edmonds
Production
2018 production averaged 80.5 kboepd, a 7 per cent increase on
2017 and a new record year for Premier, despite material asset
sales. This was driven by new production from the Premier-operated
Catcher Area and by a strong performance from the Group's operated
Asian assets.
Following announced and completed disposals, which accounted for
8 kboepd in 2018, 2019 production is expected to average around 75
kboepd. This is an underlying increase in year-on-year production,
after adjusting for disposals, driven by a full year of Catcher
Area production. Cash margins will improve in 2019 at comparable
commodity pricing driven by higher margin UK oil production
accounting for a greater proportion of the Group's output.
Kboepd 2018 2017
Indonesia 13.2 14.1
----- -----
Pakistan 5.3 6.5
----- -----
UK 46.8 39.5
----- -----
Vietnam 15.2 14.9
----- -----
Total 80.5 75.0
----- -----
UK production increased by 18 per cent, reflecting the ramp up
of the Catcher Area during 2018 partially offset by the sale of
Wytch Farm which completed at the end of 2017.
The Catcher Area (comprising the Catcher, Varadero and Burgman
fields) was Premier's highest net producer in 2018 averaging 21.5
kboepd (net). This reflected the fields ramp-up to plateau
production rates in May and significantly increased plant
availability towards the end of the year as final commissioning of
secondary systems was completed. As a result, Catcher Area
production averaged 34.7 kboepd (net) in November and December,
achieving 97 per cent operating efficiency.
The Elgin-Franklin fields averaged 6.7 kboepd (net) benefitting
from outperformance from new wells brought on-stream and continued
high operating efficiency. Further infill drilling at
Elgin-Franklin is planned for 2019. Huntington production averaged
5.8 kboepd, reflecting natural decline and several unplanned
shutdowns. Modifications have now been made to facilitate gas
import. This has improved plant stability with production averaging
7.0 kboepd in November and December, underpinned by uptime in
excess of 90 per cent.
Premier's other UK assets have performed broadly in line with
expectations.
Production from Premier's operated Chim Sao field in Vietnam
again exceeded expectations in 2018 averaging 15.2 kboepd and up on
2017. This was driven by better than forecast subsurface
performance and four successful well intervention programmes
offsetting natural decline. Further well intervention programmes
are planned for 2019.
Demand from Singapore for Premier's Indonesian gas continued to
be robust with Premier's operated Natuna Sea Block A again
capturing an increased market share of its principal gas contract
(GSA1) of 52.4 per cent and above its contractual share. The slight
reduction in Indonesia production on the prior year reflects the
sale of the Group's interest in Kakap, which completed in
April.
Development
On Natuna Sea Block A, in Indonesia, the development of the
Bison, Iguana, Gajah-Puteri fields continues within budget and to
schedule with first gas on track for the fourth quarter. The
development will recover 93 Bcf (gross) of reserves helping to
underpin delivery capacity of the Group's gas sales contracts into
Singapore.
Premier sanctioned the 500 Bcf Tolmount Main gas project in
August. Construction of the platform commenced in Rosetti Marino's
Ravenna yard in December. Detailed engineering and procurement of
the trees, wellheads and
subsea pipeline has also commenced. First gas remains on schedule for the fourth quarter of 2020.
During 2018, Premier completed the selection of its key
contractors for its operated Sea Lion project in the Falkland
Islands and put in place LOIs for the provision of services as well
as vendor financing. Premier is now working with its selected
contractors to complete FEED and to convert the LOIs into fully
termed contracts. In parallel, Premier is continuing to progress
senior funding structures for the project, ahead of a final
investment decision.
Exploration and appraisal
In Mexico, the first Block 7 Zama appraisal well, Zama-2,
spudded at the end of November to the north of the Zama discovery
well and is expected to determine the depth of the oil water
contact. The well has encountered the main Zama reservoir and is
currently drilling ahead as planned. Zama-2 will then be deepened
to test the Marte prospect and subsequently side-tracked up-dip and
flow tested. The rig will then move to drill the Zama-3 appraisal
well, to the south, which will complete the Block 7 Zama appraisal
programme, expected during the third quarter. Premier will update
the market as key activities are completed.
3D seismic acquisition across Block 30, in which Premier secured
a 30 per cent non-operated interest via Mexico's Round 3.1 in March
and contains the high impact Wahoo and Cabrilla prospects, is
scheduled to commence in the second quarter.
In Indonesia, PGS commenced acquisition of 3D seismic in the
Andaman Sea in December. This programme will mature the prospects
identified on 2D data on Premier's operated Andaman II licence.
In the UK, the high value Tolmount East appraisal well is
scheduled to spud mid-2019 and is expected to take around 80 days
to complete. 3D seismic acquisition across the Greater Tolmount
Area is planned for March/April. This will help to optimise
development drilling on Tolmount East and the location of a
potential Tolmount Far East exploration well, in addition to
identifying further prospectivity in the area.
Portfolio management
During 2018, Premier received US$75 million, after working
capital adjustments, from the completion of the sale of its
interests in Kakap (Indonesia), ETS (UK) and the Babbage Area
(UK).
In November, the Pakistan government approved the US$65.6
million sale of Premier's Pakistan interests to Al-Haj. To date,
Premier has received US$35 million of deposits from the buyer and
also collected US$25 million in cash flows since the economic date
of the transaction (1 January 2017). Completion of the sale will
follow on settlement of final working capital adjustments.
Finance
Total revenue for 2018 is estimated at US$1.4 billion (2017:
US$1.1 billion) reflecting higher production and realised commodity
prices.
In total, c.30 per cent of the Group's 2019 forecast oil and gas
entitlement production has been sold forward at prices
significantly above current pricing.
Premier has hedged 36 per cent of its forecast oil entitlement
production to end 2019 at an average of $70/bbl:
Oil swaps / forwards 2019 1H 2019 2H
Volume 3.5 mmbbls 3.1 mmbbls
----------- -----------
% of forecast entitlement
oil production 38% 35%
----------- -----------
Average price $69/bbl $71/bbl
----------- -----------
Premier has sold forward 50 million therms of its 2019 UK gas
volumes at an average price of 61 pence/therm. In addition, Premier
has hedged part of its 2019 and 2020 Indonesian gas production
through the sale of 150,000 MT and 105,000 MT of HSFO Sing 180 at
an average price of US$394/MT and US$387/MT respectively.
Full year 2018 total operating costs are estimated to be below
the low end of US$17-US18/boe guidance at US$16.9/boe, of which
US$10.4/boe relates to field opex and US$6.5/boe to FPSO lease
costs across the Group. 2019 operating costs are forecast to be
slightly higher on a per barrel basis at c. US$20/boe, of which
US$13/boe relates to field opex and US$7/boe to FPSO lease costs.
This reflects the impact of disposals of low cost gas production
and anticipated natural decline on fixed cost base assets such as
Huntington and Chim Sao.
Development, exploration and abandonment expenditure for the
full year 2018 was around US$355 million, below previously reduced
guidance of US$365 million due to phasing of appraisal and
abandonment expenditure.
Total 2019 development and exploration capex is expected to be
US$290 million of which c. US$70 million relates to the BIG-P
development and US$100 million to exploration and appraisal
(including US$60 million for the Zama appraisal programme and US$20
million for the Tolmount East appraisal well). Abandonment spend in
2019 is expected to be US$50 million, before taking into account
the benefits of tax relief, and primarily relates to abandonment
activities in the UK North Sea.
Premier continues to benefit from its substantial UK corporation
tax loss and allowance position with estimated losses and
allowances of US$4.1 billion carried forward at 31 December
2018.
Estimated 2018 year-end leverage ratio (covenant net debt /
EBITDA) is 3.0x, against a covenant of 5.0x, while year-end
accounting net debt is US$2.33 billion (2017: US$2.72 billion),
below previous market guidance of US$2.4 billion. This reflects the
strong operational performance achieved by Premier in November and
December, which helped to offset the decline in oil prices at the
end of the year.
The US$390 million reduction in net debt during 2018 reflects
free cash flow generation of c. US$250 million (including US$75
million of cash receipts from disposals) and a c. US$180 million
reduction in accounting net debt from the conversion of the
convertible bond. Offsetting this is a negative one off movement in
joint venture cash balances at the beginning of 2018.
With an improved portfolio mix, supported by increased high
margin Catcher barrels, and a strong hedging programme, Premier is
well placed to deliver further debt reduction in 2019. The current
weaker Sterling exchange rate and strong UK gas prices are also
helping to mitigate against the recent oil price volatility. On a
full year basis, Premier expects to generate positive free cash
flow at oil prices above US$45/bbl during 2019.
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END
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