Premier today provides a Trading and Operations Update for the period 1 January to 31 October 2016.
- Comprehensive term sheet for refinancing in final stages of negotiation with the Group’s banks and private bondholders
- Production averaged 69 kboepd year-to-date; current run rate of >80 kboepd, on track to meet previously increased full year guidance of 68-73 kboepd
- Outperformance from the Huntington, Chim Sáo and Natuna Sea Block A fields; production currently constrained at the Solan field
- Catcher on schedule for first oil in 2017 with total capex now estimated at $1.7 billion, 24% lower than at sanction; FPSO outfitting continues apace and well delivery remains ahead of prognosis
- Exclusivity period with preferred bidder for the Pakistan business has ended; discussions continue with the previously preferred bidder and new third parties; Pakistan assets substantially outperforming in 2016, value to be retained by Premier
- Forecast 2016 operating costs of $15.9/bbl and gross G&A of $196 million, both significantly below budget
- Forecast 2016 exploration and development capex expected to be below previous guidance of $730 million; 2017 capex anticipated to be materially lower at $300 million
- Net debt of $2.8 billion at 31 October, marginally down from Q3, with cash and undrawn facilities on hand of c. $600 million
Production from Premier’s UK fields averaged 22.2 kboepd (2015 H1: 16.9 kboepd), up 31 per cent on the prior period. This higher production was driven by the new contribution from the E.ON UK assets from 29 April, high production efficiency across the portfolio of 87 per cent and strong performance from the Huntington field. Production in the second half of the year will benefit from the ramp up of Solan and a full contribution from the E.ON UK portfolio. The operated Huntington field outperformed over the period, producing at consistent rates of 14 kboepd (gross) prior to summer maintenance restrictions. This was as a result of high uptime and positive reservoir management offsetting the impact of natural decline. Production from the non-operated Elgin Franklin area, which was acquired as part of the E.ON UK acquisition, has been strong. Post period end, the field has delivered rates of over 130 kboepd gross (Premier 5.2 per cent), levels not seen since 2011. This has been driven by a successful on-going well intervention and infill drilling programme. Separately, the non-operated Glenelg field (Premier 18.57 per cent), a satellite field within the Elgin-Franklin area, came back on-stream at the end of May following a successful well workover of the G10 well and has been producing over 20 kboepd (gross). Half-Yearly Results for the six months to 30 June 2016 Production from the non-operated Kyle field performed as anticipated delivering 1.8 kboepd (2015: 1.8 kboepd) while production from the Premier-operated Balmoral area averaged 1.7 kboepd (2014: 3.4 kboepd), impacted by a commercial disagreement between partners at the start of the year resulting in a temporary shutdown of production. Production from the non-operated Wytch Farm field averaged 5.1 kboepd for the first six months of the year (2015 H1: 5.4 kboepd), benefitting from the well maintenance work carried out in the second half of 2015. Production from the operated Babbage field, which was acquired as part of the E.ON UK acquisition, also exceeded expectations. The field is currently producing over 3 kboepd net to Premier as a result of continued high demand for the field’s gas coupled with high uptime at the onshore facility. Planning is underway to complete transition of the Babbage platform to being unmanned. This should result in considerably reduced operating costs. First oil from the Solan field was achieved on 12 April. Premier subsequently carried out a planned production shut down focused on the final commissioning of the topsides, taking advantage of the availability of the flotel utilised for pre-first oil hook up and commissioning. Production from the Solan field recommenced on 22 June and the first tanker offload from the subsea oil storage tank was successfully undertaken at the end of July with a cargo size of over 250,000 barrels of oil. Drilling activities on the second production well (P2Y) have been completed and the well was tied in by DSV during August. Production from the second well is expected to start later today (18 August) and, together with production from the first well which is producing at 14 kboepd, the field is expected to reach plateau rates of 20-25 kboepd within the next few days. Solan’s untaxed production will generate material cash flow with operating costs of less than US$10/bbl while the field is on plateau production. UK unit operating costs for the period were US$31/boe (2015 H1: US$29/boe), driven by natural decline from Premier’s UK legacy assets and higher equity in the Huntington field offset by cost reductions, particularly at Balmoral and Wytch Farm. Going forward, UK unit operating costs are expected to reduce significantly towards $20/boe with new production from the Solan field and as Premier benefits from a full contribution from the lower opex Elgin-Franklin field.