Premier Oil plc achieved “strong production” from Jan.1 to Apr. 30, according to its latest trading update, cutting costs by 10-20 percent below its 2016 budget in the process.
Production to the end of April was 57,300 barrels of oil equivalent per day for the company, which said that it was on-track to deliver “at or above” the upper end of its 2016 guidance of 65-70,000 boepd for the full year. Although Premier’s 1Q production was slightly under FirstEnergy’s forecast of 58,600 boepd for the period, the energy research firm believes the company’s full year output prediction is “too conservative”. FirstEnergy has forecasted that Premier will hit a production rate of 73,200 boepd for FY 2016.
Premier stated that its production levels in 1Q were driven by improvements in operating efficiency across the portfolio and strong gas sales into Singapore. The company also revealed that the reduction in output from the prior corresponding period reflected some “natural decline” in Pakistan and Vietnam. Premier completed the acquisition of E.ON’s UK North Sea assets Apr. 28, which delivered 17,000 boepd during 1Q, and production from the Solan field commenced Apr. 12, with rates of over 14,000 bopd achieved from the first producer well. With the second Solan well due on-stream by mid-year, FirstEnergy believes that reaching production guidance of 20-25,000 bpd at the field in 3Q looks “very achievable”.
Operating costs and gross general and administrative expenses for Premier during 1Q were 10-20 percent below its 2016 budget. As things stand, the company expects to achieve operating costs of around $17 per barrel of oil equivalent in 2016. Capital expenditure for development and exploration is now expected to be approximately $730 million, compared to a CAPEX of $1.03 billion in 2015. Last year, approximately $845 million was used for development and $190 million was utilized for exploration.
“Strong production performance from our existing assets, together with the contribution from the E.ON assets and the Solan field means that we now expect production for the year to be better than we originally anticipated. This, along with continued cost savings, positions us well to maximize our current cash flow as we remain focused on managing our balance sheet in the current oil price environment,” said Premier Oil Chief Executive Tony Durrant in a company statement.
FirstEnergy remarked that the market reaction to Premier’s trading update was viewed as “positive” overall.
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