Premier Oil’s full year production is expected to be at or above its output guidance rate of between 65,000 and 70,000 barrels of oil equivalent per day, following “strong production” during the first half of the year.
The company posted an average output of 61,000 boepd during the first six months of the year, with recent record rates above 80,000 boepd. Production from the UK North Sea Solan field, which is currently at 11,000 barrels of oil per day, is ramping up to 14,000 bopd from its first production well. Plans are in place to further raise output from Solan to between 20,000 and 25,000 boepd, through a second production well, in the near future.
The Premier-operated Catcher project remains scheduled to deliver first oil in the second half of 2017. The company now forecasts capex to first oil of $1.3 billion and total project capex of $1.8 billion, which is a 20 percent reduction on the original sanctioned estimates. Further reductions in capex in dollar terms are anticipated if the weak sterling dollar exchange rate persists with around 60 percent of the project’s remaining capex denominated in sterling.
Premier retains cash and undrawn facilities of around $800 million as at 30 June with net debt of $2.6 billion at period end and flat on end 1Q 2016. The lower sterling exchange rate also reduces the dollar value of Premier’s GBP 510 million sterling denominated debt and letters of credit.
“We have continued to secure cost reductions across the business and are set to benefit from recent foreign exchange movements,” said Tony Durrant, Premier Oil chief executive, in a company statement.
“We now look forward to a rising production profile and, with Solan on-stream, significantly lower committed capital expenditure. At current oil prices, we start to generate free cash flow later this year which positions us well to manage the balance sheet whilst retaining some optionality for future growth projects,” he added.
Market reaction to Premier’s latest update was described as positive by FirstEnergy.
“While there are no major surprises in this…[update], with Solan production now growing and net debt being for the first time stable, the company has turned a corner. The cost reduction at Catcher…is also good news but neutral versus our expectations. Importantly the proportion of cost denominated in Sterling is much higher than we thought, suggesting our FY16 costs might be too high,” said oil and gas analysts at FirstEnergy in a brief research note seen by Rigzone.
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