Premier Oil raises production guidance after record start to the year

Tony Durrant, Premier Oil Chief Executive

Premier delivered a strong first half operationally, with record production of 82.1 kboepd, up 34.5 per cent on the first half of 2016. This was driven by high production efficiency across the portfolio, enhanced by a full period of contribution from the former E.ON assets which continue to exceed expectations at the time of the acquisition. UK production, which now represents over half of Group production, saw particular outperformance by the Huntington field, which was the highest net producer in the portfolio. In Asia, demand for the company's Indonesian gas was strong with their Natuna Sea Block A again capturing a market share within its principal gas contract (GSA1) considerably ahead of its contractual share. In Vietnam, production during the period passed fifty million barrels, in excess of the original total volumes envisaged at the time of sanction of the Chim Sáo project

Tony Durrant, Chief Executive, commented:
“Premier continues to deliver excellent operational performance, which will drive free cash flow and the reduction of net debt. The first half saw good progress on the Catcher and Tolmount projects, a world class exploration success in Mexico and the acceleration of cash flow from disposals. Following the successful completion of our refinancing, we are ahead of plans to restore financial strength while progressing a number of exciting projects for future growth.”

Operational highlights

  • Record production of 82.1 kboepd, an increase of 34.5% on the prior period (1H 2016: 61.0 kboepd)
  • Catcher FPSO sailaway to North Sea imminent; positive development drilling results
  • Heads of Terms signed for new Infrastructure partnership for Tolmount project
  • World class Zama oil discovery, offshore Mexico
  • Disposal programme ongoing, including potential sale of interest in Wytch Farm field for US$200 million

Financial highlights

  • Cash flows from operations of US$292.0 million (1H 2016: US$108.7 million), up 168% on prior period
  • Opex of US$14.7/boe, down 11% on the prior period
  • Positive free cash flow in 1H, reducing net debt to US$2.7 billion
  • Profit after tax of US$40.7 million (1H 2016: US$167.1 million including one-off non-cash credits)
  • Comprehensive refinancing completed

Outlook

  • 2017 production guidance increased to 75-80 kboepd, from 75 kboepd
  • 2017 opex guidance of <US$16/boe maintained, capex guidance recently lowered to US$325 million
  • Catcher on schedule for 2017 first oil; improved field production profile now anticipated
  • Further debt reduction forecast at year end at current oil prices including effects of ongoing planned disposals
  • Debt reduction accelerating once Catcher on-stream; targeting leverage ratio of 3x EBITDA by end 2018

Production
Group production for the first half averaged 82.1 kboepd (2016 1H: 61.0 kboepd), an increase of 34.5 per cent on the prior corresponding period. This was driven by high production efficiency from our existing assets with all business units performing ahead of the 2017 budget and a full period of contribution from the former E.ON assets. As a result of this strong first half performance and with the summer maintenance programme largely complete, Premier has revised upwards its production guidance for the full year to a range of 75 - 80 kboepd. Pakistan production remains included in the Group’s full year production guidance as completion of the sale of the Pakistan business is expected around year end.

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