TIDMPMO
RNS Number : 6939M
Premier Oil PLC
13 May 2020
Premier Oil plc
("Premier" or "the Group" or "the Company")
Trading and Operations update
13 May 2020
Premier today provides the following Trading and Operations
update for the period 1 January to 30 April 2020. As previously
announced, the Group's AGM has been deferred to 25 June 2020 in
light of the Government's public health instructions and stay at
home measures regarding COVID-19.
Financial highlights
-- Forecast broadly free cash flow neutral for full year 2020 at current forward curve
o 30% of 2020 volumes hedged at $60/boe including c.50% of Q2
oil production at $64/bbl
o Estimated $240 million of capex and opex savings and deferrals
secured
-- Liquidity retained with c.$160 million of unrestricted cash
and $330m of undrawn facilities; addressing covenants and drawing
profiles with creditors
-- Court approved creditor schemes of arrangement; re-engaging
with stakeholders around proposed transactions and 2021 credit
maturities
-- Net debt reduced to $1.91 billion as at end of April (31 December 2019: $1.99 billion)
Operational highlights
-- Production averaged 70.1 kboepd to end of April, impacted by
a recent unplanned Catcher outage (now restored) and cessation of
Huntington production; 2020 guidance revised to 65-70 kboepd
-- Tolmount schedule impacted by COVID-19 with first gas now expected in Q2 2021; Tolmount East (Premier-operated) on track for sanction decision by year-end 2020
-- Zama unitisation and sales process ongoing; Mexican regulator
expected to instruct unitisation in the coming weeks
-- Operated growth projects on hold, optionality preserved:
o Sea Lion project suspended with farm-in documentation
agreed
o Tuna appraisal to be fully funded, subject to final
approvals
o Highly prospective exploration acreage retained with deferred
drilling commitments
Tony Durrant, Chief Executive, commented:
"We are proactively managing the business in these challenging
times and remain focused on the welfare, health and safety of our
people. We continued to generate free cash flow during the period
and, based on the current forward curve, expect to be broadly free
cash flow neutral for the full year, benefitting from our hedging
programme and action taken to reduce our expenditure."
Enquiries
Premier Oil plc Tel: 020 7824 1116
Tony Durrant (CEO), Richard Rose (Finance
Director)
Camarco Tel: 020 3757 4983
Billy Clegg, Georgia Edmonds, James
Crothers
Production operations
Premier remains extremely vigilant and focussed on the welfare,
health and safety of all of its staff and contractors. To date,
production operations have not been materially impacted by
COVID-19. Pre-flight screening measures and additional passenger
protocols have been implemented, including dedicated flights for
workers who develop COVID-19 symptoms offshore and for those with
whom the suspected cases have been in close contact. Premier has
also reduced manning levels on all of its installations to ensure
continued safe operations and has significantly reduced the scope
of its planned shut downs to include critical maintenance and
committed project work only.
Group production averaged 70.1 kboepd to the end of April,
impacted by a recent unplanned shut down at Catcher and the
cessation of Huntington production in early April. Together with
the delay to Tolmount first gas, this has resulted in the Group
revising its full year production guidance to 65-70 kboepd (from
70-75 kboepd).
Premier's UK assets produced 47.1 kboepd over the period. This
was underpinned by 28.7 kboepd (net, Premier 50 per cent interest)
from the Group's operated Catcher Area fields which continue to
benefit from strong reservoir performance. Catcher operating
efficiency was impacted by an unplanned gas plant outage at the end
of April. Production resumed on 10 May. The Varadero infill well
(VP1) spudded on 11 May and, once on-stream, will help maintain
Catcher plateau rates. Development drilling at Catcher North and
Laverda along with the 4D seismic survey originally planned for
this year have been deferred as part of the measures taken to
minimise 2020 capex spend.
The Elgin-Franklin Area produced 7.3 kboepd (net, Premier 5.2
per cent interest), ahead of budget. Production was supported by
high operating efficiency and the completion of the FIC infill well
in January. Huntington production averaged 2.3 kboepd (Premier 100
per cent interest) with the last cargo lifted from the field in
early April. Flushing of the flowlines and topsides is now underway
ahead of a planned mid-year FPSO sailaway. West of Shetlands,
Premier's operated Solan field delivered 2.2 kboepd (Premier 100
per cent interest) over the period. The Solan P3 vertical pilot
well was successfully completed with results in line with
expectations. The well will now be side-tracked horizontally and,
once completed, is expected to boost field production to in excess
of 10 kbopd during the fourth quarter of the year.
In Vietnam, Premier's operated Chim Sáo field averaged 9.2
kboepd (net, Premier 53.13 per cent interest), in line with budget.
Demand for Chim Sáo crude remains strong with cargoes sold during
the first half realising an average premium to Brent of over
$5/bbl. Production from Premier's operated Natuna Sea Block A
(NSBA) fields in Indonesia averaged 13.8 kboepd (net, Premier 28.67
per cent interest). This was driven by very high Singapore offtake
under the Group's principal gas sales agreement (GSA1) and NSBA
capturing a 59 per cent market share of GSA1 deliveries, higher
than its 53 per cent contractual share.
Development activities
Tolmount is Premier's only sanctioned development project and
will add 20-25 kboepd (net, Premier 50 per cent interest) to Group
production once on plateau. In March, the Rosetti yard where the
platform is being built entered lockdown. Work resumed earlier this
month with appropriate COVID-19 restrictions in place and a revised
installation period is now being planned for late summer. The
drilling rig will be mobilised thereafter to assist with final
commissioning of the Tolmount platform and to drill the four
development wells. Meanwhile terminal works are progressing and the
pipeline lay is on track for this summer. First gas is now forecast
for the second quarter of 2021.
Premier continues to progress Tolmount East so that a final
investment decision can be made by year-end with the development
concept agreed earlier this year. Once on-stream Tolmount East (and
potentially Mongour which could also be developed as a subsea
tieback to the Tolmount infrastructure) will help extend plateau
production from the Tolmount area.
In Mexico, the unitisation of the Zama field and the sales
process for Premier's 25 per cent interest in Block 7 has been
impacted by COVID-19. Earlier this month, the National Hydrocarbon
Commission (CNH) declared Zama a shared reservoir and the Mexican
Ministry of Energy (SENER) is expected to issue the instruction to
unitise the Zama field in the coming weeks. This will trigger a
defined period of negotiations with Pemex to finalise the Unit
Agreement for the Zama field. Meanwhile FEED on the selected
development concept continues ahead of submission of the FDP for
government approval.
In the Falkland Islands, Premier has taken the decision to
suspend Sea Lion Phase 1 to minimise ongoing spend in light of the
current market conditions. Sea Lion Phase 1 is complete from a
technical aspect and all of the work which has been done to date is
being fully documented, such that the project can be reactivated
once the macroeconomic outlook improves. A reduced team will
continue to progress government, commercial and financing matters
including the transaction documentation with Navitas who remain
committed to farming in for a 30 per cent interest in the Sea Lion
licences.
Exploration and appraisal
In April, Premier drilled the Charlie-1 well in Area A on the
Alaska North Slope. As previously announced, the well encountered
non-commercial gas condensate rather than the targeted light oil.
As a result, Premier plans to exit the licence as soon as
regulatory approvals have been received.
Premier has taken action to defer activity across its
exploration portfolio to reduce expenditure, given the current
market conditions. This includes the deferral of drilling on Block
717 in the Ceará basin offshore Brazil (originally scheduled for
July this year) while drilling on Block 30 (Mexico) and the Group's
Andaman Sea acreage (Indonesia) is now likely to take place in
2022. New datasets across the Group's Andaman Sea acreage, Block 30
and the Greater Tolmount Area were received in April and Premier's
exploration teams will now mature the prospectivity of these
licences to firm up well locations ahead of future drilling.
Execution of a fully termed farm down agreement with
Zarubezhneft for a 50 per cent interest in the Premier-operated
Tuna discoveries offshore Indonesia is being progressed. Under the
farm down agreement, Zarubezhneft will carry Premier for its share
of a two well appraisal campaign now expected to take place in
2021.
Finance
Premier has hedged c.30 per cent of its full year 2020 oil and
gas entitlement volumes at an average equivalent price of $60/boe,
including almost 50 per cent of the Group's oil entitlement
production for the second quarter of the year at $64/bbl.
Premier has continued to take action to reduce its 2020
expenditure to lower its free cash flow breakeven oil price. As a
result, the Group now expects to be broadly free cash flow neutral
(after interest) for the full year based on the current forward
curve.
Full year operating costs (including lease costs) are currently
forecast to be c.$100m under budget resulting in unit costs of
$18/boe ($12/boe field opex and $6/boe FPSO lease costs) compared
to the original budget of $21/boe. This reflects cessation of high
cost Huntington production as well as savings and deferrals
realised in ongoing operations across the Group.
Forecast 2020 total capex including abex now stands at $330
million, reflecting total capex savings and deferrals of $140
million compared to original guidance of $470 million.
The Group currently retains adequate liquidity. As at the end of
April, Premier had unrestricted cash of $160 million and undrawn
facilities of c.$330 million. Net debt stood at $1.91 billion,
reduced from $1.99 billion at year-end 2019. In light of the
ongoing weak oil price environment, Premier has entered discussions
with its lending group to address its covenant profile with a view
to securing any necessary waivers.
Status of proposed acquisitions and related funding
arrangements
In April, the Court of Session in Edinburgh approved the
creditor schemes of arrangement required to implement the proposed
UK North Sea Acquisitions, related funding arrangements and the
extension of the Group's credit facilities. Since then, the single
dissenting party has lodged an appeal against the Court's judgment
and, as a result, the Schemes will not become effective until that
appeal process has concluded.
While Premier remains confident in the strength of its legal
case and expects the Court to dismiss the appeal, the Board
believes it prudent to re-engage with its stakeholders regarding
the proposed transactions and extension to its May 2021 credit
maturities in light of current market conditions.
Appendix
Group production breakdown
kboepd 1 January - 30 1 January - 30
April 2020 April 2019
Indonesia 13.8 12.0
Pakistan (1) - 3.6
UK 47.1 57.6
Vietnam 9.2 12.7
--------------- ---------------
Total 70.1 85.9
--------------- ---------------
(1) sold at 26 March 2019
The information contained within this announcement is deemed by
Premier to constitute inside information as stipulated under the
Market Abuse Regulation. By the publication of this announcement
via a Regulatory Information Service, this inside information is
now considered to be in the public domain. The person responsible
for arranging for the release of this announcement on behalf of
Premier is Andy Gibb (Group General Counsel).
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END
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