Premier Oil operationally on-track ahead of year-end

Premier Oil updated the market on its trading and operations for the year-to-date on Thursday, reporting production so far of 78.4 kboepd, up from 76.2 kboepd in the first half.

The FTSE 250 company forecast full-year production of around 80 kboepd.

It also reported record Catcher Area production rates of more than 70 kboepd gross as being “frequently achieved”, with the contractual oil production rate expected to increase from 60 kbopd gross to 66 kbopd gross in the near-term.

The Tolmount Main gas project was also progressing to plan, the board said, with platform construction to start in December, and the “high value” Tolmount East appraisal well scheduled to spud in mid-2019.

Premier Oil said that at the Zama discovery in Mexico, the pre-unitisation agreement had been approved, and delivery of the rig was taken with the first appraisal well to spud later in November.

3D seismic acquisition across Andaman II in Indonesia was now set to start by year-end, with 3D seismic across Block 30 in Mexico and the Greater Tolmount Area in the UK planned for the first half of 2019, the board said.

Premier’s disposal of the Babbage Area in the UK was said to be on track to complete by year-end, with the Pakistan sale also expected to complete around year-end with government approval now received there.

On the financial front, the company said its forecast 2018 operating costs were unchanged at between $17and $18 per barrel of oil equivalent, with forecast development, exploration and abandonment expenditure now $365m, reduced from the board’s previous guidance of $380m.

Net debt had also reduced to $2.52bn at 31 October, with year-end net debt forecast at around $2.4bn with covenant leverage ratio forecast to fall to 3x EBITDA, in line with the board’s guidance

“Premier is now generating significant free cash flow,” said chief executive Tony Durrant.

“Our portfolio is currently producing 85-90 kboepd, our low cost base has been maintained and our capital spend is tightly controlled.”

Durrant said the company was “on track” to deliver material debt reduction in 2018 through 2019, substantially improving its balance sheet.

“We look forward to the appraisal of our world class Zama discovery, starting later this month, and the commencement of construction activities for our high value Tolmount gas project in December.”