Premier Oil producing within guidance as it cuts costs

Premier Oil reported average production of 67,300 barrels of oil equivalent per day in its first half on Wednesday, reiterating its 2020 guidance for between 65,000 and 70,000 barrels of oil equivalent per day, before any contribution from the proposed acquired BP assets.

The London-listed firm said that in the six months ended 30 June, Solan P3 was successfully drilled and was due on-stream in September, adding a forecast 10,000 barrels of oil per day to group production rates in the fourth quarter.

At Tolmount, it said the final onshore commissioning of topsides was underway before sailaway in August sailaway, with the asset on track to meet the previously-revised second quarter 2021 first gas date, adding between 20,000 and 25,000 barrels of oil equivalent per day net to Premier’s 50% interest.

Forecast total capital expenditure for 2020 stood at $340m (£269.7m), operational expenditure at $12 per barrel of oil equivalent, and lease costs at $6 per barrel of oil equivalent, which the board said reflected $240m in savings and secured deferrals.

Premier Oil noted that the amended BP acquisitions had been approved by creditors, subject to agreed refinancing terms and equity funding, which would add a net 17,000 barrels of oil equivalent per day from the targeted completion date of 30 September.

Discussions with a subset of Premier's creditors over a long term extension to its credit maturities was also underway, with the board aiming to agree terms which could be recommended to the full lender group by the end of July.

The company’s net debt was reduced to $1.97bn at the end of June, from $1.99bn at the end of December, with its financial covenants waived through to the end of September.

It forecast positive free cash flow for the 2020 financial year, at its current forward curve.

“The continued underlying performance of our core assets along with the decisive action we have taken to reduce our expenditure during the first half has resulted in our net debt remaining broadly flat despite significantly weaker commodity prices during the period,” said chief executive officer Tony Durrant.

“This, together with the expected agreement on the amendments to our credit facilities and the completion of the value-accretive BP acquisitions, positions us well to benefit from a recovering oil price.”

At 0900 BST, shares in Premier Oil were down 4.61% at 43.22p.