Premier Oil expects 'material' reduction in debt

Exploration and development firm Premier Oil is on track to deliver a "material" reduction in debt this year, thanks to its Catcher project finally reaching the promised 60,000 barrels per day and Brent crude prices hitting their three-year highs.

With production averaging 74,000 boe/d, Premier reiterated its full-year production guidance of 80,000 to 85,000 barrels of oil per day on Wednesday and, as a result, chief executive Tony Durrant said it was possible that the firm could slash net debt about $2.3bn by the end of the year.

After 50-% owned and operated Catcher recently reached 60kb/d with all three Catcher, Varadero and Burgman fields on-stream, it will be maintained at this plateau level as final gas surge tests are complete and the field is connected to the gas export pipeline.

Premier, which hedges a percentage of its output to protect itself against oil price drops, has expanded its hedging for 2019 to take advantage of the current high oil prices.

The London-based firm stated it had hedged between 21-28% of its output through the third quarter of its next trading year at an average price of $66-$67 a barrel, compared to the 40% it insured at $58-$60 a barrel in 2018.

Elsewhere, Premier began work on its first appraisal well in the Zama field off the coast of Mexico which it claims holds potential reserves of as much as 800m barrels in the fourth quarter.

Spending on Catcher is largely completed with two final development wells to be drilled through coming months.

Tony Durrant, Premier's chief executive, said, "The improved commodity price environment puts us in a strong position to generate significant free cash flow in the second half of the year: the underlying production portfolio is robust, Catcher has reached 60 kbopd, our low-cost base has been maintained, capital spend is reducing and we have announced further non-core disposals."

"We are on track to deliver our plan of material debt reduction in 2018 and 2019 with selective investment in our future growth projects from 2020, once balance sheet strength has been restored," he added.

As of 0840 BST, Premier shares had collected 1.57% to 112.23p.