Impairments hit Premier Oil profits in first half

- Pre-tax profit falls to $50.4m from $214.6m
- Impairment charges double, exploration costs rise
- Tax credit boosts EPS
- Full-year guidance maintained

Oil explorer Premier Oil said it had a "strong six months" but saw a sharp reduction in pre-tax profit in the first half due to impairments.

In spite of higher revenues from improved production volumes, the company reported a profit before tax of just $50.4m, down from $214.6m the year before.

Sales revenues increased 17% to $884.7m as average output increased 11% to 64,900 barrels of oil equivalents per day (boepd), ahead of guidance.

This boosted operating cash flows by 35% to $499.4m.

However, the cost of sales increased 37% to $646.3m, mainly as a result of impairment charges that doubled to $144m, relating to the Balmoral area and Huntington fields in the UK.

The impairments followed a review of the longer-term assumptions used in forecasting operating, maintenance and decommissioning costs and production profiles, Premier said.

Meanwhile, exploration expenses and pre-licence exploration costs more than doubled to $49.8m.

Nevertheless, due to a tax credit of $122.3m, compared with a charge of $53.5m previously, basic earnings per share rose to 32.8 cents from 30.5 cents.

Chief executive Tony Durant said that the company was "performing well on all fronts".

"We continue to exceed our production expectations, have achieved significant milestones on our key developments, had notable exploration success in Indonesia and advanced our non-core asset disposal programme."

However, despite the stronger-than-expected production in the first half, Premier maintained its full-year output guidance for 58,000-63,000 boepd.

BC