Company Announcements

Trading and Operations Update

Source: RNS
RNS Number : 9617Y
Premier Oil PLC
07 January 2020


Premier Oil plc

("Premier" or "the Group" or "the Company")

Trading and Operations Update

7 January 2020



Premier today provides a Trading and Operations Update ahead of its 2019 Full Year Results, which will be announced on Thursday 5 March 2020. Separately, the Group today has announced accretive and strategic UK North Sea acquisitions, underwritten financing and a proposed extension of its credit facilities.




·     2019 production of 78.4 kboepd, at the upper end of full year guidance, underpinned by high operating efficiency and continued high rates from the Premier-operated Catcher Area


·     BIG-P (Indonesia) First Gas delivered on schedule and below budget, supporting higher Singapore offtake in Q4 2019


·     Tolmount (UK) on budget and on track for First Gas by 2020 year end, adding 20-25 kboepd  (net, Premier 50 per cent interest); Tolmount East development planning underway ahead of targeted sanction in 2020 2H


·     Sea Lion (Falkland Islands) Heads of Terms signed with Navitas Petroleum to farm in for a 30 per cent interest in the Sea Lion project; discussions progressing with senior lenders regarding project financing


·     Tuna PSC (Indonesia): Heads of Terms signed for a full carry on a two well appraisal campaign


·     Zama (Mexico): unitisation process progressed with the formal notice confirming a shared reservoir submitted to the regulators in December; sales process ongoing following successful appraisal campaign


·     Exploration portfolio materially enhanced with the capture of new acreage in the Andaman Sea (Indonesia) and on the Alaska North Slope; pipeline of near-term high value E&A wells including Malguk-1 appraisal (Alaska) and Berimbau/Maraca (Brazil).


·     Estimated 2019 total capex of US$300 million and opex (ex-lease costs) of US$11/boe, both below original guidance 


·     Net debt reduced by over US$330 million from US$2.33 billion to US$1.99 billion, in line with guidance


Tony Durrant, Chief Executive, commented:

"Premier's strong operational performance in 2019 has generated significant free cash flow for the Group enabling us to materially reduce our debt levels and to invest selectively in our portfolio for future growth.  The Tolmount development is making good progress and will provide a step up in Group production once on-stream at the end of this year.  We also look forward to drilling our first well in Alaska, a potentially transformational well for Premier." 



Premier Oil plc

Tel: 020 7730 1111

Tony Durrant, Chief Executive; Richard Rose, Finance Director



Tel: 020 3757 4983

Billy Clegg, James Crothers


Production operations

2019 production is estimated at 78.4 kboepd, at the upper end of full year guidance of 75-80 kboepd and underpinned by continued high Group operating efficiency. 2020 production is expected to average 70-75 kboepd, before any contribution from the acquired assets separately announced today.

UK production averaged 54.2 kboepd during 2019, a 16 per cent increase on 2018, driven by a full year contribution from the Catcher Area at increased rates. The Catcher Area continued to outperform during 2019, averaging 33.6 kboepd (net, Premier 50 per cent interest) and achieving excellent operating efficiency.  

The Elgin-Franklin Area produced 6.0 kboepd (net, Premier 5.2 per cent interest) ahead of expectations.  Production was supported by well intervention and infill drilling campaigns, including the F12 infill well, which was placed on-stream in December.  Huntington production averaged 5.8 kboepd (Premier 100 per cent interest). Premier continues to discuss with the FPSO provider an extension of field life beyond April 2020.  Premier's operated Solan field delivered 3.5 kboepd (Premier 100 per cent interest). A rig has been contracted to drill a third producer (P3) in the central northern part of the field, targeting an unswept part of the reservoir.  The well is expected to spud during the first half of 2020 and once on-stream is anticipated to provide a significant step up in production levels from the Solan field.

In the Southern Gas Basin, the Borr Prospector-5 jack up rig has been contracted to drill two horizontal wells on Ravenspurn North, commencing later this quarter.  The wells will access gas in undrained areas of the field with the aim of extending field life to 2028.

In Vietnam, Premier's operated Chim Sao field averaged 11.4 kboepd (net, Premier 53.13 per cent interest), ahead of budget with natural decline from the existing wells mitigated by four well intervention campaigns during the year.  Preparations continue for a 2021 two well infill drilling campaign with regulatory approvals in progress.  Chim Sao cargoes remain well bid with an average premium to Brent of more than US$4.70/bbl realised for cargoes lifted over the course of the year.

Premier's Natuna Sea Block A gas fields in Indonesia delivered 11.5 kboepd (net, Premier 28.67 per cent interest) with offtake under the two gas sales agreements at or around annual take or pay levels.   In December, Premier achieved First Gas from its operated Bison, Iguana and Gajah Puteri (BIG-P) project, on schedule and significantly below budget, increasing the deliverability from Premier's operated Natuna Sea Block A.  Deliverability was also boosted following the successful tie-in of a Gajah Baru infill well in December.

Natuna Sea Block A production increased in December, averaging 16.1 kboepd. This was driven by higher Singapore demand for Premier's gas and the addition of condensate from Gajah Puteri following start-up of the field in December.

Development activities

The Premier operated Tolmount development is on schedule and tracking below budget. Construction and fit-out of the platform ahead of load-out in April continues: the platform crane and all major equipment packages, including the produced water treatment unit, diesel generator and gas and water separator have been installed on the platform with final piping, electrical installation and pre-commissioning underway.  Coating of the linepipe is nearing completion and the offshore pre-anchor route survey has been undertaken ahead of planned pipelay in June 2020.  Development drilling is on track to start mid-2020. Premier continues to expect First Gas before year-end, with Tolmount adding 20-25 kboepd (net, Premier 50 per-cent interest) to Group production once on plateau.

Following the Tolmount East discovery in October 2019, Premier is undertaking FEED studies for both platform and subsea concepts to develop the Tolmount East gas field via the Tolmount infrastructure.  Premier plans to select the optimal field development during the first half of 2020 with Tolmount East project sanction targeted for the second half of the year. 

Elsewhere in the UK, development of the two Catcher Area satellite oil fields, Catcher North and Laverda, is progressing to plan with fabrication of the flexibles, umbilicals and modification to the templates underway. The two development wells are scheduled to be drilled mid-2020, along with an additional Vardero production well.  First oil from Catcher North and Laverda is targeted for early 2021 and, together with the Varadero infill well, will help to offset natural decline from the Catcher Area as the existing wells come off plateau. In addition, a 4D seismic survey across the Catcher Area is scheduled to take place mid-year to identify further infill opportunities as well as to improve the imaging of already identified near field prospects and discoveries.

In Mexico, the Block 7 joint venture partners progressed the unitisation process in December by submitting an Aviso (notice of shared reservoir) to the Mexican authorities for their approval.  Meanwhile, FEED on the joint venture's chosen development concept continues ahead of project sanction which is targeted for the second half of 2020. Following the successful appraisal of the Zama field earlier in 2019, a sales process is underway for Premier's 25 per cent interest in Block 7 with the Group currently in discussions with potential buyers.

In the Falkland Islands, Premier and Rockhopper have agreed a detailed Heads of Terms with Navitas Petroleum to farm in for a 30 per cent interest in the 530 mmbo Sea Lion project which is expected to be developed over several phases.  Under the Heads of Terms, the interests across the Sea Lion licences will be aligned with Premier having a 40 per cent operated interest and Rockhopper and Navitas a 30 per cent interest each.  Rockhopper will be fully funded for Sea Lion Phase 1 with its share of development costs split pro rata between Premier and Navitas.  Finalisation of a Sales and Purchase Agreement is expected during the first quarter of 2020 with completion subject to regulatory approval and conclusion of senior debt financing. 

Exploration and appraisal

In November, Premier completed the farm in for a 60 per cent interest in the conventional Area A Icewine project in the Alaska North Slope.  The Nordic-3 rig has been contracted to appraise the Malguk-1 discovery which Premier estimates could contain over 1 bn bbls of STOIIP.  Construction of the ice road connecting the Dalton Highway to the well site commenced in December with the rig on track to arrive on location in time for a February spud. 

In Brazil, the Valaris-DS9 rig has been contracted to drill the Berimbau/Maraca stacked prospects on Premier's operated Block 717 in the Ceara Basin. The well is scheduled to spud in the third quarter and is targeting unrisked resource of 300 mmbbls (gross, Premier 50 per cent interest).

In Indonesia, Premier's farm in for a 20 per cent interest in Andaman 1 and South Andaman completed in December.  Premier continues to mature the prospects identified on the fast track 3D seismic data across its three Andaman Sea blocks, ahead of receiving the fully processed seismic data.  Preparations are underway for a two well drilling campaign commencing in the second quarter of 2021 which will include a well on Premier's operated Andaman II and potentially a well on the South Andaman block.

Elsewhere in Indonesia, a Heads of Terms has been signed with a new investor to farm in for a material interest in the Tuna PSC.   Under the Heads of Terms, the new investor will fully carry Premier for its share of a two well appraisal campaign.  The Tuna discoveries are estimated to contain 100 mmboe (gross).

In Mexico, Premier expects to receive the Block 30 final processed 3D seismic dataset in the second quarter of 2020.  Fast-track data already received confirms the prospectivity of the amplitude-supported Wahoo structure which Premier plans to drill in the first half of 2021.  Premier also expects to receive the final processed 3D seismic data across Blocks 11 and 13 in the Burgos Basin during 2020.

In the UK, final processed 3D seismic data from the Greater Tolmount Area seismic survey are expected by the end of the first quarter of 2020 and will enable maturation of the Tolmount Far East prospect and further assessment of the additional prospectivity in the surrounding Tolmount Area.


Premier has hedged 37 per cent of its 2020 first half oil entitlement volumes at US$64/bbl, 40 per cent of its UK gas volumes at 56 pence/therm and 46 per cent of its Indonesian gas entitlement volumes at US$382/te.  The Group's complete hedging schedule is set out at the end of this release.

Full year 2019 field operating costs are estimated to be below full year guidance of US$20/boe at US$18/boe, of which US$11/boe relates to field opex and US$7/boe to FPSO lease costs across the Group.  2020 operating costs are forecast to be US$21/boe, of which US$15/boe relates to field opex and US$6/boe to FPSO lease costs.

Development, exploration and abandonment expenditure for the full year 2019 is estimated at around US$300 million, below original guidance of US$340 million, due to the release of contingency spend related to the BIG-P drilling programme, the Tolmount project tracking below budget and some deferral of spend into 2020.

Total 2020 production and development capex is expected to be US$320 million, principally relating to drilling at Tolmount, Solan and Catcher. In addition, Premier expects to spend US$90 million on exploration and appraisal and US$30 million on abandonment (pre-tax relief). 

Premier continues to benefit from its substantial UK corporation tax loss and allowance position with estimated losses and allowances of US$4.2 billion carried forward at 31 December 2019.

Premier reduced net debt by over US$330 million during the period from US$2.33 billion at the end of 2018 to US$1.99 billion as at the end of 2019. Estimated 2019 year-end leverage ratio (covenant net debt / EBITDA) is 2.3x against a covenant of 3.0x.

Board changes

The Board is pleased to announce that, following Jane Hinkley's retirement from the Board on 31 December 2019, Anne Marie Cannon has been appointed as the Company's Senior Independent Director.  The Board would like to thank Jane for her significant contribution to the Board during her nine years of service and wish her well for the future.



Group production breakdown



















1 sold at 26 March 2019

Hedging schedules



2020 1H

2020 2H

Volume (mmbbls)



% of forecast ent. production



Average price ($/bbl)




Indonesia gas


2020 1H

2020 2H

Volume (HSFO k te)



% of forecast production



Average price ($/te)




UK gas


2020 1H

2020 2H

Volume (million therms)



% of forecast production



Average price (p/therm)




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 (Company Secretary and General Counsel).


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