Premier Oil plc (the "Company")
2019 Annual Report and Financial Statements, Sustainability Report and Revised AGM Date
22 April 2020
Publication of Annual Report and Sustainability Report
Further to the release of the Company's Annual Results on 5 March 2020, the Company announces that it has today published its Annual Report and Financial Statements for the financial year ended 31 December 2019 (the "2019 Annual Report") and its 2019 Sustainability Report. The 2019 Annual Report was finalised and approved after close of business on 4 March 2020. Since that date, the COVID-19 pandemic has had a dramatic impact on the global economy, and has contributed to the sharpest decline in oil price in 20 years. As reported in a trading update on 13 March, the Board of Directors are taking all prudent steps to manage the Company's short term liquidity position, to reduce forward expenditure commitments and to redefine the Company's future business plan, given these new circumstances.
Revised AGM Date
In response to the Government's public health instructions and stay at home measures regarding the COVID-19 pandemic, the Board has taken the decision to defer the holding of the Company's 2020 Annual General Meeting ("AGM") from 12 May 2020 to 25 June 2020. The Board is hopeful that circumstances will improve and that shareholders will be able to attend the meeting at the later date if restrictions on public gathering and social distancing requirements are reduced. It is anticipated that the shareholder mailing of the AGM notice and annual report will take place on or around 22 May 2020.
Robin Allan, Executive Director, UK & North Sea, who was due to leave the Board at the close of the AGM on 12 May 2020, has agreed to stay on the Board until the close of the AGM on the revised date of 25 June 2020. He will then continue to work for Premier as planned, on a part-time consultancy basis, with a focus on ESG matters and Premier's response to climate change.
Further detail regarding Annual Report
In accordance with Listing Rule 9.6.1., copies of the 2019 Annual Report have been submitted to the UK Listing Authority and will shortly be available for inspection from the National Storage Mechanism at www.morningstar.co.uk/uk/nsm. The 2019 Annual Report is also available to view on the Company's website at www.premier-oil.com
A condensed set of financial statements and information on important events that have occurred during the year ended 31 December 2019 and their impact on the financial statements were included in the Company's 2019 Annual Results announcement on 5 March 2020. That information together with the information set out below in Appendix 1, which is extracted from the 2019 Annual Report, fulfil the requirements of DTR 6.3.5. This announcement is not a substitute for reading the full 2019 Annual Report. Page and note references in the text in Appendix 1 are made in reference to the 2019 Annual Report. To view the 2019 Annual Results announcement, visit the Company website: www.premier-oil.com/investors
Further enquiries:
Company Secretariat:
Rachel Rickard Tel: +44 (0)20 7730 1111
Investor Relations:
Elizabeth Brooks Tel: +44 (0)20 7730 1111
Disclaimer
This announcement contains certain forward-looking statements that are subject to the usual risk factors and uncertainties associated with the oil and gas exploration and production business. Whilst the Group believes the expectations reflected herein to be reasonable in light of the information available to it at this time, the actual outcome may be materially different owing to factors beyond the Group's control or otherwise within the Group's control but where, for example, the Group decides on a change of plan or strategy. Accordingly, no reliance may be placed on the figures contained in such forward-looking statements.
APPENDIX 1
Company Risk Factors (required under DTR 4.1.8)
|
Principal risk factor |
Risk detail |
How is it managed? |
|
Production and development delivery and decommissioning execution |
Uncertain geology, reservoir and well performance.
Availability of oilfield services including FPSOs and drilling rigs, technology and engineering capacity, and skilled resources.
Adverse fiscal, regulatory, political, economic, social, security (including cyber) and weather conditions.
Immaturity of decommissioning in the UK resulting in uncertain cost and timing estimates for decommissioning of assets.
Potential consequences include reduced or deferred production, loss of reserves, cost overruns and failure to fulfil contractual commitments. |
Effective management systems in place governing geoscience, reservoir and well engineering, and production operations activities. These include rigorous production forecasting and reporting, field and well performance monitoring and independent reserves auditing.
Effective management systems in place governing project execution, including contracting strategy, cost controls, project team competency and functional oversight.
Long-term development planning to ensure timely and cost-effective access to FPSOs, rigs and other essential services.
Preference for operatorship.
Specialist decommissioning team in place coupled with continued focus on delivering asset value to defer abandonment liabilities. |
|
Joint venture partner alignment and supply chain delivery |
Major operations and projects in the oil and gas industry are conducted as joint ventures. The joint venture partners may not be aligned in their objectives and this may lead to operational inefficiencies and/or project delays. Several of our major operations are operated by our joint venture partners and our ability to influence is sometimes limited due to our small interest in such ventures. Premier is heavily dependent on supply chain providers to deliver products and services to time, cost and quality criteria and to conduct its business in a safe and ethical manner. |
Due diligence and regular engagement with partners in joint ventures in both operated and non-operated operations and projects. Defined management system for management of non-operated ventures. Assure contracted dutyholders comply with local statutory requirements (e.g. UK Safety Case Regulations 2015). Pursue strategic acquisition opportunities, where appropriate to gain a greater degree of influence and control. Due diligence of supply chain providers, including diligence of financial solvency, anti-bribery and corruption controls, and controls to prevent facilitation of tax evasion. Contractor performance management programme being implemented for major contracts to manage contractual performance and delivery, including periodic audit of the effectiveness of their management systems. Long-term development planning to ensure timely and cost-effective access to key oilfield services. |
|
Organisational capability |
The capability of the organisation may be inadequate for Premier to deliver its strategic objectives. The capability of the organisation is a function its structure and the deployment and strength of its personnel. Premier may be unable to attract, engage or retain personnel with the right skills and competencies or to deliver suitable succession plans for senior roles. The Business Management System may be inadequate or may not be sufficiently complied with to be effective. |
Premier has created a competitive reward package including bonus and long-term incentive plans to incentivise loyalty and performance from the existing skilled workforce. Continue to strengthen organisational capability to achieve strategic objectives. This includes resource and succession planning, competency and leadership development. Continuous improvement and simplification of the Business Management System and related controls appropriate to the size and market position of the Company. Continued deployment of contingent labour through a mature cost-effective Managed Service Provider ('MSP') model to rapidly respond to the peaks and troughs of labour demand in a volatile environment. Staff forums providing a mutual communication forum between staff, management and the Board to address employee matters. Continued focus on Diversity & Inclusion across the Group. Embedded Talent Management and Succession Planning process. Complete implementation of recommendations emerging from externally facilitated organisation health check conducted end 2018. Organisational capability and risk oversight further enhanced by global functional review under new operating charter. |
|
Exploration success and reserves addition |
Premier may fail to identify and capture new acreage and resource opportunities to provide a portfolio of drillable exploration prospects and future development projects. Specific exploration programmes may fail to add expected resource and hence value. Lender controls may reduce ability to capture and execute the exploration programme.
|
Focus on proven petroleum systems underpinned by world-class source rocks and identify technical or political discontinuities that we can exploit using our preferred evaluation workflows to create a competitive advantage. Continuous improvement in exploration management system with strong functional oversight.
Manage exploration portfolio to maintain alignment with strategic growth and spend targets.
Maintain new ventures activity and appropriate resourcing. |
|
Commodity price volatility |
Oil and gas prices are affected by global supply and demand and can be subject to significant fluctuations. Supply factors that influence these include the pace of new oil and gas developments, operational issues, natural disasters, adverse weather, political and security instability, conflicts and actions by major oil-exporting countries. Demand factors that influence these include economic conditions, climate change regulations and the pace of transition to a low carbon economy. Price fluctuations can affect our business assumptions, our ability to deliver on our strategy and our access to capital. |
Oil and gas price hedging programmes to underpin our financial strength and protect our capacity to fund future developments and operations. Company investment guidelines that ensure our investment opportunities are robust to downside price scenarios. |
|
Access to capital |
Sufficient funds may not be available to finance the business and fund existing operations and planned growth projects. Current Amend and Extend to debt facilities not agreed by the courts leading to renegotiations with lenders which may have adverse consequences on the Group's ability to refinance. Volatile credit markets, lender appetite and investor sentiment may impact ability to either refinance debt at maturity and/or raise equity on attractive terms. Breach of delegated authority. Financial fraud. |
Strong financial discipline through an established finance management system that ensures the Company is able to maintain an appropriate level of liquidity and financial capacity and to manage the level of assessed risk associated with the financial instruments. The management system includes a defined delegation of authority to reasonably protect against risk of financial fraud in the Group. Proactive engagement with equity markets, banks and lenders to maintain access to capital markets through the cycle. An insurance programme to reduce the potential impact of the physical risks associated with exploration and production activities. This includes business interruption cover for a proportion of the cash ow from producing fields. Cash balances are invested in short-term deposits with minimum A credit rating banks, AAA managed liquidity funds and A1/P1 commercial paper, subject to Board approved limits. Economics of investment decisions are tested against downside project scenarios. Discretionary spend is actively managed. |
|
Health, safety, environment and security ('HSES') |
Significant asset integrity, process safety or wells incident on operated asset. Significant incident arising from natural disaster, pandemic, social unrest or other external cause. Consequences may include injury, loss of life, environmental damage and disruption to business activities. |
Comprehensive HSES management systems including: HSES reporting and auditing with a focus on the identification and management of major hazards. Valid Safety Cases on all operated assets. Robust crisis management and emergency response processes in place and tested against. Senior management visits to operated facilities to demonstrate commitment to HSES values. Learning from internal and third-party incidents. Insurance against Business Interruption. |
|
Host government: political and fiscal risks |
Premier operates or maintains interests in some countries where political, economic and social transition is taking place or there are current sovereignty disputes. Developments in politics, security, laws and regulations can affect our operations and earnings. Consequences may include expropriation of property; cancellation of contract rights; limits on production or cost recovery; import and export restrictions; price controls, tax increases and other retroactive tax claims; and increases in regulatory burden or changes in local laws and regulations. Consequences may also include threats to the safe operation of Company facilities.
|
Premier strives to be a good corporate citizen globally, and seeks to forge strong and positive relationships with governments, regulatory authorities and the communities where we do business. Premier engages in respectful industry-wide lobbying and sustainable corporate responsibility and community investment programmes. Premier maintains a portfolio of interests which includes operations in both lower and higher risk environments. Rigorous adherence to Premier's Sustainability Policy and Global Code of Conduct. Monitor and adhere to local laws and regulations. Active monitoring of the political, economic and social situation in areas where we do business, including business continuity plans tailored to pre-defined levels of alert. |
|
Climate Change |
Adverse investor and stakeholder sentiment towards oil and gas sector impacting investability. Cost to comply with climate change related operational regulations and disclosure requirements. Longer-term disruption to Premier's projects and operations as a result of changing weather patterns and more frequent extreme weather events. Longer-term reduction in demand for oil and gas products due to the pace of commercial deployment of alternative energy technologies and shifts in consumer preference for lower greenhouse gas emission products. |
Premier is proactively taking steps to address the impact on society of its operations. We set time-bound climate change objectives consistent with Paris Agreement targets and also demonstrate how we meet those objectives over time, specifically: Board-owned Climate Change Policy with strategy implementation monitored by an Executive Climate Change Committee. Setting of corporate goals and annual targets within Group corporate scorecard and business unit KPIs. Physical and transitional climate change risks associated with our activities are identified and actively managed. We are committed to ensuring that all new projects sanctioned by us will deliver net zero emissions, through our Low Carbon Projects by Design initiative, supplemented where necessary by investments to offset emissions using carbon credits. We are undertaking a comprehensive asset-by-asset review during 2020 identifying projects to reduce carbon emissions within our operations and throughout our supply chain. Carbon pricing and scenario analysis is integrated into investment decision-making. Climate change performance and supporting processes with stakeholders are communicated in a transparent manner. Dialogue with shareholders and lenders on climate change actions. Collaboration with industry and other associations on climate change adaptation and mitigation, including a framework by which the industry works towards a target of net zero greenhouse gas emissions. Promote investability though positive recognition in the annual FTSE4Good and CDP climate change reporting submissions. |
Key Performance Indicators (required under DTR 4.1.9)
Working interest production (kboepd)
Objective
Premier aims to maximise production from its existing asset base and, over time, to deliver production growth.
2019 Progress
· Group Production of 78.4kboepd
· Group operating efficiency >90%
· First gas from BIG-P
· Formal government approval of Catcher North and Laverda developments
Reserves and resources (mmboe)
Objective
Premier aims to grow its reserves and resources base through a combination of successful exploration and selective acquisitions.
2019 Progress
· Upward revision in 2P reserves estimates at the Catcher Area and Natuna Sea Block A
· Premier upgraded its Zama resource estimates following successful 2019 appraisal campaign
Operating costs US$/boe
Objective
Premier aims to minimise costs from operations without compromising on health, safety and integrity.
2019 Progress
· Operating costs of US$18/boe, of which US$11/boe related to field opex and US$7/boe to FPSO lease costs
· Low cost base supported by high operating efficiency
Covenant Leverage ratio
Objective
Premier aims to have sufficient headroom against its covenant leverage ratio to ensure continued covenant compliance and access to liquidity throughout the commodity price cycle.
2019 Progress
· Covenant leverage ratio (covenant net debt/ EBITDAX) reduced to 2.3x (2018: 3.1x)
· Increased EBITDAX of US$1,230 million, up c.13%
Operating cash flow (US$ million)
Objective
Premier aims to maximise cash flow from operations to maintain financial strength, meet its debt obligations, invest in the future of the business and deliver long-term returns to shareholders.
2019 Progress
· Improved cash margins due to increased UK oil production
· Catcher reached cash payback in October
· Strong operating cash flow generated by the Group's Asian assets driven by high uptime and tight cost control
Net debt (US$ billion)
Objective
Premier aims to reduce the absolute level of its net debt in order to address the imbalance in its capital structure, to ensure compliance with its financial covenants and to provide the Company with future financial flexibility.
2019 Progress
· Net debt reduced from US$2.3 billion to less than US$2 billion
· Record free cash flow generation of US$320 million
· Net debt reduced by over US$900 million since October 2017
ROCE %
Objective
Premier is focused on effective capital and balance sheet management, and quality of earnings through driving operational and technical efficiencies.
2019 Progress
· Increased operating cash flows from high operating efficiency, higher realised sales prices and tight cost control
· Record free cash flow utilised to repay debt, with capex focused on highest return projects
Total recordable injury rate ('TRIR')
Objective
Premier is committed to managing its operations in a safe and reliable manner to prevent major accidents and to provide a high level of protection to its employees and contractors.
2019 Progress
· No recordable injuries at any of Premier's offshore operated facilities, supply bases and offices worldwide
Process safety events - IOGP Tier 1 and Tier2
Objective
Premier aims to maintain the highest standards of operational integrity to prevent any release of hazardous material from primary containment.
2019 Progress
· In 2019, there was one Tier 1 Process Safety Event relating to an oil release at Catcher and one Tier 2 Process Safety Event relating to a gas release at Catcher
GHG intensity - operated assets (kgCO2e/boe)
Objective
Premier is committed to proactively taking steps to address the Group's impact on society and in particular to minimise the climate impact of its activities.
2019 Progress
· Greenhouse gas intensity of the Group's operating assets at a record low
· Commitment to ensuring that all operated projects will be developed on a net zero emissions basis (Scope 1 and Scope 2)
Directors' responsibility statements (required under DTR 4.1.12)
The Directors are responsible for preparing the Annual Report and Financial Statements in accordance with applicable law and regulations.
Group financial statements
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors are required to prepare the Group financial statements in accordance with International Financial Reporting Standards ('IFRSs') as adopted by the European Union ('EU') and Article 4 of the International Accounting Standards ('IAS') Regulation and have also chosen to prepare the Parent Company financial statements in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.
In preparing the Parent Company financial statements, the Directors are required to:
· select suitable accounting policies and then apply them consistently;
· make judgements and accounting estimates that are reasonable and prudent;
· state whether Financial Reporting Standard 101 Reduced Disclosure Framework has been followed, subject to any material departures disclosed and explained in the financial statements; and
· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
In preparing the Group financial statements, International Accounting Standard 1 - 'Presentation of Financial Statements' - requires that Directors:
· properly select and apply accounting policies;
· present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
· provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and
· make an assessment of the Company's and Group's ability to continue as a going concern.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and Group and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website (www.premier-oil.com). Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Directors' responsibility statement
We confirm to the best of our knowledge:
1. the Group financial statements, prepared in accordance with International Financial Reporting Standards, as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;
2. the Strategic Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and
3. the Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's position and performance, business model and strategy.
This responsibility statement was approved by the Board of Directors on 4 March 2020 and is signed on its behalf by:
Tony Durrant
Chief Executive Officer
Richard Rose
Finance Director
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