Premier today provides the following Trading and Operations Update ahead of its 2018 Full Year Results, which will be announced on Thursday 7 March 2019.
- Estimated year-end net debt of US$2.3 billion, below previous guidance of US$2.4 billion and a reduction of US$390 million on 2017
- 2018 full year production of 80.5 kboepd, up 7 per cent on 2017 and a record year for the Group; production averaged 92 kboepd, above forecast, in November and December
- Catcher FPSO producing at increased oil rates of 66 kbopd (gross)
- Tolmount Main gas project sanctioned, platform construction commenced in December; high value Tolmount East appraisal well scheduled to spud mid-2019
- Appraisal of giant Zama discovery (Mexico) underway; results of first appraisal well (Zama-2) expected shortly
- 3D seismic acquisition commenced in the Andaman Sea (Indonesia); 3D seismic across Block 30 (Mexico) and Greater Tolmount Area (UK) planned for 2019 1H
- Estimated 2018 total capex of US$355 million, below previously reduced guidance of US$365 million; 2018 opex estimated at US$16.9/boe, below guidance
Tony Durrant, Chief Executive, commented:
“Our strong operational performance and disciplined expenditure have enabled us to reduce our debt levels ahead of forecast. At the same time, we have continued to build our portfolio for the future, sanctioning our high value Tolmount Main gas project and capturing highly prospective new acreage in Mexico and Indonesia. Looking to the year ahead, we have a strong production base which is well hedged and our priority remains to further reduce our debt levels while progressing our future growth projects to final investment decisions.”
Production and development operations
2018 production averaged 80.5 kboepd, a 7 per cent increase on 2017 and a new record year for Premier, despite material asset sales. This was driven by new production from the Premier-operated Catcher Area and by a strong performance from the Group’s operated Asian assets.
Following announced and completed disposals, which accounted for 8 kboepd in 2018, 2019 production is expected to average around 75 kboepd. This is an underlying increase in year-on-year production, after adjusting for disposals, driven by a full year of Catcher Area production. Cash margins will improve in 2019 at comparable commodity pricing driven by higher margin UK oil production accounting for a greater proportion of the Group’s output.
UK production increased by 18 per cent, reflecting the ramp up of the Catcher Area during 2018 partially offset by the sale of Wytch Farm which completed at the end of 2017.
The Catcher Area (comprising the Catcher, Varadero and Burgman fields) was Premier’s highest net producer in 2018 averaging 21.5 kboepd (net). This reflected the fields ramp-up to plateau production rates in May and significantly increased plant availability towards the end of the year as final commissioning of secondary systems was completed. As a result, Catcher Area production averaged 34.7 kboepd (net) in November and December, achieving 97 per cent operating efficiency.
The Elgin-Franklin fields averaged 6.7 kboepd (net) benefitting from outperformance from new wells brought on-stream and continued high operating efficiency. Further infill drilling at Elgin-Franklin is planned for 2019. Huntington production averaged 5.8 kboepd, reflecting natural decline and several unplanned shutdowns. Modifications have now been made to facilitate gas import. This has improved plant stability with production averaging 7.0 kboepd in November and December, underpinned by uptime in excess of 90 per cent.
Premier’s other UK assets have performed broadly in line with expectations.
Production from Premier’s operated Chim Sao field in Vietnam again exceeded expectations in 2018 averaging 15.2 kboepd and up on 2017. This was driven by better than forecast subsurface performance and four successful well intervention programmes offsetting natural decline. Further well intervention programmes are planned for 2019.
Demand from Singapore for Premier’s Indonesian gas continued to be robust with Premier’s operated Natuna Sea Block A again capturing an increased market share of its principal gas contract (GSA1) of 52.4 per cent and above its contractual share. The slight reduction in Indonesia production on the prior year reflects the sale of the Group’s interest in Kakap, which completed in April.
On Natuna Sea Block A, in Indonesia, the development of the Bison, Iguana, Gajah-Puteri fields continues within budget and to schedule with first gas on track for the fourth quarter. The development will recover 93 Bcf (gross) of reserves helping to underpin delivery capacity of the Group’s gas sales contracts into Singapore.
Premier sanctioned the 500 Bcf Tolmount Main gas project in August. Construction of the platform commenced in Rosetti Marino’s Ravenna yard in December. Detailed engineering and procurement of the trees, wellheads and subsea pipeline has also commenced. First gas remains on schedule for the fourth quarter of 2020.
During 2018, Premier completed the selection of its key contractors for its operated Sea Lion project in the Falkland Islands and put in place LOIs for the provision of services as well as vendor financing. Premier is now working with its selected contractors to complete FEED and to convert the LOIs into fully termed contracts. In parallel, Premier is continuing to progress senior funding structures for the project, ahead of a final investment decision.
Exploration and appraisal
In Mexico, the first Block 7 Zama appraisal well, Zama-2, spudded at the end of November to the north of the Zama discovery well and is expected to determine the depth of the oil water contact. The well has encountered the main Zama reservoir and is currently drilling ahead as planned. Zama-2 will then be deepened to test the Marte prospect and subsequently side-tracked up-dip and flow tested. The rig will then move to drill the Zama-3 appraisal well, to the south, which will complete the Block 7 Zama appraisal programme, expected during the third quarter. Premier will update the market as key activities are completed.
3D seismic acquisition across Block 30, in which Premier secured a 30 per cent non-operated interest via Mexico’s Round 3.1 in March and contains the high impact Wahoo and Cabrilla prospects, is scheduled to commence in the second quarter.
In Indonesia, PGS commenced acquisition of 3D seismic in the Andaman Sea in December. This programme will mature the prospects identified on 2D data on Premier’s operated Andaman II licence.
In the UK, the high value Tolmount East appraisal well is scheduled to spud mid-2019 and is expected to take around 80 days to complete. 3D seismic acquisition across the Greater Tolmount Area is planned for March/April. This will help to optimise development drilling on Tolmount East and the location of a potential Tolmount Far East exploration well, in addition to identifying further prospectivity in the area.