Bumper North Sea flows help Premier focus on debt cuts

Premier Oil, one of the North Sea’s biggest players, said its focus remains on making further inroads into its debt pile amid concerns over the impact of coronavirus on global demand for oil.
Output came in at the top end of forecasts thanks to the UKs Catcher field. Picture: contributed.Output came in at the top end of forecasts thanks to the UKs Catcher field. Picture: contributed.
Output came in at the top end of forecasts thanks to the UKs Catcher field. Picture: contributed.

The group, behind assets including the Catcher field, said the current “volatile” environment highlighted the importance of the business being able to fund future growth without compromising its balance sheet.

Its comments came as Premier reported that net debt fell to $1.99 billion (£1.54bn) last year from $2.33bn a year earlier, helped by group production that came in at 78,400 barrels a day – at the top end of guidance although lower than the previous year. Post-tax profits rose to $164 million from $133m.

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Premier cuts costs and debt as North Sea output jumps
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Premier, which is locked in a high-profile battle with a lender over its refinancing plans, said the progress was driven by “exceptionally high uptime across the portfolio” and outperformance from its flagship Catcher area in the North Sea.

It also said it has a significant amount of activity planned in the UK this year, including the drilling of a third producer well on the Solan field west of Shetland and the development of two Catcher Area satellites.

Production

“These investments have high returns and quick payback periods and will help boost production in the second half of 2020 and early 2021,” it said.

The group said its debt reduction process will also be aided by production from assets it has agreed to acquire in the North Sea from BP and the Korea National Oil Corporation.

Chief executive Tony Durrant said the figures showed Premier had made “significant progress” against its strategic targets during 2019. “Strong operational performance resulted in record free cash flows and reducing debt levels. We took material steps to commercialise our reserve and resource base and added to our exploration acreage position.”

Stuart Lamont, investment manager at Brewin Dolphin Aberdeen, said the results appear to be “another step in the right direction for Premier”. He added: “However, the spread of coronavirus has called global demand for oil into question, which has seen its share price drop around a third this year. The virus will likely continue to cast a shadow over oil stocks until there is greater clarity.”

Analysts at SP Angel said the “material reduction” in debt will be pleasing for shareholders but added that falling oil prices are likely to see cash flows come under pressure.

Premier also announced that its executive director for the North Sea, Robin Allan, will leave the board in May but will continue to work for the company on a part-time consultancy basis.

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