Premier cuts costs and debt as North Sea output jumps

A strong performance from its flagship Catcher field in the North Sea has helped Premier Oil beat its production forecasts in the first half of the year and cut its significant debt pile.

The firm said production at its key Catcher field was up by 40 per cent in the first half. Picture: Premier Oil.
The firm said production at its key Catcher field was up by 40 per cent in the first half. Picture: Premier Oil.

Its UK fields saw output rise by 40 per cent to an average of 57,700 barrels a day, mostly accounted for by Catcher, taking overall production to an average of 84,100 barrels a day, up 11 per cent on the same period last year.

High levels of operating efficiency also led to costs falling by $1 (80p) to $12 a barrel, helping the group cut its debt pile by $180 million to $2.15 billion and putting it on course to cut $300m from the total over the full year.

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Premier also said its next major UK project, the Tolmount gas asset, is on track to start production by the end of 2020.

Chief executive Tony Durrant said it had been a strong first half for the group.

“I am particularly pleased with the continued high operating efficiency from our producing portfolio, which has enabled us to reduce our debt by $180m,” he said.

“This puts us in good stead to meet our debt reduction target for the full year, which remains a top priority for the group. In addition, we have retained significant optionality with our future developments and an extremely attractive exploration portfolio which together offer substantial upside exposure.”

As well as a significant rise in output from Catcher, the Elgin Franklin and Huntington North Sea fields, in which Premier has an interest, produced ahead of expectations during the period.

Although its Chim Sao field in Vietnam also delivered ahead of budget, gas production from its Indonesian asset fell due to availability of lower-cost LNG gas.

Premier said formal approval for two satellite oil fields at Catcher, which lies 170 kilometres south-east of Aberdeen, is expected next month and the Tolmount development that it will operate remains on schedule and budget.

David Barclay at Brewin Dolphin in Aberdeen said the update showed that Premier “continues to head in the right direction”.

He said: “Reducing leverage has been the major focus for the company in recent times and analysts will hope debt levels can pass through the $2bn mark in the near future. In production terms, Premier is doing well, with many of its assets outperforming expectations.”

However, he added that Premier’s share price is likely to continue to be buffeted by oil price volatility, “which has seen shareholders endure a torrid time over the past few years”.

Meanwhile, AIM-quoted United Oil & Gas yesterday sold two blocks in the North Sea to Malaysia’s Hibiscus Petroleum in a deal worth up to $5m. United acquired the blocks last year.