21st Aug 2014 07:36
LONDON (Alliance News) - Premier Oil PLC Thursday posted a big drop in pretax profits despite a rise in sales revenue in the first half, as its cost of sales increased and it was hit by impairment charges in the UK and by an accounting loss on the sale of the Block A Aceh site in Indonesia.
The oil exploration and production company said pretax profit was down to USD50.4 million in the six months to June 30 from USD214.6 million last year. That was despite a rise in sales revenue in the period to USD884.7 million from USD757.8m a year ago.
Premier did not proposed an interim dividend, in line with last year, but said it will continue distributions to shareholders through an ongoing share buyback programme. The firm said it would continue the share buyback until its share price "better reflects the underlying value of the business".
Premier's cost of sales increased to USD646.3 million from USD472.2 million last year, with underlying operating costs increasing to USD18.5 per barrel of oil equivalent production. Premier said this was due to its increased share of production from higher cost UK fields.
Profit was also hit by a USD76.9 million anticipated loss on the sale of Block A Aceh onshore Indonesia. The group said, however, that the loss from this sale will be offset in the full year upon the completion of the USD130 million sale of its non-operated Scott area assets in the North Sea and the sale of PL359, which includes the Luna II discovery offshore Norway for USD17.5 million. The profits from those sales were not recognised in its half-year results, as they have yet to complete.
Premier said it was on track to deliver its targeted USD300 million disposal programme.
Premier also was hit by an impairment charge related to the Balmoral and Huntington fields in the UK totalling USD144 million.
Production in the first half averaged 64.9 thousands of barrels of oil equivalent per day, 11% ahead of guidance on the back of new production from its Dua site in Vietnam, the reinstatement of the Kyle field in the North Sea, and the first gas delivered under its domestic swap arrangement in Indonesia. Premier maintained its full-year production guidance of 58 to 63 thousands of barrels of oil equivalent per day.
The group also reported some positive exploration activity in Indonesia, with material discoveries made in the Tuna Block.
"We continue to exceed our production expectations, have achieved significant milestones on our key developments, had notable exploration success in Indonesia and advanced our non-core asset disposal programme," said Chief Executive Tony Durrant.
"Increased production has driven significantly rising cash flows, and our robust financial position has supported renewal of our principal bank facility on improved terms. Our focus continues to be on maintaining momentum and delivery of our near-term priorities, including first oil from Solan and Sea Lion FDP approval," Durrant added.
Premier Oil shares were up 0.3% to 340.40 pence in early trade Thursday.
By Sam Unsted; [email protected]; @SamUAtAlliance
Copyright 2014 Alliance News Limited. All Rights Reserved.
Related Shares:
PMO.L