20th Sep 2007 07:01
Premier Oil PLC20 September 2007 Press Release Premier Oil plc Interim Results for the six months to 30 June 2007 Highlights • Production of 34,100 boepd up 5 per cent on second half 2006 (32,400 boepd) with a current run-rate above 37,000 boepd • Key developments are moving forward which are capable of delivering an additional 30,000 boepd • Completed acquisitions in the UK and Indonesia adding booked reserves and resources at just over US$2 per barrel • Strong underlying cash flow driven by rising production and commodity prices • Operating profits of US$82.8 million (2006: US$108.8 million) after successful efforts write-downs of US$26.5 million (2006: US$7.0 million) • Rigs secured for key exploration and appraisal wells in next twelve months • Long-term convertible debt secured at 2.875 per cent coupon, pre-funding extensive development programme Regional Outlook Asia North Sea • Blackbird/Dua, Gajah Baru and • Scott acquisition completed in North Sumatra projects under way May with material production and development upside• Rig contracted for extensive 2008 Vietnam programme • Froy EPCI tenders expected in October• Ongoing exploration discoveries in Natuna Sea • Bream appraisal well planned for Q1 2008 • Operated Norwegian exploration programme planned for 2009 Middle East-Pakistan West Africa • Continuing production growth • In negotiation with preferred across all fields in Pakistan bidder for Mauritania sale • Phase 2 Zamzama production • Large prospects worked up in imminent Congo - well planning under way for late 2008 or 2009• Spudding of Anne-1 well offshore Pakistan shortly • Establishing new JV relationship in the region Simon Lockett, Chief Executive, commented: "Premier continues to make progress against its stated targets. We are on trackto deliver 50,000 boepd production by the end of 2010 from existing projectswith the capability to exceed this level in 2011. Our development programme ispre-funded and we expect final approvals over the coming months. We havehigh-impact exploration wells planned in Pakistan, Vietnam, Congo, and Norway." There will be an analyst presentation on Thursday 20 September at Premier'soffices, 23 Lower Belgrave Street, London SW1W 0NR starting at 10.00 am. A copyof the presentation will be available on the Company's website:www.premier-oil.com. 20 September 2007 ENQUIRIESPremier Oil plc Tel: 020 7730 1111Simon LockettTony Durrant Pelham PRJames Henderson Tel: 020 7743 6673Gavin Davis Tel: 020 7743 6677 CHAIRMAN'S STATEMENT "We have a material and valuable development portfolio which we are working hardto exploit; this will be complemented by our high potential explorationprogramme and targeted acquisition activities". Through incremental projects and a UK producing asset acquisition, Premier hasincreased its production from 32.4 thousand barrels of oil equivalent per day(kboepd) in the second half of 2006 to an average of 34.1 kboepd in the firsthalf of 2007. Rising production and continuing strong commodity pricesgenerated operating cash flows before working capital movements of US$143.3million (2006: US$147.6 million). Following the sale of a crude cargo from theScott field in June an additional US$42.1 million of cash flow was received inearly July. These strong cash flows will help to fund the substantialinvestment programme in exploration and development projects which Premier plansto undertake over the next three years. Important milestones have been achieved within the development portfolio in theyear to date. Phase 2 of our Zamzama field in Pakistan will be commissioned shortly. We havemade good progress on gas sales negotiations in North Sumatra and on sellingadditional gas to Singapore and Batam Island. There are contract tenderprocesses under way for major production facilities for our oil developments inVietnam and Norway and we expect to make significant further progress on thesedevelopment projects by the end of 2007. The first half of the year saw an active acquisition programme with thecompletion of two acquisitions in Indonesia and the UK. These transactions haveadded 13 million barrels of oil equivalent (mmboe) of 2P reserves and a further29 mmboe of contingent resources at a net cost of US$88.6 million. Our exploration programme in the first half was focused on high impact wells inthe UK, Guinea Bissau and India. Our UK and Guinea Bissau wells wereunsuccessful though the cost of the programmes was reduced significantly byfarm-out transactions. The data from our drilling in Cachar, India is stillbeing reviewed alongside the current testing programme after the wellencountered significant hydrocarbon shows. Our Indonesian exploration effortcontinued to add incremental discoveries to our portfolio. Although theGajah-Sumatera well was unsuccessful both the Ibu Lembu well and the Pancingwell, drilled on the adjoining Kakap Block, identified additional oil and gaszones. The remainder of the year will see drilling offshore Pakistan, Gabon andthe Philippines. We also continue to work hard to plan for our 2008 and 2009programmes. We expect to be appraising the Bream discovery in Norway in thefirst quarter of 2008, have recently contracted a rig for a significant Vietnamprogramme commencing March 2008 and are in discussions with a number of rigcompanies with a view to contracting for at least one well in Congo in late 2008or 2009. Our focus on maintaining world-class health, safety and environmentalperformance continues. Our overall group safety performance during the firsthalf, as measured by Lost Time Incident metrics, remains better than theindustry average. With the appointment of Joe Darby, we are delighted to welcome a newnon-executive director to the Board with effect from 1 September 2007. Joebrings over 35 years of experience in the energy sector including ManagingDirector of Thomson North Sea Limited and Chief Executive of LASMO plc. Mostrecently he has been Chairman of Mowlem plc and Faroe Petroleum plc. Outlook Despite a challenging commercial and service sector environment, we believe wehave made strong progress in financing and planning our development programmefor the next 2-3 years. We are confident that our increased production goalsfrom developments can be met. We are committed to providing shareholders withmaterial upside through our exploration programme. Going forward our focus willbe on offshore Pakistan, Norway, Vietnam and Congo. Our portfolio managementprogramme has added barrels at reasonable cost in areas that we know well. Weexpect to continue to add to production and reserves through acquisitionactivity where we can do so on attractive terms. Sir David John KCMG Chairman FINANCIAL REVIEW Group production, on a working interest basis, was 34.1 kboepd in the first halfcompared to an average of 32.4 kboepd in the second half of 2006 and 33.0 kboepdfor the full year 2006. This reflects good performance from our Indonesian andPakistan fields, supported by strong local gas market conditions, and theinclusion of production from the increased share of the Scott field acquired on17 May. Premier's realised average oil price for the period was US$65 per barrel, a 3per cent premium to average Brent crude prices for the period. Average realisedgas prices decreased by 4 per cent to US$5.03 per million cubic feet (mcf)(2006: US$5.26/mcf). The net effect of sales volume and price changes was toincrease turnover to US$239.4 million (2006: US$196.2 million). Cost of sales in the period was US$114.4 million (2006: US$65.6 million) afterincluding a cost of US$26.8 million for inventory acquired with the Scott fieldacquisition. Underlying operating costs after adjustments for inventory and thediscontinued operations in Mauritania, were US$6.9 per barrel (2006: US$5.0 perbarrel) mainly due to one-off operating cost increases in Indonesia andPakistan. Exploration expense and pre-licence exploration costs amounted toUS$26.5 million and US$7.9 million respectively, after taking into account aUS$25.7 million write-down of costs in Guinea Bissau. Interest revenue and finance gains for the period were US$1.2 million offset byfinance charges of US$15.5 million resulting principally from a non-cashmark-to-market hedging loss of US$9.9 million. Such accounting losses arise asoil and gas prices increase. However, given the current range of spot andforward prices, it is not expected that the hedging programme will have any cashflow impact on the group. The tax charge of US$48.0 million reflects a similarunderlying tax rate to previous years (2006: US$53.7 million). Profit after tax in the period to 30 June 2007 was US$20.5 million compared withUS$33.7 million for the corresponding period last year. Cash flow Cash flow from operating activities, before movements in the working capital,amounted to US$143.3 million (2006: US$147.6 million). After working capitalitems and tax payments, cash flow from operating activities amounted to US$86.7million in the period (2006: US$174.5 million). Following the sale of a crudecargo from the Scott field in early June, cash proceeds of US$42.1 million werereceived on 3 July. Capital expenditure in the period was US$188.5 millionafter inclusion of asset acquisition costs of US$88.6 million. Capital Expenditure (US$ million) 2007 Half Year 2006 Half YearFields/developments 37.9 39.5Exploration 61.0 39.0Acquisitions 88.6 17.0Other 1.0 0.4Total 188.5 95.9 The principal development projects were the Kyle gas lift project in the UK, theWest Lobe development in Indonesia and the Zamzama Phase 2 development inPakistan. Exploration costs of US$61.0 million for the half year take intoaccount cost savings due to recent farm-outs of US$30.9 million in GuineaBissau, the UK and India. Net debt at 30 June 2007 stood at US$24.1 million (2006: net cash of US$43.8million) following the successful completion of a US$250 million convertiblebonds issue in June. This funding provides seven year fixed rate debt at a cashcoupon of 2.875 per cent and contributes substantially towards the financing ofPremier's significant development programme over the next three years. Net (debt)/cash (US$ million) 2007 Half Year 2006 Half YearCash and cash equivalents 240.8 43.8Convertible bonds* (196.9) -Other long-term debt* (68.0) -Net (debt)/cash (24.1) 43.8 * Excluding unamortised issue costs. Hedging and risk management The group has maintained its policy of securing pricing floors for its futureproduction where it can do so on attractive terms. This is typically achievedon a zero cash cost basis by selling upside above US$100 per barrel orequivalent. As oil and gas prices have risen during 2007, we have taken theopportunity to raise the floor on existing hedges and extend the duration of theprogramme into 2013, whilst maintaining zero cash outlays. At 20 September 2007, the group has 9.9 million barrels of dated Brent oilhedging covering the period to end December 2012 at an average of US$39.3 perbarrel. In addition, 642,000 metric tonnes of High Sulphur Fuel Oil, the basisfor our Indonesian gas contract pricing, is hedged covering the period to 30June 2013. The average floor from 1 January 2008 is US$250 per metric tonnewith a ceiling of US$500 per metric tonne or approximately a Brent crudeequivalent of US$100 per barrel using the current spot rate relationship. Since Premier operates and reports in US dollars, foreign exchange exposurerelates only to certain Sterling and other currency expenditures. This netexposure is financed by the sale of US dollars on a spot or short-term forwardbasis. The average rate achieved for transactions in the first half of 2007 wasUS$1.9679:£1 marginally better than the average daily rate for the period.Forward foreign exchange contracts outstanding at the end of June 2007 showed amark-to-market gain of US$0.2 million. OPERATIONAL REVIEW ASIA During the first half of 2007 progress was made with each of the key strategicthemes in Asia. Success with both exploration and acquisitions was underpinnedby a solid production performance while new development opportunities continuedto advance. Production and development In the first half of 2007, the Premier operated Natuna Sea Block A in Indonesiasold an overall average of 126 billion British thermal units per day (BBtud)(gross) from its gas export facility while the non-operated Kakap fieldcontributed a further 68 BBtud (gross). Oil production from Anoa averaged 2,579barrels of oil per day (bopd) (gross) and from Kakap 8,162 bopd (gross). Overall, net production from Indonesia amounted to 11,848 boepd (2006: 11,644boepd), with Anoa and Kakap contributing 7,932 boepd (2006: 7,957 boepd) and3,916 boepd (2006: 3,687 boepd) respectively. West Lobe completion and commissioning was carried out in January and February.Two additional West Lobe wells were brought on stream, giving a total of fourwells producing from the West Lobe platform. Negotiations continued for the sale of further gas from Natuna Sea Block A withprospective buyers in Singapore. At the end of the first half of 2007,initialled Heads of Agreement were in place for the supply of 100 millionstandard cubic feet per day (mmscfd) of gas to a buyer in Singapore, and 30mmscfd of gas to PLN in Batam. Government approvals are pending. Target datefor first gas is the end of 2010. In January 2007, we acquired an additional 25 per cent working interest in theNorth Sumatra Block A Production Sharing Contract (PSC) onshore Indonesia, whichincreases Premier's net interest to 41.67 per cent. The block has undevelopeddiscoveries independently certified as holding over 650 billion cubic feet (bcf)(gross) of proved and probable reserves. The PSC operator is progressingdetailed gas sales negotiations, and a Memorandum of Understanding (MOU) hasbeen signed for delivery of gas to fertiliser plants and for electricitygeneration in North Sumatra. Development planning is under way with Front EndEngineering and Design studies expected to commence in the fourth quarter.First gas is targeted for the fourth quarter of 2010. In Vietnam, Premier acquired 1,600km2 of marine 3D seismic data over the 2006Blackbird discovery and adjacent undrilled structures in Block 12W. This hasallowed detailed development planning of both Blackbird and Dua fields toproceed, with the objective of achieving first oil in 2010. The reservesassessment report and outline Phase 1 development plan will be submitted in thefourth quarter for Vietnamese government approval. We are also evaluating plansfor early production from Blackbird. In India, detailed discussions with joint venture partners and governmentrepresentatives have continued with respect to the Ratna field development wherePremier has a 10 per cent carried interest and is the operator. Progresscontinues to be made towards execution of the PSC now that the required approvalfrom the finance ministry has been obtained. Exploration and appraisal In Indonesia, the Ibu Lembu-1 and Gajah Sumatera-1 (formerly referred to asGajah Puteri-3) exploration wells in Natuna Sea Block A were drilled in thefirst quarter of 2007. Ibu Lembu-1 was a follow up to the Lembu Peteng-1discovery of 2006; the well encountered gas and further studies are under way todetermine the potential of the Lembu Trend. Gajah Sumatera-1 encountered somegas shows while drilling, however wireline logs indicated that no significanthydrocarbons were encountered and the well was plugged and abandoned. At the endof the period, the Pancing-1 well on the Kakap block was drilling. This wellidentified hydrocarbons and was subsequently tested. Exploration studies continue on the prospect portfolio in the area to work uptargets for future drilling campaigns. In March 2007, Premier was awarded the Tuna PSC licence (Premier operated netinterest 65 per cent) in Indonesia. The Tuna Block is located adjacent to andimmediately south of existing Premier interests in Block 07/03 (previously Block7&8/97) and to the southeast of Block 12W in Vietnam. This provides anexcellent opportunity for us to leverage our deepening knowledge of the area andwork has commenced with planning for seismic acquisition in 2008. Within our Buton PSC (Premier net interest 30 per cent) in Indonesia, theoperator is moving ahead with acquisition of gravity and magnetic data in orderto optimise planned 2D seismic acquisition, expected to take place in early2008. In Vietnam, the exploration potential of Block 12W is being re-evaluated toincorporate the results of the successful 2006 drilling and 2007 3D seismicprogrammes. A drilling unit has been contracted for a drilling campaigncommencing early 2008 and is on hire for a minimum of six months with options toextend this further. A number of prospects are being worked up as potentialcandidates for this and subsequent exploration and appraisal campaigns. OnBlock 07/03, geological and geophysical work has commenced to progressexploration leads to drilling phase. A separate deeper water rig will berequired for this programme. In the Philippines, preparations are progressing for the drilling of explorationwell Monte Cristo-1 and the acquisition of a 400km offshore seismic survey laterthis year. We have farmed out our interest in the SC43 licence, reducing ourequity interest from 42.5 per cent to 21 per cent in exchange for being fullycarried on the costs of the Monte Cristo-1 well. In India, the challenging, high pressure Masimpur-3 well in Cachar wassuccessfully drilled. Gas shows were encountered and preparations are under wayto drill stem test the well. Premier has a 14.5 per cent operated workinginterest and costs are carried in part. MIDDLE EAST-PAKISTAN Premier is intent on building a material position within this region beyond ourexisting foothold in Pakistan and our exploration position in Egypt.Discussions continue with a Middle Eastern partner regarding a strategic jointventure in the region. Production and development The growing gas demand and more effective usage of existing developed fieldsresulted in increased production in Pakistan, reaching a new record level of12,532 barrels of oil equivalent per day (boepd), some 3 per cent higher thanthe corresponding period for 2006 (12,168 boepd). Qadirpur field production was 3,976 boepd (2006: 3,995 boepd). The slightreduction was due to a 60 day shutdown of one of the end-users of the gas formaintenance during the period. Subsequent to the signing of a Term Sheet,negotiations are ongoing with a gas buyer, Sui Northern Gas Pipelines Limited,to increase its Annual Contract Quantity (ACQ) from 450 mmscfd to 550 mmscfd. APlant Capacity Enhancement Project is under way to increase the plant capacityfrom the current 500 mmscfd to 600 mmscfd and is expected online in March 2008.The drilling of the Qadirpur Deep-1 well was completed in January and thedrilling and logging results indicate the presence of gas in the deeperhorizons. The full testing of the well will be carried out early in 2008 onarrival of the required testing equipment. At Kadanwari, production of 1,338 boepd was higher than the corresponding periodin 2006 (1,183 boepd). This was achieved due to additional production from theK-15 well which came on production in August 2006. Two new wells (K-16 and K-18)were drilled during the period on the basis of the latest 3D seismic surveydata. The K-16 well encountered gas and was suspended for further evaluation.The subsequent K-18 well proved to be a success and will be tied in to existingfacilities with first gas expected in the first quarter of 2008. Two moredevelopment wells K-17 and K-19 are planned to be drilled in 2008. Zamzama production averaged 4,330 boepd during the current period (2006: 4,063boepd). First gas from the Zamzama Phase 2 development project is expected tostart on schedule in the third quarter of 2007. This will raise the ACQ from theexisting 320 mmscfd to 470 mmscfd. Bhit field production was 2,888 boepd during the current period (2006: 2,927boepd). The Bhit Phase II Supplemental Gas Sales Agreement (GSA) was signed lastyear increasing the ACQ for Phase II from the existing 270 mmscfd to 300 mmscfd.This project, for accelerated production from the Bhit field and tie-in of theBadhra field, is expected to complete on schedule and will enhance the Bhit areaplant capacity to 315 mmscfd, effective from January 2008. A GSA for the sale of 22 mmscfd gas from the Zarghun South field, in whichPremier has a 3.75 per cent carried interest, was signed by the gas buyer SuiSouthern Gas Company Limited and joint venture partners and is pending with thegovernment for final approval. First gas is expected in mid-2009. Exploration and appraisal In Pakistan, the commencement of the Indus E Block well, Anne-1, has beendelayed to September 2007. This is a highly prospective area and this wellcould open up a hydrocarbon province offshore Pakistan. New explorationopportunities onshore Pakistan are being reviewed. In Egypt, Premier exercised an option to reduce its interest in the North WestGemsa concession to 10 per cent in return for the partial refund of past costs.Premier continues to actively pursue a number of new business initiatives todevelop its foothold in Egypt. NORTH SEA During the first half of 2007, Premier has successfully pursued its stated NorthSea strategy of expanding its exploration portfolio and seeking high impactexploration drilling opportunities while maximising the value from its existingproduction and development assets. Production and Development Production in the UK sector amounted to 8,338 boepd (2006: 7,081 boepd)representing 24 per cent of the group total (21 per cent in 2006). The increase,compared to the corresponding period in 2006, is due to a combination ofimproved field performance across most of the producing assets and the impact ofthe Scott acquisition that completed on 17 May 2007. The Wytch Farm oil field contributed 3,032 boepd net production to Premier, down7 per cent on last year. Production was adversely impacted by problems with theM19 well that was temporarily suspended after drilling difficulties. Theoperator subsequently decided against a redrill of M19 due to the expected risksand instead an A08 sidetrack well was drilled. At the period end, the drillingoperation was continuing on schedule with the well anticipated to complete andbe on production during the third quarter. Production from the remaining wellswas better than expected. In the fourth quarter the M10 well will be drilledwith a water injection well to be completed early in 2008. Net production from Kyle was 2,180 boepd, an improvement of 6 per cent on lastyear as a consequence of improved operational performance. The gas lift projectsanctioned for installation in early 2007 was completed on three of the fourproduction wells in July. This has resulted in an immediate improvement inproduction with current gross rates at 6,500 bopd and 9 mmscfd. Premier completed the pre-emption of a 20.05 per cent equity in the Scott fieldon 17 May 2007, increasing its interest to 21.83 per cent. For the periodleading up to the completion date Premier's interest was 1.79 per cent. TheScott field gross production for the period was 30,880 boepd; amounting to 1,916boepd net to Premier with the combined equity levels. A substantial infilldrilling programme for five production wells and one water injector, which hadstarted in 2005, was successfully completed. Telford produced above expectations during the first half of 2007 with grossfield production averaging 9,560 boepd (78 boepd net to Premier). In the Fife Area, Premier's net production amounted to 1,132 bopd, slightlybelow expectation due to a number of minor operational problems. In August,some evidence of corrosion was detected in the P8 riser and the field was shutdown while extensive inspection and testing on all of the eight risers wascompleted. The field is expected to restart production in October 2007. On the Froy field in Norway, development planning has progressed through theconcept selection phase and EPCI tenders for the production and drillingfacility will be received in October. The partnership plans to make thedeclaration of continuation around year-end followed by the submission of theplan of development in the first half of 2008. Exploration and Appraisal Premier operated the Peveril prospect well, located only 10km south of the Fifefield. The well was spudded on 26 March 2007 and was completed within budgetand at no cost to Premier. The Peveril well encountered an unexpectedly thickinterval Kimmeridge Clay and no evidence of the target Fife reservoir sands atthat location. The well was plugged and abandoned. In the UK 24th Licensing Round, Premier was awarded a split portion of the 15/24a application area. The firm work programme includes seismic reprocessing andstudy work. Detailed evaluation of the remainder of the UK exploration portfolio has beencompleted; as a result discussions to agree a farm-out of a well on Block 23/22bare at an advanced stage. Premier has an 87.5 per cent interest in this blockand would expect to be carried through a well to be drilled in 2008. Premier was awarded a further five licences in the Norwegian APA Licensing Roundin January 2007. Building on the APA 2005 portfolio Premier was successful incapturing two of the most sought after blocks in the 2006 APA Round, the Breamappraisal licence and adjacent Bream exploration licence, PL407 and PL406respectively. The Bream field was discovered by the 17/12-1 well and appraisedby the 17/12-3 well but no development decision was reached. Interpretation ofthe 2005 PGS 3D dataset across the structure suggests that between 60-80 millionbarrels of oil (mmbbls) reserves may be present. The exploration licenceadjacent to Bream is Premier's first operated licence in Norway and hassignificant exploration potential to add between 100-250 mmbbls reserves to theproven Bream accumulation. The three other licences were PL418 and PL419 downdip from the Gjoa discovery and PL417 adjacent to our existing licence PL378which contains a very large Jurassic fault block with potentially 250 mmbblsreserves. Premier will be acquiring 500km2 of new 3D across the PL406 licence in March2008 using PGS's Ramform Sovereign vessel with a potential well on PL406 in thesecond quarter of 2009. Premier is also actively looking to build on its portfolio in the 2007 APA Roundand the 20th Licence Round in Norway in 2008. The existing five licences fromthe APA 2005 awards have three drill or drop decisions at the end of 2007 and weplan to progress a minimum of two of these opportunities to drilling in2008-2009. WEST AFRICA The focus of the first half of 2007 in the region was the drilling of twooperated exploration wells in Guinea Bissau and progressing the sale, initiatedin December 2006, of Premier's interests in Mauritania. Negotiations with apreferred bidder are now under way. Elsewhere in the region the company hasmoved forward with well planning for the THAM-1 well, to be spudded in thefourth quarter of 2007 in Gabon (Themis PSC), where Premier is the operator forthe drilling phase. We have also progressed evaluation of the encouraging CongoMarine IX PSC, which we operate, and have approved an application to extend theDussafu PSC in Gabon. Production and Development Chinguetti production during the first half of 2007 averaged 16,867 bopd (1,368net bopd), lower than expected in pre-development planning. New seismic datawas acquired over the Chinguetti field this year to optimise the locations ofnew development wells to be drilled in early 2008. Evaluation of the potential development of the Tiof oil discovery in PSC Bcontinued with the acquisition of new high resolution seismic data in the firstquarter of 2007. The joint venture is also actively investigatingcommercialisation of the substantial gas reserves proven in PSC A (Banda field)and PSC B (Tiof, Tevet and Chinguetti accumulations). Exploration and Appraisal In Mauritania, exploration activity has been focused on re-evaluating andprioritising the prospect portfolio. One or more exploration wells may bedrilled in 2008 dependent, largely, upon rig availability. In Guinea Bissau, Premier drilled two exploration wells, Eirozes-1 andEspinafre-1Az. The Espinafre-1Az well, which was spudded early in February, wasplugged and abandoned before reaching the primary objective, for geological andoperational reasons. Eirozes-1, located 23km from Espinafre-1Az, was spudded atthe end of March, drilled to target depth, and encountered thick Albian sands inaccordance with expectations. However, no indications of oil were recordedduring drilling and the well was plugged and abandoned. Prior to commencement of the programme, Premier reduced its participation in theEsperanca and Sinapa Permits by farming-out an 8 per cent interest.Subsequently, Sterling Energy exercised an option to acquire a 5 per centinterest in the Esperanca Permit, from Premier, upon completion of the firstwell (Espinafre-1Az). Premier retains a 30.5 per cent interest (43.57 per centpaying) in both permits. Offshore Gabon, Premier (as drilling operator for the Themis joint venture)continued planning and contracting services for the THAM-1 well, to be spuddedin the fourth quarter of 2007. The Global Santa-Fe rig 'Adriatic VI' has beencontracted to drill this well. The First Exploration Period of the Dussafu PSC (Premier 25 per cent interest)ended in May 2007. The joint venture entered negotiations with the DirectorGeneral of Hydrocarbons (Gabon) to enter the Second Term of the PSC, for aperiod of three years, with a proposed variance in work commitments. In the Republic of Congo, Premier progressed technical evaluation of MarineBlock IX, a deep water PSC located near to existing production. This block,which Premier operates with 58.5 per cent participation, is in the first year ofthe initial four year exploration term. A decision on drilling in this block islikely to take place in the second half of 2007, upon which a rig will becontracted. Premier was awarded four PSCs in the Saharawi Arab Democratic Republic (SADR),formerly Spanish Sahara, in 2006. These licences will become effective when thecurrent United Nations mandated process of securing autonomy in the region isconcluded. New business opportunities in the region are being actively pursued with a focuson identifying further areas for future high impact exploration. Working interest production by field (boepd) Six months to 30 June 2007 Full year 2006 Liquids Gas Total Liquids Gas Total North Sea Wytch Farm 2,961 71 3,032 3,166 46 3,212Kyle 1,179 1,001 2,180 1,482 479 1,961Scott 1,728 188 1,916 378 27 405Others 1,188 22 1,210 1,232 39 1,271 7,056 1,282 8,338 6,258 591 6,849AsiaNatuna Sea Block A 740 7,192 7,932 740 7,147 7,887Kakap 1,530 2,386 3,916 1,323 2,346 3,669 2,270 9,578 11,848 2,063 9,493 11,556Middle East-Pakistan Bhit 19 2,869 2,888 18 2,926 2,944Zamzama 191 4,139 4,330 182 3,956 4,138Kadanwari - 1,338 1,338 - 1,199 1,199Qadirpur 50 3,926 3,976 49 3,814 3,863 260 12,272 12,532 249 11,895 12,144West Africa Chinguetti 1,368 - 1,368 2,429 - 2,429 1,368 - 1,368 2,429 - 2,429Total group 10,954 23,132 34,086 10,999 21,979 32,978 CONSOLIDATED INCOME STATEMENT Six months Six months Year to 31 to 30 June to 30 June December 2007 2006 2006 Unaudited Unaudited Notes $ million $ million $ millionContinuing operations:Sales revenues 239.4 196.2 358.8Cost of sales 2 (114.4) (65.6) (126.6)Exploration expense (26.5) (7.0) (15.3)Pre-licence exploration costs (7.9) (6.8) (21.8)General and administration costs (7.8) (8.0) (16.6) Operating profit 82.8 108.8 178.5Interest revenue and finance gains 3 1.2 1.9 2.0Finance costs and other finance expenses 3 (15.5) (20.4) (7.7) Profit before tax 68.5 90.3 172.8Tax (48.0) (53.7) (86.7) Profit for the period/year from continuing operations 20.5 36.6 86.1Discontinued operations:Loss for the period/year from assets held for sale - (2.9) (18.5) Profit for the period/year 20.5 33.7 67.6 Earnings per share (cent)From continuing operations:Basic 25.0 44.7 105.3Diluted 24.8 44.5 104.1From continuing and discontinued operations:Basic 25.0 41.2 82.6Diluted 24.8 40.9 81.7 STATEMENT OF TOTAL RECOGNISED INCOME AND EXPENSES Six months Six months Year to 31 to 30 June to 30 June December 2007 2006 2006 Unaudited Unaudited $ million $ million $ millionCurrency translation differences 1.5 0.6 0.3Pension costs - actuarial gains - - 1.4Net gains recognised directly in equity 1.5 0.6 1.7Profit for the period/year 20.5 33.7 67.6Total recognised income 22.0 34.3 69.3 RECONCILIATION TO NET ASSETS Six months to Six months to Year to 31 30 June 2007 30 June 2006 December 2006 Unaudited Unaudited $ million $ million $ millionNet assets at 1 January 449.1 376.1 376.1Total recognised income 22.0 34.3 69.3Provision for share-based payments 5.0 1.8 3.0Issue of Ordinary Shares 0.5 0.2 0.7Equity component of convertible bonds issue 51.9 - -Net assets at period/year end 528.5 412.4 449.1 CONSOLIDATED BALANCE SHEET At 30 June At 30 June At 31 2007 2006 December 2006 Unaudited Unaudited Notes $ million $ million $ millionNon-current assets:Intangible exploration and evaluation assets 185.5 111.6 114.7Property, plant and equipment 614.4 569.0 502.6Investments in associates - 1.1 - 799.9 681.7 617.3Current assets: Inventories 19.8 16.1 14.8Trade and other receivables 229.8 122.3 174.4Cash and cash equivalents 240.8 43.8 40.9Assets held for sale 97.6 - 90.4 588.0 182.2 320.5Total assets 1,387.9 863.9 937.8 Current liabilities: Trade and other payables (215.2) (142.9) (169.6)Current tax payable (50.1) (50.3) (52.4)Liabilities directly associated with assets held for sale (14.1) - (14.2) (279.4) (193.2) (236.2)Non-current liabilities: Convertible bonds 4 (192.2) - -Other long-term debt (67.0) - -Deferred tax liabilities (208.0) (206.9) (194.1)Long-term provisions (103.5) (41.7) (49.6)Long-term employee benefit plan deficits (9.3) (9.7) (8.8) (580.0) (258.3) (252.5)Total liabilities (859.4) (451.5) (488.7) Net assets 528.5 412.4 449.1 Equity and reserves: Share capital 73.4 73.2 73.3Share premium account 9.0 8.2 8.6Revenue reserves 391.1 329.1 365.6Capital redemption reserve 1.7 1.7 1.7Translation reserves 1.4 0.2 (0.1)Equity reserve 51.9 - - 528.5 412.4 449.1 CONSOLIDATED CASH FLOW STATEMENT Six months to Six months Year to 31 30 June to 30 June December 2007 2006 2006 Unaudited Unaudited Notes $ million $ million $ million Net cash from operating activities 5 86.7 174.5 244.8Investing activities:Capital expenditure (188.5) (95.9) (156.5)Pre-licence exploration costs (7.9) (6.8) (21.8)Proceeds from disposal of intangible exploration and evaluation - - 2.6assetsNet cash used in investing activities (196.4) (102.7) (175.7)Financing activities:Issue of Ordinary Shares 0.5 0.2 0.7Repayment of long-term financing - (65.0) (65.0)Issue of convertible bonds 250.0 - -Issue costs for the convertible bonds (5.9) - -Other loan drawdowns 68.0 - -Interest paid (3.0) (2.0) (2.7)Net cash from/(used in) financing activities 309.6 (66.8) (67.0)Net increase in cash and cash equivalents 199.9 5.0 2.1Cash and cash equivalents at the beginning of the period/year 40.9 38.8 38.8Cash and cash equivalents at the end of the period/year 5 240.8 43.8 40.9 1. GEOGRAPHICAL SEGMENTS Six months to Six months to Year to 31 30 June 2007 30 June 2006 December 2006 Unaudited Unaudited $ million $ million $ millionContinuing operationsSales and other operating revenues by origin and destination:North Sea 122.5 77.6 119.3Asia 71.3 73.3 149.9Middle East-Pakistan 45.6 45.3 89.6Total group sales revenue 239.4 196.2 358.8Discontinued operationsSales and other operating revenues by origin and destination:West Africa 16.1 23.4 43.4Total group revenue 255.5 219.6 402.2 Continuing operationsGroup operating profit/(loss):North Sea 35.3 38.9 54.3Asia 43.5 49.6 91.4Middle East-Pakistan 32.6 27.3 50.2West Africa (25.9) (1.3) (1.6)Other (2.7) (5.7) (15.8) 82.8 108.8 178.5 2. COST OF SALES Six months to Six months to Year to 31 30 June 2007 30 June 2006 December 2006 Unaudited Unaudited $ million $ million $ millionField operating costs 40.6 25.8 64.7Stock overlift/underlift movement* 33.1 (0.8) (20.0)Royalties 5.3 5.5 10.6Amortisation and depreciation of property, plant and equipment:Oil and gas properties 35.0 34.5 70.0Other 0.4 0.6 1.3 114.4 65.6 126.6 * includes US$26.8 million of stock acquired with the Scott field acquisition. 3. INVESTMENT REVENUE AND FINANCE COSTS Six months to Six months to Year to 31 30 June 2007 30 June 2006 December 2006 Unaudited Unaudited $ million $ million $ millionInterest revenue and finance gains:Short-term deposits 1.0 0.7 2.0Mark-to-market valuation of foreign exchange contracts 0.1 1.2 -Exchange differences 0.1 - - 1.2 1.9 2.0Finance costs and other finance expenses:Bank loans and overdrafts (3.0) (2.0) (2.6)Unwinding of discount on decommissioning provision (2.4) (0.8) (1.7)Premium on commodity hedges and mark-to-market valuation (9.9) (16.0) (2.0)Long-term debt arrangement fees (0.2) (0.2) (0.4)Exchange differences - (1.4) (1.0) (15.5) (20.4) (7.7) 4. CONVERTIBLE BONDS In June 2007, the group issued bonds at a par value of US$250 million which areconvertible into Ordinary Shares of the company at any time from 6 August 2007until six days before their maturity date of 27 June 2014. At the initialconversion price of £15.82 per share there are 8,003,434 Ordinary Shares of thecompany underlying the bonds. If the bonds have not been previously purchasedand cancelled, redeemed or converted, they will be redeemed at par value on 27June 2014. Interest of 2.875% per annum will be paid semi-annually in arrears upto that date. The net proceeds received from the issue of the convertible bonds were splitbetween a liability element and an equity component at the date of issue. Thefair value of the liability component was estimated using the prevailing marketinterest rate for similar non-convertible debt. The difference between theproceeds of issue of the convertible bonds and the fair value assigned to theliability component, representing the embedded option to convert the liabilityinto equity of the group, was included in equity reserves. Issue costs were apportioned between the liability and equity components of theconvertible bonds based on their relative carrying amounts at the date of issue.The portion relating to the equity component was charged directly againstequity. $ millionNominal value of convertible bonds issued net of issue costs 244.1Equity component (51.9)Liability component at date of issue 192.2Interest charged -Total liability component at 30 June 2007 192.2 No interest has been charged in the six months to 30 June 2007 as the issue dateof the bonds was 27 June 2007. However, the total interest charged for the yearwill be calculated by applying an effective annual interest rate of 6.73% to theliability component. The non-cash accrual of interest will increase theliability component (as the cash interest is only paid at 2.875%) to US$250million at maturity. 5. NOTES TO THE CASH FLOW STATEMENT Six months to Six months to Year to 31 30 June 2007 30 June 2006 December 2006 Unaudited Unaudited $ million $ million $ millionProfit before tax for the period/year 68.5 90.3 172.8Adjustments for:Depreciation, depletion and amortisation 35.4 42.4 95.9Exploration expense 26.5 7.0 15.3Pre-licence exploration costs 7.9 6.8 21.8Net operating charge for long-term employee benefit plans - (1.6) (1.9) less contributionsShare-based payment provision 5.0 1.8 3.0Release of warranty provision - (2.5) (2.5)Discontinued operations - 3.4 (1.6)Operating cash flows before movements in working capital 143.3 147.6 302.8Increase in inventories (5.0) (2.8) (1.5)(Increase)/decrease in receivables (24.2) 38.3 (32.4)(Decrease)/increase in payables (8.8) 22.0 84.1Cash generated by operations 105.3 205.1 353.0Income taxes paid (34.3) (50.0) (116.2)Interest payable and other finance expense 15.7 19.4 8.0Net cash from operating activities 86.7 174.5 244.8 ANALYSIS OF CHANGES IN NET (DEBT)/CASH Six months to Six months to Year to 31 30 June 2007 30 June 2006 December 2006 Unaudited Unaudited $ million $ million $ milliona) Reconciliation of net cash flow to movement in net (debt)/cash:Movement in cash and cash equivalents 199.9 5.0 2.1Proceeds from other long-term debt (68.0) - -Repayment of other long-term debt - 65.0 65.0Proceeds on issue of convertible bonds - debt portion (196.9) - -(Decrease)/increase in net cash in the period/year (65.0) 70.0 67.1Opening net cash/(debt) 40.9 (26.2) (26.2)Closing net (debt)/cash (24.1) 43.8 40.9 b) Analysis of net (debt)/cash:Cash and cash equivalents 240.8 43.8 40.9Long-term debt* (264.9) - -Total net (debt)/cash (24.1) 43.8 40.9 * The carrying value of the convertible bonds and the other long-term debt on the balance sheet are stated net of the unamortised portion of issue costs (US$4.7 million) and debt arrangement fees (US$1.0 million) respectively. 6. BASIS OF PREPARATION The interim statement does not represent statutory accounts within the meaningof Section 240 of the Companies Act 1985. The comparative financial information is based upon the statutory accounts forthe year ended 31 December 2006. Those accounts, upon which the auditors issuedan unqualified opinion, have been delivered to the Registrar of Companies anddid not contain statements under Section 237(2) or (3) of the Companies Act1985. The interim financial information has been prepared on the basis of theaccounting policies set out in the group's 2006 statutory accounts. Dividends No interim dividend is proposed (30 June 2006: US$nil). Earnings per share The calculation of basic earnings per share is based on the profit after tax andon the weighted average number of Ordinary Shares in issue during the period/year. The diluted earnings per share allows for the full exercise of outstandingshare purchase options and adjusted earnings. Basic and diluted earnings per share are calculated as follows: Profit after tax Weighted average Earnings per share Unaudited number of shares Six Six Six months to months to Six months Six months Six months months to 30 June 30 June to 30 June to 30 June to 30 June 30 June 2007 2006 2007 2006 2007 2006 $ million $ million million million cent centFrom continuing operations:Basic 20.5 36.6 82.0 81.8 25.0 44.7Outstanding share options - 0.1 0.8 0.7 * *Diluted 20.5 36.7 82.8 82.5 24.8 44.5 From continuing and discontinuedoperations:Basic 20.5 33.7 82.0 81.8 25.0 41.2Outstanding share options - 0.1 0.8 0.7 * *Diluted 20.5 33.8 82.8 82.5 24.8 40.9 * The inclusion of the outstanding share options in the 2007 and 2006 calculations produces a diluted earnings per share. The outstanding share options number includes any expected additional share issues due to future share-based payments. At 30 June 2007, 8,003,434 (2006: nil) potential Ordinary Shares in the company that are underlying the company's convertible bonds and that may dilute earnings per share in the future have not been included in the calculation of diluted earnings per share because they are anti-dilutive for the period to 30 June 2007. Independent Review Report to Premier Oil plc Introduction We have been instructed by the company to review the financial information forthe six months ended 30 June 2007 which comprise the consolidated incomestatement, statement of recognised income and expense, consolidated balancesheet, consolidated cash flow statement and related notes 1 to 6. We have readthe other information contained in the interim report and considered whether itcontains any apparent misstatements or material inconsistencies with thefinancial information. This report is made solely to the company in accordance with Bulletin 1999/4issued by the Auditing Practices Board. Our work has been undertaken so that wemight state to the company those matters we are required to state to them in anindependent review report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other thanthe company, for our review work, for this report, or for the conclusions wehave formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures are consistent withthose applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (UK andIreland) and therefore provides a lower level of assurance than an audit.Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2007. Deloitte & Touche LLPChartered AccountantsLondonUnited Kingdom19 September 2007 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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