15th Jan 2009 07:00
15th January 2009
PREMIER OIL PLC
("Premier")
Trading and Operations Update
Premier today provides a trading and operations update ahead of its 2008 Preliminary Results, which will be announced on Thursday 26th March 2009.
Simon Lockett, Chief Executive, commented:
"Our strong financial performance in 2008 and a healthy balance sheet put us in a position to move forward with our growth plans and in addition to take advantage of an increasing set of new investment opportunities. We are actively reviewing all of our development projects to optimise the trade-off between volatile, mostly falling costs and project schedules to ensure they are economically robust in the new environment.
Exploration success in Egypt and Pakistan marks an encouraging start to our year."
CURRENT TRADING OPERATIONS
Production
Estimated average production for the full year 2008 was 36.5 kboepd (2007: 35.8 kboepd) in line with previous guidance. In the UK, the Wytch Farm and Kyle fields performed strongly but production performance from the Scott field in the fourth quarter was affected by a programme of turbine maintenance work. Both Pakistani and Indonesian fields saw strong demand from gas customers, coupled with good production performance.
|
Estimated group production by field |
2008 |
2007 |
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|
Oil |
Gas |
Total |
Total |
|||||
|
FIELD |
(kbopd) |
(mmscfd) |
(kboepd) |
(kboepd) |
||||
|
Scott/Telford |
3.2 |
1.7 |
3.5 |
3.7 |
||||
|
Wytch Farm |
2.9 |
0.4 |
3.0 |
3.0 |
||||
|
Kyle |
1.8 |
3.4 |
2.5 |
2.5 |
||||
|
Fife Area |
0.3 |
- |
0.3 |
0.7 |
||||
|
Total UK |
8.2 |
5.5 |
9.3 |
9.9 |
||||
|
Anoa |
0.6 |
39.9 |
8.4 |
8.2 |
||||
|
Kakap |
1.1 |
10.2 |
3.3 |
3.8 |
||||
|
Total Indonesia |
1.7 |
50.1 |
11.7 |
12.0 |
||||
|
Bhit/Badhra |
0.0 |
18.9 |
3.2 |
2.8 |
||||
|
Kadanwari |
0.0 |
7.0 |
1.2 |
1.3 |
||||
|
Qadirpur |
0.0 |
25.7 |
4.1 |
4.0 |
||||
|
Zamzama |
0.3 |
40.8 |
6.1 |
4.6 |
||||
|
Total Pakistan |
0.3 |
92.4 |
14.6 |
12.7 |
||||
|
Chinguetti |
1.0 |
- |
1.0 |
1.2 |
||||
|
TOTAL |
11.2 |
148.0 |
36.5 |
35.8 |
||||
The group is currently undertaking an active infill drilling programme on a number of its producing fields. In the UK, a four-well programme is under way on Scott and is expected to add 800 bopd (net) to production in 2009. On Wytch Farm, the A12 sidetrack well exceeded expectations and will be on production shortly. Three infill wells are planned for 2009 together with a five-well work over programme. These are expected to contribute 500 bopd (net), and to largely offset natural field decline in 2009.
In Pakistan, commissioning of the enhanced gas capacity project on Qadirpur commenced in December and is now expected to complete by the end of January. This should facilitate an incremental 800 boepd (net) of production. The 2009 programme includes a further five development wells and a wellhead compression project. On Kadanwari, the K-17 well tie-in was completed ahead of schedule and first gas was achieved on 30th December. A further three wells are planned for 2009. On Bhit, the Bhit-12 well is now onstream. On Zamzama, Phase 2 was commissioned and came onstream in December. Tie-in of the Zamzama North well is in progress with first gas anticipated in February.
Oil and Gas Pricing
The average oil price realised for 2008 was $94.3 per barrel (2007: $72.3 per barrel) with cargoes sold at an average $0.42 per barrel premium to Brent.
Average gas prices for our principal gas producing areas for 2008 were:
|
$/MCF |
2008 |
2007 |
|
Indonesia |
15.2 |
11.3 |
|
Pakistan |
3.5 |
3.0 |
The group is protected from reductions in commodity prices from the current levels by its programme of long-term hedges. These provide a floor at an average price level equivalent to $40 per barrel for approximately one third of group production (excluding production from Pakistan which is not generally sensitive to oil price fluctuations).
Hedging contracts relating to High Sulphur Fuel Oil (HSFO) which underpin the Singapore gas contracts are marked-to-market at year-end and will generate additional non-cash 2008 income of $21 million (pre-tax).
Balance Sheet Position
As a result of the continuing positive operating cash flows, the group has maintained its strong balance sheet, with year-end cash resources estimated at $320 million and an undrawn bank facility of $275 million. The net cash position at year-end is expected to be $114 million, assuming a valuation of the outstanding convertible bond of $202 million.
DEVELOPMENT ASSETS
As previously announced, 2008 saw significant progress in all of our major development projects in terms of project approvals, both at partner and government levels, gas and transportation agreements and key supplier contracts. Completion of the three projects in Indonesia and Vietnam will increase Premier's production beyond its stated target of 50,000 bopd.
Detailed development plans for all of our major projects have been under review in the light of the significant volatility in oil and gas commodity prices and the tight financing environment seen over the last six months. We have recently completed various tender processes and while raw material and supplier service costs, particularly rig rates, are generally declining, this is not yet the case in all areas. In addition, some of our contractors are seeing delays in securing their own financing requirements.
Specific updates, by project, are as follows:
1. Gajah Baru (Premier 28.67%, operator)
The tender process for the EPCI contract for the Gajah Baru platforms has been completed and the contract award is awaiting partner and BPMigas approval. The market for platform fabrication and installation in SE Asia has remained tight and these platforms will be more expensive than forecast and will take slightly longer to build than planned. However rig rates have reduced and development drilling costs have been lowered. The net effect of all these changes on total capex for the project is an estimated increase of 10-15% and a delay in the first gas date from very late in 2010 to mid-2011. This is still in advance of the contractual obligation under GSA2 with the gas buyer in Singapore. Signature of the transportation agreements which support the gas sales agreements with customers on Batam Island, Indonesia (GSA3 and GSA4) is targeted for later in January.
2. Chim Sáo (Premier 37.5%, operator)
All joint venture and government approvals for the project were achieved in late 2008 and construction work on the first wellhead platform has commenced in Vietnam under an Interim EPCI Agreement. The proposed FPSO contractor is in the process of securing funding for the provision of an FPSO for leasing to the field owners, and final execution of both the FPSO lease agreement and the EPCI contract await conclusion of this process. Premier, on behalf of the partnership group, is co-operating with the contractor to assist in identifying funding sources. However, further slippage in this process will cause deferral of first oil on the project into 2011. Indicative rig rates for the development drilling phase, based on preliminary tender enquiries, are lower than previously held estimates.
3. North Sumatra (Premier 41.67%)
The PSC for Block A in North Sumatra is being amended in line with the (new) standard PSC for Indonesia and is expected to be signed shortly. To compensate for changes in the PSC terms an amendment to the existing gas sales agreement will also be signed. The revised gas sales price will have an increased floor of $6.50/MMBtu. The net effect of these changes is neutral in net present value terms. It is expected that following the revisions to these contracts, the development project will proceed as previously advised with first gas from the Alur Rambong field in 2010 and the Alur Siwah field in 2011.
4. Frøy (Premier 50%)
The Frøy field partners have been awarded a 10-year licence extension. The field development plan which was submitted in late 2008 is still under review by the Norwegian Oil Ministry. The contractor which is providing the JUDPSO has indicated that there will be delays in obtaining the necessary financing for this production facility. Accordingly it is not expected that final project sanction will occur until later in 2009. In the meantime work will focus on seeking cost reductions and identifying third party volumes that can be developed over the Frøy facility.
EXPLORATION AND APPRAISAL ASSETS
Testing operations have been and are currently under way on our discoveries on the Qadirpur block in Pakistan and the Al Amir block in Egypt.
Pakistan
Testing of the Qadirpur Deep discovery resumed in November. The Qadirpur Deep-1 well was initially drilled in 2007 to a depth of 4,703 metres discovering gas in several zones before being suspended when higher than anticipated temperatures and pressures were encountered. The deeper zones have yielded good quality hydrocarbons flowing at 4.5 mmscfd. Results are being evaluated to consider stimulation options for enhancing the reservoir deliverability and a further deep appraisal well is expected to be drilled later this year.
Egypt
In December, the 2005 Al-Amir-1 discovery well was re-entered and sidetracked in order to re-appraise the well as a potential producer. The sidetrack drilled to a total vertical depth of 5,270 feet, confirmed and tested this payzone and has also encountered a second, deeper pay zone. The upper zone has been tested with a sustained rate of 416 bopd, 16˚ API and the lower pay zone will be tested and confirmed when the well is brought into commercial production. Development plans to bring the wells into early production have been submitted to EGPC.
In addition, following the successful Al-Amir SE-1 discovery in October, an appraisal well on Al-Amir SE has been drilled encountering two Kareem sandstones with 42ft of net pay. The well has flowed from one zone at an average rate of 5,785 bopd of approximately 40˚ API oil with 7.8 mmscfd of gas on a 64/64 inch choke. After testing is completed, the well will be used as a future producer.
Licence awards
Premier has been awarded a 70% interest and operatorship of Block 7/7b in the Norwegian APA 2008 licence round. Participation in this block is an opportunity to develop the Ula Jurassic sandstone play proven by the Moth well on Block 23/21 and the Corrie discovery on Premier-operated Block 23/22b across the UK/Norwegian median line.
Exploration programme
2008 exploration spend was approximately $75 million (pre-tax), less than planned largely due to the deferral of the Bream well into 2009. Planned spend for 2009 is around $100 million (pre-tax).
A programme of around 20 exploration and appraisal wells is planned for the period to mid-2010. The timing of additional wells in Vietnam, Indonesia, UK, Norway and Congo is dependent on rig slots and preceding third party programmes.
The current firm well schedule for 2009 is shown below.
|
2009 Firm Programme |
||||
|
Country |
Well |
Estimated Timing |
Licence Interest |
Prospect Size (Gross) |
|
Pakistan |
Bado Jabal-1 (Badhra Deep) |
1Q |
6% |
2 tcf |
|
Egypt |
Shehab-1X |
1Q |
10% |
TBC |
|
Egypt |
Exploration well 2 |
1Q |
10% |
TBC |
|
Pakistan |
Kadanwari K-19 |
2Q |
16% |
50 bcf |
|
Norway |
Grosbeak North |
2Q |
40% |
100 mmbbls |
|
Vietnam |
07/03 - Alpha |
2Q |
45% |
60 mmbbls*,† |
|
Indonesia |
Anoa-Deep |
2Q |
29% |
150 bcf |
|
Norway |
Bream |
2Q |
20% |
50 mmbbls |
|
Congo |
Frida |
3Q |
32% |
170 mmbbls |
|
Vietnam |
07/03 - Beta |
4Q |
45% |
60 mmbbls† |
|
Norway |
Greater Luno |
4Q |
30% |
150 mmbbls |
*fault compartment within large structural trend †well location subject to final approvals
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ENQUIRIES |
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|
Premier Oil plc |
Tel: 020 7730 1111 |
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Simon Lockett |
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|
Tony Durrant |
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Pelham PR |
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James Henderson |
Tel: 020 7743 6673 / 07774 444 163 |
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Gavin Davis |
Tel: 020 7743 6677 / 07910 104 660 |
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