25th Jan 2007 07:01
Premier Oil PLC25 January 2007 PRESS RELEASE PREMIER OIL PLC ("Premier" or "the Company") Trading Update and Announcement of Acquisitions 25th January 2007 Premier today provides an operational and trading update ahead of its 2006 FinalResults, which will be announced on Thursday 22 March 2007. HIGHLIGHTS Corporate Activity • Acquisition of a further 25% net share in North Sumatra Block A PSC, onshore Indonesia for $36 million;• Exercise of the right to pre-empt Hess's sale of its interest in part of the UK Scott field for $60 million at less than $5 per barrel;• New licences acquired in Indonesia and Vietnam. Awaiting announcement of results of licensing rounds in UK and Norway;• In Norway, Premier Oil has pre-qualified as an operator on the Norwegian Continental Shelf. Exploration Update • 2006 success with Dua and Blackbird in Vietnam and three discoveries in Indonesia;• Programme of up to 17 wells planned for 2007 of which 7 are 'high impact", heavily weighted towards 1H 2007.• Current drilling activity: - Masimpur-3 (India) spudded 21st January; - Ibu Lembu (Indonesia) expected to spud imminently; - Espinafre (Guinea Bissau) expected to spud at the end of January. Eirozes to be spudded following the completion of Espinafre; - Peveril (UK) expected spud date 17th February.• Consistent with our policy of capital discipline in exploration the following farm-out transactions, on attractive terms, are announced: - A third party will earn an 8% interest in Premier's assets in Guinea Bissau by contributing on a two for one basis to the forthcoming exploration programme; - Farm out of half of Premier's 42.5% interest in the SC-43 licence in the Ragay Gulf area of the Philippines in return for a full carry on the forthcoming well. - Planning focus for 2008 includes a high impact multi-well campaign in Vietnam (Blocks 12E/W & 7&8/97) and drilling in Congo (Block Marine IX). Development Assets • Major development projects progressing as planned to build Premier's production beyond 50,000 boepd in the medium-term. Major projects expected onstream by end-2010 include Froy (Norway), Dua & Blackbird (Vietnam), Ratna (India), North Sumatra Block A and Natuna Block A (Indonesia).• Following successful completion of the Blackbird well and sidetrack, pre-development planning phase has commenced.• Development approval obtained for Bhit Phase-2 including additional gas sales and the development of the Badhra gas field in Pakistan; Current Trading Performance • Year end production rates 4% higher than the same period in 2005 at 34.4 kboepd (four week average);• Strong oil and gas prices realised in second half;• Maintained balance sheet strength with net cash of around $30 million. Simon Lockett, Chief Executive, commented: "2006 was an excellent year for Premier with good progress on our portfolio ofdevelopment projects and highly successful exploration programmes in Indonesiaand Vietnam. We enter 2007 with another phase of high impact explorationactivity and an intense phase of development planning on existing projects. Intotal, acquisitions in the last twelve months have added reserves of around 60million barrels of oil equivalent at a cost of less than $2 per barrel" ENQUIRIES:Premier Oil plc Tel: 020 7730 1111Simon LockettTony Durrant Pelham PRJames Henderson Tel: 020 7743 6673Gavin Davis Tel: 020 7743 6677 25 January 2007 CORPORATE ACTIVITY North Sumatra Acquisition Premier announces the acquisition, together with its partner Medco, ofConocoPhillips' 50% (operated) working equity interest in North Sumatra Block APSC, onshore Indonesia, for a total of $72 million ($36 million net to Premier). Premier and Medco each hold a half share of the purchased company which willsubsequently be converted into individually held (25%) working interests in thePSC. This conversion is subject to Indonesian Government approvals. Governmentapprovals are not required for the initial sale of shares by ConocoPhillips toPremier and Medco. This acquisition follows on from the joint purchase of a 50% interest in NorthSumatra Block A from ExxonMobil, together with Medco and Japex, announced on26th April 2006. On completion of the related transaction, the interests heldin the PSC will be as follows: Premier 41.67%Medco (Operator) 41.67%Japex 16.67% The block contains undeveloped discoveries on the Alur Siwah, Alur Rambong, andJulu Rayeu fields certified by DeGolyer & MacNaughton as holding over 650 bcfgross of proved and probable reserves. There is a ready market for gas sales inthe region and first gas is anticipated in 2010. There is substantial upside on the block including around 20 identifiedexploration prospects with total prognosed unrisked reserves of 1.5 tcf gross,EOR opportunities through redevelopment of old abandoned oil fields, as well asthe possible development of the giant Kuala Langsa gas field. UK Acquisition Premier has exercised its right to pre-empt Hess' sale of its interest in partof the Scott field in the UK North Sea. Subject to final discussions with thevendor and obtaining customary consents, Premier will increase its current 1.79%holding to 21.83% at a cost of US$60.1 million. Based on Operator estimates,the acquisition will increase Premier's net share of Scott 2P booked reservesfrom 1.0 million boe to 13.7 million boe and increase forecast production in2007 by more than 4000 boepd. This acquisition builds on Premier's strategicobjective of increasing equities in producing assets which it already owns, hasa better understanding of the subsurface risks and where Premier can deliverupside value. New Acreage Vietnam Premier has exercised its option to acquire a 45% working interest in, andoperatorship of, Block 7&8/97, offshore Vietnam. Block 7&8/97 is located in theNam Con Son Basin, immediately to the south east of Block 12 which is operatedby Premier and where the Dua and Blackbird oil discoveries have recently beenannounced. Premier has already worked with its partner, Vietnam AmericanExploration Company ("VAMEX"), to acquire, process and interpret a comprehensivegrid of 2D marine seismic data across Block 7&8/97 and this data hasdemonstrated the existence of the same play elements which create petroleumprospectivity in Block 12. The seismic interpretation has identified numerouslarge structures suitable for high impact well locations. Indonesia Premier has been awarded an onshore exploration licence on Buton Island,Sulawesi, by the Indonesian Government and will hold a 30% non-operated equityinterest. The block covers 3,396 km2 and lies on the south-eastern side ofButon island. Oil seeps are prolific on the island and large volumes of oilhave been generated as evidenced by the commercial asphalt mining operationsthat have been ongoing for many years. The committed work programme includes265km of 2D seismic designed to confirm at depth the structures mapped atsurface, and one exploration well. Five leads have been identified on the blockto date. EXPLORATION UPDATE Our 2006 programme included the successful Dua and Blackbird wells in Vietnamand three discoveries in Indonesia. A programme of up to 17 wells is plannedfor 2007 of which 7 are 'high impact', heavily weighted towards 1H 2007. Anupdated drilling chart is available at www.premier-oil.com. Drilling Activity Pakistan The Qadirpur Deep well has been drilled to a depth of 4,681 metres. The wellwas suspended when higher than anticipated temperatures were encountered.Specialist equipment has now been ordered and testing on the well will beresumed later in 2007. India The Masimpur-3 well spudded on 21st January. This well is targeting a 2trillion cubic feet gas prospect and is expected to take between 90 and 150 daysto complete. Premier holds a 14.75% equity share and is the operator. Premieris planning to drill the follow up prospects Hailakandi and Kanchanpur aftercompletion of operations on Masimpur-3. Indonesia The Ibu Lembu well is expected to spud imminently. Ibu Lembu is the secondprospect to be drilled by Premier on the Lembu Trend. In 2006, the firstPremier operated well to be drilled on the trend, Lembu-Peteng, flowed oil at astabilised rate of 610 bpd, and two gas zones yielded 8.5 mmscf/d of gas plus580 bpd of condensate. Guinea Bissau The Global Santa Fe rig Baltic is on contract to Premier and is currently on towfrom Nigeria to Guinea Bissau. It is expected that the first well of a two wellprogramme, Espinafre, will be spudded by the end of January. The second well,Eirozes, will be spudded following the completion of operations on Espinafre.The prospects are anticipated to contain 70 mmbbls and 190 mmbbls respectively. Consistent with our policy of maintaining capital discipline in explorationwhere terms are attractive, a third party, subject to final documentation, willearn an 8% interest from Premier's assets in Guinea Bissau (currently 42% inEsperanca, and 37% in Sinapa) by contributing on a two for one basis to theforthcoming programme. UK The Peveril well is expected to spud in mid-February. Peveril is located 15km tothe south of the Fife field (Premier 15%) and is close to existinginfrastructure. Premier holds a 30% share in this 40 mmbbl prospect and will becarried for the cost of the well. Philippines Premier is farming out half of its 42.5% interest in the SC-43 licence in theRagay Gulf area of the Philippines. Subject to completion of documentation andgovernment approvals, Premier's remaining 21.25% interest in the Monte Cristowell will be carried by the farminee. Premier expects the well to be drilled inQ3 2007. 2008 Programme Plans are progressing for our 2008 programme which will include a high impactmulti-well campaign on Block 12 E/W and 7&8/97 in Vietnam and drilling the highpotential Frida prospect on Congo Marine IX Block. DEVELOPMENT ASSETS Programme Update Significant progress on all our development projects gives us increasingconfidence that Premier will exceed its stated medium term production target of50,000 boepd. Major projects expected on-stream by end-2010 include Froy(Norway), Dua and Blackbird (Vietnam), Ratna (India), North Sumatra Block A andNatuna Block A (Indonesia). Pakistan Premier announces development approval for Bhit Phase-2 including thedevelopment of the Badhra gas field in Pakistan. Bhit Phase-2 is scheduled forcompletion in the third quarter of 2007 and contracted gas volumes will risefrom the currently contracted 270 million to 300 million standard cubic feet ofgas per day (Premier's share increasing from 5,476 to 6,084 barrels of oilequivalent per day). The gas will be sold to Sui Southern Gas Company Limited.Total capital costs for the project are estimated at US$43 million (Premiershare US$5.2 million). The Bhit Phase-2 development represents continued accelerated commercialisationof additional gas reserves. The current combined field reserves for Bhit andBadhra are now estimated at 1.5 trillion cubic feet of gas (gross). Additionalgas commercialisation projects in Premier's other fields in Pakistan, Zamzama,Qadirpur and Kadanwari, are being actively pursued. Vietnam A sidetrack has been drilled from the previously announced Blackbird discoverywell (12E CS-1X) on Block 12E. Cores and wireline logs acquired in thereservoir sandstones have confirmed expectations of the extent of thehydrocarbon interval and provided confidence for the development team to moverapidly into the project planning phase. Following evaluation of the sidetrackthe well will be plugged and abandoned as planned. India All outstanding issues have been resolved in discussions with partners ONGC(40%) and Essar Oil (50%) regarding the future development of the Ratna offshoreoilfields (Premier 10% carried). Working in conjunction with the Ministry ofPetroleum, formal signature of the PSC is expected shortly. Mauritania The Chinguetti-18 development well located in the southern part of theChinguetti oil and gas field in PSC B has been drilled to a total depth ofapproximately 2,883 metres and is scheduled for completion in mid-February. Well results are in line with expectations, with an approximate 213 metres grossoil column (35 metres net) in true vertical depth (TVD) terms, in good qualityreservoir sands which appear well placed to access pressure support from theChinguetti-8 (sidetrack 1) water injection well. CURRENT TRADING PERFORMANCE Strong gas demand and reliable production performance from our gas fields inPakistan and Indonesia contributed to a year-end production rate of 34.4 kboepd(four week average) compared to 33.1 kboepd for the equivalent period last year.This 4% increase year-on-year fell short of our target increase largely as aresult of the well-publicised disappointing performance from the Chinguettifield in Mauritania (Premier share 8.12%). Estimated average production for theCompany for the full year 2006 was 33.0 kboepd (2005 : 33.3 kboepd). Revenues in the second half of 2006 continued to benefit from a strong oil andgas pricing environment. Average realised crude oil price for 2006 was $61.34per barrel (2005:$48.38 /bbl). Average gas prices for our principal gasproducing areas for 2006 were: US$/MCF 2006 2005 Indonesia $9.4 $7.9 Pakistan $3.4 $2.2 As a result of the continuing positive operating cash flows, the Group hasmaintained its strong balance sheet, with year-end net cash position expected tobe around $30 million. The Group's income statement for the year will be impacted, inter alia, by twosignificant non-cash items. Firstly, as a result of the somewhat lowercommodity prices at year-end, relative to the position at 30 June 2006, theCompany will record a positive mark-to-market adjustment in respect of existingcommodity hedges, which will substantially offset the corresponding lossrecorded in the first half of 2006. Secondly, as a direct result of the strongshare price performance of the Group over the three year period from 1 January2004 to 31 December 2006 a provision will be made for payment in February 2007under the Company's existing employee AEP (Asset and Equity Plan) and a portionof future AEP payments. Details of the method by which such payments arecalculated (which are limited to a cap of 21/2% of market value growth) wereprovided in the Remuneration Report of the Company's 2005 Annual Report. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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