Normally when companies say they are ‘well-advanced’ in financing, development or exploration terms, investors should take the claims with a pinch of salt. However, Premier Oil (PMO) posted higher-than-expected production since the start of the year at lower costs, with guidance for 2019 increasing to 75,000-80,000 barrels of oil equivalent per day (boepd), up from 75,000 boepd.
This growth came from the UK assets, with Vietnam and Indonesia production falling 23 per cent and 15 per cent, respectively, year on year in the period.
The explorer-producer has also received the green light for two satellite fields to the Catcher asset, expected by the end of June, as are survey results from the 30 per cent-owned Block 30. The Tolmount East appraisal well is set for July. By the end of the year there should be first gas from three fields in Indonesia. The volume of development news also extends into next year.
As a result of the higher cash flow in the first months of 2019, the company said it was likely to pay off “the upper end” of $250m-$350m from its current debt pile of $2.25bn by the end of the year, cutting the leverage ratio from 2.7 to 2.3. Last year the company paid off $393m.
Despite this focus on shrinking debt, management has floated more M&A in the North Sea. At the end of 2018, the company had $214.4m in cash and undrawn facilities of $355.2m. Premier recognises more capital expenditure requirements might not be ideal, saying new assets would “have to be measured against and compete for capital with the existing organic opportunities within our portfolio”.
