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Mixed bag for Premier Oil

Fiona Bond
19.11.09 15:41


It was a game of two halves for upstream oil and gas company Premier Oil (PMO) which failed to hit its yearly production target, but said it was on track to meet its medium-term output levels.

The FTSE 250 company expects to average 43,000-45,000 barrels of oil equivalent per day (boepd) this year - below its August forecast of 46,000 boepd.

Premier's output was knocked by the temporary loss of production at its Kakap field and additional maintenance downtime across its UK producing fields.

Indonesia-based Kakap produced just 2,400 boepd, down from the 3,800 boepd recorded in 2008.

The UK's Shelley field was also performing at the lower end of expectations with an initial rate of 11,000 boepd.

Looking ahead, however, the oil and gas company said it was well-positioned to achieve 75,000 boepd through significant production increased in 2011 and 2012, helped along considerably by recent acquisitions.

Premier beefed up its portfolio with the addition of Oilexco in the North Sea and Delek in Vietnam.

The company's next exploration focus will be on Ca Rong Vang, with drilling expected imminently.

Projects in North Sumatra and Huntingdon are on line to start first production in 2012, with five additional projects lined up for pre-development work next year, the company added.

Over the next 18 months Premier will drill a total of four wells in Asia, four wells in Norway and embark on a number of wells on the UK acreage acquired this year with the hope of securing a potential 250 million barrels of oil.

Simon Lockett, chief executive, commented: "I am pleased that our North Sea and Asian business units are making excellent progress.

We are increasingly confident of the 75,000 bopd medium-term production target which we set ourselves earlier this year."

In an effort to improve the balance sheet, Premier has initiated a disposal programme of assets with low materiality.

energysaver, commenting on the news on the Interactive Investor Premier Oil discussion board remained upbeat despite the drop in production levels: "Slightly disappointing statement - that the production forecast is a little lower than expected due to temporary hitches.

"But still an excellent company with great finances and has impressive production and reserves in stable environments. Good exploration prospects too."

The company's shares were down 10p to 1,161p following the news.