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Premier Oil sees production at top end of expectations

"We now expect production for the year to be better than we originally anticipated,” said Tony Durrant, Premier Oil chief executive.

Premier Oil offshore platform
Solan's first well produced at 14,000 bopd, while the acquired assets showed a rate of 17,000 boepd.

Premier Oil Plc (LON:PMO) is now expecting oil production for 2016 to be at the top end of expectations thanks to its recent North Sea acquisitions and the start-up of the Solan field.

Solan began producing in April and in a trading update, covering four months, Premier Oil said the field’s first well had seen rates of up to 14,000 barrels of oil per day.

Assets acquired from E.ON in April showed a production rate of 17,000 boepd, the company added.

Group production, up to April 30, was described by the company as ‘strong’ at an average of 57,300 barrels oil equivalent per day. And, Premier Oil said it was on track to deliver at the top end of its guidance for 65,000 to 70,000 boepd for the whole of 2016.

"Strong production performance from our existing assets, together with the contribution from the E.ON assets and the Solan field means that we now expect production for the year to be better than we originally anticipated,” said Tony Durrant, Premier Oil chief executive.

“This, along with continued cost savings, positions us well to maximise our current cash flow as we remain focused on managing our balance sheet in the current oil price environment."

Premier Oil told investors it had US$750mln of cash and undrawn bank facilities, and noted that talks were ongoing with lenders regarding financial covenant waivers if they’re required.

Operating costs for 2016 are due to be between 10% and 20% lower than last year, it added.

Aside from Solan, the group also highlighted progress with the Catcher field, its other big ticket growth project.

Catcher is said to be on schedule and below budget, and specifically Premier Oil said that capital costs are now anticipated to be some 15% than original estimates due to lower industry cost amid the downturn.

Premier Oil also gave a brief update on the Sea Lion development, in the Falklands, where an 18-month front end engineering design (FEED) phase began in January.

The company highlighted that the draft field development plan has been submitted to the Falkland Islands Government and detailed discussions are progressing well.

It still plans to bring in a new partner to support the development, and it also expects to see additional costs savings in the eventual development project - as a result of weaker industry demand for production facilities, well construction and offtake services – and as such it expects the breakeven oil price for Sea Lion to reduce.

Timing for a final investment decision for Sea Lion remains dependent upon the “evolution of project economics” and the oil price outlook, Premier Oil added.

Quick facts: Premier Oil PLC

Price: 22.3381 GBX

LSE:PMO
Market: LSE
Market Cap: £206.75 m
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