Premier Oil PLC (LON:PMO) boss Tony Durrant says a step change in production levels, thanks to a recent North Sea acquisition and a new field start up, has delivered a leaner operating cost base and helped the company address lower oil prices.
In this morning’s interim results statement the Premier Oil chief executive also noted what he described as ‘substantial progress’ with lenders over principal terms for a new refinancing.
Durrant added: “Full year production guidance is now increased, which will drive free cash flow generation.”
Premier Oil told investors it now expects to produce between 68,000 to 73,000 barrels oil equivalent per day in 2016.
In the first half, production averaged 61,000 boepd, with ‘production efficiency’ measured at 93%, and Premier Oil highlighted recent company record production levels in excess of 95,000 boepd.
It comes after the group’s deal to acquire producing North Sea assets from E.ON and the start up of the Solan field.
Financially, Premier Oil reported a return to profitability. Profit after tax amounted to US$167.1mln, versus a US$375.2mln loss for the comparative period of 2015. Operating cash flow meanwhile was reduced at US$108.7mln, from US$513mln in the first half of last year.
Turning to its outlook, Premier Oil highlighted it was on track to achieve ‘first oil’ at the Catcher field in the North Sea in 2017 and the capital costs for the field development are down some 20% from estimates at the time of project sanctioning.
Andrew Whittock, analyst at Liberum Capital, in a note said: “Strong H1 production, the acquired E.ON assets and the contribution from Solan mean that Premier expects production for 2016 to beat earlier guidance.
“This, along with cost savings, positions it to focus on the balance sheet. Discussions with banks continue to progress well. Production should increase as Solan, Catcher and the Falklands contribute.”
Liberum repeated its ‘buy’ recommendation following this morning’s results statement and with a price target of 136p it sees some 75% upside to Premier Oil’s current price of 77.25p.