Premier Oil PLC (LON:PMO) has unveiled more than US$800mln worth of North Sea acquisitions, with BP and Dana Petroleum respectively, at the same time as it announced production at the upper end of full year guidance.
It has agreed a deal with BP to acquire the Andrew Area and Shearwater assets for US$625mln, and, separately, in a deal with Dana, it has picked up an extra 25% in its Tolmount field development project (due for first production later this year).
The BP assets account for some 23,000 barrels of oil equivalent production per day, and, as such look set to take Premier close to, if not over, the 100,000 boepd threshold.
In a separate trading update today Premier revealed that it produced at an average rate of 78,400 boepd in 2019, which is marked at the upper end of the company’s guidance. The company noted ‘high operating efficiency’ and high performance at the Catcher field in particular.
The Premier-operated Tolmount project, which will now 75% owned thanks to the Dana deal, remains on-track for first-gas before year end. It was anticipated that the field would add 20,000 to 25,000 boepd of net production, though that figure should now rise to 30,000 to 32,500 boepd.
Chief executive Tony Durrant, in a statement, noted there remained “material upside” at Tolmount.
At the same time the Premier boss described the BP deal as “materially value accretive” and as being in-line with the company’s stated strategy of investing in cash generative assets in the UK North Sea.
“We look forward to realising the significant long-term potential of the Andrew and Shearwater assets through production optimisation, incremental developments and field life extension projects,” Durrant said.
He added: “The cash flow generated from the acquired assets will also accelerate the deleveraging of Premier's balance sheet."
Elsewhere in the portfolio, Premier has also agreed a new farm-out partnership deal in the Falklands where Navitas Petroleum will acquire a 30% stake in the Sea Lion field development project, lowering Premier’s burden to 40% - and thus, it takes the asset significantly closer to project sanction.
2019 production of 78,400 boepd comes at the upper end of guidance, which was previously pitched at 75,000 to 80,000 boepd.
Before any contribution from the newly acquired assets, Premier sets its 2020 production guidance at 70,000 to 75,000 boepd.
UK North Sea assets account for some 54,200 boepd, up around 16% from the preceding year supported by the ramp up of the Catcher field which averaged 33,600 boepd gross in 2019.
Tolmount is said to be on schedule and tracking below budget. First gas is targeted in late 2020 and it is set to provide substantial further production growth (pre-acquisition it was forecast to yield 20,000 to 25,000 boepd).
In October, an extension to the project was achieved by a discovery well at the Tolmount East exploration target. Presently, the Premier-led team is assessing potential developments that would connect to the new Tolmount infrastructure, optimised plans are due in the first half of 2020 with a possible sanction decision following in the second half.
In early December, ‘first gas’ was confirmed at the BIG-P field development in the Natuna Sea Block A area offshore Indonesia. Premier holds a 28.67% interest in the project which comprises the Bison, Iguana and Gajah Puteri fields.
As Premier divests a portion of its stake in the Sea Lion field, in the Falklands, the company said it will now be fully funded for its participation in the project’s Phase 1 development, and, thus to Falklands’ ‘first oil’.
Premier’s 25% in the large Zama oil discovery, offshore Mexico, is the subject of a formal sales process, and, it is presently said to be in talks with potential buyers.
Debt and spending
Premier note that its debt pile stood at US$1.99bn, after it repaid more than US$330mln in 2019.
The company said that in 2019 it spent less than it budgeted for development, exploration and abandonment – with expenditure marked at around US$300mln rather than US$340mln – because it released contingencies related to BIG-P, in Indonesia, as well as savings at Tolmount and some deferrals into 2020.
This year, Premier expects to spend US$320mln on production and development (mainly in the North Sea) and it budgets for US$90mln of exploration and US$30mln of abandonment.
It noted that it continues to benefit from UK corporation tax loss and allowances, with some US$4.2bn carried forward into 2020.