Premier Oil Sees Lower Production for 2010

UK-based oil and gas explorer Premier Oil sees lower average production in 2010 as it saw increased maintenance activity in the North Sea, particularly during the second half of the year.

Estimated average production for the full year 2010 was 42.8 thousand barrels of oil equivalent per day (kboepd), compared to 44.2 kboepd in 2009, the company said as part of its trading statement.

Premier Oil expects group production for the full year 2011 in the range of 45-50 kboepd.

In December, several maintenance-related issues impacted UK production negatively. The company decided to shut down the Balmoral facility in mid-December and production is currently expected to resume on 1 February.

Mean while, Scott field oil production was constrained during December as the gas export route was not operational due to shut-down valve issues and at Wytch Farm, the field was shut-down due to a leak on an in-field flowline discovered in mid-November.

Premier Oil said 2010 production for the UK averaged 15.6 kboepd.

The company, which holds interests primarily in Asia, West Africa, and the North Sea, has explored for and produced oil and natural gas in the political hotspots of the Congo, Indonesia, Myanmar, and Pakistan.

Gas production in Indonesia exceeded expectations and there was increasingly strong demand from Singapore. Block A's sales for the year averaged a record 160 billion British thermal units per day, a share of approximately 45 percent of deliveries, against a contractual share of 37 percent, under the existing Singapore gas sales contract.

Gas demand in Pakistan also remained strong and 2010 production was in line with expectations. In recent weeks, the company experienced record production levels of 16.3 kboepd as it completed ongoing front-end compression projects and the drilling of further exploration and development wells on the Kadanwari field.

The company benefited from higher oil prices as the average Brent oil price for 2010 was US$79.5 per barrel (/bbl) versus US$61.7/bbl last year. Premier's oil production was selling at an average US$0.20/bbl premium to Brent.

In addition, Premier is expected to record a gain of US$35 million with respect to non-cash mark-to-market adjustments.

Following the completion of a refinancing of the majority of Premier's bank debt in November, Premier has increased liquidity, with year-end cash resources and undrawn bank facilities estimated at US$1.2 billion. The net debt position at year-end is expected to be around US$410 million, assuming a valuation of the outstanding convertible bond of US$220 million.

Looking ahead, progress on Premier's three principal development assets continues to be in line with expectations and project schedules. First oil and gas from these projects is scheduled for 2011 or early 2012 and will help Premier achieving its stated target of producing 75,000 boepd in 2012.

The company has development projects in Vietnam, Indonesia and UK.

Planned spend on production and development projects for 2011 is around US$525 million though this may increase as new projects are sanctioned, the company said.

Premier Oil will announce its 2010 preliminary results on March 24 2011.

Shares of Premier Oil ended Wednesday's trading at 2,010.93 pence on the London Stock Exchange.