Premier Oil FY output slips, reaffirms medium-term target of 50,000 boepd UPDATE

Premier Oil FY output slips, reaffirms medium-term target of 50,000 boepd UPDATE

	Published : Thu, 25 Jan 2007 11:12 By : Agencies Print this Story

(Adds interview with CEO, FD)

LONDON (AFX) - Premier Oil PLC said average oil and gas production slipped in 2006 but assured that it remains on course to achieve its medium-term target of 50,000 barrels of oil equivalent per day.

Annual output averaged at 33,000 boepd, below the 33,300 boepd it pumped in 2005, due to the disappointing performance of the Chinguetti oil field in Mauritania, which was bogged down by technical and mechanical problems.

Output at year-end, though managing to improve 4 pct to 34,400 boepd from 33,100 boepd due to contributions from its oil fields in Pakistan and Indonesia, still fell short of its target, Premier said in a trading statement.

'We were hoping to achieve a 10 pct growth at year-end, but we only got 4 pct,' chief executive Simon Lockett told AFX News in a phone interview.

Premier owns 8 pct of Chinguetti which flowed over 70,000 barrels per day when it came on stream early last year.

The field's output, however, has fallen steadily since then due to mechanical issues. Australia's Woodside Petroleum Ltd is the operator and 48 pct shareholder of the Mauritanian field.

These problems persist despite effort to fix them, cutting Chinguetti's volumes further to around 20,000 barrels per day currently, said finance director Tony Durrant.

Production should increase once the Chinguetti-18 well comes on stream next month, adding between 5,000 and 10,000 barrels per day to the field's gross output, he told AFX News.

Despite the setbacks at Chinguetti, Premier is confident it could restore volume growth in 2007, thanks to acquisitions and increased volumes in Pakistan.

Premier exercised its pre-emptive rights over Hess's stake in the Scott project in the North Sea, raising its 1.8 pct interest in the field to 22 pct. It paid 60 mln usd for the deal, which it hopes to complete in the first half.

The Scott deal will add over 4,000 boepd to Premier's overall output, said Lockett.

Total production should be 'heading towards 40,000 boepd' once the additional volumes from Chinguetti and Pakistan are taken into account, he said.

Premier is to accelerate its drilling programme for 2007, which will involve 17 wells.

Capital spending for the year will be around 60-80 mln usd, said Durrant, adding the group has enough money to fund the projects.

It has cash of around 30 mln usd and 275 mln usd of unused bank facilities, he added.

Looking ahead, Premier assured that major projects are progressing to build output to over 50,000 boepd in the medium term.

Key projects that will drive volumes by end-2010 include Froy in Norway, Dua and Blackbird in Vietnam, Ratna in India and North Sumatra Block A and Natuna Block A in Indonesia, it said.

Apart from organic growth, acquisitions will also help build output. Deals in the last 12 months have added reserves of around 60 mln boe at a cost of less than 2 usd per barrel, it added.

Despite the weak volumes in 2006, annual revenues will likely remain robust amid strong oil and gas prices, added Premier, which noted that it sold its oil at around 61.34 usd a barrel in 2006, up from 48.38 usd previously.

Its key gas producing areas Indonesia and Pakistan also realised higher prices for its output to around 9.4 usd per thousand cubic feet (mcf) in 2006 from 7.9 usd in 2005, and to 3.4 usd per mcf from 2.2 usd, respectively.

About two-thirds of Premier's output consisted of gas, while the remaining one-third is oil.

Premier said the bottom line for 2006 will be affected by two 'significant non-cash items,' which include the adjustment in its commodity hedges to reflect the volatility in prices, and payment in the employees asset and equity plan.

It booked a hedging loss of around 15 mln usd in the first half, which will be fully offset by a hedging gain of the same amount in in the second half, Durrant said during the phone interview.

The payment for the staff equity plan, meanwhile, will be in 'single-digit million dollars,' he said.

At 9.15 am, Premier Oil shares were up 1.3 pct at 1,165 pence.