Premier Oil's key North Sea oilfield is on track to start production next month

 
Courtney Goldsmith
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Premier's key North Sea project is on track (Source: Getty)

Premier Oil's flagship North Sea oilfield is poised to begin production next month, which is set to help the company pay down its hefty debt pile.

In a trading update, Premier said net debt had increased to $2.8bn (£2.1bn) at the end of September from $2.7bn at the end of June. The Catcher oilfield in the North Sea is on schedule to start production in December.

"Catcher remains critical to deleveraging through full-year 2018 and accounts for around 25 per cent of our production forecast," said Nathan Piper, an analyst at RBC Capital Markets.

Chief executive Tony Durrant said: "The excellent progress on the Catcher project, combined with the recovering oil price, will accelerate debt reduction through 2018. The agreement to export Tuna gas to Vietnam, signed last week, adds to Premier's significant backlog of future growth opportunities."

"Through strong production, cost control and disposal activity, cash generation is ahead of plan," he said.

Read more: CML pumps £135m into infrastructure for Premier Oil's North Sea field

The firm also cut its 2017 capital expenditure programme for the third time to between $300m and $310m from previous guidance of $325m.

Production year-to-date averaged 76,600 barrels of oil equivalent per day (boepd), and Premier said it remains on track to hit its raised target of between 75,000 and 80,000 boepd for the full year.

"Whilst on current oil prices nothing can be taken for granted, Premier looks in pretty good nick with a good spread of assets in diversified areas and stages of development and could even start paying back a bit of debt next year," said Malcolm Graham-Wood, analyst at Hydrocarbon Capital.

David Round, analyst at BMO Capital Markets said: "Another robust statement from Premier... We are neutral on the shares but Premier continues to add value and benefits more than other names from higher commodity prices."

Despite the glowing reviews from analysts, shares in Premier dropped 4.27 per cent to 67.25p in late morning trading.

Read more: Ramped up production allows Premier Oil to pay down debt and lift forecasts

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