Premier Oil approves key project as output slows

Funding For Scotland's Decommissioning Fund Announced
Premier Oil share price slips on trading update (Source: Getty)

Premier Oil said today that it had approved a key North Sea gas project and it expected production to begin in 2020.

It said its Tolmount gas project in the North Sea had been approved by its board with formal sanction by its partners in the project expected this quarter.

Read more: Premier Oil ramps up oil production to pay off £2bn debt

Premier said that production had fallen in the first six months of the year from the equivalent period last year to 76.1 kboepd (thousand barrels per day) which it blamed on asset sales and natural field decline.

It maintained its full-year guidance of 80-85 kboepd subject to the completion of a timetable of announced disposals.

It said that its Catcher field in the North Sea was now producing over 60 kboepd and that recent group production had hit 90 kboepd.

Premier’s share price fell sharply this morning following the announcement with its shares trading down 4.27 per cent at the time of writing.

Read more: Premier Oil's shares bump higher as production reaches a record level

Mike van Dulken head of research at Accendo said the share price fall probably relates to “scepticism” from investors “about the current run rate and whether they can keep ramping up to deliver on full-year guidance”.

“The sequential increase in production, albeit a healthy five per cent would imply you need something stonking in the second half if you are to meet even the lower end of guidance,” he said.

Chief executive Tony Durrant said: "Catcher delivering stable plateau production is an important milestone for Premier. This, coupled with the ongoing strong performance from our underlying portfolio and our continued focus on cost control, will result in significant free cash flow generation and material debt reduction in the second half.”

Net debt reduced from $2.72bn (£2.06bn) at the end of 2017 to $2.65bn at period end.

Premier estimates full-year debt reduction at between $300m and $400m at current oil prices.

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