Shares in midcap Premier Oil slipped this morning as the company announced that it had hit its reduced production guidance of 65,000 to 70,000 barrels of oil per day.
Earlier this year, the exploratory firm reduced its output guidance from 70,000 to 75,000 barrels a day after difficulties at one of its flagship fields.
However, in a trading update for the first half of the year, the FTSE 250 company said it had averaged 67,300 barrels per day thus far this year.
Shares dropped over four per cent on the back of the announcement, with the company trading at 43.42p.
When Premier completes the acquisition of two fields from BP in September, it will add 17,000 more barrels to its daily output.
At the beginning of the month, the company announced that its creditors had approved the purchases, which will now cost a revised $210m.
The oil firm said that revenue for the first half would be around $530m as a result of the decline in commodity prices, although it said it had offset damage to its finances through its price hedging programme.
For the second half of the year, Premier has hedged 20 per cent of its output at a price of $56 per barrel.
Worldwide standard Brent crude is currently trading at a little over $43 per barrel.
However, it said that it would write off $200m over fields off the Falkland Islands which will not be developed under its Sea Lion project.
Premier’s net debt stands at $2bn, which is flat from the beginning of the year. The firm said that it expected to be cash flow positive in 2020 on current estimates.
Stuart Lamont of Brewin Dolphin said that this was a “decent result” in light of the pandemic, which has sent oil prices crashing.
Chief executive Tony Durrant said that all the signs showed that Premier was set to benefit from the slowly improving oil price.
“The continued underlying performance of our core assets along with the decisive action we have taken to reduce our expenditure during the first half has resulted in our net debt remaining broadly flat despite significantly weaker commodity prices during the period”, he said.
“This, together with the expected agreement on the amendments to our credit facilities and the completion of the value-accretive BP acquisitions, positions us well to benefit from a recovering oil price.”