Premier Oil cuts back on spending, beats production target

(Adds details, background, CEO, analyst comment, share price)

Nov 12 (Reuters) - Premier Oil (LSE: PMO.L - news) has cut full-year capital expenditure as the oil producer deferred some project development and exploration spending into 2016, it said on Thursday.

Like its peers, Premier Oil is having to reduce spending to cope with a halving in oil prices since a peak in June last year that has eaten into revenues.

The group now expects to spend $1.05 billion this year on developing projects and exploration work, nearly $100 million lower than previously expected. It (Other OTC: ITGL - news) will move into 2016 some spending on projects such as its Sea Lion field in the Falkland Islands.

Next (Other OTC: NXGPF - news) year, its budget is estimated at $650 million, 38 percent lower than this year mainly due to project completions, Premier (NasdaqGS: PINC - news) said.

The energy company, whose operations stretch from Indonesia to the Falklands, said oil production so far this year had averaged 57,500 barrels per day (bpd), ahead of full-year guidance of 55,000 bpd, which it left unchanged.

Analysts have been keeping a close eye on the start-up of Premier Oil's Solan project in the North Sea which will add cash flow to the company's coffers. Chief Executive Tony Durrant told Reuters first oil would flow from the field just before Christmas.

Durrant also said he was in a good position to acquire further assets in the North Sea as many fields remained on sale in this mature basin.

"The market really is moving in our favour. We are one of the obvious acquirers in the UK, there's lots to look at, so we can afford to be quite rigorous with our criteria," he said.

In the context of weak oil prices, Premier Oil said it had reduced costs by over 25 percent compared with last year. Further savings of 5-10 percent could be made next year, it said.

"Its high leverage to a sustained weak oil price means we still struggle to see a compelling valuation argument," David Round, analyst at BMO Capital Markets, said. He rates the stock as "underperform."

Shares (Berlin: DI6.BE - news) in Premier Oil were trading down 1.5 percent at 0929 GMT. (Reporting by Karolin Schaps; Editing by Mark Potter and Jane Merriman)