Yahoo Finance Premier Oil ready to cash in as North Sea project hits full pelt
Premier Oil has brought its cornerstone North Sea project into full operation this week in move that should provide a major boost for the oil producer’s cash flows.
The eagerly awaited Catcher project reached its peak production rate of 60,000 barrels of oil a day in recent days, six months after producing its first oil in December.
The project is a major milestone for Premier, which is banking on Catcher to kick-start its cash flows and help pay off hefty debts that it incurred after a financial restructuring in 2016.
Catcher’s oil flows raised Premier’s daily production rate to 90,000 barrels of oil, which should drag its average rate for the first half of the year to its target range of between 80,000 to 85,000 barrels a day.
Catcher was expected to reach its full production plateau at the end of April, but Premier boss Tony Durrant said the two-week delay, due to software issues, would not prove material across the year as a whole.
The extra production should begin to “throw off extra cash” in the coming months to help pay back its debt. Premier's net debt fell from $2.72bn at the end of 2017 to $2.65bn at the end of the first quarter of this year.
“The improved commodity price environment puts us in a strong position to generate significant free cash flow in the second half of the year,” Mr Durrant said.
Oil prices have recently hit four-year highs on the back of global supply worries, with the European benchmark, Brent crude, topping $78 a barrel.
“We are on track to deliver our plan of material debt reduction in 2018 and 2019 with selective investment in our future growth projects from 2020, once balance sheet strength has been restored.”
Premier’s future is set to include a greater presence in Mexico after its billion-barrel discovery at the Zama field last year.
In addition, the oil group has snapped up another clutch of licence areas to the south-west of Zama that Mr Durrant described as “very exciting” due to the similar geological structure of the seabed.
A full appraisal of the Zama licence is due to begin within weeks and the company is expected to seek partners for the development work.
“This could point to a longer-term future in Mexico than we might have thought,” said Mr Durrant. “But nothing is decided just yet.”
