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Pre-tax profits fall at Premier Oil despite decent operational performance
5th Mar 2020 07:41
(Sharecast News) - Premier Oil reported production of 78,400 barrels of oil equivalent per day in its full-year results on Thursday, which was at the upper end of its guidance.
The FTSE 250 company said its 2020 guidance was for between 70,000 and 75,000 barrels of oil equivalent per day, before any contribution from its announced UK acquisitions.
It said its profit after tax for the year ended 31 December rose to $164m from $133m, while its free cash flow improved to $327m from $251m.
The company said its cash margin increased to $31 per barrel for the year, from $26 per barrel in 2018.
Its EBITDAX rose to $1.23bn, from a 2018 figure of $1.09bn, which was adjusted for the impact of IFRS16.
Despite the solid operational performance, Premier Oil still reported a fall in profit before tax from its continuing operations, which wame in at $102.5m from $158.2m in 2018.
Expenditure for the year was below guidance, with operational expenditure coming in at $11 per barrel of oil equivalent, and total capital expenditure standing at $273m.
Net debt narrowed to $1.99bn from $2.33bn, with the company's covenant leverage ratio falling to 2.3x from 3.1x.
Free cash flow generation was forecast for 2020, which Premier Oil said would drive a continuation in debt reduction.
On the operational front, the Catcher project in the UK reached payback during the year, with the Catcher North and Laverda developments now sanctioned.
First gas was delivered at BIG-P in Indonesia, on schedule and below budget, while Tolmount in the UK was on track for first gas by year-end of 2020, adding between 20,000 and 25,000 barrels of oil equivalent per day net to Premier's 50% share.
Development planning at Tolmount East was underway, targeting sanction in the second half of 2020.
Premier Oil also reported a positive appraisal campaign at Zama in Mexico, with the unitisation and sales process now underway, while heads of terms were signed for farm downs at Sea Lion in the Falkland Islands and Tuna in Indonesia.
During the year the firm made "accretive and strategic" UK acquisitions, with underwritten financing and a proposed extension of its credit facilities announced, and the related court sanction hearing scheduled for 17 to 20 March.
New prospective acreage was captured in Alaska and Indonesia, with high value near-term exploration and appraisal wells planned with drilling at Charlie-1 in Alaska ahead, and Berimbau and Maraca in Brazil to spud in the third quarter.
"Premier made significant progress against its strategic targets during 2019," said chief executive officer Tony Durrant.
"Strong operational performance resulted in record free cash flows and reducing debt levels.
"We took material steps to commercialise our reserve and resource base and added to our exploration acreage position."
Durrant said the proposed acquisitions would add material cash-generative UK production.
"Premier is committed to being a responsible operator and today announces that all operated projects will be developed on a net zero emissions basis."
At 0840 GMT, shares in Premier Oil were down 3.57% at 76.25p.
The FTSE 250 company said its 2020 guidance was for between 70,000 and 75,000 barrels of oil equivalent per day, before any contribution from its announced UK acquisitions.
It said its profit after tax for the year ended 31 December rose to $164m from $133m, while its free cash flow improved to $327m from $251m.
The company said its cash margin increased to $31 per barrel for the year, from $26 per barrel in 2018.
Its EBITDAX rose to $1.23bn, from a 2018 figure of $1.09bn, which was adjusted for the impact of IFRS16.
Despite the solid operational performance, Premier Oil still reported a fall in profit before tax from its continuing operations, which wame in at $102.5m from $158.2m in 2018.
Expenditure for the year was below guidance, with operational expenditure coming in at $11 per barrel of oil equivalent, and total capital expenditure standing at $273m.
Net debt narrowed to $1.99bn from $2.33bn, with the company's covenant leverage ratio falling to 2.3x from 3.1x.
Free cash flow generation was forecast for 2020, which Premier Oil said would drive a continuation in debt reduction.
On the operational front, the Catcher project in the UK reached payback during the year, with the Catcher North and Laverda developments now sanctioned.
First gas was delivered at BIG-P in Indonesia, on schedule and below budget, while Tolmount in the UK was on track for first gas by year-end of 2020, adding between 20,000 and 25,000 barrels of oil equivalent per day net to Premier's 50% share.
Development planning at Tolmount East was underway, targeting sanction in the second half of 2020.
Premier Oil also reported a positive appraisal campaign at Zama in Mexico, with the unitisation and sales process now underway, while heads of terms were signed for farm downs at Sea Lion in the Falkland Islands and Tuna in Indonesia.
During the year the firm made "accretive and strategic" UK acquisitions, with underwritten financing and a proposed extension of its credit facilities announced, and the related court sanction hearing scheduled for 17 to 20 March.
New prospective acreage was captured in Alaska and Indonesia, with high value near-term exploration and appraisal wells planned with drilling at Charlie-1 in Alaska ahead, and Berimbau and Maraca in Brazil to spud in the third quarter.
"Premier made significant progress against its strategic targets during 2019," said chief executive officer Tony Durrant.
"Strong operational performance resulted in record free cash flows and reducing debt levels.
"We took material steps to commercialise our reserve and resource base and added to our exploration acreage position."
Durrant said the proposed acquisitions would add material cash-generative UK production.
"Premier is committed to being a responsible operator and today announces that all operated projects will be developed on a net zero emissions basis."
At 0840 GMT, shares in Premier Oil were down 3.57% at 76.25p.