Tuesday, July 12, 2011
Premier Oil plc
Premier provided a trading and operations update ahead of its 2011 Interim Results.
Simon Lockett, Chief Executive, commented, "With continuing good progress on our Asian development projects we expect to see a significant increase in production to around 60 kboepd by year end. Our development teams in the North Sea and Asia are already focused on delivering the next stage of Premier's growth. Our exploration program of around 20 wells over the next 12 months targets around 300 mmboe of unrisked prospective potential."
Production outlook
2011 to date has seen continuing good production performance from the Anoa field in Indonesia, while Pakistan's production has remained steady. This was offset by increased maintenance activity in the UK and a recent unplanned shutdown at Balmoral. As a result, estimated average group production for the first half of 2011 was 36.6 thousand barrels of oil equivalent (kboepd) (2010: 42.8 kboepd) and forecast full year production is now estimated at between 40 kboepd and 45 kboepd.
Near term developments in Asia (Chim Sao and Gajah Baru) are progressing well and 2011 year end run rate is expected to be around 60 kboepd as these projects ramp up. With the UK Huntington and Rochelle projects due on-stream next year, Premier is on target to reach a run rate of 75 kboepd in 2012. Our medium term target of 100 kboepd remains unchanged.
Singapore gas demand continues to grow for our gas exports from the Natuna Sea, with average gas sales under the West Natuna gas contract of 373 bbtud in the first half of 2011 compared to 357 bbtud in the second half of 2010. Block A's share of the contract amounted to 41 percent in the period (against a contractual share of 37 percent), though with a recovery in output from the other two PSC's participating in the contract, actual levels of production reduced from the prior period. Premier's production levels will rise in the second half of the year as the Gajah Baru development contributes from October.
In the UK, production was below expectations due to maintenance related downtime earlier in the year at the Balmoral and Wytch Farm facilities and a recent unplanned shutdown at Balmoral due to a subsea hydraulic leak. Production resumed at Balmoral on 4 July after a three week outage. Scott and Telford production has remained steady since April following earlier disruptions for gas compression maintenance.
As announced in June, Premier increased its stake in the Wytch Farm Assets by 17.715 percent. This is expected to add around 2.5 kboepd to Premier's UK production from year end 2011 when the transaction is targeted for completion. Following the shutdown in the first quarter, production at the Wytch Farm facilities has been rising in recent weeks to around 14 kboepd (gross).
Pakistan production is stable, with the natural decline in the fields offset by infill drilling and the completion of ongoing front-end compression projects. The successful K-18 sidetrack well on Kadanwari, which came on-stream in February 2011, continues to perform favorably. Delays in the front-end compression project at Zamzama are being resolved and increased production is anticipated imminently.
Current and future developments
Asia
In Vietnam, the Chim Sao project remains on schedule with first oil expected in August. On July 1, the FPSO moved from the Keppel yard to its offshore anchorage where deep water commissioning and trials were completed. The FPSO is now on tow to the Chim Sao field for the installation of the umbilicals that will connect it to the production wells.
The Gajah Baru project in Indonesia is progressing ahead of schedule. The Central Processing Platform topsides were installed on the jacket on July 6 and the bridge linking this to the wellhead platform was installed on July 7. Elsewhere on Block A, EPCI technical bids have been received and are under evaluation for the Anoa Phase 4 Development which will add additional compression capacity on the Anoa platform. In addition, the Front End Engineering and Design has been completed for the facilities and pipelines for the Pelikan and Naga fields. These projects are on target for sanction in the fourth quarter of 2011.
In North Sumatra, discussions with the shortlisted facilities EPCI bidders are under way. Technical bids are due in by September and final contract award is expected by year end. First gas on Block A Aceh remains on target for late 2013.
North Sea
The Huntington development in the UK is progressing, with work continuing on the Sevan Voyager FPSO upgrade project and sub-contracted modules. Timing for sail away (and therefore first oil) is likely to be impacted by the current financial situation of the FPSO supplier. Any material delay in the Huntington project will impact the average production for 2012 and the date at which a run-rate of 75 kboepd is achieved. In the meantime, key subsea equipment is on order and an installation contract has been signed. Development drilling commenced in April and is proceeding well.
An agreement for the Rochelle area has been executed with Premier acquiring a 15 percent equity in the unitised East and West Rochelle projects. First gas is anticipated for the fourth quarter of 2012. As previously announced, a Sale and Purchase Agreement for the Solan field was signed in May and Premier will become the development operator of the field at sanction with a 60 percent equity interest. Pre-sanction activities are progressing with final project approval targeted for later this year.
Development concept selection for Fyne is expected by year end, after the East Fyne appraisal well has been drilled. Discussions are ongoing with partners regarding potential development solutions for the Catcher Area. In Norway, development plans for the Froy field received Premier support for moving to the next phase. However, the operator has indicated that, due to limited resources and commitments elsewhere, they will not be proceeding with the project at this time. As a result, discussions with third party new entrants to the Froy project are underway. Dialogue also continues with the preferred contractor for the Bream field development regarding the timing of the FPSO availability.
Exploration and appraisal
Around 20 exploration and appraisal wells are planned during the next 12 months, with unrisked net prospective resource potential, on a P50 basis, of around 300 mmboe. Several of the planned wells for the first half of 2012 remain subject to partner approvals and government consents.
North Sea
As previously announced, the Grosbeak well in Norway was spudded in April 2011 and has now been sidetracked. The results of the sidetrack, which reached target depth on July 7, are anticipated later in July. Premier plans to drill its first operated well in Norway, the Gardrofa exploration well, in the third quarter of 2011.
Premier has signed a Heads of Agreement (HOA) with Antrim Energy to gain additional acreage in the Greater Fyne Area. Under the HOA, Premier will earn a 50 percent working interest in the acreage in return for funding a promoted share of the costs to drill a well on the Erne Prospect, which is planned for the third quarter. The Erne well will target an Eocene Tay Formation oil prospect located between the Fyne and Guillemot NW fields in the UK Central North Sea. A successful Erne exploration well will be taken into account for the Fyne development concept selection targeted for year end.
Separately the East Fyne appraisal well is now planned for the fourth quarter, using the Sedco 704 semi-submersible rig, the results of which - along with the results of the Erne exploration well - will feed into the Fyne development concept process. The Sedco 704 will then move to spud the Bluebell well, a prospect near to the Premier-operated Caledonia field and the Balmoral facility.
The Stingray well (Premier interest, 50 percent), which is scheduled for the first half of 2012, is targeting a Jurassic sandstone reservoir in UK Block 15/13b. In UK Block 28/9, the Joint Venture partners have decided to acquire 3D seismic data over the block in the second half of 2011. As a result, the Carnaby well will now be drilled in the first half of 2012.
Asia
In Indonesia, on the Tuna Block, Gajah Laut Utara was plugged and abandoned in June with oil and gas shows. The Ocean General Rig has now moved to Belut Laut, which spudded on 4 July. The Belut Laut prospect is in a separate sub-basin to that of Gajah Laut Utara and is an independent test of the petroleum system on the Tuna acreage. The results of Belut Laut are expected in August.
Elsewhere in Indonesia the Benteng-1 well on the Buton licence is expected to be drilled in the first quarter of 2012. The Matang-1 well on Block A Aceh is also scheduled to be drilled in the first quarter of 2012. The Antareja Resources land rig, Antareja-8, has been contracted for Matang-1.
Pakistan
As previously announced, the K-27 exploration well was successful and will be tied back to the production facility by the end of the third quarter, delivering around 30 MMscfd (gross). The K-29 and K-30 exploration wells, together with Badhra-6 Parh, are planned for late 2011.
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