Independent oil firm Premier Oil is sticking to an eight-well exploration campaign in 2015, including its four-well campaign in the Falkland Islands, due to start in March, and its first well in the emerging Mandal High play offshore Norway, expected mid-year.
Premier said the program, which comes amid 5-year low oil prices, would omit discretionary drilling spending under uncommitted rig contracts. The continued exploration comes as Premier is also ramping up on a number of development projects.
Image: The Solan jacket sailing past Orkney last year. Photo by Magnus Budge.
Earlier this month, Premier Oil saw first steel cut on the North Sea Catcher project FPSO. Preparations for development drilling on Catcher are due to start in 2H 2015, with the project on schedule and on budget. Later this month, Premier Oil is planning to submit a plan for development for the Vette (previously named Bream) FPSO development offshore Norway. The firm continues to work on a lower cost solution for the first phase of the Falkland Islands’ Sea Lion project. Premier had opted for a tension leg platform development but is now assessing the FPSO design options.
However, spending will be cut, said Premier. Planned development spend for 2015 is anticipated to be 40% lower than 2014, at around $600 million. “In the light of the low oil price environment, negotiations with a number of key contractors are underway and development expenditure estimates are therefore subject to further review. The pre-tax exploration budget for 2015 is $220 million,” said Premier Oil.
Poor weather conditions throughout the winter in the North Sea have also hampered work to bring the firm’s Solan field on stream.
The field, which the firm had hoped to bring online last year, is expected to produce about 24,000 boe/d from a targeted Q2 2015, from what will become the first normally unmanned platform west of Shetland. The Solan development includes a subsea oil storage tank – another first for the North Sea. The tank, jacket and topside facilities for the Solan field were installed at the end of summer 2014.
Production from the field will help boost Premier Oil’s production above its record 2014 rate of 63,000 boe/d, which was up 13% compared to 2013, driven by improving uptime and operating efficiency, said the firm. Without production from Solan, 2015 production is estimated at 55,000 boe/d, partly due to the sale of Premier’s stake in the UK North Sea Scott area, as well as natural decline.
In Vietnam, the firm had record production from its operated Chim Sao asset, at 19,300 boe/d (net to Premier) during November and December. The subsea tie-back of the Dua field was completed in July, extending plateau production and the field life of Chim Sao.
Higher production from Indonesia was driven by strong performance from Natuna Sea Block A. The Naga field was brought on-stream in November while Pelikan will be bought on-stream in April.
Tony Durrant, Chief Executive, commented: "Premier is in a strong position to weather a period of oil price weakness due to its long-term cash flow generation. This is delivered from a stable production base with low cash operating costs (<US$20/boe) supported by a significant 2015 hedging program, a tax advantaged position in the UK and a favorable debt structure. Premier has also responded to the sharp fall in the oil price with a broad program of cost reductions and the postponement of discretionary spend.
“Operationally, Premier delivered a strong performance in 2014, with production exceeding guidance, key milestones reached on a number of our development projects and non-core assets disposed of in a difficult asset market.
“We will continue to invest in high quality projects only if they are robust at our conservative oil price assumptions and if their cost base reflects the current oil price environment.”
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