March 21, 2013 5:12 pm

Premier Oil increases output as profits rise

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Output and profits at Premier Oil rose sharply last year as the FTSE 250 company committed itself to further significant investments in the UK’s North Sea.

Simon Lockett, chief executive, said the company remained on track to raise output to 100,000 barrels of oil a day by 2016 as its share of output from Solan and Catcher projects in the UK section of the continental shelf came on stream.

However, it was contributions from fields operated in Vietnam in particular that drove last year’s increase in group production from 40,000 to 58,000 boe/d. Output last year was evenly split between fields in Pakistan, Vietnam, Indonesia and the UK.

Mr Lockett said he expected first production from the Huntington and Rochelle fields in the North Sea to contribute to a further rise in average production to between 65,000 and 70,000 boe/d this year.

The company, which also has exploration assets in Kenya, Iraq and the Falkland Islands, expects to build post-tax cash flow to $2bn a year by 2016 once its Catcher development begins production.

Premier also aims to invest further, alongside original operator Rockhopper Exploration, in plans to commercialise the Sea Lion prospect off the Falklands, which is estimated to contain about 320m barrels of oil. This is in spite of objections from Argentina to any moves to exploit oil deposits in disputed territorial waters.

Mr Lockett insisted that the forecast increase in cash flows from fields in the North Sea and elsewhere could allow Premier to develop Sea Lion without striking a deal with a bigger operator.

“We went into the deal saying we could do it and that’s what I say today,” he said.

A recommended full-year dividend of 5p, following no payment the previous year, will be payable from earnings per share that rose from 31.5 cents to 46.9 cents

The company ended the year with net debt of $1.1bn, up from $744m, following its acquisition for $231m of a 60 per cent stake in Sea Lion that completed in October.

Persistently high oil prices led to revenues rising from $827m to $1.4bn in the year to December. Pre-tax profits advanced from $142m to $360m, although a swing to paying $108m in taxes, having received tax credits last time, moderated profit after tax, which increased from $171m to $252m.

A recommended full-year dividend of 5p, following no payment the previous year, will be payable from earnings per share that rose from 31.5 cents to 46.9 cents.

Jerry Ho, analyst at Investec, shifted his recommendation from “hold” to “buy” in spite of what was described as “a sub-par performance in 2012 in terms of production and through the drill bit”.

The shares rose 2 per cent to 395.6p on Thursday, leaving Premier’s market capitalisation at a little more than £2bn.

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