November 14, 2019 / 10:51 AM / a month ago

Premier Oil shares lifted by progress on production and debt

(Reuters) - Premier Oil said on Thursday production would come in at the top end of its forecast range this year, driven by its flagship North Sea Catcher field, and that it would cut debt by more than the $300 million previously promised.

The British firm’s shares rose about 5% in early trading.

As the industry struggled with weak oil prices following a slump in 2014, Premier’s debt climbed. Now it is looking to bring the figure down to under $2 billion by selling its stake in the offshore Zama field in Mexico.

The company said it now expected annual oil production at the upper end of its previous 75,000-80,000 barrels of oil equivalent per day (boepd) forecast range, with production in the 10 months to October averaging 79,400 boepd.

The upbeat outlook contrasted with that of peer Tullow Oil, which cut its guidance on Wednesday.

Premier, founded in 1934 as the Caribbean Oil Company to pursue exploration and production activities in Trinidad, had reduced its debt to $2.03 billion at the end of October from $2.33 billion at the end of 2018.

The oil and gas explorer also said it had received formal approval to expand the Catcher field, with first oil from the satellite developments targeted for early 2021. The field produced its first oil in December 2017.

SIGNIFICANT INTEREST

Berenberg analysts said the Zama stake sale was a key catalyst for Premier.

“We see Zama as an attractive asset that is competitively positioned on the global cost curve, and are confident that a potential deal could be closed before end-2019,” they said.

Premier has extended the bid deadline for its 25% stake in the project to December after getting “significant interest.” The company started the sale process in August after raising resource estimates for the field in June.

“Zama was a very successful discovery that we had in Mexico and we decided to put it on the market. We have lots of industry interest,” Chief Executive Tony Durrant told Reuters.

Premier operates the field along with Germany’s Wintershall DEA [WINT.UL] and U.S.-based Talos Energy. Jefferies analysts value Premier’s stake in Zama at $413 million.

Zama, offshore in the southern Gulf of Mexico, was discovered in 2017 and is believed to contain nearly one billion barrels of oil, making it the largest discovery in Mexico in decades, excluding those made by national oil company Pemex.

Reporting by Shanima A and Pushkala Aripaka in Bengaluru; Editing by Shailesh Kuber and Mark Potter

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