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Fields progress is highlighted by Premier Oil

PREMIER Oil has said it is proud of its performance in the UK and hailed the progress achieved towards bringing two giant fields off Scotland into production.

proud: Premier Oil is moving towards the final stages of the development of the Solan field, in waters off Shetland.
proud: Premier Oil is moving towards the final stages of the development of the Solan field, in waters off Shetland.

London-based Premier said it is entering the final stages of work on the $1.4 billion development of the Solan field 80 miles west of Shetland, putting the company on course to start pumping 24,000 barrels oil equivalent daily from the field later this year.

With total production in the UK averaging around 1.5 million barrels oil equivalent daily in 2012, the new field will make a significant contribution to the country's output. It looks set to a profitable investment for Premier.

The company has paid more than expected under some cost headings to maximise the opportunity to get the production facilities in place this year before the weather closes in.

But, it said: "Solan continues to be a valuable project with a payback period of approximately two years."

Premier noted that in June it had won Government approval to develop the Catcher field around 120 miles east of Aberdeen.

Premier has awarded all the major service contracts in connection with the development of production facilities and is targeting first oil in mid-2017.

It said Catcher and Solan will underpin the company's future growing cash flows.

Edinburgh-based Cairn Energy is a partner in the Catcher field.

Premier also highlighted the potential to increase production from existing North Sea fields through work like drilling additional wells.

Chairman Mike Welton said: "We are particularly proud of the improved performance from our operated assets in the UK and in Vietnam where a considerable amount of effort has been invested in improving asset integrity and operating efficiency."

The company produced an average 21,300 boed in the UK in the six months to June, up 59 per cent from 13,400 boed in the corresponding period last year.

Production from the Balmoral field in the North Sea increased to 3,700 boed from 2,700 boed, reflecting the reinstatement of four wells and improved performance from existing wells.

However, Premier said it recorded a $144m (£87m) impairment charge related to the Balmoral area and Huntington fields, following a review of longer-term assumptions used in forecasting operating, maintenance and decommissioning costs and production profiles.

The company achieved first oil from the Kyle field in the North Sea following the period end, after completing a two year reinstatement project.

Premier said the Wych farm field onshore Dorset exceeded expectations due to improved operating efficiency and four new wells coming onstream.

The company has also capitalised on the enthusiasm other firms have shown for the UK North Sea to find buyers for assets it decided were non core.

Premier noted that in June it had agreed the profitable sale of its interests in the Scott, Telford and Rochelle fields to Hungary's MOL for $130 million.

Mr Welton said Premier is making good progress in other countries. In Vietnam the company delivered a number of projects aimed at maximising operating efficiency. Premier said it has made good progress with development work on the Sea Lion field just north of the Falkland Islands.

Group production averaged 64,900 boed in the first half, compared to 58,600 last time. Pre-tax profits fell to $50m from $215m.

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