NORTH Sea-focused First Oil has said it is reining in spending on new projects and minimising discretionary expenditure amid challenging market conditions.

Owned by oil and gas tycoon Ian Suttie, the company said it is unlikely to be committing to any further significant capex, or development spending, in the current economic climate besides work it has planned on two key projects.

Aberdeen-based First Oil said it is committed to work on the giant Kraken field off Shetland, which is expected onstream in 2016, while low risk drilling on the Mungo and Monan fields will continue.

The company noted it has taken steps to provide a significant degree of protection to the profits and cash it generates by selling much of its likely output for the next 17 months on the futures market at much higher rates than oil has been fetching recently.

First Oil said it has fixed a minimum price of $104 per barrel for 3,163 barrels oil per day from May

2014 to June 2016. Brent crude traded at $52/Bbl yesterday compared with $115 in June.

First Oil signalled its long term confidence in the prospects for the sector saying it will continue to target additional acquisitions where directors can identify the potential to enhance the company's balanced portfolio of assets.

First Oil, which says it is the largest, private, UK owned company producing Oil & Gas in the North Sea, achieved record production, turnover and profits in the year to 30 April, helped by the acquisition of Antrim Resources (N.I.) for around £32m.

Average production increased to 6,218 barrels oil equivalent per day (boepd) from 3,686 boepd in the preceding year.

Operating profit before exceptional costs increased to £54.5m from £44.2m.

Revenues increased to £138m from £94m.