PREMIER Oil has slashed the value of its North Sea portfolio by around $300m (£196m) and has asked contractors to take a 10 per cent pay cut in response to the slump in the oil price.
The London-based oil and gas firm unveiled a push for significant cost savings yesterday when Deloitte said it was crucial the industry and Government invest in the UK North Sea to help the area weather the storm caused by the near 60 per cent fall in the price of crude since June.
The accountancy giant highlighted a marked drop in activity levels in the UK North Sea last year, when the number of new field start ups halved to six from 13.
Only 40 wells were drilled compared with 50 in the preceding year.
Deloitte noted the number of deals fell sharply to 23, including takeovers, from 63, signalling interest in the North Sea is waning.
However, it said bargain hunters are eyeing the area in the hope of doing cut price deals.
Derek Henderson, Deloitte's Aberdeen office senior partner, said: "There are definitely firms on the lookout for assets and deals will be done if the price is right."
Premier said it expects to cut spending on the development of new assets by 40 per cent annually, to around $600m in 2015.
Work on the giant Solan and Catcher fields off Scotland is proceeding.
Premier said operating costs and general and administration spend are budgeted to be at least 10 per cent lower this year than in 2014. It said a number of initiatives are underway to target significant further cost reductions, without giving details.
Premier has around 300 self-employed contractors working for it around the world.
Chief executive Tony Durrant said: "Premier is in a strong position to weather a period of oil price weakness due to its long term cash flow generation."
He noted the company's operating costs per barrel were under $20.
Premier has used hedging to protect itself from some of the effect of falling prices. For 2015, Premier has sold forward 5.43 million barrels of crude at an average price of $98.3 per barrel.
Brent crude traded at $46.76/bbl yesterday compared with $115/bbl in June.
Premier produced an average 19,4000 barrels oil equivalent daily in the UK in 2014 out of a record group total of 63,600 boed. It has operations in Asia and West Africa.
The company did not disclose the revised valuation of its North Sea portfolio.
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