PREMIER Oil has revealed it is still facing big challenges on a flagship oil field development West of Shetland although it is making good progress elsewhere in the North Sea.

The day after announcing it had made what looks like a billion barrel find in Mexican waters, Premier Oil said production from the Solan field off Shetland stayed well below forecast in the first half.

London-based Premier produced an average 7,300 barrels oil daily from Solan in the six months to 30 June.

When it started production from Solan in April last year, Premier expected to be producing 20,000 to 25,000 boed from the field by the end of 2016.

The company has faced a litany of problems on Solan, which came onstream around 18 months later than expected.

Premier has complained that bad weather and low productivity impacted on the development of the field.

Since starting production the company has found it harder than expected to squeeze oil out of the reservoir and suffered disruption caused by a pump failure.

In an update on first half trading it said: “A number of options to improve production levels and recovery at Solan continue to be studied, including increasing water injection rates into the reservoir and a possible further drilling campaign in 2019.”

But Premier remains excited about the potential of the giant Catcher field east of Aberdeen it is developing with Cairn Energy.

The project is on track for first oil later this year and is running well under budget.

Premier has been doing planning work with a view to making a final decision next year about whether to develop the Tolmount gas field off England.

The cost of services has fallen amid the downturn triggered by the sharp fall in oil prices since 2014.

Premier said production from the UK portfolio excluding Solan was broadly in line with expectations.

Directors have been pleased with the performance of the portolio of mature North Sea fields it bought from German utility E.ON last year, for $120m

The company can make good money on its production, even with Brent crude trading at around $50 per barrel.

Average production costs fell to $14.7/bbl, from $16.5/bbl in the first half last year, reflecting ongoing cost cutting initiatives.

Chief executive Tony Durrant said: “Our producing assets are outperforming and our cash costs are below budget. Catcher will provide another step up in production and cashflow, accelerating debt reduction.”

Premier expects the refinancing it agreed recently to receive court sanction this month.

The company, which also has operations in Asia, produced an average 82,100 barrels oil equivalent daily in the first half, against 61,000 boed last time.