NORTH Sea heavyweight Premier Oil has underlined the potential of a bumper field it is developing off Aberdeen as it grapples with problems on a flagship development West of Shetland.
London-based Premier has increased estimates of peak output from the Catcher field by 20 per cent, to 60,000 barrels oil equivalent per day, as it prepares to bring the field onstream later this year.
The increase takes account of the results of the latest work on the wells that will be used to pump oil from Catcher, which Premier reckons contains around 100 million barrels recoverable reserves.
Led by chief executive Tony Durrant, Premier appears increasingly confident Catcher will be a big money spinner although the project was approved in June 2014, just before the crude price started tumbling.
This triggered a deep downturn the industry is still mired in.
Premier said: “Once on stream the Catcher field will provide a step change in our production levels, generating tax –free cash flows.”
The company is developing Catcher with Edinburgh-based Cairn Energy. On Tuesday Cairn said Catcher was extremely attractive economically. The field will utilise modern production technology.
Read More: Cairn Energy highlights appeal of North Sea amid crude price plunge
Premier’s prediction highlights the benefit of tax breaks that were introduced to encourage firms to invest in the North Sea before the market turned. The firm has accumulated tax losses that it can set against UK profits.
The expected costs of developing Catcher have fallen by around 30 per cent since the project was approved, to $1.6 billion (£1.25bn).
The cost of support services has fallen in the North Sea. Many suppliers have cut prices to help them win business in a shrinking market.
Premier’s chairman Mike Welton said after achieving significant cost reductions over the last two years the group sees opportunities for further savings from collaboration initiatives and competitive re-tendering.
The firm noted UK unit operating expenses fell to $19.9 per barrel oil equivalent in the first half, from $31/boe last time, partly reflecting good cost control.
But Premier may drill more wells on the Solan field off Shetland to boost disappointing production rates.
It pumped an average 7,300 boed from Solan in the first half. When Premier started production from Solan in April last year, the company expected to be producing 20,000 to 25,000 boed from the field by the end of 2016.
Premier said it is studying options to improve production levels, including a possible further drilling campaign in 2019.
Solan came onstream in April last year, around 18 months later than planned. Premier has noted the impact of bad weather and low productivity on the development.
While the outlook for oil and gas prices is unclear, Premier seems keen to develop the Tolmount gas find off eastern England. It might have to invest only $100m to bring the field into production using an unmanned facility.
“Tolmount is a very attractive project, meeting our economic thresholds even at low gas prices, allowing us to use our UK tax losses and with ... reserve upside,” said Mr Welton.
Premier bought Tolmount with a basket of mature North Sea assets from German utility E.ON last year, for $120m.
The performance of these has beaten expectations. Total cash returns have exceeded the outlay on the portfolio.
Premier reckons the Zama find it made off Mexico in July may contain 800 million barrels oil.
The company, which also has operations in Asia, made an underling profit of $326 m before tax in the first half, up from $162.7m.
Average production rose to 82,100 boed from 61,000 boed. UK output jumped to 45,600 boed from22,200 boed.
Premier completed a long-awaited refinancing in July.
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