NORTH SEA heavyweight Premier Oil has said it expects to recoup its investment in the giant Catcher field this year as the group reaps rewards for its decision to press on with the development amid tough times.
Premier started production from the 100 million barrel field east of Aberdeen in 2017 as the North Sea oil and gas industry grappled with the fallout from the crude price plunge.
Read more: North Sea supply chain job numbers to increase for first time since 2014
The London-based company noted yesterday: “The Catcher Area is forecast to reach cash pay back by the end of 2019, only two years after first oil, vindicating the Group’s continued investment in the project through the oil price downturn.”
Premier approved the Catcher development in June 2014, only to find the crude price tumbling in following months.
While other firms slashed investment in the North Sea in response, Premier’s decision to increase its exposure to the area has paid dividends.
The progress achieved by the firm could encourage other companies to look at the area again.
The success of Catcher underlines the potential for firms to make money from developing finds in the mature North Sea.
Premier discovered the field in 2010 and went on to develop it with Edinburgh-based Cairn Energy. It cost $1.3bn to take Catcher to first oil.
Read more: Premier a 'believer' in North Sea as it eyes deals
After posting 23 per cent growth in first half profits yesterday, Premier said Catcher may contain even more oil than expected.
“Premier currently expects to increase Catcher Area reserves as part of the Group’s formal year-end reserves assessment,” said Premier.
The group’s share of production from Catcher averaged around 35,000 barrels of oil equivalent daily (boed) in the first half amid strong operating efficiency. It has highlighted the potential to make further finds in the Catcher area.
Premier also underlined the potential of the Tolmount field in the North Sea, which it plans to bring into production next year.
Chief executive Tony Durrant noted: “Tolmount … and the addition of good quality exploration and appraisal acreage offer significant low-cost opportunities for future value growth.”
Premier acquired its interest in Tolmount with the North Sea portfolio it bought from Germany’s E.ON for $120m in 2016.
The deal also brought Premier interests in producing fields that have performed well in recent months, including Huntington.
Read more: Valuation of bumper Shetland field cut again
However Premier has faced problems with a big field it developed West of Shetland.
The company said its production from Solan averaged 4,000 boed in the first half.
When Premier started production from Solan in April 2016 it expected to be producing 20,000 to 25,000 boed from the field by the end of that year.
The company has noted poorer than expected reservoir performance on Solan. It plans to drill another production well on the field next year.
Strong production in the North Sea helped Premier generate $182m cash in the first half to help cut debt.
Premier has decided to sell its stake in the bumper Zama discovery off Mexico to help speed debt reduction.
The company said it had initiated a formal sales process for its interest in Zama which, if successful, would result in a material reduction in debt levels.
Premier also wants to sell some of its stake in the Sea Lion field off the Falkland Islands, through a farm-out process.
Read more: North Sea upheaval set to continue as US giant mulls sale of $2bn portfolio
It made $121m profit after tax in the six months to June 30, compared with $98m in the same period last.
Production averaged a record 84,100 barrels oil equivalent daily (boed) against 76,200 boed last time. UK output rose to 58,100 boed from 41,300 boed.
Premier has producing assets in Asia.
Net debt fell to $2.15bn at June 30 from $2.33bn at December 31.
Premier Oil shares closed up 6.72p at 78.98p.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here