Source - RNS
RNS Number : 1757K
Premier Oil PLC
06 April 2018

Premier Oil plc (the "Company")

2017 Annual Report and Financial Statements
and Notice of Annual General Meeting 2018

6 April 2018

Further to the release of the Company's Annual Results on 8 March 2018, the Company announces that it has today published its Annual Report and Financial Statements for the financial year ended 31 December 2017 (the "2017 Annual Report"). In addition, the Company has today posted to shareholders the Notice of Annual General Meeting ("AGM") 2018. The AGM will be held at No.11 Cavendish Square, London, W1G 0AN, at 11.00am on Wednesday 16 May 2018.

In accordance with Listing Rule 9.6.1., copies of the 2017 Annual Report, the Notice of AGM and related form of proxy have been submitted to the UK Listing Authority and will shortly be available for inspection from the National Storage Mechanism at The documents (except for the form of proxy) are also available to view on the Company's website at

A condensed set of financial statements and information on important events that have occurred during the year ended 31 December 2017 and their impact on the financial statements were included in the Company's 2017 Annual Results announcement on 8 March 2018. That information together with the information set out below in Appendix 1, which is extracted from the 2017 Annual Report, fulfil the requirements of DTR 6.3.5. This announcement is not a substitute for reading the full 2017 Annual Report. Page and note references in the text in Appendix 1 are made in reference to the 2017 Annual Report. To view the 2017 Annual Results announcement, visit the Company website:

Further enquiries:

Company Secretariat:
Daniel Rose                  Tel: +44 (0)20 7730 1111

Investor Relations:
Elizabeth Brooks           Tel: +44 (0)20 7730 1111


This announcement contains certain forward-looking statements that are subject to the usual risk factors and uncertainties associated with the oil and gas exploration and production business. Whilst the Group believes the expectations reflected herein to be reasonable in light of the information available to it at this time, the actual outcome may be materially different owing to factors beyond the Group's control or otherwise within the Group's control but where, for example, the Group decides on a change of plan or strategy. Accordingly, no reliance may be placed on the figures contained in such forward-looking statements.




Company Risk Factors (required under DTR 4.1.8)

Principal risk factor

Risk detail

How is it managed?

Key Actions in

Commodity price


Oil and gas prices are affected by global supply and demand and can be subject to significant fluctuations.

Factors that influence these include operational issues, natural disasters, adverse weather, climate change regulation, political and security instability, conflicts, economic conditions and actions by major oil-exporting countries.

Price fluctuations can affect our business assumptions and our ability to deliver on our strategy.

Specific risks for 2018: inability to execute a satisfactory oil hedging programme due to low forward oil prices and market backwardation; lack of credit lines for hedging.

Oil and gas price hedging programmes to underpin our financial strength and protect our capacity to fund future developments and operations.

Premier's investment guidelines ensure that our investment opportunities are robust to downside price scenarios.

Oil hedging programme continued with fixed price term sales and options to provide some protection in the event of an extended period of low oil prices.

Economics of investment decisions tested against downside price scenarios.

Discretionary spend actively managed.

Financial discipline

and governance

Sufficient funds may not be available to finance the business and fund existing and planned growth projects.

Breach of delegated authority.

Financial fraud.

Specific risks for 2018: reduced flexibility to manage the business due to new controls agreed with lenders; breach of revised banking covenants; and inability to execute corporate actions including funding development projects such as Sea Lion.

Premier maintains access to capital markets through the cycle by proactive engagement with banks and lenders as evidenced by the completion of its refinancing in 2017.

Strong financial discipline. Premier has an established finance management system to ensure that it is able to maintain an appropriate level of liquidity and financial capacity and to manage the level of assessed risk associated with the financial instruments.

The management system includes a defined delegation of authority to reasonably protect against risk of financial fraud in the Group.

An insurance programme is maintained to reduce the potential impact of the physical risks associated with exploration and production activities. In addition, business interruption cover is purchased for a proportion of the cash flow from producing fields. Cash balances are invested in short-term deposits with minimum A credit rating banks, AAA managed liquidity funds and A1/P1 commercial paper, subject to Board approved limits.

Continued engagement with lenders.

Economics of investment decisions tested against downside project scenarios.

Discretionary spend actively managed.

Sales and contractor financing schemes for new growth projects.

Planned programme of corporate actions.

Enhancement of the design and operating effectiveness of the finance management systems.

Production and

development delivery

and decommissioning


Uncertain geology, reservoir and well performance.

Availability of oilfield services including FPSOs and drilling rigs, technology and engineering capacity, and skilled resources.

Adverse fiscal, regulatory, political, economic, social, security (including cyber) and weather conditions.

Immaturity of decommissioning in the UK resulting in uncertain cost and timing estimates for decommissioning of assets.

Potential consequences include reduced or deferred production, loss of reserves, cost overruns and failure to fulfil contractual commitments.

Specific risks for 2018: failure of new Catcher asset to fully deliver to expectations.

Effective management systems governing geoscience, reservoir engineering and production operations activities, including rigorous production forecasting and reporting, field and well performance monitoring, and independent reserves auditing.

Effective project execution management systems, including contracting strategy and cost controls together with capable project teams and functional oversight.

Long-term development planning to ensure timely access to FPSOs, rigs and other essential services.

Preference for operatorship.

Specialist decommissioning team in place coupled with continued focus on delivering asset value to defer abandonment liabilities.

Active tracking and management of any production losses.

Continued engagement with UK Government on decommissioning.

Rationalised and refined local operating procedures.

Joint venture partner

alignment and supply

chain delivery

Major operations and projects in the oil and gas industry are conducted as joint ventures. The joint venture partners may not be aligned in their objectives and this may lead to operational inefficiencies and/or project delays. Several of our major operations are operated by our joint venture partners and our ability to influence is sometimes limited due to our small interest in such ventures.

Premier is heavily dependent on supply chain providers to deliver products and services to time, cost and quality criteria and to conduct its business in a safe and ethical manner.

Specific risks for 2018: access to and cost of appropriate service providers if oil prices recover.

Due diligence and regular engagement with partners in joint ventures in both operated and non-operated operations and projects.

Pursue strategic acquisition opportunities, where appropriate to gain a greater degree of influence and control.

Defined management system for management of non-operated ventures.

Due diligence of supply chain providers, including diligence of financial solvency, anti-bribery and corruption controls, and controls to prevent facilitation of tax evasion.

Monitor contractual performance and delivery.

Implementation of comprehensive contract performance management programme for major contracts.



The capability of the organisation may be inadequate for Premier to deliver its strategic objectives. The capability of the organisation is a function of both the strength of its personnel and the effectiveness of its business management system.

Premier may be unable to attract or retain personnel with the right skills and competencies or to deliver suitable succession plans for senior roles.

The business management system may be inadequate or may not be sufficiently complied with.

Specific risks for 2018: unable to attract, challenge or retain key staff due to lack of affordability to pursue all the growth opportunities within the portfolio; increasing competition for talent in a potentially resurgent market place.

Premier has created a competitive reward package including bonus and long-term incentive plans to incentivise loyalty and performance from the existing skilled workforce.

Continue to strengthen organisational capability to achieve strategic objectives. This includes resource and succession planning, competency and leadership development.

Continuous improvement of business management system and related controls appropriate to the size and market position of the Company.

Development and implementation of staff engagement plans following the staff survey in 2017.

Revitalised communication and understanding of the reward programme introduced in 2016.

Increased focus on Diversity & Inclusion across the Group.

Continued phased rollout of the Talent Management programme, including continued senior level succession at local and Group levels.


success and

reserves addition

Premier may fail to identify and capture new acreage and resource opportunities to provide a portfolio of drillable exploration prospects and future development projects.

Specific exploration programmes may fail to add expected resource and hence value.

Lender controls may reduce ability to capture and execute exploration programme.

Specific risks in 2018: inability to access quality global opportunity set due to lender restrictions in a highly competitive market.

Focus on geologies we know well and in which we can build a competitive advantage.

Continuous improvement in exploration management system with strong functional oversight.

Manage exploration portfolio to maintain alignment with strategic growth and spend targets.

Close out actions for managing exploration commitments and minimise spend or manage phasing relating to these commitments.

Rebuild exploration portfolio with high quality assets.

Progress discovered resource at Zama, Tolmount East and Tuna via appraisal into reserves.

Continued engagement with lenders.

Health, safety,


and security


Significant asset integrity, process safety or wells incident on operated asset.

Significant incident arising from natural disaster, pandemic, social unrest or other external cause.

Consequences may include injury, loss of life, environmental damage and disruption to business activities.

Comprehensive HSES management systems including:

Asset integrity and process safety assurance with appropriate third-party verification and performance monitoring.

Routine HSES auditing.

Valid Safety Cases on all operated assets.

Management of change.

Crisis management and emergency response processes in place and regularly tested.

Business interruption insurance.

Learning from internal and third-party incidents.

Continuous improvement of HSES management system and the auditing of principal controls.

Build awareness of identification and management of Major Hazards.

Enhanced process safety and asset integrity monitoring.

Senior management visits to operated facilities to demonstrate commitment to HSES values.

Host government:

political and fiscal risks

Premier operates or maintains interests in some countries where political, economic and social transition is taking place or there are current sovereignty disputes. Developments in politics, security, laws and regulations can affect our operations and earnings.

Consequences may include expropriation of property; cancellation of contract rights; limits on production or cost recovery; import and export restrictions; price controls, tax increases and other retroactive tax claims; and increases in regulatory burden or changes in local laws and regulations.

Consequences may also include threats to the safe operation of Company facilities.

Premier strives to be a good corporate citizen globally, and seeks to forge strong and positive relationships with governments, regulatory authorities and the communities where we do business. Premier engages in respectful industry-wide lobbying and sustainable corporate responsibility and community investment programmes.

Premier maintains a portfolio of interests which includes operations in both lower and higher risk environments.

Rigorous adherence to Premier's Business Ethics Policy and Global Code of Conduct.

Monitor and adhere to local laws and regulations.

Active monitoring of the political, economic and social situation in areas where we do business.

Business continuity plans tailored to pre-defined levels of alert.

Close engagement with Falkland Islands and UK governments on key aspects of Sea Lion project.


Key Performance Indicators (required under DTR 4.1.9)


Working interest production (kboepd)

Premier aims to maximise production from its existing asset base and, over time, to deliver production growth. Production growth is measured using average daily production and the number of development projects being brought through to sanction. The ability to commercialise and bring those projects on-stream is key to the Company's success.

2017 Progress
Average daily production in 2017 was 75.0 kboepd, in line with our market guidance and up five per cent on 2016. The increase in production on the prior year was driven by continued high operating efficiency across the Group and a full year contribution from the E.ON assets acquired in 2016. In December, our operated Catcher project was brought on-stream which will contribute materially to Group production in 2018. Premier also sanctioned the development of the Bison, Iguana, Gajah Puteri gas fields which will support our long-term contracts under which we deliver gas into Singapore. Progress was also made on our Tolmount gas project which will provide the next phase of growth beyond Catcher.

2018 Expectations
In 2018, Premier expects production from its existing producing assets to increase to 80-85 kboepd, reflecting the phased ramp up from the Catcher Area, offset by natural decline in certain of our fields and the impact of disposals.

Reserves and resources (mmboe)

Premier aims to grow its reserves and resources base through a combination of successful exploration and selective acquisitions.

2017 Progress
Proven and probable ('2P') reserves at the end of 2017 were 302 mmboe (2016: 353 mmboe). The reduction reflects the impact of 2017 production, a downward revision in reserves at Solan as a result of poorer than expected reservoir performance, and the disposal of our Wytch Farm interests. This was partially offset by upwards revisions in estimates of both Huntington and Babbage reserves as a result of extended forecast field lives facilitated by better than expected reservoir performance. Premier also added 118 mmboe of resources principally as a result of the Zama oil discovery offshore Mexico, the addition of Tolmount East as a contingent resource and upward revision to the Sea Lion Phase 2 resources including the 2015 Zebedee discovery.

2018 Expectations
Premier will look to progress and commercialise its predevelopment projects, which account for a significant proportion of its reserves and resource base, over the course of 2018. In particular, Premier expects to sanction the Tolmount gas project in the North Sea during the year which will add to our 2P reserves. Offsetting this will be production and further non-core disposals including the completion of the sale of our Pakistan business which accounted for 8 mmboe of our 2P reserves at the end of 2017.

HSES Index

Premier is committed to managing its operations in a safe, reliable and environmentally responsible manner to prevent major accidents and to provide a high level of protection to its employees, contractors and the environment. Premier measures HSES performance using a blended, weighted score covering a range of key HSES metrics.

2017 Progress
Overall performance was at or just above expectation. Both our recordable injury and high potential incident rates fell compared to 2016, and we continued to see very strong process safety performance, with only one (IOGP Tier 2) process safety event and strong process safety and asset integrity audit results from our operated assets.

Environmental performance was broadly similar to 2016 with both, greenhouse gas intensity and hydrocarbon spills to sea, showing very small reductions on the previous year.

Senior management visits to our operated facilities to demonstrate their commitment to our HSES values were supported in 2017 by Premier's first ever Global HSE Day, when coordinated visits by senior managers and other events with a HSES focus were held at all our facilities and office locations worldwide.

2018 Expectations
Premier will continue to set a base target of delivering a better HSES performance than the median HSES performance of our peers in the International Association of Oil & Gas Producers ('IOGP'), with the aim of driving continuous improvement year-on-year. In 2018, we will introduce new leading corporate metrics focused on process safety (including maintenance and integrity metrics) and routinely report performance alongside our other existing KPIs. We will also be reviewing our major HSES Management System documents to ensure their continuing relevance to our business and also their alignment with evolving international management system standards. For more information on our HSES management practices, please see page 51.

Liquidity (US$ million)

Premier seeks to have sufficient liquidity to underpin the Group's capital investment programme and to access new opportunities for future growth. The Group is committed to maintaining a disciplined approach to spending each year, where necessary, will seek farm-in partners for drilling programmes and development projects to maintain this discipline.

2017 Progress
During 2017, Premier completed a comprehensive refinancing, preserving the Group's debt facilities, resetting financial covenants and extending maturities out to 2021. This, together with a strong production performance, and continuing focus on maintaining a low operating cost base and reduced capital commitments from existing operations, enabled us to deliver our capital investment programme including first oil from our operated Catcher project.

2018 Expectations
Premier will continue to take appropriate steps in 2018 to ensure it maintains sufficient liquidity to deliver its strategic plans. We will remain focused on maximising our production while managing our operating costs and our capital expenditure. Our cash flows will be prioritised toward reducing our absolute debt levels as well as selectively investing in our new projects for future growth, while maintaining sufficient liquidity such that we are well placed to withstand another downturn in the commodity price cycle.

Operating cash flow (US$ million)

Premier aims to maximise cash flow from operations in order to maintain financial strength, ensuring we can meet our debt obligations, invest in the future of the business and deliver long-term returns to shareholders. Premier's cash flows are protected by a rolling forward hedging programme.

2017 Progress
Premier's operating cash flow for 2017 of US$496.0 million (2016: US$431.4 million) benefited from an improvement in the external macro environment which saw the oil price average US$54.2/bbl (2016: US$43.7/bbl). Premier realised an average oil price for the year post hedge of US$52.1/bbl (2016: US$52.2/bbl). The increase in operating cash flow was helped by a strong production performance and tight cost control.

2018 Expectations
Future production growth together with Premier's low cost base, will underpin 2018 operating cash flow. In particular, production from the new Catcher Area will contribute materially to the Group's operating cash flow as it ramps up during the first half of 2018. Premier will continue to look to hedge to protect its future cash flows and our investment programme. We have hedged approximately 50 per cent of 2018 oil production with an average floor price of US$58/bbl and 27 per cent of our UK gas production at 47 pence/therm.

Operating costs (US$/boe)

Premier aims to minimise costs from operations without compromising on health, safety or asset integrity. Operating costs per barrel of oil equivalent is a function of industry costs, inflation, the efficiency and effectiveness of Premier's people, technology, and production output. Operating costs are monitored closely to ensure that they are maintained within pre-set annual targets.

2017 Progress
Operating costs remained low at US$16.4/boe in 2017 (2016: US$15.8/boe), in line with our budget but a small increase on 2016 due to portfolio mix effects in the production base. The low cost base continues to be driven by high operating efficiencies across our producing portfolio, and ongoing cost savings across the business. It reflects the significant cost reductions that have been achieved over the last two years.

2018 Expectations
Premier expects operating costs in 2018 to be between US$17-18/boe, and to maintain a low cost base for the medium-term, underpinned by continued focus on maximising operating efficiencies, from collaboration initiatives and competitive re-tendering.

Net debt (US$ billion)

Premier aims to reduce the absolute levels of its net debt in order to address the imbalance in our capital structure, to ensure compliance with its financial covenants and to provide the Company with future financial flexibility. Premier anticipates reducing its net debt by using cash flow generated from its producing assets and disposals, while maintaining tight cost control.

2017 Progress
Net debt at year-end was US$2.7 billion. Positive free cash flow generation including disposals, was offset by adjustments to reflect the terms and the costs of the refinancing and non-cash foreign exchange movements on non-dollar denominated debt.

2018 Expectations
Premier is targeting further debt reduction during 2018. With forecast low operating costs, reducing capital expenditure, and increasing production from our UK tax advantaged assets as Catcher production ramps up, Premier is well placed to deliver on this target. Post year-end, Premier invited its convertible bondholders to accelerate the conversion of their bonds, which further reduced the net debt.

Directors' responsibility statements (required under DTR 4.1.12)

The Directors are responsible for preparing the Annual Report and Financial Statements in accordance with applicable law and regulations.


Group financial statements

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors are required to prepare the Group financial statements in accordance with International Financial Reporting Standards ('IFRSs') as adopted by the European Union ('EU') and Article 4 of the International Accounting Standards ('IAS') Regulation and have also chosen to prepare the Parent Company financial statements in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

In preparing the parent company financial statements, the Directors are required to:

•     select suitable accounting policies and then apply them consistently;

•     make judgements and accounting estimates that are reasonable and prudent;

•     state whether Financial Reporting Standard 101 Reduced Disclosure Framework has been followed, subject to any material departures disclosed and explained in the financial statements; and

•     prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.


In preparing the Group financial statements, International Accounting Standard 1 - 'Presentation of Financial Statements' - requires that Directors:

•     properly select and apply accounting policies;

•     present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

•     provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and

•     make an assessment of the Company's and Group's ability to continue as a going concern.


The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and Group and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.


The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website ( Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.


Directors' responsibility statement


We confirm to the best of our knowledge:


1.   the Group financial statements, prepared in accordance with International Financial Reporting Standards, as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;


2.   the Strategic Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and


3.   the Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's position and performance, business model and strategy.


This responsibility statement was approved by the Board of Directors on 7 March 2018 and is signed on its behalf by:


Tony Durrant

Chief Executive Officer


Richard Rose

Finance Director

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