The rehabilitation of hydrocarbons producer Premier Oil (PMO) is reflected in a robust set of full year results, helping to drive up the shares by 3.7% to 73.6p.
Despite a significant financial restructuring in 2017, the company still has net debt of $2.7bn. This dwarves the market cap and helps explain why the shares have been weak in recent weeks as some heat has come out of the oil price rally.
Indebted oil firms are particularly sensitive to movements in the oil market as even relatively modest movements can make a significant difference to their financial position.
Premier is targeting net debt of less than three times earnings within 18 months but this could be set back if oil prices were to crash again.
DEBT STILL DOMINATES
Cash flow from Premier’s operations was up 15% in 2017 at $496m and output hit its highest ever level of 75,000 barrels of oil equivalent per day.
Guidance is for production of between 80,000 and 85,000 boepd in 2018, which may prove conservative given the successful start up of the Catcher field at the back end of 2017.
The company may be planning an appraisal well on the large Zama discovery in Mexico - this was one of the big operational plus-points from last year.
Other developments in the pipeline include the Tolmount field in the North Sea and the Sea Lion field off the Falkland Islands.
Davy analyst Job Langbroek comments: ‘In terms of growth, the year ahead should see Tolmount sanction and Sea Lion progress towards project sanction.
‘On the exploration side, 2018 may see an appraisal well on the Zama discovery. All are decent projects trying to get market attention over the call to financial probity.’
