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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
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Harbour Energy Plc | LSE:PMO | London | Ordinary Share | Ordinary Shares |
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TIDMPMO
RNS Number : 1133C
Premier Oil PLC
10 April 2017
Premier Oil plc (the "Company")
2016 Annual Report and Financial Statements
and Notice of Annual General Meeting 2017
10 April 2017
Further to the release of the Company's Annual Results on 9 March 2017, the Company announces that it has today published its Annual Report and Financial Statements for the financial year ended 31 December 2016 (the "2016 Annual Report") and its 2016 Corporate Responsibility Report. In addition, the Company has today posted to shareholders the Notice of Annual General Meeting ("AGM") 2017. The AGM will be held at No.11 Cavendish Square, London, W1G 0AN, at 11.00am on Wednesday 17 May 2017.
In accordance with Listing Rule 9.6.1., copies of the 2016 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 www.morningstar.co.uk/uk/nsm. The documents (except for the form of proxy) are also available to view on the Company's website at www.premier-oil.com
A condensed set of financial statements and information on important events that have occurred during the year ended 31 December 2016 and their impact on the financial statements were included in the Company's 2016 Annual Results announcement on 9 March 2017. That information together with the information set out below in Appendix 1, which is extracted from the 2016 Annual Report, fulfil the requirements of DTR 6.3.5. This announcement is not a substitute for reading the full 2016 Annual Report. Page and note references in the text in Appendix 1 are made in reference to the 2016 Annual Report. To view the 2016 Annual Results announcement, visit the Company website: www.premier-oil.com/premieroil/investors
Further enquiries:
Company Secretariat:
Daniel Rose Tel: +44 (0)20 7730 1111
Investor Relations:
Elizabeth Brooks Tel: +44 (0)20 7730 1111
Disclaimer
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.
APPIX 1
Company Risk Factors (required under DTR 4.1.8)
Principal risk factor Risk detail How is it managed? Key steps to mitigate in 2016/17 --------------------------- ---------------------------- ----------------------------- ---------------------------- Commodity price Oil and gas prices are Oil and gas price hedging Hedging programme continued volatility affected by global supply programmes to underpin our with fixed price term sales and demand and price can be financial strength and and options to provide some subject to significant protect our capacity protection fluctuations. to fund our future during an extended period of developments and operations. low oil prices. Factors that influence these include operational issues, Premier investment guidelines Economics of development natural disasters, weather, are to ensure that our programmes re-worked to long-term development programmes are reflect low oil price impact of climate change, robust to environment. political and security downside sensitivity price instability, conflicts, scenarios. Discretionary spend economic conditions curtailed. or actions by major oil-exporting countries. Contingency planning for accelerated decommissioning Price fluctuations can of identified production affect our business assets. assumptions and can affect our ability to deliver on our strategy. Specific risks for 2017: inability to execute a satisfactory hedging programme due to low forward oil prices; lack of credit lines for hedging. --------------------------- ---------------------------- ----------------------------- ---------------------------- Financial discipline Risk of covenant breach and Strong financial discipline. Ongoing proactive dialogue and governance that sufficient funds are Premier has an established with lenders. not available to finance the financial management system business. to ensure Economics of investment that it is able to maintain decisions and development Risk of financial fraud. an appropriate level of projects re-worked to Breach of delegated liquidity and financial reflect low oil price authority. capacity and to environment. manage the level of assessed Specific risks in 2017: risk associated with the Deferral of discretionary reduced flexibility to financial instruments. The spend. manage the business due to management tighter controls system includes policies and Unsanctioned development agreed with lenders post a delegation of authority projects deferred and refinancing, including manual to reasonably protect re-shaped. reduced ability to deliver against M&A; ability to risk of financial fraud in Ongoing reduction of comply with reset covenants. the Group. contractor spend. Premier maintains access to Contingency planning for capital markets through the right-sizing and cycle through proactive re-structuring of Group to engagement deliver business goals. with banks and lenders as evidenced by completion of Enhancement of Business refinancing. Control Review process. An insurance programme is put Continued non-core in place to reduce the disposals. 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. --------------------------- ---------------------------- ----------------------------- ---------------------------- Production and Uncertain geology and Geoscience and reservoir Improved production
development delivery reservoir performance engineering management forecasting, enhanced and decommissioning leading to lower production systems, including rigorous reporting and monitoring execution and reserves recovery. production forecasting through further refinement and independent reserves of near-real-time production Availability of services auditing processes. analytics platform. including FPSOs and rigs, availability of technology Effective contracting Improved project planning and engineering strategy, operations, and delivery through better capacity, availability of development and project coordination and execution skilled resources, execution management of cross-functional maintaining project systems and cost controls review prior to decision schedules and costs as well together with capable project gates. as fiscal, regulatory, teams. political and other Continued ExCo, business conditions leading to Long-term development unit and project engagement operational problems and planning to ensure timely on contractor production loss or access to FPSOs, rigs and selection/management. development delay. other essential services. Escrow account for Asian Consequences may include development to fund future lower production, lower Preference for operatorship, decommissioning liabilities. recovery of reserves, as evidenced by 2016 production delays, acquisition of operatorship Expanded decommissioning cost overruns and/or failure of Huntington resources for 2017/2018. to fulfil contractual field. commitments. Engagement with UK Specialist decommissioning government on Immaturity of team in place and continued decommissioning. decommissioning in the North reduction in asset operating Sea and low oil prices, costs leading to aggressive to defer abandonment cost and timing estimates liabilities. for decommissioning of assets. Specific risks in 2017: continued underperformance of Solan field; timing of first oil from Catcher development; offtake demand from Singapore. --------------------------- ---------------------------- ----------------------------- ---------------------------- Joint venture partner Global operations in the oil Due diligence and regular Heightened engagement with alignment and supply and gas industry are engagement with partners in joint venture partners and chain delivery conducted in a joint venture joint ventures in both supply chain counterparties environment. operated and with regard non-operated projects. to their ability to fulfil There is a risk that joint Premier pursues strategic commitments. venture partners are not acquisition opportunities aligned in their objectives where appropriate Various portfolio management and drivers to gain a greater degree of options under review in and this may lead to influence and control. 2017. inefficiencies and/or delays. Several of our major Non-operated ventures projects are operated management system. by our joint venture partners and our ability to Enhance financial due influence our partners is diligence of supply chain sometimes limited providers. Monitor due to our small interest in contractual performance such ventures. and delivery. We are heavily dependent on supply chain providers to deliver services and products to time, cost and quality criteria. Heightened risk during periods of downturn in the upstream services sector. Specific risks in 2017: financial viability of key suppliers, causing delays or cost over-runs on projects or operations; joint venture partner misalignment on decommissioning in UKCS. --------------------------- ---------------------------- ----------------------------- ---------------------------- Organisational Risk that the capability of Premier has created a Continuous improvement of capability the organisation is not competitive remuneration and human resources management adequate to deliver plans retention package including systems and controls. for strategic bonus and long-term growth. The capability of incentive plans to New reward programme the organisation is a incentivise loyalty and good implemented during 2016. function of both the performance from the strength of its human existing, highly skilled Succession planning resources and its business workforce. reviewed. management systems. Inadequate systems or lack Premier continues to Improved Business Management of compliance may strengthen its organisational System platform delivered in lead to loss of value and capability to achieve 2016. failure to achieve growth strategic objectives. targets. Loss of personnel This includes resource to competitors, planning, competency inability to attract and development, training and retain quality human development programmes, resources and competency succession planning including gaps could affect our leadership development. operational performance and delivery of growth strategy. Continuous strengthening of business management systems and controls as appropriate to the size and market position of the Company. --------------------------- ---------------------------- ----------------------------- ---------------------------- Exploration Failure to identify and Strong portfolio management Continued focusing of success and capture acreage and resource and alignment with strategic exploration portfolio. reserves addition opportunities to provide a growth targets. portfolio Deepened equity interest in of drillable exploration Appropriate balance between Mexico and plans to develop prospects and future growth by exploration and prepared. development projects. acquisition. Specific exploration Mature portfolio acquired programmes may fail to add Exploration management from E.ON in 2016.
reserves and hence value. systems including comprehensive peer review Continued exiting of Failure to negotiate access with focus on geologies non-core areas. rights or close transactions in core areas we know well could slow growth of and in which we can build a Proactive engagement with reserves and competitive advantage. lenders on exploration production and lead to loss strategies. of competitive advantage. M&A effort focusing on geographical and technical Lender controls reduce areas aligned with our ability to capture and strategy. Diligence execute exploration in acquisition process and programme. post-acquisition integration to ensure targeted returns. --------------------------- ---------------------------- ----------------------------- ---------------------------- Health, safety, Major process safety Comprehensive HSES and Further embedded electronic environment incident or operational operations management systems incident-recording and and security accident, natural disasters, including emergency and oil action-tracking system, ('HSES') pandemics, social spill response implemented HSES unrest, civil war. capability and asset self-audit system. integrity. Consequences may include Further embedded accidents resulting in loss Active security monitoring implementation of asset of life, injury and/or and management and regular integrity scorecard significant pollution testing of business methodology (covering of the local environment, continuity plans. people, destruction of facilities plant and process lead and disruption to business Learning from Company and indicators) at all operated activities. third-party incidents. production assets. --------------------------- ---------------------------- ----------------------------- ---------------------------- Host government: Premier operates in some Premier's portfolio includes Improved provision of political and fiscal risks countries where political, operations in both low and politico-economic economic and social higher risk environments. /security/societal risk transition is taking Premier assessment informing place or there are current actively monitors the local investment sovereignty disputes. situation and has business decisions. Developments in politics, continuity plans in each area laws and regulations which Strengthened Corporate can affect our operations can be activated depending on Responsibility ('CR') and earnings. pre-defined levels of alert. management system and ongoing improvements to Consequences may include Premier strives to be a good CR reporting. forced divestment of assets; corporate citizen globally, limits on production or cost and fosters reputation by Ongoing cost/benefit recovery; strong assessment of political risk import and export and positive relationships insurance on case-by-case restrictions; changes in with government and basis. legislation due to climate communities where we do change; international business. Premier engages Engagement with Falkland conflicts, including war, in respectful industry-wide Islands and UK governments civil unrest and local lobbying and sustainable on fiscal terms. security concerns that corporate responsibility and threaten the safe community operation of Company investment programmes. facilities; price controls, Rigorous adherence to tax increases and other Premier's business ethics retroactive tax claims; policy and code of expropriation of property; conduct. cancellation of contract rights; and increase in Continuous monitoring of the regulatory burden. external environment for It is difficult to predict emerging risks to the the timing or severity of business. these occurrences or their potential Proactive engagement with impact. regulatory authorities. --------------------------- ---------------------------- ----------------------------- ----------------------------
Key Performance Indicators (required under DTR 4.1.9)
Working interest production (kboepd)
Objective
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.
2016 Progress
Average daily production in 2016 was 71.4 kboepd, a record for Premier and in line with previously increased market guidance. The increase in production on the prior year was driven by new production from the E.ON assets, a new contribution from the Solan field which was brought on-stream during 2016 and high operating efficiency across the Group's existing production portfolio. Premier sanctioned the development of the Bison, Iguana, Gajah Puteri gas fields post period end which will support our long-term contracts under which we deliver gas into Singapore. We have also progressed Tolmount which is likely to provide the next phase of growth beyond Catcher.
2017 Expectations
With a full-year contribution from the E.ON assets and also from the Solan field. Premier expects a further step up in production in 2017 from its existing producing assets. Premier also expects to bring on-stream the Catcher project in the second half of the year which, once at plateau rates, will add at least a further 25 kboepd to the Group's production.
Reserves and resources (mmboe)
Objective
Premier aims to grow its reserves and resources base through a combination of successful exploration and selective acquisitions.
2016 Progress
Proven and Probable ('2P') reserves at the end of 2016 were 353 mmboe (2015: 332 mmboe). The increase reflects 38 mmboe added as a result of the acquisition of the E.ON assets. In addition, Premier also revised upwards its estimates of Chim Sáo's reserves by 13 mmboe as a result of an extended field life facilitated by a lower FPSO lease rate and better than expected reservoir performance. These additions more than offset the impact of 2016 production and a downward revision in reserves at Solan as a result of poorer than anticipated reservoir performance. Premier also added 54 mmboe of resources in respect of the Tolmount project which we acquired as part of the E.ON acquisition.
2017 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 2017. Offsetting this will be production and the potential sale of our Pakistan business which accounted for 2 per cent of our 2P reserves as at the end of 2016. Premier also plans to drill its first well on its Mexico acreage in 2017 which will target the Zama structure and has the potential to increase significantly the Group's resource base.
HSES Index
Objective
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 Health, Safety, Environment and Security ('HSES') performance using a blended, weighted score covering a range of key HSES metrics.
2016 Progress
Overall performance was at or just above expectation. We incurred more recordable injuries than in 2015, and although we had a similar number of high potential events, none of these were in the highest category from a safety perspective. We saw very strong process safety performance, with no significant process safety loss of primary containment ('LOPC') and strong process safety and asset integrity audit results from our operated assets. Greenhouse gas intensity also improved when compared to the previous year. We also set targets for the first time for our senior management to visit our operated facilities to visibly demonstrate their commitment to our HSES values to our workforce.
2017 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 Oil & Gas Producers index with the aim of driving continuous improvement year on year. In 2017 we will introduce corporate targets for hydrocarbon spills and routinely report performance alongside our other existing KPIs. We will also focus our HSES resources in seeking to improve our hazard recognition and the quality of our incident investigations and HSES auditing.
Liquidity (US$ million)
Objective
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 and where necessary will seek farm-in partners for drilling programmes and development projects to maintain this discipline.
2016 Progress
During 2016, Premier remained focused on reducing its operating cost base and capital commitments from existing operations. This, together with a record production performance and continued access to our undrawn bank facilities, enabled us to deliver our capital investment programme and to fund the acquisition of the E.ON assets despite oil prices reaching a historic low. Premier also entered into discussions with its lending groups to amend the terms of its financing agreements, including extending maturities out to 2021 and resetting its financial covenants.
2017 Expectations
Premier will continue to take appropriate steps in 2017 to ensure it maintains sufficient liquidity to deliver its operated Catcher project. We expect to complete a comprehensive refinancing of all our debt facilities by mid 2017 and 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 and, when market conditions allow, 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)
Objective
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.
2016 Progress
Premier's operating cash flow for 2016 of US$431.4 million (2015: US$809.5 million) was impacted significantly by the external macro environment which saw the oil price average US$43.7/bbl (2015: US$52.4/bbl). Consequently, Premier realised an average price for the year post hedge of US$52.2/bbl. This was only partially mitigated by a strong production performance, tight cost control and a hedging programme.
2017 Expectations
Future production growth together with Premier's low cost base will underpin 2017 operating cash flow. In particular, Premier anticipates a full year of tax-advantaged production from the E.ON portfolio and the Solan field. In addition, new production from the Catcher field will contribute materially to the Group's operating cash flow from the second half of 2017. Premier will continue to look to hedge to protect its future cash flows and our investment programme. We have hedged 37 per cent of 2017 oil production at US$51/bbl and 41 per cent of our UK gas production at 50 pence/therm.
Operating costs (US$/boe)
Objective
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.
2016 Progress
Operating costs remained low at US$15.8/boe in 2016 (2015: US$15.5/boe), 10 per cent below budget. This was driven by high operating efficiencies across our producing portfolio, a weaker sterling exchange rate as well as continued cost savings across the business.
2017 Expectations
Premier expects operating costs in 2017 to stay flat at c. US$16/ boe, despite more of the Group's production coming from the relatively higher cost UK North Sea. This will be underpinned by continued focus on maximising operating efficiencies and controlling operating costs. Premier anticipates that further significant reductions will originate from collaboration and efficiency savings.
Net debt (US$ billion)
Objective
Premier aims to control the absolute levels of its net debt such that it remains in compliance with its financial covenants. Reducing our net debt is also critical in order to address the imbalance of our capital structure 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 controls.
2016 Progress
Net debt at year end was US$2.8 billion, and while below our own internal forecasts this was up on the year-end 2015 position. This was as a result of our significant capital expenditure programme of US$678.1 million (driven by our sanctioned UK North Sea projects and the completion of the Falkland Islands drilling programme) as well as the continued depressed commodity prices.
2017 Expectations
Premier plans to be cash flow positive in 2017 at oil prices above US$50/bbl (including planned disposals) enabling debt reduction. With forecast low operating costs, a significantly reduced capital expenditure of US$390 million and higher production, driven by our UK tax advantaged assets, Premier is well placed to deliver on this target.
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 (www.premier-oil.com). 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 8 March 2017 and is signed on its behalf by:
Tony Durrant
Chief Executive Officer
Richard Rose
Finance Director
This information is provided by RNS
The company news service from the London Stock Exchange
END
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April 10, 2017 11:55 ET (15:55 GMT)
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