Premier Oil's Losses Widen After Write-Downs

LONDON—Premier Oil PLC, one of the U.K.'s biggest independent oil companies, on Thursday reported a wider full-year loss after it wrote down the value of some of its oil and gas fields by just over $1 billion before tax because of the sharp decline in oil prices.

It was the second consecutive year that Premier took an impairment on its assets, highlighting the continued pain felt across the energy industry as the oil price rout shows no signs of abating.

From the smallest explorers and service companies all the way up to the supermajors such as Exxon Mobil Corp. and Royal Dutch Shell PLC, earnings have plummeted and profits have slumped amid the decline in oil prices, which have fallen some 70% since mid-2014 to around $35 a barrel currently.

While the entire oil and gas sector is suffering, the smaller independents that play a key role opening up new regions of the world to oil and gas development, have been at the sharp end of the slumping oil price. Unlike the major oil companies, explorers don't have other parts of their businesses to fall back on when oil prices are down, such as refining and marketing, and have had to slash costs and capital expenditure and delay more expensive projects.

Premier has already reduced operating costs in 2015 by a quarter and plans more cuts this year including a significant reduction in capex this year and next.

"I don't think the oil price will stay at $35 for very long, but what we're not doing is building a business that only survives at $75 a barrel. We're getting our business into shape to survive a sub-$50 oil price in the long run," Premier Chief Executive Tony Durrant said in an interview.

One project that Premier has delayed is its Sea Lion oil field in the Falkland Islands. The company has begun advanced engineering for the development, which will take about 18 months.

"We're looking for further cost savings on Sea Lion. We're not going to sanction the project today or if we're concerned about the long-term price," Mr. Durrant said.

Premier's 2015 impairment was principally related to its Solan field in the U.K. North Sea. It took the company's posttax loss to $1.1 billion for the year ended Dec. 31, 2015 compared with a posttax loss of $210 million the year before.

Revenue fell 35% to $1.07 billion on lower achieved oil and gas prices and a 9% drop in oil and gas output to 57,600 barrels of oil equivalent a day last year.

Premier's shares fell as much as 9.1% before paring back losses to 39.8 pence each, down 4.36% on the day.

The company said it plans to produce 65,000 to 70,000 barrels of oil equivalent a day following a contribution from its proposed $135 million acquisition of German utility E.ON SE's U.K. North Sea assets, which are mainly gas fields, and output from Solan, which is due to start producing soon.

Premier said about 30% of its 2016 oil production will be hedged at $73.4 a barrel once the acquisition of E.ON's U.K. assets completes. Premier's net debt rose to $2.24 billion, up from $2.12 billion in 2014.

Write to Selina Williams at [e-mail] and Alex MacDonald at [e-mail]

(END) Dow Jones Newswires

February 25, 2016 07:45 ET (12:45 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.