Premier Oil Plc (PMO), an explorer with operations from Brazil to Vietnam, expects to fix a gas-venting failure at the North Sea Huntington oilfield within about 10 days, allowing it to maintain a production target for the year.
The field, run by partner EON SE, has been ramping up production since a failed gas compressor was fixed this year. While the equipment was repaired, gas is still building up from venting during calm weather, triggering alarms and halting output, Premier Chief Executive Officer Simon Lockett said.
“We expect it to be done within the next 10 days or so,” Lockett said today in a phone interview. “When the wind conditions are high enough, i.e. greater than 10 knots, basically we can still produce.”
Premier said its full-year output forecast of 63,000 barrels of oil equivalent a day depends on Huntington’s performance. The London-based company is building new projects in Vietnam, Indonesia and the North Sea to raise production to about 100,000 barrels a day in the “medium term.”
Premier today posted first-half net income of $161 million, missing analyst estimates. Its shares declined 2.9 percent to 346.50 pence, the biggest drop since May 23 in London.
The earnings were “messy” and incorporated a $77 million impairment, in part because five wells at the North Sea Balmoral field were halted, Oswald Clint, an analyst at Sanford C. Bernstein & Co., said in an e-mailed report.
Huntington, where Iona Energy Inc. (INA) and Norwegian Energy Co. AS are also partners, is now able to pump about 27,000 barrels a day, Premier said in a statement. The company expects to raise output at the deposit to 30,000 barrels a day in the “short term” after the venting fault is fixed, Lockett said.
“What we do need to happen, of course, is for Huntington to be fully up and running” by the end of September to avoid reducing the annual production forecast, Lockett said. “There is a very good probability of that happening.”
Premier’s operating cash flow grew 18 percent to $384.9 million in the first half from a year earlier, it said today.
The producer also operates off the Falkland Islands in the Atlantic Ocean. With partner Rockhopper Exploration Plc (RKH), it plans to develop the Sea Lion project to recover a targeted 400 million barrels of oil. They are now reviewing production options in an effort to maintain projected costs at about $5 billion and may pump first oil in 2018.
The companies also plan to hire a rig to drill at least three wells to explore the area further, Lockett said.
“We are in discussions with the other operators in the Falkland Islands to bring a rig down there,” the CEO said. He expects to share hiring costs with Noble Energy Inc. (NBL:US) and Borders & Southern Petroleum Plc (BOR), also exploring off the archipelago.
Rockhopper, which expects to make an investment decision on Sea Lion toward the end of next year, said today the Falkland Islands’ government is claiming a $296 million capital-gains tax after the company sold 60 percent of its assets to Premier in 2012. Rockhopper has objected to the claim.
Rockhopper’s shares fell 13 percent to 120 pence, the biggest decline in more than two years, in London trading.
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