Annual Results Presentation

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27 Feb 2014

27 Feb 2014

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  • 1. 2013 ANNUAL RESULTS PRESENTATION // 27 February 2014
  • 2. Forward looking statements This presentation may contain forward-looking statements and information that both represents management's current expectations or beliefs concerning future events and are subject to known and unknown risks and uncertainties. A number of factors could cause actual results, performance or events to differ materially from those expressed or implied by these forward-looking statements. 27 February 2014 // Page 1
  • 3. Agenda Introduction, Highlights, Production Business Units review Exploration update 2013 financial results Summary / Outlook Simon Lockett Robin Allan Andrew Lodge Tony Durrant Simon Lockett 27 February 2014 // Page 2
  • 4. Introduction Premier today • Robust cash flow and profitability • 800 mmboe reserves and resources • Key exploration campaigns in Indonesia, Norway and Falklands • NAV >£5 per share (broker consensus) • Production increased to 68 kboepd year to date • Cash dividend and buyback programme Going forward The Board will: • Give priority to balance sheet strength • Focus investments on our highest return projects • Reduce capital exposure to the Sea Lion project “...our strategy is to invest in high-quality developments whilst maintaining balance sheet strength...” 27 February 2014 // Page 3
  • 5. Highlights • Strong and rising cash flows of $833m ($808m*) • Cash of $449m ($187m*) • Facilities increased to $1.2bn ($900m*) – extended maturities at attractive rates • Recommended dividend of 5p/sh • Up to £75m buyback • Successful asset sales in 2013 – further disposals planned in 2014 *2012 27 February 2014 // Page 4 • Production currently 4 kboepd ahead of budget • Dua, Pelikan and Naga expected in 2014 • Solan – progressing towards sail-away • Catcher – final sanction imminent • Sea Lion – TLP and phased development concept selected • 6 discoveries from 7 exploration wells • Focusing on emergent exploration plays
  • 6. Production Delivery capacity is the lower of field well capacity, facilities capacity or the expected market demand for output Operating efficiency is the actual production rate divided by the delivery capacity 27 February 2014 // Page 5
  • 7. Business Units review
  • 8. North Sea Production • 14.9 kboepd (2012: 12.1 kboepd) • Strong production from Wytch Farm and Scott/Telford • Huntington production reached 35 kboepd Development • Solan, Catcher and Bream • Kyle redevelopment due on-stream in Q3 2014 – $55m insurance claim settled Exploration • Discoveries at Luno and Bonneville • Farmed into Bagpuss/Blofeld • Increased position on Mandal High • 23 licences divested 27 February 2014 // Page 7
  • 9. North Sea – Solan Development drilling • Reservoir reached on prognosis • Pressure data indicates good reservoir connectivity • 2nd phase of drilling to start in April 2014 Platform and subsea • Tank, topsides and jacket over 80% complete Key milestones • Installation planned July & August 2014 • First oil Q4 2014 Project metrics • 24 kbopd gross post ramp up • Capex $26/bbl; Opex $18/bbl • 60% equity – rapid project payback from 75% of cash flows 27 February 2014 // Page 8 Topsides in Methil, Scotland Subsea tank in Dubai, UAE Jacket in Methil, Scotland
  • 10. North Sea – Catcher • First oil 2017 • Capex ~$24/bbl • 2P reserves of 92 mmboe – Upside of 140 mmboe • Development drilling starts 2015 • Rig and well systems contracts awarded Update • Field Development Plan submitted to DECC, project budget to partners • Negotiations with FPSO provider concluding Catcher area development scheme 27 February 2014 // Page 9
  • 11. North Sea – Bream Area Development concept • 2C resource estimate: 70 mmboe • Mackerel – 17km tie-back to Bream FPSO • Herring prospect – upside potential Key milestone • Year-end partner sanction decision Bream Mackerel Herring 27 February 2014 // Page 10
  • 12. North Sea – looking forward • Optimise levels of operating efficiency • Rising cash flow from new developments returning >20% IRR • Maximize the benefit of our UK CT losses and allowances of $2.3bn • Exploration reduced to a smaller number of key wells • Current disposal programme of non-core assets – Includes Luno and Scott area 27 February 2014 // Page 11
  • 13. Pakistan Production • 14.9 kboepd (2012: 15.6 kboepd) • Gas demand and cash flows remain strong • Improving recovery – Infill wells established new zones in Badhra, Bhit and Kadanwari – Adding compression at Badhra, Bhit and Qadirpur Exploration • Success at K-32 and Badhra B North-2 – 8 consecutive E&A successes • 5 E&A wells planned in 2014 27 February 2014 // Page 12 Kadanwari Bhit
  • 14. Vietnam Production and development • 2 year payback • 14.1 kboepd (2012: 15.2 kboepd) – Reduced due to gas export pipeline damaged by 3rd party • Year to date production of 18 kboepd (net) • ~$6/bbl premium to Brent oil price • Dua on-stream mid-2014 – Subsea development tied back to FPSO – Development drilling underway Exploration • Block 121 – 2D seismic planned for 2014 Portfolio management • Sale of Block 07/03 for $45m cash – $55m contingent upside 27 February 2014 // Page 13 West Telesto on Dua Dua template installation
  • 15. Indonesia Production • Singapore demand remains above minimum contract volumes • 13.7 kboepd (2012: 14.2 kboepd) • Average price of $17/mcf achieved (GSA1) – Contractual share increased to 39.4% – Year to date actual ~47% Development • Anoa Phase 4 successfully completed • Pelikan and Naga onstream 2014 2H – Platforms loaded out and installed – Development drilling to commence shortly Exploration • Matang gas discovery in 2013 • Kuda/Singa Laut results 2014 1H • Follow-up drilling to Lama play discovery at Anoa Deep 27 February 2014 // Page 14
  • 16. Concept selection highlights • Tension leg platform with permanent drilling rig selected – Minimal subsea infrastructure – Better economics than a new build FPSO scheme • Phased development – Phase 1 recovers 293 mmstb over 25 years from 32 wells – Phase 2 development plan will incorporate results from exploration Schedule • Award of FEED Contracts in Q2 2014 • Farm down process prior to sanction Falkland Islands – Sea Lion 27 February 2014 // Page 15
  • 17. Exploration
  • 18. 2013 exploration results • 6 discoveries from 7 exploration wells – Luno II and Matang – 40 mmboe of resources added – Finding costs $5.3/boe (pre-tax) • >800 mmboe unrisked prospective resources added – Brazil and onshore Kenya – North Falklands Basin – Bagpuss/Blofeld, UK – Mandal High, Norway • Portfolio management – 25 licences divested 2013 drilling success rate of >80% 27 February 2014 // Page 17
  • 19. 2014 indicative exploration drilling programme 27 February 2014 // Page 18 5 high impact wells planned
  • 20. Indonesia – Kuda/Singa Laut • 2 wells planned to drill the Kuda/Singa Laut prospect • Kuda Laut is a four way dip closure targeting Miocene sands • Singa Laut is the adjoining three-way structure with reservoirs in the lower Miocene and Oligocene • Low risk for gas, high risk for commercial oil • Gross prospective resource: 10-37-99 mmbbls NW Belut Laut-1 TD 4977m MMU L.Terumbu Arang Gabus 27 February 2014 // Page 19 Chim Sáo analogue SE Kuda Laut Singa Laut
  • 21. Indonesia – Lama play 27 February 2014 // Page 20 • Proven by Premier’s Anoa Deep in 2012 – 17mmscfd • Identified look-a-like opportunities from shows in existing wells • 5 prospects and leads – Ratu Gajah Q1 2014 – Anoa Deep appraisal Q4 2014 • Gross prospective resource on block ~2 TCF Kuskus lead Ratu Gajah East prospect Ratu Gajah prospect Anoa North High impact potential from the “missed” gas pay zones Anoa West
  • 22. Indonesia – Ratu Gajah well • Gross prospective resource: 60-225-700 bcf • Follow up potential at Ratu Gajah East • Originally drilled in 1984 – not flow tested – Gas readings, high resistivity and mud losses, same as Anoa Deep – Similar in Babar-1 and Koko-1 wells Raja Gajah-1 Ratu Gajah Top Sand A (Top Lama) depth map Babar-1 Koko-1 Ratu Gajah-1 proposed location Ratu Gajah East prospect Re-drilling an existing gas discovery 27 February 2014 // Page 21
  • 23. Norway – Luno II • First oil discovery on south west margin of Utsira High • Luno II Central segment to be appraised in Q2 2014 • Further exploration potential remains on PL 359 – including Luno II North Central 1 Discovery North 2 North 1 Johan SverdrupLuno/Apollo Ragnarrock PL 359 BCU Time Map C.I. 100ms 10km Luno II discovery 16/4-6 16/5-5Luno II appraisal Luno II Central Luno II S.Luno II North (Prospect) BCUTop Chalk Balder Basement 27 February 2014 // Page 22 Appraising a material discovery
  • 24. Norway – Mandal High • Built on acreage position around Mandal High – 20% equity in PL663 – 2013 – 70% and 50% in PL725 and PL726 – 2014 – Drill or drop options • >500 mmboe of gross unrisked prospective resources • Myrhauk – Rig contracted; spud Q4 2014 – Gross prospective resource: 10-50-135 mmboe – Critical risk: reservoir presence 27 February 2014 // Page 23 Myrhauk Prospect MANDAL HIGH 3 way dip closure with up-dip pinch-out trap NESW Play opening test
  • 25. 27 February 2014 // Page 24 • Over 9 bnbbls discovered in the Muglad, Albertine and Lokichar Basins • Look-a-like plays identified in the Anza Basin • Farmed into Block 2B to drill the Badada prospect – 55% equity • Targeting Tertiary reservoirs similar to Albertine and Lokichar Basins • Gross unrisked prospective resource on block >1.5 bnbbls • Badada prospect – Robust closure confirmed by new 2D – Critical risk: source maturity and charge Kenya – Southern Anza Basin Source: Taipan Resources Play opening test of the South Anza Basin
  • 26. • Under-explored, emerging plays in proven deep water basins offshore NE Brazil – Plays targeted are above and within Cretaceous rifts – Access to >1 bnbbls unrisked gross resources • Awarded 3 blocks in Brazil’s 11th Bid Round – 5 year exploration periods – 3D seismic being acquired in 2014/15 in each block • Cost mitigation by multi-client seismic acquisition and future rig share • Potential pre-drill farm down to manage capital exposure • Earliest well late 2016 Brazil exploration – new country entry Exposure to high impact emerging plays 27 February 2014 // Page 25
  • 27. • High quality dataset • Unrisked mean gross prospective resource of 1bn bbls (250 mmbbls risked) • Four E&A wells to be completed by end of 2015 – Upside in Sea Lion west flank/Chatham – Development-changing potential in Zebedee and Jayne East – Large fan complex – Elaine/Isobel area • Rig tenders being evaluated – Follow-up exploration and appraisal wells possible through options Lower F2 amplitude extraction F3G amplitude extraction Jayne East Elaine- Isobel Orinoco Zebedee Sea Lion fan outline 30km Falklands – high impact drilling in 2015 27 February 2014 // Page 26
  • 28. • Reducing E&A investment in the UK North Sea Reducing exposure to mature basins • Active disposal and relinquishment programme of assets that do not meet internal metrics • Management of equity exposures pre-drill Capital efficiency • Drilling in Indonesia, Kenya and Norway in 2014 • Maturing prospects across Brazil, Kenya, Iraq, Vietnam and Norway for drilling in 2015/2016 • Falklands matured for drilling in 2015 Exploration business model Focus on high impact opportunities in emerging plays 27 February 2014 // Page 27
  • 29. 2013 Financial Results
  • 30. Income Statement 12 months to 31 Dec 2012 Operating costs (US$/bbl) 2013 2012 UK $43.3 $41.9 Indonesia $10.9 $11.2 Pakistan $2.5 $2.3 Vietnam $20.9 $13.7 Group $19.7 $16.2 Highlights12 months to 31 Dec 2013 Working Interest production (kboepd) Entitlement production (kboepd) Realised oil price (US$/bbl) - pre hedge Realised gas price (US$/mcf) - pre hedge Sales and other operating revenues Cost of sales Gross profit Exploration/New Business General and administration costs Operating profit Financial items Profit before taxation Tax credit/(charge) Profit after taxation 57.7 51.6 111.4 8.3 US$m 1,409 (742) 666 (187) (24) 455 (95) 360 (108) 252 58.2 52.4 109.0 8.3 US$m 1,540 (1,035) 505 (133) (20) 352 (67) 285 (51) 234 • 32% of 2014 production sold forward at average equivalent of US$104/boe • Currently unhedged for 2015 Hedging Includes impairment charges of US$179m (pre-tax) Effective tax rates (%) 2013 2012 Overseas 38 42 Group 18 30 27 February 2014 // Page 29
  • 31. Cash Flow Statement Cash flow from operations Taxation Operating cash flow Capital expenditure Partner funding (Solan) (Acquisitions)/disposals, net Finance and other charges, net Dividends Pre-licence expenditure Net cash out flow 12 months to 31 Dec 2012 $m 1,041 (233) 808 (772) - (211) (163) - (29) (366) 12 months to 31 Dec 2013 $m 1,061 (228) 833 (878) (186) 61 (91) (40) (30) (331) 2013 2012 Exploration $207 $187 Development $658 $569 Other $14 $16 Total $878 $772 Capital expenditure ($m) Highlights Development costs include pre development projects • 2014 guidance of $1bn of development and $180m of exploration (pre-tax) 27 February 2014 // Page 30
  • 32. Cash Bank debt Bonds and loan notes Convertibles Net debt position Gearing Cash and undrawn facilities 187 (500) (578) (220) (1,110) 36% 1,100 449 (686) (992) (224) (1,453) 41% 1,600 • Average interests costs are 4.7% (fixed) and 1.9% over LIBOR (floating) • Split 75/25 between fixed/floating • Continue to switch to longer maturity bond market instruments 1 Maturity value of US$245 million At 31 Dec 2012 US$m At 31 Dec 2013 US$m 1 2 Net debt/net debt plus equity 2 Liquidity and balance sheet position 3 Excludes uncommitted letter of credit facilities of $275 million Repayment of drawn facilities and committed LCs 3 27 February 2014 // Page 31
  • 33. Forward Financial Profile 27 February 2014 // Page 32 • The business is managed using $85/bbl base case –Asset cash flows supplemented by disposal programme –Discretion around exploration spend / unsanctioned projects –Self-imposed covenant headroom / maximum gearing levels • At current oil prices, substantial capacity for: –Debt reduction –Enhanced shareholder distributions –Incremental investment projects
  • 34. Outlook
  • 35. Outlook • Maintaining financial strength, flexibility and growing cash flows • Dua, Pelikan, Naga and Solan on-stream • Catcher JV sanction; Bream sanction decision • Sea Lion partner prior to sanction • Key wells: Tuna block, Kenya, Norway, Falklands • Disposal programme ongoing • Commencing buyback 2013 2014 Post Solan Post Catcher Cash Flows (Current Oil Prices) 27 February 2014 // Page 34
  • 36. Appendix
  • 37. End 2013 2P reserves and contingent resources Falkland Islands Indonesia Norway Pakistan & Mauritania UK Vietnam Total 2P Reserves On production - 34.5 - 19.6 37.4 24.3 115.9 Approved for development - 22.7 - 2.6 30.0 9.1 64.5 Justified for development - 24.5 - 1.1 53.5 - 79.0 Total Reserves - 81.7 - 23.3 121.0 33.4 259.4 2C Contingent Resources Development pending 230.5 - 72.7 3.8 4.2 - 311.3 Development un- clarified / on hold 41.5 78.9 23.6 8.7 21.0 7.4 180.9 Development not currently viable - 4.5 2.3 5.5 27.7 2.2 42.1 Total Contingent Resources 272.0 83.3 98.6 18.0 52.8 9.6 534.4 Total Reserves & Contingent Resources 272.0 165.0 98.6 41.4 173.8 43.0 793.8 27 February 2014 // Page 36
  • 38. www.premier-oil.com 27 February 2014