RNS Number:1417J
Premier Oil PLC
25 March 2003
PREMIER OIL PLC
("Premier")
Preliminary Results for the year ended 31 December 2002
Premier is an independent exploration and production company with gas and oil
interests principally in the UK, Pakistan, Indonesia and Myanmar.
Highlights
Restructuring
* $670 million (#416 million) restructuring announced in September 2002 to
transform Premier into a fully independent oil company
* Transfer of Myanmar interests and part of Indonesian business in exchange
for Petronas' and Amerada Hess' combined 50% shareholding in Premier, and
cash of $376 million (#234 million)
* Completion imminent - expected early in the second quarter 2003
* Post restructuring, Premier will have total reserves of over 200 mmboe;
production of approximately 35,000 boepd, net debt of #47.1 million and
gearing of 17%, all pro forma at year end 2002
Improved finances
* Turnover up 23% at #263.1 million (2001: #213.8 million) reflecting higher
production
* Operating profit, before exceptional items, #28.6 million higher at #117.2
million
* Profit after tax and earnings per share both 23% higher, at #25.0 million
and 1.58 pence respectively (2001: #20.3 million and 1.28 pence)
* Exceptional charge of #13.1 million following a review of the carrying
value of UK investments
* Profit after tax, before exceptional items, 90% higher at #38.1 million
(2001: #20.1 million)
* Operating cash flow after interest and taxes up #41.5 million at #136.1
million
* Net debt reduced by #129.8 million to #249.5 million
Operational success
* Production up 31% at 53,600 boepd (2001: 40,900 boepd) - above top end of
target range of 45-50,000 boepd
* Higher gas deliveries from major operated gas projects in South East Asia
* Bhit gas field in Pakistan commenced production in December 2002
* Zamzama full field gas development in Pakistan on track for start up in
2003
* Increased gas sales from the Qadirpur gas field in Pakistan agreed in
principle
* Additional 5% interest in UK Kyle field acquired for #3.4 million
* Yetagun capacity upgrade to 300 mmscfd of gas deliverability complete
* Top quartile safety performance on operated facilities
Sir David John, Chairman, commented:
"Premier's year has been dominated by our main objective which was the corporate
restructuring announced in September 2002. Along with this the company has
recorded another year of improved financial and operational performance.
2003 promises to be an exciting and challenging year for Premier. We have laid
out a strategy of achieving success through adding significant value through
exploration success and commercial deals - actively managing our portfolio to
realise extra value for shareholders. We have now begun to implement this
strategy."
25 March 2003
ENQUIRIES:
Premier Oil plc Tel: 020 7730 1111
Charles Jamieson
John van der Welle
College Hill Tel: 020 7457 2020
James Henderson
PREMIER OIL PLC
Preliminary Results for the year ended 31 December 2002
Chairman's Statement
2002 has been a very significant year for Premier, dominated by the corporate
restructuring announced in September. This was the main objective for 2002 and
it involved a great deal of work in complex negotiations and structuring. Along
with this notable achievement, the company has recorded another year of improved
financial and operational performance.
Financial and Operating Performance
Net profits for the year amounted to #25.0 million (2001: #20.3 million).
Profits are shown on a pre-restructuring basis, as required by UK accounting
standards. Net profits reflect an improvement of 23% over 2001, even after
allowing for a prudent write-off of capitalised exploration expenditure of #17.7
million. The statutory reported net profits amount excludes #4.2 million (2001:
#14.2 million) associated with take or pay receivables on gas contracts.
Earnings per share of 1.58 pence have risen by 23% over the last year.
Production averaged 53,600 barrels of oil equivalent per day (boepd) - up 31% -
which, with continued strong oil and gas prices contributed to an increased
turnover figure of #263.1 million, up 23% on 2001. Gas revenues have become more
of a factor as the percentage of gas in our production mix rose from 47% in 2001
to 60% in 2002. Premier's gas is predominantly sold under long term gas supply
contracts, where prices move approximately in line with crude oil.
Net cash flow, including joint ventures, was strong at #93.2 million (2001:
#87.6 million), after a capital expenditure programme of #73.1 million, of which
#35.0 million was on exploration and appraisal and #34.6 million on development
activities, partly offset by portfolio management proceeds of #23.4 million.
Year end, net debt, including joint venture balances, was #249.5 million, a
substantial reduction of #129.8 million over the year.
Operationally, highlights included agreeing increased gas sales from the Zamzama
and Qadirpur gas fields in Pakistan, which should see production in Pakistan
rise to over 10,000 boepd net to Premier by year end 2003. Regarding the
Yetagun gas field in Myanmar, an agreement was signed with the gas buyer PTT of
Thailand which resulted in the settlement of the $22.7 million outstanding take
or pay liability. The upgrade of facilities on the Yetagun production
platform to allow rates of up to 300 million standard cubic feet per day
(mmscfd) of gas was successfully completed in October, and production has been
running at above contract quantities for the past three months.
More recently, the Bhit gas field in Pakistan has come onstream. Gross contract
production levels are planned to climb to 240 mmscfd by June 2003, of which
Premier's net interest is 2,400 boepd. The Zamzama full field development in
Pakistan is on track for start up in 2003.
Restructuring
The announcement of the major restructuring of Premier on 16 September 2002 was
a substantial achievement, resulting in the $670 million sale of our interests
in Myanmar and part of our Indonesian business for a consideration of the
combined 50% shareholding in Premier of Petronas and Amerada Hess, and cash.
We have agreed the legal form of the transfer of the assets with Petronas and
Amerada Hess, and with the Yetagun joint venture partners in respect of their
pre-emption. We have also obtained written approval of the deal from the
Indonesian government, and approval in principle from the Myanmar authorities.
Details relating to the Yetagun pre-emption are being finalised and we expect to
complete the restructuring early in the second quarter 2003.
Post restructuring, Premier will have over 200 million barrels of oil equivalent
(mmboe) of total reserves, production of around 35,000 boepd and a significantly
stronger balance sheet. As at the end of 2002, post restructuring proforma net
debt amounted to #47.1 million, with gearing at only 17%.
New Premier will focus primarily on its existing core areas of the UK, South and
South East Asia and West Africa. The principal objective will be to add
significant value for shareholders through exploration success and commercial
deal-making.
The restructuring had become an imperative following the difficulties
experienced in fulfilling the strategic goal of the alliance with Petronas and
Amerada Hess set up in 1999 to make Premier into a leading South East Asian gas
company. The need for a new strategy, and to reverse the under-performance of
Premier shares despite improved financial returns and operational success, had
become critical. I would like to thank Petronas and Amerada Hess for their
support for Premier during the last few years and for their co-operative
approach to the restructuring process.
Corporate Governance, HSE and Corporate Social Responsibility
2002 was a turbulent year for markets and for companies working internationally.
There have been increased challenges for companies with their corporate
governance, the security of their people and assets, and their involvement with
stakeholders and the environment.
Our health, safety and environment (HSE) performance has again been industry top
quartile, with Indonesia achieving to date a particularly noteworthy milestone
of 644 days without a lost time incident.
Increased security issues in a number of countries in which we operate have
meant that we are continually improving our standards of security for our people
and assets, whilst ensuring that production and other operations continue
without interruption. We have, I believe, been one of the leading companies in
embracing and evolving our corporate principles and embodying in them our
respect for the population and environments where we work. I am pleased to
report that as part of this evolution, we have recently signed partnerships with
UNEP - the United Nations Environment Programme, and Save the Children (US) who
are our principal partners in helping us to run and/or assess our community
programmes in the countries in which we operate.
The Higgs Report on the role and effectiveness of non-executive directors and
the Smith Report on audit committees are reports which Premier, together with
other publicly quoted companies, is studying carefully. Premier already has
strong governance processes in place and will continue to enhance them in the
light of the eventual changes to be made to the Combined Code as a result of
these reports.
Dividend Policy
The Board believes that most of our shares are owned by investors looking
principally for substantial capital growth in the share price, rather than
regular small dividends out of income. The Company is strongly committed to
generating returns to shareholders through capital growth, and to exploring
other methods of returning value to shareholders from time to time when
appropriate. Returns to shareholders may be made from time to time via more
significant one-off cash dividends or share buyback programmes when large
surplus funds have been generated which are not earmarked for near term
re-investment. Consistent with this policy, the Board has decided not to make a
dividend payment for the year 2002.
Board and Management
As a result of the restructuring the Petronas and Amerada Hess directors will
stand down. I would like to express my thanks to Dato' Idris Mansor, Encik
Mohammad Medan Abdullah, J Barclay Collins and Richard Mew for their valuable
contributions.
We have also said goodbye to Richard Liddell at the end of January 2003, who as
Operations Director has contributed much to the development of Premier as an
international production and development operator. Our Finance Director, John
van der Welle, has broadened his role to incorporate general management of our
business units, whilst Simon Lockett is now Head of Operations and Technical.
Additionally, Robin Allan has become Head of Business Development which includes
our exploration and commercial activities.
I would also like to express the Board's gratitude to our staff in all
locations, who have continued to achieve excellent performance throughout the
group.
Outlook
The direction of oil prices is uncertain in the light of current international
events, but given a reasonable scenario for prices, new Premier's combination of
a solid base business of production, strong balance sheet and a good portfolio
of new business assets gives the group a good platform from which to succeed.
2003 promises to be an exciting and, as usual, challenging year for Premier. We
have laid out a strategy of achieving success by adding significant value
through exploration and commercial deals - actively managing our portfolio to
realise extra value for shareholders. We have now begun to implement this
strategy.
Financial Review
Economic Environment
The oil price moved over a wide range in the year in response to heightened
geopolitical tensions and the loss of Venezuelan production, which offset a weak
global economy. The Brent crude price started the year at $19.3 per barrel and
rose steadily throughout 2002 to finish at $28.7 per barrel, giving an average
of $25.0 per barrel - slightly above the price for 2001. In the foreign
exchange market, against sterling the US dollar weakened from $1.46 at the start
of the year to $1.61 at year end.
2002 Results
Profit after tax and exceptional items for 2002 amounted to #25.0 million, which
compares with #20.3 million for the preceding year. Excluding exceptional
items, profit after tax was #38.1 million (2001: #20.1 million).
On 16 September 2002 Premier announced the restructuring of the group's South
East Asian interests in a transaction with major shareholders Amerada Hess and
Petronas. The economic effective date of this transaction was 30 September
2002. However, for accounting purposes, the impact of the transaction will be
recorded at the actual date of completion. Accordingly the results for 2002
include a full year's contribution from the Indonesian and Myanmar businesses to
be transferred under the restructuring.
As in the two previous years, net profits associated with take-or-pay
receivables for 2002 under gas contracts in Indonesia have been deferred. These
amounted to #4.2 million (2001: #14.2 million), and are excluded from reported
profits until the related gas has been delivered in the future. Pro forma
reported and deferred net profits therefore amounted to #29.2 million (2001:
#34.5 million) which Premier believes is a better measure of the group's
underlying profitability than the statutory profit after tax reported under UK
accounting standards. At the end of 2002, Premier had cumulative deferred net
profits of #26.5 million (2001: #22.3 million).
Group production, on a working interest basis, was up by 31% at 53,600 boepd
(2001: 40,900 boepd), with record production levels of over 60,000 boepd
achieved in November and December 2002. Turnover, including the group's share
of joint ventures in Pakistan and Myanmar, was 23% higher at #263.1 million,
reflecting increased production volumes. Realised oil prices averaged $24.3 per
barrel, compared with $25.2 per barrel in the previous year, reflecting the
changing mix in oil production. Gas prices averaged $3.44 per thousand standard
cubic feet, up from $2.97 in 2001.
Cost of sales rose by #9.9 million to #107.0 million reflecting higher
production partly offset by unit cost reductions. Including the joint ventures
in Pakistan and Myanmar, total cost of sales increased to #133.4 million (2001:
#118.0 million). Based on total cost of sales, underlying group unit operating
costs were 18% down at #3.0 per barrel of oil equivalent (boe) due to higher
production from Indonesia and Myanmar, offset by increasing UK operating costs.
Underlying unit group amortisation amounted to #3.14 per boe, broadly in line
with the previous year.
Administrative costs rose by #0.8 million to #7.9 million. Operating profits,
including joint ventures but before exceptional items, amounted to #117.2
million, an increase of #28.6 million reflecting the higher turnover in the
year.
Net interest expenses and foreign exchange gains/losses were down #7.7 million
at #31.5 million as debt levels have continued to fall from their peak in 2001.
Included in this amount is a realised foreign exchange loss of #2.5 million
(2001: gain #0.5 million) which reflects the US dollar's continued slide against
sterling.
Pre-tax profits were higher by #23.0 million at #72.6 million. However, the
taxation charge also increased significantly at #47.6 million (2001: #29.3
million) reflecting higher profitability and the adverse changes to UK
corporation tax on ring-fence profits imposed by the Government in the year.
These changes have increased Premier's tax charge by #8.0 million, mainly
reflected in a one-off adjustment in the deferred UK tax charge to account for
the higher tax rate of 40% effective from April 2002.
An exceptional charge of #13.1 million was made in the year on the carrying
value of the group's investments in the UK. This charge has resulted from the
decision to transfer #21.8 million of intangible fixed assets to the
depreciating tangible fixed asset pool. These costs relate to expenditure on a
number of licences where Premier now believes there is limited future value to
be realised.
Premier has also considered it appropriate to write off a further #4.6 million
relating to exploration expenditure in areas outside of the established
depreciating tangible fixed asset pools. This has been categorised as
exploration expenditure written off.
The exceptional charge and exploration write off continues Premier's policy of
prudent balance sheet management ensuring the level of capitalised assets is
maintained at an appropriate level.
Cash flow
Net cash flow from operating activities, excluding joint ventures, amounted to
#123.5 million, up from #111.1 million in 2001. After deducting interest and
taxes, operating cash flow was #85.4 million (2001: #58.4 million). Including
the cash flow from joint ventures, operating cash flow after interest and taxes
rose by #41.5 million to #136.1 million. Averaged over the year, operating cash
flow including joint ventures covered net interest expenses by an improved 7.1
times (2001: 4.4 times).
In 2002 Premier has increased its focus on exploration related activities whilst
development expenditure has fallen with the completion of major investment
projects in South East Asia and the UK. Total capital expenditure for the year
amounted to #42.2 million (2001: #60.9 million), or #73.1 million including
joint ventures. This comprised #34.6 million (2001: #51.0 million) on field
developments, #35.0 million (2001: #20.0 million) on exploration and appraisal
activities, with other expenditure of #3.5 million (2001: #2.4 million).
Capital expenditure was offset by the receipt of proceeds of #23.4 million from
portfolio management undertaken in 2001.
Net Debt
Net debt, including balances in joint ventures, has continued to fall due to
rising net cash flow, the receipt of proceeds from portfolio management together
with exchange gains, and amounted to #249.5 million at year end (2001: #379.3
million). Bank debt of #124.2 million has been classified as short-term debt as
the facility matures on 30 June 2003, or on the earlier completion of the
restructuring. Gearing, defined as net debt (including joint venture balances)
divided by net assets, was down to 80% at year end (2001: 122%).
The group continues to maintain a very liquid position, with cash and short-term
investments at the end of 2002 of #145.7 million (2001: #84.4 million).
Including balances in joint ventures, this amount stood at #166.5 million (2001:
#96.8 million).
Following the completion of the restructuring, the group's borrowing will be
refinanced in the debt market, and the resultant balance sheet will show much
reduced levels of net debt and gearing in line with Premier's new strategic
focus. On a pro forma basis, as at 31 December 2002 post restructuring, the
group's net debt amounted to #47.1 million, with gearing at 17%.
Hedging and Risk Management
Premier undertakes oil and gas price hedging periodically, within Board approved
limits, to protect operating cash flow against weak prices. Hedging is normally
undertaken with zero cost collar options, and to a lesser extent with swaps.
In 2002 the group purchased oil price options with floors at a Brent price of
$20 per barrel and ceiling prices averaging $29 per barrel. In addition oil
price swaps at an average price of approximately $25 per barrel were purchased.
These hedges produced a small loss of #1.4 million (2001: gain #1.7 million).
Hedges for 2003 currently cover 46% of the anticipated liquids production (after
completion of the restructuring) at a floor price of $20 per barrel and a
ceiling price of $28.3 per barrel, and 9% through oil swap agreements at an
average price of $23.2 per barrel. In addition, 36% of Indonesian gas
production (after completion of the restructuring) has been covered at an
equivalent floor price of $20.2 per barrel and a ceiling price of $29.5 per
barrel.
Exchange rate exposures relating to non-sterling receipts and expenditures were
not hedged during the year. As Premier's activities are largely a dollar
functional currency business, the majority of borrowings are denominated in
dollars to reduce currency exposures arising from the dollar/sterling exchange
rate. Interest rate exposures are managed by borrowing in both fixed and
floating rates - at year-end 62% of borrowings, excluding the Yetagun project
loan, were at fixed rates with an average rate of 7.5%. Cash balances are
invested in a range of floating rate bank deposits, managed liquidity funds and
commercial paper, subject to Board approved limits.
It is group policy that all transactions involving derivatives must be directly
related to the underlying business of the group. No speculative transactions
are undertaken.
The group undertakes an insurance programme to reduce the potential impact of
the physical risks associated with exploration and production activities. In
addition we purchase business interruption cover for a proportion of cash flow
from the major producing fields.
Operating Review
Production and Reserves
Working interest production for 2002 averaged 53,600 boepd, representing an
annual increase of 12,700 boepd and 7% above the top end of the range of
45-50,000 boepd projected for the year in the 2001 results. The major
contributions to the rise were much higher volumes from the West Natuna gas
project in Indonesia and increases in gas production from the Yetagun field in
Myanmar. Production levels in the UK and Pakistan were broadly similar to the
preceding year. Production comprised 40% oil and 60% gas (2001: 53% oil and 47%
gas) reflecting the higher gas volumes in South East Asia.
Proven and probable reserves, on a working interest basis, were 450 mmboe as at
31 December 2002, down from 469 mmboe reported a year earlier, mainly reflecting
annual production. The movement over the year, which excludes the impact of the
restructuring, was as follows:
mmboe
Start of 2002 469
Production (20)
Revisions (1)
Acquisitions 2
End of 2002 450
The acquisition represents the purchase of an additional interest in the UK Kyle
field, while minor revisions were booked across several UK fields. No reserves
have been booked in Indonesia in respect of the second sale of gas to Malaysia
pending future progress in the commercial arrangements for development.
Post restructuring, Premier will have total reserves (including as yet unbooked
reserves in respect of the second sale of gas to Malaysia) of over 200 mmboe.
Development
During the year field development activity was undertaken in Pakistan and
Myanmar. In the former the development of the Bhit field was largely completed
by December and commissioning is ongoing. Work on the Zamzama full field
development continued on schedule for start up in 2003. Additionally, further
upgrading of the Qadirpur field processing facilities continued. In Myanmar the
Yetagun phase II capacity upgrade was successfully completed by Premier as
operator.
Exploration and Appraisal
Premier participated in five exploration and appraisal wells during 2002 - two
in Pakistan and one in each of the UK, Indonesia and Guinea Bissau. Whilst none
of these wells resulted in a commercial discovery, drilling activity continues
in Pakistan on the Dumbar block where one well is currently operating.
The current exploration programme, which commenced in 2002, will continue into
2003, including possible further drilling in the Dumbar block and the beginning
of a West African campaign, in Guinea Bissau and Gabon.
Europe
Production in the UK for 2002 was 18,500 boepd, in line with the previous year,
and accounted for 35% of group production. This percentage is less than the
previous year (45%) as gas volumes from South East Asia continue to build.
The Wytch Farm oil field remains as Premier's main producing field in the UK,
contributing 6,900 boepd net (2001: 7,800 boepd). Production decline in this
mature asset continued to be mitigated by successful infill drilling of three
multilateral side-tracks of existing wells with development costs of less than
$3 per barrel, and infill drilling is set to continue at current levels for the
foreseeable future.
Production from the Kyle field, which came on-stream in 2001, averaged at 5,600
boepd net to Premier despite a three month interruption to gas export which
commenced during April, caused by a blockage in the export line due to hydrate
formation. During the period oil production was also curtailed. Full oil and
gas production was restored during July. Development continued with a fourth
horizontal well which was brought on-stream mid July, with production rates in
line with expectations and costs under budget. At the end of June, Premier
acquired an additional 5% equity from Roc Oil at a cost of #3.4 million taking
our interest to 40% effective from the beginning of 2002. Facilities upgrades
to enhance production are being considered for 2003.
The majority of the remainder of UK production came from the Fife area, which
contributed 3,700 boepd net. This is up 32% on last year due to a combination
of successful infill drilling on the Fife field and the first full year of Angus
field production which was re-developed in 2001.
On the exploration side, Premier earned a 16% equity share in block 204/16 by
carrying British Gas' costs in a well to appraise the Marjun-1 discovery in
adjacent Faroes block 6004/16. The well encountered hydrocarbons but not in
sufficient quantities to justify testing. Premier now has access to new 3D
seismic data acquired over the block and adjacent blocks which is currently
being interpreted and has options to farm-in to the adjacent blocks. Premier is
also evaluating other UKCS acreage as a source of new opportunities.
Pakistan
Premier conducts its operations in Pakistan through its 50% holding in a joint
venture company, Premier - Kufpec Pakistan BV (PKP). Production net to Premier
averaged 5,600 boepd, broadly in line with the preceding year (2001: 5,700
boepd).
Despite international concerns about the security environment in Pakistan
following events in Afghanistan and tensions with India, 2002 was a successful
year for Premier with further development activity on three gas fields -
Qadirpur, Bhit and Zamzama - which are planned to result in a more than doubling
of the production rate by the end of 2003.
The Qadirpur gas field was the largest contributor to production from Pakistan
amounting to 2,800 boepd. Further development of the Qadirpur gas field is
underway with an expansion of processing facilities from 235 to 400 mmscfd to be
completed in mid 2003, with further expansion to 500 mmscfd of processed gas by
early 2004.
Production from the Kadanwari gas field declined to a net 1,500 boepd (2001:
2,100 boepd), while Zamzama extended well test production exceeded contracted
volumes at 1,300 boepd net to Premier (2001: 900 boepd). Gas Sales Agreements
for Zamzama were signed with Sui Southern Gas Company Limited and Sui Northern
Gas Pipelines Limited for the sale of 320 mmscfd from mid 2003. Work on field
development continued and commissioning of the new plant is on schedule.
The development of the Bhit field was largely completed in December and initial
gas sales were achieved that month. Commissioning of the full field plant
should be completed in the first quarter of 2003 leading to full field
production of 240 mmscfd by mid 2003.
Two exploration wells were drilled in the year. Zarghun North-1 well in the
Bolan block failed to flow gas, however gas commercialisation negotiations have
commenced with Sui Southern Gas Company Limited for the neighbouring Zarghun
South gas discovery.
In the Dumbar block the programme of 650km of 2D seismic acquisition in the
Kirthar National Park area was concluded. The Benir-2 exploration well was
drilled and tested following which it has been plugged and abandoned after a
non-commercial gas flow to surface. Drilling of Zirkani-l has now commenced, in
the same concession area, and this well is due to reach the target zone in the
second quarter of 2003.
Indonesia
Record levels of production were achieved in Indonesia in 2002 as demand from
gas buyers in Singapore grew steadily throughout the year with the completion of
end user facilities. In addition, extra revenues from gas production arose in
May and June when Premier sold gas to make up for delivery shortfalls
experienced by another partner in the West Natuna gas project. Accordingly net
production amounted to 18,300 boepd, an increase of 78% from the preceding year.
The Anoa gas export and oil production facilities have been operated by Premier
with an excellent health, safety and environmental record, and no lost time
incidents occurred during the year. The facilities have performed well, with no
significant down-time and Premier was able to meet all of its contractual sales
requirements during the year.
Whilst Anoa oil volumes continue to fall, the rate of decline is slow and
volumes delivered in 2002 are slightly ahead of forecast. Technical work is
being undertaken to examine ways in which oil recovery can be maintained as high
as economically possible. During the year engineering work on the development
of additional uncontracted gas reserves discovered on block A has continued.
In December the first of two exploration wells on the eastern Area IV segment of
block A was spudded. Both wells - Kuda Nil and Binturong - have since been
plugged and abandoned with non-commercial oil shows. Further work is underway
to assess the remaining potential of Area IV.
Myanmar
Gross gas production from the Premier operated Yetagun gas field averaged 199
mmscfd in 2002 giving net gas production excluding condensate of 9,700 boepd
(2001: 5,600 boepd). In addition a total of five condensate liftings were made
during the year from the floating storage and offtake vessel with a gross volume
of 2.1 million barrels. Our net share of this condensate production was 1,500
boepd giving Premier a doubled combined net production from the field of 11,200
boepd (2001: 6,600 boepd).
The phase II capacity upgrade of the Yetagun field development was successfully
completed on time and on budget during the year. The facilities can now deliver
300 mmscfd, the quantity required under the terms of the Gas Sales Agreement.
Front-end engineering work on the phase III capacity upgrade was also completed
in the year and detailed design engineering work is well advanced to enable the
facilities to deliver 400 mmscfd from April 2004. Purchase of long lead items
required for a programme of in-fill drilling in 2003 to ensure the delivery of
the increased production commenced at the end of the year.
No take or pay debtor arose in 2002 following the signing of a Side Letter
Agreement to the Gas Sales Agreement with gas buyer PTT of Thailand. This
deferred the increase in contract quantity from 1st October 2002 until 1st
January 2003, in return for settlement of the 2001 take or pay liability ($22.7
million net to Premier) together with confirmation of the increase in daily
contract quantity to 400 mmscfd in April 2004.
2002 saw a significant drop in risk levels on the Yetagun facility, as part of
our ongoing commitment to reduce risks to meet international standards wherever
we operate. With the construction of additional blast walls, improvements to
electrical equipment and fire and gas detection systems the Yetagun facility is
on track to achieve a world class safety case at the end of Phase III.
Albania
In Albania four of the twenty new development wells planned as part of the
extended production programme had been drilled by the year end. These wells plus
an additional five new wells were completed and began producing in February
2003. The remainder of the programme is expected to be complete by end April
2003. In addition a reactivation programme on six wells had also been completed
by year end and the wells were producing satisfactorily. Information from this
programme will be analysed during the year with the aim of making a decision on
the future development programme in the third quarter of 2003.
New Venture Areas
Exploration new ventures have commenced in North East India and Gabon in 2002,
continuing the regeneration and replenishment of Premier's exploration
portfolio, and signifying a trend away from long plateau gas production and into
short-field life, higher annual cash flow oil projects.
In the Jaipur block, Assam, Premier has begun to shoot seismic adjacent to the
Digboi oil field, in an area previously unexplored. This was due to the
difficult terrain of the Naga thrust-belt which deterred previous explorers;
however we are confident that our experience of working similar thrust-belts
will enable us to acquire high quality seismic in this area, with a view to
first drilling in early 2004.
In the Phenix concession, offshore Southern Gabon, we have used new 3D seismic
processing techniques to identify firm prospects for exploration. The operator
Sasol and Premier are currently negotiating the final details of a production
sharing contract with the government prior to planning for drilling later this
year.
PREMIER OIL PLC
Preliminary Results for the year ended 31 December 2002
Consolidated profit and loss account
2002 2001
# million # million
Turnover
Group and share of joint ventures 263.1 213.8
Less: share of joint ventures' turnover (64.4) (47.0)
Group turnover 198.7 166.8
Cost of sales (107.0) (97.1)
Exceptional provision for oil and gas assets (13.1) (42.0)
Exploration expenditure written off (4.6)
Gross profit 74.0 27.7
Administrative costs (7.9) (7.1)
Group operating profit 66.1 20.6
Share of joint ventures' operating profit 38.0 26.0
Total operating profit: Group and share of joint ventures 104.1 46.6
Profit on disposal of investment 42.2
Net interest payable : Group (17.8) (26.7)
Joint ventures (11.2) (13.0)
Exchange (losses)/gains* (2.5) 0.5
Profit on ordinary activities before tax 72.6 49.6
Tax : Group (36.2) (22.8)
Joint ventures (11.4) (6.5)
Profit after tax 25.0 20.3
Earnings per share (pence) - basic and diluted 1.58 1.28
* Exchange (losses)/gains relate wholly to the Group.
Consolidated statement of total recognised gains and losses
2002 2001
# million # million
Net profit for the year excluding share of profits of joint ventures 9.6 13.8
Share of joint ventures' profits for year 15.4 6.5
Net profit for the year attributable to members of the parent company 25.0 20.3
Exchange difference on retranslation of net assets of subsidiary undertakings (16.7) 1.2
Exchange difference on retranslation of net assets of joint ventures (8.3) (0.5)
Total recognised gains relating to the year - 21.0
PREMIER OIL PLC
Preliminary Results for the year ended 31 December 2002
Balance sheets as at 31 December 2002
Group Group Company Company
2002 2001 2002 2001
# million # million # million # million
Fixed Assets
Intangible assets 24.3 30.4
Tangible assets 400.1 464.3 0.1
Investments 11.6 11.7 692.3 692.3
Investments in joint ventures:
Share of gross assets 257.4 257.7
Share of gross liabilities (155.8) (176.6)
Total fixed assets 537.6 587.5 692.3 692.4
Current assets
Stocks 7.0 12.8
Debtors, including amounts due after one year 81.5 95.4 185.1 193.6
Cash and short term deposits 145.7 84.4
Total current assets 234.2 192.6 185.1 193.6
Creditors: amounts falling due within one year (195.7) (67.6) (389.7) (375.8)
Net current assets/(liabilities) 38.5 125.0 (204.6) (182.2)
Total assets less current liabilities 576.1 712.5 487.7 510.2
Creditors: amounts falling due after one year (201.3) (355.0) (200.6) (218.2)
including convertible debt
Deferred income (11.7) (4.4)
Provision for liabilities and charges (50.8) (41.5)
Net assets 312.3 311.6 287.1 292.0
Capital and reserves
Share capital 79.4 79.2 79.4 79.2
Share premium account 138.5 138.0 138.5 138.0
Capital reserve 14.5 14.5 14.5 14.5
Merger reserve 68.2 68.2 68.2 68.2
Profit and loss account 11.7 11.7 (13.5) (7.9)
Total equity shareholders' funds 312.3 311.6 287.1 292.0
PREMIER OIL PLC
Preliminary Results for the year ended 31 December 2002
Consolidated cash flow statement
2002 2001
# million # million
Net cash inflow from operating activities 123.5 111.1
Returns on investment and servicing of finance
Interest received 4.3 1.5
Interest paid (21.7) (31.2)
(17.4) (29.7)
Taxation
UK corporation tax paid (4.1) (6.2)
UK petroleum revenue tax paid (12.6) (15.5)
Overseas taxes paid (4.0) (1.3)
(20.7) (23.0)
Capital expenditure and financial investments
Payments to acquire fixed assets (42.2) (60.9)
Receipts from sale of fixed assets 23.4
Increase shareholding in listed investment (2.4)
Investment of funds refundable from joint venture (7.1)
Investment of funds in joint ventures (11.6) (2.2)
(30.4) (72.6)
Acquisitions and disposals
Receipt arising from establishment of new joint venture 6.8 72.9
6.8 72.9
Management of liquid resources
Net change in short term deposits (60.0) (46.7)
(60.0) (46.7)
Financing
Issue of ordinary share capital 0.7 0.1
Net cash inflow from financing 0.7 0.1
Increase in cash 2.5 12.1
Cash generated after interest and taxation 85.4 58.4
Cash flow generated per share (pence) 5.4 3.7
Cash flows relating to the joint ventures are excluded, in accordance with FRS 9
- 'Associates and Joint Ventures'.
PREMIER OIL PLC
Preliminary Results for the year ended 31 December 2002
Notes to the accounts
2002 2001
1. Geographical analysis # million # million
Group turnover by origin and destination
UK 103.0 109.8
Indonesia (destination Singapore) 95.7 57.0
Total group turnover 198.7 166.8
Joint venture turnover by origin and destination
Pakistan 17.9 18.8
Myanmar (destination Thailand) 46.5 28.2
263.1 213.8
Group operating profit/(loss) before exceptional items
UK 25.6 39.1
Albania (0.1) (0.1)
Australia (0.1) (0.2)
Indonesia 58.4 23.8
Other overseas (4.6)
79.2 62.6
Exceptional provision for oil and gas assets and investment
UK (13.1) (12.1)
Albania (17.6)
Australia (8.5)
Other overseas (3.8)
(13.1) (42.0)
Group operating profit 66.1 20.6
Share of operating profit in joint ventures - Pakistan 10.8 13.1
- Myanmar 27.2 12.9
Profit on disposal of investment 42.2
Net interest (29.0) (39.7)
Exchange (losses)/gains (2.5) 0.5
Profit on ordinary activities before tax 72.6 49.6
Net assets
UK 83.8 131.5
Africa 9.9
Australia 11.6 11.7
Indonesia 266.4 327.5
Myanmar 17.2 24.2
Other overseas 2.3 8.0
391.2 502.9
Share of net assets of joint ventures
Pakistan 54.7 45.0
Myanmar 46.9 36.1
492.8 584.0
Unallocated net borrowings (180.5) (272.4)
Total net assets 312.3 311.6
PREMIER OIL PLC
Preliminary Results for the year ended 31 December 2002
Notes to the accounts
2002 2001
2. Cost of sales # million # million
Operating costs 48.1 47.7
Royalties 5.7 5.2
Amortisation and depreciation of tangible fixed assets:
Oil and gas 51.8 42.7
Other 0.9 1.0
Amortisation of decommissioning assets 0.5 0.5
107.0 97.1
Exceptional provision for oil and gas assets
Impairment write-down of:
Tangible fixed assets 13.1 33.5
Investments 8.5
13.1 42.0
The Group has made a provision in respect of non-core tangible assets held in
the UK pool of #13.1 million. In 2001, the Group made a total provision of #42.0
million which included a write-down of #12.1 million in the UK pool, #17.6
million in the Southern Europe pool, #0.4 million in the Pakistan pool, #3.4
million in the International pool and an investment write-down on the Group's
shareholding in Australian Worldwide Exploration NL of #8.5 million.
3. Intangible Fixed Assets
UK Far East International Total
# million # million # million # million
The Group
Cost
At 1 January 2002 21.5 6.0 2.9 30.4
Exchange movements (2.0) (0.5) (0.1) (2.6)
Additions during the year 7.6 2.7 13.0 23.3
Transfer to tangible fixed assets (21.8) (0.4) (22.2)
Exploration expenditure written off (4.6) (4.6)
At 31 December 2002 5.3 7.8 11.2 24.3
PREMIER OIL PLC
Preliminary Results for the year ended 31 December 2002
Notes to the accounts
Other
4. Tangible fixed assets Southern Pipeline fixed
UK Europe Far East Australia Pakistan International assets assets Total
# # # # # # # # #
million million million million million million million million million
The Group
Cost
At 1 January 2002 526.1 33.5 281.0 0.4 0.8 32.8 78.9 9.0 962.5
Exchange movements (43.2) (3.0) (22.7) (1.9) (7.4) (0.1) (78.3)
Additions during the 14.2 0.7 4.1 1.0 0.4 20.4
year
Transfer from
intangible
fixed assets 21.8 0.4 22.2
Disposals (0.1)
(0.1)
At 31 December 2002 518.9 31.2 262.8 0.4 0.8 30.9 72.5 9.2 926.7
Amortisation and depreciation
At 1 January 2002 385.6 33.5 37.1 0.4 0.8 32.8 1.0 7.0 498.2
Exchange movements (29.5) (3.0) (3.3) (1.9) (0.1) (37.8)
Charge for the year 32.2 17.5 2.6 0.9 53.2
Disposals (0.1) (0.1)
Impairment write-downs 13.1 13.1
At 31 December 2002 401.4 30.5 51.3 0.4 0.8 30.9 3.6 7.7 526.6
Net book value
At 31 December 2002 117.5 0.7 211.5 - - - 68.9 1.5 400.1
At 31 December 2001 140.5 - 243.9 - - - 77.9 2.0 464.3
The impairment test has been carried out using a 10% nominal discount rate, $/#
exchange rate of 1.61 and an oil price forecast of $22.4 (2003), $21.5 (2004), $
20.0 (2005), escalated at 2% thereafter. Cost to the Group at 31 December 2002
includes capitalised interest of #17.3 million (2001: #19.1 million). The
movement relates to exchange differences on capitalised interest balances.
PREMIER OIL PLC
Preliminary Results for the year ended 31 December 2002
Notes to the accounts
5. Group consolidated cash flow statement analysis
a) Reconciliation of operating profit to net cash flow from operating activities
2002 2001
# million # million
Operating profit 66.1 20.6
Amortisation 53.2 44.2
Impairment write-downs 13.1 42.0
Exploration expenditure written off 4.6
Exchange translation difference (3.5) 0.4
Decrease in stocks 4.6 4.1
Increase in debtors (9.3) (4.3)
(Decrease)/increase in creditors (5.3) 4.1
Net cash inflow from operating activities 123.5 111.1
b) Reconciliation of net cash flow to movement in net debt 2002 2001
# million # million
Increase in cash in the period 2.5 12.1
Cash outflow from movement in liquid resources 60.0 46.7
Change in net debt resulting from cash flows 62.5 58.8
Exchange translation difference 29.4 (8.3)
Decrease in net debt in the period 91.9 50.5
Opening net debt (272.4) (322.9)
Closing net debt (180.5) (272.4)
c) Analysis of net debt At 1 January Exchange At 31 December
2002 Cash flow movements 2002
# million # million # million # million
Cash in hand and at bank 14.5 2.5 (0.6) 16.4
Bank loans due within one year (124.2) (124.2)
Debt due after one year (356.8) 124.2 30.6 (202.0)
Short term deposits 69.9 60.0 (0.6) 129.3
Total net debt (272.4) 62.5 29.4 (180.5)
PREMIER OIL PLC
Preliminary Results for the year ended 31 December 2002
Notes to the accounts
6. Restructuring
On 16 September 2002 the Group announced that it had reached agreement with the
two principal shareholders of the company, Amerada Hess Limited (Amerada Hess)
and Petronas International Corporation Limited (PICL) on the terms of a
restructuring (the Restructuring) which, when completed, will increase the
Group's core net asset value per share, whilst reducing both net debt and
gearing. The implied consideration to be received by the Group for the assets
being transferred as part of the Restructuring is $670 million (#416 million).
The main commercial elements of the Restructuring, which, subject to completion,
will have an effective date of 30 September 2002, are as follows:
- the Group will transfer its entire 26.67 per cent interest in the
Yetagun project offshore Myanmar (the Yetagun Project) and support the transfer
of the operatorship of that project, to PICL in consideration for the
cancellation of PICL's 25 per cent ordinary shareholding in Premier, the
assumption by PICL of the Yetagun Project debt of $124 million (#77 million) net
of cash held by Premier Petroleum Myanmar Limited (PPML) and a cash payment to
the Group of $135 million (#84 million)
- the Group will transfer a 15 per cent interest in West Natuna Sea
Block A (Natuna) in Indonesia, to PICL in consideration for the cancellation of
PICL's shares held in Premier and a cash payment to the Group of $100 million
(#62 million)
- The Group will transfer a 23 per cent interest in Natuna to Amerada
Hess in consideration for the cancellation of Amerada Hess' 25 per cent ordinary
shareholding in Premier and a cash payment to the Group of approximately $17
million (#11 million); and
- The Group will retain a 28.67 per cent interest in, and the
operatorship of, Natuna. Premier and PICL have also agreed in principle with
each of the other joint venture partners in the Yetagun Project (Myanma Oil and
Gas Enterprise, PTTEP International Limited and Nippon Oil Exploration (Myanmar)
Limited) that they will be offered the option to increase their interests
therein.
The following pro forma statement of consolidated net assets of Premier has been
prepared in order to illustrate how the consolidated net assets and net debt as
at 31 December 2002 might have been affected had the Restructuring been
completed on that date. It has been prepared for illustrative purposes only
and, because of its nature, may not give a true picture of the financial
position of Premier post-Restructuring. It has been prepared in accordance with
the notes set out below:
PREMIER OIL PLC
Preliminary Results for the year ended 31 December 2002
Notes to the accounts
6. Restructuring (continued)
Premier Oil plc
Pro forma statement of consolidated net assets
As at 31 December 2002
Notes Balance Impact of Pro forma
sheet as at restructuring balance
31 December sheet as at
2002 31 December
2002
# million # million # million
Fixed assets
Intangible assets 6 24.3 (7.8) 16.5
Tangible assets 6,7 400.1 (117.5) 282.6
Investments 11.6 11.6
Investments in joint ventures
Share of gross assets 1 257.4 (179.6) 77.8
Share of gross liabilities 1 (155.8) 132.7 (23.1)
Total fixed assets 537.6 (172.2) 365.4
Current assets
Stocks 3 7.0 (0.7) 6.3
Debtors, including amounts due after one year 3 81.5 (17.5) 64.0
Cash and short term deposits 3,4,10 145.7 (120.7) 25.0
Total current assets 234.2 (138.9) 95.3
Creditors: amounts falling due under one year 3, 5 (195.7) 133.9 (61.8)
Net current assets 38.5 (5.0) 33.5
Total assets less current liabilities 576.1 (177.2) 398.9
Creditors: amounts falling due after one year 5 (201.3) 126.5 (74.8)
Provision for liabilities and charges 8 (62.5) 9.3 (53.2)
Consolidated net assets 13 312.3 (41.4) 270.9
Explanatory notes:
1. The Group holds part of its interest in Myanmar through Global Resources
Ltd, in which it holds a 50 per cent share. Premier accounts for its share in
Global Resources Ltd using the gross equity method which reflects Premier's
share of the gross assets and liabilities of the joint venture under FRS 9 - '
Associates and Joint Ventures'.
2. US$ amounts have been converted at $1.61/#1.00, the exchange rate at 31
December 2002
3. Estimated working capital balances of #15.6 million representing stock (#0.7
million), debtors (#17.5 million), cash (#7.4 million), and creditors (#10.0
million) are transferred with the Natuna and Yetagun interests. These balances
are assumed to be settled on completion. This estimated working capital balance
is based upon the Framework Agreement dated 16 September 2002.
PREMIER OIL PLC
Preliminary Results for the year ended 31 December 2002
Notes to the accounts
6. Restructuring (continued)
Explanatory notes (continued):
4. Costs of the transaction are shown as a cash expense. Total costs assumed,
including an estimate of the "make-whole" payment on Premier's loan notes,
amount to $58.3 million (#36.2 million).
5. Under the Restructuring, bridge finance arrangements have been put in place
which result in the reclassification #124.2 million from creditors falling due
under one year to creditors falling due over one year.
6. Transfer of assets from intangible cost pool to tangible cost pool prior to
the transfer.
7. The reduction in fixed assets represents impact of partial disposal of
Premier's interest in Natuna.
8. Deferred tax provision (#3.5 million) is written back to reflect Premier's
remaining equity in Natuna. In addition deferred income of #5.8 million has
been released to reserves due to change in the interest in Natuna.
9. Net debt (including balances in joint ventures) is #249.5 million
pre-Restructuring and #47.1 million post-Restructuring. Gearing is 80 per cent
pre-Restructuring and 17 per cent post-Restructuring. Net debt (excluding
balances in joint ventures) is #180.5 million pre-Restructuring and #49.8
million post-Restructuring.
10. The cash adjustment of #120.7 million is broken down as follows:
# million
Transaction costs (36.2)
Cash consideration 157.2
Working capital settlement 15.0
Repayment of long term debt (326.1)
Funding from new credit facility 74.8
Cash transferred with assets (5.4)
(120.7)
11. The adjustment to net debt of #202.4 million is reconciled as follows:
# million
Cash movement as detailed above (see note 10) (120.7)
Yetagun debt included as part of joint venture net debt transferred with asset 89.8
Yetagun cash included as part of joint venture net debt transferred with asset (18.0)
Long term debt repayment 326.1
Funding from new credit facility (74.8)
202.4
12. It is intended that the methodology used to prepare the pro forma
financials statements above will be followed in preparing the financial
statements which will reflect the Restructuring. All adjustments are directly
attributable to the Restructuring.
13. The net assets movement will be reflected in the future consolidated
accounts of the Group either as a reserves movement or as an exceptional profit
and loss item depending on the nature of the transaction. Currently it is
expected that from the total net movement of #41.4 million a charge of #30.3
million relating to "make-whole" payment on Premier's loan notes will be
reflected as an exceptional item in the profit and loss account of the Group.
Definitions:
A: Net debt is defined as the Group's borrowings, including the Group's share of
net debt held in joint venture, less cash and short term deposits.
B: Gearing is defined as net debt divided by net assets
PREMIER OIL PLC
Preliminary Results for the year ended 31 December 2002
Notes to the accounts
7. Basis of preparation
The above financial information does not represent statutory accounts within the
meaning of section 240 of the Companies Act 1985.
The comparative financial information is based upon the statutory accounts for
the year ended 31 December 2001. Those accounts upon which the auditors issued
an unqualified opinion, have been delivered to the Registrar of Companies.
The financial information has been prepared on the basis of the accounting
policies set out in the Group's 2001 statutory accounts, including the adoption
of the transitional requirements per FRS 17 - 'Retirement Benefits'.
8. Dividends
The directors do not propose any dividend.
9. Earnings per share
The calculation of basic and diluted earnings per share is based on the profit
after tax and exceptional items of #25.0 million (31 Dec 2001: #20.3 million)
and on weighted average shares in issue of 1,586 million (31 Dec 2000: 1,584
million).
10. External Audit
The Group's external auditors, Ernst & Young LLP, have confirmed that they have
reviewed this Preliminary Announcement and that it is consistent with the
audited Accounts of the Group for the year ended 31 December 2002.
11. Full accounts will be posted to shareholders on 14 April 2003 and will
be available at the Company's head office, 23 Lower Belgrave Street, London SW1W
0NR, from that date.
12. The Annual General Meeting will be held at The Drapers' Hall,
Throgmorton Avenue, London EC2N 2DQ on Friday 9 May 2003 at 11.30am.
PREMIER OIL PLC
Preliminary Results for the year ended 31 December 2002
Group proved plus probable reserves
Reserves UK Pakistan Far East TOTAL
Oil and Gas Oil and Oil and Oil and Gas Oil, NGLs
NGLs NGLs Gas NGLs Gas NGLs and Gas
mmbbls bcf mmbbls bcf mmbbls bcf mmbbls bcf mmboe
Group
At 1 January 2002 32.2 32 14.8 877 47.0 909 225.5
Revisions (1) (1.3) 3 (1.3) 3 (0.8)
Acquisitions and divestments (2) 0.7 4 0.7 4 1.7
Other (3) (0.9)
Production (5.7) (5) (1.6) (26) (7.3) (31) (13.4)
At 31 December 2002 25.9 34 - - 13.2 851 39.1 885 212.1
Joint Ventures - Group Share
At 1 January 2002 1.0 427 21.5 856 22.5 1,283 243.6
Production (13) (0.6) (19) (0.6) (32) (6.2)
At 31 December 2002 - - 1.0 414 20.9 837 21.9 1,251 237.4
Total Group and Group Share of Joint Ventures reserves
At 1 January 2002 32.2 32 1.0 427 36.3 1,733 69.5 2,192 469.1
Revisions (1) (1.3) 3 (1.3) 3 (0.8)
Acquisitions and divestments (2) 0.7 4 0.7 4 1.7
Other (3) (0.9)
Production (5.7) (5) (13) (2.2) (45) (7.9) (63) (19.6)
At 31 December 2002 25.9 34 1.0 414 34.1 1,688 61.0 2,136 449.5
Total Group and Group Share of Joint Ventures
Proved developed 13.2 8 0.5 223 10.4 482 24.1 713 151.0
Proved undeveloped 4.2 6 0.3 82 13.1 718 17.6 806 165.6
Probable developed 2.3 53 3.5 149 5.8 202 42.5
Probable undeveloped 6.2 20 0.2 56 7.1 339 13.5 415 90.4
At 31 December 2002 25.9 34 1.0 414 34.1 1,688 61.0 2,136 449.5
Notes:
1 Revisions include downgrades on the Wytch Farm, Fergus, Ivanhoe and Rob Roy
fields in the UK, plus upward revisions on the Angus and Galahad fields.
2 The acquisitions reflect the purchase of an additional 5% of the Kyle field in
the UK.
3 Gas volumes have been converted to oil equivalent volumes on the basis of
individual gas fields' calorific values. The impact of using current calorific
values compared to the historical values previously used is recorded in the
'Other' category.
Proved and probable reserves are based on operator or third-party reports and
are defined in accordance with the 'Statement of Recommended Practice' (SORP)
issued by the Oil Industry Accounting Committee (OIAC) dated July 2001.
The Group provides for amortisation of costs relating to evaluated properties
based on direct interests on an entitlement basis, which includes reflection of
the terms of the Production Sharing Contracts in Indonesia, Albania and Myanmar.
On a working interest basis the reserves increased by 0.3 mmboe before
production of 19.6 mmboe. On an entitlement basis reserves declined by 24.1
mmboe, giving total entitlement reserves of 357.6 mmboe as at 31 December 2002.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR PUUMGWUPWGRC