Premier Oil has told its board of investors that it will move ahead with plans to develop the Tolmount gas field project, more than two years after it paid £91m ($120m) to E.On for its North Sea assets.
The companies completed the deal in 2016, at the height of the oil market crash. Following the acquisition, Premier Oil entered lengthy discussions with its investors to overhaul its £3bn debt.
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Premier Oil representative Elizabeth Brooks told Offshore Technology: “Tolmount Main is estimated to have 540Bcf of gas reserves; the project was approved by Premier’s Board in June and the next step is formal partner approval, which is anticipated later this quarter.”
Tolmount gas field is said to hold long-term strategic value and is set to resurrect cash flows into the business, together with Premier Oil’s Catcher North Sea project that has reached plateau production.
Premier Oil chief executive Tony Durrant said: “This, coupled with the ongoing strong performance from our underlying portfolio and our continued focus on cost control, will result in significant free cash flow generation and material debt reduction in the second half.
“We can also look forward to the formal sanction of our high-value Tolmount project and the appraisal of our world-class Zama discovery, both of which have the potential to deliver significant future growth.”
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By GlobalDataPremier Oil plans to start work on Tolmount gas field this year, with gas production expected in 2019.
Producing a steady rate of 60,000 barrels of oil a day, Catcher has averaged 76,100 barrels a day so far this year and is likely to reach an average of 80,000 to 85,000 for 2018.
Premier Oil’s revival
The surge in production has wiped £500m from Premier Oil’s debt pile since it peaked in 2016. The company hopes to chip away as much as £300m more by the end of the year.
The company also made a sizeable discovery of a billion barrels at the Zama oil field in Mexico. This could open the door for new partnership deals in the Gulf of Mexico basin once final appraisals take place.
Brewin Dolphin broker Alasdair Ronald said that financial institutions are becoming ‘increasingly positive on the prospects of Premier Oil’.
He said: “The reduction of debt has been a focus of management and the news on this will have been well received.”
