Premier Oil says Falklands field in doubt Michael Kavanagh Premier Oil is to delay development of new fields including its contentious $2bn Sea Lion project off the Falkland Islands until there is a recovery in oil prices. The FTSE 250 company confirmed on Tuesday it had also cut rates of pay for contractors and other freelance workers working on projects in the North Sea and Southeast Asia, and was attempting to renegotiate deals with suppliers to trim operating costs. Tony Durrant, chief executive, said the cuts in pay rates for contractors were in line with similar moves announced in recent weeks by other industry players such as BP, Royal Dutch Shell and service companies such as Wood Group. “We are doing the same things that everyone else has done,” he added. “We are looking to improve our cost structure and deferring projects.” Mr Durrant said any persistent slump in oil prices — allied to an inflated cost environment in the industry — would prevent Premier from moving ahead with investment commitments to begin production at its Bream project off Norway and the Sea Lion field in the South Atlantic. “Below $50, we won’t approve Sea Lion or Bream,” he added. Brent crude was trading at $46.60 on Wednesday. Shares in Premier fell by 4.5 per cent to 130.4p, valuing the company’s equity at £670m. Premier has provoked persistent protests from Argentina’s government since assuming control of Sea Lion — and saying it could begin production in 2018 — because the field is in disputed waters. But the company’s move against making a firm commitment to launch production on Sea Lion, which is estimated to contain 293m barrels of recoverable oil, is unlikely to placate Buenos Aires. Along with partners Rockhopper Exploration and Falkland Oil & Gas, Premier remains committed to a campaign of further speculative drilling this year in waters whose sovereignty is claimed by Argentina. This will contribute to a rise in Premier’s group exploration spending from $160m last year to $220m in 2015. Mr Durrant said almost half of Premier’s production for this year had been hedged at around $98 a barrel, which would help cushion its cash flow during a period of heavy investment in the North Sea. He said the collapse in the oil price from above $115 per barrel last summer to below $50 now would not affect Premier’s ability to “weather the storm” and reverse a drain of capital spending on its balance sheet. “We are able to go into free cash flow at $50 a barrel in 2016 and 2017,” he said, while stressing costs would have to fall substantially to allow many projects to proceed at lower prices. “Previously it has been possible for the oil industry to function at $50 a barrel — there’s been lots of times in history when it has been at this price — but that’s depended on cost structures being loc
I totally agree with you, yet I don't sell. Seems madness really but I'm pretty much 100% sure the oil price is going to follow a cycle and go back up towards much higher levels. Obviously a question of when? but based on greed, I think sooner rather than later. Also, as Sampson says, once those drills start! Yes, lots producing oil, increasing output including Libya. Logistically, Falkland's not ideal but politically, (I don't count Argies as a complication) things are surely straight forward compared to many other countries. Again, greed shall dictate the will to drill and establish the region IMO unless it's all been a big scam perhaps....who knows, it's speculation for us and 'in the know' for others. I think many still feel wounded from the Des episode of it's oil, oh no it's water! People must have lost fortunes on that turnaround and of course made fortunes! IMO that's an underplayed concern of the past!
IMHO, with so many countries including Iraq exporting oil when they previously had no/very little exports is worrying. From a logical perspective, why begin oil exploration when there is an over supply? The current price isn't value for money, I'm looking to get in at the low 50's or high 40's if i can hold my nerve. At present the upside is minimal, buy now and whats the best outcome in the short term, 65 isn?. What if the price goes down, which i am pretty sure it will. Thus i wouldn't buy in at present, looking at it from a logical perspective.
im a long term holder and upto my neck also in RKH. Yes the drills are confirmed 4 in all as stated in the RNS. Now they have had several years to get this drilling campaign right - so im pretty confident that things will be OK. Unlike that other crazy outfit DES- who seemed to be doing wild cat drills.....rumors will begin to fly soon as so will the SP we hope on good or bad news...really guys good luck to one and all...we need some!
There are many 'no opinions' with these comments. Is it really a case that nobody has an idea as to how all this will pan out? Is it a brave or stupid decision to buy into Rkh at the moment. Is there a danger that no drilling will take place? Thoughts please
Premier Oil postpones development of Falklands field Premier Oil is to delay development of new fields including its contentious $2bn Sea Lion project off the Falkland Islands until there is a recovery in oil prices.
The FTSE 250 company confirmed on Tuesday it had also cut rates of pay for contractors and other freelance workers working on projects in the North Sea and Southeast Asia, and was attempting to renegotiate deals with suppliers to trim operating costs.
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