8 Apr 2014 08:00
Premier Oil plc (the "Company")
Annual Report and Financial Statements 2013and Notice of Annual General Meeting 2014
8 April 2014
Further to the release of the Company's Annual Results on 27 February 2014, the Company announces that it has today published its Annual Report and Financial Statements 2013 and Corporate Responsibility Report 2013. In addition, the Company has posted to shareholders the Notice of Annual General Meeting ("AGM") 2014. The AGM will be held at the Institute of Directors, 116 Pall Mall, London SW1Y 5ED at 11.00am on Wednesday 14 May 2014.
In accordance with Listing Rule 9.6.1., copies of the Annual Report and Financial Statements 2013, the Notice of AGM and related form of proxy have been submitted to the UK Listing Authority and will shortly be available for inspection from the National Storage Mechanism at www.morningstar.co.uk/uk/nsm. The documents (except for the form of proxy) are also available to view on the Company's website at www.premier-oil.com. Any shareholders requiring additional copies of the form of proxy should contact the Company's registrar, Capita Asset Services, by:
- Telephone:UK: 0871 664 0300 (calls cost 10p per minute including VAT plus network extras, lines are open 8.30am - 5.30pm Mon-Fri). Overseas: +44 (0)208 639 3399.
- Email:shareholder.services@capita.co.uk
- Post:The Registry34 Beckenham RoadBeckenhamKentBR3 4TU
A condensed set of financial statements and information on important events that have occurred during the year ended 31 December 2013 and their impact on the financial statements were included in the Company's Annual Results 2013 announcement on 27 February 2014. That information together with the information set out below in Appendix 1, which is extracted from the Annual Report and Financial Statements 2013, fulfil the requirements of DTR 6.3.5. This announcement is not a substitute for reading the full Annual Report and Financial Statements 2013. Page and note references in the text in Appendix 1 refer to page numbers in the Annual Report and Financial Statements 2013. To view the Annual Results 2013 announcement, visit the Company website: www.premier-oil.com/premieroil/investors.
Further enquiries:
Company Secretariat:Rachel Benjamin Tel: +44(0)20 7730 1111
Investor Relations:Elizabeth Brooks Tel: +44 (0)20 7730 1111
Disclaimer
This announcement contains certain forward-looking statements that are subject to the usual risk factors and uncertainties associated with the oil and gas exploration and production business. Whilst the group believes the expectations reflected herein to be reasonable in light of the information available to it at this time, the actual outcome may be materially different owing to factors beyond the group's control or otherwise within the group's control but where, for example, the group decides on a change of plan or strategy. Accordingly, no reliance may be placed on the figures contained in such forward-looking statements.
APPENDIX 1
Company Risk Factors (required under DTR 4.1.8)
Premier's business may be impacted by various risks leading to failure to achieve strategic targets for growth, loss of financial standing, cash flow and earnings, and reputation. Not all of these risks are wholly within the company's control and the company may be affected by risks which are not yet manifest or reasonably foreseeable.
Effective risk management is critical to achieving our strategic objectives and protecting our personnel, assets, the communities where we operate and with whom we interact and our reputation. Premier therefore has a comprehensive approach to risk management as set out in more detail in the Corporate Governance Report.
A critical part of the risk management process is to assess the impact and likelihood of risks occurring so that appropriate mitigation plans can be developed and implemented. Risk severity matrices are developed across Premier's business to facilitate assessment of risk. The specific risks identified by project and asset teams, business units and corporate functions are consolidated and amalgamated to provide an oversight of key risk factors at each level from operations through business unit management to the Executive Committee and the Board.
For all the known risks facing the business, Premier attempts to minimise the likelihood and mitigate the impact. According to the nature of the risk, Premier may elect to take or tolerate risk, treat risk with controls and mitigating actions, transfer risk to third parties or terminate risk by ceasing particular activities or operations. Premier has a zero tolerance to financial fraud or ethics non-compliance, and ensures that HSES risks are managed to levels that are as low as reasonably practicable, whilst managing exploration and development risks on a portfolio basis.
The key risk factors identified from this approach are represented in a matrix format which highlights and justifies significant movements since the previous reporting period. The following table summarises their potential impacts and our approach to managing them. The assessment of the impact and likelihood takes into account the risk mitigation measures currently applied.
Key risk factor | Risk detail | How is it managed? |
Health, safety, environment and security (HSES)
| Major process safety incident or operational accident, natural disasters, pandemics, social unrest, civil war. Consequences may include accidents resulting in loss of life, injury and/or significant pollution of the local environment, destruction of facilities and disruption to business activities. | Comprehensive HSES and operations management systems including emergency response and oil spill response capability and asset integrity. Active security monitoring and management and regular testing of business continuity plans. Learning from company and third party incidents. |
Production and development delivery
| Uncertain geology and reservoir performance leading to lower production and reserves recovery. Availability of services including FPSOs and rigs, availability of technology and engineering capacity, availability of skilled resources, maintaining project schedules and costs as well as fiscal, regulatory, political and other conditions leading to operational problems and production loss or development delay. Consequences may include lower production and/or recovery of reserves, production delays, cost overruns and/or failure to fulfil contractual commitments. | Geoscience and reservoir engineering management systems, including rigorous production forecasting and independent reserves auditing processes. Operations, development and project execution management systems and cost controls together with capable project teams. Long-term development planning to ensure timely access to FPSOs, rigs and other essential services |
Exploration success and reserves addition
| Failure to identify and capture acreage and resource opportunities to provide a portfolio of drillable exploration prospects and sufficient development projects to achieve reserves addition targets. Consequences may be that specific exploration programmes may fail to add reserves and hence value. Failure to negotiate access rights or close transactions could slow growth of reserves and production and lead to loss of competitive advantage. | Strong portfolio management and alignment with strategic growth targets. Appropriate balance between growth by exploration and acquisition. Exploration management systems including comprehensive peer review with focus on geologies in core areas we know well and in which we can build a competitive advantage. M&A effort focusing on geographical and technical areas aligned with our strategy. Diligence in acquisition process and post-acquisition integration to ensure targeted returns. |
Host government - political and fiscal risks
| Premier operates in some countries where political, economic and social transition is taking place or there are current sovereignty disputes. Developments in politics, laws and regulations can affect our operations and earnings. Consequences may include forced divestment of assets; limits on production or cost recovery; import and export restrictions; international conflicts, including war, civil unrest and local security concerns that threaten the safe operation of company facilities; price controls, tax increases and other retroactive tax claims; expropriation of property; cancellation of contract rights; and increase in regulatory burden. It is difficult to predict the timing or severity of these occurrences or their potential impact | Premier's portfolio includes operations in both low and higher risk environments. Premier actively monitors the local situation and has business continuity plans in each area which can be activated depending on predefined levels of alert. Premier strives to be a good corporate citizen globally, and fosters reputation by strong and positive relationships with government and communities where we do business. Premier engages in respectful industry-wide lobby and sustainable corporate responsibility and community investment programmes. Rigorous adherence to Premier's Business Ethics Policy and Code of Conduct. Continuous monitoring of the external environment for emerging risks to the business. |
Commodity price volatility
| Oil and gas prices are affected by global supply and demand and price can be subject to significant fluctuations. Factors that influence these include operational issues, natural disasters, weather, political instability, or conflicts and economic conditions or actions by major oil-exporting countries. Price fluctuations can affect our business assumptions and can effect investment decisions and financial capability. | Oil and gas hedging programmes to underpin our financial strength and capacity to fund our future developments and operations. Premier's investment guidelines ensure that our development programmes are robust to downside sensitivity price scenarios. |
Organisational capability
| Risk that the capability of the organisation is not adequate to deliver plans for strategic growth. The capability of the organisation is a function of both the strength of its human resources and its Business Management Systems. Inadequate systems or lack of compliance may lead to loss of value and failure to achieve growth targets. Loss of personnel to competitors, inability to attract and retain quality human resources and competency gaps could affect our operational performance and delivery of growth strategy. | Premier has created a competitive remuneration and retention package including bonus and long-term incentive plans to incentivise loyalty and good performance from the existing, highly skilled workforce. Premier is continuing to strengthen its organisational capability to achieve strategic objectives. This includes resource planning, competency development, training and development programmes, succession planning including leadership development. Continuous strengthening of Business Management Systems and controls as appropriate to the size and market position of the company. |
Joint venture partner alignment
| Global operations in the oil and gas industry are conducted in a joint venture environment. There is a risk that joint venture partners are not aligned in their objectives and drivers and this may lead to inefficiencies and/or delays. Many of our major projects are operated by our joint venture partners and our ability to influence our partners is sometimes limited due to our small shares in such ventures. | Due diligence and continuous and regular engagement with partners in joint ventures in both operated and non-operated projects. Premier takes strategic acquisition opportunities where appropriate to gain a greater degree of influence and control. |
Financial discipline and governance
| Risk that sufficient funds are not available to finance the business. Risk of financial fraud. | Strong financial discipline and balance sheet. Premier has an established financial management system to ensure that it is able to maintain an appropriate level of liquidity and financial capacity and to manage the level of assessed risk associated with the financial instruments. Premier maintains access to capital markets through the cycle. The management system includes policies and a delegation of authority manual to reasonably protect against risk of financial fraud in the group. An insurance programme is put in place to reduce the potential impact of the physical risks associated with exploration and production activities. In addition, business interruption cover is purchased for a proportion of the cash flow from producing fields. Cash balances are invested in short-term deposits with minimum A credit rating banks, AAA managed liquidity funds and A1/P1 commercial paper, subject to Board approved limits. |
Key Performance Indicators (required under DTR 4.1.9)
Premier measures its performance in line with its strategic objectives of growing the value of the underlying assets of the business and creating significant returns for shareholders. Specifically, key performance indicators (KPIs) are used to measure progress against agreed targets in the areas of safety, production performance, growth in reserves and resources and the maintenance of financial strength. These KPIs also link to senior management's remuneration.
Operating safely
Premier is committed to operating responsibly in every part of the business. Success in these areas protects our assets, our revenue streams and our reputation.
Health and Safety performance is measured using total recordable injury rate (TRIR) per million man-hours and near miss high potential incidents (HIPO) per million man-hours. Safety performance data includes both Premier employees and contractors.
In 2013, Premier achieved a TRIR performance of 3.4 per million man-hours (2012: 1.8). Despite a weaker performance relative to last year, the majority of recordable incidents were of a minor nature. The total number of manhours increased from 6 million hours in 2012 to 12 million in 2013. Premier continues to focus on health and safety procedures and standards, provide frequent training and ongoing communication to employees and contractors.
Premier's HIPO performance improved in 2013, reaching its lowest level over the last six years and well within the target of 1.5 HIPOs per million man-hours. Premier continues to ensure that key lessons are learned and disseminated for all HIPOs and company-wide Safety Alerts are issued, citing key causes and preventative actions required.
Building the strong production base
One of the metrics by which Premier's growth performance is measured is by the compound annual growth rate in net asset value (NAV) per share.
Premier targets and, over the eight-year period to end-2013, has achieved a 10 per cent growth in NAV per share per year. Premier also aims to build on its existing production base in order to sustain and continue to deliver growth. This is measured using daily average production and the number of development projects being brought through to sanction. Average daily production in 2013 was 58.2 kboepd. 2013 achieved first oil and gas from the UK North Sea fields Huntington and Rochelle. Premier is targeting average production of 58-63 kboepd for 2014.
Premier's production goal is underpinned by the pipeline of development projects being progressed across the portfolio, and the ability to commercialise and bring on-stream these projects is key to the company's success. In 2013, Premier completed the Anoa Phase 4 compression project and progressed the recently sanctioned Solan, Pelikan, Naga and Dua projects towards first oil and gas in 2014. Premier also progressed the Catcher project towards sanction this year.
Delivering growth
Premier looks to create future growth through exploration in focused geologies and value-led acquisitions. Progress towards this growth ambition is measured by reserves replacement, risked prospective resource added and finding costs.
Premier also undertakes acquisitions to access additional resources. In 2013, the company increased its stake in the Bream project in Norway and in two licences situated in the North Falkland Basin which include the Isobel/Elaine and Jayne East prospects. More recently the company farmed into Block 2B, onshore Kenya. A successful year in exploration also added to Premier's reserve and resource base. Notable successes included the Luno II and Bonneville discoveries in the North Sea, the gas discovery at Matang in Indonesia, and the Kadanwari-32 well in Pakistan.
Reserves and resources increased to 794 mmboe (2012: 773 mmboe). In addition, 2013 saw Premier add approximately 72 mmboe of contingent resources and in excess of 207 million barrels of unrisked prospective resources to its portfolio.
Premier added reserves and resources through exploration at a pre-tax finding cost of US$5.3/barrel (bbl) during 2013.
Maintaining financial strength
A key strategic objective of the group is to maintain financial strength in order to invest in the future of the business and deliver significant returns to shareholders. Despite production constraints at the Huntington and Chim Sáo fields the company registered a strong profit after tax of US$234.0 million (2012: US$252.0 million). The operating cash flow of the company in 2013 was US$832.6 million (2012: US$808.2 million).
Premier's portfolio of crudes was sold at an average of US$109.0/bbl (2012: US$111.4 bbl). Realised average gas prices, a significant portion of which tracks oil price movement, achieved US$8.32 thousand standard cubic feet (mscf) in 2013 (2012: US$8.34/mscf).
Operating costs per barrel of oil equivalent (boe) rose to US$19.7 in 2013 (2012: US$16.2/boe). Rising cash flows, along with successful bank and bond market transactions, provide Premier with the funding required for future growth. Ability to add new capital and sufficient covenant headroom are monitored closely to ensure that the company has the funds to meet forecast cash requirements and maintain liquidity throughout the cycle.
Directors' responsibility statements (required under DTR 4.1.12)
The directors are responsible for preparing the Annual Report and Financial Statements in accordance with applicable law and regulations.
Group financial statements
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors are required to prepare the group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union (EU) and Article 4 of the IAS Regulation and have elected to prepare the parent company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period.
In preparing the parent company financial statements, the directors are required to:
· select suitable accounting policies and then apply them consistently;
· make judgements and accounting estimates that are reasonable and prudent;
· state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
In preparing the group financial statements, International Accounting Standard 1 - 'Presentation of Financial Statements' - requires that directors:
· properly select and apply accounting policies;
· present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
· provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and
· make an assessment of the company's and group's ability to continue as a going concern.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and group and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website (www.premier-oil.com). Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Directors' responsibility statement
We confirm to the best of our knowledge:
· the group financial statements, prepared in accordance with International Financial Reporting Standards, as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole;
· the strategic report includes a fair review of the development and performance of the business and the position of the company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and
· the Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the company's performance, business model and strategy.
By order of the Board
S C LockettChief Executive
A R C DurrantFinance Director